ANSYS (ANSS) Q3 Earnings Outshine on Solid Revenues & Orders

ANSYS Inc.ANSS reported third-quarter 2017 non-GAAP earnings of $1.05 per share, which beat the Zacks Consensus Estimate by 8 cents. The figure increased 10.5% year over year and was better than management's guidance of 94-98 cents.

Revenues increased 12.6% (12% in constant currency) from the year-ago quarter to $276.8 million, surpassing the Zacks Consensus Estimate of $264 million and management's guidance of $258-$267 million.

The year-over-year growth was driven by 12.2% increase in software license revenues and 11.9% growth in maintenance and service revenues.

As of Sep 30, deferred revenues and backlog increased 38% year over year to $669.3 million.

ANSYS's shares have returned 46.6% year to date, substantially outperforming the 35.8% rally of the industry .

Segment Revenue Details

At constant currency, lease license revenues grew 10.3% to $94.7 million, while maintenance revenues increased 11.7% to $112.7 million in the reported quarter. Perpetual license revenues increased 15.8% to $62.6 million. Service revenues increased 10.5% to $6.7 million.

Direct and indirect businesses contributed 76% and 24%, respectively, to quarterly revenues. During the quarter, the company had 25 customers with orders in excess of $1 million, including three customers with orders in excess of $5 million and two customers with orders of more than $10 million.

ANSYS closed a three-year contract worth more than $45 million, which was the largest deal in the company's history.

Recurring revenues base was 75%. Bookings jumped 38.2% from the year-ago quarter to $285.2 million.

Region wise, North America, Europe and Asia-Pacific revenues increased 18%, 5.2% and 11.2%, respectively, at constant currency.

North America had 14 customers with orders above $1 million, including three customers with orders in excess of $5 million and two with orders of more than $10 million. The strength in North America reflected strong demand for ANSYS's solutions in the aerospace & defense, electronics/semiconductors, automotive and energy industries.

Europe, France and the United Kingdom, each delivered double-digit constant currency revenues growth. This strength was partially offset by weak performance in Germany. Europe had 7 customers with orders above $1 million.

ANSYS remains focused on rebuilding sales organization in the region, which management believes will help growth to rebound in 2018.

Asia-Pacific revenues benefited from strong performance in China and Taiwan.

ANSYS, Inc. Price, Consensus and EPS Surprise

ANSYS, Inc. Price, Consensus and EPS Surprise | ANSYS, Inc. Quote

Operating Details

Non-GAAP gross margin expanded 50 basis points (bps) from the year-ago quarter to 90.7%.

Operating expenses (excluding amortization), as a percentage of revenues, increased 370 bps from the year-ago quarter. The increase was driven by higher selling, general & administrative (up 400 bps) expenses and was partially offset by lower research & development expenses (down 30 bps).

Consequently, non-GAAP operating margin expanded 90 bps on a year-over-year basis to 48.7% in the reported quarter.

Balance Sheet & Cash Flow

ANSYS exited the quarter with cash and short-term investments of $926.6 million (of which 66% was held in the United States), up from $863.5 million in the previous quarter. The company generated cash from operations of $88.9 million compared with $112.2 million in the quarter.

Further, ANSYS repurchased 2 million shares in the reported quarter. As of Sep 30, 2017, the company had 3.5 million shares remaining in the authorized share repurchase program.


For fourth-quarter 2017, ANSYS expects non-GAAP earnings in the range of 99 cents to $1.05 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 revenues are anticipated in the range of $284-$293 million.

Management expects gross margin of 90% and operating margin between 44% and 45% for the fourth quarter.

For 2017, ANSYS now anticipates revenues of $1.079-$1.088 billion (up from $1.053-$1.073 billion) and earnings in the range of $3.93-$3.99 (up from $3.77-$3.89) per share.

Gross margin is now anticipated at 90% and operating margin between 46.5% and 47% for the full year.

ANSYS currently plans on total capital expenditure in the range of $17-22 million (up from previous guidance of $15-20 million) for 2017.

Zacks Rank & Key Picks

ANSYS carries a Zacks Rank #3 (Hold).

Adobe Systems Inc. ADBE , Microsoft Corporation MSFT and Cadence Design Systems Inc. CDNS are better-ranked stocks worth considering in the sector. While Adobe sports a Zacks Rank #1 (Strong Buy), Microsoft and Cadence carry a Zacks Rank #2 (Buy).You can see the complete list of today's Zacks #1 Rank stocks here.

Long-term earnings growth rate for Adobe, Microsoft and Cadence are pegged at 17.00%, 12.20% and 12.00%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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