A month has gone by since the last earnings report for ANSYS, Inc. (ANSS - Free Report) . Shares have added about 4.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it 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 catalysts.
ANSYS reported second-quarter 2017 non-GAAP earnings of 99 cents, which beat the Zacks Consensus Estimate by 8 cents. The figure increased 6.5% year over year and was better than management’s guided range of 88–93 cents per share.
Revenues increased 7.4% (13% at constant currency) from the year-ago quarter to $264.4 million, surpassing the Zacks Consensus Estimate of $259 million and management’s guided range of $254–$263 million. Unfavorable foreign exchange negatively impacted revenues by $2.1 million.
The year-over-year growth was driven by 6.2% increase in software license revenues and 8.6% growth in maintenance and service revenues.
As of Jun 30, deferred revenue and backlog increased 25% year over year to $655.8 million.
Segment Revenue Details
At constant currency, lease license revenues grew 12.5% to $92.7 million, while maintenance revenues increased 9.8% to $107.6 million in the reported quarter. Perpetual license revenues remained almost flat at $57.6 million in the quarter. Service revenues increased 6% to $6.4 million.
Direct and indirect businesses contributed 76% and 24%, respectively, to the quarterly revenues. During the quarter, the company had 28 customers with orders in excess of $1 million, including four customers with orders in excess of $5 million and one customer with orders over $10 million.
Recurring revenue base was 76%. Bookings were almost flat at $261.3 million. On a year-to-date basis, bookings increased 9.1% to $525.2 million.
Region wise, North America, Europe and Asia-Pacific revenues increased 13.5%, 3% and 7.1%, respectively, at constant currency.
North America had 14 customers with orders above $1 million, including four customers with orders in excess of $5 million and one over $10 million. The strength in North America reflected strong demand for ANSYS’s solutions in the aerospace & defense, electronics/semiconductors and automotive industries.
In Europe, France reported 15% constant currency growth, which was partially offset by weak performance in both Germany and the UK. ANSYS is focused on rebuilding its sales organization in the region, which it believes will continue throughout the second-half of 2017.
Asia-Pacific revenues benefited from strong performance in China and Taiwan.
Non-GAAP gross margin expanded 20 basis points (bps) from the year-ago quarter to 90.2%.
Operating expenses (excluding amortization), as a percentage of revenues, increased 240 bps from the year-ago quarter. The increase was driven by higher selling, general & administrative (up 310 bps) expenses and was partially offset by research & development expense (up 70 bps).
Consequently, non-GAAP operating margin expanded 140 bps on a year-over-year basis to 48.3% in the reported quarter.
Balance Sheet & Cash Flow
ANSYS exited the quarter with cash and short-term investments of $863.5 million (of which 67% was held in the U.S.), down from $866.6 million in the previous quarter. The company generated cash from operations of $112.2 million as compared with $125.9 million in the quarter.
Further, ANSYS repurchased 1 million shares in the reported quarter. As of Jun 30, 2017, the company had 3.5 million shares were remaining in the authorized share repurchase program.
For third-quarter 2017, ANSYS expects non-GAAP earnings in the range of $0.94–$0.98 per share. The company expects to incur additional charges of $2 million ($1.3 million, net of tax), primarily in the quarter, related to additional realignment charges.
Net revenue is anticipated in the range of $258–$267 million. The company expects gross margin of 90% and operating margin between 47% and 48% for the third quarter.
For 2017, ANSYS now anticipates revenues of $1.053–$1.073 billion (up from $1.030–$1.058 billion) and earnings in the range of $3.77–$3.89 (up from $3.68–$3.85) per share.
Gross margin is now anticipated 90% and operating margin between 46% and 47% for the full year.
ANSYS currently plans on total capital expenditure in the range of $15–$20 million for 2017.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the past month as none of them issued any earnings estimate revisions.
At this time, ANSYS' stock has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. Charting a somewhat similar path, 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.
The company's stock is suitable solely for growth based on our styles scores.
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.