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A month has gone by since the last earnings report for Ansys (ANSS). Shares have lost about 3.1% 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 Q4 Earnings and Revenues Top Estimates
ANSYS reported fourth-quarter 2020 non-GAAP earnings of $2.96 per share, which beat the Zacks Consensus Estimate by 17.9% and increased 32% year over year.
Non-GAAP revenues of $627.8 million surpassed the Zacks Consensus Estimate by 11.2%. The top line increased 27% (up 24% 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.
Deferred revenues and backlog were $967.1 million, up 11.1% on a year-over-year basis.
ANSYS announced buyouts of Lumerical Inc and Analytical Graphics, Inc in 2020. Also, the company unveiled its most recent version of its product portfolio — Ansys 2021 R1 — to enable clients to accelerate innovation.
Quarter in Details
Lease licenses revenues (41.9% of non-GAAP revenues) increased 54.5% at cc to $263.3 million. Perpetual licenses revenues (18.9%) rose 11.1% year over year at cc to $119 million.
Maintenance revenues (36.5%) increased 8.7% at cc to $228.8 million. Service revenues (2.7%) declined 1.3% year over year, at cc, to $16.6 million.
Direct and indirect channels contributed 81.4% and 18.6%, respectively, to non-GAAP revenues.
Annual contract value or ACV increased 23% year over year (up 20% at cc) to $665.5 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) contributed 51.2%, 29.6% and 19.2% to non-GAAP revenues, respectively.
Notably, at cc, non-GAAP revenues from Americas rallied 44.1% to $321.7 million, while revenues from EMEA and the Asia-Pacific increased 10.8% and 4% year over year to $185.8 million and $120.3 million, respectively.
The strength in high-tech, automotive and semiconductor sectors led to increases in revenues from the North America region.
During the quarter, the company inked an eight-figure multi-year deal with a notable North American semiconductor company, which is a testament to strength in its solutions.
The deal wins in defense vertical across North America and EMEA also boosted growth.
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis to 91.6%.
Total operating expenses increased 18.1% year over year to $296.4 million due to higher research and development as well as selling, general and administrative expenses.
Non-GAAP operating margin expanded 360 bps on a year-over-year basis to 51.6%.
Balance Sheet & Cash Flow
As of Dec 31, 2020, cash and short-term investments amounted to $913.2 million (the United States comprised 64%) compared with $845.2 million (the United States comprised 59%) as of Sep 30, 2020.
As of Dec 31, 2020, the company has two unsecured term loan with an outstanding principal balance of $800 million. Currently, the debt agreements require no principal payments through 2022.
The company generated cash from operations of $173.8 million for the fourth quarter compared with $94.5 million in the prior quarter.
The company did not repurchase shares in the fourth quarter. As of Dec 31, 2020, it had 2.8 million shares remaining under the share buyback program.
2020 Numbers in Details
ANSYS reported non-GAAP revenues of $1.696 billion in 2020, up 11% (10% at cc) over 2019 tally.
Non-GAAP earnings was $6.70 per share against earnings of $6.58 per share reported for 2019.
For 2020, ANSYS’ non-GAAP gross margin contracted 110 bps to 90% while non-GAAP operating margin contracted 230 bps to 43%.
In 2020, ANSYS generated ACV of 1.616 billion up 11% (up 9% at cc) over 2019. Cash flow from operations of $547.3 million compared with $499.9 million in the previous year.
For the first quarter of 2021, ANSYS expects non-GAAP earnings in the range of 73-90 cents.
Non-GAAP revenues are anticipated between $335 million and $360 million (mid-point of $347.5 million).
Management projects non-GAAP operating margin in the range of 24-27.5%.
For 2021, ANSYS expects non-GAAP revenues of $1.79-$1.875 billion (mid-point of $1.833 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 $6.44-$6.92 per share.
ACV is now anticipated between $1.75 billion and $1.825 billion, while operating cash flow are anticipated between $475 million and $515 million for 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -45.17% due to these changes.
At this time, Ansys has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ansys has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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