PTC (PTC) DEF 14ADefinitive proxy

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Notice of 2020 Annual Meeting of Stockholders

Wednesday, February 12, 2020 8:00 a.m. Eastern Standard Time

PTC Inc. 121 Seaport Boulevard Boston, MA 02210

Important Notice of the Internet Availability of Proxy Materials

The Proxy Statement and our 2019 Annual Report are available to stockholders at www.proxyvote.com.

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Over the past year we again executed well against our strategic initiatives, establishing a solid foundation for the future.

Dear Fellow Stockholders,

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Proxy Statement Summary

Director Nominees

			Committees
Nominee		Director Since	Audit	Compensation	Corporate Governance	Nominating	Strategic Partnerships Oversight
	Robert Schechter, Chairman of the Board INDEPENDENT	2009	✓	✓			✓
	Janice Chaffin INDEPENDENT	2013		✓	C	C	✓
	Phillip Fernandez INDEPENDENT	2016	✓
	James Heppelmann President and CEO, PTC	2008
	Klaus Hoehn INDEPENDENT	2015			✓	✓
	Paul Lacy INDEPENDENT	2009	C	✓	✓	✓
	Corinna Lathan INDEPENDENT	2017	✓
	Blake Moret INDEPENDENT	2018			✓		✓
				C    Chairman		✓    Member

All director nominees attended at least 75% of the meetings of the Board and of the committees on which they serve that were held in the past year.

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Proxy Statement Summary

Corporate Governance Highlights

	Board Independence			Board and Committee Practices
	●Independent and Diverse Board of Directors ●Independent Board Chair ●Independent Audit, Compensation, Governance, and Nominating Committee Chairs ●Independent Audit, Compensation, Governance and Nominating Committees			●Regular Executive Sessions of Independent Directors ●Annual Board and Director Evaluations ●Comprehensive Risk Management Oversight ●CEO and Management Succession Planning
	Stockholder Rights			Stock Governance
	●Annual Election of All Directors ●Annual Say-on-Pay Vote ●No Supermajority Voting Requirements ●Stockholder Right to Call a Special Meeting ●Majority Voting Policy for Uncontested Director Elections ●No Poison Pill			●Robust Stock Ownership Requirements for Directors and Executive Officers ●No Hedging or Pledging of Stock by Directors, Executives or Employees ●No Payment or Accumulation of Dividends or Dividend Equivalents on Options or Unvested Shares

Compensation Practices

●Pay-for-Performance Compensation ●Half Our Executives’ Annual Target Compensation is Performance-Based ●Independent Compensation Consultant ●All Executives are Employed “At Will” ●“Double-Trigger” Change in Control Agreements ●No Excise Tax Gross-Ups ●Compensation Clawback Policy ●No Perquisites or Supplemental Retirement Benefits ●Performance-Based Incentive Plan Earnings are Capped ●Tally Sheets Reviewed Annually ●Annual Risk Assessment of Pay Programs

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Proxy Statement Summary

Executive Compensation Highlights

2019 Total Target Compensation

CEO Target Compensation

NEO Target Compensation

	Base Salary
	Annual Incentive Plan Focus executives on achieving specific performance goals tied to annual business plan.

 

Performance Measure
FY19Ending Total	FY19Non-GAAP
Recurring ACV	Operating Expense
% Weight: 2/3	% Weight: 1/3

	Long-Term Incentives Discourages short-term risk taking and aligns long-term management goals with long-term interests of stockholders.

PSUs (50%)	RSUs (50%)
Adjusted Free Cash	Vest in three equal
Flowover 2018 for	installments in
each of 2019, 2020	November 2019, 2020
and 2021.	and 2021.
Ultimate realized value depends on stock price performance.

Annual Upside PSUs Upside earning opportunity for exceptional performance above our annual business plan. Rigorous performance goal tied toNew License and Subscription Bookings.

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Proxy Statement Summary

Alignment of Pay and Performance

Five-Year CEO Total Realized Pay vs Relative TSR		Five-Year NEO Total Realized Pay vs Relative TSR

Alignment of Executives and Stockholders

THREE-YEAR VESTING OF RSUs

+

SUBSTANTIAL STOCK OWNERSHIP REQUIREMENTS

+

CLAWBACK PROVISIONS

=

ALIGNED INTERESTS BETWEEN OUR EXECUTIVES AND STOCKHOLDERS

2019 Stockholder Engagement

			We engaged with stockholders during and after the 2019 proxy season to discuss our executive pay program and other corporate governance matters. Our chairman of the Board, Robert Schechter, participated in many of these discussions. Other participants from the company included our Vice President of Investor Relations, our General Counsel and/or our Corporate & Securities Counsel. We targeted all investors that held at least 1% of our outstanding stock.
Investors Contacted	Discussions Held
26	14
Number of Investors	Number of Investors
45.6%	27%
% Outstanding Shares	% Outstanding Shares

Most investors we spoke with focused on board composition and refreshment and executive compensation. Investors also discussed environmental and social issues, such as human capital management, and reporting on our ESG initiatives and profile.

Board Composition and Refreshment.Investors were generally comfortable with our board composition and refreshment initiatives and were mainly seeking to understand how we think about those topics.

Executive Compensation.Our discussions about our executive pay program and the actions we took for our 2020 pay program are described below in “Compensation Discussion and Analysis.”

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Proxy Statement Summary

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Proxy Statement Summary

Corporate Responsibility

We recognize the close connection between our success and our ability to make a positive impact on our customers, our employees and the planet. Giving back to communities, embracing a culture of diversity and inclusion, sustaining the environment, and practicing sound ethics aren’t just the right thing to do. These efforts help make us an employer of choice, differentiate our brand, and support profitable and responsible growth. We published our first Corporate Social Report in early 2019. You can read that report and about our Corporate Social Responsibility initiatives atptc.com/en/about/corporate-social-responsibility. The reference to our Corporate Social Responsibility Report and our website are not intended to incorporate information in that report or on our website into this Proxy Statement by reference.

Community Engagement We engage in the global community and support our employees that do so as well. In 2018, we founded the PTC Charitable Foundation to bring together our giving initiatives under one umbrella. The Foundation supports important educational initiatives, including the For Inspiration and Recognition of Technology (FIRST) program, which engages children from kindergarten through high school worldwide in research and robotics programs, the City Year program in Boston, which pairs Americorps members to support local middle and high school students, and Citizen Schools, which partners with underserved middle schools that need additional support and resources. We support other educational institutions with in-kind software donations. Finally, we support our employees’ engagement by matching our employees’ charitable donations through the Foundation and providing our employees with paid time off to volunteer with charitable organizations and community initiatives.

Diversity & Inclusion Inclusion and diversity are key to our success. We seek employees with diverse backgrounds and insights and are committed to creating a culture of innovation and inspiration where all employees feel a sense of ownership and pride in our success. PTC was named a Top Place to Work in Massachusetts by The Boston Globe in 2019, 2018 and 2017.

Sustainability As a company that operates globally, we seek to reduce and mitigate our environmental impact through our sustainability initiatives. Our sustainability initiatives include recycling programs, energy and resource conservation programs, and public transportation support programs. Our new world headquarters building in the Boston Seaport has received LEED Gold certification.

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Information about the Annual Meeting and Voting

2020 Annual Meeting of Stockholders

Date and Time Wednesday, February 12, 2020 8:00 a.m. Eastern Standard Time

Place PTC Inc. 121 Seaport Boulevard Boston, MA 02210

How You May Vote

All stockholders as of December 9, 2019 have the right to attend and vote at the Annual Meeting of Stockholders. You may vote by proxy in advance of the meeting. You may attend the meeting even if you have voted by proxy before the meeting.In order to establish a quorum and to facilitate the tabulation of votes, please vote before the meeting, even if you plan to attend the meeting.

You have one vote for each share of common stock that you owned at the close of business on December 9, 2019. On that date, there were 115,493,203 shares outstanding. See ADDITIONAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING for additional information about voting and other administrative matters.

We made this proxy statement available to stockholders on December 31, 2019.

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The Board is elected by the stockholders to represent and protect their interest in PTC. The Board selects and oversees the members of senior management, who are responsible for conducting the business of PTC.

All director nominees are current directors of the company. Information about each of the director nominees, including their qualifications, skills and experience that led the Nominating Committee and the Board to conclude that the director should serve as a director of the company, is discussed below. Information about their PTC stock ownership is set forth in INFORMATION ABOUT PTC COMMON STOCK OWNERSHIP – Stock Owned by Directors and Officers.

Summary of Qualifications

Qualifications, Skills and Experience

The Nominees have a good balance of the qualifications, skills and experience that the Nominating Committee and the Board have identified as contributing to the effectiveness of the Board.

Leadership	Strategy	Global	Financial	Software Industry	Manufacturing	Marketing	Research & Development
8/8	8/8	8/8	7/8	6/8	5/8	5/8	5/8

Supermajority is Independent	Tenure is Well Balanced
Independent - 7 Not Independent - 1	Newer Directors (0 to 5 years) - 4 Medium Tenured Directors (6 to 12 years) - 3 Longer-Tenured Directors (over 12 years) - 1
Stockholder Interests are Protected Seven of the eight director nominees, including our Board chairman, are independent. Our President and CEO is not independent. An independent board ensures that the directors exercise independent judgment, are willing to question management and are best suited to represent and protect the interests of stockholders.	Stockholders Benefit from Effective Board Refreshment The Nominating Committee and the Board strive to achieve a balance of service on the Board through a mix of new members and perspectives and members with longer tenure with institutional knowledge.

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Proposal 1: Election of Directors

Specific Qualifications, Skills and Experience of the Board

The Committee believes that certain qualifications, skills and experience should be represented on the Board, as described below, although not every member of the Board must possess all such qualifications, skills and experience to be considered capable of making valuable contributions to the Board.

		Leadership Our business is complex and evolving rapidly. Individuals who have led companies or operating business units of significant size have proven leadership experience in developing and advancing a vision and making executive-level decisions.
		Strategy Our success depends on successful development and execution of our corporate strategy, including successful selection and execution of strategic alliances and acquisitions.
		Global We are a global company, with approximately 40% of our revenue coming from the Americas, 40% from Europe and 20% from the Asia-Pacific region. Global experience enhances understanding of the complexities and issues associated with running a global business and the challenges we face.
		Financial Our business and financial model is complex and multinational. Individuals with financial expertise are able to identify and understand the issues associated with our business and financial model.
		Software Industry We are an enterprise software company. Those with enterprise software experience are better able to understand the risks and opportunities facing our business.
		Manufacturing We primarily serve companies in the manufacturing industry. Understanding of this industry enhances understanding of how we can best address the needs of our customers.
		Marketing Our business depends on successfully creating awareness of our products and entering new markets. Persons with marketing experience can help us identify ways to do so successfully.
		Research and Development Our business depends on the success of our research and development efforts to develop our products and expand our offerings. Experience in this area enhances understanding of the challenges we face and best practices.

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Proposal 1: Election of Directors

Director Nominees

Independence of Our Directors. Our Board of Directors has determined that all the director nominees, other than Mr. Heppelmann, our President and Chief Executive Officer, are independent under applicable Nasdaq rules. None of the independent directors, to our knowledge, has any business, financial, family or other type of relationship with PTC or its management that would impact the director’s independence.

	Janice Chaffin	Director since:2013	Age:65
	Board Committees:Corporate Governance (Chair), Nominating (Chair), Compensation, Strategic Partnerships Oversight

Other Public Company Boards: Synopsys, Inc. Electronics for Imaging Inc. (2018-2019) International Game Technology (2010-2015) Informatica Corporation (2001-2008) Skills and Attributes Leadership Strategy Global Financial Software Industry Marketing

Ms. Chaffin served as Group President, Consumer Business Unit of Symantec, a global leader in providing cybersecurity solutions, from April 2007 until her retirement in March 2013 and as Chief Marketing Officer of Symantec from 2003 to 2007. Before that, she spent over twenty years at Hewlett-Packard Company, in management and marketing leadership positions. Ms. Chaffin brings to the Board significant leadership experience with large global technology companies. Ms. Chaffin’s skills include financial and accounting expertise as a result of her positions at Symantec Corporation and Hewlett-Packard Company and her service on the Audit Committees of Synopsys, International Game Technology and Informatica. In 2015, Ms. Chaffin completed the requirements to become a NACD Fellow, the highest level of credentialing for corporate directors and corporate governance professionals by the National Association of Corporate Directors. To become a NACD Fellow, Ms. Chaffin demonstrated knowledge of the leading trends and practices that define exemplary corporate governance today and committed to developing professional insights through a comprehensive program of ongoing study. Ms. Chaffin holds a Bachelor of Arts from the University of California, San Diego and a Master of Business Administration from the University of California, Los Angeles.

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Proposal 1: Election of Directors

	Phillip Fernandez	Director since:2016	Age:58
	Board Committees:Audit

Other Public Company Boards: Yext, Inc. Marketo, Inc. (January 2006 – August 2016) Tibco Software, Inc. (June 2014 – December 2014) Skills and Attributes Leadership Strategy Global Financial Software Industry Marketing Research and Development

Mr. Fernandez was a Venture Partner at Shasta Ventures, a venture capital firm, from January 2017 until January 2018. Mr. Fernandez was a founder of Marketo, Inc., a global digital marketing software company, and served as its Chief Executive Officer and President from January 2006 to August 2016. Before that, he was with Epiphany, Inc., a marketing software company acquired by SSA Global Technologies, Inc., from 1999 to 2005, including as President and Chief Operating Officer from July 2003 until September 2005. Mr. Fernandez has demonstrated leadership experience as a result of his service at Marketo, Inc. and at Epiphany, Inc. He has also gained significant marketing experience through his role at Marketo, Inc. Mr. Fernandez is also a well-known writer and speaker on topics related to digital marketing, marketing automation, big data, and entrepreneurialism, and is the author of Revenue Disruption: Game-Changing Sales and Marketing Strategies to Accelerate Growth (Wiley, 2012). Mr. Fernandez holds a Bachelor of Arts in History from Stanford University.

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Proposal 1: Election of Directors

	James Heppelmann	Director since:2008	Age:55
	Board Committees:None

Other Public Company Boards: Sensata Technologies Holding plc Skills and Attributes Leadership Strategy Global Financial Software Industry Manufacturing Marketing Research and Development

Mr. Heppelmann has served as the President and Chief Executive Officer of PTC since October 2010. He was President and Chief Operating Officer of PTC from March 2009 to September 2010, Executive Vice President and Chief Product Officer of PTC from February 2003 to February 2009, and Executive Vice President, Software Solutions and Chief Technology Officer of PTC from June 2001 to January 2003. Mr. Heppelmann joined PTC in 1998. Mr. Heppelmann brings to the Board significant leadership experience in the enterprise software industry as a result of his positions at PTC Inc. and his position at Windchill Technology, Inc., where he was the founder and President before its acquisition by PTC. Through his tenure at PTC, he has developed extensive knowledge of PTC’s history, technologies and the markets in which PTC operates. Additionally, Mr. Heppelmann has financial and marketing expertise as a result of his positions as Chief Executive Officer, Chief Operating Officer and Chief Product Officer of PTC. His skills also include technology and research and development expertise as a result of his positions as Chief Product Officer and Chief Technology Officer, and at Windchill Technology, Inc. Mr. Heppelmann holds a bachelor’s degree in Mechanical Engineering from the University of Minnesota.

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Proposal 1: Election of Directors

	Klaus Hoehn	Director since:2015	Age:68
	Board Committees:Corporate Governance, Nominating

Skills and Attributes Leadership Strategy Global Manufacturing Research and Development

Mr. Hoehn serves as Senior Advisor, Innovation and Technology to the Office of the Chairman, Deere & Company, an agricultural, construction, commercial and consumer equipment manufacturer. Before that, he served as the Vice President, Advanced Technology and Engineering, at Deere & Company from January 2006 through November 2018. He joined Deere & Company in 1992 and has served in several engineering and product development roles at the company. As a result of his positions at Deere & Company, Mr. Hoehn has extensive knowledge of manufacturing and the markets in which PTC operates, as well as extensive knowledge of PTC software, including as a user of PTC software. Mr. Hoehn’s experience at Deere, a customer of PTC, makes him uniquely qualified to serve as the “voice of the customer” on the Board. His skills also include technology and research and development expertise as a result of his positions at Deere, including his role that included corporate-level responsibility for directing advanced technology development and engineering services that support worldwide agricultural, construction, and commercial and consumer equipment design and manufacturing. Mr. Hoehn holds a bachelor’s degree, a master’s degree, and a Doctorate degree in Mechanical and Agricultural Engineering from Rostock University in Germany.

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Proposal 1: Election of Directors

	Paul Lacy	Director since:2009	Age:72
	Board Committees:Audit (Chair), Compensation, Corporate Governance, Nominating

Skills and Attributes Leadership Strategy Global Financial Software Industry Manufacturing

Mr. Lacy served as President of Kronos Incorporated, a global enterprise software company, from May 2006 until his retirement in June 2008. He served as President, Chief Financial and Administrative Officer, of Kronos from November 2005 through April 2006, and as Executive Vice President and Chief Financial and Administrative Officer of Kronos from April 2002 through October 2005. Mr. Lacy’s skills include extensive financial accounting and manufacturing expertise as a result of his positions at Kronos. During his tenure at Kronos, Kronos grew from a $26 million hardware company into a $662 million public global enterprise software company. Mr. Lacy also gained significant leadership and public company software experience as a result of his positions at Kronos Incorporated. Mr. Lacy holds a Juris Doctor from Boston College Law School and Bachelor of Science in Accounting from Boston College.

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Proposal 1: Election of Directors

	Corinna Lathan	Director since:2017	Age:52
	Board Committees:Audit

Skills and Attributes Leadership Strategy Global Financial Software Industry Research and Development

Dr. Corinna Lathan has been the Chief Executive Officer, Co-Founder and Chair of the Board of AnthroTronix, Inc., a biomedical engineering research and development company that creates diverse products in robotics, digital health, wearable technology, and augmented reality, since July 1999. Before that, Dr. Lathan was an Associate Professor of Biomedical Engineering at The Catholic University of America and an Adjunct Associate Professor of Aerospace Engineering at the University of Maryland, College Park. Dr. Lathan has extensive experience as a leader and technology innovator as a result of her work at AnthroTronix and brings to the Board deep expertise in human-technology interfaces for robotics and mobile technology platforms. Her significant experience and expertise in augmented reality and other technologies enable her to help us advance our Internet of Things strategy. Dr. Lathan holds a Bachelor of Arts degree in Biopsychology and Mathematics from Swarthmore College, and an S.M. in Aeronautics and Astronautics and Ph.D. in Neuroscience from MIT.

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Proposal 1: Election of Directors

	Blake Moret	Director since:2018	Age:57
	Board Committees:Corporate Governance, Strategic Partnerships Oversight

Other Public Company Boards: Rockwell Automation, Inc. Skills and Attributes Leadership Strategy Global Financial Manufacturing Marketing

Mr. Moret has been the President and Chief Executive Officer of Rockwell Automation, Inc., a company focused on industrial automation and information, since July 2016, and Chairman of the Board since January 2018. He served as Senior Vice President, Control Products and Solutions, at Rockwell Automation from April 2011 until July 2016. Mr. Moret has been with Rockwell Automation for over 32 years, during which he served in various roles, including leadership roles in marketing, solutions, services and product groups. Mr. Moret was appointed to the Board in connection with the formation of the strategic alliance between PTC and Rockwell Automation and Rockwell Automation’s purchase of $1 Billion of PTC stock in July 2018. In connection with those transactions, we agreed to appoint to the Board and to the Corporate Governance Committee an individual proposed by Rockwell Automation and reasonably acceptable to us. Rockwell Automation designated Mr. Moret as the initial designee. Although Mr. Moret met the objective Nasdaq independence standard when he joined the Board, we initially designated him as not independent due to the new strategic alliance and uncertainty about the types of issues that could potentially arise, particularly in the early days of the relationship. The parties now have over one year of experience operating under the strategic alliance, with transactions between the parties not constituting a significant portion of either PTC’s or Rockwell Automation’s annual revenue for 2019. With the benefit of operating experience over the past year, in connection with Mr. Moret’s nomination for re-election in 2020, we have concluded that he qualifies as an independent director under the applicable Nasdaq rules. In reaching this conclusion, we considered the fact that Mr. Moret continued to meet the objective independence standard under the applicable Nasdaq rules, that Rockwell Automation’s interests are aligned with those of stockholders generally, that transactions between the parties under the strategic alliance are not expected to be a material percentage of annual revenue in 2020, that Mr. Moret does not have any other relationship with us that would compromise his independence, and that, as with all directors, if a matter arises that poses a potential conflict of interest, Mr. Moret would be excluded from consideration of that particular matter. Mr. Moret brings significant leadership experience in factory automation and the factory automation market to the Board as a result of his experience at Rockwell Automation, an area that is a significant focus of our digital transformation for industrial enterprises strategy. Mr. Moret holds a bachelor’s degree in Mechanical Engineering from the Georgia Institute of Technology.

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Proposal 1: Election of Directors

	Robert Schechter Chairman of the Board	Director since:2009	Age:71
	Board Committees:Audit, Compensation, Strategic Partnerships Oversight

Other Public Company Boards: Mimecast Limited Telaria, Inc. EXA Corporation (2012 – 2017) Unica Corporation (2005 - 2010) Soapstone Networks, Inc. (2003 - 2009) Skills and Attributes Leadership Strategy Global Financial Software Industry Manufacturing Marketing Research and Development

Mr. Schechter served as the Chief Executive Officer of NMS Communications Corporation, a global provider of hardware and software solutions for the communications industry from 1995 until his retirement in 2008. Mr. Schechter brings to the board significant financial and accounting expertise as a result of his positions at NMS Communications Corporation and at Lotus Development Corporation, where he was the Chief Financial Officer. He was also a partner at Coopers & Lybrand LLP, an independent audit firm, and served as Chairman of its North East Region High Tech Practice. Through his position at NMS Communications Corporation, he gained relevant knowledge of the manufacturing market and process. He also acquired marketing experience as well as technology and research and development expertise as a result of his position as Senior Vice President at Lotus Development Corporation, where he was responsible for all sales, marketing, customer service and product development outside North America. Mr. Schechter holds a Bachelor of Science from Rensselaer Polytechnic Institute and a Master of Business Administration from the Wharton School of the University of Pennsylvania.

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Corporate Governance

Board Leadership Structure

Our Board is led by an independent Chairman, Mr. Schechter. We believe this Board leadership structure serves the company and our stockholders well by providing independent leadership of the Board. If we were to decide that combining the Chairman and CEO positions would better serve the company and our stockholders, our policy is to have a Lead Independent Director.

Board and Committee Meetings; Attendance at the Annual Meeting

The Board and committees hold regularly scheduled meetings over the course of the year and hold additional meetings as necessary. The Board met four times in 2019. No director attended less than 75% of meetings of the Board and the committees on which he or she served in 2019.

We expect that each director will attend the Annual Meeting of Stockholders each year. All directors attended the 2019 Annual Meeting of Stockholders.

Board Evaluation Process

The Board conducts an annual evaluation process, which is facilitated by a third-party once every three years.

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Corporate Governance

Board Refreshment Process

The Nominating Committee is responsible for identifying and recommending to the Board candidates for Board membership. The Nominating Committee considers the Board’s composition, skills and attributes to determine whether they are aligned with our long-term strategy. The Nominating Committee evaluates candidates against the standards and qualifications set forth in our Corporate Governance Guidelines as well as other relevant factors, including the candidate’s potential contributions to the Board.

Our typical search process involves the steps described below.

Assess Board’s Current Skills and Attributes

Identify Skills or Attributes that are needed or may be needed in the future

Develop Candidate Profile

Identify and Retain Search Firm to Lead the Process

Screen Candidates

Chairman of the Board, CEO, Chair of Nominating Committee and other directors meet with candidates

Decision and Nomination

Board Risk Oversight

The Board and the relevant committees review with PTC’s management the risk management practices for which they have oversight responsibility. Since overseeing risk is an ongoing process and inherent in PTC’s strategic decisions, the Board and the relevant committees do not view risk in isolation but discuss risk throughout the year in relation to ongoing operations and proposed actions and initiatives.

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Corporate Governance

The Committees of the Board

The Board has five standing committees: Audit, Compensation, Corporate Governance, Nominating and the Strategic Partnerships Oversight Committee. Each of the committees acts under a written charter, all of which are available on the Investor Relations page of our website atwww.ptc.com. Mr. Heppelmann, our CEO, does not serve on any committee.

C  Chair

✓  Member

Audit Committee Financial Expert

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Corporate Governance

	Audit Committee
	Committee Chair: Paul Lacy	Committee Members: Phillip Fernandez Corinna Lathan Robert Schechter
Responsibilities ●Assists our Board in fulfilling its oversight responsibilities for accounting and financial reporting compliance and oversees our compliance programs. ●Reviews the financial information provided to stockholders and others, PTC’s accounting policies, disclosure controls and procedures, internal accounting and financial controls, and the audit process. ●Meets with management and with our independent auditor to discuss our financial reporting policies and procedures, our internal control over financial reporting, the results of the independent auditor’s examinations, PTC’s critical accounting policies and the overall quality of PTC’s financial reporting, and reports on such matters to the Board. ●Meets with the independent auditor, with and without PTC management present. ●Appoints (and, if appropriate, replaces), evaluates, and establishes the compensation of, the independent auditor. ●Reviews the independent auditor’s performance in conducting the annual financial statement audit and the audit of our internal control over financial reporting, assesses independence of the auditor, and reviews the auditor’s fees. ●Reviews and pre-approves audit and non-audit related services that may be performed by the independent auditor. Independence and Financial Expertise ●All committee members are “independent directors” under both SEC rules and the Nasdaq Stock Market listing requirements. ●No member has ever been an employee of PTC or any of its subsidiaries. ●The Board of Directors has determined that Mr. Lacy and Mr. Schechter qualify as Audit Committee Financial Experts, as defined by the SEC.

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Corporate Governance

	Compensation Committee
	Committee Chair: Donald Grierson	Committee Members: Janice Chaffin Paul Lacy Robert Schechter
Responsibilities ●Establishes the compensation levels for our executive officers. ●Oversees our employee compensation programs, including the corporate bonus programs. ●Sets performance goals for compensation of executive officers and evaluates performance against those goals. ●Oversees our equity compensation plans. May engage compensation consultants or other advisors to provide information and advice to the Committee. Independence ●All committee members are “independent directors” under The Nasdaq Stock Market listing requirements.

	Corporate Governance Committee
	Committee Chair: Janice Chaffin	Committee Members: Donald Grierson Klaus Hoehn Paul Lacy Blake Moret
Responsibilities ●Develops and recommends policies and processes regarding corporate governance. ●Reviews and makes recommendations to the Board with respect to director compensation. ●Maintains a CEO succession plan to ensure continuity of leadership for PTC. Independence ●All Committee members are “independent directors” under The Nasdaq Stock Market listing rules.

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Corporate Governance

	Nominating Committee
	Committee Chair: Janice Chaffin	Committee Members: Klaus Hoehn Paul Lacy
Responsibilities ●Oversees the director recruitment process, including the assessment of qualifications and skills sought in new directors and the retention of search firms to assist in the identification of potential candidates. ●Reviews the composition of the Board and makes recommendations regarding nominees for election to the Board. ●Makes recommendations to the Board about the composition of committees of the Board. Independence ●All Committee members are “independent directors” under The Nasdaq Stock Market listing rules.

	Strategic Partnerships Oversight Committee
	Committee Chair: Robert Schechter	Committee Members: Janice Chaffin Blake Moret
Responsibilities ●Oversee the implementation and operation of significant strategic relationships entered into by the company. Independence ●All Committee members are “independent directors” under The Nasdaq Stock Market listing rules.

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Corporate Governance

Director and Executive Officer Stock Ownership Requirements

Because we believe our directors’ and executives’ interests are more aligned with those of our stockholders if they are stockholders themselves, our directors and executive officers are required to hold a significant amount of our stock. Options and unvested equity are not counted toward the holding requirement.

Directors 5x Annual Board Cash Retainer

Chief Executive Officer 5x Annual Salary

Other Executive Officers 3x Annual Salary

OurDirector Stock Ownership Policyand ourExecutive Officer Stock Ownership Policyare available on the Investor Relations page of our website atwww.ptc.com.

No Hedging or Pledging of PTC Equity

In order to ensure members of the Board of Directors and our executives and employees are aligned with the interests of our stockholders, our Trading in Company Securities Policy prohibits the hedging of PTC stock or equity by directors, executives and employees and transactions in derivative securities whose value is tied to that of PTC stock (including puts, calls and listed options). The Policy also prohibits the pledging of PTC stock or equity by directors, executives and employees and short sales of PTC stock.

Director Election Process and Voting Standard

All directors stand for election each year. Directors are elected by a plurality of votes received. However, we maintain a Majority Voting Policy for uncontested director elections that requires a director who does not receive a majority of the votes cast for his or her proposed election to promptly tender his or her resignation from the Board. The Corporate Governance Committee will consider the resignation and recommend to the Board whether to accept the resignation. The Board will use its best efforts to act on the resignation and publicly disclose its decision and its rationale within 90 days following certification of the election results. The director who tenders his or her resignation may not participate in the decisions of the Corporate Governance Committee or the Board that concern the resignation.

Director Nominations

The Nominating Committee is responsible for identifying and evaluating nominees for director and for recommending to the Board a slate of nominees for election at each Annual Meeting of Stockholders. Candidates may be suggested by directors, management, stockholders or a search firm retained by the Committee. Stockholders that wish to nominate a candidate may do so in accordance with the procedures described in STOCKHOLDER PROPOSALS AND NOMINATIONS. Candidates properly nominated by stockholders will be given the same consideration as other proposed candidates.

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Corporate Governance

Director Qualifications and Diversity

The Nominating Committee’s mandate is to create and maintain a Board with a diversity of skills and attributes that is aligned with PTC’s current and anticipated future strategic needs. Beyond a few general requirements, the Nominating Committee does not rely on a fixed set of qualifications for director nominees but considers the composition of the Board and the experience and skills each director nominee brings to the Board.

PTC values diversity and believes that diversity among the directors as to personal and professional experiences, opinions, perspectives and backgrounds, as well as diversity with respect to race, ethnicity, gender, age and cultural backgrounds, is desirable. The Committee does not maintain a diversity policy but seeks to achieve diversity through its thoughtful selection of qualified candidates.

Qualifications Required of All Directors

The Nominating Committee considers each candidate’s character and professional ethics, judgment, leadership experience, business experience and acumen, familiarity with relevant industry issues, national and international experience and such other relevant skills and experience as may contribute to the Board’s effectiveness and PTC’s success. In addition, all candidates must be able to dedicate sufficient time and resources for the diligent performance of the duties required of a member of the Board of Directors and must not hold positions or interests that conflict with their responsibilities to PTC. Candidates must also comply with any other minimum qualifications for either individual directors or the Board under applicable laws or regulations. The Committee will also consider whether the candidate is independent of PTC as at least a majority of members of the Board of Directors must qualify as independent in accordance with Nasdaq independence rules.

Communications with the Board

Stockholders may send communications to the Board of Directors at: Board of Directors, PTC Inc., c/o General Counsel, 121 Seaport Boulevard, Boston, Massachusetts 02210.

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Director Compensation

We pay our non-employee directors a mix of cash and equity compensation. The amounts established for the annual Board and committee cash and equity retainers for the most recent year are shown in the table below. No fees are paid for service on the Strategic Partnerships Oversight Committee. The retainers are the only compensation paid for service as a director; we do not pay meeting fees for attendance at board or committee meetings.

		Annual Cash Retainer			Annual Equity Retainer			Committee Chair Retainer			Committee Member Retainer
Chairman of the Board		$	125,000		$	300,000
Other Directors		$	60,000		$	250,000
Audit Committee								$	30,000		$	15,000
Compensation Committee								$	25,000		$	12,500
Corporate Governance Committee								$	15,000		$	7,500
Nominating Committee								$	5,000		$	2,500
Strategic Partnerships Oversight Committee								$	—		$	—

Director Compensation Process and Decisions

The Board establishes the annual compensation for the directors at the meeting of the Board of Directors held directly after the Annual Meeting of Stockholders. In setting such compensation, the Board considers the recommendation of the Corporate Governance Committee. In making its recommendation for 2019, the Corporate Governance Committee considered a competitive assessment of the directors’ compensation with that of our compensation peer group (described in COMPENSATION DISCUSSION AND ANALYSIS) and reviewed each element of compensation to determine whether the compensation is competitive and reasonable for the services provided by the directors. Based on that review, no changes were made to our directors’ compensation for 2019. For 2019 our directors’ compensation was positioned at approximately the 55^thpercentile of the compensation peer group.

We provide a higher annual retainer for service as the Chairman of the Board given the additional work required by that position, but do not pay a committee chair retainer to the Chairman of the Board for service as the Chair of any committee. We provide different retainers for the Chairs and members of the various committees based on the anticipated level of work required with respect to the position and the committee.

We also believe that providing a majority of our directors’ annual retainer compensation in the form of equity rather than cash serves to further align the interests of our directors with our stockholders as they become stockholders themselves.

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Director Compensation

2019 Director Compensation

The amounts shown in theFees Earned or Paidin Cash column of the table are each director’s annual board and committee retainer fees. The amounts shown in theStock Awardscolumn of the table are the value of the restricted stock unit (RSU) awards made to the directors during the year.

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Our Executive Officers

		James Heppelmann
		Information about Jim Heppelmann is provided in“Director Nominees”above.

		Kristian Talvitie	Age49
		Executive Vice President, Chief Financial Officer
Kristian became our Chief Financial Officer in May 2019. Before that, Kristian was the Chief Financial Officer of Syncsort Incorporated, a private software company specializing in Big Data, high speed sorting products and data integration software and services from October 2018 through May 2019. He served as Chief Financial Officer of Sovos Compliance, LLC, a private SaaS software company specializing in tax compliance software from July 2016 to October 2018, and served as the Corporate Vice President, Finance of PTC from July 2013 to July 2016 and as the Senior Vice President, Financial Planning and Analysis and Investor Relations of PTC from November 2010 to July 2013.

		Kathleen Mitford	Age47
		Executive Vice President, Products
Kathleen became our Executive Vice President, Products in February 2018. Kathleen was our Executive Vice President, Products and Market Strategy from October 2017 to February 2018, Executive Vice President, Segments from February 2017 to October 2017, Corporate Vice President, Corporate Strategy from July 2014 to February 2017, and Senior Vice President, Corporate Strategy from October 2011 to July 2014. Before that, she served in various roles in our product, market and corporate strategy groups. Kathleen joined PTC in 2006.

		Aaron Von Staats	Age54
		Executive Vice President, General Counsel and Secretary
Aaron has served as our General Counsel and Secretary since 2003. Before that, he served in other roles in the company’s Legal group. Aaron joined PTC in 1997.

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This advisory vote on the compensation of our Chief Executive Officer and our other executive officers and former executive officers named in the Summary Compensation Table (our “named executive officers”) gives stockholders the opportunity to express their views on our named executive officers’ compensation. This “say-on-pay” vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers. Additional information about their compensation is discussed in COMPENSATION DISCUSSION AND ANALYSIS and in EXECUTIVE COMPENSATION.

Summary of Our Compensation Practices

Our compensation programs are designed to pay for performance.A significant portion of the compensation of our named executive officers is comprised of performance-based pay. For 2019, 51% of our CEO’s target compensation was performance-based and 49% of our other named executive officers’ target compensation was performance-based.

Our performance-based pay is tied to strategic short-term and long-term objectives and requires substantial incremental performance over the prior period to be earned. For example, although our business performed well overall for the year and our executives earned 97.60% of their annual incentive, they earned only 59.33% of the target 2019 long-term performance-based equity eligible to be earned in 2019 due to underperformance against our free cash flow target and 0% of the annual upside performance-based RSUs due to underperformance against the aggressive new license and subscription bookings target.

As shown in the pay and performance alignment charts in COMPENSATION DISCUSSION AND ANALYSIS, our executives’ pay and the Company’s performance are strongly aligned.

Our compensation programs are designed to align our executives’ interests with our stockholders’ interests.In addition to weighting our executives’ compensation to performance-based pay, a substantial portion of their compensation is in the form of equity (RSUs) that vests over three years. Moreover, our executives are subject to substantial stock ownership requirements and to clawback of incentive compensation in certain circumstances. These elements serve to align our executives’ interests with those of our stockholders in the long-term value of PTC.

Our compensation programs are developed by independent directors advised by an independent consultant.Our Compensation Committee is comprised only of independent directors and retains an independent compensation consultant to advise it on appropriate compensation practices.

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Proposal 2: Advisory Vote on the Compensation of our Named Executive Officers

Effect of Say-on-Pay Vote

This say-on-pay vote, which is required by Section 14A of the Securities Exchange Act of 1934, is advisory only and is not binding on the company, the Compensation Committee or our Board of Directors. Although the vote is advisory, we, our Compensation Committee and our Board of Directors value the opinions of our stockholders and will consider the outcome of this vote when establishing future compensation for our executive officers. We hold such a vote each year.

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Compensation Discussion and Analysis

The Compensation Committee of our Board of Directors determines the compensation for our executives. We discuss below our executive compensation program and the compensation decisions made for 2019 for our Chief Executive Officer, our Chief Financial Officer, and the other executive officers and former executive officers named in the Summary Compensation Table.

Our Compensation Philosophy & Practices

Our executive compensation programs are designed to attract, motivate and retain our executives.

We Pay for Performance

We have a pay-for-performance philosophy for executive compensation and emphasize performance-based compensation tied to strategic initiatives designed to create long-term stockholder value. We believe that equity incentives that vest over multiple years provide an important motivational and retentive aspect to the executives’ overall compensation and align our executives’ interest in the long-term performance of PTC with that of our stockholders. Accordingly, a substantial portion of our executives’ compensation consists of performance-based and service-based RSUs that vest over multiple years.

Our results for 2019 reflect the successful execution of our business transformation to a subscription company with expanding margins. Our Internet of Things business, which we view as a significant growth opportunity, continued to grow as we added new customers and existing customers expanded their implementations over the year.

Long-Term Pay and Performance Alignment

Our performance over the past several years reflects the success and efficacy of aligning executive compensation with our strategic plan. This pay-for-performance approach has resulted in strong pay and performance alignment and will continue to be the centerpiece of our executive compensation programs.

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Compensation Discussion and Analysis

5-Year CEO Total Realized Pay vs Relative TSR		5-Year NEO Total Realized Pay vs Relative TSR

We are Responsive to Stockholders

We have made significant changes to our executive compensation programs over recent years in response to say-on-pay votes, comments from stockholders and changes to perceived best practices. Those changes included:

As a result, stockholders approved our say-on-pay proposals in 2017 and 2018 at the 90%+ level. However, in 2019, stockholder support for our say-on-pay proposal was significantly lower. After this disappointing result, we embarked on a stockholder engagement initiative to understand our stockholders’ views on our executive pay program and the reasons for their lack of support for our 2018 executive pay program.

2019 Stockholder Engagement on Executive Compensation

We contacted 26 of our largest stockholders representing 46% of our outstanding shares to seek their views on our executive pay programs and any governance or other matters they wished to discuss. Of those, 14 stockholders representing 27% of our outstanding shares spoke with us. Our Chairman of the Board, Robert Schechter, who is also a member of the Compensation Committee, participated in many of these discussions. Other participants from the company included our Vice President of Investor Relations and our General Counsel and/or our Senior Vice President, Corporate & Securities Counsel.

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Compensation Discussion and Analysis

What We Heard
2018 CEO Long-Term Performance-Based Equity Grant Most stockholders we met with focused on the special five-year performance-based equity grant made to our CEO in June 2018 and sought to further understand the rationale for the grant and the structure and value of the grant. Stockholders generally understood what the Compensation Committee was trying to achieve with that incentive grant, why we selected the performance measures for that grant and the rigor of the performance measures. Although a few investors indicated that they supported the grant and had supported our say-on-pay proposal, most commented about the fact that the grant was incremental to our established executive compensation program, the value of the grant, and the structure of the grant, and indicated that the grant was the reason they voted against our say-on-pay proposal in 2019. Structure of Our Long-Term Performance-Based Equity Investors asked us to consider using a relative performance measure and adding a second performance measure to our long-term performance-based equity. Investors also commented on other features of our other long-term performance-based equity incentives, specifically the fact that portions of those awards can be earned for achieving performance milestones in years 1 and 2 of the 3-year performance period, and that amounts not earned in years 1 and 2 can be earned for year 3 (the “catch-up” opportunity).
Our Considerations and Actions
2018 CEO Long-Term Performance-Based Equity Grant We understand our stockholders’ concerns about the off-cycle grant. We do not, as a general practice, grant awards outside of the core elements of the executive compensation program but on occasion have used an additional grant for specific circumstances. In this case, our Compensation Committee felt it was appropriate to fully align our CEO incentives with a new, challenging 5-year financial target announced by the Company in 2018 and to retain him to drive that target. No supplemental grants were made in 2019 and no similar grants are currently contemplated. Structure of Long-Term Performance-Based Equity We reviewed the structure of our long-term performance-based equity and addressed stockholders’ comments by adding a second performance measure to the long-term equity for 2020. As also suggested by stockholders, the second measure we added was a relative performance measure. The measure we chose was relative TSR. This structure enables us to incent a long-term strategic goal while further aligning our executives’ interests with stockholders’ interests. We have retained the annual earning opportunities in years 1 and 2 of the 3-year performance period under our long-term performance-based equity and the catch-up opportunity. The Compensation Committee believes that retaining this design increases the likelihood that the final year 3 performance measure will be achieved by providing milestones along the way to the year 3 performance-target while also enabling executives to make decisions appropriate for the business that may cause performance to fall short of the year 1 or 2 milestones, but ultimately achieve the year 3 performance measure. The Committee believes that focusing executives on achieving a 3-year performance measure best aligns executives’ interests with those of stockholders and is more likely to create longer-term value for stockholders if the target performance measure is achieved.

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Compensation Discussion and Analysis

2019 Compensation Design

Our executives’ 2019 target compensation consisted of the compensation elements shown below. We believe these components provide an appropriate mix of fixed compensation and at-risk compensation that promotes short-term and long-term performance and rewards our executives appropriately for their performance. With this mix, we provide a competitive base salary and service-based equity that vests over multiple years while providing our executives the opportunity to earn additional compensation through short-term and long-term performance-based incentives designed to drive company performance and create long-term stockholder value. Because a significant portion of our executives’ target compensation is performance-based, actual compensation earned can differ significantly from target compensation.

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Compensation Discussion and Analysis

CEO Compensation Components					NEO Compensation Components
				Base Salary Provide a base level of competitive cash compensation.
				Service-Based Long-Term RSUs Align the executive’s long-term interests with those of stockholders and retain the executive. RSUs vest in three substantially equal annual installments over three years.
				Performance-Based Long-Term RSUs Align the executive’s long-term interests with those of PTC and stockholders by focusing the executive on achieving performance goals critical to PTC’s long-term success. PSUs are eligible to vest in three substantially equal annual installments over three years, with PSUs not earned for years one and two eligible to be earned for the third year.
				Annual Incentive Plan Focus the executive on achieving performance goals tied to PTC’s annual business plan.
				Annual Upside PSUs Align the executive’s long-term interests with those of PTC stockholders by focusing the executive on achieving a rigorous performance goal above the annual plan. PSUs earned vest in three substantially equal annual installments over three years. PSUs not earned are forfeited. These PSUs are not expected to be earned when granted (0%) and are not considered part of the executive’s target compensation.

2019 Performance-Based Compensation

The performance measures we develop and use for our performance-based compensation are designed to drive and measure our performance against our short-term and long-term business plans and objectives and create value for our stockholders.

Alignment of Corporate Strategy and Performance-Based Compensation

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Compensation Discussion and Analysis

2019 Performance–Based Compensation and Achievement

Individual 2019 Performance-Based Amounts Earned

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Compensation Discussion and Analysis

2019 CEO and NEO Compensation Decisions

The target compensation for our executives and the decisions we made when setting that compensation are described below. Target compensation includes only the elements shown below and does not include the Annual Upside Performance-Based RSUs as those are not considered part of the executives’ target compensation, but rather an upside opportunity that could be earned for exceptional performance beyond that contemplated by our business plan. Further, as noted above, a significant portion of our executives’ target compensation is performance-based, and thus actual compensation earned can differ significantly from the target compensation.

For those executives for whom we increased the target compensation for 2019, the increase was made through an increase in their target long-term equity compensation, with the increase split equally between performance-based RSUs and service-based RSUs, as we prefer to use equity that vests over multiple years rather than cash to further align our executives’ pay with the interests of our stockholders.

	James Heppelmann,President and Chief Executive Officer

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Compensation Discussion and Analysis

	Kristian Talvitie,Chief Financial Officer

Mr. Talvitie joined PTC in May 2019. When setting his target compensation for the year, we set his salary and target bonus at the same level as the retiring Chief Financial Officer, Andrew Miller, and pro-rated those amounts for the remainder of FY2019. We set his target long-term equity at an amount lower than for Andrew Miller given Mr. Talvitie’s level of experience in the CFO role. We also paid him a one-time sign-on bonus of $200,000 to compensate him for compensation he was forgoing at his previous employer.		2019 Target Compensation
		(1)	Does not include sign-on bonus as it is not considered part of his target annual compensation.
		(2)	Salary and bonus actually paid were pro-rated for FY19.

	Matthew Cohen,Executive Vice President, Field Operations

Mr. Cohen was promoted to Executive Vice President, Field Operations in February 2018 and his compensation for the role was established at that time. We evaluated his 2018 compensation against our compensation peer group as to individual elements and as to total target compensation and his performance to determine whether to make any additional changes to his target compensation for 2019. Given his performance and his compensation relative to his peers, we believed an increase to his compensation was warranted. Accordingly, we increased his target compensation by 13% for 2019.

2019 Target Compensation

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Compensation Discussion and Analysis

	Kathleen Mitford,Executive Vice President, Products

Ms. Mitford was promoted to Executive Vice President, Products in March 2018 and her compensation for the role was established at that time. We evaluated Kathleen’s 2018 compensation against our compensation peer group as to individual elements and as to total target compensation and her performance to determine whether to make any additional changes to her target compensation for 2019. Given her performance and her compensation relative to her peers, we believed an increase in her compensation was warranted. Accordingly, we increased her target compensation by 14% for 2019.

2019 Target Compensation

	Aaron von Staats,Executive Vice President, General Counsel

Mr. von Staats was promoted to Executive Vice President and General Counsel in July 2018, after having been our General Counsel since March 2003. We evaluated his 2018 compensation against our compensation peer group as to individual elements and as to total target compensation and his performance to determine whether to make any additional changes to his target compensation for 2019. Given his performance and his compensation relative to his peers, we believed an increase in his compensation was warranted. Accordingly, we increased his target compensation by 19% for 2019.

2019 Target Compensation

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Compensation Discussion and Analysis

How We Set Executive Compensation

The Compensation Committee, which is comprised entirely of independent directors, establishes and reviews the compensation for our executive officers annually.

Independent Compensation Consultant

The Committee engaged Pearl Meyer & Partners, LLC as its independent compensation consultant for 2019. The Committee assessed the independence of Pearl Meyer and determined that Pearl Meyer is independent of PTC and has no relationships that could create a conflict of interest with PTC. As part of its assessment, the Committee considered the fact that Pearl Meyer provides no other services to PTC and consults with PTC’s management only as necessary to provide the services described below.

Pearl Meyer provides a range of services to the Committee to support the Committee in fulfilling its responsibilities, including providing legislative and regulatory updates, peer group compensation data, advice on the structure and competitiveness of our compensation programs, and advice on the consistency of our programs with our executive compensation philosophy. Pearl Meyer attends Committee meetings, reviews compensation data with the Committee, and participates in discussions regarding executive compensation issues. The Committee meets with Pearl Meyer with and without PTC management present.

Consultation with Management

Members of management, including our Chief Executive Officer, participate in Committee meetings as requested by the Committee to discuss the materials provided, including recommendations on executive pay, competitive market practices and performance measures. Although the members of management provide their views, decisions on executive compensation are made solely by the Committee and, in the case of the Chief Executive Officer’s compensation, without the presence of the Chief Executive Officer.

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Compensation Discussion and Analysis

Determination of the Total Amount of Compensation

We make decisions regarding the amount and mix of compensation for our executives based on:

We use the competitive analysis to assess our executives’ compensation against the compensation paid to executives in similar positions in the peer group to ensure that the compensation we pay is competitive and fair to our executives and to our stockholders. We generally target compensation opportunities for our executives at the median of the market as an initial benchmark. While we use the competitive analysis as a starting point, we also consider the qualitative dimensions of an executive’s role, internal pay equity among our executives and tenure in the position when setting our executives’ compensation as we do not believe an external benchmark should be the only determinant of compensation.

Competitive Analysis (Benchmarking)

The peer group used for the competitive analysis consists of 16 publicly-traded U.S. software companies, most of which are in the enterprise software space, that have revenues and market capitalizations in a range we believe is appropriate. We target companies with revenue within an approximately 0.5x to 2x multiple of PTC’s revenue and an approximately 0.5x to 3x multiple of PTC’s market capitalization. However, we may include companies with revenue and/or market capitalizations outside these parameters if there is strong product and/or service similarity. We believe this group represents the competition for executive talent in our industry. We review the peer group annually to ensure that the companies in the peer group remain relevant and provide meaningful compensation comparisons.

The 2019 peer group consisted of the companies listed below. The 2019 peer group differed from the 2018 peer group due to the removal of ACI Worldwide, Inc. and Verint Systems, Inc. as they became too small relative to PTC, and the addition of LogMeIn, Inc. and The Ultimate Software Group, Inc., both of which were smaller than PTC on both a revenue and market capitalization basis, and ServiceNow, Inc., which was larger than PTC on both measures, to balance those removals.

2019 Peer Group

Akamai Technologies, Inc.		Open Text Corporation
ANSYS, Inc.		Pegasystems Inc.
Autodesk, Inc.		Red Hat, Inc.
Cadence Design Systems, Inc.		ServiceNow, Inc.
Citrix Systems, Inc.		Splunk Inc.
LogMeIn, Inc.		SS&C Technologies Holdings Inc.
Fair Isaac Corporation		Synopsys, Inc.
Nuance Communications, Inc.		The Ultimate Software Group, Inc.

Survey Data

We also use survey data for additional perspective. For 2019, we used the Radford Global Technology survey. PTC participates in this survey and believes that it represents a good cross-section of the software industry and that the data is appropriate to PTC. The survey represented 43 software companies with median revenue of $1.3 billion.

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Compensation Discussion and Analysis

Other Important Elements of Our Compensation Program

Compensation Clawback Policy

We maintain an executive compensation recoupment policy that is intended to enable us to recover incentive compensation paid to an executive officer if such compensation is subsequently determined to have been unearned due to a restatement of our financial results for the performance period as a result of the misconduct of the executive officer. TheExecutive Compensation Recoupment Policyis available in theCorporate Governancesection of the Investor Relations page of our website atwww.ptc.com.

Stock Ownership Requirements

Our executives are required to attain and maintain stock ownership levels of our common stock (options and unvested equity are not counted). For our CEO, that amount is5xhis annual salary, and for our other executive officers, that amount is3xtheir respective annual salaries. All our executives met their respective stock ownership requirements.

No Hedging or Pledging of PTC Stock

In order to ensure members of our Board of Directors and our executives and employees are aligned with the interests of our stockholders, our Trading in Company Securities Policy prohibits the hedging of PTC stock or equity by directors, executives and employees and transactions in derivative securities whose value is tied to that of PTC stock (including puts, calls and listed options). The Policy also prohibits the pledging of PTC stock or equity by directors, executives and employees and short sales of PTC stock.

Severance and Change in Control Arrangements

Agreements and Conditions

We maintain severance and change in control arrangements with our executives. The agreements require the executive to execute a non-compete agreement with PTC and to execute a general release of claims as a condition to receiving severance benefits. Each of the agreements has a one-year term and renews automatically for successive one-year terms if the Compensation Committee does not terminate the agreement. The agreements are described in more detail underPotential Payments upon Termination or Change in Control.

Annual Review

The Compensation Committee reviews these agreements each year to determine if these agreements should be maintained, modified or terminated. For 2019, the Committee reviewed current market practices and the terms of the agreements with the Committee’s compensation consultant. Based on this review, the Committee decided that it was appropriate to maintain the agreements but determined that reducing the post change-in-control protection period from three years to two years was appropriate and better aligned with peer practices.

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Compensation Discussion and Analysis

Rationale

The Committee believes that these agreements are important motivational and retention tools because, in a time of continuing consolidation in our industry and increased competition for executive talent, they provide a measure of earnings security by offering income protection in the form of severance and continued benefits if the executive’s employment is terminated without cause, economic protection for the executive’s family if the executive becomes disabled or dies, and additional protections in connection with a change in control of PTC.

The Committee believes that providing severance to PTC employees, including executives, is an appropriate bridge to subsequent employment if the person’s employment is terminated without cause. This is particularly so for executive-level positions for which the opportunities are typically more limited, and the job search lead time is longer. The agreements also benefit PTC by enabling executives to remain focused on PTC’s business in uncertain times without the distraction of potential job loss.

Importance in Connection with a Potential Change in Control

The Committee believes these agreements are even more important in the context of a change in control as it believes they will motivate and encourage the executives to be receptive to potential strategic transactions that are in the best interest of stockholders, even if the executive faces potential job loss. The agreements for our executives have “double triggers” before vesting of any equity is accelerated, so that no equity is accelerated upon a change in control but is accelerated only if the executive is terminated in connection with a change in control. The Committee believes this benefits PTC and any potential acquirer because it enables PTC to retain and motivate the executive while a potential change in control is pending, provides an acquirer with the ability to retain desired executives using existing equity incentives, and does not provide a one-time benefit to the executive that could undermine those efforts.

Timing of Equity Grants

We do not time grants either to take advantage of a depressed stock price or an anticipated increase in stock price and have limited the amount of discretion that can be exercised in connection with the timing of awards. We generally make awards only on pre-determined dates to ensure that awards cannot be timed to take advantage of material non-public information. Typically, our annual executive awards are made in November after public release of the previous fiscal year’s financial results, annual awards to our Board of Directors are made on the day of the annual stockholders’ meeting, and awards to our employees are made in November and June.

Awards to executive officers may be made only by the Compensation Committee. Other employee awards may be made by either the Compensation Committee or by our Chief Executive Officer pursuant to delegated authority. The Compensation Committee generally makes awards only at Committee meetings and generally does not make awards in trading blackout periods (the prophylactic period encompassing the last three weeks of each fiscal quarter through 24 hours after the earnings for that quarter are announced) unless special circumstances exist, such as a new hire or a contractual commitment. Our Chief Executive Officer may make awards only on the 15^thof the month (or the next succeeding business day if the 15^this not a business day), other than in the months of January, April, July and October because the 15^thof each of those months falls in a blackout period after the end of the quarter before results are announced, and only up to established values set by the Compensation Committee.

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Compensation Discussion and Analysis

Consideration of Stock-Based Compensation Expense and Dilution

We consider the stock-based compensation expense and dilution (burn rate) associated with equity awards to executives as we develop our overall equity compensation program. The expense associated with the equity awards is equal to the fair value of the equity issued and is amortized over the vesting period of the award. We monitor this expense and dilution to stockholders as we develop our plans and strive to maintain a program that balances the goals of our equity program with the expense and dilution associated with the program. For 2019, stock-based compensation expense as a percentage of our market capitalization and dilution were both below the 40^thpercentile.

Annual Assessment of Risks Associated with Our Compensation Programs

We assess our compensation plans and programs for employees, including our executives, annually to ensure alignment of the various plans and programs with our business plan and to evaluate the potential risks associated with those plans and programs. For 2019, the Compensation Committee retained Pearl Meyer & Partners, the Compensation Committee’s independent compensation consultant, to assist the Committee in assessing those risks. Based on this assessment, the Committee concluded that the company’s compensation plans and programs do not create risks that are reasonably likely to have a material adverse effect on PTC.

The Compensation Committee regularly considers the risks associated with executive compensation and corporate incentive plans when designing such plans. The elements described below with respect to such plans and programs have generally been implemented by or at the direction of the Compensation Committee and were considered when assessing the risk associated with our compensation programs:

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Compensation Discussion and Analysis

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the foregoing Compensation Discussion and Analysis. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee

Donald Grierson, Chairman
Janice Chaffin
Paul Lacy
Robert Schechter

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Executive Compensation

The discussion, table and footnotes below describe the total compensation for 2019 for our named executive officers (our Chief Executive Officer, our Chief Financial Officer, our three other most highly compensated executive officers, and two former executive officers).

As described in COMPENSATION DISCUSSION AND ANALYSIS above and reflected in the Summary Compensation Table below, we pay these executive officers a mix of cash and equity compensation. Cash compensation consists of a base salary and, for 2018 and 2017, an incentive plan bonus (Non-Equity Incentive Plan Compensation). For 2019, the incentive plan bonus was paid in stock and those amounts appear inStock Awards. Annual long-term equity compensation (Stock Awards) consists of restricted stock units (RSUs) (50% of which are performance based and 50% of which are service based) that are eligible to vest over three years from the date of grant. Additional equity compensation (Stock Awards) may also include special purpose grants. We generally do not pay discretionary cash bonuses to these executives. We paid a sign-on cash bonus to Mr. Talvitie upon his joining PTC in May 2019 in consideration of amounts he was foregoing at his prior company.

We do not provide these executives with pensions or the ability to defer compensation or any perquisites. Amounts shown in theAll Other Compensationcolumn reflect the matching cash contribution under our 401(k) Savings Plan for those participating in the plan.

Summary Compensation Table

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Executive Compensation

Grants of Plan-Based Awards

As discussed in COMPENSATION DISCUSSION AND ANALYSIS above, we tie a substantial portion of our executives’ compensation to PTC’s performance through plan-based awards. For 2019, these awards consisted of:

We describe our compensation decisions for 2019, including the rationale for these awards and the performance measures, in COMPENSATION DISCUSSION AND ANALYSIS above.

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Executive Compensation

2019 Grants of Plan-Based Awards

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Executive Compensation

Outstanding Equity Awards at Fiscal Year-End

The following table shows the equity awards held by each named executive officer as of September 30, 2019. The equity awards in the table are restricted stock units granted in 2017 through 2019.

Outstanding Equity Awards at Fiscal Year-End