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 ABAQUS Inc. (formerly 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 August
30, 2002, the WTO ruled that the European Union may impose up to
$4 billion per year in retaliatory duties against U.S. exports.
As a result, there may be further related changes to U.S. export
tax law in connection with this ruling. In 2001, export benefits
reduced the Company's effective tax rate by 6.6%. Any such
prospective changes regarding tax benefits
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associated with the Company's export sales may 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 ECONOMIC TRENDS: As the Company has grown, it has become
increasingly subject to the risks arising from adverse changes
in domestic and global economic conditions. As a result of the
current economic slowdown, many companies are delaying or
reducing technology purchases, which has had an impact on the
Company's visibility into the closing of new business, as
opposed to our recurring business. This slowdown has also
contributed to, and may continue to contribute to, reductions in
sales, longer sales cycles and increased price competition. Each
of these items could adversely affect the Company's sales and
net income in future periods.
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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