ANSYS, Inc.: Initiation of Research Coverage

Wednesday, April 23, 2014

William Blair & Company initiated research coverage of ANSYS, Inc. (ANSS $74.72), the leading provider of engineering software simulation and services platforms that are used across a variety of end-markets and applications, with an Outperform rating and Core Growth company profile.

Analyst Anil Doradla estimated that the company, whose software is used by engineers, designers, and researchers across a broad spectrum of markets, would generate pro forma EPS of $3.33 in 2014 and $3.64 in 2015.

“In a world of increasing miniaturization and complexity, simulation and virtual prototyping are becoming a crucial aspect of product design,” Doradla said. “Simulation not only allows companies to bring products to market more quickly, but also fosters innovation by enabling engineers to analyze multiple design iterations earlier in the product development process. In our opinion, the simulation market is still in its infancy stage as companies ranging from those in the automotive and aerospace to industrial and chemical industries continue to embrace the technology and acknowledge the impact these solutions can have on their bottom lines. Over the next several years, we believe that companies will increase their use of simulation technology throughout the product development process, allowing simulation software providers such as Ansys to command a greater share of customers’ research-and-development (R&D) budgets.”

He added, “With close to a 50% operating margin, a 50% free cash flow margin, 70% recurring revenues, and no single customer contributing to more than 5% of revenues, Ansys has attributes of a sustainable, high-quality business model. These strengths have enabled Ansys management to effectively deploy capital through the pursuit of strategic acquisitions and share repurchases.”

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