Schnitger Corporation

PTC: Pothole repair underway

PTC today gave more details on its financial performance in the March quarter (its fiscal Q2) and a glimpse into the year ahead. The high points: a positive spin on the revenue miss in FQ1, much more cautious outlook for the rest of the year (but the potential for significant positive surprises) and solid performance in Asia.

PTC is such an interesting company. A bunch of really smart people who shoot themselves in the foot every couple of years, either by getting too far ahead of their customers (remember “CAD is dead”?), alienating those who sign the checks while retaining intense loyalty among the user base, or moving too fast to make too many operational changes all at once. It really does sound as though the Q1 miss blindsided the company, with a wave of coincidentally timed events washing away what could otherwise have been an OK quarter. Enough editorializing, here’s what they said:

But there was lots of other news, too. Remember that PTC reorganized itself from 2 major product lines (CAD and PLM) sold through 2 channels (direct and indirect) into 5 buckets/segments: PLM, MCAD, ALM, SCM and SLM.

PTC’s guidance for FQ3 and F2012 ratchets back expectations with respect to mega deals, removing them completely from FQ3 but “assuming some contribution” from mega deals in the full-year targets. The “large European transaction that did not close in Q2” is not included in either total. For FQ3, PTC expects total revenue of $300 million to $315 million; for F12, it expects $1,265 million to $1,285 million, including about $90 million from MKS and 4CS. For the year, license revenue is expected to increase 5%l services, 14% and maintenance, 9%.

Mr. Heppelmann said on the earnings preannouncement conference call that PTC had hit a substantial pothole in FQ1. He was equally clear today: The changes in the sales organization “were right to make, and were done before this mess. The question is how to manage the pipeline and forecast. We need to transition to a “best in class” systematic approach, and we’re doing that starting now. We need to assess the impact of the new sales [people and territory changes]. If it settles into place and creates the productivity we anticipate it will, we will feel good about out long term targets.”

PTC bit the bullet early, carved an outline around the FQ2 miss that showed that the problem was of its own making (and not a competitive or economic issue) and outlined a plan to fix it. Can’t do better than that — at least until next earnings season, when we see if the plan worked. Investors like, and sent the share up 10% at 11:30 ET.

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