NewsANSYS today reported results for Q4 and full-year 2012 that, while good, highlight the slow growth in Q4 of the company’s non-Apache products. Since ANSYS has been such an aggressive aggregator of simulation technologies, it wouldn’t surprise me to see more deals as the company looks to boost growth back to the mid-teens. Investors didn’t seem too concerned about Q4, however, sending the share up 2% or so as the market opened.

ANSYS reports on a GAAP, non-GAAP and constant currency non-GAAP basis. GAAP accounting looks at acquisitions a certain way (and other things, too, but we’re concerned with revenue here, so that’s what matters most), so ANSYS opts to put out some non-GAAP data to make comparisons easier. That’s debatable, but for Q4 it doesn’t amount to much of a difference: ANSYS adds a $3.7 million deferred revenue adjustment to the GAAP reported revenue of $220.7 million to get to non-GAAP revenue of $224.5 million. That’s 1.6% of total, so we’ll look at GAAP where we can and non-GAAP where there’s no GAAP total.

I thought the following were the most interesting highlights of the earnings release:

  • The company reported total GAAP revenue of $221 million in Q4, up 11%.  For the year, total revenue was $798 million, up 15%. Esterel contributed $6.2 million in non-GAAP revenue to Q4 and $9.5 million to full-year 2012.
  • Q4 software licence revenue was $142 million, up 11% y/y but was up 18% for 2012 to $502 million. CEO Jim Cashman explained the apparent slowdown this way in prepared remarks: “This is indicative of a lower level of Q4 seasonal influences on new paid-up license revenue as compared to Q4 of 2011, and other historic fourth quarters, when the economic trends and year-end customer spending were more robust.”
  • Parsing the software line, non-GAAP lease revenue in Q4 was $73 million, with revenue from core ANSYS up 8.6% to $57 million and revenue from Apache up 13.6% to $16 million. The paid-up business is still larger, but is growing more slowly: total revenue was $71 million, up 7.7% in total — almost all ANSYS, which was up 7.6% to $70.9 million.
  • Looked at another way, non-GAAP revenue from ANSYS products (regardless of license type) was $ 127.7 million, up 8% from $118.2 million in Q4 of 2011. Subtracting out the revenue contribution from Esterel that were included in the ANSYS line, it appears that ANSYS core revenue was up around 2.5%. Keep in mind that “ANSYS core” now includes ANSYS, Fluent, Ansoft and a host of other brands acquired over the years.
  • Apache’s non-GAAP license revenue (almost all lease), on the other hand, was $16.5 million in Q4, up 15% from a year ago.
  • Maintenance revenue (non-GAAP) was $74.4 million, up 16% in Q4.
  • On a geo basis, non-GAAP revenue from North America was $74 million, up 5% as customers were cautious in their spending. ANSYS says, however, that its sales pipeline is strong, as customers across many of its verticals look to simulation to help improve reliability and safety while reducing material costs — and as, increasingly, mechatronic systems are being built into more and more products.
  • Revenue from Europe was $75 million, up 12% as reported and up 15% in constant currencies (non-GAAP), led by Germany and the UK and growing business from Eastern Europe and Russia.
  • Revenue from the company’s General International Area was also $75 million (non-GAAP), up 15% as reported and up 17% in constant currencies. Japan was the only weak spot mentioned by ANSYS, as revenue there was up 4% as reported and up 8% in constant currencies. Mr. Cashman attributed Japan’s progress to longer-term macroeconomic and political issues, and said that conditions could improve through 2013.
  • The channel didn’t come up as much as it has some years, since the direct/indirect split was consistent at 74% and 26% of revenue, respectively, in both Q4 and FY 2012.
  • ANSYS reported that it had 22 deals in excess of $1 million in Q4, the same number as a year ago. One big difference, however: four customers ended 2012 with annual spend with ANSYS at above $10 million, up from one in 2011.

These are the nuggets that most interested me. Check ANSYS’ info for additional details,  here.

Mr. Cashman and CFO Maria Shields were asked a number of times about sequestration, the looming US fiscal cliff. Both said that they haven’t really heard customers mention it as a specific reason for longer approval cycles but said that customer caution, in general, is “baked into” their guidance for 2013. (Mr. Cashman is nearly as colorful a speaker as Autodesk’s CEO Carl Bass, and perhaps the analysts were hoping for Bass-like quotes about US politicians.)

Both ANSYS executives mentioned that the company is having hard time finding qualified people as it looks to staff up. The company last year said that it wanted to grow a services capability to help customers not with the typical “how do I fix this mesh”, but to help with business process changes that take advantage of simulation improve innovation. If this sounds like you, check ANSYS’ career site.

Looking forward, the company guided to Q1 GAAP revenue of $198.2 millon to $204.2 million, which would be growth of 7% to 10% including about $5 million from Esterel. For 2013, ANSYS sees GAAP revenue in the range of $875 million and $900 million, up 10% to 13%, including roughly $23 million from Esterel. This is a slight tweak of the $881 million to $906 million guidance the company had issued during its Q3 earnings call, pushed down a bit due to currency shifts in the Japanese Yen and British Pound and liften up a bit as ANSYS sees the economy improving slightly in the second half of 2013.

That 2.5% growth rate in ANSYS core license revenue in Q4 is worrisome. ANSYS makes good, leading-edge products that span the CAE spectrum, from FEA to CFD to electromagnetics and beyond, across all of the major manufacturing verticals. Mr. Cashman talks about three drivers of growth for his company: increasing the number of users, the density of use and the intensity of use within his key accounts. Put another way, that’s how many people, how many products and how many cores of ANSYS brands are in use at any given time. He says there’s no real pricing pressure so no meaningful competitive change, so I can’t help but wonder: what’s not working? Is ANSYS selling too complex a solution to too few experts? Trying too hard to shoehorn companies into its business model, and losing good people in the process? Putting too many products into a channel that’s overwhelmed?

ANSYS is hosting an investor day next month, so I hope we’ll learn more, especially how it plans to get to its target of 10% to 13% growth for 2013.