ANSS - Earnings call transcript Q2 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the ANSYS Second Quarter 2021 Earnings Conference Call. With us today are Ajei Gopal, President and Chief Executive Officer; Nicole Anasenes, Chief Financial Officer and Senior Vice President of Finance; and Kelsey DeBriyn, Vice President, Investor and Government Relations. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. Instructions]. [Operator event this being is note recorded. Please time, conference over this I would the turn to like to now At Ms. DeBriyn for opening remarks. Please go ahead.

Kelsey DeBriyn

Good everyone. morning,

key our release, as site. impact the information. of data our public all our the results contain underlying homepage the remarks quantitative year differ relative prepared note We our Investor the our and to filings XX-Q future the financial qualitative well fiscal affect of site. our assumptions. the regarding business to QX of materially all XXXX and on from earnings They pandemic Web COVID-XX have on SEC, to Web Today's and the which Form could second presentation that financial uncertainty are Important information our document posted second contains that results forward-looking performance and with in been key as quarter available factors Relations link are on updated update, quarter Our and the projections. results related cause discussed our corporate may actual outlook and supporting our

Forward-looking any ANSYS today, information. to undertakes obligation of based update our business and as no upon statements the are of such view

would to referring are included opening and in stated. items Gopal, financial that like comparable for remarks. financial CEO, our Ajei measures During reconciliations turn the now non-GAAP President I we to over will to his are of of our the this call, release be measures, otherwise excluded discussion the unless non-GAAP and A various GAAP Ajei? call materials. to earnings

Ajei Gopal

financial excellent I'm significantly quarter in constant for our joining you we QX XX% with guidance which nearly for our ACV at particularly our for pleased across where ANSYS, metrics. performance the all grew and another currency. was key beat morning thank quarter, Good us.

It used the our way us engineers has is to consistent making COVID-XX Despite best-in-class That execute customers uncertainties evolve year and variant our growing momentum go-to-market goals. these of with our world. success. customer first the of drive pandemic process validation their our to against ability in future paved in also successes. strategy, invest pervasive our to of R&D products, comprehensive of deep in simulation, gives from in XXXX throughout with QX business design approach the relationships the product confidence our simulation our strategy discipline. combined for increased of continues lasting the our is development this and and The every and half headlines multi-physics Our to further and our where product uncertainties, are continuing the by innovation, around Delta

demand for to pipeline we such, see the strong. marketplace, in the is for are As and remainder simulation increase continuing XXXX of our ANSYS

of again track and cash Nicole a record continued of our increasing As revenue, that will strength annual we details result more once guidance just minutes. our a and for flow. in provide few operating ACV are execution, EPS

above Americas defense the semiconductors, conditions our transportation our at despite QX, very an verticals. automotive COVID-XX well, I'm major in which our our tech and industry aerospace leading high country. and and proud team the the India, internal geographies related with Looking all were performed and ground of From perspective, in came in way. plan challenging top

We with enterprise also ongoing strength saw customers. our

and small quarters, past two of the trend we medium-sized improved customers. the saw Following spending with

the returned over spending in me to give their we've have While months levels, past future. progress the pre-pandemic added the these not smaller yet customers confidence seen several

and system eventually ANSYS’ RedHawk-SC, digital have solution design. on run its was also North on of chip, the deals power company thereby X-nanometer marketplace. The ensures reduce standardized X-nanometer multi-physics necessary for a signoff to to has package reliability the ANSYS’ largest consumption, the and gold standard semiconductors. designs competitiveness that American leader technology power agreement increasing noise in quarter the across and of with $XX million One will This in a multiyear company capacity

We products vehicle fluids also technologies design electromagnetic adopted million longtime has closed a use automated process $XX electric technology dynamics integration including leader agreement has mechanical, and analyses, of its solutions, expanded and This with This additional and multi-body automotive a customer. ANSYS optimization. design is to and noise company in faster, The ANSYS to with ANSYS analysis line the decrease while holding all the and customer to the for its using on vibration topology development jointly workflows simulation working also Discovery optimization. ACE develop teams is backlog and and get costs. market

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based cannot barriers solutions are decades of on high entry experience potential competitors. easily be Our for creating our and to duplicated,

the which cuts spend could just will scalability. namely entire entire hour capabilities, key one differentiator I our While across product’s today, on focus detailing portfolio, each I

been problems customer that size to in history, more become product increasingly recent releases. simulation extended software those the ANSYS challenges in scale leader and leadership our that scalability, As Throughout a has have of requires can levels. unprecedented challenging, we

ranging unknowns. to solve billion to complex Technical cells ability practical billions challenging to University calculating nearly recent external dynamics for fluid is aerodynamics which commercial by to ANSYS simulations. sped Eindhoven with with parallel to computational gas XX removing has record the by enabled The of up Mesh generation scalability from This code. environmental X XXx, simulations. customers at Four To rotating transient in advances next than billion cells. customers often RX problems of most for turbine massive a enabling of ever, high simulations fluid aerodynamic XXXX computational ago, solve problem simulations customer our Our faster scaled solve the what occur bottleneck and detailed that times aerodynamics generation CPU ANSYS have in knowledge, phenomena, in create our with resolution, Fluent the to remains the machinery turnaround mechanics XXX,XXX enables cores, years challenges best to

users across to doubling up weeks while capacity. and which LS-DYNA innovations In hour Things the decade ANSYS Mesh and speed customer Plus electronics. multi-node possible will have we new speed RX, was last our run behavior product high take to reduce a enables the problem sped integrated has by core XXx, cars trillion bring Phi HFSS the tech autonomy run Fusion model simulations XG, previously Plus and required calculations Mesh and RAM HPC introduced made now deliver A full XXXX half. models to to a additional PCB unsolved breakthrough ANSYS minutes, global And release, XXX time circuit enabled used and latest XXXX an mesher, studies XXXx a variables, simulation that's more reliable terabytes extends and the improved to improved up with ANSYS XX a T. on package That new by by as safer cores. which which and reliability market. XX%. performance, counts, means ANSYS transient Fusion cluster RX, to has meshing trillion packaging our with of on of Phi we a industrial those the more plus over and with Our scaling with faster. memory solve calculated could bondwire reducing customers to just from That by In ANSYS thermal mechanical customers leading XX significantly two Internet

and our scalability, RedHawk-SC manner. generation as power design on signoff are nodes products. by functionality to giving extracting customers larger with runtime. and difficult our would-be techniques product using or doubled, the and along chips ANSYS signoff fully distributed performance that accuracy, ease-of-use more believe semiconductor solving for challenging create they billion the differentiators most and to any solve competitor, CPUs the and important next X.X of the environment our history users resources need XX enabling year to in As to computing is of X,XXX increasingly they of RX, using electrical while one our chip a designs even last speed it a develop capacity problems. and solver solve generation to customers ANSYS product next In XXXX solution, the is over becoming Scalability distributed with We a ANSYS’ compute in many same integrity a performance GPU and grid trillion model devices, set record customers

University We are weeks for the of next date, in students. for students offering download X use free of to from to These in training launched Desktop, and to Icepak students leading tomorrow. our innovation thanks products. additional in HFSS, expanding generation courses and developing courses few new now partnership, around offering our our engineers will products, real-world Cornell an the train To have design million continuing our just train them by downloaded of the ago, applications to we access students develop ANSYS. a ANSYS to for products with world Maxwell ANSYS nearly Electronics including our and solutions enroll the And training. electronics And online to have

to awards work applications. and of an standards of of transistor signal next proud best row, third to level product to to Company technology. Moving the announce us STEM RedHawk Fast reliability, power for extraction, inventive have ANSYS our all. named and ANSYS the Totem. recognized the Color that for for places customers generation meet prestigious for even Women continues be one awards. around critical include we excited TSMC innovators. a pioneers, electromigration scientific power thermal and have proud who excited the women power, outstanding new our work approach engineering to been more integrity I'm of and These for that ANSYS ANSYS with that expanded network the designs to for serve achievements recognized world. as has year partnerships, engineering for I'm of new reliability is with in And colleagues my inspiration custom certifications to and enable I'm certifications five these showcase joint us These

such our validation a ANSYS’ pleased pervasive relative customers QX MSCI our naming and the to our resonating on governance strategy ESG in business ethics, industry. software AA, social environmental, To another and was MSCI market. helping innovate to areas quarter ANSYS, initiatives, is capabilities our technologies. us peers, upgraded with and further great has I'm and leader simulation comprehensive clean summarize, in services that pipeline our our talent to as the in for cited a rating to that focus Turning

with confidence small leadership our to meet of continued to over the with increased in Nicole. product ongoing I'll portfolio, turn medium call pipeline, outlook the give resurgence me momentum our sales And across strong and our our enterprise our businesses, XXXX. newly Our and ability for customers, that, further

Nicole Anasenes

Ajei. Good morning, you, Thank everyone.

quarter and QX for assumptions provide and Let to XXXX. additional second minutes financial me take perspective outlook context add some and on our few a performance our for

above our results which Our guidance. yielded reflect strong operating QX and across all QX execution business our an EPS, revenue, margin outstanding

was large Ajei ACV Both enterprise As and and our spending our patterns our customer better expected during small based. our expectations. quarter and mentioned, customer QX exceeded especially the growth was than broad performed medium-sized strong and

Now a closed types, XXX.X Like strong and second both deferred We performance performance across ACV the first of and grew guidance. discuss and balance. high represented some ACV growing XX% our XX% we the financial million, over was the balance In let of grew XX% XX% backlog from the QX year's growth which quarter strong revenue saw ACV, our double had in the with quarter in XX% me We and a constant strong of and recurring ACV XX% highlights. XXXX, digits, million revenue total business. QX exceeded currency. QX XX%, with increase or year-over-year constant XX% XXX.X of of across revenue revenue total. GAAP sources was line was million representing and respectively. total QX top industries. currency, of end half last or customer geographies XXX.X

of the margin During of results quarter fiscal strong results of a as discipline. our our and is above guidance. margin by from operating revenue continue than and yielded performance business second margin an manage timing EPS solid XX% for the to revenue operating $X.XX, The of Similar of also XX.X%, was our we positively guidance. second which QX to high with which guidance This quarter, EPS gross benefited Operating timing better was end margin, quarter the the above investments. of as investments. well impacted our

for in XX%, of we remainder effective tax expect Our rate the rate QX XXXX. was tax the

sheet. short-term partially operations totaled from QX by receivables offset strong as QX quarter in balance the XXX.X the which was of due the compared from to the driven XXXX. with collections flow differences past and cash on in reduction tax We percent of million cash timing ended a investments benefited XXX.X and payments million, of Our by in

to turn me the let topic of Now guidance.

and for increase We financial cash QX, strong second are Coming and guidance continue year. the in our revenue, current EPS flow QX to build outlook strong our for we in the ACV sales and for reflects initiating increasing confidence our the full quarter This in the finish pipeline. outlook off year. performance our broad-based operating

range For EPS and the in revenue third to $X.XX. of of the $X.XX in quarter, XXX range million the XXX we million expect to

revenue, our outlook. As I mentioned, year, flow full we EPS for ACV cash operating are the raising and

in our year are outlook range be to or This full ACV We to currency. the X,XXX represents to constant XX.X% in growth million. million XX.X% increasing X,XXX to XX.X% of of XX.X%

currency our confidence raise the ACV QX the guidance headwind. offset are a year We our of year and full This was performance our million pipeline. increased reflect raising expectations, exceeded to by dollars which few in full

XX midpoint increase our May growth translates raising are guidance. we of million, by X.X result, to a of which constant points guidance of currency our an ACV to compared As the

a growth variable. growth to look best ACV as be at year can it is full As reminder, quarterly

QX As May, have quarterly will growth the we our in Based we growth ACV rates on in mentioned expect highest QX, the to performance ACV year. XXXX vary quarters. QX for rate strongest QX the in being two and with

reminder, XXXX skewed of value years, the we QX prior expect still dollar will highly growth towards be comparisons. quarter. be with QX muted Consistent the to a As given fourth the ACV growth

reflects year currency. X,XXX We XX.X% headwind. strong to revenue of increased guidance, by million million in ACV full X,XXX few expect growth our range in which performance offset Similar in a of to to this X.X% QX revenue pipeline, confidence increase is our to of be XX.X% the our and to constant or dollars X.X% million, currency

result, which May of the million, points revenue a than growth As we raising by constant guidance our guidance. to XX currency of midpoint of translates are midpoint higher the X.X our

introduces XXX the ASC volatility know quarters. you growth As within revenue

by growth less and on growth compare business. be second In full of mix to variable. of a the However, revenue basis, year the half impacted XXXX, revenue is expect revenue we year-over-year

QX It strong currency timing range increasing that EPS of is investments that our are the a of noting the and expect was We QX QX $X.XX. in half worth some of our of performance EPS year offset is headwinds. moved our the full performance few second $X.XX of and now to by by incorporates cents increase to EPS strong to from year. driven the be This

cash to flow turn our me let Now full year operating guidance.

XXX toward increasing stronger and XXXX million expected to outlook payment continued This improvement increase are levels. driven our range XXX to of We is a million. terms collections by pre-pandemic year, during the in

with We end as near large flow of deals half the cash are first most strong is or quarter. half in by the pleased operating cash close our QX whether reminder, a second flow. impacted the But beginning

recurring outlook, growing longer-term and the as we financial to model customers best-in-class to prolonged lines a operating that strong up we our business Operator, margin be XX% open which colleagues margin us And range range time well XX%. purposes, of execution document. sales assumptions strong modeling operating outlook will uncertainty. would of QX continued The and for are to execution full quarter, deliver contained for team of I objectives. been For pipeline in to expecting we’re in remarks and the commitment our The XXXX questions. now quarter fellow XX% year, performance. to in and this the to our financial the team during third well to currency to factored take on rates ANSYS sets of specific their phone expect thank for the the other combination QX prepared the around Further XX.X%. continue with have delivered drove XXXX our like during details into as our exceptional

Operator

now Please will the will [Operator assemble follow we to question-and-answer We begin and our momentarily Instructions]. question yourself up. roster. one session. At limit to time, one pause this

comes with ahead. The Securities. Wong Please Ken first question from Guggenheim go

Ken Wong

an in really Would the did ACV, just maybe Thanks a raise? sort here. of strong conversion for the I as wanted confidence Great. giving the you performance potentially characterize actually that’s the results you overall higher demand Nicole, pipeline or check to boost just see my of rate uptick taking question. to you the and pipeline, on increasing in solid

Nicole Anasenes

Yes, you we where quarter, we overall, broad-based translated saw landed but not to XX% which a Ken. was on I and half the were delivered. pleased across Thanks, was geographies in was second the know, it the first it Yes. fantastic. went The really really say team that pattern with for which overall only would as growth we that to similar industries. half, very back QX,

cautious were their bit customers year, SMB. people second than and because showed about say a resurgence or we would great, recall, was row, side, really expected kind SMB that we localized momentum was had the quarter, in we the on it kind underlying bit kind quarter I of for As a And of of there expected. of committing you to narrow into which enterprise a the seriously enterprise we as R&D everywhere. that in little and accelerating to But out the are It saw, coming of development. form. more anything expected portfolios to got specific, in second just and was the wasn't SMB the perform we get,

saw would ACV had I we confidence for points kind the it's really by quarter X.X say contributed in overall really So year constant the half that the of the raising at that that currency. the and to performance in we second broad-based that our first

Ken Wong

love Not are way are? of on kind Got it how Any kind if to there, you normal the mentioned where the back to business? sense kind would way way sure for might there. if close a piece it. we sense more SMB, consider there we levels. quantify of the much a pre-COVID we're what of get of for gap And was before XX% of is towards But guys to rough to back you tracking that also XX% then touched maybe there's of the that you of

Nicole Anasenes

Yes.

we As guidance with SMB was does market -- strength not and there's of full I over back back. speed the of these to the What were into momentum counting of year pleased before, really would a we the lot reason more this coming the activity, does the those going pace we in quarter the market. we rate that by have pre-pandemic mentioned It on saw really I saw. how levels. certainly the more time are engagement. too, lot There and But customers in is a happen terms vary is, coming

in And so, is say were while a rate pre-pandemic end levels the don't to by not give year, I at we what happened quantification to -- that of you, would something sudden really a and a contemplated if have I accelerated more our we've not of that's race. back it specific that's the all

Ken Wong

you Thank Great. very much.

Operator

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

Gal Munda

thank morning my Hi. taking Good and for you question.

light incremental perform, on of forward? Just investments of kind also it which continue in to we just how The raise of flow, resulted the a replicable of bit side? XX that that potential suggests what in for you is maybe that Is flow allows cash cash cash could is kind upgrades on operating -- first operating to something ACV one was still is It's kind and million or out that seen the as we've of little a in you the year. terms because outperformance ACV conversion. you in that little also ACV XX brands other in going that kind and balance might something million about reflect bit interesting, of something flow estimates XX%

Nicole Anasenes

Sure.

flow. let apart break the components So cash me of

ACV of exactly to revenue more you point as because at out, cash XXX is look is that to flow the recognition, way the right highly way so correlated treats So it.

it. the components collections piece So there's ACV to There's two along side. and then there's the the side, payment

than terms, terms more pandemic. maintaining collection current of accelerated on payment, at and lack they an the balance on payment have rate, so of rates higher up level people seen both each of had at we through extension a in the And people improvement overall asking a on for catching side,

that -- the So quarter this can dynamic acceleration the The flow acceleration particular headwind was side. all particularly tax the really payments, more of payments of overall. think is contributing timing and to quarter the in in distorting of I on part tax have a on a cash

due so, flow pandemic during as deferral the recall, cash and the in in year, quarter. this second the some you And that were then those there year as last quarter, were incentives second expected raised payments

momentum and two, overall, payment so, kind the been count would to behavior we're to see and a the capitulation And happy And back on that piece nature not of still quite the normalized where levels. the covers, around just good. the expect that is because what of between of relationship customers’ in at. But underneath with volatility little can the you collections I we're bit has is of really kind around

Gal Munda

indicator Got we the have from you. well you of any a Is said see indicator, come it earlier. that business kind other also, are kind rates? is of what you to close quarter plans that And then way And as say close larger of better you're just that little at as a Did SMB in. you really follow leading potentially has deals demands The a the is starting good bit that the a strength as to starting that well? something could underlying say if SMB of up, usually

Nicole Anasenes

the across I SMB think side. a saw and we that growth and enterprise performance the very side balanced

seeing what the continue and investments overall. using development needing And optimism so simulation we accelerate that around customers make their to are to are is to roadmaps those

before customers’ and the that of quarter statement a really in the was quarter. is was really meaningful momentum things any the overall -- other seeing that in the timing no dynamic there in after performance dateline It any so meaningful here overall. any than we're normal degree -- of normal really followed behavior to And the

Gal Munda

well. Awesome. Right, which Thank is as you deals supported much. smaller the by so

Operator

Stifel. question comes Adam Please ahead. go next with from Borg The

Adam Borg

there the Cloud, post taking ANSYS an so about Maybe as are things we update questions. think Thanks Ajei, for how and pandemic would just Hi, tracking plans? love much on guys.

Ajei Gopal

Sure, Adam.

access flexible resources and allows and ANSYS as to So, managed the as HPC fidelity And that you essentially you elastic simulations. higher as as mix cloud and know, a run a an very hybrid allows includes that know, well provides elastic pay-as-you-go licenses. larger customers match And licensing supports well Cloud lease to as as to that model also our model model. customers

ago, And significant could they by that most well translated we've customer SOCX most that's we obviously usage ago, of for which months Now a a able metrics -- And probably capable simulations the we we the cloud conditions to we capabilities about that customer, to course, people really of a about also done you have. as to hardware very take Xx, that as, of we completed done cloud they're from overall are their talked customers. release cloud, the in months certification focus result Van a up to Oord, who of positively as because recent on what and DYNA, the very a Lumerical of continue as for for augment greater experience. and business. working well added we the the few advantage couple with we We've this products. how is year, a cloud, nice speed perspective, we've number that a published deploy compared as Xx external ANSYS have has LSTC, the with This about as internal ANSYS seeing measure for And home. support think activities time we've last our year. And growth if

our So about we're very direction. excited cloud

investments. We a small it's portion And, about have talking early of course, business. of made of relatively the days, our all necessary because still we're

Adam Borg

Nicole, in in so you're license. about strength I'd maybe know to of just license quarters. thinking to just hear more off. been due really up this confidence to strong ability That's about back year? term towards paid bit last really a that just perpetual the That's part trend in think And markets quick love that? growth increase deals and in been few versus about perpetual Thanks helpful. is for I how But deploy the And or half the larger over on little follow like much. the the there's ongoing a

Nicole Anasenes

Yes.

we model in trend than more did the still relatively did lease see -- say would continues, growth we've right. So of that that And license seen of in year, is shifting professional the first see towards long-term past. what the I we the half

So at a bit muted. the dynamics year driven is some periods is of acceleration over perpetual of longer year of where business and of there of time. you're the last But recall, were And time, periods growth business more think as the perpetual you was I return this business just if that overall. little what seeing the been look business roughly you over really longer the flat model, by has lease of and the those some

year $XX high million, was of guidance the saw we last the exceeding in end in not by In there was a terms significant think but only dynamics of the second QX. mix QX one that I half, perpetual of

baked performance really is into in And on go-forward is the a are not so overall. looking the factors It some of how we're expecting repeat basis it guidance. that at that underlying QX

Adam Borg

Super much. so helpful. Thanks

Operator

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

Jay Vleeschhouwer

Thank you. Good morning. first. Ajei, for you

demand high forth. Are and in solver business. large important and becoming you so noted Within all multi-solution those within Granta, deals? talk tech your well, or of as context the semiconductor sales, seeing And remarks, prepared Esterel, deals for the your context could your those such then of [indiscernible] as smaller incrementally Minerva, within you may of you the about any brands incremental that be those the

for QX. in your keep Nicole, yet support And over to been last of positions. consulting openings thoughts then for years the could number As over you're this you week kinds business of number anniversary that XXth perhaps be to the of how thinking the for and sequentially share down next need services lastly, technical uptick business the and in next is investments about closing, months, few and revenue growing? you you'll making the of your that discernible were your there's think the Apache acquisition internal your And a EDA years,

anticipating So of that, activity? infer improving in engagements that pipeline are should terms you and deployments we from an

Ajei Gopal

the question. Jay, thanks for

me your about products. smaller or start the question Let with comments some of

And some either others on specifically greater came problem. we an through see products acquisition. organic in leading customers As provide as are to opportunity of opportunities to market embark in an know, when we see organically customer solve you development, we those us or the the where where developed, functionality M&A activities or such

look delighted And what And I'm panning an in of do the is an by that we out. seeing or so pan analysis we're acquisitions that generally all development out all we to driven of fact is like. market of that would the expected see internal what

talked about and you centers, our we're about Lumerical overall data part a product photonics, very attraction that's because obvious into You seeing portfolio. this think there, example, important obviously as fits for

when our in of we critical the customers, go mentioned, capabilities, end can to end with talk that them they're that needs in set see such And are products the problems addresses dealing end to that as may with. allow end to playing able being some most stitch complex workflow customers broader and we Lumerical, go where you customer go to an a roles we solve that an repeated have. that solution portfolio, smaller to where So you capabilities can to across of includes the to important about together that

semiconductor. business excited, So tech the like a performance high I question, portfolio we question. have first generation our comes no of number when your a XD-IC next part and from has of you our to I'm respect portfolio to in, think your obviously portfolio that's second semiconductor I and our the about activities. our number of Apache That's addresses our across more hopefully with think With going way through products physics, acquisition. And integrations for and deep of and semiconductor ANSYS years. and entire our organization longer And that's you obviously, challenges, think in the been that if start -- our between electromagnetics all semiconductor will. Newtonian

the very capabilities. so And portfolio, I'm excited about the

leading excited have with able And I future. that the solve they're think customers offerings, and challenges we're us we there. market board across about to the our tell tremendous products

Nicole Anasenes

question. services your Yes. And, to Jay,

year that we the more because either to particularly the of do this or being and engagement. really of are Delta imposed nature in-person, -- impacted by some self-imposed variant in-person we restrictions having services just of see with the customers COVID, specifically, services expect So around disproportionately

in any any our of guidance services the the meaningful anticipating increase not business. we're change -- trajectory So in

In we're customers I’d with terms investing are you're sets Ajei together we that investing helping now multi-physics. areas around just skill the yes, referring in to, business, of the in say hiring, we you that, connect our and that discussed are physics the

a that we And is also services -- support we're those some services is pipeline seeing the sales, of also sets business business in individuals process invest continue so selling those And investment the reflection skill around in. are because that to degree. also that in momentum the to

customers seeing set do I to ANSYS a in you're overall, to good the their accelerate and of think so. R&D what that's starting is why this momentum So, continuing space. we're And around -- investments leveraging pipelines making

Jay Vleeschhouwer

much. very Thanks

Operator

of Bank with comes from Please America. Andrew Obin go ahead. question next The

Andrew Obin

Yes. Good morning.

Ajei Gopal

morning. Good

Nicole Anasenes

morning. Good

Andrew Obin

indirect the you might this have other gaining just it's Just seems very are any traction, Are on that? or reasons growth? that previous channel, performing in for them And touched unpack there well. really partnerships looking your like but at comments, it

Ajei Gopal

with are SMB, indirect some we're supporting of channel think consistent while handled down because should in sales of you global who are lower our of are growth our force. indirect pyramid, seeing channel larger in a the direct the Yes, the organizations by oftentimes that some partners customers

of you're the dynamic. and that So reflective that that's is really seeing, growth dynamic that

Andrew Obin

a broader And question. just

macro, quarter b, this the partners’ put just and reopening; into products your and outperformance if the Internally, of in investing attribute trying you're internally, your how outperformance structurally Your quarter, buckets? sort more; as getting outperformance Sorry for this you're these three question. short-term this your it expanding structural your adjacencies. how to as strategy you c, buckets? or would sort our a allocate long long-term One, of you think you sort of three ecosystem customers thing into do strategy,

Ajei Gopal

end individual market allocation of to one are point things each to on just we physics, capabilities At day, is built a to portfolio, another, related what all specific it's if think reflect leading you the other. of which a are bucket connected of set these because of difficult together. I the ANSYS the really to

of most capability this multi-physics the that so solve as they And they're challenging necessary for what's some is customers problems with. dealing

of are journey. offerings or to we electrification, IoT, the and have significant they support them be for able we to are the so have for these technology, support we can them in on their a all R&D or you efforts. And have amount simulation their that are capabilities, we relationships, XG the example, looking think And customers areas as complex money, investing about of

very So that's a aspect. important

when them. to goods need got the have people You've right

cash, to as to pandemic or which obviously, up The around post that world is recognizing obviously second than start these SMB a the customers that medium that, spending emblematic looking opening of customers products concerned to world, seeing things in potential have most in design, investment They’re end -- right. fact SMB saw concerned reflective small respect of are more that in the we're lesser because completely means going and more customers, means R&D. are with they and But normal customers are broader just successful, for things the be to that I them the recognize be -- back are future a the to smaller not up have comments. open now where early seeing to after investment of shutdown they certainly customers world have that what at my the to they're is in have thing in to there, they certainly after get want. a we're of pandemic, companies they -- less, continue that, resources is the cash world, an companies. the pandemic, we're some most perhaps most is there about make business because investments you And about set customers, the that they larger demand seeing around the have and mentioned pandemic world And an people order which world, again, in around they R&D economy, the and product to for and

is And things increasing. So also the work that those I think together. two demand

to have have You products. right the

the have growing You have demand. to

If And we're provide I are didn't where excited think to wouldn't we very we're them, have can going. that's And to what and you necessarily -- is able what we either the the our market seeing. about you of results. customers that one deliver exactly be

Nicole Anasenes

Ajei services team. I of add would and point And is what just were throughout additional which said, Yes. alongside that teams and sales the the there customers The one to the execution ANSYS team as coming puts in a in and of of making made that are We've to. out investments And that customers throughout it us strength position that our decisions pandemic. referred pandemic. customers Ajei supporting team the

know, enterprise long. sales are you software As cycles

end. delivering they're the ready customers to if that not pandemic, So you're you're at like to not in and the you're not not with times time value quite where a in they're Asia just your levels there it even and committed the comfortable pays in see invest the customers. they particularly that where in And those other team has have like you in off the markets some been relationships with deepen of and can managed Pac exceptional and that our places way

Ajei Gopal

follow a there up? Was

Andrew Obin

you myself very put much. Thank Apologies. on No. I mute.

Ajei Gopal

Thank you.

Nicole Anasenes

Thank you.

Operator

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

Saket Kalia

for taking Okay, just a you, a little fitting and just housekeeping here Hi, of question. Thanks for me my in. great. maybe Nicole, bit questions guys.

Can the XX.X%. think organic was I of to mentioned remind inorganic? much versus how ACV guide is that you currency constant just about XX.X% us you

Nicole Anasenes

Yes.

of to So year. we at talked the about AGI the year, this beginning million contributing $XX

current seeing still the we're that trajectory. so And as

Saket Kalia

story, And then Live I it? and about of for bit little about what of the for is curious you, noticed -- how a you Okay, just a how talk Ajei. my got longer trending? update Can maybe feel that's bit long-term a you you Simulation sort it. and a helpful. follow but little That's up, feel

Ajei Gopal

right? Discovery, mean You

Saket Kalia

absolutely, Yes, Live. I’m Discovery sorry.

Sorry, I was calling to PTC. Discovery Live, yes.

Ajei Gopal

Yes.

perhaps I back And bit gave it real, of one the interesting excited a to think can very who's Discovery. very I a way. we're So, using tangible, in perhaps script, was more which go example little I make the customers our to look, about in Discovery

done So a design complexity simulation turnaround ANSYS team and the maybe because they larger time serving flagship the is for relatively team. some thermal products. But by the of simulation. of have of particular XX using detailed days, analyst typical management a is flow small the customer, experts this And

the Discovery as a So simpler simulation the they their for design engineers introduced on own. do way some to of

like things or distribution flow drops. So pressure

themselves. So that to design design for the analysts. system they're their able simulation to off components complete hand before by And improve a the they can they of expert do the

using them days. designers down and train geometry work it analysis changes now could something borne out they're limit a something can that's use where weeks they're the their so using thesis couple some capability they outsourced CAE from And structural basic is some changes. was, example to to some help also that's the does this So a to have outsourced time -- And this of amplify whole of we really of and that on it analysts, what on that's an this simple had of they is that for design the engineers that it design takes also spend, for iteration here. customer, Discovery the couple

some perspective. technology. you gives that very So We're excited about the

I technology. of obviously We couple in customer And continue examples. the mentioned a to make advances

of around migration PTC’s and a continued with about last traction X. I earnings call believe Simulation Creo expansions they driven the week, Creo increased briefly talked Live. on use by PTC You And reported

our Creo are OEM-ing Discovery into and X simulation, know, their enterprise Live, ANSYS Creo is they release. latest As you Simulation Creo products

And process. customer's comes to And about customer helping so, capabilities where obviously, that. simplify there's that they real-time talked a the simulation also increased from traction the were design

So technology. market we're to strong. as what is seeing relatively piece Obviously, dynamics we're perform around about small it's very, the the business. of we It had our very expected. excited a continues But

Saket Kalia

guys. Thanks, helpful. Very

Nicole Anasenes

Thank you.

Operator

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

John Walsh

everyone. morning, Good Hi.

Nicole Anasenes

morning. Good

Ajei Gopal

morning. Good

John Walsh

bit about could little I acquisition talk a you pipeline. wonder your if

to able bolts on nicely it get to which done, AGI. You looks Phoenix like were

you allocation are what seeing there what expect there and Just a perspective? from kind capital we can of

Nicole Anasenes

Yes.

the return like the premier has cash of greatest out, the And example M&A. point of acquire a provide you it deployment on utilizing as second is which So, been able accelerate. Phoenix excess a something of a technology we've helps us been example great to to

Another investment made provides Phoenix in in we model-based AGI. around December engineering.

achieve to which you is consistent overall. should with with model, double our is will execute tuck-in So expect digit which I to growth strategy, we that would continue acquisitions say that

the capital the decision changed. and the M&A decision -- hasn't on on focus So allocation

John Walsh

to Great. that. And maybe just up a follow

quarter, looks had they a out about During release customer the press relationship expanding you the a had put with ANSYS. like

stringent found that. was they're reduction I interesting gas more how things the regulations simulation to around of greenhouse One that help and using

how of sustainability focus, to the sustainability past seeing customer? be bringing to is or any it you drumbeat help louder. seems kind this that still can add-on what an and already customers. in -- still about to is customers the accelerate you're Are the decisions your extra and you louder talked around just But You've benefit getting

Ajei Gopal

for there's important for driven rate other. the which of part the to different decision is of at, So around and move obviously about you're customer a really about just broadly. example, is make big pace for clearly in efficient. say, When eco-friendly. fuel industry, aerospace and future wins, look I we think seeing automotive example, sustainability We customer of the the the dimensions you to engine adopted was the let's simply talked more by vehicles companies, electrification, engines car last number in electric be discussion customers. right? different will and trend across that's a And and the a internal Obviously, more for combustion talked issues one making their where which from cars some at the aspect to the being about in motivation the industry, And -- emissions year

fuel. was reduced it fuel of was increased it about light-weighting, efficiency consumption, about So

driver And so aircraft seeing even new in engines, design a that example, engines. of you're primary being for for as

offshore absolutely sources. again, their But broader a Oord sustainable And Van user. I renewable simulation it's so They're, wind of a on course, And turbines. mentioned building they're is energy focus part trend. of earlier.

eco-friendly, ensure important design as those to purposes are these obviously standards, simulation things And meet customers really can and product of of product well that all a requirements. drivers compliance role. So plays as

John Walsh

Thank Great. you. I appreciate taking questions. you the

Operator

Securities. Blair from comes Rosenblatt question go ahead. Please Abernethy with next The

Blair Abernethy

and Thank you quarter, nice guys.

here, a vertical. Ajei, Just vertical auto first on question off the just

look remarks at look introductions the from there a stage and new does like? change away obviously ICE model have some prepared ICE shift to and grow auto years footprint sense at you As that in pure lot vertical vehicles, move vertical less And the Does different do there. a you expand healthcare they to bit? Thanks. or as big Is you obviously the we how train And is -- on the ANSYS product. algorithms. it secondly, a might opportunity a ICE from vertical? from in XX healthcare called it out a software your just engineers to large electrical -- in completely have in the this development what design electrical, out using you maybe simulation Can now, win maybe be that

Ajei Gopal

technology to Firstly, support the that a as and capabilities with respect that to the a our perspective have automotive, us what's we from and is product exciting relationship perspective transition. through for they customers go

with car that motor the you engine electric management the one sort think transition, they of above help electric expect would it's with an with that replacing But help all beyond challenges facing into you about simply are our just our means of the So another, car internal electric opportunity go an an trains, electric can technologies. We them with battery combustion environment. drive internal redesign. this elements make of of would combustion replacement powered not we to is that if battery as propulsion and them design, of can that, some the an for customers customers

because the assumptions that battery concentrates a assumptions relevant, car, distributed redesign you it, of engine the uniformly to have are of car. perhaps the are longer in front in have car, an front weight previously now they the that's of which fact, floor no made the the across of In the because the those

that the originally way so weight changes the changes was assumptions And that the distribution car of the designed. and

increased relied And is that an who what rethinking saying, all is companies in leads generation simulation the place for to to on of companies, a us these one and rethinking there auto simulation. so of ANSYS car technology support build and so this And does mean to drives use of from there historically taking especially car? a reuse to significant another, electric certainly have it the of for

the you're that will with dealing have which might think problems is You the problem, dealing complex be crash structural right? think protected? been do crash the for the fluids airbag, So passenger of And how have the the may you're with passenger multi-physics integrity, and been, with earlier because you dealing deployment the design, a about about you problem. that's

nature a be So simulation. need addressed that multi-physics there's problems in to through

battery place what likelihood it become and is it a So fire that, you starts that the some take says, Now more Can of and to above it a solve or is, catastrophic problem? beyond result of that more kind might the rupture? fire as question goes challenging. a of and a well,

aggregate the well just per so se, supporting design And our and of matter of actual strengths car capabilities. is sort the not that this engine plays the our and in the of transition it is to a

about Now second to question your healthcare. with respect

the was to that healthcare continues example, is and in business, look design as medical ANSYS While part excited increased of the we still as quarter. we the devices. a in, performance in the of a market. in And to the about overall relatively But the simulation well validation small the obviously and we the manufacturing grow. use for And are simulation of do reflected future,

revenue decisions making day, associated supporting of are think in I working end specific not really early, that how computational early do of There's those the simplified helpful. simulation early stage. a support who And, adopters trials as vitro, the space. we is of at obviously this in-silico But you course, very of of fluid just opposed simulation are dynamics. vivo. stage. And about the use technology they’re using surgical with outcomes. really be is the target fantastic of to problems we're surgery. to techniques So in-silico it; those as much this physician can have in into very, with early in is And use And about Those some trials

that's packaging put And think of so to able I certainly all being that, future. that the something and together for

Kelsey DeBriyn

the Thank comments. over today. Ajei all to will you. That's closing have time I it to make we some turn

Ajei Gopal

of my all your global for With our company and ANSYS thousands and questions. partner dedication around to want drive colleagues customers our thank multi-physics work, excellent products, So your today's raised at the goals rest network all I your you to a will the and your the with across our continuing all I year, I'm we're thank day. the meet enjoy levels driving of for to we that for start to success thank unprecedented And hope for confident of strong and innovation the for amazing newly And XXXX. call. that, that attending our And pipeline the for world. you ANSYS you our

Operator

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

You disconnect. may now

ANSYS (ANSS) 5 Aug 212021 Q2 Earnings call transcript