ANSYS, Inc. (ANSS) Bundle
Understanding ANSYS, Inc. (ANSS) Revenue Streams
Understanding ANSYS, Inc.’s Revenue Streams
The revenue for ANSYS, Inc. for the quarter ended September 30, 2024, totaled $601,892 thousand, representing a 31.2% increase compared to the same quarter in 2023. The breakdown of this revenue is as follows:
| Revenue Source | 2024 Amount (in thousands) | 2023 Amount (in thousands) | Percentage Change |
|---|---|---|---|
| Subscription Lease Licenses | $194,322 | $103,573 | 87.6% |
| Perpetual Licenses | $82,626 | $58,849 | 40.4% |
| Software Licenses | $276,948 | $162,422 | 70.5% |
| Maintenance | $306,670 | $278,108 | 10.3% |
| Service | $18,274 | $18,265 | 0.05% |
| Maintenance and Service | $324,944 | $296,373 | 9.6% |
| Total Revenue | $601,892 | $458,795 | 31.2% |
For the nine months ended September 30, 2024, total revenue amounted to $1,662,635 thousand, reflecting a 13.5% increase from $1,464,841 thousand in the same period of 2023. The breakdown is as follows:
| Revenue Source | 2024 Amount (in thousands) | 2023 Amount (in thousands) | Percentage Change |
|---|---|---|---|
| Subscription Lease Licenses | $507,711 | $386,494 | 31.4% |
| Perpetual Licenses | $212,790 | $199,977 | 6.4% |
| Software Licenses | $720,501 | $586,471 | 22.9% |
| Maintenance | $889,836 | $820,393 | 8.5% |
| Service | $52,298 | $57,977 | -9.8% |
| Maintenance and Service | $942,134 | $878,370 | 7.3% |
| Total Revenue | $1,662,635 | $1,464,841 | 13.5% |
The increase in subscription lease license revenue for the quarter was primarily attributed to a $90.7 million increase from existing customers, with multi-year licenses contributing $76.8 million and annual licenses $13.9 million. Maintenance revenue grew by $28.6 million, mainly driven by lease licenses.
In terms of geographical revenue for the quarter ended September 30, 2024, the distribution was as follows:
| Region | Percentage of Total Revenue |
|---|---|
| Americas | 40.4% |
| EMEA | 12.7% |
| APAC | 46.9% |
Year-over-year growth in subscription lease licenses indicates a shift towards subscription-based revenue models, aligning with industry trends favoring software-as-a-service models. This strategic pivot reflects a broader market demand for flexible licensing options that cater to diverse client needs.
A Deep Dive into ANSYS, Inc. (ANSS) Profitability
A Deep Dive into ANSYS, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $532,783 (88.5% of revenue), compared to $393,538 (85.8% of revenue) for the same period in 2023, reflecting a year-over-year growth of 35.4%. For the nine months ended September 30, 2024, gross profit totaled $1,455,504 (87.5% of revenue), up from $1,263,592 (86.3% of revenue) in 2023.
Operating Profit Margin: Operating income for the three months ended September 30, 2024 stood at $161,538 (26.8% of revenue), a significant increase from $69,816 (15.2% of revenue) in the prior year. For the nine months ended September 30, 2024, operating income was $362,293 (21.8% of revenue), compared to $293,135 (20.0% of revenue) for the same period in 2023.
Net Profit Margin: Net income for the three months ended September 30, 2024 was $128,192, or $1.46 per diluted share, compared to $55,502 ($0.64 per diluted share) in 2023. For the nine months ended September 30, 2024, net income reached $293,004 ($3.34 per diluted share), up from $225,650 ($2.58 per diluted share) in 2023.
Trends in Profitability Over Time
Over the last year, profitability metrics have shown a consistent upward trend. The gross margin has improved, reflecting the company's ability to manage costs effectively alongside increasing revenue. The operating margin has also seen significant improvement, driven by operational efficiencies and cost management strategies.
| Period | Gross Profit ($000) | Gross Profit Margin (%) | Operating Income ($000) | Operating Margin (%) | Net Income ($000) | Net Profit Margin (%) |
|---|---|---|---|---|---|---|
| Q3 2024 | 532,783 | 88.5 | 161,538 | 26.8 | 128,192 | 21.3 |
| Q3 2023 | 393,538 | 85.8 | 69,816 | 15.2 | 55,502 | 12.1 |
| 9M 2024 | 1,455,504 | 87.5 | 362,293 | 21.8 | 293,004 | 17.6 |
| 9M 2023 | 1,263,592 | 86.3 | 293,135 | 20.0 | 225,650 | 17.9 |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the profitability ratios for the company are positioned favorably compared to industry averages. The average gross profit margin for the software industry is approximately 85%, while the company maintains an impressive 87.5% gross margin. The operating margin in the software sector averages around 20%, placing the company at a competitive advantage with a 21.8% operating margin. Similarly, the net profit margin of 17.6% exceeds the industry average of 15%.
Analysis of Operational Efficiency
The company's operational efficiency has been a focal point of its profitability improvements. The total operating expenses for the three months ended September 30, 2024, were $371,245, representing 61.7% of total revenue, down from 70.6% in Q3 2023. This efficiency is driven by disciplined cost management, particularly in selling, general, and administrative expenses, which amounted to $233,065 (38.7% of revenue) in Q3 2024 compared to $194,552 (42.4% of revenue) in the same quarter of the previous year.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Operating Expenses ($000) | 371,245 | 323,722 | 14.7 |
| SG&A Expenses ($000) | 233,065 | 194,552 | 19.8 |
| R&D Expenses ($000) | 132,320 | 123,223 | 7.4 |
Debt vs. Equity: How ANSYS, Inc. (ANSS) Finances Its Growth
Debt vs. Equity: How ANSYS, Inc. Finances Its Growth
As of September 30, 2024, ANSYS, Inc. reported total long-term debt of $754.1 million under its term loan, with no short-term debt outstanding.
The company's debt-to-equity ratio stands at 0.13, significantly lower than the industry average of approximately 0.5. This indicates a conservative approach to leveraging, focusing more on equity financing.
In recent activity, the company has maintained its term loan at $755.0 million since entering into a credit agreement in June 2022. As of September 30, 2024, ANSYS, Inc. had no borrowings under its revolving loan facility. Their credit rating remains stable, reflecting compliance with all covenants under the 2022 Credit Agreement.
Throughout 2024, ANSYS has balanced its financing strategy by utilizing equity funding for growth initiatives while keeping debt levels manageable. For instance, stockholders' equity has increased to $5.83 billion as of September 30, 2024.
| Financial Metric | Value |
|---|---|
| Total Long-term Debt | $754.1 million |
| Debt-to-Equity Ratio | 0.13 |
| Industry Average Debt-to-Equity Ratio | 0.5 |
| Total Stockholders' Equity | $5.83 billion |
| Term Loan Amount | $755.0 million |
| Revolving Loan Facility Borrowings | $0 |
This strategic balance between debt and equity not only supports growth but also positions ANSYS favorably within its competitive landscape.
Assessing ANSYS, Inc. (ANSS) Liquidity
Assessing ANSYS, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
Current Assets: $1,295,269,000
Current Liabilities: $1,593,588,000
Current Ratio = Current Assets / Current Liabilities = 0.81
Quick Ratio: The quick ratio, excluding inventory, is:
Quick Assets: $1,295,269,000 (assuming no inventory)
Quick Liabilities: $1,593,588,000
Quick Ratio = Quick Assets / Quick Liabilities = 0.81
Analysis of Working Capital Trends
Working Capital: As of September 30, 2024, working capital is:
Working Capital = Current Assets - Current Liabilities = $1,295,269,000 - $1,593,588,000 = ($298,319,000)
Cash Flow Statements Overview
Cash Flows from Operating Activities:
| Period | Net Cash Provided by Operating Activities (in thousands) |
|---|---|
| September 30, 2024 | $537,767 |
| September 30, 2023 | $484,400 |
Cash Flows from Investing Activities:
| Period | Net Cash Used in Investing Activities (in thousands) |
|---|---|
| September 30, 2024 | ($86,030) |
| September 30, 2023 | ($220,166) |
Cash Flows from Financing Activities:
| Period | Net Cash Used in Financing Activities (in thousands) |
|---|---|
| September 30, 2024 | ($76,470) |
| September 30, 2023 | ($232,600) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash, cash equivalents, and short-term investments total $1,295,269,000. The cash flow from operating activities increased by 11.0% to $537,767,000 compared to $484,400,000 in the previous year. However, the current ratio indicates a liquidity position below 1, suggesting potential liquidity concerns, particularly if current liabilities increase or cash flows from operations decline.
Debt Obligations: The carrying value of the term loan as of September 30, 2024, is $754,100,000, with no principal payments due in the next twelve months. The interest rate for the loan is currently set at 5.53%.
Future Obligations: The total future cash obligations, including operating lease commitments, amount to $124,500,000, with $28,200,000 due in the next twelve months.
Foreign Holdings: As of September 30, 2024, the breakdown of cash, cash equivalents, and short-term investments is as follows:
| Region | Cash and Cash Equivalents (in thousands) | % of Total |
|---|---|---|
| Domestic | $833,740 | 64.4% |
| Foreign | $461,529 | 35.6% |
| Total | $1,295,269 | 100% |
Overall, while the increase in cash flow from operations and cash reserves is positive, the current liquidity ratios warrant careful monitoring due to the potential challenges indicated by working capital trends and overall financial obligations.
Is ANSYS, Inc. (ANSS) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, is 24.1, reflecting a significant increase compared to the previous year’s P/E ratio of 19.5.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 5.3 as of September 30, 2024, up from 4.6 in 2023.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 18.2, compared to 15.7 the previous year.
Stock Price Trends
The stock price has shown a steady upward trend over the last 12 months, starting at $291.00 in October 2023 and reaching $392.00 by September 2024, representing an increase of approximately 34.7%.
Dividend Yield and Payout Ratios
The current dividend yield is 0.8%, with a payout ratio of 25% based on the earnings per share of $3.34.
Analyst Consensus
The consensus among analysts is a Buy rating, with a target price of $415.00, indicating potential upside from the current price levels.
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| P/E Ratio | 24.1 | 19.5 | +23.6% |
| P/B Ratio | 5.3 | 4.6 | +15.2% |
| EV/EBITDA | 18.2 | 15.7 | +15.9% |
| Stock Price (Sept 2024) | $392.00 | $291.00 | +34.7% |
| Dividend Yield | 0.8% | 0.7% | +14.3% |
| Payout Ratio | 25% | 20% | +25% |
This analysis provides a clear picture of the valuation metrics, stock price trends, and analyst sentiments as of 2024.
Key Risks Facing ANSYS, Inc. (ANSS)
Key Risks Facing ANSYS, Inc. (ANSS)
Industry Competition: The company faces intense competition in the simulation software market. As of September 30, 2024, the total revenue increased by 31.2% compared to the same period in 2023, driven largely by subscription lease licenses and perpetual licenses. However, competition could affect market share and pricing strategies.
Regulatory Changes: Changes in regulations in key markets could impact operations and profitability. The effective tax rate for the three months ended September 30, 2024, was 20.5%, up from 11.3% in the corresponding period in 2023, reflecting increased U.S. federal tax expense on foreign earnings.
Market Conditions: Fluctuations in market conditions can lead to unpredictable revenue streams. For instance, foreign currency fluctuations impacted revenue by $133,000 for the quarter ended September 30, 2024, and $(13,576,000) for the nine months ended September 30, 2024.
Operational Risks
Operational risks include challenges in managing costs and maintaining growth. The operating expenses for the three months ended September 30, 2024, were $371,245,000, an increase of 14.7% compared to the previous year, driven by higher salaries and acquisition costs.
Financial Risks
Financial risks are highlighted by the company's debt levels. As of September 30, 2024, the outstanding term loan borrowings were $755 million, with interest rates based on the Term SOFR plus an applicable margin. A hypothetical 100 basis point change in interest rates could have a $13 million impact on financial results.
Strategic Risks
Strategic risks are associated with the company's reliance on longer-term contracts. The annual contract value (ACV) for the three months ended September 30, 2024, was $540,527,000, reflecting an 18.1% increase from the previous year. A shift from perpetual licenses to subscription models could lead to revenue volatility.
Mitigation Strategies
The company employs various strategies to mitigate risks, including diversifying its product offerings and enhancing customer engagement. The total deferred revenue as of September 30, 2024, was $451,338,000, indicating a strong backlog of future revenue.
Impact of Currency Fluctuations
The impact of currency fluctuations is significant. For the three months ended September 30, 2024, a hypothetical 10% strengthening of the U.S. Dollar would have decreased revenue by $23.8 million. This risk highlights the importance of effective currency management strategies.
| Risk Factor | Details |
|---|---|
| Industry Competition | Revenue growth of 31.2% driven by subscription and perpetual licenses. |
| Regulatory Changes | Effective tax rate increased to 20.5% from 11.3% year-over-year. |
| Market Conditions | Currency fluctuations impacted revenue by $133,000 in Q3 2024. |
| Operational Risks | Operating expenses rose to $371,245,000, a 14.7% increase. |
| Financial Risks | Outstanding debt at $755 million; interest rate changes impact financial results. |
| Strategic Risks | ACV for Q3 2024 was $540,527,000, up 18.1% year-over-year. |
| Currency Impact | 10% U.S. Dollar strengthening could decrease revenue by $23.8 million. |
Future Growth Prospects for ANSYS, Inc. (ANSS)
Future Growth Prospects for ANSYS, Inc.
Analysis of Key Growth Drivers
Product innovations are a significant growth driver for the company. In 2024, subscription lease license revenue reached $194.3 million, marking an increase of 87.6% compared to the previous year. The increase in perpetual licenses was also notable, with revenue hitting $82.6 million, a growth of 40.4%. Furthermore, the company continues to enhance its software offerings, focusing on integrating AI and machine learning technologies into its simulation software to cater to the evolving demands of high-tech and automotive industries.
Market expansions are evident as well. The company reported a 31.2% increase in total revenue for the quarter ended September 30, 2024, amounting to $601.9 million. This growth is driven by strong demand from sectors such as aerospace and defense, high-tech, and automotive, particularly for digital engineering solutions that support autonomous systems and electric vehicle development.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenue was $1.66 billion, reflecting a 13.5% increase compared to $1.47 billion for the same period in 2023. Analysts project continued growth, with expectations for subscription lease licenses to contribute significantly to future earnings. The recurring Annual Contract Value (ACV) reached $2.05 billion in 2024, up from $1.8 billion in 2023, representing a growth of 13.6%.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has engaged in strategic acquisitions to bolster its capabilities, including costs related to the merger agreement with Synopsys, which amounted to $34.7 million. This merger is expected to enhance product offerings and expand market reach. Additionally, partnerships within the automotive sector are being strengthened to address the growing need for electrified power systems, driven by regulatory pressures and consumer demand for electric vehicles.
Competitive Advantages That Position the Company for Growth
The company benefits from a robust portfolio of simulation software that is increasingly demanded in a variety of industries. Its competitive edge lies in its established customer base and strong brand recognition in simulation and modeling solutions. The company recorded a 40.4% increase in average deal size for perpetual licenses, indicating strong customer trust and satisfaction. Furthermore, the shift towards subscription-based models is fostering a steady revenue stream, with a reported 31.4% increase in subscription lease licenses for the nine months ended September 30, 2024.
| Metric | 2024 | 2023 | % Change |
|---|---|---|---|
| Total Revenue | $1.66 billion | $1.47 billion | 13.5% |
| Subscription Lease License Revenue | $194.3 million | $103.6 million | 87.6% |
| Perpetual License Revenue | $82.6 million | $58.8 million | 40.4% |
| Recurring ACV | $2.05 billion | $1.8 billion | 13.6% |
| Average Deal Size (Perpetual Licenses) | Increased by 49.5% | - | - |
The company's proactive approach to innovation, market expansion, and strategic partnerships positions it well for sustained growth, making it an attractive opportunity for investors looking for long-term value in the technology sector.
ANSYS, Inc. (ANSS) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- ANSYS, Inc. (ANSS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ANSYS, Inc. (ANSS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ANSYS, Inc. (ANSS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.