ANSYS Inc (ANSS) 2015 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to ANSYS second-quarter 2015 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, good morning and thanks everybody for joining us to discuss our second-quarter and first-half 2015 financial results. But before we get started, I will introduce Maria Shields, our CFO, for our Safe Harbor statement. Maria?

Thanks, Jim. Good morning, everyone. Our earnings release and the related prepared remarks documents have all been posted on our homepage at the investor relations website this morning. They contain all of the key financial information and the supporting data relative to Q2 and the first-half 2015 financial results in the business updates as well as our current Q3 and FY15 outlook and our key underlying assumptions. I would also like to remind anyone that in addition to any risks and uncertainties that we highlight during the course of this call, important factors that may affect our future results are discussed at length in our public filings with the SEC, all of which are also available via our website. Additionally, the Company's reported results should not be considered an indication of future performance, as there are risks and uncertainties that could impact our business in the future. These statements are based upon our view of the business as of today and ANSYS undertakes no obligation to update any such information unless we do so in a public forum.

During the course of this call and throughout 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 related form 8-K. Jim, I will now turn it back to you.

Thanks, Maria. I would like to start with a recap of the results that the ANSYS team achieved in Q2. As you may recall from our Q1 earnings call and from our Investor Day in early June, we laid out a number of key financial objectives for Q2. These included achieving non-GAAP revenue growth of 7% to 10% in constant currency, achieving strong margins and earnings per share, high rates of recurring revenue, continued growth in both deferred and backlog, and improvement in our European business. And I am glad to say that we did in fact deliver on every one of those goals and at high levels in the second quarter.

So first, our non-GAAP revenue for the quarter in constant currency was 9%. This was led by solid sales execution in North America and Asia-Pac, which both reported double-digit in constant currency. We also made progress in our restructuring efforts in Europe, where we realized improvement from our Q1 results with 7% constant currency overall and 11% growth in Germany. Eastern Europe and Russia remain the softer parts of Europe for us. Growth came from a broad base of industries, and these are all highlighted in more detail within this quarter's prepared remarks on our website. Non-GAAP EPS in Q2 was $0.85, above the high end of our guidance range. Our non-GAAP operating margin was 47%, above the 45% to 46% projected margin. This is a result of previously announced cost of the organizational changes being at the lower end of what we expected, as well as ongoing spending disciplines that we always engage. Our recurring revenue for the quarter was 71%, and our deferred revenue and backlog as of June 30 was $474 million. Overall, the second quarter results reflect a combination of improved execution in targeted areas of our business, the continuation of softness in certain markets, and parts of the channel, in addition to, of course, the various ongoing geopolitical tensions that we highlighted last quarter.

So now I would like to actually take a little chance to talk about the latest groundbreaking, not to call it, version of our software, ANSYS 16.1, which we released in May included the launch of our new ANSYS enterprise cloud solution. This is an area where we continue to accelerate our investment to further develop these offerings in line with our customers' adoption patterns, and extend our competitive advantages. Now the ANSYS enterprise cloud solution, it's been specifically architected to actually remove previous barriers to adoption of cloud computing for engineering simulation. It's, first of all, it is delivered a single tenant environment that secures customer data. Large data streams do not need to be transmitted between end users in the cloud data center. The solution also supports 3-D interactive graphics and auto scaling of high performance computing. So basically with ANSYS enterprise cloud, more engineers can access the software and hardware, exercise those tools that they need from any desktop or hand-held device. It basically is a step toward enabling broader adoption of simulation technologies and helping organizations stay competitive while also focusing on their core competencies, which is usually developing products and on maintaining large data centers. ANSYS enterprise cloud also enables our customers to utilize the scale of processors that they need, but only when they need them. So they avoid some of the costly investment in underutilized server, security and maintenance and certain things that we are tending to slow down some of the adoption.

We also completed the acquisition of Gear Design on July 1. This was an acquisition that we targeted for two key reasons. First and foremost, the unique talent and leadership skills that the Gear team adds to ANSYS, which will be immediately combined with our existing Apache business. Secondly, the technology that Gear has developed, which is a purpose-built big data platform to solve problems confronting next generation semiconductor and electronic design systems. So what we've seen is on time and on schedule robust low-power, high-performance devices. It is critical to a wide range of areas. It is critical to the success of mobile, high-performance commuting, automotive and also internet of things, electronic platforms. So similar to the other acquisitions that we have done in the past, this will enable us to leverage the power of combining ANSYS's proven technologies for low-power designs and Gear big data analytics. So ultimately this will provide our semiconductor and electronic system customers with a best in class simulation platform that provides both measurement validated accuracy for design sign off and accelerated closure of early design decisions. And it will also continue to extend our leadership in what we feel is a very important and growing market.

During the second quarter we continue to see progress from a number of changes and investments that we made throughout 2014 and earlier this year. And I will tell you our plan is to continue to focus and invest our energy and resources toward achieving strong results in the second half of 2015. You may recall at Investor Day this year, we outlined the significant growth opportunities available to us across what we normally categorize in three major dimensions. First, increasing the number of users, second, increasing the density of usage and third of all, increasing in the intensity of usage. ANSYS 16.0 and 16.1 include significant advancement in our platform, and these releases, we think, substantially broaden the capabilities available to our customers. They break down the barriers to adoption, and they help us drive growth from all of these dimensions. So even though we already have the deepest and broadest physics portfolio, we're committed to continuing to make significant investments in R&D to further increase our technological and competitive leadership advantages, and to strengthen our position at the forefront of the industry.

So with those brief comments, I will turn it back over to Maria to discuss our Q3 and 2015 guidance before we move into the Q&A session.

Okay. As we outlined in this morning's press release, we've initiated our outlook for Q3 with non-GAAP revenue in the range of $232 million to $240 million and non-GAAP EPS in the range of $0.85 to $0.89. With respect to our previous guidance, for the full year of 2015, while we've narrowed the revenue range, the midpoint of our revenue guidance for the full year remains essentially unchanged from our last call. We've also factored in a slightly higher tax rate, further weakening of the Japanese yen since our last call, and the acquisition of Gear. So all of that translates to our revised outlook for the full year of non-GAAP revenue in the range of $948 million to $964 million and non-GAAP EPS of $3.37 to $3.45. For 2015, we are assuming no significant changes either way in the overall macro climate, and we also continue to see that our sales will ramp up later in the year as the new heads that we've brought on in Q4 of 2014 and the first half of the year begin producing and as a channel initiatives that we've also announced also drive incremental sales. Further details around currency rates and other key assumptions that have been factored into the outlook for both Q3 and the full year are contained in prepared remarks that we posted on the homepage earlier this morning. Also during the second quarter, we purchased about 36,000 shares at an average price of slightly north of $85, and for the first half of the year we've repurchased over 1.5 million shares at an average price of $83.42. As of the end of June, we still have 4.4 million shares remaining in our authorized repurchase pool. So in addition to our ongoing M&A activities, and consistent with what we've previously communicated earlier in this year, it's our intention to continue to return capital to shareholders through share repurchase program.

So with that, operator, we'll now open up the phone line to take some questions.

(Operator Instructions)

Jay Vleeschhouwer, Griffin Securities.

Thank you. Good morning, Jim and Maria. I would like to ask first about the results you have seen in your various end markets and your expectations for those. When we take the percentages of revenue by end market that you provided now for the second quarter, we see, for example, that automotive appears to have been down slightly year-over-year for the quarter, about flat for the trailing 12 months. Aero and defense seems to have been down pretty materially year over year for the quarter and for the trailing 12. On the other hand, you did quite well, it seems, in industrial equipment, up pretty strongly for the quarter of the trailing 12, and semis were up again pretty strongly, which I assume is still Apache. Perhaps you could talk about the varying trends that you are in fact seeing in those markets and do you foresee, for example, that either auto or aero and defense might begin to rebound after having some negative comps here lately?

Jay, I would say relative to auto and aero and defense, I think some of what you are seeing ties into the timing of some of those deals and renewals, so I wouldn't focus on any given quarter as much as I would focus on the full year. I would say no doubt, one of the areas where we definitely felt pain is in the oil and gas sector, not only in North America, but in other geographies where oil and gas has played an important part, but I don't know of any, I would say, trends that we are aware of. I think it's more around the timing of some of these larger deals in those sectors that you spoke of.

Okay. Secondly, could you comment on the likely direction of your operating expenses for the remainder of the year and perhaps into next year? When we look at your website, we see and count the number of job openings that you're advertising. There was a pretty significant increase from the last time we did that a couple of months ago. In fact, it looks like the largest number of openings for the last few years, since we began tracking this, with increases in sales openings, which certainly is consistent with your plan, R&D up a lot, particularly in places like India. So I guess my question is, are you are happen over advertising the number of openings that you're looking to fill as you've sometimes of done in the past? Or do you think you're about to embark on, in fact, some significant addition to your -- to headcount?

Well, we -- as you see the ramp up in the last half of the year, we started to build to some of the run rates that we guided to at the earlier part of the year. So that's going to continue to, that's going to continue to drive up that. The other thing is, we also, we are looking at sometimes we don't always get precise skill sets in the exact primary geography that we look for, so we may have secondary locations, and if that's the case, you might see some redundant postings in there. But in general, we're keeping a broad range because the long-term projections are that we will be adding staff and we want to continue to find the best people and at least build up that portfolio as quickly as we can.

So we will continue to build up along those lines, but it is, as we've alluded, we've seen improvement in Europe, but we've also kind of gotten into the double-digit range of both North America and Asia-Pac, and this is even in light of the fact that we expanded the sales force and alluded, for the last couple of quarters, that the ramp up in training and acquisition of that talent would take time, which is why we see the continuation toward the stronger end of the year, but that's a continuation of something that we'll want to carry into 2016 and 2017.

All right. If I could perhaps just squeeze in one more. You articulated a very interesting strategy and definition for what you call systems engineering. Could you comment on any examples to date of customers who have, in fact, deployed your full vision our definition of what you call systems engineering? And what requirements do foresee an terms of adding to your ramp up services capabilities to support that strategy?

Well, the first of which is, with regard to the mention specific customers, that something that were going to actually be publishing on the website as we get those permissions and do it in the correct way. The other thing I will say is that, like many of the things, early on when we were talking about design space more than a decade ago, or when we were talking about a workbench platform, none of those things existed before we did it, so we were talking about it and sometimes it was a year or two, three before those things manifested themselves.

So the fact is, some of things that we're doing in the system simulation capability, there really weren't skill sets and organizations at our customer's site really built around those because the tools didn't exist at that time. But I would say, if I can throw one breadcrumb out there, any time you would see reference to a, some of the enterprise license agreements, which are starting to happen in increasing amounts, there is almost always an element of the system simulation and strategy being involved there, but it will be an evolutionary sense for the customer to think in terms of how it fits their processes and how do they organize around that.

That being said, you are absolutely correct. Anytime you have a new technology, services which will help bridge the adoption of that, is very key and that -- again, that's something we've been talking about for the last couple. If you recall, we did mention some of these at Investor Day, so I think it's probably okay to mention those, but Cummins, Ferrari and Ford, those were the three that we mentioned.

They were there, right? Telling their own system story.

That was during the Simulation Congress that was concurrent with the Investor Day. We'll probably have more those because as we mentioned, the enterprise engagements have been noticeably ramping up over the last probably three quarters.

Thanks very much.

Anil Doradla, William Blair.

Hey, guys. A couple of questions. In the quarter you had about 18 million -- 18 customers, sorry, with $1 million revenues. And you talked about some commentary in the second half, but Jim, can you talk about how many of the customers are very close to that 1 million number?

If you are talking about in the high six-figure amount, think of it, it's not like there is a vast wasteland. There's actually like a pyramid building up below that, ramping up. So we probably have easily 70 to 100 customers in that next tier of range, but we also see that some of those percolate very quickly and some of those might be on a more protracted thing, but they are all ones that we have to develop. And keep in mind, that's pretty consistent with the strategy that we talked about both at Investor Day and on previous calls here in terms of why we have gone more toward addressing that growing market with more of a name-to-count strategy versus the old territory thing.

Very good. And you know, with all the good stuff is happening on the sales front, the new initiatives that were kicked in, one of the questions that we get from investors is, if we were to look at when we would see it from an inflection point of view, in your business, when would that quarter be? Granted, since the new head of sales has come on board has been over year, it takes about 15, 20 months to get many of these new strategies in place. So if you were pick and choose what maybe around what time we should start seeing the business getting inflected by these great initiatives, any color on that front?

Yes, first of all, in terms of what I would call an inflection point, I need to break that between two things. One of which is related to sales capacity, but there's always longer-term one that we talked about in terms of both the creation of enabling technology and customer's ability to adopt it, and that's just not an increased amount of sales engagement, because even though we've got the leading technology, it needs to progress a lot more. Just think in terms of, again, I've used this analogy lot, but things in terms of where the home PC was in 1980 what happened over the next 15, 20 years. All the components were there in 1985 and there were leading providers there, but a lot of things that happened before use all the inflection point of computing. Same thing really holds for the simulation software.

Now, getting back to the sales one, I wouldn't think in terms of what some people think in terms of a massive dislocation. I think what you're going to see is quarter upon quarter, adjusted for seasonality, of course. You throw Q3 in the mix and Q3 doesn't compare to many other quarters. But as you see that, you're going to see a continuing ramp up, and in fact, I think that's what we saw in Q2 versus Q1 and some of the early comparables, where now you've got a couple of areas that have ramped up into the double-digit, right there, we need to increase and sustain that. There may be blips up and down original quarters, but you should see a longer term, and that should continue to ramp up as we go through, if you will, the Bell curve of training requirements of all the new sales people.

So I don't think you'd see a step function increase our a massive dislocation. I think you'll see numbers of people raise up, and you will see continued up pressure on the growth curve. And as I mentioned, as we mentioned before, we were little bit slower in terms of the sales up ramp, which we were addressing, was in Europe. But you even see some of the early returns in Europe. Of course, Q3 in Europe is well chronicled, so we got that factored into our guidance also. So I think in terms of, if you're talking about inflexion points or major movements, I think you see -- I think you will see when the -- on the technology side, but we've always talked about that being a multi-year kind of transition. But in terms of taking care the sales capacity, I think that's one where you see kind of a steady, continued ramp up.

Great. Thanks a lot.

Thank you.

Steve Ashley, Robert W. Baird & Company.

Thanks. I would just like to ask about the third quarter guidance. Actually, Maria, I don't know if you have an answer to this, but when we look at it in constant currencies, you been growing here constant currencies kind of 8%, 9% recently. Does the third quarter guidance kind of assume that similar growth rate, constant currency?

Constant currently for Q3, that range is 5% to 9%, Steve. And what we are factoring in is what Jim alluded to in the previous question, is the reality is Q3 for us is iffy relative to Europe. A third of our business doesn't really get back into the groove until after Labor Day, and so whether or not some of those deals that are in the pipeline make it into Q3, we're just putting in a little bit of caution.

Perfect. That's very helpful. And in terms of the evolution of the sales go to market, lots of different things happening there. One of the things that you wanted to happen were named account reps starting to engage with a VP of engineering, someone at a higher level. Have we started to see some anecdotal evidence that, that is beginning to happen?

Absolutely on that one. Again, just having a visit with a VP and checking the box, only time will tell on that. But if I look at the number of engagements, it's probably about a fourfold increase, at least. Again, that's anecdotal and I just have from the number of meetings. The other thing that I think is particularly interesting that the sales team has done, is sometimes when you have the VP meetings you have to have a lot of reach. We've actually started a series of executive virtual town halls, and I know that we've had several hundred people just on the first couple of those sequences going in. So at least, if we don't get a full chunk of a day with senior execs, we do have introductory things to introduce them to concepts and we've actually had some very interesting customer presentations that were co-presented with those things. So the overall, at least introduction and entree, has increased quite a bit. For certain, the focus has been more along those lines, which in turn, is -- are necessary steps as we see some of these increasing amounts of some of the enterprise engagements, because those do not happen at a grassroots level.

Great. Thanks.

Thank you.

Sterling Auty, JPMorgan.

Thanks. Hi, guys. In the prepared remarks, talking about the deals over $1 million, and the 18 number, there was a comment in there about the pipeline for the second half, and I guess the way was worded, it made me wonder, did you see deal slippage in this quarter in terms of some of those large deals? And maybe you could tie that into what you saw in terms of the linearity. Was the linearity any different than typical?

Linearity is about the same. In terms of any major slips, there were some that [pull poor]. That's a natural motion in there, but there were no aberrations, nothing out of the process. The thing is, keep in mind, when you're dealing with some of these larger deals, they can tend to take longer because of the number of cycle, the number of -- the amount of scrutiny that they are put in there, but there was nothing that was there.

As for comparables, the only thing I would say is that again, these deals tend to be multi-year, so in general, that's why we are tending to look at these characteristics of what happens to the overall deferred and backlog, because the timing of multi-year deals, they don't, by definition, they don't very often renew the next year. So they are in the denominator but not in the numerator. That's just more of a numbers reality.

Got you. And this has been asked a couple of different ways. I just want to ask this question in this structure. When looking at the guidance for the second half, in the first half at conferences and meetings, you've talked about the increased hiring and trying to accelerate the growth. If I look at the guidance of the second half, it feels like it's really kind of flat or maybe even a little bit of deceleration that's factored into the second-half guidance. I'm wondering, how much of that is the FX that you talked about the terms of the yen or other versus macro demand versus anything else?

Well, first of all, the Q4 constant currency growth is right up in that thing where double digits gets in the range and continues kind of half, so I don't buy into the premise of deceleration. There's no doubt that the currency has a little bit of impact on that, and then also some of the things we factor. I think maybe one of the key things you have to realize is that we talk about some of these ELAs and I would not be surprised -- keep in mind, when they come in, they typically are multi-year, they typically are time based, which means you do not get a lump of revenue. However, you do see the long term prospects significantly increase as best evidenced by the growth in the deferred and the backlog.

So I think even when you factor those things, it's a fairly impressive growth that we are targeting in light of all of that for the end of the year. And it's tending to build off of what we said from the very beginning of the year, and its continuing to inch up, even with the time-based element and the strengthening of the long term book of business.

Got you. Last real quick one, the Gear acquisition. What's the contribution to revenue assumed for the year?

It's minimal. That was really not the reason. There's some there, but it's not much, and that's really not the reason. The main thing we were looking at there was really key technology, and quite frankly, as was mentioned before, we're always looking for talent, and we got that in multitude with this particular one. What we are looking to do is actually continue to strengthen that position, building off of the foundation that we had with Apache, but take that into the next few years of development for us.

Got it. Thank you.

Steve Koenig, Wedbush Securities.

Good morning. Thanks for taking my question. I will do the first one and then I've got one follow up. In the prepared remarks, Jim, there is reference in discussing the European performance to commodity oversupply and the slowdown in China affecting not only Europe but also North America. There is also a comment about oil and gas, and that comment is pretty clear, but can you give us a more granular view of the impact of the slowdown in China and the commodity oversupply? What verticals does it impact and how is that flowing through your forecast? What's your outlook, as well, based on what you're seeing?

Yes, with China right now, and we view this is being temporary, because we still view that as being a good long-term market, we saw a little bit of slowness in some of the state-owned enterprises. I think you saw that there is a lot of macro environment things going on with China and their stock market, some of the things that the state was doing in terms of that. That's really kind of the primary part of it. Oil and gas, pretty straightforward, but those are really the only ones that really stand out. We've talked for a couple of quarters about Germany. As Europe was coming up even with, as I mentioned, Eastern Europe and Russia being continuing to be pretty underwhelming right now is that Germany has always been a big bellwether for us and one of our top three markets perennially, and we had talked about some of those things in some of the things we put in place and that's probably one of the leading elements we had coming out.

Okay. And just for clarity, and the commodity oversupply, what's that and how is that impacting you?

It's just, if you remember when oil and gas and copper and anything was driving mining and other commodity related industries, as a result of the slowdown in all of those sectors, obviously some of those our end customers; so they tend to either result in those businesses realigning themselves for the realities of the current economic situation and slowdowns.

If you look at it, the most notable ones of the last few years, the mining in Australia, which was largely to support the Asia-Pacific, and if you look at also the mining and oil in South America, and Latin America was one of the areas where we saw probably the lowest performance. Even that being said, we wound up at the pretty high upper end of the revenue guidance. So it wasn't like it had a major impact, but we're always trying to note those various [pertabations] we see. Not that anyone signals a megatrend, but they tend to be a number of things that we are looking at just as we continue to project out the next couple of years.

Got it. And if I may squeeze in a follow-up, this one on the sales initiatives. There have been some questions about the impact of the sales hiring. I'm curious to get your read on, who is the creation of a -- the enlargement of a named accounts group, and the account assignments by named accounts, when might -- are you seeing progress with that and when might that have a more significant impact? And then just on the sales hiring, I don't want to repeat all the questions that of been asked, but I think given the rate of sales hiring, we might've expected a more significant impact than what you've included in your guide. Would it surprise you to see some pretty good upside from your guide? Is there potentially some conservatism there? Or is it more of a time lag as these people get productive?

Well, I would say it's conservatism and I would say it is time lag, because anytime you get people involved, it is a big issue. Keep in mind, we did a very major thing and the management and absorption of that is important. Quite frankly, I don't know anybody who hits 100% on all the sales hires. We've got a really good percentage, but you've got some of that factoring in. And again, we're still hitting what we had projected at the beginning of the year for the year end and that's even taking into account that we're absorbing an increasing number of these ELAs. Like I mentioned, we're close to [$]0.5 billion now in deferred and backlog element, so the business is building along those lines.

Now keep in mind, when you go to the named accounts, as somebody mentioned earlier, but I will reiterate, we had -- first of all, you find them, second of all, you train them, third of all, you have to then engage with the customer and we are getting that increased engagement. Somebody mentioned -- alluded to the VP kind of access, and that is on a market uptick, but it isn't like the very first time that you meet the VP, they write you a check. We're talking about planning out, if you will, to 2 through 10-year type of adoption patterns. So there's that natural -- but that natural latency was built into the very guidance that we gave at the beginning of the year, and if you will, we're maintaining it even against some of the additional headwinds and also the benefits of the longer term nature of the enterprise license agreements. And even though we are only on the very beginning of the ANSYS enterprise cloud usage, we've gotten a lot of interest there. Now that will be time before people change overall usage patterns also. But those are all your fairly positive things, but I think they're also fairly much in line with the guidance that we've been giving for the last few quarters.

Okay got it. Thanks, Jim. Thanks, Maria.

Thank you.

Tsutomu Kijima, Barclays Capital.

Thanks for taking my questions, here.

How are you doing?

Good, Maria, how are you? Let me start with a high level and then I've got a follow-up. Jim, can you just talk about the US macro backdrop for your customers? We all see them manufacturing PMI, and it seems like it's affected at least one other design company. If you look at the more established sales reps that you have, what are they seeing in terms of their pipeline and their close rates in the US?

I'm going to have to try to process the closure rate. The pipelines are markedly, markedly up. I would say in general you look at the manufacturing index and things like that, those are some bellwether, but I think what you have to look -- what we've always gauged more towards is the R&D and, if you will, the innovation measures because essentially that's where our software's used, not primarily on the manufacturing and inventory side of things. So as a result, we've seen a range of companies continuing to try to drive new intervention into their products, first and foremost. Second of all is they're starting to figure out what, for instance, the industrial internet or Internet of Things might mean in terms of how they evolve or retrofit their products to fit in with that kind of environment.

We've talked about the overall electrification of traditional industries, automotive being one of the more notable ones, but being able to go into that one. So with those type of things, we still see a lot of innovation. In keeping with our global presence, we do see a fairly broad-based globalization, but amidst there, there are increasing amounts of fits and starts that continue around the globe as everybody seems to be recalculating things. But at the end of the day, we don't really see an end of interest in new innovative products or basically flat lining on the new design level.

Got it. This is my follow-up. Can you just remind us, do customers on lease and maintenance get access to the suite of tools under ANSYS 16.1, or do you think the product could maybe generate incremental revenue from your existing customer base?

Well, it can create incremental revenue because essentially if somebody is on a lease basis, they basically get enhancements to the products that they have leased, but they'll get those generally across the portfolio. Now, some of that starts to enter a little bit more as we discussed with the enterprise license agreements, where there is an increased flexibility that helps people predict, over a multi-year period, usage patterns that they might not be able to predict but allows them to flexibly meet that, which gives them the confidence to kind of, I would say, move forward instead of doing an exhaustive study to determine exactly what they need and when. So we will have some of that.

But in answer to that, is that what we've usually said is that it tends to bend the curve up. Maybe that's a bad expression these days, but it bends the curve, it does not dislocate the curve, traditionally. But we do see that increased usage from the capability. But that's -- keep in mind, we've had a normal cadence for the last decade of almost every six months having a fairly significant feature release, and it's continued to be one of those things that has helped propel us to this point, and we think is essential for going -- keeping that progress going over the next couple of years.

Makes sense. Thanks very much.

I think also -- the other thing I would mention, of course, is that as a testament to that, you also look at the historical renewal rates, which continue to be historically strong, and that's one of those things, it's really that vote of confidence in getting continued access to those capabilities, I think, that keeps those strong on both the lease and the service side of things.

Understood. Thanks again Jim.

Thank you.

Ross Macmillan, Royal Bank of Canada.

Thanks a lot. Jim, how many ELA deals did you sign this quarter? And can you remind me how many you signed to date?

Well, the one thing I want to mention is sometimes ELAs are really covered under -- I mean, you can kind of draw a proxy by the, by those seven figure deals that we talk about, because ELAs are always in the healthy side of that, but I will tell you that sometimes the kind of agreements that we have here, where we're not even allowed to really mention some of those. So I will tell you the one that we were able to kind of put through there and you will see you will be able to get at least a windage and elevation on that from that. The other thing is that -- the other thing is tendency. ELAs, they tend to more often happen beginning and end of years as people are synchronizing on their various calendars and budget cycles.

Maybe I can ask it this way. Is it trending in line, above, or below your expectations?

Above.

Okay. And Maria, two for you --

By the way, when I say above, I won't say 2X above, but it's significantly above. I'm sorry, I'm just trying to give you little bit more color on that.

That's helpful. Maria, just do you have the FX impact deferred sequentially this quarter?

Hang on a minute.

Yes, plus $2.5.

Plus $2.5 million?

Yes.

Great. And Maria, just curious, your perpetual license constant currently has been growing faster than leased constant currency this year, and that's despite more ELAs that are time base and therefore would go into deferred and backlog and ultimately, I think, be recognized through the lease line. Why is that? Why are the perpetuals growing faster?

Ross, on, I think it was the last call, someone asked about are we going to trend our model kind of in line with what other people in the industry are doing relative to moving to everything subscription, and I commented that historically, we have tended to have models that are flexible and meet the needs of many of our customers. So if you looked at the commentary around geography, if you look at the performance of Asia-Pac for example, Asia-Pac, places like India, China, Korea, when they are growing very fast, they are really perpetual license buyers. They are not subscription license buyers predominantly, particularly in those major accounts and we have in those geographies. So the reality is, while in some geographies ELAs and subscription is becoming more of an acceptable norm, in other parts of the world they are still perpetual buyers and we're going to continue to offer them perpetual licenses.

Understood. Just one quick last one if I could, what was the consideration for Gear?

$30 million.

Great. Thank you so much.

Having no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jim Cashman for any closing remarks.

Okay. Actuary like to thank you all for your participation in our call today and for your ongoing support and coverage of ANSYS. We are proud of what we've accomplished in the first half of 2015, but as we've discussed on the Q&A session here, we have got a lot of work ahead of us to deliver on our goals for the full year. So with that, in addition to thanking you, I would like to thank the entire ANSYS team for their commitment to driving the results that we've had and that we are moving toward. I would also like to welcome the Gear team to the ANSYS family.

In short, we feel that we are very well positioned to continue to drive the growth. I'd probably cite two very significant reasons. First, we have increased visibility from some of the larger multi-year enterprise opportunities that are in the pipeline for the back half of the year, and also the general growth of the pipeline that we have alluded to on this Q&A. Secondly, we've been successful in the more aggressive approach to sales hiring that we referenced on the last couple of calls, and of course, we've discussed that here.

In short, we have unparalleled product offerings. We've got a great long-lived record with our customers, extremely high recurring revenues and the opportunity to augment our growth through new features and the kind of the exciting technologies from acquisitions, as well as our own internal R&D innovations. So continued sights in the near term, we are growing our direct sales force, we have a renewed focus on our indirect channel. I think you saw some of those results in Germany, where we have a very hybrid model, and we are committed to driving solid financial results to generate continued value for our shareholders. So with that, I will sign off. Thank you very much and talk to you again next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [ End of transcript ]