CIMdata PLM Industry Summary Online Archive

6 August 2009

Financial News

ANSYS, Inc. Reports Second Quarter 2009 Results and Updates Outlook

Highlights

Non-GAAP revenue of $124.2 million and GAAP revenue of $122.0 million

Non-GAAP diluted earnings per share of $0.43, or $0.41 adjusted for certain items, and GAAP diluted earnings per share of $0.30

Operating cash flows of $43.4 million

Non-GAAP operating profit margin of 47.3%; GAAP operating profit margin of 33.3%

ANSYS, Inc. (NASDAQ: ANSS), a global innovator of simulation software and technologies designed to optimize product development processes, today announced second quarter 2009 results.

"While the global environment remains challenging, our revenues were within the range of our outlook with the ANSYS organic business stable in constant currencies. Our non-GAAP earnings exceeded the upper end of the range and were further supplemented by approximately $.02 of favorable tax benefits. We continued to deliver on our stated objectives of strong operating margins and cash flows, even during a time when the exact timing of business intake patterns is difficult to predict," stated Jim Cashman, ANSYS president and CEO.

Cashman continued, "This quarter's results reflect our ongoing commitment to manage our business with strong discipline. At the same time, we have been able to help our customers adjust to the current climate by leveraging ANSYS technology to improve their own competitive positions with better quality, innovative products created in less time and at lower cost. While delivering on commitments, we have also continued to prepare for future growth opportunities and eventual market improvement. With the recent commercial release of ANSYS(R) 12.0 and ANSYS WorkbenchTM 2.0, and upcoming releases of our AnsoftTM suite of products, we are excited about the strength of our product portfolio and believe that we are well-positioned to continue delivering long-term value to our customers and our stockholders."

ANSYS' second quarter 2009 financial results are presented below. The non-GAAP results exclude the income statement effects of stock-based compensation and acquisition-related amortization of intangible assets. The 2009 non-GAAP results also exclude the effects of purchase accounting adjustments to deferred revenue. These non-GAAP results include approximately $1.3 million ($840,000 after tax) of restructuring charges and $2.0 million of tax benefits related to settlements of tax years previously under audit. Excluding these items, the Company's non-GAAP diluted earnings per share for the three and six months ended June 30, 2009, would have been $0.41 and $0.79, respectively.

Non-GAAP and GAAP results reflect:

Total non-GAAP revenue of $124.2 million in the second quarter of 2009 as compared to $111.2 million in the second quarter of 2008; total non-GAAP revenue of $245.6 in the first six months of 2009 as compared to $220.8 million in the first six months of 2008; total GAAP revenue of $122.0 million in the second quarter of 2009 as compared to $111.2 million in the second quarter of 2008; total GAAP revenue of $238.3 million in the first six months of 2009 as compared to $220.8 million in the first six months of 2008;

A non-GAAP operating profit margin of 47.3% in the second quarter of 2009 as compared to 48.4% in the second quarter of 2008; a non-GAAP operating profit margin of 46.7% in the first six months of 2009 as compared to 47.9% in the first six months of 2008; a GAAP operating profit margin of 33.3% in the second quarter of 2009 as compared to 39.4% in the second quarter of 2008; a GAAP operating profit margin of 31.7% in the first six months of 2009 as compared to 38.8% in the first six months of 2008;

Non-GAAP net income of $38.9 million in the second quarter of 2009 as compared to $34.7 million in the second quarter of 2008; non-GAAP net income of 73.4 million in the first six months of 2009 as compared to $67.2 million in the first six months of 2008; GAAP net income of $27.1 million in the second quarter of 2009 as compared to $28.1 million in the second quarter of 2008; GAAP net income of $48.2 million in the first six months of 2009 as compared to $54.0 million in the first six months of 2008; and

Non-GAAP diluted earnings per share of $0.43 in the second quarter of 2009 as compared to $0.42 in the second quarter of 2008; non-GAAP diluted earnings per share of $0.80 in the first six months of 2009 as compared to $0.82 in the first six months of 2008; GAAP diluted earnings per share of $0.30 in the second quarter of 2009 as compared to $0.34 in the second quarter of 2008; GAAP diluted earnings per share of $0.53 in the first six months of 2009 as compared to $0.66 in the first six months of 2008.

The Company's GAAP results reflect stock-based compensation charges of approximately $3.0 million ($2.4 million after tax) or $0.03 diluted earnings per share for the second quarter of 2009 and approximately $6.1 million ($4.9 million after tax) or $0.05 diluted earnings per share for the first six months of 2009. The non-GAAP financial results highlighted above, and the non-GAAP financial outlook for 2009 discussed below, represent non-GAAP financial measures. Reconciliations of these measures to the appropriate GAAP measures, for the three and six months ended June 30, 2009 and 2008, and for the 2009 financial outlook, are included in the condensed financial information included in this release.

Management's Remaining 2009 Financial Outlook

The Company is providing its 2009 revenue and earnings per share guidance below. The earnings per share guidance is provided on both a GAAP basis and a non-GAAP basis. Non-GAAP diluted earnings per share excludes charges for stock-based compensation, purchase accounting adjustments to deferred revenue and acquisition-related amortization of intangible assets.

Third Quarter 2009 Guidance

The Company currently expects the following for the quarter ending September 30, 2009:

GAAP revenue in the range of $123.4 - $129.4 million

Non-GAAP revenue in the range of $124 - $130 million

GAAP diluted earnings per share of $0.27 - $0.31

Non-GAAP diluted earnings per share of $0.40 - $0.42

Fiscal Year 2009 Guidance

The Company currently expects the following for the fiscal year ending December 31, 2009:

GAAP revenue in the range of $501.9 - $519.9 million

Non-GAAP revenue in the range of $510 - 528 million

GAAP diluted earnings per share of $1.13 - $1.26

Non-GAAP diluted earnings per share of $1.66 - $1.76

The preceding third quarter 2009 guidance excludes non-recurring pre-tax charges of approximately $3.2 - $4.5 million associated with continued headcount right-sizing initiatives that management estimates will be substantially finalized during the third quarter. The fiscal year 2009 guidance excludes non-recurring pre-tax charges of approximately $4.5 - $5.8 million related to these activities, $1.3 million of which was recorded in the 2009 second quarter.

These statements are forward-looking and actual results may differ materially. ANSYS is unable to predict the likely duration and severity of the current disruption in the domestic and global economies. Should these economic conditions continue to deteriorate further, it could result in ANSYS not meeting the guidance provided above and ANSYS' operating results and financial performance could be adversely affected. Non-GAAP diluted earnings per share and Non-GAAP revenue are supplemental financial measures and should not be considered as a substitute for, or superior to, diluted earnings per share or revenue determined in accordance with GAAP.

Conference Call Information

ANSYS will hold a conference call at 10:30 a.m. Eastern Time on August 6, 2009 to discuss second quarter results. 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 800-642-1687 (US & Canada) or 709-645-9291 (Int'l) and entering the passcode 19821486. The archived webcast can be accessed, along with other financial information, on ANSYS' website at http://investors.ansys.com.

ANSYS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

June 30, 2009

December 31, 2008

ASSETS:

Cash & short-term investments

$ 254,187

$ 233,875

Accounts receivable, net

50,886

61,823

Goodwill

1,046,019

1,048,003

Other intangibles, net

346,204

373,398

Other assets

137,828

147,415

Total assets

$ 1,835,124

$ 1,864,514

LIABILITIES & STOCKHOLDERS' EQUITY:

Deferred revenue

$ 182,744

$ 166,189

Long-term debt (including current portion)

238,556

279,425

Other liabilities

205,083

236,001

Stockholders' equity

1,208,741

1,182,899

Total liabilities & stockholders' equity

$ 1,835,124

$ 1,864,514

ANSYS, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

2009

June 30,

2008

June 30,

2009

June 30,

2008

Revenue:

Software licenses

$ 73,136

$ 73,915

$ 143,625

$ 147,551

Maintenance and service

48,890

37,331

94,711

73,240

Total revenue

122,026

111,246

238,336

220,791

Cost of sales:

Software licenses

2,366

2,056

4,666

4,403

Amortization of software and

acquired technology

9,001

4,768

17,997

9,952

Maintenance and service

12,193

13,706

24,525

27,082

Restructuring charges

498

-

498

-

Total cost of sales

24,058

20,530

47,686

41,437

Gross profit

97,968

90,716

190,650

179,354

Operating expenses:

Selling, general and administrative

32,570

28,153

66,395

56,862

Research and development

19,909

16,528

39,939

32,486

Amortization

4,021

2,181

8,019

4,351

Restructuring charges

808

-

808

-

Total operating expenses

57,308

46,862

115,161

93,699

Operating income

40,660

43,854

75,489

85,655

Interest expense

(2,941

)

(1,242

)

(6,218

)

(2,227

)

Interest income

360

1,212

929

2,808

Other (expense) income, net

(817

)

(378

)

(1,305

)

554

Income before income tax provision

37,262

43,446

68,895

86,790

Income tax provision

10,125

15,317

20,663

32,807

Net income

$ 27,137

$ 28,129

$ 48,232

$ 53,983

Earnings per share - basic:

Basic earnings per share

$ 0.31

$ 0.36

$ 0.55

$ 0.69

Weighted average shares - basic

87,726

78,503

88,296

78,403

Earnings per share - diluted:

Diluted earnings per share

$ 0.30

$ 0.34

$ 0.53

$ 0.66

Weighted average shares - diluted

91,048

82,083

91,612

81,863

ANSYS, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Measures

(Unaudited)

(in thousands, except percentages and per share data)

Three Months Ended

June 30, 2009

June 30, 2008

As

Non-GAAP

As

Non-GAAP

Reported

Adjustments

Results

Reported

Adjustments

Results

Total revenue

$122,026

$ 2,189(1

)

$124,215

$111,246

$111,246

Operating income

40,660

18,147(2

)

58,807

43,854

$9,999(4

)

53,853

Operating profit margin

33.3

%

47.3

%

39.4

%

48.4

%

Net income

$27,137

$11,734(3

)

$38,871

$28,129

$6,575(5

)

$ 34,704

Earnings per share - diluted:

Diluted earnings per share

$0.30

$0.43

$0.34

$0.42

Weighted average shares - diluted

91,048

91,048

82,083

82,083

(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 $12.9 million of amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list, trademarks and non-compete agreements, a $3.0 million charge for stock-based compensation, as well as the $2.2 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 $6.4 million.

(4) Amount represents $6.8 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, and a $3.2 million charge for stock-based compensation.

(5) Amount represents the impact of the adjustments to operating income referred to in (4) above, adjusted for the related income tax impact of $3.4 million.

ANSYS, INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Measures

(Unaudited)

(in thousands, except percentages and per share data)

Six Months Ended

June 30, 2009

June 30, 2008

As

Non-GAAP

As

Non-GAAP

Reported

Adjustments

Results

Reported

Adjustments

Results

Total revenue

$238,336

$7,263(1

)

$245,599

$220,791

$220,791

Operating income

75,489

$39,228(2

)

114,717

85,655

$19,997(4

)

105,652

Operating profit margin

31.7

%

46.7

%

38.8

%

47.9

%

Net income

$48,232

$25,139(3

)

$73,371

$53,983

$13,186(5

)

$ 67,169

Earnings per share - diluted:

Diluted earnings per share

$0.53

$0.80

$0.66

$0.82

Weighted average shares - diluted

91,612

91,612

81,863

81,863

(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 $25.8 million of amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list, trademarks and non-compete agreements, a $6.1 million charge for stock-based compensation, as well as the $7.3 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 $14.1 million.

(4) Amount represents $14.1 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, and a $5.9 million charge for stock-based compensation.

(5) Amount represents the impact of the adjustments to operating income referred to in (4) above, adjusted for the related income tax impact of $6.8 million.

ANSYS, INC. AND SUBSIDIARIES

Reconciliation of Forward-Looking Guidance

Quarter Ending September 30, 2009

Earnings Per Share Range
- Diluted

U.S. GAAP expectation

$0.27 - $0.31

Adjustment to exclude acquisition-related amortization

$0.08 - $0.09

Adjustment to exclude purchase accounting adjustments to deferred revenue

$0.00 - $0.01

Adjustment to exclude stock-based compensation

$0.03

Non-GAAP expectation

$0.40 - $0.42

ANSYS, INC. AND SUBSIDIARIES

Reconciliation of Forward-Looking Guidance

Year Ending December 31, 2009

Earnings Per Share Range
- Diluted

U.S. GAAP expectation

$1.13 - $1.26

Adjustment to exclude acquisition-related amortization

$0.34 - $0.35

Adjustment to exclude purchase accounting adjustments to deferred revenue

$0.05 - $0.06

Adjustment to exclude stock-based compensation

$0.11 - $0.12

Non-GAAP expectation

$1.66 - $1.76

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 July 31, 2008, ANSYS acquired Ansoft Corporation. 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 $7.5 million was recorded on the opening balance sheet, which was approximately $23.5 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 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 these 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.

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

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