PTC Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

June 30,

June 30,

June 30,

June 30,

2022

2021

2022

2021

GAAP gross margin

$

360,479

$

340,591

$

1,134,972

$

1,055,149

Stock-based compensation

8,429

5,094

18,665

14,034

Amortization of acquired intangible assets included in cost of revenue

6,596

8,260

19,010

21,644

Non-GAAP gross margin

$

375,504

$

353,945

$

1,172,647

$

1,090,827

GAAP operating income

$

79,977

$

73,582

$

301,345

$

265,611

Stock-based compensation

49,420

43,068

133,283

133,896

Amortization of acquired intangible assets

15,527

15,771

44,875

43,352

Acquisition-related and other transactional charges

6,355

618

11,308

14,844

Restructuring and other charges, net

4,458

(132)

36,887

584

Non-GAAP operating income ⁽¹⁾

$

155,737

$

132,907

$

527,698

$

458,287

GAAP net income

$

70,476

$

51,203

$

206,244

$

183,980

Stock-based compensation

49,420

43,068

133,283

133,896

Amortization of acquired intangible assets

15,527

15,771

44,875

43,352

Acquisition-related and other transactional charges

6,355

618

11,308

14,844

Restructuring and other charges, net

4,458

(132)

36,887

584

Non-operating charges (credits), net ⁽²⁾

(32,801)

-

2,046

-

Income tax adjustments ⁽³⁾

1,052

(12,513)

(43,617)

(37,065)

Non-GAAP net income

$

114,487

$

98,015

$

391,026

$

339,591

GAAP diluted earnings per share

$

0.60

$

0.43

$

1.75

$

1.56

Stock-based compensation

0.42

0.36

1.13

1.13

Amortization of acquired intangibles

0.13

0.13

0.38

0.37

Acquisition-related and other transactional charges

0.05

0.01

0.10

0.13

Restructuring and other charges, net

0.04

-

0.31

-

Non-operating charges (credits), net

(0.28)

-

0.02

-

Income tax adjustments

0.01

(0.11)

(0.37)

(0.31)

Non-GAAP diluted earnings per share

$

0.97

$

0.83

$

3.31

$

2.87

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

Three Months Ended

Nine Months Ended

June 30,

June 30,

June 30,

June 30,

2022

2021

2022

2021

GAAP operating margin

17.3

%

16.9

%

21.1

%

20.0

%

Stock-based compensation

10.7

%

9.9

%

9.4

%

10.1

%

Amortization of acquired intangibles

3.4

%

3.6

%

3.1

%

3.3

%

Acquisition-related and other transactional charges

1.4

%

0.1

%

0.8

%

1.1

%

Restructuring and other charges, net

1.0

%

0.0

%

2.6

%

0.0

%

Non-GAAP operating margin

33.7

%

30.5

%

37.0

%

34.5

%

(2) Credits for the three months ended June 30, 2022 include a $29.8 million gain on the sale of a portion of our PLM services business, and a $3.0 million gain on sale of an investment.  Net charges for the nine months ended June 30, 2022 include a $34.8 million expense recognized due to the reduction in value of an equity investment in a publicly-traded company, offset by a $29.8 million gain on the sale of a portion of our PLM services business, and a $3.0 million gain on sale of an investment.

(3) 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. In Q3, adjustments include tax expense of $15.5 million related to the sale of our PLM service business, of which $8.1 million pertains to the basis difference on goodwill.  In 2021 we had recorded a full valuation allowance against our U.S. net deferred tax assets. As we were profitable on a non-GAAP basis, the 2021 tax provision was calculated assuming there was no valuation allowance.  Additionally, our non-GAAP results for the nine months ended June 30, 2021 excluded tax expenses of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.