6
EXHIBIT 99 Certain Factors Regarding Future Results
Information provided by the Company or its
spokespersons may from time to time contain forward-
looking statements concerning projected financial
performance, market and industry segment growth,
product development and commercialization or other
aspects of future operations. Such statements will
be based on the assumptions and expectations of the
Company's management at the time such statements are
made. The Company cautions investors that its
performance (and, therefore, any forward-looking
statement) is subject to risks and uncertainties.
Various important factors, including but not limited
to the following, may cause the Company's future
results to differ materially from those projected in
any forward-looking statement.
Potential Fluctuations in Operating Results. The
Company may experience significant fluctuations in
future quarterly operating results. Fluctuations
may be caused by many factors, including the timing
of new product releases or product enhancements by
the Company or its competitors; the size and timing
of individual orders, including a fluctuation in the
demand for and the ability to complete large
contracts; software errors or other product quality
problems; competition and pricing; customer order
deferrals in anticipation of new products or product
enhancements; reduction in demand for the Company's
products; changes in operating expenses; changes in
the mix of software license and maintenance and
service revenue; personnel changes and general
economic conditions. A substantial portion of the
Company's operating expenses are related to
personnel, facilities and marketing programs. The
level of personnel and related expenses cannot be
adjusted quickly and is based, in significant part,
on the Company's expectation for future revenue.
The Company does not typically experience
significant order backlog. Further, the Company has
often recognized a substantial portion of its
revenue in the last month of a quarter, with this
revenue frequently concentrated in the last weeks or
days of a quarter. During certain quarterly
periods, the Company has been dependent upon
receiving large orders of perpetual licenses
involving the payment of a single, up-front fee and,
more recently, has shifted the business emphasis of
its products to provide a collaborative solution to
the Company's customers. This emphasis has
increased the Company's average order size and
increased the related sales cycle time for the
larger orders and may have the effect of increasing
the volatility of the Company's revenue and profit
from period to period. The Company also depends
upon renewals and sales of noncancellable annual
leases, for which a portion of the annual license
fee is recognized as paid-up revenue upon renewal or
inception of the lease. As a result, product
revenue in any quarter is substantially dependent on
sales completed in the latter part of that quarter,
and revenue for any future quarter is not
predictable with any significant degree of accuracy.
Stock Market and Stock Price Volatility. Market
prices for securities of software companies have
generally been volatile. In particular, the market
price of the Company's common stock has been and may
continue to be subject to significant fluctuations
as a result of factors affecting the Company, the
software industry or the securities markets in
general. Such factors include, but are not limited
to, declines in trading price that may be triggered
by the Company's failure to meet the expectations of
securities analysts and investors. The Company
cannot provide assurance that in such circumstances
the trading price of the Company's common stock will
recover or that it will not experience a further
decline. Moreover, the trading price could be
subject to additional fluctuations in response to
quarter-to-quarter variations in the Company's
operating results, material announcements made by
the Company or its competitors, conditions in the
software industry generally or other events and
factors, many of which are beyond the Company's
control.
In addition, a large percentage of the Company's
common stock is held by investment funds associated
with TA Associates, Inc. and various institutional
investors. Consequently, actions with respect to
the Company's common stock by either TA Associates,
Inc. or certain of these institutional investors
could have a significant impact on the market price
of the stock.
Rapidly Changing Technology; New Products; Risk of
Product Defects. The markets for the Company's
products are generally characterized by rapidly
changing technology and frequent new product
introductions that can render existing products
obsolete or unmarketable. A major factor in the
Company's future success will be its ability to
anticipate technological changes and to develop and
introduce in a timely manner enhancements to its
existing products and new products to meet those
changes. If the Company is unable to introduce new
products and respond quickly to industry changes,
its business, financial condition and results of
operations could be materially adversely affected.
The introduction and marketing of new or enhanced
products require the Company to manage the
transition from existing products in order to
minimize disruption in customer purchasing patterns.
There can be no assurance that the Company will be
successful in developing and marketing, on a timely
basis, new products or product enhancements, that
its new products will adequately address the
changing needs of the marketplace or that it will
successfully manage the transition from existing
products. Software products as complex as those
offered by the Company may contain undetected errors
or failures when first introduced or as new versions
are released, and the likelihood of errors is
increased as a result of the Company's commitment to
accelerating the frequency of its product releases.
There can be no assurance that errors will not be
found in new or enhanced products after commencement
of commercial shipments. Any of these problems may
result in the loss of or delay in market acceptance,
diversion of development resources, damage to the
Company's reputation or increased service and
warranty costs, any of which could have a materially
adverse effect on the Company's business, financial
condition and results of operations.
Dependence on Distributors. The Company continues
to distribute its products principally through its
global network of 29 independent, regional ASDs.
The ASDs sell ANSYS and DesignSpace products to new
and existing customers, expand installations within
their existing customer base, offer consulting
services and provide the first line of ANSYS
technical support. The ASDs have more immediate
contact with most customers who use ANSYS software
than does the Company. Consequently, the Company is
highly dependent on the efforts of the ASDs.
Difficulties in ongoing relationships with ASDs,
such as delays in collecting accounts receivable,
failure to meet performance criteria or to promote
the Company's products as aggressively as the
Company expects and differences in the handling of
customer relationships could adversely affect the
Company's performance. Additionally, the loss of
any major ASD for any reason, including an ASD's
decision to sell competing products rather than the
Company's products, could have a materially adverse
effect on the Company. Moreover, the Company's
future success will depend substantially on the
ability and willingness of its ASDs to continue to
dedicate the resources necessary to promote the
Company's products and to support a larger installed
base of the Company's products. If the ASDs are
unable or unwilling to do so, the Company may be
unable to sustain revenue growth.
Competition. The CAD, CAE and computer-aided
manufacturing ("CAM") markets are intensely
competitive. In the traditional CAE market, the
Company's primary competitors include MSC.Software
Corporation and Hibbitt, Karlsson and Sorenson, Inc.
The Company also faces competition from smaller
vendors of specialized analysis applications in
fields such as computational fluid dynamics. In
addition, certain integrated CAD suppliers such as
Parametric Technology Corporation, Structural
Dynamics Research Corporation and Dassault Systemes
provide varying levels of design analysis,
optimization and verification capabilities as part
of their product offerings. The entrance of new
competitors would likely intensify competition in
all or a portion of the overall CAD, CAE and CAM
markets. Some of the Company's current and possible
future competitors have greater financial,
technical, marketing and other resources than the
Company, and some have well established
relationships with current and potential customers
of the Company. It is also possible that alliances
among competitors may emerge and rapidly acquire
significant market share or that competition will
increase as a result of software industry
consolidation. Increased competition may result in
price reductions, reduced profitability and loss of
market share, any of which would materially
adversely affect the Company's business, financial
condition and results of operations.
Dependence on Senior Management and Key Technical
Personnel. The Company is highly dependent upon the
ability and experience of its senior executives and
its key technical and other management employees.
Although the Company has an employment agreement
with one executive, the loss of this employee, or
any of the Company's other key employees, could
adversely affect the Company's ability to conduct
its operations.
Risks Associated with International Activities. A
significant portion of the Company's business comes
from outside the United States. Risks inherent in
the Company's international business activities
include imposition of government controls, export
license requirements, restrictions on the export of
critical technology, political and economic
instability, trade restrictions, changes in tariffs
and taxes, difficulties in staffing and managing
international operations, longer accounts receivable
payment cycles and the burdens of complying with a
wide variety of foreign laws and regulations.
Effective patent, copyright and trade secret
protection may not be available in every foreign
country in which the Company sells its products.
The Company's business, financial condition and
results of operations could be materially adversely
affected by any of these risks.
Additionally, countries in certain international
regions have continued to experience weaknesses in
their currency, banking and equity markets. These
weaknesses could adversely affect consumer demand
for the Company's products and ultimately the
Company's financial position or results of
operations.
Recently, the World Trade Organization ("WTO") ruled
that tax incentives provided to U.S.-based companies
that export their products via a foreign sales
corporation are prohibited tax subsidies. In
September, the House of Representatives approved the
FSC Repeal and Extraterritorial Income Exclusion Act
(the "Act"). The Act generally repeals the foreign
sales corporation and implements an extraterritorial
income tax benefit. The Act provides short-term and
long-term relief for foreign sales corporations in
existence as of September 30, 2000. The short-term
transition rules permit foreign sales corporations
to retain benefits through December 31, 2001. Any
prospective changes regarding tax benefits
associated with the Company's export sales may
directly impact the Company's effective tax rate.
Dependence on Proprietary Technology. The Company's
success is highly dependent upon its proprietary
technology. Although the Company was recently
awarded a patent by the U.S. Patent and Trademark
Office for its web-based reporting technology, the
Company generally relies on contracts and the laws
of copyright and trade secrets to protect its
technology. Although the Company maintains a trade
secrets program, enters into confidentiality
agreements with its employees and distributors and
limits access to and distribution of its software,
documentation and other proprietary information,
there can be no assurance that the steps taken by
the Company to protect its proprietary technology
will be adequate to prevent misappropriation of its
technology by third parties, or that third parties
will not be able to develop similar technology
independently. Although the Company is not aware
that any of its technology infringes upon the rights
of third parties, there can be no assurance that
other parties will not assert technology
infringement claims against the Company, or that, if
asserted, such claims will not prevail.
Increased Reliance on Perpetual Licenses. The
Company has historically maintained stable recurring
revenue from the sale of monthly lease licenses and
noncancellable annual leases for its software
products. More recently, the Company has
experienced an increase in customer preference for
perpetual licenses that involve payment of a single
up-front fee and that are more typical in the
computer software industry. While revenue generated
from monthly lease licenses and noncancellable
annual leases currently represents a portion of the
Company's software license revenue, to the extent
that perpetual license revenue continues to increase
as a percentage of total software license revenue,
the Company's revenue in any period will
increasingly depend on sales completed during that
period.
Risks Associated With Acquisitions. The Company has
consummated and may continue to consummate certain
strategic acquisitions in order to provide increased
capabilities to its existing products, enter new
product and service markets or enhance its
distribution channels. The ability of the Company
to integrate the acquired businesses, including
delivering sales and support, ensuring continued
customer commitment, obtaining further commitments
and challenges associated with expanding sales in
particular markets and retaining key personnel, will
impact the success of these acquisitions. If the
Company is unable to properly and timely integrate
the acquired businesses, there could be a materially
adverse effect on the Company's business, financial
condition and results of operations.
On August 31, 2000, the Company acquired ICEM CFD
Engineering. The Company cannot guarantee that it
will be able to fully realize the benefits or
strategic objectives it sought in acquiring ICEM
CFD. The acquisition of ICEM CFD was accounted for
as a purchase and, as a result, a significant amount
of goodwill and other identifiable intangible assets
were recorded, the amortization of which will
adversely affect the Company's results of operations
in future periods.
General Contingencies. The Company is subject to
various investigations, claims and legal proceedings
from time to time that arise in the ordinary course
of its business activities. Each of these matters is
subject to various uncertainties, and it is possible
that some of these matters may be resolved
unfavorably to the Company.
