PTC Announces Fiscal 2008 Q3 Results

Issues Q4 Guidance and Increases Full Fiscal Year Revenue Guidance
NEEDHAM, Mass.--(Business Wire)--
PTC (Nasdaq: PMTC - News), The Product Development Company(R),
today reported results for its fiscal third quarter ended June 28,
2008.

Highlights

-- Q3 non-GAAP Results: Revenue of $272.7 million and EPS of
$0.33

-- Q3 GAAP Results: Revenue of $271.7 million and EPS of $0.12

-- Q4 non-GAAP Guidance: Revenue of $290 to $300 million with EPS
of $0.38 to $0.42

-- Q4 GAAP Guidance: Revenue of $289 to $299 million with EPS of
$0.21 to $0.25

-- FY 2008 non-GAAP Guidance: Revenue of $1,070 million with 22%
operating margin

-- FY 2008 GAAP Guidance: Revenue of $1,065 million with 12%
operating margin

Q3 Results

C. Richard Harrison, president and chief executive officer,
commented, "We achieved 21% year-over-year non-GAAP revenue growth in
the third quarter reflecting contribution from the CoCreate Software
business acquired on November 30, 2007, organic revenue growth and
favorable currency impact. Importantly, we achieved double digit
license revenue growth in every region except the Pacific Rim." GAAP
year-over-year revenue growth for the third fiscal quarter was 21%.
Our third quarter non-GAAP revenue excludes the effect of purchase
accounting on the acquired deferred maintenance revenue balance of
CoCreate of approximately $1 million.

The following tables provide further detail on PTC's GAAP revenue
performance by line of business, region and distribution channel.
Further financial and operating metrics are available on PTC's web
site at www.ptc.com/for/investors.htm.

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Q2 Q3 Q4 Q1 Q2 Q3 Y-Y
($ in millions) FY07 FY07 FY07 FY08 FY08 FY08 Change
----------------------------------------------------------------------

License $ 71.3 $ 62.1 $ 96.1 $ 67.2 $ 72.9 $ 77.6 25%
Services 58.0 59.7 64.6 60.2 63.8 63.8 7%
Maintenance 98.8 103.1 106.0 113.8 121.1 130.3 26%
----------------------------------------------------------------------
Total Revenue $228.1 $224.9 $266.7 $241.2 $ 257.8 $271.7 21%

Europe $ 82.9 $ 86.2 $101.6 $101.6 $ 106.2 $111.8 30%
North America 89.4 86.9 102.2 84.5 88.2 90.0 4%
Pacific Rim 30.7 32.6 34.3 30.0 33.5 34.2 5%
Japan 25.1 19.2 28.6 25.1 29.9 35.7 86%
----------------------------------------------------------------------
Total Revenue $228.1 $224.9 $266.7 $241.2 $ 257.8 $271.7 21%

Direct (a) $179.2 $177.3 $215.3 $182.5 $190.3(a) $201.3 14%
Channel (a) 48.9 47.6 51.4 58.7 67.5(a) 70.4 48%
----------------------------------------------------------------------
Total Revenue $228.1 $224.9 $266.7 $241.2 $ 257.8 $271.7 21%
*T

(a) Note: Q2 FY08 revenue by channel was revised, with $5.9
million of revenue (primarily maintenance) moving from the Direct
category to the Channel category. The revised numbers are reflected in
the table above.

Harrison added, "In the third quarter, PTC received orders from
leading organizations, including Airbus, Bang & Olufsen, Gamesa,
Raytheon, Sumitomo Wiring System, LTD., Toyota Motor Corporation, and
Volvo Group. There were 13 customers from which we recognized more
than $1 million of license and services revenue in Q3. This compares
to 16 customers last quarter and 17 in the same period last year. We
recognized $35.6 million of license and services revenue from such
customers in Q3, compared with $37.6 million last quarter and $34.7
million in Q3 of last year."

Neil Moses, chief financial officer, commented, "We delivered
21.3% non-GAAP operating margin in the third quarter, an 860 basis
point improvement from the same period last year. Our year-to-date
non-GAAP operating margin of 20.2% is up 610 basis points over the
same period in fiscal 2007." GAAP operating margins for Q3 of 2008 and
the first nine months of fiscal 2008 were 11.7% and 10.1%,
respectively. The Company's non-GAAP tax rate in the third quarter of
2008 was 32% and its GAAP tax rate was 42%.

Moses continued, "During the quarter we recorded a $3.8 million
restructuring charge related to our ongoing globalization initiative
as we transition certain back-office functions to lower cost regions.
We also recorded a one-time non-cash loss recorded to other income
(expense) of $6.2 million during the quarter as we liquidated certain
legal entities related to previous acquisitions. Both of these items
are excluded from our non-GAAP results."

Moses added, "Cash flow from operations was $53 million for the
third quarter and $181 million year to date. We used $54 million in Q3
to repay amounts borrowed under our revolving credit facility to
finance the CoCreate acquisition, leaving an outstanding loan balance
of $110 million as of the end of the third quarter. Additionally, we
used $5 million of cash during the quarter to repurchase our common
shares under our current $50 million authorization. We have $45
million remaining under that authorization. Cash and cash equivalents
were $242 million at the end of the third quarter of fiscal 2008."

Q4 Outlook

"Looking forward to Q4, we are currently expecting non-GAAP
revenue to be between $290 million and $300 million," said Harrison.
"Non-GAAP earnings per diluted share are expected to be between $0.38
and $0.42." PTC expects GAAP Q4 revenue between $289 million and $299
million, and GAAP earnings per diluted share between $0.21 and $0.25.
The Q4 guidance assumes a non-GAAP tax rate of 35% and GAAP tax rate
of 37.5%.

The non-GAAP revenue guidance for Q4 excludes the effect of
purchase accounting on the acquired deferred maintenance revenue
balance of CoCreate of approximately $1 million. In addition, the Q4
non-GAAP earnings guidance excludes approximately $11 million of
stock-based compensation expense, $10 million of acquisition-related
amortization expenses, $5 million of restructuring expenses related to
our continued globalization program and the related income tax
effects.

FY08 Outlook

For the fiscal year ending September 30, 2008, PTC currently
expects non-GAAP revenue to be approximately $1,070 million with
non-GAAP earnings per diluted share in the range of $1.28 to $1.32.
PTC expects GAAP revenue to be approximately $1,065 million with GAAP
earnings per diluted share in the range of $0.58 to $0.62 for the
fiscal year. The full fiscal year guidance assumes a non-GAAP tax rate
of 34% and GAAP tax rate of 39%.

The non-GAAP revenue guidance for the full fiscal year excludes
the effect of purchase accounting on the acquired deferred maintenance
revenue balance of CoCreate of approximately $5 million. In addition,
the non-GAAP earnings guidance excludes approximately $44 million of
stock-based compensation expense, $35 million of acquisition-related
amortization expense, $20 million of restructuring expenses primarily
related to our continued globalization program, $2 million of
in-process research and development expense related to acquisitions
completed in the first quarter of 2008, $6 million of a non-cash loss
recorded to other income (expense) resulting from the liquidation of
certain legal entities related to previous acquisitions, and the
related income tax effects.

Harrison concluded, "While we continue to remain mindful of the
potential impact of a slowing economy in 2008, we are confident in our
ability to achieve our Q4 and fiscal 2008 revenue and earnings
targets. We are expecting modest sequential increases in our
maintenance and services lines of business. We are expecting a modest
year-over-year increase of license revenue in Q4 as we continue to
expand and increase the effectiveness of our reseller channel, which
accounts for more the 30% of our license revenue, and as we see
strength in our pipeline for new license opportunities worldwide."

Earnings Conference Call and Webcast

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What: PTC Fiscal Q3 Conference Call and Webcast

IMPORTANT: Supplemental financial and operating metric information
and prepared remarks with respect to tomorrow's conference call have
been posted to the investor relations section of our website at
www.ptc.com. The prepared remarks will not be read live; the call
will be primarily Q&A.
---------------------------------------------------------------------

When: Wednesday, July 23, 2008 at 8:30 a.m. Eastern Time

Dial-in:1-888-566-8560 or 1-517-623-4768
Call Leader: Richard Harrison
Passcode: PTC

Webcast:http://www.ptc.com/for/investors.htm

Replay: The audio replay of this event will be archived for public
replay until 4:00 pm on July 28, 2008 at 1-866-516-0671 or
1-203-369-2035. To access the replay via webcast, please
visit http://www.ptc.com/for/investors.htm.
*T

Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial
results. Non-GAAP revenue excludes the effect of purchase accounting
on the fair value of the acquired deferred maintenance revenue balance
of CoCreate Software GmbH. Non-GAAP operating margin and EPS also
exclude stock-based compensation expense, amortization of acquired
intangible assets and acquired in-process research and development
expenses, restructuring expenses, non-cash effects of liquidating
subsidiaries and any one-time tax items, such as valuation allowance
reversals. PTC provides this non-GAAP information to facilitate
period-to-period comparisons of its operational performance by
adjusting for episodic expenses. We believe that providing non-GAAP
measures affords investors a view of our operating results that may be
more easily compared to peer companies. PTC management also uses this
and other non-GAAP financial information to evaluate, manage and plan
our business because the information provides additional insight into
ongoing financial performance. In addition, compensation of our
executives is based in part on the performance of our business based
on these non-GAAP measures. However, non-GAAP information should not
be construed as alternative to GAAP information as the items excluded
from the non-GAAP measures often have a material impact on PTC's
financial results. Therefore, management uses, and investors should
use, non-GAAP measures in conjunction with our reported GAAP results.
Please refer to the attached tables for a reconciliation between GAAP
results and the non-GAAP supplemental information.

About PTC

PTC (Nasdaq: PMTC - News) provides leading product lifecycle
management (PLM), content management and dynamic publishing solutions
to more than 50,000 companies worldwide. PTC customers include the
world's most innovative companies in manufacturing, publishing,
services, government and life sciences industries. PTC is included in
the S&P Midcap 400 and Russell 2000 indices. For more information on
PTC, please visit http://www.ptc.com.

Statements in this news release that are not historical facts,
including statements about our confidence that we will achieve our
fiscal 2008 financial targets, our expected revenue growth rates and
projected revenue and earnings, are forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those projected. These risks include the
possibility that our customers may not continue to spend at recent
levels or may elect to defer or forego investment in our solutions in
the current economic climate. In addition, our purchase price
allocations associated with our first quarter acquisitions, including
CoCreate, are preliminary and may change. Likewise, our assumptions
concerning our future GAAP and non-GAAP effective income tax rates are
based on estimates and other factors that could change, including
geographic mix of our revenue and profits and loans and cash
repatriations from foreign subsidiaries. Other risks and uncertainties
that could cause actual results to differ materially from those
projected are detailed from time to time in reports we file with the
Securities and Exchange Commission, including our most recent Annual
Report on Form 10-K.

PTC, The Product Development Company, and all other PTC product
names and logos are trademarks or registered trademarks of Parametric
Technology Corporation or its subsidiaries in the United States and in
other countries. All other companies referenced herein are trademarks
or registered trademarks of their respective holders.

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PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Three Months Ended Nine Months Ended
------------------- -------------------
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
------------------- -------------------
Revenue:
License $ 77,557 $ 62,098 $217,658 $200,022
Service 194,191 162,766 553,125 474,605
------------------- -------------------
Total revenue 271,748 224,864 770,783 674,627
------------------- -------------------

Costs and expenses:
Cost of license revenue(1) 8,760 4,084 20,106 11,855
Cost of service revenue(1) 76,802 67,673 221,894 204,855
Sales and marketing(1) 78,762 74,573 223,149 215,694
Research and development(1) 47,374 39,798 134,656 117,935
General and
administrative(1) 20,294 16,855 64,653 56,489
Amortization of acquired
intangible assets 4,044 1,764 11,252 5,440
In-process research and
development -- 544 1,887 544
Restructuring charge 3,790 -- 15,367 --
------------------- -------------------
Total costs and expenses 239,826 205,291 692,964 612,812
------------------- -------------------

Operating income 31,922 19,573 77,819 61,815
Other income (expense), net (7,110) 2,268 (5,859) 4,396
------------------- -------------------
Income before income taxes 24,812 21,841 71,960 66,211
Provision for (benefit
from) income taxes 10,342 (58,624) 28,762 (46,806)
------------------- -------------------
Net income $ 14,470 $ 80,465 $ 43,198 $113,017
=================== ===================
Earnings per share:
Basic $ 0.13 $ 0.71 $ 0.38 $ 1.00
Weighted average shares
outstanding 113,491 113,154 113,661 112,610
Diluted $ 0.12 $ 0.68 $ 0.37 $ 0.96
Weighted average shares
outstanding 117,363 117,500 117,565 117,423
*T

(1) Stock-based compensation is accounted for under SFAS 123(R),
"Share-Based Payment." The amounts in the tables above include
stock-based compensation as follows:

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Three Months Nine Months
Ended Ended
------------- --------------
June June June June
28, 30, 28, 30,
2008 2007 2008 2007
------------- --------------
Cost of license revenue $ 12$ 60 $ 26$ 100
Cost of service revenue 2,298 993 6,867 4,671
Sales and marketing 3,130 2,035 8,933 5,926
Research and development 2,322 1,058 6,929 4,529
General and administrative 3,387 884 9,926 7,281
------------- --------------
Total stock-based compensation $11,149$5,030 $32,681$22,507
============= ==============
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PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

Three Months Ended Nine Months Ended
------------------- -------------------
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
-----------------------------------------
GAAP revenue $271,748 $224,864 $770,783 $674,627
Fair value adjustment of
acquired CoCreate deferred
maintenance revenue 978 -- 3,920 --
------------------- -------------------
Non-GAAP revenue $272,726 $224,864 $774,703 $674,627
=================== ===================

GAAP operating income $ 31,922 $ 19,573 $ 77,819 $ 61,815
Fair value adjustment of
acquired CoCreate
deferred maintenance
revenue 978 -- 3,920 --
Stock-based compensation 11,149 5,030 32,681 22,507
Amortization of acquired
intangible assets
included in cost of license
revenue 6,289 1,728 13,850 4,895
Amortization of acquired
intangible assets
included in cost of service
revenue 17 17 51 66
Amortization of acquired
intangible assets 4,044 1,764 11,252 5,440
In-process research and
development -- 544 1,887 544
Restructuring charge 3,790 -- 15,367 --
------------------- -------------------
Non-GAAP operating income $ 58,189 $ 28,656 $156,827 $ 95,267
=================== ===================

GAAP net income $ 14,470 $ 80,465 $ 43,198 $113,017
Fair value adjustment of
acquired CoCreate
deferred maintenance
revenue 978 -- 3,920 --
Stock-based compensation 11,149 5,030 32,681 22,507
Amortization of acquired
intangible assets
included in cost of
license revenue 6,289 1,728 13,850 4,895
Amortization of acquired
intangible assets
included in cost of
service revenue 17 17 51 66
Amortization of acquired
intangible assets 4,044 1,764 11,252 5,440
In-process research and
development -- 544 1,887 544
Restructuring charge 3,790 -- 15,367 --
One-time non-cash loss
included in other income
(expense), net (2) 6,206 -- 6,206 --
Income tax adjustments (3) (7,724) (71,049) (22,371) (72,924)
------------------- -------------------
Non-GAAP net income $ 39,219 $ 18,499 $106,041 $ 73,545
=================== ===================

GAAP diluted earnings per
share $ 0.12 $ 0.68 $ 0.37 $ 0.96
Stock-based compensation 0.09 0.04 0.28 0.19
All other items identified
above 0.12 (0.56) 0.25 (0.52)
------------------- -------------------
Non-GAAP diluted earnings
per share $ 0.33 $ 0.16 $ 0.90 $ 0.63
=================== ===================

Weighted average shares
outstanding - diluted 117,363 117,500 117,565 117,423
*T

(2) Reflects a one-time non-cash loss from the liquidation of
certain legal entities related to previous acquisitions.

(3) Reflects the tax effect of non-GAAP adjustments above, as well
as the effect of one-time tax benefits recorded in the three and nine
months ended June 30, 2007 due to the reversal of the valuation
allowance recorded in the United States and a foreign jurisdiction of
$58.9 million and the favorable resolution of a tax claim of $3.9
million.

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PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 28, September 30,
2008 2007
---------- -------------

ASSETS

Cash and cash equivalents $ 242,020 $ 263,271
Accounts receivable, net 180,094 217,101
Property and equipment, net 56,851 54,745
Goodwill and acquired intangibles, net 617,574 325,052
Other assets 226,499 230,144

---------- -------------
Total assets $1,323,038 $1,090,313
========== =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue $ 265,632 $ 227,164
Borrowings under revolving credit facility 109,556 --
Other liabilities 295,427 268,642
Stockholders' equity 652,423 594,507

---------- -------------
Total liabilities and stockholders' equity $1,323,038 $1,090,313
========== =============
*T

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PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Three Months Ended Nine Months Ended
--------------------- ----------------------
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
--------- --------- ---------- ---------

Cash flows from
operating activities:
Net income $ 14,470 $ 80,465 $ 43,198 $113,017
Stock-based
compensation 11,149 5,030 32,681 22,507
Amortization of
acquired intangible
assets 10,350 3,509 25,153 10,401
Depreciation and
other amortization 6,286 6,150 18,331 18,481
Accounts receivable 268 18,751 69,819 33,483
Accounts payable and
accruals(4) 1,041 (4,945) (29,155) (25,999)
Deferred revenue (5,411) 450 16,305 21,454
In-process research
and development -- 544 1,887 544
Income taxes (868) (65,380) 1,645 (62,308)
Other 16,017 (5,625) 1,242 (16,508)
----------------------------------------------
Net cash provided by
operating activities 53,302 38,949 181,106 115,072

Capital expenditures (9,785) (4,746) (20,492) (17,139)
Acquisitions of
businesses, net of
cash acquired (5) -- (10,879) (261,592) (28,518)
Proceeds (payments)
from debt, net (53,643) -- 98,999 --
Repurchases of common
stock (5,288) (1,809) (27,297) (1,809)
Other investing and
financing activities 3,929 2,949 (3,313) 7,302
Foreign exchange
impact on cash (5,441) (2,535) 11,338 1,600
--------- --------- ---------- ---------

Net change in cash and
cash equivalents (16,926) 21,929 (21,251) 76,508
Cash and cash
equivalents, beginning
of period 258,946 238,027 263,271 183,448
--------- --------- ---------- ---------
Cash and cash
equivalents, end of
period $242,020 $259,956 $ 242,020 $259,956
========= ========= ========== =========
*T

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(4) Includes accounts payable, accrued expenses, and accrued
compensation and benefits.
(5) Acquisitions of businesses:
a. The nine months ended June 28, 2008 includes $248 million for
our acquisition of CoCreate and $14 million for two other
acquisitions, net of cash acquired.
b. The nine months ended June 30, 2007 includes $16 million for
our acquisition of ITEDO and $7 million for our acquisition of
NC Graphics, both net of cash acquired; $2 million of
contingent purchase price earned in the first quarter of 2007
related to 2006 acquisitions; and $4 million for the
acquisition of the remaining equity interest in a controlled
subsidiary.
*T

PTC
Kristian Talvitie, 781-370-6151
ktalvitie@ptc.com

Copyright Business Wire 2008