Ansys Announces Q4 and FY 2023 Financial Results
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Ansys Announces Q4 and FY 2023 Financial Results

/ Q4 2023 Results

/ FY 2023 Results

   

PITTSBURGH, Feb. 21, 2024 (GLOBE NEWSWIRE) -- ANSYS, Inc. (NASDAQ: ANSS), today reported fourth quarter 2023 GAAP and non-GAAP revenue growth of 16% in reported currency, or 15% in constant currency, when compared to the fourth quarter of 2022. For FY 2023, GAAP and non-GAAP revenue growth was 10% in reported and constant currency when compared to FY 2022. For the fourth quarter of 2023, the Company reported diluted earnings per share of $3.14 and $3.94 on a GAAP and non-GAAP basis, respectively, compared to $2.95 and $3.09 on a GAAP and non-GAAP basis, respectively, for the fourth quarter of 2022. For FY 2023, the Company reported diluted earnings per share of $5.73 and $8.80 on a GAAP and non-GAAP basis, respectively, compared to $5.99 and $7.99 on a GAAP and non-GAAP basis, respectively, for FY 2022. Additionally, the Company reported fourth quarter and FY 2023 ACV growth of 17% and 13% in reported currency, respectively, or 16% and 13% in constant currency, respectively, when compared to the fourth quarter and FY 2022.

On January 15, 2024, the Company entered into a definitive agreement with Synopsys, Inc. (Synopsys) under which Synopsys will acquire Ansys. Under the terms of the agreement, Ansys shareholders will receive $197.00 in cash and 0.3450 shares of Synopsys common stock for each Ansys share, representing an enterprise value of approximately $35.0 billion based on the closing price of Synopsys common stock on December 21, 2023. The transaction is anticipated to close in the first half of 2025, subject to approval by Ansys shareholders, the receipt of required regulatory approvals and other customary closing conditions. Bringing together Synopsys’ pioneering semiconductor electronic design automation with Ansys’ broad simulation and analysis portfolio will create a leader in silicon to systems design solutions.

   

The non-GAAP financial results highlighted represent non-GAAP financial measures. Reconciliations of these measures to the comparable GAAP measures for the three and twelve months ended December 31, 2023 and 2022 can be found later in this release.

   

/ Summary of Financial Results

Ansys’ fourth quarter and FY 2023 and 2022 financial results are presented below. The 2023 and 2022 non-GAAP results exclude the income statement effects of stock-based compensation, excess payroll taxes related to stock-based compensation, amortization of acquired intangible assets, expenses related to business combinations and adjustments for the income tax effect of the excluded items. The 2022 period non-GAAP results also exclude the income statement effects of acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022. This adjustment is not material in 2023.

GAAP and non-GAAP results are as follows:

 GAAP Non-GAAP
(in thousands, except per share data and percentages)Q4 QTD 2023 Q4 QTD 2022 % Change Q4 QTD 2023 Q4 QTD 2022 % Change
Revenue$805,108  $694,115  16.0% $805,108  $694,690  15.9%
Net income$274,762  $257,947  6.5% $345,317  $270,366  27.7%
Diluted earnings per share$3.14  $2.95  6.4% $3.94  $3.09  27.5%
Gross margin 91.3%  91.2%    94.3%  94.0%  
Operating profit margin 41.4%  37.5%    53.0%  48.0%  
Effective tax rate 15.4% (0.6)%    17.5%  18.0%  


 GAAP Non-GAAP
(in thousands, except per share data and percentages)FY 2023 FY 2022 % Change FY 2023 FY 2022 % Change
Revenue$2,269,949  $2,065,553  9.9% $2,269,949  $2,072,886  9.5%
Net income$500,412  $523,710  (4.4)% $769,308  $698,905  10.1%
Diluted earnings per share$5.73  $5.99  (4.3)% $8.80  $7.99  10.1%
Gross margin 88.0%  87.9%    92.2%  91.8%  
Operating profit margin 27.6%  28.7%    42.6%  42.0%  
Effective tax rate 15.5%  9.0%    17.5%  18.0%  


(in thousands, except percentages)Q4 QTD 2023 Q4 QTD 2022 % Change
ACV$955,161 $818,009 16.8%
Operating cash flows$232,722 $173,972 33.8%
Unlevered operating cash flows$242,848 $181,067 34.1%


(in thousands, except percentages)FY 2023 FY 2022 % Change
ACV$2,300,466 $2,031,744 13.2%
Operating cash flows$717,122 $631,003 13.6%
Unlevered operating cash flows$755,129 $648,095 16.5%

/ Management’s 2024 Financial Outlook and Conference Call Information

As previously announced, in light of the pending transaction with Synopsys, Ansys is suspending quarterly earnings conference calls and will no longer be providing quarterly or annual guidance. We expect FY 2024 ACV to grow double-digit and the dollar value of ACV will continue to be highly skewed toward the fourth quarter of the year as has been the case in prior years. Additionally, 2024 quarterly ACV and revenue growth rates are expected to be variable across the quarters and are affected by the performance comparisons to 2023. As a result, we expect Q1 2024 ACV and revenue results to be the lowest amongst the quarters with the expectation that we will see double-digit ACV and revenue growth the remaining quarters of the year.

Supplemental Financial Information

/ Annual Contract Value

(in thousands, except percentages)Q4 QTD 2023 Q4 QTD 2023 in Constant Currency Q4 QTD 2022 % Change % Change in Constant Currency
ACV$       955,161  $        947,815  $818,009 16.8% 15.9%
          
(in thousands, except percentages)FY 2023 FY 2023 in Constant Currency FY 2022 % Change % Change in Constant Currency
ACV$   2,300,466  $     2,303,344  $2,031,744 13.2% 13.4%

ACV by License Type

*Subscription lease ACV includes the bundled arrangement of time-based licenses with related maintenance.
**Perpetual and service ACV includes perpetual licenses, with related maintenance, and services.

Recurring ACV

Recurring ACV includes both subscription lease ACV and all maintenance ACV (including maintenance from perpetual licenses). It excludes perpetual license ACV and service ACV.

FY 2023 ACV by Industry

FY 2022 ACV by Industry


/ Revenue

(in thousands, except percentages)Q4 QTD 2023 Q4 QTD 2023 in Constant Currency Q4 QTD 2022 % Change % Change in Constant Currency
GAAP Revenue$       805,108  $        799,681  $694,115 16.0% 15.2%
Non-GAAP Revenue$       805,108  $        799,681  $694,690 15.9% 15.1%
          
(in thousands, except percentages)FY 2023 FY 2023 in Constant Currency FY 2022 % Change % Change in Constant Currency
GAAP Revenue$   2,269,949  $    2,275,702  $2,065,553 9.9% 10.2%
Non-GAAP Revenue$   2,269,949  $    2,275,702  $2,072,886 9.5% 9.8%

The difference between the GAAP and non-GAAP revenue values for the 2022 period is a result of the application of the fair value provisions applicable to the accounting for business combinations closed prior to 2022.

REVENUE BY LICENSE TYPE
            
GAAP
            
(in thousands, except percentages)Q4 QTD 2023 % of Total Q4 QTD 2022 % of Total % Change % Change in Constant Currency
Subscription Lease$       399,556  49.6% $324,688 46.8% 23.1% 22.4%
Perpetual          102,721  12.8%  88,958 12.8% 15.5% 14.8%
Maintenance1          283,130  35.2%  261,691 37.7% 8.2% 7.2%
Service            19,701  2.4%  18,778 2.7% 4.9% 3.7%
Total$       805,108    $694,115   16.0% 15.2%
            
            
(in thousands, except percentages)FY 2023 % of Total FY 2022 % of Total % Change % Change in Constant Currency
Subscription Lease$       786,050  34.6% $687,665 33.3% 14.3% 14.4%
Perpetual          302,698  13.3%  301,313 14.6% 0.5% 0.7%
Maintenance1       1,103,523  48.6%  1,004,245 48.6% 9.9% 10.3%
Service            77,678  3.4%  72,330 3.5% 7.4% 7.4%
Total$   2,269,949    $2,065,553   9.9% 10.2%

Non-GAAP
            
(in thousands, except percentages)Q4 QTD 2023 % of Total Q4 QTD 2022 % of Total % Change % Change in Constant Currency
Subscription Lease$       399,556  49.6% $324,700 46.7% 23.1% 22.4%
Perpetual          102,721  12.8%  88,958 12.8% 15.5% 14.8%
Maintenance1          283,130  35.2%  262,254 37.8% 8.0% 7.0%
Service            19,701  2.4%  18,778 2.7% 4.9% 3.7%
Total$       805,108    $694,690   15.9% 15.1%
            
            
(in thousands, except percentages)FY 2023 % of Total FY 2022 % of Total % Change % Change in Constant Currency
Subscription Lease$       786,050  34.6% $687,790 33.2% 14.3% 14.4%
Perpetual          302,698  13.3%  301,313 14.5% 0.5% 0.7%
Maintenance1       1,103,523  48.6%  1,011,452 48.8% 9.1% 9.5%
Service            77,678  3.4%  72,331 3.5% 7.4% 7.4%
Total$   2,269,949    $2,072,886   9.5% 9.8%

1Maintenance revenue is inclusive of both maintenance associated with perpetual licenses and the maintenance component of subscription leases.

REVENUE BY GEOGRAPHY
            
GAAP
            
(in thousands, except percentages)Q4 QTD 2023 % of Total Q4 QTD 2022 % of Total % Change % Change in Constant Currency
Americas$       410,681  51.0% $359,081 51.7% 14.4% 14.3%
            
Germany            81,828  10.2%  86,724 12.5% (5.6)% (9.6)%
Other EMEA          155,023  19.3%  112,909 16.3% 37.3% 33.0%
EMEA          236,851  29.4%  199,633 28.8% 18.6% 14.5%
            
Japan            61,243  7.6%  52,637 7.6% 16.3% 22.4%
Other Asia-Pacific            96,333  12.0%  82,764 11.9% 16.4% 16.3%
Asia-Pacific          157,576  19.6%  135,401 19.5% 16.4% 18.7%
            
Total$       805,108    $694,115   16.0% 15.2%
            
            
(in thousands, except percentages)FY 2023 % of Total FY 2022 % of Total % Change % Change in Constant Currency
Americas$   1,106,242  48.7% $969,237 46.9% 14.1% 14.2%
             
Germany          199,068  8.8%  198,612 9.6% 0.2% (2.6)%
Other EMEA          406,719  17.9%  349,159 16.9% 16.5% 14.5%
EMEA          605,787  26.7%  547,771 26.5% 10.6% 8.3%
             
Japan          203,013  8.9%  186,199 9.0% 9.0% 16.2%
Other Asia-Pacific          354,907  15.6%  362,346 17.5% (2.1)% (0.8)%
Asia-Pacific          557,920  24.6%  548,545 26.6% 1.7% 5.0%
             
Total$   2,269,949    $2,065,553   9.9% 10.2%

Non-GAAP
            
(in thousands, except percentages)Q4 QTD 2023 % of Total Q4 QTD 2022 % of Total % Change % Change in Constant Currency
Americas$       410,681  51.0% $359,243 51.7% 14.3% 14.3%
            
Germany            81,828  10.2%  86,765 12.5% (5.7)% (9.7)%
Other EMEA          155,023  19.3%  112,991 16.3% 37.2% 32.9%
EMEA          236,851  29.4%  199,756 28.8% 18.6% 14.4%
            
Japan            61,243  7.6%  52,826 7.6% 15.9% 22.0%
Other Asia-Pacific            96,333  12.0%  82,865 11.9% 16.3% 16.1%
Asia-Pacific          157,576  19.6%  135,691 19.5% 16.1% 18.4%
            
Total$       805,108    $694,690   15.9% 15.1%
            
            
(in thousands, except percentages)FY 2023 % of Total FY 2022 % of Total % Change % Change in Constant Currency
Americas$   1,106,242  48.7% $972,373 46.9% 13.8% 13.8%
            
Germany          199,068  8.8%  199,234 9.6% (0.1)% (2.9)%
Other EMEA          406,719  17.9%  350,374 16.9% 16.1% 14.1%
EMEA          605,787  26.7%  549,608 26.5% 10.2% 7.9%
              
Japan          203,013  8.9%  187,617 9.1% 8.2% 15.4%
Other Asia-Pacific          354,907  15.6%  363,288 17.5% (2.3)% (1.0)%
Asia-Pacific          557,920  24.6%  550,905 26.6% 1.3% 4.6%
             
Total$   2,269,949    $2,072,886   9.5% 9.8%


REVENUE BY CHANNEL
        
GAAP
        
 Q4 QTD 2023 Q4 QTD 2022 FY 2023 FY 2022
Direct revenue, as a percentage of total revenue74.5% 80.7% 73.9% 76.1%
Indirect revenue, as a percentage of total revenue25.5% 19.3% 26.1% 23.9%


Non-GAAP
        
 Q4 QTD 2023 Q4 QTD 2022 FY 2023 FY 2022
Direct revenue, as a percentage of total revenue74.5% 80.7% 73.9% 76.1%
Indirect revenue, as a percentage of total revenue25.5% 19.3% 26.1% 23.9%

/ Deferred Revenue and Backlog

(in thousands)December 31, 2023 September 30, 2023 December 31, 2022 September 30, 2022
Current Deferred Revenue$457,514 $349,668 $413,989 $334,901
Current Backlog 439,879  424,547  432,323  339,241
Total Current Deferred Revenue and Backlog 897,393  774,215  846,312  674,142
        
Long-Term Deferred Revenue 22,240  20,765  21,769  19,817
Long-Term Backlog 552,951  410,697  548,765  414,929
Total Long-Term Deferred Revenue and Backlog 575,191  431,462  570,534  434,746
        
Total Deferred Revenue and Backlog$1,472,584 $1,205,677 $1,416,846 $1,108,888

/ Currency

The fourth quarter and FY 2023 revenue, operating income, ACV and deferred revenue and backlog, as compared to the fourth quarter and FY 2022, were impacted by fluctuations in the exchange rates of foreign currencies against the U.S. Dollar. The currency fluctuation impacts on GAAP and non-GAAP revenue and operating income, ACV, and deferred revenue and backlog based on 2022 exchange rates are reflected in the tables below. Amounts in brackets indicate an adverse impact from currency fluctuations.

GAAP
    
(in thousands)Q4 QTD 2023 FY 2023
Revenue$5,427 $(5,753)
Operating income$1,745 $(1,393)


Non-GAAP
    
(in thousands)Q4 QTD 2023 FY 2023
Revenue$5,427 $(5,753)
Operating income$2,083 $(958)


Other Metrics
    
(in thousands)Q4 QTD 2023 FY 2023
ACV$7,346 $(2,878)
Deferred revenue and backlog$22,952 $2,534 

The most meaningful currency impacts are typically attributable to U.S. Dollar exchange rate changes against the Euro and Japanese Yen. Historical exchange rates are reflected in the charts below.

 Period-End Exchange Rates
As ofEUR/USD USD/JPY
December 31, 20231.10 141
December 31, 20221.07 131
December 31, 20211.14 115


 Average Exchange Rates
Three Months EndedEUR/USD USD/JPY
December 31, 20231.08 148
December 31, 20221.02 141


 Average Exchange Rates
Twelve Months EndedEUR/USD USD/JPY
December 31, 20231.08 140
December 31, 20221.05 131

/ GAAP Financial Statements

ANSYS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)December 31, 2023 December 31, 2022
ASSETS:   
Cash & short-term investments$                         860,390  $614,574
Accounts receivable, net                            864,526   760,287
Goodwill                        3,805,874   3,658,267
Other intangibles, net                            835,417   809,183
Other assets                            956,668   845,634
Total assets$                     7,322,875  $6,687,945
LIABILITIES & STOCKHOLDERS’ EQUITY:   
Current deferred revenue$                         457,514  $413,989
Long-term debt                            753,891   753,574
Other liabilities                            721,106   654,531
Stockholders’ equity                        5,390,364   4,865,851
Total liabilities & stockholders’ equity$                     7,322,875  $6,687,945


ANSYS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
 Three Months Ended Twelve Months Ended
(in thousands, except per share data)December 31,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
Revenue:       
Software licenses$             502,277   $413,646  $          1,088,748   $988,978 
Maintenance and service                 302,831    280,469               1,181,201    1,076,575 
Total revenue                 805,108    694,115               2,269,949    2,065,553 
Cost of sales:       
Software licenses                   10,909    7,711                     40,004    33,081 
Amortization                   20,586    17,425                     80,990    69,372 
Maintenance and service                   38,554    36,291                   150,304    148,188 
Total cost of sales                   70,049    61,427                   271,298    250,641 
Gross profit                 735,059    632,688               1,998,651    1,814,912 
Operating expenses:       
Selling, general and administrative                 269,857    257,450                   855,135    772,871 
Research and development                 126,288    111,390                   494,869    433,661 
Amortization                     5,914    3,747                     22,512    15,722 
Total operating expenses                 402,059    372,587               1,372,516    1,222,254 
Operating income                 333,000    260,101                   626,135    592,658 
Interest income                     7,199    3,576                     19,588    5,717 
Interest expense                 (12,551)  (9,058)                  (47,145)  (22,726)
Other (expense) income, net                   (2,876)  1,792                     (6,440)  (334)
Income before income tax provision                 324,772    256,411                   592,138    575,315 
Income tax provision (benefit)                   50,010    (1,536)                    91,726    51,605 
Net income$             274,762   $257,947  $             500,412   $523,710 
Earnings per share – basic:       
Earnings per share$                    3.16   $2.96  $                    5.76   $6.02 
Weighted average shares                   86,888    87,017                     86,833    87,051 
Earnings per share – diluted:       
Earnings per share$                    3.14   $2.95  $                    5.73   $5.99 
Weighted average shares                   87,541    87,473                     87,386    87,490 


/ Glossary of Terms
Annual Contract Value (ACV): ACV is a key performance metric and is useful to investors in assessing the strength and trajectory of our business. ACV is a supplemental metric to help evaluate the annual performance of the business. Over the life of the contract, ACV equals the total value realized from a customer. ACV is not impacted by the timing of license revenue recognition. ACV is used by management in financial and operational decision-making and in setting sales targets used for compensation. ACV is not a replacement for, and should be viewed independently of, GAAP revenue and deferred revenue as ACV is a performance metric and is not intended to be combined with any of these items. There is no GAAP measure comparable to ACV. ACV is composed of the following:

When we refer to the anniversary dates in the definition of ACV above, we are referencing the date of the beginning of the next twelve-month period in a contractually committed multi-year contract. If a contract is three years in duration, with a start date of July 1, 2023, the anniversary dates would be July 1, 2024 and July 1, 2025. We label these anniversary dates as they are contractually committed. While this contract would be up for renewal on July 1, 2026, our ACV performance metric does not assume any contract renewals.

Example 1: For purposes of calculating ACV, a $100,000 subscription lease contract or a $100,000 maintenance contract with a term of July 1, 2023 – June 30, 2024, would each contribute $100,000 to ACV for fiscal year 2023 with no contribution to ACV for fiscal year 2024.

Example 2: For purposes of calculating ACV, a $300,000 subscription lease contract or a $300,000 maintenance contract with a term of July 1, 2023 – June 30, 2026, would each contribute $100,000 to ACV in each of fiscal years 2023, 2024 and 2025. There would be no contribution to ACV for fiscal year 2026 as each period captures the full annual value upon the anniversary date.

Example 3: A perpetual license valued at $200,000 with a contract start date of March 1, 2023 would contribute $200,000 to ACV in fiscal year 2023.

Backlog: Deferred revenue associated with installment billings for periods beyond the current quarterly billing cycle and committed contracts with start dates beyond the end of the current period.

Deferred Revenue: Billings made or payments received in advance of revenue recognition.

Subscription Lease or Time-Based License: A license of a stated product of our 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.

Perpetual / Paid-Up License: A license of a stated product and version of our software that is granted to a customer for use in perpetuity. The revenue related to this type of license is 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.

/ Reconciliations of GAAP to Non-GAAP Measures (Unaudited)

 Three Months Ended
 December 31, 2023
(in thousands, except percentages and per share data)Revenue Gross Profit % Operating Income % Net Income EPS - Diluted1
Total GAAP$805,108 $735,059 91.3% $333,000 41.4% $274,762  $3.14 
Stock-based compensation expense —  3,413 0.4%  63,358 7.9%  63,358   0.73 
Excess payroll taxes related to stock-based awards —  4 —%  271 —%  271   — 
Amortization of intangible assets from acquisitions —  20,586 2.6%  26,500 3.3%  26,500   0.30 
Expenses related to business combinations —  — —%  3,664 0.4%  3,664   0.04 
Adjustment for income tax effect —  — —%  — —%  (23,238)  (0.27)
Total non-GAAP$805,108 $759,062 94.3% $426,793 53.0% $345,317  $3.94 

1 Diluted weighted average shares were 87,541.

 Three Months Ended
 December 31, 2022
(in thousands, except percentages and per share data)Revenue Gross Profit % Operating Income % Net Income EPS - Diluted1
Total GAAP$694,115 $632,688 91.2% $260,101 37.5% $257,947  $2.95 
Acquisition accounting for deferred revenue 575  575 —%  575 —%  575   0.01 
Stock-based compensation expense —  2,625 0.3%  46,009 6.7%  46,009   0.53 
Excess payroll taxes related to stock-based awards —  29 —%  588 0.1%  588   0.01 
Amortization of intangible assets from acquisitions —  17,425 2.5%  21,172 3.0%  21,172   0.24 
Expenses related to business combinations —  — —%  4,959 0.7%  4,959   0.06 
Adjustment for income tax effect —  — —%  — —%  (60,884)  (0.71)
Total non-GAAP$694,690 $653,342 94.0% $333,404 48.0% $270,366  $3.09 

1 Diluted weighted average shares were 87,473.

 Twelve Months Ended
 December 31, 2023
(in thousands, except percentages and per share data)Revenue Gross Profit % Operating Income % Net Income EPS - Diluted1
Total GAAP$2,269,949 $1,998,651 88.0% $626,135 27.6% $500,412  $5.73 
Stock-based compensation expense —  13,337 0.6%  221,891 9.9%  221,891   2.54 
Excess payroll taxes related to stock-based awards —  307 0.1%  5,541 0.2%  5,541   0.06 
Amortization of intangible assets from acquisitions —  80,990 3.5%  103,502 4.5%  103,502   1.18 
Expenses related to business combinations —  — —%  9,422 0.4%  9,422   0.11 
Adjustment for income tax effect —  — —%  — —%  (71,460)  (0.82)
Total non-GAAP$2,269,949 $2,093,285 92.2% $966,491 42.6% $769,308  $8.80 

1 Diluted weighted average shares were 87,386.

 Twelve Months Ended
 December 31, 2022
(in thousands, except percentages and per share data)Revenue Gross Profit % Operating Income % Net Income EPS - Diluted1
Total GAAP$2,065,553 $1,814,912 87.9% $592,658 28.7% $523,710  $5.99 
Acquisition accounting for deferred revenue 7,333  7,333 —%  7,333 0.2%  7,333   0.08 
Stock-based compensation expense —  10,073 0.5%  168,128 8.2%  168,128   1.92 
Excess payroll taxes related to stock-based awards —  510 —%  6,118 0.3%  6,118   0.07 
Amortization of intangible assets from acquisitions —  69,372 3.4%  85,094 4.1%  85,094   0.97 
Expenses related to business combinations —  — —%  10,335 0.5%  10,335   0.12 
Adjustment for income tax effect —  — —%  — —%  (101,813)  (1.16)
Total non-GAAP$2,072,886 $1,902,200 91.8% $869,666 42.0% $698,905  $7.99 

1 Diluted weighted average shares were 87,490.

 Three Months Ended Twelve Months Ended
(in thousands)December 31,
2023		 December 31,
2022		 December 31,
2023		 December 31,
2022
Net cash provided by operating activities$232,722  $173,972  $717,122  $631,003 
Cash paid for interest 12,274   8,652   46,069   20,844 
Tax benefit (2,148)  (1,557)  (8,062)  (3,752)
Unlevered operating cash flows$242,848  $181,067  $755,129  $648,095 

/ Use of Non-GAAP Measures

We provide non-GAAP revenue, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income, non-GAAP diluted earnings per share and unlevered operating cash flows as supplemental measures to GAAP regarding our 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 these 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, as applicable.

We use non-GAAP financial measures (a) to evaluate our historical and prospective financial performance as well as our performance relative to our 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 employees. In addition, many financial analysts that follow us focus on and publish both historical results and future projections based on non-GAAP financial measures. We believe that it is in the best interest of our investors to provide this information to analysts so that they accurately report the non-GAAP financial information. Moreover, investors have historically requested, and we have historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.

While we believe 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 our competitors and may not be directly comparable to similarly titled measures of our competitors due to potential differences in the exact method of calculation. We compensate 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. Historically, we have consummated acquisitions in order to support our strategic and other business objectives. Under prior accounting guidance, a fair value provision resulted in acquired deferred revenue that was often recorded on the opening balance sheet at an amount that was lower than the historical carrying value. Although this fair value provision has no impact on our business or cash flow, it adversely impacts our reported GAAP revenue in the reporting periods following an acquisition. In 2022, we adopted accounting guidance which eliminates the fair value provision that resulted in the deferred revenue adjustment on a prospective basis. In order to provide investors with financial information that facilitates comparison of both historical and future results, we have historically provided non-GAAP financial measures which exclude the impact of the acquisition accounting adjustment for acquisitions prior to the adoption of the new guidance in 2022. The 2022 non-GAAP financial measures presented in this document include the adjustment to exclude the income statement effects of acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022. There is no adjustment included for 2023 as the impact is not material.

Amortization of intangible assets from acquisitions. We incur amortization of intangible assets, included in our GAAP presentation of amortization expense, related to various acquisitions we have made. We exclude these expenses for the purpose of calculating non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when we evaluate our continuing operational performance 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 us after the acquisition. Accordingly, we do not consider these expenses for purposes of evaluating our performance during the applicable time period after the acquisition, and we exclude such expenses when making decisions to allocate resources. We believe 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 us in our financial and operational decision-making, and (b) compare our past reports of financial results as we have historically reported these non-GAAP financial measures.

Stock-based compensation expense. We incur expense related to stock-based compensation included in our GAAP presentation of 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. Although stock-based compensation is an expense and viewed as a form of compensation, we exclude these expenses for the purpose of calculating non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when we evaluate our continuing operational performance. Specifically, we exclude stock-based compensation during our annual budgeting process and our quarterly and annual assessments of our performance. The annual budgeting process is the primary mechanism whereby we allocate resources to various initiatives and operational requirements. Additionally, the annual review by our Board of Directors during which it compares our 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 our senior management and department managers, charges related to stock-based compensation are excluded from expenditure and profitability results. In fact, we record stock-based compensation expense into a stand-alone cost center for which no single operational manager is responsible or accountable. In this way, we can 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. We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate our operating results and the effectiveness of the methodology used by us to review our operating results, and (b) review historical comparability in our financial reporting as well as comparability with competitors’ operating results.

Expenses related to business combinations. We incur expenses for professional services rendered in connection with business combinations, which are included in our GAAP presentation of selling, general and administrative expense. We also incur other expenses directly related to business combinations, including compensation expenses and concurrent restructuring activities, such as employee severances and other exit costs. These costs are included in our GAAP presentation of selling, general and administrative and research and development expenses. We exclude these acquisition-related 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 we evaluate our continuing operational performance, as we generally would not have otherwise incurred these expenses in the periods presented as a part of our operations. We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate our operating results and the effectiveness of the methodology used by us to review our operating results, and (b) review historical comparability in our financial reporting as well as comparability with competitors’ operating results.

Non-GAAP tax provision. We utilize a normalized non-GAAP annual effective tax rate (AETR) to calculate non-GAAP measures. This methodology provides better consistency across interim reporting periods by eliminating the effects of non-recurring items and aligning the non-GAAP tax rate with our expected geographic earnings mix. To project this rate, we analyzed our historic and projected non-GAAP earnings mix by geography along with other factors such as our current tax structure, recurring tax credits and incentives, and expected tax positions. On an annual basis we re-evaluate and update this rate for significant items that may materially affect our projections.

Unlevered operating cash flows. We make cash payments for the interest incurred in connection with our debt financing which are included in our GAAP presentation of operating cash flows. We exclude this cash paid for interest, net of the associated tax benefit, for the purpose of calculating unlevered operating cash flows. Unlevered operating cash flow is a supplemental non-GAAP measure that we use to evaluate our core operating business. We believe this measure is useful to investors and management because it provides a measure of our cash generated through operating activities independent of the capital structure of the business.

Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Our 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 our consolidated financial statements prepared in accordance with GAAP.
We have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures as listed below:

GAAP Reporting MeasureNon-GAAP Reporting Measure
RevenueNon-GAAP Revenue
Gross ProfitNon-GAAP Gross Profit
Gross Profit MarginNon-GAAP Gross Profit Margin
Operating IncomeNon-GAAP Operating Income
Operating Profit MarginNon-GAAP Operating Profit Margin
Net IncomeNon-GAAP Net Income
Diluted Earnings Per ShareNon-GAAP Diluted Earnings Per Share
Operating Cash FlowsUnlevered Operating Cash Flows

Constant currency. In addition to the non-GAAP financial measures detailed above, we use constant currency results for financial and operational decision-making and as a means to evaluate period-to-period comparisons by excluding the effects of foreign currency fluctuations on the reported results. To present this information, the 2023 results for entities whose functional currency is a currency other than the U.S. Dollar were converted to U.S. Dollars at rates that were in effect for the 2022 comparable period, rather than the actual exchange rates in effect for 2023. Constant currency growth rates are calculated by adjusting the 2023 reported amounts by the 2023 currency fluctuation impacts and comparing the adjusted amounts to the 2022 comparable period reported amounts. We believe 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 us in our financial and operational decision-making, and (b) compare our reported results to our past reports of financial results without the effects of foreign currency fluctuations.

/ About Ansys

Our Mission: Powering Innovation that Drives Human Advancement™

When visionary companies need to know how their world-changing ideas will perform, they close the gap between design and reality with Ansys simulation. For more than 50 years, Ansys software has enabled innovators across industries to push boundaries by using the predictive power of simulation. From sustainable transportation to advanced semiconductors, from satellite systems to life-saving medical devices, the next great leaps in human advancement will be powered by Ansys.

/ Forward-Looking Information

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act). Forward-looking statements are statements that provide current expectations or forecasts of future events based on certain assumptions. Forward-looking statements are subject to risks, uncertainties, and factors relating to our business which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements.

Forward-looking statements use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “project,” “should,” “target,” or other words of similar meaning. Forward-looking statements include those about market opportunity, including our total addressable market, the proposed transaction with Synopsys, Inc., including the expected date of closing and the potential benefits thereof, or other aspects of future operation. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.

The risks associated with the following, among others, could cause actual results to differ materially from those described in any forward-looking statements:

Important Information and Where to Find It

This document relates to a proposed transaction between Synopsys and Ansys. Synopsys will file a registration statement on Form S-4 with the SEC, which will include a document that serves as a prospectus of Synopsys and a proxy statement of Ansys referred to as a proxy statement/prospectus. This proxy statement/prospectus will be sent to all Ansys shareholders. Synopsys and Ansys also will file other documents regarding the proposed transaction with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders will be able to obtain free copies of the registration statement, proxy statement/prospectus and all other relevant documents filed or that will be filed with the SEC by Synopsys or Ansys through the website maintained by the SEC at www.sec.gov. 

The documents filed by Synopsys with the SEC also may be obtained free of charge at Synopsys’ website at https://investor.synopsys.com/overview/default.aspx or upon written request to Synopsys at Synopsys, Inc., 675 Almanor Avenue, Sunnyvale, California 94085, Attention: Investor Relations Department. The documents filed by Ansys with the SEC also may be obtained free of charge at Ansys’ website at https://investors.ansys.com/ or upon written request to kelsey.debriyn@ansys.com. 

Participants in Solicitation

Synopsys, Ansys and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Ansys’ shareholders in connection with the proposed transaction.

Information about Ansys’ directors and executive officers and their ownership of Ansys’ common stock is set forth in Ansys’ proxy statement for its 2023 Annual Meeting of Shareholders on Schedule 14A filed with the SEC on March 28, 2023. To the extent that holdings of Ansys’ securities have changed since the amounts printed in Ansys’ proxy statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Information about Synopsys’ directors and executive officers is set forth in Synopsys’ proxy statement for its 2023 Annual Meeting of Shareholders on Schedule 14A filed with the SEC on February 17, 2023 and Synopsys’ subsequent filings with the SEC. Additional information regarding the direct and indirect interests of those persons and other persons who may be deemed participants in the proposed transaction may be obtained by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.

No Offer or Solicitation

This document is for informational purposes only and is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

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 https://investors.ansys.com for more information.

ANSS-F

Contact:  
Investors: Kelsey DeBriyn
  724.820.3927
   Email Contact 
Media: Mary Kate Joyce
  724.820.4368
   Email Contact 






Photos accompanying this announcement are available at:

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