ANSYS Q2 beats expectations, raises annual guidance

Ansys last night reported Q2 GAAP revenue of $474 million, up 6% as reported and up 12% in constant currencies (cc) — and handily ahead of expectations.

The details:

• Within total revenue, Subscription and lease revenue was $135 million, up 4% (up 12% cc)
• Perpetual license revenue was $74 million, down 13% (down 9% cc)
• Maintenance revenue was $248 million, up 13% (up nearly 20% cc)
• Services revenue was $17 million, up 27% (up 33% cc)
• By geo, revenue from the Americas was $196 million, down 9% (down 9% cc); from EMEA, $123 million, up 17% (up 29% cc); and from Asia-Pacific, $155 million, up 24% (up 36% cc). The company said that revenue from the Americans was down mathematically because of the way the company has to account for software revenue and the strong performance a year ago — so nothing unexpected happened
• By channel, revenue from resellers was 26% of total — pretty much the same proportion as a year ago
• Ansys also uses ACV (Annual Contract Value) to gauge its progress. At the end of Q2, ACV was $460 million, up 7% (up 13% cc)
• Using ACV (not revenue), Ansys also releases data on end-industry adoption. Not surprisingly, it hasn’t changed much — for the trailing 12 months, high tech accounted for 31% of ACV (versus 32% a year ago), with aero (21% vs. 19%), auto (17% vs. 18%), and industrial equipment (9% vs. 9%) making up the top four verticals. The biggest gainer? Consumer products doubled from 1% to 2%, though that could simply be one large deal or two rather than a seismic shift in use cases

In its prepared remarks, the company said that more customers are thinking long-term about their simulation needs, demanding “contracts that often include longer-term, subscription lease licenses involving a larger number of our software products.” IT cautioned that these larger deals often have to be accounted for with an “upfront recognition of license revenue [that] can result in significant subscription lease license revenue volatility.”

Ansys also cited 5G as continuing to play a leading role in high tech revenue (and ACV) growth. The company reports signing a “multi-year, eight-figure sale [possibly the $25 million deal described by CEO Ajai Gopal] to a European telecommunications company … to support its shift to in-house chip design and meet the demands of high-performance networks and 5G wireless systems” and another with a customer in Japan, “an eight-figure sale to [an] electronics manufacturer,” as well as “several multimillion-dollar sales to technology companies” in greater Asia. These likely account for the somewhat unusual weighting of geos, with Asia and Europe outperforming the Americas. Mr. Gopal said that the Americas performance was as expected, and that the company closed numerous large-ish deals there.

The success of Q2 and a strong pipeline leads Ansys to increase its guidance for the rest of the year. For Q3 Ansys expects revenue in the range of $454 million to $474 million (up 3% to 7%) and, for all of 2022, revenue between $2.0 billion and $2.05 billion (up 5% to 7%). The growth is more apparent in constant currencies: Q3 is expected to be up 9% to 14%; FY 2022, up 10% to 13% because of the strengthening of the US Dollar against other currencies. FY 2202 revenue is up roughly 1% from prior guidance. More details to come at next week’s investor day — I’ll update if there’s anything new.

Mr.Gopal also talked about NASA’s use of Ansys technology in designing and deploying the new Webb telescope. He’s justifiably proud of that project since Webb enables NASA scientists to create the most amazing images from space. If you haven’t seen them, look here. Webb exemplifies the use of simulation: one chance to get it right. Impossible to test phyiscally because of the loads at launch and use in zero gravity, magnetic and other effects in space – and stuff I don’t understand. When people ask me, “why simulation,” — THIS is why. And it’s not just valuable for space exemplars; the same principles apply in all industries and across application areas.