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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 September 30, 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.
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareANSSNasdaq 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 27, 2023 was 86,872,803 shares.



ANSYS, INC. AND SUBSIDIARIES
INDEX
  
Page No.

2

Table of Contents
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)September 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents$639,342 $614,391 
Short-term investments171 183 
Accounts receivable, less allowance for doubtful accounts of $20,700 and $18,300, respectively
673,973 760,287 
Other receivables and current assets229,013 289,261 
Total current assets1,542,499 1,664,122 
Long-term assets:
Property and equipment, net75,431 80,838 
Operating lease right-of-use assets116,187 129,140 
Goodwill3,769,321 3,658,267 
Other intangible assets, net849,205 809,183 
Other long-term assets174,289 261,880 
Deferred income taxes146,588 84,515 
Total long-term assets5,131,021 5,023,823 
Total assets$6,673,520 $6,687,945 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$14,801 $14,021 
Accrued bonuses and commissions89,327 160,908 
Accrued income taxes14,652 7,698 
Other accrued expenses and liabilities165,983 198,220 
Deferred revenue349,668 413,989 
Total current liabilities634,431 794,836 
Long-term liabilities:
Deferred income taxes70,360 58,126 
Long-term operating lease liabilities100,071 112,802 
Long-term debt753,812 753,574 
Other long-term liabilities108,046 102,756 
Total long-term liabilities1,032,289 1,027,258 
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 capital1,612,269 1,540,317 
Retained earnings5,008,580 4,782,930 
Treasury stock, at cost: 8,428,972 and 8,317,389 shares, respectively
(1,480,733)(1,335,627)
Accumulated other comprehensive loss(134,269)(122,722)
Total stockholders' equity5,006,800 4,865,851 
Total liabilities and stockholders' equity$6,673,520 $6,687,945 

The accompanying notes are an integral part of the condensed consolidated financial statements.
3

Table of Contents

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months EndedNine Months Ended
(in thousands, except per share data)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Revenue:
Software licenses$162,422 $208,906 $586,471 $575,332 
Maintenance and service296,373 263,605 878,370 796,106 
Total revenue458,795 472,511 1,464,841 1,371,438 
Cost of sales:
Software licenses8,692 8,425 29,095 25,370 
Amortization20,707 17,281 60,404 51,947 
Maintenance and service35,858 36,261 111,750 111,897 
Total cost of sales65,257 61,967 201,249 189,214 
Gross profit393,538 410,544 1,263,592 1,182,224 
Operating expenses:
Selling, general and administrative194,552 175,283 585,278 515,421 
Research and development123,223 108,056 368,581 322,271 
Amortization5,947 3,821 16,598 11,975 
Total operating expenses323,722 287,160 970,457 849,667 
Operating income69,816 123,384 293,135 332,557 
Interest income4,909 1,345 12,389 2,141 
Interest expense(12,276)(6,092)(34,594)(13,668)
Other income (expense), net96 (656)(3,564)(2,126)
Income before income tax provision62,545 117,981 267,366 318,904 
Income tax provision7,043 22,006 41,716 53,141 
Net income$55,502 $95,975 $225,650 $265,763 
Earnings per share – basic:
Earnings per share$0.64 $1.10 $2.60 $3.05 
Weighted average shares86,817 87,063 86,814 87,062 
Earnings per share – diluted:
Earnings per share$0.64 $1.10 $2.58 $3.04 
Weighted average shares87,381 87,418 87,335 87,496 

The accompanying notes are an integral part of the condensed consolidated financial statements.
4

Table of Contents

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months EndedNine Months Ended
(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Net income$55,502 $95,975 $225,650 $265,763 
Other comprehensive loss:
Foreign currency translation adjustments(32,834)(61,636)(11,547)(132,371)
Comprehensive income$22,668 $34,339 $214,103 $133,392 

The accompanying notes are an integral part of the condensed consolidated financial statements.
5

Table of Contents

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended
(in thousands)September 30,
2023
September 30,
2022
Cash flows from operating activities:
Net income$225,650 $265,763 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization99,016 86,239 
Operating lease right-of-use assets expense17,625 17,356 
Deferred income tax benefit(74,426)(63,560)
Provision for bad debts2,442 2,476 
Stock-based compensation expense158,533 122,119 
Other1,252 4,986 
Changes in operating assets and liabilities:
Accounts receivable168,958 66,369 
Other receivables and current assets61,203 96,641 
Other long-term assets(5,897)(3,121)
Accounts payable, accrued expenses and current liabilities(105,197)(111,039)
Accrued income taxes6,327 9,751 
Deferred revenue(65,242)(28,203)
Other long-term liabilities(5,844)(8,746)
Net cash provided by operating activities484,400 457,031 
Cash flows from investing activities:
Acquisitions, net of cash acquired(197,786)(242,613)
Capital expenditures(16,541)(15,227)
Other investing activities(5,839)(782)
Net cash used in investing activities(220,166)(258,622)
Cash flows from financing activities:
Purchase of treasury stock(196,494)(155,571)
Restricted stock withholding taxes paid in lieu of issued shares(60,827)(62,035)
Proceeds from shares issued for stock-based compensation26,015 20,918 
Other financing activities(1,294)(1,290)
Net cash used in financing activities(232,600)(197,978)
Effect of exchange rate fluctuations on cash and cash equivalents(6,683)(35,589)
Net increase (decrease) in cash and cash equivalents24,951 (35,158)
Cash and cash equivalents, beginning of period614,391 667,667 
Cash and cash equivalents, end of period$639,342 $632,509 
Supplemental disclosure of cash flow information:
Income taxes paid$100,135 $42,055 
Interest paid$33,795 $12,192 
Non-cash and unpaid consideration in connection with acquisitions$5,056 $3,391 

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


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ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated Other Comprehensive (Loss) IncomeTotal
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 2023
95,267$953 $1,540,317 $4,782,930 8,317 $(1,335,627)$(122,722)$4,865,851 
Treasury shares acquired, including excise tax650 (197,416)(197,416)
Stock-based compensation activity
(34,529)(356)34,350 (179)
Other comprehensive income13,284 13,284 
Net income100,622 100,622 
Balance, March 31, 2023
95,267$953 $1,505,788 $4,883,552 8,611$(1,498,693)$(109,438)$4,782,162 
Treasury shares acquired, including excise tax343 343 
Stock-based compensation activity44,365 (105)10,013 54,378 
Other comprehensive income8,003 8,003 
Net income69,52669,526 
Balance, June 30, 202395,267$953 $1,550,153 $4,953,078 8,506$(1,488,337)$(101,435)$4,914,412 
Treasury shares acquired, including excise tax264 264 
Stock-based compensation activity62,116 (77)7,340 69,456 
Other comprehensive loss(32,834)(32,834)
Net income55,50255,502
Balance, September 30, 202395,267$953 $1,612,269 $5,008,580 8,429$(1,480,733)$(134,269)$5,006,800 
    
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive Loss
Total
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
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 acquired500 (155,571)(155,571)
Stock-based compensation
  activity
(50,287)(403)36,865 (13,422)
Other comprehensive loss(22,092)(22,092)
Net income70,988 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 income98,800 98,800 
Balance, June 30, 202295,267$953 $1,450,549 $4,429,008 8,249$(1,300,908)$(126,847)$4,452,755 
Stock-based compensation
  activity
49,781 (70)6,810 56,591 
Other comprehensive loss(61,636)(61,636)
Net income95,975 95,975 
Balance, September 30, 202295,267$953 $1,500,330 $4,524,983 8,179$(1,294,098)$(188,483)$4,543,685 

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

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ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(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 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, 2022 (2022 Form 10-K). The condensed consolidated December 31, 2022 balance sheet presented is derived from the audited December 31, 2022 balance sheet included in the 2022 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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for any future period. Certain items in the notes to the condensed consolidated financial statements of prior years have been reclassified to conform to the current year's presentation. These reclassifications had no effect on reported net income, comprehensive income, cash flows, total assets or total liabilities and stockholders' equity.
Accounting Guidance Issued and Not Yet Adopted
Recently issued accounting pronouncements are not expected to have a material impact on our financial position, results of operations or cash flows upon adoption.
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:
 September 30, 2023December 31, 2022
(in thousands, except percentages)Amount% of TotalAmount% of Total
Cash accounts$530,839 83.0 $503,733 82.0 
Money market funds108,503 17.0 110,658 18.0 
Total$639,342 $614,391 

Our money market fund balances are held in various funds of a single issuer at September 30, 2023.

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3.Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue:
Three Months EndedNine Months Ended
(in thousands, except percentages)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Revenue:
Subscription lease licenses$103,573 $136,489 $386,494 $362,977 
Perpetual licenses58,849 72,417 199,977 212,355 
Software licenses162,422 208,906 586,471 575,332 
Maintenance278,108 247,678 820,393 742,554 
Service18,265 15,927 57,977 53,552 
Maintenance and service296,373 263,605 878,370 796,106 
Total revenue$458,795 $472,511 $1,464,841 $1,371,438 
Direct revenue, as a percentage of total revenue73.5 %74.8 %73.7 %73.7 %
Indirect revenue, as a percentage of total revenue26.5 %25.2 %26.3 %26.3 %

Our software license revenue is recognized up front, while maintenance and service revenue is recognized over the term of the contract.
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 nine months ended September 30, 2023 and 2022 were as follows:
(in thousands)20232022
Beginning balance – January 1$435,758 $412,781 
Acquired deferred revenue7,910 1,032 
Deferral of revenue1,399,367 1,343,122 
Recognition of revenue(1,464,841)(1,371,438)
Currency translation(7,761)(30,779)
Ending balance – September 30$370,433 $354,718 

Total revenue allocated to remaining performance obligations as of September 30, 2023 will be recognized as revenue as follows:
(in thousands) 
Next 12 months$774,215 
Months 13-24306,571 
Months 25-3695,311 
Thereafter29,580 
Total revenue allocated to remaining performance obligations$1,205,677 

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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 deferred revenue associated with installment billings for periods beyond the current quarterly billing cycle and committed contracts with start dates beyond the end of the current period. Revenue recognized during the nine months ended September 30, 2023 and 2022 included amounts in deferred revenue and backlog at the beginning of the period of $706.2 million and $608.7 million, respectively.
4.Acquisitions
During the quarter ended June 30, 2023, we completed the acquisition of Diakopto for a purchase price of $83.3 million, or $77.2 million net of cash acquired, to expand our multiphysics simulation portfolio for semiconductor designers. The effects of the business combination were not material to our condensed consolidated results of operations.
On January 3, 2023, we completed the acquisition of DYNAmore for a purchase price of $139.2 million, or $126.4 million net of cash acquired. The acquisition expands our position as a simulation solution provider within the automotive industry. The effects of the acquisition were not material to our condensed consolidated results of operations.
During the three and nine months ended September 30, 2023, we incurred acquisition-related expenses of $1.5 million and $5.8 million, respectively. Acquisition-related expenses are 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 the fair market values as of each respective date of acquisition. The following tables summarize the fair value of consideration 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$217,392 
Non-cash consideration5,056 
Total consideration$222,448 
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash$18,866 
Accounts receivable and other tangible assets18,152 
Developed software and core technologies 25,594 
Customer lists83,790 
Trade names2,910 
Accounts payable and other liabilities(8,742)
Deferred revenue(7,910)
Net deferred tax liabilities(31,272)
Total identifiable net assets$101,388 
Goodwill$121,060 
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 value 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).
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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, attrition rate and obsolescence rate.
The weighted-average useful life, valuation method and assumptions used to determine the fair value of the intangible assets acquired in 2023 are as follows:
Intangible AssetWeighted-Average Useful LifeValuation MethodAssumptions
Developed software and core technologies5 yearsRelief-from-royalty or multi-period excess earnings
Royalty rate: 20.0%
Obsolescence rate: 20.0% Discount rate: 15.5% - 22.0%
Trade names5 yearsRelief-from-royalty
Royalty rate: 1.0% - 2.0%
Discount rate: 15.5% - 22.0%
Customer lists13 yearsMulti-period excess earnings
Attrition rate: 5.0%
Discount rate: 15.5% - 22.0%
2022 Acquisitions
During the year ended December 31, 2022, we completed several acquisitions to enhance our customers' experience. The combined purchase price of these acquisitions during the year ended December 31, 2022 was $401.7 million, or $390.8 million net of cash acquired.
The operating results of each acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition. The effects of the acquisitions were not material to our condensed consolidated results of operations.
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)September 30,
2023
December 31,
2022
Receivables related to unrecognized revenue$135,981 $209,139 
Income taxes receivable, including overpayments and refunds37,097 28,963 
Prepaid expenses and other current assets55,935 51,159 
Total other receivables and current assets$229,013 $289,261 
Accrued vacation44,369 39,118 
Consumption, VAT and sales tax liabilities16,298 41,812 
Accrued expenses and other current liabilities105,316 117,290 
Total other accrued expenses and liabilities$165,983 $198,220 

Receivables related to unrecognized revenue represent the current portion of billings made for customer contracts that have not yet been recognized as revenue.
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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 EndedNine Months Ended
(in thousands, except per share data)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Net income$55,502 $95,975 $225,650 $265,763 
Weighted average shares outstanding – basic86,817 87,063 86,814 87,062 
Dilutive effect of stock plans564 355 521 434 
Weighted average shares outstanding – diluted87,381 87,418 87,335 87,496 
Basic earnings per share$0.64 $1.10 $2.60 $3.05 
Diluted earnings per share$0.64 $1.10 $2.58 $3.04 
Anti-dilutive shares73 54 257 366 

7.Goodwill and Intangible Assets
Intangible assets are classified as follows:
 September 30, 2023December 31, 2022
(in thousands)Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Finite-lived intangible assets:
Developed software and core technologies
$1,136,728 $(536,643)$1,106,789 $(483,033)
Customer lists283,231 (82,267)205,484 (71,618)
Trade names 189,203 (141,404)186,424 (135,220)
Total$1,609,162 $(760,314)$1,498,697 $(689,871)
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 September 30, 2023, estimated future amortization expense for the intangible assets reflected above was as follows:
(in thousands) 
Remainder of 2023$26,383 
2024111,049 
2025113,657 
2026114,451 
2027117,260 
2028110,478 
Thereafter255,570 
Total intangible assets subject to amortization848,848 
Indefinite-lived trade name357 
Other intangible assets, net$849,205 

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The changes in goodwill during the nine months ended September 30, 2023 and 2022 were as follows:
(in thousands)20232022
Beginning balance – January 1$3,658,267 $3,409,271 
Acquisitions and adjustments(1)
113,502 197,173 
Currency translation(2,448)(73,985)
Ending balance – September 30$3,769,321 $3,532,459 
(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 effected the measurement of the amounts recognized as of that date.
During the first quarter of 2023, 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, 2023. No events or circumstances changed during the nine months ended September 30, 2023 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)September 30,
2023
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents$108,503 $108,503 $ $ 
Short-term investments$171 $ $171 $ 
Deferred compensation plan investments$2,302 $2,302 $ $ 
Equity securities$761 $761 $ $ 
  Fair Value Measurements at Reporting Date Using:
(in thousands)December 31, 2022Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents$110,658 $110,658 $ $ 
Short-term investments$183 $ $183 $ 
Deferred compensation plan investments$1,618 $1,618 $ $ 
Equity securities$892 $892 $ $ 

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. 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 EndedNine Months Ended
(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Lease liability cost$7,097 $6,960 $21,207 $20,886 
Variable lease cost not included in the lease liability(1)
1,523 1,015 4,134 3,202 
     Total lease cost$8,620 $7,975 $25,341 $24,088 
(1) Variable lease cost includes common area maintenance, property taxes, utilities and fluctuations in rent due to a change in an index or rate.
Other information related to operating leases is as follows:
 Three Months EndedNine Months Ended
(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Cash paid for amounts included in the measurement of the lease liability:
     Operating cash flows from operating leases$(7,288)$(6,720)$(20,993)$(20,309)
Right-of-use assets obtained in exchange for new operating lease liabilities$2,192 $8,131 $7,508 $28,806 
As of September 30,
20232022
Weighted-average remaining lease term of operating leases
6.5 years7.3 years
Weighted-average discount rate of operating leases
3.4 %3.2 %

The maturity schedule of the operating lease liabilities as of September 30, 2023 is as follows:
(in thousands) 
Remainder of 2023$7,097 
202425,268 
202521,558 
202619,446 
202718,038 
Thereafter45,236 
     Total future lease payments136,643 
Less: Present value adjustment(13,930)
     Present value of future lease payments(1)
$122,713 
(1) Includes the current portion of operating lease liabilities of $22.6 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 September 30, 2023.
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10.Debt
On June 30, 2022, we entered into a credit agreement (as amended, the 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 initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.
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 net leverage ratio and (2) a pricing level determined by our public debt rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an interest rate adjustment (Sustainability Rate Adjustment) based upon the achievement of certain environmental, social and governance key performance indicators (KPIs). The Sustainability Rate Adjustment range is +/- 0.05% and will go into effect in the first quarter of 2024 based on the 2023 KPIs and will be adjusted annually based on the KPIs of the preceding year.

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 2022 Credit Agreement, the weighted average interest rate in effect for the three and nine months ended September 30, 2023 was 6.22% and 5.89%, respectively. Under the prior credit agreements and the 2022 Credit Agreement, the weighted average interest rate in effect for the three and nine months ended September 30, 2022 was 3.05% and 2.11%, respectively. The rate in effect as of September 30, 2023 and for the fourth quarter of 2023 under the 2022 Credit Agreement is 6.37%.
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 net 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 net 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 September 30, 2023, we had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $753.8 million, which is net of $1.2 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of September 30, 2023, no borrowings were outstanding under the revolving loan facility.
As of December 31, 2022, we had $755.0 million of borrowings outstanding under the term loan, 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, 2022, no borrowings were outstanding under the revolving loan facility.
We were in compliance with all covenants under the 2022 Credit Agreement as of September 30, 2023 and December 31, 2022.
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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 EndedNine Months Ended
(in thousands, except percentages)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Income before income tax provision$62,545 $117,981 $267,366 $318,904 
Income tax provision$7,043 $22,006 $41,716 $53,141 
Effective tax rate11.3 %18.7 %15.6 %16.7 %


12.Stock Repurchase Program
Under our stock repurchase program, we repurchased shares as follows:
Nine Months Ended
(in thousands, except per share data)September 30,
2023
September 30,
2022
Number of shares repurchased650500 
Average price paid per share$302.34 $311.14 
Total cost$196,494 $155,571 

All of the shares repurchased during the nine months ended September 30, 2023 were repurchased during the first quarter. As of September 30, 2023, 1.1 million shares remained available for repurchase under the program. Average price paid per share excludes excise tax. As of January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. Any excise tax incurred is recognized and reflected as part of the cost basis of the shares acquired in the Condensed Consolidated Statements of Stockholders' Equity.
13.Stock-Based Compensation
Total stock-based compensation expense and its net impact on basic and diluted earnings per share are as follows:
 Three Months EndedNine Months Ended
(in thousands, except per share data)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
Cost of sales:
Maintenance and service$3,568 $2,621 $9,924 $7,448 
Operating expenses:
Selling, general and administrative32,907 27,077 89,006 67,117 
Research and development21,586 17,272 59,603 47,554 
Stock-based compensation expense before taxes58,061 46,970 158,533 122,119 
Related income tax benefits(12,993)(9,984)(41,848)(42,037)
Stock-based compensation expense, net of taxes$45,068 $36,986 $116,685 $80,082 
Net impact on earnings per share:
Basic earnings per share$(0.52)$(0.42)$(1.34)$(0.92)
Diluted earnings per share$(0.52)$(0.42)$(1.34)$(0.92)

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14.Geographic Information
Revenue to external customers is attributed to individual countries based upon the location of the customer. Revenue by geographic area is as follows:
 Three Months EndedNine Months Ended
(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
United States$204,824 $201,263 $661,953 $586,063 
Japan40,956 38,586 141,770 133,562 
Germany37,901 48,115 117,240 111,888 
China19,548 28,265 91,128 83,924 
South Korea27,928 49,581 75,868 104,950 
Other Europe, Middle East and Africa (EMEA)83,719 72,058 251,696 236,250 
Other international43,919 34,643 125,186 114,801 
Total revenue$458,795 $472,511 $1,464,841 $1,371,438 

Property and equipment by geographic area is as follows:
(in thousands)September 30,
2023
December 31,
2022
United States$55,589 $58,258 
India5,244 5,978 
EMEA10,063 11,043 
Other international4,535 5,559 
Total property and equipment, net$75,431 $80,838 

15.Contingencies and Commitments
We are subject to various claims, investigations, and legal and regulatory proceedings that arise in the ordinary course of business, including, but not limited to, commercial disputes, labor and employment matters, tax audits, alleged infringement of third parties' intellectual property rights and other matters. In our opinion, the resolution of pending matters is not expected to have a material adverse effect on our consolidated results of operations, cash flows or financial position. However, each of these matters is subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these proceedings could materially affect our consolidated results of operations, cash flows or financial position.
Our Indian subsidiary has several service tax audits pending that have resulted in formal inquiries being received on transactions through mid-2012. We could incur tax charges and related liabilities of $7.1 million. As such charges are not probable at this time, a reserve has not been recorded on the condensed consolidated balance sheet as of September 30, 2023. The service tax issues raised in our notices and inquiries are very similar to the case, M/s Microsoft Corporation (I) (P) Ltd. Vs. Commissioner of Service Tax, New Delhi, wherein the Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT) issued a favorable ruling to Microsoft. The Microsoft ruling was subsequently challenged in the Supreme Court by the Indian tax authority and a decision is still pending. We can provide no assurances on the impact that the present Microsoft case's decision will have on our cases, however, an unfavorable ruling in the Microsoft case may impact our assessment of probability and result in the recording of a $7.1 million reserve. We are uncertain as to when these service tax matters will be concluded.
We sell software licenses and services to our customers under contractual agreements. Such agreements generally include certain provisions indemnifying the customer against claims, by third parties, of infringement or misappropriation of their intellectual property rights arising from such customer's usage of our products or services. To date, payments related to these indemnification provisions have been immaterial. For several reasons, including the lack of prior material indemnification claims, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto for the nine months ended September 30, 2023, and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in the 2022 Form 10-K filed with the Securities and Exchange Commission (SEC). The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (GAAP).
Business
Ansys, a corporation formed in 1994, 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. Headquartered south of Pittsburgh, Pennsylvania, we employed 6,100 and 5,600 people as of September 30, 2023 and December 31, 2022, respectively. We focus on the development of open and flexible solutions that enable users to analyze designs on-premises and/or via the cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing, validation and deployment. We distribute our suite of simulation technologies through direct sales offices in strategic, global locations and a global network of independent resellers and distributors (collectively, channel partners). It is our intention to continue to maintain this hybrid sales and distribution model. We operate and report as one segment.
When visionary companies need to know how their world-changing ideas will perform, they close the gap between design and reality using Ansys simulation. For more than 50 years, Ansys software has enabled innovators across industries to push the boundaries of product design by using the predictive power of simulation. From sustainable transportation and advanced satellite systems to life-saving medical devices, Ansys powers innovation that drives human advancement.
Our strategy of Pervasive Insights seeks to deepen the use of simulation in our core market, to inject simulation throughout the product lifecycle and extend the accessibility to a broader set of users and use cases. Our business has three vectors of growth:
More products. Our broad and deep multiphysics portfolio enables us to grow with customers as they use simulation to solve more complex problems across a broad set of industries.
More users. Investments in simulation education and user experience simplification has made simulation more accessible to a broader user base.
More computations. Larger and more complex simulations drive more computation, requiring customers to use more Ansys licenses to complete their simulations.
Through decades of investments in the academic community and enhanced user experiences, our solutions have become accessible and relevant beyond our core "engineering" end user, to reach more users upstream and downstream from our core, which is the product validation process. Our multiphysics solutions enable our customers to address increasingly complex research and development (R&D) challenges from the component through the system and mission level of analysis. Our products seamlessly enable access to high performance compute capacity to run simulations, on-premises or in the cloud, which means our customers' R&D teams are unencumbered by compute capacity limitations that can hinder R&D cycle times.
The engineering simulation software market is strong and growing. The market growth is driven by customers' need for rapid, quality innovation in a cost efficient manner, enabling faster time to market for new products and lower warranty costs. Increasing product complexity is driving sustained demand for simulations. Key industry trends fueling customers' increasing needs for simulation include:
Electrification;
Autonomy;
Connectivity;
The industrial internet of things; and
Sustainability, including minimizing waste and physical prototyping, and improving circularity and development time.

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We have been investing and intend to continue to invest in our portfolio to broaden the range of physics and enable customers to analyze the interactions among physics at the component, system and mission level. Our strategy of Pervasive Insights is aligned with the near-term market growth opportunities and is laying the foundation for a future where simulation can be further democratized to broader classes of end users and end-use cases.
To augment our organic development roadmaps, we intend to continue our strategic and disciplined acquisition strategy to grow our business. Our strategy is to partner with industry leaders to extend simulation into other ecosystems and customer R&D workflows. Our business is built on a culture of high ethical standards and commitment to diversity, equity, inclusion and belonging.

We license our technology to businesses in a diverse set of industries, educational institutions and governmental agencies. We believe that the features, functionality and integrated multiphysics capabilities of our software products are as strong as they have ever been. The software business is generally characterized by long sales cycles which increase the difficulty of predicting sales for any particular quarter. We make many operational and strategic decisions based upon short- and long-term sales forecasts that are impacted not only by these long sales cycles, but also by current global economic conditions. As a result, we believe that our overall performance is best measured by fiscal year results rather than by quarterly results.

We address the competition and price pressure that we face in the short- and long-term by focusing on expanding the breadth, depth, ease of use and quality of the technologies, features, functionality and integrated multiphysics capabilities of our software products as compared to our competitors; investing in research and development to develop new and innovative products and increasing the capabilities of our existing products; maintaining a diverse industry footprint and focusing on customer needs, training, consulting and support; and enhancing our distribution channels. We also evaluate and execute strategic acquisitions to supplement our global engineering talent, product offerings and distribution channels.

Overview
Overall GAAP and Non-GAAP Results
This section includes a discussion of GAAP and non-GAAP results. For reconciliations of non-GAAP results to GAAP results, see the section titled "Non-GAAP Results" herein.
The 2023 period non-GAAP results exclude the income statement effects of stock-based compensation, excess payroll taxes related to stock-based compensation, amortization of acquired intangible assets, expenses related to business combinations and adjustments for the income tax effect of the excluded items. The 2022 period non-GAAP results also exclude the income statement effects of acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022. There is no adjustment in 2023 as the impact is not material.
Our GAAP and non-GAAP results for the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022 reflected the following variances:
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
GAAPNon-GAAPGAAPNon-GAAP
Revenue(2.9)%(3.1)%6.8 %6.3 %
Operating income(43.4)%(19.5)%(11.9)%0.6 %
Diluted earnings per share(41.8)%(20.3)%(15.1)%(1.0)%
Our results reflect a decline in revenue during the three months ended September 30, 2023 due to reductions in subscription lease license and perpetual license revenue, partially offset by an increase in maintenance revenue. Our results reflect an increase in revenue during the nine months ended September 30, 2023 due to growth in maintenance and subscription lease license revenue, partially offset by a decline in perpetual license revenue. We also experienced increased operating expenses during the three and nine months ended September 30, 2023, primarily due to increased personnel costs.


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In the context of broader U.S. foreign policy shifts, the U.S. Department of Commerce is continuing to apply controls to the export to China of certain technologies. Ansys maintains a robust global compliance program. Compliance and cooperation with the U.S. government’s evolving requirements are paramount to Ansys. Ansys has and will continue to align our internal processes to comply with U.S. export laws and regulations and any changes to those laws and regulations. During the third quarter, the U.S. Department of Commerce informed Ansys of additional restrictions on sales to certain Chinese entities, and incremental approval processes and export restrictions on the sale of certain Ansys products and services to entities performing research & development and certain controlled activities in China. The incremental export restrictions and processes took effect during the third quarter and initially included a broad export license requirement for certain China sales, which was later replaced by an enhanced Ansys screening process that was approved by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) on the final business day of the quarter. The new restrictions and processes have led to an elongated transaction cycle with certain prospects, which, in turn, is expected to lead to a delay in certain fourth quarter transactions and in some situations, could result in a loss of business. Ansys will continue to work collaboratively with the U.S. Department of Commerce to adhere to the new requirements, and we have internally aligned our business operations to adjust to these requirements. The requirements negatively impacted revenue and annual contract value (ACV) by $20.0 million in the current quarter and we expect a headwind for fiscal year 2023 of $25.0 million.
The third quarter's operating results also reflect a structural timing dynamic in the renewal base this quarter in which fewer lease contracts were up for renewal, resulting in comparatively lower up-front lease license revenue recognition. Quarterly dynamics may not be representative of the momentum in our business given the shifting mix of license types and renewal cycles that can be volatile quarter to quarter. While this timing dynamic leads to revenue volatility, it does not represent changes in customers' software usage or cash flows. This further highlights the importance of measuring our results based on our fiscal year rather than individual quarters.
This section also includes a discussion of constant currency results, which we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons by excluding the effects of foreign currency fluctuations on the reported results. All constant currency results presented in this Item 2 exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 2023 period results for entities whose functional currency is a currency other than the U.S. Dollar were converted to U.S. Dollars at rates that were in effect for the 2022 comparable period, rather than the actual exchange rates in effect for the 2023 period. Constant currency growth rates are calculated by adjusting the 2023 period reported amounts by the 2023 period currency fluctuation impacts and comparing to the 2022 comparable period reported amounts.
Impact of Foreign Currency
Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022. The impacts on our revenue and operating income as a result of the fluctuations of the U.S. Dollar when measured against our foreign currencies based on 2022 period exchange rates are reflected in the table below. Amounts in brackets indicate an adverse impact from currency fluctuations.
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
(in thousands)GAAPNon-GAAPGAAPNon-GAAP
Revenue$6,163 $6,163 $(11,180)$(11,180)
Operating income$2,505 $2,990 $(3,138)$(3,041)

In constant currency, our variances were as follows:
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
GAAPNon-GAAPGAAPNon-GAAP
Revenue(4.2)%(4.4)%7.6 %7.1 %
Operating income(45.4)%(21.0)%(10.9)%1.2 %


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Other Key Business Metric

ACV is a key performance metric and is useful to investors in assessing the strength and trajectory of our business. ACV is a supplemental metric to help evaluate the annual performance of the business. Over the life of the contract, ACV equals the total value realized from a customer. ACV is not impacted by the timing of license revenue recognition. ACV is used by management in financial and operational decision-making and in setting sales targets used for compensation. ACV is not a replacement for, and should be viewed independently of, GAAP revenue and deferred revenue as ACV is a performance metric and is not intended to be combined with any of these items. There is no GAAP measure comparable to ACV. ACV is composed of the following:

the annualized value of maintenance and subscription lease contracts with start dates or anniversary dates during the period, plus

the value of perpetual license contracts with start dates during the period, plus

the annualized value of fixed-term services contracts with start dates or anniversary dates during the period, plus

the value of work performed during the period on fixed-deliverable services contracts.

When we refer to the anniversary dates in the definition of ACV above, we are referencing the date of the beginning of the next twelve-month period in a contractually committed multi-year contract. If a contract is three years in duration, with a start date of July 1, 2023, the anniversary dates would be July 1, 2024 and July 1, 2025. We label these anniversary dates as they are contractually committed. While this contract would be up for renewal on July 1, 2026, our ACV performance metric does not assume any contract renewals.

Example 1: For purposes of calculating ACV, a $100,000 subscription lease contract or a $100,000 maintenance contract with a term of July 1, 2023 – June 30, 2024, would each contribute $100,000 to ACV for fiscal year 2023 with no contribution to ACV for fiscal year 2024.

Example 2: For purposes of calculating ACV, a $300,000 subscription lease contract or a $300,000 maintenance contract with a term of July 1, 2023 – June 30, 2026, would each contribute $100,000 to ACV in each of fiscal years 2023, 2024 and 2025. There would be no contribution to ACV for fiscal year 2026 as each period captures the full annual value upon the anniversary date.

Example 3: A perpetual license valued at $200,000 with a contract start date of March 1, 2023 would contribute $200,000 to ACV in fiscal year 2023.
During the three and nine months ended September 30, 2023 and 2022 our ACV was as follows:
 Three Months Ended September 30,
(in thousands, except percentages)20232022Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$457,549 $451,779 $409,317 $48,232 11.8 $42,462 10.4 
 Nine Months Ended September 30,
(in thousands, except percentages)20232022Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$1,345,305 $1,355,529 $1,213,735 $131,570 10.8 $141,794 11.7 

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Our trailing twelve-month recurring ACV, converted from the functional currency to U.S. Dollars at the 2022 period monthly average exchange rates, was as follows:
 
Twelve Months Ended September 30,
Change
(in thousands, except percentages)20232022Amount%
Recurring ACV at 2022 monthly average exchange rates$1,804,517 $1,560,140 $244,377 15.7 
Recurring ACV includes both subscription lease license and maintenance ACV and excludes perpetual license and service ACV.

Industry Commentary:
We continue to see our customers expand their digital engineering capabilities in support of digital transformation endeavors. Competitive pressures to reduce costs and shorten design cycles remain steady drivers of demand for our solutions. During the third quarter, our high-tech customers continued to invest in our simulation solutions to deliver more advanced chips, enhanced 5G and 6G technology, and next-generation automotive components. Within the aerospace and defense (A&D) industry, digital transformation remains a high-level priority for customers as they bolster defense and space programs. Our value proposition also remains attractive to automotive companies as major automotive companies seek to reduce product development costs, particularly for electric vehicles. Traditional original equipment manufacturers and suppliers continued to invest in simulation to drive electrification, advanced driver assistance systems, safety, and cybersecurity innovation. Additionally, electrification remains a key priority and investment driver among our industrial equipment customer base.
Geographic Trends:
The following table presents our geographic revenue variances using actual and constant currency rates during the three and nine months ended September 30, 2023 as compared to the three and nine months ended September 30, 2022:

GAAP
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
ActualConstant CurrencyActualConstant Currency
Americas4.2 %4.2 %14.0 %14.1 %
EMEA1.2 %(5.2)%6.0 %4.8 %
Asia-Pacific(16.8)%(15.6)%(3.1)%0.5 %
Total(2.9)%(4.2)%6.8 %7.6 %
Non-GAAP
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
ActualConstant CurrencyActualConstant Currency
Americas4.0 %3.9 %13.4 %13.5 %
EMEA1.0 %(5.4)%5.5 %4.2 %
Asia-Pacific(17.0)%(15.9)%(3.6)%— %
Total(3.1)%(4.4)%6.3 %7.1 %
The value and duration of multi-year subscription lease contracts executed during the period significantly impact the recognition of revenue. As a result, revenue may fluctuate, particularly on a quarterly basis, due to the timing of such contracts, relative differences in duration of long-term contracts from quarter to quarter and changes in the mix of license types sold compared to the prior year. Large swings in revenue growth rates are not necessarily indicative of customers' software usage changes or cash flows during the periods presented. To drive growth, we continue to focus on a number of sales improvement activities across our geographic regions, including sales hiring, pipeline building, productivity initiatives and customer engagement activities.
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Use of Estimates:
The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to contract revenue, standalone selling prices of our products and services, allowance for doubtful accounts receivable, valuation of goodwill and other intangible assets, useful lives for depreciation and amortization, acquired deferred revenue, operating lease assets and liabilities, fair values of stock awards, deferred compensation, income taxes, uncertain tax positions, tax valuation reserves, and contingencies and litigation. We base our estimates on historical experience, market experience, estimated future cash flows and various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Forward-Looking Information
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). Forward-looking statements are statements that provide current expectations or forecasts of future events based on certain assumptions. Forward-looking statements are subject to risks, uncertainties, and factors relating to our business which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.
Forward-looking statements use words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "likely," "may," "outlook," "plan," "predict," "project," "should," "target," or other words of similar meaning. Forward-looking statements include those about market opportunity, including our total addressable market. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.
The risks associated with the following, among others, could cause actual results to differ materially from those described in any forward-looking statements:

adverse conditions in the macroeconomic environment, including high inflation, recessionary conditions and volatility in equity and foreign exchange markets; political, economic and regulatory uncertainties in the countries and regions in which we operate;

impacts from tariffs, trade sanctions, export controls or other trade barriers, including export control restrictions and licensing requirements for exports to China;

impacts resulting from the conflict between Israel and Hamas, including impacts from changes to diplomatic relations and trade policy between the United States and other countries resulting from the conflict; impacts from changes to diplomatic relations and trade policy between the United States and Russia or the United States and other countries that may support Russia or take similar actions due to the conflict between Russia and Ukraine;

constrained credit and liquidity due to disruptions in the global economy and financial markets, which may limit or delay availability of credit under our existing or new credit facilities, or which may limit our ability to obtain credit or financing on acceptable terms or at all;

our ability to timely recruit and retain key personnel in a highly competitive labor market for skilled personnel, including potential financial impacts of wage inflation;

declines in our customers’ businesses resulting in adverse changes in procurement patterns; disruptions in accounts receivable and cash flow due to customers’ liquidity challenges and commercial deterioration; uncertainties regarding demand for our products and services in the future and our customers’ acceptance of new products; delays or declines in anticipated sales due to reduced or altered sales and marketing interactions with customers; and potential variations in our sales forecast compared to actual sales;

increased volatility in our revenue due to the timing, duration and value of multi-year subscription lease contracts; and our reliance on high renewal rates for annual subscription lease and maintenance contracts;