PTC Blames Government Shutdown, Restructuring For Slipped Deals

Industrial software vendor PTC said the U.S. government shutdown caused two deals worth roughly $2 million to slip from the company's first quarter of fiscal year 2019.

"There was nobody there to process the deals," said Jim Heppelmann, PTC's CEO and president, during the company's first quarter earnings call on Wednesday.

The Boston-based company said the government deals were among a total of nine deals worth more than $20 million that PTC missed in the first quarter, which Heppelmann largely blamed on an $18 million workforce realignment plan the company enacted last October, when its new fiscal year began. PTC had previously said the plan would allow it to invest more in the industrial Internet of Things and other growth initiatives.

"We just didn’t get a fast-enough start," Heppelmann said.

[Related: PTC Hires Oracle Vet As New Channel Chief To Push IoT, Subscriptions]

Heppelmann said one of the non-government deals — a transaction for PTC's IoT business that is expected to be worth more than $5 million — fell through because of a sales execution issue.

"The approval process ended up being different than we understood it to be," he said.

Heppelmann said he expects several of the deals to close within the next week.

The company's stock price was down more than 5 percent in after-hours trading Wednesday due to the company issuing revenue and earnings guidance for the second quarter that was lower than Wall Street estimates. Heppelmann said the company is exercising caution as the result of several macroeconomic factors, including the government shutdown, weakness in Germany and China, and the trade dispute between the U.S. and China. In response to an analyst question, the CEO said the concerns were not tied to specific issues with customers.

"It's just general concern about what's happening," he said.

The partial government shutdown began on Dec. 22, 2018, after congressional Democrats objected to President Donald Trump's request for $5.7 billion in spending for a border wall between the U.S. and Mexico as part of the federal budget. The government has remained closed, impacting nine federal executive departments and hundreds of thousands of employees, as the impasse between Democrats and Trump continues.

PTC, which relocated its headquarters to Boston at the beginning of the year, also announced on Wednesday that CFO Andrew Miller plans to retire this fiscal year, which ends in September. Miller will leave after the company finds a successor — a search that that has already begun. Miller, who also serves as an executive vice president, joined PTC in 2015 after serving in executive finance roles at medical technology company Cepheid and design software company Autodesk.

"Andy joined us four years ago and has played an integral role in PTC’s transformation. His most notable contribution has been leading PTC’s transition to a subscription business model, which was completed this past quarter," Heppelmann said in a statement.

Miller said he plans to move back to California with his family while he continues to serve on boards of other companies, which includes Roomba maker iRobot.

PTC's first quarter revenue was $334.7 million, a 9 percent increase over the same period last year and $10 million higher than Wall Street's expectations. The company also beat analysts' estimates for earnings by 15 cents with an earnings per share of 56 cents, compared to a net earnings of 31 cents the same quarter last year.