Schnitger Corporation

ANSYS beats some expectations, lowers others

EarningsANSYS is in a no-win situation: reporting the best first-quarter revenue in its history, within its guidance for the first quarter but lower than some financial analysts had expected. Too, like many other tech companies, ANSYS lowered its revenue forecast for the rest of 2013 as customers slowdown spending in an uncertain end-buyer climate. Taken together, it’s not all that bad and certainly not a reason to overreact. Investors didn’t see it that way; ANSYS’s share got hammered on Wall Street last week, dropping 7% even as the Dow and NASDAQ hit record highs.

This quote, from CEO Jim Cashman, describes how he sees Q1:

“Our Q1 results reflect a resilient business in a less than robust and somewhat unpredictable global economy. Most major metrics of the business performed as anticipated, highlighted by solid margins and earnings, a record deferred revenue and backlog balance of $399 million, and all-time high first quarter cash flows from operations of $95 million… We entered the year with cautious optimism and throughout the quarter we focused on those aspects of the business that we could control. While we continued to deliver on a number of key financial metrics, we also see opportunities as 2013 continues to unfold.”

Focusing on what we can control, performing as anticipated, deliver on key metrics: To me, that sounds like a company that knows what it’s doing, but decide for yourself if ANSYS is in trouble. The full earnings release is here; I found the following to be the most interesting:

Given how Q1 ended more slowly than it began, ANSYS lowered its forecast for 2013 to GAAP revenue of $850 million to $870 million, from the $875 million and $900 million target set earlier this year. Roughly half of the decrease is due to the weakening Japanese Yen, the rest to the caution its customers exhibited at the end of Q1, which also led to a more cautious forecast for Q2, which is expected to see GAAP revenue in the range of $205 million to $211 million.

You may remember that ANSYS recently brought onboard a Chief Product Officer who comes from outside the world of CAE. Mr. Cashman said that the CPO will add a new perspective that is critical in the world ANSYS now finds itself in, with new delivery models; mobile, cloud and other devices; and installations that have grown, on average, from a couple of seats/customer to, in some cases, thousands/customer. He looks to the CPO to manage these new models of delivering enterprise computing but made clear that the product direction and vision are not changing though this new model may require strengthening of individual products and portfolio unification in a “rational manner”.

What does it all mean? ANSYS may be slowing down a bit, which usually means a major acquisition is coming to boost perceived growth to higher levels, though the company gave no hints about this at all. None. Pure speculation based on its history with Fluent, Ansoft, Apache … But even without acquiring growth, ANSYS is doing just fine, and with far better prospects than many investors seem to believe.

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