PTC Announces Fiscal Second Quarter 2020 Results

April 29, 2020

Solid Q2’20 ARR, Revenue, Operating Margin and EPS Performance; Revises FY’20 Outlook

BOSTON--(BUSINESS WIRE)--Apr. 29, 2020-- PTC (NASDAQ: PTC) today reported financial results for its fiscal second quarter ended March 28, 2020.

“Our performance in the second quarter was solid, with ARR growing 11% on a constant currency basis despite the increasingly challenging macro environment towards the end of the quarter. Revenue, operating margin and EPS results exceeded our expectations, reflecting the strength of our recurring revenue model. Given the durable nature of our business, we remain committed to delivering solid results for the remainder of FY’20 while navigating the current backdrop of macroeconomic uncertainty,” said James Heppelmann, President and CEO, PTC.

“We continue to work closely with our customers to address the ever-changing demands this crisis is having on their businesses. We are providing white-glove support to our many medical device and health-tech customers to ramp up production of critical medical equipment, and we announced free use of our Vuforia Chalk augmented reality remote support and collaboration technology during the crisis,” continued Heppelmann.

“The disruptive nature of the crisis is reinforcing the mission-critical nature of our broad technology portfolio – from the data access and collaboration capabilities of Windchill PLM, to the remote management enabled by our ThingWorx IoT solutions, to the remote collaboration and training of front-line workers enabled by our Vuforia AR suite, to our pure SaaS Onshape platform that enables engineers to work from anywhere and on any device. We will continue to drive innovation to further enhance our already robust product portfolio and we believe we will emerge even better positioned following this crisis,” concluded Heppelmann.

Second quarter 2020 highlights1

Key operating and financial highlights are set forth below. For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.

  • ARR was $1.18 billion. Growth of 10%, or 11% in constant currency, compared to Q2’19 reflects solid performance in our Core and Growth businesses, and in our global channel.
  • Revenue was $360 million in Q2’20. Growth of 24% compared to Q2’19 was driven by strength across our Core and Growth businesses.
  • Cash from operations was $88 million in Q2’20, compared to $141 million in Q2’19. Free cash flow was $82 million, compared to $120 million in Q2’19. Cash flow from operations and free cash flow included $18 million in restructuring payments and $2 million of acquisition-related payments.
  • Operating margin was 14% in Q2’20 on a GAAP basis compared to (8)% in Q2’19; non-GAAP operating margin was 29%, compared to 15% in Q2’19.
  • Total cash, cash equivalents, and marketable securities as of the end of Q2’20 was $884 million; total debt, net of deferred issuance costs, was $1.6 billion. We will redeem all $500 million of our 6% Senior Notes due 2024 on May 15, 2020.
_______________

1We include operating and non-GAAP financial measures in our operational highlights. We revised the definition of ARR on September 5, 2019. The detailed definitions of these items and reconciliations of Non-GAAP financial measures to comparable GAAP measures are included below and in the reconciliation tables at the end of this press release.

Fiscal 2020 Outlook

“Our actions over the past few years to migrate the business to a more predictable recurring revenue model has made PTC more resilient than ever. Our revised fiscal 2020 guidance demonstrates our expectation that even in this challenging environment PTC will remain financially healthy and still post solid growth,” said Kristian Talvitie, EVP and CFO, PTC.

Revised Fiscal 2020 Guidance

Our revised fiscal 2020 financial outlook includes the following assumptions:

  • Impact of weakening of macroeconomic conditions related to the COVID-19 crisis.
  • A severe disruption in new bookings growth, down 30% YoY at the midpoint for the second half of the year.
    • The low end of the range assumes ~50% decline in new bookings for Q3’20 and Q4’20.
    • The high end of the range assumes a ~30% decline in new bookings for Q3’20 and a ~20% decline in Q4.
  • Churn deteriorates approximately 100 bps to 8%, rather than a modest improvement over FY’19.
  • Operating expense growth of roughly 2% YoY compared to our previous projection of 9% YoY due primarily to restructuring activity conducted in H1’20 as well as increased cost discipline related to headcount additions, variable compensation expense, travel and marketing expense.
  • GAAP tax rate is expected to be 20%, Non-GAAP tax rate is expected to be 19%.

In millions except per share amounts

Previous

Guidance

Revised

Guidance

YoY

ARR

$1,270 - $1,295

$1,220 - $1,255

9% - 12%

Cash from Operations

$245 - $265

~$222

~(22)%

Free cash flow (1)

$218 - $238

~$200

~(10)%

Revenue

$1,445 - $1,525

$1,400 - $1,430

11% - 14%

GAAP Operating Margin

11% - 15%

13% - 14%

800 - 900 bps

Non-GAAP Operation Margin (2)

26% - 29%

27% - 28%

700 - 800 bps

GAAP EPS

$0.71 - $1.23

$0.70 - $0.84

404% - 465%

Non-GAAP EPS (2)

$2.15 - $2.65

$2.20 - $2.35

34% - 43%

(1)

Cash from operations and free cash flow include ~$65 million of interest payments, ~$45 million of restructuring and ~$10 million of acquisition-related payments; free cash flow includes capital expenditures of ~$22 million.

(2)

The FY’20 non-GAAP guidance excludes the estimated items outlined in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected).

In millions

 

 

FY’20

 

 

 

 

Acquisition-related charges

 

 

$7

Restructuring and other charges

 

 

$32

Intangible asset amortization expense

 

 

$56

Stock-based compensation expense

 

 

$102

Debt early redemption premium

 

 

$15

Total Estimated Pre-Tax GAAP adjustments

 

 

$212

PTC’s Fiscal Second Quarter 2020 Results Conference Call, Prepared Remarks and Data Tables

Prepared remarks and financial data tables have been posted to the Investor Relations section of our website at ptc.com. The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, April 29, 2020.

To access the live webcast, we recommend you visit PTC’s Investor Relations website at investor.ptc.com 15 minutes before the scheduled start time to download any necessary audio or plug-in software.

To participate in the live conference call, dial 866-987-6881 or 270-215-9571 and provide the conference ID: 1299773. The call will be recorded, and replay will be available via webcast on PTC’s Investor Relations website.

 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
Revenue:
Recurring revenue

$

315,863

 

$

239,185

 

$

621,231

 

$

490,623

 

Perpetual license

 

8,217

 

 

10,336

 

 

17,215

 

 

52,141

 

Professional services

 

35,523

 

 

40,930

 

 

77,267

 

 

82,376

 

Total revenue (1)

 

359,603

 

 

290,451

 

 

715,713

 

 

625,140

 

 
Cost of revenue

 

83,027

 

 

79,904

 

 

170,432

 

 

157,256

 

 
Gross margin

 

276,576

 

 

210,547

 

 

545,281

 

 

467,884

 

 
Operating expenses:
Sales and marketing (2)

 

107,438

 

 

103,722

 

 

215,042

 

 

207,940

 

Research and development (2)

 

59,954

 

 

61,402

 

 

125,262

 

 

122,184

 

General and administrative (2)

 

33,629

 

 

35,371

 

 

78,186

 

 

73,235

 

Amortization of acquired intangible assets

 

7,288

 

 

5,930

 

 

14,065

 

 

11,866

 

Restructuring and other charges, net

 

18,242

 

 

26,980

 

 

32,276

 

 

45,473

 

Total operating expenses

 

226,551

 

 

233,405

 

 

464,831

 

 

460,698

 

 
Operating income (loss)

 

50,025

 

 

(22,858

)

 

80,450

 

 

7,186

 

Other expense, net

 

(34,247

)

 

(10,562

)

 

(45,641

)

 

(20,184

)

Income (loss) before income taxes

 

15,778

 

 

(33,420

)

 

34,809

 

 

(12,998

)

Provision (benefit) for income taxes

 

8,622

 

 

10,093

 

 

(7,802

)

 

9,530

 

Net income (loss)

$

7,156

 

$

(43,513

)

$

42,611

 

$

(22,528

)

 
Earnings (loss) per share:
Basic

$

0.06

 

$

(0.37

)

$

0.37

 

$

(0.19

)

Weighted average shares outstanding

 

115,606

 

 

118,461

 

 

115,401

 

 

118,392

 

 
Diluted

$

0.06

 

$

(0.37

)

$

0.37

 

$

(0.19

)

Weighted average shares outstanding

 

116,017

 

 

118,461

 

 

115,856

 

 

118,392

 

(1)

See supplemental financial data for revenue by license, support, and professional services.

(2)

See supplemental financial data for additional information about stock-based compensation.
 
PTC Inc.
SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION
(in thousands, except per share data)
 
Revenue by license, support and services is as follows:
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

2020

2019

2020

2019

License revenue (1)

$

127,607

$

61,876

$

251,037

$

167,198

Support and cloud services revenue

 

196,473

 

187,645

 

387,409

 

375,566

Professional services revenue

 

35,523

 

40,930

 

77,267

 

82,376

Total revenue

$

359,603

$

290,451

$

715,713

$

625,140

 
(1) License revenue includes the portion of subscription revenue allocated to license.
 
The amounts in the income statement include stock-based compensation as follows:
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

2020

2019

2020

2019

Cost of revenue

$

3,000

$

3,112

$

6,043

$

6,223

Sales and marketing

 

7,146

 

9,522

 

14,598

 

19,244

Research and development

 

4,765

 

5,190

 

11,697

 

10,090

General and administrative

 

5,573

 

9,143

 

16,082

 

20,817

Total stock-based compensation

$

20,484

$

26,967

$

48,420

$

56,374

 
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
GAAP revenue

$

359,603

 

$

290,451

 

$

715,713

 

$

625,140

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Non-GAAP revenue

$

359,603

 

$

290,649

 

$

715,713

 

$

625,611

 

 
GAAP gross margin

$

276,576

 

$

210,547

 

$

545,281

 

$

467,884

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Fair value adjustment to deferred services cost

 

-

 

 

(77

)

 

-

 

 

(162

)

Stock-based compensation

 

3,000

 

 

3,112

 

 

6,043

 

 

6,223

 

Amortization of acquired intangible assets included in cost of revenue

 

6,879

 

 

6,842

 

 

13,678

 

 

13,559

 

Non-GAAP gross margin

$

286,455

 

$

220,622

 

$

565,002

 

$

487,975

 

 
GAAP operating income (loss)

$

50,025

 

$

(22,858

)

$

80,450

 

$

7,186

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Fair value adjustment to deferred services cost

 

-

 

 

(77

)

 

-

 

 

(162

)

Stock-based compensation

 

20,484

 

 

26,967

 

 

48,420

 

 

56,374

 

Amortization of acquired intangible assets included in cost of revenue

 

6,879

 

 

6,842

 

 

13,678

 

 

13,559

 

Amortization of acquired intangible assets

 

7,288

 

 

5,930

 

 

14,065

 

 

11,866

 

Acquisition-related and other transactional charges included in general and administrative costs

 

261

 

 

372

 

 

7,390

 

 

791

 

Restructuring and other charges, net

 

18,242

 

 

26,980

 

 

32,276

 

 

45,473

 

Non-GAAP operating income (1)

$

103,179

 

$

44,354

 

$

196,279

 

$

135,558

 

 
GAAP net income (loss)

$

7,156

 

$

(43,513

)

$

42,611

 

$

(22,528

)

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Fair value adjustment to deferred services cost

 

-

 

 

(77

)

 

-

 

 

(162

)

Stock-based compensation

 

20,484

 

 

26,967

 

 

48,420

 

 

56,374

 

Amortization of acquired intangible assets included in cost of revenue

 

6,879

 

 

6,842

 

 

13,678

 

 

13,559

 

Amortization of acquired intangible assets

 

7,288

 

 

5,930

 

 

14,065

 

 

11,866

 

Acquisition-related and other transactional charges included in general and administrative costs

 

261

 

 

372

 

 

7,390

 

 

791

 

Restructuring and other charges, net

 

18,242

 

 

26,980

 

 

32,276

 

 

45,473

 

Debt early redemption premium

 

15,000

 

 

-

 

 

15,000

 

 

-

 

Income tax adjustments (2)

 

(6,855

)

 

2,138

 

 

(38,821

)

 

(12,718

)

Non-GAAP net income

$

68,455

 

$

25,837

 

$

134,619

 

$

93,126

 

 
GAAP diluted earnings (loss) per share

$

0.06

 

$

(0.37

)

$

0.37

 

$

(0.19

)

Fair value adjustment of acquired deferred revenue

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation

 

0.18

 

 

0.23

 

 

0.42

 

 

0.47

 

Amortization of acquired intangibles

 

0.12

 

 

0.11

 

 

0.24

 

 

0.21

 

Acquisition-related and other transactional charges

 

-

 

 

-

 

 

0.06

 

 

0.01

 

Restructuring and other charges, net

 

0.16

 

 

0.23

 

 

0.28

 

 

0.38

 

Debt early redemption premium

 

0.13

 

 

-

 

 

0.13

 

 

-

 

Income tax adjustments

 

(0.06

)

 

0.02

 

 

(0.34

)

 

(0.11

)

Non-GAAP diluted earnings per share

$

0.59

 

$

0.22

 

$

1.16

 

$

0.78

 

 
GAAP diluted weighted average shares outstanding

 

116,017

 

 

118,461

 

 

115,856

 

 

118,392

 

Dilutive effect of stock-based compensation plans

 

-

 

 

881

 

 

-

 

 

1,098

 

Non-GAAP diluted weighted average shares outstanding

 

116,017

 

 

119,342

 

 

115,856

 

 

119,490

 

 

(1)

Operating margin impact of non-GAAP adjustments:
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP operating margin

 

13.9

%

 

-7.9

%

 

11.2

%

 

1.1

%

Fair value adjustment of acquired deferred revenue

 

0.0

%

 

0.1

%

 

0.0

%

 

0.1

%

Fair value adjustment to deferred services cost

 

0.0

%

 

0.0

%

 

0.0

%

 

0.0

%

Stock-based compensation

 

5.7

%

 

9.3

%

 

6.8

%

 

9.0

%

Amortization of acquired intangibles

 

3.9

%

 

4.4

%

 

3.9

%

 

4.1

%

Acquisition-related and other transactional charges

 

0.1

%

 

0.1

%

 

1.2

%

 

0.1

%

Restructuring and other charges, net

 

5.1

%

 

9.3

%

 

4.5

%

 

7.3

%

Non-GAAP operating margin

 

28.7

%

 

15.3

%

 

27.4

%

 

21.7

%

 

(2)

We have recorded a full valuation allowance against our U.S. net deferred tax assets. As we are profitable on a non-GAAP basis, the 2020 and 2019 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. 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.
 
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
March 28, September 30,

2020

2019

 
ASSETS
 
Cash and cash equivalents (1)

$

826,776

$

269,579

Marketable securities

 

56,941

 

57,435

Accounts receivable, net

 

352,673

 

372,743

Property and equipment, net

 

104,147

 

105,531

Goodwill and acquired intangible assets, net

 

1,854,272

 

1,408,128

Lease assets, net (2)

 

157,016

 

-

Other assets

 

514,646

 

451,172

 
Total assets

$

3,866,471

$

2,664,588

 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deferred revenue

$

417,202

$

396,632

Debt, net of deferred issuance costs

 

1,630,722

 

669,134

Lease obligations (2)

 

224,158

 

-

Other liabilities

 

320,308

 

396,824

Stockholders' equity

 

1,274,081

 

1,201,998

 
Total liabilities and stockholders' equity

$

3,866,471

$

2,664,588

(1)

We have notified bondholders that we will redeem the $500 million of 2024 Senior Notes in May 2020. Of the March cash balance, $530 million is reserved for that redemption.

(2)

In the first quarter of 2020, we adopted Accounting Standards Update 2016-02, Leases (Topic 842).

 
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
Cash flows from operating activities:
Net income (loss)

$

7,156

 

$

(43,513

)

$

42,611

 

$

(22,528

)

Stock-based compensation

 

20,484

 

 

26,967

 

 

48,420

 

 

56,374

 

Depreciation and amortization

 

20,605

 

 

19,505

 

 

40,193

 

 

39,558

 

Accounts receivable

 

(14,127

)

 

30,476

 

 

20,187

 

 

54,501

 

Accounts payable and accruals

 

23,086

 

 

9,264

 

 

7,564

 

 

(27,868

)

Deferred revenue

 

52,345

 

 

58,767

 

 

17,393

 

 

36,947

 

Income taxes

 

(1,113

)

 

5,991

 

 

(43,815

)

 

(15,677

)

Other

 

(20,619

)

 

33,673

 

 

(37,224

)

 

41,037

 

Net cash provided by operating activities

 

87,817

 

 

141,130

 

 

95,329

 

 

162,344

 

 
Capital expenditures

 

(5,536

)

 

(20,936

)

 

(10,243

)

 

(51,268

)

Acquisition of businesses, net of cash acquired (1)

 

(771

)

 

103

 

 

(468,520

)

 

(69,453

)

Borrowings (payments) on debt, net

 

520,000

 

 

(40,000

)

 

975,000

 

 

95,000

 

Net proceeds associated with issuance of common stock

 

8,980

 

 

8,798

 

 

8,980

 

 

4,158

 

Repurchases of common stock

 

-

 

 

(64,994

)

 

-

 

 

(64,994

)

Payments of withholding taxes in connection with
vesting of stock-based awards

 

(722

)

 

(703

)

 

(23,571

)

 

(34,491

)

Proceeds from (purchase of) investment

 

-

 

 

(7,500

)

 

-

 

 

(7,500

)

Contingent consideration

 

-

 

 

-

 

 

-

 

 

(1,575

)

Credit facility origination costs

 

(15,261

)

 

-

 

 

(16,266

)

 

-

 

Other financing & investing activities

 

2,983

 

 

1,205

 

 

2,020

 

 

(119

)

Foreign exchange impact on cash

 

(7,731

)

 

196

 

 

(5,740

)

 

2,237

 

 
Net change in cash, cash equivalents, and restricted cash

 

589,759

 

 

17,299

 

 

556,989

 

 

34,339

 

Cash, cash equivalents, and restricted cash, beginning of period

 

237,919

 

 

278,133

 

 

270,689

 

 

261,093

 

Cash, cash equivalents, and restricted cash, end of period

$

827,678

 

$

295,432

 

$

827,678

 

$

295,432

 

 
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Cash provided by operating activities

 

87,817

 

 

141,130

 

 

95,329

 

 

162,344

 

Capital expenditures

 

(5,536

)

 

(20,936

)

 

(10,243

)

 

(51,268

)

Free cash flow (2)

 

82,281

 

 

120,194

 

 

85,086

 

 

111,076

 

(1)

In the three months ended December 28, 2019, we acquired Onshape for $468 million, net of cash acquired. In the three months ended December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.

(2)

Free cash flow includes $18.0 million and $21.3 million of restructuring payments in the three and six months ended March 28, 2020, respectively, compared with $9.6 million and $17.9 million in the three and six months ended March 30, 2019. Free cash flow includes $2.1 million and $8.6 million of acquisition-related payments for the three and six months ended March 28, 2020, respectively. There were no acquisition-related payments in the first half of 2019.

Important Disclosures

Important Information About Our Non-GAAP Financial Measures

PTC provides non-GAAP supplemental financial information to its financial results. We use these non-GAAP financial 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. These, non-GAAP financial measures should not be construed as an alternative to GAAP results as the items excluded from the non-GAAP measures often have a material impact on our financial results and such items often recur. Management uses, and investors should consider, non-GAAP financial 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 and other transactional charges included in general and administrative costs, restructuring and other charges, debt early redemption premium 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” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

Free Cash Flow - PTC also provides information on “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 goals and intent to return approximately 50% of our free cash flow to shareholders via stock repurchases. As a reminder, we suspended the share repurchase program for FY’20. Free cash flow is net cash provided by (used in) operating activities less capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures.

Constant Currency Change Metric - We present CC information for revenue, EPS, and ARR to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency rate fluctuations. To present CC revenue, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the foreign exchange rate as of September 30, 2019, excluding the effect of any hedging, rather than the actual exchange rates in effect during that period.

Operating Measure

ARR - To help investors understand and assess the success of our subscription transition, we provide an ARR operating measure. On September 5, 2019, we revised the ARR definition. ARR represents the annualized value of our portfolio of recurring customer arrangements as of the end of the reporting period, including subscription software, cloud, and support contracts. We believe ARR is a valuable operating metric to measure the health of a subscription business because it captures expected subscription and support cash generation from new customers, existing customer expansions and includes the impact of churn (gross churn net of pricing). Because this measure represents the annualized value of recurring customer contracts as of the end of a reporting period, ARR does not represent revenue or billings for any particular period or remaining revenue that will be recognized in future periods.

Forward-Looking Statements

Statements in this document that are not historic facts, including statements about our future financial and growth expectations and targets, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: the COVID-19 pandemic impact on the global macroeconomic environment and our business could be more severe and prolonged than we expect; the macroeconomic and/or global manufacturing climates may deteriorate further due to, among other factors, the geopolitical environment, including the focus on technology transactions with non-U.S. entities and potential expanded prohibitions, and ongoing trade tensions and tariffs; customers may continue to delay or reduce purchases of new software, to reduce the number of subscriptions they carry, or delay payments to us due to the COVID-19 pandemic, all of which would adversely affect ARR and our financial results, including cash flow; our businesses, including our Internet of Things (IoT), Augmented Reality and Onshape businesses, may not expand and/or generate the revenue we expect if customers are slower to adopt those technologies than we expect or adopt competing technologies; bookings associated with minimum purchase commitments under our Strategic Alliance Agreement with Rockwell Automation may not result in subscription contracts sold through to end-user customers; our strategic initiatives and investments may not generate the revenue 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 generate sufficient operating cash flow to repay our outstanding debt when or as we expect or to return 50% of free cash flow to shareholders under our long-term capital plan, and other uses of cash or our credit facility limits or other matters could preclude such repayments or share repurchases; we may be unable to expand our partner ecosystem as we expect; and our partners may not generate the revenue 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 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.

About PTC (NASDAQ: PTC)

PTC unleashes industrial innovation with award-winning, market-proven solutions that enable companies to differentiate their products and services, improve operational excellence, and increase workforce productivity. With PTC, and its partner ecosystem, manufacturers can capitalize on the promise of today’s new technology to drive digital transformation.

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