PLM software bellwethers PTC and Dassault Systèmes this week both reported disappointing financial results, as the worldwide recession took big bites out of new license revenues.
For its fiscal second quarter, ended April 4, PTC reported total revenue of $225.3 million, down 12.6% from $257.8 million in the same quarter last year. PTC saw its net income tumble 61.9% to $7.2 million as dramatically lower new product revenue for the period was exacerbated by a $9.8 million restructuring charge.
Competitor Dassault, meanwhile, reported slightly better, though still disappointing, results for the first quarter, ended March 31. Consistent with Dassault’s recent earnings preview statement, the company reported total revenue of €309.7 million, down less than 1% compared with the €307.4 million in revenue the company reported in the same period last year. Dassault’s net income for the period, €28.8 million, was down 50% compared with a year earlier. While the company’s revenue from maintenance grew a healthy 23% to €207.2 million, its revenue from new software licenses fell by nearly 36% to just €64.6 million.
PTC saw a similar steep drop in new license revenue, which, at $43.1 million for the most recent period, fell 46%. The company’s maintenance and service revenue, meanwhile, rose 1.8% to $183.2 million.
PTC officials said the economic downturn is inhibiting large deals. The reduction in license revenue also impacted maintenance revenue, said PTC Chairman and CEO C. Richard Harrison in remarks to financial analysts. That’s because new license customers usually purchase maintenance at a higher level than existing customers. As a byproduct of the drop in license revenue during the quarter, he said, PTC’s maintenance renewal rate dropped from the 90% range to around 85%.
“Not surprisingly, we are continuing to experience longer lead times and reduced spending on large deals, and our reseller channel continues to be impacted by soft end-market demand,” Harrison said in prepared remarks. “On the positive side, our pipeline for new business opportunities remains strong, and our products continue to perform well in competitive benchmarks for strategically significant PLM programs.”
The quarter saw a significant decline in the revenue PTC receives through its reseller channel partners, said CFO Neil Moses in remarks to financial analysts. That drop came despite PTC incentives to its channel partners, such as a 0% financing option.
In light of the ongoing recession, PTC downgraded its public financial targets for the rest of 2009. The company said it now expects revenue for the year of $940 million and earnings per share of about $0.34. Last quarter, the company said it expected 2009 revenue of $960 million and earnings per share of $0.43 to $0.49.
PTC did see some bright spots during the quarter, however. The company said orders in North America improved during the period. Officials, however, said the business climate in Europe and Asia remains challenging.
Meanwhile, Dassault officials also lowered revenue and earnings projections for the remainder of the year.