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ANSYS (ANSS) Q3 Earnings Beat Estimates, Revenues Fall Y/Y
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ANSYS Inc (ANSS - Free Report) reported third-quarter 2023 earnings of $1.41 per share, beating the Zacks Consensus Estimate by 11.9%. The bottom line declined 20.3% year over year.
Non-GAAP revenues of $458.8 million missed the Zacks Consensus Estimate by 1.7%. The top line decreased 3% (down 4% at constant currency or cc) from a year ago.
ANSYS stated that it was notified by the U.S. Department of Commerce of incremental approval processes and export restrictions including sales to some Chinese entities. This resulted in a $20 million headwind to both Annual contract value (ACV) and revenues for the third quarter.
Further, management highlighted that these new restrictions and processes are likely to elongate transaction cycles, causing delays in closing of certain transactions in the fourth quarter. Therefore, it tempered its outlook for 2023. It expects these additional restrictions and processes to be a $25 million headwind to 2023 ACV and revenues compared with the previous forecast.
ANSS now projects non-GAAP revenues in the range of $2,234-$2,284 million compared with the earlier prediction of $2,257-$2,327 million. Management suggests non-GAAP operating margin to be between 41% and 42%.
Non-GAAP earnings are anticipated in the range of $8.34-$8.75 per share compared with the previous guidance of $8.39-$8.88.
ACV is estimated to be between $2,243 million and $2,288 million. Operating cash flow is expected in the $705-$735 million band. Earlier, the company had envisioned ACV to be between $2,275 million and $2,340 million. Operating cash flow is forecast in the $699-$749 million range.
Shares of ANSS were down 10.1% in the after-market trading on Nov 1. The stock has gained 31.4% of its value compared with the sub-industry’s increase of 51.5%.
Image Source: Zacks Investment Research
Quarter in Detail
Subscription lease revenues (22.6% of non-GAAP revenues) were down 25.1% at cc to $103.6 million. Perpetual licenses revenues (12.8%) fell 19.8% year over year at cc to $58.9 million.
Maintenance revenues (60.6%) climbed 10.2% at cc to $278.1 million. Service revenues (4%) were up 12.8% year over year to $18.3 million.
Direct and indirect channels contributed 73.5% and 26.5%, respectively, to non-GAAP revenues.
ACV grew 11.8% year over year (up 10.4% at cc) to $457.5 million. Our estimate was pegged at $466.3 million.
On a geographic basis, the Americas, EMEA (comprising Germany, the U.K. and other EMEA) and the Asia-Pacific (Japan and Other Asia-Pacific) contributed 47.6%, 26.5% and 25.9% to non-GAAP revenues, respectively.
Non-GAAP revenues from the Americas were up 3.9% at cc to $218.3 million. EMEA revenues were down 5.4% at cc to $121.6 million. Revenues from the Asia-Pacific decreased 15.9% at cc to $118.9 million.
Deferred revenues and backlogs were $1.206 billion, up 8.7% year over year.
Operating Details
Non-GAAP gross margin was unchanged on a year-over-year basis at 91.1%. Total operating expenses gained 12.7% year over year to $323.7 million due to higher research and development, and selling, general and administrative expenses.
Non-GAAP operating margin contracted 690 bps on a year-over-year basis to 34.1%.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash and short-term investments amounted to $639.5 million compared with $478 million as of Jun 30, 2023.
As of Sep 30, 2023, the company’s long-term debt was $753.8 million compared with $753.7 million as of Jun 30, 2023.
In the quarter under review, cash from operations came in at $160.8 million compared with $127.2 million in the prior-year quarter.
In the quarter under discussion, the company did not repurchase shares. As of Sep 30, 2023, ANSS had 1.1 million shares remaining under its share buyback program.
Guidance
For fourth-quarter 2023, ANSYS expects non-GAAP earnings in the range of $3.48-$3.89 per share.
Non-GAAP revenues are anticipated to be between $769.2 million and $819.2 million. Management projects non-GAAP operating margin in the 48.9-51.2% band.
The Zacks Consensus Estimate for Asure Software’s 2023 EPS has increased 5.9% in the past 60 days to 54 cents.
Asure Software’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 676.4%. Shares of ASUR have climbed 25.1% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2023 EPS has remained flat in the past 60 days at $11.09. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have surged 70.2% in the past year.
The Zacks Consensus Estimate for VMware’s fiscal 2024 EPS has improved 1% in the past 60 days to $7.23.
VMware’s earnings outpaced the Zacks Consensus Estimate in two of the last four quarters while missing twice. The average earnings surprise is 1.2%. Shares of VMW have jumped 33.8% in the past year.
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ANSYS (ANSS) Q3 Earnings Beat Estimates, Revenues Fall Y/Y
ANSYS Inc (ANSS - Free Report) reported third-quarter 2023 earnings of $1.41 per share, beating the Zacks Consensus Estimate by 11.9%. The bottom line declined 20.3% year over year.
Non-GAAP revenues of $458.8 million missed the Zacks Consensus Estimate by 1.7%. The top line decreased 3% (down 4% at constant currency or cc) from a year ago.
ANSYS stated that it was notified by the U.S. Department of Commerce of incremental approval processes and export restrictions including sales to some Chinese entities. This resulted in a $20 million headwind to both Annual contract value (ACV) and revenues for the third quarter.
Further, management highlighted that these new restrictions and processes are likely to elongate transaction cycles, causing delays in closing of certain transactions in the fourth quarter. Therefore, it tempered its outlook for 2023. It expects these additional restrictions and processes to be a $25 million headwind to 2023 ACV and revenues compared with the previous forecast.
ANSYS, Inc. Price, Consensus and EPS Surprise
ANSYS, Inc. price-consensus-eps-surprise-chart | ANSYS, Inc. Quote
ANSS now projects non-GAAP revenues in the range of $2,234-$2,284 million compared with the earlier prediction of $2,257-$2,327 million. Management suggests non-GAAP operating margin to be between 41% and 42%.
Non-GAAP earnings are anticipated in the range of $8.34-$8.75 per share compared with the previous guidance of $8.39-$8.88.
ACV is estimated to be between $2,243 million and $2,288 million. Operating cash flow is expected in the $705-$735 million band. Earlier, the company had envisioned ACV to be between $2,275 million and $2,340 million. Operating cash flow is forecast in the $699-$749 million range.
Shares of ANSS were down 10.1% in the after-market trading on Nov 1. The stock has gained 31.4% of its value compared with the sub-industry’s increase of 51.5%.
Image Source: Zacks Investment Research
Quarter in Detail
Subscription lease revenues (22.6% of non-GAAP revenues) were down 25.1% at cc to $103.6 million. Perpetual licenses revenues (12.8%) fell 19.8% year over year at cc to $58.9 million.
Maintenance revenues (60.6%) climbed 10.2% at cc to $278.1 million. Service revenues (4%) were up 12.8% year over year to $18.3 million.
Direct and indirect channels contributed 73.5% and 26.5%, respectively, to non-GAAP revenues.
ACV grew 11.8% year over year (up 10.4% at cc) to $457.5 million. Our estimate was pegged at $466.3 million.
On a geographic basis, the Americas, EMEA (comprising Germany, the U.K. and other EMEA) and the Asia-Pacific (Japan and Other Asia-Pacific) contributed 47.6%, 26.5% and 25.9% to non-GAAP revenues, respectively.
Non-GAAP revenues from the Americas were up 3.9% at cc to $218.3 million. EMEA revenues were down 5.4% at cc to $121.6 million. Revenues from the Asia-Pacific decreased 15.9% at cc to $118.9 million.
Deferred revenues and backlogs were $1.206 billion, up 8.7% year over year.
Operating Details
Non-GAAP gross margin was unchanged on a year-over-year basis at 91.1%.
Total operating expenses gained 12.7% year over year to $323.7 million due to higher research and development, and selling, general and administrative expenses.
Non-GAAP operating margin contracted 690 bps on a year-over-year basis to 34.1%.
Balance Sheet & Cash Flow
As of Sep 30, 2023, cash and short-term investments amounted to $639.5 million compared with $478 million as of Jun 30, 2023.
As of Sep 30, 2023, the company’s long-term debt was $753.8 million compared with $753.7 million as of Jun 30, 2023.
In the quarter under review, cash from operations came in at $160.8 million compared with $127.2 million in the prior-year quarter.
In the quarter under discussion, the company did not repurchase shares. As of Sep 30, 2023, ANSS had 1.1 million shares remaining under its share buyback program.
Guidance
For fourth-quarter 2023, ANSYS expects non-GAAP earnings in the range of $3.48-$3.89 per share.
Non-GAAP revenues are anticipated to be between $769.2 million and $819.2 million. Management projects non-GAAP operating margin in the 48.9-51.2% band.
Zacks Rank
ANSYS currently carries a Zacks Rank #4 (Sell).
Key Picks
Some better-ranked stocks worth consideration in the broader technology space are Asure Software (ASUR - Free Report) , Synopsys (SNPS - Free Report) and VMware . While Asure Software and Synopsys sport a Zacks Rank #1 (Strong Buy) each, VMware carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Asure Software’s 2023 EPS has increased 5.9% in the past 60 days to 54 cents.
Asure Software’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 676.4%. Shares of ASUR have climbed 25.1% in the past year.
The Zacks Consensus Estimate for Synopsys’ fiscal 2023 EPS has remained flat in the past 60 days at $11.09. SNPS’ long-term earnings growth rate is 16.7%. Shares of SNPS have surged 70.2% in the past year.
The Zacks Consensus Estimate for VMware’s fiscal 2024 EPS has improved 1% in the past 60 days to $7.23.
VMware’s earnings outpaced the Zacks Consensus Estimate in two of the last four quarters while missing twice. The average earnings surprise is 1.2%. Shares of VMW have jumped 33.8% in the past year.