BIG DATA
ANSYS reports continued growth momentum
Jim Cashman, President and CEO commented on the company's third quarter 2007 performance by saying, "This was a very solid quarter for ANSYS. Most notably, this quarter's performance stands out as it represents an 'apples- to-apples' comparison of our business with Non-GAAP organic revenue growth at 21.5% (18% in constant currencies). We believe that the strength of the results hints at increasing potential and validates our strategy to engage our customers at new levels, driven by the breadth and depth of our world-class simulation capabilities. It also reinforces the importance of our continued focus on integration to build the foundation for the future." Cashman continued, "While a great deal of work remains to be done, our strategies and vision have continued to be validated. The opportunity over the long haul appears to be solidifying, and we believe that the ANSYS trajectory of future technology, coupled with our focus on execution and understanding the business drivers, should enable us to cope with the challenges of the future. This is a real testament to all of our employees, partners and expanding array of customers that have propelled us in this endeavor. As we close in on this year, our outlook is positive, our business momentum is good and we are continuing to invest to support the needs of our customers and our business, all with an eye toward generating long-term shareholder value." ANSYS' third quarter and year-to-date 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. The nine-month results for 2006 also exclude a one-time charge related to in-process research and development associated with the acquisition of Fluent. Non-GAAP and GAAP results reflect:
- Total non-GAAP revenue of $94.0 million in the third quarter of 2007 as compared to $77.4 million in the third quarter of 2006; total non-GAAP revenue of $275.9 million in the first nine months of 2007 as compared to $191.6 million in the first nine months of 2006; total GAAP revenue of $94.0 million in the third quarter of 2007 as compared to $70.1 million in the third quarter of 2006; total GAAP revenue of $274.1 million in the first nine months of 2007 as compared to $178.4 million in the first nine months of 2006;
- A non-GAAP operating profit margin of 43.8% in the third quarter of 2007 as compared to 37.1% in the third quarter of 2006; a non-GAAP operating profit margin of 43.3% in the first nine months of 2007 as compared to 39.0% in the first nine months of 2006; a GAAP operating profit margin of 33.6% in the third quarter of 2007 as compared to 18.3% in the third quarter of 2006; a GAAP operating profit margin of 32.4% in the first nine months of 2007 as compared to 9.1% in the first nine months of 2006;
- Non-GAAP net income of $25.0 million in the third quarter of 2007 as compared to $18.2 million in the third quarter of 2006; non-GAAP net income of $73.0 million in the first nine months of 2007 as compared to $49.2 million in the first nine months of 2006; GAAP net income of $18.7 million in the third quarter of 2007 as compared to GAAP net income of $8.4 million in the third quarter of 2006; GAAP net income of $53.1 million in the first nine months of 2007 as compared to GAAP net income of $1.9 million in the first nine months of 2006; and
- Non-GAAP diluted earnings per share of $0.31 in the third quarter of 2007 as compared to $0.23 in the third quarter of 2006; non-GAAP diluted earnings per share of $0.90 in the first nine months of 2007 as compared to $0.66 in the first nine months of 2006; GAAP diluted earnings per share of $0.23 in the third quarter of 2007 as compared to GAAP diluted earnings per share of $0.10 in the third quarter of 2006; GAAP diluted earnings per share of $0.66 in the first nine months of 2007 as compared to GAAP diluted earnings per share of $0.03 in the first nine months of 2006.
The Company's GAAP results reflect stock-based compensation charges of approximately $ 2.1 million ($1.7 million after tax) or $0.02 diluted earnings per share for the third quarter of 2007 and approximately $6.4 million ($5.3 million after tax) or $0.06 diluted earnings per share for the first nine months 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 and nine months ended September 30, 2007 and 2006, and for the 2007 and 2008 financial outlook, is included in the condensed financial information included in this release. On May 14, 2007, the Company announced that its Board of Directors approved a 2-for-1 stock split of the Company's common shares. The stock split was payable in the form of a stock dividend and entitled each stockholder of record at the close of business on May 25, 2007 to receive one share of common stock for every outstanding share of common stock held on that date. The stock dividend was distributed on June 4, 2007. The share data and earnings per share data in this press release give effect to the stock split, applied retroactively, to all periods presented. Management's Remaining 2007 and Initial 2008 Financial Outlook The Company has provided its 2007 and 2008 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 $1.7 million during the third quarter of 2007 related to disqualified incentive stock options; however, only $36,000 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 its income tax positions. The adoption of FIN 48 resulted in an increase to income tax expense in the third quarter of 2007 of $591,000 and a corresponding adverse impact on the effective tax rate of 1.9%. Income taxes as a percentage of GAAP earnings before income taxes were approximately 39.6% in the third quarter of 2007 as compared to 25.3% in the third 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. Fourth Quarter 2007 Guidance The Company currently expects the following for the quarter ending December 31, 2007: -- GAAP revenue in the range of $99 - $101 million -- Non-GAAP revenue in the range of $99 - $101 million -- GAAP diluted earnings per share of $0.23 - $0.24 -- Non-GAAP diluted earnings per share of $0.32 - $0.33 Fiscal Year 2007 Guidance The Company currently expects the following for the fiscal year ending December 31, 2007: -- GAAP revenue in the range of $373 - $375 million -- Non-GAAP revenue in the range of $375 - $377 million -- GAAP diluted earnings per share of $0.89 - $0.91 -- Non-GAAP diluted earnings per share of $1.22 - $1.23 Fiscal Year 2008 Guidance The Company currently expects the following for the fiscal year ending December 31, 2008: -- GAAP revenue in the range of $425 - $432 million -- Non-GAAP revenue in the range of $425 - $432 million -- GAAP diluted earnings per share of $1.04 - $1.11 -- Non-GAAP diluted earnings per share of $1.39 - $1.42 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 November 1, 2007 to discuss third quarter results. To participate in the live conference call, dial 913-312-0841 or 888-218-8184 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 its Web site.