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 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 to $30 million on both ACV and revenue in the full year in 2024. And 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. And 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.
Ajei Gopal: And if I could just jump in a little bit, just to talk – to give you some color about the broader environment that we’re working with. 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 continues to be as strong as ever or stronger. And 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, Nicole walked through the impact of the China additional approval processes that we just went through.
Joe Vruwink: And just on that point, Ajei, and that was great, Nicole. Thank you. 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 maybe factor positively in 2024?
Ajei Gopal: 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 these five broad areas that we’re investing in, 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 investments that we’re making are paying off as we support our customers.
Joe Vruwink: Thank you.
Operator: The next question comes from Jason Celino of KeyBanc Capital Markets. Please go ahead.
Jason Celino: Hi. Thanks for taking my question. Just a couple on the China export restrictions. Ajei, I hear you on the news, optically, I think we’re a little surprised because it appears others may not be affected. Do you know if other companies were approached as well?
Ajei Gopal: So obviously, we don’t 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 obviously, I’m not in a position to comment about those. I don’t know.
Jason Celino: 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 that question.
Nicole Anasenes: 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 sponsorship to lease [ph]. And so there was a mix of both that were impacted in the quarter
Kelsey DeBriyn: Operator we can take the next question.
Operator: Our next question comes from Ken Wong of Oppenheimer & Company. Please go ahead.
Ken Wong: Great. thanks for taking y question. Maybe first off for you, Ajei, maybe change gears a little bit. Just wanted to ask about the auto industry, there has been some concern that maybe with the strike that that could have caused some deal slippage or anything like that. Just wondering if you saw any erosion in your auto business at all?
Ajei Gopal: 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 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-driven, not manufacturing-driven.
The other important thing to consider and realize is that car companies and automotive companies, frankly, all industries everyone is 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 entrances coming in as well, that design cycle is of paramount importance. And that’s really where we are seeing the opportunity. And that’s reflected in the conversations we’re having with our customers.
