ANSYS today announced results for Q2 and outlook for the rest of the year that sent shares up by over 5% in early trading on the NASDAQ and finally answering some questions about its Apache acquisition. ANSYS reported revenue for the second quarter of 2011, up 18% to $162 million, led by software licenses sales up 19% to $97 million. The company reports that revenue was up across all of its major geographic regions, all major product lines and a broad array of industries.
Mr, Cashman said that Q2 "ended better than expected" as the company continued to see the momentum among its customers that had been building for the last couple for quarters. Sales composition across industries remained diverse, with Mr. Cashman highlighting specific strength in energy, auto, aero, electronics.
During the earnings call we also got to hear from Dr. Andrew Yang of Apache. He said that Apache employees and stakeholders were excited to be part of ANSYS, and that the merger "just makes sense" given both companies’ technology and market leadership. He sees the merger helping Apache to expand its focus from chip-level to system-level, and invest in creating the solutions customers need.
The details of ANSYS’ Q2 (recall that the Apache acquisition closed on August 1, so are not included in ANSYS’ Q2 results):
• Total revenue was $162 million in Q2, up 17%. $9 million of this growth was due to currency effects; in constant currency, revenue in Q2 2011 was up 11%
• The Q2 revenue split of 31% lease, 29% paid-up licenses, 37% maintenance and 3% service is quite consistent with prior periods
• Software license revenue was $97 million, up 18%
• Lease revenue was $51 million, up 14%
• Paid-up revenue was $47 million, up 26%
• Maintenance and services revenue was $65 million, up 16%
• Maintenance revenue was $61 million, up 16%
• Services continues to struggle, with revenue of $4 million up 7%
• By geography, revenue from North America was $51 million, up 6%, a deceleration from prior quarters. Mr. Cashman implied that one shouldn’t read too much into this slowing, as ANSYS tries to report on where software is used, rather than purchased. Mr. Cashman said that US-based companies often coordinating purchase decisions in the US, but deploy the software around the world since the "business climate is better in other areas”. Business with the US Federal government did pick up, "but not as much as in previous years". Mr. Cashman also said that “a couple of deals slipped out of the quarter, but [they were] relatively minor."
• Revenue from Europe was $58 million, up 25% as reported but up 12% in constant currencies.
• Revenue from Japan was $26 million, up 18% as reported but up only 4% in constant currencies. Mr. Cashman said that "Japan is still working its way through catastrophic events of Q1. The ongoing economic uncertainty affects the predictability & timing of deals."
• Finally, revenue from ANSYS’ "Other General International Area" was $28 million, up 30% as reported and up 28% in constant currencies.
• The company reported 8 orders in excess of $1 million, down from 17 in Q1, as well as "12 … 13 … 14 7-figure deals" (up from 8 such deals a year ago) spread across aerospace, automotive, oil and other verticals.
• The split between sales channels held constant, at 72% direct/ 28% indirect. Mr. Cashman sees 60% -70% of ANSYS’ channel partners making the investment over the next two or so to sell Apache products in addition to the current ANSYS product set.
• ANSYS doesn’t break out revenue by product, but said that "mechanical, fluids and HPC products lead the way". The company did not comment on high-end versus mid-range products as it has typically done.
Not to be left out of the cloud buzz, ANSYS said that it "saw continued strength, as well as progress, in our High-Performance Computing offerings and strategy. One such example was the recent announcement from IBM naming ANSYS as one of the ISV partners in their Engineering Solutions for Cloud, which will be available in Q3 of 2011." You may remember that ANSYS acquired a "cloud" computing capacity when it bought Fluent, which provided compute resource offloading services to its CFD customers. Mr. Cashman said that ANSYS has seen significant desire among his customers to expand their use of simulation, and that these cloud (as internal HPC centers or externally provided) infrastructures let customers ramp up availability and usage.
The company issued updated guidance to reflect, as Mr. Cashman put it, the over-performance of Q2, the impact of Apache for Q3 and Q4 and updated currency assumptions. ANSYS now expects Q3 GAAP revenue in the range of $166 million to $174 million and full-year 2011 GAAP revenue of between $671 and $687 million. CFO Maria Shields said that Apache is expected to add $9 million non GAAP in Q3 and $23 million in total for fiscal 2011, implying an ANSYS organic growth rate of something like 13%, pretty much the same as it had forecast at the end of Q1 2011.
It would appear that ANSYS’ acquisitive interests are not yet satisfied. Mr. Cashman told investors that ANSYS plans to “invest in the business for longterm, and will continue to step up strategic M&A” activities. While I understand his point, I worry that investors are missing the big picture. ANSYS has a lot to offer, and these acquisitions tend to focus attention on the newest, shiniest bauble. I would have liked to see some attention paid to the vast majority of ANSYS’ products and sources of revenue. What’s happening with ANSYS? Workbench? Fluent? Ansoft?
I’ve asked the company for any details it can share and will update with anything interesting.