We Would Have Had a Good Quarter—Except for Japan, Says PTC
Roopinder Tara posted on July 25, 2017 | 2124 views

PTC CEO Jim Heppelmann, in the company’s Q3 2017 results earnings call, blamed “sales execution” in Japan for a $12 million decline in that country. It was the worst third quarter in Japan in the last 7 years, added Andrew Miller, PTC’s CFO. Something had to be done.

Hiroaki Kuwahara, president of PTC Japan, welcomes attendees to PlanetPTC Live in this 2010 photo. (Image courtesy of PTC.)
Hiroaki Kuwahara, president of PTC Japan, welcomes attendees to PlanetPTC Live in this 2010 photo. (Image courtesy of PTC.)

To remedy the “problem in Japan,” leadership has been shuffled. Hiroaki Kuwahara, who led the sales team in Japan until he was brought to the U.S., was told to “take one for the team” and return to Japan. We have no idea what will happen to the current head of the 250-person sales and marketing office that PTC has in Osaka, Japan.

“Japanese culture and Japanese business culture is very different from the rest of the world,” said Heppelmann. “They don’t trust expats over there.”

“The best guy we had was a Japanese national,” said Heppelmann. “We got him from Oracle, where he was the number 2 guy. He did so well, we promoted him out of Japan.”

“We thought we had adequate bench strength in Japan. However, it became apparent that we did not. Our bench was not as deep as we thought.”

CAD and PLM at Core but IoT Gets Attention

PTC’s core businesses of CAD and PLM are still expected to perform at or above market, which is only in the single digits. That is to be expected in a mature industry, says PTC.

But the major share of attention was given to PTC’s Internet of Things (IoT) initiative. The company expects 30 to 40 percent growth from its IoT line of products.

So great is the company’s emphasis on IoT that its annual user event was renamed LiveWorx, after its IoT product ThingWorx.

“More than 8,000 people attended LiveWorx 2017,” said Heppelmann, including the 4,100 who logged on remotely.

And on it went. A considerable amount of praise and attention was lavished on IoT.  Overall, “IoT” was mentioned 28 times during the call, whereas “PLM”was mentioned 15 times and “CAD” only 7.

AR

Another industry that PTC is making headway in is augmented reality (AR), and the company is now throwing all of its backing to Microsoft, calling the HoloLens “the most powerful wearable device” that delivers “amazing experiences.”

Term Licensing

Plans to migrate to subscription licenses were taken aback by a “large perpetual license deal,” but the firm plans to go full subscription in the Americas and Europe by Q2 2018.

The company feels like it has “exited the revenue trough,” citing two quarters in a row of year-over-year revenue growth.

Althoughit is following Autodesk to a fully term-licensing model, PTC sees itself at an advantage. “Most of our customers are already on maintenance,” said Miller. “Autodesk has to use a carrot/stick approach because their customers are not on subscription.”

Revenue and Income

Total revenue for the third quarter was $291 million, a 4 percent increase from the previous quarter. The company is counting on a strong Q4, with 31 percent of the total year’s bookings. That is in keeping with history, said Miller. PTC is forecasting revenue of $1.2 billion for the year. The company had a net loss of $1 million. PTC still has $261 million in cash reserves.


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