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Ansys (ANSS) Down 1.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Ansys (ANSS). Shares have lost about 1.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ansys due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

ANSYS Q2 Earnings and Revenues Top Estimates

ANSYS reported second-quarter 2021 non-GAAP earnings of $1.85 per share, which beat the Zacks Consensus Estimate by 22.5% and increased 19% year over year.

Non-GAAP revenues of $452.6 million surpassed the Zacks Consensus Estimate by 4.6%. The top line increased 16% (up 14% at constant currency or cc) from the year-ago quarter’s levels.

Continued momentum in recurring revenues, strength in defense, high tech and semiconductor verticals along with growth in all regions drove the top line. The company closed several deals in the aerospace and defense sector in North America and EMEA regions. Improving business conditions at small- and medium-sized customers contributed to the top line.

Deferred revenues and backlog were $927.1 million, up 10% on a year-over-year basis.

Quarter in Details

Lease licenses revenues (28.7% of non-GAAP revenues) increased 13.2% at cc to $129.8 million. Perpetual licenses revenues (18.8%) rose 48.1% year over year at cc to $85 million.

Maintenance revenues (49.5%) increased 5.6% at cc to $224.2 million. Service revenues (3%) dropped 0.1% year over year to $13.5 million.

Direct and indirect channels contributed 75.6% and 24.4%, respectively, to non-GAAP revenues.

Annual contract value or ACV increased 25% year over year (up 22.7% at cc) to $430.5 million.

On a geographic basis, non-GAAP revenues from Americas, EMEA (comprising Germany, the U.K. and other EMEA) and the Asia-Pacific (Japan and Other Asia-Pacific) contributed 48.9%, 23.3% and 27.8% to non-GAAP revenues, respectively.

Non-GAAP revenues from Americas rallied 14.2% to $221.2 million at cc. Revenues from EMEA and the Asia-Pacific increased 11.3% and 14.9% year over year to $105.4 million and $126 million, respectively.

Strength in aerospace and defense, high-tech, automotive and semiconductor sectors led to increases in overall revenues.

Operating Details

Non-GAAP gross margin expanded 40 basis points (bps) on a year-over-year basis to 90%.

Total operating expenses increased 21.3% year over year to $265.7 million, due to higher research and development as well as selling, general and administrative expenses.

Non-GAAP operating margin contracted 120 bps on a year-over-year basis to 41.7%.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash and short-term investments amounted to $958.2 million (the United States contributed 66%) compared with $987.9 million (the United States contributed 67%) as of Mar 31, 2021.

As of Jun 30, 2021, the company’s long-term debt stood at $753.3 million.

The company generated cash from operations of $118.9 million in the second quarter compared with $171.1 million in the prior quarter.

The company did not repurchase shares in the second quarter. As of Jun 30, 2021, it had 2.8 million shares remaining under the share buyback program.

Guidance

For third-quarter 2021, ANSYS expects non-GAAP earnings in the range of $1.22-$1.39.

Non-GAAP revenues are anticipated between $400 million and $425 million.

Management projects non-GAAP operating margin in the range of 34-36.5%.

For 2021, ANSYS now expects non-GAAP revenues of $1.84-$1.89 billion compared with the previous guidance of $1.81-$1.875 billion.

Management expects non-GAAP operating margin in the range of 40-41% for 2021.

Non-GAAP earnings are now envisioned in the range of $6.85-$7.15 per share compared with the previous guidance of $6.69-$7.10.

ACV is now anticipated between $1.8 billion and $1.845 billion, while operating cash flow are anticipated between $495 million and $535 million for 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Ansys has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ansys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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