PTC INC.

Previous wording

Our discussion of results includes discussion of our ARR (Annual Run Rate) operating measure, non-GAAP financial measures, and disclosure of our results on a constant currency basis. ARR and our non-GAAP financial measures, including the reasons we use those measures, are described below in Results of Operations - Operating Measure and Results of Operations - Non-GAAP Financial Measures, respectively. The methodology used to calculate constant currency disclosures is described in Results of Operations - Impact of Foreign Currency Exchange on Results of Operations. You should read those sections to understand our operating measure, non-GAAP financial measures, and constant currency disclosures.

Current wording

Our discussion of results includes discussion of our ARR (Annual Run Rate) operating measure, non-GAAP financial measures, and disclosure of our results on a constant currency basis. ARR and our non-GAAP financial measures, including the reasons we use those measures, are described below in Operating and Non-GAAP Financial Measures. The methodology used to calculate constant currency disclosures is described in Results of Operations - Impact of Foreign Currency Exchange on Results of Operations. You should read those sections to understand our operating measure, non-GAAP financial measures, and constant currency disclosures.

Previous wording

Despite the overall demand environment, which has been challenging for many quarters now, ARR grew 14% (12% constant currency) to $2.25 billion as of the end of FY'24 compared to FY’23.

Current wording

ARR grew 10% (8.5% constant currency) to $2.48 billion as of the end of FY'25 compared to FY’24.

Previous wording

Cash provided by operating activities grew 23% to $750 million in FY'24 compared to FY'23. Free cash flow grew 25% to $736 million in FY'24 compared to FY'23. Our cash flow growth is attributable to solid top-line growth due to our subscription business model and operational discipline. Interest payments were $47 million higher in FY'24 compared to FY'23, mainly due to the payment of $30 million of imputed interest on a deferred acquisition payment associated with our 2023 acquisition of ServiceMax and incremental interest expense associated with borrowings in FY'23 and FY'24. We ended FY’24 with cash and cash equivalents of $266 million and gross debt of $1.75 billion, which debt carried an aggregate weighted average interest rate of 5.1%.

Current wording

Cash provided by operating activities grew 16% to $868 million in FY'25 compared to FY'24. Free cash flow grew 16% to $857 million in FY'25 compared to FY'24. Our cash flow growth is attributable to resilient top-line growth due to our subscription business model and operational discipline. In FY'25, we made net debt repayments of $553 million and repurchased $300 million of our outstanding shares. We ended FY’25 with cash and cash equivalents of $184 million and gross debt of $1.20 billion, which debt carried an aggregate weighted average interest rate of 4.9%.

Previous wording

Revenue grew 10% (9% constant currency) in FY'24 compared to FY'23. Our acquisition of ServiceMax in early Q2'23 contributed to FY'24 revenue growth. Under ASC 606, the timing of revenue recognition for on-premises subscription revenue can vary significantly, impacting reported revenue and growth rates.

Current wording

Revenue grew 19% (18% constant currency) in FY'25 compared to FY'24. Under ASC 606, the timing of revenue recognition for on-premises subscription revenue can vary significantly, impacting reported revenue, operating margin, and earnings per share. FY'25 revenue growth reflects the higher total value and longer average duration of contracts that commenced in the current year. Operating margin grew by approximately 1030 basis points in FY'25 compared to FY'24, reflecting higher revenue as well as continued operating discipline. Diluted earnings per share grew 95% to $6.08 in FY'25 compared to FY'24, driven by revenue growth.

Previous wording

See Non-GAAP Financial Measures below for a reconciliation of our GAAP results to our non-GAAP financial measures and Impact of Foreign Currency Exchange on Results of Operations below for a description of how we calculate our results on a constant currency basis.

Current wording

See Operating and Non-GAAP Financial Measures below for a reconciliation of our GAAP results to our non-GAAP financial measures and Impact of Foreign Currency Exchange on Results of Operations below for a description of how we calculate our results on a constant currency basis.

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. Changes in foreign currency exchange rates were a slight tailwind to reported income statement results in FY’24. ARR was positively impacted by improvements in currency exchange rates, particularly the Euro to U.S. Dollar exchange rate, as of September 30, 2024 compared to September 30, 2023.

Current 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. Changes in foreign currency exchange rates were a slight tailwind to reported income statement results compared to constant currency results in FY’25. ARR was positively impacted by more favorable currency exchange rates, particularly the Euro to U.S. Dollar exchange rate, as of September 30, 2025 compared to September 30, 2024.

Previous wording

The results of operations in the table above, and the tables and discussions below about revenue by line of business and product group present both actual percentage changes year over year and percentage changes on a constant currency basis. Our constant currency disclosures are calculated by multiplying the results in local currency for FY'24 and FY'23 by the exchange rates in effect on September 30, 2023. If FY'24 reported results were converted into U.S. Dollars using the rates in effect as of September 30, 2023, ARR would have been lower by $47 million, revenue would have been lower by $22 million, and expenses would have been lower by $10 million. If FY'23 reported results were converted into U.S. Dollars using the rates in effect as of September 30, 2023, ARR would have been the same, revenue would have been lower by $17 million, and expenses would have been lower by $12 million.

Current wording

The results of operations in the table above, and the tables and discussions below about revenue by line of business and product group present both actual percentage changes year over year and percentage changes on a constant currency basis. Our constant currency disclosures are calculated by multiplying the results in local currency for FY'25 and FY'24 by the exchange rates in effect on September 30, 2024. If FY'25 reported results were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been lower by $33 million, revenue would have been higher by $21 million, and expenses would have been higher by $9 million. If FY'24 reported results were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been the same, revenue would have been higher by $34 million, and expenses would have been higher by $14 million.

Previous wording

Support and cloud services revenue growth in FY'24 was mainly driven by PLM (which included contribution from ServiceMax) in the Americas and Europe.

Current wording

Support and cloud services revenue growth in FY'25 was mainly driven by growth in PLM.

Previous wording

PLM ARR grew 15% (13% constant currency) from September 30, 2023 to September 30, 2024.

Current wording

PLM ARR grew 10% (8% constant currency) from September 30, 2024 to September 30, 2025, primarily driven by Windchill and Codebeamer.

Previous wording

CAD ARR grew 13% (10% constant currency) from September 30, 2023 to September 30, 2024.

Current wording

CAD ARR grew 10% (9% constant currency) from September 30, 2024 to September 30, 2025, primarily driven by Creo.

Previous wording

License gross margin grew at a higher rate than license revenue in FY'24 due mainly to lower intangible amortization expense. Excluding intangible amortization expense, license gross margin percentage was consistent year over year.

Current wording

License gross margin grew at a higher rate than license revenue in FY'25 due mainly to license revenue growth. Total cost of license revenue in FY'25 remained consistent with FY'24, with lower intangible amortization expense offsetting growth in other areas.

Previous wording

Support and cloud services gross margin growth in FY'24 was in line with support and cloud services revenue growth. Cost of support and cloud services in FY'24 grew at a similar rate to revenue, driven by higher intangible amortization expense, compensation expense, and royalty expense.

Current wording

Support and cloud services gross margin growth in FY'25 was in line with support and cloud services revenue growth. Cost of support and cloud services grew 6% in FY'25, primarily due to increasing compensation-related costs and cloud and software subscription-related costs as the business grows.

Previous wording

Professional services gross margin increased in FY’24 compared to FY’23, primarily due to lower outside service costs, partially offset by decreases in professional services revenue. The decreases in professional services revenue and costs are due to our continued execution on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.

Current wording

Professional services gross margin decreased in FY’25 compared to FY’24, primarily driven by a sharper decrease in professional services revenue than in professional services expense. The decreases in professional services revenue and costs are due to our continued execution on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.

Previous wording

Total headcount increased by 4% between September 30, 2023 and September 30, 2024.

Current wording

Total headcount increased by 2% between September 30, 2024 and September 30, 2025.

Previous wording

a $16 million decrease in acquisition and transaction-related costs, largely driven by costs associated with our Q2'23 acquisition of ServiceMax; and

Current wording

a $6 million increase in acquisition and transaction-related costs.

Previous wording

The effective tax rate for FY’24 was lower than the effective rate for FY’23. In FY'24, the rate was impacted by a U.S. Tax Court ruling in Varian Medical Systems, Inc. v. Commissioner, issued on August 26, 2024. The ruling related to the U.S. taxation of deemed foreign dividends in the transition year of the Tax Act (our fiscal 2018). As a result, we recorded a $14.4 million benefit for additional foreign tax credits that have become available to us. Additionally, our rate included a net benefit of $4.4 million for the effects of Internal Revenue Service (IRS) procedural guidance requiring consent for previously automatic changes of accounting method. The IRS procedural guidance change significantly increased our estimated taxable income in the year ended September 30, 2024, resulting in an increase to the estimated tax benefit for the deductions associated with Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income. The benefit from this IRS procedural guidance change will reverse in a future fiscal period if we receive IRS consent for a change in the treatment of these deductions. These benefits were offset by a tax expense of $4.6 million related to a tax reserve in a foreign jurisdiction. FY'23 included tax expense of $21.8 million related to an uncertain tax position regarding transfer pricing in a foreign jurisdiction where we are currently under audit. Our FY'23 rate was also impacted by tax expense of $6.3 million related to non-deductible imputed interest related to the deferred payment on the acquisition of ServiceMax.

Current wording

In FY'24, the rate was impacted by a U.S. Tax Court ruling in Varian Medical Systems, Inc. v. Commissioner, issued on August 26, 2024. The ruling related to the U.S. taxation of deemed foreign dividends in the transition year of the Tax Act (our fiscal 2018). As a result, we recorded a $14 million benefit for additional foreign tax credits that became available to us. These benefits were offset by a tax expense of $5 million related to a tax reserve in a foreign jurisdiction.

Previous wording

In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the IRS in the United States. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions including Germany, Ireland, and Italy. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses, and tax credits.

Current wording

In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the IRS in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses, and tax credits.

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 September 30, 2024, we had cash and cash equivalents of $36 million in the U.S., $127 million in Europe, $86 million in Asia Pacific (including India), and $17 million in other non-U.S. 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 September 30, 2025, we had cash and cash equivalents of $18 million in the U.S., $87 million in Europe, $63 million in Asia Pacific (including India), and $16 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 inflows, 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 by $139.1 million in FY'24 compared to FY'23. This increase was driven by higher collections (including contribution from ServiceMax), which were partially offset by higher salary-related and interest payments. Interest payments in FY'24 were approximately $47.2 million higher than in FY'23 and include the payment of $30.0 million of imputed interest on the ServiceMax deferred acquisition payment.

Current wording

Cash provided by operating activities increased by $118 million in FY'25 compared to FY'24. This increase was driven by higher collections, lower interest payments, and lower vendor disbursements, partially offset by higher tax payments and higher severance payments. Interest payments were $59 million lower in FY'25 than in FY'24, driven by the Q1'24 payment of $30 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 used in investing activities in FY'24 was driven by the acquisition of pure-systems for $93.5 million in Q1'24. Cash used in investing activities in FY'23 was driven by a payment of $828.2 million in Q2'23 related to the acquisition of ServiceMax. Capital expenditures in FY'24 were lower than in FY'23 as we invest more in cloud-based rather than on-premises software.

Current wording

Cash used in investing activities in FY'25 was driven by outflows from the settlement of net investment hedges. Cash used in investing activities in FY'24 was driven by the acquisition of pure-systems for $93 million.

Previous wording

Cash Provided by (Used in) Financing Activities

Current wording

Cash Used in Financing Activities

Previous wording

As of September 30, 2024, we were in compliance with all financial and operating covenants of the credit facility and the Senior Note indentures. As of September 30, 2024, the annual rates for borrowings outstanding under the credit facility revolver line and term loan were 7.0% and 6.9%, respectively.

Current wording

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

Previous wording

Our credit facility and our Senior Notes, including the financial and operating covenants and limitations on the payment of dividends, are described in Note 9. Debtof Notes to the Consolidated Financial Statements in this Annual Report.

Current wording

Our credit facility and our senior notes, including the financial and operating covenants and limitations on the payment of dividends, are described in Note 8. Debtof Notes to the Consolidated Financial Statements in this Annual Report. As of September 30, 2025, $25 million of our debt associated with the credit facility term loan was classified as current. In Q2'25, we redeemed the 2025 senior notes using a draw on our revolving credit facility and cash on hand.

Previous wording

Our long-term goal is to return approximately 50% of our free cash flow to shareholders via share repurchases, while also taking into consideration the interest rate environment and strategic initiatives and acquisitions, which could cause us to reduce, suspend, or cease repurchases. We currently intend to repurchase approximately $300 million of our common stock in FY'25.

Current wording

Our long-term goal is to return excess cash to shareholders via share repurchases, while also taking into consideration the interest rate environment and strategic initiatives and acquisitions, which could cause us to reduce, suspend, or cease repurchases. We expect to repurchase approximately $150 to $250 million of our common stock per quarter in FY'26.

Previous wording

We believe that existing cash and cash equivalents, together with cash generated from operations and amounts available under the credit facility, will be sufficient to meet our working capital and capital expenditure requirements through at least the next twelve months, including redemption of the 3.625% Senior Notes in February 2025, and to meet our known long-term capital requirements.

Current wording

We believe that existing cash and cash equivalents, together with cash inflows from operations and amounts available under the credit facility, will be sufficient to meet our working capital and capital expenditure requirements through at least the next twelve months and to meet our known long-term capital requirements.

Previous wording

At September 30, 2024, our future contractual obligations were related to debt, leases, pension liabilities, unrecognized tax benefits, and purchase obligations. See Note 9. Debt, Note 17. Leases, Note 14. Pension Plans, and Note 8. Income Taxesof Notes to Consolidated Financial Statements in this Annual Report for information about those obligations, which Notes are incorporated by reference into this section. Our purchase obligations were approximately $163.2 million, with $88.2 million expected to be paid in FY'25 and $75.0 million thereafter. Purchase obligations represent minimum commitments due to third parties, including royalty contracts, research and development contracts, telecommunication contracts, information technology maintenance contracts in support of internal-use software and hardware, financing leases, operating leases with original terms of less than 12 months, and other marketing and consulting contracts. Contracts for which our commitment is variable or based on volumes with no fixed minimum quantities and contracts that can be canceled without payment penalties are not included in the purchase obligation amounts above. The purchase obligations included above are in addition to amounts included in Current liabilities and Prepaid expenses recorded on our September 30, 2024 Consolidated Balance Sheet.

Current wording

At September 30, 2025, our future contractual obligations were related to debt, leases, pension liabilities, unrecognized tax benefits, and purchase obligations. See Note 8. Debt, Note 16. Leases, Note 13. Pension Plans, and Note 7. Income Taxesof Notes to Consolidated Financial Statements in this Annual Report for information about those obligations, which Notes are incorporated by reference into this section. Our purchase obligations were approximately $188.8 million, with $91.9 million expected to be paid in FY'26 and $96.9 million thereafter. Purchase obligations represent minimum commitments due to third parties, including royalty contracts, research and development contracts, telecommunication contracts, information technology maintenance contracts in support of internal-use software and hardware, financing leases, operating leases with original terms of less than 12 months, and other marketing and consulting contracts. Contracts for which our commitment is variable or based on volumes with no fixed minimum quantities and contracts that can be canceled without payment penalties are not included in the purchase obligation amounts above. The purchase obligations included above are in addition to amounts included in Current liabilities and Prepaid expenses recorded on our September 30, 2025 Consolidated Balance Sheet.

Previous wording

For contracts that include annual values that increase over time, which we refer to as ramp contracts, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include any future committed increases in the contract value as of the date of the ARR calculation.

Current wording

For contracts that include annual values that change over time, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include any future committed increases in the contract value as of the date of the ARR calculation.

Previous wording

As ARR includes only contracts that are active at the end of the reporting period, ARR does not reflect assumptions or estimates regarding future customer renewals or non-renewals.

Current wording

As ARR includes only contracts that are active at the end of the reporting period, ARR does not reflect assumptions or estimates regarding future contract renewals or non-renewals.

Previous wording

The non-GAAP financial measures other than free cash flow exclude, as applicable: stock-based compensation expense; amortization of acquired intangible assets; acquisition and transaction-related charges included in General and administrative expenses; Restructuring and other charges (credits), net; non-operating charges (credits), net; and income tax adjustments.

Current wording

The non-GAAP financial measures other than free cash flow exclude, as applicable: stock-based compensation expense; amortization of acquired intangible assets; acquisition and transaction-related charges included in General and administrative expenses; Impairment and other charges (credits), net; non-operating charges (credits), net; and income tax adjustments.

Previous wording

Non-operating charges (credits), net are gains or losses associated with sales or changes in value of assets or liabilities that are generally investing or financing in nature and are not indicative of our ongoing ordinary operating activities. In FY'24, we recognized an impairment charge related to an available-for-sale debt security. In FY'23, we recognized a financing charge for a debt commitment agreement associated with our acquisition of ServiceMax.

Current wording

Non-operating charges (credits), net are gains or losses associated with sales or changes in value of assets or liabilities that are generally investing or financing in nature and are not indicative of our ongoing ordinary operating activities. In FY'25, we recognized a gain related to contingent consideration earned upon the achievement of performance milestones associated with the FY'22 sale of a portion of our PLM services business. In FY'24, we recognized a non-operating impairment charge related to an available-for-sale debt security.

Previous wording

Income tax adjustments include the tax impact of the items above. Additionally, we exclude other material tax items that we do not include when reviewing our operating results internally. For example, in FY'24, adjustments include a charge related to a tax reserve related to prior years in a foreign jurisdiction. Adjustments in FY’23 include a charge related to an uncertain tax position in a foreign jurisdiction.

Current wording

Income tax adjustments include the tax impact of the items above. Additionally, we exclude other material tax items that we do not include when reviewing our operating results internally. For example, in FY'25, adjustments include a benefit for a tax reserve related to prior years in a foreign jurisdiction. Adjustments in FY'24 include a charge for a tax reserve related to prior years in a foreign jurisdiction.

Previous wording

We use these non-GAAP financial 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 core operating results. We believe that these non-GAAP financial measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals (communicated internally and externally)

Current wording

We use these non-GAAP financial 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 core operating results. We believe that these non-GAAP financial 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 financial measures also affords investors a view of our operating results that may be more easily compared to the results of other companies in our industry that use similar financial measures to supplement their GAAP results.

Previous wording

The items excluded from the non-GAAP financial measures often have a material impact on our financial results, certain of those items are recurring, and other such items often recur. Accordingly, the non-GAAP financial measures included in this Annual Report should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable GAAP measure on our financial statements.

Current wording

The items excluded from the non-GAAP financial measures often have a material impact on our financial results, certain of those items are recurring, and other items often recur. Accordingly, the non-GAAP financial measures included in this Annual Report should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable GAAP measure on our financial statements.

Previous wording

In FY'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security. In FY'23, we recognized $4.2 million of financing charges for a debt commitment agreement associated with our acquisition of ServiceMax.

Current wording

In FY'25, we recognized a $13.1 million gain related to contingent consideration earned upon the achievement of performance milestones associated with the FY'22 sale of a portion of our PLM services business. In 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. In FY'24, adjustments exclude a tax expense of $4.4 million or $0.04 per share for a tax reserve related to prior years in a foreign jurisdiction. In FY'23, non-GAAP expense excludes $21.8 million or $0.18 per share related to uncertain tax positions in a foreign jurisdiction.

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 FY'25, adjustments exclude a $10.4 million tax benefit or $0.09 per share for a tax reserve related to prior years in a foreign jurisdiction. In FY'24, adjustments exclude a tax expense of $4.4 million or $0.04 per share for a tax reserve related to prior years in a foreign jurisdiction.

Previous wording

Allocation of transaction price. We estimate the standalone selling price of each identified performance obligation and use that estimate to allocate the transaction price among said performance obligations. The estimated standalone selling price is determined using all information reasonably available to us, including market conditions and other observable inputs. Significant judgment is used in determining the standalone selling prices of the on-premises license, support, and cloud components of our subscription products. These estimates are subject to change as our product offerings change and could have a significant impact due to the difference in the timing of revenue recognition for on-premises licenses versus support and cloud.

Current wording

Allocation of transaction price. We estimate the standalone selling price of each identified performance obligation and use that estimate to allocate the transaction price among the performance obligations. The estimated standalone selling price is determined using all information reasonably available to us, including market conditions and other observable inputs. Significant judgment is used in determining the standalone selling prices of the on-premises license, support, and cloud components of our subscription products. These estimates are subject to change as our product offerings change and could have a significant impact due to the difference in the timing of revenue recognition for on-premises licenses versus support and cloud.

Previous wording

We have unrecognized tax benefits as of September 30, 2024 of $65.0 million. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $27.0 million as audits close and statutes of limitations expire.

Current wording

We have unrecognized tax benefits as of September 30, 2025 of $157.7 million. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. As described in Note 7. Income Taxes, within the next 12 months the amount of unrecognized tax benefits related to the IRS consent will be reduced by $109.2 million. Apart from that, we do not believe it is reasonably possible that there could be additional reductions to the amount of unrecognized tax benefits within the next 12 months.

Previous wording

As of September 30, 2024, we have a valuation allowance of $17.4 million against net deferred tax assets in the U.S. and a valuation allowance of $4.4 million against net deferred tax assets in certain foreign jurisdictions. The valuation allowance recorded in the U.S. relates to Massachusetts tax credit carryforwards that we do not expect to realize a benefit from prior to expiration.

Current wording

As of September 30, 2025, we have a valuation allowance of $3.4 million against net deferred tax assets in the U.S. and a valuation allowance of $5.1 million against net deferred tax assets in certain foreign jurisdictions. The valuation allowance recorded in the U.S. relates to Massachusetts tax credit carryforwards that we do not expect to realize a benefit from prior to expiration.

Previous wording

In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the Internal Revenue Service (IRS) in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses and tax credits. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in material changes in our estimates.

Current wording

In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the IRS in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses and tax credits. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in material changes in our estimates.

Previous wording

In accordance with recently issued accounting pronouncements, we will be required to comply with certain changes in accounting rules and regulations. Refer to Note 2. Summary of Significant Accounting Policies, included in the Notes to Consolidated Financial Statements of this Annual Report, which is incorporated herein by reference, for all recently issued accounting pronouncements, none of which are expected to have a material effect.

Current wording

In accordance with recently issued accounting pronouncements, we will be required to comply with certain changes in accounting rules and regulations. Refer to Note 2. Summary of Significant Accounting Policies, included in the Notes to Consolidated Financial Statements of this Annual Report, which is incorporated herein by reference, for all recently issued accounting pronouncements. We are evaluating the impact of ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software and ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets and have not yet determined whether they will have a material impact.