PTC (PTC) DEF 14ADefinitive proxy

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

PTC Inc.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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NOTICE OF 2022 ANNUAL
MEETING OF STOCKHOLDERS

Monday, January 31, 2022

12:30 p.m. Eastern Standard Time

PTC Inc. 121 Seaport Boulevard Boston, MA 02210

Matters to be Voted on at the Meeting

Other matters that are properly brought before the meeting may also be considered.

Stockholders at the close of business on December 2, 2021 are entitled to vote.

Please vote your shares before the meeting, even if you plan to attend the meeting.

Your broker will not be able to vote your shares on the election of directors or the say-on-pay proposal unless you have given your broker specific instructions to do so.

By Order of the Board of Directors

AARON C. VON STAATS
Secretary

Boston, Massachusetts
December 20, 2021

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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,

In 2020, we hired our first Chief Diversity and Inclusion Officer to drive our diversity and inclusion initiatives and have implemented initiatives to identify, attract and retain employees that are underrepresented minorities.

In 2021, we retained a consultant to help us develop an appropriate process to collect and track relevant information for our community engagement and environmental programs that will enable us to develop appropriate goals and track progress against those goals that we can share. We also intend to conduct an ESG materiality analysis to enable us to address those items that are most material to us and our stakeholders.

We describe these initiatives measures further in Corporate Sustainability and Responsibility below.

Looking to the Future
Given our execution in 2021 and the steps we are taking to increase diversity on the Board and in the company and to advance our ESG initiatives, we believe the company is well-positioned for the future.

We thank you for your continued support of PTC.

Sincerely,

ROBERT SCHECHTER
Chairman of the Board

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2021 STOCKHOLDER ENGAGEMENT

We engaged with stockholders in Fall 2021. The conversations included corporate governance matters, including our executive compensation program. Robert Schechter, Chairman of the Board, Mark Benjamin, Chair of the Compensation Committee, and Janice Chaffin, Chair of the Corporate Governance, Cybersecurity and Nominating Committees, participated in a number of these discussions. Other participants from the company included our Investor Relations representatives, our General Counsel, our Corporate & Securities Counsel, and a senior member of our Compensation group.

For our engagement, we targeted all investors holding at least 0.75% of our outstanding stock, and additional investors in our Top 50 investors that we knew had voted against our 2021 Say-on-Pay proposal.

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2021 STOCKHOLDER ENGAGEMENT

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CORPORATE SUSTAINABILITY AND RESPONSIBILITY

We recognize the close connection between our success and our ability to make a positive impact on our customers, our employees, and our communities. Giving back to communities, embracing a culture of diversity, equity, and inclusion, 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. You can read about our Corporate Social Responsibility initiatives at ptc.com/en/about/corporate-social-responsibility. We expect to release our Corporate Social Responsibility Report for FY20 and FY21 in the coming months and to make it available there. 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

Our Commitment

We are committed to creating a better reality by providing financial grants to organizations with charitable and social missions and by supporting employees in their efforts to give back to the community.

Why It’s Important

PTC is part of our communities. It is where our employees, customers, suppliers, and partners live and work. Supporting the growth of strong, resilient communities helps us and, we believe, inspires others to make the world a better place.

Our Approach

The PTC Foundation focuses on charitable giving in STEM and Education and in the communities where PTC employees, partners and stakeholders are located.

We also provide direct support to STEM and educational institutions and initiatives with in-kind donations, and provide our employees with paid time off to volunteer with charitable organizations and community initiatives.

Diversity, Equity & Inclusion

Our Commitment

DEI is critical to how we think about our employee culture, our engagement with our customers and partners, and the communities in which we work and live.

Our definition of “diversity” is intentionally broad and includes many groups, united by purpose. Our common goal is to drive meaningful change and to create an environment where all employees can succeed personally and professionally. We are also committed to embedding equity into every part of the organization, promoting an innovative, inclusive forward-thinking culture, and building high-performing teams.

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CORPORATE SUSTAINABILITY AND RESPONSIBILITY

Why It’s Important

Our future performance is dependent on our ability to attract, develop, and retain a diverse workforce of talented and engaged employees who believe in the purpose of PTC.

Our Approach

We have a history of working to attract a wide diversity of people from different backgrounds, cultures, education experiences, and religions because we know that a workforce that reflects the diversity of our customers and communities will bring more innovative thinking and better ideas and solutions to our business.

Formalize Our Commitment. In 2020, like many organizations, we realized we needed to accelerate our progress. We created a formal DEI team and appointed our first Chief Diversity Officer to examine the full scope of the talent management process with a specific focus on underrepresented groups (URGs) in the tech industry, including people of color, women, and members of the LGBTQIAP+ community.

Enhance Our Strategy and Talent Practices. In 2020, working with a consultant, we conducted a baseline assessment of our DEI policies, practices, and programs. The results are informing our strategy and talent practices as we embed DEI principles into how we attract, select, retain, and develop talent.

Build Accountability. We are working to establish goals and metrics to hold ourselves accountable and have invested in technology tools to track our diverse talent pipeline, hiring slates, and hiring conversions.

Environmental Sustainability

Our Commitment

We are committed to addressing our environmental impact and to providing solutions to our customers that enable them to transform their businesses and operations to reduce their environmental impact and that of their customers.

Why It’s Important

Climate change is real, and we all have a role to play in addressing and seeking to mitigate our climate impacts. As a software company, our environmental impact is relatively significantly lighter than the customers we serve and results mainly from our offices and our employees.

Our Approach

Address Our Direct Impacts

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CORPORATE SUSTAINABILITY AND RESPONSIBILITY

Support Our Customers’ Digital Transformation Initiatives

We are committed to driving innovation and creating products that help our customers improve productivity and reduce costs and help them achieve their own sustainability goals and those of their customers.

Our software products enable companies to design, manufacture, and service their products in ways that lower their physical environmental impact by saving energy, reducing materials usage and waste, and increasing efficiency. Our augmented reality software enables our customers to service their products and train their employees in more sustainable ways by enabling them to remotely service their products and to train their employees more efficiently, including remotely, enabling them to make processes more efficient and to reduce travel. We are exploring ways to capture and report the efficiencies and reductions in environmental impact realized by our customers through the use of our software.

Cybersecurity and Data Privacy

Our Commitment

have implemented and continue to implement measures intended to maintain the security and integrity of our products, source code and IT systems and are committed to collecting, processing, and protecting our information and that of our customers, employees and partners in compliance with applicable laws and regulations.

Why It’s Important

The potential for a security breach or system disruption has significantly increased over time as the scope, number, intensity and sophistication of attempted cyberattacks and cyber intrusions have increased. 

Our Approach

Cybersecurity

Cybersecurity is a risk area with oversight at the highest levels of the organization, including the Executive level and Board.

The Cybersecurity program is constantly under review as we are always adapting to new threats and maturing the program. As a matrixed cybersecurity organization, we have adopted the “Three Lines of Defense Model” to effectively address Cybersecurity Risk Management, Controls and Assurance. The overall operational program is led by a cross functional Cybersecurity Strategy Council led by the office of Cyber Risk Management that reports to our Chief Compliance Officer. The Council is supported by a qualified team of security professionals and key business stakeholders from all key functions including Products, IT Infrastructure, SaaS and Cloud. The Cybersecurity Risk and Privacy teams are supported from an Assurance perspective by our Internal Audit Teams. All Cybersecurity, Risk and Internal Audit functions report periodically to the PTC Executive Leadership Team and the Cybersecurity Committee of the Board.

As part of the program, we regularly train our employees on cybersecurity risks and our policies and practices designed to address to those risks.

Data Privacy

We understand the importance of protecting personal information. We have adopted a robust Privacy Policy that covers how we process any personal data we collect through our website and in connection with managing our workforce and conducting our business.

We also maintain a comprehensive written information security plan for the protection of personal and proprietary information. The security plan includes policies and procedures for accessing, collecting, storing, using, transmitting, and protecting personal information.

In addition, all employees receive information security training annually.

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CORPORATE SUSTAINABILITY AND RESPONSIBILITY

Corporate Governance Highlights

	Board Independence			Board and Committee Practices
⬢Independent and Diverse Board of Directors ⬢Independent Board Chair ⬢Independent Audit, Compensation, and Nominating Committee Chairs ⬢Independent Audit, Compensation, 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

This summary highlights information contained elsewhere in this proxy statement and does not contain all the information you should consider. You should read the entire proxy statement before voting.

See the Letter from the Chairman of the Board on page 3 for highlights of PTC’s 2021 performance.

All references to 2021 and 2020 refer to PTC’s fiscal years ended September 30, 2021 and 2020, respectively, unless otherwise indicated.

Matters to be Voted on at the Meeting

		Proposal 1 Elect eight directors to serve until the 2023 Annual Meeting of Stockholders.
		The Board of Directors recommends a vote FOR All Nominees
		Proposal 2 Advisory vote to approve the compensation of our named executive officers (say-on-pay).
		The Board of Directors recommends that you vote FOR the approval of the compensation of our named executive officers as disclosed in COMPENSATION DISCUSSION AND ANALYSIS and the tables and related disclosures contained in EXECUTIVE COMPENSATION.
		Proposal 3 Advisory vote to confirm the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the current fiscal year.
		The Board of Directors recommends that you vote FOR the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022.

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PROXY STATEMENT SUMMARY

Director Nominees

Tenure		Independence
Shorter – Tenured Directors (0 – 4 years) – 3		Independent – 7
Medium – Tenured Directors (5 – 11 years) – 2		Non-Independent – 1
Longer – Tenured Directors (12+ years) – 3

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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

2021 PricewaterhouseCoopers LLP Services and Fees

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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

DATE Monday, January 31, 2022

TIME 12:30 p.m. Eastern Standard Time

PLACE PTC Inc. 121 Seaport Boulevard Boston, MA 02210

2022 Annual Meeting of Stockholders

Proposals to be Voted on at the Meeting

How You May Vote

All stockholders as of December 2, 2021 have the right to attend and vote at the Annual Meeting of Stockholders. You may vote by proxy before 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.

We made this proxy statement available to stockholders on December 20, 2021.

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		Proposal 1 ELECTION OF DIRECTORS
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. The Board of Directors recommends that you vote FOR the election of all director nominees.

Snapshot of Board Composition

Supermajority is Independent		Tenure is Well-Balanced		Gender is Diverse
Independent – 7		0 – 4 Years – 3		Women – 2
Not Independent – 1		5 – 11 Years – 2		Men – 6
		12+ Years – 3
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 Board strives 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. Our President and CEO has served on the Board for over 12 years.		Stockholders Benefit from Existence of Diverse Views Of our eight directors, two are women. This composition provides a diverse set of viewpoints and experiences that we believe benefits stockholders. Effective February 8, 2022, Ms. Michal Katz will join the Board. Ms. Katz is considered independent – increasing both gender diversity and the supermajority of independent directors on the Board.

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PROPOSAL 1: ELECTION OF DIRECTORS

STRONG AND EFFECTIVE BOARD DUE TO GOOD BALANCE OF QUALIFICATIONS, SKILLS, AND EXPERIENCE

Leadership

Strategy

Global

Financial

Software Industry

Manufacturing

Marketing

R&D

Mark Benjamin

Janice Chaffin

James Heppelmann

Klaus Hoehn

Paul Lacy

Corinna Lathan

Blake Moret

Robert Schechter

Total

8

8

8

7

6

5

5

4

Board 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. The Board and Nominating Committee value diversity and believe that diversity among the directors as to personal and professional experiences, opinions, perspectives, and backgrounds, including diversity with respect to race, ethnicity, gender, age, cultural backgrounds, sexual identity, and gender orientation is desirable. Entering 2021, our Board had eight members – three of which were diverse, with two directors that were women and one director identifying as LGBTQ+. One of those directors resigned in mid-2021, leaving only gender diversity on the Board.

The Board currently had two director searches open in 2021 and actively sought diverse candidates by requiring that all slates of proposed candidates include at least two racially and/or ethnically diverse candidates and opening the aperture to identify candidates that might not otherwise be identified. We had success with this approach previously when we were seeking to add women to the Board by expanding the searches to include leaders of significant business units within public companies and reaching into academia, leading to the selections of Janice Chaffin and Cori Lathan, respectively. Effective February 8, 2022, Ms. Michal Katz will join the Board. We hope to add a racially or ethnically diverse director to the Board within the next year as a result of the remaining open director search.

BOARD DIVERSITY MATRIX (AS OF DECEMBER 15, 2021)

Total Number of Directors: 8

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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, familial, or other type of relationship with PTC or its management that would impact the director’s independence.

MARK BENJAMIN Director Since 2021 Age 51 Board Committees Compensation (Chair) Cybersecurity Other Public Company Boards ⬢ Nuance Communications, Inc.	Key Qualifications: ⬢Extensive leadership experience with large global technology companies, including Nuance Communications, NCR Corporation, and ADP. ⬢Extensive experience advancing growth initiatives related to cloud, SaaS, mobile, big data, and IoT solutions. Career Highlights: ⬢Chief Executive Officer, Nuance Communications, Inc., a global software company that provides speech recognition solutions powered by artificial intelligence, April 2018 – Present ⬢President and Chief Operating Officer of NCR Corporation, a provider of enterprise software, hardware and services, from October 2016 to March 2018 ⬢Over 20 years in various leadership positions at Automatic Data Processing, Inc. (ADP), a provider of human resources management software and services, including as President of Global Enterprise Solutions from July 2013 to October 2016. Education: ⬢Bachelor’s degree in international finance and marketing from the University of Miami. Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Software Industry		Marketing

JANICE CHAFFIN Director Since 2013 Age 67 Board Committees Cybersecurity (Chair) Corporate Governance (Chair) Nominating (Chair) Other Public Company Boards ⬢Informatica Inc. ⬢Synopsys, Inc. ⬢Electronics for Imaging Inc. (2018 – 2019) ⬢International Game Technology (2010 – 2015)	Key Qualifications: ⬢Significant leadership experience with large global technology companies. ⬢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. ⬢Significant expertise in corporate governance due to her being a NACD Fellow from 2015 – 2022, the highest credential level for corporate directors by the National Association of Corporate Directors. ⬢Regular speaker on the topic of Diversity, Equity, and Inclusion at the Anderson School of Management at the University of California, Los Angeles. Career Highlights: ⬢Group President, Consumer Business Unit, Symantec, a global leader in providing cybersecurity solutions, April 2007 – March 2013 ⬢Chief Marketing Officer, Symantec, 2003 – 2007 ⬢Over 20 years at Hewlett-Packard Company, in management and marketing leadership positions. Education: ⬢Bachelor of Arts – University of California, San Diego ⬢Master of Business Administration – University of California, Los Angeles Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Software Industry		Marketing

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PROPOSAL 1: ELECTION OF DIRECTORS

JAMES HEPPELMANN Director Since 2008 Age 57 Board Committees None Other Public Company Boards ⬢Sensata Technologies Holding plc ⬢Agile Growth Corp., a special purchase acquisition company	Key Qualifications: ⬢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. ⬢Extensive knowledge of PTC’s history, technologies and the markets in which PTC operates. ⬢Financial and marketing expertise as a result of his positions as Chief Executive Officer, Chief Operating Officer and Chief Product Officer of PTC. ⬢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. Career Highlights: ⬢President and Chief Executive Officer, PTC, October 2010 – Present ⬢President and Chief Operating Officer, PTC, March 2009 – September 2010 ⬢Executive Vice President and Chief Product Officer, PTC, February 2003 – February 2009 ⬢Executive Vice President, Software Solutions, and Chief Technology Officer, PTC, June 2001 – January 2003 ⬢Joined PTC in 1998 Education: ⬢Bachelor’s degree in Mechanical Engineering – University of Minnesota Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Software Industry		Manufacturing		Marketing		Research and Development

KLAUS HOEHN Director Since 2015 Age 70 Board Committees Corporate Governance Nominating	Key Qualifications: ⬢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. ⬢His experience at Deere, a customer of PTC, makes him uniquely qualified to serve as the “voice of the customer” on the Board. ⬢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. Career Highlights: ⬢Senior Advisor, Innovation and Technology, to the Office of the Chairman, Deere & Company, November 2018 – December 2020 ⬢Vice President, Advanced Technology and Engineering, Deere & Company, January 2006 – November 2018 ⬢Over 12 years’ earlier experience at Deere & Company in various engineering and product development roles. Education: ⬢Bachelor’s degree in Mechanical and Agricultural Engineering – Rostock University, Germany ⬢Master’s degree in Mechanical and Agricultural Engineering – Rostock University, Germany ⬢Doctorate degree in Mechanical and Agricultural Engineering – Rostock University, Germany Skills and Attributes:
		Leadership		Strategy		Global		Manufacturing
		Research and Development

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PROPOSAL 1: ELECTION OF DIRECTORS

PAUL LACY Director Since 2009 Age 74 Board Committees Audit (Chair) Compensation Corporate Governance Nominating	Key Qualifications: ⬢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. ⬢Significant leadership and public company software experience as a result of his positions at Kronos Incorporated. Career Highlights: ⬢President, Kronos Incorporated, a global enterprise software company, May 2006 – June 2008 ⬢President, Chief Financial and Administrative Officer, Kronos Incorporated, November 2005 – April 2006 ⬢Executive Vice President and Chief Financial and Administrative Officer, Kronos Incorporated, April 2002 – October 2005 Education: ⬢Bachelor of Science in Accounting – Boston College ⬢Juris Doctor – Boston College School of Law Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Software Industry		Marketing

CORINNA LATHAN Director Since 2017 Age 54 Board Committees Audit Cybersecurity	Key Qualifications: ⬢Extensive experience as a leader and technology innovator as a result of her work at AnthroTronix. ⬢Deep expertise in human-technology interfaces for robotics and mobile technology platforms. ⬢Significant experience and expertise in augmented reality and other technologies. Career Highlights: ⬢Chief Executive Officer, Co-Founder and Chair of the Board, AnthroTronix, Inc., a biomedical engineering research and development company that creates diverse products in robotics, digital health, wearable technology, and augmented reality, July 1999 – Present ⬢Associate Professor of Biomedical Engineering, The Catholic University of America ⬢Adjunct Associate Professor of Aerospace Engineering, University of Maryland, College Park Education: ⬢Bachelor of Arts degree in Biopsychology and Mathematics – Swarthmore College ⬢S.M. in Aeronautics and Astronautics – MIT ⬢Ph.D. in Neuroscience – MIT Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Software Industry		Research and Development

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PROPOSAL 1: ELECTION OF DIRECTORS

BLAKE MORET Director Since 2018 Age 59 Board Committees Corporate Governance Other Public Company Boards ⬢Rockwell Automation, Inc.	Key Qualifications: ⬢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 its designee. Transactions between Rockwell Automation and PTC under the strategic alliance did not constitute a significant portion of either company’s annual revenue for 2021. ⬢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. Independence Considerations: ⬢We have concluded that Mr. Moret 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 2022, 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. Career Highlights: ⬢President and Chief Executive Officer, Rockwell Automation, Inc., a company focused on industrial automation and information, July 2016 – Present ⬢Chairman of the Board, Rockwell Automation, Inc., January 2018 – Present ⬢Senior Vice President, Control Products and Solutions, Rockwell Automation, Inc., April 2011 – July 2016 ⬢Over 20 years’ earlier experience at Rockwell Automation in various roles, including leadership roles in the marketing, solutions, services, and product groups. Education: ⬢Bachelor’s degree in Mechanical Engineering – Georgia Institute of Technology Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Manufacturing		Marketing

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PROPOSAL 1: ELECTION OF DIRECTORS

ROBERT SCHECHTER Chairman of the Board Director Since 2009 Age 73 Board Committees Audit, Compensation Other Public Company Boards ⬢Mimecast Limited ⬢Telaria, Inc. (2013 – 2019) ⬢EXA Corporation (2012 – 2017) ⬢Unica Corporation (2005 – 2010) ⬢Soapstone Networks, Inc. (2003 – 2009)	Key Qualifications: ⬢Significant financial and accounting expertise as a result of his experience at Coopers & Lybrand, LLP, an independent accounting firm, and his positions at NMS Communications Corporation and at Lotus Development Corporation, where he was the Chief Financial Officer. ⬢Relevant knowledge of the manufacturing market and process through his position at NMS Communications Corporation. ⬢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. Career Highlights: ⬢Chief Executive Officer, NMS Communications Corporation, a global provider of hardware and software solutions for the communications industry, 1995 – 2008 ⬢Senior Vice President, International Operations, Lotus Development Corporation, 1990 – 1994 ⬢Chief Financial Officer, Lotus Development Corporation, 1987 – 1990 ⬢Partner, Chair of Northeast Region High Tech Practice, Coopers & Lybrand, LLP, 1973 – 1987 Education: ⬢Bachelor of Science – Rensselaer Polytechnic Institute ⬢Master of Business Administration – Wharton School of the University of Pennsylvania Skills and Attributes:
		Leadership		Strategy		Global		Financial
		Software Industry		Manufacturing		Marketing		Research and Development

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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 seven times in 2021. All directors attended at least 86% of meetings of the Board and the committees on which the director served in 2021, with all directors attending 100% of such meetings other than Mr. Benjamin and Mr. Moret, each of whom missed one special Board meeting due to prior commitments.

We expect that each director will attend the Annual Meeting of Stockholders each year. All directors attended the 2021 Annual Meeting of Stockholders.

Director Election Process and Voting Standard

All directors stand for election each year. Directors are elected by a plurality of votes received. 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 tendering the resignation may not participate in the decisions of the Corporate Governance Committee or the Board that concern the resignation.

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

Director Nominations and Board Refreshment

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 may nominate candidates 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.

The Nominating Committee considers the Board’s composition, including the alignment of the skills and professional experience of the directors with our long-term strategy and the Board’s gender, racial, ethnic, and LGBTQ+ diversity. The Nominating Committee evaluates candidates against the standards and qualifications set forth in our Corporate Governance Guidelines and the Nominating Committee Charter as well as other relevant factors, including the candidate’s potential to add gender, racial, ethnic, or LGBTQ+ diversity to the Board.

Our typical search process involves the steps described below.

Commitment to Diversity

The Board and the Nominating Committee are committed to increasing diversity on the Board. The Board initially focused on increasing gender diversity on the Board and successfully identified and recruited two women, both of whom serve on the Board today. The Board has turned its attention to increasing other elements of diversity, including racial, ethnic and LGBTQ+ diversity. Our initiatives and efforts to increase racial, ethnic, and LGBTQ+ diversity on the Board are described above in LETTER FROM OUR CHAIRMAN and PROPOSAL 1: ELECTION OF DIRECTORS – Board Diversity.

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 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 must qualify as independent in accordance with Nasdaq independence rules.

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CORPORATE GOVERNANCE

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.

Given the importance of oversight of the Company’s management of its cybersecurity risks, including the responsibilities associated with maintaining privacy of personal information, the Board created the Cybersecurity Committee in 2021 to oversee those risks. Ms. Chaffin, who held leadership positions at Symantec Corporation – a leading global cybersecurity company – in her career, was appointed Chair of the Committee.

Board of Directors Ultimate responsibility for risk management oversight and oversees risk management of risks not addressed by a committee, including ESG risks and initiatives.
Audit ⬢Financial Condition and Debt ⬢Accounting and Financial Reporting ⬢Compliance Programs ⬢Taxes ⬢Related Party Transactions	Compensation & People ⬢Executive Compensation Policies, Programs and Practices ⬢Human Capital Management, including Diversity and Inclusion Initiatives	Corporate Governance ⬢Corporate Governance Policies ⬢CEO Succession Planning ⬢Composition of Board Committees ⬢Director Evaluation ⬢Director Compensation ⬢ESG risks and initiatives not addressed by other committees	Cybersecurity ⬢Cybersecurity and IT Programs	Nominating ⬢Board Refreshment ⬢Director Nominations ⬢Composition of the Board
			Established June 2021

The Committees of the Board

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

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CORPORATE GOVERNANCE

AUDIT COMMITTEE
	Committee Chair: Paul Lacy	Committee Members: Corinna Lathan Robert Schechter

COMPENSATION AND PEOPLE COMMITTEE
	Committee Chair: Mark Benjamin	Committee Members: Janice Chaffin Paul Lacy Robert Schechter

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CORPORATE GOVERNANCE

CORPORATE GOVERNANCE COMMITTEE
	Committee Chair: Janice Chaffin	Committee Members: Klaus Hoehn Paul Lacy Blake Moret

CYBERSECURITY COMMITTEE
	Committee Chair: Janice Chaffin	Committee Members: Mark Benjamin Corinna Lathan

NOMINATING COMMITTEE
	Committee Chair: Janice Chaffin	Committee Members: Klaus Hoehn Paul Lacy

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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.

Our Director Stock Ownership Policy and our Executive Officer Stock Ownership Policy are available on the Investor Relations page of our website at www.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.

Communications with the Board

Stockholders may send communications to the Board of Directors at: Board of Directors, PTC Inc., c/o General Counsel and Secretary, 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 were paid for service on the Cybersecurity Committee as it was established late in 2021. 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.

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 2021, 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 2021.

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

2021 Director Compensation

The amounts shown in the Fees Earned or Paid in Cash column of the table are each director’s annual board and committee retainer fees. The amounts shown in the Stock Awards column of the table are the value of the equity awards (RSUs) made to the directors during the year.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

	JAMES HEPPELMANN Information about Jim Heppelmann is provided in “Director Nominees” above.
	KRISTIAN TALVITIE Executive Vice President, Chief Financial Officer Age 51 Kristian joined PTC as 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.
	TROY RICHARDSON President, Digital Thread Business Age 59 Troy joined PTC in November 2020 as our Chief Operating Officer. In October 2021, he was promoted to President, Digital Thread Business. Troy previously served as the Senior Vice President, Head of Global Sales for DXC Technology, a $20 Billion leading IT services company, from July 2019 to November 2020. Before that, he served as the Senior Vice President, General Manager, Enterprise and Cloud Applications for DXC from April 2017 to July 2019; General Manager, Global Sales Leader for CSC, an information and technology services company, from December 2015 to April 2017; and Senior Vice President, Strategic Alliances for Oracle Corporation from May 2014 to December 2015. Before that, Mr. Richardson held management positions at SAP, Hewlett-Packard, Novell, NCR and IBM.
	MICHAEL DITULLIO President, Velocity Business Age 54 Mike has been our Executive Vice President, SaaS Business, since January 2021. Before that Mr. DiTullio served in various positions in our Sales organization, including as Executive Vice President, Global Sales from November 2015 to January 2021. Mike joined PTC in 1999.
	AARON VON STAATS Executive Vice President, General Counsel and Secretary Age 56 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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	Proposal 2
	ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
This advisory vote on the compensation of our Chief Executive Officer and our other 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.
The Board of Directors recommends that you vote FOR the approval of the compensation of our named executive officers as disclosed in COMPENSATION DISCUSSION AND ANALYSIS and the tables and related disclosures contained 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 2021, 51% of our CEO’s target compensation was performance-based and 50% of our other named executive officers’ target compensation was performance-based.

As shown in the pay and performance alignment charts in COMPENSATION DISCUSSION AND ANALYSIS, our executives’ pay and the company’s performance are 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. Our executives are also subject to robust stock ownership requirements and to clawback of performance-based 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.

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

Letter from the Compensation Committee

Dear Fellow Stockholders:

In the past three years, stockholder support for PTC’s say-on-pay advisory vote has been below desired levels, including less than majority support in 2019 and 2021. Through our shareholder engagement efforts, we heard that the lower levels of support were primarily attributable to an off-cycle performance-based retention equity award granted to our CEO. The award was originally made in June 2018 and was subsequently cancelled and replaced in September 2020 due to failure of the original award to continue to provide retentive and incentive value following strategy shifts over those years and the effect of the COVID-19 pandemic on our business. The rationale for the replacement award was explained most recently in our Proxy Statement filed in December 2020, as the replacement award was a component of the decisions made with respect to our CEO’s FY20 compensation and was subject to last year’s say-on-pay vote.

In response to the low level of support for last year’s say-pay vote, we undertook an extensive stockholder engagement effort in the Fall of 2021. The Compensation Discussion and Analysis below discusses the extent of those engagement efforts, the feedback we received from stockholders, and the actions we have taken when structuring FY22 compensation plans. We have endeavored to be responsive to stockholders. Our executive officers’ compensation for FY21 did not include any special or off-cycle awards and no such awards are currently contemplated. In response to stockholder feedback disfavoring the use of special or off-cycle awards, we commit that we will not make additional special or off-cycle awards to executive officers absent compelling circumstances where the compensation objectives cannot be achieved through our annual compensation programs. Also, in direct response to stockholder feedback, we have changed the structure of our annual long-term incentive awards for FY22 to add a three-year performance period, with no annual performance periods or vesting opportunities, for the relative TSR performance-based RSUs. The Compensation Discussion and Analysis below discusses these matters further.

At the same time, based on our discussions with stockholders, we believe that a substantial majority of our stockholders support our core annual compensation programs, which are heavily weighted toward performance-based pay and which received support at an over 90% level in 2017 and 2018. Our compensation decisions in FY21 reflect these core programs and we are hopeful that stockholders will again endorse those programs by voting in favor of this year’s advisory vote on executive compensation.

We hope this has been helpful and thank you for your investment in PTC and your continued support.

Respectfully,

THE COMPENSATION COMMITTEE
Mark Benjamin, Janice Chaffin, Paul Lacy and Robert Schechter

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COMPENSATION DISCUSSION AND ANALYSIS

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 FY21 reflect the continued successful execution of strategic plan to increase the growth of our portfolio of recurring revenue contracts (Annual Run Rate or ARR) and to increase our free cash flow.

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 pay and performance alignment and will continue to be the centerpiece of our executive compensation programs.

5-YEAR CEO TOTAL REALIZED PAY VS RELATIVE TSR		5-YEAR NEO TOTAL REALIZED PAY VS RELATIVE TSR
Performance Rank		Performance Rank

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 evolving perceived best practices. Those changes included:

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COMPENSATION DISCUSSION AND ANALYSIS

2021 Stockholder Engagement on Executive Compensation

In response to low support reflected in last year’s say-on-pay vote, we engaged with a significant number of stockholders in Fall 2021. A member of our board of directors (either our Chairman of the Board, Robert Schechter, who is also a member of the Compensation Committee, Mark Benjamin, Chair of the Compensation Committee, or Janice Chaffin, Chair of the Nominating and Corporate Governance Committees and former Chair and current member of the Compensation Committee) participated in the majority of these discussions. Other participants from the company included our Investor Relations professionals, our General Counsel, our Senior Vice President, Corporate & Securities Counsel, and a senior member of our Compensation team.

What We Heard and Our Responses

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COMPENSATION DISCUSSION AND ANALYSIS

Changes to FY22 Performance-Based Compensation Structure

As noted above, the FY22 relative TSR performance-based RSUs will be subject to one three-year performance period with no annual measurement periods or vesting. Accordingly, the performance period for these RSUs will be from October 1, 2021 – September 30, 2024, with the September 30, 2021 weighted average stock price used as the base value for the purpose of determining whether absolute TSR was positive (that is, whether the weighted average stock price determined for September 30, 2024 is more than the weighted average stock price determined for September 30, 2021). The weighted average stock price is determined using a 30-day weighted average for the applicable period ending on September 30. In recognition of the fact that PTC was added to the S&P 500 in August 2021, the FY22 relative TSR RSUs will use the S&P 500 Software & Services Index, excluding five services companies included in the Index, plus compensation peer group companies not included in the Index as the comparison group.

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COMPENSATION DISCUSSION AND ANALYSIS

2021 Compensation Design

Our executives’ 2021 target compensation consisted of the 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.

2021 Target Compensation

Target Compensation		Compensation Elements
CEO	NEO
		Base Salary Provides a base level of competitive cash compensation.
		Annual Corporate Incentive Plan Focuses executives on achieving specific performance goals tied to PTC’s annual business plan.
		Performance Measures
		ARR Growth          Non-GAAP Operating Expense
		Long-Term Incentives ⬢Focuses executives on achieving performance goals to drive PTC’s long-term success. ⬢Discourages short-term risk taking and aligns long-term management goals with long-term interests of stockholders.
		Performance - Based RSUs (50%)		RSUs (50%)
		Adjusted Free Cash Flow Annual growth for each of FY21, FY22, FY23	Relative TSR from FY20 for each of FY21, FY22, FY23	Vest in three equal installments in November 2021, 2022 and 2023
		RSUs not earned for a period are forfeited. Ultimate realized value depends on stock price performance.

2021 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 2021 Performance-Based Compensation

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COMPENSATION DISCUSSION AND ANALYSIS

Overview of Performance-Based Compensation Design and Percentage Earned for FY21

Performance-based compensation for our executives for FY21 includes an annual corporate incentive plan and performance-based RSUs granted for FY19, FY20 and FY21 that were eligible to vest in FY21 if and to the extent the performance measures for FY21 were achieved.

Annual Corporate Incentive Plan

The annual Corporate Incentive Plan is intended to focus our executives and other employees on achieving performance goals tied to our annual business plan. The 2021 Corporate Incentive Plan had two performance measures, which were designed to align our executives and other employees with our strategic goals of driving top line growth and cash flow by increasing recurring revenue and expanding operating margins.

We selected ARR as a performance measure as it represents the value of our portfolio of recurring revenue contracts at a given point in time – in this case, the end of each of FY21 and FY20. We use ARR rather than revenue or recurring revenue given the revenue recognition required for on-premise subscription companies – which requires that a substantial portion of the subscription value be recognized up front when the subscription contract is booked, with the remainder being recognized ratably over the term of the subscription contract. We use ARR as a performance measure to ultimately drive recurring revenue as it provides a better line of sight to the recurring revenue potential of our portfolio.

We selected non-GAAP operating expense as the other performance measure as it provides a readily understandable line of sight for employees to measure and control spending, which is expected to ultimately contribute to cash flow growth – a measure on which our investors are focused.

The following table summarizes the performance measures for the Corporate Incentive Plan for FY21 and achievement under the plan.

FY21 Annual Corporate Incentive Plan Design and Achievement

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COMPENSATION DISCUSSION AND ANALYSIS

Long-Term Performance-Based Equity

Annual performance-based compensation for our executives includes long-term performance-based RSUs that are eligible to vest in three substantially equal annual tranches if and to the extent the performance measures for the applicable year are achieved. Accordingly, performance-based RSUs granted for FY19, FY20 and FY21 were outstanding and eligible to be earned for FY21.

The annual performance measures for each grant are set on the grant date – that is, the grants are not structured such that the Compensation Committee sets targets annually while the grant is outstanding. So, for example, for FY21, the performance measures for each of FY21, FY22 and FY23 were set in November 2020, near the beginning of FY21. For these grants using operating performance measures (rather than relative TSR), the annual targets require absolute performance above the prior year’s operating performance.

FY21 Performance-Based RSUs

The FY21 performance-based RSUs used two performance measures – Adjusted Free Cash Flow (AFCF) and relative TSR – to align our executives with our strategic goals of increasing cash flow and total shareholder return. One-half of the target performance-based RSUs was tied to the achievement of the AFCF measure and one-half was tied to the achievement of the relative TSR measure. Performance-based RSUs not earned for a period are forfeited.

We used a free cash flow measure and a relative TSR measure as free cash flow is a measure that is important to our stockholders, upon which our company is valued, and that, ultimately, is expected to increase long-term stockholder returns.

The comparison group of companies for the FY21 relative TSR performance-based RSUs is the S&P 400 Software and Services Index plus any compensation peer group companies not included in that index.

FY21 PERFORMANCE-BASED RSU DESIGN AND ACHIEVEMENT FOR FY21

CEO Performance-Based Retention RSUs

The CEO performance-based retention RSUs issued in FY20 used two performance measures – ARR and AFCF – to align our CEO with our strategic goals of increasing recurring revenue and free cash flow. One-half of the target performance-based RSUs was tied to the achievement of the ARR measure and one half was tied to the AFCF measures. Performance-based RSUs not earned for a period are forfeited. FY21 was the first performance measurement period under this award.

CEO PERFORMANCE-BASED RETENTION RSU ACHIEVEMENT FOR FY21

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COMPENSATION DISCUSSION AND ANALYSIS

Prior Period Performance-Based Equity Design and Achievement for FY21

FY20 Performance-Based RSUs

The FY20 performance-based RSUs used two performance measures – ARR and relative TSR – to align our executives with our strategic goals of increasing recurring revenue and total shareholder return. One-half of the target performance-based RSUs was tied to the achievement of the ARR measure and one half was tied to the relative TSR measure. ARR RSUs not earned for a period are forfeited; relative TSR RSUs not earned for a period may be earned for the third period (FY22). This “catch-up” feature is not included in the FY21 or FY22 relative TSR performance-based RSUs.

As the FY20 relative TSR performance-based RSUs are in the second year of the three-year performance period, the measurement period for relative TSR was two years – from October 1, 2019 to September 30, 2021. The comparison group of companies for the FY20 relative TSR performance-based RSUs is the S&P 400 Software and Services Index plus any compensation peer group companies not included in that index.

FY20 PERFORMANCE-BASED RSU ACHIEVEMENT FOR FY21

FY20 Performance-Based RSU Achievement for FY20

For FY20, the first performance period under these RSUs, the ARR performance measure was earned at 62.5% and the relative TSR performance measure was earned at 120%.

FY19 Performance-Based RSUs

The FY19 performance-based RSUs used one performance measure – AFCF – to align our executives with our strategic goal of increasing free cash flow. Performance-based RSUs not earned for this final performance period would have been forfeited.

FY19 PERFORMANCE-BASED RSU ACHIEVEMENT FOR FY21

Overall Achievement for FY19 Performance-Based RSUs

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COMPENSATION DISCUSSION AND ANALYSIS

2021 CEO Compensation Decisions

JAMES HEPPELMANN President and Chief Executive Officer
	Mr. Heppelmann has been our President and CEO since 2010, during which time he has transformed the company into a dynamic force supporting the digital transformations of industrial enterprises. When establishing his compensation for 2021, we evaluated his compensation against our compensation peer group as to individual elements and as to total target compensation and his performance. Given his compensation relative to his peers, and changes made to his compensation in 2020, we made no changes to his annual compensation for 2021.	FY21 TARGET TOTAL COMPENSATION

2021 NEO Compensation Decisions

KRISTIAN TALVITIE Executive Vice President, Chief Financial Officer
	Mr. Talvitie has been our Chief Financial Officer since May 2019. When establishing his compensation for 2021, we evaluated his 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 changes to his target compensation for 2021. Given the fact that we increased his compensation to competitive levels in May 2020, we made no changes to his compensation for 2021.	FY21 TARGET TOTAL COMPENSATION

TROY RICHARDSON President, Digital Thread Business
	Mr. Richardson joined PTC in November 2020 as our Chief Operating Officer. He was promoted to President, Digital Thread Business in November 2021. His 2021 compensation was established in connection with his employment offer and includes our standard compensation elements that are competitive with the market for his position and other compensation designed to compensate him for lost compensation opportunities at his prior employer. Those additional lost compensation elements, which are not reflected in his 2021 Target Compensation, were a $500,000 sign-on bonus, which amount was recoverable if he terminated his employment before his first anniversary, and a service-based RSU grant valued at $2.6 million, which vests in three equal annual installments over three years.	FY21 TARGET TOTAL COMPENSATION

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COMPENSATION DISCUSSION AND ANALYSIS

MICHAEL DITULLIO President, Velocity Business
	Mr. DiTullio has served in many senior Sales leadership roles since 2015. In February 2020, he was named the Executive Vice President of our SaaS Businesses. Given his performance in the role and our desire to maintain compensation parity with the market, we increased his salary by 6% and his target incentive bonus by 21% for 2021.	FY21 TARGET TOTAL COMPENSATION

AARON VON STAATS Executive Vice President, General Counsel
	Mr. von Staats has served as our General Counsel since 2003. When establishing his compensation for 2021, we evaluated his compensation against our compensation peer group as to individual elements and as to total target compensation and his performance. Given his performance and the compensation benchmark, we increased his salary for 2021 by 7% to bring his salary closer to the market median.	FY21 TARGET TOTAL 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 2021. 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.

Pearl Meyer was paid $270,204 for services to the Compensation Committee in 2021. No other compensation was paid to Pearl Meyer in 2021.

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.

Compensation Committee Calendar

Q1		Q2		Q3		Q4
⬢Determine achievement under prior period performance-based compensation. ⬢Review pay-for-performance alignment. ⬢Establish performance-based compensation plans for current year. ⬢Make annual performance-based and service-based equity awards. ⬢Review Compensation Discussion and Analysis. ⬢Review equity use and forecast expense.		⬢Review annual say-on-pay vote results and proxy advisor recommendations. ⬢Review in-season stockholder engagement results. ⬢Review compliance with director and executive stock ownership requirements. ⬢Review Compensation Committee Charter.		⬢Review and establish compensation peer group for upcoming year. ⬢Review peer group executive compensation practices. ⬢Review executive agreements and change-in-control arrangements.		⬢Review competitive assessment of executive compensation. ⬢Review pay-for-performance analysis. ⬢Review annual risk assessment of compensation practices. ⬢Review independence and retention of independent compensation consultant.

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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 2021 competitive analysis consists of 15 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 2.5x multiple of PTC’s revenue and an approximately 0.5x to 4.0x 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.

Removed	Removed	Added
Due to the acquisition of each by private equity firms.	Due to lack of business model comparability as we pivot to SaaS solutions for our products.	Due to their business model comparability as we pivot to SaaS solutions for our products.
LogMeIn, Inc. The Ultimate Software Company	Open Text Corporation Pegasystems Inc. SS&C Technologies Holdings Inc. Synopsys Inc.	Black Knight, Inc. J2 Global, Inc. Paycom Software, Inc. Proofpoint, Inc. RealPage, Inc.

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COMPENSATION DISCUSSION AND ANALYSIS

Other Important Elements of Our Compensation Program

Compensation Clawback Policy

We maintain an executive compensation clawback policy that is intended to enable us to recover performance-based compensation paid to an executive officer if such compensation is later determined to have been unearned due to a restatement of our financial results for the performance period due to the misconduct of the executive officer. The Executive Compensation Recoupment Policy is available in the Corporate Governance section of the Investor Relations page of our website at www.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 was 5x his annual salary for FY21 (6x for FY22), and for our other executive officers, that amount is 3x their respective annual salaries. All our executives meet 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. Our agreement with our CEO has a three-year term that expires on September 30, 2023. Each of the other named executive officers’ 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 under Potential Payments upon Termination or Change in Control.

The Compensation 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.

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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.

Periodic Review

The Compensation Committee reviews these agreements each year for the executive officers other than the CEO and, in light of the three-year term of the agreement with the CEO, periodically for the CEO, to determine if these agreements should be maintained, modified, or terminated. For 2021, the Committee reviewed current market practices and the terms of the executives’ agreements (other than the CEO agreement) with the Committee’s compensation consultant. Based on this review, the Committee decided that it was appropriate to maintain the agreements.

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 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 May.

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^th of the month (or the next succeeding business day if the 15^th is not a business day), other than in the months of January, April, July and October because the 15^th of 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.

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 FY21, stock-based compensation expense as a percentage of our market capitalization and dilution were both at or below the 40^th percentile.

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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 2021, 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 Compensation 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 risks associated with our compensation programs:

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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

Mark Benjamin, Chair
Janice Chaffin
Paul Lacy
Robert Schechter

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EXECUTIVE COMPENSATION

The discussion, table and footnotes below describe the total compensation for FY21 for our named executive officers (our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated 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. Our target annual compensation consists of a base salary, an incentive plan bonus (Non-Equity Incentive Plan Compensation), and annual long-term equity compensation (Stock Awards) consisting 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 retention or special purpose grants and the value of any grant modifications.

We do not provide these executives with pensions or the ability to defer compensation or any perquisites. Amounts shown in the All Other Compensation column reflect the matching cash contribution under our 401(k) Savings Plan for those participating in the plan and any additional items described in the footnotes.

Summary Compensation Table

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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 2021, these awards consisted of:

We describe our compensation decisions for 2021, including the rationale for these awards and the performance measures, in COMPENSATION DISCUSSION AND ANALYSIS above.

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EXECUTIVE COMPENSATION

2021 GRANTS OF PLAN-BASED AWARDS