Ansys (ANSS)

Q3 2011 Earnings Call

November 03, 2011 10:30 am ET

Executives

Maria T. Shields - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance & Administration

James E. Cashman - Chief Executive Officer, President and Director

Analysts

Jason Rogers - Great Lakes Review

Daniel T. Cummins - ThinkEquity LLC, Research Division

Blair Abernethy - Stifel, Nicolaus & Co., Inc., Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Mark W. Schappel - The Benchmark Company, LLC, Research Division

Barbara Coffey - Brigantine Advisors LLC

Steven R. Koenig - Longbow Research LLC

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Richard H. Davis - Canaccord Genuity, Research Division

Ross MacMillan - Jefferies & Company, Inc., Research Division

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to ANSYS Third Quarter 2011 Conference Call. With us today are Mr. Jim Cashman, President and Chief Executive Officer; and Maria Shields, Chief Financial Officer. At this time, I would like to turn the call over to Mr. Jim Cashman.

James E. Cashman

Okay. Good morning, everybody. And again, thank you for joining us to discuss ANSYS' third quarter 2011 financial results. Okay. So consistent with our 2011 protocol, all of the general information and key topics relative to the third quarter and the year-to-date business results, as well as our future outlook are included in the earnings release and in the prepared remarks that we posted on the homepage of our Investor Relations website this morning. But before we get started I will introduce Maria Shields, our CFO, and I'll ask her to go through our typical Safe Harbor Statement. So Maria?

Maria T. Shields

Okay. Good morning. Thanks, Jim. I'd like to remind everyone that in addition to any risks and uncertainties that we highlight during the course of this call, important factors that may affect our future results are discussed at length in our public filings with the SEC, all of which are also available via our website. Additionally, the company's reported results should not be considered an indication of future performance, as there are risks and uncertainties that could impact our business in the future. These statements are based upon our view of the world and our business as of today. And we undertake no obligation to update any such information, unless we do so in a public forum.

Consistent with our standard practice, during the course of this call and in the prepared remarks, we make reference to non-GAAP financial measures. A discussion of the various items that are excluded and a full reconciliation of GAAP to comparable non-GAAP financial measures are included in this morning's earnings release materials and the related Form 8-K.

So Jim, I'll turn it over to you for some opening commentary before we jump to Q&A.

James E. Cashman

Okay. Thanks, Maria. Okay, let's see, well before the Q&A, I'd basically like to briefly underscore a few important points about our Q3 results and our Q4 2011 outlook. And I guess I'll just begin by saying that Q3 was another very strong quarter for ANSYS in virtually every respect. Our revenue growth was 27%. Our organic growth was 20%. Our total license growth was 32%. This put us in the upper end of guidance for revenue and exceeded it for earnings, and all of this while experiencing slightly less favorable currency than we had guided last quarter.

And then finally, we maintained all of the historical strength of ANSYS over a multiyear period with double-digit growth within our 3 major geographic regions, double-digit growth in each of our major product units and in most categories of revenue -- I'm sorry, basically in all of the categories of revenue we have like license and maintenance major categories. So this in turn yielded strong margins, cash flow and earnings as typical.

Let's see, our industry composition was also strong as we maintained our diversity while leveraging our continuing strengths in various sectors including energy, electronics, automotive and industrials. We added new customers to our global base and we continue to see good growth in our major accounts where we're in virtually all of the top 100 industrial companies in the world.

And I think most importantly, this was accomplished while we maintained the core tenets of our long term vision. It was supported by an environment where our customers basically typically can't afford to compromise depth, breadth or quality of the simulation tools that they use to saw there increasingly, complex design challenges.

The result of this is that we've increased our outlook on revenue and EPS for Q4 in fiscal year 2011 as discussed in our earnings release. I will highlight that our Q4 outlook does factor in some volume of the year end spending but not anything like we've seen in the past, very healthy Q4. In the recent climate, there's been a greater variability in the end game of our customers' year end spending patterns and it appears that the uncertainty in today's world basically fosters a more patient, in a way, if you will, wait-and-see attitude. And since we're not seeing it yet, we don't want to predict with certainty that it will come. And if it does come, then we'll all be pleasantly surprised. But again, the net impact is an increase in Q4 and 2011 full year guidance.

Now with respect to our initial outlook for 2012, we have factored in a positive customer sentiment, the release of ANSYS 14, strong pipelines and increased sales capacity. Again somewhat tempered by economic uncertainty. And this translates to our initial outlook of $818 million to $840 million in non-GAAP revenue and $2.80 to $2.90 in non-GAAP EPS. More details around currency rate and other key assumptions are contained in the prepared remarks that we posted on our Investor Relations home page earlier this morning.

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