ANSYS (ANSS) Q4 Earnings & Revenues Top Estimates, Up Y/Y

ANSYS Inc. ANSS delivered fourth-quarter 2017 non-GAAP earnings of $1.07 per share, which beat the Zacks Consensus Estimate by 3 cents. The figure increased 9.2% year over year and was better than management’s guidance of 99 cents to $1.05 per share.

Revenues increased 12.1% (9.1% in constant currency) from the year-ago quarter to $303.4 million, surpassing the Zacks Consensus Estimate of $291 million and management’s guidance of $284-$293 million.

Year-over-year growth was driven by 9.3% increase in software license revenues and 15.2% growth in maintenance and service revenues.

As of Dec 31, 2017, deferred revenues and backlog increased 20.7% year over year to $769.7 million.

ANSYS’s shares have returned 57% year over year, substantially outperforming the 33.8% rally of the industry.

Segment Revenue Details

At constant currency, lease license revenues grew 7.4% to $97.7 million, while maintenance revenues increased 10.9% to $116.5 million in the reported quarter. Perpetual license revenues increased 6.7% to $79.6 million. Service revenues surged 30% to $9.7 million.

Direct and indirect businesses contributed 74% and 26%, respectively, to quarterly revenues. During the quarter, the company had 49 customers with orders in excess of $1 million, including six customers with orders in excess of $5 million and three customers with orders of more than $10 million.

Recurring revenues base was 71%. Bookings declined 10.8% from the year-ago quarter to $400.2 million.

Region wise, North America, Europe and Asia-Pacific revenues increased 10%, 10.5% and 7%, respectively, at constant currency.

North America had 24 customers with orders above $1 million, including three customers with orders in excess of $5 million and seven 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, Italy and the UK, each delivered double-digit constant currency revenues growth. This strength was partially offset by weak performance in Germany. Europe had 16 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.

Operating Details

Non-GAAP gross margin came in at 90.1% during the quarter.

Operating expenses (excluding amortization), as a percentage of revenues, increased 340 basis points (bps) from the year-ago quarter and came 52%. The increase was driven by higher selling, general & administrative expenses and research & development expenses.

Consequently, non-GAAP operating margin contracted 250 bps on a year-over-year basis to 42.6% in the reported quarter.

Balance Sheet & Cash Flow

ANSYS exited the quarter with cash and short-term investments of $881.8 million (of which 64% was held in the United States), down from $926.6 million in the previous quarter. The company generated cash from operations of $103.5 million compared with $88.9 million in the quarter.

Further, the company repurchased 0.8 million shares in the reported quarter. As of Dec 31, 2017, the company had 2.8 million shares remaining in the authorized share repurchase program.

Guidance

For first-quarter 2018, ANSYS expects non-GAAP earnings in the range of 90 cents to $1.05 per share. The Zacks Consensus Estimate is pegged at 97 cents.

Net revenues are anticipated in the range of $261-$281 million. The Zacks Consensus Estimate is pegged at $273.9 million

Management projects non-GAAP operating margin to be in the range of 39-42% for the first quarter.

For 2018, ANSYS now anticipates revenues of $1.152-$1.232 billion and earnings in the range of $4.41-$5.04 per share. The Zacks Consensus Estimate for revenues and earnings are pegged at $1.17 billion and $4.25 per share, respectively.

Non-GAAP operating margin is expected to be in the range of 42% and 45% for the full year.

ANSYS expects operating cash flow for fiscal 2018 to be in the range of $430-$470 million.

Zacks Rank & Key Picks

ANSYS carries a Zacks Rank #3 (Hold).

Intel Corporation INTC, Adobe Systems Inc. ADBE and Microsoft Corporation MSFT are better-ranked stocks worth considering in the sector. While Intel sports a Zacks Rank #1 (Strong Buy), Adobe and Microsoft 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 Intel, Adobe and Microsoft and Cadence are pegged at 8.4%, 16% and 11.9%, respectively.

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