PTC INC.
For the period ended Dec 31, 2025. Filed Feb 5, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2025 · Filed Feb 5, 2026
PTC$195.07+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-07-31.
0000950170-25-100879
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-12-31; filed 2026-02-05.
0001193125-26-039347
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 108 previous paragraphs and 102 current paragraphs.
57 unchanged; 34 reworded; 11 added; 17 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
In Q1'26, we entered into an agreement to sell our Kepware and ThingWorx businesses and classified related assets and liabilities as held for sale. We may receive up to $600 million upon closing of the transaction, subject to adjustments as set forth in the purchase agreement. For further detail, refer to Note 5. Acquisitions and Divestituresto the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. The transaction is expected to close on or before April 1, 2026. Our expected use of the net after-tax proceeds will follow our overall capital allocation strategy of returning excess cash to shareholders via share repurchases.
Current report
PLMsoftware revenue growth in Q1'26 was primarily driven by Windchill revenue growth in Europe.
Current report
CADsoftware revenue growth in Q1'26 was driven by Creo revenue growth in the Americas and Europe.
Current report
a $10 million increase in acquisition and transaction-related costs, driven by costs associated with the Kepware and ThingWorx divestiture; and
Current report
partially offset by:
Current report
In Q1’26, our rate included the effects of IRS procedural guidance requiring consent for previously automatic changes of accounting method. In 2024, we requested consent from the IRS to change our tax accounting method for the treatment of certain deductions. In Q1’26, upon receiving consent from the IRS, we released the reserve established in 2025 related to the procedural guidance, which resulted in a net income tax benefit of $7 million for the reversal of the associated accrued interest and indirect effects on GILTI and FDII in 2024.
Current report
Cash provided by operating activities increased $31 million in Q1'26 compared to Q1'25. Growth was driven by higher collections and lower vendor disbursements, partially offset by higher tax payments and higher salary and related payments. Additionally, Q1'26 included $10 million of divestiture-related payments.
Current report
Cash Provided by Investing Activities
Current report
Cash used in financing activities in Q1'26 included $200 million of repurchases of common stock. Cash used in financing activities in Q1'25 included net payments of $205 million on our credit facility and $75 million of repurchases of common stock.
Current report
We expect to use the net after-tax proceeds of the Kepware and ThingWorx divestiture to repurchase shares, in line with our long-term goal of returning excess cash to shareholders.
Current report
In Q1'26, we recognized a $0.8 million financing charge related to a debt commitment agreement associated with our anticipated divestiture of the Kepware and ThingWorx businesses.
Removed paragraphs (17)
Previous report
Our offerings include CAD (Computer-Aided Design) solutions for product data authoring and PLM (Product Lifecycle Management) solutions for product data management and process orchestration. Within the overall PLM category, our offerings also include ALM (Application Lifecycle Management) and SLM (Service Lifecycle Management).
Previous report
Our product portfolio enables end-to-end digital thread initiatives that leverage a connected flow of product data across design, manufacturing, service, and, ultimately, reuse. A digital thread enables product companies to break down silos, streamline workflows, and achieve interoperability across departments, functions and systems with a single version of truth. It also secures the quality, consistency and traceability of product-related data, ensuring that the data is up-to-date, accessible, reliable and actionable. With a digital thread, the right data is delivered to the right people at the right time and in the right context across the value chain.
Previous report
PLMsoftware revenue growth in Q3'25 was driven by the higher total value and longer average duration of contracts that renewed in the period. PLM software revenue growth in the first nine months of FY'25 was driven by revenue growth across all geographic regions, primarily in Windchill.
Previous report
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 report
a $9 million increase in total compensation expense (including stock-based compensation expense), driven by severance costs and headcount growth.
Previous report
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 report
a $4 million impairment charge recognized in Q2'25 related to the lease asset associated with the subleased portion of our Boston office.
Previous report
Other Income (Expense)
Previous report
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 report
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 report
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 report
Cash Used in Investing Activities
Previous report
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 report
Our long-term goal is to return excess cash to shareholders via share repurchases. We currently intend to repurchase approximately $300 million of our common stock in FY'25.
Previous report
In Q2'25, we changed the income statement caption of Restructuring and other charges (credits), net to Impairment and other charges (credits), net to reflect that the amounts presented are mainly impairment charges rather than restructuring charges. We correspondingly revised the caption with respect to the list of items excluded from our non-GAAP financial measures and, as reflected below, the list of items covered under that caption to reflect the primary charges and credits included in the adjustment. All charges and credits under the captioned line item remain the same.
Previous report
Impairment and other charges (credits), net are charges associated with disposal or exit activities, including lease impairment and abandonment charges, net charges or income related to impaired or exited facilities, restructuring severance charges resulting from substantial employee reduction actions, and other related costs.
Previous report
In the first nine months of FY'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security.
Reworded paragraphs (34)
Previous wording
PTC is a global software company that enables manufacturers and product companies to digitally transform how they design, manufacture, and service the physical products that the world relies on. Headquartered in Boston, Massachusetts, PTC employs over 7,000 people and supports more than 30,000 customers globally.
Current wording
PTC is a global software company headquartered in Boston, Massachusetts. We employ over 7,000 people and support more than 30,000 customers globally.
Previous wording
Our customers are focused on improving their competitiveness in the face of global competition and increasing product complexity, and our suite of software offerings is a strategic enabler of this and their digital transformation initiatives. We enable our customers to establish a strong product data foundation and leverage that foundation to drive cross-functional collaboration, accelerate new product introduction timelines and deliver higher product quality.
Current wording
Our customers are focused on improving their competitiveness in the face of global competition and increasing product complexity, and our suite of software offerings is a strategic enabler of this and their digital transformation initiatives. Given the breadth and openness of our portfolio, we enable the Intelligent Product Lifecycle: establishing a strong product data foundation in the engineering department and democratizing the access and use of that data across the enterprise to drive cross-functional collaboration, accelerate new product introduction timelines, and deliver higher product quality. By embracing the Intelligent Product Lifecycle, our customers establish the quality, consistency, and traceability of product data, ensuring the data is up-to-date, accessible, reliable, and actionable. Our customers can then go on to use this data to break down silos, streamline workflows, and achieve interoperability across departments, functions, and systems. This includes the growing emphasis on AI-driven transformation across our customers’ teams, operations, and processes. A product data foundation is the backbone of AI-driven transformation.
Previous wording
Our business is based on a subscription model, with 93% of our 2024 revenue recurring in nature. Compared to a perpetual license model, our subscription model naturally drives higher customer engagement and retention and provides better business predictability. This, in turn, enables us to make steady and sustained investments to support our customers and pursue mid-to-long-term growth opportunities.
Current wording
Our business is based on a subscription model and 95% of our 2025 revenue was recurring in nature. Compared to a perpetual license model, our subscription model naturally drives higher customer engagement and retention and provides better business predictability. This, in turn, enables us to make steady and sustained investments to support our customers and pursue mid-to-long-term growth opportunities.
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, 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.
Current wording
Statements in this document that are not historic facts, including statements about our future operating, financial and growth expectations, potential stock repurchases, and the expected timing of closing the sale of the Kepware and ThingWorx businesses (the "divestiture"), 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 import tariffs, threats of additional and reciprocal import tariffs, global trade and geopolitical tensions and uncertainty, volatile foreign exchange rates, high interest rates or increases in interest rates, inflation, and tightening of credit standards and availability, 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 not generate the ARR and/or financial results or cash flow when or as we expect; the divestiture may not be consummated when or as we expect if, among other factors, regulatory approvals under applicable laws and regulations are not received when or as we expect, or if other closing conditions are not satisfied when or as we expect or are waived; the future thresholds upon which the additional contingent consideration of up to $125 million related to the divestiture would become payable may not be achieved; other uses of cash or our credit facility limits could limit or preclude the return of excess cash and the net proceeds of the divestiture to shareholders by way of 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 th…
Excerpt shortened here; the source contains the full paragraph.
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 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.
Current wording
Our discussion of results includes discussion of our ARR operating measure, non-GAAP financial measures, and disclosure of our results on a constant currency basis. ARR and our non-GAAP financial 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 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.
Current wording
ARR grew 13% (8% constant currency) to $2.49 billion as of the end of Q1’26 compared to Q1’25.
Previous 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.
Current wording
Cash provided by operating activities grew 13% to $270 million in Q1'26 compared to Q1'25. Free cash flow grew 13% to $267 million in Q1'26 compared to Q1'25. In Q1'26, we made $10 million of divestiture-related payments. Our cash flow growth is attributable to resilient top-line growth due to our subscription business model and operational discipline. In Q1'26, we repurchased $200 million of our outstanding shares.
Previous 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.
Current wording
Revenue grew 21% (19% constant currency) to $686 million in Q1'26 compared to Q1'25, driven by growth in license revenue due to the higher total value and longer average duration of renewal contracts that commenced in the period. Operating margin grew by approximately 1180 basis points in Q1'26 compared to Q1'25, reflecting higher revenue as well as continued operating discipline. Diluted earnings per share grew 104% to $1.39 in Q1'26 compared to Q1'25, driven by revenue growth.
Previous 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.
Current wording
Approximately 55% of our revenue and 30% 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'26 and FY'25 by the exchange rates in effect on September 30, 2025.
Previous 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.
Current wording
If Q1'26 reported results were converted into U.S. Dollars using the rates in effect as of September 30, 2025, ARR would have been higher by $6 million, revenue would have been higher by $4 million, and expenses would have been higher by $1 million. If Q1'25 reported results were converted into U.S. Dollars using the rates in effect as of September 30, 2025, ARR would have been higher by $102 million, revenue would have been higher by $16 million, and expenses would have been higher by $6 million.
Previous wording
Under ASC 606, the volume, mix, and duration of contract types (support, SaaS, on-premises subscription) starting or renewing in any given period can have a material impact on revenue in the period, and as a result can impact the comparability of reported revenue period over period. We recognize revenue for the license portion of on-premises subscription contracts when we deliver the licenses to the customer, typically on the start date, and we recognize revenue on the support portion of on-premises subscription contracts and stand-alone support contracts ratably over the term. We continue to convert existing support contracts to on-premises subscriptions, resulting in a shift to up-front recognition of on-premises subscription license revenue in the period converted compared to ratable recognition for a perpetual support contract. Revenue from our cloud services (primarily SaaS) contracts is recognized ratably. We expect that over time a higher portion of our revenue will be recognized ratably as we expand our SaaS offerings, release additional cloud functionality into our products, and migrate customers from on-premises subscriptions to SaaS. Given the different mix, duration and volume of new and renewing contracts in any period, year-over-year or sequential revenue can vary significantly.
Current wording
Under ASC 606, the volume, mix, and duration of contract types (support, SaaS, on-premises subscription) starting or renewing in any given period can have a material impact on revenue in the period, and as a result can impact the comparability of reported revenue period over period. We recognize revenue for the license portion of on-premises subscription contracts when we deliver the licenses to the customer, typically on the start date, and we recognize revenue on the support portion of on-premises subscription contracts and stand-alone support contracts ratably over the term. Revenue from our cloud services (primarily SaaS) contracts is recognized ratably. We expect that over time a higher portion of our revenue will be recognized ratably as we expand our SaaS offerings, release additional cloud functionality into our products, and migrate customers from on-premises subscriptions to SaaS. Given the different mix, duration and volume of new and renewing contracts in any period, year-over-year or sequential revenue can vary significantly.
Previous 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.
Current wording
Software revenue growth in Q1'26 was driven by license revenue growth, which reflects the higher total value and longer average duration of contracts that renewed in the current-year period.
Previous 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.
Current wording
Support and cloud services revenue growth in Q1'26 was driven by growth in both PLM and CAD.
Previous 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.
Current wording
Professional services revenue decreased in Q1'26 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 14% (10% constant currency) from Q3’24 to Q3'25, primarily driven by Windchill and Codebeamer.
Current wording
PLM ARR grew 13% (9% constant currency) from Q1'25 to Q1'26, primarily driven by Windchill and Codebeamer. PLM ARR grew 24% (12% constant currency) in Europe, 15% (13% constant currency) in Asia Pacific, and 6% (6% constant currency) in the Americas.
Previous wording
CAD ARR grew 13% (8% constant currency) from Q3’24 to Q3’25, primarily driven by Creo.
Current wording
CAD ARR grew 13% (8% constant currency) from Q1'25 to Q1'26, primarily driven by Creo. CAD ARR grew 20% (7% constant currency) in Europe, 12% (10% constant currency) in Asia Pacific, and 7% (7% constant currency) in the Americas.
Previous 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.
Current wording
License gross margin growth in Q1'26 was in line with license revenue growth. Cost of license revenue grew in Q1'26 compared to Q1'25, primarily due to higher royalty expenses.
Previous 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.
Current wording
Support and cloud services gross margin growth in Q1'26 was in line with support and cloud services revenue growth. Cost of support and cloud services revenue grew 11% in Q1'26 compared to Q1'25, primarily due to increasing compensation-related costs and cloud and software subscription-related costs as the business grows.
Previous wording
Professional services gross margin decreased in Q3'25 compared to Q3'24, primarily driven by a sharper decrease in professional services revenue than in professional services expense. Professional services gross margin in the first nine months of FY'25 was consistent with the corresponding FY'24 period, with costs decreasing in line with 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 Q1'26 compared to Q1'25, 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 3% between Q3’24 and Q3’25.
Current wording
Total headcount increased 4% between Q1’25 and Q1’26.
Previous wording
a $6 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 travel-related expenses;
Previous 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;
Current wording
a $6 million decrease in compensation expense (including stock-based compensation), mainly driven by severance in Q1'25 related to the go-to-market realignment (which was primarily included in Sales and marketing).
Previous 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.
Current wording
Interest expense in both Q1'26 and Q1'25 includes interest on our revolving credit facility, term loan, and our senior notes due in 2028. Interest expense in Q1'25 also included interest on our senior notes due in 2025, which were redeemed in Q2'25. Interest expense decreased in Q1'26 compared to Q1'25 due to lower debt balances.
Previous 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.
Current wording
The effective tax rate for Q1'26 was higher than the effective tax rate for the corresponding prior-year period primarily due to changes in the geographic mix of income before taxes. The effective tax rate for Q1’26 also reflected a net income tax benefit of $7 million related to IRS procedural guidance, as described below. Q1’25 included a benefit of $5 million associated with the impact of tax reserves related to prior years in a foreign jurisdiction.
Previous wording
On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that will be applicable to us beginning in FY'26. These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. We are in the process of evaluating the impact of the Act to our consolidated financial statements and cash flow, but currently expect such changes will have a material positive cash impact in FY'26 and FY'27. As our review is not yet complete, our expectations could change.
Current wording
On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that are applicable to us beginning in FY'26. These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. Our financials reflect the impact of the provisions of the Act that are applicable beginning FY'26.
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 1. Basis of Presentationto the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, 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 1. Basis of Presentationto the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, 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.
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 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.
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 December 31, 2025, we had cash and cash equivalents of $23 million in the U.S., $101 million in Europe, $69 million in Asia Pacific (including India) and $17 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 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.
Current wording
Cash provided by investing activities in Q1'26 and Q1'25 was driven by inflows from the settlement of net investment hedges.
Previous 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%.
Current wording
As of December 31, 2025, we were in compliance with all financial and operating covenants of the credit facility and the note indenture. As of December 31, 2025, the annual rate for borrowings outstanding under the credit facility was 5.2%.
Previous wording
Our credit facility and our senior notes are described in Note 10. Debtto the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. As of June 30, 2025, $25.0 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.
Current wording
Our credit facility and our senior notes are described in Note 10. Debtto the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. As of December 31, 2025, $25 million of our debt associated with the credit facility term loan was classified as current.
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 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
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 items excluded from the non-GAAP financial measures often have a material impact on our financial results, some of those items are recurring, and other items often recur. Accordingly, the non-GAAP financial measures included in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q 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
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.
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 Q1'25, adjustments exclude a $5.4 million benefit related to the tax impact of tax reserves related to prior years in a foreign jurisdiction.