ANSYS, Inc.

Ladies and gentlemen, thank you for standing by and welcome to ANSYS' fourth quarter 2018 earnings conference call. With us today are Ajay Gopal, Chief Executive Officer, Maria Shields, SVP and Chief Financial Officer, and Annette Arribas, Senior Director, Global Investor Relations. If you require operator assistance, please press star then zero. Please note the call is being recorded. At this time, I would like to turn the call over to Ms. Erebus for some opening remarks.

Good morning, everyone. Our earnings release and the related prepared remarks document have been posted on the homepage of our investor relations website this morning. They contain all the key financial information and supporting data relative to our fourth quarter and full year 2018 financial results and business updates, as well as our initial Q1 and fiscal year 2019 outlook and the key underlying assumptions. I would like to remind everyone that in addition to any risks and uncertainties that we highlight during the course of this call, important factors that may affect our future results are discussed at length in our public filings with the SEC, all of which are also available via our website. Additionally, the company's reported results should not be considered an indication of future performance, as there are risks and uncertainties that could impact our business in the future. These statements are based upon our view of the business as of today and ANSYS undertakes no obligation to update any such information unless we do so in a public forum. During this call and in the prepared remarks, we'll be referring to non-GAAP financial measures unless otherwise stated. Please take any reference to revenue to mean revenue under ASC 606 unless we explicitly note that we are referring to ASC 605 results. Note that all references to growth will be in terms of ASC 605 results since we have no baseline for last year under 606. A discussion of the various items that are excluded and a full reconciliation of GAAP to comparable non-GAAP financial measures under both ASC 605 and 606 are included in this morning's earnings release materials and related form 8K. In closing, I'd like to announce that our 2019 Investor Day will be held on Thursday, September 12th, in Pittsburgh, with a reception and technology showcase event the evening before. Further details around location, logistics, and the agenda will be announced in the very near future and will be available on our IR website. I would now like to turn the call over to our CEO, Ajay Gopal, for his opening remarks. Ajay?

Thank you, Annette, and good morning, everyone. Q4 was yet another exceptional quarter for Ansys. We delivered double digit growth in revenue, earnings per share, and operating cash flow. Our ACV growth of 28% in constant currency was particularly notable because of the challenging comparison with Q4 of 2017. For the year, revenue grew by 11% and ACV grew 17% both in constant currency. And we ended the year with a record $957 million in 605 deferred revenue and backlog, which is a 24% increase over Q4 in 2017. To summarize, our financial results in Q4 were outstanding and provided a great ending to a stellar 2018. At Investor Day in 2017, we announced that our objective was sustained double-digit growth by 2020 while maintaining industry-leading margins. We introduced several strategic pillars to guide our journey to that objective. I'm pleased that we have made important advances across all these priorities over the course of the past year. And with double-divided revenue growth in both 2017 and 2018, I am confident we are tracking to our 2020 objective. The central pillar of our growth strategy was the need to extend our leadership in the core business by introducing new innovations and by transforming our go-to-market. Let me start with products. Building on the momentum from last year's 19.x series of releases, we launched ANSYS 2019 R1 earlier this month. R1 features innovation after innovation, including a new multi-body dynamics product line, an intuitive user experience and fluent R flagship CFD solution, an electromagnetic interference scanner that delivers results in seconds as part of our industry-leading electronic solutions, a new heads-up display capability in SPIOS, our flagship optic solution, and multi-core platform support in SCADE, our embedded software solution. Each of these individual innovations is important in helping customers solve some of the most challenging problems. Taken together, however, they show that ANSYS is leading the industry with advanced multi-physics simulation capabilities. We also recently launched a new ANSYS cloud-native solution enabled by Microsoft Azure that offers customers seamless access to on-demand, high-performance computing in the public cloud. The offering is optimized for ANSYS solutions, initially ANSYS mechanical and fluent, and dovetails nicely with offerings by ANSYS cloud hosting partners which include both ANSYS and third-party products. Based on the advances in our core products and the integration across our portfolio, we're continuing to help customers address some of their most challenging problems where they're aggressively investing in R&D. Today, let me highlight some of our successes with autonomous systems. 3M has developed advanced materials that enable sensors to deliver additional information from enhanced infrastructure to advanced driver assistance systems, or ADAS. ANSYS tools and services are opening the doors to new opportunities in the fast-changing automotive market by providing 3M credibility in demonstrating their sensor material performance under adverse weather and lighting conditions. This is another example of how ANSYS is helping a customer chase a multi-billion dollar market opportunity. Another great example of our integrated solutions is with Oceaneering, which is developing autonomous submersible vehicles for use with offshore oil rigs. They are using a multi-physics ANSYS solution to digitally test obstacle avoidance algorithms, a technique that could reduce costs by 90 percent, and that's critical when in-water tests can run up to $150,000 each day. Moving to sales. You may recall that two years ago, we had embarked on a transformation of our go-to-market strategy to allow us to maximize our market opportunity and to correct underperformance in key geographies, notably Europe. Our new go-to-market approach enables us to effectively grow and close large enterprise deals through the Ansys direct sales team, while simultaneously efficiently addressing the large volume of our transactional or momentum business through a combination of territory sales, channel partners, and inside sales. That strategy has unlocked new opportunities, as you can see from our revenue and ACV growth numbers. We saw strength in all of our geographies. While North America led the way with 19% constant currency growth, I am delighted that Europe grew 10% in constant currency both in Q4 and in 2018, continuing the growth recovery we had expected. On the large enterprise front, we began 2018 with a $50 million customer contract. At the time, the largest in the history of Ansys. And I'm thrilled to announce that we capped off the year with a Q4 $59 million contract across multiple product lines with a longstanding customer. The second pillar of our growth strategy is was selectively investing in high potential adjacencies to expand our addressable market. You may remember that simulation has traditionally been used primarily as a validation tool. As part of our vision of pervasive simulation, we're expanding the use of simulation upfront in the design process with Discovery Live, during manufacturing with our additive manufacturing solutions, and in operations with TwinBuilder. 2019 will be a validation and building year for these offerings, setting the stage for additional growth in 2020 and beyond. With its real-time simulation capabilities, Discovery Live has captured the attention of design engineers across the globe. One of the new users of Discovery Live, longtime Ansys customer Andresen Hauser, is seeing the benefits of simulation in product ideation. This global leader in measurement instrumentation services and solutions for industrial process engineering is cutting costs and reducing time to market by bringing simulation earlier in the product development process with Discovery Live. To quote one of the company's engineers, with Discovery Live, we are agile, we are fast, and we are efficient. Discovery has picked up more Best New Product awards than any other Ansys solution in the last decade. And at the end of Q4, we signed our first seven-figure Discovery deal. Another new solution, TwinBuilder, enables our customers to build, validate, and deploy simulation-based digital twins. The market for TwinBuilder is enormous, with half of the large industrial companies expected to deploy digital twins in the next three years. And we are seeing early traction in the market. The home appliance and air solution division of the global giant LG is using TwinBuilder to create virtual prototypes at the component level and share IoT information amongst products, supporting research to boost product reliability, reduce the time to market, decrease the need for physical testing, and improve product development. The next pillar of our growth strategy was pursuing strategic partnerships and acquisitions. On the partnership side, last week, PTC released Creo Simulation Live, which embeds Ansys discovery technology into Creo. With PTC's market leadership, this partnership grows the Ansys reach to a new and broader base of design engineers around the world. While it is too soon to evaluate market success, early indications are positive. During its most recent earnings call, PTC reported that it already had orders from 20 customers following its December preview release, as well as more than 160 customers in its short-term pipeline. M&A continues to be a highlight for us. As you know, Ansys has a long history of successful M&A, where we acquire companies with leading technologies, invest in both innovation and integration with the broader Ansys portfolio, and take advantage of the vast Ansys customer footprint to increase customer adoption and sales and drive growth for Ansys. We're following that same playbook with our two most recent acquisitions, both of which closed earlier this month. The first is Granta Design, the pioneer of material intelligence and information technology. With the variety of materials available to product developers today, having accurate, traceable, and reliable materials information is increasingly critical to simulation accuracy. Granta has proven world-class technology that has enjoyed success in some of the largest and most sophisticated companies. Rolls-Royce, for example, used Granta to save $10 million through reduced testing, legacy data capture, and other cost avoidance. And although we share a few customers with Granta, including Lockheed Martin, Saudi Aramco, and Airbus, their distribution was limited because of their size. Now, as part of ANSYS, with our ability to reach customers in all geographies, there are many new opportunities to drive growth by introducing the Granta material solution to a much larger customer base. We also closed a smaller acquisition, Helix, which builds great technology to analyze and mitigate the risk of electromagnetic crosstalk for semiconductor designs. This is particularly relevant because medical trends like 5G and artificial intelligence are driving the need for extensive on-chip electromagnetic analysis to combat electromagnetic noise. Helix Solutions, when combined with ANSYS PowerArtist, our power integrity and noise analysis technology, as well as our market-leading electromagnetic solvers, will help engineers deliver on the promise of next-generation solutions. Our 2019 strategy for growth remains the same as last year. We'll continue to grow our core, expand into the adjacencies we've selected, drive partnerships, and pursue appropriate M&A. With this strategy in place, I'm excited that our guidance for 2019 is 12% constant currency 606 revenue growth at the midpoint for the full year. This is an ambitious growth objective, especially in the light of our stellar performance in 2018, and it is a testament to the strength of the Ansys franchise. I want to take a minute to talk about corporate commitment to environmental, social, and governance initiatives. Last month, we were named to the Global 100 Most Sustainable Corporations Award by corporate knights, a firm slowly focused on tracking and ranking companies committed to sustainability. This is a powerful recognition of our company and our employees. And now, I'd like to turn the call over to Maria.