All financial measures in this presentation are non-GAAP financial measures. A reconciliation between the non-GAAP measures and the comparable GAAP measures is located in our Prepared Remarks document on the Investor Relations page of our website at www.ptc.com.With us this morning, we have Jim Heppelmann, Jeff Glidden and Barry Cohen. With that, I'll turn the call over to Jim. James E. Heppelmann Thanks, Tim. Good morning, and thank you, all, for joining us on the call this morning. In line with the comments we've previously made on the April 5 call, we at PTC were disappointed with the overall results from our Q2 of FY '12. But at the same time, we did see many important bright spots that suggest we're making good progress on our longer-term initiatives. On the revenue front, in Q2, the license shortfall we experienced was confined to the large deal category of license transactions above $1 million. And of course, it was most acute in the category of megadeal license transactions above $5 million, where we failed to close the large forecasted European transaction that we spoke about on the earlier call. Had we secured this deal, we would've posted a decent quarter relative to our guidance range and relative to last year. But beyond that single transaction, the large deal category in general was weaker than expected in North America, where our performance came in below our forecast. Naturally, we have investigated this situation in some detail and find that the shortfall is not easily attributable to a single factor, but rather, a combination of factors that are hardly characterized with a blanket statement. There was, for example, a defense-oriented deal whose funding was intercepted by another defense program. Several situations where our customer decided to take a more cautious approach and spread a large upfront purchase out over several phases and, thus, placed a smaller initial order than we had forecasted. And there was a sizable expansion order in a commercial customer that was interrupted by acquisition dynamics, in some way similar to the large European deal. So please note that none of these situations directly involved competitors. And in each case, we do expect to ultimately secure all of this revenue.
I think in every quarter's forecast, there are deals that move in and deals that move out and deals that change in size. So in Q2, we can't really attribute the results to changes in the economic situation or to competitive dynamics, but rather, to poor forecasting and execution. This is something we'll have to monitor closely in the back half of the year. As we've mentioned, we are approaching the go-live date this quarter for a new CRM system and look forward to the improvements in pipeline visibility and forecasting accuracy that we expect to see from that investment and from the process changes that it will enable.Aside from the big deal issue we've discussed, there were many notable bright spots in the quarter. Our maintenance and services business both posted strong revenue results, as did our reseller channel, and even our base business of smaller transactions in the direct channel. We were pleased with the performance of the MKS Integrity acquisition and excited about new strengths we are seeing in Japan, both in the quarter and in the pipeline going forward. We did secure a follow-on license transaction from a large Korean automotive OEM that serves to expand their Phase 1 user base, and we're continuing to work with them on Phase 2 deployment plans in the incremental license expansion opportunities that surround that. So the foundation of our business remains healthy. On the product front, Q2 was a strong quarter, as we delivered Creo version 2.0, which is a significant MCAD release that's likely to become a major destination for our MCAD customer base. We also delivered significant Windchill enhancements in Windchill 10.1, including mobile platform support and integration to the Integrity ALM Suite that will enable a much stronger cross-sell story going forward. Included in this release are our new capabilities for quality lifecycle management and important enhancements to our supply chain planning and optimization capabilities. We also released Mathcad Prime 2.0, another major destination release for our customer base. So together, these developments on the product front will do a lot to help us expand PTC's competitive advantage and solidify our growth opportunities going forward. Read the rest of this transcript for free on seekingalpha.com