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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30,
2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_ to_
Commission File Number:
0-18059
PTC Inc.
(Exact name of registrant as specified in its charter)
Massachusetts
04-2866152
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
121 Seaport Boulevard
,
Boston
,
MA
02210
(Address of principal executive offices, including zip code)
(
781
)
370-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value per share
PTC
NASDAQ Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☑
There were
119,792,704
shares of our common stock outstanding on July 29, 2025.
Common stock, $
0.01
par value;
500,000
shares authorized;
119,790
and
120,155
shares issued and outstanding at June 30, 2025 and September 30, 2024, respectively
1,198
1,202
Additional paid-in capital
1,847,441
1,965,307
Retained earnings
1,735,814
1,349,610
Accumulated other comprehensive loss
(
71,570
)
(
101,721
)
Total stockholders’ equity
3,512,883
3,214,398
Total liabilities and stockholders’ equity
$
6,229,053
$
6,383,542
The accompanying notes are an integral part of the condensed consolidated financial statements.
Hedge gain (loss) arising during the period, net of tax of $
9.7
million and $(
0.8
) million in the third quarter of 2025 and 2024, respectively, and $
6.4
million and $
0.9
million in the first nine months of 2025 and 2024, respectively
(
29,904
)
2,292
(
19,678
)
(
2,787
)
Foreign currency translation adjustment, net of tax of $
0
for each period
77,862
(
9,344
)
50,067
538
Change in pension benefit, net of tax of $(
0.1
) million and $
0.0
million in the third quarter of 2025 and 2024, respectively, and $(
0.2
) million and $(
0.1
) million in the first nine months of 2025 and 2024, respectively
(
769
)
112
(
238
)
106
Other comprehensive income (loss)
47,189
(
6,940
)
30,151
(
2,143
)
Comprehensive income
$
188,517
$
62,038
$
416,355
$
247,667
The accompanying notes are an integral part of the condensed consolidated financial statements.
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 GAAP 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
Measurements of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient to measure credit losses on accounts receivable and contract assets. The ASU will be effective for us in the first quarter of 2027, with early adoption permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
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. The ASU does not change the definition of a reportable segment or the method for determining reportable segments. We expect the adoption to result in additional disclosures only.
2. Revenue from Contracts with Customers
Receivables, Co
ntract Assets and Contract Liabilities
(in thousands)
June 30, 2025
September 30, 2024
Short-term and long-term receivables
$
962,810
$
1,062,052
Contract asset
$
8,405
$
14,410
Deferred revenue
$
777,352
$
775,274
During the nine months ended June 30, 2025, we recognized $
681.9
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 an increase 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 June 30, 2025 and September 30, 2024, our total revenue liability was $
33.4
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 June 30, 2025, RPO totaled $
2,309.2
million, of which $
777.4
million is recorded in Deferred revenue and $
1,531.8
million is not yet recorded in the Consolidated Balance Sheets. Of the total, we expect to recognize approximately
58
% over the next
12
months,
25
% over the next
13
to
24
months, and the remaining amount thereafter.
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
Nine months ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Product lifecycle management (PLM)
$
403,722
$
329,529
$
1,153,331
$
1,051,671
Computer-aided design (CAD)
240,215
189,110
692,100
620,254
Total revenue
$
643,937
$
518,639
$
1,845,431
$
1,671,925
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
Nine months ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Americas
$
282,560
$
253,592
$
853,352
$
781,480
Europe
239,286
170,617
686,458
624,884
Asia Pacific
122,091
94,430
305,621
265,561
Total revenue
$
643,937
$
518,639
$
1,845,431
$
1,671,925
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
Nine months ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Cost of license revenue
$
176
$
49
$
282
$
116
Cost of support and cloud services revenue
4,122
4,035
12,092
10,762
Cost of professional services revenue
993
1,772
4,337
5,101
Sales and marketing
15,059
15,167
46,672
46,023
Research and development
17,788
13,101
48,334
41,275
General and administrative
15,894
13,914
49,678
57,965
Total stock-based compensation expense
$
54,032
$
48,038
$
161,395
$
161,242
As of June 30, 2025 and September 30, 2024
, we had liability-classified awards related to stock-based compensation based on a fixed monetary amount of $
37.4
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.
The following table presents the calculation for both basic and diluted EPS:
(in thousands, except per share data)
Three months ended
Nine months ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Net income
$
141,328
$
68,978
$
386,204
$
249,810
Weighted-average shares outstanding—Basic
119,913
119,893
120,106
119,533
Dilutive effect of restricted stock units
548
929
709
1,060
Weighted-average shares outstanding—Diluted
120,461
120,822
120,815
120,593
Earnings per share—Basic
$
1.18
$
0.58
$
3.22
$
2.09
Earnings per share—Diluted
$
1.17
$
0.57
$
3.20
$
2.07
There were
0.4
million and
0.0
million ant
i-dilutive shares for the three and nine months ended June 30, 2025
, respectively. There were
0.2
million and
0.1
million anti-dilutive shares
for the three and nine months ended June 30, 2024, respectively.
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
third quarter and first nine months of 2025
, we repurchased
0.4
million shares for $
75
million and
1.3
million shares for $
225
million, respectively. We did
no
t repurchase any shares in the
third quarter and first nine 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 third quarter and first nine months of 2025 totaled $
1.6
million and $
2.4
million, respectively, compared to $
0.2
million and $
3.0
million in the third quarter and first nine 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.
Other Acquisitions
In the third quarter of 2025, we acquired IncQuery Group GmbH pursuant to a Share Purchase Agreement. The purchase price was $
7.9
million, net of cash acquired, of which $
6.5
million was paid in the period and $
1.4
million is contingent consideration that may be paid in 2027 to the extent earned.
During the third quarter of 2025, we completed our annual impairment test of goodwill, which was based on a qualitative assessment, and concluded that there w
as
no
impairment. A
qualitative assessment is designed to determine whether we believe it is more likely than not that the fair values of our reporting units exceed their carrying values. A qualitative assessment includes a review of qualitative factors, including company-specific (financial performance and long-range plans), industry, and macroeconomic factors, and a consideration of the fair value of each reporting unit at the last valuation date.
Goodwill and acquired intangible assets consisted of the following:
(in thousands)
June 30, 2025
September 30, 2024
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Goodwill
$
3,497,012
$
3,461,891
Intangible assets with finite lives:
Purchased software
$
639,597
$
464,507
$
175,090
$
634,439
$
436,471
$
197,968
Capitalized software
22,877
22,877
—
22,877
22,877
—
Customer lists and relationships
1,150,597
495,329
655,268
1,141,086
457,718
683,368
Trademarks and trade names
38,233
23,772
14,461
37,961
21,821
16,140
Other
4,026
4,026
—
3,941
3,941
—
Total intangible assets with finite lives
$
1,855,330
$
1,010,511
$
844,819
$
1,840,304
$
942,828
$
897,476
Total goodwill and acquired intangible assets
$
4,341,831
$
4,359,367
Changes in Goodwill were as follows:
(in thousands)
Balance, October 1, 2024
$
3,461,891
Acquisitions
5,977
Foreign currency translation adjustment
29,144
Balance, June 30, 2025
$
3,497,012
The aggregate amortization expense for intangible assets with finite lives is classified in our Consolidated Statements of Operations as follows:
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
June 30, 2025 and September 30, 2024 were as follows:
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 nine months ended June 30, 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
June 30, 2025
September 30, 2024
June 30, 2025
September 30, 2024
Derivative assets
(1)
:
Forward contracts
$
—
$
181
$
6,198
$
1,021
Derivative liabilities
(2)
:
Forward contracts
$
7,895
$
630
$
6,519
$
3,536
(1)
As of
June 30, 2025 and September 30, 2024
, current derivative assets are recorded in Other current assets in the Consolidated Balance Sheets.
(2)
As of
June 30, 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 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
June 30, 2025 and September 30, 2024, we had outstanding forward contracts not designated as hedging instruments with notional amounts equivalent to the following:
The following table shows the effect of our non-designated hedges on the Consolidated Statements of Operations for the
three and nine months ended June 30, 2025 and June 30, 2024:
(in thousands)
Three months ended
Nine months ended
Location of Gain (Loss)
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Net realized and unrealized gain (loss), excluding the underlying foreign currency exposure being hedged
Other income (expense), net
$
4,021
$
(
1,590
)
$
3,661
$
(
6,611
)
In the three and nine months ended June 30, 2025, total foreign currency gains
, net were $
1.1
million and $
0.0
million, respectively. In the three and nine months ended June 30, 2024, total foreign currency losses, net were $
1.7
million and $
1.8
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
mo
nths
.
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
June 30, 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)
June 30, 2025
September 30, 2024
Euro / U.S. Dollar
$
471,940
$
462,894
Japanese Yen / U.S. Dollar
10,412
10,739
Total
$
482,352
$
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 nine months ended June 30, 2025 and June 30, 2024:
(in thousands)
Three months ended
Nine months ended
Location of Gain (Loss)
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Gain (loss) recognized in Other comprehensive income (loss) ("OCI")
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
June 30, 2025:
(in thousands)
Gross Amounts Offset in the Consolidated Balance Sheets
Gross Amounts Not Offset in the Consolidated Balance Sheets
As of June 30, 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
$
6,198
$
—
$
6,198
$
(
6,198
)
$
—
$
—
The following table sets forth the offsetting of derivative liabilities as of
June 30, 2025:
(in thousands)
Gross Amounts Offset in the Consolidated Balance Sheets
Gross Amounts Not Offset in the Consolidated Balance Sheets
As of June 30, 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
$
14,414
$
—
$
14,414
$
(
6,198
)
$
—
$
8,216
9. Income Taxes
(in thousands)
Three months ended
Nine months ended
June 30, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Income before income taxes
$
193,676
$
67,373
$
492,079
$
298,717
Provision (benefit) for income taxes
$
52,348
$
(
1,605
)
$
105,875
$
48,907
Effective income tax rate
27
%
(
2
)%
22
%
16
%
The effective tax rate for the three and nine months ended June 30, 2025 was higher than the effective tax rate for the corresponding prior-year periods primarily due to changes in the geographic mix of income before taxes and the effects of Internal Revenue Service (IRS) procedural guidance issued in April 2024 requiring IRS consent for certain previously automatic changes of accounting method on our estimated taxable income for the year ended September 30, 2024.
Additionally, for the nine months ended June 30, 2025 and June 30, 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 IRS 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 June 30, 2025 and September 30, 2024, we had unrecognized tax benefits of $
45.7
million and $
65.0
million, respectively. If all our unrecognized tax benefits as of June 30, 2025 were to become recognizable in the future, we would record a benefit to the income tax provision of $
45.7
million, which would be partially offset by an increase in the U.S. valuation allowance of $
6.6
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.
On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that will be applicable to us beginning in 2026. These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. We are in the process of evaluating the impact of the Act to our consolidated financial statements and cash flow.
10. Debt
As of
June 30, 2025 and September 30, 2024, we had the following debt obligations:
(in thousands)
June 30, 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)
261,250
262,000
Credit facility term loan
(1)(2)
475,000
490,625
Total debt
1,236,250
1,752,625
Unamortized debt issuance costs for the senior notes
(3)
(
2,838
)
(
4,053
)
Total debt, net of issuance costs
(4)
$
1,233,412
$
1,748,572
(1)
Unamortized debt issuance costs related to the credit facility were
$
2.7
million included in Other current assets and $
4.0
million included in Other assets on the Consolidated Balance Sheet as of
June 30, 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 $
6.3
million remaining in 2025, $
25.0
million in 2026 and 2027, and $
418.7
million in 2028.
(3)
As of
June 30, 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 o
n the Consolidated Balance Sheet.
(4)
As of
June 30, 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 June 30, 2025, the total estimated fair value of the 2028 notes was approximately $
488.3
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 June 30, 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 June 30, 2025, unused commitments under our credit facility were $
988.7
million and amounts available for borrowing were $
971.8
million.
As of June 30, 2025, the fair value of our credit facility approximates its book value.
PTC and certain foreign subsidiaries are eligible borrowers under the credit facility. As of June 30, 2025
, $
116.3
million was borrowed by an eligible foreign subsidiary borrower.
Loans under the credit facility bear interest at variable rates. As of June 30, 2025, the annual rate for borrowings outstanding was
5.6
%
. 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 June 30, 2025, we were in compliance with all financial and operating covenants of the credit facility.
Interest
We incurred interest expense on our debt of $
18.4
million and $
60.1
million in the third quarter and first nine months of 2025, respectively, and $
27.8
million and $
94.7
million in the third quarter and first nine months of 2024, respectively. The average interest rate on borrowings outstanding was approximately
5.0
%
and
4.9
%
during the third quarter and first nine months of 2025, respectively, and
5.3
%
and
5.5
%
during the third quarter and first nine months of 2024
, respectively.
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.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS O
F FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Business Overview
PTC is a global software company that enables manufacturers and product companies to digitally transform how they design, manufacture, and service the physical products that the world relies on. Headquartered in Boston, Massachusetts, PTC employs over 7,000 people and supports more than 30,000 customers globally.
We primarily serve customers in the following industry verticals:
•
Industrials
•
Federal, Aerospace and Defense
•
Electronics and High Tech
•
Automotive
•
Medical Technology and Life Sciences
Our customers are focused on improving their competitiveness in the face of global competition and increasing product complexity, and our suite of software offerings is a strategic enabler of this and their digital transformation initiatives. We enable our customers to establish a strong product data foundation and leverage that foundation to drive cross-functional collaboration, accelerate new product introduction timelines and deliver higher product quality.
Our offerings include CAD (Computer-Aided Design) solutions for product data authoring and PLM (Product Lifecycle Management) solutions for product data management and process orchestration. Within the overall PLM category, our offerings also include ALM (Application Lifecycle Management) and SLM (Service Lifecycle Management).
Our product portfolio enables end-to-end digital thread initiatives that leverage a connected flow of product data across design, manufacturing, service, and, ultimately, reuse. A digital thread enables product companies to break down silos, streamline workflows, and achieve interoperability across departments, functions and systems with a single version of truth. It also secures the quality, consistency and traceability of product-related data, ensuring that the data is up-to-date, accessible, reliable and actionable. With a digital thread, the right data is delivered to the right people at the right time and in the right context across the value chain.
Our business is based on a subscription model, with 93% of our 2024 revenue recurring in nature. Compared to a perpetual license model, our subscription model naturally drives higher customer engagement and retention and provides better business predictability. This, in turn, enables us to make steady and sustained investments to support our customers and pursue mid-to-long-term growth opportunities.
Forward-Looking Statements
Statements in this document that are not historic facts, including statements about our future operating, financial and growth expectations, and potential stock repurchases, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: the macroeconomic and/or global manufacturing climates may not improve or may deteriorate due to, among other factors, the effects of recently imposed import tariffs, threats of additional and reciprocal import tariffs, global trade tensions and uncertainty, volatile foreign exchange rates, high interest rates or increases in interest rates, inflation, tightening of credit standards
and availability, geopolitical uncertainty, including the effects of the conflicts between Russia and Ukraine and in the Middle East, and tensions between the U.S. and China, any of which could cause customers to delay or reduce purchases of new software, adopt competing software solutions, reduce the number of subscriptions they carry, or delay payments to us, which would adversely affect our ARR (Annual Run Rate) and/or financial results and cash flow and growth; our investments in our software solutions, including the integration of artificial intelligence (AI) capabilities into our software solutions, may not drive expansion of those solutions and/or generate the ARR and/or cash flow we expect if customers are slower to adopt those solutions than we expect or if they adopt competing solutions; customers may not build the product data foundations essential for the AI-driven transformation of their business when or as we expect, which could adversely affect our ARR and/or financial results and cash flow and growth; our go-to-market realignment and related initiatives may disrupt our business to a greater extent than we expect or may not generate the ARR and/or financial results or cash flow when or as we expect; other uses of cash or our credit facility limits could limit or preclude the return of excess cash to shareholders via share repurchases, or could change the amount and timing of any share repurchases; and foreign exchange rates may differ materially from those we expect. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including changes to tax laws in the U.S. and other countries and the geographic mix of our revenue, expenses, and profits. Other risks and uncertainties that could cause actual results to differ materially from those projected are described below throughout or referenced in Part II, Item 1A.
Risk Factors
of this report.
Our Operating and Non-GAAP Financial Measures
Our discussion of results includes discussion of our ARR (Annual Run Rate) operating measure, non-GAAP financial measures, and disclosure of our results on a constant currency basis. ARR and our non-GAAP financial measures are described below in
Operating and Non-GAAP Financial Measures
. The methodology used to calculate constant currency disclosures is described in
Results of Operations - Impact of Foreign Currency Exchange on Results of Operations
. You should read those sections to understand our operating measure, non-GAAP financial measures, and constant currency disclosures.
Executive Overview
Despite the overall selling environment, which has been challenging for a couple of years now and reflects heightened macroeconomic uncertainly related to global trade tensions and tariffs, ARR grew 14% (9% constant currency) to $2.42 billion as of the end of Q3’25 compared to Q3’24.
Cash provided by operating activities grew 14% to $244 million in Q3'25 compared to Q3'24. Free cash flow grew 14% to $242 million in Q3'25 compared to Q3'24. Our cash flow growth is attributable to resilient top-line growth due to our subscription business model and operational discipline. In Q3'25, we repaid $157 million of debt and repurchased $75 million of our outstanding shares.
Revenue grew 24% (22% constant currency) to $644 million in Q3'25 compared to Q3'24. Under ASC 606, the timing of revenue recognition for on-premises subscription revenue can vary significantly, impacting reported revenue and growth rates. Operating margin grew by 1410 basis points in Q3'25 compared to Q3'24, reflecting higher revenue as well as continued operating discipline. Diluted earnings per share grew 106% to $1.17 in Q3'25 compared to Q3'24.
(Dollar amounts in millions, except per share data)
Three months ended
Percent Change
June 30, 2025
June 30, 2024
Actual
Constant
Currency
(1)
ARR
$
2,415.6
$
2,126.1
14
%
9
%
Total recurring revenue
(2)
$
613.6
$
481.6
27
%
25
%
Perpetual license
7.8
7.1
10
%
10
%
Professional services
22.6
30.0
(25
)%
(26
)%
Total revenue
643.9
518.6
24
%
22
%
Total cost of revenue
110.0
111.9
(2
)%
(2
)%
Gross margin
533.9
406.7
31
%
29
%
Operating expenses
324.1
310.9
4
%
3
%
Operating income
$
209.8
$
95.8
119
%
107
%
Non-GAAP operating income
(1)
$
285.2
$
164.4
73
%
68
%
Operating margin
32.6
%
18.5
%
Non-GAAP operating margin
(1)
44.3
%
31.7
%
Diluted earnings per share
$
1.17
$
0.57
Non-GAAP diluted earnings per share
(1)
$
1.64
$
0.98
Cash provided by operating activities
$
243.9
$
213.8
Capital expenditures
(1.9
)
(1.6
)
Free cash flow
$
242.0
$
212.2
(Dollar amounts in millions, except per share data)
Nine months ended
Percent Change
June 30, 2025
June 30, 2024
Actual
Constant
Currency
(1)
ARR
$
2,415.6
$
2,126.1
14
%
9
%
Total recurring revenue
(2)
$
1,739.4
$
1,551.6
12
%
12
%
Perpetual license
23.0
22.2
3
%
4
%
Professional services
83.0
98.1
(15
)%
(15
)%
Total revenue
1,845.4
1,671.9
10
%
11
%
Total cost of revenue
328.1
332.0
(1
)%
(1
)%
Gross margin
1,517.3
1,339.9
13
%
14
%
Operating expenses
968.5
945.8
2
%
2
%
Operating income
$
548.8
$
394.1
39
%
39
%
Non-GAAP operating income
(1)
$
775.8
$
617.8
26
%
26
%
Operating margin
29.7
%
23.6
%
Non-GAAP operating margin
(1)
42.0
%
37.0
%
Diluted earnings per share
$
3.20
$
2.07
Non-GAAP diluted earnings per share
(1)
$
4.53
$
3.54
Cash provided by operating activities
$
763.7
$
651.9
Capital expenditures
(7.5
)
(9.8
)
Free cash flow
$
756.2
$
642.0
(1)
See
Operating and Non-GAAP Financial Measures
below for a reconciliation of our GAAP results to our non-GAAP financial measures and
Impact of Foreign Currency Exchange on Results of Operations
below for a description of how we calculate our results on a constant currency basis.
(2)
Recurring revenue is comprised of on-premises subscription, perpetual support, SaaS, and hosting services revenue.
Impact of Foreign Currency Exchange on Results of Operations
Approximately 55% of our revenue and 35% of our expenses are transacted in currencies other than the U.S. Dollar. Because we report our results of operations in U.S. Dollars, currency translation, particularly changes in the Euro, Yen, Shekel, and Rupee relative to the U.S. Dollar, affects our reported results. Our constant currency disclosures are calculated by multiplying the results in local currency for the quarterly periods for FY'25 and FY'24 by the exchange rates in effect on September 30, 2024.
If reported results for the nine months ended June 30, 2025 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been lower by $43 million, revenue would have been higher by $33 million, and expenses would have been higher by $11 million. If reported results for the nine months ended June 30, 2024 were converted into U.S. Dollars using the rates in effect as of September 30, 2024, ARR would have been higher by $44 million, revenue would have been higher by $26 million, and expenses would have been higher by $10 million.
Revenue
Under ASC 606, the volume, mix, and duration of contract types (support, SaaS, on-premises subscription) starting or renewing in any given period can have a material impact on revenue in the period, and as a result can impact the comparability of reported revenue period over period. We recognize revenue for the license portion of on-premises subscription contracts when we deliver the licenses to the customer, typically on the start date, and we recognize revenue on the support portion of on-premises subscription contracts and stand-alone support contracts ratably over the term. We continue to convert existing support contracts to on-premises subscriptions, resulting in a shift to up-front recognition of on-premises subscription license revenue in the period converted compared to ratable recognition for a perpetual support contract. Revenue from our cloud services (primarily SaaS) contracts is recognized ratably. We expect that over time a higher portion of our revenue will be recognized ratably as we expand our SaaS offerings, release additional cloud functionality into our products, and migrate customers from on-premises subscriptions to SaaS. Given the different mix, duration and volume of new and renewing contracts in any period, year-over-year or sequential revenue can vary significantly.
Revenue by Line of Business
(Dollar amounts in millions)
Three months ended
Percent Change
Nine months ended
Percent Change
June 30, 2025
June 30, 2024
Actual
Constant
Currency
June 30, 2025
June 30, 2024
Actual
Constant
Currency
License
$
251.5
$
149.1
69
%
66
%
$
678.6
$
567.4
20
%
20
%
Support and cloud services
369.9
339.5
9
%
7
%
1,083.8
1,006.4
8
%
8
%
Software revenue
621.3
488.6
27
%
25
%
1,762.4
1,573.8
12
%
12
%
Professional services
22.6
30.0
(25
)%
(26
)%
83.0
98.1
(15
)%
(15
)%
Total revenue
$
643.9
$
518.6
24
%
22
%
$
1,845.4
$
1,671.9
10
%
11
%
Software revenue
growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods was driven by license revenue growth, which reflects the higher total value and longer average duration of contracts that renewed in the current-year periods.
Support and cloud services revenue growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods was mainly driven by growth in PLM.
Professional services
revenue decreased in Q3'25 and the first nine months of FY'25 as we continue to execute on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.
PLM
software revenue growth in Q3'25 was driven by the higher total value and longer average duration of contracts that renewed in the period. PLM software revenue growth in the first nine months of FY'25 was driven by revenue growth across all geographic regions, primarily in Windchill.
PLM ARR grew 14% (10% constant currency) from Q3’24 to Q3'25, primarily driven by Windchill and Codebeamer.
CAD
software revenue growth in Q3'25 was driven by the higher total value and longer average duration of contracts that renewed in the period. CAD software revenue growth in the first nine months of FY'25 was driven by revenue growth across all geographic regions, primarily in Creo.
CAD ARR grew 13% (8% constant currency) from Q3’24 to Q3’25, primarily driven by Creo.
Gross Margin
(Dollar amounts in millions)
Three months ended
Nine months ended
June 30, 2025
June 30, 2024
Percent Change
June 30, 2025
June 30, 2024
Percent Change
License gross margin
$
239.4
$
137.0
75
%
$
645.4
$
534.4
21
%
License gross margin percentage
95
%
92
%
95
%
94
%
Support and cloud services gross margin
$
296.4
$
269.5
10
%
$
868.7
$
802.0
8
%
Support and cloud services gross margin percentage
80
%
79
%
80
%
80
%
Professional services gross margin
$
(1.9
)
$
0.2
(1,352
)%
$
3.2
$
3.5
(8
)%
Professional services gross margin percentage
(9
)%
1
%
4
%
4
%
Total gross margin
$
533.9
$
406.7
31
%
$
1,517.3
$
1,339.9
13
%
Total gross margin percentage
83
%
78
%
82
%
80
%
Non-GAAP gross margin
(1)
$
547.4
$
422.3
30
%
$
1,558.7
$
1,384.7
13
%
Non-GAAP gross margin percentage
(1)
85
%
81
%
84
%
83
%
(1)
Non-GAAP financial measures are reconciled to GAAP results under
Non-GAAP Financial Measures
below.
License
gross margin growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods were in line with license revenue growth. Cost of license revenue in Q3'25 and the first nine months of FY'25 remained consistent with the corresponding FY'24 periods.
Support and cloud services
gross margin growth in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods was in line with support and cloud services revenue growth. Cost of support and cloud services revenue grew 5% in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods, primarily due to higher compensation-related costs.
Professional services
gross margin decreased in Q3'25 compared to Q3'24, primarily driven by a sharper decrease in professional services revenue than in professional services expense. Professional services gross margin in the first nine months of FY'25 was consistent with the corresponding FY'24 period, with costs decreasing in line with professional services revenue. The decreases in professional services revenue and costs are due to our continued execution on our strategy of leveraging partners to deliver services rather than contracting to deliver services ourselves.
Total headcount increased 3% between Q3’24 and Q3’25.
Operating expenses in Q3'25 increased compared to Q3'24, primarily due to the following:
•
a $9 million increase in total compensation expense (including stock-based compensation expense), driven by severance costs and headcount growth.
Operating expenses in the first nine months of FY'25 increased compared to the first nine months of FY'24, primarily due to the following:
•
a $12 million increase in total compensation expense (including stock-based compensation expense), driven by a $19 million increase in severance costs primarily related to our go-to-market realignment (which is mainly included in Sales and marketing), offset by lower compensation charges in General and administrative driven by our FY'24 chief executive officer succession;
•
a $6 million increase in outside services, driven by consulting services related to our go-to-market realignment and other corporate initiatives; and
•
a $4 million impairment charge recognized in Q2'25 related to the lease asset associated with the subleased portion of our Boston office.
Interest Expense
(Dollar amounts in millions)
Three months ended
Nine months ended
June 30, 2025
June 30, 2024
Percent Change
June 30, 2025
June 30, 2024
Percent Change
Interest expense
$
(18.4
)
$
(27.8
)
(34
)%
$
(60.1
)
$
(94.7
)
(37
)%
Interest expense in both FY'25 and FY'24 includes interest on our revolving credit facility, term loan, senior notes that were redeemed in Q2'25, and senior notes due in 2028. Interest expense decreased in Q3'25 and the first nine months of FY'25 compared to the corresponding FY'24 periods due to lower debt balances and lower interest rates.
Other income (expense), net increased in Q3'25 compared to Q3'24, driven by foreign currency exchange gains in Q3'25. Other income (expense), net increased in the first nine months of FY'25 compared to the comparable FY'24 period due to a $2.0 million impairment charge recognized in Q2'24 related to an available-for-sale debt security and lower foreign currency exchange losses.
Income Taxes
(Dollar amounts in millions)
Three months ended
Nine months ended
June 30, 2025
June 30, 2024
Percent Change
June 30, 2025
June 30, 2024
Percent Change
Income before income taxes
$
193.7
$
67.4
187
%
$
492.1
$
298.7
65
%
Provision (benefit) for income taxes
$
52.3
$
(1.6
)
(3,362
)%
$
105.9
$
48.9
116
%
Effective income tax rate
27
%
(2
)%
22
%
16
%
The effective tax rate for Q3'25 and the first nine months of FY'25 was higher than the effective tax rate for the corresponding prior-year periods primarily due to changes in the geographic mix of income before taxes and the effects of IRS procedural guidance issued in April 2024 requiring IRS consent for certain previously automatic changes of accounting method on our estimated taxable income for FY'24. Additionally, for the first nine months of FY'25 and FY'24, rates were impacted by a benefit of $10.4 million and an expense of $3.6 million, respectively, associated with the impact of changes in tax reserves related to prior years in foreign jurisdictions.
In FY’24, we requested consent from the IRS to change the accounting method for the treatment of certain deductions. If we do not receive this consent, it would have a material adverse impact on cash flow for the year in which our request is denied and our future tax payments could be higher than currently estimated, which would also adversely impact our operating cash flow. In accordance with GAAP, our financial statements currently reflect the fact that we have not yet received the consent, including an accrual for the income tax payable in Accrued income taxes on the Consolidated Balance Sheets.
On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that will be applicable to us beginning in FY'26. These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. We are in the process of evaluating the impact of the Act to our consolidated financial statements and cash flow, but currently expect such changes will have a material positive cash impact in FY'26 and FY'27. As our review is not yet complete, our expectations could change.
Critical Accounting Policies and Estimates
There were no material changes to our critical accounting policies and estimates as set forth under the heading
Critical Accounting Policies and Estimates
in Part II, Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
of our 2024 Annual Report on Form 10-K.
Recent Accounting Pronouncements
In accordance with recently issued accounting pronouncements, we will be required to comply with certain changes in accounting rules and regulations. Refer to
Note 1. Basis of Presentation
to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for all recently issued accounting pronouncements, none of which are expected to have a material effect.
We invest our cash with highly rated financial institutions. Cash and cash equivalents include highly liquid investments with original maturities of three months or less.
Due to the stability of our subscription model and consistency of annual, up-front billing, we aim to maintain a low cash balance. A significant portion of our cash is generated and held outside the U.S. As of June 30, 2025, we had cash and cash equivalents of $5.2 million in the U.S., $73.6 million in Europe, $103.0 million in Asia Pacific (including India) and $17.5 million in other countries. We have substantial cash requirements in the U.S. but believe that the combination of our existing U.S. cash and cash equivalents, cash available under our revolving credit facility, future U.S. operating cash flows, and our ability to repatriate cash to the U.S. will be sufficient to meet our ongoing U.S. operating expenses and known capital requirements.
Cash Provided by Operating Activities
Cash provided by operating activities increased $111.8 million in the first nine months of FY'25 compared to the same period in FY'24. Growth was driven by higher collections as well as lower interest payments, partially offset by higher tax payments and payments related to our go-to-market realignment. Interest payments were $53.3 million lower in the first nine months of FY'25 compared to the first nine months of FY'24, driven by a Q1'24 payment of $30.0 million of imputed interest on a deferred acquisition payment associated with our FY'23 acquisition of ServiceMax as well as lower interest payments in FY'25 due mainly to lower debt balances.
Cash Used in Investing Activities
Cash used in investing activities in the first nine months of FY'25 was driven by outflows from the settlement of net investment hedges. Cash used in investing activities in the first nine months of FY'24 was driven by the acquisition of pure-systems for $93.5 million.
Cash Used in Financing Activities
Cash used in financing activities in the first nine months of FY'25 included net payments of $516.7 million on our outstanding debt, including the redemption of our 2025 senior notes primarily using a draw on our credit facility, and the repurchase of $225.0 million of our common stock. Cash used in financing activities in the first nine months of FY'24 included $620.0 million paid to settle the ServiceMax deferred acquisition payment, partially offset by net borrowings of $109.0 million to fund the ServiceMax deferred acquisition payment and the pure-systems acquisition. Payments of withholding taxes in connection with vesting of stock-based awards were lower in the first nine months of FY'25 compared to the comparable prior-year period, primarily driven by vesting of certain awards in connection with the chief executive officer succession in Q2'24.
Unamortized debt issuance costs for the senior notes
(2.8
)
(4.1
)
Total debt, net of issuance costs
$
1,233.4
$
1,748.6
Undrawn under credit facility revolver
$
988.7
$
988.0
Undrawn under credit facility revolver available to borrow
$
971.8
$
972.1
As of June 30, 2025, we were in compliance with all financial and operating covenants of the credit facility and the note indenture. As of June 30, 2025, the annual rate for borrowings outstanding under the credit facility was 5.6%.
Our credit facility and our senior notes are described in
Note 10. Debt
to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. As of June 30, 2025, $25.0 million of our debt associated with the credit facility term loan was classified as current. In Q2'25, we redeemed the 2025 senior notes using a draw on our revolving credit facility and cash on hand.
Future Expectations
We believe that existing cash and cash equivalents, together with cash generated from operations and amounts available under the credit facility, will be sufficient to meet our working capital and capital expenditure requirements through at least the next twelve months and to meet our known long-term capital requirements.
Our long-term goal is to return excess cash to shareholders via share repurchases. We currently intend to repurchase approximately $300 million of our common stock in FY'25.
Our expected uses and sources of cash could change, our cash position could be reduced, and we could incur additional debt obligations if we retire other debt, engage in strategic transactions, or repurchase shares, any of which could be commenced, suspended, or completed at any time. Any such repurchases or retirement of debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any debt retirement or issuance, share repurchases, or strategic transactions may be material.
ARR (Annual Run Rate) represents the annualized value of our portfolio of active subscription software, SaaS, hosting, and support contracts as of the end of the reporting period. We calculate ARR as follows:
•
We consider a contract to be active when the product or service contractual term commences (the “start date”) until the right to use the product or service ends (the “expiration date”). Even if the contract with the customer is executed before the start date, the contract will not count toward ARR until the customer right to receive the benefit of the products or services has commenced.
•
For contracts that include annual values that change over time, we include in ARR only the annualized value of components of the contract that are considered active as of the date of the ARR calculation. We do not include any future committed increases in the contract value as of the date of the ARR calculation.
•
As ARR includes only contracts that are active at the end of the reporting period, ARR does not reflect assumptions or estimates regarding future customer renewals or non-renewals.
•
Active contracts are annualized by dividing the total active contract value by the contract duration in days (expiration date minus start date), then multiplying that by 365 days (or 366 days for leap years).
We believe ARR is a valuable operating measure to assess the health of a subscription business because it is aligned with the amount that we invoice the customer on an annual basis. We generally invoice customers annually for the current year of the contract. A customer with a one-year contract will typically be invoiced for the total value of the contract at the beginning of the contractual term, while a customer with a multi-year contract will be invoiced for each annual period at the beginning of each year of the contract.
ARR increases by the annualized value of active contracts that commence in a reporting period and decreases by the annualized value of contracts that expire in the reporting period.
As ARR is not annualized recurring revenue, it is not calculated based on recognized or unearned revenue and is not affected by variability in the timing of revenue under ASC 606, particularly for on-premises license subscriptions where a substantial portion of the total value of the contract is recognized as revenue at a point in time upon the later of when the software is made available, or the subscription term commences.
ARR should be viewed independently of recognized and unearned revenue and is not intended to be combined with, or to replace, either of those items. Investors should consider our ARR operating measure only in conjunction with our GAAP financial results.
Our non-GAAP financial measures and the reasons we use them and exclude the items identified below are described in
Management's Discussion and Analysis of Financial Condition and Results of Operations
in our Annual Report on Form 10-K for the year ended September 30, 2024.
The non-GAAP financial measures presented in the discussion of our results of operations and the respective most directly comparable GAAP measures are:
•
non-GAAP gross margin—GAAP gross margin
•
non-GAAP operating income—GAAP operating income
•
non-GAAP operating margin—GAAP operating margin
•
non-GAAP net income—GAAP net income
•
non-GAAP diluted earnings per share—GAAP diluted earnings per share
•
free cash flow—cash flow from operations
The non-GAAP financial measures other than free cash flow exclude, as applicable: stock-based compensation expense; amortization of acquired intangible assets; acquisition and transaction-related charges included in General and administrative expenses; Impairment and other charges (credits), net; non-operating charges (credits), net; and income tax adjustments as defined in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 and as reflected in the reconciliation tables.
In Q2'25, we changed the income statement caption of Restructuring and other charges (credits), net to Impairment and other charges (credits), net to reflect that the amounts presented are mainly impairment charges rather than restructuring charges. We correspondingly revised the caption with respect to the list of items excluded from our non-GAAP financial measures and, as reflected below, the list of items covered under that caption to reflect the primary charges and credits included in the adjustment. All charges and credits under the captioned line item remain the same.
Impairment and other charges (credits), net are charges associated with disposal or exit activities, including lease impairment and abandonment charges, net charges or income related to impaired or exited facilities, restructuring severance charges resulting from substantial employee reduction actions, and other related costs.
The items excluded from the non-GAAP financial measures often have a material impact on our financial results, some of those items are recurring, and other items often recur. Accordingly, the non-GAAP financial measures included in this Quarterly Report on Form 10-Q should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable GAAP measure on our financial statements.
Amortization of acquired intangible assets included in cost of revenue
8.2
9.7
24.6
28.8
Non-GAAP gross margin
$
547.4
$
422.3
$
1,558.7
$
1,384.7
GAAP operating income
$
209.8
$
95.8
$
548.8
$
394.1
Stock-based compensation
54.0
48.0
161.4
161.2
Amortization of acquired intangible assets
19.7
20.4
59.0
60.3
Acquisition and transaction-related charges
1.6
0.2
2.4
3.0
Impairment and other charges (credits), net
—
—
4.2
(0.8
)
Non-GAAP operating income
$
285.2
$
164.4
$
775.8
$
617.8
GAAP net income
$
141.3
$
69.0
$
386.2
$
249.8
Stock-based compensation
54.0
48.0
161.4
161.2
Amortization of acquired intangible assets
19.7
20.4
59.0
60.3
Acquisition and transaction-related charges
1.6
0.2
2.4
3.0
Impairment and other charges (credits), net
—
—
4.2
(0.8
)
Non-operating charges
(1)
—
—
—
2.0
Income tax adjustments
(2)
(19.3
)
(19.5
)
(65.7
)
(48.2
)
Non-GAAP net income
$
197.4
$
118.0
$
547.5
$
427.3
GAAP diluted earnings per share
$
1.17
$
0.57
$
3.20
$
2.07
Stock-based compensation
0.45
0.40
1.34
1.34
Amortization of acquired intangible assets
0.16
0.17
0.49
0.50
Acquisition and transaction-related charges
0.01
0.00
0.02
0.02
Impairment and other charges (credits), net
—
—
0.03
(0.01
)
Non-operating charges
(1)
—
—
—
0.02
Income tax adjustments
(2)
(0.16
)
(0.16
)
(0.54
)
(0.40
)
Non-GAAP diluted earnings per share
$
1.64
$
0.98
$
4.53
$
3.54
Cash provided by operating activities
$
243.9
$
213.8
$
763.7
$
651.9
Capital expenditures
(1.9
)
(1.6
)
(7.5
)
(9.8
)
Free cash flow
$
242.0
$
212.2
$
756.2
$
642.0
(1)
In the first nine months of FY'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security.
(2)
Income tax adjustments reflect the tax effects of non-GAAP adjustments which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above. Additionally, in the first nine months of FY'25 and FY’24, adjustments exclude a $10.4 million benefit and a $3.6 million charge, respectively, related to the tax impact of tax reserves related to prior years in foreign jurisdictions.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our market risk exposure as described in Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
of our 2024 Annual Report on Form 10-K.
ITEM 4. CONTROLS AN
D PROCEDURES
Evaluation of Effectiveness of Disclosure Controls and Procedures
Our management maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), as appropriate, to allow for timely decisions regarding required disclosure.
We evaluated, under the supervision and with the participation of management, including our principal executive and principal financial officers, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the period ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
In addition to other information set forth in this report, you should carefully consider the risk factors described in Part I. Item 1A.
Risk Factors
in our 2024 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The table below shows the shares of our common stock we repurchased in the third quarter of 2025.
Period
Total Number of Shares (or Units) Purchased
Average Price Paid per Share (or Unit)
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
(1)
April 1, 2025 - April 30, 2025
—
$
—
—
$
1,849,999,766
May 1, 2025 - May 31, 2025
267,282
$
168.36
267,282
$
1,805,001,497
June 1, 2025 - June 30, 2025
176,823
$
169.60
176,823
$
1,775,012,684
Total
444,105
$
168.85
444,105
$
1,775,012,684
(1)
As announced on November 6, 2024, our Board of Directors has authorized us to repurchase up to $2 billion of our common stock in the period October 1, 2024 through September 30, 2027.
ITEM 5.
OTHER INFORMATION
Director and Executive Officer
Adoption
,
Modification
or
Termination
of 10b5-1 Plans in Q3'25
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101.SCH
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents
104
The cover page of the Q3 Form 10-Q formatted in Inline XBRL (included in Exhibit 101)
* Indicates that the exhibit is being furnished, not filed, with this report.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PTC Inc.
By:
/s/ KRISTIAN TALVITIE
Kristian Talvitie
Executive Vice President and Chief Financial Officer
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