PTC Announces Q2 FY’12 Results, Issues Q3 Guidance and Revised

PTC Announces Q2 FY’12 Results, Issues Q3 Guidance and Revised FY’12 Targets

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our fiscal 2012 financial expectations and other future financial and growth expectations, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that customers may not purchase our solutions when or at the rates we expect, the possibility that foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense, the possibility that we may not achieve the license, services or maintenance growth rates that we expect, which could result in a different mix of revenue between license, service and maintenance and could impact our EPS results, the possibility that increases in sales capacity might not generate the additional sales pipeline and revenue that we expect, the possibility that new product releases and the MKS and 4CS businesses may not generate the revenue we expect, the possibility that we may be unable to achieve our profitability targets with lower license revenue, and the possibility that remedial actions we are taking in China following our previously announced investigation could adversely affect our revenue in China. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses and profits and loans and cash repatriations from foreign subsidiaries. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

PTC and all other PTC product names and logos are trademarks or registered trademarks of Parametric Technology Corporation or its subsidiaries in the United States and in other countries.

About PTC ( www.ptc.com)

PTC (Nasdaq: PMTC) enables manufacturers to achieve maximum value from their product strategies with software and services designed to optimize key business processes throughout the entire product lifecycle – from conception and design to sourcing and service. PTC’s integral solution portfolio enables customers to unleash product innovation, improve collaboration and ensure product data integrity within engineering and across the enterprise, supply chain and service partner networks. Founded in 1985, PTC employs over 6,000 professionals serving more than 27,000 customers worldwide. More information can be found at www.ptc.com.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)


	Three Months Ended						Six Months Ended
	March 31,			April 2,			March 31,			April 2,
	2012			2011			2012			2011

Revenue:
License	$	74,779		$	74,215		$	163,867		$	149,688
Service		226,346			194,974			455,534			386,053
Total revenue		301,125			269,189			619,401			535,741

Cost of revenue:
Cost of license revenue ⁽¹⁾		7,824			6,558			15,483			12,512
Cost of service revenue ⁽¹⁾		85,392			75,213			175,952			155,320
Total cost of revenue		93,216			81,771			191,435			167,832

Gross margin		207,909			187,418			427,966			367,909

Operating expenses:
Sales and marketing ⁽¹⁾		90,962			81,163			188,740			165,684
Research and development ⁽¹⁾		54,576			53,051			109,569			104,573
General and administrative ⁽¹⁾		29,534			24,712			59,106			48,196
Amortization of acquired intangible assets		5,132			4,266			10,341			8,120
Restructuring charges		20,802			-			20,802			-
Total operating expenses		201,006			163,192			388,558			326,573

Operating income		6,903			24,226			39,408			41,336
Other expense, net		(2,967	)		(822	)		(5,610	)		(2,708	)
Income before income taxes		3,936			23,404			33,798			38,628
Provision for income taxes		367			4,387			8,106			6,351
Net income	$	3,569		$	19,017		$	25,692		$	32,277

Earnings per share:
Basic	$	0.03		$	0.16		$	0.22		$	0.27
Weighted average shares outstanding		119,003			118,194			118,356			117,501

Diluted	$	0.03		$	0.16		$	0.21		$	0.27
Weighted average shares outstanding		121,401			121,502			120,985			121,317



(1)The amounts in the tables above include stock-based compensation as follows:


	Three Months Ended						Six Months Ended
	March 31,			April 2,			March 31,			April 2,
	2012			2011			2012			2011
Cost of license revenue	$	7		$	3		$	12		$	6
Cost of service revenue		2,171			1,583			4,684			3,720
Sales and marketing		3,306			2,350			7,034			4,779
Research and development		2,240			1,749			4,789			4,142
General and administrative		4,968			4,186			9,555			8,251
Total stock-based compensation	$	12,692		$	9,871		$	26,074		$	20,898

PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

			Three Months Ended						Six Months Ended
			March 31,			April 2,			March 31,			April 2,
			2012			2011			2012			2011

GAAP revenue			$	301,125		$	269,189		$	619,401		$	535,741
Fair value of acquired MKS deferred maintenance revenue				736			-			2,258			-
Non-GAAP revenue			$	301,861		$	269,189		$	621,659		$	535,741

GAAP gross margin			$	207,909		$	187,418		$	427,966		$	367,909
Fair value of acquired MKS deferred maintenance revenue				736			-			2,258			-
Stock-based compensation				2,178			1,586			4,696			3,726
Amortization of acquired intangible assets included in cost of license revenue				3,931			3,339			8,034			6,702
Non-GAAP gross margin			$	214,754		$	192,343		$	442,954		$	378,337

GAAP operating income			$	6,903		$	24,226		$	39,408		$	41,336
Fair value of acquired MKS deferred maintenance revenue				736			-			2,258			-
Stock-based compensation				12,692			9,871			26,074			20,898
Amortization of acquired intangible assets included in cost of license revenue				3,931			3,339			8,034			6,702
Amortization of acquired intangible assets				5,132			4,266			10,341			8,120
Acquisition-related charges included in general and administrative expenses				444			608			2,512			608
Restructuring charges				20,802			-			20,802			-
Non-GAAP operating income ⁽²⁾			$	50,640		$	42,310		$	109,429		$	77,664

GAAP net income			$	3,569		$	19,017		$	25,692		$	32,277
Fair value of acquired MKS deferred maintenance revenue				736			-			2,258			-
Stock-based compensation				12,692			9,871			26,074			20,898
Amortization of acquired intangible assets included in cost of license revenue				3,931			3,339			8,034			6,702
Amortization of acquired intangible assets				5,132			4,266			10,341			8,120
Acquisition-related charges included in general and administrative expenses				444			608			2,512			608
Restructuring charges				20,802			-			20,802			-
Non-operating foreign currency transaction loss ⁽³⁾				-			-			761			722
Income tax adjustments ⁽⁴⁾				(11,412	)		(5,848	)		(18,090	)		(11,658	)
Non-GAAP net income			$	35,894		$	31,253		$	78,384		$	57,669

GAAP diluted earnings per share			$	0.03		$	0.16		$	0.21		$	0.27
Stock-based compensation				0.10			0.08			0.22			0.17
Amortization of acquired intangibles				0.07			0.06			0.15			0.12
Acquisition-related charge				-			0.01			0.02			0.01
Restructuring charges				0.17			-			0.17			-
Income tax adjustments				(0.09	)		(0.05	)		(0.15	)		(0.10	)
All other items identified above				0.02			-			0.03			0.01
Non-GAAP diluted earnings per share			$	0.30		$	0.26		$	0.65		$	0.48

(2	)	Operating margin impact of non-GAAP adjustments:
			Three Months Ended						Six Months Ended
			March 31,			April 2,			March 31,			April 2,
				2012			2011			2012			2011
GAAP operating margin				2.3	%		9.0	%		6.4	%		7.7	%
Fair value of deferred maintenance revenue				0.2	%		0.0	%		0.4	%		0.0	%
Stock-based compensation				4.2	%		3.7	%		4.2	%		3.9	%
Amortization of acquired intangibles				3.0	%		2.8	%		3.0	%		2.8	%
Acquisition-related charges				0.1	%		0.2	%		0.4	%		0.1	%
Restructuring charges				6.9	%		0.0	%		3.4	%		0.0	%
Non-GAAP operating margin				16.8	%		15.7	%		17.6	%		14.5	%

(3)			In the first quarter of 2012 we recorded $0.8 million of foreign currency transaction losses related to MKS legal entity mergers completed during the quarter. In the first quarter of 2011 we recorded $0.7 million of foreign currency losses related to a previously announced litigation settlement in Japan.

(4)			Reflects the tax effects of non-GAAP adjustments for the three and six months ended March 31, 2012 and April 2, 2011, which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above, as well as a one-time non-cash charge of $1.4 million related to the impact from a reduction in the statutory tax rate in Japan on deferred tax assets from a litigation settlement recorded in the first quarter of 2012.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


	March 31,		September 30,
	2012		2011

ASSETS

Cash and cash equivalents	$	224,107	$	167,878
Accounts receivable, net		204,437		230,220
Property and equipment, net		64,021		62,569
Goodwill and acquired intangible assets, net		821,727		835,411
Other assets		344,324		333,604

Total assets	$	1,658,616	$	1,629,682

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	341,354	$	294,324
Borrowings under revolving credit facility		160,000		200,000
Other liabilities		299,269		312,668
Stockholders' equity		857,993		822,690

Total liabilities and stockholders' equity	$	1,658,616	$	1,629,682

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)



	Three Months Ended						Six Months Ended
	March 31,			April 2,			March 31,			April 2,
	2012			2011			2012			2011

Cash flows from operating activities:
Net income	$	3,569		$	19,017		$	25,692		$	32,277
Stock-based compensation		12,692			9,871			26,074			20,898
Depreciation and amortization		16,259			14,651			33,285			28,720
Accounts receivable		25,403			16,857			38,698			15,899
Accounts payable and accruals ⁽⁵⁾		18,988			3,916			(13,868	)		(25,317	)
Deferred revenue		35,557			34,594			33,482			27,169
Litigation settlement		-			-			-			(52,129	)
Income taxes		(9,492	)		(7,129	)		(11,901	)		(9,198	)
Excess tax benefits from stock-based awards		(303	)		(268	)		(453	)		(530	)
Other		(6,124	)		(13,233	)		2,025			(7,551	)
Net cash provided by operating activities		96,549			78,276			133,034			30,238

Capital expenditures		(9,054	)		(6,148	)		(16,624	)		(11,560	)
Acquisitions of businesses, net of cash acquired		(290	)		-			(1,170	)		-
Payments on debt		(40,000	)		-			(40,000	)		-
Proceeds from issuance of common stock		6,927			3,742			14,123			15,974
Payments of withholding taxes in connection with vesting of stock-based awards		(6,804	)		(4,788	)		(19,465	)		(21,956	)
Repurchases of common stock		(14,983	)		-			(14,983	)		-
Excess tax benefits from stock-based awards		303			268			453			530
Foreign exchange impact on cash		4,108			5,239			861			6,025

Net change in cash and cash equivalents		36,756			76,589			56,229			19,251
Cash and cash equivalents, beginning of period		187,351			182,915			167,878			240,253
Cash and cash equivalents, end of period	$	224,107		$	259,504		$	224,107		$	259,504

(5)

Includes accounts payable, accrued expenses, and accrued compensation and benefits

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