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 December 31, 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 118,263,203 shares of our common stock outstanding on February 6, 2023.

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended December 31, 2022

		Page Number
Part I—FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:
	Consolidated Balance Sheets as of December 31, 2022 and September 30, 2022	1
	Consolidated Statements of Operations for the three months ended December 31, 2022 and December 31, 2021	2
	Consolidated Statements of Comprehensive Income for the three months ended December 31, 2022 and December 31, 2021	3
	Consolidated Statements of Cash Flows for the three months ended December 31, 2022 and December 31, 2021	4
	Consolidated Statements of Stockholders' Equity for the three months ended December 31, 2022 and December 31, 2021	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
Part II—OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 6.	Exhibits	39
Signature		40

PART I—FINANCIAL INFORMATION

ITEM 1.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	December 31, 2022			September 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	387,588		$	272,182
Accounts receivable, net of allowance for doubtful accounts of $381 and $362 at December 31, 2022 and September 30, 2022, respectively		562,036			636,556
Prepaid expenses		110,393			88,854
Other current assets		66,777			71,065
Total current assets		1,126,794			1,068,657
Property and equipment, net		95,142			98,101
Goodwill		2,388,589			2,353,654
Acquired intangible assets, net		373,837			382,718
Deferred tax assets		266,879			256,091
Operating right-of-use lease assets		148,637			137,780
Other assets		395,891			390,267
Total assets	$	4,795,769		$	4,687,268
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	38,983		$	40,153
Accrued expenses and other current liabilities		126,002			117,158
Accrued compensation and benefits		96,487			104,022
Accrued income taxes		2,239			5,142
Deferred revenue		500,222			503,781
Short-term lease obligations		22,809			22,002
Total current liabilities		786,742			792,258
Long-term debt		1,351,171			1,350,628
Deferred tax liabilities		31,038			28,396
Deferred revenue		15,811			16,552
Long-term lease obligations		177,109			167,573
Other liabilities		33,349			35,827
Total liabilities		2,395,220			2,391,234
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued		—			—
Common stock, $0.01 par value; 500,000 shares authorized; 118,161 and 117,472 shares issued and outstanding at December 31, 2022 and September 30, 2022, respectively		1,182			1,175
Additional paid-in capital		1,701,817			1,720,580
Retained earnings		802,772			727,737
Accumulated other comprehensive loss		(105,222	)		(153,458	)
Total stockholders’ equity		2,400,549			2,296,034
Total liabilities and stockholders’ equity	$	4,795,769		$	4,687,268

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
	December 31, 2022			December 31, 2021
Revenue:
License	$	172,698		$	169,108
Support and cloud services		257,656			244,485
Total software revenue		430,354			413,593
Professional services		35,556			44,128
Total revenue		465,910			457,721
Cost of revenue:
Cost of license revenue		12,753			9,794
Cost of support and cloud services revenue		50,225			45,885
Total cost of software revenue		62,978			55,679
Cost of professional services revenue		32,812			39,439
Total cost of revenue		95,790			95,118
Gross margin		370,120			362,603
Operating expenses:
Sales and marketing		118,383			125,476
Research and development		88,177			80,534
General and administrative		50,971			51,940
Amortization of acquired intangible assets		8,026			8,484
Restructuring and other charges (credits), net		(338	)		33,991
Total operating expenses		265,219			300,425
Operating income		104,901			62,178
Interest and debt premium expense		(16,358	)		(12,986	)
Other income (expense), net		(2,119	)		6,184
Income before income taxes		86,424			55,376
Provision for income taxes		11,389			9,287
Net income	$	75,035		$	46,089
Earnings per share—Basic	$	0.64		$	0.39
Earnings per share—Diluted	$	0.63		$	0.39
Weighted-average shares outstanding—Basic		117,819			117,347
Weighted-average shares outstanding—Diluted		118,788			118,598

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
	December 31, 2022			December 31, 2021
Net income	$	75,035		$	46,089
Other comprehensive income (loss), net of tax:
Hedge gain (loss) arising during the period, net of tax of $3.8 million and $(0.8) million in the first quarter of 2023 and 2022, respectively		(11,485	)		2,495
Foreign currency translation adjustment, net of tax of $0 for each period		60,029			(5,668	)
Amortization of net actuarial pension loss included in net income, net of tax of $0.0 million and $(0.1) million in the first quarter of 2023 and 2022, respectively		41			265
Change in unamortized pension gain (loss) during the period related to changes in foreign currency		(349	)		385
Other comprehensive income (loss)		48,236			(2,523	)
Comprehensive income	$	123,271		$	43,566

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

3

PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Three months ended
	December 31, 2022			December 31, 2021
Cash flows from operating activities:
Net income	$	75,035		$	46,089
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,328			22,088
Amortization of right-of-use lease assets		8,054			8,860
Stock-based compensation		41,504			45,942
Gain on investment		—			(9,766	)
Other non-cash items, net		(617	)		(273	)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		105,512			57,316
Accounts payable and accrued expenses		7,680			12,959
Accrued compensation and benefits		(17,530	)		2,853
Deferred revenue		(19,635	)		(13,696	)
Accrued income taxes		(16,836	)		(8,328	)
Other current assets and prepaid expenses		2,956			(13,474	)
Operating lease liabilities		7,895			(2,343	)
Other noncurrent assets and liabilities		(34,425	)		(10,491	)
Net cash provided by operating activities		180,921			137,736
Cash flows from investing activities:
Additions to property and equipment		(9,180	)		(3,362	)
Purchase of intangible assets		—			(450	)
Settlement of net investment hedges		(10,795	)		6,473
Divestitures of businesses and assets, net		(154	)		—
Net cash (used in) provided by investing activities		(20,129	)		2,661
Cash flows from financing activities:
Repurchases of common stock		—			(119,739	)
Payments of withholding taxes in connection with stock-based awards		(52,423	)		(49,165	)
Payments of principal for financing leases		(217	)		(239	)
Credit facility origination costs		(1,350	)		—
Net cash used in financing activities		(53,990	)		(169,143	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		8,616			(1,661	)
Net change in cash, cash equivalents, and restricted cash		115,418			(30,407	)
Cash, cash equivalents, and restricted cash, beginning of period		272,888			327,046
Cash, cash equivalents, and restricted cash, end of period	$	388,306		$	296,639
Supplemental disclosure of non-cash financing activities:
Withholding taxes in connection with stock-based awards, accrued	$	452		$	—
Repurchases of common stock, accrued	$	—		$	(5,260	)

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 December 31, 2022
	Common Stock											Accumulated
	Shares			Amount			Additional Paid-In Capital			Retained Earnings		Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of September 30, 2022		117,472		$	1,175		$	1,720,580		$	727,737	$	(153,458	)	$	2,296,034
Common stock issued for employee stock-based awards		1,090			11			(11	)		—		—			—
Shares surrendered by employees to pay taxes related to stock-based awards		(401	)		(4	)		(52,871	)		—		—			(52,875	)
Compensation expense from stock-based awards		—			—			34,119			—		—			34,119
Net income		—			—			—			75,035		—			75,035
Unrealized loss on net investment hedges, net of tax		—			—			—			—		(11,485	)		(11,485	)
Foreign currency translation adjustment		—			—			—			—		60,029			60,029
Change in pension benefits, net of tax		—			—			—			—		(308	)		(308	)
Balance as of December 31, 2022		118,161		$	1,182		$	1,701,817		$	802,772	$	(105,222	)	$	2,400,549

	Three months ended December 31, 2021
	Common Stock											Accumulated
	Shares			Amount			Additional Paid-In Capital			Retained Earnings		Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of September 30, 2021		117,163		$	1,172		$	1,718,504		$	414,656	$	(95,864	)	$	2,038,468
Common stock issued for employee stock-based awards		1,120			11			(11	)		—		—			—
Shares surrendered by employees to pay taxes related to stock-based awards		(410	)		(4	)		(49,161	)		—		—			(49,165	)
Compensation expense from stock-based awards		—			—			45,942			—		—			45,942
Repurchases of common stock		(1,003	)		(10	)		(124,989	)		—		—			(124,999	)
Net income		—			—			—			46,089		—			46,089
Unrealized gain on net investment hedges, net of tax		—			—			—			—		2,495			2,495
Foreign currency translation adjustment		—			—			—			—		(5,668	)		(5,668	)
Change in pension benefits, net of tax		—			—			—			—