ANSYS, Inc.

Ladies and gentlemen, thank you for standing by and welcome to ANSYS' second quarter 2020 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. At this time, I would like to turn the call over to Ms. Arribas for some opening remarks. Please go ahead.

Good morning, everyone. Our earnings release, the related prepared remarks document, and the link to our second quarter form 10Q have all been posted on the homepage of our investor relations website. They contain the key financial information and supporting data relative to our second quarter financial results and business update, as well as our Q3 and updated fiscal year 2020 outlook, and the key underlying qualitative and quantitative 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. We note in particular that uncertainty regarding the impacts of the COVID-19 pandemic on our performance could cause actual results to differ materially from our projections. 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 obligations 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. A discussion of the various items that are excluded and a full reconciliation of GAAP to the comparable non-GAAP financial measures is included in this morning's earnings release materials and related form 8K. I would now like to turn the call over to our CEO, Ajay Kapal, for his opening remarks. Ajay?

Good morning, everyone, and thank you for joining us. Thanks to strong execution, Ansys delivered Q2 revenue, operating margin, and earnings that exceeded the high end of our guidance. Our Q2 results illustrate the close relationships we have built with our customers, which were important as the overwhelming majority of our business in Q2 was transacted remotely. That included two notable sales. First, we closed the largest total contract in our 50-year history at almost $100 million with an existing customer in the automotive and ground transportation space. This customer is standardizing on ANSI solutions for multi-physics, additive manufacturing, electrification, and digital twins to develop great products faster and more affordably. Our second notable deal was our largest new business perpetual agreements, which was driven by our flagships HFSS for electromagnetics and Ellis Dyna for explicit analysis. This $12 million agreement with a major high-tech company had been forecasted for the second half of the year, but based on the customer's evolving needs and strong sales execution, we were able to sign the contract in Q2. That contract was the primary contributor to our Q2 revenue coming in over the high end of our guidance. Turning to our performance by industries, Q2 largely played out as we had expected. We saw little to no reduction in demand in the high-tech and semiconductor vertical, which included the $12 million new business deal that I already mentioned. Similarly, the defense segment remains relatively stable due to its focus on technology to support national security. For example, in Q2, we closed a seven-figure multi-year deal with a European defense contractor. Even while many manufacturing plants were idle due to COVID, the automotive industry is continuing its investment in R&D. In particular, OEMs and their supply chains continue to rely on simulation for emerging solutions and electrification and autonomy. Our optical solutions were adopted by a North American autonomous electric vehicle developer, and by an Asian automotive OEM to advance their ADAS programs. Also in Asia, tier one automotive supplier Denso signed a three-year multi-million dollar deal to adopt ANSI solutions for automotive parts development for electrification and autonomy. Our Q2 performance by geography was as we expected with North America leading the way. North America has our largest installed base of enterprise customers with a number of them due to renew their leases in 2020. We're seeing a high renewal rate for those leases and are expanding on them by attaching new product sales. However, as we mentioned in our prepared remarks document, we saw a slowdown in the SMB space across all our major geographies, as we had predicted in our last earnings call. Despite the uncertain economic times, companies are continuing their investments in R&D. As we have previously discussed, R&D is typically the initiative least impacted by budget cuts and the first restored, primarily because it drives future growth and market success. Customers view simulation as a key component of R&D, a force multiplier that helps them drive both top-line revenue growth and achieve significant cost savings. Furthermore, the pandemic has limited access to labs for some customers making simulation even more important than ever. Some other customers have struggled with remote access to corporate data centers and are taking advantage of Ansys Cloud to give their engineers access to high-performance compute capacity. For example, our customer Coca-Cola is reporting that Ansys Cloud is dramatically reducing the time required for simulations, making its engineers working from home even more productive than when they were in the office. Our inaugural Simulation World virtual conference clearly illustrated the importance of simulation to customers and prospects across industries. More than 55,000 registrants from around the world signed up to learn how companies such as Ferrari, HPE, Honeywell, Siemens, Ford, Seagate, and Bosch are using answer simulation to develop their next generation products. They also heard from our partners, including Microsoft, PTC, Autodesk, and Rockwell Automation. Simulation World demonstrated the power of digital transformation and the key role that simulation plays in making our customers' digital transformations successful. Our customers' continued reliance on simulation, along with our proven ability to close even the largest deals remotely, gives us confidence as we forecast the second half of the year. We have increased our guidance to reflect currency changes, improved cash flow, and our EPS overachievement in Q2. Maria will give you the details in a few minutes. Moving to our product successes, we recently released Ansys 2020 R2. This innovative release helps distributed engineering teams accelerate innovation by harnessing new streamlined workflows and dynamic capabilities across our multi-physics product suites. Some of the many highlights in R2 include a streamlined fluids workflow to simulate capacity fade and cell life influence. Integration of solver capabilities from LS Dyna into our mechanical interface. The ability to solve over 100 million unknowns in a single simulation while delivering a nearly 10X increased solution size in our electromagnetics flagship product, HFSS. A new electrothermal option in our semiconductor solution, RedHawk SC, which uses our big data platform to solve coupling of various structures on over 1 billion instances concurrently. and platform upgrades that empower engineers to rapidly process and finalize their designs through cloud-based high-performance computing. As part of our ANSYS 2020 R2 launch, we also unveiled our next generation upfront simulation solution, ANSYS Discovery. With built-in seamless connection to ANSYS flagship products, Discovery now empowers all engineers to explore larger design spaces and quickly answer critical design questions early, resulting in improved engineering productivity and product quality. Our partner, PTC, has embedded discovery into its CAD solution, Creo Simulation Live. On its recent earnings call, PTC announced the closing of its first seven-figure Creo Simulation Live deal with a large U.S. government agency, as well as the closing of 10 follow-on expansion deals. As the product continues to build momentum, PTC is planning new marketing programs to support sales. We have partnered with Microsoft, Dell, GE, and LendLease to form the Digital Twin Consortium. Physics-based Digital Twin technology enables companies to head off problems before they occur, prevent unplanned downtime, improve the customer experience, and drive innovation and performance. This consortium will build an ecosystem of digital twin users, drive best practices, and define requirements for new digital twin standards across industries. Due to our deep commitment to encouraging innovation at all levels, Fast Company has once again named ANSYS as one of the best workplaces for innovators. Working with Accenture, Fast Company recognized ANSYS for giving employees the freedom to explore the ideas that benefit our customers and the communities we serve. Turning to our recent moves in M&A, we started Q2 with our acquisition of Lumerical, which enables ANSYS customers to predict the behavior of light within complex photonic devices, structures, and systems. By integrating Lumerical's photonics products with our semiconductor and optical suites, designers can accurately predict the impact of both nanoscale and macroscale optics for automotive displays, autonomous vehicles, augmented reality, and even the development of cosmetics. Our acquisition of LSTC continues to play a key role in expanding a solution footprint with customers around the world. In Europe, our channel partner, Dynamore, inked an important deal with BMW to adopt Ansys LS Dyna for virtual crash testing, replacing an incumbent competitor. And in Asia, a major global automotive OEM continued its investment in LS Dyna as the product of choice for crash safety analysis. This is exciting news coming just months after we closed the acquisition of LSCC. Finally, I'm proud that ANSYS has been named one of the Bay Area's best places to work by the San Francisco Business Times and the Silicon Valley Business Journal. This recognition is a testament to our diverse and inclusive culture. which incorporates valuable perspectives and backgrounds to solve complex challenges for our customers. To summarize, Q2 was a strong quarter, highlighted by great execution across the board, thanks to our global team of dedicated employees and channel partners. Despite the economic uncertainties, our customers know that ANSYS simulation technologies help them solve their most vexing product challenges. Whether they're working in a corporate research lab or using the cloud, from their home offices. They know that ANSYS simulation delivers both top-line revenue growth and significant cost savings. And they know that ANSYS simulation will position them for future growth and market success. Our ability to close business and to support our customers, even as they work remotely, gives us confidence to deliver against our objectives for the second half of the year. And with that, I'd like to turn the call over to Maria to discuss the financials for Q2, as well as the details around our outlook and the assumptions for the remainder of 2020. Maria? Thank you, Ajay.