James Cashman - President and Chief Executive Officer Maria Shields - Vice President Chief Financial Officer.

Anil Doradla - William Blair & Company Jay Vleeschhouwer - Griffin Securities Matt Williams - Evercore ISI Steve Ashley - Robert W. Baird Saket Kalia - Barclays Capital Steve Koenig - Wedbush Securities Ross MacMillan - RBC Capital Markets Mark Schappel - Benchmark.

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS’ Fourth Quarter and Fiscal Year 2014 Conference Call. 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, thank you Rocco. Good morning, and thanks to everyone, for joining us to discuss our 2014 Fourth Quarter and Fiscal Year Financial Results. So as usual before we get started, I'd like to introduce Maria Shields, our CFO and ask her to go through our Safe Harbor statements.

Maria?.

Okay. Thanks, Jim. Good morning, everyone. Our earnings release and the related prepared remarks document have been posted on the home page of our Investor Relations website this morning.

And they contain all of the key financial information and supporting data relative to Q4 and the Full-Year 2014 business results as well as our current Q1 and fiscal year 2015 outlook and our key underlying assumptions.

I'd also like to remind everyone that in addition to any risks and uncertainties that we highlight during the course of this call, important factors that may affect our future results are discussed at length in our public filings with the SEC, all of which are also available via our website.

Additionally, the company's reported results should not be considered an indication of future performance as there are risks and uncertainties that could impact our business in the future.

These statements are based upon our view of the business as of today, and we undertake no obligation to update any such information unless we do so in a public forum. Finally, during the course of this call and in the prepared remarks, we will 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 the related Form 8-K. So Jim, I'll now turn it back to you. .

Okay, thanks Maria. So let’s start with a recap of the results that the ANSYS team achieved in 2014. So as you might recall from our Investor Day in March of 2014, we laid out a number of key objectives for the year.

We set goals of achieving non-GAAP revenue growth of 8 to 11% in constant currency, achieving strong margins and cash flows, high rates of recurring revenue, and continued growth in both deferred and revenue and backlog. And I am pleased to say that we did in fact achieve every one of those goals.

First, we achieved an extraordinary milestone of $1 billion in sales bookings. Our non-GAAP revenue growth for the year in constant currency was 10%. Our non-GAAP operating margin was 48%. We generated over $385 million in cash flow. That's a 16% increase over 2013.

Our recurring revenue for the year was 71% and our deferred revenue and backlog grew by 14%. We also accelerated the rate of return in capital to our shareholders through share repurchases. You might recall that in the November 2014 call, our Board of Directors we mentioned had significantly increased our share repurchase program to 5 million shares.

At that time, we committed to purchasing $200 million in stock over the following five months. We actually achieved that goal in less than three months. So in total we repurchased 3 million shares of stock in 2014 and 930,000 shares in January of 2015.

Now we committed to returning capital to our shareholders while simultaneously growing our top line business, both organically and through targeted acquisitions. As a result, our Board recently increased the authorized share repurchase pool back to 5 million shares.

During 2014, we acquired Reaction Design for advanced simulation of chemical reactions for combustion, and SpaceClaim for evolutionary geometry handling. And just a week ago, we acquired Newmerical Technologies International, a premier developer of in-flight icing simulation software and associated design, testing and certification services.

These acquisitions along with the groundbreaking technology we introduced last month in ANSYS version 16 which I’ll discuss a bit later, further distances us from the competition. So I’d like to now just take a moment to highlight some of the successes from the fourth quarter.

Most importantly, we achieved double-digit growth in revenue in the fourth quarter in constant currency surpassing the expectations that we shared with you in early November. We ended the year on a particularly strong note with record revenue and operating cash flows for the fourth quarter which drove record results for the full year.

Importantly our recurring revenue base continues to be very strong at 66% for the fourth quarter even off of the strong license performance. Now continuing the trends from Q3, we closed with strong contributions from all of our major regions.

North American non-GAAP revenue grew 12%, Europe rose 9% and Asia Pac increased 15%, again all in constant currency. Growth came from a broad base of industries and these industries are highlighted in more detail within the quarter’s prepared remarks which you can find on our investor site.

During the fourth quarter, we had 35 customers with orders in excess of $1 million. The average value of those orders represented a 14% increase over last year. Now two of those customers actually had orders in excess of $15 million, in fact one of them Cummins was featured in a separate announcement that we made earlier today.

We signed a landmark agreement with Cummins Inc, which has been a customer of ANSYS for over 25 years. The new multiyear enterprise license agreement provides Cummins with broad access to the ANSYS portfolio, including our high-performance computing solutions.

Cummins’ commitment to the ANSYS technology is in direct relationship with their vision of Analysis Led Design providing them with the flexibility necessary to grow their use of simulation in ways that would have been very difficult previously.

The agreement is actually indicative of the continuing shift to multi-year enterprise license agreements that several of our larger long-standing customers are considering that we talked about in recent calls. This allows for a widespread adoption of our technology across their enterprises.

So the Cummins announcement is really just the next step in a long journey that we’ve been on for over two decades, and one that we see continuing into the future for many more. This really is an example of simulation-driven product development and the democratization of simulation, visions that we’ve been advancing for over 15 years now.

Okay, so during the fourth quarter we continue to accelerate sales hiring as an important lever to drive the increased sales execution, capacity and growth as we head into 2015. Now we’ve seen the payoff in Q4 and overall 2014 results from a number of the changes and investments that we made throughout the of the year of 2014.

And our plan is to continue to drive change in investment in 2015 to continue on a path toward achieving our goal of double-digit constant currency revenue growth in 2015. So in summary for the quarter, constant currency and bookings growth were both double-digits. We ended 2014 with record results and we’ve great momentum as enter into 2015.

So now let me just share a little bit about the groundbreaking version of our software ANSYS 16.0 which we released in January.

Now you may recall at Investor Day last year, we outlined for you the tremendous growth opportunities available to us across three primary dimensions; increasing the number of users, number one; increasing the density of usage through multiphysics; and increasing the intensity of usage through high-performance computing.

ANSYS 16.0 is transformational in our industry and helps us to drive growth across all three of these dimensions. Even though we already have the deepest and broadest physics, we’re continuing to make significant advances and investments in R&D.

So first, with its dramatically enhanced user-interface and improved ease of use, it makes simulation more accessible to the broader range of people, and it increases the situations in which simulation can be used.

Secondly, ANSYS 16.0 reflects major enhancements to our entire portfolio including structures, fluids, electronics, systems, engineering solutions of all types. These enhanced features will broaden the use of simulation beyond one type of physics to true multiphysics used collaboratively by teams to assess entire systems.

And third, ANSYS 16.0 is geared for high-performance computing solutions and it provides extreme scalability, ease of use and flexibility through customization and cloud-enabled applications. We’re the only simulation provider that's really certified at 36,000 cores and above.

So all of these features will enable our customers to solve difficult problems in minutes, instead of hours or days thereby driving the intensity of usage. And then actually one final point I should make is certainly not the left, because there’s a lot we could talk about.

But with the release of ANSYS 16.0, we further solidified our platform status in the industry. The ANSYS Workbench platform further enabled simulation-driven product development by identifying which design parameters most influence product performance and by enabling engineers to easily evaluate multiple-design variations.

There are numerous additional enhancements in version 16.0 around robustness, efficiency, ease of use and actually most notably including extensions to the Workbench customization to allow the user to create their own, well user-defined processes, automation wizards and customization and optimization algorithms.

So in summary for ANSYS 16.0; A, extended leadership in each of our simulation disciplines; B, preeminent multiphysics and support of comprehensive virtual prototypes; and finally an enterprise-capable simulation platform. There’s a lot more on the website if you are interested in digging into that, but those are just the summary highlights.

So with that, I am going to turn it back to Maria to discuss our Q1 and our 2015 guidance before we move into Q&A.

So, Maria?.

Okay, thanks Jim. So as we outlined in this morning’s press release, we’ve initiated our outlook for Q1 with non-GAAP revenue in the range of $217 million to $225 million and non-GAAP EPS in the range of $0.74 to $0.79.

With respect to fiscal year 2015 with the sole exception of updates for movements in currency since we initially provided our 2015 outlook in early November, everything else remains largely the same.

Those currency updates translates to our revived outlook of non-GAAP revenue in the range of $946 million to $976 million and non-GAAP EPS of $3.40 to $3.51.

From a qualitative perspective, our Q1 guidance takes into account the currency updates that I just mentioned, as well as one particularly large customer deal that has historically included a combination of upfront perpetual revenue and the annual lease and maintenance business.

Because of the structure of this year’s deal, the entire value of the transaction will be recognized ratably throughout 2015. The structural change of just this one transaction adversely affects first-quarter revenue by approximately $2 million to $3 million. For 2015, we’re assuming no significant changes either way in the overall macro climate.

We also see sales and revenue growth rates ramping up as the year progresses, particularly as the new sales capacity that Jim talked about earlier that has been brought on in Q4 and Q1 begins producing and as the recently announced channel initiatives begin to take hold.

For further details around specific currency rates and other key assumptions that we factored into Q1 and fiscal 2015 outlook, please take a look at the prepared remarks that we posted on the Investor Relations home page this morning. So with that Rocco, we’ll now open up the line to take some questions. .

Question-and:.

Thank you very much, ma’am. We’ll now begin the question-and-answer session. [Operator Instructions]. At this time, we’ll pause momentarily to assemble our roster. Our first question comes from Anil Doradla of William Blair. Please go ahead. .

A couple of questions. Can you talk a little bit about you know the oil and kind of drilling end markets. I know you’ve some exposure there, they are heavy users of your products.

Energy prices have been coming down, so in terms of their discretionary spending, how have they been off lately?.

Well the good news is that you are correct. We’ve exposure there, but keep in mind with the number of customers we’ve, we’ve exposure across every industry because we’ve access and play in every industry.

And there’s no doubt that the oil prices where they are now compared to where they have been in past years, it does have a dampening effect on their spending. But the only thing I would say is that, that's one thing about the diversity of our industry base is that there’s almost always one industry that's always in kind of a temporary nadir.

So that's really not to get around. So the interesting adjunct to that though is that while there’s a dampening effect on the expenditure of engineers, the one thing we’ve found is that when that is the case, a fair amount of times companies will actually say well we can’t add more engineers, we’ve got to do more with less.

And more and more simulation is one of those things that allows them to amplify the number of engineers that they do have. So you know there is you know a hedging aspect in terms of that utilization. But there’s no doubt that the industry you know does ebb and flow on those prices.

And by the way, likewise when oil prices go high, you know a lot of other alternate energies become a little bit more in vogue as the comparative tradeoffs there. So it’s really a pretty complex dynamic equation that is kind of just beyond the one.

But I guess you know briefly it's not a major factor to us, but yes it is an overall environmental thing that we’ve to factor into our everyday living. .

Great and Maria, I mean given that you know FX is a hard reality going forward, have you guys considered or considering you know incorporating some level of hedging in the whole P&L? Because going forward with 65% of exposure to foreign currencies, you know we could see this recurring theme, wouldn’t you say?.

Absolutely, but because of our presence we’ve got natural hedges built-in to the expense base. So the reality is, I'll be honest with you. I am not an expert in betting on currency movements and so I think we will continue what we have historically done and just use the natural hedges that we’ve got in place. .

Our next question comes from Jay Vleeschhouwer of Griffin Securities. Please go ahead. .

Maria, first for you and then a follow-up for Jim. First, could you comment on your 2015 cash flow expectations? And secondly, when we look at the Q4 revenue split by license type, that is lease versus perpetual, it looks like your total lease revenues were about flat sequentially.

And that on a year-over-year basis most if not all of the year-over-year increase in lease revenues might have been attributable to Apache, which of course is an entirely lease-based model. Could you just comment on that as well? And then a follow-up for Jim, thanks. .

Yeah, so let’s start with cash flows. We’re looking at for right now based on everything we know Jay, we’re looking at probably somewhere in the $360 million to $380 million of operating cash flows for 2015. With respect to your -- yes, in constant currency so the lease base was up about 8%.

No doubt the Apache business for Q4 versus Q4, the Apache business plays a role. But we’ve also got leases throughout the rest of the portfolio and some of the strength particularly in the Electronics business unit which is complimentary to the Apache business also played a role in that growth. .

And for Jim, when we look at your portion of revenue by end market, you provided that now for 2014. It looks as though for Q4 and for the year as a whole, but particularly for Q4, you had quite strong growth in automotives. So that is pretty consistent with what we hear from your peer group vis-à-vis that end market.

It looks like you did well in industrial equipment and materials and chemicals just to name a couple of the end markets.

Could you comment on your expectations on sustainable momentum into 2015 and beyond, particularly for automotives, and after semis and electronics, it’s your largest vertical?.

Yeah, well we’re still seeing continued progress in there. And in fact even some of the -- you know some of these larger kind of engagements, we’re getting to or starting to bring in non-traditional sources along that line. And by the way that's across multiple geographies on top of it.

And what it really gets down to is if you look at the complexity of what’s going in there, it used to be things were always broken into, here’s body and white and here is powertrain.

And here is, I mean now looking at some of the more system impacts of these are tending to take you know a broader role in addition to the overall kind of inexorable push toward efficiency you know in the vehicle.

So I look at that and then I look at also the -- we also look at the increasing amount of [electronical] content, be it control systems, be it you know all sorts of safety systems and monitoring and things like that. And those are major things that are driving it, along with also some of the changes in materials. .

And our next question comes from Matt Williams of Evercore ISI. Please go ahead. .

I was just wondering Jim, if you could spend a little bit of time on ANSYS AIM. It sounds like you know as a component of ANSYS 16.0 that that really has a lot of potential to really broaden the access and user base within your customer base.

So I was just wondering if you could comment a little bit on any feedback or reception that you’ve gotten around that?.

Well, essentially keep in mind that this is also a first step of a multi-step journey, so we’ve been continuing to do that. The key thing to focus on is we always said that A, the first thing was bringing together multiphysics. And then the second part then was okay, we’re going to develop a platform that allows these shared data inter-operate.

And then we were -- and that was roughly embodied in the Workbench platform. And you can see, even though we’ve been at that for a few years, some of the things that have taken hold most recently was the customization and that is the next step.

But we always talked about the third step of that was going to be the environment for using multiphysics in a way where people didn’t have to struggle with all the nuances of the legacy applications that were pervasive throughout the industry.

And AIM is really one of those first things that terms at that step of providing a user environment that basically draws the user in and allows them to take advantage of a lot of the modern advances that are going on.

And of course when you layer everything else underneath that, the next step will be how does that work into both private and public clouds and going there and there’s a lot of exciting movement on that point.

So again just like Workbench was several stages going through, AIM is a very important first step, but it's a very real palpable thing for the next generation of user interaction. .

And then maybe just one quick follow-up for me and then I will hop off. But you know it seems like with the Reaction acquisition, the Newmerical acquisition, that you're starting to get a little bit more vertically focused in some areas.

I guess, you know are there other opportunities to really get a little bit deeper with some of the vertical opportunities and some of the demands that you are seeing within particular industries?.

Well the only thing I’ll want to say primarily is that we’re not inherently getting more vertically focused because we’ve a broad base. But keep in mind, any time you acquire any kind of a relatively small company, small companies tend to focus around some area of excellence.

The main thing around Reaction Design was that A, starting to move into the chemistry realm and you can think of all sorts of realm where chemistry meeting physics opens a whole new line of thing.

I mean we talked about powertrain that realizes a different set of chemistry, but you know what impact might that have on battery life and things like that sometime in the future.

But it also in many cases plays very well into what was mentioned on an earlier question around the automotive, something that we even mentioned for instance around the Cummins deal and things like that, where okay now some of the performance aspects of this are very important.

And while we may, we don't want to have a 1000 paper cuts of all these vertical different [apps].

These are unitary products that fit across our family, but they provide immediate value for a group of customers that then we can expand based on our scale, the breadth of our -- the breadth and depth of our sales and go-to-market strategy that maybe a smaller company might have been more limited by.

So actually we can create that and frankly that's something that we’ve demonstrated with every acquisition that we’ve done, you know done so far.

So you know I think the thing is that these are ways of fleshing out things and in particular getting areas of intellectual competency in areas where we might have been able to study up and build our way to them.

But if we can get masses of very talented people who are interested as we’re in continuing to build this vision, that’s a great immediate move for us, and it’s something that plays well with our customers. So I wouldn’t say that's the only thing that we’re doing as we go forward, acquisitions are still a major part.

Actually I shouldn't say that, I should say the major part of what we intend to do with our capital utilization. But amongst that, that's going to be a mix of some of the additional add-ons we do, but also some of the tech tuck-ins and some of the ancillary type of technologies that we’re bringing on.

But you know virtually all the technologies we bring on ultimately have some kind of you know bearing into you know into other industries. So it's not just a niche play. .

Our next question comes from Steve Ashley of Robert W. Baird. Please go ahead. .

Yeah, I’d just like to drill down on the sales force a little bit.

Do you know by any chance, how many reps you maybe ended the year with? What kind of you know increase we might have seen in the fourth quarter and what you are highlighting [indiscernible]?.

Well it was -- you know without getting into specific numbers, it was a little bit above 200, you know the things we’ve talking about. And we’ve probably had the equivalent of about, you know to date probably about a 15% to 20% increase in head counts.

And that's something we did very aggressively in Q4, because we wanted to be prepped up for the year. As it is, we’ve had a really good you know onboarding of some of those people. We’ve had a really good attraction kind of strategy. And of course then it’s going to take some time for them to bring up you know to get productive throughout the year.

I think we’ve talked about a 3 to 6 month kind of ramp up. And by the way, we were still hiring into the early part of Q1, because you know there is a certain amount of bandwidth for bringing these on.

But we’ve already seen some of the impacts of that early hiring and certainly from a demand generation effort, you know the system is still, I mean the external system is still absorbing that ability. So in other words, we’re not getting, you know we’re not over saturated by any means. .

And then on ANSYS 16.0, you gave us a nice little overview of all of the benefits there. And I know one of them you talked about is the UI enhancement, really wanting to make that easier to use.

Can you give us just maybe a little more color on that ease of use and what might be involved with what you provided in ANSYS 16.0?.

Well, there’s a whole range of things where -- I mean if you think about a lot of other applications that you use, I mean in terms of you know being able to you know to get -- you know how to pod things, videos, it will pop up like as you hover over things. So in other words, in some cases, you don’t even have to ask for things.

It’s anticipating what you want, it's anticipating certain guidelines. It allows you to set the preferences.

And I think the other thing that can’t be overplayed is that you know in some cases, these initial steps where we can be operating all the physics within one window, that may seem like a pretty trivial kind of end-user enhancement or a comp-side achievement.

But what you can do you know in that one window where you are not kind of like trying to you know hop between different things that are connected and talking to one another, but they still feel a little bit different.

And I think that's part of it, I think also as somebody, as people start branching into multiphysics, you might think you know historically fluids and structures even though they are both mechanical engineering disciplines.

And every mechanical engineer learned in school the tools and their application historically have been so separate, you had to be an expert practitioner in there. And because of that, the different tools kind of pose problems in different ways, spoke in different languages.

And you know we want to get to that point where a person with good engineering judgment overall isn’t wrestling with the nuances of the linguistics of the program. So they can get those working together. So first of all, we solve the interactivity from the data standpoint, meaning we can solve the problems.

Now we want to bring that in where the bar gets lowered to a good engineer being able to get access to it. And that's what I meant about the multi-step journey that we’ll be on that. Just like we’re in a multi-step journey on Workbench, even though we’ve been able to harvest some nice success out of that over the last few years. .

Our next question comes from Saket Kalia of Barclays. Please go ahead. .

The first one for Jim. Jim, can you just talk about this Cummins contract a little bit? You know it seems like it wasn't just the flexible payment structure that the time-based license inherently give. But it also sounds like Cummins was maybe getting broader access to the portfolio.

And I know you said in the past that you are not doing a token-based licensing model.

So can you just walk through how maybe these sort of agreements work?.

Yeah again token, that's just -- that's one way of approaching a flexibility issue and things like that. But really what we looked at was -- and that's where when we engage with major customers, we get a concept of what they want to do. But what we try to do is make access to that software.

We elevate it out of the individual transaction level, because they have already made a commitment to us. We’ve already made a commitment to them, and it provides that flexibility to actually bring in the things. You know sometimes it's very difficult at the very beginning to say I'm going to need exactly this capability at this particular time.

And you try to over-programatize it, but with this one we can look at the number of users, the types of jobs that they trying to do, the things that they are trying to solve from a business standpoint. And it allows you to do the things we couldn't do for our 45,000 customers on a standard price list.

But when you can actually engage with somebody and get that economy, it allows us to work together. I think also an interesting adjunct of these kind of enterprise agreements we’ve.

And you saw a reference of that with an announcement we had made a year ago in terms of this is the way that sometimes we’ll actually collaborate with those customers to be prepared to jointly tackle the next generation of problems that are maybe addressed by simulation. So it's actually – it's more than just a transactional purchasing.

It's really more of a holistic technology implementation trajectory that we tried to build on there. And it’s really an invigorating one, because it’s really solved -- it’s really around how you solve new classes of problems as opposed to how do you get over a certain kind of purchase hurdle. And we’re starting to see more and more of these.

That's what factors into some, you know some of things we’ve talked about the last couple of calls in terms of time-based licenses that you know it tends to maybe slightly deflate in the early period. But it builds over the long period and I think we’ve even seen that you know in these early stages.

But we just see increasing interest you know in those type of a relationship. And it really is one of those things, and I think it’s a very significant point because it shows. It basically shows if you will, getting to a certain level of maturity and jumping a hurdle in terms of the adoption simulation on a broader base. .

And just for my follow-up for Maria. Well, can you just parse out that -- it’s roughly a $40 million reduction to 2015 revenue guide for the year. I definitely see that FX is really the vast majority of that.

But is that large contract, you know having any sort of impact beyond maybe the first quarter?.

No, and so -- and that's why if you look at the headline, the word solely was inserted in there. So that the only significant modification we’ve made from when we guided back at November is roughly 3% to 4% related to currency for the full year. However at the same time, you know we hadn’t guided on Q1. This deal has been in the works.

And we’ve been working with this particular customer similar to we work with Cummins on a deal that makes sense for them, their usage pattern, trying to proliferate more technology across this organization. And as a result the treatment under GAAP for this deal is going to be spread.

So for 2014 or for 2015, it will be spread over the full year as opposed to in the past when we booked a deal with this particular customer that tended to be a couple of million dollars of paid-up revenue won’t be there. But we’ll take the long-term gain for you know what people might perceive as short-term pain. .

Our next question comes from Steve Koenig of Wedbush Securities. Please go ahead. .

I wanted to ask a bit about what you are doing with your direct channel and maybe partners as well. And then I’ve got one follow-up. Is the Q4 large --.

No, I thought that was a question, please continue. .

Okay, let me just elaborate a little bit more.

So two parts here, one is, is the Q4 large deal performance, is that normal seasonality [indiscernible] variability? Or is that attributable in part to some of the initiatives you put in place to drive adoption at large accounts? And can that lead to better, large deal performance perhaps going forward as well? And the second part of that question is maybe if you all could elaborate a little bit on Maria’s comments about the channel initiatives that have been put in place should help provide acceleration as the year progresses? What exactly do you mean by that?.

Okay, the first thing there -- it really wasn’t that there were new initiatives. But the increased bandwidth in our sales allowed us to address those more completely.

And in general, if you look at that, I think a couple of things we talked about was, as opposed to having if you will more of a geography-based or a geography-skewed sales force, it's now pretty much partitioned between there is that element.

But there's also a major account focus by the number of reps and that increased quite a lot because there’s more of a consolidated aspect and a focus requirement that's required to drive that forward. To answer your question, there’s more than just -- I mean there’s typically seasonality patterns in these.

However the number that I talked about is greater in terms of the number of customers of those large orders. And secondarily as I mentioned, the average value of those orders was a 14%, actually probably even a little bit above 14% increase in average order size.

So I mean it’s not just the -- like clockwork here is the season that comes in and goes forward. Now with regard to, I guess the final thing was with regard to we’ve already talked quite a bit about the direct sales force expansion.

But I will say that if you recall, we also mentioned in a previous call about the things that we’re doing because the channel is still a very strong part of that. And we’ve actually put constructs in place to do that.

In fact there is even some things we’re working on in terms of collaboration with them, where we can jointly do things under an ANSYS aegis. But it’s really primarily focused at driving the channel business. So those are, I mean the bottom line is those are both you know obviously going to be key parts of our go-forward strategy.

And we want to make sure that our historical channel you know was actually in the same boat going in the same direction we were. .

Okay and if I could squeeze in one follow-up if you don't mind. I am curious to know what you are seeing with SpaceClaim.

How is it meeting your specific goals for the unit? And how is it advancing your overall goals and you know and over what timeframe?.

Well I’ve to actually say, you know we talked in the last of couple of calls where the results were a little bit depressed. Initially, you know sometimes that happens when there’s that changing of you know changing of the guard.

But I’ll say that once we got through that, once we were able to go through a broader base sales training, and introduction of what this technology means as well as customers realizing, this just wasn't kind of like a cute little third-party addition into our suite but it was a key part of what we’ve going forward, it became something.

And quite frankly the interest levels and the pipeline is actually pretty strong right now. So you know, we look towards getting back on the [glide] path or the take-off trajectory that we had envisioned for this you know, albeit maybe a few months lower.

But the reception has been really strong, so I think we are headed in a really good direction on this. .

[Operator Instructions]. And our next question is from Ross MacMillan of RBC. Please go ahead. .

Jim, can you comment how far you have progressed with TBL agreements. Is it still a very small number of customers? And secondly for Maria, what are the implications we should think about in the model as you do more of these TBL agreements? And then I actually had one follow-up. Thanks. .

Well first of all, it's a small number of actually enacted ones. It's an increasing number of people who are interested in engaging along those standpoints, so definitely the trend. The one thing before I turn it over to Maria, the one thing that I said is we know that this is a definite trend.

How quickly or how completely it enters the equation is still a question. It will be significant, but is it like a 100% or 30%? Either of those numbers will be very significant.

We don't really know that, but there’s no doubt that the trend and all the winds are blowing in that particular direction which means of course we have had to try to make different assumptions on modeling that.

But if you recall from the very -- I mean for years we’ve been saying hey, we’ve been talking about a strong lease base, a strong license base. And basically saying that you know we really don’t care. What we’re trying to do are providing multiple opportunities and just not create acquisition, you know purchasing hurdles to adopting the technology.

And so we continue to do that, but the receptivity and the interest seems to be shifting towards more of that. And as this technology gets a little bit more pervasive, however it gets manifested in things like the cloud and large-scale networks long-term, that all could, that all could shift and affect it too.

But it definitely is a trend line, but you said you wanted to turn in part of that question to Maria, so I’ll give her a swing. .

Okay. So Ross just a couple of comments to add on to Jim’s point. What you’ll basically see is probably over time an uptick in the percentage of recurring revenue. And obviously in whatever quarters that we booked those deals, you will see an uptick in deferred revenue and backlog.

So just like I commented relative to the Q1 outlook, there’s the potential for perhaps some slight decreases in short-term revenue growth. But these are really, really good for building our long-term relationships and our long-term growth.

And the other thing I will say is as Jim pointed out, this is kind of I would say an evolution for some of our traditional larger customers. We obviously, the TBL have been part of the Apache model since that business started and since we acquired it.

But there are still some parts of the world that larger deals, perpetual is the model they preferred in places like China and India and Korea. So what we want to do is remain as we always have been flexible to the needs of our customers to enable them, to acquire the software under whatever model makes sense for them.

We are not going to force them into time-based licenses if perpetual is the model they prefer. .

Maybe just one quick follow-up. So we pay attention to bookings, both current and total bookings. And there was a deceleration in Q4 relative to I think the trend we’ve been seeing over the past three quarters, was there anything --.

Keep in mind, Ross. The one thing is and you keep in mind, you know there’s a lot of different factors here. Yeah, there is currency, but you look at long-term, you know multi-year kind of issues coming in. So they are definitely currency, there’s issues between and maybe I don't know if we want to get into this, but the build versus unbuild.

But you know one of the main things is that, if you’ve got you know we’ve talked in the past about, if you’ve got a multi-year deal maybe a four-year deal. And it showed as a $40 million last year, the fact that it didn't renew this year may show one set of calculations as being down. But it is not at all indicative of a decreased book of business.

I mean it basically is -- it basically is really strong stuff. It's just that when you do these multi-year things, those cycles are going to go in and out. So actually with this trend going on, we look at a number of things and trying to look at an annualized value of those going forward.

And you know obviously taking out some of the currency and making sure that, I mean there’s also things when you do bookings. You know some might be for periods out in the future as opposed to the current period. And trying to line up all that, it's a very complex you know kind of equation.

But you know, you could really get caught off guard if you just try to assume that it’s an apples-to-apples comparison.

With that I mean and maybe Maria, if you’ve got a concept on [indiscernible]?.

Yeah, just you know Ross, the one thing as Jim pointed out, we would really encourage people to focus on full-year results as opposed to any given quarter. Because as these deals become larger, the quarters can become skewed.

The reality is if you take a look at, at least how we calculate bookings growth and factor in the impact of FX for the full year on deferred revenue from 2014, we’ve got you know roughly 11% bookings growth.

So that's what we’re really focused on is that double-digit bookings growth that we at least for 2015 envision will translate at the high end into double-digit non-GAAP revenue growth. .

Our next question comes from Mark Schappel of Benchmark. Please go ahead. .

Jim, I was wondering if you could just provide us, just a quick update or a brief update on your Asian operation.

So you made several changes in the region [indiscernible], so I was just wondering if you could just give us a brief update?.

Well, yeah well remember when I was talking about the comparative growth, I think it was 12% North America, 9% Europe and 15% for Asia Pacific. And I think that's, you know that's not the only aspect of that.

But we talked about things both at the country level at our major markets as well as the transition of the overall leadership in addition to propagating some of the best practices that we had in other parts of the world going forward. And I think as you go forward, you look at all that going forward.

And I think the other thing that's very significant is a part of that also are changes that we did. And we talked about them being leadership, structural and operational changes in Japan. And if you look at that going forward and that even involves the way that we worked with our partners.

And when you look at that continuing on, you know we talked about in past years we’ve been a little bit disappointed with our number two market which was Japan. And you know they were in solid double digits. The rest of Asia was growing, you know in the mid to upper teens kind of level. So it’s a pretty consistent you know kind of basis going forward.

And when I talked about some of the investments we made in 2014 that we felt positioned us well, this is not the only one. But it is one significant one that, you know that we’re on record talking about throughout last year. And so our prospects for that are very good.

I mean again there is always going to be local economic and macro and currency, but that's part of everyday life. And no matter what it’s at, I mean you know we feel like the team we’ve got there is markedly more solid than we were say this time 12 months ago. .

And our next question is a follow-up from Jay Vleeschhouwer of Griffin Securities. Please go ahead. .

Just a couple of odds and ends. First in the quarter, you had an unusually large increase, an amount of services revenue although it’s still a fairly small percentage of total. Could you talk about those results in terms of they are being concentrated perhaps.

It’s a relatively small number of large engagements or what are your longer-term expectations for these services businesses?.

The bottom line is we said for you, we actually again when we were talking about the investments in the last couple of calls, the services aspect was one that we specifically spoke on. And we were bringing in people that were familiar and capable of driving service as a business. And that's the key role of a couple of these major people.

And also services play a major role in the enterprise deals and in general, what we view as services is not what traditionally has been service in our industry. But they are things that are made more along implementation and adoption services going, you know going forward.

So it's clearly one of those things that we’re going to continue to build going forward and it's not like it's one or two major big engagement. It's really a more of a broad-based one and it actually covers all of our geography. And it's one that will be a slow gradual buildup, but it's an important part going forward. .

And just a couple of last things then. As I am sure you know, nearly all of your peers in technical software are speaking about the opportunity in systems engineering. Yet the definitions of systems engineering across the vendors seem to differ.

So could you talk about how you envision systems engineering versus your competitors or more specifically what you think they might be missing relative to your definition of that capability.

And lastly at a recent simulation industry conference a couple of months back, there were some discussion about the potential for what we would call preconfigured validated IT, you know similar to the trend that we’ve seen in EDA. For example companies like Synopsys and Cadence have built some pretty big business in IT.

And I am wondering if there is an opportunity for you in that sort of offering? And whether or not that might somehow tie into your new implementation of EKM that you will be bringing out in a couple of months?.

Wow I am trying to figure out, there is a lot there. Okay, so first of all we’ve been talking about systems for a long time. I mean in the form of simulation, you know we were the ones that were kicking it off. And to us, it was always around the building, basically being able to build a complete virtual prototype.

I mean not -- and this can be -- it can be the traditional zero and one-dimensional kind of approximations. But we see moving that toward three-dimensional with the help of high-performance computing. We see that, and basically if you look at almost all successful product launches of new innovative products, it was because the system succeeded.

And thereby you have to be able to balance a lot of different component interactions.

So it's the ability to conceptualize in the virtual world a complete system and then actually when you’ve got something that works then it allows you to even use that to help describe what the requirements for the components are, so you can go through the traditional refinement of that.

But it's multi-dimensional, it's multi-scale, it’s multiphysics and it's really you know if you will creating that complete 3-D virtual prototype in the computer. Now what we define there, it really pushes the bounds of technology. But technology supporting us will allow us to go forward and enable those things.

But that's again one of the reasons why we push multiphysics early and why we built a platform for all of these things to work together. And the last part which I -- we may need to dig into a little bit more, but that's one reason why engineering knowledge management in terms of being able to link together the multitude of all these simulations.

But also the complex configurations that might compose a system, link those into optimization runs that might say I also want to look at multiple variations and permutations of that. But that's basically in a nutshell where it all heads. .

And thank you, this concludes our question-and-answer session. I’d like to turn the conference back over to Mr. Cashman for any closing remarks. .

Wow, I don't know what else I can say after closing. But I guess I’ll just start by thanking everybody for participating in the call and for the questions and for your continuing support or following of answers. So you know basically we are proud of what we achieved in 2014.

But, and I would like to thank the entire ANSYS team for basically the fulfillment and the commitment of those results to date. But it's really only a starting point. This is a step on a long journey and a fun journey.

So, but basically we believe that we’re very well positioned to continue to drive the growth in the coming year probably for two very significant reasons. First, we’ve the increased visibility from some of those larger multi-year enterprise opportunities that are starting to build that we talked about.

Secondly, as we also talked about, you know we’ve been very successful in the more aggressive approach to sales hiring that we referenced on the last call. So if you look at that, I mean those are the two specifics. But we’ve those ongoing generalities, we’ve an unparalleled product offering. We had extraordinary longevity with our customers.

We’ve an extremely high recurring revenue base and an opportunity to augment our growth through new product features and exciting technologies from some of the acquisitions. So we’ve talked about all that, so we are growing our direct sales force.

We’ve a renewed focus on our indirect channel and we are committed to driving operating cash flow and continuing to generate significant shareholder returns. So basically we actually, we will talk to you on the next call. But we also look forward to seeing all of you at our upcoming Investor Day on June 2nd.

It’s going to be outside of Detroit and it's going to be held in conjunction with the Automotive Simulation World Congress. So that might be a unique opportunity for you to learn more about some of the exciting growth prospects that are available to us as well as to see you know some of the technology in action. So we hope to see you there.

But thank you very much and we’ll talk to you again no later than a quarter from now. .

Thank you, sir. The conference has now concluded and we thank you all for attending today's presentation. You may now disconnect and have a great day..