Common stock discount to fair market value for ESPP purchases

[Table of Contents](#i3944da1428384b81954c2cd4a4fd88bf_7)11.Income TaxesOur income before income tax provision, income tax provision and effective tax rates were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | Three Months Ended |  | Nine Months Ended |
| (in thousands, except percentages) | September 30,2022 |  | September 30,2021 |  | September 30,2022 |  | September 30,2021 |
| Income before income tax provision | $ | 117,981  |  |  | $ | 103,898  |  |  | $ | 318,904  |  |  | $ | 280,381  |  |
| Income tax provision | 22,006  |  |  | 18,556  |  |  | $ | 53,141  |  |  | $ | 28,925  |  |
| Effective tax rate | 18.7  | % |  | 17.9  | % |  | 16.7  | % |  | 10.3  | % |

  
The increase in the effective tax rate from the prior year was primarily due to decreased benefits related to stock-based compensation.Tax expense for the nine months ended September 30, 2022 and 2021 benefited from deductions related to stock-based compensation, many of which were recognized discretely. These benefits were partially offset by non-deductible compensation.12.Stock Repurchase Program Under our stock repurchase program, we repurchased shares as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | Nine Months Ended |
| (in thousands, except per share data) | September 30,2022 |  | September 30,2021 |
| Number of shares repurchased | 500 |  | 97  |  |
| Average price paid per share | $ | 311.14  |  |  | $ | 371.83  |  |
| Total cost | $ | 155,571  |  |  | $ | 35,993  |  |

  
All of the shares repurchased during the nine months ended September 30, 2022 were repurchased during the first quarter. As of September 30, 2022, 2.0 million shares remained available for repurchase under the program. 13.Stock-Based CompensationOn May 12, 2022, our stockholders approved the ANSYS, Inc. 2022 Employee Stock Purchase Plan (2022 ESPP) and the reservation by our board of directors of 750,000 shares of common stock for issuance under the 2022 ESPP. The 2022 ESPP allows our employees and employees of our designated subsidiaries to purchase shares of our common stock at a discount to fair market value of 10% in accordance with the terms and conditions of the 2022 ESPP.Total stock-based compensation expense and its net impact on basic and diluted earnings per share are as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | Three Months Ended |  | Nine Months Ended |
| (in thousands, except per share data) | September 30,2022 |  | September 30,2021 |  | September 30,2022 |  | September 30,2021 |
| Cost of sales: |  |  |  |  |  |  |  |
| Maintenance and service | $ | 2,621  |  |  | $ | 2,753  |  |  | $ | 7,448  |  |  | $ | 9,834  |  |
| Operating expenses: |  |  |  |  |  |  |  |
| Selling, general and administrative | 27,077  |  |  | 25,420  |  |  | 67,117  |  |  | 66,158  |  |
| Research and development | 17,272  |  |  | 15,971  |  |  | 47,554  |  |  | 46,156  |  |
| Stock-based compensation expense before taxes | 46,970  |  |  | 44,144  |  |  | 122,119  |  |  | 122,148  |  |
| Related income tax benefits | (9,984) |  |  | (10,743) |  |  | (42,037) |  |  | (62,151) |  |
| Stock-based compensation expense, net of taxes | $ | 36,986  |  |  | $ | 33,401  |  |  | $ | 80,082  |  |  | $ | 59,997  |  |
| Net impact on earnings per share: |  |  |  |  |  |  |  |
| Basic earnings per share | $ | (0.42) |  |  | $ | (0.38) |  |  | $ | (0.92) |  |  | $ | (0.69) |  |
| Diluted earnings per share | $ | (0.42) |  |  | $ | (0.38) |  |  | $ | (0.92) |  |  | $ | (0.68) |  |

  
  
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