UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): November 7, 2018  

ANSYS, Inc.
(Exact Name of Registrant as Specified in Charter)

Delaware	0-20853	04-3219960
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

 

2600 ANSYS Drive, Canonsburg, PA 15317

(Address of Principal Executive Offices) (Zip Code)

(724) 746-3304
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
	[   ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	[   ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	[   ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	[   ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). 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. [   ]

 

 

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Item 2.02. Results of Operations and Financial Condition.

On November 7, 2018, the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference, as well as a Prepared Remarks document, a copy of which is also attached hereto as Exhibit 99.2.

Item 9.01. Financial Statements and Exhibits.

	Exhibit 99.1.	Press release dated November 7, 2018
	Exhibit 99.2.	Prepared remarks dated November 7, 2018

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ANSYS, Inc.
Date: November 7, 2018	By:	/s/ Ajei S. Gopal
		Ajei S. Gopal
		President and Chief Executive Officer

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press Release dated November 7, 2018
99.2		Prepared remarks dated November 7, 2018

EXHIBIT 99.1

ANSYS Announces Exceptional Q3 Results, With Double-Digit Growth in Revenue, EPS, ACV and Operating Cash Flow

Company Increases FY 2018 Guidance for Revenue (ASC 606), EPS and Operating Cash Flow

ASC 606 - Third Quarter 2018

• GAAP revenue of $289.4 million and non-GAAP revenue of $293.0 million
• GAAP diluted earnings per share of $1.04 and non-GAAP diluted earnings per share of $1.31
• GAAP operating profit margin of 32.1% and non-GAAP operating profit margin of 44.0%
• Deferred revenue and backlog of $544.7 million at September 30, 2018

ASC 605 - Third Quarter 2018 (as if previous revenue recognition guidance was in effect)

• GAAP revenue of $302.0 million and non-GAAP revenue of $307.9 million
• GAAP diluted earnings per share of $1.16 and non-GAAP diluted earnings per share of $1.46
• GAAP operating profit margin of 35.0% and non-GAAP operating profit margin of 46.7%
• Deferred revenue and backlog of $761.6 million at September 30, 2018, an increase of 14% over Q3 2017

Other Highlights

• ACV growth of 13% and 11% in constant currency for Q3 2018 and the nine months ended September 30, 2018 (YTD), respectively
• Operating cash flows of $110.0 million and $353.5 million for Q3 2018 and YTD 2018, respectively
• Repurchased 0.4 million shares in the third quarter at an average price of $176.58 and 1.2 million shares in the first nine months at an average price of $164.14

Note: We adopted ASC 606 on January 1, 2018, which impacted our financial results, including the categorization and geographic allocation of revenue. For comparability purposes, and unless otherwise specified, the amounts included in the commentary below refer to results under ASC 605 as if the previous revenue recognition guidance was still in effect.

PITTSBURGH, Nov. 07, 2018 (GLOBE NEWSWIRE) -- ANSYS, Inc. (NASDAQ: ANSS), today reported third quarter 2018 GAAP and non-GAAP revenue growth of 10% and 11%, respectively, or 10% and 12%, respectively, in constant currency. Recurring revenue, which comprises lease license and annual maintenance revenue, totaled 77% of revenue for the third quarter on both a GAAP and non-GAAP basis. For the third quarter, the Company reported growth in diluted earnings per share of 36% and 39% on a GAAP and non-GAAP basis, respectively.

Ajei Gopal, ANSYS President and CEO, commented, “Q3 was a record-breaking quarter for ANSYS as we delivered double-digit growth across revenue, EPS and ACV. The digital revolution is driving customers to transform their product development processes to achieve greater agility, innovation and cost synergies, and ANSYS’ simulation solutions are enabling customers to achieve these seemingly divergent objectives with increased functionality and usability across our entire product portfolio. Our strategy of Pervasive Simulation is working."

Gopal added, "We continue to invest to deliver advanced capabilities, such as our newly available, patent-pending Mosaic meshing technology designed to provide a significant improvement in our fluids workflow and user experience. In the third quarter, we extended our technology leadership with the release of ANSYS 19.2, which incorporates the technology from our recent OPTIS acquisition and reflects the integration of ANSYS VRXPERIENCE and ANSYS SPEOS into our portfolio. Importantly, in an ever-evolving industry, we remain committed to improving the way customers experience our technology by providing them with new, modern workflow advancements that enhance the quality and speed of their simulations."

Maria Shields, ANSYS CFO, stated, “Our continued focus on execution and disciplined approach to investment drove another quarter of record financial results across all key financial metrics. We are pleased with our strong performance through the first nine months of 2018 and, looking ahead, remain confident in our ability to continue driving momentum in our business. This is evidenced by our increased outlook for full year 2018 revenue (ASC 606), EPS and operating cash flow.”

Financial Results

ANSYS' third quarter and year-to-date 2018 and 2017 financial results are presented below. The 2018 and 2017 non-GAAP results exclude the income statement effects of acquisition adjustments to deferred revenue, stock-based compensation, amortization of acquired intangible assets, acquisition-related transaction costs, restructuring charges and measurement-period adjustments related to the 2017 Tax Cuts and Jobs Act.

GAAP and non-GAAP results under ASC 606:

	GAAP				Non-GAAP
(in millions, except percentages and per share data)	Q3 2018				Q3 2018
Revenue	$	289.4			$	293.0
Net income	$	89.3			$	112.9
Earnings per share	$	1.04			$	1.31
Operating profit margin	32.1		%		44.0		%

	GAAP					Non-GAAP
(in millions, except percentages and per share data)	YTD 2018					YTD 2018
Revenue	$		878.2			$		885.1
Net income	$		266.2			$		331.8
Earnings per share	$		3.09			$		3.86
Operating profit margin	33.8			%		45.5			%

GAAP and non-GAAP results under ASC 605:

	GAAP											Non-GAAP
(in millions, except percentages and per share data)	Q3 2018				Q3 2017				% Change			Q3 2018				Q3 2017				% Change
Revenue	$	302.0			$	275.6			10	%		$	307.9			$	276.8			11	%
Net income	$	100.1			$	73.6			36	%		$	125.4			$	91.3			37	%
Earnings per share	$	1.16			$	0.85			36	%		$	1.46			$	1.05			39	%
Operating profit margin	35.0		%		38.5		%					46.7		%		48.7		%
	GAAP											Non-GAAP
(in millions, except percentages and per share data)	YTD 2018				YTD 2017				% Change			YTD 2018				YTD 2017				% Change
Revenue	$	880.6			$	792.9			11	%		$	892.0			$	794.7			12	%
Net income	$	268.3			$	206.7			30	%		$	337.1			$	255.1			32	%
Earnings per share	$	3.12			$	2.38			31	%		$	3.92			$	2.94			33	%
Operating profit margin	34.0		%		36.6		%					45.9		%		47.8		%

The non-GAAP financial results highlighted above, and the non-GAAP financial outlook for 2018 discussed below, represent non-GAAP financial measures. Reconciliations of these measures to the appropriate GAAP measures, for the three and nine months ended September 30, 2018 and 2017, and for the 2018 financial outlook, are included in the condensed financial information included in this release.

Other Financial Metrics

(in millions, except percentages)	Q3 2018						Q3 2017						% Change				% Change in Constant Currency
Annual contract value (ACV)	$			257.8			$			228.7			13%				13%
Operating cash flows	$			110.0			$			88.9			24%

(in millions, except percentages)	YTD 2018						YTD 2017						% Change				% Change in Constant Currency
ACV	$			844.7			$			743.2			14%				11%
Operating cash flows	$			353.5			$			327.0			8%

ACV is composed of the following:

• the annualized value of maintenance and lease contracts with start dates or anniversary dates during the period, plus
• the value of perpetual license contracts with start dates during the period, plus
• the annualized value of fixed-term services contracts with start dates or anniversary dates during the period, plus
• the value of work performed during the period on fixed-deliverable services contracts.

Management's 2018 Financial Outlook

The Company's fourth quarter and fiscal year 2018 revenue and diluted earnings per share guidance is provided below. The revenue and diluted earnings per share guidance is provided on both a GAAP and a non-GAAP basis, and in accordance with both ASC 606 and ASC 605. Non-GAAP financial measures exclude the income statement effects of acquisition adjustments to deferred revenue, stock-based compensation, amortization of acquired intangible assets, acquisition-related transaction costs and measurement-period adjustments related to the Tax Cuts and Jobs Act.

Fourth Quarter 2018 Guidance

The Company currently expects the following for the quarter ending December 31, 2018:

(in millions, except per share data)	GAAP		Non-GAAP
Revenue under ASC 606	$349.5 - $369.5		$352.0 - $372.0
Diluted earnings per share under ASC 606	$1.10 - $1.29		$1.39 - $1.55
Revenue under ASC 605	$332.8 - $342.8		$337.0 - $347.0
Diluted earnings per share under ASC 605	$0.95 - $1.05		$1.26 - $1.32

Commentary on Fiscal Year 2018 Revenue Guidance

The Company's FY 2018 revenue guidance presented below reflects a slight adverse currency impact as compared to the exchange rates provided with the Company's guidance in August 2018.

Fiscal Year 2018 Guidance

The Company currently expects the following for the fiscal year ending December 31, 2018:

(in millions, except per share data)	GAAP		Non-GAAP
Revenue under ASC 606	$1,227.6 - $1,247.6		$1,237.0 - $1,257.0
Diluted earnings per share under ASC 606	$4.19 - $4.38		$5.25 - $5.41
Revenue under ASC 605	$1,213.4 - $1,223.4		$1,229.0 - $1,239.0
Diluted earnings per share under ASC 605	$4.07 - $4.16		$5.18 - $5.24

(in millions)	Other Financial Metrics
ACV	$1,262.0 - $1,282.0
Operating cash flows	$455.0 - $480.0

Conference Call Information

ANSYS will hold a conference call at 8:30 a.m. Eastern Time on November 8, 2018 to discuss third quarter results. The Company will provide its prepared remarks on the Company’s investor relations homepage and as an exhibit in its Form 8-K in advance of the call to provide shareholders and analysts with additional time and detail for analyzing its results in preparation for the conference call. The prepared remarks will not be read on the call, and only brief remarks will be made prior to the Q&A session.

To participate in the live conference call, dial 855-239-2942 (US) or 412-542-4124 (Canada & Int’l). The call will be recorded and a replay will be available within two hours after the call. The replay will be available by dialing (877) 344-7529 (US), (855) 669-9658 (Canada) or (412) 317-0088 (Int’l) and entering the passcode 10123501. The archived webcast can be accessed, along with other financial information, on ANSYS' website at https://investors.ansys.com/news-and-events/events-calendar.

ANSYS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
	ASC 606				ASC 605				ASC 605
(in thousands)	September 30, 2018				September 30, 2018				December 31, 2017
ASSETS:
Cash & short-term investments	$	729,391			$	729,391			$	881,787
Accounts receivable, net	235,547				102,626				124,659
Goodwill	1,575,567				1,575,567				1,378,553
Other intangibles, net	219,564				219,564				157,625
Other assets	296,042				413,349				398,999
Total assets	$	3,056,111			$	3,040,497			$	2,941,623
LIABILITIES & STOCKHOLDERS' EQUITY:
Current deferred revenue	$	272,872			$	434,129			$	440,491
Other liabilities	234,693				239,719				255,301
Stockholders' equity	2,548,546				2,366,649				2,245,831
Total liabilities & stockholders' equity	$	3,056,111			$	3,040,497			$	2,941,623

ANSYS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
	Three Months Ended												Nine Months Ended
	ASC 606				ASC 605				ASC 605				ASC 606				ASC 605				ASC 605
	September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
(in thousands, except per share data)	2018				2018				2017				2018				2018				2017
Revenue:
Software licenses	$	109,103			$	166,606			$	156,580			$	350,296			$	482,656			$	448,368
Maintenance and service	180,315				135,350				119,005				527,908				397,895				344,546
Total revenue	289,418				301,956				275,585				878,204				880,551				792,914
Cost of sales:
Software licenses	4,291				8,488				7,395				12,301				25,078				24,197
Amortization	5,530				5,530				9,004				23,403				23,403				26,892
Maintenance and service	26,487				22,290				19,584				80,092				67,315				58,263
Total cost of sales	36,308				36,308				35,983				115,796				115,796				109,352
Gross profit	253,110				265,648				239,602				762,408				764,755				683,562
Operating expenses:
Selling, general and administrative	97,576				97,576				80,015				280,443				280,443				230,483
Research and development	59,019				59,019				50,144				174,906				174,906				153,524
Amortization	3,491				3,491				3,260				10,421				10,421				9,506
Total operating expenses	160,086				160,086				133,419				465,770				465,770				393,513
Operating income	93,024				105,562				106,183				296,638				298,985				290,049
Interest income	3,213				3,213				1,910				7,674				7,674				4,827
Other expense, net	(974		)		(974		)		(168		)		(2,289		)		(2,289		)		(1,512		)
Income before income tax provision	95,263				107,801				107,925				302,023				304,370				293,364
Income tax provision	5,927				7,685				34,295				35,811				36,089				86,698
Net income	$	89,336			$	100,116			$	73,630			$	266,212			$	268,281			$	206,666
Earnings per share – basic:
Earnings per share	$	1.06			$	1.19			$	0.87			$	3.17			$	3.19			$	2.43
Weighted average shares	84,158				84,158				84,774				84,065				84,065				85,132
Earnings per share – diluted:
Earnings per share	$	1.04			$	1.16			$	0.85			$	3.09			$	3.12			$	2.38
Weighted average shares	86,043				86,043				86,588				86,060				86,060				86,902

ANSYS, INC. AND SUBSIDIARIES
ASC 606 Reconciliation of Non-GAAP Measures
(Unaudited)
	Three Months Ended
	September 30, 2018
(in thousands, except percentages and per share data)	GAAP Results				Adjustments					Non-GAAP  Results
Total revenue	$	289,418			$	3,548		(1	)	$	292,966
Operating income	93,024				35,889			(2	)	128,913
Operating profit margin	32.1		%							44.0		%
Net income	$	89,336			$	23,557		(3	)	$	112,893
Earnings per share – diluted:
Earnings per share	$	1.04								$	1.31
Weighted average shares	86,043									86,043
(1)  Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.
(2)  Amount represents $23.0 million of stock-based compensation expense, $0.3 million of excess payroll taxes related to stock-based awards, $9.0 million of amortization expense associated with intangible assets acquired in business combinations and the $3.5 million adjustment to revenue as reflected in (1) above.
(3)  Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $11.7 million, a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.5 million, and rabbi trust income of $0.1 million.

ANSYS, INC. AND SUBSIDIARIES
ASC 606 Reconciliation of Non-GAAP Measures
(Unaudited)
	Nine Months Ended
	September 30, 2018
(in thousands, except percentages and per share data)	GAAP Results				Adjustments					Non-GAAP  Results
Total revenue	$	878,204			$	6,897		(1	)	$	885,101
Operating income	296,638				105,796			(2	)	402,434
Operating profit margin	33.8		%							45.5		%
Net income	$	266,212			$	65,591		(3	)	$	331,803
Earnings per share – diluted:
Earnings per share	$	3.09								$	3.86
Weighted average shares	86,060									86,060
(1)  Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.
(2)  Amount represents $58.9 million of stock-based compensation expense, $3.8 million of excess payroll taxes related to stock-based awards, $33.8 million of amortization expense associated with intangible assets acquired in business combinations, $2.4 million of transaction expenses related to business combinations and the $6.9 million adjustment to revenue as reflected in (1) above.
(3)  Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $41.0 million and rabbi trust income of $0.1 million, and increased for a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.9 million.

ANSYS, INC. AND SUBSIDIARIES
ASC 605 Reconciliation of Non-GAAP Measures
(Unaudited)
	Three Months Ended
	September 30, 2018													September 30, 2017
(in thousands, except percentages and per share data)	GAAP Results				Adjustments					Non-GAAP  Results				GAAP Results				Adjustments					Non- GAAP  Results
Total revenue	$	301,956			$	5,972		(1	)	$	307,928			$	275,585			$	1,181		(4	)	$	276,766
Operating income	105,562				38,313			(2	)	143,875				106,183				28,711			(5	)	134,894
Operating profit margin	35.0		%							46.7		%		38.5		%							48.7		%
Net income	$	100,116			$	25,280		(3	)	$	125,396			$	73,630			$	17,638		(6	)	$	91,268
Earnings per share – diluted:
Earnings per share	$	1.16								$	1.46			$	0.85								$	1.05
Weighted average shares	86,043									86,043				86,588									86,588
(1)  Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.
(2)  Amount represents $23.0 million of stock-based compensation expense, $0.3 million of excess payroll taxes related to stock-based awards, $9.0 million of amortization expense associated with intangible assets acquired in business combinations, and the $6.0 million adjustment to revenue as reflected in (1) above.
(3)  Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $12.4 million, a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.5 million and rabbi trust income of $0.1 million.
(4)  Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.
(5)  Amount represents $14.8 million of stock-based compensation expense, $12.3 million of amortization expense associated with intangible assets acquired in business combinations, $0.5 million of restructuring charges, and the $1.2 million adjustment to revenue as reflected in (4) above.
(6)  Amount represents the impact of the adjustments to operating income referred to in (5) above, adjusted for the related income tax impact of $11.0 million and rabbi trust income of $0.1 million.

ANSYS, INC. AND SUBSIDIARIES
ASC 605 Reconciliation of Non-GAAP Measures
(Unaudited)
	Nine Months Ended
	September 30, 2018													September 30, 2017
(in thousands, except percentages and per share data)	GAAP Results				Adjustments					Non-GAAP  Results				GAAP Results				Adjustments					Non- GAAP  Results
Total revenue	$	880,551			$	11,436		(1	)	$	891,987			$	792,914			$	1,748		(4	)	$	794,662
Operating income	298,985				110,335			(2	)	409,320				290,049				89,985			(5	)	380,034
Operating profit margin	34.0		%							45.9		%		36.6		%							47.8		%
Net income	$	268,281			$	68,827		(3	)	$	337,108			$	206,666			$	48,480		(6	)	$	255,146
Earnings per share – diluted:
Earnings per share	$	3.12								$	3.92			$	2.38								$	2.94
Weighted average shares	86,060									86,060				86,902									86,902
(1)  Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.
(2)  Amount represents $58.9 million of stock-based compensation expense, $3.8 million of excess payroll taxes related to stock-based awards, $33.8 million of amortization expense associated with intangible assets acquired in business combinations, $2.4 million of transaction expenses related to business combinations and the $11.4 million adjustment to revenue as reflected in (1) above.
(3)  Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $42.3 million and rabbi trust income of $0.1 million, and increased for a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.9 million.
(4)  Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.
(5)  Amount represents $39.4 million of stock-based compensation expense, $36.4 million of amortization expense associated with intangible assets acquired in business combinations, $11.7 million of restructuring charges, $0.7 million of transaction expenses related to business combinations and the $1.7 million adjustment to revenue as reflected in (4) above.
(6)  Amount represents the impact of the adjustments to operating income referred to in (5) above, adjusted for the related income tax impact of $41.4 million and rabbi trust income of $0.1 million.

ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Forward-Looking Guidance
Quarter Ending December 31, 2018
				ASC 606		ASC 605
				Earnings Per Share Range - Diluted		Earnings Per Share Range - Diluted
U.S. GAAP expectation				$1.10 - $1.29		$0.95 - $1.05
Adjustment to exclude acquisition adjustments to deferred revenue				$0.02		$0.03 - $0.04
Adjustment to exclude acquisition-related amortization				$0.06 - $0.07		$0.06 - $0.07
Adjustment to exclude stock-based compensation				$0.18 - $0.20		$0.18 - $0.20
Non-GAAP expectation				$1.39 - $1.55		$1.26 - $1.32

ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Forward-Looking Guidance
Year Ending December 31, 2018
				ASC 606		ASC 605
				Earnings Per Share Range - Diluted		Earnings Per Share Range - Diluted
U.S. GAAP expectation				$4.19 - $4.38		$4.07 - $4.16
Adjustment to exclude acquisition adjustments to deferred revenue				$0.08		$0.13
Adjustment to exclude acquisition-related amortization				$0.36 - $0.37		$0.36 - $0.37
Adjustment to exclude stock-based compensation				$0.55 - $0.57		$0.55 - $0.57
Adjustment to exclude acquisition-related transaction expenses				$0.03		$0.03
Exclusion of measurement-period adjustments related to the Tax Cuts and Jobs Act				$0.01		$0.01
Non-GAAP expectation				$5.25 - $5.41		$5.18 - $5.24

Use of Non-GAAP Measures

The Company provides non-GAAP revenue, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share as supplemental measures to GAAP regarding the Company's operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. A detailed explanation of each of the adjustments to such financial measures is described below. This press release also contains a reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure.

Management uses non-GAAP financial measures (a) to evaluate the Company's historical and prospective financial performance as well as its performance relative to its competitors, (b) to set internal sales targets and spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, (e) to assess financial discipline over operational expenditures and (f) as an important factor in determining variable compensation for management and its employees. In addition, many financial analysts that follow the Company focus on and publish both historical results and future projections based on non-GAAP financial measures. The Company believes that it is in the best interest of its investors to provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors have historically requested, and the Company has historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.

While management believes that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, are not reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

The adjustments to these non-GAAP financial measures, and the basis for such adjustments, are outlined below:

Acquisition accounting for deferred revenue and its related tax impact. Historically, the Company has consummated acquisitions in order to support its strategic and other business objectives. In accordance with the fair value provisions applicable to the accounting for business combinations, acquired deferred revenue is often recorded on the opening balance sheet at an amount that is lower than the historical carrying value. Although this acquisition accounting requirement has no impact on the Company's business or cash flow, it adversely impacts the Company's reported GAAP revenue in the reporting periods following an acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company provides non-GAAP financial measures which exclude the impact of the acquisition accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making, and (b) compare past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related annual lease licenses and software maintenance contracts are renewed in future periods.

Amortization of intangible assets from acquisitions and its related tax impact. The Company incurs amortization of intangible assets, included in its GAAP presentation of amortization expense, related to various acquisitions it has made. Management excludes these expenses and their related tax impact for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company because these costs are fixed at the time of an acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. Accordingly, management does not consider these expenses for purposes of evaluating the performance of the Company during the applicable time period after the acquisition, and it excludes such expenses when making decisions to allocate resources. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making, and (b) compare past reports of financial results of the Company as the Company has historically reported these non-GAAP financial measures.

Stock-based compensation expense and its related tax impact. The Company incurs expense related to stock-based compensation included in its GAAP presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. This non-GAAP adjustment also includes excess payroll tax expense related to stock-based compensation. Stock-based compensation expense (benefit) incurred in connection with the Company's deferred compensation plan held in a rabbi trust includes an offsetting benefit (charge) recorded in other income (expense). Although stock-based compensation is an expense of the Company and viewed as a form of compensation, management excludes these expenses for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company. Management similarly excludes income (expense) related to assets held in a rabbi trust in connection with the Company's deferred compensation plan. Specifically, the Company excludes stock-based compensation and income (expense) related to assets held in the deferred compensation plan rabbi trust during its annual budgeting process and its quarterly and annual assessments of the Company's and management's performance. The annual budgeting process is the primary mechanism whereby the Company allocates resources to various initiatives and operational requirements. Additionally, the annual review by the board of directors during which it compares the Company's historical business model and profitability to the planned business model and profitability for the forthcoming year excludes the impact of stock-based compensation. In evaluating the performance of senior management and department managers, charges related to stock-based compensation are excluded from expenditure and profitability results. In fact, the Company records stock-based compensation expense into a stand-alone cost center for which no single operational manager is responsible or accountable. In this way, management is able to review, on a period-to-period basis, each manager's performance and assess financial discipline over operational expenditures without the effect of stock-based compensation. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting as well as comparability with competitors' operating results.

Restructuring charges and the related tax impact. The Company occasionally incurs expenses for restructuring its workforce included in its GAAP presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. Management excludes these expenses for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as it generally does not incur these expenses as a part of its operations. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting as well as comparability with competitors' operating results.

Transaction costs related to business combinations. The Company incurs expenses for professional services rendered in connection with business combinations, which are included in its GAAP presentation of selling, general and administrative expense. These expenses are generally not tax-deductible. Management excludes these acquisition-related transaction expenses, derived from announced acquisitions, for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as it generally would not have otherwise incurred these expenses in the periods presented as a part of its operations. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting as well as comparability with competitors' operating results.

Tax Cuts and Jobs Act. The Company recorded charges in its income tax provision related to the enactment of the Tax Cuts and Jobs Act, specifically for the transition tax related to unrepatriated cash. Management excludes these charges for the purpose of calculating non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as (i) the charges are not expected to recur as part of its normal operations and (ii) the charges resulted from the extremely infrequent event of major U.S. tax reform, the last such reform having occurred in 1986. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting.

Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

The Company has provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as listed below:

GAAP Reporting Measure	Non-GAAP Reporting Measure
Revenue	Non-GAAP Revenue
Operating Income	Non-GAAP Operating Income
Operating Profit Margin	Non-GAAP Operating Profit Margin
Net Income	Non-GAAP Net Income
Diluted Earnings Per Share	Non-GAAP Diluted Earnings Per Share

About ANSYS, Inc.

If you've ever seen a rocket launch, flown on an airplane, driven a car, used a computer, touched a mobile device, crossed a bridge or put on wearable technology, chances are you've used a product where ANSYS software played a critical role in its creation. ANSYS is the global leader in engineering simulation. Through our strategy of Pervasive Engineering Simulation, we help the world's most innovative companies deliver radically better products to their customers. By offering the best and broadest portfolio of engineering simulation software, we help them solve the most complex design challenges and create products limited only by imagination. Founded in 1970, ANSYS is headquartered south of Pittsburgh, Pennsylvania, U.S.A. Visit www.ansys.com for more information.

Forward-Looking Information

Certain statements contained in this press release regarding matters that are not historical facts, including, but not limited to, statements regarding:  trends in customer development processes and the success of our strategy of Pervasive Simulation; our ability to continue to drive momentum in our business;  our projections for the fourth quarter of 2018 and fiscal year 2018 (both GAAP and non-GAAP to exclude acquisition accounting adjustments to deferred revenue, acquisition-related amortization, stock-based compensation expense and acquisition-related transaction costs with related tax impacts); statements regarding management's use of non-GAAP financial measures; statements regarding investing in the business; statements regarding the Tax Cuts and Jobs Act; and statements regarding the increase in constant currency revenue growth rates as compared to the August 2018 guidance are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995). The words “believe,” “continue,” “expect,” and similar expressions are intended to identify forward-looking statements. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. All forward-looking statements in this press release are subject to risks and uncertainties, including, but not limited to: the risk that adverse conditions in the global and domestic markets will significantly affect ANSYS’ customers’ ability to purchase products from the Company at the same level as prior periods or to pay for the Company’s products and services; the risk that declines in ANSYS’ customers’ business may lengthen customer sales cycles; the risk of declines in the economy of one or more of ANSYS’ primary geographic regions; the risk that ANSYS’ revenues and operating results will be adversely affected by changes in currency exchange rates or economic declines in any of the countries in which ANSYS conducts transactions; the risk that the assumptions underlying ANSYS' anticipated revenues and expenditures will change or prove inaccurate; the risk that ANSYS has overestimated its ability to maintain growth and profitability, and control costs; uncertainties regarding the demand for ANSYS' products and services in future periods; uncertainties regarding customer acceptance of new products; the risk of ANSYS’ products' future compliance with industry quality standards and its potential impact on the Company’s financial results; the risk that the Company may need to change its pricing models due to competition and its potential impact on the Company’s financial results; the risk that ANSYS' operating results will be adversely affected by possible delays in developing, completing or shipping new or enhanced products; the risk that enhancements to the Company's products or products acquired in acquisitions may not produce anticipated sales; the risk that the Company may not be able to recruit and retain key executives and technical personnel; the risk that third parties may misappropriate the Company’s proprietary technology or develop similar technology independently; the risk of unauthorized access to and distribution of the Company’s source code; the risk of the Company’s implementation of its new IT systems; the risk of difficulties in the relationship with ANSYS’ independent regional channel partners; the risk of ANSYS’ reliance on perpetual licenses and the result that any change in customer licensing behavior may have on the Company’s financial results; the risk that ANSYS may not achieve the anticipated benefits of its acquisitions or that the integration of the acquired technologies or products with the Company’s existing product lines may not be successful; the risk of periodic reorganizations and changes within ANSYS’ sales organization; the risk of industry consolidation and the impact it may have on customer purchasing decisions; and other factors that are detailed from time to time in reports filed by ANSYS, Inc. with the Securities and Exchange Commission, including ANSYS, Inc.'s 2017 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether changes occur as a result of new information or future events, after the date they were made.

ANSYS and any and all ANSYS, Inc. brand, product, service and feature names, logos and slogans are registered trademarks or trademarks of ANSYS, Inc. or its subsidiaries in the United States or other countries. All other brand, product, service and feature names or trademarks are the property of their respective owners.

Visit www.investors.ansys.com/ for more information. The ANSYS IR App is now available for download on iTunes and Google Play. ANSYS also has a strong presence on the major social channels. To join the simulation conversation, please visit www.ansys.com/Social@ANSYS.

ANSS-F

Contact:

Investors:
Annette Arribas
724.820.3700
annette.arribas@ansys.com 

Media:
Amy Pietzak
724.820.4367    
amy.pietzak@ansys.com 

Exhibit 99.2

 

 

 

 

ANSYS, INC. THIRD QUARTER 2018

EARNINGS ANNOUNCEMENT

PREPARED REMARKS

November 7, 2018

 

ANSYS is providing a copy of its prepared remarks in connection with its earnings announcement. These remarks are offered to provide stockholders and research analysts with additional time and detail for analyzing our Q3 2018 results in advance of our quarterly conference call. These prepared remarks will not be read on the call.

 

Conference call details:

November 8, 2018

8:30 a.m. Eastern Time

 

•

To access the live broadcast, please visit the Investor Relations section of ANSYS’ website at https://investors.ansys.com and click on Events & Presentations, then Webcasts & Events.

•

The call can also be heard by dialing (855) 239-2942 (US) or (412) 542-4124 (CAN & INT’L) at least five minutes prior to the call and referencing conference code 10123501.

•

A replay will be available within two hours of the call's completion at https://investors.ansys.com or by dialing (877) 344-7529 (US), (855) 669-9658 (CAN) or (412) 317-0088 (INT’L) and referencing the access code 10123501.

 

 

SUPPLEMENTAL INFORMATION

 

In addition to our GAAP information, ANSYS has historically provided non-GAAP supplemental information. Our reasons for providing this information are described later in this document, as well as in our Q3 earnings press release, which can be found on our website in the Press Releases section. Reconciliations of GAAP to non-GAAP information are also provided. In line with our historical practice, the financial information below is presented on a supplemental, non-GAAP basis unless otherwise indicated.

 

We transitioned to ASC 606 on January 1, 2018, which impacted the timing and amounts of revenue recognized. The most significant impact relates to the accounting for lease licenses. Under ASC 605, the revenue associated with these licenses was recognized ratably, over the lease term, and was accounted for entirely as lease license revenue. Under ASC 606, approximately 50% of the value of the lease license is recognized up front as lease license revenue, while the remainder is recognized as maintenance revenue ratably over the contract duration. The upfront recognition of the amount attributed to license revenue results in greater volatility in our revenue and earnings results. To assist analysts and investors with their understanding of our operating results, we have introduced a new performance metric, Annual Contract Value (ACV). We believe this new measure is an improved metric as compared to the historically provided bookings metric because it adjusts the sales bookings metric to reflect only the annual value of a contract and also adjusts to reflect the sales booking at the date of the contract inception or renewal.

 

For comparability purposes, the amounts presented in the sections below refer to non-GAAP results under ASC 605, as if the previous revenue recognition guidance was still in effect, unless otherwise specified.

 

 

THIRD QUARTER 2018 OVERVIEW

 

We delivered another strong quarter with EPS that exceeded the high end of our guidance. We reported third quarter consolidated non-GAAP revenue of $307.9 million, an increase of 11% in reported currency and 12% in constant currency. We reported year-to-date consolidated non-GAAP revenue of $892.0 million, an increase of 12% in reported currency and 10% in constant currency. We also achieved non-GAAP EPS of $1.46 and $3.92 in the third quarter and year-to-date 2018, respectively, which represented 39% and 33% growth over the third quarter and year-to-date 2017, respectively. Our financial results for Q3 2018 included cash flows from operations of $110.0 million for the quarter and $353.5 million year-to-date.

 

The following are other notable comments related to Q3 2018:

 

•

Lease license revenue and maintenance revenue each grew 15% for the quarter in constant currency. Lease license revenue grew 10% and maintenance revenue grew 13% for year-to-date 2018, both in constant currency. Perpetual license revenue declined 1% and service revenue grew 34% for the quarter, both in constant currency. Perpetual license revenue grew 2% and service revenue grew 31% for year-to-date 2018, both in constant currency.

 

•

Both lease licenses and maintenance contributed to a steady stream of recurring revenue that totaled 77% of revenue for both the quarter and year-to-date 2018.

 

•

Our direct and indirect businesses contributed 77% and 23%, respectively, of both Q3 and year-to-date revenue.

 

•

ACV increased 13% and 11%, both in constant currency, for the third quarter and year-to-date 2018, respectively.

 

•

We continued to drive sales execution, which resulted in a deferred revenue and backlog balance of $761.6 million, an increase of 14% over Q3 2017.

 

•

For the third quarter, we had 30 customers with cumulative orders over $1 million, including one customer with cumulative orders over $10 million. This compares to 25 customers with orders over $1 million in the third quarter of 2017, including two customers with cumulative orders over $10 million. For year-to-date 2018, we had 99 customers with cumulative orders over $1 million. This compares to 98 customers with cumulative orders in excess of $1 million for year-to-date 2017.

 

As we have been communicating throughout the year, an important area of increased investment in 2018 has been in the form of additional resources across our field engineering teams. This has driven measurable business results as evidenced by the constant currency services revenue growth of 34% for the quarter and 31% for year-to-date 2018. These investments have been instrumental in supporting key customer initiatives that have enabled us to continue to expand our relationships at both major and strategic accounts.

 

•

During the third quarter, we repurchased 0.4 million shares at an average price of $176.58. During the first nine months, we repurchased 1.2 million shares at an average price of $164.14. As of September 30, 2018, the Company had 4.3 million shares remaining in its authorized share repurchase program.

 

•

The Company recognized a net $6.8 million income tax benefit associated with global legal entity restructuring activities in the third quarter.

 

•

Total headcount on September 30, 2018 was approximately 3,300 employees as compared to approximately 2,900 employees at September 30, 2017.

 

 

Other Recent Highlights

 

•

We released ANSYS® 19.2, which empowers more users to accelerate the design process. For example, Fluent's new single window, efficient workflows and patent-pending advanced meshing technology for computational fluid dynamics (CFD) were included in the release. Users will greatly benefit from new processes for developing embedded software for safety-critical applications, as well as dramatic computational speed and user experience improvements for solving automotive radar scenarios, digital twins, 3D design exploration and structural modeling. Highlights of ANSYS 19.2 include: accelerated and more accurate CFD models; increased speed and performance for multiphysics designs; expanded capabilities to perform functional safety analysis for automotive semiconductors; expanded systems simulation capabilities for autonomous and electric vehicles; and expanded physics simulation capabilities for optics and optoelectronics.

 

•

In October 2018, Prith Banerjee joined the executive team as its chief technology officer (CTO). Utilizing his extensive experience in both industry and academia, Mr. Banerjee will lead the evolution of ANSYS' technology and will champion our next phase of innovation and growth.

 

 

DEFERRED REVENUE AND BACKLOG

 

		ASC 606								ASC 605
(in thousands)		September 30, 2018				June 30, 2018				September 30, 2018				June 30, 2018				September 30, 2017				June 30, 2017
Current Deferred Revenue		$	272,872			$	306,879			$	434,129			$	462,575			$	381,727			$	411,646
Current Backlog			139,241				126,187				133,673				127,749				91,885				77,491
Total Current			412,113				433,066				567,802				590,324				473,612				489,137
Long-Term Deferred Revenue			13,581				16,658				24,418				27,462				23,971				18,975
Long-Term Backlog			119,021				137,178				169,340				198,338				171,686				147,712
Total Long-Term			132,602				153,836				193,758				225,800				195,657				166,687
Total Deferred Revenue and Backlog		$	544,715			$	586,902			$	761,560			$	816,124			$	669,269			$	655,824

 

The table above represents GAAP deferred revenue and backlog. As a result of the fair value provisions applicable to the accounting for business combinations, the Company typically records acquired deferred revenue at an amount that is lower than the historical carrying value. The expected impacts on revenue under ASC 606 are $2.5 million and $9.4 million for the quarter and the year ending December 31, 2018, respectively. The expected impacts on revenue under ASC 605 are $4.2 million and $15.6 million for the quarter ending December 31, 2018 and for the year ending December 31, 2018, respectively.

 

 

ACV AND SEVEN-FIGURE CUSTOMER ORDERS

 

(in thousands)		Q3 QTD 2018				Q3 QTD 2017				% Change				% Change in Constant Currency
ACV		$	257,824			$	228,739				12.7	%			13.5	%

 

(in thousands)		Q3 YTD 2018				Q3 YTD 2017				% Change				% Change in Constant Currency
ACV		$	844,724			$	743,187				13.7	%			10.8	%

 

 

The Company had customers with seven-figure cumulative orders as follows:

 

		Q3 QTD 2018				Q3 QTD 2017				Q3 YTD 2018				Q3 YTD 2017
≥ $1.0  -  < $5.0 million			26				22				82				85
≥ $5.0  -  < $10.0 million			3				1				11				9
≥ $10.0 million			1				2				6				4
Total ≥ $1.0 million			30				25				99				98

 

 

REVENUE HIGHLIGHTS

 

		ASC 606								ASC 605
(in thousands, except percentages)		Q3 QTD 2018				% of Total				Q3 QTD 2018				% of Total				Q3 QTD 2017				% of Total				% Change				% Change in Constant Currency
Lease		$	43,202				14.7	%		$	108,718				35.3	%		$	94,676				34.2	%			14.8	%			15.3	%
Perpetual			65,901				22.5	%			61,353				19.9	%			62,624				22.6	%			(2.0	)%			(1.1	)%
Maintenance			175,011				59.7	%			128,942				41.9	%			112,761				40.7	%			14.3	%			15.0	%
Service			8,852				3.0	%			8,915				2.9	%			6,705				2.4	%			33.0	%			33.6	%
Total		$	292,966							$	307,928							$	276,766								11.3	%			11.9	%

 

		ASC 606								ASC 605
(in thousands, except percentages)		Q3 YTD 2018				% of Total				Q3 YTD 2018				% of Total				Q3 YTD 2017				% of Total				% Change				% Change in Constant Currency
Lease		$	148,837				16.8	%		$	313,249				35.1	%		$	281,142				35.4	%			11.4	%			9.6	%
Perpetual			201,501				22.8	%			176,154				19.7	%			168,513				21.2	%			4.5	%			2.3	%
Maintenance			507,817				57.4	%			375,535				42.1	%			324,799				40.9	%			15.6	%			12.6	%
Service			26,946				3.0	%			27,049				3.0	%			20,208				2.5	%			33.9	%			31.4	%
Total		$	885,101							$	891,987							$	794,662								12.2	%			9.8	%

 

As a result of the Company's application of the fair value provisions applicable to the accounting for business combinations, there were impacts on GAAP revenue under ASC 606 of $3.5 million and $6.9 million for the third quarter and year-to-date 2018, respectively. The impacts on GAAP revenue under ASC 605 were $6.0 million and $1.2 million for the third quarters of 2018 and 2017, respectively. The impacts on GAAP revenue under ASC 605 were $11.4 million and $1.7 million for year-to-date 2018 and 2017, respectively.

 

 

GEOGRAPHIC REVENUE HIGHLIGHTS

 

		ASC 606								ASC 605
(in thousands, except percentages)		Q3 QTD 2018				% of Total				Q3 QTD 2018				% of Total				Q3 QTD 2017				% of Total				% Change				% Change in Constant Currency
Americas		$	113,646				38.8	%		$	128,380				41.7	%		$	112,398				40.6	%			14.2	%			14.3	%
Germany			28,291				9.7	%			31,445				10.2	%			28,467				10.3	%			10.5	%			11.8	%
United Kingdom			11,492				3.9	%			8,582				2.8	%			9,603				3.5	%			(10.6	)%			(10.1	)%
Other EMEA			49,018				16.7	%			51,195				16.6	%			44,844				16.2	%			14.2	%			15.4	%
EMEA			88,801				30.3	%			91,222				29.6	%			82,914				30.0	%			10.0	%			11.2	%
Japan			37,217				12.7	%			34,811				11.3	%			30,919				11.2	%			12.6	%			13.2	%
Other Asia-Pacific			53,302				18.2	%			53,515				17.4	%			50,535				18.3	%			5.9	%			7.1	%
Asia-Pacific			90,519				30.9	%			88,326				28.7	%			81,454				29.4	%			8.4	%			9.4	%
Total		$	292,966							$	307,928							$	276,766								11.3	%			11.9	%

 

 

		ASC 606								ASC 605
(in thousands, except percentages)		Q3 YTD 2018				% of Total				Q3 YTD 2018				% of Total				Q3 YTD 2017				% of Total				% Change				% Change in Constant Currency
Americas		$	346,319				39.1	%		$	365,277				41.0	%		$	325,788				41.0	%			12.1	%			12.1	%
Germany			98,042				11.1	%			93,485				10.5	%			79,233				10.0	%			18.0	%			10.3	%
United Kingdom			28,463				3.2	%			27,615				3.1	%			24,197				3.0	%			14.1	%			8.1	%
Other EMEA			154,457				17.5	%			153,192				17.2	%			130,764				16.5	%			17.2	%			10.9	%
EMEA			280,962				31.7	%			274,292				30.8	%			234,194				29.5	%			17.1	%			10.4	%
Japan			110,835				12.5	%			104,631				11.7	%			94,753				11.9	%			10.4	%			8.2	%
Other Asia-Pacific			146,985				16.6	%			147,787				16.6	%			139,927				17.6	%			5.6	%			4.6	%
Asia-Pacific			257,820				29.1	%			252,418				28.3	%			234,680				29.5	%			7.6	%			6.1	%
Total		$	885,101							$	891,987							$	794,662								12.2	%			9.8	%

 

Regional Commentary

 

Americas

 

The Americas led the regions with 14% constant currency revenue growth, including double-digit growth in lease, maintenance and service revenue. The region had nine customers with cumulative orders over $1 million during the quarter as compared to 14 customers during the third quarter of 2017. The decrease in the number of these deals as compared to last year's third quarter is attributable to the timing of large deals, in particular deals that have both elements of new and renewal business, that have a tendency to be aligned around Q4 customer year-end budgeting and spending cycles.

 

 

EMEA

 

EMEA delivered constant currency revenue growth of 11%, including double-digit growth in lease, maintenance and service revenue. The region had 10 customers with cumulative orders over $1 million during the quarter as compared to seven customers during the third quarter of 2017. Germany, France and Italy each experienced double-digit revenue growth in constant currency, partially offset by the United Kingdom. The overall results in the region continue to demonstrate our strong sales execution and an improved go-to-market strategy.

 

Asia-Pacific

 

Asia-Pacific experienced 9% constant currency revenue growth, including double-digit growth in lease, maintenance and service revenue. The region experienced strong growth in Japan, our largest geography in the region, and India, partially offset by South Korea and Taiwan. Asia-Pacific led the regions in large deals with a total of 11 customers with cumulative orders over $1 million during the quarter as compared to four customers during the third quarter of 2017.

 

Industry Commentary

 

Consistent with the first half of 2018, the automotive industry remained strong due to continued investments in autonomous vehicles and electrification. Investments in smart, connected products and 5G by companies around the globe bolstered the high-tech industry in Q3. The industrial equipment industry saw growth as companies continued to focus on the use of simulation in maintenance, repair and overhaul projects. Aerospace and defense had strong performance due to an increase in defense spending in both the United States and Europe.

 

 

INCOME STATEMENT HIGHLIGHTS

 

Q3 2018 MARGINS AND TAX RATE: The gross margins, operating margins and effective tax rates were as follows:

 

		ASC 606								ASC 605
		Q3 QTD 2018				Q3 YTD 2018				Q3 QTD 2018				Q3 YTD 2018
Gross Margin			90.0	%			90.0	%			90.5	%			90.1	%
Operating Margin			44.0	%			45.5	%			46.7	%			45.9	%
Effective Tax Rate			13.9	%			18.6	%			14.1	%			18.7	%

 

 

BALANCE SHEET AND CASH FLOW HIGHLIGHTS

 

•

Cash and short-term investments totaled $729.4 million as of September 30, 2018, of which 77% was held domestically.

•

Cash flows from operations were $110.0 million for the third quarter of 2018 as compared to $88.9 million for the third quarter of 2017. Cash flows from operations were $353.5 million for year-to-date 2018 as compared to $327.0 million for year-to-date 2017.

•

Consolidated net DSO was 33 days under ASC 605. Consolidated net DSO was 77 days under ASC 606, which significantly increased upon the adoption of ASC 606 on January 1, 2018.

•

Capital expenditures totaled $6.3 million and $13.1 million for the third quarter and year-to-date 2018, respectively. We are currently planning total 2018 capital expenditures in the range of $20 - $25 million.

 

 

SHARE COUNT AND SHARE REPURCHASES

 

We had 86.0 million fully diluted weighted average shares outstanding in Q3. In line with our commitment to return capital to stockholders, we repurchased 0.4 million shares during Q3 at an average price of $176.58 and repurchased 1.2 million shares YTD at an average price of $164.14. In February 2018, the Company's Board of Directors increased the authorized share repurchase program to a total of 5.0 million shares. As of September 30, 2018, the Company had 4.3 million shares remaining in its authorized share repurchase program.

 

 

STOCK-BASED COMPENSATION EXPENSE

 

		Three Months Ended								Nine Months Ended
(in thousands, except per share data)		September 30,  2018				September 30,  2017				September 30,  2018				September 30,  2017
Cost of sales:
Software licenses		$	339			$	140			$	938			$	711
Maintenance and service			1,099				739				2,942				1,894
Operating expenses:
Selling, general and administrative			13,484				8,782				33,288				23,310
Research and development			8,061				5,112				21,719				13,493
Stock-based compensation expense before taxes			22,983				14,773				58,887				39,408
Related income tax benefits			(8,611	)			(6,080	)			(30,311	)			(23,980	)
Stock-based compensation expense, net of taxes		$	14,372			$	8,693			$	28,576			$	15,428
Net impact on earnings per share:
Diluted earnings per share		$	(0.17	)		$	(0.10	)		$	(0.33	)		$	(0.18	)

 

CURRENCY

 

CURRENCY IMPACTS: The third quarter and year-to-date 2018 revenue and operating income under ASC 605 as compared to the third quarter and year-to-date 2017 were impacted by fluctuations in the U.S. Dollar. The impacts on revenue and operating income are reflected in the table below. Amounts in brackets indicate an adverse impact from currency fluctuations.

 

		Three Months Ended				Nine Months Ended
(in thousands)		September 30, 2018				September 30, 2018
Revenue		$	(1,843	)		$	19,231
Operating income		$	(485	)		$	11,028

 

There were adverse foreign exchange impacts on deferred revenue and backlog of $3.6 million and $11.0 million for the third quarter and year-to-date 2018, respectively.

 

 

OUTLOOK

 

The Company continues to expect that the OPTIS non-GAAP impact on 2018 revenue is approximately $25 million to $26 million under both ASC 606 and ASC 605. The expected impact on GAAP revenue is approximately $16 million to $18 million under ASC 606 and $10 million to $12 million under ASC 605.

 

 

Q4 2018 OUTLOOK: We are currently forecasting the following for Q4 2018 under ASC 606:

 

(in millions, except percentages and per share data)		GAAP		non-GAAP
Revenue		$349.5 - $369.5		$352.0 - $372.0
Operating margin		34.0% - 37.0%		43.0% - 45.0%
Effective tax rate		19.5% - 22.5%		21.5% - 22.5%
Diluted earnings per share		$1.10 - $1.29		$1.39 - $1.55

 

We are currently forecasting the following for Q4 2018 under ASC 605:

 

(in millions, except percentages and per share data)		GAAP		non-GAAP
Revenue		$332.8 - $342.8		$337.0 - $347.0
Operating margin		30.0% - 33.0%		40.0% - 41.0%
Effective tax rate		19.0% - 22.0%		21.5% - 22.5%
Diluted earnings per share		$0.95 - $1.05		$1.26 - $1.32

 

FY 2018 OUTLOOK: We are updating our FY 2018 forecast based on our current sales visibility and the assumption of a continuation of a similar business climate to that we experienced in the third quarter. The guidance also reflects a slight adverse impact on revenue related to currency exchange rate changes since we last provided guidance in August 2018.

 

We are currently forecasting the following for FY 2018 under ASC 606:

 

(in millions, except percentages and per share data)		GAAP		non-GAAP
Revenue		$1,227.6 - $1,247.6		$1,237.0 - $1,257.0
Operating margin		34.0% - 35.0%		44.5% - 45.5%
Effective tax rate		14.0% - 15.0%		19.0% - 20.0%
Diluted earnings per share		$4.19 - $4.38		$5.25 - $5.41

 

We are also updating our forecast for FY 2018 under ASC 605 as follows:

 

(in millions, except percentages and per share data)		GAAP		non-GAAP
Revenue		$1,213.4 - $1,223.4		$1,229.0 - $1,239.0
Operating margin		33.0% - 34.0%		44.0% - 45.0%
Effective tax rate		14.0% - 15.0%		19.0% - 20.0%
Diluted earnings per share		$4.07 - $4.16		$5.18 - $5.24

 

We are updating our ACV and operating cash flow forecast for FY 2018. We are currently forecasting:

 

(in millions)		Other Financial Metrics
ACV		$1,262.0 - $1,282.0
Operating cash flows*		$455.0 - $480.0

 

*The Company's operating cash flow guidance reflects an adverse impact of approximately $12.0 - $15.0 million related to income tax payments associated with deferred revenue and backlog credited to retained earnings and never recognized as revenue in the financial statements.

 

The Company's ACV metric for FY 2017 was approximately $1,124.0 million.

 

We are currently expecting approximately 86.0 million fully diluted shares outstanding for Q4 2018 and FY 2018.

 

 

CURRENCY OUTLOOK: The Company’s results have been, and will continue to be, impacted by currency fluctuations, particularly by rate movements in the Euro, British Pound and Japanese Yen. Our currency rate assumptions are as follows:

 

		Euro		British Pound		Japanese Yen
Q4 2018		1.14 - 1.17		1.29 - 1.32		111 - 114

 

The outlook presented above factors in actual and planned increases in sales and channel capacity, our current visibility around major account activity, sales pipelines and forecasts. However, as we have said in the past, and will continue to reiterate, there are many things that we have no control over, including the macro-economic environment, customer procurement patterns, government and tax policies, and currency rate volatility. We do, however, have the benefit of a solid, repeatable business base; a diversified geographic and industry footprint; and a world-class customer base that have helped us to succeed and to deliver on our commitments.

 

 

GLOSSARY OF TERMS

 

Annual Contract Value (ACV): ACV is composed of the following:

 

•

the annualized value of maintenance and lease contracts with start dates or anniversary dates during the period, plus

•

the value of perpetual license contracts with start dates during the period, plus

•

the annualized value of fixed-term services contracts with start dates or anniversary dates during the period, plus

•

the value of work performed during the period on fixed-deliverable services contracts.

 

Example 1: A $300,000 lease or maintenance contract with a term of January 1, 2018 - December 31, 2020 would contribute $100,000 to ACV in each of fiscal years 2018, 2019 and 2020.

 

Example 2: A perpetual license valued at $200,000 with a contract start date of March 1, 2018 sold in connection with three years of annual maintenance valued at a total of $120,000 would contribute to ACV as follows:  fiscal year 2018: $240,000 ($200,000 + $40,000); fiscal years 2019 and 2020: $40,000 in each year.

 

Backlog: Installment billings for periods beyond the current quarterly billing cycle and customer orders received but not processed.

 

Deferred Revenue: Billings made or payments received in advance of revenue recognition from software license and maintenance agreements.

 

Lease or Time-Based License: A license of a stated product of the Company’s software that is granted to a customer for use over a specified time period, which can be months or years in length. In addition to the use of the software, the customer is provided with access to maintenance (unspecified version upgrades and technical support) without additional charge. The revenue related to these contracts is recognized ratably over the contract period for the maintenance portion and up front for the license portion under ASC 606. Both portions were recognized ratably under ASC 605.

 

Perpetual / Paid-Up License: A license of a stated product and version of the Company’s software that is granted to a customer for use in perpetuity. The revenue related to this type of license is typically recognized up front.

 

 

Maintenance: A contract, typically one year in duration, that is purchased by the owner of a perpetual license and that provides access to unspecified version upgrades and technical support during the duration of the contract. The revenue from these contracts is recognized ratably over the contract period.

 

 

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

 

Information provided by the Company or its spokespersons, including the above statements and any others in this document that refer to plans and expectations for the fourth quarter of 2018, FY 2018 and the future are forward-looking statements. The Company cautions investors that its performance (and, therefore, any forward-looking statement) is subject to risks and uncertainties. A detailed discussion of these risks and other factors that could affect ANSYS’ results is included in ANSYS’ SEC filings, including the Annual Report on Form 10-K for the year ended December 31, 2017, filed on February 22, 2018.

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

 

ANSYS, INC. AND SUBSIDIARIES

ASC 606 Reconciliation of Non-GAAP Measures

(Unaudited)

 

		Three Months Ended
		September 30, 2018
(in thousands, except percentages and per share data)		GAAP Results				Adjustments					Non-GAAP Results
Total revenue		$	289,418			$	3,548		(1)		$	292,966
Operating income			93,024				35,889		(2)			128,913
Operating profit margin			32.1	%								44.0	%
Net income		$	89,336			$	23,557		(3)		$	112,893
Earnings per share – diluted:
Earnings per share		$	1.04								$	1.31
Weighted average shares			86,043									86,043

 

(1)

Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.

(2)

Amount represents $23.0 million of stock-based compensation expense, $0.3 million of excess payroll taxes related to stock-based awards, $9.0 million of amortization expense associated with intangible assets acquired in business combinations and the $3.5 million adjustment to revenue as reflected in (1) above.

(3)

Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $11.7 million, a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.5 million, and rabbi trust income of $0.1 million.

 

 

ANSYS, INC. AND SUBSIDIARIES

ASC 606 Reconciliation of Non-GAAP Measures

(Unaudited)

 

		Nine Months Ended
		September 30, 2018
(in thousands, except percentages and per share data)		GAAP Results				Adjustments					Non-GAAP Results
Total revenue		$	878,204			$	6,897		(1)		$	885,101
Operating income			296,638				105,796		(2)			402,434
Operating profit margin			33.8	%								45.5	%
Net income		$	266,212			$	65,591		(3)		$	331,803
Earnings per share – diluted:
Earnings per share		$	3.09								$	3.86
Weighted average shares			86,060									86,060

 

(1)

Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.

(2)

Amount represents $58.9 million of stock-based compensation expense, $3.8 million of excess payroll taxes related to stock-based awards, $33.8 million of amortization expense associated with intangible assets acquired in business combinations, $2.4 million of transaction expenses related to business combinations and the $6.9 million adjustment to revenue as reflected in (1) above.

(3)

Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $41.0 million and rabbi trust income of $0.1 million, and increased for a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.9 million.

 

 

ANSYS, INC. AND SUBSIDIARIES

ASC 605 Reconciliation of Non-GAAP Measures

(Unaudited)

 

		Three Months Ended
		September 30, 2018													September 30, 2017
(in thousands, except percentages and per share data)		GAAP Results				Adjustments					Non-GAAP Results				GAAP Results				Adjustments					Non-GAAP Results
Total revenue		$	301,956			$	5,972		(1)		$	307,928			$	275,585			$	1,181		(4)		$	276,766
Operating income			105,562				38,313		(2)			143,875				106,183				28,711		(5)			134,894
Operating profit margin			35.0	%								46.7	%			38.5	%								48.7	%
Net income		$	100,116			$	25,280		(3)		$	125,396			$	73,630			$	17,638		(6)		$	91,268
Earnings per share – diluted:
Earnings per share		$	1.16								$	1.46			$	0.85								$	1.05
Weighted average shares			86,043									86,043				86,588									86,588

 

(1)

Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.

(2)

Amount represents $23.0 million of stock-based compensation expense, $0.3 million of excess payroll taxes related to stock-based awards, $9.0 million of amortization expense associated with intangible assets acquired in business combinations, and the $6.0 million adjustment to revenue as reflected in (1) above.

(3)

Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $12.4 million, a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.5 million and rabbi trust income of $0.1 million.

(4)

Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.

(5)

Amount represents $14.8 million of stock-based compensation expense, $12.3 million of amortization expense associated with intangible assets acquired in business combinations, $0.5 million of restructuring charges, and the $1.2 million adjustment to revenue as reflected in (4) above.

(6)

Amount represents the impact of the adjustments to operating income referred to in (5) above, adjusted for the related income tax impact of $11.0 million and rabbi trust income of $0.1 million.

 

 

ANSYS, INC. AND SUBSIDIARIES

ASC 605 Reconciliation of Non-GAAP Measures

(Unaudited)

 

		Nine Months Ended
		September 30, 2018													September 30, 2017
(in thousands, except percentages and per share data)		GAAP Results				Adjustments					Non-GAAP Results				GAAP Results				Adjustments					Non-GAAP Results
Total revenue		$	880,551			$	11,436		(1)		$	891,987			$	792,914			$	1,748		(4)		$	794,662
Operating income			298,985				110,335		(2)			409,320				290,049				89,985		(5)			380,034
Operating profit margin			34.0	%								45.9	%			36.6	%								47.8	%
Net income		$	268,281			$	68,827		(3)		$	337,108			$	206,666			$	48,480		(6)		$	255,146
Earnings per share – diluted:
Earnings per share		$	3.12								$	3.92			$	2.38								$	2.94
Weighted average shares			86,060									86,060				86,902									86,902

 

(1)

Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.

(2)

Amount represents $58.9 million of stock-based compensation expense, $3.8 million of excess payroll taxes related to stock-based awards, $33.8 million of amortization expense associated with intangible assets acquired in business combinations, $2.4 million of transaction expenses related to business combinations and the $11.4 million adjustment to revenue as reflected in (1) above.

(3)

Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $42.3 million and rabbi trust income of $0.1 million, and increased for a measurement-period adjustment related to the Tax Cuts and Jobs Act of $0.9 million.

(4)

Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.

(5)

Amount represents $39.4 million of stock-based compensation expense, $36.4 million of amortization expense associated with intangible assets acquired in business combinations, $11.7 million of restructuring charges, $0.7 million of transaction expenses related to business combinations and the $1.7 million adjustment to revenue as reflected in (4) above.

(6)

Amount represents the impact of the adjustments to operating income referred to in (5) above, adjusted for the related income tax impact of $41.4 million and rabbi trust income of $0.1 million.

 

 

NON-GAAP MEASURES

 

Management uses non-GAAP financial measures (a) to evaluate the Company's historical and prospective financial performance as well as its performance relative to its competitors, (b) to set internal sales targets and spending budgets, (c) to allocate resources, (d) to measure operational profitability and the accuracy of forecasting, (e) to assess financial discipline over operational expenditures and (f) as an important factor in determining variable compensation for management and its employees. In addition, many financial analysts that follow the Company focus on and publish both historical results and future projections based on non-GAAP financial measures. The Company believes that it is in the best interest of its investors to provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors have historically requested, and the Company has historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.

 

While management believes that these non-GAAP financial measures provide useful supplemental information to investors, there are limitations associated with the use of these non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with GAAP, are not reported by all of the Company's competitors and may not be directly comparable to similarly titled measures of the Company's competitors due to potential differences in the exact method of calculation. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by reviewing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

 

 

The adjustments to these non-GAAP financial measures, and the basis for such adjustments, are outlined below:

 

Acquisition accounting for deferred revenue and its related tax impact. Historically, the Company has consummated acquisitions in order to support its strategic and other business objectives. In accordance with the fair value provisions applicable to the accounting for business combinations, acquired deferred revenue is often recorded on the opening balance sheet at an amount that is lower than the historical carrying value. Although this acquisition accounting requirement has no impact on the Company's business or cash flow, it adversely impacts the Company's reported GAAP revenue in the reporting periods following an acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, the Company provides non-GAAP financial measures which exclude the impact of the acquisition accounting adjustment. The Company believes that this non-GAAP financial adjustment is useful to investors because it allows investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making, and (b) compare past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related annual lease licenses and software maintenance contracts are renewed in future periods.

 

Amortization of intangible assets from acquisitions and its related tax impact. The Company incurs amortization of intangible assets, included in its GAAP presentation of amortization expense, related to various acquisitions it has made. Management excludes these expenses and their related tax impact for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company because these costs are fixed at the time of an acquisition, are then amortized over a period of several years after the acquisition and generally cannot be changed or influenced by management after the acquisition. Accordingly, management does not consider these expenses for purposes of evaluating the performance of the Company during the applicable time period after the acquisition, and it excludes such expenses when making decisions to allocate resources. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the effectiveness of the methodology and information used by management in its financial and operational decision-making, and (b) compare past reports of financial results of the Company as the Company has historically reported these non-GAAP financial measures.

 

Stock-based compensation expense and its related tax impact. The Company incurs expense related to stock-based compensation included in its GAAP presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. This non-GAAP adjustment also includes excess payroll tax expense related to stock-based compensation. Stock-based compensation expense (benefit) incurred in connection with the Company's deferred compensation plan held in a rabbi trust includes an offsetting benefit (charge) recorded in other income (expense). Although stock-based compensation is an expense of the Company and viewed as a form of compensation, management excludes these expenses for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company. Management similarly excludes income (expense) related to assets held in a rabbi trust in connection with the Company's deferred compensation plan. Specifically, the Company excludes stock-based compensation and income (expense) related to assets held in the deferred compensation plan rabbi trust during its annual budgeting process and its quarterly and annual assessments of the Company's and management's performance. The annual budgeting process is the primary mechanism whereby the Company allocates resources to various initiatives and operational requirements. Additionally, the annual review by the board of directors during which it compares the Company's historical business model and profitability to the planned business model and profitability for the forthcoming year excludes the impact of stock-based compensation. In evaluating the performance of senior management and department managers, charges related to stock-based compensation are excluded from expenditure and profitability results. In fact, the Company records stock-based compensation expense into a stand-alone cost center for which no single operational manager is responsible or accountable. In this way, management is able to review, on a period-to-period basis, each manager's performance and assess financial discipline over operational expenditures without the effect of stock-based compensation. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting as well as comparability with competitors' operating results.

 

 

Restructuring charges and the related tax impact. The Company occasionally incurs expenses for restructuring its workforce included in its GAAP presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. Management excludes these expenses for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as it generally does not incur these expenses as a part of its operations. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting as well as comparability with competitors' operating results.

 

Transaction costs related to business combinations. The Company incurs expenses for professional services rendered in connection with business combinations, which are included in its GAAP presentation of selling, general and administrative expense. These expenses are generally not tax-deductible. Management excludes these acquisition-related transaction expenses, derived from announced acquisitions, for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as it generally would not have otherwise incurred these expenses in the periods presented as a part of its operations. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting as well as comparability with competitors' operating results.

 

Tax Cuts and Jobs Act. The Company recorded charges in its income tax provision related to the enactment of the Tax Cuts and Jobs Act, specifically for the transition tax related to unrepatriated cash. Management excludes these charges for the purpose of calculating non-GAAP net income and non-GAAP diluted earnings per share when it evaluates the continuing operational performance of the Company, as (i) the charges are not expected to recur as part of its normal operations and (ii) the charges resulted from the extremely infrequent event of major U.S. tax reform, the last such reform having occurred in 1986. The Company believes that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company's operating results and the effectiveness of the methodology used by management to review the Company's operating results, and (b) review historical comparability in the Company's financial reporting.

 

Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

 

 

The Company has provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as listed below:

 

GAAP Reporting Measure	Non-GAAP Reporting Measure
Revenue	Non-GAAP Revenue
Operating Income	Non-GAAP Operating Income
Operating Profit Margin	Non-GAAP Operating Profit Margin
Net Income	Non-GAAP Net Income
Diluted Earnings Per Share	Non-GAAP Diluted Earnings Per Share

 

IR Contact:

 

Annette N. Arribas

(724) 820-3700

annette.arribas@ansys.com