Heppelmann added, “Our PLM market momentum was evident in Q4 as we delivered record quarterly revenue in the Americas as customers continued to deepen their relationships with PTC. Market adoption of our Creo® next-generation CAD solutions is benefiting from our 2.0 release delivered this past spring and we anticipate continued momentum in FY’13. The pipeline for SLM again expanded in Q4 and with the addition of complementary SLM solutions from Servigistics, we are excited about our unique positioning in the growing after-market service market.”
“We had 35 large deals (recognized license + services revenue of more than $1 million) in Q4’12, driven primarily by activity in the Americas, where the number of large deals increased 90% year over year. For FY’12 large deal activity was approximately flat year-over-year, however the mix of large deal revenue was skewed more heavily toward Services, reflecting strong Enterprise implementation activity and a lower level of large license transactions. During the quarter we recognized revenue from leading organizations such as CooperStandard, L.L. Bean, Pratt & Whitney Rocketdyne, Knorr Bremse, KHS, Stryker, and the United States Army.”
Jeff Glidden, chief financial officer, commented, “From a profitability standpoint we had another solid quarter; we delivered $0.50 non-GAAP EPS and achieved a 24.5% non-GAAP operating margin. For the full year, our non-GAAP EPS increased 20% year over year to $1.51 and we achieved a non-GAAP operating margin of 19.6%, up 190 basis points year over year. We ended Q4 with $490 million of cash, up from $238 million at the end of Q3, reflecting in part $230 million in proceeds drawn from our credit facility to finance the Servigistics acquisition (which was paid when the acquisition closed on October 2, 2012) and $20 million in operating cash flow. For FY’12 we had a solid year from a cash flow perspective, generating $217 million or $1.80 per share in operating cash flow.” In Q4, GAAP EPS was a loss of $0.71 reflecting a $124 million non-cash charge to the income tax provision to establish a valuation allowance against deferred U.S. tax assets. Q4 GAAP operating margin was 17.7%.
“Given our mix of revenue and expenses, historical profitability by region, and revenue and profitability outlook for FY’13, we are establishing a valuation allowance against our deferred tax assets in the U.S. This resulted in a non-cash $124 million GAAP charge in Q4,” Glidden concluded.
Outlook Commentary
“We continue to be excited about our long-term growth opportunity based on the strength of our pipeline, our increased sales capacity, market acceptance of our products in core markets, as well as the significant interest we are seeing in our broader solution areas. Given the slowdown in the global manufacturing industry and uncertainty about the near-term economy, we believe it is prudent to provide a guidance range that reflects moderated revenue growth for FY’13,” said Heppelmann. “Importantly, we remain committed to driving operating margin expansion and achieving our goal of 25% to 27% non-GAAP operating margin in FY’15.”
Glidden added, “For Q1’13, we are providing guidance of $315 to $325 million in non-GAAP revenue with $75 to $85 million in license revenue, approximately $75 million in services revenue and $165 million in non-GAAP maintenance revenue. We are expecting Q1 non-GAAP EPS of $0.30 to $0.35 and GAAP EPS of $0.36 to $0.40, which includes $16 million of charges related to our previously announced Q1’13 restructuring.” The Q1 guidance assumes $1.30 USD / EURO, a non-GAAP tax rate of 23%, a GAAP tax benefit of approximately $42 million in part reflecting a one-time non-cash tax benefit associated with purchase accounting of the Servigistics acquisition and 122 million diluted shares outstanding. The Q1 non-GAAP guidance excludes $2 million of the effect of purchase accounting on maintenance revenue from Servigistics, $12 million of stock-based compensation expense, $16 million of restructuring costs, $5 million of acquisition related expenses, $11 million of acquisition-related intangible asset amortization expense, their related income tax effects, as well as any one time tax items.
Glidden continued, “Looking to the full year FY’13, we are targeting non-GAAP revenue of $1,360 to $1,380 million, representing 8% to 10% year-over-year growth. We are targeting license revenue of $370 to $380 million (up 6% to 9% year-over-year), services revenue of $330 to $340 million and non-GAAP maintenance revenue of approximately $660 million. Our commitment to profitability remains on track, and we believe that the cost control actions we initiated in Q1’13 help to position us to achieve our FY’13 EPS target, despite the lower view on revenue. We continue to work toward improvement in services non-GAAP net margins with a target of at least 12% for the year, and we are targeting approximately 200 basis points of non-GAAP operating margin improvement during FY’13. Our FY’13 non-GAAP EPS target is $1.70 to $1.80.” We are targeting GAAP revenue of $1,356 to $1,376 million and GAAP EPS of $1.10 to $1.20.
The FY’13 targets assume a non-GAAP tax rate of 23%, a GAAP tax rate of 5% and 122 million diluted shares outstanding. The FY’13 non-GAAP targets exclude approximately $16 million in restructuring charges, $4 million for the effect of purchase accounting on acquired Servigistics deferred revenue, $50 million of stock-based compensation expense, $50 million of acquisition-related intangible asset amortization, $7 million of acquisition-related expenses, their related income tax effects, as well as any one time tax items.
