James E. Cashman - Chief Executive Officer, President, Director and Member of Strategy Committee Maria T. Shields - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance & Administration.

Sterling P. Auty - JP Morgan Chase & Co, Research Division Steven R. Koenig - Wedbush Securities Inc., Research Division Matthew L. Williams - Evercore Partners Inc., Research Division Anil K. Doradla - William Blair & Company L.L.C., Research Division Jay Vleeschhouwer - Griffin Securities, Inc., Research Division Steven M. Ashley - Robert W. Baird & Co.

Incorporated, Research Division Gregory W. Halter - LJR Great Lakes Review.

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS' Second Quarter 2014 Conference Call. Please note this call is being recorded. With us today are Mr. Jim Cashman, President and Chief Executive Officer; and Maria Shields, Chief Financial Officer. At this time, I would like to turn the call over to Mr.

Jim Cashman for some opening remarks..

Okay. Thanks. Good morning, and thanks, everyone, for joining us to discuss our 2014 second quarter financial results.

So let's get started by saying that the earnings release and the related prepared remarks document have been posted on the homepage of our Investor Relations website this morning, and it contains all of the key financial information and supporting data relative to Q2 and the first half of our 2014 business results, as well as our current Q3 and fiscal year 2014 outlook.

So before we get started, I'd like to introduce Maria Shields, our CFO, for our Safe Harbor Statement.

So Maria?.

Okay. Thank you, Jim. Good morning, everyone. I'd like to remind you that in addition to any risks and uncertainties that we highlight during the course of this call, important factors that may affect our future business 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 the course of this call, and in the prepared remarks, we'll be making reference to non-GAAP financial measures.

A discussion of the various items that are excluded and a full reconciliation of GAAP to comparable non-GAAP financial measures are included in this morning's earnings release materials and in the related Form 8-K. So with that, Jim, I'll turn it back over to you..

Okay. Thanks, Maria. And so -- but before we open the call up for Q&A, I'd like to briefly provide some commentary about our Q2 results and our Q3 and fiscal year 2014 outlook. So from our perspective, Q2 was a very good quarter that combined results at the top end of our guidance while substantially building for future opportunities.

We reported consolidated non-GAAP revenue at the high end of our Q2 outlook range of $234 million, an increase in 8% reported currency or 7% constant currency. Non-GAAP EPS was $0.86. This was above the high end of our range, even excluding a $0.03 related to nonrecurring tax benefits.

We're encouraged by the continued progress that we've made in our Asia-Pacific business as demonstrated by another quarter of double-digit growth.

Overall, the second quarter reflects a combination of improved execution in targeted areas of our business, the continuation of softness in certain markets, as well as the various ongoing geopolitical tensions that we highlighted last quarter.

Consistent with our stated capital allocation strategy, during the quarter, we repurchased just over 970,000 shares, leaving about 2 million shares remaining in the current authorized pool. So here's some other highlights from the quarter.

We achieved revenue growth in all 3 major geographies, as well as double-digit constant currency growth in GIA, our Asia-Pacific area. We had 20 customers with orders in excess of $1 million. Now we had a similar number in Q2 of last year, but the amount this year represents a 27% increase in the underlying sales associated with them.

Our recurring revenue was very strong at 71%. Deferred revenue and backlog grew to an all-time high of $440 million. Non-GAAP operating margins remained strong within our guidance range at 47.5%. We generated $80 million in operating cash flows.

There was one other specific data point of interest that we also called out last quarter, the relative strength of lease versus paid-up license revenue.

This was also partially reflected in the increase in our recurring revenue percentage and was predominantly driven by continued growth in the lease space, most notably across all of our electronics products. The result of this is that we've updated our outlook for fiscal year 2014.

This translates into Q3 non-GAAP revenue in the range of $233 million to $241 million and EPS of $0.81 to $0.85, and revenue for the full year in the range of $943 million to $960 million with EPS of $3.29 to $3.37. So before we wrap up, I'd like to provide some qualitative context around the guidance.

First and foremost, the fundamentals of our business, the customer interest and long-term market opportunity remain intact. We've also noticed that customer increase in interest has led to some more significant engagements, as evidenced by that 27% sales growth in our 7-figure customers this past quarter.

Now these enterprise deals, they are very encouraging in that they embody, really, all the 3 dimensions of growth that we've been talking about, user account, density and intensity, but they are more complex in terms of timing and composition.

So to net it all out, our enthusiasm continues, and we believe it's important to invest in our business to prepare for the long-term opportunity that we see over the next 3 to 5 years. And one last highlight I'd like to mention regards Bob Kocis joining us our new Vice President of Worldwide Sales and Support.

Bob brings a wealth of experience, as well as some new perspectives and expertise that will just add to the existing talent within the ANSYS global team. We're excited that Bob has joined us to continue our drive towards the targeted double-digit revenue growth, as well as our long-term vision of Simulation-Driven Product Development.

So with those brief comments, I'd be happy to open it up for Q&A..

[Operator Instructions] And the first question comes from Sterling Auty with JPMorgan..

So I didn't see in the prepared remarks or the press release, can you give us what the acquisition-related revenue was in the quarter?.

Yes, well, again, it was approximately $2 million related to SpaceClaim..

Okay.

And can you give us a sense on SpaceClaim, if you take a look at just one -- a sample deal, who is it that they're seeing the most in terms of -- is there a specific RFP that they're going in and competing and benchmarking against? Or how is that kind of a sales cycle structure?.

Sterling, I'm sorry. I wasn't quite finished with the one part of the answer. We also had about $1 million that was related to Reaction Design. So a total of about $3 million. So anyway, I just -- I wanted to clarify that one.

So now, the next one?.

On SpaceClaim, sales..

SpaceClaim, who do they -- the sales cycle, who do they -- who are they seeing in their RFPs, if there are dedicated RFPs for that type of purchase?.

So the largest part of their business right now, Sterling, is through OEM channels and building out their partner ecosystem. Some of those partners happen to be overlap partners that were traditionally ANSYS partners. And then a smaller piece is to direct customers, some of them, which are also overlap logos with traditional ANSYS customers.

So I would say it's your R&D centers more towards the designer users, the initial users in the process..

Yes, again, we've talked about this from the very beginning. This is more of a conceptual design, supporting simulation -- our concept of Simulation-Driven Product Development. This is -- this really isn't a traditional CAD/CAM kind of play.

So it's not that -- don't view it in terms of the RFPs for a series of CAD players, because it's really not a primary market that they've been -- it's one that can be served, but it's really not a primary market that they were targeting or that really is in the main street of what we've been doing..

Got you.

And then along that M&A front, can you give us an update on where you're at in your M&A strategy? What types of opportunities you're seeing? What are the parameters you're looking for at this point given you've been successful in a lot of the tuck-ins that you've done already?.

Well, there's really no change. In general, I mean, even with some of the technological advantages our product currently have, I mean, we've got a very robust internal spending pattern that's driving those forward. And sometimes, we can acquire both talent and software capability to accelerate those.

But the other thing is, if you've noticed the constant rise in some of the major account agreements, if you look at what's -- even some of our public announcements with the expanded relationships and joint technology relationships we have with key customers, this gets into a little bit more by necessity, not just a technological capability, but of a process play that actually supports the infusion of simulation throughout the development cycle.

So when you get to that, the things related to process offerings, management of data, those type of things. So really, there's nothing different than we've been talking about probably for the last couple of years. It's just that the -- it's an emerging body of capability.

There's a different base of players, and so the process of building partnerships as well as leading to acquisitions is a little bit longer than, if you will, the usual suspects..

The next question comes from Steve Koenig with Wedbush Securities..

I wanted to ask on -- first on the revenues for Q2. So you outperformed certainly relative to the midpoint of your guidance. Jim, would you, or Maria, would you be able to rank for us or kind of help us take apart what were the most important factors behind... [Technical Difficulty].

Are you still there, Steve?.

Yes.

I'm sorry, can you hear me?.

Yes, you keep breaking up..

You cut out on us, so we weren't really sure..

Oh, I'm sorry. You outperformed relative to the midpoint of your revenue guidance.

Could you identify for us the major factors, maybe in order of importance, for that outperformance?.

Well, the key aspect of it, I mean, obviously was we had growth in all regions, and they were all pretty much on target. But getting to the upper end of the range and over consensus really was largely driven, as I mentioned, by the Asia-Pacific business.

But then also, keep in mind, the acceleration that we still saw in those upper-end customers, fairly significant.

It's the -- it takes a while for people to build into the -- into that 7-figure range and to have -- the group that's already there that increased by a fairly substantial, in excess of 20% growth, and those were areas that were a little bit above that.

And that was also -- that was somewhat mitigated and could be counterbalanced by the fact that we also mentioned that there was an increased shift toward lease and time-based license versus the traditional perpetual, which on one hand, would, while it built up the deferred balance, it tends to mute a little bit the actual recognized revenue for the quarter.

So it's a good thing for us long term. But even in spite of all that, when you balance it all out, it still wound up, like I said, above consensus and at the -- pretty much towards the top of our revenue range..

Okay. Yes, I saw your bookings number was very good. It looked like it grew maybe 16% year-on-year. I did want to ask you then, my -- for my follow-up, another question about SpaceClaim.

Jim, could you talk to us a little bit about the product synergies with your core offering and how any revenue synergies might unfold over time?.

Well, over time is a long question, and -- but in reality, we do see that because the ability to build, develop a conceptual geometry that can also keep pace with the optimization capabilities of simulation also allows a much friendlier entry point for casual users to start to utilize the capability and actually close the loop on that.

Long term, that's something that we clearly see, because we've also been talking about it being, over past years, one of those barriers that we'd be addressing going forward. But -- and you see that going forward.

Keep in mind, we're a couple of months into this, and while we've got some fairly significant and I think exciting integration plans, the integration of that capability is going to be an ongoing pursuit. Now keep in mind also that for a couple of years, we were providing this as -- on an OEM partner kind of basis.

But the overall theme really is around the democratization of simulation. It's really around ease of use. It's basically about being able to broaden the base, and if you will, just remove some of the initial fears that people might have of stepping into it with a more embracing kind of user interface..

The next question comes from Matt Williams with Evercore..

I was just wondering if we could possibly get an update around sales hiring and sort of what you're seeing in the market there in terms of your ability to onboard reps, and maybe where you are relative to plan? It looked like you guys added about 60 employees in the quarter, and I think when you closed the SpaceClaim acquisition, you were talking about bringing on board about 50 from them.

So I was just curious if we can get an update there. That would be helpful..

Sure. Well, the 60 people, as you noted, did include some from the acquisition, but we're pretty much on hiring plans and staffing plans. The on-boarding issue, of course, is a complex one when you consider the breadth of our products, but we've been having a pretty good hit rate on that.

Obviously, we had a very smooth transition as the Head of Sales role that we did that particular one. So we're actually -- and the other thing is, keep in mind, you get some evidence, I mean, it's one spot.

But you can -- you know that for the past few quarters, we've been talking about rebuilding -- of actually bringing the Asia-Pacific team up to a new level that we think is commensurate with where we're headed.

And we talked -- started talking about that about 9 months to a year ago, and over the last couple of quarters, we've been talking about the noted change there. So I think in some ways, we've been able to increase both the effectiveness of the type of person we're hiring, but also the ability to get them on board a lot more quickly.

With that being said, it still is not a matter of weeks, it's a matter -- it takes months to really get people up to kind of a par kind of capability and productivity..

Great. That's helpful. And maybe just one quick follow-up from me. On the large deals that you've talked about, obviously, a nice increase year-over-year in the dollar value there.

And I know in the past, you've talked about creating a more strategic relationship with customers and even using some of your services capabilities to really make sure you're getting the most out of those agreements.

Are the increases that you're seeing in terms of dollar value, are these with customers that maybe came in and did a little bit a year ago and are adding capabilities as they're sort of renewing? Or is it really a factor of just large deals kind of coming to you right....

No, it's a mix. It is mostly known customers. Keep in mind that at the time, people thought many years ago that simulation was saturated. Most of these customers have been with us in, let's say, earlier generations of analysis software capability. They've been with us, in many cases, for 10, 15, 20, even more, longer in terms of years.

It was just that we had to do a lot of the other things that we've been doing over the last decade or so to bring it -- to make it more broadly usable to the company. So most of those are customers that have been with us for quite a while, and they continue to ramp up. Now that being said, it's -- there are some that are immediate large sales.

There are -- the majority of them, I'd say, are probably ones that used lower-level capabilities for a number of years and now are branching into broader ones. But you still see that there's quite a bit of this that's a continually increasing base of recurring revenue combined with substantial new sales.

And again, the service aspect of it is the last part, and in general, that's a body that we've been building up over the last year or 2. Yes, that's having an impact on some of those comp customers. It isn't universal across all of them. Some of them are just in a normal proliferation phase, but it definitely has helped us.

We've had a couple of press releases, if you checked our website about formal joint technology agreements and things like that, that have actually propelled some of that forward.

But it's also one where it's not a standard practice that's really out there in industry, at least at the technical detail at which we deal with people ramping up on simulation. So that's one that -- we're continuing to build it as we grow the capability with the customers..

The next question comes from Anil Doradla with William Blair..

I had a couple of questions. Jim, I mean, the whole Eastern European crisis continues to go on.

Can you remind us once again what the impacts were in this quarter and how should we be looking at it, say, over the next 12 months?.

So at this point, what we really did was we said that it was around $10 million for the year, and once it kind of freezes up allocating what would have been in any 1 quarter, it's kind of tough. I mean, we could see over that range. Frankly, the reason why we didn't drum that up a lot on this call is because we mentioned it in Q1.

We tried to account for it. We pretty much assumed, like I think we stated at the time that, hey, we assume that something this complex and this nasty is going to go on for at least a year. And for that reason, if anything positive happens, it's all good for us.

But we didn't see it changing anytime soon, and quite frankly, we don't -- we didn't see it changing in Q2. If anything, it got slightly more strident. But again, we pretty much balanced a lot of that out. So while it still has an impact, it was factored into our guidance from the last call. It's continued to be baked in there.

And if we do get some positive movement on there, it will be a pleasant surprise..

Okay. And one of the key themes that is going on in processors is the rise of ARM-based processors. It's a theme that is going to impact the infrastructure markets in 2015 with the rise of about 0.5 dozen semiconductor companies launching these products.

Now, Jim, you've talked about commoditization of processing, and I wanted to know how you're looking at ARM-based processors competing with the Intel platforms, bringing the cost down significantly.

And how should we be looking at your business, say, over the next 36 months with rise of these family of chips?.

Well, in general, any -- I mean, there are a lot of different technology bases, but any increase in the availability, drop in cost of any kind of processing, anything driven along that turns out to be a net tailwind for us.

And that's everything from the little-bit-earlier graphics processing units and the fact that they're in there and linking into there. So any form of computing that's out there is -- we're going to tap into it because, frankly, as valuable as our software is, it's also -- it also uses a lot of computing resource.

So we go after that, whether it's large scale. Any of the new innovative kind of capabilities, we will -- we'll continue to tap into. And anything that drops the overall hardware cost of that is something that just creates more opportunity for us.

So ARM, one aspect of that GPU, and for that matter, even some of the things that we see with some of the on-demand kind of licensing and access to that. So really, it's more of a broader base question.

But virtually anything that increases the proliferation of the computing capacity, and in particular, embeds it in the company, even in a customer company, even in advance of us involved in the software engagement has turned out to be a net-plus.

We've come a long way from the day where every time we sold a license, we also had to work with them to help procure a UNIX box or something like that to run along [ph]. So all of this is good movement for us..

Great. And finally, if I can sneak in one small thing.

The record backlog, anything that surprised you on the upside on that front?.

Well, not really, I mean, but we have seen as we've done -- one of the things we saw was that, traditionally, we had a kind of our own balance in lease license, and it was very stable for a long amount of time. But you looked at some of the companies that we partnered with, and they each had their own individual models.

So Ansoft, in particular, really didn't have a lease model, but Apache had virtually an all-lease model and a lot of it multiyear.

As we started to get integration between the products, what we saw was that, okay, well, customers that traditionally might have been Apache products but are starting to buy increasing amounts of Ansoft products, well, they're -- whatever their dialed-in purchase mechanism was for the time-based license.

And that's what I mentioned when we saw the lease part of our business actually growing more quickly. So that was one aspect of it. The other thing is that we do see that there are trends toward more of the on-demand kind of usage, which is inherently time-based by definition. So we have those 2 major elements going forward.

Those are really the only major trends that we saw.

And then again, the other thing is keep in mind what the -- those larger customer deals we talked about that were growing disproportionately, well, since they've been continually accumulating business, well, part of that accumulation, of course, is the growth of the maintenance business, in addition to some of that also being increased lease business, and of course, all of that adds to the backlog..

[Operator Instructions] The next question comes from Jay Vleeschhouwer with Griffin Securities..

I'd like to ask a couple of questions regarding, in effect, your sustainable competitive differentiation built around the breadth of your portfolio.

And specifically, you've talked, for instance, about systems engineering or what you call your comprehensive systems solution on the one hand, including the acquisitions of Apache for electronics, of course, Esterel, Reaction Design for chemical processes.

I imagine that's partly aimed at new types of batteries, for example, and SpaceClaim, which, when private, had a nice niche in automotive.

And so the question I have is do you see automotive as perhaps the principal vertical market in which you can, a [ph], more succeed in systems engineering? So not to exclude other areas, but auto perhaps would be the most significant area. As you're probably aware, one of the major U.S.

car companies recently made a very interesting selection, not involving you, around systems engineering, but it's perhaps indicative of what's going on in that space..

Yes. Well, I mean, the bottom line is we -- like anything we do, we assume it's got a broader base. The only thing I'd say is that what we've noted over the last couple of years, in particular, that automotive, it's -- while it's not the sole market, it's one that's been under a lot of transformation.

Before, it was around hybrid drives and battery technology, motor efficiency, things that are inherently multi-physics.

We talked about the fact that the amount of electronic content in car, whether it's entertainment systems, active safety systems, engine and control kind of systems, the combining of the electronics and the mechanics obviously was another key aspect.

You mentioned Reaction Design, and yes, we see that, that kind of -- while it's not really aimed necessarily at chemical, the main thing was toward combustion and fuel efficiency, which, of course, not only is good for aero, but it's also very good for automotive.

So it's more along the lines, when you see the convergence of all the regulatory pressures, of all the safety concerns of fuel efficiency, of a whole range of those things. The standard practices that used to be locked in 30, 40 years ago, they're not really the main failure point and failure mechanisms.

It's when you switch over to new systems that might have unintended consequences. You look at the system combinations, a broad range of things, and that's just created in it -- not that automotive itself is inherently more applicable to this.

I think every product can apply to this, but the pressure is for change, and the transformations that are going on are particularly noted in the automotive. And that's why we have seen some of those things going on. Like I said, we've also seen it in commercial aviation, and of course, the rapid transition of things, we've seen a lot in electronics.

So that's one reason why those have tended to be predominating industries for a number of times [ph]. But you're correct, automotive is one that's been particularly noteworthy as of recent..

Okay.

Secondly, could you update us on what's going on with EKM and your cloudy investments? Is it fair to think about those 2 as going increasingly together, that you're trying to grow your EKM business and of course, your cloudy investments as part of your new collaboration strategy?.

Well, actually that's spot on. And this is -- and it's probably a little premature to talk about it at this time.

But in fact, not surprisingly, EKM related to cloud offerings related to collaboration and actually related to the commercialization of our own offerings inside the cloud has been one that's actually gone -- has actually been one of the more technologically advancing areas for us in the last few months.

The other thing is we find that it was the -- it was just the same technologies. Our architecture was -- is fine in a public cloud or a private cloud, but the ability to link all of those together was particularly key.

So that's -- essentially, that's one element where we have continued to -- we talked about the increased R&D spend that we're doing internally.

That's one where there aren't -- there isn't a lot of off-the-shelf things that are really there that are usable for us and the ability to link in with the innate knowledge created by a simulation product becomes important. So that's been a significant part in addition to ease-of-use of our own internal investment strategy.

Now that's one, obviously, we've also talked about as being a potential target for some of the M&A activities. But like I say, a lot of these things really don't exist or there would be a lot of assembly required. It's just that we're always interested in different middleware and infrastructural software that can actually drive that forward.

So it actually plays a little bit into one of the elements of our acquisition strategy..

All right. And lastly, with regard to sales. When Bob was at PTC, part of his experience there entailed working with the channel.

And my question is, would you anticipate, now that you have the new Head of Sales, that the role or proportion of sales coming from the channel might change in -- on the direct side? Would you anticipate perhaps taking somewhat more of a vertical alignment as with the aforementioned automotive market or anything else?.

Well, the verticalization, I mean, we don't want to sit there and over-slice that. And in general, we already have teams that are associated but largely around major accounts and clusters of industries. So it's really not a pure industry alignment, but it's a very focused sales and program backed with some -- from targeted marketing.

Now on -- the other thing, our main thing is that we want to make sure as our product portfolio continues to broaden, the biggest issue we've had are taking these slightly smaller companies that have been with us a number of years and helping them move up the learning curve, if you will, on-boarding them to new technology.

And that part of tapping into that channel experience was one thing that we were -- it was just one of those extra pluses that we wanted to tap into, and this new VP provides an expertise space in there that's particularly strong. A lot of people have ideas on the direct, but it's a little bit more complicated when you're balancing all of that.

So it's not that you're going to see anything dramatically different. I hope what you'll continue to see over a multi-year period is commensurate and correlated growth between the 2 and keeping balance..

The next question comes from Steve Ashley with Robert W. Baird..

I want to just go back and revisit an earlier line of questioning on SpaceClaim.

In regards to the product road map, what needs to happen to that product for it to reach maybe an important first milestone? You talked about it being kind of a longer-term evolutionary process, but I think the understanding here is you're going to try to import some ANSYS technology and simulation into that product.

Does that sound right? And what kind of time frame are we talking about for that to happen?.

Well, I don't think we see it so much as capability being imported into SpaceClaim. I think what you see is -- are some of the SpaceClaim constructs, user interaction styles being more pervasive throughout the ANSYS family in terms of having that newer user interface.

A lot of our legacy products, while they're very popular, some of them have -- they've been around for a long time and so have their user interfaces. And if you think of how user interaction has changed with software and how difficult it is to effect those changes through it, it's pretty complicated.

But with this using -- I mean, interacting with the -- interacting with a conceptual geometry and gradually refining it as you learn more and more about it is a very natural way of working with things.

And so really, it's more of the merging and embedding of the combining of the capabilities of simulation with the capabilities of conceptual geometry creation, linking them together so you can do closed-loop kind of optimization in a way that actually -- where geometry can be both an input and a parameter to be altered and allow those all to come together.

But at the same point is taking advantage of the ease of use because SpaceClaim was very effective at reaching a broad base of users and being very intuitive, easy to learn. In fact, we had a chance to witness that ourselves when we OEM-ed it as a -- when they were a third-party supplier to us.

And we saw the impact that it was already starting to have in -- just with the initial baby steps in terms of implementing that.

So I wouldn't see in terms of shoving a bunch of simulation capabilities into SpaceClaim, but I think what happens is it becomes very blurry as to where SpaceClaim -- where geometry creation starts and where simulation ends. It becomes part of an overall process, and linking those together both by data and user interaction are key aspects of it..

That was really good.

In terms of -- is it possible that with ANSYS 16 later this year, we could also see some of that ease-of-use elements being rolled [ph] in the ANSYS offering?.

I'm sorry, Steve. But the -- I didn't mean to cut you off, but no, that's absolutely part of the roadmap.

And even though we're always adding features into the software, solving new classes of problems, I think that we even mentioned the last couple of calls, the ease of use is really the banner aspect of moving forward, and that's across all of our product lines.

So it's not just that it's some of the ease of use with geometry, but in terms of what we're doing with all the major product lines, be they electronics, be they fluids or be that structure, we're starting to put that in. Now the ease-of-use, keep in mind, that's a pretty broad-based thing. Ease-of-use is everything from user interaction.

It's to automation of capabilities that always could be strung together, but you had to kind of do it more manually, and now they do it more as automated steps.

And frankly, the -- some of the ease-of-use that we're getting through the ANSYS customization toolkit, allowing people to customize it particular to things they want to do or different corporate best practices they have.

So when we think ease-of-use, it's a really, really broad term, but there's 3 -- those are the 3 major fronts that we're working on..

And just real quick, Maria, do you happen to remember in the year-ago third quarter, you did a large license deal.

Do you happen to remember which geography that occurred in?.

Do you mean second quarter, Steve?.

Well, there was a second quarter when we had a really large one..

That's what I meant to say. I'm sorry..

Okay, okay. Yes, that one we're familiar with. The Q3 ones, not so much..

Yes, that was in North America, Steve..

Yes..

The next question comes from Greg Halter with Great Lakes Review..

I wondered if you could comment on your capital allocation strategy, obviously cash flow has been very strong currently and historically.

Obviously, you bought back stock, but any thoughts on the continuation of the buyback and/or dividend and/or M&A?.

Yes, yes. I mean, again, keep in mind, these weren't tactics that we invoked over the last few years. It really is part of a strategy, and it's really the same thing we talked about before is it's always been positive, accretive acquisitions that help us build our product roadmap and actually, if you will, pull the future in sooner.

And then secondarily is the share repurchase, which I think we demonstrated in large part. Now keep in mind, as I mentioned in some of my opening comments was we still have around 2 million that's already authorized. And that's not to say that that's the end game, I'm just saying that's on the shelf and ready to go.

But that's -- but those elements continue to be the 2 major bulwarks of our capital allocation..

All right.

And I don't know if you mentioned this or not, I know you had some comment about the employee count, but what kind of openings do you currently have and versus maybe a quarter ago or a year ago?.

Well, the good news is we've closed on that quite a bit. The -- we do have -- we always have a number of openings because we're always -- first of all, keep in mind, for us, recruiting is a -- it's a process. It's not an event. It's something that we know we need to continually build. We know there's certain runway that it takes.

So we continue to build things going on. Now we don't have quite the number of openings that we did because we filled some of them, but the most important part is that the -- in particular, the productive sales headcount and keeping that fully fleshed out, that's really been kind of a top of the thing. So bottom line is we're continuing to hire.

Second of all, we're in -- we're disproportionately in good shape in terms of the sales headcount, although we're always looking for increased talent there. And we're just continuing to -- the recruiting process in a generic sense, just knowing that over the next couple of years that we want to continue to add top flight talent to the team..

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Cashman for any closing remarks..

Okay. Well, thanks a lot, everybody. So in close -- basically, in closing, the emphasis for the remainder of 2014, it's an ongoing focus on sales execution, and then as some of you noted already, the delivery of ANSYS 16, a key release for us.

Actually, many of us just spent the last quarter traveling to our annual user group meetings, and we actually engaged with well over 10,000 of our customers and partners from around the globe.

So all I can say is that backing up the numbers and the guidance that we talked about today, those customers, their receptivity and enthusiasm for our long-term vision is actually continuing to strengthen, which gives us a pretty good visibility into that revenue range for 2014 that we mentioned, and it certainly gives us increased confidence in the long-term opportunity.

So again, the normal shout-out is that we continue to get a lot of propelling by a strong combination. The vision continues solid. I think our business model has demonstrated time and time again to be very resilient. The customers are loyal, those ones that keep increasing that large mega-customer base.

But the partners, the technology and now this growing base of exceptional employees, they are really what has made it possible and continue to make it possible in the future, and I'd like to thank all of them. But thank you for your time, and we'll be speaking again with you next quarter..

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