UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the transition period from_ to_

Commission File Number: 0-18059

PTC Inc.

(Exact name of registrant as specified in its charter)

Massachusetts	04-2866152
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

121 Seaport Boulevard, Boston, MA 02210

(Address of principal executive offices, including zip code)

(781) 370-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	PTC	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
						Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 117,466,379 shares of our common stock outstanding on August 4, 2022.

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended June 30, 2022

		Page Number
Part I—FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:	1
	Consolidated Balance Sheets as of June 30, 2022 and September 30, 2021	1
	Consolidated Statements of Operations for the three and nine months ended June 30, 2022 and June 30, 2021	2
	Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2022 and June 30, 2021	3
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2022 and June 30, 2021	4
	Consolidated Statements of Stockholders' Equity for the three and nine months ended June 30, 2022 and June 30, 2021	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	43
Part II—OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 6.	Exhibits	45
Signature		46

PART I—FINANCIAL INFORMATION

ITEM 1.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	June 30, 2022			September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	322,326		$	326,532
Accounts receivable, net of allowance for doubtful accounts of $715 and $304 at June 30, 2022 and September 30, 2021, respectively		473,298			541,072
Prepaid expenses		91,734			69,991
Other current assets		61,074			135,415
Total current assets		948,432			1,073,010
Property and equipment, net		90,815			100,237
Goodwill		2,382,680			2,191,887
Acquired intangible assets, net		398,634			378,967
Deferred tax assets		282,556			297,789
Operating right-of-use lease assets		143,388			152,337
Other assets		359,033			313,333
Total assets	$	4,605,538		$	4,507,560
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,462		$	33,381
Accrued expenses and other current liabilities		124,342			113,067
Accrued compensation and benefits		109,732			117,784
Accrued income taxes		15,703			5,055
Deferred revenue		481,360			482,131
Short-term lease obligations		22,072			27,864
Total current liabilities		769,671			779,282
Long-term debt		1,425,084			1,439,471
Deferred tax liabilities		24,362			4,165
Deferred revenue		14,113			15,546
Long-term lease obligations		172,764			180,935
Other liabilities		42,374			49,693
Total liabilities		2,448,368			2,469,092
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued		—			—
Common stock, $0.01 par value; 500,000 shares authorized; 117,362 and 117,163 shares issued and outstanding at June 30, 2022 and September 30, 2021, respectively		1,174			1,172
Additional paid-in capital		1,668,983			1,718,504
Retained earnings		620,900			414,656
Accumulated other comprehensive loss		(133,887	)		(95,864	)
Total stockholders’ equity		2,157,170			2,038,468
Total liabilities and stockholders’ equity	$	4,605,538		$	4,507,560

The accompanying notes are an integral part of the condensed consolidated financial statements.

1

PTC Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three months ended						Nine months ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Revenue:
License	$	175,163		$	163,583		$	562,646		$	538,769
Support and cloud services		248,237			230,851			736,597			670,853
Total software revenue		423,400			394,434			1,299,243			1,209,622
Professional services		39,074			41,234			126,179			116,882
Total revenue		462,474			435,668			1,425,422			1,326,504
Cost of revenue:
Cost of license revenue		13,676			15,502			35,406			42,918
Cost of support and cloud services revenue		46,598			42,392			137,251			120,706
Total cost of software revenue		60,274			57,894			172,657			163,624
Cost of professional services revenue		41,721			37,183			117,793			107,731
Total cost of revenue		101,995			95,077			290,450			271,355
Gross margin		360,479			340,591			1,134,972			1,055,149
Operating expenses:
Sales and marketing		124,325			134,412			366,209			388,315
Research and development		88,170			78,134			250,639			221,514
General and administrative		54,618			47,084			154,027			157,417
Amortization of acquired intangible assets		8,931			7,511			25,865			21,708
Restructuring and other charges (credits), net		4,458			(132	)		36,887			584
Total operating expenses		280,502			267,009			833,627			789,538
Operating income		79,977			73,582			301,345			265,611
Interest and debt premium expense		(13,758	)		(13,178	)		(38,983	)		(37,622	)
Other income (expense), net		34,559			(1,935	)		(2,642	)		(5,756	)
Income before income taxes		100,778			58,469			259,720			222,233
Provision for income taxes		30,302			7,266			53,476			38,253
Net income	$	70,476		$	51,203		$	206,244		$	183,980
Earnings per share—Basic	$	0.60		$	0.44		$	1.76		$	1.58
Earnings per share—Diluted	$	0.60		$	0.43		$	1.75		$	1.56
Weighted-average shares outstanding—Basic		117,073			116,934			117,114			116,702
Weighted-average shares outstanding—Diluted		117,968			118,611			118,097			118,181

The accompanying notes are an integral part of the condensed consolidated financial statements.

2

PTC Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three months ended						Nine months ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Net income	$	70,476		$	51,203		$	206,244		$	183,980
Other comprehensive income (loss), net of tax:
Hedge gain (loss) arising during the period, net of tax of $1.9 million and $0 million in the third quarter of 2022 and 2021, respectively, and $4.0 million and $0 million in the first nine months of 2022 and 2021, respectively		5,880			(1,797	)		12,072			(1,559	)
Foreign currency translation adjustment, net of tax of $0 for each period		(35,795	)		6,457			(52,819	)		10,581
Unrealized loss on marketable securities, net of tax of $0 for each period		—			—			—			(307	)
Amortization of net actuarial pension loss included in net income, net of tax of $0 million and $0.3 million in the third quarter of 2022 and 2021, respectively, and $0.2 million and $0.9 million in the first nine months of 2022 and 2021, respectively		(78	)		738			447			2,214
Change in unamortized pension gain (loss) during the period related to changes in foreign currency		1,354			(291	)		2,277			(385	)
Other comprehensive income (loss)		(28,639	)		5,107			(38,023	)		10,544
Comprehensive income	$	41,837		$	56,310		$	168,221		$	194,524

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine months ended
	June 30, 2022			June 30, 2021
Cash flows from operating activities:
Net income	$	206,244		$	183,980
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		65,456			62,670
Amortization of right-of-use lease assets		26,149			28,031
Stock-based compensation		133,283			133,896
Loss on investment		31,854			—
Gain on divestiture of business		(29,808	)		—
Other non-cash items, net		(645	)		(1,108	)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		25,228			(4,110	)
Accounts payable and accrued expenses		(7,434	)		15,834
Accrued compensation and benefits		(9,334	)		121
Deferred revenue		18,038			30,733
Accrued income taxes		6,124			(13,524	)
Other current assets and prepaid expenses		(26,933	)		426
Operating lease liabilities		(10,544	)		(13,106	)
Other noncurrent assets and liabilities		(30,851	)		(100,355	)
Net cash provided by operating activities		396,827			323,488
Cash flows from investing activities:
Additions to property and equipment		(9,979	)		(11,662	)
Purchases of short- and long-term marketable securities		—			(7,562	)
Proceeds from sales of short- and long-term marketable securities		—			56,170
Proceeds from maturities of short- and long-term marketable securities		—			9,861
Acquisitions of businesses, net of cash acquired		(274,974	)		(717,779	)
Proceeds from sale of investments		46,906			—
Purchases of investments		—			(2,000	)
Purchase of intangible assets		(5,453	)		(550	)
Settlement of net investment hedges		18,043			(1,291	)
Divestiture of business, net		32,518			—
Net cash used in investing activities		(192,939	)		(674,813	)
Cash flows from financing activities:
Borrowings under credit facility		264,000			600,000
Repayments of borrowings under credit facility		(280,000	)		(128,000	)
Repurchases of common stock		(125,000	)		—
Proceeds from issuance of common stock		10,857			10,484
Payments of withholding taxes in connection with stock-based awards		(62,856	)		(42,215	)
Payments of principal for financing leases		(239	)		(279	)
Net cash (used in) provided by financing activities		(193,238	)		439,990
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(14,654	)		1,646
Net change in cash, cash equivalents, and restricted cash		(4,004	)		90,311
Cash, cash equivalents, and restricted cash, beginning of period		327,046			275,960
Cash, cash equivalents, and restricted cash, end of period	$	323,042		$	366,271
Supplemental disclosure of non-cash financing activities:
Withholding taxes in connection with stock-based awards, accrued		5,803			9,979

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

PTC Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

	Three months ended June 30, 2022
	Common Stock										Accumulated
	Shares			Amount		Additional Paid-In Capital			Retained Earnings		Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of March 31, 2022		116,976		$	1,170	$	1,637,631		$	550,424	$	(105,248	)	$	2,083,977
Common stock issued for employee stock-based awards		558			6		(6	)		—		—			—
Shares surrendered by employees to pay taxes related to stock-based awards		(172	)