Total revenue was up 7% from last year; more proof of a manufacturing sector recovery. The SharePoint-based PDM offering is gaining momentum. We think PTC has put primping for a suitor into high gear.

PTC (NASDAQ: PTMC) turned in a good second quarter, with consistent evidence that an economic rebound has started, at least in manufacturing. Revenue in the quarter (ending March 31, 2010) was $240.6 million, up 7% from $225.3 a year earlier. On a constant currencies basis, revenue was up 3%.

License revenues drove second quarter results, up 54% to $64.6 million. On a constant currencies basis, license revenue was up 48%, year-over-year (YOY).

Services revenue in the quarter was $175.9 million, down slightly from $183.2 million YOY. Maintenance revenue was flat at $122 million. The lagging services and maintenance revenue results are a by-product of poor license sales in 2009.

Net income was $9 million, up from $7.2 million a year earlier.

Large Deals Up Significantly
PTC tracks “large deals,” which it defines as new sales over $1 million. There were 18 such large deals, up sequentially from 10 in the first quarter, which is traditionally a strong quarter (the second quarter is traditionally a weak quarter).

PTC considers its ProductPoint PDM product, based on Microsoft SharePoint technology, to be a door-opener with accounts that might otherwise not talk to PTC. There were 105 new SharePoint accounts added in the quarter, bringing the total to 321.

Cash per share on March 31, 2010 was $1.90, down a bit from $1.97 at the end of 2009. PTC paid down on its line of credit and repurchased shares during the quarter, lowering its cash and equivalents on hand to $222.7 million. Autodesk and Dassault Systèmes, by comparison, each have roughly $1 billion in cash and equivalents on hand.

President and COO James Heppelmann says PTC secured two additional strategically important ‘domino’ account wins during the quarter, bringing the total number of domino account wins to 13.

Still Expecting to Make A Billion
Looking ahead to fiscal year 2010, the company maintained its revenue target of $1.02 billion. For the third quarter, the company expects revenue in range of $235 million to $245 million.

PTC expects license revenue to grow year-over-year in a range of 35% to 40% for fiscal 2010 and 30% for the third quarter.

The Final Analysis
For the last two quarters, PTC has been preparing increasingly detailed narrative reports to accompany its required financial disclosure. These reports go beyond the traditional putting a good spin on the numbers; they are explaining in great detail what PTC believes is their rising prominence in the marketplace.

It seems to us that PTC is pitching beyond the usual gang of institutional investors who buy their stock; instead they are talking to the principals at the hedge funds who might be convinced to buy PTC and take it private. In mid-2008 there were rumors floating around Wall Street that PTC had retained a counsel to assist in the process, but the recession soon put a stop to such talk. The rumor was going around not long after PTC’s board approved a huge payout plan for
senior executives that would only take place if the company were to be acquired.

In short, we think PTC is back to preening for potential suitors. In February we put 5-1 odds on PTC being taken private in 2010; that’s our story and we’re sticking to it. §

Six charts follow; the first five are created by VEKTORRUM, the last one is provided by PTC.

Contributing Analyst L. Stephen Wolfe, P.E. contributed research for this article.