EXHIBIT 99.1
Certain Factors Regarding Future Results
Information provided by the Company or its spokespersons may
from time to time contain forward-looking statements
concerning projected financial performance, market and
industry segment growth, product development and
commercialization or other aspects of future operations. Such
statements will be based on the assumptions and expectations
of the Company's management at the time such statements are
made. The Company cautions investors that its performance
(and, therefore, any forward-looking statement) is subject to
risks and uncertainties. Various important factors including,
but not limited to, the following may cause the Company's
future results to differ materially from those projected in
any forward-looking statement.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS: The Company may
experience significant fluctuations in future quarterly
operating results. Fluctuations may be caused by many factors,
including the timing of new product releases or product
enhancements by the Company or its competitors; the size and
timing of individual orders, including a fluctuation in the
demand for and the ability to complete large contracts;
software errors or other product quality problems; competition
and pricing; customer order deferrals in anticipation of new
products or product enhancements; reduction in demand for the
Company's products; changes in operating expenses; changes in
the mix of software license and maintenance and service
revenue; personnel changes and general economic conditions. A
substantial portion of the Company's operating expenses is
related to personnel, facilities and marketing programs. The
level of personnel and related expenses cannot be adjusted
quickly and is based, in significant part, on the Company's
expectation for future revenue. The Company does not typically
experience significant order backlog. Further, the Company has
often recognized a substantial portion of its revenue in the
last month of a quarter, with this revenue frequently
concentrated in the last weeks or days of a quarter. During
certain quarterly periods, the Company has been dependent upon
receiving large orders of perpetual licenses involving the
payment of a single up-front fee and, more recently, has
shifted the business emphasis of its products to provide a
collaborative solution to the Company's customers. This
emphasis has increased the Company's average order size and
increased the related sales cycle time for the larger orders
and may have the effect of increasing the volatility of the
Company's revenue and profit from period to period. As a
result, product revenue in any quarter is
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substantially dependent on sales completed in the latter part
of that quarter, and revenue for any future quarter is not
predictable with any significant degree of accuracy.
STOCK MARKET AND STOCK PRICE VOLATILITY: Market prices for
securities of software companies have generally been volatile.
In particular, the market price of the Company's common stock
has been and may continue to be subject to significant
fluctuations as a result of factors affecting the Company, the
software industry or the securities markets in general. Such
factors include, but are not limited to, declines in trading
price that may be triggered by the Company's failure to meet
the expectations of securities analysts and investors. The
Company cannot provide assurance that in such circumstances
the trading price of the Company's common stock will recover
or that it will not experience a further decline. Moreover,
the trading price could be subject to additional fluctuations
in response to quarter-to-quarter variations in the Company's
operating results, material announcements made by the Company
or its competitors, conditions in the software industry
generally or other events and factors, many of which are
beyond the Company's control.
RAPIDLY CHANGING TECHNOLOGY; NEW PRODUCTS; RISK OF PRODUCT
DEFECTS: The markets for the Company's products are generally
characterized by rapidly changing technology and frequent new
product introductions that can render existing products
obsolete or unmarketable. A major factor in the Company's
future success will be its ability to anticipate technological
changes and to develop and introduce, in a timely manner,
enhancements to its existing products and new products to meet
those changes. If the Company is unable to introduce new
products and respond quickly to industry changes, its
business, financial condition and results of operations could
be materially adversely affected. The introduction and
marketing of new or enhanced products require the Company to
manage the transition from existing products in order to
minimize disruption in customer purchasing patterns. There can
be no assurance that the Company will be successful in
developing and marketing, on a timely basis, new products or
product enhancements, that its new products will adequately
address the changing needs of the marketplace or that it will
successfully manage the transition from existing products.
Software products as complex as those offered by the Company
may contain undetected errors or failures when first
introduced or as new versions are released, and the likelihood
of errors is increased as a result of the Company's commitment
to accelerating the frequency of its product releases.
There can be no assurance that errors will not be found in
new or enhanced products after commencement
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of commercial shipments. Any of these problems may result in
the loss of or delay in market acceptance, diversion of
development resources, damage to the Company's reputation or
increased service and warranty costs, any of which could have
a materially adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON DISTRIBUTORS: The Company continues to
distribute most of its products through its global network of
30 independent, regional ASDs. The ASDs sell ANSYS and
DesignSpace products to new and existing customers, expand
installations within their existing customer base, offer
consulting services and provide the first line of technical
support. The ASDs have more immediate contact with most
customers who use ANSYS software than does the Company.
Consequently, the Company is highly dependent on the efforts
of the ASDs. Difficulties in ongoing relationships with ASDs,
such as delays in collecting accounts receivable, failure to
meet performance criteria or to promote the Company's products
as aggressively as the Company expects and differences in the
handling of customer relationships could adversely affect the
Company's performance. Additionally, the loss of any major ASD
for any reason, including an ASD's decision to sell competing
products rather than the Company's products, could have a
materially adverse effect on the Company. Moreover, the
Company's future success will depend substantially on the
ability and willingness of its ASDs to continue to dedicate
the resources necessary to promote the Company's products and
to support a larger installed base of the Company's products.
If the ASDs are unable or unwilling to do so, the Company may
be unable to sustain revenue growth.
COMPETITION: The CAD, CAE and computer-aided manufacturing
("CAM") markets are intensely competitive. In the traditional
CAE market, the Company's primary competitors include
MSC.Software Corporation and Hibbitt, Karlsson and Sorenson,
Inc. The Company also faces competition from smaller vendors
of specialized analysis applications in fields such as
computational fluid dynamics. In addition, certain integrated
CAD suppliers such as Parametric Technology Corporation,
Electronic Data Systems Corporation and Dassault Systemes
provide varying levels of design analysis, optimization and
verification capabilities as part of their product offerings.
The entrance of new competitors would likely intensify
competition in all or a portion of the overall CAD, CAE and
CAM markets. Some of the Company's current and possible future
competitors have greater financial, technical, marketing and
other resources than the Company, and some have well
established relationships with current and potential customers
of the Company. It is also possible that alliances among
competitors may emerge and rapidly
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acquire significant market share or that competition will
increase as a result of software industry consolidation.
Increased competition may result in price reductions, reduced
profitability and loss of market share, any of which would
materially adversely affect the Company's business, financial
condition and results of operations.
DEPENDENCE ON SENIOR MANAGEMENT AND KEY TECHNICAL PERSONNEL:
The Company is highly dependent upon the ability and
experience of its senior executives and its key technical and
other management employees. Although the Company has an
employment agreement with one executive, the loss of this
employee, or any of the Company's other key employees, could
adversely affect the Company's ability to conduct its
operations.
RISKS ASSOCIATED WITH INTERNATIONAL ACTIVITIES: A significant
portion of the Company's business comes from outside the
United States of America. Risks inherent in the Company's
international business activities include imposition of
government controls, export license requirements, restrictions
on the export of critical technology, political and economic
instability, trade restrictions, changes in tariffs and taxes,
difficulties in staffing and managing international
operations, longer accounts receivable payment cycles and the
burdens of complying with a wide variety of foreign laws and
regulations. Effective patent, copyright and trade secret
protection may not be available in every foreign country in
which the Company sells its products. The Company's business,
financial condition and results of operations could be
materially adversely affected by any of these risks.
Additionally, countries in certain international regions
have continued to experience weaknesses in their currency,
banking and equity markets. These weaknesses could adversely
affect consumer demand for the Company's products and
ultimately the Company's financial condition or results of
operations.
In November 2000, the United States enacted the FSC Repeal
and Extraterritorial Income Exclusion Act (the "Act") in
response to a challenge from the World Trade Organization
("WTO") that the existing tax benefits provided by foreign
sales corporations were prohibited tax subsidies. The Act
generally repeals the foreign sales corporation and implements
an extraterritorial income ("ETI") tax benefit. Recently, the
European Union stated that it did not believe the ETI
provisions bring U.S. tax law into WTO-compliance and asked
the WTO to rule on the matter. On January 14, 2002, the WTO
ruled in favor of the European Union's charge. As a result,
there may be further related changes to U.S. export tax law in
connection with this ruling. Any such prospective changes
regarding tax benefits associated with the Company's export
sales may
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adversely impact the Company's effective tax rate and decrease
its net income in future periods.
DEPENDENCE ON PROPRIETARY TECHNOLOGY: The Company's success is
highly dependent upon its proprietary technology. Although the
Company was awarded a patent by the U.S. Patent and Trademark
Office for its web-based reporting technology, the Company
generally relies on contracts and the laws of copyright and
trade secrets to protect its technology. Although the Company
maintains a trade secrets program, enters into confidentiality
agreements with its employees and distributors and limits
access to and distribution of its software, documentation and
other proprietary information, there can be no assurance that
the steps taken by the Company to protect its proprietary
technology will be adequate to prevent misappropriation of its
technology by third parties, or that third parties will not be
able to develop similar technology independently. Although the
Company is not aware that any of its technology infringes upon
the rights of third parties, there can be no assurance that
other parties will not assert technology infringement claims
against the Company, or that, if asserted, such claims will
not prevail.
INCREASED RELIANCE ON PERPETUAL LICENSES: The Company has
historically maintained stable recurring revenue from the sale
of monthly lease licenses and noncancellable annual leases for
its software products. More recently, the Company has
experienced an increase in customer preference for perpetual
licenses that involve payment of a single up-front fee and
that are more typical in the computer software industry. While
revenue generated from monthly lease licenses and
noncancellable annual leases currently represents a portion of
the Company's software license revenue, to the extent that
perpetual license revenue continues to represent a significant
percentage of total software license revenue, the Company's
revenue in any period will increasingly depend on sales
completed during that period.
RISKS ASSOCIATED WITH ACQUISITIONS: The Company has
consummated and may continue to consummate certain strategic
acquisitions in order to provide increased capabilities to its
existing products, enter new product and service markets or
enhance its distribution channels. The ability of the Company
to integrate the acquired businesses, including delivering
sales and support, ensuring continued customer commitment,
obtaining further commitments and challenges associated with
expanding sales in particular markets and retaining key
personnel, will impact the success of these acquisitions. If
the Company is unable to properly and timely integrate the
acquired businesses, there could be a materially
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adverse effect on the Company's business, financial condition
and results of operations.
GENERAL CONTINGENCIES: The Company is subject to various
investigations, claims and legal proceedings from time to time
that arise in the ordinary course of its business activities.
Each of these matters is subject to various uncertainties, and
it is possible that some of these matters may be resolved
unfavorably to the Company.
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