ANSS - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS' Fourth Quarter 2020 Earnings Conference Call. With us today are Ajei Gopal, Senior Executive Officer; Maria Shields, SVP and Chief Financial Officer; Nicole Anasenes, Senior Vice President; 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. Ma'am, you may begin.

Annette Arribas

everyone. morning, Good

in to quarter key year website. that the like affect to available differ public fiscal would to all website. release, data assumptions. all remarks and may this our Investor COVID-XX and pandemic document with remind posted risks and information year of addition filings everyone key Our the results and course important quantitative fiscal our related and that impacts year link highlight Relations our cause call, in of our our the have XXXX also we XXXX future contain and XXXX could the uncertainties materially during of the to our I the and performance and relative on are which length financial actual supporting that earnings homepage of via results that prepared the SEC, They results any from Form been update, initial on as QX full are financial the underlying qualitative factors note business well to our at fourth We as the our outlook projections. XX-K our discussed

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

materials non-GAAP non-GAAP is otherwise GAAP related full A Form excluded financial in to items and of release the prepared a and X-K. unless morning’s included discussion During the that we’ll stated. various remarks, referring and comparable earnings this measures this to are be in financial call of reconciliation the measures,

focused governance roadmap. turn solutions our role like year, continuing Earlier are let and I how progress environmental, product our know on in to case first towards make electric to now play Ajei, would the many industry's hand we to vehicles, published call I critical solving that social the of over illustrating use a Before everybody we this print challenges. ANSYS

published we aspects ESG as guide and our the talent ANSYS human strategy, highlighting as well which assessment, infographic our non-financial will capital Additionally, of management. materiality our key culture

All of this now the section would the Relations I like opening call Ajei? information sustainability over to his is turn our CEO, our available of in to Gopal, website. for remarks. Ajei Investor

Ajei Gopal

spending of government customer from in coupled sales a COVID-XX activity, quarters was year end by in to and joining saw off than up with driven which across another for QX combination a cautious thank deferred morning, vaccines expected ANSYS, XX-year stimulus albeit believe earlier emergence in Good revenue, of thanks in Americas the the ACV, cash of and and for capping history. year flow. the QX most us. share, We successful earnings including key you stronger metrics, the EMEA, was everyone expected optimism activities. economy, increased, quarter beat budgets all and per quarter greater for expected customer we than excellent guidance financial the

QX, deals the in we total, During XXX million. $X figures. deals closed On that includes eight nearly over eight

company, those deal customer. the enterprise second contract was in history $XX the agreements One the of million an largest of five-year with a

ANSYS leadership. testament to to ANSYS ANSYS decision as contract the customer's it dynamic company global technology on forces electronics renewed to technology, use and expanded conditions physical over testing vendors, reflects and reliability standardize other solver technology acquired ANSYS economic worldwide and its reliance expenses analysis. and market reduce business, to core reduce including added of While long-term This its across on newly and the a

This deals. fourth primarily higher year. due years in have an operations said, the of consistently allowed of support steady of magnitude sales progression our have to increasingly has become increasingly loaded we backend quarter the each business our teams large As and timing to

strong in previous ACV whole largest our execution geography closed regards currency. XX% XXXX in of business in largely Our developed QX which The quarter annual and constant and QX of QX a in by was as million May, XXXX. of strength the XXXX call, predicted in with industry, size. The we than drove had volume ACV, over higher that company growth, $XXX to year our performance record we resulted quarterly

we our deals importance simulation physics, enterprise During the we have of all three multi-physics as with expectations closing customers. the largest our capabilities built major with the the integrated that enterprise connect well customers, trusted to partnerships ANSYS' That our exceeded to the year, in speaks including history. as that

now levels features of release simulation Moving ANSYS our This our of simulation to our harness increasing entire drive computing of We with a RX, advanced platform, multi-physics where reliability recent an integrated can new incorporate power strategy together ever comprehensive thermal ANSYS which portfolio advances product in for innovation. technology to advances mechanicals reliability customers. products. X predict fluid to Release engineers XXXX including analysis our ANSYS product and for includes to design simulation improving and analysis pervasive a the X,XXX solid and delivery lifetime. across with With thereby now can management random heat now vibration devices. And cores Sherlock electronic their job where scale behaviors and and customers into automated Cloud can ANSYS cooling thermal single workflow, beyond customers Discovery, for ANSYS

multiple Today systems one HFSS pro game-changing with long breakthrough these systems components flat the a Another in analyze which each interacting Mesh [ph] HFSS simulation or using consisting which ANSYS solve can of which manual Mesh products, result techniques, can risks then either can key development eradicates HFSS simplifies one-size-fits-all-approach, of individual of fuses automatically of design RX solution incredibly times costs modern and times. for and ANSYS suboptimal shrink methods, electronic using optimal results. previously technology efficiently technology electronics develop its engineers be can combination, were element component. Fusion. create of is This complex optimize components. of unimaginable. The is traditional and to Using virtually This are that component cycle engineer two enabling Fusion engineers simulation the And an air Fusion's jives a complex HFSS next-generation costs level fidelity that screen for Mesh products. Samsung electronics innovative at designs to this designs and uses most advanced to televisions. the design relevant to the

mission Moving and third-party on level With system Analytical missions. That ANSYS. ongoing to the simulation will In that and acquisition to with by be Inc., QX, market or a industry increases and is digital AGI. analysis closed which combined from of components address the a AGI, growth our Based M&A. mission ANSYS' acquisition experts, of $XXX million. simulation primary market called AGI replacement Graphics, broader with the analysis engineering, from market open we addressable of able and fueled code, being in by market interviews source the number unsustainable we code total believe in-house AGI we

enable relationship, time call, with relationship with them analysis and of systems Our simulate capability. to resources. highlighted powered its RS to other reported such by empowers partnership times. decrease software mission than level engineers which PTC, Keysight one aerospace modeling products behavior, company builds XX% and starting added deal that to more The announced key the combined spark and at Keysight, will up SharkNinja, which PTC ANSYS Creo high which the up success most technology. we Live crucial level bookings money, help continues AGI's Simulation This OEM innovation the a the connects an fidelity week, time, increasing earnings evaluate and others. the stack, down the and for This grew existing quarter. to mission and going customer applications development and cycle success on with recent likelihood by at to product way another in enabler mission, saving customers In its as amongst portfolio partner ANSYS all the chip Creo see of

put XXXX ANSYS ahead pronounced results COVID-XX and pandemic on an of with some As in with that QX cautious to most be had adverse COVID spending. reflect impact in context choosing the look we I'd XXXX, to it our on customers to and like business. QX the

of However, May ACV and including established back of updated guidance range above year, high-end the our our half resulted for performance, record originally QX the strong execution in within in the the the the year.

base, is tempered rollout We but in had ease The that we're mutations and expectation schedules. sales are the customer a seeing the our uncertainty pressures QX's economic takeaway with to a assuming XXXX, would have activities than the greater of timing with optimism cautious the in non-COVID half continuation year. we this of in by been concerns of of virus start that will the pandemic second vaccine

slightly in even We similar to our projections be of are XXXX. full wider a also more we than in loaded, XXXX. or XXXX expect And heavily range was as to, pronounced backend the case outcomes year for planning

for more hear about shortly. will You guidance our XXXX

Let move the me is the to to long-term pandemic behind when us. now

to position projections. More will believe are our in pandemic as a that with we increase during and post-pandemic in spending cut some to we While these underinvestment that quantify served see compared to for market number of not believe XXXX. growth will back the I considerations, tailwinds I in compensate a customers pre-pandemic are the R&D important, that increase simulation rates however,

much R&D may will transformations home industries, the simulation their in digital no of decade. a as from simulation. develop that products, they proved have XXX with to managers I our increased when even successfully post-pandemic access engineers the this First, particularly of as across a survey found recent is their nearly in labs. that The relevant hasten executives they that by and use deeper and pandemic physical pandemic are customers effective McKinsey can driving digital for use working accelerated believe and transformation to and the firm process

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and the innovate push as roadmaps and accelerate seems in customers electronics. to Next to faster such areas to pandemic telecommunications consumer

R&D seeing eco-friendly We lightweight as we call. the also as aircraft our creation last earnings and such engines increased efficient products, discussed of electric vehicles fuel are in in

our demand complex these record quarter, To and newly mission pandemic, outstanding including require for All sophisticated by multi-physics and to QX summarize, our will the design entire acquired continue offerings. are products disruptions by That results. and despite post-pandemic AGI marked was simulation caused financial integrated development. portfolio, drive increased across an the of

the addressable to growth. go drive projections. to makes confident strong will ANSYS that pre-pandemic me total believe able may continue that be leader we our our long-term, actually market long-term faster Looking profitable as the than This cause pandemic and market to

Shields. is Maria speaker next Our

calls. in earnings She's been where As very those ANSYS instrumental industry for status in you she And our focus we role as our even technology talent, Maria March will that efficiencies. of public from last Xst, in today And have as company know, delivered of of you record guiding been us journey may quarterly President remarkable a Senior Administration, XXXX. initial a greater results since her that's CFO. accounting, a it's to transition simulation to has Vice CFO operate on full leader. On fitting offering into XXXX new culture, help and at a she will on quarter XX

board With well Maria, running hit in ANSYS Nicole the succeed since as on joining the full-time as sector, ANSYS, Former Nicole ground will experience March of as her Anasenes member, knowledge the in CFO tech December. Xst.

then to a mergers including QX oversee year. CFO call traditional in CFO various transformation. XXXX now business. at our financials, ANSYS' She years with and IBM development, responsibilities, CFO business to give around at XX assumptions Maria? direct and spent In M&A leadership a and the Squarespace. the COO function, and XXXX over was of to as to Nicole positions software digital and Infour as and Nicole discuss the details market and turn outlook cloud CFO and Maria was IBM and the middleware addition Nicole acquisitions finance, well I'll for our to and will

Maria Shields

partnership and Ajei. appreciate the and years. support Thank words kind four you, the your Hello, past over everyone. I truly ongoing

an strong record in the for all color resulting We overview the pleased our another and of quarter assumptions and the turn for highlights, cadence outlook I'll the report performance year. are I'll year through both key a add initial financial to quarter, and and call spend few QX walking to very full XXXX. then financial quarter to first Nicole quantitative over around and the the minutes

get into entire you the take like Before highlights, a our details I of I to moment say to financial team. to ANSYS would the thank

disruptions finish to COVID-XX and both and many despite both the and with commitment accompanied collaboration enabled year, the excellence operational on pandemic. customer financial ongoing focused uncertainties execution, to You're a us and that record across fronts, quarter

about operating the made December and total activities. also the and are and closed acquisition the XX% $XXX our progress the above business AGI and with particularly when or that durability very teams well have quarter of growth the the of We that ANSYS margins strength of both strong comparable high-end early excited EPS currency in closing model, the a This you QX is million revenue were XXXX. integration of results the positive guidance. testament the consider to We quite on constant of QX of

in last quarter me by sources. growth our XX% with closed million as of respect results sales with XX% QX revenue solid that throughout a ACV to compares that the both results, year, consistent This XXXX financial XX% the a total total constant recurrent for currency solid been increase $XXX constant continued execution. this key the Let in is XX% reflect past it every in sales Other revenue. license ACV sources. currency quarter. for is This percentage also of add in of driven or trend from we've which a record recurring and to was quarter continue, fourth record we out with XXXX, year's metrics new QX's experiencing attributable revenue leased lease to to with

QX helped rate constant of quarter focus XXXX, million, with rates our the in in yield our with flow debt of very to $XXX fourth our revenue sheet totaled also QX tax and was reported license net deferred year as $X.XX, XX.X%, to effective currency the discipline with and maintenance increase sales from tax an and cash in of total strong in million in of continued $XXX quarter's certain our of a a and in quarter, in the benefited well $XXX XX% XX% gross combined million combined payments high-end The our to return million, revenue. balance increase full year's was a This as leased and of QX flow currency. XX% from fiscal the guidance. The line margin total a a well cash time growth line We collection, finished year. it $XXX which year's the growth fourth results of to closed renewal expectations. XX%, XXXX. to the investments, with strong the EPS quarter our finished For software total respect of The This in record cash the software deferral our balance. for backlog of million. contracts a we high-end an license well which to contributed over with is illustrated We increase top constant $XXX the new last cash license short-term balance high with into The paid-up With of on receivables margin in line translates in XX% a above XX% fourth over taxes, growth drive quarter operating guidance. comparable building result operations, position last above quarter. fourth our fourth on

testament me and to with the saying XX-year a history. best partners. to are to fortunate of tenacity, and Let XXXX work ANSYS our performance the are the financial customers, that dedication employees, These and business by results just have we extremely in resiliency model our of hard close finished the

continue to let with Nicole, the Nicole? guidance. call who of over me Now, the topic will turn

Nicole Anasenes

Maria. you, Thank

for the ANSYS of results delivered face XXXX. stellar commitment of and reasons of many such and The join the First, I one to uncertainty. to teamwork unprecedented success team. to thrilled culture Together, amazing one ANSYS an those so in is I congratulations gratitude want the outcomes to that business am team customer we echo entire Maria's the drove

be guidance. pre-pandemic. factored pandemic, during availability uncertainty normal Due XXXX, we return and the into and operations of into Looking range a of stimulus the wider have to our continued than post about year, to guidance our historically impact We continued and vaccines. the have business is dynamics the that key share those some continue I year to recovery want timing to the with the the we provided business the increased half second global expect the environment of through half environment the the of first current will in anticipate economic global of

We million. and throughout our annual We small versus impact continue customers have sized to the have sales customers adversely larger disproportionate our $XX effect on a and believe the trade estimate restrictions by XXXX. approximately impact will U.S. China between medium

changing so dynamics rapidly administration, the outlook do the that our trade environment factors new restrictions the been existing has While today. U.S. they to place in are and trade continue under in and

to lease The We is the are licenses, certain mix model on see continue find expecting as leasing outlay licensing customers with to uncertainty. the capital appealing. more continued the customers operating to during of reduced perpetual licenses also a shift from appealing to of more associated time cloud lease a flexibility and economic

Our maintenance the approximately been even historically blended XX%, across rates renewal with and on maintenance higher. rates agreements have leases renewal being

Our assumptions historical only remained will as with And historical take slight compared levels. high to slightly a towards in are up our that rates XXXX renewal our experience. they reduction have

at need to to our we and that ahead. opportunity reflect long-term the balancing continue to We recovery pace for while adjust which see our will occur, invest spending for expectations economic the the

impact Xst, negative and point December to the acquisition and guidance, it AGI margin. acquired as to companies, We We to our our factored future to transformation critical continue for scale are of as and growth. our invest projects, those business R&D the projects one translates ability as have operate and intend to expected the well also commitment in which on into of digital efficiently approximately maintained completed certain

this dilutive pronounced We with the the to to impact year approach post first acquisition, experiences past consistent expect and most in our be integration.

XXXX, has we seasonal customer In saw similar very spending patterns. customer year-end flow and in the purchase year on to significant We $XX and grew our an ahead we to a pattern and December million with a disproportionately of currency unexpected and planning QX, high-end we XXXX large guidance QX full customer and relative in as was by ACV constant decisions XXXX what see million As historically years, acceleration XXXX, $XX X%. cash shift with exceeded we've by pay. to expect to There driven occurred. QX look in growth, a prior in behavior XX% guidance seen outsized by both

leaves optimistic and will belief Our own customers continue to digital strong finish our that simulation us their invest reinforces essential as in transformation. view and

Our flow. improvement both cash full guidance reflects year momentum an in XXXX in and ACV

However, momentum the overachievement that high-end which any some December was guidance. seen XXXX, of of impact of our the of above in started

metrics. While this growth key for XXXX the positive, negatively momentum also financial affects is dynamic comparisons

$XX the ACV of in overachievement to growth. a example, X% ACV million For creates XXXX headwind

of post-COVID of the our current our environment fluid recovery we in trade $X the and we attainable. with economic is still remains expectations, believe pandemic, and are long-term that remained billion line guidance in in Although, the if environment the XXXX midst ACV

of X% to in range $X.XX. and is XX% million, EPS expect full of currency to which Now we X% to year non-GAAP In constant the of revenue $X.XX let of $X,XXX me specifics get in growth million guidance. to X% or our to the XXXX, $X,XXX

in growth to XX% projecting non-GAAP which million X% revenue $XXX $XXX EPS to For or currency we to XX% and of the in $X.XX to constant of is X% are $X.XX. XXXX, range QX million,

we with margins XX.X%. or last million, year translates growth similar in of and lower to be nature revenue XXXX for to to XX% operating margins we ACV quarter, to currency. in reflect which the maintain expect outlook million $X,XXX the of to relatively is lower XXXX The industry-leading XX% contribution XX% X% X% in full to of experienced of $X,XXX of to the in year an XX% margin business we QX in with operating full range what operating seasonal our year margins, a the the XXXX constant to range in to XX% QX QX operating which expect Our range XX% For below XXXX,

mentioned expect toward we As highly fourth to be earlier, quarter. ACV skewed we the

new ACV to million the is expecting are in continued trend We flow of full deliver full that contracts, and tax reflective view in well $XXX $XXX the This deferred negotiated to of year year XXXX collectively XXXX range terms than full year on cash as current year of our collections early and of outlook. profitability. certain payments considers the payment extended million. cash It operating and requests as flow timing for XXXX raised in full lower

assumptions outstanding document. continue team call full personal thrilled guidance our our specific qualitative our impact to to achieve questions. details open XXXX year and innovation deliver now time and other into of a of am with and and will around so headwinds are that in who to details and the currency XXXX we full the and fully goals flow am their to for this Further to the strategy customers be remarks help to to contained also sustainability related team, provided have confident Operator, and during year rates Additional are XXXX specific document. need for results, remarks prepared quantitative delivered are has of many despite and cash that simulation proud we our many. be prepared I in more a able factored business pervasive on ready for of disruptions I such hardship been so macro outlook part and QX key

Operator

and your go gentlemen, question question-and-answer first JPMorgan. Please to And ahead from ladies today time, begin this [Operator we with comes are question. Ader Instructions] Jackson ready session. And at the our from

Jackson Ader

XXth and sticking from around -- go your and sad should with but Great. ANSYS you Nicole. heartfelt we're to congratulations guess call with to it's Thanks. that see CFO the Good off guys. And role, morning, welcome I we Maria, start on glad

growth for your the TAM comments though question is First about Ajei and pre-and-post-pandemic.

the and expectations the mix? So, maybe components just can the the others, growth opportunities or and specifically about get IoT two we and talking for the one total of simulation, were all just then color? you this a more of electrification core TAM, that components TAM or in bit different Is little

Ajei Gopal

for Hey, question. Jackson, the thanks

the So, we my one on said added to at set increase comments result acquisition, which AGI TAM, $XXX addressable TAM million a around about in as very specifically -- was of which in the market. our the total script we

about off I -- to spoke quantify. were harder that were tailwinds comments more other The

As I digital engineers customers in point have also their of said pandemic, certainly from recognition could home seen the the the with simulation away is script, the transformation about that work effectively simulation. use more during embrace we that's been the that another for and from corporate labs, tailwind

So, proposition certainly the simulation we see product expect able market save even being to money. and that continue value drive of faster to to

pointed second the one And tailwind. -- we've increased levels areas, to investment. was, that's So, I that seen that we of certain in the

that require specifically those multi-physics electronics, Now, simulation telecommunications I are and are, -- consumer areas those analysis. which and call

other aircraft the So, comments with which that multi-physics but interesting the it engines whether eco-friendly also and we that a question it's before, I electric area, nature products. increased thing the on you which and pandemic, in area not other also reflects noticed, which pointed light-weighting asking. it's the points levels really but about the commonality or like there's with coincidence seen and we've others. of investment, identified in that were the things if certainly I'm vehicles, And in here to sure eco-friendly -- is we've I was portfolio, But in to of the think

simulation. of multi-physics and this growth requires continues that also an increased it's something to so, area And be area

the that of my Jackson. context was comments, So,

Jackson Ader

Gotcha.

-- this follow-up XXXX? coming up the in Okay. of $XX and ACV pooled XXXX on then was or renewal Great. comment that quick from into And was million in -- was ACV a was Maria maybe that that quarter. Was the upside -- that Nicole,

Maria Shields

sidelines. No. we It flush, didn't specifically we on QX vaccines. of some which we where this and around second forecasted. execution, it growth did just QX people did and perhaps the enthusiasm of increments of some just normalcy from addition year, what return of sense QX I a that sales but There demand XXXX, were -- solid budget we and of see see to see some and we the to And half was when think perhaps year-end had was in above pent-up XXXX in -- the very the

I the hadn't just that we saw of year. the customer that we some part enthusiasm in base in experienced the think earlier

Operator

next Our Securities. from comes ahead go your Please from Guggenheim question question. with Ken Wong

Ken Wong

my and hopefully, also taking Maria. question Thanks forward. my stranger wishes to won't going best you And a be Great. for

for Ajei. question you this So

In positive terms of that shift Cloud? still be then But today. to and how would we ANSYS Cloud ANSYS a perspective the the wondering digital, realize And affect look ahead, just lease? of small might as monetization on-prem I from that relative adoption is a to

Ajei Gopal

Yeah.

a more interesting, would who've call I mentioned premises. I in efficient last usage XXXX. to by and And the we've if what's year, the well, question much ANSYS as Cloud ANSYS last we've this a question seen and guess was has XXXX the usage look So, your increasing or reached increase, the used pandemic about solution -- Cloud and if at continued and they customers demand and XXX% between you during I during over think usage, the than have Cloud for on had ANSYS

accurately. we which the for take that is infrastructure advantage and in ANSYS mentioned, process, the Automation, development and is appropriate, engineers example, accelerate show of largely is For they sure can workload, we've to think were make that and allowed hardware more some Cloud ANSYS reason to the using Rockwell because I And I its problems which done Azure obviously simulation Cloud Azure able product that about to solve runtimes for and interconnect the XX%, work to by they their reduce latest that is optimized ANSYS available. has

certainly is have we about We've talked made flagships VRX. new available advantage that Cloud I electromagnetics, the the So, optics, script, on of there Cloud available ANSYS scale cetera. absolutely. the taking et as workload, out of fluids, like customers as time. like during SPEOS, something just ANSYS that on majority this mechanical well our are things

a that own flexibility software ANSYS clouds. important the greater our we're think have, while we're own we majority very I the customers customers moving so physics, their offering to data lot to own cloud about on just about can afford, across their gives of we all that bring premises hybrid So And encouraged and license own usage their that obviously the rapid world think being and or bring I of in the in private options. it's customers That their license, use today we're centers that seeing note with hardware that fast license or flexibility said, usage. the or allows by we're seeing progress, products which excited as coupled

so is our future. of very foreseeable but still and business Cloud the for small piece rapidly, And it's today ANSYS growing obviously a

Ken Wong

Got color it. Ajei. Ajei. And for the you, for also Thanks another that maybe Got one it. then,

if automotive Just the or has shortage change buying of potentially business chip on any any the behavior of RedHawk electronics or your had the wondering impact consumer customers?

Ajei Gopal

No.

semiconductor talking side. that, cycle the -- semiconductor the the of manufacturing think shortage of in that different the I I a you're design about of chips availability of and that think a has sort that's

like for there to and robust demand, see semis demand our continues -- demand both to products, the in growth electronics. because continue robust and We be in

are demand technology. fact RedHawk the into And market customers the RedHawk-SC and starting a So that knows And technologies. in particular process we've obviously all, pay negative more more is for usage more for at going as just that translates to the our to of no those advanced tailwinds in impact off. made investments and that

Operator

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

Richard Valera

but really to would the companies seeing relative the to your that contrast congratulations help, going due EDA new Asia-Pac add rest welcome I'm meaningful other pretty chip of can't to let seen the business a And business demand of least that that, strengths, you've especially pure restriction seeing ask side out China. great Thank just but kind be and underperformance COVID, kind that And some and to And to and of business Asia any I on cited role the Nicole. with Maria centric of you. at exceptional to of the a with that. me play you fill where my strong in wanted are about run your

push into of going of and kind that can covers? on give what's under you a area the if wondering just us little So sense

Maria Shields

Yeah.

also is relative the some of performance large So, Rich, the like deals. influenced I'd timing of geographies other Asia's just say what is to

take that growth some a -- we that there at XXXX. of enjoyed deals Asia-Pacific so, some XXXX, you in the if were And drove look drove in that larger

have is We licenses like that U.S.-based is companies, we get specifically of because us, them for China quantities many in to that have when cycle. still And our on software the a those they get to markets perpetual of of money. -- one business impact felt consume of China. market the through the And timing next they to of will then access just the tend large sanctions

due sanctions, the in I China what you XXXX, we but of India also saw underperformance in think influenced also that not during Asia-Pac's only So, to underperformance combination the saw in results.

Ajei Gopal

just I overall is out less X% China And point business. our that than of

something like I think X%.

a relatively a of it's small piece So, overall. business

Richard Valera

smaller headwinds some the I tried the the from you've Have XXXX? Got that it. -- particularly a side. you COVID, as in talked was customer headwind And to about what then quantify all had just you've know at follow-up. on

Maria Shields

strategic some around didn't issues can't liquidity were the enterprise of versus have invest that precision Rich, the We with direct, of do we that channel just anything largely performance much to cycle. in customers because more through willing continue that. we the market SMB the saw. the know the seeing and And to Now, that the they

Operator

Credit question. question go next Suisse. from ahead with Walsh Our comes John from your Please

John Walsh

morning Hi. Good

Ajei Gopal

Morning.

Maria Shields

Hello.

John Walsh

welcome ramp with the the next I guidance Hi. as expectations Thank well. questions on help operating margin Nicole, for the you One here, if year. to two Maria for to may. Maybe all and

the in prepared called some dilution the from you acquisitions. think for script the out headwinds I

in the front we wanted consensus, people what a maybe understand versus doing kind to TAM maybe to this year. you? of are guys added of that that marketing also of but picks portion think take explains that advantage R&D, delta I he think of and I you you sales terms up XXX of think your good in SG&A, Should this as

Nicole Anasenes

Sure. Thanks, John.

yes. So,

continue for So X,XXX targeted we portion the year invest continue AGI, people In really to to growth. of of we've year, to last investments a second outside as contributed half it here, point up about expense about people. In we we the going remarks, to a in impact we to ended accounts XXX the of and and the are XXXX, so onboarded grow. at about make discussed meaningful headcount, acquisitions,

but more in roles, the and transformation. We operational that -- are business. to digital be to our in outlook confident And primarily targeted long-term some support R&D and the sales of they're going areas of and degrees, the

Operator

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

Jay Vleeschhouwer

I'll two Ajei, morning. for been personal on my fascinating quarter a you. a note, to But Thank it's you. questions Maria Good direct and first century.

Nicole. for you that. Welcome thank So

the So, with work call solutions, development simulation the what in availability tool rollout automotive, perhaps more subject last a of on would how of AGI you the as of industry of we in touched your of domain or doing more specific BMW an of The you're and chain for or suggested industry applications course. Ajei, adoption question are call, of, anticipating what example now, the that, for and is be solutions. plus you we

you've are you. progress those could about factoring couple Thank or you So internal years? affect company long-term been technology dimensions, ultimate and your over which the talk actually priorities more you eight eight into perhaps that made But interesting. of might your last this on the how XXXX then of which results? terms depicting on relatedly, two or each that years, think is financial in roadmap, thinking perhaps specifically, how was the its or the more for of beyond investments, technology And next has of those

Ajei Gopal

exposed have focus when maybe could Jay, thanks gone I'll structures, questions. couple profoundly back our capability are we this of think over just that So, -- lot a important. technologies journey When all profoundly set point And go address for materials which all of to important led has platform to and that cetera. building ecosystem. makes that And across the it's integrated add about we've of the interest or And that agility et specific these There's brought ace the own combination of acquisitions, provide, in might was we and industry. the capability, time, capabilities as our as from lot with with as that our different from a as solutions like as example, of you that physics optimization support we core we've provide as of to capabilities, build in physics industry our own to company, integration through of components up a through on integrated providing able to multi-physics specific together together advantage technologies, as continued take be outside and a to -- for things. that a a core there's of integrate full-fledged organic that the now it a a started well well have customer capabilities of because of well And our engineers it a together. we've easier customers, that years we for And available that's development. to set comprehensive platform, these we with physics be

So that's we're been the pursuing. that direction

strong as to more we very with use very technical where simulation an part in of applications and have is to the support simulation added but tool, in customers. integrated And be the as dealing robust of and to of this use also traditional within use underpinnings technology a the made on-premises a we've platform that some you. case announcements only of value both a the Our you're think I to And deliver seeing the able available not you're cloud.

simulation one capability. healthcare to are top the We provide specific of the our others with that because able were wraps BMW. to we where space intelligence referenced announcements our and of that made way who we're with partners application our some platforms working on them of and solutions respect architecting in You

would I a one is the And with second of elements just we obviously, talked you key Now platform. about those platform refer respect to ago. the long-term roadmap,

-- but area techniques AIML better supportive where being orthogonal, The you AIML better. technology to you these -- perhaps makes use the into we've Another And be incorporated already products. this see see as because make see can we insights that learning. in insights AIML about from of might investments interesting to We support technologies a machine simulation. AIML continue talked AIML, simulation. see and and our really from Simulation AIML that is, capability, we

into You leave see space to customers can into the in for to that. it products, And let's time, you example, details, or helping more solution whether so go aspects our interest but forth. engineers comes to portfolio, see at it of semiconductor this, and and whether in of just usability, other this integrated helping comes a navigate we the it continue obviously

Operator

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

Gal Munda

taking my questions. Hey, for good morning and you thank

in Firstly, close continue can those deals you in touch especially or maybe And that learned you've little pipeline? the I'd definitely over the just increased and bit pandemic able like last of years, the few the little cycles activity. Ajei, a you like there's see deals. trend predictability that the a what to to an of on deals bit during about larger ability to talk the the sales to terms shows those be It this seems

do last of maybe over little have color years. just bit evolved a say few the So, how around maybe cyclists

Ajei Gopal

So, question. Gal, thanks. the Thanks for

really them. then question we customer some how working of is your how with we integrating So these larger with

a through at were had off And customers recall, to solve, the went money was spending enterprise of them a years. spoke had top lot a R&D, enterprise were had of powers go-to-market and when really be It So, who accelerate we the years that putting enterprise ago, teams. where had we of specialized started around and being supported but customers by traditional the pyramid, therefore of customers last we and significant because because to such to if complex large in pyramid. only on were together and not also they spending transformation we customer we you the couple couple deemed problems

we've simulation and that on, allocate as we educate That the to When relationship the able as you been thread help be understanding and made and that good and digital other some to within dedicated customers well been I to customers these given lifecycle obviously so And That the possible -- can us side -- And work in representation clearly and side, able very transmission needed that the digital of has so technical the the through would great it comment -- both through customers going some as of continues what's for enable a to that sales product to customers. pandemic, mentioned engineers account. transformation, a important a is about and from I of be of their an they years. to process digital management, digital made we able underway that important. product. a this provide. coupled with The in were area manifest -- large accelerated about to gives a a few us is clear enterprise for anywhere. that earlier, purist account the have to these senses the capabilities help And that's navigate ANSYS on customers

from effective we the to to that are And was day taking can simulation did wherever. that's -- second the be broad Engineers end sort so that at the tremendous value the customers. advantage people the about that of They can provides be perhaps the third, technology look, and recognition most I of thread prototypes. a about can this the effective. said, is for important of one you to help help, we product save money don't money. area, can can because And We That's drives top help can you growth. time. said, help save line to physical accelerate build have you talked that you -- market. also We've look, you we've -- long we've revenue

the less. customers, especially times. You that more with proverbial with do also And tough can in economic resonates

we're to This them accidental. provide. to continue it to build that seeing and that to in drive we simulation customers. and help transformation put the these that has it's no value make multi-years in planned. you of this to their with continue deals been when been sure planning stuff that portfolio not investments show from is This relationships the This large to digital wonder of all So, some has together,

Operator

comes question Vruwink your from Joe next Our ahead with Please go question. from Baird.

Joseph Vruwink

It's faster. comment Great. I trend welcome go it's a TAM on across Ajei, growing engineering, -- wanted just my level to towards everyone. markets. notable to and congratulations Nicole. Maria, end big happening the of you a back one. This and many to to Hi, discussion your system

the ANSYS of I on been expected have the how some discussed long-term would platform that have roadmap. just developments these You compliments planning strategy. would it

that why your question So, developing are or guess, it be the such seems how, these exceeding expectations? to differently now actually is I

Ajei Gopal

the being and particular use presented twin depending significant off as historically it's these we have used, about rate pace that that it in of areas. simulation with on to amount a digital being been. of used were digital may off out on we how so simulation. forth. pointed and we as you opportunity that, we adoption basis, out historically digital -- of the was was there maintenance make technologies. that by did And pointed twin, predictability was for there term simulation not more to lifecycle. from respect we of And a the core analysis We where IoT, simulation TAM We Investor is predictive non-traditional -- business. simulation years being talked like ago, analysis and back number electrification, high if use historical phase XXXX, today in Day and use and autonomy, comprehensive is of firstly, talked XG. did things or vehicles the cases of talked pretty about And solutions our used going. Well, was our which couple We a which TAM, a and the maintenance of you of about go talked affected they of And deployment example, we we electric the the assumptions talked validation product through where about cases and of we then capabilities have that longer and it's of about, predictive design of that what like, in about growth the about talked rate when But some in the variables

The ago. digital -- to this the real. attention a lot recognizing more that on seen they is pay the pandemic, we've the said comment in I are the So in Customers on have were about specifically The that's very transformation call we couple more digital my to spend already. they need certain scripts as talked areas. years a way been of observations transformation. We've

there. initiatives. little activities of set it's I but accelerates that across might in about to demand ESG of that bit that certain high-tech more And importance may like Maybe communications remotely, continuing of think in that has an started of translated activities continue start electronics, do represents other again, does the this I those you see this. acceleration because the vertical to increased some caused -- it come and as end obviously Perhaps, earlier. it's eco-friendly infrastructure? the And aggregate about to an you product electronics not But because which focus the to markets, taken of more of in And for to it's a electronics, level otherwise that us, so see place think the what have already. in entire And recognition related believe working the that's which consumer pandemic said pandemic, of getting it's on area again, into green, increased directly and clear number office And have a pandemic, et to products. see areas we broader interest but people taken like we're tailwind to we of with interact of of How mean cetera? translates areas my these telecommunications, the acceleration. when activities for longer to a

core and these what quantify be. timing. call, the what us market, for elements question the the had of tailwinds it's talked about, that think the going in are to to And I said So, hard effects also recognition I we the is main the as of the

So, effects tailwinds of that not I but anecdotally, these We're hard. the want this see quantifying to we point. this be very clear at it's

Operator

Our from ahead Please your Radke with Citi. next question go from comes Tyler question.

Tyler Radke

and thanks Maria wishes And everyone. and taking to question for morning, best Nicole. good my Hey,

that the as the think you kind out budgets budgets past, about space. guess, to XX% the put industrial throng up, company, of the ANSYS, be of the I And peers are one the And some I with your in strength growth than restored ACV faster seeing come online. ANSYS organic R&D of a appear QX, how first might of typically budgets would that talked some large implies has downturns. when inflection sees your in maybe see it ACV back these -- organic might get and here much an it argue, growth, But of next flush, certainly, basis seeing budget really doesn't currency, you're year. at I some constant you're look deals, on some better guidance,

a what's it driving there here or relatively the end conservatism? strong caution, in put what I that? is geos Thank seeing you're the or up would the just given such certain CFO So, just drive I Are results know cautious to guess, trying markets you CFO, you. a that quarter. -- understand, transition, outlook there's with

Nicole Anasenes

Yeah. question. Thanks. for your Thanks Tyler. Thanks,

characterize is therefore of of the me that the we put and I'd of rest out And in significant is Maria first what -- spoke quarter. some I'd thing overachievement the say ACV, the let So, the assumptions guidance. kind which point the P&L revenue into about, and of

about ACV a to the on headwind is alone overachievement point side that growth so two And year-over-year.

And for simulation been to things really lot it. And transformation. once so with benefit past strong we're we in the through years, that we've come digital because are leaves -- the investing a a that to -- we've that strength, the of demand well-positioned investments customers -- there's fourth what the capitulation get optimism quarter us portfolio that out going over seeing their of then pandemic from we're in through are the pandemic, position what made that a the found the we on accelerating of couple we that of based it of things

going to I of the the COVID expect is continue really uncertainty. And what's to think of see by thing and year, baked downs speaking, governments generally activity more expecting half to into to what and ups and we're the the right half do to to see have is we its support being first start economic guidance that economic because open is the to development. second momentum up continue and

pipeline and the And revenue more so, like full years, we customer really into to visibility it from quarter other the the year perspective, we're and and strength guidance deals loaded driven expecting an pipeline. of have activities. into see the ACV a timing of backend by reflects the multiyear large planning first the And

in right and we sitting the years perspective, significant to engaging little you just in a as we here more. throughout situation difficult with our it's is fluid sitting the level the quarter, from we So, where predict saw now, fourth of February, continue that around are a such but know overachievement updated we'll

Operator

from question RBC comes Capital Markets. Matthew go next Swanson Our from with question. ahead your Please

Matthew Swanson

all not technology companies my is This strength for open some be it talking Thanks. both thinking this there of make and pandemic, you. the I'll well throughout Matt pair value Look some Matt working this might with pandemic? opportunities at up A on congratulations. through maybe here of around from maybe sensitivity weren't Hedberg. welcome. to standpoint, Yeah. to a this that does to some M&A, that year? mean, maybe for question just philosophy during Swanson just given add Nicole forward Maria, some around your or companies it as time And able your just you. change challenging for able be might I

Maria Shields

Yeah.

complicated past to for we dedicated the got align and companies acquisitions of look, our that with strategy like that extremely equally say culture. important M&A. excellence, active dedicated that's and dedicated our successful are always that been portfolio look We've technology the customer pervasive us because in So, looking compliment is, have an these world's pipeline of aligned always Matt, most things we're problems. that and what simulation, and the I'd are team the are We've as for to advancing integrating that with a solving years, XX-plus that we over

to so, our we to add the this continue leadership search portfolio for to opportunities actively maintain continue to exciting And and in will to space. absolutely

Matthew Swanson

your compelling like feel just customers. really might you. was you Ajei, especially little high of how process announced playing and bit can to Moxie, And about environment demand ROI I one Could those -- I a more in now? just kind talk the a that's right this for quick little bit just a then, solutions And be about which Could talk week? last just into broadly, add if more you then

Ajei Gopal

mission can L that as analyze STK really And such AGI's capability that's make engineers to requirements. system -- toolkit. be models they But being don't Moxie sure new Moxie to a in execute again, it here. a environment, it's virtual by the able models essentially and simulation AGI So, too meet to engineers behavioral want -- detailed get offered validate I and to is enables to

we're technology. excited So, very about the

I at And our and think, it certainly perhaps can adds to our more later portfolio we the point. a capabilities. about details technical talk

Operator

session. end with to gentlemen, and we've Ajei remarks. time like today's back the turn for question-and-answer conference ladies that the I'd And any of for reached over closing call to the allotted

Ajei Gopal

ANSYS was operator. strong great ending quarter a Thank thanks an the world. a XXXX, and all team around excellent QX one to to you, our

World, this to discuss. We use to was the XXst relationships. This as largest Simulation which on They deep press, business, feature continue the will This with our demonstrate strength of upcoming as course, will XXth and well during our as April tens customer those a year. of Johnson our Northrop event, World as Grumman. customers such virtual of HPE, Several of simulation year. thousands of customers, [ph] Me to students, investors customers Ferrari, & last its of Johnson, of kind, and, year prospects Travel Simulation

register rest of attending Thank hope you can enjoy call today's day. You by your simulationworld.com. I the attending and you for

Operator

for that conference with We gentlemen, and conclude Ladies attending. thank call. today's we will you

You disconnect your may lines. now

ANSYS (ANSS) 25 Feb 212020 Q4 Earnings call transcript