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; customer order deferrals in
anticipation of new products or product enhancements; reduction in
demand for the Company's products; changes in operating expenses;
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
personnel expenses cannot be adjusted quickly and is based, in
significant part, on the Company's expectation for future revenues.
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, and
increasingly is dependent upon receiving large orders of perpetual
licenses involving the payment of a single up-front fee. The Company
believes that large orders of this type may reflect an increasing
demand for enterprise-wide software solutions from certain of the
Company's customers, which, if continued, may increase the
volatility of the Company's revenues and profit from period to
period. More recently, the Company has also experienced an increase
in renewals and sales of noncancellable annual leases, for which a
portion of the annual license fee is recognized as paid-up revenue
upon renewal or inception of the lease.
As a result, product revenues in any quarter are substantially
dependent on orders booked and shipped in the latter part of that
quarter, and revenues for any future quarter are not predictable
with any significant degree of accuracy.
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Stock Market 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 and software industry or securities markets in general.
In addition, a large percentage of the Company's common stock is
held by TA Associates, Inc. and various institutional investors.
Consequently, actions with respect to the Company's common stock by
either TA Associates, Inc. or certain of these institutional
investors could have a significant impact on the market price for
the stock.
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 to industry changes on a timely
basis, 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 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 or warranty costs, any of
which could have a materially adverse effect upon the Company's
business, financial condition and results of operations.
Dependence on Distributors. The Company distributes its products
principally through its global network of 35 independent, regional
ANSYS Support Distributors ("ASDs"). The ASDs sell ANSYS
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and DesignSpace(R) products to new and existing customers, expand
installations within their existing customer base, offer consulting
services and provide the first line of ANSYS 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, ASDs' 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, 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, computer-aided engineering ("CAE") and
computer-aided manufacturing ("CAM") markets are intensely
competitive. In the traditional CAE market, the Company's primary
competitors include MacNeal-Schwendler Corporation, Hibbitt,
Karlsson and Sorenson, Inc. and MARC Analysis Research Corporation.
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 and Structural Dynamics
Research Corporation provide varying levels of design analysis and
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
market. 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 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
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its key technical and other management employees. Although the
Company has entered into employment agreements with two executives,
the loss of these, 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 and
growing portion of the Company's business comes from outside the
United States. 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 the Asia Pacific region, including Japan,
have recently experienced 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 position or results of operations.
Dependence on Proprietary Technology. The Company's success is
highly dependent upon its proprietary technology. The Company does
not have patents on any of its technology and 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 and Noncancellable Annual
Leases. The Company has historically maintained stable recurring
revenue from the sale of monthly lease licenses for its software
products. While the Company has experienced an increase in customer
preference for
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perpetual licenses that involve payment of a single up-front fee and
that are more typical in the computer software industry, most
recently, it has also experienced an increase in customer preference
for noncancellable annual leases. Although lease license revenue
currently represents a significant portion of the Company's software
license fee revenue, to the extent that perpetual license and
noncancellable annual lease license revenue increase as a percent of
total software license fee revenue, the Company's revenue in any
period will increasingly depend on sales completed during that
period.
Year 2000 Computer Systems Compliance. The Company has established a
corporate-wide Year 2000 task force, led by the Company's Vice
President of Corporate Quality, with the representation of all major
business segments. This task force is responsible for identifying,
evaluating and overseeing the implementation of necessary changes to
computer systems and applications to achieve a Year 2000 date
conversion with no effect on customers or disruption of business
operations. The task force is currently in the process of assessing
its exposure to contingencies related to the Year 2000 Issue for
previous releases of its products. The Company plans to utilize both
internal and external resources to reprogram, or replace and test
the software for Year 2000 modifications. The Company plans to
substantially complete the Year 2000 project no later than December
31, 1998. The total remaining cost of the Year 2000 project will be
funded through operating cash flows. The Company does not expect the
amounts required to be expensed to have a material effect on its
financial position or results of operations. During 1997 and the
first six months of 1998, the costs related to the assessment of,
and preliminary efforts in connection with, its Year 2000 project
and the development of its action plan were not material.
The Company is also communicating with its significant suppliers and
customers to identify critical related issues which need to be
resolved. The Company's total Year 2000 project costs and estimates
to complete include the estimated costs and time associated with the
impact of a third party's Year 2000 issue, and are based on
presently available information. However, there can be no guarantee
that the systems of other companies on which the Company's systems
rely will be converted on a timely basis, or that a failure to
convert by another company, or a conversion that is incompatible
with the Company's systems, would not have a material adverse effect
on the Company.
The costs of the project and the date on which the Company plans to
complete the year 2000 action plan are based upon management's best
estimates, which are derived utilizing numerous assumptions of
future events including the availability of certain resources, third
party modification plans and
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other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the
availability and cost of personnel with necessary expertise in this
area, the ability to identify and correct all relevant computer
codes and similar uncertainties.
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