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Ansys (ANSS) Up 1.7% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Ansys (ANSS - Free Report) . Shares have added about 1.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ansys due for a pullback? 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 drivers.
ANSYS Q4 Earnings Tops Estimates
ANSYS delivered fourth-quarter 2018 non-GAAP earnings of $2.13 per share (per ASC 606), surpassing the Zacks Consensus Estimate of $1.49. The figure also fared better than higher end of management’s guided range of $1.39 to $1.55 per share.
Earnings surged 30% on a year-over-year basis to $1.39 per share, according to ASC 605 standard.
Non-GAAP revenues of almost $418 million (per ASC 606) comfortably surpassed the Zacks Consensus Estimate of $362 million. Further, the figure came above the higher end of management’s guided range of $352 million to $372 million.
Non-GAAP revenues increased 12% from the year-ago quarter to $340.1 million, according to ASC 605 standard. Year-over-year revenue growth was driven by double-digit growth across lease, maintenance and service revenues.
As of Dec 31, 2018, total deferred revenues and backlog came in at $659.2 million per ASC 606. The figure increased 24% on a year-over-year basis to $957.1 million, per ASC 605.
Robust investments in autonomous vehicles, electrification, smart, connected solutions and 5G acted as primary catalyst. Customers’ focus on utilizing simulation across repair, maintenance and other overhaul projects was a positive.
Budgetary increase in allocation for defense spending across Europe and the United States favored growth in aerospace and defense domains.
In the reported quarter, ANSYS unveiled the latest Pervasive Engineering Simulation offerings, named ANSYS 2019 R1 to accelerate problem-solving capabilities across its comprehensive portfolio. It is anticipated to enhance the company’s go-to-market strategy.
The company also acquired Granta Design Limited (Granta Design) and Helic, Inc. (Helic) for a combined consideration of $261.5 million.
Segment Revenue Details
Lease and Perpetual license revenues came in at $126.8 million and $99.6 million, respectively, per ASC 606. While Lease revenues grew 18%, perpetual revenues increased 4.9% on a year-over year basis, at constant currency, per ASC 605.
Maintenance and Service revenues came in at $178.5 million and $13.1 million, respectively. The figures surged 13.6% and 37.6% year over year, respectively, at constant currency, on ASC 605 basis.
Geographic Revenue Details
Region wise, Americas, EMEA and Asia-Pacific revenues increased 19.4%, 9.5% and 9.9%, respectively, at constant currency.
Americas reflected demand for ANSYS’s solutions and the company had 36 customers with cumulative orders amounting more than $1 million as compared with 24 customers in the year-ago period.
EMEA had 21 customers with orders above $1 million up from 16 in the year-ago quarter. Germany and other EMEA delivered constant currency year-over-year revenue growth of 12.1% and 9.5%, respectively. Moreover, revenues from the U.K. increased 7.3% in the same period. ANSYS is rebuilding sales organization and improving operational execution to enhance go-to-market strategy in the EMEA region.
Asia-Pacific had 11 customers with orders above $1 million up from nine customers in the year-ago quarter. Japan and other Asia-Pacific delivered constant currency year-over-year revenue growth of 10.4% and 5.1%, respectively.
Strong performance in Japan and India was a positive but revenue growth was limited by weakness in Taiwan and South Korea.
Other Metrics
Direct and indirect businesses contributed 77% and 23%, respectively, to quarterly revenues. During the reported quarter, the company had 68 customers with orders in excess of $1 million, including four having cumulative orders in excess of $10 million. This compares with 49 customers with orders over $1 million in the year-ago period.
Recurring revenues base was 73% under ASC 606 and 72% under ASC 605. ACV increased 26.2% (27.7% on a constant currency basis) from the year-ago quarter to $480.5 million.
Operating Details
Non-GAAP gross margin came in at approximately 91.6% and 89.7% per ASC 606 and ASC 605, respectively, during the fourth quarter.
Non-GAAP operating margin contracted 210 bps on a year-over-year basis to 40.5% per ASC 605. Non-GAAP operating margin came in at 51.6% per ASC 606, in the reported quarter.
Balance Sheet & Cash Flow
ANSYS exited the quarter with cash and short-term investments of $777.4 million (of which 79% was held in the United States) compared with $729.4 million (77% held in the United States) in the previous quarter.
The company generated cash from operations of $132.9 million compared with $110 million in the previous quarter.
Further, the company repurchased 1.7 million shares during 12 months of 2018 (0.5 million shares in the reported quarter for approximately $154.03).
Notably, the company had around 85.5 million average shares outstanding in fourth quarter. As of Dec 31, 2018, the company reported 3.8 million shares remaining in the share buyback program.
Guidance
Per ASC 606, ANSYS expects non-GAAP earnings in the range of 98 cents to $1.11 per share for first-quarter 2019.
Non-GAAP revenues are anticipated in the range of $290 million to $310 million.
Management projects non-GAAP operating margin to be in the range of 36.5-38.5% for the first quarter.
For 2019, ANSYS provided outlook. The company anticipates non-GAAP revenues of $1.410-$1.470. Non-GAAP earnings are envisioned in the range of $5.55-$6.00 per share.
ANSYS anticipates operating cash flow for fiscal 2019 to be in the range of $470-$510 million. Non-GAAP operating margin is expected to be in the range of 43-44%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -14.35% due to these changes.
VGM Scores
Currently, Ansys has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. 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 C. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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Ansys (ANSS) Up 1.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Ansys (ANSS - Free Report) . Shares have added about 1.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ansys due for a pullback? 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 drivers.
ANSYS Q4 Earnings Tops Estimates
ANSYS delivered fourth-quarter 2018 non-GAAP earnings of $2.13 per share (per ASC 606), surpassing the Zacks Consensus Estimate of $1.49. The figure also fared better than higher end of management’s guided range of $1.39 to $1.55 per share.
Earnings surged 30% on a year-over-year basis to $1.39 per share, according to ASC 605 standard.
Non-GAAP revenues of almost $418 million (per ASC 606) comfortably surpassed the Zacks Consensus Estimate of $362 million. Further, the figure came above the higher end of management’s guided range of $352 million to $372 million.
Non-GAAP revenues increased 12% from the year-ago quarter to $340.1 million, according to ASC 605 standard. Year-over-year revenue growth was driven by double-digit growth across lease, maintenance and service revenues.
As of Dec 31, 2018, total deferred revenues and backlog came in at $659.2 million per ASC 606. The figure increased 24% on a year-over-year basis to $957.1 million, per ASC 605.
Robust investments in autonomous vehicles, electrification, smart, connected solutions and 5G acted as primary catalyst. Customers’ focus on utilizing simulation across repair, maintenance and other overhaul projects was a positive.
Budgetary increase in allocation for defense spending across Europe and the United States favored growth in aerospace and defense domains.
In the reported quarter, ANSYS unveiled the latest Pervasive Engineering Simulation offerings, named ANSYS 2019 R1 to accelerate problem-solving capabilities across its comprehensive portfolio. It is anticipated to enhance the company’s go-to-market strategy.
The company also acquired Granta Design Limited (Granta Design) and Helic, Inc. (Helic) for a combined consideration of $261.5 million.
Segment Revenue Details
Lease and Perpetual license revenues came in at $126.8 million and $99.6 million, respectively, per ASC 606. While Lease revenues grew 18%, perpetual revenues increased 4.9% on a year-over year basis, at constant currency, per ASC 605.
Maintenance and Service revenues came in at $178.5 million and $13.1 million, respectively. The figures surged 13.6% and 37.6% year over year, respectively, at constant currency, on ASC 605 basis.
Geographic Revenue Details
Region wise, Americas, EMEA and Asia-Pacific revenues increased 19.4%, 9.5% and 9.9%, respectively, at constant currency.
Americas reflected demand for ANSYS’s solutions and the company had 36 customers with cumulative orders amounting more than $1 million as compared with 24 customers in the year-ago period.
EMEA had 21 customers with orders above $1 million up from 16 in the year-ago quarter. Germany and other EMEA delivered constant currency year-over-year revenue growth of 12.1% and 9.5%, respectively. Moreover, revenues from the U.K. increased 7.3% in the same period. ANSYS is rebuilding sales organization and improving operational execution to enhance go-to-market strategy in the EMEA region.
Asia-Pacific had 11 customers with orders above $1 million up from nine customers in the year-ago quarter. Japan and other Asia-Pacific delivered constant currency year-over-year revenue growth of 10.4% and 5.1%, respectively.
Strong performance in Japan and India was a positive but revenue growth was limited by weakness in Taiwan and South Korea.
Other Metrics
Direct and indirect businesses contributed 77% and 23%, respectively, to quarterly revenues. During the reported quarter, the company had 68 customers with orders in excess of $1 million, including four having cumulative orders in excess of $10 million. This compares with 49 customers with orders over $1 million in the year-ago period.
Recurring revenues base was 73% under ASC 606 and 72% under ASC 605. ACV increased 26.2% (27.7% on a constant currency basis) from the year-ago quarter to $480.5 million.
Operating Details
Non-GAAP gross margin came in at approximately 91.6% and 89.7% per ASC 606 and ASC 605, respectively, during the fourth quarter.
Non-GAAP operating margin contracted 210 bps on a year-over-year basis to 40.5% per ASC 605. Non-GAAP operating margin came in at 51.6% per ASC 606, in the reported quarter.
Balance Sheet & Cash Flow
ANSYS exited the quarter with cash and short-term investments of $777.4 million (of which 79% was held in the United States) compared with $729.4 million (77% held in the United States) in the previous quarter.
The company generated cash from operations of $132.9 million compared with $110 million in the previous quarter.
Further, the company repurchased 1.7 million shares during 12 months of 2018 (0.5 million shares in the reported quarter for approximately $154.03).
Notably, the company had around 85.5 million average shares outstanding in fourth quarter. As of Dec 31, 2018, the company reported 3.8 million shares remaining in the share buyback program.
Guidance
Per ASC 606, ANSYS expects non-GAAP earnings in the range of 98 cents to $1.11 per share for first-quarter 2019.
Non-GAAP revenues are anticipated in the range of $290 million to $310 million.
Management projects non-GAAP operating margin to be in the range of 36.5-38.5% for the first quarter.
For 2019, ANSYS provided outlook. The company anticipates non-GAAP revenues of $1.410-$1.470. Non-GAAP earnings are envisioned in the range of $5.55-$6.00 per share.
ANSYS anticipates operating cash flow for fiscal 2019 to be in the range of $470-$510 million. Non-GAAP operating margin is expected to be in the range of 43-44%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -14.35% due to these changes.
VGM Scores
Currently, Ansys has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. 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 C. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.