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 March 31, 2023

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 118,353,472 shares of our common stock outstanding on May 2, 2023.

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended March 31, 2023

		Page Number
Part I—FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:	1
	Consolidated Balance Sheets as of March 31, 2023 and September 30, 2022	1
	Consolidated Statements of Operations for the three and six months ended March 31, 2023 and March 31, 2022	2
	Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2023 and March 31, 2022	3
	Consolidated Statements of Cash Flows for the six months ended March 31, 2023 and March 31, 2022	4
	Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2023 and March 31, 2022	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42
Item 4.	Controls and Procedures	42
Part II—OTHER INFORMATION
Item 1A.	Risk Factors	42
Item 6.	Exhibits	43
Signature		44

PART I—FINANCIAL INFORMATION

ITEM 1.UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

	March 31, 2023			September 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	320,477		$	272,182
Accounts receivable, net of allowance for doubtful accounts of $355 and $362 at March 31, 2023 and September 30, 2022, respectively		643,017			636,556
Prepaid expenses		119,298			88,854
Other current assets		83,618			71,065
Total current assets		1,166,410			1,068,657
Property and equipment, net		92,003			98,101
Goodwill		3,369,041			2,353,654
Acquired intangible assets, net		979,221			382,718
Deferred tax assets		151,154			256,091
Operating right-of-use lease assets		150,327			137,780
Other assets		391,464			390,267
Total assets	$	6,299,620		$	4,687,268
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,693		$	40,153
Accrued expenses and other current liabilities		138,184			117,158
Accrued compensation and benefits		110,027			104,022
Accrued income taxes		13,319			5,142
Deferred acquisition payments		620,040			—
Deferred revenue		649,262			503,781
Short-term lease obligations		24,521			22,002
Total current liabilities		1,593,046			792,258
Long-term debt		1,917,703			1,350,628
Deferred tax liabilities		38,221			28,396
Deferred revenue		22,142			16,552
Long-term lease obligations		177,106			167,573
Other liabilities		32,868			35,827
Total liabilities		3,781,086			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; 118,334 and 117,472 shares issued and outstanding at March 31, 2023 and September 30, 2022, respectively		1,182			1,175
Additional paid-in capital		1,749,574			1,720,580
Retained earnings		866,276			727,737
Accumulated other comprehensive loss		(98,498	)		(153,458	)
Total stockholders’ equity		2,518,534			2,296,034
Total liabilities and stockholders’ equity	$	6,299,620		$	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						Six months ended
	March 31, 2023			March 31, 2022			March 31, 2023			March 31, 2022
Revenue:
License	$	196,993		$	218,375		$	369,691		$	387,483
Support and cloud services		304,071			243,875			561,727			488,360
Total software revenue		501,064			462,250			931,418			875,843
Professional services		41,117			42,977			76,673			87,105
Total revenue		542,181			505,227			1,008,091			962,948
Cost of revenue:
Cost of license revenue		17,039			11,936			29,792			21,730
Cost of support and cloud services revenue		59,137			44,768			109,362			90,653
Total cost of software revenue		76,176			56,704			139,154			112,383
Cost of professional services revenue		37,330			36,633			70,142			76,072
Total cost of revenue		113,506			93,337			209,296			188,455
Gross margin		428,675			411,890			798,795			774,493
Operating expenses:
Sales and marketing		129,207			116,408			247,590			241,884
Research and development		100,349			81,935			188,526			162,469
General and administrative		65,923			47,469			116,894			99,409
Amortization of acquired intangible assets		10,656			8,450			18,682			16,934
Restructuring and other charges (credits), net		1			(1,562	)		(337	)		32,429
Total operating expenses		306,136			252,700			571,355			553,125
Operating income		122,539			159,190			227,440			221,368
Interest and debt premium expense		(41,525	)		(12,239	)		(57,883	)		(25,225	)
Other income (expense), net		55			(43,385	)		(2,064	)		(37,201	)
Income before income taxes		81,069			103,566			167,493			158,942
Provision for income taxes		17,565			13,887			28,954			23,174
Net income	$	63,504		$	89,679		$	138,539		$	135,768
Earnings per share—Basic	$	0.54		$	0.77		$	1.17		$	1.16
Earnings per share—Diluted	$	0.53		$	0.76		$	1.17		$	1.15
Weighted-average shares outstanding—Basic		118,260			117,008			118,037			117,135
Weighted-average shares outstanding—Diluted		119,041			117,811			118,912			118,162

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						Six months ended
	March 31, 2023			March 31, 2022			March 31, 2023			March 31, 2022
Net income	$	63,504		$	89,679		$	138,539		$	135,768
Other comprehensive income (loss), net of tax:
Hedge gain (loss) arising during the period, net of tax of $0.7 million and $(1.2) million in the second quarter of 2023 and 2022, respectively, and $4.5 million and $(2.0) million in the first six months of 2023 and 2022, respectively		(1,999	)		3,697			(13,484	)		6,192
Foreign currency translation adjustment, net of tax of $0 for each period		8,747			(11,356	)		68,776			(17,024	)
Amortization of net actuarial pension loss included in net income, net of tax of $0 million and $(0.1) million in the second quarter of 2023 and 2022, respectively, and $0 million and $(0.2) million in the first six months of 2023 and 2022, respectively		41			260			82			525
Change in unamortized pension gain (loss) during the period related to changes in foreign currency		(65	)		538			(414	)		923
Other comprehensive income (loss)		6,724			(6,861	)		54,960			(9,384	)
Comprehensive income	$	70,228		$	82,818		$	193,499		$	126,384

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

3

PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six months ended
	March 31, 2023			March 31, 2022
Cash flows from operating activities:
Net income	$	138,539		$	135,768
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49,037			43,468
Amortization of right-of-use lease assets		16,564			17,536
Stock-based compensation		93,750			83,863
Loss on investment		—			34,847
Other non-cash items, net		(2,089	)		(110	)
Loss on disposal of fixed assets
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		86,478			12,310
Accounts payable and accrued expenses		11,110			(23,388	)
Accrued compensation and benefits		(18,468	)		(16,544	)
Deferred revenue		36,092			47,012
Accrued income taxes		(12,169	)		(6,279	)
Other current assets and prepaid expenses		(786	)		(20,569	)
Operating lease liabilities		4,985			(3,360	)
Other noncurrent assets and liabilities		(11,174	)		(24,493	)
Net cash provided by operating activities		391,869			280,061
Cash flows from investing activities:
Additions to property and equipment		(12,950	)		(5,510	)
Acquisitions of businesses, net of cash acquired		(828,271	)		—
Proceeds from sale of investments		—			42,693
Purchases of investments		(5,823	)		—
Purchase of intangible assets		—			(4,454	)
Settlement of net investment hedges		(12,544	)		11,308
Divestitures of businesses and assets, net		(154	)
Net cash provided by (used in) investing activities		(859,742	)		44,037
Cash flows from financing activities:
Borrowings under credit facility		1,130,000			—
Repayments of borrowings under credit facility		(564,000	)		(175,000	)
Repurchases of common stock		—			(125,000	)
Proceeds from issuance of common stock		10,592			10,857
Payments of withholding taxes in connection with stock-based awards		(56,022	)		(50,595	)
Payments of principal for financing leases		(217	)		(239	)
Credit facility origination costs		(13,355	)		—
Net cash provided by (used in) financing activities		506,998			(339,977	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		9,181			(3,739	)
Net change in cash, cash equivalents, and restricted cash		48,306			(19,618	)
Cash, cash equivalents, and restricted cash, beginning of period		272,888			327,046
Cash, cash equivalents, and restricted cash, end of period	$	321,194		$	307,428

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 March 31, 2023
	Common Stock											Accumulated
	Shares			Amount			Additional Paid-In Capital			Retained Earnings		Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of December 31, 2022		118,161		$	1,182		$	1,701,817		$	802,772	$	(105,222	)	$	2,400,549
Common stock issued for employee stock-based awards		94			1			(1	)		—		—			—
Shares surrendered by employees to pay taxes related to stock-based awards		(23	)		(1	)