ANSYS Announces Results For Q3

Company Increases 2006 Guidance and Provides Initial 2007 Outlook

SOUTHPOINTE, Pa., Nov. 2 /PRNewswire-FirstCall/ -- ANSYS, Inc. (NASDAQ: ANSS), a global innovator of simulation software and technologies designed to optimize product development processes, today announced a new Company record for quarterly non-GAAP operating results and an increase in its outlook for 2006 non-GAAP results. The Company has also provided its initial outlook for the 2007 fiscal year.

"We are proud to announce a record quarter for financial performance for both revenue and earnings, and are pleased with the efforts of the entire ANSYS team," said ANSYS President and CEO, Jim Cashman. "The Company continues to make substantial progress against its short-term integration and business execution priorities, in addition to its long-term strategic initiatives. We firmly believe that these results not only validate the initial enthusiastic customer response to our diversified portfolio of innovative product and service offerings, but also provide us with the business momentum that enables us to continue to focus, invest and drive our technology vision for the future."

ANSYS' third quarter and year-to-date 2006 financial results are presented below. ANSYS' 2006 year-to-date GAAP results are heavily impacted by a one- time charge of $28.1 million, which was recorded in the second quarter of 2006, and related to in-process research and development associated with the May 2006 acquisition of Fluent. The non-GAAP results exclude the income statement effects of stock-based compensation, purchase accounting for deferred revenue, acquisition-related amortization of intangible assets and the one-time acquired in-process research and development charge. Non-GAAP and GAAP results reflect:

    * Total non-GAAP revenue of $77.4 million in the third quarter of 2006 as
      compared to $39.0 million in the third quarter of 2005; total non-GAAP
      revenue of $191.6 million in the first nine months of 2006 as compared
      to $114.3 million in the first nine months of 2005; total GAAP revenue
      of $70.1 million in the third quarter of 2006 as compared to $39.0
      million in the third quarter of 2005; total GAAP revenue of $178.4
      million in the first nine months of 2006 as compared to $114.3 million
      in the first nine months of 2005;

    * A non-GAAP operating profit margin of 37.1% in the third quarter of 2006
      as compared to 39.4% in the third quarter of 2005; a non-GAAP operating
      profit margin of 39.0% in the first nine months of 2006 as compared to
      38.8% in the first nine months of 2005; a GAAP operating profit margin
      of 18.3% in the third quarter of 2006 as compared to 36.7% in the third
      quarter of 2005; a GAAP operating profit margin of 9.1% in the first
      nine months of 2006 as compared to 35.9% in the first nine months of
      2005;

    * Non-GAAP net income of $18.2 million in the third quarter of 2006 as
      compared to $11.9 million in the third quarter of 2005; non-GAAP net
      income of $49.2 million in the first nine months of 2006 as compared to
      $32.8 million in the first nine months of 2005; GAAP net income of $8.4
      million in the third quarter of 2006 as compared to GAAP net income of
      $11.2 million in the third quarter of 2005; GAAP net income of $1.9
      million in the first nine months of 2006 as compared to GAAP net income
      of $30.6 million in the first nine months of 2005; and

    * Non-GAAP diluted earnings per share of $0.45 in the third quarter of
      2006 as compared to $0.35 in the third quarter of 2005; non-GAAP diluted
      earnings per share of $1.31 in the first nine months of 2006 as compared
      to $0.97 in the first nine months of 2005; GAAP diluted earnings per
      share of $0.21 in the third quarter of 2006 as compared to GAAP diluted
      earnings per share of $0.33 in the third quarter of 2005; GAAP diluted
      earnings per share of $0.05 in the first nine months of 2006 as compared
      to GAAP diluted earnings per share of $0.91 in the first nine months of
      2005.

The Company's GAAP results reflect stock-based compensation charges related to the January 1, 2006 adoption of SFAS No. 123R "Share-Based Payment" of approximately $1.2 million ($1.0 million after tax) or $0.03 diluted earnings per share for the third quarter of 2006 and approximately $3.7 million ($3.0 million after tax) or $0.08 diluted earnings per share for the first nine months of 2006. Because the Company elected prospective adoption of SFAS No. 123R, as permitted by SFAS No. 123R, the 2005 results do not reflect charges for stock-based compensation.

The non-GAAP financial results highlighted above, and the non-GAAP financial outlook for 2006 and 2007 discussed below, represent non-GAAP financial measures. A reconciliation of these measures to the appropriate GAAP measures, for the three months and nine months ended September 30, 2006 and 2005, and for the 2006 and initial 2007 financial outlook, is included in the condensed financial information included in this release.

"We believe that today's reported results highlight continued progress in the core business, as well as the positive impact of our integration efforts to date. They are also a clear indication that our dedication to customers and our focus on execution against a long-term strategy translates to sustained profitable growth and ultimately drives value for the benefit of our stockholders," Cashman stated.

Management's Remaining 2006 and Initial 2007 Financial Outlook

The Company has provided its 2006 and 2007 revenue and earnings per share guidance below. The revenue and earnings per share guidance is provided on both a GAAP basis and a non-GAAP basis. Non-GAAP revenue and non-GAAP diluted earnings per share exclude charges for stock-based compensation as well as the income statement effects of purchase accounting for deferred revenue, acquisition-related amortization of intangible assets and acquired in-process research and development.

As required by SFAS No. 123R and 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 is accounted for as an increase to equity (additional paid-in capital) rather than as a reduction in income tax expense, especially in the periods most closely following the adoption date of SFAS No. 123R. 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 $3.7 million during the first nine months of 2006 related to disqualified incentive stock options; however, only $65,000 of such amount was recorded as a reduction in income tax expense. Because there are significant limitations in estimating the impact of SFAS No. 123R, 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.

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