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 June 30, 2022

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.

(Exact name of registrant as specified in its charter)

Delaware			04-3219960
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
2600 ANSYS Drive,	Canonsburg,	PA	15317
(Address of Principal Executive Offices)			(Zip Code)

844-462-6797

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.01 par value per share	ANSS	Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   ☒ No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐   No  ☒

The number of shares of the Registrant's Common Stock, $0.01 par value per share, outstanding as of July 31, 2022 was 87,068,665 shares.

ANSYS, INC. AND SUBSIDIARIES

INDEX

PART I	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Income – Three and Six Months Ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2022 and 2021	6
	Condensed Consolidated Statements of Stockholders' Equity – Three and Six Months Ended June 30, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	43
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
	SIGNATURES	46

2

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements:

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	517,303	$	667,667
Short-term investments	332		361
Accounts receivable, less allowance for doubtful accounts of $14,600	566,829		645,891
Other receivables and current assets	242,761		324,655
Total current assets	1,327,225		1,638,574
Long-term assets:
Property and equipment, net	81,154		87,914
Operating lease right-of-use assets	125,743		120,881
Goodwill	3,566,968		3,409,271
Other intangible assets, net	771,257		763,119
Other long-term assets	226,341		279,676
Deferred income taxes	19,892		24,879
Total long-term assets	4,791,355		4,685,740
Total assets	$	6,118,580	$	6,324,314
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	17,304	$	10,863
Accrued bonuses and commissions	55,026		163,182
Accrued income taxes	17,015		8,410
Other accrued expenses and liabilities	174,444		204,509
Deferred revenue	360,910		391,528
Total current liabilities	624,699		778,492
Long-term liabilities:
Deferred income taxes	73,087		105,548
Long-term operating lease liabilities	111,357		104,378
Long-term debt	753,402		753,576
Other long-term liabilities	103,280		98,272
Total long-term liabilities	1,041,126		1,061,774
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding	—		—
Common stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 shares issued	953		953
Additional paid-in capital	1,450,549		1,465,694
Retained earnings	4,429,008		4,259,220
Treasury stock, at cost: 8,248,926 and 8,188,331 shares, respectively	(1,300,908)		(1,185,707)
Accumulated other comprehensive loss	(126,847)		(56,112)
Total stockholders' equity	4,452,755		4,484,048
Total liabilities and stockholders' equity	$	6,118,580	$	6,324,314

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended				Six Months Ended
(in thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Revenue:
Software licenses	$	208,981	$	214,822	$	366,426	$	347,426
Maintenance and service	264,869		231,832		532,501		462,454
Total revenue	473,850		446,654		898,927		809,880
Cost of sales:
Software licenses	8,509		8,065		16,945		15,671
Amortization	17,414		15,025		34,666		29,974
Maintenance and service	36,564		41,068		75,636		80,616
Total cost of sales	62,487		64,158		127,247		126,261
Gross profit	411,363		382,496		771,680		683,619
Operating expenses:
Selling, general and administrative	170,383		160,410		340,138		306,625
Research and development	108,941		100,879		214,215		201,358
Amortization	4,029		4,434		8,154		8,841
Total operating expenses	283,353		265,723		562,507		516,824
Operating income	128,010		116,773		209,173		166,795
Interest income	269		486		796		1,003
Interest expense	(4,609)		(3,336)		(7,576)		(6,651)
Other (expense) income, net	(776)		14,937		(1,470)		15,336
Income before income tax provision	122,894		128,860		200,923		176,483
Income tax provision	24,094		35,144		31,135		10,369
Net income	$	98,800	$	93,716	$	169,788	$	166,114
Earnings per share – basic:
Earnings per share	$	1.14	$	1.08	$	1.95	$	1.91
Weighted average shares	87,001		87,168		87,062		86,988
Earnings per share – diluted:
Earnings per share	$	1.13	$	1.06	$	1.94	$	1.89
Weighted average shares	87,321		88,053		87,535		88,019

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income	$	98,800	$	93,716	$	169,788	$	166,114
Other comprehensive (loss) income:
Foreign currency translation adjustments	(48,643)		4,217		(70,735)		(15,047)
Comprehensive income	$	50,157	$	97,933	$	99,053	$	151,067

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
(in thousands)	June 30, 2022		June 30, 2021
Cash flows from operating activities:
Net income	$	169,788	$	166,114
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization	58,012		54,146
Operating lease right-of-use assets expense	11,374		11,100
Deferred income tax benefit	(35,304)		(9,110)
Provision for bad debts	2,426		660
Stock-based compensation expense	75,149		78,004
Gain on equity investment	—		(15,139)
Other	3,562		1,212
Changes in operating assets and liabilities:
Accounts receivable	110,044		92,170
Other receivables and current assets	73,596		54,554
Other long-term assets	(3,834)		(1,743)
Accounts payable, accrued expenses and current liabilities	(129,933)		(86,276)
Accrued income taxes	9,097		(17,947)
Deferred revenue	(12,914)		(28,792)
Other long-term liabilities	(1,183)		(8,969)
Net cash provided by operating activities	329,880		289,984
Cash flows from investing activities:
Acquisitions, net of cash acquired	(241,630)		(105,192)
Capital expenditures	(10,059)		(10,835)
Other investing activities	85		(297)
Net cash used in investing activities	(251,604)		(116,324)
Cash flows from financing activities:
Principal payments on long-term debt	—		(45,000)
Purchase of treasury stock	(155,571)		—
Restricted stock withholding taxes paid in lieu of issued shares	(61,554)		(90,697)
Proceeds from shares issued for stock-based compensation	10,814		13,644
Other financing activities	(1,290)		(50)
Net cash used in financing activities	(207,601)		(122,103)
Effect of exchange rate fluctuations on cash and cash equivalents	(21,039)		(6,525)
Net (decrease) increase in cash and cash equivalents	(150,364)		45,032
Cash and cash equivalents, beginning of period	667,667		912,672
Cash and cash equivalents, end of period	$	517,303	$	957,704
Supplemental disclosure of cash flow information:
Income taxes paid	$	11,926	$	39,325
Interest paid	$	6,298	$	6,024
Fair value of unpaid consideration in connection with acquisitions	$	3,223	$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(in thousands)	Shares	Amount						Shares	Amount
Balance, January 1, 2022	95,267	$	953	$	1,465,694	$	4,259,220	8,188	$	(1,185,707)	$	(56,112)	$	4,484,048
Treasury shares acquired								500	(155,571)				(155,571)
Stock-based compensation activity				(50,287)				(403)	36,865				(13,422)
Other comprehensive loss											(22,092)		(22,092)
Net income						70,988							70,988
Balance, March 31, 2022	95,267	$	953	$	1,415,407	$	4,330,208	8,285	$	(1,304,413)	$	(78,204)	$	4,363,951
Acquisition of Analytical Graphics, Inc.				511				(3)	300				811
Stock-based compensation activity				34,631				(33)	3,205				37,836
Other comprehensive loss											(48,643)		(48,643)
Net income						98,800							98,800
Balance, June 30, 2022	95,267	$	953	$	1,450,549	$	4,429,008	8,249	$	(1,300,908)	$	(126,847)	$	4,452,755

	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Equity
(in thousands)	Shares	Amount						Shares	Amount
Balance, January 1, 2021	95,266	$	953	$	1,434,203	$	3,804,593	8,694	$	(1,124,102)	$	(17,775)	$	4,097,872
Stock-based compensation activity				(87,602)				(565)	48,565				(39,037)
Other comprehensive loss											(19,264)		(19,264)
Net income						72,398							72,398
Balance, March 31, 2021	95,266	$	953	$	1,346,601	$	3,876,991	8,129	$	(1,075,537)	$	(37,039)	$	4,111,969
Acquisition of Analytical Graphics, Inc.	1			328									328
Stock-based compensation activity				34,661				(63)	5,327				39,988
Other comprehensive income											4,217		4,217
Net income						93,716							93,716
Balance, June 30, 2021	95,267	$	953	$	1,381,590	$	3,970,707	8,066	$	(1,070,210)	$	(32,822)	$	4,250,218

The accompanying notes are an integral part of the condensed consolidated financial statements.

7

ANSYS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(Unaudited)

1.Organization

ANSYS, Inc. (Ansys, we, us, our) develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare, and construction.

As defined by the accounting guidance for segment reporting, we operate as one segment.

Given the integrated approach to the multi-discipline problem-solving needs of our customers, a single sale of software may contain components from multiple product areas and include combined technologies. We also have a multi-year product and integration strategy that will result in new, combined products or changes to the historical product offerings. As a result, it is impracticable for us to provide accurate historical or current reporting among our various product lines.

2.Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information for commercial and industrial companies, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K). The condensed consolidated December 31, 2021 balance sheet presented is derived from the audited December 31, 2021 balance sheet included in the 2021 Form 10-K. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for any future period.

Recently Adopted Accounting Guidance

Business combinations: In October 2021, the Financial Accounting Standards Board issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08). ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. We adopted the standard effective January 1, 2022. Under the prior guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The standard does not impact acquired contract assets or liabilities from business combinations that occurred prior to the effective date of adoption, and the impact in current and future periods will depend on the contract assets and contract liabilities acquired in business combinations after the effective date of adoption.

Accounting Guidance Issued and Not Yet Adopted

It is not expected that the future adoption of any recently issued accounting pronouncements will have a material impact on our financial position, results of operations or cash flows.

8

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds. Cash equivalents are carried at cost, which approximates fair value. Our cash and cash equivalents balances comprise the following:

	June 30, 2022			December 31, 2021
(in thousands, except percentages)	Amount		% of Total	Amount		% of Total
Cash accounts	$	417,539	80.7	$	580,047	86.9
Money market funds	99,764		19.3	87,620		13.1
Total	$	517,303		$	667,667

Our money market fund balances are held in various funds of two issuers.

3.Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue:

	Three Months Ended						Six Months Ended
(in thousands, except percentages)	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Revenue:
Subscription lease licenses	$	135,031		$	129,794		$	226,488		$	194,871
Perpetual licenses	73,950			85,028			139,938			152,555
Software licenses	208,981			214,822			366,426			347,426
Maintenance	247,635			218,297			494,876			431,971
Service	17,234			13,535			37,625			30,483
Maintenance and service	264,869			231,832			532,501			462,454
Total revenue	$	473,850		$	446,654		$	898,927		$	809,880
Direct revenue, as a percentage of total revenue	73.7		%	75.4		%	73.1		%	73.8		%
Indirect revenue, as a percentage of total revenue	26.3		%	24.6		%	26.9		%	26.2		%

Our software license revenue is recognized up front, while maintenance and service revenue is generally recognized over the term of the contract.

9

Deferred Revenue

Deferred revenue consists of billings made or payments received in advance of revenue recognition from customer agreements. The timing of revenue recognition may differ from the timing of billings to customers. Payment terms vary by the type and location of customer and the products or services offered. The time between invoicing and when payment is due is not significant.

The changes in deferred revenue, inclusive of both current and long-term deferred revenue, during the six months ended June 30, 2022 and 2021 were as follows:

(in thousands)	2022		2021
Beginning balance – January 1	$	412,781	$	388,810
Acquired deferred revenue	1,032		746
Deferral of revenue	888,130		777,714
Recognition of revenue	(898,927)		(809,880)
Currency translation	(19,394)		(5,792)
Ending balance – June 30	$	383,622	$	351,598

Total revenue allocated to remaining performance obligations as of June 30, 2022 will be recognized as revenue as follows:

(in thousands)
Next 12 months	$	725,323
Months 13-24	264,892
Months 25-36	133,351
Thereafter	55,682
Total revenue allocated to remaining performance obligations	$	1,179,248

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog. Our backlog represents installment billings for periods beyond the current quarterly billing cycle. Revenue recognized during the six months ended June 30, 2022 and 2021 included amounts in deferred revenue and backlog at the beginning of the period of $437.2 million and $373.7 million, respectively.

4.Acquisitions

During the six months ended June 30, 2022, we completed various strategic acquisitions to expand our solution offerings and enhance our customers' experience. The effects of the acquisitions were not material to our condensed consolidated results of operations individually or in the aggregate. The combined purchase price of the acquisitions completed during the six months ended June 30, 2022 was approximately $250.3 million.

During the six months ended June 30, 2022, we incurred $4.2 million in acquisition-related expenses, recognized as selling, general and administrative and research and development expenses on the condensed consolidated statements of income.

The assets acquired and liabilities assumed in connection with the acquisitions have been recorded based upon management's estimates of their fair market values as of each respective date of acquisition. The following tables summarize the fair value of consideration transferred and the fair values of identified assets acquired and liabilities assumed for the combined acquisitions at each respective date of acquisition:

Fair Value of Consideration:

(in thousands)
Cash	$	247,119
Consideration not yet paid	3,223
Total consideration	$	250,342

10

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

(in thousands)
Cash	$	5,540
Accounts receivable and other tangible assets	2,879
Developed software and core technologies	60,030
Customer lists	126
Trade names	1,304
Accounts payable and other liabilities	(5,284)
Deferred revenue	(1,032)
Net deferred tax liabilities	(10,720)
Total identifiable net assets	$	52,843
Goodwill	$	197,499

The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforces of the acquired businesses and the synergies expected to arise as a result of the acquisitions.

The fair values of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for these items are subject to change as additional information about what was known and knowable at each respective acquisition date is obtained during the measurement period (up to one year from the acquisition date).

We determined the fair value of our intangible assets using various valuation techniques, including the relief-from-royalty method and the multi-period excess earnings method. These models utilize certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include, but are not limited to: selection of a valuation methodology, royalty rate, discount rate and attrition rate.

The weighted-average useful life, valuation method and assumptions used to determine the fair value of the intangible assets acquired in 2022 are as follows:

Intangible Asset	Weighted-Average Useful Life	Valuation Method	Assumptions
Developed software and core technologies	8 years	Multi-period excess earnings	Discount rate: 9.5% - 10.0%
Trade names	9 years	Relief-from-royalty	Royalty rate: 1.0% Discount rate: 10.0% - 10.5%
Customer lists	7 years	Multi-period excess earnings	Attrition rate: 10.0% Discount rate: 9.5%

On October 1, 2021, we acquired 100% of the shares of Zemax, a leader in high-performance optical imaging system simulation, for a purchase price of $411.5 million, paid in cash, or $399.1 million net of cash acquired from Zemax. The acquisition expands the scope of our optical and photonics simulation portfolio by giving users comprehensive solutions that could drive innovation in healthcare, autonomy, consumer electronics and the industrial internet of things (IIoT).

Additionally, during the year ended December 31, 2021, we completed several other acquisitions to expand our solution offerings and enhance our customers' experience. These acquisitions were not individually significant. The combined purchase price of these acquisitions during the year ended December 31, 2021 was $110.7 million, which was paid in cash.

The operating results of each acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition.

11

5.Other Receivables and Current Assets and Other Accrued Expenses and Liabilities

Our other receivables and current assets and other accrued expenses and liabilities comprise the following balances:

(in thousands)	June 30, 2022		December 31, 2021
Receivables related to unrecognized revenue	$	129,727	$	200,888
Income taxes receivable, including overpayments and refunds	47,048		71,332
Prepaid expenses and other current assets	65,986		52,435
Total other receivables and current assets	$	242,761	$	324,655
Accrued vacation	42,493		35,879
Consumption, VAT and sales tax liabilities	27,561		52,630
Accrued expenses and other current liabilities	104,390		116,000
Total other accrued expenses and liabilities	$	174,444	$	204,509

Receivables related to unrecognized revenue represent the current portion of billings made for customer contracts that have not yet been recognized as revenue.

6.Earnings Per Share

Basic earnings per share (EPS) amounts are computed by dividing earnings by the weighted average number of common shares outstanding during the period. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalents outstanding. To the extent stock awards are anti-dilutive, they are excluded from the calculation of diluted EPS.

The details of basic and diluted EPS are as follows:

	Three Months Ended				Six Months Ended
(in thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income	$	98,800	$	93,716	$	169,788	$	166,114
Weighted average shares outstanding – basic	87,001		87,168		87,062		86,988
Dilutive effect of stock plans	320		885		473		1,031
Weighted average shares outstanding – diluted	87,321		88,053		87,535		88,019
Basic earnings per share	$	1.14	$	1.08	$	1.95	$	1.91
Diluted earnings per share	$	1.13	$	1.06	$	1.94	$	1.89
Anti-dilutive shares	979		31		522		29

12

7.Goodwill and Intangible Assets

Intangible assets are classified as follows:

	June 30, 2022				December 31, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Developed software and core technologies	$	1,038,126	$	(451,047)	$	985,685	$	(422,797)
Customer lists	196,708		(63,466)		203,072		(57,175)
Trade names	182,200		(131,621)		182,554		(128,577)
Total	$	1,417,034	$	(646,134)	$	1,371,311	$	(608,549)
Indefinite-lived intangible asset:
Trade name	$	357			$	357

Finite-lived intangible assets are amortized over their estimated useful lives of two years to seventeen years.

As of June 30, 2022, estimated future amortization expense for the intangible assets reflected above was as follows:

(in thousands)
Remainder of 2022	$	42,293
2023	90,999
2024	92,893
2025	92,423
2026	92,788
2027	94,516
Thereafter	264,988
Total intangible assets subject to amortization	770,900
Indefinite-lived trade name	357
Other intangible assets, net	$	771,257

The changes in goodwill during the six months ended June 30, 2022 and 2021 were as follows:

(in thousands)	2022		2021
Beginning balance – January 1	$	3,409,271	$	3,038,306
Acquisitions and adjustments(1)	196,417		78,610
Currency translation	(38,720)		(6,180)
Ending balance – June 30	$	3,566,968	$	3,110,736

(1) In accordance with the accounting for business combinations, we recorded adjustments to goodwill for the effect of changes in the provisional fair values of the assets acquired and liabilities assumed during the measurement period (up to one year from the acquisition date) as we obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

During the first quarter of 2022, we completed the annual impairment test for goodwill and the indefinite-lived intangible asset and determined that these assets had not been impaired as of the test date, January 1, 2022. Given the adverse economic and market conditions in the second quarter, we considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined it was not more likely than not that an impairment existed as of June 30, 2022. No other events or circumstances changed during the six months ended June 30, 2022 that would indicate that the fair values of our reporting unit and indefinite-lived intangible asset are below their carrying amounts.

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8.Fair Value Measurement

The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:

•Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

•Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or

•Level 3: unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Our debt is classified within Level 2 of the fair value hierarchy because these borrowings are not actively traded and have a variable interest rate structure based upon market rates. The carrying amount of our debt approximates the estimated fair value. See Note 10, "Debt", for additional information on our borrowings.

The following tables provide the assets carried at fair value and measured on a recurring basis:

			Fair Value Measurements at Reporting Date Using:
(in thousands)	June 30, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	99,764	$	99,764	$	—	$	—
Short-term investments	$	332	$	—	$	332	$	—
Deferred compensation plan investments	$	1,596	$	1,596	$	—	$	—
Equity securities	$	1,714	$	1,714	$	—	$	—

			Fair Value Measurements at Reporting Date Using:
(in thousands)	December 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	87,620	$	87,620	$	—	$	—
Short-term investments	$	361	$	—	$	361	$	—
Deferred compensation plan investments	$	1,602	$	1,602	$	—	$	—
Equity securities	$	2,500	$	2,500	$	—	$	—

The cash equivalents in the preceding tables represent money market funds, valued at net asset value, with carrying values which approximate their fair values because of their short-term nature.

The short-term investments in the preceding tables represent deposits held by certain foreign subsidiaries. The deposits have fixed interest rates with original maturities ranging from three months to one year.

The deferred compensation plan investments in the preceding tables represent trading securities held in a rabbi trust for the benefit of non-employee directors. These securities consist of mutual funds traded in an active market with quoted prices. As a result, the plan assets are classified as Level 1 in the fair value hierarchy. The plan assets are recorded within other long-term assets on our condensed consolidated balance sheets.

The equity securities represent our investment in a publicly traded company. These securities are traded in an active market with quoted prices. As a result, the securities are classified as Level 1 in the fair value hierarchy. The securities are recorded within other long-term assets on our condensed consolidated balance sheets.

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9.Leases

Our right-of-use assets and lease liabilities primarily include operating leases for office space. Our executive offices and those related to certain domestic product development, marketing, production and administration are located in a 186,000 square foot office facility in Canonsburg, Pennsylvania. The term of the lease is 183 months, which began on October 1, 2014 and expires on December 31, 2029. The lease agreement includes options to renew the contract through August 2044, an option to lease additional space in January 2025 and an option to terminate the lease in December 2025. No options are included in the lease liability as renewal is not reasonably certain. In addition, we are reasonably certain we will not terminate the lease agreement. Absent the exercise of options in the lease, our remaining base rent (inclusive of property taxes and certain operating costs) is $4.5 million per annum through 2024 and $4.7 million per annum for 2025 - 2029.

The components of our global lease cost reflected in the condensed consolidated statements of income are as follows:

	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Lease liability cost	$	6,955	$	7,138	$	13,926	$	14,139
Variable lease cost not included in the lease liability(1)	1,103		904		2,187		2,186
Total lease cost	$	8,058	$	8,042	$	16,113	$	16,325

(1) Variable lease cost includes common area maintenance, property taxes, utilities and fluctuations in rent due to a change in an index or rate.

Other information related to operating leases is as follows:

	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Cash paid for amounts included in the measurement of the lease liability:
Operating cash flows from operating leases	$	(6,571)	$	(7,139)	$	(13,589)	$	(13,966)
Right-of-use assets obtained in exchange for new operating lease liabilities	4,357		5,007		$	20,675	$	5,594

	As of June 30,
	2022		2021
Weighted-average remaining lease term of operating leases	7.3 years		6.9 years
Weighted-average discount rate of operating leases	3.0	%	3.0	%

The maturity schedule of the operating lease liabilities as of June 30, 2022 is as follows:

(in thousands)
Remainder of 2022	$	12,933
2023	22,683
2024	20,346
2025	18,711
2026	17,037
Thereafter	55,289
Total future lease payments	146,999
Less: Present value adjustment	(14,877)
Present value of future lease payments(1)	$	132,122

(1) Includes the current portion of operating lease liabilities of $20.8 million, which is reflected in other accrued expenses and liabilities in the condensed consolidated balance sheets.

There were no material leases that have been signed but not yet commenced as of June 30, 2022.

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10.Debt

On June 30, 2022, we entered into a credit agreement (2022 Credit Agreement) with PNC Bank, National Association as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto. The 2022 Credit Agreement refinanced our previous credit agreements in their entirety. Terms used in this description of the 2022 Credit Agreement with the initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.

The term loan facility was advanced by the lenders thereunder to refinance and replace our (i) Credit Agreement, dated as of February 22, 2019, as amended, among us, as borrower, Bank of America, N.A., as administrative agent, swing line lender and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto and (ii) Credit Agreement, dated as of November 9, 2020, among us, as borrower, Bank of America, N.A., as administrative agent, and the lenders party thereto (together, the “Prior Credit Agreements”).

The 2022 Credit Agreement provides for a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, which includes a $50.0 million sublimit for the issuance of letters of credit. The revolving loan facility is available for working capital and general corporate purposes. Each of the term loan facility and the revolving loan facility matures on June 30, 2027.

Borrowings under the term loan and revolving loan facilities accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our debt ratings (if such debt ratings exist).

The 2022 Credit Agreement also provides for the option to add certain foreign subsidiaries as borrowers and to borrow in Euros, Sterling, Yen and Swiss Francs under the revolving loan facility, up to a sublimit of $150.0 million. Borrowings under the revolving loan facility denominated in these currencies will accrue interest at a rate that is based on (a) for Euros, €STR, (b) for Sterling, SONIA, (c) for Yen, TONAR and (d) for Swiss Francs, SARON, plus an applicable margin calculated as described above.

Under the Prior Credit Agreements, the weighted average interest rate in effect during the three and six months ended June 30, 2022 was 1.90% and 1.63%, respectively. Under the Prior Credit Agreements, the weighted average interest rate in effect during the three and six months ended June 30, 2021 was 1.45%. As of June 30, 2022, the rate in effect for the 2022 Credit Agreement was 3.04%.

The 2022 Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a consolidated leverage ratio not in excess of 3.50 to 1.00 as of the end of any fiscal quarter (for the four-quarter period ending on such date) with an opportunity for a temporary increase in such consolidated leverage ratio to 4.00 to 1.00 upon the consummation of certain qualified acquisitions for which the aggregate consideration is at least $250.0 million.

As of June 30, 2022, we had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $753.4 million, which is net of $1.6 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of June 30, 2022, no borrowings were outstanding under the revolving loan facility.

As of December 31, 2021, we had $755.0 million of borrowings outstanding under the Prior Credit Agreements, with a carrying value of $753.6 million, which is net of $1.4 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of December 31, 2021, no borrowings were outstanding under the revolving loan facility.

We were in compliance with all covenants under the 2022 Credit Agreement and the Prior Credit Agreements as of June 30, 2022 and December 31, 2021, respectively.

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11.Income Taxes

Our income before income tax provision, income tax provision and effective tax rates were as follows:

	Three Months Ended				Six Months Ended
(in thousands, except percentages)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Income before income tax provision	$	122,894	$	128,860	$	200,923	$	176,483
Income tax provision	24,094		35,144		$	31,135	$	10,369
Effective tax rate