ANSYS (ANSS) 23 Feb 232022 Q4 Earnings call transcript

Welcome to the ANSYS Fourth Quarter and Fiscal Year 2022 Earnings Results Conference Call. [Operator Instructions].

Please note this event is being recorded. I would now like to turn the conference over to Alex Deruta, Investor Relations Manager. Please go ahead.

everyone. morning, Good

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

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 obligation to as upon based ANSYS information. any of are such the

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

strong and financial Alex. share. largest history. across and was Good morning, ANSYS for for in QX per including margin you us. year quarter all a was guidance ANSYS. the ACV, our for you, metrics, another the quarter We earnings key for thank beat QX our excellent culmination operating and Thank joining everyone, the quarter of revenue,

growing enabled operationally our of raise industry-leading XXXX. quarter product customer and beat Our us guidance to execution loyal strong markets portfolio, base, each and

guidance in We dedicated our currency products, guidance entire the Nicole our Thanks realized congratulate demand in in few process, from to including financial and excellent trade we ANSYS ongoing our our uncertainties economic significant XX% the reflects full year. customers ACV accomplishment. In long-term brought $X in the entire for this set of XXXX. the and achieved constant This, and by I for of course, continued goal at a world-class the we of strength one want war of Ukraine. at year. in of ACV was billion performance, team, sanctions channel And goal the the grew Day despite XXXX. discuss partners our the to QX Investor minutes, our the business. power for our our the will This on

achieving that results well our I in set as keep XXXX XXXX out we XXXX. goals in excited as of investor for our am to our August and the from us on guidance long-term track update

growth geographies XXXX, back across broad-based industries, saw routes. all and Looking major at we go-to-market

and direct double double also digits. defense Our automotive indirect The enterprise Hi-tech strategic in and accounts constant by channels again sectors ground transportation top our our and grew aerospace were Similarly, segments, customer contributors. digits and currency. volume at and semiconductor, of each and go-to-market grew

pleased a perspective, growing better with also a we $X performances excited time of lines regions, first offerings. the to for From than history. the our geographical one in newest flagship more that I'm ACV in saw billion our we expected. recorded the product over ACV strong solutions Americas, with established our of our to each performance I'm from region announce And

computations. and their more years, QX and or years global expanding the and technology these in customer vertical more more and ANSYS X semiconductor million. ACV X for X segments, business is use top driving X the customers for more totaled products into Through X new of are Our agreements high-tech users, $XXX which contracts, than for

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can ANSYS role million product a to approval key play extensive in process in that which $X navigate nuclear process a day. per solutions an must development strict up delays cost

initiatives. with portfolio Continuing sustainability As of how our conjunction I address working structural with like rest products important analysis this would theme key of these customer in plays scale new example, you through of with structured highlight few this structures heard solutions a role in the topic. examples the to ANSYS a sustainability the

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comes particularly works goals. While hand-in-hand is structures, when product sustainability offering, materials a newer customers' it it to meeting ANSYS with

often Structural their develop nontraditional its as fiber customer reducing new simulation waste using programs. of to ensure composites sustainable consider short plastics. ANSYS over these which to further one and architects, safety to can is and weight durability customers members topology includes steels, reinforced sustainability they through also of customers simulation start-up X,XXX and while optimization. program, our materials ANSYS nature help seek products, performance more materials, because That's new on assess

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release are customers one is Our ANSYS initiatives. recent sustainability of their XXXX also with helping

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only objectives our intelligence are so to them to such learning help machine business more achieve will customers in artificial is develop their salt prediction prediction which products, decreasing sustainable guide how resource-friendly we example, is in leverages time predict much are to solutions time helping and Resource more or not energy enabling capability users resource one required. reducing One memory ANSYS and a manner. be for but will to do consumption.

innovation increase is customers Another vehicles. in RX electric aimed at of the helping safety

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or structural and simulates LS the our through responses are other simultaneously Specifically, comprehensive of safety thermal workflow new Dyna some electrochemical in an that damaged batteries ANSYS event. accident in

make vehicles commercial with not solution We critical electric this to any of functionality other safer. aware are help

simulation and to explicit are structures developing through recent in models addition of with In was longtime emphasis solutions leadership the leader and addition automotive product body development, M&A, develops providing human and organic expertise in our our dummy selling and Dynamor development for to an [indiscernible]. in we our partner a acquisitions industry. namely Rocky. furthering ANSYS with

production safety provides This simulation, with capability for customers crash processes. software critical solutions complete occupant and

our sophisticated integrity. shapes products Rocky product experienced a solves XX% granular customer acquisition with bulk Nearly flows, potentially industrial particles where efficiency of or structural interact, complex different challenge. Our material sized of impacting

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our Thanks customers to in ANSYS based most has the the initiatives, included initiatives. the to its be and governance durability As corporate will America's sustainability was reduce part of predict of and in ANSYS companies social product our ranking XXX improve responsible named list able environmental, companies of XXXX. a to performance equipment. for quality result, and waste on responsible most Newsweek annual

improve Our inclusion on and reduce commitment for customers by this waste efficiency physical minimizing list need the making to demonstrates our prototyping.

capabilities Turning released real-time ANSYS' smart insights products. Signal was design to in partners. XXX Integrity Fusion can electromagnetic by Autodesk Autodesk XXX near embedding Fusion within extension I'm access that consumer board process for printed designers ANSYS excited simulation in by the powered November circuit earlier commercially

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set has markets over some am metrics history. Despite years. our we uncertainties, And during proven confident recent robust, business $X ability economic we We I resilience goals the our best achieve company guidance exceeded billion key of across and in its most end to ACV. all in beat the August. delivered our update our in our remain the and course, in long-term year of goal investor

had I've the opportunity direct speak of channel sales our well with partners. weeks, few our global as to past the team of several Over members as

enterprises the from market strength Reporting in the accounts. SMB through largest

of because for our more proposition. understand innovation. continuing to base. strong Given research to compelling computations our And throughout more importance customers simulation customer and and users, demand more The drive and is continues that products the be development, ANSYS value

relationships, QX, our will product and strong end of out XXXX propel and our coming leading us momentum portfolio through our customer beyond. markets Our robust

to achieve Nicole? we more the in turn I'll with result, And future a now ever than ability call milestones. over to As are Nicole. our that, confident

Thank you, everyone. Good morning, Ajei.

our another momentum begin our optimistic given me and XXXX Let year about was we're saying for ANSYS, our business. XXXX the by outlook outstanding that in long-term and

guidance beat full key For metrics. quarter both fourth across the and our XXXX, all year we financial

particularly noteworthy raised revenue, year This course for given operating flow quarters we throughout the ACV full the cash operationally and our all of guidance is year. EPS across that X

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

with XXXX growth customer year types and growth As in and quarter seen was Ajei our full industries. regions, mentioned, geographic across the broad-based

performance, a at ACV billion achieved XXXX our made As broad-based our commitment $X.XXX Day. surpasses the which result Investor in $X in billion we we of XXXX,

XXXX entering further additional pandemic macro foreign and economic For a magnitude when a a outstanding we environment we which billion, backlog. context, would ACV amidst rates, momentum global and delivered outperformance, exchange at an approximately the on. $X.XXX volatile our year was XXXX and demonstrating All quality with and are and XXXX of strong equal translated XXXX challenging full year accounts,

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

full the ACV, For in in constant recognized XX% year, currency. $X.XX or X% growing we billion

For customer the and types, broad-based quarter geographies across was industries. and year, full performance

our Our of leading nature wide rate in execution. growth exceptional portfolio is simulation evidence and of essential the market

more additional For Russia X and course set constant of and to million $XX year the U.S. operational dollar offset the nonoperational Throughout initially Belarus, we in and February. relative by than XX% strengthening points from $XX currency in including ACV growth million full our the momentum. incremental unprecedented in exit guidance where absorbed context, last of year, came of we was business of which higher headwinds

XX% ACV of created or X% the ongoing shift This our in leases. grew constant growth recurring momentum sources by XX% in year-over-year from towards represented is strong annuity currency driven in subscription and recurring total. the ACV by XXXX

strong XX% be the the over For for year. year or in grew of leases which $X growth XX% subscription continues ACV billion ACV Subscription ACV XX% $X.X in the lease billion total to XXXX, full performance currency. fueled or crossed full constant to by

of or in has driver the ACV. foundation strong X% been positively revenue top grew our total the outperforming to continue subscription or Full X% high expect end ACV building by on and performance We double was XX% currency, leases in XXXX revenue $XXX.X the and year was will growing growth. both constant guidance be currency. had over QX in in respectively. billion digit XX% $X.XXX our XX%, of and and We with was grew line the continue to constant annuity be future growth time which to underlying at currency constant strong XX% and that for impacted exceeded million of revenue, a and

revenue the and balance of double-digit. of executed which of year-over-year. closed QX our grew quarter $X.X a the we model backlog billion, business GAAP We both deferred In full with year, XX% total against and over

with XX% operating which our the continued guidance. This quarter solid we margin a leverage. to gross deliver full an and During fourth XX% a margin of yielded of of of strong gross margin quarter, was and business had year model We XX.X% better than XX%. operating margin operating

outperforming was Operating quarter margin The by also result of better impacted $X.XX, revenue. on than guidance. our positively was EPS which fourth was

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

tax effective XX%. the in quarter year and fourth full Our was rate

from million operating flows collections. $XXX Our cash outperforming ACV totaled which quarter benefited on strong fourth and in the

$XXX.X cash flow was operating million. Our unlevered

and XX%, meaningfully exchange ACV nonoperational year, full operating the despite we foreign $XXX cash headwinds. grew For flow which significant outpacing growth of million, had

to purposes, modeling million. of flow operating $XXX.X operating unlevered translates For cash flow cash XXXX

million For operating flow since February. headwinds cash absorbed XXXX initiating nonoperational guidance additional context, $XX last of we

operating from in tax into of our exchange These headwinds, adverse Russia and were guidance. already other R&E offset guidance. million operational and foreign changes legislation incremental headwinds was than and from nonoperational including law February the our of The the by million exit this February cash midpoint XXXX headwinds capitalization performance year. the the top Belarus The factored of throughout $XX $XX impact on million of was of the better flow was that $XX result

$XXX.X with repurchased timing million expansion outperformance collections. shares and we the on allocation several short-term balance line ended the outperforming million. In with the driven capital sheet. $XX factors, priorities, and by XXX,XXX cash including quarter our This the for on ACV of the and around We was investments margin during of approximately quarter

years. form repurchased the capital For the XXX,XXX average year, around the return shares over repurchase past for of shareholders million in to approximately share of we X $XXX XXX% the which full was

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

of from and in the XXXX XXXX we of our cash update M&A for long-term to X pipeline of The entering guidance. our that and QX unlevered XXXX laid operating annual us investor with and achieving Now $X are We continued momentum in underlying an year confidence topic a ACV at full let the and continues constant best-in-class XX% demand delivered robust me we backlog, and inclusive gives to which portfolio to of compounded growth, momentum strong. turn be outstanding business outlook tuck-in out of our currency points XXXX XXXX. billion cumulative X flow to and

guidance. Let me start with our full year XXXX

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

is midpoint broad-based we currency set have that guidance expect annual investor diversified we which in model and growth see August. balanced We to update of our double-digit performance that XXXX. is at and driving constant the ACV XX% growth Notably, the a on our in of our business, compounded

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

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

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

that continues. continue business than also We lease revenue as towards assume ACV expected subscription to model licenses our grow grow result, perpetual leases to the subscription and faster is a as than shift faster

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

This brings me to our operating margin guidance.

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

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

is X.X in XX.X% had the our expect than to and be effective tax point rate XX% XXXX. year We rate full lower which we

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

long-term investor aligns provided our to flow the we operating are unlevered providing at August. cash cash guidance billion in cumulative outlook XXXX flow update as We $X it for

unlevered operating to million. Our XXXX guidance cash of range $XXX million $XXX flow is a

unlevered of significant growth flow strong the to growth levels the top We operating expect cash exhibits on flow cash continued XX% saw cash operating year-over-year. The XXXX leverage to operating see in of implied another of business our XX% year model. XXXX unlevered flow for in we growth in XX%

the unlevered on reconciliation contained cash cash non-GAAP operating in remarks of flow details document. operating and the prepared our flow comparable GAAP Further are

Now guidance QX. turn for to the let me

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

EPS margin and to range QX outlook in the into the contained $X.XX. specific in QX XXXX and range to currency We been expect are have operating XX.X% the in factored XX.X% that rates other our of prepared of and $X.XX document. remarks details around Further assumptions for

out would fantastic I ANSYS a exceptionally team the another like for rounding thank year. strong quarter to

portfolio nature team's on performance the of simulation focus excellence. critical market-leading and well our customer Our evidence the of as discipline as operational is

to Our volatile consistent Investor above enabled macro XXXX us performance a commitments environment. and Day our XXXX deliver execution despite challenging and continued and and annual beyond

and excited opportunity ahead simulation as challenges. most solve customers growing, immense core market complex Our their and we is help are we product development strong about the continue that our to lies

with model healthy resilient We vectors business with a XXXX and entering diversified considerable growth a X momentum, and and pipeline. are of backlog

fuels outlook. which year in optimism and of our full long-term All the embedded

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

[Operator Instructions].

question first Oppenheimer. Ken from Wong The is of

mix quarter and the defense wanted touch from aerospace maybe to I stood just guys. up. out of you and strength one that I me the on was perspective, segment some really fantastic it from Ajei, to a noticed jumped rev Fantastic

underlying and runway growth talked And highlight beyond, there? You maybe some we 'XX particular those X-figure there out is that for drivers as still X-, look you decent particular vertical? of up in deals the to can tailwinds

Sure. Ken.

briefly me aerospace. about let talk So

facing pretty complex are broad-based. and it's customers aerospace challenges, Our relatively

a there focusing space, on whether are to trends efficiency, you industry. we engines, of so companies. so a some there smaller aircraft customers to different cases, and electric comes our there's at engines. place innovation continues be aerospace points some about of different both companies world, X.X energy are when there as the Obviously, AMB as and of it in of fuel in think various -- that number sources, of lightweighting obviously, well -- And taking number levels innovation lot who Space the in in are have And in larger a business

some our done used course, projects dark those that the the with were of technologies where telescope the work development and And mission our significant of the web we've you've then, project in where seen like projects. of

entire across our this continues for demand activity pipeline that lot a be aerospace see I defense And robust, a space in offerings in that there's world us. different the and believe of So the well. for to space and as we

a And Great. follow-up for Nicole. then you,

wanted building it touch guess a like kind long-term that, of looks an room look, growth on be I the to guess a strong there flow think Just closer was operating there I the it's targets mean, XX% off to really sort calculation should we of assumption that guide. expand. underlying we a it's unlevered to, off suggests cash of my think number it a and assume I that number. continue number think, just about fantastic I expansion. 'XX. still you as long guys for year XX% I Is does of see more term of this little would

be puts Just fantastic. and takes there some would

close cash really unlevered flow flow our Yes. operating performance of the were And outlook the Well, in it overall. XXXX continued delevered to of indicates yes, cash grew quite thanks, of the you substantially Ken. XX% cash out, pleased our point momentum really, end XX% business as at range operating in flow in year, we the exceptional with

guidance. XXXX the impact know, cash flow when you the perspective, But that early growth We're and ECB and to combined XXXX I pretty exogenous flow ago. of prepared year. to margin little X substantial August. exchange rate the at cash long-term factors know, -- over expansion unlevered meaningful that operating -- the a long-term associated number you in comparative just of mean, with what operating is there's from growth can foreign it that for not and and But you leverage see gave to the unlevered last the look update guidance as lot rate had update we a operating you it's long-term a that X-year could impacted period, As guidance I gave us say we months

out term the the example, to relates momentum prepared strength underlying an the good we we're as longer to but it of anything of so than XXXX woods of still quite operational As really business. not today, give the feel about not that really

-- to around We able very to are model have incremental to that expect And of a we investment build putting investment in, growth. disciplined drives on years. those next that things couple the over continue we that be

question Vruwink Baird. next The of Joe from is

year? within years intended in I was an that growing, basis line, the I leases? XXXX given, to know, organic question upside last I the provided ACV this can to some framework of year you XXXX 'XX shift year. think, renewals several your just above of time Great. for basis if my way, the and is, to guess pricing points be or were maybe seems the hundred And or XXXX be this to last and case, not the the drivers outlook through that always then don't in that's walk terms just

sure. Yes,

just we kind maybe what on makeup can term. of of level XXXX, the XXXX the long about was So talk in set

was you last to we a previously had last overall about said contribution $XX we of year. as that, year, the performance point as it point And from inorganic So the contributed around million. mentioned, ZMAX growth out,

X As end were completed were quarter we the acquisitions we most the at XXXX, look that X that of the completed announcement. notable earnings at time. into our after

some those primary is reseller we for of Just context were product the a already.

contribution from a to to of around million rate EUR XX line we in pretty EUR XX a so relationship the to it And run business. doesn't inorganic revenue. that million small product have already expect be although we transaction with material had And the very a ACV also it's

that under just of half in So QX. with

pretty relative ours. different that business SKUs to So there's a to

more XX% including our business double-digit would constant that the full ACV. you is growth model around exclude growth, our year which put in us So of currency Dyna on ACV outlook when

XX% view still I around we we mean, ACV are particular it perspective it, in and XXXX we and remain change As confident how the of long-term a in out, outlook there anything to what in compounded would update change certainly the business isn't see growth that would that course the as how that shift would that growth time. rate happened in future relates foundationally objective, through and we our guidance the underlying long-term certainly, the the in trends of at annual the And time. -- that

But right model what on pleased now, top really pleased performance XXXX we're to outlook to XXXX, a continue with XXXX on we're we in and building set delivered that have for strong in really we really out -- and be of that a really strong we we're in.

Great. a thinking. was bigger was Okay. bit now. I

your that's customer then across interesting just there are was spending on ask, comment And patterns an you changes there noticeable when think I guess, in any, that performance year-end XXX top being of the I'll guess, So outside? think the for all segments. I the outside helpful. about activity. Typically, I XQ. your I big of strong guess, and And outlook the inside heart enterprise at this is different pace question,

so this broad more is at start customer that base year? the is And of across the the indicating maybe strength

different briefly individual as remarks, in similar of we've -- last in mean was half customer in a to slightly no There's year, bit bit mentioned across QX. actually QX think to and M&A prepared concentration. less of than I of very guidance, a There half bit our -- element just said the in XXXX a their the is considers the SKUs that have one very outlook happens little that less business drivers you this on customer business growth I on impact. does answer my and more the said I part broad-based. geographies the under industries we than think throughout first underlying business. I the to Yes. than -- had of half or little and so broad-based and -- M&A There's

different we've quarterly So than past. a bit that to have M&A of around kind of the of year is there pattern in on we a year that future other of Dynamar that periods maybe smaller earlier in the that you some on more is little impacts some the of relative dynamic in see a slightly the the the basis a done

of from is Jay question next Vleeschhouwer The Securities. Griffin

Let spending of in that elements me your that priorities ask posing technology about in we've terms defined at your in incremental -- and the context is and your group. newest peers to the long-term dozen what above R&D, And the your you've in other solvers companies of been priorities the what over CEO of are strategy as when question the not XXXX beyond, or your and you most solvers. think investments a base

way of terms vectors, would most spoke integrated described far X executables vectors of guidance, R&D way Meeting guidance as your important and about a you you any growth new 'XX growth to to Analyst and at which newer some you could in thought are second workflows. say use you. as referred cases variety traditional about and think the connected the question, those is relate also months or of you What you or you the when among cases which there use as Thank new concerned, of 'XX are traditional and then ago, you the use cases

firstly, in technical investments our about you that I so Jay, business, will that our priorities So when we're think investments. areas be probably making making would areas where technological X we're say broad

both would the do. first part that and categorize methods for physics physics of physics core the includes models and as The what we That's multiphysics. broadly and numerics I just

the second area in we're across where portfolio. learning AI investments machine is significant making The

we to this products benefits cover significant to through space, of filed patents We've, getting great are make been investments of context in ANSYS enhanced the of that technology in to advantage customers have continue our in take seeing the to some course, of our AI. the today offerings. customers work Our and AI and of be our able

like HBC is RX, single example, well we both computing. exciting The so for that includes where XX work the Xx solver our look as as area obviously optical GPU can and example, high-performance includes announced [indiscernible] that if at you obviously show faster than really CPU something for is CPUs, GPUs third a on That core machine. just -- we some

And fluid can and on a about terms a usage then, it of simulations savings of excited we as cost magnitude and course, which solver we're changer allows as, and multi-GPU performance well terms orders in tremendous that of like and comes performance, show game natively to things of fluent of energy is run scale GPUs, very multiple others. in up when course, to both

So we done we've excited that investments and over about continue GPU very space, work in we there. make to are the the

fourth cloud. the area. and in is Cloud doing experience includes that That we're the work

native where recent seen we're continue to context may cloud technology announcements cloud our capabilities digital the system continue last twins, some as to in advances. simulation cloud some we and is like -- of marketplace and digital invest in user that mission, we we've experience. includes You our make as have well the area and of things And offerings, there, in announced engineering,

the obviously, things ongoing when but of in Webb the well, of we product investments NBFC. lines like talked you on certainly, and about that mission, that when saw, we dark you have some space includes the space. our -- Unintended as capabilities And well James as as

driving engineering and AI, cloud So our digital broadly, computing, there and high-performance next-generation areas experience these are are the ML, activities. numerics, that are X and areas:

that right? way mean of growth to trends as the answer and and question an complex I Jay, if our industry generation So investment things. if as the double-digit example, are to you like your Yes. mix. around of as those the kind the in automotive the think are demand really growth underlying are these cases QX it, performance trends think could customer driving well types multi-business are that connection just about to things that much sustainability, that in those trends kind that you demand, electrification, talked Ajei what's to of in of double-digit that on and next the the driving areas, at I of -- technology are you driving connected in of to kind referred And use look refer those we vehicles things about

cases both are component and know, problem, level forms not multiphysics a alerting. to are space all level [indiscernible] Single use component the system you involve of way that the system those As particularly are to case, which they level. in traditional like X.X that systems complex single falling

so of those order our customers economic selling we higher motion of makes problems, kind the or be may we becoming be known of sell main a more very help seeing And regardless we can more -- difficult and are strategic very and problems which us of what main focus how help the partner is that solving -- important complex those what engage of sell. people times, having motion

from is JPMorgan. Tusa Steve of question Next

of a the of the Just question on cadence guide. the kind

on influence acquisition and like next you XQ the perspective. mentioned a Can revenue just XQ. It you and down of Maybe a if about the wrong. pretty doing strong think, what's margins, quarters, kind the growth there? back think are seems then talk from just is out margin I it's you bit I Matt, slower of year-over-year. the on X calc the I'm And going

Sure.

in a that's around years the the mix back. the the revenue the quarterly accounting the XXX on because So influence basis difference around first, underlying of on change of one business the year-over-year lot And change several the volatility dynamics licenses of basis. and creates P&L the is that dynamics a aspects recognition. can to recognition in particularly for a revenue accounting significantly since

-- little as of leases is in time kind going extrapolating motion is And for moved it to can meaningful have remixed to once throughout there's a of only selling an momentum quarters not We throughout of directional also ACV a be particularly the up where so the single the as it's the an kind that like. pattern about the a P&L. a variability of much in in of customer year process where margins do year have kind similar what multiyear of comes is ongoing customers year a selling in year, that less prior relative kind relative happens point at where event looks kind the

the with the way in full So really the P&L guidance. there's focused the year business in and that full to considerable is feel indicating the year the particularly volatility full kind flow overall. the our ACV throughout about trajectory really and cash for guidance on our we in year And where is that updates change our quarters. clear particular, happened why outlook that's of And being of we're operating we're

I went how in would last guidance see it that's how you that's of overall so how And year. could And about that we we kind think through think around that. is really our

that a And create down, -- our of the there we looks predict because based up the beginning what business in business guidance of give or be pipeline book is if was year. to at control. an will And We the see we it example, macro of where of we that what us today. of don't we trends We could book to we look philosophy or And ranges, things about year, changes. look on like at the try X-point look progressed our things in clear we and what today as terms ACV ahead difference as we can't that's try as the today. is in change, wide which throughout

question? does So answer your that

I seeing large across that's as well CAD some guys that clearly enterprises not companies, obviously what saying. is in of other simulation are small than which helpful. Yes, and but guess you and PLM pretty as you're mentioning different the clear medium-sized were more strength businesses,

that was to not wanted just in strength that make seems contrary nothing it I comment is really there to where sure slowing. broad-based the was and that So like guidance

outlook. to So the not reflect guidance really is kind of meant that macro

demand, the can some strong is timing Yes, the year. variability think quarters is as the really the overall of things a which throughout reflection of out. you point of the absolutely. create broad-based is in quite outlook, it and gate we I But mean ups downs out the within

Great.

on Any cash on one for Just XQ. flow XQ. more color

make dynamics within because because lines quarterly Cash that collections timing date cash that around fall the not because change flow flow flow, so of do we a give of timing the of occurs could But sell modeling think strong purposes, a QX, off meaningful portion can easily particularly for QX. assume meaningful over I that really differences. flow cash in datelines of you over of cash payments quite quarter guidance or a and --

QX be quarters being mark. The be to And tend with to the little QX a middle cash flow QX the more lower water largest probably X bit muted quarters. and tend

is Kalia of from question Barclays. Saket next The Okay.

that maybe you on from very about inorganic. you could flow And so well And helpful Nicole, margin broad a give of brushes just rare to preface that from it ANSYS cash I just a acquisition tuck-in a for course, little maybe mean, strong free you, bit, contribution -- on can profitable. accretive operating you us just on a was to that just the just some thank if It's margins. But to done is ACV is. margins, wondering is, and finish talk perspective. I

whether are of maybe of Can just us kind here flow? some in are operating the acquisitions margin that impacting cash you broad give additive acquisitions to any And for or dilutive and other how brushes mid-'XX those on and maybe 'XX?

Yes. Thanks, Saket.

in as almost do we So to is acquisition you point actual every out, margin. dilutive

accretion So have. any for is with individual we acquisition some there that no occurs or margin

impacts cash as there's as operating it flow, can things, associated muted normal more with flow know, is sometimes meaningful one types mean, I cash and slight are Now flow. of the to which Cash positive outflows. But relates you integration have those first expenses relatively cash year. you also year in some

significant to an ongoing be kind guide, cash as it did be overall have most some relative modest would what contribution to but relates contributor That the underlying so individual example. portfolio to of really it's flow on basis. the to might And the the it

you. Ajei, maybe it. for That's my Got it. Got helpful. follow-up very for

customer you in public touched quarter question. the priorities AWS Azure. think which of How being base or on simulation just of with a that how question both -- done I cloud and Maybe mix -- does do R&D mix traditional some make cloud this just being public sort around this that the thought very private you notable see and simulation do with hyperscalers were cloud higher-level You How of announcements, done shifting? more sense? about sort versus on of the on-premise within your

for Thank for as able does. computing it to today we -- you ANSYS to I is think the question. is, uses solutions. mean, applications. way our I one high-performance an mean really we're Look, from of it the run should about cloud Yes, want might perspective, where of someone be primary the agnostic you

know that we we customers the is trend a Obviously, clear taking so we the are data make compute cloud. taking which that And there is have organizations, to they're people public to to as of use time able goes towards largest have invested clear be to be available and them we whatever the the on, environment really, cloud. of where there And available. using advantage in have want licenses flexibility our from in they have them even perspective, a centers trend who public in to advantage

scientific vendors are are the obviously, in invest cloud continuing driving where And public computing, incremental usage. the available scientific that's also as needs have capabilities, computing nodes the that to requisite for

you cloud distinct about previously mean, the we an ongoing So announced public full newly know, have, of kinds developed cloud it takes this well of everything an of cloud native marketplace and about ongoing used something and excited strategy, direction that offerings, talked happen. that and strategy call is very of native what see From as advantage we as cloud from capabilities. we we call are perspective, being clearly cloud we as combination I to what is and marketplace it our clearly the and look, our some X expect we

base. our The marketplace offerings to customer are really about delivering existing flexibility

I So giving it's their they with providers. the products today, as the earlier, same of ANSYS own taking computing relationships service pre-existing while of giving leveraging to that the patterns really them familiar advantage maintain cloud customers, employ benefit said option and cloud

the last year. QX AWS, mentioned ANSYS in of you Gateway we which with released so And

Agile Microsoft we this our in year in talked marketplace the partnership we You about where the offering. announcement extended of made February

there's So that in space. number activities a of

as to, deployment And targeting and cloud remember our the native the of applications where and use new new On verticalized workflows a Investor who simulation and current of users you development cloud-based analytics. about at the simulation platform Day, power far new a if beyond really for user applications. we're anyone back of and needs predictive frankly, space, area cases, gets its we that's new base extended talked

early very tuned it's as underway still that rollout. days, you technology initiatives more efforts to And And and the should we but we this space. progress for in exciting R&D continue so move stay for have

question is of next Tyler Citi. The from Radke

Yes.

exactly on you're that what elaborate driving like seeing the wins impressive of is the Could And the in automakers, with terms quarter, core Germany large you you outperformance of in think expansions you the into automakers. driving just quarter? deals in Japan talked in big some and some electronic detail of trends talk And go could motor drivers in that? with the simulation and that count Some maybe and just if higher about results design. some I the some really large these this about the of

verticals industries, areas Sure. tech to transportation. and things got I ground is business top you deep as continuing and to we defense where automotive And X with look, -- their be one automotive growth and as know, the as they of X And our And it a a semiconductor, relationships top mean, of we've number continues to high there's a products. automotive customers define and continue complex strong face it, innovate. area. our challenges number with these they're of there's aerospace

is all efficiency traditional are a and there lines. towards crash fuel of more across et combustion about the cars internal the traditional deals think direction testing, lightweighting, for you so a if engine clearly in with and passenger product cars obviously, that those in on Firstly, cetera, moment,

important the alternative as mention term. the customers about energies, are long script analysis investing I of and earlier. in for electrification those are hope making you the Battery we're next-generation doing there with investments themes that And of start an to me impact think my the But example with where some -- work all technology.

supply that be in are who suppliers in that then automotive automotive and the work of industry, example, that the I or the in that the out, chain that just entire about may very then high-tech way, by space. a the areas So work in work lot for supporting building vertical with the components are customers point there's includes that think the are our as used takes high-tech would automotive place taking to place, we multiple being electrification leads

impact to look of as is automotive looking And supply very at the different if you industry at entire they're the of chain, so start these all across areas. the large

it's and help different technology of customers that these of And portfolio so our is of the breadth I I at Sustainability as breadth are example. they we another the looking think our to issues. able that's the the require you're are all of through mean large why these they're market. to are sophisticated transformations, the these trends navigate seeing with strength industries, the able our which are going -- customers or help which that next-generation industries, these we in facing through Now these dealing [indiscernible]

certainly, And OpEx in the outlook challenges. result a a strong. companies Obviously, any the not initiatives look of performance the savings top or was pretty you're for there growth specific people the and facing of taking the But a there's and if lot line Nicole. obviously, outperformance. out a just profitability level could processes of I'm if you this is at quarter follow-up just -- you're undertaking that or cost wondering if

companies. lot the software cost other there's on any just if that of But you're side curious incremental a pursuing There's initiatives here.

Tyler. Thanks,

costs low yes, that's why see variable we relatively operating leverage in the very that growth, and continue would the because operating So in as so leverage what definitely the business I business. accelerate is, operating you strong -- we can the have say we have to

prioritize a and eye us we helping an the we term. that get where how are for prudently we making and with sure do return with for towards how how how is term we're what I not and around that we to with embedded you of would what you to how a in is discipline comes decision-making it It do amount that new around ANSYS. do Now down investments it kind growth? tremendous investing on short decisions balance long investments of do is And put that operational incremental we have reinvest we make the say

helps road the can make And so has our also how allowed as things as us us us good that map. to we to time. we things sure strategy over in to well. continue monitor -- need are and accelerate understand invest It It things has business served

robust how support unnecessary in nothing our the that enterprise-wide always we work the do remove the reevaluating looking business. basis, at there's a transformation pretty And so quite around new and and we're we processes process have way always-on an

always that's not that we but disciplined. to because new the it the strategy the operationally we've again, been is we outlook, influence the on And why course have can stay reason

uncertainty, even maneuverability when we're times So have confident that there's we to execute. with the

the like concludes closing remarks. This for our would back to question-and-answer over to session. I management conference turn

relationships for The would again, XXXX. the I our progress ANSYS customer broad-based great like greater business Thank execute one goals. again momentum work I for ongoing our around a our in ANSYS joining and ability to give the excited you thank team's in day. against excellent and success. to world by us even the today's strong Once am confidence made long-term call, team our have

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

disconnect. You now may