Company Increases FY 2018 Guidance for
Revenue (ASC 606), EPS and Operating Cash Flow
ANSYS, Inc. (NASDAQ: ANSS), today reported third quarter 2018 GAAP
and non-GAAP revenue growth of 10% and 11%, respectively, or 10%
and 12%, respectively, in constant currency. Recurring revenue,
which comprises lease license and annual maintenance revenue,
totaled 77% of revenue for the third quarter on both a GAAP and
non-GAAP basis. For the third quarter, the Company reported growth
in diluted earnings per share of 36% and 39% on a GAAP and non-GAAP
basis, respectively.
Ajei Gopal, ANSYS President and CEO, commented,
“Q3 was a record-breaking quarter for ANSYS as we
delivered double-digit growth across revenue, EPS and ACV. The
digital revolution is driving customers to transform their product
development processes to achieve greater agility, innovation and
cost synergies, and ANSYS’ simulation solutions are enabling
customers to achieve these seemingly divergent objectives
with increased functionality and usability across our entire
product portfolio. Our strategy of Pervasive Simulation is
working."
Gopal added, "We continue to invest to deliver
advanced capabilities, such as our newly available, patent-pending
Mosaic meshing technology designed to provide a significant
improvement in our fluids workflow and user experience. In the
third quarter, we extended our technology leadership with the
release of ANSYS 19.2, which incorporates the technology from our
recent OPTIS acquisition and reflects the integration of ANSYS
VRXPERIENCE and ANSYS SPEOS into our portfolio. Importantly, in an
ever-evolving industry, we remain committed to improving the way
customers experience our technology by providing them with new,
modern workflow advancements that enhance the quality and speed of
their simulations."
Maria Shields, ANSYS CFO, stated, “Our continued
focus on execution and disciplined approach to investment drove
another quarter of record financial results across all key
financial metrics. We are pleased with our strong performance
through the first nine months of 2018 and, looking ahead, remain
confident in our ability to continue driving momentum in our
business. This is evidenced by our increased outlook for full year
2018 revenue (ASC 606), EPS and operating cash flow.”
Financial Results
ANSYS' third quarter and year-to-date 2018 and
2017 financial results are presented below. The 2018 and 2017
non-GAAP results exclude the income statement effects of
acquisition adjustments to deferred revenue, stock-based
compensation, amortization of acquired intangible assets,
acquisition-related transaction costs, restructuring charges and
measurement-period adjustments related to the 2017 Tax Cuts and
Jobs Act.
GAAP and non-GAAP results under ASC 606:
|
GAAP |
|
Non-GAAP |
(in millions, except percentages and per share
data) |
Q3 2018 |
|
Q3 2018 |
Revenue |
$ |
289.4 |
|
|
$ |
293.0 |
|
Net income |
$ |
89.3 |
|
|
$ |
112.9 |
|
Earnings per share |
$ |
1.04 |
|
|
$ |
1.31 |
|
Operating profit margin |
32.1 |
% |
|
44.0 |
% |
|
GAAP |
|
Non-GAAP |
(in millions, except percentages and per share
data) |
YTD 2018 |
|
YTD 2018 |
Revenue |
$ |
878.2 |
|
|
$ |
885.1 |
|
Net income |
$ |
266.2 |
|
|
$ |
331.8 |
|
Earnings per share |
$ |
3.09 |
|
|
$ |
3.86 |
|
Operating profit margin |
33.8 |
% |
|
45.5 |
% |
GAAP and non-GAAP results under ASC 605:
|
GAAP |
|
Non-GAAP |
(in millions,
except percentages and per share data) |
Q3 2018 |
|
Q3 2017 |
|
% Change |
|
Q3 2018 |
|
Q3 2017 |
|
% Change |
Revenue |
$ |
302.0 |
|
|
$ |
275.6 |
|
|
10 |
% |
|
$ |
307.9 |
|
|
$ |
276.8 |
|
|
11 |
% |
Net income |
$ |
100.1 |
|
|
$ |
73.6 |
|
|
36 |
% |
|
$ |
125.4 |
|
|
$ |
91.3 |
|
|
37 |
% |
Earnings per share |
$ |
1.16 |
|
|
$ |
0.85 |
|
|
36 |
% |
|
$ |
1.46 |
|
|
$ |
1.05 |
|
|
39 |
% |
Operating profit
margin |
35.0 |
% |
|
38.5 |
% |
|
|
|
46.7 |
% |
|
48.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP |
|
Non-GAAP |
(in millions,
except percentages and per share data) |
YTD 2018 |
|
YTD 2017 |
|
% Change |
|
YTD 2018 |
|
YTD 2017 |
|
% Change |
Revenue |
$ |
880.6 |
|
|
$ |
792.9 |
|
|
11 |
% |
|
$ |
892.0 |
|
|
$ |
794.7 |
|
|
12 |
% |
Net income |
$ |
268.3 |
|
|
$ |
206.7 |
|
|
30 |
% |
|
$ |
337.1 |
|
|
$ |
255.1 |
|
|
32 |
% |
Earnings per share |
$ |
3.12 |
|
|
$ |
2.38 |
|
|
31 |
% |
|
$ |
3.92 |
|
|
$ |
2.94 |
|
|
33 |
% |
Operating profit
margin |
34.0 |
% |
|
36.6 |
% |
|
|
|
45.9 |
% |
|
47.8 |
% |
|
|
The non-GAAP financial results highlighted
above, and the non-GAAP financial outlook for 2018 discussed below,
represent non-GAAP financial measures. Reconciliations of these
measures to the appropriate GAAP measures, for the three and nine
months ended September 30, 2018 and 2017, and for the 2018
financial outlook, are included in the condensed financial
information included in this release.
Other Financial Metrics
(in millions,
except percentages) |
Q3 2018 |
|
Q3 2017 |
|
% Change |
|
% Change in Constant Currency |
Annual contract value
(ACV) |
$ |
257.8 |
|
|
$ |
228.7 |
|
|
13% |
|
|
13% |
|
Operating cash
flows |
$ |
110.0 |
|
|
$ |
88.9 |
|
|
24% |
|
|
|
(in millions,
except percentages) |
YTD 2018 |
|
YTD 2017 |
|
% Change |
|
% Change in Constant Currency |
ACV |
$ |
844.7 |
|
|
$ |
743.2 |
|
|
14% |
|
|
11% |
|
Operating cash
flows |
$ |
353.5 |
|
|
$ |
327.0 |
|
|
8% |
|
|
|
ACV is composed of the following:
- the annualized value of maintenance and lease contracts with
start dates or anniversary dates during the period, plus
- the value of perpetual license contracts with start dates
during the period, plus
- the annualized value of fixed-term services contracts with
start dates or anniversary dates during the period, plus
- the value of work performed during the period on
fixed-deliverable services contracts.
Management's 2018 Financial Outlook
The Company's fourth quarter and fiscal year
2018 revenue and diluted earnings per share guidance is provided
below. The revenue and diluted earnings per share guidance is
provided on both a GAAP and a non-GAAP basis, and in accordance
with both ASC 606 and ASC 605. Non-GAAP financial measures exclude
the income statement effects of acquisition adjustments to deferred
revenue, stock-based compensation, amortization of acquired
intangible assets, acquisition-related transaction costs and
measurement-period adjustments related to the Tax Cuts and Jobs
Act.
Fourth Quarter 2018 Guidance
The Company currently expects the following for the quarter
ending December 31, 2018:
(in millions,
except per share data) |
GAAP |
|
Non-GAAP |
Revenue under ASC
606 |
$349.5 - $369.5 |
|
$352.0 - $372.0 |
Diluted earnings per
share under ASC 606 |
$1.10 - $1.29 |
|
$1.39 - $1.55 |
Revenue under ASC
605 |
$332.8 - $342.8 |
|
$337.0 - $347.0 |
Diluted earnings per
share under ASC 605 |
$0.95 - $1.05 |
|
$1.26 - $1.32 |
Commentary on Fiscal Year 2018 Revenue
Guidance
The Company's FY 2018 revenue guidance presented below reflects
a slight adverse currency impact as compared to the exchange rates
provided with the Company's guidance in August 2018.
Fiscal Year 2018 Guidance
The Company currently expects the following for the fiscal year
ending December 31, 2018:
(in millions,
except per share data) |
GAAP |
|
Non-GAAP |
Revenue under ASC
606 |
$1,227.6 -
$1,247.6 |
|
$1,237.0 -
$1,257.0 |
Diluted earnings per
share under ASC 606 |
$4.19 - $4.38 |
|
$5.25 - $5.41 |
Revenue under ASC
605 |
$1,213.4 -
$1,223.4 |
|
$1,229.0 -
$1,239.0 |
Diluted earnings per
share under ASC 605 |
$4.07 - $4.16 |
|
$5.18 - $5.24 |
(in
millions) |
Other
Financial Metrics |
ACV |
$1,262.0 -
$1,282.0 |
Operating cash
flows |
$455.0 - $480.0 |
Conference Call Information
ANSYS will hold a conference call at
8:30 a.m. Eastern Time on November 8, 2018 to
discuss third quarter results. The Company will provide its
prepared remarks on the Company’s investor relations homepage and
as an exhibit in its Form 8-K in advance of the call to provide
shareholders and analysts with additional time and detail for
analyzing its results in preparation for the conference call. The
prepared remarks will not be read on the call, and only brief
remarks will be made prior to the Q&A session.
To participate in the live conference call, dial
855-239-2942 (US) or 412-542-4124 (Canada & Int’l). The call
will be recorded and a replay will be available within two hours
after the call. The replay will be available by dialing (877)
344-7529 (US), (855) 669-9658 (Canada) or (412) 317-0088 (Int’l)
and entering the passcode 10123501. The archived webcast can be
accessed, along with other financial information, on ANSYS' website
at https://investors.ansys.com/news-and-events/events-calendar.
ANSYS, INC. AND SUBSIDIARIES |
Condensed Consolidated Balance
Sheets |
(Unaudited) |
|
ASC 606 |
|
ASC 605 |
|
ASC 605 |
(in
thousands) |
September 30, 2018 |
|
September 30, 2018 |
|
December 31, 2017 |
ASSETS: |
|
|
|
|
|
Cash
& short-term investments |
$ |
729,391 |
|
|
$ |
729,391 |
|
|
$ |
881,787 |
|
Accounts
receivable, net |
235,547 |
|
|
102,626 |
|
|
124,659 |
|
Goodwill |
1,575,567 |
|
|
1,575,567 |
|
|
1,378,553 |
|
Other
intangibles, net |
219,564 |
|
|
219,564 |
|
|
157,625 |
|
Other
assets |
296,042 |
|
|
413,349 |
|
|
398,999 |
|
Total
assets |
$ |
3,056,111 |
|
|
$ |
3,040,497 |
|
|
$ |
2,941,623 |
|
LIABILITIES
& STOCKHOLDERS' EQUITY: |
|
|
|
|
|
Current
deferred revenue |
$ |
272,872 |
|
|
$ |
434,129 |
|
|
$ |
440,491 |
|
Other
liabilities |
234,693 |
|
|
239,719 |
|
|
255,301 |
|
Stockholders' equity |
2,548,546 |
|
|
2,366,649 |
|
|
2,245,831 |
|
Total
liabilities & stockholders' equity |
$ |
3,056,111 |
|
|
$ |
3,040,497 |
|
|
$ |
2,941,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
ANSYS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of
Income |
(Unaudited) |
|
Three Months Ended |
|
Nine Months Ended |
|
ASC 606 |
|
ASC 605 |
|
ASC 605 |
|
ASC 606 |
|
ASC 605 |
|
ASC 605 |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
(in thousands, except per share data) |
2018 |
|
2018 |
|
2017 |
|
2018 |
2018 |
|
2017 |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
Software
licenses |
$ |
109,103 |
|
|
$ |
166,606 |
|
|
$ |
156,580 |
|
|
$ |
350,296 |
|
|
$ |
482,656 |
|
|
$ |
448,368 |
|
Maintenance and service |
180,315 |
|
|
135,350 |
|
|
119,005 |
|
|
527,908 |
|
|
397,895 |
|
|
344,546 |
|
Total
revenue |
289,418 |
|
|
301,956 |
|
|
275,585 |
|
|
878,204 |
|
|
880,551 |
|
|
792,914 |
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
Software
licenses |
4,291 |
|
|
8,488 |
|
|
7,395 |
|
|
12,301 |
|
|
25,078 |
|
|
24,197 |
|
Amortization |
5,530 |
|
|
5,530 |
|
|
9,004 |
|
|
23,403 |
|
|
23,403 |
|
|
26,892 |
|
Maintenance and service |
26,487 |
|
|
22,290 |
|
|
19,584 |
|
|
80,092 |
|
|
67,315 |
|
|
58,263 |
|
Total
cost of sales |
36,308 |
|
|
36,308 |
|
|
35,983 |
|
|
115,796 |
|
|
115,796 |
|
|
109,352 |
|
Gross profit |
253,110 |
|
|
265,648 |
|
|
239,602 |
|
|
762,408 |
|
|
764,755 |
|
|
683,562 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
97,576 |
|
|
97,576 |
|
|
80,015 |
|
|
280,443 |
|
|
280,443 |
|
|
230,483 |
|
Research
and development |
59,019 |
|
|
59,019 |
|
|
50,144 |
|
|
174,906 |
|
|
174,906 |
|
|
153,524 |
|
Amortization |
3,491 |
|
|
3,491 |
|
|
3,260 |
|
|
10,421 |
|
|
10,421 |
|
|
9,506 |
|
Total
operating expenses |
160,086 |
|
|
160,086 |
|
|
133,419 |
|
|
465,770 |
|
|
465,770 |
|
|
393,513 |
|
Operating income |
93,024 |
|
|
105,562 |
|
|
106,183 |
|
|
296,638 |
|
|
298,985 |
|
|
290,049 |
|
Interest income |
3,213 |
|
|
3,213 |
|
|
1,910 |
|
|
7,674 |
|
|
7,674 |
|
|
4,827 |
|
Other expense, net |
(974 |
) |
|
(974 |
) |
|
(168 |
) |
|
(2,289 |
) |
|
(2,289 |
) |
|
(1,512 |
) |
Income before income
tax provision |
95,263 |
|
|
107,801 |
|
|
107,925 |
|
|
302,023 |
|
|
304,370 |
|
|
293,364 |
|
Income tax
provision |
5,927 |
|
|
7,685 |
|
|
34,295 |
|
|
35,811 |
|
|
36,089 |
|
|
86,698 |
|
Net income |
$ |
89,336 |
|
|
$ |
100,116 |
|
|
$ |
73,630 |
|
|
$ |
266,212 |
|
|
$ |
268,281 |
|
|
$ |
206,666 |
|
Earnings per share –
basic: |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
$ |
1.06 |
|
|
$ |
1.19 |
|
|
$ |
0.87 |
|
|
$ |
3.17 |
|
|
$ |
3.19 |
|
|
$ |
2.43 |
|
Weighted
average shares |
84,158 |
|
|
84,158 |
|
|
84,774 |
|
|
84,065 |
|
|
84,065 |
|
|
85,132 |
|
Earnings per share –
diluted: |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
$ |
1.04 |
|
|
$ |
1.16 |
|
|
$ |
0.85 |
|
|
$ |
3.09 |
|
|
$ |
3.12 |
|
|
$ |
2.38 |
|
Weighted
average shares |
86,043 |
|
|
86,043 |
|
|
86,588 |
|
|
86,060 |
|
|
86,060 |
|
|
86,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ANSYS, INC. AND SUBSIDIARIES |
ASC 606 Reconciliation of Non-GAAP
Measures |
(Unaudited) |
|
Three Months Ended |
|
September 30, 2018 |
(in thousands,
except percentages and per share data) |
GAAP Results |
|
Adjustments |
|
|
Non-GAAP Results |
Total revenue |
$ |
289,418 |
|
|
$ |
3,548 |
|
(1 |
) |
$ |
292,966 |
|
Operating income |
93,024 |
|
|
35,889 |
|
(2 |
) |
128,913 |
|
Operating profit
margin |
32.1 |
% |
|
|
|
44.0 |
% |
Net income |
$ |
89,336 |
|
|
$ |
23,557 |
|
(3 |
) |
$ |
112,893 |
|
Earnings per share –
diluted: |
|
|
|
|
|
Earnings
per share |
$ |
1.04 |
|
|
|
|
$ |
1.31 |
|
Weighted
average shares |
86,043 |
|
|
|
|
86,043 |
|
|
(1)
Amount represents the revenue not reported during the period as a
result of the acquisition accounting adjustment associated with the
accounting for deferred revenue in business combinations. |
(2)
Amount represents $23.0 million of stock-based compensation
expense, $0.3 million of excess payroll taxes related to
stock-based awards, $9.0 million of amortization expense associated
with intangible assets acquired in business combinations and the
$3.5 million adjustment to revenue as reflected in (1) above. |
(3)
Amount represents the impact of the adjustments to operating income
referred to in (2) above, decreased for the related income tax
impact of $11.7 million, a measurement-period adjustment related to
the Tax Cuts and Jobs Act of $0.5 million, and rabbi trust income
of $0.1 million. |
|
|
|
|
|
|
|
|
|
|
|
|
ANSYS, INC. AND SUBSIDIARIES |
ASC 606 Reconciliation of Non-GAAP
Measures |
(Unaudited) |
|
Nine Months Ended |
|
September 30, 2018 |
(in thousands,
except percentages and per share data) |
GAAP Results |
|
Adjustments |
|
|
Non-GAAP Results |
Total revenue |
$ |
878,204 |
|
|
$ |
6,897 |
|
(1 |
) |
$ |
885,101 |
|
Operating income |
296,638 |
|
|
105,796 |
|
(2 |
) |
402,434 |
|
Operating profit
margin |
33.8 |
% |
|
|
|
45.5 |
% |
Net income |
$ |
266,212 |
|
|
$ |
65,591 |
|
(3 |
) |
$ |
331,803 |
|
Earnings per share –
diluted: |
|
|
|
|
|
Earnings
per share |
$ |
3.09 |
|
|
|
|
$ |
3.86 |
|
Weighted
average shares |
86,060 |
|
|
|
|
86,060 |
|
|
(1)
Amount represents the revenue not reported during the period as a
result of the acquisition accounting adjustment associated with the
accounting for deferred revenue in business combinations. |
(2)
Amount represents $58.9 million of stock-based compensation
expense, $3.8 million of excess payroll taxes related to
stock-based awards, $33.8 million of amortization expense
associated with intangible assets acquired in business
combinations, $2.4 million of transaction expenses related to
business combinations and the $6.9 million adjustment to revenue as
reflected in (1) above. |
(3)
Amount represents the impact of the adjustments to operating income
referred to in (2) above, decreased for the related income tax
impact of $41.0 million and rabbi trust income of $0.1 million, and
increased for a measurement-period adjustment related to the Tax
Cuts and Jobs Act of $0.9 million. |
|
|
|
|
|
|
|
|
|
|
|
|
ANSYS, INC. AND SUBSIDIARIES |
ASC 605 Reconciliation of Non-GAAP
Measures |
(Unaudited) |
|
Three Months Ended |
|
September 30, 2018 |
|
September 30, 2017 |
(in thousands,
except percentages and per share data) |
GAAP Results |
|
Adjustments |
|
|
Non-GAAP Results |
|
GAAP Results |
|
Adjustments |
|
|
Non-GAAP Results |
Total revenue |
$ |
301,956 |
|
|
$ |
5,972 |
|
(1 |
) |
$ |
307,928 |
|
|
$ |
275,585 |
|
|
$ |
1,181 |
|
(4 |
) |
$ |
276,766 |
|
Operating income |
105,562 |
|
|
38,313 |
|
(2 |
) |
143,875 |
|
|
106,183 |
|
|
28,711 |
|
(5 |
) |
134,894 |
|
Operating profit
margin |
35.0 |
% |
|
|
|
46.7 |
% |
|
38.5 |
% |
|
|
|
48.7 |
% |
Net income |
$ |
100,116 |
|
|
$ |
25,280 |
|
(3 |
) |
$ |
125,396 |
|
|
$ |
73,630 |
|
|
$ |
17,638 |
|
(6 |
) |
$ |
91,268 |
|
Earnings per share –
diluted: |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
$ |
1.16 |
|
|
|
|
$ |
1.46 |
|
|
$ |
0.85 |
|
|
|
|
$ |
1.05 |
|
Weighted
average shares |
86,043 |
|
|
|
|
86,043 |
|
|
86,588 |
|
|
|
|
86,588 |
|
|
|
(1)
Amount represents the revenue not reported during the period as a
result of the acquisition accounting adjustment associated with the
accounting for deferred revenue in business
combinations. |
|
(2)
Amount represents $23.0 million of stock-based compensation
expense, $0.3 million of excess payroll taxes related to
stock-based awards, $9.0 million of amortization expense associated
with intangible assets acquired in business combinations, and the
$6.0 million adjustment to revenue as reflected in (1) above. |
(3)
Amount represents the impact of the adjustments to operating income
referred to in (2) above, decreased for the related income tax
impact of $12.4 million, a measurement-period adjustment related to
the Tax Cuts and Jobs Act of $0.5 million and rabbi trust income of
$0.1 million. |
|
(4)
Amount represents the revenue not reported during the period as a
result of the acquisition accounting adjustment associated with the
accounting for deferred revenue in business
combinations. |
|
(5)
Amount represents $14.8 million of stock-based compensation
expense, $12.3 million of amortization expense associated with
intangible assets acquired in business combinations, $0.5 million
of restructuring charges, and the $1.2 million adjustment to
revenue as reflected in (4) above. |
|
(6)
Amount represents the impact of the adjustments to operating income
referred to in (5) above, adjusted for the related income tax
impact of $11.0 million and rabbi trust income of $0.1
million. |
|
ANSYS, INC. AND SUBSIDIARIES |
ASC 605 Reconciliation of Non-GAAP
Measures |
(Unaudited) |
|
Nine Months Ended |
|
September 30, 2018 |
|
September 30, 2017 |
(in thousands,
except percentages and per share data) |
GAAP Results |
|
Adjustments |
|
|
Non-GAAP Results |
|
GAAP Results |
|
Adjustments |
|
|
Non-GAAP Results |
Total revenue |
$ |
880,551 |
|
|
$ |
11,436 |
|
(1 |
) |
$ |
891,987 |
|
|
$ |
792,914 |
|
|
$ |
1,748 |
|
(4 |
) |
$ |
794,662 |
|
Operating income |
298,985 |
|
|
110,335 |
|
(2 |
) |
409,320 |
|
|
290,049 |
|
|
89,985 |
|
(5 |
) |
380,034 |
|
Operating profit
margin |
34.0 |
% |
|
|
|
45.9 |
% |
|
36.6 |
% |
|
|
|
47.8 |
% |
Net income |
$ |
268,281 |
|
|
$ |
68,827 |
|
(3 |
) |
$ |
337,108 |
|
|
$ |
206,666 |
|
|
$ |
48,480 |
|
(6 |
) |
$ |
255,146 |
|
Earnings per share –
diluted: |
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
$ |
3.12 |
|
|
|
|
$ |
3.92 |
|
|
$ |
2.38 |
|
|
|
|
$ |
2.94 |
|
Weighted
average shares |
86,060 |
|
|
|
|
86,060 |
|
|
86,902 |
|
|
|
|
86,902 |
|
|
|
(1)
Amount represents the revenue not reported during the period as a
result of the acquisition accounting adjustment associated with the
accounting for deferred revenue in business combinations. |
|
(2)
Amount represents $58.9 million of stock-based compensation
expense, $3.8 million of excess payroll taxes related to
stock-based awards, $33.8 million of amortization expense
associated with intangible assets acquired in business
combinations, $2.4 million of transaction expenses related to
business combinations and the $11.4 million adjustment to revenue
as reflected in (1) above. |
(3)
Amount represents the impact of the adjustments to operating income
referred to in (2) above, decreased for the related income tax
impact of $42.3 million and rabbi trust income of $0.1 million, and
increased for a measurement-period adjustment related to the Tax
Cuts and Jobs Act of $0.9 million. |
|
(4)
Amount represents the revenue not reported during the period as a
result of the acquisition accounting adjustment associated with the
accounting for deferred revenue in business combinations. |
|
(5)
Amount represents $39.4 million of stock-based compensation
expense, $36.4 million of amortization expense associated with
intangible assets acquired in business combinations, $11.7 million
of restructuring charges, $0.7 million of transaction expenses
related to business combinations and the $1.7 million adjustment to
revenue as reflected in (4) above. |
(6)
Amount represents the impact of the adjustments to operating income
referred to in (5) above, adjusted for the related income tax
impact of $41.4 million and rabbi trust income of $0.1
million. |
|
ANSYS, INC. AND SUBSIDIARIES |
Reconciliation of Forward-Looking
Guidance |
Quarter Ending December 31, 2018 |
|
|
|
ASC
606 |
|
ASC
605 |
|
Earnings Per Share Range - Diluted |
|
Earnings Per Share Range - Diluted |
U.S. GAAP
expectation |
$1.10
- $1.29 |
|
$0.95
- $1.05 |
Adjustment
to exclude acquisition adjustments to deferred revenue |
$0.02 |
|
$0.03
- $0.04 |
Adjustment
to exclude acquisition-related amortization |
$0.06
- $0.07 |
|
$0.06
- $0.07 |
Adjustment
to exclude stock-based compensation |
$0.18
- $0.20 |
|
$0.18 - $0.20 |
Non-GAAP
expectation |
$1.39 - $1.55 |
|
$1.26 - $1.32 |
|
|
|
|
ANSYS, INC. AND SUBSIDIARIES |
Reconciliation of Forward-Looking
Guidance |
Year Ending December 31, 2018 |
|
|
|
ASC
606 |
|
ASC
605 |
|
Earnings Per Share Range - Diluted |
|
Earnings Per Share Range - Diluted |
U.S. GAAP
expectation |
$4.19
- $4.38 |
|
$4.07
- $4.16 |
Adjustment
to exclude acquisition adjustments to deferred revenue |
$0.08 |
|
$0.13 |
Adjustment
to exclude acquisition-related amortization |
$0.36
- $0.37 |
|
$0.36
- $0.37 |
Adjustment
to exclude stock-based compensation |
$0.55
- $0.57 |
|
$0.55
- $0.57 |
Adjustment
to exclude acquisition-related transaction expenses |
$0.03 |
|
$0.03 |
Exclusion
of measurement-period adjustments related to the Tax Cuts and Jobs
Act |
$0.01 |
|
$0.01 |
Non-GAAP
expectation |
$5.25 - $5.41 |
|
$5.18 - $5.24 |
|
|
|
|
Use of Non-GAAP Measures
The Company provides non-GAAP revenue, non-GAAP
operating income, non-GAAP operating profit margin, non-GAAP net
income and non-GAAP diluted earnings per share as supplemental
measures to GAAP regarding the Company's operational performance.
These financial measures exclude the impact of certain items and,
therefore, have not been calculated in accordance with GAAP. A
detailed explanation of each of the adjustments to such financial
measures is described below. This press release also contains a
reconciliation of each of these non-GAAP financial measures to its
most comparable GAAP financial measure.
Management uses non-GAAP financial measures
(a) to evaluate the Company's historical and prospective
financial performance as well as its performance relative to its
competitors, (b) to set internal sales targets and spending
budgets, (c) to allocate resources, (d) to measure
operational profitability and the accuracy of forecasting,
(e) to assess financial discipline over operational
expenditures and (f) as an important factor in determining
variable compensation for management and its employees. In
addition, many financial analysts that follow the Company focus on
and publish both historical results and future projections based on
non-GAAP financial measures. The Company believes that it is in the
best interest of its investors to provide this information to
analysts so that they accurately report the non-GAAP financial
information. Moreover, investors have historically requested, and
the Company has historically reported, these non-GAAP financial
measures as a means of providing consistent and comparable
information with past reports of financial results.
While management believes that these non-GAAP
financial measures provide useful supplemental information to
investors, there are limitations associated with the use of these
non-GAAP financial measures. These non-GAAP financial measures are
not prepared in accordance with GAAP, are not reported by all of
the Company's competitors and may not be directly comparable to
similarly titled measures of the Company's competitors due to
potential differences in the exact method of calculation. The
Company compensates for these limitations by using these non-GAAP
financial measures as supplements to GAAP financial measures and by
reviewing the reconciliations of the non-GAAP financial measures to
their most comparable GAAP financial measures.
The adjustments to these non-GAAP financial measures, and the
basis for such adjustments, are outlined below:
Acquisition accounting for deferred
revenue and its related tax impact. Historically, the
Company has consummated acquisitions in order to support its
strategic and other business objectives. In accordance with
the fair value provisions applicable to the accounting for business
combinations, acquired deferred revenue is often recorded on the
opening balance sheet at an amount that is lower than the
historical carrying value. Although this acquisition accounting
requirement has no impact on the Company's business or cash flow,
it adversely impacts the Company's reported GAAP revenue in the
reporting periods following an acquisition. In order to provide
investors with financial information that facilitates comparison of
both historical and future results, the Company provides non-GAAP
financial measures which exclude the impact of the acquisition
accounting adjustment. The Company believes that this non-GAAP
financial adjustment is useful to investors because it allows
investors to (a) evaluate the effectiveness of the methodology
and information used by management in its financial and operational
decision-making, and (b) compare past and future reports of
financial results of the Company as the revenue reduction related
to acquired deferred revenue will not recur when related annual
lease licenses and software maintenance contracts are renewed in
future periods.
Amortization of intangible assets from
acquisitions and its related tax impact. The Company
incurs amortization of intangible assets, included in its GAAP
presentation of amortization expense, related to various
acquisitions it has made. Management excludes these expenses and
their related tax impact for the purpose of calculating non-GAAP
operating income, non-GAAP operating profit margin, non-GAAP net
income and non-GAAP diluted earnings per share when it evaluates
the continuing operational performance of the Company because these
costs are fixed at the time of an acquisition, are then amortized
over a period of several years after the acquisition and generally
cannot be changed or influenced by management after the
acquisition. Accordingly, management does not consider these
expenses for purposes of evaluating the performance of the Company
during the applicable time period after the acquisition, and it
excludes such expenses when making decisions to allocate resources.
The Company believes that these non-GAAP financial measures are
useful to investors because they allow investors to
(a) evaluate the effectiveness of the methodology and
information used by management in its financial and operational
decision-making, and (b) compare past reports of financial
results of the Company as the Company has historically reported
these non-GAAP financial measures.
Stock-based compensation expense and its
related tax impact. The Company incurs expense
related to stock-based compensation included in its GAAP
presentation of cost of software licenses; cost of maintenance and
service; research and development expense; and selling, general and
administrative expense. This non-GAAP adjustment also includes
excess payroll tax expense related to stock-based compensation.
Stock-based compensation expense (benefit) incurred in connection
with the Company's deferred compensation plan held in a rabbi trust
includes an offsetting benefit (charge) recorded in other income
(expense). Although stock-based compensation is an expense of the
Company and viewed as a form of compensation, management excludes
these expenses for the purpose of calculating non-GAAP operating
income, non-GAAP operating profit margin, non-GAAP net income and
non-GAAP diluted earnings per share when it evaluates the
continuing operational performance of the Company. Management
similarly excludes income (expense) related to assets held in a
rabbi trust in connection with the Company's deferred compensation
plan. Specifically, the Company excludes stock-based compensation
and income (expense) related to assets held in the deferred
compensation plan rabbi trust during its annual budgeting process
and its quarterly and annual assessments of the Company's and
management's performance. The annual budgeting process is the
primary mechanism whereby the Company allocates resources to
various initiatives and operational requirements. Additionally, the
annual review by the board of directors during which it compares
the Company's historical business model and profitability to the
planned business model and profitability for the forthcoming year
excludes the impact of stock-based compensation. In evaluating the
performance of senior management and department managers, charges
related to stock-based compensation are excluded from expenditure
and profitability results. In fact, the Company records stock-based
compensation expense into a stand-alone cost center for which no
single operational manager is responsible or accountable. In this
way, management is able to review, on a period-to-period basis,
each manager's performance and assess financial discipline over
operational expenditures without the effect of stock-based
compensation. The Company believes that these non-GAAP financial
measures are useful to investors because they allow investors to
(a) evaluate the Company's operating results and the
effectiveness of the methodology used by management to review the
Company's operating results, and (b) review historical
comparability in the Company's financial reporting as well as
comparability with competitors' operating results.
Restructuring charges and the related
tax impact. The Company occasionally incurs expenses for
restructuring its workforce included in its GAAP presentation of
cost of software licenses; cost of maintenance and service;
research and development expense; and selling, general and
administrative expense. Management excludes these expenses for the
purpose of calculating non-GAAP operating income, non-GAAP
operating profit margin, non-GAAP net income and non-GAAP diluted
earnings per share when it evaluates the continuing operational
performance of the Company, as it generally does not incur these
expenses as a part of its operations. The Company believes that
these non-GAAP financial measures are useful to investors because
they allow investors to (a) evaluate the Company's operating
results and the effectiveness of the methodology used by management
to review the Company's operating results, and (b) review
historical comparability in the Company's financial reporting as
well as comparability with competitors' operating results.
Transaction costs related to business
combinations. The Company incurs expenses for
professional services rendered in connection with business
combinations, which are included in its GAAP presentation of
selling, general and administrative expense. These expenses are
generally not tax-deductible. Management excludes these
acquisition-related transaction expenses, derived from announced
acquisitions, for the purpose of calculating non-GAAP operating
income, non-GAAP operating profit margin, non-GAAP net income and
non-GAAP diluted earnings per share when it evaluates the
continuing operational performance of the Company, as it generally
would not have otherwise incurred these expenses in the periods
presented as a part of its operations. The Company believes that
these non-GAAP financial measures are useful to investors because
they allow investors to (a) evaluate the Company's operating
results and the effectiveness of the methodology used by management
to review the Company's operating results, and (b) review
historical comparability in the Company's financial reporting as
well as comparability with competitors' operating results.
Tax Cuts and Jobs Act. The
Company recorded charges in its income tax provision related to the
enactment of the Tax Cuts and Jobs Act, specifically for the
transition tax related to unrepatriated cash. Management excludes
these charges for the purpose of calculating non-GAAP net income
and non-GAAP diluted earnings per share when it evaluates the
continuing operational performance of the Company, as (i) the
charges are not expected to recur as part of its normal operations
and (ii) the charges resulted from the extremely infrequent event
of major U.S. tax reform, the last such reform having occurred in
1986. The Company believes that these non-GAAP financial measures
are useful to investors because they allow investors to
(a) evaluate the Company's operating results and the
effectiveness of the methodology used by management to review the
Company's operating results, and (b) review historical
comparability in the Company's financial reporting.
Non-GAAP financial measures are not in
accordance with, or an alternative for, GAAP. The Company's
non-GAAP financial measures are not meant to be considered in
isolation or as a substitute for comparable GAAP financial measures
and should be read only in conjunction with the Company's
consolidated financial statements prepared in accordance with
GAAP.
The Company has provided a reconciliation of the non-GAAP
financial measures to the most directly comparable GAAP financial
measures as listed below:
GAAP Reporting Measure |
Non-GAAP Reporting Measure |
Revenue |
Non-GAAP Revenue |
Operating Income |
Non-GAAP Operating Income |
Operating Profit Margin |
Non-GAAP Operating Profit Margin |
Net Income |
Non-GAAP Net Income |
Diluted Earnings Per Share |
Non-GAAP Diluted Earnings Per Share |
About ANSYS, Inc.
If you've ever seen a rocket launch, flown on an
airplane, driven a car, used a computer, touched a mobile device,
crossed a bridge or put on wearable technology, chances are you've
used a product where ANSYS software played a critical role in its
creation. ANSYS is the global leader in engineering
simulation. Through our strategy of Pervasive Engineering
Simulation, we help the world's most innovative companies deliver
radically better products to their customers. By offering the best
and broadest portfolio of engineering simulation software, we help
them solve the most complex design challenges and create products
limited only by imagination. Founded in 1970, ANSYS is
headquartered south of Pittsburgh, Pennsylvania, U.S.A. Visit
www.ansys.com for more information.
Forward-Looking Information
Certain statements contained in this press
release regarding matters that are not historical facts, including,
but not limited to, statements regarding: trends in customer
development processes and the success of our strategy of Pervasive
Simulation; our ability to continue to drive momentum in our
business; our projections for the fourth quarter of 2018 and
fiscal year 2018 (both GAAP and non-GAAP to exclude acquisition
accounting adjustments to deferred revenue, acquisition-related
amortization, stock-based compensation expense and
acquisition-related transaction costs with related tax impacts);
statements regarding management's use of non-GAAP financial
measures; statements regarding investing in the business;
statements regarding the Tax Cuts and Jobs Act; and statements
regarding the increase in constant currency revenue growth rates as
compared to the August 2018 guidance are "forward-looking"
statements (as defined in the Private Securities Litigation Reform
Act of 1995). The words “believe,” “continue,” “expect,” and
similar expressions are intended to identify forward-looking
statements. Because such statements are subject to risks and
uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. All
forward-looking statements in this press release are subject to
risks and uncertainties, including, but not limited to: the risk
that adverse conditions in the global and domestic markets will
significantly affect ANSYS’ customers’ ability to purchase products
from the Company at the same level as prior periods or to pay for
the Company’s products and services; the risk that declines in
ANSYS’ customers’ business may lengthen customer sales cycles; the
risk of declines in the economy of one or more of ANSYS’ primary
geographic regions; the risk that ANSYS’ revenues and operating
results will be adversely affected by changes in currency exchange
rates or economic declines in any of the countries in which ANSYS
conducts transactions; the risk that the assumptions underlying
ANSYS' anticipated revenues and expenditures will change or prove
inaccurate; the risk that ANSYS has overestimated its ability to
maintain growth and profitability, and control costs; uncertainties
regarding the demand for ANSYS' products and services in future
periods; uncertainties regarding customer acceptance of new
products; the risk of ANSYS’ products' future compliance with
industry quality standards and its potential impact on the
Company’s financial results; the risk that the Company may need to
change its pricing models due to competition and its potential
impact on the Company’s financial results; the risk that ANSYS'
operating results will be adversely affected by possible delays in
developing, completing or shipping new or enhanced products; the
risk that enhancements to the Company's products or products
acquired in acquisitions may not produce anticipated sales; the
risk that the Company may not be able to recruit and retain key
executives and technical personnel; the risk that third parties may
misappropriate the Company’s proprietary technology or develop
similar technology independently; the risk of unauthorized access
to and distribution of the Company’s source code; the risk of the
Company’s implementation of its new IT systems; the risk of
difficulties in the relationship with ANSYS’ independent regional
channel partners; the risk of ANSYS’ reliance on perpetual licenses
and the result that any change in customer licensing behavior may
have on the Company’s financial results; the risk that ANSYS may
not achieve the anticipated benefits of its acquisitions or that
the integration of the acquired technologies or products with the
Company’s existing product lines may not be successful; the risk of
periodic reorganizations and changes within ANSYS’ sales
organization; the risk of industry consolidation and the impact it
may have on customer purchasing decisions; and other factors that
are detailed from time to time in reports filed by ANSYS, Inc. with
the Securities and Exchange Commission, including ANSYS, Inc.'s
2017 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether changes occur as a result of
new information or future events, after the date they were
made.
ANSYS and any and all ANSYS, Inc. brand,
product, service and feature names, logos and slogans are
registered trademarks or trademarks of ANSYS, Inc. or its
subsidiaries in the United States or other countries. All
other brand, product, service and feature names or trademarks are
the property of their respective owners.
Visit www.investors.ansys.com/ for more
information. The ANSYS IR App is now available for download
on iTunes and Google Play. ANSYS also has a strong
presence on the major social channels. To join the simulation
conversation, please visit www.ansys.com/Social@ANSYS.
ANSS-F
Contact:
Investors:Annette
Arribas724.820.3700annette.arribas@ansys.com
Media:Amy Pietzak724.820.4367
amy.pietzak@ansys.com
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