EXHIBIT 99
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 changes; 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. This shift, therefore, 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 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.
SEASONAL VARIATIONS: The Company's business has experienced
significant seasonality, including second and third quarter slowdown
in software sales resulting from the purchasing and budgeting
patterns of the Company's customers. Typically, the Company's
revenue is lowest during the quarters ended June 30 and September
30.
ECONOMIC SLOWDOWN IN CERTAIN MARKETS: The Company's sales are based
significantly on demand for products in its primary end markets.
Many of these end markets, including automotive, aerospace and power
generation, have recently experienced economic declines which have
adversely affected our business. A continuation of this general
economic decline may adversely affect our business by extending
sales cycles and reducing revenue.
The current Severe Acute Respiratory Syndrome (SARS) outbreak has
adversely impacted the Company's operations in certain Asian
markets, particularly in China. To the extent this outbreak becomes
more widespread, it could affect the Company's business in other
global markets, resulting in an adverse impact on the Company's
financial condition, results of operations and cash flows.
In addition, terrorist attacks and other increased global
hostilities have contributed to widespread uncertainty and
speculation in the world financial markets. This uncertainty and
speculation may result in further economic contraction, resulting in
the suspension or delay of purchasing by our customers.
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 to respond quickly to industry changes,
its business, financial condition, results of operations and cash
flows 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 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 material adverse effect on the Company's
business, financial condition, results of operations and cash flows.
DEPENDENCE ON DISTRIBUTORS: The Company continues to distribute a
substantial portion of its products through its global network of
independent, regional channel partners. The channel partners sell
the Company's software 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 channel partners have more immediate contact with most customers
in their territories who use ANSYS software than does the Company.
Consequently, the Company is highly dependent on the efforts of the
channel partners. Difficulties in ongoing relationships with channel
partners, 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 channel partner for any reason, including a channel
partner's decision to sell competing products rather than the
Company's products, could have a material adverse effect on the
Company. Moreover, the Company's future success will depend
substantially on the ability and willingness of its channel partners
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 channel partners 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 Sorensen, Inc.) The
Company also faces competition from smaller vendors of specialized
analysis applications in fields such as computational fluid
dynamics. These vendors include Fluent, Inc. and Adapco, Inc. 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 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, results of
operations and cash flows.
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 employment agreements with three
executives, the loss of these employees, 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, results of
operations and cash flows 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, results of operations and cash flows.
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 April 2003, the Job Protection Act of 2003 (H.R. 1769) was
introduced into the House of Representatives. The Act would repeal
the ETI tax regime and replace it with a permanent rate deduction
for companies with production activities in the US. In its current
form, the Act provides general transition relief through 2008 based
upon the 2001 ETI benefit. In fiscal year 2002, export benefits
reduced the Company's effective tax rate by approximately 4.3%. Any
prospective changes regarding tax benefits 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: Although the Company has
historically maintained stable recurring revenue from the sale of
monthly lease licenses and noncancellable annual leases for its
software products, it has relied increasingly on sales of 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 depend
increasingly 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. In the future, the Company may not be able to identify
suitable acquisition candidates or, if suitable candidates are
identified, the Company may not be able to complete the business
combination on commercially acceptable terms. Business acquisitions
may result in devotion of significant management and financial
resources. 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 material adverse
effect on the Company's
business, financial condition, results of operations and cash flows.
DISRUPTION OF OPERATIONS AT DEVELOPMENT FACILITIES: A significant
portion of the Company's software development personnel, source code
and computer equipment is located at operating facilities in the
United States, Canada and Europe. The occurrence of a natural
disaster or other unforeseen catastrophe at any of these facilities
could cause interruptions in the Company's operations, services and
product development activities. These interruptions could have a
material adverse effect on the Company's business, financial
condition, results of operations and cash flows.
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. These
proceedings currently include customary audit activities by various
taxing authorities. 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK: The
Company is exposed to certain market risks, primarily foreign
currency exchange rates, which arise from transactions entered into
in the normal course of business. The Company seeks to minimize
these risks through its normal operating and financing activities.
The Company does not use derivative financial instruments to hedge
these risks.