PTC surprised by subs, DS continues to roll

Apr 21, 2016 | Hot Topics

It’s a big day in PLMish earnings, as PTC reported last night and Dassault Systèmes this morning. We’ll get to details in other posts but here are the highlights:

PTC continues to struggle with the mix of traditional and subscription licensing, causing revenue to come in lighter than expected. The company says it’s, in effect, a year ahead of plan on the move to subs. The lower than expected revenue trickled through the income statement to a net loss for the period ended March 31. Total revenue was $273 million; software revenue of $224 million was down 12% year/year as reported (down 9%in constant currencies) including what PTC estimates to be $30 million of perpetual/maintenance revenue that went subscription during the quarter. By my math, that means software revenue would have been flat-ish year/year, had subscribers stuck to traditional licensing. More on that and all of the other slicing/dicing of revenue by geo, product and so one to come. For fiscal Q3, the company said it expects revenue to be between $287 million and $292 million, and for the year, it forecasts revenue of $1.16 billion to $1.18 billion.6%.

DS reported fiscal Q1 revenue of €691 million, up 6% as reported and in constant currency. Software revenue was 612 million, up 6%, even as new license revenue declined 3% (which DS says reflect their expectation that 2016 will be weighted towards the second half of the year). On a non-IFRS and constant currency basis, CATIA software revenue increased 5% with double-digit growth in new licenses; ENOVIA software revenue increased 11% with 30% growth in new license revenue growth; SOLIDWORKS software revenue increased 8% on strong growth in maintenance subscriptions. BUT revenue from Other software decreased 2% due to the comparison to a strong quarter a year ago. I need to listen to the analyst session replay to see if there’s any more detail on whether there’s more to this and which brands are most affected. DS confirmed prior guidance of non-IFRS revenue growth of 6% to 7% in constant currencies for total revenue of €2.98 billion to €3.01 billion for 2016.

More soon on each of these but it’s an interesting foreground to a background of tech companies that announced earnings this week. Buyers like mobile devices and are buying fewer PCs; enterprise IT departments are struggling to balance their need to reduce investment in hardware with fears over cloud security and what “the cloud” means for users and system administrators. Traditional IT vendors are scrambling to reinvent themselves to these newer and often ratable revenue streams –lower now, more stable later isn’t just a PTC issue– and new competitors who can move more quickly. Intel, EMC, IBM and SAP all announced results that disappoint investors as their legacy businesses continue to shrink and new sources of revenue aren’t mature enough to make up the gap. Each company has to figure out how to deal with its unique set of challenges; Intel is laying off 12,000 people (11% of its workforce) in the most extreme example of cost-cutting while DS is relying on its industry diversification and PTC on its IoT-related offerings to boost revenue growth. Interesting times.