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Parametric Technology Q2 2010 Earnings Call Transcript

Parametric Technology Q2 2010 Earnings Call Transcript

Parametric Technology (PMTC)

Q2 2010 Earnings Call

April 28, 2010 8:30 am ET


Cornelius Moses - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Barry Cohen - Executive Vice President of Strategic Services and Partners

C. Harrison - Chairman and Chief Executive Officer

James Heppelmann - President, Chief Operating Officer, Director and Member of National FIRST Executive Advisory Board

Kristian Talvitie -


Sterling Auty - JP Morgan Chase & Co

Blair Abernethy - Thomas Weisel Partners Equity Research

Alexander Zorovic - Janney Montgomery Scott LLC

Yun Kim - Broadpoint AmTech, Inc.

Ross MacMillan - Jefferies & Company, Inc.

Richard Davis - Needham & Company, LLC

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Steven Koenig - Longbow Research LLC

Jay Vleeschhouwer - Ticonderoga Securities LLC



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Good morning, ladies and gentlemen, and welcome to the PTC's Second Quarter Fiscal Year 2010 Results Conference Call. [Operator Instructions] I would now like to introduce Kristian Talvitie, PTC's Vice President of Corporate Communications. Please go ahead.

Kristian Talvitie

Great. Thanks and good morning, everybody. Before we get started, I'd like to just quickly remind everybody that this call and Q&A session may include forward-looking statements regarding PTC's products or anticipated future operations or financial performance. Any such statements will be based on the current assumptions of PTC's management and are subject to risks and uncertainties that could cause actual events and results to differ materially. Information concerning these risks and uncertainties is contained in PTC's most recent Form 10-K and forms 10-Q on file with the SEC.

All financial measures in this discussion are non-GAAP financial measures. A reconciliation between the non-GAAP measures and the comparable GAAP measure is located in the press release and prepared remarks documents on the Investor Relations page of our website at

With that, I'd like to turn it over to Dick Harrison for a few opening comments, and then we'll right into Q&A.

C. Harrison

Thanks, Kristian, and welcome, everybody, today. We feel like we had a really nice quarter. Again, as we saw in Q1, license revenue grew in excess of 50%. 54% again, so we're greater than 50% at the halfway mark in the year in terms of license growth. We'll get into more detail on it, but we had growth in all products, in all geographies. Those of you that know our 4-box, we saw good license growth and just growth in general in all those four categories, and that just suggest strength across the entire business.

We have maintained our guidance in the face of about $18 million sort of headwind in currency for the back half of the year, which is effectively raising the guidance, and we'll talk more about that. The number of big deals, 18 deals over $1 million was substantial. It was greater than it was in the same quarter in 2008 and really suggests, and I'll confirm it for you, there's an underlying pipeline of big deals, deals greater than $1 million that's at least twice the size that it would've been a year ago at this time.

So with that, let me open it up to questions and answers.

Question-and-Answer Session


[Operator Instructions] Your first question comes from Sterling Auty from JPMorgan.

Sterling Auty - JP Morgan Chase & Co

The one area that, I guess, I need better explanation is what you characterize as the lingering hangover in the Services business, I would've thought that some of the services revenue would have either been coincident, meaning in parallel with the improvement license or even a precursor to a certain extent. Give us more explanation as to why -- I think you characterized the weak license in the first part of 2090 on Windchill is actually affecting some of the services business now. I didn't quite understand that.

James Heppelmann

Sterling, it's Jim Heppelmann. I think one way to think about the Services business is if you imagined or sort of hypothesize an average services engagement of lasting four to six quarters, then what you realize is you sort of have a rolling portfolio of services engagement, and the new quarters we're adding now are not yet offsetting the quarters that are of projects that are wrapping up. So I think it's a very positive trend, and Barry can comment in a minute that the bookings are strong for new business going forward. But we're suffering this hangover of projects that were not started back in 2009 because of the bad economy are now part of that portfolio, of that rolling portfolio services projects. And thus, the services revenues is down, but we all know pretty clearly that where license go, services will follow. So we sort of look at it -- it's more or less a type of backlog going into next year that we absolutely should expect to see that services revenue coming online next year.

Barry Cohen

The only point I'd add there it's -- when you look at the results and where we are in terms of bookings and revenues, it's a little lumpy. So when you look at North America with license revenue, which is pretty okay in 2009, service revenue actually in North America is pretty strong. And we see some of the lag is in [indiscernible] where the license was softer during 2009 like in Europe and Asia. So we're already seeing the rebound in North America, and we sort of -- we certainly expect the rest of the rebound to take place in the latter half of the this year and the beginning of next year.

James Heppelmann

I think just sort of summary, for us to post the quarter we did on a combination of revenue that was extra heavy on license and a little bit softer in services. First of all, that's not really bad news by anybody's measure.

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