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Q1 2013 Earnings Call
May 02, 2013 10:30 am ET
James E. Cashman - Chief Executive Officer, President, Director and Member of Strategy Committee
Maria T. Shields - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance & Administration
Richard H. Davis - Canaccord Genuity, Research Division
Sterling P. Auty - JP Morgan Chase & Co, Research Division
Perry Huang - Goldman Sachs Group Inc., Research Division
Steven R. Koenig - Wedbush Securities Inc., Research Division
Ross MacMillan - Jefferies & Company, Inc., Research Division
Jay Vleeschhouwer - Griffin Securities, Inc., Research Division
Matthew L. Williams - Evercore Partners Inc., Research Division
Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division
Barbara Coffey - S&P Equity Research
Previous Statements by ANSS
» Ansys Management Discusses Q4 2012 Results - Earnings Call Transcript
» Ansys Management Discusses Q3 2012 Results - Earnings Call Transcript
» Ansys Management Discusses Q2 2012 Results - Earnings Call Transcript
I would now like to turn the conference over to Mr. Jim Cashman, President and CEO. Please go ahead, sir.
James E. Cashman
Okay. Good morning. And again thanks, everyone, for joining us to discuss ANSYS's 2013 first quarter financial results. So again, some housekeeping. Consistent with our standard protocol, all the information of the key topics relative to Q1's business performance and our updated 2013 outlook are included within this morning's earnings release and in the prepared documents that we posted on the homepage of our Investor Relations website this morning.
So with that in place, I'm going to ask -- first I'll introduce Maria Shields, our CFO, and ask her to go through our typical Safe Harbor statement. So, Maria?
Maria T. Shields
Okay. Thanks, Jim. Good morning, everyone. I'd like to remind you 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 business as of today and ANSYS undertakes no obligation to update any such information unless we do so in a public forum.
During the course of this call and in the prepared remarks, we'll be making reference to non-GAAP financial measures. A discussion of the various items that are excluded and a full reconciliation of the 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 now turn the call back over to you.
James E. Cashman
Okay. Thanks, Maria.
So before we get started with the Q&A, I'd like to briefly underscore a few important highlights regarding our Q1 results and our updated fiscal year 2013 outlook. So let me begin by saying that Q1 was a solid quarter on many fronts, but it also finished a bit softer than it started or than we had planned. From my perspective, the most important aspect of our performance for Q1 is despite a variety of issues, including macroeconomic challenges and currency rates that were towards the lower end, and in the case of the yen, outside the range that we provided, we continued an important multiyear trend for us as a company and as a management team, we delivered on our earnings commitment. We managed the business in a disciplined fashion and finished with earnings above the range that we had guided coming into the quarter. In addition, we achieved revenue growth in all 3 major geographies, as well as double-digit constant currency growth in both Europe and GIA, Asia-Pacific. Our recurring revenue was very strong at 74%. Our operating margins remain slightly above guidance at 48%. Deferred revenue and backlog grew to an all-time high of $399 million. We generated $95 million in operating cash flows, which is a 14% increase over Q1 of 2012. We welcomed EVEN, the company named EVEN, to the ANSYS family on April 2nd. This is a company that actually gives us a very good positioning into the advancing world of composite materials in our simulation space. And on the hiring front, we netted about 50 employees.
So there were many positive aspects in the quarter, including relatively strong constant currency revenue performance in the United Kingdom and in GIA, most notably. But we also acknowledge that there were some pockets of sales ramp up issues. For all those new hires that we talked about in previous quarters that impacted the quarter Q1. And they are top priorities for us in Q2 and the remainder of 2013 to continue to expedite that ramp-up. Our industry composition continued to be diverse while exhibiting strength in automotive, industrial equipment, electronics and the biomed sectors in particular. We added really a host of new logos and continued to see new sales and strong renewals in our existing account base.
Now as we look forward to the remainder of 2013, we are revising our full year outlook based on 2 primary assumptions. Well, first of all, we're expecting a continuation of the business climate similar to that which we experienced in the first quarter. And secondly, we're adjusting our currency rate, most notably for the significant weakening of the Japanese yen.
With this in mind, we've updated our full year outlook for 2013 non-GAAP revenue in the range of $855 million to $875 million and EPS in the $2.96 -- $2.96 and $3.04 range. For Q2, we're targeting non-GAAP revenues of $206 million to $212 million and EPS of $0.69 to $0.72. Now, I'd also like to -- one thing I'd like to note is that our Q2 EPS guidance includes additional costs related to user group meetings that historically occurred in the second half of the year, but due to some product timing things, we've actually moved that forward into a Q2 thing. So it will be non-comparable, but nothing surprising there.