6
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.
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 36 independent, regional ANSYS
Support Distributors ("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 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
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'' 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
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 complete the Year 2000 project
within the next year, but 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 over the next two years to have a
material effect on its financial position or results
of operations. During 1997 and the first quarter 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 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.