UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-20853
ANSYS, Inc.
(Exact name of registrant as specified in its charter)
Delaware04-3219960
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2600 ANSYS Drive,Canonsburg,PA15317
(Address of Principal Executive Offices)(Zip Code)
844-462-6797
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareANSSNasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes       No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No  
The number of shares of the Registrant's Common Stock, $0.01 par value per share, outstanding as of October 27, 2023April 26, 2024 was 86,872,80387,299,981 shares.



ANSYS, INC. AND SUBSIDIARIES
INDEX
  
Page No.

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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,
2023
December 31,
2022
(in thousands, except share and per share data)March 31,
2024
December 31,
2023
ASSETSASSETS
Current assets:Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$639,342 $614,391 
Short-term investmentsShort-term investments171 183 
Accounts receivable, less allowance for doubtful accounts of $20,700 and $18,300, respectively673,973 760,287 
Accounts receivable, less allowance for doubtful accounts of $20,700
Other receivables and current assetsOther receivables and current assets229,013 289,261 
Total current assetsTotal current assets1,542,499 1,664,122 
Long-term assets:Long-term assets:
Property and equipment, net
Property and equipment, net
Property and equipment, netProperty and equipment, net75,431 80,838 
Operating lease right-of-use assetsOperating lease right-of-use assets116,187 129,140 
GoodwillGoodwill3,769,321 3,658,267 
Other intangible assets, netOther intangible assets, net849,205 809,183 
Other long-term assetsOther long-term assets174,289 261,880 
Deferred income taxesDeferred income taxes146,588 84,515 
Total long-term assetsTotal long-term assets5,131,021 5,023,823 
Total assetsTotal assets$6,673,520 $6,687,945 
LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payableAccounts payable$14,801 $14,021 
Accrued bonuses and commissionsAccrued bonuses and commissions89,327 160,908 
Accrued income taxesAccrued income taxes14,652 7,698 
Other accrued expenses and liabilitiesOther accrued expenses and liabilities165,983 198,220 
Other accrued expenses and liabilities
Other accrued expenses and liabilities
Deferred revenueDeferred revenue349,668 413,989 
Total current liabilitiesTotal current liabilities634,431 794,836 
Long-term liabilities:Long-term liabilities:
Deferred income taxes
Deferred income taxes
Deferred income taxesDeferred income taxes70,360 58,126 
Long-term operating lease liabilitiesLong-term operating lease liabilities100,071 112,802 
Long-term debtLong-term debt753,812 753,574 
Other long-term liabilitiesOther long-term liabilities108,046 102,756 
Total long-term liabilitiesTotal long-term liabilities1,032,289 1,027,258 
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies
Stockholders' equity:Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstandingPreferred 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 shares issuedCommon stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 shares issued953 953 
Additional paid-in capitalAdditional paid-in capital1,612,269 1,540,317 
Retained earningsRetained earnings5,008,580 4,782,930 
Treasury stock, at cost: 8,428,972 and 8,317,389 shares, respectively(1,480,733)(1,335,627)
Treasury stock, at cost: 7,971,231 and 8,361,447 shares, respectively
Accumulated other comprehensive lossAccumulated other comprehensive loss(134,269)(122,722)
Total stockholders' equityTotal stockholders' equity5,006,800 4,865,851 
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$6,673,520 $6,687,945 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months EndedNine Months Ended
Three Months Ended
Three Months Ended
Three Months Ended
(in thousands, except per share data)(in thousands, except per share data)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except per share data)March 31,
2024
March 31,
2023
Revenue:Revenue:
Software licenses
Software licenses
Software licensesSoftware licenses$162,422 $208,906 $586,471 $575,332 
Maintenance and serviceMaintenance and service296,373 263,605 878,370 796,106 
Total revenueTotal revenue458,795 472,511 1,464,841 1,371,438 
Cost of sales:Cost of sales:
Software licenses
Software licenses
Software licensesSoftware licenses8,692 8,425 29,095 25,370 
AmortizationAmortization20,707 17,281 60,404 51,947 
Maintenance and serviceMaintenance and service35,858 36,261 111,750 111,897 
Total cost of salesTotal cost of sales65,257 61,967 201,249 189,214 
Gross profitGross profit393,538 410,544 1,263,592 1,182,224 
Operating expenses:Operating expenses:
Selling, general and administrativeSelling, general and administrative194,552 175,283 585,278 515,421 
Selling, general and administrative
Selling, general and administrative
Research and developmentResearch and development123,223 108,056 368,581 322,271 
AmortizationAmortization5,947 3,821 16,598 11,975 
Total operating expensesTotal operating expenses323,722 287,160 970,457 849,667 
Operating incomeOperating income69,816 123,384 293,135 332,557 
Interest incomeInterest income4,909 1,345 12,389 2,141 
Interest expenseInterest expense(12,276)(6,092)(34,594)(13,668)
Other income (expense), net96 (656)(3,564)(2,126)
Other expense, net
Income before income tax provisionIncome before income tax provision62,545 117,981 267,366 318,904 
Income tax provisionIncome tax provision7,043 22,006 41,716 53,141 
Net incomeNet income$55,502 $95,975 $225,650 $265,763 
Earnings per share – basic:Earnings per share – basic:
Earnings per shareEarnings per share$0.64 $1.10 $2.60 $3.05 
Earnings per share
Earnings per share
Weighted average sharesWeighted average shares86,817 87,063 86,814 87,062 
Earnings per share – diluted:Earnings per share – diluted:
Earnings per shareEarnings per share$0.64 $1.10 $2.58 $3.04 
Earnings per share
Earnings per share
Weighted average sharesWeighted average shares87,381 87,418 87,335 87,496 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months EndedNine Months EndedThree Months Ended
(in thousands)(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)March 31,
2024
March 31,
2023
Net incomeNet income$55,502 $95,975 $225,650 $265,763 
Other comprehensive loss:
Other comprehensive (loss) income:
Foreign currency translation adjustmentsForeign currency translation adjustments(32,834)(61,636)(11,547)(132,371)
Foreign currency translation adjustments
Foreign currency translation adjustments
Net unrealized losses on available-for-sale securities, net of tax of $0
Comprehensive incomeComprehensive income$22,668 $34,339 $214,103 $133,392 

The accompanying notes are an integral part of the condensed consolidated financial statements.
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ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended Three Months Ended
(in thousands)(in thousands)September 30,
2023
September 30,
2022
(in thousands)March 31,
2024
March 31,
2023
Cash flows from operating activities:Cash flows from operating activities:
Net incomeNet income$225,650 $265,763 
Net income
Net income
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 amortization99,016 86,239 
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Operating lease right-of-use assets expenseOperating lease right-of-use assets expense17,625 17,356 
Deferred income tax benefitDeferred income tax benefit(74,426)(63,560)
Provision for bad debtsProvision for bad debts2,442 2,476 
Stock-based compensation expenseStock-based compensation expense158,533 122,119 
OtherOther1,252 4,986 
Other
Other
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivableAccounts receivable168,958 66,369 
Other receivables and current assetsOther receivables and current assets61,203 96,641 
Other long-term assetsOther long-term assets(5,897)(3,121)
Accounts payable, accrued expenses and current liabilitiesAccounts payable, accrued expenses and current liabilities(105,197)(111,039)
Accrued income taxesAccrued income taxes6,327 9,751 
Deferred revenueDeferred revenue(65,242)(28,203)
Other long-term liabilitiesOther long-term liabilities(5,844)(8,746)
Net cash provided by operating activitiesNet cash provided by operating activities484,400 457,031 
Cash flows from investing activities:Cash flows from investing activities:
Acquisitions, net of cash acquiredAcquisitions, net of cash acquired(197,786)(242,613)
Acquisitions, net of cash acquired
Acquisitions, net of cash acquired
Capital expendituresCapital expenditures(16,541)(15,227)
Purchases of short-term investments
Other investing activitiesOther investing activities(5,839)(782)
Net cash used in investing activitiesNet cash used in investing activities(220,166)(258,622)
Cash flows from financing activities:Cash flows from financing activities:
Purchase of treasury stockPurchase of treasury stock(196,494)(155,571)
Purchase of treasury stock
Purchase of treasury stock
Restricted stock withholding taxes paid in lieu of issued sharesRestricted stock withholding taxes paid in lieu of issued shares(60,827)(62,035)
Proceeds from shares issued for stock-based compensationProceeds from shares issued for stock-based compensation26,015 20,918 
Other financing activities(1,294)(1,290)
Net cash used in financing activities
Net cash used in financing activities
Net cash used in financing activitiesNet cash used in financing activities(232,600)(197,978)
Effect of exchange rate fluctuations on cash and cash equivalentsEffect of exchange rate fluctuations on cash and cash equivalents(6,683)(35,589)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents24,951 (35,158)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period614,391 667,667 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$639,342 $632,509 
Supplemental disclosure of cash flow information:Supplemental disclosure of cash flow information:
Income taxes paidIncome taxes paid$100,135 $42,055 
Income taxes paid
Income taxes paid
Interest paidInterest paid$33,795 $12,192 
Non-cash and unpaid consideration in connection with acquisitions$5,056 $3,391 
Non-cash consideration in connection with acquisitions

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


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Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated Other Comprehensive (Loss) IncomeTotal
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202395,267$953 $1,540,317 $4,782,930 8,317 $(1,335,627)$(122,722)$4,865,851 
Treasury shares acquired, including excise tax650 (197,416)(197,416)
Stock-based compensation activity(34,529)(356)34,350 (179)
Other comprehensive income13,284 13,284 
Net income100,622 100,622 
Balance, March 31, 202395,267$953 $1,505,788 $4,883,552 8,611$(1,498,693)$(109,438)$4,782,162 
Treasury shares acquired, including excise tax343 343 
Stock-based compensation activity44,365 (105)10,013 54,378 
Other comprehensive income8,003 8,003 
Net income69,52669,526 
Balance, June 30, 202395,267$953 $1,550,153 $4,953,078 8,506$(1,488,337)$(101,435)$4,914,412 
Treasury shares acquired, including excise tax264 264 
Stock-based compensation activity62,116 (77)7,340 69,456 
Other comprehensive loss(32,834)(32,834)
Net income55,50255,502
Balance, September 30, 202395,267$953 $1,612,269 $5,008,580 8,429$(1,480,733)$(134,269)$5,006,800 
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated Other Comprehensive LossTotal
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202495,267$953 $1,670,450 $5,283,342 8,361 $(1,474,110)$(90,271)$5,390,364 
Acquisition activity of previously acquired businesses1,818 (8)719 2,537 
Stock-based compensation activity(30,455)(382)34,443 3,988 
Other comprehensive loss(22,024)(22,024)
Net income34,778 34,778 
Balance, March 31, 202495,267$953 $1,641,813 $5,318,120 7,971$(1,438,948)$(112,295)$5,409,643 
    
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive Loss
Total
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202295,267$953 $1,465,694 $4,259,220 8,188 $(1,185,707)$(56,112)$4,484,048 
Treasury shares acquired500 (155,571)(155,571)
Stock-based compensation
  activity
(50,287)(403)36,865 (13,422)
Other comprehensive loss(22,092)(22,092)
Net income70,988 70,988 
Balance, March 31, 202295,267$953 $1,415,407 $4,330,208 8,285$(1,304,413)$(78,204)$4,363,951 
Acquisition of Analytical
  Graphics, Inc.
511 (3)300 811 
Stock-based compensation
  activity
34,631 (33)3,205 37,836 
Other comprehensive loss(48,643)(48,643)
Net income98,800 98,800 
Balance, June 30, 202295,267$953 $1,450,549 $4,429,008 8,249$(1,300,908)$(126,847)$4,452,755 
Stock-based compensation
  activity
49,781 (70)6,810 56,591 
Other comprehensive loss(61,636)(61,636)
Net income95,975 95,975 
Balance, September 30, 202295,267$953 $1,500,330 $4,524,983 8,179$(1,294,098)$(188,483)$4,543,685 
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive (Loss) Income
Total
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202395,267$953 $1,540,317 $4,782,930 8,317 $(1,335,627)$(122,722)$4,865,851 
Treasury shares acquired, including excise tax650 (197,416)(197,416)
Stock-based compensation
  activity
(34,529)(356)34,350 (179)
Other comprehensive income13,284 13,284 
Net income100,622 100,622 
Balance, March 31, 202395,267$953 $1,505,788 $4,883,552 8,611$(1,498,693)$(109,438)$4,782,162 

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

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ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023March 31, 2024
(Unaudited)

1.Organization
ANSYS, Inc. (Ansys, we, us, our) develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction.
As defined by the accounting guidance for segment reporting, we operate as one segment.
Given the integrated approach to the multi-discipline problem-solving needs of our customers, a single sale may contain components from multiple product areas and include combined technologies. We also have a multi-year product and integration strategy that will result in new, combined products or changes to the historical product offerings. As a result, it is impracticable for us to provide accurate historical or current reporting among our various product lines.
Pending Acquisition
On January 15, 2024, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Synopsys, Inc., a Delaware corporation (Synopsys), and ALTA Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Synopsys (Merger Sub), under which Synopsys will acquire Ansys. The transaction is anticipated to close in the first half of 2025, subject to approval by Ansys stockholders, the receipt of required regulatory approvals and other customary closing conditions.

2.Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information for commercial and industrial companies, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, 2022 (20222023 (2023 Form 10-K). The condensed consolidated December 31, 20222023 balance sheet presented is derived from the audited December 31, 20222023 balance sheet included in the 20222023 Form 10-K. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the three and nine months ended September 30, 2023March 31, 2024 are not necessarily indicative of the results that may be expected for any future period. Certain items in the notes to the condensed consolidated financial statements of prior years have been reclassified to conform to the current year's presentation. These reclassifications had no effect on reported net income, comprehensive income, cash flows, total assets or total liabilities and stockholders' equity.
Accounting Guidance Issued and Not Yet Adopted
RecentlySegment reporting: In November 2023, the FASB issued accounting pronouncementsASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 requires enhanced disclosures related to segment information, including for entities with one reportable segment. It does not change the determination of reportable segments. The enhanced disclosures in accordance with the new guidance are not expectedrequired to have a material impact on our financial position, resultsbe reported in the annual period beginning after December 15, 2023. Early adoption is permitted. The standard only impacts footnote disclosures.
Income tax disclosures: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 requires disclosure of operations or cash flows upon adoption.greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The standard only impacts footnote disclosures.
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Cash, and Cash Equivalents and Short-Term Investments
Cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds. Cash equivalents are carried at cost, which approximates fair value. Our cash and cash equivalents balances comprise the following:
 September 30, 2023December 31, 2022
(in thousands, except percentages)Amount% of TotalAmount% of Total
Cash accounts$530,839 83.0 $503,733 82.0 
Money market funds108,503 17.0 110,658 18.0 
Total$639,342 $614,391 

Our money market fund balances are held in various funds of a single issuer at September 30, 2023.March 31, 2024.
Short-term investments consist of available-for-sale debt securities with remaining maturities greater than three months at the date of purchase and time deposits. Investments in debt securities with remaining maturities greater than three months at the date of purchase are designated as short-term available-for-sale securities, as we may convert these investments into cash at any time, including to fund general operations. We invest in debt securities that have an effective maturity term of less than three years. The debt securities are carried at fair value, with unrealized gains and losses included in the condensed consolidated balance sheets as a component of accumulated other comprehensive (loss) income. For available-for-sale debt securities in an unrealized loss position, we evaluate whether a current expected credit loss exists based on available information relevant to the credit rating of the security, current economic conditions and reasonable and supportable forecasts. The allowance for any credit loss will be recorded in other expense, net, on the condensed consolidated statements of income, not to exceed the amount of the unrealized loss. Any excess unrealized loss other than the credit loss is generally recognized in accumulated other comprehensive loss. The cost of securities sold is based on the specific identification method and realized gains and losses are included in other expense, net. To date, we have not recorded any credit loss or realized gains or losses.

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3.Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue:
Three Months EndedNine Months Ended
Three Months Ended
Three Months Ended
Three Months Ended
(in thousands, except percentages)(in thousands, except percentages)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except percentages)March 31,
2024
March 31,
2023
Revenue:Revenue:
Subscription lease licenses
Subscription lease licenses
Subscription lease licensesSubscription lease licenses$103,573 $136,489 $386,494 $362,977 
Perpetual licensesPerpetual licenses58,849 72,417 199,977 212,355 
Software licensesSoftware licenses162,422 208,906 586,471 575,332 
MaintenanceMaintenance278,108 247,678 820,393 742,554 
ServiceService18,265 15,927 57,977 53,552 
Maintenance and serviceMaintenance and service296,373 263,605 878,370 796,106 
Total revenueTotal revenue$458,795 $472,511 $1,464,841 $1,371,438 
Direct revenue, as a percentage of total revenueDirect revenue, as a percentage of total revenue73.5 %74.8 %73.7 %73.7 %
Direct revenue, as a percentage of total revenue
Direct revenue, as a percentage of total revenue66.5 %76.3 %
Indirect revenue, as a percentage of total revenueIndirect revenue, as a percentage of total revenue26.5 %25.2 %26.3 %26.3 %Indirect revenue, as a percentage of total revenue33.5 %23.7 %

Our software license revenue is recognized up front, while maintenance and service revenue is 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 ninethree months ended September 30,March 31, 2024 and 2023 and 2022 were as follows:
(in thousands)(in thousands)20232022(in thousands)20242023
Beginning balance – January 1Beginning balance – January 1$435,758 $412,781 
Acquired deferred revenueAcquired deferred revenue7,910 1,032 
Deferral of revenueDeferral of revenue1,399,367 1,343,122 
Recognition of revenueRecognition of revenue(1,464,841)(1,371,438)
Currency translationCurrency translation(7,761)(30,779)
Ending balance – September 30$370,433 $354,718 
Ending balance – March 31

Total revenue allocated to remaining performance obligations as of September 30, 2023March 31, 2024 will be recognized as revenue as follows:
(in thousands) 
Next 12 months$774,215866,273 
Months 13-24306,571333,293 
Months 25-3695,311125,623 
Thereafter29,58044,264 
Total revenue allocated to remaining performance obligations$1,205,6771,369,453 

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Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog. Our backlog represents deferred revenue associated with installment billings for periods beyond the current quarterly billing cycle and committed contracts with start dates beyond the end of the current period. Revenue recognized during the ninethree months ended September 30,March 31, 2024 and 2023 and 2022 included amounts in deferred revenue and backlog at the beginning of the period of $706.2$292.8 million and $608.7$317.6 million, respectively.

4.Acquisitions
During the quarterthree months ended June 30,March 31, 2024, we incurred acquisition-related expenses of $14.3 million, primarily consisting of costs related to the Merger Agreement with Synopsys. Acquisition-related expenses are recognized as selling, general and administrative and research and development expenses on the condensed consolidated statements of income.
On December 5, 2023, we completed the acquisition of Diakoptoentered into an agreement to make a strategic equity investment. The investment is subject to regulatory approvals and customary closing conditions and is expected to close in 2024 for a purchase price of $83.3 million, or $77.2 million net of cash acquired, to expand our multiphysics simulation portfolio for semiconductor designers. The effects of the business combination were not material to our condensed consolidated results of operations.$300.0 million.
2023 Acquisitions
On January 3, 2023, we completed the acquisition of DYNAmore for a purchase price of $139.2$140.8 million, or $126.4$128.0 million net of cash acquired. The acquisition expandsexpanded our position as a simulation solution provider within the automotive industry. The effects of the acquisition were not material to our condensed consolidated results of operations.
During the three and nine months ended September 30, 2023, we incurred acquisition-related expenses of $1.5 million and $5.8 million, respectively. Acquisition-related expenses are recognized as selling, general and administrative and research and development expenses on the condensed consolidated statements of income.
The assets acquired and liabilities assumed in connection with the acquisitions have been recorded based upon management's estimates of the fair market values as of each respective date of acquisition. The following tables summarize the fair value of consideration and the fair values of identified assets acquired and liabilities assumed for the combined acquisitions at each respective date of acquisition:
Fair Value of Consideration:
(in thousands)
Cash$217,392
Non-cash consideration5,056
Total consideration$222,448
Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash$18,866
Accounts receivable and other tangible assets18,152
Developed software and core technologies25,594
Customer lists83,790
Trade names2,910
Accounts payable and other liabilities(8,742)
Deferred revenue(7,910)
Net deferred tax liabilities(31,272)
Total identifiable net assets$101,388
Goodwill$121,060
The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforces of the acquired businesses and the synergies expected to arise as a result of the acquisitions.
The fair value of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for these items are subject to change as additional information about what was known and knowable at each respective acquisition date is obtainedAdditionally, during the measurement period (up to one year from the acquisition date).
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We determined the fair value of our intangible assets using various valuation techniques, including the relief-from-royalty method and the multi-period excess earnings method. These models utilize certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include, but are not limited to: selection of a valuation methodology, royalty rate, discount rate, attrition rate and obsolescence rate.
The weighted-average useful life, valuation method and assumptions used to determine the fair value of the intangible assets acquired in 2023 are as follows:
Intangible AssetWeighted-Average Useful LifeValuation MethodAssumptions
Developed software and core technologies5 yearsRelief-from-royalty or multi-period excess earnings
Royalty rate: 20.0%
Obsolescence rate: 20.0% Discount rate: 15.5% - 22.0%
Trade names5 yearsRelief-from-royalty
Royalty rate: 1.0% - 2.0%
Discount rate: 15.5% - 22.0%
Customer lists13 yearsMulti-period excess earnings
Attrition rate: 5.0%
Discount rate: 15.5% - 22.0%
2022 Acquisitions
During the year ended December 31, 2022,2023, we completed severalother acquisitions to expand our solution offerings and enhance our customers' experience. These acquisitions were not significant, individually or in the aggregate. The combined purchase price of these acquisitions during the year ended December 31, 20222023 was $401.7approximately $94.4 million, or $390.8$88.3 million net of cash acquired.
The operating results of each acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition. The effects of the acquisitions were not material to our condensed consolidated results of operations.
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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,
2023
December 31,
2022
(in thousands)March 31,
2024
December 31,
2023
Receivables related to unrecognized revenueReceivables related to unrecognized revenue$135,981 $209,139 
Income taxes receivable, including overpayments and refundsIncome taxes receivable, including overpayments and refunds37,097 28,963 
Prepaid expenses and other current assetsPrepaid expenses and other current assets55,935 51,159 
Total other receivables and current assetsTotal other receivables and current assets$229,013 $289,261 
Accrued vacationAccrued vacation44,369 39,118 
Accrued vacation
Accrued vacation
Payroll-related accruals
Consumption, VAT and sales tax liabilities16,298 41,812 
Accrued expenses and other current liabilities
Accrued expenses and other current liabilities
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities105,316 117,290 
Total other accrued expenses and liabilitiesTotal other accrued expenses and liabilities$165,983 $198,220 

Receivables related to unrecognized revenue represent the current portion of billings made for customer contracts that have not yet been recognized as revenue.
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6.Earnings Per Share
Basic earnings per share (EPS) amounts are computed by dividing earnings by the weighted average number of common shares outstanding during the period. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalents outstanding. To the extent stock awards are anti-dilutive, they are excluded from the calculation of diluted EPS.
The details of basic and diluted EPS are as follows:
Three Months EndedNine Months EndedThree Months Ended
(in thousands, except per share data)(in thousands, except per share data)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except per share data)March 31,
2024
March 31,
2023
Net incomeNet income$55,502 $95,975 $225,650 $265,763 
Weighted average shares outstanding – basicWeighted average shares outstanding – basic86,817 87,063 86,814 87,062 
Dilutive effect of stock plansDilutive effect of stock plans564 355 521 434 
Weighted average shares outstanding – dilutedWeighted average shares outstanding – diluted87,381 87,418 87,335 87,496 
Basic earnings per shareBasic earnings per share$0.64 $1.10 $2.60 $3.05 
Diluted earnings per shareDiluted earnings per share$0.64 $1.10 $2.58 $3.04 
Anti-dilutive sharesAnti-dilutive shares73 54 257 366 

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7.Goodwill and Intangible Assets
Intangible assets are classified as follows:
September 30, 2023December 31, 2022 March 31, 2024December 31, 2023
(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:
Developed software and core technologies
Developed software and core technologies
Developed software and core technologiesDeveloped software and core technologies$1,136,728 $(536,643)$1,106,789 $(483,033)
Customer listsCustomer lists283,231 (82,267)205,484 (71,618)
Trade namesTrade names189,203 (141,404)186,424 (135,220)
TotalTotal$1,609,162 $(760,314)$1,498,697 $(689,871)
Indefinite-lived intangible asset:Indefinite-lived intangible asset:
Trade nameTrade name$357 $357 
Trade name
Trade name
Finite-lived intangible assets are amortized over their estimated useful lives of two years to seventeen years.
As of September 30, 2023,March 31, 2024, estimated future amortization expense for the intangible assets reflected above was as follows:
(in thousands)(in thousands) (in thousands) 
Remainder of 2023$26,383 
2024111,049 
Remainder of 2024
20252025113,657 
20262026114,451 
20272027117,260 
20282028110,478 
2029
ThereafterThereafter255,570 
Total intangible assets subject to amortizationTotal intangible assets subject to amortization848,848 
Indefinite-lived trade nameIndefinite-lived trade name357 
Other intangible assets, netOther intangible assets, net$849,205 

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The changes in goodwill during the ninethree months ended September 30,March 31, 2024 and 2023 and 2022 were as follows:
(in thousands)(in thousands)20232022(in thousands)20242023
Beginning balance – January 1Beginning balance – January 1$3,658,267 $3,409,271 
Acquisitions and adjustments(1)
Acquisitions and adjustments(1)
113,502 197,173 
Currency translationCurrency translation(2,448)(73,985)
Ending balance – September 30$3,769,321 $3,532,459 
Currency translation
Currency translation
Ending balance – March 31
(1) In accordance with the accounting for business combinations, we recorded adjustments to goodwill for the effect of changes in the provisional fair values of the assets acquired and liabilities assumed during the measurement period (up to one year from the acquisition date) as we obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have effected the measurement of the amounts recognized as of that date.
During the first quarter of 2023,2024, we completed the annual impairment test for goodwill and the indefinite-lived intangible asset and determined that these assets had not been impaired as of the test date, January 1, 2023.2024. No events or circumstances changed during the ninethree months ended September 30, 2023March 31, 2024 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.Cash Equivalents and Short-Term Investments
During the three months ended March 31, 2024, we invested in available-for-sale debt securities, which are included in short-term investments in the condensed consolidated balance sheets. As of March 31, 2024, our cash equivalents and short-term investments were as follows:
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized Losses Less Than 12 Continuous Months
Estimated Fair Value(1)
Cash equivalents:
Money market funds$294,440 $ $ $294,440 
Total cash equivalents294,440   294,440 
Short-term investments:
Corporate debt securities15,046 1 (59)14,988 
Municipal bonds4,943  (19)4,924 
Other short-term investments188   188 
Total short-term investments20,177 1 (78)20,100 
Total cash equivalents and short-term investments$314,617 $1 $(78)$314,540 
(1) See Note 9, "Fair Value Measurements" for further discussion on fair values.
Of the $15.0 million corporate debt securities, $13.8 million are in a loss position at March 31, 2024. Of the $4.9 million municipal bonds, $4.5 million are in a loss position at March 31, 2024.
The unrealized losses presented above are primarily attributable to changes in interest rates. We believe that we have the ability to realize the full value of all of these investments upon maturity.
The following table outlines maturities of our available-for-sale debt securities as of March 31, 2024:
(in thousands)Amortized CostFair Value
Less than 1 year$4,232 $4,226 
1-3 years15,757 15,686 
Total$19,989 $19,912 
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8.9.Fair Value Measurement
The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or
Level 3: unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.
A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Our debt is classified within Level 2 of the fair value hierarchy because these borrowings are not actively traded and have a variable interest rate structure based upon market rates. The carrying amount of our debt approximates the estimated fair value. See Note 10,11, "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,
2023
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in thousands)March 31,
2024
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
AssetsAssets
Cash equivalents$108,503 $108,503 $ $ 
Short-term investments$171 $ $171 $ 
Cash equivalents:
Cash equivalents:
Cash equivalents:
Money market funds
Money market funds
Money market funds
Short-term investments:
Corporate debt securities
Corporate debt securities
Corporate debt securities
Municipal bonds
Other short-term investments
Deferred compensation plan investmentsDeferred compensation plan investments$2,302 $2,302 $ $ 
Equity securitiesEquity securities$761 $761 $ $ 
 Fair Value Measurements at Reporting Date Using:  Fair Value Measurements at Reporting Date Using:
(in thousands)(in thousands)December 31, 2022Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in thousands)December 31, 2023Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents$110,658 $110,658 $— $— 
Short-term investments$183 $— $183 $— 
Assets (Liabilities)
Cash equivalents:
Cash equivalents:
Cash equivalents:
Money market funds
Money market funds
Money market funds
Short-term investments:
Other short-term investments
Other short-term investments
Other short-term investments
Deferred compensation plan investmentsDeferred compensation plan investments$1,618 $1,618 $— $— 
Equity securitiesEquity securities$892 $892 $— $— 
Forward contracts

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.
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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.available-for-sale debt securities and time deposits.
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.
The forward contracts represent currency hedges to mitigate exchange rate exposure. These contracts are classified within Level 2 because these contracts are not actively traded and the valuation inputs are based on quoted prices and market observable data of similar instruments. The liabilities associated with the forward contracts are recorded at fair value in other accrued expenses and liabilities in our condensed consolidated balance sheets.
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9.10.Leases
Our right-of-use assets and lease liabilities primarily include operating leases for office space. Our executive offices and those related to certain domestic product development, marketing, production and administration are located in a 186,000 square foot office facility in Canonsburg, Pennsylvania. The term of the lease is 183 months, which began on October 1, 2014 and expires on December 31, 2029. The lease agreement includes options to renew the contract through August 2044, an option to lease additional space in January 2025 and an option to terminate the lease in December 2025. No options are included in the lease liability. Absent the exercise of options in the lease, our remaining base rent (inclusive of property taxes and certain operating costs) is $4.5 million per annum through 2024 and $4.7 million per annum for 2025 - 2029.
The components of our global lease cost reflected in the condensed consolidated statements of income are as follows:
Three Months EndedNine Months EndedThree Months Ended
(in thousands)(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)March 31,
2024
March 31,
2023
Lease liability costLease liability cost$7,097 $6,960 $21,207 $20,886 
Variable lease cost not included in the lease liability(1)
Variable lease cost not included in the lease liability(1)
1,523 1,015 4,134 3,202 
Total lease cost Total lease cost$8,620 $7,975 $25,341 $24,088 
(1) Variable lease cost includes common area maintenance, property taxes, utilities and fluctuations in rent due to a change in an index or rate.
Other information related to operating leases is as follows:
Three Months EndedNine Months EndedThree Months Ended
(in thousands)(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)March 31,
2024
March 31,
2023
Cash paid for amounts included in the measurement of the lease liability:Cash paid for amounts included in the measurement of the lease liability:
Operating cash flows from operating leases Operating cash flows from operating leases$(7,288)$(6,720)$(20,993)$(20,309)
Operating cash flows from operating leases
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilitiesRight-of-use assets obtained in exchange for new operating lease liabilities$2,192 $8,131 $7,508 $28,806 
As of September 30,
20232022
As of March 31,As of March 31,
202420242023
Weighted-average remaining lease term of operating leasesWeighted-average remaining lease term of operating leases6.5 years7.3 yearsWeighted-average remaining lease term of operating leases6.2 years6.7 years
Weighted-average discount rate of operating leasesWeighted-average discount rate of operating leases3.4 %3.2 %Weighted-average discount rate of operating leases3.4 %3.2 %

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The maturity schedule of the operating lease liabilities as of September 30, 2023March 31, 2024 is as follows:
(in thousands)(in thousands) (in thousands) 
Remainder of 2023$7,097 
202425,268 
Remainder of 2024
2025202521,558 
2026202619,446 
2027202718,038 
2028
ThereafterThereafter45,236 
Total future lease payments Total future lease payments136,643 
Less: Present value adjustmentLess: Present value adjustment(13,930)
Present value of future lease payments(1)
Present value of future lease payments(1)
$122,713 
(1) Includes the current portion of operating lease liabilities of $22.6$22.5 million, which is reflected in other accrued expenses and liabilities in the condensed consolidated balance sheets.
There were no material leases that have been signed but not yet commenced as of September 30, 2023.March 31, 2024.
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10.11.Debt
On June 30, 2022, we entered into a credit agreement (as amended, the 2022 Credit Agreement) with PNC Bank, National Association, as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto. The 2022 Credit Agreement refinanced our previous credit agreements in their entirety. Terms used in this description of the 2022 Credit Agreement with initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.
The 2022 Credit Agreement provides for a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, which includes a $50.0 million sublimit for the issuance of letters of credit. The revolving loan facility is available for working capital and general corporate purposes. Each of the term loan facility and the revolving loan facility matures on June 30, 2027.
Borrowings under the term loan and revolving loan facilities accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated net leverage ratio and (2) a pricing level determined by our public debt rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an interest rate adjustment (Sustainability Rate Adjustment) based upon the achievement of certain environmental, social and governance key performance indicators (KPIs). The Sustainability Rate Adjustment range is +/- 0.05% and will go into effect in the first quarter of 2024 based on the 2023 KPIs and will be adjusted annually based on the KPIs of the preceding year.

The 2022 Credit Agreement also provides for the option to add certain foreign subsidiaries as borrowers and to borrow in Euros, Sterling, Yen and Swiss Francs under the revolving loan facility, up to a sublimit of $150.0 million. Borrowings under the revolving loan facility denominated in these currencies will accrue interest at a rate that is based on (a) for Euros, €STR, (b) for Sterling, SONIA, (c) for Yen, TONAR and (d) for Swiss Francs, SARON, plus an applicable margin calculated as described above.
Under the 2022 Credit Agreement, the weighted average interest rate in effect for the three and nine months ended September 30,March 31, 2024 and March 31, 2023 was 6.22%6.32% and 5.89%, respectively. Under the prior credit agreements and the 2022 Credit Agreement, the weighted average interest rate in effect for the three and nine months ended September 30, 2022 was 3.05% and 2.11%5.56%, respectively. The rate in effect as of September 30, 2023March 31, 2024 and for the fourthsecond quarter of 20232024 under the 2022 Credit Agreement is 6.37%6.23%.
The 2022 Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a consolidated net leverage ratio not in excess of 3.50 to 1.00 as of the end of any fiscal quarter (for the four-quarter period ending on such date) with an opportunity for a temporary increase in such consolidated net leverage ratio to 4.00 to 1.00 upon the consummation of certain qualified acquisitions for which the aggregate consideration is at least $250.0 million.
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As of September 30, 2023,March 31, 2024, we had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $753.8$754.0 million, which is net of $1.2$1.0 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of September 30, 2023,March 31, 2024, no borrowings were outstanding under the revolving loan facility.
As of December 31, 2022,2023, we had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $753.6$753.9 million, which is net of $1.4$1.1 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of December 31, 2022,2023, no borrowings were outstanding under the revolving loan facility.
We were in compliance with all covenants under the 2022 Credit Agreement as of September 30, 2023March 31, 2024 and December 31, 2022.2023.
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11.12.Income Taxes
Our income before income tax provision, income tax provision and effective tax rates were as follows:
Three Months EndedNine Months EndedThree Months Ended
(in thousands, except percentages)(in thousands, except percentages)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except percentages)March 31,
2024
March 31,
2023
Income before income tax provisionIncome before income tax provision$62,545 $117,981 $267,366 $318,904 
Income tax provisionIncome tax provision$7,043 $22,006 $41,716 $53,141 
Effective tax rateEffective tax rate11.3 %18.7 %15.6 %16.7 %Effective tax rate15.1 %16.7 %


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

AllThere were no share repurchases in the first quarter of 2024. For the shares repurchased during the ninethree months ended September 30,March 31, 2023, 650 thousand shares were repurchased during the first quarter.at an average price of $302.34 per share, with a total cost of $196.5 million. As of September 30, 2023,March 31, 2024, 1.1 million shares remained available for repurchase under the program. Average price paid per share excludes excise tax. As of January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. Any excise tax incurred is recognized and reflected as part of the cost basis of the shares acquired in the Condensed Consolidated Statements of Stockholders' Equity.
13.
14.Stock-Based Compensation
Total stock-based compensation expense and its net impact on basic and diluted earnings per share are as follows:
Three Months EndedNine Months EndedThree Months Ended
(in thousands, except per share data)(in thousands, except per share data)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands, except per share data)March 31,
2024
March 31,
2023
Cost of sales:Cost of sales:
Maintenance and serviceMaintenance and service$3,568 $2,621 $9,924 $7,448 
Maintenance and service
Maintenance and service
Operating expenses:Operating expenses:
Selling, general and administrative
Selling, general and administrative
Selling, general and administrativeSelling, general and administrative32,907 27,077 89,006 67,117 
Research and developmentResearch and development21,586 17,272 59,603 47,554 
Stock-based compensation expense before taxesStock-based compensation expense before taxes58,061 46,970 158,533 122,119 
Related income tax benefitsRelated income tax benefits(12,993)(9,984)(41,848)(42,037)
Stock-based compensation expense, net of taxesStock-based compensation expense, net of taxes$45,068 $36,986 $116,685 $80,082 
Net impact on earnings per share:Net impact on earnings per share:
Basic earnings per shareBasic earnings per share$(0.52)$(0.42)$(1.34)$(0.92)
Basic earnings per share
Basic earnings per share
Diluted earnings per shareDiluted earnings per share$(0.52)$(0.42)$(1.34)$(0.92)

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14.15.Geographic Information
Revenue to external customers is attributed to individual countries based upon the location of the customer. Revenue by geographic area is as follows:
Three Months EndedNine Months EndedThree Months Ended
(in thousands)(in thousands)September 30,
2023
September 30,
2022
September 30,
2023
September 30,
2022
(in thousands)March 31,
2024
March 31,
2023
United StatesUnited States$204,824 $201,263 $661,953 $586,063 
China and Hong Kong
JapanJapan40,956 38,586 141,770 133,562 
GermanyGermany37,901 48,115 117,240 111,888 
China19,548 28,265 91,128 83,924 
South KoreaSouth Korea27,928 49,581 75,868 104,950 
Other Europe, Middle East and Africa (EMEA)Other Europe, Middle East and Africa (EMEA)83,719 72,058 251,696 236,250 
Other Europe, Middle East and Africa (EMEA)
Other Europe, Middle East and Africa (EMEA)
Other internationalOther international43,919 34,643 125,186 114,801 
Total revenueTotal revenue$458,795 $472,511 $1,464,841 $1,371,438 

Property and equipment by geographic area is as follows:
(in thousands)(in thousands)September 30,
2023
December 31,
2022
(in thousands)March 31,
2024
December 31,
2023
United StatesUnited States$55,589 $58,258 
France
India
India
IndiaIndia5,244 5,978 
EMEA10,063 11,043 
Other EMEA
Other EMEA
Other EMEA
Other internationalOther international4,535 5,559 
Total property and equipment, netTotal property and equipment, net$75,431 $80,838 

15.16.Contingencies and Commitments
We are subject to various claims, investigations, and legal and regulatory proceedings that arise in the ordinary course of business, including, but not limited to, commercial disputes, labor and employment matters, tax audits, alleged infringement of third parties' intellectual property rights and other matters. In our opinion, the resolution of pending matters is not expected to have a material adverse effect on our consolidated results of operations, cash flows or financial position. However, each of these matters is subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these proceedings could materially affect our consolidated results of operations, cash flows or financial position.
Our Indian subsidiary has several service tax audits pending that have resulted in formal inquiries being received on transactions through mid-2012. We could incur tax charges and related liabilities of $7.1$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 30, 2023.March 31, 2024. 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 of India by the Indian tax authority and a decision is still pending. We can provide no assurances on the impact that the present Microsoft case's decision will have on our cases, however, an unfavorable ruling in the Microsoft case may impact our assessment of probability and result in the recording of a $7.1$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.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto for the ninethree months ended September 30, 2023,March 31, 2024, and with our audited consolidated financial statements and notes thereto for the year ended December 31, 20222023 included in the 20222023 Form 10-K filed with the Securities and Exchange Commission (SEC). The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (GAAP).
Business
Ansys, a corporation formed in 1994, develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction. Headquartered south of Pittsburgh, Pennsylvania, we employed 6,100 and 5,6006,200 people as of September 30, 2023March 31, 2024 and December 31, 2022, respectively.2023. We focus on the development of open and flexible solutions that enable users to analyze designs on-premises and/or via the cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing, validation and deployment. We distribute our suite of simulation technologies through direct sales offices in strategic, global locations and a global network of independent resellers and distributors (collectively, channel partners). It is our intention to continue to maintain this hybrid sales and distribution model. We operate and report as one segment.
When visionary companies need to know how their world-changing ideas will perform, they close the gap between design and reality using Ansys simulation. For more than 50 years, Ansys software has enabled innovators across industries to push the boundaries of product design by using the predictive power of simulation. From sustainable transportation and advanced satellite systems to life-saving medical devices, Ansys powers innovation that drives human advancement.
Our strategy of Pervasive Insights seeks to deepen the use of simulation in our core market, to inject simulation throughout the product lifecycle and extend the accessibility to a broader set of users and use cases. Our business has three vectors of growth:
More products. Our broad and deep multiphysics portfolio enables us to grow with customers as they use simulation to solve more complex problems across a broad set of industries.
More users. Investments in simulation education and user experience simplification has made simulation more accessible to a broader user base.
More computations. Larger and more complex simulations drive more computation, requiring customers to use more Ansys licenses to complete their simulations.
Through decades of investments in the academic community and enhanced user experiences, our solutions have become accessible and relevant beyond our core "engineering" end user, to reach more users upstream and downstream from our core, which is the product validation process. Our multiphysics solutions enable our customers to address increasingly complex research and development (R&D) challenges from the component through the system and mission level of analysis. Our products seamlessly enable access to high performance compute capacity to run simulations, on-premises or in the cloud, which means our customers' R&D teams are unencumbered by compute capacity limitations that can hinder R&D cycle times. Our investments in artificial intelligence capabilities across our simulation portfolio and technical support services enhance the customer experience, democratize simulation and further next-generation innovation.
The engineering simulation software market is strong and growing. The market growth is driven by customers' need for rapid, quality innovation in a cost efficient manner, enabling faster time to market for new products and lower warranty costs. Increasing product complexity is driving sustained demand for simulations. Key industry trends fueling customers' increasing needs for simulation include:
Electrification;
Autonomy;
Connectivity;
The industrial internet of things; and
Sustainability, including minimizing waste and physical prototyping, and improving circularity and development time.

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

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

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

Synopsys Merger Agreement
On January 15, 2024, we entered into the Merger Agreement with Synopsys and Merger Sub. The Merger Agreement provides for the merger of Merger Sub with and into Ansys, with Ansys surviving the merger as a wholly owned subsidiary of Synopsys (the Merger). Our Board of Directors has unanimously approved the Merger Agreement and, subject to certain exceptions set forth in the Merger Agreement, resolved to recommend that our stockholders adopt the Merger Agreement. If the Merger is consummated, our common stock will be delisted from the Nasdaq Global Select Market and deregistered under the Exchange Act. The completion of the Merger is subject to customary closing conditions, including, among others, approval of the Merger under certain applicable antitrust and foreign investment regimes and the adoption of the Merger Agreement by our stockholders. We anticipate the transaction to close in the first half of 2025.
The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the Merger Agreement, which was filed as Exhibit 2.1 to our Current Report on Form 8-K filed on January 16, 2024, and is incorporated herein by reference.

Overview
Overall GAAP and Non-GAAP Results
This section includes a discussion of GAAP and non-GAAP results. For reconciliations of non-GAAP results to GAAP results, see the section titled "Non-GAAP Results" herein.
The 2024 and 2023 period non-GAAP results exclude the income statement effects of stock-based compensation, excess payroll taxes related to stock-based compensation, amortization of acquired intangible assets, expenses related to business combinations and adjustments for the income tax effect of the excluded items. The 2022 period non-GAAP results also exclude the income statement effects of acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022. There is no adjustment in 2023 as the impact is not material.
Our GAAP and non-GAAP results for the three and nine months ended September 30, 2023March 31, 2024 as compared to the three and nine months ended September 30, 2022March 31, 2023 reflected the following variances:
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
GAAPNon-GAAPGAAPNon-GAAP
Revenue(2.9)%(3.1)%6.8 %6.3 %
Operating income(43.4)%(19.5)%(11.9)%0.6 %
Diluted earnings per share(41.8)%(20.3)%(15.1)%(1.0)%
Three Months Ended March 31, 2024
Revenue(8.4)%
GAAP Operating income(66.1)%
Non-GAAP Operating income(26.0)%
GAAP Diluted earnings per share(65.2)%
Non-GAAP Diluted earnings per share(24.9)%
Our results reflect a decline in revenue during the three months ended September 30, 2023March 31, 2024 due to reductions in subscription lease license and perpetual license revenue, partially offset by an increase in maintenance revenue. Our results reflect an increase in revenue during the nine months ended September 30, 2023 due to growth in maintenance and subscription lease license revenue, partially offset by a decline in perpetual license revenue. We also experienced increased operating expenses during the three and nine months ended September 30, 2023,March 31, 2024, primarily due to increased personnel and acquisition costs.


Acquisition costs primarily consist of costs related to the Merger Agreement with Synopsys.
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InFor 2024, quarterly growth rates will be variable across the context of broader U.S. foreign policy shifts, the U.S. Department of Commerce is continuing to apply controls to the export to China of certain technologies. Ansys maintains a robust global compliance program. Compliancequarters and cooperation with the U.S. government’s evolving requirements are paramount to Ansys. Ansys has and will continue to align our internal processes to comply with U.S. export laws and regulations and any changes to those laws and regulations. During the third quarter, the U.S. Department of Commerce informed Ansys of additional restrictions on sales to certain Chinese entities, and incremental approval processes and export restrictions on the sale of certain Ansys products and services to entities performing research & development and certain controlled activities in China. The incremental export restrictions and processes took effect during the third quarter and initially included a broad export license requirement for certain China sales, which was later replaced by an enhanced Ansys screening process that was approvedaffected by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) onperformance comparisons to 2023. Specifically, the final business day of the quarter. The new restrictions and processes have led to an elongated transaction cycle with certain prospects, which, in turn, is expected to lead to a delay in certain fourth quarter transactions and in some situations, could result in a loss of business. Ansys will continue to work collaboratively with the U.S. Department of Commerce to adhere to the new requirements, and we have internally aligned our business operations to adjust to these requirements. The requirements negatively impacted revenue and annual contract value (ACV) by $20.0 million in the current quarter and we expect a headwind for fiscal year 2023 of $25.0 million.
The thirdfirst quarter's operating results also reflect a structural timing dynamic inaffected by the renewal base this quarter in which fewer lease contracts were up for renewal, resulting in comparatively lower up-front lease license revenue recognition.recognition, impacting revenue, operating income and EPS. As a comparison, the first quarter of 2023 reflected a 65% constant currency growth rate in subscription lease license revenue driven by a meaningful increase in the value of multi-year deals. Quarterly dynamics mayrevenue and ACV in Q1 2024 are not be representative of the momentum in our business given the shifting mix of license types and renewal cycles that can be volatile quarter to quarter. While this timing dynamic leads to revenue volatility, it does not represent changes in customers' software usage or cash flows. This further highlights the importance of measuring our results based on our fiscal year rather than individual quarters.
This section also includes a discussion of constant currency results, which we use for financial and operational decision-making and as a means to evaluate period-to-period comparisons by excluding the effects of foreign currency fluctuations on the reported results. All constant currency results presented in this Item 2 exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 20232024 period results for entities whose functional currency is a currency other than the U.S. Dollar were converted to U.S. Dollars at rates that were in effect for the 20222023 comparable period, rather than the actual exchange rates in effect for the 20232024 period. Constant currency growth rates are calculated by adjusting the 20232024 period reported amounts by the 20232024 period currency fluctuation impacts and comparing to the 20222023 comparable period reported amounts.
Impact of Foreign Currency
Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three and nine months ended September 30, 2023March 31, 2024 as compared to the three and nine months ended September 30, 2022.March 31, 2023. The impacts on our revenue and operating income as a result of the fluctuations of the U.S. Dollar when measured against our foreign currencies based on 20222023 period exchange rates are reflected in the table below. Amounts in bracketsparenthesis indicate an adverse impact from currency fluctuations.
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
(in thousands)GAAPNon-GAAPGAAPNon-GAAP
Revenue$6,163 $6,163 $(11,180)$(11,180)
Operating income$2,505 $2,990 $(3,138)$(3,041)
(in thousands)Three Months Ended March 31, 2024
Revenue$(3,903)
GAAP Operating income$(3,398)
Non-GAAP Operating income$(3,178)

In constant currency, our variances were as follows:
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
GAAPNon-GAAPGAAPNon-GAAP
Revenue(4.2)%(4.4)%7.6 %7.1 %
Operating income(45.4)%(21.0)%(10.9)%1.2 %
Three Months Ended March 31, 2024
Revenue(7.6)%
GAAP Operating income(63.4)%
Non-GAAP Operating income(24.4)%


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Other Key Business Metric

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

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

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

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

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

When we refer to the anniversary dates in the definition of ACV above, we are referencing the date of the beginning of the next twelve-month period in a contractually committed multi-year contract. If a contract is three years in duration, with a start date of July 1, 2023,2024, the anniversary dates would be July 1, 20242025 and July 1, 2025.2026. We label these anniversary dates as they are contractually committed. While this contract would be up for renewal on July 1, 2026,2027, our ACV performance metric does not assume any contract renewals.


Example 1:
For purposes of calculating ACV, a $100,000 subscription lease contract or a $100,000 maintenance contract with a term of July 1, 20232024 – June 30, 2024,2025, would each contribute $100,000 to ACV for fiscal year 20232024 with no contribution to ACV for fiscal year 2024.
2025.

Example 2:
For purposes of calculating ACV, a $300,000 subscription lease contract or a $300,000 maintenance contract with a term of July 1, 20232024 – June 30, 2026,2027, would each contribute $100,000 to ACV in each of fiscal years 2023, 2024, 2025 and 2025.2026. There would be no contribution to ACV for fiscal year 20262027 as each period captures the full annual value upon the anniversary date.


Example 3:
A perpetual license valued at $200,000 with a contract start date of March 1, 20232024 would contribute $200,000 to ACV in fiscal year 2023.2024.
During the three and nine months ended September 30,March 31, 2024 and 2023 and 2022 our ACV was as follows:
 Three Months Ended September 30,
(in thousands, except percentages)20232022Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$457,549 $451,779 $409,317 $48,232 11.8 $42,462 10.4 
 Nine Months Ended September 30,
(in thousands, except percentages)20232022Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$1,345,305 $1,355,529 $1,213,735 $131,570 10.8 $141,794 11.7 

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 Three Months Ended March 31,
(in thousands, except percentages)20242023Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$407,405 $410,433 $399,407 $7,998 2.0 $11,026 2.8 
Our trailing twelve-month recurring ACV, converted from the functional currency to U.S. Dollars at the 20222023 period monthly average exchange rates, was as follows:
Twelve Months Ended September 30,Change Twelve Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20232022Amount%(in thousands, except percentages)20242023Amount%
Recurring ACV at 2022 monthly average exchange rates$1,804,517 $1,560,140 $244,377 15.7 
Recurring ACV at 2023 monthly average exchange rates
Recurring ACV includes both subscription lease license and maintenance ACV and excludes perpetual license and service ACV.

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Industry Commentary:
We continue to see our customers expand their digital engineering capabilities in support of digital transformation endeavors. Competitive pressures to reduce costs and shorten design cycles remain steady drivers of demand for our solutions. During the thirdfirst quarter of 2024, ACV growth was supported by our high-tech customers continued to invest in our simulation solutions to deliver more advanced chips, enhanced 5G and 6G technology, and next-generation automotive components. Within thecore industries of aerospace and defense (A&D) and automotive. Despite a decrease in high-tech ACV during the quarter, we continue to see demand in the industry digital transformation remains a high-level priority foras more customers as they bolster defenserequire our semiconductor and space programs.multiphysics solutions to model advanced packaging technologies. We remain critical to our customers' development of advanced chips, often with bespoke functionality. Our value proposition also remains attractiveA&D customers continue to rely on simulation in support of complex, connected and autonomous platforms. Within the automotive companies as major automotive companies seek to reduce product development costs, particularly for electric vehicles. Traditional original equipment manufacturers and suppliers continued to invest in simulation to drive electrification, advanced driver assistance systems, safety, and cybersecurity innovation. Additionally,industry, electrification remains a key prioritycritical driver of simulation investment in electric vehicles (EVs). Our portfolio is well-positioned to support automotive companies focused on addressing tight margins on EV sales and investment driver among our industrial equipment customer base.optimizing efficiency in both operations and vehicle performance. The energy sector also contributed to ACV growth in the first quarter driven by the need to continually deliver, convert and consume various forms of fuel more efficiently, as well as develop scalable, renewable energy sources.
Geographic Trends:
The following table presents our geographic revenue variances using actual and constant currency rates during the three and nine months ended September 30, 2023March 31, 2024 as compared to the three and nine months ended September 30, 2022:March 31, 2023:

Three Months Ended March 31, 2024
Three Months Ended March 31, 2024
Three Months Ended March 31, 2024
GAAP
Actual
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Actual
ActualConstant CurrencyActualConstant Currency
Actual
Americas
Americas
AmericasAmericas4.2 %4.2 %14.0 %14.1 %
EMEAEMEA1.2 %(5.2)%6.0 %4.8 %
EMEA
EMEA
Asia-Pacific
Asia-Pacific
Asia-PacificAsia-Pacific(16.8)%(15.6)%(3.1)%0.5 %
TotalTotal(2.9)%(4.2)%6.8 %7.6 %
Total
Total
Non-GAAP
Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
ActualConstant CurrencyActualConstant Currency
Americas4.0 %3.9 %13.4 %13.5 %
EMEA1.0 %(5.4)%5.5 %4.2 %
Asia-Pacific(17.0)%(15.9)%(3.6)%— %
Total(3.1)%(4.4)%6.3 %7.1 %
The value and duration of multi-year subscription lease contracts executed during the period significantly impact the recognition of revenue. As a result, revenue may fluctuate, particularly on a quarterly basis, due to the timing of such contracts, relative differences in duration of long-term contracts from quarter to quarter and changes in the mix of license types sold compared to the prior year. Large swings in revenue growth rates are not necessarily indicative of customers' software usage changes or cash flows during the periods presented. To drive growth, we continue to focus on a number of sales improvement activities across our geographic regions, including sales hiring, pipeline building, productivity initiatives and customer engagement activities.
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Use of Estimates:
The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to contract revenue, standalone selling prices of our products and services, allowance for doubtful accounts receivable, valuation of goodwill and other intangible assets, useful lives for depreciation and amortization, acquired deferred revenue, operating lease assets and liabilities, fair values of stock awards, deferred compensation, income taxes, uncertain tax positions, tax valuation reserves, and contingencies and litigation. We base our estimates on historical experience, market experience, estimated future cash flows and various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Forward-Looking Information
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). Forward-looking statements are statements that provide current expectations or forecasts of future events based on certain assumptions. Forward-looking statements are subject to risks, uncertainties, and factors relating to our business which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.

Forward-looking statements use words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "likely," "may," "outlook," "plan," "predict," "project," "should," "target,"“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.market, the proposed transaction with Synopsys, Inc., including the expected date of closing and the potential benefits thereof, and other aspects of future operation. 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.
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The risks associated with the following, among others, could cause actual results to differ materially from those described in any forward-looking statements:

our ability to complete the proposed transaction with Synopsys on anticipated terms and timing, including obtaining stockholder and regulatory approvals, and other conditions related to the completion of the transaction;

the realization of the anticipated benefits of the proposed transaction with Synopsys, including potential disruptions to our and Synopsys’ businesses and commercial relationships with others resulting from the announcement or completion of the proposed transaction and uncertainty as to the long-term value of Synopsys’ common stock;

restrictions during the pendency of the proposed transaction with Synopsys that could impact our ability to pursue certain business opportunities or strategic transactions, including tuck-in M&A;

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

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

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

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

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

our ability to protect our proprietary technology; cybersecurity threats or other security breaches, including in relation to breaches occurring through our products and 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;

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;

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

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

our ability to protect our proprietary technology; cybersecurity threats or other security breaches, including in relation to breaches occurring through our products and 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;

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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 tax audit cases;

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;

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

investments in complementary companies, products, services and technologies; our 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;

current and potential future impacts of a global health crisis, natural disaster or catastrophe, and the actions taken to address these events by our customers, suppliers, regulatory authorities and our business, on the global economy and consolidated financial statements, and other public health and safety risks; and government actions or mandates;

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 intention to repatriate previously taxed earnings 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 a slowdown in our research and development activities;

our ability to execute on our strategies related to environmental, social, and governance matters, and meet evolving and varied 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).

Important Information and Where to Find It
This document refers to a proposed transaction between Synopsys and Ansys. In connection with the proposed transaction, Synopsys filed with the SEC, and the SEC has declared effective on April 17, 2024, a registration statement on Form S-4 (File No. 333-277912), that included a prospectus with respect to the shares of common stock of Synopsys to be issued in the proposed transaction and a proxy statement of Ansys and is referred to as the proxy statement/prospectus. Each party may also file other documents regarding the proposed transaction with the SEC. This document is not a substitute for the proxy statement/prospectus or registration statement or any other document that Synopsys or Ansys may file with the SEC. The definitive proxy statement/prospectus will be mailed to all Ansys stockholders. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of the registration statement, proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by Synopsys or Ansys through the website maintained by the SEC at www.sec.gov.

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The documents filed by Synopsys with the SEC also may be obtained free of charge at Synopsys’ website at https://investor.synopsys.com/overview/default.aspx or upon written request to Synopsys at Synopsys, Inc., 675 Almanor Avenue, Sunnyvale, California 94085, Attention: Investor Relations. The documents filed by Ansys with the SEC also may be obtained free of charge at Ansys’ website at https://investors.ansys.com/ or upon written request to kelsey.debriyn@ansys.com.

Participants in the Solicitation
Synopsys, Ansys and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Ansys’ stockholders in connection with the proposed transaction.

Information about Ansys’ directors and executive officers and their ownership of Ansys’ common stock is set forth in Ansys’ proxy statement for its 2024 Annual Meeting of Stockholders on Schedule 14A filed with the SEC on April 10, 2024. To the extent that holdings of Ansys’ securities have changed since the amounts printed in Ansys’ proxy statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Information about Synopsys’ directors and executive officers is set forth in Synopsys’ proxy statement for its 2024 Annual Meeting of Stockholders on Schedule 14A filed with the SEC on February 16, 2024 and Synopsys’ subsequent filings with the SEC. Additional information regarding the direct and indirect interests of those persons and other persons who may be deemed participants in the proposed transaction may be obtained by reading the proxy statement/prospectus filed by Synopsys and declared effective by the SEC on April 17, 2024, and any other relevant documents that are filed with the SEC relating to the proposed transaction. You may obtain free copies of these documents as described in the preceding paragraph.

No Offer or Solicitation
This document is for informational purposes only and is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

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Results of Operations
The results of operations discussed below are on a GAAP basis unless otherwise stated.
Three Months Ended September 30, 2023March 31, 2024 Compared to Three Months Ended September 30, 2022March 31, 2023
Revenue:
Three Months Ended September 30,
(in thousands, except percentages)(in thousands, except percentages)20232022Change
GAAPConstant CurrencyGAAPGAAPConstant
Currency
AmountAmount%Amount%
(in thousands, except percentages)
(in thousands, except percentages)20242023Change
GAAPGAAPConstant CurrencyGAAPGAAPConstant
Currency
AmountAmountAmount%Amount%
Revenue:Revenue:
Subscription lease licenses
Subscription lease licenses
Subscription lease licensesSubscription lease licenses$103,573 $102,316 $136,489 $(32,916)(24.1)$(34,173)(25.0)
Perpetual licensesPerpetual licenses58,849 58,074 72,417 (13,568)(18.7)(14,343)(19.8)
Software licensesSoftware licenses162,422 160,390 208,906 (46,484)(22.3)(48,516)(23.2)
MaintenanceMaintenance278,108 274,284 247,678 30,430 12.3 26,606 10.7 
ServiceService18,265 17,958 15,927 2,338 14.7 2,031 12.8 
Maintenance and serviceMaintenance and service296,373 292,242 263,605 32,768 12.4 28,637 10.9 
Total revenueTotal revenue$458,795 $452,632 $472,511 $(13,716)(2.9)$(19,879)(4.2)

Revenue for the quarter ended September 30, 2023March 31, 2024 decreased 2.9%8.4% compared to the quarter ended September 30, 2022,March 31, 2023, or 4.2%7.6% in constant currency. The reported $32.9$53.1 million decrease in lease license revenue was attributable to a $35.6$53.8 million decrease in value from multi-year licenses, partially offset by a $2.7$0.7 million increase in value from annual licenses. Perpetual license revenue, which is derived from new sales during the three months ended September 30, 2023,March 31, 2024, decreased 18.7%8.0%, or 19.8%7.7% in constant currency, as compared to the three months ended September 30, 2022.March 31, 2023. Driving the decrease in perpetual license revenue was a 17.6% decrease in average deal size and a 1.1%22.6% decrease in the volume of deals. Multi-year lease license revenue and perpetual license revenue were negatively impacteddeals, partially offset by a 14.6% increase in the current quarter by $20.0 million related to incremental China export restrictions and enhanced approval processes.average deal size. Maintenance revenue growth of 12.3%7.7%, or 10.7%8.8% in constant currency, is correlated with previous license sales and is driven substantially by our existing customer base. The reported $30.4$20.7 million growth in maintenance revenue was attributable to a $28.9$27.8 million increase in maintenance associated with lease licenses, andpartially offset by a $1.5$7.1 million increasedecrease in maintenance associated with perpetual sales.
We continue to experience strong demand from our customers for contracts that often include longer-term, subscription leases 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 transactions can result in significant subscription lease revenue volatility. Specifically, the first quarter's operating results reflect a structural timing dynamic affected by the renewal base this quarter in which fewer lease contracts were up for renewal, resulting in comparatively lower up-front lease license revenue recognition. 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.
With respect to revenue, on average for the quarter ended September 30, 2023,March 31, 2024, the U.S. Dollar was 3.1% weaker,2.0% stronger, when measured against our foreign currencies, than for the quarter ended September 30, 2022.March 31, 2023. The table below presents the net impacts of currency fluctuations on revenue for the quarter ended September 30, 2023.March 31, 2024. Amounts in bracketsparenthesis indicate an adverse impact from currency fluctuations.
(in thousands)Three Months Ended September 30, 2023March 31, 2024
EuroJapanese Yen$7,315(4,289)
South Korean Won765(955)
Euro1,206 
Taiwan Dollar(339)
Indian Rupee(352)
Japanese Yen(1,757)
Other531135 
        Total$6,163(3,903)

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As a percentage of revenue, our international and domestic revenues, and our direct and indirect revenues, were as follows:
Three Months Ended September 30,
20232022
Three Months Ended March 31,Three Months Ended March 31,
202420242023
InternationalInternational55.4 %57.4 %International57.1 %51.6 %
DomesticDomestic44.6 %42.6 %Domestic42.9 %48.4 %
DirectDirect73.5 %74.8 %
Direct
Direct66.5 %76.3 %
IndirectIndirect26.5 %25.2 %Indirect33.5 %23.7 %
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 sheet does not represent the total value of annual or multi-year, noncancellable agreements. Our backlog represents deferred revenue associated with installment billings for periods beyond the current quarterly billing cycle and committed contracts with start dates beyond the end of the current period. Our deferred revenue and backlog as of September 30, 2023March 31, 2024 and December 31, 20222023 consisted of the following:
Balance at September 30, 2023
Balance at March 31, 2024Balance at March 31, 2024
(in thousands)(in thousands)TotalCurrentLong-Term(in thousands)TotalCurrentLong-Term
Deferred revenueDeferred revenue$370,433 $349,668 $20,765 
BacklogBacklog835,244 424,547 410,697 
TotalTotal$1,205,677 $774,215 $431,462 
Balance at December 31, 2022
Balance at December 31, 2023Balance at December 31, 2023
(in thousands)(in thousands)TotalCurrentLong-Term(in thousands)TotalCurrentLong-Term
Deferred revenueDeferred revenue$435,758 $413,989 $21,769 
BacklogBacklog981,088 432,323 548,765 
TotalTotal$1,416,846 $846,312 $570,534 

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,
20232022Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
2024
20242023Change
GAAPGAAPConstant CurrencyGAAPConstant 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:
Software
licenses
Software
licenses
Software
licenses
Software
licenses
$8,692 1.9 $8,564 1.9 $8,425 1.8 $267 3.2 $139 1.6 
AmortizationAmortization20,707 4.5 20,442 4.5 17,281 3.7 3,426 19.8 3,161 18.3 
Maintenance
and service
Maintenance
and service
35,858 7.8 35,485 7.8 36,261 7.7 (403)(1.1)(776)(2.1)
Total cost of
sales
Total cost of
sales
65,257 14.2 64,491 14.2 61,967 13.1 3,290 5.3 2,524 4.1 
Gross profitGross profit$393,538 85.8 $388,141 85.8 $410,544 86.9 $(17,006)(4.1)$(22,403)(5.5)

Software Licenses: The decrease in the cost of software licenses was primarily due to decreased third-party royalties of $1.7 million.
Amortization: The increase in amortization expense was primarily due to the amortization of newlyrecently acquired intangible assets.
Maintenance and Service: The net decrease in maintenance and service costs was driven by lower consulting and professional fees.
The reduction in gross profit was a result of the decrease in revenue and increase in the cost of sales.
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Three Months Ended September 30,
20232022Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
2024
20242023Change
GAAPGAAPConstant CurrencyGAAPConstant 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:
Selling, general and administrative
Selling, general and administrative
Selling, general and administrativeSelling, general and administrative$194,552 42.4 $193,092 42.7 $175,283 37.1 $19,269 11.0 $17,809 10.2 
Research and
development
Research and
development
123,223 26.9 122,003 27.0 108,056 22.9 15,167 14.0 13,947 12.9 
AmortizationAmortization5,947 1.3 5,735 1.3 3,821 0.8 2,126 55.6 1,914 50.1 
Total operating
expenses
Total operating
expenses
323,722 70.6 320,830 70.9 287,160 60.8 36,562 12.7 33,670 11.7 
Operating incomeOperating income$69,816 15.2 $67,311 14.9 $123,384 26.1 $(53,568)(43.4)$(56,073)(45.4)

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-relatedacquisition costs of $11.7 million.$12.1 million, primarily due to costs related to the Merger Agreement with Synopsys.
Increased stock-based compensation of $5.8$10.3 million.
Increased salaries of $7.1 million.
We anticipate that we will continue to make targeted investments in our global sales and marketing organizations and our global business infrastructure to enhance and support our revenue-generating activities.
Research and Development: The increase in research and development costs was primarily due to the following:
Increased salaries and other headcount-related costs of $10.1$5.8 million.
Increased stock-based compensation of $4.3$3.7 million.
Amortization: The increase in amortization expense was primarily due to the amortization of newly acquired intangible assets.
We have traditionally invested significant resources in research and development activities and expect to continue to make investments in expanding the ease of use and capabilities of our broad portfolio of simulation software products.
The impacts from currency fluctuations resulted in increased operatiingn decreased operating income of $2.5$3.4 million for the quarter ended September 30, 2023March 31, 2024 as compared to the quarter ended September 30, 2022.March 31, 2023.
Interest Income: Interest income for the three months ended September 30, 2023March 31, 2024 was $4.9$11.0 million as compared to $1.3$4.1 million for the three months ended September 30, 2022.March 31, 2023. Interest income increased as a result of a higher invested cash balance, a higher interest rate environment and the related increase in the average rate of return on invested cash balances.
Interest Expense: Interest expense for the quarter ended September 30, 2023March 31, 2024 was $12.3$12.4 million as compared to $6.1$10.8 million for the quarter ended September 30, 2022March 31, 2023 due to a higher interest rate environment.
Other Income (Expense),Expense, net: Other income (expense)expense consisted primarily of net foreign currency gains during the three months ended September 30, 2023 and losses on equity investments and net foreign currency losses during the three months ended September 30, 2022.March 31, 2024 and 2023.
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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 March 31,Three Months Ended March 31,
(in thousands, except percentages)(in thousands, except percentages)20232022(in thousands, except percentages)20242023
Income before income tax provisionIncome before income tax provision$62,545 $117,981 
Income tax provisionIncome tax provision$7,043 $22,006 
Effective tax rateEffective tax rate11.3 %18.7 %Effective tax rate15.1 %16.7 %

The decrease in the effective tax rate for the three months ended September 30, 2023March 31, 2024 was a result of a decrease in U.S. federal tax expense on foreign earnings and increased benefits related to research and development credits.credits and stock-based compensation.
When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the quarters ended September 30,March 31, 2024 and March 31, 2023 and September 30, 2022 were favorably impacted by the foreign-derived intangible income (FDII) deduction, and research and development credits.
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)20232022
Net income$55,502 $95,975 
Diluted earnings per share$0.64 $1.10 
Weighted average shares outstanding - diluted87,381 87,418 
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Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Revenue:
 Nine Months Ended September 30,
(in thousands, except percentages)20232022Change
GAAPConstant CurrencyGAAPGAAPConstant
Currency
AmountAmount%Amount%
Revenue:
Subscription lease licenses$386,494 $389,366 $362,977 $23,517 6.5 $26,389 7.3 
Perpetual licenses199,977 201,299 212,355 (12,378)(5.8)(11,056)(5.2)
Software licenses586,471 590,665 575,332 11,139 1.9 15,333 2.7 
Maintenance820,393 827,158 742,554 77,839 10.5 84,604 11.4 
Service57,977 58,198 53,552 4,425 8.3 4,646 8.7 
Maintenance and service878,370 885,356 796,106 82,264 10.3 89,250 11.2 
Total revenue$1,464,841 $1,476,021 $1,371,438 $93,403 6.8 $104,583 7.6 

Revenue for the nine months ended September 30, 2023 increased 6.8% compared to the nine months ended September 30, 2022, or 7.6% in constant currency. Maintenance revenue growth of 10.5%, or 11.4% in constant currency, is correlated with previous license sales and is driven substantially by our existing customer base. The reported $77.8 million growth in maintenance revenue was attributable to a $68.1 million increase in maintenance associated with lease licenses and a $9.7 million increase in maintenance associated with perpetual sales. Subscription lease license revenue increased 6.5%, or 7.3% in constant currency, as compared to the nine months ended September 30, 2022, with substantially all of the increase attributable to incremental sales to our existing customers. The reported $23.5 million increase in lease license revenue was attributable to a $13.7 million increase in value from annual licenses and a $9.8 million increase in value from multi-year licenses. Perpetual license revenue, which is derived from new sales during the nine months ended September 30, 2023, decreased 5.8%, or 5.2% in constant currency, as compared to the nine months ended September 30, 2022. Driving the decrease in perpetual license revenue was a 4.6% decrease in average deal size and a 1.2% decrease in the volume of deals.
With respect to revenue, on average for the nine months ended September 30, 2023, the U.S. Dollar was 1.8% stronger, when measured against our foreign currencies, than for the nine months ended September 30, 2022. The table below presents the net impacts of currency fluctuations on revenue for the nine months ended September 30, 2023. Amounts in brackets indicate an adverse impact from currency fluctuations.
(in thousands)Nine Months Ended September 30, 2023
Japanese Yen$(10,256)
Indian Rupee(1,828)
South Korean Won(1,500)
Taiwan Dollar(1,413)
Euro5,611
Other(1,794)
        Total$(11,180)

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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,
20232022
International54.8 %57.3 %
Domestic45.2 %42.7 %
Direct73.7 %73.7 %
Indirect26.3 %26.3 %
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.
 Nine Months Ended September 30,
20232022Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
(in thousands,
except percentages)
Amount% of
Revenue
Amount% of
Revenue
Amount% of
Revenue
Amount%Amount%
Cost of sales:
Software
licenses
$29,095 2.0 $29,206 2.0 $25,370 1.8 $3,725 14.7 $3,836 15.1 
Amortization60,404 4.1 60,331 4.1 51,947 3.8 8,457 16.3 8,384 16.1 
Maintenance
and service
111,750 7.6 113,044 7.7 111,897 8.2 (147)(0.1)1,147 1.0 
Total cost of
sales
201,249 13.7 202,581 13.7 189,214 13.8 12,035 6.4 13,367 7.1 
Gross profit$1,263,592 86.3 $1,273,440 86.3 $1,182,224 86.2 $81,368 6.9 $91,216 7.7 

Software Licenses: The increase in the cost of software licenses was primarily due to increased third-party royalties of $3.8 million.
Amortization: The increase in amortization expense was primarily due to the amortization of newly acquired intangible assets.
Maintenance and Service: The net decrease in maintenance and service costs was primarily due to the following:
Decreased salaries of $1.6 million.
Decreased costs related to foreign exchange translation of $1.3 million due to a stronger U.S. Dollar.
Increased stock-based compensation of $2.5 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,
20232022Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
(in thousands, except percentages)Amount% of
Revenue
Amount% of
Revenue
Amount% of
Revenue
Amount%Amount%
Operating expenses:
Selling, general and administrative$585,278 40.0 $590,565 40.0 $515,421 37.6 $69,857 13.6 $75,144 14.6 
Research and development368,581 25.2 370,128 25.1 322,271 23.5 46,310 14.4 47,857 14.8 
Amortization16,598 1.1 16,474 1.1 11,975 0.9 4,623 38.6 4,499 37.6 
Total operating expenses970,457 66.2 977,167 66.2 849,667 62.0 120,790 14.2 127,500 15.0 
Operating income$293,135 20.0 $296,273 20.1 $332,557 24.2 $(39,422)(11.9)$(36,284)(10.9)

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 $41.2 million.
Increased stock-based compensation of $21.9 million.
Increased business travel of $8.0 million as in-person meetings and live attendance at trade events have continued to expand.
Increased marketing expenses of $3.1 million.
Increased information technology (IT) maintenance and software hosting costs of $2.4 million.
Increased facilities costs of $1.9 million.
Decreased costs related to foreign exchange translation of $5.3 million due to a stronger U.S. Dollar.
Decreased third-party commissions of $2.7 million.
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 $31.6 million.
Increased stock-based compensation of $12.0 million.
Increased IT maintenance and software hosting costs of $2.4 million.
Amortization: The increase in amortization expense was primarily due to the amortization of newly acquired intangible assets.
The impacts from currency fluctuations resulted in decreased operating income of $3.1 million for the nine months ended
September 30, 2023 as compared to the nine months ended September 30, 2022.
Interest Income: Interest income for the nine months ended September 30, 2023 was $12.4 million as compared to $2.1 million for the nine months ended September 30, 2022. The higher interest rate environment and the related increase in the average rate of return on invested cash balances was partially offset by a lower invested cash balance as a result of investments in acquisitions and share repurchases.
Interest Expense: Interest expense for the nine months ended September 30, 2023 was $34.6 million as compared to $13.7 million for the nine months ended September 30, 2022. Interest expense increased as a result of a higher interest rate environment.
Other Expense, net: Other expense for the nine months ended September 30, 2023 was $3.6 million as compared to other expense of $2.1 million for the nine months ended September 30, 2022. Other expense consisted primarily of losses on equity investments and net foreign currency losses.
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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,
(in thousands, except percentages)20232022
Income before income tax provision$267,366 $318,904 
Income tax provision$41,716 $53,141 
Effective tax rate15.6 %16.7 %
The decrease in the effective tax rate for the nine months ended September 30, 2023 was primarily due to increased benefits related to research and development credits and an increase in benefits related to tax planning in a foreign jurisdiction, partially offset by a decrease in benefits related to stock-based compensation.
When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the nine months ended September 30, 2023 and September 30, 2022 were favorably impacted by tax benefits from stock-based compensation, the FDII deductiondeductions 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,
Three Months Ended March 31,Three Months Ended March 31,
(in thousands, except per share data)(in thousands, except per share data)20232022(in thousands, except per share data)20242023
Net incomeNet income$225,650 $265,763 
Diluted earnings per shareDiluted earnings per share$2.58 $3.04 
Weighted average shares outstanding - dilutedWeighted average shares outstanding - diluted87,335 87,496 
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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, as applicable.
ANSYS, INC. AND SUBSIDIARIES
ANSYS, INC. AND SUBSIDIARIES
ANSYS, INC. AND SUBSIDIARIES
Reconciliations of GAAP to Non-GAAP MeasuresReconciliations of GAAP to Non-GAAP MeasuresReconciliations of GAAP to Non-GAAP Measures
(Unaudited)(Unaudited)(Unaudited)
Three Months Ended
September 30, 2023
Three Months EndedThree Months Ended
March 31, 2024March 31, 2024
(in thousands, except percentages and per share data)(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
(in thousands, except percentages and per share data)Gross Profit% of RevenueOperating Income% of RevenueNet Income
EPS - Diluted1
Total GAAPTotal GAAP$458,795 $393,538 85.8 %$69,816 15.2 %$55,502 $0.64 
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expenseStock-based compensation expense 3,568 0.8 %58,061 12.7 %58,061 0.66 
Excess payroll taxes related to stock-based awardsExcess payroll taxes related to stock-based awards 3  %241 0.1 %241  
Amortization of intangible assets from acquisitionsAmortization of intangible assets from acquisitions 20,707 4.5 %26,654 5.8 %26,654 0.31 
Expenses related to business combinationsExpenses related to business combinations   %1,465 0.3 %1,465 0.02 
Adjustment for income tax effectAdjustment for income tax effect   %  %(19,026)(0.22)
Adjustment for income tax effect
Adjustment for income tax effect
Total non-GAAPTotal non-GAAP$458,795 $417,816 91.1 %$156,237 34.1 %$122,897 $1.41 
1 Diluted weighted average shares were 87,381.87,780.
Three Months Ended
Three Months Ended
September 30, 2022
Three Months Ended
Three Months Ended
March 31, 2023March 31, 2023
(in thousands, except percentages and per share data)(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
(in thousands, except percentages and per share data)Gross Profit% of RevenueOperating Income% of RevenueNet Income
EPS - Diluted1
Total GAAPTotal GAAP$472,511 $410,544 86.9 %$123,384 26.1 %$95,975 $1.10 
Acquisition accounting for deferred revenue1,162 1,162 — %1,162 0.2 %1,162 0.01 
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expenseStock-based compensation expense— 2,621 0.5 %46,970 9.9 %46,970 0.55 
Excess payroll taxes related to stock-based awardsExcess payroll taxes related to stock-based awards— 37 — %260 0.1 %260 — 
Amortization of intangible assets from acquisitionsAmortization of intangible assets from acquisitions— 17,281 3.7 %21,102 4.4 %21,102 0.24 
Expenses related to business combinationsExpenses related to business combinations— — — %1,210 0.3 %1,210 0.01 
Adjustment for income tax effectAdjustment for income tax effect— — — %— — %(11,958)(0.14)
Adjustment for income tax effect
Adjustment for income tax effect
Total non-GAAPTotal non-GAAP$473,673 $431,645 91.1 %$194,088 41.0 %$154,721 $1.77 
1 Diluted weighted average shares were 87,418.87,431.






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ANSYS, INC. AND SUBSIDIARIES
Reconciliations of GAAP to Non-GAAP Measures
(Unaudited)
Nine Months Ended
September 30, 2023
(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
Total GAAP$1,464,841 $1,263,592 86.3 %$293,135 20.0 %$225,650 $2.58 
Stock-based compensation expense 9,924 0.6 %158,533 10.7 %158,533 1.81 
Excess payroll taxes related to stock-based awards 303  %5,270 0.4 %5,270 0.06 
Amortization of intangible assets from acquisitions 60,404 4.2 %77,002 5.3 %77,002 0.88 
Expenses related to business combinations   %5,758 0.4 %5,758 0.07 
Adjustment for income tax effect   %  %(48,222)(0.55)
Total non-GAAP$1,464,841 $1,334,223 91.1 %$539,698 36.8 %$423,991 $4.85 
1 Diluted weighted average shares were 87,335.

Nine Months Ended
September 30, 2022
(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
Total GAAP$1,371,438 $1,182,224 86.2 %$332,557 24.2 %$265,763 $3.04 
Acquisition accounting for deferred revenue6,758 6,758 0.1 %6,758 0.3 %6,758 0.08 
Stock-based compensation expense— 7,448 0.5 %122,119 8.9 %122,119 1.40 
Excess payroll taxes related to stock-based awards— 481 — %5,530 0.5 %5,530 0.06 
Amortization of intangible assets from acquisitions— 51,947 3.8 %63,922 4.6 %63,922 0.73 
Expenses related to business combinations— — — %5,376 0.4 %5,376 0.06 
Adjustment for income tax effect— — — %— — %(40,929)(0.47)
Total non-GAAP$1,378,196 $1,248,858 90.6 %$536,262 38.9 %$428,539 $4.90 
1 Diluted weighted average shares were 87,496.

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We use non-GAAP financial measures (a) to evaluate our historical and prospective financial performance as well as our performance relative to our competitors, (b) to set internal sales targets and spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, (e) to assess financial discipline over operational expenditures and (f) as an important factor in determining variable compensation for management and employees. In addition, many financial analysts that follow us focus on and publish both historical results and future projections based on non-GAAP financial measures. We believe that it is in the best interest of our investors to provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors have historically requested, and we have historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.
While we believe that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, are not reported by all our competitors and may not be directly comparable to similarly titled measures of our competitors due to potential differences in the exact method of calculation. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.
The adjustments to these non-GAAP financial measures, and the basis for such adjustments, are outlined below:
Acquisition accounting for deferred revenue. Historically, we have consummated acquisitions in order to support our strategic and other business objectives. Under prior accounting guidance, a fair value provision resulted in acquired deferred revenue that was often recorded on the opening balance sheet at an amount that was lower than the historical carrying value. Although this 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 have historically provided non-GAAP financial measures which exclude the impact of the acquisition accounting adjustment for acquisitions prior to the adoption of the new guidance in 2022. The 2022 non-GAAP financial measures presented in this document include the adjustment to exclude the income statement effects of acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022. There is no adjustment included for 2023 as the impact is not material.
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.
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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. 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. Specifically, we exclude stock-based compensation 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 boardBoard of directorsDirectors 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'smanager’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'competitors’ operating results.
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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. We also incur 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. We exclude these acquisition-related expenses 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'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 re-evaluate and update 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 MeasureNon-GAAP Reporting Measure
RevenueNon-GAAP Revenue
Gross ProfitNon-GAAP Gross Profit
Gross Profit MarginNon-GAAP Gross Profit Margin
Operating IncomeNon-GAAP Operating Income
Operating Profit MarginNon-GAAP Operating Profit Margin
Net IncomeNon-GAAP Net Income
Diluted Earnings Per ShareNon-GAAP Diluted Earnings Per Share
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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 20232024 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 20222023 comparable period, rather than the actual exchange rates in effect for the 20232024 period. Constant currency growth rates are calculated by adjusting the 20232024 reported amounts by the 20232024 currency fluctuation impacts and comparing the adjusted amounts to the 20222023 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
Change
ChangeChange
(in thousands, except percentages)(in thousands, except percentages)September 30,
2023
December 31,
2022
Amount%(in thousands, except percentages)March 31,
2024
December 31,
2023
Amount%
Cash, cash equivalents and short-term investmentsCash, cash equivalents and short-term investments$639,513 $614,574 $24,939 4.1 
Working capitalWorking capital$908,068 $869,286 $38,782 4.5 

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 subsidiariesavailable-for-sale debt securities with originalremaining maturities ofgreater than three months to one year.at the date of purchase and time deposits. The following table presents our foreign and domestic holdings of cash, cash equivalents and short-term investments as of September 30, 2023March 31, 2024 and December 31, 2022:2023:
(in thousands, except percentages)(in thousands, except percentages)September 30,
2023
% of TotalDecember 31,
2022
% of Total(in thousands, except percentages)March 31,
2024
% of TotalDecember 31,
2023
% of Total
DomesticDomestic$326,877 51.1 $326,784 53.2 
ForeignForeign312,636 48.9 287,790 46.8 
TotalTotal$639,513 $614,574 

In general, it is our intention to permanently reinvest all earnings in excess of previously taxed amounts. Substantially all of the pre-2018 earnings of our non-U.S. subsidiaries were taxed through the transition tax and post-2018 current earnings are taxed as part of global intangible low-taxed income tax expense. These taxes increase our previously taxed earnings and allow for the repatriation of the majority of our foreign earnings without any residual U.S. federal tax. Unrecognized provisions for taxes on indefinitely reinvested undistributed earnings of foreign subsidiaries would not be significant.
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,Change
Three Months Ended March 31,Three Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20232022Amount%(in thousands, except percentages)20242023Amount%
Net cash provided by operating activitiesNet cash provided by operating activities$484,400 $457,031 $27,369 6.0 

Net cash provided by operating activities increased during the ninethree months ended September 30, 2023March 31, 2024 compared to the ninethree months ended September 30, 2022.March 31, 2023. The increase in net cash provided by operating activities was a result of increased customer receipts driven primarily by ACV growth, partially offset by increased payments related to higher operating expenses and income tax payments, and interest payments due to the higher interest rate environment as compared to the ninethree months ended September 30, 2022.March 31, 2023.
Cash Flows from Investing Activities
Nine Months Ended September 30,Change
Three Months Ended March 31,Three Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20232022Amount%(in thousands, except percentages)20242023Amount%
Net cash used in investing activitiesNet cash used in investing activities$(220,166)$(258,622)$38,456 14.9 

Net cash used in investing activities decreased by $38.5$94.0 million during the ninethree months ended September 30, 2023March 31, 2024 compared to the ninethree months ended September 30, 2022March 31, 2023 due to decreased acquisition-related net cash outlays of $44.8$120.6 million, partially offset by increased purchases of short-term investments of $19.9 million and capital expenditures of $3.7 million. We currently plan capital spending of $25.0$40.0 million to $30.0$50.0 million during fiscal year 20232024 as compared to the $24.4$25.3 million that was spent in fiscal year 2022.2023. The level of spending will depend on various factors, including the growth of the business and general economic conditions.
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Cash Flows from Financing Activities
Nine Months Ended September 30,Change
Three Months Ended March 31,Three Months Ended March 31,Change
(in thousands, except percentages)(in thousands, except percentages)20232022Amount%(in thousands, except percentages)20242023Amount%
Net cash used in financing activitiesNet cash used in financing activities$(232,600)$(197,978)$(34,622)(17.5)

Net cash used in financing activities increaseddecreased during the ninethree months ended September 30, 2023March 31, 2024 compared to the ninethree months ended September 30, 2022March 31, 2023 due to increaseddecreased stock repurchases of $40.9$196.5 million.
Other Cash Flow Information
On June 30, 2022, we entered into a credit agreement (as amended, the 2022 Credit Agreement) with PNC Bank, National Association as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto. The 2022 Credit Agreement refinanced our previous credit agreements in their entirety. The 2022 Credit Agreement provides for a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, which includes a $50.0 million sublimit for the issuance of letters of credit. Terms used in this description of the 2022 Credit Agreement with initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.
As of September 30, 2023,March 31, 2024, the carrying value of our term loan was $753.8$754.0 million, with no principal payments due in the next twelve months. Borrowings under the term loan and revolving loan facilities accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated net leverage ratio and (2) a pricing level determined by our public debt rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an interest rate adjustment (Sustainability Rate Adjustment) based upon the achievement of certain environmental, social and governance key performance indicators (KPIs). The Sustainability Rate Adjustment range is +/- 0.05% and will go into effect in the first quarter of 2024 based on the 2023 KPIs and will be adjusted annually based on the KPIs of the preceding year.
The rate in effect for the fourthsecond quarter of 2024 under the 2022 Credit Agreement is 6.37%6.23%.
We previously entered into operating lease commitments, primarily for our domestic and international offices. The commitments related to these operating leases is $136.6$130.6 million, of which $26.2 million is due in the next twelve months. There
Under our stock repurchase program, wewere no share repurchases in the first quarter of 2024. For the three months ended March 31, 2023, 650 thousand shares were repurchased shares as follows:
Nine Months Ended
(in thousands, except per share data)September 30,
2023
September 30,
2022
Number of shares repurchased650500 
Average price paid per share$302.34 $311.14 
Total cost$196,494 $155,571 
at an average price of $302.34 per share, with a total cost of $196.5 million. As of September 30, 2023,March 31, 2024, 1.1 million shares remained available for repurchase under the program. Average price paid per share excludes excise tax. As of January 1, 2023, our share repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. Any excise tax incurred is recognized and reflected as part of the cost basis of the shares acquired in the Condensed Consolidated Statements of Stockholders' Equity.
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 including 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.
We believe that existing cash and cash equivalent balances, together with cash generated from operations and access to our $500.0 million revolving loan facility, will be sufficient to meet our working capital, and capital expenditure requirements and contractual obligations through at least the next twelve months and the foreseeable future thereafter. 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.
Contractual and Other Obligations
There were no material changes to our significant contractual and other obligations during the ninethree months ended September 30, 2023March 31, 2024 as compared to those previously reported within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 20222023 Form 10-K.
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Critical Accounting Estimates
During the first quarter of 2023,2024, we completed the annual impairment test for goodwill and the indefinite-lived intangible asset and determined that these assets had not been impaired as of the test date, January 1, 2023.2024. No events or circumstances changed during the ninethree months ended September 30, 2023March 31, 2024 that would indicate that the fair values of our reporting unit and indefinite-lived intangible asset are below their carrying amounts.
No significant changes have occurred to our critical accounting estimates as previously reported within "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 20222023 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 September 30, 2023,March 31, 2024, the U.S. Dollar was 3.1% weaker,2.0% stronger, when measured against our foreign currencies, than for the quarter ended September 30, 2022. With respect to revenue, on average for the nine months ended September 30, 2023, the U.S. Dollar was 1.8% stronger, when measured against our foreign currencies, than for the nine months ended September 30, 2022.March 31, 2023. The table below presents the net impacts of currency fluctuations on revenue for the three and nine months ended September 30, 2023.March 31, 2024. Amounts in bracketsparenthesis indicate a net adverse impact from currency fluctuations.
(in thousands)Three Months Ended September 30, 2023Nine Months Ended September 30, 2023
Japanese Yen$(1,757)$(10,256)
Indian Rupee(352)(1,828)
South Korean Won765 (1,500)
Taiwan Dollar(339)(1,413)
Euro7,315 5,611 
Other531 (1,794)
        Total$6,163 $(11,180)
(in thousands)Three Months Ended March 31, 2024
Japanese Yen$(4,289)
South Korean Won(955)
Euro1,206
Other135
        Total$(3,903)

The impacts from currency fluctuations resulted in increased operating income of $2.5 million and decreased operating income of $3.1$3.4 million for the three and nine months ended September 30, 2023, respectively,March 31, 2024 as compared to the three and nine months ended September 30, 2022, respectively.March 31, 2023.

A hypothetical 10% strengthening in the U.S. Dollar against other currencies would have decreased our revenue by $19.8$20.0 million and $63.6 million for the three and nine months ended September 30, 2023, respectively, and decreased our operating income by $7.4 million and $22.6$4.8 million for the three and nine months ended September 30, 2023, respectively.March 31, 2024.
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 ofEUR/USDUSD/JPY
September 30, 20231.06 149 
December 31, 20221.07 131 
September 30, 20220.98 145 
Period-End Exchange Rates
As ofEUR/USDUSD/JPY
March 31, 20241.08 151 
December 31, 20231.10 141 
March 31, 20231.08 133 
    
Average Exchange Rates
Three Months EndedEUR/USDUSD/JPY
September 30, 20231.09 145 
September 30, 20221.01 138 
Average Exchange Rates
Three Months EndedEUR/USDUSD/JPY
March 31, 20241.09 148 
March 31, 20231.07 132 
Average Exchange Rates
Nine Months EndedEUR/USDUSD/JPY
September 30, 20231.08 138 
September 30, 20221.06 127 

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 generatedincurred from our outstanding borrowings. For the three and nine months ended September 30, 2023,March 31, 2024, interest income was $4.9$11.0 million and $12.4 million, respectively, and interest expense was $12.3 million and $34.6 million, respectively.$12.4 million.
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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 subsidiariesavailable-for-sale debt securities with originalremaining maturities ofgreater than three months to one year.at the date of purchase and time deposits. A hypothetical 100 basis point change in interest rates on these holdings wouldcould have an immateriala $10.7 million impact on our financial results.
Our outstanding term loan borrowings of $755.0 million as of September 30, 2023March 31, 2024 accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated net leverage ratio and (2) a pricing level determined by our public debt rating (if available).
On September 29, 2023, the 2022 Credit Agreement was amended to provide for an interest rate adjustment (Sustainability Rate Adjustment) based upon the achievement of certain environmental, social and governance key performance indicators (KPIs). The Sustainability Rate Adjustment range is +/- 0.05% and will go into effect in the first quarter of 2024 based on the 2023 KPIs and will be adjusted annually based on the KPIs of the preceding year.
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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 $7.7 million over the next twelve months, based on outstanding borrowings at September 30, 2023.March 31, 2024.
No other material change has occurred in our market risk subsequent to December 31, 2022.2023.
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Item 4.Controls and Procedures
Evaluation of Disclosure Controls and ProceduresAs required by Rules 13a-15 and 15d-15 of the Exchange Act, we have evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures are effective, as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act.
We believe, based on our knowledge, that the financial statements and other financial information included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in this report. We are committed to both a sound internal control environment and to good corporate governance.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
From time to time, we review the disclosure controls and procedures, and may periodically make changes to enhance their effectiveness and to ensure that our systems evolve with our business.
Changes in Internal Control. There were no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2023March 31, 2024 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.


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PART II – OTHER INFORMATION
 
Item 1.Legal Proceedings
We are subject to various claims, investigations and legal and regulatory proceedings that arise in the ordinary course of business, including, but not limited to, commercial disputes, labor and employment matters, tax audits, alleged infringement of third parties' intellectual property rights and other matters. Use or distribution of our products could generate product liability, regulatory infraction, or claims by our customers, end users, channel partners, government entities or third parties. Sales and marketing activities that impact processing of personal data, as well as measures taken to promote license compliance against pirated or unauthorized usage of our commercial products, may also result in claims by customers and individual employees of 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, prospects, financial condition, results of operations and cash flows. A discussion of our risk factors can be found in Part I, Item 1A "Risk Factors" in our 20222023 Form 10-K. The risk factor set forth below includes additional information relatingNo material changes have occurred to trade restrictions and should be read together with thesuch risk factors disclosed in our 2022 Form 10-K.

We are subject to trade restrictions that have impacted, and may continue to impact, our ability to sell to customers and could result in liabilities for violations.

Due toafter the global naturefiling of our business, we are subject to domestic and international trade protection laws, policies, sanctions and other regulatory requirements affecting trade and investment. For example, we are subject to import and export restrictions and regulations that prohibit the shipment or provision of certain products and services to certain countries, regions and persons targeted by the U.S. and certain end uses identified by the U.S., including the Export Administration Regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), economic and trade sanctions administered by the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) and International Traffic in Arms Regulations (ITAR) administered by the Department of State’s Directorate of Defense Trade Controls (DDTC).

BIS continues to expand its export control restrictions, including with respect to the export to China of certain technologies, impose new export licensing requirements, and require enhanced denied party screening processes. These additional restrictions have limited and could continue to limit our ability to sell and deliver products and services to certain customers, including to entities performing research and development and certain controlled activities in China. Export control restrictions have led to, and, in the future may continue to lead to, elongated transaction cycles with certain customers. In addition, export control restrictions have resulted, and may continue to result, in reduced sales and/or delays in our ability to deliver products and services to certain prospects, adversely affecting our business and consolidated financial statements. In certain cases, when an export license may be required to deliver products and services to certain customers, the receipt of licenses to export to certain countries, including China, is not guaranteed and, in the absence of a license or applicable license exception, our ability to sell and deliver products and services to certain customers may be negatively impacted. Additionally, BIS continues to add more companies, including existing customers, to its Entity List, and OFAC continues to increase the number of companies subject to its sanctions, which continues to limit the companies with which we can do business.

Adding companies as restricted parties and subjecting companies to heightened export control restrictions may additionally encourage those companies to seek substitute products from competitors whose products are not subject to these restrictions or to develop their own products.

Additionally, existing and prospective customers have been and may continue to be added as restricted parties and/or be subjected to trade restrictions and additional end uses, products or services have been and may continue to be identified for further restrictions. Such actions have resulted in, and may continue to result in, increases to our cost of sales and time to market. Additional trade restrictions on our business by the U.S., China or other countries may also result in other indirect impacts that cannot be quantified. Restrictions on our ability to sell and ship to customers could have a significant adverse effect on our business and consolidated financial statements.

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Our products could also be delivered to restricted parties by third parties, including our channel partners. We take measures to confirm that our channel partners comply with all applicable trade restrictions, but any failure by channel partners to comply with such restrictions could have negative consequences for us.

Violators of trade restrictions or restricted end uses may be subject to significant penalties, which may include considerable monetary fines, criminal proceedings against them and their officers and employees, a denial of export privileges and suspension or debarment from selling products or services to the federal government. Any such penalties could have a significant adverse effect on our business and consolidated financial statements. In addition, the political and media scrutiny surrounding any governmental investigation could cause significant expense and reputational harm and distract senior executives from managing normal day-to-day operations.

2023 Form 10-K.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities
None.

Item 3.Defaults Upon Senior Securities
None.

Item 4.Mine Safety Disclosures
Not applicable.

Item 5.Other Information
Trading Arrangements
None of the directors or "officers" of ANSYS, Inc. (as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended) adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K, during the fiscal quarter ended September 30, 2023.March 31, 2024.
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Item 6.Exhibits
Exhibit No.Exhibit
10.1*2.1
10.1
10.2
31.1
31.2
32.1
32.2
101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema
101.CALInline XBRL Taxonomy Extension Calculation Linkbase
101.DEFInline XBRL Taxonomy Extension Definition Linkbase
101.LABInline XBRL Taxonomy Extension Label Linkbase
101.PREInline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Certain schedules, exhibits, and appendices have been omitted pursuant to Item 601(a)(5) of Regulation S-K.The Company hereby undertakes to furnish copies of any omitted schedule, exhibit,*Indicates management contract or appendix to the SEC upon request.compensatory plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ANSYS, Inc.
Date:NovemberMay 1, 20232024By:
/s/ Ajei S. Gopal
Ajei S. Gopal
President and Chief Executive Officer
(Principal Executive Officer)
Date:NovemberMay 1, 20232024By:
/s/ Nicole AnasenesRachel Pyles
Nicole AnasenesRachel Pyles
Chief Financial Officer and Senior Vice President of Finance
(Principal Financial Officer and Principal Accounting Officer)
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