ANSS - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS' Second Quarter 2018 Earnings Conference Call. With us today are Ajei Gopal, Chief Executive Officer; Maria Shields, SVP and 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 documents prepared been morning. Our Investor Relations supporting QX second key all relative business half and update, contain of the as key underlying fiscal and information They our year well initial outlook the financial results to updated and quarter and our as our and first assumptions. financial data XXXX during discussed uncertainties the everyone remind in to that that of important we via also and that filings future highlight in which of I'd affect like to available all public our factors course any addition the call, at this our risks SEC, website. our are with may results length are

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

of Gopal, non-GAAP opening Form in turn our to Ajei? measures both be course accordance and for Ajei ASC X-K. we'll otherwise non-GAAP items various under comparable to now XXX. and GAAP full for the discussion financial excluded unless earnings a prepared comparability, and would remarks. measures like the making in reference over During morning's call to and be the financial this included of purposes the of stated, presenting reconciliation release his and to the this XXX I results we'll in remarks, A with of that are are CEO, ASC XXX call materials ASC related

Ajei S. Gopal

constant led high exceeded QX an delivered Annette, was you, end In an revenue our guidance has under and our and first all across excellent EPS and growth the morning, both margins ASC key operating QX, XX%, outstanding half metrics, XXX. we which currency XXXX. of XXX everyone. quarter of to good ASC Thank of and

are quarter EPS and revenue XXX both ASC for ANSYS. records QX second Our

and Our of million. of the indicators in backlog $XXX metrics to of year. robust of Both constant are contract deferred or year-over-year grew the revenue leading our business. value increased XX% currency the for these first ACV XX% half Annualized health

drive of about details of Given products also the pipeline and product over ANSYS XXXX our million, year, quarter, the date into XXXX. in currency strong currency products our outlook, adjusting performance to in adverse provide XX% last the the our from revenue increase and minutes. for of to in purchase $X will to least our increasing since customers These XX of EPS success are second tend the we over portfolio last customers from in half guidance. lines. second but of with over a more consistent year. to strength provided guidance an We're customers an quarter XX% buy of impact reflect $XX of of at we these full three multiple our revenue with Large of the recording our the our constant the few orders increase an million context quarter going helped guidance deals in Maria

orders this million of product largest quarter lines. four Our combined customer had over $XX across

accounts revenue important We succeeding a that XX% direct constant of and recovery our context we services I'm QX engineering class respectively, This in currency services our American XX% our investments first the denominator. that ongoing to in the are is is portfolio. XX%, with business. of team half reported this evidence is half performance of enterprise region. albeit smaller talent Europe up adoption around success this and in and another drive leveraging the momentum of XX% our in and and QX world-class a field in grew incremental customer and This with go-to-market engineering turnaround quarter. highlight services engineering strategic the the of and European Our of growth and in we respectively, in made for delighted of North continuing result our customers. in focused have currency our significant business with strategy the of first constant our

the excited sales quarter. a China and first our As back-end are key for that solid growth relatively hence for regions quarter delivered had we half. the had and Asia-Pacific Japan APJ in the slower year I'm loaded growth this of planned, and revenue

sales in changes of are the key in year. Representing of in an area about the the changes, go-to-market However, completion in focus. resources enterprise performance incremental and indirect the in of India. results of of addition our region a muted the of pace of of larger revenue, some expanded total deals, enterprise impacted channel optimistic of go-to-market the country pipeline is deals and Korea our performance Asia-Pacific South that slower ongoing implementation our purchasing centralized second half we XX% about With

XX the partners, half in Europe. of XXXX, including we X channel During new first added

increased X. an partners group also initial our Elite of We channel to from XX

We next-generation enhance partners' our add in industry make perspective, product innovative high-tech and using continue we I'm power and partner, their time Hill very their Today our car electronics around of XXX continue companies Volkswagen capabilities. products strongly, with the levels has they racecar. choice build the the simulating portfolio as and technology ANSYS strategic was autonomy for the a across perform certification also proud also using Motorsport's to excited and wins over Motorsport, Volkswagen Climb rise electrification sales capacity we International channel saw Pikes recently and of of the our ANSYS the mission-critical all-electric technical resources of automotive partner selected XX solutions to driven From advances be system electrification. when propulsion notable at aspects in the record from of design. Startup push the and shattered to example our Our to continue have an increased wonderful and by to solution electric that Peak young to seconds nearly and services. overall Program. the an the world power by

Now our becomes of last year product simulation entire Pervasive Simulation life where cycle. across critical vision we described the

user across to experience. our into all on business our regions solutions mechanical, multiphysics reliability, sales release of QX relies core driving bolters comprehensive portfolio features industries This dramatic the serve. are the performance, physics. semiconductors our These driving XX.X Our during and innovation flagship released we improvements across speed advances key ANSYS fluids, overall systems. our electromagnetics, leadership across and of high-value improve and

Eldor HiSilicon X evolving co-analyses platform while automotive suite area, a next-generation RedHawk-SC, budgeting, discharge, expanded with design, will press of These thermal-aware chip market. reliability power, new ANSYS solutions A XD a simulating Multiphysics as just to simulation well of performance electromagnetic noise example customers' statistical the X systems, of success and electric functionality efficiency and adoption Technologies, manufacturing on of multiphysics including on their signoff ANSYS in and signoff conference. reliability at to to subsidiary have include nanometer and and Huawei. name structural, electronics effects, nanometer. are by and next-generation for our package power signoff system. to customers innovate IC CFD system-on-chip traditional models for of excited of the electromigration system adoption was increasing HiSilicon to on to outlined multiphysics or entire responding complex beyond advanced power DAC, global goals. they the few. data critical ANSYS' how semiconductor electrostatic Eldor share Extending enable all the were yesterday process of analytics, X release a topic exceeding dozens of creation use as further June's for big nanometers electronics major thermal to of and the For simulation them leader This development. They address We using and solution their of leveraging their power simulations, this Corporation, was challenges. products reliability and is power the solutions challenges our critical rapidly help relying HPC chip tackle industry design integrity best package practices enables ANSYS area for nodes, to and solutions multiphysics based powertrain aging, their great a semiconductor their designs, ensure a example, on-chip to success the support ANSYS to a

RedHawk-SC also signoff XG, the for RedHawk-SC all Our RedHawk heart deploying their so autonomous successes was are designs design. that artificial intelligence, products most X-nanometer at of excited These our customers showcased mobile on. innovations and at and complex or in vehicles, using devices with are of DAC. I'm of

startups Live, hardware its The saw with computing. teams and signed in tower is a We in provides intelligence. Xx XXX as offering. with an high-performance Live also upstream ideation Southern modeling Global their new using Discovery which Discovery XD become early to developing seeing partnership introduced This Workbench the their enables beyond solution into improvement simulation over on Tier-X Discovery expand simulation collaborate an also beyond in embed for using physics, well Our announced must adoption digital successes across success contract engineering people. into number resulting in development design with fluids, product product ANSYS chip for direct structures, expansion Also to CAD ANSYS million innovation. usage Creo Fortune pervasive, enable across QX, we including move Grid, on China electromagnetics, RedHawk-SC This ANSYS customers for by They the But downstream integrated rapid XXX a geometry of exploration, simulation to QX we phase instantaneous their company in times. a and and provides with We're operations. QX, Discovery design company XD and engine design exploration as which makers. Live's based exciting electricity a the artificial rapid disciplines differentiated PTC. workflow ANSYS that design Live platform. chip are to interactive truly move Power into to go focused

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engineering increased while for new not revenue opportunities on side, we're OPTIS. has our XXXX of positive. customers working while teams customer we're initial Now acquisition the expecting product, our recent strong seeing ANSYS any from feedback the in finally, on And interest and product are been very from

The portfolio customers, mentioned our best-in-class flagship investment vertical. in particularly the software mounting company electric safety, And million helps human ANSYS' as that a I As increase leading world's to automotive This electromagnetics technology like their simulation was you including market efficiency this physics-based the to industry who's $XX one technology bring leadership and to crucial solutions, drive further autonomous sales, for automotive also innovation. which industry full pressures may leading of with provider of will remember, customer earlier many OPTIS of the our facing rapid deal as simulation functional and possible. in realized visualization. is extend is companies. automotive light, OPTIS This and QX vision vehicle is leader to and of new, quickly

Board give I update to before an of close, Now Directors. on want I you our

and technology Pat Anasenes they thank will bring outstanding leadership are results financial Zilvitis wealth to looking the our to board I'd very Glenda earlier And accomplished retired of and of members, Board our we Morley like executives experience our enterprise. they to year, growing Along like to the their to this who Dorchak. at board call welcome service. Gallimore for more will thought Directors who board to in many bring Alec would Brad joined our leading Maria December, years of I in Maria? and companies; extensive forward longstanding our a First, now the turn to with much with dedicated I to and Nicole of value over two Dr. two discuss experience detail.

Maria T. Shields

second performance. I Ajei half my everyone. on additional take key and from first morning, Good with And me Ajei. our few key let outlook assumptions add and some you, commentary remarks shared results. and to update around few a Thank our a now prepared our highlights close for quarter minutes an QX financial will XXXX.

of like ASC ASC Before remind first I to of adoption under will results everyone begin, under have year that I both financial XXX would provide XXX. outlook to we and recognition the continue ASC and and XXX, revenue during been

will XXX key my comments and results of rates Additionally, currency. ASC state with growth standard to any I comments that unless otherwise. practice, be both XXX QX XXX will and ASC I will be to our XXXX QX make comparing consistent in XXXX under ASC non-GAAP, in relative constant and metrics provide under terms I financial

rates, in posted strong forecasted growth results across margins compared momentum reflect of dollar currency. XX% approximately both or XXX. exchange to under Despite that and our U.S. continued ASC and constant were and we business. million guidance of a above ASC XX% the revenue XXX high EPS end Operating our by $X execution record the revenue affected as stronger Our adversely QX our

on in half another a Our our of second and make strong us results we confidence path against XXXX. deliver quarter to to strategic give record year progress that performance and first continue financial priorities are to

currency of first begin XX% quarter year. the of the and for half growth QX metrics financial for constant growth ACV with key the X% Our

at our against the impacted revenue the of revenue to XXX operating anticipated were the under quarter. XX% euro were the good our XXX. timing deliverables of U.S. of previously upper our ASC XXX QX currency and revenue ASC dollar The ASC QX this finishing above results end example that revenue grew $XXX accounting ranges was comparable XX% XXX yielded single and provided. revenue previous guidance with ASC both year. the strengthening and revenue revenue. Recurring the method, to performance. as under the total and ASC This favorably $X.X $X.X XXX contributed that can totaled be combined good and revenue million and XX% XXX of by either results. ranges XXX, currency currency increase recurring totaled to when positively deferred million total helped the an second year. total guidance ASC future of Under ASC constant under of British positive revenue million, in last million of for end of ASC into The under a under XX% strong Margins respectively, margins of revenue. contracts XX.X% guidance, of QX operating XXX over growing license of maintenance particularly revenue balance. $XXX the contract software totaled under in sales under a had under $XXX and high a XXX methods that last Under increased recorded cause margin is with impacted that we was year's margin by $XXX or record representing revenue base million $XXX ASC quarter XX% drive top renewals to Deferred or to our us XXX insight predictability performance quarter backlog revenue of gives The ASC million our increase of and provided line $XX.X in the million include compared a the factoring margin second million backlog beyond and originally a the of volatility impacts our This quarter in recurring expect and a strong million. of gross $XXX we and XX.X% and pound. Second high in in The

With ASC EPS We of These the the also We that have taking slightly XX%, was deal the ASC the coming slower $X.XX quarter for was been and under quarter. guided had place experienced since into hiring of OPTIS of to range activities our integration a delays than tax May. XXX. were respect end under we had closing early pace that in of lower effective which quarter. teams the attributable second $X.XX at QX reported in taxes, we partially the planned XXX across rate to the

our estimates rate Going updated QX an year. effective anticipated $X non-recurring includes XX% net XX% range or we the forward, subsidiary underway. that that have expect benefit expect the full XX% XX% This activities, in to currently for QX. of and net be tax we million approximately in and certain to tax of relates our to benefit This to structuring, to including entity $X.XX are record for

Our total million for operations closed $XXX and $XXX the investments, quarter cash flow for a first of quarter of XX% which million We from cash the the totaled $XXX with held is short-term and in half. million domestically.

me of turn Now to the guidance. let topic

in quarter ASC in EPS under to is $XXX the and $XXX range revenue million, We are expect to revenue of million range $X.XX non-GAAP EPS $X.XX. $XXX non-GAAP third to of of the range and in initiating $X.XX. XXX under Non-GAAP XXX million $XXX for ASC and guidance range $X.XX million, the the in the non-GAAP to of

estimated I half million impact full earlier, in negative in also the $XX currency revising we revenue year. we due reflect revenue our our movements that the the But are For are mentioned due second on outlook the constant year, currency to to of guidance. the rates to increasing currency

from reflects our positive quarter of continued $X.XXX to under outlook $X.XX. year. in outlook constant of to increasing $X.XXX the of our We're communicated outlook of This of updated since ASC the midpoint, range billion and last to for updating remainder EPS in is into XX% of momentum billion, range range of XXX the quarter largely our Non-GAAP million negative our non-GAAP a for in XXXX in in second range a we strong and billion what respect in last revenue to the also with or business, million EPS for at of our in for increase to or business the $XX are provided full $X.XXX revenue XXX ASC of $XX the remains the We $X.XX combined currency in under to OPTIS growth impacts the billion XXXX $X.XX rates the changes revenue in range the XX% factor with $X.XX. the ACV outlook year. to also translates $X.XXX currency This line performance EPS for contribution XXXX. guidance. confidence we With to from the had non-GAAP

XX% is billion. the $X.XXX midpoint. X% to for range a ACV $X.XXX approximately represents of outlook revised of billion over This XX% or Our constant XX% ACV baseline at XXXX currency to growth to the

ASC cash $XX are range income and everyone and our We of flows flow that credited to adverse outlook I payments than million $XXX revenue current acceleration to associated never that slight also like other tax recognized in XXX as financial impact includes a company's to our narrowing our million retained be statements. that the $XXX the to earnings remind in under million currency backlog maintaining deferred estimated operating the adjustment will revenue approximately with $XX related is outlook of to would cash of for million. XXXX operating to for

a XX% XXX. around we document. QX XXX. assumptions into prepared remarks for XXX revenue investing ongoing key strength rates flows, details and the that In execution of ASC combined first margins, purposes, half XX% give operating relationships continue customer questions, and sales our are confidence and longer-term cash in across full on the open us on Further to the foundation well goals, lines metrics: under phone margins top as currency operating XXXX and operating our backlog. XXXX targets. and summary, the modeling second quarter been for now to with financial to delivered to solid business, our in year, other contained growth, expecting line key have XXXX quarter XX% and under specific another factored deliver we with quarter please. of strong recurring our provide growth to that The XXX continued healthy we our outlook as strong ACV, to Operator, performance the For EPS, and and third XX% financial solid business can our ASC XX% in XX% margins and under operating deferred we are to pipelines our under expect ASC focus XX% ASC And take XX%

Operator

you Thank much. very

We will question-and-answer the now begin session.

Monika Our first ahead. is Please question from KeyBanc. of Garg go

Monika Garg

Hi. question revenue, my Thanks $XX is total your not by revenue impacting you impact for question. currency FX, Maria, of why guidance because yearly are impacting reducing first to taking if it to of ACV is is But trying million unchanged spite I'm then in million. $XX it's understand ACV. due guidance

Maria T. Shields

Monika, rate since from So, the up modified in currency the to the $XX only the the this currency. million. second at And There for slightly gave guidance, outlook because perspective, really it point of on changes other after for revenue transpired half impact year of currency other in changes from in factoring year impact no ACV full was to changes an May. negative we the ACV relative the in ACV to what's thing, factoring than are in is of same the guidance

Monika Garg

you revenue it. upside in you trying I in see I'm the ACV? the to also is what Got mean business the in side, won't seeing understand the are

Maria T. Shields

puts takes towards. may and particularly weighted where of Yeah. those are given deals a of heavily larger in we that wide some enough range happen, we've believe The ACV some Monika, the QX range, that that

reality is may timing those the another Sometimes, move into quarter.

as year the you just deals large all balance variables holidays to and get trying out to and that run in we're sometimes with runway. things, timing the factor of end you reality and the So, of the around

Operator

Borges much. The very you Please Gabriela go Sachs. of is Goldman ahead. from Thank question next

Gabriela Borges

is cadence morning. I initiatives of specifically and quarter. ask salespeople. when technical a you Maybe on how the build-out the see salesperson the follow investments you. technical to typically in few channel in and on to higher I partners to and wanted also contribution the long to remarks, these the APAC and in the the channel prepared between Thank the the comment it remarks. prepared in-progress Good new hiring a of could mentioned that Ajei, on or go-to-market are you where at add the you do pipeline Congrats If a when partner, expect level, mentioned are bookings? a changes a in of for up of you

Ajei S. Gopal

Sure.

making when focus focus the to we market we of that and we clear sort direct the and go-to-market segmentation include and you we accounts working channel with we're accounts with taking think enterprise and and then understanding last incremental what were with also So, channel of accounts the an on strategic make organization sure would and said then to that our a sales announced territory would that have change clear through segmentation. also strategy and a changes greater about in a partners going go on year, our include a

that to done in work amount channel ongoing. in they've on-board channel their up who've come new come space number background Obviously, past. the and clearly rate speed a the on of and part the that partners that process, As is we of at partners recruited of depends of our level which work

how And choose We to are on to so take time space. can screen diligent at partners we some our they our again, channel their obviously, which are to it depends speed in on products in to very sell come the forth. them to and come they speed experience up But on-board. and have able

wanted recruit we would have looking able people. add or continue have as because we're pace for resources we salespeople organization. As to to obviously skilled our technical been very, ACE concerned, our what to are high technical far is the we The very and not exactly

that, to to our on behind bit ranks. little a we're so, be And able add we continue to but still

there I think were I missed? that the those anything questions. Was

Gabriela Borges

I the a if I and then in-progress follow-up in Live, Just changes on on may. APAC Discovery have

Ajei S. Gopal

had APAC In that the Korea I deals say, as our APAC, loaded. Essentially I around that's bit enterprise obviously, of South some timing yes. is would that point mentioned deals. point have large little on was, of happens the in obviously an was Oh, and And so the script, what I about And centralization performance we then, we number then serve back-end mentioned the impact, that changes Point centralize year customers I in we the of in country. a a different – workforces nature, a in impact versus at essentially where even a customers in the have overall global talked and quarter chose slower I number the they about And a to bit an the obviously India, workforces around with some who deals implementing world. performance few one. two, go-to-market we country the year were in just are has on that purchasing. had That's other would little more say performance. purchase

the are that's situation customers after single there. over of physics multiphysics these It's solution as historical kind opposed a deal. going to So, a that obviously

really that's in that highlighted the So, the are changes script.

Gabriela Borges

follow-up at a Thank about you share price can you. helpful. very That's talked A before. this unit point what on $X,XXX, is we've think about $X,XXX economics? Discovery I Live, point $X,XXX,

has sometimes price when more solution? CAD that of that CAD meaning the range, of color solutions, that the $X,XXX, tell line point, feedback, range. Live look historically the you've any With contribution of agreement, the the price an is a have is have. at or that price of customer $X,XXX, on price gotten points questions that PTC concerns be and And on of one the double, of the we there while battle. uphill upselling When almost can $X,XXX could also same you equal sort you're than Discovery or been bit And us can at in gross perhaps adding the been margin you any they've around kind little the when base pushback of

to that. in and spite hear that has love the positive if all at touched any would from maybe I customers feedback So, of been on of Thanks.

Ajei S. Gopal

this quarter Discovery first firstly, seen was in So, and our full of increase. trials the marketplace we've

example I We traction. have Discovery geo, China channels very we've every in through has Grid. the been of Discovery you script customer conducted Southern feedback positive. and or seeing gave Power single We're the Live an multiple in we've sold sold

it demand right. and for that There's that product. validation clearly product is sweet have spot market there hits the there's the a we So, validation

excited PTC, about that. With PTC. respect arrangement I'm a that's So, with to royalty

a about So, arrangement. it's point to royalty your margins,

point year. the in and have from don't the As this far expect in see We're impact we don't following to impact an impact any of revenue XXXX. as we to at product have PTC time on relationship, the expecting this market

far not As a are customers' this small a simulation brand-new industry extremely solution. they Discovery of as a aspects leading to Live, don't the interests is concerned, is – this CAD this capability. view as Live powerful The and are Discovery of sort add-on

think seeing users, Creo about don't of the in installed we especially point able get maintaining all. customers, excitement they any So, we're lot for to from their see price to at as PTC base a them be in the problem CAD

problem So, hands-on have we'll in but on, later Obviously, all. point right we think see I the we'll a I questions. later all now. evidence have as we right problem now the at product that don't see price and on market And as addressed don't a

Operator

Berenberg. of question from next very Please Gal is you Munda much. Thank you. Thank ahead. go The

Gal Munda

question. I'd like large Hi, guys. my terms the taking in of one to Thanks deals. ask for

your ballpark trying the of that is that you. what that kind using XX, customers, you just and of overall your some your simulation large those three pipeline or see can have for at $XX three over the terms the how just of portfolio, idea, of many vendors are base, Now in of us you of the quarters look way so. us. opportunity, starting you give get about the opportunity customers you in over is a it that means are Can to consolidate deals of guys existing Thank large a for last deals? XXXs, installed an to is out million color maybe done bit the if a it Just

Ajei S. Gopal

accounts. of about physics thoughtful earlier, on. metrics more where that ANSYS, have something the think million-dollar channel the three were look address spoke you my our as we we customers. And Rick and evolution being – much to organization. we deals history solver certainly is operating large to lower that have important changes to the these levels partners one appropriate, clear script, in selling has sales that consider that about or motions deals at the the also have an certainly like I So, think were very our you multi-portfolio significant at we've and and sales approach around We've changes inside a are sell made, enterprise been accounts the accounts be large over single and We driving very up of – back appropriate, physics. we These and the that we incremental being strategic use time and we of were include moved years our sales with needs the believe in will at journey we obviously go-to-market historically of mentioned Rick the of able use as to and XX% I able for to a about if where the

what software multiphysics as who footprint their so, customers. on now in of up moving one happens the come you're a shows non-customer are seeing is were in then customers is multiple of evolution they'll multiple buys of No dollars and what day across grow. they'll customers single And one physics and to previously physics. and Usually expanding millions ANSYS

go-to-market of customers use use had success are adjust And we're expanding is best who many customers. are. our to who've way now building, they to customers We're from not in simulation large them because we're We're simulation. the they're deals their the existing trying so, of customers are. with many come of their The possible expanding ANSYS our of address the trying just reaching of needs reason meet and the we of to where years these

products dealing that becoming case they're also the one. with more the that's it's are complicated. significantly So, that But

electrification, we a you ago we have all our Volkswagen automotive have in solutions air or so solutions, may the the and OPTIS conversation solutions, drive multiphysics customers about if software, conversation take, had optical autonomous for The electronic mentioned whereas I mentioned electrification. and and electric the So, Today, intrinsically about example, embedded trains. it's are fluids that years flow. I about our include with conversation of these example it's automotive sale Motorsport, or forth. is about structures about autonomous case an is of

in of the right the at nature We're portfolio. time right the have right problems place the so, And the changed. of customer

portfolio. essentially right in our customers a we're they driving position to need and the get the have the to, growth as go-to-market of We which is to

investments adoption investment I monetize The in drives is other engineering made point it script our in made customer that and we're that able drives success. and the we've services to organization and also

excited movement and larger towards very we're higher needs So, customer a level satisfying optimistic. we're towards about this at deals, very

Gal Munda

you. does Maria, contracts how compare Even, with future coming as and to just on Do I bit follow-up, if you and growth that deferred How be still backlog can in around are leases year-on-year? the ACV kind Thank you and compare leases as constant at in currencies, of still when look just perpetual shift on you those mostly, And does you. And currencies that comment see more your XX%. still in expectations Thank a licenses talk must mix that more a your Can you the well? revenue had? and that's going constant X% that. even that above between about leases? be growing likely large

Maria T. Shields

Yeah.

and, script, Ajei I are to, So, certain That the recurring out in commented particularly this are I'd revenue tended paid be year. the Gal, leases quarterly physics fact up larger to part paid digits When up single-digit the said, in no alluded growing perpetual growth say in Gal, now be as as more business opposed and to strategic they are accounts the in tend were choosing and enterprise no, the they are traditional. they called geographies become migrating. had flow, of single half being doubt, they customers, currency second double nature. to are a for But streams that what that is, constant I licenses as slated Asia,

customers makes flexible their that. them. customers And adding that's to whatever We multiyear model and multiphysics broadening the of the we're allow the software have choosing currently migrate to we across to of business to use license because believe, choose a those that the truly products enables to element, portfolio okay will are leases need model continue and usage. under new them a for with important number as We sense most of enterprise to

Operator

Talanian question next The much. ISI. very is from of Ken go you Thank Please Evercore ahead.

Kenneth Talanian

question. Thanks guys. for Hi, taking the

a could us for of now the estimate tell inorganic of and rough year? in bit the the what first housekeeping, So, for expect a quarter to contribution you ACV you

Maria T. Shields

for the quarter, X% XX% and about to year. the to it's Yeah, X% XX% for

Kenneth Talanian

as I the you're starting of upsell was guess these for sort help expand see question, I the great. but Okay, wondering physics. you you Ajei, bigger if of what level And some picture us given on deal could activity, big deals to of understand

Ajei S. Gopal

level upsell? please? talking clarify, cases? Could across of mean you about do you you expansion use what What or Are physics

Kenneth Talanian

are simply, Well, and with getting above million, $X the a much renewal they prior on if revisiting a are average say run paying customer are you upsell how rate? you

Ajei S. Gopal

have customer to remains each depends the underway. that a of you depends response, give it it that it to on the hard in, very the It's depends geos initiatives and specific be they because the that the formulaic on deals, on happens industry fact these

driving several And products, so, lot smarter broad this there's conversation. that we're that's of the no standardized trends mentioned times, answer. I've The that trends a broad seeing though of

they the using That a the support them to on you'll little a technology. starting they're depends there, the of for step to take I that industry support for on level area If are what course, And try conversations space. telecommunications, having number electronics. bit broader get the to and too. help position broader electronics areas recognize staffing whatever can automotive on that's those example and you and incremental more to they get we're of in that's move that you themselves core strategic you'd conversations products, a on. need so, I initiatives away of area so the the oftentimes these the new And physics. building about customers need from into used with smarter we're focused successful heavily in I our pick use these technology. customers can we that their to some some and And the to in be is, of able competence about and, gave as having and And to together customers of of not to get now a they we're When historically be of their the how products. happen XG depends have find start strategic think particular, build drives help in they of of

so So, geo industry, and a customer where really depends lot it on. is, the of on

Operator

next The Oliver Rob much. Please very Baird you is Co. question & W. Robert Thank of from ahead. go

Rob Oliver

Hi, and guys. my connection the question, have Thanks bad for apologize I here for one. taking if

you'll hire hiring row be you get to field you just guys the to cut be second off technical sales again. how I all? that been where indirect loaded. should push and direct that of channels that been gives that guys a This see it's I in the is And are would and think at then, hire and into indirect traditionally year? do partnerships mentioned guys lot. you of I we put second longer-term think a now the guys success And Just my in Thanks in it's the back-end direct. was I changing challenging three-quarters wondering, I'll follow-up quarter a the about about business? versus the there, mean given having the what of able mix and you issue kind confidence in case is half

Ajei S. Gopal

numbers So, three-quarters in expect term in to and question the about been, certainly the we as what not as say, and you far – your we partners, that's to going dramatically volume of the in a – business channel as quarter term it's short the fundamentally forward. the we first rightly about short are seeing change see don't

about process. were And have been it historically certain As hiring we aperture question engines are we for bit than far the find. to your harder individuals year the to and of that some to And time about as of more latency a recruiting adds skilled your know position – rev people people, these to you this individuals a also in the we're hire. little that and increased looking amount case it's takes hiring significantly looking very up the our for obviously and

address well our So, on have is, and of key some we can partners course, focus we making bring recruiting and as which anything as Maria, add? internal our on-board. more we're both sure to pipeline a building pipeline recruiting people

Maria T. Shields

Rob, just to thing. Yeah. I add wanted one

to we businesses, through has acquire talent be slowdown, with just fill. we to integration, roles time plan As the to may we that thought natural that the do able that they bring as were we as fulfill to market table in going think what think had we any go the through a it originally that to

fact, we a us XXXX. that team we doubt, aggressive no more as more are on challenging continue we have slowed just hiring so things that well with, recruiting engine, additional that to combined has in an to that second people help environment a So, down. we said, But recently half, we couple head as prepared being into the hired head into

Operator

you is much. Thank very Please Valera ahead. The next go question & from Co. Rich Needham of

Richard Valera

to wondering, historically just remarks large in is auto very and And of featured specifically auto in quote something products. your leading customers sort you verticals there pervasively unique of your of been you. to Ajei, auto? is the amongst that's know that's the I to your Or prepared going kind expect prominently deals activity, Thank that on that see something (XX:XX:XX)? bigger somewhat that's other more you industry

Ajei S. Gopal

that technologies if really they customers trends, is all products. auto The mentioned epitomize trends smart I've change vehicles, this we electrification are autonomous that have sort taking place connected, connected which reasons of you great the will, those transition. our of through that's one towards big Well, automotive and in of support

acquisition have, end-to-end the we an simulation concluded, allows we with customers to OPTIS have driven now able that just to for that be miles. So, simulate our we recently example,

the distance. difficult camera, of we miles can't we process. all short driven as course, now to big an ANSYS traditional and close lidar we across integrated can the you as the view ultrasound simulation And an of the test including loop well can it's of of – well as, of and vehicles autonomous virtual the on of this integration as with now kind portfolio, the radar sensors, and one challenges for so, very view is portfolio integrated have OPTIS autonomous with And

are electrification and off to road. now and examples, talking with right So, connected couple not relevant road, about I exciting that's antenna what XG we're for gave on also solution. similarly so and completely for but very design It's a the of and dealing just forth. a car Similarly and and companies

the then, supply through reverberate and So, course, difference making the clearly that's chain. for customer end changes a those of

so, we're And integration for of having into example, the and we're around working with conversations technology customers, safety semiconductors. our

provider, medini, the include fact, the is the major in simulation functional provider, so, chip ANSYS of for and safety analysis, functional they automotive XXXXX simulation our expanded XXXXX of solution use is in – appropriate safety use for get – to expanded QX And to which they a their ISO which auto ISO industry. chip who's

sector reverberation you're through seeing. an the chain there's automotive So, amount enormous that supply the from of

are So, industries. applicable I But these think I think, that's broad across area. one trends,

I As of we industries levels maturity at as industries are other see to these across trends themselves expect different well. and repeating said,

Richard Valera

Can in you Thank you. reiterate Maria. And the you for then (XX:XX:XX)? Thanks. it just follow-up said pipeline, a for what what quick on too taxes was XXXX,

Maria T. Shields

Yeah.

million was I year, are at have of to looking the looking will about because said we XX% we full what So, range of $X or rate QX, we're then a a $X.XX. XX% a XX% to And for for of XX%. benefit at non-recurring

Richard Valera

much. you Thank very

Operator

Vleeschhouwer Griffin Securities. Jay of ahead. question is from next Please The go

Jay Vleeschhouwer

Thank Yeah. morning. Good you.

additional the opportunities, are tens substantially active particular, of of or relationship majority perhaps thousands your consider operations hundreds the via partner you licenses with potentially Creo case lower highest ask you is And ANSYS antimatter more. you in then more a on acquisition? is R&D, margin SG&A base, including margin the SAP comp say, XXX,XXX of the mostly base, the deeply added for just space, For particularly other operating albeit of I'll from let's thousands relatedly, organization, the than the PTC the into Maria, about OPTIS variable Thanks. When Is not midpoint question at pervasive the solvers? ASC of managing in bookings And at add or non-GAAP you of guidance Ajei, for to XXX suggests to your the if ARRIS, penetrate, first, decline a I follow-up possibly would the in my asked are thinking then in with respect growth? making ARPUs simulation levels such the how Or partnerships partnerships, point due implementing licenses ANSYS plus the terms the or the to that basis as XXXX. as PTC the which it you in just to your higher for at with usual company. more year add you of XXX mostly about sales in AEs

Ajei S. Gopal

me have to let So, – here. Jay, me at sure try multipart notes that look I'm the address all let question. not of Maria's I

first around the number of users. the So, was

we others for designer the Obviously, using So, of think the And think and, opportunity a of will of case, about operations you to just soon and solutions. look, with the partnerships. we'll monetize as depend much course, to expanding about us not to community. projection that you have certainly the users the there's downstream you start It's into going kind some in. ANSYS that of we be where give case been as on it's who to obviously relationship believe be they're revenue forward. it'll user those start going the too of to That's industry number that traditionally an

use a pricing right going absolutely need. twins usage the obviously different level across our to the from traditional for And or You're run-time cost cases licenses are case the charge different with those two of complexity to drive also for solvers. because would solver cases our be digital nature that's the pricing different of suggest that we will that will and and be

As touch think the is in the multiple concerned, has as I relationship investing far points. that relationship

project We place. have in management

together. place sure are perspective. product some can R&D doing up planning our an we PTC, points well what deliverables perspective, involved a R&D touch are that obviously, sure as closely we're And together and multiple the we go-to-market that obviously we together. release understand a perspective, for in from make on to down from teams have working From but get there's perspective from everything as by sync We and teams up an make both working go-to-market to

So, the and that people is job with well that's and getting working this I their up partnership rolling obviously think sleeves done. underway a

us I'm So, the companies; both another I'm that and on there relationship forward. excited mobilization right? about Maria, to about move was PTC things question, and excited both frankly

Maria T. Shields

was communicated the our you Yeah, under take to in margins, year came we if the our pretty guidance for saying full XX%, year much line around at relative full I'll had ASC XXX, that for XX% perspective look Jay, as we're to what we which one. with into year.

is in no building are on are investments doubt, across the Ajei as we R&D, to as had field mentioned. engineering, continuing negative which the And, communicated of slightly the add we We quarter. business, impact OPTIS, people last particularly front,

On the job is partnerships, we now incremental focus those partnerships. people the added full-time have on success to whose of

the across continue investing market to we're prepare take we be the of see all So, functions to ourselves of ahead the able to that opportunity to business advantage tremendous

Ajei S. Gopal

Chris, do have another we question? Operator?

Operator

next from question go gentlemen, and Ross Please of MacMillan Ladies Capital ahead. sir. apologies, our is Markets. My RBC

Ross MacMillan

accounts. China currency, you it's growth the pervasive. that of if that drive Live, XH but constant us effect, of way broader in customers trend a to a know XQ a first growth just I had Power Southern that example I think for in for curious, XXXX and into Thanks. Maria, actually to And Ajei, on that I portfolio ACV those then you've be is wondered more given much. going my Grid you rates may both the so and QX suggests follow-up the XXXX. then comparable the be for Thanks is ACV was on half and with adoption engage Discovery it early secondary

Ajei S. Gopal

use who of who at of So, have be we've to those – companies ANSYS as could is, by individuals historically not couple a answer would question, the Live. discussed solutions. using your have And say, been Discovery use is one bought simulation not there Live the actually, Discovery and important necessarily of I individuals cases for are course,

many broaden is use that's the base Live, a of a through of available customers and the to deployment their our Southern designers. bring Discovery Discovery be are clearly Live use exciting to case that focus But so, ANSYS does historical to there's by to their simulation experience making users able And which that the recognize opportunity case. really engineering of China who

But provide this designers. the have go different migrate move now across lines. of able in product the across the from go equally, we'll work organization coverage the for so, people to simulation we the of end-to-end And the because into and to from ability designers into can flagship the be the different and we ability levels to with of and skills flagships, capabilities understanding

And dynamic we're about that customers we're our with this encouraging enterprise so, is certainly, continuing that's And see a that's very that something and pattern sales excited about. excited force with customers seeing then that g that we for an because these them driving sales. and large Live, they're further engage that but flagship of opportunity opportunities they're Discovery some large and, seeing to

a that's symbiotic very about. effect that we're excited So,

Maria T. Shields

that And, Ross, new ACV to on your reporting ACV growth, a XXXX. question is metric we just in started

recreate to back under gone historical not ACV have data. we So,

same to periods. I last comparisons So, for year the have don't the

Operator

like and for back any conference turn Ladies session. the And much. Gopal very I to gentlemen, would remarks. our Ajei Q&A you that concludes Thank to closing

Ajei S. Gopal

excellent I'm Chris. the quarter Thanks, that by we've progress and delighted made. the

think Our execution. on remains Pervasive And customers. Simulation the our I of as clearly resonating the rest strategy about year, with is focus

Enjoy our joining today. customers you I and on continue We efforts for shout I to my continue to you look In ANSYS and products flagship you And, for partners grow closing, to day. all to sincere thank another of forward we me call strengthen my our through to to and to with express will all the a customer that's support gratitude expand Thank out would discussions. base. next additional colleagues, and rest for our your great our will we XX.X to quarter. your partnerships. ANSYS thank coming continue our of and soon course, ecosystem our the like will out

Operator

Thank you disconnect Ladies call you concludes your very lines. that much, and this now sir. may and gentlemen, conference

ANSYS (ANSS) 7 Aug 182018 Q2 Earnings call transcript