ANSYS, Inc. Delivers Record First Quarter Operating Results
Celebrates Major Milestone of One Year Anniversary of Fluent Acquisition
Company Raises Full Year Outlook
SOUTHPOINTE, Pa., May 3 /PRNewswire-FirstCall/ -- ANSYS, Inc. (Nasdaq:
ANSS), a global innovator of simulation software and technologies designed to
optimize product development processes, today announced a new Company record for
first quarter non-GAAP operating results.
"We are very excited to start off 2007 with record first quarter operating
results. These results are the outcome of the persistent dedication and efforts
of the global ANSYS team and demonstrate our continued progress in executing on
our long-term vision," stated Jim Cashman, ANSYS President and CEO. "We entered
into this fiscal year with enthusiasm and momentum, and we continue to be
pleased with the measurable progress against our integration plans for the
Fluent acquisition, particularly as we have reached another important milestone
with the one year anniversary this week."
ANSYS' first quarter 2007 financial results are presented below. The
non-GAAP results exclude the income statement effects of stock-based
compensation, purchase accounting for deferred revenue and acquisition-related
amortization of intangible assets. Non-GAAP and GAAP results reflect:
-- Total non-GAAP revenue of $89.6 million in the first quarter of 2007
and total GAAP revenue of $87.9 million in the first quarter of 2007
as compared to $46.0 million in the first quarter of 2006;
-- A non-GAAP operating profit margin of 42.6% in the first quarter of
2007 as compared to 43.4% in the first quarter of 2006; a GAAP
operating profit margin of 30.5% in the first quarter of 2007 as
compared to 38.7% in the first quarter of 2006;
-- Non-GAAP net income of $23.5 million in the first quarter of 2007 as
compared to $14.5 million in the first quarter of 2006; GAAP net
income of $16.2 million in the first quarter of 2007 as compared to
GAAP net income of $12.9 million in the first quarter of 2006; and
-- Non-GAAP diluted earnings per share of $0.58 in the first quarter of
2007 as compared to $0.42 in the first quarter of 2006; GAAP diluted
earnings per share of $0.40 in the first quarter of 2007 as compared
to GAAP diluted earnings per share of $0.38 in the first quarter of
2006.
The Company's GAAP results reflect stock-based compensation charges of
approximately $2.2 million ($1.8 million after tax) or $0.04 diluted earnings
per share for the first quarter of 2007.
The non-GAAP financial results highlighted above, and the non-GAAP
financial outlook for 2007 discussed below, represent non-GAAP financial
measures. A reconciliation of these measures to the appropriate GAAP measures,
for the three months ended March 31, 2007 and 2006, and for the 2007 financial
outlook, is included in the condensed financial information included in this
release.
Continuing his comments, Cashman noted, "We remain committed to provide an
unparalleled array of world-class engineering simulation solutions as
demonstrated by the recent delivery of new product releases to the market, which
included ANSYS 11.0. This release represents the continued advancement of our
integrated, best-in-class computer-aided engineering (CAE) functionality,
including advanced analysis, meshing, optimization, multiphysics and multibody
dynamics."
Cashman concluded, "Looking ahead, our first quarter results lay the
groundwork for continued momentum in 2007, and as such, we are increasing our
outlook for the year. We believe that we are well positioned to invest and
capitalize on the global market opportunities for growth, leveraging our
extensive customer base, strategic vision, technology leadership, and solid
business model, to drive technological and operational excellence."
Management's Remaining 2007 Financial Outlook
The Company has provided its 2007 revenue and earnings per share guidance
below. The revenue and earnings per share guidance is provided on both a GAAP
basis and a non-GAAP basis. Non-GAAP revenue and non-GAAP diluted earnings per
share exclude charges for stock-based compensation, as well as the income
statement effects of purchase accounting for deferred revenue and acquisition-
related amortization of intangible assets.
As required by SFAS No. 123R and guidance issued by the Securities and
Exchange Commission, effective January 1, 2006, the Company records expenses and
tax benefits related to stock-based compensation. As a result, the GAAP
estimates for earnings per share provided below reflect the anticipated impact
of stock-based compensation. The Company issues both nonqualified and incentive
stock options; however, incentive stock options comprise a significant portion
of outstanding stock options. The tax benefits associated with incentive stock
options are unpredictable, as they are predicated upon an award recipient
triggering an event that disqualifies the award and which then results in a tax
deduction to the Company. GAAP requires that these tax benefits be recorded at
the time of the triggering event. The triggering events for each option holder
are not easily projected. In order to estimate the tax benefit related to
incentive stock options, the Company makes many assumptions and estimates,
including the number of incentive stock options that will be exercised during
the period by U.S. employees, the number of incentive stock options that will be
disqualified during the period and the fair market value of the Company's stock
price on the exercise dates. Each of these items is subject to significant
uncertainty. Additionally, a significant portion of the tax benefits related to
disqualified incentive stock options is accounted for as an increase to equity
(additional paid-in capital) rather than as a reduction in income tax expense,
especially in the periods most closely following the adoption date of SFAS No.
123R. Although all such benefits continue to be realized through the Company's
tax filings, this accounting treatment has the effect of increasing tax expense
and reducing net income. For example, the Company realized a tax benefit of $1.3
million during the first quarter of 2007 related to disqualified incentive stock
options; however, only $99,000 of such amount was recorded as a reduction in
income tax expense. Because there are significant limitations in estimating the
impact of SFAS No. 123R, including those discussed above, the actual impact of
stock-based compensation on GAAP earnings per share may differ materially from
the estimated amounts included in the guidance below.
Impact of Adoption of FIN 48
Effective January 1, 2007, the Company adopted FASB Interpretation No.
(FIN) 48, "Accounting for Uncertainty in Income Taxes" - an Interpretation of
SFAS No. 109, "Accounting for Income Taxes." Pursuant to FIN 48, ANSYS
identified, evaluated and measured the amount of income tax benefits to be
recognized for all of its income tax positions. The adoption of FIN 48 resulted
in an increase to income tax expense in the first quarter of 2007 of $584,000
and a corresponding adverse impact on the effective tax rate of 2.3%. Income
taxes as a percentage of GAAP earnings before income taxes were approximately
37% in the first quarter of 2007 as compared to 34% in the first quarter of
2006. This rate fluctuates over time based on the income tax rates in the
various jurisdictions in which the Company operates, and based on the level of
profits in those jurisdictions.
Second Quarter 2007 Guidance
The Company currently expects the following for the quarter ending June
30, 2007:
-- GAAP revenue in the range of $87 - $89 million
-- Non-GAAP revenue in the range of $87 - $89 million
-- GAAP diluted earnings per share of $0.35 - $0.38
-- Non-GAAP diluted earnings per share of $0.52 - $0.53
Fiscal Year 2007 Guidance
-- The Company currently expects the following for the fiscal year
ending December 31, 2007:
-- GAAP revenue in the range of $363 - $366 million
-- Non-GAAP revenue in the range of $365 - $368 million
-- GAAP diluted earnings per share of $1.46 - $1.53
-- Non-GAAP diluted earnings per share of $2.14 - $2.17
Non-GAAP revenue and diluted earnings per share are supplemental financial
measures and should not be considered as a substitute for, or superior to,
revenue and diluted earnings per share determined in accordance with GAAP.
ANSYS will hold a conference call at 10:30 a.m. Eastern Time on May 3,
2007 to discuss first quarter results. To participate in the live conference
call, dial 913-312-1264 or 888-802-2278 and enter the passcode "ANSYS" or
"26797". The call will be recorded and a replay will be available approximately
two hours after the call ends. The replay will be available for one week by
dialing 719-457-0820 or 888-203-1112 and entering the passcode "ANSYS" or
"26797". The archived webcast can be accessed, along with other financial
information, on ANSYS' website at http://www.ansys.com/corporate/investors.asp .
Use of Non-GAAP Measures
The Company provides non-GAAP revenue, non-GAAP operating income, non-GAAP
operating profit margin, non-GAAP net income and non-GAAP diluted earnings per
share as supplemental measures to GAAP regarding the Company's operational
performance. These financial measures exclude the impact of certain items and,
therefore, have not been calculated in accordance with GAAP. A detailed
explanation of each of the adjustments to such financial measures is described
below. This press release also contains a reconciliation of each of these
non-GAAP financial measures to its most comparable GAAP financial measure.
Management uses non-GAAP financial measures (a) to evaluate the Company's
historical and prospective financial performance as well as its performance
relative to its competitors, (b) to set internal sales targets and spending
budgets, (c) to allocate resources, (d) to measure operational profitability and
the accuracy of forecasting, (e) to assess financial discipline over operational
expenditures and (f) as an important factor in determining variable compensation
for management and its employees. In addition, many financial analysts that
follow our Company focus on and publish both historical results and future
projections based on non-GAAP financial measures. We believe that it is in the
best interest of our investors to provide this information to analysts so that
they accurately report the non- GAAP financial information. Moreover, investors
have historically requested and the Company has historically reported these
non-GAAP financial measures as a means of providing consistent and comparable
information with past reports of financial results.
While management believes that these non-GAAP financial measures provide
useful supplemental information to investors, there are limitations associated
with the use of these non-GAAP financial measures. These non-GAAP financial
measures are not prepared in accordance with GAAP, are not reported by all of
the Company's competitors and may not be directly comparable to similarly titled
measures of the Company's competitors due to potential differences in the exact
method of calculation. The Company compensates for these limitations by using
these non-GAAP financial measures as supplements to GAAP financial measures and
by reviewing the reconciliations of the non-GAAP financial measures to their
most comparable GAAP financial measures.
The adjustments to these non-GAAP financial measures, and the basis for
such adjustments, are outlined below:
Purchase accounting for deferred revenue. As announced on May 1, 2006,
ANSYS acquired Fluent Inc. in a series of mergers. In accordance with the fair
value provisions of EITF 01-3, "Accounting in a Business Combination for
Deferred Revenue of an Acquiree," acquired deferred revenue of approximately
$31.5 million was recorded on the opening balance sheet, which was approximately
$20.1 million lower than the historical carrying value. Although this purchase
accounting requirement has no impact on the Company's business or cash flow, it
adversely impacts the Company's reported GAAP software license revenue primarily
for the first twelve months post- acquisition. In order to provide investors
with financial information that facilitates comparison of both historical and
future results, the Company has provided non-GAAP financial measures which
exclude the impact of the purchase accounting adjustment. The Company believes
that this non-GAAP financial adjustment is useful to investors because it allows
investors to (a) evaluate the effectiveness of the methodology and information
used by management in its financial and operational decision-making and (b) to
compare past and future reports of financial results of the Company as the
revenue reduction related to acquired deferred revenue will not recur when
related annual lease licenses and software maintenance contracts are renewed in
future periods.
Amortization of intangibles from acquisitions and its related tax impact.
The Company incurs amortization of intangibles, included in its GAAP
presentation of amortization of software and acquired technology, and
amortization expense, related to various acquisitions it has made in recent
years. Management excludes these expenses and their related tax impact for the
purpose of calculating non-GAAP operating income, non-GAAP operating profit
margin, non-GAAP net income and non-GAAP diluted earnings per share when it
evaluates the continuing operational performance of the Company because these
costs are fixed at the time of an acquisition, are then amortized over a period
of several years after the acquisition and generally cannot be changed or
influenced by management after the acquisition. Accordingly, management does not
consider these expenses for purposes of evaluating the performance of the
Company during the applicable time period after the acquisition, and it excludes
such expenses when making decisions to allocate resources. The Company believes
that these non-GAAP financial measures are useful to investors because they
allow investors to (a) evaluate the effectiveness of the methodology and
information used by management in its financial and operational decision-making
and (b) compare past reports of financial results of the Company as the Company
has historically reported these non-GAAP financial measures.
Stock-based compensation expense and its related tax impact. The Company
incurs expense related to stock-based compensation included in its GAAP
presentation of cost of software licenses, cost of maintenance and service,
research and development expense and selling, general and administrative
expense. Although stock-based compensation is an expense of the Company and
viewed as a form of compensation, management excludes these expenses for the
purpose of calculating non-GAAP operating income, non-GAAP operating profit
margin, non-GAAP net income and non-GAAP diluted earnings per share when it
evaluates the continuing operational performance of the Company. Specifically,
the Company excludes stock-based compensation during its annual budgeting
process and its quarterly and annual assessments of the Company's and
management's performance. The annual budgeting process is the primary mechanism
whereby the Company allocates resources to various initiatives and operational
requirements. Additionally, the annual review by the board of directors during
which it compares the Company's historical business model and profitability as
it relates to the planned business model and profitability for the forthcoming
year excludes the impact of stock-based compensation. In evaluating the
performance of senior management and department managers, charges related to
stock-based compensation are excluded from expenditure and profitability
results. In fact, the Company records stock-based compensation expense into a
stand-alone cost center for which no single operational manager is responsible
or accountable. In this way, management is able to review on a period-to-period
basis each manager's performance and assess financial discipline over
operational expenditures without the effect of stock-based compensation. The
Company believes that the non-GAAP financial measures are useful to investors
because they allow investors to (a) evaluate the Company's operating results and
the effectiveness of the methodology used by management to review the Company's
operating results, and (b) review historical comparability in its financial
reporting, as well as comparability with competitors' operating results.
Acquired in-process research and development. The Company incurs in-
process research and development expenses when technological feasibility for
acquired technology has not been established and no future alternative use for
such technology exists. Management excludes these expenses and their related tax
impact for the purpose of calculating non-GAAP financial measures when it
evaluates the continuing operational performance of the Company because these
costs do not relate to the Company's ongoing operations and generally cannot be
changed or influenced by management at the time of or after the acquisition.
Accordingly, management does not consider these expenses for purposes of
evaluating the performance of the Company during the applicable time period
after the acquisition, and it excludes such expenses when making decisions to
allocate resources. The Company believes that this non-GAAP financial adjustment
is useful to investors because it allows investors to (a) evaluate the
effectiveness of the methodology and information used by management in its
financial and operational decision-making and (b) to compare past and future
reports of financial results of the Company as the expense related to in-process
research and development is a one-time item recorded on the date of acquisition.
Non-GAAP financial measures are not in accordance with, or an alternative
for, generally accepted accounting principles in the United States. The
Company's non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for comparable GAAP financial measures, and should
be read only in conjunction with the Company's consolidated financial statements
prepared in accordance with GAAP.
Pursuant to the requirements of Regulation G, the Company has provided a
reconciliation of the non-GAAP financial measures to the most directly
comparable GAAP financial measures as listed below:
GAAP Reporting Measure Non-GAAP Reporting Measure
Revenue Non-GAAP Revenue
Operating Profit Non-GAAP Operating Profit
Operating Profit Margin Non-GAAP Operating Profit Margin
Net Income Non-GAAP Net Income
Diluted Earnings Per Share Non-GAAP Diluted Earnings Per Share
About ANSYS, Inc.
ANSYS, Inc., founded in 1970, develops and globally markets engineering
simulation software and technologies widely used by engineers and designers
across a broad spectrum of industries. The Company focuses on the development of
open and flexible solutions that enable users to analyze designs directly on the
desktop, providing a common platform for fast, efficient and cost- conscious
product development, from design concept to final-stage testing and validation.
The Company and its global network of channel partners provide sales, support
and training for customers. Headquartered in Canonsburg, Pennsylvania U.S.A.
with more than 40 strategic sales locations throughout the world, ANSYS, Inc.
and its subsidiaries employ approximately 1,400 people and distribute ANSYS
products through a network of channel partners in over 40 countries. Visit
http://www.ansys.com for more information.
Certain statements contained in the press release regarding matters that
are not historical facts, including, but not limited to, statements regarding
our projections for revenue and earnings per share for the second quarter and
fiscal year 2007 (both GAAP and non-GAAP to exclude purchase accounting for
deferred revenue, acquisition-related amortization and stock-based compensation
expense), statements about management's views concerning the Company's prospects
in the remainder of 2007 and subsequent years and the effect of the Fluent
integration on these prospects, statements and projections relating to the
impact of stock-based compensation, statements regarding management's use of
non-GAAP financial measures, statements regarding the impact of the integration
of the Fluent operations, statements regarding our long-term vision, statements
regarding our commitment to providing world-class solutions and the significance
of the release of ANSYS 11.0, statements regarding our momentum in 2007, and
statements regarding our ability to invest and capitalize on market
opportunities, including through leveraging our customer base, strategic vision,
technology leadership, and business model, to drive technological and
operational excellence, are "forward-looking" statements (as defined in the
Private Securities Litigation Reform Act of 1995). Because such statements are
subject to risks and uncertainties, actual results may differ materially from
those expressed or implied by such forward-looking statements. All
forward-looking statements in this press release are subject to risks and
uncertainties, including, but not limited to, the risk of a general economic
downturn in one or more of ANSYS' primary geographic regions, the risk that the
assumptions underlying ANSYS' anticipated revenues and expenditures will change
or prove inaccurate, the risk that ANSYS has overestimated its ability to
maintain growth and profitability and control costs, uncertainties regarding the
demand for ANSYS' products and services in future periods, the risk that ANSYS
has overestimated the strength of the demand among its customers for its
products, risks of problems arising from customer contract cancellations,
uncertainties regarding customer acceptance of new products, the risk that
ANSYS' operating results will be adversely affected by possible delays in
developing, completing, or shipping new or enhanced products, risks that
enhancements to the Company's products may not produce anticipated sales,
uncertainties regarding fluctuations in quarterly results, including
uncertainties regarding the timing of orders from significant customers, and
other factors that are detailed from time to time in reports filed by ANSYS,
Inc. with the Securities and Exchange Commission, including ANSYS, Inc.'s 2007
Annual Report and Form 10-K, as amended. We undertake no obligation to publicly
update or revise any forward-looking statements, whether changes occur as a
result of new information or future events, after the date they were made.
ANSYS, ANSYS Workbench, AUTODYN, CFX, FLUENT and any and all ANSYS, Inc.
brand, product, service and feature names, logos and slogans are registered
trademarks or trademarks of ANSYS, Inc. or its subsidiaries in the United States
or other countries. All other brand, product, service and feature names or
trademarks are the property of their respective owners.
ANSYS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31, 2007 March 31, 2006
Revenue:
Software licenses $ 57,212 $ 26,752
Maintenance and service 30,647 19,259
Total revenue 87,859 46,011
Cost of sales:
Software licenses 2,212 1,490
Amortization of software and
acquired technology 5,342 908
Maintenance and service 11,326 4,470
Total cost of sales 18,880 6,868
Gross profit 68,979 39,143
Operating expenses:
Selling, general and administrative 26,891 11,839
Research and development 13,072 9,357
Amortization 2,195 128
Total operating expenses 42,158 21,324
Operating income 26,821 17,819
Interest (expense) income (1,121) 1,516
Other income 84 182
Income before income tax provision 25,784 19,517
Income tax provision 9,633 6,604
Net income $ 16,151 $ 12,913
Earnings per share - basic:
Basic earnings per share $ 0.42 $ 0.40
Weighted average shares - basic 38,683 32,122
Earnings per share - diluted:
Diluted earnings per share $ 0.40 $ 0.38
Weighted average shares - diluted 40,367 34,165
ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
For the three months ended March 31, 2007
(in thousands, except percentages and per share data)
(Unaudited)
Non-GAAP
As Reported Adjustments Results
Total revenue: $87,859 $ 1,760(1) $89,619
Operating income 26,821 11,342(2) 38,163
Operating profit margin 30.5% 42.6%
Net income $16,151 $ 7,302(3) $23,453
Earnings per share - diluted:
Diluted earnings per share $ 0.40 $ 0.58
Weighted average shares - diluted 40,367 40,367
(1) Amount represents the revenue not reported during the period as a
result of the purchase accounting adjustment associated with EITF
01- 3, "Accounting in a Business Combination for Deferred Revenue of
an Acquiree."
(2) Amount represents $7.4 million of amortization expense associated
with intangible assets acquired in business acquisitions, including
amounts primarily related to acquired software, customer list and
non-compete agreements, a $2.2 million charge for stock-based
compensation in accordance with SFAS No. 123R, "Share-Based
Payment," as well as the $1.8 million adjustment to revenue as
reflected in (1) above.
(3) Amount represents the impact of the adjustments to operating income
referred to in (2) above, adjusted for the related income tax impact
of $4.0 million.
ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
For the three months ended March 31, 2006
(in thousands, except percentages and per share data)
(Unaudited)
Non-GAAP
As Reported Adjustments Results
Total revenue: $46,011 -- $46,011
Operating income 17,819 $ 2,145(1) 19,964
Operating profit margin 38.7% 43.4%
Net income $12,913 $ 1,581(2) $14,494
Earnings per share - diluted:
Diluted earnings per share $ 0.38 $ 0.42
Weighted average shares - diluted 34,165 34,165
(1) Amount represents $922,000 of amortization expense associated with
intangible assets acquired in business acquisitions, including
amounts primarily related to acquired software, customer list and
non-compete agreements, as well as $1.2 million charge for
stock-based compensation in accordance with SFAS No. 123R,
"Share-Based Payment."
(2) Amount represents the impact of the adjustments to operating income
referred to in (1) above, adjusted for the related income tax impact
of $564,000.
ANSYS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
March 31, December 31,
2007 2006
ASSETS:
Cash & short-term investments $117,543 $104,486
Accounts receivable, net 43,550 37,341
Goodwill 430,509 428,959
Other intangibles, net 197,051 204,115
Other assets 116,603 103,142
Total assets $905,256 $878,043
LIABILITIES & STOCKHOLDERS' EQUITY:
Deferred revenue $120,506 $101,226
Long-term debt (including current portion) 114,802 123,320
Other liabilities 115,932 118,704
Stockholders' equity 554,016 534,793
Total liabilities & stockholders' equity $905,256 $878,043
ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Forward-Looking Guidance
Quarter Ending June 30, 2007
Earnings Per Share Range
- Diluted
U.S. GAAP expectation $0.35 - $0.38
Adjustment to exclude purchase accounting
adjustments to deferred revenue -
Adjustment to exclude acquisition-related
amortization $0.11 - $0.12
Adjustment to exclude stock-based
compensation $0.04 - $0.05
Non-GAAP expectation $0.52 - $0.53
ANSYS, INC. AND SUBSIDIARIES
Reconciliation of Forward-Looking Guidance
Year Ending December 31, 2007
Earnings Per Share Range
- Diluted
U.S. GAAP expectation $1.46 - $1.53
Adjustment to exclude purchase accounting
adjustments to deferred revenue $0.03
Adjustment to exclude acquisition-related
amortization $0.43 - $0.45
Adjustment to exclude stock-based
compensation $0.18 - $0.20
Non-GAAP expectation $2.14 - $2.17
SOURCE ANSYS, Inc.
-0- 05/03/2007
/CONTACT: Investors, Lisa O'Connor, +1-724-514-1782,
lisa.oconnor@ansys.com, or Media, Kelly Wall, +1-724-514-3076,
kelly.wall@ansys.com, both of ANSYS, Inc. /
/Web site: http://www.ansys.com/
(ANSS)