Bookings Metric
We offer both perpetual and subscription licensing options to our customers. Given the difference in revenue recognition between the sale of a perpetual software license (revenue is recognized at the time of sale) and a subscription (revenue is deferred and recognized ratably over the subscription term), we use bookings for internal planning, forecasting and reporting of new license and cloud services transactions. In order to normalize between perpetual and subscription transactions, we define bookings as either the annualized contract value (ACV) of a new subscription multiplied by a conversion factor of 2 or the perpetual license revenue recognized. We arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. We define ACV as the total value of a new subscription solutions booking divided by the term of the contract (in days) multiplied by 365, unless the term is less than one year, in which case the contract value equals the ACV. When calculating L&SS bookings for a period, we add the value of the converted subscription solutions bookings for the period to our perpetual license revenue for the period.
Important Information about Non-GAAP References
PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue (and the components thereof), non-GAAP operating expenses, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of purchase accounting on the fair value of acquired deferred revenue, stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, acquisition-related expenses, costs associated with terminating a U.S. pension plan, the litigation accrual described above in “Other Important Information,” certain identified non-operating gains and losses, the related tax effects of the preceding items, and certain discrete tax items. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.
Forward-Looking Statements
This press release contains preliminary results for the third quarter of 2015. Actual results may differ materially from those stated as a result of finalization of our third quarter financial statements, including as a result of an increase in the litigation accrual described above in “Other Important Information”.
PTC, the PTC logo, and all other PTC product names and logos are trademarks or registered trademarks of PTC Inc. or its subsidiaries in the United States and in other countries.
About PTC
PTC (NASDAQ: PTC) is a global provider of technology platforms and enterprise applications for smart and connected products, operations, and systems. PTC’s enterprise applications serve manufacturers and other businesses that create, operate and service products. Led by its award winning ThingWorx® application enablement platform, PTC’s platform technologies help companies deliver new value emerging from the Internet of Things. An early pioneer in Computer Aided Design (CAD) software, PTC today employs more than 6,000 professionals serving more than 28,000 businesses worldwide.
| Reconciliation of GAAP to Non-GAAP revenue (in millions) | ||||||||||||
| GAAP Revenue | $ | 303 | ||||||||||
| Fair value adjustment of acquired deferred revenue | 1 | |||||||||||
| Non-GAAP Revenue | $ | 304 | ||||||||||
| Reconciliation of GAAP to Non-GAAP EPS | Diluted EPS Range | |||||||||||
| Diluted GAAP EPS | $ | 0.13 | - | $ | 0.14 | |||||||
| Fair value adjustment of acquired deferred revenue | 0.01 | 0.01 | ||||||||||
| Stock-based compensation expense | 0.12 | 0.12 | ||||||||||
| Intangible asset amortization expense | 0.12 | 0.12 | ||||||||||
| Accrual for pending legal settlement | 0.12 | 0.12 | ||||||||||
| Acquisition-related charges | 0.02 | 0.02 | ||||||||||
| Pension plan termination costs | 0.02 | 0.02 | ||||||||||
| Restructuring charges, net | 0.04 | 0.04 | ||||||||||
| Income tax adjustments (1) | (0.07 | ) | (0.07 | ) | ||||||||
| Diluted Non-GAAP EPS | $ | 0.51 | - | $ | 0.52 | |||||||
