(2) In the third quarter of 2017, PTC began reporting cost of support revenue separate from cost of license and subscription revenue.  Costs for previous periods have also been separately reported to conform to the current period presentation.

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
								Three Months Ended														Nine Months Ended
								July 1,							July 2,							July 1,							July 2,
								2017							2016							2017							2016
GAAP revenue								$	291,293						$	288,652						$	857,660						$	852,296
Fair value adjustment of acquired deferred subscription revenue									373							746							1,430							1,711
Fair value adjustment of acquired deferred services revenue									258							277							788							873
Non-GAAP revenue								$	291,924						$	289,675						$	859,878						$	854,880
GAAP gross margin								$	209,025						$	206,182						$	611,447						$	609,487
Fair value adjustment of acquired deferred revenue									631							1,023							2,218							2,584
Fair value adjustment to deferred services cost									(108	)						(121	)						(329	)						(378	)
Stock-based compensation									2,991							2,500							9,092							8,235
Amortization of acquired intangible assets included in cost of revenue									6,517							6,383							19,294							18,235
Non-GAAP gross margin								$	219,056						$	215,967						$	641,722						$	638,163
GAAP operating income (loss)								$	11,256						$	7,596						$	23,330						$	(3,939	)
Fair value adjustment of acquired deferred revenue									631							1,023							2,218							2,584
Fair value adjustment to deferred services cost									(108	)						(121	)						(329	)						(378	)
Stock-based compensation									16,574							13,796							56,139							51,821
Amortization of acquired intangible assets included in cost of revenue									6,517							6,383							19,294							18,235
Amortization of acquired intangible assets									7,973							8,294							23,986							25,040
Acquisition-related charges included in general and administrative costs									264							937							987							3,215
US pension plan termination-related costs									285							-							285							-
Restructuring charges									1,551							2,815							8,300							44,541
Non-GAAP operating income (1)								$	44,943						$	40,723						$	134,210						$	141,119
GAAP net income (loss)								$	(951	)					$	3,073						$	(11,196	)					$	(25,992	)
Fair value adjustment of acquired deferred revenue									631							1,023							2,218							2,584
Fair value adjustment to deferred services cost									(108	)						(121	)						(329	)						(378	)
Stock-based compensation									16,574							13,796							56,139							51,821
Amortization of acquired intangible assets included in cost of revenue									6,517							6,383							19,294							18,235
Amortization of acquired intangible assets									7,973							8,294							23,986							25,040
Acquisition-related charges included in general and administrative costs									264							937							987							3,215
US pension plan termination-related costs									285							-							285							-
Restructuring charges									1,551							2,815							8,300							44,541
Non-operating credit facility refinancing costs									-							-							1,152							2,359
Income tax adjustments (2)									(171	)						(6,202	)						(2,810	)						(6,481	)
Non-GAAP net income								$	32,565						$	29,998						$	98,026						$	114,944
GAAP diluted earnings (loss) per share								$	(0.01	)					$	0.03						$	(0.10	)					$	(0.23	)
Fair value of acquired deferred revenue									0.01							0.01							0.02							0.02
Stock-based compensation									0.14							0.12							0.48							0.45
Amortization of acquired intangibles									0.12							0.13							0.37							0.38
Acquisition-related charges									-							0.01							0.01							0.03
Restructuring charges									0.01							0.02							0.07							0.39
Non-operating credit facility refinancing costs									-							-							0.01							0.02
Income tax adjustments									-							(0.05	)						(0.02	)						(0.06	)
Non-GAAP diluted earnings per share								$	0.28						$	0.26						$	0.84						$	1.00
GAAP diluted weighted average shares outstanding									115,615							115,698							115,511							114,499
Dilutive effect of stock based compensation plans									1,962							-							1,812							807
Non-GAAP diluted weighted average shares outstanding									117,577							115,698							117,323							115,306
(1)Operating margin impact of non-GAAP adjustments:
								Three Months Ended														Nine Months Ended
								July 1,							July 2,							July 1,							July 2,
								2017							2016							2017							2016
GAAP operating margin									3.9	%						2.6	%						2.7	%						-0.5	%
Fair value of acquired deferred revenue									0.2	%						0.4	%						0.3	%						0.3	%
Fair value adjustment to deferred services cost									0.0	%						0.0	%						0.0	%						0.0	%
Stock-based compensation									5.7	%						4.8	%						6.5	%						6.1	%
Amortization of acquired intangibles									5.0	%						5.1	%						5.0	%						5.1	%
Acquisition-related charges									0.1	%						0.3	%						0.1	%						0.4	%
US pension plan termination-related costs									0.1	%						0.0	%						0.0	%						0.0	%
Restructuring charges									0.5	%						1.0	%						1.0	%						5.2	%
Non-GAAP operating margin									15.4	%						14.1	%						15.6	%						16.5	%

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