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Company Raises Full Year Outlook -- ANSYS, Inc., a global innovator of simulation software and technologies designed to optimize product development processes, today announced first quarter results. ANSYS President and CEO, Jim Cashman, commenting on the Company's first quarter results, said, "We are pleased by our overall financial performance in the first quarter and are especially encouraged that we were able to accelerate the closure of sales. This sales success, combined with the strength of our business model, directly contributed to first quarter results exceeding our earlier estimates. Our continued ability to deliver solid operating results illustrates that we are committed to our long-term mission of being the global innovator of engineering simulation and technologies." ANSYS' first quarter GAAP results include: - Total revenue of $31.3 million, as compared to $24.6 million in the first quarter of 2003; - Net income of $7.1 million, as compared to $4.3 million in the first quarter of 2003; - Diluted earnings per share of $0.43 as compared to $0.27 in the first quarter of 2003; - Cash flows from operations of $13.2 million, as compared to $11.5 million in the first quarter of 2003; and - Cash and short-term investment balances of $96.3 million, and no debt. Excluding the adverse impact on reported software license revenue of purchase accounting adjustments related to the Company's February 2003 acquisition of CFX and acquisition-related amortization (see discussion below), ANSYS' first quarter adjusted (non-GAAP) results include: - Total adjusted revenue of $31.5 million, as compared to $25.1 million in the first quarter of 2003; - An overall adjusted operating profit margin, excluding total amortization, of 35% as compared to 29% for the first quarter of 2003; and - Adjusted diluted earnings per share of $0.47 as compared to $0.32 for the first quarter of 2003. ANSYS President and CEO, Jim Cashman added, "While our first quarter performance enables us to become more optimistic about our prospects for 2004, we remain committed to a long- term focus and the importance of continued investment in our global sales and marketing infrastructure, expansion of the depth and breadth of our product and service offerings and the strengthening of the business infrastructure to support our growth initiatives." In summarizing the first quarter and the Company's expectations for the balance of 2004, Mr. Cashman said, "We believe that our product offerings and financial position have never been stronger. However, we still have a number of challenges ahead of us. The second and third quarters have traditionally been the most difficult and we do not envision that changing in the near future. In light of this, we will continue to concentrate our energy on providing solutions for total product innovation through simulation and continuing to improve our sales productivity." The adjusted results highlighted above, and the adjusted estimates for 2004 discussed below, represent non-GAAP (Generally Accepted Accounting Principles) financial measures. A reconciliation of these measures to the appropriate GAAP measures for the three months ended March 31, 2004 is included in the condensed financial statements included in this release. A discussion of the impact of these items on the Company's outlook for the remainder of the year is included in the section below titled, "2004 Outlook." Adjustments to Reported GAAP Financial Results - Purchase Accounting Adjustment for Acquired Deferred Revenue: As announced February 26, 2003, ANSYS acquired CFX for approximately $22 million in cash. In accordance with the fair value provisions of EITF 01-3 "Accounting in a Business Combination for Deferred Revenue of an Acquiree," acquired deferred software license revenue of approximately $4.8 million was recorded on the opening balance sheet, which was approximately $3.4 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 impacted the Company's reported GAAP software license revenue 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 adjusted financial information, which excludes the impact of the purchase accounting adjustment. - Acquisition Related Amortization: As previously discussed, the Company completed its acquisition of CFX in February 2003. Prior to that, the Company also acquired CADOE S.A. and ICEM CFD Engineering in November 2001 and August 2000, respectively. These acquisitions have all been accounted for as purchases, resulting in the recording of a significant amount of goodwill and identifiable intangible assets. ANSYS is providing, and has historically provided, its current quarter GAAP results as well as financial results that have been adjusted for the impact of the items described above. The Company believes that these non-GAAP measures provide a consistent basis for comparison between quarters, as they are not influenced by certain non-cash items and are therefore useful to investors in helping them to better understand the Company's operating results. In certain instances, amortization expense associated with acquired intangibles also makes period-to-period comparisons difficult because amortization expense may appear in one period but not in the comparable period. Management uses these non-GAAP financial measures internally to evaluate the Company's performance. 2004 Outlook Based on the results of the first quarter and assumptions relating to currently anticipated investments and expenditures for the remainder of the year, the Company currently projects that full year 2004 GAAP diluted earnings per share will be in the range of $1.61 - $1.65 and adjusted diluted earnings per share will be in the range of $1.76 - $1.80. Management previously forecasted adjusted diluted earnings per share in the range of $1.69 - $1.70 for 2004. The approximate $0.15 difference between the GAAP diluted earnings per share estimate and the adjusted diluted earnings per share estimate includes an estimated $0.14 related to acquisition-related amortization and $0.01 related to the purchase accounting adjustment for acquired deferred revenue. ANSYS will hold a conference call at 10:30 A.M. Eastern Time on May 4, 2004 to discuss first quarter results as well as to provide guidance regarding 2004 business prospects. The dial in number is 800-857-7001 and the passcode is "ANSYS". A replay will be available until May 11, 2004 by dialing 800-731-6045. The conference call will be webcast live as well as archived and can be accessed, along with other financial information, on ANSYS' website, located at www.ansys.com/newsrooms/investor.htm . 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. ANSYS 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. Headquartered in Canonsburg, Pennsylvania U.S.A. with more than 25 strategic sales locations throughout the world, ANSYS, Inc. employs approximately 550 people and distributes its products through a network of channel partners in 40 countries. Visit www.ansys.com for more information. Certain statements contained in the press release regarding matters that are not historical facts, including statements regarding our current estimates for full year 2004 earnings per share, 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. These include the risk of a general economic downturn in one or more of ANSYS' primary geographic markets, the risk that the assumptions underlying ANSYS' earnings per share estimates will change or prove inaccurate, the risk that ANSYS has overestimated its ability to maintain growth and profitability and control costs in the current economic environment, 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 in an unstable economy, risks of problems arising from customer contract cancellations, uncertainties regarding customer acceptance of new products, the risk that ANSYS' strategic plan will not increase shareholder value over the long run, 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 benefits, the risk that changes in the price of our common stock or the existence of competing uses for available cash will affect our willingness to continue the stock repurchase program, uncertainties regarding fluctuations in quarterly results, including uncertainties regarding the timing of orders from significant customers and regional economies, 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 2003 Annual Report and Form 10-K and the most recent quarterly report on Form 10-Q. ANSYS, Inc. is committed to providing the most open and flexible analysis solutions to meet customer requirements for engineering software in today's competitive marketplace. ANSYS, Inc. partners with leading design software suppliers to develop state-of-the-art CAD-integrated products. ANSYS and its global network of channel partners provide sales, support and training for customers. Information about ANSYS, Inc. and its products can be found on the Worldwide Web at www.ansys.com . ANSYS, DesignSpace, ANSYS DesignModeler, ANSYS DesignXplorer VT, ANSYS DesignXplorer, ANSYS ProFEA, ANSYS Emax, ANSYS Workbench environment, Multi- field, CFX, AI*Environment, AI*NASTRAN, CADOE S.A. and any and all ANSYS, Inc. product names referenced on any media, manual or the like, are registered trademarks or trademarks of subsidiaries of ANSYS, Inc. located in the United States or other countries. NASTRAN is a registered trademark of the National Aeronautics Space Administration. All other product names mentioned are trademarks or registered trademarks of their respective manufacturers. Reconciliation of Non-GAAP Measures This earnings release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of the adjusted (non- GAAP) financial measures to the most directly comparable GAAP financial measures. Adjusted software license revenue, adjusted operating profit margin, adjusted net income and adjusted diluted earnings per share are presented in this earnings release because management uses this information in evaluating the results of the continuing operations of business and believes that this information provides the users of the financial statements a valuable insight into the operating results. Additionally, management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results. ANSYS, INC. AND SUBSIDIARIES Consolidated Statements of Income (in thousands, except per share data) (Unaudited) Three months ended March 31, March 31, 2004 2003 Revenue: Software licenses $16,324 $12,442 Maintenance and service 15,008 12,158 Total revenue 31,332 24,600 Cost of sales: Software licenses 1,337 1,179 Amortization of software and acquired technologies 755 525 Maintenance and service 3,083 2,894 Total cost of sales 5,175 4,598 Gross profit 26,157 20,002 Operating expenses: Selling and marketing 6,054 5,512 Research and development 6,347 5,656 Amortization 287 223 General and administrative 3,499 2,644 Total operating expenses 16,187 14,035 Operating income 9,970 5,967 Other income, net 230 534 Income before income tax provision 10,200 6,501 Income tax provision 3,060 2,222 Net income $7,140 $4,279 Earnings per share - basic: Basic earnings per share $0.47 $0.29 Weighted average shares - basic 15,315 14,627 Earnings per share - diluted: Diluted earnings per share $0.43 $0.27 Weighted average shares - diluted 16,461 15,584 ANSYS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures For the three months ended March 31, 2004 (in thousands, except per share data) (Unaudited) Adjusted As Reported Adjustments Results Revenue: Software licenses $16,324 $122(a) $16,446 Maintenance and service 15,008 - 15,008 Total revenue 31,332 122 31,454 Cost of sales: Software licenses 1,337 - 1,337 Amortization of software and acquired technologies 755 (617)(b) 138 Maintenance and service 3,083 - 3,083 Total cost of sales 5,175 (617) 4,558 Gross profit 26,157 739 26,896 Operating expenses: Selling and marketing 6,054 - 6,054 Research and development 6,347 - 6,347 Amortization 287 (287)(b) - General and administrative 3,499 - 3,499 Total operating expenses 16,187 (287) 15,900 Operating income 9,970 1,026 10,996 Other income, net 230 - 230 Income before income tax provision 10,200 1,026 11,226 Income tax provision 3,060 359(c) 3,419 Net income $7,140 $667 $7,807 Earnings per share - basic: Basic earnings per share $0.47 $0.51 Weighted average shares - basic 15,315 15,315 Earnings per share - diluted: Diluted earnings per share $0.43 $0.47 Weighted average shares - diluted 16,461 16,461 (a) 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." (b) Amount represents amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list and non-compete agreements. (c) Amount represents the income tax impact of the revenue and amortization expense adjustments referred to in (a) and (b) above. ANSYS, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Measures For the three months ended March 31, 2003 (in thousands, except per share data) (Unaudited) Adjusted As Reported Adjustments Results Revenue: Software licenses $12,442 $454(a) $12,896 Maintenance and service 12,158 - 12,158 Total revenue 24,600 454 25,054 Cost of sales: Software licenses 1,179 - 1,179 Amortization of software and acquired technologies 525 (398)(b) 127 Maintenance and service 2,894 - 2,894 Total cost of sales 4,598 (398) 4,200 Gross profit 20,002 852 20,854 Operating expenses: Selling and marketing 5,512 - 5,512 Research and development 5,656 - 5,656 Amortization 223 (223)(b) - General and administrative 2,644 - 2,644 Total operating expenses 14,035 (223) 13,812 Operating income 5,967 1,075 7,042 Other income, net 534 - 534 Income before income tax provision 6,501 1,075 7,576 Income tax provision 2,222 376(c) 2,598 Net income $4,279 $699 $4,978 Earnings per share - basic: Basic earnings per share $0.29 $0.34 Weighted average shares - basic 14,627 14,627 Earnings per share - diluted: Diluted earnings per share $0.27 $0.32 Weighted average shares - diluted 15,584 15,584 (a) Amount represents the revenue not reported during the period as a result of the purchase accounting adjustment associated with EITF 01-03, "Accounting in a Business Combination for Deferred Revenue of an Acquiree." (b) Amount represents amortization expense associated with intangible assets acquired in business acquisitions, including amounts primarily related to acquired software, customer list and non-compete agreements. (c) Amount represents the income tax impact of the amortization expense adjustment referred to in (a) above. ANSYS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) (Unaudited) March 31, December 31, 2004 2003 ASSETS: Cash & short-term investments $96,283 $83,014 Accounts receivable, net 18,653 20,028 Other assets 78,520 76,304 Total assets $193,456 $179,346 LIABILITIES & STOCKHOLDERS' EQUITY: Deferred revenue $43,787 $37,874 Other liabilities 12,589 14,398 Stockholders' equity 137,080 127,074 Total liabilities & stockholders' equity $193,456 $179,346