UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~2022


☐			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,

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~~Registrant's Common Stock, $0.01 par value per share, outstanding as of April 30, ~~2021~~2022 was ~~87,151,573~~86,990,120 shares.

ANSYS, INC. AND SUBSIDIARIES

INDEX



PART I	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets – March 31 3 1 , 202 12 and December 31, 202 20 201	3

	Condensed Consolidated Statements of Income – Three Months Ended March 31 ~~2021~~, 202 2 and ~~2020~~20 2 1	4

	Condensed Consolidated Statements of Comprehensive Income – Three Months Ended ~~March~~ March 3 1 , 202 12 and 20202 201	5

	Condensed Consolidated Statements of Cash Flows – Three Months Ended March 3 1 , 202 12 and 202 20 201	6

	Condensed Consolidated Statements of Stockholders' Equity – Three Months Ended March 31 3 1 , 202 12 and 20202 201	7

	Notes to Condensed Consolidated Financial Statements	8

	~~Report of Independent Registered Public Accounting Firm~~	18

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3436

Item 4.	Controls and Procedures	3537

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	3638

Item 1A.	Risk Factors	3638

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3638

Item 3.	Defaults Upon Senior Securities	3638

Item 4.	Mine Safety Disclosures	3638

Item 5.	Other Information	3638

Item 6.	Exhibits	3739

	SIGNATURES	3840

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)	(in thousands, except share and per share data)	March 31, 2021		December 31, 2020		(in thousands, except share and per share data)	March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	987,427	$	912,672	Cash and cash equivalents	$	657,421	$	667,667
Short-term investments	Short-term investments	516		479		Short-term investments	344		361
Accounts receivable, less allowance for doubtful accounts of $14,000		394,289		537,564
Accounts receivable, less allowance for doubtful accounts of $14,600						Accounts receivable, less allowance for doubtful accounts of $14,600	513,738		645,891
Other receivables and current assets	Other receivables and current assets	278,720		268,522		Other receivables and current assets	278,375		324,655
Total current assets	Total current assets	1,660,952		1,719,237		Total current assets	1,449,878		1,638,574
Long-term assets:	Long-term assets:					Long-term assets:
Property and equipment, net	Property and equipment, net	93,207		96,503		Property and equipment, net	84,678		87,914
Operating lease right-of-use assets	Operating lease right-of-use assets	125,635		137,730		Operating lease right-of-use assets	130,274		120,881
Goodwill	Goodwill	3,036,783		3,038,306		Goodwill	3,399,897		3,409,271
Other intangible assets, net	Other intangible assets, net	677,357		694,865		Other intangible assets, net	739,059		763,119
Other long-term assets	Other long-term assets	201,675		225,119		Other long-term assets	227,383		279,676
Deferred income taxes	Deferred income taxes	22,419		28,830		Deferred income taxes	22,014		24,879
Total long-term assets	Total long-term assets	4,157,076		4,221,353		Total long-term assets	4,603,305		4,685,740
Total assets	Total assets	$	5,818,028	$	5,940,590	Total assets	$	6,053,183	$	6,324,314
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	16,970	$	18,691	Accounts payable	$	17,102	$	10,863
Accrued bonuses and commissions	Accrued bonuses and commissions	24,911		112,491		Accrued bonuses and commissions	30,646		163,182
Accrued income taxes	Accrued income taxes	6,260		26,116		Accrued income taxes	7,065		8,410
Current portion of long-term debt	Current portion of long-term debt	4,688		0		Current portion of long-term debt	9,125		—
Other accrued expenses and liabilities	Other accrued expenses and liabilities	204,622		199,466		Other accrued expenses and liabilities	184,663		204,509
Deferred revenue	Deferred revenue	366,596		372,061		Deferred revenue	386,019		391,528
Total current liabilities	Total current liabilities	624,047		728,825		Total current liabilities	634,620		778,492
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Deferred income taxes	Deferred income taxes	102,221		110,321		Deferred income taxes	99,439		105,548
Long-term operating lease liabilities	Long-term operating lease liabilities	109,454		120,940		Long-term operating lease liabilities	114,238		104,378
Long-term debt	Long-term debt	793,515		798,118		Long-term debt	744,575		753,576
Other long-term liabilities	Other long-term liabilities	76,822		84,514		Other long-term liabilities	96,360		98,272
Total long-term liabilities	Total long-term liabilities	1,082,012		1,113,893		Total long-term liabilities	1,054,612		1,061,774
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding	Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding	0		0		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; 95,266,320 shares issued		953		953
Common stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 shares issued						Common stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 shares issued	953		953
Additional paid-in capital	Additional paid-in capital	1,346,601		1,434,203		Additional paid-in capital	1,415,407		1,465,694
Retained earnings	Retained earnings	3,876,991		3,804,593		Retained earnings	4,330,208		4,259,220
Treasury stock, at cost: 8,128,708 and 8,693,809 shares, respectively		(1,075,537)		(1,124,102)
Treasury stock, at cost: 8,285,245 and 8,188,331 shares, respectively						Treasury stock, at cost: 8,285,245 and 8,188,331 shares, respectively	(1,304,413)		(1,185,707)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(37,039)		(17,775)		Accumulated other comprehensive loss	(78,204)		(56,112)
Total stockholders' equity	Total stockholders' equity	4,111,969		4,097,872		Total stockholders' equity	4,363,951		4,484,048
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	5,818,028	$	5,940,590	Total liabilities and stockholders' equity	$	6,053,183	$	6,324,314

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

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three Months Ended					Three Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	March 31, 2021		March 31, 2020		(in thousands, except per share data)		March 31, 2022		March 31, 2021
Revenue:	Revenue:					Revenue:
Software licenses	Software licenses	$	132,604	$	87,830	Software licenses		$	157,445	$	132,604
Maintenance and service	Maintenance and service	230,622		217,155		Maintenance and service		267,632		230,622
Total revenue	Total revenue	363,226		304,985		Total revenue		425,077		363,226
Cost of sales:	Cost of sales:					Cost of sales:
Software licenses	Software licenses	7,606		4,926		Software licenses		8,436		7,606
Amortization	Amortization	14,949		9,552		Amortization		17,252		14,949
Maintenance and service	Maintenance and service	39,548		35,638		Maintenance and service		39,072		39,548
Total cost of sales	Total cost of sales	62,103		50,116		Total cost of sales		64,760		62,103
Gross profit	Gross profit	301,123		254,869		Gross profit		360,317		301,123
Operating expenses:	Operating expenses:					Operating expenses:
Selling, general and administrative	Selling, general and administrative	146,215		130,522		Selling, general and administrative		169,755		146,215
Research and development	Research and development	100,479		86,112		Research and development		105,274		100,479
Amortization	Amortization	4,407		4,162		Amortization		4,125		4,407
Total operating expenses	Total operating expenses	251,101		220,796		Total operating expenses		279,154		251,101
Operating income	Operating income	50,022		34,073		Operating income		81,163		50,022
Interest income	Interest income	517		2,775		Interest income		527		517
Interest expense	Interest expense	(3,315)		(3,651)		Interest expense		(2,967)		(3,315)
Other income, net		399		127
Income before income tax benefit		47,623		33,324
Income tax benefit		(24,775)		(12,740)
Other (expense) income, net						Other (expense) income, net		(694)		399
Income before income tax provision (benefit)						Income before income tax provision (benefit)		78,029		47,623
Income tax provision (benefit)						Income tax provision (benefit)		7,041		(24,775)
Net income	Net income	$	72,398	$	46,064	Net income		$	70,988	$	72,398
Earnings per share – basic:	Earnings per share – basic:					Earnings per share – basic:
Earnings per share	Earnings per share	$	0.83	$	0.54	Earnings per share		$	0.81	$	0.83
Weighted average shares	Weighted average shares	86,808		85,798		Weighted average shares		87,122		86,808
Earnings per share – diluted:	Earnings per share – diluted:					Earnings per share – diluted:
Earnings per share	Earnings per share	$	0.82	$	0.53	Earnings per share		$	0.81	$	0.82
Weighted average shares	Weighted average shares	87,986		87,369		Weighted average shares		87,750		87,986

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

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three Months Ended					Three Months Ended
(in thousands)	(in thousands)	March 31, 2021		March 31, 2020		(in thousands)		March 31, 2022		March 31, 2021
Net income	Net income	$	72,398	$	46,064	Net income		$	70,988	$	72,398
Other comprehensive loss:	Other comprehensive loss:					Other comprehensive loss:
Foreign currency translation adjustments	Foreign currency translation adjustments	(19,264)		(24,292)		Foreign currency translation adjustments		(22,092)		(19,264)
Comprehensive income	Comprehensive income	$	53,134	$	21,772	Comprehensive income		$	48,896	$	53,134

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

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended					Three Months Ended
(in thousands)	(in thousands)	March 31, 2021		March 31, 2020		(in thousands)	March 31, 2022		March 31, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	72,398	$	46,064	Net income	$	70,988	$	72,398
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization	Depreciation and intangible assets amortization	27,082		20,702		Depreciation and intangible assets amortization	29,080		27,082
Operating lease right-of-use assets expense	Operating lease right-of-use assets expense	5,699		5,075		Operating lease right-of-use assets expense	5,553		5,699
Deferred income tax benefit	Deferred income tax benefit	(3,564)		(5,442)		Deferred income tax benefit	(861)		(3,564)
Provision for bad debts	Provision for bad debts	18		3,116		Provision for bad debts	2,326		18
Stock-based compensation expense	Stock-based compensation expense	35,119		30,941		Stock-based compensation expense	35,651		35,119

Other	Other	975		1,553		Other	919		975
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	159,038		117,830		Accounts receivable	180,259		159,038
Other receivables and current assets	Other receivables and current assets	(12,071)		12,013		Other receivables and current assets	43,479		(12,071)
Other long-term assets	Other long-term assets	(1,909)		(3,426)		Other long-term assets	(5,983)		(1,909)
Accounts payable, accrued expenses and current liabilities	Accounts payable, accrued expenses and current liabilities	(80,050)		(99,112)		Accounts payable, accrued expenses and current liabilities	(143,883)		(80,050)
Accrued income taxes	Accrued income taxes	(20,954)		1,006		Accrued income taxes	(1,119)		(20,954)
Deferred revenue	Deferred revenue	1,204		4,784		Deferred revenue	455		1,204
Other long-term liabilities	Other long-term liabilities	(11,878)		12,308		Other long-term liabilities	(5,928)		(11,878)
Net cash provided by operating activities	Net cash provided by operating activities	171,107		147,412		Net cash provided by operating activities	210,936		171,107
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(10,783)		(2,348)		Acquisitions, net of cash acquired	(4,915)		(10,783)
Capital expenditures	Capital expenditures	(5,045)		(6,987)		Capital expenditures	(5,062)		(5,045)
Other investing activities	Other investing activities	(35)		(264)		Other investing activities	13		(35)
Net cash used in investing activities	Net cash used in investing activities	(15,863)		(9,599)		Net cash used in investing activities	(9,964)		(15,863)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Principal payments on long-term debt		0		(75,000)

Purchase of treasury stock	Purchase of treasury stock	0		(161,029)		Purchase of treasury stock	(155,571)		—
Restricted stock withholding taxes paid in lieu of issued shares	Restricted stock withholding taxes paid in lieu of issued shares	(86,049)		(62,425)		Restricted stock withholding taxes paid in lieu of issued shares	(59,196)		(86,049)
Proceeds from shares issued for stock-based compensation	Proceeds from shares issued for stock-based compensation	11,892		9,716		Proceeds from shares issued for stock-based compensation	10,122		11,892
Other financing activities	Other financing activities	(51)		0		Other financing activities	—		(51)
Net cash used in financing activities	Net cash used in financing activities	(74,208)		(288,738)		Net cash used in financing activities	(204,645)		(74,208)
Effect of exchange rate fluctuations on cash and cash equivalents	Effect of exchange rate fluctuations on cash and cash equivalents	(6,281)		(3,421)		Effect of exchange rate fluctuations on cash and cash equivalents	(6,573)		(6,281)
Net increase (decrease) in cash and cash equivalents		74,755		(154,346)
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(10,246)		74,755
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	912,672		872,094		Cash and cash equivalents, beginning of period	667,667		912,672
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	987,427	$	717,748	Cash and cash equivalents, end of period	$	657,421	$	987,427
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Income taxes paid	Income taxes paid	$	20,641	$	6,757	Income taxes paid	$	3,566	$	20,641
Interest paid	Interest paid	$	2,956	$	5,628	Interest paid	$	2,626	$	2,956

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

Table of Contents

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			Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(in thousands)	(in thousands)	Shares	Amount						Shares	Amount						(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

Balance, January 1, 2022																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																Treasury shares acquired								500	(155,571)				(155,571)
Stock-based compensation activity	Stock-based compensation activity				(87,602)				(565)	48,565				(39,037)		Stock-based compensation activity				(50,287)				(403)	36,865				(13,422)
Other comprehensive loss	Other comprehensive loss											(19,264)		(19,264)		Other comprehensive loss											(22,092)		(22,092)
Net income	Net income						72,398							72,398		Net income						70,988							70,988
Balance, March 31, 2021		95,266	$	953	$	1,346,601	$	3,876,991	8,129	$	(1,075,537)	$	(37,039)	$	4,111,969
Balance, March 31, 2022																Balance, March 31, 2022	95,267	$	953	$	1,415,407	$	4,330,208	8,285	$	(1,304,413)	$	(78,204)	$	4,363,951


		Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Stockholders' Equity			Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss		Total Stockholders' Equity
(in thousands)	(in thousands)	Shares	Amount						Shares	Amount						(in thousands)	Shares	Amount						Shares	Amount
Balance, January 1, 2020		94,628	$	946	$	1,188,939	$	3,370,706	8,893	$	(1,041,831)	$	(65,381)	$	3,453,379
Treasury shares acquired									690	(161,029)				(161,029)
Balance, January 1, 2021																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	Stock-based compensation activity				(70,769)				(541)	48,997				(21,772)		Stock-based compensation activity				(87,602)				(565)	48,565				(39,037)
Other comprehensive loss	Other comprehensive loss											(24,292)		(24,292)		Other comprehensive loss											(19,264)		(19,264)
Net income	Net income						46,064							46,064		Net income						72,398							72,398
Balance, March 31, 2020		94,628	$	946	$	1,118,170	$	3,416,770	9,042	$	(1,153,863)	$	(89,673)	$	3,292,350
Balance, March 31, 2021																Balance, March 31, 2021	95,266	$	953	$	1,346,601	$	3,876,991	8,129	$	(1,075,537)	$	(37,039)	$	4,111,969

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

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2021~~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, ~~electronics, semiconductors,~~ energy, ~~turbomachinery,~~industrial equipment, materials and chemicals, consumer products, healthcare, and ~~healthcare.~~construction.

As defined by the accounting guidance for segment reporting, we operate as 1 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.

We are closely monitoring the spread of COVID-19 and continually mitigating its potential effects on our business. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our business and employees.

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, ~~2020 (2020~~2021 (2021 Form 10-K). The condensed consolidated December 31, ~~2020~~2021 balance sheet presented is derived from the audited December 31, ~~2020~~2021 balance sheet included in the ~~2020~~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 months ended March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for any future period.

Recently Adopted Accounting Guidance

~~Income taxes:~~Business combinations: In ~~December 2019,~~October 2021, the Financial Accounting Standards Board ~~(FASB)~~ 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 ~~Update (ASU) No. 2019-12,~~Codification (ASC) 606, ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~Revenue from Contracts with Customers ~~(ASU 2019-12)~~, as ~~part of its initiative to reduce complexity in~~if the ~~accounting standards.~~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 ~~amendments in ASU 2019-12 eliminated certain exceptions related~~standard does not impact acquired contract assets or liabilities from business combinations that occurred prior to the ~~approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period~~effective date of adoption, and the ~~recognition~~impact in current and future periods will depend on the contract assets and contract liabilities acquired in business combinations after the effective date of ~~deferred tax liabilities for outside basis differences. ASU 2019-12 also clarified~~adoption.

Accounting Guidance Issued and ~~simplified other aspects~~Not Yet Adopted

It is not expected that the future adoption of ~~the~~any recently issued accounting ~~for income taxes. We adopted ASU 2019-12 on January 1, 2021 with no~~pronouncements will have a material impact toon our ~~condensed consolidated~~ financial ~~statements.~~position, results of operations or cash flows.

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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:


		March 31, 2021			December 31, 2020				March 31, 2022			December 31, 2021
(in thousands, except percentages)	(in thousands, except percentages)	Amount		% of Total	Amount		% of Total	(in thousands, except percentages)	Amount		% of Total	Amount		% of Total
Cash accounts	Cash accounts	$	548,833	55.6	$	571,587	62.6	Cash accounts	$	572,768	87.1	$	580,047	86.9
Money market funds	Money market funds	438,594		44.4	341,085		37.4	Money market funds	84,653		12.9	87,620		13.1
Total	Total	$	987,427		$	912,672		Total	$	657,421		$	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							Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	March 31, 2021			March 31, 2020			(in thousands, except percentages)		March 31, 2022			March 31, 2021
Revenue:	Revenue:							Revenue:
Lease licenses		$	65,077		$	44,874
Subscription lease licenses								Subscription lease licenses		$	91,457		$	65,077
Perpetual licenses	Perpetual licenses	67,527			42,956			Perpetual licenses		65,988			67,527
Software licenses	Software licenses	132,604			87,830			Software licenses		157,445			132,604
Maintenance	Maintenance	213,674			200,488			Maintenance		247,241			213,674
Service	Service	16,948			16,667			Service		20,391			16,948
Maintenance and service	Maintenance and service	230,622			217,155			Maintenance and service		267,632			230,622
Total revenue	Total revenue	$	363,226		$	304,985		Total revenue		$	425,077		$	363,226

Direct revenue, as a percentage of total revenue	Direct revenue, as a percentage of total revenue	71.8		%	73.6		%	Direct revenue, as a percentage of total revenue		72.4		%	71.8		%
Indirect revenue, as a percentage of total revenue	Indirect revenue, as a percentage of total revenue	28.2		%	26.4		%	Indirect revenue, as a percentage of total revenue		27.6		%	28.2		%

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

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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 three months ended March 31, ~~2021~~2022 and ~~2020~~2021 were as follows:


(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Beginning balance – January 1	Beginning balance – January 1	$	388,810	$	365,274	Beginning balance – January 1	$	412,781	$	388,810

Acquired deferred revenue						Acquired deferred revenue	84		—
Deferral of revenue	Deferral of revenue	362,043		308,817		Deferral of revenue	423,649		362,043
Recognition of revenue	Recognition of revenue	(363,226)		(304,985)		Recognition of revenue	(425,077)		(363,226)
Currency translation	Currency translation	(6,898)		(3,355)		Currency translation	(6,317)		(6,898)
Ending balance – March 31	Ending balance – March 31	$	380,729	$	365,751	Ending balance – March 31	$	405,120	$	380,729

Total revenue allocated to remaining performance obligations as of March 31, ~~2021~~2022 will be recognized as revenue as follows:


(in thousands)
Next 12 months	$	~~607,500~~746,037
Months 13-24	~~178,935~~251,667
Months 25-36	~~75,807~~139,907
Thereafter	~~74,259~~65,564
Total revenue allocated to remaining performance obligations	$	~~936,501~~1,203,175

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 three months ended March 31, ~~2021~~2022 and ~~2020~~2021 included amounts in deferred revenue and backlog at the beginning of the period of ~~$209.3~~$244.6 million and ~~$191.3~~$209.3 million, respectively.

4.Acquisitions

During the quarter ended March 31, ~~2021,~~2022, we completed an acquisition ~~with~~for a purchase price of ~~$10.8~~$5.1 million to enhance our ~~customers' experience.~~solution offerings. The effects of the business combination were not material to our consolidated results of operations. The preliminary purchase allocations are $5.6 million of identifiable intangible assets, $6.2 million of goodwill and $1.0 million of net liabilities. The preliminary fair values of the assets acquired and liabilities assumed may change as additional information becomes available during the measurement period (up to one year from the acquisition date).

On ~~December~~October 1, ~~2020,~~2021, we acquired 100% of the shares of ~~Analytical Graphics, Inc. (AGI),~~Zemax, a ~~premier provider~~leader in high-performance optical imaging system simulation, for a purchase price of ~~mission-simulation, modeling, testing and analysis software for aerospace, defense and intelligence applications.~~$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 ~~empowering users to solve challenges by simulating from the chip level all the way to a customer's entire mission.~~and enhance our customers' experience. These acquisitions were not individually significant. The ~~transaction closed with a~~combined purchase price of ~~$722.5 million.~~

~~On April 1, 2020, we acquired 100% of~~these acquisitions during the ~~shares of Lumerical Inc. (Lumerical), a leading developer of photonic design and simulation tools, for a purchase price of approximately $107.5~~year ended December 31, 2021 was $110.7 million, which was paid in cash. ~~The acquisition adds best-in-class photonic products to our multiphysics portfolio, providing customers with a full set of solutions to solve their next-generation product challenges.~~

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

See Note 16, Subsequent Events, for information on our recent acquisitions.

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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)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
Receivables related to unrecognized revenue	Receivables related to unrecognized revenue	$	135,828	$	192,154	Receivables related to unrecognized revenue	$	139,441	$	200,888
Income taxes receivable, including overpayments and refunds	Income taxes receivable, including overpayments and refunds	59,876		31,628		Income taxes receivable, including overpayments and refunds	68,962		71,332
Prepaid expenses and other current assets	Prepaid expenses and other current assets	83,016		44,740		Prepaid expenses and other current assets	69,972		52,435
Total other receivables and current assets	Total other receivables and current assets	$	278,720	$	268,522	Total other receivables and current assets	$	278,375	$	324,655

Accrued vacation						Accrued vacation	41,882		35,879
Payroll-related accruals	Payroll-related accruals	41,431		20,117		Payroll-related accruals	37,597		21,507
Accrued vacation		39,156		34,132
Consumption, VAT and sales tax liabilities	Consumption, VAT and sales tax liabilities	28,370		45,156		Consumption, VAT and sales tax liabilities	25,867		52,630
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	95,665		100,061		Accrued expenses and other current liabilities	79,317		94,493
Total other accrued expenses and liabilities	Total other accrued expenses and liabilities	$	204,622	$	199,466	Total other accrued expenses and liabilities	$	184,663	$	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					Three Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	March 31, 2021		March 31, 2020		(in thousands, except per share data)		March 31, 2022		March 31, 2021
Net income	Net income	$	72,398	$	46,064	Net income		$	70,988	$	72,398
Weighted average shares outstanding – basic	Weighted average shares outstanding – basic	86,808		85,798		Weighted average shares outstanding – basic		87,122		86,808
Dilutive effect of stock plans	Dilutive effect of stock plans	1,178		1,571		Dilutive effect of stock plans		628		1,178
Weighted average shares outstanding – diluted	Weighted average shares outstanding – diluted	87,986		87,369		Weighted average shares outstanding – diluted		87,750		87,986
Basic earnings per share	Basic earnings per share	$	0.83	$	0.54	Basic earnings per share		$	0.81	$	0.83
Diluted earnings per share	Diluted earnings per share	$	0.82	$	0.53	Diluted earnings per share		$	0.81	$	0.82
Anti-dilutive shares	Anti-dilutive shares	27		28		Anti-dilutive shares		65		27

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7.Goodwill and Intangible Assets

Intangible assets are classified as follows:


		March 31, 2021				December 31, 2020					March 31, 2022				December 31, 2021
(in thousands)	(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:	Finite-lived intangible assets:									Finite-lived intangible assets:
Developed software and core technologies	Developed software and core technologies	$	862,677	$	(382,824)	$	859,620	$	(370,338)	Developed software and core technologies	$	983,973	$	(437,282)	$	985,685	$	(422,797)
Customer lists and contract backlog		283,592		(137,680)		288,085		(136,093)
Customer lists										Customer lists	200,957		(60,700)		203,072		(57,175)
Trade names	Trade names	175,090		(123,855)		175,626		(122,392)		Trade names	182,025		(130,271)		182,554		(128,577)
Total	Total	$	1,321,359	$	(644,359)	$	1,323,331	$	(628,823)	Total	$	1,366,955	$	(628,253)	$	1,371,311	$	(608,549)
Indefinite-lived intangible asset:	Indefinite-lived intangible asset:									Indefinite-lived intangible asset:
Trade name	Trade name	$	357			$	357			Trade name	$	357			$	357

Finite-lived intangible assets are amortized over their estimated useful lives of two years to seventeen years. Amortization expense for the intangible assets reflected above was ~~$19.4~~$21.4 million and ~~$13.7~~$19.4 million for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

As of March 31, ~~2021,~~2022, estimated future amortization expense for the intangible assets reflected above was as follows:


(in thousands)	(in thousands)			(in thousands)
Remainder of 2021		$	55,244
2022		77,005
Remainder of 2022				Remainder of 2022	$	62,556
2023	2023	78,298		2023	88,738
2024	2024	77,451		2024	89,805
2025	2025	74,950		2025	88,387
2026	2026	72,559		2026	86,831
2027				2027	85,813
Thereafter	Thereafter	241,493		Thereafter	236,572
Total intangible assets subject to amortization	Total intangible assets subject to amortization	677,000		Total intangible assets subject to amortization	738,702
Indefinite-lived trade name	Indefinite-lived trade name	357		Indefinite-lived trade name	357
Other intangible assets, net	Other intangible assets, net	$	677,357	Other intangible assets, net	$	739,059

The changes in goodwill during the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 were as follows:


(in thousands)	(in thousands)	2021		2020		(in thousands)	2022		2021
Beginning balance – January 1	Beginning balance – January 1	$	3,038,306	$	2,413,280	Beginning balance – January 1	$	3,409,271	$	3,038,306
Acquisitions and adjustments(1)	Acquisitions and adjustments(1)	8,215		(336)		Acquisitions and adjustments(1)	1,961		8,215

Currency translation	Currency translation	(9,738)		(14,260)		Currency translation	(11,335)		(9,738)
Ending balance – March 31	Ending balance – March 31	$	3,036,783	$	2,398,684	Ending balance – March 31	$	3,399,897	$	3,036,783

(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 ~~2021,~~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, ~~2021.~~2022. No other events or circumstances changed during the three months ended March 31, ~~2021~~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 current and long-term 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 current and long-term 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:									Fair Value Measurements at Reporting Date Using:
(in thousands)	(in thousands)	March 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(in thousands)	March 31, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	438,594	$	438,594	$	0	$	0	Cash equivalents	$	84,653	$	84,653	$	—	$	—
Short-term investments	Short-term investments	$	516	$	0	$	516	$	0	Short-term investments	$	344	$	—	$	344	$	—
Deferred compensation plan investments	Deferred compensation plan investments	$	1,601	$	1,601	$	0	$	0	Deferred compensation plan investments	$	1,600	$	1,600	$	—	$	—
Equity securities										Equity securities	$	2,313	$	2,313	$	—	$	—


				Fair Value Measurements at Reporting Date Using:									Fair Value Measurements at Reporting Date Using:
(in thousands)	(in thousands)	December 31, 2020		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(in thousands)	December 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets	Assets									Assets
Cash equivalents	Cash equivalents	$	341,085	$	341,085	$	0	$	0	Cash equivalents	$	87,620	$	87,620	$	—	$	—
Short-term investments	Short-term investments	$	479	$	0	$	479	$	0	Short-term investments	$	361	$	—	$	361	$	—
Deferred compensation plan investments	Deferred compensation plan investments	$	1,602	$	1,602	$	0	$	0	Deferred compensation plan investments	$	1,602	$	1,602	$	—	$	—
Equity securities										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 (ROU) 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

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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					Three Months Ended
(in thousands)	(in thousands)	March 31, 2021		March 31, 2020		(in thousands)		March 31, 2022		March 31, 2021
Lease liability cost	Lease liability cost	$	7,001	$	6,218	Lease liability cost		$	6,971	$	7,001
Variable lease cost not included in the lease liability(1)	Variable lease cost not included in the lease liability(1)	1,282		1,097		Variable lease cost not included in the lease liability(1)		1,084		1,282
Total lease cost	Total lease cost	$	8,283	$	7,315	Total lease cost		$	8,055	$	8,283

(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					Three Months Ended
(in thousands)	(in thousands)	March 31, 2021		March 31, 2020		(in thousands)		March 31, 2022		March 31, 2021
Cash paid for amounts included in the measurement of the lease liability:	Cash paid for amounts included in the measurement of the lease liability:					Cash paid for amounts included in the measurement of the lease liability:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	(6,827)	$	(5,733)	Operating cash flows from operating leases		$	(7,018)	$	(6,827)
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	587		19,601		Right-of-use assets obtained in exchange for new operating lease liabilities		$	16,318	$	587


		As of March 31,					As of March 31,
		2021		2020			2022		2021
Weighted-average remaining lease term of operating leases	Weighted-average remaining lease term of operating leases	7.1 years		8.0 years		Weighted-average remaining lease term of operating leases	7.3 years		7.1 years
Weighted-average discount rate of operating leases	Weighted-average discount rate of operating leases	3.1	%	3.4	%	Weighted-average discount rate of operating leases	2.9	%	3.1	%

The maturity schedule of the operating lease liabilities as of March 31, ~~2021~~2022 is as follows:


(in thousands)	(in thousands)			(in thousands)
Remainder of 2021		$	20,283
2022		24,304
Remainder of 2022				Remainder of 2022	$	20,230
2023	2023	19,027		2023	22,610
2024	2024	17,956		2024	20,417
2025	2025	16,877		2025	18,625
2026				2026	16,537
Thereafter	Thereafter	49,834		Thereafter	53,139
Total future lease payments	Total future lease payments	148,281		Total future lease payments	151,558
Less: Present value adjustment	Less: Present value adjustment	(15,787)		Less: Present value adjustment	(15,081)
Present value of future lease payments(1)	Present value of future lease payments(1)	$	132,494	Present value of future lease payments(1)	$	136,477

(1) Includes the current portion of operating lease liabilities of ~~$23.0~~$22.2 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 March 31, ~~2021.~~2022.

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10.Debt

In February 2019, we entered into a credit agreement for a $500.0 million unsecured revolving credit facility, which includes a $50.0 million sublimit for the issuance of letters of credit (Revolving Credit Facility), with Bank of America, N.A. as the Administrative Agent. The Revolving Credit Facility becomes payable in full on February 22, 2024 and is available for general corporate purposes, including, among others, to finance acquisitions and capital expenditures. The Revolving Credit Facility ~~had not~~has never been ~~utilized as of March 31, 2021.~~utilized.

WeIn connection with a 2019 acquisition, we amended our credit agreement (Amended Credit Agreement) on October 16, 2019. The amendment provided for a new $500.0 million unsecured term loan facility to partially finance ~~our acquisition of Livermore Software Technology (LST) in~~ the ~~fourth quarter of 2019.~~acquisition. The term loan was funded on November 1, 2019 and matures on November 1, 2024. Principal on the term loan ~~will be~~is payable ~~on the last business day of each fiscal quarter commencing with the ninth full fiscal quarter after the funding date~~quarterly at a rate of 1.25% ~~per quarter, increasing to~~in 2022 and 2.50% ~~per quarter after the next four fiscal quarters.~~thereafter. We repaid $75.0 million of the unsecured term loan balance in January 2020 prior to the scheduled maturity dates in 2022 ($25.0 million) and 2023 ($50.0 million). In June 2021, we repaid $26.0 million of the unsecured term loan balance prior to the scheduled maturity dates in 2024.

In connection with ~~the~~a 2020 acquisition, ~~of AGI,~~ we entered into a credit agreement ~~(AGI~~(2020 Credit Agreement) on November 9, 2020, with Bank of America, N.A. as the Administrative Agent. The ~~AGI~~2020 Credit Agreement provided for a new $375.0 million unsecured term loan facility to finance a portion of the cash consideration for the acquisition. The term loan was funded on December 1, 2020 and matures on November 1, 2024. Principal on the term loan ~~will be~~is payable ~~on the last business day of each fiscal quarter commencing with the fifth full fiscal quarter after the funding date~~quarterly at a rate of 1.25% ~~per quarter, increasing~~in 2022 and 2.50% thereafter. We repaid $19.0 million of the unsecured term loan balance in June 2021 prior to ~~2.50% per quarter after~~ the ~~next four fiscal quarters.~~scheduled maturity dates in 2022 ($18.8 million) and 2023 ($0.2 million).

Borrowings under the Amended Credit Agreement and the ~~AGI~~2020 Credit Agreement (collectively, the Credit Agreements) accrue interest at the Eurodollar rate plus an applicable margin or at the base rate, at our election. For the quarter ended March 31, ~~2021,~~2022, we elected to apply the Eurodollar rate. The base rate is the applicable margin plus the highest of (i) the federal funds rate plus 0.500%, (ii) the Bank of America prime rate and (iii) the Eurodollar rate plus 1.000%. The applicable margin for these 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). This results in a margin ranging from 1.125% to 1.750% and 0.125% to 0.750% for the Eurodollar rate and base rate, respectively.

The ~~weighted-average~~weighted average interest ~~rates~~rate in effect for the three months ended March 31, 2022 and 2021 was 1.35% and ~~2020 were~~ 1.45% ~~and 3.03%~~, respectively. As of March 31, ~~2021,~~2022, the rate in effect for the Credit Agreements was ~~1.45%~~1.58%.

The Credit Agreements contain language in the event the Eurodollar rate is not available due to LIBOR changes. If this occurs, the base rate will be used for borrowings. However, we may work with the Administrative Agent to amend the Credit Agreements to replace the Eurodollar rate with (i) one or more rates based on the Secured Overnight Financing Rate (SOFR); or (ii) another alternative benchmark rate, subject to the lenders' approval.

The Credit Agreements contain customary representations and warranties, affirmative and negative covenants and events of default. The Credit Agreements also each contain a financial covenant requiring us to maintain a consolidated leverage ratio of indebtedness to earnings before interest, taxes, depreciation and amortization not exceeding 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 March 31, ~~2021 and December 31, 2020,~~2022, the carrying ~~values~~value of the term loans ~~were $798.2~~was $753.7 million, of which $9.1 million is included in current portion of long-term debt and $744.6 million is included in long-term debt and is net of $1.3 million of unamortized debt issuance costs. As of December 31, 2021, the carrying value of the term loans was $753.6 million, which is net of ~~$1.8~~$1.4 million of unamortized debt issuance costs and ~~$798.1 million, which~~the total amount is ~~net of $1.9 million of unamortized debt issuance costs, respectively.~~included in long-term debt. We were in compliance with all covenants as of March 31, ~~2021~~2022 and December 31, ~~2020.~~2021.

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11.Income Taxes

Our income before income tax ~~benefit,~~provision (benefit), income tax ~~benefit~~provision (benefit) and effective tax rates were as follows:


		Three Months Ended							Three Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	March 31, 2021			March 31, 2020			(in thousands, except percentages)		March 31, 2022			March 31, 2021
Income before income tax benefit		$	47,623		$	33,324
Income tax benefit		(24,775)			(12,740)
Income before income tax provision (benefit)								Income before income tax provision (benefit)		$	78,029		$	47,623
Income tax provision (benefit)								Income tax provision (benefit)		$	7,041		$	(24,775)
Effective tax rate	Effective tax rate	(52.0)		%	(38.2)		%	Effective tax rate		9.0		%	(52.0)		%

Tax ~~benefit~~expense (benefit) for the three months ended March 31, 2022 and 2021 ~~and 2020 was~~benefited due to ~~increased tax~~ deductions related to ~~stock~~stock-based compensation, many of which were recognized discretely. These ~~tax~~ benefits were ~~in excess of tax expense at the annualized effective tax rate~~partially offset by non-deductible compensation. Discrete deductions relating to stock-based compensation were significantly higher for the three months ended March 31, ~~2021 and 2020, resulting in a net tax benefit. Our expected annualized effective tax rate remains positive for~~ 2021.

12.Stock Repurchase Program

Under our stock repurchase program, we repurchased shares as follows:

Three Months Ended
(in thousands, except per share data) March 31,
2021 March 31,
2020
Number of shares repurchased 0 690
Average price paid per share $ 0 $ 233.48
Total cost $ 0 $ 161,029


	Three Months Ended
(in thousands, except per share data)	March 31, 2022		March 31, 2021
Number of shares repurchased	500		—
Average price paid per share	$	311.14	$	—
Total cost	$	155,571	$	—

As of March 31, ~~2021, 2.8~~2022, 2.0 million shares remained available for repurchase under the program.

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 Ended					Three Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	March 31, 2021		March 31, 2020		(in thousands, except per share data)		March 31, 2022		March 31, 2021
Cost of sales:	Cost of sales:					Cost of sales:
Maintenance and service	Maintenance and service	$	3,562	$	2,866	Maintenance and service		$	2,563	$	3,562
Operating expenses:	Operating expenses:					Operating expenses:
Selling, general and administrative	Selling, general and administrative	17,223		15,144		Selling, general and administrative		20,444		17,223
Research and development	Research and development	14,334		12,931		Research and development		12,644		14,334
Stock-based compensation expense before taxes	Stock-based compensation expense before taxes	35,119		30,941		Stock-based compensation expense before taxes		35,651		35,119
Related income tax benefits	Related income tax benefits	(42,625)		(25,906)		Related income tax benefits		(24,888)		(42,625)
Stock-based compensation expense, net of taxes	Stock-based compensation expense, net of taxes	$	(7,506)	$	5,035	Stock-based compensation expense, net of taxes		$	10,763	$	(7,506)
Net impact on earnings per share:	Net impact on earnings per share:					Net impact on earnings per share:
Basic earnings per share	Basic earnings per share	$	0.09	$	(0.06)	Basic earnings per share		$	(0.12)	$	0.09
Diluted earnings per share	Diluted earnings per share	$	0.09	$	(0.06)	Diluted earnings per share		$	(0.12)	$	0.09

Stock-based compensation iswas a net benefit for the three months ended March 31, ~~2021. The~~2021 as the tax benefits on stock-based compensation ~~exceed~~exceeded the gross stock-based compensation expense due to increased excess tax benefits recognized related to awards issued in prior periods that were either exercised or released in the ~~current~~ period.

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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 Ended					Three Months Ended
(in thousands)	(in thousands)	March 31, 2021		March 31, 2020		(in thousands)		March 31, 2022		March 31, 2021
United States	United States	$	152,701	$	125,113	United States		$	197,561	$	152,701
Japan	Japan	42,015		37,359		Japan		37,871		42,015
Germany	Germany	31,346		30,097		Germany		30,586		31,346
China						China		23,208		14,452
South Korea	South Korea	22,398		15,561		South Korea		21,940		22,398

France		15,386		15,469

Other Europe, Middle East and Africa (EMEA)	Other Europe, Middle East and Africa (EMEA)	56,543		43,841		Other Europe, Middle East and Africa (EMEA)		74,437		71,929
Other international	Other international	42,837		37,545		Other international		39,474		28,385
Total revenue	Total revenue	$	363,226	$	304,985	Total revenue		$	425,077	$	363,226

Property and equipment by geographic area is as follows:


(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021
United States	United States	$	62,890	$	65,633	United States	$	60,909	$	62,880
India	India	7,077		7,408		India	6,104		6,144
Germany	Germany	5,541		5,277		Germany	3,840		4,434
France		5,239		5,749

Other EMEA	Other EMEA	5,688		5,847		Other EMEA	8,752		9,215
Other international	Other international	6,772		6,589		Other international	5,073		5,241
Total property and equipment, net	Total property and equipment, net	$	93,207	$	96,503	Total property and equipment, net	$	84,678	$	87,914

15.Contingencies and Commitments

We are subject to various claims, investigations, ~~claims~~ 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 party's 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 ~~approximately~~ $7.4 million. As such charges are not probable at this time, a reserve has not been recorded on the condensed consolidated balance sheet as of March 31, ~~2021.~~2022. 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~~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 $7.4 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, ~~of intellectual property infringement or non-compliance to contractual terms and conditions~~ by third parties, of infringement or misappropriation of their intellectual property rights arising from such ~~customer’s~~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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~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

16.Subsequent Events

In May 2022, we completed various strategic acquisitions for a combined purchase price of $249.0 million. These acquisitions were funded with existing cash balances. Due to the ~~Board of Directors and Stockholders of ANSYS, Inc.~~

~~Results of Review of Interim Financial Information~~

~~We have reviewed~~limited time since the ~~accompanying condensed consolidated balance sheet of ANSYS, Inc. and subsidiaries (the "Company")~~acquisition dates, the initial accounting for these business combinations is incomplete. As a result, we are unable to provide the amounts recognized as of ~~March 31, 2021,~~ the ~~related condensed consolidated statements of income, comprehensive income, stockholders’ equity and cash flows~~acquisition dates for the ~~three-month periods ended March 31, 2021~~major classes of assets acquired and 2020, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

liabilities assumed. We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~Basis for Review Results~~

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not ~~express such an opinion.~~expect the operations to contribute meaningfully to our current year’s financial results.

~~/s/ Deloitte & Touche LLP~~

~~Pittsburgh, Pennsylvania~~

~~May 5, 2021~~

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Item 2.~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto for the three months ended March 31, ~~2021,~~2022, and with our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2020~~2021 included in the ~~2020~~2021 Form 10-K filed with the Securities and Exchange ~~Commission.~~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 ~~Delaware~~ 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, ~~electronics, semiconductors,~~ energy, ~~turbomachinery,~~industrial equipment, materials and chemicals, consumer products, healthcare, and ~~healthcare.~~construction. Headquartered south of Pittsburgh, Pennsylvania, we employed ~~approximately 4,800~~5,200 people as of March 31, ~~2021.~~2022. We focus on the development of open and flexible solutions that enable users to analyze designs directly on the desktop ~~which can be delivered both on-premises and in~~and/or via the ~~cloud. We provide~~cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. 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.

Our strategy of Pervasive Engineering ~~Simulation~~Simulation™ seeks to deepen the use of simulation in our core, to ~~amplify usage of~~inject simulation throughout the product lifecycle and to embed simulation into our partners' ecosystems. The engineering software simulation market is strong and growing. The market growth is driven by ~~customers’ needs~~customers' need for rapid, quality innovation in a ~~cost-efficient~~cost efficient manner, enabling faster time to market of new products and lower warranty costs. ~~While~~We are investing in solutions to help engineers deal with increasing product complexity in:

•Electrification, including electric vehicles;

•Autonomy, including self-driving vehicles;

•5G and telecommunications; and

•IIoT.

In the ~~transition away from physical prototyping toward~~longer term, we are also investing in opportunities around digital twins and simulation ~~is prevalent through all industries, simulation demand is heightened by investments in high-growth solutions, including 5G, electrification, autonomous and the IIoT.~~for additive manufacturing. Our strategy of Pervasive Engineering Simulation is aligned with ~~this~~the market growth.

To support our strategy of Pervasive Engineering Simulation, we will continue to follow a series of pillars that we believe will drive future growth. We will reinforce and extend our leadership in core and the high-growth solutions. We will build and grow our offerings and expertise in adjacencies to our current core competencies. We will also continue to pursue a smart and strategic acquisition strategy to grow our business, and we will partner with other industry leaders to broaden pervasive simulation into other ecosystems. Importantly, we will continue to win in the right way, built on a culture of and commitment to diversity, equity, inclusion and belonging.

We license our technology to businesses, educational institutions and governmental agencies. Growth in our revenue is affected by the strength of global economies, general business conditions, currency exchange rate fluctuations, customer budgetary constraints and the competitive position of our products. We believe that the features, functionality and integrated multiphysics capabilities of our software products are as strong as they have ever been. However, the software business is generally characterized by long sales cycles. These long sales cycles 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, including the impact of the current COVID-19 pandemic.~~conditions. As a result, we believe that our overall performance is best measured by fiscal year results rather than by quarterly results.

Management ~~considers~~addresses the competition and price pressure that it faces 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 increase the capabilities of our existing products; supplying new products and services; focusing on customer needs, training, consulting and support; and enhancing our distribution channels. We also ~~consider~~evaluate and execute strategic acquisitions to supplement our global engineering talent, product offerings and distribution channels.

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Overview:

Update on the Impact of the COVID-19 Pandemic

~~As we moved into 2021, we continuously worked~~We continued to employ measures intended to mitigate the effects of the COVID-19 pandemic on our business ~~as described~~ in ~~our 2020 Form 10-K. The health and safety of our employees and their families, our partners and our broad Ansys community around~~ the ~~world remain a high priority. We are continuing to monitor the situation, but as of now remote~~first quarter. Remote access ~~remains~~remained the primary means of work for ~~a majority~~much of our workforce. ~~As we prepare for a broader employee base to return to the office later in the year, we are developing new flexible work arrangements.~~ Remote work arrangements have not adversely affected our ability to maintain effective financial operations, including our financial reporting systems, internal controls over financial reporting and disclosure controls and procedures. ~~We expect to maintain these effective controls as we~~Our direct and indirect sales and support teams continue to ~~work remotely during the COVID-19 pandemic.~~

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~~The impact from the rapidly changing market and economic conditions due~~use collaborative technology to the COVID-19 pandemic has disrupted the business of our customers and partners, and has impacted our business and consolidated results of operations. Our current expectations regarding future performance are subject to significant uncertainty and dependent upon the remaining duration and severity of the pandemic, the geographic markets affected, the actions taken by governmental authorities to contain the spread of the virus and variants, the nature and scope of government economic recovery measures,access both Ansys’ data centers and the ~~widespread availability, consumption~~public cloud, and ~~reliability~~to meet virtually with customers to mitigate disruptions to our sales pipeline. Our sales team continues to engage with customers around the world in a mix of ~~vaccines, among other factors. The spread of~~virtual and in-person meetings, depending on the ~~virus~~location specific guidelines and its variants and economic deterioration caused by them have had an adverse impact on our business and, in the future, could have a material adverse impact on our business, as well as on our ability to achieve our financial guidance. Wecustomer preferences. They continue to ~~adjust our spending to reflect our expectations for the pace at which economic recovery will occur, while balancing the need to invest for long-term opportunities. We have also maintained~~deliver customer value and intend to maintain our commitment to invest in our acquisitions, research and development, and certain digital transformation projects, in particular our Customer Relationship Management (CRM) system and human resources information system (HRIS) projects, as those projects are critical to our ability to operate efficiently and scale thegenerate business ~~for future growth. During the first quarter of 2021, we implemented enhancements to our CRM platform, and we expanded the rollout of our global payroll platform for HRIS.~~momentum.

Please see ~~"Note About Forward-Looking Statements"~~"Forward-Looking Information" herein and "Risk Factors" in Part I, Item 1A of our ~~2020~~2021 Form 10-K for discussion on additional business risks, including those associated with the COVID-19 pandemic.

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.

~~Our GAAP and non-GAAP results for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 reflected the following increases:~~

Three Months Ended March 31, 2021
GAAP Non-GAAP
Revenue 19.1 % 20.5 %
Operating income 46.8 % 37.5 %
Diluted earnings per share 54.7 % 34.9 %

We experienced an increase in revenue during the three months ended March 31, 2021 due to growth in software license and maintenance revenue and contributions from our recent acquisitions. The COVID-19 pandemic and trade restrictions with China adversely impacted our revenue during the three months ended March 31, 2021 and 2020. However, due to our diverse customer base, both from a vertical and geographic perspective, as well as our close relationships with customers, we were able to conduct a large amount of business remotely, which mitigated the impacts of the COVID-19 outbreak.

We also experienced increased operating expenses primarily due to increased personnel costs, additional operating expenses related to acquisitions, increased costs related to foreign exchange translation due to a weaker U.S. Dollar and higher stock-based compensation. While our hiring pace was slowed and certain discretionary operational expenses, such as travel, were significantly reduced, the COVID-19 pandemic did not have a material impact on our operating expenses during the three months ended March 31, 2021.

The non-GAAP results exclude the income statement effects of the acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022, stock-based compensation, excess payroll taxes related to stock-based compensation, amortization of acquired intangible assets, ~~and~~ transaction expenses related to business ~~combinations.~~combinations and adjustments for the income tax effect of the excluded items.

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. Constant currency is a non-GAAP measure. 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 2022 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 2021 comparable period, rather than the actual exchange rates in effect for 2022. Constant currency growth rates are calculated by adjusting the 2022 reported revenue and operating income amounts by the 2022 currency fluctuation impacts and comparing to the 2021 comparable period reported revenue and operating income amounts.

Our GAAP and non-GAAP results for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 reflected the following variances:


	Three Months Ended March 31, 2022
		GAAP		Non-GAAP
Revenue		17.0	%	15.2	%
Operating income		62.3	%	19.3	%
Diluted earnings per share		(1.2)	%	21.4	%

Our results reflect an increase in revenue during the three months ended March 31, 2022 due to growth in subscription lease licenses, maintenance and service revenue. We also experienced increased operating expenses during the three months ended March 31, 2022, primarily due to increased personnel costs, partially offset by decreased costs related to foreign exchange translation due to a stronger U.S. Dollar.

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Impact of Foreign Currency

Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three months ended March 31, ~~2021~~2022 as compared to the three months ended March 31, ~~2020.~~2021. The ~~net favorable~~ impacts on our GAAP and non-GAAP revenue and operating income as a result of the ~~weakened~~fluctuations of the U.S. Dollar when measured against our primary foreign currencies are reflected in the table below. Amounts in brackets indicate an adverse impact from currency fluctuations.


		Three Months Ended March 31, 2021						Three Months Ended March 31, 2022
(in thousands)	(in thousands)		GAAP		Non-GAAP		(in thousands)		GAAP		Non-GAAP
Revenue	Revenue		$	9,912	$	9,948	Revenue		$	(11,325)	$	(11,389)
Operating income	Operating income		$	2,046	$	2,473	Operating income		$	(4,494)	$	(5,071)

In constant currency, our increases were as follows:

Three Months Ended March 31, 2021
GAAP Non-GAAP
Revenue 15.8 % 17.3 %
Operating income 40.8 % 34.8 %

Constant currency amounts exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 2021 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 2020 comparable period, rather than the actual exchange rates in effect for 2021. Constant currency growth rates are calculated by adjusting the 2021 reported revenue and operating income amounts by the 2021 currency fluctuation impacts and comparing to the 2020 comparable period reported revenue and operating income amounts.


	Three Months Ended March 31, 2022
		GAAP		Non-GAAP
Revenue		20.1	%	18.2	%
Operating income		71.2	%	23.4	%

Other Key Business Metric

Annual Contract Value (ACV) is one of our key performance metrics and is useful to investors in assessing the strength and trajectory of our business. Given that revenue is more volatile due to the upfront revenue recognition of perpetual licenses and multi-year subscription lease license sales, we provide ACV as a supplemental metric to help evaluate the annual performance of the business. Summed over the long term, ACV and revenue ~~lead to the same outcome.~~are equal. However, there will be years in which ACV growth lags revenue growth and other years in which ACV growth leads revenue growth. It is used by management in financial and operational decision-making and in setting sales targets used for compensation. ACV should be viewed independently of 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.

Our ACV was as follows:

Three Months Ended March 31, Change
(in thousands, except percentages) 2021 2020 Amount % Constant Currency %
ACV $ 319,382 $ 301,050 $ 18,332 6.1 3.0
Recurring ACV as a percentage of ACV 77.6 % 82.2 %


	Three Months Ended March 31,
(in thousands, except percentages)	2022				2021		Change
	Actual		Constant Currency		Actual		Actual			Constant Currency
	Amount						Amount		%	Amount		%
ACV	$	344,145	$	353,792	$	319,382	$	24,763	7.8	$	34,410	10.8

Our trailing twelve-month recurring ACV was as follows:


	Twelve Months Ended March 31,				Change
(in thousands, except percentages)	2022		2021		Amount		%
Recurring ACV*	$	1,529,385	$	1,319,384	$	210,001	15.9

*All periods are converted from the functional currency to U.S. Dollars at the 2021 monthly average exchange rates.

Recurring ACV includes both subscription lease ~~licenses~~license and maintenance ~~contracts. The reduction as a percentage of total~~ ACV, ~~in Q1 2021 as compared to Q1 2020 was driven by an increase in~~and excludes perpetual ~~licensing, primarily within our Asia-Pacific markets.~~

~~Other Financial Information~~

~~Our financial position includes $987.9 million in cash~~license and ~~short-term investments, and working capital of $1,036.9 million as of March 31, 2021.~~

~~There were no share repurchases during the first quarter of 2021. As of March 31, 2021, we had 2.8 million shares remaining available for repurchase under our authorized share repurchase program.~~service ACV.

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Industry Commentary:

The industry trends from 2021 carried into the first quarter of 2022 as high-tech, automotive, and aerospace and defense continue to be our leading industries. Our leading product portfolio remains attractive to customers as they continue investing in simulation to reduce costs and time-to-market while advancing digital transformation and sustainability initiatives. In the high-tech and semiconductor industry, growth was driven by customers seeking advanced simulation tools for 5G, high-performance computing, IoT and increasingly complex chip designs. Digital transformation initiatives continue to be a tailwind for simulation, particularly in the defense sector, where model-based systems engineering and our core solvers support defense modernization.

Geographic Trends:

The following ~~table presents~~tables present our GAAP and non-GAAP geographic revenue variances using actual and constant currency ~~GAAP revenue growth~~rates during the three months ended March 31, ~~2021~~2022 as compared to the three months ended March 31, ~~2020:~~2021:


	~~Three Months Ended March 31, 2021~~
~~Americas~~	~~21.1~~	%
~~EMEA~~	~~7.6~~	%
~~Asia-Pacific~~	~~16.3~~	%
~~Total~~	~~15.8~~	%


	Three Months Ended March 31, 2022
	GAAP				Non-GAAP
	Actual		Constant Currency		Actual		Constant Currency
Americas	28.3	%	28.4	%	23.4	%	23.4	%
EMEA	1.7	%	7.4	%	2.2	%	7.9	%
Asia-Pacific	14.8	%	20.2	%	15.0	%	20.3	%
Total	17.0	%	20.1	%	15.2	%	18.2	%

The ~~mix of perpetual license sales as well as the~~ value and duration of multi-year subscription lease contracts executed during the period significantly impact ~~revenue recognition.~~the recognition of revenue. As a result, ~~regional revenues~~revenue may fluctuate significantly, 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 ~~customer~~customers' software usage changes or ~~our~~ cash flows ~~for such regions~~ during the periods presented.

To drive growth, we continue to focus on a number of sales improvement activities across ~~the~~our geographic regions, including sales hiring, pipeline building, productivity initiatives and customer engagement activities.

~~Continued trade tensions between the U.S. and China, together with the uncertainty around the COVID-19 outbreak, have had an impact on, and in the future may further restrict,~~Trade restrictions limited our ability to ~~sell~~deliver products and ~~distribute~~services to customers in Russia and Belarus and certain entities in China. For context, the combined 2021 revenue for all customers in Russia and Belarus was $15.1 million, less than 1% of our ~~products to certain customers and our ability to collect against existing trade receivables. As~~total 2021 revenue. Additional restrictions or a ~~result, each of these have had, and~~further deterioration in the ~~future~~trade environment in China or other parts of the world could ~~continue to~~ have ana material adverse ~~effect~~impact on our business, results of operations or financial condition. China's 2021 revenue represented 4.3% of our total 2021 revenue. Refer to additional details in Part I, "~~Item~~"Item 1A. Risk Factors" in our ~~2020~~2021 Form ~~10-K.~~

~~Industry Commentary:~~

~~The industry trends from 2020 carried into~~10-K and Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of additional business risks, including those associated with the ~~first quarter~~Russian invasion of 2021 as high-tech, automotive, and aerospace and defense continue to be our leading industries. This reflects the sustained research and development investments companies in these industries are making in critical technology initiatives – such as 5G and cloud computing infrastructure, advanced defense systems, electrification and autonomy. In the high-tech and semiconductor industry, 5G is still driving growth as it has significant implications in relation to the amount of data that is generated and stored and how effectively it can be processed. The transportation and mobility revolution continues to drive investment in the automotive industry.Ukraine.

Use of Estimates:

The preparation of ~~these~~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 ~~fair values of stock awards, bad debts,~~ contract revenue, ~~acquired deferred revenue, the~~ standalone selling prices of our products and services, ~~the~~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, ~~operating lease assets and liabilities, useful lives for depreciation and amortization,~~ 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.

~~Note About~~ Forward-Looking ~~Statements~~Information:

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of ~~Section 27A of~~ the Private Securities Litigation Reform Act of ~~1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), including, but not limited to, the following~~1995. Forward-looking statements ~~as well as~~are statements that ~~contain~~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 ~~"anticipates,~~"anticipate," "believe,"~~intends,~~ "could," "estimate,"~~believes,~~ "expect," "forecast,"~~plans~~ "intend," ~~and~~ "likely," "may," "outlook," "plan," "predict," "project," "should," "target," or other words of similar ~~expressions:~~

•~~Our expectations regarding the impacts of the COVID-19 pandemic and variants of the virus as well as trade tensions between the U.S. and China.~~

•~~Our intentions regarding~~meaning. Forward-looking statements include those about market opportunity, including our ~~hybrid sales and distribution model.~~

•~~Our intentions related~~total addressable market. We caution readers not to ~~investments in research and development, particularly as it relates to expanding the ease of use and capabilities of our broad portfolio of simulation software products.~~

•~~Our expectations regarding the accelerated development of new and innovative products to the marketplace while lowering design and engineering costs for customers as a result of our acquisitions.~~place

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•~~Our~~undue reliance upon any such forward-looking statements, ~~regarding~~which speak only as of the ~~impact~~date they are made. We undertake no obligation to update forward-looking statements, whether as a result of ~~global economic conditions.~~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:

•~~Our expectations regarding~~adverse conditions in the ~~outcome~~macroeconomic environment, including high inflation, and volatility in equity and foreign exchange markets; political, economic and regulatory uncertainties in the countries and regions in which we operate (including the Russian invasion of ~~our service tax audit cases.~~Ukraine);

•~~Our assessment~~our ability to timely recruit and retain key personnel in a highly competitive labor market for skilled personnel, including potential financial impacts of ~~the ultimate liabilities arising from various investigations, claims and legal proceedings.~~wage inflation;

•~~Our~~impacts from tariffs, trade sanctions, export license requirements or other trade barriers (including 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 Russian invasion of Ukraine);

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

•current and future impacts of a natural disaster or catastrophe, including the COVID-19 pandemic and actions taken to address the pandemic by our customers, suppliers, regulatory authorities, and our business, on the global economy and our business and consolidated financial statements, and other public health and safety risks; and government actions or mandates surrounding the COVID-19 pandemic;

•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;

•our ability to protect our proprietary technology; cybersecurity threats or other security breaches, including in relation to an increased level of our activity that is occurring from remote global off-site locations; and disclosure and misuse of employee or customer data whether as a result of a cybersecurity incident or otherwise;

•the quality of our products, including the strength of ~~the~~ features, functionality and integrated ~~multiphysics capabilities~~multi-physics capabilities; our ability to develop and market new products to address the industry’s rapidly changing technology; failures or errors in our products and services; and increased pricing pressure as a result of the competitive environment in which we operate;

•investments in complementary companies, products, services and technologies; our ~~software products.~~ability to complete and successfully integrate our acquisitions and realize the financial and business benefits of the transactions; and the impact indebtedness incurred in connection with any acquisition could have on our operations;

•~~Our belief that our overall performance is best measured by fiscal year results rather than by quarterly results.~~

•~~Our expectations regarding increased lease license volatility due to an increased customer preference for time-based licenses rather than perpetual licenses.~~

•~~Our estimates regarding the expected impact on reported revenue related to the acquisition accounting treatment of deferred revenue.~~

•~~Our expectation that we will continue to make targeted~~ investments in ~~our~~ global sales and marketing organizations and ~~our~~ global business ~~infrastructure to enhance~~infrastructure; and ~~support~~dependence on our ~~revenue-generating activities.~~channel partners for the distribution of our products;

•~~Our~~operational disruptions generally or specifically in connection with transitions to and from remote work environments; and the failure of our technological infrastructure or those of the service providers upon whom we rely including for infrastructure and cloud services;

•our ability and our channel partners’ ability to comply with laws and regulations in relevant jurisdictions; and the outcome of contingencies, including legal proceedings, government or regulatory investigations and service tax audit cases;

•our intention to repatriate previously taxed earnings in excess of working capital needs and to reinvest all other earnings of our non-U.S. ~~subsidiaries.~~subsidiaries;

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•plans for future capital spending; the extent of corporate benefits from such spending including with respect to customer relationship management; and higher than anticipated costs for research and development or slowdown in our research and development activities;

•~~Our plans related to future capital spending.~~uncertainty regarding income tax estimates in the jurisdictions in which we operate; and the effect of changes in tax laws and regulations in the jurisdictions in which we operate; and

•~~The sufficiency of existing cash~~other risks and ~~cash equivalent balances~~uncertainties described in our reports filed from time to ~~meet future working capital and capital expenditure requirements.~~

•Our belief that the best uses of our excess cash are to invest in the business, acquire or make investments in complementary companies, products, services and technologies, make payments on outstanding debt balances and repurchase stock in order to both offset dilution and return capital, in excess of our requirements, to stockholderstime with the ~~goal of increasing stockholder value.~~SEC.

•~~Our expectation that changes in currency exchange rates will affect our financial position, results of operations and cash flows.~~

•~~Our expectations regarding future claims related to indemnification obligations.~~

•~~Our expectations regarding acquisitions, related capital expenditures and integrating such acquired companies to realize the benefits of cost reductions and other synergies relating thereto.~~

Forward-looking statements should not be unduly relied upon because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. We describe such risks, uncertainties, and factors in the “Risk Factors,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Forms 10-K and 10-Q. Many of these risks, uncertainties, and factors are currently amplified by, and may continue to be amplified by, the COVID-19 pandemic. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update them. Our actual results could differ materially from those set forth in forward-looking statements.

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Results of Operations

The results of operations discussed below are on a GAAP basis unless otherwise stated.

Three Months Ended March 31, ~~2021~~2022 Compared to Three Months Ended March 31, ~~2020~~2021

Revenue:


		Three Months Ended March 31,				Change					Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2021		2020		Amount		%	Constant Currency %	(in thousands, except percentages)	2022				2021		Change
											GAAP		Constant Currency		GAAP		GAAP			Constant Currency
											Amount						Amount		%	Amount		%
Revenue:	Revenue:									Revenue:
Lease licenses		$	65,077	$	44,874	$	20,203	45.0	42.6
Subscription lease licenses										Subscription lease licenses	$	91,457	$	93,283	$	65,077	$	26,380	40.5	$	28,206	43.3
Perpetual licenses	Perpetual licenses	67,527		42,956		24,571		57.2	52.8	Perpetual licenses	65,988		67,577		67,527		(1,539)		(2.3)	50		0.1
Software licenses	Software licenses	132,604		87,830		44,774		51.0	47.6	Software licenses	157,445		160,860		132,604		24,841		18.7	28,256		21.3
Maintenance	Maintenance	213,674		200,488		13,186		6.6	3.3	Maintenance	247,241		254,671		213,674		33,567		15.7	40,997		19.2
Service	Service	16,948		16,667		281		1.7	(1.1)	Service	20,391		20,871		16,948		3,443		20.3	3,923		23.1
Maintenance and service	Maintenance and service	230,622		217,155		13,467		6.2	3.0	Maintenance and service	267,632		275,542		230,622		37,010		16.0	44,920		19.5
Total revenue	Total revenue	$	363,226	$	304,985	$	58,241	19.1	15.8	Total revenue	$	425,077	$	436,402	$	363,226	$	61,851	17.0	$	73,176	20.1

~~Our revenue in~~Revenue for the quarter ended March 31, ~~2021~~2022 increased ~~19.1% as~~17.0% compared to the quarter ended March 31, ~~2020, while revenue grew 15.8%~~2021, or 20.1% in constant currency. The growth rate was favorably impacted by our continued investment in our global sales, support and marketing organizations, ~~strong perpetual license sales,~~and the timing and duration of our multi-year subscription lease ~~contracts, momentum sales to our small- and medium-sized businesses, and our recent acquisitions. Lease~~contracts. Subscription lease license revenue increased ~~45.0%~~40.5%, or ~~42.6%~~43.3% in constant currency, as compared to the prior-year quarter. Annual maintenance contracts that were sold with new perpetual licenses, maintenance contracts for new perpetual licenses sold in previous quarters, maintenance renewals and the maintenance portion of subscription lease license contracts collectively contributed to maintenance revenue growth of 15.7%, or 19.2% in constant currency. Service revenue increased 20.3%, or 23.1% in constant currency, as compared to the prior-year quarter. Perpetual license revenue, which is derived from new sales during the quarter, ~~increased 57.2%~~decreased 2.3%, or 52.8% in constant currency, as compared to the prior-year quarter. Annual maintenance contracts that were sold with new perpetual licenses, maintenance renewals and the maintenance portion of lease license contracts collectively contributed to maintenance revenue growth of 6.6%, or 3.3% in constant currency. Service revenue increased 1.7%, or decreased 1.1%was flat in constant currency, as compared to the prior-year quarter.

We continue to experience increased ~~interest by some of~~demand from our ~~larger~~ customers ~~in enterprise agreements~~for contracts that often include longer-term, time-based licenses involving a larger number of our software products. ~~While these~~These arrangements typically involve a higher overall transaction ~~price, the~~price. The upfront recognition of license revenue related to these larger ~~multi-year~~ transactions can result in ~~significantly higher~~significant subscription lease license revenue volatility. Software products, across a large variety of applications and industries, are increasingly distributed in software-as-a-service, cloud and other subscription environments in which the licensing approach is time-based rather than perpetual. This preference ~~resulted~~could result in a shift from perpetual licenses to time-based licenses, ~~across a broader spectrum of our customers, with~~such as subscription leases, over the ~~exception of our Asia-Pacific region which experienced a disproportionate increase in perpetual licensing for the first quarter of 2021.~~

In relation to COVID-19 and our revenue, we currently expect a recovery in the business environment as vaccine distribution becomes more widespread and a larger percentage of the population is inoculated. Globally, businesses have not resumed full operations and our teams and those of our customers will likely continue working remotely into the second half of 2021. As a result of social distancing, our in-person demand generation events and those of our channel partners have been canceled. While we have adjusted to have a stronger digital focus, as evidenced by our hosting of our annual Simulation World digital event in April 2021, the absence of certain events has had and is expected to continue to have an adverse impact on our results, especially for certain channel partners. Additional waves or mutated variants of COVID-19 could result in renewed shutdowns that stop or regress economic recovery.long term.

With respect to revenue, on average for the quarter ended March 31, ~~2021,~~2022, the U.S. Dollar was ~~approximately 6.5% weaker,~~6.4% stronger, when measured against our primary foreign currencies, than for the quarter ended March 31, ~~2020.~~2021. The table below presents the net ~~favorable~~ impacts of currency fluctuations on revenue for the quarter ended March 31, ~~2021.~~2022. Amounts in brackets indicate an adverse impact from currency fluctuations.


(in thousands)	Three Months Ended March 31, ~~2021~~2022
Euro	$(5,648)
Japanese Yen	~~6,120~~(3,440)
South Korean Won	~~1,369~~
~~British Pound~~	~~820~~
~~Japanese Yen~~	~~782~~(1,655)
Other	~~821~~(582)
Total	$	~~9,912~~(11,325)

The impacts from currency fluctuations resulted in decreased operating income of $4.5 million for the quarter ended March 31, 2022 as compared to the quarter ended March 31, 2021.

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~~The impacts from currency fluctuations resulted in increased operating income of $2.0 million for the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020.~~

As a percentage of revenue, our international and domestic revenues, and our direct and indirect revenues, were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2022		2021
International	International	58.0	%	59.0	%	International	53.5	%	58.0	%
Domestic	Domestic	42.0	%	41.0	%	Domestic	46.5	%	42.0	%

Direct	Direct	71.8	%	73.6	%	Direct	72.4	%	71.8	%
Indirect	Indirect	28.2	%	26.4	%	Indirect	27.6	%	28.2	%

In valuing deferred revenue on the balance sheets of our recent acquisitions as of their respective acquisition dates, we applied the fair value provisions applicable to the accounting for business combinations closed prior to 2022, resulting in a reduction of deferred revenue as compared to the historical carrying amount. As a result, our post-acquisition revenue will be less than the sum of what would have otherwise been reported by us and each acquiree absent the acquisitions. The impacts on reported revenue were ~~$8.9~~$3.6 million and ~~$3.9~~$8.9 million for the quarters ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The expected impacts on reported revenue are ~~$5.3~~$2.1 million and ~~$19.3~~$7.4 million for the quarter ending June 30, ~~2021~~2022 and the year ending December 31, ~~2021,~~2022, respectively.

Deferred Revenue and Backlog:

Deferred revenue consists of billings made or payments received in advance of revenue recognition from customer agreements. The deferred revenue on our condensed consolidated balance sheets does not represent the total value of annual or multi-year, noncancellable agreements. Our backlog represents installment billings for periods beyond the current quarterly billing cycle. Our deferred revenue and backlog as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:


		Balance at March 31, 2021							Balance at March 31, 2022
(in thousands)	(in thousands)	Total		Current		Long-Term		(in thousands)	Total		Current		Long-Term
Deferred revenue	Deferred revenue	$	380,729	$	366,596	$	14,133	Deferred revenue	$	405,120	$	386,019	$	19,101
Backlog	Backlog	555,772		240,904		314,868		Backlog	798,055		360,018		438,037
Total	Total	$	936,501	$	607,500	$	329,001	Total	$	1,203,175	$	746,037	$	457,138


		Balance at December 31, 2020							Balance at December 31, 2021
(in thousands)	(in thousands)	Total		Current		Long-Term		(in thousands)	Total		Current		Long-Term
Deferred revenue	Deferred revenue	$	388,810	$	372,061	$	16,749	Deferred revenue	$	412,781	$	391,528	$	21,253
Backlog	Backlog	578,317		234,719		343,598		Backlog	845,079		373,334		471,745
Total	Total	$	967,127	$	606,780	$	360,347	Total	$	1,257,860	$	764,862	$	492,998

Revenue associated with deferred revenue and backlog that will be recognized in the subsequent twelve months is classified as current in the tables above.

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Cost of Sales and Operating Expenses:

The tables below reflect our operating results ~~as presented~~ on ~~the condensed consolidated statements of income, which are inclusive of foreign~~both a GAAP and constant currency ~~translation impacts.~~basis. Amounts included in the discussions that follow each table are provided in constant currency and are inclusive of costs related to our acquisitions. The impact of foreign exchange translation is discussed separately, where material.

Three Months Ended March 31,
2021 2020 Change
(in thousands, except percentages) Amount % of
Revenue Amount % of
Revenue Amount %
Cost of sales:
Software licenses $ 7,606 2.1 $ 4,926 1.6 $ 2,680 54.4
Amortization 14,949 4.1 9,552 3.1 5,397 56.5
Maintenance and service 39,548 10.9 35,638 11.7 3,910 11.0
Total cost of sales 62,103 17.1 50,116 16.4 11,987 23.9
Gross profit $ 301,123 82.9 $ 254,869 83.6 $ 46,254 18.1


	Three Months Ended March 31,
	2022						2021			Change
	GAAP			Constant Currency			GAAP			GAAP			Constant Currency
(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%
Cost of sales:
Software licenses	$	8,436	2.0	$	8,457	1.9	$	7,606	2.1	$	830	10.9	$	851	11.2
Amortization	17,252		4.1	17,434		4.0	14,949		4.1	2,303		15.4	2,485		16.6
Maintenance and service	39,072		9.2	40,233		9.2	39,548		10.9	(476)		(1.2)	685		1.7
Total cost of sales	64,760		15.2	66,124		15.2	62,103		17.1	2,657		4.3	4,021		6.5
Gross profit	$	360,317	84.8	$	370,278	84.8	$	301,123	82.9	$	59,194	19.7	$	69,155	23.0

Software Licenses: The increase in the cost of software licenses was primarily due to increased third-party royalties of ~~$2.5~~$1.0 million.

Amortization: The increase in amortization expense was primarily due to the amortization of newly acquired intangible ~~assets acquired within the last year.~~assets.

Maintenance and Service: The ~~increase~~net decrease in maintenance and service costs was primarily due to the following:

•~~Increased salaries and incentive compensation of $2.2 million.~~

•~~Increased~~Decreased costs related to foreign exchange translation of ~~$1.3~~$1.2 million due to a ~~weaker~~stronger U.S. Dollar.

•Decreased stock-based compensation of $1.0 million.

•Increased salaries, incentive compensation and other headcount-related costs of $1.0 million.

•Increased IT maintenance and software hosting costs of $0.7 million.

The improvement in gross profit was a result of the increase in revenue, partially offset by the increase in the cost of sales.

Three Months Ended March 31,
2021 2020 Change
(in thousands, except percentages) Amount % of
Revenue Amount % of
Revenue Amount %
Operating expenses:
Selling, general and administrative $ 146,215 40.3 $ 130,522 42.8 $ 15,693 12.0
Research and development 100,479 27.7 86,112 28.2 14,367 16.7
Amortization 4,407 1.2 4,162 1.4 245 5.9
Total operating expenses $ 251,101 69.1 $ 220,796 72.4 $ 30,305 13.7

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	Three Months Ended March 31,
	2022						2021			Change
	GAAP			Constant Currency			GAAP			GAAP			Constant Currency
(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%
Operating expenses:
Selling, general and administrative	$	169,755	39.9	$	173,290	39.7	$	146,215	40.3	$	23,540	16.1	$	27,075	18.5
Research and development	105,274		24.8	107,087		24.5	100,479		27.7	4,795		4.8	6,608		6.6
Amortization	4,125		1.0	4,244		1.0	4,407		1.2	(282)		(6.4)	(163)		(3.7)
Total operating expenses	279,154		65.7	284,621		65.2	251,101		69.1	28,053		11.2	33,520		13.3
Operating income	$	81,163	19.1	$	85,657	19.6	$	50,022	13.8	$	31,141	62.3	$	35,635	71.2

Selling, General and Administrative: The net increase in selling, general and administrative costs was primarily due to the following:

•Increased salaries, incentive compensation and other headcount-related costs of ~~$15.3~~$14.0 million.

•Increased stock-based compensation of $3.2 million.

•Increased consulting costs of $2.5 million.

•Increased bad debt expense of $2.3 million due to the write-off of receivables due from Russian customers as a result of sanctions imposed related to Russia's invasion of Ukraine.

•Increased business travel of $2.1 million as in-person meetings and live attendance at trade events have continued to expand.

•Increased marketing expenses of $1.9 million.

•Increased IT maintenance and software hosting costs of $1.3 million.

•Decreased costs related to foreign exchange translation of ~~$3.8~~$3.5 million due to a ~~weaker~~stronger U.S. Dollar.

•~~Increased stock-based compensation of $2.1 million.~~

•~~Decreased business travel of $4.9 million due to the COVID-19 pandemic.~~

•~~Decreased bad debt expense of $3.1 million.~~

We anticipate that we will continue to make targeted investments in our global sales and marketing organizations and our global business infrastructure to enhance and support our revenue-generating activities.

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Research and Development: The net increase in research and development costs was primarily due to the following:

•Increased salaries, incentive compensation and other headcount-related costs of ~~$9.7~~$6.3 million.

•Increased IT maintenance and software hosting costs of $1.4 million.

•Decreased costs related to foreign exchange translation of ~~$2.4~~$1.8 million due to a ~~weaker~~stronger U.S. Dollar.

•~~Increased~~Decreased stock-based compensation of ~~$1.4~~$1.7 million.

We have traditionally invested significant resources in research and development activities and intend to continue to make investments in expanding the ease of use and capabilities of our broad portfolio of simulation software products.

Interest Income: Interest income was $0.5 million for the ~~quarter~~quarters ended March 31, ~~2021 was $0.5 million as compared to $2.8 million for the quarter ended~~2022 and March 31, ~~2020. Interest income decreased as a result of a lower~~2021. The higher interest rate environment and the ~~related decrease~~increase in the average rate of return on invested cash ~~balances.~~balances was offset by a lower invested cash balance.

Interest Expense: Interest expense for the quarter ended March 31, ~~2021~~2022 was ~~$3.3~~$3.0 million as compared to ~~$3.7~~$3.3 million for the quarter ended March 31, ~~2020. Interest expense decreased as a result of~~2021 due to a lower interest rate ~~environment, partially offset by interest incurred~~and lower principal balances on ~~debt financing obtained in connection with the acquisition~~our term loans.

Table of ~~AGI in the fourth quarter of 2020.~~Contents

Other (Expense) Income, net: Other ~~income~~expense for the quarter ended March 31, ~~2021~~2022 was ~~$0.4~~$0.7 million as compared to ~~$0.1~~other income of $0.4 million for the quarter ended March 31, ~~2020.~~2021. Other (expense) income consisted primarily of ~~net~~ foreign currency ~~gains.~~exchange activity.

Income Tax ~~Benefit:~~Provision (Benefit): Our income before income tax ~~benefit,~~provision (benefit), income tax ~~benefit~~provision (benefit) and effective tax rates were as follows:


		Three Months Ended March 31,							Three Months Ended March 31,
(in thousands, except percentages)	(in thousands, except percentages)	2021			2020			(in thousands, except percentages)	2022			2021
Income before income tax benefit		$	47,623		$	33,324
Income tax benefit		$	(24,775)		$	(12,740)
Income before income tax provision (benefit)								Income before income tax provision (benefit)	$	78,029		$	47,623
Income tax provision (benefit)								Income tax provision (benefit)	$	7,041		$	(24,775)
Effective tax rate	Effective tax rate	(52.0)		%	(38.2)		%	Effective tax rate	9.0		%	(52.0)		%

The ~~decrease~~increase in the effective tax rate from the first quarter of ~~2020~~2021 was primarily due to ~~increased~~decreased benefits related to stock-based compensation.

When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the quarters ended March 31, ~~2021~~2022 and ~~2020~~2021 were favorably impacted by tax benefits from stock-based compensation, the foreign-derived intangible income deduction and research and development ~~credits.~~credits, partially offset by the impact of non-deductible compensation.

Net Income: Our net income, diluted earnings per share and weighted average shares used in computing diluted earnings per share were as follows:

Three Months Ended March 31,
(in thousands, except per share data) 2021 2020
Net income $ 72,398 $ 46,064
Diluted earnings per share $ 0.82 $ 0.53
Weighted average shares outstanding - diluted 87,986 87,369


	Three Months Ended March 31,
(in thousands, except per share data)	2022		2021
Net income	$	70,988	$	72,398
Diluted earnings per share	$	0.81	$	0.82
Weighted average shares outstanding - diluted	87,750		87,986

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Non-GAAP Results

We provide non-GAAP revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share as supplemental measures to GAAP regarding our operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are included below.


ANSYS, INC. AND SUBSIDIARIES	ANSYS, INC. AND SUBSIDIARIES															ANSYS, INC. AND SUBSIDIARIES
Reconciliations of GAAP to Non-GAAP Measures	Reconciliations of GAAP to Non-GAAP Measures															Reconciliations of GAAP to Non-GAAP Measures
(Unaudited)	(Unaudited)															(Unaudited)
		Three Months Ended															Three Months Ended
		March 31, 2021															March 31, 2022
(in thousands, except percentages and per share data)	(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted1		(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted1
Total GAAP	Total GAAP	$	363,226	$	301,123	82.9	%	$	50,022	13.8	%	$	72,398	$	0.82	Total GAAP	$	425,077	$	360,317	84.8	%	$	81,163	19.1	%	$	70,988	$	0.81
Acquisition accounting for deferred revenue	Acquisition accounting for deferred revenue	8,923		8,923		0.4	%	8,923		2.0	%	8,923		0.10		Acquisition accounting for deferred revenue	3,560		3,560		0.1	%	3,560		0.7	%	3,560		0.04
Stock-based compensation expense	Stock-based compensation expense	—		3,562		1.0	%	35,119		9.5	%	35,119		0.41		Stock-based compensation expense	—		2,563		0.6	%	35,651		8.3	%	35,651		0.41
Excess payroll taxes related to stock-based awards	Excess payroll taxes related to stock-based awards	—		865		0.2	%	9,135		2.5	%	9,135		0.10		Excess payroll taxes related to stock-based awards	—		417		0.1	%	5,053		1.2	%	5,053		0.06
Amortization of intangible assets from acquisitions	Amortization of intangible assets from acquisitions	—		14,949		4.0	%	19,356		5.2	%	19,356		0.22		Amortization of intangible assets from acquisitions	—		17,252		4.0	%	21,377		5.0	%	21,377		0.24
Transaction expenses related to business combinations	Transaction expenses related to business combinations	—		—		—	%	1,970		0.5	%	1,970		0.02		Transaction expenses related to business combinations	—		—		—	%	1,738		0.4	%	1,738		0.02

Adjustment for income tax effect	Adjustment for income tax effect	—		—		—	%	—		—	%	(47,979)		(0.55)		Adjustment for income tax effect	—		—		—	%	—		—	%	(19,132)		(0.22)
Total non-GAAP	Total non-GAAP	$	372,149	$	329,422	88.5	%	$	124,525	33.5	%	$	98,922	$	1.12	Total non-GAAP	$	428,637	$	384,109	89.6	%	$	148,542	34.7	%	$	119,235	$	1.36

1 Diluted weighted average shares were 87,750.





	Three Months Ended
	March 31, 2021
(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted1
Total GAAP	$	363,226	$	301,123	82.9	%	$	50,022	13.8	%	$	72,398	$	0.82
Acquisition accounting for deferred revenue	8,923		8,923		0.4	%	8,923		2.0	%	8,923		0.10
Stock-based compensation expense	—		3,562		1.0	%	35,119		9.5	%	35,119		0.41
Excess payroll taxes related to stock-based awards	—		865		0.2	%	9,135		2.5	%	9,135		0.10
Amortization of intangible assets from acquisitions	—		14,949		4.0	%	19,356		5.2	%	19,356		0.22
Transaction expenses related to business combinations	—		—		—	%	1,970		0.5	%	1,970		0.02


Adjustment for income tax effect	—		—		—	%	—		—	%	(47,979)		(0.55)
Total non-GAAP	$	372,149	$	329,422	88.5	%	$	124,525	33.5	%	$	98,922	$	1.12

1 Diluted weighted average shares were 87,986.

Three Months Ended
March 31, 2020
(in thousands, except percentages and per share data) Revenue Gross Profit % Operating Income % Net Income
EPS - Diluted1
Total GAAP $ 304,985 $ 254,869 83.6 % $ 34,073 11.2 % $ 46,064 $ 0.53
Acquisition accounting for deferred revenue 3,912 3,912 0.2 % 3,912 1.1 % 3,912 0.04
Stock-based compensation expense — 2,866 0.9 % 30,941 10.0 % 30,941 0.36
Excess payroll taxes related to stock-based awards — 523 0.1 % 6,983 2.3 % 6,983 0.08
Amortization of intangible assets from acquisitions — 9,552 3.2 % 13,714 4.4 % 13,714 0.16
Transaction expenses related to business combinations — — — % 950 0.3 % 950 0.01
Rabbi trust (income) / expense — — — % — — % (4) —
Adjustment for income tax effect — — — % — — % (30,255) (0.35)
Total non-GAAP $ 308,897 $ 271,722 88.0 % $ 90,573 29.3 % $ 72,305 $ 0.83

1 ~~Diluted weighted average shares were 87,369.~~

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We use non-GAAP financial measures (a) to evaluate our historical and prospective financial performance as well as our performance relative to our competitors, (b) to set internal sales targets and spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, (e) to assess financial discipline over operational expenditures and (f) as an important factor in determining variable compensation for management and employees. In addition, many financial analysts that follow us focus on and publish both historical results and future projections based on non-GAAP financial measures. We believe that it is in the best interest of our investors to provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors have historically requested, and we have historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.

While we believe that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, are not reported by all our competitors and may not be directly comparable to similarly titled measures of our competitors due to potential differences in the exact method of calculation. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

The adjustments to these non-GAAP financial measures, and the basis for such adjustments, are outlined below:

Acquisition accounting for deferred revenue. Historically, we have consummated acquisitions in order to support our strategic and other business objectives. ~~In accordance with the~~Under prior accounting guidance, a fair value ~~provisions applicable to the accounting for business combinations,~~provision resulted in acquired deferred revenue isthat was often recorded on the opening balance sheet at an amount that iswas lower than the historical carrying value. Although this ~~acquisition accounting requirement~~fair value provision has no impact on our business or cash flow, it adversely impacts our reported GAAP revenue in the reporting periods following an acquisition. In 2022, we adopted accounting guidance which eliminates the fair value provision that resulted in the deferred revenue adjustment on a prospective basis. In order to provide investors with financial information that facilitates comparison of both historical and future results, we provide non-GAAP financial measures which exclude the impact of the acquisition accounting ~~adjustment.~~adjustment for acquisitions prior to the adoption of the new guidance in 2022. We believe that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by us in our financial and operational decision-making, and (b) compare our past and future reports of financial results as the revenue reduction related to acquired deferred revenue will not recur when related subscription lease licenses and software maintenance contracts are renewed in future periods.

Amortization of intangible assets from acquisitions. We incur amortization of intangible assets, included in our GAAP presentation of amortization expense, related to various acquisitions we have made. We exclude these expenses for the purpose of calculating non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when we evaluate our continuing operational performance because these costs are fixed at the time of an acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by us after the acquisition. Accordingly, we do not consider these expenses for purposes of evaluating our performance during the applicable time period after the acquisition, and we exclude such expenses when making decisions to allocate resources. We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the effectiveness of the methodology and information used by us in our financial and operational decision-making, and (b) compare our past reports of financial results as we have historically reported these non-GAAP financial measures.

Stock-based compensation expense. We incur expense related to stock-based compensation included in our GAAP presentation of cost of maintenance and service; research and development expense; and selling, general and administrative expense. This non-GAAP adjustment also includes excess payroll tax expense related to stock-based compensation. ~~Stock-based compensation expense (benefit) incurred in connection with our deferred compensation plan held in a rabbi trust includes an offsetting benefit (charge) recorded in other income (expense).~~ Although stock-based compensation is an expense and viewed as a form of compensation, we exclude these expenses for the purpose of calculating non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when we evaluate our continuing operational performance. ~~We similarly exclude income (expense) related to assets held in a rabbi trust in connection with our deferred compensation plan.~~ Specifically, we exclude stock-based compensation ~~and income (expense) related to assets held in the deferred compensation plan rabbi trust~~ during our annual budgeting process and our quarterly and annual assessments of our performance. The annual budgeting process is the primary mechanism whereby we allocate resources to various initiatives and operational requirements. Additionally, the annual review by our board of directors during which it compares our historical business model and profitability to the planned business model and profitability for the forthcoming year excludes the impact of stock-based compensation. In evaluating the performance of our senior management and department managers, charges related to stock-based compensation are excluded from expenditure and profitability results. In fact, we record stock-based compensation expense into a stand-alone cost center for which no single operational manager is responsible or accountable. In this way, we can review, on a period-to-period basis,

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each manager's performance and assess financial discipline over operational expenditures without the effect of stock-based compensation. We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate our operating results and the

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effectiveness of the methodology used by us to review our operating results, and (b) review historical comparability in our financial reporting as well as comparability with competitors' operating results.

Transaction expenses related to business combinations. We incur expenses for professional services rendered in connection with business combinations, which are included in our GAAP presentation of selling, general and administrative expense. These expenses are generally not tax-deductible. We exclude these acquisition-related transaction expenses, derived from announced acquisitions, for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when we evaluate our continuing operational performance, as we generally would not have otherwise incurred these expenses in the periods presented as a part of our operations. We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate our operating results and the effectiveness of the methodology used by us to review our operating results, and (b) review historical comparability in our financial reporting as well as comparability with competitors' operating results.

Non-GAAP tax provision. We utilize a normalized non-GAAP annual effective tax rate (AETR) to calculate non-GAAP measures. This methodology provides better consistency across interim reporting periods by eliminating the effects of non-recurring items and aligning the non-GAAP tax rate with our expected geographic earnings mix. To project this rate, we analyzed our historic and projected non-GAAP earnings mix by geography along with other factors such as our current tax structure, recurring tax credits and incentives, and expected tax positions. On an annual basis we will re-evaluate this rate for significant items that may materially affect our projections.

Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

We have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as listed below:


GAAP Reporting Measure			Non-GAAP Reporting Measure
Revenue			Non-GAAP Revenue
Gross Profit			Non-GAAP Gross Profit
Gross Profit Margin			Non-GAAP Gross Profit Margin
Operating Income			Non-GAAP Operating Income
Operating Profit Margin			Non-GAAP Operating Profit Margin
Net Income			Non-GAAP Net Income
Diluted Earnings Per Share			Non-GAAP Diluted Earnings Per Share

Constant currency. In addition to the non-GAAP financial measures detailed above, we use constant currency results 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. To present this information, the 2022 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 2021 comparable period, rather than the actual exchange rates in effect for 2022. Constant currency growth rates are calculated by adjusting the 2022 reported amounts by the 2022 currency fluctuation impacts and comparing the adjusted amounts to the 2021 comparable period reported amounts. We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the effectiveness of the methodology and information used by us in our financial and operational decision-making, and (b) compare our reported results to our past reports of financial results without the effects of foreign currency fluctuations.

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Liquidity and Capital Resources


(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		Change		(in thousands)	March 31, 2022		December 31, 2021		Change
Cash, cash equivalents and short-term investments	Cash, cash equivalents and short-term investments	$	987,943	$	913,151	$	74,792	Cash, cash equivalents and short-term investments	$	657,765	$	668,028	$	(10,263)
Working capital	Working capital	$	1,036,905	$	990,412	$	46,493	Working capital	$	815,258	$	860,082	$	(44,824)

Cash, Cash Equivalents and Short-Term Investments

Cash and cash equivalents consist primarily of highly liquid investments such as money market funds and deposits held at major banks. Short-term investments consist primarily of deposits held by certain of our foreign subsidiaries with original maturities of three months to one year. The following table presents our foreign and domestic holdings of cash, cash equivalents and short-term investments as of March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in thousands, except percentages)	(in thousands, except percentages)	March 31, 2021		% of Total	December 31, 2020		% of Total	(in thousands, except percentages)	March 31, 2022		% of Total	December 31, 2021		% of Total
Domestic	Domestic	$	662,071	67.0	$	582,882	63.8	Domestic	$	336,413	51.1	$	365,390	54.7
Foreign	Foreign	325,872		33.0	330,269		36.2	Foreign	321,352		48.9	302,638		45.3
Total	Total	$	987,943		$	913,151		Total	$	657,765		$	668,028

In general, it is our intention to permanently reinvest all earnings in excess of previously taxed amounts. Substantially all of the pre-2018 earnings of our non-U.S. subsidiaries were taxed through the transition tax and post-2018 current earnings are taxed as part of global intangible low-taxed income tax expense. These taxes increase our previously taxed earnings and allow for the repatriation of the majority of our foreign earnings without any residual U.S. federal tax. While we believe that the financial reporting bases may be greater than the tax bases of investments in foreign subsidiaries for any earnings in excess of previously taxed amounts, such amounts are considered permanently reinvested. The cumulative temporary difference related to such permanently reinvested earnings is ~~approximately $87.8~~$61.6 million and we would anticipate the tax effect on those earnings to be immaterial.

The amount of cash, cash equivalents and short-term investments held by foreign subsidiaries is subject to translation adjustments caused by changes in foreign currency exchange rates as of the end of each respective reporting period, the offset to which is recorded in accumulated other comprehensive loss on our condensed consolidated balance sheet.

Cash Flows from Operating Activities


		Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		Change		(in thousands)	2022		2021		Change
Net cash provided by operating activities	Net cash provided by operating activities	$	171,107	$	147,412	$	23,695	Net cash provided by operating activities	$	210,936	$	171,107	$	39,829

Net cash provided by operating activities increased during the ~~first quarter~~three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to increased net income (net of non-cash operating adjustments) of ~~$35.7~~$5.9 million ~~partially offset by decreased~~and increased net cash flows from operating assets and liabilities of ~~$12.0~~$33.9 million. The growth in net cash provided by operating activities was ~~impacted by~~ a ~~meaningful increase in~~result of increased customer receipts ~~driven primarily by~~due to a strong ~~growth in the fourth quarter of 2020 as well as increased collections of aged accounts,~~close to 2021 and lower tax payments, partially offset by ~~increased~~additional cash outflows related to ~~operational payments and income taxes.~~

increased operating expenses as compared to the three months ended March 31, 2021.

Cash Flows from Investing Activities


		Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		Change		(in thousands)	2022		2021		Change
Net cash used in investing activities	Net cash used in investing activities	$	(15,863)	$	(9,599)	$	(6,264)	Net cash used in investing activities	$	(9,964)	$	(15,863)	$	5,899

Net cash used in investing activities ~~increased~~decreased by $5.9 million during the ~~first quarter~~three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to ~~increased~~decreased acquisition-related net cash outlays of ~~$8.4~~$5.9 million. We currently plan capital spending of ~~$30.0~~$25.0 million to ~~$40.0~~$35.0 million during fiscal year ~~2021~~2022 as compared to the ~~$35.4~~$23.0 million that was spent in fiscal year ~~2020.~~2021. The level of spending will depend on various factors, including the growth of the business and general economic ~~conditions and the ongoing impact of COVID-19.~~conditions.

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Cash Flows from Financing Activities


		Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	(in thousands)	2021		2020		Change		(in thousands)	2022		2021		Change
Net cash used in financing activities	Net cash used in financing activities	$	(74,208)	$	(288,738)	$	214,530	Net cash used in financing activities	$	(204,645)	$	(74,208)	$	(130,437)

Net cash used in financing activities ~~decreased~~increased during the ~~first quarter~~three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to ~~decreased~~increased stock repurchases of ~~$161.0 million and decreased principal payments on long-term debt of $75.0~~$155.6 million, partially offset by ~~increased~~decreased restricted stock withholding taxes paid in lieu of issued shares of ~~$23.6~~$26.9 million.

Other Cash Flow Information

As of March 31, ~~2021,~~2022, the carrying value of our term loans was ~~$798.2~~$753.7 million, ~~of which $4.7~~with $9.1 million isin principal payments due in the next twelve months. Borrowings under the term loans accrue interest at the Eurodollar rate plus an applicable margin or at the base rate, at our election. The base rate is the applicable margin plus the highest of (i) the federal funds rate plus 0.500%, (ii) the Bank of America prime rate and (iii) the Eurodollar rate plus 1.000%. The applicable margin for these 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).

We previously entered into ~~noncancellable~~ operating lease commitments, primarily for our domestic and international ~~offices as well as certain operating equipment.~~offices. The commitments related to these operating leases is ~~$148.3~~$151.6 million, of which ~~$26.6~~$25.8 million is due in the next twelve months.

In May 2022, we completed various strategic acquisitions for a combined purchase price of $249.0 million. These acquisitions were funded with existing cash balances.

We believe that existing cash and cash equivalent balances ~~of $987.4 million,~~after these acquisitions, together with cash generated from operations and access to the $500.0 million Revolving Credit Facility, will be sufficient to meet our working capital and capital expenditure requirements through the next twelve months. ~~We also believe that our liquidity will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future.~~ Our cash requirements in the future may also be financed through additional equity or debt financings. However, future disruptions in the capital markets could make financing more challenging, and there can be no assurance that such financing can be obtained on commercially reasonable terms, or at all.

Under our stock repurchase program, we repurchased shares as follows:


	Three Months Ended
(in thousands, except per share data)	March 31, ~~2021~~2022		March 31, ~~2020~~2021
Number of shares repurchased	—500		~~690~~—
Average price paid per share	$	—311.14	$	~~233.48~~—
Total cost	$	—155,571	$	~~161,029~~—

As of March 31, ~~2021, 2.8~~2022, 2.0 million shares remained available for repurchase under the program.

The authorized repurchase program does not have an expiration date, and the pace of the repurchase activity will depend on factors such as working capital needs, cash requirements for acquisitions, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases orincluding pursuant to a Rule 10b5-1 plan.

We continue to generate positive cash flows from operating activities and believe that the best uses of our excess cash are to invest in the business; acquire or make investments in complementary companies, products, services and technologies; and make payments on our outstanding debt balances. Any future acquisitions may be funded by available cash and investments, cash generated from operations, debt financing, or the issuance of additional securities. Additionally, we have in the past, and expect in the future, to repurchase stock in order to both offset dilution and return capital, in excess of our requirements, to stockholders with the goal of increasing stockholder value.

~~Off-Balance-Sheet Arrangements~~

~~We do not have any special-purpose entities or off-balance-sheet arrangements.~~

Contractual and Other Obligations

There were no material changes to our significant contractual and other obligations during the three months ended March 31, ~~2021~~2022 as compared to those previously reported within ~~"Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" in our ~~2020~~2021 Form 10-K.

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Critical Accounting ~~Policies and~~ Estimates

No significant changes have occurred to our critical accounting ~~policies and~~ estimates as previously reported within ~~"Management’s~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" in our ~~2020~~2021 Form 10-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk. As we operate in international regions, a portion of our revenue, expenses, cash, accounts receivable and payment obligations are denominated in foreign currencies. As a result, changes in currency exchange rates will affect our financial position, results of operations and cash flows. We seek to reduce our currency exchange transaction risks primarily through our normal operating and treasury activities, including the use of derivative instruments.

With respect to revenue, on average for the quarter ended March 31, 2022, the U.S. Dollar was 6.4% stronger, when measured against our primary foreign currencies, than for the quarter ended March 31, 2021. The table below presents the net impacts of currency fluctuations on revenue for the three months ended March 31, 2022. Amounts in brackets indicate a net adverse impact from currency fluctuations.


(in thousands)	Three Months Ended March 31, 2022
Euro	$	(5,648)
Japanese Yen	(3,440)
South Korean Won	(1,655)
Other	(582)
Total	$	(11,325)

The impacts from currency fluctuations resulted in decreased operating income of $4.5 million for the quarter ended March 31, 2022 as compared to the quarter ended March 31, 2021.

A hypothetical 10% strengthening in the U.S. Dollar against other currencies would have decreased our revenue by $17.7 million and decreased our operating income by $4.3 million for the three months ended March 31, 2022.

The most meaningful currency impacts on revenue and operating income are typically attributable to U.S. Dollar exchange rate changes against the Euro and Japanese Yen. Historical exchange rates for these currency pairs are reflected in the charts below:


	Period-End Exchange Rates
As of	EUR/USD	USD/JPY
March 31, 2022	1.11	121.71
December 31, 2021	1.14	115.11
March 31, 2021	1.17	110.73


	Average Exchange Rates
Three Months Ended	EUR/USD	USD/JPY
March 31, 2022	1.12	116.23
March 31, 2021	1.21	105.91

Interest Rate Risk. Changes in the overall level of interest rates affect the interest income that is generated from our cash, cash equivalents and short-term investments and the interest expense that is generated from our outstanding borrowings. For the three months ended March 31, ~~2021,~~2022, interest income was $0.5 million and interest expense was ~~$3.3~~$3.0 million.

Cash and cash equivalents consist primarily of highly liquid investments such as money market funds and deposits held at major banks. Short-term investments consist primarily of deposits held by certain foreign subsidiaries with original maturities of three months to one year. A hypothetical 100 basis point change in interest rates on these holdings would have an immaterial impact on our interest income.

~~Foreign Currency Transaction Risk.~~ AsOur outstanding borrowings of $755.0 million as of March 31, 2022 accrue interest at the Eurodollar rate plus an applicable margin or at the base rate, at our election. The base rate is the applicable margin plus the highest of (i) the federal funds rate plus 0.500%, (ii) the Bank of America prime rate and (iii) the Eurodollar rate plus 1.000%. The applicable margin for these 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). This results in a margin ranging from 1.125% to 1.750% and 0.125% to 0.750% for the Eurodollar rate and base rate, respectively. Because interest rates applicable to the outstanding borrowings are variable, we ~~operate in international regions, a portion of our revenue, expenses, cash, accounts receivable and payment obligations~~ are ~~denominated in foreign currencies. As a result,~~exposed to interest rate risk from changes in ~~currency exchange~~the underlying index rates, ~~will affect~~which affects our ~~financial position, results~~interest expense. A hypothetical increase of ~~operations~~100 basis points in interest rates would result in an increase in interest expense and a corresponding decrease in cash ~~flows. The currency exchange rate volatility due to COVID-19 has increased our foreign currency transaction risk.~~

~~With respect to revenue,~~flows of $7.6 million over the next twelve months, based on ~~average for the quarter ended~~outstanding borrowings at March 31, 2021, the U.S. Dollar was approximately 6.5% weaker, when measured against our primary foreign currencies, than for the quarter ended March 31, 2020. The table below presents the net favorable impacts of currency fluctuations on revenue for the three months ended March 31, 2021.


~~(in thousands)~~	~~Three Months Ended March 31, 2021~~
~~Euro~~	$	~~6,120~~
~~South Korean Won~~	~~1,369~~
~~British Pound~~	~~820~~
~~Japanese Yen~~	~~782~~
~~Other~~	~~821~~
~~Total~~	$	~~9,912~~

~~The impacts from currency fluctuations resulted in increased operating income of $2.0 million for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.~~

The most significant currency impacts on revenue and operating income are typically attributable to U.S. Dollar exchange rate changes against the Euro and Japanese Yen. Historical exchange rates for these currency pairs are reflected in the charts below:

Period-End Exchange Rates
As of EUR/USD USD/JPY
March 31, 2021 1.17 110.73
December 31, 2020 1.22 103.27
March 31, 2020 1.10 107.56

Average Exchange Rates
Three Months Ended EUR/USD USD/JPY
March 31, 2021 1.21 105.91
March 31, 2020 1.10 108.99

2022.

No other material change has occurred in our market risk subsequent to December 31, ~~2020.~~2021.

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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As required by Rules 13a-15 and 15d-15 of the Exchange Act, we have evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures are effective, as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act.

We believe, based on our knowledge, that the financial statements and other financial information included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in this report. We are committed to both a sound internal control environment and to good corporate governance.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

From time to time, we review the disclosure controls and procedures, and may periodically make changes to enhance their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control. There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, ~~2021~~2022 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. Although the majority of our employee base worked remotely, the remote work arrangements did not adversely affect our ability to maintain financial operations, including our financial reporting systems, internal controls over financial reporting and disclosure controls and procedures.

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PART II – OTHER INFORMATION

Item 1.Legal Proceedings

We are subject to various claims, investigations ~~claims~~ 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, ~~and litigations,~~ alleged infringement of third parties' intellectual property rights and other matters. Use or distribution of our products could generate product liability, regulatory infraction, or ~~similar~~ claims by our customers, end users, channel partners, government entities or ~~other~~ third parties. Sales and marketing activities that impact processing of personal data, as well as measures taken to ensure license compliance against pirated or unauthorized usage of our commercial product, may also result in claims by customers and individual employees of ~~customers.~~customers or by non-customers using pirated versions of our products. Each of these matters is subject to various uncertainties, and it is possible that an unfavorable resolution of one or more of these matters could have a significant adverse effect on our condensed consolidated financial statements as well as cause reputational damage. In our opinion, the resolution of pending matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors

We face a number of risks that could materially and adversely affect our business, financial position, results of operations and cash flows. A discussion of our risk factors can be found in Part I, Item 1A "Risk Factors" in our ~~2020~~2021 Form 10-K. ~~No material changes have occurred~~The risk factor set forth below includes additional information relating to ~~such~~the Russian invasion of Ukraine and should be read together with the risk factors ~~after~~disclosed in our 2021 Form 10-K.

Escalating global tensions, including the ~~filing~~conflict between Russia and Ukraine, could negatively impact us.

Escalating global tensions, including the ongoing conflict between Russia and Ukraine, could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations. The U.S. government and other governments in jurisdictions in which we operate have imposed sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as other changes in diplomatic relations and trade policy, including between the United States and Russia (or the United States and other countries that may support Russia or take similar actions) is currently unknown and they could adversely affect our ~~2020 Form 10-K.~~business.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~Issuer Purchases of Equity Securities


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under Plans or Programs(1)
January 1 - January 31, 2022	—	$	—	—	2,459,495
February 1 - February, 28 2022	—	$	—	—	2,459,495
March 1 - March 31, 2022	500,000	$	311.14	500,000	1,959,495
Total	500,000	$	311.14	500,000	1,959,495

(1) We initially announced our stock repurchase program in February 2000, and subsequently announced various amendments to the program. The most recent amendment to the program, authorizing the repurchase of up to 5.0 million shares, was approved by our Board of Directors in February 2018. There is no expiration date for the stock repurchase program.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

None.

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Item 6.Exhibits


Exhibit No.						Exhibit
15						~~Independent Registered Public Accountant’s Letter Regarding Unaudited Financial Information.~~

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~10.24~~						2021 Form of Award Notice (Annual Contract Value) under the Fifth Amended and Restated ANSYS, Inc. 1996 Stock Option and Grant Plan.*

~~10.25~~						2021 Form of Award Notice (Total Shareholder Return) under the Fifth Amended and Restated ANSYS, Inc. 1996 Stock Option and Grant Plan.*

~~10.26~~						2021 Form of Restricted Stock Unit Agreement under the Fifth Amended and Restated ANSYS, Inc. 1996 Stock Option and Grant Plan.*

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH						Inline XBRL Taxonomy Extension Schema

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*						Indicates management contract or compensatory plan, contract or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		ANSYS, Inc.

Date:	May ~~5, 2021~~4, 2022	By:	/s/ Ajei S. Gopal
			Ajei S. Gopal
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	May ~~5, 2021~~4, 2022	By:	/s/ Nicole Anasenes
			Nicole Anasenes
			Chief Financial Officer and Senior Vice President, Finance
			(Principal Financial Officer and Principal Accounting Officer)

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	Three Months Ended
	March 31, 2020
(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted1
Total GAAP	$	304,985	$	254,869	83.6	%	$	34,073	11.2	%	$	46,064	$	0.53
Acquisition accounting for deferred revenue	3,912		3,912		0.2	%	3,912		1.1	%	3,912		0.04
Stock-based compensation expense	—		2,866		0.9	%	30,941		10.0	%	30,941		0.36
Excess payroll taxes related to stock-based awards	—		523		0.1	%	6,983		2.3	%	6,983		0.08
Amortization of intangible assets from acquisitions	—		9,552		3.2	%	13,714		4.4	%	13,714		0.16
Transaction expenses related to business combinations	—		—		—	%	950		0.3	%	950		0.01
Rabbi trust (income) / expense	—		—		—	%	—		—	%	(4)		—

Adjustment for income tax effect	—		—		—	%	—		—	%	(30,255)		(0.35)
Total non-GAAP	$	308,897	$	271,722	88.0	%	$	90,573	29.3	%	$	72,305	$	0.83