PTC INC.

Previous wording

Statements in this document that are not historic facts, including statements about our future operating, financial and growth expectations, and potential stock repurchases, 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 not improve or may deteriorate due to, among other factors, the effects of recently imposed import tariffs, threats of additional and reciprocal import tariffs, and global trade tensions and uncertainty, volatile foreign exchange rates, high interest rates or increases in interest rates, inflation, tightening of credit standards and availability, geopolitical uncertainty, including the effects of the conflicts between Russia and Ukraine and in the Middle East, and tensions between the U.S. and China, any of which could cause customers to delay or reduce purchases of new software, adopt competing software solutions, reduce the number of subscriptions they carry, or delay payments to us, which would adversely affect our ARR (Annual Run Rate) and/or financial results and cash flow and growth; our investments in our software solutions may not drive expansion of those solutions and/or generate the ARR and/or cash flow we expect if customers are slower to adopt those solutions than we expect or if they adopt competing solutions; our go-to-market realignment and other strategic initiatives to improve organizational and operational efficiency may not do so when or as we expect and may disrupt our business to a greater extent than we expect; other uses of cash or our credit facility limits could limit or preclude the return of excess cash to shareholders via share repurchases, or could change the amount and timing of any share repurchases; and foreign exchange rates may differ materially from those we expect. 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 changes to tax laws in the U.S. and other countries and 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 described below throughout or referenced in Part II, Item 1A. Risk Factorsof this report.

Current wording

Statements in this document that are not historic facts, including statements about our future operating, financial and growth expectations, and potential stock repurchases, 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 not improve or may deteriorate due to, among other factors, the effects of recently imposed import tariffs, threats of additional and reciprocal import tariffs, global trade tensions and uncertainty, volatile foreign exchange rates, high interest rates or increases in interest rates, inflation, tightening of credit standards and availability, geopolitical uncertainty, including the effects of the conflicts between Russia and Ukraine and in the Middle East, and tensions between the U.S. and China, any of which could cause customers to delay or reduce purchases of new software, adopt competing software solutions, reduce the number of subscriptions they carry, or delay payments to us, which would adversely affect our ARR (Annual Run Rate) and/or financial results and cash flow and growth; our investments in our software solutions, including the integration of artificial intelligence (AI) capabilities into our software solutions, may not drive expansion of those solutions and/or generate the ARR and/or cash flow we expect if customers are slower to adopt those solutions than we expect or if they adopt competing solutions; customers may not build the product data foundations essential for the AI-driven transformation of their business when or as we expect, which could adversely affect our ARR and/or financial results and cash flow and growth; our go-to-market realignment and related initiatives may disrupt our business to a greater extent than we expect or may not generate the ARR and/or financial results or cash flow when or as we expect; other uses of cash or our credit facility limits could limit or preclude the return of excess cash to shareholders via share repurchases, or could change the amount and timing of any share repurchases; and foreign exchange rates may differ materially from those we expect. 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 changes to tax laws in the U.S. and other countries and 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 described below throughout or referenced in Part II, Item 1A. Risk Factorsof this report.

Previous wording

Despite the overall selling environment, which has been challenging for a couple of years now and has begun to reflect heightened macroeconomic uncertainly related to global trade tensions and tariffs, ARR grew 10% (10% constant currency) to $2.29 billion as of the end of Q2’25 compared to Q2’24.

Current wording

Despite the overall selling environment, which has been challenging for a couple of years now and reflects heightened macroeconomic uncertainly related to global trade tensions and tariffs, ARR grew 14% (9% constant currency) to $2.42 billion as of the end of Q3’25 compared to Q3’24.

Previous wording

Cash provided by operating activities grew 12% to $281 million in Q2'25 compared to Q2'24. Free cash flow grew 13% to $279 million in Q2'25 compared to Q2'24. Our cash flow growth is attributable to resilient top-line growth due to our subscription business model and operational discipline. In Q2'25, we made net repayments on our debt of $155 million and repurchased $75 million of our outstanding shares.

Current wording

Cash provided by operating activities grew 14% to $244 million in Q3'25 compared to Q3'24. Free cash flow grew 14% to $242 million in Q3'25 compared to Q3'24. Our cash flow growth is attributable to resilient top-line growth due to our subscription business model and operational discipline. In Q3'25, we repaid $157 million of debt and repurchased $75 million of our outstanding shares.

Previous wording

Revenue grew 6% (8% constant currency) to $636 million in Q2'25 compared to Q2'24. Under ASC 606, the timing of revenue recognition for on-premises subscription revenue can vary significantly, impacting reported revenue and growth rates. Operating margin grew by 530 basis points in Q2'25 compared to Q2'24, reflecting higher revenue as well as continued operating discipline. Diluted earnings per share grew 42% to $1.35 in Q2'25 compared to Q2'24.

Current wording

Revenue grew 24% (22% constant currency) to $644 million in Q3'25 compared to Q3'24. Under ASC 606, the timing of revenue recognition for on-premises subscription revenue can vary significantly, impacting reported revenue and growth rates. Operating margin grew by 1410 basis points in Q3'25 compared to Q3'24, reflecting higher revenue as well as continued operating discipline. Diluted earnings per share grew 106% to $1.17 in Q3'25 compared to Q3'24.

Previous wording

Approximately 50% of our revenue and 35% of our expenses are transacted in currencies other than the U.S. Dollar. Because we report our results of operations in U.S. Dollars, currency translation, particularly changes in the Euro, Yen, Shekel, and Rupee relative to the U.S. Dollar, affects our reported results. Our constant currency disclosures are calculated by multiplying the results in local currency for the quarterly periods for FY'25 and FY'24 by the exchange rates in effect on September 30, 2024.

Current wording

Approximately 55% of our revenue and 35% of our expenses are transacted in currencies other than the U.S. Dollar. Because we report our results of operations in U.S. Dollars, currency translation, particularly changes in the Euro, Yen, Shekel, and Rupee relative to the U.S. Dollar, affects our reported results. Our constant currency disclosures are calculated by multiplying the results in local currency for the quarterly periods for FY'25 and FY'24 by the exchange rates in effect on September 30, 2024.

Previous wording

If reported results for the six months ended March 31, 2025 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been higher by $36 million, revenue would have been higher by $30 million, and expenses would have been higher by $10 million. If reported results for the six months ended March 31, 2024 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been higher by $31 million, revenue would have been higher by $15 million, and expenses would have been higher by $6 million.

Current wording

If reported results for the nine months ended June 30, 2025 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been lower by $43 million, revenue would have been higher by $33 million, and expenses would have been higher by $11 million. If reported results for the nine months ended June 30, 2024 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been higher by $44 million, revenue would have been higher by $26 million, and expenses would have been higher by $10 million.

Previous wording

License revenue growth in Q2'25 and the first six months of FY'25 compared to the prior-year periods reflects the higher value and longer duration of contracts that renewed in the current-year periods.

Current wording

Software revenue growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods was driven by license revenue growth, which reflects the higher total value and longer average duration of contracts that renewed in the current-year periods.

Previous wording

Support and cloud services revenue growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods was mainly driven by growth in PLM.

Current wording

Support and cloud services revenue growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods was mainly driven by growth in PLM.

Previous wording

Professional services revenue decreased in Q2'25 and the first six months of FY'25 as we continue to execute on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.

Current wording

Professional services revenue decreased in Q3'25 and the first nine months of FY'25 as we continue to execute on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.

Previous wording

PLM ARR grew 11% (11% constant currency) from Q2’24 to Q2'25.

Current wording

PLM ARR grew 14% (10% constant currency) from Q3’24 to Q3'25, primarily driven by Windchill and Codebeamer.

Previous wording

CADsoftware revenue growth in Q2'25 was driven by revenue growth in Europe. CAD software revenue growth in the first six months of FY'25 was driven by revenue growth across geographic regions.

Current wording

CADsoftware revenue growth in Q3'25 was driven by the higher total value and longer average duration of contracts that renewed in the period. CAD software revenue growth in the first nine months of FY'25 was driven by revenue growth across all geographic regions, primarily in Creo.

Previous wording

CAD ARR grew 8% (8% constant currency) from Q2’24 to Q2’25.

Current wording

CAD ARR grew 13% (8% constant currency) from Q3’24 to Q3’25, primarily driven by Creo.

Previous wording

License gross margin growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods were in line with license revenue growth. Cost of license revenue in Q2'25 and the first six months of FY'25 remained consistent with the corresponding FY'24 periods.

Current wording

License gross margin growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods were in line with license revenue growth. Cost of license revenue in Q3'25 and the first nine months of FY'25 remained consistent with the corresponding FY'24 periods.

Previous wording

Support and cloud services gross margin growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods was in line with support and cloud services revenue growth. Cost of support and cloud services revenue grew 4% in Q2'25 and 5% in the first six months of FY'25 compared to the corresponding FY'24 periods, primarily due to higher compensation-related costs.

Current wording

Support and cloud services gross margin growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods was in line with support and cloud services revenue growth. Cost of support and cloud services revenue grew 5% in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods, primarily due to higher compensation-related costs.

Previous wording

Total headcount increased 1% between Q2’24 and Q2’25.

Current wording

Total headcount increased 3% between Q3’24 and Q3’25.

Previous wording

Operating expenses in Q2'25 decreased compared to Q2'24, primarily due to the following:

Current wording

Operating expenses in Q3'25 increased compared to Q3'24, primarily due to the following:

Previous wording

Operating expenses in the first six months of FY'25 increased compared to the first six months of FY'24, primarily due to the following:

Current wording

Operating expenses in the first nine months of FY'25 increased compared to the first nine months of FY'24, primarily due to the following:

Previous wording

a $10 million increase in compensation expense (excluding stock-based compensation expense), mainly driven by severance costs recognized in Q1'25 related to the go-to-market realignment (which is primarily included in Sales and marketing), offset by lower compensation charges in General and administrative driven by our FY'24 chief executive officer succession;

Current wording

a $12 million increase in total compensation expense (including stock-based compensation expense), driven by a $19 million increase in severance costs primarily related to our go-to-market realignment (which is mainly included in Sales and marketing), offset by lower compensation charges in General and administrative driven by our FY'24 chief executive officer succession;

Previous wording

a $4 million increase in outside services, driven by consulting services related to our go-to-market realignment and other corporate initiatives; and

Current wording

a $6 million increase in outside services, driven by consulting services related to our go-to-market realignment and other corporate initiatives; and

Previous wording

Interest expense in both FY'25 and FY'24 includes interest on our revolving credit facility, term loan, our senior notes that were redeemed in Q2'25, and our senior notes due in 2028. Interest expense decreased in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods due to lower debt balances and lower interest rates.

Current wording

Interest expense in both FY'25 and FY'24 includes interest on our revolving credit facility, term loan, senior notes that were redeemed in Q2'25, and senior notes due in 2028. Interest expense decreased in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods due to lower debt balances and lower interest rates.

Previous wording

Other income (expense), net increased in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods driven by a $2.0 million impairment charge recognized in Q2'24 related to an available-for-sale debt security.

Current wording

Other income (expense), net increased in Q3'25 compared to Q3'24, driven by foreign currency exchange gains in Q3'25. Other income (expense), net increased in the first nine months of FY'25 compared to the comparable FY'24 period due to a $2.0 million impairment charge recognized in Q2'24 related to an available-for-sale debt security and lower foreign currency exchange losses.

Previous wording

The effective tax rate for the first six months of FY'25 was lower than the effective tax rate for the corresponding prior-year period primarily due to changes in the geographic mix of income before taxes. Additionally, for the first six months of FY'25 and FY'24, rates were impacted by a benefit of $10.4 million and an expense of $3.6 million, respectively, associated with the impact of changes in tax reserves related to prior years in foreign jurisdictions.

Current wording

The effective tax rate for Q3'25 and the first nine months of FY'25 was higher than the effective tax rate for the corresponding prior-year periods primarily due to changes in the geographic mix of income before taxes and the effects of IRS procedural guidance issued in April 2024 requiring IRS consent for certain previously automatic changes of accounting method on our estimated taxable income for FY'24. Additionally, for the first nine months of FY'25 and FY'24, rates were impacted by a benefit of $10.4 million and an expense of $3.6 million, respectively, associated with the impact of changes in tax reserves related to prior years in foreign jurisdictions.

Previous wording

In FY’24, we requested consent from the U.S. Internal Revenue Service to change the accounting method for the treatment of certain deductions. If we do not receive this consent, our future tax payments could be higher than currently estimated, which would also adversely impact our operating cash flow.

Current wording

In FY’24, we requested consent from the IRS to change the accounting method for the treatment of certain deductions. If we do not receive this consent, it would have a material adverse impact on cash flow for the year in which our request is denied and our future tax payments could be higher than currently estimated, which would also adversely impact our operating cash flow. In accordance with GAAP, our financial statements currently reflect the fact that we have not yet received the consent, including an accrual for the income tax payable in Accrued income taxes on the Consolidated Balance Sheets.

Previous wording

Due to the stability of our subscription model and consistency of annual, up-front billing, we aim to maintain a low cash balance. A significant portion of our cash is generated and held outside the U.S. As of March 31, 2025, we had cash and cash equivalents of $20.7 million in the U.S., $82.3 million in Europe, $113.4 million in Asia Pacific (including India) and $18.8 million in other countries. We have substantial cash requirements in the U.S. but believe that the combination of our existing U.S. cash and cash equivalents, cash available under our revolving credit facility, future U.S. operating cash flows, and our ability to repatriate cash to the U.S. will be sufficient to meet our ongoing U.S. operating expenses and known capital requirements.

Current wording

Due to the stability of our subscription model and consistency of annual, up-front billing, we aim to maintain a low cash balance. A significant portion of our cash is generated and held outside the U.S. As of June 30, 2025, we had cash and cash equivalents of $5.2 million in the U.S., $73.6 million in Europe, $103.0 million in Asia Pacific (including India) and $17.5 million in other countries. We have substantial cash requirements in the U.S. but believe that the combination of our existing U.S. cash and cash equivalents, cash available under our revolving credit facility, future U.S. operating cash flows, and our ability to repatriate cash to the U.S. will be sufficient to meet our ongoing U.S. operating expenses and known capital requirements.

Previous wording

Cash provided by operating activities increased $81.7 million in the first six months of FY'25 compared to the same period in FY'24. Growth was driven by higher collections as well as lower interest payments and vendor disbursements, partially offset by higher tax payments and payments related to our go-to-market realignment. Interest payments were $48.8 million lower in the first six months of FY'25 compared to the first six months of FY'24, driven by a Q1'24 payment of $30.0 million of imputed interest on a deferred acquisition payment associated with our FY'23 acquisition of ServiceMax as well as lower interest payments in FY'25 due mainly to lower debt balances.

Current wording

Cash provided by operating activities increased $111.8 million in the first nine months of FY'25 compared to the same period in FY'24. Growth was driven by higher collections as well as lower interest payments, partially offset by higher tax payments and payments related to our go-to-market realignment. Interest payments were $53.3 million lower in the first nine months of FY'25 compared to the first nine months of FY'24, driven by a Q1'24 payment of $30.0 million of imputed interest on a deferred acquisition payment associated with our FY'23 acquisition of ServiceMax as well as lower interest payments in FY'25 due mainly to lower debt balances.

Previous wording

Cash Provided by (Used in) Investing Activities

Current wording

Cash Used in Investing Activities

Previous wording

Cash provided by investing activities in the first six months of FY'25 was driven by inflows from the settlement of net investment hedges. Cash used in investing activities in the first six months of FY'24 was driven by the acquisition of pure-systems for $93.5 million.

Current wording

Cash used in investing activities in the first nine months of FY'25 was driven by outflows from the settlement of net investment hedges. Cash used in investing activities in the first nine months of FY'24 was driven by the acquisition of pure-systems for $93.5 million.

Previous wording

Cash used in financing activities in the first six months of FY'25 included net payments of $360.1 million on our outstanding debt, including the redemption of our 2025 senior notes primarily using a draw on our credit facility, and $150.0 million of repurchases of common stock. Cash used in financing activities in the first six months of FY'24 included $620.0 million paid to settle the ServiceMax deferred acquisition payment, partially offset by net borrowings of $304.1 million to fund the ServiceMax deferred acquisition payment and the pure-systems acquisition.

Current wording

Cash used in financing activities in the first nine months of FY'25 included net payments of $516.7 million on our outstanding debt, including the redemption of our 2025 senior notes primarily using a draw on our credit facility, and the repurchase of $225.0 million of our common stock. Cash used in financing activities in the first nine months of FY'24 included $620.0 million paid to settle the ServiceMax deferred acquisition payment, partially offset by net borrowings of $109.0 million to fund the ServiceMax deferred acquisition payment and the pure-systems acquisition. Payments of withholding taxes in connection with vesting of stock-based awards were lower in the first nine months of FY'25 compared to the comparable prior-year period, primarily driven by vesting of certain awards in connection with the chief executive officer succession in Q2'24.

Previous wording

As of March 31, 2025, we were in compliance with all financial and operating covenants of the credit facility and the note indenture. As of March 31, 2025, the annual rate for borrowings outstanding under the credit facility was 5.9%.

Current wording

As of June 30, 2025, we were in compliance with all financial and operating covenants of the credit facility and the note indenture. As of June 30, 2025, the annual rate for borrowings outstanding under the credit facility was 5.6%.

Previous wording

In Q2'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security.

Current wording

In the first nine months of FY'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security.

Previous wording

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. Additionally, in Q2'25, adjustments exclude a $4.9 million benefit related to the tax impact of tax reserves related to prior years in foreign jurisdictions, of which $4.2 million was a non-cash benefit. In the first six months of FY'25 and FY’24, adjustments exclude a $10.4 million benefit and a $3.6 million charge, respectively, related to the tax impact of tax reserves related to prior years in foreign jurisdictions.

Current wording

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. Additionally, in the first nine months of FY'25 and FY’24, adjustments exclude a $10.4 million benefit and a $3.6 million charge, respectively, related to the tax impact of tax reserves related to prior years in foreign jurisdictions.