About PTC (NASDAQ: PTC)
PTC unleashes industrial innovation with award-winning, market-proven solutions that enable companies to differentiate their products and services, improve operational excellence, and increase workforce productivity. With PTC, and its partner ecosystem, manufacturers can capitalize on the promise of today’s new technology to drive digital transformation.

PTC.com @PTC Blogs

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
			Three Months Ended
			March 30,				March 30,				March 31,
			2019				2019				2018
			ASC 606				ASC 605				ASC 605
Revenue:
Subscription license			$	51,540
Subscription support & cloud services				83,228
Total Subscription				134,768			$	162,070			$	112,931
Perpetual support				104,417				103,564				126,683
Total recurring revenue				239,185				265,634				239,614
Perpetual license				10,336				11,267				22,839
Total software revenue				249,521				276,901				262,453
Professional services				40,930				38,598				45,430
Total revenue (1)				290,451				315,499				307,883
Cost of revenue:
Cost of software revenue (2) (3)				45,749				45,222				46,189
Cost of professional services revenue (2) (3)				34,155				32,745				37,519
Total cost of revenue				79,904				77,967				83,708
Gross margin				210,547				237,532				224,175
Operating expenses:
Sales and marketing (2) (3)				103,722				109,421				98,390
Research and development (2) (3)				61,402				61,402				62,197
General and administrative (2) (3)				35,371				35,371				33,369
Amortization of acquired intangible assets				5,930				5,930				7,895
Restructuring and other charges, net				26,980				26,980				114
Total operating expenses				233,405				239,104				201,965
Operating income (loss)				(22,858	)			(1,572	)			22,210
Other expense, net (3)				(10,562	)			(10,318	)			(10,664	)
Income (loss) before income taxes				(33,420	)			(11,890	)			11,546
Provision for income taxes				10,093				140				3,624
Net income (loss)			$	(43,513	)		$	(12,030	)		$	7,922
Earnings (loss) per share:
Basic			$	(0.37	)		$	(0.10	)		$	0.07
Weighted average shares outstanding				118,461				118,461				116,241
Diluted			$	(0.37	)		$	(0.10	)		$	0.07
Weighted average shares outstanding				118,461				118,461				117,905

(1)		See supplemental financial data for revenue by license, support, and professional services.
(2)		See supplemental financial data for additional information about stock-based compensation.
(3)		In the first quarter of fiscal 2019, we adopted Accounting Standards Update (ASU) 2017-07 - Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost . In accordance with this guidance, we reclassified $0.2 million of non-service related net periodic pension income to other expense, net from cost of revenue and operating expenses for the three months ended March 31, 2018.

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
			Six Months Ended
			March 30,				March 30,				March 31,
			2019				2019				2018
			ASC 606				ASC 605				ASC 605
Revenue:
Subscription license			$	115,057
Subscription support & cloud services				160,652
Total Subscription				275,709			$	310,483			$	212,939
Perpetual support				214,914				212,789				257,880
Total recurring revenue				490,623				523,272				470,819
Perpetual license				52,141				53,017				56,824
Total software revenue				542,764				576,289				527,643
Professional services				82,376				77,967				86,884
Total revenue (1)				625,140				654,256				614,527
Cost of revenue:
Cost of software revenue (2) (3)				89,509				88,199				92,805
Cost of professional services revenue (2) (3)				67,747				64,964				73,938
Total cost of revenue				157,256				153,163				166,743
Gross margin				467,884				501,093				447,784
Operating expenses:
Sales and marketing (2) (3)				207,940				216,725				197,765
Research and development (2) (3)				122,184				122,184				126,169
General and administrative (2) (3)				73,235				73,235				68,389
Amortization of acquired intangible assets				11,866				11,866				15,716
Restructuring and other charges, net				45,473				45,473				219
Total operating expenses				460,698				469,483				408,258
Operating income				7,186				31,610				39,526
Other expense, net (3)				(20,184	)			(20,046	)			(21,509	)
Income (loss) before income taxes				(12,998	)			11,564				18,017
Provision (benefit) for income taxes (4)				9,530				4,346				(3,782	)
Net income (loss)			$	(22,528	)		$	7,218			$	21,799
Earnings (loss) per share:
Basic			$	(0.19	)		$	0.06			$	0.19
Weighted average shares outstanding				118,392				118,392				115,986
Diluted			$	(0.19	)		$	0.06			$	0.19
Weighted average shares outstanding				118,392				119,490				117,780

(1)		See supplemental financial data for revenue by license, support, and professional services.
(2)		See supplemental financial data for additional information about stock-based compensation.
(3)		In the first quarter of fiscal 2019, we adopted Accounting Standards Update (ASU) 2017-07 - Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost . In accordance with this guidance, we reclassified $0.3 million of non-service related net periodic pension income to other expense, net from cost of revenue and operating expenses for the six months ended March 31, 2018.
(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)
Revenue by license, support and services is as follows:
			Three Months Ended
			March 30,			March 30,			March 31,
			2019			2019			2018
			ASC 606			ASC 605			ASC 605
License revenue (1)			$	61,876		$	156,131		$	120,505
Support and cloud services revenue				187,645			120,770			141,948
Professional services revenue				40,930			38,598			45,430
Total revenue			$	290,451		$	315,499		$	307,883
			Six Months Ended
			March 30,			March 30,			March 31,
			2019			2019			2018
			ASC 606			ASC 605			ASC 605
License revenue (1)			$	167,198		$	330,036		$	240,023
Support and cloud services revenue				375,566			246,253			287,620
Professional services revenue				82,376			77,967			86,884
Total revenue			$	625,140		$	654,256		$	614,527
(1) Under ASC 605, all subscription revenue is classified as license revenue.
The amounts in the income statement include stock-based compensation as follows:
			Three Months Ended
			March 30,			March 30,			March 31,
			2019			2019			2018
			ASC 606			ASC 605			ASC 605
Cost of software revenue			$	1,206		$	1,206		$	1,098
Cost of professional services revenue				1,906			1,906			1,669
Sales and marketing				9,522			9,522			5,038
Research and development				5,190			5,190			3,383
General and administrative				9,143			9,143			5,838
Total stock-based compensation			$	26,967		$	26,967		$	17,026
			Six Months Ended
			March 30,			March 30,			March 31,
			2019			2019			2018
			ASC 606			ASC 605			ASC 605
Cost of software revenue			$	2,503		$	2,503		$	2,319
Cost of professional services revenue				3,720			3,720			3,375
Sales and marketing				19,244			19,244			9,917
Research and development				10,090			10,090			6,343
General and administrative				20,817			20,817			13,403
Total stock-based compensation			$	56,374		$	56,374		$	35,357

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
			Three Months Ended
			March 30,				March 30,				March 31,
			2019				2019				2018
			ASC 606				ASC 605				ASC 605
GAAP revenue			$	290,451			$	315,499			$	307,883
Fair value adjustment of acquired deferred subscription revenue				-				-				75
Fair value adjustment of acquired deferred services revenue				198				198				233
Non-GAAP revenue			$	290,649			$	315,697			$	308,191
GAAP gross margin			$	210,547			$	237,532			$	224,175
Fair value adjustment of acquired deferred revenue				198				198				308
Fair value adjustment to deferred services cost				(77	)			(77	)			(96	)
Stock-based compensation				3,112				3,112				2,767
Amortization of acquired intangible assets included in cost of revenue				6,842				6,842				6,556
Non-GAAP gross margin			$	220,622			$	247,607			$	233,710
GAAP operating income (loss)			$	(22,858	)		$	(1,572	)		$	22,210
Fair value adjustment of acquired deferred revenue				198				198				308
Fair value adjustment to deferred services cost				(77	)			(77	)			(96	)
Stock-based compensation				26,967				26,967				17,026
Amortization of acquired intangible assets included in cost of revenue				6,842				6,842				6,556
Amortization of acquired intangible assets				5,930				5,930				7,895
Acquisition-related and other transactional charges included in general and administrative costs				372				372				133
Restructuring and other charges, net				26,980				26,980				114
Non-GAAP operating income (1)			$	44,354			$	65,640			$	54,146
GAAP net income (loss)			$	(43,513	)		$	(12,030	)		$	7,922
Fair value adjustment of acquired deferred revenue				198				198				308
Fair value adjustment to deferred services cost				(77	)			(77	)			(96	)
Stock-based compensation				26,967				26,967				17,026
Amortization of acquired intangible assets included in cost of revenue				6,842				6,842				6,556
Amortization of acquired intangible assets				5,930				5,930				7,895
Acquisition-related and other transactional charges included in general and administrative costs				372				372				133
Restructuring and other charges, net				26,980				26,980				114
Income tax adjustments (2)				2,138				(10,399	)			(80	)
Non-GAAP net income			$	25,837			$	44,783			$	39,778
GAAP diluted earnings (loss) per share			$	(0.37	)		$	(0.10	)		$	0.07
Fair value adjustment of acquired deferred revenue				-				-				-
Stock-based compensation				0.23				0.23				0.14
Amortization of acquired intangibles				0.11				0.11				0.12
Acquisition-related and other transactional charges				-				-				-
Restructuring and other charges, net				0.23				0.23				-
Income tax adjustments				0.02				(0.09	)			-
Non-GAAP diluted earnings per share			$	0.22			$	0.38			$	0.34
GAAP diluted weighted average shares outstanding				118,461				118,461				117,905
Dilutive effect of stock-based compensation plans				881				881				-
Non-GAAP diluted weighted average shares outstanding				119,342				119,342				117,905
(1)Operating margin impact of non-GAAP adjustments:
			Three Months Ended
			March 30,				March 30,				March 31,
			2019				2019				2018
			ASC 606				ASC 605				ASC 605
GAAP operating margin				-7.9	%			-0.5	%			7.2	%
Fair value adjustment of acquired deferred revenue				0.1	%			0.1	%			0.1	%
Fair value adjustment to deferred services cost				0.0	%			0.0	%			0.0	%
Stock-based compensation				9.3	%			8.5	%			5.5	%
Amortization of acquired intangibles				4.4	%			4.0	%			4.7	%
Acquisition-related and other transactional charges				0.1	%			0.1	%			0.0	%
Restructuring and other charges, net				9.3	%			8.6	%			0.0	%
Non-GAAP operating margin				15.3	%			20.8	%			17.6	%

(2)		We have recorded a full valuation allowance against our U.S. net deferred tax assets. As we are profitable on a non-GAAP basis, the 2019 and 2018 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. Income tax adjustments 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.

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
			Six Months Ended
			March 30,				March 30,				March 31,
			2019				2019				2018
			ASC 606				ASC 605				ASC 605
GAAP revenue			$	625,140			$	654,256			$	614,527
Fair value adjustment of acquired deferred subscription revenue				66				66				191
Fair value adjustment of acquired deferred services revenue				405				405				480
Non-GAAP revenue			$	625,611			$	654,727			$	615,198
GAAP gross margin			$	467,884			$	501,093			$	447,784
Fair value adjustment of acquired deferred revenue				471				471				671
Fair value adjustment to deferred services cost				(162	)			(162	)			(200	)
Stock-based compensation				6,223				6,223				5,694
Amortization of acquired intangible assets included in cost of revenue				13,559				13,559				13,231
Non-GAAP gross margin			$	487,975			$	521,184			$	467,180
GAAP operating income			$	7,186			$	31,610			$	39,526
Fair value adjustment of acquired deferred revenue				471				471				671
Fair value adjustment to deferred services cost				(162	)			(162	)			(200	)
Stock-based compensation				56,374				56,374				35,357
Amortization of acquired intangible assets included in cost of revenue				13,559				13,559				13,231
Amortization of acquired intangible assets				11,866				11,866				15,716
Acquisition-related and other transactional charges included in general and administrative costs				791				791				140
Restructuring and other charges, net				45,473				45,473				219
Non-GAAP operating income (1)			$	135,558			$	159,982			$	104,660
GAAP net income (loss)			$	(22,528	)		$	7,218			$	21,799
Fair value adjustment of acquired deferred revenue				471				471				671
Fair value adjustment to deferred services cost				(162	)			(162	)			(200	)
Stock-based compensation				56,374				56,374				35,357
Amortization of acquired intangible assets included in cost of revenue				13,559				13,559				13,231
Amortization of acquired intangible assets				11,866				11,866				15,716
Acquisition-related and other transactional charges included in general and administrative costs				791				791				140
Restructuring and other charges, net				45,473				45,473				219
Income tax adjustments (2)				(12,718	)			(22,540	)			(11,080	)
Non-GAAP net income			$	93,126			$	113,050			$	75,853
GAAP diluted earnings (loss) per share			$	(0.19	)		$	0.06			$	0.19
Fair value adjustment of acquired deferred revenue				-				-				0.01
Stock-based compensation				0.47				0.47				0.30
Amortization of acquired intangibles				0.21				0.21				0.25
Acquisition-related and other transactional charges				0.01				0.01				-
Restructuring and other charges, net				0.38				0.38				-
Income tax adjustments				(0.11	)			(0.19	)			(0.09	)
Non-GAAP diluted earnings per share			$	0.78			$	0.95			$	0.64
GAAP diluted weighted average shares outstanding				118,392				119,490				117,780
Dilutive effect of stock-based compensation plans				1,098				-				-
Non-GAAP diluted weighted average shares outstanding				119,490				119,490				117,780
(1) Operating margin impact of non-GAAP adjustments:
			Six Months Ended
			March 30,				March 30,				March 31,
			2019				2019				2018
			ASC 606				ASC 605				ASC 605
GAAP operating margin				1.1	%			4.8	%			6.4	%
Fair value adjustment of acquired deferred revenue				0.1	%			0.1	%			0.1	%
Fair value adjustment to deferred services cost				0.0	%			0.0	%			0.0	%
Stock-based compensation				9.0	%			8.6	%			5.8	%
Amortization of acquired intangibles				4.1	%			3.9	%			4.7	%
Acquisition-related and other transactional charges				0.1	%			0.1	%			0.0	%
Restructuring and other charges, net				7.3	%			7.0	%			0.1	%
Non-GAAP operating margin				21.7	%			24.4	%			17.0	%

(2)		We have recorded a full valuation allowance against our U.S. net deferred tax assets. As we are profitable on a non-GAAP basis, the 2019 and 2018 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. Income tax adjustments 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. We have recorded the impact of the Tax Cuts and Jobs Act in our Q1'18 GAAP earnings, resulting in a non-cash benefit of approximately $7 million. We have excluded this benefit from our non-GAAP results.

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
			March 30,			March 30,			September 30,
			2019			2019			2018
			ASC 606 (1)			ASC 605			ASC 605
ASSETS
Cash and cash equivalents			$	294,299		$	294,299		$	259,946
Marketable securities				56,415			56,415			55,951
Accounts receivable, net				352,217			110,510			129,297
Property and equipment, net				106,837			106,837			80,613
Goodwill and acquired intangible assets, net				1,421,913			1,421,913			1,382,659
Other assets				484,138			490,722			420,556
Total assets			$	2,715,819		$	2,480,696		$	2,329,022
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue			$	391,807		$	553,709		$	499,442
Debt, net of deferred issuance costs				738,700			738,700			643,268
Other liabilities				337,604			275,359			311,723
Stockholders' equity				1,247,708			912,928			874,589
Total liabilities and stockholders' equity			$	2,715,819		$	2,480,696		$	2,329,022

(1)		Our consolidated balance sheet as of March 30, 2019 under ASC 606 is preliminary, pending final adjustments required as a result of our adoption of ASC 606 in the first quarter of 2019. We expect the adjustments to be finalized prior to the filing of our Form 10-Q for the second quarter of 2019.

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
			Three Months Ended								Six Months Ended
			March 30,				March 31,				March 30,				March 31,
			2019				2018				2019				2018
Cash flows from operating activities:
Net income (loss)			$	(43,513	)		$	7,922			$	(22,528	)		$	21,799
Stock-based compensation				26,967				17,026				56,374				35,357
Depreciation and amortization				19,505				21,681				39,558				42,727
Accounts receivable				30,476				10,424				54,501				32,027
Accounts payable and accruals				9,264				13,927				(27,868	)			(39,130	)
Deferred revenue				58,767				36,972				36,947				59,027
Income taxes				5,991				138				(15,677	)			(14,134	)
Other (1)				33,673				2,993				41,037				(1,075	)
Net cash provided by operating activities (3)				141,130				111,083				162,344				136,598
Capital expenditures				(20,936	)			(4,762	)			(51,268	)			(11,139	)
Acquisition of businesses, net of cash acquired (2)				103				(3,000	)			(69,453	)			(3,000	)
Purchase of intangible asset				-				(500	)			-				(3,000	)
Borrowings (payments) on debt, net				(40,000	)			(100,000	)			95,000				(70,000	)
Net proceeds associated with issuance of common stock				8,798				7,472				4,158				7,472
Repurchases of common stock				(64,994	)			-				(64,994	)			-
												-
Payments of withholding taxes in connection with vesting of stock-based awards				(703	)			(454	)			(34,491	)			(33,942	)
Proceeds from (purchase of) investment				(7,500	)			-				(7,500	)			-
Contingent consideration				-				-				(1,575	)			(3,176	)
Purchases of marketable securities, net				(504	)			(5,046	)			(233	)			(5,554	)
Other financing & investing activities				1,709				-				114				-
Foreign exchange impact on cash				196				3,239				2,237				5,837
Net change in cash, cash equivalents, and restricted cash (1)				17,299				8,032				34,339				20,096
Cash, cash equivalents, and restricted cash, beginning of period				278,133				293,273				261,093				281,209
Cash, cash equivalents, and restricted cash, end of period			$	295,432			$	301,305			$	295,432			$	301,305

(1)		In the first quarter of fiscal 2019, we adopted Accounting Standards Update (ASU) 2016-18 - Statement of Cash Flows (Topic 230) . In accordance with this guidance, we excluded the $0.1 million decrease and $0.3 million increase related to the change in restricted cash from the change in other current assets for the three months and six months ended March 31, 2018, respectively.
(2)		On December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.
(3)		Our consolidated cash flows as of March 30, 2019 under ASC 606 is preliminary, pending final balance sheet adjustments required as a result of our adoption of ASC 606 in the first quarter of 2019, which will impact components of operating cash flow, but not total cash from operating activities. We expect the adjustments to be finalized prior to the filing of our Form 10-Q for the second quarter of 2019.

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