“With the launch of Windchill 10.0 this spring and Creo 1.0 in June, we have had an exciting year from a product portfolio perspective,” said Heppelmann. “In addition, the acquisition of MKS adds important breadth and depth to our already robust product portfolio, and further extends PTC’s long-term growth opportunity. Given the market momentum we are experiencing and the extent of our technology leadership position, we remain confident in our ability to achieve our longer-term goal of 20% non-GAAP EPS CAGR through 2014. Based on the market momentum we are seeing, the strength of our pipeline and investment to increase sales capacity, we continue to be excited about our FY’12 growth opportunity. We will provide formal FY’12 guidance when we issue our Q4 results in October.”
“For Q4, we are providing guidance of $320 to $330 million in non-GAAP revenue, which includes approximately $20 million in non-GAAP revenue from the acquisition of MKS Inc. We are expecting non-GAAP EPS of $0.40 to $0.44, which reflects incremental sales expense as we begin to ramp capacity in the quarter,” Glidden added. “We continue to expect MKS to be neutral to FY’11 non-GAAP EPS. From a revenue perspective, we are expecting approximately $100 to $110 million in license revenue in Q4, with combined services and maintenance revenue of approximately $220 million, resulting in approximately 20% to 23% year-over-year growth in total non-GAAP revenue.” For Q4, the GAAP revenue target is $318 to $328 million and the GAAP EPS target is $0.25 to $0.29.
The Q4 guidance assumes a non-GAAP tax rate of 23%, a GAAP tax rate of 20% and 121 million diluted shares outstanding. The Q4 non-GAAP guidance excludes approximately $2 million for the effect of purchase accounting on acquired MKS deferred maintenance revenue, $13 million of stock-based compensation expense, $10 million of acquisition-related intangible asset amortization expense, any acquisition-related expenses, and their related income tax effects.
Glidden concluded, “Looking to the full year FY’11, we are increasing our non-GAAP revenue growth target to a range of 14% to 15% vs. our previous guidance of 13% to 14%. We expect MKS to contribute approximately $25 million in non-GAAP revenue for the full year. We are expecting license revenue growth of approximately 15%, at the lower-end of our previous 15% to 20% guidance range, which is more than offset by stronger and more predictable services and maintenance revenue. We are now expecting growth of approximately 20% in services revenue and 12% in maintenance revenue. Our FY’11 non-GAAP EPS target of $1.20 to $1.24 reflects incremental sales expense in Q4 as we begin to ramp sales capacity to better address market demand. We will continue to balance investments to support future growth with our commitment to 20% non-GAAP EPS growth.” For FY’11, the GAAP EPS target is $0.63 to $0.67.
The FY’11 targets assume a non-GAAP tax rate of 23%, a GAAP tax rate of 19% and 121 million diluted shares outstanding. The FY’11 non-GAAP guidance excludes approximately $3 million for the effect of purchase accounting on acquired MKS deferred maintenance revenue, $45 million of stock-based compensation expense, $34 million of acquisition-related intangible asset amortization, $5 million of foreign currency transaction losses, any acquisition-related expenses, and their related income tax effects.
Other Important Information
We have identified payments by certain business partners in China that raise questions of compliance with laws, including the Foreign Corrupt Practices Act, and/or compliance with the Company’s business policies. We are conducting an internal investigation and have voluntarily disclosed this matter to the United States Department of Justice and the Securities and Exchange Commission. Based on the findings to date, we do not believe that these matters will have a material adverse effect on our results of operations or financial condition.
Q3 Earnings Conference Call and Webcast
Prepared remarks for the conference call have been posted to the investor relations section of our website. The prepared remarks will not be read live; the call will be primarily Q&A.
|What:||PTC Fiscal Q3 Conference Call and Webcast|
|When:||Wednesday, July 27th, 2011 at 8:30 am (ET)|
|Dial-in:||1-800-857-5592 or 1-773-799-3757
Call Leader: James Heppelmann
The audio replay of this event will be archived for public replay until 4:00 pm (CT) on August 1, 2011 at 1-866-386-4117 or 402-220-9814. To access the replay via webcast, please visit www.ptc.com/for/investors.htm.
Important Information About Non-GAAP References
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, certain foreign currency transaction losses, and the related tax effects of the preceding items and any one-time tax items. 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.