ANSYS Inc (ANSS) 2008 Q4 法說會逐字稿

Good morning, and welcome to the ANSYS fourth quarter 2008 earnings conference call. All participants will be in a listen-only mode until the question and answer of the call. Today's conference is being recorded at the request of ANSYS, Incorporated. If anyone has any objections, you may disconnect at this time.

I'll now introduce your speaker for this morning's conference call, Mr. Jim Cashman, President and Chief Executive Officer. Please go ahead, Mr. Cashman.

Thanks a lot. Good morning and welcome to the ANSYS call for Q4 2008 and the fiscal year end of 2008. And with me today, as usual, our CFO, Maria Shields. And we'll go through our usual outline of highlights of the quarter and the year to date at a high level.

And then we'll go into greater depth on the operational results. Then we'll go into a discussion of some of the qualitative factors which basically reinforce our long-term optimism, but given the rampant unpredictability of the current economic situation, we'll also talk about our approach to maintaining solid earnings and structure without unduly hampering the long-term opportunity. In the course of this, Maria will then update you on our line item expense performance, balance sheet and cash flows.

ANd after that we'll go into projections for Q1 2009, and after discussing those topics we'll be happy to respond to any questions you may have. Let's get started, Maria. If you would, our Safe Harbor statement, please.

Okay, thanks. Good morning, everyone. Before we begin, I'd like to remind everyone that our fourth quarter results include a full quarter of Ansoft operations. In addition to any risk we highlight during the course this call, important factors that may affect our future results are discussed at length in our public filings with the SEC, all of which are also available via our web site.

Additionally, the Company's reported results should not be considered an indication of future performance as there are risks and uncertainties that could impact our business in the future. These statements are based upon the Company's best judgment as of today, and ANSYS undertakes no obligation to update any such information unless we do so in public forum.

During the course this call we'll be making reference to non-GAAP financial measures in an effort to provide supplemental information to our GAAP disclosures, a discussion and full reconciliation of GAAP financial measures to comparable non-GAAP measures is included in this morning's earnings release and related form 8-K. With all that covered, I'll turn it back over to you, Jim.

Okay. Thanks. Let me begin by saying that Q4 was a good quarter on a number of fronts. And in spite of everything that we faced, we still executed and delivered. The Q4 business results were slightly below our guidance on a revenue basis. But non-GAAP earnings turned out to be well above the guidance due to some of the precautionary controls that we had put in place through most of the past year, and then also some incremental tax benefits.

As always, the numbers that we're using are non-GAAP, and historically consistent fashion. And just as a reminder for us, non-GAAP earnings include the add-back for purchase accounting treatment of acquired deferred revenue, acquisition-related amortization, and stock-based compensation adjustments for 2007, 2008, and these are detailed in our earnings announcement. So from a high-level perspective this was, again, a very good quarter. Even in these tough -- tougher economic times, and off a very strong comparable that included five seven-figure deals.

For the quarter, we reported solid financial performance with non-GAAP revenues of $143.3 million. This represents a 29% increase from last year's Q4 of $111.2 million. This is a tad under our guidance of the $145 million to $149 million range but currency was all over the map to the tune of slightly north of $5 million in net negative impact compared to last Q4. Non-GAAP diluted earnings per share increased 14%, with non-GAAP EPS of $0.50, up from last Q4's comparable of $0.44.

Now, I mentioned that the incremental tax benefits -- when we adjust for the incremental tax benefit in each of those quarters, the operational comparison is actually about $0.48, up from $0.40, or about a 20% increase. EPS performance was driven by steady non-GAAP revenues combined with business model adjustments that we made in connection with the Ansoft acquisition and in response to the economy. Just as in the past few years, both have been driven by increasing customer adoptions. But we're also aided by positive vectors in the Ansoft integration and our own long-standing disciplined approach to spending.

Secondly, most of the major aspects of the business performed as anticipated. Each geography grew, and we had significant input from each major product line. We saw continued strong growths in operating margins, cash flows, and a stable business model. So basically almost every metric was positive there.

We saw a fair amount of resiliency in our customer engagements that included expansion in our major accounts and the addition of many new customers. Equally important, our recurring base continued to be strong, even in these difficult times. We even saw a few of the seven-figure orders which contributed some new license business for the quarter, but disproportionately to building the deferred revenue balance.

There was continued expansion of portfolio sales and cross selling, and something that we expect to cultivate with Ansoft over the next few years. Anecdotally, customers are still telling us that even in the tougher economic times there's a heightened need on their part for product innovation. So while this is far from bulletproof, they generally feel that they can't achieve in this mission with lower end or less-capable solutions.

So this is one of the major factors that's seen us through a wide range of economic conditions while still filling a critical customer need. And we believe that the combination of this depth and breadth of our simulation capabilities combined with the power of a flexible and open workbench platform put us in even better position to increase our market share and expand relationships within our existing and extensive customer base.

So with that in mind, I'll go into the operational highlights. And I guess before I go into the operational highlights, I'd like to set the high level stage because there will be a number of different ways that we're presenting numbers. And I know everybody likes to look at them from a different perspective. So first of all, with the Ansoft acquisition we have some noncomparability in the quarterly numbers and, to a lesser degree, to an annual basis. So we're going to be talking in terms of both total numbers and organic numbers to provide that particular look.

With the currency volatility, we experienced mostly negative effects, especially for the quarter. And we'll explain this in terms of the actual and constant currency numbers. Q4, number three, Q4 of last year was an exceptionally strong quarter for us, particularly in paid-ups. Our guidance at the beginning of 2008 reflected that, and we actually exceeded that, so that the Q4 comparables shouldn't be taken out of context. And yes, the economy. It has deteriorated since the beginning of the year. No newsflash there. And it has slowed down the short-term pace of the order payment, but it really has not affected the pipeline or the long-term picture.

So as we go through this, we'll try to highlight all of that in terms of -- in non-GAAP numbers, the total business, organic business, and constant currency numbers. But in general, good quarter, good year, and still solid foundation to get through some difficult macro times. So looking at the operational highlights first, as I previously mentioned, our new -- our non-GAAP revenue for the quarter was $143.3 million. Again, 29% over the $111.2 million of Q4 in 2007. Again, I'll remind you that this includes -- these total numbers include the noncomparable of Ansoft revenues. On a core basis we grew at about 5%, or just under 10% in constant currencies. Again, organically. This is consistent with our guidance from the beginning of the year, and last quarter as our business plans had already factored in the bump effects of Q4, 2007.

Our non-GAAP diluted earnings for the quarter grew 14% to $0.50, up from $0.44 per share in Q4 2007. These results did include a negative currency impact of about $0.01. This exceeded the analysts' consensus which marked the 45th consecutive quarter that the non-GAAP EPS has met or exceeded consensus.

Overall non-GAAP operating margins for the quarter were 49%, which represents a blended rate with Ansoft. There were some positive integration efficiencies included in there, but the majority of this was from our own economic defensive measures that we started to put in place. Non-GAAP gross margins were at a healthy 89%, pretty much the same story as with the operating margins. We also saw continued strong cash flows from operations of over $61 million, which is a 48% increase over the $42 million of last Q4. Looking at the whole year, for the year ending 2008 we reported total non-GAAP revenue of $493 million or a 27% increase over the prior year. Again, this number includes a five-month contribution from Ansoft, but excluding that, the organic growth was 16%.

Software license business was disproportionately strong, but the maintenance and service revenue also grew well, particularly the software enhancement subscriptions. The year-to-day non-GAAP EPS was $1.76 which is a 31% increase over $1.34 in 2007. For the year, non-GAAP operating and gross margins were 48% and 87%, respectively. These are both an improvement over 2007. The cash flows from operations were $196.7 million for the year, which is a 55% increase over the comparable of 2007.

So with those high-level things, we can now take a look at the picture from a variety of different perspectives as we historically do, from category business, geography, customer, product line kind of standpoints.

And let's start with category business. Overall the consolidated non-GAAP software license revenue grew 21% for the quarter and 25% for the year. On an organic basis, these were 2% for the quarter and 16% year to date. Total paid-up licenses grew at 30% for the quarter or slightly down organically due to the new license contribution of those major events that we talked about from last Q4's mega orders. And also due to the strong negative currency effects. For the year to date, paid-up growth was 37%, and an 18% organic.

Lease business grew 13% for the quarter to equal about 33% of total business. This reflects a slight shift due to the historical Ansoft business being nonlease. For the organic business, it grew at 8%, and for the year to date, it grew 17% and represents 36% of total revenues. The lease business may be something that we can see trending up, given the current challenge some of our customers face relative to access to capital budgets. But this is just another element of the flexible model that allows us to meet the business needs of customers and allows us to build the foundational strength at the company.

Total maintenance and service grew at about 46% for the quarter, and 31% year to date, or 10% for the quarter, 15% year to date organically. The peer software maintenance and enhancement subscription portion grew at 59% for the quarter and -- sorry, 42% for the year to date or 14% and 21%, respectively, for the organic business. The peer services element was around 4% of total revenue and about 5% for the year. While we saw growth across all of our major product lines, many high-end products grew at double digits for the quarter and the year.

Our direct and indirect businesses both performed fairly well. There's a 74% direct, 26% indirect split. This reflects a very consistent organic performance with the bulk in favor of direct, largely related to the direct nature of the Ansoft business. Ultimately, portions of this business will be adopted by the channel after certification and business plans are worked out. But minimally, in the short term as technical incompetencies will need the business plans to be developed, so it will take a little bit of time there. But this is something that historically we've done with all the new technologies that we acquire.

Business intake grew comparably to revenue at about 28% for the quarter. For the year, intake grew at 30%, which exceeded the revenue growth, you know, basically a good leading indicator there. This contributed to a rise in deferred revenue to 39% as compared to last year's Q4 of $173.9 million. Our strong repeatable business base remained at a healthy 66%, even in this larger base of business. And that compares to 65% at this time last year, even including the less-visible Ansoft component.

The consistent ability to maintain the solid base of the recurring revenue or repeatable revenue is one of the hallmarks of our business model and a foundation for navigating tough economies. And we believe this is a result of the long-term commitment we've had to R&D that is ready to sell, even in these unpredictable times. This has driven our product leadership which, in turn, allows our customers to solve increasingly complex design issues.

We have a solid balance sheet and strong cash flows, as I mentioned, $61.7 million for the quarter, $196.7 million for the year. And these strong cash flows afford us flexibility in dealing with accelerated debt buydown, ANSYS share repurchase or economic insulation as needs may dictate over the short and long term.

Geography, actually very much in line with the general discussion that I gave earlier on revenues. We're quite pleased to maintain this, even with the volatile economy and currency effects. Specifically, every geography grew. You know, basically in core terms, absolute constant currency terms, although some of the metrics were in single digits. We are pleased, with all the chaff going on around us in Q4, and absorbing over $5 million in net negative currency impacts.

North America increased at 30% for the quarter, and 21% year to date. As North America was the main portion of the large over achievement last Q4, the organic growth was only about 1% for the quarter and 8% for the year. The performance of our direct offices were largely driven by major customers and outpaced that with upper teens growth for the year. Major orders in North America and for the quarter came from a typical mix of both long-standing and new customers. The Honeywell, Pratt Whitney, Boeing, Ford, Northrop Grumman, BAE Systems, Tyco, John Deere, Raytheon, Lockheed Martin, General Dynamics, Goodrich, Trane, Belcan, Aerojet, Westinghouse, Procter and Gamble, Conoco Phillips, Nvidia just to name a few. Almost 2/3 of some of this wound up in our deferred balance as we saw strong renewals and good lease component.

Europe continued its impressive performance even in light of the obvious currency headwinds. For the quarter there was an overall 13% growth or 27% in constant currencies. For the year, we saw 24% growth or a little over 23% for the year, after factoring in the currency advantage in the first half of the year balanced by what we saw in the latter part of the year. For the quarter and the year, Germany and the central Europe business led the way, while our French business was also quite strong. All regions saw in -- in Europe saw adverse currency effects at the end, but the British pound was especially hard hit. Ansoft had a very nominal presence in Europe, so the quarter versus total in terms of currency impacts are relatively low.

The largest deals in Europe included repeat customers and new ones such as Azstarnet UK, Saudi Aramco, EDF, Vestas Wind Technology, EADS, Krylov Ship Building, Korolev Rocket and Space. So you see they are a mix of some usual companies as well as some new ones in particularly exciting areas. Our general international area continued to grow well but with a greater variation in currency and economy. The end was actually positive for us. Many currencies were relatively flat while others like the won were negative. The overall growth for the region was 57% for the quarter, and 43% for the year.

Now keep in mind these include the quarterly effects from the Ansoft component, five months for the year in an Ansoft component. So unlike Europe, it has greater significance in the Asian Pacific area. Nevertheless, the organic growth for the region was 13% for the quarter and 23% for the year. Japan grew at 49% for the quarter and organically at 10%. And for the core business, Japan grew at 19% for the year or about 10% ex-currency. Most of the rest of GIA grew in excess of those numbers, actually in aggregate, 60% for the year or about 28% organically. Key customer engagements in the region included Cummins, Wally Energy, Samsung, LG Electronics, Ishikawajima Heavy Industries, Infotech, Nippon Steel, Hitachi, Kawasaki Heavy Industries, Emerson, [Petrogross], Mitsubushi, Canon, Reiko, Konica, Toshiba , a number of companies along that line. From the worldwide list of large orders, but it's also evident in the smaller ones also.

There was a continued trend toward all forms of energy optimization - conventional, petro, nuclear, and alternatives. Additionally, the aerials related to heavy equipment, infrastructure, and materials also had an increase that might possibly build off of the various demands for increased infrastructure spending.

Even in troubled industries such as automotive, we've seen increased interest in our multiphysics capabilities for alternate drives and systems for safety or efficiency, and even while they're sorting out broader issues of financial strengthening in the industry. So sometimes even going counter to the -- the prevailing winds.

Obviously, the inclusion of Ansoft into our portfolio serves these design initiatives well, and in all cases, even rapid understanding of very complex problems with extreme accuracy is essential. And that basically is the strength of ANSYS multiphysics and what we do.

So the net of all this is continued industry breadth, accentuated by increasing interest in infrastructure and energy, both with and without stimulus packages. We're seeing increased penetration within our strong and broad customer base. The pipeline of new opportunities, it continues to be solid. And even in this, the challenging economic environment, we're seeing growing interest, although the paper flow process definitely has become more protracted.

So there's little doubt of the long-term opportunity as evidenced by the continuing momentum that we've had both with existing and new customers. But in the short term, I'm going to add the caveat that even with this increasing interest there's also cause for constant vigilance due to the turmoil that's basically affected virtually the entire global economic environment. And this can sometimes -- it's positively, but lately adversely influencing the timings and patterns of customer buying decisions. And we've tried to factor that into our guidance. And we'll continue to endeavor doing so going forward.

So in summary, there was growth around the globe, real and constant currency, even in the tough climate. All areas had double-digit organic growth for the year. With the exception of North America which was in the high single digits as we mentioned before. And as you can tell from the customer -- list of customer names, there was good industry and major account activities, and major accounts in particular were important to -- in their contribution to the new license revenue, as well as for the deferred balance.

So in short, there was performance everywhere, but there is areas for improvement almost everywhere and areas of concern, particularly in this climate. So in light this progress, we're very selectively ramping up elements of the customer facing organization in response to the available opportunity, but being really mindful of the turbulence out there. Now that was the geography.

So if we cut into products next. From the product revenue standpoint, we saw no surprises from either the trends or the guidance. The consolidated software license revenues grew by 21% in total and 2% organically quarter to quarter. Paid up software licenses were up 30% for the quarter and down 5% organically, again related to that -- the bump of those mega orders that we talked about before. For the year, paid-ups were up 37%, and they were up 18% organically. Lease business stayed strong at 33% of the blended total. Now all parts of the product spectrum did well, good overall balance. Although the established work bench enabled parts of our product line grew disproportionately well. This set of products, of course, gets expanded significantly with the upcoming R12 release. The software maintenance and enhancement subscription business grew at 59% for the quarter. And 42% year to date. It was 14% for the quarter and 21% year to date in organic terms. High-end sales grew disproportionately as previously mentioned.

But the bottom line is with the pressures that our customers are facing, they simply can't really compromise on the scope or accuracy of the solution to tackle the problems they're confronted with. ASP's for the quarter were stable, actually up over Q4 last year, and at the low end, ASP's were stable when adjusted for normal volume purchase schedules.

We had mentioned last quarter that with the acquisition of Ansoft, the broadest, deepest set of our integrated simulation tools that's been driving the customer adoption, this continued to get broader and deeper. And to that point, integration activities started in earnest. And as of the beginning of this year, the sales teams are unified. Software revenues came in well, but it was complicated via the economy, integration effort, and even some details such as the changing of the typical Ansoft quarterly and annual boundaries.

We have seen that some short-term dampening of Ansoft sales that have historically happened due to their overlaps with the electronics industry. But in the early stages, we're already starting to see some of the positive aspects of wrapping their capabilities into the ANSYS portfolio and business model. In fact, in the upcoming R12, we'll even see some of the first signs of level integration.

So, we're still excited about the prospects of being able to do complete product simulations across all industries with products that are increasingly a blur of mechanical and electrical effects. Essentially combining the simulation of form and function. It's especially key to be able to do this in an egalitarian plug-and-play manner in a CAD-neutral environment, the very CAD-neutral environment that exists in most of our customers and their supply chains and be able to do that with our many partners. So basically concluding this part, in summary, we had another good quarter and a great year by all metrics. It was above our organic revenue guidance from the beginning of the year and well ahead of our earnings guidance. And again, this was in spite of the economic surprises and currency downturns that happened in the later parts of the year. Both the quantitative and qualitative factors showed progress, and the results demonstrated our continued financial and market performance. We've been making good progress on Ansoft integration, our earnings and cash flow remain solid, which should serve to continue our investment patterns as well as to support the data associated with the Ansoft acquisition.

So we reiterate our long-term commitment to taking these markets to a new level and to continue our pursuit of meeting customer expectation and corporate commitments to our -- all of our stakeholders. Basically our major customers and, you know, these are the premiere companies in the world, are telling us that while they might be slowing in reviewing IT spending in general, they're not pulling back on new product innovations or R&D. But they are telling us that things are taking longer for them internally and frankly, some of them are waiting to see the impact of various government interventions. But I will say renewal rates have stayed solid, and the gross pipelines have actually gotten larger. So we continue to drive toward our long-term vision. Long-term optimism totally intact.

But we are carefully watching the range of short-term factors out there. And we are taking proactive, defensive measures. Basically that means we'll be using the same short-term caution that we've exercised positively during past difficult times. But we have taken them to greater levels due to the current situation. Specifically, we've been aggressively managing salary and headcount expense. And the whole range of discretionary costs of marketing, events, travel, and incremental IT infrastructures. And we'll continually scale the company to the evolving realities of the business to solidify our position. Over the long term we've demonstrated our ability to grow the top line in accordance with the guidance. But also to maintain solid margins and an optimal earnings profile. And that's basically what we're taking to new levels going forward.

With that, I'll turn it over to Maria Shields, our CFO, and she'll provide you with a more detailed look at our financials.

Okay. Thanks, Jim. I'm just going to spend a few minutes to go through some of the financial highlights as they relate to Q4 and the annual expense results, as well as some balance sheet and operating cash flows highlights.

So we'll start off with cost of sales, excluding acquisition-related amortization, and the impact of stock-based compensation, which combined totaled $9.9 million, cost of sales for the fourth quarter totaled $15.5 million, compared to $15.4 million in the fourth quarter of '07. Which resulted in an overall non-GAAP gross profit margin of 89% for the fourth quarter. And on an annual basis, 2008 non-GAAP cost of sales, which excluded $28.3 million of acquisition-related amortization and stock-based compensation, totaled $53.2 million versus $56.5 million in 2007. Resulting in an 87% non-GAAP gross profit margin for 2008.

Looking ahead, we're currently targeting non-GAAP gross profit margin in the 87% to 89% range. Taking a look at the SG&A front for the fourth quarter, total expenses which, if you exclude $2 million of stock-based compensation expense, were $39.9 million, that compares to $32.7 million in 2007. SG&A expenses, excluding $8 million in stock-based compensation, were $126.9 million compared with $108.8 million in 2007.

Looking ahead, we plan to continue to make investments in areas that we deem to be critical to strengthening our global sales and business infrastructure to support improved productivity, scalability, and future growth. In the area of research and development, total expenses for the quarter, net of approximately $800,000 relating to stock-based comp, were $18 million, and that compares to $15.1 million in Q4 of last year. For 2008 the total investment in R&D, excluding $2.9 million of stock-based compensation expense, reached $68.7 million versus $54.4 million for 2007. Looking at 2009, we are currently targeting a low to mid teens range relative to our ongoing investment in R&D.

For the fourth quarter of 2008, we've delivered a solid non-GAAP operating profit margin of 48.8% and 45.5%, respectively. Admittedly, these are above what we had planned coming out of the gates in 2008. In the previous calls throughout this year we have consistently communicated that we had consciously adjusted or held back on various aspects of our original 2008 planned spend, particularly in the first half in the anticipation of the Ansoft acquisition. And then subsequent to closing, as we worked our way through various integration issues.

Given everything that's transpired since then in retrospect, those decisions helped to set the foundation for our strong operating margins and non-GAAP earnings performance in Q4, despite the macro economy. As is the case with most companies in the world today, we're aggressively managing our spending to maintain earnings growth in line with sales momentum.

Having said all that, one of our top priorities has always been and will continue to be customer satisfaction. We are committed to continuing to deliver the most advanced simulation solutions to our customers. As you may have seen in this morning's earnings release, the fourth-quarter results did include approximately $2 million or $0.02 per share of incremental tax benefits related to the reinstatement of the R&D credit in the fourth quarter.

Looking ahead into 2009, we're currently planning for an overall non-GAAP consolidated tax rate in the range of 35% to 37%. For the fourth quarter, ANSYS reported non-GAAP EPS of $0.50, and that's on 93.2 million diluted shares compared to $0.44 on 81.7 million shares in the fourth quarter of '07. And for the full year, non-GAAP EPS increased to $1.76 on 86.8 million diluted shares versus $1.34 on 81.1 million shares in 2007.

So to summarize, the key factors impacting our Q4 operational performance, we had organic revenue growth of 5% or 9% in constant currencies. This is off a very strong comparable in Q4 of 2007. The Q4 results include negative impacts from currency of approximately $5.4 million at the revenue line and $2.1 million at the operating income level.

We had strong gross profit and operating margins. Our results included a full quarter of revenue and profits from Ansoft but also included the negative impacts of the interest expense and the additional shares issued in conjunction with the deal. And we experienced an incremental $0.02 in tax benefits related to the R&D credit in the US, and that compares to $0.04 of incremental tax benefits in the fourth quarter of last year.

Taking a quick look at the year-end balance sheet, it remains very strong. Cash and short-term investments at $234 million, consolidated DSO at a healthy 43 days. And we had record combined operating cash flows of $61.7 million in the fourth quarter and $196.7 million in 2008. This enabled us to pay down $76 million of the original $355 million in debt under a five-year credit facility that we entered into to partially fund the Ansoft deal. Effective February 1, the debt carries an effective rate of LIBOR plus one. Which is expected to ultimately migrate to a lower rate here as we utilize the operating cash flows to pay down the debt and reduce our leverage.

And I also wanted to point out that we did enter into an interest rate swap agreement in the third quarter to mitigate the variability in the interest rate fluctuations on a portion of that debt. And the average rate going into Q1 is about 4.1% excluding amortization of loan fees. I would like to also remind everyone that we currently have an approved share buy-back plan in place that allows for the repurchase of up to 3.4 million shares. We did repurchase approximately 368,000 shares in the fourth quarter at an average price of about $27.14.

As we saw in Q4 and more importantly are projecting into 2009, given our level of international business, our 2009 results will be negatively impacted by currency, particularly on the Euro and British pound front, with some slightly positive benefits from the current rate on the Japanese yen. In our outlook we're assuming that rates stay in roughly the same range as the recent spot rates or in the $1.25 to $1.30 for the Euro, $1.45 for the British pound and $0.90 to $0.95 for the Japanese yen.

As rates continue to change in the future, we'll modulate our outlook accordingly and trust that you'll also take this into consideration as you update your models and projections. Jim, turn the call back over to you.

Okay. Thank you. Okay. So to recap, first, above all, continued good, diversified financial performance of all the major parameters of the business - revenue, earnings, margin, cash flow, business base. Even in light of the current environment and hazier visibility. Secondly, progress on Ansoft integration. Third, sustained customer interest marked by activity on a broad front. You know, geographic, industry, commitment levels, albeit the customers going through increased discretion cycles themselves. And then a rapidly expanding product portfolio augmented by partnerships and relationships and technology distribution of customers. It's just dramatically increased with the inclusion of Ansoft. So the long-term outlook stays bullish even in light of the current environment.

For 2009 we're adjusting our preliminary guidance from last year, based on the newest data and the undeniable market deterioration over the past few months. To begin, we're reiterating what we said last time in terms of the yearly contour, where Q1 will be restrained as customers sit on the sidelines to evaluate whether new government actions will be effective. Based on what we've seen, we are expecting some stabilization and improvement toward the latter half of the year but not a lot. In the short term, we'll focus on effective revenue attainment, which is another way of saying pushing on the road. The focus will be on prudent growth and maintaining our earnings trajectory.

To map it out, this means, first, the long-term premise and opportunity is still there, and we have the best technology to meet them. Secondly, we'll be doing more aggressive cost measures, particularly those that don't hurt the long-term premise in response to the economic uncertainty. At the floor of assumptions we continue to have a solid business with good, recurring revenues, and marquee customer relationships, all of which combine for good net income and cash flows.

We'll be focusing on maintaining strong operating margins from about mid-40's early year to upper 40's at the end of the year, while continuing to build our annuity base of recurring revenues and expanding at the maximum rate allowed by the macro market conditions.

So what does all this equate to in terms of numbers? Well, given the turbulence, our projections will have a wider spread than we usually do. For the quarter, we're looking at revenue range of $122 million to $130 million, which equates to an earnings range of $0.33 to $0.39, after absorbing the adverse currency. It should continue to modestly build throughout the year barring an unforeseen market surge or other directions. We don't know how quickly. We are projecting revenues in the $530 million to $590 million range. Again, which is a wider uncertainty spread than last November. Consequently, our earnings projections are in the $1.54 to $1.85 range. And reflects some of the cautionary measures that we put in place without sacrificing the long-term thesis.

The guidance is cognizant of the number of unknowns out there. There are some things we have no control over -- macro economy, government, tax policies, currency. But our guidance is based on the model that allows us to balance our cost structures. Again, without hindering any ability to capture revenue upside when it occurs. Combined with our repeatable business base, diversified, geographic footprint, and world-class customer base and our deferred revenues. We're utilizing the same business model that's allowed us to weather a wide range of economic situations over the last decade.

So we plan to focus on strong margins, good cash flow, and optimal earnings during that time. And as I mentioned, we're very selectively ramping up subsets of our models, particularly in the sales realm, to take advantage of market opportunities as they occur. So we'll continually monitor shorter term market factors on a global basis as we demonstrated over the past two years. And with that, I'm prepared to handle any specific questions that you may have.

Thank you, Mr. Cashman. (Operator Instructions) Our first question comes from Greg Dunham with Deutsche Bank. Please go ahead, sir.

Thanks for taking my question. I do want to focus on that last bit about the guidance. Given the amount of leased business and the much smaller piece of now perpetual license business, I'm getting to at least the 20-point swing in expectations. You mentioned that you -- you're including some stabilization in the business, but not a whole lot. I think was your exact quote. My question is, what kind of close rates would you need to have, what kind of improvement in close rates would you need to have to hit your high end, and how much of a deterioration in close rates would you need to have at the low end?

Well, the -- the close -- like I said, we weren't predicting, you know, a whole lot of improvement or hoping for a lot of that. So we're building -- the bottom line is there is unpredictability. And anybody that tells there isn't should really be scrutinized. We have less unpredictability than many companies because of the recurring rate that we've built for year upon year. And we've also demonstrated over that same period the ability to capture any available upside revenue.

So our major customers are the ones that are most likely to invest. So we have that and by this -- we're not placing any bets on how long or what those are. But with this we can buffer the short-term, be able to meet almost any demand. A couple things also to factor in is that by virtue of the Ansoft business being more skewed toward paid up, having a much lower base recurring rate, that alone adds in certain levels of unpredictability. But you also have the same situations that are spread out by the macro climate.

So essentially we tried to build upon the knowns we have with the recurring business space. You know, making -- holding some of the assumptions that we've seen in terms of close rates which are little bit down, not expecting them to climb much in the first half of the year even. But in Q3, it's kind of a toss-up because we've said for years it's always that one with all the vacation patterns. It's slightly less predictable. And in Q4, starting to open up a little bit, hopefully by that time there's a little less sitting on the sidelines, to see what packages and interventions various governments are going to do.

But we're not expecting -- if there is a big, major positive change, we still have the products to be able to meet that. Obviously, software has to be done well in advance. It doesn't done on a three-month cycle. So we can -- we're really prepared to take advantage of that. However, we're not building cost structures assuming that that's going to happen. We're doing it basically. Keep in mind, you know, 37% was still the -- 37% of our 2008 business came in the form of paid-ups. So we do have that which provides that unpredictability. That's the portion that's most affected by the uncertainty out there.

But we're still basing this off a strong deferred balance and recurring revenue base. And as I mentioned before, we have not seen really even major, modest changes in the renewal rates or the commitment of that. So all that nets out to the solid foundation, but also the -- again, that we have to build cost structures that don't -- aren't based on a hope of when that economy might have. But we've got the products ready to go when it does happen.

So one quick followup. I guess it sounds like you're not baking in a big second-half recovery in the economy to -- even at the high end to summarize. But the followup would be -- the deferred revenue was very strong this quarter. They beat my expectations. Any comments on renewals, what you're seeing there, and any impact from the economy?

I'm sorry. I would say -- I wasn't clear. No. What I've been saying is because that's one of the first things we track. Renewal rates have continued to be quite quite strong. And that would be one of the things that we'd also look at.

It's one thing about people slowing down the -- slowing down the acquisition and expansion of technology versus the jettisoning of others. And basically, we've seen that. But I think one thing that is particularly telling is that I mentioned that we had seven-figure orders in 2007. But they were largely, major acquisitions of new technology. In 2008, we had a few seven-figure orders, but they tended to be incredibly skewed toward building the deferred balance. And this was happening even at the end of the year as companies were already starting to sense that.

So the basic thing is the -- a lot of the recurring base currently is staying and what we're observing right now indicates that that's good. But your earlier earlier comment , I didn't mean to gloss over that. You basically alluded to the fact that, no, we're not -- our business plans do not assume that there is going to be a magic recovery. If there is, we're in great shape to be able to participate in that. But we're not counting on that in our cost structures. That's what I meant by looking at the margins and the other things. So we can go up from that standpoint, but it's -- apart from the economy versus the close rate, those things are linked, but they're not identically the same.

Even if the economy's down, we could see some increase in closure rates as at least customers see more light at the end of the tunnel. It's also not

Our next question comes from Sterling Audi from JPMorgan. Please go ahead. Your mic is open.

Good morning. Looking at the guidance, specifically for the March quarter versus December quarter results, can you comment were there any deals that actually you closed early? In other words, did you pull forward any deals to hit the December numbers?

Not really. Not really. I mean, there's always -- I mean, keep in mind there's always, particularly at this scale of business, there's always a couple of things that slip forward and if anything, I'd say that -- we had less that moved forward this period.

And I think it was largely because a lot of people were waiting to see, okay, well there's going to be some policy shifts that may or may not affect, we don't want to be the first in the queue and get caught unaware. We start to see that additional discretion being done in the latter parts of Q4. And we saw them continuing. If anything, getting a little stronger in Q1 as new governments took hold and what will happen with various actions that are going on. And so we did see that slowing down. But even if the economy doesn't pick up, there are certain elements of the uncertainty that become at least more certain as time goes on. We really just don't know. So we're not banking on any prediction of wholesale trends in that.

Okay. And could you comment in terms of what you saw in the quarter in terms of pricing versus the number of seats. Meaning, did you see increased discounting or lower prices to close deals and offset by a high number of seats, or did pricing hold consistent and then the seat count came in relatively stable to your expectation?

Actually what I mentioned and I meant to say this earlier, if I didn't, I'll apologize to everybody. The ASP's of all our mainline products stayed basically the same. In fact, I think they were even slightly up from last Q4. You always have to kind of look at the seasonal kind of adjustments. There were at the low end, basically they were stable. They were flat at the low end -- other than the fact that we have normal purchase decisions that are not part of any discounting methodology. They are just part of volume purchase when people do mass desktop deployments. So we saw those be very stable.

So in general, the discounting, at least any major discounting that would have to cross by approvals at this level, they weren't coming through there. Albeit customers were talking about budget pressures during that thing. But there really wasn't any major trend in that direction.

We'll take our next question from Steve Ashley with Robert W. Baird. Please go ahead, sir, your mic is open.

Thank you. I was working if you could give us some kind of insight into what you're expecting for Ansoft in terms of revenue contribution for the first quarter and for the full year.

Well, the first thing I'd like to say is that in general, Ansoft has been that traditionally more of a high technical content sale to those particular class of end users. And they've been more linked, or at least more drawn economically to cycles in the electronics industry. As such, historically if you look back at the numbers, you'd see how it tends to follow some of that trend. And since again, they're a greater proportion of paid-up licenses, of course, that tends to exacerbate the impact of that. With that in mind, in the Q1 we're looking at the low to mid-20s roughly. And for 2009, we're looking north of $100 million but south of $120 million if you looked at kind of a range.

Very helpful. Thanks. And in terms of maintenance, would you expect that to increase in dollars sequentially in the first quarter of '09?

In the first -- basically what I talked about again, what we're doing is even if there's unpredictability in the paid-up line -- and here again, gross pipelines increasing, anecdotally customer demand albeit filtered via our sales entities going -- improving. You know, there is unpredictability there because of the flow of paper coming through.

However, in the recurring base, keep in mind that we -- first of all, we've got pretty strong renewal rates, and it tends to build up over time. Benefiting from the previous sales that have happened before. So we'd expect that to stay solid and start to move up. But there is a couple of other things. For instance, we have the Ansoft standpoints. So again, I think some of that you'll see in the non-GAAP even if it's -- there's that non-GAAP/GAAP recognition in some of that. And again, as I've mentioned the previous sales bump.

So that's what I meant by continuing to -- even at the floor of our assumptions we've got a solid foundation. We've got, I think, really good recurring revenues solidifying all this. And we've been trying to pay pretty close attention just to see if we see a trend line toward people saying, oh, we can't afford to -- frankly, we haven't seen that to this point. Did that cover you? Hello?

And our next question comes from Mark Schappel with the Benchmark Company. Please go ahead, your mic is open.

Hi. Good morning, along with the previous question, Jim, if you could give us a sense of what your assumptions are for organic revenue growth in the core business for 2009.

Well basically, it's -- on the core growth, it's -- basically there's still going to be a lot of license sales going through. But if you look at the core growth, it's probably going to be at the low end, relatively flat, probably at the mid-point still, a little bit. And upper single digits at the upper end. And that's -- by the way, I'll mention that that's all excluding currency effects. And we're going to -- the comparables are going to be -- the currency impact is going to be pretty steep. I mean, unless currencies take another extreme left turn over the next few months.

Thank you.

And our next question comes from Greg Halter with Great Lakes Review. Please go ahead, sir, your mic is open.

Yes. Thank you. As you did on the last call, can you comment on whether or not there's any long-term deferred revenues and/or what may be from Ansoft.

Well, first of all, there is some deferred from Ansoft, not at traditional ANSYS levels. That's based on -- that's essentially based on the revenue recognition things. But that will show up in our non-GAAP. Now in the long term, yes, we do have a small amount which I think is around seven -- a little under $8 million in terms of long-term defer.

And again, we only count that if it's money and commitments that we've received. Not contractual things that talk about multi--year but that we haven't been paid for. So yes, there is some of that that shows up. Probably-- I think somewhere, can you check me on this? It's probably around $25 million in terms of an Ansoft total that we'd see in the equivalent non-GAAP deferred revenue balances.

And that number is not in the one -- the 166 I think it is?

Well, if you look at the 166, the $7.7 million is not there. I believe in the non-GAAP that the Ansoft $25 million is in fact there.

Our next question comes from Ross Macmillan with Jefferies. Please go ahead, sir, your mic is open.

Thanks. So just really going back on to kind of mix and the guidance, historically, lease revenues have -- leased licenses have been flat to slightly up into Q1. And then for each subsequent quarter to a year up sequentially. Should we expect to see the same pattern this coming year? In other words, there's no change to that -- there's no -- I guess the question is there's no change to that renewal rate on leases.

The renewal rates, no change or -- I mean, very little change. I'm sure there are microscopic changes. But in general, holistically, very little change. If you look in aggregate, we would not see a major shift in there.

But I'll put two caveats. First of all is the effect of the blending of the Ansoft business, which really historically was not lease based or very little at all. And the secondary standpoint, and this is one that we are just preparing for because it did happen, it did happen post 9/11 and during that dot.com bubble burst standpoint where short term people were doing leases even when they normally would be purchasers of licenses. With the idea that ultimately they would change that when things became a little more flexible from their standpoint.

So we've been hearing in this corner that maybe some of that is happening. I don't think it's a huge -- I don't think it's going to be a huge impact, but we really don't know. And the bottom line is as long we're getting customers, building that foundation, it adds the recurring base. It adds to a whole range of things. You know, all things equal, we're just happy when they acquire more software. Marie, did you see anything different from your perspective?

Yes, Ross, one thing that we have been hearing from the field is that from both the channel and the direct sales force, is some of what we are starting to see in Q1 is as companies let go of some of their engineering and perhaps outsource some of their problems to consulting firms, those consulting firms tend to lease because they -- they're not long-duration contracts, they're more fixed term. So we are seeing some trend, particularly on the low end, in the trend toward the lease model. But you won't see the impact of that until moving into Q2, Q3, and Q4.

So just to be clear, that impact that we're talking about is potentially an accelerator for the leased piece, right, versus the paid up or perpetual, that's what we're talking about?

Yes.

So if anything, that sequential trend could begin to almost accelerate relative--?

Right.

I would say build. I think accelerate may be -- be a second derivative.

Fair enough. That's fair enough.

Yes, because of how the lease revenue recognition transpires.

I understand. On the Ansoft side, you -- it was helpful giving the numbers there, Jim. I just am curious. I think that business historically was 20% into semi OEM and then 80% into electronics, both consumer and then industrial. But is it fair to say that enmass the whole thing is going to be basically impacted by some of the trends that we're seeing in the electronics industry today? And is that really as you're thinking as you think about the current year?

No. That a probably pretty good aggregate. I don't want to be -- the general trend of what you said, the 20/80, that's pretty close. I don't want -- I'm sure it would be something to that. And yes, it has been more associated with those purchase patterns. The one thing I can say pretty certain is that as we continue the integration efforts and those are things you just don't turn on a light switch and it happens.

But as they continue on, it tends to start to get more traction in some of the broader mainstream accounts, which tend to be the bigger names. But that -- that's something that allows us additional optimism for the future. But again, not banking on that on that wholesale thing going on because we do see some of the effects that you just mentioned in terms of the electronics industry and the previous selling models.

Our next question comes from Steve Koenig with Keybanc Capital Markets. Go ahead, sir.

Good morning. Thanks for taking my question.

No problem.

I'd like to understand a little bit better. I was struck by the growth in Europe in Q4. And I'd like to understand a little bit about what drove that and what you're expecting going forward, maybe in your guidance at the low end and the high end. And related to that, Jim, did your constant currency numbers, can you quantify the Ansoft contribution, if any, in that?

Well, I -- if we're talking about Europe, keep in mind that the Ansoft business historically in Europe was quite low. So it really -- it had its biggest impact in Asia-Pacific for us.

But to put things in perspective, yes, there's no doubt that the -- if we look at the Q4 business geographic, if you look at -- it was -- it was positive even against the -- it was positive in an organic sense even in light of the currency impact. So it was actually -- I don't know if you were asking the question from why it was as high as it was or why it wasn't higher. In general, we were quite happy with that. And again, it was driven by all of the basic core premises that we talked about. It was dragged down even more proportionately from the fact that the British pound really took a pretty significant drubbing. Even moreso than the Euro, at least in our standpoint. If you look at the overall year, of course, it was, again, the same standpoint, but we -- I'd say that if you look at it, it 's probably fairly similar throughout the year, a lot of differences.

Keep in mind in Europe when we were always downplaying the Europe growth, when we were getting the currency bump, and when you flattened out all that it was fairly consistent. Now there was a slight -- a slight bump from an Ansoft component, but it really was only a few million in terms of revenue upside.

Jim, if I may just then inquire about your expectation for 2009, where -- how do you kind of factor Europe into that and how do you think about growth with constant currency relative to North America --

In constant currency, I think it will be kind of on par with the overall standpoint. It's got a disproportionate chance of upside. But in our range, it's -- could be slightly negative to the single digits kind of standpoint. But again, in constant currency that comes up quite a bit. So if we look at it still building, building a lot of foundational growth, a lot of recurring revenue base, and building customer and market share during that timeframe, and again, if the economic uncertainties -- each of which has its own little microcosm even though they're all all factored by the macro, each local geography has a slightly different story. The net trend is that when any one of those pop up we have the ability to grab them. But we're applying basically the same methodologies, somewhat modulated by the things we're hearing from the field. But again, not banking on those and certainly not building them into the cost structure.

Europe still continues to be a very strong market. We've got a strong organization there. Yes, we are fighting the currency headwinds and the overall macro standpoint. But in terms of ongoing customer attainment, building solidity of business, it's still a good part of our business.

And our next question comes from Blair Abernathy with Thomas Weisel Partners. Please go ahead, your mic is open.

Thank you. Just another question on the electrical business. Jim, I'm just wondering two things here. Can you comment around now that you've had your hands around the business for awhile, what are you seeing in terms of end markets? Are your customers buying primarily? How is applying behavior in coming out of the R&D budgets versus the CapEx budgets for your customers? Secondly, how are you looking at shifting the Ansoft model to more of a lease model from a paid-up model? Sort of what are you doing to drive that?

Well, first of all, first of all historically we've never done anything to sway lease versus license. We try to provide a number of options out there that allow people to buy and sometimes in different timeframes as they want. So that normally follows the contour of the decisions of the purchasing company. Now, from that -- and by the way, that's why you've seen a very stable lease base as opposed to one that fluctuates and swings to create a different financial picture. At the end of the day, we just want more people utilizing the software and build this particular base.

Now given that, as we get into the broader base and Ansoft becomes more spread out with the broader ANSYS customer base, obviously some of the things that might have been procured by those companies favoring lease, they will probably shift more toward -- I mean continue to be lease as they augment their products with Ansoft. I think those are the only dynamics you're going to see. Nothing artificial that we're doing. Now in these timeframes, I think you asked the question about capital budgets versus R&D spending. Which clearly, of course, is different than IT spending.

But I need to decouple the R&D spending unless my colleague disagrees here. There's one issue of R&D, are they going to have access, are they going to invest in it? Now in some cases then even subject to that, if they decide that they need to invest in this for their product innovations, then the question is how do they finance that and do they do it through capital which normally comes form corporate approvals. And if that happens, then the normal purchasing thing happens. Very often if for some reason capital budgets are restrained, that's more -- that's disproportionately when they will do a short-term lease from their budget to be able to get access to the capabilities and go forward.

And I think there was a final question on the -- a focus on this on the patterns we see in terms of the electronics industry. And the only thing I'll say is that in general, the OEMs follow one cycle, but a lot of our customers, you look at the amount of electronics content that's going into a lot of their new product innovations. We see it with, like I said, the alternate drive systems, safety and control systems and things like that. And when that happens, that's an awful lot of places where innovations are happening either to gain market advantage or to comply with government mandates, be they funded or unfunded. So we start to see some of those things happening, but again, we're only a handful of months into this and in a real complex environment.

So we want to make sure that we're maintaining the elements of the good business while also maximizing what we can get on the confluence of those.

Okay, great. Thank you.

Okay.

And our next question comes from Greg Halter with Great Lakes Review. Please go ahead, sir, your mic is open.

Yes. Thank you for taking me again. Wondering if you could break down the business for the year by industry. I don't know if you have that.

For 2008 or -- actually, for 2009, we don't know. That's one level of uncertainty. For 2008 we still sort through some of that information. So we basically don't have that at this particular case. But I will say there's a number of camps -- as I mentioned, we saw growths in all industries, even the ones that you would say, wow, that's counterintuitive. You say auto industry is hurting, to still see that growing.

The proportions of the pie between the industries might change, but I would say that we're safely within the bounds that there's no industry that accounts for more than 20% of our revenues. That diversification element still persists. Again, we don't have -- we're not top heavy in any customer or things along that line. So we continue to diversify. If you look at it, as I mentioned, energy sectors became continuing to grow. We see some actually interest in the -- that may be premature. But some of the research going on in the biomed industry and actually applying simulation techniques to that, is good.

As I mentioned, the portfolio for airline efficiency, things like that, the turbo and aero industries, they're needing to squeeze out efficiencies, that was going on. Also efficiency in defense that seems to -- when there's major programs, we do well with that. When there's dwindling programs and competitiveness increases and tends to increase. And I also mentioned that some of the infrastructure aspects and heavy equipment elements are in fact going down. Probably chemical processing and things like that, maybe slightly down a little bit. At least as a percentage of the pie. But this is all very preliminary information. And keeping in mind that we've just kind of gone through all the basic financial processing for the year. Something like that. That's something that we start to look at in earnest. You know, just to refresh the information. I can give you information that was six months old, but that really wouldn't answer the question you just asked for total year.

Okay. That's fine. Do you have any customer that's more than 5% of your revenues?

Off the top of my head no. It's kind of like that was my earlier question saying there's no customer where we're top heavy. And even if you looked at the lists of the top 25 and the top 50, I'll give the same disclaimer of looking through and being able to take time to sort through some of the numbers. But there's nothing that's really made major changes along that line. So if you took top customer, top 25, top 50, and say what's the exposure, the lumpiness of that, really not a lot of exposure there.

Our next question comes from David Hines with Needham and Company. Please go ahead, sir, your mic is open.

Thanks, this is D.J. Richards. Been trying to dial in. He's having trouble. I'll ask the question in his place.

Sure.

Jim, can you help me -- I guess just thinking about the seasonality of the Ansoft business. Historically, they've been -- they were an April fiscal -- And that was historically their strongest quarter.

Yes.

You mentioned earlier your expectations, I guess, for revenues. In the kind of low 20% range, which would imply a pretty significant down year over year, in the range, I guess, of 30% plus. I guess have there been efforts on your end to realign sales incentives to remove some of that seasonality, or is it in fact -- I guess you guys are just expecting a --

I got to tell you, I'm not -- you lost me on the 20% and 30% kind of numbers. Maybe -- But in terms of -- the only thing we do, if you look at the contours of the ANSYS business over time, we tried to predicate that on having steady, sustainable business, high, recurring revenues and the like. From that standpoint, basically removing some of the hockey stick impact. Both interquarter and intraquarter standpoints. That's still something that we want to continue to build. In terms of trying to inordinately trying to create that, it's try to hit a bunch of microswitches and get a lot of unintended consequences. There's not major groundswells in that. In terms of the overall business model that allows that to grow, it's a little -- we still see that evolution toward the model. But not by trying to do an abrupt slamming of it. But, I want to go back to that one thing. I didn't quite understand when you said 20% and --

So you had mentioned Ansoft revenues coming in the low 20s, I think you had said.

Low to mid-20's for Q1.

And I think they did roughly $34 million in the March '08 quarter. So that would imply a nearly down 30% quarter.

Again, what you're seeing is the comparable. Quite frankly, when you see a lot of com plans, theyr'e geared toward the end of the year, and so that particular thing changes quite a bit. Do you have any -- Maria, maybe you have a different take or maybe you're hearing it differently --

No. I think -- D.J., one clarification, they didn't have a March quarter end, they had an April quarter end.

Four million in the quarter ending April.

And part of their year end is also influenced by April being the first month of the new budget year for Japan.

Got it. Okay. That's helpful. Thanks.

Yes. I think it's one of those things where you don't necessarily want to read anything into a very small time slice. It's kind of like it's 30% hotter here in Pittsburgh than it was the same day last year. That doesn't mean that Pittsburgh on total is 30% hotter.

Sure. Okay.

Our next question comes from Sanil Daptardar with Sentinel Investment. Your mic is open.

Jim, on the guidance first. When I look at the prior guidance, particularly after the third-quarter conference call, the guidance it's a about a $60 million shortfall on the mid-point. How much of that shortfall you can characterize it because of the currency effect and because of the economy? And how much of that might be, if it's because of the economy, how much of that might be a shortfall on Ansoft?

First of all, basically the entire -- if you look at the fundamentals of the business and the customer relationships and thing like that that we have, basically there is -- there's not much change even from the trajectory.

So what that means is virtually all of it is the economy and you can kind of almost then compute what -- after the economy takes hold and all of that is reflected in, you can almost back out to what the currency impact was. But it is -- it's all macro and that's why we're saying we're not going to tweak -- we're not going to change the world economy but we can continue to build off our solid foundation of business and continue to generate good cash flows and net income. When things start to recover, whatever timeframe that is, we're to do that. And then was there was a subquestion on Ansoft. I'm sorry. I forgot. Did you --

Yes. It wasn't kind of broken down into currency. What was the shortfall because of the currency and because of the economy. And if it's because of the economy, what would have been the portion that would have attributed to Ansoft?

Basically, it would follow the same standpoint. Probably not as much because of the stronger Asia-Pacific business, the strong Japan thing. It's just -- just because something had a major shift over the last year doesn't necessarily mean it's going to follow that same trend for the next year. But again, if you look at it actually Ansoft had a pretty similar kind of percent of international business, albeit in different parts of the globe. And from that standpoint, that actually provides us a little diversification, too. But you will see in aggregate the same kind of trends. I think the evolution away from being a follower -- largely following the electronics industry is something you will see ameliorate over time.

It appears there are no further questions in the queue. Mr.Cashman, I would like to turn the conference back to you for additional or closing comments.

Okay. Thanks, everyone. So basically from what I've just said here, the emphasis is going to be a continued focus on execution in tough times. And effective integration, which a lot of you have alluded to here. Basically, it's supported by the history I think we've demonstrated over the years. Customer acceptance of our existing commission, unique value proposition, expansion of our product portfolio with the release of R12 coming up and the addition of Ansoft, basically only bolster that enthusiasm even while we're in the middle of what everybody is in the middle of. So basically we continue to be propelled by a strong combination of solid business model which is providing that foundation for us.

We've got loyal customers. We've talked about the fact that their retention and renewal has remained high. We've got the channel partners that have been with us through a number of different economic cycles over the years. We've got great technology as a result of many, many years of accumulated R&D. And again, all the employees that got us to that point. So, well armed to -- for defensive purposes through this. And also with the products and organization ready to be able to rise up with the economy as it happens. And maybe even a little above that. So, basically I'd like to thank everybody for the call. And see you next quarter.

This concludes today's conference. Thank you for your participation. You may now disconnect your line.