ANSYS’ Q2 hit the usual superlatives: record revenue, forecasts and consensus beaten — but, even so, it felt as though the company and CEO Jim Cashman were largely treading water, in a “same old same old” pattern of previous quarters. It’s hard to argue with even moderate success, though, and investors sent the share price up almost 2% on a day the Nasdaq fell about 0.5% — clearly, they were OK with what they heard.
More commentary after the details:
The details (using GAAP data from the 10-Q SEC filing as much as possible, though all cc data is non-GAAP):
- Total revenue for Q2 was $232 million, up 8% as reported and up 7% in constant currencies (cc). Spaceclaim contributed $2 million while Reaction Design contributed $1 million or so to the quarter, which means that ANSYS’ organic growth was around 7%.
- Revenue from software licenses was $141 million, up 5% as reported.
- Revenue from the lease business was up 7% to $79 million, primarily due to sales of electronics simulation products.
- Revenue from the perpetual business was up 3% to $62 million.
- Maintenance revenue was up 13% to $86 million.
- Services revenue was $6 million,essentially flat as reported and down 2% in cc.
- By region, revenue from North America was $82 million, up 4% even though one large deal from 2013 skewed the comparison a bit. ANSYS said it again experienced cautious customer sentiment and deals being pushed to the end of the quarter (perhaps in expectation of a good deal? — Ed.) The company says it saw relative strength in aerospace and defense and in automotive.
- Revenue from Europe was up 10% as reported (up 8% in cc) to $79 million. Revenue from Germany was revenue up 9% as reported to $24 million. During the call with investors, Mr. Cashman reiterated what he said during the Q1 call: ANSYS expects the annual impact of the Russia/Ukraine conflict to be about $10 million in lost revenue. If anything, he said, the situation in Russia is “even more strident” than it was in Q1 and again affected channel performance, though clearly not as much as in Q1. The company reports growth in industrial equipment, automotive, and the process industries.
- ANSYS’ “General International Area” reported revenue of $72 million, up 11% as reported and up 12% in cc. GAAP Revenue from Japan was $28 million, up 3% as reported (up 11% in cc). Japan, Korea and Taiwan continued to be relatively strong, while China “recovered in Q2, despite a continuation of lower spending from state-owned enterprises”. India and Brazil showed relative weakness in Q2.
- ANSYS reported 20 big deals (orders over $1 million) in the quarter, down sharply from 32 orders last quarter. Those 20 orders, though, were equal in number to Q2 2013 but had a 27% greater total revenue — in other words, big is getting bigger.
- The company no longer really gives color on specific brands or even the low and high-end commentary that it used to give. Mr. Cashman did say that all major brands grew y/y in Q2.
- Q2 saw the direct/indirect mix return to the normal 75%25%, reversing the slight deviation in Q1 (77%/23%).
Mr. Cashman gave a tiny bit more information about the company’s plans for Spaceclaim. No, ANSYS capabilities won’t be added to Spaceclaim; rather, its user interaction styles, ease of learning and ease of use will start to appear in ANSYS products, beginning with ANSYS 16 later this year.
ANSYS also adjusted its guidance for 2014. The company now forecasts Q3 revenue in the range of $231 million to $239 million and F2014 revenue of $937 million to $954 million.
So, what does it all mean? Mr. Cashman tried to pump up the investors by talking about how important systems engineering is to the automotive industry and the impact of a Spaceclaim-like user experience in bringing new types of users to simulation — all true, but all workmanlike attributes that will keep ANSYS growing nicely but not spectacularly. He spoke about the potential for cloud-enabling technology acquisitions (by definition, small). ANSYS doesn’t disclose it, but it would appear that its mechanical and CFD products are growing only in the single digits. Right now, all of the sizzle in CAE is coming from SIMULIA (although MSC, the current dark horse, is rumored to be announcing something this Fall and the integration of LMS into the Siemens PLM family could also lead to interesting cross-offerings). ANSYS is by far the biggie, and its crown isn’t in jeopardy, but it is in danger of losing that cool kid momentum it held for so long.