It has been about a month since the last earnings report for Ansys (ANSS Quick QuoteANSS - Free Report) . Shares have added about 7.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ansys 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 drivers.

Ansys Q3 Earnings Beat Estimates

Ansys reported third-quarter 2023 earnings of $1.41 per share, beating the Zacks Consensus Estimate by 11.9%. The bottom line declined 20.3% year over year.

Non-GAAP revenues of $458.8 million missed the Zacks Consensus Estimate by 1.7%. The top line decreased 3% (up 4% at constant currency or cc) from a year ago.

Ansys stated that it was notified by the U.S. Department of Commerce of incremental approval processes and export restrictions including sales to some Chinese entities. This resulted in a $20 million headwind to both ACV and revenues for the third quarter.

Further, management highlighted that these new restrictions and processes are likely to elongate transaction cycles, causing delays in closing of certain deals in the fourth quarter. Therefore, it tempered its outlook for 2023. It expects these additional restrictions and processes to be a $25 million headwind to 2023 ACV and revenues compared with the previous forecast.

The company now projects non-GAAP revenues in the range of $2,234-$2,284 million compared with the earlier prediction of $2,257-$2,327 million. Management suggests non-GAAP operating margin to be between 41% and 42%.

Non-GAAP earnings are anticipated in the range of $8.34-$8.75 per share compared with the previous guidance of $8.39-$8.88.

ACV is estimated to be between $2,243 million and $2,288 million. Operating cash flow is expected in the $705-$735 million band. Earlier, the company had envisioned ACV to be between $2,275 million and $2,340 million. Operating cash flow is forecast in the $699-$749 million range.

Quarter in Detail

Subscription lease revenues (22.6% of non-GAAP revenues) were down 25.1% at cc to $103.6 million. Perpetual licenses revenues (12.8%) fell 19.8% year over year at cc to $58.9 million.

Maintenance revenues (60.6%) climbed 10.2% at cc to $278.1 million. Service revenues (4%) were up 12.8% year over year to $18.3 million.

Direct and indirect channels contributed 73.5% and 26.5%, respectively, to non-GAAP revenues.

ACV grew 11.8% year over year (up 10.4% at cc) to $457.5 million.  Our estimate was $466.3 million.

On a geographic basis, the Americas, EMEA (comprising Germany, the U.K. and other EMEA) and the Asia-Pacific (Japan and Other Asia-Pacific) contributed 47.6%, 26.5% and 25.9% to non-GAAP revenues, respectively.

Non-GAAP revenues from the Americas were up 3.9% at cc to $218.3 million. EMEA revenues dipped 5.4% at cc to $121.6 million. Revenues from the Asia-Pacific plunged 15.9% at cc to $118.9 million.

Deferred revenues and backlogs were $1.206 billion, up 8.7% year over year.

Operating Details

Non-GAAP gross margin was unchanged on a year-over-year basis at 91.1%.
Total operating expenses rose 12.7% year over year to $323.7 million due to higher research and development, and selling, general and administrative expenses.

Non-GAAP operating margin contracted 690 bps on a year-over-year basis to 34.1%.

Balance Sheet & Cash Flow

As of Sep 30, 2023, cash and short-term investments amounted to $639.5 million compared with $478 million as of Jun 30, 2023.

As of Sep 30, 2023, the company’s long-term debt was $753.8 million compared with $753.7 million as of Jun 30, 2023.

In the quarter under review, cash from operations came in at $160.8 million compared with $127.2 million in the prior-year quarter. In the quarter under discussion, the company did not repurchase shares. As of Sep 30, 2023, it had 1.1 million shares remaining under its share buyback program.

Guidance

For fourth-quarter 2023, Ansys expects non-GAAP earnings in the range of $3.48-$3.89 per share. Non-GAAP revenues are anticipated to be between $769.2 million and $819.2 million. Management projects non-GAAP operating margin in the 48.9-51.2% band.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -6.05% due to these changes.

VGM Scores

At this time, Ansys has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ansys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Ansys belongs to the Zacks Computer - Software industry. Another stock from the same industry, SAP (SAP Quick QuoteSAP - Free Report) , has gained 14.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

SAP reported revenues of $8.43 billion in the last reported quarter, representing a year-over-year change of +6.7%. EPS of $1.58 for the same period compares with $1.13 a year ago.

For the current quarter, SAP is expected to post earnings of $1.67 per share, indicating a change of +63.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -4.2% over the last 30 days.

SAP has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.