[Part I - Financial Information](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's total assets were $6.67 billion as of September 30, 2023, a slight decrease from $6.69 billion at year-end 2022, with revenue increasing to $1.46 billion and net income decreasing to $225.7 million for the nine months ended September 30, 2023, while operating cash flow rose to $484.4 million [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $1,542,499 | $1,664,122 | | **Total Assets** | **$6,673,520** | **$6,687,945** | | **Total Current Liabilities** | $634,431 | $794,836 | | **Total Liabilities** | $1,666,720 | $1,822,094 | | **Total Stockholders' Equity** | **$5,006,800** | **$4,865,851** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $458,795 | $472,511 | $1,464,841 | $1,371,438 | | **Gross Profit** | $393,538 | $410,544 | $1,263,592 | $1,182,224 | | **Operating Income** | $69,816 | $123,384 | $293,135 | $332,557 | | **Net Income** | $55,502 | $95,975 | $225,650 | $265,763 | | **Diluted EPS** | $0.64 | $1.10 | $2.58 | $3.04 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Highlights for the Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $484,400 | $457,031 | | **Net cash used in investing activities** | ($220,166) | ($258,622) | | **Net cash used in financing activities** | ($232,600) | ($197,978) | | **Net increase (decrease) in cash** | $24,951 | ($35,158) | | **Cash and cash equivalents, end of period** | $639,342 | $632,509 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail revenue disaggregation, showing a shift in license types and strong maintenance growth, alongside two acquisitions totaling $222.4 million, an increase in goodwill to $3.77 billion, a $755.0 million term loan, $196.5 million in stock repurchases, and a potential $7.1 million Indian service tax liability - For the nine months ended Sep 30, 2023, subscription lease license revenue grew to **$386.5 million** from **$363.0 million** YoY, while perpetual license revenue declined to **$200.0 million** from **$212.4 million** YoY, and maintenance revenue showed strong growth, increasing to **$820.4 million** from **$742.6 million**[29](index=29&type=chunk) - In 2023, the company completed the acquisitions of Diakopto for **$83.3 million** and DYNAmore for **$139.2 million**, with total cash consideration of **$217.4 million**, adding **$113.5 million** to goodwill[35](index=35&type=chunk)[37](index=37&type=chunk)[53](index=53&type=chunk) - As of September 30, 2023, the company had **$755.0 million** of borrowings outstanding under its term loan, with a carrying value of **$753.8 million**, and an interest rate of **6.37%** in effect for Q4 2023[69](index=69&type=chunk)[70](index=70&type=chunk) - The company repurchased **650,000 shares** for a total cost of **$196.5 million** during the nine months ended September 30, 2023, with **1.1 million shares** remaining available for repurchase as of the period end[75](index=75&type=chunk) - A potential contingency exists from several pending service tax audits in India, which could result in tax charges and liabilities of **$7.1 million**, though no reserve has been recorded as the charge is not considered probable at this time[83](index=83&type=chunk) [Management's Discussion and Analysis (MD&A)](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports a 6.8% GAAP revenue increase for the first nine months of 2023, driven by maintenance and subscription lease growth, though Q3 revenue declined 2.9% YoY due to U.S. export restrictions, while Annual Contract Value (ACV) grew 10.4% in constant currency in Q3, and operating expenses increased, leading to lower operating and net income for both the three and nine-month periods [Business Overview and Strategy](index=19&type=section&id=Business%20Overview%20and%20Strategy) Ansys develops and markets engineering simulation software globally, with its 'Pervasive Insights' strategy focusing on deepening and extending simulation use across the product lifecycle, driven by expanding product offerings, increasing user base, and handling more complex computations, fueled by key market trends such as electrification, autonomy, connectivity, IIoT, and sustainability - Ansys's business strategy, 'Pervasive Insights,' aims to expand simulation use through three growth vectors: more products, more users, and more computations[87](index=87&type=chunk) - Market growth is driven by customer needs for innovation and efficiency, fueled by key industry trends such as electrification, autonomy, connectivity, the industrial internet of things, and sustainability[89](index=89&type=chunk) [Financial Performance Overview](index=20&type=section&id=Financial%20Performance%20Overview) In Q3 2023, GAAP revenue decreased by 2.9% and operating income fell by 43.4% YoY, while for the nine-month period, GAAP revenue grew 6.8% but operating income declined 11.9%, with performance affected by new U.S. export restrictions on China, which negatively impacted Q3 revenue and ACV by $20 million, despite Annual Contract Value (ACV) growing 10.4% in constant currency in Q3 GAAP & Non-GAAP Performance vs. Prior Year | Metric | Q3 2023 (GAAP) | Q3 2023 (Non-GAAP) | 9 Months 2023 (GAAP) | 9 Months 2023 (Non-GAAP) | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | (2.9)% | (3.1)% | 6.8% | 6.3% | | **Operating Income** | (43.4)% | (19.5)% | (11.9)% | 0.6% | | **Diluted EPS** | (41.8)% | (20.3)% | (15.1)% | (1.0)% | - New U.S. Department of Commerce restrictions on sales to certain Chinese entities negatively impacted revenue and Annual Contract Value (ACV) by **$20.0 million** in Q3 2023, with an expected full-year headwind of **$25.0 million**[96](index=96&type=chunk) Annual Contract Value (ACV) Growth (in thousands) | Period | ACV (Actual) | ACV (Constant Currency) | YoY Change (Actual) | YoY Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | **Q3 2023** | $457,549 | $451,779 | 11.8% | 10.4% | | **9 Months 2023** | $1,345,305 | $1,355,529 | 10.8% | 11.7% | [Results of Operations](index=26&type=section&id=Results%20of%20Operations) For Q3 2023, total revenue decreased 2.9% YoY to $458.8 million, driven by declines in subscription lease and perpetual licenses, partially offset by increased maintenance revenue, while for the nine-month period, revenue grew 6.8% to $1.46 billion, led by maintenance revenue, with operating expenses rising due to higher personnel and stock-based compensation costs, resulting in lower operating income and a decreased effective tax rate for both periods Q3 Revenue by Type (in thousands) | Revenue Type | Q3 2023 | Q3 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Subscription lease licenses | $103,573 | $136,489 | (24.1)% | | Perpetual licenses | $58,849 | $72,417 | (18.7)% | | Maintenance and service | $296,373 | $263,605 | 12.4% | | **Total Revenue** | **$458,795** | **$472,511** | **(2.9)%** | Nine-Month Revenue by Type (in thousands) | Revenue Type | 9M 2023 | 9M 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Subscription lease licenses | $386,494 | $362,977 | 6.5% | | Perpetual licenses | $199,977 | $212,355 | (5.8)% | | Maintenance and service | $878,370 | $796,106 | 10.3% | | **Total Revenue** | **$1,464,841** | **$1,371,438** | **6.8%** | - Q3 selling, general, and administrative (SG&A) expenses increased **11.0%** YoY to **$194.6 million**, and R&D expenses increased **14.0%** to **$123.2 million**, primarily due to higher salaries and stock-based compensation[125](index=125&type=chunk) - The effective tax rate for Q3 2023 was **11.3%**, down from **18.7%** in Q3 2022, and for the nine-month period, the rate was **15.6%**, down from **16.7%** in the prior year[130](index=130&type=chunk)[148](index=148&type=chunk) [Non-GAAP Results](index=35&type=section&id=Non-GAAP%20Results) The company provides non-GAAP metrics to supplement GAAP results, adjusting for items like stock-based compensation, amortization of acquired intangibles, business combination expenses, and historical deferred revenue write-downs, with non-GAAP diluted EPS at $1.41 for Q3 2023 (vs GAAP $0.64) and $4.85 for the nine months (vs GAAP $2.58), aiming to provide a clearer view of ongoing operational performance - Non-GAAP results exclude items such as stock-based compensation, amortization of acquired intangibles, and expenses related to business combinations to better reflect ongoing operational performance[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) GAAP to Non-GAAP Reconciliation Highlights (Q3 2023) | Metric (in thousands) | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | **Operating Income** | $69,816 | $86,421 | $156,237 | | **Net Income** | $55,502 | $67,395 | $122,897 | | **Diluted EPS** | $0.64 | $0.77 | $1.41 | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2023, the company held $639.5 million in cash, cash equivalents, and short-term investments, with net cash from operations for the nine-month period at $484.4 million, primarily used for $197.8 million in acquisitions and $196.5 million in stock repurchases, and the company believes existing liquidity, including its $755.0 million term loan and $500.0 million revolving credit facility, is sufficient to meet needs for at least the next twelve months - Cash and cash equivalents increased to **$639.5 million** at Sep 30, 2023 from **$614.6 million** at year-end 2022, with **48.9%** of this cash held by foreign subsidiaries[169](index=169&type=chunk)[171](index=171&type=chunk) - For the nine months ended Sep 30, 2023, cash from operations was **$484.4 million**, cash used in investing was **$220.2 million** (primarily for acquisitions), and cash used in financing was **$232.6 million** (primarily for stock repurchases)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - The company believes existing cash, cash from operations, and access to its **$500.0 million** revolving loan facility will be sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[182](index=182&type=chunk) [Market Risk Disclosures](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to foreign currency exchange risk and interest rate risk, with currency fluctuations having a mixed impact on operating income, and a hypothetical 10% strengthening of the U.S. Dollar decreasing nine-month revenue by $63.6 million, while a 100 basis point increase in interest rates on its $755.0 million variable-rate term loan would raise annual interest expense by $7.7 million - The company is exposed to foreign currency risk, where a hypothetical **10%** strengthening of the U.S. Dollar would have decreased revenue by **$63.6 million** and operating income by **$22.6 million** for the nine months ended September 30, 2023[188](index=188&type=chunk) - The company is exposed to interest rate risk on its **$755.0 million** of variable-rate debt, where a hypothetical **100 basis point** increase in interest rates would increase annual interest expense by **$7.7 million**[190](index=190&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the third quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[192](index=192&type=chunk) - No changes in internal control over financial reporting occurred during Q3 2023 that materially affected, or are reasonably likely to materially affect, internal controls[194](index=194&type=chunk) [Part II - Other Information](index=46&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various claims and legal proceedings in the ordinary course of business, with management believing the resolution of pending matters is not expected to have a material adverse effect on its financial position, results of operations, or cash flows - The company states that the resolution of pending legal matters is not expected to have a material adverse effect on its financial condition[196](index=196&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) The company highlights a significant risk related to expanding U.S. trade restrictions, particularly export controls to China, which have already limited sales to certain Chinese entities, elongated transaction cycles, and could continue to adversely affect business and financial results, with potential violations leading to significant penalties - The company is subject to expanding U.S. export control restrictions, particularly regarding China, which have limited and could continue to limit its ability to sell products and services to certain customers[199](index=199&type=chunk) - These trade restrictions have led to elongated transaction cycles and may result in reduced sales or delays in delivery, adversely affecting business and financial statements[199](index=199&type=chunk) - Violations of trade restrictions can result in significant penalties, including monetary fines, denial of export privileges, and reputational harm[201](index=201&type=chunk)

ANSYS, Inc. (NASDAQ:ANSS) Q2 2023 Earnings Conference Call August 3, 2023 8:30 AM ET Company Participants Kelsey DeBriyn - VP, IR Ajei Gopal - President and CEO Nicole Anasenes - CFO Conference Call Participants Joe Vruwink - Baird Jay Vleeschhouwer - Griffin Securities Andrew Obin - Bank of America Tyler Radke - Citi Andrew DeGasperi - Berenberg Steve Tusa - JPMorgan Operator Ladies and gentlemen, thank you for standing by, and welcome to the ANSYS Second Quarter 2023 Earnings Conference Call. With us toda ...

Revenue Performance - Total revenue for the six months ended June 30, 2023, was $1,006,046 thousand, compared to $898,927 thousand for the same period in 2022, representing an increase of 11.9%[20] - Total revenue for the six months ended June 30, 2023 was $1,006.046 million, a 12% increase from $898.927 million in 2022[39] - Revenue growth for the three months ended June 30, 2023 was 4.8% GAAP and 4.4% non-GAAP, while for the six months ended June 30, 2023, it was 11.9% GAAP and 11.2% non-GAAP[103] - Revenue for the quarter ended June 30, 2023 increased by 4.8% (5.5% in constant currency) to $496.6 million compared to the same period in 2022[123] - Revenue for the six months ended June 30, 2023, increased by 11.9% to $1,006,046 thousand compared to the same period in 2022, with subscription lease license revenue growing by 24.9%[145] - Total GAAP revenue for the period was $473.85 million, with a gross profit of $411.36 million, representing a gross margin of 86.8%[167] - Non-GAAP revenue for the period was $475.89 million, with a non-GAAP gross profit of $433.10 million, representing a non-GAAP gross margin of 91.0%[167] - For the six months ended June 30, 2023, total GAAP revenue was $1.01 billion, with a gross profit of $870.05 million, representing a gross margin of 86.5%[169] - Non-GAAP revenue for the six months ended June 30, 2023 was $1.01 billion, with a non-GAAP gross profit of $916.41 million, representing a non-GAAP gross margin of 91.1%[169] Net Income and Earnings - Net income for the six months ended June 30, 2023, was $170,148 thousand, slightly higher than $169,788 thousand for the same period in 2022[20] - Net income for the six months ended June 30, 2023 was $98.8 million, compared to $70.988 million for the same period in 2022[30] - Net income for the six months ended June 30, 2023, was $170.1 million, with basic and diluted earnings per share of $1.96 and $1.95, respectively[57] - Net income for Q2 2023 decreased to $69,526 thousand, compared to $98,800 thousand in Q2 2022, with diluted earnings per share declining from $1.13 to $0.80[143] - Net income for the first six months of 2023 was $170.15 million, with diluted earnings per share of $1.95, compared to $169.79 million and $1.94 per share in the same period in 2022[162] - Total GAAP net income was $98.80 million, with diluted EPS of $1.13, while non-GAAP net income was $154.58 million, with non-GAAP diluted EPS of $1.77[167] - Total GAAP net income for the six months ended June 30, 2023 was $170.15 million, with diluted EPS of $1.95, while non-GAAP net income was $301.09 million, with non-GAAP diluted EPS of $3.45[169] Operating Income and Expenses - Operating income for the three months ended June 30, 2023 decreased by 25.3% GAAP and 6.8% non-GAAP, but increased by 6.8% GAAP and 12.1% non-GAAP for the six months ended June 30, 2023[103] - Operating income for Q2 2023 decreased by 25.3% to $95,624 thousand compared to Q2 2022, primarily due to increased operating expenses[136] - Operating income grew by 6.8% to $223.32 million in the first six months of 2023, with an operating margin of 22.2%, down from 23.3% in the same period in 2022[154] - Total GAAP operating income was $128.01 million, representing an operating margin of 27.0%, while non-GAAP operating income was $193.63 million, representing a non-GAAP operating margin of 40.7%[167] - Total GAAP operating income for the six months ended June 30, 2023 was $223.32 million, representing an operating margin of 22.2%, while non-GAAP operating income was $383.46 million, representing a non-GAAP operating margin of 38.1%[169] Cash Flow and Financial Position - Net cash provided by operating activities for the six months ended June 30, 2023, was $323,632 thousand, slightly lower than $329,880 thousand in the same period in 2022[26] - Net cash provided by operating activities decreased by $6.2 million (1.9%) to $323.6 million for the six months ended June 30, 2023[188] - Net cash used in investing activities decreased by $36.0 million (14.3%) to $215.6 million for the six months ended June 30, 2023[189] - Net cash used in financing activities increased by $36.4 million (17.5%) to $244.0 million for the six months ended June 30, 2023, primarily due to increased stock repurchases[190] - Cash, cash equivalents, and short-term investments decreased by $136.6 million (22.2%) from $614.6 million as of December 31, 2022, to $478.0 million as of June 30, 2023[184] - Domestic cash holdings decreased to 29.9% of total cash, while foreign cash holdings increased to 70.1% as of June 30, 2023[186] Acquisitions and Intangible Assets - The company completed the acquisition of Diakopto for $83.3 million and DYNAmore for $139.2 million in 2023 to expand its simulation portfolio[45] - Acquisition-related expenses for the six months ended June 30, 2023 were $4.3 million[46] - The fair value of consideration for the combined acquisitions in 2023 was $222.448 million, including $217.392 million in cash[47] - Developed software and core technologies acquired in 2023 have a weighted-average useful life of 5 years and were valued using the relief-from-royalty or multiperiod excess earnings method[51] - Trade names acquired in 2023 have a weighted-average useful life of 5 years and were valued using the relief-from-royalty method with a royalty rate of 1.0% to 2.0%[51] - The company completed acquisitions totaling $401.7 million in 2022, with a net purchase price of $390.8 million after deducting cash acquired[52] - Intangible assets subject to amortization totaled $883.7 million as of June 30, 2023, with estimated future amortization expenses of $53.3 million for the remainder of 2023 and $112.0 million for 2024[60] - Goodwill increased from $3.66 billion at the beginning of 2023 to $3.79 billion by June 30, 2023, due to acquisitions and currency translation adjustments[63] Foreign Currency Impact - Foreign currency translation adjustments for the six months ended June 30, 2023, were $21,287 thousand, compared to a loss of $70,735 thousand in the same period in 2022[22] - The company's revenue and operating income were negatively impacted by a stronger U.S. Dollar, with adverse impacts of $3.452 million on revenue and $1.740 million on operating income for the three months ended June 30, 2023[105] - The U.S. Dollar was 1.5% stronger against foreign currencies in Q2 2023 compared to Q2 2022, resulting in a $3.5 million adverse currency impact[123][124] - The impact of currency fluctuations resulted in a $17,343 thousand adverse effect on revenue for the six months ended June 30, 2023, with the Japanese Yen contributing the largest negative impact[147] - The U.S. Dollar was 4.0% stronger against foreign currencies for the six months ended June 30, 2023, resulting in a $17.3 million adverse impact on revenue[200][201] - A hypothetical 10% strengthening in the U.S. Dollar would decrease revenue by $43.8 million and operating income by $15.2 million for the six months ended June 30, 2023[202] Stock-Based Compensation and Share Repurchases - Stock-based compensation expense for the six months ended June 30, 2023, was $100,472 thousand, up 33.7% from $75,149 thousand in the same period in 2022[26] - The company repurchased 650,000 shares during the six months ended June 30, 2023 at an average price of $302.34 per share, for a total cost of $196.5 million[84] - The company repurchased 650,000 shares at an average price of $302.34 per share, totaling $196.5 million, during the six months ended June 30, 2023[194] - Stock-based compensation expense for the six months ended June 30, 2023 was $100.47 million, representing 10.0% of revenue[169] Legal and Regulatory Matters - The company is subject to various legal proceedings, including commercial disputes, labor matters, and intellectual property claims, which could have adverse financial or reputational impacts[210] - Resolution of pending legal matters is not expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[210] Market and Strategic Outlook - The company's strategy of Pervasive Insights focuses on deepening the use of simulation in its core market, extending accessibility to a broader set of users, and driving growth through more products, users, and computations[96] - The engineering simulation software market is growing, driven by trends such as electrification, autonomy, connectivity, the industrial internet of things, and sustainability[98] - The company plans to continue its strategic and disciplined acquisition strategy to grow its business and extend simulation into other ecosystems and customer R&D workflows[99] Regional Revenue Performance - Revenue from the United States for the six months ended June 30, 2023 was $457.1 million, up from $384.8 million in the same period in 2022[88] - Americas region revenue grew by 12.5% (12.5% in constant currency) for the three months ended June 30, 2023[114] - Asia-Pacific region revenue decreased by 3.2% but grew by 0.3% in constant currency for the three months ended June 30, 2023[114] - International revenue accounted for 57.6% of total revenue in Q2 2023, down from 60.5% in Q2 2022[127] - International revenue accounted for 54.6% of total revenue in the first six months of 2023, down from 57.2% in the same period in 2022, while domestic revenue increased to 45.4% from 42.8%[150] Cost of Sales and Gross Profit - Total cost of sales for Q2 2023 was $68,340 thousand, representing 13.8% of revenue, an increase of 9.4% compared to Q2 2022[132] - Gross profit for Q2 2023 was $428,259 thousand, an increase of 4.1% compared to Q2 2022, driven by higher revenue partially offset by increased cost of sales[132] - Total cost of sales increased by 6.9% to $135.99 million in the first six months of 2023, driven by higher software license costs ($3.6 million increase in third-party royalties) and amortization expenses ($5.03 million increase due to newly acquired intangible assets)[152] - Gross profit increased by 12.7% to $870.05 million in the first six months of 2023, with a gross margin of 86.5%, up from 85.8% in the same period in 2022[152] Research and Development Expenses - Research and development expenses for the six months ended June 30, 2023, were $245,358 thousand, up 14.5% from $214,215 thousand in the same period in 2022[20] - Research and development expenses increased by 14.8% to $125,023 thousand in Q2 2023, driven by higher salaries and stock-based compensation[136] Tax and Interest Expenses - The effective tax rate for Q2 2023 decreased to 17.2% from 19.6% in Q2 2022, primarily due to lower U.S. federal tax expense on foreign earnings and increased R&D credits[142] - The effective tax rate increased to 16.9% in the first six months of 2023, up from 15.5% in the same period in 2022, primarily due to decreased benefits related to stock-based compensation[160] - Interest income increased significantly to $7.5 million in the first six months of 2023, compared to $0.8 million in the same period in 2022, driven by higher interest rates[156] - Interest income was $7.5 million, and interest expense was $22.3 million for the six months ended June 30, 2023[203] Lease and Debt Obligations - The company's lease liability cost for the six months ended June 30, 2023, was $14.1 million, with total lease costs reaching $16.7 million[72] - Operating cash flows from operating leases for the three months ended June 30, 2023 were $(6.9 million), compared to $(6.6 million) in the same period in 2022[73] - The weighted-average remaining lease term of operating leases as of June 30, 2023 was 6.6 years, down from 7.3 years as of June 30, 2022[73] - Total future lease payments as of June 30, 2023 were $142.7 million, with a present value of $128.5 million after discounting[74] - The company had $755.0 million in borrowings outstanding under the term loan facility as of June 30, 2023, with a carrying value of $753.7 million[79] - The weighted average interest rate under the 2022 Credit Agreement was 5.88% for the three months ended June 30, 2023, up from 1.90% in the same period in 2022[78] - Outstanding term loan borrowings of $755.0 million as of June 30, 2023, with variable interest rates based on Term SOFR or base rate plus applicable margin[204] - A hypothetical 100 basis points increase in interest rates would result in an additional $7.7 million in interest expense over the next twelve months[204] Employee and Workforce - The company employed 6,000 people as of June 30, 2023, up from 5,600 as of December 31, 2022[95] Financial Controls and Reporting - Disclosure controls and procedures evaluated as effective by the Chief Executive Officer and Chief Financial Officer[206] - Financial statements and other financial information fairly present the company's financial condition, results of operations, and cash flows[207] - No changes in internal control over financial reporting during the three months ended June 30, 2023, that materially affected financial reporting[208] Capital Spending and Market Risk - The company plans capital spending of $28.0 million to $38.0 million during fiscal year 2023, compared to $24.4 million spent in fiscal year 2022[189] - No material changes in market risk since December 31, 2022[204] Deferred Revenue and Backlog - Deferred revenue balance as of June 30, 2023 was $396.506 million, compared to $383.622 million in 2022[41] - Total revenue allocated to remaining performance obligations as of June 30, 2023 was $1,295.798 million, with $810.219 million expected to be recognized in the next 12 months[42] - Deferred revenue and backlog as of June 30, 2023, totaled $1,295,798 thousand, with $810,219 thousand classified as current and $485,579 thousand as long-term[129] Maintenance and Service Revenue - Maintenance and service revenue for the six months ended June 30, 2023, was $581,997 thousand, an increase of 9.3% from $532,501 thousand in the same period in 2022[20] - Maintenance revenue grew by 10.5% (11.1% in constant currency) to $273.7 million, driven by existing customer base[123] - Maintenance revenue for the six months ended June 30, 2023, increased by 9.6% to $542,285 thousand, driven by growth in maintenance associated with lease licenses[145] - Service revenue increased by 4.5% (4.3% in constant currency) to $18.0 million in Q2 2023[123] Software Licenses Revenue - Software licenses revenue for the six months ended June 30, 2023, was $424,049 thousand, up 15.7% from $366,426 thousand in the same period in 2022[20] - Perpetual license revenue decreased by 5.5% (4.9% in constant currency) to $69.9 million due to a 4.5% decrease in deal volume and 1.0% decrease in average deal size[123] - Subscription lease licenses revenue remained stable at $135.0 million, with a 1.1% increase in constant currency[123] Comprehensive Income and Other Financial Metrics - Comprehensive income for the six months ended June 30, 2023, was $191,435 thousand, significantly higher than $99,053 thousand in the same period in 2022[22] - The company's Annual Contract Value (ACV) for the three months ended June 30,

ANSYS, Inc. (NASDAQ:ANSS) Q1 2023 Earnings Conference Call May 4, 2023 8:30 AM ET Company Participants Alex Di Ruzza - Investor Relations Manager Ajei Gopal - President & Chief Executive Officer Nicole Anasenes - Chief Financial Officer & Senior Vice President-Finance\ Conference Call Participants Jay Vleeschhouwer - Griffin Securities Jason Celino - KeyBanc Capital Markets Steve Tusa - JPMorgan Ken Wong - Oppenheimer Mike Richards - Stifel Joe Vruwink - Baird Blair Abernethy - Rosenblatt Securities Josh Ti ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 0-20853 ANSYS, Inc. | --- | --- | --- | |---------------------------------------------------------------------- ...

Financial Data and Key Metrics Changes - Q4 2022 was the largest quarter in ANSYS's history, exceeding financial guidance across all key metrics including ACV, revenue, operating margin, and earnings per share [5][20] - Full year 2022 ACV reached $2.032 billion, surpassing the $2 billion target set in 2019, with a growth of 14% in constant currency [6][24] - Q4 total revenue was $694.7 million, growing 10% in constant currency, while full year revenue was $2.073 billion, growing 13% in constant currency [27][28] - Operating margin for Q4 was 48%, with a full year operating margin of 42% [28][29] - EPS for Q4 was $3.09, and for the full year, it was $7.99 [28][29] Business Line Data and Key Metrics Changes - Subscription lease ACV grew 18% or 24% in constant currency, crossing over $1 billion to $1.2 billion, representing 57% of total ACV for the full year [26] - Recurring ACV grew 9% or 15% in constant currency year-over-year, accounting for 81% of total ACV [26] Market Data and Key Metrics Changes - The Americas region recorded over $1 billion in ACV for the first time, contributing to strong overall performance across all regions [7] - Growth was broad-based across industries, with significant contributions from high-tech, semiconductor, aerospace, defense, and automotive sectors [6][21] Company Strategy and Development Direction - ANSYS aims for 12% constant currency ACV compounded annual growth from 2022 to 2025, with a focus on subscription leases as a key growth driver [33][34] - The company is investing in five key areas: numerics, AI and machine learning, high-performance computing, cloud and experience, and digital engineering [55][58] - Recent acquisitions are expected to enhance product offerings and address complex customer challenges, particularly in the automotive and aerospace sectors [16][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve future milestones despite economic uncertainties, citing robust end markets and strong customer relationships [21][22] - The outlook for 2023 includes expectations for ACV growth between $2.265 billion and $2.335 billion, reflecting continued demand across customer segments [33][34] Other Important Information - ANSYS was named one of America's most responsible companies for 2023, highlighting its commitment to sustainability and efficiency [18] - The company repurchased approximately 725,000 shares for around $206 million in 2022, indicating a strong capital return strategy [31] Q&A Session Summary Question: What are the underlying drivers for growth in the aerospace and defense segment? - Management noted that aerospace customers face complex challenges, including trends in lightweighting, energy efficiency, and innovation in electric engines, contributing to robust demand [40][41] Question: Can you elaborate on the unlevered operating cash flow guidance? - Management indicated that the strong cash flow performance in 2022 reflects operational momentum, with expectations for continued growth in 2023 [42][44] Question: What are the drivers of ACV growth in 2022 and 2023? - Management highlighted broad-based growth across customer types and geographies, with significant contributions from subscription leases and acquisitions [46][49] Question: How do you view the mix of simulation being done on public cloud versus traditional setups? - Management stated that there is a clear trend towards public cloud usage for high-performance computing applications, with ongoing investments in cloud capabilities [72][74] Question: What are the drivers behind the strong performance in Germany and Japan? - Management attributed the outperformance to deep relationships with automotive customers and ongoing innovations in electronic motor design [76]

Customer and Revenue Distribution - No single customer accounted for more than 5% of the company's revenue in 2022, 2021, or 2020[51] - International revenue represented 54.9% of total revenue in 2022, with the largest geographic revenue bases being the United States, Germany, and Japan[94] - Channel partners accounted for 23.9%, 23.7%, and 22.2% of revenue in 2022, 2021, and 2020, respectively, with significant dependence in APAC and EMEA regions[123] Strategic Partnerships and Alliances - The company has strategic alliances with leading CAD vendors like Autodesk, PTC, and Siemens Digital Industries, enabling direct data transfer between CAD systems and its products[53] - A partnership with Microsoft was executed to develop Ansys Access powered by Azure, enabling customers to launch Ansys products using Azure and connect third-party tools[54] - Ansys Gateway powered by AWS was launched in 2022, facilitating seamless access and deployment of Ansys products on AWS[55] - The company has technical relationships with Intel and AMD, optimizing solver performance and scalability, with AMD GPU acceleration providing speedups of up to 8x or 14x depending on the application[56] - The company has over 350 technology partnerships, extending the depth and breadth of its technology offerings across various solution areas[57] Financial Metrics and Risks - Deferred revenue and backlog as of December 31, 2022, totaled $1,416,846 thousand, with $846,312 thousand classified as current[71][72] - Outstanding borrowings of $755.0 million under a term loan facility maturing on June 30, 2027, with a $500.0 million revolving loan facility including a $50.0 million sublimit for letters of credit[155] - Consolidated net leverage ratio must not exceed 3.50 to 1.00, with a temporary increase to 4.00 to 1.00 allowed for qualified acquisitions of at least $250.0 million[155] - U.S. Dollar was 11.4% stronger against foreign currencies in 2022 compared to 2021, resulting in a net adverse impact of $112.7 million on revenue[261][262] - Currency fluctuations decreased operating income by $63.7 million in 2022 compared to 2021[262] - A hypothetical 10% strengthening in the U.S. Dollar would decrease revenue by $99.2 million and operating income by $47.9 million[263] - Interest income was $5.7 million and interest expense was $22.7 million for the year ended December 31, 2022[264] - A hypothetical 100 basis point increase in interest rates would increase interest expense by $7.7 million based on outstanding borrowings of $755.0 million[266] Workforce and Employee Engagement - As of December 31, 2022, the company employed 5,600 people, with 45% located in the Americas, 28% in EMEA, and 27% in APAC[74] - The company's global employee gender diversity as of December 31, 2022, was 75% male, 23% female, and 2% other/not indicated[76] - The company's U.S.-based employee racial/ethnic diversity as of December 31, 2022, was 55% White, 25% Asian, 2% Hispanic or Latino, 2% Black or African American, 1% Other, and 15% Not Indicated[78] - Annual turnover rate for 2022 was 10%, with voluntary turnover at 8%[81] - Employee engagement score in 2022 remained steady compared to 2021, exceeding external norms across all dimensions of engagement[86] - 92% of employees responded favorably to managing work responsibilities with flexibility in a remote and hybrid work environment[85] - Over half of employees receive equity grants annually, aligning long-term financial interests with stockholders[83] - Global internship, co-op, and new college graduate programs emphasize hiring emerging talent, with outreach events doubled in volume over the last year[79] - Annual talent reviews, succession planning, and leadership development programs were implemented in 2022, including individualized coaching and high-potential assessments[80] Operational and Compliance Risks - Compliance with global data privacy laws requires substantial resources and may increase costs due to evolving regulations[106] - Non-compliance with privacy laws could result in monetary penalties, reputational damage, and increased expenses to achieve compliance[107] - The company operates in high-risk environments for corruption, exposing it to financial and reputational risks despite having anti-corruption compliance programs[109] - COVID-19 has led to remote and hybrid work arrangements, increasing risks of cyber incidents and potential delays in work due to limited access to technology[111] - Acquisitions may pose risks such as integration challenges, failure to achieve synergies, and potential impairment of goodwill or intangible assets[126] - The company is undergoing digital transformation, but delays or failures in implementation could lead to increased costs and write-offs of capitalized expenditures[129] - The software business faces long sales cycles, making accurate short- and long-term sales forecasts challenging and subject to external economic factors[133] - Product quality issues or non-compliance with ISO 9001 standards could result in reputational damage and adverse impacts on financial statements[132] - The company faces competitive pressures, including price reductions and increased operating costs, which could lower revenues, margins, and net income[117] - Research and development expenses may not correlate with revenue, potentially leading to declines in operating profits if investments do not yield expected returns[120] - Global market disruptions may significantly impact the accuracy of sales forecasts, potentially leading to variations between actual sales and forecasts, which could adversely affect the company's business and financial statements[135] - The company relies on intellectual property protection, but software piracy and inadequate enforcement in certain countries may lead to revenue loss[138] - Cybersecurity risks, including cyberattacks and data breaches, could result in reduced revenue, increased costs, and reputational damage[142] - The company uses third-party service providers for cloud-based products, exposing it to risks such as service interruptions and security vulnerabilities[147] - Foreign exchange rate fluctuations, particularly involving the Euro and Japanese Yen, may adversely affect the company's consolidated financial statements[149] - Changes in tax laws, including the OECD's Pillar Two proposals, could impact the company's tax provision, net income, and cash flows[152] - The company faces risks related to third-party software licenses, including potential disruptions in product development and customer usage if licenses are not renewed or obtained on reasonable terms[141] - The company has experienced cybersecurity attacks in the past, and while none have had a material impact, future attacks could disrupt operations and harm financial performance[145] Environmental, Social, and Governance (ESG) - The company has established greenhouse gas emission reduction targets, but achieving these targets is subject to external factors such as evolving regulations, technological developments, and financing availability[136] - Environmental, social, and governance (ESG) considerations are increasingly important to stakeholders, and failure to meet ESG targets or comply with regulations could result in legal proceedings and reputational harm[137] Trade and Export Control Risks - Trade restrictions and export control regulations, particularly involving China, could limit the company's ability to sell products and services to certain customers[97]

Financial Data and Key Metrics Changes - Q3 ACV was $409.3 million, growing 12% year-over-year or 20% in constant currency [17] - Total revenue for Q3 was $473.7 million, an increase of 6% or 15% in constant currency, exceeding guidance [18] - Operating margin for Q3 was 41%, better than guidance, with gross margin at 91.1% [19] - Q3 EPS was $1.77, also better than guidance [19] - Operating cash flows totaled $127.2 million for Q3, with unlevered operating cash flows at $132 million [20] Business Line Data and Key Metrics Changes - The largest contract in Q3 was a $59 million agreement in the high tech and semiconductor space [7] - Recurring ACV grew 16% in constant currency year-over-year, representing 79% of total ACV in Q3 [18] - Strong revenue growth was reported from Asia Pacific and EMEA, with double-digit growth in constant currency [19] Market Data and Key Metrics Changes - ANSYS has a balanced geographic distribution, with nearly 50% of business from the Americas and strong growth from Asia Pacific and EMEA [8] - The company reported strong performance across various industries, including high tech, aerospace, and automotive [6][8] Company Strategy and Development Direction - ANSYS is focusing on three vectors of growth: more products, more users, and more computations [10] - The company is enhancing its product portfolio and expanding its cloud offerings, such as the ANSYS Gateway powered by AWS [14] - ANSYS aims to attract new customers and displace competitor technology through its diverse product offerings and strong customer relationships [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's resilience and growth potential, citing strong customer demand and a robust product portfolio [16][20] - The company is operationally raising its full-year guidance for ACV, revenue, EPS, and operating cash flow due to strong Q3 performance [20][21] - Management noted that despite macroeconomic challenges, customers continue to invest in R&D, relying on ANSYS for product development [51][52] Other Important Information - ANSYS has been recognized as the 13th most loved workplace in the US, reflecting its strong company culture [16] - The company has a significant presence in over 1,600 universities, promoting simulation technology among students [56] Q&A Session Summary Question: How does ANSYS capture the value from increased computational power used by customers? - ANSYS monetizes through product licensing, providing access to technology and high-performance computing capabilities [28] Question: What factors contributed to the company's ability to exceed guidance despite macro challenges? - The transformation of the business model and strong product capabilities have allowed ANSYS to maintain resilience and support customer needs [30][31] Question: Can you elaborate on the competitive displacement opportunities? - Competitive displacements are challenging but are driven by the strength of ANSYS's portfolio and recent innovations [32][34] Question: What is the outlook for Q4 given the strong Q3 performance? - Q4 guidance reflects normal quarter-to-quarter dynamics, with no significant macroeconomic issues impacting the outlook [45][50] Question: How is ANSYS encouraging broader engineering adoption of simulation software? - ANSYS has made products easier to use, invested in academic partnerships, and leveraged high-performance computing to broaden user adoption [55][57]

Start Time: 08:30 January 1, 0000 9:29 AM ET ANSYS, Inc. (NASDAQ:ANSS) Q2 2021 Earnings Conference Call August 05, 2021, 08:30 AM ET Company Participants Ajei Gopal - President and CEO Nicole Anasenes - SVP and CFO Kelsey DeBriyn - VP, Investor and Government Relations Conference Call Participants Ken Wong - Guggenheim Securities Gal Munda - Berenberg Adam Borg - Stifel Jay Vleeschhouwer - Griffin Securities Andrew Obin - Bank of America Merrill Lynch Saket Kalia - Barclays John Walsh - Credit Suisse Blair ...

ANSYS, Inc. (NASDAQ:ANSS) Q1 2021 Earnings Conference Call May 6, 2021 8:30 AM ET Company Participants Kelsey DeBriyn - Head, IR & Government Affairs Ajei Gopal - President, CEO & Director Nicole Anasenes - CFO & SVP, Finance Conference Call Participants Gal Munda - Berenberg Jay Vleeschhouwer - Griffin Securities Andrew Obin - Bank of America Merrill Lynch John Walsh - Crédit Suisse Tyler Radke - Citigroup Joseph Vruwink - Robert W. Baird & Co. Adam Borg - Stifel, Nicolaus & Company Jackson Ader - JPMorgan ...