PTC Inc.: 10-K Risk Factor Changes

Expectations around environmental, social, governance and other sustainability matters continue to evolve rapidly, and stakeholders – including investors, customers, employees, and regulators – are increasingly focused on our sustainability disclosures and performance against targets. If we fail, or are perceived to have failed, to make progress on our stated sustainability targets or initiatives, or if our sustainability initiatives or disclosures are or are perceived to be inadequate, inaccurate, misleading, or unlawful, our reputation could be harmed, and we could face regulatory investigations, enforcement actions, fines, penalties, and litigation, any of which could adversely affect our business, financial condition, results of operations, and prospects. Additionally, differing stakeholder views on sustainability priorities may create tension or conflict, which could adversely affect our reputation, employee morale, or investor relations. 10 10 Table of Contents Table of Contents Table of Contents Our use of artificial intelligence (“AI”) technology and the incorporation of AI technology into our products carries risks and challenges that could adversely affect our business, financial condition, results of operations, and prospects.We are increasingly incorporating AI capabilities into many of our products to enable our customers to become more agile and productive. The integration of AI into our products presents risks and challenges, including that we may be unable to integrate AI technologies into our products when or as we expect, that our customers do not appreciate or realize the anticipated benefits of such technologies, that competitors may incorporate AI into their products more quickly or effectively, that our AI-based solutions could produce inaccurate results or have other unintended consequences, or that our AI-based solutions may expose us to lawsuits, regulatory investigations, or other proceedings, and subject us to legal liability as well as brand and reputational harm, all of which could negatively affect our business, financial condition, results of operations, and prospects.We also use AI tools internally to make certain business processes more efficient. While these technologies offer significant benefits, they also create risks and challenges. Although we implement measures to address the accuracy and appropriate use of AI tools, including internal AI policies and training, these efforts may not always be successful. Inadvertent selection of AI tools that introduce bias, errors, or hallucinations, as well as any failure by our employees, contractors, or partners to adhere to our AI policies, or inappropriate use of AI, could result in violations of confidentiality obligations, laws, or regulations, jeopardize our intellectual property rights, or expose our products or business systems to defects and malware, any of which could adversely affect our business, financial condition, results of operations, and prospects.II. Risks Related to Our Intellectual PropertyWe may be unable to adequately protect our proprietary rights, which could adversely affect our competitive position, business and prospects.Our software products are proprietary. We protect our intellectual property rights in these items by relying on copyrights, trademarks, patents, and common law safeguards, including trade secret protection, as well as restrictions on disclosures and transferability contained in our agreements with other parties. Despite these measures, the laws of all relevant jurisdictions may not afford adequate protection to our software products and other intellectual property. In addition, we frequently encounter attempts by individuals and companies to pirate our software. If our measures to protect our intellectual property rights fail, others may be able to use those rights, which could reduce our competitiveness and adversely affect our business, financial condition, operating results, and prospects.Any legal action to protect our intellectual property rights that we may bring or be engaged in could be expensive, divert management’s attention from regular operations, and lead to additional claims against us, and we may not prevail, any of which could adversely affect our business, financial condition, operating results, and prospects.Many of our products and services incorporate or depend on open source software components, which are governed by various open source licenses. Some of these licenses may require, as a condition of use, modification, or distribution, that we make available the source code of our proprietary software or derivative works. While we maintain policies and procedures designed to monitor and control the use of open source software in our products and in any third-party software that is incorporated into our products, and ensure compliance with applicable licenses, these controls may not be effective in all cases. If we inadvertently use open source software in a manner that triggers such disclosure obligations, we could be required to publicly disclose portions of our proprietary code, which could result in a loss of competitive advantage and intellectual property rights, which could adversely affect our business, financial condition, operating results, and prospects.