01—Abstract
Summary
Summary of the 10-K filed November 23, 2010. Cited figures are marked; the original filing is the authoritative source.
Parametric Technology Corporation (PTC) develops, markets and supports product lifecycle management (PLM) software and CAx (CAD, CAM and CAE) solutions, generating revenue from software licenses, maintenance services, and consulting and training services.
For fiscal 2010 (year ended September 30, 2010), total revenue rose to $1,010.0 milliona from $938.2 million, and license revenue increased 39% to $296.0 million, driven by a 73% increase in PLM license revenue. Operating income was $74.8 million versus $19.3 million in 2009, and cash flow from operations was $156.6 million. GAAP diluted earnings per share fell to $0.20 from $0.27 because of a one-time $43.4 million tax provision tied to a legal entity reorganization; non-GAAP diluted EPS was $1.00 versus $0.80.
Management expects revenue to grow 10% to 12% and license revenue to grow 20% to 25% in fiscal 2011, and is modestly increasing investment in direct sales, research and development, and services. Cash and cash equivalents were $240.3 millionb at year end, and the company had no borrowings under a new $300 million revolving credit facility. Known near-term cash outflows include an approximately $48 million payment in the first quarter of fiscal 2011 to resolve litigation with GE Japan Corporation, and the company repurchased $62.5 million of stock in 2010 with $118.0 million remaining under its authorization.
The filing also highlights the launch of the Creo product initiative, with Creo 1.0 expected in the summer of 2011, and the renewal of the Needham, Massachusetts headquarters lease. Management characterizes the economic recovery as uncertain, and the company's results depend on large PLM deals that are lumpy and difficult to predict quarter to quarter.
02—Key points
Key Highlights
- Total revenue increased 8% to $1,010.0 million in fiscal 2010 from $938.2 million in fiscal 2009.
- License revenue grew 39% to $296.0 million, led by a 73% increase in PLM (Enterprise) license revenue.
- GAAP operating income rose to $74.8 million from $19.3 million; non-GAAP operating income was $157.7 million versus $120.9 million.
- GAAP diluted EPS was $0.20 and included a one-time $43.4 million tax provision from a legal entity reorganization; non-GAAP diluted EPS was $1.00 versus $0.80.
- Cash flow from operations was $156.6 million, with $240.3 million of cash and cash equivalents and no borrowings outstanding at year end.
- Management guides to fiscal 2011 revenue growth of 10% to 12% and license growth of 20% to 25%.
- An approximately $48 million litigation payment to GE Japan Corporation is due in the first quarter of fiscal 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, PTC kept $0.02.
- Revenue$1.01B100.0%
- Cost of revenue−$307.7M30.5%
- Gross profit$702.4M69.5%
- Operating costs−$627.6M62.1%
- Operating income$74.8M7.4%
- Interest, other & tax−$50.4M5.0%
- Net income$24.4M2.4%
Where FY2010 revenue went
$1.01B- Other operating costs: $426.0M, 42% of revenue
- Cost of revenue: $307.7M, 30% of revenue
- R&D: $201.6M, 20% of revenue
- Net income: $24.4M, 2.4% of revenue
- Interest, other & tax: $50.4M, 5.0% of revenue
Kept 2.4% as net incomeNet income $24.4M · 2.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed November 23, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $1.01B$938.18M | +7.7% |
| Cost of Revenue | $307.69M— | — |
| Gross Profit | $702.35M— | — |
| R&D Expenses | $201.57M$188.50M | +6.9% |
| Operating Expenses | $627.58M$918.89M | −31.7% |
| Operating Income | $74.78M$19.30M | +287.5% |
| Interest Expense | $1.53M$3.20M | −52.3% |
| Net Income | $24.37M$31.52M | −22.7% |
| EPS (Basic) | $0.21$0.27 | −22.2% |
| EPS (Diluted) | $0.20$0.27 | −25.9% |
| Shares Outstanding (Basic) | 115.64M114.95M | +0.6% |
| Shares Outstanding (Diluted) | 119.92M117.36M | +2.2% |
05—Questions
Frequently Asked Questions
What drove the increase in PTC's fiscal 2010 revenue and license sales?
License revenue rose 39% to $296.0 million, primarily from a 73% increase in PLM license revenue due mainly to sales of Windchill to large customers. Management attributes this to customers resuming investment in business process and IT initiatives as the macroeconomic climate improved.
Why did GAAP diluted earnings per share decline even though operating income increased?
GAAP diluted EPS fell to $0.20 from $0.27 because of a one-time tax provision of $43.4 million, which reduced EPS by $0.36, recorded in connection with a legal entity reorganization. The company's effective tax rate was 70% in 2010 compared with a benefit of 84% in 2009.
What outlook does management give for fiscal 2011?
Management expects revenue to grow 10% to 12% and license revenue to grow 20% to 25% in fiscal 2011. It also plans modest increases in investment in direct sales hiring, research and development, and services, and notes that results may be affected by economic conditions and currency movements.
What is the status of the GE Japan litigation and what is its cash impact?
PTC resolved the lawsuits filed by GE Japan Corporation under an agreement reached on October 20, 2010. Neither party admitted liability. The company recorded a $9.0 million gain in the fourth quarter and will make a cash payment of approximately $48 million in the first quarter of fiscal 2011.
How much capital is available to PTC and how is it being returned to shareholders?
The company had $240.3 million in cash and cash equivalents and $300 million available under its new revolving credit facility, which had no amounts drawn at September 30, 2010. In 2010 PTC repurchased 3.7 million shares for $62.5 million, leaving $118.0 million under its share repurchase authorization, and it does not pay cash dividends.
06—Continue