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Ansys Inc. has a market cap of $4.1 billion; its shares were traded at around $45.41 with a P/E ratio of 24.2 and P/S ratio of 7.8. Ansys Inc. had an annual average earning growth of 24.6% over the past 10 years. GuruFocus rated Ansys Inc. the business predictability rank of 5-star.ANSS is in the portfolios of Ron Baron of Baron Funds, Columbia Wanger of Columbia Wanger Asset Management, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Pioneer Investments.
Highlight of Business Operations: ANSYS, Inc.’s results for the three months ended September 30, 2010 reflect a revenue increase of 9.1% as compared to the three months ended September 30, 2009, and basic and diluted earnings per share growth of 14.3% and 18.2%, respectively. The Company’s results for the nine months ended September 30, 2010 reflect a revenue increase of 12.9% as compared to the nine months ended September 30, 2009, and basic and diluted earnings per share growth of 29.2% and 30.2%, respectively. The Company experienced higher revenues in 2010 from growth in both license and maintenance revenue. In addition, the operating results were favorably impacted by reduced interest expense and the absence in 2010 of $2.8 million in severance costs related to second and third quarter 2009 global workforce reductions. The 2010 results were also favorably impacted by the absence of $567,000 and $7.8 million adverse impacts on revenue in the three and nine months ended September 30, 2009, respectively, related to purchase accounting adjustments to deferred revenue. These favorable items were partially offset by increased operating expenses, including higher incentive compensation, stock-based compensation and third party technical support fees.
The Company’s financial position includes $495.8 million in cash and short-term investments, and working capital of $330.8 million as of September 30, 2010. The Company has outstanding borrowings under its term loan of $164.8 million.
In valuing deferred revenue on the Ansoft Corporation (“Ansoft”) balance sheet as of the acquisition date, the Company applied the fair value provisions applicable to the accounting for business combinations. Although this purchase accounting requirement had no impact on the Company’s business or cash flow, the Company’s reported revenue under accounting principles generally accepted in the United States, primarily for the first 12 months post-acquisition, was less than the sum of what would otherwise have been reported by Ansoft and ANSYS absent the acquisition. The impact on reported revenue for the quarter ended September 30, 2009 was $100,000 for lease license revenue and $450,000 for maintenance revenue; there was no meaningful impact for the three months ended September 30, 2010.
Research and Development: The increase in research and development costs was a result of increased salary and headcount-related costs, including incentive compensation, of $1.0 million, increased stock-based compensation expense of $500,000 and increased maintenance-related costs of $400,000.
Interest Income: Interest income for the quarter ended September 30, 2010 was $491,000 as compared to $425,000 during the quarter ended September 30, 2009. Interest income increased as a result of an increase in invested cash balances, partially offset by a decline in interest rates in the 2010 period as compared to the 2009 period.
Income Tax Provision: The Company recorded income tax expense of $14.8 million and had income before income taxes of $50.9 million for the quarter ended September 30, 2010. This represents an effective tax rate of 29.0% in the third quarter of 2010. During the quarter ended September 30, 2009, the Company recorded income tax expense of $15.3 million and had income before income taxes of $45.8 million. The Company’s effective tax rate was 33.3% in the third quarter of 2009.
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