ANSYS Reports Q4 2006 Operating Results

Company Announces Increase to 2007 Initial Outlook

SOUTHPOINTE, Pa., Feb. 20 /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 fourth quarter and annual non-GAAP operating results, and an increase in its outlook for 2007 non-GAAP results.

"I am pleased to report another record year for our company," commented ANSYS President and CEO, Jim Cashman. "During 2006, despite the significant time and resources that were invested in our Fluent integration activities, the results for the fourth quarter and the year demonstrate the outcome of the continued focus of and execution by the ANSYS team. The results are also indicative of continued strong growth in our core business, complemented by the positive impact of the integration of the Fluent operations. Our financial performance during this past year reflects that our long-term vision and strategy continue to resonate with, and are very much aligned with, the needs and visions of our customers throughout the globe."

ANSYS' fourth quarter and year-to-date 2006 financial results are presented below. ANSYS' 2006 GAAP results are 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 $90.4 million in the fourth quarter of 2006
       as compared to $43.7 million in the fourth quarter of 2005; total non-
       GAAP revenue of $282.0 million in 2006 as compared to $158.0 million in
       2005; total GAAP revenue of $85.2 million in the fourth quarter of 2006
       as compared to $43.7 million in the fourth quarter of 2005; total GAAP
       revenue of $263.6 million in 2006 as compared to $158.0 million in
       2005;
    -- A non-GAAP operating profit margin of 38.1% in the fourth quarter of
       2006 as compared to 42.8% in the fourth quarter of 2005; a non-GAAP
       operating profit margin of 38.7% in 2006 as compared to 39.9% in 2005;
       a GAAP operating profit margin of 23.4% in the fourth quarter of 2006
       as compared to 40.6% in the fourth quarter of 2005; a GAAP operating
       profit margin of 13.7% in 2006 as compared to 37.2% in 2005;
    -- Non-GAAP net income of $21.5 million in the fourth quarter of 2006 as
       compared to $13.9 million in the fourth quarter of 2005; non-GAAP net
       income of $70.7 million in 2006 as compared to $46.7 million in 2005;
       GAAP net income of $12.3 million in the fourth quarter of 2006 as
       compared to GAAP net income of $13.3 million in the fourth quarter of
       2005; GAAP net income of $14.2 million in 2006 as compared to GAAP net
       income of $43.9 million in 2005; and
    -- Non-GAAP diluted earnings per share of $0.53 in the fourth quarter of
       2006 as compared to $0.41 in the fourth quarter of 2005; non-GAAP
       diluted earnings per share of $1.85 in 2006 as compared to $1.38 in
       2005; GAAP diluted earnings per share of $0.30 in the fourth quarter of
       2006 as compared to GAAP diluted earnings per share of $0.39 in the
       fourth quarter of 2005; GAAP diluted earnings per share of $0.37 in
       2006 as compared to GAAP diluted earnings per share of $1.30 in 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 $1.9 million ($1.6 million after tax) or $0.04 diluted earnings per share for the fourth quarter of 2006 and approximately $5.6 million ($4.7 million after tax) or $0.12 diluted earnings per share for 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 2007 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, 2006 and 2005, and for the 2007 financial outlook, is included in the condensed financial information included in this release.

Continuing his comments on 2006 performance, Cashman noted, "2006 has been a very productive and successful year for ANSYS as we completed a significant acquisition that has transformed our business and significantly extended the capabilities of our broad-based engineering simulation portfolio. We have also further expanded the diversity of our customer base, our geographic presence and our wealth of employee talent. The foundation that we have been building over the course of many years has generated a solid business model that positions the Company for future success and growth."

Cashman concluded with, "Our business continues to generate a significant level of cash from operations. During 2006, we deployed cash to partially fund the Fluent acquisition, aggressively pay down our debt and to fund capital expenditures that expanded our product offerings and improved our overall productivity. There is strong business and customer momentum as we begin 2007, and we are truly excited about the opportunities and challenges that lie ahead."

Management's Remaining 2007 Financial Outlook

The Company has provided its 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 $4.0 million during 2006 related to disqualified incentive stock options; however, only $67,000 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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