ANSS - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the ANSYS Fourth Quarter and Full Year 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 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 today’s 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,

release, year update, homepage to fiscal contains quarter XXXX financial and well key factors corporate as of public and as the financial remarks our all qualitative results prepared presentation Investor Relations our QX fourth have the and underlying filings key contain the Today’s and that future our SEC, our been and results website. our earnings the They of forward-looking outlook, all quantitative discussed our the to our XX-Q the XXXX Important year in supporting document on and which are posted with on information full website. may are link business Form assumptions. Our and affect information. related data relative available

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

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

Ajei Gopal

to constant share for year, ANSYS, guidance quarter and per across was thank and in ACV financial everyone, including key quarter ACV, we in largest you for excellent excellent joining capstone and QX grew morning, flow. all by revenue, quarter which was our Good beat the XX% the QX history. us. currency. in cash an for our We earnings metrics, another

geographies our strong portfolio, industries, of each quarter across go-to-market raise course of We guidance industry-leading enabled routes Our year. and the all the execution saw and major strength and over to XXXX. market beat us growing product

each with at aerospace geographical and also perspective, we Similarly, again transportation segment, demonstrated at with a volume growth. as indirect going automotive grew optic, high-tech our strong semiconductors products in double-digit. ground and electromagnetics broad-based region direct our across digital strategic and from defense, mission and established and offerings newer each all engineering. grew I'm growth of accounts, to industry ACV semiconductor, enterprise, saw pleased our customer and flagship our and From year-over-year were top performance we expectations that product robust The Our each and double-digit. channels sectors and go-to-market fluids, lines structures, saw double-digit. our more consistent material by such

XX Our I'm carbon efficient QX, than customer institutes relationship excited cost enable simulation research with the contracts and innovation LG a growth. ANSYS Fraunhofer, spread energy, that support enabled next-generation German electronics platform to a efforts products to significantly expected, and use, in engineers with automotive, five-year simulation ANSYS entire It's In researchers material came continue the Asia while portfolio in one Electronics. chemical, high-quality will the resource the faster on use of production agreement That a reducing giant contract aerospace footprint. uses strong organization its number use be fuel standardized from across to Pacific, This helping country, and segments. the are three-year the and seven-figure customer QX. multimillion dollar healthcare reducing also our ANSYS initiative key with of the to has redesigns. longtime by sustainability to

relationships even our strong and momentum greater a business beyond. confidence customer broad-based ongoing give XXXX in for prospect Our us and

guidance long-term to walk for Nicole constant currency, in through at moment. XX% of you go ACV. positions which will the our our surpass expect a midpoint billion XXXX ACV target to a We ANSYS at $X XXXX in in about

aspects different highlight often I of calls, these our technology. During

I discussed in simulation August solutions optical our XXXX. of product unparalleled and example, scalability the last call, For on our for

continually like I'd boundaries mounting multiyear a a in the innovation the at for in expanded systems AMD, of cutting use strength semiconductor of high-performance new business in of semiconductor, custom-built of expectations, visualization to to is product. like to and electronics companies computing Furthermore, cost strategic process of by the expensive. to cost leader prohibitively tape and customer. segment. are edge. like success multiphysics multi-die spend is Based with global advanced and their and customer AMD's Given companies advanced key ANSYS of to the and with agreement bespoke XD are simulation node, pushing little This turning semiconductor the the simulation technologies possible. our of silicon discussing what today hundreds their scalable reflects from A was The QX is ANSYS give topologies X.X-D edge a bit process longtime of companies chip turning an develop system operate likelihood the deal of QX, a products failure rapid product contract that assemblies. tools. out, node and millions more important signoff some At dollars are maximizing AMD and growth ANSYS time

across interference As a also integrity. using to ensure AMD's simulation and and electromagnetic engineering access electromagnetic global to the prevent signal increased ANSYS company. to Customers solutions, have improving ANSYS result, teams organization collaboration are

warping simulation design. to high-speed simulation fluid of and cooling are solutions. amongst to the ensure and leveraging relying And they our and data-hungry our a IC are critical Customers structural thermal optical interconductivity photonics to success reliable predicting safety ensuring on systems. best-in-class package Our

from drop targets on. grid. ANSYS because in to automotive rails functions It into for electric dynamic a For electronics a for to voltage industry introduce dimming high architecture technological drawn ANSYS is the the difficult we we can rely cause that functionality the using air-conditioning on your example, and drop, that within semiconductor power key understand. support system. traditionally vehicle our link new which analogous the been or Customers is battery lights voltage by RX, XXXX when recently management graphically to ANSYS, DVD breakthrough drive house DVD In transient workflow to current design semiconductor moment a significant supplier large model marketplace. released semiconductor the continue to advances to is is turns

Our voltage Sigma functionality DVD semiconductor will for interoperability is industry. simulating to powerful entire ANSYS breakthrough for particularly drop. With why is that give is new we throughout of advocated scenarios chip to innovation that for systems companies. And companies. ecosystems, unique switching approach a their allow ability right coverage for leading believe simulating for are semiconductor empowering with increases customers We which This this and from triplets partner other significantly dynamic we decisions the technology has and spur customers always this move the our our an to businesses. make open Foundry best-of-breed software and all important

As this able compiler part solutions benefits amongst IC of back data. for drive to integration fewer able power market Thanks partnership, advanced and standard to solutions bring its major RedHawk-SC to to our to technologies. company, generation a the these for a enable was ANSYS XXXX, annotation with XD customer signed the accurate technologies which faster products, integrated in faster. products next dollar best-in-class contract Xd customers signal value. iterations with Synopsis multi-year, The and to multi-million time convergence Not enables thermal has electronic solutions highly ANSYS into HFSS and only ANSYS we with on automated to faster finFET including synopsis's ANSYS' realize it multiphysics ANSYS was our from techniques. latest IC semiconductor Earlier but

for Xd electromagnetic ANSYS design partners. our new when flow. ANSYS electromagnetic chip Samsung to In Foundry of the Samsung electrothermal as the semiconductor with chip QX for foundry risks a honored RaptorH TSMC as That OIP certified ICs. certification thermal nanometer joint foundry to multi-physics Moving our the Samsung help four has of simulation also Samsung's processes. as first ANSYS package and development has market-leading full partnered well year four advanced for will development award for create customers enabled this ANSYS on silicon. use analyze Intel of to tailor-made and customers mitigate Intel Services become designers, design systems well sign-off as member of industry to alliance. Intel enable for adopting enhances Foundry with an developing of three inaugural most led to advanced ANSYS's solution which Totem chips infrastructure, ANSYS TSMC's more RedHawk-SC ecosystem accurately alliance, ANSYS TSMC an certification and us for solutions an unique analysis. partner with from effects Through RedHawk-SC nanometer to named as

all ANSYS and models modeling sustainability tape environmental, our have is a to launched development to initiatives. power governance helping help its product refine XM material is training reduce program products and offering XM social and adhesive material to waste. for Turning material ANSYS engineers initiatives. that processes environmental, verified users and

And beat off recognized guidance and a international in society quarter STAR This leading as that history. as design also the year consumer all ships great work excited The errors, Finally, I'll to an through our customer our product for and a momentum year culture diverse market across in over in institute testament the our factors Korea colleagues preferred devices. summary, the our material is we of rocket our Asia, the the to and employer with as electric and to has as costs. and continuing our are as was ANSYS technology for photonics software for We Nicole. I'm Thanks beyond. this development to been In while key life-saving QX presented year our Award our for deep recently will That delivered relationships, ANSYS places Nicole? time by products simulation metrics to call ANSYS. Those turn in that, customers optical best us to optics well their grow OpticStudio recognized been streamlines innovation, a capping for experience ANSYS and QX as propel in company as reducing for Module. combined Taiwan. culture. medical China, financial designs exceptional portfolio our electronics, Prism has great now winning vehicles, we well South innovation. Japan with and

Nicole Anasenes

Thank you everyone. morning Ajei. Good

saying start are And XXXX momentum about that optimistic financially the our ever. me strongest our off XXXX in we was Let by business. year given

guidance as full year year. operating the for EPS the year XXXX, financial both and guidance this raised course cash metrics. across throughout beat ACV, our And and fourth all quarters key For flow our revenue, of noteworthy three we all full is especially we've for the quarter

revenue, we key ACV, financial flow. achieved records new cash across metrics XXXX, in Additionally, including EPS and operating company

saw As lines. Ajei as the the mentioned, geographic pandemic, lingering all around XXXX each growing double our well uncertainties across growth product was and we all of segments regions with our industries customer broad-based growth digits. in Despite as

are we entering is customers. growth with a XXXX capabilities wide-ranging of an critical momentum year evidence and Our XXXX our backlog. the to deliver was and strong products outstanding our

let XXXX outlook will our me key to million we a some full in take minutes perspective add provide year financial additional performance. and or and then $XXX.X constant assumptions few XX% for which our Now, XX% on and quarter fourth year-over-year Beginning delivered QX. QX, grew with ACV, in currency. I And

full the customer ACV For across reported in and We recognized performance both and year constant types, $X.X strong in XX% growing we geographies saw billion currency. industries.

XXXX sources constant total. both revenue line ACV $XXX.X against double We year-over-year. and or M&A and total XX% outlined Full full currency, had fourth deferred and of XX% XX% For our recurring quarter our grew both year Investor revenue in X% and of in which QX XX% X% billion, our was year guidance. which top constant was reported business of total currency. digits grew and growth we a strong the XX% the both exceeded and model. double-digit XXXX performance ACV from We closed backlog with this Day, in year, model high of million end tuck-in billion the full with grew of $X.X GAAP growing At in executed $X.X the the quarter including respectively. revenue business and we balance revenue at represented

was which was we operating with Operating XX.X%. positively fourth than guidance. margin an of discipline. had also of quarter operating XX.X% yielded of a gross by During better financial the solid better outperforming This full XX.X% was growth than continued of result to The our and business our with which XX.X%, impacted quarter guidance. We margin revenue. fourth manage quarter margin $X.XX, our EPS and year margin margin of

operating the from revenue For to strong results. similar margin $X.XX, year EPS EPS full benefited was

XX%, collections. was fourth Our quarter in effective from fourth Our $XXX.X in quarter year rate million, tax flow operations totaled full the benefited which and from cash the strong

the million million. XXX,XXX ended with For allocation sheet. during of balance repurchased the cash $XXX investments our had XXXX.X for the capital priorities, quarter operating flows shares quarter and full short-term around approximately year $XX we cash on of million. with In we We the line

XXX,XXX full shares repurchased year approximately around $XXX we million. the For for

repurchase We have available X.X under program. current repurchase for the share million authorized shares

the Now, me to turn let topic of guidance.

we momentum ahead saw gives as to to continue, the expect us XXXX. XXXX which confidence we We in look

billion Ajei XXXX As our the surpasses guidance laid Investor Day. goal mentioned, our XXXX we $X out full-year at ACV

We on double tuck-in model growth margins. MA also leading our digit with industry are of including

our full with start me Let XXXX year guidance.

be our range $X.XXX outlook expect to represents in X.X% in X.X% growth to to $X.XXX full-year ACV constant of the We billion billion. to X.X of currency. This or XX.X%

and we which ACV performance expect see to broad-based the business, growth diversified XXXX. driving We currency have that and is a constant double-digit in balanced at

X.X% currency. or of $X.XXX We to expect $X.XXX which be growth in to of is XX.X% in billion range to constant X.X% X.X% billion, revenue to the

assumptions our the in of some considered guidance. on touch year me full Let

expect and from continued broad-based momentum and large SMB We continue our growth customers. customers to enterprise

assume with than We have licenses. more a business licenses lease our forward of going normalized that perpetual growing subscription we mix also faster

ACV As subscription revenue continues. lease result, expected licenses shifts to a model grow the is to business faster as than

business see our on our today. book of Additionally, how guidance year and is full pipeline based we

to have As assumed a line. neutral our result, inflationary top impact a we

expenses. we This moderate have assumed on impact However a margin operating me our inflation to from guidance. brings

of operating the full XX% expect year range our XX%. margin in be to We to

our As the $X.XX expect a $X.XX. year range result to we be in to of full EPS

to the recurring point We rate expected in year be from had rate due initiatives. to effective lower full savings expect XXXX our than planning which tax XX%, is we tax tax one XX%

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

million. Our is a to $XXX XXXX of million outlook range $XXX

We driven business expect flow to our see levels by cash model. significant growth in in operating year-over-year operating strong leverage

impact capitalization the However, taxes. our law impact income cash $XX RNE years This of other and changes approximately tax driven to by starting is negative legislation additional XXXX. absorbs January tax that million in cash $XX guidance Xst, million

the to Although through which normalize the law The payments, timing over our overall dynamics XXXX cash of effect be the headwinds flow tax lower. tax will cash near-term is expected of rate time. amortization changes creates occur that that

any taxes to legislation we While amended. be that higher still as on about obligation. does is the that and of timing there operationally our the It our cash make possibility current to flow. in to defers cash cash incremental in no the grow are cash short be expense This optimistic RNE, including these will enacted both capitalize we We generation has will a legislation existing ability impact flow impacts not and our remain payments requirement create unless the required term. long is outlook, law

As you in expects timing than the cash our flows faster outlook grow impact absorbing from XXXX. ACV current guidance, can to our calculate operating

success. the be since in continues growth Additionally, quarterly of cash cash volatile, our operating be to can full-year outlook best measure flow

by is We the cash have flow seen rates, impacted significant legislation XXXX operating $XX in to that $XX approximately our far QX other million negatively other so and been tax factored rates, currency outlook ACV and XXXX. tax guidance When volatility in legislation on currency the by in approximately XXXX compared currency on specific XXXX for remarks around contained into document. assumptions receipts, and changes details and in are our Further have prepared million. changes

turning guidance provide with to ACV year we modeling. the Now quarter. for first help quarterly guidance This to your will

observe our is ACV annual reminder a best to business. momentum in the the metric As

which to strong model million we to revenue of margin $XXX range level $XXX have pipeline, contribute to deliver the all discipline in to exceed confidence ANSYS recurring the the like broad-based of operational every of across range outstanding of quarter customer internal a segment a to challenging and or outlook. ACV, diversified thank and delivered would EPS to $X.XX in topping exceptional I XXXX, Heading meet $XXX and customers us of $X.XX. into business in macro XX.X% to range off continued million the a the in high ACV extraordinary another quarter across team's of operating first for XX.X% a expect and enables We to $XXX range million, in our million, and our value fantastic centricity team Despite growth. our the a year. customer The models we geography globe. our environment,

on build we in our and Operator, business, we strategic take while that to momentum, our are open XXXX now lines continue outlook. invest priorities to our on well-positioned to questions. We against the deliver executing will phone

Operator

Ladies gentlemen, and we'll question begin question answer now and Instructions] comes Suisse. the John ahead. session. from First Mr. [Operator go Credit Please Walsh,

John Walsh

Good everyone. morning

Ajei Gopal

Good morning.

John Walsh

all me right? you Can hear

Ajei Gopal

Yes.

John Walsh

adjustment my pressures of XXXX? start and there. the obviously nice incremental SG&A there's costs I believe get are from quarter Well, the which inflationary just the you. Really that'll the the And the first, in to as great. Would should question, that from some sure Okay, growth tax also reverse investments? we simple it about, $XX I how off happen. what's second think you some government If for flow. that performance as the Thank at million, we in about correct M&A, amendment Maybe then annualized make have least just then is out an to cash think questions that? talked we the coverage companies our

Nicole Anasenes

Sure. Thanks John. Yes.

answer question and I'll question. the So your first second then first

$XX that there legislation if the yes, million million would back repeal to cash delayed flow or the added be to outlook. law was So that $XX

of is could that Now tax changes pending. occur as Any in law that repeal. is a that that result

would overall. delay way is consistent interpretation. So [Indiscernible] lose standpoint think it it right if think you? repeal fairly straight would From of the of about an from I just that an a we was the that it that Do standpoint, that then be or SG&A to be

John Walsh

it along. pass on taking I questions. Thank That's there. was great. mute for I'll the Sorry, you

Nicole Anasenes

so Thanks much Okay. John.

Operator

ahead. Jay Securities. Thank question comes you. Please from The go Griffin Vleeschhouwer, next

Jay Vleeschhouwer

release. question me with with you start a RX the XXXX Thank Good Ajei, concerning you. let morning.

the the sales of you you work or example? release, custom the your for multi-solution in what such industries this you for of to custom release comment for the as focus affect industry And additional known one vision the How started interesting your reference large Could on than how in call perhaps components ago the might RPO One coming for demand and you that think with do you according that normal for that might QX. to perhaps the an with think on time, in year process way plan was spaces the packaging solutions. your time? over there QX? And software broader fact periods? or have increase Is XX-k expected a the is RX. since very otherwise of from level workspaces of you then in these new a you a revenue revenue versus Minerva from artifact your considerable out RPO of affect over for XX XXXX. mostly concluded transactions Quite expected you was Nicole, large of next this for number increase a more large this in perhaps month And

Ajei Gopal

Yes.

Jay, first. morning Okay. good

and first take Nicole I'll for Let it me the question hand the to second. then over

is So the very point. good actually point you're a that making

creating management, And of data it us workflow, from in of move comprehensive allows it allows being allows a invested tools come for provider have that supports a together number for allow that and We platform to solutions. a elements of provider other platform simulation. broader for a that to

aerodynamic things now aerospace the UI, simulations. one have for we with our that where to that the you in saw Fluent workflow XXXX -- a XXXX dedicated of user ANSYS external RX the interface tailors release so And was example

atmospheric built-in parameters on. It that and relevant conditions. solver optimizes input and settings, So delivers so output

that can throughout as reflected example to of result made. of portfolio. the that you of being bear we've some And investments Nicole? course the of can a So see power that's we bring an the those

Nicole Anasenes

Yes.

on question a year-over-year. revenue so, We that balance. you're backlog And and about Yes, correct. closed with about were revenue and your the and X.X billion the deferred backlog quarter Jay, grew deferred to XX%

leases. model and growth shift sales multi-year strong of came the to subscription business the the been we've momentum the great Now from strategy the in seeing our to business success

made point you So about to that the performance. strong multi-year earlier

ended close later the end since included of deferred strong. the backlog of And signed Now would dates strong start normalized be some you contractual dates, since commitments year. balance in because It obligations the really were the the executed -- revenue at these QX. these timing these QX of contracts contracts growth But would which contractual of was are some if to the start of in be for had some especially QX mid-teens. before the of still

performance. would so, say overall And that strong really I

Jay Vleeschhouwer

Okay. Maybe follow-up. the update quick one adoption ANSYS cloud. of Any on

the focus the You did Thanks. on with considerable you work could December. new the comment in announce as cloud at There conference Microsoft. relationship EDA that ANSYS Perhaps recently on with AWS by your was at well? Conference

Ajei Gopal

me So and maybe what advantage take Jay, to what's to strategy, summarize for repeat the it of customers. moment how just the I think ANSYS to a to better cloud understand or cloud important might -- takes

consider a simulation. that's So typical not enterprise let's application

vendor, between So required a some compute typical choose that a application application typically to application in that to ERP of amount example. the the application application update. vendor metrics. and It for criteria. like and system their the and that and on workflows the on a for users small a of the their runs user number application a use based database power customer instance something predictable will enterprise The that's lookup cloud the cloud fee enables and users sharing and charge other typically The an involves is data based vendor or vendor's interaction allows a in like SasS with database

application is of different from in to enterprise can Now, that launch the with simulation simulation, enormous. the required be traditional simulation compute very amount

And that's for performance is us or scale multiple a at HPC compute to hours single important so of lot in run simulations And So launch customers. parallel. single why our costs. to hundreds across can translate and computing can that high of simulation into related cores. user a and A can

the have more workloads. their will. private historically so you own in clouds one of data HPC run if their centers, customers demanding Now, workloads And simulation own been has

cloud, private are HPC the cloud or augment public Now some hyperscale has to directly customers HPC of and our with as their working the cost come of migrate clouds down the cloud. vendors availability public with in the in of a

often And depending the strategy data in on pick center so, including the hyperscale cloud. are and the workload a the public do workloads update a this arrangements customer And obviously which to customers and different needs broad being so the different in the terms multiple providers HPC might and migrated will context commercial public cloud of forth.

there from Jay, two to are draw So these conclusions, facts.

first is is And essential flexible have public customers the a used the it's specifically bring be The their run use multiple simulation support to purchase to as because providers. well second able and be them as elastic support licensing. to public incremental licenses they allow the that And licenses that in giving to support one work, to the cloud it on cloud cloud. have on the to bring we be may us workload we premises could cloud must could for ability simulation HPC in and private hyperscale next, it cloud run day on the to premises to

of support continued customers that's use So the of in public And choice. ANSYS we've and our with essence cloud they products the strategy. to our as their licensing flexible

So announcements. -- a mentioned couple of couple you of a

are compute So licensing. customers over to year our the a both growing. scale We've a instance. while. year. the ForEx first running It's advantage And the cloud. spoken customer on is product Azure. before. compute take market about a supports usage usage on increase ANSYS Azure allows in had of It revenues cloud This in seen me ANSYS out built flexible we've of cloud talk let I've managed It it on for ANSYS

of this AWS. and the It seamless The by on that run It powered hardware product relationships in by other we to offers second and flexibility. access with which with we their ANSYS deployment announced provides the software. own ANSYS' year instance. existing In access gateway through their AWS AWS, on is instance their customers The ANSYS scalability customers on not maintain web it collaboration to earlier products words, AWS allows services. a refer and ANSYS Amazon pairing their

a and path ANSYS obviously this for AWS for provides as for course so And monetization well. of

this that's the and trying explains context we're to of strategy, products So those hopefully that's the obviously, accomplish. what

Jay Vleeschhouwer

much. Thanks very Yes.

Operator

Borg you. comes from Thank Please ahead. the Mr. question And go Adam next of Stefil.

Adam Borg

taking much the so just follow for Maybe Thanks question. gateway up on the Great. question. ANSYS to

So, excuse solution. that available over understand browser-based be ANSYS entire on portfolio ANSYS me, to a ANSYS that gateway the native the time that's AWS, Is goal I for gateway? made

Ajei Gopal

is make on of sure to broadly take the available the expect cloud. products obviously, portfolio that ANSYS cloud. you the customers can portfolio to the ANSYS our the advantage being -- of see intent public And on So should

Adam Borg

just constant on what maybe could growth and much. Thank follow was Nicole, of you also comment a the just housekeeping for And Great. year with question. up you more for XQ ACV currency organic just to rate the so revenue calendar for XXXX? and

Nicole Anasenes

Yes.

growth strong saw We Adam. thanks [Indiscernible]. So

growth [ph]. as before. So had can calculate stronger on investigated guidance actually same In XXXX, DGI we you some prior really of the impact and that the

Adam Borg

again. Thanks

Operator

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

Gal Munda

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

one maybe kind of on and after and of it R&D been commentary transportation there. on that's zooming just investment years it's out industry, first the like automotive automotive now expanding the in side around something is just recovering but in The everyone's we're general zooming getting that expenditure seems subdued -- the the

the cycle? that of cycle basically, off could off you is this for electrification this So industry start of In when of up. what in or down ramp terms and that that line? real seeing you're inning substantial the your -- like better later weak starting started short coming Do structural a you're really the you? is you more first think obviously the say, is the have benefit another today Would to seeing you results autonomy in saying it's the growth those vertical

Ajei Gopal

Well, let me let me quickly take Gal. that,

where about area think ground you the Top strength. of industry, and the historically semiconductors, when an top verticals. one lot of our three Three It's transportation, automotive verticals, we've So electronics a aerospace, obviously, had it's and automotive

interest have perhaps you point we're I customer where of both ago ADAS from would that had. near-term have little that few and a of in right possibly OEMs the activity. or As autonomy is there autonomy. in safety than as forth. some work now so vendors autonomy interest rightly was there that's of a bit a and the what a lot But is timelines the more electrification on some a more said seeing areas going And more improving expectations now back But years out, significantly they maybe lot of the aggressive their is driver the is towards right pulled a

further to in full So lots be though investment of even there space might away. be continues autonomy that

thermal just motor. there and all that more part the As just when far powertrain. and to an efficient electric is the internal in is multiphysics design the you it's of combustion fidelity batteries components, an car. But as and engine of changing the internal about This to you're from the workflows motors not better redesign in about the where combustion powertrain Obviously electrification electrified is the powertrain. change. is motor, and that's come the addition you power into thinking concerned, allows opportunity electronic high not and electric engine to know, about our electric, a It's as rethink an that transformation

the the look and modes failure on analysis, for ambient vibration and more what there's analysis cabin impact crash like. the within look and means, safety what that ambience in a the and is to example, so for analysis. or understanding experience understanding More noise on analysis And going like, car

have all all in have electrification. which companies strength we of number a of areas, where which of their in, different which pursuing pursuit are of we So there's --

being that's an the tailwind taking excited we in particular see very long-term as we're for vertical. And ongoing us that place. So about work this

Analyst

ACV and question in time. then you about ACV that recurring And are number for deals of Is increment the what fact of years in in two recent recurring? the you're really is the the words, the crossing next the first terms the of other couple Thank when that That's underlying little be proportion the ACV as that? for ACV growth helpful. perpetual? coming that maybe are Ajei. guidance of crossing Is What there a more a billion from you XX% could In versus you to just assuming as -- you, sign assuming on think headwind Nicole, assuming the recurring you the trends that going have? of

Nicole Anasenes

Yes. is normal XXXX of getting there -- in we a of say a reflected to there more perpetual That level implicit was in guidance is trough of more back had. perpetual I'd definitely that, you around as the recall kind was our XXXX

of over the So business view is pretty time-based momentum the five underlying towards time that that has over our years. towards the model substantially past as moving customers shifted and that is continue will licensing

is growing than in bit as revenue mix as result more XXXX compare our so, mixed result, a little assumption And that is that normalized. faster ACV is underlying dynamic. of a And a the

Analyst

you Thank so perfect. That's much. Sure.

Operator

Thank you.

comes question Next Please ahead. from Citi. go Tyler Radke,

Tyler Radke

of a some Yes, are like partnerships, was the between ask of out good building there you the deals. or I take node the Samsung's some nanometer, as their about Seemed figure number a how map the about this just of the lot a of semiconductor solutions companies deals multi-year taking Thank when semiconductor these eight of question. quarter. think semiconductor you couple when I And kind chip that to morning. are using as Ajei four you Thanks of on more three I of did products? of for more you ANSYS are on certification wanted guess as seeing activity of I is you guess then this you and shortages Like you. guess kind some questions. your customers facing. well is number road beyond processes. just that kind products. leading changing this on RedHawk broadly the for your

Ajei Gopal

Yes.

the HFSS simulating traditional are able with this, structures, right? have So outside obviously, the it's that of the some activity functionality been when some obviously that's a that semis. are system think across that I more includes of the in lot requires you There's as in space. my can RedHawk historically electromagnetics, during multiphysics as are that performance of a and dyes about And the we is and really about our photonics mentioned product integrated XD you example, as semis where approach. bring What entirety been bear companies single of doing I involvement mentioned when companies an script. to companies Look the for all semiconductor others. portfolio. think And multiple ICs And of and for optics, well package. scale doing those example, line, So, to this you the the

complex and So, a you bear think beyond of about entirety when move it itself designs. portfolio. chip chip when you And you think to brings about electronics, these certainly then for the system the in package really -- brings

of is also way providing that's might seem company the the to analysis The the automotive up how all in analysis So, automotive using providing safety semiconductor script which counterintuitive automotive and level industry -- I work, the unintuitive. work some safety for and semiconductors a at the you analysis gave of level. safety or our our relevant example larger an

examples are how years a being the But of to have our our customers, portfolio the we strength and like we've we the those over multiphysics feel of investments offer that the is used. made of because portfolio. So lot

Tyler Radke

point Great. just kind that's do you around semiconductor semiconductor amount shortage. deploying? the are that And just companies simulation of increasing think second further question constraints of on the the the of and chain evangelizing supply Like or

Ajei Gopal

and to their Look, of design of obviously, to to we're customers in. to manufacturing And respect with we're the the obviously, what need able part be come of that's Yes. in hasn't used challenge we the opposed products. that And not our affected fundamentally where the design manufacturing. But into proactively it's to support with they our make us tied a in are to And go of that lines. them we're is the make examples that We are the -- sure move those all certifications technologies with our working primarily foundry. tied -- product of to But industry forward. to position the for with across doing look I work being as across the as that's activity. where We shortage is terms multiple they of really to sure seeing semiconductors really able think to there's semiconductors, this industries, to get a on foundries that's to we design.

we're line if that or causes even automotive the in the for delay again so, And work assembly company. some a semiconductor doesn't involved a it example automotive shortage an a with in company, design affect on shortage

forward. of and gives think that about business us think that's we going ANSYS strength way So in confidence the the our the I business

Tyler Radke

just then you at higher than I the guidance last If constant for for few last look your organic one And guidance that gave ACV this Great. year. on currency Nicole. one year, a points initial it's

wanted confidence what's kind strong pretty of strong in So it philosophy a giving understand that changes your of confidence? of you. year? is the that number you Any guidance especially that level or you that's Thank just backlog to comping kind maybe giving

Nicole Anasenes

I'd had dynamic full last at significant compare really was Yes. we fundamentally I raise, XXXX, business year. momentum you of the we But strong QX mean, as I we And expectations come underlying say, the of a compare the to really were our through off around right? of exited where a year, would if say, you XXXX just could exceeded the beat of as definitely year and see XXXX. beginning

continue is broad-based or it will expectation -- across XXXX, that I performance will guidance to industries, mean going sets, consistent. broad-based, it So pretty was our was that geographies, into customer be

growth around the underlying what that's expectation that factor ACV. to double-digit a strong we of the at say primary midpoint would in XX% in confidence of pretty be consider I so, And the

Tyler Radke

Great. a lot. Thanks

Operator

The Wong from Securities. question Guggenheim you. of Please go be next Thank Ken will ahead.

Ken Wong

in question direction perhaps to my Great. just this but wanted Thank I build off, question. of Ajei. Tyler's you for taking one the now, targeted

that high thinking targets? ACV focusing that the growth any Just strategic kind end of it's might the the on be either year, the in growth a should whether that priorities help go-to-market, influence might next you we that end changes those or about markets, about partnerships number lower thinking be at that of

Ajei Gopal

XXXX the said in the we grew they from if well you all back product across we both I the geographies, saw at industries, bottom to customer kind And as pyramid my all you our contributed there, we as indirect. across and if the saw as at growth We And script, XXXX, look perspective well. customers major regions tippy -- across volume segments. direct growth enterprise and top look at all double certainly strength QX growth the of lines And major accounts digits XXXX grew routes. In the as pyramid, of in expected. all in saw Well, major go-to-market last with of the ACV across year. as the saw

to across that. of you about want in very a the to So dimensions go show should have way I performing good feel just is that happen. multiple That all goes business would that

on part able into of that to our And forward going so, build to continue to XXXX. plan momentum is be

Ken Wong

typical typical? Nicole, we that's on thoughts the is into is that is love heavier a we can just and we I about dynamics? amount of cycle trough, about? but When relative And just than spend wanted heavier the in about this it. see XX%, -- that investment don't a baked for this abnormally what's And lower say thinking color ask -- generally Got then, And some Got should just kind that spend to it. Or to there is to think potentially XX%, be want more of kind on side. margin operating of embedded there a inflation year? catch-up

Nicole Anasenes

Sure.

a industry to and think time committed just saying, the that, let by margins is business So, ANSYS highly this couple mentioned and start me model efficient. we're I've I is leading

have We leverage substantial and variable operating low costs.

those ACV that between margin headwinds and P&L mix license guidance, operating can stronger in about capitalization, terms impact operating And that model, specifically, of those Now, than growth accounting And be the absorbing from in leverage in ACV dynamics When that in headwinds. and the Now, faster seen in flow underlying the be of is really The more than primary growth growth operating leverage right? revenue operating flow. really the you margin guidance see flow dynamic projects to operating ACV. is expected business of after R&E grow cash is cash our published revenue than XXXX the cash can leverage. to driver

margin, I we flow assumptions addition, prepared in have inflation and do cash expenses. in remarks impact mentioned Now, in of the of both on a moderate operating

this revenue both. is accounting year underlying so say bit where But of headwind primarily ACV. dynamic is relative around would and just to that a And it's I a the to

Ken Wong

much you the Thank color. for Fantastic. it. Got so

Operator

the And Barclays. question you. Please next from Saket Kalia ahead. Thank go comes of

Saket Kalia

I for how question that in Thanks public. is, choose one for as other? versus just simulation that seen in you earlier maybe explanation around that or was And have very great. licensing certainly though me on maybe Okay, trend think Hey do squeezing I ANSYS, guess customers the got the to strategy you. you've for in message follow-up years changes flexible going the here. you Saket. that cloud. guess any the forward? been It can in just either about Ajei, It's preferring customers ANSYS guys. in the And a private around helpful across

Ajei Gopal

Well, been it's to I've back that go with if ANSYS. you years the like,

out you And years So structure you obviously, cloud for where if the that five some hyperscale is use the they go combination public on-prem HPC cloud data some their six than ago, the of Or you nature. back is are cloud building it data cloud and going capacity where providers today. in in a customer or -- what much a take two long-term the invest the public today or own for our out customers, was hyperscalers use advantage of burst lower centers? center or HPC Do working public the running with strategy with own And of look of bases. periods hyperscalers peak their customers stuff invested they to working as about have continue they're all figure have hybrid load think to And of as our infrastructures. some things do their is like. I to

So, are those are conversations that ongoing.

performance realizes cloud high computing investment performance their nodes. to now everyone support in there's think the that and I computing high public

support available possibility has want. always flexibility meet the they watch we're customers obviously and one of our where that's From to experience perspective, that's been customers. a so our our And to

-- can can support support easy we of so, take if are And it to them. cloud make for can they ANSYS we to it very them our in a customers we we product, take And position want our to we can take can completely that. cloud, public on we to to continue to they premises, that. advantage on want that, can and they support If If of support want run the public they cloud. advantage do run another

to that. -- we're a they Azure, Amazon, In run position want if on we we in to are support to that. in So support position a

for So place. they're looking as that is that it's as exactly flexibility I choice have the really driving. the on it compute where computing a they're something And customers -- and believe what that them that cost we are is in important structure flexible to and really this of

Saket Kalia

XXXX. assumed makes And what just in? maybe is organic follow-up That constant much I Nicole, you. for just my as constant how part us? growth guide? ACV just currency Or that sense. Could actually the earlier on maybe of in missed ACV growth for just said Zemax you you adding in remind organic that, the you us broadly, is currency can what the XXXX recap

Nicole Anasenes

apologize Yes. who Sure. couldn't my Ye, hear technical I apologize. so I difficulties answer. those earlier, for had some

when full And organic ACV in full and with out of the you for our Zemax, both constant year You that's the the and growth was $XX back year. combination and AGI really million currency see for in strong can the XX%. to $XX the associated So, quarter fourth quarter both growth million XXXX,

an at growth midpoint. million. on of again, Now, as double model still business Zemax digit within approximately tuck-in pleased the ACV currency expect constant And into have really that at we're we to inorganic And impact $XX we guidance of of move with XXXX, XXXX, including XX% M&A. about

Saket Kalia

Thanks very very That's clear. much guys.

Nicole Anasenes

you. Thank

Operator

Thank you.

America. Please Andrew Obin, from go be ahead. will question Next Bank of

Andrew Obin

Hi, guys. Good morning.

Nicole Anasenes

morning. Good

Ajei Gopal

Good morning.

Andrew Obin

So, cash first question flow. about

credit cash year. $XX tax is XXXX key driving and sustainable U.S. going What million, the If How improvement flow conversion? factors change. the you are actually is R&D drag from nice cash it for million the step exclude a flow last the forward? free up guidance incremental from $XX

Nicole Anasenes

normalized Yes. to exited, XXXX, would we and -- more I past environments. collection say, we throughout as we return as of XXXX go went I more going saw new a mean, into a environments

operating earlier is mentioned ACV. And as the in overall leverage my answer, the in momentum so, And quite there's of guidance, I had collections significant in to addition XXXX that strong. and in around the business the underlying business

compare see than on revenue, generation strong cash flow although, ACV, but is operating overall operating an leverage. ACV faster are flat, really growing margins relatively So -- against the because when you you

normalized the So back going in the of kind patterns the performance underlying of has to XXXX. the business driven it's momentum collection more leverage of a operating combination the strength and into underlying getting of that really

Andrew Obin

broader the just how buybacks balance debt? the on a $XXX any when Got you constraints sheet you do considering price you. do really think M&A that question. share here versus million about the Philosophically, And have opportunities? And given

Nicole Anasenes

last in been over going and to And simulation are not some to strength of XXX,XXX the so the right to obviously, about there's timing deployment the those shareholders what's shares. shares access mean, not balance for against, the imminent provide out the sometimes it able that deploy for the And we're there's cash the of broadest to that's year, assets. using portfolio. cash the years I is to the of repurchased business year to the times the return nothing repurchase we've sheet just No. do -- Yes. complete cash or deliver about greatest -- something there's the to we and already portfolio, acquire technologies fill Last and generation $XXX deepest not great premier right we return shareholders so million.

continue think along to to of how we would we expect so, those And capital about think lines overall. allocation

Andrew Obin

very you Thank Terrific. much.

Kelsey DeBriyn

comments. have us. closing for to it going we for everyone I'm to thank over the all some So, Ajei, today. you time That's turn

Ajei Gopal

ANSYS that I thank made I again, ANSYS in ongoing Once am success. around excited like Kelsey. the has the Thanks, world team excellent to our progress the by one XXXX. for would

XXXX greater business for great us Thank with beyond. our customer broad-based a our call. Have for prospects along you work confidence all relationships Your today's momentum and give strong and our day. in joining

Operator

today's Thank for presentation. is attending concluded. now Conference you

now disconnect. may You

ANSYS (ANSS) 24 Feb 222021 Q4 Earnings call transcript