Windchill is hot; desktop products are not. The “Domino Accounts” continue to fall PTC’s way. A billion in annual revenue is back in sight. Digging into PTC’s first quarter numbers yields interesting results.
By Randall S. Newton
February 26, 2010–PTC (Nasdaq: PMTC) has announced encouraging first quarter results, for the period ending January 2, 2010. The company posted revenue of $258 million, up 8% year-over-year. On a constant currency basis, 1Q10 revenue was up 3% and license revenue up 43%. The company resumed offering guidance for future quarters.
Net income for the quarter was $18 million, up from $5 million a year earlier.
License revenue in the quarter was $74.8 million, up compared to $50.5 million in the first quarter of fiscal 2009. Service revenue in 1Q10 was $183.6 million, down slightly from $189.9 million in 1Q09.
Desktop revenue (primarily Pro/ENGINEER but also other products including Arbortext and MathCAD) was $136 million in 1Q10, down from $145 million in 1Q09. Within Desktop, maintenance was $95 million (down from $100 million a year earlier) while license revenue was $30 million (down from $32 million a year earlier).
Enterprise revenue (primarily Windchill PLM) was $123 million, up from $96 million a year earlier. Within Enterprise, maintenance was $32 million (up slightly from $31 million a year earlier) and license revenue was $45 million (up sharply from $18 million a year earlier).
After more than a year of maintaining silence about future quarters, PTC is again issuing guidance. The company expects 30% license growth in FY10, based on the strength of Windchill PLM. The second quarter estimate is for revenue of $235 million to $245 million. For the full year PTC estimates revenue of $1.01 billion.
Cash per share on December 31, 2009 was $1.97, among the lower CPS figures for the companies we cover.
The Final Analysis
PTC continues to make good on its promise to land key accounts it calls the Dominos. PTC defines a Domino as a large manufacturer, considered a leader in its field, under pressure to deliver innovative products. PTC has now closed on 11 of the 12 domino accounts it originally targeted for 2010, so the goal is now 15 such accounts. In addition to the Dominos, PTC says it is working to unseat the competition at more than 200 other accounts.
In comments to analysts, PTC made the case that its enterprise revenues are growing along with indirect sales of desktop systems. While PTC had a better than expected quarter, most of the boost was due to a few large orders, most notably Nokia, Volvo, Raytheon, GE Medical Systems, and Cummins. The last two were displacements. We lack hard numbers from some of the competition, but it seems safe that for the last four quarters PTC’s Windchill PLM has been the enterprise volume leader. The big win with EADS (Airbus) two years ago still continues to propel new large sales.
Desktop revenues have been flat for four years with new licenses trending down and software maintenance rising slightly. Desktop sales include Pro/E, CoCreate, CADDS, MathCAD, and Arbortext. Given all the acquisitions in the “desktop” area, one would expect growth to be a bit more robust.
Although the number of $1 million-plus deals rose from nine to 10 in the last quarter, PTC’s average order size for such deals almost doubled from $2.7 million a year ago, to $5.0 million.
Seven charts follow.
Contributing Analyst L. Stephen Wolfe, P.E. contributed research for this report.