ANSYS hits Q4 targets, but plans to do better

ANSYS keeps rolling along, relying on a mix of products and end-industries to insulate it somewhat from broader macroeconomic winds. The company reported Q4 revenue of $236 million, up 7% from a year ago, with software revenue up 4% to $148 million and maintenance and services revenues of $88 million, up 12%. For the year, revenue was $861 million, up 8%. That’s pretty good and allows ANSYS to claim that it, once again hit revenue targets (and beat its profit target thanks to a one-time tax thingy). But it’s not great — investors expected slightly better performance and stronger guidance for 2014 and sent the share down 1% or so on the news. The details:

• In Q4, revenue from software licenses was $148 million, up 4%. On a non-GAAP basis, revenue from the lease business was up 6% to $77 million while the perpetual business held steady at $71 million
• Maintenance revenue was up 10% t0 $82 million
• Services revenue was $7 million, up 16%
• By region, revenue from North America was $78 million, up 11% despite what ANSYS terms as “caution in certain markets”. The company says it saw little to no year-end budget flush in 2013 but has a strong sales pipeline going forward.
• Revenue from Europe was up 14% to $84 million. Germany continues to be the best performer, with revenue up 15% as reported to $25 million. ANSYS said it also saw “an increase in business coming from Italy, Spain and Russia.”
• ANSYS’ “General International Area” reported revenue of $71 million, down 6% overall as strength in Korea couldn’t stem the tide against weakness in China, India and Brazil, and a sharp 16% decline in Japan as reported, though Japan was up 2% in constant currency. During the earnings conference call, CEO Jim Cashman said that performance in Asia was both self-inflicted and external; he said that the company recently added new senior sales leadership and expects increasing sales productivity in the region to be a priority going into 2014.
• ANSYS reported 33 orders in excess of $1 million, up nicely from the 22 recorded a year ago, and up, too, from the 15 reported in Q3 2013. For 2013 as a whole, ANSYS reports closing 4 deals in excess of $10 million; I couldn’t find a comparable for 2012
• As per usual, direct sales accounted for 75% of revenue in Q4

ANSYS also tweaked its guidance for 2014 to take into account its acquisition of Reaction Design in January. The company now sees Q1 revenue in the range of $211 million t0 $219 million; for the year, ANSYS now sees revenue between $935 million and $966 million, or $1 million to $2 million higher than earlier stated. Given that Mr. Cashman said Reaction Design had revenue of about $4 million, the company sees the rest of its business a tiny bit more cautiously than it did in November. In any event, the full-year revenue forecast implies growth of 9% to 12%. What does it all mean? In constant currencies (cc) ANSYS revenue grew 7% in Q4 and 9% for the fiscal year, with cc revenue growth in all 3 of its geographic regions for both periods. That’s just OK and, if ANSYS’ track record is anything to go by, usually precedes a major acquisition. Mr. Cashman, of course, didn’t say that; he said that he’s committed to “driving double-digit organic top line growth” without going into details. ANSYS has a large, impressive portfolio that it can cross-sell into existing accounts, and many types of simulation and price points with which to target new ones, so double-digit growth should be achievable — but it should have been in 2013, too, and that didn’t happen. Perhaps ANSYS management will share more details during its investor day on March 12.