PTC just reported results for its fiscal second quarter (ended March 31) that show the company performed more or less as it predicted. But the rest of fiscal 2013 (through September) is going to be tough and so PTC moderated its revenue forecast for the next six months. CEO Jim Heppelmann said that the continued slowdown in the manufacturing industry led to decreased license revenue (and large deals weighted towards services) in FQ2, a trend that is likely to continue.
Total GAAP revenue for the second fiscal quarter was $314 million, up 4%, right in the middle of the target it announced at the FQ1 earnings call, though $1 million below analyst consensus so the share price may fall a bit at the open. On the other hand, PTC implemented cost control measures (including a layoff) that led to higher profit in FQ2, and a higher earnings outlook for the rest of the year that should make investors happy. On the other other hand, PTC lowered its revenue forecast for the rest of the year. Oh, who knows what investors will do? The share price will open up, down or the same. (Also, DS will have announced in Europe before the US markets open; if they report a massive March quarter, PTC would suffer in comparison.)
- License revenue was up 7% year/year (y/y) to $80 million. Performance was characterized as “strong” in Japan (up 33%) and “solid” in the Pacific Rim (up 9%), and “soft” in the Americas (down 4%) and Europe (up 2% y/y). Clearly, one question for the earnings call is why Japan was so much an outlier in FQ2.
- Support (aka maintenance) revenue was also up 7%, to $161 million, slightly ahead of guidance.
- Services revenue was down 4% y/y to $73 million, reflecting continued pressure on large license transactions. Excluding Servigistics, service revenue was down 14%. PTC said that this decline is consistent with its strategy to move services to partner companies, which both improves their opportunity and PTC’s operating profit.
- By solution type, CAD revenue was down 3% y/y (though up 3% sequentially) to $136 million. License revenue was $37 million (down 2%), support revenue was $93 million (down 2% y/y). Strength in Japan couldn’t offset weakness in the Americas and Europe. Channel revenue (40% of the CAD total) was up 2% y/y.
- Extended PLM (=PLM + SCM + ALM) revenue was $140 million, down 3% y/y. PTC doesn’t break the category down any further but said that PLM was “soft” and ALM “strong”. License revenue was $35 million, flat y/y, while support revenue was $53 million, up 7%.
- SLM revenue was $38 million, up 117% y/y on the strength of the Servigistics acquisition and up 8% y/y organically. License revenue was $7 million; services, $16 million and support, $15 million.
- By region, revenue from the Americas was $119 million, up 8% as reported but down 4% when excluding Servigistics. PTC, however, is optimistic about the Americas and says its pipeline of deals continues to build.
- Revenue from Europe was $119 million, up 3% as reported and up 1% in constant currencies. This is an improvement over FQ1 (-10% and -7%, respectively), but still PTC sees only moderate growth in the region in FY13.
- Finally, revenue from Japan was $38 million, down 2% as reported but up 13% in constant currencies due, in part, to large deals. The rest of the Pacific Rim reported revenue of $39 million, up 5% as reported and up 5% in constant currencies. PTC sees solid potential here, citing momentum and a growing pipeline.
- The company reports signing one mega deal in Japan (>$5 million) and 23 large deals (>$1million recognized in the quarter). These deals totaled $58 million, up 3% over last year. The progression in number of deals has been 25/34/35/27/24 over the last five quarters — but PTC doesn’t seem to think that FY23 will be back-weighted. The average deal size over that same period has actually gone up (2.3/2.2/2.1/2.3/2.4 million dollars), so closing the deals seems to be the problem, not the demand for product.
- Servigistics reported Q2 GAAP revenue of $22 million ($5 million from licenses, $8 million from support and $8 million from services), in line with expectations.
PTC lowered its outlook for the rest of 2013, with FQ3 GAAP revenue now expected to be between $314 million and $329 million (of which $80 million to $90 million will be from licenses, basically flat with last year). For the year, PTC now sees GAAP revenue of $1,302 million to $1,312 million — which is a pretty significant $40 million lower than forecast at the FQ1 earnings call.
Okay. That’s a heck of a lot of numbers. We’ll get more color commentary in the morning. I hope we find out what worked in Japan that doesn’t seem to be working in other parts of the world; why the CAD channel appears to be struggling; why big deals seem harder to close yet stay the same size (would it be easier to close smaller deals?); what percentage of the base is now on Creo (vs. ProE or Wildfire) and how Windchill Elements, the new “quick install” flavor released earlier this year, is doing.
I’d also be interested in learning what parts of the business are winning competitive engagements — and why. Is it because PTC has such a broad offering now that entire enterprises are standardizing on PTC for design – manufacturing – service? Or is one part of the portfolio leading today, and there is evaluation/interest in the rest? Or is it point solutions, Creo vs CAD or Windchill vs PLM?
Stay tuned. I’ll post a quick update after the earnings call, if warranted.