PTC Reports Fourth Quarter and Fiscal Year 2005 Results; Company Delivers 15% Year-Over-Year Revenue Growth in the Fourth Quarter; 9% Revenue Growth for the Fiscal Year

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2 November 2005

Financial News

PTC Reports Fourth Quarter and Fiscal Year 2005 Results; Company Delivers 15% Year-Over-Year Revenue Growth in the Fourth Quarter; 9% Revenue Growth for the Fiscal Year

PTC reported revenue of $195.1 million for the fourth fiscal quarter ended September 30, 2005, up 15% from $170.1 million for the same period last year. The growth was driven by a combination of strong organic growth as well as the addition of revenue from Arbortext, which PTC acquired during the quarter. For the fiscal year, revenue grew 9% to $720.7 million, compared to $660.0 million in fiscal 2004.

"2005 was a great year for PTC," said C. Richard Harrison, president and chief executive officer. "We exceeded our goals for organic revenue growth and also expanded our business through strategic acquisition. We strengthened our ability to serve existing customers with new product and service offerings. And we leveraged our own solutions as well as those we acquired to enter new markets, such as Retail, Footwear & Apparel, and Life Sciences."

As previously announced, PTC adopted FAS 123® during the fourth quarter, which requires the expensing of stock-based compensation. Additionally, as previously announced, commencing with fourth quarter 2005 results, PTC has begun to provide a non-GAAP income statement to supplement its GAAP income statement. Accordingly, earnings and expense results are provided below on both a GAAP and a non-GAAP basis, and we have provided a reconciliation between GAAP and non-GAAP results in the attached financial tables.

GAAP net income for the fourth quarter was $17.3 million, or $0.06 per diluted share, compared with GAAP net income of $42.0 million, or $0.15 per diluted share, in the year-ago period. Non-GAAP net income, which excludes restructuring charges, stock-based compensation, acquisition-related amortization, in-process research and development, and their related tax effects, as well as the effect of one-time tax items, was $24.6 million for the fourth quarter, or $0.09 per diluted share, compared to $25.4 million in the year-ago period, or $0.09 per diluted share.

For the fiscal year, GAAP net income was $83.6 million, or $0.30 per diluted share, compared to $34.8 million, or $0.13 per diluted share, in fiscal 2004. Non-GAAP net income was $87.2 million, or $0.31 per diluted share, compared to $61.1 million, or $0.22 per diluted share, in fiscal 2004. Cash and investments were $204.4 million at the end of the fourth quarter, down from $403.0 million at the end of the third quarter, reflecting the cost of the Arbortext acquisition ($190 million) and the employee stock option buyback ($12.7 million).

Revenue Metrics

With the acquisition of Arbortext and the launch of Pro/INTRALINK 8.0, PTC has begun to classify its revenue into two new categories:

• "Desktop Solutions", which includes Pro/ENGINEER, Arbortext Editor and all other solutions that help companies create content and improve desktop productivity. In the commentary below, this category is compared to the revenue category formerly called Design Solutions.

• "Enterprise Solutions", which includes Windchill, Pro/INTRALINK, Arbortext Publishing Engine and all other solutions that help companies collaborate, manage and publish information across an extended enterprise. In the commentary below, this category is compared to the revenue category formerly called Collaboration and Control Solutions.

Total Desktop Solutions revenue for the fourth quarter was $129.3 million, which includes $37.8 million of license revenue. Both license revenue and total revenue grew 6% from the year-ago period. For fiscal year 2005, PTC delivered total Desktop Solutions revenue of $503.1 million, up 5% from fiscal 2004.

Total Enterprise Solutions revenue grew 37% in the fourth quarter to $65.8 million from $47.9 million in the fourth quarter of 2004. Enterprise Solutions license revenue was $23.0 million, up 40% from $16.4 million in the year-ago period. For the fiscal year 2005, PTC delivered total Enterprise Solutions revenue of $217.6 million, or 21% growth from fiscal 2004.

Revenue growth in both categories reflects organic growth as well as growth through acquisition, primarily from the contribution of Arbortext, which PTC acquired on July 19, 2005.

In the fourth quarter, PTC received orders from leading organizations, including AGCO Corporation, Alion Science and Technology Corporation, Boeing Company, Casio Hitachi Mobile Communications Co., Ltd., Fila USA Inc., Hino Motors, Ltd., Mitsubishi Electric Engineering Co., Ltd., NASA, Naval Reactors Program (U.S. Navy), Northrop Grumman Corporation, Novellus Systems Inc., Pfizer Inc., Siemens VDO Automotive AG, Turbomeca SA, and Volkswagen AG. PTC's reseller channel delivered $34.8 million in total revenue during the quarter. For the fiscal year, PTC's channel delivered $138.6 million in total revenue.

"We are executing very well and are in a position to deliver accelerated revenue growth in 2006," continued Harrison. "We have articulated a highly differentiated vision with our integral product development system. Our solutions are unmatched in breadth, ease-of-use and ease-of-deployment, and we are building momentum in new and existing accounts of all sizes. We are enthusiastic about our outlook as a result, and we are poised to deliver 12% revenue growth in 2006."

First Quarter and Fiscal Year 2006 Financial Outlook

PTC's revenue forecast for the first quarter of fiscal 2006 is between $190 million and $195 million. On a GAAP basis, first quarter total costs and expenses are expected to be approximately $177 million to $182 million, and earnings per share are expected to be between $0.02 and $0.04. Total non-GAAP first quarter operating costs are expected to be approximately $165 million to $170 million. The Company expects non-GAAP first quarter earnings per share to be between $0.06 and $0.08. These non-GAAP operating cost and earnings expectations exclude the following first quarter estimated expenses:

• Approximately $10 million of expense related to stock-based compensation. This expense is slightly higher than previously expected because the Company has decided to implement a mix of performance-based and time-based equity incentive plans. PTC previously used only time-based equity incentives, which carry a lower initial accounting expense than do performance-based equity incentives.

• Approximately $2 million of acquisition-related amortization expense.

For the fiscal year ending September 30, 2006, PTC expects revenue to be between $805 and $815 million. On a GAAP basis, fiscal year 2006 earnings per share are expected to be between $0.18 and $0.20. The Company expects non-GAAP earnings per share to be between $0.35 and $0.37 for the fiscal year. These non-GAAP earnings expectations exclude the following full-year estimated expenses:

• Approximately $40 million of expense related to stock-based compensation.

• Approximately $9 million of acquisition-related amortization expense.

Other Important Information

Separately, PTC has identified irregularities in certain sales orders in the Asia-Pacific region, principally related to PTC's 2001-2003 fiscal years. The orders identified are not material to the results for these fiscal years, but PTC's investigation has not been completed. PTC expects to complete its investigation in time for the filing of its Annual Report on Form 10-K in December.

Important Information about Non-GAAP References

References by the Company to non-GAAP operating costs and non-GAAP earnings per share refer to costs and expenses or earnings per share excluding stock-based compensation cost, amortization of acquisition-related intangible assets, in-process research and development write-offs associated with acquisitions, restructuring charges, and their related tax effects, as well the effect of one-time tax items, if any. GAAP requires that these costs and charges be included in costs and expenses and accordingly used to determine operating income (loss) and earnings per share. The Company's management uses non-GAAP operating costs, and associated non-GAAP net income (which is the basis for non-GAAP earnings per share) to make operational and investment decisions, and the Company believes that they are among several useful measures for an enhanced understanding of our operating results for a number of reasons.

First, excluding the stock-based compensation cost from GAAP operating income enables management and investors to perform a meaningful comparison of the Company's operating results to prior periods. In these prior periods, the Company's GAAP financial results were not required to include expense associated with stock-based compensation, and now these expenses will be distributed among the functional expense line items in the GAAP presentation. Second, although the Company undertakes analyses to ensure that its stock-based compensation grants are in line with peer companies and do not unduly dilute shareholders, the Company allocates these grants and measures them at the corporate level. Management excludes their financial statement effect when planning or measuring the periodic financial performance of the Company's functional organizations since they are episodic in nature and unrelated to our core operating metrics. Likewise, we believe that excluding items such as in-process R&D write-offs and amortization of intangible assets associated with acquisitions, or restructuring charges that are not directly attributable to our ongoing operations and that do not generally fluctuate in correlation with periodic performance, provides investors with information that helps to compare period-over-period operating performance by highlighting the effect of the acquisitions or restructuring activities on our results of operations. In addition, the Company's management excludes the financial statement effect of these items in creating operating budgets for the Company's functional business units and in evaluating and compensating employees due to the fact that it is difficult to forecast these expenses. Lastly, we believe that providing non-GAAP earnings per share affords investors a view of earnings that may be more easily compared to peer companies and enables investors to consider the Company's earnings on both a GAAP and non-GAAP basis in periods when the Company is engaged in acquisition activities or undertaking non-recurring activities.

The Company believes these non-GAAP measures will aid investors' overall understanding of the Company's results by providing a higher degree of transparency for certain expenses, and providing a level of disclosure that will help investors understand how the Company plans and measures its own business. However, non-GAAP net income (loss) should be construed neither as an alternative to GAAP net income (loss) or earnings (loss) per share as an indicator of our operating performance nor as a substitute for cash flow from operations as a measure of liquidity because the items excluded from the non-GAAP measures often have a material impact on the Company's results of operations. Therefore, management uses, and investors should use, non-GAAP measures in conjunction with our reported GAAP results.

Earnings Call Webcast

The Company will provide detailed financial information and an outlook update on its fourth quarter and fiscal year 2005 results conference call and live webcast on November 2, 2005 at 10 a.m. ET. This earnings press release and accompanying financial and operating statistics will be accessible prior to the conference call and webcast on the Company's web site at http://www.ptc.com/for/investors.htm . In addition, the live webcast may be accessed at the same Web address. To access the live call, please dial 1-888-566-8560 (in the U.S.) or +1-517-623-4768 (international). Please use passcode PTC. A replay of the call will be available until 5:00 p.m. ET on November 7, 2005. To access the replay via webcast, please visit http://www.ptc.com/for/investors.htm . To access the replay by phone, please dial 402-220-9726.

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