Reconciliation of Operating Cash Flow Guidance to Free Cash Flow Guidance

Reconciliation of EPS Guidance to Non-GAAP EPS Guidance

FY'25 financial guidance includes the following assumptions:

• We provide ARR guidance on a constant currency basis, using our FY'25 Plan foreign exchange rates (rates as of September 30, 2024) for all periods.
• We expect churn to remain low.
• For cash flow, due to invoicing seasonality, and consistent with the past 4 years, we expect the majority of our collections to occur in the first half of our fiscal year and for fiscal Q4 to be our lowest cash flow generation quarter.
• Compared to FY'24, at our FY'25 ARR guidance, FY'25 GAAP operating expenses are expected to increase approximately 4% and FY'25 non-GAAP operating expenses are expected to increase approximately 5%, primarily due to investments to drive future growth and foreign exchange rate fluctuations.
• Cash flow guidance includes approximately $20 million of outflows related to go-to-market realignment.
• Capital expenditures are expected to be approximately $15 million.
• Cash interest payments are expected to be approximately $90 million.
• Cash tax payments are expected to be approximately $110 million.
• GAAP and non-GAAP tax rates are expected to be approximately 25%.
• GAAP P&L results are expected to include the items below, totaling approximately $279 million to $309 million, as well as their related tax effects:
  • approximately $200 million to $230 million of stock-based compensation expense, and
  • approximately $79 million of intangible asset amortization expense.
• 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.
  • We currently intend to repurchase approximately $300 million of our common stock in FY'25 and retire the $500 million senior notes due in Q2'25.
  • We currently expect our fully diluted share count to be approximately flat in FY'25.

PTC's Fiscal Fourth Quarter and Full Year Results Conference Call

The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, November 6, 2024. To participate in the live conference call, dial (888) 330-2508 or (240) 789-2735, provide the passcode 7328695, and press # or log in to the webcast, available on PTC's Investor Relations website. A replay will also be available.

Important Information About Our Operating and Non-GAAP Financial Measures

Non-GAAP Financial Measures

We provide supplemental non-GAAP financial measures to our financial results. We use these non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operating performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. These non-GAAP financial measures should not be construed as an alternative to GAAP results as the items excluded from the non-GAAP financial measures often have a material impact on our operating results, certain of those items are recurring, and others often recur. Management uses, and investors should consider, our non-GAAP financial measures only in conjunction with our GAAP results.

Non-GAAP operating expense, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of the following items: stock-based compensation; amortization of acquired intangible assets; acquisition and transaction-related charges included in general and administrative expenses; restructuring and other charges and credits, net; non-operating charges and credits shown in the reconciliation provided; and income tax adjustments. Additional information about the items we exclude from our non-GAAP financial measures and the reasons we exclude them can be found in "Non-GAAP Financial Measures" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Free Cash Flow: We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings and to evaluate our performance against our announced long-term goals and intent to return approximately 50% of our free cash flow to shareholders via stock repurchases. Free cash flow is cash provided by (used in) operations net of capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures.

Constant Currency (CC): We present CC information to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency exchange rate fluctuations. To present CC information, FY'24 and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the foreign exchange rate as of September 30, 2023 , rather than the actual exchange rates in effect during that period. All discussion of FY'25 and comparative prior period ARR results (including FY'24 baseline amounts) are reflected using the foreign exchange rates as of September 30, 2024 .