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Engineering simulation software provider Ansys (NASDAQ:ANSS) beat analysts' expectations in Q2 CY2024, with revenue up 19.6% year on year to $594.1 million. It made a non-GAAP profit of $2.50 per share, improving from its profit of $1.60 per share in the same quarter last year.
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ANSYS (ANSS) Q2 CY2024 Highlights:
- Revenue: $594.1 million vs analyst estimates of $555.8 million (6.9% beat)
- Adjusted Operating Income: $266.6 million vs analyst estimates of $208.7 million (27.7% beat)
- EPS (non-GAAP): $2.50 vs analyst estimates of $1.94 (28.6% beat)
- Gross Margin (GAAP): 88.3%, down from 90.3% in the same quarter last year
- Market Capitalization: $26.58 billion
Design SoftwareThe demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.
Sales GrowthAs you can see below, ANSYS's revenue growth has been weak over the last three years, growing from $446.7 million in Q2 2021 to $594.1 million this quarter.
This quarter, ANSYS's quarterly revenue was up 19.6% year on year, above the company's historical trend. On top of that, its revenue increased $127.5 million quarter on quarter, a strong improvement from the $338.5 million decrease in Q1 CY2024. This is a sign of acceleration of growth and very nice to see indeed.
Looking ahead, analysts covering the company were expecting sales to grow 8.3% over the next 12 months before the earnings results announcement.
Gross Margin & Pricing PowerSoftware is eating the world. It's one of our favorite business models because once you develop the product, it usually doesn't cost much to provide it as an ongoing service.
These costs include servers, licenses, and certain personnel, and leverage on them can decide the winners in competitive markets because they determine how much can be invested into new products, sales, and talent.
ANSYS's excellent gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an exceptional 91% gross margin over the last year. That means ANSYS only paid its providers $9.01 for every $100 in revenue to run its products and services.
ANSYS's gross profit margin came in at 88.3% this quarter, down 2 percentage points year on year. On a wider time horizon, the company's full-year margin has remained steady over the past eight quarters, suggesting its input costs have been stable and it isn't under pressure to lower prices.
Key Takeaways from ANSYS's Q2 Results We enjoyed seeing ANSYS exceed analysts' revenue, adjusted operating income, and EPS expectations this quarter. On the other hand, its gross margin fell. Overall, we think this was a strong quarter that should satisfy shareholders. The stock remained flat at $313.63 immediately following the results.
