PTC (PTC) 10-K risk factor changes: FY2020 vs FY2019

You should consider them carefully when evaluating an investment in PTC securities or any forward-looking statements made by us, including those contained in this Annual Report, because these factors could cause actual results to differ materially from historical results or the performance projected in [removed: forward- looking] [added: forward-looking] statements.

[removed: I.Risks] [added: I.Risks] Related to Our Business Operations and [removed: Industry][added: Industry]

[removed: We] [added: We] face significant competition, which may reduce our profitability and limit or reduce our market [removed: share.][added: share.]

[removed: Competitive] [added: In addition, competitive] pressures could [removed: also] cause us to reduce our prices, which could reduce our revenue and margins.

[removed: Our] [added: Finally, our] current and potential competitors range from large and well-established companies to emerging start-ups.

[removed: A] [added: A] breach of security in our products or computer systems, or those of our third-party service providers, could compromise the integrity of our products, cause loss of data, harm our reputation, create additional liability and adversely impact our financial [removed: results.][added: results.]

Despite efforts to create security barriers to such threats, it is impossible for us to eliminate [removed: this risk,] [added: the risk of a successful cyberattack or intrusion,] and, in fact, we deal with security issues on a regular basis and have experienced security incidents from time to time.

In addition, we offer cloud services to our customers and some of our products are hosted by third-party service providers, which expose us to additional risks as those repositories of our customers’ proprietary data may be targeted [removed: by hackers.][added: and a cyberattack or intrusion may be successful and material.]

A significant breach of the security [removed: and/ or] [added: and/or] integrity of our products or systems, or those of our third-party service providers, could prevent our products from functioning properly, could enable access to sensitive, proprietary or confidential information, including that of our customers, or could disrupt our business operations or those of our customers.

This could require us to incur significant costs of investigation, [removed: remediation, and further protection,] [added: remediation and/or payment of a ransom;] harm our [removed: reputation,] [added: reputation;] cause customers to stop buying our [removed: products,] [added: products;] and cause us to face lawsuits and potential liability, which could have a material adverse effect on our financial condition and results of operations.

[removed: We] [added: We] may be unable to hire or retain personnel with the necessary skills to operate and grow our business, which could adversely affect our ability to [removed: compete.][added: compete.]

[removed: We] [added: We] depend on sales within the discrete manufacturing sector and our business could be adversely affected if manufacturing activity does not grow, or if it contracts, or if manufacturers are adversely affected by other economic [removed: factors.][added: factors.]

Although the [removed: decline] [added: volatility] in Manufacturing PMI did not have a significant adverse [removed: affect] [added: effect] on our business in [removed: 2019,] [added: FY’20,] if the manufacturing sector does not improve or continues to decline, our customers in this sector may, as they have in the past, reduce or defer purchases of our products and services, which could adversely affect our financial results.

In addition, manufacturers worldwide are facing increasing uncertainty about the global economic climate due to, among other factors, the [added: COVID-19 pandemic, the] geopolitical environment and ongoing trade tensions and tariffs.

[removed: If] [added: If] we fail to successfully manage our transition to a subscription-based licensing company, our business and financial results could be adversely [removed: affected.][added: affected.]

Whether our transition will be successful and will accomplish our business and financial objectives is subject to uncertainties, including but not limited to: customer demand, attach and renewal rates, channel acceptance, our ability to further develop and scale infrastructure, our ability to include functionality and usability in such offerings that address customer [removed: requirements, and our costs.]

[removed: Because] [added: Because] our sales and operations are globally dispersed, we face additional compliance risks and any compliance risk could adversely affect our business and financial [removed: results.][added: results.]

We sell and deliver software and services, and maintain support operations, in [removed: a large number of] [added: many] countries whose laws and practices differ from one another and are subject to unexpected changes.

Managing these geographically dispersed operations requires significant attention and resources to [added: ensure compliance with laws of those countries and those of the U.S. governing our activities in non-U.S. countries.]

Our compliance risks are heightened due to the go-to-market approach for our [removed: businesses] [added: business] that relies heavily on a partner ecosystem, the fact that we operate in, and are expanding into, countries with a higher incidence of corruption and fraudulent business practices than others, the fact that we deal with governments and state-owned business enterprises, [removed: the fact that cyber attacks] and [removed: intrusions that could expose sensitive information have increased, and] the fact that global enforcement of laws has significantly increased.

Accordingly, while we strive to maintain a comprehensive compliance program, we cannot guarantee that an employee, agent or business partner will not act in violation of our policies or U.S. or other applicable [removed: laws, that a cyber attack or intrusion would not be successful,] [added: laws] or that we may inadvertently violate such laws.

Investigations of alleged violations of those laws [removed: and cyber intrusions] can be expensive and disruptive.

[removed: Our] [added: Our] international businesses present economic and operating risks, which could adversely affect our business and financial [removed: results.][added: results.]

| [added: |] • | difficulties in staffing and managing foreign sales and development operations; |

| [added: |] • | possible future limitations upon foreign-owned businesses; |

| [added: |] • | increased financial accounting and reporting burdens and complexities; |

| [added: |] • | inadequate local infrastructure; and |

| [added: |] • | greater difficulty in protecting our intellectual property. |

[removed: We] [added: We] may have exposure to additional tax liabilities and our effective tax rate may increase or fluctuate, which could increase our income tax expense and reduce our net [removed: income.][added: income.]

If we do not prevail in that challenge, we could be subject to additional liabilities for periods after 2015, which we estimate could be [removed: $13] [added: $17] million.

| [added: |] • | changes in tax laws, regulations, and interpretations in multiple jurisdictions in which we operate; |

| [added: |] • | assessments, and any related tax interest or penalties, by taxing authorities; |

| [added: |] • | changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; |

| [added: |] • | changes to the financial accounting rules for income taxes; |

| [added: |] • | unanticipated changes in tax rates; and |

| [added: |] • | changes to a valuation allowance on net deferred tax assets, if any. |

[removed: II.Risks] [added: II.Risks] Related to Acquisitions and Strategic [removed: Relationships][added: Relationships]

[removed: Businesses] [added: Businesses] we acquire may not generate the revenue and earnings we anticipate and may otherwise adversely affect our [removed: business.][added: business.]

If we fail to successfully integrate and manage the businesses and technologies we acquire, [removed: or] if an acquisition does not further our business strategy as we expect, [added: or if a business we acquire has unexpected legal or financial liabilities,] our operating results will be adversely affected.

| [added: |] • | difficulties managing an acquired company’s technologies or lines of business or entering new markets where we have limited or no prior experience or where competitors may have stronger market positions; |

For example, the COVID-19 pandemic has caused companies worldwide to close their offices and their employees to have to work remotely from their homes, which has focused companies on the need for solutions that empower and support remote work by employees.

We believe customers and potential customers will increasingly seek software solutions that support remote work by employees.

Although many of our solutions support remote work, others are less efficient at doing so.

We have embarked on an effort to make our solutions available on a SaaS platform, however, this will require significant effort and investment and we cannot be sure that we will be able to make our solutions available as SaaS solutions as quickly as we expect.

If we are unable to compete successfully with competitors offering SaaS solutions, we could lose customers and/or fail to attract new customers, which could cause us to lose revenue and market share, which would adversely affect our business and financial results.

The potential for a security breach or system disruption has significantly increased over time as the scope, number, intensity and sophistication of attempted cyberattacks and cyberintrusions have increased.

We face cyberattacks and intrusions designed to access and exfiltrate information and to disrupt and lock-up access to systems for the purpose of demanding a ransom payment.

Accordingly, there is a risk that a cyberattack or intrusion will be successful and that such event will be material.

The extent to which the novel coronavirus COVID-19 may impact our business is uncertain and it could materially adversely affect our financial condition and results of operations.

The COVID-19 pandemic has significantly impacted global economic activity and has created macroeconomic uncertainty.

Public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, temporary closures of businesses, and the adoption of remote working, have significantly changed the way we and our customers work.

The effects and duration of this disruption remain uncertain.

While PTC was able to transition to remote working without significant disruption to our day-to-day operations, disruption to our customers’ and our prospects’ operations and the way we work with them have adversely affected our business.

Demand for our solutions has declined and could decline further due to challenges associated with conducting in-person sales meetings and project scoping and implementation activities while social distancing measures are in place, which has deterred or prevented, and could further deter or prevent, customers from proceeding with new software purchases and deployments.

Likewise, temporary plant closures, layoffs and furloughs at our customers and the challenges they face forecasting business needs in this time of global economic uncertainty have caused, and could continue to cause, our customers to delay or reduce new license purchases.

Longer term plant closures and layoffs among our customer base could cause existing subscription customers to renew fewer existing licenses when their subscriptions come up for renewal and could cause existing support customers to discontinue support at the time of renewal.

We experienced an increase in churn in FY’20 to 8.6%, versus a churn rate of 7.4% for FY’19.

If churn increases in the future, our ARR and financial results and condition could be negatively impacted.

Reductions in new license sales and/or renewals and in professional services delivered could reduce our ARR growth or cause our ARR to decline, and would reduce our professional services revenue, all of

which would adversely affect our revenue, earnings and cash flow.

Further prolonged disruption could continue to negatively impact the businesses of our customers and prospective customers and, therefore, our business and financial condition.

The economic uncertainty caused by the COVID-19 pandemic has also caused our customers to focus on their liquidity.

This focus on liquidity, or our customers’ lack of liquidity, could adversely affect our cash flows if we make concessions in the amount or timing of payments due from customers or if our customers do not pay when or as expected.

Moreover, some of our resellers may face liquidity challenges, which could adversely affect our cash flows if they do not pay us when or as expected.

If our business declines due to the above, we could be required to reduce our expenses, which could result in material restructuring charges and/or reduce or delay investments in our business, including hiring.

Reductions in our workforce and/or investments in our business could hamper our ability to recover and compete successfully, which could adversely affect our business and results of operations.

Finally, while we expect to have sufficient liquidity with cash on hand, cash generated from operations, and amounts available under our credit facility to meet our working capital and capital expenditure requirements through at least the next twelve months and our known long-term capital requirements, declines in cash flows could adversely affect our liquidity and we may be unable to draw on our credit facility as we expect due to covenants under the credit facility.

If our liquidity is significantly impaired, it would significantly adversely affect our business due to our inability to pay our suppliers and our employees.

Further, a significant liquidity impairment could cause us to be unable to make the required periodic interest payments due on our outstanding Senior Notes due 2028 and 2025, which would constitute an event of default under the applicable notes, and cause the aggregate principal amount of those notes on which we defaulted to become due and payable.

The global Manufacturing Purchasing Managers' Index (PMI) declined significantly in the second and third quarters of 2020 due to the impact of COVID-19 and, though it has recovered somewhat, remained approximately at the 50% level in September 2020.

requirements, and our costs.

The types of issues that we may face in integrating and operating the acquired business include:

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We may incur significant debt or issue a material amount of debt or equity securities to finance an acquisition, which could adversely affect our operating flexibility and financial statements.

The increases in these expenses and in our leverage could adversely impact our ability to operate the company as we might otherwise and to borrow additional amounts.

| --- | --- | --- |

Holders of the 6.00% Senior Notes due 2024 (the “2024 6% Notes”) that we issued in May 2016 should also consider the risk factors related to those notes described in the prospectus supplement we filed with the Securities and Exchange Commission on May 5, 2016, which are incorporated herein by reference.

The potential consequences of a security breach or system disruption (particularly through cyber-attack or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists) have increased in scope as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Accordingly, there is a risk that we might encounter a material event or issue and that such an event or issue may occur.

The global Manufacturing Purchasing Managers' Index (PMI) has declined significantly over the past year and remained below the 50% level in September 2019, with a particularly large recent decline in Europe.

ensure compliance with laws of those countries and those of the U.S. governing our activities in non-U.S. countries.

| | |

| --- | --- |

Moreover, business combinations involve risks and uncertainties that can adversely affect our operations and operating results, including:

| • | assumption of unanticipated legal or financial liabilities or other unidentified issues with the acquired business; |

Of the $628 million outstanding under our secured credit facility, $455 million was borrowed on November 1, 2019 to finance our acquisition of Onshape.

In November 2019, we also amended the credit facility to increase the revolving loan commitment from $700 million to $1 billion (see *Liquidity and Capital Resources-Outstanding Notes* in Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report).

Notwithstanding the limits contained in the credit agreement governing our credit facility and the indenture governing our 2024 6% Notes, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.

If we do so, the risks related to our level of debt could intensify.

of which are beyond our control.

Our long-range financial targets are predicated on expanding our portfolio of recurring revenue contracts (ARR growth), operating margin improvements and cash flow growth that we may fail to achieve, which could reduce our expected earnings and cause us to fail to meet the expectations of analysts or investors and cause the price of our securities to decline.

We are projecting long-term ARR, operating margin and cash flow growth.

Our projections are based on the expected growth potential in the IoT and AR markets, as well as more modest growth in our core CAD and PLM markets.

We may not achieve the expected ARR growth if the markets we serve do not grow at expected rates, if customers do not purchase, renew, or expand subscriptions as we expect, if we are not able to deliver solutions desired by customers and potential customers, and/or if acquired businesses do not generate the revenue growth that we expect.

Over time, we expect our operating margin to improve, which improvements are predicated on operating leverage and on improved operating efficiencies, particularly within our sales organization, and on service margin improvements.

If we are unable to reduce our sales and marketing expenses as a percentage of revenue through productivity initiatives, or to reduce the amount of services we provide and/or to improve our services margins, we may not achieve our operating margin targets.

If we fail to achieve our long-range financial targets, or if analysts and investors expect that we will not achieve our long-range financial targets, the price of our securities could decline.

The market, if any, for

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

[removed: *Statements] [added: Statements] in this Annual Report about anticipated financial results and growth, as well as about the development of our products and markets, are forward-looking statements that are based on our current plans and assumptions.

“Risk Factors” of this Annual [removed: Report.*][added: Report.]

[removed: *Unless] [added: Unless] otherwise indicated, all references to a year reflect our fiscal year that ends on September [removed: 30.*][added: 30.]

[removed: Operating] [added: Operating] and Non-GAAP Financial [removed: Measures][added: Measures]

Our discussion of results includes discussion of our [added: ARR] operating [removed: measures (including "ARR," “license and subscription bookings” and other subscription-related measures) and] [added: measure,] non-GAAP financial [removed: measures.][added: measures, and disclosure of our results on a constant currency basis.]

[removed: Our operating measures] [added: ARR] and [added: our] non-GAAP financial measures, including the reasons we use those measures, are described below in *Results of Operations - Operating [removed: Measures*] [added: Measure*] and *Results of Operations - Non-GAAP Financial Measures,* respectively.

[added: 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 [removed: and] [added: measure,] non-GAAP financial [removed: measures.][added: measures, and constant currency disclosures.]

[removed: Revenue Sources and Recognition][added: | | • | revenue recognition; |]

[removed: Revenue from Contracts with Customers*] [added: Debt*, included] in the Notes to Consolidated Financial Statements in this Annual Report.

[removed: Executive Overview][added: Executive Overview]

[removed: Operating cash flow] [added: Cash provided by operating activities] was [removed: $285 million, up 15%] [added: $234 million] in [removed: 2019] [added: FY'20] compared to [removed: 2018.][added: $285 million in FY'19.]

| | | [removed: Year Ended] [added: Year ended] September [removed: 30, | | | | | | | | | |] [added: 30,] | | | | | | |

| | | [removed: | | | | | |] [added: 2020] | | | | [added: 2019] | | [removed: Percent change] | | [added: Percent Change] | | |

| Total recurring revenue | | [removed: 1,017.4 | | |] [added: $] | [removed: 1,078.6] [added: 1,281.9] | | | [added: $] | [removed: 978.9] [added: 1,017.4] | | | | [removed: 10] [added: 26] | % | | [removed: 13] | [added: 27 |] % |

| Perpetual license | | [removed: 70.7] | [removed: | | | 72.2] [added: 32.7] | | | | [removed: 109.6] [added: 70.7] | | | | [removed: (34] [added: (54] | )% | | [removed: (32] | [added: (53 |] )% |

| Total software revenue [removed: (1)] | | [removed: 1,088.1] | [removed: | | | 1,150.8] [added: 1,314.6] | | | | [removed: 1,088.5] [added: 1,088.1] | | | | [removed: 6] [added: 21] | % | | [removed: 8] | [added: 22 |] % |

| Professional services | | [removed: 167.5] | [removed: | |] [added: 143.8] | [removed: 160.7] | | | [added: 167.5] | [removed: 153.3] | | | [added: (14] | [removed: 5] [added: )%] | [removed: %] | | [removed: 9] [added: (13] | [removed: %] [added: )%] |

| Total revenue | | [removed: $] | [removed: 1,255.6 | | | $] [added: 1,458.4] | [removed: 1,311.5] | | | [removed: $] [added: 1,255.6] | [removed: 1,241.8] | | | [removed: 6] [added: 16] | % | | [removed: 8] | [added: 17 |] % |

| [removed: (1) Total software] [added: % of total] revenue [removed: includes:] | | | [removed: | | | | | |] [added: 30] | [added: %] | | | [added: 33] | [added: %] | | | | |

| License [removed: (2)] | | $ | [removed: 324.4] [added: 509.8] | | | $ | [removed: 666.8 | | | $] [added: 324.4] | [removed: 529.3] | | | [removed: 26] [added: 57] | % | | [removed: 29] | [added: 58 |] % |

| Support and cloud services | | [removed: 763.7] | [removed: | |] [added: 804.8] | [removed: 484.0] | | | [added: 763.7] | [removed: 559.2] | | | [added: 5] | [removed: (13] [added: %] | [removed: )%] | | [removed: (11] [added: 6] | [removed: )%] [added: %] |

| Total [removed: software] revenue | | $ | [removed: 1,088.1] [added: 1,314.6] | | | $ | [removed: 1,150.8 | | | $] [added: 1,088.1] | [removed: 1,088.5] | | | [removed: 6] [added: 21] | % | | [removed: 8] | [added: 22 |] % |

| [added: (in millions)] | | [removed: Year Ended] [added: Year ended] September [removed: 30, | | | | | | |] [added: 30,] | | | | | | |

| Operating [removed: Margin] [added: margin] | | [removed: 5.0] | [added: 14.5] | % | | [removed: 7.7] | [added: 5.0] | % | | [removed: 5.8] | | [removed: %] | | [removed: 33] | [removed: %] | [added: |]

| [removed: Earnings (Loss) Per Share] [added: Diluted earnings (loss) per share] | | $ | [removed: (0.23] [added: 1.12] | [removed: )] | | $ | [removed: 0.03] [added: (0.23] | [added: )] | | [removed: $] | [removed: 0.44] | | | [removed: (94] | [removed: )%] | [added: |]

| Non-GAAP [removed: Operating Margin(1)] [added: operating margin(1)] | | [removed: 20.3] | [added: 29.0] | % | | [removed: 22.4] | [added: 20.3] | % | | [removed: 18.3] | | [removed: %] | | [removed: 22] | [removed: %] | [added: |]

| Non-GAAP [removed: Earnings Per Share(1)] [added: diluted earnings per share(1)(2)] | | $ | [removed: 1.64] [added: 2.57] | | | $ | [removed: 1.74] [added: 1.64] | | | [removed: $] | [removed: 1.45] | | | [removed: 20] | [removed: %] | [added: |]

[added: |] (1) [added: |] Non-GAAP financial measures are reconciled to GAAP results under [removed: *Results of Operations - Non-GAAP] [added: *Non-GAAP Financial] Measures* below. [added: |]

[removed: *ARR*][added: ARR]

| [removed: *(Dollar] [added: (Dollar] amounts in [removed: millions)* | | September 30, | |] [added: millions)] | | [added: Year ended September 30,] | | | | | | | | | | |

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

The following table shows the financial measures that we consider the most significant indicators of [removed: the performance of] our [removed: business.][added: business performance.]

For discussion of [removed: 2018] [added: FY'19] results and comparison with [removed: 2017 results] [added: FY'18 results,] refer to [removed: "Management's] [added: *Management's] Discussion and Analysis of Financial Conditions and Results of [removed: Operations"] [added: Operations*] in our Annual Report on Form 10-K for the fiscal year ended September 30, [removed: 2018.][added: 2019.]

| [removed: *(Dollar] [added: (Dollar] amounts in millions, except per share [removed: data)*] [added: data)] | [removed: Year] [added: | Year] ended September [removed: 30, | | | | | | | | | | | |] [added: 30,] | | | | | | | | [added: Percent Change] | | | | | | |

| | | [removed: | | | | | | | | | | | | | | | Percent Change] [added: 2020] | | | | [added: 2019] | | | | [added: Percent Change] | | |

| | [removed: 2019] | [removed: | | | 2019 | | | | 2018 | | | | 2017] [added: 2020] | | | | [removed: Actual] [added: 2019] | | | [removed: Constant Currency] | [added: Actual] | | [removed: Actual] | | [added: Constant Currency(1)] | [removed: Constant Currency] | |

| Professional services | [removed: 167.5] | | [removed: | | 160.7 | | | | 153.3 | |] [added: 143.8] | | [removed: 176.7] | | [added: 167.5] | | [removed: 5] | [removed: %] | [added: (14] | [removed: 9] [added: )%] | [removed: %] | | (13 | )% | [removed: | (16 | )% |]

| Total revenue | [removed: 1,255.6] | [removed: | | | 1,311.5 | | | | 1,241.8 | |] [added: $] | [added: 1,458.4] | [removed: 1,164.0] | | [added: $] | [added: 1,255.6] | [removed: 6] | [removed: %] | | [removed: 8] [added: 16] | % | | [removed: 7] | [removed: % | | 4] [added: 17] | % |

| Total cost of revenue | [removed: 325.4] | | [removed: | | 318.2 | | | | 326.5 | | | | 328.5 |] [added: 334.3] | | | [removed: (3] | [removed: )%] [added: 325.4] | | | | [added: 3] | [removed: (1] [added: %] | [removed: )%] | | [added: 3] | [added: %] |

ARR increased 14% to $1,270 million (11% and $1,236 million constant currency) compared to the end of FY’19.

ARR growth was strong in our much larger Core business and accelerated in our Growth business, but declined modestly in our Focused Solutions Group (FSG) business.

Churn of 8.6% was slightly higher than expected.

FY’20 revenue of $1.46 billion increased 16% year over year driven by 26% recurring revenue growth, due in part to the adoption of ASC 606 and related business policy changes.

In Q4’20, contract durations were slightly longer than forecasted and we had a higher than anticipated number of conversions, both of which positively impacted the amount of upfront subscription revenue recognized in the quarter.

FY’20 operating margin of 14% increased approximately 900 basis points and EPS increased significantly year over year due to the increase in revenue and a decrease in the effective tax rate, primarily due to a reduction of the U.S. valuation allowance.

We generated $234 million of cash from operations in FY'20 compared to $285 million in FY'19, primarily due to higher interest and restructuring payments in the year.

We ended FY’20 with $335 million of cash and marketable securities and $1.0 billion of debt outstanding, including $1 billion of Senior Notes with a weighted average cost of debt of 3.8%, and $18 million outstanding under our credit facility, which was paid down subsequent to year end.

In addition to providing operating income, operating margin, diluted earnings per share and cash from operations as calculated under GAAP, we provide non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share, and free cash flow for the reported periods.

We also provide a view of our actual results on a constant currency basis.

These non-GAAP financial measures exclude the items described in *Non-GAAP Financial Measures* below.

| Operating income | | $ | 210.9 | | | $ | 63.0 | | | | 234 | % | | | 281 | % |

| Free cash flow(4) | | $ | 213.6 | | | $ | 220.7 | | | | | | | | | |

| (4) | Free cash flow is cash from operations net of capital expenditures of $20.2 million and $64.4 million in FY’20 and FY’19, respectively. |

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.

Starting in Q1’20, our constant currency disclosures are calculated by multiplying the results in local currency for FY’20 and FY’19 by the exchange rates in effect on September 30, 2019, excluding the effect of any hedging.

Our revenue results period to period are impacted by contract terms, including the duration and start dates of our subscription contracts.

Early in Q4’19, we discontinued offering cancellation rights for multi-year subscription contracts, which results in the recognition of the license portion of revenue for all years of the contract at the beginning of the multiyear contract period for our on-premises subscription licenses.

The discontinuation of the cancellation clause is expected to have less of an impact in FY’21.

We are expanding our SaaS offerings and are releasing additional cloud functionality into our products.

As a result, our revenue will be impacted as a higher portion of it will be recognized ratably.

| (Dollar amounts in millions) | | Year ended September 30, | | | | | | | | Percent Change | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | 2020 | | | | 2019 | | | | Actual | | | | Constant Currency | | |

Software revenue increased in FY’20 compared to FY’19 due to subscription revenue growth, offset by declines in perpetual license and perpetual support revenue due to conversions of support contracts to subscriptions.

In FY’20, subscription license revenue increased 88% (89% constant currency) compared to the year-ago period, due in part to the discontinuation of the annual cancellation right in new multi-year contracts and in part to new conversions in FY’20.

Professional services revenue declined in FY’20 due to challenges with project scoping and implementation activities and performance due to social distancing measures and facility closures implemented to address the COVID-19 pandemic.

Additionally, there was an increase in the estimated costs to complete a large fixed price professional services contract, which led to a corresponding decrease in the estimated percent complete and a related reversal of revenue.

| Software Revenue by Product Group | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (Dollar amounts in millions) | | Year ended September 30, | | | | | | | | Percent Change | | | | | | |

| | | 2020 | | | | 2019 | | | | Actual | | | | Constant Currency | | |

| Core (CAD and PLM) | | $ | 947.1 | | | $ | 762.2 | | | | 24 | % | | | 25 | % |

| Growth (IoT, AR, Onshape) | | | 183.8 | | | | 140.2 | | | | 31 | % | | | 32 | % |

| FSG (Focused Solutions Group) | | | 183.7 | | | | 185.7 | | | | (1 | )% | | | (1 | )% |

| Software revenue | | $ | 1,314.6 | | | $ | 1,088.1 | | | | 21 | % | | | 22 | % |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (Dollar amounts in millions) | | Year ended September 30, | | | | | | | | Percent Change | | | | | | |

| | | 2020 | | | | 2019 | | | | Actual | | | | Constant Currency | | |

| Core (CAD and PLM) | | $ | 1,025.7 | | | $ | 869.0 | | | | 18 | % | | | 19 | % |

We sell software subscription and perpetual licenses, support for perpetual licenses, cloud services and professional services.

Subscription revenue is comprised of time-based licenses whereby customers use our software and receive related support for a specified term.

Results for reporting periods beginning on or after October 1, 2018 are presented under the Accounting Standards Update No. 2014-09, *Revenue from Contracts with Customers: Topic 606* (ASC 606), while prior period amounts are not adjusted and continue to be reported in accordance with the guidance provided by ASC 985-605, *Software-Revenue Recognition* and revenues for non-software deliverables in accordance with ASC 605-25, *Revenue Recognition, Multiple-Element Arrangements* (ASC 605).

Through 2018, revenue for our subscription contracts was recognized ratably over the term of the contract under ASC 605; this differs from how revenue for such contracts is recognized under ASC 606.

Our contracts with customers may include multiple goods and services.

Under ASC 606, revenue is recognized for each performance obligation that can be separately identified under the contract.

Accordingly, our on-premise subscription contracts are unbundled into multiple performance obligations (i.e., license, cloud and support).

Determining whether the software licenses and the cloud services are distinct from each other, and therefore performance obligations to be accounted for separately, or not distinct from each other, and therefore part of a single performance obligation, may require significant judgment.

To date, for the majority of our products, we have concluded that the on-premise software licenses and cloud services provided in our subscription offerings are distinct from each other such that revenue from each performance obligation within the offering should be recognized separately.

We will continue to review this conclusion as the cloud services that we deliver in combination with our on-premise subscriptions continue to evolve, which could result in changes to how we recognize revenue for such products.

The license portion of our on-premise subscription contracts (approximately 50% to 55%) is recognized upfront and the cloud and support portions (approximately 45% to 50%) are recognized ratably over the term.

Software as a Service (SaaS) and cloud services for which revenue is generally recognized ratably over the term of the contract are included in subscription revenue and have been immaterial to date.

Perpetual licenses are a perpetual right to use the software, for which revenue is generally recognized up front upon shipment to the customer.

Support revenue is comprised of contracts to maintain new and/or previously purchased licenses, for which revenue is recognized ratably over the

term of the contract.

Professional services engagements typically result from sales of new licenses, and for which revenue is recognized as the services are performed.

Our revenue recognition practices and the effects of our adoption of ASC 606, including adjustments to accumulated deficit related to billed and unbilled deferred revenue, are described in "revenue Recognition" and *"Recently Adopted Accounting Pronouncements"* in *Note 2.

Summary of Significant Accounting Policies* and in *Note 3.

Our adoption of ASC 606 has increased the volatility of our revenue results as a significant portion of subscription revenue is recognized at the time of delivery, rather than being recognized ratably over the contract period.

ARR increased 10% to $1,116 million ($1,134 million and 12% at the guidance rate) as of the end of 2019 reflecting solid growth for this metric across all our businesses, particularly in our IoT and AR businesses.

We made $22 million more in restructuring payments in 2019 compared to 2018 related to our workforce realignment and headquarters relocation.

Our 2019 results reflect continued demand for our PLM and CAD products as well as growing demand for our IoT and Augmented Reality (AR) products.

License and subscription bookings in the fourth quarter of 2019 were $150 million, higher than anticipated, driven by strong bookings in IoT and AR, including a mega deal (bookings greater than $5 million) with our strategic alliance partner, Rockwell Automation.

License and subscription bookings were $472 million, up 1% (4% constant currency) in 2019 compared to 2018, primarily driven by strong IoT and AR bookings growth, offset by declines in PLM and CAD bookings.

Under ASC 605, total revenue, software revenue and subscription revenue grew in 2019 compared to 2018, despite an 800 basis point increase in subscription mix in 2019.

Under ASC 605, recurring software revenue was $1,079 million, an increase of 10% (13% constant currency) in 2019 compared to 2018.

Under ASC 605, recurring revenue as a percentage of software revenue was 94% in 2019 compared to 90% in 2018.

Under ASC 605, perpetual license and support revenue decreased year over year because we discontinued offering perpetual licenses for most of our solutions effective January 1, 2019.

Operating margin under ASC 605 increased 200 basis points in 2019 resulting from the compounding effect of subscription licenses and lower operating expenses due to effective cost discipline.

EPS declined under ASC 605 in 2019 primarily due to a higher tax provision.

Summary Revenue and Earnings Results


| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | ASC 605 | | | | |

| | | As Reported ASC 606 | | | | ASC 605 | | | | As Reported ASC 605 | | | | 2019 vs 2018 | | | | |

| Revenue *(in thousands)* | | 2019 | | | | 2019 | | | | 2018 | | | | Change | | | Constant Currency | |

| Subscription license | | $ | 253.7 | | | | | | | | | | | | | | | |

| Subscription support & cloud services | | 348.5 | | | | | | | | | | | | | | | | |

| Total subscription | | 602.2 | | | | 667.6 | | | | 482.0 | | | | 38 | % | | 41 | % |

[removed: *Foreign] [added: Foreign] currency exchange [removed: risk*][added: risk]

We do not enter into or hold foreign currency derivative financial instruments for trading or speculative purposes nor do we enter into derivative financial instruments to hedge future cash [removed: flow] [added: flows] or forecast transactions.

[removed: In 2019, approximately] [added: Approximately] 60% of our revenue and 40% of our expenses were transacted in currencies other than the U.S. dollar.

Based on current revenue and expense levels (excluding restructuring charges and stock-based compensation), a $0.10 change in the USD to [removed: European exchange rates] [added: EUR] and a 10 Yen change in the Yen to USD exchange rate would impact operating income by approximately [removed: $17] [added: $19] million and [removed: $7] [added: $9] million, respectively.

The contracts [removed: primarily] are [added: primarily] denominated in [removed: Canadian Dollars] [added: Japanese Yen] and European currencies, and have maturities of less than three months.

[added: Gains and] losses on forward contracts and foreign [added: currency] denominated receivables and payables are included in foreign currency net losses.

As of September 30, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] we had outstanding forward contracts for derivatives not designated as hedging instruments with notional amounts equivalent to the following:

| | | [removed: September 30,] [added: September 30,] | | | | | | |

| [removed: Currency Hedged] [added: Currency Hedged] *(in thousands)* | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | |

| Canadian / U.S. Dollar | | $ | [removed: 9,408] [added: 6,847] | | | $ | [removed: 7,334] [added: 9,408] | |

| Euro / U.S. Dollar | | [removed: 308,282] | [added: 390,673] | | | [removed: 297,730] | [added: 308,282] | |

| British Pound / U.S. Dollar | | [removed: 3,756] | [added: 6,328] | | | [removed: 7,074] | [added: 3,756] | |

| Israeli [removed: Sheqel] [added: Shekel] / U.S. Dollar | | [removed: 10,272] | [added: 9,503] | | | [removed: 9,778] | [added: 10,272] | |

| Japanese Yen / U.S. Dollar | | [removed: 37,462] | [added: 50,379] | | | [removed: 37,456] | [added: 37,462] | |

| Swiss Franc / U.S. Dollar | | [removed: 12,001] | [added: 12,874] | | | [removed: 11,944] | [added: 12,001] | |

| Swedish Krona / U.S. Dollar | | [removed: 20,636] | [added: 18,871] | | | [removed: 18,207] | [added: 20,636] | |

| Singapore Dollar / U.S. Dollar | | [removed: 34,585] | [added: 3,281] | | | [removed: 1,314] | [added: 34,585] | |

| Chinese [removed: Renminbi/U.S.] [added: Renminbi / U.S.] Dollar | | [removed: 9,079] | [added: 5,415] | | | [removed: 9,010] | [added: 52,466] | |

| All other | | [removed: 9,487] | [added: 8,291] | | | [removed: 5,993] | [added: 9,487] | |

| Total | | $ | [removed: 498,355] [added: 512,462] | | | $ | [removed: 405,956] [added: 498,355] | |

[removed: *Debt*][added: Debt]

In addition to the [removed: $500 million] [added: $1 billion] due under our [removed: 2024 6%] [added: 2025 and 2028 Senior] Notes, as of September 30, [removed: 2019,] [added: 2020,] we had [removed: $173] [added: $18] million outstanding under our credit facility.

As of September 30, [removed: 2019,] [added: 2020,] the annual rate on the credit facility loans was [removed: 3.44%.][added: 1.81%.]

If there was a hypothetical 100 basis point change in interest rates, the annual net impact to earnings and cash flows would be [removed: $1.7 million.][added: immaterial.]

This hypothetical change in cash flows and earnings has been calculated based on the borrowings outstanding at September 30, [removed: 2019] [added: 2020] and a 100 basis point per annum change in interest rate applied over a one-year period.

[removed: *Cash] [added: Cash] and cash [removed: equivalents*][added: equivalents]

As of September 30, [removed: 2019,] [added: 2020,] cash equivalents were invested in highly liquid investments with maturities of three months or less when purchased.

We invest our cash with highly rated financial institutions in North America, Europe and [removed: Asia-Pacific] [added: Asia Pacific] and in diversified domestic and international money market mutual funds.

At September 30, [removed: 2019,] [added: 2020,] we had cash and cash equivalents of [removed: $40.0] [added: $39] million in the United States, [removed: $83.0] [added: $108] million in Europe, [removed: $122.0] [added: $99] million in Asia Pacific [removed: Rim] (including India), and [removed: $25.0] [added: $29] million in other non-U.S. countries.

Given the short maturities and investment grade quality of the portfolio holdings at September 30, [removed: 2019,] [added: 2020,] a hypothetical 10% change in interest rates would not materially affect the fair value of our cash and cash equivalents.

[added: The] opposite holds true in a rising interest rate environment.

Over the past several years, the U.S. Federal Reserve Board, European Central Bank and Bank of England have changed certain benchmark interest rates, which [removed: have] [added: has] led to declines and increases in market interest rates.

[removed: Our] [added: Changes in foreign currencies relative to the U.S. dollar had an immaterial impact on our] consolidated cash balances [removed: were impacted favorably by] [added: in 2020 and an unfavorable impact of] $2.6 million and $7.8 million in 2019 and 2018, [removed: respectively and unfavorably by $1.1 million] [added: respectively,] in [removed: 2017,] [added: particular] due to changes in [removed: foreign currencies relative to] the [removed: U.S. dollar, particularly the] Euro and the Japanese Yen.

| --- | --- |

Historically two-thirds of our revenue and half of our expenses were transacted in currencies other than U.S. Dollars.

Gains and

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Chinese Yuan offshore / U.S. Dollar | | 43,387 | | | | 116 | | |

As of September 30, 2019 and 2018, we had outstanding forward contracts designated as cash flow hedges with notional amounts equivalent to the following:

| Euro / U.S. Dollar | | $ | — | | | $ | 8,495 | |

| Japanese Yen / U.S. Dollar | | — | | | | 2,193 | | |

| SEK / U.S. Dollar | | — | | | | 1,708 | | |

| Total | | $ | — | | | $ | 12,396 | |

As of November 15, 2019, we have $628 million outstanding under our credit facility due to the Onshape acquisition.

The

[removed: ][added: ]

We [added: also] continue to expand our solution offerings to address the most pressing business problems our customers confront.

These solutions are being designed to aggregate [removed: products and] technology from [added: across] our portfolio as well as from other companies, including our key partners.

Our business is based on a subscription business model, which provides flexibility to customers and increases predictability and consistency of billings [removed: to] [added: for] PTC.

Our customer success program partners with customers to enable successful deployment and [removed: utilization] [added: use] of our solutions.

We generate revenue through the sale of software subscriptions, which include license access and support (technical support and software [removed: updates),] [added: updates);] support for existing perpetual [removed: licenses,] [added: licenses;] professional services (consulting, implementation, and [removed: training),] [added: training);] and cloud [removed: services.][added: services (hosting for our software and SaaS).]

[removed: ][added: ]

Creo provides capabilities for [added: generative design, real-time simulation (through our collaboration with ANSYS), additive manufacturing,] design flexibility, advanced assembly design, piping and cabling design, advanced surfacing, comprehensive virtual prototyping and other essential design functions.

Our Creo solutions [added: also] include augmented and virtual reality through a native [removed: cloud dependent] [added: cloud-dependent] integration with our Vuforia® augmented reality (AR) solution.

With every seat of Creo, our customers can create and publish AR experiences and share their [removed: design] [added: designs] instantly to collaborate with anyone across the entire enterprise around the world on [added: virtually] any device.

Our [added: Windchill® suite of] PLM [removed: platform] [added: software] enables efficient and consistent product data management from inception through design, as well as communication and collaboration across the entire enterprise, including product development, manufacturing and the supply chain.

[removed: ][added: ]

Windchill offers a single repository for [removed: all] product information, thus providing a “single source of truth” for [removed: all] product-related content such as CAD models, documents, technical illustrations, embedded software, calculations, and requirement specifications for all phases of the product lifecycle to help companies streamline enterprise-wide communication and make informed decisions.

[removed: Our] Windchill [removed: product now] also includes augmented reality (AR) capabilities, enabling customers to build a digital product definition and publish the representation of the resulting product in AR.

[removed: ][added: ]

[removed: Our ThingWorx® product] [added: ThingWorx] enables customers to reduce the time, cost, and risk required to build and deploy [removed: IoT] [added: IIoT] applications; [added: easily and more securely] connect devices, systems, and applications; [added: build applications quickly and at enterprise scale; analyze IIoT data to proactively optimize operations;] manage connected [removed: products;] [added: devices, processes] and [removed: analyze industrial IoT data.][added: systems; and create digital and AR experiences.]

[removed: ThingWorx] [added: ThingWorx] Solution [removed: Central] [added: Central] is a centralized portal in the cloud that allows users of ThingWorx to efficiently discover, deploy, and manage ThingWorx applications across the enterprise from a single location, which allows for cost-effective, efficient, and [removed: version controlled] [added: version-controlled] management of applications.

[added: Our ThingWorx Kepware® product enables users to connect, manage,] monitor, and control disparate devices and software applications.

ThingWorx also offers sophisticated artificial intelligence and machine learning technology that enables customers to simplify and automate complex analytical [removed: processes that enhance industrial IoT] [added: processes, enhancing IIoT] solutions through real-time insights, predictions and recommendations from information collected from smart, connected [removed: products.][added: things.]

[removed: ][added: ]

Our [removed: Vuforia] [added: Vuforia] Expert Capture™ product chronicles the real-time movements of a person wearing an AR headset by monitoring the individual both audio-visually and spatially in three dimensions.

The Vuforia suite also includes the Vuforia Engine™ technology for application [removed: development and] [added: development,] Vuforia Chalk™ collaboration and remote assistance [removed: solution.][added: solution, and Vuforia Spatial Toolbox™ technology to accelerate the development of spatial computing prototypes and use cases.]

Building an ecosystem of partners is becoming increasingly important as we expand the capabilities of our core [removed: solutions,] [added: solutions] and [removed: IoT] [added: IIoT] offerings and [removed: as we] expand our addressable markets by leveraging our partner sales and services distribution channels.

We [removed: partnered] [added: partner] with [removed: Rockwell Automation] [added: Rockwell Automation] to align our respective smart factory technologies to address the market for smart, connected operations, with particular focus on the plant and factory setting.

In connection with this strategic alliance, [added: in 2018] Rockwell Automation made a $1 billion equity investment in PTC.

We [removed: partnered] [added: partner] with [removed: Microsoft] [added: Microsoft] to make the ThingWorx® Industrial Innovation Platform available on the Microsoft Azure cloud platform as our preferred cloud platform.

This integration enables us to deliver a combined and connected solution for [removed: industrial IoT] [added: IIoT] and digital product lifecycle management that [removed: enable] [added: enables] companies to bring new products to market faster, enhance customer service, and introduce new revenue streams, while reducing operating costs.

We [removed: partnered] [added: partner] with [removed: ANSYS to enable us] [added: ANSYS] to embed Ansys' Discovery Live real-time simulation within Creo, enabling us to offer a fully-integrated CAD and real-time simulation solution.

[removed: Our] [added: Our] Markets and How We Address [removed: Them][added: Them]

We compete in the [removed: Industrial IoT (IIoT) and augmented reality markets and the] [added: IIoT, AR,] CAD and PLM markets.

Approximately [removed: 20% to] 30% [added: to 35%] of our sales of products and services are through third-party [removed: resellers and other strategic partners.][added: resellers.]

As we grow our IIoT business, we expect [added: that] our go-to-market strategy will rely more on [added: selling through] partners, including the types of strategic partners described above, and marketing directly to end users and developers.

Additional financial information about our segments and international and domestic operations may be found in [removed: Note] [added: *Note] 18.

Segment and Geographic [removed: Information] [added: Information*] of Notes to Consolidated Financial Statements in this [removed: Annual Report,] [added: Form 10-K,] which information is incorporated herein by reference.

[removed: Competition][added: Competition]

We compete with a number of companies [removed: that offer solutions that] [added: whose offerings] address one or more specific functional areas covered by our solutions.

In our IIoT business, we compete with large established companies [removed: like] [added: such as] Amazon, IBM, Oracle, SAP, Siemens AG, [added: Software AG,] and GE.

There are also a number of [removed: small] [added: smaller] companies that compete in the market for [removed: IoT] [added: IIoT] products.

For enterprise CAD and PLM [removed: solutions and for discrete desktop CAD products,] [added: solutions,] we compete with companies including [removed: AutoDesk,] [added: Autodesk,] Dassault Systèmes [removed: SA] [added: SA,] and Siemens AG.

[removed: Proprietary Rights][added: Proprietary Rights]

| --- | --- |

PTC is a global software and services company that delivers solutions to power our industrial customers' digital transformations, enabling them to better design, manufacture, operate, and service their products.

Our Internet of Things (IoT) and Augmented Reality (AR) solutions enable companies to connect factories and plants, smart products, and enterprise systems to transform their businesses.

These products, along with Onshape, are considered our Growth Products.

The primary products in our Core Products portfolio are innovative Computer-Aided Design (CAD) and Product Lifecycle Management (PLM) solutions that enable manufacturers to create, innovate, and service products.

Our Focused Solutions Group (FSG) is a family of software products that target specific vertical industries where we can deliver unique domain expertise and a competitive advantage with Application Lifecycle Management (ALM) products, Service Lifecycle Management (SLM) products, and other niche tailored solutions.

Our Strategy

There are three key elements to our strategy to deliver long-term shareholder value.

Align with market demand to build a strong pipeline.

We believe demand for solutions such as ours that enable work from home, global team and supply chain collaboration, remote asset management, and remote frontline worker training and support is strong.

Optimize new and renewal sales and customer success to power top line ARR growth.

FY’20 marked the third consecutive year of double-digit ARR growth, despite the extreme volatility of PMIs and the macroeconomic environment that occurred during the same time frame.

In the past year, we have accelerated our digital marketing and sales capabilities.

Create an efficient business model and operation that enable us to drive free cash flow growth.

As we have completed our subscription transition, we see greater ARR stability and continue to drive operational efficiencies.

Growth Products

Our ThingWorx® IIoT platform delivers end-to-end capabilities that enable customers to address every facet of their digital transformation journey, enabling them to transform their operations, products, and services—and unlock new business models.

PTC was named a leader in IIoT platforms in Gartner’s 2020 Magic Quadrant, Quadrant Knowledge Solutions’ 2020 SPARK Matrix, and Forrester’s 2019 Wave.

Our Vuforia® enterprise AR platform and wide-ranging solution suite enable industrial enterprise customers to address workforce challenges and meet business goals.

PTC was named a leader in AR platforms in ABI Research’s 2019 Competitive Assessment and Teknowlogy’s PAC RADAR assessment.

Our Onshape® Software-as-a-Service (SaaS) product development platform unites computer-aided design with data management, collaboration tools, and real-time analytics.

A cloud-native multi-tenant solution that can be instantly deployed on virtually any computer or mobile device, Onshape enables teams to work together from anywhere.

Real-time design reviews, commenting, and simultaneous editing enable a collaborative workflow where multiple design iterations can be completed in parallel and merged into the final design.

Core Products

PTC was named a leader in PLM in Quadrant Knowledge Solutions’ 2019 SPARK Matrix.

Focused Group Products (FSG)

Our IntegrityTM application lifecycle management (ALM) and model-based systems engineering capabilities enable users to manage system models, software configurations, test plans and defects.

Our Servigistics® service parts management solution enables customers to effectively manage service parts, improve their products and services, and increase customer satisfaction.

Strategic Alliances

The companies’ primary joint offering, FactoryTalk InnovationSuite Powered by PTC, is the industry’s first comprehensive digital transformation software suite that offers fully integrated IIoT, edge-to-cloud analytics, manufacturing execution systems (MES), and AR.

In October 2020, we expanded our strategic alliance with Rockwell Automation to include our PLM and SaaS products to streamline both companies’ commercial efforts to extend a comprehensive digital thread solution, from upfront design through operation and maintenance.

PTC will also offer Rockwell Automation’s virtual machinery simulation and testing software to its own customers and partners.

In Q3’20, we expanded our strategic alliances with Microsoft and Rockwell Automation into a three-way alliance to take to market a new class of IIoT solutions called Factory Insights as a Service.

Factory Insights as a Service is a turnkey cloud solution that enables manufacturers to achieve significant impact, speed, and scale with their digital transformation initiatives.

We are also working towards integrating Ansys’s broader Discovery AIM suite with the Creo suite.

For our AR products, our primary competitors include Microsoft, Upskill, Ubimax, ScopeAR and Re’Flekt.

Of these employees, 2,315 were in the United States; 2,218 in the Asia Pacific region, including 1,501 in India; 1,566 in Europe; and 144 in the Americas (excluding the U.S.).

As a software company, our employees are a significant asset and we aim to create an environment that is equitable, inclusive and representative in which our employees can grow and advance their careers, with the overall goal of developing, expanding and retaining our workforce to support our business.

Inclusion and Diversity.

We have prioritized inclusion and diversity (I&D) as part of our corporate-wide strategic goals.

PTC is a global software and services company that, together with a partner ecosystem, drives digital transformation for industrial companies.

We serve a broad range of these companies, including discrete manufacturers (industrial machinery & components, aerospace & defense, automotive, and electronics & high technology), process/continuous manufacturers (life sciences, energy & resources, and consumer packaged goods), and operators.

Our technology enables customers to improve operational efficiency, accelerate product and service innovation, and increase workforce productivity.

We go to market with four technology platforms, consisting of and supported by products that enable 3D modeling (CAD), lifecycle management (PLM), data orchestration (IIoT), and experience creation (AR).

Recent Events

On November 1, 2019, we acquired Onshape, creators of the first Software as a Service (SaaS) product development platform that unites robust CAD with powerful data management and collaboration tools, for approximately $470 million, net of cash acquired.

The acquisition is expected to accelerate our ability to attract new customers with a SaaS-based product offering and position the company to capitalize on an industry transition to SaaS.

In connection with the acquisition, we borrowed $455 million under our existing credit facility.

On November 13, 2019, we also increased the revolving loan commitment under the credit facility to $1 billion and made other amendments to the credit facility.

3D (CAD)

Our 3D platform enables users to create conceptual and detailed designs, analyze designs, perform engineering calculations and leverage the information created downstream using 2D, 3D, parametric and direct modeling.

Our principal 3D product is described below.

Creo also now includes the Discovery Live real-time simulation technology from ANSYS.

This solution offers customers a unified modeling and simulation environment and provides design engineers with an interactive design experience that will enable them to create higher quality products, while reducing product and development costs.

Lifecycle Management (PLM)

Our principal Lifecycle Management product is described below.

Our Windchill® suite of PLM software provides product lifecycle management capabilities - from design to service.

Data Orchestration (IIoT)

Our data orchestration platform delivers tools, technologies, and solutions that empower companies to rapidly develop and deploy powerful industrial IoT applications, enabling them to transform their operations, products, and services - and unlock new business models.

Our principal data orchestration product is described below.

ThingWorx includes cloud-based tools that allow customers to easily and more securely connect products and devices to the cloud, and intelligently process and store product and sensor data.

ThingWorx contains integral communications connectivity to industrial automation environments through our ThingWorx Kepware® product, which enables users to connect, manage,

Experience Creation (AR)

Our Experience Creation platform offers a way to capture, create, and deliver content for industrial augmented reality experiences.

Our principal experience creation products are described below.

Strategic Partners

With this in mind, in 2018, we entered into the three strategic alliances described below.

As part of this strategic alliance, we have aligned our ThingWorx® IoT, Kepware® industrial connectivity, and Vuforia® augmented reality (AR) platforms with Rockwell Automation’s FactoryTalk® MES, FactoryTalk Analytics, and Industrial Automation platforms, and we both offer these solutions in the market.

This suite is now launched and marketed as FactoryTalk Innovation Suite Powered by PTC.

We believe our ThingWorx IoT platform and solutions are complementary to the offerings of many of our competitors, and we have partnered with many of the named competitors.

You should read that discussion, which is incorporated into this section by reference.

Deferred Revenue and Backlog (Unbilled Deferred Revenue)

Information about Deferred Revenue and Backlog (Unbilled Deferred Revenue) is discussed in Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview” below.

Of these employees, 2,203 were located in the United States and 3,852 were located outside the United States.

Information on legal proceedings can be found in *Note 10.

Commitments and Contingencies* of Notes to Consolidated Financial Statements in this Form 10-K, which information is incorporated herein by reference.

None.

| | |

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| ☑ | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

For the Fiscal Year Ended: September 30, [removed: 2019][added: 2020]

| ☐ | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period from_ [removed: to_][added: to_]

[removed: PTC Inc.][added: PTC Inc.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Massachusetts] [added: Massachusetts] | | [removed: 04-2866152] [added: 04-2866152] |

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization)] [added: organization)] | | [removed: (I.R.S. Employer Identification Number)] [added: (I.R.S. Employer Identification Number)] |

[removed: 121] [added: 121] Seaport [removed: Boulevard, Boston, MA 02210][added: Boulevard, Boston, MA 02210]

[removed: (Address] [added: (Address] of principal executive offices, including zip [removed: code)][added: code)]

[removed: (781) 370-5000][added: (781) 370-5000]

[removed: (Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code)][added: code)]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [removed: Trading Symbol] [added: Trading Symbol] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: Common] [added: Common] Stock, $.01 par value per [removed: share] [added: share] | [removed: PTC] [added: PTC] | [removed: NASDAQ] [added: NASDAQ] Global Select [removed: Market] [added: Market] |

[removed: Securities] [added: Securities] registered [removed: pursuant][added: pursuant]

[removed: to] [added: to] Section 12(g) of the Act: [removed: None][added: None]

Yes ☑ No [removed: ¨][added: ☐]

Yes [removed: ¨ No] ☑ [added: No ☐]

The aggregate market value of our voting stock held by non-affiliates was approximately [removed: $10,784,576,792] [added: 6,144,651,405] on [removed: April 1, 2019] [added: March 27, 2020] based on the last reported sale price of our common stock on the Nasdaq Global Select Market on [removed: March 29, 2019.][added: that date.]

There were [removed: 118,097,684] [added: 115,695,428] shares of our common stock outstanding on that day and [removed: 115,492,735] [added: 116,662,768] shares of our common stock outstanding on November [removed: 15, 2019.][added: 18, 2020.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the definitive Proxy Statement in connection with the [removed: 2020] [added: 2021] Annual Meeting of Stockholders [removed: (2020] [added: (2021] Proxy Statement) are incorporated by reference into Part III.

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM 10-K FOR FISCAL YEAR [removed: 2019][added: 2020]

[removed: Table] [added: Table] of [removed: Contents][added: Contents]

| | | [removed: Page] [added: Page] |

| [removed: [PART I.](#sEC74104D59765AEB9BD2E415ABAB22B0)] [added: [PART I.](#PART_I_)] | | |

| Item 1. | [removed: [Business](#sA17597908F3A5756B5A5731A82D54398)] [added: [Business](#Business)] | [removed: [1](#sA17597908F3A5756B5A5731A82D54398)] [added: [1](#Business)] |

| Item 1A. | [Risk [removed: Factors](#sC6E055DD24545EC388E501C9E767B24C)] [added: Factors](#ITEM_1A_RISK_FACTORS)] | [removed: [5](#sC6E055DD24545EC388E501C9E767B24C)] [added: [7](#ITEM_1A_RISK_FACTORS)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#sE2AAE931B3265104A8D848E56CF6435D)] [added: Comments](#UNRESOLVED_STAFF_COMMENTS)] | [removed: [12](#sE2AAE931B3265104A8D848E56CF6435D)] [added: [16](#UNRESOLVED_STAFF_COMMENTS)] |

| Item 2. | [removed: [Properties](#s2CAA1A2813665122837800F2E4188C7A)] [added: [Properties](#PROPERTIES)] | [removed: [12](#s2CAA1A2813665122837800F2E4188C7A)] [added: [17](#PROPERTIES)] |

| Item 3. | [Legal [removed: Proceedings](#s50C1058C41E25C7C9D2433F91A6CD46C)] [added: Proceedings](#LEGAL_PROCEEDINGS)] | [removed: [12](#s50C1058C41E25C7C9D2433F91A6CD46C)] [added: [17](#LEGAL_PROCEEDINGS)] |

| Item 4. | [Mine Safety [removed: Disclosures](#sCA638B6A8CA2590EA4DFCC93B234AE4B)] [added: Disclosures](#MINE_SAFETY_DISCLOSURES)] | [removed: [12](#sCA638B6A8CA2590EA4DFCC93B234AE4B)] [added: [17](#MINE_SAFETY_DISCLOSURES)] |

| [removed: [PART II.](#s2477A607E9EA5647842998C69BEB95C2)] [added: [PART II.](#PART_II)] | | |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sD32F0C072E265353BF5F38F29FDE3935)] [added: Securities](#MARKET_FOR_REGISTRANTS_COMMON_EQUITY_REL)] | [removed: [12](#sD32F0C072E265353BF5F38F29FDE3935)] [added: [17](#MARKET_FOR_REGISTRANTS_COMMON_EQUITY_REL)] |

| Item 6. | [Selected Financial [removed: Data](#s61834D95C73955CA8D30CB16E1748405)] [added: Data](#ITEM_6_SELECTED_FINANCIAL_DATA)] | [removed: [13](#s61834D95C73955CA8D30CB16E1748405)] [added: [17](#ITEM_6_SELECTED_FINANCIAL_DATA)] |

OR

Yes ☑ No ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes ☐ No ☑

____________________________________________________

| | |

| --- | --- |

OR

| | | |

| | | | | | | | |

| | |

We currently have [removed: 80 primary] [added: 88] office locations used in operations in the United States and internationally, predominately as sales and/or support offices and for research and development work.

Of our total of approximately [removed: 1,812,000] [added: 1,288,000] square feet of leased facilities used in operations, approximately [removed: 420,000] [added: 521,000] square feet are located in the U.S., including 250,000 square feet at our headquarters facility located in Boston, Massachusetts, and approximately [removed: 289,000] [added: 260,000] square feet are located in India, where a significant amount of our research and development is conducted.

In addition, approximately [removed: 520,000] [added: 276,000] feet are associated with facilities that have been restructured, primarily our previous headquarters facility in Needham, Massachusetts.

| | |

[removed: PART II][added: PART II]

| | |

On September 30, [removed: 2019,] [added: 2020,] the close of our fiscal year, and on November [removed: 13, 2019,] [added: 18, 2020,] our common stock was held by [removed: 1,107] [added: 1,072] and [removed: 1,104] [added: 1,070] shareholders of record, respectively.

| --- | --- |

The table below shows the shares of our common stock we repurchased in the fourth quarter of 2019.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Period (1) | 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 |

| June 30, 2019 - July 27, 2019 | — | | | $— | | — | | $310,005,304 (2) |

| July 28, 2019 - August 24, 2019 | 301,459 | | | $66.39 | | 301,459 | | $290,006,120 (2) |

| August 25, 2019 - September 30, 2019 | 76,705 | | | $65.19 | | 76,705 | | $285,006,347 (2) |

| Total | 378,164 | | | $66.15 | | 378,164 | | $285,006,347 (2) |

(1) Periods are our fiscal months within the fiscal quarter.

(2) Our Board of Directors has authorized us to repurchase up to $1,500 million of our common stock for the period October 1, 2017 through September 30, 2020, which program we announced on September 19, 2017 and announced expansion of in July 2018.

Our five-year summary of selected financial data and quarterly financial data for the past two years is located on [removed: pages] [added: page] A-1 [removed: and A-2] at the end of this Form 10-K and incorporated herein by reference.

| | |

| --- | --- |

| --- | --- |

[removed: Evaluation] [added: Evaluation] of Disclosure Controls and [removed: Procedures][added: Procedures]

Based on this evaluation, we concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, [removed: 2019.][added: 2020.]

[removed: Management’s] [added: Management’s] Annual Report on Internal Control over Financial [removed: Reporting][added: Reporting]

| [added: |] • | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |

| [added: |] • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |

| [added: |] • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, [removed: 2019] [added: 2020] using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in *Internal Control-Integrated Framework (2013)*.

Based on this assessment and those criteria, our management concluded that, as of September 30, [removed: 2019,] [added: 2020,] our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of September 30, [removed: 2019] [added: 2020] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears under Item 8.

There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, [removed: 2019] [added: 2020] that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

| --- | --- | --- |

| --- | --- | --- |

| --- | --- | --- |

| | |

| --- | --- |

[removed: PART III][added: PART III]

| --- | --- |

The information required by this item with respect to our directors and executive officers may be found in the sections captioned “Proposal 1: Election of Directors,” “Corporate Governance,” "Our Executive Officers," and “Transactions With Related Persons” appearing in our [removed: 2020] [added: 2021] Proxy Statement.

[removed: *Code] [added: Code] of Ethics for Senior Executive [removed: Officers*][added: Officers]

| --- | --- |

Information with respect to director and executive compensation may be found under the headings “Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation,” and “Compensation Committee Report” appearing in our [removed: 2020] [added: 2021] Proxy Statement.

| --- | --- |

Information required by this item may be found under the headings “Information about PTC Common Stock Ownership” in our [removed: 2020] [added: 2021] Proxy Statement.

[removed: | EQUITY] [added: EQUITY] COMPENSATION PLAN [removed: INFORMATION as of SEPTEMBER 30, 2019 | | | | | | | | | | |][added: INFORMATION]

| [removed: Plan Category] [added: Plan Category] | | [removed: Number] [added: Number] of securities to be issued upon exercise of outstanding options, warrants and [removed: rights] [added: rights] | | | [removed: Weighted-average] [added: | Weighted-average] exercise price of outstanding options, warrants and [removed: rights] [added: rights] | | | [removed: Number] [added: | Number] of securities remaining available for future issuance under equity compensation [removed: plans] [added: plans] | | | [added: |]

| Equity compensation plans approved by security holders: | | | | | | | | | | | [added: | | |]

| 2016 Employee Stock Purchase [removed: Plan (2)] [added: Plan(2)] | | [added: |] — | | | [added: |] — | | | [removed: 1,164,289] | [added: 875,488] | [added: |] (2) |

| (1) [added: |] All of the shares issuable upon vesting are restricted stock units, which have no exercise price. | [removed: | | | | | | | | | |]

| (2) [added: |] This amount represents the total number of shares remaining available under the 2016 Employee Stock Purchase Plan, of which [removed: 165,909] [added: 146,691] shares are subject to purchase during the current offering period. | [removed: | | | | | | | | | |]

| --- | --- |

as of September 30, 2020

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2000 Equity Incentive Plan(1) | | | 3,507,317 | | | | — | | (1) | | 5,282,903 | | |

| Total | | | 3,507,317 | | | | — | | | | 6,158,391 | | |

| --- | --- |

| --- | --- |

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2000 Equity Incentive Plan (1) | | 3,230,724 | | | — | | (1) | 6,949,302 | | |

| Total | | 3,230,724 | | | — | | | 8,113,591 | | |

Information with respect to this item may be found under the headings “Independence of Our Directors,” “Review of Transactions with Related Persons” and “Transactions with Related Persons” in our [removed: 2020] [added: 2021] Proxy Statement.

| --- | --- |

Information with respect to this item may be found under the headings “Engagement of Independent Auditor and Approval of Professional Services and Fees” and “PricewaterhouseCoopers LLP Professional Services and Fees” in our [removed: 2020] [added: 2021] Proxy Statement.

[removed: PART IV][added: PART IV]

| --- | --- |

[removed: *(a)] [added: (a)] Documents Filed as Part of Form [removed: 10-K*][added: 10-K]

| | [Report of Independent Registered Public Accounting [removed: Firm](#s70BF33E2007F53268BA6A95B536EF520)] [added: Firm](#Report_of_Independent_Registered_Public_)] | [removed: [F-1](#s70BF33E2007F53268BA6A95B536EF520)] [added: [F-1](#Report_of_Independent_Registered_Public_)] |

| | [Consolidated Balance Sheets as of September 30, [removed: 2019] [added: 2020] and [removed: 2018](#sA1BC22C098D25F158446D5104F68FF66)] [added: 2019](#CONSOLIDATED_BALANCE_SHEETS)] | [removed: [F-4](#sA1BC22C098D25F158446D5104F68FF66)] [added: [F-4](#CONSOLIDATED_BALANCE_SHEETS)] |

| | [Consolidated Statements of Operations for the years ended September 30, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s2CB9D765C627574ABA524952A4950E3A)] [added: 2018](#CONSOLIDATED_STATEMENTS_OPERATIONS)] | [removed: [F-5](#s2CB9D765C627574ABA524952A4950E3A)] [added: [F-5](#CONSOLIDATED_STATEMENTS_OPERATIONS)] |

| | [Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#sC2EE1947730E5BC08C651BF42FD0226B)] [added: 2018](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] | [removed: [F-6](#sC2EE1947730E5BC08C651BF42FD0226B)] [added: [F-6](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] |

| | [Consolidated Statements of Cash Flows for the years ended September 30, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s6DEE6F4C5C7A599C85E69DD222A8D7DF)] [added: 2018](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] | [removed: [F-7](#s6DEE6F4C5C7A599C85E69DD222A8D7DF)] [added: [F-7](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] |

| | [Consolidated Statements of Stockholders’ Equity for the years ended September 30, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#s32999232AFF652F483054E24875296AA)] [added: 2018](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU)] | [removed: [F-8](#s32999232AFF652F483054E24875296AA)] [added: [F-8](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU)] |

| | [Notes to Consolidated Financial [removed: Statements](#s3445458A9BE5561C823E7F5F0FF8B8E0)] [added: Statements](#Notes_to_Consolidated_Financial_Statemen)] | [removed: [F-9](#s3445458A9BE5561C823E7F5F0FF8B8E0)] [added: [F-9](#Notes_to_Consolidated_Financial_Statemen)] |

[removed: *(b) Exhibits*][added: (b) Exhibits]

[removed: *(c)] [added: (c)] Financial Statement [removed: Schedules*][added: Schedules]

| --- | --- |

| | | |

[removed: EXHIBIT INDEX][added: EXHIBIT INDEX]

| [removed: Exhibit Number] [added: Exhibit Number] | | [removed: Exhibit] [added: Exhibit] |

| 4.1 | — | [Indenture, dated as of [removed: May 12, 2016, by and] [added: February 13, 2020,] between [removed: the Company] [added: PTC Inc.] and [removed: The Bank of New York Mellon,] [added: Wells Fargo Bank, National Association,] as [removed: Trustee] [added: trustee] (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on [removed: May 18, 2016] [added: February 13, 2020] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312516594669/d167845dex41.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000119312520035604/d882560dex41.htm)] |

| [removed: 4.2] [added: 10.13] | — | [removed: [First Supplemental Indenture, dated as of May 12, 2016,] [added: [Registration Rights Agreement] by and between the Company and [removed: The Bank of New York Mellon, as Trustee] [added: Rockwell Automation, Inc., dated July 19, 2018] (filed as Exhibit [removed: 4.2 to] [added: 10.1 in] our Current Report on Form 8-K filed on [removed: May 18, 2016] [added: July 19, 2018] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312516594669/d167845dex42.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000119312518221582/d360302dex101.htm)] |

| 4.3 | — | [removed: [6.000% Senior Notes] [added: [Form of 4.000% senior unsecured notes] due [removed: 2024] [added: 2028] (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on [removed: May 18, 2016] [added: February 13, 2020] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312516594669/d167845dex43.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000119312520035604/d882560dex41.htm)] |

| 4.4 | — | [Description of Securities Registered under Section 12 of the Securities Exchange Act of [removed: 1934](https://www.sec.gov/Archives/edgar/data/857005/000085700519000040/ptc93019ex44.htm)] [added: 1934 (filed as Exhibit 4.4 to our Annual Report on Form 10-K for the year ended September 30, 2019 (File No. 0-18059) and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700519000040/ptc93019ex44.htm)] |

| [removed: 10.1.2*] [added: 10.1.3*] | — | [Form of Restricted Stock [removed: Agreement] [added: Unit Certificate] (Non-Employee Director) (filed as Exhibit [removed: 10.2] [added: 10.1.1] to our Quarterly Report on Form 10-Q for the fiscal quarter ended [removed: April 4, 2009] [added: March 30, 2013] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312509111423/dex102.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700513000018/exhibit1011formofrsucertif.htm)] |

| [removed: 10.1.3*] [added: 10.1.2] | — | [Form of Restricted Stock [removed: Agreement (Employee)] [added: Unit Certificate (Non-U.S.)] (filed as Exhibit [removed: 10.2] [added: 10.4] to our Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2005 (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312505165325/dex102.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312505165325/dex104.htm)] |

| 10.1.4 | — | [Form of Restricted Stock Unit Certificate [removed: (Non-U.S.)] [added: (U.S.)] (filed as Exhibit [removed: 10.4] [added: 10.1.9] to our [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the fiscal [removed: quarter] [added: year] ended [removed: July 2, 2005] [added: September 30, 2016] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312505165325/dex104.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex1019.htm)] |

| 10.1.5 | — | [Form of [removed: Incentive] [added: Restricted] Stock [removed: Option] [added: Unit] Certificate [added: (U.S.)] (filed as Exhibit [removed: 10.5] [added: 10.1.10] to our [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the fiscal [removed: quarter] [added: year] ended [removed: July 2, 2005] [added: September 30, 2016] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312505165325/dex105.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10110.htm)] |

| [removed: 10.1.6*] [added: 10.1.6] | — | [Form of [removed: Nonstatutory] [added: Restricted] Stock [removed: Option] [added: Unit] Certificate [added: (U.S.)] (filed as Exhibit [removed: 10.6] [added: 10.1.11] to our [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the fiscal [removed: quarter] [added: year] ended [removed: July 2, 2005] [added: September 30, 2016] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312505165325/dex106.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10111.htm)] |

| [removed: 10.1.7*] [added: 10.1.7] | — | [Form of [added: Restricted] Stock [removed: Appreciation Right] [added: Unit] Certificate [added: (U.S. EVP)] (filed as Exhibit [removed: 10.7] [added: 10.1.12] to our [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the fiscal [removed: quarter] [added: year] ended [removed: July 2, 2005] [added: September 30, 2016] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312505165325/dex107.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10112.htm)] |

| 10.1.8* | — | [Form of Restricted Stock Unit Certificate [removed: (Non-Employee Director)] [added: (U.S. Section 16)] (filed as Exhibit [removed: 10.1.1] [added: 10.1.13] to our [removed: Quarterly] [added: Annual] Report on Form [removed: 10-Q] [added: 10-K] for the fiscal [removed: quarter] [added: year] ended [removed: March] [added: September] 30, [removed: 2013] [added: 2016] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700513000018/exhibit1011formofrsucertif.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10113.htm)] |

| 10.1.9 | — | [Form of Restricted Stock Unit Certificate [removed: (U.S.)] [added: (U.S. EVP)] (filed as Exhibit [removed: 10.1.9] [added: 10.1.14] to our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex1019.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10114.htm)] |

| 10.1.10 | — | [Form of Restricted Stock Unit Certificate (U.S.) (filed as Exhibit [removed: 10.1.10] [added: 10.1.15] to our Annual Report on Form 10-K for the fiscal year ended September 30, [removed: 2016 (File] [added: 2016(File] No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10110.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10115.htm)] |

| [removed: 10.1.11] [added: 10.1.11*] | — | [Form of Restricted Stock Unit Certificate [removed: (U.S.)] [added: (U.S. Section 16)] (filed as Exhibit [removed: 10.1.11] [added: 10.1.16] to our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10111.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10116.htm)] |

| [removed: 10.1.12] [added: 10.1.12*] | — | [Form of Restricted Stock Unit Certificate (U.S. [removed: EVP)] [added: Section 16)] (filed as Exhibit [removed: 10.1.12] [added: 10.1.17] to our Annual Report on Form 10-K for the fiscal year ended September 30, [removed: 2016] [added: 2012] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10112.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10117.htm)] |

| [removed: 10.1.13*] [added: 10.2*] | — | [removed: [Form of Restricted] [added: [2016 Employee] Stock [removed: Unit Certificate (U.S. Section 16)] [added: Purchase Plan] (filed as Exhibit [removed: 10.1.13] [added: 10.1] to our [removed: Annual] [added: Quarterly] Report on Form [removed: 10-K] [added: 10-Q] for the fiscal [removed: year] [added: quarter] ended [removed: September 30, 2016] [added: December 28, 2019] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10113.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000085700520000009/a1012016employeestockpur.htm)] |

| [removed: 10.1.14] [added: 10.7] | — | [removed: [Form of Restricted Stock Unit Certificate (U.S. EVP)] [added: [Lease dated December 14, 1999 by and between PTC Inc. and Boston Properties Limited Partnership] (filed as Exhibit [removed: 10.1.14] [added: 10.21] to our Annual Report on Form 10-K for the fiscal year ended September 30, [removed: 2016] [added: 2000] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10114.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000092701600004477/0000927016-00-004477-0009.txt)] |

| [removed: 10.1.15] [added: 10.11] | — | [removed: [Form] [added: [First Amendment to Lease dated as] of [removed: Restricted Stock Unit Certificate (U.S.)] [added: October 5, 2017 by and between PTC Inc. and SCD L2 Seaport Square LLC] (filed as Exhibit [removed: 10.1.15] [added: 10.23] to our Annual Report on Form 10-K for the [removed: fiscal year] [added: period] ended September 30, [removed: 2016(File] [added: 2017 (File] No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700516000071/ptc93016ex10115.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700517000021/ptc93017ex1023.htm)] |

| 10.3* | — | [removed: [Amended and Restated Executive] [added: [Executive] Agreement [removed: with] [added: by and between the Company and] James Heppelmann, President and Chief Executive Officer, dated [removed: May 7, 2010] [added: September 30, 2020] (filed as Exhibit [removed: 10.2] [added: 10.1] to our [removed: Quarterly] [added: Current] Report on Form [removed: 10-Q for the fiscal quarter ended April 3, 2010] [added: 8-K dated September 30, 2020] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312510118795/dex102.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000156459020045937/ptc-ex101_8.htm)] |

| [removed: 10.4*] [added: 10.8] | — | [removed: [Amendment to Executive Agreement dated as of November 18, 2011 by and between PTC Inc. and James Heppelmann] [added: [Third Amendment] to [removed: Amended and Restated Executive] [added: Lease] Agreement dated as of [removed: May 7,] [added: October 27,] 2010 by and between [removed: PTC] [added: Boston Properties Limited Partnership] and [removed: James Heppelmann] [added: PTC Inc.] (filed as Exhibit [removed: 10.2] [added: 10.1] to our Current Report on Form 8-K dated November [removed: 15, 2011] [added: 8, 2010] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700511000030/amendexec.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700510000023/lease.htm)] |

| [removed: 10.5*] [added: 10.10] | — | [removed: [Amendment to Executive] [added: [Office Lease] Agreement [added: dated as of September 7, 2017] by and between PTC Inc. and [removed: James Heppelmann dated May 13, 2013] [added: SCD L2 Seaport Square LLC] (filed as Exhibit [removed: 10.9] [added: 10] to our [removed: Annual] [added: Current] Report on Form [removed: 10-K for the fiscal year ended] [added: 8-K filed on] September [removed: 30, 2013] [added: 7, 2017] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700513000038/ptc9302013ex109.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312517278944/d454992dex10.htm)] |

| [removed: 10.6*] [added: 10.14] | — | [removed: [Amendment to Executive] [added: [Securities Purchase] Agreement by and between PTC Inc. and [removed: James Heppelmann] [added: Rockwell Automation, Inc.,] dated [removed: August 4, 2015] [added: as of June 11, 2018] (filed as Exhibit 10.1 to our Current Report on Form 8-K [removed: dated August 10, 2015] [added: filed on June 11, 2018] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700515000027/exec1.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000119312518188692/d599110dex101.htm)] |

| [removed: 10.7*] [added: 10.4*] | — | [Form of Amended and Restated Executive Agreement [removed: by and] between [removed: PTC Inc.] [added: the Company] and [added: each of Kristian Talvitie, Kathleen Mitford and] Aaron von Staats (filed as Exhibit 10.3 to [removed: our] [added: PTC’s] Quarterly Report on Form 10-Q for the [removed: fiscal quarter dated April 3, 2010 (File No.] [added: period ended December 28, 2019 (File.] 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000119312510118795/dex103.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000085700520000009/a103evpexecutiveagreemen.htm)] |

| [removed: 10.8*] [added: 10.12*] | — | [removed: [Form of Amendment to] [added: [Third] Amended and Restated [removed: Executive] [added: Strategic Alliance] Agreement [removed: entered into as of November 18, 2011] by and between PTC Inc. and [removed: Aaron von Staats] [added: Rockwell Automation, Inc. dated as of October 28, 2020] (filed as Exhibit [removed: 10.3] [added: 10.1] to our Current Report on Form 8-K dated [removed: November 15, 2011] [added: October 28, 2020] (File No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700511000030/formamend.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/0000857005/000156459020048319/ptc-ex101_25.htm)] |

| [removed: 10.9*] [added: 10.9] | — | [removed: [Executive Agreement] [added: [Fifth Amendment] dated April [removed: 16, 2014] [added: 10, 2020 to Lease dated December 14, 1999 by and] between PTC Inc. and [removed: Matthew Cohen] [added: Boston Properties Limited Partnership] (filed as Exhibit [removed: 10.1] [added: 10.2] to [removed: our] [added: PTC’s] Quarterly Report on Form 10-Q for the [removed: fiscal quarter] [added: period] ended March [removed: 29, 2014 (File] [added: 28, 2020 (File.] No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700514000010/ptc03292014ex101q2.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700520000017/a102leaseamendment.htm)] |

| [removed: 10.11] [added: 10.5*] | — | [removed: [Executive] [added: [Form of Executive] Agreement [removed: dated May 15, 2017] between [removed: PTC Inc.] [added: the Company] and [removed: Kathleen Mitford] [added: each of Eduarda Camacho, Michael DiTullio and Kevin Wrenn] (filed as Exhibit [removed: 10.13] [added: 10.1] to [removed: our Annual] [added: PTC’s Quarterly] Report on Form [removed: 10-K] [added: 10-Q] for the [removed: fiscal year] [added: period] ended [removed: September 30, 2018 (File] [added: March 28, 2020 (File.] No. 0-18059) and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700518000025/ptc93018ex1013.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/857005/000085700520000017/a101executiveagreement.htm)] |