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; 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,
which could increase the volatility of the Company's
revenue 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 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.
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.
In addition, a large percentage of the Company's
common stock is held by investment funds
associated with 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 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
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 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, 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, Structural
Dynamics Research Corporation and Dassault Systemes
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
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 and results of operations.
Dependence on Senior Management and Key Personnel.
The Company is highly dependent upon the
ability and experience of its senior executives and
its key technical, sales and other management employees.
Although the Company has entered into 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 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 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 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 Leases. 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 increase
as a 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
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. These proceedings
include certain state income tax and sales and use
tax examinations. 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.
Year 2000 Computer Systems Compliance. The Company
has developed a plan to address the possible
exposures related to the impact of the Year 2000 on
its products, as well as its internal computer
software and hardware systems. Details of the
Company's Year 2000 Plan, along with further
information regarding costs, timing and risks are
contained in the "Management's Discussion and
Analysis of Financial Condition and Results of
Operations" section of this Form 10-Q under the
heading "Management's Assessment of the Year 2000."
The timely resolution of Year 2000 issues by the
Company and its distributors, customers and
suppliers is based upon certain assumptions and
estimates of the Company and independent third
parties. To the extent these prove to be incorrect
or inaccurate, or the Company or its distributors,
customers or suppliers experience unanticipated
delays or expenses, this could cause the actual
outcome to differ materially from the projected
results.