July 17, 2001
Dow Jones Newswires
Excerpts From Parametric Tech's 3Q Conference
Call
Dow Jones Newswires
Following are excerpts from a transcript provided by StreamingText Inc.
(www.StreamingText.com, 703-326-8221) of Parametric Technology
Corp.'s (PMTC) conference call to discuss its fiscal third-quarter results. The
company reported second-quarter operating earnings of 3 cents a share, in
line with Wall Street expectations.
Speaking on behalf of the company is Richard Harrison, president and chief
executive, and Edwin Gillis, financial chief.
Gillis discusses the company's outlook.
GILLIS: Despite the initiatives on the distribution side and the product side,
which Dick described to you, there continues to be ample evidence of
macroeconomic slowdown, particularly in the manufacturing sector.
Dick indicated we saw signs of this in the later stages of the most recent
quarter to a greater extent than anticipated particularly internationally. And it
was reflected largely in specific large orders being deferred.
This quarter I think, is really only the second time in the last ten quarters in
which we had no transactions over $3.5 million. And, in fact, as Dick
indicated, our deals over $3.5 million have been contributing on average of
$10 million per quarter.
The absence of this activity obviously hurts, and in this environment it is
difficult to forecast.
Accordingly, in view of the general kind of economic uncertainty, we are
forecasting approximately flat revenues until spending in the manufacturing
segment of the economy begins to approve.
Currently, we would expect revenues in our fourth quarter ending September
to be somewhere between $225 million and $240 million. This revenue
outlook could be worse if the economy continues to deteriorate.
A flat revenue outlook for FY '02, at least as a place holder for planning
purposes, we are approximately at $950 million. We will revisit this after our
fourth quarter.
As Dick indicated to you, we are committed to profitability. We plan to
reduce our existing fixed cost structure by approximately 8 to 10 percent.
This is currently a work in process, but should result in several hundred
headcount reductions.
Most of this will be concentrated in the fourth quarter and will result in a
restructuring charge against earnings.
The restructuring will focus our resources on our major companywide
initiatives, growing the partner programs and broadening distribution
coverage, building our solutions oriented products and improving product
usability and customer satisfaction.
We will reduce those areas not directly focused on supporting these initiatives.
Assuming no significant change in the economy from current levels, we expect
earnings for the fourth quarter to approximate 3 to 6 cents at revenue levels of
$225 million to $240 million.
Modeling next year at $950 million in revenues and reflecting the results of
cost reductions should generate operating margins of approximately 15
percent and earnings of approximately thirty-eight cents before amortization.
Harrison responded to a caller's question about the nature of the company's
outlook.
HARRISON: Really I think we are being conservative because I think we did
and most other software companies and high-tech companies probably
manufacturing companies saw the slowdown move to Europe very
deliberately during the last 90 days.
We have a number of anecdotes over in Europe that were similar to ones that
occurred in the December and the March quarter here. Japan is in a
recession. They are technically in a recession.
So given that we want to be conservative on the guidance. We hope to do
better, and I think we can. But in today's economy, it just doesn't make any
sense to be bold or aggressive.
Let me try to maybe even help you understand I think, some of what's going
on out there because we are disappointed in the fact that we missed, and we
were surprised by the miss because our sales guys are actually pretty good
forecasters, in general.
And I think that what has changed a little bit out in the marketplace today and
I think again, a lot of the other companies are experiencing the same thing, is
that when we go through the process of qualifying a deal and working with the
customer, we have a champion inside the account, we generally sort of scope
a deal and at some point we get a nod from the champion, a project leader,
engineering director, supply chain vice president, whatever.
And at that point we get from he or she, sort of a nod, you have won the deal
and I am going to carry forth and I think I can make it happen in the quarter.
What I think has changed really in the last quarter or two is that our sales
force is having difficulty forecasting, particularly the larger deals, but even
some of the base business, because the champions themselves inside these
companies are bringing these deals through the requisition process and they
themselves are getting surprised at the last-minute when it hits finance or
procurement.
And so that is a phenomenon which just makes it very difficult to predict.
During the last week of the quarter I was over in Zurich with a very, very
large $30 billion European company, and we pulled out a very nice Windchill
order. But when I got there and we were expected to get it, they really
weren't going to place the order because of the softening of their own
business.
So we went through the ROI that we've built over the last six months and the
partnership that we were forming and so forth, and we succeeded in getting
that order out, but it was much more difficult than it should have been.
So guidance right now for us is we want to be careful. We want to, we
worked hard during the last year actually, and this is one of the things that is
most disappointing to me right now is that we've tried to work hard during the
last year on predictability, or consistency on profitability and growth. I think
we made some progress during the last four quarters, but sort of a little miss
here today sets us back a little bit with all these. So I am not going to again
stand out and get bold about forecast, there is just too much unpredictability
today. |
