Thank you for standing by, and welcome to the Ansys third quarter 2023 earnings conference call. With us today are Ajei Gopal, President and Chief Executive Officer, Nicole Anasenes, Chief Financial Officer, and Kelsey DeBriyn, Vice President, Investor Relations. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on your telephone keypad. To withdraw your question, please press Star, then two. Please note, this event is being recorded. At this time, I would like now to turn the conference over to Miss DeBriyn for opening remarks. Please go ahead. Good morning, everyone. Our earnings release, the related prepared remarks document, and the link to our third quarter 2023 Form 10-Q, have all been posted on the homepage of our investor relations website. They contain the key financial information and supporting data relative to our third quarter financial results and business update, as well as our Q4 and fiscal year 2023 outlook and the key underlying quantitative and qualitative assumptions. Today's presentation contains forward-looking information. Important factors that may affect our future results are discussed in our public filings. Forward-looking statements are based upon our view of the business as of today, and Ansys undertakes no obligation to update any such information. During this call, we will be referring to non-GAAP financial measures, unless otherwise stated. A discussion of the various items that are excluded and the reconciliations of GAAP to the comparable non-GAAP financial measures are included in our earnings release materials. I would now like to turn the call over to our President and CEO, Ajei Gopal, for his opening remarks. Ajei? Good morning, everyone, and thank you for joining us today. In Q3, Ansys was on track to deliver against our third quarter guidance commitments when we were notified by the U.S. Department of Commerce of additional restrictions on sales to certain Chinese entities, as well as incremental approval processes and export restrictions on the sale of some Ansys products and services to entities located in China. These incremental approval processes take the form of additional vetting of prospects located in China. They introduce delays in transacting certain orders for prospects in China, resulting in the potential loss or deferral of some business that was scheduled to be closed in Q3. As a result, we came in below our expectations in both ACV and revenue for the quarter. Despite these developments, Ansys delivered a strong quarter, marked by double-digit growth in ACV. These updated export restrictions and incremental processes will mute Ansys's growth in China in 2023 and 2024, after which we expect our business in China to return to steady state growth. Nicole will give the specifics in a few minutes. It is important to remember that China represents only a small portion of our overall business. Given the strength of our business worldwide, I am confident in our ability to execute on our short and long-term objectives. Looking back on Q3, high-tech and semiconductor, aerospace and defense, and automotive and ground transportation were our top contributing industries. We saw strength in Q3 for ACV across all customer types, and our geographical performance was as expected, with the exception of China, as I already mentioned. Our largest contract in the quarter was a 3-year, eight-figure agreement with a North American aerospace and defense company that has used our solutions for years. The new agreement with this customer increases the number of users of Ansys technology. Thanks in part to Ansys technology, the customer has secured a key contract with the U.S. government. On our calls, I typically highlight a specific aspect of our business. I have discussed the critical role that Ansys solutions play in sustainability initiatives, as well as in the development of next-generation semiconductors, and how Ansys simulation is driving fundamental changes in the commercial aerospace industry. A similar simulation-powered transformation is taking place in the automotive industry, which is where I'd like to focus today's discussion. As you are aware, automotive and ground transportation is our third-largest industry, and Ansys is already working with over 50 of the top transportation OEMs around the world and 93 of the top 100 global automotive suppliers. Yet with all the innovation taking place within the sector, there is still significant room for Ansys to grow through more users, more products, and more computations. Ansys simulation is helping to usher in a new era of mobility through three key areas: electrification, autonomy and driver assistance, and software-defined vehicles. Of course, we are also driving continued innovation in vehicle development. I'll walk through each with some pertinent examples. The first area of profound change in the industry is around electrification. From battery management systems to fuel cells to integrated electrified powertrain systems, Ansys solutions are enabling rapid electric vehicle innovation from the components to the system levels. For example, our multiphysics battery simulation solutions provide interdisciplinary expertise at different scales. Ansys solutions for powertrain electrification provide a complete development flow from the system level to the software level, including system simulation, model-based development, and functional safety analysis. Using Ansys, customers have reduced battery project costs by up to 30% and design cycle times by up to 50%. Porsche Motorsport turns to Ansys simulation to speed up development time for its electric race car. With Ansys, the engineers from the TAG Heuer Porsche Formula E Team optimize their car's inverter and e-motor efficiency and then test it on a virtual racetrack. Simulation has proved to be pivotal for managing the battery's temperature and maximizing the car's performance within these demanding driving conditions. The next area I'd like to discuss is autonomy and driver-assistance systems. While the road to truly autonomous vehicles may be a long one, the simulation-driven advances required to bring this technology to market are leading to safer driving experiences today. Using Ansys, customers are improving advanced driver-assistance systems, also known as ADAS. For example, sensors play a critical role in providing human drivers, as well as autonomous systems, the data they need to make intelligent and safe decisions. Ansys solutions for Lidar, Radar, and cameras enable engineers to improve sensor performance, to determine optimal vehicle integration configurations, and to examine their behavior across a range of operational scenarios. Ansys customer, Continental, is using Ansys simulation for optical integration analysis and corner case studies that are integral to the development and validation of new sensors and computer vision algorithms. Ansys simulation is helping Continental to slash development time and physical testing, while reducing costs and freeing up engineering resources. The next area I would like to discuss is the development of software-defined vehicles. These automobiles have features that are primarily enabled through software and can be remotely upgraded over the car's lifetime. The market for software-defined vehicles is expected to grow from about $35 billion today to over $200 billion early in the next decade, thanks to software-driven features for safety, infotainment, and efficiency. Ansys solutions enable these feature-rich functions through model-based, certified embedded software and code generation, electronics reliability, and connectivity systems. These advances enable engineers to meet industry safety requirements faster than manual approaches and at lower costs. Long-time Ansys customer, ZF Group, is using our solutions to reduce the complexity of analysis for embedded systems. These embedded systems must be capable of operating reliably and safely under challenging environmental conditions. In the past, ZF used different tools for failure modes and effects analysis and for fault tree analysis. By standardizing on Ansys, the company reports saving hundreds of hours on each of the many analysis projects they run. The final area I would like to mention is in vehicle development. This is a space in which Ansys has a long history, as we play a key role in such critical areas as aerodynamics, lighting, crash safety analysis, and material management for sustainability initiatives. For example, Ansys LS-DYNA simulates crash scenarios and accurately predicts the impact on the vehicle, as well as the driver and passengers, thanks to human body models. Our materials intelligence solutions enable vehicle lightweighting efforts while assessing the environmental impact of materials throughout their life cycle. With the growth of lighting technologies and headlamps and tail lamps, Ansys lighting solutions have reduced the need for prototypes. One of our key contracts in the quarter was with a global automotive OEM based in Europe that has standardized on Ansys for virtual crash testing and impact analysis, replacing a competitive product. The company is leveraging Ansys simulation to help meet its goal of reducing engineering lead time by 30% and cutting the costs of physical testing by 50%. In Q3, we also signed a contract with a leading provider of automotive seating products. This longtime customer has expanded its use of Ansys Multiphysics solutions from explicit dynamics, electromagnetics, and functional safety to include mechanical, fluids, and high-performance computing. This expanded Ansys footprint benefits a number of projects. For example, enabling the company to simulate the fan noise from its ventilated seats. With Ansys technology, this automotive leader has dramatically cut development costs, reduced simulation time from days to hours, and enabled the company to respond faster and more accurately to customer requests for quotes. I'd also like to mention a different kind of customer win. I'm excited to congratulate Ansys customer, Oracle Red Bull Racing, on an amazing season, which culminated in capturing the 2023 Formula One World Constructors and World Drivers Championships. Using Ansys solutions, the team simulated airflow interactions with differing shapes of the car's surface, while also analyzing engine cooling intakes. As a result, the team drove away with the championship. Moving beyond the automotive industry, I'm excited to announce that we have enrolled our 2,000th company as a member of the Ansys Startup Program. As I've said in the past, while members of our startup program represent a small piece of our overall business, they're amongst the most innovative users of our products. With the program's strong graduation rates, more and more expand their use of Ansys technology and become larger Ansys customers. I'm also proud that Ansys has received a number of awards this quarter related to employee engagement and satisfaction from organizations such as Newsweek, Best Workplaces in Europe, and US News & World Report. These recognitions are a testament to our supportive, diverse, and inclusive culture, as well as the quality of our team around the world. In summary, Q3 was marked by an external challenge that impacted our ability to process certain transactions. Our global business remains strong, and the demand for Ansys technology is robust. That's because companies across industries rely on Ansys to solve the most challenging problems that they're facing. These global organizations understand that Ansys's expertise and deep and broad portfolio of multiphysics solutions can help them solve their key product and business challenges. That, combined with our best-in-class product portfolio, our deep customer relationships, and the ongoing strength of our pipeline, give me confidence in our ability to meet our commitments. And with that, I will turn the call over to Nicole. Nicole? Thank you, Ajei. Good morning, everyone. Let me take a few minutes to add some perspective on our third quarter financial performance and provide context for our outlook and assumptions for Q4 and full year 2023. Our ability to deliver double-digit ACV constant currency growth in Q3, despite the disruption from the changes required for export compliance in China, is a testament to the resilience of our business model. Our highly recurring business model, significant base of renewals, market-leading simulation portfolio, and deep customer relationships create a strong financial foundation and contribute to unwavering demand for our product. As a result, we are raising our full-year ACV and revenue guidance for operational momentum in the business. This momentum is offset by impacts of incremental approval processes and export restrictions in China and foreign exchange headwinds. I'll provide additional details on our guidance in a few minutes. Now, let me discuss some of our Q3 financial highlights. Beginning with ACV, we delivered $457.5 million in Q3, which grew 12% year-over-year, or 10% in constant currency. Our growth was broad-based across customer types, geographic regions, and most industries. ACV from recurring sources grew 13%, or 16% in constant currency, on a trailing 12-month basis and represented 83% of the total. This momentum in recurring ACV growth is driven by the strong annuity created by our ongoing shift towards subscription lease licenses. This annuity creates resiliency and durability in our business model. It provides a robust foundation for near and long-term growth, which enables us to navigate the impact of business disruptions that can occur from time to time, like the impact of the changes to export compliance that we saw in Q3. Q3 total revenue was $458.8 million, and was down 3%, or down 4% in constant currency, primarily due to ASC 606 dynamics, given the quarterly mix of license types that generate upfront revenue recognition, which we previously discussed on our August earnings call and detailed in our Q2 prepared remarks document. During the third quarter, both ACV and revenue were below expectations, as incremental approval processes and export restrictions on certain prospects in China created a $20 million headwind. When we set our guidance range, we guide based on the pipeline and book of business that we see in front of us. During the third quarter, we saw an impact on the contracts we expected to sign due to incremental approval processes and export restrictions that were not contemplated in our Q3 guidance provided in August. As a result, our Q3 ACV and revenue results were below our guidance. Without this impact, we would have landed near the high end of our third quarter guidance on ACV and above the high end of our revenue guidance. We have a very strong track record of achieving our guidance, and it was unfortunate that we were not able to achieve our guidance for ACV and revenue this quarter. We continue to have a broad and diverse business model and a strong financial foundation with significant recurring ACV. We remain optimistic on our future growth. Despite the disruption in Q3, our year-to-date ACV performance was robust, with ACV growing double-digit in constant currency at 12% and broad-based growth across geographies and customer types.... We closed the quarter with a total balance of GAAP deferred revenue and backlog of $1.2 billion, which grew 9% year-over-year. During the quarter, we continued to deliver a business model with strong operating leverage. This yielded a solid third quarter gross margin of 91% and an operating margin of 34.1%, which was better than our guidance. Operating margin was positively impacted by lower expenses and the timing of some investments. The result was third quarter EPS of $1.41, which was also better than our guidance. Similar to operating margin, EPS benefited from lower expenses and the timing of some investments. Our effective tax rate in the third quarter was 17.5%, which is the rate that we expect for the remainder of 2023. Our unlevered operating cash flow in the third quarter totaled $170.6 million, and was in line with expectations, and continues to be supported by strong cash collections. We ended the quarter with $640 million of cash and short-term investments on the balance sheet. Now, let me turn to the topic of guidance. Looking to the remainder of the year, the business continues to show momentum, which bolsters our confidence in achieving our 2023 and long-term outlooks. Let me start with our full-year 2023 guidance. We are updating our full-year ACV outlook to a range of $2.243 billion-$2.288 billion, which represents growth of 10.4%-12.6%, or 11%-13.3% in constant currency. We continue to see our ACV growth driven by our broad-based customer demand for our products, and as a result, we are operationally increasing our full year ACV by $11 million relative to our August guidance. This momentum was offset by $25 million of the impact from additional export restrictions and approval processes for certain prospects in China, and $28 million of additional foreign exchange headwinds. This $25 million China export restriction and process headwinds will mute Ansys's growth in China in 2023, and includes some timing and loss of business impact. Despite the impact from China, our ACV growth outlook for the full year is 12% constant currency growth at the midpoint, which is on our financial model of 12% ACV growth, including tuck-in M&A. We are updating our revenue outlook to a range of $2.234 billion-$2.284 billion, which is growth of 7.8%-10.2%, or 8.4%-10.9% in constant currency. We are operationally increasing our full year revenue by $15 million relative to our August guidance. This momentum was offset by $25 million of impact from additional export restrictions and approval processes for certain prospects in China, and $23 million of additional foreign exchange headwinds. We expect our full year EPS to be in the range of $8.34-$8.75. Relative to our August guidance, our updated full year EPS contemplates $0.25 of operational improvement, which was offset by $0.21 of impact from additional export restrictions and approval processes for certain prospects in China, and $0.13 of additional foreign exchange headwinds. Now, let me turn to our full year unlevered operating cash flow guidance. As a reminder, we now provide guidance for unlevered operating cash flow as it aligns to the long-term cumulative $3 billion cash flow outlook we provided at our 2022 investor update. Our 2023 guidance is a range of $705 million-$735 million, and relative to our August guidance, includes a $10 million increase from operational improvement, which was offset by $7 million of impact from additional export restrictions and approval processes for certain prospects in China, and $7 million of additional foreign exchange headwinds. The underlying operating leverage in our business remains robust. Further details on the reconciliation of GAAP operating cash flow to the comparable non-GAAP unlevered operating cash flow are contained in our prepared remarks document. Although we experienced an unexpected impact in Q3 from changes in export compliance, our underlying model remains strong. This is driven by robust market growth, a best-in-class portfolio, deep customer relationships, and a highly recurring business model with strong operating leverage. Our current full year 2023 guidance midpoint implies a two-year unlevered operating cash flow CAGR of 14% since 2021. This reflects the strong top-line momentum and operating leverage, where unlevered operating cash flow growth outpaces ACV growth. Now, let me turn to guidance for Q4. For the fourth quarter, we expect ACV in the range of $897.8 million-$942.8 million. Turning to the P&L, we expect Q4 revenue in the range of $769.2 million-$819.2 million. We expect Q4 operating margin in the range of 48.9%-51.2%, and EPS in the range of $3.48-$3.89. Given the robust renewal business in our fourth quarter, we are confident in achieving our Q4 guidance. Our core simulation market is strong and diversified, with consistent demand from our customers as they encounter increasingly complex product development challenges. Despite the headwinds we expect to see from the impact of additional export restrictions and approval processes for certain prospects in China, we have confidence in our long-term model. As a result, in February, we expect to initiate full year 2024 guidance with ACV of around 10% constant currency growth, excluding tuck-in M&A, which is consistent with our model. Within this outlook, we are absorbing the impact of the updated export restrictions and incremental processes related to certain prospects located in China, which will mute Ansys' ACV and revenue growth in China in 2024. We continue to focus our efforts on areas of opportunity and innovation to ensure continued growth. As a result, we also reaffirm our long-term outlook from 2022 to 2025 of 12% constant currency ACV growth, including tuck-in M&A, and $3 billion of cumulative unlevered operating cash flow. Further details around specific currency rates and other assumptions that have been factored into our outlook for 2023 and Q4 are contained in the prepared remarks document. Ansys' business is highly resilient, with a diverse and broad customer base, market-leading portfolio, deep customer relationships, and recurring financial model. To the entire Ansys team, thank you for your dedication and hard work in supporting our customers and delivering world-class innovation. We saw some complexity during the quarter, and we executed well in a challenging environment. I remain confident in our ability to deliver our 2023 and long-term outlooks while working alongside the best team in the industry. Operator, we will now open the phone lines to take questions. Ladies and gentlemen, at this time, we are ready to begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In order to give as many people as possible the opportunity to ask questions, we do ask that you please limit yourselves to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jay Vleeschhouwer of Griffin Securities. Please go ahead. Thank you. Good morning. Let's start with China. With respect to the enhanced processes that you refer to in the prepared remarks and the 10-Q, could you elaborate on what that means? What was Ansys not doing, perhaps sufficiently internally, to vet the customers? And would it be fair to say that the Ansys products in question were not solely EDA products? In other words, this isn't just product that we're going to Chinese semis, but other non-EDA products as well, to perhaps other end customers in China. That's my follow-up. Hey, good morning, Jay. So let me take that. There's clearly a bit of a misunderstanding in your question, so let me just try to sort of lay this out so that you have more clarity on the context here. So as you know, in the context of the broader U.S. foreign policy shifts, the Department of Commerce is engaging both privately and publicly with companies to apply export controls to China of certain technologies. Of course, elite high tech companies are facing new restrictions. And given the capabilities of Ansys products and their broad applicability across industries and across use cases, we have implemented an additional layer of vetting for prospects located in China to comply with the incremental requirements from the U.S. Department of Commerce. So let me just sort of walk through how the quarter unfolded. So we were on track to delivering against our third quarter guidance commitments when the Commerce Department informed us of these additional restrictions, as well as incremental approval processes, on the sale of certain Ansys products to entities located in China. And so we immediately complied. We suspended processing orders from those affected prospects that were located in China, pending the resolution of some ambiguities that were related to the process. And we worked with the Commerce Department, but unfortunately, by the time we received clarity on the incremental vetting that was required above and beyond our existing compliance program, it was the last business day of Q3, and that made it too late to complete our vetting process within the quarter. Now, moving forward, we have internally aligned our business operations to adjust to these new vetting requirements, and the result is an increase in the time that it takes us to process transactions with certain prospects that are located in China. But as I said in the call, you know, despite these developments related to prospects in China, the Ansys business overall is performing well. We delivered a strong quarter, marked by double-digit growth in ACV, and we continue to see robust and broad-based demands for our technologies and the products. And given the critical role that our solutions play in our customers' product development and initiatives, and the strength of the underlying foundations of our global business, we're confident in our ability to execute against our short and our long-term objectives. Okay. With respect to guidance for Q4 and the initial thoughts on next year, was the operational raise for Q4, both renewals business, in other words, you're expecting some, higher ACV in the renewals and new, new business, perhaps some new logos? And then for the 10% for next year, how are you thinking about the contribution from the new, AI/ML enhanced products, which are beginning to deploy as per the, the schedule you gave back in July? So, Jay, maybe I'll just take the Q4 guidance question, and then we can add some more color on your last part of your question. So although we experienced an unexpected impact from changes in export compliance in China, you know, the underlying model remains strong, as Ajei said. And as a testament to this, year to date, we achieved 12% ACV growth in constant currency, which is, of course, on our model. Our business is very resilient. As you know, 80% of it comes from recurring sources. And as we look to Q4, the robust renewal business that we see in the fourth quarter gives us confidence in achieving our guidance. And maybe just to add, you know, an additional data point to add some color as to where we stand as of October. As of the end of October, we have just under half the business in our Q4 outlook already committed. So despite the disruption from changes required for export compliance in China, we're continuing to see the operational momentum in the rest of our business. That's what gave us the confidence in raising the full year ACV by $11 million compared to the August guidance, which of course, was offset by the $25 million of impact from additional restrictions and processes in our business in China, and of course, the foreign exchange impact of $28 million. But outside of this impact, we continue to see momentum across the business, and we haven't seen any notable changes in customer activity. Thank you very much. The next question comes from Joe Vruwink from Baird. Please go ahead. Great. Hi, everyone. I also wanted to start on the 10% growth outlook for 2024. I'm wondering, how did you go about ring-fencing the potential risk from China export controls into next year? Is it just kind of run rating the 2023 experience, or are you layering on incremental assumptions? And then I was hoping you could maybe be a bit more explicit on just the total ACV exposure from China, and then a sense of maybe how much business is assumed not to transact within the 2024 initial outlook. Sure, happy to do that. So, why don't I kind of take you through the Q3 impact, how we kind of think that impacts 2023, and what the flow-through impact to 2024 in the long term will be, to kind of try to holistically answer some of your questions. But just to kind of give some overall context, going into that, in terms of your question around China exposure overall. You know, our business is broad and diverse, and as you know, we're diversified across many industries and geographies and customer types. And our business in China is around 5% of ACV, both on a trailing twelve-month basis and full year 2022. So it's a relatively smaller portion of the portfolio. Now, in the third quarter, you know, again, our ability to deliver that double-digit constant currency growth in the quarter, despite the disruptions we saw, is really a testament to the resilience of our business model, which, as we talk about 2024, is what gives us the confidence in our outlook. Now, the third quarter results were impacted by those incremental vetting processes and restrictions to certain prospects in China. That created about a $20 million headwind to ACV in revenue, which was not contemplated in our third quarter guidance. But without this impact, we would have landed near the high end of our third quarter guidance range on ACV and above the high end of our revenue guidance. Now we expect that the majority of the $20 million to be a timing shift with a small portion of being lost in business. So as you extend into our 2023 outlook, embedded in the 2023 outlook, it does reflect that incremental operational performance and the momentum that we've seen in the business overall, which is, of course, offset by the impact from the export compliance changes. But for the full year in 2023, we expect the impact from incremental export the restrictions in the vetting processes in China to have a $25 million impact on ACV and revenue. And we believe, just to kind of give a rough sizing, about a third of that is loss of business, and two thirds of that would be an expected timing shift from the elongated transaction cycle. So the effect of this will mute 2023 growth in China. Now, as we look to the future, the incremental export restrictions and vetting processes, we also believe will mute China's ANSYS' ACV and revenue growth in China in 2024. And we expect that impact, just, since you asked about sizing, we expect it to be about $10 million-$30 million on both ACV and revenue in the full year in 2024. And, you know, as the majority of that headwind will be loss of business, we would expect the 2024 cash impact to be similar in that range as well. Now, despite these headwinds, in February, we still expect to initiate full year 2024 guidance on our model, with ACV around 10% constant currency growth, excluding tuck-in M&A. Really, the double-digit performance we saw year to date, the strong pipeline and momentum in our business, all of these really give us the confidence, not only in our 2024 outlook, but in our ability to achieve our long-term outlook, which of course, was a 12% constant currency ACV growth, including tuck-in M&A, and $3 billion of cumulative unlevered operating cash flows from 2022 to 2025. And if I could just jump in a little bit, just to talk, you know, to give you some color about the broader environment that we're working with. I mean, I have an opportunity as part of my job to talk to customers around the world, to talk to channel partners around the world. And the demand for our products and our services, you know, continues to be, as you know, as strong as ever or stronger. And, you know, just given the nature of our technology, we feel very confident in our ability to solve some of our customers' most challenging problems. So we feel very good about our business. Obviously, and Nicole walks through the impact of the China additional approval processes that we just went through. And just on that point, Ajei, and that was great, Nicole. Thank you. You know, organic growth, and I'll say ex China, it was better than your formal framework in 2022. It's been better year to date. I guess, how do you think about the recent drivers of outperformance relative to your midterm plan and whether those may be factored positively in 2024? Well, I think one of the key things that we've been doing very clearly and explicitly in our strategy is to be focusing on some important technologies that continue to improve our product capabilities, and as well as being very explicit about going after some of these high growth or next generation use cases like electrification. So if you look at the nature of our technology, we can support those use cases. We're in a position to support our customers as they're thinking about these next-generation use cases, and that's those are the investments that we've been making in our product portfolio. And I talked about, last time I talked about, you know, these five broad areas that we're investing in, you know, the numerics of our business, HPC capabilities, AI capabilities, of course, cloud, as well as digital engineering. And all of those are broad techniques that we use across our portfolio and advantage our portfolio. So the investment, investments that we're making are paying off, as we support our customers. Thank you. The next question comes from Jason Celino of KeyBanc Capital Markets. Please go ahead. Hey, thanks for taking my question. Just a couple on the China export restrictions. Ajei, I hear you on the news. You know, optically, I think we're all a little surprised because it appears others may not be affected. Do you know if other companies were approached as well? So obviously, you know, we don't know who else has been approached privately, because these conversations are taking place between the Commerce Department, both privately as well as publicly. So I can't really comment on who else has been approached. But the reality, as I said before, is you're seeing out there elite high-tech companies facing these new restrictions. And I would imagine that anyone who has products like Ansys, which are highly capable products, which are broad-based, and applicable across industries and across use cases, might have similar discussions. But I obviously am not in a position to comment about those. I don't know. Okay. And then just a quick one for Nicole. On the types of revenue that was affected, was it more perpetual or lease? Sorry, just a modeling type question. Sure. It was a combination of both. So as you know, our business model has been shifting to subscription lease over the long term, and this year in particular, you've seen just generally outside of this quarter a faster shift to lease. And so there was a mix of both that were impacted in the quarter. Our next question- Operator, we can take the next. Our next question comes from Ken Wong of Oppenheimer and Company. Please go ahead. Great, thanks for taking my question. Maybe, maybe first off for you, Ajei, maybe change gears a little bit. Just wanted to, to ask about the auto industry. You know, there has been some concern that maybe with the strike, that that could have caused some, you know, some, some, you know, deal slippage or anything like that. Just wondering if you saw any, any erosion in your auto business at all. Hey, thanks for the question, Ken. So with auto, the broad-based, and I've said this multiple times, and I'll say it again: I mean, we're tied to the overall R&D cycle. And the broad-based conversations that are taking place with our automotive customers are around electrification, around autonomy, and those continue, those conversations and those design imperatives continue unabated as far as our customers are concerned. So that's really driving our business. And then, of course, we, as I mentioned in the script, we also have, you know, the traditional business, crash testing, external airflow, things like that, which we've been doing for a number of years. So all of that continues. It's really design, you know, it's really design-driven, not manufacturing driven. The other important thing to consider and realize is that car companies and automotive companies, frankly, all industries, everyone's looking at reducing cycle time. And so as you start to reduce cycle time, what's really happening is many of our customers are recognizing that using digital techniques such as simulation allows them to achieve that reduction in cycle time. It allows them to effectively shift left, and that shift left reduces the time that it takes to bring innovation to market faster. And in a highly competitive world, like automotive, for example, where you have multiple new entrants coming in as well, that design cycle is of paramount importance. That's really where we are seeing the opportunity, and that's reflected in the conversations we're having with our customers. Got it. Then, Nicole, just because I don't want to be excluded from the China party. It sounds like the like, what you guys have baked into the expectations is that these deals do come back into the pipeline. As we think about 2024, is it assumed that the 2023 deals fall into 2024, or should we assume that both 2023, 2024 don't return until fiscal 2025 in terms of how you guys are embedding into your outlook? Yeah. So, you know, my reference to the 2023 impact of about two-thirds timing shift and one-third loss of business translates to 2024 as well, right? So the nature of this process is really just kind of an extension of that sales cycle, which in the current outlook, we're seeing is kind of a shift of that business to the right, if you will. But the $10 million-$30 million of headwind that we're expecting to see next year related to this specifically is our best estimate as to what would be the net loss in 2024. Okay, perfect. Thank you for the color. Mm-hmm. The next question comes from Steve Tusa of JPMorgan. Please go ahead. Hey, guys. Good morning. Good morning. Good morning. Can you just talk about what kind of— Is this a customer type issue in China, or is it, you know, more general than that? Well, this issue affects prospects who are located in China. So, you know, that's the nature of the conversation. It's the sale of prospects who are located in China. And, you know, it's to people who are performing things like R&D and some other activities in China. So it's specifically restricted to those kinds of customers or prospects. I guess, so on your ACV, it looked like electronics was, you know, kind of weaker than expected. We assumed that it was kind of focused in that, in that piece of the pie. Oh, sorry, are you talking about the industrial, the industry mix chart? I just want to make sure which document you're referring to. Exactly. Yeah. Like, what type of industry is what I'm, like, trying to just, you know, wrap my head around here a little bit. Yeah, I would say so. It is industry. It... The processes, the incremental vetting processes apply to essentially prospects in China that are regardless of industry, right? And so- Okay. There's additional restrictions that may be specific, but the incremental processes are agnostic across industry. The dynamics that you're referring to, just to kind of answer that particular question. So when you look at those industry mix charts, you know, those relative sizings of the representation by industry are all relative. So really, relative growth is more of what's driving the mix shift in those countries. And so all of our largest industries have grown, but given the strong twelve-month performance in automotive, that kind of drove the overall mix shift. So it was really about relative strength in automotive than any particular weakness in any other place. Right. That makes sense. And is this, like, Ansys specific, or is it something that, you know, they kind of cast a bit wider of a net? Obviously, there's a lot going on out there between our two countries. You know, Rockwell had some issue, I believe. Is this like, is this really Ansys specific? Again, I can't-- We don't know who the Commerce Department is engaged with because some of these conversations are private and some of these are public. So we don't really know who they're engaged with. But as I said, you know, it. You know, what we can see, what we can see what's in front of us. And I believe it just has to do with the fact that our products are very capable and are broadly applicable across industries and use cases. Right. Sorry, really quick last one. And so, specifically to follow on that point, Joe. Yeah. So the incremental vetting that we're putting in place is really that: it's an incremental vetting process that just adds a certain amount of latency to the approval process. So that's really what's happening in this context. You know, and obviously, we're just taking what we had before, which was industry standard, you know, industry standard vetting, and we've added some additional, additional, an additional layer above that. Right. And that's why it's not, it's 1% of ACV or whatever you wanna call it right now, as opposed to- Right ... it being like across the board, you know, 5% of ACV, which would be, you know, a real impairment in the ability to kind of do business over in China. Right? Correct. Yep. Yeah. Okay. All right. Thanks for all the details, guys. Good luck. ... The next question comes from Adam Borg with Stifel. Please go ahead. Hey, everyone, this is Mike Richards on for Adam Borg. Thanks for taking the question. Maybe just on the AI innovations announced last week, between SimAI and AI and AI+, and then even Ansys GPT. Maybe you guys could discuss how you guys are thinking about planning on pricing these, and, you know, what kind of pricing uplift that'll drive in the long term. Thanks. So let me sort of explain what those are, since you asked the question. But to get to your question about pricing, some of this is still being worked out in terms of exactly what we would price them, but I can give you some philosophy as we go through this. So obviously, AI ML is one of our critical pillars that we are focused on across our portfolio. In Q2, we released a beta version of our support technology called Ansys GPT. That's based on GPT-4, and that's a virtual multilingual support tool that can answer customers' technical questions by retrieving and summarizing Ansys information. We believe that that will provide answers to the most frequently asked questions that customers have in a matter of seconds. And obviously, it's going to be available 24/7. So that's the first area. The second thing that we announced last week is this new generation of products called the AI+ products, and those are building on the AI capabilities that we have available today. So these are new products that will be packaged and priced accordingly. And these new AI+ products include things like Ansys Granta AI+, optiSLang AI+. And these new products will incorporate and extend some of the AI features that we already have within these products. The SimAI technology that we talked about, this is a brand-new offering that is a cloud. It's a cloud-native AI platform that will augment our 3D physics simulation capabilities. And it's essentially one where our customers will be able to do things like, you know, design analysis optimization by using simulation results to train an AI model to predict new design configurations using deep learning techniques. And so this can predict performance across design changes, geometry changes, and so forth. It's really a physics-neutral technology. It applies across industry segments, and we can leverage, we can leverage, you know, simulation data, whether it originates from Ansys or from anyone else for that matter. So this is, this is, again, a new product that will be priced accordingly. The actual pricing has not been announced yet. Thank you. Operator, we have time for one more question. Our last question comes from Tyler Radke from Citi. Please go ahead. Yeah, thanks for taking the question. Just wanted to follow up on the international performance. You know, looked like Germany in particular was a bit weaker. It sounded like you are seeing pretty resilient trends in autos, but you know, wasn't sure if that was a tougher compare or just anything to call out in Europe. Sure. So, as just one reminder on the overall revenue results that you see, you see in the results, we saw a lot of impact from the ASC 606 accounting change. And so I'll answer to your question specifically related to that, but also kind of try to give some broader context around ACV, because as you recall, this quarter, ACV and revenue are highly disconnected. And your Germany answer or your Germany question is actually a prime example of the lease accounting dynamics that played out, creating that year-over-year headwind. So just to use that as an example, in Q3 2022, Germany saw exceptionally robust revenue growth. Revenue growth in Germany was 102% at constant currency. Now, the growth last year was a function of both strong ACV growth, but also the underlying accounting associated with the nature of the mix of transactions in that quarter. And so, I think that just gives you kind of a microcosm in Germany being a relatively larger portion of Europe. That was a dynamic that affected overall revenue growth. But when you zoom out, and although we don't give, we don't typically provide ACV by geography, but EMEA had good growth on ACV in Q3, and which was really reflective of the region's operational stability. And just to give some kind of color to the dynamics in, and the underlying industry performance there, high tech, aerospace and defense, industrial equipment industries, all were strong in EMEA. The quarter was highlighted by sales to a global semiconductor manufacturer and a supplier. We also saw a multi-year deal with a research and development company in the A&D industry. They provided more users within its growing simulation team to access our solutions. And then we also had a multi-year deal with the European pump manufacturer that added more global users, more products, more physics, and HPC capacity, so more computation. So the revenue results are, you know, really emblematic of the dynamics that we talked about and expected in August. But the underlying ACV performance in the region is quite strong. Okay, that's helpful. And just to follow up on the long term- Yeah, and just to- Yeah. Yeah, just to add to what Nicole was saying, I mean, I think that when I talk about my own experiences with customers, sort of anecdotally, as I said before, I have an opportunity to talk to customers and channel partners. And we're really seeing strength, as Nicole said, across multiple industries and across also the different market segments. And in particular, when I talk to channel partners who focus more at the lower end, we're seeing a lot of activity. And obviously, at our enterprise customers, where we directly engage, we're seeing a lot of activity. So there's a lot of design work and R&D efforts that are taking place across these industries, across the world. We believe, and we're excited about our ability to support our customers in those spaces. That's helpful. And- Did Tyler, you had a follow-up question? Yeah, I did. I did. Yeah, thank you. So just as I think about the 2024 comments and your helpful, you know, breakout of the China impacts in terms of, you know, I think two-thirds being just delayed business. Should we think about that all happening in 2024? And then as I think about your reiteration of your long-term targets, I guess if you could just kind of unpack the puts and takes, and do you assume to kind of have the China business normalize and get that full two-thirds through the long-term targets? Thank you. Yeah. Yeah. I mean, I'd say to, to... That when you, when you look underneath—So as we said, we, we expect to initiate in 2024, in February in 2024, at, on the model, so 10% constant currency growth, excluding tuck-in M&A. Now, the, the impact of what we're estimating to be dropout, that we are kind of overcoming in that underlying, model, is the $10 million-$30 million of ACV and revenue. Now, throughout, throughout the year, you know, there will be—there's some, there's some shift in timing from this year to next year, and next year to the year after. But kind of that just is like the permanent shift that we would expect underneath the covers. But in terms of the kind of headwind, which is that we'd be wrapping on coming out of 2024, it would be that $10 million-$30 million. Okay, thank you. Mm-hmm. That's all the time we have today. I will turn it over to Ajei for some closing remarks. Thank you, Kelsey. With our market-leading product portfolio and strong pipeline, Ansys is well positioned to meet our commitments. I want to thank my colleagues around the world for their continued dedication to Ansys. I want to thank our channel partners, and I want to thank, of course, our global customer base. Thank you for your time today, and have a great day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.