ANSYS reported Q2 results today that met the company’s earlier forecasts but foreshadowed a coming slowdown. Total revenue for Q2 was $137.8 million, up 12.9% from $122.0 million a year ago and up 15% for the year-to-date — showing the same slowing that was reported by DS and PTC last week.
ANSYS continues to mix GAAP for 2010 with non-GAAP results for 2009, making a real comparison difficult. The difference in 2009s GAAP and non-GAAP results for the year to date is about $2.2 million (and is defined as “revenue not reported during the period as a result of the purchase accounting adjustment associated with accounting for deferred revenue in business combinations” in a footnote in the earnings release) — so less than 1% of revenue in the first six months of 2010. Let’s pretend that GAAP and non-GAAP for 2009 are the same. In that case,
Looking at revenue components,
• software revenue was up 12% to $81.7 million
• maintenance and services combined were up 15% to $56 million. Within these two categories,
• the lease business continues to struggle, with revenue essentially flat at $45 million in Q2
• paid-up license sales remained strong, with revenue up 30% to $37 million
• services revenue continued to decline, down 14% to $4 million.
The company reported that its renewal rate held at over 90%, and that the high end products continue to lead sales.
ANSYS reports signing 8 seven-figure deals in Q2 (up from 4 a year ago), of which the majority of revenue was deferred to future periods. CEO Jim Cashman said that these are typically expansions in existing accounts, where the benefits of ANSYS’ product are proven.
Business was good around the word in Q2 but appears to be slowing in North America and Europe and accelerating in ANSYS’ General International Area (predominantly Asia):
• the geographic star in Q2 as the General International Area led by Japan, up 22% in Q2 to $22 million
• revenue from North America was up nearly 9% to $48 million
• revenue from Europe was up over 3% to $47 million, led by solid growth in Germany and in other countries but pulled down by a 10% decline in the United Kingdom. Mr. Cashman said that the decline in the UK was due to currency effects but also to the change in government and the new austerity measures it has imposed.
The channel mix changed slightly in Q2, as more resellers become certified on new products and as the Asia economy picks up. In Q2, the channel represented 28% of sales, up from 25% in Q1 2010.
Ansoft is seeing a good recovery, contributing to ANSYS’ growth and momentum in Asia.
In answer to a question about R&D expenses in Q2 (up 7% from last year), CFO Maria Shields said that it was actually lower than ANSYS’ plan, since it was tough to find qualified people for its job openings. Send in those resumes!
ANSYS tightened but didn’t really change guidance for the remainder of the year. For the third quarter, ANSYS expects total revenue in the range of $137 million to $142.0 million and for the year, revenue of between $565 million and $580 million — an increase of $5 million in the bottom end of the range. Investors clearly expected a better outlook, with the share price down 6% during the earnings call.