PTC Inc.

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

September
30,

September
30,

September
30,

September
30,

2022

2021

2022

2021

GAAP gross margin

$

412,395

$

380,908

$

1,547,367

$

1,436,057

Stock-based compensation

4,110

5,229

22,775

19,263

Amortization of acquired intangible assets included in cost of revenue

6,568

8,125

25,578

29,769

Non-GAAP gross margin

$

423,073

$

394,262

$

1,595,720

$

1,485,089

GAAP operating income

$

146,017

$

115,137

$

447,362

$

380,748

Stock-based compensation

41,580

43,393

174,863

177,289

Amortization of acquired intangible assets

15,673

15,813

60,548

59,165

Acquisition and transaction-related charges

1,877

166

13,185

15,010

Restructuring and other charges (credits), net

(653)

1,627

36,234

2,211

Non-GAAP operating income ⁽¹⁾

$

204,494

$

176,136

$

732,192

$

634,423

GAAP net income

$

106,837

$

292,943

$

313,081

$

476,923

Stock-based compensation

41,580

43,393

174,863

177,289

Amortization of acquired intangible assets

15,673

15,813

60,548

59,165

Acquisition and transaction-related charges

1,877

166

13,185

15,010

Restructuring and other charges (credits), net

(653)

1,627

36,234

2,211

Non-operating charges (credits), net ⁽²⁾

(3,408)

(68,829)

(1,362)

(68,829)

Income tax adjustments ⁽³⁾

(11,448)

(154,546)

(55,065)

(191,611)

Non-GAAP net income

$

150,458

$

130,567

$

541,484

$

470,158

GAAP diluted earnings per share

$

0.90

$

2.46

$

2.65

$

4.03

Stock-based compensation

0.35

0.36

1.48

1.50

Amortization of acquired intangibles

0.13

0.13

0.51

0.50

Acquisition and transaction-related charges

0.02

-

0.11

0.13

Restructuring and other charges (credits), net

(0.01)

0.01

0.31

0.02

Non-operating charges (credits), net

(0.03)

(0.58)

(0.01)

(0.58)

Income tax adjustments

(0.10)

(1.30)

(0.47)

(1.62)

Non-GAAP diluted earnings per share

$

1.27

$

1.10

$

4.58

$

3.97

(1) Operating margin impact of non-GAAP adjustments:

Three Months Ended

Twelve Months Ended

September
30,

September
30,

September
30,

September
30,

2022

2021

2022

2021

GAAP operating margin

28.7

%

24.0

%

23.1

%

21.1

%

Stock-based compensation

8.2

%

9.0

%

9.0

%

9.8

%

Amortization of acquired intangibles

3.1

%

3.3

%

3.1

%

3.3

%

Acquisition and transaction-related charges

0.4

%

0.0

%

0.7

%

0.8

%

Restructuring and other charges (credits), net

(0.1)

%

0.3

%

1.9

%

0.1

%

Non-GAAP operating margin

40.3

%

36.6

%

37.9

%

35.1

%

(2) Credits for Q422 include a $3.4 million gain on the sale of an asset. Net credits for FY22 include a $29.8 million gain on the sale of a portion of our
PLM services business, a $3.4 million gain on the sale of an asset, and a $3.0 million gain on the sale of an investment, offset by a $34.8 million charge
from the reduction in value of an equity investment in a publicly-traded company. Non-operating credits for Q421 and FY21 include a $68.8 million gain
associated with an increase in value of an equity investment in a publicly-traded company.

(3) 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.  In FY22, adjustments include tax expense of $15.5 million related to the sale of our PLM services business, of
which $8.1 million pertains to the basis difference in goodwill. Our Q421 and FY21 GAAP results included benefits of $137.4 million and $179.7 million,
respectively, related to the release of the valuation allowance on the majority of our U.S. net deferred tax assets.  As we were profitable on a non-GAAP
basis, the FY21 tax provision was calculated assuming there was no valuation allowance.  Additionally, our non-GAAP results for FY21 excluded tax
expenses of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.