As previewed last night, PTC announced startlingly strong results for the December quarter, 2009. To recap, total revenue was up 8%, led by a very strong rebound in license revenue. Not surprising, maintenance revenue was down, since it’s driven by license sales in prior periods. PTC held a conference call for analysts earlier today and issued supplemental material giving the following additional information about the calendar fourth quarter:
• Total revenue was $258.4 million, well ahead of guidance of $230 million to $240 million
• Total license revenue was $74.8 million, far above guidance of $50 million to $60 million and up 48% from last year
• The upside was driven by strong Windchill license sales, which grew 155% to nearly $45 million
• MCAD license revenue fell about 7% to $30 million, with an 11% decline in direct/enterprise sales
• Service revenue was $56 million, at the top end of guidance and down 9% from a year ago
• Maintenance revenue was $128 million, above guidance of $125 million but still down 2% from last year — but there are signs of improvement in that maintenance is up 3% sequentially
• PTC’s focus on enterprise sales has begun to pay off, as for the first time ever its license mix was 60% enterprise/40% desktop
• On a regional basis, sales in the Americas were up 28% from a year ago and up 4% sequentially to $107 million, even as indirect revenue fell 19%
• Revenue from Europe was flat year/year at $99 million but up 8% sequentially
• Sales in Japan were $23 million, down 10% from a year ago and down 1% sequentially
• Pacific Rim revenue was $29 million, down 9% from a year ago and up 4% sequentially. China was up 8% year/year.
PTC had 10 large deals in the quarter totaling $50 million with an average deal size of $5.0 million. To give some idea how significant this is, the average deal size was $2.8 million in fiscal 2009 and $2.5 million in fiscal 2008. Analysts on the earnings call pressed to find out if one or two huge deals caused the upside for the quarter and unanticipated growth in license revenue — or if PTC may have peaked too early, closing deals in the December quarter that would make it harder to meet targets in coming quarters. PTC declined to offer specifics but said repeatedly that, even if one omitted the two largest deals from the calculation, it would have had a very strong quarter even without the two largest revenue deals and that the growth targets for the remainder of fiscal 2010 are based on a broad set of customer engagements and deals in the pipeline. CEO Dick Harrison said that there are 100 deals over a million dollars in the pipeline, likely to close at some point and that deals are actually expanding as PTC works with the client to nail down requirements.
PTC did provide an unusual level of detail in the supplemental material posted on Tuesday evening, laying out license, services and maintenance for desktop and enterprise sales, for both direct and indirect channels. There’s so much information here that it’s going to take a while to sift through but the good news is that many of the numbers in the direct buckets, at least, seem to be trending upward for the December quarter. Once PTC’s competitors report, we’ll be able to do a calendar 2010 comparison — and PTC is betting that it will come out on top.
PTC’s channel continues to struggle, even though the company reported modest sequential improvement for the second straight quarter. Company execs feel a rebound won’t come for another few quarters, as the business climate improves for the channel’s small to medium enterprise customers.
One other interesting factoid: PTC had been at the lower end of the spectrum of R&D spend as a function of total revenue — no more. In fiscal 2008, its R&D expenditure totaled $173 million, 17% of revenue; in 2009, it was $180 million but, since revenue declined, 19% of total revenue. So far, in fiscal Q1 2010, the company held to that 19% level, increasing the dollar amount to $48 million (an increase of 4%).
Given these strong Q1 results, the company increased second quarter and fiscal 2010 guidance and now expects Q2 to have revenue of $235 million to $245 million, including a 50% increase in license revenue to about $63 million. FY 2010 guidance has been increase to revenue of $1.015 billion, an increase of 3.5% over the prior goal of $980 million. If achieved, this new goal would show growth for the year of 8.2% and return PTC to the “Billion Dollar Club” earlier than anticipated. PTC expects license sales to continue to build over the year, with a total increase of 30% to about $275 million.