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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 March 31, 2021
OR
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,
PA
15317
(Address of Principal Executive Offices)
(Zip Code)
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:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, $0.01 par value per shareANSSNasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes    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 filerAccelerated filer
Non-accelerated filerSmaller 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 per share, outstanding as of April 30, 2021 was 87,151,573 shares.



ANSYS, INC. AND SUBSIDIARIES
INDEX
  
Page No.

2

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

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)March 31,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents$987,427 $912,672 
Short-term investments516 479 
Accounts receivable, less allowance for doubtful accounts of $14,000394,289 537,564 
Other receivables and current assets278,720 268,522 
Total current assets1,660,952 1,719,237 
Long-term assets:
Property and equipment, net93,207 96,503 
Operating lease right-of-use assets125,635 137,730 
Goodwill3,036,783 3,038,306 
Other intangible assets, net677,357 694,865 
Other long-term assets201,675 225,119 
        Deferred income taxes22,419 28,830 
Total long-term assets4,157,076 4,221,353 
Total assets$5,818,028 $5,940,590 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$16,970 $18,691 
Accrued bonuses and commissions24,911 112,491 
Accrued income taxes6,260 26,116 
Current portion of long-term debt4,688  
Other accrued expenses and liabilities204,622 199,466 
Deferred revenue366,596 372,061 
Total current liabilities624,047 728,825 
Long-term liabilities:
Deferred income taxes102,221 110,321 
Long-term operating lease liabilities109,454 120,940 
Long-term debt793,515 798,118 
Other long-term liabilities76,822 84,514 
Total long-term liabilities1,082,012 1,113,893 
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000,000 shares authorized; zero shares issued or outstanding  
Common stock, $0.01 par value; 300,000,000 shares authorized; 95,266,320 shares issued953 953 
Additional paid-in capital1,346,601 1,434,203 
Retained earnings3,876,991 3,804,593 
Treasury stock, at cost: 8,128,708 and 8,693,809 shares, respectively(1,075,537)(1,124,102)
Accumulated other comprehensive loss(37,039)(17,775)
Total stockholders' equity4,111,969 4,097,872 
Total liabilities and stockholders' equity$5,818,028 $5,940,590 

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

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
(in thousands, except per share data)March 31,
2021
March 31,
2020
Revenue:
Software licenses$132,604 $87,830 
Maintenance and service230,622 217,155 
Total revenue363,226 304,985 
Cost of sales:
Software licenses7,606 4,926 
Amortization14,949 9,552 
Maintenance and service39,548 35,638 
Total cost of sales62,103 50,116 
Gross profit301,123 254,869 
Operating expenses:
Selling, general and administrative146,215 130,522 
Research and development100,479 86,112 
Amortization4,407 4,162 
Total operating expenses251,101 220,796 
Operating income50,022 34,073 
Interest income517 2,775 
Interest expense(3,315)(3,651)
Other income, net399 127 
Income before income tax benefit47,623 33,324 
Income tax benefit(24,775)(12,740)
Net income$72,398 $46,064 
Earnings per share – basic:
Earnings per share$0.83 $0.54 
Weighted average shares86,808 85,798 
Earnings per share – diluted:
Earnings per share$0.82 $0.53 
Weighted average shares87,986 87,369 

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

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 Three Months Ended
(in thousands)March 31,
2021
March 31,
2020
Net income$72,398 $46,064 
Other comprehensive loss:
Foreign currency translation adjustments(19,264)(24,292)
Comprehensive income$53,134 $21,772 

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

ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended
(in thousands)March 31,
2021
March 31,
2020
Cash flows from operating activities:
Net income$72,398 $46,064 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and intangible assets amortization27,082 20,702 
Operating lease right-of-use assets expense5,699 5,075 
Deferred income tax benefit(3,564)(5,442)
Provision for bad debts18 3,116 
Stock-based compensation expense35,119 30,941 
Other975 1,553 
Changes in operating assets and liabilities:
Accounts receivable159,038 117,830 
Other receivables and current assets(12,071)12,013 
Other long-term assets(1,909)(3,426)
Accounts payable, accrued expenses and current liabilities(80,050)(99,112)
Accrued income taxes(20,954)1,006 
Deferred revenue1,204 4,784 
Other long-term liabilities(11,878)12,308 
Net cash provided by operating activities171,107 147,412 
Cash flows from investing activities:
Acquisitions, net of cash acquired(10,783)(2,348)
Capital expenditures(5,045)(6,987)
Other investing activities(35)(264)
Net cash used in investing activities(15,863)(9,599)
Cash flows from financing activities:
Principal payments on long-term debt (75,000)
Purchase of treasury stock (161,029)
Restricted stock withholding taxes paid in lieu of issued shares(86,049)(62,425)
Proceeds from shares issued for stock-based compensation11,892 9,716 
Other financing activities(51) 
Net cash used in financing activities(74,208)(288,738)
Effect of exchange rate fluctuations on cash and cash equivalents(6,281)(3,421)
Net increase (decrease) in cash and cash equivalents74,755 (154,346)
Cash and cash equivalents, beginning of period912,672 872,094 
Cash and cash equivalents, end of period$987,427 $717,748 
Supplemental disclosure of cash flow information:
Income taxes paid$20,641 $6,757 
Interest paid$2,956 $5,628 

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


6

Table of Contents
ANSYS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive Loss
Total
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202195,266$953 $1,434,203 $3,804,593 8,694 $(1,124,102)$(17,775)$4,097,872 
Stock-based compensation activity(87,602)(565)48,565 (39,037)
Other comprehensive loss(19,264)(19,264)
Net income72,398 72,398 
Balance, March 31, 202195,266$953 $1,346,601 $3,876,991 8,129$(1,075,537)$(37,039)$4,111,969 
    
 Common StockAdditional
Paid-In
Capital
Retained
Earnings
Treasury StockAccumulated
Other
Comprehensive Loss
Total
Stockholders'
Equity
(in thousands)SharesAmountSharesAmount
Balance, January 1, 202094,628$946 $1,188,939 $3,370,706 8,893 $(1,041,831)$(65,381)$3,453,379 
Treasury shares acquired690 (161,029)(161,029)
Stock-based compensation activity(70,769)(541)48,997 (21,772)
Other comprehensive loss(24,292)(24,292)
Net income46,064 46,064 
Balance, March 31, 202094,628$946 $1,118,170 $3,416,770 9,042$(1,153,863)$(89,673)$3,292,350 

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

7

Table of Contents
ANSYS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)

1.Organization
ANSYS, Inc. (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, turbomachinery, consumer products, and healthcare.
As defined by the accounting guidance for segment reporting, we operate as one segment.
Given the integrated approach to the multi-discipline problem-solving needs of our customers, a single sale of software may contain components from multiple product areas and include combined technologies. We also 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 us to provide accurate historical or current reporting among our various product lines.
We are closely monitoring the spread of COVID-19 and continually mitigating 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 and employees.

2.Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared 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 our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K). The condensed consolidated December 31, 2020 balance sheet presented is derived from the audited December 31, 2020 balance sheet included in the 2020 Form 10-K. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for any future period.
Recently Adopted Accounting Guidance
Income taxes: In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminated 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 clarified and simplified other aspects of the accounting for income taxes. We adopted ASU 2019-12 on January 1, 2021 with no material impact to our condensed consolidated financial statements.
8

Table of Contents
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds. Cash equivalents are carried at cost, which approximates fair value. Our cash and cash equivalents balances comprise the following:
 March 31, 2021December 31, 2020
(in thousands, except percentages)Amount% of TotalAmount% of Total
Cash accounts$548,833 55.6 $571,587 62.6 
Money market funds438,594 44.4 341,085 37.4 
Total$987,427 $912,672 

Our money market fund balances are held in various funds of two issuers.

3.Revenue from Contracts with Customers
Disaggregation of Revenue
The following table summarizes revenue:
Three Months Ended
(in thousands, except percentages)March 31,
2021
March 31,
2020
Revenue:
Lease licenses$65,077 $44,874 
Perpetual licenses67,527 42,956 
Software licenses132,604 87,830 
Maintenance213,674 200,488 
Service16,948 16,667 
Maintenance and service230,622 217,155 
Total revenue$363,226 $304,985 
Direct revenue, as a percentage of total revenue71.8 %73.6 %
Indirect revenue, as a percentage of total revenue28.2 %26.4 %

Our software licenses revenue is recognized up front, while maintenance and service revenue is generally recognized over the term of the contract.
9

Table of Contents
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 three months ended March 31, 2021 and 2020 were as follows:
(in thousands)20212020
Beginning balance – January 1$388,810 $365,274 
Deferral of revenue362,043 308,817 
Recognition of revenue(363,226)(304,985)
Currency translation(6,898)(3,355)
Ending balance – March 31$380,729 $365,751 

Total revenue allocated to remaining performance obligations as of March 31, 2021 will be recognized as revenue as follows:
(in thousands) 
Next 12 months$607,500 
Months 13-24178,935 
Months 25-3675,807 
Thereafter74,259 
Total revenue allocated to remaining performance obligations$936,501 

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes both deferred revenue and backlog. Our backlog represents installment billings for periods beyond the current quarterly billing cycle. Revenue recognized during the three months ended March 31, 2021 and 2020 included amounts in deferred revenue and backlog at the beginning of the period of $209.3 million and $191.3 million, respectively.

4.Acquisitions
During the quarter ended March 31, 2021, we completed an acquisition with a purchase price of $10.8 million to enhance our customers' experience. The effects of the business combination were not material to our consolidated results of operations. The preliminary purchase allocations are $5.6 million of identifiable intangible assets, $6.2 million of goodwill and $1.0 million of net liabilities. The preliminary fair values of the assets acquired and liabilities assumed may change as additional information becomes available during the measurement period (up to one year from the acquisition date).
On December 1, 2020, we acquired 100% of the shares of Analytical Graphics, Inc. (AGI), a premier provider of mission-simulation, modeling, testing and analysis software for aerospace, defense and intelligence applications. The acquisition expands the scope of our offerings, empowering users to solve challenges by simulating from the chip level all the way to a customer's entire mission. The transaction closed with a purchase price of $722.5 million.
On April 1, 2020, we acquired 100% of the shares of Lumerical Inc. (Lumerical), a leading developer of photonic design and simulation tools, for a purchase price of approximately $107.5 million, paid in cash. The acquisition adds best-in-class photonic products to our multiphysics portfolio, providing customers with a full set of solutions to solve their next-generation product challenges.
The operating results of each acquisition have been included in our condensed consolidated financial statements since each respective date of acquisition.
10

Table of Contents
5.Other Receivables and Current Assets and Other Accrued Expenses and Liabilities
Our other receivables and current assets and other accrued expenses and liabilities comprise the following balances:
(in thousands)March 31,
2021
December 31,
2020
Receivables related to unrecognized revenue$135,828 $192,154 
Income taxes receivable, including overpayments and refunds59,876 31,628 
Prepaid expenses and other current assets83,016 44,740 
Total other receivables and current assets$278,720 $268,522 
Payroll-related accruals41,431 20,117 
Accrued vacation39,156 34,132 
Consumption, VAT and sales tax liabilities28,370 45,156 
Accrued expenses and other current liabilities95,665 100,061 
Total other accrued expenses and liabilities$204,622 $199,466 

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

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. 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
(in thousands, except per share data)March 31,
2021
March 31,
2020
Net income$72,398 $46,064 
Weighted average shares outstanding – basic86,808 85,798 
Dilutive effect of stock plans1,178 1,571 
Weighted average shares outstanding – diluted87,986 87,369 
Basic earnings per share$0.83 $0.54 
Diluted earnings per share$0.82 $0.53 
Anti-dilutive shares27 28 

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7.Goodwill and Intangible Assets
Intangible assets are classified as follows:
 March 31, 2021December 31, 2020
(in thousands)Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Finite-lived intangible assets:
Developed software and core technologies
$862,677 $(382,824)$859,620 $(370,338)
Customer lists and contract backlog 283,592 (137,680)288,085 (136,093)
Trade names 175,090 (123,855)175,626 (122,392)
Total$1,321,359 $(644,359)$1,323,331 $(628,823)
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 $19.4 million and $13.7 million for the three months ended March 31, 2021 and 2020, respectively.
As of March 31, 2021, estimated future amortization expense for the intangible assets reflected above was as follows:
(in thousands) 
Remainder of 2021$55,244 
202277,005 
202378,298 
202477,451 
202574,950 
202672,559 
Thereafter241,493 
Total intangible assets subject to amortization677,000 
Indefinite-lived trade name357 
Other intangible assets, net$677,357 

The changes in goodwill during the three months ended March 31, 2021 and 2020 were as follows:
(in thousands)20212020
Beginning balance – January 1$3,038,306 $2,413,280 
Acquisitions and adjustments(1)
8,215 (336)
Currency translation(9,738)(14,260)
Ending balance – March 31$3,036,783 $2,398,684 
(1) In accordance with the accounting for business combinations, we recorded adjustments to goodwill for the effect of changes in the provisional fair values of the assets acquired and liabilities assumed during the measurement period (up to one year from the acquisition date) as we obtained new information about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.
During the first quarter of 2021, 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, 2021. No other events or circumstances changed during the three months ended March 31, 2021 that would indicate that the fair values of our reporting unit and indefinite-lived intangible asset are below their carrying amounts.

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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 our own assumptions used to measure assets and liabilities at fair value.
A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Our current and long-term debt is classified within Level 2 of the fair value hierarchy because these borrowings are not actively traded and have a variable interest rate structure based upon market rates. The carrying amount of our current and long-term debt approximates the estimated fair value. See Note 10, "Debt", for additional information on our borrowings.
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)March 31,
2021
Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents$438,594 $438,594 $ $ 
Short-term investments$516 $ $516 $ 
Deferred compensation plan investments$1,601 $1,601 $ $ 
  Fair Value Measurements at Reporting Date Using:
(in thousands)December 31, 2020Quoted Prices in
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Cash equivalents$341,085 $341,085 $ $ 
Short-term investments$479 $ $479 $ 
Deferred compensation plan investments$1,602 $1,602 $ $ 

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. 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 non-employee directors. These securities consist of mutual funds traded in an active market with quoted prices. As a result, the plan assets are classified as Level 1 in the fair value hierarchy. The plan assets are recorded within other long-term assets on our condensed consolidated balance sheets.

9.Leases
Our right-of-use (ROU) assets and lease liabilities primarily include operating leases for office space. Our executive offices and those related to certain domestic product development, marketing, production and administration are located in a 186,000 square foot office facility in Canonsburg, Pennsylvania. The term of the lease is 183 months, which began on October 1, 2014 and expires on December 31, 2029. The lease agreement includes options to renew the contract through August 2044, an option to lease additional space in January 2025 and an option to terminate the lease in December 2025. No options are included in the
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lease liability as renewal is not reasonably certain. In addition, we are reasonably certain we will not terminate the lease agreement. Absent the exercise of options in the lease, our remaining base rent (inclusive of property taxes and certain operating costs) is $4.5 million per annum through 2024 and $4.7 million per annum for 2025 - 2029.
The components of our global lease cost reflected in the condensed consolidated statements of income are as follows:
 Three Months Ended
(in thousands)March 31,
2021
March 31,
2020
Lease liability cost$7,001 $6,218 
Variable lease cost not included in the lease liability(1)
1,282 1,097 
     Total lease cost$8,283 $7,315 
(1) Variable lease cost includes common area maintenance, property taxes, utilities and fluctuations in rent due to a change in an index or rate.
Other information related to operating leases is as follows:
 Three Months Ended
(in thousands)March 31,
2021
March 31,
2020
Cash paid for amounts included in the measurement of the lease liability:
     Operating cash flows from operating leases$(6,827)$(5,733)
Right-of-use assets obtained in exchange for new operating lease liabilities587 19,601 
As of March 31,
20212020
Weighted-average remaining lease term of operating leases
7.1 years8.0 years
Weighted-average discount rate of operating leases
3.1 %3.4 %

The maturity schedule of the operating lease liabilities as of March 31, 2021 is as follows:
(in thousands) 
Remainder of 2021$20,283 
202224,304 
202319,027 
202417,956 
202516,877 
Thereafter49,834 
     Total future lease payments148,281 
Less: Present value adjustment(15,787)
     Present value of future lease payments(1)
$132,494 
(1) Includes the current portion of operating lease liabilities of $23.0 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 March 31, 2021.
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10.Debt
In February 2019, we entered into a credit agreement for a $500.0 million unsecured revolving credit facility, which includes a $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 becomes payable in full on February 22, 2024 and is available for general corporate purposes, including, among others, to finance acquisitions and capital expenditures. The Revolving Credit Facility had not been utilized as of March 31, 2021.
We amended our credit agreement (Amended Credit Agreement) on October 16, 2019. The amendment provided for a new $500.0 million unsecured term loan facility to finance our acquisition of Livermore Software Technology (LST) in the fourth quarter of 2019. 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 1.25% per quarter, increasing to 2.50% per quarter after the next four fiscal quarters. 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).
In connection with the acquisition of AGI, we entered into a credit agreement (AGI Credit Agreement) on November 9, 2020, with Bank of America, N.A. as the Administrative Agent. The AGI Credit Agreement provided for a new $375.0 million unsecured term loan facility to finance a portion of the cash consideration for the acquisition. The term loan was funded on December 1, 2020 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 fifth full fiscal quarter after the funding date at a rate of 1.25% per quarter, increasing to 2.50% per quarter after the next four fiscal quarters.
Borrowings under the Amended Credit Agreement and the AGI Credit Agreement (collectively, the Credit Agreements) accrue interest at the Eurodollar rate plus an applicable margin or at the base rate, at our election. For the quarter ended March 31, 2021, 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 for the three months ended March 31, 2021 and 2020 were 1.45% and 3.03%, respectively. As of March 31, 2021, the rate in effect for the Credit Agreements was 1.45%.
The Credit Agreements contain 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 Credit Agreements 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 Credit Agreements contain customary representations and warranties, affirmative and negative covenants and events of default. The Credit Agreements also each contain 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 end of any fiscal quarter (for the four-quarter period ending on such date) with an opportunity for a temporary increase in such consolidated leverage ratio to 4.00 to 1.00 upon the consummation of certain qualified acquisitions for which the aggregate consideration is at least $250.0 million.
As of March 31, 2021 and December 31, 2020, the carrying values of the term loans were $798.2 million, which is net of $1.8 million of unamortized debt issuance costs, and $798.1 million, which is net of $1.9 million of unamortized debt issuance costs, respectively. We were in compliance with all covenants as of March 31, 2021 and December 31, 2020.


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11.Income Taxes
Our income before income tax benefit, income tax benefit and effective tax rates were as follows:
 Three Months Ended
(in thousands, except percentages)March 31,
2021
March 31,
2020
Income before income tax benefit$47,623 $33,324 
Income tax benefit(24,775)(12,740)
Effective tax rate(52.0)%(38.2)%

Tax benefit for the three months ended March 31, 2021 and 2020 was due to increased tax deductions related to stock compensation, many of which were recognized discretely. These tax benefits were in excess of tax expense at the annualized effective tax rate for the three months ended March 31, 2021 and 2020, resulting in a net tax benefit. Our expected annualized effective tax rate remains positive for 2021.

12.Stock Repurchase Program
Under our stock repurchase program, we repurchased shares as follows:
Three Months Ended
(in thousands, except per share data)March 31,
2021
March 31,
2020
Number of shares repurchased690 
Average price paid per share$ $233.48 
Total cost$ $161,029 

As of March 31, 2021, 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
(in thousands, except per share data)March 31,
2021
March 31,
2020
Cost of sales:
Maintenance and service$3,562 $2,866 
Operating expenses:
Selling, general and administrative17,223 15,144 
Research and development14,334 12,931 
Stock-based compensation expense before taxes35,119 30,941 
Related income tax benefits(42,625)(25,906)
Stock-based compensation expense, net of taxes$(7,506)$5,035 
Net impact on earnings per share:
Basic earnings per share$0.09 $(0.06)
Diluted earnings per share$0.09 $(0.06)

Stock-based compensation is a net benefit for the three months ended March 31, 2021. The tax benefits on stock-based compensation exceed the gross stock-based compensation expense due to increased excess tax benefits recognized related to awards issued in prior periods that were either exercised or released in the current period.
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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
(in thousands)March 31,
2021
March 31,
2020
United States$152,701 $125,113 
Japan42,015 37,359 
Germany31,346 30,097 
South Korea22,398 15,561 
France15,386 15,469 
Other Europe, Middle East and Africa (EMEA)56,543 43,841 
Other international42,837 37,545 
Total revenue$363,226 $304,985 

Property and equipment by geographic area is as follows:
(in thousands)March 31,
2021
December 31,
2020
United States$62,890 $65,633 
India7,077 7,408 
Germany5,541 5,277 
France5,239 5,749 
Other EMEA5,688 5,847 
Other international6,772 6,589 
Total property and equipment, net$93,207 $96,503 

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 material adverse effect on our 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 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 $7.4 million. As such charges are not probable at this time, a reserve has not been recorded on the condensed consolidated balance sheet as of March 31, 2021. The service tax issues raised in our 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) issued a favorable ruling to Microsoft. The Microsoft ruling was subsequently challenged in the Supreme Court by the Indian tax authority and a decision is still pending. We can provide no assurances on the impact that the present Microsoft case’s decision will have on our cases, however, an unfavorable ruling in the Microsoft case may impact our assessment of probability and result in the recording of a $7.4 million reserve. We are uncertain as to when these service tax matters will be concluded.
We sell software licenses and services to our customers under contractual agreements. Such agreements generally include certain provisions indemnifying the customer against claims of intellectual property infringement or non-compliance to contractual terms and conditions 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 lack of prior material indemnification claims, we cannot determine the 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 March 31, 2021, the related condensed consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the three-month periods ended March 31, 2021 and 2020, and the related notes (collectively referred to as the "interim financial 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, 2020, 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 24, 2021, 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, 2020, 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
May 5, 2021



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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 three months ended March 31, 2021, and with our audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the 2020 Form 10-K filed with the Securities and Exchange Commission. The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (GAAP).
Business:
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, turbomachinery, consumer products, and healthcare. Headquartered south of Pittsburgh, Pennsylvania, we employed approximately 4,800 people as of March 31, 2021. We focus on the development of open and flexible solutions that enable users to analyze designs directly on the desktop, which can be delivered both on-premises and in the cloud. We provide a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing and validation. We distribute our suite of simulation technologies through direct sales offices in strategic, global locations and a global network of independent resellers and distributors (collectively, channel partners). It is our intention to continue to maintain this hybrid sales and distribution model.
Our strategy of Pervasive Engineering Simulation seeks to deepen the use of simulation in our core, to amplify usage of simulation throughout the product lifecycle and to embed simulation into our partners' ecosystems. The engineering software simulation market is strong and growing. The market growth is driven by customers’ needs for rapid, quality innovation in a cost-efficient manner, enabling faster time to market of new products and lower warranty costs. While the transition away from physical prototyping toward simulation is prevalent through all industries, simulation demand is heightened by investments in high-growth solutions, including 5G, electrification, autonomous and the IIoT. Our strategy of Pervasive Engineering Simulation is aligned with this market growth.
We license our technology to businesses, educational institutions and governmental agencies. Growth in 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 our products. We believe that the features, functionality and integrated multiphysics capabilities of 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. 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, including the impact of the current COVID-19 pandemic. As a result, we believe that our overall performance is best measured by fiscal year results rather than by quarterly results.
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 our software products as compared to our competitors; investing in research and development to develop new and innovative products and increase the capabilities of our existing products; supplying new products and services; focusing on customer needs, training, consulting and support; and enhancing our distribution channels. We also consider acquisitions to supplement our global engineering talent, product offerings and distribution channels.
Overview:
Update on the Impact of COVID-19
As we moved into 2021, we continuously worked to mitigate the effects of COVID-19 on our business as described in our 2020 Form 10-K. The health and safety of our employees and their families, our partners and our broad Ansys community around the world remain a high priority. We are continuing to monitor the situation, but as of now remote access remains the primary means of work for a majority of our workforce. As we prepare for a broader employee base to return to the office later in the year, we are developing new flexible work arrangements. 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 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 the remaining duration and severity of the pandemic, the geographic markets affected, the actions taken by governmental authorities to contain the spread of the virus and variants, the nature and scope of government economic recovery measures, and the widespread availability, consumption and reliability of vaccines, among other factors. The spread of the virus and its variants and economic deterioration caused by them 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 our financial guidance. We continue to adjust our spending to reflect our expectations for the pace at which economic recovery will occur, while balancing the need to invest for long-term opportunities. We have also maintained and intend to maintain our commitment to invest in our acquisitions, research and development, and certain digital transformation projects, in particular our Customer Relationship Management (CRM) system 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. During the first quarter of 2021, we implemented enhancements to our CRM platform, and we expanded the rollout of our global payroll platform for HRIS.
Please see "Note About Forward-Looking Statements" and "Risk Factors" in Part I, Item 1A of our 2020 Form 10-K for discussion on additional business risks, including those associated with the COVID-19 pandemic.
Overall GAAP and Non-GAAP Results
This section includes a discussion of GAAP and non-GAAP results. For reconciliations of non-GAAP results to GAAP results, see the section titled "Non-GAAP Results" herein.
Our GAAP and non-GAAP results for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 reflected the following increases:
Three Months Ended March 31, 2021
GAAPNon-GAAP
Revenue19.1 %20.5 %
Operating income46.8 %37.5 %
Diluted earnings per share54.7 %34.9 %

We experienced an increase in revenue during the three months ended March 31, 2021 due to growth in software license and maintenance revenue and contributions from our recent acquisitions. The COVID-19 pandemic and trade restrictions with China adversely impacted our revenue during the three months ended March 31, 2021 and 2020. However, due to our diverse customer base, both from a vertical and geographic perspective, as well as our close relationships with customers, we were able to conduct a large amount of business remotely, which mitigated the impacts of the COVID-19 outbreak.
We also experienced increased operating expenses primarily due to increased personnel costs, additional operating expenses related to acquisitions, increased costs related to foreign exchange translation due to a weaker U.S. Dollar and higher stock-based compensation. While our hiring pace was slowed and certain discretionary operational expenses, such as travel, were significantly reduced, the COVID-19 pandemic did not have a material impact on our operating expenses during the three months ended March 31, 2021.
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, and transaction expenses related to business combinations.
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Impact of Foreign Currency
Our comparative financial results were impacted by fluctuations in the U.S. Dollar during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The net favorable impacts on our GAAP and non-GAAP revenue and operating income as a result of the weakened U.S. Dollar when measured against our primary foreign currencies are reflected in the table below.
Three Months Ended March 31, 2021
(in thousands)GAAPNon-GAAP
Revenue$9,912 $9,948 
Operating income$2,046 $2,473 

In constant currency, our increases were as follows:
Three Months Ended March 31, 2021
GAAPNon-GAAP
Revenue15.8 %17.3 %
Operating income40.8 %34.8 %
Constant currency amounts exclude the effects of foreign currency fluctuations on the reported results. To present this information, the 2021 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 2020 comparable period, rather than the actual exchange rates in effect for 2021. Constant currency growth rates are calculated by adjusting the 2021 reported revenue and operating income amounts by the 2021 currency fluctuation impacts and comparing to the 2020 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. Given that revenue is more volatile due to the upfront revenue recognition of multi-year lease license sales, we provide ACV as a supplemental metric to help evaluate the annual performance of the business. Summed over the long term, ACV and revenue lead to the same outcome. However, there will be years in which ACV growth lags revenue growth and other years in which ACV growth leads revenue growth. It is used by management in financial and operational decision-making and in setting sales targets used for compensation. ACV should be viewed independently of revenue and deferred revenue as ACV is a performance metric and is not intended to be combined with any of these items. There is no GAAP measure comparable to ACV. ACV is composed of the following:
the annualized value of maintenance and 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 March 31,Change
(in thousands, except percentages)20212020Amount%Constant Currency %
ACV$319,382 $301,050 $18,332 6.1 3.0 
Recurring ACV as a percentage of ACV77.6 %82.2 %

Recurring ACV includes both lease licenses and maintenance contracts. The reduction as a percentage of total ACV in Q1 2021 as compared to Q1 2020 was driven by an increase in perpetual licensing, primarily within our Asia-Pacific markets.
Other Financial Information
Our financial position includes $987.9 million in cash and short-term investments, and working capital of $1,036.9 million as of March 31, 2021.
There were no share repurchases during the first quarter of 2021. As of March 31, 2021, we had 2.8 million shares remaining available for repurchase under our authorized share repurchase program.
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Geographic Trends:
The following table presents our geographic constant currency GAAP revenue growth during the three months ended March 31, 2021 as compared to the three months ended March 31, 2020:
Three Months Ended March 31, 2021
Americas21.1 %
EMEA7.6 %
Asia-Pacific16.3 %
Total15.8 %

The mix of perpetual license sales as well as the value and duration of multi-year lease contracts executed 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.
To drive 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.
Continued trade tensions between the U.S. and China, together with the uncertainty around the COVID-19 outbreak, have had an impact on, and in the future may further restrict, our ability to sell and distribute our products to certain customers and our ability to collect against existing trade receivables. As a result, each of these have had, and in the future could continue to have, an adverse effect on our business, results of operations or financial condition. Refer to additional details in Part I, "Item 1A. Risk Factors" in our 2020 Form 10-K.
Industry Commentary:
The industry trends from 2020 carried into the first quarter of 2021 as high-tech, automotive, and aerospace and defense continue to be our leading industries. This reflects the sustained research and development investments companies in these industries are making in critical technology initiatives – such as 5G and cloud computing infrastructure, advanced defense systems, electrification and autonomy. In the high-tech and semiconductor industry, 5G is still driving growth as it has significant implications in relation to the amount of data that is generated and stored and how effectively it can be processed. The transportation and mobility revolution continues to drive investment in the automotive industry.
Use of Estimates:
The preparation of these financial statements requires 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, we evaluate our estimates, including those related to fair values of stock awards, bad debts, contract revenue, acquired deferred revenue, the standalone selling prices of 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. We base our estimates on historical experience, market experience, estimated future cash flows and various other assumptions that management believes are 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 apparent from other sources. Actual results may differ from these estimates.
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 (the Exchange Act), 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:
Our expectations regarding the impacts of the COVID-19 pandemic and variants of the virus as well as trade tensions between the U.S. and China.
Our intentions regarding our hybrid sales and distribution model.
Our intentions related to investments in research and development, particularly as it relates to expanding the ease of use and capabilities of our broad portfolio of simulation software products.
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.
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Our statements regarding the impact of global economic conditions.
Our expectations regarding the outcome of our service tax audit cases.
Our assessment of the ultimate liabilities arising from various investigations, claims and legal proceedings.
Our statements regarding the strength of the features, functionality and integrated multiphysics capabilities of our software products.
Our belief that our overall performance is best measured by fiscal year results rather than by quarterly results.
Our expectations regarding increased lease license volatility due to an increased customer preference for time-based licenses rather than perpetual licenses.
Our estimates regarding the expected impact on reported revenue related to the acquisition accounting treatment of deferred revenue.
Our expectation that we will continue to make targeted investments in our global sales and marketing organizations and our global business infrastructure to enhance and support our revenue-generating activities.
Our intention to repatriate previously taxed earnings in excess of working capital needs and to reinvest all other earnings of our non-U.S. subsidiaries.
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.
Our belief that the best uses of our excess cash are to invest in the business, acquire or make investments in complementary companies, products, services and technologies, make payments on outstanding debt balances and repurchase stock in order to both offset dilution and return capital, in excess of our requirements, to stockholders with the goal of increasing stockholder value.
Our expectation that changes in currency exchange rates will affect our financial position, results of operations and cash flows.
Our expectations regarding future claims related to indemnification obligations.
Our expectations regarding acquisitions, related capital expenditures 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 our control. We describe such risks, uncertainties, and factors in the “Risk Factors,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Forms 10-K and 10-Q. Many of these risks, uncertainties, and factors are currently amplified by, and may continue to be amplified by, the COVID-19 pandemic. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update them. Our actual results could differ materially from those set forth in forward-looking statements.
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Results of Operations
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Revenue:
 Three Months Ended March 31,Change
(in thousands, except percentages)20212020Amount%Constant Currency %
Revenue:
Lease licenses$65,077 $44,874 $20,203 45.0 42.6 
Perpetual licenses67,527 42,956 24,571 57.2 52.8 
Software licenses132,604 87,830 44,774 51.0 47.6 
Maintenance213,674 200,488 13,186 6.6 3.3 
Service16,948 16,667 281 1.7 (1.1)
Maintenance and service230,622 217,155 13,467 6.2 3.0 
Total revenue$363,226 $304,985 $58,241 19.1 15.8 

Our revenue in the quarter ended March 31, 2021 increased 19.1% as compared to the quarter ended March 31, 2020, while revenue grew 15.8% in constant currency. The growth rate was favorably impacted by our continued investment in our global sales, support and marketing organizations, strong perpetual license sales, the timing and duration of our multi-year lease contracts, momentum sales to our small- and medium-sized businesses, and our recent acquisitions. Lease license revenue increased 45.0%, or 42.6% in constant currency, as compared to the prior-year quarter. Perpetual license revenue, which is derived from new sales during the quarter, increased 57.2%, or 52.8% in constant currency, as compared to the prior-year quarter. Annual maintenance contracts that were sold with new perpetual licenses, maintenance renewals and the maintenance portion of lease license contracts collectively contributed to maintenance revenue growth of 6.6%, or 3.3% in constant currency. Service revenue increased 1.7%, or decreased 1.1% in constant currency, as compared to the prior-year quarter.
We continue to experience increased interest by some of our larger customers in enterprise agreements that often include longer-term, time-based licenses involving a larger number of 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 volatility. Software products, across a large variety of applications and industries, are increasingly distributed in software-as-a-service, cloud and other subscription environments in which the licensing approach is time-based rather than perpetual. This preference resulted in a shift from perpetual licenses to time-based licenses across a broader spectrum of our customers, with the exception of our Asia-Pacific region which experienced a disproportionate increase in perpetual licensing for the first quarter of 2021.
In relation to COVID-19 and our revenue, we currently expect a recovery in the business environment as vaccine distribution becomes more widespread and a larger percentage of the population is inoculated. Globally, businesses have not resumed full operations and our teams and those of our customers will likely continue working remotely into the second half of 2021. 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, as evidenced by our hosting of our annual Simulation World digital event in April 2021, the absence of certain events has had and is expected to continue to have an adverse impact on our results, especially for certain channel partners. Additional waves or mutated variants of COVID-19 could result in renewed shutdowns that stop or regress economic recovery.
With respect to revenue, on average for the quarter ended March 31, 2021, the U.S. Dollar was approximately 6.5% weaker, when measured against our primary foreign currencies, than for the quarter ended March 31, 2020. The table below presents the net favorable impacts of currency fluctuations on revenue for the quarter ended March 31, 2021.
(in thousands)Three Months Ended March 31, 2021
Euro$6,120 
South Korean Won1,369 
British Pound820 
Japanese Yen782 
Other821 
Total$9,912 
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The impacts from currency fluctuations resulted in increased operating income of $2.0 million for the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020.
As a percentage of revenue, our international and domestic revenues, and our direct and indirect revenues, were as follows:
Three Months Ended March 31,
20212020
International58.0 %59.0 %
Domestic42.0 %41.0 %
Direct71.8 %73.6 %
Indirect28.2 %26.4 %

In valuing deferred revenue on the balance sheets of our recent acquisitions as of their respective acquisition dates, we applied the fair value provisions applicable to the accounting for business combinations, resulting in a reduction of deferred revenue as compared to the historical carrying amount. As a result, our post-acquisition revenue will be less than the sum of what would have otherwise been reported by us and each acquiree absent the acquisitions. The impacts on reported revenue were $8.9 million and $3.9 million for the quarters ended March 31, 2021 and 2020, respectively. The expected impacts on reported revenue are $5.3 million and $19.3 million for the quarter ending June 30, 2021 and the year ending December 31, 2021, respectively.
Deferred Revenue and Backlog:
Deferred revenue consists of billings made or payments received in advance of revenue recognition from customer agreements. The deferred revenue on our condensed consolidated balance sheets does not represent the total value of annual or multi-year, noncancellable agreements. Our backlog represents installment billings for periods beyond the current quarterly billing cycle. Our deferred revenue and backlog as of March 31, 2021 and December 31, 2020 consisted of the following:
Balance at March 31, 2021
(in thousands)TotalCurrentLong-Term
Deferred revenue$380,729 $366,596 $14,133 
Backlog555,772 240,904