UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September~~June 30, ~~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 Common Stock, $0.01 par value per share, outstanding as of ~~October~~July 31, ~~2021~~2022 was ~~87,252,950~~87,068,665 shares.

ANSYS, INC. AND SUBSIDIARIES

INDEX



PART I	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets – ~~September~~June ~~30, 2021~~3 0 , 2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Income – Three and ~~Nine~~Six Months Ended ~~September~~June ~~30,~~3 0 , 2022 and 2021 ~~and 2020~~	4

	Condensed Consolidated Statements of Comprehensive Income – Three and Six ~~Nine~~Months Ended ~~September~~June ~~30,~~3 0 , 2022 and 2021 ~~and 2020~~	5

	Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~June 30 , 2022 and 2021 ~~and 2020~~	6

	Condensed Consolidated Statements of Stockholders' Equity – Three and Six ~~Nine~~Months Ended ~~September~~June ~~30,~~3 0 , 2022 and 2021 ~~and 2020~~	7

	Notes to Condensed Consolidated Financial Statements	8

	~~Report of Independent Registered Public Accounting Firm~~	19

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	43

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4544

Item 3.	Defaults Upon Senior Securities	4544

Item 4.	Mine Safety Disclosures	4544

Item 5.	Other Information	4544

Item 6.	Exhibits	4645

	SIGNATURES	4746

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)	September 30, 2021		December 31, 2020		(in thousands, except share and per share data)	June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,080,838	$	912,672	Cash and cash equivalents	$	517,303	$	667,667
Short-term investments	Short-term investments	527		479		Short-term investments	332		361
Accounts receivable, less allowance for doubtful accounts of $14,600 and $14,000, respectively		475,829		537,564
Accounts receivable, less allowance for doubtful accounts of $14,600						Accounts receivable, less allowance for doubtful accounts of $14,600	566,829		645,891
Other receivables and current assets	Other receivables and current assets	199,491		268,522		Other receivables and current assets	242,761		324,655
Total current assets	Total current assets	1,756,685		1,719,237		Total current assets	1,327,225		1,638,574
Long-term assets:	Long-term assets:					Long-term assets:
Property and equipment, net	Property and equipment, net	90,793		96,503		Property and equipment, net	81,154		87,914
Operating lease right-of-use assets	Operating lease right-of-use assets	119,938		137,730		Operating lease right-of-use assets	125,743		120,881
Goodwill	Goodwill	3,101,623		3,038,306		Goodwill	3,566,968		3,409,271
Other intangible assets, net	Other intangible assets, net	667,268		694,865		Other intangible assets, net	771,257		763,119
Other long-term assets	Other long-term assets	215,259		225,119		Other long-term assets	226,341		279,676
Deferred income taxes	Deferred income taxes	23,186		28,830		Deferred income taxes	19,892		24,879
Total long-term assets	Total long-term assets	4,218,067		4,221,353		Total long-term assets	4,791,355		4,685,740
Total assets	Total assets	$	5,974,752	$	5,940,590	Total assets	$	6,118,580	$	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	$	12,590	$	18,691	Accounts payable	$	17,304	$	10,863
Accrued bonuses and commissions	Accrued bonuses and commissions	83,537		112,491		Accrued bonuses and commissions	55,026		163,182
Accrued income taxes	Accrued income taxes	8,024		26,116		Accrued income taxes	17,015		8,410

Other accrued expenses and liabilities	Other accrued expenses and liabilities	178,248		199,466		Other accrued expenses and liabilities	174,444		204,509
Deferred revenue	Deferred revenue	318,032		372,061		Deferred revenue	360,910		391,528
Total current liabilities	Total current liabilities	600,431		728,825		Total current liabilities	624,699		778,492
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Deferred income taxes	Deferred income taxes	84,566		110,321		Deferred income taxes	73,087		105,548
Long-term operating lease liabilities	Long-term operating lease liabilities	102,842		120,940		Long-term operating lease liabilities	111,357		104,378
Long-term debt	Long-term debt	753,451		798,118		Long-term debt	753,402		753,576
Other long-term liabilities	Other long-term liabilities	94,218		84,514		Other long-term liabilities	103,280		98,272
Total long-term liabilities	Total long-term liabilities	1,035,077		1,113,893		Total long-term liabilities	1,041,126		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	—		—		Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding	—		—
Common stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 and 95,266,320 shares issued, respectively		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	1,428,419		1,434,203		Additional paid-in capital	1,450,549		1,465,694
Retained earnings	Retained earnings	4,056,049		3,804,593		Retained earnings	4,429,008		4,259,220
Treasury stock, at cost: 8,055,219 and 8,693,809 shares, respectively		(1,097,051)		(1,124,102)
Treasury stock, at cost: 8,248,926 and 8,188,331 shares, respectively						Treasury stock, at cost: 8,248,926 and 8,188,331 shares, respectively	(1,300,908)		(1,185,707)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(49,126)		(17,775)		Accumulated other comprehensive loss	(126,847)		(56,112)
Total stockholders' equity	Total stockholders' equity	4,339,244		4,097,872		Total stockholders' equity	4,452,755		4,484,048
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	5,974,752	$	5,940,590	Total liabilities and stockholders' equity	$	6,118,580	$	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				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Revenue:	Revenue:									Revenue:
Software licenses	Software licenses	$	200,394	$	141,622	$	547,820	$	398,793	Software licenses	$	208,981	$	214,822	$	366,426	$	347,426
Maintenance and service	Maintenance and service	240,774		225,343		703,228		658,818		Maintenance and service	264,869		231,832		532,501		462,454
Total revenue	Total revenue	441,168		366,965		1,251,048		1,057,611		Total revenue	473,850		446,654		898,927		809,880
Cost of sales:	Cost of sales:									Cost of sales:
Software licenses	Software licenses	8,289		7,251		23,960		20,688		Software licenses	8,509		8,065		16,945		15,671
Amortization	Amortization	15,189		9,911		45,163		29,227		Amortization	17,414		15,025		34,666		29,974
Maintenance and service	Maintenance and service	39,268		36,223		119,884		107,446		Maintenance and service	36,564		41,068		75,636		80,616
Total cost of sales	Total cost of sales	62,746		53,385		189,007		157,361		Total cost of sales	62,487		64,158		127,247		126,261
Gross profit	Gross profit	378,422		313,580		1,062,041		900,250		Gross profit	411,363		382,496		771,680		683,619
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	165,368		132,642		471,993		391,862		Selling, general and administrative	170,383		160,410		340,138		306,625
Research and development	Research and development	102,023		86,616		303,381		258,861		Research and development	108,941		100,879		214,215		201,358
Amortization	Amortization	3,403		4,237		12,244		12,562		Amortization	4,029		4,434		8,154		8,841
Total operating expenses	Total operating expenses	270,794		223,495		787,618		663,285		Total operating expenses	283,353		265,723		562,507		516,824
Operating income	Operating income	107,628		90,085		274,423		236,965		Operating income	128,010		116,773		209,173		166,795
Interest income	Interest income	541		754		1,544		4,463		Interest income	269		486		796		1,003
Interest expense	Interest expense	(2,943)		(1,853)		(9,594)		(8,544)		Interest expense	(4,609)		(3,336)		(7,576)		(6,651)
Other (expense) income, net	Other (expense) income, net	(1,328)		1,158		14,008		3,169		Other (expense) income, net	(776)		14,937		(1,470)		15,336
Income before income tax provision	Income before income tax provision	103,898		90,144		280,381		236,053		Income before income tax provision	122,894		128,860		200,923		176,483
Income tax provision	Income tax provision	18,556		14,517		28,925		17,798		Income tax provision	24,094		35,144		31,135		10,369
Net income	Net income	$	85,342	$	75,627	$	251,456	$	218,255	Net income	$	98,800	$	93,716	$	169,788	$	166,114
Earnings per share – basic:	Earnings per share – basic:									Earnings per share – basic:
Earnings per share	Earnings per share	$	0.98	$	0.88	$	2.89	$	2.55	Earnings per share	$	1.14	$	1.08	$	1.95	$	1.91
Weighted average shares	Weighted average shares	87,239		85,798		87,072		85,749		Weighted average shares	87,001		87,168		87,062		86,988
Earnings per share – diluted:	Earnings per share – diluted:									Earnings per share – diluted:
Earnings per share	Earnings per share	$	0.97	$	0.87	$	2.86	$	2.50	Earnings per share	$	1.13	$	1.06	$	1.94	$	1.89
Weighted average shares	Weighted average shares	88,169		87,224		88,069		87,176		Weighted average shares	87,321		88,053		87,535		88,019

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				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income	Net income	$	85,342	$	75,627	$	251,456	$	218,255	Net income	$	98,800	$	93,716	$	169,788	$	166,114
Other comprehensive (loss) income:	Other comprehensive (loss) income:									Other comprehensive (loss) income:
Foreign currency translation adjustments	Foreign currency translation adjustments	(16,304)		28,048		(31,351)		14,044		Foreign currency translation adjustments	(48,643)		4,217		(70,735)		(15,047)
Comprehensive income	Comprehensive income	$	69,038	$	103,675	$	220,105	$	232,299	Comprehensive income	$	50,157	$	97,933	$	99,053	$	151,067

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)


		Nine Months Ended					Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	251,456	$	218,255	Net income	$	169,788	$	166,114
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	80,500		62,197		Depreciation and intangible assets amortization	58,012		54,146
Operating lease right-of-use assets expense	Operating lease right-of-use assets expense	16,896		15,336		Operating lease right-of-use assets expense	11,374		11,100
Deferred income tax benefit	Deferred income tax benefit	(22,459)		(22,627)		Deferred income tax benefit	(35,304)		(9,110)
Provision for bad debts	Provision for bad debts	827		5,799		Provision for bad debts	2,426		660
Stock-based compensation expense	Stock-based compensation expense	122,148		103,256		Stock-based compensation expense	75,149		78,004
Gain on equity investment	Gain on equity investment	(15,139)		—		Gain on equity investment	—		(15,139)
Other	Other	1,940		2,294		Other	3,562		1,212
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	86,098		62,184		Accounts receivable	110,044		92,170
Other receivables and current assets	Other receivables and current assets	57,992		12,735		Other receivables and current assets	73,596		54,554
Other long-term assets	Other long-term assets	(2,548)		(12,341)		Other long-term assets	(3,834)		(1,743)
Accounts payable, accrued expenses and current liabilities	Accounts payable, accrued expenses and current liabilities	(58,520)		(76,517)		Accounts payable, accrued expenses and current liabilities	(129,933)		(86,276)
Accrued income taxes	Accrued income taxes	(18,997)		22,010		Accrued income taxes	9,097		(17,947)
Deferred revenue	Deferred revenue	(46,467)		(29,978)		Deferred revenue	(12,914)		(28,792)
Other long-term liabilities	Other long-term liabilities	(5,898)		10,940		Other long-term liabilities	(1,183)		(8,969)
Net cash provided by operating activities	Net cash provided by operating activities	447,829		373,543		Net cash provided by operating activities	329,880		289,984
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	(105,141)		(100,194)		Acquisitions, net of cash acquired	(241,630)		(105,192)
Capital expenditures	Capital expenditures	(18,133)		(24,195)		Capital expenditures	(10,059)		(10,835)
Other investing activities	Other investing activities	(382)		(6,201)		Other investing activities	85		(297)
Net cash used in investing activities	Net cash used in investing activities	(123,656)		(130,590)		Net cash used in investing activities	(251,604)		(116,324)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Principal payments on long-term debt	Principal payments on long-term debt	(45,000)		(75,000)		Principal payments on long-term debt	—		(45,000)
Purchase of treasury stock	Purchase of treasury stock	(35,993)		(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	(92,143)		(66,774)		Restricted stock withholding taxes paid in lieu of issued shares	(61,554)		(90,697)
Proceeds from shares issued for stock-based compensation	Proceeds from shares issued for stock-based compensation	26,321		26,957		Proceeds from shares issued for stock-based compensation	10,814		13,644
Other financing activities	Other financing activities	(50)		—		Other financing activities	(1,290)		(50)
Net cash used in financing activities	Net cash used in financing activities	(146,865)		(275,846)		Net cash used in financing activities	(207,601)		(122,103)
Effect of exchange rate fluctuations on cash and cash equivalents	Effect of exchange rate fluctuations on cash and cash equivalents	(9,142)		5,540		Effect of exchange rate fluctuations on cash and cash equivalents	(21,039)		(6,525)
Net increase (decrease) in cash and cash equivalents		168,166		(27,353)
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(150,364)		45,032
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	$	1,080,838	$	844,741	Cash and cash equivalents, end of period	$	517,303	$	957,704
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Income taxes paid	Income taxes paid	$	59,973	$	35,576	Income taxes paid	$	11,926	$	39,325
Interest paid	Interest paid	$	8,721	$	9,985	Interest paid	$	6,298	$	6,024
Fair value of unpaid consideration in connection with acquisitions						Fair value of unpaid consideration in connection with acquisitions	$	3,223	$	—

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)/Income		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

Stock-based compensation activity					(87,602)				(565)	48,565				(39,037)
Other comprehensive loss												(19,264)		(19,264)
Net income							72,398							72,398
Balance, March 31, 2021		95,266	$	953	$	1,346,601	$	3,876,991	8,129	$	(1,075,537)	$	(37,039)	$	4,111,969
Acquisition of Analytical Graphics, Inc.		1			328									328
Stock-based compensation activity					34,661				(63)	5,327				39,988
Other comprehensive income												4,217		4,217
Net income							93,716							93,716
Balance, June 30, 2021		95,267	$	953	$	1,381,590	$	3,970,707	8,066	$	(1,070,210)	$	(32,822)	$	4,250,218
Acquisition of Analytical Graphics, Inc.					454				(2)	152				606
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								97	(35,993)				(35,993)		Treasury shares acquired								500	(155,571)				(155,571)
Stock-based compensation activity	Stock-based compensation activity				46,375				(106)	9,000				55,375		Stock-based compensation activity				(50,287)				(403)	36,865				(13,422)
Other comprehensive loss	Other comprehensive loss											(16,304)		(16,304)		Other comprehensive loss											(22,092)		(22,092)
Net income	Net income						85,342							85,342		Net income						70,988							70,988
Balance, September 30, 2021		95,267	$	953	$	1,428,419	$	4,056,049	8,055	$	(1,097,051)	$	(49,126)	$	4,339,244
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
Acquisition of Analytical Graphics, Inc.																Acquisition of Analytical Graphics, Inc.				511				(3)	300				811
Stock-based compensation activity																Stock-based compensation activity				34,631				(33)	3,205				37,836
Other comprehensive loss																Other comprehensive loss											(48,643)		(48,643)
Net income																Net income						98,800							98,800
Balance, June 30, 2022																Balance, June 30, 2022	95,267	$	953	$	1,450,549	$	4,429,008	8,249	$	(1,300,908)	$	(126,847)	$	4,452,755


																Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Equity
(in thousands)															(in thousands)	Shares	Amount						Shares	Amount
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				(87,602)				(565)	48,565				(39,037)
Other comprehensive loss															Other comprehensive loss											(19,264)		(19,264)
Net income															Net income						72,398							72,398
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
Acquisition of Analytical Graphics, Inc.															Acquisition of Analytical Graphics, Inc.	1			328									328
Stock-based compensation activity															Stock-based compensation activity				34,661				(63)	5,327				39,988
Other comprehensive income															Other comprehensive income											4,217		4,217
Net income															Net income						93,716							93,716
Balance, June 30, 2021															Balance, June 30, 2021	95,267	$	953	$	1,381,590	$	3,970,707	8,066	$	(1,070,210)	$	(32,822)	$	4,250,218

	Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss)/Income		Total Stockholders' Equity
(in thousands)	Shares	Amount						Shares	Amount
Balance, January 1, 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)
Stock-based compensation activity				(70,769)				(541)	48,997				(21,772)
Other comprehensive loss											(24,292)		(24,292)
Net income						46,064							46,064
Balance, March 31, 2020	94,628	$	946	$	1,118,170	$	3,416,770	9,042	$	(1,153,863)	$	(89,673)	$	3,292,350
Acquisition of Livermore Software Technology, LLC				1,030				(6)	501				1,531
Stock-based compensation activity				24,993				(146)	12,322				37,315
Other comprehensive income											10,288		10,288
Net income						96,564							96,564
Balance, June 30, 2020	94,628	$	946	$	1,144,193	$	3,513,334	8,890	$	(1,141,040)	$	(79,385)	$	3,438,048
Stock-based compensation activity				37,934				(116)	9,956				47,890
Other comprehensive income											28,048		28,048
Net income						75,627							75,627
Balance, September 30, 2020	94,628	$	946	$	1,182,127	$	3,588,961	8,774	$	(1,131,084)	$	(51,337)	$	3,589,613

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

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ANSYS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~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.

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 and ~~nine~~six months ended ~~September~~June 30, ~~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:


		September 30, 2021			December 31, 2020				June 30, 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	$	960,228	88.8	$	571,587	62.6	Cash accounts	$	417,539	80.7	$	580,047	86.9
Money market funds	Money market funds	120,610		11.2	341,085		37.4	Money market funds	99,764		19.3	87,620		13.1
Total	Total	$	1,080,838		$	912,672		Total	$	517,303		$	667,667

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

~~Table of Contents~~

3.Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue:


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020			(in thousands, except percentages)	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Revenue:	Revenue:													Revenue:
Lease licenses		$	120,516		$	78,917		$	315,387		$	237,000
Subscription lease licenses														Subscription lease licenses	$	135,031		$	129,794		$	226,488		$	194,871
Perpetual licenses	Perpetual licenses	79,878			62,705			232,433			161,793			Perpetual licenses	73,950			85,028			139,938			152,555
Software licenses	Software licenses	200,394			141,622			547,820			398,793			Software licenses	208,981			214,822			366,426			347,426
Maintenance	Maintenance	223,872			211,942			655,843			615,609			Maintenance	247,635			218,297			494,876			431,971
Service	Service	16,902			13,401			47,385			43,209			Service	17,234			13,535			37,625			30,483
Maintenance and service	Maintenance and service	240,774			225,343			703,228			658,818			Maintenance and service	264,869			231,832			532,501			462,454
Total revenue	Total revenue	$	441,168		$	366,965		$	1,251,048		$	1,057,611		Total revenue	$	473,850		$	446,654		$	898,927		$	809,880

Direct revenue, as a percentage of total revenue	Direct revenue, as a percentage of total revenue	74.4		%	74.9		%	74.0		%	75.7		%	Direct revenue, as a percentage of total revenue	73.7		%	75.4		%	73.1		%	73.8		%
Indirect revenue, as a percentage of total revenue	Indirect revenue, as a percentage of total revenue	25.6		%	25.1		%	26.0		%	24.3		%	Indirect revenue, as a percentage of total revenue	26.3		%	24.6		%	26.9		%	26.2		%

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

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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 ~~nine~~six months ended ~~September~~June 30, ~~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	746		1,405		Acquired deferred revenue	1,032		746
Deferral of revenue	Deferral of revenue	1,202,547		1,025,057		Deferral of revenue	888,130		777,714
Recognition of revenue	Recognition of revenue	(1,251,048)		(1,057,611)		Recognition of revenue	(898,927)		(809,880)
Currency translation	Currency translation	(8,591)		4,307		Currency translation	(19,394)		(5,792)
Ending balance – September 30		$	332,464	$	338,432
Ending balance – June 30						Ending balance – June 30	$	383,622	$	351,598

Total revenue allocated to remaining performance obligations as of ~~September~~June 30, ~~2021~~2022 will be recognized as revenue as follows:


(in thousands)
Next 12 months	$	~~575,771~~725,323
Months 13-24	~~171,906~~264,892
Months 25-36	~~93,487~~133,351
Thereafter	~~58,331~~55,682
Total revenue allocated to remaining performance obligations	$	~~899,495~~1,179,248

~~Table of Contents~~

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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 included amounts in deferred revenue and backlog at the beginning of the period of ~~$507.0~~$437.2 million and ~~$465.5~~$373.7 million, respectively.

4.Acquisitions

During the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, we completed ~~several~~various strategic acquisitions to expand our solution offerings and enhance our customers' experience. The effects of the acquisitions were not material to our condensed consolidated results of operations individually or in the aggregate. The combined purchase price of the acquisitions completed during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was approximately ~~$110.7~~$250.3 million ~~which was paid~~.

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

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

Fair Value of ~~Consideration Transferred:~~

Consideration:


(in thousands)
Cash	$	~~110,739~~247,119
Consideration not yet paid	3,223
Total consideration	$	250,342

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Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:


(in thousands)
Cash	$	~~4,320~~5,540
Accounts receivable and other tangible assets	~~3,013~~2,879
Developed software and core technologies ~~(11 year weighted-average life)~~	~~32,200~~60,030
Customer lists ~~(7 year weighted-average life)~~	~~2,300~~126
Trade names ~~(10 year weighted-average life)~~	~~1,000~~1,304
Accounts payable and other liabilities	~~(2,852)~~(5,284)
Deferred revenue	~~(746)~~(1,032)
Net deferred tax liabilities	~~(7,311)~~(10,720)
Total identifiable net assets	$	~~31,924~~52,843
Goodwill	$	~~78,815~~197,499

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

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

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

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

Intangible Asset

Weighted-Average Useful Life

Valuation Method

Assumptions

Developed software and core technologies

8 years

Multi-period excess earnings

Discount rate: 9.5% - 10.0%

Trade names

9 years

Relief-from-royalty

Royalty rate: 1.0%

Discount rate: 10.0% - 10.5%

Customer lists

7 years

Multi-period excess earnings

Attrition rate: 10.0%

Discount rate: 9.5%

On ~~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 ~~purchase price was approximately $720.6 million, inclusive of net working capital adjustments.~~

~~On April 1, 2020, we acquired 100% of the shares of Lumerical Inc. (Lumerical), a leading developer of photonic design and simulation tools, for a~~combined purchase price of ~~approximately $107.5~~these acquisitions during the 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 Event, for information on our acquisition of~~ ~~Zemax, LLC (Zemax).~~

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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)	September 30, 2021		December 31, 2020		(in thousands)	June 30, 2022		December 31, 2021
Receivables related to unrecognized revenue	Receivables related to unrecognized revenue	$	119,073	$	192,154	Receivables related to unrecognized revenue	$	129,727	$	200,888
Income taxes receivable, including overpayments and refunds	Income taxes receivable, including overpayments and refunds	29,947		31,628		Income taxes receivable, including overpayments and refunds	47,048		71,332
Prepaid expenses and other current assets	Prepaid expenses and other current assets	50,471		44,740		Prepaid expenses and other current assets	65,986		52,435
Total other receivables and current assets	Total other receivables and current assets	$	199,491	$	268,522	Total other receivables and current assets	$	242,761	$	324,655

Accrued vacation	Accrued vacation	38,396		34,132		Accrued vacation	42,493		35,879

Consumption, VAT and sales tax liabilities	Consumption, VAT and sales tax liabilities	26,123		45,156		Consumption, VAT and sales tax liabilities	27,561		52,630
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	113,729		120,178		Accrued expenses and other current liabilities	104,390		116,000
Total other accrued expenses and liabilities	Total other accrued expenses and liabilities	$	178,248	$	199,466	Total other accrued expenses and liabilities	$	174,444	$	204,509

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

6.Earnings Per Share

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

The details of basic and diluted EPS are as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net income	Net income	$	85,342	$	75,627	$	251,456	$	218,255	Net income	$	98,800	$	93,716	$	169,788	$	166,114
Weighted average shares outstanding – basic	Weighted average shares outstanding – basic	87,239		85,798		87,072		85,749		Weighted average shares outstanding – basic	87,001		87,168		87,062		86,988
Dilutive effect of stock plans	Dilutive effect of stock plans	930		1,426		997		1,427		Dilutive effect of stock plans	320		885		473		1,031
Weighted average shares outstanding – diluted	Weighted average shares outstanding – diluted	88,169		87,224		88,069		87,176		Weighted average shares outstanding – diluted	87,321		88,053		87,535		88,019
Basic earnings per share	Basic earnings per share	$	0.98	$	0.88	$	2.89	$	2.55	Basic earnings per share	$	1.14	$	1.08	$	1.95	$	1.91
Diluted earnings per share	Diluted earnings per share	$	0.97	$	0.87	$	2.86	$	2.50	Diluted earnings per share	$	1.13	$	1.06	$	1.94	$	1.89
Anti-dilutive shares	Anti-dilutive shares	32		30		30		28		Anti-dilutive shares	979		31		522		29

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7.Goodwill and Intangible Assets

Intangible assets are classified as follows:


		September 30, 2021				December 31, 2020					June 30, 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	$	887,926	$	(409,288)	$	859,620	$	(370,338)	Developed software and core technologies	$	1,038,126	$	(451,047)	$	985,685	$	(422,797)
Customer lists	Customer lists	194,047		(54,546)		288,085		(136,093)		Customer lists	196,708		(63,466)		203,072		(57,175)
Trade names	Trade names	175,785		(127,013)		175,626		(122,392)		Trade names	182,200		(131,621)		182,554		(128,577)
Total	Total	$	1,257,758	$	(590,847)	$	1,323,331	$	(628,823)	Total	$	1,417,034	$	(646,134)	$	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 $18.6 million and $14.1 million for the three months ended September 30, 2021 and 2020, respectively. Amortization expense for the intangible assets reflected above was $57.4 million and $41.8 million for the nine months ended September 30, 2021 and 2020, respectivelyyears.

As of ~~September~~June 30, ~~2021,~~2022, estimated future amortization expense for the intangible assets reflected above was as follows:


(in thousands)	(in thousands)			(in thousands)
Remainder of 2021		$	18,000
2022		78,125
Remainder of 2022				Remainder of 2022	$	42,293
2023	2023	80,348		2023	90,999
2024	2024	79,784		2024	92,893
2025	2025	77,509		2025	92,423
2026	2026	75,325		2026	92,788
2027				2027	94,516
Thereafter	Thereafter	257,820		Thereafter	264,988
Total intangible assets subject to amortization	Total intangible assets subject to amortization	666,911		Total intangible assets subject to amortization	770,900
Indefinite-lived trade name	Indefinite-lived trade name	357		Indefinite-lived trade name	357
Other intangible assets, net	Other intangible assets, net	$	667,268	Other intangible assets, net	$	771,257

The changes in goodwill during the ~~nine~~six months ended ~~September~~June 30, ~~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)	79,905		69,598		Acquisitions and adjustments(1)	196,417		78,610

Currency translation	Currency translation	(16,588)		8,712		Currency translation	(38,720)		(6,180)
Ending balance – September 30		$	3,101,623	$	2,491,590
Ending balance – June 30						Ending balance – June 30	$	3,566,968	$	3,110,736

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

During the first quarter of ~~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. Given the adverse economic and market conditions in the second quarter, we considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined it was not more likely than not that an impairment existed as of June 30, 2022. No other events or circumstances changed during the ~~nine~~six months ended ~~September~~June 30, ~~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 ~~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 ~~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)	September 30, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		(in thousands)	June 30, 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	$	120,610	$	120,610	$	—	$	—	Cash equivalents	$	99,764	$	99,764	$	—	$	—
Short-term investments	Short-term investments	$	527	$	—	$	527	$	—	Short-term investments	$	332	$	—	$	332	$	—
Deferred compensation plan investments	Deferred compensation plan investments	$	1,602	$	1,602	$	—	$	—	Deferred compensation plan investments	$	1,596	$	1,596	$	—	$	—
Equity securities	Equity securities	$	2,642	$	2,642	$	—	$	—	Equity securities	$	1,714	$	1,714	$	—	$	—


				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	$	—	$	—	Cash equivalents	$	87,620	$	87,620	$	—	$	—
Short-term investments	Short-term investments	$	479	$	—	$	479	$	—	Short-term investments	$	361	$	—	$	361	$	—
Deferred compensation plan investments	Deferred compensation plan investments	$	1,602	$	1,602	$	—	$	—	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 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				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Lease liability cost	Lease liability cost	$	7,139	$	6,206	$	21,278	$	18,704	Lease liability cost	$	6,955	$	7,138	$	13,926	$	14,139
Variable lease cost not included in the lease liability(1)	Variable lease cost not included in the lease liability(1)	1,017		1,033		3,203		3,354		Variable lease cost not included in the lease liability(1)	1,103		904		2,187		2,186
Total lease cost	Total lease cost	$	8,156	$	7,239	$	24,481	$	22,058	Total lease cost	$	8,058	$	8,042	$	16,113	$	16,325

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

Other information related to operating leases is as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Cash paid for amounts included in the measurement of the lease liability:	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	$	(7,217)	$	(5,921)	$	(21,183)	$	(17,322)	Operating cash flows from operating leases	$	(6,571)	$	(7,139)	$	(13,589)	$	(13,966)
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	1,301		1,076		6,895		21,319		Right-of-use assets obtained in exchange for new operating lease liabilities	4,357		5,007		$	20,675	$	5,594


		As of September 30,					As of June 30,
		2021		2020			2022		2021
Weighted-average remaining lease term of operating leases	Weighted-average remaining lease term of operating leases	6.7 years		7.5 years		Weighted-average remaining lease term of operating leases	7.3 years		6.9 years
Weighted-average discount rate of operating leases	Weighted-average discount rate of operating leases	3.0	%	3.3	%	Weighted-average discount rate of operating leases	3.0	%	3.0	%

The maturity schedule of the operating lease liabilities as of ~~September~~June 30, ~~2021~~2022 is as follows:


(in thousands)	(in thousands)			(in thousands)
Remainder of 2021		$	7,188
2022		25,964
Remainder of 2022				Remainder of 2022	$	12,933
2023	2023	20,393		2023	22,683
2024	2024	18,956		2024	20,346
2025	2025	17,727		2025	18,711
2026				2026	17,037
Thereafter	Thereafter	50,382		Thereafter	55,289
Total future lease payments	Total future lease payments	140,610		Total future lease payments	146,999
Less: Present value adjustment	Less: Present value adjustment	(14,053)		Less: Present value adjustment	(14,877)
Present value of future lease payments(1)	Present value of future lease payments(1)	$	126,557	Present value of future lease payments(1)	$	132,122

(1) Includes the current portion of operating lease liabilities of ~~$23.7~~$20.8 million, which is reflected in other accrued expenses and liabilities in the condensed consolidated balance sheets.

There were no material leases that have been signed but not yet commenced as of ~~September~~June 30, ~~2021.~~2022.

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10.Debt

~~In February 2019,~~On June 30, 2022, we entered into a credit agreement (2022 Credit Agreement) with PNC Bank, National Association as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto. The 2022 Credit Agreement refinanced our previous credit agreements in their entirety. Terms used in this description of the 2022 Credit Agreement with the initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.

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

The 2022 Credit Agreement provides for a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving ~~credit~~loan 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.~~credit. The ~~Revolving Credit Facility becomes payable in full on February 22, 2024 and~~revolving loan facility is available for working capital and general corporate ~~purposes, including, among others, to finance acquisitions and capital expenditures. The Revolving Credit Facility had not been utilized as~~purposes. Each of ~~September 30, 2021.~~

~~We amended our credit agreement (Amended Credit Agreement) on October 16, 2019. The amendment provided for a new $500.0 million unsecured~~the term loan facility ~~to finance our acquisition of Livermore Software Technology (LST) in~~and the ~~fourth quarter of 2019. The term~~revolving loan ~~was funded on November 1, 2019 and~~facility matures on ~~November 1, 2024. Principal on~~June 30, 2027.

Borrowings under the term loan ~~will be payable on the last business day of each fiscal quarter commencing with the ninth full fiscal quarter after the funding date~~and revolving loan facilities accrue interest at a rate of 1.25% per quarter, increasing to 2.50% per quarter after the next four fiscal quarters. 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 date in 2024.

In connection with the acquisition of AGI, we entered into a credit agreement (AGI Credit Agreement) on November 9, 2020, with Bank of America, N.A. as the Administrative Agent. The AGI 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. Principalthat is based on the term loan will be payable on the last business day of each fiscal quarter commencing with the fifth full fiscal quarter after the funding date at a rate of 1.25% per quarter, increasing to 2.50% per quarter after the next four fiscal quarters. We repaid $19.0 million of the unsecured term loan balance in June 2021 prior to the scheduled maturity dates in 2022 ($18.8 million) and 2023 ($0.2 million).

~~Borrowings under the Amended Credit Agreement and the AGI Credit Agreement (collectively, the Credit Agreements) accrue interest at the Eurodollar rate~~Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. ~~For the quarter ended September 30, 2021, we elected to apply the Eurodollar rate.~~ The base rate is the ~~applicable margin plus the~~ highest of (i) the ~~federal funds rate~~Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, ~~of America~~National Association prime rate, and (iii) ~~the Eurodollar rate~~Daily Simple SOFR plus ~~1.000%~~an adjustment for SOFR plus 1.00%. The applicable margin for ~~these~~the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our debt ratings (if such debt ratings exist). ~~This results in a margin ranging from 1.125% to 1.750% and 0.125% to 0.750%~~

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

~~The~~Under the Prior Credit Agreements, the weighted average interest rate in effect during ~~each of~~ the three and ~~nine~~six months ended ~~September~~June 30, 2022 was 1.90% and 1.63%, respectively. Under the Prior Credit Agreements, the weighted average interest rate in effect during the three and six months ended June 30, 2021 was ~~1.33% and 1.41%, respectively.~~1.45%. As of ~~September~~June 30, ~~2021,~~2022, the rate in effect for the 2022 Credit ~~Agreements~~Agreement was ~~1.26%~~3.04%.

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

As of ~~September~~June 30, ~~2021 and December 31, 2020, the carrying values~~2022, we had $755.0 million of borrowings outstanding under the term ~~loans were $753.5~~loan, with a carrying value of $753.4 million, which is net of ~~$1.5~~$1.6 million of unamortized debt discounts and issuance ~~costs, and $798.1~~costs. The total amount was included in long-term debt. As of June 30, 2022, no borrowings were outstanding under the revolving loan facility.

As of December 31, 2021, we had $755.0 million of borrowings outstanding under the Prior Credit Agreements, with a carrying value of $753.6 million, which is net of ~~$1.9~~$1.4 million of unamortized debt discounts and issuance ~~costs, respectively.~~ costs. The total amount was included in long-term debt. As of December 31, 2021, no borrowings were outstanding under the revolving loan facility.

We were in compliance with all covenants under the 2022 Credit Agreement and the Prior Credit Agreements as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020.~~

2021, respectively.

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11.Income Taxes

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


		Three Months Ended						Nine Months Ended							Three Months Ended						Six Months Ended
(in thousands, except percentages)	(in thousands, except percentages)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020			(in thousands, except percentages)	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Income before income tax provision	Income before income tax provision	$	103,898		$	90,144		$	280,381		$	236,053		Income before income tax provision	$	122,894		$	128,860		$	200,923		$	176,483
Income tax provision	Income tax provision	18,556			14,517			28,925			17,798			Income tax provision	24,094			35,144			$	31,135		$	10,369
Effective tax rate	Effective tax rate	17.9		%	16.1		%	10.3		%	7.5		%	Effective tax rate	19.6		%	27.3		%	15.5		%	5.9		%

Tax expense for the ~~nine months ended September 30,~~first half of 2022 and 2021 ~~and 2020~~ benefited ~~due~~from deductions related to ~~increased stock~~stock-based compensation, ~~benefits,~~ many of which were recognized ~~discretely in the first quarter of each year.~~discretely. These benefits were partially offset by ~~an increase in~~ non-deductible ~~compensation in 2021.~~

compensation.

12.Stock Repurchase Program

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

Nine Months Ended
(in thousands, except per share data) September 30,
2021 September 30,
2020
Number of shares repurchased 97 690
Average price paid per share $ 371.83 $ 233.48
Total cost $ 35,993 $ 161,029


	Six Months Ended
(in thousands, except per share data)	June 30, 2022		June 30, 2021
Number of shares repurchased	500		—
Average price paid per share	$	311.14	$	—
Total cost	$	155,571	$	—

All of the shares repurchased during the six months ended June 30, 2022 were repurchased during the first quarter. As of ~~September~~June 30, ~~2021, 2.7~~2022, 2.0 million shares remained available for repurchase under the program.

13.Stock-Based Compensation

On May ~~14, 2021,~~12, 2022, our stockholders approved the ANSYS, Inc. ~~2021 Equity~~2022 Employee Stock Purchase Plan (2022 ESPP) and ~~Incentive Compensation Plan (the 2021 Plan). The 2021 Plan is a long-term incentive plan pursuant to which awards may be granted to~~the reservation by our board of directors ~~officers, other employees and certain consultants~~ of Ansys and its subsidiaries. These awards include stock option rights, stock appreciation rights, restricted stock, restricted stock units, cash incentives, performance shares, performance units and other awards. The 2021 Plan authorizes 4.4 million750,000 shares of common stock for issuance ~~plus 1.6 million shares that remained available for issuance~~ under the ~~Fifth Amended~~2022 ESPP. The 2022 ESPP allows our employees and ~~Restated ANSYS, Inc. 1996 Stock Option~~employees of our designated subsidiaries to purchase shares of our common stock at a discount to fair market value of 10% in accordance with the terms and ~~Grant Plan (the Predecessor Plan) as~~conditions of the effective date of the 2021 Plan plus any shares relating to the outstanding awards under the Predecessor Plan or the 2021 Plan that are subsequently forfeited. As of the effective date of the 2021 Plan, grants are no longer made under the Predecessor Plan.

~~Table of Contents~~

2022 ESPP.

Total stock-based compensation expense and its net impact on basic and diluted earnings per share are as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands, except per share data)	(in thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Cost of sales:	Cost of sales:									Cost of sales:
Maintenance and service	Maintenance and service	$	2,753	$	3,626	$	9,834	$	9,956	Maintenance and service	$	2,264	$	3,519	$	4,827	$	7,081
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	25,420		18,954		66,158		50,417		Selling, general and administrative	19,596		23,515		40,040		40,738
Research and development	Research and development	15,971		15,605		46,156		42,883		Research and development	17,638		15,851		30,282		30,185
Stock-based compensation expense before taxes	Stock-based compensation expense before taxes	44,144		38,185		122,148		103,256		Stock-based compensation expense before taxes	39,498		42,885		75,149		78,004
Related income tax benefits	Related income tax benefits	(10,743)		(10,060)		(62,151)		(46,849)		Related income tax benefits	(7,165)		(8,783)		(32,053)		(51,408)
Stock-based compensation expense, net of taxes	Stock-based compensation expense, net of taxes	$	33,401	$	28,125	$	59,997	$	56,407	Stock-based compensation expense, net of taxes	$	32,333	$	34,102	$	43,096	$	26,596
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	$	(0.38)	$	(0.33)	$	(0.69)	$	(0.66)	Basic earnings per share	$	(0.37)	$	(0.39)	$	(0.50)	$	(0.31)
Diluted earnings per share	Diluted earnings per share	$	(0.38)	$	(0.32)	$	(0.68)	$	(0.65)	Diluted earnings per share	$	(0.37)	$	(0.39)	$	(0.49)	$	(0.30)

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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				Nine Months Ended					Three Months Ended				Six Months Ended
(in thousands)	(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020		(in thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
United States	United States	$	208,998	$	156,663	$	570,101	$	465,919	United States	$	187,239	$	208,402	$	384,800	$	361,103
Japan	Japan	45,298		40,565		147,511		133,773		Japan	57,105		60,198		94,976		102,213
Germany	Germany	27,826		27,677		89,781		85,048		Germany	33,187		30,609		63,773		61,955
South Korea	South Korea	22,364		21,083		67,853		54,105		South Korea	33,429		23,091		55,369		45,489
China										China	26,730		21,805		49,938		36,257

China		26,677		17,414		62,934		42,016
United Kingdom		19,441		26,595		45,894		46,334

Other Europe, Middle East and Africa (EMEA)	Other Europe, Middle East and Africa (EMEA)	54,365		52,244		174,189		151,898		Other Europe, Middle East and Africa (EMEA)	89,755		74,348		164,192		146,277
Other international	Other international	36,199		24,724		92,785		78,518		Other international	46,405		28,201		85,879		56,586
Total revenue	Total revenue	$	441,168	$	366,965	$	1,251,048	$	1,057,611	Total revenue	$	473,850	$	446,654	$	898,927	$	809,880

Property and equipment by geographic area is as follows:


(in thousands)	(in thousands)	September 30, 2021		December 31, 2020		(in thousands)	June 30, 2022		December 31, 2021
United States	United States	$	64,740	$	65,633	United States	$	59,918	$	62,880
India	India	6,002		7,408		India	5,572		6,144
Germany	Germany	4,730		5,277		Germany	3,147		4,434
France		4,581		5,749

Other EMEA	Other EMEA	5,027		5,847		Other EMEA	7,830		9,215
Other international	Other international	5,713		6,589		Other international	4,687		5,241
Total property and equipment, net	Total property and equipment, net	$	90,793	$	96,503	Total property and equipment, net	$	81,154	$	87,914

~~Table of Contents~~

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~~parties' intellectual property rights and other matters. In our opinion, the resolution of pending matters is not expected to have a material adverse effect on our consolidated results of operations, cash flows or financial position. However, each of these matters is subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these proceedings could materially affect our consolidated results of operations, cash flows or financial position.

Our Indian subsidiary has several service tax audits pending that have resulted in formal inquiries being received on transactions through mid-2012. We could incur tax charges and related liabilities of ~~approximately $7.4 million.~~$7.2 million. As such charges are not probable at this time, a reserve has not been recorded on the condensed consolidated balance sheet as of ~~September~~June 30, ~~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 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~~$7.2 million reserve. We are uncertain as to when these service tax matters will be concluded.

We sell software licenses and services to our customers under contractual agreements. Such agreements generally include certain provisions indemnifying the customer against claims, by third parties, of infringement or misappropriation of their intellectual property rights arising from such customer's usage of our products or services. To date, payments related to these indemnification provisions have been immaterial. For several reasons, including the lack of prior material indemnification claims, we cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

~~16.Subsequent Event~~

On October 1, 2021, we acquired 100% of the shares of Zemax, a leader in high-performance optical imaging system simulation, for a purchase price of $411.5 million, paid in cash, or $399.1 million net of cash acquired from Zemax. The acquisition expands the scope of our optical and photonics simulation portfolio by giving users comprehensive solutions that could drive innovation in healthcare, autonomy, consumer electronics and the industrial internet of things (IIoT). Due to the limited time since the acquisition date, the initial accounting for the business combination is incomplete. As a result, we are unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed.

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~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Stockholders of ANSYS, Inc.~~

~~Results of Review of Interim Financial Information~~

~~We have reviewed the accompanying condensed consolidated balance sheet of ANSYS, Inc. and subsidiaries (the "Company") as of September 30, 2021~~,the related condensed consolidated statements of income, comprehensive income, and stockholders' equity for the three-month and nine-month periods ended September 30, 2021 and 2020, and of cash flows for the nine-month periods ended September 30, 2021 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.

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.

~~/s/ Deloitte & Touche LLP~~

~~Pittsburgh, Pennsylvania~~

~~November 3, 2021~~

~~Table of Contents~~

Item 2.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 ~~nine~~six months ended ~~September~~June 30, ~~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 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 5,000~~5,300 people as of ~~September~~June 30, ~~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~~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 across 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

~~During the third quarter, we~~We continued to ~~work~~employ measures intended to mitigate the effects of the COVID-19 pandemic on our business ~~by adapting our local guidelines based on the impact of the virus~~ in the countries and sub-regions in which we operate. The health and safety of our employees and their families, our partners and our broad Ansys community around the world remain a high priority. Remote access continued to remain the primary means of work for much of our workforce. We previously announced our plans for post-pandemic work arrangements. These plans include options for our employees to work from home, in the office or on a flexible basis where they can alternate between the office and home. The adoption of the arrangements is subject to evolving local guidelines on precautions to be taken to mitigate COVID-19 risk to our employees and customers. 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 continue to work remotely during and after the COVID-19 pandemic. The spread of the virus and its variants and economic deterioration caused by them could have an impact on our business, as well as on our ability to achieve our financial guidance.

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second quarter. Our direct and indirect sales and support teams continue to use collaborative technology to access both ~~Ansys'~~Ansys’ data centers and the public cloud, and to meet virtually with customers to mitigate disruptions to our sales pipeline. ~~Additionally,~~Our sales team continues to engage with customers around the world in a mix of virtual and in-person meetings, ~~started~~depending on the location specific guidelines and customer preferences. They continue to ~~resume as well as live attendance at trade events.~~deliver customer value and generate business momentum. Our research and development teams have also continued to be productive and meet our product release ~~targets.~~

~~Our spending reflects our expectations for~~targets, as evidenced by the ~~pace at which economic recovery will occur, and we continue to invest~~recent release of Ansys 2022 R2 in long-term opportunities. We have also maintained and intend to maintain our commitment to invest in our acquisitions, research and development, and certain digital transformation projects, as those projects are critical to our ability to operate efficiently and scale the business for future growth.July.

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 ~~and Part II, Item 1A of this Quarterly Report on Form 10-Q~~ 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.

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 and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 reflected the following variances:

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
GAAP Non-GAAP GAAP Non-GAAP
Revenue 20.2 % 20.7 % 18.3 % 19.0 %
Operating income 19.5 % 20.5 % 15.8 % 21.2 %
Diluted earnings per share 11.5 % 16.9 % 14.4 % 22.3 %


	Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
	GAAP		Non-GAAP		GAAP		Non-GAAP
Revenue	6.1	%	5.2	%	11.0	%	9.7	%
Operating income	9.6	%	2.6	%	25.4	%	9.3	%
Diluted earnings per share	6.6	%	(4.3)	%	2.6	%	5.4	%

Our results reflect an increase in revenue during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 due to growth ~~across all~~in subscription lease licenses, maintenance and service revenue, ~~streams, driven~~partially offset by ~~strong execution, acquisitions and by the improving global economic environment~~a reduction in ~~2021 as compared to 2020.~~perpetual license revenue. We also experienced increased operating expenses during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily due to increased personnel ~~costs, additional operating expenses related to acquisitions, higher stock-based compensation and increased costs related to foreign exchange translation due to~~costs. The actual U.S. Dollar reported results were significantly impacted by a ~~weaker~~stronger U.S. Dollar. ~~The COVID-19 pandemic did not have a material impact on our operating expenses during the three and nine months ended September 30, 2021.~~

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Impact of Foreign Currency

Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The impacts on our GAAP and non-GAAP revenue and operating income as a result of the fluctuations of the U.S. Dollar when measured against our primary foreign currencies based on 2021 exchange rates are reflected in the table below. Amounts in brackets indicate an adverse impact from currency fluctuations.


		Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021					Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
(in thousands)	(in thousands)	GAAP		Non-GAAP		GAAP		Non-GAAP		(in thousands)	GAAP		Non-GAAP		GAAP		Non-GAAP
Revenue	Revenue	$	1,148	$	1,170	$	20,259	$	20,366	Revenue	$	(28,785)	$	(28,878)	$	(40,110)	$	(40,267)
Operating income	Operating income	$	(752)	$	(652)	$	2,706	$	3,698	Operating income	$	(17,346)	$	(18,077)	$	(21,840)	$	(23,148)

In constant currency, our ~~increases were~~growth was as follows:

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
GAAP Non-GAAP GAAP Non-GAAP
Revenue 19.9 % 20.4 % 16.4 % 17.0 %
Operating income 20.3 % 20.9 % 14.7 % 20.3 %

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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 the adjusted amounts to the 2020 comparable period reported revenue and operating income amounts.


	Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
	GAAP		Non-GAAP		GAAP		Non-GAAP
Revenue	12.5	%	11.5	%	15.9	%	14.6	%
Operating income	24.5	%	12.2	%	38.5	%	16.6	%

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 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 September 30,						Change					Three Months Ended June 30,
(in thousands, except percentages)	(in thousands, except percentages)	2021			2020			Amount		%	Constant Currency %	(in thousands, except percentages)	2022				2021		Change
													Actual		Constant Currency		Actual		Actual			Constant Currency
													Amount						Amount		%	Amount		%
ACV	ACV	$	365,444		$	305,334		$	60,110	19.7	19.3	ACV	$	460,273	$	487,222	$	430,539	$	29,734	6.9	$	56,683	13.2
Recurring ACV as a percentage of ACV		76.3		%	77.6		%

Nine Months Ended September 30, Change
(in thousands, except percentages) 2021 2020 Amount % Constant Currency %
ACV $ 1,115,365 $ 950,790 $ 164,575 17.3 15.4
Recurring ACV as a percentage of ACV 78.9 % 81.1 %

Recurring ACV includes both lease licenses and maintenance contracts. The reduction as a percentage of total ACV in 2021 as compared to 2020 was driven by an increase in perpetual licensing due to relatively lower perpetual sales during the pandemic in Q3 2020.

~~Industry Commentary:~~

We experienced industry trends consistent with those of the first half of 2021 as customers continued investing in innovation and leveraging our simulation solutions to offset revenue challenges by reducing costs. The high-tech industry growth was strengthened by 5G, pervasive connectivity and data centers. Despite the aerospace and defense industry continuing to feel impacts from the pandemic, process integration and design optimization, as well as our missions and materials capabilities, contributed to the growth in the industry. Growth in the automotive industry was aided by original equipment manufacturers' and suppliers' continued investment in simulation to reduce time-to-market, meet commitments to expanding electric vehicle lineups and production, and improve the safety, reliability and performance of batteries. Sustainability initiatives are driving growth in the energy industry as companies rush to achieve aggressive net zero carbon goals.


	Six Months Ended June 30,
(in thousands, except percentages)	2022				2021		Change
	Actual		Constant Currency		Actual		Actual			Constant Currency
	Amount						Amount		%	Amount		%
ACV	$	804,418	$	841,014	$	749,921	$	54,497	7.3	$	91,093	12.1

2221

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~~Other Financial Information~~Our trailing twelve-month recurring ACV, converted from the functional currency to U.S. Dollars at the 2021 monthly average exchange rates, was as follows:


	Twelve Months Ended June 30,				Change
(in thousands, except percentages)	2022		2021		Amount		%
Recurring ACV at 2021 monthly average exchange rates	$	1,572,422	$	1,379,670	$	192,752	14.0

Recurring ACV includes both subscription lease license and maintenance ACV, and excludes perpetual license and service ACV.

Industry Commentary:

High-tech, aerospace and defense (A&D), and automotive continued to be strong as companies sought to improve efficiency and innovation through digital technologies. Our ~~financial position includes $1,081.4 million~~high-tech and semiconductor industry remained strong due to continued investments in ~~cash~~5G, sustainability and ~~short-term investments,~~high-performance computing. Our comprehensive multiphysics portfolio is responsible for the growth in A&D as customers address modernization needs via digital transformation and ~~working capital of $1,156.3 million~~new engineering challenges stemming from products that must travel farther, faster and more efficiently. The automotive industry continues to invest in electrification and advanced driver assistance systems (ADAS) in response to increasing demand for safety and reliability. The industrial equipment and energy industries also had strong performance as ~~of September 30, 2021.~~

~~We repurchased 0.1 million shares during the nine months ended September 30, 2021~~companies use our solutions for $36.0 million as compared to the 0.7 million shares repurchased during the nine months ended September 30, 2020 for $161.0 million. As of September 30, 2021, we had 2.7 million shares remaining available for repurchase under our authorized share repurchase program.their sustainability and digital transformation initiatives.

Geographic Trends:

The following tables present our GAAP and non-GAAP geographic revenue variances using actual and constant currency rates during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2020:~~

GAAP
Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Actual Constant Currency Actual Constant Currency
Americas 36.3 % 36.2 % 23.0 % 22.8 %
EMEA (4.6) % (6.1) % 9.4 % 3.7 %
Asia-Pacific 20.6 % 21.4 % 19.1 % 18.0 %
Total 20.2 % 19.9 % 18.3 % 16.4 %

Non-GAAP
Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Actual Constant Currency Actual Constant Currency
Americas 37.5 % 37.3 % 25.2 % 25.0 %
EMEA (4.6) % (6.1) % 9.2 % 3.5 %
Asia-Pacific 20.4 % 21.1 % 18.2 % 17.0 %
Total 20.7 % 20.4 % 19.0 % 17.0 %
2021:


	GAAP
	Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
	Actual		Constant Currency		Actual		Constant Currency
Americas	(9.4)	%	(9.3)	%	6.6	%	6.7	%
EMEA	17.1	%	29.1	%	9.5	%	18.4	%
Asia-Pacific	23.6	%	36.3	%	19.7	%	29.1	%
Total	6.1	%	12.5	%	11.0	%	15.9	%


	Non-GAAP
	Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
	Actual		Constant Currency		Actual		Constant Currency
Americas	(11.0)	%	(10.9)	%	3.8	%	3.9	%
EMEA	17.2	%	29.2	%	9.7	%	18.6	%
Asia-Pacific	23.5	%	36.2	%	19.7	%	29.1	%
Total	5.2	%	11.5	%	9.7	%	14.6	%

The value and duration of multi-year subscription lease contracts executed during the period significantly impact the recognition of revenue. As a result, revenue may fluctuate 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 customers' software usage changes or cash flows during the periods presented.

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

~~Continued~~During the six months ended June 30, 2022, trade ~~tensions between the U.S. and China have had an impact on, and in the future may further restrict,~~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. As~~total 2021 revenue. China's 2021 revenue represented 4.3% of our total 2021 revenue. Additional restrictions or a ~~result, this has had, and~~further deterioration in the ~~future~~global trade environment could ~~continue to~~ have ana material adverse ~~effect~~impact on our business, results of operations or financial condition. Refer to additional details in Part I, "~~Item~~"Item 1A. Risk Factors" in our ~~2020~~2021 Form ~~10-K.~~10-K and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 for a discussion of additional business risks, including those associated with the Russian invasion of Ukraine.

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Use of Estimates:

The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to ~~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.

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Forward-Looking 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).~~1995. Forward-looking statements are statements that provide current expectations or forecasts of future events based on certain assumptions. Forward-looking statements are subject to risks, uncertainties, and factors relating to our business which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.

Forward-looking statements use words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "likely," "may," "outlook," "plan," "predict," "project," "should," "target," or other words of similar meaning. Forward-looking statements include those about market opportunity, including our total addressable market. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.

The risks associated with the following, among others, could cause actual results to differ materially from those described in any forward-looking statements:

•adverse conditions in the macroeconomic environment, including high inflation, recessionary conditions and volatility in equity and foreign exchange markets; political, economic and regulatory uncertainties in the countries and regions in which we operate (including as a result of the conflict between Russia and Ukraine);

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

•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 conflict between Russia and Ukraine);

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

•current and potential future impacts of a global health crisis, 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 ~~condensed~~ consolidated financial ~~statements; adverse changes in global economic and/or political conditions;~~statements, and ~~political, economic, regulatory and~~other public health and safety ~~risks~~risks; and ~~uncertainties in~~government actions or mandates surrounding the ~~countries and regions in which we operate;~~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;

•impacts from tariffs, trade sanctions, export license requirements or other trade barriers; 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; the volatility of our stock price; and the effect of changes in currency exchange rates or interest rates;

•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; ~~and the uncertainty of estimates associated with the acquisition accounting treatment of deferred revenue;~~

•our ability to recruit and retain key personnel including the impact of any government actions or mandates surrounding the COVID-19 pandemic; delays in recruitment caused by restrictions on travel and in person interactions; and the absence of key personnel or teams due to illness or recuperation;

•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 features, functionality and integrated multi-physics capabilities; our ability to develop and market new products to address the industry’s rapidly changing technology; failures or

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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 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;

•investments in global sales and marketing organizations and global business infrastructure; and dependence on our channel partners for the distribution of our products;

•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;

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•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;

•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;

•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;

•our ability to execute on our strategies related to environmental, social, and governance matters, and achieve related expectations, including as a result of evolving regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs and the availability of requisite financing, and changes in carbon markets; and

•other risks and uncertainties described in our reports filed from time to time with the ~~Securities and Exchange Commission.~~SEC.

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Results of Operations

The ~~three and nine months~~ results of operations discussed below are on a GAAP basis unless otherwise stated.

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to Three Months Ended ~~September~~June 30, ~~2020~~2021

Revenue:


		Three Months Ended September 30,													Three Months Ended June 30,
(in thousands, except percentages)	(in thousands, except percentages)	2021				2020		Change						(in thousands, except percentages)	2022				2021		Change
		GAAP		Constant Currency		GAAP		GAAP			Constant Currency				GAAP		Constant Currency		GAAP		GAAP			Constant Currency
		Amount						Amount		%	Amount		%		Amount						Amount		%	Amount		%
Revenue:	Revenue:													Revenue:
Lease licenses		$	120,516	$	120,112	$	78,917	$	41,599	52.7	$	41,195	52.2
Subscription lease licenses														Subscription lease licenses	$	135,031	$	145,850	$	129,794	$	5,237	4.0	$	16,056	12.4
Perpetual licenses	Perpetual licenses	79,878		79,686		62,705		17,173		27.4	16,981		27.1	Perpetual licenses	73,950		77,136		85,028		(11,078)		(13.0)	(7,892)		(9.3)
Software licenses	Software licenses	200,394		199,798		141,622		58,772		41.5	58,176		41.1	Software licenses	208,981		222,986		214,822		(5,841)		(2.7)	8,164		3.8
Maintenance	Maintenance	223,872		223,351		211,942		11,930		5.6	11,409		5.4	Maintenance	247,635		261,619		218,297		29,338		13.4	43,322		19.8
Service	Service	16,902		16,871		13,401		3,501		26.1	3,470		25.9	Service	17,234		18,030		13,535		3,699		27.3	4,495		33.2
Maintenance and service	Maintenance and service	240,774		240,222		225,343		15,431		6.8	14,879		6.6	Maintenance and service	264,869		279,649		231,832		33,037		14.3	47,817		20.6
Total revenue	Total revenue	$	441,168	$	440,020	$	366,965	$	74,203	20.2	$	73,055	19.9	Total revenue	$	473,850	$	502,635	$	446,654	$	27,196	6.1	$	55,981	12.5

Revenue for the quarter ended ~~September~~June 30, ~~2021~~2022 increased ~~20.2%~~6.1% compared to the quarter ended ~~September~~June 30, ~~2020,~~2021, or ~~19.9%~~12.5% in constant currency. The growth rate was favorably impacted by our continued investment in our global sales, support and marketing organizations, and the timing ~~and duration~~ of our multi-year subscription lease contracts, strong perpetual license sales, sales to our small- and medium-sized businesses, and our recent acquisitions. Lease license revenue increased 52.7%, or 52.2% in constant currency, as compared to the prior-year quarter. Perpetual license revenue, which is derived from new sales during the quarter, increased 27.4%, or 27.1% in constant currency, as compared to the prior-year quarter. Service revenue increased 26.1%, or 25.9% in constant currency, as compared to the prior-year quarter.contracts. 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 ~~5.6%~~13.4%, or ~~5.4%~~19.8% in constant currency. Subscription lease license revenue increased 4.0%, or 12.4% in constant currency, as compared to the prior-year quarter. Service revenue increased 27.3%, or 33.2% in constant currency, as compared to the prior-year quarter. Perpetual license revenue, which is derived from new sales during the quarter, decreased 13.0%, or 9.3% in constant currency, as compared to the prior-year quarter primarily due to customers' preference shifting to subscription lease licenses and the timing of contracts executed.

We continue to experience increased demand from our customers for contracts that often include longer-term, ~~time-based~~subscription lease licenses involving a larger number of our software products. These arrangements typically involve a higher overall transaction price. The upfront recognition of license revenue related to these larger ~~multi-year~~ transactions can result in 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 could result in a shift from perpetual licenses to time-based licenses, such as subscription leases, over the long term.

In relation to the COVID-19 pandemic and our revenue, we continue to expect a recovery in the business environment during the fourth quarter. Globally, businesses have not resumed full operations. Additional waves or mutated variants of COVID-19 could result in renewed shutdowns that stop or regress economic recovery.

With respect to revenue, on average for the quarter ended ~~September~~June 30, ~~2021,~~2022, the U.S. Dollar was ~~approximately 0.7% weaker,~~12.0% stronger, when measured against our primary foreign currencies, than for the quarter ended ~~September~~June 30, ~~2020.~~2021. The table below presents the net impacts of currency fluctuations on revenue for the quarter ended ~~September~~June 30, ~~2021.~~2022. Amounts in brackets indicate an adverse impact from currency fluctuations.


(in thousands)	Three Months Ended ~~September~~June 30, ~~2021~~2022
~~British Pound~~Euro	~~1,063~~$	(11,325)
Japanese Yen	(10,454)
South Korean Won	~~447~~(4,175)
~~Euro~~British Pound	~~434~~(1,333)
~~Japanese Yen~~Taiwan Dollar	~~(1,554)~~(862)
Indian Rupee	(376)
Other	~~758~~(260)
Total	$	~~1,148~~(28,785)

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The impacts from currency fluctuations resulted in decreased ~~operating~~operating income of ~~$0.8~~$17.3 million for the quarter ended ~~September~~June 30, ~~2021~~2022 as compared to the quarter ended ~~September~~June 30, ~~2020.~~2021.

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


		Three Months Ended September 30,					Three Months Ended June 30,
		2021		2020			2022		2021
International	International	52.6	%	57.3	%	International	60.5	%	53.3	%
Domestic	Domestic	47.4	%	42.7	%	Domestic	39.5	%	46.7	%

Direct	Direct	74.4	%	74.9	%	Direct	73.7	%	75.4	%
Indirect	Indirect	25.6	%	25.1	%	Indirect	26.3	%	24.6	%

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 ~~$4.3~~$2.0 million and ~~$2.2~~$5.9 million for the quarters ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The expected impacts on reported revenue ~~inclusive of the expected impact from the Zemax acquisition,~~ are ~~$5.6~~$1.2 million and ~~$24.7~~$7.3 million for the quarter ending September 30, 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~~sheet 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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of the following:


		Balance at September 30, 2021							Balance at June 30, 2022
(in thousands)	(in thousands)	Total		Current		Long-Term		(in thousands)	Total		Current		Long-Term
Deferred revenue	Deferred revenue	$	332,464	$	318,032	$	14,432	Deferred revenue	$	383,622	$	360,910	$	22,712
Backlog	Backlog	567,031		257,739		309,292		Backlog	795,626		364,413		431,213
Total	Total	$	899,495	$	575,771	$	323,724	Total	$	1,179,248	$	725,323	$	453,925


		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 on both a GAAP and constant currency 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 September 30,																Three Months Ended June 30,
		2021						2020			Change							2022					2021			Change
		GAAP			Constant Currency			GAAP			GAAP			Constant Currency				GAAP			Constant Currency		GAAP			GAAP			Constant Currency
(in thousands, except percentages)	(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%	(in thousands, except percentages)	Amount		% of Revenue	Amount	% of Revenue	Amount		% of Revenue	Amount		%	Amount		%
Cost of sales:	Cost of sales:																Cost of sales:
Software licenses	Software licenses	$	8,289	1.9	$	8,286	1.9	$	7,251	2.0	$	1,038	14.3	$	1,035	14.3	Software licenses	$	8,509	1.8	8,612	1.7	$	8,065	1.8	$	444	5.5	$	547	6.8
Amortization	Amortization	15,189		3.4	15,135		3.4	9,911		2.7	5,278		53.3	5,224		52.7	Amortization	17,414		3.7	17,808	3.5	15,025		3.4	2,389		15.9	2,783		18.5
Maintenance and service	Maintenance and service	39,268		8.9	39,082		8.9	36,223		9.9	3,045		8.4	2,859		7.9	Maintenance and service	36,564		7.7	38,361	7.6	41,068		9.2	(4,504)		(11.0)	(2,707)		(6.6)
Total cost of sales	Total cost of sales	62,746		14.2	62,503		14.2	53,385		14.5	9,361		17.5	9,118		17.1	Total cost of sales	62,487		13.2	64,781	12.9	64,158		14.4	(1,671)		(2.6)	623		1.0
Gross profit	Gross profit	$	378,422	85.8	$	377,517	85.8	$	313,580	85.5	$	64,842	20.7	$	63,937	20.4	Gross profit	$	411,363	86.8	437,854	87.1	$	382,496	85.6	$	28,867	7.5	$	55,358	14.5

~~Software Licenses:~~ ~~The increase in the cost of software licenses was primarily due to increased third-party royalties of $0.9 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~~decrease in maintenance and service costs was primarily due to ~~increased salaries and~~the following:

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

•Decreased incentive compensation and other headcount-related costs of ~~$2.5~~$1.4 million.

•Decreased stock-based compensation of $1.3 million.

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

Three Months Ended September 30,
2021 2020 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 $ 165,368 37.5 $ 164,378 37.4 $ 132,642 36.1 $ 32,726 24.7 $ 31,736 23.9
Research and
development 102,023 23.1 101,380 23.0 86,616 23.6 15,407 17.8 14,764 17.0
Amortization 3,403 0.8 3,380 0.8 4,237 1.2 (834) (19.7) (857) (20.2)
Total operating
expenses 270,794 61.4 269,138 61.2 223,495 60.9 47,299 21.2 45,643 20.4
Operating income $ 107,628 24.4 $ 108,379 24.6 $ 90,085 24.5 $ 17,543 19.5 $ 18,294 20.3

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	Three Months Ended June 30,
	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	$	170,383	36.0	$	176,406	35.1	$	160,410	35.9	$	9,973	6.2	$	15,996	10.0
Research and development	108,941		23.0	111,833		22.2	100,879		22.6	8,062		8.0	10,954		10.9
Amortization	4,029		0.9	4,259		0.8	4,434		1.0	(405)		(9.1)	(175)		(3.9)
Total operating expenses	283,353		59.8	292,498		58.2	265,723		59.5	17,630		6.6	26,775		10.1
Operating income	$	128,010	27.0	$	145,356	28.9	$	116,773	26.1	$	11,237	9.6	$	28,583	24.5

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 ~~$21.4~~$9.4 million.

•Increased ~~stock-based compensation~~business travel of ~~$6.5~~$2.6 million as in-person meetings and live attendance at trade events have continued to expand.

•Increased marketing expenses of $1.7 million.

•Increased IT maintenance and software hosting costs of ~~$2.6~~$1.7 million.

•Increased ~~business travel~~consulting and professional fees of ~~$1.3 million as in-person meetings and live attendance at trade events started to resume.~~$2.0 million.

•Decreased ~~third-party commissions~~costs related to foreign exchange translation of ~~$2.2~~$6.0 million due to a stronger U.S. Dollar.

•Decreased stock-based compensation of $3.9 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.

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

•Increased salaries ~~and incentive~~of $6.3 million.

•Increased stock-based compensation of ~~$11.1~~$1.8 million.

•Increased IT maintenance and software hosting costs of ~~$2.0~~$1.0 million.

•Increased business travel of $1.0 million as in-person meetings and live attendance at trade events have continued to expand.

•Decreased costs related to foreign exchange translation of $2.9 million due to a stronger U.S. Dollar.

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 for the quarter ended September 30, 2021 was $0.5 million as compared to $0.8 million for the quarter ended September 30, 2020. Interest income decreased as a result of a lower interest rate environment and the related decrease in the average rate of return on invested cash balances.

~~Interest~~ Expense: Interest expense for the quarter ended ~~September~~June 30, ~~2021~~2022 was ~~$2.9~~$4.6 million as compared to ~~$1.9~~$3.3 million for the quarter ended ~~September~~June 30, ~~2020. Interest expense increased as~~2021 due to a ~~result of interest incurred on debt financing obtained in connection with the acquisition of AGI in the fourth quarter of 2020, partially offset by a lower~~higher interest rate environment.

Other (Expense) Income, net: Other expense for the quarter ended ~~September~~June 30, ~~2021~~2022 was ~~$1.3~~$0.8 million as compared to other income of ~~$1.2~~$14.9 million for the quarter ended ~~September~~June 30, ~~2020.~~2021. Other (expense) income consisted primarily of ~~foreign currency (losses) gains.~~losses and gains on equity investments during the second quarter of 2022 and 2021, respectively.

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


		Three Months Ended September 30,							Three Months Ended June 30,
(in thousands, except percentages)	(in thousands, except percentages)	2021			2020			(in thousands, except percentages)	2022			2021
Income before income tax provision	Income before income tax provision	$	103,898		$	90,144		Income before income tax provision	$	122,894		$	128,860
Income tax provision	Income tax provision	$	18,556		$	14,517		Income tax provision	$	24,094		$	35,144
Effective tax rate	Effective tax rate	17.9		%	16.1		%	Effective tax rate	19.6		%	27.3		%

The ~~increase~~decrease in the effective tax rate from the ~~third~~second quarter of ~~2020~~2021 was primarily due to a decrease in non-deductible compensation in 2022 and an increase in tax benefits from the ~~release of~~foreign-derived intangible income (FDII) deduction, partially offset by a ~~valuation allowance~~decrease in benefits related to tax planning in a foreign ~~jurisdiction in the third quarter of 2020 that did not recur in 2021.~~jurisdiction.

When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the quarters ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were favorably impacted by tax benefits from the ~~foreign-derived intangible income (FDII)~~FDII deduction and research and development credits. Additionally, tax expense/benefits related to stock-based compensation impacted the rate in each period.

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 September 30,
(in thousands, except per share data) 2021 2020
Net income $ 85,342 $ 75,627
Diluted earnings per share $ 0.97 $ 0.87
Weighted average shares outstanding - diluted 88,169 87,224


	Three Months Ended June 30,
(in thousands, except per share data)	2022		2021
Net income	$	98,800	$	93,716
Diluted earnings per share	$	1.13	$	1.06
Weighted average shares outstanding - diluted	87,321		88,053

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~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

Revenue:


		Nine Months Ended September 30,													Six Months Ended June 30,
(in thousands, except percentages)	(in thousands, except percentages)	2021				2020		Change						(in thousands, except percentages)	2022				2021		Change
		GAAP		Constant Currency		GAAP		GAAP			Constant Currency				GAAP		Constant Currency		GAAP		GAAP			Constant Currency
		Amount						Amount		%	Amount		%		Amount						Amount		%	Amount		%
Revenue:	Revenue:													Revenue:
Lease licenses		$	315,387	$	313,025	$	237,000	$	78,387	33.1	$	76,025	32.1
Subscription lease licenses														Subscription lease licenses	$	226,488	$	239,133	$	194,871	$	31,617	16.2	$	44,262	22.7
Perpetual licenses	Perpetual licenses	232,433		228,456		161,793		70,640		43.7	66,663		41.2	Perpetual licenses	139,938		144,713		152,555		(12,617)		(8.3)	(7,842)		(5.1)
Software licenses	Software licenses	547,820		541,481		398,793		149,027		37.4	142,688		35.8	Software licenses	366,426		383,846		347,426		19,000		5.5	36,420		10.5
Maintenance	Maintenance	655,843		642,818		615,609		40,234		6.5	27,209		4.4	Maintenance	494,876		516,290		431,971		62,905		14.6	84,319		19.5
Service	Service	47,385		46,490		43,209		4,176		9.7	3,281		7.6	Service	37,625		38,901		30,483		7,142		23.4	8,418		27.6
Maintenance and service	Maintenance and service	703,228		689,308		658,818		44,410		6.7	30,490		4.6	Maintenance and service	532,501		555,191		462,454		70,047		15.1	92,737		20.1
Total revenue	Total revenue	$	1,251,048	$	1,230,789	$	1,057,611	$	193,437	18.3	$	173,178	16.4	Total revenue	$	898,927	$	939,037	$	809,880	$	89,047	11.0	$	129,157	15.9

Revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 increased ~~18.3%~~11.0% compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, or ~~16.4%~~15.9% 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 lease ~~contracts, sales to our small- and medium-sized businesses, and our recent acquisitions. Perpetual~~contracts. Subscription lease license revenue ~~which is derived from new sales during the nine months ended September 30, 2021,~~ increased ~~43.7%~~16.2%, or ~~41.2%~~22.7% in constant currency, as compared to the ~~nine~~six months ended ~~September~~June 30, 2020. Lease license revenue increased 33.1%, or 32.1% in constant currency, as compared to the nine months ended September 30, 2020. Service revenue increased 9.7%, or 7.6% in constant currency, as compared to the nine months ended September 30, 2020.2021. 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 ~~6.5%~~14.6%, or ~~4.4%~~19.5% in constant currency. Service revenue increased 23.4%, or 27.6% in constant currency, as compared to the six months ended June 30, 2021. Perpetual license revenue, which is derived from new sales during the six months ended June 30, 2022, decreased 8.3%, or 5.1% in constant currency, as compared to the six months ended June 30, 2021 primarily due to customers' preference shifting to subscription lease licenses and the timing of contracts executed.

With respect to revenue, on average for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the U.S. Dollar was ~~approximately 4.1% weaker,~~9.6% stronger, when measured against our primary foreign currencies, than for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The table below presents the net impacts of currency fluctuations on revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Amounts in brackets indicate an adverse impact from currency fluctuations.


(in thousands)	~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022
Euro	$	~~12,649~~(16,973)
Japanese Yen	(13,894)
South Korean Won	~~3,511~~(5,830)
British Pound	~~3,107~~(1,673)
~~Japanese Yen~~Taiwan Dollar	~~(1,704)~~(849)
Indian Rupee	(661)
Other	~~2,696~~(230)
Total	$	~~20,259~~(40,110)

The impacts from currency fluctuations resulted in ~~increased~~decreased operating income of ~~$2.7~~$21.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

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


		Nine Months Ended September 30,					Six Months Ended June 30,
		2021		2020			2022		2021
International	International	54.4	%	55.9	%	International	57.2	%	55.4	%
Domestic	Domestic	45.6	%	44.1	%	Domestic	42.8	%	44.6	%

Direct	Direct	74.0	%	75.7	%	Direct	73.1	%	73.8	%
Indirect	Indirect	26.0	%	24.3	%	Indirect	26.9	%	26.2	%

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 ~~$19.1~~$5.6 million and ~~$10.1~~$14.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Cost of Sales and Operating Expenses:


		Nine Months Ended September 30,																Six Months Ended June 30,
		2021						2020			Change							2022						2021			Change
		GAAP			Constant Currency			GAAP			GAAP			Constant Currency				GAAP			Constant Currency			GAAP			GAAP			Constant Currency
(in thousands, except percentages)	(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%	(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%
Cost of sales:	Cost of sales:																Cost of sales:
Software licenses	Software licenses	$	23,960	1.9	$	23,819	1.9	$	20,688	2.0	$	3,272	15.8	$	3,131	15.1	Software licenses	$	16,945	1.9	$	17,069	1.8	$	15,671	1.9	$	1,274	8.1	$	1,398	8.9
Amortization	Amortization	45,163		3.6	44,629		3.6	29,227		2.8	15,936		54.5	15,402		52.7	Amortization	34,666		3.9	35,242		3.8	29,974		3.7	4,692		15.7	5,268		17.6
Maintenance and service	Maintenance and service	119,884		9.6	117,150		9.5	107,446		10.2	12,438		11.6	9,704		9.0	Maintenance and service	75,636		8.4	78,594		8.4	80,616		10.0	(4,980)		(6.2)	(2,022)		(2.5)
Total cost of sales	Total cost of sales	189,007		15.1	185,598		15.1	157,361		14.9	31,646		20.1	28,237		17.9	Total cost of sales	127,247		14.2	130,905		13.9	126,261		15.6	986		0.8	4,644		3.7
Gross profit	Gross profit	$	1,062,041	84.9	$	1,045,191	84.9	$	900,250	85.1	$	161,791	18.0	$	144,941	16.1	Gross profit	$	771,680	85.8	$	808,132	86.1	$	683,619	84.4	$	88,061	12.9	$	124,513	18.2

Software Licenses: The increase in the cost of software licenses was primarily due to increased third-party royalties of ~~$3.1~~$1.2 million.

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

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

•~~Increased salaries, incentive compensation and other headcount-related costs of $7.5 million.~~

•~~Increased~~Decreased costs related to foreign exchange translation of ~~$2.7~~$3.0 million due to a ~~weaker~~stronger U.S. Dollar.

•~~Increased consulting costs~~Decreased stock-based compensation of ~~$1.3 million.~~

•~~Increased IT maintenance and software hosting costs of $1.1 million.~~

•~~Decreased third-party technical support of $1.2~~$2.3 million.

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

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		Nine Months Ended September 30,																Six Months Ended June 30,
		2021						2020			Change							2022						2021			Change
		GAAP			Constant Currency			GAAP			GAAP			Constant Currency				GAAP			Constant Currency			GAAP			GAAP			Constant Currency
(in thousands, except percentages)	(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%	(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		% of Revenue	Amount		%	Amount		%
Operating expenses:	Operating expenses:																Operating expenses:
Selling, general and administrative	Selling, general and administrative	$	471,993	37.7	$	463,519	37.7	$	391,862	37.1	$	80,131	20.4	$	71,657	18.3	Selling, general and administrative	$	340,138	37.8	$	349,696	37.2	$	306,625	37.9	$	33,513	10.9	$	43,071	14.0
Research and development	Research and development	303,381		24.3	298,061		24.2	258,861		24.5	44,520		17.2	39,200		15.1	Research and development	214,215		23.8	218,920		23.3	201,358		24.9	12,857		6.4	17,562		8.7
Amortization	Amortization	12,244		1.0	11,894		1.0	12,562		1.2	(318)		(2.5)	(668)		(5.3)	Amortization	8,154		0.9	8,503		0.9	8,841		1.1	(687)		(7.8)	(338)		(3.8)
Total operating expenses	Total operating expenses	787,618		63.0	773,474		62.8	663,285		62.7	124,333		18.7	110,189		16.6	Total operating expenses	562,507		62.6	577,119		61.5	516,824		63.8	45,683		8.8	60,295		11.7
Operating income	Operating income	$	274,423	21.9	$	271,717	22.1	$	236,965	22.4	$	37,458	15.8	$	34,752	14.7	Operating income	$	209,173	23.3	$	231,013	24.6	$	166,795	20.6	$	42,378	25.4	$	64,218	38.5

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 ~~$51.7~~$23.3 million.

•Increased ~~stock-based compensation~~business travel of ~~$15.7~~$4.7 million as in-person meetings and live attendance at trade events have continued to expand.

•Increased marketing expenses of $3.6 million.

•Increased consulting costs ~~related to foreign exchange translation~~ of ~~$8.5 million due to a weaker U.S. Dollar.~~$3.5 million.

•Increased IT maintenance and software hosting costs of ~~$5.5~~$3.0 million.

•~~Decreased~~Increased bad debt expense of ~~$5.0 million.~~$1.8 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.

•Decreased costs related to foreign exchange translation of $9.6 million due to a stronger U.S. Dollar.

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 ~~$28.6~~$11.6 million.

•~~Increased costs related to foreign exchange translation of $5.3 million due to a weaker U.S. Dollar.~~

•Increased IT maintenance and software hosting costs of ~~$4.3~~$2.4 million.

•Increased ~~stock-based compensation~~business travel of ~~$3.3 million.~~$1.4 million as in-person meetings and live attendance at trade events have continued to expand.

•Decreased costs related to foreign exchange translation of $4.7 million due to a stronger U.S. Dollar.

Interest Income: Interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$1.5~~$0.8 million as compared to ~~$4.5~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020. Interest income decreased~~2021. The lower invested cash balance, as a result of ~~a lower~~investments in acquisitions and share repurchases, was partially offset by the higher interest rate environment and the related ~~decrease~~increase in the average rate of return on invested cash balances.

Interest Expense: Interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$9.6~~$7.6 million as compared to ~~$8.5~~$6.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Interest expense increased as a result of a higher interest ~~incurred on debt financing obtained in connection with the acquisition of AGI in the fourth quarter of 2020,~~rate environment, partially offset by a lower ~~interest rate environment.~~principal balances on our outstanding debt.

Other (Expense) Income, net: Other ~~income~~expense for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 was ~~$14.0~~$1.5 million as compared to ~~$3.2~~other income of $15.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Other (expense) income consisted primarily of ~~net investment gains.~~losses and gains on equity investments during the six months ended June 30, 2022 and June 30, 2021, respectively.

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


		Nine Months Ended September 30,							Six Months Ended June 30,
(in thousands, except percentages)	(in thousands, except percentages)	2021			2020			(in thousands, except percentages)	2022			2021
Income before income tax provision	Income before income tax provision	$	280,381		$	236,053		Income before income tax provision	$	200,923		$	176,483
Income tax provision	Income tax provision	$	28,925		$	17,798		Income tax provision	$	31,135		$	10,369
Effective tax rate	Effective tax rate	10.3		%	7.5		%	Effective tax rate	15.5		%	5.9		%

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The increase in the effective tax rate from the prior year was primarily due to an increase in non-deductible compensation in 2021 and the release of valuation allowances in foreign jurisdictions recognized in 2020 that did not recur in 2021. These tax increases were partially offset by increaseddecreased benefits ~~from~~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 ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 were favorably impacted by tax benefits from stock-based compensation, the FDII deduction, and research and development 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:


		Nine Months Ended September 30,					Six Months Ended June 30,
(in thousands, except per share data)	(in thousands, except per share data)	2021		2020		(in thousands, except per share data)	2022		2021
Net income	Net income	$	251,456	$	218,255	Net income	$	169,788	$	166,114
Diluted earnings per share	Diluted earnings per share	$	2.86	$	2.50	Diluted earnings per share	$	1.94	$	1.89
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	88,069		87,176		Weighted average shares outstanding - diluted	87,535		88,019

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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
		September 30, 2021															June 30, 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	$	441,168	$	378,422	85.8	%	$	107,628	24.4	%	$	85,342	$	0.97	Total GAAP	$	473,850	$	411,363	86.8	%	$	128,010	27.0	%	$	98,800	$	1.13
Acquisition accounting for deferred revenue	Acquisition accounting for deferred revenue	4,256		4,256		0.1	%	4,256		0.7	%	4,256		0.05		Acquisition accounting for deferred revenue	2,036		2,036		0.1	%	2,036		0.3	%	2,036		0.02
Stock-based compensation expense	Stock-based compensation expense	—		2,753		0.6	%	44,144		9.9	%	44,144		0.49		Stock-based compensation expense	—		2,264		0.5	%	39,498		8.3	%	39,498		0.45
Excess payroll taxes related to stock-based awards	Excess payroll taxes related to stock-based awards	—		38		—	%	626		0.1	%	626		0.01		Excess payroll taxes related to stock-based awards	—		27		—	%	217		0.1	%	217		—
Amortization of intangible assets from acquisitions	Amortization of intangible assets from acquisitions	—		15,189		3.4	%	18,592		4.2	%	18,592		0.21		Amortization of intangible assets from acquisitions	—		17,414		3.6	%	21,443		4.5	%	21,443		0.25
Transaction expenses related to business combinations		—		—		—	%	1,716		0.4	%	1,716		0.02
Expenses related to business combinations																Expenses related to business combinations	—		—		—	%	2,428		0.5	%	2,428		0.03

Adjustment for income tax effect	Adjustment for income tax effect	—		—		—	%	—		—	%	(14,358)		(0.16)		Adjustment for income tax effect	—		—		—	%	—		—	%	(9,839)		(0.11)
Total non-GAAP	Total non-GAAP	$	445,424	$	400,658	89.9	%	$	176,962	39.7	%	$	140,318	$	1.59	Total non-GAAP	$	475,886	$	433,104	91.0	%	$	193,632	40.7	%	$	154,583	$	1.77

1 Diluted weighted average shares were ~~88,169.~~87,321.


		Three Months Ended															Three Months Ended
		September 30, 2020															June 30, 2021
(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	$	366,965	$	313,580	85.5	%	$	90,085	24.5	%	$	75,627	$	0.87	Total GAAP	$	446,654	$	382,496	85.6	%	$	116,773	26.1	%	$	93,716	$	1.06
Acquisition accounting for deferred revenue	Acquisition accounting for deferred revenue	2,164		2,164		—	%	2,164		0.5	%	2,164		0.02		Acquisition accounting for deferred revenue	5,896		5,896		0.2	%	5,896		0.9	%	5,896		0.07
Stock-based compensation expense	Stock-based compensation expense	—		3,626		0.9	%	38,185		10.4	%	38,185		0.44		Stock-based compensation expense	—		3,519		0.8	%	42,885		9.5	%	42,885		0.48
Excess payroll taxes related to stock-based awards	Excess payroll taxes related to stock-based awards	—		85		—	%	732		0.2	%	732		0.01		Excess payroll taxes related to stock-based awards	—		182		0.1	%	2,319		0.6	%	2,319		0.03
Amortization of intangible assets from acquisitions	Amortization of intangible assets from acquisitions	—		9,911		2.8	%	14,148		3.8	%	14,148		0.16		Amortization of intangible assets from acquisitions	—		15,025		3.3	%	19,459		4.3	%	19,459		0.22
Transaction expenses related to business combinations		—		—		—	%	1,549		0.4	%	1,549		0.02
Expenses related to business combinations																Expenses related to business combinations	—		—		—	%	1,321		0.3	%	1,321		0.02

Adjustment for income tax effect	Adjustment for income tax effect	—		—		—	%	—		—	%	(14,133)		(0.16)		Adjustment for income tax effect	—		—		—	%	—		—	%	(2,997)		(0.03)
Total non-GAAP	Total non-GAAP	$	369,129	$	329,366	89.2	%	$	146,863	39.8	%	$	118,272	$	1.36	Total non-GAAP	$	452,550	$	407,118	90.0	%	$	188,653	41.7	%	$	162,599	$	1.85

1 Diluted weighted average shares were ~~87,224.~~88,053.

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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)
		Nine Months Ended															Six Months Ended
		September 30, 2021															June 30, 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	$	1,251,048	$	1,062,041	84.9	%	$	274,423	21.9	%	$	251,456	$	2.86	Total GAAP	$	898,927	$	771,680	85.8	%	$	209,173	23.3	%	$	169,788	$	1.94
Acquisition accounting for deferred revenue	Acquisition accounting for deferred revenue	19,075		19,075		0.2	%	19,075		1.1	%	19,075		0.22		Acquisition accounting for deferred revenue	5,596		5,596		—	%	5,596		0.4	%	5,596		0.06
Stock-based compensation expense	Stock-based compensation expense	—		9,834		0.8	%	122,148		9.7	%	122,148		1.38		Stock-based compensation expense	—		4,827		0.6	%	75,149		8.4	%	75,149		0.86
Excess payroll taxes related to stock-based awards	Excess payroll taxes related to stock-based awards	—		1,085		0.1	%	12,080		1.0	%	12,080		0.14		Excess payroll taxes related to stock-based awards	—		444		0.1	%	5,270		0.6	%	5,270		0.06
Amortization of intangible assets from acquisitions	Amortization of intangible assets from acquisitions	—		45,163		3.5	%	57,407		4.5	%	57,407		0.65		Amortization of intangible assets from acquisitions	—		34,666		3.8	%	42,820		4.7	%	42,820		0.49
Transaction expenses related to business combinations		—		—		—	%	5,007		0.4	%	5,007		0.06
Expenses related to business combinations																Expenses related to business combinations	—		—		—	%	4,166		0.4	%	4,166		0.05

Adjustment for income tax effect	Adjustment for income tax effect	—		—		—	%	—		—	%	(65,334)		(0.75)		Adjustment for income tax effect	—		—		—	%	—		—	%	(28,971)		(0.33)
Total non-GAAP	Total non-GAAP	$	1,270,123	$	1,137,198	89.5	%	$	490,140	38.6	%	$	401,839	$	4.56	Total non-GAAP	$	904,523	$	817,213	90.3	%	$	342,174	37.8	%	$	273,818	$	3.13

1 Diluted weighted average shares were ~~88,069.~~87,535.


		Nine Months Ended															Six Months Ended
		September 30, 2020															June 30, 2021
(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	$	1,057,611	$	900,250	85.1	%	$	236,965	22.4	%	$	218,255	$	2.50	Total GAAP	$	809,880	$	683,619	84.4	%	$	166,795	20.6	%	$	166,114	$	1.89
Acquisition accounting for deferred revenue	Acquisition accounting for deferred revenue	10,116		10,116		0.2	%	10,116		0.7	%	10,116		0.12		Acquisition accounting for deferred revenue	14,819		14,819		0.3	%	14,819		1.4	%	14,819		0.17
Stock-based compensation expense	Stock-based compensation expense	—		9,956		0.9	%	103,256		9.7	%	103,256		1.19		Stock-based compensation expense	—		7,081		0.9	%	78,004		9.5	%	78,004		0.88
Excess payroll taxes related to stock-based awards	Excess payroll taxes related to stock-based awards	—		774		0.1	%	9,591		0.9	%	9,591		0.11		Excess payroll taxes related to stock-based awards	—		1,047		0.1	%	11,454		1.4	%	11,454		0.13
Amortization of intangible assets from acquisitions	Amortization of intangible assets from acquisitions	—		29,227		2.7	%	41,789		3.9	%	41,789		0.48		Amortization of intangible assets from acquisitions	—		29,974		3.6	%	38,815		4.7	%	38,815		0.44
Transaction expenses related to business combinations		—		—		—	%	2,808		0.3	%	2,808		0.03
Rabbi trust (income) / expense		—		—		—	%	—		—	%	(5)		—
Expenses related to business combinations																Expenses related to business combinations	—		—		—	%	3,291		0.4	%	3,291		0.04

Adjustment for income tax effect	Adjustment for income tax effect	—		—		—	%	—		—	%	(60,906)		(0.70)		Adjustment for income tax effect	—		—		—	%	—		—	%	(50,976)		(0.58)
Total non-GAAP	Total non-GAAP	$	1,067,727	$	950,323	89.0	%	$	404,525	37.9	%	$	324,904	$	3.73	Total non-GAAP	$	824,699	$	736,540	89.3	%	$	313,178	38.0	%	$	261,521	$	2.97

1 Diluted weighted average shares were ~~87,176.~~88,019.

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

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historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.

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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, 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 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~~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. As of the second quarter of 2022, we have updated this non-GAAP measure to include, in addition to professional services rendered in connection with business combinations, other expenses directly related to business combinations, including compensation expenses and concurrent restructuring activities, such as employee severances and other exit costs. These costs are included in our GAAP presentation of selling, general and administrative and research and development expenses. The additional expenses were not material in the current or comparable period. We exclude these acquisition-related expenses for the purpose of

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~~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 ~~2021~~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 ~~2020~~2021 comparable period, rather than the actual exchange rates in effect for ~~2021.~~2022. Constant currency growth rates are calculated by adjusting the ~~2021~~2022 reported amounts by the ~~2021~~2022 currency fluctuation impacts and comparing the adjusted amounts to the ~~2020~~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)	September 30, 2021		December 31, 2020		Change		(in thousands)	June 30, 2022		December 31, 2021		Change
Cash, cash equivalents and short-term investments	Cash, cash equivalents and short-term investments	$	1,081,365	$	913,151	$	168,214	Cash, cash equivalents and short-term investments	$	517,635	$	668,028	$	(150,393)
Working capital	Working capital	$	1,156,254	$	990,412	$	165,842	Working capital	$	702,526	$	860,082	$	(157,556)

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 ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in thousands, except percentages)	(in thousands, except percentages)	September 30, 2021		% of Total	December 31, 2020		% of Total	(in thousands, except percentages)	June 30, 2022		% of Total	December 31, 2021		% of Total
Domestic	Domestic	$	746,039	69.0	$	582,882	63.8	Domestic	$	249,061	48.1	$	365,390	54.7
Foreign	Foreign	335,326		31.0	330,269		36.2	Foreign	268,574		51.9	302,638		45.3
Total	Total	$	1,081,365		$	913,151		Total	$	517,635		$	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 ~~imposed as part of the Tax Cuts and Jobs Act of 2017~~ 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 $130.5~~$16.4 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


		Nine Months Ended September 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2021		2020		Change		(in thousands)	2022		2021		Change
Net cash provided by operating activities	Net cash provided by operating activities	$	447,829	$	373,543	$	74,286	Net cash provided by operating activities	$	329,880	$	289,984	$	39,896

Net cash provided by operating activities increased during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to ~~increased net income (net of non-cash operating adjustments) of $51.7 million and~~ increased net cash flows from operating assets and liabilities of ~~$22.6~~$41.9 million, partially offset by decreased net income (net of non-cash operating adjustments) of $2.0 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 ACV growth and ~~stronger collections in 2021,~~lower tax payments, partially offset by ~~increased~~additional cash outflows related to ~~operational payments and income taxes.~~

increased operating expenses as compared to the six months ended June 30, 2021.

Cash Flows from Investing Activities


		Nine Months Ended September 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2021		2020		Change		(in thousands)	2022		2021		Change
Net cash used in investing activities	Net cash used in investing activities	$	(123,656)	$	(130,590)	$	6,934	Net cash used in investing activities	$	(251,604)	$	(116,324)	$	(135,280)

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Net cash used in investing activities ~~decreased~~increased by ~~$6.9~~$135.3 million during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020. Capital expenditures decreased by $6.1 million and other investments decreased by $5.8 million. These decreases were partially offset by~~2021 due to increased acquisition-related net cash outlays of ~~$4.9~~$136.4 million. We currently plan capital spending of $25.0 million to ~~$35.0~~$30.0 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.

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Cash Flows from Financing Activities


		Nine Months Ended September 30,							Six Months Ended June 30,
(in thousands)	(in thousands)	2021		2020		Change		(in thousands)	2022		2021		Change
Net cash used in financing activities	Net cash used in financing activities	$	(146,865)	$	(275,846)	$	128,981	Net cash used in financing activities	$	(207,601)	$	(122,103)	$	(85,498)

Net cash used in financing activities ~~decreased~~increased during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 due to ~~decreased~~increased stock repurchases of ~~$125.0~~$155.6 million, ~~and~~partially offset by decreased principal payments on long-term debt of ~~$30.0~~$45.0 million ~~partially offset by increased~~and decreased restricted stock withholding taxes paid in lieu of issued shares of ~~$25.4~~$29.1 million.

Other Cash Flow Information

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

The term loan facility was advanced by the lenders thereunder to refinance and replace the Prior Credit Agreements.

As of ~~September~~June 30, ~~2021,~~2022, the carrying value of our term ~~loans~~loan was ~~$753.5~~$753.4 million, with no principal payments due in the next twelve months. Borrowings under the term ~~loans~~loan and revolving loan facilities accrue interest at a rate that is based on the ~~Eurodollar rate~~Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the ~~applicable margin plus the~~ highest of (i) the ~~federal funds rate~~Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, ~~of America~~National Association prime rate, and (iii) ~~the Eurodollar rate~~Daily Simple SOFR plus ~~1.000%~~an adjustment for SOFR plus 1.00%. The applicable margin for ~~these~~the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our debt ratings (if such debt ratings exist). As of June 30, 2022, the rate in effect for the 2022 Credit Agreement was 3.04%.

We previously entered into ~~noncancellable~~ operating lease commitments, primarily for our domestic and international offices. The commitments related to these operating leases is ~~$140.6~~$147.0 million, of which ~~$27.1~~$24.3 million is due in the next twelve months.

We believe that existing cash and cash equivalent balances, ~~after this acquisition,~~ together with cash generated from operations and access to ~~the~~our $500.0 million ~~Revolving Credit Facility,~~revolving loan facility, will be sufficient to meet our working capital and capital expenditure requirements through the next twelve months. 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:


	Six Months Ended
(in thousands, except per share data)	June 30, 2022		June 30, 2021
Number of shares repurchased	500		—
Average price paid per share	$	311.14	$	—
Total cost	$	155,571	$	—

All of the shares repurchased during the six months ended June 30, 2022 were repurchased in the first quarter. As of ~~September~~June 30, ~~2021, 2.7~~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.

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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.~~

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Contractual and Other Obligations

There were no material changes to our significant contractual and other obligations during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 as compared to those previously reported within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our ~~2020~~2021 Form 10-K.

Critical Accounting ~~Policies and~~ Estimates

No significant changes have occurred to our critical accounting ~~policies and~~ estimates as previously reported within "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 June 30, 2022, the U.S. Dollar was 12.0% stronger, when measured against our primary foreign currencies, than for the quarter ended June 30, 2021. With respect to revenue, on average for the six months ended June 30, 2022, the U.S. Dollar was 9.6% stronger, when measured against our primary foreign currencies, than for the six months ended June 30, 2021. The table below presents the net impacts of currency fluctuations on revenue for the three and six months ended June 30, 2022. Amounts in brackets indicate a net adverse impact from currency fluctuations.


(in thousands)	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Euro	$	(11,325)	$	(16,973)
Japanese Yen	(10,454)		(13,894)
South Korean Won	(4,175)		(5,830)
British Pound	(1,333)		(1,673)
Taiwan Dollar	(862)		(849)
Indian Rupee	(376)		(661)
Other	(260)		(230)
Total	$	(28,785)	$	(40,110)

The impacts from currency fluctuations resulted in decreased operating income of $17.3 million and $21.8 million for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021.

A hypothetical 10% strengthening in the U.S. Dollar against other currencies would have decreased our revenue by $24.0 million and $41.7 million for the three and six months ended June 30, 2022, respectively, and decreased our operating income by $12.1 million and $16.4 million for the three and six months ended June 30, 2022, respectively.

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
June 30, 2022	1.05	135.76
December 31, 2021	1.14	115.11
June 30, 2021	1.19	111.12


	Average Exchange Rates
Three Months Ended	EUR/USD	USD/JPY
June 30, 2022	1.06	129.69
June 30, 2021	1.21	109.45


	Average Exchange Rates
Six Months Ended	EUR/USD	USD/JPY
June 30, 2022	1.09	122.59
June 30, 2021	1.21	107.65

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 and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, interest income was ~~$0.5~~$0.3 million and ~~$1.5~~$0.8 million, respectively, and interest expense was ~~$2.9~~$4.6 million and ~~$9.6~~$7.6 million, respectively.

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.

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Our outstanding term loan borrowings of $755.0 million as of June 30, 2022 accrue interest at a rate that is based on the ~~Eurodollar rate~~Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the ~~applicable margin plus the~~ highest of (i) the ~~federal funds rate~~Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, ~~of America~~National Association prime rate, and (iii) ~~the Eurodollar rate~~Daily Simple SOFR plus ~~1.000%~~an adjustment for SOFR plus 1.00%. The applicable margin for ~~these~~the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our debt ratings (if such debt ratings exist). ~~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 are exposed to interest rate risk from changes in the underlying index rates, which affects our interest expense. A hypothetical increase of 100 basis points in interest rates would result in an increase in interest expense and a corresponding decrease in cash flows of $7.6 million over the next twelve months, based on outstanding borrowings at ~~September~~June 30, ~~2021.~~

~~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.

With respect to revenue, on average for the quarter ended September 30, 2021, the U.S. Dollar was approximately 0.7% weaker, when measured against our primary foreign currencies, than for the quarter ended September 30, 2020. With respect to revenue, on average for the nine months ended September 30, 2021, the U.S. Dollar was approximately 4.1% weaker, when measured against our primary foreign currencies, than for the nine months ended September 30, 2020. The table below presents the net impacts of currency fluctuations on revenue for the three and nine months ended September 30, 2021. Amounts in brackets indicate a net adverse impact from currency fluctuations.

(in thousands) Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Euro $ 434 $ 12,649
South Korean Won 447 3,511
British Pound 1,063 3,107
Japanese Yen (1,554) (1,704)
Other 758 2,696
Total $ 1,148 $ 20,259

The impacts from currency fluctuations resulted in decreased operating income of $0.8 million and increased operating income of $2.7 million for the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively.

A hypothetical 10% strengthening in the U.S. dollar against other currencies would have decreased our revenue by $17.1 million and $49.4 million for the three and nine months ended September 30, 2021, respectively, and decreased our operating income by $7.3 million and $18.7 million for the three and nine months ended September 30, 2021, respectively.

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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
September 30, 2021 1.16 111.30
December 31, 2020 1.22 103.27
September 30, 2020 1.17 105.44

Average Exchange Rates
Three Months Ended EUR/USD USD/JPY
September 30, 2021 1.18 110.09
September 30, 2020 1.17 106.13

Average Exchange Rates
Nine Months Ended EUR/USD USD/JPY
September 30, 2021 1.20 108.45
September 30, 2020 1.12 107.55

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 have not yet included our 2022 acquisitions in our assessment of the effectiveness of our internal control over financial reporting. Accordingly, pursuant to the SEC's general guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our disclosure controls and procedures does not include our 2022 acquisitions. As of and for the three and six months ended June 30, 2022, our 2022 acquisitions represented 4.2% of our consolidated assets and accounted for less than 1% of our consolidated revenues.

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 ~~September~~June 30, ~~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 ~~party's~~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. The risk factor set forth below includes additional information relating to the COVID-19 pandemic,~~10-K and ~~updates, and should be read together with, the risk factors disclosed~~Part II, Item 1A “Risk Factors” in our ~~2020~~Quarterly Report on Form ~~10-K. This situation continues to evolve and additional impacts may arise of which we are currently not aware.~~

~~The COVID-19 pandemic has had, and is expected to continue to have, an effect on our business, employees, and consolidated financial statements. The uncertainty surrounding~~10-Q for the ~~remaining duration and impact of~~quarterly period ended March 31, 2022. During the ~~COVID-19 pandemic limits our ability to accurately forecast expected business results in the near term.~~

The health and safety of our employees and their families, our partners and our other constituents around the world is a high priority. At the onset of the COVID-19 pandemic, we took action to enable our employees to work from home. We closed our offices (including our corporate headquarters), transitioned to a remote work environment, and implemented certain travel restrictions, each of which has changed how we operate our business. We continue to monitor and manage the situation, but as of now remote access remains the primary means of work for most of our workforce. We previously announced our plans for post-pandemic work arrangements. These plans include options for our employees to work from home, in the office or on a flexible basis where they can alternate between the office and home. The adoption of the arrangements is subject to evolving local guidelines on precautions to be taken to mitigate COVID-19 riskquarterly period ended June 30, 2022, there were no material changes to our ~~employees and customers.~~

New mandates, orders and similar requirements or regulations continue to be issued or are expected, including for example U.S. Executive Order 14042 and the U.S. Emergency Temporary Standard directed at the U.S. Occupational Safety and Health Administration. Additional requirements related to COVID-19 safety precautions, including COVID-19 vaccine mandates of varying scope and applicability, may apply to operations in the U.S. or other jurisdictions in which our business operates. Failure to comply with the applicable requirements could create thepreviously disclosed risk of potential loss of business, including with respect to our U.S. Government contracts or agreements with customers who contract with the U.S. Government, which could have an adverse effect on our business and consolidated financial statements. Our implementation of various mandatory vaccination, testing or other requirements related to COVID-19 safety may result in reduction in productivity of our workforce, attrition of management personnel or technical talent or in a reduction in employee morale, which could have an adverse effect on our business and consolidated financial statements.

The COVID-19 outbreak continues to cause business slowdowns and shutdowns in affected areas. While in-person meetings have started to resume as well as live attendance at trade events, a majority of our customer events and those of our channel partners remain virtual only experiences. Virtual events may not be as successful as customer events prior to COVID-19 because, among other reasons, the limited number of such events, the varying attendance levels and virtual event fatigue.

An extended period of remote work arrangements may negatively impact the sales pipeline due to reduced, delayed, or altered sales and marketing interactions with customers and potential customers, expose us to increased risk of cyber incidents, delay or alter product roadmaps or research and development due to reduced or limited access to technologies, equipment, or services, and delay or disrupt recruitment efforts. Limitations on availability, ease of use or increased cost related to the use of our products in our customers' remote work environments could also result in a decline in demand for our products.

We have experienced, and continue to expect, that our larger customer accounts will perform more strongly than the small- and medium-sized businesses during the pandemic. In addition, the shifting preference from perpetual licenses to time-based licenses was, and is expected to continue to be, elevated as a result of the impacts of COVID-19. There may also be continued lower activity levels in the end markets we service or declining financial performance of our customers and channel partners, which could result in lower rates of renewal, which have historically been stable and high, and cancellations, reductions, or

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delays for our products and services. Due to our subscription-based business model, the effect of the pandemic may not be fully reflected in our results of operations until future periods and could impact future growth rates.

The situation surrounding COVID-19 remains fluid, and given its inherent uncertainty, we expect the pandemic will continue to have an impact on our business and consolidated financial statements in the near term. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such as the timing and effectiveness of vaccination efforts in the markets where we do business, transmission rates of the virus and the development of virus mutations and variants, the nature and scope of government economic recovery measures and the extent and effectiveness of containment actions. The impact of the COVID-19 pandemic may also have the effect of heightening many of the other risks and uncertainties described in the "Risk Factors" section in our 2020 Form 10-K.factors.

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

~~(c) 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)
July 1 - July 31, 2021 — $ — — 2,806,295
August 1 - August 31, 2021 — $ — — 2,806,295
September 1 - September 30, 2021 96,800 $ 371.83 96,800 2,709,495
Total 96,800 $ 371.83 96,800 2,709,495

~~(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.None.

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
153.1						~~Independent Registered Public Accountant's Letter Regarding Unaudited Financial Information.~~Restated Certificate of Incorporation of ANSYS, Inc., dated May 25, 2022 (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8, filed June 13, 2022, and incorporated herein by reference).

3.2						Fourth Amended and Restated By-Laws of ANSYS, Inc., adopted and effective May 16, 2022 (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed May 17, 2022, and incorporated herein by reference).

10.1						ANSYS, Inc. 2022 Employee Stock Purchase Plan (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed May 17, 2022, and incorporated herein by reference).

10.2						Credit Agreement, dated as of June 30, 2022, among ANSYS, Inc., as Borrower, PNC Bank, National Association, as Administrative Agent, Swing Line Lender and an L/C Issuer, the lenders party thereto, and the other L/C Issuers party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed July 6, 2022, and incorporated herein by reference).

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.

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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Table of Contents

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:	~~November~~August 3, ~~2021~~2022	By:	/s/ Ajei S. Gopal
			Ajei S. Gopal
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	~~November~~August 3, ~~2021~~2022	By:	/s/ Nicole Anasenes
			Nicole Anasenes
			Chief Financial Officer and Senior Vice President, Finance
			(Principal Financial Officer and Principal Accounting Officer)

4746


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)
July 1 - July 31, 2021	—	$	—	—	2,806,295
August 1 - August 31, 2021	—	$	—	—	2,806,295
September 1 - September 30, 2021	96,800	$	371.83	96,800	2,709,495
Total	96,800	$	371.83	96,800	2,709,495