Fiscal 2023 and Q3'23 Guidance

"Our financial results in the first half of our fiscal year were solid, driven by the resilience of our business model, consistent execution, operational discipline, and the actions we have taken to align our investments with our growth opportunities. We believe we have set our financial guidance appropriately, balancing our momentum and outlook with macroeconomic uncertainties. Based on our performance in the first half of FY'23 and outlook for the second half of FY'23, we are narrowing our guidance range for constant currency ARR and raising our full year guidance for cash flow, while increasing investment in long-term growth opportunities," said Kristian Talvitie, CFO, PTC.

Reconciliation of Cash from Operations Guidance to Free Cash Flow Guidance

Our FY'23 and Q3'23 financial guidance includes the assumptions below:

• We provide ARR guidance on a constant currency basis, using our FY'23 Plan foreign exchange rates (rates as of September 30, 2022) for all periods. Foreign exchange fluctuations during the first half of FY'23 had a favorable impact on our Q2'23 reported ARR, compared to our Q2'23 constant currency ARR. Using foreign exchange rates as of the end of Q2'23 and assuming the midpoint of our constant currency guidance ranges:
• Q3'23 reported ARR guidance would be higher by approximately $70 million, compared to Q3'23 constant currency ARR guidance
• FY'23 reported ARR guidance would be higher by approximately $73 million, compared to FY'23 constant currency ARR guidance
• We expect FY'23 organic churn to be to be approximately 5.5%, in-line with FY'22.
• For cash flow, due to invoicing seasonality, and consistent with the past 2 years, we expect the majority of our collections to occur in 1H'23 and for Q4'23 to be our lowest cash flow generation quarter.
• Compared to FY'22, at the midpoint of FY'23 ARR guidance, FY'23 GAAP operating expenses are expected to increase approximately 7% to 8%, and FY'23 non-GAAP operating expenses are expected to increase approximately 10% to 11%, primarily due to the acquisition of ServiceMax, foreign exchange rate fluctuations, and incremental investments in 2H'23
• FY'23 GAAP P&L results are expected to include the items below, totaling $284 million to $299 million, as well as their related tax effects:
• $185 million to $200 million of stock-based compensation expense
• $76 million of intangible asset amortization expense
• $18 million of acquisition and transaction-related expense
• $5 million of other non-operating expenses, primarily financing charges associated with a debt commitment agreement related to the ServiceMax acquisition
• Our FY'23 GAAP and non-GAAP tax rate is expected to be approximately 20%.
• FY'23 capital expenditures are expected to be approximately $20 million .
• Our long-term goal, assuming our Debt/EBITDA ratio is below 3x, is to return approximately 50% of our free cash flow to shareholders via share repurchases, while also taking into consideration the interest rate environment and strategic opportunities. Given the current interest rate environment, we expect to prioritize paying down our debt in FY'23 and FY'24.