Pre-New Year's Surprise: PTC acquiring Exton-based ThingWorx for $112 million + potential earnout (Updated with morning press conference)

Tom Paine

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Massachusetts-based PTC, Inc. announced today it has acquired Exton-based Internet of Things (IoT) and Machine to Machine (M2M) platform startup ThingWorx for $112 million, plus a potential earnout of up to $18 million.

I'm a bit surprised to see ThingWorx, founded only in 2009 with funding from its co-founders, exit so soon, but the price should bring a good return for its founders and primary investor Safeguard Scientifics, the market is hot, and PTC should give the ThingWorx platform broader acceptance among corporate partners.

As of December, Wayne-based Safeguard Scientifics reported holding a 40% stake in ThingWorx and had invested $10 million in it. PTC said in its release that "the acquisition is expected to add more than $10 million of revenue over the next 12 months, with $5 million to $7 million of revenue in FY'14" (ending 9/14).

ThingWorx had said it had raised $13 million in two rounds in 2011 and 2012. Whether the additional $3 million came from the founders or another private investor is not known. Safeguard says it expects a "4x cash-on-cash return" on the deal, which has already closed.

ThingWorx co-founders are Russell Fadel, CEO, Rick Bullotta, CTO, and John Richardson, COO.

PTC will host a conference call tomorrow morning (the 31st) at 8:30. I'll have more to add after that.

PTC, Inc. (formerly Parametric Technology Corporation) is a Needham, MA-based computer software company specializing in 2D & 3D design software, product lifecycle management (PLM), and service management solutions. PTC had revenue in FY '13 of just under $1.3
billion and a market value of about $4 billion.

Safeguard Scientifics has released its own press release on the deal.

Fadel and Bullotta had also been principals of another Exton-based startup, Lighthammer
Software Development Corporation, which was acquired by SAP in 2005.

PTC CEO Jim Heppelmann said during this morning's press conference that ThingWorx was not profitable and declined to say how many it employed (its LinkedIn page lists 36 employees). Heppelmann said the acquisition price reflects a "very hot" company.

The term of the earnout period is two years.

Fadel and Heppelmann both said they see ThingWorx as having a two-year lead on competition. Fadel stressed that ThingWorx primarily works with industrial, rather than
consumer, applications.

While ThingWorx will continue to operate independently out of Exton, a major priority
will be to integrate its technology with PTC's Service Lifecycle Management (SLM) and
Product Lifecycle Management (PLM) offerings. Heppelmann says he sees "proactive service"
(trying to anticipate and service equipment before it fails) as being one of the first areas for major monetization.

Fadel said that while some applications require "big data" solutions, others are relatively simple in terms of the amount of data captured and do not. Fadel also said
the price of connecting to incremental devices is dropping towards zero.