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Randall S. Newton, July 31, 2007
On July 5, 2007 PTC (Nasdaq: PMTC) announced it was revising downward
its previous revenue guidance for the third quarter of fiscal 2007,
which ended June 30, 2007. PTC issued its quarterly report, and offered
explanations for what happened and what the company is doing in
response. The changes may offer an opportunity for investors to jump in
at a low point, but consider us not amused by the sleepy-headed senior
leadership that put PTC in this position.
If you have read other news reports on PTC’s results, you may be
surprised to learn that the company dismissed approximately 200
employees this week. That bit of news was not in the company’s press
release; it only came out during a conference call with analysts.
First, the Basic Numbers
PTC reported revenue of $225.1 million for the third quarter of
fiscal 2007 (ended June 30, 2007), up 4% from the same period last year.
Total license revenue for the period was $62.1 million, a decline of 5%
year-over. The company said Q3 results reflected year-over-year revenue
growth in Europe and the Pacific Rim, offset by declines in North
America and Japan. Explaining that it was a quarter of both good and bad
news, PTC said it “delivered continued growth” in its Enterprise
Solutions product category, but that Desktop Solutions revenue declined
year-over.
The company also achieved the highest level of quarterly maintenance
revenue in the company’s history, at $162.9 million, up 9% year-over. At
the same time, total license revenue dropped 5% year-over to $62
million, the lowest tally since Q2 2006.
Quarterly Line Chart (click for larger view)
Reversal of Valuation Allowance Against Deferred Tax Assets
During the PTC conference call announcing Q3 results, company CFO
Neil Moses explained the valuation allowance and its reversal. “After
reviewing results from the quarter we concluded that we needed to
reverse the valuation allowance which was established back in 2002. We
came to this conclusion based on our improved financial performance over
the past three years and the likelihood of continued profitability in
the US. The reversal impacts our income statement and our balance sheet,
although it does not impact cash.”
