PTC Announces Second Quarter Fiscal Year 2018 Results

(2) In the third quarter of 2017, PTC began reporting cost of support revenue separate from cost of license and subscription revenue. Costs for previous periods have also been separately reported to conform to the current period presentation.

(3) Headquarters relocation charges represent accelerated depreciation expense recorded in anticipation of the exit of our current headquarters facility.

(4) Our 2018 year-to-date tax rate includes a benefit of $7 million relating to the enactment of the Tax Cuts and Jobs Act.


PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

			Three Months Ended						Six Months Ended
			March 31,			April 1,			March 31,			April 1,
			2018			2017			2018			2017

GAAP revenue			$	307,883		$	280,040		$	614,527		$	566,367
	Fair value adjustment of acquired deferred subscription revenue			75			411			191			1,057
	Fair value adjustment of acquired deferred services revenue			233			262			480			530
Non-GAAP revenue			$	308,191		$	280,713		$	615,198		$	567,954

GAAP gross margin			$	224,252		$	198,210		$	447,938		$	402,422
	Fair value adjustment of acquired deferred revenue			308			673			671			1,587
	Fair value adjustment to deferred services cost			(96	)		(108	)		(200	)		(221	)
	Stock-based compensation			2,767			3,207			5,694			6,101
	Amortization of acquired intangible assets included in cost of revenue			6,556			6,389			13,231			12,777
Non-GAAP gross margin			$	233,787		$	208,371		$	467,334		$	422,666

GAAP operating income			$	22,366		$	7,513		$	39,838		$	12,074
	Fair value adjustment of acquired deferred revenue			308			673			671			1,587
	Fair value adjustment to deferred services cost			(96	)		(108	)		(200	)		(221	)
	Stock-based compensation			17,026			21,577			35,357			39,565
	Amortization of acquired intangible assets included in cost of revenue			6,556			6,389			13,231			12,777
	Amortization of acquired intangible assets			7,895			7,946			15,716			16,013
	Acquisition-related charges included in general and administrative costs			133			554			140			723
	Restructuring charges, net			(839	)		464			(734	)		6,749
	Headquarters relocation charges			953			-			953			-
Non-GAAP operating income ⁽¹⁾			$	54,302		$	45,008		$	104,972		$	89,267

GAAP net income (loss)			$	7,922		$	(1,104	)	$	21,799		$	(10,245	)
	Fair value adjustment of acquired deferred revenue			308			673			671			1,587
	Fair value adjustment to deferred services cost			(96	)		(108	)		(200	)		(221	)
	Stock-based compensation			17,026			21,577			35,357			39,565
	Amortization of acquired intangible assets included in cost of revenue			6,556			6,389			13,231			12,777
	Amortization of acquired intangible assets			7,895			7,946			15,716			16,013
	Acquisition-related charges included in general and administrative costs			133			554			140			723
	Restructuring charges, net			(839	)		464			(734	)		6,749
	Headquarters relocation charges			953			-			953			-
	Non-operating credit facility refinancing costs			-			1,152			-			1,152
	Income tax adjustments ⁽²⁾			(80	)		(2,787	)		(11,080	)		(2,639	)
Non-GAAP net income			$	39,778		$	34,756		$	75,853		$	65,461

GAAP diluted earnings (loss) per share			$	0.07		$	(0.01	)	$	0.19		$	(0.09	)
	Fair value adjustment of acquired deferred revenue			-			0.01			0.01			0.01
	Stock-based compensation			0.14			0.18			0.30			0.34
	Amortization of acquired intangibles			0.12			0.12			0.25			0.25
	Acquisition-related charges			-			-			-			0.01
	Restructuring charges, net			(0.01	)		-			(0.01	)		0.06
	Headquarters relocation charges			0.01			-			0.01			-
	Non-operating credit facility refinancing costs						0.01			-			0.01
	Income tax adjustments			-			(0.02	)		(0.09	)		(0.02	)
Non-GAAP diluted earnings per share			$	0.34		$	0.30		$	0.64		$	0.56

GAAP diluted weighted average shares outstanding				117,905			115,709			117,780			115,498
	Dilutive effect of stock-based compensation plans			-			1,737			-			1,736
Non-GAAP diluted weighted average shares outstanding				117,905			117,446			117,780			117,234

	(1)	Operating margin impact of non-GAAP adjustments:
			Three Months Ended						Six Months Ended
			March 31,			April 1,			March 31,			April 1,
			2018			2017			2018			2017
	GAAP operating margin			7.3	%		2.7	%		6.5	%		2.1	%
		Fair value of acquired deferred revenue		0.1	%		0.2	%		0.1	%		0.3	%
		Fair value adjustment to deferred services cost		0.0	%		0.0	%		0.0	%		0.0	%
		Stock-based compensation		5.5	%		7.7	%		5.8	%		7.0	%
		Amortization of acquired intangibles		4.7	%		5.1	%		4.7	%		5.1	%
		Acquisition-related charges		0.0	%		0.2	%		0.0	%		0.1	%
		Restructuring charges, net		-0.3	%		0.2	%		-0.1	%		1.2	%
		Headquarters relocation charges		0.3	%		0.0	%		0.2	%		0.0	%
	Non-GAAP operating margin			17.6	%		16.0	%		17.1	%		15.7	%

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