May 13, 2008
Executives
Jim Cashman – President and CEO Maria Shields – CFO
Analysts
Andrew Matorin – Bear Stearns Richard Davis – Needham & Co. Barbara Coffey – Kaufman Brothers Mark Schappel – The Benchmark Co.
Steve Ashley – Robert W. Baird Ross MacMillan – Jefferies & Co.
Scott Blumenthal – Emerald Advisers Sanil Daptardar – Centennial Asset Management Jason Rogers – Great Lakes Review
Operator
Good morning and welcome to the ANSYS first quarter 2008 earnings conference call. All participants will be in a listen-only mode until the question-and-answer session at the end of the call.
Today's conference is being recorded at the request of ANSYS, Inc. If anyone has any objections, you may disconnect at this time.
I would like to introduce your speaker for this morning, Mr. Jim Cashman, President and Chief Executive Officer.
Mr. Cashman, you may begin.
Jim Cashman
Okay, thank you. Good morning everybody, and welcome to the ANSYS call for Q1 2008, and there will be another speaker of course.
Joining me this morning is Maria Shields, our CFO. There is a lot to cover this morning, so I'll start with some summary comments to outline the highlights of the quarter, and then follow that up with the examination of the results from our usual variety of perspectives.
Okay, there are two major themes for the quarter. First is the continued strong performance of the ANSYS core business.
The second centers around our recent announcement of signing a definitive agreement to purchase Ansoft Corporation. Maria will then update you on our line item expense performance, balance sheet, cash flows, and provide an update on our current outlook on earnings, and after that we'll be happy to entertain any questions you may have.
So, to get us officially started, Maria would you present our Safe Harbor statement, please?
Maria Shields
Yes, thanks. Good morning and again everyone, thank you for joining us.
Before we begin, I'll remind everyone that during the course of this conference call some matters that will be discussed, as either part of the prepared remarks or in response to questions, may constitute forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from those projected. Additionally, the company's reported results should not be considered an indication of future performance as there are potential risks and uncertainties that could impact our business in the future.
These are discussed at length in our public filings, including our Forms 10-Q, 10-K, 8-K, and our 2007 Annual Report to stockholders, all of which are available via our website. Any forward-looking statements are based upon the company's best judgment 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, we'll be making reference to non-GAAP financial measures in an effort to provide supplemental information to our GAAP disclosures. A discussion and full reconciliation of GAAP financial measures to comparable non-GAAP measures is included in this morning's earnings release and the related Form 8-K.
In connection with the proposed transaction that Jim mentioned earlier, ANSYS has filed a registration statement on Form S4 with the SEC. It includes the prospectus proxy statement of ANSYS and Ansoft, and other relevant materials in connection with the proposed transaction.
We urge you to read the registration statement and any other relevant material when they become available because they contain important information about ANSYS and Ansoft and the proposed transaction and related matters. The final joint proxy prospectus statement will be mailed to stockholders of Ansoft.
You can obtain free copies of the registration statement and the prospectus proxy statement when they become available, as well as other filings with the SEC containing information about ANSYS and Ansoft, without charge, from the Investor Relations department of either company, or from either company's website, as well as the SEC’s Internet site. ANSYS, Ansoft, and the respective Directors and Executive Officers, and other members of management and employees, may be deemed to be participants in the solicitation of proxies from the security holders of Ansoft in connection with the merger.
Information regarding these participants is available in each company's Annual Report and proxy statement, and will be included in the registration statement and joint prospectus proxy. I'll now turn the call back over to Jim to go through an overview of our first quarter business results and our progress to date.
Jim?
Jim Cashman
Okay. Thanks, Maria.
So, as I said before, Q1 saw continued excellent performance of our core ANSYS business. It was above our non-GAAP revenue and earnings guidance, and basically all segments of our business performed well on both a quantitative and a qualitative basis.
To set the stage for the numbers, I'll be using non-GAAP numbers in the same fashion as we've been using historically. This will maintain consistency with our calls of past quarters and years.
And actually, GAAP and non-GAAP revenues are identical in 2008, and they will be compared to the non-GAAP revenues for the comparable Q1 2007, the ones we talked about a year ago. Non-GAAP earnings include the usual amortization and stock-based compensation adjustments for Q1 2007 and 2008, and they are detailed in our earnings announcement.
So just from a high-level perspective, for the quarter, we reported strong financial performance with non-GAAP revenues of $109.5 million. This represents a 22% increase from last year's Q1 of $89.6 million.
Essentially, we have maintained this growth even in light of a strong comparable, and while spending considerable effort in the background on the Ansoft engagement. Non-GAAP diluted earnings per share increased 38%, with non-GAAP EPS of $0.40, up from last Q1's comparable of $0.29, reflecting last year's two-for-one stock split.
This was also above our guidance and the analyst consensus, but it's a direct consequence of what happens in our model when we overperform on the top line. Secondly, all major aspects, as I mentioned, of the business performed well.
We saw continued strong gross and operating margins, cash flows, and a stable business model that proved to be resilient to some of the economic climate that we've been seeing here and there. Then we also saw continued acceleration of customer engagements for both new adopters and longstanding relationships.
There were increases in portfolio sales, cross-selling activities, and a continued uncharacteristic increase in large orders, including several in excess of seven-figure orders, which explained a portion of the top line overachievement. The general feedback we have gotten from customers indicate that economic concerns that they may be feeling are mitigated by the increased competitive pressures for product advances, which in turn creates opportunities for uncompromising simulation capabilities.
So, if we take a cut on this from the operational highlights as I, again, repeating the non-GAAP revenue for the quarter, $109.5 million, again for this quarter non-GAAP equals GAAP, and it's 22% over the $89.6 million of Q1 2007. And, of course, this represents all core growth.
And as we'll discuss later, it was double-digit growth basically, virtually in all aspects of examination, so as we go through the categories that will be obvious. Non-GAAP diluted earnings for the quarter grew 38% to $0.40, up from $0.29 per share in Q1 of 2007.
This exceeded the analyst consensus, and it marks the 42nd consecutive quarter that our non-GAAP EPS has met or exceeded consensus. From my earlier comment, there was some operational efficiencies, most notably in the G&A area, as we continue to capture the financial upside of the Fluent acquisition, but the majority upside was due to the revenue overachievement.
Overall, non-GAAP operating margins for the quarter were 47.3%, fueled by the strong top line results, of course. This compares to 42.6% in Q1 of 2007.
And there are basically two components to this. First and foremost, again, the top line overachievement flowed to the bottom line as a direct consequence of our business model.
Secondly, though, there were some things that we had planned but were delayed due to the effort which was going on in the background with Ansoft. So those are thing that will still be – try to pick up later in the year.
Adjusted gross margins continued in line with our business model, but actually ticked up slightly to 86%, again reflective of the overachievement in the software license area. This compares to 85% in Q1 2007, so very much in line with our business model.
More importantly, we were able to achieve these margins without sacrificing the ongoing building of our foundation for the future. This included the ongoing investments in sales headcounts, as well as in our financial systems and their convergence, and convergence in the CRM area, as well as the expansion of our global IT infrastructure as we continue to scale up as a business.
And then finally, we saw continued strong cash flows from operations, over $37 million, which is a 67% increase when compared to the $22 million in Q1 of last year. So, again, those are the highlights.
Let's now go slice into the numbers from a variety of different perspectives, category, business, geography, different customer aspects, and products, and as you'll see, my earlier comment about basically kind of double-digit across the board. So by category of business, overall non-GAAP software license revenue grew at 25% for the quarter.
Our paid up licenses grew at about 30%, primarily driven by higher growth rates in our flagship mechanical offerings. The lease business grew 20% and continues to represent about 38% of revenues.
So when you combine the lease with our software maintenance and enhancement subscription business, this continues to strengthen that repeatable business base, and aids in the overall visibility, a long-standing hallmark of ANSYS. Total maintenance and service growth was upper teens for the quarter.
The total software maintenance growth component of this was 24%, very in line with the business, and indicative of the health of the overall core business. Our pure services business actually slightly decreased, but that's in line with our earlier guidance, as we've published migrated to do higher value-added services and, of course, this is reflected in our margins also.
There was good balance cross all product lines, but the upper-end products definitely saw disproportionately higher growth, basically in the upper 20s. As the Workbench platform basically has provided dramatically increased visibility, we've seen a steady increase to the higher-end products, and this is basically because people don't have – they can't compromise on the accuracy of the solutions no matter where they use it in the design process, so basically it's not an ease of use versus power; it basically has to have both, but it ultimately has to have the power of solution.
There was a significant increase in ASPs at the high end, primarily driven by a progression to the more fully-featured products. Nonetheless, ASPs remained – what I call steady at the low end, but there was a minor increase when compared to last year's Q1.
And then finally our direct and indirect businesses both performed well, maintaining a fairly consistent balance of basically 69% to 31% percent, that's direct to indirect. Basically on – business intake has also stayed strong with growth again in excess of 20%.
This has carried the deferred revenue to almost $154 million, which is a company record, and represents a 26% growth over this time last year. Our already strong core repeatable business base has grown to 67%, and that's even in light of the paid-up license overperformance.
One – basically one of the greatest strengths of our business model is the consistent ability to maintain this solid base of recurring revenue, and we believe it's a direct consequence of our commitment to reinvest a high percentage of our revenue back into R&D, which reinforces our technical leadership. This continues to provide capabilities that allow our customers to solve basically an ever-expanding set of complex issues that they are being confronted with on a daily basis.
In addition to the deferred revenue balance, we have a strong balance sheet, Maria will detail that coming up shortly, and the strong cash flow that I have mentioned, that have easily supported the acceleration of the pay down of the debt that we took on with the Fluent acquisition in 2006, and likewise to support the amortization of the debt associated with the upcoming Ansoft acquisition that we hope to close later this quarter. From a geographic perspective, we saw double-digit growth for all regions, but with mildly less uniform performance.
This primarily came in the anticipated form of a slight moderation in North America. From a total business perspective, North America increased 13% for the quarter.
As we said, there was this general anticipated softening, but they also tend to be mitigated by the longer-term perspectives with which our products are used. Additionally, embedded in this number is the fact that we've seen some of the U.S.
multinationals that are expanding their global usages at a faster pace, in light of their business successes and in anticipation of future opportunities. And then finally, with the rapid growth we've seen some opportunities for internal improvements in a manner similar to what you've heard from us over the years in other parts of the world and, of course, these are already underway.
But it’s not to lose site of the great number of positives. First of all, the aforementioned double-digit growth with improvement plans underway, and the multinationals spending some of these dollars overseas, but it's also highlighted by the fact that every direct office grew in excess of 20%.
Finally, the ongoing adoption by new users, and especially our major accounts, was particularly strong even for this time of the year. Major orders in North America came from longstanding and new customers such as General Electric, Pratt and Whitney, Volvo, IBM, Hewlett Packard, Raytheon, Dow Chemical, Solar Turbines, Alliant, Intel, Corning, Cummins, BAE Systems, Schlumberger, Lockheed Martin, General Dynamics, Rockwell, Eaton, Westinghouse, Diamond Offshore Drilling, NASA, John Deere, Senopi, Pasteur, Honeywell – so I mean, basically this list goes on quite a ways.
Europe continued to perform quite well with a growth of 25% overall for the quarter, which was led by Germany, but it was in excess of 20% for all the subregions. Now, there was a significant positive currency effect for the quarter, but it still netted out to a net growth of high teens for the region in constant dollar terms.
Similar to North America, there was very strong activity in the European major accounts. The largest deals in Europe include both names you've heard us talk about over the last few calls, as well as addition from new customers such as Bosch, BMW, Alstom, Rolls Royce, Mann, Renault, Valleho [ph], ABB, JFC Saturn, the ITER nuclear program, Volkswagen, Airbus, Arriva, Siemens, Soljer [ph], Enviroserve, New Solsys [ph], Sukhoi, Snecma – so basically a lot of the diversity there continued.
And our general international area also produced well with an overall growth in excess of 30%. Now, Japan represents the largest part of this business, and it grew about 23%, with the rest of the major centers operating significantly above that.
Now, there was a positive currency impact for the region here, but it still yielded a 25% growth in constant currency terms. Key customer engagements in the region included Honda, Toyota, Tata Motors, Kawasaki, Japan Aerospace, Canon, Quean [ph] Advanced Research, Hitachi, Rico, Honeywell, Eaton, Mitsubishi, Texas Instruments, again, Airbus in Asia Pacific, Matsushita, Almeron [ph], Whirlpool, Nippon Steel and again Reliance Petroleum – so a number of major accounts there, the list goes on quite extensively here also.
We saw our usual continuing variety of orders from local-based businesses and multinational expansion. Now, we always seem to get a lot of interest in the industry make up on these calls, and you can tell from the subset of customers that we just mentioned that virtually all industries are represented, and usually by the thought leaders and business leaders amongst them.
However, we see a couple of repeated themes of industry strength. We've spoken of the energy sector for a few quarters now, and it certainly doesn't seem to be slowing any more, the price of or demand for energy.
This continues across the board with alternative and renewable energy forums, the nuclear renaissance, green issues, and even in conventional hydrocarbons, where efficient and cleaner exploration, combustion, and even broader consideration of heavier crudes, shales, and synthetics are catching notice. We'd also mention the general bio and healthcare markets, which also continued in strength, but we also saw some interesting additions such as the development of new bio reactors for the increased innovation of vaccines.
Now there's one other that's made itself noticed as of recent, and I don't know if it's a spike or trend, but there's been kind of a widespread push in some of the computing, and in particular the wireless computing and communication areas, but a few months doesn't make a trend, but this is something that we kind of noticed a pop up in. If there's a trend in these industries, it's probable that each are under huge pressures, and they also have the minimum of a yoke of decades-old tools and processes, but they also have very complex requirements that are uniquely served by our rapidly-expanding multi-physics offerings.
You might have even noticed that some of the traditional industries are being driven by new realities. So if you notice the number of aeronautic and automotive customers that are starting to populate the list, basically these are companies that have created products in a $30 a barrel world of oil, and now they are dealing with the efficiencies required in $100-plus barrel world.
So basically, there's a number of challenges and opportunities that continue to abound for them and ANSYS alike. Last quarter we had mentioned our involvement with leading champion sports teams, like Ferrari, Team Alinghi, and even our participation at that point in February's unveiling of the Speedo LZR RACER, the elite speed suit.
Well, since that call, just a couple of months ago, the LZR RACER has already been worn by athletes breaking 35 world records, and at the recent FINA World Championships alone, the LZR RACER was involved in 17 of the 18 world records broken. I got to tell you that, having met some of the people involved, the swimmers are amazing, the team at Speedo's Aqualab are truly pushing the boundaries of innovation, and it was an honor for ANSYS to be associated with those folks.
And it just seems to be the hallmark of most of our best customers, that ongoing pursuit of excellence and innovation, plus the results to show for it. So, in summary, good to very good growth across all regions, with areas that we'd still like to take to even higher levels.
As you can tell from the list of customer names, there was good industry and major account activity, continuing strong performance in Europe with good balance, good progress, particularly in the high potential areas of Asia Pacific, and continued momentum in North America, particularly in those major accounts that engage in global business activities. We are doing well in most places, but we also have plans to expand and improve almost everywhere at the same time.
But we all see the headlines every day, increased energy cost, tightening labor markets, housing credit crunch, currency fluctuations, geopolitical events, all of which can positively or adversely influence the timing and patterns of our customer buying decisions, but we are encouraged that our existing and new customer attainment has continued to grow off the momentum that we've built over the course of the past few years. And, of course, we've been talking about this for over a decade now, but we are always examining our sales strategies in each of the key geographies, and given the current market interest, we are continuing to judiciously ramp up our customer organization in response to the growing opportunity.
Essentially, the basic assumptions that started years ago have been validated through – even through the numerous ups and downs around us. Now, moving on to products, it's probably obvious from both the corporate and geographic performance that most product sales vectors were also very positive.
As I mentioned before, total software licenses were up 25%; all product sectors grew well; each major product group sold well, both individually and in portfolio sales; and as I mentioned before, the ASPs were up quite a bit at the high end, slightly up at the low end, each when compared to a year ago. Now, we have a major release concluding at the end of this year, so there's a ton of activity going on as you might guess.
Obviously, though, the most exciting news on the horizon is centered on signing the definitive agreement to acquire Ansoft. Now, those of you who have followed the story over the last few years understand why this is an exciting addition, and at the right time for us.
We are somewhat limited by what we can say other than the fact that we are hopeful for a close later this quarter. As Maria mentioned in her opening comments, we did file the S4 last week.
We are currently finalizing the financing, but we've made good progress there, and we are awaiting to receive the formal notice of early termination from the HSR waiting period. In addition, we've had – even had some initial, albeit very high-level integration meetings between the two companies.
While there are many things we can't discuss between us until after the close, the meetings have largely exceeded expectation. So, in conclusion, it was basically another strong quarter, quantitatively and qualitatively; continued financial end market performance; strong revenue growth; excellent margins; good earnings, cash flows; challenges and opportunities are plentiful.
But even in spite of the current successes and issues, we still feel the real promise is still ahead of us. The same business model, investments, vision of a new world of simulation are important aspects of our ability to serve customers, affiliates and shareholders alike.
Over the long term, I think we've demonstrated our commitment and ability to grow the top line in accordance with our guidance, while maintaining solid margins and continuing to provide strong earnings growth. And while nothing is a economy-proof, we've been able to consistently weather a number of different economic environments without sacrificing the ability to capture upside as opportunity has provided itself, and that's happened again this quarter.
We'll continue to drive toward our long-term vision with our long-term optimism intact, and increasing confidence; of course, tempered with our usual caution. And I guess it wouldn't be an official ANSYS call without mentioning some variant of cautious optimism, but arguably it hasn't been a bad model for a sustained period of time.
So with that, I'll turn it over to Maria Shields, our CFO, to provide you with a more detailed look at our financials, including the balance sheet highlights, expense structure, and general insights. So, Maria?
Maria Shields
Okay. Thanks, Jim.
I'm going to spend a few minutes going through kind of a detailed recap of some of what happened in the expense line items, go through some balance sheet and operating cash flow highlights, and then I'll also put in some commentary regarding our EPS outlook at this time for upcoming Q2 and the full year of 2008. I will also mention our outlook at this time does not include the impact of Ansoft.
We will provide 2008 outlook relative to the combined entity once we close the deal. So if we look at cost of sales, excluding acquisition-related amortization and the impact of stock-based compensation, which combined totaled about $5.3 million, cost of sales for the quarter totaled $15.6 million, compared to $13.5 million in the first quarter of '07.
And this resulted in an overall non-GAAP gross profit margin of 86%. The increase over last year's first quarter is largely driven by increases in third-party royalties, as well as increases in salaries and headcount-related expenses.
At this time, we are currently forecasting a non-GAAP gross profit margin in the 85% to 86% range for ANSYS for the remainder of '08. If we take a look at SG&A, our total expenses for the quarter, if you exclude $1.8 million related to stock-based compensation, totaled $26.9 million, and that compares to last year's first quarter of $25.4 million.
The increases in expenses in this quarter compared to last year's first quarter, were primarily related to, once again, increased headcount and compensation expenses, and these were partially offset by a decrease in third-party accounting and tax-related consulting expenses. In the area of R&D, our total expenses, net of about $700,000 related to stock-based compensation, increased to $15.3 million, and that compares to $12.5 million in last year's Q1.
The increases in expenses over the prior year's first quarter were also driven by increased headcount and compensation-related expenses. And at this time, our outlook for 2008 continues to assume a total investment in R&D as a percentage of total revenue in the mid-teens range.
While we continue to make investments in key areas across the company largely focused on expanding our global sales force, integration efforts, foundation building and process improvement, we also delivered non-GAAP operating profit margin of 47% for the first quarter. Our consolidated effective tax rate was about 39%.
This is a percentage point above what we had forecasted at the end of last quarter, but, like many others, our tax rate is negatively impacted by the delay in congress not extending the R&E credit as of the end of first quarter. At this time, we are anticipating an overall tax rate of between 37% and 39% for the remainder of '08.
The strong revenue and profit performance, combined with a positive impact from net interest income, led to a 38% increase in total non-GAAP diluted EPS to $0.40 on 81.6 million diluted shares, compared to non-GAAP diluted EPS of $0.29 on 80.7 million shares in the first quarter of '07. At the current time, we are projecting non-GAAP diluted EPS in the range of $0.36 to $0.37 for the upcoming second quarter, and $1.54 to $1.57 for the full year of '08.
I'll just reiterate once again, that's for ANSYS only; no impact of Ansoft is included in the outlook at this time. Also, as we saw in Q1, given our level of international business, our 2008 results may continue to be favorably or, who knows, unfavorably impacted by currency.
But in our current projections we are assuming that rates stay roughly the same as the current rate environment. Based on our current visibility, we are targeting second quarter GAAP diluted EPS in the range of $0.28 to $0.29, and $1.19 to $1.25 for the full year.
Taking a quick look at the March 31st balance sheet and cash flow highlights, they continue to be very positive. Our total cash and short-term investments are now over $200 million.
And I would just like to mention quickly that our cash is conservatively invested to both protect principal as well as allow for liquidity, and we don't have any exposure relative to auction rates, subprime or similar nature securities that have been raised as concerns in the current market environment. Our consolidated net DSO was 49 days.
Our deferred revenue grew to an all-time high of over $150 million. The outstanding balance on our total debt obligations has been reduced to $48.2 million.
The business generated over $37 million in operating cash flow for the quarter; a 60 – 67% increase over last year's Q1. And we invested about $2.4 million in CapEx in the first quarter.
So I'll just wrap up buy saying that, overall, this was very good quarter for ANSYS on many fronts. But we've all worked very hard together as a team to execute and deliver on our commitments, and more importantly, we are really excited about the challenges and opportunities that lie ahead in 2008.
So, Jim, I'll turn it back over to you.
Jim Cashman
Okay. Thanks, Maria.
So to recap, sustained strong performance of all major parameters of the business: Revenue, earnings, margin, cash flow, business base, visibility, across the board. Strong process and progress in the building of our infrastructure for ongoing growth; increasing customer interest at higher levels, resulting in increased activity in response to what I think is a demonstrated value of a multi-physics operating and open and flexible Workbench platform; it's demonstrated by industry, geographic diversity, broad-based adoption, and accelerated interests in our ever-expanding portfolio.
And then finally, advancement and innovation of our simulation Workbench with upcoming new releases of ANSYS coming, augmented by the addition of Ansoft capabilities, hopefully, later this quarter. Long-term outlook, it stays bullish.
The short-term outlook is strengthening. For the remainder of 2008, we are raising our estimates from the last call, based on Q1's performance and the newest data.
We anticipate a good Q2 performance with revenue in the $109 million to $111 million range with non-GAAP earnings in the $0.36 to $0.37 range. You will recall earlier we mentioned the occurrence of, actually it was 7 seven-figure orders in the quarter, that's a company first, and one that involves some pulling forward of orders that easily could have been Q2 or Q3 events, were it not for basically customer business issues that drove the timing.
We don't envision a repeat of that in Q2, but as you can see, we still have a very solid quarter ahead. For fiscal year 2008 our guidance for revenue is an increase to the range of $448 million to $452 million, with non-GAAP EPS increasing to the $1.54 to $1.57 range.
This translates to a solid top line growth, and a slightly higher bottom line growth. And as Maria mentioned, this guidance is only for the ANSYS business.
We'll get back to you with guidance relative to the new combined company results after the Ansoft deal closes. As I mentioned, we are already ramping up parts of our business in a controlled fashion, but we'll continue to monitor the market factors, as we have demonstrated over the past few years, basically to take advantage of market opportunities throughout the globe and across the vast array of industries.
Basically we are now – I guess we are prepared to respond to any specific questions that you might have. I would like to open it up.
Operator
(Operator instructions) We'll take our first question from Andrew Matorin with Bear Stearns. Please go ahead.
Andrew Matorin – Bear Stearns
Thank you, just with respect to the product roadmap, if you could give us a little more color. I think you said on the prepared remarks that the expectation was back loaded towards the ends of the year.
Does everything remain on schedule with that release?
Jim Cashman
Well, within the normal ranges. We are still – we talked about – we've always talked about – first of all, the date has never been formally announced.
Second of all, we always said it would be the latter part of this year, and first availabilities are still targeted for the end of the year. Then there is a lot of distribution issues, so probably mass distribution even spilling of course over into 2009, but basically within the parameters of what we have always talked about.
Andrew Matorin – Bear Stearns
Okay. And then Maria, if you could just give a little bit more color on the G&A line item.
It seemed like it did decline more materially sequentially than perhaps we might have anticipated–
Maria Shields
Yes, I tried to highlight that, Andrew. We are definitely seeing the financial upsides of a lot of the integration efforts that we've gone through on the Fluent acquisition for the past almost two years now.
Well, yes, two years now.
Jim Cashman
Yes.
Maria Shields
Yes, so between reduction in consulting cost, improvement in process and efficiencies we've gained over the past two years, there are also – we were undoubtedly focused on some other things this quarter relative to getting the Ansoft transaction done. So I think you'll see kind of a similar model going forward.
Once we close the Ansoft deal, we'll have to make investments in third parties to help us integrate them. It will tick up but then eventually for the long term, it will tick back down.
Andrew Matorin – Bear Stearns
Okay. So were there any headcount reductions other than the consulting costs that came down?
And were those consulting costs incremental to the combined organization as a way to facilitate the integration process?
Maria Shields
Yes. We do not – in any of the acquisitions that we've done, we never ramp up the full-time headcount for things that, quite frankly, are shorter-term in nature.
So if we have got a year plan to, say, migrate everybody on to the – our financial platform, we don't hire eight or nine people full time to deal with those issues. We usually do it between a combination of our own internal existing resources, plus we supplement with folks that have the experience that we need to get it done as quickly and as efficiently as we can, and we definitely have been doing that since May of 2006, but a lot of that heavy lifting is now behind us.
Andrew Matorin – Bear Stearns
Okay, great. And would you anticipate any – I know you are reserving comments on Ansoft until the deal closes, but can you give any color as to anticipation that there would be resumption of some these ancillary costs on the consulting–
Maria Shields
Yes, no doubt, because we'll do the same thing with the Ansoft transaction as we've done to gain operational efficiencies, to reduce our Sarbanes-Oxley cost, and all that, relative to getting people on common platforms, so that we can share financial information, we can share customer information. So there will be some investment in the early quarters, but we believe that it will pay off in later quarters.
Jim Cashman
I think – every situation is different, but I think that as a general kind of pattern, some of the same trends that we saw with previous acquisitions would be probably manifested in the upcoming ones also. So using that as kind of a – not an absolute predictor, but as kind of a guideline.
Maria Shields
Guide post.
Andrew Matorin – Bear Stearns
Okay. And Maria, just one last question.
Cash from operations, I think you said it but I missed it.
Maria Shields
Excuse me?
Andrew Matorin – Bear Stearns
Cash from operations?
Maria Shields
Oh, cash flow from operations? Yes, $37 million.
Andrew Matorin – Bear Stearns
Great. Thank you very much.
Operator
Thank you. We'll take our next question from Richard Davis with Needham.
Please go ahead.
Richard Davis – Needham & Co.
Thanks. I guess, Jim, if you kind of think about after you've done the Ansoft acquisition, you are going to kind of have both mechanical and electronic, and then when you include Fluent in there, and all those groups kind of sell to the little bit different parts of an organization, so it seems to me to sell an integrated solution you are going to have to kind of move higher up in the organization, from maybe the engineering departments up to the at least some part of a C level.
Can you talk about kind of how you think about that? How you evolve the sales force?
What do you need to do to go from A to B? And I realize it's not instantaneous, but how does that business evolve that way?
Jim Cashman
Well, you are absolutely right, it's not instantaneous, and I always love it when people say that's what they are going to go in a couple of quarters. But if you do a fast rewind and playback of probably about the last eight to nine years of these calls, we've been building towards this for about – over eight years, at least in public fashion.
And so there's – there's actually two elements of this, one of which is the building we do for the skill set that's required to perform at that level. But frankly, as you can tell, there's also another trend line over the last few years, is even though we don't go out and try to hunt for these mega orders, we've always talked about – we'll grow just in time with the customer, provide value at each step of the way, all that kind of thing, so you don't hear about these billion dollars investments that never panned out.
It was like pay as you go. Even then, the order sizes have ticked up.
Our portfolio sales have increased, the cross-selling has definitely been demonstrated. And frankly, by the virtue, yes, companies are currently organized around some of the legacy shortcomings of all the different product lines, but at some point they ultimately do combine into some place of the company, and we've been getting continued access and propulsion into those areas.
So, A, is the natural momentum that comes as those units aggregate, but also the foundational building we are doing. So it's both the supply and demand side of the equation, but it's been in building for many years.
Richard Davis – Needham & Co.
Got it. And then, Maria, you may or may not want to comment on this, and if you don't that's fine.
With regard to the Ansoft, you guys said that it would be accretive, and we did our little back of the envelope analysis to just kind of figure out how you could get there. The question I had for you, and the question I've gotten from investors is, is the theoretical potential accretion in the future, is that derived – is all of that – can you get that with just cost-cutting, or do you need a combination of cost cutting and revenue synergies to get there?
Maria Shields
Well, Richard, I'll say this. We never predicate anything on revenue synergies because when they'll happen, you don't know.
Jim Cashman
They happen, you just couldn't pick the timing of them. So we've never based it on that.
We think that's a house of cards.
Richard Davis – Needham & Co.
Good. Okay, that's what I thought, but I wanted to make sure.
Maria Shields
And then on the cost front, there are definitely synergies that exist from putting just, for example, two public companies together.
Jim Cashman
But I do want to highlight on this, Maria, is that when we've done these acquisitions, we are in a full stop, and we've said this for years, we are in a building mode. We are building the foundation.
We think the opportunity is much greater than we've even scratched, and as we do that, therefore, as we do these acquisitions, we want to make sure that we are getting forward-looking technology with really solid people doing it. So we normally actually try to maintain all of those type of people as we go forward also.
I just want to throw that comment out. I didn't mean to interrupt, but–
Richard Davis – Needham & Co.
Got it. That's helpful.
I appreciate it. I'll turn it over to the next person.
Thanks.
Operator
Thank you. We will take our next question from Barbara Coffey with Kaufman.
Please go ahead.
Barbara Coffey – Kaufman Brothers
Yes, good morning. As you are taking a look at sort of the world economies, are you seeing different sales cycles in different regions?
And, Jim, you mentioned there were some business reasons for some deals to accelerate. Are you seeing specific industries in which this is occurring?
Jim Cashman
Well, no, actually if you look at those major orders, you would also find that there is quite a bit of revenue – I'm sorry, there's quite a lot of diversity across those. But as you mentioned, a lot of those are based on the ones that are being confronted either by the demand for or the supply of energy.
So they do tend to – they do tend to come up with that. There is no doubt you can infer from the thing that the – some of the emerging areas you hear, in terms of China, India, Brazil, Eastern Europe, and – those areas, I mean, they – as I mentioned on the call, those were clearly growing more.
Like I said, even though the – we score the revenue where it's actually purchased, even though like a U.S. company, if they are expanding into those regions, it will show up in those areas.
So we basically had strong growth along there. I'd say really the regional impact of sales cycle, probably not as predominant as the – again, it gets down to the leading and top companies in every industry, wherever they are in the geography, they are tending to make these kind of investments because – and the reason some of them are being pulled forward is that once they determine that there's value, they want to start extracting that value as quickly as they can, due to the competitive environment.
And that's really more of the trend of what we are seeing.
Barbara Coffey – Kaufman Brothers
And you are seeing that internationally–?
Jim Cashman
Internationally, everywhere. So it transcends industry, transcends geography.
Barbara Coffey – Kaufman Brothers
Thank you.
Operator
Thank you. We will take our next question from Mark Schappel with Benchmark.
Please go ahead.
Mark Schappel – The Benchmark Co.
Hi, good morning. Jim, I just want to make sure I heard you correctly earlier.
Did you say there were seven 7-figure deals in the quarter?
Jim Cashman
Yes, like I said, that’s very uncharacteristic. I mean you've heard us talk about the odd one here and there and Like I said, we don't go after – you know, we don't sit there and try to do these big lumpy things.
It's more common for us with our major accounts to hear them mention significant six figure orders two or three times a year. And basically, I got to say, this is combined – those figures are in many times combined expansion and renewal type of orders.
So it's a really good mix there. It was across multiple geographies, across multiple industries.
Mark Schappel – The Benchmark Co.
Okay, good, that's great. On the foreign exchange question, Maria, I was wondering if you could give us the impact of foreign exchange on the top line.
Maria Shields
Yes. Top line was $4.5 million, and that slowed to about 1.3 on the operating margin.
Mark Schappel – The Benchmark Co.
Thank you. That's all from me.
Operator
Thank you. We will take our next question from Steve Ashley with Robert Baird.
Please go ahead.
Steve Ashley – Robert W. Baird
Hi. I don't know if it's possible, Maria, that you could provide a more detailed breakdown of the geographical regions, maybe give us some dollar amounts or percentage of total for North America?
Maria Shields
Yes, we can give you percent of total. North America was about 34%.
Europe was about 41%, and GIA was about 25%.
Steve Ashley – Robert W. Baird
Great. I would just like to circle back to these large deals.
And, Jim, can you give us some color, are they – is Workbench the genesis of driving these larger – these larger portfolio deals, do you think, or just trying to understand some of the dynamics behind it.
Jim Cashman
Understand. It's one of several – it's one of the several factors.
I mean as people are trying to make commitments to overall – launching products, you have to be able to simulate the whole product. And traditionally each one – as somebody alluded on an earlier question, each one was kind of done almost in a balkanized manner, and then they hopefully could link them together somewhat.
So, Workbench is one aspect of it. It's one of those things where, A, at the end of the day making it easier to use for people is important.
But that can't be done with any compromise of the solution fidelity, and the ability to accurately predict things. So you need the full power of what's there, and Workbench was one of the capabilities that provided multiple – a whole multitude of applications to work together in a very process-flexible and easy to use manner, which made it more adoptable for companies.
And it probably really is at the core of the ANSYS progression, particularly over the last few years.
Steve Ashley – Robert W. Baird
Great. Thanks.
Jim Cashman
Certainly.
Operator
Thank you. We will take our next question from Ross MacMillan with Jefferies.
Ross MacMillan – Jefferies & Co.
Yes, thank you. First question is just on North America growth.
13% was up against pretty tough comparison, I think, from last year. But I think, Jim, you mentioned that you had taken some actions – I forget your wording, but something along the lines of internal improvements being made.
Can you just talk to maybe when you see maybe a growth rate that's a little different from what you expected, what sort of things you go about doing to try to fine tune the sales organization?
Jim Cashman
Absolutely. And then, first of all, we tend to be pretty open on these calls, so it wasn't to send any klaxon of – I mean, every, every quarter I think for the last 40 some calls we've talked about, well, here's – so even if the lowest performing region was at 20% and everybody else was at 25%, we'd try to figure out how do we get that other one up to 25%.
It's just – call it an ISO continuous improvement mentality. But 13%, yes, first of all, you are right, it absolutely was against a very strong comparable Q1.
Secondarily, as I mentioned, that 13% really is kind of understated because of the number of major accounts. In fact, you might have even noticed when I was talking about things that were going on in the international regions, those were familiar U.S.
company names; it's just that they were implementing them as they spread on a global basis. So the health of those companies and their expenditure patterns are even greater than that number might exist.
But on top of that, since we are at another growth point in that development organization, in earlier calls we were talking about – a few years ago, talking about continuing to expand Europe, and I think we've shown the results of that the last few years. About a year ago we were talking about some things in Asia-Pac that we wanted to upgrade.
And now, in that standpoint there's a combination of things, a combination of tools. So, first of all, I mentioned the CRM, Customer Relationship Management systems convergence.
Second of all, we talked about the headcount improvements where we've been continuing to ramp up that standpoint and actually try to formalize and institutionalize the onboarding process for that. And then there are just normal kind of process and automation changes.
And those are the basic things. But I can almost guarantee all of those are going on in every region on a continual basis, and we just tend to turn up again in other areas as we see the opportunity, and that's really what you are seeing.
That really is what was underneath my comments.
Ross MacMillan – Jefferies & Co.
Great. And then just on the – just to circle back on the seven large deals, two questions.
One, were they all paid up-front, so – or were they a mixture of lease and paid up-front? And then secondly, are you still getting some benefit of standardization post-Fluent?
Is that still a driving factor? Some of the sort of standardizations and movement from lease to paid up front?
Thanks.
Jim Cashman
Well, okay, first of all, the – those orders were almost all combined with combinations of – no, first to your question, no, they were not all paid-ups. Second of all, almost all of them exhibited significant increase in new business, most oftentimes also combined with expansion business.
And the third one of – actually as you can almost back calculate, while we had overperformance on the paid-up license, which was the major part of our overachievement, you can tell that the paid – the lease business also grew at 20%, and it still is in that high 30% of total business. So there was no wholesale or massive swing toward any kind of conversions.
In fact, we basically try to neutralize that from all perspectives. I would say that if there is a gradual trend, it's – most major companies when they have made a full long-term commitment, they may tend to go towards the more capital-intensive as opposed to the expense line approach, and therefore paid-ups might tends to predominate.
But you can see from both, they were both growing very comparable to the company – paid-ups growing a little bit over the company average.
Ross MacMillan – Jefferies & Co.
Thank you.
Jim Cashman
Okay.
Operator
Thank you. (Operator instructions) We'll take our next question from Scott Blumenthal with Emerald Advisers.
Please go ahead.
Scott Blumenthal – Emerald Advisers
Good morning, Jim and Maria.
Jim Cashman
Good morning.
Maria Shields
Good morning, Scott.
Scott Blumenthal – Emerald Advisers
Can you tell us if traditionally, when there is an impeding new release, do you have a surge of adoption or your customers kind of rushing in to get the current release prior to the new release?
Jim Cashman
No, no. In fact I would say we almost have a marked absence of that effect.
In general, you can tell from the repeat business flows we've got, and the number of people that just have gotten on the – this enhancement subscription trend with us I mean because they want the steady flow of new capabilities. Actually people start using – first of all, we don't have massive new training curves from a new version, so they can pretty much flow along with those implementations.
And as such, that's why it's more common for people to pull forward. If anything, I'd say that in a lot of major – in a lot our multinational accounts, it maybe a few months before they actually implement and roll in the new releases.
So, if anything, there maybe is a little bit of a lag, and it really doesn't affect purchase timings at all.
Scott Blumenthal – Emerald Advisers
So do you think at this point, Jim, that there may be – since you've announced the new release, there may be potential ANSYS customers that are kind of holding off to get the new release?
Jim Cashman
Well, first of all, we haven't announced the new release. We have not officially announced it.
Second of all, it's pretty much like clockwork. Like almost on these 12 to 15-month cycles, and it's been that way for a long time.
So the expectation levels are kind of already set. And like I said, we've actually – this past time we saw orders pulling forward from Q2 and Q3.
So we didn't see – we certainly didn't see people delay on this, and if anything, we saw probably a net – a net influx. So basically I don't see any of that effect that you just suggested.
Scott Blumenthal – Emerald Advisers
Okay. Then conversely, Maria, I guess this would probably be a better one for you to answer.
Do you think that there was any – and I know there has been a couple of questions asked already about foreign currency, do you think there was any foreign currency effect in some of these very large orders? Because, I guess at the end of Q1, the dollar really kind of hit a trough then.
And, Jim, can you give us any color as to whether a large portion or most or many of those 7-figure orders came from overseas?
Jim Cashman
Well, most of them came from multinationals. There was a combination of them but most of them – a lot of them came from these multinational companies.
Basically, I was aware of no currency FX-driving issues, and in many cases they are in local currency purchases anyway. So I don't know, Maria?
Maria Shields
I don't recall any one saying that, hey, this order that wasn't originally in the forecast came in because of currency, particularly the larger ones, Scott. But I would say a lot of what we see, particularly in Q4 and Q1, a lot of it is around internal budget and things like that.
So I think those are more the business issues that drive perhaps pulling ahead things.
Scott Blumenthal – Emerald Advisers
Okay. So I guess one of the questions that I've never thought of asking you is, ANSYS products are priced then in the currency in which – I guess in the currency in the country in which they are sold?
Is that a correct statement?
Maria Shields
For the most part, yes.
Scott Blumenthal – Emerald Advisers
Okay. All right.
Very good. That's very helpful.
Thank you.
Jim Cashman
Thank you.
Operator
Thank you. And we will take our next question from Sanil Daptardar with Centennial Asset Management.
Please go ahead.
Sanil Daptardar – Centennial Asset Management
Yes, thanks. Jim, on the ASP part, you talked about very strong ASP gains here.
Was there any price increase on the products, or it was just a–?
Jim Cashman
No.
Sanil Daptardar – Centennial Asset Management
It was just a product mix shift?
Jim Cashman
There was no – there weren't price increases. No, this is basically were people moving up, and as you can see – you know, people really do want the full-function products, and as they basically come up their adoption curve, basically this was almost all a shift toward the higher-end, more comprehensive products.
Sanil Daptardar – Centennial Asset Management
And do you see that continuing in that case?
Jim Cashman
Well, it's been – it's been on the move for about, well, I don't know, several years. I mean we've been talking and tracking this for many years, and it has been a trend at least over the last couple of years.
I'd have to go back and determine exactly when we first saw the first one, but it's been a multi-year, multi-quarter phenomenon.
Sanil Daptardar – Centennial Asset Management
Okay. Just on the previous question, basically in terms of that major release, when you look at your guidance, of course the first quarter strongly, the second quarter is also projected to be very strong in low to mid-20% growth, kind of, in license terms.
But in the second half, the growth drops down to mid-teens kind of, low- to mid-teens. Now, is that what you expect that in front of the major release probably there might be a softness, is that what you are expecting?
Jim Cashman
It's not related to the release at all. There is some impact from the pull forward of orders from things that we had – we knew were in the pipeline.
But frankly, and we talked about this last year to try highlight it, because Q4 in and of itself was a blowout kind of quarter for us, and we mentioned that as being a very strong comparable that was always incorporated into our beginning of the year and our current guidance for the year and the quarters. And nothing related to softening or related to a product release.
Sanil Daptardar – Centennial Asset Management
Any significant things that you saw that the orders are being pulled into the earlier quarters, or that's just a kind of a given thing basically, or it's kind of a phenomenon which is just occurring right now?
Maria Shields
Can you repeat that question?
Sanil Daptardar – Centennial Asset Management
Now, did you see anything major that the orders had been pulled into the forward quarters, into earlier quarters, into Q1 or Q2 from Q3, or is there basically just a regular phenomenon which is happening right now?
Maria Shields
It's happening and I think – as Jim alluded to, there is a number of business issues and some of them relate to the competitive environment that these companies are operating in.
Jim Cashman
Yes, I know for instance there were some companies that were basically in the middle of some new major product development cycles, and as a result needed to continue to expand, basically to equip their sales force and hit certain timeframes. I mean – but that's an anecdotal thing I know that's true for three or four of these major ones; whether or not I just hit the only three that those occurred in, but it is – it was a prevailing theme.
Sanil Daptardar – Centennial Asset Management
Okay, if I may, last question. And just housekeeping on the SG&A expense, has bulk of the leverage been obtained in the first quarter or are there still more to go in the future quarters on the SG&A side from the Fluent acquisition?
Maria Shields
Can you repeat that one more time?
Jim Cashman
We are getting, we are having a lot of problem with the sound here so hang on. Go ahead
Sanil Daptardar – Centennial Asset Management
Okay. On the Fluent financial leverage that you got in the SG&A expense, was most of it recovered in the first quarter or you still think there is a lot remaining in the future quarters?
Maria Shields
Well, I think you saw a lot of it in the first quarter, and it was further accentuated by the fact that some of the things that we had planned, quite frankly, we were focused on the Ansoft acquisition, and not necessarily on some of those things that are not critical, but they are nice to have, in process improvement and things. So kind of – I would say that the Ansoft acquisition will kind of change some of our priorities going forward.
Sanil Daptardar – Centennial Asset Management
Okay. Thank you.
Jim Cashman
Thank you.
Operator
Thank you. We will take our last question from Jason Rogers with Great Lakes Review.
Jason Rogers – Great Lakes Review
Hello.
Maria Shields
Good morning.
Jason Rogers – Great Lakes Review
I don't know if you gave this out or not, but what percent of the revenue came from maintenance and service in the quarter?
Jim Cashman
Well, it was 24, it was 24% – or 27% of total revenues, it was a 24% growth.
Jason Rogers – Great Lakes Review
Okay. And was there any share repurchases in the quarter–?
Jim Cashman
Well, actually, no, that was software maintenance. Do you want all the – the body for hire service business and things like that in it also?
Which way do you want it?
Jason Rogers – Great Lakes Review
Let me put it this way, what was software license revenue in the quarter total?
Jim Cashman
Okay. Software license revenue was 67% of our total, 25% growth.
The software maintenance was 27% of total revenue, and a 24% growth. And the total maintenance and all forms of services revenue was 33% of total revenue, or about a 17% growth.
Jason Rogers – Great Lakes Review
Okay. And were there any share repurchases in the quarter?
Maria Shields
No.
Jim Cashman
No.
Jason Rogers – Great Lakes Review
Okay. And then, finally, just looking at Ansoft compared to the Fluent acquisition, I just wanted to get your thoughts on, if you had to rate to – compared to the opportunity versus the challenges in integration, I don't know if you can provide any comparison between the two acquisitions?
Jim Cashman
Well, they are – everything is a little bit different, it's slightly smaller in terms of headcount, but we do gain some advantages of geographic proximity because they are located very near our headquarters. The technology is maybe one step a little bit more removed, but in terms of some of the buying centers that people mentioned.
But it's certainly a trend that's occurring out in our customers’ standpoint, and the opportunity and the desire is certainly there. So it's a different set of issues but very comparable to the last cycle.
Jason Rogers – Great Lakes Review
Would you say the expense saving synergies may be a little less than the Fluent acquisition, but perhaps more opportunity as far as expanding your products?
Jim Cashman
Well, yes, first of all the product expansion is quite strong. On the expense side, the Ansoft margins were higher going in than were the Fluent margins.
So I mean there are some differences. And we still have – we still want to maintain the business model we have that continues to balance investment, but the ability to run a growing, solid business.
So I think you'll see some general trends. But the starting point that each one entered in at are slightly different.
Jason Rogers – Great Lakes Review
Great. Thanks.
Jim Cashman
Okay. Thank you.
Operator
Thank you. And at this time there are no further questions.
I would like to turn it back over to Mr. Jim Cashman for any closing remarks.
Please go ahead.
Jim Cashman
Okay. Thanks a lot, and thanks everybody.
So in close, I would have to characterize us as having increased enthusiasm due to the encouraging customer response, and obviously your questions gave us a chance to dig into that a little bit more. Basically the customers, they are responding to the product vision and the offerings.
But I tell you, we are also trying to keep our eyes squarely on the ball, and basically we are not taking anything for granted. We don't take for granted that we continue to be bolstered by a strong combination of a business model that I think is both solid and resilient.
We've obviously got those loyal customers that we discussed in great detail, in terms of expanding and continuing to grow and renew those relationships. Obviously, we have the dedicated partners, all of the hardware partners that we've collaborated with, and the fact that our direct and indirect models have stayed pretty much in line, great technology, and of course I can't go through one of these calls without continuing to thank this cadre of employees we have that have teamed up to make this happen.
They are part of our core. They are part of our sustained performance, and they are clearly part of our future.
So, as we close, I'd like to thank all those dedicated members of the ANSYS team, and long-term shareholders, and all the business partners who have been part of this journey to date, and we appreciate all that, and I thank all of you on this and look forward to talking to you again next quarter. Thanks a lot.
Operator
Thank you. That concludes today's conference.
We appreciate your participation. You may now disconnect.