Ken Wong: Got it. And then, Nicole, just because I don’t want to be excluded from the China Party, it sounds 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?
Nicole Anasenes: Yes. So 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, kind of to the right, if you will. But the $10 million to $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.
Ken Wong: Okay, perfect. Thank you for the color.
Operator: The next question comes from Steven Tusa of JPMorgan. Please go ahead.
Steven Tusa: Hi guys. Good morning.
Nicole Anasenes: Good morning.
Steven Tusa: Can you just talk about what kind of is this a customer type issue in China or is it more general than that?
Ajei Gopal: Well, this issue affects prospects who are located in China. So that’s the nature of the conversation. It’s the sale of prospects who are located in China and 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.
Steven Tusa: I guess though, on your ACV, it looked like electronics was kind of weaker than expected. We assume that it was kind of focused in that piece of the pie.
Nicole Anasenes: Sorry, are you talking about the industrial – the industry mix chart? I just want to make sure exactly what you are referring to.
Steven Tusa: Exactly.
Nicole Anasenes: Yes. So.
Steven Tusa: What type of industry is what I’m like trying to just wrap my head around here a little bit.
Nicole Anasenes: Yes, I would say so it is the industry – that the processes – the incremental vetting processes apply to essentially prospects in China that are regardless of industry, right. And so 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, those that the relative – those kind of sizings of 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. Given – but given the strong 12 months 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.
Steven Tusa: Right. That makes sense. And is this like ANSYS specific or is it something that they kind of cast a bit wider of a net? Obviously, there’s a lot going on out there between our two countries. Rockwell had some issue, I believe. Is this like – is this really ANSYS specific?
Ajei Gopal: 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, 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.
Steven Tusa: Right. Sorry, one really quick last one.
Ajei Gopal: And specifically to follow on that point, 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. And obviously, we’re just taking what we had before, which was industry standard vetting, and we’ve added some an additional layer above that.
Steven Tusa: Right. And that’s why it’s not – it’s 1% of ACV or whatever you want to call it right now, as opposed to it being like across the board, 5% of ACV, which would be a real impairment in the ability to kind of do business over in China, right?
Nicole Anasenes: Correct.
Ajei Gopal: Yes.
Steven Tusa: Yes. Okay. All right. Thanks for all the details, guys. Good luck.
Operator: The next question comes from Adam Borg with Stifel. Please go ahead.
Mike Richards: Hi, 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 plus, and then even ANSYS GPT, maybe you guys could discuss how you guys are thinking about planning on pricing these? And what kind of pricing uplift that’ll drive in the long term? Thanks.
Ajei Gopal: So let me sort of just since you asked the question, let me sort of explain what those are. And – but to get to your question about pricing, some of this is still being worked out in terms of how we would – exactly what we would price them. But I can give you some philosophy as we go through this. So obviously, AIML 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 ANSYSGPT 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. And we believe that will provide ANSYS to the most frequently asked questions that customers have in a matter of seconds.
