Ansys (ANSS) Up 1.7% Since Last Earnings Report: Can It Continue?

It’s been about a month since Ansys (ANSS) last reported earnings. Shares rose about 1.7% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ansys headed for a recession? 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 better understand the important catalysts.

Ansys does not provide earnings estimates for the first quarter

Ansys reported first-quarter 2024 earnings of $1.39 per share, missing the Zacks Consensus Estimate by 28%. The financial result decreased by 24.9% year on year.

Revenues of $466.6 million missed the Zacks Consensus Estimate by 15.9%. Year over year, the top line is down 8% (down 8% at constant currency or cc).

In January 2024, Ansys and Synopsys officially announced a definitive agreement, opening the way for the latter to acquire ANSS. Terms of the deal state that ANSS shareholders will receive $197 in cash along with 0.3450 shares of Synopsys common stock for each Ansys share.

Valued at approximately $35 billion, this transaction includes an implied price per share of $390.19 and represents a premium of approximately 29% to the closing share price of ANSS on December 21, 2023. ANSS shareholders will likely own approximately 16, 5% of the shares of the merged company (on a pro-forma basis). The transaction is expected to close in the first half of 2025, subject to ANSS shareholder approval, regulatory approvals and customary closing conditions.

Due to the upcoming acquisition, the company no longer provides financial prospects. However, management expects ACV and revenue growth rates to vary across quarters in 2024, impacted by performance comparisons to 2023.

ANSS expects double-digit ACV and revenue growth for the remaining quarters of 2024. It anticipates double-digit ACV growth for the full year.

First quarter ACV and revenue growth were expected to be the lowest among the four quarters of 2024.

Quarter in detail

Subscription rental revenues (20.3% of total revenues) decreased by 35.5% year over year and amounted to USD 94.8 million. Revenues from perpetual licenses (14%) decreased by 7.7% year over year and amounted to USD 65.5 million.

Maintenance revenues (62%) increased 8.8% year over year to cc to $289.3 million. Services revenue (3.6%) decreased by 21.3% year over year and amounted to USD 16.9 million.

Direct and indirect channels accounted for 66.5% and 33.5% of total revenues, respectively.

ACV increased 2% year-over-year (up 3% cc) to $407.4 million.

Geographically, the Americas, EMEA (including Germany, the UK and other EMEA regions) and Asia-Pacific (Japan and other Asia-Pacific regions) contributed 44.7%, 25.4% and 29.9%, respectively. revenues.

Revenue in the Americas declined 18.8% year-over-year to $208.7 million. EMEA revenues decreased 3.4% (cc) to $118.6 million. Asia-Pacific revenues increased 10.2% on a cc basis to USD 139.3 million.

Total deferred revenues and backlogs were $1,369.5 million, up 0.9% year-over-year.

Operational details

Non-GAAP gross margin decreased 30 basis points (bps) year-over-year to 90.9%.

Total operating expenses increased 12.9% year-over-year to $354.6 million due to higher research and development and sales, general and administrative costs.

Non-GAAP operating margin declined 760 basis points year-over-year to 32.2%.

Balance sheet and cash flow

As of March 31, 2024, cash and short-term investments were $1,070.6 million compared to $860.4 million as of December 31, 2023.

As of March 31, 2024, the company’s long-term debt was $754 million, compared to $753.9 million as of December 31, 2023.

Cash provided by operating activities was $282.8 million in the quarter, compared to $260.8 million in the prior-year quarter.

How have estimates changed since then?

Over the last month, investors have seen a downward trend in estimate revisions.

VGM results

Currently, Ansys has a solid Growth Score of B, although it lags slightly behind its Momentum Score of C. However, the stock is rated F on the value side, putting it in the bottom 20% of the quintile for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. No wonder Ansys has a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

Industry player performance

Ansys is part of the Zacks Computer – Software industry. Shares of Microsoft (MSFT) in the same industry have gained 4.2% over the past month. More than a month ago, the company published its results for the quarter ended March 2024.

Microsoft reported revenue of $61.86 billion in the most recent quarter, representing a +17% year-over-year change. EPS of $2.94 in the same period compared to $2.45 a year ago.

Microsoft is expected to report earnings per share of $2.90 for the current quarter, representing a year-over-year change of +7.8%. Over the past 30 days, the Zacks Consensus Estimate has moved +0.2%.

The overall direction and magnitude of estimate revisions translates into a Zacks Rank #3 (Hold) for Microsoft. The stock also has a VGM Rating of C.

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