“By staying true to our strategic vision, we validated that the fundamentals of the ANSYS business remain strong, even in the midst of the macro challenges. Our customers’ ability to innovate is essential to their future success, which in turn furthers the success of ANSYS. As a result, we continue to have a strong financial model that can drive profitable operations while ANSYS delivers on its promise to provide best in class engineering simulation,” commented ANSYS President & CEO Jim Cashman. “The fourth quarter presented us with a combination of both challenges and opportunities. ANSYS’ ability to deliver solid financial results was driven by our tight alignment with our customer’s research and product development priorities, our broad portfolio of product solutions, and solid execution by our global workforce and channel partners. While we continue to face the realities of ongoing pressure on customer capital spending and prolonged sales cycles, we are also cognizant of the need to focus on and invest in our top priorities – sales, technology innovation and the integration of Ansoft. During this past quarter, we made progress on a number of important fronts that we believe continue to position ANSYS for future long-term growth as we address the expanding needs of our diverse customer base.”
ANSYS' fourth quarter and full year 2008 financial results are presented below. The non-GAAP results exclude the income statement effects of stock-based compensation, purchase accounting for deferred revenue and acquisition-related amortization of intangible assets. Non-GAAP and GAAP results reflect:
- Total non-GAAP revenue of $143.3 million in the fourth quarter of 2008 as compared to $111.2 million in the fourth quarter of 2007; total non-GAAP revenue of $493.0 million in 2008 as compared to $387.2 million in 2007; total GAAP revenue of $135.3 million in the fourth quarter of 2008 as compared to $111.2 million in the fourth quarter of 2007; total GAAP revenue of $478.3 million in 2008 as compared to $385.3 million in 2007;
- A non-GAAP operating profit margin of 48.8% in the fourth quarter of 2008 as compared to 43.2% in the fourth quarter of 2007; a non-GAAP operating profit margin of 47.5% in 2008 as compared to 43.3% in 2007; a GAAP operating profit margin of 33.8% in the fourth quarter of 2008 as compared to 34.1% in the fourth quarter of 2007; a GAAP operating profit margin of 35.5% in 2008 as compared to 32.9% in 2007;
- Non-GAAP net income (see *Note below) of $46.6 million in the fourth quarter of 2008 as compared to $36.0 million in the fourth quarter of 2007; non-GAAP net income of $152.4 million in 2008 as compared to $109.0 million in 2007; GAAP net income of $31.9 million in the fourth quarter of 2008 as compared to GAAP net income of $29.3 million in the fourth quarter of 2007; GAAP net income of $111.7 million in 2008 as compared to GAAP net income of $82.4 million in 2007; and
- Non-GAAP diluted earnings per share (see *Note below) of $0.50 in the fourth quarter of 2008 as compared to $0.44 in the fourth quarter of 2007; non-GAAP diluted earnings per share of $1.76 in 2008 as compared to $1.34 in 2007; GAAP diluted earnings per share of $0.34 in the fourth quarter of 2008 as compared to GAAP diluted earnings per share of $0.36 in the fourth quarter of 2007; GAAP diluted earnings per share of $1.29 in 2008 as compared to GAAP diluted earnings per share of $1.02 in 2007.
* Note: The GAAP and non-GAAP net income and earnings per share data reflected above include approximately $2.0 million, or $0.02 per share, in tax benefits during the fourth quarter of 2008 related to U.S. research and development activities that occurred during the first nine months of 2008. These amounts were recorded in the fourth quarter when the U.S. government approved the related tax credits retroactive to January 1, 2008. The GAAP and non-GAAP net income and earnings per share data for 2007 include approximately $3 million, or $0.04 per share, in tax benefits during the fourth quarter of 2007, primarily related to (1) reductions in the Company’s accrual related to uncertain tax positions associated with the filing of voluntary disclosure agreements in various state taxing jurisdictions, (2) reductions in the Company’s U.S. net deferred tax liabilities associated with the merger of two U.S. legal entities, (3) a favorable adjustment to the Company’s previous estimate for taxes owed in a foreign jurisdiction as a result of the completion of the related tax filing and (4) reductions in certain deferred tax liabilities in foreign jurisdictions related to prospective income tax rate changes adopted by the foreign jurisdiction.
The Company's GAAP results reflect stock-based compensation charges of approximately $3.1 million ($2.0 million after tax) or $0.02 diluted earnings per share for the fourth quarter of 2008 and approximately $11.8 million ($8.9 million after tax) or $0.10 diluted earnings per share for 2008.
The non-GAAP financial results highlighted above, and the non-GAAP financial outlook for 2009 discussed below, represent non-GAAP financial measures. A reconciliation of these measures to the appropriate GAAP measures, for the three months and twelve months ended December 31, 2008 and 2007, and for the 2009 financial outlook, is included in the condensed financial information included in this release.
Cashman continued, “Our on-going challenge will be to respond to the current market conditions without sacrificing long-term opportunity. Having demonstrated our ability to succeed, we believe our solid fourth quarter and fiscal year 2008 results continue to reflect ANSYS’ strength in the marketplace and is testimony to the fact that our engineering solutions remain a high priority investment within our expanding customer base. Throughout 2008, we managed our spending, while at the same time, investing in important future growth opportunities such as the Ansoft acquisition. We also continued to focus on strengthening the breadth and depth of our solutions and extending our technology leadership. Throughout 2009 we will continue to take steps to streamline operations, manage discretionary costs and strengthen the effectiveness of our global operations.”
Cashman concluded by saying, “Looking ahead, we are very excited about the upcoming releases of ANSYS 12.0 and Workbench 2.0 and the potential that these products have for our business. In every economic cycle that we have experienced, there are new opportunities that are created. We believe that our efforts in 2008 have positioned us with a vast array of new and improved technologies that will position us to take advantage of those new opportunities and to drive new business and increase the adoption rates of ANSYS solutions. During these challenging times, we will continue to work with our customers to help them meet or exceed their goals of reducing the number of design iterations, shortening the design cycle, lowering costs, improving product quality and expanding market share.”
Management's Remaining 2009 Financial Outlook
The Company has updated its 2009 revenue and earnings per share guidance below. The earnings per share guidance is provided on both a GAAP basis and a non-GAAP basis. Non-GAAP diluted earnings per share excludes purchase accounting adjustments to deferred revenue, as well as charges for stock-based compensation and acquisition-related amortization of intangible assets.
First Quarter 2009 Guidance
The Company currently expects the following for the quarter ending March 31, 2009:
| GAAP revenue in the range of | $117.0 - $125.0 million | |
| Non-GAAP revenue in the range of | $122.0 - $130.0 million | |
| GAAP diluted earnings per share of | $0.17- $0.25 | |
| Non-GAAP diluted earnings per share of | $0.33- $0.39 |
Fiscal Year 2009 Guidance
The Company currently expects the following for the fiscal year ending December 31, 2009:
| GAAP revenue in the range of | $522.0 - $582.0 million | |
| Non-GAAP revenue in the range of | $530.0 - $590.0 million | |
| GAAP diluted earnings per share of | $1.01- $1.36 | |
| Non-GAAP diluted earnings per share of | $1.54- $1.85 |
These statements are forward-looking and actual results may differ materially. ANSYS is unable to predict the likely duration and severity of the current disruption in the domestic and global economies. Should these economic conditions continue to deteriorate further, it could result in ANSYS not meeting the guidance provided above and ANSYS’ operating results and financial performance could be adversely affected. Non-GAAP diluted earnings per share is a supplemental financial measure and should not be considered as a substitute for, or superior to, diluted earnings per share determined in accordance with GAAP.
Use of Non-GAAP Measures