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Why Is Ansys (ANSS) Down 15.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ansys (ANSS - Free Report) . Shares have lost about 15.8% 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 catalysts.

ANSYS Q2 Earnings Beat Estimates, Revenues Up Y/Y

ANSYS Inc. reported second-quarter 2022 earnings of $1.77 per share, beating the Zacks Consensus Estimate by 9.94%. The bottom line decreased 4.3% year over year.Non-GAAP revenues of $475.9 million surpassed the Zacks Consensus Estimate by 1.97%. The top line increased 5% (up 12% at constant currency or cc) from the year-ago quarter.

High-performance computing, 5G, and sustainability boosted high-tech and semiconductor industry growth in the Europe, Middle East, and Africa (EMEA) and Asia-Pacific regions. The company saw double-digit growth for its electrification and advanced driver assistance systems business segment in the Americas and the Asia-Pacific region. Deferred revenues and backlogs were $1.179 billion, up 27.2% year over year.

Quarter in Detail

Subscription lease revenues (28.4% of non-GAAP revenues) increased 12.4% at cc to $135 million. Perpetual licenses’ revenues (15.5%) decreased 9.3% year over year at cc to $73.9 million.

Maintenance revenues (52.5%) increased 17.7% at cc to $249.7 million. Service revenues (3.6%) rose 33.1% year over year to $17.2 million.

Direct and indirect channels contributed 73.7% and 26.3%, respectively, to non-GAAP revenues.

Annual contract value or ACV increased 6.9% year over year (up 13.2% at cc) to $460.3 million.

On a geographic basis, non-GAAP revenues from the Americas, EMEA (comprising Germany, the U.K. and other EMEA) and the Asia-Pacific (Japan and Other Asia-Pacific) contributed 41.4%, 25.9% and 32.7% to non-GAAP revenues, respectively.

Non-GAAP revenues from the Americas were down 10.9% to $196.8 million at cc. Revenues from EMEA increased 29.2% to $123.4 million at cc. Revenues from the Asia-Pacific increased 36.2% to $155.6 million at cc.

Strength in the industrial and energy industries, high-tech, and automotive sectors increased overall revenues.

Operating Details

The non-GAAP gross margin expanded 100 basis points (bps) on a year-over-year basis to 91%.

Total operating expenses increased 6.6% year over year to $283.3 million due to higher research and development; and selling, general and administrative expenses.

The non-GAAP operating margin contracted 100 bps on a year-over-year basis to 40.7%.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash and short-term investments amounted to $517.6 million compared with $657.8 million as of Mar 31, 2022.

As of Jun 30, 2022, the company’s long-term debt stood at $753.4 million compared with $744.5 million as of Mar 31, 2022.

In the quarter under review, cash from operations remained flat at $118.9 million compared with the prior-year quarter.

In the quarter under review, the company did not repurchase shares. As of Jun 30, 2022, it had 2 million shares remaining under the share buyback program.

Guidance

For third-quarter 2022, ANSYS expects non-GAAP earnings of $1.56-$1.70 per share. Non-GAAP revenues are anticipated to be between $455 million and $475 million. Management projects a non-GAAP operating margin of 37.8-39.4%.For 2022, ANSYS expects non-GAAP revenues of $2.005-$2.055 billion.

Management expects a non-GAAP operating margin of 41-42% for 2022.Non-GAAP earnings are envisioned to be $7.50-$7.88 per share. ACV is anticipated to be between $1.98 billion and $2.02 billion, while the operating cash flow is projected between $570 million and $610 million for 2022.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, 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 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 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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