ANSYS(ANSS) - 2024 Q2 - Quarterly Results

Q2 2024 Financial Results Overview This section covers the highlights of Q2 2024 performance, including key financial metrics and the status of the Synopsys acquisition Q2 2024 Performance Highlights Ansys reported strong financial results for the second quarter of 2024, with significant year-over-year growth in revenue and earnings per share, alongside progress on the Synopsys acquisition Q2 2024 Performance Metrics | Metric | Q2 2024 Value (in millions) | | :--- | :--- | | Revenue | $594.1 | | GAAP Diluted EPS | $1.48 | | Non-GAAP Diluted EPS | $2.50 | | GAAP Operating Margin | 26.5% | | Non-GAAP Operating Margin | 44.9% | | Annual Contract Value (ACV) | $520.5 | | Deferred Revenue and Backlog | $1,394.0 | - Revenue increased by 20% in reported currency and 22% in constant currency compared to Q2 2023[2] - The pending acquisition by Synopsys is anticipated to close in the first half of 2025, subject to regulatory approvals, leading Ansys to suspend quarterly earnings calls and financial guidance[3] Financial Performance This section details Ansys' financial results, including comparative GAAP and non-GAAP figures, revenue analysis, and currency impacts Summary of Financial Results This section provides a comparative overview of Ansys' financial results for the second quarter and year-to-date periods of 2024 and 2023, presented on both a GAAP and non-GAAP basis GAAP Financial Results Summary (Q2 QTD, in millions) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $594.1 | $496.6 | 19.6% | | Net Income | $130.0 | $69.5 | 87.0% | | Diluted EPS | $1.48 | $0.80 | 85.0% | | Operating Margin | 26.5% | 19.3% | N/A | Non-GAAP Financial Results Summary (Q2 QTD, in millions) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Income | $219.2 | $139.3 | 57.3% | | Diluted EPS | $2.50 | $1.60 | 56.3% | | Operating Margin | 44.9% | 36.4% | N/A | Key Performance Metrics (Q2 QTD, in millions) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | ACV | $520.5 | $488.3 | 6.6% | | Operating Cash Flows | $80.7 | $62.9 | 28.4% | Supplemental Financial Information This section provides a deeper analysis of key business metrics, including Annual Contract Value (ACV), a detailed breakdown of revenue by type and geography, the status of deferred revenue and backlog, and the impact of currency fluctuations on financial results Annual Contract Value (ACV) Annual Contract Value (ACV) for Q2 2024 was $520.5 million, representing a growth of 6.6% as reported and 9.3% in constant currency compared to Q2 2023 ACV Performance (in millions) | Period | ACV (Reported, in millions) | % Change (Reported) | ACV (Constant Currency, in millions) | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Q2 2024 | $520.5 | 6.6% | $533.7 | 9.3% | | YTD 2024 | $928.0 | 4.5% | $944.1 | 6.4% | Revenue Analysis Q2 2024 revenue increased 19.6% to $594.1 million, primarily driven by two large multi-year contracts in the Americas totaling $210 million, with subscription lease revenue seeing substantial growth - Revenue growth was significantly impacted by two multi-year contracts with a combined value of $210 million, one in the automotive industry and one in high-tech, both in the Americas region[14] Q2 2024 Revenue by License Type (vs. Q2 2023, in millions) | Type | Revenue | % of Total | % Change | | :--- | :--- | :--- | :--- | | Subscription Lease | $218.6 | 36.8% | 61.9% | | Perpetual | $64.6 | 10.9% | (7.5)% | | Maintenance | $293.8 | 49.5% | 7.4% | | Service | $17.1 | 2.9% | (5.2)% | Q2 2024 Revenue by Geography (vs. Q2 2023, in millions) | Region | Revenue | % of Total | % Change | | :--- | :--- | :--- | :--- | | Americas | $324.4 | 54.6% | 47.2% | | EMEA | $130.8 | 22.0% | 3.6% | | Asia-Pacific | $138.9 | 23.4% | (7.4)% | Deferred Revenue and Backlog As of June 30, 2024, the company's total deferred revenue and backlog stood at $1.394 billion, indicating a strong pipeline of future revenue Deferred Revenue and Backlog (in millions) | Metric | June 30, 2024 (in millions) | June 30, 2023 (in millions) | | :--- | :--- | :--- | | Total Current Deferred Revenue and Backlog | $862.0 | $810.2 | | Total Long-Term Deferred Revenue and Backlog | $532.0 | $485.6 | | Total Deferred Revenue and Backlog | $1,394.0 | $1,295.8 | Currency Impact Foreign currency fluctuations, primarily from the Euro and Japanese Yen against the U.S. Dollar, had an adverse impact on reported results for the second quarter and year-to-date 2024 Adverse Currency Fluctuation Impact (in thousands) | Metric | Q2 QTD 2024 | Q2 YTD 2024 | | :--- | :--- | :--- | | Revenue | $(9,806) | $(13,709) | | GAAP operating income | $(6,715) | $(10,113) | | Non-GAAP operating income | $(6,761) | $(9,939) | | ACV | $(13,167) | $(16,195) | GAAP Financial Statements This section presents the company's condensed consolidated balance sheets and statements of income in accordance with GAAP Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2024, shows total assets of $7.32 billion, relatively stable compared to year-end 2023, with increases in cash and stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | (in thousands) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $7,319,615 | $7,322,875 | | Cash & short-term investments | $1,119,272 | $860,390 | | Goodwill | $3,793,510 | $3,805,874 | | Total Liabilities & Equity | $7,319,615 | $7,322,875 | | Long-term debt | $754,049 | $753,891 | | Stockholders' equity | $5,586,503 | $5,390,364 | Condensed Consolidated Statements of Income For the three months ended June 30, 2024, Ansys reported total revenue of $594.1 million and a net income of $130.0 million, a significant increase from the prior year Income Statement Summary (Three Months Ended June 30, in thousands) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total revenue | $594,138 | $496,599 | | Gross profit | $524,783 | $428,259 | | Operating income | $157,416 | $95,624 | | Net income | $130,034 | $69,526 | | Diluted EPS | $1.48 | $0.80 | Non-GAAP Measures & Reconciliations This section provides reconciliations from GAAP to non-GAAP measures and explains the rationale for using non-GAAP metrics Reconciliation of GAAP to Non-GAAP Measures This section provides detailed tables reconciling GAAP results to non-GAAP results for key metrics, illustrating adjustments for items like stock-based compensation and amortization of intangibles Q2 2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $524,783 | $26,115 | $550,898 | | Operating Income | $157,416 | $109,167 | $266,583 | | Net Income | $130,034 | $89,168 | $219,202 | | Diluted EPS | $1.48 | $1.02 | $2.50 | YTD 2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $922,721 | $52,320 | $975,041 | | Operating Income | $200,755 | $216,083 | $416,838 | | Net Income | $164,812 | $176,386 | $341,198 | | Diluted EPS | $1.88 | $2.01 | $3.89 | Use and Explanation of Non-GAAP Measures Ansys explains its use of non-GAAP financial measures to evaluate performance, set budgets, and allocate resources, believing they provide useful supplemental information to investors - Non-GAAP measures are used internally to evaluate financial performance, set sales targets, allocate resources, and determine variable compensation[38] - Key adjustments to GAAP results include: * Amortization of intangible assets from acquisitions: Excluded because these costs are fixed at the time of acquisition and not influenced by ongoing operations[39] * Stock-based compensation expense: Excluded to assess financial discipline over operational expenditures without its effect[41] * Expenses related to business combinations: Excluded as they are not considered part of core operations[42] - The company also uses constant currency results to evaluate period-to-period comparisons by excluding the effects of foreign currency fluctuations[47] Supporting Information This section includes a glossary of key terms, forward-looking statements, risk factors, and information regarding the Synopsys transaction Glossary of Terms This section defines key business and financial terms used in the report to provide clarity for investors, including Annual Contract Value (ACV), Backlog, Deferred Revenue, and different software license types - Annual Contract Value (ACV): A key performance metric composed of the annualized value of maintenance and subscription contracts, the value of perpetual licenses, and the value of services contracts with start dates or work performed during the period[27] - Subscription Lease: A software license granted for a specified time period, which includes maintenance, with revenue recognized ratably for the maintenance portion and upfront for the license portion[30] - Perpetual License: A software license granted for use in perpetuity, with revenue recognized upfront[30] Forward-Looking Statements and Risk Factors The company provides a standard safe harbor statement, cautioning that forward-looking statements are subject to numerous risks and uncertainties, including those related to the Synopsys transaction and macroeconomic conditions - Key risks that could cause actual results to differ materially from forward-looking statements include: * Ability to complete the proposed transaction with Synopsys on anticipated terms and timing[51] * Adverse conditions in the macroeconomic environment, including inflation and recessionary conditions[53] * Cybersecurity threats or other security breaches[53] * Increased volatility in revenue due to the timing of multi-year subscription contracts and reliance on high renewal rates[53] Information Regarding Synopsys Transaction This section provides important legal information regarding the proposed acquisition by Synopsys, directing investors to the registration statement on Form S-4 for comprehensive details - In connection with the proposed transaction with Synopsys, a registration statement on Form S-4 (File No. 333-277912) was filed with the SEC and declared effective on April 17, 2024[54] - Investors are urged to read the proxy statement/prospectus and other relevant documents filed with the SEC as they contain important information about the proposed transaction[54] - This document does not constitute an offer to sell or a solicitation of an offer to buy any securities related to the transaction[57]