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, 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 118,833,211 shares of our common stock outstanding on August 2, 2023.

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended June 30, 2023

		Page Number
Part I—FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:	1
	Consolidated Balance Sheets as of June 30, 2023 and September 30, 2022	1
	Consolidated Statements of Operations for the three and nine months ended June 30, 2023 and June 30, 2022	2
	Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2023 and June 30, 2022	3
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2023 and June 30, 2022	4
	Consolidated Statements of Stockholders' Equity for the three and nine months ended June 30, 2023 and June 30, 2022	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	32
Part II—OTHER INFORMATION
Item 1A.	Risk Factors	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signature		34

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, 2023			September 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	281,513		$	272,182
Accounts receivable, net of allowance for doubtful accounts of $429 and $362 at June 30, 2023 and September 30, 2022, respectively		625,471			636,556
Prepaid expenses		118,872			88,854
Other current assets		77,421			71,065
Total current assets		1,103,277			1,068,657
Property and equipment, net		89,180			98,101
Goodwill		3,377,319			2,353,654
Acquired intangible assets, net		959,120			382,718
Deferred tax assets		146,307			256,091
Operating right-of-use lease assets		144,860			137,780
Other assets		387,586			390,267
Total assets	$	6,207,649		$	4,687,268
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,492		$	40,153
Accrued expenses and other current liabilities		148,784			117,158
Accrued compensation and benefits		150,774			104,022
Accrued income taxes		19,198			5,142
Deferred acquisition payments		620,040			—
Deferred revenue		631,325			503,781
Short-term lease obligations		23,042			22,002
Total current liabilities		1,611,655			792,258
Long-term debt		1,738,241			1,350,628
Deferred tax liabilities		35,077			28,396
Deferred revenue		19,102			16,552
Long-term lease obligations		171,777			167,573
Other liabilities		33,133			35,827
Total liabilities		3,608,985			2,391,234
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued		—			—
Common stock, $0.01 par value; 500,000 shares authorized; 118,731 and 117,472 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively		1,186			1,175
Additional paid-in capital		1,767,442			1,720,580
Retained earnings		927,674			727,737
Accumulated other comprehensive loss		(97,638	)		(153,458	)
Total stockholders’ equity		2,598,664			2,296,034
Total liabilities and stockholders’ equity	$	6,207,649		$	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						Nine months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Revenue:
License	$	192,940		$	175,163		$	562,631		$	562,646
Support and cloud services		313,721			248,237			875,448			736,597
Total software revenue		506,661			423,400			1,438,079			1,299,243
Professional services		35,681			39,074			112,354			126,179
Total revenue		542,342			462,474			1,550,433			1,425,422
Cost of revenue:
Cost of license revenue		11,501			13,676			41,293			35,406
Cost of support and cloud services revenue		68,264			46,598			177,626			137,251
Total cost of software revenue		79,765			60,274			218,919			172,657
Cost of professional services revenue		36,089			41,721			106,231			117,793
Total cost of revenue		115,854			101,995			325,150			290,450
Gross margin		426,488			360,479			1,225,283			1,134,972
Operating expenses:
Sales and marketing		145,083			124,325			392,673			366,209
Research and development		103,819			88,170			292,345			250,639
General and administrative		57,055			54,618			173,949			154,027
Amortization of acquired intangible assets		10,670			8,931			29,352			25,865
Restructuring and other charges (credits), net		(39	)		4,458			(376	)		36,887
Total operating expenses		316,588			280,502			887,943			833,627
Operating income		109,900			79,977			337,340			301,345
Interest and debt premium expense		(35,836	)		(13,758	)		(93,719	)		(38,983	)
Other income (expense), net		2,462			34,559			398			(2,642	)
Income before income taxes		76,526			100,778			244,019			259,720
Provision for income taxes		15,128			30,302			44,082			53,476
Net income	$	61,398		$	70,476		$	199,937		$	206,244
Earnings per share—Basic	$	0.52		$	0.60		$	1.69		$	1.76
Earnings per share—Diluted	$	0.51		$	0.60		$	1.68		$	1.75
Weighted-average shares outstanding—Basic		118,483			117,073			118,186			117,114
Weighted-average shares outstanding—Diluted		119,392			117,968			119,072			118,097

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, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Net income	$	61,398		$	70,476		$	199,937		$	206,244
Other comprehensive income (loss), net of tax:
Hedge gain (loss) arising during the period, net of tax of $0.2 million and $(1.9) million in the third quarter of 2023 and 2022, respectively, and $4.7 million and $(4.0) million in the first nine months of 2023 and 2022, respectively		(521	)		5,880			(14,005	)		12,072
Foreign currency translation adjustment, net of tax of $0 for each period		1,405			(35,795	)		70,181			(52,819	)
Amortization of net actuarial pension loss included in net income, net of tax of $0.0 million and $0.0 million in the third quarter of 2023 and 2022, respectively, and $0.0 million and $(0.2) million in the first nine months of 2023 and 2022, respectively		43			(78	)		125			447
Change in unamortized pension loss during the period related to changes in foreign currency		(67	)		1,354			(481	)		2,277
Other comprehensive income (loss)		860			(28,639	)		55,820			(38,023	)
Comprehensive income	$	62,258		$	41,837		$	255,757		$	168,221

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, 2023			June 30, 2022
Cash flows from operating activities:
Net income	$	199,937		$	206,244
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		76,943			65,456
Amortization of right-of-use lease assets		24,705			26,149
Stock-based compensation		147,568			133,283
Loss on investment		—			31,854
Gain on divestiture of business		—			(29,808	)
Other non-cash items, net		(3,114	)		(645	)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		99,521			25,228
Accounts payable and accrued expenses		5,407			(7,434	)
Accrued compensation and benefits		5,961			(9,334	)
Deferred revenue		18,696			18,038
Accrued income taxes		(9,910	)		6,124
Other current assets and prepaid expenses		8,670			(26,933	)
Operating lease liabilities		(1,360	)		(10,544	)
Other noncurrent assets and liabilities		(11,932	)		(30,851	)
Net cash provided by operating activities		561,092			396,827
Cash flows from investing activities:
Additions to property and equipment		(18,035	)		(9,979	)
Acquisitions of businesses, net of cash acquired		(828,271	)		(274,974	)
Proceeds from sale of investments		349			46,906
Purchases of investments		(5,823	)		—
Purchase of intangible assets		—			(5,453	)
Settlement of net investment hedges		(14,204	)		18,043
Divestitures of businesses and assets, net		(154	)		32,518
Net cash used in investing activities		(866,138	)		(192,939	)
Cash flows from financing activities:
Borrowings under credit facility		1,130,000			264,000
Repayments of borrowings under credit facility		(744,000	)		(280,000	)
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		(75,489	)		(62,856	)
Payments of principal for financing leases		(217	)		(239	)
Credit facility origination costs		(13,355	)		—
Net cash provided by (used in) financing activities		307,531			(193,238	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		6,835			(14,654	)
Net change in cash, cash equivalents, and restricted cash		9,320			(4,004	)
Cash, cash equivalents, and restricted cash, beginning of period		272,888			327,046
Cash, cash equivalents, and restricted cash, end of period	$	282,208		$	323,042
Supplemental disclosure of non-cash financing and investing activities:
Withholding taxes in connection with stock-based awards, accrued		5,705			5,803
Operating right-of-use assets obtained in exchange for operating lease liabilities		23,142			11,825

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, 2023
	Common Stock											Accumulated
	Shares			Amount			Additional Paid-In Capital			Retained Earnings		Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of March 31, 2023		118,334		$	1,182		$	1,749,574		$	866,276	$	(98,498	)	$	2,518,534
Common stock issued for employee stock-based awards		582			6			(6	)		—		—			—
Shares surrendered by employees to pay taxes related to stock-based awards		(185	)		(2	)		(25,170	)		—		—			(25,172	)
Compensation expense from stock-based awards		—			—	<