EarningsExa, the Burlington MA-based CFD supplier, recently reported Q4 results (ended January 31) that saw revenue rise 18% year/year (y/y) in constant currencies (cc) to $16.9 million.

The details:

  • Total revenue in Q4 was $17 million, up 11% y/y as reported and up 18% cc
  • License revenue was $13 million, up 7% as reported and up 14% cc
  • Project revenue, which Exa sees as a leading indicator for future license revenue, was $4 million up 25% and 36% cc
  • Exa reported a GAAP loss from operations of $0.2 million in Q4, essentially flat y/y
  • Non-GAAP income from operations was $0.7 million, up from $0.3 million a year ago
  • GAAP net loss in Q4 was $(1.1) million versus a GAAP net income of $0.1 million in Q4 fiscal 2014.
  • By geo, revenue from Europe was $7.8 million, up about 7%; from, the Americas, $4.4 million, up about 16% and from Asia, $4.7 million, up 15%. [Exa offers percentages of total revenue, so the growth rates are rounded. –Ed] Mr. Remondi offered a bit of color on Asia, saying that China was the strongest growth region, but is still small compared to Japan and Korea. Japan had very strong growth in 2015, as the company moves beyond the automotive OEMs into heavy vehicle (highway truck and off highway). Sales in Korea are to a narrower set of customers (apparently dominated by Hyundai).
  • By end-market, Exa reports strong momentum from the passenger car market for both Q4 and the full year, especially in North America. The news from Europe is promising: “the bottom in car sales [in Europe] may now be behind us after six years of decreasing unit sales. While end market health is just one factor that contributes to our performance, we continue to see secular drivers such as increased regulatory pressure and vehicle model proliferation generate increasing demands for our technology and solutions”.
  • The heavy vehicle market continues to struggle as agricultural and mining equipment saw year-over-year unit sales declines but other pockets, such as highway trucks, did well.
  • Aerospace continues to be a tiny part of Exa’s current business (estimated by Mr. Remondi at under 10% of total revenue) but it is of strategic importance. He told investors that the company wants to add several percentage points of growth per year to its aero totals as it grows its offering for this customer set. Mr. Remondi said that aerospace is, for Exa, a breakeven business at this point.
  • One other point of note: deferred revenue at the end of Q4 was $26.9 million, more than double the $11.7 million at the end of Q3. CFO Rick Gilbody explained that this was due to normal seasonality and that the 6% y/y decrease in Q4 was due to the timing of invoicing and doesn’t represent a decrease in customer commitment.

For the full year revenue 2015, total revenue was $61 million, up 13%. License revenue was $50 million, up 12% as reported. That’s ahead of last year’s growth rate, which the company attributes to an expanded sales team reaching more customers, which led to strong exploratory project revenue — that, in turn, helped drive license revenue growth in FY ’15. Project revenue was $12 million, up 18%. The operating loss expanded in 2015 to $2.5 million, while the net loss for FY15 was $19 million.

In discussing the results with investors, CEO Steve Remondi pointed out that Exa has been hiring to support new development and to add sales and services capacity, and that Exa’s growth doesn’t yet reflect the impact of these investments. That, he says, should come in fiscal 2016.

For fiscal 2016, Exa expects Q1 revenue between $14.5 million and $15.1 million and full-year revenue of $64.7 million to $67.0 million, a cc growth rate between 13% and 17%. The company is still projecting a net loss for 2016: $(5.9) million to $(5.2) million on a GAAP basis and $(4.3) million to $(3.6) million non-GAAP.

It’s been interesting to watch the news swirling around Exa lately. Its results haven’t been awful, but they also haven’t been as awesome as the company projected in its IPO a few years ago. Not awesome news means a so-so valuation, which stands at a market cap of about $164 million (after the close, 30 March 20150). That’s a revenue multiple of 2.7, not much when you consider the price paid by ANSYS for Spaceclaim, for example, or ANSYS’ enterprise value of 7.5 times trailing 12-month revenue.

As a result, activist investors have been urging the company to seek a buyer –they’ve thrown around ANSYS, Autodesk, Dassault Systèmes, PTC and Siemens as the obvious candidates, even though it’s unlikely regulators would approve or all of the buyers are all that interested– since they feel the company is undervalued on Wall Street.

One activist, Discovery Group, even sent a letter to Exa’s board. In it, Discovery says that being undervalues is a “common phenomenon with micro-cap companies, where their small float, limited trading volume, and general lack of research coverage lead to low institutional investor interest — and thus chronic undervaluation.” Exa’s Chairman of the Board Jack Shields replied “Exa Corporation’s Board periodically reviews, discusses and deliberates the strategic direction of the company, and weighs all reasonable opportunities, options and risks in the context of optimizing value to all of our shareholders. The full Exa Board has recently met and reviewed your September 24 communication and will take your views, as well as those of other shareholders, into consideration as it continues to act in the best interest of all shareholders.” Whomp.

Exa’s Q4 results are unlikely to drive the share price high enough to change the valuation math used by Discovery and others — though there’s no reason to presume immediate action by anyone on anything. It’s business as usual at Exa but stay tuned …

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