ANSS - Earnings call transcript Q4 2017

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS Fourth Quarter and Fiscal Year 2017 Earnings Conference Call. With us today are Ajei Gopal, Chief Executive Officer; Maria Shields, Chief Financial Officer; and Annette Arribas, Senior Director, Global Investor Relations. At this time, I would like to turn the call over to Ms. Arribas for some opening remarks.

Annette N. Arribas

Good morning, everyone.

the homepage remarks website of and posted have this release the on our earnings related document prepared been morning. Our Investor Relations supporting fiscal fourth all relative update, financial underlying as contain of assumptions. our key outlook, business information They QX and as and key the results and to XXXX and quarter and our well full year year financial data the of any this to length remind with important are during everyone risks to and our which of like addition highlight results uncertainties SEC, also would the may I the in that available website. in course call, factors future filings affect via we that that all are our our public at discussed

of could as uncertainties so are ANSYS Additionally, the risks public obligation as and our future impact based are do of business the future. a today, unless information, reported an of performance upon should company's there These that results forum. we in in not business to such and the be view update statements any no our indication undertakes considered

over this currency, call a included otherwise the and noted. GAAP materials earnings All comparable During the of now his A our and constant to opening non-GAAP release items will measures Gopal, in for of we'll excluded non-GAAP turn financial be unless Ajei? call reference morning's growth I this related CEO, Form percentages remarks. of course in measures. X-K. discussion like remarks, Ajei would to the various are are that be full the reconciliation making and prepared to financial to

Ajei S. Gopal

good morning, and everyone. you, Thank Annette,

years, year. barrier, digits expectations through our my revenue the we We five first broke and revenue double $X performance Our the we were XXXX to in exceeded Index. S&P the in added by coming XXX annual time grew billion for into significantly the

our We business the margins, comes backlog than we revenue, revenue deferred did illustrated ending model technology XXXX, maintenance, of million. and from excellent grew this And record expected by of revenue. $XXX lead extending against by higher leases further all over to EPS, the and our while year XX% recurring maintaining of sustainability with competition. growing and the a which delivering XX% Our double-digits

in I true I the joined knew what XXXX success Our reaffirmed be board company when from directors. to the of

world-class give my on Our objectives three foundation build in ANSYS margins recurring for stockholder growing and success sustained leading market, as I base, and products, stream, first an mind. with great CEO industry outstanding robust creation. long-term approach value the year revenue To that

both excited towards XXXX that the establish multi-year a for the recruit significantly improve objectives. each internally to to these of strategy second, by externally execution. company; top-tier we made First, progress I'm and to promote talent; and third, in

with Let me strategy. start

products we a market simulation and flagship in manufacturing, and our As of to Day a articulated leading Multiphysics becomes vision in technical reminder, operations how across at highlighted effectiveness our of improve We September the commitment by continuing our and pervasive leadership to ideation, product maintenance, solutions. our phases. extending design, lifecycle the accuracy Investor already compelling the

also We additive namely to our are and described manufacturing, adjacencies, capabilities twins. we broadening selective how digital digital exploration,

customer in X,XXX success financial and the We in problems Together a revenue legal, hires is one world. ANSYS the corporate and starts culture, solving the in some passion senior with marketplace. sales, industry and leadership of ANSYS the long-term achieve employees for the the demand. ANSYS external market of out minds a development. The we're digit growth, to to or the corresponding postings expanded in with also attract executives, testament best ANSYS while margins. double and well objectives team company winning around as a key ends our the includes sustained job leading some laid maintaining is new strength And as ANSYS's dedication that product, consistently amplifying XXXX industry. responsibilities, of in our the passion for executive

Moving all in financial already of I results. company. saw across better functions execution. performance some mentioned results and the XXXX to the improved

and Both now our So me it region, grew region context XX% the put and which in in the by lease I'm America, revenue QX. of North full let our total XX% year. in the performance talk annual about QX excited of revenue our of largest represents by revenue. our

leases total American was The XX%. year, of while full grew For driven strength business our the sales our team. grew North revenue by XX% direct

China, growth annual and of Korea, in With and increase a revenue. strong Asia-Pacific QX represents include performance revenue. the in in XX% Asia-Pacific Taiwan, our results continued XX% revenue X% lease

the and revenue. revenue XXXX, growth lease region growth in total X% in experienced For XX%

over could in region we channel Our that showed several for QX achieve sales double as quarter deliver Europe, in digit the variability organic helped digit indirect revenue years as double the for investments the once past growth both fourth some well full revenue year. the indirect Despite in channel again growth. the the for

channel full I'm to the that improvements This XXXX growth, seen XXXX would changes Europe, see Europe's will more underperformance course After quarters rate the over growth early last large the leadership, a of up early by sales large with customers. channel focus deepen critical low as ability QX, contributor previously at QX, Europe's delivered with achieving report relationships supported deals Europe both improvement as the or stated to including the for the a growth in for trends indirect improvement to continue XXXX. regions, and in realized industrial couple results our channel in strong while XX% transition X%. The our made the oil strategic and that to of XXXX. also in seven-figure we recruit long-term end several made indirect, North XXXX. beyond, be its a by strongest Worldwide, and sector. a since we tech, indirect the as pipeline, effect the a year Over re-segmenting on performance recovery XXXX happy over of And automotive the and deals, From and an products. direct by as continues Europe continue revenue a to channel way expanding the in these quarter the as we've and expect perspective, in energy start and the renewable new in to our the and driven channel. strengthened be electrification our partners growth XX.X% have I recruiting in for sectors of of energy pulled of success, region, new Asia-Pacific of hitting partners. point rate see annual equipment build excited that and to growth performed be in QX for and initial led changes I industry in in we would well the well supply QX Europe, America the year, of high to like the chain, address I'm we performance showed well developing both gas an to aerospace sector. to a existing

history. and drove productivity from which rockets, to our portfolio ANSYS release to across in last autonomous embedded electrification, Day, At customers like broadest structures more and to customers' advanced these entire drive insight ANSYS Those many We're lifesaving to engineers new products accurately which of move manage XX-year systems, the electromagnetics, software. of and making in across generation offering, XX even range priorities enhancements fluids, our solutions, enhance we reusable is vehicles, of priorities, month's nearly delivered and simulation top more applications, devices. products. pervasive. helping our now we to to includes next accuracy, capabilities, actionable the enhancements include can most complexity Using release discussed simulate feature-rich XX, Investor Multiphysics semiconductors, for medical me methods. Let the

section, enhanced Let me highlights. to an XX a looks delivers ANSYS like give capabilities measure radar how object some a electromagnetic large cross of you system. radar

Now vehicle a engineers near development. is, XD signatures field like complex systems aircraft, expect, far ships, you these and for quickly would automobiles. key can radar requirement and as objects This for autonomous with predict field

XX structural non-linear and advancements solutions, Looking in major at mechanics fracture brings our ANSYS technologies. adaptivity our

such customers Now saving crack problems ANSYS time. simulate, in be hard quickly to solved analyst very as of Mechanical, that complex can weeks were propagation,

based simulations. Customers appreciate in enhanced than accelerates XX competition. ANSYS the other downloads. And customers. ANSYS our and clearly is solutions time new By delivers of XX enterprise large with newly made top workflows, delivers course the additive needed airflow faster to functionality topology number the have on of for in-demand significant priorities, five manufacturing. streamlined optimization and fluid ANSYS addressing grow reducing customers' most history, solutions, our our XX particularly ability drastically this times this release Our our deliver to In new

footprint successes, drive and This adoption product class capability, and ongoing world a That increase even $XX as support companies advisor the including deals, we were customers' solutions. them us can As a around gain over business initiatives a products help ANSYS to million, our with the million. momentum trusted small with convert we to of better long-term continuing allows which QX into XX of large strategy seven-figure large we world. two is three alone, had In relationship. $XX over

year, the report records. million. $X full I'm in annual had both and And are XXX cumulative we the numbers For to with of quarterly excess customers the delighted that orders

signed technology, of systems a agreement enterprise for and One to simulation was expand use an with automakers, leading advanced of components the DENSO, these of major QX who products. deals ANSYS supplier automotive significantly global

and cleaner, industry in investing As A their expanded products integrated by teams products. design on workflow is gained vehicles, engineering their for will and DENSO from further across an simulation intelligent, the simulation and collaborate enable leverage competitive ANSYS improve technologies workflow rapidly to success DENSO electromagnetic maintains based lighter, using to responds continually more structural their need design its This that to disciplines, fluids share ANSYS their to developing across and edge electrified efficient, Workbench key investing insights to in the automotive enable fuel product organization. and processes.

performance to or and develops, example on action. Richard the Cup of NASCAR racing another challenging have In start simulate As in model our or you races is Austin ANSYS, this impossible simulate hostile develop with to create that is electrical environment a it RCR's other true the relied will DAYTONA in RCR, ZLX our flagship great the digital XXXX manufacturers, in RCR XXX. races Series. every designs, RCR of products The car Dillon and agreement in to which to may enables car that week in that Racing, aspects know to follow efficiently. the all systems more this of car, to if environments, RCR difficult a Energy optimize our strategy prestigious and won ability physical last announcement cars is you you'll week, Monster in seen the Childress season. the twin test. new model and the the And sport, a Camaro week earlier RCR any

integrated system and design doing our a in global deal, ANSYS we Europe successful QX ASIC's in series workflow Mechanical ASIC a competition. and In in establishing with top through the to displacing a entered displacing are example, tier their process based and environments, package on competitor. after major company more benchmarks, presence chip is this their Colorado HiRel another The provider platform a adopting as standardized a aerospace products. into with of a Cobham ANSYS with provider fluids based capability teams. expand an as their a partnership multi-year on As our to a expand business Semiconductor simulation reshaping Workbench comprehensive collaborate physics advanced customers became QX flagship process workflows and Solutions, the solutions, multiyear agreement, they efficient customer ANSYS ANSYS displacing of mechanical harsh best-in-class and nodes and workflow through a for Aeroflex competition. integrated packaging we incumbent Springs, our create with

them and solutions reliability paramount cost reliable, prototyping generation performance more efficient, digital next effective ANSYS enable aircraft to realize through remain designs. designs, and more more As for will

market bringing next commitment advanced to bearing for problems solve Our also generation methods fruit. to to is customers

we the with team experts to customer vehicles. with a to critical comprehensive deals requirements deliver following needed of week, leading to a advancements ANSYS's cars. ANSYS's automotive autonomous performance successful technology breakthrough fully I'm QX industry excited and agreement bring simulate global last software that engineering just technology released Live self-driving will market. Discovery autonomous vehicles product tremendously the of and OEM fully provides simulation a accelerate This news. commercially of to in simulation enable off a preview. solution sensors One to was the Finishing safety, large our reliability,

engineers us product which of to Now leverage democratize will as the recall, who will and Live provides efficient may analysis. lifecycle. simulation. in real-time giving is where design guidance very the phases that is them also you the transformative will excited are to important with useful the It to Discovery their the first by while interactive empower Live help early product. is Live directional with a simulation simulation, to quick it could become simulations Discovery help of engineers ideation particularly opportunity, not we note more deeper previously on And proficient focus and Discovery this version

commercial product workflows. how figure this Hence, the Discovery pickup expect as revenue into any material customers out we such, from As not their be to we Live fits do expect contribution year. deliberate

By while is one adjacencies. of we a our additive into on XXXX, To XDSIM, a market. develop our bring technology XDSIM of workflow. material have Let's design-to-print, simulation acquired manufacturing offer additive strategic move integrated XDSIM we won't solution to it roadmap, developer integrating platform, accelerate to M&A. complete only in will ANSYS acquisition in simulation key Additive impact manufacturing The the manufacturing we premier technology. revenue our QX the and industry's

to previously acquired other enhance value significant the continue ANSYS with we We products products our drive and solution, within customers. integrated cross-sell from and capabilities as

late medini was when acquired the company focused example, on As in XXXX, sector. automotive we an the

expanded medini in dimensions. since have two ANSYS We

First, including and integrate safety and beyond to with ANSYS analysis industries; automotive, offer products. robust aerospace, to to industries second rail, other other nuclear,

we growth. provide XD and marketplace systems, can team, strategy, focus our across critical financial simulation of I'm value we only that in Maria comprehensive simulation, span industries. that Now our multiple our on the with and to generation safety more system next outlook to can embedded ANSYS detail. this first excited software, for continue safety of solutions stockholders. a little in while integrated products, the will discuss systems year And was it's with results of win XXXX, I And lot laser in revenue still sustained to our to to customers journey proud now that critical their physics and work But our performance while us. only that in turn help achieve a digit am multi-year to execution, have with with our deliver remember over of We call important I ahead the confident Maria? a double our and

Maria T. Shields

to with take Thank we impact and XXXX reform. and for our top not in factors, of well some on quarterly some of UK and a a and closed I everyone. Double driven and will in note, by revenue line North just you, a our in higher importantly $X I'll out but currency shared forward. on recurring also of metrics, $XXX total and communicated line minutes currency revenue. QX annual double a year On revenue digits financial deliver Ajei of million both America, in recurring that we over-performance and revenue be million a of XXXX to annual to million add strong a in the unless time revenue grow in ANSYS, QX let number business I across XX%. XX% the non-GAAP, growth that were of otherwise. Both on QX are results The messages a as The of currency Day, constant and billion, of growth Taiwan, key terms included execution QX growth highlights include billion digit including reflect QX to of The contributed results and above $X.XXX us firsts the for milestones, we were the base $XXX.X business. $X.X terms our than In Key financial crossing revenue. the to was revenue results state for with million, strong quarter earnings XX.X% currency for only XXXX hallmarks to of for more $XXX million. of company's the at the commenting revenue also key solid Ajei. to threshold spend going and outlook financial our additional our performance. total few has perspective metrics Recurring I'd record the crossing line maintain Good morning, and enabled China, additional our totaled tax $XXX ability million. of bookings as of the revenue decades. key with this performance few X% XXXX Investor sales key mix respectively. one to assumptions increased but as disclosing end the been on our QX or perpetual they to important model continue and be begin QX QX revenue also highlights, quarter. The as expected like guidance. me including that impact QX commenting constant and of of basis, of outlook the $X.X of performance these of total everyone will revenue and of remind constant And XXXX, an operational positive high

not XX% in this constant year. quarter currency the of fourth sales in bookings So surprisingly, declined

sales importantly, the grew bookings most for year. X% However, full

based over As contracts. across to of we our can large continue we've go-to-market overall expand the of bookings to significantly year, renewals of vary past metrics on course timing our of the commitment, historical execute multi-year the customer quarters, the and as upon size seasonality the initiatives and seen the duration

from into coming bookings we color XXXX. I annual And had we a in for on few relevant in the range as volatility operating with XXXX why closed quarterly continue we year. margin in business to to new annual discipline. additional contract that will that the line financial committed topic with target want just moments. highlight or the a to moving manage we this This provide measure specifically more is and focusing be I'll away value, ACV, some on

margin respectively. XX%, a growth both also with for XDSIM, fourth $X.XX was in the Investor X% and the some of quarter conjunction changes operating and XX% over guidance inclusion $X.XX the highlighted margins. expense, slightly close and of in and lesser performance year, We mostly provided full our record margins last XXXX EPS and by To XX% year. a and in For with that sales was XXXX of year's extent, The in record we QX's go-to-market below connection earnings. activities the for the strong quarter we of XX% quarter QX and margin pre-hiring gross sales Day fourth the year had that cost we achieved at commission the impacted for representing QX, full and consulting reported incremental the quarter and for impacted very

Now let's tax QX of income $X.X million toward connection GAAP move reform recently negatively the under topic included tax and in to EPS tax taxes. our impacted the adjustment enacted provision The charge net deferred assets. QX both results. with changes a U.S.

recorded over also of transition We on unrepatriated foreign estimated years. of payable subsidiaries, eight which tax an million $XX is earnings certain,

of These announcement Additionally, in be lost previously we related excluded purposes, a detail items, and which discussed was $X.X repatriation quarter. prepared earnings expected benefit to further were recognized and the the in that foreign earnings for in fourth million are to non-GAAP otherwise remarks.

reform. For and the of to rate many the we subject of of XXXX, tax further tax nuances clarification interpretation in XX% be to expect range our effective currently U.S. to XX.X%,

will We provide to updates. our and continue refine estimates

of XXXX at growth year. repurchased XXXX. for the and priorities, including X.X high flow with total line This we quarter cash fourth $XXX million of a our shares million operating $XXX.X a In with total of capital for we shares the during was over XX% $XXX.X reached a quarter Our the cost million. represents XXX,XXX closed repurchased, million, record allocation

the saw commitment renewed evening's to by X program of capital our total authorized board announcement, shares. back continue in a to return stockholders to the share you million repurchase last has our increasing As to

turn guidance. on me let to our Now our commentary

in to previously As ASC XXXX, adoption recognition of we new is company's We also the XXX financial historical XXX additional adoption, be will of first of not will that rules. results, providing communicated, we with will rules. as the only new comparability previous this of the XXXX, we rules, we believe the our and level outlook had analysts be investors outlook to XXX, ASC under of as part QX year in but providing transition revenue under provide ASC an

Additionally, two be measures. also performance beginning guidance we on in new providing will XXXX

is contract ACV. first value, The annual metric or

that business, more the performance Going that metric of of ASC meaningful particularly as ACV the volatility forward transactions will remarks. of well in the light provided that bookings a multi-year metric in our XXX, for ACV in underlying and we in in details that in impact adoption timing believe as change variability the results and the are prepared from provided the the definition resulted measuring be of health revenue around our we Further the from renewals. historically movement the of of have

underlying of is impacted metric metric performance new how also our collect impact do from new performance XXX, to bill significantly partners. flows, business standard expect ACS go our how not we be to that market customers second cash measuring key or by The or annual will and as we operating not the a in the channel the we

EPS QX of for million initiated $XXX non-GAAP million Non-GAAP have non-GAAP the and $X.XX range in ASC revenue of in $XXX of non-GAAP our $X.XX. of in ASC $XXX XXX EPS in the under to to $X.XX range range the XXX under range and million revenue to the outlook is to $XXX We million with $X.XX.

$X.XX includes in range $X. of billion X% $X.XXX For XXX X% $X.XXX Non-GAAP $X.XXX growth range to the billion to in of our to billion ASC under to currency $X.XX outlook EPS XXX revenue of the to revenue the non-GAAP XXXX, non-GAAP in in range constant range ACS the of non-GAAP billion under $X.XXX or current EPS is and $X.XX. and of

constant currency or market represents baseline the X% growth midpoint, outlook XX% ACV billion. to XXXX ACV rate. $X.XXX the XXXX overall growth is at X% to billion $X.XXX of simulation the Our over for of This ahead

cash to the under million of to revenue with credited XXXX million make tax the includes estimated that adverse annual outlook impact is deferred of and the $XX range of operating for operating associated to in ASC backlog approximately payments XXXX income cash flows revenue that million statements. total our to be in revenue the $XXX in company's or of $XXX backlog $XXX deferred range estimating retained as will become net a earnings recognized the in XXX, of million currently we tax, will ASC cumulative $XXX effect acceleration $XXX in and XXX that's related part connection million, for earnings. within would never $XXX million. financial Our clear also outlook to our with our reduction million flow adjustment retained for like in Also of are I to that

operating For and a particularly business ASC digit incremental and in and are XXXX. approximately the teams technical compute across business investing a additional XXX with continued of areas business sustainable and key deliver modeling growth, specific and the regarding sales hires, factored This Investor profit that, on questions, targets. This top portfolio, will financial in top-line to are other to discipline, our incremental phone and will for in key and into a around a the XXXX strength with quarter, QX And and system been as record quarter margin well our as what and of well provides foundation by and we lines goals, infrastructure. sales open in at metrics, document. product investment XX% with under strength combined financial communicated first prepared as purposes, drive we of investment double our XXXX pipeline, the Day each performance, we and us in reduction the the we contained our to for R&D, XX% that investment delivered its margin, that assumptions company's aligns the remarks have XX% earnings, margin operator, XXXX business revenue incremental financial to execution across that QX line XXXX. XXXX, details targeting in gives XX% HPC all the now capacity XXXX non-GAAP non-GAAP include Further confidence solid and rates delivered near-term the as growth support year In backlog. currency the longer-term take and in deferred In of please. the to of outlook XX% operating XXXX flows, strong focus with enable XX% cash margins gross for with both QX to on and model, our summary, quarter for operating

Operator

Thank you.

to begin one the follow question-and-answer question up. and We ask that yourself now We one session. limit will you

from go question first ahead. comes W. Please Robert Baird Oliver Company. with Rob Our &

Rob Oliver

Hi, guys. Good one taking morning. follow for question. my Thanks up. a and One quick then

First, I just that it. wanted it's contract number, on to the going of dig kind we're get time the bookings into lengths, since last to

comp for Thanks. to I there around I'm do could But might So were year number? they on over into compare year tough go just that Was a as wanted impact that aware year. well it. you that. anything lengths? any dig awfully contract bookings over up Or had year how have guys meaningful coming against an

Maria T. Shields

last Yeah. current the of either with that. at I'll in line QX of and or a you QX year. largely with look take long-term take duration it's When deferred,

real changes no So in contract duration.

Rob Oliver

talked then that maybe this a as presentation spreading outlooks Analyst into And lot if more one starting more mentioned It gain consultative part within area, sort moving that that you how within expand area. your accounts? we guys as Thanks, as sales of investment? technical in for Great. At Rick's be in that of Okay. know spending I can you Where terms sales you that's guys. those Day, year so hiring and as for this would accounts. plot about your seek – year one technical you to trajectory that the think to really sounds sale And traction. field Thanks. in Ajei. in sales about field of how of hire, that technical out more are that Maria

Ajei S. Gopal

Sure.

resources, to So planning areas ramp technical investing ACE our year in one her to is or comments, continue our as where resources. are of Maria we the on mentioned sales this up

that's in that comments. Maria we well on the activity QX, a for this So have as bit got that in little head the planned a of year. as start mentioned We

we've we're I as relationships number that deeper And customers. our of the drive at some technical the broaden of candidates. situation within the It's an people. And And basis past. we strategy relationship pipeline the us we day deeper – from monetize been really end comments a to level we of the customers. helping obviously where off. technologies a on can some the So us see create have of – of usage that than salespeople ongoing have seeing of And in some the at is the our you allows well, we as can of increasing with able made to a good can quality good being ANSYS the paying to

Operator

next comes ahead. Jay Please with from Griffin Our question Securities. Vleeschhouwer go

Jay Vleeschhouwer

Thanks. Good morning.

Let way. ask my the all questions get of together, that to me out just

generation When end you First outlook to at talked about think markets? XXXX for were your you if by highlighted for about your XXXX, your you through a at you still fifth as two Analyst In four other markets than perhaps corporate proportion, slow Analyst Number based verticals? end make even could how words, talked about two. some the on the you devoting areas. or expected expectation, other about your thinking are Meeting, the and numbers and/or largest R&D Ajei. in semis, less into example, Meeting next your about rate technology. specific grow bookings electronics And the of growth At

those exploration. digital was of One

just that. talked takes couple Could generation so next perhaps that. So within you talk And then Discovery manufacturing, of bonus in a could I you additive of about care about takes question. other if Live And finally, R&D? pieces squeeze the I care assume XDSIM of

expectant bit I'm language, are just perhaps been typically a On of your might seeing you as activity displacement more or you sounds before? little you the than are expecting more it activity? though margin, displacement into have reading

Ajei S. Gopal

those me some of try So questions, to quickly let address Jay.

of uniquely the products. end taking the As industry far will seeing It not a products product electronification the a industry. green a trend to different verticals. number is broad-based get essentially smarter, number now of electronics as of you concerned, This across which is different And think major and areas related the inexorable, that's of – is trends markets one world. electronification there's the some that which are we're are is right if place I

also nature So given I a us, that end mentioned that remains energy the think strength number a in tailwind in other our for of of We're example, seeing the markets. broad-based I frankly Europe. portfolio. helps

we down QX. example, come in deals number large as well of energy saw renewable in For a

quarter-over-quarter while of trends the other, industries variations I Multiphysics, generally the see, think in. across broad-based et cetera, speaking, one market number we participate to there a these apply may be So from we that that electronification,

That's we're we from immunized minor one. like number quarter from to So variations feel quarter. these

believe acquisition. we to I right compelling work that team, the now that the Discovery way just mentioned, but have not includes where end-to-end which the incredibly exploration will few from solution it And came integration the now include additive workflow different obviously number commercially. the we manufacturing. to just days XDSIM the overall that from proposition As all mentioned areas, an that's far have out we of – And manufacturing portfolio, Discovery it's was also that Live. the say a Live, into And came available I as end And that to XDSIM, as product was users. other for you're value design fantastic, digital ago. our an a goes And our

of comments about mentioned the take about opportunity work in we're with – can as those. in autonomous my excited towards I view specifically well or space. that. both – doing development we're the we And vehicles we're that sensor-oriented a systems-oriented view particular and autonomous because also So as a the in some excited the there,

exciting. So I think that's

And seeing Another to downtime try what interest a twin. on digital case, digital the maintenance optimization where interesting from finding industries you're optimize an products. are to opportunity digital of really and demand seeing and And – is involved in be field with more what's to starting seeing now we're lot around area this participate more that twin is that and twins. concept be understanding in more customers that. of traction in continues And we're or to there are to creating

more what product we in the already And think next and you advanced talked generation talk about our of absolutely. – Day, these amount at develop mean our as we of that questions. I've innovation. closer to continue were a we of obviously as well. certain those we other I to some initiatives. we mentioned broad-based Investor can about allocation And for we products some I So set R&D discussed aside prioritization things about you labs. I think as have with talked get And And

Operator

Needham comes question Valera next Rich with from Our go & Company. ahead. Please

Richard Valera

with Thank about you'll I board be you on the with wondering if forming more was you. Ajei, announced the yesterday? GE advisory you part light the shed could them. agreement a Particularly little

this have other is three, could what one, repeat you major of, customers? sort you Two, think with And objectives that? are of maybe, Thanks. you do before? something of the Sort done this

Ajei S. Gopal

a as you of GE is know So customer longtime ours.

of they've longer. portfolio access across I – full portfolio. – agreement years essentially for all a of customer QX a this a or essentially of the And think been of to they've our physics. agreement XX they've them And essentially lot agreement. gives is used This which our been and breadth the ours

do other their to a business have have management where relationships and with with understand review able opportunity frankly customers, is about interest, our can are that's challenges for their want mutual where solutions we what review technology going together areas be find of going. also the – very important product validate to to where we how us leading are where a where collaborate, areas we where to going, customers. And leading board, the and customers large Now board, some our we talk get of we

we it believe number a And can a is this that. of GE. with relationship take something because in does to kind our – that this we this engage we're customers, that do excited time with of effort. has the customers. we this Obviously across value and So large like And is largest

Richard Valera

of just planning contribution Live, from while? might call Got for talk changed you you've it? think revenue I beta for been it. any period product? And looking And or then you're material Discovery based a democratized you during on you've solution year. physics the what the trial of it, learned understand not the kind on can But make the, that about what simulation? this How The sort that truly of

Ajei S. Gopal

a we think the use people commercial from didn't in product the I all earlier, perspective. using kinds period as I it's gratifying. think for Frankly, trial days But that said that obviously very expect. cases. was early saw of Well, interesting use that we cases And I

we rapid people in need have of realized had into a And cycle. changes a to our that change that in have been lot roadmap. of that terms we we so suggested – that had expansions development a more number put And all came of

So leases we're pushing to out be rapidly. going more the

we made So say easier it's of to go-to-market, technology a to to and product. would physics that use the because the number of core in the the we've our to obviously e-commerce of through orders online traditional available an running it get all through to able download. be that make we technology available we've also But well. as the channel to learnings also There's I have this it the around make nature infrastructure up channels. from And process had about think and

transact in – are how we are the learnings. necessarily I those the So around It's it's business. not also those But product. think

America is and channel the for right And e-commerce for live both so now Europe. North

Discovery And the cases. use continue So customer will excited that with we gleaned said, But direction we've the learnings far. Live we're it's all days. from early I these work feedback the the really to And about our so goes. these are kinds that as influence that expect are of – product

Operator

go Kalia next Capital. ahead. Barclays with comes Saket Our Please from question

Saket Kalia

questions Hi, here. guys. Thanks How my for you? taking are

Ajei S. Gopal

Good.

Maria T. Shields

doing, Good. Saket? How are you

Ajei S. Gopal

How are you?

Saket Kalia

just sector bad. North energy Not is bad. It America like perhaps and recovery with start seems Ajei, starting in Hey, stronger seeing internationally. is the maybe to Not the you.

I total is of about XX% sector think the sales.

of sector catch And whether is of just significantly here a other could in maybe course. different touch So these you just think just your time also Qualitatively, for exposure other about geographies it's the regions? you matter talk to up? on whether

Ajei S. Gopal

So think I to just we – it comes as just renewable Europe, in as saw energy in I some energy deals just mentioned I when QX.

we Latin in all bit As accelerating. the behind is ramping concerned, far are trends is in persist that pretty America we we're America. was saw North as see it East, growth. some that fueled seeing think decent But and North Russia, And North oil maybe by I a land are up, But some shaping happening. little in industry. Middle drilling frankly investments long-term America of America, the the And

demand digital use So ongoing be technology there's that's reliability There's obviously in And safety simulation. important the their is and increased assets regulation. driver for Also twin of of And performance to technologies. management. to And the use the of driving obvious. an And that's where and that's optimize energy. also example asset management our the asset able evaluating are field. an customers the of

more And so than asset it's asset performance around per se. management, really

mentioned. we some seeing we're those other up ramping see are of So of trends And that here. in of I the outside some geos North long-term the America, the as just

Saket Kalia

for it. that. Thanks Maria. for one my for Got Maybe Got follow-up, it. a quick you,

First maybe disclosure we and on know new I of just it's much wanted talk be make we ACV thanks And as contributing might and that said qualitatively I about but just the XDSIM also all, you ACV? just ACV. guide? and trending revenue, to on sure services? maintenance, it components immaterial for ask part not also but includes believe maybe the you how question guidance. of ACV how Because think about of perpetual the lease Could

Maria T. Shields

Yeah.

material to So, expect contribution Saket, we relative don't from ACV, XDSIM. to ACV

top right immaterial the perpetuals. the as XXXX to model relative on well line of Relative is our the proportion that both we're ACV. now to to perpetuals, assuming XXXX expectations the XXXX, as So for for similar

in significant We this aren't from at XXXX seeing any time. outlook deviations our away XXXX

Operator

Our next question with Gabriela Sachs. ahead. from comes Borges go Please Goldman

Gabriela Borges

in maybe sales in conversation. marketing last that about had and the specific about channel you changes this make talk that the Great. earlier morning. on have the thinking to the you're you direct could all taking a follow-up changes question. any the discussions how a Congrats Thanks. for year? force? I any year? and Is sales it the a you're looking on just commentary bit of Ajei, results. we just go-to-market specific Good continuation the Thank little more Or of my from

Ajei S. Gopal

out emphasize me a driving strategically just out. I to And So laid let Gabriela, sales organization, go-to he couple that plan Rick or market. continue we his out the at – he driving those laid discussion direction of think we're against we points, the where out, that our Investor because in laid execute the that laid Day

The on enterprise first is accounts.

land more ingrained business. into accounts, driven we where deals coming and footprint by comments, mentioned our can accounts. my that's some within where As in we in existing I on seeing with these And And it focus deepen account. broaden get and work the we of we're and larger as more can the usage larger the within a

customers or who so increasing of managed number customers are And the enterprise enterprise we're program. our through

you group Rick. So And is a individual had that as we remember, into new we that's one leader in headquartered actually Germany. area. that reporting hired for Last mentioned year

years He's based So experience you a around of team. in enterprise he we're the is responsible He of if experience, will, accounts. has out the number for worldwide he large his Germany. of companies world. has portfolio managing And increasing that

So that's area. one

and us continue – existing The We new business, it's channel channel. we is important. the as other we to well with grow our partners, that to area to as is believe as the partners. ever ensure recruit that as channel And as we important been continue channel for our enable more

area forward. important moving for as us well so And that an is

a sales starting a area go-to-market we more the are sales to buy customers, can mentioned strategic of that we're access a organizations a motion, account a to or as on And as them strategic regional we're really perspective, Rick you splitting invest from sales have and customer, how – taking is, we're that approaching either customer. and we depending our and – they in like a segmentation we volume motion. The momentum or have you other we them, momentum volume to into how we're

appropriate year. was this what is and market for strategy customers where So when segment that particular as we customer, for laid that's them we the a together, what comprehensive that particular Rick all put And out executing you it against we're geo. go-to approach

Gabriela Borges

for commentary could. seeing quick us to this the could large mix sense I played that little time why on follow-ups How just a last if That's compare that a And weighted Maria, two qualitatively, intra-quarter. more out Any give you And pipeline? helpful. mentioned you think higher mix perpetual towards were maybe deal perpetual? does what the on Maria, you Thanks. very year? you

Maria T. Shields

Yeah.

I the perpetual. say Asia of it's just to customer perpetual, the and be The you of channel particularly, to spend very end And heard in performance tends relative some positive. is environment So year. the the would

in them So stage ago very a of licensing of the the And think will I And the we're I pipeline. of time. close. initiatives XXXX continuing factors technical the continue of grow XXXX yield it with some and confident can so to and our It seeing a identified tied segmentation, that certain targets. stronger at second of key resources activity. some to all more efforts specifically deal are we to of than segments is this I part ACV those say, around more team, accomplish The certainly all apologize. combination the would just to that strong the still question, world customers Oh, those of and our perpetuals are we results to for the in about contributed accounts. certain And respect us the parts and, year set We've model. following was more accounts. the Ajei's importantly, large the stronger. is pipeline on in We've commentary enterprise preferred taken

Operator

Talanian Ken Our from ISI. next Please with Evercore comes question go ahead.

Ken Talanian

question. Hi, the guys. Thanks taking for

some And of sales lines, new some you're thinking you're customers? about wondering whether other versus along So versus to discuss using deals for LTV if of I how was type you CAC could the those existing analysis sales framework? or cost

Ajei S. Gopal

then and as in Maria I'll jump just well. ask me to let Ken, start,

So customers, large with if with our in for will with no simply prior day relationship very agreement generally jump one multimillion on a customers, is few us. any, speaking it dollar

they always because initial years. deal just understand happens, value; where of might never of well-established If a might one. they've solutions, you technology of licenses, bit that they've they have how an little where a want a more for the require size cycle a small just And the through through, the might to that what a walk to So to that And use so than be effort few deal customer, ANSYS, flow see, life the using size understand similar that they deal. customer. have used a more be been a to

start and different So is all do, physics footprint there's to move of the multiple show established between once in can, once two you the dimensions. difference increase and One usage then across a customers you the can customer, move you cross-sell start we to obviously what the use two. within cases. a But you the can value across you within of those which you then you've and

to customers of autonomous. with into that that a autonomous. when need we're how the facilitated businesses. that talk when number can may larger And make, that example usage are about And are strategy place taking in, And broadening to today. relevant and in challenging is we deepening you trying around of about be this and evolution conversations to customers are get think they as what figure Now conversations pulled their and problems are these out is dealing the go bets getting they customers of pulled and that of of particularly make great a and

clear. their fits these understand are challenges all And with size we what when engage And to then customers, one it's across opportunity go-to we no very the there's have what markets. is. sometimes the and So

that for particular what money ahead scale look you're can a and that of simulation a example the opportunity size at can spend you If translate and we on of with much in area, how have customers engaging us. equivalent customer similar is into

can You look footprint are customer. the incumbents, if our you can incumbents, at at the within there other look

leads what whether customer. like we channel a the we at whether take account, resources a whether opportunity account, take of a as to to account, All strategic we the work our we influences what is it the evaluate enterprise that as particular ability apply with that's an account to the And partner.

of that analysis. segmentation is driven by all that So

that so make a work that business able need and we're of year in model, we to So pretty maintain do piece success, of. sure our we're for our which it's up sophisticated proud is order to that set to

Maria T. Shields

are XX% is those a as deals spoke commentary follow why smaller add important. the revenue is, on to, to we can for go-to of more physics, that Ajei those hunting perhaps farming. they cost is so from the channel and so focus of channel, which the more some more relationships, about efficient established that for the today, of go-to-market customer is begin, currently comments And doing I'll additional market Because that's that on only and us, of a much single while the some is Yeah. our is early where that longer, a

to And we could that direct of are more inside market like as investing to so that that well products talking been themselves indirect that on sales, relative really in sales. lend Live the and balance own, share for as Discovery than of we've about what inside of us some is and initiatives the enables the capture early our to particularly

and invest of market those all that continue So are of and our parts go-to important we will to in refine.

Operator

Munda question next Gal with Berenberg. comes from ahead. go Our Please

Gal Munda

pipeline the in mentioned. But that the growth about a you've up more about going I'd to is Hey, growth from come said a previously. majority which to accounts, sense. Historically talking than competition about you bit just of you're like follow displacing existing makes that today the

it and existing much of broad expanding the within view? Thank kind how market addressable of is So the itself? the accounts how usage is competition? displacing growth And much you. Just

Ajei S. Gopal

cases, standardize, from willing to to invest. the highlighting of is was as to I lot business. What our technologies. cases continues to start of cases Because sticky on as technology the broaden in – start usage installed that And the ANSYS growth some in that lead to growth a start use that simulation a customers standardization they customers solutions, be are to the in customers and very can comes we're some expanding So base. driving in

the invest vendors. of product, the to challenge standardizing our of and capabilities on technology because simulation Just taking other they're of in willing on us replacing from

accounts, single the vendors large a and many – definitely through just there be as there It's acquisitions through and there so have grow may But well. companies, forth so presence. other how uniquely not of certainly is nature vendor. no find If in and one on you'll they may – may projects. for others ANSYS be So

they'll start significant significant usage the use see opportunity a technology, projects, So existing when our of of they'll the and getting of use expanding within clearly think think about and a cases, some customers, use cases, In on customers that's we business to they for project. But dynamic. use standardize new comes technology as a from the And particular that a involved. technology. about part new

to sense into that's an that that's opportunity in be our a beauty we'll are same that's trying that competitive get It in so the activity. new others of and our capabilities. the participate. get And But may solutions to also expansion,

Operator

Our next Please ahead. with question Garg go from comes Monika KeyBanc.

Monika Garg

for of you. taking what about kind have question. the over Thanks If Thank lower growth? lower is my look at from growth I couple XX%, been points year your guidance would X% Any rate? reason to of And XXXX. year guidance, revenue guide the constant slight currency to than revenue

Maria T. Shields

Yeah, we Monika, as to growth full X% [ASC] into XXXX said XXX, rate guiding the head as for X% commentary, I in under year. currency my constant we're

Operator

Koenig ahead. from comes next Steve Our with question go Securities. Wedbush Please

Steve R. Koenig

the I about ask guide. Hi and and my thanks to Monika's question question. on for up you just follow want taking

constant midpoint, this have ACV X%. X.X% thought But to mix mix similar XXXX. to assumption yet is due said shift. the is was the the at you guide currency So Maria I would

then the put you the if context could those And about So talk you why the can well. two in guide of long-term just difference it in maybe metrics? as

about XXXX. Your fiscal in XX% guide for operating margin calls

long-term at end margin, your you're So on the of you're below guide already on but high revenue.

potential downside? trajectory? do either think about for XXXX, think we or So your do upside we And the how about variance from in that guide how

Maria T. Shields

Yes.

here, So, it's February the Steve, essentially right looking and at we're full now.

doubt way half particularly now slowest we've the at And of visibility, our our year. quarter pipeline, largely no revenue larger mapped look are is the of is that So deals, in we scheduled some the on those based of when current year. based QX the growth second current right on they the out,

guidance try the some because margin Relative to the off that's we of for in of drive right don't to invest. kind now those the the enables trade opportunity. line of just this communicated to Investor driving right put to growth now. we just going larger the long-term what's with So to top margin. we're at continue deals, what reduction incredible that to timing of margin. And In business we risk line short-term see at health Because want to us Day,

business part being that that top growth, So can And an ability and sustainable XXXX in so get to which is that digit trade to is get revenue off the we we to that double drive double foundation XXXX. line very growth to get good to of our double investment digit by feel about to the ACV, will get important able digit to really drive to growth. sustainable

Operator

Our Markets. RBC Please go ahead. Capital next with from comes MacMillan question Ross

Ross MacMillan

lot question. I my had one a for actually Maria Thanks taking costs. for on

grew think XXXX. with in And the in the I teens employee, per low growth that mid-single OpEx So XXXX. digit in compares

a should OpEx So of some it rate Thanks. point? I at kind terms wage we when guess type back it what think And is that normal driving employee? get might that normalize in does how ramp of, in to higher we OpEx growth in And Should per employee? that per about happen? inflation

Maria T. Shields

can So, stock your when expense? are you including ask doing calculation, I you're Ross, compensation

Ross MacMillan

I'm No, doing non-GAAP.

at only a accelerated stock-based expenses, I'm there. So I'm it in the comp. like so including of But last lot excluding looking operating not COGS it any the seemed year.

were some if cost as result place? of employee a some maybe You mentioned in consulting. I'm there like underlying some your you inflation initiatives these that in But there's wondering just other one-time costs structure, put of

Maria T. Shields

is because well relative we teams by XXXX share do our sales and commissions. the well, to probably reality we a And the And No. employees in year. our sales even as the had the is, the variable employees, would say I of with we commentary throughout when our costs QX record is related variable form cost driven bonuses. as that's to

And so it for imagine, than say in the greater below at all plan. was variable can employees we compensation our element constant currency X.X% you finished and growth where was the XXXX, as

Operator

and question to turn session. for our Ajei conference remarks. closing back the over would like This concludes answer I Gopal

Ajei S. Gopal

Brandon. you, Thank

I to I'm of was many to We our for by my that believe ANSYS. we am Thank strategy, the you to sincere have gratitude And and to so joining all than work all to thank one and our successes and on successes. And customers and year for team, you our of ever your combination achieved Thank focus today. call. our expressing as opportunities our pervasive will an high simulation partners. differentiate And in outstanding I like next the XXXX close hard I your and our ANSYS you. more for our proud execution ANSYS. excited forward for look quality XXXX call beyond. us So of what team, our us. drive ahead would will about the

Operator

for now conference Thank you presentation. attending has today's concluded. The

may You now disconnect.

ANSYS (ANSS) 22 Feb 182017 Q4 Earnings call transcript