Parametric Technology Corporation CEO Discusses Q1 2011 Results - Earnings Call Transcript

Parametric Technology Corporation ( PMTC)

Q1 2011 Earnings Call

January 27, 2011 8:30 a.m. ET

Executives

Kristian Talvitie - Senior Vice President of Investor Relations

Jim Heppelmann - President & Chief Executive Officer

Jeff Glidden - Executive Vice President & Chief Financial Officer

Barry Cohen - Executive Vice President of Strategy

Analysts

Sterling Auty – JP Morgan

Yun Kim – Gleacher

Blair Abernethy – Stifel Nicolaus

Steven Koenig – Longbow Research

Richard Davis – Canaccord

Ross Macmillan - Jefferies & Company

Ben Rose - Battle Road Research

Andrew Kaplan - Deutsche Bank

Presentation

Operator

Good morning ladies and gentlemen and welcome to PTC’s first quarter fiscal year 2011 results conference call. After brief comments by management we will go directly into question and answer session. If anyone should require assistance during the call please press star followed by the 0 on your touchtone phone. As a reminder ladies and gentlemen, this conference is being recorded. I would now like to introduce Mr. Kristian Talvitie, PTC’s Senior Vice President of Investor Relations. Please go ahead.

Kristian Talvitie

Good morning, good afternoon everyone. Before we get started I just want to 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 filed with the SEC.

All financial measures on this call are non-GAAP financial measures. A reconciliation between the non-GAAP measures and the comparable GAAP measures is located in the prepared remarks document on the investor relations page of our Web site at www.ptc.com.

Here today are Jim Heppelmann, President and CEO, Jeff Glidden, CFO, and Barry Cohen, EVP of Strategy. With that I’ll turn the call over to Jim.

Jim Heppelmann

Good. Thank you Kristian. Well, good morning to everybody. Good morning here from snowy Needham where we have a foot of fresh snow on the ground. But the PTC management team being very loyal and commitment all found a way to get to the office. I’d like to say we’re very pleased with what we think was a very strong first quarter and a very good start to our fiscal ’11 year.

We really see a good balance of revenue strength across almost all of our product lines, across our direct and indirect channels, across our different geographies and so forth. It was really pretty much solid across the board. We also saw a good continued momentum with Domino wins and we’ll talk about it. We saw pretty good progress in monetizing some of the previous Domino wins as well. So I’d like to start with some comments regarding the automotive industry in general and the win at Hyundai Kia Motors Company in particular.

So just to give you some background context, automotives is the biggest vertical within the manufacturing industry. That said, the automotive segment has been an historical strength of some of our competitors, Siemens and Dassault in particular, and relatively speaking PTC has been under represented in the automotive industry over the years. Now at the same time, we felt that with the competitive strength we have in PLM we ought to be able to fix that to our advantage. We should be better represented in the automotive industry.

So I think right now and really over the last six quarters or so we’re starting to see a lot of good progress of PTC taking share in this very important automotive segment. So if I look at the last 18 months or so, we’ve had competitive displacement wins, may of which we’ve announced at places like Volvo Truck, which is one of the world’s biggest truck companies, at Continental and as well separately at Schaeffler. And I think some of you know that Continental and Schaeffler are merging together to become the world’s biggest automotive supplier.

We had a very important win at Cummins, at Harley-Davidson, ArvinMeritor and a number of others. But really prior to this last quarter what we hadn’t succeeded in doing was penetrating one of the passenger vehicle automotive OEMs. And the passenger vehicle automotive OEMs are by far the biggest segment for enterprise PLM. Now we had some presence with CAD and power train and we had some presence with our Windchill software next to the CAD software we had sold. But in terms of enterprise PLM PTC really didn’t have a single automotive OEM account we could point to.

And of course that held us back because whenever we got in an engagement we didn’t have a good automotive OEM reference to use. So obviously we’re very pleased to announce what is a tremendous win at Hyundai Kia Motor Company. Now Hyundai Kia win, HKMC as we call it, is extremely important because HKMC is the envy of the automotive industry right now, particularly the OEMs. They are currently the fifth largest in the world and they are the fastest growing. So at current speed by next year the will be the fourth largest and passing Renault Nissan in the process.

So to put that in perspective, Hyundai Kia is bigger than Ford, than Daimler, Honda, BMW, Chrysler and a long list of others. This is a big, successful company and a big, important win that will be watched carefully by the entire automotive industry. So what happened at HKMC is that two years ago HKMC decided they really needed a better PLM strategy and they began a competitive benchmark process. PTC was represented as was Siemens, Dassault and SAP. The incumbent strategy that they were looking to upgrade was a Dassault Enovia strategy. So they went through a comprehensive request for proposal process and then separately they did many months of hands on software evaluation testing the software against the HKMC requirements at the HKMC sites.

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