It has been about a month since the last earnings report for ANSYS, Inc. (ANSS - Free Report) . Shares have added about 1.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is ANSS due for a pullback? 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 delivered strong results for first-quarter 2018, wherein both the top and bottom lines fared better than the respective Zacks Consensus Estimates and came ahead of management’s guided range.
Notably, the company has adopted the new revenue rules of ASC 606. The company has incorporated both ASC 605 and ASC 606 calculations while reporting the first-quarter results.
First-quarter 2018 non-GAAP earnings came in at $1.20 per share (per ASC 606), better than management’s guidance of 90 cents to $1.05 per share. The Zacks Consensus Estimate was pegged at $1.06.
Earnings surged 37.1% on a year-over-year basis to $1.22 per share, according to ASC 605 standard.
Non-GAAP revenues increased 11.7% (7% in constant currency) from the year-ago quarter to $283.3 million. The top line also crossed thehigh end of management’s guided range of $261-$281 million. The Zacks Consensus Estimate was pegged at $276.5 million.
The 12.5% year-over-year revenue growth (per ASC 605) was driven by 9.3% increase in software license revenues and 15.2% growth in maintenance and service revenues.
As of Mar 31, 2018, deferred revenues and backlog came in at $595 million per ASC 606. The figure increased 29% on a year over year basis, per ASC 605.
Segment Revenue Details
At constant currency, Lease and Perpetual license revenues were $48.8 million and $61.3 million, respectively, per ASC 606. The figures grew 5% and 3.2% on a year-over year basis, respectively, per ASC 605.
Maintenanceand Service revenues (at constant currency) were $164.3 million and $8.9 million, respectively. The figures increased 9.2% and 21.1% year over year, respectively on ASC 605 basis.
Geographic Revenue Details
Region wise, Americas, EMEA and Asia-Pacific revenues increased 7.1%, 9.1% and 4.1%, respectively, at constant currency.
The strength in Americas reflected strong demand for ANSYS’s solutions in the aerospace & defense, electronics/semiconductors, automotive and energy industries. Notably, the company signed the biggest deal in its history, a three-year contract worth $50 million.
EMEA had 11 customers with orders above $1 million up from seven in the year-ago quarter. France, Germany and the U.K., each delivered double-digit cc revenues growth. Recovery in the automotive industry aided the region’s performance.
ANSYS is rebuilding sales organization and improving operational execution to enhance go-to-market strategy in the EMEA region which will aid growth to rebound in 2018.
Asia-Pacific revenues benefited from strong performance in China and South Korea. China's investment in infrastructure programs and domestic energy generation benefited the energy industry.
Further, the industrial equipment industry gained on the back of strength in India and South Korea, but was marginally hurt by weakness in Japan and China.
Direct and indirect businesses contributed 77% and 23%, respectively, to quarterly revenues. During the quarter, the company had 30 customers with orders in excess of $1 million, including one customer with orders in excess of $5 million and two customers with orders of more than $10 million.
Recurring revenues base was 78%. ACV increased 9.9% on a year-over-year basis to $293.9 million.
Non-GAAP gross margin came in at 89.9% per ASC 605 and 89.8% per ASC 606 during the quarter.
Non-GAAP operating margin contracted 100 bps on a year-over-year basis to 45.3%, per ASC 605 and 45.0% per ASC 606, in the reported quarter.
Balance Sheet & Cash Flow
ANSYS exited the quarter with cash and short-term investments of $889.8 million (of which 62% was held in the United States) compared with $881.8 million (64% held in the United States), down from $926.6 million in the previous quarter. The company generated cash from operations of $132.4 million compared with $103.5 million in the previous quarter.
Further, the company repurchased 0.8 million shares in the reported quarter. ANSYS' Board of Directors increased authorized share repurchase program in February 2018, to a total of 5 million shares. As of Mar 31, 2018, the company had 4.8 million shares remaining in the authorized share repurchase program.
Per ASC 606, for second-quarter 2018, ANSYS expects non-GAAP earnings in the range of 94 cents to $1.09 per share.
Non-GAAP revenues are anticipated in the range of $272-$292 million.
Management projects non-GAAP operating margin to be in the range of 39-41% for the second quarter.
For 2018, ANSYS raised its outlook. The company now anticipates non-GAAP revenues of $1.197-$1.262 better than the earlier band of $1.152-$1.232 billion. Non-GAAP earnings are now envisioned in the range of $4.60-$5.08 per share better than the previously guided range of $4.41-$5.04.
ANSYS now anticipates operating cash flow for fiscal 2018 to be in the range of $435-$475 million above the previously guided range of $430-$470 million.
However, non-GAAP operating margin is expected to be in the range of 42-44%, compared with the earlier range of 42-45% for the full year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter.
At this time, ANSS has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. The stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, ANSS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.