Heppelmann continued, “We had 33 large deals (recognized license + services revenue of more than $1 million) in both Q3’14 and Q3’13. The mix of large deal revenue in Q3’14 was skewed somewhat more heavily toward license. We had one mega deal (a transaction resulting in recognized license revenue of over $5 million in the quarter) in Q3’14 in the Americas, compared to one mega deal in Q3’13 in Japan. During the quarter we recognized revenue from leading organizations such as Argo Tractors, Brother Industries, Embraer, Komatsu, Liebherr, Marks and Spencer, Mitsubishi Electric Engineering, Raytheon, Renault, the U.S. Department of Energy, and ZF Friedrichshafen.”
Jeff Glidden, chief financial officer, commented, “From a profitability standpoint, we delivered $0.53 non-GAAP EPS, above our guidance range, driven by a good mix of revenue, a lower tax rate, and cost controls in the core business, offset by investments in our Internet of Things business. We achieved a 24.2% non-GAAP operating margin. We generated $106 million in operating cash flow and used $60 million for stock repurchases. We ended the quarter with $304 million cash.” Q3 GAAP EPS was $0.32 and GAAP operating margin was 16.2%.
Outlook Commentary
“We are encouraged by a macroeconomic environment that appears healthier now than it was a year ago at this time; however, we continue to see a somewhat uncertain pace of recovery in the global manufacturing industry, with specific concerns in China. Nevertheless, our pipeline of opportunities continues to grow, which when combined with our expanding solutions portfolio, and opportunity to address key customer challenges in the IoT space, presents a compelling growth opportunity for PTC. We remain committed to improving our non-GAAP operating margin toward our FY’17 target range of 28% to 30%,” said Heppelmann.
Glidden remarked, “For Q4’14, we are providing guidance of $340 to $355 million in revenue, which includes approximately $5 million from Atego, which we acquired on June 30, 2014, with $95 to $110 million in license revenue, approximately $70 million in services revenue and approximately $175 million in support revenue. We are targeting Q4 non-GAAP EPS of $0.59 to $0.63 and GAAP EPS of $0.39 to $0.43 (excluding the pending acquisition of Axeda and acquisition accounting for Atego).”
The Q4 guidance assumes $1.35 USD / EURO and 101 YEN / USD, a non-GAAP tax rate of 22%, a GAAP tax rate of 25% and 119 million diluted shares outstanding. The Q4 non-GAAP guidance excludes $14 million of stock-based compensation expense, $12 million of intangible asset amortization expense, $2 million of acquisition-related expense and pension plan termination costs, their related income tax effects, as well as any additional discrete tax items or restructuring costs.
Glidden continued, “We are targeting FY’14 revenue of $1,330 to $1,345 million, with license revenue of $352 to $367 million, services revenue of approximately $293 million, and support revenue of approximately $685 million. We are targeting non-GAAP EPS of $2.10 to $2.14 and GAAP EPS of $1.40 to $1.44 (excluding the pending acquisition of Axeda and acquisition accounting for Atego).”
The FY’14 targets assume a tax rate of 23%, and 120 million diluted shares outstanding. The FY’14 non-GAAP guidance excludes $52 million of stock-based compensation expense, $50 million of intangible asset amortization expense, $2 million of restructuring charges, $9 million of acquisition-related charges and pension plan termination costs and their related income tax effects, as well as any additional discrete tax items or restructuring costs.
Preliminary Directional Color on FY’15
“We are in the midst of our annual planning process, and will be providing formal FY’15 guidance in conjunction with our Q4 earnings release later this year. However, we wanted to provide some directional insight into our next fiscal year. Assuming a stable macroeconomic environment and no significant currency fluctuations, we are currently targeting non-GAAP EPS growth in the low to mid teens, with total revenue growth in the low to mid single digit range, including Atego and Axeda (once acquired). We expect a favorable revenue mix shift with low double digit license growth, flat services revenue, and low to mid single digit growth in our support business. This is based on the size and strength of our pipeline reflecting increasing customer interest in our solutions, coupled with our initiatives and commitment to enhancing profitability. Finally, we expect our non-GAAP tax rate to be approximately 22% in FY’15 and beyond,” said Glidden.
Q3 Earnings Conference Call and Webcast
Prepared remarks for the conference call have been posted to the investor relations section of our website. The prepared remarks will not be read live; the call will be primarily Q&A.
| What: | PTC Fiscal Q3 FY’14 Conference Call and Webcast | |
| When: |
Thursday, July 24, 2014 at 8:30 am (ET) |
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| Dial-in: | 1-800-857-5592 or 1-773-799-3757 | |
| Call Leader: James Heppelmann | ||
| Passcode: PTC | ||
| Webcast: | ||
| Replay: | The audio replay of this event will be archived for public replay until 4:00 pm (CT) on August 4, 2014. | |
| Dial-in: 1-888-566-0650 Passcode: 8672 | ||
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To access the replay via webcast, please visit www.ptc.com/for/investors.htm . |
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