PTC Announces Fourth Quarter and Fiscal Year 2018 Results Bookings Near High End of Guidance; Strong Recurring Software Revenue Growth NEEDHAM, MA, October 24, 2018 - PTC (NASDAQ: PTC) today reported financial results for its fiscal fourth quarter and fiscal year ended September 30, 2018. • Fourth quarter GAAP revenue was $313 million; non-GAAP revenue was $322 million • FY'18 GAAP revenue was $1,242 million; non-GAAP revenue was $1,252 million • Fourth quarter GAAP net income was $13 million or $0.11 per diluted share; non-GAAP net income was $53 million or $0.45 per diluted share • FY’18 GAAP net income was $52 million or $0.44 per diluted share; non-GAAP net income was $171 million and $1.45 per diluted share • Fourth quarter license and subscription bookings were $149 million and subscription mix was 81% • FY’18 license and subscription bookings were $466 million and subscription mix was 76%. • Total deferred revenue, billed and unbilled, was $1,410 million, an increase of 29% from the same period last year • Fourth quarter subscription Annualized Recurring Revenue (ARR) was $544 million, an increase of $205 million or 61% from the same period last year “We are very pleased with our fourth quarter results and strong finish to the fiscal year,” said James Heppelmann, President and CEO. “Despite currency headwinds in the quarter, recurring software revenue grew 15% year over year, reflecting the strength of our subscription model, and new bookings were strong.” Heppelmann continued, “Fiscal 2018 was another year of great progress in our transformation to become a high-growth subscription software company and industrial IoT leader. During the year, we delivered good results in our core CAD and PLM businesses, ThingWorx continued to gain significant traction with both new and expanding customers, and interest in our augmented reality (AR) solutions accelerated. We also made important strides in extending our market reach and further differentiating our technology with new strategic partnerships entered into during the year.” Additional operating and financial highlights are set forth below. Information about our bookings and other reporting measures (as updated) is provided beginning on page five. For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. • Q4’18 license and subscription bookings were $149 million, up 4% year over year. FY’18 license and subscription bookings were $466 million, up 11% year over year. • Q4’18 software revenue was $287 million, an increase of 9% year over year, despite a 900 basis point increase in the subscription mix compared to the same period last year. FY’18 software revenue was $1,088 million, an increase of 10% year over year, despite a 800 basis point increase in the subscription mix compared to the same period last year. • Approximately 91% of fourth quarter software revenue came from recurring revenue streams, up from 85% in the same period last year. • Annualized Recurring Revenue (ARR) was $1,012 million, an increase of 12% year over year and the seventh consecutive quarter of double-digit year-over-year growth.


 
• Billed deferred revenue increased 9% year over year to $499 million. Total deferred revenue – billed and unbilled - increased $318 million or 29% year over year. Billed and unbilled deferred revenue can fluctuate quarterly based upon the contractual billing dates in our recurring revenue contracts, the timing of our fiscal reporting periods, and Fx rates. • GAAP operating margin in the fourth quarter was 4%, compared to 6% in the same period last year; non-GAAP operating margin was 21%, compared to 18% in the same period last year. FY’18 GAAP operating margin was 6%, compared to 4% in the same period last year; non-GAAP operating margin was 18%, compared to 16% in the same period last year. • Operating cash flow in the fourth quarter was $62 million and free cash flow was $45 million. FY’18 operating cash flow was $248 million and free cash flow was $212 million, up 83% and 93%, respectively, compared to the same periods last year. Free cash flow includes cash payments of approximately $0.3 million for the fourth quarter and $3 million for FY’18 related to our past restructuring plans, compared to $2 million in Q4’17 and $37 million for FY’17. • Total cash, cash equivalents, and marketable securities as of the end of the fourth quarter was $316 million and total debt, net of deferred issuance costs, was $643 million. During the fourth quarter, we repaid net $50 million of debt, and for FY’18, we repaid net $70 million of debt. • In Q4’18, in connection with our strategic alliance with Rockwell Automation, we sold 10,582,010 shares of the Company’s Common Stock to Rockwell for approximately $1.0 billion. We used the proceeds from the Rockwell equity investment to repurchase shares of our common stock under a $1.0 billion accelerated share repurchase ("ASR") agreement with a major financial institution, of which $800 million worth of shares were delivered to us in Q4’18. • With the growth opportunity in front of us in the Industrial Internet of Things and Augmented Reality, other strategic initiatives we’ve undertaken, and our continued commitment to operating margin improvement, we are realigning our workforce in the beginning of FY’19 to shift investment to support these strategic, high growth opportunities. This realignment will result in a restructuring charge of approximately $18 million in FY’19, which consists principally of termination benefits, substantially all of which we expect will be paid in FY’19. As this is a realignment of resources rather than a cost-savings initiative, we don’t expect this realignment will result in significant cost savings, and the effect of the realignment is reflected in our FY’19 guidance. Page 2 of 12


 
Fiscal 2019 Business Outlook – ASC 605 For the first quarter and fiscal year ending September 30, 2019, the company expects: In millions except per share amounts Q1’19 Q1’19 FY’19 FY’19 Operating Measures(1) Low High Low High Subscription ACV $ 38 $ 41 $ 224 $ 230 License and Subscription Bookings 100 110 $ 500 $ 520 Subscription % of Bookings 76% 74% 90% 88% (1)An explanation of the metrics included in this table is provided below. Q1’19 Q1’19 FY’19 FY’19 Financial Measures Low High Low High Subscription Revenue $ 141 $ 144 $ 670 $ 680 Support Revenue 113 114 438 440 Perpetual License Revenue 24 28 52 60 Total Software Revenue 278 286 1,160 1,180 Professional Services Revenue 40 40 160 160 Total Revenue $ 318 $ 326 $ 1,320 $ 1,340 Operating Expense (GAAP) $ 231 $ 234 $ 898 $ 903 Operating Expense (Non-GAAP) 179 182 750 755 Operating Margin (GAAP) 1% 4% 7% 8% Operating Margin (Non-GAAP) 21% 22% 22% 22% Tax Rate (GAAP) 30% 30% 30% 30% Tax Rate (Non-GAAP) 19% 18% 19% 18% Shares Outstanding 120 120 119 119 EPS (GAAP) $ (0.04) $ 0.00 $ 0.32 $ 0.39 EPS (Non-GAAP) $ 0.37 $ 0.42 $ 1.65 $ 1.75 Free Cash Flow $ 255 $ 265 Adjusted Free Cash Flow $ 273 $ 283 The first quarter and fiscal 2019 non-GAAP operating margin and non-GAAP EPS guidance exclude the estimated items shown in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected). Adjusted free cash flow excludes $18 million of restructuring payments related to our workforce realignment plans. In millions Q1’19 FY’19 Restructuring charges 18 18 Headquarters relocation charges (1) 2 2 Intangible asset amortization expense 13 51 Stock-based compensation expense 29 116 Total Estimated Pre-Tax GAAP adjustments $ 62 $ 187 (1) Represents accelerated depreciation expense recorded in anticipation of exiting our current headquarters facility. In 2019, we will be moving into a new worldwide headquarters in the Boston Seaport District and we will be vacating our current headquarters space. Because our current headquarters lease will not expire until November 2022, we are seeking to sublease that space, but have not yet done so. If we are unable to sublease our current headquarters space for an amount at least equal to our rent obligations under the current headquarters lease, we will bear overlapping rent obligations for those premises and will be required to record a charge related to such rent shortfall. We currently pay approximately $12 million in annual base rent and operating expenses for our current headquarters. We expect to record a charge for any such shortfall in the earlier of the period that we cease using the space (which will likely occur in the second quarter of our fiscal 2019) or the period we exit the lease contract. Additionally, we will incur other costs associated with the move which will be recorded as incurred. Page 3 of 12


 
Fiscal 2019 Business Outlook – ASC 606 For the first quarter and fiscal year ending September 30, 2019, the company expects: In millions except per share amounts Q1’19 Q1’19 FY’19 FY’19 Operating Measures(1) Low High Low High Subscription ACV $ 38 $ 41 $ 224 $ 230 License and Subscription Bookings 100 110 $ 500 $ 520 Subscription % of Bookings 76% 74% 90% 88% (1)An explanation of the metrics included in this table is provided below. Q1’19 Q1’19 FY’19 FY’19 Financial Measures Low High Low High Total Subscription Revenue $ 93 $ 103 $ 565 $ 605 Perpetual Support Revenue 113 114 438 440 Perpetual License Revenue 24 28 52 60 Total Software Revenue 230 245 1,055 1,105 Professional Services Revenue 40 40 160 160 Total Revenue $ 270 $ 285 $ 1,215 $ 1,265 Operating Expense (GAAP) $ 225 $ 228 $ 873 $ 877 Operating Expense (Non-GAAP) 173 176 725 730 Operating Margin (GAAP) (14%) (8%) 1% 5% Operating Margin (Non-GAAP) 9% 14% 17% 20% Tax Rate (GAAP) 30% 30% 30% 30% Tax Rate (Non-GAAP) 19% 18% 19% 18% Shares Outstanding 120 120 119 119 EPS (GAAP) $ (0.29) $ (0.19) $ (0.15) $ 0.14 EPS (Non-GAAP) $ 0.08 $ 0.20 $ 1.10 $ 1.45 Free Cash Flow $ 255 $ 265 Adjusted Free Cash Flow $ 273 $ 283 The first quarter and fiscal 2019 non-GAAP operating margin and non-GAAP EPS guidance exclude the estimated items outlined in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected). Adjusted free cash flow excludes $18 million of restructuring payments related to our workforce realignment plans. In millions Q1’19 FY’19 Restructuring charges 18 18 Headquarters relocation charges (1) 2 2 Intangible asset amortization expense 13 51 Stock-based compensation expense 29 116 Total Estimated Pre-Tax GAAP adjustments $ 62 $ 187 (1) Represents accelerated depreciation expense recorded in anticipation of exiting our current headquarters facility. In 2019, we will be moving into a new worldwide headquarters in the Boston Seaport District and we will be vacating our current headquarters space. Because our current headquarters lease will not expire until November 2022, we are seeking to sublease that space, but have not yet done so. If we are unable to sublease our current headquarters space for an amount at least equal to our rent obligations under the current headquarters lease, we will bear overlapping rent obligations for those premises and will be required to record a charge related to such rent shortfall. We currently pay approximately $12 million in annual base rent and operating expenses for our current headquarters. We expect to record a charge for any such shortfall in the earlier of the period that we cease using the space (which will likely occur in the second quarter of our fiscal 2019) or the period we exit the lease contract. Additionally, we will incur other costs associated with the move which will be recorded as incurred. Page 4 of 12


 
PTC’s Fiscal 2018 Fourth Quarter Results Conference Call, Prepared Remarks and Data Tables Prepared remarks and financial data tables have been posted to the Investor Relations section of our website at ptc.com. The Company will host a management presentation to discuss results at 5:00 pm ET on Wednesday, October 24, 2018. To access the live webcast, please visit PTC’s Investor Relations website at investor.ptc.com at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. To participate in the live conference call, dial 773-799-3757 or 800-857-5592 and provide the passcode PTC. The call will be recorded and a replay will be available for 10 days following the call by dialing 866-358-4517 and entering the pass code 7910. The archived webcast will also be available on PTC’s Investor Relations website. Bookings Metrics We offer both perpetual and subscription licensing options to our customers, as well as monthly software rentals for certain products. Given the difference in revenue recognition between the sale of a perpetual software license (revenue is recognized at the time of sale) and a subscription (revenue is deferred and recognized ratably over the subscription term), we use bookings for internal planning, forecasting and reporting of new license and cloud services transactions. In order to normalize between perpetual and subscription licenses, we define subscription bookings as the subscription annualized contract value (subscription ACV) of new subscription bookings multiplied by a conversion factor of 2. We arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. We define subscription ACV as the total value of a new subscription booking divided by the term of the contract (in days) multiplied by 365. If the term of the subscription contract is less than a year, and is not associated with an existing contract, the booking is equal to the total contract value. Beginning in Q3’18, minimum ACV commitments under our Strategic Alliance Agreement with Rockwell Automation are included in subscription ACV if the period-to-date minimum ACV commitment exceeds actual ACV sold under the Agreement. License and subscription bookings equal subscription bookings (as described above) plus perpetual license bookings. Because subscription bookings is a metric we use to approximate the value of subscription sales if sold as perpetual licenses, it does not represent the actual revenue that will be recognized with respect to subscription sales or that would be recognized if the sales were perpetual licenses, nor does the annualized value of monthly software rental bookings represent the value of any such booking. Total Deferred Revenue Total Deferred Revenue consists of Billed Deferred Revenue and Unbilled Deferred Revenue. Unbilled deferred revenue is the aggregate of booked orders for license, support and subscription (including multi-year subscription contracts with start dates after October 1, 2018 that are subject to a limited annual cancellation right) for which the associated revenue has not been recognized and the customer has not been invoiced. We do not record Unbilled Deferred Revenue on our Consolidated Balance Sheet; we record such amounts as deferred revenue when we invoice the customer. Billed Deferred Revenue primarily relates to software agreements invoiced to customers for which the revenue has not yet been recognized. Billed deferred revenue can fluctuate quarterly based upon the contractual billing dates in our recurring revenue contracts, the timing of our fiscal reporting periods and Fx rates. Software Revenue Any reference to “total recurring software revenue” or “recurring software revenue” means the sum of subscription revenue and support revenue. Any reference to “total software revenue” or “software revenue” means the sum of subscription revenue, support revenue and perpetual license revenue. “Subscription revenue” includes cloud services revenue. Page 5 of 12


 
Navigate Allocation Revenue and bookings for Navigate™, a ThingWorx-based IoT solution for PLM, are allocated 50% to Solutions and 50% to IoT. Annualized Recurring Revenue (ARR) To help investors understand and assess the success of our subscription transition, we provide an Annualized Recurring Revenue operating measure. Annualized Recurring Revenue (ARR) for a given quarter is calculated by dividing the portion of non-GAAP software revenue attributable to subscription and support for the quarter by the number of days in the quarter and multiplying by 365. (A related metric is Subscription ARR, which is calculated by dividing the portion of non- GAAP revenue attributable to subscription for the quarter by the number of days in the quarter and multiplying by 365.) ARR should be viewed independently of revenue and deferred revenue as it is an operating measure and is not intended to be combined with or to replace either of those items. ARR is not a forecast of future revenue, which can be impacted by contract expiration and renewal rates, and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of income. Subscription and support revenue and ARR disclosed in a quarter can be impacted by multiple factors, including but not limited to (1) the timing of the start of a contract or a renewal, including the impact of on-time renewals, support win-backs, and support conversions, which may vary by quarter, (2) the ramping of committed monthly payments under a subscription agreement over time, (3) multiple other contractual factors with the customer including other elements sold with the subscription or support contract, and (4) the impact of currency fluctuations. These factors can result in variability in disclosed ARR. Constant Currency Change Metric Year-over-year changes in revenue and bookings on a constant currency basis compare reported results excluding the effect of any hedging converted into U.S. dollars based on the corresponding prior year’s foreign currency exchange rates to reported results for the comparable prior year period. Important Information About Non-GAAP References PTC provides non-GAAP supplemental information to its financial results. We use these non- GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non- GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results and such items often recur. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results. Non-GAAP revenue, non-GAAP operating expense, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of the following items: a revenue write-down and revenue associated with the settlement of a previously disclosed disputed customer receivable, fair value of acquired deferred revenue, fair value adjustment to deferred services cost, stock-based compensation, amortization of Page 6 of 12


 
acquired intangible assets, acquisition-related and other transactional charges included in general and administrative costs, restructuring charges, headquarters relocation charges, and income tax adjustments. Settlement Revenue Exclusions. In Q4'18, we settled a previously disclosed dispute with respect to a customer receivable. The settlement included partial payment of the receivable and new software purchases. The net revenue write-down recorded in Q4'18 was $9.3 million, comprised of a $14.5 million professional services revenue write-down, partially offset by new subscription revenue of $5.2 million. We excluded the professional services revenue write-down because the write-down related to revenue that was recorded in periods prior to CY17 and is not reflective of current operating performance and excluded the new subscription revenue because it mitigated the impact of the professional services revenue write-down. Additional information about the items we exclude from our non-GAAP financial measures and the reasons we exclude them can be found in “Non-GAAP Financial Measures” beginning on page 33 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017. A reconciliation of non-GAAP measures to GAAP results is provided within this press release. PTC also provides information on “free cash flow” and “adjusted free cash flow” to enable investors to assess our ability to generate cash without incurring additional external financings and to evaluate our performance against our announced long-term goal of returning approximately 40% of our free cash flow to shareholders via stock repurchases. Free cash flow is net cash provided by (used in) operating activities less capital expenditures; adjusted free cash flow is free cash flow excluding restructuring payments and certain identified non-ordinary course payments. Free cash flow and adjusted free cash flow are not measures of cash available for discretionary expenditures. Forward-Looking Statements Statements in this press release that are not historic facts, including statements about our first quarter and full fiscal 2019 targets, and other future financial and growth expectations and targets and anticipated tax rates, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: the macroeconomic and/or global manufacturing climates may deteriorate; customers may not purchase our solutions or convert existing support contracts to subscription when or at the rates we expect; our businesses, including our Internet of Things (IoT) business, and Augmented Reality businesses, may not expand and/or generate the revenue we expect; foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense; the mix of revenue between license & subscription solutions, support and professional services could be different than we expect, which could impact our EPS results; our transition to subscription-only licensing could adversely affect sales and revenue; sales of our solutions as subscriptions may not have the longer-term effect on revenue and earnings that we expect; bookings associated with minimum ACV commitments under our Strategic Alliance Agreement with Rockwell Automation may not result in subscription contracts sold through to end-user customers; our strategic initiatives and investments may not generate the revenue we expect; we may be unable to expand our partner ecosystem as we expect and our partners may not generate the revenue we expect; we may be unable to generate sufficient operating cash flow to return 40% of free cash flow to shareholders and other uses of cash or our credit facility limits or other matters could preclude share repurchases. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses and profits. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Page 7 of 12


 
Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. PTC and the PTC logo are trademarks or registered trademarks of PTC Inc. or its subsidiaries in the United States and in other countries. About PTC (NASDAQ: PTC) PTC helps companies around the world reinvent the way they design, manufacture, operate, and service things in and for a smart, connected world. In 1986 we revolutionized digital 3D design, and in 1998 were first to market with Internet-based product lifecycle management. Today, our leading industrial innovation platform and field-proven solutions enable you to unlock value at the convergence of the physical and digital worlds. With PTC, manufacturers and an ecosystem of partners and developers can capitalize on the promise of the Internet of Things and augmented reality technology today and drive the future of innovation. PTC.com @PTC Blogs PTC Investor Relations Contacts Tim Fox, 781-370-5961 tifox@ptc.com Page 8 of 12


 
PTC Inc. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, 2018 2017 2018 2017 Revenue: Subscription $ 142,376 $ 84,245 $ 482,027 $ 279,246 Support 117,819 141,056 496,826 574,680 Total recurring revenue 260,195 225,301 978,853 853,926 Perpetual license 27,030 39,291 109,634 133,390 Total subscription, support and license revenue 287,225 264,592 1,088,487 987,316 Professional services 25,296 41,787 153,337 176,723 Total revenue 312,521 306,379 1,241,824 1,164,039 Cost of revenue: Cost of license and subscription revenue (1) 22,603 23,713 94,108 86,047 Cost of support revenue (1) 21,122 23,174 88,575 92,202 Total cost of software revenue 43,725 46,887 182,683 178,249 Cost of professional services revenue(1) 34,324 35,918 143,511 150,770 Total cost of revenue 78,049 82,805 326,194 329,019 Gross margin 234,472 223,574 915,630 835,020 Operating expenses: Sales and marketing (1) 109,138 101,378 414,524 372,946 Research and development (1) 62,393 60,585 249,774 236,059 General and administrative (1) 41,542 36,278 142,981 145,067 Amortization of acquired intangible assets 7,784 8,122 31,350 32,108 Restructuring and headquarters charges, net (2) 1,918 (358) 3,764 7,942 Total operating expenses 222,775 206,005 842,393 794,122 Operating income 11,697 17,569 73,237 40,898 Other expense, net (11,028) (12,114) (44,581) (42,304) Income (loss) before income taxes 669 5,455 28,656 (1,406) Benefit for income taxes (3) (12,522) (11,980) (23,331) (7,645) Net income $ 13,191 $ 17,435 $ 51,987 $ 6,239 Earnings per share: Basic $ 0.11 $ 0.15 $ 0.45 $ 0.05 Weighted average shares outstanding 117,823 115,483 116,390 115,523 Diluted $ 0.11 $ 0.15 $ 0.44 $ 0.05 Weighted average shares outstanding 119,580 117,380 118,158 117,356 (1) The amounts in the tables above include stock-based compensation as follows: Three Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, 2018 2017 2018 2017 Cost of license and subscription revenue $ 560 $ 425 $ 1,801 $ 1,379 Cost of support 620 1,478 2,645 5,116 Cost of professional services revenue 2,233 1,616 7,079 6,116 Sales and marketing 10,066 4,326 24,893 15,373 Research and development 3,862 4,215 13,488 13,968 General and administrative 13,583 8,509 33,033 34,756 Total stock-based compensation $ 30,924 $ 20,569 $ 82,939 $ 76,708 (2) Headquarters relocation charges represent accelerated depreciation expense recorded in anticipation of the exit of our current headquarters facility. (3) Our year-to-date 2018 tax rates include a benefit of $12 million relating to the enactment of the Tax Cuts and Jobs Act. Page 9 of 12


 
PTC Inc. NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED) (in thousands, except per share data) Three Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, 2018 2017 2018 2017 GAAP revenue $ 312,521 $ 306,379 $ 1,241,824 $ 1,164,039 Fair value adjustment of acquired deferred subscription revenue 75 240 341 1,670 Fair value adjustment of acquired deferred services revenue 223 255 929 1,043 Settlement adjustment - subscription revenue (2) (5,250) - (5,250) - Settlement adjustment - services revenue (2) 14,546 - 14,546 - Non-GAAP revenue $ 322,115 $ 306,874 $ 1,252,390 $ 1,166,752 GAAP gross margin $ 234,472 $ 223,574 $ 915,630 $ 835,020 Fair value adjustment of acquired deferred revenue 298 495 1,270 2,713 Settlement adjustment - revenue (2) 9,296 - 9,296 - Fair value adjustment to deferred services cost (91) (108) (384) (437) Stock-based compensation 3,413 3,519 11,525 12,611 Amortization of acquired intangible assets included in cost of revenue 6,677 7,327 26,706 26,621 Non-GAAP gross margin $ 254,065 $ 234,807 $ 964,043 $ 876,528 GAAP operating income $ 11,697 $ 17,569 $ 73,237 $ 40,898 Fair value adjustment of acquired deferred revenue 298 495 1,270 2,713 Settlement adjustment - revenue (2) 9,296 - 9,296 - Fair value adjustment to deferred services cost (91) (108) (384) (437) Stock-based compensation 30,924 20,569 82,939 76,708 Amortization of acquired intangible assets included in cost of revenue 6,677 7,327 26,706 26,621 Amortization of acquired intangible assets 7,784 8,122 31,350 32,108 Acquisition-related and other transactional charges included in general and administrative costs 135 600 1,853 1,587 US pension plan termination-related costs - - - 285 Restructuring charges, net 11 (358) (1,003) 7,942 Headquarters relocation charges 1,907 - 4,767 - Non-GAAP operating income (1) $ 68,638 $ 54,216 $ 230,031 $ 188,425 GAAP net income $ 13,191 $ 17,435 $ 51,987 $ 6,239 Fair value adjustment of acquired deferred revenue 298 495 1,270 2,713 Settlement adjustment - revenue (2) 9,296 - 9,296 - Fair value adjustment to deferred services cost (91) (108) (384) (437) Stock-based compensation 30,924 20,569 82,939 76,708 Amortization of acquired intangible assets included in cost of revenue 6,677 7,327 26,706 26,621 Amortization of acquired intangible assets 7,784 8,122 31,350 32,108 Acquisition-related and other transactional charges included in general and administrative costs 135 600 1,853 1,587 US pension plan termination-related costs - - - 285 Restructuring charges, net 11 (358) (1,003) 7,942 Headquarters relocation charges 1,907 - 4,767 - Non-operating credit facility refinancing costs - - - 1,152 Income tax adjustments (3) (16,843) (14,546) (37,581) (17,357) Non-GAAP net income $ 53,289 $ 39,536 $ 171,200 $ 137,561 GAAP diluted earnings per share $ 0.11 $ 0.15 $ 0.44 $ 0.05 Fair value adjustment of acquired deferred revenue - - 0.01 0.02 Settlement adjustment - revenue (2) 0.08 - 0.08 - Stock-based compensation 0.26 0.18 0.70 0.65 Amortization of acquired intangibles 0.12 0.13 0.49 0.50 Acquisition-related and other transactional charges - 0.01 0.02 0.01 US pension plan termination-related costs - - - - Restructuring charges, net - - (0.01) 0.07 Headquarters relocation charges 0.02 - 0.04 - Non-operating credit facility refinancing costs - - - 0.01 Income tax adjustments (0.14) (0.12) (0.32) (0.15) Non-GAAP diluted earnings per share $ 0.45 $ 0.34 $ 1.45 $ 1.17 GAAP diluted weighted average shares outstanding 119,580 117,380 118,158 117,356 Dilutive effect of stock-based compensation plans - - - - Non-GAAP diluted weighted average shares outstanding 119,580 117,380 118,158 117,356 (1) Operating margin impact of non-GAAP adjustments: Three Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, 2018 2017 2018 2017 GAAP operating margin 3.7% 5.7% 5.9% 3.5% Fair value adjustment of acquired deferred revenue 0.1% 0.2% 0.1% 0.2% Settlement adjustment - revenue (2) 2.4% 0.0% 0.6% 0.0% Fair value adjustment to deferred services cost 0.0% 0.0% 0.0% 0.0% Stock-based compensation 9.9% 6.7% 6.7% 6.6% Amortization of acquired intangibles 4.6% 5.0% 4.7% 5.0% Acquisition-related and other transactional charges 0.0% 0.2% 0.1% 0.1% US pension plan termination-related costs 0.0% 0.0% 0.0% 0.0% Restructuring charges, net 0.0% -0.1% -0.1% 0.7% Headquarters relocation charges 0.6% 0.0% 0.4% 0.0% Non-GAAP operating margin 21.3% 17.7% 18.4% 16.1% (2) Our Q4'18 and FY'18 GAAP revenue results include the impact of a settlement of a customer dispute concerning a professional services receivable. The settlement, reached in September 2018, included partial payment of the receivable and new software purchases. The net revenue write-down recorded in the fourth quarter was $9.3 million, comprised of a $14.5 million services revenue write-down, partially offset by new subscription revenue of $5.2 million. We have excluded these amounts from our Non-GAAP results. (3) In the fourth quarter we excluded the GAAP benefit of a $3 million valuation allowance release in a foreign jurisdiction as the jurisdiction was profitable on a non-GAAP basis. We have recorded a full valuation allowance against our U.S. net deferred tax assets and a valuation allowance against net deferred tax assets in certain foreign jurisdictions. As we are profitable on a non-GAAP basis, the 2018 and 2017 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. Income tax adjustments reflect the tax effects of non-GAAP adjustments which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above. We have recorded the impact of the Tax Cuts and Jobs Act in our Q1'18 GAAP earnings, resulting in a non-cash benefit of approximately $7 million. In Q3’18, we increased the non-cash benefit by approximately $5 million to reflect additional guidance on the state tax implications of the Act. We have excluded this benefit from our non-GAAP results. Page 10 of 12


 
PTC Inc. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 30, September 30, 2018 2017 ASSETS Cash and cash equivalents $ 259,946 $ 280,003 Marketable securities 55,951 50,315 Accounts receivable, net 129,297 152,299 Property and equipment, net 80,613 63,600 Goodwill and acquired intangible assets, net 1,382,659 1,440,680 Other assets 420,556 373,487 Total assets $ 2,329,022 $ 2,360,384 LIABILITIES AND STOCKHOLDERS' EQUITY Deferred revenue $ 499,442 $ 458,907 Debt, net of deferred issuance costs 643,268 712,406 Other liabilities 311,723 303,635 Stockholders' equity 874,589 885,436 Total liabilities and stockholders' equity $ 2,329,022 $ 2,360,384 Page 11 of 12


 
PTC Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended Twelve Months Ended September 30, September 30, September 30, September 30, 2018 2017 2018 2017 Cash flows from operating activities: Net income (loss) $ 13,191 $ 17,435 $ 51,987 $ 6,239 Stock-based compensation 30,924 20,569 82,939 76,708 Depreciation and amortization 22,105 22,555 87,408 86,742 Accounts receivable (799) (22,081) 20,396 12,832 Accounts payable and accruals 37,150 33,393 (1,737) (14,531) Deferred revenue (26,653) (40,177) 56,141 5,808 Income taxes (16,228) (11,255) (46,233) (29,087) Other 2,799 12,332 (3,090) (9,477) Net cash provided by operating activities (1) 62,489 32,771 247,811 135,234 Capital expenditures (17,375) (6,111) (36,041) (25,444) Acquisition of businesses, net of cash acquired - - (3,000) (4,960) Purchase of intangible asset - - (3,000) - Proceeds (payments) on debt, net (50,000) - (70,000) (40,000) Proceeds from issuance of common stock (2) 1,008,182 6,800 1,015,654 10,778 Payments of withholding taxes in connection with vesting of stock-based awards (577) (410) (45,374) (26,654) Proceeds from (purchase of) investments - - (1,000) 15,218 Contingent consideration (525) - (8,275) (11,054) Purchases of marketable securities, net (1,748) (208) (6,171) (941) Repurchases of common stock (2) (1,000,000) (15,997) (1,100,000) (50,991) Other financing & investing activities (2,851) - (2,851) (184) Foreign exchange impact on cash (4,201) 2,463 (7,810) 1,066 Net change in cash and cash equivalents (6,606) 19,308 (20,057) 2,068 Cash and cash equivalents, beginning of period 266,552 260,695 280,003 277,935 Cash and cash equivalents, end of period $ 259,946 $ 280,003 $ 259,946 $ 280,003 (1) Effective the beginning of fiscal 2018, in accordance with the adoption of ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," excess tax benefits are now classified as an operating activity on the statement of cash flows rather than as a financing activity. The prior period excess tax benefits have been reclassified for comparability. (2) In the fourth quarter of 2018, Rockwell Automation made a $1.0 billion equity investment in PTC as part of a strategic partnership. Using the cash proceeds from this investment, PTC entered into a $1.0 billion accelerated share repurchase. Page 12 of 12


 

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