filings.toolsItem 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
61K characters. Original on sec.gov · Markdown
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PTC Inc.
CONSOLIDATED B****ALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| March 31, 2025 | September 30, 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 235,169 | $ | 265,808 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $1,272 and $1,180 at March 31, 2025 and September 30, 2024, respectively | 716,624 | 861,953 | ||||||
| Prepaid expenses | 114,624 | 102,931 | ||||||
| Other current assets | 66,392 | 68,013 | ||||||
| Total current assets | 1,132,809 | 1,298,705 | ||||||
| Property and equipment, net | 68,047 | 75,187 | ||||||
| Goodwill | 3,444,104 | 3,461,891 | ||||||
| Acquired intangible assets, net | 855,794 | 897,476 | ||||||
| Deferred tax assets | 186,401 | 159,404 | ||||||
| Operating right-of-use lease assets | 127,808 | 133,317 | ||||||
| Other assets | 347,468 | 357,562 | ||||||
| Total assets | $ | 6,162,431 | $ | 6,383,542 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 8,500 | $ | 24,198 | ||||
| Accrued expenses and other current liabilities | 101,317 | 129,528 | ||||||
| Accrued compensation and benefits | 129,859 | 173,797 | ||||||
| Accrued income taxes | 70,725 | 39,978 | ||||||
| Current portion of long-term debt | 25,000 | 521,467 | ||||||
| Deferred revenue | 786,530 | 754,039 | ||||||
| Short-term lease obligations | 24,319 | 24,186 | ||||||
| Total current liabilities | 1,146,250 | 1,667,193 | ||||||
| Long-term debt | 1,364,393 | 1,227,105 | ||||||
| Deferred tax liabilities | 31,417 | 32,216 | ||||||
| Long-term deferred revenue | 15,317 | 21,235 | ||||||
| Long-term lease obligations | 153,786 | 157,568 | ||||||
| Other liabilities | 64,805 | 63,827 | ||||||
| Total liabilities | 2,775,968 | 3,169,144 | ||||||
| Commitments and contingencies (Note 11) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value; 5,000 shares authorized; none issued | — | — | ||||||
| Common stock, $0.01 par value; 500,000 shares authorized; 119,926 and 120,155 shares issued and outstanding at March 31, 2025 and September 30, 2024, respectively | 1,199 | 1,202 | ||||||
| Additional paid-in capital | 1,909,537 | 1,965,307 | ||||||
| Retained earnings | 1,594,486 | 1,349,610 | ||||||
| Accumulated other comprehensive loss | (118,759 | ) | (101,721 | ) | ||||
| Total stockholders’ equity | 3,386,463 | 3,214,398 | ||||||
| Total liabilities and stockholders’ equity | $ | 6,162,431 | $ | 6,383,542 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
PTC Inc.
CONSOLIDATED STATEM****ENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three months ended | Six months ended | |||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Revenue: | ||||||||||||||||
| License | $ | 254,395 | $ | 234,321 | $ | 427,149 | $ | 418,319 | ||||||||
| Support and cloud services | 352,990 | 336,446 | 713,952 | 666,915 | ||||||||||||
| Total software revenue | 607,385 | 570,767 | 1,141,101 | 1,085,234 | ||||||||||||
| Professional services | 28,981 | 32,305 | 60,393 | 68,052 | ||||||||||||
| Total revenue | 636,366 | 603,072 | 1,201,494 | 1,153,286 | ||||||||||||
| Cost of revenue: | ||||||||||||||||
| Cost of license revenue | 10,939 | 10,602 | 21,162 | 20,931 | ||||||||||||
| Cost of support and cloud services revenue | 70,303 | 67,414 | 141,655 | 134,437 | ||||||||||||
| Total cost of software revenue | 81,242 | 78,016 | 162,817 | 155,368 | ||||||||||||
| Cost of professional services revenue | 25,020 | 32,039 | 55,242 | 64,707 | ||||||||||||
| Total cost of revenue | 106,262 | 110,055 | 218,059 | 220,075 | ||||||||||||
| Gross margin | 530,104 | 493,017 | 983,435 | 933,211 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 125,031 | 134,521 | 282,563 | 271,445 | ||||||||||||
| Research and development | 111,023 | 106,998 | 226,539 | 212,781 | ||||||||||||
| General and administrative | 54,993 | 61,526 | 108,312 | 130,732 | ||||||||||||
| Amortization of acquired intangible assets | 11,380 | 10,424 | 22,820 | 20,787 | ||||||||||||
| Impairment and other charges (credits), net | 4,213 | (7 | ) | 4,213 | (802 | ) | ||||||||||
| Total operating expenses | 306,640 | 313,462 | 644,447 | 634,943 | ||||||||||||
| Operating income | 223,464 | 179,555 | 338,988 | 298,268 | ||||||||||||
| Interest expense | (19,606 | ) | (31,586 | ) | (41,654 | ) | (66,920 | ) | ||||||||
| Other income (expense), net | 1,391 | (2,224 | ) | 1,069 | (4 | ) | ||||||||||
| Income before income taxes | 205,249 | 145,745 | 298,403 | 231,344 | ||||||||||||
| Provision for income taxes | 42,605 | 31,300 | 53,527 | 50,512 | ||||||||||||
| Net income | $ | 162,644 | $ | 114,445 | $ | 244,876 | $ | 180,832 | ||||||||
| Earnings per share—Basic | $ | 1.35 | $ | 0.96 | $ | 2.04 | $ | 1.52 | ||||||||
| Earnings per share—Diluted | $ | 1.35 | $ | 0.95 | $ | 2.02 | $ | 1.50 | ||||||||
| Weighted-average shares outstanding—Basic | 120,177 | 119,587 | 120,210 | 119,354 | ||||||||||||
| Weighted-average shares outstanding—Diluted | 120,854 | 120,712 | 121,000 | 120,480 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
PTC Inc.
CONSOLIDATED STATEMENTS OF C****OMPREHENSIVE INCOME
(in thousands)
(unaudited)
| Three months ended | Six months ended | |||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Net income | $ | 162,644 | $ | 114,445 | $ | 244,876 | $ | 180,832 | ||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||
| Hedge gain (loss) arising during the period, net of tax of $4.9 million and $(2.1) million in the second quarter of 2025 and 2024, respectively, and $(3.3) million and $1.7 million in the first six months of 2025 and 2024, respectively | (15,014 | ) | 6,432 | 10,226 | (5,079 | ) | ||||||||||
| Foreign currency translation adjustment, net of tax of $0 for each period | 36,202 | (24,792 | ) | (27,795 | ) | 9,882 | ||||||||||
| Change in pension benefit, net of tax of $0.0 million and $0.0 million in the second quarter of 2025 and 2024, respectively, and $(0.1) million and $0.0 million in the first six months of 2025 and 2024, respectively | (313 | ) | 216 | 531 | (6 | ) | ||||||||||
| Other comprehensive income (loss) | 20,875 | (18,144 | ) | (17,038 | ) | 4,797 | ||||||||||
| Comprehensive income | $ | 183,519 | $ | 96,301 | $ | 227,838 | $ | 185,629 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
PTC Inc.
CONSOLIDATED STATEM****ENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six months ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 244,876 | $ | 180,832 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 51,263 | 54,144 | ||||||
| Amortization of right-of-use lease assets | 16,165 | 15,459 | ||||||
| Stock-based compensation | 107,363 | 113,204 | ||||||
| Other non-cash items, net | 1,903 | 649 | ||||||
| Changes in operating assets and liabilities, excluding the effects of acquisitions: | ||||||||
| Accounts receivable | 127,972 | 107,507 | ||||||
| Accounts payable and accrued expenses | (35,405 | ) | (48,345 | ) | ||||
| Accrued compensation and benefits | (15,301 | ) | (16,451 | ) | ||||
| Deferred revenue | 34,532 | 40,971 | ||||||
| Accrued income taxes | 5,565 | 18,087 | ||||||
| Other current assets and prepaid expenses | (7,735 | ) | (21,745 | ) | ||||
| Operating lease liabilities | (2,596 | ) | (10,293 | ) | ||||
| Other noncurrent assets and liabilities | (8,864 | ) | 4,052 | |||||
| Net cash provided by operating activities | 519,738 | 438,071 | ||||||
| Cash flows from investing activities: | ||||||||
| Additions to property and equipment | (5,575 | ) | (8,202 | ) | ||||
| Acquisitions of businesses, net of cash acquired | — | (93,457 | ) | |||||
| Settlement of net investment hedges | 12,260 | (2,224 | ) | |||||
| Net cash provided by (used in) investing activities | 6,685 | (103,883 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Borrowings under credit facility | 860,000 | 739,845 | ||||||
| Repayments of Senior Notes | (500,000 | ) | — | |||||
| Repayments of borrowings under credit facility and acquired debt | (720,125 | ) | (435,671 | ) | ||||
| Repurchases of common stock | (150,000 | ) | — | |||||
| Proceeds from issuance of common stock | 13,307 | 12,709 | ||||||
| Payments of withholding taxes in connection with stock-based awards | (52,871 | ) | (71,184 | ) | ||||
| Payment of deferred acquisition consideration | — | (620,040 | ) | |||||
| Other financing activity | (1,410 | ) | — | |||||
| Net cash used in financing activities | (551,099 | ) | (374,341 | ) | ||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (6,048 | ) | 829 | |||||
| Net change in cash, cash equivalents, and restricted cash | (30,724 | ) | (39,324 | ) | ||||
| Cash, cash equivalents, and restricted cash, beginning of period | 266,466 | 288,798 | ||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 235,742 | $ | 249,474 | ||||
| Supplemental disclosure of non-cash financing and investing activities: | ||||||||
| Operating right-of-use assets obtained in exchange for operating lease liabilities | $ | 11,294 | $ | 2,847 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
PTC Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
| Three months ended March 31, 2025 | ||||||||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Retained Earnings | Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||
| Balance as of December 31, 2024 | 120,219 | $ | 1,202 | $ | 1,936,411 | $ | 1,431,842 | $ | (139,634 | ) | $ | 3,229,821 | ||||||||||||
| Common stock issued for employee stock-based awards | 115 | 1 | (1 | ) | — | — | — | |||||||||||||||||
| Shares surrendered by employees to pay taxes related to stock-based awards | (34 | ) | — | (6,128 | ) | — | — | (6,128 | ) | |||||||||||||||
| Common stock issued for employee stock purchase plan | 89 | 1 | 13,306 | — | — | 13,307 | ||||||||||||||||||
| Compensation expense from stock-based awards | — | — | 41,278 | — | — | 41,278 | ||||||||||||||||||
| Repurchases of common stock, including excise tax | (463 | ) | (5 | ) | (75,329 | ) | — | — | (75,334 | ) | ||||||||||||||
| Net income | — | — | — | 162,644 | — | 162,644 | ||||||||||||||||||
| Loss on net investment hedges, net of tax | — | — | — | — | (15,014 | ) | (15,014 | ) | ||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | 36,202 | 36,202 | ||||||||||||||||||
| Change in defined benefit pension items, net of tax | — | — | — | — | (313 | ) | (313 | ) | ||||||||||||||||
| Balance as of March 31, 2025 | 119,926 | $ | 1,199 | $ | 1,909,537 | $ | 1,594,486 | $ | (118,759 | ) | $ | 3,386,463 |
| Six months ended March 31, 2025 | ||||||||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Retained Earnings | Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||
| Balance as of September 30, 2024 | 120,155 | $ | 1,202 | $ | 1,965,307 | $ | 1,349,610 | $ | (101,721 | ) | $ | 3,214,398 | ||||||||||||
| Common stock issued for employee stock-based awards | 810 | 8 | (8 | ) | — | — | — | |||||||||||||||||
| Shares surrendered by employees to pay taxes related to stock-based awards | (282 | ) | (3 | ) | (53,318 | ) | — | — | (53,321 | ) | ||||||||||||||
| Common stock issued for employee stock purchase plan | 89 | 1 | 13,306 | — | — | 13,307 | ||||||||||||||||||
| Compensation expense from stock-based awards | — | — | 134,575 | — | — | 134,575 | ||||||||||||||||||
| Repurchases of common stock, including excise tax | (846 | ) | (9 | ) | (150,325 | ) | — | — | (150,334 | ) | ||||||||||||||
| Net income | — | — | — | 244,876 | — | 244,876 | ||||||||||||||||||
| Gain on net investment hedges, net of tax | — | — | — | — | 10,226 | 10,226 | ||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | (27,795 | ) | (27,795 | ) | ||||||||||||||||
| Change in defined benefit pension items, net of tax | — | — | — | — | 531 | 531 | ||||||||||||||||||
| Balance as of March 31, 2025 | 119,926 | $ | 1,199 | $ | 1,909,537 | $ | 1,594,486 | $ | (118,759 | ) | $ | 3,386,463 |
| Three months ended March 31, 2024 | ||||||||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Retained Earnings | Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||
| Balance as of December 31, 2023 | 119,445 | $ | 1,194 | $ | 1,860,934 | $ | 1,039,664 | $ | (95,139 | ) | $ | 2,806,653 | ||||||||||||
| Common stock issued for employee stock-based awards | 266 | 3 | (3 | ) | — | — | — | |||||||||||||||||
| Shares surrendered by employees to pay taxes related to stock-based awards | (96 | ) | (1 | ) | (17,537 | ) | — | — | (17,538 | ) | ||||||||||||||
| Common stock issued for employee stock purchase plan | 102 | 1 | 12,708 | — | — | 12,709 | ||||||||||||||||||
| Compensation expense from stock-based awards | — | — | 45,007 | — | — | 45,007 | ||||||||||||||||||
| Net income | — | — | — | 114,445 | — | 114,445 | ||||||||||||||||||
| Gain on net investment hedges, net of tax | — | — | — | — | 6,432 | 6,432 | ||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | (24,792 | ) | (24,792 | ) | ||||||||||||||||
| Change in defined benefit pension items, net of tax | — | — | — | — | 216 | 216 | ||||||||||||||||||
| Balance as of March 31, 2024 | 119,717 | $ | 1,197 | $ | 1,901,109 | $ | 1,154,109 | $ | (113,283 | ) | $ | 2,943,132 |
| Six months ended March 31, 2024 | ||||||||||||||||||||||||
| Common Stock | Accumulated | |||||||||||||||||||||||
| Shares | Amount | Additional Paid-In Capital | Retained Earnings | Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||
| Balance as of September 30, 2023 | 118,846 | $ | 1,188 | $ | 1,820,905 | $ | 973,277 | $ | (118,080 | ) | $ | 2,677,290 | ||||||||||||
| Common stock issued for employee stock-based awards | 1,216 | 13 | (13 | ) | — | — | — | |||||||||||||||||
| Shares surrendered by employees to pay taxes related to stock-based awards | (447 | ) | (5 | ) | (71,869 | ) | — | — | (71,874 | ) | ||||||||||||||
| Common stock issued for employee stock purchase plan | 102 | 1 | 12,708 | — | — | 12,709 | ||||||||||||||||||
| Compensation expense from stock-based awards | — | — | 139,378 | — | — | 139,378 | ||||||||||||||||||
| Net income | — | — | — | 180,832 | — | 180,832 | ||||||||||||||||||
| Loss on net investment hedges, net of tax | — | — | — | — | (5,079 | ) | (5,079 | ) | ||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | 9,882 | 9,882 | ||||||||||||||||||
| Change in defined benefit pension items, net of tax | — | — | — | — | (6 | ) | (6 | ) | ||||||||||||||||
| Balance as of March 31, 2024 | 119,717 | $ | 1,197 | $ | 1,901,109 | $ | 1,154,109 | $ | (113,283 | ) | $ | 2,943,132 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
PTC Inc.
NOTES TO CON****DENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
General
The accompanying unaudited condensed consolidated financial statements include the accounts of PTC Inc. and its wholly owned subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America (GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with our annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of our financial position, results of operations and cash flows as of the dates and for the periods indicated. The September 30, 2024 Consolidated Balance Sheet included herein is derived from our audited consolidated financial statements.
Unless otherwise indicated, all references to a year mean our fiscal year, which ends on September 30.
In the second quarter of 2025, we changed the income statement caption of Restructuring and other charges (credits), net to Impairment and other charges (credits), net to reflect that the amounts presented are mainly impairment charges rather than restructuring charges. All charges and credits under the captioned line item remain the same.
Pending Accounting Pronouncements
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses and in January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. As clarified by ASU 2025-01, ASU 2024-03 will be effective for us in the fourth quarter of 2028. We expect the adoption to result in disclosure changes only.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU will be effective for us in the fourth quarter of 2026. We expect the adoption to result in disclosure changes only.
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU will be effective for us in the fourth quarter of 2025. We expect the adoption to result in disclosure changes only.
2. Revenue from Contracts with Customers
Receivables, Co**ntract Assets and Contract Liabilities
| (in thousands) | March 31, 2025 | September 30, 2024 | ||||||
| Short-term and long-term receivables | $ | 920,037 | $ | 1,062,052 | ||||
| Contract asset | $ | 10,225 | $ | 14,410 | ||||
| Deferred revenue | $ | 801,847 | $ | 775,274 |
During the six months ended March 31, 2025, we recognized $553.3 million of revenue that was included in Deferred revenue as of September 30, 2024. The remainder of the change in the Deferred revenue balance was driven by additional deferrals, primarily from new billings, as well as a reduction in the balance resulting from changes in foreign currency exchange rates.
Our multi-year, non-cancellable on-premises subscription contracts provide customers with an annual right to exchange software within the subscription with other software. As of March 31, 2025 and September 30, 2024, our total revenue liability was $28.9 million and $26.0 million, respectively, primarily associated with the annual right to exchange on-premises subscription software.
Remaining Performance Obligations (RPO)
Our contracts with customers include amounts allocated to performance obligations that will be satisfied and recognized as revenue at a later date. The value of RPO and timing of recognition may be impacted by several factors, including the performance obligation type, duration and timing of commencement, as well as foreign currency exchange rate fluctuations. As of March 31, 2025, RPO totaled $2,280.0 million, of which $801.8 million is recorded in Deferred revenue and $1,478.2 million is not yet recorded in the Consolidated Balance Sheets. Of the total, we expect to recognize approximately 59% over the next 12 months, 24% over the next 13 to 24 months, and the remaining amount thereafter.
Disaggregation of Revenue
| (in thousands) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Recurring revenue(1) | $ | 601,549 | $ | 564,014 | $ | 1,125,860 | $ | 1,070,041 | ||||||||
| Perpetual license | 5,836 | 6,753 | 15,241 | 15,193 | ||||||||||||
| Professional services | 28,981 | 32,305 | 60,393 | 68,052 | ||||||||||||
| Total revenue | $ | 636,366 | $ | 603,072 | $ | 1,201,494 | $ | 1,153,286 |
(1)
Recurring revenue is comprised of on-premises subscription, perpetual support, SaaS, and hosting services revenue.
We report revenue by the following two product groups:
| (in thousands) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Product lifecycle management (PLM) | $ | 396,149 | $ | 373,495 | $ | 749,608 | $ | 722,142 | ||||||||
| Computer-aided design (CAD) | 240,217 | 229,577 | 451,886 | 431,144 | ||||||||||||
| Total revenue | $ | 636,366 | $ | 603,072 | $ | 1,201,494 | $ | 1,153,286 |
Our international revenue is presented based on the location of our customer. Revenue for the geographic regions in which we operate is presented below.
| (in thousands) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Americas | $ | 292,823 | $ | 260,622 | $ | 570,792 | $ | 527,889 | ||||||||
| Europe | 251,148 | 257,309 | 447,172 | 454,262 | ||||||||||||
| Asia Pacific | 92,395 | 85,141 | 183,530 | 171,135 | ||||||||||||
| Total revenue | $ | 636,366 | $ | 603,072 | $ | 1,201,494 | $ | 1,153,286 |
3. Stock-based Compensation
Compensation expense recorded for our stock-based awards is classified in our Consolidated Statements of Operations as follows:
| (in thousands) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Cost of license revenue | $ | 72 | $ | 29 | $ | 106 | $ | 67 | ||||||||
| Cost of support and cloud services revenue | 3,912 | 3,345 | 7,970 | 6,727 | ||||||||||||
| Cost of professional services revenue | 1,523 | 1,660 | 3,344 | 3,329 | ||||||||||||
| Sales and marketing | 13,545 | 14,729 | 31,613 | 30,856 | ||||||||||||
| Research and development | 14,391 | 13,936 | 30,546 | 28,174 | ||||||||||||
| General and administrative | 18,069 | 20,492 | 33,784 | 44,051 | ||||||||||||
| Total stock-based compensation expense | $ | 51,512 | $ | 54,191 | $ | 107,363 | $ | 113,204 |
As of March 31, 2025 and September 30, 2024, we had liability-classified awards related to stock-based compensation based on a fixed monetary amount of $20.5 million and $47.7 million, respectively. The liability as of September 30, 2024 was settled via the issuance of shares in the first quarter of 2025.
4. Earnings per Share (EPS) and Common Stock
EPS
The following table presents the calculation for both basic and diluted EPS:
| (in thousands, except per share data) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Net income | $ | 162,644 | $ | 114,445 | $ | 244,876 | $ | 180,832 | ||||||||
| Weighted-average shares outstanding—Basic | 120,177 | 119,587 | 120,210 | 119,354 | ||||||||||||
| Dilutive effect of restricted stock units | 677 | 1,125 | 790 | 1,126 | ||||||||||||
| Weighted-average shares outstanding—Diluted | 120,854 | 120,712 | 121,000 | 120,480 | ||||||||||||
| Earnings per share—Basic | $ | 1.35 | $ | 0.96 | $ | 2.04 | $ | 1.52 | ||||||||
| Earnings per share—Diluted | $ | 1.35 | $ | 0.95 | $ | 2.02 | $ | 1.50 |
There were 0.3 million and 0.2 million anti-dilutive shares for the three and six months ended March 31, 2025, respectively. There were 0.1 million anti-dilutive shares for the three and six months ended March 31, 2024.
Common Stock Repurchases
Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors has authorized us to repurchase up to $2 billion of our common stock in the period October 1, 2024 through September 30, 2027. In the second quarter and first six months of 2025, we repurchased 0.5 million shares for $75 million and 0.8 million shares for $150 million, respectively. We did not repurchase any shares in the second quarter and first six months of 2024. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued.
5. Acquisitions
Acquisition and transaction-related costs in the second quarter and first six months of 2025 totaled $0.6 million and $0.8 million, respectively, compared to $0.3 million and $2.8 million in the second quarter and first six months of 2024, respectively. These costs are classified in General and administrative expense in the accompanying Consolidated Statements of Operations.
pure-systems
On October 4, 2023, we acquired pure-systems GmbH pursuant to a Share Purchase Agreement. The purchase price was $93.5 million, net of cash acquired, which we financed primarily with a draw on the revolving line of our credit facility. The purchase price allocation resulted in $77.1 million of goodwill, $28.2 million of intangible assets, $8.8 million of net tax liabilities, and $3.0 million of other net liabilities.
ServiceMax
On January 3, 2023, we acquired ServiceMax, Inc. pursuant to a Share Purchase Agreement dated November 17, 2022 for $1,448.2 million, net of cash acquired. PTC paid the first installment of $828.2 million on the acquisition date. The remaining installment of $650.0 million, of which $620.0 million represented the fair value as of the acquisition date and $30.0 million was imputed interest, was paid in October 2023.
6. Goodwill and Intangible Assets
Goodwill and acquired intangible assets consisted of the following:
| (in thousands) | March 31, 2025 | September 30, 2024 | ||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | |||||||||||||||||||
| Goodwill | $ | 3,444,104 | $ | 3,461,891 | ||||||||||||||||||||
| Intangible assets with finite lives: | ||||||||||||||||||||||||
| Purchased software | $ | 631,889 | $ | 451,196 | $ | 180,693 | $ | 634,439 | $ | 436,471 | $ | 197,968 | ||||||||||||
| Capitalized software | 22,877 | 22,877 | — | 22,877 | 22,877 | — | ||||||||||||||||||
| Customer lists and relationships | 1,135,655 | 475,455 | 660,200 | 1,141,086 | 457,718 | 683,368 | ||||||||||||||||||
| Trademarks and trade names | 37,780 | 22,879 | 14,901 | 37,961 | 21,821 | 16,140 | ||||||||||||||||||
| Other | 3,900 | 3,900 | — | 3,941 | 3,941 | — | ||||||||||||||||||
| Total intangible assets with finite lives | $ | 1,832,101 | $ | 976,307 | $ | 855,794 | $ | 1,840,304 | $ | 942,828 | $ | 897,476 | ||||||||||||
| Total goodwill and acquired intangible assets | $ | 4,299,898 | $ | 4,359,367 |
Changes in Goodwill were as follows:
| (in thousands) | |||
| Balance, October 1, 2024 | $ | 3,461,891 | |
| Foreign currency translation adjustment | (17,787 | ) | |
| Balance, March 31, 2025 | $ | 3,444,104 |
The aggregate amortization expense for intangible assets with finite lives is classified in our Consolidated Statements of Operations as follows:
| (in thousands) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Amortization of acquired intangible assets | $ | 11,380 | $ | 10,424 | $ | 22,820 | $ | 20,787 | ||||||||
| Cost of revenue | 8,131 | 9,584 | 16,431 | 19,150 | ||||||||||||
| Total amortization expense | $ | 19,511 | $ | 20,008 | $ | 39,251 | $ | 39,937 |
7. Fair Value Measurements
The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or
Level 3: unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.
A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Money market funds, time deposits, and corporate notes/bonds are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.
The principal market in which we execute our foreign currency derivatives is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants are generally large financial institutions. Our foreign currency derivatives’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.
Our significant financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and September 30, 2024 were as follows:
| (in thousands) | March 31, 2025 | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash equivalents(1) | $ | 73,936 | $ | — | $ | — | $ | 73,936 | ||||||||
| Forward contracts | — | 6,001 | — | 6,001 | ||||||||||||
| $ | 73,936 | $ | 6,001 | $ | — | $ | 79,937 | |||||||||
| Financial liabilities: | ||||||||||||||||
| Forward contracts | — | 4,286 | — | 4,286 | ||||||||||||
| $ | — | $ | 4,286 | $ | — | $ | 4,286 |
| (in thousands) | September 30, 2024 | |||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Financial assets: | ||||||||||||||||
| Cash equivalents(1) | $ | 48,509 | $ | — | $ | — | $ | 48,509 | ||||||||
| Forward contracts | — | 1,202 | — | 1,202 | ||||||||||||
| $ | 48,509 | $ | 1,202 | $ | — | $ | 49,711 | |||||||||
| Financial liabilities: | ||||||||||||||||
| Forward contracts | — | 4,166 | — | 4,166 | ||||||||||||
| $ | — | $ | 4,166 | $ | — | $ | 4,166 |
(1)
Money market funds and time deposits.
Level 3 Investments
Convertible Note
In the fourth quarter of 2021, we invested $2.0 million in a non-marketable convertible note. This debt security was classified as available-for-sale and included in Other assets on the Consolidated Balance Sheet. During the three months ended March 31, 2024, we recorded a $2.0 million impairment loss related to this Level 3 investment. The impairment loss is included in Other income (expense), net on the Consolidated Statements of Operations.
8. Derivative Financial Instruments
We enter into foreign currency forward contracts to manage our exposure to foreign currency exchange risk to reduce earnings volatility. We do not enter into derivative transactions for trading or speculative purposes.
The following table shows our derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets:
| (in thousands) | Fair Value of Derivatives Designated As Hedging Instruments | Fair Value of Derivatives Not Designated As Hedging Instruments | ||||||||||||||
| March 31, 2025 | September 30, 2024 | March 31, 2025 | September 30, 2024 | |||||||||||||
| Derivative assets(1): | ||||||||||||||||
| Forward contracts | $ | 3,170 | $ | 181 | $ | 2,831 | $ | 1,021 | ||||||||
| Derivative liabilities(2): | ||||||||||||||||
| Forward contracts | $ | — | $ | 630 | $ | 4,286 | $ | 3,536 |
(1)
As of March 31, 2025 and September 30, 2024, current derivative assets are recorded in Other current assets in the Consolidated Balance Sheets.
(2)
As of March 31, 2025 and September 30, 2024, current derivative liabilities are recorded in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.
Non-Designated Hedges
We hedge our net foreign currency monetary assets and liabilities primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These contracts have maturities of up to approximately three months. Generally, we do not designate these foreign currency forward contracts as hedges for accounting purposes and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into forward contracts only as an economic hedge, gains or losses on the underlying foreign-denominated balance are generally offset by the losses or gains on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in Other income (expense), net.
As of March 31, 2025 and September 30, 2024, we had outstanding forward contracts not designated as hedging instruments with notional amounts equivalent to the following:
| Currency Hedged (in thousands) | March 31, 2025 | September 30, 2024 | ||||||
| Euro / U.S. Dollar | $ | 764,722 | $ | 781,398 | ||||
| British Pound / U.S. Dollar | 16,391 | 24,810 | ||||||
| Israeli Shekel / U.S. Dollar | 13,615 | 12,535 | ||||||
| Japanese Yen / U.S. Dollar | 27,008 | 42,340 | ||||||
| Swiss Franc / U.S. Dollar | 5,319 | 74,939 | ||||||
| Swedish Krona / U.S. Dollar | 16,036 | 48,596 | ||||||
| Chinese Renminbi / U.S. Dollar | 3,891 | 32,124 | ||||||
| New Taiwan Dollar / U.S. Dollar | 6,501 | 16,368 | ||||||
| All other | 19,551 | 25,368 | ||||||
| Total | $ | 873,034 | $ | 1,058,478 |
The following table shows the effect of our non-designated hedges on the Consolidated Statements of Operations for the three and six months ended March 31, 2025 and March 31, 2024:
| (in thousands) | Three months ended | Six months ended | ||||||||||||||||
| Location of Gain (Loss) | March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | ||||||||||||||
| Net realized and unrealized loss, excluding the underlying foreign currency exposure being hedged | Other income (expense), net | $ | (917 | ) | $ | (1,286 | ) | $ | (360 | ) | $ | (5,022 | ) |
In the three months ended March 31, 2025, total foreign currency gains, net were $0.1 million. In the three months ended March 31, 2024, total foreign currency losses, net were $1.1 million. In the six months ended March 31, 2025 and March 31, 2024, total foreign currency losses, net were $1.1 million and $0.1 million, respectively.
Net Investment Hedges
We translate balance sheet accounts of subsidiaries with foreign functional currencies into the U.S. Dollar using the exchange rate at each balance sheet date. Resulting translation adjustments are reported as a component of Accumulated other comprehensive loss on the Consolidated Balance Sheets. We designate certain foreign exchange forward contracts as net investment hedges against exposure on translation of balance sheet accounts of Euro and Japanese Yen functional subsidiaries. Net investment hedges partially offset the impact of Foreign currency translation adjustment recorded in Accumulated other comprehensive loss on the Consolidated Balance Sheets. All foreign exchange forward contracts are carried at fair value on the Consolidated Balance Sheets and the maximum duration of net investment hedge foreign exchange forward contracts is approximately three months.
Net investment hedge relationships are designated at inception, and effectiveness is assessed retrospectively on a quarterly basis using the net equity position of Euro and Japanese Yen functional subsidiaries. As the forward contracts are highly effective in offsetting exchange rate exposure, we record changes in these net investment hedges in Accumulated other comprehensive loss. Changes in the fair value of foreign exchange forward contracts due to changes in time value are excluded from the assessment of effectiveness. Our derivatives are not subject to any credit contingent features. We manage credit risk with counterparties by trading among several counterparties and we review our counterparties’ credit at least quarterly.
As of March 31, 2025 and September 30, 2024, we had outstanding forward contracts designated as net investment hedges with notional amounts equivalent to the following:
| Currency Hedged (in thousands) | March 31, 2025 | September 30, 2024 | ||||||
| Euro / U.S. Dollar | $ | 443,398 | $ | 462,894 | ||||
| Japanese Yen / U.S. Dollar | 10,102 | 10,739 | ||||||
| Total | $ | 453,500 | $ | 473,633 |
The following table shows the effect of our derivative instruments designated as net investment hedges in the Consolidated Statements of Operations for the three and six months ended March 31, 2025 and March 31, 2024:
| (in thousands) | Three months ended | Six months ended | ||||||||||||||||
| Location of Gain (Loss) | March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | ||||||||||||||
| Gain (loss) recognized in Other comprehensive income (loss) ("OCI") | OCI | $ | (19,898 | ) | $ | 8,552 | $ | 13,550 | $ | (6,752 | ) | |||||||
| Gain (loss) reclassified from OCI to earnings | n/a | $ | — | $ | — | $ | — | $ | — | |||||||||
| Gain recognized, excluded portion | Other income (expense), net | $ | 1,254 | $ | 1,079 | $ | 2,329 | $ | 2,215 |
As of March 31, 2025, we estimate that all amounts reported in Accumulated other comprehensive loss will be applied against exposed balance sheet accounts upon translation within the next three months.
Offsetting Derivative Assets and Liabilities
We have entered into master netting arrangements for our forward contracts that allow net settlements under certain conditions. Although netting is permitted, it is currently our policy and practice to record all derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets.
The following table sets forth the offsetting of derivative assets as of March 31, 2025:
| (in thousands) | Gross Amounts Offset in the Consolidated Balance Sheets | Gross Amounts Not Offset in the Consolidated Balance Sheets | ||||||||||||||||||||||
| As of March 31, 2025 | Gross Amount of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Financial Instruments | Cash Collateral Received | Net Amount | ||||||||||||||||||
| Forward contracts | $ | 6,001 | $ | — | $ | 6,001 | $ | (4,286 | ) | $ | — | $ | 1,715 |
The following table sets forth the offsetting of derivative liabilities as of March 31, 2025:
| (in thousands) | Gross Amounts Offset in the Consolidated Balance Sheets | Gross Amounts Not Offset in the Consolidated Balance Sheets | ||||||||||||||||||||||
| As of March 31, 2025 | Gross Amount of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||||||||||||||
| Forward contracts | $ | 4,286 | $ | — | $ | 4,286 | $ | (4,286 | ) | $ | — | $ | — |
9. Income Taxes
| (in thousands) | Three months ended | Six months ended | ||||||||||||||
| March 31, 2025 | March 31, 2024 | March 31, 2025 | March 31, 2024 | |||||||||||||
| Income before income taxes | $ | 205,249 | $ | 145,745 | $ | 298,403 | $ | 231,344 | ||||||||
| Provision for income taxes | $ | 42,605 | $ | 31,300 | $ | 53,527 | $ | 50,512 | ||||||||
| Effective income tax rate | 21 | % | 21 | % | 18 | % | 22 | % |
The effective tax rate for the six months ended March 31, 2025 was lower than the effective tax rate for the corresponding prior-year period primarily due to changes in the geographic mix of income before taxes. Additionally, for the six months ended March 31, 2025 and March 31, 2024, rates were impacted by a benefit of $10.4 million and an expense of $3.6 million, respectively, associated with the impact of changes in tax reserves related to prior years in foreign jurisdictions.
In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the Internal Revenue Service in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, transfer pricing, limitations on net operating losses and tax credits.
As of March 31, 2025 and September 30, 2024, we had unrecognized tax benefits of $42.5 million and $65.0 million, respectively. If all our unrecognized tax benefits as of March 31, 2025 were to become recognizable in the future, we would record a benefit to the income tax provision of $42.5 million, which would be partially offset by an increase in the U.S. valuation allowance of $6.5 million.
Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $1 million.
10. Debt
As of March 31, 2025 and September 30, 2024, we had the following debt obligations:
| (in thousands) | March 31, 2025 | September 30, 2024 | ||||||
| 4.000% Senior notes due 2028 | $ | 500,000 | $ | 500,000 | ||||
| 3.625% Senior notes due 2025 | — | 500,000 | ||||||
| Credit facility revolver line(1)(2) | 411,250 | 262,000 | ||||||
| Credit facility term loan(1)(2) | 481,250 | 490,625 | ||||||
| Total debt | 1,392,500 | 1,752,625 | ||||||
| Unamortized debt issuance costs for the senior notes(3) | (3,107 | ) | (4,053 | ) | ||||
| Total debt, net of issuance costs(4) | $ | 1,389,393 | $ | 1,748,572 |
(1)
Unamortized debt issuance costs related to the credit facility were $2.7 million included in Other current assets and $4.7 million included in Other assets on the Consolidated Balance Sheet as of March 31, 2025 and $2.3 million included in Other current assets and $5.2 million included in Other assets on the Consolidated Balance Sheet as of September 30, 2024.
(2)
The stated maturity date under the credit facility on which both the revolver line and the term loan will mature and all amounts then outstanding will become due and payable is January 3, 2028. The term loan began amortizing in March 2024, with payments of $12.5 million remaining in 2025, $25.0 million in 2026 and 2027, and $418.7 million in 2028.
(3)
As of March 31, 2025, all unamortized debt issuance costs for the senior notes were included in Long-term debt on the Consolidated Balance Sheet. As of September 30, 2024, $0.4 million of unamortized debt issuance costs for the senior notes was included in Current portion of long-term debt and $3.6 million was included in Long-term debt on the Consolidated Balance Sheet.
(4)
As of March 31, 2025, $25.0 million of debt associated with the credit facility term loan was classified as short term. As of September 30, 2024, $521.5 million of debt was classified as short term, including $499.6 million associated with the 2025 senior notes and related debt issuance costs and $21.9 million associated with the credit facility term loan.
Senior Unsecured Notes
In February 2020, we issued $500 million in aggregate principal amount of 4.0% senior, unsecured long-term debt at par value, due in 2028 (the 2028 notes) and $500 million in aggregate principal amount of 3.625% senior, unsecured long-term debt at par value, due in February 2025 (the 2025 notes). In the second quarter of 2025, we redeemed the 2025 notes using a draw on our revolving credit facility and cash on hand.
As of March 31, 2025, the total estimated fair value of the 2028 notes was approximately $481.3 million based on quoted prices for the notes on that date.
We were in compliance with all the covenants for our senior notes as of March 31, 2025.
Credit Agreement
Our credit facility consists of (i) a $1.25 billion revolving credit facility, (ii) a $500 million term loan credit facility, and (iii) an incremental facility pursuant to which we may incur additional term loan tranches or increase the revolving credit facility. On October 1, 2024, we entered into an amendment to our credit facility which removed a repayment obligation as of November 16, 2024 in the event that the 2025 notes had not been redeemed or refinanced as of that date.
As of March 31, 2025, unused commitments under our credit facility were $838.8 million and amounts available for borrowing were $823.3 million.
As of March 31, 2025, the fair value of our credit facility approximates its book value.
PTC and certain eligible foreign subsidiaries are eligible borrowers under the credit facility. As of March 31, 2025, $241.3 million was borrowed by an eligible foreign subsidiary borrower.
Loans under the credit facility bear interest at variable rates. As of March 31, 2025, the annual rate for borrowings outstanding was 5.9%. A quarterly revolving commitment fee on the undrawn portion of the revolving credit facility is required, ranging from 0.175% to 0.325% per annum, based upon our total leverage ratio.
As of March 31, 2025, we were in compliance with all financial and operating covenants of the credit facility.
Interest
We incurred interest expense on our debt of $19.6 million and $41.7 million in the second quarter and first six months of 2025, respectively, and $31.6 million and $66.9 million in the second quarter and first six months of 2024, respectively. The average interest rate on borrowings outstanding was approximately 4.9% and 4.8% during the second quarter and first six months of 2025, respectively, and 5.5% and 5.6% during the second quarter and first six months of 2024.
11. Commitments and Contingencies
Guarantees and Indemnification Obligations
We enter into standard indemnification agreements with our customers and business partners in the ordinary course of our business. Under such agreements, we typically indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our products. Indemnification may also cover other types of claims, including claims relating to certain data breaches. These agreements typically limit our liability with respect to indemnification claims other than intellectual property infringement claims. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and, accordingly, we believe the estimated fair value of liabilities under these agreements is immaterial.
We warrant that our software products will perform in all material respects in accordance with our standard published specifications during the term of the license. Additionally, we generally warrant that our consulting services will be performed consistent with generally accepted industry standards and, in the case of fixed price services, the agreed-upon specifications. In most cases, liability for these warranties is capped. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history; however, we have not incurred significant cost under our product or services warranties. As a result, we believe the estimated fair value of these liabilities is immaterial.
Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS