PTC’s Q4 revenue down, subs & manufacturing economy

Oct 28, 2015 | Hot Topics

Earnings come, whether I’m there to listen or not. PTC just reported fiscal Q4 and 2015 results — and, at first glance, they’re decent given the change to a subscription model. About to hop on a plane but here are the bare facts:

  • Total revenue in Q4 was $313 million, down 15% as reported and down 6% in constant currencies (cc)
  • Software revenue was $265 million, down 12% (down 4% cc) even as license and subscription (L&S) revenue was above the midpoint of Q4 guidance on solid demand for IoT and SLM solutions. But as a whole, the subs still pull down total revenue. PTC offers this: “On a license mix-adjusted basis, non-GAAP L&S revenue was up 4% and software revenue was up 3%”, both cc. These measures are always tough to reconcile –we have to hope PTC is applying consistent logic and metrics. But by all appearances, we should not take the decline in reported revenue as competitive losses or other negative market effects — it’s accounting.
  • As borne out by the above subscription bookings continue to become more and more relevant for PTC. In Q4, subs were 20% of total L&S bookings, up from 4% a year ago. You can see the hockey stick: for fiscal 2015, subscription bookings were 17% of L&S bookings, up from 8% a year ago
  • Unfortunately, we can’t blame the transition to subs for the CAD revenue decline. CAD revenue was $123 million, down 19% as reported (down 10% cc). PTC’s prepared material says CAD L&S revenue was down 34% year/year (down 28% cc) on fewer large deals and a weaker macroeconomic environment that negatively affected spending by discrete manufacturers. That’s not good, and it doesn’t match what DS told us a few weeks ago. More on this when I’ve had time to get into both companies’ details
  • ePLM revenue was $99 million, down 14% as reported (down 6% cc) as “high single digit cc growth in ALM” was offset by a decline in PLM business. Again, fewer large deals was cited, as was a higher mix of subscriptions
  • IoT continues to boom, but is still a small part of PTC’s current picture. Total revenue was $11 million, up 175% as reported — but this includes the bump from the Axeda acquisition in August 2014. PTC added 108 new IoT customers during Q4, bringing the total for FY’15 to 290 — WAY beyond original projections (of 200, I think).
  • The SLM business grew 7% as reported, to $31 million.

FY15 revenue was $1,255 million, down 10% or so as reported. For FY16, PTC sees total revenue of $1,200 million to $1,220 million because of the continued transition to subscriptions. In fact, PTC thinks it’ll see roughly 25% of L&S bookings coming from subs — this seems conservative to me, since we’re already at 20% in Q4 FY15.

CEO Jim Heppelmann highlighted PTC’s increased operating efficiency in Q4, saying in the earnings press release that the company “delivered solid fourth quarter results including non-GAAP operating margin and non-GAAP EPS above the high-end of guidance, while also achieving a subscription bookings mix of 20% compared to our guidance of 14%.” He then quickly shifts focus to the newer part of the business: “Continuing the momentum we have experienced in our IoT business, fourth quarter IoT bookings and new logo additions were both strong, and we announced an agreement to acquire the Vuforia augmented reality technology platform. We were also pleased with the second consecutive quarter of strong performance in our SLM business, a reflection of pipeline rebuilding efforts in late FY’14 and early FY’15.”

There’s a mountain of stuff to parse, the earnings call to listen to — and a flight attendant urgently requesting that I power off and stow. More soon.