PTC Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

June 30,

June 27,

June 30,

June 27,

2021

2020

2021

2020

GAAP gross margin

$

340,591

$

272,497

$

1,055,149

$

817,778

Stock-based compensation

5,094

3,165

14,034

9,208

Amortization of acquired intangible assets included in cost of revenue

8,260

6,857

21,644

20,535

Non-GAAP gross margin

$

353,945

$

282,519

$

1,090,827

$

847,521

GAAP operating income

$

73,582

$

63,401

$

265,611

$

143,851

Stock-based compensation

43,068

25,185

133,896

73,605

Amortization of acquired intangible assets

15,771

14,159

43,352

41,902

Acquisition-related and other transactional charges

618

674

14,844

8,064

Restructuring and other charges, net

(132)

62

584

32,338

Non-GAAP operating income ⁽¹⁾

$

132,907

$

103,481

$

458,287

$

299,760

GAAP net income

$

51,203

$

34,678

$

183,980

$

77,289

Stock-based compensation

43,068

25,185

133,896

73,605

Amortization of acquired intangible assets

15,771

14,159

43,352

41,902

Acquisition-related and other transactional charges

618

674

14,844

8,064

Restructuring and other charges, net

(132)

62

584

32,338

Non-operating charges ⁽²⁾

-

3,451

-

18,451

Income tax adjustments ⁽³⁾

(12,513)

(6,167)

(37,065)

(44,988)

Non-GAAP net income

$

98,015

$

72,042

$

339,591

$

206,661

GAAP diluted earnings per share

$

0.43

$

0.30

$

1.56

$

0.67

Stock-based compensation

0.36

0.22

1.13

0.63

Amortization of acquired intangibles

0.13

0.12

0.37

0.36

Acquisition-related and other transactional charges

0.01

0.01

0.13

0.07

Restructuring and other charges, net

-

-

-

0.28

Non-operating charges

-

0.03

-

0.16

Income tax adjustments

(0.11)

(0.05)

(0.31)

(0.39)

Non-GAAP diluted earnings per share

$

0.83

$

0.62

$

2.87

$

1.78

(1)

Operating margin impact of non-GAAP adjustments:

Three Months Ended

Nine Months Ended

June 30,

June 27,

June 30,

June 27,

2021

2020

2021

2020

GAAP operating margin

16.9

%

18.0

%

20.0

%

13.5

%

Stock-based compensation

9.9

%

7.2

%

10.1

%

6.9

%

Amortization of acquired intangibles

3.6

%

4.0

%

3.3

%

3.9

%

Acquisition-related and other transactional charges

0.1

%

0.2

%

1.1

%

0.8

%

Restructuring and other charges, net

0.0

%

0.0

%

0.0

%

3.0

%

Non-GAAP operating margin

30.5

%

29.4

%

34.5

%

28.1

%

(2)

We recognized $15 million of expense in the nine months ended June 27, 2020 related to penalties for the early redemption of the 6.000% Senior Notes due in 2024 and wrote off approximately $3 million of related debt issuance costs in the third quarter of 2020.

(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 the nine months ended June 30, 2021 and June 27, 2020, 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 nine months of FY'21 exclude tax expense of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.