Important Information about Non-GAAP References
PTC provides non-GAAP supplemental information to its financial results. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results and such items often recur. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

Non-GAAP revenue, non-GAAP operating expense, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of the following items: fair value of acquired deferred revenue, fair value adjustment to deferred services cost, stock-based compensation, amortization of acquired intangible assets, acquisition-related charges included in general and administrative costs, restructuring charges, and income tax adjustments. Additional information about the items we exclude from our non-GAAP financial measures and the reasons we exclude them can be found in “Non-GAAP Financial Measures” beginning on page 33 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.

A reconciliation of non-GAAP measures to GAAP results is provided within this press release.

PTC also provides information on “free cash flow” and “adjusted free cash flow” to enable investors to assess our ability to generate cash without incurring additional external financings and to evaluate our performance against our announced long term goal of returning approximately 40% of our free cash flow to shareholders via stock repurchases. Free cash flow is net cash provided by (used in) operating activities less capital expenditures; adjusted free cash flow is free cash flow excluding restructuring payments and certain identified non-ordinary course payments. Free cash flow and adjusted free cash flow are not measures of cash available for discretionary expenditures.

Forward-Looking Statements
Statements in this press release that are not historic facts, including statements about our second quarter and full fiscal 2018 targets, and other future financial and growth expectations and targets, and anticipated tax rates, 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 deteriorate; customers may not purchase our solutions when or at the rates we expect; our businesses, including our Internet of Things (IoT) business, may not expand and/or generate the revenue we expect; foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense; the mix of revenue between license & subscription solutions, support and professional services could be different than we expect, which could impact our EPS results; our transition to subscription-only licensing in the Americas and Western Europe could adversely affect sales and revenue; sales of our solutions as subscriptions may not have the longer-term effect on revenue and earnings that we expect; we may be unable to expand our partner ecosystem as we expect and our partners may not generate the revenue we expect; we may be unable to improve performance in Japan when or as we expect; we may be unable to generate sufficient operating cash flow to return 40% of free cash flow to shareholders and other uses of cash or our credit facility limits could preclude share repurchases. 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 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 detailed from time to time in reports we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

PTC and the PTC logo are trademarks or registered trademarks of PTC Inc. or its subsidiaries in the United States and in other countries.

About PTC (NASDAQ: PTC)
PTC has the most robust Internet of Things technology in the world. In 1986 we revolutionized digital 3D design, and in 1998 were first to market with Internet-based PLM. Now our leading IoT and AR platform and field-proven solutions bring together the physical and digital worlds to reinvent the way you create, operate, and service products. With PTC, global manufacturers and an ecosystem of partners and developers can capitalize on the promise of the IoT today and drive the future of innovation.

PTC.com @PTC Blogs

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
					Three Months Ended
					December 30,					December 31,
					2017					2016
Revenue:
	Subscription				$	100,008				$	54,362
	Support					131,197					151,478
Total recurring revenue						231,205					205,840
	Perpetual license					33,985					34,379
Total subscription, support and license revenue						265,190					240,219
	Professional services					41,454					46,108
Total revenue						306,644					286,327
Cost of revenue:
	Cost of license and subscription revenue (1) (2)					24,376					20,130
	Cost of support revenue (1) (2)					22,200					22,817
		Total cost of software revenue				46,576					42,947
	Cost of professional services revenue (1)					36,382					39,168
Total cost of revenue						82,958					82,115
Gross margin						223,686					204,212
Operating expenses:
	Sales and marketing (1)					99,315					90,690
	Research and development (1)					63,969					57,914
	General and administrative (1)					35,004					36,695
	Amortization of acquired intangible assets					7,821					8,067
	Restructuring charges, net					105					6,285
Total operating expenses						206,214					199,651
Operating income						17,472					4,561
	Other expense, net					(11,001	)				(11,064	)
Income (loss) before income taxes						6,471					(6,503	)
	Provision (benefit) for income taxes (3)					(7,406	)				2,638
Net income (loss)					$	13,877				$	(9,141	)
Earnings (loss) per share:
	Basic				$	0.12				$	(0.08	)
		Weighted average shares outstanding				115,731					115,290
	Diluted				$	0.12				$	(0.08	)
		Weighted average shares outstanding				117,656					115,290
	(1)	The amounts in the tables above include stock-based compensation as follows:
					Three Months Ended
					December 30,					December 31,
					2017					2016
	Cost of license and subscription revenue				$	413				$	293
	Cost of support					808					1,144
	Cost of professional services revenue					1,706					1,457
	Sales and marketing					4,879					3,621
	Research and development					2,960					2,997
	General and administrative					7,565					8,476
		Total stock-based compensation			$	18,331				$	17,988

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