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ANSYS (ANSS) Beats on Q2 Earnings & Revenues, Ups '20 View

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Zacks Equity Research
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ANSYS ANSS reported second-quarter 2020 non-GAAP earnings of $1.55 per share, which beat the Zacks Consensus Estimate by 33.6%. However, the bottom line declined 4% year over year.

Non-GAAP revenues of $389.7 million surpassed the Zacks Consensus Estimate by 10.2%. The figure improved 5% (up 6% at constant currency or cc) from the year-ago quarter.

Management is elated on closure of “the largest deal in 50-year history and largest sales agreement for new business.”

Deferred revenues and backlog were $846 million, reflecting an increase of 18% on a year-over-year basis.

ANSYS, Inc. Price, Consensus and EPS Surprise

ANSYS, Inc. Price, Consensus and EPS Surprise
ANSYS, Inc. Price, Consensus and EPS Surprise

ANSYS, Inc. price-consensus-eps-surprise-chart | ANSYS, Inc. Quote

Top-Line Details

Lease licenses revenues (29.2% of non-GAAP revenues) declined 13.7% at cc to $113.9 million. Perpetual licenses revenues (14.4%) fell 20% year over year at cc to $56.1 million.

Maintenance revenues and Service revenues improved 11.2% and 1.9%, year over year, at cc, to $206.5 million and $13.1 million, contributing 53% and 3.4% to non-GAAP revenues, respectively.

Direct and indirect channels contributed 77.9% and 22.1%, respectively, to non-GAAP revenues.  ACV improved 5.6% year over year (up 5.9% at cc) to $344.4 million.

On a geographic basis, non-GAAP revenues from Americas, EMEA (comprising Germany, the UK and other EMEA) and the Asia-Pacific (Japan and Other Asia-Pacific) accounted for 49.6%, 22.6% and 27.8% of non-GAAP revenues, respectively.

Notably, at cc, revenues from Americas improved 33.1% to $193.3 million, while revenues from EMEA and the Asia-Pacific declined 4.6% and 17.5% year over year to $88 million and $108.5 million, respectively.

New deal wins in high-tech and automotive verticals across North America aided growth. Despite strength in high-tech and automotive sectors with growing clout of digital twins and process optimization solutions, softness in the industrial equipment industry led to decline in revenues from the APAC region. Meanwhile, performance across EMEA was impacted by coronavirus crisis-induced weakness in the oil and gas industry despite strength in defense segment and improvement in semiconductor end-market.

Operating Details

Non-GAAP gross margin contracted 140 basis points (bps) on a year-over-year basis to 89.6%.

Total operating expenses increased 9.8% year over year to $219 million.

Non-GAAP operating margin expanded 600 bps on a year-over-year basis to 42.9%.

Balance Sheet & Cash Flow

As of Jun 30, 2020, cash and short-term investments of $745 million (the United States comprised 54%) compared with $718 million (the United States comprised 60%) as of Mar 31, 2020.

As of Jun 30, 2020, the company has an unsecured term loan with an outstanding principal balance of $425 million. Notably, the debt agreement currently requires no principal payments through the next 12 months.

The company generated cash from operations of $131.6 million compared with $147.4 million in the prior quarter. Negative business impacts across China owing to COVID-19 outbreak, led to delay in payments, affecting cash flows.

The company did not repurchase shares in the second quarter. As of Jun 30, 2020, it had 2.8 million shares remaining under the share buyback program.

Guidance

ANSYS expects non-GAAP earnings in the range of $1.10-$1.34 per share for third-quarter 2020. The Zacks Consensus Estimate is pegged at $1.42 per share.

Non-GAAP revenues are anticipated between $347 million and $377 million (mid-point of $362 million). The Zacks Consensus Estimate stands at $376.7 million.

Management projects non-GAAP operating margin in the range of 34.5-38.5%.

For 2020, ANSYS has raised guidance. The company now expects non-GAAP revenues of $1.57-$1.645 billion (mid-point of $1.61 billion) compared with the prior range of $1.555-$1.63 billion. The Zacks Consensus Estimate is pegged at $1.60 billion.

Non-GAAP earnings are now envisioned in the range of $5.75-$6.35 per share (mid-point of $6.05) compared with the prior range of $5.61-$6.23 per share. The Zacks Consensus Estimate for earnings stands at $5.96 per share.

ACV is now anticipated between $1.52 billion and $1.585 billion compared with the prior range of $1.5-$1.575 billion.

Management continues to expect non-GAAP operating margin in the range of 40-42%.

The company now anticipates operating cash flow for 2020 between $435 million and $475 million compared with the previous range of $425-$470 million.

Zacks Rank & Other Stocks to Consider

Currently, ANSYS carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Dropbox DBX, Asure Software, Inc. ASUR and Analog Devices ADI. While Asure Software sports a Zacks Rank #1 (Strong Buy), both Analog Devices and Dropbox carry a Zacks Rank #2 You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate of Dropbox, Asure Software, and Analog Devices is pegged at 16.83%, 14% and 13.33%, respectively.

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