PTC announced last night that Q3 revenue (for the period ended June 30) was $226.2 million, compared to earlier guidance of between $220 million and $230 million, bolstered by a $3 million positive currency trend. The company lowered its revenue guidance for Q4 by about $7 million, to between $235 million and $245 million, for an annual total of about $931 million.
As reported, Q3 revenue was down 17% from a year ago but essentially flat when compared to the March quarter — a possible sign that the economic turmoil has bottomed out.
PTC slices its revenue in a number of ways:
• License revenue was down 38% from a year ago but up 18% from last quarter at $49.5 million.
• Direct revenue was down 16% from last year but up very slightly from Q2 to $169.3, led by direct license revenue which was up 32% sequentially.
• Channel revenue was down 20% from last year and flat sequentially. while channel license revenue was down 5% sequentially.
• Maintenance revenue was $121.8 million on a non-GAAP basis — down 8% from last year and down 1% from Q2.
• Large deal size was up slightly even as the number of large deals held constant from Q2 at 9.
• Services revenue was down 10% from last year and the company expects Q4 revenue to be down even more sharply, as lower Windchill license sales earlier in the year impact implementation services engagements.
• By geography, North America was down 5% from last year, but up 7% sequentially, driven by a 51% sequential increase in license revenue. Channel revenue was up 7% from a year ago, and direct revenue was down 7%. Revenue from Europe down 18% (4% on a constant currency basis) from last year, but up 2% sequentially as license revenue was up 16%. Revenue from Japan was down 32% (36% on a constant currency basis) compared with last year and down 20% sequentially both led by license revenue that was down 38% sequentially. Finally, revenue from the Pacific Rim revenue was down 28% from last year, and down 3% sequentially, led by China, where revenue declined 24% from last year and down 4% from Q2. Even so, Q3 license revenue in the Pacific Rim was up 5% sequentially.
For Q4, PTC expects license revenue to be between $60 million and $65 million, given historic patterns. Even so, this would mean that, for fiscal 2009, license revenue would be down 40% from fiscal 2008, which will have a staggering impact on future maintenance revenue streams.
Maintenance revenue is expected to increase slightly in Q4 (when compared to Q3) and to be up 3% on a constant currency basis for the year. PTC provides data on the number of seats under maintenance, and it seems that the number of Windchill seats reversed its decline in Q2 to be up slightly in Q3; the Pro/E and “other” categories were flat sequentially — though all three were down from last year. The company reports that it saw improvement in renewal rates in Q3 and that attach rates continue to “remain strong”.
In the press release, CEO Dick Harrison said that “on a sequential basis we are seeing a number of positive data points: 1) total revenue is stabilizing, 2) we delivered license revenue growth in all of our major geographies except Japan, 3) active maintenance paying seats are up, driven by Windchill seat growth, and 4) we won three additional strategically important "domino" accounts during Q3." He went on to say that the “pipeline for new business opportunities remains strong and lead times to close enterprise deals seem to be shortening.”
[Recall that PTC has determined that certain key accounts will drive adoption in their respective markets and has targeted these “domino accounts” as high priority direct sales accounts.]
According to Reuters Estimates, analysts were expecting the company to report revenues of $241 million and EPS of $0.32 for fourth quarter of 2009, so we’ll see how the market reacts.
More after the earnings call if warranted.