ANSYS reported Q3 results that show continued improvement over 2009, though perhaps dampened as the market awaited the arrival of the 13.0 release of products and as pent-up demand from last year is exhausted.
•Total revenue was $139.8 million, up 9% from a year ago and up 1% sequentially.
•On a geographic basis, North America was up 2% over last year; Europe, up 1%; and Asia, up 26%.
•Total software revenue was up 8% to $82.6 million. Looking at revenue by source, the lease business grew 1% over last year to $46.2 million; paid-up grew 18% to $36.5 million.
•The maintenance and service line was up 10% to $57.2 million. Maintenance revenue was up 10% to $53.2 million while services continued to decline, down 1% to $4 million. Maintenance renewal rates have returned to the historical 90% level.
•The company reports that it closed 6 seven-figure deals in Q3 2010 as compared to 2 in Q3 2009.
In order to improve its effectiveness in Japan, during Q3 ANSYS merged its subsidiaries there. ANSYS says that this will change its income tax burden — and that will affect net income, diluted earnings per share and cash flows in future periods. How much? Cash flow will increase by around $40 million; net income by $7 million and diluted EPS by $0.07 for fiscal 2011. As CFO Maria Shields said, “Simply put, this is a good thing.”
ANSYS CFO Jim Cashman said on the earnings call that some geographies are still suffering from the economic slowdown, with customers carefully considering all purchases. These customers do see CAE as integral to their product development processes, and continue to invest with ANSYS — albeit at a slower pace.
An interesting note from the call: ANSYS reports on the geography where the software is actually used, as opposed to where it is purchased. This means that the slow growth in US reflects the fact that many of ANSYS’ long-time customers have off-shored work to be near their clients or establish offices closer to newly-minted engineering talent. Mr. Cashman believes that revenue growth in North America would have been near the typical norms in constant currency if this data had been presented on a “where-bought” basis. My data shows this to be on the order of 15% year/year.
I attended the ANSYS user conference in Boston last month, and came away impressed with the ANSYS 13.0 enhancements. More importantly, the users I spoke with were excited about 13.0, the integration of Ansoft into the ANSYS product suite — and intended to adopt 13.0 as soon as ANSYS releases it and their workflows allow.
ANSYS has seen year/year growth slow during 2010: 17% in Q1, 13% in Q2, 9% in Q3. Last year was a very strange year, so perhaps these comparisons don’t portend what they usually do, but ANSYS typically makes an acquisition to get to a higher level of revenue growth when this dips to under 10%. No announcements were made on today’s call and nothing was teased.
ANSYS also gave guidance for Q4 and 2011. For Q4, ANSYS expects revenue to be in the range of $157 million to $163 million for an annual total of $570.7 million to $576.7 million; that would be growth of about 11% for the year. For 2011, ANSYS sees total revenue of about $635 million to $660 million, or growth of 11% to 15%.