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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 0-20853

ANSYS, Inc.

(Exact name of registrant as specified in its charter)

Delaware

04-3219960

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

2600 ANSYS Drive,

Canonsburg,

PA

15317

(Address of Principal Executive Offices)

(Zip Code)

844-462-6797

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, $0.01 par value per share

ANSS

Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   ☒ No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐   No  ☒

The number of shares of the Registrant's Common Stock, $0.01 par value per share, outstanding as of October 28, 2022 was 87,112,235 shares.

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ANSYS, INC. AND SUBSIDIARIES

INDEX

PART I			FINANCIAL INFORMATION			Page No.
Item 1.			Financial Statements
			Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021			3
			Condensed Consolidated Statements of Income – Three and Nine Months Ended September 30, 2022 and 2021			4
			Condensed Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2022 and 2021			5
			Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021			6
			Condensed Consolidated Statements of Stockholders' Equity – Three and Nine Months Ended September 30, 2022 and 2021			7
			Notes to Condensed Consolidated Financial Statements			8
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			42
Item 4.			Controls and Procedures			44
PART II			OTHER INFORMATION
Item 1.			Legal Proceedings			45
Item 1A.			Risk Factors			45
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			46
Item 3.			Defaults Upon Senior Securities			46
Item 4.			Mine Safety Disclosures			46
Item 5.			Other Information			46
Item 6.			Exhibits			47
			SIGNATURES			48

2

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Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements:

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)			September 30, 2022						December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents			$	632,509					$	667,667
Short-term investments			194						361
Accounts receivable, less allowance for doubtful accounts of $14,600			602,607						645,891
Other receivables and current assets			214,566						324,655
Total current assets			1,449,876						1,638,574
Long-term assets:
Property and equipment, net			77,748						87,914
Operating lease right-of-use assets			123,511						120,881
Goodwill			3,532,459						3,409,271
Other intangible assets, net			739,202						763,119
Other long-term assets			214,648						279,676
Deferred income taxes			24,196						24,879
Total long-term assets			4,711,764						4,685,740
Total assets			$	6,161,640					$	6,324,314
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	17,353					$	10,863
Accrued bonuses and commissions			80,282						163,182
Accrued income taxes			16,461						8,410
Other accrued expenses and liabilities			160,693						204,509
Deferred revenue			334,901						391,528
Total current liabilities			609,690						778,492
Long-term liabilities:
Deferred income taxes			48,357						105,548
Long-term operating lease liabilities			109,706						104,378
Long-term debt			753,495						753,576
Other long-term liabilities			96,707						98,272
Total long-term liabilities			1,008,265						1,061,774
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding			—						—
Common stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 shares issued			953						953
Additional paid-in capital			1,500,330						1,465,694
Retained earnings			4,524,983						4,259,220
Treasury stock, at cost: 8,178,940 and 8,188,331 shares, respectively			(1,294,098)						(1,185,707)
Accumulated other comprehensive loss			(188,483)						(56,112)
Total stockholders' equity			4,543,685						4,484,048
Total liabilities and stockholders' equity			$	6,161,640					$	6,324,314

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

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Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

			Three Months Ended												Nine Months Ended
(in thousands, except per share data)			September 30, 2022						September 30, 2021						September 30, 2022						September 30, 2021
Revenue:
Software licenses			$	208,906					$	200,394					$	575,332					$	547,820
Maintenance and service			263,605						240,774						796,106						703,228
Total revenue			472,511						441,168						1,371,438						1,251,048
Cost of sales:
Software licenses			8,425						8,289						25,370						23,960
Amortization			17,281						15,189						51,947						45,163
Maintenance and service			36,261						39,268						111,897						119,884
Total cost of sales			61,967						62,746						189,214						189,007
Gross profit			410,544						378,422						1,182,224						1,062,041
Operating expenses:
Selling, general and administrative			175,283						165,368						515,421						471,993
Research and development			108,056						102,023						322,271						303,381
Amortization			3,821						3,403						11,975						12,244
Total operating expenses			287,160						270,794						849,667						787,618
Operating income			123,384						107,628						332,557						274,423
Interest income			1,345						541						2,141						1,544
Interest expense			(6,092)						(2,943)						(13,668)						(9,594)
Other (expense) income, net			(656)						(1,328)						(2,126)						14,008
Income before income tax provision			117,981						103,898						318,904						280,381
Income tax provision			22,006						18,556						53,141						28,925
Net income			$	95,975					$	85,342					$	265,763					$	251,456
Earnings per share – basic:
Earnings per share			$	1.10					$	0.98					$	3.05					$	2.89
Weighted average shares			87,063						87,239						87,062						87,072
Earnings per share – diluted:
Earnings per share			$	1.10					$	0.97					$	3.04					$	2.86
Weighted average shares			87,418						88,169						87,496						88,069

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

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Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

			Three Months Ended												Nine Months Ended
(in thousands)			September 30, 2022						September 30, 2021						September 30, 2022						September 30, 2021
Net income			$	95,975					$	85,342					$	265,763					$	251,456
Other comprehensive loss:
Foreign currency translation adjustments			(61,636)						(16,304)						(132,371)						(31,351)
Comprehensive income			$	34,339					$	69,038					$	133,392					$	220,105

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

			Nine Months Ended
(in thousands)			September 30, 2022						September 30, 2021
Cash flows from operating activities:
Net income			$	265,763					$	251,456
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization			86,239						80,500
Operating lease right-of-use assets expense			17,356						16,896
Deferred income tax benefit			(63,560)						(22,459)
Provision for bad debts			2,476						827
Stock-based compensation expense			122,119						122,148
Gain on equity investment			—						(15,139)
Other			4,986						1,940
Changes in operating assets and liabilities:
Accounts receivable			66,369						86,098
Other receivables and current assets			96,641						57,992
Other long-term assets			(3,121)						(2,548)
Accounts payable, accrued expenses and current liabilities			(111,039)						(58,520)
Accrued income taxes			9,751						(18,997)
Deferred revenue			(28,203)						(46,467)
Other long-term liabilities			(8,746)						(5,898)
Net cash provided by operating activities			457,031						447,829
Cash flows from investing activities:
Acquisitions, net of cash acquired			(242,613)						(105,141)
Capital expenditures			(15,227)						(18,133)
Other investing activities			(782)						(382)
Net cash used in investing activities			(258,622)						(123,656)
Cash flows from financing activities:
Principal payments on long-term debt			—						(45,000)
Purchase of treasury stock			(155,571)						(35,993)
Restricted stock withholding taxes paid in lieu of issued shares			(62,035)						(92,143)
Proceeds from shares issued for stock-based compensation			20,918						26,321
Other financing activities			(1,290)						(50)
Net cash used in financing activities			(197,978)						(146,865)
Effect of exchange rate fluctuations on cash and cash equivalents			(35,589)						(9,142)
Net (decrease) increase in cash and cash equivalents			(35,158)						168,166
Cash and cash equivalents, beginning of period			667,667						912,672
Cash and cash equivalents, end of period			$	632,509					$	1,080,838
Supplemental disclosure of cash flow information:
Income taxes paid			$	42,055					$	59,973
Interest paid			$	12,192					$	8,721
Fair value of unpaid consideration in connection with acquisitions			$	3,391					$	—

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

			Common Stock												Additional Paid-In Capital						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive Loss						Total Stockholders' Equity
(in thousands)			Shares						Amount																		Shares						Amount
Balance, January 1, 2022			95,267						$	953					$	1,465,694					$	4,259,220					8,188						$	(1,185,707)					$	(56,112)					$	4,484,048
Treasury shares acquired																											500						(155,571)												(155,571)
Stock-based compensation activity															(50,287)												(403)						36,865												(13,422)
Other comprehensive loss																																							(22,092)						(22,092)
Net income																					70,988																								70,988
Balance, March 31, 2022			95,267						$	953					$	1,415,407					$	4,330,208					8,285						$	(1,304,413)					$	(78,204)					$	4,363,951
Acquisition of Analytical Graphics, Inc.															511												(3)						300												811
Stock-based compensation activity															34,631												(33)						3,205												37,836
Other comprehensive loss																																							(48,643)						(48,643)
Net income																					98,800																								98,800
Balance, June 30, 2022			95,267						$	953					$	1,450,549					$	4,429,008					8,249						$	(1,300,908)					$	(126,847)					$	4,452,755
Stock-based compensation activity															49,781												(70)						6,810												56,591
Other comprehensive loss																																							(61,636)						(61,636)
Net income																					95,975																								95,975
Balance, September 30, 2022			95,267						$	953					$	1,500,330					$	4,524,983					8,179						$	(1,294,098)					$	(188,483)					$	4,543,685

    

			Common Stock												Additional Paid-In Capital						Retained Earnings						Treasury Stock												Accumulated Other Comprehensive (Loss) Income						Total Stockholders' Equity
(in thousands)			Shares						Amount																		Shares						Amount
Balance, January 1, 2021			95,266						$	953					$	1,434,203					$	3,804,593					8,694						$	(1,124,102)					$	(17,775)					$	4,097,872
Stock-based compensation activity															(87,602)												(565)						48,565												(39,037)
Other comprehensive loss																																							(19,264)						(19,264)
Net income																					72,398																								72,398
Balance, March 31, 2021			95,266						$	953					$	1,346,601					$	3,876,991					8,129						$	(1,075,537)					$	(37,039)					$	4,111,969
Acquisition of Analytical Graphics, Inc.			1												328																														328
Stock-based compensation activity															34,661												(63)						5,327												39,988
Other comprehensive income																																							4,217						4,217
Net income																					93,716																								93,716
Balance, June 30, 2021			95,267						$	953					$	1,381,590					$	3,970,707					8,066						$	(1,070,210)					$	(32,822)					$	4,250,218
Acquisition of Analytical Graphics, Inc.															454												(2)						152												606
Treasury shares acquired																											97						(35,993)												(35,993)
Stock-based compensation activity															46,375												(106)						9,000												55,375
Other comprehensive loss																																							(16,304)						(16,304)
Net income																					85,342																								85,342
Balance, September 30, 2021			95,267						$	953					$	1,428,419					$	4,056,049					8,055						$	(1,097,051)					$	(49,126)					$	4,339,244

The accompanying notes are an integral part of the condensed consolidated financial statements.

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ANSYS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(Unaudited)

1.Organization

ANSYS, Inc. (Ansys, we, us, our) develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare, and construction.

As defined by the accounting guidance for segment reporting, we operate as one segment.

Given the integrated approach to the multi-discipline problem-solving needs of our customers, a single sale of software may contain components from multiple product areas and include combined technologies. We also have a multi-year product and integration strategy that will result in new, combined products or changes to the historical product offerings. As a result, it is impracticable for us to provide accurate historical or current reporting among our various product lines.

2.Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information for commercial and industrial companies, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K). The condensed consolidated December 31, 2021 balance sheet presented is derived from the audited December 31, 2021 balance sheet included in the 2021 Form 10-K. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for any future period.

Recently Adopted Accounting Guidance

Business combinations: In October 2021, the Financial Accounting Standards Board issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08). ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. We adopted the standard effective January 1, 2022. Under the prior guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The standard does not impact acquired contract assets or liabilities from business combinations that occurred prior to the effective date of adoption, and the impact in current and future periods will depend on the contract assets and contract liabilities acquired in business combinations after the effective date of adoption.

Accounting Guidance Issued and Not Yet Adopted

It is not expected that the future adoption of any recently issued accounting pronouncements will have a material impact on our financial position, results of operations or cash flows.

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Cash and Cash Equivalents

Cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds. Cash equivalents are carried at cost, which approximates fair value. Our cash and cash equivalents balances comprise the following:

			September 30, 2022												December 31, 2021
(in thousands, except percentages)			Amount						% of Total						Amount						% of Total
Cash accounts			$	399,971					63.2						$	580,047					86.9
Money market funds			232,538						36.8						87,620						13.1
Total			$	632,509											$	667,667

Our money market fund balances are held in various funds of two issuers.

3.Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue:

			Three Months Ended												Nine Months Ended
(in thousands, except percentages)			September 30, 2022						September 30, 2021						September 30, 2022						September 30, 2021
Revenue:
Subscription lease licenses			$	136,489					$	120,516					$	362,977					$	315,387
Perpetual licenses			72,417						79,878						212,355						232,433
Software licenses			208,906						200,394						575,332						547,820
Maintenance			247,678						223,872						742,554						655,843
Service			15,927						16,902						53,552						47,385
Maintenance and service			263,605						240,774						796,106						703,228
Total revenue			$	472,511					$	441,168					$	1,371,438					$	1,251,048
Direct revenue, as a percentage of total revenue			74.8		%				74.4		%				73.7		%				74.0		%
Indirect revenue, as a percentage of total revenue			25.2		%				25.6		%				26.3		%				26.0		%

Our software license revenue is recognized up front, while maintenance and service revenue is generally recognized over the term of the contract.

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Deferred Revenue

Deferred revenue consists of billings made or payments received in advance of revenue recognition from customer agreements. The timing of revenue recognition may differ from the timing of billings to customers. Payment terms vary by the type and location of customer and the products or services offered. The time between invoicing and when payment is due is not significant.

The changes in deferred revenue, inclusive of both current and long-term deferred revenue, during the nine months ended September 30, 2022 and 2021 were as follows:

(in thousands)			2022						2021
Beginning balance – January 1			$	412,781					$	388,810
Acquired deferred revenue			1,032						746
Deferral of revenue			1,343,122						1,202,547
Recognition of revenue			(1,371,438)						(1,251,048)
Currency translation			(30,779)						(8,591)
Ending balance – September 30			$	354,718					$	332,464

Total revenue allocated to remaining performance obligations as of September 30, 2022 will be recognized as revenue as follows:

(in thousands)
Next 12 months			$	674,142
Months 13-24			270,106
Months 25-36			121,553
Thereafter			43,087
Total revenue allocated to remaining performance obligations			$	1,108,888

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog. Our backlog represents installment billings for periods beyond the current quarterly billing cycle. Revenue recognized during the nine months ended September 30, 2022 and 2021 included amounts in deferred revenue and backlog at the beginning of the period of $608.7 million and $507.0 million, respectively.

4.Acquisitions

During the nine months ended September 30, 2022, we completed various strategic acquisitions to expand our solution offerings and enhance our customers' experience. The effects of the acquisitions were not material to our condensed consolidated results of operations individually or in the aggregate. The combined purchase price of the acquisitions completed during the nine months ended September 30, 2022 was approximately $251.5 million, or $246.0 million net of cash acquired.

During the three and nine months ended September 30, 2022, we incurred acquisition-related expenses of $1.2 million and $5.4 million, respectively. Acquisition-related expenses are recognized as selling, general and administrative and research and development expenses on the condensed consolidated statements of income.

The assets acquired and liabilities assumed in connection with the acquisitions have been recorded based upon management's estimates of their fair market values as of each respective date of acquisition. The following tables summarize the fair value of consideration transferred and the fair values of identified assets acquired and liabilities assumed for the combined 2022 acquisitions at each respective date of acquisition:

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Fair Value of Consideration:

(in thousands)
Cash			$	248,102
Consideration not yet paid			3,391
Total consideration			$	251,493

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

(in thousands)
Cash			$	5,540
Accounts receivable and other tangible assets			2,873
Developed software and core technologies			60,030
Customer lists			126
Trade names			1,304
Accounts payable and other liabilities			(5,195)
Deferred revenue			(1,032)
Net deferred tax liabilities			(10,720)
Total identifiable net assets			$	52,926
Goodwill			$	198,567

The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the assembled workforces of the acquired businesses and the synergies expected to arise as a result of the acquisitions.

The fair values of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for these items are subject to change as additional information about what was known and knowable at each respective acquisition date is obtained during the measurement period (up to one year from the acquisition date).

We determined the fair value of our intangible assets using various valuation techniques, including the relief-from-royalty method and the multi-period excess earnings method. These models utilize certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include, but are not limited to: selection of a valuation methodology, royalty rate, discount rate and attrition rate.

The weighted-average useful life, valuation method and assumptions used to determine the fair value of the intangible assets acquired in 2022 are as follows:

Intangible Asset

Weighted-Average Useful Life

Valuation Method

Assumptions

Developed software and core technologies

8 years

Multi-period excess earnings

Discount rate: 9.5% - 10.0%

Trade names

9 years

Relief-from-royalty

Royalty rate: 1.0% Discount rate: 10.0% - 10.5%

Customer lists

7 years

Multi-period excess earnings

Attrition rate: 10.0% Discount rate: 9.5%

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On October 1, 2021, we acquired 100% of the shares of Zemax, a leader in high-performance optical imaging system simulation, for a purchase price of $411.5 million, paid in cash, or $399.1 million net of cash acquired from Zemax. The acquisition expanded the scope of our optical and photonics simulation portfolio by giving users comprehensive solutions that can drive innovation in healthcare, autonomy, consumer electronics and the industrial internet of things (IIoT).

Additionally, during the year ended December 31, 2021, we completed several other acquisitions to expand our solution offerings and enhance our customers' experience. These acquisitions were not individually significant. The combined purchase price of these acquisitions during the year ended December 31, 2021 was $110.7 million, which was paid in cash.

The operating results of each acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition.

See Note 16, Subsequent Event, for information on our recent acquisition completed subsequent to the end of the period covered by this report.

5.Other Receivables and Current Assets and Other Accrued Expenses and Liabilities

Our other receivables and current assets and other accrued expenses and liabilities comprise the following balances:

(in thousands)			September 30, 2022						December 31, 2021
Receivables related to unrecognized revenue			$	129,721					$	200,888
Income taxes receivable, including overpayments and refunds			31,411						71,332
Prepaid expenses and other current assets			53,434						52,435
Total other receivables and current assets			$	214,566					$	324,655
Accrued vacation			38,084						35,879
Consumption, VAT and sales tax liabilities			25,741						52,630
Accrued expenses and other current liabilities			96,868						116,000
Total other accrued expenses and liabilities			$	160,693					$	204,509

Receivables related to unrecognized revenue represent the current portion of billings made for customer contracts that have not yet been recognized as revenue.

6.Earnings Per Share

Basic earnings per share (EPS) amounts are computed by dividing earnings by the weighted average number of common shares outstanding during the period. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalents outstanding. To the extent stock awards are anti-dilutive, they are excluded from the calculation of diluted EPS.

The details of basic and diluted EPS are as follows:

			Three Months Ended												Nine Months Ended
(in thousands, except per share data)			September 30, 2022						September 30, 2021						September 30, 2022						September 30, 2021
Net income			$	95,975					$	85,342					$	265,763					$	251,456
Weighted average shares outstanding – basic			87,063						87,239						87,062						87,072
Dilutive effect of stock plans			355						930						434						997
Weighted average shares outstanding – diluted			87,418						88,169						87,496						88,069
Basic earnings per share			$	1.10					$	0.98					$	3.05					$	2.89
Diluted earnings per share			$	1.10					$	0.97					$	3.04					$	2.86
Anti-dilutive shares			54						32						366						30

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7.Goodwill and Intangible Assets

Intangible assets are classified as follows:

			September 30, 2022												December 31, 2021
(in thousands)			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Finite-lived intangible assets:
Developed software and core technologies			$	1,028,973					$	(464,227)					$	985,685					$	(422,797)
Customer lists			191,742						(65,705)						203,072						(57,175)
Trade names			180,876						(132,814)						182,554						(128,577)
Total			$	1,401,591					$	(662,746)					$	1,371,311					$	(608,549)
Indefinite-lived intangible asset:
Trade name			$	357											$	357

Finite-lived intangible assets are amortized over their estimated useful lives of two years to seventeen years.

As of September 30, 2022, estimated future amortization expense for the intangible assets reflected above was as follows:

(in thousands)
Remainder of 2022			$	20,702
2023			89,581
2024			91,442
2025			90,950
2026			91,270
2027			93,004
Thereafter			261,896
Total intangible assets subject to amortization			738,845
Indefinite-lived trade name			357
Other intangible assets, net			$	739,202

The changes in goodwill during the nine months ended September 30, 2022 and 2021 were as follows:

(in thousands)			2022						2021
Beginning balance – January 1			$	3,409,271					$	3,038,306
Acquisitions and adjustments(1)			197,173						79,905
Currency translation			(73,985)						(16,588)
Ending balance – September 30			$	3,532,459					$	3,101,623

(1) In accordance with the accounting for business combinations, we recorded adjustments to goodwill for the effect of changes in the provisional fair values of the assets acquired and liabilities assumed during the measurement period (up to one year from the acquisition date) as we obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

During the first quarter of 2022, we completed the annual impairment test for goodwill and the indefinite-lived intangible asset and determined that these assets had not been impaired as of the test date, January 1, 2022. Given the adverse economic and market conditions in the third quarter, we considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined it was not more likely than not that an impairment existed as of September 30, 2022. No other events or circumstances changed during the nine months ended September 30, 2022 that would indicate that the fair values of our reporting unit and indefinite-lived intangible asset are below their carrying amounts.

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8.Fair Value Measurement

The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:

•Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

•Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or

•Level 3: unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Our debt is classified within Level 2 of the fair value hierarchy because these borrowings are not actively traded and have a variable interest rate structure based upon market rates. The carrying amount of our debt approximates the estimated fair value. See Note 10, "Debt", for additional information on our borrowings.

The following tables provide the assets carried at fair value and measured on a recurring basis:

									Fair Value Measurements at Reporting Date Using:
(in thousands)			September 30, 2022						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents			$	232,538					$	232,538					$	—					$	—
Short-term investments			$	194					$	—					$	194					$	—
Deferred compensation plan investments			$	1,599					$	1,599					$	—					$	—
Equity securities			$	1,309					$	1,309					$	—					$	—

									Fair Value Measurements at Reporting Date Using:
(in thousands)			December 31, 2021						Quoted Prices in Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents			$	87,620					$	87,620					$	—					$	—
Short-term investments			$	361					$	—					$	361					$	—
Deferred compensation plan investments			$	1,602					$	1,602					$	—					$	—
Equity securities			$	2,500					$	2,500					$	—					$	—