ANSYS reported revenue yesterday for the fourth quarter and all of 2011. In a nutshell, Q4 was terrific by pretty much any measure and only in part due to the contribution of the Apache acquisition. Wall Street was less impressed as tax adjustments lowered net income in Q4 and ANSYS tempered its outlook for 2012. As a result, as was the case with Dassault Systèmes earlier in the month, the share price fell after the news was released.

To summarize:

  • Fourth quarter GAAP revenue was $198 million, up 19% from a year ago and beating the company’s own estimate of $189 million to $195 million. On a non-GAAP basis, Apache contributed $15 million, so organic ANSYS growth was 13%.
  • Total license revenue as reported was $128 million, up 22%.
  • Maintenance and service revenue as reported was $70 million, up 13%.
  • On a non-GAAP basis, lease revenue was up 7% excluding Apache (which is almost exclusively leased). The paid-up business (almost all ANSYS) grew 17% non-GAAP while maintenance (also almost exclusively ANSYS) grew 14%. On a non-GAAP basis, revenue was almost evenly split in Q4, 33% lease; 33% paid-up; 32% maintenance; 2% services.
  • ANSYS reports that it closed 22 orders in excess of $1 million in Q4, up from 14 in Q3 and up from 14 a year ago. The company also says that it saw its first 8-figure customer in 2011, meaning that one customer purchased $xx,xxx,xxx-worth of products and services through the year. During the Q&A session on the analyst call, CEO Jim Cashman clarified that this was “the accumulation over the year of the new and recurring business from that one customer.” Later, Mr. Cashman said that no one customer accounts for even 5% of revenue, so that means the 8-figure customer top out at $35 million. Hmm. How many licenses of ANSYS does that equate to? A LOT.
  • On a geographic basis non-GAAP revenue from North America was $71 million (up 23% year/year), or 35% of the business, with ANSYS core revenue up 8%. ANSYS says it saw particular success in aerospace, automotive, electronics, industrials and energy.
  • Revenue (NON-GAAP) from Europe was $67 million, up 19% in total, and up 16% on an organic basis. The company cited performance in Germany, up 24% organically and up 25% overall, as a standout, while “ongoing economic concerns in certain markets” that delayed some purchases. In Europe, ANSYS says it saw success in automotive, aerospace, energy and industrials.
  • The General International Area contributed $65 million in non-GAAP revenue, up 23% in total with organic ANSYS revenue up 15%. Japan, the company’s second largest single-nation market, is still affected by the supply chain disruptions caused by flooding in Thailand; even so, revenue there was up 13% in Q4 in total and up 7% on an organic basis. ANSYS says that Korea, India, China and Brazil report growth of 35% in constant currency (although it’s not clear if that’s in aggregate or if each country performed that well). Regarding China, specifically, Mr. Cashman told investors that “We’ve got a renewed, strengthened relationship with the channel partner there, and we’ve also continued to build our own direct presence. We see that as the size of business grows, the relationships we build require touch points at the local level for advance support and services.”
  • Fiscal year 2011 GAAP revenue was $691 million, up 19% and also beating its target from November of $683 million to $689 million.
  • For the year, the split of lease/paid-up/maintenance/services shows the impact of Apache’s inclusion for less than half of the year, with the proportions at 32%/30%/35%/3%.
  • ANSYS says that its sales channels’ contributions are relatively constant at 74% direct/26% indirect for the year. By comparison, for FY10, sales were 73% direct.
  • The company’s recurring revenue base is still roughly 2/3 of the business, at 65% in Q4 and 68% for FY11.

ANSYS also updated its outlook for 2012, saying that it expects Q1 revenue of between $183 million and $190 million, and full-year revenue of $805 million to $827 million — a slight decrease from November’s estimates of $815 million to $840 million. CFO Maria Shields said that the contribution from Apache would be around $15 million in Q1 and $62 million to $63 million for the year. That places the core ANSYS growth rate at about 10% to 13% for 2012. Not bad at all, and not yet at the point at which ANSYS usually makes an acquisition to bolster growth.

Even with all this good stuff, ANSYS was deemed to “miss” fourth quarter analysts’ estimates because a $0.05 per share charge related to a deferred tax expense from its Japanese subsidiaries caused earnings per share to be below expectations. Adjusted for that charge, as well as other one-time items, net income was up 7% to $65 million, or $0.68 per share. Analysts had apparently expected $0.70 per share in profits for the quarter, on $199 million in revenues. The reported results and analyst expectations seem close enough to me, but the share price fell around 4% after ANSYS’ press release hit the wires.

What was really interesting about ANSYS’ flood of data for Q4 and F11 was the subtext of how the company intends to take its broad portfolio to the market. ANSYS plans to increased sales headcount by about 10% even though it sees uncertainty in the economic outlook. If the company plans to grow revenue 10% to 13% in 2012, while increasing its direct sales headcount by 10%, that would appear to place a disproportionate burden on ANSYS’ indirect partners. But those numbers may not tell the whole story: Mr. Cashman said that the emerging economies of Brazil, India, China and Korea are increasingly significant markets where channel partners are especially important. Faster growth there, including a buildout of indirect sales capacity, could mean a slight shift in the direct/indirect mix for 2012.

One point Mr. Cashman made during the earnings call that warrants repeating is that ANSYS channel is not a group of box-pushers; these are service providers and software resellers who train, implement and offer design services with a much higher degree of sophistication than is typical in engineering software. As Mr. Cashman said, “The kind of relationships and the technical expertise that it takes to support customers at the level we require, and to understand the breadth of our technology — these people don’t really grow on trees.” ANSYS is not going to do anything to jeopardize these longterm partners.

About CAE data management (EKM to ANSYS, SLM to Simulia, SimManager to MSC and so on), Mr. Cashman said that ANSYS customers are still in the tire-kicking stage: “It’s one of the things where a lot of time you don’t realize you have a problem until the usage picks up and then all the clutter and the chaos starts. Even when people become aware that they have problems, they are not always aware of what the solution is and how they can utilize that to solve their problems.” ANSYS want us to think they are taking a laid-back approach to selling a data management solution that many competitors see as crucial to their customers’ success (and their own financial futures); I would bet that sales teams are in each account, pointing out just how much more effective the design process could be, if only they could find the latest simulation results. At least, I hope they are.

ANSYS is hosting an investor day next week. I hope to learn how they sell this broad portfolio of loosely-connected solutions to their customers, and how customers react to the idea of a single-source provider for such critical assets — at some point, customers may see benefit in buying best-of niche products from ANSYS competitors, but when? Too, Ansys has $470 million in cash on hand (and about $130 million in debt); what might they buy next?