UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172022
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-20853
ANSYS, Inc.
(Exact name of registrant as specified in its charter)
Delaware04-3219960
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2600 ANSYS Drive,Canonsburg,PA15317
(Address of principal executive offices)Principal Executive Offices)(Zip Code)
844-462-6797
(Registrant’sRegistrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.01 par value per shareANSSNasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes   x☒No  o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x☒    No  o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company, (as defined" and "emerging growth company" in Rule 12b-2 of the Exchange Act Rule 12b-2). (Check one):
Act.
Large accelerated filerx☒Accelerated filero☐
Non-accelerated filero☐Smaller reporting companyo☐
Emerging growth companyo☐
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.
o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o☐   No  x☒
The number of shares of the Registrant’sRegistrant's Common Stock, $0.01 par value $.01 per share, outstanding as of October 31, 2017 was 84,860,47328, 2022 was 87,112,235 shares.




ANSYS, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I
Page No.
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets – September 30, 20172022 and December 31, 20162021
3
4
5
6
7
78
Report of Independent Registered Public Accounting Firm
15
1620
3342
3444
3545
3545
3546
3546
3546
3546
3647
3748



2
Table of Contents
PART I – UNAUDITED FINANCIAL INFORMATION
Item 1.Financial Statements:

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 September 30,
2017		 December 31,
2016
(in thousands, except share and per share data)(Unaudited) (Audited)
ASSETS   
Current assets:   
Cash and cash equivalents$919,571
 $822,479
Short-term investments7,064
 381
Accounts receivable, less allowance for doubtful accounts of $6,800 and $5,700, respectively91,356
 107,192
Other receivables and current assets183,683
 239,349
Total current assets1,201,674
 1,169,401
Property and equipment, net57,160
 54,677
Goodwill1,353,444
 1,337,215
Other intangible assets, net154,996
 172,619
Other long-term assets33,633
 24,287
Deferred income taxes45,106
 42,327
Total assets$2,846,013
 $2,800,526
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$4,257
 $7,395
Accrued bonuses and commissions40,375
 49,487
Accrued income taxes4,436
 5,263
Other accrued expenses and liabilities65,557
 73,676
Deferred revenue381,727
 403,279
Total current liabilities496,352
 539,100
Long-term liabilities:   
Deferred income taxes1,793
 2,259
Other long-term liabilities60,614
 50,762
Total long-term liabilities62,407
 53,021
Commitments and contingencies

 

Stockholders' equity:   
Preferred stock, $.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding—
 —
Common stock, $.01 par value; 300,000,000 shares authorized; 93,236,023 shares issued932
 932
Additional paid-in capital865,430
 883,010
Retained earnings2,264,331
 2,057,665
Treasury stock, at cost: 8,401,924 and 7,548,188 shares, respectively(804,012) (675,550)
Accumulated other comprehensive loss(39,427) (57,652)
Total stockholders' equity2,287,254
 2,208,405
Total liabilities and stockholders' equity$2,846,013
 $2,800,526
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)September 30,
2022		December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$632,509 $667,667 
Short-term investments194 361 
Accounts receivable, less allowance for doubtful accounts of $14,600602,607 645,891 
Other receivables and current assets214,566 324,655 
Total current assets1,449,876 1,638,574 
Long-term assets:
Property and equipment, net77,748 87,914 
Operating lease right-of-use assets123,511 120,881 
Goodwill3,532,459 3,409,271 
Other intangible assets, net739,202 763,119 
Other long-term assets214,648 279,676 
Deferred income taxes24,196 24,879 
Total long-term assets4,711,764 4,685,740 
Total assets$6,161,640 $6,324,314 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$17,353 $10,863 
Accrued bonuses and commissions80,282 163,182 
Accrued income taxes16,461 8,410 
Other accrued expenses and liabilities160,693 204,509 
Deferred revenue334,901 391,528 
Total current liabilities609,690 778,492 
Long-term liabilities:
Deferred income taxes48,357 105,548 
Long-term operating lease liabilities109,706 104,378 
Long-term debt753,495 753,576 
Other long-term liabilities96,707 98,272 
Total long-term liabilities1,008,265 1,061,774 
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding— — 
Common stock, $0.01 par value; 300,000,000 shares authorized; 95,267,307 shares issued953 953 
Additional paid-in capital1,500,330 1,465,694 
Retained earnings4,524,983 4,259,220 
Treasury stock, at cost: 8,178,940 and 8,188,331 shares, respectively(1,294,098)(1,185,707)
Accumulated other comprehensive loss(188,483)(56,112)
Total stockholders' equity4,543,685 4,484,048 
Total liabilities and stockholders' equity$6,161,640 $6,324,314 

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

3
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 Three Months Ended
Nine Months Ended
(in thousands, except per share data)September 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
Revenue:






Software licenses$156,580

$139,530

$448,368

$406,668
Maintenance and service119,005

106,332

344,546

311,169
Total revenue275,585

245,862

792,914

717,837
Cost of sales:






Software licenses7,395

6,433

24,197

19,705
Amortization9,004

9,513

26,892

28,544
Maintenance and service19,584

19,640

58,263

59,633
Total cost of sales35,983

35,586

109,352

107,882
Gross profit239,602

210,276

683,562

609,955
Operating expenses:






Selling, general and administrative80,015

61,537

230,483

183,565
Research and development50,144

45,418

153,524

137,533
Amortization3,260

3,222

9,506

9,581
Total operating expenses133,419

110,177

393,513

330,679
Operating income106,183

100,099

290,049

279,276
Interest income1,910

1,083

4,827

3,110
Other expense, net(168)
(189)
(1,512)
(137)
Income before income tax provision107,925

100,993

293,364

282,249
Income tax provision34,295

31,436

86,698

86,596
Net income$73,630

$69,557

$206,666

$195,653
Earnings per share – basic:






Earnings per share$0.87

$0.80

$2.43

$2.23
Weighted average shares84,774

86,959

85,132

87,570
Earnings per share – diluted:






Earnings per share$0.85

$0.78

$2.38

$2.19
Weighted average shares86,588

88,676

86,902

89,355
Table of Contents

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months EndedNine Months Ended
(in thousands, except per share data)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Revenue:
Software licenses$208,906 $200,394 $575,332 $547,820 
Maintenance and service263,605 240,774 796,106 703,228 
Total revenue472,511 441,168 1,371,438 1,251,048 
Cost of sales:
Software licenses8,425 8,289 25,370 23,960 
Amortization17,281 15,189 51,947 45,163 
Maintenance and service36,261 39,268 111,897 119,884 
Total cost of sales61,967 62,746 189,214 189,007 
Gross profit410,544 378,422 1,182,224 1,062,041 
Operating expenses:
Selling, general and administrative175,283 165,368 515,421 471,993 
Research and development108,056 102,023 322,271 303,381 
Amortization3,821 3,403 11,975 12,244 
Total operating expenses287,160 270,794 849,667 787,618 
Operating income123,384 107,628 332,557 274,423 
Interest income1,345 541 2,141 1,544 
Interest expense(6,092)(2,943)(13,668)(9,594)
Other (expense) income, net(656)(1,328)(2,126)14,008 
Income before income tax provision117,981 103,898 318,904 280,381 
Income tax provision22,006 18,556 53,141 28,925 
Net income$95,975 $85,342 $265,763 $251,456 
Earnings per share – basic:
Earnings per share$1.10 $0.98 $3.05 $2.89 
Weighted average shares87,063 87,239 87,062 87,072 
Earnings per share – diluted:
Earnings per share$1.10 $0.97 $3.04 $2.86 
Weighted average shares87,418 88,169 87,496 88,069 

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

4
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 Three Months Ended Nine Months Ended
(in thousands)September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
Net income$73,630
 $69,557
 $206,666
 $195,653
Other comprehensive income:       
Foreign currency translation adjustments4,149
 2,044
 18,225
 14,267
Comprehensive income$77,779
 $71,601
 $224,891
 $209,920
Table of Contents

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months EndedNine Months Ended
(in thousands)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Net income$95,975 $85,342 $265,763 $251,456 
Other comprehensive loss:
Foreign currency translation adjustments(61,636)(16,304)(132,371)(31,351)
Comprehensive income$34,339 $69,038 $133,392 $220,105 

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

5
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 Nine Months Ended
(in thousands)September 30,
2017		 September 30,
2016
Cash flows from operating activities:   
Net income$206,666
 $195,653
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization49,939
 52,320
Deferred income tax benefit(4,217) (3,102)
Provision for bad debts1,382
 1,006
Stock-based compensation expense39,408
 24,564
Other241
 (211)
Changes in operating assets and liabilities:   
Accounts receivable17,899
 6,601
Other receivables and current assets60,754
 26,431
Other long-term assets4,495
 (80)
Accounts payable, accrued expenses and current liabilities(22,362) (23,622)
Accrued income taxes(221) 4,674
Deferred revenue(35,502) (12,178)
Other long-term liabilities8,478
 (5,285)
Net cash provided by operating activities326,960
 266,771
Cash flows from investing activities:   
Acquisitions, net of cash acquired(25,998) —
Capital expenditures(14,815) (8,219)
Other investing activities(20,810) (11,355)
Net cash used in investing activities(61,623) (19,574)
Cash flows from financing activities:   
Purchase of treasury stock(223,291)
(243,288)
Restricted stock withholding taxes paid in lieu of issued shares(10,075) (5,044)
Contingent consideration payments—
 (1,048)
Proceeds from shares issued for stock-based compensation47,992
 43,347
Other financing activities—
 (1)
Net cash used in financing activities(185,374) (206,034)
Effect of exchange rate fluctuations on cash and cash equivalents17,129
 12,585
Net increase in cash and cash equivalents97,092
 53,748
Cash and cash equivalents, beginning of period822,479
 784,168
Cash and cash equivalents, end of period$919,571
 $837,916
Supplemental disclosures of cash flow information:   
Income taxes paid$84,760
 $95,066
Interest paid$163
 $791
Table of Contents

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended
(in thousands)September 30,
2022		September 30,
2021
Cash flows from operating activities:
Net income$265,763 $251,456 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization86,239 80,500 
Operating lease right-of-use assets expense17,356 16,896 
Deferred income tax benefit(63,560)(22,459)
Provision for bad debts2,476 827 
Stock-based compensation expense122,119 122,148 
Gain on equity investment— (15,139)
Other4,986 1,940 
Changes in operating assets and liabilities:
Accounts receivable66,369 86,098 
Other receivables and current assets96,641 57,992 
Other long-term assets(3,121)(2,548)
Accounts payable, accrued expenses and current liabilities(111,039)(58,520)
Accrued income taxes9,751 (18,997)
Deferred revenue(28,203)(46,467)
Other long-term liabilities(8,746)(5,898)
Net cash provided by operating activities457,031 447,829 
Cash flows from investing activities:
Acquisitions, net of cash acquired(242,613)(105,141)
Capital expenditures(15,227)(18,133)
Other investing activities(782)(382)
Net cash used in investing activities(258,622)(123,656)
Cash flows from financing activities:
Principal payments on long-term debt— (45,000)
Purchase of treasury stock(155,571)(35,993)
Restricted stock withholding taxes paid in lieu of issued shares(62,035)(92,143)
Proceeds from shares issued for stock-based compensation20,918 26,321 
Other financing activities(1,290)(50)
Net cash used in financing activities(197,978)(146,865)
Effect of exchange rate fluctuations on cash and cash equivalents(35,589)(9,142)
Net (decrease) increase in cash and cash equivalents(35,158)168,166 
Cash and cash equivalents, beginning of period667,667 912,672 
Cash and cash equivalents, end of period$632,509 $1,080,838 
Supplemental disclosure of cash flow information:
Income taxes paid$42,055 $59,973 
Interest paid$12,192 $8,721 
Fair value of unpaid consideration in connection with acquisitions$3,391 $— 

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



6
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury StockAccumulated Other Comprehensive LossTotal
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202295,267$953 $1,465,694 $4,259,220 8,188 $(1,185,707)$(56,112)$4,484,048 
Treasury shares acquired500 (155,571)(155,571)
Stock-based compensation activity(50,287)(403)36,865 (13,422)
Other comprehensive loss(22,092)(22,092)
Net income70,988 70,988 
Balance, March 31, 202295,267$953 $1,415,407 $4,330,208 8,285$(1,304,413)$(78,204)$4,363,951 
Acquisition of Analytical Graphics, Inc.511 (3)300 811 
Stock-based compensation activity34,631 (33)3,205 37,836 
Other comprehensive loss(48,643)(48,643)
Net income98,800 98,800 
Balance, June 30, 202295,267$953 $1,450,549 $4,429,008 8,249$(1,300,908)$(126,847)$4,452,755 
Stock-based compensation activity49,781 (70)6,810 56,591 
Other comprehensive loss(61,636)(61,636)
Net income95,97595,975 
Balance, September 30, 202295,267$953 $1,500,330 $4,524,983 8,179$(1,294,098)$(188,483)$4,543,685 
 Common StockAdditional
Paid-In
Capital		Retained
Earnings		Treasury StockAccumulated
Other
Comprehensive (Loss) Income		Total
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202195,266$953 $1,434,203 $3,804,593 8,694 $(1,124,102)$(17,775)$4,097,872 
Stock-based compensation activity(87,602)(565)48,565 (39,037)
Other comprehensive loss(19,264)(19,264)
Net income72,398 72,398 
Balance, March 31, 202195,266$953 $1,346,601 $3,876,991 8,129$(1,075,537)$(37,039)$4,111,969 
Acquisition of Analytical Graphics, Inc.1 328 328 
Stock-based compensation activity34,661 (63)5,327 39,988 
Other comprehensive income4,217 4,217 
Net income93,716 93,716 
Balance, June 30, 202195,267$953 $1,381,590 $3,970,707 8,066$(1,070,210)$(32,822)$4,250,218 
Acquisition of Analytical Graphics, Inc.454 (2)152 606 
Treasury shares acquired97 (35,993)(35,993)
Stock-based compensation activity46,375 (106)9,000 55,375 
Other comprehensive loss(16,304)(16,304)
Net income85,342 85,342 
Balance, September 30, 202195,267$953 $1,428,419 $4,056,049 8,055$(1,097,051)$(49,126)$4,339,244 

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

7
Table of Contents
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20172022
(Unaudited)


1.Organization
1.Organization
ANSYS, Inc. (hereafter the "Company" or "ANSYS")(Ansys, we, us, our) develops and globally markets engineering simulation software and technologiesservices widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, electronics, biomedical, energy, materials and chemical processing,chemicals, consumer products, healthcare, and semiconductors.construction.
As defined by the accounting guidance for segment reporting, the Company operateswe operate as one segment.
Given the integrated approach to the multi-discipline problem-solving needs of the Company'sour customers, a single sale of software may contain components from multiple product areas and include combined technologies. The CompanyWe also hashave a multi-year product and integration strategy that will result in new, combined products or changes to the historical product offerings. As a result, it is impracticable for the Companyus to provide accurate historical or current reporting among itsour various product lines.

2.Accounting Policies
2.Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by ANSYS in accordance with accounting principles generally accepted in the United States for interim financial information for commercial and industrial companies, and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company'sour audited consolidated financial statements (and notes thereto) included in the Company'sour Annual Report on Form 10-K for the year ended December 31, 2016.2021 (2021 Form 10-K). The condensed consolidated December 31, 20162021 balance sheet presented is derived from the audited December 31, 20162021 balance sheet included in the most recent Annual Report on2021 Form 10-K. In theour opinion, of management, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the three and nine months ended September 30, 20172022 are not necessarily indicative of the results that may be expected for any future period.
Recently Adopted Accounting Guidance
Business combinations: In October 2021, the Financial Accounting Standards Board issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08). ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. We adopted the standard effective January 1, 2022. Under the prior guidance, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date. The standard does not impact acquired contract assets or liabilities from business combinations that occurred prior to the effective date of adoption, and the impact in current and future periods will depend on the contract assets and contract liabilities acquired in business combinations after the effective date of adoption.
Accounting Guidance Issued and Not Yet Adopted
It is not expected that the future adoption of any recently issued accounting pronouncements will have a material impact on our financial position, results of operations or cash flows.
8
Table of Contents
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds. Cash equivalents are carried at cost, which approximates fair value. The Company’sOur cash and cash equivalentequivalents balances comprise the following:
 September 30, 2022December 31, 2021
(in thousands, except percentages)Amount% of TotalAmount% of Total
Cash accounts$399,971 63.2 $580,047 86.9 
Money market funds232,538 36.8 87,620 13.1 
Total$632,509 $667,667 
 September 30, 2017 December 31, 2016
(in thousands, except percentages)Amount % of Total Amount % of Total
Cash accounts$528,134
 57.4 $488,504
 59.4
Money market funds391,437
 42.6 333,975
 40.6
Total$919,571
   $822,479
  

The Company'sOur money market fund balances are held in various funds of a single issuer. two issuers.



3.Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue:
Three Months EndedNine Months Ended
(in thousands, except percentages)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Revenue:
Subscription lease licenses$136,489 $120,516 $362,977 $315,387 
Perpetual licenses72,417 79,878 212,355 232,433 
Software licenses208,906 200,394 575,332 547,820 
Maintenance247,678 223,872 742,554 655,843 
Service15,927 16,902 53,552 47,385 
Maintenance and service263,605 240,774 796,106 703,228 
Total revenue$472,511 $441,168 $1,371,438 $1,251,048 
Direct revenue, as a percentage of total revenue74.8 %74.4 %73.7 %74.0 %
Indirect revenue, as a percentage of total revenue25.2 %25.6 %26.3 %26.0 %

Our software license revenue is recognized up front, while maintenance and service revenue is generally recognized over the term of the contract.
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Deferred Revenue
Deferred revenue consists of billings made or payments received in advance of revenue recognition from customer agreements. The timing of revenue recognition may differ from the timing of billings to customers. Payment terms vary by the type and location of customer and the products or services offered. The time between invoicing and when payment is due is not significant.
The changes in deferred revenue, inclusive of both current and long-term deferred revenue, during the nine months ended September 30, 2022 and 2021 were as follows:
(in thousands)20222021
Beginning balance – January 1$412,781 $388,810 
Acquired deferred revenue1,032 746 
Deferral of revenue1,343,122 1,202,547 
Recognition of revenue(1,371,438)(1,251,048)
Currency translation(30,779)(8,591)
Ending balance – September 30$354,718 $332,464 

Total revenue allocated to remaining performance obligations as of September 30, 2022 will be recognized as revenue as follows:
3.(in thousands)Acquisitions
Next 12 months$674,142
Months 13-24270,106
Months 25-36121,553
Thereafter43,087
Total revenue allocated to remaining performance obligations$1,108,888

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

4.Acquisitions
During the nine months ended September 30, 2017, the Company2022, we completed various strategic acquisitions to expand our solution offerings and enhance our customers' experience. The effects of the customer baseacquisitions were not material to our condensed consolidated results of operations individually or in the aggregate. The combined purchase price of the acquisitions completed during the nine months ended September 30, 2022 was approximately $251.5 million, or $246.0 million net of cash acquired.
During the three and acceleratenine months ended September 30, 2022, we incurred acquisition-related expenses of $1.2 million and $5.4 million, respectively. Acquisition-related expenses are recognized as selling, general and administrative and research and development expenses on the developmentcondensed consolidated statements of newincome.
The assets acquired and innovative productsliabilities assumed in connection with the acquisitions have been recorded based upon management's estimates of their fair market values as of each respective date of acquisition. The following tables summarize the fair value of consideration transferred and the fair values of identified assets acquired and liabilities assumed for the combined 2022 acquisitions at each respective date of acquisition:
10
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Fair Value of Consideration:
(in thousands)
Cash$248,102
Consideration not yet paid3,391
Total consideration$251,493


Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:
(in thousands)
Cash$5,540
Accounts receivable and other tangible assets2,873
Developed software and core technologies60,030
Customer lists126
Trade names1,304
Accounts payable and other liabilities(5,195)
Deferred revenue(1,032)
Net deferred tax liabilities(10,720)
Total identifiable net assets$52,926
Goodwill$198,567
The goodwill, which is not tax-deductible, is attributed to intangible assets that do not qualify for separate recognition, including the marketplace while lowering designassembled workforces of the acquired businesses and engineering coststhe synergies expected to arise as a result of the acquisitions.
The fair values of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for customers.these items are subject to change as additional information about what was known and knowable at each respective acquisition date is obtained during the measurement period (up to one year from the acquisition date).
We determined the fair value of our intangible assets using various valuation techniques, including the relief-from-royalty method and the multi-period excess earnings method. These models utilize certain unobservable inputs classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures. The determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimating fair value requires us to make assumptions and estimates regarding our future plans, as well as industry and economic conditions. These assumptions and estimates include, but are not limited to: selection of a valuation methodology, royalty rate, discount rate and attrition rate.
The weighted-average useful life, valuation method and assumptions used to determine the fair value of the intangible assets acquired in 2022 are as follows:
Intangible AssetWeighted-Average Useful LifeValuation MethodAssumptions
Developed software and core technologies8 yearsMulti-period excess earningsDiscount rate: 9.5% - 10.0%
Trade names9 yearsRelief-from-royalty
Royalty rate: 1.0%
Discount rate: 10.0% - 10.5%
Customer lists7 yearsMulti-period excess earnings
Attrition rate: 10.0%
Discount rate: 9.5%
11
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On October 1, 2021, we acquired 100% of the shares of Zemax, a leader in high-performance optical imaging system simulation, for a purchase price of $411.5 million, paid in cash, or $399.1 million net of cash acquired from Zemax. The acquisition expanded the scope of our optical and photonics simulation portfolio by giving users comprehensive solutions that can drive innovation in healthcare, autonomy, consumer electronics and the industrial internet of things (IIoT).
Additionally, during the year ended December 31, 2021, we completed several other acquisitions to expand our solution offerings and enhance our customers' experience. These acquisitions were not individually significant. The combined purchase price of the acquisitions was approximately $28.7 million for the nine months ended September 30, 2017. The Company had nothese acquisitions during the nine monthsyear ended September 30, 2016.December 31, 2021 was $110.7 million, which was paid in cash.
The operating results of each acquisition have been included in the Company'sour condensed consolidated financial statements since each respective date of acquisition. The effects
See Note 16, Subsequent Event, for information on our recent acquisition completed subsequent to the end of the business combinations were not material to the Company's consolidated results of operations individually or in the aggregate.period covered by this report.

5.Other Receivables and Current Assets and Other Accrued Expenses and Liabilities
4.Other Receivables and Current Assets
The Company'sOur other receivables and current assets and other accrued expenses and liabilities comprise the following balances:
(in thousands)September 30,
2022		December 31,
2021
Receivables related to unrecognized revenue$129,721 $200,888 
Income taxes receivable, including overpayments and refunds31,411 71,332 
Prepaid expenses and other current assets53,434 52,435 
Total other receivables and current assets$214,566 $324,655 
Accrued vacation38,084 35,879 
Consumption, VAT and sales tax liabilities25,741 52,630 
Accrued expenses and other current liabilities96,868 116,000 
Total other accrued expenses and liabilities$160,693 $204,509 
(in thousands)September 30,
2017		 December 31,
2016
Receivables related to unrecognized revenue$141,644
 $199,119
Income taxes receivable, including overpayments and refunds18,615
 15,718
Prepaid expenses and other current assets23,424
 24,512
Total other receivables and current assets$183,683
 $239,349

Receivables forrelated to unrecognized revenue represent the current portion of billings made for annual lease licenses and software maintenancecustomer contracts that have not yet been recognized as revenue.

6.Earnings Per Share
5.Earnings Per Share
Basic earnings per share ("EPS")(EPS) amounts are computed by dividing earnings by the weighted average number of common shares outstanding during the period. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalents outstanding. To the extent stock awards are anti-dilutive, they are excluded from the calculation of diluted EPS.
The details of basic and diluted EPS are as follows:
 Three Months EndedNine Months Ended
(in thousands, except per share data)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Net income$95,975 $85,342 $265,763 $251,456 
Weighted average shares outstanding – basic87,063 87,239 87,062 87,072 
Dilutive effect of stock plans355 930 434 997 
Weighted average shares outstanding – diluted87,418 88,169 87,496 88,069 
Basic earnings per share$1.10 $0.98 $3.05 $2.89 
Diluted earnings per share$1.10 $0.97 $3.04 $2.86 
Anti-dilutive shares54 32 366 30 

12
 Three Months Ended Nine Months Ended
(in thousands, except per share data)September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
Net income$73,630
 $69,557
 $206,666
 $195,653
Weighted average shares outstanding – basic84,774
 86,959
 85,132
 87,570
Dilutive effect of stock plans1,814
 1,717
 1,770
 1,785
Weighted average shares outstanding – diluted86,588
 88,676
 86,902
 89,355
Basic earnings per share$0.87
 $0.80
 $2.43
 $2.23
Diluted earnings per share$0.85
 $0.78
 $2.38
 $2.19
Anti-dilutive shares27
 269
 112
 242
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7.Goodwill and Intangible Assets

Intangible assets are classified as follows:
6.Goodwill and Intangible Assets
The Company's
 September 30, 2022December 31, 2021
(in thousands)Gross
Carrying
Amount		Accumulated
Amortization		Gross
Carrying
Amount		Accumulated
Amortization
Finite-lived intangible assets:
Developed software and core technologies$1,028,973 $(464,227)$985,685 $(422,797)
Customer lists191,742 (65,705)203,072 (57,175)
Trade names180,876 (132,814)182,554 (128,577)
Total$1,401,591 $(662,746)$1,371,311 $(608,549)
Indefinite-lived intangible asset:
Trade name$357 $357 
Finite-lived intangible assets andare amortized over their estimated useful lives are classified as follows:
of two years to seventeen years.
 September 30, 2017 December 31, 2016
(in thousands)
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Finite-lived intangible assets:       
Developed software and core technologies (3 – 11 years)$355,112
 $(291,960) $338,594
 $(275,130)
Customer lists and contract backlog (5 – 15 years)164,548
 (100,324) 159,549
 (88,414)
Trade names (2 – 10 years)128,346
 (101,083) 127,952
 (90,289)
Total$648,006
 $(493,367) $626,095
 $(453,833)
Indefinite-lived intangible asset:       
Trade name$357
   $357
  
Amortization expense for the intangible assets reflected above was $12.3 million and $12.7 million for the three months ended September 30, 2017 and 2016, respectively. Amortization expense for the intangible assets reflected above was $36.4 million and $38.1 million for the nine months ended September 30, 2017 and 2016, respectively.
As of September 30, 2017,2022, estimated future amortization expense for the intangible assets reflected above iswas as follows:
(in thousands) 
Remainder of 2017$12,405
201837,466
201924,357
202023,396
202119,169
202214,202
Thereafter23,644
Total intangible assets subject to amortization154,639
Indefinite-lived trade name357
Other intangible assets, net$154,996
(in thousands) 
Remainder of 2022$20,702 
202389,581 
202491,442 
202590,950 
202691,270 
202793,004 
Thereafter261,896 
Total intangible assets subject to amortization738,845 
Indefinite-lived trade name357 
Other intangible assets, net$739,202 

The changes in goodwill during the nine months ended September 30, 20172022 and 20162021 were as follows:
(in thousands)2017 2016(in thousands)20222021
Beginning balance – January 1$1,337,215
 $1,332,348
Beginning balance – January 1$3,409,271 $3,038,306 
Acquisitions11,719
 —
Adjustments—
 (1)
Acquisitions and adjustments(1)
Acquisitions and adjustments(1)
197,173 79,905 
Currency translation4,510
 1,184
Currency translation(73,985)(16,588)
Ending balance – September 30$1,353,444
 $1,333,531
Ending balance – September 30$3,532,459 $3,101,623 
(1) In accordance with the accounting for business combinations, we recorded adjustments to goodwill for the effect of changes in the provisional fair values of the assets acquired and liabilities assumed during the measurement period (up to one year from the acquisition date) as we obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.
During the first quarter of 2017, the Company2022, we completed the annual impairment test for goodwill and the indefinite-lived intangible asset and determined that these assets had not been impaired as of the test date, January 1, 2017.2022. Given the adverse economic and market conditions in the third quarter, we considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined it was not more likely than not that an impairment existed as of September 30, 2022. No other events or circumstances changed during the nine months ended September 30, 20172022 that would indicate that the fair values of the Company'sour reporting unit and indefinite-lived intangible asset are below their carrying amounts.



13
7.Fair Value Measurement
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8.Fair Value Measurement
The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels:
•Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
•Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or
•Level 3: unobservable inputs based on the Company'sour own assumptions used to measure assets and liabilities at fair value.
A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Our debt is classified within Level 2 of the fair value hierarchy because these borrowings are not actively traded and have a variable interest rate structure based upon market rates. The carrying amount of our debt approximates the estimated fair value. See Note 10, "Debt", for additional information on our borrowings.
The following tables provide the assets and liabilities carried at fair value and measured on a recurring basis:
  Fair Value Measurements at Reporting Date Using:
(in thousands)September 30,
2022		Quoted Prices in
Active Markets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents$232,538 $232,538 $— $— 
Short-term investments$194 $— $194 $— 
Deferred compensation plan investments$1,599 $1,599 $— $— 
Equity securities$1,309 $1,309 $— $— 
  Fair Value Measurements at Reporting Date Using:  Fair Value Measurements at Reporting Date Using:
(in thousands)September 30,
2017		 
Quoted Prices in
Active Markets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
(in thousands)December 31, 2021Quoted Prices in
Active Markets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets       Assets
Cash equivalents$391,437
 $391,437
 $—
 $—
Cash equivalents$87,620 $87,620 $— $— 
Short-term investments$7,064
 $—
 $7,064
 $—
Short-term investments$361 $— $361 $— 
Deferred compensation plan investments$2,256
 $2,256
 $—
 $—
Deferred compensation plan investments$1,602 $1,602 $— $— 
Equity securitiesEquity securities$2,500 $2,500 $— $— 
   Fair Value Measurements at Reporting Date Using:
(in thousands)December 31, 2016 
Quoted Prices in
Active Markets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets       
Cash equivalents$333,975
 $333,975
 $—
 $—
Short-term investments$381
 $—
 $381
 $—
Deferred compensation plan investments$459
 $459
 $—
 $—

The cash equivalents in the preceding tables represent money market funds.funds, valued at net asset value, with carrying values which approximate their fair values because of their short-term nature.
The short-term investments in the preceding tables represent deposits held by certain foreign subsidiaries of the Company.subsidiaries. The deposits have fixed interest rates with maturity datesoriginal maturities ranging from three months to one year.
The deferred compensation plan investments in the preceding tables represent trading securities held in a rabbi trust for the benefit of the non-affiliate independentnon-employee directors. These securities consist of mutual funds traded in an active market with quoted prices. As a result, the plan assets are classified as Level 1 in the fair value hierarchy. The plan assets are recorded within other long-term assets on the Company'sour condensed consolidated balance sheets.
The carrying valuesequity securities represent our investment in a publicly traded company. These securities are traded in an active market with quoted prices. As a result, the securities are classified as Level 1 in the fair value hierarchy. The securities are recorded within other long-term assets on our condensed consolidated balance sheets.
14
Table of cash, accounts receivable, accounts payable,Contents
9.Leases
Our right-of-use assets and lease liabilities primarily include operating leases for office space. Our executive offices and those related to certain domestic product development, marketing, production and administration are located in a 186,000 square foot office facility in Canonsburg, Pennsylvania. The term of the lease is 183 months, which began on October 1, 2014 and expires on December 31, 2029. The lease agreement includes options to renew the contract through August 2044, an option to lease additional space in January 2025 and an option to terminate the lease in December 2025. No options are included in the lease liability as renewal is not reasonably certain. In addition, we are reasonably certain we will not terminate the lease agreement. Absent the exercise of options in the lease, our remaining base rent (inclusive of property taxes and certain operating costs) is $4.5 million per annum through 2024 and $4.7 million per annum for 2025 - 2029.
The components of our global lease cost reflected in the condensed consolidated statements of income are as follows:
 Three Months EndedNine Months Ended
(in thousands)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Lease liability cost$6,960 $7,139 $20,886 $21,278 
Variable lease cost not included in the lease liability(1)
1,015 1,017 3,202 3,203 
     Total lease cost$7,975 $8,156 $24,088 $24,481 
(1) Variable lease cost includes common area maintenance, property taxes, utilities and fluctuations in rent due to a change in an index or rate.
Other information related to operating leases is as follows:
 Three Months EndedNine Months Ended
(in thousands)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Cash paid for amounts included in the measurement of the lease liability:
     Operating cash flows from operating leases$(6,720)$(7,217)$(20,309)$(21,183)
Right-of-use assets obtained in exchange for new operating lease liabilities8,131 1,301 $28,806 $6,895 
As of September 30,
20222021
Weighted-average remaining lease term of operating leases7.3 years6.7 years
Weighted-average discount rate of operating leases3.2 %3.0 %

The maturity schedule of the operating lease liabilities as of September 30, 2022 is as follows:
(in thousands) 
Remainder of 2022$6,241 
202323,009 
202420,857 
202518,907 
202617,436 
Thereafter59,040 
     Total future lease payments145,490 
Less: Present value adjustment(15,928)
     Present value of future lease payments(1)
$129,562 
(1) Includes the current portion of operating lease liabilities of $19.9 million, which is reflected in other accrued expenses and liabilities in the condensed consolidated balance sheets.
There were no material leases that have been signed but not yet commenced as of September 30, 2022.
15
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10.Debt
On June 30, 2022, we entered into a credit agreement (2022 Credit Agreement) with PNC Bank, National Association as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other accrued liabilitiesL/C issuers party thereto. The 2022 Credit Agreement refinanced our previous credit agreements in their entirety. Terms used in this description of the 2022 Credit Agreement with initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.
The term loan facility was advanced by the lenders thereunder to refinance and short-term obligations approximate theirreplace our (i) Credit Agreement, dated as of February 22, 2019, as amended, among us, as borrower, Bank of America, N.A., as administrative agent, swing line lender and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto and (ii) Credit Agreement, dated as of November 9, 2020, among us, as borrower, Bank of America, N.A., as administrative agent, and the lenders party thereto (together, the “Prior Credit Agreements”).
The 2022 Credit Agreement provides for a $755.0 million unsecured term loan facility and a $500.0 million unsecured revolving loan facility, which includes a $50.0 million sublimit for the issuance of letters of credit. The revolving loan facility is available for working capital and general corporate purposes. Each of the term loan facility and the revolving loan facility matures on June 30, 2027.
Borrowings under the term loan and revolving loan facilities accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our public debt rating (if available).

The 2022 Credit Agreement also provides for the option to add certain foreign subsidiaries as borrowers and to borrow in Euros, Sterling, Yen and Swiss Francs under the revolving loan facility, up to a sublimit of $150.0 million. Borrowings under the revolving loan facility denominated in these currencies will accrue interest at a rate that is based on (a) for Euros, €STR, (b) for Sterling, SONIA, (c) for Yen, TONAR and (d) for Swiss Francs, SARON, plus an applicable margin calculated as described above.
Under the 2022 Credit Agreement the weighted average interest rate in effect during the three months ended September 30, 2022 was 3.05%. Under the 2022 Credit Agreement and Prior Credit Agreements, the weighted average interest rate in effect during nine months ended September 30, 2022 was 2.11%.Under the Prior Credit Agreements, the weighted average interest rate in effect during the three and nine months ended September 30, 2021 was 1.33% and 1.41%, respectively. The rate in effect for the fourth quarter under the 2022 Credit Agreement is 4.53%.
The 2022 Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The 2022 Credit Agreement also contains a financial covenant requiring us and our subsidiaries to maintain a consolidated leverage ratio not in excess of 3.50 to 1.00 as of the end of any fiscal quarter (for the four-quarter period ending on such date) with an opportunity for a temporary increase in such consolidated leverage ratio to 4.00 to 1.00 upon the consummation of certain qualified acquisitions for which the aggregate consideration is at least $250.0 million.
As of September 30, 2022, we had $755.0 million of borrowings outstanding under the term loan, with a carrying value of $753.5 million, which is net of $1.5 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of September 30, 2022, no borrowings were outstanding under the revolving loan facility.
As of December 31, 2021, we had $755.0 million of borrowings outstanding under the Prior Credit Agreements, with a carrying value of $753.6 million, which is net of $1.4 million of unamortized debt discounts and issuance costs. The total amount was included in long-term debt. As of December 31, 2021, no borrowings were outstanding under the revolving loan facility.
We were in compliance with all covenants under the 2022 Credit Agreement and the Prior Credit Agreements as of September 30, 2022 and December 31, 2021, respectively.

16
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11.Income Taxes
Our income before income tax provision, income tax provision and effective tax rates were as follows:
 Three Months EndedNine Months Ended
(in thousands, except percentages)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Income before income tax provision$117,981 $103,898 $318,904 $280,381 
Income tax provision22,006 18,556 $53,141 $28,925 
Effective tax rate18.7 %17.9 %16.7 %10.3 %

The increase in the effective tax rate from the prior year was primarily due to decreased benefits related to stock-based compensation.
Tax expense for the nine months ended September 30, 2022 and 2021 benefited from deductions related to stock-based compensation, many of which were recognized discretely. These benefits were partially offset by non-deductible compensation.
12.Stock Repurchase Program
Under our stock repurchase program, we repurchased shares as follows:
Nine Months Ended
(in thousands, except per share data)September 30,
2022		September 30,
2021
Number of shares repurchased50097 
Average price paid per share$311.14 $371.83 
Total cost$155,571 $35,993 

All of the shares repurchased during the nine months ended September 30, 2022 were repurchased during the first quarter. As of September 30, 2022, 2.0 million shares remained available for repurchase under the program.
13.Stock-Based Compensation
On May 12, 2022, our stockholders approved the ANSYS, Inc. 2022 Employee Stock Purchase Plan (2022 ESPP) and the reservation by our board of directors of 750,000 shares of common stock for issuance under the 2022 ESPP. The 2022 ESPP allows our employees and employees of our designated subsidiaries to purchase shares of our common stock at a discount to fair values becausemarket value of their short-term nature.10% in accordance with the terms and conditions of the 2022 ESPP.

Total stock-based compensation expense and its net impact on basic and diluted earnings per share are as follows:

 Three Months EndedNine Months Ended
(in thousands, except per share data)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Cost of sales:
Maintenance and service$2,621 $2,753 $7,448 $9,834 
Operating expenses:
Selling, general and administrative27,077 25,420 67,117 66,158 
Research and development17,272 15,971 47,554 46,156 
Stock-based compensation expense before taxes46,970 44,144 122,119 122,148 
Related income tax benefits(9,984)(10,743)(42,037)(62,151)
Stock-based compensation expense, net of taxes$36,986 $33,401��$80,082 $59,997 
Net impact on earnings per share:
Basic earnings per share$(0.42)$(0.38)$(0.92)$(0.69)
Diluted earnings per share$(0.42)$(0.38)$(0.92)$(0.68)
8.Geographic Information


17
Table of Contents
14.Geographic Information
Revenue to external customers is attributed to individual countries based upon the location of the customer. Revenue by geographic area is as follows:
 Three Months EndedNine Months Ended
(in thousands)September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
United States$201,263 $208,998 $586,063 $570,101 
Japan38,586 45,298 133,562 147,511 
Germany48,115 27,826 111,888 89,781 
South Korea49,581 22,364 104,950 67,853 
China26,474 26,677 76,412 62,934 
Other Europe, Middle East and Africa (EMEA)72,058 73,806 236,250 220,083 
Other international36,434 36,199 122,313 92,785 
Total revenue$472,511 $441,168 $1,371,438 $1,251,048 
 Three Months Ended Nine Months Ended
(in thousands)September 30,
2017		 September 30,
2016		 September 30,
2017		 September 30,
2016
United States$107,130
 $91,301
 $309,486
 $265,945
Japan30,778
 31,496
 94,572
 90,601
Germany25,391
 25,399
 71,115
 73,428
South Korea15,309
 13,381
 45,677
 41,629
China16,608
 11,271
 42,942
 29,810
France15,099
 12,054
 42,482
 36,106
Canada3,864
 3,179
 10,368
 9,855
Other European37,455
 33,991
 107,019
 103,765
Other international23,951
 23,790
 69,253
 66,698
Total revenue$275,585
 $245,862
 $792,914
 $717,837

Property and equipment by geographic area is as follows:
(in thousands)September 30,
2022		December 31,
2021
United States$58,734 $62,880 
India5,219 6,144 
Germany2,564 4,434 
Other EMEA7,031 9,215 
Other international4,200 5,241 
Total property and equipment, net$77,748 $87,914 

15.Contingencies and Commitments
(in thousands)September 30,
2017		 December 31,
2016
United States$45,521
 $43,810
Europe5,193
 4,753
India3,685
 3,033
Other international2,761
 3,081
Total property and equipment, net$57,160
 $54,677

9.Stock-Based Compensation
Total stock-based compensation expense and its net impact on basic and diluted earnings per shareWe are as follows:
 Three Months Ended
Nine Months Ended
(in thousands, except per share data)September 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
Cost of sales:






Software licenses$140

$187

$711

$524
Maintenance and service739

417

1,894

1,200
Operating expenses:






Selling, general and administrative8,782

4,292

23,310

11,160
Research and development5,112

4,056

13,493

11,680
Stock-based compensation expense before taxes14,773

8,952

39,408

24,564
Related income tax benefits(6,080)
(2,993)
(23,980)
(7,928)
Stock-based compensation expense, net of taxes$8,693

$5,959

$15,428

$16,636
Net impact on earnings per share:






Basic earnings per share$(0.10)
$(0.07)
$(0.18)
$(0.19)
Diluted earnings per share$(0.10)
$(0.07)
$(0.18)
$(0.19)

As a result of new accounting guidance further discussed in Note 13, the three and nine months ended September 30, 2017 related income tax benefits above include $1.4 million and $11.5 million, respectively, of excess tax benefits that in prior years would have been recorded to additional paid-in capital. If such tax benefits were excluded, the impact on both basic and diluted earnings per share would have been a decrease of $0.02 and $0.13 for the three and nine months ended September 30, 2017, respectively.

10.Stock Repurchase Program
Under the Company's stock repurchase program, the Company repurchased shares as follows:
 Nine Months Ended
(in thousands, except per share data)September 30,
2017		 September 30,
2016
Number of shares repurchased2,000
 2,700
Average price paid per share$111.65
 $90.11
Total cost$223,291
 $243,288
In February 2017, the Company's Board of Directors increased the number of shares authorized for repurchase to a total of 5.0 million shares under the stock repurchase program. As of September 30, 2017, 3.5 million shares remained available for repurchase under the program.

11.Restructuring
During the fourth quarter of 2016, the Company initiated workforce realignment activities to reallocate resources to align with the Company's future strategic plans. The Company incurred related restructuring charges as follows:
(in thousands)Gross Net of Tax
Q4 2016$3,419
 $2,355
Q1 20179,273
 6,176
Q2 20172,000
 1,435
Q3 2017466
 331
Total restructuring charges$15,158
 $10,297
The restructuring charges are included in the presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. During the nine months ended September 30, 2017, the Company paid $11.3 million of the gross charges. As of September 30, 2017, $3.4 million of the gross charges incurred to date remains unpaid. The Company has completed the workforce realignment activities as of September 30, 2017.

12.Contingencies and Commitments
The Company is subject to various claims, investigations, claims and legal and regulatory proceedings that arise in the ordinary course of business, including, but not limited to, commercial disputes, labor and employment matters, tax audits, alleged infringement of third parties' intellectual property rights and other matters. In theour opinion, of the Company, the resolution of pending matters is not expected to have a material adverse effect on the Company’sour consolidated results of operations, cash flows or financial position. However, each of these matters is subject to various uncertainties and it is possible that an unfavorable resolution of one or more of these proceedings could materially affect the Company’sour consolidated results of operations, cash flows or financial position.
AnOur Indian subsidiary of the Company has several service tax audits pending that have resulted in formal inquiries being received on transactions through mid-2012. The CompanyWe could incur tax charges and related liabilities of approximately $7$7.0 million. As such charges are not probable at this time, a reserve has not been recorded on the condensed consolidated balance sheet as of September 30, 2022. The service tax issues raised in the Company’sour notices and inquiries are very similar to the case, M/s Microsoft Corporation (I) (P) Ltd. VsVs. Commissioner of Service Tax, New Delhi, wherein the Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has passedissued a favorable ruling to Microsoft. The CompanyMicrosoft ruling was subsequently challenged in the Supreme Court by the Indian tax authority and a decision is still pending. We can provide no assurances on whether the Microsoft case’s favorable ruling will be challenged in higher courts or on the impact that the present Microsoft case’scase's decision will have on our cases, however, an unfavorable ruling in the Company’s cases. The Company isMicrosoft case may impact our assessment of probability and result in the recording of a $7.0 million reserve. We are uncertain as to when these service tax matters will be concluded.

A French subsidiary of the Company previously received notice that the French taxing authority rejected the Company's 2012 research and development credit. The Company contested the decision and received a favorable outcome during the first half of 2017. There are currently no challenges to other years' research and development credits for this subsidiary; however, other years are subject to future review and audit.
The Company sellsWe sell software licenses and services to itsour customers under proprietary software licensecontractual agreements. Each license agreement contains the relevant terms of the contractual arrangement with the customer, andSuch agreements generally includesinclude certain provisions for indemnifying the customer against losses, expenses and liabilitiesclaims, by third parties, of infringement or misappropriation of their intellectual property rights arising from damages that are incurred bysuch customer's usage of our products or awarded against the customer in the event the Company’s software or services are found to infringe upon a patent, copyright or other proprietary right of a third party.services. To date, the Company has not had to reimburse any of its customers for any lossespayments related to these indemnification provisions and no material claims asserted under these indemnification provisions are outstanding as of September 30, 2017.have been immaterial. For several reasons, including the lack of prior material indemnification claims, the Companywe cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.

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13.New Accounting Guidance
Revenue from contracts16.Subsequent Event
In November 2022, we had a $70.0 million cash outflow (net of cash acquired) associated with customers: In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09, Revenue from Contractsa strategic acquisition. The acquisition was funded with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 supersedes most current revenue recognition guidance, including industry-specific guidance. Previous guidance requires an entity to recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's priceour existing cash balance. Due to the buyer is fixed or determinable, and collectibility is reasonably assured. Underlimited time since the new guidance, an entity is required to evaluate revenue recognition by identifying a contract with a customer, identifyingacquisition date, the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when (or as) the entity satisfies a performance obligation. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, delayed the effective date of ASU 2014-09 to annual periods beginning after December 15, 2017, including interim periods within that reporting period. This standard is effectiveinitial accounting for the Company on January 1, 2018. Entities have the option of usingbusiness combination is incomplete. As a full retrospective, cumulative effect or modified retrospective approachresult, we are unable to adopt ASU 2014-09. The Company expects to utilize the modified retrospective implementation approach.
This update will impact the timing and amounts of revenue recognized, which will result in increased volatility inprovide the amount of revenue recognized each period. The Company's preliminary assessment is that the adoption of this standard will have a material impact on the Company’s consolidated financial statements. While the Company expects that the standard will impact various elements of its business, the Company's initial assessment is that the most significant impact will be on the recognition of revenue related to software lease licenses. These licenses include the right to use the software and PCS over the term of the license. These licenses are currently recognized as revenue ratably over the term of the license. Under the new standard and the existing interpretations, the Company expects to recognize a meaningful portion of the revenue related to these licenses up-front at the time the license is delivered. In addition, it is anticipated in the year of adoption there will be an acceleration in the timing of certain income tax payments associated with deferred revenue that will be booked directly to opening retained earnings. The Company has also made a preliminary assessment that the expense related to sales commissions will not be materially different under the new standard. However, the Company's preliminary assessments could change as additional interpretations relating to the new standard are provided and as issues identified by software industry groups are addressed.
Business combinations: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01). This update narrows the definition of a business. If substantially all the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the acquiree is not a business. The update also requires a business to include an input and a substantive process that significantly contributes to the ability to create outputs. This definition is expected to reduce the number of acquisitions accounted for as business combinations, which will impact the accounting treatment of certain items, including the accounting treatment of contingent consideration and transaction expenses. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted and the update will be applied prospectively. The effect of the implementation will depend upon the nature of the Company's future acquisitions, if any. Historically, the Company has entered into acquisitions that would meet the definition of a business under ASU 2017-01. The Company plans to adopt ASU 2017-01 effective January 1, 2018.

Income taxes: In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16). Previous guidance requires the tax effects from intra-entity asset transfers to be deferred until the asset is sold to a third party or recovered through use. ASU 2016-16 eliminates this deferral for all intra-entity asset transfers other than inventory. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted and a modified retrospective transition is required upon adoption. The Company plans to adopt ASU 2016-16 effective January 1, 2018 and expects adoption to have an immaterial effect, if any, on its financial results.
Credit losses: In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). Previous guidance requires the allowance for doubtful accounts to be estimated based on an incurred loss model, which considers past and current conditions. ASU 2016-13 requires companies to use an expected loss model that also considers reasonable and supportable forecasts of future conditions. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within that reporting period. The standard requires a cumulative-effect adjustment to the statement of financial position as of the beginningacquisition date for the major classes of the first reporting period in which the guidance is effective.assets acquired and liabilities assumed. The Company is currently evaluating the effect that this update will have on its financial results upon adoption.
Employee share-based payment accounting: In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). This update includes various areas for simplification related to aspectspreliminary allocation of the accounting for share-based payment transactions. One simplification is that the tax effects of share-based payment settlementspurchase price will be recordedincluded in the income statement. Prior guidance required tax windfalls at settlement, and tax shortfalls to the extent of previous windfalls, to be recorded in equity. This provision was required to be adopted prospectively.
The Company adopted the guidance during the quarter ended March 31, 2017. The primary impact of adoption was the recognition of excess tax benefits in the Company's provision for income taxes rather than paid-in capital, which resulted in the recognition of excess tax benefits in the provision for income taxes of $1.4 million and $11.5 million during the three and nine months ended September 30, 2017, respectively. In addition, the Company applied the change in classification of such benefits from financing to operatingour Annual Report on the consolidated statements of cash flows on a retrospective basis, resulting in an increase to both net cash provided by operating activities and net cash used in financing activities of $6.2 million for the nine months ended September 30, 2016.
Leases: In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02). ASU 2016-02 requires virtually all leases, other than leases that meet the definition of a short-term lease or leases of intangible assets, to be recorded on the balance sheet with a right-of-use asset and corresponding lease liability. Leases will be classified as either operating or finance leases based on certain criteria. This classification will determine the timing and presentation of expenses on the income statement, as well as the presentation of related cash flows. The standard is effective for annual periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted and a modified retrospective transition is required upon adoption. The Company does not expect to early adopt and continues to evaluate the effect that this update will have on its financial results upon adoption. The Company's preliminary assessment is that this update will materially increase the Company's assets and liabilities upon adoption. The Company has completed the initial inventory of its leases and policy elections. The Company is currently developing new processes and controls to meet the accounting and disclosure requirements under the new standard.


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
ANSYS, Inc.
Canonsburg, Pennsylvania
We have reviewed the accompanying condensed consolidated balance sheet of ANSYS, Inc. and subsidiaries (the "Company") as of September 30, 2017, and the related condensed consolidated statements of income and comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016, and of cash flows for the nine-month periods ended September 30, 2017 and 2016. These interim financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of ANSYS, Inc. and subsidiaries as of December 31, 2016, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flowsForm 10-K for the year then ended (not presented herein); and in our report dated February 23, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016 is fairly stated, in all material respects, in relation2022. We do not expect the operation to the consolidated balance sheet from which it has been derived.contribute meaningfully to our financial results.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
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Table of Contents
Item 2.Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
Overview:
The Company's GAAP results forfollowing discussion should be read in conjunction with the three months ended September 30, 2017 reflect growth in revenue of 12.1%, operating income of 6.1%accompanying unaudited condensed consolidated financial statements and diluted earnings per share of 9.0% as compared to the three months ended September 30, 2016. The Company's GAAP resultsnotes thereto for the nine months ended September 30, 2017 reflect growth in revenue of 10.5%, operating income of 3.9%2022, and diluted earnings per share of 8.7% as compared to the nine months ended September 30, 2016. The Company experienced higher revenue in 2017 across all classes of revenue, including license revenue, maintenancewith our audited consolidated financial statements and services. The Company also experienced increased operating expenses primarily due to increased personnel costs, costs associated with workforce realignment activities and higher stock-based compensation.
The Company's non-GAAP resultsnotes thereto for the three monthsyear ended September 30, 2017 reflect growth in revenue of 12.6%, operating income of 10.6% and diluted earnings per share of 10.5% as compared to the three months ended September 30, 2016. The Company's non-GAAP results for the nine months ended September 30, 2017 reflect growth in revenue of 10.7%, operating income of 11.0% and diluted earnings per share of 10.9% as compared to the nine months ended September 30, 2016. The non-GAAP results exclude the income statement effects of the acquisition accounting adjustment to deferred revenue, stock-based compensation, amortization of acquired intangible assets, restructuring charges and transaction costs related to business combinations. For further disclosure regarding non-GAAP results, see the section titled "Non-GAAP Results" immediately preceding the section titled "Liquidity and Capital Resources."
The Company's comparative financial results were impacted by fluctuationsDecember 31, 2021 included in the U.S. Dollar during2021 Form 10-K filed with the threeSecurities and nine months ended September 30, 2017 as compared to the threeExchange Commission (SEC). The discussion and nine months ended September 30, 2016. The impacts on the Company's revenueanalysis of our financial condition and operating income due to currency fluctuationsresults of operations are reflectedbased upon our condensed consolidated financial statements, which have been prepared in the table below.
The amounts in the table represent the difference between the actual 2017 results and the same results calculated at the 2016 exchange rates. Amounts in brackets indicate a net adverse impact from currency fluctuations.
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
(in thousands)GAAP Non-GAAP GAAP Non-GAAP
Revenue$1,198
 $1,195
 $(2,667) $(2,670)
Operating income$329
 $348
 $(415) $(456)
In constant currency(1), the Company's growth rates were as follows:
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
 GAAP Non-GAAP GAAP Non-GAAP
Revenue11.6% 12.1% 10.8% 11.1%
Operating income5.7% 10.3% 4.0% 11.2%
(1) Constant currency amounts exclude the effect of foreign currency fluctuations on the reported results. To present this information, the 2017 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 2016, rather than the actual exchange rates in effect for 2017.
The Company’s financial position includes $926.6 million in cash and short-term investments, and working capital of $705.3 million as of September 30, 2017.
During the nine months ended September 30, 2017, the Company repurchased 2.0 million shares for $223.3 million at an average price of $111.65 per share.accordance with generally accepted accounting principles (GAAP).
Business:
ANSYSAnsys, a corporation formed in 1994, develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, electronics, biomedical, energy, materials and chemical processing,chemicals, consumer products, healthcare, and semiconductors.construction. Headquartered south of Pittsburgh, Pennsylvania, the Companywe employed approximately 2,9005,500 people as of September 30, 2017. ANSYS focuses2022. We focus on the development of open and flexible solutions that enable users to analyze designs directly on the desktop and/or via the cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. The Company distributes itsWe distribute our suite of simulation technologies through a global network of independent channel partners and direct sales offices in strategic, global locations.locations and a global network of independent resellers and distributors (collectively, channel partners). It is the Company’sour intention to continue to maintain this hybrid sales and distribution model.

Our strategy of Pervasive Insights seeks to deepen the use of simulation in our core market, to inject simulation throughout the product lifecycle and to extend the accessibility to a broader set of users and use cases. Our business has three vectors of growth:
•More products. Our broad and deep portfolio enables us to grow with customers’ increasing adoption of simulation across broad sets of product development disciplines.
•More users. Investments in simulation education and user experience simplification has made simulation more accessible to broader classes of simulation users.
•More computation. As customers' problems become more complex, simulations increase in complexity which drives more computation.
We develop easy-to-use solutions that are intuitive for more than just engineers, allowing us to reach more users upstream and downstream. Our multiphysics solutions enable our customers to address increasingly complex R&D challenges from the component through the system and mission level of analysis. Our products seamlessly enable access to high performance compute capacity, on premise or in the cloud, which means our customers' R&D teams are unencumbered by compute capacity limitations that can hinder R&D cycle times.
The Company licenses itsengineering software simulation market is strong and growing. The market growth is driven by customers' need for rapid, quality innovation in a cost efficient manner, enabling faster time to market of new products and lower warranty costs. Product complexity is driving sustained demand for simulations. Key industry trends fueling customers' increasing needs for simulation include:
•Electrification, including electric vehicles;
•Autonomy, including self-driving vehicles;
•Connectivity;
•Industrial Internet of Things; and
•Sustainability, including minimizing waste and physical prototyping, and improving circularity and development time.

We have been investing and will be continuing to invest in our portfolio to broaden the range of physics and enable customers to analyze the interactions among physics at the component, system and mission level. Our strategy of Pervasive Insights is aligned with near-term market growth opportunities and is laying the foundation for a future where simulation can be further democratized to ever broader classes of end-use cases.
To further support our strategy of Pervasive Insights, we will continue to pursue a highly selective and strategic acquisition strategy to grow our business. We will also partner with industry leaders to broaden pervasive simulation into other ecosystems, and customer R&D workflows. Importantly, we will continue to win in the right way, built on a culture of high ethical standards and commitment to diversity, equity, inclusion and belonging.
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We license our technology to businesses, educational institutions and governmental agencies. Growth in the Company’s revenue is affected by the strength of global economies, general business conditions, currency exchange rate fluctuations, customer budgetary constraints and the competitive position of the Company’s products. The Company believesWe believe that the features, functionality and integrated multiphysics capabilities of itsour software products are as strong as they have ever been. However, the software business is generally characterized by long sales cycles. These long sales cycles increase the difficulty of predicting sales for any particular quarter. The Company makesWe make many operational and strategic decisions based upon short- and long-term sales forecasts that are impacted not only by these long sales cycles, but also by current global economic conditions. As a result, the Company believeswe believe that itsour overall performance is best measured by fiscal-yearfiscal year results rather than by quarterly results.
The Company’s management considersManagement addresses the competition and price pressure that it faces in the short- and long-term by focusing on expanding the breadth, depth, ease of use and quality of the technologies, features, functionality and integrated multiphysics capabilities of itsour software products as compared to itsour competitors; investing in research and development to develop new and innovative products and increaseincreasing the capabilities of itsour existing products; supplying new products and services; focusing on customer needs, training, consulting and support; and enhancing itsour distribution channels. From time to time, the CompanyWe also considersevaluate and execute strategic acquisitions to supplement itsour global engineering talent, product offerings and distribution channels.
Geographic Trends:
Overview:
Overall GAAP and Non-GAAP Results
This section includes a discussion of GAAP and non-GAAP results. For reconciliations of non-GAAP results to GAAP results, see the section titled "Non-GAAP Results" herein.
The following table presentsnon-GAAP results exclude the Company's geographicincome statement effects of the acquisition accounting adjustments to deferred revenue from business combinations closed prior to 2022, 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.
This section also includes a discussion of constant currency results, which we use 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. All constant currency results presented in this Item 2 exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 2022 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 2021 comparable period, rather than the actual exchange rates in effect for 2022. Constant currency growth rates are calculated by adjusting the 2022 reported revenue growth, based uponand operating income amounts by the customer location, during2022 currency fluctuation impacts and comparing to the 2021 comparable period reported revenue and operating income amounts.
Our GAAP and non-GAAP results for the three and nine months ended September 30, 20172022 as compared to the three and nine months ended September 30, 2016:2021 reflected the following variances:
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
GAAPNon-GAAPGAAPNon-GAAP
Revenue7.1 %6.3 %9.6 %8.5 %
Operating income14.6 %9.7 %21.2 %9.4 %
Diluted earnings per share13.4 %11.3 %6.3 %7.5 %
Our results reflect an increase in revenue during the three and nine months ended September 30, 2022 due to growth in subscription lease licenses and maintenance revenue, partially offset by a reduction in perpetual license revenue. We also experienced increased operating expenses during the three and nine months ended September 30, 2022, primarily due to increased personnel costs. The actual U.S. Dollar reported results were significantly impacted by a stronger U.S. Dollar.
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 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
North America17.3% 16.0%
Europe4.9% 4.4%
Asia-Pacific10.8% 10.7%
Total11.6% 10.8%
Impact of Foreign Currency
Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021. The impacts on our GAAP and non-GAAP revenue and operating income as a result of the fluctuations of the U.S. Dollar when measured against our foreign currencies based on 2021 exchange rates are reflected in the table below. Amounts in brackets indicate an adverse impact from currency fluctuations.
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
(in thousands)GAAPNon-GAAPGAAPNon-GAAP
Revenue$(38,237)$(38,293)$(78,347)$(78,560)
Operating income$(23,146)$(24,003)$(44,986)$(47,151)

In North America,constant currency, our growth was as follows:
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
GAAPNon-GAAPGAAPNon-GAAP
Revenue15.8 %14.9 %15.9 %14.7 %
Operating income36.1 %23.2 %37.6 %19.0 %
Other Key Business Metric
Annual Contract Value (ACV) is one of our key performance metrics and is useful to investors in assessing the Company'sstrength and trajectory of our business. Given that revenue is more volatile due to the upfront revenue recognition of perpetual licenses and multi-year subscription lease license sales, we provide ACV as a supplemental metric to help evaluate the annual performance of the business. Summed over the long term, ACV and revenue are equal. However, there will be years in which ACV growth lags revenue growth and other years in which ACV growth leads revenue growth. It is used by management in financial and operational decision-making and in setting sales targets used for compensation. ACV should be viewed independently of 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:
•the annualized value of maintenance and subscription 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.
Our ACV was primarily driven by the aerospace and defense, electronics, semiconductors and automotive industries. The automotive manufacturers maintained their strong investments in developing advanced technologies for autonomous, electric and smart, connected vehicles. The electronics industry continued to benefitas follows:
 Three Months Ended September 30,
(in thousands, except percentages)20222021Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$409,317 $439,341 $365,444 $43,873 12.0 $73,897 20.2 
 Nine Months Ended September 30,
(in thousands, except percentages)20222021Change
ActualConstant CurrencyActualActualConstant
Currency
AmountAmount%Amount%
ACV$1,213,735 $1,280,355 $1,115,365 $98,370 8.8 $164,990 14.8 

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Our trailing twelve-month recurring ACV, converted from the placement of software into a wide range of smart, connected products. The performance withinfunctional currency to U.S. Dollars at the 2021 monthly average exchange rates, was as follows:
 Twelve Months Ended September 30,Change
(in thousands, except percentages)20222021Amount%
Recurring ACV at 2021 monthly average exchange rates$1,642,325 $1,420,800 $221,525 15.6 
Recurring ACV includes both subscription lease license and maintenance ACV, and excludes perpetual license and service ACV.
Industry Commentary:
High-tech, aerospace & defense, and defense continued to be driven by major and strategic accounts and a growing demand from the commercial space sector. The renewable energy sectorautomotive remained strong as energydigital transformation efforts increased the use cases and users of simulation, driving demand for solutions across our portfolio. The predictive accuracy of our multiphysics solutions has been key to our growth in high-tech as our customers seek to understand the interaction of thermal, mechanical and electronic stresses exacerbated by increasing product complexity. Customer focus on digital transformation and model-based engineering initiatives remains a driver of our growth in aerospace & defense. Automotive companies continued their investment initiatives.continue to reorient themselves around virtual product development and electrification, supporting our growth in the industry. The healthcare industry also had strong growth as we continue to see companies mature digital engineering efforts as they expand engineering staff and Digital Twin/Digital Engineering initiatives in areas such as surgery and implantable devices.
In Europe,Geographic Trends:
The following tables present our GAAP and non-GAAP geographic revenue variances using actual and constant currency rates during the three and nine months ended September 30, 2022 as compared to the three and nine months ended September 30, 2021:

GAAP
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
ActualConstant CurrencyActualConstant Currency
Americas(4.9)%(4.7)%2.4 %2.5 %
EMEA18.2 %36.2 %12.4 %24.2 %
Asia-Pacific19.7 %36.1 %19.7 %31.5 %
Total7.1 %15.8 %9.6 %15.9 %
Non-GAAP
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
ActualConstant CurrencyActualConstant Currency
Americas(6.0)%(5.8)%0.2 %0.3 %
EMEA18.1 %36.0 %12.5 %24.3 %
Asia-Pacific19.4 %35.7 %19.6 %31.4 %
Total6.3 %14.9 %8.5 %14.7 %
The value and duration of multi-year subscription lease contracts executed during the period significantly impact the recognition of revenue. As a result, revenue may fluctuate significantly, particularly on a quarterly basis, due to the timing of such contracts, relative differences in duration of long-term contracts from quarter to quarter and changes in the mix of license types sold compared to the prior year. Large swings in revenue growth continued to lagrates are not necessarily indicative of customers' software usage changes or cash flows during the other regions. France led the region, but was partially offset by weak performance in Germany. New sales leadership in the region remained focused on building the sales pipeline and finalizing initiatives to update the Company's go-to-market strategy. The automotive and electronics industries continued to demonstrate similar trends as North America. Additionally, the indirect channel performance helped to offset some of the weakness in the direct businessperiods presented.
The results in Asia-Pacific were driven by sustained
To drive growth, in China and Taiwan. From an industry perspective, the regional performance was driven by the aerospace and defense, electronics, automotive and industrial equipment sectors. The region continued to benefit from investment in domestic development programs, particularly in China and India.
The Company continueswe continue to focus on a number of sales improvement activities across theour geographic regions, including sales hiring, pipeline building, customer engagement activities, productivity initiatives and customer engagement activities.sales hiring.

Note About Forward-Looking Statements
The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto forDuring the nine months ended September 30, 2017,2022, trade restrictions limited our ability to deliver products and withservices to customers in Russia and Belarus and certain entities in China. For context, the Company’s auditedcombined 2021 revenue for all customers in Russia and Belarus was $15.1 million, less than 1% of our total 2021 revenue.
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On October 7, 2022, the U.S. Department of Commerce, Bureau of Industry and Security announced new restrictions targeting the sales of semiconductor products into China. We expect the impact of those restrictions to be immaterial on our business. As a reference, our semiconductor business in China over the last twelve months represented less than 1% of our consolidated financial statementsrevenue and notes theretoChina's total contribution to revenue for the year ended December 31, 2016 filedsame period was 4.7%.

Additional restrictions or a further deterioration in the global trade environment could have a material adverse impact on the Annualour business, results of operations or financial condition. Refer to additional details in Part II, Item 1A herein, Part I, "Item 1A. Risk Factors" in our 2021 Form 10-K and Part II, Item 1A of our Quarterly Report on Form 10-K10-Q for the quarterly period ended March 31, 2022 for a discussion of additional business risks, including those associated with the Securitiesconflict between Russia and Exchange Commission. The Company’s discussion and analysisUkraine.
Use of its financial condition and results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with GAAP. Estimates:
The preparation of theseour financial statements requires the Companyus to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates itswe evaluate our estimates, including those related to the fair values of stock awards, bad debts, contract revenue, acquired deferred revenue, thestandalone selling prices of our products and services, allowance for doubtful accounts receivable, valuation of goodwill and other intangible assets, useful lives for depreciation and amortization, acquired deferred revenue, operating lease assets and liabilities, fair values of stock awards, deferred compensation, income taxes, uncertain tax positions, tax valuation reserves, useful lives for depreciation and amortization, and contingencies and litigation. The Company bases itsWe base our estimates on historical experience, market experience, estimated future cash flows and various other assumptions that management believes are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily availableapparent from other sources. Actual results may differ from these estimates.
Forward-Looking Information:
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27Athe Private Securities Litigation Reform Act of 1995. 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. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the Securities Actdate they are made. We undertake no obligation to update forward-looking statements, whether as a result of 1933new 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:

•adverse conditions in the macroeconomic environment, including high inflation, recessionary conditions and Section 21Evolatility in equity and foreign exchange markets; political, economic and regulatory uncertainties in the countries and regions in which we operate (including as a result of the Securities Exchange Actconflict between Russia and Ukraine);

•our ability to timely recruit and retain key personnel in a highly competitive labor market for skilled personnel, including potential financial impacts of 1934,wage inflation;

•impacts from tariffs, trade sanctions, export controls or other trade barriers including but not limitedexport control restrictions and licensing requirements for exports to China, and impacts from changes to diplomatic relations and trade policy between the United States and Russia or the United States and other countries that may support Russia or take similar actions due to the followingconflict between Russia and Ukraine;

•constrained credit and liquidity due to disruptions in the global economy and financial markets, which may limit or delay availability of credit under our existing or new credit facilities, or which may limit our ability to obtain credit or financing on acceptable terms or at all;

•current and potential future impacts of a global health crisis, natural disaster or catastrophe, including the COVID-19 pandemic and actions taken to address the pandemic by our customers, suppliers, regulatory authorities, and our business, on the global economy and our business and consolidated financial statements, as well as statements that contain such words as "anticipates", "intends", "believes", "plans" and other similar expressions:public health and safety risks; and government actions or mandates surrounding the COVID-19 pandemic;
The Company's assessment
•declines in our customers’ businesses resulting in adverse changes in procurement patterns; disruptions in accounts receivable and cash flow due to customers’ liquidity challenges and commercial deterioration; uncertainties regarding
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demand for our products and services in the ultimate liabilities arising from various investigations, claimsfuture and legal proceedings.
The Company's expectations regarding the outcome of its service tax audit cases.
The Company's expectations regarding future claims related to indemnification obligations.
The Company's expectations regarding the impactsour customers’ acceptance of new accounting guidance.
The Company's intentions regarding its hybridproducts; delays or declines in anticipated sales due to reduced or altered sales and distribution model.marketing interactions with customers; and potential variations in our sales forecast compared to actual sales;
The Company's statement regarding
•increased volatility in our revenue due to the timing, duration and value of multi-year subscription lease contracts; and our reliance on high renewal rates for annual subscription lease and maintenance contracts;

•our ability to protect our proprietary technology; cybersecurity threats or other security breaches, including in relation to breaches occurring through our products and an increased level of our activity that is occurring from remote global off-site locations; and disclosure and misuse of employee or customer data whether as a result of a cybersecurity incident or otherwise;

•the quality of our products, including the strength of the features, functionality and integrated multiphysics capabilitiescapabilities; our ability to develop and market new products to address the industry’s rapidly changing technology; failures or errors in our products and services; and increased pricing pressure as a result of its software products.the competitive environment in which we operate;
The Company's belief that its overall performance is best measured by fiscal-year results rather than by quarterly results.
The Company's expectations regarding the adverse impact on license and maintenance revenue growth in the near term due to an increased customer preference for time-based licenses.
The Company's estimates regarding the expected impact on reported revenue related to the acquisition accounting treatment of deferred revenue.
The Company's expectation that it will continue to make targeted •investments in itscomplementary companies, products, services and technologies; our ability to complete and successfully integrate our acquisitions and realize the financial and business benefits of the transactions; and the impact indebtedness incurred in connection with any acquisition could have on our operations;

•investments in global sales and marketing organizationorganizations and its global business infrastructure; and dependence on our channel partners for the distribution of our products;

•operational disruptions generally or specifically in connection with transitions to and from remote work environments; and the failure of our technological infrastructure or those of the service providers upon whom we rely including for infrastructure and cloud services;

•our ability and our channel partners’ ability to enhancecomply with laws and support its revenue-generating activities.regulations in relevant jurisdictions; and the outcome of contingencies, including legal proceedings, government or regulatory investigations and service tax audit cases;
The Company's intentions related to investments in research and development, particularly as it relates to expanding the ease of use and capabilities of its broad portfolio of simulation software products.
The Company's•our intention to repatriate previously taxed earnings in excess of working capital needs and to reinvest all other earnings of itsour non-U.S. subsidiaries.subsidiaries;
The Company's
•plans for future capital spending; the extent of corporate benefits from such spending including with respect to customer relationship management; and higher than anticipated costs for research and development or slowdown in our research and development activities;

•uncertainty regarding income tax estimates in the jurisdictions in which we operate; and the effect of changes in tax laws and regulations in the jurisdictions in which we operate;

•our ability to execute on our strategies related to future capital spending.
The sufficiencyenvironmental, social, and governance matters, and achieve related expectations, including as a result of existing cashevolving regulatory and cash equivalent balances to meet future working capitalother standards, processes, and capital expenditure requirements.
The Company's belief thatassumptions, the best usespace of its excess cash are to invest inscientific and technological developments, increased costs and the businessavailability of requisite financing, and to repurchase stock in order to both offset dilution and return capital to stockholders, in excess of its requirements, with the goal of increasing stockholder value.
The Company's intentions related to investments in complementary companies, products, services and technologies.
The Company's expectation that changes in currency exchange rates will affect the Company's financial position, results of operationscarbon markets; and cash flows.


Forward-looking statements should not be unduly relied upon because they involve known and unknown risks, uncertainties and •other factors, some of which are beyond the Company’s control. The Company’s actual results could differ materially from those set forth in forward-looking statements. Certain factors, among others, that might cause such a difference include risks and uncertainties discloseddescribed in our reports filed from time to time with the Company’s most recent Annual Report on Form 10-K, Part I, Item 1A. Information regarding new risk factors or material changes to these risk factors have been included within Part II, Item 1ASEC.
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Table of this Quarterly Report on Form 10-Q.Contents

Results of Operations
The results of operations discussed below are on a GAAP basis unless otherwise stated.
Three Months Ended September 30, 20172022 Compared to Three Months Ended September 30, 20162021
Revenue:
 Three Months Ended September 30,
(in thousands, except percentages)20222021Change
GAAPConstant CurrencyGAAPGAAPConstant
Currency
AmountAmount%Amount%
Revenue:
Subscription lease licenses$136,489 $151,322 $120,516 $15,973 13.3 $30,806 25.6 
Perpetual licenses72,417 76,560 79,878 (7,461)(9.3)(3,318)(4.2)
Software licenses208,906 227,882 200,394 8,512 4.2 27,488 13.7 
Maintenance247,678 266,167 223,872 23,806 10.6 42,295 18.9 
Service15,927 16,699 16,902 (975)(5.8)(203)(1.2)
Maintenance and service263,605 282,866 240,774 22,831 9.5 42,092 17.5 
Total revenue$472,511 $510,748 $441,168 $31,343 7.1 $69,580 15.8 
 Three Months Ended September 30, Change
(in thousands, except percentages)2017 2016 Amount %
Revenue:       
Lease licenses$93,956
 $85,907
 $8,049
 9.4
Perpetual licenses62,624
 53,623
 9,001
 16.8
Software licenses156,580
 139,530
 17,050
 12.2
Maintenance112,300
 100,288
 12,012
 12.0
Service6,705
 6,044
 661
 10.9
Maintenance and service119,005
 106,332
 12,673
 11.9
Total revenue$275,585
 $245,862
 $29,723
 12.1

The Company’s revenue inRevenue for the quarter ended September 30, 20172022 increased 12.1% as7.1% compared to the quarter ended September 30, 2016, while revenue grew 11.6%2021, or 15.8% in constant currency. The growth rateOur revenue was favorably impacted by the Company’sour continued investment in itsour global sales, support and marketing organizations. Perpetual license revenue, which is derived primarily from new sales duringorganizations, and the quarter, increased 16.8% as compared to the prior-year quarter. Lease license revenue increased 9.4% as compared to the prior-year quarter.timing and duration of our multi-year subscription lease contracts. Annual maintenance contracts that were sold with new perpetual licenses, along with maintenance contracts sold withfor new perpetual licenses sold in previous quarters, maintenance renewals and the maintenance portion of subscription lease license contracts collectively contributed to maintenance revenue growth of 12.0%.10.6%, or 18.9% in constant currency. Subscription lease license revenue increased 13.3%, or 25.6% in constant currency, as compared to the prior-year quarter. Perpetual license revenue, which is derived from new sales during the quarter, decreased 9.3%, or 4.2% in constant currency, as compared to the prior-year quarter primarily due to customers' preference shifting to subscription lease licenses. Service revenue decreased 5.8%, or 1.2% in constant currency, as compared to the prior-year quarter.
We continue to experience increased demand from our customers for contracts that often include longer-term, subscription lease licenses involving a larger number of our software products. These arrangements typically involve a higher overall transaction price. The upfront recognition of license revenue related to these larger transactions can result in significant subscription lease license revenue volatility. Software products, across a large variety of applications and industries, are increasingly distributed in software-as-a-service, cloud and other subscription environments in which the licensing approach is time-based rather than perpetual. This preference could result in a shift from perpetual licenses to time-based licenses, such as subscription leases, over the long term.
With respect to revenue, on average for the quarter ended September 30, 2017,2022, the U.S. Dollar was approximately 0.9% weaker,15.3% stronger, when measured against the Company’s primaryour foreign currencies, than for the quarter ended September 30, 2016.2021. The table below presents the net impacts of currency fluctuations on revenue for the quarter ended September 30, 2017.2022. Amounts in brackets indicate a netan adverse impact from currency fluctuations.
(in thousands)Three Months Ended September 30, 2022
Euro$(15,924)
Japanese Yen(9,724)
South Korean Won(8,633)
British Pound(2,320)
Taiwan Dollar(546)
Indian Rupee(661)
Other(429)
        Total$(38,237)

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(in thousands)Three Months Ended September 30, 2017
Euro$3,150
Indian Rupee225
Taiwan Dollar210
Japanese Yen(2,363)
South Korean Won(144)
British Pound(11)
Other131
Total$1,198
The net overall weaker U.S. Dollar also resulted in increased operating income of $0.3 million for the quarter ended September 30, 2017 as compared to the quarter ended September 30, 2016.
A substantial portion of the Company’s license and maintenance revenue is derived from annual lease and maintenance contracts. These contracts are generally renewed on an annual basis and typically have a high rate of customer renewal. In addition to the recurring revenue base associated with these contracts, a majority of customers purchasing new perpetual licenses also purchase related annual maintenance contracts. As a resultpercentage of the significant recurring revenue, base, the Company’s license and maintenance revenue growth rate in any period does not necessarily correlate to the growth rate of new license and maintenance contracts sold during that period. To the extent the rate of customer renewal for lease and maintenance contracts is high, incremental lease contracts, and maintenance contracts sold with new perpetual licenses, will result in license and maintenance revenue growth in constant currency. Conversely, if the rate of renewal for these contracts is adversely affected by economic or other factors, the Company’s license and maintenance growth will be adversely affected over the term that the revenue for those contracts would have otherwise been recognized.
The Company has been experiencing an increased interest by some of its larger customers in enterprise agreements that often include longer-term, time-based licenses involving a larger number of the Company's software products. While these arrangements typically involve a higher overall transaction price, the revenue from these contracts is typically deferred and

recognized over the period of the contract, resulting in increased deferred revenue and backlog. To the extent these types of contracts replace sales of perpetual licenses, there could be a near-term adverse impact on software license and maintenance revenue growth. The Company is similarly experiencing a shifting preference from perpetual licenses to time-based licenses across a broader spectrum of its customers, particularly in the more mature geographic markets, such as the U.S. and Japan. To the extent this shift continues or becomes more prevalent, the result could be a similar and incremental near-term adverse impact on software license and maintenance revenue growth.
Internationalour international and domestic revenues, and our direct and indirect revenues, were as a percentage of total revenue, were 61.1% and 38.9%, respectively, during the quarter ended September 30, 2017, and 62.9% and 37.1%, respectively, during the quarter ended September 30, 2016. The Company derived 24.1% and 24.3% of its total revenue through the indirect sales channel for the quarters ended September 30, 2017 and 2016, respectively.follows:
Three Months Ended September 30,
20222021
International57.4 %52.6 %
Domestic42.6 %47.4 %
Direct74.8 %74.4 %
Indirect25.2 %25.6 %

In valuing deferred revenue on the balance sheets of the Company's recentour acquisitions as of their respective acquisition dates, the Companythat closed prior to 2022, we applied the fair value provisions applicable to the accounting for business combinations, resulting in a reduction of deferred revenue as compared to itsthe historical carrying amount. As a result, the Company'sour post-acquisition revenue will be less than the sum of what would have otherwise been reported by ANSYSus and each acquiree absent the acquisitions. The impactimpacts on reported revenue waswere $1.2 million and $4.3 million for the quarterquarters ended September 30, 2017. There was no impact on reported revenue for the quarter ended September 30, 2016.2022 and 2021, respectively. The expected impacts on reported revenue are $1.0$0.5 million and $2.7$7.3 million for the quarter ending December 31, 2017 and for the year ending December 31, 2017,2022, respectively.
Deferred Revenue and Backlog:
Deferred revenue consists of billings made or payments received in advance of revenue recognition from software license and maintenancecustomer agreements. The deferred revenue on the Company'sour condensed consolidated balance sheetssheet does not represent the total value of annual or multi-year, noncancellable software license and maintenance agreements. The Company'sOur backlog represents installment billings for periods beyond the current quarterly billing cycle and customer orders received but not processed. The Company's. Our deferred revenue and backlog as of September 30, 20172022 and December 31, 2016 consist2021 consisted of the following:
Balance at September 30, 2022
(in thousands)TotalCurrentLong-Term
Deferred revenue$354,718 $334,901 $19,817 
Backlog754,170 339,241 414,929 
Total$1,108,888 $674,142 $434,746 
Balance at September 30, 2017Balance at December 31, 2021
(in thousands)Total Current Long-Term(in thousands)TotalCurrentLong-Term
Deferred revenue$405,698
 $381,727
 $23,971
Deferred revenue$412,781 $391,528 $21,253 
Backlog263,571
 91,885
 171,686
Backlog845,079 373,334 471,745 
Total$669,269
 $473,612
 $195,657
Total$1,257,860 $764,862 $492,998 
 Balance at December 31, 2016
(in thousands)Total Current Long-Term
Deferred revenue$415,846
 $403,279
 $12,567
Backlog221,994
 64,361
 157,633
Total$637,840
 $467,640
 $170,200

Revenue associated with deferred revenue and backlog that will be recognized in the subsequent twelve months is classified as current in the tabletables above.

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Cost of Sales and Gross Profit:Operating Expenses:
The tabletables below reflects the Company'sreflect our operating results as presented on the condensed consolidated statements of income, which are inclusive of foreignboth a GAAP and constant currency translation impacts.basis. Amounts included in the discussiondiscussions that followsfollow each table are provided in constant currency.currency and are inclusive of costs related to our acquisitions. The impact where material, of foreign exchange translation on each expense line is provided separately.discussed separately, where material.
 Three Months Ended September 30,
20222021Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
(in thousands,
except percentages)		Amount% of
Revenue		Amount% of
Revenue		Amount% of
Revenue		Amount%Amount%
Cost of sales:
Software
licenses		$8,425 1.8 8,540 1.7 $8,289 1.9 $136 1.6 $251 3.0 
Amortization17,281 3.7 17,762 3.5 15,189 3.4 2,092 13.8 2,573 16.9 
Maintenance
and service		36,261 7.7 38,547 7.5 39,268 8.9 (3,007)(7.7)(721)(1.8)
Total cost of
sales		61,967 13.1 64,849 12.7 62,746 14.2 (779)(1.2)2,103 3.4 
Gross profit$410,544 86.9 445,899 87.3 $378,422 85.8 $32,122 8.5 $67,477 17.8 
 Three Months Ended September 30,    
2017 2016 Change
(in thousands, except percentages)Amount 
% of
Revenue
 Amount 
% of
Revenue
 Amount %
Cost of sales:           
Software licenses$7,395
 2.7 $6,433
 2.6 $962
 15.0
Amortization9,004
 3.3 9,513
 3.9 (509) (5.4)
Maintenance and service19,584
 7.1 19,640
 8.0 (56) (0.3)
Total cost of sales35,983
 13.1 35,586
 14.5 397
 1.1
Gross profit$239,602
 86.9 $210,276
 85.5 $29,326
 13.9

Software Licenses:Amortization: The increase in the cost of software licenses was primarily due to the following:
Increased third-party royalties of $0.5 million.
Increased salaries, incentive compensation and other headcount-related costs of $0.5 million.
Amortization: The decrease in amortization expense was primarily due to a net decrease in the amortization of newly acquired technology.intangible assets.
Maintenance and Service: The net decrease in maintenance and service costs was primarily due to the following:
Net decrease in salaries, incentive compensation and other headcount-related•Decreased costs related to foreign exchange translation of $0.9$2.3 million primarily due to a reallocation of technical personnel resources to pre-sales activities.stronger U.S. Dollar.
Increased third-party technical support of $0.4 million.
Increased stock-based•Decreased salaries and incentive compensation of $0.3$1.1 million.
Restructuring costs of $0.2 million.
The improvement in gross profit was a result of the increase in revenue partially offset byand the increasedecrease in the related cost of sales.
Operating Expenses:
28
The table below reflects the Company's operating results as presented on the condensed consolidated statements
Table of income, which are inclusive of foreign currency translation impacts. Amounts included in the discussion that follows are provided in constant currency. The impact, where material, of foreign exchange translation on each expense line is provided separately.
Contents
 Three Months Ended September 30,    
2017 2016 Change
(in thousands, except percentages)Amount 
% of
Revenue
 Amount 
% of
Revenue
 Amount %
Operating expenses:           
Selling, general and administrative$80,015
 29.0 $61,537
 25.0 $18,478
 30.0
Research and development50,144
 18.2 45,418
 18.5 4,726
 10.4
Amortization3,260
 1.2 3,222
 1.3 38
 1.2
Total operating expenses$133,419
 48.4 $110,177
 44.8 $23,242
 21.1


 Three Months Ended September 30,
20222021Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
(in thousands,
except percentages)		Amount% of
Revenue		Amount% of
Revenue		Amount% of
Revenue		Amount%Amount%
Operating expenses:
Selling, general and administrative$175,283 37.1 $183,682 36.0 $165,368 37.5 $9,915 6.0 $18,314 11.1 
Research and
development		108,056 22.9 111,575 21.8 102,023 23.1 6,033 5.9 9,552 9.4 
Amortization3,821 0.8 4,112 0.8 3,403 0.8 418 12.3 709 20.8 
Total operating
expenses		287,160 60.8 299,369 58.6 270,794 61.4 16,366 6.0 28,575 10.6 
Operating income$123,384 26.1 $146,530 28.7 $107,628 24.4 $15,756 14.6 $38,902 36.1 

Selling, General and Administrative: The net increase in selling, general and administrative costs was primarily due to the following:
•Increased salaries, incentive compensation and other headcount-related costs of $9.1$9.3 million.
•Increased business travel of $3.8 million as in-person meetings and live attendance at trade events have continued to expand.
•Increased stock-based compensation of $4.5$1.7 million.
•Increased consulting and professional fees of $1.3 million.
•Decreased costs related to foreign exchange translation of $2.1 million.$8.4 million due to a stronger U.S. Dollar.
Increased business travel of $0.8 million.
The Company anticipatesWe anticipate that itwe will continue to make targeted investments in itsour global sales and marketing organizationorganizations and itsour global business infrastructure to enhance and support itsour revenue-generating activities.
Research and Development: The net increase in research and development costs was primarily due to the following:
•Increased salaries, incentive compensation and other headcount-related costs of $3.3$5.6 million.
•Increased stock-based compensation of $1.1$1.3 million.
•Increased consultingbusiness travel of $0.9 million as in-person meetings and live attendance at trade events have continued to expand.
•Decreased costs related to foreign exchange translation of $0.6 million.$3.5 million due to a stronger U.S. Dollar.
The Company hasWe have traditionally invested significant resources in research and development activities and intendsexpect to continue to make investments in expanding the ease of use and capabilities of itsour broad portfolio of simulation software products.
Interest Income: InterestThe impacts from currency fluctuations resulted in decreased operating income for the quarter ended September 30, 2017 was $1.9 million as compared to $1.1of $23.1 million for the quarter ended September 30, 2016. 2022 as compared to the quarter ended September 30, 2021.
Interest Income: Interest income increasedfor the three months ended September 30, 2022 was $1.3 million as a result of ancompared to $0.5 million for the three months ended September 30, 2021. The higher interest rate environment and the related increase in both the Company's average invested cash balances and the average rate of return on those balances.invested cash balances was partially offset by the lower invested cash balance, as a result of investments in acquisitions and share repurchases.
Other Expense, net: The Company's otherInterest Expense: Interest expense consists offor the following:
 Three Months Ended
(in thousands)September 30,
2017		 September 30,
2016
Foreign currency losses, net$(209) $(162)
Other41
 (27)
Total other expense, net$(168) $(189)
Income Tax Provision: The Company recorded income tax expense of $34.3quarter ended September 30, 2022 was $6.1 million and had income before income taxes of $107.9as compared to $2.9 million for the quarter ended September 30, 2017. During2021 due to a higher interest rate environment.
Other Expense, net: Other expense for the quarter ended September 30, 2016, the Company recorded income tax2022 was $0.7 million as compared to other expense of $31.4$1.3 million for the quarter ended September 30, 2021. Other expense consisted primarily of losses on equity investments and hadforeign currency losses during the third quarter of 2022 and 2021, respectively.
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Income Tax Provision: Our income before income taxes of $101.0 million. Thetax provision, income tax provision and effective tax rates were 31.8% and 31.1% for the third quarters of 2017 and 2016, respectively.as follows:
Three Months Ended September 30,
(in thousands, except percentages)20222021
Income before income tax provision$117,981 $103,898 
Income tax provision$22,006 $18,556 
Effective tax rate18.7 %17.9 %

The increase in the effective tax rate from the prior year isthird quarter of 2021 was primarily due to taxa decrease in benefits of $1.8 million related to entity structuring and related repatriation activities recognizedtax planning in a foreign jurisdiction, offset by change in the third quarter of 2016 that did not recur in 2017. The increase in the effectivenet reserve for uncertain tax rate was partially offset by 2017 tax benefits of $1.4 million related to stock-based compensation. In the first quarter of 2017, the Company adopted ASU 2016-09, which requires excess tax benefits and deficiencies related to stock-based compensation to be reflected in the income statement as a component of the provision for income taxes. Previously, these tax effects were reflected in stockholders' equity. positions.
When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the quarters ended September 30, 20172022 and 20162021 were favorably impacted by tax benefits from the domestic manufacturingforeign-derived intangible income (FDII) deduction and research and development credits. The rates were also favorably impacted by the recurring item of lower statutory tax rates in many of the Company's foreign jurisdictions.
Net Income: The Company’s Our net income, in the third quarter of 2017 was $73.6 million as compared to net income of $69.6 million in the third quarter of 2016. Diluteddiluted earnings per share was $0.85 in the third quarter of 2017 and $0.78 in the third quarter of 2016. The weighted average shares used in computing diluted earnings per share were 86.6 million and 88.7 million in the third quartersas follows:
Three Months Ended September 30,
(in thousands, except per share data)20222021
Net income$95,975 $85,342 
Diluted earnings per share$1.10 $0.97 
Weighted average shares outstanding - diluted87,418 88,169 
30
Table of 2017 and 2016, respectively.Contents

Nine Months Ended September 30, 20172022 Compared to Nine Months Ended September 30, 20162021
Revenue:
 Nine Months Ended September 30,
(in thousands, except percentages)20222021Change
GAAPConstant CurrencyGAAPGAAPConstant
Currency
AmountAmount%Amount%
Revenue:
Subscription lease licenses$362,977 $390,455 $315,387 $47,590 15.1 $75,068 23.8 
Perpetual licenses212,355 221,273 232,433 (20,078)(8.6)(11,160)(4.8)
Software licenses575,332 611,728 547,820 27,512 5.0 63,908 11.7 
Maintenance742,554 782,457 655,843 86,711 13.2 126,614 19.3 
Service53,552 55,600 47,385 6,167 13.0 8,215 17.3 
Maintenance and service796,106 838,057 703,228 92,878 13.2 134,829 19.2 
Total revenue$1,371,438 $1,449,785 $1,251,048 $120,390 9.6 $198,737 15.9 
 Nine Months Ended September 30, Change
(in thousands, except percentages)2017 2016 Amount %
Revenue:       
Lease licenses$279,855
 $250,715
 $29,140
 11.6
Perpetual licenses168,513
 155,953
 12,560
 8.1
Software licenses448,368
 406,668
 41,700
 10.3
Maintenance324,338
 292,775
 31,563
 10.8
Service20,208
 18,394
 1,814
 9.9
Maintenance and service344,546
 311,169
 33,377
 10.7
Total revenue$792,914
 $717,837
 $75,077
 10.5

The Company’s revenue inRevenue for the nine months ended September 30, 20172022 increased 10.5% as9.6% compared to the nine months ended September 30, 2016, while revenue grew 10.8%2021, or 15.9% in constant currency. The growth rateOur revenue was favorably impacted by the Company’sour continued investment in itsour global sales, support and marketing organizations. Lease license revenue increased 11.6% as compared toorganizations and the nine months ended September 30, 2016. Perpetual license revenue, which is derived primarily from new sales during the period, increased 8.1% as compared to the nine months ended September 30, 2016.timing and duration of our multi-year lease contracts. Annual maintenance contracts that were sold with new perpetual licenses, along with maintenance contracts sold withfor new perpetual licenses sold in previous quarters, maintenance renewals and the maintenance portion of subscription lease license contracts collectively contributed to maintenance revenue growth of 10.8%.13.2%, or 19.3% in constant currency. Subscription lease license revenue increased 15.1%, or 23.8% in constant currency, as compared to the nine months ended September 30, 2021. Service revenue increased 13.0%, or 17.3% in constant currency, as compared to the nine months ended September 30, 2021. Perpetual license revenue, which is derived from new sales during the nine months ended September 30, 2022, decreased 8.6%, or 4.8% in constant currency, as compared to the nine months ended September 30, 2021 primarily due to customers' preference shifting to subscription lease licenses.
With respect to revenue, on average for the nine months ended September 30, 2017,2022, the U.S. Dollar was approximately 0.7%11.8% stronger, when measured against the Company’s primaryour foreign currencies, than for the nine months ended September 30, 2016.2021. The table below presents the net impacts of currency fluctuations on revenue for the nine months ended September 30, 2017.2022. Amounts in brackets indicate a netan adverse impact from currency fluctuations.
(in thousands)Nine Months Ended September 30, 2022
Euro$(32,897)
Japanese Yen(23,618)
South Korean Won(14,463)
British Pound(3,993)
Taiwan Dollar(1,395)
Indian Rupee(1,322)
Other(659)
        Total$(78,347)

31
Table of Contents
(in thousands)Nine Months Ended September 30, 2017
Japanese Yen$(2,571)
British Pound(1,865)
Euro(205)
South Korean Won674
Taiwan Dollar651
Indian Rupee514
Other135
Total$(2,667)
The net overall stronger U.S. Dollar also resulted in decreased operating incomeAs a percentage of $0.4 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.
Internationalrevenue, our international and domestic revenues, and our direct and indirect revenues, were as a percentage of total revenue, were 61.0% and 39.0%, respectively, during the nine months ended September 30, 2017, and 63.0% and 37.0%, respectively, during the nine months ended September 30, 2016. The Company derived 24.3% and 24.1% of its total revenue through the indirect sales channel for the nine months ended September 30, 2017 and 2016, respectively.follows:
Nine Months Ended September 30,
20222021
International57.3 %54.4 %
Domestic42.7 %45.6 %
Direct73.7 %74.0 %
Indirect26.3 %26.0 %
In valuing deferred revenue on the balance sheets of the Company's recentour acquisitions as of their respective acquisition dates, the Companythat closed prior to 2022, we applied the fair value provisions applicable to the accounting for business combinations, resulting in a reduction of deferred revenue as compared to itsthe historical carrying amount. As a result, the Company'sour post-acquisition revenue will be less than the sum of what would have otherwise been reported by ANSYSus and each acquiree absent the acquisitions. The impacts on reported revenue were $1.7$6.8 million and $0.1$19.1 million for the nine months ended September 30, 20172022 and 2016,2021, respectively.


Cost of Sales and Gross Profit:Operating Expenses:
The tabletables below reflects the Company'sreflect our operating results as presented on the condensed consolidated statements of income, which are inclusive of foreignboth a GAAP and constant currency translation impacts.basis. Amounts included in the discussiondiscussions that followsfollow each table are provided in constant currency.currency and are inclusive of costs related to our acquisitions. The impact where material, of foreign exchange translation on each expense line is provided separately.discussed separately, where material.
 Nine Months Ended September 30,
20222021Change
GAAPConstant CurrencyGAAPGAAPConstant Currency
(in thousands,
except percentages)		Amount% of
Revenue		Amount% of
Revenue		Amount% of
Revenue		Amount%Amount%
Cost of sales:
Software
licenses		$25,370 1.8 $25,609 1.8 $23,960 1.9 $1,410 5.9 $1,649 6.9 
Amortization51,947 3.8 53,004 3.7 45,163 3.6 6,784 15.0 7,841 17.4 
Maintenance
and service		111,897 8.2 117,141 8.1 119,884 9.6 (7,987)(6.7)(2,743)(2.3)
Total cost of
sales		189,214 13.8 195,754 13.5 189,007 15.1 207 0.1 6,747 3.6 
Gross profit$1,182,224 86.2 $1,254,031 86.5 $1,062,041 84.9 $120,183 11.3 $191,990 18.1 
 Nine Months Ended September 30,    
2017 2016 Change
(in thousands, except percentages)Amount 
% of
Revenue
 Amount 
% of
Revenue
 Amount %
Cost of sales:           
Software licenses$24,197
 3.1 $19,705
 2.7 $4,492
 22.8
Amortization26,892
 3.4 28,544
 4.0 (1,652) (5.8)
Maintenance and service58,263
 7.3 59,633
 8.3 (1,370) (2.3)
Total cost of sales109,352
 13.8 107,882
 15.0 1,470
 1.4
Gross profit$683,562
 86.2 $609,955
 85.0 $73,607
 12.1

Software Licenses: The increase in the cost of software licenses was primarily due to the following:
Increasedincreased third-party royalties of $2.5$1.4 million.
Increased salaries and other headcount-related costs of $1.1 million.
Restructuring costs of $0.6 million.
Amortization: The decreaseincrease in amortization expense was primarily due to a net decrease in the amortization of intangible assets acquired technology.within the last year.
Maintenance and Service: The net decrease in maintenance and service costs was primarily due to the following:
Decrease in salaries and other headcount-related•Decreased costs of $3.3 million, primarily due to a reallocation of technical personnel resources to pre-sales activities.
Cost decrease related to foreign exchange translation of $0.6$5.2 million due to a stronger U.S. dollar.Dollar.
Decrease in depreciation of $0.5 million.
Restructuring costs of $1.7 million.
Increased third-party technical support of $1.0 million.
Increased•Decreased stock-based compensation of $0.7$2.4 million.
The improvement in gross profit was a result of the increase in revenue, partially offset by the increase in the related cost of sales.
Operating Expenses:
32
The table below reflects the Company's operating results as presented on the condensed consolidated statements
Table of income, which are inclusive of foreign currency translation impacts. Amounts included in the discussion that follows are provided in constant currency. The impact, where material, of foreign exchange translation on each expense line is provided separately.
Contents
Nine Months Ended September 30,
Nine Months Ended September 30,    20222021Change
2017 2016 ChangeGAAPConstant CurrencyGAAPGAAPConstant Currency
(in thousands, except percentages)Amount 
% of
Revenue
 Amount 
% of
Revenue
 Amount %(in thousands, except percentages)Amount% of
Revenue		Amount% of
Revenue		Amount% of
Revenue		Amount%Amount%
Operating expenses:       Operating expenses:
Selling, general and administrative$230,483
 29.1 $183,565
 25.6 $46,918
 25.6
Selling, general and administrative$515,421 37.6 $533,378 36.8 $471,993 37.7 $43,428 9.2 $61,385 13.0 
Research and development153,524
 19.4 137,533
 19.2 15,991
 11.6
Research and development322,271 23.5 330,495 22.8 303,381 24.3 18,890 6.2 27,114 8.9 
Amortization9,506
 1.2 9,581
 1.3 (75) (0.8)Amortization11,975 0.9 12,615 0.9 12,244 1.0 (269)(2.2)371 3.0 
Total operating expenses$393,513
 49.6 $330,679
 46.1 $62,834
 19.0
Total operating expenses849,667 62.0 876,488 60.5 787,618 63.0 62,049 7.9 88,870 11.3 
Operating incomeOperating income$332,557 24.2 $377,543 26.0 $274,423 21.9 $58,134 21.2 $103,120 37.6 


Selling, General and Administrative: The net increase in selling, general and administrative costs was primarily due to the following:
•Increased salaries, incentive compensation and other headcount-related costs of $22.2$33.4 million.
Increased stock-based compensation of $12.2 million.
Increased consulting costs of $6.1 million.
Restructuring costs of $2.8 million.
•Increased business travel of $2.5$8.5 million as in-person meetings and live attendance at trade events have continued to expand.
•Increased consulting and professional fees of $5.0 million.
•Increased marketing expenses of $4.5 million.
•Increased IT maintenance and software hosting costs of $3.5 million.
•Increased bad debt expense of $1.7 million due to the write-off of receivables due from Russian customers as a result of sanctions imposed related to Russia's invasion of Ukraine.
•Decreased costs related to foreign exchange translation of $18.0 million due to a stronger U.S. Dollar.
Research and Development: The net increase in research and development costs was primarily due to the following:
•Increased salaries, incentive compensation and other headcount-related costs of $8.4$17.2 million.
Restructuring•Increased IT maintenance and software hosting costs of $6.9$2.6 million.
•Increased business travel of $2.3 million as in-person meetings and live attendance at trade events have continued to expand.
•Increased stock-based compensation of $1.8$1.4 million.
Cost reduction•Decreased costs related to foreign exchange translation of $1.2$8.2 million primarily due to a stronger U.S. Dollar.
The impacts from currency fluctuations resulted in decreased operating income of $45.0 million for the removal of a reserve associated with the French research and development credit matter discussed in Note 12nine months ended
September 30, 2022 as compared to the Company's financial statements.nine months ended September 30, 2021.
Interest Income: Interest income for the nine months ended September 30, 20172022 was $4.8$2.1 million as compared to $3.1$1.5 million for the nine months ended September 30, 2016. Interest income increased as a result of an2021. The higher interest rate environment and the related increase in both the Company's average invested cash balances and the average rate of return on those balances.invested cash balances was partially offset by the lower invested cash balance, as a result of investments in acquisitions and share repurchases.
Other Expense, net: The Company's otherInterest Expense: Interest expense consists offor the following:
 Nine Months Ended
(in thousands)September 30,
2017		 September 30,
2016
Foreign currency (losses) gains, net$(1,499) $28
Other(13) (165)
Total other expense, net$(1,512) $(137)
Income Tax Provision: The Company recorded income tax expense of $86.7nine months ended September 30, 2022 was $13.7 million and had income before income taxes of $293.4as compared to $9.6 million for the nine months ended September 30, 2017. During the nine months ended September 30, 2016, the Company recorded income tax2021. Interest expense increased as a result of $86.6 million and had income before income taxesa higher interest rate environment, partially offset by lower principal balances on our outstanding debt.
33
Table of $282.2 million. The effective tax rates were 29.6% and 30.7%Contents
Other (Expense) Income, net: Other expense for the nine months ended September 30, 20172022 was $2.1 million as compared to other income of $14.0 million for the nine months ended September 30, 2021. Other (expense) income consisted primarily of losses on equity investments and 2016, respectively.net foreign currency losses during the nine months ended September 30, 2022 and gains on equity investments during the nine months ended September 30, 2021.

Income Tax Provision: Our income before income tax provision, income tax provision and effective tax rates were as follows:
Nine Months Ended September 30,
(in thousands, except percentages)20222021
Income before income tax provision$318,904 $280,381 
Income tax provision$53,141 $28,925 
Effective tax rate16.7 %10.3 %
The decreaseincrease in the effective tax rate from the prior year iswas primarily due to taxdecreased benefits of $11.5 million related to stock-based compensation, partially offset by entity structuring and related repatriation benefits of $7.2 million recognized in 2016 that did not recur in 2017. In the first quarter of 2017, the Company adopted ASU 2016-09, which requires excess tax benefits and deficiencies related to stock-based compensation to be reflected in the income statement as a component of the provision for income taxes. Previously, these tax effects were reflected in stockholders' equity. compensation.
When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the nine months ended September 30, 20172022 and 20162021 were favorably impacted by tax benefits from stock-based compensation, the domestic manufacturingFDII deduction and research and development credits. The rates were also favorably impactedcredits, partially offset by the recurring itemimpact of lower statutory tax rates in many of the Company's foreign jurisdictions.non-deductible compensation.
Net Income: The Company’s Our net income, for the nine months ended September 30, 2017 was $206.7 million as compared to net income of $195.7 million for the nine months ended September 30, 2016. Diluteddiluted earnings per share was $2.38 for the nine months ended September 30, 2017 and $2.19 for the nine months ended September 30, 2016. The weighted average shares used in computing diluted earnings per share were 86.9 million and 89.4 million for the nine months ended September 30, 2017 and 2016, respectively.as follows:

Nine Months Ended September 30,
(in thousands, except per share data)20222021
Net income$265,763 $251,456 
Diluted earnings per share$3.04 $2.86 
Weighted average shares outstanding - diluted87,496 88,069 

34
Table of Contents
Non-GAAP Results
The Company providesWe 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 and non-GAAP diluted earnings per share as supplemental measures to GAAP regarding the Company’sour operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are describedincluded below.
ANSYS, INC. AND SUBSIDIARIES
Reconciliations of GAAP to Non-GAAP Measures
(Unaudited)
Three Months Ended
September 30, 2022
(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
Total GAAP$472,511 $410,544 86.9 %$123,384 26.1 %$95,975 $1.10 
Acquisition accounting for deferred revenue1,162 1,162 — %1,162 0.2 %1,162 0.01 
Stock-based compensation expense— 2,621 0.5 %46,970 9.9 %46,970 0.55 
Excess payroll taxes related to stock-based awards— 37 — %260 0.1 %260 — 
Amortization of intangible assets from acquisitions— 17,281 3.7 %21,102 4.4 %21,102 0.24 
Expenses related to business combinations— — — %1,210 0.3 %1,210 0.01 
Adjustment for income tax effect— — — %— — %(11,958)(0.14)
Total non-GAAP$473,673 $431,645 91.1 %$194,088 41.0 %$154,721 $1.77 
1 Diluted weighted average shares were 87,418.
Three Months Ended
September 30, 2021
(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
Total GAAP$441,168 $378,422 85.8 %$107,628 24.4 %$85,342 $0.97 
Acquisition accounting for deferred revenue4,256 4,256 0.1 %4,256 0.7 %4,256 0.05 
Stock-based compensation expense— 2,753 0.6 %44,144 9.9 %44,144 0.49 
Excess payroll taxes related to stock-based awards— 38 — %626 0.1 %626 0.01 
Amortization of intangible assets from acquisitions— 15,189 3.4 %18,592 4.2 %18,592 0.21 
Expenses related to business combinations— — — %1,716 0.4 %1,716 0.02 
Adjustment for income tax effect— — — %— — %(14,358)(0.16)
Total non-GAAP$445,424 $400,658 89.9 %$176,962 39.7 %$140,318 $1.59 
1 Diluted weighted average shares were 88,169.


35
 Three Months Ended
 September 30, 2017 September 30, 2016
(in thousands, except percentages and per share data)As
Reported		 Adjustments Non-GAAP
Results		 As
Reported		 Adjustments Non-GAAP
Results
Total revenue$275,585
 $1,181
(1)$276,766
 $245,862
 $—
 $245,862
Operating income106,183
 28,711
(2)134,894
 100,099
 21,885
(4)121,984
Operating profit margin38.5%   48.7% 40.7%   49.6%
Net income$73,630
 $17,638
(3)$91,268
 $69,557
 $14,638
(5)$84,195
Earnings per share – diluted:           
Earnings per share$0.85
   $1.05
 $0.78
   $0.95
Weighted average shares86,588
   86,588
 88,676
   88,676
(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 $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 (1) above.
(3)Amount represents the impact of the adjustments to operating income referred to in (2) above, adjusted for the related income tax impact of $11.0 million and rabbi trust income of $0.1 million.
(4)Amount represents $12.7 million of amortization expense associated with intangible assets acquired in business combinations, $9.0 million of stock-based compensation expense and $0.2 million of transaction expenses related to business combinations.
(5)Amount represents the impact of the adjustments to operating income referred to in (4) above, adjusted for the related income tax impact of $7.2 million.

Table of Contents
ANSYS, INC. AND SUBSIDIARIES
Reconciliations of GAAP to Non-GAAP Measures
(Unaudited)
Nine Months Ended
September 30, 2022
(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
Total GAAP$1,371,438 $1,182,224 86.2 %$332,557 24.2 %$265,763 $3.04 
Acquisition accounting for deferred revenue6,758 6,758 0.1 %6,758 0.3 %6,758 0.08 
Stock-based compensation expense— 7,448 0.5 %122,119 8.9 %122,119 1.40 
Excess payroll taxes related to stock-based awards— 481 — %5,530 0.5 %5,530 0.06 
Amortization of intangible assets from acquisitions— 51,947 3.8 %63,922 4.6 %63,922 0.73 
Expenses related to business combinations— — — %5,376 0.4 %5,376 0.06 
Adjustment for income tax effect— — — %— — %(40,929)(0.47)
Total non-GAAP$1,378,196 $1,248,858 90.6 %$536,262 38.9 %$428,539 $4.90 
1 Diluted weighted average shares were 87,496.

Nine Months Ended
September 30, 2021
(in thousands, except percentages and per share data)RevenueGross Profit%Operating Income%Net Income
EPS - Diluted1
Total GAAP$1,251,048 $1,062,041 84.9 %$274,423 21.9 %$251,456 $2.86 
Acquisition accounting for deferred revenue19,075 19,075 0.2 %19,075 1.1 %19,075 0.22 
Stock-based compensation expense— 9,834 0.8 %122,148 9.7 %122,148 1.38 
Excess payroll taxes related to stock-based awards— 1,085 0.1 %12,080 1.0 %12,080 0.14 
Amortization of intangible assets from acquisitions— 45,163 3.5 %57,407 4.5 %57,407 0.65 
Expenses related to business combinations— — — %5,007 0.4 %5,007 0.06 
Adjustment for income tax effect— — — %— — %(65,334)(0.75)
Total non-GAAP$1,270,123 $1,137,198 89.5 %$490,140 38.6 %$401,839 $4.56 
1 Diluted weighted average shares were 88,069.

36
Table of Contents
 Nine Months Ended
 September 30, 2017
September 30, 2016
(in thousands, except percentages and per share data)As
Reported
Adjustments Non-GAAP
Results
As
Reported
Adjustments Non-GAAP
Results
Total revenue$792,914

$1,748
(1)$794,662

$717,837

$103
(4)$717,940
Operating income290,049

89,985
(2)380,034

279,276

62,990
(5)342,266
Operating profit margin36.6%


47.8%
38.9%


47.7%
Net income$206,666

$48,480
(3)$255,146

$195,653

$41,145
(6)$236,798
Earnings per share – diluted:










Earnings per share$2.38



$2.94

$2.19



$2.65
Weighted average shares86,902



86,902

89,355



89,355
(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 $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 (1) above.
(3)Amount represents the impact of the adjustments to operating income referred to in (2) above, adjusted for the related income tax impact of $41.4 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 $38.1 million of amortization expense associated with intangible assets acquired in business combinations, $24.6 million of stock-based compensation expense, $0.2 million of transaction expenses related to business combinations and the $0.1 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 $21.8 million.
Non-GAAP Measures
Management usesWe use non-GAAP financial measures (a) to evaluate the Company'sour historical and prospective financial performance as well as itsour performance relative to itsour 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 Companyus focus on and publish both historical results and future projections based on non-GAAP financial measures. The Company believesWe believe that it is in the best interest of itsour 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 haswe have historically reported, these non-GAAP financial measures as a means of providing consistent and comparable information with past reports of financial results.
While management believeswe 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 of the Company’sour competitors and may not be directly comparable to similarly titled measures of the Company’sour competitors due to potential differences in the exact method of calculation. The Company compensatesWe 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 and its related tax impact.revenue. Historically, the Company haswe have consummated acquisitions in order to support itsour strategic and other business objectives. In accordance with theUnder prior accounting guidance, a fair value provisions applicable to the accounting for business combinations,provision resulted in acquired deferred revenue isthat was often recorded on the opening balance sheet at an amount that iswas lower than the historical carrying value. Although this acquisition accounting requirementfair value provision has no impact on the Company'sour business or cash flow, it adversely impacts the Company'sour 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, the Company provideswe provide non-GAAP financial measures which exclude the impact of the acquisition accounting adjustment. The Company believesadjustment for acquisitions prior to the adoption of the new guidance in 2022. We believe 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 managementus in itsour financial and operational decision-making, and (b) compare our past and future reports of financial results of the Company as the revenue reduction related to acquired deferred revenue will not recur when related annualsubscription lease licenses and software maintenance contracts are renewed in future periods.
Amortization of intangible assets from acquisitions and its related tax impact. The Company incursacquisitions. We incur amortization of intangible assets, included in itsour GAAP presentation of amortization expense, related to various acquisitions it haswe have made. Management excludesWe exclude these expenses and their related tax impact 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 it evaluates thewe evaluate our 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 managementus after the acquisition. Accordingly, management doeswe do not consider these expenses for purposes of evaluating theour performance of the Company during the applicable time period after the acquisition, and it excludeswe exclude such expenses when making decisions to allocate resources. The Company believesWe 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 managementus in itsour financial and operational decision-making, and (b) compare our past reports of financial results of the Company as the Company haswe have historically reported these non-GAAP financial measures.
Stock-based compensation expense and its related tax impact. The Company incursWe incur expense related to stock-based compensation included in itsour GAAP presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. Stock-based compensationThis non-GAAP adjustment also includes excess payroll tax 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).related to stock-based compensation. Although stock-based compensation is an expense of the Company and viewed as a form of compensation, management excludeswe 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 it evaluates thewe evaluate our 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.performance. Specifically, the Company excludeswe exclude stock-based compensation and income related to assets held in the deferred compensation plan rabbi trust during itsour annual budgeting process and itsour quarterly and annual assessments of the Company's and management'sour performance. The annual budgeting process is the primary mechanism whereby the Company allocateswe allocate resources to various initiatives and operational requirements. Additionally, the annual review by theour board of directors during which it compares the Company'sour 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, the Company recordswe record 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 towe 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. The Company believesWe believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company'sour operating results and the
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effectiveness of the methodology used by managementus to review the Company'sour operating results, and (b) review historical comparability in the Company'sour financial reporting as well as comparability with competitors' operating results.
Restructuring charges and theExpenses related tax impact. The Company occasionally incursto business combinations. We incur expenses for restructuring its workforceprofessional services rendered in connection with business combinations, which are included in itsour GAAP presentation of cost of software licenses; cost of maintenance and service; research and development expense; and selling, general and administrative expense. Management excludesBeginning in the second quarter of 2022, we have updated this non-GAAP measure to include, in addition to professional services rendered in connection with business combinations, 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. The additional expenses were not material in the current or comparable period. 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 it evaluates thewe evaluate our continuing operational performance, ofas we generally would not have otherwise incurred these expenses in the Company, as it generally does not incur these expensesperiods presented as a part of itsour operations. The Company believesWe believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate the Company'sour operating results and the effectiveness of the methodology used by managementus to review the Company'sour operating results, and (b) review historical comparability in the Company'sour financial reporting as well as comparability with competitors' operating results.

Transaction costs relatedNon-GAAP tax provision. We utilize a normalized non-GAAP annual effective tax rate (AETR) to business combinations. The Company incurs expensescalculate 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 will re-evaluate this rate 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 closed 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 believessignificant items 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.may materially affect our projections.
Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. The Company'sOur 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'sour consolidated financial statements prepared in accordance with GAAP.
The Company hasWe 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

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 2022 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 2021 comparable period, rather than the actual exchange rates in effect for 2022. Constant currency growth rates are calculated by adjusting the 2022 reported amounts by the 2022 currency fluctuation impacts and comparing the adjusted amounts to the 2021 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.

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Liquidity and Capital Resources
(in thousands)September 30,
2022		December 31,
2021		Change
Cash, cash equivalents and short-term investments$632,703 $668,028 $(35,325)
Working capital$840,186 $860,082 $(19,896)
(in thousands)September 30,
2017		 December 31,
2016		 Change
Cash, cash equivalents and short-term investments$926,635
 $822,860
 $103,775
Working capital$705,322
 $630,301
 $75,021

Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents consist primarily of highly liquid investments such as money market funds and deposits held at major banks. Short-term investments consist primarily of deposits held by certain of our foreign subsidiaries of the Company with original maturities of three months to one year.year. The following table presents the Company'sour foreign and domestic holdings of cash, cash equivalents and short-term investments as of September 30, 20172022 and December 31, 2016:2021:
(in thousands, except percentages)September 30,
2022		% of TotalDecember 31,
2021		% of Total
Domestic$359,619 56.8 $365,390 54.7 
Foreign273,084 43.2 302,638 45.3 
Total$632,703 $668,028 
(in thousands, except percentages)September 30,
2017		 % of Total December 31,
2016		 % of Total
Domestic$614,533
 66.3 $593,348
 72.1
Foreign312,102
 33.7 229,512
 27.9
Total$926,635
   $822,860
  

If the foreign balances were repatriated to the U.S., unless previously taxed in the U.S., they would be subject to domestic tax, resulting in a tax obligation in the period of repatriation. In general, it is the practice andour intention to permanently reinvest all earnings in excess of previously taxed amounts. Substantially all of the Company to repatriatepre-2018 earnings of our non-U.S. subsidiaries were taxed through the transition tax and post-2018 current earnings are taxed as part of global intangible low-taxed income tax expense. These taxes increase our previously taxed earnings and to reinvest all otherallow for the repatriation of the majority of our foreign earnings without any residual U.S. federal tax. Unrecognized provisions for taxes on indefinitely reinvested undistributed earnings of its non-U.S. subsidiaries. foreign subsidiaries would not be significant.
The amount of cash, cash equivalents and short-term investments held by foreign subsidiaries is subject to translation adjustments caused by changes in foreign currency exchange rates as of the end of each respective reporting period, the offset to which is recorded in accumulated other comprehensive loss on the Company’sour condensed consolidated balance sheet.
Cash Flows from Operating Activities
Nine Months Ended September 30,
(in thousands)20222021Change
Net cash provided by operating activities$457,031 $447,829 $9,202 
 Nine Months Ended September 30,  
(in thousands)2017 2016 Change
Net cash provided by operating activities$326,960
 $266,771
 $60,189

Net cash provided by operating activities increased during the current fiscal yearnine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to increased net cash flows from operating assets and liabilities of $37.0$10.0 million, and increasedpartially offset by decreased net income (net of non-cash operating adjustments) of $23.2$0.8 million. The growth in net cash provided by operating activities was a result of increased customer receipts driven primarily by ACV growth and lower income tax payments, partially offset by additional cash outflows related to increased operating expenses as compared to the nine months ended September 30, 2021.
Cash Flows from Investing Activities
Nine Months Ended September 30,
(in thousands)20222021Change
Net cash used in investing activities$(258,622)$(123,656)$(134,966)
 Nine Months Ended September 30,  
(in thousands)2017 2016 Change
Net cash used in investing activities$(61,623) $(19,574) $(42,049)

Net cash used in investing activities increased by $135.0 million during the current fiscal yearnine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due to increased acquisition-related net cash outlays of $26.0 million, increased capital expenditures of $6.6 million and increased net cash outlays from other investing activities of $9.5$137.5 million. The CompanyWe currently plansplan capital spending of $17$20.0 million to $22$25.0 million for the 2017during fiscal year 2022 as compared to the $12.4$23.0 million that was spent in 2016.fiscal year 2021. The level of spending will depend on various factors, including the growth of the business and general economic conditions.
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Cash Flows from Financing Activities
Nine Months Ended September 30,
(in thousands)20222021Change
Net cash used in financing activities$(197,978)$(146,865)$(51,113)
 Nine Months Ended September 30,  
(in thousands)2017 2016 Change
Net cash used in financing activities$(185,374) $(206,034) $20,660

Net cash used in financing activities decreasedincreased during the current fiscal yearnine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due primarily to decreasedincreased stock repurchases of $20.0 million and increased proceeds from shares issued for stock-based compensation of $4.6$119.6 million, partially offset by increaseddecreased principal payments on long-term debt of $45.0 million and decreased restricted stock withholding taxes paid in lieu of issued shares of $5.0$30.1 million.

Other Cash Flow Information
On June 30, 2022, we entered into the 2022 Credit Agreement with PNC Bank, National Association as administrative agent, swing line lender, and an L/C issuer, the lenders party thereto, and the other L/C issuers party thereto. The Company believes2022 Credit Agreement refinanced our previous credit agreements in their entirety. Terms used in this description of the 2022 Credit Agreement with initial capital letters that are not otherwise defined herein are as defined in the 2022 Credit Agreement.
The term loan facility was advanced by the lenders thereunder to refinance and replace the Prior Credit Agreements.
As of September 30, 2022, the carrying value of our term loan was $753.5 million, with no principal payments due in the next twelve months. Borrowings under the term loan and revolving loan facilities accrue interest at a rate that is based on the Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a percentage per annum based on the lower of (1) a pricing level determined by our then-current consolidated leverage ratio and (2) a pricing level determined by our public debt rating (if available). The rate in effect for the fourth quarter under the 2022 Credit Agreement is 4.53%.
We previously entered into operating lease commitments, primarily for our domestic and international offices. The commitments related to these operating leases is $145.5 million, of which $23.6 million is due in the next twelve months.
In November 2022, we had a $70.0 million cash outflow (net of cash acquired) associated with a strategic acquisition.
We believe that existing cash and cash equivalent balances, of $919.6 million, together with cash generated from operations and access to our $500.0 million revolving loan facility, will be sufficient to meet the Company’sour working capital and capital expenditure requirements through the next twelve months. The Company’sOur cash requirements in the future may also be financed through additional equity or debt financings. ThereHowever, future disruptions in the capital markets could make financing more challenging, and there can be no assurance that such financingsfinancing can be obtained on favorablecommercially reasonable terms, ifor at all.
Under the Company'sour stock repurchase program, the Companywe repurchased shares as follows:
Nine Months Ended
(in thousands, except per share data)September 30,
2022		September 30,
2021
Number of shares repurchased50097 
Average price paid per share$311.14 $371.83 
Total cost$155,571 $35,993 
All of the shares repurchased during the nine months ended September 30, 2017 and 2016, as follows:
 Nine Months Ended
(in thousands, except per share data)September 30,
2017		 September 30,
2016
Number of shares repurchased2,000
 2,700
Average price paid per share$111.65
 $90.11
Total cost$223,291
 $243,288
In February 2017,2022 were repurchased in the Company's Board of Directors increased the number of shares authorized for repurchase to a total of 5.0 million shares under the stock repurchase program.first quarter. As of September 30, 2017, 3.52022, 2.0 million shares remained available for repurchase under the program.
The Company'sauthorized repurchase authorizationprogram does not have an expiration date, and the pace of the repurchase activity will depend on factors such as working capital needs, cash requirements for acquisitions, the Company'sour stock price, and economic and market conditions. The Company'sOur stock repurchases may be effected from time to time through open market purchases orincluding pursuant to a Rule 10b5-1 plan.
The Company continues
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We continue to generate positive cash flows from operating activities and believesbelieve that the best uses of itsour excess cash are to invest in the businessbusiness; acquire or make investments in complementary companies, products, services and technologies; and make payments on our outstanding debt balances. Any future acquisitions may be funded by available cash and investments, cash generated from operations, debt financing, or the issuance of additional securities. Additionally, we have in the past, and expect in the future, to repurchase stock in order to both offset dilution and return capital, in excess of itsour requirements, to stockholders with the goal of increasing stockholder value. Additionally, the Company has in the past,
Contractual and expects in the future, to acquire or make investments in complementary companies, products, services and technologies. Any future acquisitions may be funded by available cash and investments, cash generated from operations, credit facilities or the issuance of additional securities.
Off-Balance-Sheet Arrangements
The Company does not have any special-purpose entities or off-balance-sheet financing.
ContractualOther Obligations
There were no material changes to the Company’sour significant contractual and other obligations during the nine months ended September 30, 20172022 as compared to those previously reported in “Management’swithin "Management's Discussion and Analysis of Financial Condition and Results of Operations” within the Company’s most recent Annual Report onOperations" in our 2021 Form 10-K.
Critical Accounting Policies and Estimates
During the first quarter of 2017, the Company2022, we completed the annual impairment test for goodwill and the indefinite-lived intangible asset and determined that these assets had not been impaired as of the test date, January 1, 2017.2022. Given the adverse economic and market conditions in the third quarter, we considered a variety of qualitative factors to determine if an additional quantitative impairment test was required subsequent to our annual impairment test. Based on a variety of factors, including the excess of the fair value over the carrying amount in the most recent impairment test, we determined it was not more likely than not that an impairment existed as of September 30, 2022. No other events or circumstances changed during the nine months ended September 30, 20172022 that would indicate that the fair values of the Company'sour reporting unit and indefinite-lived intangible asset are below their carrying amounts.
No significant changes have occurred to the Company’sour critical accounting policies and estimates as previously reported within “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" in the Company’s most recent Annual Report onour 2021 Form 10-K.








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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Risk. As we operate in international regions, a portion of our revenue, expenses, cash, accounts receivable and payment obligations are denominated in foreign currencies. As a result, changes in currency exchange rates will affect our financial position, results of operations and cash flows. We seek to reduce our currency exchange transaction risks primarily through our normal operating and treasury activities, including the use of derivative instruments.
With respect to revenue, on average for the quarter ended September 30, 2022, the U.S. Dollar was 15.3% stronger, when measured against our foreign currencies, than for the quarter ended September 30, 2021. With respect to revenue, on average for the nine months ended September 30, 2022, the U.S. Dollar was 11.8% stronger, when measured against our foreign currencies, than for the nine months ended September 30, 2021. The table below presents the net impacts of currency fluctuations on revenue for the three and nine months ended September 30, 2022. Amounts in brackets indicate a net adverse impact from currency fluctuations.
(in thousands)Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Euro$(15,924)$(32,897)
Japanese Yen(9,724)(23,618)
South Korean Won(8,633)(14,463)
British Pound(2,320)(3,993)
Taiwan Dollar(546)(1,395)
Indian Rupee(661)(1,322)
Other(429)(659)
        Total$(38,237)$(78,347)

The impacts from currency fluctuations resulted in decreased operating income of $23.1 million and $45.0 million for the three and nine months ended September 30, 2022, respectively, as compared to the three and nine months ended September 30, 2021.

A hypothetical 10% strengthening in the U.S. Dollar against other currencies would have decreased our revenue by $25.0 million and $66.7 million for the three and nine months ended September 30, 2022, respectively, and decreased our operating income by $13.1 million and $29.5 million for the three and nine months ended September 30, 2022, respectively.
The most meaningful currency impacts on revenue and operating income are typically attributable to U.S. Dollar exchange rate changes against the Euro and Japanese Yen. Historical exchange rates for these currency pairs are reflected in the charts below:
Period-End Exchange Rates
As ofEUR/USDUSD/JPY
September 30, 20220.98 144.78 
December 31, 20211.14 115.11 
September 30, 20211.16 111.30 
Average Exchange Rates
Three Months EndedEUR/USDUSD/JPY
September 30, 20221.01 138.32 
September 30, 20211.18 110.09 
Average Exchange Rates
Nine Months EndedEUR/USDUSD/JPY
September 30, 20221.06 127.42 
September 30, 20211.20 108.45 
Interest Income Rate Risk. Changes in the overall level of interest rates affect the interest income that is generated from the Company’sour cash, cash equivalents and short-term investments.investments and the interest expense that is generated from our outstanding borrowings. For the three and nine months ended September 30, 2017, total2022, interest income was $1.9$1.3 million and $4.8$2.1 million, respectively, and interest expense was $6.1 million and $13.7 million, respectively.
Cash and cash equivalents consist primarily of highly liquid investments such as money market funds and deposits held at major banks. Short-term investments consist primarily of deposits held by certain foreign subsidiaries of the Company with original maturities
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of three months to one year.year. A hypothetical 100 basis point change in interest rates on these holdings would have an immaterial impact on our financial results.
Foreign Currency Transaction Risk. AsOur outstanding term loan borrowings of $755.0 million as of September 30, 2022 accrue interest at a rate that is based on the Company operates in international regions,Term SOFR plus an applicable margin or at the base rate plus an applicable margin, at our election. The base rate is the highest of (i) the Overnight Bank Funding Rate, plus 0.500%, (ii) the PNC Bank, National Association prime rate, and (iii) Daily Simple SOFR plus an adjustment for SOFR plus 1.00%. The applicable margin for the borrowings is a portionpercentage per annum based on the lower of its revenue, expenses, cash, accounts receivable(1) a pricing level determined by our then-current consolidated leverage ratio and payment obligations(2) a pricing level determined by our public debt rating (if available). Because interest rates applicable to the outstanding borrowings are denominated in foreign currencies. As a result,variable, we are exposed to interest rate risk from changes in currency exchangethe underlying index rates, will affectwhich affects our interest expense. A hypothetical increase of 100 basis points in interest rates would result in an increase in interest expense and a corresponding decrease in cash flows of $7.6 million over the Company’s financial position, results of operations and cash flows. The Company is most impacted by movements in and among the Japanese Yen, British Pound, South Korean Won, Taiwan Dollar, Indian Rupee, Euro and U.S. Dollar.
With respect to revenue,next twelve months, based on average for the quarter endedoutstanding borrowings at September 30, 2017, the U.S. Dollar was approximately 0.9% weaker, when measured against the Company’s primary foreign currencies, than for the quarter ended September 30, 2016. With respect to revenue, on average for the nine months ended September 30, 2017, the U.S. Dollar was approximately 0.7% stronger, when measured against the Company’s primary foreign currencies, than for the nine months ended September 30, 2016. The table below presents the impacts of currency fluctuations on revenue for the three and nine months ended September 30, 2017. Amounts in brackets indicate a net adverse impact from currency fluctuations.
(in thousands)Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Japanese Yen$(2,363) $(2,571)
British Pound(11) (1,865)
Euro3,150
 (205)
South Korean Won(144) 674
Taiwan Dollar210
 651
Indian Rupee225
 514
Other131
 135
Total$1,198
 $(2,667)
The most significant currency impacts on revenue and operating income are typically attributable to U.S. Dollar exchange rate changes against the British Pound, Euro, Japanese Yen and South Korean Won as reflected in the charts below:
 Period-End Exchange Rates
As ofGBP/USD EUR/USD USD/JPY USD/KRW
September 30, 20161.298
 1.124
 101.358
 1,102.901
December 31, 20161.234
 1.051
 116.918
 1,208.313
September 30, 20171.340
 1.181
 112.511
 1,146.263
 Average Exchange Rates
Three Months EndedGBP/USD EUR/USD USD/JPY USD/KRW
September 30, 20161.313
 1.116
 102.394
 1,121.537
September 30, 20171.309
 1.175
 111.006
 1,133.658

 Average Exchange Rates
Nine Months EndedGBP/USD EUR/USD USD/JPY USD/KRW
September 30, 20161.393
 1.116
 108.285
 1,161.185
September 30, 20171.276
 1.113
 111.887
 1,139.197
2022.
No other material change has occurred in the Company’sour market risk subsequent to December 31, 2016.2021.

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Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act, of 1934, as amended, or the Exchange Act, the Company haswe have evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation of itsour disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures are effective, as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act.
The Company hasWe have not yet included our 2022 acquisitions in our assessment of the effectiveness of our internal control over financial reporting. Accordingly, pursuant to the SEC's general guidance that an assessment of a Disclosure Review Committee to assistrecently acquired business may be omitted from the scope of an assessment in the quarterly evaluationyear of acquisition, the scope of our assessment of the Company’s internaleffectiveness of our disclosure controls and procedures does not include our 2022 acquisitions. As of and infor the reviewthree and nine months ended September 30, 2022, our 2022 acquisitions represented 4.0% of the Company’s periodic filings under the Exchange Act. The membershipour consolidated assets and accounted for less than 1% of the Disclosure Review Committee consists of the Company’s President and Chief Executive Officer; Chief Financial Officer; Vice President of Finance; General Counsel; Senior Director, Global Investor Relations; Vice President of Worldwide Sales and Customer Excellence; Vice President of Human Resources; Vice President, Corporate Marketing and Business Development; Vice President, Design and Platform Business Unit; and Vice President and General Manager of Electronics, Fluids and Mechanical. This committee is advised by external counsel, particularly on SEC-related matters. Additionally, other members of the Company’s global management team advise the committee with respect to disclosure via a sub-certification process.our consolidated revenues.
The Company believes,We believe, based on itsour knowledge, that the financial statements and other financial information included in this report fairly present, in all material respects, theour financial condition, results of operations and cash flows of the Company as of and for the periods presented in this report. The Company isWe are committed to both a sound internal control environment and to good corporate governance.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
From time to time, the Company reviewswe review the disclosure controls and procedures, and may periodically make changes to enhance their effectiveness and to ensure that the Company’sour systems evolve with itsour business.
Changes in Internal Control. There were no changes in the Company’sour internal control over financial reporting that occurred during the three months ended September 30, 20172022 that materially affected, or werethat are reasonably likely to materially affect, the Company'sour internal control over financial reporting.




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PART II – OTHER INFORMATION
 
Item 1.Legal Proceedings
The Company isWe are subject to various claims, investigations claims and legal and regulatory proceedings that arise in the ordinary course of business, including, but not limited to, commercial disputes, labor and employment matters, tax audits, alleged infringement of third parties' intellectual property rights and other matters. In the opinionUse or distribution of the Company, the resolutionour products could generate product liability, regulatory infraction, or claims by our customers, end users, channel partners, government entities or third parties. Sales and marketing activities that impact processing of pending matters is not expectedpersonal data, as well as measures taken to have a material adverse effect on the Company’s consolidated resultsensure license compliance against pirated or unauthorized usage of operations, cash flowsour commercial product, may also result in claims by customers and individual employees of customers or financial position. However, eachby non-customers using pirated versions of our products. Each of these matters is subject to various uncertainties, and it is possible that an unfavorable resolution of one or more of these proceedingsmatters could inhave a significant adverse effect on our condensed consolidated financial statements as well as cause reputational damage. In our opinion, the future, materially affect the Company’sresolution of pending matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows or financial position.flows.


Item 1A.Risk Factors
The Company cautions investorsWe face a number of risks that its performance (and, therefore, any forward-looking statement) is subject to riskscould materially and uncertainties. Various importantadversely affect our business, financial position, results of operations and cash flows. A discussion of our risk factors may cause the Company’s future results to differ materially from those projectedcan be found in any forward-looking statement. These factors were disclosedPart I, Item 1A "Risk Factors" in but are not limited to, the items within the Company’s most recent Annualour 2021 Form 10-K and Part II, Item 1A “Risk Factors” in our Quarterly Report on Form 10-K, Part I, Item 1A. No material changes have occurred regarding10-Q for the Company'squarterly period ended March 31, 2022. The risk factor set forth below includes additional information relating to trade restrictions and should be read together with the risk factors subsequentdisclosed in our 2021 Form 10-K and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

We are subject to December 31, 2016.trade restrictions that could impact our ability to sell to customers and result in liability for violations.


Due to the global nature of our business, we are subject to domestic and international trade protection laws, policies, sanctions, and other regulatory requirements affecting trade and investment. For example, we are subject to import and export restrictions and regulations that prohibit the shipment or provision of certain products and services to certain countries, regions and persons targeted by the U.S., including the Export Administration Regulations administered by the U.S. Bureau of Industry and Security (BIS), economic and trade sanctions administered by the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), and International Traffic in Arms Regulations (ITAR) administered by the Department of State’s Directorate of Defense Trade Controls (DDTC).

BIS continues to expand its export control restrictions and impose new licensing requirements. The receipt of licenses to export to certain countries, including China, is not guaranteed, and in the absence of a license, these export control restrictions could limit our ability to deliver products and services to our customers and our ability to sell products and services to customers in the future. Additionally, BIS continues to add more companies, including existing customers, to its Entity List and Unverified List, and OFAC continues to increase the number of companies subject to its sanctions, which continues to limit the companies with which we can do business. In addition, restrictions implemented by OFAC limit our ability to sell to, or transact with, restricted individuals, entities, or countries. Adding companies as restricted parties and subjecting companies to heightened export control restrictions may encourage those companies to seek substitute products from competitors whose products are not subject to these restrictions or to develop their own products. We cannot predict whether or when any changes will be made that eliminate or decrease these limitations on our ability to sell products and provide services to these customers. Additionally, other existing and prospective customers may be added as restricted parties and/or be subjected to trade restrictions in the future, and such actions may result in other indirect impacts that cannot be quantified, including the imposition of additional trade restrictions on our business by the U.S., China, or other countries. Restrictions on our ability to sell and ship to customers could have a significant adverse effect on our business and consolidated financial statements.

Our products could also be delivered to restricted parties by third parties, including our channel partners. We take measures to confirm that our channel partners comply with all applicable trade restrictions; however, any failure by channel partners to comply with such restrictions could have negative consequences for us.

Violators of trade restrictions may be subject to significant penalties, which may include considerable monetary fines, criminal proceedings against them and their officers and employees, a denial of export privileges, and suspension or debarment from selling products or services to the federal government. Any such penalties could have a significant adverse effect on our business and consolidated financial statements. In addition, the political and media scrutiny surrounding any governmental investigation could cause significant expense and reputational harm and distract senior executives from managing normal day-to-day operations.
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
None.


Item 3.Defaults Upon Senior Securities
None.


Item 4.Mine Safety Disclosures
Not applicable.


Item 5.Other Information
None.



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Item 6.Exhibits
Exhibit No.Exhibit
10.131.1
10.2
Form of Performance-Based Restricted Stock Unit Agreement under Long-Term Incentive Plan (filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed May 4, 2017, and incorporated herein by reference).*
10.3
Third Amended and Restated Long-Term Incentive Plan (filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q, filed May 4, 2017, and incorporated herein by reference).*
10.4
Agreement and General Release by and between the Company and Walid Abu-Hadba, dated May 1, 2017 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed May 1, 2017, and incorporated herein by reference).*
15
Independent Registered Public Accountant’s Letter Regarding Unaudited Financial Information.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
32.1
32.2
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
*104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Indicates management contract or compensatory plan, contract or arrangement.

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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, thereunto duly authorized.
ANSYS, Inc.
Date:ANSYS, Inc.
Date:November 2, 20172022By:
/s/ Ajei S. Gopal
Ajei S. Gopal
President and Chief Executive Officer
(Principal Executive Officer)
Date:
Date:November 2, 20172022By:
/s/ Maria T. ShieldsNicole Anasenes
Maria T. ShieldsNicole Anasenes
Chief Financial Officer and Senior Vice President, Finance
(Principal Financial Officer and Principal Accounting Officer)

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