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Executives

James E. Cashman - Chief Executive Officer, President and Director

Maria T. Shields - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance & Administration

Analysts

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division

Richard H. Davis - Canaccord Genuity, Research Division

Blair Abernethy - Stifel, Nicolaus & Co., Inc., Research Division

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Daniel T. Cummins - ThinkEquity LLC, Research Division

Steven R. Koenig - Longbow Research LLC

Mark W. Schappel - The Benchmark Company, LLC, Research Division

Perry Huang - Goldman Sachs Group Inc., Research Division

Jason Rogers

Barbara Coffey - Brigantine Advisors

Ross MacMillan - Jefferies & Company, Inc., Research Division

Ansys (ANSS) Q1 2012 Earnings Call May 3, 2012 10:30 AM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS' First Quarter 2012 Conference Call. With us today are Mr. Jim Cashman, President and Chief Executive Officer; Maria Shields, Chief Financial Officer. For your information, today's conference is being recorded. At this time, I would like to turn the conference call over to Mr. Jim Cashman for some opening remarks.

James E. Cashman

Okay. Good morning, and again, thank you, everyone, for joining us to discuss ANSYS' 2012 first quarter financial results. So consistent with the standard protocol we've been keeping, all of the general information and key topics relative to Q1's business performance and our 2012 outlook are included within this morning's earnings release and in the prepared remarks document that we posted on the homepage of our Investor Relations website this morning.

So with that, I'll introduce my cohort here, Maria Shields, our CFO, who will go through our Safe Harbor Statement. So Maria?

Maria T. Shields

Okay. Thanks, Jim. Good morning, everyone. I'd just like to remind you that in addition to any risks and uncertainties that we highlight during the course of this call, important factors that may affect our future results are discussed at length in our public filings with the SEC, all of which are also available via our website. Additionally, the company's reported results should not be considered an indication of future performance as there are risks and uncertainties that could impact our business in the future. These statements are based upon our view of the business as of today and ANSYS undertakes no obligation to update any such information, unless we do so in a public forum. During the course of this call and in the prepared remarks, we'll be making reference to non-GAAP financial measures. A discussion of the various items that are excluded and a full reconciliation of GAAP to comparable non-GAAP financial measures are included in this morning's earnings release materials and the related Form 8-K.

So Jim, I'll turn it back over to you.

James E. Cashman

Okay, great. Thanks. So before we get started with the Q&A, I'd like to briefly underscore a few important highlights regarding our Q1 results and the continued commitment to delivering our 2012 outlook. So let me begin by saying Q1 was a solid quarter on many fronts. I guess from my perspective the most important aspect of the performance for Q1 was that despite some challenges, we continued an important multiyear trend for us to the company and the management team, and we delivered on those key commitments. So both revenue and earnings were in line with the range that we have guided on coming into the quarter.

In addition, just hitting some highlights here, we achieved double-digit revenue growth in all 3 major geographies as well as double-digit growth in our software license and our maintenance and service businesses. The Apache financial results were slightly ahead of our projections, and we made good progress in our integration efforts, but of course, there's a lot more work ahead of us. Our recurring revenue went to 72%, our operating margins remained strong at 50%, our deferred revenue grew to an all-time high of $299 million. We generated $83.6 million in operating cash flows. And on the hiring front, as we have mentioned on previous calls, we added a net 40-plus new employees for the quarter, and there's more planned in Q2 in the second half of 2012.

So with that, there are many positive aspects in the quarter. In addition to that, including strong revenue performance in Germany and North America, most notably. And then as always, there were some isolated sales execution issues that impacted the quarter and have been the top priority for us in Q2 and the remainder of 2012.

Our industry composition continues to be diverse while exhibiting particular strengths in a few sectors like automotive, aerospace, energy, industrial equipment and electronics. We added new customers and also continued to see new sales and strong renewals at our existing account base, where we're in virtually all of the top 100 industrial companies in the world. Most importantly, this was accomplished while we maintained the core tenets of our long-term vision, and it was supported by an environment where our customers that just can't afford to compromise on the depth, breadth or quality of the simulation solutions that they're using in the processes to solve their own complex design challenges.

So the result of this is as we look forward to the remainder of 2012, we're slightly raising and tightening our range. This consists of maintaining the upper end of our range while absorbing some minor additional currency impacts. We're also raising the floor of our previous guidance. And so netting all this out, we will remain committed to our full year outlook on non-GAAP earnings and the revenue for 2012, with revenues in the range of $810 million to $830 million in revenue, and earnings in the range of $2.78 to $2.87. And for Q2, we're targeting non-GAAP revenues in the range of $192 million to $199 million, and EPS in the range of $0.66 to $0.69.

So with all that to just kind of highlight and bracket the things, we'll now open the phone lines to any questions that you may have.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Steve Ashley from Robert W Baird.

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

I'm surprised by this, but I wonder if you could give us some more color on the sales issues you talked about, where they were and maybe a little bit more color on what they were.

James E. Cashman

Well, I mean, the only thing is -- I mean, first of all, I mean, for the last 10 years, every quarter, we've talked about the areas that we're going to continue to focus on and raising all those levels. But we did mention in the other commentary that for instance, in Japan, yes, there were some macro issues, there were some things related around the electronics sector and there were some things that we felt that we could turn the gain up on in terms of execution, so nothing earthshaking. It's just kind of the standard process of continuing to grow and reenergize a business on an ongoing basis. So I mean, it's really kind of that. And we mentioned -- I think we probably mentioned the U.K. but obviously, there are some things going on there with some of the austerity measures and getting there -- the fiscal house in order, overall. But that tends to put a dampening effect, which does hit in the short term. On the other hand, we talked about a variety of pockets of strength. So if it's really that same litany, where there's always areas that are performing well and you want to turn the gain up on that, and other where you sit there and say, "Hey, we think there's opportunity for more." And that's -- so things that we continue to do behind the scenes and again, just in trying to keep us as transparent as possible, we’ll spell those out.

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Terrific. And then maybe you could comment on linearity on the quarter. I know DSOs were just a little bit higher than last year.

Maria T. Shields

Linearity. Steve, linearity is about the same.

James E. Cashman

There's no really appreciable change in linearity now on the DSOs, I mean, we can dissect, though.

Maria T. Shields

No significant changes or concerns, Steve.

Operator

Our next question comes from Jay Vleeschhouwer from Griffin Securities.

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division

Jim, in Q1, it appears that you're -- ANSYS-only growth in constant currency x the Apache acquisition was in the high single digits, and I'm wondering if you're assuming that for the remainder of the year, you can return to double-digit constant currency growth for the ANSYS business, again, excluding the Apache business.

James E. Cashman

Okay. No, no, no. I got you on that. And the first thing I'd say is that in general, we were right in line with the guidance that we set for Q1 with all the things that we saw, the various timings of major account renewals, a whole range of things that are tied in with our business. So we tied in pretty well on that. I think we did note that -- and we're not calling out any kind of a trend here. We're just noticing a piece wise of data is that even in the organic business, our lease business climbed up a bit. Now I don't -- we don't see anything anecdotally that says it's a long-term trend here. But one thing that does do is it tends to solidify longer-term revenue pattern and it tends to have a slight dampening on the short-term base. I mean, even as you go -- when you look at the organic deferred revenue, you'd see that, that grew in excess of the rates, which kind of bears all that out. Now to -- so everything kind of like pretty much as we have said. And as I said going forward into the guidance, we went into -- so the guidance is really looking at about 12% to 14% constant currency for the organic standpoint. I think that was the net crystal of what you're talking there. And in our guidance, like I mentioned, we've been absorbing additional currency impacts, so actually raising that guidance. We've also tightened the range a little bit, raised the floor. So all of that kind of plays into that 12% to 14%. But 12% to 14% constant currency organic for the year.

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division

Okay. My follow-up then is with respect to your vertical markets. Are you seeing across the verticals, including the ones you mentioned, any appreciable differences in terms of either license growth as measured in seats, or as well, are you seeing any appreciable differences by vertical in terms of lease or maintenance renewal rates?

James E. Cashman

Okay. The first question, the easiest one to address is on the lease renewal rates. Basically pretty uniform across all industries and again, staying in that mid- to high-90s kind of range that we've historically talked about. Now when you talk about the individual industry participants, there does tend to be a high correlation, of course, between the additional growth. And so those areas that are a little bit more vibrant or in stronger renewal cycles -- not renewal, but renovation cycles, you'll see that kind of rise up. So -- but I'd say that it's fairly linearly a portion to all of the industries, pretty much in relative proportion to how they've grown. I would say also, though, that the trend that we talked about on top of other calls, you will see that the HPC aspects continue to grow, so that can tied of, whether you count that as a seat or a user or things like that, that gets a little bit different. The one thing that was interesting is, if you noticed, there was one thing that I mentioned and I might have created a paradox here, but talked about the -- in an earlier question, talked about the macroeconomic and particularly, the macro in the electronics sector in Japan as being a factor in Japan. However, we talked about the relative strength in North America with double-digit growth, and they were actually quite strong in the electronics. Likewise, some of the other giants that you'd hear are the upcoming names in Electronics, Korea was particularly strong and, of course, that is heavily influenced by the electronics sector. So there's really kind of like no oddball data that would poke you in a different direction. Those industry sectors in general went well. Sometimes they were metered by a local macroeconomic sectors, but in general, it was all pretty linear. And then like I said, the foundation across all that was, regardless of the industry, the renewal rates were right in the target range that we maintain.

Operator

Our next question comes from Richard Davis from Canaccord.

Richard H. Davis - Canaccord Genuity, Research Division

Maybe kind of following up on what Jay asked. Do you have a sense on what the organic growth rate of the core ANSYS bookings are? You mentioned deferred revenues bumping up and for some companies, that's helpful; some companies, it's not. Because I don't know how much is services or maintenance renewals, but if you have something along those lines to kind of -- that would help people understand kind of how [indiscernible] change.

James E. Cashman

Well, basically, I don't have that number off the top of my head. I mean, other than the fact that we did do that check on there to make sure that yes, we're looking at -- basically, we're also in the -- if you look at the deferred revenue for organic only, it went double digits, correct into the double-digit things. So above the rate we had for the revenue originally, which also was the guidance revenue we had. So I don't have that specific number, so I don't want to take a wild stab at it. But the fact is, you could see that, that increase, that influx to lease, which I say is a slight shift right now, you see some of the other things. But it really didn't relate. One thing you mentioned there in terms of service, it didn't relate to bookings for pre-service or anything out of ordinary there because all of the renewal rates were basically in line. So really, we just see this as more of a net positive overall for the long term of the business.

Richard H. Davis - Canaccord Genuity, Research Division

Got it. And then I guess a follow-up would be, competitively, it sounded as if most of your -- again, adjusting for natural enthusiasms of private companies, but it sounds like most of the private companies with whom you competed had a pretty good quarter. Do you have a sense as to any changing customer matter competitive dynamics out there?

James E. Cashman

Well, basically, absolutely not in terms of any changing dynamic. I mean, there's always going to be a collection of people. I mean, none that compete across the broad spectrum that we have, that have individual solutions occurs. Obviously, the law, the denominator can work for or against you in that standpoint. I mean, the relative size of things. But if you look at the scale we had, everything was kind of in line with, again, in line with our guidance and in line with the normal booking and renewal and addition cycles of most of the customers, there wasn't any new competitor that popped up as being either numerically or anecdotally more on the radar screen. And frankly, we added a ton of new license business ourselves on top of it, which plays into the overall long-term strengths. So really, no significant changes. And really, if you look at the guidance, the projections and what we've been talking about, no surprises. That's just more validation.

Operator

Our next question comes from Blair Abernethy from Stifel, Nicolaus.

Blair Abernethy - Stifel, Nicolaus & Co., Inc., Research Division

Two quick things. Maria, I wondered if you could comment some more on the headcount, the 40 that you added this quarter, so where did you fill holes there and sort of what are you looking like going forward?

Maria T. Shields

Yes, the 40 are probably maybe slightly less than half of that in the sales force. The remainder of that, a scattering of R&D and some G&A.

James E. Cashman

It was across all sectors. We did hire on the platform of what we were planning on for sales. Of course, when you do that, you have a little bit of the support thing that comes along. And we did the aforementioned, things that we talked out in previous calls in terms of continuing to ramp up the R&D engine, so we had key ones there. But again, we really only go for the cream of that -- of particular standpoint. But then, underneath that, there was basically across all sectors. And I mean, you really don't go much further than look at -- go to ansys.com and look at the position list that are even publicly quoted there, and you'll see the ones that we're continuing to look for as we go forward.

Blair Abernethy - Stifel, Nicolaus & Co., Inc., Research Division

Okay, great. And the other question I had is for you, Jim. Can you give us a sense of what the magnitude of the shift was this quarter from what you would've expected to be paid up that shifted to lease? And then are you still seeing a larger trend here of major or long-time customers continue to come off lease back towards to paid up?

James E. Cashman

No, not really on the second one. On the first one, probably talking about a couple of million. Of course, that makes the -- I mean, we were still in the bit of the original revenue range. But that was that. If there was a minor, minor surprise, that was part of it. But again, that works out well for us long term. But that was about the level, the shift that we are looking at. The fact is that we're still business in hand.

Operator

Our next question comes from Sterling Auty.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

I want to start with the SG&A expenses. When you look at the spending level in the quarter, how did that come in relative to what you kind of had thought originally coming into the quarter? Because relative to the seasonal trends, it seems like it's a little bit lighter than what we would have seen.

Maria T. Shields

Yes, it's lighter, largely due to hedge.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

So just for headcount, I was going to add -- the follow-up question would be around that. How much of that was variable expenses coming in lower than seasonal?

Maria T. Shields

Yes, the other thing that -- this was probably the lowest quarter in a very long time for ANSYS where we basically had no bad debt expense.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay, okay. It is my backhanded way of asking you when you look at the commission revenue around it, I know you have the leased versus the purchased, but how was the variable expense around commissions in the quarter?

Maria T. Shields

Commissions, commissions were maybe a little bit lower just because if you don't have the salespeople here, you can't pay the commission.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay, okay. And in terms -- but to your point being light on heads, you hired into sales, where was the turnover? Was it proactive [ph]?

Maria T. Shields

Yes, some of the sales positions, particularly in Japan, while they're higher, the problem is they have long notice periods. So they're "higher" but some of them didn't start until the end of the quarter or won't start until Q2.

James E. Cashman

A couple of people we mentioned, of course, were like partial entrants into the quarter, not across the whole quarter, but they...

Maria T. Shields

Yes, not everybody started in January.

James E. Cashman

But they'll show at the whole Q2.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

So you'll start to get a little bit -- obviously, it takes a couple of quarters for them to ramp, but you'll start to get a little bit of contribution from them in the second quarter?

Maria T. Shields

Yes.

James E. Cashman

Yes, you'll start to see that.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And then on the lease versus purchase discussion, how much of that shift was just shifting in greenfield new customers coming in deciding to go lease versus purchase, versus existing customers that, as they're adding additional licenses for HPC or something else deciding to lease them instead of purchase?

James E. Cashman

The majority of it was new. I mean, anecdotally, there might have been a few a little threads of things that people were picking up something to try to -- because they can get it more quickly than they could going through the capital purchase long term. But if the majority of it was new from almost everything I could see, I don't know, Maria, do you...

Maria T. Shields

Yes. I would say it's more newer business, newer names than our long, traditional enterprise accounts.

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Okay. And last question, when you talk about electronics in Japan, is this specifically CE? We saw a lot of news with Sony cutting heads, for example. Is it more consumer electronics that...

James E. Cashman

Oh, yes, yes. I'm sorry, I didn't mean to cut you off. But yes, it definitely was more consumer electronics. And on the other hand, when I talk about some of the versions [ph] of pockets of strength, there were some of those that were driven up by strength in some other geography locales. And it somewhat mirrors the headlines you'd see about who's driving in current electronics growth and who's having a little bit more difficulty and things like that. A recent write up in The Wall Street Journal on some things along that line. So yes, it's heavily driven along those lines. It tends to be more micro in this case than macro. In other words, geography and/or even account-specific.

Operator

Our next question comes from Dan Cummins from ThinkEquity.

Daniel T. Cummins - ThinkEquity LLC, Research Division

Let's see, first question regarding the revenue guidance for Q2. The sequentials are pretty strong in the guidance, I think 4% to 7.5%. My model goes back to I think 2004, and I don't have an organic in that range. I'm just curious what you're seeing or counting on or maybe you have already seen business that wrapped over. And then I had a follow-up on your reference to customers switching preference toward term in Q1.

James E. Cashman

Okay. Yes, just give me -- Q2 is really based on that bottom-up forecast and then we got a pretty good visibility on a lot of that business. So really, this represents the grassroots that gets down to a named account kind of basis scoured by geography, and that's really what stays long and it tracks along with our earlier statements, it tracks along with the -- it dovetails nicely into the longer-term annual guidance. So it's been basically just one more piece of that in that puzzle, and hopefully, we demonstrated that over a long period of years. And then, I'm sorry, you had a second question on the time on the period licenses versus paid-up?

Daniel T. Cummins - ThinkEquity LLC, Research Division

Yes, actually. And also -- I just wanted to also clarify that all of Apache is term, ratable term?

James E. Cashman

I mean, like, yes, high 90%. I mean, I'm saying there may be a couple of odd ones out there, but it's all time-based.

Daniel T. Cummins - ThinkEquity LLC, Research Division

Okay, right. On the prepared remarks slides, Page 3, it says, “Certain customers electing to switch their Q1 orders from paid-up to lease.” I'm curious kind of what's the case color on those examples? What's coming back from your field salespeople? What do you think is the change there on the customer side?

Maria T. Shields

Choppiness where people are perhaps being a little cautious with their capital, especially in the SMB world where credit’s not always robust and cash is king. Sometimes at the begin of the quarter, they're feeling better, and maybe just like we see, choppiness is parts of the business due to macro issues, maybe they felt the same thing and they decided that they’d go with leases versus paid-ups.

James E. Cashman

Yes, and when we go into this -- I mean, we've talked over the years, we're relatively agnostic when it comes to which kind of purchase or acquisition mechanism they'll use. So a lot of times, you'll have that in the forecast that we know that an order is good, and it's coming in, but it can shift slightly. Normally, we have an idea what form it's coming in. But not all the time. Sometimes it gets down to the wire and the customers says, "We want to get a kick on this project, but we will have to acquire it in a different way." And that's kind of what we saw here. But again, relatively small. This is not -- I want to highlight, this is not the kind of impact we saw back in the 2009 or 2002 timeframes, where you could see wholesale -- and I wouldn't call it migrations, I just call it temporary dislocations that 1 year or 2 later sell themselves out. This is just one quarter of things that did amount to a, not insignificant amount of information but it's -- or business transfer, but it was something that we want to -- that we said that we needed to kind of highlight. We'll be keeping an eye on it. But at the end of the day, we're still adding those customers, they're still using the software and again, our deferred base continues to -- and recurring business tends to keep rising on that, so it certainly helps as another aspects of the business.

Operator

Our next question comes from Steve Koenig from Longbow Research.

Steven R. Koenig - Longbow Research LLC

Just a quick clarification, housekeeping before the main question, if you don't mind. Maria, the deferred revenue in the print says $282 million. So I'm just wondering the discrepancy with the $299 million. Is that the -- is the print the current deferred or what's the difference?

Maria T. Shields

Yes, the $282 million is current and then there is $17.7 million deferred revenues. It's classified on the balance sheet in the long-term section.

Steven R. Koenig - Longbow Research LLC

Okay, great. And then what I'd like to inquire about is Europe here, looks like it grew about 10% constant currency organic. You had really strong results in Germany. The PMIs in April really declined in Germany, did not look good in that country and for Europe overall. And so I'm wondering, can you comment on, number one, linearity at the start of the quarter here in April. And secondly -- particularly Germany. And then secondly, what are you assuming about Europe and your guidance going forward?

James E. Cashman

Well, the guidance is still based again on the existing relationships we have and the short-term in forecast. The linearity, no real changes to highlight on that. The key thing is, again, we've -- I've witnessed this pattern probably about 3 or 4 times where -- and usually Germany was at the epicenter of it, where people’s idea was, here is the German GDP and why are you growing way above that? It just turns out that there's a lot of multinational companies that are supplying infrastructure, energy, a whole range of things to other places in the globe, and as such, they're having a huge influx of business, and those are the ones that we continue to do quite strongly with. So while macros can be a -- I'm sorry, while the macro economy of a sub-region can be a factor for us, it's more often transcended by the markets that the companies in there are serving, because we're not really like a consumer entity within those geographies. And that's why even on the Japan situation, I mentioned the fact that you're looking at some micro -- some companies that are having broader range issues on a global competitiveness issue, and those are the ones that are being written up in the papers. So while it's certainly is a factor, it really isn't a necessary -- it isn't necessarily a barrier to the ongoing growth, again, because we're serving companies that are serving not just European markets but serving global markets.

Steven R. Koenig - Longbow Research LLC

So Jim, is it fair to say your Europe assumptions are about the same as a quarter ago?

James E. Cashman

Yes, I mean, broadly speaking, yes. I mean, there's always going to be some puts and takes across the board, but yes, it's -- and in fact, that's why it's reflective again in our guidance, which, again, we've kind of strengthened and tighten the range on for the year.

Operator

Our next question comes from Mark Schappel from Benchmark.

Mark W. Schappel - The Benchmark Company, LLC, Research Division

Jim, you recently highlighted your strategic agreement with FMC in the recent press release. I was wondering if you could just comment a little bit further on that relationship, and whether we can expect similar type of partnerships down the road?

James E. Cashman

Well, first of all, looking at those kinds of partnerships are actually things that we've been seeing in increasing amounts. With regards to these kind of announcements though, the more strategic they get, actually, the more, I don't want to say cloak and dagger, but the more secretive they get. Because the fact is, the customer you mentioned was a long-standing customer. They’ve continued to grow with us over time. And in fact, it's just another one of those things -- we've been talking about this at the Analyst Day, those long-standing customers that are actually expanding and elevating. They're starting to move up our quintessential S-curve, if you will. Now the nature of what's involved in there, the more strategic those relationships get, actually, the more secretive they become in terms of what they're doing, because more often than not, they're doing it to -- for some increase in strategic advantage and they normally don't like to talk a lot about the details of what those are. So really, it's an overall strengthening. The other thing you've mentioned is that these customers as they extend and elevate, they tend to get much broader in the product portfolios that they're using. So these are the ones -- we've talked about this where everybody loves the concept of multi-physics but it's a long time to get it built into the process of individual customers. You'll see, if you look at some of these customers, that they actually are also increasing the breadth of products and the interactivity with which they're using them. And all of those are kind of in our wheelhouse. They're really good portends for us.

Operator

Our next question comes from Perry Huang from Goldman Sachs.

Perry Huang - Goldman Sachs Group Inc., Research Division

I just wanted to ask a question around gross margins. It looks like for the full year guidance at 87% compares to the prior outlook of about 87% to 88%. Should we think about the outlook as reflecting a higher contribution from services revenue, which I think had a strong quarter sequentially, I'm sorry, or maybe lower license expectations given the shift in the quarter?

James E. Cashman

No, no, no. There's 2 primary things. You hit one, and again, these are all very minor things. But again, when you're talking about 88%, 87% -- going to 87%, that's really -- that's not a seismic -- that's not a tectonic shift. Yes, we've talked over the past few quarters about using services as a means of accelerating some of those hurdles to the advanced adoption of it. I'd say the other thing is -- so you will see that that's already incorporating into those trends that you correctly seen. The other thing is that there's another element in that gross margin line that relates to royalty content and some of the components that we might be using. So there’s going to be a small contribution of that in there. But again, nothing really apart from what we've been talking about for the last few quarters.

Perry Huang - Goldman Sachs Group Inc., Research Division

Got it. And sort of as a follow-up around HPC, is there any color that maybe you could provide around the momentum of the business in the quarter? For example, last year, I think commentary was that it was about 10% of total sales. I'm just trying to get a sense of the business momentum as we start this year.

James E. Cashman

Well, the thing we've been talking about that's kind of a metric here that seems to be growing at about 2 to 3x of the license growth, which means that people, while we're adding new users, the intensity of the previous users is continuing to increase. That means they can solve larger problem sizes and more complex things. They can get things in a lesser amount of time. So if you just extrapolate those multiples, yes, it's creeping up there. But again, if you look to the pie chart, they'd probably be largely un-differentiable because you have that smaller component growing at a larger rate. It's not like it's, oh now, it's 15% or 20%, but it just continues to edge up there, and we are seeing it continue to grow disproportionately.

Operator

Our next question comes from Jason Rogers from Great Lakes Review.

Jason Rogers

Looking at your growing cash balance, I was interested in your thoughts on both the acquisition environment, as well as share repurchases, given your recent increase in the authorization.

James E. Cashman

Well, the -- we always -- I mean, the reason we authorized that increased share count was to have more latitude on when the previous plan which was starting to get a little bit tighter. So that's always on there. And according to the same metrics that we've always talked about how we do that. With regard to the acquisition environment, of course, those -- the very large ones in the tangential spaces aren't as much, but there really are a number of tech tuck-ins and things, I think for every quarter that I can remember for over a decade, we talked about those. Those are always on the radar. Now they don't always come. I mean, it's not like you decide that you decide to do them and a week later, you announce them. So there's always a lot of work in terms of due diligence and things like that, that are going on. But that is still the number one thing that we are utilizing, that we're looking for the utilization of cash on. Secondarily is, it would be yes, we are looking at that opportunistic share repurchases. And frankly, over the last few quarters, couple of years, the -- any kind of acceleration of debt paydown has really just not been high on that pecking order of best uses of cash. So it really does get down. But there are some interesting technologies out there. Ones that we're interested that would be great acquisitions, great partners, a whole range of things. And what makes it a little bit trickier is the -- sometimes is the, in the turbulence of today and what's going on, there's always -- bridging those valuation or even defining what is a good valuation sometimes is a very interesting challenge for all sides of the equation.

Jason Rogers

And could you provide an update on your CRM system? Where you are in the implementation of that?

Maria T. Shields

Yes, that's fully implemented. And in fact, in Q1, we brought Apache on relative to order processing and financials. So they are now fully integrated from a system perspective relative to sales forecasting and ordering and processing and financial segment.

James E. Cashman

The one thing we continue to do, this is an organic system. It continues to grow with the business. And as such, yes, every year, we're doing things to enhance it in terms of the tie-ins with marketing, the robustness of the forecasting mechanism, a range of different things and interconnectivity with some of our other infrastructural systems. So I mean, we'll continue. But in terms of, is everybody using it? Are we using it on all products? We continue to say at that point, we're able to quickly, as Maria mentioned, quickly do that even on recent acquisitions. So we've gotten to the point where it's a pretty vibrant standpoint. But just like we’ve got really good software that we provide our customers but they're always asking for additional things, our internal groups here are going to be continuing to ask for additional things and we’ll continue to progress that. But in terms of the breadth of its coverage and the uniformity of it, we're essentially there.

Maria T. Shields

And having look things behind.

James E. Cashman

Yes.

Operator

Our next question comes from Barbara Coffey from Brigantine.

Barbara Coffey - Brigantine Advisors

Actually, I have 2 questions. Can you speak a bit about how you're continuing to penetrate some of your large accounts, and if possible, give a breakdown of how much revenue came from sort of existing accounts versus new accounts? And then, this is more a refresher for me because I just don't seem to have it anywhere in my notes. When you sign up people for the HPC-type programs, how are you charging and sort of what kind of adoption are you seeing off of HPC solutions relative to sort of revenue growth?

James E. Cashman

Yes, well so the -- let's see, the first part of that is the major accounts were -- first of all, we're growing in the existing divisions. We typically -- that's happening through increasing number of users and increasing the number of projects. So for instance, if a project was a midstream, they might not try to inject us but as that rolls off and it roll on new projects, that comes on. Secondarily, we've seen that then bridges over to sister divisions, and what it also tends to do is either sister design groups inside the same entity or these are multidisciplinary major account groups that are in like multiple industries, they will actually now start to spread that across different ones, whereupon we’ll actually sometimes formalized the arrangement by which we actually meet and interact with them. And FMC, which was alluded to earlier by one of the questioners on this call is kind of a really nice example of how that happens. So it continues to grow along those lines. In general, the major account activities continue to grow, but none of our staff’s along the #1 customer, the top customer, no one being more than 5%, the top 50 or so being just around that 20%. So it's in those ranges, none of those things have really changed. And I think the final thing you had was on the HPC. And I said the HPC gets -- I don't have a precise number for it but it gets -- it just get implemented at higher levels in the more mature accounts. So the major accounts tend to adopt it a little bit more, like I mentioned before. If you look at the additional incremental seats that come in, probably happens at about 2x, the rate of incremental individual seats that are coming in. So that kind of paints the overall canvas.

Operator

[Operator Instructions] Our next question comes from Ross MacMillan from Jefferies.

Ross MacMillan - Jefferies & Company, Inc., Research Division

Maria, I noticed that the long-term deferred revenue stepped up quite significantly this quarter. Can you talk to why?

Maria T. Shields

Yes, it's largely Apache-related, Ross.

Ross MacMillan - Jefferies & Company, Inc., Research Division

Yes, but I guess the question will be then, Apache has been in for a couple of quarters now. Was there any change in kind of duration of billing or any sort of contractual changes there that would've driven that?

Maria T. Shields

Yes. Also, Ross, one thing that will factor into that is the write-down from the purchase accounting becomes smaller and smaller, so that will impact that number.

Ross MacMillan - Jefferies & Company, Inc., Research Division

Yes, okay. So just to be clear then, most of that change sequentially in long-term deferred relates to the Apache business, not ANSYS core?

Maria T. Shields

Yes, the majority of it relates Apache.

Ross MacMillan - Jefferies & Company, Inc., Research Division

Okay, that's helpful. And then I just had one other question on the Apache business. You comment that you're executing on the milestones to work towards the comprehensive chip package system offering. Can you just update us on kind of the timeframe and the kind of way should we think about having that comprehensive release in market? Is that something where we'll actually get to a point where we will have net new products in market, or is it just more kind of evolutionary and that won't be necessarily sort of net new product release, if you will, in that division [ph]?

James E. Cashman

I don't think -- if you think of net new, if you're mentioning net new product as a new module to attack this, no. Our physics are going to attack all of that. It's basically -- internally, we've outlined that probably about 3 1-year time frames that I think I mentioned earlier ones, looking at being able to take some of the signal integrity and work that with power integrity and working with our SI products in addition to some of the Sentinel and RedHawk products on theirs, and those are ones that -- so they actually do create an updraft by the virtue of being able to solve a broader range of problems that could be solved, but they are largely -- the integration is largely a problem that's solving connectivity. So in essence, we get kind of a life -- a form of multi-physics, multidisciplinary kind of simulations to solve new classes of problems that have been particularly vexing. And so you'll see that, as we come out with the 14.5 and version 15 over the next few months, you will actually see that level of capability being built in. But it's largely on the integration of the blending of the capabilities and allowing them to inter-operate through the Workbench platform.

Ross MacMillan - Jefferies & Company, Inc., Research Division

That's helpful. Then maybe one other one for you, Jim. In the world of handsets, we have 2 particularly strong players. One here in the U.S. and one in South Korea. Does that sort of bifurcation between 2 very, very strong players have any implication, either in the supply chain or anywhere else for your Apache offering?

James E. Cashman

Well, there are some -- obviously, there are some links in the supply chain because you do then get to -- you look at the major impact of the various chip providers there and what's being pushed along those lines. But it's nothing that's changing the normal course of business because in general, we tend to have a lot of those situations where all of the major players, be they 2 or be they 5, are utilizing this. And this is one of the -- very often, you get down to the standpoint. This is kind of the classic example where 3%, 4%, 5% increased efficiency and things like that can actually have a major impact on their business. And so it's one of the things we're just kind of getting close enough and using engineering intuition, which is what some of the older generations of this technology does, really doesn't get them past some of the major, major design hurdles. So being able to kind of really get in there and look at those refined effects that allow them to get a better quality product or a better user experience is really what's driving those.

Operator

And at this time, in showing no additional questions, I'd like to turn the conference call back over to Mr. Cashman for any closing remarks.

James E. Cashman

Okay. So well, okay. So just in closing, the emphasis for Q2 and the remainder of 2012, it's just the continued growth, customer development. I mentioned about the improved sales execution, but like I say, we're right in the lines of our guidance. Q1 tracking along it. It’s actually, like I said, strengthening and tightening the guidance for the full year. And again, if you look at that overall, we're encouraged, we're motivated by the positive customer receptivity to our long-term vision, and again, we continue to be propelled by the combination of that vision, but a business model that has continued to work.

And again, I'll do my obligatory close with a shout out to the -- thanks to all the loyal customers, the partners we've had over the years, the people creating the great technology and this growing base of super employees that we have here, and that's really what allowed us to do what we've been doing and will propel us into the future. So thanks to everybody, and we'll see you next quarter on the next call.

Operator

Ladies and gentlemen, thank you for attending today's conference call. It has now concluded. You may now disconnect your telephone lines.

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