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    ANSYS Inc (ANSS)

    Q3 2023 Earnings Summary

    Reported on Jan 6, 2025 (After Market Close)
    Pre-Earnings Price$272.85Last close (Nov 2, 2023)
    Post-Earnings Price$274.57Open (Nov 3, 2023)
    Price Change
    $1.72(+0.63%)

    What went well

    • ANSYS delivered a strong quarter marked by double-digit growth in ACV, despite challenges due to additional export restrictions impacting sales to China.
    • The company continues to see robust and broad-based demand for its technologies and products, and is confident in its ability to execute against its short- and long-term objectives.
    • ANSYS is maintaining its long-term outlook from 2022 to 2025 of 12% constant currency ACV growth, including $3 billion of cumulative unlevered operating cash flow, demonstrating confidence in future growth despite current headwinds.

    What went wrong

    • New U.S. export restrictions have led to delays and potential loss of business for ANSYS in China, impacting their ability to close certain deals in Q3 and muting growth in China for 2023 and 2024 .
    • ANSYS expects a significant financial impact from these restrictions, estimating a $25 million impact on ACV and revenue in 2023, and a $10 million to $30 million impact in 2024, which may affect overall growth targets .
    • Additional vetting processes create latency in transaction approvals, potentially putting ANSYS at a competitive disadvantage, especially since it's unclear if other companies are facing similar restrictions, suggesting ANSYS might be uniquely affected .

    Q&A Summary

    1. China Export Controls Impact
      Q: How did export controls affect your China business?
      A: ANSYS faced new export restrictions from the U.S. Department of Commerce, leading to delayed transactions and a $25 million impact on ACV and revenue for 2023, with about one-third as lost business and two-thirds as timing shifts. The company expects a $10 million to $30 million headwind in 2024 due to these controls.

    2. 2024 Growth Outlook
      Q: Can you discuss your 2024 growth expectations?
      A: Despite the China headwinds, ANSYS expects to achieve 10% constant currency ACV growth in 2024. The strong year-to-date performance and robust pipeline give the company confidence in meeting its long-term objectives.

    3. AI Product Contribution
      Q: How will AI products impact future growth?
      A: ANSYS is introducing new AI-enhanced products like ANSYS GPT, AI Plus, and Semi-AI. These offerings will augment simulation capabilities and are expected to contribute to growth, with pricing details being finalized.

    4. Automotive Industry Performance
      Q: How is the auto segment performing amid industry challenges?
      A: Demand in the automotive sector remains strong, driven by electrification and autonomy R&D efforts. The business is design-driven rather than manufacturing-driven, making it resilient to disruptions like strikes.

    5. International Performance
      Q: Was there any weakness in international markets like Germany?
      A: The apparent revenue weakness in Germany was due to accounting changes from ASC 606. On an ACV basis, EMEA showed good growth, with strong performance in high-tech, aerospace and defense, and industrial equipment industries.

    6. Revenue Types Affected
      Q: Were perpetual or lease revenues impacted by China issues?
      A: Both perpetual and lease revenues were affected by the export controls in China.

    7. Other Companies Affected
      Q: Were other companies impacted by similar controls?
      A: ANSYS is not aware of which other companies were approached by the Commerce Department, as these discussions are private.

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