PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, operating expenses, margin and EPS exclude the effect of purchase accounting on the fair value of the acquired deferred maintenance balance of MKS Inc., stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, restructuring charges, certain foreign currency transaction losses, and the related tax effects of the preceding items and any one-time tax items. Constant currency measures are calculated by multiplying results by the exchange rates in effect for the comparable periods in the prior year and assumes no change in tax rates. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.
Forward-Looking Statements
Statements in this press release that are not historic facts, including statements about our fiscal 2012, fiscal 2013 and other future financial and growth expectations and anticipated tax rates, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that customers may not purchase our solutions when or at the rates we expect, the possibility that our pipeline of opportunities in North America may not generate the revenue we expect, the possibility that we will be unable to achieve planned services margins and operating margin improvements, the possibility that foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expenses, and the possibility that we may not achieve the license, services or maintenance growth rates that we expect, which could result in a different mix of revenue between license, service and maintenance and could impact our EPS results. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses and profits and loans and cash repatriations from foreign subsidiaries. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.
PTC and all other PTC product names and logos are trademarks or registered trademarks of Parametric Technology Corporation or its subsidiaries in the United States and in other countries. All other companies referenced herein are trademarks or registered trademarks of their respective holders.
About PTC
PTC (Nasdaq: PMTC) enables manufacturers to achieve sustained product and service advantage. The company’s technology solutions help customers transform the way they create and service products across the entire product lifecycle – from conception and design to sourcing and service. Founded in 1985, PTC employs over 6,000 professionals serving more than 27,000 businesses in rapidly-evolving, globally distributed manufacturing industries worldwide. Get more information at www.ptc.com.
PARAMETRIC TECHNOLOGY CORPORATION | |||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
June 30,
|
July 2,
2011 |
June 30,
2012 |
July 2,
2011 |
||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||
License | $ | 83,829 | $ | 81,431 | $ | 247,696 | $ | 231,119 | |||||||||||||||||||
Service | 227,154 | 210,352 | 682,688 | 596,405 | |||||||||||||||||||||||
Total revenue | 310,983 | 291,783 | 930,384 | 827,524 | |||||||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||||||
Cost of license revenue (1) | 7,634 | 7,617 | 23,117 | 20,129 | |||||||||||||||||||||||
Cost of service revenue (1) | 85,220 | 82,792 | 261,172 | 238,112 | |||||||||||||||||||||||
Total cost of revenue | 92,854 | 90,409 | 284,289 | 258,241 | |||||||||||||||||||||||
Gross margin | 218,129 | 201,374 | 646,095 | 569,283 | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Sales and marketing (1) | 94,706 | 89,106 | 283,446 | 254,790 | |||||||||||||||||||||||
Research and development (1) | 53,260 | 51,103 | 162,829 | 155,676 | |||||||||||||||||||||||
General and administrative (1) | 29,851 | 31,882 | 88,957 | 80,078 | |||||||||||||||||||||||
Amortization of acquired intangible assets | 5,103 | 4,753 | 15,444 | 12,873 | |||||||||||||||||||||||
Restructuring charges | 4,126 | - | 24,928 | - | |||||||||||||||||||||||
Total operating expenses | 187,046 | 176,844 | 575,604 | 503,417 | |||||||||||||||||||||||
Operating income | 31,083 | 24,530 | 70,491 | 65,866 | |||||||||||||||||||||||
Other expense, net | (304 | ) | (6,271 | ) | (5,914 | ) | (8,979 | ) | |||||||||||||||||||
Income before income taxes | 30,779 | 18,259 | 64,577 | 56,887 | |||||||||||||||||||||||
Provision for income taxes | 7,884 | 2,733 | 15,990 | 9,084 | |||||||||||||||||||||||
Net income | $ | 22,895 | $ | 15,526 | $ | 48,587 | $ | 47,803 | |||||||||||||||||||
Earnings per share: | |||||||||||||||||||||||||||
Basic | $ | 0.19 | $ | 0.13 | $ | 0.41 | $ | 0.41 | |||||||||||||||||||
Weighted average shares outstanding | 119,042 | 118,214 | 118,584 | 117,622 | |||||||||||||||||||||||
Diluted | $ | 0.19 | $ | 0.13 | $ | 0.40 | $ | 0.39 | |||||||||||||||||||
Weighted average shares outstanding | 120,728 | 121,164 | 120,898 | 121,149 | |||||||||||||||||||||||
(1 | ) | The amounts in the tables above include stock-based compensation as follows: | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
June 30,
2012 |
July 2,
2011 |
June 30,
2012 |
July 2,
2011 |
||||||||||||||||||||||||
Cost of license revenue | $ | 4 | $ | 4 | $ | 16 | $ | 10 | |||||||||||||||||||
Cost of service revenue | 2,050 | 1,857 | 6,734 | 5,577 | |||||||||||||||||||||||
Sales and marketing | 3,334 | 3,062 | 10,368 | 7,841 | |||||||||||||||||||||||
Research and development | 1,886 | 2,010 | 6,675 | 6,152 | |||||||||||||||||||||||
General and administrative | 6,057 | 4,627 | 15,612 | 12,878 | |||||||||||||||||||||||
Total stock-based compensation | $ | 13,331 | $ | 11,560 | $ | 39,405 | $ | 32,458 |
PARAMETRIC TECHNOLOGY CORPORATION | |||||||||||||||||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED) | |||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
June 30,
2012 |
July 2,
2011 |
June 30,
2012 |
July 2,
2011 |
||||||||||||||||||||||
GAAP revenue | $ | 310,983 | $ | 291,783 | $ | 930,384 | $ | 827,524 | |||||||||||||||||
Fair value of acquired MKS deferred maintenance revenue |
227 | 693 | 2,485 | 693 | |||||||||||||||||||||
Non-GAAP revenue | $ | 311,210 | $ | 292,476 | $ | 932,869 | $ | 828,217 | |||||||||||||||||
GAAP gross margin | $ | 218,129 | $ | 201,374 | $ | 646,095 | $ | 569,283 | |||||||||||||||||
Fair value of acquired MKS deferred maintenance revenue |
227 | 693 | 2,485 | 693 | |||||||||||||||||||||
Stock-based compensation | 2,054 | 1,861 | 6,750 | 5,587 | |||||||||||||||||||||
Amortization of acquired intangible assets included in cost of license revenue |
3,933 | 3,895 | 11,967 | 10,597 | |||||||||||||||||||||
Non-GAAP gross margin | $ | 224,343 | $ | 207,823 | $ | 667,297 | $ | 586,160 | |||||||||||||||||
GAAP operating income | $ | 31,083 | $ | 24,530 | $ | 70,491 | $ | 65,866 | |||||||||||||||||
Fair value of acquired MKS deferred maintenance revenue |
227 | 693 | 2,485 | 693 | |||||||||||||||||||||
Stock-based compensation | 13,331 | 11,560 | 39,405 | 32,458 | |||||||||||||||||||||
Amortization of acquired intangible assets included in cost of license revenue |
3,933 | 3,895 | 11,967 | 10,597 | |||||||||||||||||||||
Amortization of acquired intangible assets | 5,103 | 4,753 | 15,444 | 12,873 | |||||||||||||||||||||
Acquisition-related charges included in general and administrative expenses |
- | 6,041 | 2,512 | 6,649 | |||||||||||||||||||||
Restructuring charges | 4,126 | - | 24,928 | - | |||||||||||||||||||||
Non-GAAP operating income (2) | $ | 57,803 | $ | 51,472 | $ | 167,232 | $ | 129,136 | |||||||||||||||||
GAAP net income | $ | 22,895 | $ | 15,526 | $ | 48,587 | $ | 47,803 | |||||||||||||||||
Fair value of acquired MKS deferred maintenance revenue |
227 | 693 | 2,485 | 693 | |||||||||||||||||||||
Stock-based compensation | 13,331 | 11,560 | 39,405 | 32,458 | |||||||||||||||||||||
Amortization of acquired intangible assets included in cost of license revenue |
3,933 | 3,895 | 11,967 | 10,597 | |||||||||||||||||||||
Amortization of acquired intangible assets | 5,103 | 4,753 | 15,444 | 12,873 | |||||||||||||||||||||
Acquisition-related charges included in general and administrative expenses |
- | 6,041 | 2,512 | 6,649 | |||||||||||||||||||||
Restructuring charges | 4,126 | - | 24,928 | - | |||||||||||||||||||||
Non-operating foreign currency transaction losses (3) | - | 4,385 | 761 | 5,107 | |||||||||||||||||||||
Income tax adjustments (4) | (5,338 | ) | (8,526 | ) | (23,428 | ) | (20,184 | ) | |||||||||||||||||
Non-GAAP net income | $ | 44,277 | $ | 38,327 | $ | 122,661 | $ | 95,996 | |||||||||||||||||
GAAP diluted earnings per share | $ | 0.19 | $ | 0.13 | $ | 0.40 | $ | 0.39 | |||||||||||||||||
Stock-based compensation | 0.11 | 0.10 | 0.33 | 0.27 | |||||||||||||||||||||
Amortization of acquired intangibles | 0.07 | 0.07 | 0.23 | 0.19 | |||||||||||||||||||||
Acquisition-related charge | - | 0.05 | 0.02 | 0.05 | |||||||||||||||||||||
Restructuring charges | 0.03 | - | 0.21 | - | |||||||||||||||||||||
Non-operating foreign currency transaction losses | - | 0.04 | 0.01 | 0.04 | |||||||||||||||||||||
Income tax adjustments | (0.04 | ) | (0.07 | ) | (0.19 | ) | (0.17 | ) | |||||||||||||||||
All other items identified above | - | 0.01 | 0.02 | 0.01 | |||||||||||||||||||||
Non-GAAP diluted earnings per share | $ | 0.37 | $ | 0.32 | $ | 1.01 | $ | 0.79 | |||||||||||||||||
(2) Operating margin impact of non-GAAP adjustments: |
|||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
June 30,
2012 |
July 2,
2011 |
June 30,
2012 |
July 2,
2011 |
||||||||||||||||||||||
GAAP operating margin | 10.0 | % | 8.4 | % | 7.6 | % | 8.0 | % | |||||||||||||||||
Fair value of deferred maintenance revenue | 0.1 | % | 0.2 | % | 0.3 | % | 0.1 | % | |||||||||||||||||
Stock-based compensation | 4.3 | % | 4.0 | % | 4.2 | % | 3.9 | % | |||||||||||||||||
Amortization of acquired intangibles | 2.9 | % | 3.0 | % | 2.9 | % | 2.8 | % | |||||||||||||||||
Acquisition-related charges | 0.0 | % | 2.1 | % | 0.3 | % | 0.8 | % | |||||||||||||||||
Restructuring charges | 1.3 | % | 0.0 | % | 2.7 | % | 0.0 | % | |||||||||||||||||
Non-GAAP operating margin | 18.6 | % | 17.6 | % | 17.9 | % | 15.6 | % |
(3) | In the first quarter of 2012 we recorded $0.8 million of foreign currency transaction losses related to MKS legal entity mergers completed during the quarter. In the third quarter of 2011, in connection with our acquisition of MKS, we had entered into forward contracts to reduce our foreign currency exposure related to changes in the Canadian to U.S. Dollar exchange rate from the time we entered into the agreement in early April to acquire MKS (the purchase price was in Canadian Dollars) and the closing date which occurred on May 31, 2011. We realized foreign currency losses of $4.4 million recorded as other expense related to the acquisition. In the first quarter of 2011 we recorded $0.7 million of foreign currency losses related to a previously announced litigation settlement in Japan. | ||
(4) | Reflects the tax effects of non-GAAP adjustments for the three and nine months ended June 30, 2012 and July 2, 2011, which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above, as well as one-time non-cash charges including (i) $3.3 million, net, in the third quarter of 2012, primarily related to a $4.2 million charge as a result of acquired legal entity integration activities, and (ii) a $1.4 million charge in the first quarter of 2012 related to the impact of a reduction in the statutory tax rate in Japan on deferred tax assets from a litigation settlement. |
PARAMETRIC TECHNOLOGY CORPORATION | |||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(in thousands) | |||||||||
June 30,
2012 |
September 30,
2011 |
||||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 238,047 | $ | 167,878 | |||||
Accounts receivable, net | 203,261 | 230,220 | |||||||
Property and equipment, net | 61,849 | 62,569 | |||||||
Goodwill and acquired intangible assets, net | 799,741 | 835,411 | |||||||
Other assets | 308,563 | 333,604 | |||||||
Total assets | $ | 1,611,461 | $ | 1,629,682 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Deferred revenue | $ | 323,796 | $ | 294,324 | |||||
Borrowings under revolving credit facility | 140,000 | 200,000 | |||||||
Other liabilities | 284,662 | 312,668 | |||||||
Stockholders' equity | 863,003 | 822,690 | |||||||
Total liabilities and stockholders' equity | $ | 1,611,461 | $ | 1,629,682 |
PARAMETRIC TECHNOLOGY CORPORATION | |||||||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
June 30,
2012 |
July 2,
2011 |
June 30,
2012 |
July 2,
2011 |
||||||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||||||
Net income | $ | 22,895 | $ | 15,526 | $ | 48,587 | $ | 47,803 | |||||||||||||||||
Stock-based compensation | 13,331 | 11,560 | 39,405 | 32,458 | |||||||||||||||||||||
Depreciation and amortization | 16,867 | 15,827 | 50,152 | 44,547 | |||||||||||||||||||||
Accounts receivable | 3,084 | 2,160 | 41,782 | 18,059 | |||||||||||||||||||||
Accounts payable and accruals (5) | 7,576 | 13,563 | (6,292 | ) | (11,754 | ) | |||||||||||||||||||
Deferred revenue | 18,746 | 9,656 | 52,228 | 36,825 | |||||||||||||||||||||
Litigation settlement | - | - | - | (52,129 | ) | ||||||||||||||||||||
Income taxes | (16,210 | ) | (8,657 | ) | (28,111 | ) | (17,855 | ) | |||||||||||||||||
Excess tax benefits from stock-based awards | - | (1,777 | ) | (453 | ) | (2,307 | ) | ||||||||||||||||||
Other | (2,279 | ) | (9,425 | ) | (254 | ) | (16,976 | ) | |||||||||||||||||
Net cash provided by operating activities (6) | 64,010 | 48,433 | 197,044 | 78,671 | |||||||||||||||||||||
Capital expenditures | (5,882 | ) | (6,735 | ) | (22,506 | ) | (18,295 | ) | |||||||||||||||||
Acquisitions of businesses, net of cash acquired (7) | - | (265,153 | ) | (1,170 | ) | (265,153 | ) | ||||||||||||||||||
Proceeds (payments) on debt (7) | (20,000 | ) | 250,000 | (60,000 | ) | 250,000 | |||||||||||||||||||
Proceeds from issuance of common stock | 1,192 | 6,287 | 15,315 | 22,261 | |||||||||||||||||||||
Payments of withholding taxes in connection with vesting of stock-based awards |
(1,428 | ) | (96 | ) | (20,893 | ) | (22,052 | ) | |||||||||||||||||
Repurchases of common stock | (19,970 | ) | (39,947 | ) | (34,953 | ) | (39,947 | ) | |||||||||||||||||
Excess tax benefits from stock-based awards | - | 1,777 | 453 | 2,307 | |||||||||||||||||||||
Foreign exchange impact on cash | (3,982 | ) | 6,681 | (3,121 | ) | 12,706 | |||||||||||||||||||
Net change in cash and cash equivalents | 13,940 | 1,247 | 70,169 | 20,498 | |||||||||||||||||||||
Cash and cash equivalents, beginning of period | 224,107 | 259,504 | 167,878 | 240,253 | |||||||||||||||||||||
Cash and cash equivalents, end of period | $ | 238,047 | $ | 260,751 | $ | 238,047 | $ | 260,751 |
(5) | Includes accounts payable, accrued expenses, and accrued compensation and benefits | ||
(6) |
The third quarter of 2011 cash flow from operations includes cash outflows of approximately $10 million for PTC and MKS acquisition-related costs paid after the acquisition date. |
||
(7) |
We acquired MKS on May 31, 2011, for $265.2 million (net of cash acquired) which was partially funded with $250 million in borrowings under our revolving credit facility. |
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