ANSYS reported mixed results today: on the one hand, the company reported Q4 revenue of $150.4 million, handily beating the projected $136 million to $142 million and sweeping it to a 2009 revenue total of $517 million, up 8%. It should be noted that this includes Ansoft for all of 2009 as compared to 5 months of 2008. Excluding Ansoft, GAAP revenue was down 3.5% for the year. ANSYS also tweaked its guidance for 2010, taking its growth objective from 8%-13% to 6%-11%, or $550 million to $575 million.

CEO Jim Cashman started the earnings call by saying that “the best part about 2009 is that it’s over”. He then went through a rather confusing mix of Q4 and full-year 2009 commentary, summarized below:

• ANSYS recorded 14 seven-figure deals in Q4 2009, nearly double the 8 of Q4 2009. The deals were roughly evenly split between North America and Europe; one or two were predominantly for Ansoft but almost all were portfolio sales (meaning for a number of ANSYS products, including ANSYS, Fluent, Ansoft and others). 36% of the aggregate value of these 14 deals was recorded as new license revenue during Q4; the rest was recorded as deferred revenue.
• For Q4, total GAAP revenue was $150.6 million, up from $135.3 million in the fourth quarter of 2008.
• Revenue from software licenses was $95.6 million, up 6%.
• Maintenance and services revenue was up 22% to $54.7 million as maintenance renewal rates remain strong, “well in the 90%+ range” per CEO Cashman.
• Core ANSYS revenue was up nearly 7% in Q4, with strong performance in Europe offsetting declines in Japan. Ansoft revenue was down 2% in the quarter with large declines in Japan and North America not offset by gains in other geographies. Answering the implied “Was this acquisition a good idea?”, CEO Cashman said that Ansoft is more affected by disruptions in the global economy, with its reliance on electronics customers and Japan as markets, but ANSYS still sees potential as electromechanical device development will only increase.
• The lease business grew slightly to $47.5 million in Q4, but was down 3% in constant currencies — the result of a “cumulative hangover from lease pressure in 2009” per CEO Cashman. Once again software revenue was led by sales of paid-up licenses, which grew 8% on a combined basis and 11% for the core ANSYS product set. Customers have recently been investing more in paid-up licenses, perhaps out of a need to “own” key tools in uncertain times.
• Maintenance revenue was up 5% but services continued to be hard-hit, declining nearly 20% to $4.9 million for Q4.
• ASPs remained stable even with megadeals causing volume discounts.

For 2009, total GAAP revenue was $516.9 million in 2009 as compared to $478.3 million in 2008; the Ansoft acquisition (closed July 31, 2008) skews this statistic as revenue from the core ANSYS products declined 3.5% to $443 million. For the year,

• Software license revenue was $315.6 million, down less than 1% as the high end grew disproportionately because, per CEO Cashman, “the cost of being right is far dwarfed by the cost of being wrong” – which I interpret to mean that the cost of licenses for advanced simulation is a cheap hedge against product failure-related costs. Cashman also cited the increased use of HPC as consuming more licenses. [Ed — Of course, users hate that part of the revenue model.]
• Maintenance and services revenue was up 26% to $210.3 million.
• Revenue from the ANSYS product set declined across the board geographically, with the largest decline in Europe although the company says revenue from that region was up in constant currencies.
• The repeatable base still strong, with recurring revenue at 66% of total for both 2008 and 2009.
• As proportions of total revenue, the lease business made up 35% with paid-up at 25% of total revenue. This changed somewhat during the year, as paid-up sales were lower in early 2009 but picked up towards the end of the year.
• While no details were offered, ANSYS’ direct/indirect split is still at 75%/25% for Q4 and for the year, implying that ANSYS’ channel did reasonably well in a difficult year.

Looking ahead, CEO Cashman still sees industry leaders in each of ANSYS’ customer verticals being most forward-looking and therefore most receptive to the promise of CAE. Industries and companies with longer product design cycles are starting to show early signs of activity, anticipating increasing demand in their end-markets. He also sees a trend towards energy optimization across verticals; opportunity in heavy equipment, infrastructure and materials increasing (perhaps due to infrastructure stimulus spending); and growing interest from the auto industry in multiphysics for alternate drives, control systems, etc. — “areas where the inclusion of Ansoft in our portfolio serves us well”.

The company said that its deal pipeline continues to improve, with sign of “growing interest and the paper flow process improving”, according to CFO Maria Shields. She also said that the “pipeline is ramping up and is stronger than it was a year ago — last year it was frozen as people tried to figure out where their market was going. There’s still volatility in that we don’t know if a deal is going to close in Q1 or Q2 but it’s much better than a year ago.”

ANSYS did make clear two key element of its strategy: it’s interested in the high-end and doesn’t see Autodesk or other CAD vendors as poaching on their turf and it feels its approach to simulation data management is unique. CEO Cashman was asked whether the recent trend of low growth in the low-end products concerned him. He responded by saying: “We’ve alway said we want to solve the tough problems. Once we figure that out, we want to make sure that more and more people can use these tools. We also want to take the ease-of-use concepts developed in the low-end tools to the high-end. Low end is an entry-point; the high end is accuracy, fidelity, really modeling what’s gong on in the problem. Low-end is a stable seeding ground for us, to move people to the high-end products over time. Want to meet their current needs and allow them to grow as their needs grow.”

Cashman also said that ANSYS doesn’t see “simulation data management” as a “data” issue, but rather one of managing inferences: “Simulation data management is not so much a data management issue, more about knowledge, inference and parameter management. How do you sort through massive amounts of information to find the one cogent piece that describes your problem? This gets worse as simulation complexity increases, as the number of simulations increase and number of people doing simulations increase. We’ve already got a seamless, native capability to manage this process. It’s a fundamental architecture and approach difference.”

For Q1, ANSYS anticipates revenue in the range of $125 million to $131 million. For the full year 2010 it sees revenue in the range of between $550 million and $575.0 million, with a modest build throughout the year. ANSYS sees 2010 as a year of investment in technical innovation and sales and marketing, including a double digit growth in number of sales reps and ongoing improvements in sales productivity.

At mid-day, the US stock markets were down about 1.5%; ANSYS shares were down 3% on this news.

Update, 6PM Thursday 25 February: the NASDAQ closed roughly flat with Wednesday and ANSYS shares recovered to close down just under 1%.