UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~September~~June 30, ~~2019~~2020



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

For the transition period from _________ to _________

Commission File Number: 0-20853

ANSYS, Inc.

(Exact name of registrant as specified in its charter)

Delaware

04-3219960

(State or other jurisdiction of incorporation or organization)

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

2600 ANSYS Drive,

Canonsburg,

15317

(Address of Principal Executive Offices)

(Zip Code)

~~844~~-~~462-6797~~844-462-6797

(Registrant's telephone number, including area code)

N/A

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

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

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

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common Stock, $0.01 par value per share

~~ANSS~~

~~The~~ ANSS

Nasdaq Stock Market LLC

(Nasdaq Global Select ~~Market~~Market)

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

Yes ☒ No ☐

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

Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

☐

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

Yes ☐ No ☒

The number of shares of the Registrant’s Common Stock, $0.01 par value ~~$.01~~ per share, outstanding as of ~~October~~July 31, ~~2019 was 84,189,728~~2020 was 85,789,237 shares.

ANSYS, INC. AND SUBSIDIARIES

INDEX



PART I			FINANCIAL INFORMATION		Page No.

Item 1.			Financial Statements


~~PART I~~	~~UNAUDITED FINANCIAL INFORMATION~~			~~Page No.~~

~~Item 1.~~	~~Financial Statements~~

	Condensed Consolidated Balance Sheets – ~~September~~June 30 ~~2019~~, 2020 and December 31, ~~2018~~2019	3

			Condensed Consolidated Statements of Income – Three and ~~Nine~~ Six Months Ended ~~September~~June 30 , 2020 and 2019 ~~and 2018~~		4

			Condensed Consolidated Statements of Comprehensive Income – Three and ~~Nine~~ Six Months Ended ~~September~~June 30 , 2020 and 2019 ~~and 2018~~		5

			Condensed Consolidated Statements of Cash Flows – ~~Nine~~Six Months Ended ~~September~~ June 30 ~~2019~~, 2020 and ~~2018~~2019		6

			Condensed Consolidated Statements of Stockholders' Equity – Three and ~~Nine~~ Six Months Ended ~~September~~June 30 , 2020 and 2019 ~~and 2018~~		7

			Notes to Condensed Consolidated Financial Statements		8

			Report of Independent Registered Public Accounting Firm		1920

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2021

Item 3.			Quantitative and Qualitative Disclosures About Market Risk		4042

Item 4.			Controls and Procedures		4143

PART II			OTHER INFORMATION

Item 1.			Legal Proceedings		4244

Item 1A.			Risk Factors		4244

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4245

Item 3.			Defaults Upon Senior Securities		4245

Item 4.			Mine Safety Disclosures		4345

Item 5.			Other Information		4345

Item 6.			Exhibits		4446

			SIGNATURES		4547

Table of Contents

PART I – ~~UNAUDITED~~ FINANCIAL INFORMATION

Item 1.Financial Statements:

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,
2019 December 31,
2018
(in thousands, except share and per share data) (Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 732,684
$ 777,139
Short-term investments 218
225
Accounts receivable, less allowance for doubtful accounts of $8,700 and $8,000, respectively 295,590
317,700
Other receivables and current assets 177,734
216,113
Total current assets 1,206,226
1,311,177
Long-term assets:
Property and equipment, net 70,295
61,655
Operating lease right-of-use assets 104,160
—
Goodwill 1,771,862
1,572,455
Other intangible assets, net 267,378
211,272
Other long-term assets 134,757
82,775
Deferred income taxes 27,334
26,630
Total long-term assets 2,375,786
1,954,787
Total assets $ 3,582,012
$ 3,265,964
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,172
$ 7,953
Accrued bonuses and commissions 55,362
79,945
Accrued income taxes 7,278
8,726
Other accrued expenses and liabilities 111,633
99,559
Deferred revenue 291,385
328,584
Total current liabilities 473,830
524,767
Long-term liabilities:
Deferred income taxes 31,201
30,077
Long-term operating lease liabilities 91,173
—
Other long-term liabilities 62,484
61,573
Total long-term liabilities 184,858
91,650
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 issued 932
932
Additional paid-in capital 865,634
867,462
Retained earnings 3,204,854
2,919,411
Treasury stock, at cost: 9,072,210 and 9,601,670 shares, respectively (1,057,955 ) (1,075,879 )
Accumulated other comprehensive loss (90,141 ) (62,379 )
Total stockholders' equity 2,923,324
2,649,547
Total liabilities and stockholders' equity $ 3,582,012
$ 3,265,964
ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share and per share data)	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	744,546	$	872,094
Short-term investments	433		288
Accounts receivable, less allowance for doubtful accounts of $13,400 and $8,700, respectively	343,247		433,479
Other receivables and current assets	206,038		249,619
Total current assets	1,294,264		1,555,480
Long-term assets:
Property and equipment, net	88,792		83,636
Operating lease right-of-use assets	117,242		105,671
Goodwill	2,474,299		2,413,280
Other intangible assets, net	481,694		476,711
Other long-term assets	191,326		180,032
Deferred income taxes	24,249		24,077
Total long-term assets	3,377,602		3,283,407
Total assets	$	4,671,866	$	4,838,887
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,505	$	14,298
Accrued bonuses and commissions	37,642		101,546
Accrued income taxes	28,291		9,996
Current portion of long-term debt	—		75,000
Other accrued expenses and liabilities	142,270		142,947
Deferred revenue	325,098		351,353
Total current liabilities	543,806		695,140
Long-term liabilities:
Deferred income taxes	66,661		78,643
Long-term operating lease liabilities	103,585		91,768
Long-term debt	423,683		423,531
Other long-term liabilities	96,083		96,426
Total long-term liabilities	690,012		690,368
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; 94,627,585 shares issued	946		946
Additional paid-in capital	1,144,193		1,188,939
Retained earnings	3,513,334		3,370,706
Treasury stock, at cost: 8,889,945 and 8,893,177 shares, respectively	(1,141,040)		(1,041,831)
Accumulated other comprehensive loss	(79,385)		(65,381)
Total stockholders' equity	3,438,048		3,453,379
Total liabilities and stockholders' equity	$	4,671,866	$	4,838,887

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

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

Three Months Ended
Nine Months Ended
(in thousands, except per share data) September 30,
2019
September 30,
2018
September 30,
2019
September 30,
2018
Revenue:

Software licenses $ 137,144

$ 109,103

$ 430,687

$ 350,296
Maintenance and service 206,755

180,315

598,977

527,908
Total revenue 343,899

289,418

1,029,664

878,204
Cost of sales:

Software licenses 5,708

4,291

16,620

12,301
Amortization 4,762

5,530

14,064

23,403
Maintenance and service 30,895

26,487

85,993

80,092
Total cost of sales 41,365

36,308

116,677

115,796
Gross profit 302,534

253,110

912,987

762,408
Operating expenses:

Selling, general and administrative 120,682

97,576

353,263

280,443
Research and development 73,018

59,019

219,058

174,906
Amortization 3,787

3,491

11,342

10,421
Total operating expenses 197,487

160,086

583,663

465,770
Operating income 105,047

93,024

329,324

296,638
Interest income 3,188

3,213

9,610

7,674
Other income (expense), net 594

(974 )
(1,498 )
(2,289 )
Income before income tax provision 108,829

95,263

337,436

302,023
Income tax provision 19,366

5,927

51,993

35,811
Net income $ 89,463

$ 89,336

$ 285,443

$ 266,212
Earnings per share – basic:

Earnings per share $ 1.06

$ 1.06

$ 3.40

$ 3.17
Weighted average shares 84,109

84,158

83,951

84,065
Earnings per share – diluted:

Earnings per share $ 1.04

$ 1.04

$ 3.34

$ 3.09
Weighted average shares 85,733

86,043

85,570

86,060

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended						Six Months Ended
(in thousands, except per share data)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Revenue:
Software licenses	$	169,341	$	170,499	$	257,171	$	293,543
Maintenance and service	216,320		198,136		433,475		392,222
Total revenue	385,661		368,635		690,646		685,765
Cost of sales:
Software licenses	8,511		6,204		13,437		10,912
Amortization	9,764		4,755		19,316		9,302
Maintenance and service	35,585		29,538		71,223		55,098
Total cost of sales	53,860		40,497		103,976		75,312
Gross profit	331,801		328,138		586,670		610,453
Operating expenses:
Selling, general and administrative	128,698		120,412		259,220		232,581
Research and development	86,133		75,302		172,245		146,040
Amortization	4,163		3,796		8,325		7,555
Total operating expenses	218,994		199,510		439,790		386,176
Operating income	112,807		128,628		146,880		224,277
Interest income	934		2,980		3,709		6,422
Interest expense	(3,040)		(231)		(6,691)		(322)
Other income (expense), net	1,884		(1,436)		2,011		(1,770)
Income before income tax provision	112,585		129,941		145,909		228,607
Income tax provision	16,021		20,191		3,281		32,627
Net income	$	96,564	$	109,750	$	142,628	$	195,980
Earnings per share – basic:
Earnings per share	$	1.13	$	1.31	$	1.66	$	2.34
Weighted average shares	85,651		83,978		85,724		83,871
Earnings per share – diluted:
Earnings per share	$	1.11	$	1.28	$	1.64	$	2.29
Weighted average shares	86,934		85,483		87,152		85,488

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

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

Three Months Ended Nine Months Ended
(in thousands) September 30,
2019 September 30,
2018 September 30,
2019 September 30,
2018
Net income $ 89,463
$ 89,336
$ 285,443
$ 266,212
Other comprehensive loss:
Foreign currency translation adjustments (20,762 ) (5,102 ) (27,762 ) (23,047 )
Comprehensive income $ 68,701
$ 84,234
$ 257,681
$ 243,165

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Net income	$	96,564	$	109,750	$	142,628	$	195,980
Other comprehensive income (loss):
Foreign currency translation adjustments	10,288		558		(14,004)		(7,000)
Comprehensive income	$	106,852	$	110,308	$	128,624	$	188,980

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

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

Nine Months Ended
(in thousands) September 30,
2019 September 30,
2018
Cash flows from operating activities:
Net income $ 285,443
$ 266,212
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization 42,216
47,341
Operating lease right-of-use assets amortization 13,912
—
Deferred income tax benefit (13,221 ) (28,175 )
Provision for bad debts 2,559
1,389
Stock-based compensation expense 84,784
58,887
Other 2,560
2,039
Changes in operating assets and liabilities:
Accounts receivable (12,610 ) 32,356
Other receivables and current assets 37,773
23,207
Other long-term assets (2,288 ) 2,458
Accounts payable, accrued expenses and current liabilities (37,289 ) (31,243 )
Accrued income taxes (2,547 ) (2,581 )
Deferred revenue (35,807 ) 1,175
Other long-term liabilities (5,000 ) (19,562 )
Net cash provided by operating activities 360,485
353,503
Cash flows from investing activities:
Acquisitions, net of cash acquired (294,987 ) (283,026 )
Capital expenditures (25,781 ) (13,077 )
Other investing activities (12,680 ) (5,510 )
Net cash used in investing activities (333,448 ) (301,613 )
Cash flows from financing activities:
Purchase of treasury stock (59,116 )
(192,787 )
Restricted stock withholding taxes paid in lieu of issued shares (37,936 ) (26,955 )
Proceeds from shares issued for stock-based compensation 28,633
37,398
Other financing activities (1,617 ) (4,939 )
Net cash used in financing activities (70,036 ) (187,283 )
Effect of exchange rate fluctuations on cash and cash equivalents (1,456 ) (16,928 )
Net decrease in cash and cash equivalents (44,455 ) (152,321 )
Cash and cash equivalents, beginning of period 777,139
881,501
Cash and cash equivalents, end of period $ 732,684
$ 729,180
Supplemental disclosure of cash flow information:
Income taxes paid $ 73,561
$ 74,086

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

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS' EQUITY~~CASH FLOWS

(Unaudited)

Common Stock
Additional
Paid-In
Capital

Retained
Earnings
Treasury Stock
Accumulated
Other
Comprehensive (Loss)/Income

Total
Stockholders'
Equity
(in thousands) Shares Amount Shares Amount
Balance, January 1, 2019 93,236 $ 932
$ 867,462
$ 2,919,411
9,602
$ (1,075,879 ) $ (62,379 ) $ 2,649,547
Treasury shares acquired 250
(44,856 ) (44,856 )
Stock-based compensation activity (42,465 ) (494 ) 43,483
1,018
Other comprehensive loss (7,558 ) (7,558 )
Net income 86,230
86,230
Balance, March 31, 2019 93,236 932
824,997
3,005,641
9,358
(1,077,252 ) (69,937 ) 2,684,381
Treasury shares acquired

80
(14,260 )

(14,260 )
Stock-based compensation activity

14,699

(241 ) 22,158

36,857
Other comprehensive income

558
558
Net income

109,750

109,750
Balance, June 30, 2019 93,236 932
839,696
3,115,391
9,197
(1,069,354 ) (69,379 ) 2,817,286
Stock-based compensation activity

25,938

(125 ) 11,399

37,337
Other comprehensive loss

(20,762 ) (20,762 )
Net income

89,463

89,463
Balance, September 30, 2019 93,236 $ 932
$ 865,634
$ 3,204,854
9,072
$ (1,057,955 ) $ (90,141 ) $ 2,923,324

Common Stock
Additional
Paid-In
Capital

Retained
Earnings
Treasury Stock
Accumulated
Other
Comprehensive (Loss)/Income

Total
Stockholders'
Equity
(in thousands) Shares Amount Shares Amount
Balance, January 1, 2018 93,236 $ 932
$ 873,357
$ 2,316,916
9,044
$ (907,530 ) $ (37,844 ) $ 2,245,831
Cumulative effect of the ASC 606 adoption 183,132
183,132
Treasury shares acquired

750
(117,831 ) (117,831 )
Stock-based compensation activity (39,943 ) (492 ) 43,648
3,705
Other comprehensive income 8,243
8,243
Net income 84,280
84,280
Balance, March 31, 2018 93,236 932
833,414
2,584,328
9,302
(981,713 ) (29,601 ) 2,407,360
Stock-based compensation activity 3,910
(313 ) 29,801
33,711
Other comprehensive loss (26,188 ) (26,188 )
Net income 92,596
92,596
Balance, June 30, 2018 93,236 932
837,324
2,676,924
8,989
(951,912 ) (55,789 ) 2,507,479
Cumulative effect of the ASC 606 adoption

(1 )

(1 )
Treasury shares acquired
424
(74,956 ) (74,956 )
Stock-based compensation activity

13,292

(199 ) 18,498

31,790
Other comprehensive loss

(5,102 ) (5,102 )
Net income

89,336

89,336
Balance, September 30, 2018 93,236 $ 932
$ 850,616
$ 2,766,259
9,214
$ (1,008,370 ) $ (60,891 ) $ 2,548,546


	Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019
Cash flows from operating activities:
Net income	$	142,628	$	195,980
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization	41,356		27,518
Operating lease right-of-use assets expense	10,216		8,970
Deferred income tax benefit	(15,684)		(6,238)
Provision for bad debts	5,672		2,010
Stock-based compensation expense	65,071		52,922
Other	2,099		1,536
Changes in operating assets and liabilities:
Accounts receivable	79,444		(2,949)
Other receivables and current assets	44,377		11,780
Other long-term assets	(9,280)		(1,474)
Accounts payable, accrued expenses and current liabilities	(88,099)		(38,216)
Accrued income taxes	19,576		(179)
Deferred revenue	(25,678)		(10,341)
Other long-term liabilities	7,306		(1,202)
Net cash provided by operating activities	279,004		240,117
Cash flows from investing activities:
Acquisitions, net of cash acquired	(100,194)		(285,323)
Capital expenditures	(16,967)		(16,946)
Other investing activities	(2,405)		(9,008)
Net cash used in investing activities	(119,566)		(311,277)
Cash flows from financing activities:
Principal payments on long-term debt	(75,000)		—
Purchase of treasury stock	(161,029)		(59,116)
Restricted stock withholding taxes paid in lieu of issued shares	(65,396)		(35,605)
Proceeds from shares issued for stock-based compensation	15,874		20,780
Other financing activities	—		(1,617)
Net cash used in financing activities	(285,551)		(75,558)
Effect of exchange rate fluctuations on cash and cash equivalents	(1,435)		1,034
Net decrease in cash and cash equivalents	(127,548)		(145,684)
Cash and cash equivalents, beginning of period	872,094		777,139
Cash and cash equivalents, end of period	$	744,546	$	631,455
Supplemental disclosure of cash flow information:
Income taxes paid	$	13,483	$	55,700
Interest paid	$	8,412	$	144

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

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)



	Common Stock					Additional Paid-In Capital		Retained Earnings	Treasury Stock						Accumulated Other Comprehensive (Loss)/Income	Total Stockholders' Equity
(in thousands)	Shares	Amount									Shares		Amount
Balance, January 1, 2020	94,628	$	946	$	1,188,939	$	3,370,706	8,893	$	(1,041,831)	$	(65,381)	$	3,453,379
Treasury shares acquired								690	(161,029)				(161,029)
Stock-based compensation activity				(70,769)				(541)	48,997				(21,772)
Other comprehensive loss											(24,292)		(24,292)
Net income						46,064							46,064
Balance, March 31, 2020	94,628	$	946	$	1,118,170	$	3,416,770	9,042	$	(1,153,863)	$	(89,673)	$	3,292,350
Acquisition of Livermore Software Technology, LLC				1,030				(6)	501				1,531
Stock-based compensation activity				24,993				(146)	12,322				37,315
Other comprehensive income											10,288		10,288
Net income						96,564							96,564
Balance, June 30, 2020	94,628	$	946	$	1,144,193	$	3,513,334	8,890	$	(1,141,040)	$	(79,385)	$	3,438,048



	Common Stock					Additional Paid-In Capital		Retained Earnings	Treasury Stock						Accumulated Other Comprehensive (Loss)/ Income	Total Stockholders' Equity
(in thousands)	Shares	Amount									Shares		Amount
Balance, January 1, 2019	93,236	$	932	$	867,462	$	2,919,411	9,602	$	(1,075,879)	$	(62,379)	$	2,649,547
Treasury shares acquired								250	(44,856)				(44,856)
Stock-based compensation activity				(42,465)				(494)	43,483				1,018
Other comprehensive loss											(7,558)		(7,558)
Net income						86,230							86,230
Balance, March 31, 2019	93,236	$	932	$	824,997	$	3,005,641	9,358	$	(1,077,252)	$	(69,937)	$	2,684,381
Treasury shares acquired								80	(14,260)				(14,260)
Stock-based compensation activity				14,699				(241)	22,158				36,857
Other comprehensive income											558		558
Net income						109,750							109,750
Balance, June 30, 2019	93,236	$	932	$	839,696	$	3,115,391	9,197	$	(1,069,354)	$	(69,379)	$	2,817,286

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

Table of Contents

ANSYS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~2019~~2020

(Unaudited)


1.	~~Organization~~

1.Organization

ANSYS, Inc. ~~(hereafter the Company or ANSYS)~~(Ansys, we, us, our) develops and globally markets engineering simulation software and services widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including aerospace and defense, automotive, electronics, semiconductors, energy, materials and chemical processing, turbomachinery, consumer products, healthcare, and sports.

As defined by the accounting guidance for segment reporting, ~~the Company operates~~we operate as 1 segment.

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

We are closely monitoring the spread of COVID-19 and continually assessing its potential effects on our business. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our business, employees, liquidity, financial condition, results of operations and cash flows.


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, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with ~~the Company's~~our audited consolidated financial statements (and notes thereto) included in ~~the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2018 (2018~~2019 (2019 Form 10-K). The condensed consolidated December 31, ~~2018~~2019 balance sheet presented is derived from the audited December 31, ~~2018~~2019 balance sheet included in the ~~2018~~2019 Form 10-K. In ~~the~~our 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. Certain items in the condensed consolidated financial statements of prior years have been reclassified to conform to the current year's presentation. These reclassifications had no effect on reported net income, comprehensive income, cash flows, total assets or total liabilities and stockholders' equity. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for any future period.

Changes in Accounting Policies

~~The Company’s~~Our accounting policies are described in Note 2, “Accounting Policies,” in the ~~2018~~2019 Form 10-K. Summarized below is the accounting guidance adopted subsequent to December 31, ~~2018.~~2019.

~~Leases:~~Credit losses: In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~No. 2016-02,~~ ~~Leases(Topic 842)~~ (ASU 2016-02). The Company adopted ASU 2016-02 and its related amendments (collectively known as Accounting Standards Codification (ASC) 842) on January 1, 2019 using the modified retrospective approach. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 840, ~~Leases. ASC 842 requires virtually all leases, other than leases of intangible assets, to be recorded on the balance sheet with a right-of-use (ROU) asset and a corresponding lease liability.~~

The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its historical assessments of whether a contract contains a lease, lease classification and initial direct costs. In addition, the Company elected the accounting policy to combine the lease and nonlease components as a single component for all asset classes.

The Company determines if an arrangement is a lease at inception. Leases are classified as either operating or finance leases based on certain criteria. This classification determines the timing and presentation of expenses on the income statement, as well as the presentation of the related cash flows and balance sheet. Operating leases are recorded on the balance sheet as operating lease right-of-use assets, other accrued expenses and liabilities, and long-term operating lease liabilities. The Company currently has no finance leases.

ROU assets and related liabilities are recorded at lease commencement based on the present value of the lease payments over the expected lease term. Lease payments include future increases unless the increases are based on changes in an index or rate. As the Company's leases do not usually provide an implicit rate, the Company’s incremental borrowing rate is used to calculate ROU assets and related liabilities. The incremental borrowing rate is determined based on the Company’s estimated credit rating, the term of the lease, the economic environment where the asset resides and full collateralization. The ROU assets and related lease liabilities include optional renewals for which the Company is reasonably certain to exercise; whereas, optional terminations are included unless it is reasonably certain not to be elected.

The adoption of the new standard resulted in the recognition of ROU assets of $90.9 million and lease liabilities of $92.5 million, and corresponding deferred tax assets and liabilities, on the Company’s condensed consolidated balance sheet as of January 1, 2019. The adoption had no impact on the Company’s condensed consolidated statements of income or cash flows.

~~Accounting Guidance Issued and Not Yet Adopted~~

~~Credit losses:~~ ~~In June 2016, the FASB issued ASU~~ No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13)~~. The current~~, which modifies the measurement of expected credit losses of certain financial instruments. We adopted ASU 2016-13 on January 1, 2020 with no material impact to our condensed consolidated financial statements. Previous guidance ~~requires~~required the allowance for doubtful accounts to be estimated based on an incurred loss model, which ~~considers~~considered past and current conditions. ASU 2016-13 requires ~~companies~~us to use an expected loss model that also considers reasonable and supportable forecasts of future ~~conditions.~~conditions, referred to as the current expected credit loss (CECL) methodology.

Under ASU 2016-13, ~~is effective~~we make judgments as to our ability to collect outstanding receivables and provide allowances 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~~portion of receivables over the ~~balance sheet as~~lifetime of the ~~beginning~~receivables. Provisions are made based upon a specific review of all significant outstanding invoices from both value and delinquency perspectives. For those invoices not specifically reviewed, provisions are estimated at differing rates based upon the age of the ~~first reporting period in which the guidance is effective.~~ receivable. In determining these percentages, we consider our historical loss experience, current economic trends and future conditions.

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The ~~Company is currently~~changes in the ~~data gathering phase of~~allowance for doubtful accounts during the ~~implementation.~~ six months ended June 30, 2020 were as follows:


(in thousands)	Six Months Ended June 30, 2020
Beginning balance – January 1	$	8,700
Additions: Charges to costs and expenses	5,672
Deductions: Returns and write-offs	(972)
Ending balance – June 30	$	13,400

The ~~Company will adopt~~increase in the ~~standard effective January 1, 2020~~allowance for doubtful accounts was driven by expected losses related to COVID-19.

Accounting Guidance Issued and ~~continues to evaluate the effect that this update will have on its financial results upon adoption.~~Not Yet Adopted

~~Implementation cost accounting for cloud computing arrangements:~~Income taxes: In ~~August 2018,~~December 2019, the FASB issued ASU No. ~~2018-15,~~2019-12, ~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)~~Income Taxes (Topic 740): ~~Customer's~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract~~Income Taxes (ASU ~~2018-15).~~2019-12), as part of its initiative to reduce complexity in the accounting standards. The ~~standard aligns~~amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for costs incurred to implement a cloud computing arrangement (CCA) that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Underincome taxes. ASU 2018-15, an entity would apply Subtopic 350-40 to determine which implementation costs related to a CCA that is a service contract should be capitalized. The standard does not change the accounting for the service component of a CCA. The associated cash flows will be reflected within operating activities. ASU 2018-152019-12 is effective for ~~annual~~fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2019, including interim periods within that reporting period.~~2020. Early adoption is permitted, including adoption in any interim ~~period for which~~period. We do not expect the adoption of this guidance to have a material impact on our financial ~~statements have not been issued. Entities can choose to adopt the new guidance (1) prospectively to eligible costs incurred on~~position or ~~after the date the guidance is first applied or (2) retrospectively. The Company continues to evaluate the effect that this update will have on its financial~~ results ~~upon adoption.~~of operations.

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’s~~Our cash and cash ~~equivalent~~equivalents balances comprise the following:


	June 30, 2020					December 31, 2019
(in thousands, except percentages)	Amount		% of Total	Amount		% of Total
Cash accounts	$	518,734	69.7	$	549,639	63.0
Money market funds	225,812		30.3	322,455		37.0
Total	$	744,546		$	872,094

September 30, 2019 December 31, 2018
(in thousands, except percentages) Amount % of Total Amount % of Total
Cash accounts $ 431,624
58.9 $ 331,084
42.6
Money market funds 301,060
41.1 446,055
57.4
Total $ 732,684
$ 777,139

~~The Company's~~Our money market fund balances are held in various funds of two issuers. The decrease in money market funds during the six months ended June 30, 2020 was a ~~single issuer.~~result of redemptions for share repurchases and the Lumerical Inc. (Lumerical) acquisition. See Note 4, "Acquisitions", for additional disclosures regarding the Lumerical acquisition.


3.	~~Revenue from Contracts with Customers~~

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3.Revenue from Contracts with Customers

Disaggregation of Revenue

The following table summarizes revenue:

Three Months Ended Nine Months Ended
(in thousands, except percentages) September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Revenue:
Lease licenses $ 70,693
$ 43,202
$ 239,953
$ 148,795
Perpetual licenses 66,451
65,901
190,734
201,501
Software licenses 137,144
109,103
430,687
350,296
Maintenance 193,189
171,463
559,768
500,962
Service 13,566
8,852
39,209
26,946
Maintenance and service 206,755
180,315
598,977
527,908
Total revenue $ 343,899
$ 289,418
$ 1,029,664
$ 878,204

Direct revenue, as a percentage of total revenue 76.8 % 75.5 % 75.9 % 76.1 %
Indirect revenue, as a percentage of total revenue 23.2 % 24.5 % 24.1 % 23.9 %


	Three Months Ended									Six Months Ended
(in thousands, except percentages)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue:
Lease licenses	$	113,209		$	100,004		$	158,083		$	169,260
Perpetual licenses	56,132			70,495			99,088			124,283
Software licenses	169,341			170,499			257,171			293,543
Maintenance	203,179			185,118			403,667			366,579
Service	13,141			13,018			29,808			25,643
Maintenance and service	216,320			198,136			433,475			392,222
Total revenue	$	385,661		$	368,635		$	690,646		$	685,765

Direct revenue, as a percentage of total revenue	78.1		%	79.7		%	76.2		%	75.4		%
Indirect revenue, as a percentage of total revenue	21.9		%	20.3		%	23.8		%	24.6		%

~~The Company’s~~Our software licenses revenue is recognized up front, while maintenance and service revenue is generally recognized over the term of the contract.

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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were as follows:

(in thousands) 2019 2018
Beginning balance – January 1 $ 343,174
$ 299,730
Acquired deferred revenue 3,266
2,470
Deferral of revenue 991,524
868,522
Recognition of revenue (1,029,664 ) (878,204 )
Currency translation (4,985 ) (6,065 )
Ending balance – September 30 $ 303,315
$ 286,453


(in thousands)	2020		2019
Beginning balance – January 1	$	365,274	$	343,174
Acquired deferred revenue	1,405		3,266
Deferral of revenue	661,790		675,209
Recognition of revenue	(690,646)		(685,765)
Currency translation	(1,635)		(500)
Ending balance – June 30	$	336,188	$	335,384

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, ~~and~~which includes both deferred revenue and backlog. ~~The Company's~~Our backlog represents installment billings for periods beyond the current quarterly billing cycle. Revenue recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 included amounts in deferred revenue and backlog at the beginning of the period of ~~$409.1~~$343.9 million and ~~$334.4~~$305.3 million, respectively.

Total revenue allocated to remaining performance obligations as of ~~September~~June 30, ~~2019~~2020 will be recognized as revenue as follows:

(in thousands)
Next 12 months $ 445,934
Months 13-24 122,932
Months 25-36 52,090
Thereafter 29,431
Total revenue allocated to remaining performance obligations $ 650,387


4.(in thousands)	~~Acquisitions~~
Next 12 months	$	552,093
Months 13-24	179,925
Months 25-36	69,539
Thereafter	44,913
Total revenue allocated to remaining performance obligations	$	846,470

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4.Acquisitions

On ~~February~~April 1, ~~2019, the Company completed the acquisition of~~2020, we acquired 100% of the shares of ~~Granta Design Limited (Granta Design)~~Lumerical, a leading developer of photonic design and simulation tools, for a purchase price of ~~$208.7~~approximately $107.5 million, paid in ~~cash and inclusive of final net working capital adjustments.~~cash. The acquisition adds best-in-class photonic products to our multiphysics portfolio, providing customers with a full set of ~~Granta Design, the premier provider of materials information technology, expands ANSYS' portfolio into this important area, giving customers access~~solutions to ~~materials intelligence, including data that is critical to successful simulations.~~

Additionally, during the nine months ended September 30, 2019, the Company acquired Helic, Inc. and certain assets and liabilities of DfR Solutions to combine the acquired technologies with the Company's existing comprehensive multiphysics portfolio. The acquisitions were not individually significant. The combined purchase price of these other acquisitions was $102.7 million, paid in cash and inclusive of final net working capital adjustments.solve their next-generation product challenges.

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

Fair Value of Consideration Transferred:


(in thousands)
Cash	$	107,545

(in thousands) Granta Design Other Acquisitions Total
Cash $ 208,736
$ 102,737
$ 311,473

Recognized Amounts of Identifiable Assets Acquired and Liabilities Assumed:

(in thousands)
Cash $ 13,644
$ 2,842
$ 16,486
Accounts receivable and other tangible assets 7,023
8,653
15,676
Developed software and core technologies (12-year weighted-average life) 32,445
17,761
50,206
Customer lists (13-year weighted-average life) 20,016
14,180
34,196
Trade names (10-year weighted-average life) 4,579
1,381
5,960
Accounts payable and other liabilities
(6,403 ) (4,704 ) (11,107 )
Deferred revenue
(1,426 ) (1,840 ) (3,266 )
Net deferred tax liabilities (9,822 ) (5,049 ) (14,871 )
Total identifiable net assets $ 60,056
$ 33,224
$ 93,280
Goodwill $ 148,680
$ 69,513
$ 218,193


(in thousands)
Cash	$	11,844
Accounts receivable and other tangible assets	3,385
Developed software and core technologies	31,614
Customer lists	1,616
Trade names	1,756
Accounts payable and other liabilities	(1,108)
Deferred revenue	(1,405)
Net deferred tax liabilities	(6,305)
Total identifiable net assets	$	41,397
Goodwill	$	66,148

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

The fair values of the assets acquired and liabilities assumed are based on preliminary calculations. The estimates and assumptions for these items are subject to change as additional information about what was known and knowable at the 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: royalty rate, discount rate and attrition rate.

The valuation method and assumptions used to determine the fair value of the intangible assets acquired with the Lumerical acquisition are as follows:

Intangible Asset

Useful Life

Valuation Method

Assumptions

Developed software and core technologies

10 years

Multi-period excess earnings

Discount rate: 16.5%

Trade names

6 years

Relief-from-royalty

Royalty rate: 2.0%
Discount rate: 16.5%

Customer lists

10 years

Multi-period excess earnings

Attrition rate: 10.0%
Discount rate: 12.5%

The operating results of Lumerical have been included in our condensed consolidated financial statements since the date of acquisition. The effects of the business combination were not material to our consolidated results of operations.

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On ~~May 2, 2018, the Company~~November 1, 2019, we completed the acquisition of 100% of the shares of ~~OPTIS, a~~Livermore Software Technology (LST), the premier provider of ~~software for scientific simulation of light, human vision~~explicit dynamics and ~~physics-based visualization,~~other advanced finite element analysis technology, for a purchase price of ~~$291.0~~$781.5 million, inclusive of final net working capital adjustments. The acquisition empowers our customers to solve a new class of engineering challenges, including developing safer automobiles, aircraft and trains while reducing or even eliminating the need for costly physical testing. The purchase price was paid with $472.8 million in cash and 1.4 million shares of our common stock valued at $308.7 million. We issued $307.2 million of common stock in an unregistered offering to the prior owners of LST and the remaining $1.5 million was issued from shares held in treasury.

On February 1, 2019, we completed the acquisition of 100% of the shares of Granta Design Limited (Granta Design) for a purchase price of $208.7 million, paid in

~~cash.~~ cash and inclusive of final net working capital adjustments. The acquisition ~~extends~~of Granta Design, the ~~Company's~~premier provider of materials information technology, expands our portfolio into this important area, giving customers access to materials intelligence, including data that is critical to successful simulations.

Additionally, during the ~~area~~year ended December 31, 2019, we acquired DYNARDO GmbH, Helic, Inc. (Helic) and DfR Solutions to combine the acquired technologies with our existing comprehensive multiphysics portfolio. These acquisitions were not individually significant. The combined purchase price of ~~optical simulation to provide comprehensive sensor solutions, covering visible~~these other acquisitions was $138.6 million, paid in cash and ~~infrared light, electromagnetics and acoustics for camera, radar and lidar.~~inclusive of final net working capital adjustments.

The operating results of each 2019 acquisition have been included in ~~the Company's~~our condensed consolidated financial statements since each respective date of acquisition. ~~The effects of the business combinations were not material to the Company's consolidated results of operations individually or in the aggregate.~~


5.	~~Other Receivables and Current Assets and Other Long-Term Liabilities~~

~~The Company's~~5.Other Receivables and Current Assets, Other Accrued Expenses and Liabilities, and Other Long-Term Liabilities

Our other receivables and current assets, other accrued expenses and liabilities, and other long-term liabilities comprise the following balances:

(in thousands) September 30,
2019 December 31,
2018
Receivables related to unrecognized revenue $ 101,939
$ 167,144
Income taxes receivable, including overpayments and refunds 32,921
13,709
Prepaid expenses and other current assets 42,874
35,260
Total other receivables and current assets $ 177,734
$ 216,113

Uncertain tax positions
$ 33,105
$ 29,279
Other long-term liabilities 29,379
32,294
Total other long-term liabilities $ 62,484
$ 61,573


(in thousands)	June 30, 2020		December 31, 2019
Receivables related to unrecognized revenue	$	112,187	$	177,679
Income taxes receivable, including overpayments and refunds	47,859		26,672
Prepaid expenses and other current assets	45,992		45,268
Total other receivables and current assets	$	206,038	$	249,619

Accrued vacation	34,478		24,336
Consumption, VAT and sales tax liabilities	18,377		36,398
Accrued expenses and other current liabilities	89,415		82,213
Total other accrued expenses and liabilities	$	142,270	$	142,947

Uncertain tax positions	$	67,341	$	64,375
Other long-term liabilities	28,742		32,051
Total other long-term liabilities	$	96,083	$	96,426

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

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6.	~~Earnings Per Share~~

6.Earnings Per Share

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

The details of basic and diluted EPS are as follows:


	Three Months Ended						Six Months Ended
(in thousands, except per share data)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Net income	$	96,564	$	109,750	$	142,628	$	195,980
Weighted average shares outstanding – basic	85,651		83,978		85,724		83,871
Dilutive effect of stock plans	1,283		1,505		1,428		1,617
Weighted average shares outstanding – diluted	86,934		85,483		87,152		85,488
Basic earnings per share	$	1.13	$	1.31	$	1.66	$	2.34
Diluted earnings per share	$	1.11	$	1.28	$	1.64	$	2.29
Anti-dilutive shares	26		—		27		—

Three Months Ended Nine Months Ended
(in thousands, except per share data) September 30,
2019 September 30,
2018 September 30,
2019 September 30,
2018
Net income $ 89,463
$ 89,336
$ 285,443
$ 266,212
Weighted average shares outstanding – basic 84,109
84,158
83,951
84,065
Dilutive effect of stock plans 1,624
1,885
1,619
1,995
Weighted average shares outstanding – diluted 85,733
86,043
85,570
86,060
Basic earnings per share $ 1.06
$ 1.06
$ 3.40
$ 3.17
Diluted earnings per share $ 1.04
$ 1.04
$ 3.34
$ 3.09
Anti-dilutive shares 25
—
8
—

7.Goodwill and Intangible Assets


7.	~~Goodwill and~~ Intangible ~~Assets~~

~~The Company's intangible~~ assets are classified as follows:

September 30, 2019 December 31, 2018
(in thousands)
Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization
Finite-lived intangible assets:
Developed software and core technologies $ 455,998
$ (325,583 ) $ 410,680
$ (314,730 )
Customer lists and contract backlog 238,373
(127,770 ) 209,031
(117,614 )
Trade names 142,224
(116,221 ) 137,225
(113,677 )
Total $ 836,595
$ (569,574 ) $ 756,936
$ (546,021 )
Indefinite-lived intangible asset:
Trade name $ 357
$ 357


	June 30, 2020						December 31, 2019
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Developed software and core technologies	$	665,779	$	(349,705)	$	635,063	$	(332,622)
Customer lists and contract backlog	258,239		(129,149)		269,629		(132,596)
Trade names	155,716		(119,543)		154,259		(117,379)
Total	$	1,079,734	$	(598,397)	$	1,058,951	$	(582,597)
Indefinite-lived intangible asset:
Trade name	$	357			$	357

Finite-lived intangible assets are amortized over their estimated useful lives of two years to seventeen years. Amortization expense for the intangible assets reflected above was ~~$8.5~~$13.9 million and ~~$9.0~~$8.6 million for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Amortization expense for the intangible assets reflected above was ~~$25.4~~$27.6 million and ~~$33.8~~$16.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

As of ~~September~~June 30, ~~2019,~~2020, estimated future amortization expense for the intangible assets reflected above iswas as follows:


(in thousands)			(in thousands)
Remainder of 2019	$	8,499
2020	36,101
Remainder of 2020			Remainder of 2020	$	27,679
2021	34,100		2021	55,045
2022	32,780		2022	56,038
2023	31,122		2023	55,690
2024	28,728		2024	54,226
2025			2025	50,507
Thereafter	95,691		Thereafter	182,152
Total intangible assets subject to amortization	267,021		Total intangible assets subject to amortization	481,337
Indefinite-lived trade name	357		Indefinite-lived trade name	357
Other intangible assets, net	$	267,378	Other intangible assets, net	$	481,694

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The changes in goodwill during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were as follows:

(in thousands) 2019 2018
Beginning balance – January 1 $ 1,572,455
$ 1,378,553
Acquisitions and adjustments⁽¹⁾
219,009
204,271
Currency translation (19,602 ) (7,257 )
Ending balance – September 30 $ 1,771,862
$ 1,575,567


(in thousands)	2020		2019
Beginning balance – January 1	$	2,413,280	$	1,572,455
Acquisitions and adjustments⁽¹⁾	69,330		209,093

Currency translation	(8,311)		(5,814)
Ending balance – June 30	$	2,474,299	$	1,775,734

⁽¹⁾ In accordance with the accounting for business combinations, ~~the Company~~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 ~~the Company~~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. Such adjustments are not material to our consolidated financial statements.

During the first quarter of ~~2019, the Company~~2020, 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, ~~2019.~~2020. Given the adverse economic and market conditions caused by COVID-19, 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 values over the carrying amounts in the most recent impairment test, we determined it was not more likely than not that an impairment existed as of March 31, 2020. No other events or circumstances changed during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 that would indicate that the fair values of ~~the Company's~~our reporting unit and indefinite-lived intangible asset are below their carrying amounts.


8.	~~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's~~our own assumptions used to measure assets and liabilities at fair value.

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

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


			Fair Value Measurements at Reporting Date Using:
(in thousands)	June 30, 2020		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	225,812	$	225,812	$	—	$	—
Short-term investments	$	433	$	—	$	433	$	—
Deferred compensation plan investments	$	1,114	$	1,114	$	—	$	—

Fair Value Measurements at Reporting Date Using:
(in thousands) September 30,
2019
Quoted Prices in
Active Markets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents $ 301,060
$ 301,060
$ —
$ —
Short-term investments $ 218
$ —
$ 218
$ —
Deferred compensation plan investments $ 4,193
$ 4,193
$ —
$ —

Fair Value Measurements at Reporting Date Using:
(in thousands) December 31, 2018
Quoted Prices in
Active Markets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents $ 446,055
$ 446,055
$ —
$ —
Short-term investments $ 225
$ —
$ 225
$ —
Deferred compensation plan investments $ 1,646
$ 1,646
$ —
$ —


			Fair Value Measurements at Reporting Date Using:
(in thousands)	December 31, 2019		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	322,455	$	322,455	$	—	$	—
Short-term investments	$	288	$	—	$	288	$	—
Deferred compensation plan investments	$	1,110	$	1,110	$	—	$	—

The cash equivalents in the preceding tables represent money market 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 original 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-employee ~~Directors.~~directors who elected to diversify their vested deferred stock awards. 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's~~our condensed consolidated balance sheets.


9.	~~Leases~~

~~The Company~~9.Leases

We primarily ~~has~~have operating leases for office space and leased cars included in ~~its ROU~~our right-of-use (ROU) assets and lease liabilities. ~~The Company's~~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, ~~the Company is~~we are reasonably certain itwe will not terminate the lease agreement. Absent the exercise of options in the lease, ~~the Company's~~our remaining base rent

~~(inclusive~~ (inclusive of property taxes and certain operating costs) is ~~$4.3 million per annum for the first five years of the lease term,~~ $4.5 million per annum ~~for years six~~ through ~~ten~~2024 and $4.7 million per annum for ~~years eleven through fifteen.~~2025 - 2029.

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The components of ~~the Company's~~our global lease cost reflected in the condensed consolidated statements of income are as follows:


						Three Months Ended						Six Months Ended
(in thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		(in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Lease liability cost	$	5,684	$	16,579	Lease liability cost	$	6,280	$	5,610	$	12,498	$	10,895
Variable lease cost not included in the lease liability⁽¹⁾	1,126		2,847		Variable lease cost not included in the lease liability⁽¹⁾	1,224		924		2,321		1,721
Total lease cost	$	6,810	$	19,426	Total lease cost	7,504		6,534		14,819		12,616

⁽¹⁾ Variable lease cost includes common area maintenance, property taxes, utilities and fluctuations in rent due to a change in an index or rate.

~~For the three and nine months ended September 30, 2018, lease cost totaled $6.1 million and $16.3 million, respectively.~~

Other information related to operating leases is as follows:

(in thousands) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of the lease liability:
Operating cash flows from operating leases $ (5,242 ) $ (14,551 )
Right-of-use assets obtained in exchange for new operating lease liabilities

$ 6,155
$ 29,262

~~As of September 30, 2019, the weighted-average remaining lease term of operating leases was 7.8 years, and the weighted-average discount rate of operating leases was 3.7%.~~


	Three Months Ended						Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Cash paid for amounts included in the measurement of the lease liability:
Operating cash flows from operating leases	$	(5,668)	$	(4,977)	$	(11,401)	$	(9,309)
Right-of-use assets obtained in exchange for new operating lease liabilities	642		9,272		20,243		23,107


	As of June 30,
	2020		2019
Weighted-average remaining lease term of operating leases	7.7 years		7.8 years
Weighted-average discount rate of operating leases	3.3	%	3.3	%

The maturity schedule of the operating lease liabilities as of ~~September~~June 30, ~~2019~~2020 is as follows:


(in thousands)				(in thousands)
Remainder of 2019	$	6,335
2020	20,192
Remainder of 2020				Remainder of 2020	$	11,395
2021	18,178			2021	22,531
2022	15,472			2022	19,549
2023	11,748			2023	14,962
2024				2024	14,245
Thereafter	54,966			Thereafter	57,847
Total future lease payments	126,891			Total future lease payments	140,529
Less: Present value adjustment	(19,059		)	Less: Present value adjustment	(17,810)
Present value of future lease payments⁽¹⁾	$	107,832		Present value of future lease payments⁽¹⁾	$	122,719

⁽¹⁾Includes the current portion of operating lease liabilities of ~~$16.7~~$19.1 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~~June 30, ~~2019.~~2020.

~~The future minimum lease payments under ASC 840, including termination fees, under noncancellable operating leases for office space in effect at December 31, 2018 were as follows:~~

(in thousands)
2019 $ 16,354
2020 12,469
2021 10,177
2022 8,523
2023 6,809
Thereafter 14,267
Total $ 68,599


~~10.~~	~~Debt~~

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10.Debt

In February 2019, ~~the Company~~we entered into a credit agreement for a ~~$500~~$500.0 million unsecured revolving credit facility, which includes a ~~$50~~$50.0 million sublimit for the issuance of letters of credit (Revolving Credit Facility), with Bank of America, N.A. as the Administrative Agent. The ~~revolving credit facility~~Revolving Credit Facility becomes payable in full on February 22, 2024 and is available for general corporate purposes, including, among others, to finance acquisitions and capital ~~expenditures and becomes payable in full on February 22, 2024.~~

Borrowings under the revolving credit facility will accrue interest at the Eurodollar rate plus an applicable margin or at the base rate. The base rate is the applicable margin plus the highest of (i) the federal funds rate plus 0.500%, (ii) the Bank of America prime rate and (iii) the Eurodollar rate plus 1.000%. The applicable margin for these borrowings is a percentage per annum based on the lower of (1) a pricing level determined by the Company’s then-current consolidated leverage ratio and (2) a pricing level determined by the Company’s debt ratings (if such debt ratings exist). This results in a margin ranging from 1.125% to 1.750% and 0.125% to 0.750% for the Eurodollar rate and base rate, respectively.

The credit agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The credit agreement also contains a financial covenant requiring the Company and its subsidiaries to maintain a consolidated leverage ratio of indebtedness to earnings before interest, taxes, depreciation and amortization 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 million.

The credit agreement will terminate and all amounts owing thereunder will be due and payable on February 22, 2024 unless (i) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (ii) the maturity date is further extended upon the Company's request, subject to the agreement of the lenders.

~~As of September 30, 2019, there were no outstanding borrowings under the credit agreement, and the Company was in compliance with all covenants.~~

~~See Note 15 Subsequent Events for information on the October 16, 2019 amendment to this credit agreement.~~


~~11.~~	~~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,
2019 September 30,
2018
Number of shares repurchased 330
1,174
Average price paid per share $ 179.41
$ 164.14
Total cost $ 59,116
$ 192,787

In February 2018, 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, 2019, 3.5 million shares remained available for repurchase under the program. During the three months ended September 30, 2019, the Company did not repurchase any shares of common stock.


~~12.~~	~~Stock-Based Compensation~~

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

Three Months Ended
Nine Months Ended
(in thousands, except per share data) September 30,
2019
September 30,
2018
September 30,
2019
September 30,
2018
Cost of sales:

Maintenance and service $ 2,422

$ 1,438

$ 6,024

$ 3,880
Operating expenses:

Selling, general and administrative 16,774

13,484

44,408

33,288
Research and development 12,666

8,061

34,352

21,719
Stock-based compensation expense before taxes 31,862

22,983

84,784

58,887
Related income tax benefits (9,847 )
(8,611 )
(30,075 )
(30,311 )
Stock-based compensation expense, net of taxes $ 22,015

$ 14,372

$ 54,709

$ 28,576
Net impact on earnings per share:

Basic earnings per share $ (0.26 )
$ (0.17 )
$ (0.65 )
$ (0.34 )
Diluted earnings per share $ (0.26 )
$ (0.17 )
$ (0.64 )
$ (0.33 )


~~13.~~	~~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 Ended Nine Months Ended
(in thousands) September 30,
2019 September 30,
2018 September 30,
2019 September 30,
2018
United States $ 146,761
$ 106,229
$ 425,212
$ 327,784
Japan 35,749
36,309
116,364
109,050
Germany 37,541
27,831
93,847
97,262
South Korea 16,902
12,943
72,833
45,468
France 17,226
14,035
46,825
44,638
China 18,057
14,568
43,904
38,616
Other Europe, Middle East and Africa (EMEA)
44,860
45,602
142,337
136,719
Other international 26,803
31,901
88,342
78,667
Total revenue $ 343,899
$ 289,418
$ 1,029,664
$ 878,204

~~Property and equipment by geographic area is as follows:~~

(in thousands) September 30,
2019 December 31,
2018
United States $ 48,886
$ 46,605
India 5,641
4,176
United Kingdom 3,696
1,238
Other EMEA 7,694
5,882
Other international 4,378
3,754
Total property and equipment, net $ 70,295
$ 61,655


~~14.~~	~~Contingencies and Commitments~~

The Company is subject to various investigations, claims and legal proceedings that arise in the ordinary course of business, including commercial disputes, labor and employment matters, tax audits, alleged infringement of intellectual property rights and other matters. In the opinion of the Company, the resolution of pending matters is not expected to have a material adverse effect on the Company's 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's results of operations, cash flows or financial position.

An 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 Company could incur tax charges and related liabilities of approximately $7.2 million. The service tax issues raised in the Company’s notices and inquiries are very similar to the case, M/s Microsoft Corporation (I) (P) Ltd. Vs. Commissioner of Service Tax, New Delhi, wherein the Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT) passed a favorable ruling to Microsoft. The Microsoft case ruling was subsequently challenged in the Supreme Court by the Indian tax authority. The Company can provide no assurances on the impact that the present Microsoft case’s decision will have on the Company’s cases. The Company is uncertain as to when these service tax matters will be concluded.

The Company sells software licenses and services to its customers under contractual agreements. Such agreements generally include certain provisions indemnifying the customer against claims of intellectual property infringement by third parties arising from such customer’s usage of the Company's products or services. To date, payments related to these indemnification provisions have been immaterial. For several reasons, including the lack of prior material indemnification claims, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnification provisions.


~~15.~~	~~Subsequent Events~~

On November 1, 2019, the Company completed the acquisition of 100% of the shares of Livermore Software Technology Corporation (LSTC), the premier provider of explicit dynamics and other advanced finite element analysis technology. The acquisition will empower ANSYS customers to solve a new class of engineering challenges, including developing safer automobiles, aircraft and trains while reducing or even eliminating the need for costly physical testing. The transaction closed with a purchase price of $779.9 million, which included $472.7 million in cash and the issuance of 1.4 million shares of ANSYS common stock in an unregistered offering to the prior owners of LSTC. The fair value of the common stock issued as consideration was based on the volume-weighted average price of ANSYS common stock on November 1, 2019 of $220.74, resulting in a fair value of $307.2 million.

expenditures.

In connection with the acquisition of ~~LSTC, the Company entered into an amendment to its existing~~LST, we amended our credit agreement ~~dated~~(Amended Credit Agreement) on October 16, 2019. The amendment ~~provides~~provided for a new $500.0 million unsecured term loan facility to finance the acquisition. The term loan was funded on November 1, 2019 and matures on November 1, 2024. Principal on the term loan will be payable on the last business day of each fiscal quarter commencing with the ninth full fiscal quarter after the funding date at a rate of 5%1.25% per ~~annum,~~quarter, increasing to ~~10%~~2.50% per ~~annum~~quarter after the next four fiscal quarters. ~~All other terms, including financial~~We repaid $75.0 million of the unsecured term loan balance in January 2020 prior to the scheduled maturity dates in 2022 ($25.0 million) and 2023 ($50.0 million).

Borrowings under the Amended Credit Agreement accrue interest at the Eurodollar rate plus an applicable margin or at the base rate, at our election. For the quarter ended June 30, 2020, we elected to apply the Eurodollar rate. The base rate is the applicable margin plus the highest of (i) the federal funds rate plus 0.500%, (ii) the Bank of America prime rate and (iii) the Eurodollar rate plus 1.000%. The applicable margin for these 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 debt ratings (if such debt ratings exist). This results in a margin ranging from 1.125% to 1.750% and 0.125% to 0.750% for the Eurodollar rate and base rate, respectively. The weighted-average interest rates in effect during the three and six months ended June 30, 2020 were 2.575% and 2.793%, respectively. As of June 30, 2020, the rate in effect was 1.433%.

The Amended Credit Agreement contains language in the event the Eurodollar rate is not available due to LIBOR changes. If this occurs, the base rate will be used for borrowings. However, we may work with the Administrative Agent to amend the agreement to replace the Eurodollar rate with (i) one or more rates based on the Secured Overnight Financing Rate (SOFR); or (ii) another alternative benchmark rate, subject to the lenders' approval.

The Amended Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The Amended Credit Agreement also contains a financial covenant requiring us to maintain a consolidated leverage ratio of indebtedness to earnings before interest, taxes, depreciation and amortization not exceeding 3.50 to 1.00 as of the ~~applicable interest rate~~end of any fiscal quarter (for the four-quarter period ending on ~~all loans~~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 June 30, 2020 and December 31, 2019, there were no outstanding borrowings under the ~~credit agreement, including~~unsecured Revolving Credit Facility, and the ~~new~~carrying value of the term loan ~~remain~~was $423.7 million, which is net of $1.3 million of unamortized debt issuance costs, and $498.5 million, which is net of $1.5 million of unamortized debt issuance costs, respectively. The next principal payment on the ~~same.~~term loan is not required until 2024. We were in compliance with all covenants as of June 30, 2020 and December 31, 2019.

~~On November 1, 2019,~~

11.Income Taxes

Our income before income tax provision, income tax provision and effective tax rates were as follows:


	Three Months Ended									Six Months Ended
(in thousands, except percentages)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Income before income tax provision	$	112,585		$	129,941		$	145,909		$	228,607
Income tax provision	16,021			20,191			3,281			32,627
Effective tax rate	14.2		%	15.5		%	2.2		%	14.3		%

Tax expense for the ~~Company completed~~first half of 2020 benefited due to increased stock compensation benefits, many of which were recognized discretely in the ~~acquisition~~first quarter.

Table of ~~100%~~Contents

12.Stock Repurchase Program

Under our stock repurchase program, we repurchased shares as follows:


	Six Months Ended
(in thousands, except per share data)	June 30, 2020		June 30, 2019
Number of shares repurchased	690		330
Average price paid per share	$	233.48	$	179.41
Total cost	$	161,029	$	59,116

All of the shares of ~~Dynardo,~~common stock repurchased during the first six months of 2020 were repurchased in the first quarter of 2020. As of June 30, 2020, 2.8 million shares remained available for repurchase under the program.

13.Stock-Based Compensation

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


	Three Months Ended						Six Months Ended
(in thousands, except per share data)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Cost of sales:
Maintenance and service	$	3,464	$	2,374	$	6,330	$	3,602
Operating expenses:
Selling, general and administrative	16,319		14,503		31,463		27,634
Research and development	14,347		12,245		27,278		21,686
Stock-based compensation expense before taxes	34,130		29,122		65,071		52,922
Related income tax benefits	(10,883)		(9,152)		(36,789)		(20,228)
Stock-based compensation expense, net of taxes	$	23,247	$	19,970	$	28,282	$	32,694
Net impact on earnings per share:
Basic earnings per share	$	(0.27)	$	(0.24)	$	(0.33)	$	(0.39)
Diluted earnings per share	$	(0.27)	$	(0.23)	$	(0.32)	$	(0.38)

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 Ended						Six Months Ended
(in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
United States	$	184,143	$	137,789	$	309,256	$	278,451
Japan	55,849		47,042		93,208		80,615
Germany	27,274		25,879		57,371		56,306
South Korea	17,461		40,853		33,022		55,931
Other Europe, Middle East and Africa (EMEA)	60,083		67,212		119,393		127,076
Other international	40,851		49,860		78,396		87,386
Total revenue	$	385,661	$	368,635	$	690,646	$	685,765

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Property and equipment by geographic area is as follows:


(in thousands)	June 30, 2020		December 31, 2019
United States	$	62,113	$	59,473
France	5,593		3,657
India	5,479		5,660
Germany	4,879		4,237
United Kingdom	3,600		4,194
Other EMEA	1,947		1,875
Other international	5,181		4,540
Total property and equipment, net	$	88,792	$	83,636

15.Contingencies and Commitments

We are subject to various investigations, claims and legal proceedings that arise in the ordinary course of business, including commercial disputes, labor and employment matters, tax audits, alleged infringement of intellectual property rights and other matters. In our opinion, the resolution of pending matters is not expected to have a ~~leading provider~~material adverse effect on our condensed consolidated results of ~~multidisciplinary analysis~~operations, cash flows or financial position. However, each of these matters is subject to various uncertainties and ~~optimization technology, for a purchase price~~it is possible that an unfavorable resolution of one or more of these proceedings could materially affect our results of operations, cash flows or financial position.

Our Indian subsidiary has several service tax audits pending that have resulted in formal inquiries being received on transactions through mid-2012. We could incur tax charges and related liabilities of approximately ~~€30.0~~$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 June 30, 2020. The ~~acquisition gives ANSYS customers access to a full suite of process integration~~service tax issues raised in our notices and ~~robust design tools — empowering users to identify optimal product designs faster and more economically.~~

~~Due~~inquiries are very similar to the ~~limited time since~~case, M/s Microsoft Corporation (I) (P) Ltd. Vs. Commissioner of Service Tax, New Delhi, wherein the ~~respective acquisition dates,~~Delhi Customs, Excise and Service Tax Appellate Tribunal (CESTAT) issued a favorable ruling to Microsoft. The Microsoft ruling was subsequently challenged in the ~~initial accounting for~~Supreme Court by the ~~business combinations~~Indian tax authority and a decision is ~~incomplete. As a result,~~still pending. We can provide no assurances on the ~~Company is unable~~impact that the present Microsoft case’s decision will have on our cases. We are uncertain as to ~~provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed. For LSTC, this information~~when these service tax matters will be ~~included in an amendment expected~~concluded.

We sell software licenses and services to ~~be filed in January 2020~~our customers under contractual agreements. Such agreements generally include certain provisions indemnifying the customer against claims of intellectual property infringement by third parties arising from such customer’s usage of our products or services. To date, payments related to these indemnification provisions have been immaterial. For several reasons, including the ~~Company's Current Report on Form 8-K that was initially filed on November 6, 2019. For Dynardo, this information will be included in~~lack of prior material indemnification claims, we cannot determine the ~~Company's Annual Report on Form 10-K for the year ended December 31, 2019.~~maximum amount of potential future payments, if any, related to such indemnification provisions.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of ANSYS, Inc.

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of ANSYS, Inc. and subsidiaries (the “Company”) as of ~~September~~June 30, ~~2019,~~2020, the related condensed consolidated statements of income, comprehensive income, and stockholders’ equity for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, and of cash flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019 and the related notes (collectively referred to as the “interim financial ~~information"~~information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it 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) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2018,~~2019, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~28, 2019,~~27, 2020, 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, ~~2018,~~2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. 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 PCAOB, 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.

/s/ Deloitte & Touche LLP

Pittsburgh, Pennsylvania

August 5, 2020

~~November 7, 2019~~

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, and with ~~the Company’s~~our audited consolidated financial statements and notes thereto for the year ended December 31, ~~2018~~2019 included in the ~~2018~~2019 Form 10-K filed with the Securities and Exchange Commission. The ~~Company’s~~ discussion and analysis of ~~its~~our financial condition and results of operations are based upon ~~the Company’s~~our condensed consolidated financial statements, which have been prepared in accordance with ~~GAAP.~~

~~Overview~~:

~~Overall GAAP and Non-GAAP Results~~

~~The Company's growth rates of GAAP and non-GAAP results for the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018 were as follows:~~

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
GAAP Non-GAAP GAAP Non-GAAP
Revenue 18.8 % 17.9 % 17.2 % 17.0 %
Operating income 12.9 % 16.1 % 11.0 % 13.3 %
Diluted earnings per share 0.0 % 8.4 % 8.1 % 12.2 %

The Company experienced higher revenue during the three and nine months ended September 30, 2019 from growth in lease licenses, maintenance and service, and additional revenue related to acquisitions. The Company also experienced increased operating expenses primarily due to increased personnel costs, higher stock-based compensation and additional operating expenses related to acquisitions, partially offset by a reduction in expenses due to a stronger U.S. Dollar.

~~The non-GAAP results~~ ~~exclude the income statement effects of the acquisition~~generally accepted accounting adjustments to deferred revenue, stock-based compensation, amortization of acquired intangible assets, transaction costs related to business combinations, and adjustments related to the transition tax associated with the Tax Cuts and Jobs Act. ~~For further disclosure regarding non-GAAP results, see the section titled "Non-GAAP Results" immediately preceding the section titled "Liquidity and Capital Resources."~~

Constant currency amounts exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 2019 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 2018 comparable period, rather than the actual exchange rates in effect for 2019. Constant currency growth rates are calculated by adjusting the 2019 reported revenue and operating income amounts by the 2019 currency fluctuation impacts and comparing to the 2018 comparable period reported revenue and operating income amounts.

~~Impact of Foreign Currency~~

The Company's comparative financial results were impacted by fluctuations in the U.S. Dollar during the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018. The impacts on the Company's revenue and operating income due to currency fluctuations are reflected in the table below. Amounts in brackets indicate a net adverse impact from currency fluctuations.

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
(in thousands) GAAP Non-GAAP GAAP Non-GAAP
Revenue $ (4,481 ) $ (4,543 ) $ (21,842 ) $ (22,110 )
Operating income $ (2,051 ) $ (2,246 ) $ (9,210 ) $ (10,039 )

~~In constant currency, the Company's growth rates were as follows:~~

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
GAAP Non-GAAP GAAP Non-GAAP
Revenue 20.4 % 19.5 % 19.7 % 19.5 %
Operating income 15.1 % 17.9 % 14.1 % 15.8 %

~~Other Financial Information~~

~~The Company’s financial position includes $732.9 million in cash and short-term investments, and working capital of $732.4 million as of September 30, 2019.~~

During the nine months ended September 30, 2019, the Company repurchased 0.3 million shares for $59.1 million at an average price of $179.41 per share. No shares were repurchased during the three months ended September 30, 2019.

During the fourth quarter of 2019, the Company completed the acquisitions of LSTC for $779.9 million and Dynardo for €30.0 million. In conjunction with the LSTC transaction, ANSYS amended its existing credit agreement and obtained $500.0 million of term debt financing to fund the cash component of the purchase price.principles (GAAP).

Business:

~~ANSYS~~Ansys, a Delaware 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 aerospace and defense, automotive, electronics, semiconductors, energy, materials and chemical processing, turbomachinery, consumer products, healthcare, and sports. Headquartered south of Pittsburgh, Pennsylvania, ~~the Company~~we employed approximately ~~3,900~~4,400 people as of ~~September~~June 30, ~~2019. ANSYS focuses~~2020. We focus on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. ~~The Company distributes its~~We distribute our suite of simulation technologies through a global network of independent resellers and distributors (collectively, channel ~~partners~~partners) and direct sales offices in strategic, global locations. It is ~~the Company’s~~our intention to continue to maintain this hybrid sales and distribution model.

~~The Company licenses its~~We license our technology to businesses, educational institutions and governmental agencies. Growth in ~~the Company’s~~our 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~~our products. ~~The Company believes~~We believe that the features, functionality and integrated multiphysics capabilities of ~~its~~our 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 makes~~We 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.~~conditions, including the impact of the current COVID-19 pandemic. As a result, ~~the Company believes~~we believe that ~~its~~our overall performance is best measured by ~~fiscal-year~~fiscal year results rather than by quarterly results.

~~The Company’s management~~Management considers 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 ~~its~~our software products as compared to ~~its~~our competitors; investing in research and development to develop new and innovative products and increase the capabilities of ~~its~~our existing products; supplying new products and services; focusing on customer needs, training, consulting and support; and enhancing ~~its~~our distribution channels. ~~The Company~~We also ~~uses~~consider acquisitions to supplement ~~its~~our global engineering talent, product offerings and distribution channels.

Overview:

Impact of COVID-19

We are closely monitoring the spread of COVID-19 and continually assessing its current and potential effects on our business. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our business, employees, liquidity, financial condition, results of operations and cash flows.

At the onset of the crisis, we took action to enable our employees to work from home. We closed our offices (including our corporate headquarters) and transitioned to a remote work environment in North America, Asia and Europe and implemented certain travel restrictions, both of which have disrupted how we operate our business. While most of our offices have since reopened, many of our locations have limited access or have few employees working on site. Remote access remains the primary means of work for a majority of our workforce. Remote work arrangements have not adversely affected our ability to maintain effective financial operations, including our financial reporting systems, internal controls over financial reporting and disclosure controls and procedures. We expect to continue to maintain these effective controls as we continue to work remotely during the COVID-19 pandemic.

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The impact from the rapidly changing market and economic conditions due to the COVID-19 pandemic has disrupted the business of our customers and partners, and has impacted our business and consolidated results of operations. Our current expectations regarding future performance are subject to significant uncertainty and dependent upon how widespread the virus becomes, the duration and severity of the outbreak, the geographic markets affected, the actions taken by governmental authorities to contain the spread of the virus, including the shelter-in-place orders, the nature and scope of government economic recovery measures and other factors. The spread of the virus and economic deterioration caused by the virus have had an adverse impact on our business and, in the future, could have a material adverse impact on our business, as well as on our ability to achieve the financial guidance. We continue to adjust our spending to reflect our expectations for the pace at which economic recovery will occur. These adjustments include slowing the pace of our hiring and reducing non-headcount-related discretionary spending, as well as spending less on certain facilities and infrastructure projects. However, we have not and do not intend to reduce our spending on critical digital transformation projects, such as our customer relationship management (CRM) and human resources information system (HRIS) projects, as those projects are critical to our ability to operate efficiently and scale the business for future growth. In addition, we continue to strategically invest in research and development, enabling us to stay on track with our product release targets.

Please see "Note About Forward-Looking Statements" and "Risk Factors" in Part I, Item 1A of our 2019 Form 10-K and Part II, Item 1A of this Quarterly Report on Form 10-Q and the first quarter 2020 Form 10-Q for discussion on additional business risks, including those associated with the COVID-19 pandemic.

Overall GAAP and Non-GAAP Results

The table below presents the percentage change for both our GAAP and non-GAAP results for the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019.


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	GAAP		Non-GAAP		GAAP		Non-GAAP
Revenue	4.6	%	5.2	%	0.7	%	1.2	%
Operating income	(12.3)	%	(1.1)	%	(34.5)	%	(15.9)	%
Diluted earnings per share	(13.3)	%	(3.7)	%	(28.4)	%	(18.6)	%

We experienced an increase in revenue during the three and six months ended June 30, 2020 from growth in maintenance and service revenue and by contributions from our recent acquisitions, partially offset by reductions in software license revenue. The outbreak of COVID-19 also adversely impacted our revenue during the three and six months ended June 30, 2020 with the most pronounced reductions occurring in perpetual licenses. However, due to our diverse customer base, both from a vertical and geographic perspective, as well as the close relationships with customers, we were able to conduct a large amount of business remotely, which partially mitigated the impacts of the COVID-19 outbreak.

We also experienced increased operating expenses primarily due to increased personnel costs, higher stock-based compensation and additional operating expenses related to acquisitions. While our hiring pace was slowed and certain discretionary operational expenses, such as travel, were significantly reduced, the COVID-19 outbreak did not have a material impact on our operating expenses during the three and six months ended June 30, 2020.

The non-GAAP results exclude the income statement effects of the acquisition accounting adjustments to deferred revenue, stock-based compensation, amortization of acquired intangible assets, transaction expenses related to business combinations, and adjustments related to the transition tax associated with the Tax Cuts and Jobs Act. For further disclosure regarding non-GAAP results, see the section titled "Non-GAAP Results."

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Impact of Foreign Currency

Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three and six months ended June 30, 2020 as compared to the three and six months ended June 30, 2019. The impacts on our revenue and operating income due to currency fluctuations are reflected in the table below. Amounts in brackets indicate an adverse impact from currency fluctuations.


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
(in thousands)	GAAP		Non-GAAP		GAAP		Non-GAAP
Revenue	$	(1,542)	$	(1,615)	$	(4,132)	$	(4,211)
Operating income	$	477	$	320	$	216	$	(51)

In constant currency, our growth rates were as follows:


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	GAAP		Non-GAAP		GAAP		Non-GAAP
Revenue	5.0	%	5.6	%	1.3	%	1.8	%
Operating income	(12.7)	%	(1.3)	%	(34.6)	%	(15.8)	%

Constant currency amounts exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 2020 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 2019 comparable period, rather than the actual exchange rates in effect for 2020. Constant currency growth rates are calculated by adjusting the 2020 reported revenue and operating income amounts by the 2020 currency fluctuation impacts and comparing to the 2019 comparable period reported revenue and operating income amounts.

Other Key Business Metric

Annual Contract Value (ACV) is one of our key performance metrics and is useful to investors in assessing the strength and trajectory of our business. 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 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 as follows:


	Three Months Ended June 30,						Change
(in thousands, except percentages)	2020		2019		Amount		%	Constant Currency %
ACV	$	344,406	$	326,145	$	18,261	5.6	5.9


	Six Months Ended June 30,						Change
(in thousands, except percentages)	2020		2019		Amount		%	Constant Currency %
ACV	$	645,456	$	629,635	$	15,821	2.5	3.2

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While the resilience of our business is evident in the growth shown above, the economic conditions due to the recent COVID-19 outbreak has disrupted the business of our customers and partners, and has adversely impacted our business and consolidated results. In addition, during 2019, trade discussions between the U.S. and China led to certain entities being placed on a restricted entity list. These restrictions limited our ability to deliver products and services to these customers. While our 2019 results were adversely impacted by these restrictions for a portion of the year, the 2019 operating results include approximately $20.0 million of ACV related to transactions that occurred prior to the placement of the restrictions.

Other Financial Information

Our financial position includes $745.0 million in cash and short-term investments, and working capital of $750.5 million as of June 30, 2020.

During the six months ended June 30, 2020, we repurchased 0.7 million shares for $161.0 million at an average price of $233.48 per share. Those repurchases occurred during the first quarter of 2020; there were no repurchases during the second quarter.

Geographic Trends:

The following table presents ~~the Company's~~our geographic constant currency revenue growth during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2018:~~2019:


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Americas	32.7	%	11.1	%
EMEA	(4.6)	%	(1.7)	%
Asia-Pacific	(18.6)	%	(9.6)	%
Total	5.0	%	1.3	%

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Americas 34.8 % 28.6 %
EMEA 19.0 % 7.1 %
Asia-Pacific 3.4 % 21.5 %
Total 20.4 % 19.7 %
Under the current accounting for revenue, the value and duration of multi-year leases entered into during the period significantly impact revenue recognition. As a result, regional revenues may fluctuate significantly on a quarterly basis and are not necessarily indicative of customer usage changes or our cash flows for such regions during the periods presented.

~~The Company continues~~To drive additional growth, we continue to focus on a number of sales improvement activities across the geographic regions, including sales hiring, pipeline building, productivity initiatives and customer engagement activities.

AsContinued trade tensions between the U.S. and China, ~~continue,~~together with the ~~Company's~~uncertainty around the COVID-19 outbreak, may further restrict our ability to sell and ~~ship the Company's~~distribute our products to certain customers ~~may be further restricted~~and our ability to collect against existing trade receivables and could have an adverse effect on ~~the Company's~~our business, results of operations or financial condition. Refer to additional details ~~within~~in Part I, Item 1A of our 2019 Form 10-K as supplemented by Part II, Item 1A of this Quarterly Report on Form 10-Q.

Industry Commentary:

~~The Company~~We experienced industry trends consistent with those of 2019 and in the first ~~half~~quarter of ~~2019.~~2020. The high-tech and semiconductor industry was positively impacted by companies' investments in the development of the next generation of increasingly complex chips and technology to support applications in 5G, autonomy and other ~~applications.~~high growth areas. The automotive industry ~~continued~~maintained its momentum ~~due to~~through continued investments ~~in autonomous vehicles and electrification. Defense spending continued~~ to support ~~growth~~the development of electrification and autonomous technologies, as well as in vehicle crash safety applications. Investment from the defense segment supported performance in the aerospace and defense industry.

Use of Estimates:

The preparation of these financial statements requires ~~the Company~~us 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 its~~we evaluate our estimates, including those related to ~~the~~ fair values of stock awards, bad debts, contract revenue, acquired deferred revenue, the standalone selling prices of ~~its~~our products and services, the valuation of goodwill and other intangible assets, deferred compensation, income taxes, uncertain tax positions, tax valuation reserves, operating lease assets and liabilities, useful lives for depreciation and amortization, and contingencies and litigation. ~~The Company bases its~~We 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 ~~available~~apparent from other sources. Actual results may differ from these estimates.

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Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to, the following statements, as well as statements that contain such words as "anticipates," "intends," "believes," "plans" and other similar expressions:

~~The Company's~~•Our expectations regarding the impacts of the COVID-19 pandemic.

•Our expectations regarding the impacts of new accounting guidance.

~~The Company's~~•Our expectations regarding the outcome of ~~its~~our service tax audit cases.

~~The Company's~~•Our assessment of the ultimate liabilities arising from various investigations, claims and legal proceedings.

~~The Company's~~•Our expectations regarding future claims related to indemnification obligations.

~~The Company's~~•Our intentions regarding ~~its~~our hybrid sales and distribution model.

~~The Company's~~•Our statement regarding the strength of the features, functionality and integrated multiphysics capabilities of ~~its~~our software products.

~~The Company's~~•Our belief that ~~its~~our overall performance is best measured by fiscal-year results rather than by quarterly results.

~~The Company's~~•Our expectations regarding increased lease license volatility due to an increased customer preference for time-based licenses.

~~The Company's~~•Our estimates regarding the expected impact on reported revenue related to the acquisition accounting treatment of deferred revenue.

~~The Company's~~•Our expectation that itwe will continue to make targeted investments in ~~its~~our global sales and marketing organizations and ~~its~~our global business infrastructure to enhance and support ~~its~~our revenue-generating activities.

~~The Company's~~•Our intentions related to investments in research and development, particularly as it relates to expanding the ease of use and capabilities of ~~its~~our broad portfolio of simulation software products.

~~The Company's~~•Our expectations regarding the accelerated development of new and innovative products to the marketplace while lowering design and engineering costs for customers as a result of our acquisitions.

•Our statements regarding the impact of global economic conditions.

•Our intention to repatriate previously taxed earnings in excess of working capital needs and to reinvest all other earnings of ~~its~~our non-U.S. subsidiaries.

~~The Company's~~•Our plans related to future capital spending.

•The sufficiency of existing cash and cash equivalent balances to meet future working capital and capital expenditure requirements.

~~The Company's~~•Our belief that the best uses of ~~its~~our excess cash are to invest in the business and to repurchase stock in order to both offset dilution and return capital to stockholders, in excess of ~~its~~our requirements, with the goal of increasing stockholder value.

~~The Company's~~•Our intentions related to investments in complementary companies, products, services and technologies.

~~The Company's~~•Our expectation that changes in currency exchange rates will affect ~~the Company's~~our financial position, results of operations and cash flows.

~~The Company’s~~•Our expectations regarding acquisitions and integrating such acquired companies to realize the benefits of cost reductions and other synergies relating thereto.

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~~our control. ~~The Company’s~~Our 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 disclosed in ~~the Company’s 2018~~our 2019 Form 10-K, Part I, Item ~~1A.~~1A "Risk Factors" and our first quarter 2020 Form 10-Q, Part II, Item 1A "Risk Factors." Information regarding any new risk factors or material changes to these risk factors has been included within Part II, Item 1A of this Quarterly Report on Form 10-Q.

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Results of Operations

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to Three Months Ended ~~September~~June 30, ~~2018~~2019

Revenue:


	Three Months Ended June 30,						Change
(in thousands, except percentages)	2020		2019		Amount		%	Constant Currency %
Revenue:
Lease licenses	$	113,209	$	100,004	$	13,205	13.2	13.0
Perpetual licenses	56,132		70,495		(14,363)		(20.4)	(20.0)
Software licenses	169,341		170,499		(1,158)		(0.7)	(0.6)
Maintenance	203,179		185,118		18,061		9.8	10.5
Service	13,141		13,018		123		0.9	1.9
Maintenance and service	216,320		198,136		18,184		9.2	9.9
Total revenue	$	385,661	$	368,635	$	17,026	4.6	5.0

Three Months Ended September 30, Change
(in thousands, except percentages) 2019 2018 Amount % Constant Currency %
Revenue:
Lease licenses $ 70,693
$ 43,202
$ 27,491
63.6 66.4
Perpetual licenses 66,451
65,901
550
0.8 2.1
Software licenses 137,144
109,103
28,041
25.7 27.5
Maintenance 193,189
171,463
21,726
12.7 14.0
Service 13,566
8,852
4,714
53.3 54.7
Maintenance and service 206,755
180,315
26,440
14.7 16.0
Total revenue $ 343,899
$ 289,418
$ 54,481
18.8 20.4

~~The Company’s~~Our revenue in the quarter ended ~~September~~June 30, ~~2019~~2020 increased ~~18.8%~~4.6% as compared to the quarter ended ~~September~~June 30, ~~2018,~~2019, while revenue grew ~~20.4%~~5.0% in constant currency. The growth rate was favorably impacted by ~~the Company’s~~our continued investment in ~~its~~our global sales, support and marketing organizations, as well as ~~its acquisitions.~~our recent acquisitions and the timing and duration of our multi-year lease contracts. The growth rate was negatively impacted by the shifting preference of customers toward time-based licensing, the trade restrictions between the United States and China and the impact of COVID-19. Lease license revenue increased ~~63.6%~~13.2%, or ~~66.4%~~13.0% in constant currency, as compared to the prior-year quarter. Perpetual license revenue, which is derived primarily from new sales during the quarter, ~~driven primarily by an increase~~decreased 20.4%, or 20.0% in ~~multi-year lease contracts.~~constant currency, as compared to the prior-year quarter. Annual maintenance contracts that were sold with new perpetual licenses, maintenance contracts for new perpetual licenses sold in previous quarters and the maintenance portion of lease license contracts ~~each~~collectively contributed to maintenance revenue growth of ~~12.7%~~9.8%, or ~~14.0%~~10.5% in constant currency. Service revenue, driven primarily by a focus on service offerings that provide ~~on-site~~ mentorship on simulation best practices, training and expanding simulation adoption, increased ~~53.3%~~0.9%, or ~~54.7%~~1.9% in constant currency, as compared to the prior-year quarter.

~~The Company continues~~We continue to experience increased interest by some of ~~its~~our larger customers in enterprise agreements that often include longer-term, time-based licenses involving a larger number of ~~the Company's~~our software products. While these arrangements typically involve a higher overall transaction price, the upfront recognition of license revenue related to these larger, multi-year transactions can result in significantly higher lease license revenue ~~and corresponding revenue growth~~ volatility. As software products, across a large variety of applications and industries, become increasingly distributed in software-as-a-service, cloud and other subscription environments in which the licensing approach is time-based rather than perpetual, ~~the Company is~~we are also experiencing a shifting preference from perpetual licenses to time-based licenses across a broader spectrum of ~~its~~our customers. This shifting preference was elevated in the first half of 2020 as a result of the economic impacts of COVID-19, and we expect it to continue into the foreseeable future.

In relation to COVID-19 and our revenue, we currently expect a modest recovery in the business environment during the third quarter with the hope of an even stronger recovery in the fourth quarter. However, businesses have not resumed full operations and our teams and those of our customers will likely continue working remotely. In addition, the EMEA region's traditional extended summer holiday season could further impact the speed of the recovery in the third quarter. As a result of social distancing, our in-person demand generation events and those of our channel partners have been canceled. While we have adjusted to have a stronger digital focus for demand generation, as evidenced by our hosting of our inaugural Simulation World in June, we expect the absence of certain events to have an adverse impact on our results, especially for certain channel partners. In addition, we expect there to be a significant delay in the timing of closing certain transactions, and closing the larger enterprise-type deals may be especially difficult. These deals are often multi-year leases which have a significant impact on our operating results due to up-front revenue recognition of the license. We anticipate that customers will delay certain purchases to later in the year or into 2021. We also anticipate some deterioration in renewal rates among our smaller customers, particularly small- and medium-sized businesses. The third quarter business environment is expected to be modestly stronger than that of the second quarter, but will remain adversely impacted by the continuing effects of COVID-19, with a disproportionate impact on certain customers and industries. We expect a stronger recovery in the fourth quarter, perhaps buoyed by sales transactions that may have been deferred from earlier quarters. However, additional waves of COVID-19 could result in renewed shutdowns that stop or regress economic recovery.

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(in thousands)	Three Months Ended ~~September~~June 30, ~~2019~~2020
Euro	$	~~(4,123~~(1,247)	)
South Korean Won	~~(972~~(705)		)
~~British Pound~~Indian Rupee	~~(611~~(489)		)
~~Taiwan Dollar~~British Pound	~~(87~~(322)		)
~~Indian Rupee~~Canadian Dollar	~~(23~~(192)		)
Japanese Yen	~~1,336~~1,120
~~Other~~Taiwan Dollar	(1253		)
~~Total~~Other	$40		~~(4,481~~
Total	)$	(1,542)

The ~~net overall stronger U.S. Dollar also~~impacts from currency fluctuations resulted in ~~decreased~~increased operating income of ~~$2.1~~$0.5 million for the quarter ended ~~September~~June 30, ~~2019~~2020 as compared to the quarter ended ~~September~~June 30, ~~2018.~~

2019.

As a percentage of revenue, ~~the Company's~~our international and domestic revenues, and ~~the Company's~~our direct and indirect revenues, were as follows:


	Three Months Ended September 30,					Three Months Ended June 30,
	2019		2018			2020		2019
International	57.3	%	63.3	%	International	52.3	%	62.6	%
Domestic	42.7	%	36.7	%	Domestic	47.7	%	37.4	%

Direct	76.8	%	75.5	%	Direct	78.1	%	79.7	%
Indirect	23.2	%	24.5	%	Indirect	21.9	%	20.3	%

In valuing deferred revenue on the balance sheets of ~~the Company's~~our recent acquisitions as of their respective acquisition dates, ~~the Company~~we applied the fair value provisions applicable to the accounting for business combinations, resulting in a reduction of deferred revenue as compared to ~~its~~the historical carrying amount. As a result, ~~the Company's~~our post-acquisition revenue will be less than the sum of what would have otherwise been reported by ~~ANSYS~~us and each acquiree absent the acquisitions. The impacts on reported revenue were ~~$1.6~~$4.0 million and ~~$3.5~~$1.9 million for the quarters ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The expected impacts on reported revenue ~~including an estimate for the Company's fourth quarter acquisitions, range from $3.9 million to $4.5~~are $2.1 million and ~~$10.1 million to $10.7~~$11.3 million for the quarter ending September 30, 2020 and the year ending December 31, ~~2019,~~2020, respectively. The Company has not yet performed a valuation of the acquired deferred revenue for its fourth quarter acquisitions. Until such valuation is completed, the expected impacts on revenue will remain preliminary estimates that are likely to change.

Deferred Revenue and Backlog:

Deferred revenue consists of billings made or payments received in advance of revenue ~~recognition.~~recognition from customer agreements. The deferred revenue on ~~the Company's~~our condensed consolidated balance sheets does not represent the total value of annual or multi-year, noncancellable agreements. ~~The Company's~~Our backlog represents installment billings for periods beyond the current quarterly billing cycle. ~~The Company's~~Our deferred revenue and backlog as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following:


	Balance at June 30, 2020
(in thousands)	Total		Current		Long-Term
Deferred revenue	$	336,188	$	325,098	$	11,090
Backlog	510,282		226,995		283,287
Total	$	846,470	$	552,093	$	294,377

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Balance at September 30, 2019
(in thousands) Total Current Long-Term
Deferred revenue $ 303,315
$ 291,385
$ 11,930
Backlog 347,072
154,549
192,523
Total $ 650,387
$ 445,934
$ 204,453


	Balance at December 31, 2018							Balance at December 31, 2019
(in thousands)	Total		Current		Long-Term		(in thousands)	Total		Current		Long-Term
Deferred revenue	$	343,174	$	328,584	$	14,590	Deferred revenue	$	365,274	$	351,353	$	13,921
Backlog	315,998		147,299		168,699		Backlog	505,469		218,398		287,071
Total	$	659,172	$	475,883	$	183,289	Total	$	870,743	$	569,751	$	300,992

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

Cost of Sales and Operating Expenses:

The tables below reflect ~~the Company's~~our operating results as presented on the condensed consolidated statements of income, which are inclusive of foreign currency translation impacts. Amounts included in the discussions that follow each table are provided in constant currency and are inclusive of costs related to ~~the Company's~~our acquisitions. The impact of foreign exchange translation is discussed separately, where material. ~~Granta Design~~The fourth quarter 2019 acquisition of LST contributed ~~$4.4~~$11.3 million to the overall increase in cost of sales and operating ~~expenses.~~expenses, inclusive of intangible asset amortization.


	Three Months Ended September 30,												Three Months Ended June 30,
	2019			2018			Change								2020					2019				Change
(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount			%		(in thousands, except percentages)	Amount			% of Revenue	Amount		% of Revenue		Amount		%
Cost of sales:												Cost of sales:
Software licenses	$	5,708	1.7	$	4,291	1.5	$	1,417		33.0		Software licenses	$	8,511		2.2	$	6,204	1.7		$	2,307	37.2
Amortization	4,762		1.4	5,530		1.9	(768		)	(13.9	)	Amortization	9,764			2.5	4,755		1.3		5,009		105.3
Maintenance and service	30,895		9.0	26,487		9.2	4,408			16.6		Maintenance and service	35,585			9.2	29,538		8.0		6,047		20.5
Total cost of sales	41,365		12.0	36,308		12.5	5,057			13.9		Total cost of sales	53,860			14.0	40,497		11.0		13,363		33.0
Gross profit	$	302,534	88.0	$	253,110	87.5	$	49,424		19.5		Gross profit	$	331,801		86.0	$	328,138	89.0		$	3,663	1.1

Software Licenses: The increase in the cost of software licenses was primarily due to increased third-party royalties of ~~$1.2~~$2.2 million.

Amortization: The increase in amortization expense was due to the amortization of newly acquired intangible assets.

Maintenance and Service: The increase in maintenance and service costs was primarily due to the following:

~~Increased stock-based compensation of $1.0 million.~~

•Increased salaries ~~of $0.9 million.~~

~~Increased IT maintenance~~ and ~~software hosting~~other headcount-related costs of ~~$0.7~~$3.5 million.

~~Increased consulting costs of $0.6 million.~~

•Increased third-party technical support of ~~$0.5~~$1.3 million.

•Increased ~~severance costs~~stock-based compensation of ~~$0.5~~$1.1 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.


	Three Months Ended June 30,
			2020					2019				Change
(in thousands, except percentages)	Amount			% of Revenue	Amount		% of Revenue		Amount		%
Operating expenses:
Selling, general and administrative	$	128,698		33.4	$	120,412	32.7		$	8,286	6.9
Research and development	86,133			22.3	75,302		20.4		10,831		14.4
Amortization	4,163			1.1	3,796		1.0		367		9.7
Total operating expenses	$	218,994		56.8	$	199,510	54.1		$	19,484	9.8

Three Months Ended September 30,
2019 2018 Change
(in thousands, except percentages) Amount
% of
Revenue
Amount
% of
Revenue
Amount %
Operating expenses:
Selling, general and administrative $ 120,682
35.1 $ 97,576
33.7 $ 23,106
23.7
Research and development 73,018
21.2 59,019
20.4 13,999
23.7
Amortization 3,787
1.1 3,491
1.2 296
8.5
Total operating expenses $ 197,487
57.4 $ 160,086
55.3 $ 37,401
23.4

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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 ~~$12.8~~$10.1 million.

•Increased third-party commissions of $1.9 million.

•Increased stock-based compensation of ~~$3.3~~$1.8 million.

~~Increased professional services of $2.8 million.~~

~~Increased~~•Decreased business travel of ~~$1.4 million.~~$5.7 million due to COVID-19.

~~Increased third-party commissions of $1.2 million.~~

~~The Company anticipates~~We anticipate that itwe will continue to make targeted investments in ~~its~~our global sales and marketing organizations and ~~its~~our global business infrastructure to enhance and support ~~its~~our 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 ~~$7.5~~$9.0 million.

•Increased stock-based compensation of ~~$4.6~~$2.1 million.

~~The Company has~~•Increased IT maintenance and software hosting costs of $1.1 million.

•Decreased business travel of $1.2 million due to COVID-19.

We have traditionally invested significant resources in research and development activities and ~~intends~~intend to continue to make investments in expanding the ease of use and capabilities of ~~its~~our broad portfolio of simulation software ~~products.~~products, even through the COVID-19 pandemic. We do not anticipate the impact of COVID-19 to significantly delay our 2020 product releases, as evidenced by our recent release of Ansys^® 2020 R2 in July.

Interest Income: Interest income for the quarter ended June 30, 2020 was ~~$3.2~~$0.9 million as compared to $3.0 million for the ~~quarters~~quarter ended ~~September~~June 30, ~~2019 and 2018.~~2019. Interest income ~~remained consistent~~decreased as a ~~higher~~result of a decrease in the average rate of return on invested cash ~~balances~~balances.

Interest Expense: Interest expense for the quarter ended June 30, 2020 was ~~offset by~~$3.0 million as compared to $0.2 million for the ~~Company's lower average invested cash balances.~~quarter ended June 30, 2019. Interest expense increased as a result of the interest incurred on debt financing obtained in connection with the acquisition of LST in the fourth quarter of 2019.

Other Income (Expense), net: ~~The Company's~~Our other income (expense) consisted of the following:


	Three Months Ended							Three Months Ended June 30,
(in thousands)	September 30, 2019			September 30, 2018			(in thousands)	2020		2019
Foreign currency gains (losses), net	$	826		$	(1,023	)
Investment gains, net							Investment gains, net	$	3,689	$	48
Foreign currency losses, net							Foreign currency losses, net	(1,804)		(1,869)
Other	(232		)	49			Other	(1)		385
Total other income (expense), net	$	594		$	(974	)	Total other income (expense), net	$	1,884	$	(1,436)

Income Tax Provision: ~~The Company's~~Our income before income tax provision, income tax provision and effective tax ~~rate~~rates were as follows:


	Three Months Ended							Three Months Ended June 30,
(in thousands, except percentages)	September 30, 2019			September 30, 2018			(in thousands, except percentages)	2020			2019
Income before income tax provision	$	108,829		$	95,263		Income before income tax provision	$	112,585		$	129,941
Income tax provision	$	19,366		$	5,927		Income tax provision	$	16,021		$	20,191
Effective tax rate	17.8		%	6.2		%	Effective tax rate	14.2		%	15.5		%

The ~~increase~~decrease in the effective tax rate from the prior year was primarily due to benefits ~~of $6.8 million recorded in 2018 related to global legal~~from entity ~~restructuring activities that did not recur in 2019 and decreased benefits related to stock-based compensation.~~structuring activities.

When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the quarters ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were favorably impacted by tax benefits from stock-based compensation, the foreign-derived intangible income (FDII) deduction, and research and development credits.

Table of Contents

Net Income: ~~The Company's~~Our net income, diluted earnings per share and weighted average shares used in computing diluted earnings per share were as follows:


	Three Months Ended June 30,
(in thousands, except per share data)	2020		2019
Net income	$	96,564	$	109,750
Diluted earnings per share	$	1.11	$	1.28
Weighted average shares outstanding - diluted	86,934		85,483

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Three Months Ended
(in thousands, except per share data) September 30,
2019 September 30,
2018
Net income $ 89,463
$ 89,336
Diluted earnings per share $ 1.04
$ 1.04
Weighted average shares outstanding - diluted 85,733
86,043

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

Revenue:


	Six Months Ended June 30,						Change
(in thousands, except percentages)	2020		2019		Amount		%	Constant Currency %
Revenue:
Lease licenses	$	158,083	$	169,260	$	(11,177)	(6.6)	(6.6)
Perpetual licenses	99,088		124,283		(25,195)		(20.3)	(19.8)
Software licenses	257,171		293,543		(36,372)		(12.4)	(12.2)
Maintenance	403,667		366,579		37,088		10.1	11.0
Service	29,808		25,643		4,165		16.2	17.2
Maintenance and service	433,475		392,222		41,253		10.5	11.4
Total revenue	$	690,646	$	685,765	$	4,881	0.7	1.3

Nine Months Ended September 30, Change
(in thousands, except percentages) 2019 2018 Amount % Constant Currency %
Revenue:
Lease licenses $ 239,953
$ 148,795
$ 91,158
61.3
64.7
Perpetual licenses 190,734
201,501
(10,767 ) (5.3 ) (3.5 )
Software licenses 430,687
350,296
80,391
22.9
25.5
Maintenance 559,768
500,962
58,806
11.7
14.1
Service 39,209
26,946
12,263
45.5
48.8
Maintenance and service 598,977
527,908
71,069
13.5
15.9
Total revenue $ 1,029,664
$ 878,204
$ 151,460
17.2
19.7

~~The Company’s~~Our revenue in the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 increased ~~17.2%~~0.7% as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, while revenue grew ~~19.7%~~1.3% in constant currency. The growth rate was favorably impacted by our recent acquisitions. The growth rate was negatively impacted by the ~~Company’s continued investment in its global sales, support~~shifting preference of customers toward time-based licensing, the timing and ~~marketing organizations, as well as its acquisitions.~~duration of multi-year lease contracts, the trade restrictions between the United States and China and the impact of COVID-19. Lease license revenue ~~increased 61.3%~~decreased 6.6% in both reported and constant currency, as compared to the six months ended June 30, 2019, driven primarily by a decrease in multi-year lease contracts. Perpetual license revenue, which is derived primarily from new sales during the six months ended June 30, 2020, decreased 20.3%, or ~~64.7%~~19.8% in constant currency, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018, driven primarily by an increase in multi-year lease contracts.~~2019. Annual maintenance contracts that were sold with new perpetual licenses, maintenance contracts for new perpetual licenses sold in previous quarters and the maintenance portion of lease license contracts ~~each~~collectively contributed to maintenance revenue growth of ~~11.7%~~10.1%, or ~~14.1%~~11.0% in constant currency. Service revenue, driven primarily by a focus on service offerings that provide ~~on-site~~ mentorship on simulation best practices, training and expanding simulation adoption, increased ~~45.5%~~16.2%, or ~~48.8%~~17.2% in constant currency, as compared to the ~~nine~~six months ended ~~September~~June 30, 2018. Perpetual license revenue, which is derived primarily from new sales during the nine months ended September 30, 2019, decreased 5.3%, or 3.5% in constant currency, as compared to the nine months ended September 30, 2018. The decline in perpetual license revenue was driven by a shifting preference from perpetual to lease licenses across a broad spectrum of the Company's customers.2019.

With respect to revenue, on average for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the U.S. Dollar was approximately ~~4.3%~~1.3% stronger, when measured against ~~the Company’s~~our primary foreign currencies, than for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The table below presents the impacts of currency fluctuations on revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Amounts in brackets indicate an adverse impact from currency fluctuations.

(in thousands) Nine Months Ended September 30, 2019
Euro $ (13,919 )
South Korean Won (4,425 )
British Pound (1,958 )
Indian Rupee (833 )
Taiwan Dollar (626 )
Japanese Yen 314
Other (395 )
Total $ (21,842 )


(in thousands)	Six Months Ended June 30, 2020
Euro	$	(3,250)
South Korean Won	(1,615)
Indian Rupee	(717)
British Pound	(504)
Canadian Dollar	(213)
Japanese Yen	1,652
Taiwan Dollar	421
Other	94
Total	$	(4,132)

The ~~net overall stronger U.S. Dollar also~~impacts from currency fluctuations resulted in ~~decreased~~increased operating income of ~~$9.2~~$0.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.

Table of Contents

As a percentage of revenue, ~~the Company's~~our international and domestic revenues, and ~~the Company's~~our direct and indirect revenues, were as follows:


	Nine Months Ended September 30,					Six Months Ended June 30,
	2019		2018			2020		2019
International	58.7	%	62.7	%	International	55.2	%	59.4	%
Domestic	41.3	%	37.3	%	Domestic	44.8	%	40.6	%

Direct	75.9	%	76.1	%	Direct	76.2	%	75.4	%
Indirect	24.1	%	23.9	%	Indirect	23.8	%	24.6	%

Cost of Sales and Operating Expenses:

The tables below reflect ~~the Company's~~our operating results as presented on the condensed consolidated statements of income, which are inclusive of foreign currency translation impacts. Amounts included in the discussions that follow each table are provided in constant currency and are inclusive of costs related to ~~the Company's~~our acquisitions. The impact of foreign exchange translation is discussed separately, where material. The ~~OPTIS and Granta Design acquisitions~~fourth quarter 2019 acquisition of LST contributed ~~$11.6~~$22.5 million ~~and $11.7 million, respectively,~~ to the overall increase in cost of sales and operating ~~expenses.~~expenses, inclusive of intangible asset amortization.


	Nine Months Ended September 30,												Six Months Ended June 30,
	2019			2018			Change								2020					2019				Change
(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount			%		(in thousands, except percentages)	Amount			% of Revenue	Amount		% of Revenue		Amount		%
Cost of sales:												Cost of sales:
Software licenses	$	16,620	1.6	$	12,301	1.4	$	4,319		35.1		Software licenses	$	13,437		1.9	$	10,912	1.6		$	2,525	23.1
Amortization	14,064		1.4	23,403		2.7	(9,339		)	(39.9	)	Amortization	19,316			2.8	9,302		1.4		10,014		107.7
Maintenance and service	85,993		8.4	80,092		9.1	5,901			7.4		Maintenance and service	71,223			10.3	55,098		8.0		16,125		29.3
Total cost of sales	116,677		11.3	115,796		13.2	881			0.8		Total cost of sales	103,976			15.1	75,312		11.0		28,664		38.1
Gross profit	$	912,987	88.7	$	762,408	86.8	$	150,579		19.8		Gross profit	$	586,670		84.9	$	610,453	89.0		$	(23,783)	(3.9)

Software Licenses: The increase in the cost of software licenses was primarily due to increased third-party royalties of ~~$4.4~~$2.5 million.

Amortization: The ~~net decrease~~increase in amortization expense was ~~primarily~~ due to ~~a decrease in the amortization of trade names and acquired technology due to assets that became fully amortized, which was partially offset by~~ the amortization of newly acquired intangible assets.

Maintenance and Service: The ~~net~~ increase in maintenance and service costs was primarily due to the following:

~~Increased stock-based compensation of $2.1 million.~~

•Increased salaries and other headcount-related costs of ~~$2.1~~$8.4 million.

•Increased third-party technical support of ~~$1.1~~$3.4 million.

•Increased ~~consulting~~stock-based compensation of $2.7 million.

•Increased IT maintenance and software hosting costs of ~~$1.1~~$1.3 million.

~~Decreased costs related to foreign exchange translation of $1.9 million due to a stronger U.S. Dollar.~~

The ~~improvement~~reduction in gross profit was a result of ~~the~~an increase in ~~revenue,~~the cost of sales, partially offset by ~~the~~an increase in ~~the related cost~~revenue.

Table of ~~sales.~~

Contents


	Nine Months Ended September 30,										Six Months Ended June 30,
	2019			2018			Change						2020					2019				Change
(in thousands, except percentages)	Amount		% of Revenue	Amount		% of Revenue	Amount		%	(in thousands, except percentages)	Amount			% of Revenue	Amount		% of Revenue		Amount		%
Operating expenses:										Operating expenses:
Selling, general and administrative	$	353,263	34.3	$	280,443	31.9	$	72,820	26.0	Selling, general and administrative	$	259,220		37.5	$	232,581	33.9		$	26,639	11.5
Research and development	219,058		21.3	174,906		19.9	44,152		25.2	Research and development	172,245			24.9	146,040		21.3		26,205		17.9
Amortization	11,342		1.1	10,421		1.2	921		8.8	Amortization	8,325			1.2	7,555		1.1		770		10.2
Total operating expenses	$	583,663	56.7	$	465,770	53.0	$	117,893	25.3	Total operating expenses	$	439,790		63.7	$	386,176	56.3		$	53,614	13.9

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 ~~$44.7~~$20.1 million.

•Increased stock-based compensation of ~~$11.1~~$3.8 million.

•Increased bad debt expense of $3.7 million due to expected losses related to COVID-19.

•Increased IT maintenance and software hosting costs of $3.0 million.

•Increased third-party commissions of $2.4 million.

•Decreased business travel of ~~$5.2 million.~~

~~Increased professional fees of $4.0 million.~~

~~Increased consulting costs of $3.0 million.~~

~~Increased marketing expenses of $2.9 million.~~

~~Decreased costs related to foreign exchange translation of $6.5~~$5.8 million due to ~~a stronger U.S. Dollar.~~COVID-19.

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 ~~$27.4~~$21.8 million.

•Increased stock-based compensation of ~~$12.6~~$5.6 million.

~~Decreased costs related to foreign exchange translation of $3.5 million due to a stronger U.S. Dollar.~~

Interest Income: Interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$9.6~~$3.7 million as compared to ~~$7.7~~$6.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. Interest income ~~increased~~decreased as a result of ~~an increase~~a decrease in the average rate of return on invested cash balances.

Interest Expense: Interest expense for the six months ended June 30, 2020 was $6.7 million as compared to $0.3 million for the six months ended June 30, 2019. Interest expense increased as a result of the interest incurred on debt financing obtained in connection with the acquisition of LST in the fourth quarter of 2019.

Other ~~Expense,~~Income (Expense), net: ~~The Company's~~Our other ~~expense~~income (expense) consisted of the following:


	Nine Months Ended							Six Months Ended June 30,
(in thousands)	September 30, 2019			September 30, 2018			(in thousands)	2020		2019
Investment gains, net							Investment gains, net	$	3,682	$	230
Foreign currency losses, net	$	(1,556	)	$	(2,346	)	Foreign currency losses, net	(1,658)		(2,382)
Other	58			57			Other	(13)		382
Total other expense, net	$	(1,498	)	$	(2,289	)
Total other income (expense), net							Total other income (expense), net	$	2,011	$	(1,770)

Income Tax Provision: ~~The Company's~~Our income before income tax provision, income tax provision and effective tax ~~rate~~rates were as follows:

Nine Months Ended
(in thousands, except percentages) September 30,
2019 September 30,
2018
Income before income tax provision $ 337,436
$ 302,023
Income tax provision $ 51,993
$ 35,811
Effective tax rate 15.4 % 11.9 %

In February 2019, the U.S. government published final regulations relating to the transition tax, enacted as part of the Tax Cuts and Jobs Act. In accordance with the final regulations, the Company adjusted its provisional transition tax calculations and recorded a tax benefit of $1.8 million during the nine months ended September 30, 2019.


	Six Months Ended June 30,
(in thousands, except percentages)	2020			2019
Income before income tax provision	$	145,909		$	228,607
Income tax provision	$	3,281		$	32,627
Effective tax rate	2.2		%	14.3		%

The ~~increase~~decrease in the effective tax rate from the prior year was primarily due to ~~benefits of $6.8 million recorded in 2018 related to global legal entity restructuring activities that did not recur in 2019 and decreased~~increased benefits related to stock-based compensation. The effective tax rate also benefited from entity structuring activities and the release of a valuation allowance in a foreign jurisdiction.

Table of Contents

When compared to the federal and state combined statutory rate for each respective period, the effective tax rates for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were favorably impacted by tax benefits from stock-based compensation, the ~~FDII~~foreign-derived intangible income (FDII) deduction, and research and development credits.

Net Income: ~~The Company's~~Our net income, diluted earnings per share and weighted average shares used in computing diluted earnings per share were as follows:


	Six Months Ended June 30,
(in thousands, except per share data)	2020		2019
Net income	$	142,628	$	195,980
Diluted earnings per share	$	1.64	$	2.29
Weighted average shares outstanding - diluted	87,152		85,488

Nine Months Ended
(in thousands, except per share data) September 30,
2019 September 30,
2018
Net income $ 285,443
$ 266,212
Diluted earnings per share $ 3.34
$ 3.09
Weighted average shares outstanding - diluted 85,570
86,060

Table of Contents

Non-GAAP Results

~~The Company provides~~We provide non-GAAP revenue, non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share as supplemental measures to GAAP regarding ~~the Company’s~~our operational performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are described below.


ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(Unaudited)
	Three Months Ended
	June 30, 2020
(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted¹
Total GAAP	$	385,661	$	331,801	86.0	%	$	112,807	29.3	%	$	96,564	$	1.11

Acquisition accounting for deferred revenue	4,040		4,040		0.2	%	4,040		0.7	%	4,040		0.05

Stock-based compensation expense	—		3,464		0.8	%	34,130		8.9	%	34,130		0.40

Excess payroll taxes related to stock-based awards	—		166		0.1	%	1,876		0.4	%	1,876		0.02

Amortization of intangible assets from acquisitions	—		9,764		2.5	%	13,927		3.6	%	13,927		0.16

Transaction expenses related to business combinations	—		—		—	%	309		—	%	309		—

Rabbi trust (income) / expense	—		—		—	%	—		—	%	(1)		—

Adjustment for income tax effect	—		—		—	%	—		—	%	(16,518)		(0.19)

Total non-GAAP	$	389,701	$	349,235	89.6	%	$	167,089	42.9	%	$	134,327	$	1.55

¹Diluted weighted average shares were 86,934.





	Three Months Ended
	June 30, 2019
(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted¹
Total GAAP	$	368,635	$	328,138	89.0	%	$	128,628	34.9	%	$	109,750	$	1.28

Acquisition accounting for deferred revenue	1,873		1,873		0.1	%	1,873		0.3	%	1,873		0.02

Stock-based compensation expense	—		2,374		0.7	%	29,122		7.9	%	29,122		0.35

Excess payroll taxes related to stock-based awards	—		11		—	%	389		0.1	%	389		—

Amortization of intangible assets from acquisitions	—		4,755		1.2	%	8,551		2.3	%	8,551		0.10

Transaction expenses related to business combinations	—		—		—	%	450		0.1	%	450		0.01

Rabbi trust (income) / expense	—		—		—	%	—		—	%	(58)		—

Adjustment related to the Tax Cuts and Jobs Act	—		—		—	%	—		—	%	(498)		(0.01)

Adjustment for income tax effect	—		—		—	%	—		—	%	(11,673)		(0.14)

Total non-GAAP	$	370,508	$	337,151	91.0	%	$	169,013	45.6	%	$	137,906	$	1.61

¹Diluted weighted average shares were 85,483.

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Three Months Ended
September 30, 2019 September 30, 2018
(in thousands, except percentages and per share data) GAAP Results Adjustments Non-GAAP
Results GAAP Results Adjustments Non-GAAP
Results
Total revenue $ 343,899
$ 1,596
(1) $ 345,495
$ 289,418
$ 3,548
(4) $ 292,966
Operating income 105,047
44,675
(2) 149,722
93,024
35,889
(5) 128,913
Operating profit margin 30.5 % 43.3 % 32.1 % 44.0 %
Net income $ 89,463
$ 32,245
(3) $ 121,708
$ 89,336
$ 23,557
(6) $ 112,893
Earnings per share – diluted:
Earnings per share $ 1.04
$ 1.42
$ 1.04
$ 1.31
Weighted average shares 85,733
85,733
86,043
86,043


ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(Unaudited)
	Six Months Ended
	June 30, 2020
(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted¹
Total GAAP	$	690,646	$	586,670	84.9	%	$	146,880	21.3	%	$	142,628	$	1.64

Acquisition accounting for deferred revenue	7,952		7,952		0.2	%	7,952		0.9	%	7,952		0.09

Stock-based compensation expense	—		6,330		1.0	%	65,071		9.4	%	65,071		0.75

Excess payroll taxes related to stock-based awards	—		689		0.1	%	8,859		1.2	%	8,859		0.10

Amortization of intangible assets from acquisitions	—		19,316		2.7	%	27,641		4.0	%	27,641		0.32

Transaction expenses related to business combinations	—		—		—	%	1,259		0.1	%	1,259		0.01

Rabbi trust (income) / expense	—		—		—	%	—		—	%	(5)		—

Adjustment for income tax effect	—		—		—	%	—		—	%	(46,773)		(0.54)

Total non-GAAP	$	698,598	$	620,957	88.9	%	$	257,662	36.9	%	$	206,632	$	2.37

~~(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.~~

¹Diluted weighted average shares were 87,152.





	Six Months Ended
	June 30, 2019
(in thousands, except percentages and per share data)	Revenue		Gross Profit		%		Operating Income		%		Net Income		EPS - Diluted¹
Total GAAP	$	685,765	$	610,453	89.0	%	$	224,277	32.7	%	$	195,980	$	2.29

Acquisition accounting for deferred revenue	4,653		4,653		0.1	%	4,653		0.5	%	4,653		0.05

Stock-based compensation expense	—		3,602		0.5	%	52,922		7.5	%	52,922		0.62

Excess payroll taxes related to stock-based awards	—		476		0.1	%	4,379		0.6	%	4,379		0.05

Amortization of intangible assets from acquisitions	—		9,302		1.3	%	16,857		2.5	%	16,857		0.20

Transaction expenses related to business combinations	—		—		—	%	3,111		0.5	%	3,111		0.04

Rabbi trust (income) / expense	—		—		—	%	—		—	%	(223)		—

Adjustment related to the Tax Cuts and Jobs Act	—		—		—	%	—		—	%	(1,834)		(0.02)

Adjustment for income tax effect	—		—		—	%	—		—	%	(27,269)		(0.32)

Total non-GAAP	$	690,418	$	628,486	91.0	%	$	306,199	44.3	%	$	248,576	$	2.91

¹Diluted weighted average shares were 85,488.


~~(2)~~	Amount represents $31.9 million of stock-based compensation expense, $0.1 million of excess payroll taxes related to stock-based awards, $8.5 million of amortization expense associated with intangible assets acquired in business combinations, $2.5 million of transaction expenses related to business combinations and the $1.6 million adjustment to revenue as reflected in (1) above.


~~(3)~~	~~Amount represents the impact of the adjustments to operating income referred to in (2) above, decreased for the related income tax impact of $12.4 million.~~


~~(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 $23.0 million of stock-based compensation expense, $0.3 million of excess payroll taxes related to stock-based awards, $9.0 million of amortization expense associated with intangible assets acquired in business combinations and the $3.5 million adjustment to revenue as reflected in (4) above.


~~(6)~~	Amount represents the impact of the adjustments to operating income referred to in (5) above, decreased for the related income tax impact of $11.7 million, adjustments related to the transition tax associated with the Tax Cuts and Jobs Act of $0.5 million, and rabbi trust income of $0.1 million.

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Nine Months Ended
September 30, 2019 September 30, 2018
(in thousands, except percentages and per share data) GAAP Results Adjustments Non-GAAP
Results GAAP Results Adjustments Non-GAAP
Results
Total revenue $ 1,029,664
$ 6,249
(1) $ 1,035,913
$ 878,204
$ 6,897
(4) $ 885,101
Operating income 329,324
126,597
(2) 455,921
296,638
105,796
(5) 402,434
Operating profit margin 32.0 % 44.0 % 33.8 % 45.5 %
Net income $ 285,443
$ 84,841
(3) $ 370,284
$ 266,212
$ 65,591
(6) $ 331,803
Earnings per share – diluted:
Earnings per share $ 3.34
$ 4.33
$ 3.09
$ 3.86
Weighted average shares 85,570
85,570
86,060
86,060


~~(1)~~	~~Amount represents the revenue not reported during the period as a result of the acquisition accounting adjustment associated with the accounting for deferred revenue in business combinations.~~


~~(2)~~	Amount represents $84.8 million of stock-based compensation expense, $4.5 million of excess payroll taxes related to stock-based awards, $25.4 million of amortization expense associated with intangible assets acquired in business combinations, $5.6 million of transaction expenses related to business combinations and the $6.2 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, decreased for the related income tax impact of $39.7 million, adjustments related to the transition tax associated with the Tax Cuts and Jobs Act of $1.8 million, and rabbi trust income of $0.3 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 $58.9 million of stock-based compensation expense, $3.8 million of excess payroll taxes related to stock-based awards, $33.8 million of amortization expense associated with intangible assets acquired in business combinations, $2.4 million of transaction expenses related to business combinations and the $6.9 million adjustment to revenue as reflected in (4) above.


~~(6)~~	Amount represents the impact of the adjustments to operating income referred to in (5) above, decreased for the related income tax impact of $41.0 million and rabbi trust income of $0.1 million, and increased for adjustments related to the transition tax associated with the Tax Cuts and Jobs Act of $0.9 million.

~~Non-GAAP Measures~~

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

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

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

Acquisition accounting for deferred ~~revenue and its related tax impact.~~revenue. Historically, ~~the Company has~~we have consummated acquisitions in order to support ~~its~~our strategic and other business objectives. In accordance with the fair value provisions applicable to the accounting for business combinations, acquired deferred revenue is often recorded on the opening balance sheet at an amount that is lower than the historical carrying value. Although this acquisition accounting requirement has no impact on ~~the Company's~~our business or cash flow, it adversely impacts ~~the Company's~~our reported GAAP revenue in the reporting periods following an acquisition. In order to provide investors with financial information that facilitates comparison of both historical and future results, ~~the Company provides~~we provide non-GAAP financial measures which exclude the impact of the acquisition accounting adjustment. ~~The Company believes~~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 ~~management~~us in ~~its~~our 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 annual lease licenses and software maintenance contracts are renewed in future periods.

Amortization of intangible assets from ~~acquisitions and its related tax impact.~~acquisitions. ~~The Company incurs~~We incur amortization of intangible assets, included in ~~its~~our GAAP presentation of amortization expense, related to various acquisitions ~~it has~~we have made. ~~Management excludes~~We exclude these expenses ~~and their related tax impact~~ for the purpose of calculating non-GAAP operating income, non-GAAP operating profit margin, non-GAAP net income and non-GAAP diluted earnings per share when ~~it evaluates the~~we 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 ~~management~~us after the acquisition. Accordingly, ~~management does~~we do not consider these expenses for purposes of evaluating ~~the~~our performance ~~of the Company~~ during the applicable time period after the acquisition, and ~~it excludes~~we exclude such expenses when making decisions to allocate resources. ~~The Company believes~~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 ~~management~~us in ~~its~~our financial and operational decision-making, and (b) compare our past reports of financial results ~~of the Company~~ as ~~the Company has~~we have historically reported these non-GAAP financial measures.

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

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GAAP financial measures are useful to investors because they allow investors to (a) evaluate ~~the Company's~~our operating results and the effectiveness of the methodology used by ~~management~~us to review ~~the Company's~~our operating results, and (b) review historical comparability in ~~the Company's financial reporting as well as comparability with competitors' operating results.~~

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

~~used by management to review the Company's operating results, and (b) review historical comparability in the Company's~~our financial reporting as well as comparability with competitors' operating results.

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

Tax Cuts and Jobs Act. ~~The Company~~We recorded impacts to ~~its~~our income tax provision related to the enactment of the Tax Cuts and Jobs Act of 2017, specifically for the transition tax related to unrepatriated cash and the impacts of the tax rate change on net deferred tax assets. ~~Management excludes~~We exclude these impacts for the purpose of calculating non-GAAP net income and non-GAAP diluted earnings per share when ~~it evaluates the~~we evaluate our continuing operational performance, ~~of the Company,~~ as (i) the charges are not expected to recur as part of ~~its~~our normal operations and (ii) the charges resulted from the extremely infrequent event of major U.S. tax reform, the last such reform having occurred in 1986. ~~The Company believes~~We believe that these non-GAAP financial measures are useful to investors because they allow investors to (a) evaluate ~~the Company's~~our operating results and the effectiveness of the methodology used by ~~management~~us to review ~~the Company's~~our operating results, and (b) review historical comparability in ~~the Company's~~our financial reporting.

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

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

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



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

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Liquidity and Capital Resources


(in thousands)	September 30, 2019		December 31, 2018		Change			(in thousands)	June 30, 2020		December 31, 2019		Change
Cash, cash equivalents and short-term investments	$	732,902	$	777,364	$	(44,462	)	Cash, cash equivalents and short-term investments	$	744,979	$	872,382	$	(127,403)
Working capital	$	732,396	$	786,410	$	(54,014	)	Working capital	$	750,458	$	860,340	$	(109,882)

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. The following table presents ~~the Company's~~our foreign and domestic holdings of cash, cash equivalents and short-term investments as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


(in thousands, except percentages)	September 30, 2019		% of Total	December 31, 2018		% of Total	(in thousands, except percentages)	June 30, 2020		% of Total	December 31, 2019		% of Total
Domestic	$	502,706	68.6	$	616,249	79.3	Domestic	$	405,278	54.4	$	626,433	71.8
Foreign	230,196		31.4	161,115		20.7	Foreign	339,701		45.6	245,949		28.2
Total	$	732,902		$	777,364		Total	$	744,979		$	872,382

In general, it is ~~the practice and~~our intention ~~of the Company~~ to ~~repatriate previously taxed~~permanently reinvest all earnings in excess of ~~working capital needs and to reinvest all other earnings of its non-U.S. subsidiaries.~~previously taxed amounts. As part of ~~the Tax Cuts and Jobs Act, the Company incurred~~ U.S. tax onreform, substantially all of the previous earnings of ~~its~~our non-U.S. subsidiaries were taxed through the transition tax and current earnings are taxed as part of ~~the transition tax. This~~global intangible low-taxed income tax expense. These taxes increased ~~the Company’s~~our previously taxed earnings and ~~allows~~allow for the repatriation of the majority of ~~its~~our foreign earnings without any residual U.S. federal tax. ~~The Company does not~~While we believe that ~~there is an excess of~~ the financial reporting ~~basis over~~bases may be greater than the tax ~~basis~~bases of investments in foreign ~~subsidiaries. Accordingly,~~subsidiaries for any ~~repatriation~~earnings in excess of previously taxed amounts, such amounts are considered permanently reinvested. The cumulative temporary difference related to such permanently reinvested earnings ~~will~~is approximately $8.4 million and we would anticipate the tax effect on those earnings to be immaterial as a ~~non-taxable return~~result of ~~basis.~~U.S. tax reform.

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's~~our condensed consolidated balance sheet.

Cash Flows from Operating Activities


	Nine Months Ended September 30,							Six Months Ended June 30,
(in thousands)	2019		2018		Change		(in thousands)	2020		2019		Change
Net cash provided by operating activities	$	360,485	$	353,503	$	6,982	Net cash provided by operating activities	$	279,004	$	240,117	$	38,887

Net cash provided by operating activities increased during the current fiscal year due to increased net ~~income (net of non-cash operating adjustments) of $70.6 million, partially offset by decreased net~~ cash flows from operating assets and liabilities of ~~$63.6~~$70.2 million, partially offset by decreased net income (net of non-cash operating adjustments) of $31.3 million. The net cash provided by operating activities growth was driven primarily by our ability to delay certain income, employment and indirect tax payments into the second half of 2020 and beyond due to payment extensions issued by governments in connection with COVID-19.

Cash Flows from Investing Activities


	Nine Months Ended September 30,										Six Months Ended June 30,
(in thousands)	2019			2018			Change			(in thousands)	2020		2019		Change
Net cash used in investing activities	$	(333,448	)	$	(301,613	)	$	(31,835	)	Net cash used in investing activities	$	(119,566)	$	(311,277)	$	191,711

Net cash used in investing activities ~~increased~~decreased during the current fiscal year due ~~primarily~~ to ~~increased capital expenditures of $12.7 million and increased~~decreased acquisition-related net cash outlays of ~~$12.0~~$185.1 million. ~~The Company~~We currently ~~plans~~plan capital spending of ~~$44~~$40.0 million to ~~$50~~$50.0 million ~~for the 2019~~during fiscal year 2020 as compared to the ~~$21.8~~$44.9 million that was spent in ~~2018. The capital spending plan in 2019 includes $9.5 million to acquire the corporate headquarters building in connection with the acquisition of LSTC in the fourth quarter.~~fiscal year 2019. The level of spending will depend on various factors, including the growth of the business and general economic ~~conditions.~~conditions as well as the impact of the COVID-19 pandemic on our operations.

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Cash Flows from Financing Activities


	Nine Months Ended September 30,									Six Months Ended June 30,
(in thousands)	2019			2018			Change		(in thousands)	2020		2019		Change
Net cash used in financing activities	$	(70,036	)	$	(187,283	)	$	117,247	Net cash used in financing activities	$	(285,551)	$	(75,558)	$	(209,993)

Net cash used in financing activities ~~decreased~~increased during the current fiscal year due ~~primarily~~ to ~~decreased~~increased stock repurchases of ~~$133.7~~$101.9 million, ~~partially offset by~~increased principal payments on long-term debt of $75.0 million, increased restricted stock withholding taxes paid in lieu of issued shares of ~~$11.0~~$29.8 million, and decreased proceeds from shares issued for stock-based compensation of ~~$8.8~~$4.9 million.

Other Cash Flow Information

~~The Company believes~~We believe that existing cash and cash equivalent balances of ~~$732.7~~$744.5 million, together with cash generated from operations and access to the ~~$500~~$500.0 million ~~revolving credit facility,~~Revolving Credit Facility, will be sufficient to meet ~~the Company’s~~our working capital and capital expenditure requirements through the next twelve months. ~~The Company’s~~Our cash requirements in the future may also be financed through additional equity or debt financings. ~~There~~However, future disruptions in the capital markets could make financing more challenging, and there can be no assurance that such ~~financings~~financing can be obtained on ~~favorable~~commercially reasonable terms, ifor at all.

~~On November 1, 2019,~~We also believe that our liquidity will allow us to manage the ~~Company completed~~anticipated impact of COVID-19 on our business operations for the ~~acquisition~~foreseeable future. However, we have seen delays in customer payments on existing contracts, primarily in China, and longer payment terms requested for new contracts. While such requests were initially in the automotive industry, we have experienced the expansion of ~~100%~~such requests in many other industries, particularly related to larger contract commitments, during the second quarter. Management reviews these requests weekly and approves on a case-by-case basis. We expect that an estimated $15 - $25 million of customer payments that would have otherwise been made in 2020 will be delayed to 2021.

Under our stock repurchase program, we repurchased shares as follows:


	Six Months Ended
(in thousands, except per share data)	June 30, 2020		June 30, 2019
Number of shares repurchased	690		330
Average price paid per share	$	233.48	$	179.41
Total cost	$	161,029	$	59,116

All of the shares of LSTC, the premier provider of explicit dynamics and other advanced finite element analysis technology. The transaction closed with a purchase price of $779.9 million, which included $472.7 million in cash and the issuance of 1.4 million shares of ANSYS common stock in an unregistered offering to the prior owners of LSTC. The fair value of the common stock issued as consideration was based on the volume-weighted average price of ANSYS common stock on November 1, 2019 of $220.74, resulting in a fair value of $307.2 million. In conjunction with the transaction, ANSYS obtained $500.0 million of term debt financing to fund the cash component of the purchase price.

On November 1, 2019, the Company completed the acquisition of 100% of the shares of Dynardo, a leading provider of multidisciplinary analysis and optimization technology, for a purchase price of approximately €30.0 million.

~~Under the Company's stock repurchase program, the Company~~ repurchased ~~shares~~ during the ~~nine~~first six months ~~ended September 30, 2019 and 2018, as follows:~~

~~In February 2018,~~of 2020 were repurchased in the ~~Company's Board~~first quarter of ~~Directors increased the number of shares authorized for repurchase to a total of 5.0 million shares under the stock repurchase program.~~2020. As of ~~September~~June 30, ~~2019, 3.5~~2020, 2.8 million shares remained available for repurchase under the program.

The ~~Company's~~ authorized repurchase program 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's~~our stock price, and economic and market conditions. ~~The Company's~~Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 plan.

~~The Company continues~~We continue to generate positive cash flows from operating activities and ~~believes~~believe that the best uses of ~~its~~our excess cash are to invest in the ~~business and~~business; acquire or make investments in complementary companies, products, services and ~~technologies.~~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, ~~the Company has~~we have in the past, and ~~expects~~expect in the future, to repurchase stock in order to both offset dilution and return capital, in excess of ~~its~~our requirements, to stockholders with the goal of increasing stockholder value.

Off-Balance-Sheet Arrangements

~~The Company does~~We do not have any special-purpose entities or off-balance-sheet financing.

Contractual Obligations

During the nine months ended September 30, 2019, the Company entered into an office lease amendment that resulted in an additional $12.6 million obligation and expires in December 2028. The Company's base rent escalates over the lease term and will range from approximately $1.2 million - $1.6 million per annum.

There were no ~~other~~ material changes to ~~the Company’s~~our significant contractual obligations during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to those previously reported inwithin “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ~~within the Company’s 2018~~in our 2019 Form 10-K.

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Critical Accounting Policies and Estimates

No significant changes have occurred to ~~the Company’s~~our critical accounting policies and estimates as previously reported within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in ~~the Company’s 2018~~our 2019 Form 10-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest ~~Income~~ Rate Risk. Changes in the overall level of interest rates affect the interest income that is generated from ~~the Company’s~~our cash, cash equivalents and short-term ~~investments.~~investments and the interest expense that is generated from our outstanding borrowings. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, total~~2020, interest income was ~~$3.2~~$0.9 million and ~~$9.6~~$3.7 million, respectively, and interest expense was $3.0 million and $6.7 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 of three months to one year.

Foreign Currency Transaction Risk. As ~~the Company operates~~we operate in international regions, a portion of ~~its~~our revenue, expenses, cash, accounts receivable and payment obligations are denominated in foreign currencies. As a result, changes in currency exchange rates will affect ~~the Company’s~~our financial position, results of operations and cash flows. ~~The Company is~~While all of the economic effects of COVID-19 are not known, it may expose us to additional foreign currency transaction risk. We are most impacted by movements in and among the ~~British Pound,~~ Euro, Japanese Yen ~~South Korean Won,~~ and U.S. Dollar.

With respect to revenue, on average for the quarter ended ~~September~~June 30, ~~2019,~~2020, the U.S. Dollar was approximately ~~2.7%~~0.9% stronger, when measured against ~~the Company’s~~our primary foreign currencies, than for the quarter ended ~~September~~June 30, ~~2018.~~2019. With respect to revenue, on average for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the U.S. Dollar was approximately ~~4.3%~~1.3% stronger, when measured against ~~the Company’s~~our primary foreign currencies, than for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The table below presents the impacts of currency fluctuations on revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. Amounts in brackets indicate a net adverse impact from currency fluctuations.


(in thousands)	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019			(in thousands)	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Euro	$	(4,123	)	$	(13,919	)	Euro	$	(1,247)	$	(3,250)
South Korean Won	(972		)	(4,425		)	South Korean Won	(705)		(1,615)
Indian Rupee							Indian Rupee	(489)		(717)
British Pound	(611		)	(1,958		)	British Pound	(322)		(504)
Indian Rupee	(23		)	(833		)
Canadian Dollar							Canadian Dollar	(192)		(213)
Japanese Yen							Japanese Yen	1,120		1,652
Taiwan Dollar	(87		)	(626		)	Taiwan Dollar	253		421
Japanese Yen	1,336			314
Other	(1		)	(395		)	Other	40		94
Total	$	(4,481	)	$	(21,842	)	Total	$	(1,542)	$	(4,132)

The ~~net overall stronger U.S. Dollar also~~impacts from currency fluctuations resulted in ~~decreased~~increased operating income of ~~$2.1~~$0.5 million and ~~$9.2~~$0.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively, as compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019.

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. ~~The relevant~~Historical exchange rates for these ~~currencies~~currency pairs are as reflected in the charts below:


	Period-End Exchange Rates
As of	GBP/USD	EUR/USD	USD/JPY	USD/KRW
June 30, 2019	1.269	1.137	107.910	1,157.407
December 31, 2019	1.326	1.121	108.637	1,156.069
June 30, 2020	1.240	1.123	107.945	1,199.616

Period-End Exchange Rates
As of GBP/USD EUR/USD USD/JPY USD/KRW
September 30, 2018 1.303
1.161
113.714
1,110.371
December 31, 2018 1.276
1.147
109.589
1,115.325
September 30, 2019 1.229
1.090
108.085
1,200.048


	Average Exchange Rates
Three Months Ended	GBP/USD	EUR/USD	USD/JPY	USD/KRW
June 30, 2019	1.285	1.124	109.905	1,166.680
June 30, 2020	1.241	1.101	107.552	1,219.909

Average Exchange Rates
Three Months Ended GBP/USD EUR/USD USD/JPY USD/KRW
September 30, 2018 1.303
1.163
111.532
1,121.957
September 30, 2019 1.232
1.111
107.335
1,195.362

Average Exchange Rates
Nine Months Ended GBP/USD EUR/USD USD/JPY USD/KRW
September 30, 2018 1.352
1.195
109.636
1,091.862
September 30, 2019 1.273
1.123
109.131
1,162.070


	Average Exchange Rates
Six Months Ended	GBP/USD	EUR/USD	USD/JPY	USD/KRW
June 30, 2019	1.294	1.130	110.052	1,146.110
June 30, 2020	1.260	1.102	108.266	1,206.442

No other material change has occurred in ~~the Company’s~~our market risk subsequent to December 31, ~~2018.~~2019.

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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 has~~we 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 ~~its~~our 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) of the Exchange Act.

~~The Company believes,~~We believe, based on ~~its~~our knowledge, that the financial statements and other financial information included in this report fairly present, in all material respects, ~~the~~our financial condition, results of operations and cash flows ~~of the Company~~ as of and for the periods presented in this report. ~~The Company is~~We 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 reviews~~we review the disclosure controls and procedures, and may periodically make changes to enhance their effectiveness and to ensure that ~~the Company’s~~our systems evolve with ~~its~~our business.

Changes in Internal Control. There were no changes in ~~the Company’s~~our internal control over financial reporting that occurred during the three months ended ~~September~~June 30, ~~2019~~2020 that materially affected, or were reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting. Although the majority of our employee base worked remotely, the remote work arrangements did not adversely affect our ability to maintain financial operations, including our financial reporting systems, internal controls over financial reporting and disclosure controls and procedures.

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PART II – OTHER INFORMATION

Item 1.Legal Proceedings

~~The Company is~~We are subject to various investigations, claims and legal proceedings that arise in the ordinary course of business, including commercial disputes, labor and employment matters, tax audits, alleged infringement of intellectual property rights and other matters. In ~~the~~our opinion, ~~of the Company,~~ the resolution of pending matters is not expected to have a material adverse effect on ~~the Company's~~our condensed 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's~~our results of operations, cash flows or financial position.

Item 1A.Risk Factors

~~The Company cautions investors~~We face a number of risks that ~~its performance (and, therefore, any forward-looking statement) is subject to risks~~could materially and ~~uncertainties. Various important~~adversely 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 projected~~can be found in ~~any forward-looking statement. These factors were disclosed~~“Item 1A. Risk Factors,” in ~~but are not limited to, the items within the Company’s 2018~~our 2019 Form ~~10-K, Part I, Item 1A. "Risk Factors."~~10-K. The risk factor set forth below includes additional information relating to the COVID-19 pandemic, and updates, and should be read together with, the risk factors disclosed in our 2019 Form 10-K and first quarter 2020 Form 10-Q. The impact of COVID-19 may also exacerbate other risks discussed in Item 1A. “Risk Factors” in our 2019 Form 10-K, any of which could have a material effect on us. This situation continues to evolve and additional impacts may arise of which we are currently not aware.

The COVID-19 pandemic has had, and is expected to continue to have, an ~~addition~~adverse impact on our business, employees, liquidity, financial condition, results of operations and cash flows.

The COVID-19 outbreak and preventative measures taken to ~~those included~~contain the COVID-19 outbreak are constantly changing and continue to cause business slowdowns and shutdowns in affected areas. The pandemic has caused, and in the ~~Company's 2018 Form 10-K.~~future could cause, significant disruption in the financial and credit markets both globally and in the United States.

~~Additional Risks Associated with International Activities~~

~~Due~~While the full impact of this outbreak is not yet known, we are closely monitoring the spread of COVID-19 and continually assessing its potential effects on our business. In response to the ~~global nature~~pandemic, we closed our offices and transitioned to a remote work environment and implemented certain travel restrictions, both of which have disrupted how we operate our business. While most of our offices have since reopened, many have reopened on a limited basis, so remote access remains the ~~Company’s business, it is subject~~primary means of work for a majority of our workforce. Our continuing efforts to ~~import~~reopen our offices safely may not be successful, could expose our personnel to health risks and ~~export restrictions~~will involve additional financial burdens. In addition, we announced the cancellation of many in-person customer and ~~regulations including the Export Administration Regulations administered by the U.S. Bureau of Industry and Security (BIS). During~~industry events for the second quarter of ~~2019,~~2020. We have shifted a majority of our customer events to virtual-only experiences, including hosting Simulation World in June, and we are pursuing a micro-event strategy for critical in-person events, until the ~~BIS placed certain entities on~~end of 2020. Micro-events include smaller groups with a targeted purpose and do not require exhibit booths. These events may not be as successful as in-person events. We also may deem it advisable to similarly alter, postpone or cancel entirely additional customer, employee or industry events in the ~~Entity List. Among~~future.

These impacts could continue for the ~~entities included on~~foreseeable future. In addition, an extended period of remote work arrangements may negatively impact the ~~list are existing~~sales pipeline due to reduced, delayed, or ~~prospective customers of the Company, including Huawei. The restrictions limit the Company’s ability to deliver products~~altered sales and ~~services to these existing or prospective~~marketing interactions with customers and potential customers, expose us to increased risk of cyber incidents, delay or alter product roadmaps or research and development due to reduced or limited access to technologies, equipment, or services, and delay or disrupt recruitment efforts. Limitations on availability, ease of use or increased cost related to the use of our products in our customers’ remote work environments could also result in a decline in demand for our products. Furthermore, if the ~~absence~~COVID-19 pandemic has a substantial impact on our employees, partners or customers’ attendance or productivity, our results of ~~a license from the BIS, there~~operations and overall financial performance may be ~~a negative effect on the Company’s ability to sell products~~harmed.

We anticipate continued adverse revenue and ~~services to these customers in the future. The inclusion of companies on the restricted Entity List may also encourage customers to seek substitute products~~net income impacts from the Company’s competitors that are not subject to these restrictions or to develop their own products. In addition, although customers are not prohibited from paying accounts receivable for products or services the Company previously provided, the credit risks associated with these accounts may have increasedCOVID-19 as a result of the economic slowdown and the decrease in customer spending. Customers have delayed transactions with us due to the uncertainty resulting from COVID-19. In the first half of 2020 there was a decrease in multi-year leases and large enterprise agreements. Furthermore, during this same period, the shifting preference from perpetual licenses to time-based licenses was elevated as a result of the impacts of COVID-19. We expect both of these ~~limitations. The Company cannot predict whether~~trends to continue. There may also be continued lower activity levels in the end markets we service or ~~when any changes will be made that eliminate~~declining financial performance of our customers and channel partners, which could result in lower rates of renewal, which have historically been stable and high, and cancellations, reductions, or ~~decrease these limitations on the Company’s ability to sell~~delays for our products and ~~provide services~~services. Due to our subscription-based business model, the effect of the pandemic may not be fully reflected in our results of operations until future periods. Recessionary macroeconomic conditions could suppress customer demand broadly and could negatively affect stock prices, including the price of our common stock.

The situation surrounding COVID-19 remains fluid, and given its inherent uncertainty, we expect the pandemic will continue to have an adverse impact on our business in the near term. The duration and extent of the impact from the COVID-19 pandemic

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depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, the nature and scope of government economic recovery measures and the impact of these ~~customers. Based~~and other factors on ~~current restrictions,~~our employees, customers, partners and vendors. Should these conditions persist for a prolonged period, the ~~Company does not believe there will be~~COVID-19 pandemic, including any of the above factors and others that are currently unknown, could have a material ~~impact to its~~adverse effect on our business, employees, liquidity, financial condition, results ~~for the remainder~~ of ~~2019. However, other customers have been~~operations and ~~may continue to be added to the Entity List and/or subject to trade restrictions. The Company is unable to predict the duration of the export restrictions imposed~~cash flows.

Our business practices with respect to ~~any particular customer~~the collection, use and management of personal information could give rise to operational interruption, liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

As regulatory focus on privacy, data and security issues continues to increase and evolve, and as worldwide laws and regulations concerning the ~~long-term effects~~handling of personal data expand and become more complex, implementation standards remain uncertain and potential risks related to data processing within our business may intensify.

In addition to Standard Contractual Clauses (“SCCs”) or Binding Corporate Rules, the E.U. and the United States formally entered into a framework in July 2016 that provided an additional mechanism for companies to transfer data from E.U. member states to the U.S., known as the Privacy Shield. On July 16, 2020, the Court of Justice invalidated the Privacy Shield, and also opined on compliance obligations for companies relying upon SCCs as their valid basis of transferring personal data outside of the E.U. This decision leads to uncertainty about the legal basis for personal data transfers out of the E.U. to the U.S. Potential new rules and restrictions on the ~~Company. In addition, there may be indirect impacts to~~flow of data across borders could increase the Company’s business that cannot be reasonably quantified, including that the Company’s business may also be impacted by other trade restrictions that may be imposed by the U.S., China, or other countries. Restrictions on the Company’s ability to sellcost and ~~ship the Company’s~~complexity of delivering our products ~~to customers on the Entity List could have an adverse effect on the Company's business, results of operations or financial condition.~~

~~Violators of these export controls may be subject to significant penalties, which may include significant 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 an adverse effect on the Company’s business, financial condition, operating results and cash flows. In addition, the political and media scrutiny surrounding any governmental investigation of the Company could cause significant expense and reputational harm and distract senior executives from managing normal day-to-day operations.

~~The Company’s products~~in some markets. This decision could also ~~be shipped~~give rise to ~~denied parties by third parties, including~~operational interruption in the ~~Company’s channel partners. Even though the Company takes precautions to ensure that its channel partners comply with all relevant import~~performance of services for customers and ~~export regulations, any failure by channel partners to comply with such regulations could have negative consequences for the Company, including~~internal processing of employee information, regulatory liabilities or reputational ~~harm, government investigations and penalties.~~harm.

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
~~10.1~~15			First Amendment to Credit Agreement dated October 16, 2019, by and among ANSYS, Inc., the lenders party thereto and Bank of America, N.A. (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed October 21, 2019, and incorporated herein by reference).

~~10.2~~	~~Non-Employee Director Deferred Compensation Plan, attached hereto as Exhibit 10.2*.~~

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			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

104				Cover 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:

August 5, 2020

~~ANSYS, Inc.~~

~~Date:~~

~~November 7, 2019~~

By:

/s/ Ajei S. Gopal

Ajei S. Gopal

President and Chief Executive Officer

(Principal Executive Officer)

~~Date:~~

~~November 7, 2019~~

Date:

August 5, 2020

By:

/s/ Maria T. Shields

Maria T. Shields

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

4547



	September 30, 2019			December 31, 2018
(in thousands, except percentages)	Amount		% of Total	Amount		% of Total
Cash accounts	$	431,624	58.9	$	331,084	42.6
Money market funds	301,060		41.1	446,055		57.4
Total	$	732,684		$	777,139



(in thousands)
Next 12 months	$	445,934
Months 13-24	122,932
Months 25-36	52,090
Thereafter	29,431
Total revenue allocated to remaining performance obligations	$	650,387



(in thousands)	Granta Design		Other Acquisitions		Total
Cash	$	208,736	$	102,737	$	311,473



(in thousands)
Cash	$	13,644		$	2,842		$	16,486
Accounts receivable and other tangible assets	7,023			8,653			15,676
Developed software and core technologies (12-year weighted-average life)	32,445			17,761			50,206
Customer lists (13-year weighted-average life)	20,016			14,180			34,196
Trade names (10-year weighted-average life)	4,579			1,381			5,960
Accounts payable and other liabilities	(6,403		)	(4,704		)	(11,107		)
Deferred revenue	(1,426		)	(1,840		)	(3,266		)
Net deferred tax liabilities	(9,822		)	(5,049		)	(14,871		)
Total identifiable net assets	$	60,056		$	33,224		$	93,280
Goodwill	$	148,680		$	69,513		$	218,193



(in thousands)
2019	$	16,354
2020	12,469
2021	10,177
2022	8,523
2023	6,809
Thereafter	14,267
Total	$	68,599



	Balance at September 30, 2019
(in thousands)	Total		Current		Long-Term
Deferred revenue	$	303,315	$	291,385	$	11,930
Backlog	347,072		154,549		192,523
Total	$	650,387	$	445,934	$	204,453



	Three Months Ended
	September 30, 2019									September 30, 2018
(in thousands, except percentages and per share data)	GAAP Results			Adjustments			Non-GAAP Results			GAAP Results			Adjustments			Non-GAAP Results
Total revenue	$	343,899		$	1,596	(1)	$	345,495		$	289,418		$	3,548	(4)	$	292,966
Operating income	105,047			44,675		(2)	149,722			93,024			35,889		(5)	128,913
Operating profit margin	30.5		%				43.3		%	32.1		%				44.0		%
Net income	$	89,463		$	32,245	(3)	$	121,708		$	89,336		$	23,557	(6)	$	112,893
Earnings per share – diluted:
Earnings per share	$	1.04					$	1.42		$	1.04					$	1.31
Weighted average shares	85,733						85,733			86,043						86,043