01—Abstract
Summary
Summary of the 10-K filed November 23, 2011. Cited figures are marked; the original filing is the authoritative source.
Parametric Technology Corporation (PTC) reported record fiscal 2011 revenue of $1.17 billiona ($1,166,949 thousand), up 16% from 2010 (12% on a constant currency basis).
GAAP operating income rose to $117.1 millionb from $74.8 million, and GAAP diluted earnings per share were $0.71 versus $0.20 in 2010. Non-GAAP operating income was $206.6 million and non-GAAP diluted EPS was $1.26. Growth was driven by strong Desktop license revenue following the June 2011 launch of the Creo CAx suite, a recovery in Enterprise maintenance and services, and the acquisition of MKS Inc. on May 31, 2011, which contributed $26.8 million to 2011 revenue.
Cash flow from operations fell to $78.7 millionc from $156.6 million, mainly because of a litigation payment that reduced cash by about $48 million and slower collections on receivables, which rose to $230.2 million. The balance sheet shows $167.9 million of cash and $200 million outstanding under the revolving credit facility, which was used to fund the MKS acquisition. Goodwill increased to $613.4 million.
The company's leverage ratio was 0.85 to 1.00 against a 2.50 to 1.00 covenant, and it had authorized up to $100 milliond of share repurchases for October 2011 through September 2012. Management guided to 14% to 15% revenue growth for fiscal 2012, with license revenue growth of approximately 20%, and a goal of improving operating margin by 100 basis points. Key risks disclosed include an investigation of certain payments and expenses in China that raises possible Foreign Corrupt Practices Act questions, with China historically representing 6% to 7% of revenue; a European Commission investigation of anticompetitive practices in CAD software, under which no charges have been filed; quarterly revenue concentration in the last month of each quarter; and dependence on large enterprise deals and on foreign currency movements, since about two-thirds of revenue is transacted in currencies other than the U.S. dollar.
02—Key points
Key Highlights
- Record revenue of $1,166.9 million in fiscal 2011, up 16% year over year (12% on a constant currency basis).
- GAAP operating income rose to $117.1 million from $74.8 million; non-GAAP operating margin reached 18% versus 16% in 2010.
- GAAP diluted EPS was $0.71 versus $0.20 in 2010; non-GAAP diluted EPS was $1.26 versus $1.00.
- Desktop license revenue grew 33% to $187.8 million, driven by the June 2011 launch of the Creo CAx suite; Enterprise license revenue was $154.3 million, flat year over year.
- Acquired MKS Inc. on May 31, 2011 for $298 million, financed mainly with $250 million of borrowings under the revolving credit facility; MKS contributed $25.9 million to Enterprise revenue.
- Cash flow from operations fell to $78.7 million from $156.6 million, mainly due to a litigation payment of about $48 million and higher accounts receivable of $230.2 million.
- Fiscal 2012 guidance calls for 14% to 15% revenue growth and a goal of a 100 basis point improvement in operating margin.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, PTC kept $0.07.
- Revenue$1.17B100.0%
- Cost of revenue−$356.8M30.6%
- Gross profit$810.2M69.4%
- Operating costs−$693.1M59.4%
- Operating income$117.1M10.0%
- Interest, other & tax−$31.7M2.7%
- Net income$85.4M7.3%
Where FY2011 revenue went
$1.17B- Other operating costs: $481.7M, 41% of revenue
- Cost of revenue: $356.8M, 31% of revenue
- R&D: $211.4M, 18% of revenue
- Net income: $85.4M, 7.3% of revenue
- Interest, other & tax: $31.7M, 2.7% of revenue
Kept 7.3% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed November 23, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $1.17B$1.01B | +15.5% |
| Cost of Revenue | $356.77M$307.69M | +15.9% |
| Gross Profit | $810.18M$702.35M | +15.4% |
| R&D Expenses | $211.41M$201.57M | +4.9% |
| Operating Expenses | $693.07M$627.58M | +10.4% |
| Operating Income | $117.11M$74.78M | +56.6% |
| Interest Expense | $3.31M$1.53M | +116.9% |
| Net Income | $85.42M$24.37M | +250.6% |
| EPS (Basic) | $0.73$0.21 | +247.6% |
| EPS (Diluted) | $0.71$0.20 | +255.0% |
| Shares Outstanding (Basic) | 117.58M115.64M | +1.7% |
| Shares Outstanding (Diluted) | 120.97M119.92M | +0.9% |
05—Questions
Frequently Asked Questions
How did PTC perform financially in fiscal 2011?
Revenue reached $1,166.9 million, up 16% from $1,010.0 million in 2010. GAAP operating income was $117.1 million, compared with $74.8 million in 2010, and GAAP diluted EPS was $0.71, compared with $0.20.
What drove revenue growth in 2011?
The filing attributes growth to strong Desktop license revenue following the launch of Creo in June 2011, continued Enterprise maintenance and consulting strength after a strong 2010 Enterprise license year, and the MKS acquisition. Excluding acquisitions, total revenue was $1,140.1 million, up 13%.
Why did operating cash flow decline?
Operating cash flow was $78.7 million, down from $156.6 million in 2010. The filing cites the resolution of a litigation matter in Japan, which reduced cash by about $48 million in the first quarter of 2011, and the timing of accounts receivable collections, with receivables rising to $230.2 million.
What are the key regulatory and legal risks disclosed?
The company has been investigating payments by certain business partners and expenses by certain employees in China that raise Foreign Corrupt Practices Act questions, and has voluntarily disclosed the results to the U.S. Department of Justice and the SEC, which could result in fines or other sanctions. The European Commission is also investigating anticompetitive practices related to CAD software; no charges have been initiated against PTC, but the Commission has authority to impose significant fines.
What is the company's debt and capital return position?
As of September 30, 2011, $200 million was outstanding under the revolving credit facility, which has a $300 million limit and matures in 2016. The leverage ratio was 0.85 to 1.00 against a covenant maximum of 2.50 to 1.00. The Board authorized up to $100 million of share repurchases for October 2011 through September 2012, and the company does not pay cash dividends.
06—Continue