Schnitger Corporation

ANSYS channel worries, Russia drag down Q1

EarningsANSYS’s announcement that it was buying SpaceClaim took the spotlight off its Q1 earnings, but those deserve a look, too. The company reported Q1 revenue of $215 million, up 9% from a year ago, with software revenue up 6% to $126 million and maintenance and services revenues of $89 million, up 13%.

That’s pretty good and allows ANSYS to claim that it, once again, hit revenue targets. But it was short of expectations and not even the news of the SpaceClaim acquisition could keep the share from diving 5% on the results release.

The details (using GAAP data from the 10-Q SEC filing, rather than the mix of GAAP and non-GAAP found in ANSYS’ earnings release-day materials):

ANSYS also adjusted its guidance for 2014 to include SpaceClaim and to take into account the slowdown of sales in Russia and Ukraine. To see the pattern, the company started its 2014 GAAP revenue guidance at $934 million to $964 million in November, adjusted this a scosche to $935 million to $966 million at the end of February and, most recently, Mr. Cashman announced a range of $933 million to $959 million.

If SpaceClaim is to have total non-GAAP revenue in 2014 of about $14 million, then from May to December it should add about $10 million to ANSYS’ revenue. If that’s +10, and the situation in Russia is “a couple of million” a quarter, that’s -10 or so for the year (assuming it continues for the rest of 2014). Why then, is ANSYS lowering the top end of guidance? It should be a wash, right? Apparently, ANSYS is being conservative on channel weakness outside Russia.

The company now forecasts Q2 revenue in the range of $224 million to $233 million.

So, what does it all mean? I’ve been saying for a while that ANSYS tends to acquire growth when its organic growth slows. SpaceClaim is an interesting choice that can take the company in many possible directions — but the $10 million it will add to 2014 revenue won’t give Wall Street the numbers it seeks. SpaceClaim shakes things up, but I still think ANSYS will spend some of its $850 million in cash on something bigger.

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