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Ansys (ANSS)

Q3 2012 Earnings Call

November 01, 2012 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

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

Perry Huang - Goldman Sachs Group Inc., Research Division

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

Gregory W. Halter - LJR Great Lakes Review

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

Steven R. Koenig - Wedbush Securities Inc., Research Division

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division

Stephen D. Bersey - CL King & Associates, Inc., Research Division



Good morning, and welcome to the ANSYS Third Quarter 2012 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jim Cashman. Please go ahead, sir.

James E. Cashman

Okay, thanks, Maureen. Good morning, and again, thanks, everyone, for joining us to discuss the ANSYS Third Quarter 2012 Financial Results. And consistent with what we've been doing all of this year, 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. So before we get started, I'd like to introduce Maria Shields, CFO, and would you give us our Safe Harbor statement, please?

Maria T. Shields

Thanks, Jim. Good morning, everyone. 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 forward-looking statements to reflect events or circumstances after the date that these are made. Consistent with our standard practice, 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 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 back to you.

James E. Cashman

Okay, Thanks, Maria. Before the Q&A, I'd like to briefly highlight a few key points about our Q2 results and our updated 2012 outlook, as well as our preliminary 2013 outlook. Actually, before I get into that I just want to send condolences and best wishes out to all of those on the East Coast who are dealing with their own versions of tragic and challenging times, so we wish everybody the best as they start to recover and rebuild from the events of recent days. So anyway, moving onto Q3. In summary, I'll say it like Q3 was a very good quarter for ANSYS in many respects. In fact, it was the highest revenue and earnings quarter of any third quarter in our history. And this morning, we reported revenue growth of 16% in constant currency and 12% EPS growth, or $200 million in non-GAAP revenue and $0.74 in non-GAAP EPS. This was in the midrange of our guidance for revenue and beyond the high end of our range for earnings. This yielded deferred revenue balance of $306 million, which is also a new record high for Q3.

Both software and maintenance revenues grew in double digits. All 3 of our major geographies delivered double-digit constant currency growth and our industry composition remains strong as we maintained our diversity, while leveraging our continuing strength in various sectors, most notably this quarter, including Automotive, Aerospace and Defense and Electronics and Semiconductors. Now we also added a significant number of new logo-ed customers to our global base. Now I mentioned these because they're usually, initially, not high-volume account, but a good number of them grow over the 3 to 5-year time frame. And then we also, of course, continue to see expansion in our major accounts where we're inversely all of the top 100 industrial companies of the world. I think most importantly, this was accomplished while we maintained the core tenets of our long-term vision and focus to deliver on our key commitments. We continue to focus on efforts and investment on building our business and capabilities for the long-term. I'm thinking of some -- if I get to throw out a few examples of this, the recent acquisition of Esterel, a commitment of our new corporate headquarters in 2014, and the release of ANSYS 14.5, which is coming up next week, as just a few examples.

Now I acknowledge that the overall macro-environment and customer sentiment turned out to be increasingly, at least much more cautious as we finished out the quarter and as we focus on closing out the year, and think this is a pretty similar to what a lot of people are seeing and we've been seeing as we ended up the last part of third quarter. And we don't see any clear signs of that changing anytime soon. So with Q3, in the rearview mirror and one quarter left in 2012, it looks to -- it's like more of the same. The result is, that we've adjusted our outlook for the year and it’ss based on the following factors: first, and the overwhelmingly -- biggest one is the economic and political realities that our current environment with all the uncertainty and concerns around the continued slow growth, elections, fiscal cliff, what's going to happen to taxes, we just aren't hearing any of our customers talk about year-end budget flush or excess spending. So we've factored in the challenge that we and many of our customers are facing into our guidance.

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