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Stock-Based Compensation | 9 Months Ended
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Jul. 31, 2025
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation As of the Acquisition Date, we assumed outstanding equity incentive awards under the following Ansys equity incentive plans: (i) the Fourth Amended and Restated Ansys, Inc. 1996 Stock Option and Grant Plan, (ii) the Fifth Amended and Restated Ansys, Inc. 1996 Stock Option and Grant Plan, and (iii) the Ansys, Inc. 2021 Equity and Incentive Compensation Plan (each, an Assumed Equity Plan, and collectively the Assumed Equity Plans). The awards under the Assumed Equity Plans, previously issued in the form of stock options and RSUs, were generally settled as follows: (1) Each award of Ansys restricted stock units (RSUs) held by non-employee directors and specified employees that were outstanding immediately prior to the Acquisition Date (the specified RSUs), including any RSUs deferred as part of Ansys' director deferred compensation program, was canceled and terminated and converted into the right to receive the Merger Consideration as of the Acquisition Date. (2) Each award of Ansys stock options and RSUs (other than specified RSUs) that was outstanding and unvested immediately prior to the Acquisition Date was assumed by us (each, an Assumed Option and Assumed RSU, and collectively, the Assumed Equity Awards) and converted to stock options exercisable and RSUs settleable in the number of shares of our common stock equal to the product of (i) the number of Ansys shares underlying such Assumed Equity Awards as of immediately prior to the Acquisition Date multiplied by (ii) the conversion ratio defined in the Merger Agreement. Any Ansys performance-based RSUs that were assumed by us will only be subject to time-based vesting. The number of Ansys shares underlying the performance-based RSUs for which the performance period was not complete as of the Acquisition Date was based on the target level of performance, and the number of Ansys shares underlying the performance-based RSUs for which the performance period was complete as of the Acquisition Date was based on the actual level of performance. The Assumed Equity Awards generally retain all of the rights, terms and conditions of the respective plans under which they were originally granted, including the same service-based vesting schedule, applicable thereto. As of the Acquisition Date, the estimated fair value of the Assumed Equity Awards was $639.7 million, of which $131.0 million was recognized as goodwill and the balance of $508.7 million will be recognized as stock-based compensation expense over the remainder term of the Assumed Equity Awards. The fair value of the Assumed Equity Awards for services rendered through the Acquisition Date was recognized as a component of the purchase consideration, with the remaining fair value related to the post-combination services to be recorded as stock-based compensation over the remaining vesting period. A total of 1.1 million shares of our common stock underlying the Assumed Equity Awards that will be recognized as stock-based compensation expense have an estimated weighted average fair value at the Acquisition Dat e of $453.83 per sh are. During the three months ended July 31, 2025, stock-based compensation expense included $67.2 million related to the Assumed Equity Awards in connection with the Ansys Merger. As of July 31, 2025, we had $432.5 million of total unrecognized stock-based compensation expense relating to RSUs underlying the outstanding Assumed Equity Awards, which is expected to be recognized over a weighted-average period of 1.74 years. The compensation cost recognized in the condensed consolidated statements of income for our stock compensation arrangements is as follows:
| Three Months Ended July 31, |  | Nine Months Ended July 31,
| 2025 |  | 2024 |  | 2025 |  | 2024
| (in thousands)
Cost of products | $ | 22,943 |  |  | $ | 14,645 |  |  | $ | 66,470 |  |  | $ | 44,824 |
Cost of maintenance and service | 10,222 |  |  | 9,677 |  |  | 28,715 |  |  | 28,126 |
Research and development expense | 113,861 |  |  | 89,279 |  |  | 326,274 |  |  | 269,087 |
Sales and marketing expense | 45,564 |  |  | 30,251 |  |  | 117,214 |  |  | 91,811 |
General and administrative expense | 75,133 |  |  | 20,502 |  |  | 117,236 |  |  | 58,702 |
Stock-based compensation expense from continuing operations before taxes | 267,723 |  |  | 164,354 |  |  | 655,909 |  |  | 492,550 |
Stock-based compensation expense from discontinued operations before taxes | — |  |  | 17,185 |  |  | — |  |  | 47,476 |
Total stock-based compensation expense before taxes | 267,723 |  |  | 181,539 |  |  | 655,909 |  |  | 540,026 |
Income tax benefit | (38,686) |  |  | (29,972) |  |  | (94,779) |  |  | (89,158) |
Stock-based compensation expense after taxes | $ | 229,037 |  |  | $ | 151,567 |  |  | $ | 561,130 |  |  | $ | 450,868 |
During the three and nine months ended July 31, 2025 and 2024, we recognized stock-based compensation expense relating to RSUs granted to senior executives with certain market, performance and service conditions (market-based RSUs). The grant date fair value of the market-based RSUs and the assumptions used in the Monte Carlo simulation model to determine the grant date fair value during the periods are as follows:
|  |  | Nine Months Ended July 31,
|  |  |  |  | 2025 |  | 2024
Expected life (in years) |  |  |  |  | 2.67 - 2.79 |  | 2.89
Risk-free interest rate |  |  |  |  | 3.90% - 4.39% |  | 4.41%
Volatility |  |  |  |  | 33.40% - 34.72% |  | 34.03%
Grant date fair value |  |  |  |  | $409.94 - $464.17 |  | $600.29
As of July 31, 2025, we had $1.7 billion of total unrecognized stock-based compensation expense relating to options, RSUs and restricted stock awards, which is expected to be recognized over a weighted-average period of 2.0 years. As of July 31, 2025, we had $109.2 million of unrecognized stock-based compensation expense relating to our Employee Stock Purchase Plan, which is expected to be recognized over a period of approximately 2.0 years. The intrinsic values of equity awards exercised during the periods are as follows:
| Three Months Ended July 31, |  | Nine Months Ended July 31,
| 2025 |  | 2024 |  | 2025 |  | 2024
| (in thousands)
Intrinsic value of awards exercised | $ | 31,834 |  |  | $ | 90,973 |  |  | $ | 86,671 |  |  | $ | 166,993 |

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