Form 8-K PTC INC. For: Apr 20

April 20, 2016 4:05 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8‑K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported)	April 20, 2016

PTC Inc.
(Exact Name of Registrant as Specified in Its Charter)

Massachusetts
(State or Other Jurisdiction of Incorporation)

0-18059	04-2866152
(Commission File Number)	(IRS Employer Identification No.)

140 Kendrick Street Needham, Massachusetts	02494-2714
(Address of Principal Executive Offices)	(Zip Code)

(781) 370-5000
(Registrant's Telephone Number, Including Area Code)


(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 - Financial Information

Item 2.02. Results of Operations and Financial Condition.

On April 20, 2016, PTC Inc. announced its financial results for its second quarter ended April 2, 2016. PTC also posted a copy of its supplemental prepared remarks about the completed quarter on the Investor Relations section of its website at www.ptc.com. Copies of the press release and the prepared remarks are furnished herewith as Exhibits 99.1 and 99.2, respectively.

Section 7 – Regulation FD

Item 7.01 Regulation FD Disclosure.

On April 18, 2016, we entered into an amendment to our outstanding Credit Agreement dated as of November 4, 2015 by and among PTC Inc., JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto. The amendment amends the definition of Consolidated EBITDA to include cash expenses incurred in connection with, or attributable to, the termination of the Computervision Corporation Pension Plan that were deducted in the determination of Consolidated Net Earnings used for that purpose. The amendment also adds provisions to comply with the recently enacted European Union ("EU") rules that enable EU regulators to cancel any claims we have against a failed bank organized in the EU that is a lender under the credit facility.

On March 7, 2016, a lawsuit was filed against us and certain of our current and former officers and directors in the U.S. District Court for the District of Massachusetts by a shareholder on behalf of himself and purportedly on behalf of other shareholders who purchased our stock during the period November 24, 2011 through July 29, 2015. The lawsuit alleges that, during that period, certain of PTC's public disclosures concerning the recently resolved U.S. Foreign Corrupt Practices Act investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice (the "China FCPA Matter") were false and/or misleading and/or failed to disclose certain alleged facts. We intend to contest the action vigorously. We cannot predict the outcome of this action nor when it will be resolved. If the plaintiff(s) were to prevail in the litigation, we could be liable for damages, which could be material and could adversely affect our financial condition or results of operations.

On March 2, 2016, the China Administration for Industry and Commerce ("China AIC") initiated an investigation at our China subsidiary related to the China FCPA Matter described above, but not necessarily limited to the China FCPA Matter. The China AIC is authorized to issue fines and assess other civil penalties. We are unable to predict the outcome of this matter, which could include fines or other sanctions that could be material and could adversely affect our financial condition or results of operations.

Section 9 - Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

99.1	PTC Inc. press release dated April 20, 2016.

99.2	Prepared remarks posted by PTC Inc. on April 20, 2016.

99.3	Amendment No. 1 dated April 18, 2016 to Credit Agreement dated as of November 4, 2015 by and among PTC Inc., JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto.

SIGNATURES

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.



Date: April 20, 2016	By:	/s/Andrew Miller
		Andrew Miller
		Executive Vice President and Chief Financial Officer

PTC Announces Second Quarter FY'16 Results

Bookings Exceed High End of Guidance; Business Model Transition Accelerates with 54% Subscription Mix

NEEDHAM, MA, April 20, 2016 ‑ PTC (Nasdaq: PTC) today reported financial results for the second quarter ended April 2, 2016.

Q2 Fiscal 2016 Overview

Second quarter FY'16 GAAP revenue was $273 million; non-GAAP revenue was $274 million. GAAP net loss was $5 million or $0.05 per share; non-GAAP net income was $26 million or $0.23 per share.

As compared to the second quarter of FY'15, currency negatively impacted revenue by approximately $9 million and negatively impacted non-GAAP EPS by approximately $0.01 per share.

James Heppelmann, President and CEO said, "We were very pleased with our execution in Q2. Bookings exceeded the high-end of guidance, adoption of our subscription licensing model accelerated, support conversions to subscription accelerated sequentially, and we continued to gain traction in our IoT business." Heppelmann added, "While a higher subscription mix negatively impacts near-term reported revenue and earnings, we believe significant long-term value will be created for our customers and shareholders by transitioning to a subscription model. Importantly, we remain committed to our track record of financial discipline, and when viewed on a mix-adjusted basis, according to our model, both our Q2 revenue and earnings per share would have exceeded the high end of our guidance range."

Operational Overview

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 ptc.com. Information about our bookings and other reporting measures is provided on page 4.

o	License and subscription bookings were $86 million; above the high end of the guidance range of $71 million to $81 million.

For the quarter, subscription bookings were approximately 54% of total bookings, well above our guidance assumption of 26% and up from 14% a year ago. Based upon our model, this higher than guidance mix of subscription in the quarter, while expected to be positive long-term, reduced perpetual license revenue by approximately $24 million and reduced non-GAAP EPS by approximately $0.16 as compared to our guidance. As a rule of thumb, our model indicates that, on an annual basis, every 1% change in subscription mix will impact annual revenue by $3 million, and annual non-GAAP EPS by $0.02.

o	Total subscription annualized contract value (ACV) was $23 million; above guidance of $10 million.

o	Software revenue, which reflects a higher mix of subscription than last year, was down approximately $24 million or 9% on a year-over-year, constant currency basis. Our model indicates that the higher mix of subscription than last year lowered Q2'16 software revenue by approximately $30 million.

o	Annualized recurring revenue (ARR) was approximately $742 million at the end of the second quarter of fiscal 2016.

o	GAAP operating expenses were approximately $191 million; non-GAAP operating expenses were approximately $164 million. These results were at the low end of both the GAAP and non-GAAP guidance ranges.

Q2'16 GAAP operating margin was 1% and non-GAAP operating margin was 14%. Q2'15 GAAP operating margin was 1% and non-GAAP operating margin was 23%. Based on our model, the higher mix of subscription in Q2'16 reduced Q2'16 non-GAAP operating margin by approximately 700 basis points as compared to guidance.

o	For Q2'16, we recorded a GAAP income tax expense of $1.6 million, or $0.01 per share and a non-GAAP income tax expense of $6.8 million, or $0.06 per share. The non-GAAP tax rate for the quarter was 21%.

Cash flow from operations was $49 million. Excluding $28 million paid in February in connection with the SEC and DOJ FCPA investigation related to our China business and $25 million paid in connection with the restructuring announced in October 2015, cash provided by operations for Q2'16 was $102 million and free cash flow was $97 million. We did not purchase any shares in Q2'16, as our share repurchases are planned for the second half of FY'16.

o	We ended the quarter with total cash and cash equivalents of $368 million and total debt of $838 million.

Workforce Realignment

In October 2015, reflecting a realignment of resources toward higher growth opportunities and our commitment to operating margin improvement, we announced a plan to repurpose or eliminate approximately 8% of worldwide positions and to consolidate select facilities. This is expected to result in a restructuring charge of up to $50 million; of which $37 million was recorded in Q1'16 and $5 million was recorded in Q2'16, with the remainder expected to be recorded in Q3 and Q4 of FY'16. Substantially all of the charges are attributable to termination benefits, most of which will be paid in FY'16.

FY'16 Business Outlook

For the quarter ending July 2, 2016 and fiscal year 2016, the company expects:

	Q3'16			Q3'16			FY'16			FY'16
($ in millions)	Low			High			Low			High

Subscription ACV⁽¹⁾	$	22		$	24		$	79		$	84
License and Subscription Bookings⁽¹⁾		90			100			357			377
Subscription % of Bookings⁽¹⁾		48	%		48	%		44	%		44	%

Subscription Revenue	$	32		$	32		$	115		$	116
Support Revenue		159			159			649			650
Perpetual License Revenue		47			52			200			212
Total Software Revenue		238			243			964			978
Professional Services Revenue		49			49			196			197
Total Revenue	$	287		$	292		$	1,160		$	1,175

Operating Expense (GAAP)	$	196		$	198		$	798		$	802
Operating Expense (Non-GAAP)		167			169			656			660
Operating Margin (GAAP)		2	%		4	%		3	%		4	%
Operating Margin (Non-GAAP)		16	%		17	%		18	%		19	%
Tax Rate (GAAP)		10	%		8	%		10	%		0	%
Tax Rate (Non-GAAP)		10	%		8	%		10	%		8	%
Shares Outstanding		116			116			116			116
EPS (GAAP)	$	0.01		$	0.06		$	0.11		$	0.18
EPS (Non-GAAP)	$	0.31		$	0.36		$	1.52		$	1.62
Free Cash Flow⁽²⁾							$	215		$	225

⁽¹⁾Explanation of these metrics is provided below.

⁽²⁾Free Cash Flow guidance is net cash provided by (used in) operating activities less capital expenditures, and excludes previously announced restructuring payments of approximately $50 million and the $28 million legal settlement in connection with the SEC and DOJ FCPA investigation related to our China business.

The Q3'16 and full year FY'16 non-GAAP operating margin and non-GAAP EPS guidance exclude the estimated items outlined in the table below and their income tax effects, as well as any discrete tax items (which are not known or reflected). Additionally, the company is currently reviewing its financing structure and considering refinancing opportunities in the credit and debt markets; our guidance excludes the potential impact of any such potential refinancing.

($ in millions)	Q3'16		FY'16

Effect of acquisition accounting on fair value of acquired deferred revenue	$	1	$	3
Stock-based compensation expense		14		66
Intangible asset amortization expense		15		58
Acquisition-related charges		0		2
Restructuring charges		8		50
Non-operating credit facility refinancing costs		-		2
Total Estimated GAAP adjustments	$	38	$	182

Numbers may not sum due to rounding.

PTC's Second Quarter FY'16 Results Conference Call, Prepared Remarks and Financial Data Tables

Prepared remarks for the conference call and financial data tables have been posted to the Investor Relations section of our website at ptc.com. The Company will host a management presentation to discuss results at 5:00 pm ET on Wednesday, April 20, 2016. To access the live webcast, please visit PTC's Investor Relations website at investor.ptc.com at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. To participate in the live conference call, dial 800-857-5592 or 773-799-3757 and provide the passcode PTC. The call will be recorded and a replay will be available for 10 days following the call by dialing 888-567-0385 and entering the pass code 1321. The archived webcast will also be available on PTC's Investor Relations website.

Bookings Metrics

We offer both perpetual and subscription licensing options to our customers, as well as monthly software rentals for certain products. Given the difference in revenue recognition between the sale of a perpetual software license (revenue is recognized at the time of sale) and a subscription (revenue is deferred and recognized ratably over the subscription term), we use bookings for internal planning, forecasting and reporting of new license and cloud services transactions. In order to normalize between perpetual and subscription licenses, we define subscription bookings as the subscription annualized contract value (subscription ACV) of new subscription bookings multiplied by a conversion factor of 2. We arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. We define subscription ACV as the total value of a new subscription booking divided by the term of the contract (in days) multiplied by 365. If the term of the subscription contract is less than a year, the ACV is equal to the total contract value.

License and subscription bookings equal subscription bookings (as described above) plus perpetual license bookings plus any monthly software rental bookings during the period. Total ACV equals subscription ACV (as described above) plus the annualized value of incremental monthly software rental bookings during the period.

Because subscription bookings is a metric we use to approximate the value of subscription sales if sold as perpetual licenses, it does not represent the actual revenue that will be recognized with respect to subscription sales or that would be recognized if the sales were perpetual licenses, nor does the annualized value of monthly software rental bookings represent the value of any such booking.

License Mix-Adjusted Metrics

These metrics assume that all new software and cloud services bookings since the start of FY'14 were perpetual license sales that included support in subsequent periods. The license mix-adjusted amount is calculated by converting the ACV (as defined above) of a new subscription solutions booking in the period to an assumed perpetual license equivalent by multiplying the ACV by a conversion factor of 2 (as defined above), and adding that amount to the perpetual license revenue amounts recognized in that period. Support calculated at 20% of the annual value of the converted amount is added to support revenue in future periods, beginning the quarter after the converted booking is assumed to be recognized. The assumed support revenue is spread ratably over a 12 month period and is assumed to renew in subsequent years.

Annualized Recurring Revenue (ARR)

We currently offer our solutions on premise, as a cloud service, and as SaaS offerings. Our on premise solutions can be licensed either as perpetual with annual support contracts or through a subscription, which is a combination of license and support. Beginning in FY'16, we launched a number of initiatives designed to incentivize more of our customers to purchase our solutions on a subscription basis. If successful, these initiatives will cause an increasing percentage of our revenue to come from subscriptions, which is expected to grow our recurring software revenue.

To help investors understand and assess the success of this expected revenue transition, we are providing an Annualized Recurring Revenue operating measure. Annualized Recurring Revenue (ARR) for a given quarter is calculated by dividing the non-GAAP subscription and support software revenue for the quarter by the number of days in the quarter and multiplying by 365. ARR should be viewed independently of revenue and deferred revenue as it is an operating measure and is not intended to be combined with or to replace either of those items. ARR is not a forecast and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of income. Subscription and support revenue and ARR reported in a quarter can be impacted by multiple factors, including but not limited to (1) the timing of the start of a contract or a renewal, including the impact of on-time renewals, support win-backs, and support conversions, which may vary by quarter, (2) the ramping of committed monthly payments under a subscription agreement over time, and (3) multiple other contractual factors with the customer including other elements sold with the subscription or support contract, and these elements can result in variability in reported ARR.

Constant Currency Change Metric

Year-over-year changes in revenue and bookings on a constant currency basis compare reported results excluding the effect of any hedging converted into U.S. dollars based on the corresponding prior year's foreign currency exchange rates to reported results for the comparable prior year period.

Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of purchase accounting on the fair value of acquired deferred revenue and costs, stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, acquisition-related expenses, costs associated with terminating a U.S. pension plan, costs associated with our previously disclosed China investigation, certain identified non-operating gains and losses, the related tax effects of the preceding items, credit facility refinancing expenses and certain discrete tax items. 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 core 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. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

PTC also provides information on "free cash flow" and "free cash flow return" 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, and free-cash flow return is the value of shares repurchased divided by free cash flow.

Forward-Looking Statements

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; 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 customers may purchase more of our solutions as subscriptions than we expect, which would adversely affect near-term revenue, operating margins, and EPS; customers may not purchase subscriptions at the rate we expect; sales of our solutions as subscriptions may not have the longer-term effect on revenue that we expect; our workforce realignment may not achieve the expense savings we expect and may adversely affect our operations; we may be unable to generate sufficient operating cash flow to return 40% of free cash flow to shareholders or that other uses of cash could preclude share repurchases; the resolution of the Securities and Exchange Commission and Department of Justice FCPA investigation may have collateral effects on our business in the United States and elsewhere; and we may be unable to complete any refinancing opportunities or that, if we do, expenses associated with our capital structure may increase.

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 and loans and cash repatriations from foreign subsidiaries. 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 Report 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

PTC (NASDAQ: PTC) is a global provider of technology platforms and solutions that transform how companies create, operate, and service the "things" in the Internet of Things (IoT). The company's next-generation ThingWorx® technology platform gives developers the tools they need to capture, analyze, and capitalize on the vast amounts of data being generated by smart, connected products and systems. The company's field-proven solutions are deployed in more than 26,000 businesses worldwide to generate a product or service advantage. PTC's award-winning CEO, considered an industry thought leader, co-authored the definitive guides to the impact of the IoT on business in the Harvard Business Review.

PTC Investor Relations Contacts

Tim Fox, 781-370-5961

[email protected]

Jason Howard, 781-370-5087

[email protected]

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)


	Three Months Ended						Six Months Ended
	April 2,			April 4,			April 2,			April 4,
	2016			2015			2016			2015

Revenue:
Subscription	$	23,659		$	15,765		$	45,835		$	29,988
Support		160,625			168,727			332,381			350,356
Total recurring software		184,284			184,492			378,216			380,344
Perpetual license		39,689			70,187			87,452			134,935
Total software		223,973			254,679			465,668			515,279
Professional services		48,654			59,440			97,976			124,282
Total revenue		272,627			314,119			563,644			639,561

Cost of revenue:
Cost of software revenue⁽¹⁾		38,613			34,518			75,427			69,243
Cost of professional services revenue⁽¹⁾		41,578			51,536			84,912			109,753
Total cost of revenue		80,191			86,054			160,339			178,996

Gross margin		192,436			228,065			403,305			460,565

Operating expenses:
Sales and marketing ⁽¹⁾		87,177			83,865			169,606			173,349
Research and development ⁽¹⁾		56,610			60,158			114,279			121,255
General and administrative ⁽¹⁾		33,916			32,394			72,483			67,524
Amortization of acquired intangible assets		8,396			9,173			16,746			18,586
Restructuring charges		4,579			38,487			41,726			38,232
Total operating expenses		190,678			224,077			414,840			418,946

Operating income (loss)		1,758			3,988			(11,535	)		41,619
Other expense, net		(5,327	)		(3,601	)		(11,580	)		(6,825	)
Income (loss) before income taxes		(3,569	)		387			(23,115	)		34,794
Provision (benefit) for income taxes		1,604			(5,005	)		5,950			(882	)
Net income (loss)	$	(5,173	)	$	5,392		$	(29,065	)	$	35,676

Earnings (loss) per share:
Basic	$	(0.05	)	$	0.05		$	(0.25	)	$	0.31
Weighted average shares outstanding		114,563			114,944			114,354			115,147

Diluted	$	(0.05	)	$	0.05		$	(0.25	)	$	0.31
Weighted average shares outstanding		114,563			115,922			114,354			116,479



(1) The amounts in the tables above include stock-based compensation as follows:

	Three Months Ended						Three Months Ended
	April 2,			April 4,			April 2,			April 4,
		2016			2015			2016			2015
Cost of software revenue	$	1,100		$	1,107		$	3,005		$	2,025
Cost of professional services revenue		1,279			1,504			2,730			3,193
Sales and marketing		3,777			3,545			8,059			6,746
Research and development		2,534			3,001			5,047			6,087
General and administrative		6,146			3,665			19,184			6,013
Total stock-based compensation	$	14,836		$	12,822		$	38,025		$	24,064

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	April 2,			April 4,			April 2,			April 4,
	2016			2015			2016			2015

GAAP revenue	$	272,627		$	314,119		$	563,644		$	639,561
Fair value adjustment of acquired deferred subscription revenue		777			590			965			1,272
Fair value adjustment of acquired deferred support revenue		-			265			-			730
Fair value adjustment of acquired deferred services revenue		286			278			595			535
Non-GAAP revenue	$	273,690		$	315,252		$	565,204		$	642,098

GAAP gross margin	$	192,436		$	228,065		$	403,305		$	460,565
Fair value adjustment of acquired deferred revenue		1,063			1,133			1,560			2,537
Fair value adjustment to deferred services cost		(125	)		(151	)		(257	)		(257	)
Stock-based compensation		2,379			2,611			5,735			5,218
Amortization of acquired intangible assets included in cost of software revenue		6,725			4,714			11,852			9,481
Non-GAAP gross margin	$	202,478		$	236,372		$	422,195		$	477,544

GAAP operating income (loss)	$	1,758		$	3,988		$	(11,535	)	$	41,619
Fair value adjustment of acquired deferred revenue		1,063			1,133			1,560			2,537
Fair value adjustment to deferred services cost		(125	)		(151	)		(257	)		(257	)
Stock-based compensation		14,836			12,822			38,025			24,064
Amortization of acquired intangible assets included in cost of software revenue		6,725			4,714			11,852			9,481
Amortization of acquired intangible assets		8,396			9,173			16,746			18,586
Acquisition-related charges included in general and administrative costs		1,071			1,892			2,278			5,925
US pension plan termination-related costs		-			1,713			-			3,397
Restructuring charges		4,579			38,487			41,726			38,232
Non-GAAP operating income ⁽²⁾	$	38,303		$	73,771		$	100,395		$	143,584

GAAP net income (loss)	$	(5,173	)	$	5,392		$	(29,065	)	$	35,676
Fair value adjustment of acquired deferred revenue		1,063			1,133			1,560			2,537
Fair value adjustment to deferred services cost		(125	)		(151	)		(257	)		(257	)
Stock-based compensation		14,836			12,822			38,025			24,064
Amortization of acquired intangible assets included in cost of software revenue		6,725			4,714			11,852			9,481
Amortization of acquired intangible assets		8,396			9,173			16,746			18,586
Acquisition-related charges included in general and administrative costs		1,071			1,892			2,278			5,925
US pension plan termination-related costs		-			1,713			-			3,397
Restructuring charges		4,579			38,487			41,726			38,232
Non-operating credit facility refinancing costs		-			-			2,359			-
Income tax adjustments ⁽³⁾		(5,208	)		(13,757	)		(279	)		(17,243	)
Non-GAAP net income	$	26,164		$	61,418		$	84,945		$	120,398

			PTC Inc.
			NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED), CONT'D.
			(in thousands, except per share data)

GAAP diluted earnings (loss) per share				$	(0.05	)	$	0.05		$	(0.25	)	$	0.31
Fair value of acquired deferred revenue					0.01			0.01			0.01			0.02
Stock-based compensation					0.13			0.11			0.33			0.21
Amortization of acquired intangibles					0.13			0.12			0.25			0.24
Acquisition-related charges					0.01			0.02			0.02			0.05
US pension plan termination-related costs					-			0.01			-			0.03
Restructuring charges					0.04			0.33			0.36			0.33
Non-operating credit facility refinancing costs					-			-			0.02			-
Income tax adjustments					(0.05	)		(0.12	)		(0.00	)		(0.15	)
Non-GAAP diluted earnings per share				$	0.23		$	0.53		$	0.74		$	1.03

GAAP diluted weighted average shares outstanding					114,563			115,922			114,354			116,479
Dilutive effect of stock based compensation plans					428			-			758			-
Non-GAAP diluted weighted average shares outstanding					114,991			115,922			115,112			116,479

	(2	)	Operating margin impact of non-GAAP adjustments:
				Three Months Ended						Six Months Ended
				April 2,			April 4,			April 2,			April 4,
					2016			2015			2016			2015
GAAP operating margin					0.6	%		1.3	%		-2.0	%		6.5	%
			Fair value of acquired deferred revenue		0.4	%		0.4	%		0.3	%		0.4	%
			Fair value adjustment to deferred services cost		0.0	%		0.0	%		0.0	%		0.0	%
			Stock-based compensation		5.4	%		4.1	%		6.7	%		3.8	%
			Amortization of acquired intangibles		5.5	%		4.4	%		5.1	%		4.4	%
			Acquisition-related charges		0.4	%		0.6	%		0.4	%		0.9	%
			US pension plan termination-related costs		0.0	%		0.5	%		0.0	%		0.5	%
			Restructuring charges		1.7	%		12.3	%		7.4	%		6.0	%
Non-GAAP operating margin					14.0	%		23.4	%		17.8	%		22.4	%

	(3	)	We have recorded a full valuation allowance against our U.S. net deferred tax assets and a valuation allowance against net deferred tax assets in certain foreign jurisdictions. As we are profitable on a non-GAAP basis, the 2016 and 2015 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. Income tax adjustments for the three and six months ended April 4, 2015 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. However, for the six months ended April 2, 2016, because of low expected full year GAAP earnings combined with the relatively large year-to-date GAAP loss, the non-GAAP provision for the second quarter and first six months of 2016 calculated based on our historical methodology is not reflective of our full year expected non-GAAP tax rate. As a result, in the second quarter we changed our methodology for calculating our non-GAAP tax provision. For the six months ended April 2, 2016, our non-GAAP tax provision is based on our annual expected non-GAAP tax rate applied to our year-to-date non-GAAP earnings.

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


	April 2,		September 30,
	2016		2015

ASSETS

Cash and cash equivalents	$	368,456	$	273,417
Accounts receivable, net		146,669		197,275
Property and equipment, net		62,867		65,162
Goodwill and acquired intangible assets, net		1,511,416		1,360,342
Other assets		322,094		313,717

Total assets	$	2,411,502	$	2,209,913

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	446,608	$	386,850
Borrowings under credit facility		838,125		668,125
Other liabilities		272,665		294,767
Stockholders' equity		854,104		860,171

Total liabilities and stockholders' equity	$	2,411,502	$	2,209,913

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)




	Three Months Ended						Six Months Ended
	April 2,			April 4,			April 2,			April 4,
	2016			2015			2016			2015

Cash flows from operating activities:
Net income (loss)	$	(5,173	)	$	5,392		$	(29,065	)	$	35,676
Stock-based compensation		14,836			12,822			38,025			24,064
Depreciation and amortization		22,291			20,968			42,904			42,205
Accounts receivable		28,398			(3,089	)		63,617			22,711
Accounts payable and accruals		(28,067	)		33,720			(17,692	)		(17,198	)
Deferred revenue		22,757			40,976			24,019			32,200
Income taxes		(5,471	)		(13,612	)		(8,826	)		(16,565	)
Excess tax benefits from stock-based awards		-			-			(56	)		(163	)
Other		(686	)		(5,185	)		(2,787	)		(17,306	)
Net cash provided by operating activities⁽⁴⁾		48,885			91,992			110,139			105,624

Capital expenditures		(4,681	)		(6,160	)		(8,866	)		(14,107	)
Acquisitions of businesses, net of cash acquired ⁽⁵⁾		(99,411	)		-			(164,191	)		180
Proceeds (payments) on debt, net		120,000			(75,000	)		170,000			(81,250	)
Proceeds from issuance of common stock		-			3			1			6
Payments of withholding taxes in connection with
vesting of stock-based awards		(638	)		(195	)		(15,471	)		(21,864	)
Excess tax benefits from stock-based awards		-			-			56			163
Other financing & investing activities		-			-			(2,300	)		(1,000	)
Foreign exchange impact on cash		7,504			(3,877	)		5,671			(13,591	)

Net change in cash and cash equivalents		71,659			6,763			95,039			(25,839	)
Cash and cash equivalents, beginning of period		296,797			261,052			273,417			293,654
Cash and cash equivalents, end of period	$	368,456		$	267,815		$	368,456		$	267,815


(4) The three months ended April 2, 2016 include a $28 million legal settlement payment. The three and six months ended April 2, 2016 include $25 million and $42 million in restructuring payments, respectively. The three and six months ended April 4, 2015 include $5 million and $23 million in restructuring payments, respectively. The three and six months ended April 4, 2015 included $5 million and $15 million of voluntary contributions to a non-U.S. pension plan, respectively.

(5) We aquired Kepware, Inc. on January 11, 2016 for $99 million (net of cash acquired) and Vuforia on November 3, 2015 for $65 million (net of cash acquired).

PTC

SECOND QUARTER FISCAL 2016

PREPARED REMARKS

April 20, 2016

Please refer to the "Important Disclosures" section of these prepared remarks for important information about our operating metrics (including Subscription ACV, License and Subscription Bookings, and Subscription % of Bookings), GAAP and non-GAAP definitions, and other important disclosures. Additional financial information is provided in the PTC Q2'16 Financial Data tables posted with these prepared remarks to PTC's Investor Relations website at investor.ptc.com.

Q2'16 Results vs. Guidance

	Operating and Non-GAAP Guidance		Operating and Non-GAAP Results		GAAP Results
In millions	Q2'16 Low	Q2'16 High	Actual	At Guidance Mix ⁽¹⁾	Actual
Subscription ACV	$10	$10	$23	$11	N/A
License and Subscription Bookings	$71	$81	$86	$86	N/A
Subscription % of Bookings	26%	26%	54%	26%	N/A

Subscription Revenue	$24	$24	$24	$24	$24
Support Revenue	$162	$162	$161	$161	$161
Perpetual License Revenue	$55	$60	$40	$64	$40
Software Revenue	$241	$246	$225	$249	$224
Professional Services Revenue	$49	$49	$49	$49	$49
Total Revenue	$290	$295	$274	$298	$273
Operating Expense	$164	$166	$164	$164	$191
Operating Margin	19%	19%	14%	21%	1%
Tax Rate	16%	16%	21%	21%	(45%)
EPS	$0.33	$0.38	$0.23	$0.39	($0.05)

(1)	Adjusted to guidance mix of 26% vs. actual Q2'16 mix of 54% and includes other adjustments as described in "Important Disclosures" set forth below.

Key Highlights of Quarterly Performance

In millions	Q2'16	YoY	YoY CC	Management Comments
Subscription ACV	$23.5	324%	330%	·Subscription ACV was well above guidance of $10M, primarily due to a higher than expected mix of subscriptions in our Solutions business, and due to bookings above the high end of our guidance.
License and Subscription Bookings	$86.1	6%	8%	·Bookings were above the high end of guidance and grew 8% YoY in CC. ·Solutions Group bookings grew in the low single-digits YoY in CC, with particular strength in ePLM. Large deal quarterly variability impacted results in SLM, where we have a strong pipeline for the remainder of the year. ·We continued to gain traction in TPG, where we grew bookings, added 66 new logos during the quarter and saw a number of six-figure expansion deals.
Subscription % of Bookings	54%	297%	293%	·Q2'16 Subscription mix of 54% far outpaced our guidance of 26% and Q2'15 mix of 14%, driven by stronger than expected adoption across all segments of our Solutions business. ·In addition, we are seeing a high subscription mix in the Americas, Europe and Japan, and while the Pac Rim and the channel are trailing in terms of total mix, we are seeing significant growth across all regions and sales channels.

In millions	Q2'16	YoY	YoY CC	Management Comments
Total Revenue (GAAP) (Non-GAAP)	$272.6 $273.7	(13%) (13%)	(10%) (10%)	·Total non-GAAP revenue was below our Q2'16 guidance range due to the over-performance of subscription mix in the quarter, which our model indicates reduced Software revenue by approximately $24 million compared to guidance. ·The 10% YoY CC decline in total non-GAAP revenue was driven by 1) software revenue decreasing 9% YoY CC, due primarily to the higher subscription mix, and 2) professional services revenue decreasing 15% YoY CC driven by our strategy to grow our service partner ecosystem.
Total Revenue (GAAP) (Non-GAAP)	$272.6 $273.7	(13%) (13%)	(10%) (10%)
Software Revenue (GAAP) (Non-GAAP)	$224.0 $224.7	(12%) (12%)	(9%) (9%)	·Non-GAAP Software revenue was below our Q2'16 guidance range due to strong subscription adoption, which our model indicates reduced perpetual license revenue by approximately $24 million compared to guidance. ·On a CC basis, non-GAAP perpetual license revenue declined 42% YoY, non-GAAP subscription revenue increased 53% YoY and non-GAAP support revenue declined 2% YoY. The support decline is due to a higher mix of subscription bookings and fewer support win-backs in the channel, as we prepared for a Q3 launch of a new support win-back conversion program. ·Based on our model, license mix-adjusted basis, non-GAAP software revenue increased 2% YoY CC.
EPS (GAAP) (Non-GAAP)	($0.05) $0.23	(197%) (57%)	(168%) (55%)	·Non-GAAP EPS was below our Q2'16 guidance range driven by the higher than expected mix of subscription in the quarter. Based on our model, it otherwise would have been above the high-end of our guidance. ·GAAP EPS was negatively impacted by a $5M restructuring charge.

Quarterly Software Revenue Performance by Group

In millions	Q2'16	YoY	YoY CC	Management Comments
Solutions Group Software	$206.7	(16%)	(13%)	·The decline in Solutions Group Software was driven primarily by the higher than expected subscription mix in the quarter. We saw strong YoY subscription mix growth in each segment of the Solutions Group. ·On a constant currency, license mix-adjusted basis, Solutions software revenue was approximately flat YoY.
Technology Platform Group Software (GAAP) (Non-GAAP)	$17.3 $18.0	98% 88%	99% 89%	·The Technology Platform Group delivered significant software revenue growth YoY, partly driven by the Kepware acquisition. ·On an organic basis, TPG non-GAAP software revenue grew approximately 15% YoY CC. ·66 new IoT logos were added in the quarter, a 6% increase YoY, bringing the cumulative total of new IoT logos this year to 131, a 26% increase over the first-half of last year.

Quarterly Software Revenue Performance by Region

In millions	Q2'16	YoY	YoY CC	Management Comments
Americas Software (GAAP) (Non-GAAP)	$98.6 $99.2	(6%) (6%)	(6%) (6%)	·YoY CC bookings growth of 11% was offset by a YoY increase in subscription mix of greater than 100%. ·On a license mix-adjusted basis, software revenue grew 3% YoY CC. ·Non-GAAP subscription revenue grew nearly 40% YoY CC.

Europe Software (GAAP) (Non-GAAP)	$80.4 $80.5	(9%) (9%)	(3%) (3%)	·YoY CC bookings growth of 26% was offset by a YoY increase in subscription mix of over 300%. ·On a constant currency, license mix-adjusted basis, software revenue grew 6% YoY. ·Non-GAAP subscription revenue grew over 70% YoY CC.
Japan Software	$21.6	(35%)	(34%)	·Q2'15 is a difficult compare for Japan as we had a very strong quarter with a number of large deals, including one mega deal (>$5m). ·Software revenue declined due to the combination of YoY CC bookings decline of 14% and a YoY increase in subscription mix greater than 20x. ·On a constant currency, license mix-adjusted basis, software revenue declined 7% YoY. ·Subscription revenue grew over 60% YoY CC.
Pacific Rim Software	$23.5	(17%)	(12%)	·YoY CC bookings growth of 4% was offset by a YoY increase in subscription mix of greater than 10x. ·On a constant currency, license mix-adjusted basis, software revenue declined 1% YoY. ·Subscription revenue grew more than 350% YoY CC.

Quarterly Operating Performance

In millions	Q2'16 GAAP	Q2'16 Non-GAAP	Management Comments
Professional Services Gross Margin	15%	17%	·Strong performance in the quarter. We expect to achieve our non-GAAP target of 16% for the full year.
Operating Expense	$190.7	$164.2	·Non-GAAP operating expense was at the low end of our guidance range, despite high incentive compensation expense due to the over-performance in subscription bookings and ACV, while GAAP operating expense was just below the low end of our range. ·Non-GAAP operating expense increased approximately 1% YoY, despite 3 acquisitions (Kepware, Vuforia and ColdLight), demonstrating our strong focus on managing our costs through rigorous portfolio management. ·GAAP operating expense reflects restructuring charges of $5 million booked in Q2 related to the workforce realignment announced in October 2015.
Operating Margin	1%	14%	·Both GAAP and non-GAAP operating margin were below our guidance due to lower perpetual revenue recognized in the quarter resulting from the stronger-than-anticipated subscription mix. ·Our model shows that if adjusted to our guidance subscription mix, non-GAAP operating margin would have exceeded our guidance. ·GAAP operating margin was negatively impacted by the $5 million restructuring charge described above.
Tax Rate	(45%)	21%	·We expect a non-GAAP tax rate of 8-10% for the year. The first-half non-GAAP tax rate is approximately 7% with a 21% tax rate in Q2.

Other Highlights

In Q2'16, subscription solutions bookings represented 54% of bookings, above our guidance assumption of 26%, driven by better than expected adoption of our subscription offering in each of our segments, in each of the regions in which we operate, in both our direct and indirect channels, and due to our support conversion program. In Q2'16, all large deals (>$1 million) were subscriptions; there were no large (>$1 million) perpetual bookings.

·	For Q2'16, approximately 82% of non-GAAP software revenue came from recurring revenue streams, up from 73% in the year ago period.

Annualized recurring revenue (ARR), was approximately $742 million, which increased 3% on a constant currency basis compared to Q2'15. Due to our calculation methodology, quarterly variability in this metric should be expected, primarily due to the linearity of support billings during the year and the percentage of on-time renewals, the amount of support win-backs in a quarter, and whether the win-backs are traditional support, with immediate revenue recognition of the past-due amount, or a conversion to subscription, where all revenue is recognized over the future period. Multiple other contractual factors including ramping of committed monthly payments and other elements that may be sold with the subscription or support contract can impact the timing of revenue and the calculation of ARR.

·	In keeping with our strategy to grow our professional services partner ecosystem, Q2'16 service partner bookings grew approximately 11% QoQ, with strong bookings growth among our large system integrator partners.

As of April 2, 2016, borrowings under our credit facility totaled $838 million. Under our current leverage covenant, we are limited to 3.5 times adjusted EBITDA, which is reduced to 3.25 from September 30, 2016 forward. Further, if our leverage covenant ratio exceeds 3.0 times adjusted EBITDA, our stock repurchases are limited to $50 million in a year. Our leverage ratio at the end of Q2'16 reflecting all current terms under the credit facility is 3.12.

Guidance and Long-Range Targets

Our FY'16 financial guidance includes the following general considerations:

·	While our Q2'16 bookings results were above the high-end of our guidance, we attribute our solid performance, relative to guidance, primarily to improved execution and our support conversion program and remain cautious of the global macroeconomic environment.

·	Despite the macroeconomic uncertainty, we are increasing our bookings guidance to reflect (1) current foreign exchange rates, (2) our first-half bookings over-performance, and (3) our current view of the second half of the fiscal year.

We expect large deals, which historically represented 30% to 50% of bookings, will remain at the lower end of that range. This is based on the effect of a more challenging global manufacturing economy on large deal volumes in our Solutions Group business and the potential for smaller average deal sizes as the subscription model accelerates.

The solid subscription results in the first half of FY'16 and growing pipeline of subscription deals is resulting in an increase to our outlook for the full-year subscription mix. A higher mix of subscription bookings is expected to benefit us over the long term, but results in lower revenue and lower earnings in the near term.

·	Because subscription is still new to much of our sales force, it can be challenging to forecast the rate of customer adoption, the pace of our subscription transition and the overall impact to near-term reported financial results.

·	We are modestly increasing the high end of our OpEx guidance for the year, but only to reflect the impact of currency. Excluding currency, there is no change to the high end of our operating investment plans.

Our previously announced restructuring plan to repurpose or eliminate approximately 8% of worldwide positions and to consolidate select facilities in order to drive long-term margin expansion is expected to result in a restructuring charge of up to $50 million; of which $37 million was recorded in Q1'16 and $5 million in Q2'16, with the remainder expected to be recorded in Q3 and Q4 of FY'16. Substantially all of the charges are attributable to termination benefits, most of which will be paid in FY'16.

As it relates to our longer-term capital strategy, the company is evaluating refinancing opportunities in the credit and debt markets, and guidance excludes the impact of any such refinancing, which would likely increase our interest expense in the near-term, but enable us to fix our interest rate for an extended period of time.

FY'16 Financial and Operating Guidance
In millions	Q3'16 Low	Q3'16 High	FY'16 Low	FY'16 High	Management Comments
Subscription ACV	$22	$24	$79	$84	·FY'16 increased due to higher anticipated mix of subscription bookings.
License and Subscription Bookings	$90	$100	$357	$377	·FY'16 increased to reflect better than expected currency, 1H performance, and anticipated 2H results.
Subscription % of Bookings	48%	48%	44%	44%	·Based on the results of Q2 and our current view of the pipeline, we have raised our FY'16 guidance to 44% from 30%.

Subscription Revenue	$32	$32	$115	$116	·FY'16 increased reflecting the higher anticipated mix of subscription bookings and contribution from support conversions in the first half of FY'16.
Support Revenue	$159	$159	$649	$650	·FY'16 decreased primarily by lower anticipated perpetual license bookings due to mix and support conversions. In addition, to further our objective to become a subscription company, at the start of Q3 we introduced in the channel a win-back support conversion program to subscription, where revenue will be deferred and recognized over the future period of the subscription contract rather than up-front at the time of the win-back as it had been recognized in the past.
Perpetual License Revenue	$47	$52	$200	$212	·FY'16 decreased due to higher subscription mix.
Software Revenue	$238	$243	$964	$978	·FY'16 decreased due to a higher mix of subscription and support conversions, including projected channel conversions under our new win-back program where revenue is deferred and recognized over the future period of the subscription contract rather than up front at the time of the win-back as it had been recognized in the past.
Professional Services Revenue	$49	$49	$196	$197	·FY'16 decreased due to continued focus on growing our service partner ecosystem.
Total Revenue	$287	$292	$1,160	$1,175	·FY'16 decreased primarily due to a higher mix of subscription, including support conversions and win-back conversions to subscription, as well as lowered professional service revenue expectations. ·Our hedging program reduces the impact of recent Fx changes on our FY'16 revenue guidance.

FY'16 Financial and Operating Guidance Continued

In millions	Q3'16 Low	Q3'16 High	FY'16 Low	FY'16 High	Management Comments
Operating Expense (GAAP) Operating Expense (Non-GAAP)	$196 $167	$198 $169	$798 $656	$802 $660	·FY'16 non-GAAP operating expense increased on the high end to reflect Fx. Range narrowed from the low end to reflect higher incentive compensation due to over-performance on subscription and ACV.
Operating Margin (GAAP)	2%	4%	3%	4%	·FY'16 non-GAAP operating margin decline to 19% vs. previous guidance of 22% to reflect the negative impact of a higher subscription mix on revenue. ·We are targeting a 16% non-GAAP professional services gross margin in FY'16.
Operating Margin (Non-GAAP)	16%	17%	18%	19%
Tax Rate (GAAP)	10%	8%	10%	0%	·FY'16 tax rate guidance of 8% to 10% vs. previous guidance of 12% to 15% due to full year forecasted geographic mix of non-GAAP earnings.
Tax Rate (Non-GAAP)	10%	8%	10%	8%
Shares Outstanding	116	116	116	116	·We expect share count to be 116 million, with planned share repurchases in the second half of the year.
EPS (GAAP)	$0.01	$0.06	$0.11	$0.18	·FY'16 non-GAAP EPS decreased due to the negative impact of a higher subscription mix on revenue.
EPS (Non-GAAP)	$0.31	$0.36	$1.52	$1.62
Free Cash Flow			$215	$225	·Our FY'16 free cash flow guidance excludes previously announced restructuring payments of approximately $50 million and the $28 million legal settlement in connection with the SEC and DOJ FCPA investigation related to our China business.

Our guidance above assumes 48% mix of subscription bookings in Q3'16 and 44% for the full-year FY'16. If subscription bookings mix varies from our guidance, it will affect our income statement and cash flow results. Assuming bookings of equal value, our model indicates that every 1% change in subscription mix will raise or lower annual revenue by approximately $3 million, annual non-GAAP operating margin by approximately 20 basis points and annual non-GAAP EPS by approximately $0.02. Of course, the incremental value created by a higher mix of subscription bookings is expected to ultimately benefit our financial performance over the long-term.

The third quarter and full year FY'16 revenue, non-GAAP operating margin and non-GAAP EPS guidance exclude the estimated items outlined below and their income tax effects, as well as any discrete tax items that occur.

In millions	Q3 FY'16	FY'16
Effect of acquisition accounting on fair value of acquired deferred revenue	$ 1	$3
Stock-based compensation expense	14	66
Intangible asset amortization expense	15	58
Acquisition-related charges	0	2
Restructuring Charges	8	50
Non-Operating Credit Facility Refinancing Costs	-	2
Total Estimated GAAP adjustments	$38	$182

Numbers may not sum due to rounding.

Long-Range Targets (Non-GAAP)

Our long-range target model includes the following general considerations:

We believe that the initiatives we are driving in our Solutions Group and strong position we have established in our Technology Platform Group together can drive ~10% bookings growth by FY'18. This is predicated on achieving growth in our Solutions Group in line with market growth rates of ~6% by FY18 and growth in our Technology Platform Group in line with market growth rates of ~40%.

·	Exiting FY'18 we expect to see continued bookings growth, which in turn, we expect to drive ~10% total revenue growth by FY'21, when we expect our financial results will have normalized from the subscription transition.

·	We expect our subscription bookings mix will average 44% for the full-year, then continue to grow through FY'18, when we expect to achieve a steady-state mix of 70%.

·	Based on these high-level assumptions, we expect revenue, operating margin and free cash flow to trough in FY'18, begin to recover in FY'19 and normalize in FY'21, at which point we expect to achieve non-GAAP operating margins in the low 30% range.

Important Disclosures

Reporting metrics and non-GAAP definitions – Management believes certain operating measures and non-GAAP financial measures provide additional meaningful information that should be considered when assessing our ongoing performance. These measures should be considered in addition to, not as a substitute for, the reported GAAP results.

Software licensing model – A majority of our software sales to date have been perpetual licenses, where customers own the software license. Typically our customers choose to pay for ongoing support, which includes the right to software upgrades and technical support, and attach rates on support are in the high 90% range with retention rates also in the 90% range. A small but growing percentage of our business consists of ratably recognized subscriptions. Under a subscription, customers pay a periodic fee for the continuing right to use our software, including access to technical support. They may also elect to use our cloud services and have us manage the application. We began offering subscription pricing as an option for most PTC products in Q1 FY'15. We believe this additional purchase option will prove attractive to customers over time as it: (1) increases customer flexibility and opportunity to change their mix of licenses; (2) lowers the initial purchase commitment; and (3) allows customers to use operating rather than capital budgets. Over a three to five year period we believe the net present value (NPV) of a subscription is likely to exceed that of a perpetual license, assuming similar seat counts. However, initial revenue, operating margin, and EPS will be lower as revenue is recognized ratably in a subscription, rather than up front.

Bookings Metrics – We offer both perpetual and subscription licensing options to our customers, as well as monthly software rentals for certain products. Given the difference in revenue recognition between the sale of a perpetual software license (revenue is recognized at the time of sale) and a subscription (revenue is deferred and recognized ratably over the subscription term), we use bookings for internal planning, forecasting and reporting of new license and cloud services transactions. In order to normalize between perpetual and subscription licenses, we define subscription bookings as the subscription annualized contract value (subscription ACV) of new subscription bookings multiplied by a conversion factor of 2. We arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. We define subscription ACV as the total value of a new subscription booking divided by the term of the contract (in days) multiplied by 365. If the term of the subscription contract is less than a year, the ACV is equal to the total contract value.

License Mix-Adjusted Metrics ‑ These metrics assume that all new software and cloud services bookings since the start of FY'14 were perpetual license sales that included support in subsequent periods. The license mix-adjusted amount is calculated by converting the ACV (as defined above) of a new subscription solutions booking in the period to an assumed perpetual license equivalent by multiplying the ACV by a conversion factor of 2 (as defined above), and adding that amount to the perpetual license revenue amounts recognized in that period. Support calculated at 20% of the annual value of the converted amount is added to support revenue in future periods, beginning the quarter after the converted booking is assumed to be recognized. The assumed support revenue is spread ratably over a 12 month period and is assumed to renew in subsequent years.

Annualized Recurring Revenue (ARR) – We currently offer our solutions on premise and in the cloud as SaaS offerings. Our on premise solutions can be licensed either as perpetual with annual support contracts or through a subscription, which is a combination of license and support. Beginning in FY'16, we launched a number of initiatives designed to incentivize more of our customers to purchase our solutions on a subscription basis. If successful, these initiatives will cause an increasing percentage of our revenue to come from subscriptions, which is expected to grow our recurring software revenue.

To help investors understand and assess the success of this expected revenue transition, we are providing an Annualized Recurring Revenue operating measure. Annualized Recurring Revenue (ARR) for a given quarter is calculated by dividing the non-GAAP subscription and support software revenue for the quarter from our consolidated statement of income by the number of days in the quarter and multiplying by 365. ARR should be viewed independently of revenue and deferred revenue as it is an operating measure and is not intended to be combined with or to replace either of those items. ARR is not a forecast and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of income. Subscription and support revenue and ARR reported in a quarter can be impacted by multiple factors, including but not limited to (1) the timing of the start of a contract or a renewal, including the impact of on-time renewals, support win-backs, and support conversions, which may vary by quarter, (2) the ramping of committed monthly payments under a subscription agreement over time, and (3) multiple other contractual factors with the customer including other elements sold with the subscription or support contract, and these elements can result in variability in reported ARR.

Non-GAAP Revenue – Excludes the fair value adjustment for acquired deferred revenue. In Q1'15, we began including cloud services revenue, which was formerly reported in services, within license & subscription solutions. We also reclassified a modest amount of FY'14 support revenue as subscription (less than $4 million).

Foreign Currency Impacts on our Business – We have a global business, with Europe and Asia historically representing approximately 60% of our revenue, and fluctuation in foreign currency exchange rates can significantly impact our results. We do not forecast currency movements; rather we provide detailed constant currency commentary. We do employ a hedging strategy to limit our exposure to currency risk.

Constant Currency Change Measure (YoY CC) – Year-over-year changes in revenue on a constant currency basis compare reported results excluding the effect of any hedging converted into U.S. dollars based on the corresponding prior year's foreign currency exchange rates to reported results for the comparable prior year period.

Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of purchase accounting on the fair value of acquired deferred revenue and costs, stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, acquisition-related expenses, costs associated with terminating a U.S. pension plan, costs associated with the resolution of our previously disclosed China investigation, certain identified non-operating gains and losses, the related tax effects of the preceding items, credit facility refinancing expenses and certain discrete tax items. 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 core 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. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our third quarter and full fiscal 2016 targets and other future financial and growth expectations, anticipated tax rates, and potential refinancing opportunities 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; 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 customers may purchase more of our solutions as subscriptions than we expect, which would adversely affect near-term revenue, operating margins, and EPS; customers may not purchase subscriptions at the rate we expect; sales of our solutions as subscriptions may not have the longer-term effect on revenue that we expect; our workforce realignment may not achieve the expense savings we expect and may adversely affect our operations; we may be unable to generate sufficient operating cash flow to return 40% of free cash flow to shareholders or that other uses of cash could preclude share repurchases; the resolution of the Securities and Exchange Commission and Department of Justice FCPA investigation may have collateral effects on our business in the United States and elsewhere; and the possibility that we may be unable to complete any refinancing opportunities or that, if we do, expenses associated with our capital structure may increase.

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

				Three Months Ended						Six Months Ended
				April 2,			April 4,			April 2,			April 4,
				2016			2015			2016			2015

GAAP revenue				$	272,627		$	314,119		$	563,644		$	639,561
Fair value adjustment of acquired deferred subscription revenue					777			590			965			1,272
Fair value adjustment of acquired deferred support revenue					-			265			-			730
Fair value adjustment of acquired deferred services revenue					286			278			595			535
Non-GAAP revenue				$	273,690		$	315,252		$	565,204		$	642,098

GAAP gross margin				$	192,436		$	228,065		$	403,305		$	460,565
Fair value adjustment of acquired deferred revenue					1,063			1,133			1,560			2,537
Fair value adjustment to deferred services cost					(125	)		(151	)		(257	)		(257	)
Stock-based compensation					2,379			2,611			5,735			5,218
Amortization of acquired intangible assets included in cost of software revenue					6,725			4,714			11,852			9,481
Non-GAAP gross margin				$	202,478		$	236,372		$	422,195		$	477,544

GAAP operating income (loss)				$	1,758		$	3,988		$	(11,535	)	$	41,619
Fair value adjustment of acquired deferred revenue					1,063			1,133			1,560			2,537
Fair value adjustment to deferred services cost					(125	)		(151	)		(257	)		(257	)
Stock-based compensation					14,836			12,822			38,025			24,064
Amortization of acquired intangible assets included in cost of software revenue					6,725			4,714			11,852			9,481
Amortization of acquired intangible assets					8,396			9,173			16,746			18,586
Acquisition-related charges included in general and administrative costs					1,071			1,892			2,278			5,925
US pension plan termination-related costs					-			1,713			-			3,397
Restructuring charges					4,579			38,487			41,726			38,232
Non-GAAP operating income ⁽¹⁾				$	38,303		$	73,771		$	100,395		$	143,584

GAAP net income (loss)				$	(5,173	)	$	5,392		$	(29,065	)	$	35,676
Fair value adjustment of acquired deferred revenue					1,063			1,133			1,560			2,537
Fair value adjustment to deferred services cost					(125	)		(151	)		(257	)		(257	)
Stock-based compensation					14,836			12,822			38,025			24,064
Amortization of acquired intangible assets included in cost of software revenue					6,725			4,714			11,852			9,481
Amortization of acquired intangible assets					8,396			9,173			16,746			18,586
Acquisition-related charges included in general and administrative costs					1,071			1,892			2,278			5,925
US pension plan termination-related costs					-			1,713			-			3,397
Restructuring charges					4,579			38,487			41,726			38,232
Non-operating credit facility refinancing costs					-			-			2,359			-
Income tax adjustments ⁽²⁾					(5,208	)		(13,757	)		(279	)		(17,243	)
Non-GAAP net income				$	26,164		$	61,418		$	84,945		$	120,398

GAAP diluted earnings (loss) per share				$	(0.05	)	$	0.05		$	(0.25	)	$	0.31
Fair value of acquired deferred revenue					0.01			0.01			0.01			0.02
Stock-based compensation					0.13			0.11			0.33			0.21
Amortization of acquired intangibles					0.13			0.12			0.25			0.24
Acquisition-related charges					0.01			0.02			0.02			0.05
US pension plan termination-related costs					-			0.01			-			0.03
Restructuring charges					0.04			0.33			0.36			0.33
Non-operating credit facility refinancing costs					-			-			0.02			-
Income tax adjustments					(0.05	)		(0.12	)		(0.00	)		(0.15	)
Non-GAAP diluted earnings per share				$	0.23		$	0.53		$	0.74		$	1.03

GAAP diluted weighted average shares outstanding					114,563			115,922			114,354			116,479
Dilutive effect of stock based compensation plans					428			-			758			-
Non-GAAP diluted weighted average shares outstanding					114,991			115,922			115,112			116,479

	(1	)	Operating margin impact of non-GAAP adjustments:
				Three Months Ended						Six Months Ended
				April 2,			April 4,			April 2,			April 4,
					2016			2015			2016			2015
GAAP operating margin					0.6	%		1.3	%		-2.0	%		6.5	%
			Fair value of acquired deferred revenue		0.4	%		0.4	%		0.3	%		0.4	%
			Fair value adjustment to deferred services cost		0.0	%		0.0	%		0.0	%		0.0	%
			Stock-based compensation		5.4	%		4.1	%		6.7	%		3.8	%
			Amortization of acquired intangibles		5.5	%		4.4	%		5.1	%		4.4	%
			Acquisition-related charges		0.4	%		0.6	%		0.4	%		0.9	%
			US pension plan termination-related costs		0.0	%		0.5	%		0.0	%		0.5	%
			Restructuring charges		1.7	%		12.3	%		7.4	%		6.0	%
Non-GAAP operating margin					14.0	%		23.4	%		17.8	%		22.4	%

	(2	)	We have recorded a full valuation allowance against our U.S. net deferred tax assets and a valuation allowance against net deferred tax assets in certain foreign jurisdictions. As we are profitable on a non-GAAP basis, the 2016 and 2015 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. Income tax adjustments for the three and six months ended April 4, 2015 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. However, for the six months ended April 2, 2016, because of low expected full year GAAP earnings combined with the relatively large year-to-date GAAP loss, the non-GAAP provision for the second quarter and first six months of 2016 calculated based on our historical methodology is not reflective of our full year expected non-GAAP tax rate. As a result, in the second quarter we changed our methodology for calculating our non-GAAP tax provision. For the six months ended April 2, 2016, our non-GAAP tax provision is based on our annual expected non-GAAP tax rate applied to our year-to-date non-GAAP earnings.

EXECUTION COPY

AMENDMENT NO. 1

Dated as of April 18, 2016

AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of November 4, 2015

THIS AMENDMENT NO. 1 (this "Amendment") is made as of April 18, 2016 by and among PTC Inc., a Massachusetts corporation (the "Parent"), PTC (IFSC) Limited, an entity organized under the laws of the Republic of Ireland (the "Irish Borrower" and, together with the Parent, the "Borrowers"), the Lenders listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as administrative agent for the Lenders (in such capacity, the "Administrative Agent'), under that certain Amended and Restated Credit Agreement, dated as of November 4, 2015, by and among the Parent, the Foreign Subsidiary Borrowers from time to time party thereto, the Lenders from time to time party thereto and the Administrative Agent (as further amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Parent has requested that the Lenders and the Administrative Agent agree to make certain amendments to the Credit Agreement; and

WHEREAS, the Borrowers, the requisite Lenders and the Administrative Agent have so agreed on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders party hereto and the Administrative Agent hereby agree to enter into this Amendment.

1. Amendments to the Credit Agreement. Subject to the satisfaction of the condition precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows, with effect from (and including) the date hereof (unless otherwise specified below):

(a) Section 1.01 of the Credit Agreement is hereby amended to add the following new terms and their related definitions in the appropriate alphabetical order:

"Bail-In Action" means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

"Bail-In Legislation" means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

"EEA Financial Institution" means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;

"EEA Member Country" means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

"EEA Resolution Authority" means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

"EU Bail-In Legislation Schedule" means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

"Write-Down and Conversion Powers" means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

(b) the definition of "Consolidated EBITDA" set forth in Section 1.01 of the Credit Agreement is hereby amended to delete the term "non-cash" set forth in clause (a)(ix) thereof, with effect from (and including) March 31, 2016.

(c) clause (d) of the definition of "Defaulting Lender" set forth in Section 1.01 of the Credit Agreement is hereby amended and restated to read as follows:

has become the subject of (A) a Bankruptcy Event or (B) a Bail-In Action

(d) Section 2.17 of the Credit Agreement is hereby amended to add the following new clause (l) thereto, with effect from (and including) the Effective Date:

(l) For purposes of determining withholding Taxes imposed under FATCA, from and after the Effective Date, the Borrowers and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) this Agreement and the Loans as not qualifying as "grandfathered obligations" within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i) or 1.1471-2T(b)(2)(i).

(e) Section 2.22 of the Credit Agreement is hereby amended to add the phrase "or a Bail-In Action" immediately following the phrase "a Bankruptcy Event" set forth therein.

(f) Article III of the Credit Agreement is hereby amended to add the following new Section 3.21 thereto:

SECTION 3.21. EEA Financial Institutions. No Credit Party is an EEA Financial Institution.

(g) Article IX of the Credit Agreement is hereby amended to add the following new Section 9.18 thereto:

SECTION 9.18. Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a)	the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b)	the effects of any Bail-In Action on any such liability, including, if applicable:

(i)	a reduction in full or in part or cancellation of any such liability;

(ii)

a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii)

the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

2. Condition of Effectiveness. The effectiveness of this Amendment is subject to the condition precedent that the Administrative Agent shall have received (i) counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Administrative Agent and (ii) counterparts of the Consent and Reaffirmation attached as Exhibit A hereto duly executed by the Subsidiary Guarantor.

3. Representations and Warranties of the Borrowers. Each of the Borrowers hereby represents and warrants as follows:

(a) This Amendment and the Credit Agreement as modified hereby constitute valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their respective terms.

(b) As of the date hereof and immediately after giving effect to the terms of this Amendment, (i) no Default or Event of Default has occurred and is continuing and (ii) the representations and warranties of the Borrowers set forth in the Credit Agreement are true and correct in all material respects (or, in the case of any representation or warranty qualified by materiality or Material Adverse Effect, in all respects) on and as of the date hereof (or, if a representation or warranty is expressly stated to have been made as of a specific date, such representation or warranty shall be true and correct in all material respects (or, in the case of any representation or warranty qualified by materiality or Material Adverse Effect, in all respects) as of such specific date).

4. Reference to and Effect on the Credit Agreement.

(a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.

(b) The Credit Agreement and all other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

(c) Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other Loan Documents.

(d) This Amendment is a Loan Document.

5. Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York.

6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Signatures delivered by facsimile or other electronic imaging shall have the same force and effect as manual signatures delivered in person.

[Signature Pages Follow]

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

PTC INC., as the Parent


By: _/s/Andrew Miller__________________
	Name: Andrew Miller
	Title: Chief Financial Officer

PTC (IFSC) LIMITED, as the Irish Borrower


By: _/s/Charles C.W. Dunn_____________
	Name: Charles C.W. Dunn
	Title: Director

Name of Lender:

JPMORGAN CHASE BANK, N.A.,
individually as a Lender, as the Swingline Lender, as an Issuing Bank and as Administrative Agent


By __/s/Justin Burton________________
	Name: Justin Burton
	Title: Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

KEYBANK NATIONAL ASSOCIATION



By __/s/David A. Wild_________________
	Name: David A. Wild
	Title: Senior Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

HSBC BANK USA, NATIONAL ASSOCIATION



By __/s/Manuel Burgueno______________
	Name: Manuel Burgueno
	Title: Senior Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

CITIZENS BANK, N.A., Individually as a Lender and as a Co-Documentation Agent



By __/s/Christopher Delauro____________
	Name: Christopher Delauro
	Title: Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

TD BANK, N.A.



By __/s/Christopher Matheson____________
	Name: Christopher Matheson
	Title: Director



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

FIFTH THIRD BANK



By __/s/Colin Murphy_______________
	Name: Colin Murphy
	Title: Director



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

ROYAL BANK OF CANADA



By __/s/Nicholas Heslip______________
	Name: Nicholas Heslip
	Title: Authorized Signatory



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

BARCLAYS BANK PLC



By __/s/Daniel Hunter_____________________
	Name: Daniel Hunter
	Title: Assistant Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

SUN TRUST BANK



By __/s/Jason Crowley__________________
	Name: Jason Crowley
	Title: Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

WELLS FARGO BANK, NATIONAL ASSOCIATION



By __/s/David Mallett___________________
	Name: David Mallett
	Title: Managing Director



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

SILICON VALLEY BANK



By __/s/Frank Groccia________________
	Name: Frank Groccia
	Title: Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

THE HUNTINGTON NATIONAL BANK



By __/s/Jared Shaner__________________
	Name: Jared Shaner
	Title: Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

BANK OF AMERICA, N.A.



By __/s/Patrick Martin_________________
	Name: Patrick Martin
	Title: Managing Director



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

Name of Lender:

PEOPLE'S UNITED BANK, N.A.



By __/s/Kathryn M. Williams____________
	Name: Kathryn M. Williams
	Title: Vice President



For any Lender requiring a second signature line:


By _________________________________
	Name:
	Title:

EXHIBIT A

Consent and Reaffirmation

Each of the undersigned hereby acknowledges receipt of a copy of the foregoing Amendment No. 1 to the Amended and Restated Credit Agreement, dated as of November 4, 2015 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), by and among PTC Inc., a Massachusetts corporation (the "Parent"), the Foreign Subsidiary Borrowers from time to time party thereto, the Lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (the "Administrative Agent"), which Amendment No. 1 is dated as of April 18, 2016 and is by and among the Borrowers, the financial institutions listed on the signature pages thereof and the Administrative Agent (the "Amendment"). Capitalized terms used in this Consent and Reaffirmation and not defined herein shall have the meanings given to them in the Credit Agreement.

Without in any way establishing a course of dealing by the Administrative Agent or any Lender, each of the undersigned consents to the Amendment and reaffirms the terms and conditions of the Subsidiary Guaranty and any other Loan Document executed by it and acknowledges and agrees that the Subsidiary Guaranty and each and every such Loan Document executed by the undersigned in connection with the Credit Agreement remains in full force and effect and is hereby reaffirmed, ratified and confirmed. All references to the Credit Agreement contained in the above‑referenced documents shall be a reference to the Credit Agreement as so modified by the Amendment and as the same may from time to time hereafter be amended, modified or restated.

Dated: April 18, 2016

[Signature Page Follows]

PARAMETRIC HOLDINGS INC.

By:__/s/Catherine Gorecki_________

Name: Catherine Gorecki

Title: President

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Form 8-K PTC INC. For: Apr 20

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