- Total revenue of $46.0 million, as compared to $37.6 million in the first quarter of 2005; - Net income of $12.9 million, as compared to $9.7 million in the first quarter of 2005; - An operating profit margin of 38.7% as compared to 35.7% for the first quarter of 2005; and - Diluted earnings per share of $0.38 as compared to $0.29 for the first quarter of 2005.
Excluding both acquisition-related amortization and stock-based compensation, ANSYS' first quarter 2006 adjusted (non-GAAP) results include:
- An adjusted operating profit margin of 43.4% as compared to 38.6% for the first quarter of 2005; - Adjusted diluted earnings per share of $0.42 as compared to $0.31 for the first quarter of 2005
"ANSYS is off to a strong start in 2006, as evidenced by our record first quarter financial performance. We believe that our first quarter results are further validation that we are headed in the right strategic direction and that we must continue to focus on execution and delivery of our commitments for continued success in the future. Our first quarter results include the further expansion of a long-term customer relationship that contributed significant incremental software revenues for the first quarter. I am very proud that the ANSYS team was able to stay focused on delivering a solid quarter, while at the same time engaging in planning and finalizing logistics related to the upcoming closing of the Fluent acquisition, which is anticipated to occur on May 1, 2006," stated ANSYS President and CEO, Jim Cashman.
Cashman further commented, "We are encouraged that customers see the tremendous value, as we expand our portfolio of advanced technologies by bringing more powerful engineering simulation tools to more people in the product development cycle. Next week we are hosting our 2006 International Users' Conference and we are very pleased with the strong support and interest that has been received from our customers and partners. We plan to demonstrate how simulation has become a critical element of the product development process, as well as how global, forward-thinking companies have put engineering simulation at the forefront in producing innovative and successful products."
"We've had an exciting start to a milestone year for ANSYS with the anticipated closing of a very strategic acquisition and our upcoming conference," said Cashman. "Our results in the first quarter lay the groundwork as we look forward to a strong 2006 and continued growth and progress on our long-term strategy."
The adjusted results highlighted above, and the adjusted estimates for 2006 discussed below, represent non-GAAP financial measures. A reconciliation of these measures to the appropriate GAAP measures, for the three months ended March 31, is included in the condensed financial information included in this release.
Adjustments to Reported GAAP Financial Results
- Acquisition-Related Amortization:
As previously disclosed, the Company completed its acquisition of both Century Dynamics, Inc. and the assets of Harvard Thermal, Inc. in 2005. In previous years, the Company also acquired other businesses. These acquisitions have all been accounted for as purchases, resulting in the recording of a significant amount of identifiable intangible assets.
- Stock-Based Compensation:
On January 1, 2006, the Company adopted SFAS No. 123R, "Accounting for Stock-Based Compensation." Accordingly, the first quarter GAAP results for 2006 reflect charges for stock-based compensation. Because the Company elected prospective adoption of SFAS No. 123R, as permitted by the standard, the 2005 results do not reflect charges for stock-based compensation.
ANSYS is providing, and has historically provided, its current quarter GAAP results as well as financial results that have been adjusted for the impact of acquisition-related amortization and stock-based compensation. The Company believes that these non-GAAP measures supplement its consolidated GAAP financial statements as they provide a consistent basis for comparison between reporting periods that are not influenced by certain non-cash items and are, therefore, useful to investors in helping them to better understand the Company's operating results and underlying operational trends. Management uses these non-GAAP financial measures internally to evaluate the Company's business performance and plan for future periods; however, these measures are not intended to supersede or replace the GAAP results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP. As such, a reconciliation of GAAP and non-GAAP financial measures is provided in the financial statements attached to this press release.
Recent Business Highlights - Acquisition of Fluent Inc. - April 2006 -- Announced that the waiting period under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended, with respect to ANSYS' pending acquisition of Fluent, a stock and cash transaction valued at approximately $574 million, expired at 11:59 p.m. (Eastern Time) on Wednesday, April 26, 2006. Under the terms of the agreement, ANSYS will issue 6,000,000 shares of its common stock and pay approximately $300 million of net cash to acquire Fluent, subject to certain adjustments at closing. After the anticipated May 1, 2006 closing, ANSYS expects the acquisition to be immediately accretive to earnings, excluding acquisition-related costs, amortization of intangibles, the impact of deferred revenue purchase accounting treatment and expensing of stock options. The Company will use a combination of existing cash and proceeds from approximately $200 million of committed bank financing to fund the transaction. Management's Financial Outlook
The Company has provided its 2006 revenue and earnings per share guidance below. The earnings per share guidance is provided on both a GAAP basis and an adjusted basis. Adjusted diluted earnings per share excludes acquisition- related amortization and the effects of stock-based compensation.
As required by FASB Statement 123(R) and recent guidance issued by the Securities and Exchange Commission, effective January 1, 2006, the Company records expenses and tax benefits related to stock-based compensation. As a result, the GAAP estimates for earnings per share provided below reflect the anticipated impact of stock-based compensation. The Company issues both nonqualified and incentive stock options; however, incentive stock options comprise a significant portion of outstanding stock options. The tax benefits associated with incentive stock options are unpredictable, as they are predicated upon an award recipient triggering an event that disqualifies the award and which then results in a tax deduction to the Company. GAAP requires that these tax benefits be recorded at the time of the triggering event. The triggering events for each option holder are not easily projected. In order to estimate the tax benefit related to incentive stock options, the Company makes many assumptions and estimates, including the number of incentive stock options that will be exercised during the period by U.S. employees, the number of incentive stock options that will be disqualified during the period and the fair market value of the Company's stock price on the exercise dates. Each of these items is subject to significant uncertainty. Additionally, a significant portion of the tax benefits related to disqualified incentive stock options are accounted for as increases to equity (additional paid-in capital) rather than as reductions in income tax expense, especially in the periods most closely following the adoption date of Statement 123(R). Although all such benefits continue to be realized through the Company's tax filings, this accounting treatment has the effect of increasing tax expense and reducing net income. For example, the Company realized a tax benefit of $1.9 million during the first quarter related to disqualified incentive stock options; however, only $25,000 of such amount was recorded as a reduction in income tax expense. Because there are significant limitations in estimating the impact of FASB Statement 123(R), including those discussed above, the actual impact of stock-based compensation on GAAP earnings per share may differ materially from the estimated amounts included in the guidance below.