ANSYS(ANSS) - 2024 Q2 - Quarterly Report

Revenue and Financial Performance - Total revenue for the six months ended June 30, 2024, was $1,060.7 million, compared to $1,006.0 million in the same period of 2023, representing a 5.4% increase[19] - Total revenue for the three months ended June 30, 2024 was $594.1 million, a 19.6% increase from $496.6 million in the same period in 2023[39] - Revenue increased by 19.6% for the three months ended June 30, 2024, and by 5.4% for the six months ended June 30, 2024[104] - Revenue for Q2 2024 increased by 19.6% YoY to $594.1 million, or 21.6% in constant currency[129] - Total revenue for the six months ended June 30, 2024, increased by 5.4% to $1.06 billion, or 6.8% in constant currency[149][150] - Revenue growth in the Americas was 47.2% for the three months ended June 30, 2024, and 11.7% for the six months ended June 30, 2024[118] - Revenue in the Asia-Pacific region decreased by 7.4% for the three months ended June 30, 2024, but increased by 3.9% in constant currency for the six months ended June 30, 2024[118] - Revenue from the United States for the six months ended June 30, 2024 was $514.5 million, compared to $457.1 million for the same period in 2023[88] - International revenue accounted for 47.1% of total revenue in Q2 2024, down from 57.6% in Q2 2023[133] - International revenue accounted for 51.5% of total revenue, down from 54.6% in the prior year period[154] - Direct revenue accounted for 76.0% of total revenue for the three months ended June 30, 2024, up from 71.2% in the same period in 2023[39] - Direct revenue accounted for 76.0% of total revenue in Q2 2024, up from 71.2% in Q2 2023[133] - Subscription lease licenses revenue grew by 61.9% YoY to $218.6 million, driven by multi-year licenses[129] - Subscription lease license revenue grew 10.8% to $313.4 million, driven by incremental sales to existing customers[149][150] - Perpetual licenses revenue decreased by 7.5% YoY to $64.6 million, with a 20.1% drop in deal volume partially offset by a 12.6% increase in average deal size[129] - Maintenance revenue increased by 7.4% YoY to $293.8 million, driven by existing customer base[129] - Service revenue decreased by 5.2% YoY to $17.1 million in Q2 2024[129] - Total software licenses revenue increased by 38.2% YoY to $283.2 million in Q2 2024[129] - Software license revenue for the six months ended June 30, 2024 was $443.6 million, up 4.6% from $424.0 million in the same period in 2023[39] - Total revenue allocated to remaining performance obligations as of June 30, 2024 was $1.39 billion, with $862.0 million expected to be recognized in the next 12 months[43] - Deferred revenue and backlog totaled $1.39 billion as of June 30, 2024, with $445.9 million in deferred revenue and $948.1 million in backlog[135] - Deferred revenue decreased to $22.7 million in the first half of 2024, down from $45.4 million in the same period in 2023[25] - Deferred revenue decreased to $445.9 million as of June 30, 2024 from $479.8 million at the beginning of the year, primarily due to revenue recognition exceeding new deferrals[42] - Annual Contract Value (ACV) for the three months ended June 30, 2024, was $520.5 million, a 6.6% increase compared to the same period in 2023[114] - ACV for the six months ended June 30, 2024, was $927.9 million, a 4.5% increase compared to the same period in 2023[114] - Recurring ACV at 2023 monthly average exchange rates was $1.99 billion for the twelve months ended June 30, 2024, a 14.2% increase compared to the same period in 2023[115] - The company's ACV growth was supported by core industries including automotive, high-tech, and aerospace and defense (A&D) during the second quarter of 2024[116] Net Income and Earnings - Net income for the six months ended June 30, 2024, was $164.8 million, compared to $170.1 million in the same period of 2023, a decrease of 3.1%[19] - Net income for the six months ended June 30, 2024, was $164.8 million, compared to $170.1 million in the same period in 2023[25] - Net income for the six months ended June 30, 2024 was $164.8 million, down 3.1% from $170.1 million in the same period in 2023[50] - Net income for Q2 2024 reached $130.0 million, up 87.1% year-over-year, with diluted EPS of $1.48[147] - Net income decreased by $5.34 million to $164.81 million in 2024, with diluted earnings per share dropping from $1.95 to $1.88[166] - Earnings per share (diluted) for the six months ended June 30, 2024, was $1.88, compared to $1.95 in the same period of 2023, a 3.6% decrease[19] - Non-GAAP net income for the six months ended June 30, 2023 was $301.1 million, with diluted earnings per share of $3.45[173] Operating Income and Expenses - Operating income for the six months ended June 30, 2024, was $200.7 million, compared to $223.3 million in the same period of 2023, a 10.1% decrease[19] - GAAP operating income increased by 64.6% for the three months ended June 30, 2024, but decreased by 10.1% for the six months ended June 30, 2024[104] - Non-GAAP operating income increased by 47.7% for the three months ended June 30, 2024, and by 8.7% for the six months ended June 30, 2024[104] - Operating income grew by $61.8 million (64.6%) to $157.4 million, with a 26.5% margin[141] - Operating income declined by $22.56 million (10.1%) to $200.76 million in 2024, impacted by increased operating expenses and currency fluctuations[159][160] - Research and development expenses increased to $261.4 million for the six months ended June 30, 2024, from $245.3 million in the same period of 2023, a 6.5% increase[19] - Research and development expenses increased by $7.6 million (6.1%) due to higher salaries and stock-based compensation[141][142] - Research and development expenses increased by $16.08 million (6.6%) to $261.44 million in 2024, driven by higher salaries and stock-based compensation[159][160] - Selling, general, and administrative expenses rose by $26.5 million (13.1%) due to acquisition costs, higher salaries, and marketing expenses[141][142] - Selling, general, and administrative costs rose by $57.54 million (14.7%) to $448.27 million in 2024, primarily due to acquisition costs and increased compensation[159][160] - Acquisition-related expenses for the six months ended June 30, 2024 were $26.7 million, primarily related to the Merger Agreement with Synopsys[44] - Total cost of sales increased by $2.03 million (1.5%) to $138.02 million in 2024 compared to $135.99 million in 2023[156] - Gross profit increased by $96.5 million (22.5%) driven by higher revenue, partially offset by increased cost of sales[138] - Gross profit rose by $52.67 million (6.1%) to $922.72 million in 2024, driven by increased revenue[156] - Total GAAP gross profit for the six months ended June 30, 2023 was $870.1 million, representing 86.5% of revenue[173] - Non-GAAP gross profit margin improved to 91.9% in 2024, up from 87.0% under GAAP, reflecting adjustments for stock-based compensation and amortization[172] - Maintenance and service costs decreased by $3.9 million (10.0%) primarily due to reduced third-party technical support and headcount-related costs[138][139] - Maintenance and service costs decreased by $4.09 million (5.4%) to $71.80 million in 2024, primarily due to reduced third-party technical support and headcount-related costs[156][157] - Amortization expense increased by $5.17 million (13.0%) to $44.87 million in 2024 due to recently acquired intangible assets[156] - Software licenses cost increased by $2.7 million due to higher third-party royalties, representing a 30.6% year-over-year growth[138] Cash Flow and Liquidity - Cash and cash equivalents increased to $1,098.9 million as of June 30, 2024, from $860.2 million as of December 31, 2023, a 27.7% increase[16] - Cash and cash equivalents at the end of June 2024 stood at $1.1 billion, up from $477.9 million at the end of June 2023[25] - Net cash provided by operating activities increased to $363.5 million in the first half of 2024, up from $323.6 million in the same period in 2023[25] - Net cash provided by operating activities increased by $39.9 million (12.3%) to $363.5 million for the six months ended June 30, 2024 compared to the same period in 2023[189] - Net cash used in investing activities decreased by $166.3 million (77.1%) to $49.4 million for the six months ended June 30, 2024 compared to the same period in 2023[190] - Net cash used in financing activities decreased by $174.8 million (71.6%) to $69.2 million for the six months ended June 30, 2024 compared to the same period in 2023[191] - Cash, cash equivalents, and short-term investments increased by $258.9 million (30.1%) to $1.12 billion as of June 30, 2024 compared to December 31, 2023[185] - Domestic cash, cash equivalents, and short-term investments increased to $700.8 million (62.6% of total) as of June 30, 2024 from $529.1 million (61.5% of total) as of December 31, 2023[187] - Foreign cash, cash equivalents, and short-term investments increased to $418.4 million (37.4% of total) as of June 30, 2024 from $331.3 million (38.5% of total) as of December 31, 2023[187] - The company's cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds[36] - Short-term investments consist of available-for-sale debt securities with remaining maturities greater than three months, carried at fair value with unrealized gains and losses included in accumulated other comprehensive income[37] - Cash equivalents and short-term investments total $278.3 million, with $257.9 million in money market funds and $20.4 million in short-term investments[59] - Corporate debt securities of $15.2 million include $15.1 million in a loss position, and municipal bonds of $5.0 million include $4.6 million in a loss position as of June 30, 2024[59] - Unrealized losses on investments are primarily due to changes in interest rates, with the company expecting to realize full value upon maturity[60] - Available-for-sale debt securities maturing within 1 year total $8.0 million, and those maturing in 1-3 years total $12.2 million[61] - The company plans capital spending of $40.0 million to $50.0 million during fiscal year 2024, compared to $25.3 million spent in fiscal year 2023[190] - Capital expenditures for the six months ended June 30, 2024, were $23.8 million, up from $12.0 million in the same period in 2023[25] Debt and Financing - The company has a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, both maturing on June 30, 2027[76] - Borrowings under the credit facilities accrue interest based on Term SOFR or the base rate plus an applicable margin, with a Sustainability Rate Adjustment of +/- 0.05% based on ESG KPIs[77][78] - The weighted average interest rate under the 2022 Credit Agreement for the three and six months ended June 30, 2024 was 6.24% and 6.28%, respectively, compared to 5.88% and 5.72% for the same periods in 2023[79] - As of June 30, 2024, the company had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $754.0 million, net of $1.0 million of unamortized debt discounts and issuance costs[80] - The company entered into a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, including a $50.0 million sublimit for letters of credit[192] - As of June 30, 2024, the carrying value of the term loan was $754.0 million, with no principal payments due in the next twelve months[193] - The interest rate in effect for the third quarter of 2024 under the 2022 Credit Agreement is 6.26%[194] - The company's debt is classified as Level 2 in the fair value hierarchy due to variable interest rates and lack of active trading[65] - A hypothetical 100 basis point increase in interest rates would result in an additional $7.7 million in interest expense over the next twelve months[204] - Interest income for Q2 2024 was $12.2 million, while interest expense was $12.2 million[203] - Interest income surged by $15.7 million to $23.2 million in 2024, driven by higher invested cash balances and interest rates[161] Leases and Commitments - Lease liabilities for office space include a 183-month lease expiring in December 2029, with annual base rent of $4.5 million through 2024 and $4.7 million from 2025-2029[71] - Total lease cost for the six months ended June 30, 2024, was $17.1 million, including $14.5 million in lease liability cost and $2.6 million in variable lease costs[72] - Operating lease commitments total $127.5 million, with $27.8 million due in the next twelve months[194] Stock-Based Compensation and Share Repurchases - Stock-based compensation expense rose to $125.6 million in the first half of 2024, compared to $100.5 million in the same period in 2023[25] - Stock-based compensation expense before taxes for the six months ended June 30, 2024 was $125.6 million, compared to $100.5 million for the same period in 2023[85] - No share repurchases were made in the first half of 2024, while 650 thousand shares were repurchased at an average price of $302.34 per share in the first half of 2023, totaling $196.5 million[83] - The company repurchased 650 thousand shares in the first half of 2023 at an average price of $302.34 per share, totaling $196.5 million[195] Taxes and Liabilities - The effective tax rate for the six months ended June 30, 2024 was 16.5%, compared to 16.9% for the same period in 2023[82] - Income before income tax provision for the three months ended June 30, 2024 was $156.5 million, compared to $84.0 million for the same period in 2023[82] - The company's Indian subsidiary faces potential tax charges and related liabilities of $7.3 million due to pending service tax audits[91] Assets and Liabilities - Total current assets increased to $2,091.8 million as of June 30, 2024, from $2,049.5 million as of December 31, 2023, a 2.1% increase[16] - Accounts receivable decreased to $724.1 million as of June 30, 2024, from $864.5 million as of December 31, 2023, a 16.2% decrease[16] - Total liabilities decreased to $1,733.1 million as of June 30, 2024, from $1,932.5 million as of December 31, 2023, a 10.3% decrease[16] - Total stockholders' equity increased to $5.59 billion as of June 30, 2024, compared to $4.91 billion as of June 30, 2023[27][28] - Goodwill decreased to $3.79 billion as of June 30, 2024 from $3.81 billion at the beginning of the year, primarily due to currency translation effects[56] Comprehensive Income and Other Financial