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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_ to_

Commission File Number: 0-18059

PTC Inc.

(Exact name of registrant as specified in its charter)

Massachusetts |  | 04-2866152
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

121 Seaport Boulevard, Boston, MA 02210

(Address of principal executive offices, including zip code)

(781) 370-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading symbol(s) | Name of each exchange on which registered
Common Stock, $.01 par value per share | PTC | NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer | ☑ |  | Accelerated filer | ☐ |  | Non-accelerated filer | ☐ |  | Smaller reporting company | ☐ |
|  |  |  |  |  |  |  |  | Emerging growth company | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 119,947,852 shares of our common stock outstanding on April 29, 2025.

Table of Contents

INDEX TO FORM 10-Q

For the Quarter Ended March 31, 2025

|  |  |  | Page Number
Part I—FINANCIAL INFORMATION |  |
Item 1. |  | Unaudited Condensed Consolidated Financial Statements: |  | 1
|  | Consolidated Balance Sheets as of March 31, 2025 and September 30, 2024 |  | 1
|  | Consolidated Statements of Operations for the three and six months ended March 31, 2025 and March 31, 2024 |  | 2
|  | Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2025 and March 31, 2024 |  | 3
|  | Consolidated Statements of Cash Flows for the six months ended March 31, 2025 and March 31, 2024 |  | 4
|  | Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2025 and March 31, 2024 |  | 5
|  | Notes to Condensed Consolidated Financial Statements |  | 7
Item 2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 18
Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk |  | 30
Item 4. |  | Controls and Procedures |  | 30
Part II—OTHER INFORMATION |  |
Item 1A. |  | Risk Factors |  | 31
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 31
Item 5. |  | Other Information |  | 31
Item 6. |  | Exhibits |  | 32
Signature |  | 33

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

|  | March 31, 2025 |  |  | September 30, 2024 |
ASSETS |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 235,169 |  |  | $ | 265,808 |
Accounts receivable, net of allowance for doubtful accounts of $1,272 and $1,180 at March 31, 2025 and September 30, 2024, respectively |  |  | 716,624 |  |  |  | 861,953 |
Prepaid expenses |  |  | 114,624 |  |  |  | 102,931 |
Other current assets |  |  | 66,392 |  |  |  | 68,013 |
Total current assets |  |  | 1,132,809 |  |  |  | 1,298,705 |
Property and equipment, net |  |  | 68,047 |  |  |  | 75,187 |
Goodwill |  |  | 3,444,104 |  |  |  | 3,461,891 |
Acquired intangible assets, net |  |  | 855,794 |  |  |  | 897,476 |
Deferred tax assets |  |  | 186,401 |  |  |  | 159,404 |
Operating right-of-use lease assets |  |  | 127,808 |  |  |  | 133,317 |
Other assets |  |  | 347,468 |  |  |  | 357,562 |
Total assets |  | $ | 6,162,431 |  |  | $ | 6,383,542 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable |  | $ | 8,500 |  |  | $ | 24,198 |
Accrued expenses and other current liabilities |  |  | 101,317 |  |  |  | 129,528 |
Accrued compensation and benefits |  |  | 129,859 |  |  |  | 173,797 |
Accrued income taxes |  |  | 70,725 |  |  |  | 39,978 |
Current portion of long-term debt |  |  | 25,000 |  |  |  | 521,467 |
Deferred revenue |  |  | 786,530 |  |  |  | 754,039 |
Short-term lease obligations |  |  | 24,319 |  |  |  | 24,186 |
Total current liabilities |  |  | 1,146,250 |  |  |  | 1,667,193 |
Long-term debt |  |  | 1,364,393 |  |  |  | 1,227,105 |
Deferred tax liabilities |  |  | 31,417 |  |  |  | 32,216 |
Long-term deferred revenue |  |  | 15,317 |  |  |  | 21,235 |
Long-term lease obligations |  |  | 153,786 |  |  |  | 157,568 |
Other liabilities |  |  | 64,805 |  |  |  | 63,827 |
Total liabilities |  |  | 2,775,968 |  |  |  | 3,169,144 |
Commitments and contingencies (Note 11) |  |  |  |  |  |
Stockholders’ equity: |  |  |  |  |  |
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued |  |  | — |  |  |  | — |
Common stock, $0.01 par value; 500,000 shares authorized; 119,926 and 120,155 shares issued and outstanding at March 31, 2025 and September 30, 2024, respectively |  |  | 1,199 |  |  |  | 1,202 |
Additional paid-in capital |  |  | 1,909,537 |  |  |  | 1,965,307 |
Retained earnings |  |  | 1,594,486 |  |  |  | 1,349,610 |
Accumulated other comprehensive loss |  |  | (118,759 | ) |  |  | (101,721 | )
Total stockholders’ equity |  |  | 3,386,463 |  |  |  | 3,214,398 |
Total liabilities and stockholders’ equity |  | $ | 6,162,431 |  |  | $ | 6,383,542 |

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Table of Contents

PTC Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

|  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |
License |  | $ | 254,395 |  |  | $ | 234,321 |  |  | $ | 427,149 |  |  | $ | 418,319 |
Support and cloud services |  |  | 352,990 |  |  |  | 336,446 |  |  |  | 713,952 |  |  |  | 666,915 |
Total software revenue |  |  | 607,385 |  |  |  | 570,767 |  |  |  | 1,141,101 |  |  |  | 1,085,234 |
Professional services |  |  | 28,981 |  |  |  | 32,305 |  |  |  | 60,393 |  |  |  | 68,052 |
Total revenue |  |  | 636,366 |  |  |  | 603,072 |  |  |  | 1,201,494 |  |  |  | 1,153,286 |
Cost of revenue: |  |  |  |  |  |  |  |  |  |  |  |
Cost of license revenue |  |  | 10,939 |  |  |  | 10,602 |  |  |  | 21,162 |  |  |  | 20,931 |
Cost of support and cloud services revenue |  |  | 70,303 |  |  |  | 67,414 |  |  |  | 141,655 |  |  |  | 134,437 |
Total cost of software revenue |  |  | 81,242 |  |  |  | 78,016 |  |  |  | 162,817 |  |  |  | 155,368 |
Cost of professional services revenue |  |  | 25,020 |  |  |  | 32,039 |  |  |  | 55,242 |  |  |  | 64,707 |
Total cost of revenue |  |  | 106,262 |  |  |  | 110,055 |  |  |  | 218,059 |  |  |  | 220,075 |
Gross margin |  |  | 530,104 |  |  |  | 493,017 |  |  |  | 983,435 |  |  |  | 933,211 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  | 125,031 |  |  |  | 134,521 |  |  |  | 282,563 |  |  |  | 271,445 |
Research and development |  |  | 111,023 |  |  |  | 106,998 |  |  |  | 226,539 |  |  |  | 212,781 |
General and administrative |  |  | 54,993 |  |  |  | 61,526 |  |  |  | 108,312 |  |  |  | 130,732 |
Amortization of acquired intangible assets |  |  | 11,380 |  |  |  | 10,424 |  |  |  | 22,820 |  |  |  | 20,787 |
Impairment and other charges (credits), net |  |  | 4,213 |  |  |  | (7 | ) |  |  | 4,213 |  |  |  | (802 | )
Total operating expenses |  |  | 306,640 |  |  |  | 313,462 |  |  |  | 644,447 |  |  |  | 634,943 |
Operating income |  |  | 223,464 |  |  |  | 179,555 |  |  |  | 338,988 |  |  |  | 298,268 |
Interest expense |  |  | (19,606 | ) |  |  | (31,586 | ) |  |  | (41,654 | ) |  |  | (66,920 | )
Other income (expense), net |  |  | 1,391 |  |  |  | (2,224 | ) |  |  | 1,069 |  |  |  | (4 | )
Income before income taxes |  |  | 205,249 |  |  |  | 145,745 |  |  |  | 298,403 |  |  |  | 231,344 |
Provision for income taxes |  |  | 42,605 |  |  |  | 31,300 |  |  |  | 53,527 |  |  |  | 50,512 |
Net income |  | $ | 162,644 |  |  | $ | 114,445 |  |  | $ | 244,876 |  |  | $ | 180,832 |
Earnings per share—Basic |  | $ | 1.35 |  |  | $ | 0.96 |  |  | $ | 2.04 |  |  | $ | 1.52 |
Earnings per share—Diluted |  | $ | 1.35 |  |  | $ | 0.95 |  |  | $ | 2.02 |  |  | $ | 1.50 |
Weighted-average shares outstanding—Basic |  |  | 120,177 |  |  |  | 119,587 |  |  |  | 120,210 |  |  |  | 119,354 |
Weighted-average shares outstanding—Diluted |  |  | 120,854 |  |  |  | 120,712 |  |  |  | 121,000 |  |  |  | 120,480 |

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PTC Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

|  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Net income |  | $ | 162,644 |  |  | $ | 114,445 |  |  | $ | 244,876 |  |  | $ | 180,832 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |  |  |  |  |
Hedge gain (loss) arising during the period, net of tax of $4.9 million and $(2.1) million in the second quarter of 2025 and 2024, respectively, and $(3.3) million and $1.7 million in the first six months of 2025 and 2024, respectively |  |  | (15,014 | ) |  |  | 6,432 |  |  |  | 10,226 |  |  |  | (5,079 | )
Foreign currency translation adjustment, net of tax of $0 for each period |  |  | 36,202 |  |  |  | (24,792 | ) |  |  | (27,795 | ) |  |  | 9,882 |
Change in pension benefit, net of tax of $0.0 million and $0.0 million in the second quarter of 2025 and 2024, respectively, and $(0.1) million and $0.0 million in the first six months of 2025 and 2024, respectively |  |  | (313 | ) |  |  | 216 |  |  |  | 531 |  |  |  | (6 | )
Other comprehensive income (loss) |  |  | 20,875 |  |  |  | (18,144 | ) |  |  | (17,038 | ) |  |  | 4,797 |
Comprehensive income |  | $ | 183,519 |  |  | $ | 96,301 |  |  | $ | 227,838 |  |  | $ | 185,629 |

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

|  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |
Cash flows from operating activities: |  |  |  |  |  |
Net income |  | $ | 244,876 |  |  | $ | 180,832 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 51,263 |  |  |  | 54,144 |
Amortization of right-of-use lease assets |  |  | 16,165 |  |  |  | 15,459 |
Stock-based compensation |  |  | 107,363 |  |  |  | 113,204 |
Other non-cash items, net |  |  | 1,903 |  |  |  | 649 |
Changes in operating assets and liabilities, excluding the effects of acquisitions: |  |  |  |  |  |
Accounts receivable |  |  | 127,972 |  |  |  | 107,507 |
Accounts payable and accrued expenses |  |  | (35,405 | ) |  |  | (48,345 | )
Accrued compensation and benefits |  |  | (15,301 | ) |  |  | (16,451 | )
Deferred revenue |  |  | 34,532 |  |  |  | 40,971 |
Accrued income taxes |  |  | 5,565 |  |  |  | 18,087 |
Other current assets and prepaid expenses |  |  | (7,735 | ) |  |  | (21,745 | )
Operating lease liabilities |  |  | (2,596 | ) |  |  | (10,293 | )
Other noncurrent assets and liabilities |  |  | (8,864 | ) |  |  | 4,052 |
Net cash provided by operating activities |  |  | 519,738 |  |  |  | 438,071 |
Cash flows from investing activities: |  |  |  |  |  |
Additions to property and equipment |  |  | (5,575 | ) |  |  | (8,202 | )
Acquisitions of businesses, net of cash acquired |  |  | — |  |  |  | (93,457 | )
Settlement of net investment hedges |  |  | 12,260 |  |  |  | (2,224 | )
Net cash provided by (used in) investing activities |  |  | 6,685 |  |  |  | (103,883 | )
Cash flows from financing activities: |  |  |  |  |  |
Borrowings under credit facility |  |  | 860,000 |  |  |  | 739,845 |
Repayments of Senior Notes |  |  | (500,000 | ) |  |  | — |
Repayments of borrowings under credit facility and acquired debt |  |  | (720,125 | ) |  |  | (435,671 | )
Repurchases of common stock |  |  | (150,000 | ) |  |  | — |
Proceeds from issuance of common stock |  |  | 13,307 |  |  |  | 12,709 |
Payments of withholding taxes in connection with stock-based awards |  |  | (52,871 | ) |  |  | (71,184 | )
Payment of deferred acquisition consideration |  |  | — |  |  |  | (620,040 | )
Other financing activity |  |  | (1,410 | ) |  |  | — |
Net cash used in financing activities |  |  | (551,099 | ) |  |  | (374,341 | )
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |  |  | (6,048 | ) |  |  | 829 |
Net change in cash, cash equivalents, and restricted cash |  |  | (30,724 | ) |  |  | (39,324 | )
Cash, cash equivalents, and restricted cash, beginning of period |  |  | 266,466 |  |  |  | 288,798 |
Cash, cash equivalents, and restricted cash, end of period |  | $ | 235,742 |  |  | $ | 249,474 |
Supplemental disclosure of non-cash financing and investing activities: |  |  |  |  |  |
Operating right-of-use assets obtained in exchange for operating lease liabilities |  | $ | 11,294 |  |  | $ | 2,847 |

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PTC Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

|  | Three months ended March 31, 2025 |
|  | Common Stock |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Shares |  |  | Amount |  |  | Additional Paid-In Capital |  |  | Retained Earnings |  |  | Other Comprehensive Loss |  |  | Total Stockholders’ Equity |
Balance as of December 31, 2024 |  |  | 120,219 |  |  | $ | 1,202 |  |  | $ | 1,936,411 |  |  | $ | 1,431,842 |  |  | $ | (139,634 | ) |  | $ | 3,229,821 |
Common stock issued for employee stock-based awards |  |  | 115 |  |  |  | 1 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares surrendered by employees to pay taxes related to stock-based awards |  |  | (34 | ) |  |  | — |  |  |  | (6,128 | ) |  |  | — |  |  |  | — |  |  |  | (6,128 | )
Common stock issued for employee stock purchase plan |  |  | 89 |  |  |  | 1 |  |  |  | 13,306 |  |  |  | — |  |  |  | — |  |  |  | 13,307 |
Compensation expense from stock-based awards |  |  | — |  |  |  | — |  |  |  | 41,278 |  |  |  | — |  |  |  | — |  |  |  | 41,278 |
Repurchases of common stock, including excise tax |  |  | (463 | ) |  |  | (5 | ) |  |  | (75,329 | ) |  |  | — |  |  |  | — |  |  |  | (75,334 | )
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 162,644 |  |  |  | — |  |  |  | 162,644 |
Loss on net investment hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (15,014 | ) |  |  | (15,014 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 36,202 |  |  |  | 36,202 |
Change in defined benefit pension items, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (313 | ) |  |  | (313 | )
Balance as of March 31, 2025 |  |  | 119,926 |  |  | $ | 1,199 |  |  | $ | 1,909,537 |  |  | $ | 1,594,486 |  |  | $ | (118,759 | ) |  | $ | 3,386,463 |

|  | Six months ended March 31, 2025 |
|  | Common Stock |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Shares |  |  | Amount |  |  | Additional Paid-In Capital |  |  | Retained Earnings |  |  | Other Comprehensive Loss |  |  | Total Stockholders’ Equity |
Balance as of September 30, 2024 |  |  | 120,155 |  |  | $ | 1,202 |  |  | $ | 1,965,307 |  |  | $ | 1,349,610 |  |  | $ | (101,721 | ) |  | $ | 3,214,398 |
Common stock issued for employee stock-based awards |  |  | 810 |  |  |  | 8 |  |  |  | (8 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares surrendered by employees to pay taxes related to stock-based awards |  |  | (282 | ) |  |  | (3 | ) |  |  | (53,318 | ) |  |  | — |  |  |  | — |  |  |  | (53,321 | )
Common stock issued for employee stock purchase plan |  |  | 89 |  |  |  | 1 |  |  |  | 13,306 |  |  |  | — |  |  |  | — |  |  |  | 13,307 |
Compensation expense from stock-based awards |  |  | — |  |  |  | — |  |  |  | 134,575 |  |  |  | — |  |  |  | — |  |  |  | 134,575 |
Repurchases of common stock, including excise tax |  |  | (846 | ) |  |  | (9 | ) |  |  | (150,325 | ) |  |  | — |  |  |  | — |  |  |  | (150,334 | )
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 244,876 |  |  |  | — |  |  |  | 244,876 |
Gain on net investment hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,226 |  |  |  | 10,226 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (27,795 | ) |  |  | (27,795 | )
Change in defined benefit pension items, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 531 |  |  |  | 531 |
Balance as of March 31, 2025 |  |  | 119,926 |  |  | $ | 1,199 |  |  | $ | 1,909,537 |  |  | $ | 1,594,486 |  |  | $ | (118,759 | ) |  | $ | 3,386,463 |

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|  | Three months ended March 31, 2024 |
|  | Common Stock |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Shares |  |  | Amount |  |  | Additional Paid-In Capital |  |  | Retained Earnings |  |  | Other Comprehensive Loss |  |  | Total Stockholders’ Equity |
Balance as of December 31, 2023 |  |  | 119,445 |  |  | $ | 1,194 |  |  | $ | 1,860,934 |  |  | $ | 1,039,664 |  |  | $ | (95,139 | ) |  | $ | 2,806,653 |
Common stock issued for employee stock-based awards |  |  | 266 |  |  |  | 3 |  |  |  | (3 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares surrendered by employees to pay taxes related to stock-based awards |  |  | (96 | ) |  |  | (1 | ) |  |  | (17,537 | ) |  |  | — |  |  |  | — |  |  |  | (17,538 | )
Common stock issued for employee stock purchase plan |  |  | 102 |  |  |  | 1 |  |  |  | 12,708 |  |  |  | — |  |  |  | — |  |  |  | 12,709 |
Compensation expense from stock-based awards |  |  | — |  |  |  | — |  |  |  | 45,007 |  |  |  | — |  |  |  | — |  |  |  | 45,007 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 114,445 |  |  |  | — |  |  |  | 114,445 |
Gain on net investment hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,432 |  |  |  | 6,432 |
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (24,792 | ) |  |  | (24,792 | )
Change in defined benefit pension items, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 216 |  |  |  | 216 |
Balance as of March 31, 2024 |  |  | 119,717 |  |  | $ | 1,197 |  |  | $ | 1,901,109 |  |  | $ | 1,154,109 |  |  | $ | (113,283 | ) |  | $ | 2,943,132 |

|  | Six months ended March 31, 2024 |
|  | Common Stock |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Shares |  |  | Amount |  |  | Additional Paid-In Capital |  |  | Retained Earnings |  |  | Other Comprehensive Loss |  |  | Total Stockholders’ Equity |
Balance as of September 30, 2023 |  |  | 118,846 |  |  | $ | 1,188 |  |  | $ | 1,820,905 |  |  | $ | 973,277 |  |  | $ | (118,080 | ) |  | $ | 2,677,290 |
Common stock issued for employee stock-based awards |  |  | 1,216 |  |  |  | 13 |  |  |  | (13 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares surrendered by employees to pay taxes related to stock-based awards |  |  | (447 | ) |  |  | (5 | ) |  |  | (71,869 | ) |  |  | — |  |  |  | — |  |  |  | (71,874 | )
Common stock issued for employee stock purchase plan |  |  | 102 |  |  |  | 1 |  |  |  | 12,708 |  |  |  | — |  |  |  | — |  |  |  | 12,709 |
Compensation expense from stock-based awards |  |  | — |  |  |  | — |  |  |  | 139,378 |  |  |  | — |  |  |  | — |  |  |  | 139,378 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 180,832 |  |  |  | — |  |  |  | 180,832 |
Loss on net investment hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,079 | ) |  |  | (5,079 | )
Foreign currency translation adjustment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,882 |  |  |  | 9,882 |
Change in defined benefit pension items, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (6 | ) |  |  | (6 | )
Balance as of March 31, 2024 |  |  | 119,717 |  |  | $ | 1,197 |  |  | $ | 1,901,109 |  |  | $ | 1,154,109 |  |  | $ | (113,283 | ) |  | $ | 2,943,132 |

The accompanying notes are an integral part of the condensed consolidated financial statements.

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PTC Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

General

The accompanying unaudited condensed consolidated financial statements include the accounts of PTC Inc. and its wholly owned subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with our annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of our financial position, results of operations and cash flows as of the dates and for the periods indicated. The September 30, 2024 Consolidated Balance Sheet included herein is derived from our audited consolidated financial statements.

Unless otherwise indicated, all references to a year mean our fiscal year, which ends on September 30.

In the second quarter of 2025, we changed the income statement caption of Restructuring and other charges (credits), net to Impairment and other charges (credits), net to reflect that the amounts presented are mainly impairment charges rather than restructuring charges. All charges and credits under the captioned line item remain the same.

Pending Accounting Pronouncements

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses and in January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. As clarified by ASU 2025-01, ASU 2024-03 will be effective for us in the fourth quarter of 2028. We expect the adoption to result in disclosure changes only.

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU will be effective for us in the fourth quarter of 2026. We expect the adoption to result in disclosure changes only.

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU will be effective for us in the fourth quarter of 2025. We expect the adoption to result in disclosure changes only.

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2. Revenue from Contracts with Customers

Receivables, Contract Assets and Contract Liabilities

(in thousands) |  | March 31, 2025 |  |  | September 30, 2024 |
Short-term and long-term receivables |  | $ | 920,037 |  |  | $ | 1,062,052 |
Contract asset |  | $ | 10,225 |  |  | $ | 14,410 |
Deferred revenue |  | $ | 801,847 |  |  | $ | 775,274 |

During the six months ended March 31, 2025, we recognized $553.3 million of revenue that was included in Deferred revenue as of September 30, 2024. The remainder of the change in the Deferred revenue balance was driven by additional deferrals, primarily from new billings, as well as a reduction in the balance resulting from changes in foreign currency exchange rates.

Our multi-year, non-cancellable on-premises subscription contracts provide customers with an annual right to exchange software within the subscription with other software. As of March 31, 2025 and September 30, 2024, our total revenue liability was $28.9 million and $26.0 million, respectively, primarily associated with the annual right to exchange on-premises subscription software.

Remaining Performance Obligations (RPO)

Our contracts with customers include amounts allocated to performance obligations that will be satisfied and recognized as revenue at a later date. The value of RPO and timing of recognition may be impacted by several factors, including the performance obligation type, duration and timing of commencement, as well as foreign currency exchange rate fluctuations. As of March 31, 2025, RPO totaled $2,280.0 million, of which $801.8 million is recorded in Deferred revenue and $1,478.2 million is not yet recorded in the Consolidated Balance Sheets. Of the total, we expect to recognize approximately 59% over the next 12 months, 24% over the next 13 to 24 months, and the remaining amount thereafter.

Disaggregation of Revenue

(in thousands) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Recurring revenue(1) |  | $ | 601,549 |  |  | $ | 564,014 |  |  | $ | 1,125,860 |  |  | $ | 1,070,041 |
Perpetual license |  |  | 5,836 |  |  |  | 6,753 |  |  |  | 15,241 |  |  |  | 15,193 |
Professional services |  |  | 28,981 |  |  |  | 32,305 |  |  |  | 60,393 |  |  |  | 68,052 |
Total revenue |  | $ | 636,366 |  |  | $ | 603,072 |  |  | $ | 1,201,494 |  |  | $ | 1,153,286 |

(1)
Recurring revenue is comprised of on-premises subscription, perpetual support, SaaS, and hosting services revenue.

We report revenue by the following two product groups:

(in thousands) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Product lifecycle management (PLM) |  | $ | 396,149 |  |  | $ | 373,495 |  |  | $ | 749,608 |  |  | $ | 722,142 |
Computer-aided design (CAD) |  |  | 240,217 |  |  |  | 229,577 |  |  |  | 451,886 |  |  |  | 431,144 |
Total revenue |  | $ | 636,366 |  |  | $ | 603,072 |  |  | $ | 1,201,494 |  |  | $ | 1,153,286 |

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Our international revenue is presented based on the location of our customer. Revenue for the geographic regions in which we operate is presented below.

(in thousands) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Americas |  | $ | 292,823 |  |  | $ | 260,622 |  |  | $ | 570,792 |  |  | $ | 527,889 |
Europe |  |  | 251,148 |  |  |  | 257,309 |  |  |  | 447,172 |  |  |  | 454,262 |
Asia Pacific |  |  | 92,395 |  |  |  | 85,141 |  |  |  | 183,530 |  |  |  | 171,135 |
Total revenue |  | $ | 636,366 |  |  | $ | 603,072 |  |  | $ | 1,201,494 |  |  | $ | 1,153,286 |

3. Stock-based Compensation

Compensation expense recorded for our stock-based awards is classified in our Consolidated Statements of Operations as follows:

(in thousands) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Cost of license revenue |  | $ | 72 |  |  | $ | 29 |  |  | $ | 106 |  |  | $ | 67 |
Cost of support and cloud services revenue |  |  | 3,912 |  |  |  | 3,345 |  |  |  | 7,970 |  |  |  | 6,727 |
Cost of professional services revenue |  |  | 1,523 |  |  |  | 1,660 |  |  |  | 3,344 |  |  |  | 3,329 |
Sales and marketing |  |  | 13,545 |  |  |  | 14,729 |  |  |  | 31,613 |  |  |  | 30,856 |
Research and development |  |  | 14,391 |  |  |  | 13,936 |  |  |  | 30,546 |  |  |  | 28,174 |
General and administrative |  |  | 18,069 |  |  |  | 20,492 |  |  |  | 33,784 |  |  |  | 44,051 |
Total stock-based compensation expense |  | $ | 51,512 |  |  | $ | 54,191 |  |  | $ | 107,363 |  |  | $ | 113,204 |

As of March 31, 2025 and September 30, 2024, we had liability-classified awards related to stock-based compensation based on a fixed monetary amount of $20.5 million and $47.7 million, respectively. The liability as of September 30, 2024 was settled via the issuance of shares in the first quarter of 2025.

4. Earnings per Share (EPS) and Common Stock

EPS

The following table presents the calculation for both basic and diluted EPS:

(in thousands, except per share data) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Net income |  | $ | 162,644 |  |  | $ | 114,445 |  |  | $ | 244,876 |  |  | $ | 180,832 |
Weighted-average shares outstanding—Basic |  |  | 120,177 |  |  |  | 119,587 |  |  |  | 120,210 |  |  |  | 119,354 |
Dilutive effect of restricted stock units |  |  | 677 |  |  |  | 1,125 |  |  |  | 790 |  |  |  | 1,126 |
Weighted-average shares outstanding—Diluted |  |  | 120,854 |  |  |  | 120,712 |  |  |  | 121,000 |  |  |  | 120,480 |
Earnings per share—Basic |  | $ | 1.35 |  |  | $ | 0.96 |  |  | $ | 2.04 |  |  | $ | 1.52 |
Earnings per share—Diluted |  | $ | 1.35 |  |  | $ | 0.95 |  |  | $ | 2.02 |  |  | $ | 1.50 |

There were 0.3 million and 0.2 million anti-dilutive shares for the three and six months ended March 31, 2025, respectively. There were 0.1 million anti-dilutive shares for the three and six months ended March 31, 2024.

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Common Stock Repurchases

Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors has authorized us to repurchase up to $2 billion of our common stock in the period October 1, 2024 through September 30, 2027. In the second quarter and first six months of 2025, we repurchased 0.5 million shares for $75 million and 0.8 million shares for $150 million, respectively. We did no t repurchase any shares in the second quarter and first six months of 2024. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued.

5. Acquisitions

Acquisition and transaction-related costs in the second quarter and first six months of 2025 totaled $0.6 million and $0.8 million, respectively, compared to $0.3 million and $2.8 million in the second quarter and first six months of 2024, respectively. These costs are classified in General and administrative expense in the accompanying Consolidated Statements of Operations.

pure-systems

On October 4, 2023, we acquired pure-systems GmbH pursuant to a Share Purchase Agreement. The purchase price was $93.5 million, net of cash acquired, which we financed primarily with a draw on the revolving line of our credit facility. The purchase price allocation resulted in $77.1 million of goodwill, $28.2 million of intangible assets, $8.8 million of net tax liabilities, and $3.0 million of other net liabilities.

ServiceMax

On January 3, 2023, we acquired ServiceMax, Inc. pursuant to a Share Purchase Agreement dated November 17, 2022 for $1,448.2 million, net of cash acquired. PTC paid the first installment of $828.2 million on the acquisition date. The remaining installment of $650.0 million, of which $620.0 million represented the fair value as of the acquisition date and $30.0 million was imputed interest, was paid in October 2023.

6. Goodwill and Intangible Assets

Goodwill and acquired intangible assets consisted of the following:

(in thousands) |  | March 31, 2025 |  |  | September 30, 2024 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Book Value |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Book Value |
Goodwill |  |  |  |  |  |  |  | $ | 3,444,104 |  |  |  |  |  |  |  |  | $ | 3,461,891 |
Intangible assets with finite lives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchased software |  | $ | 631,889 |  |  | $ | 451,196 |  |  | $ | 180,693 |  |  | $ | 634,439 |  |  | $ | 436,471 |  |  | $ | 197,968 |
Capitalized software |  |  | 22,877 |  |  |  | 22,877 |  |  |  | — |  |  |  | 22,877 |  |  |  | 22,877 |  |  |  | — |
Customer lists and relationships |  |  | 1,135,655 |  |  |  | 475,455 |  |  |  | 660,200 |  |  |  | 1,141,086 |  |  |  | 457,718 |  |  |  | 683,368 |
Trademarks and trade names |  |  | 37,780 |  |  |  | 22,879 |  |  |  | 14,901 |  |  |  | 37,961 |  |  |  | 21,821 |  |  |  | 16,140 |
Other |  |  | 3,900 |  |  |  | 3,900 |  |  |  | — |  |  |  | 3,941 |  |  |  | 3,941 |  |  |  | — |
Total intangible assets with finite lives |  | $ | 1,832,101 |  |  | $ | 976,307 |  |  | $ | 855,794 |  |  | $ | 1,840,304 |  |  | $ | 942,828 |  |  | $ | 897,476 |
Total goodwill and acquired intangible assets |  |  |  |  |  |  |  | $ | 4,299,898 |  |  |  |  |  |  |  |  | $ | 4,359,367 |

Changes in Goodwill were as follows:

(in thousands) |  |
Balance, October 1, 2024 | $ | 3,461,891 |
Foreign currency translation adjustment |  | (17,787 | )
Balance, March 31, 2025 | $ | 3,444,104 |

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The aggregate amortization expense for intangible assets with finite lives is classified in our Consolidated Statements of Operations as follows:

(in thousands) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Amortization of acquired intangible assets |  | $ | 11,380 |  |  | $ | 10,424 |  |  | $ | 22,820 |  |  | $ | 20,787 |
Cost of revenue |  |  | 8,131 |  |  |  | 9,584 |  |  |  | 16,431 |  |  |  | 19,150 |
Total amortization expense |  | $ | 19,511 |  |  | $ | 20,008 |  |  | $ | 39,251 |  |  | $ | 39,937 |

7. Fair Value Measurements

The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:

•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or
•
Level 3: unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Money market funds, time deposits, and corporate notes/bonds are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

The principal market in which we execute our foreign currency derivatives is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants are generally large financial institutions. Our foreign currency derivatives’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.

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Our significant financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and September 30, 2024 were as follows:

(in thousands) |  | March 31, 2025 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents(1) |  | $ | 73,936 |  |  | $ | — |  |  | $ | — |  |  | $ | 73,936 |
Forward contracts |  |  | — |  |  |  | 6,001 |  |  |  | — |  |  |  | 6,001 |
|  | $ | 73,936 |  |  | $ | 6,001 |  |  | $ | — |  |  | $ | 79,937 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Forward contracts |  |  | — |  |  |  | 4,286 |  |  |  | — |  |  |  | 4,286 |
|  | $ | — |  |  | $ | 4,286 |  |  | $ | — |  |  | $ | 4,286 |

(in thousands) |  | September 30, 2024 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents(1) |  | $ | 48,509 |  |  | $ | — |  |  | $ | — |  |  | $ | 48,509 |
Forward contracts |  |  | — |  |  |  | 1,202 |  |  |  | — |  |  |  | 1,202 |
|  | $ | 48,509 |  |  | $ | 1,202 |  |  | $ | — |  |  | $ | 49,711 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Forward contracts |  |  | — |  |  |  | 4,166 |  |  |  | — |  |  |  | 4,166 |
|  | $ | — |  |  | $ | 4,166 |  |  | $ | — |  |  | $ | 4,166 |

(1)
Money market funds and time deposits.

Level 3 Investments

Convertible Note

In the fourth quarter of 2021, we invested $2.0 million in a non-marketable convertible note. This debt security was classified as available-for-sale and included in Other assets on the Consolidated Balance Sheet. During the three months ended March 31, 2024, we recorded a $2.0 million impairment loss related to this Level 3 investment. The impairment loss is included in Other income (expense), net on the Consolidated Statements of Operations.

8. Derivative Financial Instruments

We enter into foreign currency forward contracts to manage our exposure to foreign currency exchange risk to reduce earnings volatility. We do not enter into derivative transactions for trading or speculative purposes.

The following table shows our derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets:

(in thousands) |  | Fair Value of Derivatives Designated As Hedging Instruments |  |  | Fair Value of Derivatives Not Designated As Hedging Instruments |
|  | March 31, 2025 |  |  | September 30, 2024 |  |  | March 31, 2025 |  |  | September 30, 2024 |
Derivative assets(1): |  |  |  |  |  |  |  |  |  |  |  |
Forward contracts |  | $ | 3,170 |  |  | $ | 181 |  |  | $ | 2,831 |  |  | $ | 1,021 |
Derivative liabilities(2): |  |  |  |  |  |  |  |  |  |  |  |
Forward contracts |  | $ | — |  |  | $ | 630 |  |  | $ | 4,286 |  |  | $ | 3,536 |

(1)
As of March 31, 2025 and September 30, 2024, current derivative assets are recorded in Other current assets in the Consolidated Balance Sheets.
(2)
As of March 31, 2025 and September 30, 2024, current derivative liabilities are recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

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Non-Designated Hedges

We hedge our net foreign currency monetary assets and liabilities primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These contracts have maturities of up to approximately three months. Generally, we do not designate these foreign currency forward contracts as hedges for accounting purposes and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into forward contracts only as an economic hedge, gains or losses on the underlying foreign-denominated balance are generally offset by the losses or gains on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in Other income (expense), net.

As of March 31, 2025 and September 30, 2024, we had outstanding forward contracts not designated as hedging instruments with notional amounts equivalent to the following:

Currency Hedged (in thousands) |  | March 31, 2025 |  |  | September 30, 2024 |
Euro / U.S. Dollar |  | $ | 764,722 |  |  | $ | 781,398 |
British Pound / U.S. Dollar |  |  | 16,391 |  |  |  | 24,810 |
Israeli Shekel / U.S. Dollar |  |  | 13,615 |  |  |  | 12,535 |
Japanese Yen / U.S. Dollar |  |  | 27,008 |  |  |  | 42,340 |
Swiss Franc / U.S. Dollar |  |  | 5,319 |  |  |  | 74,939 |
Swedish Krona / U.S. Dollar |  |  | 16,036 |  |  |  | 48,596 |
Chinese Renminbi / U.S. Dollar |  |  | 3,891 |  |  |  | 32,124 |
New Taiwan Dollar / U.S. Dollar |  |  | 6,501 |  |  |  | 16,368 |
All other |  |  | 19,551 |  |  |  | 25,368 |
Total |  | $ | 873,034 |  |  | $ | 1,058,478 |

The following table shows the effect of our non-designated hedges on the Consolidated Statements of Operations for the three and six months ended March 31, 2025 and March 31, 2024:

(in thousands) |  |  |  | Three months ended |  |  | Six months ended |
|  | Location of Gain (Loss) |  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Net realized and unrealized loss, excluding the underlying foreign currency exposure being hedged |  | Other income (expense), net |  | $ | (917 | ) |  | $ | (1,286 | ) |  | $ | (360 | ) |  | $ | (5,022 | )

In the three months ended March 31, 2025, total foreign currency gains, net were $0.1 million. In the three months ended March 31, 2024, total foreign currency losses, net were $1.1 million. In the six months ended March 31, 2025 and March 31, 2024, total foreign currency losses, net were $1.1 million and $0.1 million, respectively.

Net Investment Hedges

We translate balance sheet accounts of subsidiaries with foreign functional currencies into the U.S. Dollar using the exchange rate at each balance sheet date. Resulting translation adjustments are reported as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets. We designate certain foreign exchange forward contracts as net investment hedges against exposure on translation of balance sheet accounts of Euro and Japanese Yen functional subsidiaries. Net investment hedges partially offset the impact of Foreign currency translation adjustment recorded in Accumulated other comprehensive loss on the Consolidated Balance Sheets. All foreign exchange forward contracts are carried at fair value on the Consolidated Balance Sheets and the maximum duration of net investment hedge foreign exchange forward contracts is approximately three months.

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Net investment hedge relationships are designated at inception, and effectiveness is assessed retrospectively on a quarterly basis using the net equity position of Euro and Japanese Yen functional subsidiaries. As the forward contracts are highly effective in offsetting exchange rate exposure, we record changes in these net investment hedges in Accumulated other comprehensive loss. Changes in the fair value of foreign exchange forward contracts due to changes in time value are excluded from the assessment of effectiveness. Our derivatives are not subject to any credit contingent features. We manage credit risk with counterparties by trading among several counterparties and we review our counterparties’ credit at least quarterly.

As of March 31, 2025 and September 30, 2024, we had outstanding forward contracts designated as net investment hedges with notional amounts equivalent to the following:

Currency Hedged (in thousands) |  | March 31, 2025 |  |  | September 30, 2024 |
Euro / U.S. Dollar |  | $ | 443,398 |  |  | $ | 462,894 |
Japanese Yen / U.S. Dollar |  |  | 10,102 |  |  |  | 10,739 |
Total |  | $ | 453,500 |  |  | $ | 473,633 |

The following table shows the effect of our derivative instruments designated as net investment hedges in the Consolidated Statements of Operations for the three and six months ended March 31, 2025 and March 31, 2024:

(in thousands) |  |  |  | Three months ended |  |  | Six months ended |
|  | Location of Gain (Loss) |  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Gain (loss) recognized in Other comprehensive income (loss) ("OCI") |  | OCI |  | $ | (19,898 | ) |  | $ | 8,552 |  |  | $ | 13,550 |  |  | $ | (6,752 | )
Gain (loss) reclassified from OCI to earnings |  | n/a |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Gain recognized, excluded portion |  | Other income (expense), net |  | $ | 1,254 |  |  | $ | 1,079 |  |  | $ | 2,329 |  |  | $ | 2,215 |

As of March 31, 2025, we estimate that all amounts reported in Accumulated other comprehensive loss will be applied against exposed balance sheet accounts upon translation within the next three months.

Offsetting Derivative Assets and Liabilities

We have entered into master netting arrangements for our forward contracts that allow net settlements under certain conditions. Although netting is permitted, it is currently our policy and practice to record all derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets.

The following table sets forth the offsetting of derivative assets as of March 31, 2025:

(in thousands) |  | Gross Amounts Offset in the Consolidated Balance Sheets |  |  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |  |  |
As of March 31, 2025 |  | Gross Amount of Recognized Assets |  |  | Gross Amounts Offset in the Consolidated Balance Sheets |  |  | Net Amounts of Assets Presented in the Consolidated Balance Sheets |  |  | Financial Instruments |  |  | Cash Collateral Received |  |  | Net Amount |
Forward contracts |  | $ | 6,001 |  |  | $ | — |  |  | $ | 6,001 |  |  | $ | (4,286 | ) |  | $ | — |  |  | $ | 1,715 |

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The following table sets forth the offsetting of derivative liabilities as of March 31, 2025:

(in thousands) |  | Gross Amounts Offset in the Consolidated Balance Sheets |  |  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheets |  |  |  |
As of March 31, 2025 |  | Gross Amount of Recognized Liabilities |  |  | Gross Amounts Offset in the Consolidated Balance Sheets |  |  | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |  |  | Financial Instruments |  |  | Cash Collateral Pledged |  |  | Net Amount |
Forward contracts |  | $ | 4,286 |  |  | $ | — |  |  | $ | 4,286 |  |  | $ | (4,286 | ) |  | $ | — |  |  | $ | — |

9. Income Taxes

(in thousands) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
Income before income taxes |  | $ | 205,249 |  |  | $ | 145,745 |  |  | $ | 298,403 |  |  | $ | 231,344 |
Provision for income taxes |  | $ | 42,605 |  |  | $ | 31,300 |  |  | $ | 53,527 |  |  | $ | 50,512 |
Effective income tax rate |  |  | 21 | % |  |  | 21 | % |  |  | 18 | % |  |  | 22 | %

The effective tax rate for the six months ended March 31, 2025 was lower than the effective tax rate for the corresponding prior-year period primarily due to changes in the geographic mix of income before taxes. Additionally, for the six months ended March 31, 2025 and March 31, 2024, rates were impacted by a benefit of $10.4 million and an expense of $3.6 million, respectively, associated with the impact of changes in tax reserves related to prior years in foreign jurisdictions.

In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the Internal Revenue Service in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses and tax credits.

As of March 31, 2025 and September 30, 2024, we had unrecognized tax benefits of $42.5 million and $65.0 million, respectively. If all our unrecognized tax benefits as of March 31, 2025 were to become recognizable in the future, we would record a benefit to the income tax provision of $42.5 million, which would be partially offset by an increase in the U.S. valuation allowance of $6.5 million.

Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $1 million.

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10. Debt

As of March 31, 2025 and September 30, 2024, we had the following debt obligations:

(in thousands) |  | March 31, 2025 |  |  | September 30, 2024 |
4.000% Senior notes due 2028 |  | $ | 500,000 |  |  | $ | 500,000 |
3.625% Senior notes due 2025 |  |  | — |  |  |  | 500,000 |
Credit facility revolver line(1)(2) |  |  | 411,250 |  |  |  | 262,000 |
Credit facility term loan(1)(2) |  |  | 481,250 |  |  |  | 490,625 |
Total debt |  |  | 1,392,500 |  |  |  | 1,752,625 |
Unamortized debt issuance costs for the senior notes(3) |  |  | (3,107 | ) |  |  | (4,053 | )
Total debt, net of issuance costs(4) |  | $ | 1,389,393 |  |  | $ | 1,748,572 |

(1)
Unamortized debt issuance costs related to the credit facility were $2.7 million included in Other current assets and $4.7 million included in Other assets on the Consolidated Balance Sheet as of March 31, 2025 and $2.3 million included in Other current assets and $5.2 million included in Other assets on the Consolidated Balance Sheet as of September 30, 2024.
(2)
The stated maturity date under the credit facility on which both the revolver line and the term loan will mature and all amounts then outstanding will become due and payable is January 3, 2028. The term loan began amortizing in March 2024, with payments of $12.5 million remaining in 2025, $25.0 million in 2026 and 2027, and $418.7 million in 2028.
(3)
As of March 31, 2025, all unamortized debt issuance costs for the senior notes were included in Long-term debt on the Consolidated Balance Sheet. As of September 30, 2024, $0.4 million of unamortized debt issuance costs for the senior notes was included in Current portion of long-term debt and $3.6 million was included in Long-term debt on the Consolidated Balance Sheet.
(4)
As of March 31, 2025, $25.0 million of debt associated with the credit facility term loan was classified as short term. As of September 30, 2024, $521.5 million of debt was classified as short term, including $499.6 million associated with the 2025 senior notes and related debt issuance costs and $21.9 million associated with the credit facility term loan.

Senior Unsecured Notes

In February 2020, we issued $500 million in aggregate principal amount of 4.0% senior, unsecured long-term debt at par value, due in 2028 (the 2028 notes) and $500 million in aggregate principal amount of 3.625% senior, unsecured long-term debt at par value, due in February 2025 (the 2025 notes). In the second quarter of 2025, we redeemed the 2025 notes using a draw on our revolving credit facility and cash on hand.

As of March 31, 2025, the total estimated fair value of the 2028 notes was approximately $481.3 million based on quoted prices for the notes on that date.

We were in compliance with all the covenants for our senior notes as of March 31, 2025.

Credit Agreement

Our credit facility consists of (i) a $1.25 billion revolving credit facility, (ii) a $500 million term loan credit facility, and (iii) an incremental facility pursuant to which we may incur additional term loan tranches or increase the revolving credit facility. On October 1, 2024, we entered into an amendment to our credit facility which removed a repayment obligation as of November 16, 2024 in the event that the 2025 notes had not been redeemed or refinanced as of that date.

As of March 31, 2025, unused commitments under our credit facility were $838.8 million and amounts available for borrowing were $823.3 million.

As of March 31, 2025, the fair value of our credit facility approximates its book value.

PTC and certain eligible foreign subsidiaries are eligible borrowers under the credit facility. As of March 31, 2025, $241.3 million was borrowed by an eligible foreign subsidiary borrower.

Loans under the credit facility bear interest at variable rates. As of March 31, 2025, the annual rate for borrowings outstanding was 5.9%. A quarterly revolving commitment fee on the undrawn portion of the revolving credit facility is required, ranging from 0.175% to 0.325% per annum, based upon our total leverage ratio.

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As of March 31, 2025, we were in compliance with all financial and operating covenants of the credit facility.

Interest

We incurred interest expense on our debt of $19.6 million and $41.7 million in the second quarter and first six months of 2025, respectively, and $31.6 million and $66.9 million in the second quarter and first six months of 2024, respectively. The average interest rate on borrowings outstanding was approximately 4.9% and 4.8% during the second quarter and first six months of 2025, respectively, and 5.5% and 5.6% during the second quarter and first six months of 2024.

11. Commitments and Contingencies

Guarantees and Indemnification Obligations

We enter into standard indemnification agreements with our customers and business partners in the ordinary course of our business. Under such agreements, we typically indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our products. Indemnification may also cover other types of claims, including claims relating to certain data breaches. These agreements typically limit our liability with respect to indemnification claims other than intellectual property infringement claims. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and, accordingly, we believe the estimated fair value of liabilities under these agreements is immaterial.

We warrant that our software products will perform in all material respects in accordance with our standard published specifications during the term of the license. Additionally, we generally warrant that our consulting services will be performed consistent with generally accepted industry standards and, in the case of fixed price services, the agreed-upon specifications. In most cases, liability for these warranties is capped. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history; however, we have not incurred significant cost under our product or services warranties. As a result, we believe the estimated fair value of these liabilities is immaterial.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business Overview

PTC is a global software company that enables manufacturers and product companies to digitally transform how they design, manufacture, and service the physical products that the world relies on. Headquartered in Boston, Massachusetts, PTC employs over 7,000 people and supports more than 30,000 customers globally.

We primarily serve customers in the following industry verticals:

•
Industrials
•
Federal, Aerospace and Defense
•
Electronics and High Tech
•
Automotive
•
Medical Technology and Life Sciences

Our customers are focused on improving their competitiveness in the face of global competition and increasing product complexity, and our suite of software offerings is a strategic enabler of this and their digital transformation initiatives. We enable our customers to establish a strong product data foundation and leverage that foundation to drive cross-functional collaboration, accelerate new product introduction timelines and deliver higher product quality.

Our offerings include CAD (Computer-Aided Design) solutions for product data authoring and PLM (Product Lifecycle Management) solutions for product data management and process orchestration. Within the overall PLM category, our offerings also include ALM (Application Lifecycle Management) and SLM (Service Lifecycle Management).

Our product portfolio enables end-to-end digital thread initiatives that leverage a connected flow of product data across design, manufacturing, service, and, ultimately, reuse. A digital thread enables product companies to break down silos, streamline workflows, and achieve interoperability across departments, functions and systems with a single version of truth. It also secures the quality, consistency and traceability of product-related data, ensuring that the data is up-to-date, accessible, reliable and actionable. With a digital thread, the right data is delivered to the right people at the right time and in the right context across the value chain.

Our business is based on a subscription model, with 93% of our 2024 revenue recurring in nature. Compared to a perpetual license model, our subscription model naturally drives higher customer engagement and retention and provides better business predictability. This, in turn, enables us to make steady and sustained investments to support our customers and pursue mid-to-long-term growth opportunities.

Forward-Looking Statements

Statements in this document that are not historic facts, including statements about our future operating, financial and growth expectations, and potential stock repurchases, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: the macroeconomic and/or global manufacturing climates may not improve or may deteriorate due to, among other factors, the effects of recently imposed import tariffs, threats of additional and reciprocal import tariffs, and global trade tensions and uncertainty, volatile foreign exchange rates, high interest rates or increases in interest rates, inflation, tightening of credit

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standards and availability, geopolitical uncertainty, including the effects of the conflicts between Russia and Ukraine and in the Middle East, and tensions between the U.S. and China, any of which could cause customers to delay or reduce purchases of new software, adopt competing software solutions, reduce the number of subscriptions they carry, or delay payments to us, which would adversely affect our ARR (Annual Run Rate) and/or financial results and cash flow and growth; our investments in our software solutions may not drive expansion of those solutions and/or generate the ARR and/or cash flow we expect if customers are slower to adopt those solutions than we expect or if they adopt competing solutions; our go-to-market realignment and other strategic initiatives to improve organizational and operational efficiency may not do so when or as we expect and may disrupt our business to a greater extent than we expect; other uses of cash or our credit facility limits could limit or preclude the return of excess cash to shareholders via share repurchases, or could change the amount and timing of any share repurchases; and foreign exchange rates may differ materially from those we expect. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including changes to tax laws in the U.S. and other countries and the geographic mix of our revenue, expenses, and profits. Other risks and uncertainties that could cause actual results to differ materially from those projected are described below throughout or referenced in Part II, Item 1A. Risk Factors of this report.

Our Operating and Non-GAAP Financial Measures

Our discussion of results includes discussion of our ARR (Annual Run Rate) operating measure, non-GAAP financial measures, and disclosure of our results on a constant currency basis. ARR and our non-GAAP financial measures are described below in Operating and Non-GAAP Financial Measures. The methodology used to calculate constant currency disclosures is described in Results of Operations - Impact of Foreign Currency Exchange on Results of Operations. You should read those sections to understand our operating measure, non-GAAP financial measures, and constant currency disclosures.

Executive Overview

Despite the overall selling environment, which has been challenging for a couple of years now and has begun to reflect heightened macroeconomic uncertainly related to global trade tensions and tariffs, ARR grew 10% (10% constant currency) to $2.29 billion as of the end of Q2’25 compared to Q2’24.

Cash provided by operating activities grew 12% to $281 million in Q2'25 compared to Q2'24. Free cash flow grew 13% to $279 million in Q2'25 compared to Q2'24. Our cash flow growth is attributable to resilient top-line growth due to our subscription business model and operational discipline. In Q2'25, we made net repayments on our debt of $155 million and repurchased $75 million of our outstanding shares.

Revenue grew 6% (8% constant currency) to $636 million in Q2'25 compared to Q2'24. Under ASC 606, the timing of revenue recognition for on-premises subscription revenue can vary significantly, impacting reported revenue and growth rates. Operating margin grew by 530 basis points in Q2'25 compared to Q2'24, reflecting higher revenue as well as continued operating discipline. Diluted earnings per share grew 42% to $1.35 in Q2'25 compared to Q2'24.

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Results of Operations

(Dollar amounts in millions, except per share data) |  | Three months ended |  |  | Percent Change |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Actual |  |  | Constant Currency(1) |
ARR |  | $ | 2,290.1 |  |  | $ | 2,088.5 |  |  |  | 10 | % |  |  | 10 | %
Total recurring revenue(2) |  | $ | 601.5 |  |  | $ | 564.0 |  |  |  | 7 | % |  |  | 10 | %
Perpetual license |  |  | 5.8 |  |  |  | 6.8 |  |  |  | (14 | )% |  |  | (12 | )%
Professional services |  |  | 29.0 |  |  |  | 32.3 |  |  |  | (10 | )% |  |  | (9 | )%
Total revenue |  |  | 636.4 |  |  |  | 603.1 |  |  |  | 6 | % |  |  | 8 | %
Total cost of revenue |  |  | 106.3 |  |  |  | 110.1 |  |  |  | (3 | )% |  |  | (2 | )%
Gross margin |  |  | 530.1 |  |  |  | 493.0 |  |  |  | 8 | % |  |  | 11 | %
Operating expenses |  |  | 306.6 |  |  |  | 313.5 |  |  |  | (2 | )% |  |  | (1 | )%
Operating income |  | $ | 223.5 |  |  | $ | 179.6 |  |  |  | 24 | % |  |  | 30 | %
Non-GAAP operating income(1) |  | $ | 299.3 |  |  | $ | 254.0 |  |  |  | 18 | % |  |  | 23 | %
Operating margin |  |  | 35.1 | % |  |  | 29.8 | % |  |  |  |  |  |
Non-GAAP operating margin(1) |  |  | 47.0 | % |  |  | 42.1 | % |  |  |  |  |  |
Diluted earnings per share |  | $ | 1.35 |  |  | $ | 0.95 |  |  |  |  |  |  |
Non-GAAP diluted earnings per share(1) |  | $ | 1.79 |  |  | $ | 1.46 |  |  |  |  |  |  |
Cash provided by operating activities |  | $ | 281.3 |  |  | $ | 250.7 |  |  |  |  |  |  |
Capital expenditures |  |  | (2.8 | ) |  |  | (3.6 | ) |  |  |  |  |  |
Free cash flow |  | $ | 278.5 |  |  | $ | 247.1 |  |  |  |  |  |  |

(Dollar amounts in millions, except per share data) |  | Six months ended |  |  | Percent Change |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Actual |  |  | Constant Currency(1) |
ARR |  | $ | 2,290.1 |  |  | $ | 2,088.5 |  |  |  | 10 | % |  |  | 10 | %
Total recurring revenue(2) |  | $ | 1,125.9 |  |  | $ | 1,070.0 |  |  |  | 5 | % |  |  | 6 | %
Perpetual license |  |  | 15.2 |  |  |  | 15.2 |  |  |  | 0 | % |  |  | 1 | %
Professional services |  |  | 60.4 |  |  |  | 68.1 |  |  |  | (11 | )% |  |  | (11 | )%
Total revenue |  |  | 1,201.5 |  |  |  | 1,153.3 |  |  |  | 4 | % |  |  | 5 | %
Total cost of revenue |  |  | 218.1 |  |  |  | 220.1 |  |  |  | (1 | )% |  |  | (1 | )%
Gross margin |  |  | 983.4 |  |  |  | 933.2 |  |  |  | 5 | % |  |  | 7 | %
Operating expenses |  |  | 644.4 |  |  |  | 634.9 |  |  |  | 1 | % |  |  | 2 | %
Operating income |  | $ | 339.0 |  |  | $ | 298.3 |  |  |  | 14 | % |  |  | 17 | %
Non-GAAP operating income(1) |  | $ | 490.6 |  |  | $ | 453.4 |  |  |  | 8 | % |  |  | 10 | %
Operating margin |  |  | 28.2 | % |  |  | 25.9 | % |  |  |  |  |  |
Non-GAAP operating margin(1) |  |  | 40.8 | % |  |  | 39.3 | % |  |  |  |  |  |
Diluted earnings per share |  | $ | 2.02 |  |  | $ | 1.50 |  |  |  |  |  |  |
Non-GAAP diluted earnings per share(1) |  | $ | 2.89 |  |  | $ | 2.57 |  |  |  |  |  |  |
Cash provided by operating activities |  | $ | 519.7 |  |  | $ | 438.1 |  |  |  |  |  |  |
Capital expenditures |  |  | (5.6 | ) |  |  | (8.2 | ) |  |  |  |  |  |
Free cash flow |  | $ | 514.2 |  |  | $ | 429.9 |  |  |  |  |  |  |

(1)
See Operating and Non-GAAP Financial Measures below for a reconciliation of our GAAP results to our non-GAAP financial measures and Impact of Foreign Currency Exchange on Results of Operations below for a description of how we calculate our results on a constant currency basis.
(2)
Recurring revenue is comprised of on-premises subscription, perpetual support, SaaS, and hosting services revenue.

Impact of Foreign Currency Exchange on Results of Operations

Approximately 50% of our revenue and 35% of our expenses are transacted in currencies other than the U.S. Dollar. Because we report our results of operations in U.S. Dollars, currency translation, particularly changes in the Euro, Yen, Shekel, and Rupee relative to the U.S. Dollar, affects our reported results. Our constant currency disclosures are calculated by multiplying the results in local currency for the quarterly periods for FY'25 and FY'24 by the exchange rates in effect on September 30, 2024.

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If reported results for the six months ended March 31, 2025 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been higher by $36 million, revenue would have been higher by $30 million, and expenses would have been higher by $10 million. If reported results for the six months ended March 31, 2024 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been higher by $31 million, revenue would have been higher by $15 million, and expenses would have been higher by $6 million.

Revenue

Under ASC 606, the volume, mix, and duration of contract types (support, SaaS, on-premises subscription) starting or renewing in any given period can have a material impact on revenue in the period, and as a result can impact the comparability of reported revenue period over period. We recognize revenue for the license portion of on-premises subscription contracts when we deliver the licenses to the customer, typically on the start date, and we recognize revenue on the support portion of on-premises subscription contracts and stand-alone support contracts ratably over the term. We continue to convert existing support contracts to on-premises subscriptions, resulting in a shift to up-front recognition of on-premises subscription license revenue in the period converted compared to ratable recognition for a perpetual support contract. Revenue from our cloud services (primarily SaaS) contracts is recognized ratably. We expect that over time a higher portion of our revenue will be recognized ratably as we expand our SaaS offerings, release additional cloud functionality into our products, and migrate customers from on-premises subscriptions to SaaS. Given the different mix, duration and volume of new and renewing contracts in any period, year-over-year or sequential revenue can vary significantly.

Revenue by Line of Business

(Dollar amounts in millions) |  | Three months ended |  |  | Percent Change |  |  | Six months ended |  |  | Percent Change |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Actual |  |  | Constant Currency |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Actual |  |  | Constant Currency |
License |  | $ | 254.4 |  |  | $ | 234.3 |  |  |  | 9 | % |  |  | 12 | % |  | $ | 427.1 |  |  | $ | 418.3 |  |  |  | 2 | % |  |  | 4 | %
Support and cloud services |  |  | 353.0 |  |  |  | 336.4 |  |  |  | 5 | % |  |  | 7 | % |  |  | 714.0 |  |  |  | 666.9 |  |  |  | 7 | % |  |  | 8 | %
Software revenue |  |  | 607.4 |  |  |  | 570.8 |  |  |  | 6 | % |  |  | 9 | % |  |  | 1,141.1 |  |  |  | 1,085.2 |  |  |  | 5 | % |  |  | 6 | %
Professional services |  |  | 29.0 |  |  |  | 32.3 |  |  |  | (10 | )% |  |  | (9 | )% |  |  | 60.4 |  |  |  | 68.1 |  |  |  | (11 | )% |  |  | (11 | )%
Total revenue |  | $ | 636.4 |  |  | $ | 603.1 |  |  |  | 6 | % |  |  | 8 | % |  | $ | 1,201.5 |  |  | $ | 1,153.3 |  |  |  | 4 | % |  |  | 5 | %

Software revenue growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods was driven by growth in our subscription offerings in both CAD and PLM.

License revenue growth in Q2'25 and the first six months of FY'25 compared to the prior-year periods reflects the higher value and longer duration of contracts that renewed in the current-year periods.

Support and cloud services revenue growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods was mainly driven by growth in PLM.

Professional services revenue decreased in Q2'25 and the first six months of FY'25 as we continue to execute on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.

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Software Revenue by Product Group

(Dollar amounts in millions) |  | Three months ended |  |  | Percent Change |  |  | Six months ended |  |  | Percent Change |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Actual |  |  | Constant Currency |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Actual |  |  | Constant Currency |
PLM |  | $ | 368.4 |  |  | $ | 343.6 |  |  |  | 7 | % |  |  | 10 | % |  | $ | 692.0 |  |  | $ | 658.3 |  |  |  | 5 | % |  |  | 6 | %
CAD |  |  | 239.0 |  |  |  | 227.2 |  |  |  | 5 | % |  |  | 9 | % |  |  | 449.1 |  |  |  | 426.9 |  |  |  | 5 | % |  |  | 7 | %
Software revenue |  | $ | 607.4 |  |  | $ | 570.8 |  |  |  | 6 | % |  |  | 9 | % |  | $ | 1,141.1 |  |  | $ | 1,085.2 |  |  |  | 5 | % |  |  | 6 | %

PLM software revenue growth in Q2'25 and the first six months of FY'25 was driven by revenue growth in the Americas and Asia Pacific, partially offset by a decrease in Europe license revenue due to the lower volume and value of large subscriptions renewing in the period.

PLM ARR grew 11% (11% constant currency) from Q2’24 to Q2'25.

CAD software revenue growth in Q2'25 was driven by revenue growth in Europe. CAD software revenue growth in the first six months of FY'25 was driven by revenue growth across geographic regions.

CAD ARR grew 8% (8% constant currency) from Q2’24 to Q2’25.

Gross Margin

(Dollar amounts in millions) |  | Three months ended |  |  |  |  |  | Six months ended |  |  |  |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |
License gross margin |  | $ | 243.5 |  |  | $ | 223.7 |  |  |  | 9 | % |  | $ | 406.0 |  |  | $ | 397.4 |  |  |  | 2 | %
License gross margin percentage |  |  | 96 | % |  |  | 95 | % |  |  |  |  |  | 95 | % |  |  | 95 | % |  |  |
Support and cloud services gross margin |  | $ | 282.7 |  |  | $ | 269.0 |  |  |  | 5 | % |  | $ | 572.3 |  |  | $ | 532.5 |  |  |  | 7 | %
Support and cloud services gross margin percentage |  |  | 80 | % |  |  | 80 | % |  |  |  |  |  | 80 | % |  |  | 80 | % |  |  |
Professional services gross margin |  | $ | 4.0 |  |  | $ | 0.3 |  |  |  | 1,389 | % |  | $ | 5.2 |  |  | $ | 3.3 |  |  |  | 54 | %
Professional services gross margin percentage |  |  | 14 | % |  |  | 1 | % |  |  |  |  |  | 9 | % |  |  | 5 | % |  |  |
Total gross margin |  | $ | 530.1 |  |  | $ | 493.0 |  |  |  | 8 | % |  | $ | 983.4 |  |  | $ | 933.2 |  |  |  | 5 | %
Total gross margin percentage |  |  | 83 | % |  |  | 82 | % |  |  |  |  |  | 82 | % |  |  | 81 | % |  |  |
Non-GAAP gross margin(1) |  | $ | 543.7 |  |  | $ | 507.6 |  |  |  | 7 | % |  | $ | 1,011.3 |  |  | $ | 962.5 |  |  |  | 5 | %
Non-GAAP gross margin percentage(1) |  |  | 85 | % |  |  | 84 | % |  |  |  |  |  | 84 | % |  |  | 83 | % |  |  |

(1)
Non-GAAP financial measures are reconciled to GAAP results under Non-GAAP Financial Measures below.

License gross margin growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods were in line with license revenue growth. Cost of license revenue in Q2'25 and the first six months of FY'25 remained consistent with the corresponding FY'24 periods.

Support and cloud services gross margin growth in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods was in line with support and cloud services revenue growth. Cost of support and cloud services revenue grew 4% in Q2'25 and 5% in the first six months of FY'25 compared to the corresponding FY'24 periods, primarily due to higher compensation-related costs.

Professional services gross margin increased in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods, primarily due to lower subcontractor costs.

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Operating Expenses

(Dollar amounts in millions) |  | Three months ended |  |  |  |  |  | Six months ended |  |  |  |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |
Sales and marketing |  | $ | 125.0 |  |  | $ | 134.5 |  |  |  | (7 | )% |  | $ | 282.6 |  |  | $ | 271.4 |  |  |  | 4 | %
% of total revenue |  |  | 20 | % |  |  | 22 | % |  |  |  |  |  | 24 | % |  |  | 24 | % |  |  |
Research and development |  | $ | 111.0 |  |  | $ | 107.0 |  |  |  | 4 | % |  | $ | 226.5 |  |  | $ | 212.8 |  |  |  | 6 | %
% of total revenue |  |  | 17 | % |  |  | 18 | % |  |  |  |  |  | 19 | % |  |  | 18 | % |  |  |
General and administrative |  | $ | 55.0 |  |  | $ | 61.5 |  |  |  | (11 | )% |  | $ | 108.3 |  |  | $ | 130.7 |  |  |  | (17 | )%
% of total revenue |  |  | 9 | % |  |  | 10 | % |  |  |  |  |  | 9 | % |  |  | 11 | % |  |  |
Amortization of acquired intangible assets |  | $ | 11.4 |  |  | $ | 10.4 |  |  |  | 9 | % |  | $ | 22.8 |  |  | $ | 20.8 |  |  |  | 10 | %
% of total revenue |  |  | 2 | % |  |  | 2 | % |  |  |  |  |  | 2 | % |  |  | 2 | % |  |  |
Impairment and other charges (credits), net |  | $ | 4.2 |  |  | $ | (0.0 | ) |  |  | 60,286 | % |  | $ | 4.2 |  |  | $ | (0.8 | ) |  |  | 625 | %
% of total revenue |  |  | 1 | % |  |  | (0 | )% |  |  |  |  |  | 0 | % |  |  | (0 | )% |  |  |
Total operating expenses |  | $ | 306.6 |  |  | $ | 313.5 |  |  |  | (2 | )% |  | $ | 644.4 |  |  | $ | 634.9 |  |  |  | 1 | %

Total headcount increased 1% between Q2’24 and Q2’25.

Operating expenses in Q2'25 decreased compared to Q2'24, primarily due to the following:

•
a $9 million decrease in compensation expense (excluding stock-based compensation expense), mainly driven by the temporary impact of cost reductions resulting from our go-to-market realignment;

partially offset by:

•
a $4 million impairment charge recognized in Q2'25 related to the sublease of a portion of our Boston office in Q2'25.

Operating expenses in the first six months of FY'25 increased compared to the first six months of FY'24, primarily due to the following:

•
a $10 million increase in compensation expense (excluding stock-based compensation expense), mainly driven by severance costs recognized in Q1'25 related to the go-to-market realignment (which is primarily included in Sales and marketing), offset by lower compensation charges in General and administrative driven by our FY'24 chief executive officer succession;
•
a $4 million increase in outside services, driven by consulting services related to our go-to-market realignment and other corporate initiatives; and
•
a $4 million impairment charge recognized in Q2'25 related to the lease asset associated with the subleased portion of our Boston office;

partially offset by:

•
a $7 million decrease in stock-based compensation, driven in part by the FY'24 acceleration of expense on equity grants held by our former chief executive officer (which is included in General and administrative).

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Interest Expense

(Dollar amounts in millions) |  | Three months ended |  |  |  |  |  | Six months ended |  |  |  |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |
Interest expense |  | $ | (19.6 | ) |  | $ | (31.6 | ) |  |  | (38 | )% |  | $ | (41.7 | ) |  | $ | (66.9 | ) |  |  | (38 | )%

Interest expense in both FY'25 and FY'24 includes interest on our revolving credit facility, term loan, our senior notes that were redeemed in Q2'25, and our senior notes due in 2028. Interest expense decreased in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods due to lower debt balances and lower interest rates.

Other Income (Expense)

(Dollar amounts in millions) |  | Three months ended |  |  |  |  |  | Six months ended |  |  |  |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |
Interest income |  | $ | 0.8 |  |  | $ | 1.1 |  |  |  | (30 | )% |  | $ | 1.7 |  |  | $ | 2.4 |  |  |  | (29 | )%
Other income (expense), net |  |  | 0.6 |  |  |  | (3.3 | ) |  |  | 118 | % |  |  | (0.6 | ) |  |  | (2.4 | ) |  |  | 73 | %
Other income (expense), net |  | $ | 1.4 |  |  | $ | (2.2 | ) |  |  | 163 | % |  | $ | 1.1 |  |  | $ | (0.0 | ) |  |  | 26,825 | %

Other income (expense), net increased in Q2'25 and the first six months of FY'25 compared to the corresponding FY'24 periods driven by a $2.0 million impairment charge recognized in Q2'24 related to an available-for-sale debt security.

Income Taxes

(Dollar amounts in millions) |  | Three months ended |  |  |  |  |  | Six months ended |  |  |  |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |  |  | March 31, 2025 |  |  | March 31, 2024 |  |  | Percent Change |
Income before income taxes |  | $ | 205.2 |  |  | $ | 145.7 |  |  |  | 41 | % |  | $ | 298.4 |  |  | $ | 231.3 |  |  |  | 29 | %
Provision for income taxes |  | $ | 42.6 |  |  | $ | 31.3 |  |  |  | 36 | % |  | $ | 53.5 |  |  | $ | 50.5 |  |  |  | 6 | %
Effective income tax rate |  |  | 21 | % |  |  | 21 | % |  |  |  |  |  | 18 | % |  |  | 22 | % |  |  |

The effective tax rate for the first six months of FY'25 was lower than the effective tax rate for the corresponding prior-year period primarily due to changes in the geographic mix of income before taxes. Additionally, for the first six months of FY'25 and FY'24, rates were impacted by a benefit of $10.4 million and an expense of $3.6 million, respectively, associated with the impact of changes in tax reserves related to prior years in foreign jurisdictions.

In FY’24, we requested consent from the U.S. Internal Revenue Service to change the accounting method for the treatment of certain deductions. If we do not receive this consent, our future tax payments could be higher than currently estimated, which would also adversely impact our operating cash flow.

Critical Accounting Policies and Estimates

There were no material changes to our critical accounting policies and estimates as set forth under the heading Critical Accounting Policies and Estimates in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2024 Annual Report on Form 10-K.

Recent Accounting Pronouncements

In accordance with recently issued accounting pronouncements, we will be required to comply with certain changes in accounting rules and regulations. Refer to Note 1. Basis of Presentation to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for all recently issued accounting pronouncements, none of which are expected to have a material effect.

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Liquidity and Capital Resources

(in millions) |  | March 31, 2025 |  |  | September 30, 2024 |
Cash and cash equivalents |  | $ | 235.2 |  |  | $ | 265.8 |
Restricted cash |  |  | 0.6 |  |  |  | 0.7 |
Total |  | $ | 235.7 |  |  | $ | 266.5 |
(in millions) |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |
Net cash provided by operating activities |  | $ | 519.7 |  |  | $ | 438.1 |
Net cash provided by (used in) investing activities |  | $ | 6.7 |  |  | $ | (103.9 | )
Net cash used in financing activities |  | $ | (551.1 | ) |  | $ | (374.3 | )

Cash, Cash Equivalents and Restricted Cash

We invest our cash with highly rated financial institutions. Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Due to the stability of our subscription model and consistency of annual, up-front billing, we aim to maintain a low cash balance. A significant portion of our cash is generated and held outside the U.S. As of March 31, 2025, we had cash and cash equivalents of $20.7 million in the U.S., $82.3 million in Europe, $113.4 million in Asia Pacific (including India) and $18.8 million in other countries. We have substantial cash requirements in the U.S. but believe that the combination of our existing U.S. cash and cash equivalents, cash available under our revolving credit facility, future U.S. operating cash flows, and our ability to repatriate cash to the U.S. will be sufficient to meet our ongoing U.S. operating expenses and known capital requirements.

Cash Provided by Operating Activities

Cash provided by operating activities increased $81.7 million in the first six months of FY'25 compared to the same period in FY'24. Growth was driven by higher collections as well as lower interest payments and vendor disbursements, partially offset by higher tax payments and payments related to our go-to-market realignment. Interest payments were $48.8 million lower in the first six months of FY'25 compared to the first six months of FY'24, driven by a Q1'24 payment of $30.0 million of imputed interest on a deferred acquisition payment associated with our FY'23 acquisition of ServiceMax as well as lower interest payments in FY'25 due mainly to lower debt balances.

Cash Provided by (Used in) Investing Activities

Cash provided by investing activities in the first six months of FY'25 was driven by inflows from the settlement of net investment hedges. Cash used in investing activities in the first six months of FY'24 was driven by the acquisition of pure-systems for $93.5 million.

Cash Used in Financing Activities

Cash used in financing activities in the first six months of FY'25 included net payments of $360.1 million on our outstanding debt, including the redemption of our 2025 senior notes primarily using a draw on our credit facility, and $150.0 million of repurchases of common stock. Cash used in financing activities in the first six months of FY'24 included $620.0 million paid to settle the ServiceMax deferred acquisition payment, partially offset by net borrowings of $304.1 million to fund the ServiceMax deferred acquisition payment and the pure-systems acquisition.

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Outstanding Debt

(in millions) |  | March 31, 2025 |  |  | September 30, 2024 |
4.000% Senior notes due 2028 |  | $ | 500.0 |  |  | $ | 500.0 |
3.625% Senior notes due 2025 |  |  | — |  |  |  | 500.0 |
Credit facility revolver line |  |  | 411.3 |  |  |  | 262.0 |
Credit facility term loan |  |  | 481.3 |  |  |  | 490.6 |
Total debt |  | $ | 1,392.5 |  |  | $ | 1,752.6 |
Unamortized debt issuance costs for the senior notes |  |  | (3.1 | ) |  |  | (4.1 | )
Total debt, net of issuance costs |  | $ | 1,389.4 |  |  | $ | 1,748.6 |
Undrawn under credit facility revolver |  | $ | 838.8 |  |  | $ | 988.0 |
Undrawn under credit facility revolver available to borrow |  | $ | 823.3 |  |  | $ | 972.1 |

As of March 31, 2025, we were in compliance with all financial and operating covenants of the credit facility and the note indenture. As of March 31, 2025, the annual rate for borrowings outstanding under the credit facility was 5.9%.

Our credit facility and our senior notes are described in Note 10. Debt to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. As of March 31, 2025, $25.0 million of our debt associated with the credit facility term loan was classified as current. In Q2'25, we redeemed the 2025 senior notes using a draw on our revolving credit facility and cash on hand.

Future Expectations

We believe that existing cash and cash equivalents, together with cash generated from operations and amounts available under the credit facility, will be sufficient to meet our working capital and capital expenditure requirements through at least the next twelve months and to meet our known long-term capital requirements.

Our long-term goal is to return excess cash to shareholders via share repurchases. We currently intend to repurchase approximately $300 million of our common stock in FY'25.

Our expected uses and sources of cash could change, our cash position could be reduced, and we could incur additional debt obligations if we retire other debt, engage in strategic transactions, or repurchase shares, any of which could be commenced, suspended, or completed at any time. Any such repurchases or retirement of debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any debt retirement or issuance, share repurchases, or strategic transactions may be material.

Operating and Non-GAAP Financial Measures

Operating Measure

ARR

ARR (Annual Run Rate) represents the annualized value of our portfolio of active subscription software, SaaS, hosting, and support contracts as of the end of the reporting period. We calculate ARR as follows:

•
We consider a contract to be active when the product or service contractual term commences (the “start date”) until the right to use the product or service ends (the “expiration date”). Even if the contract with the customer is executed before the start date, the contract will not count toward ARR until the customer right to receive the benefit of the products or services has commenced.

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•
For contracts that include annual values that change over time, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include any future committed increases in the contract value as of the date of the ARR calculation.
•
As ARR includes only contracts that are active at the end of the reporting period, ARR does not reflect assumptions or estimates regarding future customer renewals or non-renewals.
•
Active contracts are annualized by dividing the total active contract value by the contract duration in days (expiration date minus start date), then multiplying that by 365 days (or 366 days for leap years).

We believe ARR is a valuable operating measure to assess the health of a subscription business because it is aligned with the amount that we invoice the customer on an annual basis. We generally invoice customers annually for the current year of the contract. A customer with a one-year contract will typically be invoiced for the total value of the contract at the beginning of the contractual term, while a customer with a multi-year contract will be invoiced for each annual period at the beginning of each year of the contract.

ARR increases by the annualized value of active contracts that commence in a reporting period and decreases by the annualized value of contracts that expire in the reporting period.

As ARR is not annualized recurring revenue, it is not calculated based on recognized or unearned revenue and is not affected by variability in the timing of revenue under ASC 606, particularly for on-premises license subscriptions where a substantial portion of the total value of the contract is recognized as revenue at a point in time upon the later of when the software is made available, or the subscription term commences.

ARR should be viewed independently of recognized and unearned revenue and is not intended to be combined with, or to replace, either of those items. Investors should consider our ARR operating measure only in conjunction with our GAAP financial results.

Non-GAAP Financial Measures

Our non-GAAP financial measures and the reasons we use them and exclude the items identified below are described in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2024.

The non-GAAP financial measures presented in the discussion of our results of operations and the respective most directly comparable GAAP measures are:

•
non-GAAP gross margin—GAAP gross margin
•
non-GAAP operating income—GAAP operating income
•
non-GAAP operating margin—GAAP operating margin
•
non-GAAP net income—GAAP net income
•
non-GAAP diluted earnings per share—GAAP diluted earnings per share
•
free cash flow—cash flow from operations

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The non-GAAP financial measures other than free cash flow exclude, as applicable: stock-based compensation expense; amortization of acquired intangible assets; acquisition and transaction-related charges included in General and administrative expenses; Impairment and other charges (credits), net; non-operating charges (credits), net; and income tax adjustments as defined in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and as reflected in the reconciliation tables.

In Q2'25, we changed the income statement caption of Restructuring and other charges (credits), net to Impairment and other charges (credits), net to reflect that the amounts presented are mainly impairment charges rather than restructuring charges. We correspondingly revised the caption with respect to the list of items excluded from our non-GAAP financial measures and, as reflected below, the list of items covered under that caption to reflect the primary charges and credits included in the adjustment. All charges and credits under the captioned line item remain the same.

Impairment and other charges (credits), net are charges associated with disposal or exit activities, including lease impairment and abandonment charges, net charges or income related to impaired or exited facilities, restructuring severance charges resulting from substantial employee reduction actions, and other related costs.

The items excluded from the non-GAAP financial measures often have a material impact on our financial results, some of those items are recurring, and other items often recur. Accordingly, the non-GAAP financial measures included in this Quarterly Report on Form 10-Q should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable GAAP measure on our financial statements.

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(in millions, except per share amounts) |  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
GAAP gross margin |  | $ | 530.1 |  |  | $ | 493.0 |  |  | $ | 983.4 |  |  | $ | 933.2 |
Stock-based compensation |  |  | 5.5 |  |  |  | 5.0 |  |  |  | 11.4 |  |  |  | 10.1 |
Amortization of acquired intangible assets included in cost of revenue |  |  | 8.1 |  |  |  | 9.6 |  |  |  | 16.4 |  |  |  | 19.2 |
Non-GAAP gross margin |  | $ | 543.7 |  |  | $ | 507.6 |  |  | $ | 1,011.3 |  |  | $ | 962.5 |
GAAP operating income |  | $ | 223.5 |  |  | $ | 179.6 |  |  | $ | 339.0 |  |  | $ | 298.3 |
Stock-based compensation |  |  | 51.5 |  |  |  | 54.2 |  |  |  | 107.4 |  |  |  | 113.2 |
Amortization of acquired intangible assets |  |  | 19.5 |  |  |  | 20.0 |  |  |  | 39.3 |  |  |  | 39.9 |
Acquisition and transaction-related charges |  |  | 0.6 |  |  |  | 0.3 |  |  |  | 0.8 |  |  |  | 2.8 |
Impairment and other charges (credits), net |  |  | 4.2 |  |  |  | (0.0 | ) |  |  | 4.2 |  |  |  | (0.8 | )
Non-GAAP operating income |  | $ | 299.3 |  |  | $ | 254.0 |  |  | $ | 490.6 |  |  | $ | 453.4 |
GAAP net income |  | $ | 162.6 |  |  | $ | 114.4 |  |  | $ | 244.9 |  |  | $ | 180.8 |
Stock-based compensation |  |  | 51.5 |  |  |  | 54.2 |  |  |  | 107.4 |  |  |  | 113.2 |
Amortization of acquired intangible assets |  |  | 19.5 |  |  |  | 20.0 |  |  |  | 39.3 |  |  |  | 39.9 |
Acquisition and transaction-related charges |  |  | 0.6 |  |  |  | 0.3 |  |  |  | 0.8 |  |  |  | 2.8 |
Impairment and other charges (credits), net |  |  | 4.2 |  |  |  | (0.0 | ) |  |  | 4.2 |  |  |  | (0.8 | )
Non-operating charges(1) |  |  | — |  |  |  | 2.0 |  |  |  | — |  |  |  | 2.0 |
Income tax adjustments(2) |  |  | (21.7 | ) |  |  | (14.6 | ) |  |  | (46.4 | ) |  |  | (28.6 | )
Non-GAAP net income |  | $ | 216.8 |  |  | $ | 176.4 |  |  | $ | 350.1 |  |  | $ | 309.4 |
GAAP diluted earnings per share |  | $ | 1.35 |  |  | $ | 0.95 |  |  | $ | 2.02 |  |  | $ | 1.50 |
Stock-based compensation |  |  | 0.43 |  |  |  | 0.45 |  |  |  | 0.89 |  |  |  | 0.94 |
Amortization of acquired intangible assets |  |  | 0.16 |  |  |  | 0.17 |  |  |  | 0.32 |  |  |  | 0.33 |
Acquisition and transaction-related charges |  |  | 0.01 |  |  |  | 0.00 |  |  |  | 0.01 |  |  |  | 0.02 |
Impairment and other charges (credits), net |  |  | 0.03 |  |  |  | (0.00 | ) |  |  | 0.03 |  |  |  | (0.01 | )
Non-operating charges(1) |  |  | — |  |  |  | 0.02 |  |  |  | — |  |  |  | 0.02 |
Income tax adjustments(2) |  |  | (0.18 | ) |  |  | (0.12 | ) |  |  | (0.38 | ) |  |  | (0.24 | )
Non-GAAP diluted earnings per share |  | $ | 1.79 |  |  | $ | 1.46 |  |  | $ | 2.89 |  |  | $ | 2.57 |
Cash provided by operating activities |  | $ | 281.3 |  |  | $ | 250.7 |  |  | $ | 519.7 |  |  | $ | 438.1 |
Capital expenditures |  |  | (2.8 | ) |  |  | (3.6 | ) |  |  | (5.6 | ) |  |  | (8.2 | )
Free cash flow |  | $ | 278.5 |  |  | $ | 247.1 |  |  | $ | 514.2 |  |  | $ | 429.9 |

(1)
In Q2'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security.
(2)
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, in Q2'25, adjustments exclude a $4.9 million benefit related to the tax impact of tax reserves related to prior years in foreign jurisdictions, of which $4.2 million was a non-cash benefit. In the first six months of FY'25 and FY’24, adjustments exclude a $10.4 million benefit and a $3.6 million charge, respectively, related to the tax impact of tax reserves related to prior years in foreign jurisdictions.

Operating margin impact of non-GAAP adjustments:

|  | Three months ended |  |  | Six months ended |
|  | March 31, 2025 |  |  | March 31, 2024 |  |  | March 31, 2025 |  |  | March 31, 2024 |
GAAP operating margin |  |  | 35.1 | % |  |  | 29.8 | % |  |  | 28.2 | % |  |  | 25.9 | %
Stock-based compensation |  |  | 8.1 | % |  |  | 9.0 | % |  |  | 8.9 | % |  |  | 9.8 | %
Amortization of acquired intangible assets |  |  | 3.1 | % |  |  | 3.3 | % |  |  | 3.3 | % |  |  | 3.5 | %
Acquisition and transaction-related charges |  |  | 0.1 | % |  |  | 0.1 | % |  |  | 0.1 | % |  |  | 0.2 | %
Impairment and other charges (credits), net |  |  | 0.7 | % |  |  | 0.0 | % |  |  | 0.4 | % |  |  | (0.1 | )%
Non-GAAP operating margin |  |  | 47.0 | % |  |  | 42.1 | % |  |  | 40.8 | % |  |  | 39.3 | %

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our market risk exposure as described in Item 7A. Quantitative and Qualitative Disclosures about Market Risk of our 2024 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

Our management maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), as appropriate, to allow for timely decisions regarding required disclosure.

We evaluated, under the supervision and with the participation of management, including our principal executive and principal financial officers, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the period ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1A. RISK FACTORS

In addition to other information set forth in this report, you should carefully consider the risk factors described in Part I. Item 1A. Risk Factors in our 2024 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below shows the shares of our common stock we repurchased in the second quarter of 2025.

Period | Total Number of Shares (or Units) Purchased |  | Average Price Paid per Share (or Unit) |  | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |  | Approximate Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) |
January 1, 2025 - January 31, 2025 |  | — |  | $ | — |  |  | — |  | $ | 1,924,999,900 |
February 1, 2025 - February 28, 2025 |  | 195,777 |  | $ | 166.00 |  |  | 195,777 |  | $ | 1,892,501,813 |
March 1, 2025 - March 31, 2025 |  | 266,750 |  | $ | 159.33 |  |  | 266,750 |  | $ | 1,849,999,766 |
Total |  | 462,527 |  | $ | 162.15 |  |  | 462,527 |  | $ | 1,849,999,766 |

(1)
As announced on November 6, 2024, our Board of Directors has authorized us to repurchase up to $2 billion of our common stock in the period October 1, 2024 through September 30, 2027.

ITEM 5. OTHER INFORMATION

Director and Executive Officer Adoption, Modification or Termination of 10b5-1 Plans in Q2'25

None.

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ITEM 6. EXHIBITS

|  |  |  |  |  | Incorporated by Reference
Exhibit Number |  | Description |  | Filed Herewith |  | Form |  | Filling Date |  | Exhibit |  | SEC File No.
3.1 |  | Restated Articles of Organization of PTC Inc. |  |  |  | 10-K |  | November 23, 2015 |  | 3.1 |  | 0-18059
3.2 |  | Amended and Restated By-Laws of PTC Inc. |  |  |  | 10-K |  | November 14, 2024 |  | 3.2 |  | 0-18059
4.1 |  | Indenture dated as of February 13, 2020, between PTC Inc. and Wells Fargo Bank, National Association, as trustee |  |  |  | 8-K |  | February 13, 2020 |  | 4.1 |  | 0-18059
4.2 |  | Form of 4.000% senior unsecured notes due 2028 |  |  |  | 8-K |  | February 13, 2020 |  | 4.3 |  | 0-18059
31.1 |  | Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) |  | X |  |  |  |  |  |  |  |
31.2 |  | Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) |  | X |  |  |  |  |  |  |  |
32* |  | Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350 |  | X |  |  |  |  |  |  |  |
101.INS |  | Inline XBRL Instance Document – the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document |  |  |  |  |  |  |  |  |  |
101.SCH |  | Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |  |  |  |  |  |  |  |  |  |
104 |  | The cover page of the Q2 Form 10-Q formatted in Inline XBRL (included in Exhibit 101) |  |  |  |  |  |  |  |  |  |

* Indicates that the exhibit is being furnished, not filed, with this report.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

| PTC Inc.
| By: |  | /s/ KRISTIAN TALVITIE
|  |  | Kristian Talvitie Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: May 1, 2025

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