ANSYS reported Q1 2010 results that it characterized as “over-performance against its outlook”: total revenue of $136 million, with gains in all regions and all categories of business. Perhaps most important, the core business is described as “solid”, and the maintenance business as “returning to pre-downturn levels”. ANSYS has raised its full-year guidance a percentage point or from February levels, and now expects to see revenue of between $560 million to $580 million for 2010.
In comments during the conference call held to discuss the earnings release, CEO Jim Cashman said (paraphrasing), “Q1 marks an upturn in customer sentiment and spending. We see this improvement continuing to build modestly through the year, leading us to raise guidance — but the pace and timing of the recovery has ongoing pockets of uncertainty. Sales cycles are still protracted, and not back to pre-2009 levels.”
• Total revenue of $136 million is up 17% from a year ago (on a reported, GAAP basis). Foreign exchange rate changes contributed $4 million to reported revenue, about 3% of the growth.
• The company recorded a dozen 7-figure deals, up from 8 in Q1 2009. For Q1 2010, 21% of this big-deal revenue is classified as “new” — meaning that most large deals seem to center on perpetual/maintenance sales and the bulk of the revenue from these deals (79%) is deferred revenue. The deals were “1/2 from North America, 1/2 from Asia and 1-2 from Europe”.
• Total software license revenue was $82 million, up 17% from a year ago. Within this, the paid-up business continued to lead the way, with revenue of $37 million (or 27% of total revenue), up 37% from Q1 2009 GAAP and non-GAAP* levels. Most Ansoft users prefer the perpetual format and though ANSYS has moved some of these to a lease basis, it is still heavily weighted towards perpetual. The lease business continues to struggle, with revenue of $45 million in Q1 2010, up 2% when compared to Q1 2009 non-GAAP* revenue. On a GAAP basis, the lease business was up 3%.
• Maintenance and services revenue was $55 million, up 19%. Of this total, maintenance was $50 million, up 9% from Q1 2009 non-GAAP* and up 21% on a GAAP basis. CEO Cashman said that maintenance renewal rates have returned to the history “mid-90% level” after dipping last year. Services revenue was up a modest 2% to $5 million.
• On a geographic basis, (and comparing Q1 2010 GAAP to Q1 2009 non-GAAP, which adds back revenue not included in the GAAP totals because of purchase accounting rules), Europe led growth, up 13% to $48 million. Within Europe, growth was strongest in Germany, which was up 15%. The company’s General International Area was up 12% to $41 million, within which Japan was up 11.7%. North America was up 11% to $47 million. Sales of electromagnetics products helped drive some of the improvement in Japan.
• Looking at geographic performance comparing Q1 2010 GAAP to Q1 2009 GAAP as reported in the company’s 10Q filing with the SEC leads to a slightly different picture: Revenue from the US was up 16%; Germany down 4% even as Europe in total rose 14%; and Japan was up 20% to boost the rest of GIA to 12% growth.
• ANSYS has nearly $400 million in cash and short-term securities at the end of March 2010. It still owes about $200 million in connection with the Ansoft acquisition.
The strength of Q1 results led ANSYS increased its guidance for the rest of the year. For Q2, the company now sees revenue in the range of $135 million to $140 million, an increase of 11% to 14%. For the year, ANSYS believes revenue will be between $560 million to $580 million, up 8% to 12%, assuming a gradual improvement in the economy. For those keeping track, prior guidance for the year had been between $550 million and $575 million, so this is mostly an increase in the bottom end of the range.
One interesting note from the 10Q that has nothing to do with anything but is one of those things that just requires a comment: “The Company has a $4.7 million line of credit available on a purchase card.” Home Depot? A Ferrari dealer? Nordstroms? What can you do with that kind of credit limit ….
ANSYS’ results are very impressive, especially coming against a Q1 2009 that wasn’t as terrible as for many others in the industry. ANSYS reports that it sees competitors at about 40% of its sales engagements. Flip this around: 60% of the time ANSYS is not competing for the sale because the “buy” decision has already been made; only the details need to be worked out. That’s an enviable position to be in and one that will serve ANSYS well for the rest of the year.
But the challenge to its competitors is clear: why aren’t you in there?
* ANSYS uses non-GAAP comparatives for much of 2009 because of the way it accounted for the Ansoft acquisition. For Q1 2009, these non-GAAP totals increase revenue components by a total of $5 million for Q1 2009. ANSYS does this because it believes these comparisons more accurately represent its business.