Acquisition and transaction-related costs in the third quarter and first nine months of 2023 totaled $0.8 million and $18.5 million, respectively, compared to $6.4 million and $11.3 million in the third quarter and first nine months of 2022, respectively. These costs are classified in General and administrative expense in the accompanying Consolidated Statements of Operations.

Our results of operations include or exclude, as applicable, the results of acquired or sold businesses beginning on their respective acquisition or sale date.

On January 3, 2023, we acquired ServiceMax, Inc. pursuant to a Share Purchase Agreement dated November 17, 2022 by and among PTC, ServiceMax, Inc., and ServiceMax JV, LP. ServiceMax develops and licenses cloud-native, product-centric field service management (FSM) software, which is included within our PLM product group. The purchase price of $1,448.2 million, net of cash acquired, is payable in two installments. Upon closing of the transaction, PTC paid the first installment of $828.2 million, as adjusted for working capital, indebtedness, cash, and transaction expenses as set forth in the Share Purchase Agreement. The remaining installment of $650.0 million, of which $620.0 million represents the fair value as of the acquisition date and $30.0 million is imputed interest, is payable on October 2, 2023. The fair value of the deferred acquisition payment was calculated based on our borrowing rate at the time of the acquisition.

PTC borrowed $630 million under the revolving line of our new credit facility and $500 million under the term loan of the new credit facility to repay amounts under the prior credit facility and to pay the closing purchase price and transaction expenses related to the acquisition. ServiceMax had approximately 500 employees on the close date. In the three and nine months ended June 30, 2023, ServiceMax revenue was $46.6 million and $91.7 million, respectively, and ServiceMax earnings were immaterial.

The acquisition of ServiceMax has been accounted for as a business combination. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using a discounted cash flow model which requires the use of significant estimates and assumptions, including estimating future revenues, future costs, and an applicable discount rate. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The purchase price allocation is considered preliminary, and additional adjustments may be recorded during the measurement period as we receive additional information relevant to the value of deferred tax assets and liabilities.

The following table sets forth the preliminary purchase price allocation for ServiceMax. We have also recorded a liability of $620.0 million related to the fair value of the $650.0 million deferred purchase price payment.


(in thousands)
Goodwill(1)	$	979,349
Customer relationships		509,200
Purchased software		106,900
Accounts receivable		58,722
Trademarks		9,000
Other net assets		5,540
Net tax liability(1)		(122,654	)
Deferred revenue		(97,829	)
Total	$	1,448,228

(1)

Includes a measurement period adjustment of $4.2 million to Goodwill and $(4.2) million to Net tax liability in the third quarter of 2023 related to deferred tax liabilities.

The acquired customer relationships, purchased software, and trademarks are being amortized over useful lives of 19 years, 10 years, and 10 years, respectively, based on the expected economic benefit pattern of the assets. The acquired goodwill will not be deductible for income tax purposes. The amount of goodwill resulting from purchase price allocation reflects expected future growth as ServiceMax expands our closed-loop product lifecycle management (PLM) strategy.

The unaudited pro forma financial information in the table below summarizes the combined results of operations for PTC and ServiceMax. The unaudited pro forma financial information for all periods presented includes adjustments to reflect certain business combination effects, including: amortization of acquired intangible assets, including the elimination of related ServiceMax expenses; acquisition-related costs incurred by both parties; reversal of certain costs incurred by ServiceMax which would not have been incurred had the acquisition occurred at the beginning of fiscal 2022; interest expense under the new combined capital structure; stock-based compensation charges; and the related tax effects as though ServiceMax was acquired as of the beginning of fiscal 2022. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2022.

The unaudited pro forma financial information for the three and nine months ended June 30, 2023 and 2022 presented below combines the historical results of PTC for those periods and the historical results of ServiceMax for the three and nine months ended July 31, 2022, respectively, and the effects of the pro forma adjustments listed above.


(in thousands)	Pro forma three months ended				Pro forma nine months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Revenue	$	542,342	$	506,367	$	1,594,118	$	1,550,767
Net income	$	61,398	$	59,905	$	193,834	$	136,495

The impact from acquisitions other than ServiceMax for the reported periods if presented on a pro forma basis would not differ materially from our reported results.