Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, operating expenses, margin and EPS exclude the effect of purchase accounting on the fair value of acquired deferred revenue of Axeda and Servigistics, Inc., stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, acquisition-related expenses, costs associated with terminating a U.S. pension plan, certain identified non-operating gains and losses, and the related tax effects of the preceding items and discrete tax items. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results. PTC also provides results on a constant currency basis to provide a year-over-year view of our results excluding the effect of currency translation. Our constant currency disclosures are calculated by multiplying the actual results for the fourth quarter of 2014 by the exchange rates in effect for the comparable period in the prior year.

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our fiscal 2015 and other future financial and growth expectations and anticipated tax rates, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that the macroeconomic climate may not improve or may deteriorate, the possibility that customers may not purchase or adopt our solutions when or at the rates we expect and that our pipeline deals may not convert as we expect, the possibility that foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense, the possibility that we may not achieve the license, services or support growth rates that we expect, which could result in a different mix of revenue between license, service and support and could impact our EPS results, the possibility that customers may purchase more of our solutions as subscriptions, which would adversely affect near-term revenue, operating margins, and EPS, the possibility that we may be unable to improve services margins as we expect, the possibility that we may be unable to improve sales productivity as we expect, the possibility that our businesses, including the SLM business and the Internet of Things/Smart, Connected Products business, may not expand and/or generate the revenue we expect, the possibility that resource constraints and personnel reductions could adversely affect our revenue, the possibility that we may not generate sufficient operating cash flow to repurchase our shares as we plan or that other uses of cash may preclude such repurchases; the possibility that remedial actions relating to our previously announced investigation in China will have a material impact on our operations in China and that fines and penalties may be assessed against us in connection with this matter. 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 the geographic mix of our revenue, expenses and profits and loans and cash repatriations from foreign subsidiaries. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.

PTC, the PTC logo, ThingWorx, Creo, Servigistics, and all other PTC product names and logos are trademarks or registered trademarks of PTC Inc. or its subsidiaries in the United States and in other countries. All other companies referenced herein are trademarks or registered trademarks of their respective holders.

About PTC

PTC (Nasdaq: PTC) enables manufacturers to achieve sustained product and service advantage. PTC’s technology solutions help customers transform the way they create, operate and service products for a smart, connected, world. Founded in 1985, PTC employs approximately 6,000 professionals serving more than 28,000 businesses in rapidly-evolving, globally distributed manufacturing industries worldwide. Get more information at www.ptc.com.

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
					Three Months Ended								Twelve Months Ended
					September 30,				September 30,				September 30,				September 30,
					2014				2013				2014				2013
Revenue:
	License				$ 112,573				$ 105,432				$ 369,691				$ 344,209
	Service				72,067				72,269				295,009				294,653
	Support				182,068				167,144				692,267				654,679
Total revenue					366,708				344,845				1,356,967				1,293,541
Cost of revenue:
	Cost of license revenue (1)				8,315				8,270				31,663				33,004
	Cost of service revenue (1)				65,210				62,871				256,876				258,954
	Cost of support revenue (1)				22,329				20,388				85,144				81,081
Total cost of revenue					95,854				91,529				373,683				373,039
Gross margin					270,854				253,316				983,284				920,502
Operating expenses:
	Sales and marketing (1)				95,835				90,734				357,447				360,640
	Research and development (1)				60,387				55,127				226,496				221,918
	General and administrative (1)				43,344				33,910				142,232				131,937
	Amortization of acquired intangible assets				8,355				6,691				32,127				26,486
	Restructuring charges				26,825				17,848				28,406				52,197
Total operating expenses					234,746				204,310				786,708				793,178
Operating income					36,108				49,006				196,576				127,324
	Other income (expense), net				(3,740)				(599)				(10,464)				(1,090)
Income before income taxes					32,368				48,407				186,112				126,234
	Provision (benefit) for income taxes				(6,387)				(8,059)				25,918				(17,535)
Net income					$ 38,755				$ 56,466				$ 160,194				$ 143,769
Earnings per share:
	Basic				$ 0.33				$ 0.47				$ 1.36				$ 1.20
		Weighted average shares outstanding			116,173				119,020				118,094				119,473
	Diluted				$ 0.33				$ 0.47				$ 1.34				$ 1.19
		Weighted average shares outstanding			118,275				121,267				119,984				121,240
	(1)	The amounts in the tables above include stock-based compensation as follows:
					Three Months Ended								Twelve Months Ended
					September 30,				September 30,				September 30,				September 30,
					2014				2013				2014				2013
	Cost of license revenue				$ 4				$ 4				$ 17				$ 21
	Cost of service revenue				2,016				1,730				6,648				6,134
	Cost of support revenue				1,034				941				3,745				3,324
	Sales and marketing				2,399				3,340				10,982				11,326
	Research and development				3,052				2,115				10,119				8,590
	General and administrative				4,522				5,777				19,378				19,392
		Total stock-based compensation			$ 13,027				$ 13,907				$ 50,889				$ 48,787

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
						Three Months Ended												Twelve Months Ended
						September 30						September 30						September 30						September 30
							2014						2013						2014						2013
GAAP revenue						$	366,708					$	344,845					$	1,356,967					$	1,293,541
	Fair value adjustment of acquired deferred license revenue						719						-						719						-
	Fair value adjustment of acquired deferred service revenue						183						-						183						-
	Fair value adjustment of acquired deferred support revenue						347						287						347						3,035
Non-GAAP revenue						$	367,957					$	345,132					$	1,358,216					$	1,296,576
GAAP gross margin						$	270,854					$	253,316					$	983,284					$	920,502
	Fair value adjustment of acquired deferred license revenue						719						-						719						-
	Fair value adjustment of acquired deferred service revenue						183						-						183						-
	Fair value adjustment of acquired deferred support revenue						347						287						347						3,035
	Fair value adjustment to deferred services cost						(65	)					-						(65	)					-
	Stock-based compensation						3,054						2,675						10,410						9,479
	Amortization of acquired intangible assets
		included in cost of license revenue					4,702						4,695						17,746						18,586
	Amortization of acquired intangible assets
		included in cost of service revenue					91						26						366						-
Non-GAAP gross margin						$	279,885					$	260,999					$	1,012,990					$	951,602
GAAP operating income						$	36,108					$	49,006					$	196,576					$	127,324
	Fair value adjustment of acquired deferred license revenue						719						-						719						-
	Fair value adjustment of acquired deferred service revenue						183						-						183						-
	Fair value adjustment of acquired deferred support revenue						347						287						347						3,035
	Fair value adjustment to deferred services cost						(65	)					-						(65	)					-
	Fair value adjustment to deferred commission costs						(102	)					-						(102	)					-
	Stock-based compensation						13,027						13,907						50,889						48,787
	Amortization of acquired intangible assets
		included in cost of license revenue					4,702						4,695						17,746						18,560
	Amortization of acquired intangible assets
		included in cost of service revenue					91						26						366						26
	Amortization of acquired intangible assets						8,355						6,691						32,127						26,486
	Charges included in general and administrative expenses (3)						6,328						2,246						13,096						9,855
	Restructuring charges						26,825						17,848						28,406						52,197
Non-GAAP operating income (2)						$	96,518					$	94,706					$	340,288					$	286,270
GAAP net income						$	38,755					$	56,466					$	160,194					$	143,769
	Fair value adjustment of acquired deferred license revenue						719						-						719						-
	Fair value adjustment of acquired deferred service revenue						183						-						183						-
	Fair value adjustment of acquired deferred support revenue						347						287						347						3,035
	Fair value adjustment to deferred services cost						(102	)					-						(102	)					-
	Fair value adjustment to deferred commission costs						(65	)					-						(65	)					-
	Stock-based compensation						13,027						13,907						50,889						48,787
	Amortization of acquired intangible assets
		included in cost of license revenue					4,702						4,695						17,746						18,560
	Amortization of acquired intangible assets
		included in cost of service revenue					91						26						366						26
	Amortization of acquired intangible assets						8,355						6,691						32,127						26,486
	Charges included in general and administrative expenses (3)						6,328						2,246						13,096						9,855
	Restructuring charges						26,825						17,848						28,406						52,197
	Non-operating one-time gain (4)						-						(594	)					-						(5,717	)
	Income tax adjustments (5)						(20,440	)					(29,990	)					(43,528	)					(77,834	)
Non-GAAP net income						$	78,725					$	71,582					$	260,378					$	219,164

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED) - Continued
(in thousands, except per share data)
							Three Months Ended												Twelve Months Ended
							September 30						September 30						September 30						September 30
								2014						2013						2014						2013
GAAP diluted earnings per share							$	0.33					$	0.47					$	1.34					$	1.19
	Fair value adjustment of acquired deferred revenue							0.01						-						0.01						0.03
	Fair value adjustment to deferred costs							-						-						-						-
	Stock-based compensation							0.11						0.11						0.42						0.40
	Amortization of acquired intangibles							0.11						0.09						0.42						0.37
	Charges included in general and administrative expenses (3)							0.05						0.02						0.11						0.08
	Restructuring charges							0.23						0.15						0.24						0.43
	Non-operating one-time gain (4)							-						-						-						(0.05	)
	Income tax adjustments (5)							(0.17	)					(0.25	)					(0.36	)					(0.64	)
Non-GAAP diluted earnings per share							$	0.67					$	0.59					$	2.17					$	1.81
	(2	)	Operating margin impact of non-GAAP adjustments:
							Three Months Ended												Twelve Months Ended
							September 30						September 30						September 30						September 30
								2014						2013						2014						2013
	GAAP operating margin							9.8	%					14.2	%					14.5	%					9.8	%
			Fair value adjustment of acquired deferred revenue					0.3	%					0.1	%					0.1	%					0.2	%
			Fair value adjustment to deferred costs					0.0	%					0.0	%					0.0	%					0.0	%
			Stock-based compensation					3.6	%					4.0	%					3.8	%					3.8	%
			Amortization of acquired intangibles					3.6	%					3.3	%					3.7	%					3.5	%
			Charges included in general and administrative expenses (3)					1.7	%					0.7	%					1.0	%					0.8	%
			Restructuring charges					7.3	%					5.2	%					2.1	%					4.0	%
	Non-GAAP operating margin							26.2	%					27.4	%					25.1	%					22.1	%

(3)			Represents acquisition-related charges, as well as, costs related to terminating a U.S. pension plan of $0.3 million in the twelve months ended September 30, 2014.
(4)			The fourth quarter of 2013 includes a gain on investment of $0.6 million and the third quarter of 2013 includes a legal settlement gain of $5.1 million, which are both excluded from non-GAAP net income.
(5)			Income tax adjustments for the three and twelve months ended September 30, 2014 and 2013 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, and also include any identified tax items. In Q4'12, a valuation allowance was established against our U.S. net deferred tax assets. Similarly, in Q4’14, valuation allowances totaling $3.5 million were established against our foreign net deferred tax assets in two foreign jurisdictions. As the U.S. and the two foreign jurisdictions are profitable on a non-GAAP basis, the 2014 and 2013 non-GAAP tax provision is being calculated assuming there is no valuation allowance in these jurisdictions. The following identified tax items have also been excluded from the non-GAAP tax results. Fiscal year 2014 includes a tax benefit of $18.1 million related to the release of a portion of the valuation allowance as a result of deferred tax liabilities established for the acquisitions of ThingWorx in Q2’14 of $8.9 million and Axeda in Q4’14 of $9.1 million; and a $1.9 million tax benefit in Q4’14 resulting from tax authority clearance in a foreign jurisdiction of an acquired company. Q4'13 and fiscal year 2013 includes a non-cash benefit of $7.9 million related to the release of a portion of the valuation allowance as a result of the pension gain (decrease in unrecognized actuarial loss) recorded in accumulated other comprehensive income; a $4.1 million tax benefit related to the release of a portion of the valuation allowance as a result of deferred tax liabilities established in accounting for acquisitions completed in the Q4'13; and a $2.6 million tax benefit relating to a tax audit in a foreign jurisdiction of an acquired company. Fiscal year 2013 includes a tax benefit of $32.6 million related to the release of deferred tax liabilities established for the Servigistics acquisition recorded in Q1'13 and tax benefits of $3.2 million relating to the final resolution of a long standing tax litigation and completion of an international jurisdiction tax audit recorded in Q2'13.

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
			September 30,					September 30,
				2014					2013
ASSETS
Cash and cash equivalents			$	293,654				$	241,913
Accounts receivable, net				235,688					229,106
Property and equipment, net				67,783					64,652
Goodwill and acquired intangible assets, net				1,349,400					1,042,216
Other assets				253,429					251,019
Total assets			$	2,199,954				$	1,828,906
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue			$	382,544				$	336,913
Borrowings under credit facility				611,875					258,125
Other liabilities				351,646					307,388
Stockholders' equity				853,889					926,480
Total liabilities and stockholders' equity			$	2,199,954				$	1,828,906

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
				Three Months Ended												Twelve Months Ended
				September 30,						September 30,						September 30,						September 30,
					2014						2013						2014						2013
Cash flows from operating activities:
	Net income			$	38,755					$	56,466					$	160,194					$	143,769
	Stock-based compensation				13,027						13,907						50,889						48,787
	Depreciation and amortization				20,008						19,119						77,307						76,551
	Accounts receivable				(7,071	)					(18,566	)					7,554						17,308
	Accounts payable and accruals				36,746						14,732						8,538						6,208
	Deferred revenue				(30,341	)					(36,224	)					24,998						6,727
	Income taxes				(15,357	)					(14,576	)					(812	)					(54,925	)
	Excess tax benefits from stock-based awards				(853	)					(163	)					(10,429	)					(334	)
	Other				(3,749	)					8,966						(13,687	)					(19,408	)
Net cash provided by operating activities (6)					51,165						43,661						304,552						224,683
Capital expenditures					(8,554	)					(10,200	)					(25,275	)					(29,328	)
Acquisitions of businesses, net of cash acquired (7)					(212,006	)					(25,026	)					(323,525	)					(245,843	)
Proceeds (payments) on debt, net					296,875						(10,000	)					353,750						(111,875	)
Proceeds from issuance of common stock					76						1,472						877						4,884
Payments of withholding taxes in connection with
vesting of stock-based awards					(108	)					(22	)					(26,857	)					(14,996	)
Repurchases of common stock					(125,000	)					(19,959	)					(224,915	)					(74,871	)
Excess tax benefits from stock-based awards					853						163						10,429						334
Credit facility origination costs					(3,811	)					-						(7,931	)					-
Other financing & investing activities					-						721						-						721
Foreign exchange impact on cash					(10,009	)					4,072						(9,364	)					(1,339	)
Net change in cash and cash equivalents					(10,519	)					(15,118	)					51,741						(247,630	)
Cash and cash equivalents, beginning of period					304,173						257,031						241,913						489,543
Cash and cash equivalents, end of period				$	293,654					$	241,913					$	293,654					$	241,913

(6)			Q4'14 and fiscal year 2014 include $1 million and $21 million in restructuring payments, respectively. Q4'13 and fiscal year 2013 include $6 million and $37 million in restructuring payments, respectively.
(7)			In fiscal year 2014, we completed the acquisitions of Axeda for $166 million (net of cash acquired) and Atego for $46 million (net of cash acquired) in Q4'14 and the acquisition of ThingWorx for $112 million (net of cash acquired) in Q2'14. During fiscal year 2014, we used cash flow from operations and borrowings under our credit facility to complete these acquisitions and to fund share repurchases. In fiscal year 2013, we completed the acquisition of Servigistics for $221 million (net of cash acquired) in Q1'13 which was funded with $230 million borrowed under our revolving credit facility in Q4'12 in contemplation of the acquisition closing.

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