PTC posts modest gains but warns of downturn

Commercial aviation, life sciences, and electronics are doing well for PTC, but defense is weak.

PTC today reported second quarter revenue results showing modest gains in most regions and product lines, but warned of weakening markets across much of the globe. Financial analysts who cover the CAD/PLM market (also covered as part of the larger technical software market) often refer to PTC as the bellwether company for showing changing macroeconomic trends. If this is the case, there could be another modest downturn in manufacturing activity in the next two quarters.

Total revenue for the quarter, ending March 31, 2013, was $314 million, up 4.3% from $301 million in 2Q12. By revenue categories:

License revenue of $ 79.7 million, up 6.5% from $74.8 million a year earlier
Support revenue of $161.1 million, up 7% from $150.5 million a year earlier
Service revenue of $73 million, down 3.7% from $75.8 million a year earlier.

PTC’s total revenue in the second quarter of 2013 is a 2Q record.

Net income in the quarter was $17 million, up 385% from $3.5 million a year earlier, a particularly bad bottom-line quarter for the company.

Revenue by regions:

North America, $118.7 million, up 8.5% from 2Q12
Europe, $118.9 million, up 2.6% from 2Q12
Asia, $77 million, up 1.4% from 2Q12.

PTC revenue is well-balanced globally; however most of the Asia revenue is from Japan where PTC has long enjoyed a competitive edge over its rivals.

During the conference call with analysts, PTC said some manufacturing sectors are not experiencing downturn, including commercial aviation, electronics, and life sciences. Defense is weakening as governments restrict spending, and automotive is down from a post-recession peak a year ago.

In a response to a question about Software as a Service trends in manufacturing, CEO James Heppelmann suggested enterprise manufacturing businesses are taking a wait-and-see attitude toward cloud-based deployments of PLM. This echoes a comment we heard last week from a Siemens PLM executive; both have cloud versions of their software available, yet are seeing weak demand. Heppelmann said there is more interest in cloud-based deployments in their newer software lines, now part of the PTC portfolio through acquisitions in the last three years.

PTC maps product family revenues into the following categories: