ANSYS, Inc. (NASDAQ: ANSS), today reported third quarter 2020 GAAP
and non-GAAP revenue growth of 7% in reported currency, or 5% in
constant currency, when compared to the third quarter of 2019. For
the third quarter of 2020, the Company reported earnings per share
of $0.87 and $1.36 on a GAAP and non-GAAP basis, respectively,
compared to $1.04 and $1.42 on a GAAP and non-GAAP basis,
respectively, for the third quarter of 2019.
“Ansys delivered a strong third quarter in which we overachieved
on both earnings and operating margin. While all of our major
geographies showed growth, Asia-Pacific was particularly strong,
with Japan and South Korea growing by double digits. We also saw
double-digit growth in revenue coming from our indirect channel.
With corporate initiatives around eco-friendly aircraft engines,
Space 2.0 and national defense, we saw robust spending in the
aerospace and defense sector during the quarter. We also recently
signed a definitive agreement to acquire Analytical Graphics, Inc.
(AGI), a leader in mission simulation and analysis, which will
strengthen our simulation leadership within the key aerospace and
defense sector. Finally, during Q3, our ESG initiatives focused on
environmental sustainability, including our own carbon footprint as
well as the efficiencies that our solutions are enabling for our
customers,” said Ajei Gopal, Ansys president and CEO.
Maria Shields, Ansys CFO, stated, “Our solid Q3
financial performance reflects the strength of our core business
and the continued dedication and focused execution of the Ansys
employees and our partner ecosystem. Despite the challenging
circumstances created by the prolonged pandemic, we delivered
strong revenue performance, which drove earnings and operating
margins. We reported a record third quarter balance of deferred
revenue and backlog of $880 million, an increase of 35% over the
third quarter of 2019. Additional financial highlights reflecting
the resiliency of our business model included ACV growth, which
continues to be comprised of a high level of recurring sources at
78% for the quarter and 81% for the first nine months of the year.
The combination of our high level of recurring revenue sources,
strong financial position and operating discipline positions us
well to continue to prudently invest in the business for the
long-term. This includes the pending acquisition of AGI, which
demonstrates the continued execution of our growth strategy.”
On October 23, 2020, the Company entered
into a definitive agreement to acquire 100% of the shares of AGI, a
premier provider of mission-simulation, modeling, testing and
analysis software for aerospace, defense and intelligence
applications. Once closed, the acquisition will expand the scope of
the Company's offerings, empowering users to solve challenges by
simulating from the chip level all the way to a customer's entire
mission. The transaction is expected to close with a purchase price
of $700.0 million, of which the AGI shareholders will receive 67%
in cash and 33% in Ansys common stock. The Company anticipates
obtaining new debt financing to fund a significant portion of the
cash component of the purchase price.
Financial Results
Ansys' third quarter and year-to-date (YTD) 2020
and 2019 financial results are presented below. The 2020 and 2019
non-GAAP results exclude the income statement effects of the
acquisition accounting adjustments to deferred revenue, stock-based
compensation, amortization of acquired intangible assets,
transaction expenses related to business combinations, and
adjustments related to the transition tax associated with the Tax
Cuts and Jobs Act.
GAAP and non-GAAP results are as follows:
|
GAAP |
|
Non-GAAP |
(in millions, except percentages and per share
data) |
Q3 QTD 2020 |
|
Q3 QTD 2019 |
|
% Change |
|
Q3 QTD 2020 |
|
Q3 QTD 2019 |
|
% Change |
Revenue |
$ |
367.0 |
|
|
$ |
343.9 |
|
|
7% |
|
$ |
369.1 |
|
|
$ |
345.5 |
|
|
7% |
Net
income |
$ |
75.6 |
|
|
$ |
89.5 |
|
|
(15)% |
|
$ |
118.3 |
|
|
$ |
121.7 |
|
|
(3)% |
Diluted
earnings per share |
$ |
0.87 |
|
|
$ |
1.04 |
|
|
(16)% |
|
$ |
1.36 |
|
|
$ |
1.42 |
|
|
(4)% |
Operating profit margin |
24.5 |
% |
|
30.5 |
% |
|
|
|
39.8 |
% |
|
43.3 |
% |
|
|
|
GAAP |
|
Non-GAAP |
(in millions, except percentages and per share
data) |
Q3 YTD 2020 |
|
Q3 YTD 2019 |
|
% Change |
|
Q3 YTD 2020 |
|
Q3 YTD 2019 |
|
% Change |
Revenue |
$ |
1,057.6 |
|
|
$ |
1,029.7 |
|
|
3% |
|
$ |
1,067.7 |
|
|
$ |
1,035.9 |
|
|
3% |
Net
income |
$ |
218.3 |
|
|
$ |
285.4 |
|
|
(24)% |
|
$ |
324.9 |
|
|
$ |
370.3 |
|
|
(12)% |
Diluted
earnings per share |
$ |
2.50 |
|
|
$ |
3.34 |
|
|
(25)% |
|
$ |
3.73 |
|
|
$ |
4.33 |
|
|
(14)% |
Operating profit margin |
22.4 |
% |
|
32.0 |
% |
|
|
|
37.9 |
% |
|
44.0 |
% |
|
|
The non-GAAP financial results highlighted
above, and the non-GAAP financial outlook for 2020 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, 2020 and 2019, and for the 2020
financial outlook, can be found in the condensed financial
information included in this release.
Other Financial Metrics
(in millions, except percentages) |
Q3 QTD 2020 |
|
Q3 QTD 2019 |
|
% Change |
|
% Change in Constant Currency |
Annual Contract Value (ACV) |
$ |
305.3 |
|
$ |
290.9 |
|
5% |
|
3% |
Operating cash flows |
$ |
94.5 |
|
$ |
120.4 |
|
(21)% |
|
|
(in millions, except percentages) |
Q3 YTD 2020 |
|
Q3 YTD 2019 |
|
% Change |
|
% Change in Constant Currency |
ACV |
$ |
950.8 |
|
$ |
920.5 |
|
3% |
|
3% |
Operating cash flows |
$ |
373.5 |
|
$ |
360.5 |
|
4% |
|
|
ACV is a metric the Company uses to better understand the
business. There is no GAAP measure comparable to ACV. 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 2020 Financial
Outlook
The Company's fourth quarter and fiscal year
2020 revenue and diluted earnings per share guidance is provided
below. The Company is also providing its fiscal year 2020 guidance
for ACV and operating cash flows. The revenue and diluted earnings
per share guidance is provided on both a GAAP and non-GAAP basis.
Non-GAAP financial measures exclude the income statement effects of
acquisition adjustments to deferred revenue, stock-based
compensation, amortization of acquired intangible assets and
acquisition-related transaction expenses.
The financial guidance below reflects the
Company's current estimates of the adverse impacts of the global
pandemic. This guidance is based on certain assumptions made by the
Company and the Company's evaluation of factual information it has
determined to be relevant. Additional details related to the
Company's financial guidance, including assumptions and economic
impacts of COVID-19, are detailed in its prepared remarks
document.
The financial guidance below is not adjusted for
the impacts of the Company's recently announced agreement to
acquire AGI. The acquisition closing date is unknown as it is
subject to the receipt of regulatory clearance and the satisfaction
of customary closing conditions. The transaction is not expected to
have a meaningful impact on the Company's 2020 results.
Fourth Quarter 2020
Guidance
The Company currently expects the following for the quarter
ending December 31, 2020:
(in millions, except per share data) |
GAAP |
|
Non-GAAP |
Revenue |
$541.1 - $581.1 |
|
$542.3 - $582.3 |
Diluted earnings per share |
$1.93 - $2.29 |
|
$2.36 - $2.67 |
Fiscal Year 2020 Guidance
The Company currently expects the following for the fiscal year
ending December 31, 2020:
(in millions, except per share data) |
GAAP |
|
Non-GAAP |
Revenue |
$1,598.7 - $1,638.7 |
|
$1,610.0 - $1,650.0 |
Diluted earnings per share |
$4.43 - $4.79 |
|
$6.09 - $6.40 |
The difference between the GAAP and non-GAAP
revenue guidance presented above is a result of the expected impact
of the application of the fair value provisions applicable to the
accounting for business combinations in the amount of $1.2 million
for the fourth quarter and $11.3 million for fiscal year 2020.
(in millions) |
Other Financial Metrics |
ACV |
$1,555.0 - $1,590.0 |
Operating cash flows |
$435.0 - $475.0 |
Conference Call Information
Ansys will hold a conference call at
8:30 a.m. Eastern Time on November 5, 2020 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
stockholders 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. The Company will
also post a complementary investor presentation titled "Q3 2020
Investor Presentation" that can be accessed by clicking Events
& Presentations, then Presentations at
https://investors.ansys.com.
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 10149085. The archived webcast can be
accessed, along with other financial information, on Ansys' website
at
https://investors.ansys.com/events-and-presentations/events-calendar.
GAAP Financial Statements
ANSYS, INC. AND SUBSIDIARIES |
Condensed Consolidated Balance
Sheets |
(Unaudited) |
(in thousands) |
September 30, 2020 |
|
December 31, 2019 |
ASSETS: |
|
|
|
Cash & short-term investments |
$ |
845,209 |
|
$ |
872,382 |
Accounts receivable, net |
371,352 |
|
433,479 |
Goodwill |
2,491,590 |
|
2,413,280 |
Other intangibles, net |
474,785 |
|
476,711 |
Other assets |
663,359 |
|
643,035 |
Total assets |
$ |
4,846,295 |
|
$ |
4,838,887 |
LIABILITIES & STOCKHOLDERS' EQUITY: |
|
|
|
Current deferred revenue |
$ |
326,491 |
|
$ |
351,353 |
Long-term debt |
423,759 |
|
423,531 |
Other liabilities |
506,432 |
|
610,624 |
Stockholders' equity |
3,589,613 |
|
3,453,379 |
Total liabilities & stockholders' equity |
$ |
4,846,295 |
|
$ |
4,838,887 |
ANSYS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Income |
(Unaudited) |
|
Three Months Ended |
|
Nine Months Ended |
(in thousands, except per share data) |
September 30, 2020 |
|
September 30, 2019 |
|
September 30, 2020 |
|
September 30, 2019 |
Revenue: |
|
|
|
|
|
|
|
Software licenses |
$ |
141,622 |
|
|
$ |
137,144 |
|
|
$ |
398,793 |
|
|
$ |
430,687 |
|
Maintenance and service |
225,343 |
|
|
206,755 |
|
|
658,818 |
|
|
598,977 |
|
Total revenue |
366,965 |
|
|
343,899 |
|
|
1,057,611 |
|
|
1,029,664 |
|
Cost of sales: |
|
|
|
|
|
|
|
Software licenses |
7,251 |
|
|
5,708 |
|
|
20,688 |
|
|
16,620 |
|
Amortization |
9,911 |
|
|
4,762 |
|
|
29,227 |
|
|
14,064 |
|
Maintenance and service |
36,223 |
|
|
30,895 |
|
|
107,446 |
|
|
85,993 |
|
Total cost of sales |
53,385 |
|
|
41,365 |
|
|
157,361 |
|
|
116,677 |
|
Gross profit |
313,580 |
|
|
302,534 |
|
|
900,250 |
|
|
912,987 |
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
132,642 |
|
|
120,682 |
|
|
391,862 |
|
|
353,263 |
|
Research and development |
86,616 |
|
|
73,018 |
|
|
258,861 |
|
|
219,058 |
|
Amortization |
4,237 |
|
|
3,787 |
|
|
12,562 |
|
|
11,342 |
|
Total operating expenses |
223,495 |
|
|
197,487 |
|
|
663,285 |
|
|
583,663 |
|
Operating income |
90,085 |
|
|
105,047 |
|
|
236,965 |
|
|
329,324 |
|
Interest income |
754 |
|
|
3,188 |
|
|
4,463 |
|
|
9,610 |
|
Interest expense |
(1,853 |
) |
|
(239 |
) |
|
(8,544 |
) |
|
(561 |
) |
Other income (expense), net |
1,158 |
|
|
833 |
|
|
3,169 |
|
|
(937 |
) |
Income before income tax provision |
90,144 |
|
|
108,829 |
|
|
236,053 |
|
|
337,436 |
|
Income tax provision |
14,517 |
|
|
19,366 |
|
|
17,798 |
|
|
51,993 |
|
Net income |
$ |
75,627 |
|
|
$ |
89,463 |
|
|
$ |
218,255 |
|
|
$ |
285,443 |
|
Earnings per share – basic: |
|
|
|
|
|
|
|
Earnings per share |
$ |
0.88 |
|
|
$ |
1.06 |
|
|
$ |
2.55 |
|
|
$ |
3.40 |
|
Weighted average shares |
85,798 |
|
|
84,109 |
|
|
85,749 |
|
|
83,951 |
|
Earnings per share – diluted: |
|
|
|
|
|
|
|
Earnings per share |
$ |
0.87 |
|
|
$ |
1.04 |
|
|
$ |
2.50 |
|
|
$ |
3.34 |
|
Weighted average shares |
87,224 |
|
|
85,733 |
|
|
87,176 |
|
|
85,570 |
|
Reconciliations of GAAP to Non-GAAP
Measures (Unaudited)
|
Three Months Ended |
|
September 30, 2020 |
(in thousands, except percentages and per share
data) |
Revenue |
|
Gross Profit |
|
% |
|
Operating Income |
|
% |
|
Net Income |
|
EPS - Diluted1 |
Total GAAP |
$ |
366,965 |
|
|
$ |
313,580 |
|
|
85.5 |
% |
|
$ |
90,085 |
|
|
24.5 |
% |
|
$ |
75,627 |
|
|
$ |
0.87 |
|
Acquisition accounting for deferred revenue |
2,164 |
|
|
2,164 |
|
|
— |
% |
|
2,164 |
|
|
0.5 |
% |
|
2,164 |
|
|
0.02 |
|
Stock-based compensation expense |
— |
|
|
3,626 |
|
|
0.9 |
% |
|
38,185 |
|
|
10.4 |
% |
|
38,185 |
|
|
0.44 |
|
Excess payroll taxes related to stock-based awards |
— |
|
|
85 |
|
|
— |
% |
|
732 |
|
|
0.2 |
% |
|
732 |
|
|
0.01 |
|
Amortization of intangible assets from acquisitions |
— |
|
|
9,911 |
|
|
2.8 |
% |
|
14,148 |
|
|
3.8 |
% |
|
14,148 |
|
|
0.16 |
|
Transaction expenses related to business combinations |
— |
|
|
— |
|
|
— |
% |
|
1,549 |
|
|
0.4 |
% |
|
1,549 |
|
|
0.02 |
|
Adjustment for income tax effect |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(14,133 |
) |
|
(0.16 |
) |
Total non-GAAP |
$ |
369,129 |
|
|
$ |
329,366 |
|
|
89.2 |
% |
|
$ |
146,863 |
|
|
39.8 |
% |
|
$ |
118,272 |
|
|
$ |
1.36 |
|
1 Diluted weighted average shares were 87,224.
|
Three Months Ended |
|
September 30, 2019 |
(in thousands, except percentages and per share
data) |
Revenue |
|
Gross Profit |
|
% |
|
Operating Income |
|
% |
|
Net Income |
|
EPS - Diluted1 |
Total GAAP |
$ |
343,899 |
|
|
$ |
302,534 |
|
|
88.0 |
% |
|
$ |
105,047 |
|
|
30.5 |
% |
|
$ |
89,463 |
|
|
$ |
1.04 |
|
Acquisition accounting for deferred revenue |
1,596 |
|
|
1,596 |
|
|
— |
% |
|
1,596 |
|
|
0.4 |
% |
|
1,596 |
|
|
0.02 |
|
Stock-based compensation expense |
— |
|
|
2,422 |
|
|
0.7 |
% |
|
31,862 |
|
|
9.2 |
% |
|
31,862 |
|
|
0.37 |
|
Excess payroll taxes related to stock-based awards |
— |
|
|
— |
|
|
— |
% |
|
137 |
|
|
0.1 |
% |
|
137 |
|
|
— |
|
Amortization of intangible assets from acquisitions |
— |
|
|
4,762 |
|
|
1.4 |
% |
|
8,549 |
|
|
2.4 |
% |
|
8,549 |
|
|
0.10 |
|
Transaction expenses related to business combinations |
— |
|
|
— |
|
|
— |
% |
|
2,531 |
|
|
0.7 |
% |
|
2,531 |
|
|
0.03 |
|
Rabbi trust (income) / expense |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(45 |
) |
|
— |
|
Adjustment for income tax effect |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(12,385 |
) |
|
(0.14 |
) |
Total non-GAAP |
$ |
345,495 |
|
|
$ |
311,314 |
|
|
90.1 |
% |
|
$ |
149,722 |
|
|
43.3 |
% |
|
$ |
121,708 |
|
|
$ |
1.42 |
|
1 Diluted weighted average shares were 85,733.
|
Nine Months Ended |
|
September 30, 2020 |
(in thousands, except percentages and per share
data) |
Revenue |
|
Gross Profit |
|
% |
|
Operating Income |
|
% |
|
Net Income |
|
EPS - Diluted1 |
Total GAAP |
$ |
1,057,611 |
|
|
$ |
900,250 |
|
|
85.1 |
% |
|
$ |
236,965 |
|
|
22.4 |
% |
|
$ |
218,255 |
|
|
$ |
2.50 |
|
Acquisition accounting for deferred revenue |
10,116 |
|
|
10,116 |
|
|
0.2 |
% |
|
10,116 |
|
|
0.7 |
% |
|
10,116 |
|
|
0.12 |
|
Stock-based compensation expense |
— |
|
|
9,956 |
|
|
0.9 |
% |
|
103,256 |
|
|
9.7 |
% |
|
103,256 |
|
|
1.19 |
|
Excess payroll taxes related to stock-based awards |
— |
|
|
774 |
|
|
0.1 |
% |
|
9,591 |
|
|
0.9 |
% |
|
9,591 |
|
|
0.11 |
|
Amortization of intangible assets from acquisitions |
— |
|
|
29,227 |
|
|
2.7 |
% |
|
41,789 |
|
|
3.9 |
% |
|
41,789 |
|
|
0.48 |
|
Transaction expenses related to business combinations |
— |
|
|
— |
|
|
— |
% |
|
2,808 |
|
|
0.3 |
% |
|
2,808 |
|
|
0.03 |
|
Rabbi trust (income) / expense |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(5 |
) |
|
— |
|
Adjustment for income tax effect |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(60,906 |
) |
|
(0.70 |
) |
Total non-GAAP |
$ |
1,067,727 |
|
|
$ |
950,323 |
|
|
89.0 |
% |
|
$ |
404,525 |
|
|
37.9 |
% |
|
$ |
324,904 |
|
|
$ |
3.73 |
|
1 Diluted weighted average shares were 87,176.
|
Nine Months Ended |
|
September 30, 2019 |
(in thousands, except percentages and per share
data) |
Revenue |
|
Gross Profit |
|
% |
|
Operating Income |
|
% |
|
Net Income |
|
EPS - Diluted1 |
Total GAAP |
$ |
1,029,664 |
|
|
$ |
912,987 |
|
|
88.7 |
% |
|
$ |
329,324 |
|
|
32.0 |
% |
|
$ |
285,443 |
|
|
$ |
3.34 |
|
Acquisition accounting for deferred revenue |
6,249 |
|
|
6,249 |
|
|
— |
% |
|
6,249 |
|
|
0.4 |
% |
|
6,249 |
|
|
0.07 |
|
Stock-based compensation expense |
— |
|
|
6,024 |
|
|
0.6 |
% |
|
84,784 |
|
|
8.2 |
% |
|
84,784 |
|
|
0.98 |
|
Excess payroll taxes related to stock-based awards |
— |
|
|
476 |
|
|
— |
% |
|
4,516 |
|
|
0.4 |
% |
|
4,516 |
|
|
0.05 |
|
Amortization of intangible assets from acquisitions |
— |
|
|
14,064 |
|
|
1.4 |
% |
|
25,406 |
|
|
2.5 |
% |
|
25,406 |
|
|
0.30 |
|
Transaction expenses related to business combinations |
— |
|
|
— |
|
|
— |
% |
|
5,642 |
|
|
0.5 |
% |
|
5,642 |
|
|
0.07 |
|
Rabbi trust (income) / expense |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(268 |
) |
|
— |
|
Adjustment related to the Tax Cuts and Jobs Act |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(1,834 |
) |
|
(0.02 |
) |
Adjustment for income tax effect |
— |
|
|
— |
|
|
— |
% |
|
— |
|
|
— |
% |
|
(39,654 |
) |
|
(0.46 |
) |
Total non-GAAP |
$ |
1,035,913 |
|
|
$ |
939,800 |
|
|
90.7 |
% |
|
$ |
455,921 |
|
|
44.0 |
% |
|
$ |
370,284 |
|
|
$ |
4.33 |
|
1 Diluted weighted average shares were 85,570.
ANSYS, INC. AND SUBSIDIARIES |
Reconciliation of Forward-Looking Guidance |
Quarter Ending December 31, 2020 |
|
Earnings Per Share - Diluted |
U.S. GAAP
expectation |
$1.93 - $2.29 |
Exclusions before tax: |
|
Acquisition adjustments to deferred
revenue |
$0.01 |
Acquisition-related amortization |
$0.15 - $0.17 |
Stock-based compensation and related
excess payroll tax |
$0.39 - $0.45 |
Transaction expenses related to business
combinations |
$0.02 |
Adjustment for income tax effect |
($0.19) - ($0.22) |
Non-GAAP expectation |
$2.36 - $2.67 |
ANSYS, INC. AND SUBSIDIARIES |
Reconciliation of Forward-Looking Guidance |
Year Ending December 31, 2020 |
|
Earnings Per Share - Diluted |
U.S. GAAP
expectation |
$4.43 - $4.79 |
Exclusions before tax: |
|
Acquisition adjustments to deferred
revenue |
$0.13 |
Acquisition-related amortization |
$0.63 - $0.65 |
Stock-based compensation and related
excess payroll tax |
$1.69 - $1.75 |
Transaction expenses related to business
combinations |
$0.05 |
Adjustment for income tax effect |
($0.89) - ($0.92) |
Non-GAAP expectation |
$6.09 - $6.40 |
Use of Non-GAAP Measures
We provide non-GAAP revenue, non-GAAP gross
profit, non-GAAP gross profit margin, 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 our 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.
We use non-GAAP financial measures (a) to
evaluate our historical and prospective financial performance as
well as our performance relative to our 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 employees. In addition, many financial analysts that
follow us focus on and publish both historical results and future
projections based on non-GAAP financial measures. We believe that
it is in the best interest of our investors to provide this
information to analysts so that they accurately report the non-GAAP
financial information. Moreover, investors have historically
requested, and we have historically reported, these non-GAAP
financial measures as a means of providing consistent and
comparable information with past reports of financial results.
While we believe 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 our
competitors and may not be directly comparable to similarly titled
measures of our competitors due to potential differences in the
exact method of calculation. We compensate 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. Historically, we have consummated
acquisitions in order to support our 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
our business or cash flow, it adversely impacts our 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, we provide
non-GAAP financial measures which exclude the impact of the
acquisition accounting adjustment. We believe 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 us in our financial and operational
decision-making, and (b) compare our past and future reports
of financial results as the revenue reduction related to acquired
deferred revenue will not recur when related lease licenses and
software maintenance contracts are renewed in future periods.
Amortization of intangible assets from
acquisitions. We incur amortization of intangible
assets, included in our GAAP presentation of amortization expense,
related to various acquisitions we have made. We exclude these
expenses for the purpose of calculating non-GAAP gross profit,
non-GAAP gross profit margin, non-GAAP operating income, non-GAAP
operating profit margin, non-GAAP net income and non-GAAP diluted
earnings per share when we evaluate our continuing operational
performance 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 us after the acquisition. Accordingly, we do not consider these
expenses for purposes of evaluating our performance during the
applicable time period after the acquisition, and we exclude such
expenses when making decisions to allocate resources. We believe
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 us in our financial and
operational decision-making, and (b) compare our past reports
of financial results as we have historically reported these
non-GAAP financial measures.
Stock-based compensation
expense. We incur expense related to stock-based
compensation included in our GAAP presentation of 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 our 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 and viewed as a form of compensation, we
exclude these expenses for the purpose of calculating non-GAAP
gross profit, non-GAAP gross profit margin, non-GAAP operating
income, non-GAAP operating profit margin, non-GAAP net income and
non-GAAP diluted earnings per share when we evaluate our continuing
operational performance. We similarly exclude income (expense)
related to assets held in a rabbi trust in connection with our
deferred compensation plan. Specifically, we exclude stock-based
compensation and income (expense) related to assets held in the
deferred compensation plan rabbi trust during our annual budgeting
process and our quarterly and annual assessments of our
performance. The annual budgeting process is the primary mechanism
whereby we allocate resources to various initiatives and
operational requirements. Additionally, the annual review by our
board of directors during which it compares our 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 our
senior management and department managers, charges related to
stock-based compensation are excluded from expenditure and
profitability results. In fact, we record stock-based compensation
expense into a stand-alone cost center for which no single
operational manager is responsible or accountable. In this way, we
can 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. We believe that
these non-GAAP financial measures are useful to investors because
they allow investors to (a) evaluate our operating results and
the effectiveness of the methodology used by us to review our
operating results, and (b) review historical comparability in
our financial reporting as well as comparability with competitors'
operating results.
Transaction expenses related to business
combinations. We incur expenses for professional
services rendered in connection with business combinations, which
are included in our GAAP presentation of selling, general and
administrative expense. These expenses are generally not
tax-deductible. We exclude 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 we evaluate our continuing operational performance, as we
generally would not have otherwise incurred these expenses in the
periods presented as a part of our operations. We believe that
these non-GAAP financial measures are useful to investors because
they allow investors to (a) evaluate our operating results and
the effectiveness of the methodology used by us to review our
operating results, and (b) review historical comparability in
our financial reporting as well as comparability with competitors'
operating results.
Tax Cuts and Jobs Act. We
recorded impacts to our income tax provision related to the
enactment of the Tax Cuts and Jobs Act of 2017, specifically for
the transition tax related to unrepatriated cash and the impacts of
the tax rate change on net deferred tax assets. We exclude these
impacts for the purpose of calculating non-GAAP net income and
non-GAAP diluted earnings per share when we evaluate our continuing
operational performance, as (i) the charges are not expected to
recur as part of our 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. We believe
that these non-GAAP financial measures are useful to investors
because they allow investors to (a) evaluate our operating
results and the effectiveness of the methodology used by us to
review our operating results, and (b) review historical
comparability in our financial reporting.
Non-GAAP tax provision. We
utilize a normalized non-GAAP annual effective tax rate (AETR) to
calculate non-GAAP measures. This methodology provides better
consistency across interim reporting periods by eliminating the
effects of non-recurring items and aligning the non-GAAP tax rate
with our expected geographic earnings mix. To project this rate, we
analyzed our historic and projected non-GAAP earnings mix by
geography along with other factors such as our current tax
structure, recurring tax credits and incentives, and expected tax
positions. On an annual basis we will re-evaluate this rate for
significant items that may materially affect our projections.
Non-GAAP financial measures are not in
accordance with, or an alternative for, GAAP. Our 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 our consolidated financial
statements prepared in accordance with GAAP.
We have 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 |
Gross Profit |
Non-GAAP Gross Profit |
Gross Profit Margin |
Non-GAAP Gross Profit
Margin |
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
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
https://www.ansys.com for more information.
Contact: |
|
|
Investors: |
|
Annette Arribas, IRC |
|
|
724.820.3700 |
|
|
annette.arribas@ansys.com |
Media: |
|
Mary Kate Joyce |
|
|
724.820.4368 |
|
|
marykate.joyce@ansys.com |
Forward-Looking Information
This document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements that provide current
expectations or forecasts of future events based on certain
assumptions. Forward-looking statements are subject to risks,
uncertainties, and factors relating to our business which could
cause our actual results to differ materially from the expectations
expressed in or implied by such forward-looking statements. Many of
these risks, uncertainties, and factors are currently amplified by,
and may continue to be amplified by, the COVID-19 pandemic.
Forward-looking statements use words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “forecast,” “intend,”
“likely,” “may,” “outlook,” “plan,” “predict,” “project,” “should,”
“target,” or other words of similar meaning. Forward-looking
statements include those about market opportunity, including our
total addressable market. Risks, uncertainties, and factors that
could cause actual results to differ materially from those implied
by these forward-looking statements include: current and potential
future impacts of the COVID-19 pandemic on the global economy and
our business, financial position, results of operations and cash
flows; adverse changes in global economic and/or political
conditions; declines in our customers’ businesses resulting in
adverse changes in customer procurement patterns; disruptions in
accounts receivable and cash flow due to customers’ liquidity
challenges and commercial deterioration; uncertainties regarding
demand for our products and services in the future and our
customers’ acceptance of new products, including those arising from
the need of customers to utilize our products from remote
locations; plans for future capital spending; delays or declines in
anticipated sales due to reduced or altered sales and marketing
interactions with customers; disruptions in the global economy and
financial markets that may limit or delay availability of credit
under existing or new credit facilities, or that may limit our
ability to obtain credit or financing on acceptable terms or at
all; investments in complementary companies, products, services and
technologies; our ability to complete and successfully integrate
our acquisitions and realize the financial and business benefits of
the transactions; political, economic, regulatory and public health
and safety risks and uncertainties in the countries and regions in
which we operate; impacts from tariffs, trade sanctions, export
license requirements or other trade barriers; the effect of changes
in currency exchange rates and changes in interest rates; potential
variations in our sales forecasts compared to actual sales; the
volatility of our stock price; failures or errors in our products
and services; our industry’s rapidly changing technology; the
quality of our products, including the strength of features,
functionality and integrated multi-physics capabilities; lease
license volatility; higher than anticipated costs for research and
development or slowdown in our research and development activities;
increased pricing pressure as a result of the competitive
environment in which we operate; our ability to recruit and retain
key personnel including any delays in recruitment caused by
restrictions on travel and in person interactions and the absence
of key personnel or teams due to illness or recuperation; our
ability to protect our proprietary technology; cybersecurity
threats or other security breaches, including in relation to an
increased level of our activity that is occurring from remote
global off-site locations; disclosure and misuse of employee or
customer data whether as a result of a cybersecurity incident or
otherwise; implementation of our new IT systems; investments in
global sales and marketing organizations and global business
infrastructure; dependence on our channel partners for the
distribution of our products; increased volatility in our revenue
due to the timing, duration and value of multi-year lease
contracts; our reliance on high renewal rates for annual lease and
maintenance contracts; operational disruptions generally or
specifically in connection with transitions to and from remote work
environments, or the failure of our technological infrastructure;
the outcome of contingencies, including legal proceedings and
government or regulatory investigations and service tax audit
cases; uncertainty regarding income tax estimates in the
jurisdictions in which we operate; changes in accounting principles
or standards; the effect of changes in tax laws and regulations in
the jurisdictions in which we operate; the uncertainty of estimates
relating to the impact on reported revenue related to the
acquisition accounting treatment of deferred revenue; and other
risks and uncertainties described in our reports filed from time to
time with the Securities and Exchange Commission. We caution
readers not to place undue reliance upon any such forward-looking
statements, which speak only as of the date they are made. We
undertake no obligation to publicly update forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
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 https://investors.ansys.com for more
information.
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