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Why Is Ansys (ANSS) Down 3.6% Since Last Earnings Report?

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  • ANSS

A month has gone by since the last earnings report for Ansys (ANSS). Shares have lost about 3.6% 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 the most recent earnings report in order to get a better handle on the important drivers.

ANSYS Q3 Earnings and Revenues Top Estimates

ANSYS reported third-quarter 2021 non-GAAP earnings of $1.59 per share, which beat the Zacks Consensus Estimate by 18.7% and increased 16.9% year over year.

Non-GAAP revenues of $445.4 million surpassed the Zacks Consensus Estimate by 7.3%. The top line increased 21% (up 20% at constant currency or cc) from the year-ago quarter’s levels.

Continued momentum in core business, strength in the high tech and semiconductor verticals boosted 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 acted as a tailwind.

Deferred revenues and backlog were $899.5 million, up 2.2% on a year-over-year basis.

Quarter in Details

Lease licenses revenues (27.1% of non-GAAP revenues) increased 52% at cc to $120.5 million. Perpetual licenses revenues (18%) rose 27.2% year over year at cc to $79.9 million.

Maintenance revenues (51.2%) increased 6.3% at cc to $228 million. Service revenues (3.8%) increased 25.9% year over year to $16.9 million.

Direct and indirect channels contributed 74.4% and 25.6%, respectively, to non-GAAP revenues.

Annual contract value or ACV increased 19.7% year over year (up 19.3% at cc) to $365.4 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 50.2%, 22.9% and 26.9% to non-GAAP revenues, respectively.

Non-GAAP revenues from Americas rallied 37.3% to $223.4 million at cc. Revenues from EMEA declined 6.1% to $102 million. Revenues from Asia-Pacific increased 21.1% to $120 million.

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

Operating Details

Non-GAAP gross margin expanded 70 basis points (bps) on a year-over-year basis to 89.9%.

Total operating expenses increased 21.2% year over year to $270.8 million, due to higher research and development as well as selling, general and administrative expenses.

Non-GAAP operating margin contracted 10 bps on a year-over-year basis to 39.7%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash and short-term investments amounted to $1.081 billion (the United States contributed 69%) compared with $958.2 million (the United States contributed 66%) as of Jun 30, 2021.

As of Sep 30, 2021, the company’s long-term debt stood at $753.5 million.

The company generated cash from operations of $157.8 million in the third quarter compared with $118.9 million in the prior quarter.

The company repurchased 0.1 million shares worth $36 million in the third quarter. As of Sep 30, 2021, it had 2.7 million shares remaining under the share buyback program.

In October 2021, the company concluded the acquisition of Zemax for $411.5 million paid in cash net of cash acquired from Zemax, bringing the actual cash payment to $399.1 million.

Guidance

For fourth-quarter 2021, ANSYS expects non-GAAP earnings in the range of $2.48-$2.81.

Non-GAAP revenues are anticipated between $614.9 million and $654.9 million.

Management projects non-GAAP operating margin in the range of 44.5-47%.

For 2021, ANSYS now expects non-GAAP revenues of $1.885-$1.925 billion compared with the previous guidance of $1.84-$1.89 billion.

Management expects non-GAAP operating margin in the range of 40.5-41.5% for 2021 compared with 40-41% guided earlier.

Non-GAAP earnings are now envisioned in the range of $7.05-$7.38 per share compared with the previous guidance of $6.85-$7.15.

ACV is now anticipated between $1.825 billion and $1.86 billion, while operating cash flow is projected between $505 million and $535 million for 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Ansys has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ansys has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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