ANSYS, Inc. (NASDAQ:ANSS) is a leading provider of engineering simulation software, empowering innovators across a wide range of industries to push the boundaries of product design and development. With a rich history spanning over 50 years, the company has established itself as a trusted partner for organizations seeking to harness the predictive power of simulation to drive their world-changing ideas.
Business Overview
ANSYS develops and globally markets engineering simulation software and services that are widely used by engineers, designers, researchers, and students across a diverse spectrum of industries, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare, and construction. The company's focus is on the development of open and flexible solutions that enable users to analyze designs on-premises and/or via the cloud, providing a common platform for fast, efficient, and cost-conscious product development, from design concept to final-stage testing, validation, and deployment.ANSYS distributes its suite of simulation technologies through direct sales offices in strategic, global locations and a global network of independent resellers and distributors. The company operates and reports as a single segment, reflecting its integrated approach to addressing the multi-discipline problem-solving needs of its customers.
Financials
ANSYS has demonstrated strong financial performance, with annual revenue reaching $2,269,949,000 and net income of $500,412,000 in the most recent fiscal year. The company's annual operating cash flow and free cash flow stood at $717,122,000 and $691,804,000, respectively, highlighting its ability to generate substantial cash flows to support its operations and strategic initiatives.In the latest reported quarter (Q1 2024), ANSYS generated revenue of $466,605,000, a decrease of 8.4% compared to the same period in the prior year. The company's net income for the quarter was $34,778,000, with diluted earnings per share of $0.40. ANSYS's operating cash flow and free cash flow for the quarter were $282,817,000 and $272,274,000, respectively.
Geographical Breakdown
ANSYS's revenue is diversified across various geographic regions. In the latest quarter, the company generated 42.9% of its revenue from the United States, 57.1% from international markets, with the largest international contributors being China and Hong Kong (9.6%), Japan (7.8%), Germany (7.8%), and South Korea (5.2%).Revenue Breakdown and Trends
ANSYS's revenue is primarily derived from two main sources: software licenses and maintenance and service. In the latest quarter, software license revenue accounted for 34.4% of total revenue, while maintenance and service revenue contributed 65.6%.The company's software license revenue declined by 26.8% year-over-year, primarily due to a 35.9% decrease in subscription lease license revenue, partially offset by a 8.0% decrease in perpetual license revenue. The decline in subscription lease license revenue was attributable to a structural timing dynamic, where fewer lease contracts were up for renewal in the quarter, resulting in comparatively lower up-front lease license revenue recognition.
In contrast, maintenance and service revenue increased by 5.5% year-over-year, driven by a 7.7% growth in maintenance revenue, which was partially offset by a 21.9% decrease in service revenue.
Guidance and Outlook
ANSYS has suspended providing financial guidance due to the pending acquisition by Synopsys, Inc., which was announced in January 2024. However, the company has indicated that it expects ACV and revenue growth rates to vary across the quarters in 2024, with the first quarter's results not being representative of the overall momentum in the business. For the remaining quarters of 2024, ANSYS expects ACV and revenues to grow in double digits.Liquidity
ANSYS maintains a strong liquidity position, with cash, cash equivalents, and short-term investments totaling $1,070,609,000 as of March 31, 2024. The company's working capital stood at $1,274,597,000, providing ample resources to fund its operations and strategic initiatives.ANSYS has a credit facility that includes a $755,000,000 unsecured term loan and a $500,000,000 unsecured revolving loan facility. As of March 31, 2024, the company had $755,000,000 in outstanding borrowings under the term loan, with a carrying value of $754,000,000, net of unamortized debt discounts and issuance costs.
Risks and Challenges
ANSYS faces several risks and challenges that could impact its future performance, including:1. Macroeconomic conditions: The company's business is susceptible to fluctuations in the global economy, which could affect customer demand and spending patterns.
2. Competitive landscape: ANSYS operates in a highly competitive market, with the need to continuously innovate and enhance its product offerings to maintain its competitive edge.
3. Reliance on key industries: A significant portion of ANSYS's revenue is derived from the aerospace and defense, automotive, and high-tech industries, making it vulnerable to changes in these sectors.
4. Acquisition integration: The successful integration of acquired companies and technologies is crucial for ANSYS to realize the expected benefits and synergies.
5. Regulatory and compliance risks: The company is subject to various laws and regulations in the jurisdictions in which it operates, and any non-compliance could result in legal and financial consequences.