Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the ANSYS Second Quarter 2023 Earnings Conference Call. With us today are Ajei Gopal, President and Chief Executive Officer; Nicole Anasenes, Chief Financial Officer; and Kelsey DeBriyn, Vice President, Investor Relations. [Operator Instructions] Please note this event is being recorded.

At this time, I would like to turn the conference over to Ms. DeBriyn for opening remarks. ahead. go Please

Kelsey DeBriyn

everyone. Good morning,

Relations and release, link the have XXXX to document our supporting earnings qualitative our prepared key quantitative been outlook the and and related financial second QX our our second assumptions. the relative well and Investor of to homepage XX-Q on and They as quarter contain the update, as data posted and key information Our the remarks website. XXXX quarter results all financial business Form fiscal year underlying

Today's affect presentation discussed public that contains forward-looking information. important in our factors may filings. are future results our

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

non-GAAP discussion and non-GAAP stated. financial measures During our call, the GAAP included this unless in of are release excluded various earnings to A items reconciliations that of measures are comparable to materials. we will financial referring the otherwise be

President over like now would I remarks. Ajei? his our to Ajei the call Gopal, for opening to and turn CEO,

Ajei Gopal

And Good call. for today's joining you thank morning.

QX the XXXX, first metrics. our across key momentum the excellent in another we quarter of guidance all for of beat on which quarter Building ANSYS was

half and customer broad-based of saw For the well in growth ACV we first growth revenue, across double-digit types. industries, XXXX, and as as geographies

raising few as are excited details in strong we pipeline. the in outstanding half delighted minutes. revenue. year QX well announce Nicole, performance year ACV about and that as our have our of And I'm and guidance a the the will first to for I'm full

transportation. small medium-sized was a perspective, defense, aerospace for industry growth accounts and high-tech expected. in and growth our contributors semiconductors, and QX, For three robust our our we automotive ground and saw top and from as geographical We by and

was products expanding users Japan. the year of based its our One core new customer products a largest agreement long-time a multiphysics multinational quarter company across portfolio. while This of growing number the of X-figure of in industrial our with four ANSYS contracts of our is use

ANSYS As part to a of go-to-market this product virtual customer's drive using which development strategies helping sustainability by product digital environment, it company's and the to establish is accelerating its initiatives. transformation, is

calls, our business. of specific a our typically aspect On highlight I

several in past ANSYS across semiconductor given and I how critical customers have I the next-generation using have portfolio role the through in of are the our that have driving insights solutions Over the five discussed you multiphysics innovation we technology sustainability. quarters, are into our solutions play development I our highlighted pillars.

discuss would defense, our to our Given use like and I today's sector, second call industry. strength in continuing largest aerospace to this critical

In fact, a largest the United States. aerospace agreement keep previous user to $XX our with was This multiyear significant global quarter contract growth the company based in million defense with contract demand. nearly reflects up and over the a contract in

The aerospace old playing a ANSYS levels experienced development record the industry this with challenging about summer. And resurgence are travel in industry a to transformation. perspective, a this simulation pandemic role industry has leaders since returning aircraft. key commercial is From their product assumptions air

aircraft traditional by blend in also Today, an can they consider they fuels. hydrogen. choices These manufacturers of companies. use or choose those play including or powered for were initiatives can impact aerospace role fuel. critical SAFB from airplanes but fuel an most can organization, alternative aviation commercial past, the a in sustainable sustainability though, example, fuels, For aircraft - They important

the from By net aircraft XXXX. me, emissions company's our sector X maker to NOx XXX%. that XX% Pratt developing & a key the consumption hydrogen engine ANSYS, of number and emissions present which a on half. the turbofan cutting reducing initiatives sustainability are ANSYS increase solutions company's to Whitney, geared close optimizing run to by achieve company air is by Sustainability in and including using plans number which of is driver a by at to engines has the carbon propulsion enabling vision at fuel Today, used SAFB. are XX% transportation simulation system with certified

commercial to aircraft. source, fuel boost by companies the of to ANSYS their efficiency simulation aerospace the using addition In

has technical significantly multiphysics aircraft leader, fuel example, simulation shark emulates the coating and dioxide a consumption For services emissions. carbon biomimetic Lufthansa design skin used Technik ANSYS that to to reduce associated

agencies. long-haul and Company Using current positive makes of aircraft the already and stage from ANSYS, European an critical the U.S. certification In environmental impact. will accelerated computationally aircraft efficient which robust accurate, in short efficient more development, and a air have quickly Boeing modeled aerodynamic modification two XXX manner of behavior aviation the and its types

the is for that will consideration foreseeable one Automation had the profound aircraft. has who Another industry, those will on a and impact the is for future. commercial pilot continue leaders it technology already aerospace

of customers air OneSky time prepare for create solutions to certification. train validation and the neural ANSYS mobility software simulation integrating risk, required better is advanced Systems mission-driven and OneSky the The ANSYS To AI-based domain streamlines airspace expertise certification technology to with reduce collaboration industry, its enables and cost to optimizes development, with systems. and the autonomous networks airworthiness and and validate that

in sector where was Air commercial display Paris in aerospace the at Show, recent ANSYS exhibited. success Our the

industry. that the further using During of the a event, disrupt customers our to encountered we number are ANSYS simulation

that hours turbine crucial to that For the gas has meet less The recently X,XXX company to with environment. its XX customer than high-performance to model takes it ANSYS was in simulation engines thermomechanical announced Paris from Rolls-Royce its perform hours of example, ANSYS it using computing time reduced a in clients. a

for complex As safety-critical a result, Rolls-Royce applications. is deliver and able solutions to rapidly clean propulsion

complete discussion is sector. new touching space the the defense in industry upon and developments With without our of aerospace

critical environment testing the physical for there, is unforgiving a of to and playing role perform simulation to companies. space, the royal space inability Given

takes twins. products portfolio, key as our Space core full advantage digital and with our of One solutions that motor was well of contracts materials, in digital the design, mission a engineering ANSYS for X.X including as leader newer QX

is solutions. of ANSYS of of agreement year the the increases leveraging, company number three well This users products as the number as

trends of small These is the and X.X heavier Space customers light missions less than delivering satellites satellites micro ones. amongst are to services. develop of certain our perform broadband launch to employ expensive radar traditional the to such as One coverage

more ANSYS its customer, world. aim of of earlier the first Astranis of service Astranis the example ANSYS more mechanical, to role engineering broadband use and is include With this year anywhere electronics with the digital in delivering of satellite solutions, simulation a products launched its great mission low-cost customers users. expanding fluids, and

constellations and reached X.X digital satellites. company engineering an the ANSYS small of [ISI], the we long-time satellite synthetic aperture mission with help agreement accuracy analysis operate to deliver of solutions through design for uses and maneuver ensuring help coverage ANSYS QX Earth customer, Similarly, satellite to solutions which and radar simulation imaging systems in planning. its Space globe unparalleled

lander Here the company multiphysics of the launch through we vacuum rapidly eagerly iterates year impact of technology, Pittsburgh, called withstanding that tremendous are later the are of Using this ANSYS lunar of capable landing. the in the of Astrobotic space awaiting Technology's, and Peregrine. designs lander launch, pressures

and Astrobotic navigation help will in will how craft put Kosmos. moon our will further is its expand the on guidance understanding the knowledge of operate back space and simulation. humans beyond using This

structures, electromagnetics, highly to advantage and believe high-performance with And physics, take scalable of design these access complexity, aircraft travel, an Companies greater of play to options must the the in in of all in near even forward. that commercial to computing Space solutions aerospace X.X increasing future. quickly simulation sectors complexities all Given fluids, optics a we role the and materials. industry via including is propel position ANSYS explore will areas in the and and need space our cloud, unique the

Turning XX discharge ANSYS our integrity chip's of to verification provide chip silicon while solutions with verifying manufacturing process. that Intel our solutions the leading unparalleled activities. of partnership Intel capacity Services has circuits sign-off a effectiveness circuitry. Foundry integrated to the designed certified protection analyze electrostatic for full semiconductor design power

of announce of RedHawk-SC in designing role where to also plays relationship packaging ICs the the At the technologies. and them, XD importance ANSYS Samsung the our Samsung for I'm with of pleased Foundry. SAFE family conference, in foundry's multi-die developments ANSYS that certified presentation reviewed number company's recent critical heterogeneous my a

Red Total RedHawk-SC Foundry certified Hawk-SC, latest and solutions for technology. Samsung's our as thermal also you verification ANSYS signoff process integrity ANSYS remember, Integrity is silicon power may Power and X-nanometer platform. Samsung

also have Synopsys. expanded our relationship with We

recently companies golden ANSYS' new of a reference electromagnetic with accuracy sign-off Samsung's the delivers two which flow custom announced Our technology, design for leading XX Synopsys. analysis LPU from flow

an In expansion announced our QX, we also PTC. with of partnership

Windchill Our materials priorities pursuing are products and workflows PTC's and integrated performance design engineers will This environmental footprint and balance Creo Granta. help ANSYS products. as collaboration sustainability teams they and between management more

have XXXX. list leaders. achieved to of to emissions Turning to report that intensity The ANSYS recognizes companies greatest list XXXX ESG that TODAY's very and I'm in has USA reduction happy climate between America's inaugural core initiatives, the been named our

I'm are This recognition Newsweek's that with and ranked and of workplaces. team named our been around world. impact list celebrates this most recognized ANSYS ANSYS yet global on tremendous having precedes feel companies XXth excited list, valued. employees included, Finally, has globally is which another who indication to loved of the the we

to am goals. our remains the another was our for QX solutions excited provide. customer portfolio our that meet proposition robust, I'm pipeline, ANSYS industry-leading that thanks short- confident the long-term the our summary, our is vibrant market and we I to and In value quarter unique With deep demand and relationships, excellent in ability for strong ANSYS.

And will the Nicole? turn I that, with Nicole. to over call

Nicole Anasenes

you, Good Thank morning, Ajei. everyone.

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

our as The financial came beat in second revenue, and business mix all exceeded performance of the we driven and during guidance license also margin sold across guidance, types the of by better the solid ACV and metrics. key than operating guidance, quarter. EPS quarter outperformance our delivered in strength demonstrated ACV QX our

year will ACV on outperformance. Given revenue. pipeline, the minutes. for we QX raising in improvement and full strength full provide momentum details few above The is in additional see demand are guidance our our beyond and year we simulation ACV the outlook I in our our and of our a

with some financial in Beginning highlights. Now $XXX.X which constant X% QX, of let me currency. in X% discuss delivered grew QX million or we ACV, year-over-year our

the SMB ACV currency of grew XX% total. Our during or sources represented quarter, industries. from across XX% customers basis saw XX-month the in and recurring performed and trailing most growth we on a XX% well constant

the $XXX.X in is mentioned, or by and the subscription our quarter. license X% the currency, towards constant million guidance ongoing the This QX lease which, driven total ACV revenue shift and in ACV momentum by licenses. recurring types outperformance created by X% strong in of I annuity our mix driven as growth grew was exceeded

and XX% geography ACV performance was double ACV customer respectively both line broad-based Year-to-date, top industries, line types. in both for constant currency with in and at was growing by robust our revenue, and Growth XX%, revenue expectations. geographies our with and with across growth digit

We backlog closed with balance XX% quarter total year-over-year. and the grew of $X.X a which revenue GAAP deferred of billion

During This of guidance. Operating was deliver the expenses. and revenue, was outperformance model quarter, a to our an as impacted of solid better well a continued XX.X%, XX% yielded second margin strong operating the of business than of license types, leverage. quarter with margin by favorable gross as on timing which operating margin positively we mix the

result expenses. The of timing than and which guidance. from strong of quarter EPS better $X.XX, our second with margin, operating revenue Similar was EPS results benefited to also the

tax is rate the XX.X%, that for year. which we quarter rate was expect of the effective remainder the Our second in the

underlying in cash remain flow The cash unlevered in line totaled Our million and second with in collections expectations. strong. operating quarter $XX.X momentum the our

to cash timing short-term quarter operating sheet. was on and unlevered with ended million of tax the due payments. the down investments balance We cash the of year-over-year However, flow $XXX

half the guidance. first Now an market-leading simulation We delivered of and an let updated continued the outstanding broad-based demand me exceptional for coming forecast portfolio. turn reflects our customer XXXX to XXXX topic our off

year, to show in Looking the our XXXX and confidence which our momentum, remainder continues bolsters to the of the achieving long-term outlook. business

start Let full XXXX our year me guidance. with

XX% $X.XXX full to which our constant or raising range to in outlook ACV XX.X% growth represents to billion $X.XXX of currency. are billion, year XX.X% XX.X% of We to a

ACV our by of in We X.X currency are growth raising midpoint constant guidance the point.

headwind. the outlook in partially QX improved overperformance delivered we by offset excess our Our few of guidance exchange and million a to QX foreign dollars is is relative of

increasing X.X% XX.X% XX.X% X.X% are outlook revenue $X.XXX billion a currency. or of constant to to which billion, growth We of range is to to our in $X.XXX

of our raising growth constant in X.X by midpoint point. are the currency revenue We guidance

of amount in Within we anticipate that a this headwind ACV. guidance, increased are we similar absorbing foreign exchange seeing

full $X.XX year to full of items offset We expect interest improvement increased to operational expense and May of more onetime EPS other in $X.XX contemplates full than in to the from revenue higher our year be range guidance, $X.XX. expense. $X.XX EPS Relative was year our guidance, our updated which of by

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

it a billion long-term provided As outlook now our reminder, update. unlevered aligns cash cash for to the guidance operating we flow XXXX as provide flow we at investor $X cumulative

and Our the is $XXX a million the of our we exchange relative additional half. second see small XXXX guidance foreign absorbs million to to May in range guidance, headwind $XXX

our leverage on business flow document. comparable the prepared reconciliation remains operating Further contained of are flow operating GAAP the operating our in underlying details The to non-GAAP remarks robust. unlevered cash in cash

Now let me QX. turn to guidance for

expect in million. million $XXX.X of ACV we range quarter, third to the the $XXX.X For

first constant constant the growth year above ACV outlook which our full Our growth half. currency acceleration model the currency at an XX% the is is financial and saw and XX% we growth midpoint, QX in the for both from

P&L. the to Turning

$XXX.X expect We million. to the million of revenue $XXX.X range QX in

in and EPS to the of of QX $X.XX. expect operating We range XX.X% margin to XX.X% the in $X.XX range

quarterly oftentimes, the year-over-year outlook. headwind volatile noted half have the in from creates types to The which can be disconnected quarter, in from I As quarterly of dynamics third accelerating third a the the license ACV and the can growth P&L that generate dynamics quarter be causing is ACV. second recognition in upfront P&L past, strong mix be and disconnected

is year-over-year a revenue change reflection P&L third momentum. resulting of the in not in The quarter and business a

ACV best observe be in Our full to metric our guidance year raised to continues the business. momentum

our execution are focus reflected are along for outlook us increased year, the been other remarks the laser revenue. robust half contained ACV execution business prepared for and strong Further really of and proud assumptions have I outlook document. factors specific our expanding and product momentum. our These details leadership am This in in currency into our giving QX around of and pipeline. the on XXXX with rates in business diversified is the and that first factored

delivering dedication To the delighting to team, and world-class customers entire ANSYS our thank for you your innovation.

contributed not into going XXXX first momentum and our outlook. ability our fuels only efforts continued our half long-term deliver Your in second year. the remain in performance XXXX, also of but strong to the I to half of confident our the

phone line to will questions. the Operator, we open now take

Operator

Vruwink [Operator Instructions] go Our Please first Baird. Joe question comes ahead. from with

Joe Vruwink

the if kind and monetizing And that business, will. you been like ANSYS, for to things just is a of data. time. play Great. how flagship things And into to kind start Hi, that machine products see been with better off or a development platforms new the products roadmap even the more silver for product will everyone. you appreciate Design quarter of about question new been I at Conference and I AI. a of during additive. AI It's separate long learning-based simulation and has what's think time. the potential My be the new wanted become on part out your wanted would cloud some I for question all about to this coming long hearing Automation the new in distinct playing within these of the from that solvers making are core of

Ajei Gopal

question. Good morning, Joe. for Thanks the

AI, map, we in five So I've But earnings our to part go said broad about won't talked AI has as a some products. through all of road one of before, call, that technology five length pillars. from perspective improve is been I of them investing and at to we're have last key the the so areas. those I And areas improve continue at - course, our

And investments coming have ready. products to to as area, out make we and see in investments will in AI. continued you'll We've continue they're

One the AI I is, in - improve of think a see the already. experience areas and there. course, on products tools. of experience the you'll have ANSYS we'll impact where the the benefit of broad market The user ANSYS. We role plays

We continue area. that focus on to

GPT, appropriate that's use. to The broadly and how in based easier designed the on which multilingual technology seen is ANSYS based go second information that is way it may support a our technology. really to is against more on virtual summarize information which it's speaking, have made you ANSYS we using making announcement help tool, can and is easily, customers virtual public a simulation a that's recent user use our a about And GPT solutions

really were automaker our on to gave European that's a the making - of in solution course, area And we've than then, recently. ADAS making on a last been I I of earnings example So about customer and talked simulations. gave traditional position X,XXXx products capabilities our use multivariate a they're faster that this the as and faster. available Carlo a interesting focusing the using And who's to one optimization. was using I simulation made they that's and case large think position and call, we've faster, I in examples of of in an using an AI our get optimization a Monte at

of lot exciting look overall Does landscape. the as place question? that taking AI we a there's answer So start things your at are to that

Joe Vruwink

but new you guess end market? big how quarter. but of in an spanning experience the engineering? what's business Thank just existing this cord, as evolution ask Yes, focus retention end you to think ACV follow-up, they the the and missions There's given Defense way maybe kind customer occurring obviously Ajei. wanted acquired within the across between simulation a market, in ANSYS. you, And this more net broadly quick that's driver, about Aerospace as about deal then multiphysics the really or not And and a just cross-pollination of talked expanding a the rate I seeing to best into use solutions customers the is how has are great. the on I a

Nicole Anasenes

So dynamics are already growth example what our in terms across the customer remarks supply that Yes. we're it. really of that their able I drivers right? capabilities, propagating highlighted who that of we in three an all of - example a really use breadth to was dimensions that broad of sets of of couple a to was users but licenses had the demand is capabilities, the additional see I we generally be we see, added mean the would the constrained accommodate that say was the they

very our in amount problems, third license space, computational really customers has have have. right? These which the needing of that computation, growth defense to to of so the And the they that and complex are that constraint driving particular, dimension face things in capacity - around additional accommodate of significant drive complexity these aerospace also the is growth all model multiphysics

the experiences think the aerospace that ANSYS the usage I at is products comes the points beginning life the So it's going more industry the very those of problems solve industry cycle solution, development of and driving then it from an are tipping industry kind complicated. themselves because software in of through to their defense very across emblematic evolution what of adding more given an transformations can of and some and the

don't to know, if Ajei, I you'd add. anything have

Joe Vruwink

Great. Okay. you. Thank

Operator

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

Jay Vleeschhouwer

which are start you've and sustainability Good for outgrowing to I But and morning. that concentrated number the might terms the that and years, about which market, to pretty you. your A&D. perhaps in Ajei, defense is similar reasons foresee, more market for growth acceleration same that you that commentary on how see a tech acceleration for about market. second for example, your has automotive largest A&D customers you been percent. it's somewhat logos, for the It the also interesting the an now the of interesting the how many example, of is and it market, could consider of kind think in been very seeing a A&D, largest was for surpassing perhaps following Thank automotive aerospace high become of of thinking seeing up it kind has

Ajei Gopal

Good morning, Jay.

the So the every people end taking course, changing that's really consider that we're of place about changing interesting markets. markets. of market, it's when through a way or level are markets, drivers point dynamics the talk different they we innovation talking individual about And you when in specific of thinking go are

come of they're be that market will customer, end semiconductors any from chain vertical. which consider relying supply and you produced, if some a the to would of so example, considered components high-tech would on be which for from end same of some And be

for that may - We supply might an ultimately example. a in be providing the to the get but they're semiconductors chain, in selling in used customer building airplane,

we crosses how that So But that's the markets. industry end it said, being verticals. categorize

Look, It's in aerospace it I Air my takeoff, where discussion of at transition, motors really I as propulsion. conversations as the with very show, versus takeoff, fuels, highlighted There's takeoff about going modalities place opportunity Show whole of is interesting taking different is a vectors mentioned taking of not to there the is different air had a one the kinds through was electric of meet more mentioned. number just script, and traditional prunes that at the I I vertical discussed, industry reasons is traditional are call. is a I short That's actually our the it customers. I there place. - Paris in large an of some on

companies now. very of point some already their opportunity. dealing aerospace are this technology, you But building there a changing companies, was is landscape aircraft either are walking And all which And that this show ours. there's there those perhaps designs aerospace ANSYS. pursuing companies one companies the their who every ANSYS and is thousands them out, supply customers dizzying dreams are small number of of chain or customers it makes industry of that where designing and the with smaller we potential of companies pursuing of were single of right small place customers technology out the interesting part booths are people really They these floor. with have representing As dealing over around of large

So these it very its ups the excited market. aerospace goes drivers Every but through we're vibrant through area. and one really of it's about goes its a verticals

to that mission to to these companies like of help great to different we they're them some have or trying support from We and the can lots bear transformation physics, technologies achieve engineering, capabilities this aerospace of traditional what changing technologies bring there's market. rapidly do interesting more in things a

Jay Vleeschhouwer

Okay.

want follow-up, I'll different an weeks this renewals, you conference, AI see your on AIML across nine you've question. how I releases, the keynote you integrated detailed And product for it and earlier AI workflows the As well could use you road cases, a important to just products a solutions, about as interesting affecting an or as ask which driver stacks. for the have for tie alone, I AI. into growth was commented call posited XX very CTO if do, is which But Three depicted obligatory this see a over new you on also you? growth unusually EDA you above an what and AI over map ask question year for driver industry ago at as what and

Ajei Gopal

obviously there's and earlier. AI look, Well, asked of the about Joe a discussion question lot

said area I've multiple As times, this we've is investing an in. been

product have activity. We

interesting that able driving are that perhaps talked to we're the made the AI. get for customer have optimize to there more and iterate about of how I obviously, use of being improve the to be get And use cases and optimization, perspective AI example, We use are can through for to to technique able And that the multivariate design. activity. of

let's question to well. I'll markets. as angle a take little here And slightly I end But respond a your the bit about think to talk different

of our do will helping obviously as and you That's run company other AI, articulated, see when the we I've about do. every so, as own company. use see us that clearly, we the something And design we we think AI, of will see, sort activity,

So that's every no different other company. from

experience. to use, go making simulation to faster, I've and talked easier is, that. into not length products, the our of to going is second at this, The making improve about user simulation the AI use I'm

The if being - third by being affected at most that see industry AI. is you high-tech it and the we from And the look semiconductor the end you at markets is clearly sort really how perspective, leading of if most edge. do, - affected potentially

example, like their Hawk they're manage use advantage to improve of to to of have - have technologies Raptor, And as all for products taking they design so risk able be to able customers to limits our Red start we physical design. pursue we customers the be our to NVIDIA,

look is the using they're You which wafer-scale at for on AI focused market for Red and really Cerebras, their engine, helping. example, Hawk-SC they're

we're And helping signal with integrity that electrostatic with discharge of mixed power them nature. things challenges of and

customers a being leading the in how those high-tech clearly, is in terms edge the but market, - are So that's being of is examples this this just couple of of rolled will, customers. think out, recognize cycle of design some have if a heavier these you you high-tech market. other the about the it's than that in to important longer industries, industries When

aerospace, high cycle. about just longer think think are you we've have that when aerospace So and about cycles talked than development traditional automotive, or they you about the tech

as impact we it. AI to they little further techniques is And so, see bit their it the as incorporate more will products, out to into start but starts change. It have a impact, an

use Now of the perspective, our AI. from

this greater take because customers reason more feel start because to designs drives simulation, as about that for generative of drive, for about simulation sense use some make The those AI use for more simulation, example, design It's drives - that that to we're not. that, talking example, explore iterations, design or use help is whether validating we that sort start of to AI different as you time. the options is design technique, question we've to had of

additional simulation ANSYS. translates which that into intensity, And benefits so,

capability. it to as these net-net, as spaces look exploring that design as develop, for different a these rates So at tailwind as and ANSYS we customers more paces. of and as them will markets they AI markets, options continues - start some end be give more design at long-term develop the But they techniques markets, driving to are

Jay Vleeschhouwer

you, Thank Great. Ajei.

Operator

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

Andrew Obin

Yes. morning. Good

Nicole Anasenes

morning. Good

Andrew Obin

Ajei morning see. Good I the call can and

Ajei Gopal

morning. Good

Andrew Obin

sort dig Yes, of strength of to small Just larger terms sensitivity. enterprises angles. A) question sort small of and enterprises. you in think sort - two just want you I enterprises And lead a tend into said of I in from in economic just to it medium highlighted that medium and

for demand software there? there that a So seeing the just are update doing? an accelerating? on message is is maybe start-up Is What program. you second, And here how underlying ANSYS on

Nicole Anasenes

Sure.

yes, in we've sector performance, half. when segments in growth entirely. So the we first we've industries, broad-based you at across remarks, mentioned the the sustained SMB seen first total throughout had as And look pretty our prepared performance and half seen - customer look geographies and when you

and half, when expecting that is strength look that you at we're where it has go-forward because profile seen in persisted a second to any the first haven't changes we basis, year-to-date underlying sitting So half that see looking on in we're overall. that we're the broad-based in where

what's kind about momentum that's we're it. thinking the So our and underlying driving business in of how

As to the start-up program. it relates ANSYS

We've from start-ups we're R&D to graduated over with get to - really X,XXX simulation commercial at We've really this able I a that And processes of that viable. the I start-ups XXX worked be teams to their program to help more first once countries. mean commercially successful are think, relationships of first these to simulation aligned thinking. model. - have proud closely kind really, of help is than helped they're be them to the more these XX start-ups than forefront

R&D indication forward massive is not It how drives program. really it the is Again, momentum. about we're influence where in being future our happy but of a - of of can So that an amounts progress near-term our leadership drives look. of it's thinking the the kind ACV, is of a lot where with program thought and of

Ajei Gopal

companies Climb were the very that you know just example. well couple program say works from that graduated another done was have of there have an may example Relativity is that is I to going a

see taken had to a customers we've gone have tremendous So early success. stages their have of number on in advantage this of

Andrew Obin

just And you. a question. Got follow-up

As sort semis, with rebuilding U.S. impact your global supply North you that was to growth ecosystem sort of plants. growth tech the margin, the does incremental is the globalize in you on shifting America. more chains, are of EV that How ACV fact this

That's If Thank a expand you could longer-term on question? you. just that.

Nicole Anasenes

question complex relies the So as where answer, Yes. I it is just an in a mean nature question to the the really of a space, what because is business say about reminder, - really decoupling. right? happens - is, moving decoupling answer, in what upon would is because I and a kind is our of what that R&D actually placed understanding the of it's complex answering you're we where

lift fundamentally works the innovation the where role R&D as of which exposed changing the it's way the to simulation way shift or of process the manufacturing If it R&D than works the because or more we… to amenable be plays, cycle model as changing would R&D and isn't of

Andrew Obin

That's part. the That's my exactly question. my Yes. That question.

So are what you?

Nicole Anasenes

Yes.

to looks that tell, dynamic the business. our I about, definitive would it changes, R&D it isn't to - is for early point thinking anything like is moment, the of would impact wouldn't say that that's a and framework it still mean, around really I where too are business yes, the to say that it would I so what and - shifting what is there is because at think and this what impact early the about So, where how right? would that our So so mixed where process decoupling - in that is the manufacturing customers I but

Andrew Obin

a Well, really answer. the appreciate lot. Thanks

Operator

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

Tyler Radke

for types of obviously, is chips as a then Thanks semiconductor vehicle more you're to question. the custom But a you market, auto are you GPU towards you. AI. a just AI as rises. industry, bit these the to because talked how, from you're seeing dominant in taking relates it guess kind I that it's seeing where some pivoting wanted partially chip couple generative more And as Yes. I rate GPUs probably are of in relative of building own chips making little their CPU simulation the my off, how about complexity intensity, differ the you taking about generative attach the in historically? new ask obviously, of whether to industry auto or workloads. of Thank chips, is, question trends and

Ajei Gopal

built, being couple important to if very the given simulation So, cost being there's of these advanced the that chips that's necessary failure, you for tape-out, and of we are failed look capability of of amount the being One amount are there able of sort that's process simulation of when there are node able is the most important. can, high-performance areas certified certainly of - One think I consider. is that's you significant. are necessary support - will, to at most a And as is get advanced designs. a consider of that to some you quite

And so for a you need advanced clearly simulation. the nodes, process sign off these at lot of

so obviously creating for tailwind chip a And sets. that's very these us, AI because the are workloads complex

next-generation traditional that worked XD chiplets. or changes that traditional to that starting have with. people different design the -- start you're are support designs look thing a from from really that kind technology, technologies the of at more are think is as second stack kind that ICs And The necessary you silicon to to then SoC of about

about then designer, of is the fact two sort levels scale, design dealing dealing ways different are multiscale package centimeter with chip with challenges design, at challenges primary One these thinking challenges scale. semiconductor now as change dealing of is physics PCP you can dealing you're the you the you're of lot as things of because with multiple with which like nanometer scale the you're at challenges. are you're and at millimeter that the a scale and that design those scale. introduces dealing And There now a

scales, smooth appear temperature thermal effects, sizable which the large example, temperature chip So modules. can on very differences dealing geometry you're for can when small with but out multi-die

one that's challenge of so, scale. And really

chip because with between that you're the not you're also different dealing you've with just, of traditional dealing not challenge in you're just that of SoCs, dealing novel labs. case, is got second you're the dealing The structure, this interconnections the with multiphysics fact and challenges

you interference, example. about example, for for electromagnetic worry So

to handle electromagnetic got to be able ball to connection. that warpage need integrity, to you do signal so to simulation And and reliable cooling ensure you've EMI soda prevent

So, there's photonics.

of number and out different or in used areas SoC ship. you're a you bringing build there's different have traditional traditionally where may So physics what to from

is that's that multiscale of so, puts deal shine really multiphysics about good in area customers challenges and can and our We ICs, place. with with a we XD really these another technology because multiphysics. our where that, us help And I think

needs we're and the offer So, about we of can AIML. building what to systems customers next-generation these of some address are as very excited silicon

Tyler Radke

quarter That's and the outlook. I guide just know in here lot It second a the little at APAC, U.S. a talk you and strength of while, that in on And the the by seems Europe it seasonality in QX the duration you. Just and was prepared saw sounded like just on bit understand performance we've bit softer. you Nicole, it helpful. Thank the in rate Could in saw did growth for midpoint ACV, remarks. trends the least there you but and you of performance? here beat about maybe came Was the type like a was a U.S.? any in seen QX there macro change lowest conditions? in us duration driven contract of help the

Nicole Anasenes

Yes.

by first, saying a dynamics a overall what So quarter in in guidance. the we I'll saw start line we when that that from standpoint, off are much initiated mix geography standpoint, expected deal mix from with we very the

- to region. when in Americas continue different the value And customers, you quarter that has So, Americas surprising our we was creating look or outcome. that it there's for to the is from company changed largest the in expect at be it's overall, nothing led and that

growth we be revenue highlighted continue remarks, large quarter. expect in emblematic constant and a quarter the in deals in XX% the We it We currency. some had in strong performer the to prepared was to that

our the pleased overall, in saw pointed dynamics And Americas Pacific EMEA was quarterly remarks. expectations in as what Asia the So, we're as we then around really well, we in mix performance that delivered and in with the line we the out we prepared had. in geographic with

performed look industry had industry we dynamics growth, were had Chemicals strong. EMEA, kind industrial in Materials broad ground transportation, and similar automotive growth equipment and and an automotive, and strong. and A&D we equipment you really aerospace also diversified at as And defense, APAC industrial pretty of were example, particularly well. all When

a So in would the much in it which way quarter we saw we in play very out. QX envisioned

had that ended beat the segments the the is X.X And midpoint the is allowed ACV bit dynamics little we've that across of in globe, us our being guidance year full seen up the quarter. which QX. in which And what it in by pipeline customer the better in actually a the building across to excess industries, the point, gave confidence of raise to geographies, beat we us

Tyler Radke

you. Thank Okay.

Operator

Our Andrew Berenberg. next Please go comes with ahead. question from DeGasperi

Andrew DeGasperi

question a taking question. for M&A the Thanks two on side. Maybe part my

expect the half dollar or bit a as in the from second Just a just elaborate Nicole, acquisition is wondering amount could how you on if, partnership And you the percent a if first, do what your that? you and balance Diakopto portfolio kind. could Do then touch secondly, us contribution any you little maybe with do to Synopsys. maybe the in tell Ajei, - Thanks. growth you that you that broadly, could maybe more EDA more with invest you have. And

Ajei Gopal

Yes.

answer question. then turn Nicole you it the rationale So I to let and me give then just for can I'll Diakopto quick over the maybe and back

subject shifting IP process. commercialization in their that developed about performance business. It it the very left high extremely team to in design And by but complementary of a small cycle. was matter was So relatively early was was really core experts. our Diakopto really They were

things and and key addressing they for and communications application electronics signal that challenges things of some like And is analog mixed important nature. for automotive, were design. So RF circuit that

do existing very I it a it's products. our natural to complement want? semiconductor that So supports shift said, you Nicole, as left.

Nicole Anasenes

mean Yes. - And team, great phase. was I is was IP commercial not an Ajei amazing talented really as this advanced in technology, said, it this an

there's impact this or in particular in from second So outlook. acquisition quarter no material half the the

Ajei Gopal

we very, about have advanced received an are been continued about nodes. product I the very we golden that's portfolio areas sort semiconductors. have we ANSYS with very question the you in, capabilities. our on So the of to you from about thermal historically effects about off, things sign Look, that. investments and with integrity asked the to at I of some have dealing how our And excited foundries that RedHawk fits will, think area like if we that And one excited our of you had respect we're most forth. and certifications the and process talked so and with in, power asked make portfolio of Like

different I start you future, are at use being length others. that technologies by XD designing the into thermal going think talked to that's ICs about though, broadly of who more really some not bringing the about portfolio. used and look and ICs, And people multiphysics historically you were and the traditional in As effects

Depending talked about we I automotive on segment. the of the mean, this, placements

are putting - could you're into in that chips you recognize now in not have get extremely be If chips extremely hot. sitting environments, a cars, these in could they car, air-conditioned are to which sitting

It can get lots of vibrations.

becoming to be solutions to to that cases increasingly for a the different And portfolio. whole there's are able reliability needs analysis be the different these these leads set that use ensure done of ANSYS traditional common. of So to that

we're so we we about to open make excited partnering our our other obviously, successful. sure vendors to believe we position ecosystem, make strength. believe in sure that ultimately and certainly, customers of are in in an work that our And a areas And we're with

Kelsey DeBriyn

Operator, we have more time for one question.

Operator

Steve last with from be go ahead. Our Tusa will Please question JPMorgan.

Steve Tusa

letting in. me for Hi. Good Thanks morning.

Ajei Gopal

Steve. morning, Good

Steve Tusa

sort of just just on - mechanics it reflects there's income an Obviously, you like put of non-GAAP the Can flows. just statement - it, those the behavior headlines just Obviously, perspective, degree. just maybe the a just doesn't there little color cash mechanically. in a change accounting parts from longer-term you talk little quarter about value to more maybe more But color really what's driving the the the change a front. on some in as a on moving third

Nicole Anasenes

sure. Yes,

has noted in we where the you a much a quarter between have as meaningful haven't that quite I've a in past, while. couple can you quarters and quarter had But disconnect in the sometimes ACV. So P&L a this a have disconnection of

QX growth you both first if and QX. the ACV underlying accelerating and in it half, the is throughout the and the half in again, from look at quarter So

very is ECB, the which And so generation overall consistent. dynamics of cash are basis around the

is quarter, Now versus in which XXXX. the XXXX QX the in lower recognition upfront relatively license mix types within outlook, of generate the

what's between quarter the third causing So P&L second outlook. and in that's accelerating from quarter headwind creating ACV disconnect the the and that's quarter what's the the the year-over-year strong half and in

you QX evaluate strong outlook growth. a quarter, the double-digit reflection you guidance, revenue momentum - you the the the P&L if And returns it's revenue business. not as or when resulting to third when and year guidance of and said, in year-over-year Now QX consider look in see and you you change can that that that, the the full implied we growth, any can

of so the reason And continued half additional guidance our X.X we've that's add we gave. we've when really observe that under is - increased the the that's And best The outlook where kind - and our points February why business. of year seen since metric to point momentum just this in ACV you full our in progress ACV momentum. with

the I'm that's the year. full sorry, between So quarter and quarter the disconnect the underlying dynamic the the - and that's driving

Steve Tusa

So just that. as a follow-up to

change bit different kind what like what any into ACV But ground, profile? is a is on flow. level? do the mechanically, P&L. vertical actually volatility doesn't at this the a acknowledging that that just quarter, a what there's the where of that So you SKU is kind read high between again, drives of the ground change there it cash in of Like just changing and - like or what third or on the fourth Or

Nicole Anasenes

Yes.

the pipeline types the renew license were mix the because pipeline operational nothing kind of and really there's of new. So that is that those are

like recognition multiyear So of types license perpetual operational. can there's get period compared right? higher you a on an different the of of or where example, leases mix, that mix as relatively comparison mix really have high upfront to you one-year nothing occasion, a But of a leases different a upfront have licenses

a drives the rates business. but the mix which in overall it anomalies have change comparative fundamentally different in dynamics in So growth you period, doesn't a can

in year, of you half that just fact, another what the odd one and comparison in period the business of In mix guidance versus implied SKU to period. have of of kind if can implied second some the look in dynamics the recognition tend SKU with have done rules been It's comparative really comparative types in you quarters. consistent very the it the in delivering the at the has when the we're revenue what overall license prior is of

dynamic a It while, of a happened that's once basis is challenging. you hasn't in quarters, have different but where a couple that quarter-to-quarter a on just And within in quarter every very a a have year-over-year a you - dynamic quarter. so sometimes

Steve Tusa

Thanks. it. a makes really ton I sense. Yes, of appreciate

Kelsey DeBriyn

today. we No I you remarks. joining will That's Thank problem. for closing all the for And have. to over Ajei time us it turn

Ajei Gopal

and strong my our and ANSYS expanding in I'm first joining the I excited to proposition all Thank at channel achieve of our many have our for global by pipeline. to and a value successes. us, of colleagues execution year, commitment, confidence factors and our goals. thank proven my product our track want unique and our focus you well Those their success ability at partners to as day. as record our their the great half for adds a excellent in leadership

Operator

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

You may now disconnect.

ANSYS (ANSS) 3 Aug 232023 Q2 Earnings call transcript