PTC Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Six Months Ended

March 31,

March 28,

March 31,

March 28,

2021

2020

2021

2020

GAAP gross margin

$

372,337

$

276,576

$

714,558

$

545,281

Stock-based compensation

4,506

3,000

8,940

6,043

Amortization of acquired intangible assets included in cost of revenue

7,117

6,879

13,384

13,678

Non-GAAP gross margin

$

383,960

$

286,455

$

736,882

$

565,002

GAAP operating income

$

101,690

$

50,025

$

192,029

$

80,450

Stock-based compensation

44,740

20,484

90,828

48,420

Amortization of acquired intangible assets

14,767

14,167

27,581

27,743

Acquisition-related and other transactional charges

10,310

261

14,226

7,390

Restructuring and other charges, net

469

18,242

716

32,276

Non-GAAP operating income ⁽¹⁾

$

171,976

$

103,179

$

325,380

$

196,279

GAAP net income

$

109,262

$

7,156

$

132,777

$

42,611

Stock-based compensation

44,740

20,484

90,828

48,420

Amortization of acquired intangible assets

14,767

14,167

27,581

27,743

Acquisition-related and other transactional charges

10,310

261

14,226

7,390

Restructuring and other charges, net

469

18,242

716

32,276

Non-operating charges ⁽²⁾

-

15,000

-

15,000

Income tax adjustments ⁽³⁾

(51,703)

(6,855)

(24,552)

(38,821)

Non-GAAP net income

$

127,845

$

68,455

$

241,576

$

134,619

GAAP diluted earnings per share

$

0.92

$

0.06

$

1.13

$

0.37

Stock-based compensation

0.38

0.18

0.77

0.42

Amortization of acquired intangibles

0.12

0.12

0.23

0.24

Acquisition-related and other transactional charges

0.09

-

0.12

0.06

Restructuring and other charges, net

-

0.16

0.01

0.28

Non-operating charges

-

0.13

-

0.13

Income tax adjustments

(0.44)

(0.06)

(0.21)

(0.34)

Non-GAAP diluted earnings per share

$

1.08

$

0.59

$

2.05

$

1.16

(1)      Operating margin impact of non-GAAP adjustments:

Three Months Ended

Six Months Ended

March 31,

March 28,

March 31,

March 28,

2021

2020

2021

2020

GAAP operating margin

22.0

%

13.9

%

21.6

%

11.2

%

Stock-based compensation

9.7

%

5.7

%

10.2

%

6.8

%

Amortization of acquired intangibles

3.2

%

3.9

%

3.1

%

3.9

%

Acquisition-related and other transactional charges

2.2

%

0.1

%

1.6

%

1.0

%

Restructuring and other charges, net

0.1

%

5.1

%

0.1

%

4.5

%

Non-GAAP operating margin

37.2

%

28.7

%

36.5

%

27.4

%

(2)

We recognized $15 million of expense in the second quarter of 2020 related to penalties for the early redemption of the 6.000% Senior Notes due in 2024.

(3)

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 2021 and 2020 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. In Q2'21 and Q1'20, our GAAP results included benefits of $42.3 million and $21.2 million, respectively, related to the release of a valuation allowance as a result of the Arena and Onshape acquisitions. As the non-GAAP tax provision is calculated assuming that there is no valuation allowance, these benefits have been excluded. 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. Additionally, our non-GAAP results for the first six months of FY'21 exclude tax expense of $34.2 million related to a non-U.S. tax exposure, primarily related to foreign withholding taxes.