The technology used to conceive, design and fabricate the objects around us is complicated. It may be difficult to understand if you're not a practitioner, yet businesses routinely entrust their most important processes to these tools. Our Hot Topics blog tries to clear up some of the confusion.
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Remember how the bar was set for all earnings calls a few weeks ago, when Alcoa raised the bar for all financial results to come? Well, PTC just did the same to the PLMish universe — and announced an acquisition, too. Lots more after the earnings call in the morning, but FQ3 revenue was $337 million, up 7% as reported and up 5% on a constant currency basis. That’s near the top end of guidance, which was revenue of $325 million to $340 million, with license revenue of $80 million to $95 million, $75 million in services revenue and $170 million in support revenue. As reported, license revenue was $92.7 million, while service was $70.2 million.
That acquisition? It’s privately-held Axeda Corporation, developer of solutions that connect machines and sensors to the cloud. We’ll learn more during the earnings call, but PTC’s press release says they choose to Axeda because of its technology, extensive customer base and powerful partnerships. The transaction is expected close this quarter. PTC paid about $170 million in cash for the company; PTC didn’t offer 2013 or 2014 revenue, but said that Axeda should “add $25 million to $30 million of revenue in FY’15″.
More after the call.
DS also reports in the morning — it’s going to be a busy day!
PLMish results start in earnest this week, as both PTC and Dassault Systèmes talk about their June quarter results. But AVEVA kicked things off in their uniquely British way last week, updating us on how things are going so far in fiscal 2015 — and all seems to be to plan. With typical understatement, the announcement says “we have not seen any noticeable shift in the trends reported [in May] in either our end markets or from a geographical perspective”. What, you may ask, was that? Was it good? Bad? Somewhere in between?
The second half of fiscal 2014 was a confusing picture of growth and weakness: EMEA was up slightly on strength in Central and Western Europe tempered by weakness in Russia and the Middle East. The Americas were dragged down by problems in Brazil even though shale gas in North America is “booming”. Asia was the overall standout as China was “tough” but India, “good”, and South Korean shipyards continued their expansion from traditional shipbuilding into offshore oil & gas. Diversity in both geo and end-industry that appears to be continuing into the summer.
The company said that the March to June quarter is “seasonally the least significant” since many large contract renewals happen later in the year and the new “One AVEVA” go-to-market approach won’t really kick in until the second half of the fiscal year.
The one downbeat note in the announcement was that the continued strengthening of the British pound will likely hinder growth this year, since fully 90% of AVEVA’s revenue comes from outside UK. Even so, “[t]he Group … continued to see solid cash generation in the first quarter, resulting in net cash of £129 million at 30 June 2014.” That’s impressive, considering that it was £204 million a year ago, before distribution of a £100 million special dividend, and up from £118 million at the end of the 2014 fiscal year in March.
Bottom line: “Our expectations for the Group performance on a constant currency basis for the full financial year remain unchanged.” London City analysts expect the strong British Pound and other currency effects to cut something like 5% off revenue for the year, mainly in the first half, but still on average expect revenue to be 256 million, up 8% year/year.
In slightly other news, the Financial Times is once again reporting that AVEVA is a takeover candidate, this time by companies as diverse as Emerson, General Electric and Siemens on the major industrial conglomerate side, and “peers in product life cycle management such as Dassault Systemes”. I’ve even heard Autodesk and PTC mentioned. Every company is always a takeover candidate, so don’t get too excited about this – AVEVA comes up fairly often since it’s been growing well, is profitable, is executing on a product roadmap and has blue-chip customers. I’m not hearing anything that makes this a more imminent deal than anything rumored over the last 15 years.
Let’s see what PTC and DS have to say on Thursday — maybe more acquisitions there, too?
Early today, Hexagon announced that it is acquiring Vero Software, the UK CAM company that itself is a composite of brands like Alphacam, Edgecam, Radan, SURFCAM, VISI, Cabinet Vision, and WorkNC. To call it “Vero” isn’t complete but it does the job: Vero was publicly traded until 2010, when it was bought by Battery Ventures, a US venture capital firm, and taken private. Vero then merged with Planit in 2011, adding Alphacam, Cabinet Vision and Edgecam to its brands, and tripling the size of the business. Then, in 2013, it acquired Sescoi and the Surfcam assets of Surfware Inc. Phew. Let’s just call it Vero, ok?
Vero’s brands make it, in total, the third largest CAM vendor in the world. Their solutions include design software as well as programming and controlling machine tools, across a variety of materials and machine types.
Hexagon says that Vero will help it “close the gap of making quality data fully actionable by extending the reach of the newly developed MMS (metrology planning software) to include CAM (manufacturing planning software)”. Metrology is the practice of measuring things; in this context, measuring the exactness of a manufactured part and comparing it to specifications, a CAD model or other parts to gauge whether the manufacturing process was successful. This type of measurement is, for many companies, the last step in the production process and is increasingly planned into the production timeline.
Hexagon is canny in its acquisitions, buying up nuggets that it can add to other offerings to make something bigger than expected. Says Hexagon CEO Ola Rollén, “Vero Software has the expertise, knowledge and resources to deliver even higher levels of productivity to our customers … [T]he synergies from our combined technologies will advance our strategy, supporting the growing need to integrate all data and processes across the manufacturing lifecycle.” One can see immediate products resulting from combining Hexagon Metrology’s MMS solutions with Vero CAM solutions, much like Delcam’s Powerinspect, for example. Further out, whole quality programs could be built around the joint offerings, involving Vero’s many channel partners as evangelists.
Richard Smith, Vero Software CEO commented “All of our efforts over many years have positioned Vero and our products as leaders in the industries we serve … I firmly believe that Hexagon’s size and global reach will provide stability and support our growth into the future.” No word on whether Mr. Smith and other Vero leaders will join Hexagon or if this will affect the channel partners representing many of the brands under the Vero umbrella.
This acquisition is subject to regulatory approvals but is expected to close in August. After the acquisition, Vero will continue to run as an autonomous business unit within Hexagon Metrology. Terms were not released but Hexagon did say that Vero’s sales for 2013 were about €80 million and that Vero would “positively contribute to Hexagon’s earnings”. We might learn more on Hexagon’s Q2 earnings call in early August.
Altair today announced that it is acquiring Visual Solutions, makers of the VisSim graphical block diagram language for modeling and simulating complex dynamic systems, including embedded systems.
Visual Solutions says it has over 250,000 users worldwide, scientists and engineers in process control, aerospace, mechatronics, electric motor control, pulp and paper, nuclear, wind and hydro power, data communications, economics, HVAC, and biomedical applications, who rely on VisSim’s for real-time execution of high fidelity models.
As more users move towards modeling and simulating the controller along with the plant being controlled, and automatic generating the controller codes, technologies like VisSim become more critical. VisSim itself lets users define and simulating large-scale complex dynamic systems; VisSim add-ons extend this functionality to include real-time hardware-in-the-loop prototyping and control, C code generation, and the modeling, simulation, and building of embedded systems.
I did a bit of research into this area several years ago and learned that this workflow, from simulation through to code, is critical. Block diagram tools like VisSim (as well as LabView, MapleSim and MATLAB/Simulink, among others) let users drag and drop blocks into a work space and join them to create algorithms. These algorithms are simulated and, once everything meets requirements, used to generate C code for embedded chips. The magic is that users are simulating at the system level and can quickly debug before ever generating code for their control systems. Easier to create, faster to simulate, less error prone in execution.
Terms of the transaction were not disclosed, but it is expected to close by the end of July.
Over at the PTC Creo blog this week, I’m musing on how to recapture the value of legacy data — all those CAD models you created in the past, now stored on drives all over the place (or archived in a PDM/PLM if you’re so inclined), gathering the equivalent of digital dust.
They’re a treasure trove: Good ideas, abandoned for some reason. Product variants that never made it into production. A starting point for the next design iteration. How much of an investment do you have tied up in those parts, doing nothing for your business?
The hard part has always been figuring out the best way to move these ideas forward, from CAD modeller to CAD modeller, as technology changed and you implemented new solutions. [If you're not a CAD person, think about Wang documents stored on 5 inch floppies; how would you get that into the word processor you're using today? Same general idea.] Some teams migrate all of their parts each time they update CAD authoring tools; others take a piecemeal approach. One takes a long time and probably results in higher quality output; the other takes more time if all added together, but gets the team moving more quickly in the meantime.
The AEC world continues to expand and contract at the same time, as the big providers branch out into new areas by acquiring smaller companies. Trimble is a perfect example, making more than 100 acquisitions since 2000 (spending over $3.2 billion in the process). These additions took Trimble from being “the GPS company” to BIM, construction site management, farming and public safety. Today, Trimble announced another acquisition, of The Omega Group, taking Trimble deeper into the world of intelligent GIS (Geographic/Geospatial Information Systems).
The Omega Group provides of cloud-based and on-premise tools to integrate mapping, analytics and mobile technologies for public safety agencies. Think of your local police or fire department, and how they have to respond to emergencies and prepare for both critical events (big highway accidents) and more routine, non-threatening activities (parades). Omega’s solutions let agencies design action plans, allocate resources, and monitor execution on desktops, dashboards and mobile devices.
Trimble’s end-goal for this acquisition appears larger than public safety. Omega’s solutions of GIS, big data analytics and mobile seem to have cross-application uses, and once can see them cropping up in other solution sets over time. Of course, this deal also puts even more of Trimble head-to-head against even more of Intergraph, so expect more contract award news, faster releases and a bigger presence from both companies.
(Trimble took earlier aim at Intergraph with its mining acquisition last month.)
Financial terms were not disclosed, which isn’t surprising. Something like 85% of Trimble’s acquisitions are small, with revenue under $25 million. We should learn more when Trimble reports results in a few weeks.
Dassault Systèmes today announced that it has acquired SIMPACK (formerly INTEC), developer of the SIMPACK general purpose multi-body simulation software that’s been used for decades to analyze the motion, coupling forces and stresses on mechanical and mechatronic systems.
SIMPACK AG is a cool little company that I’ve followed for 15 years. CEO and founder Alex Eichberger spun INTEC out of the German Aerospace Centre, where SIMPACK’s early development took place. He and his team (including my old boss from Computervision, Bob Solomon) have grown SIMPACK globally, and outwards from aerospace into road and railway vehicles, engine simulation, wind turbine design, vehicle NVH and fatigue studies, and more. Today, SIMPACK says it has more than 130 customers, including many global brands. Transaction details were not disclosed.
Not surprising, SIMPACK will be operated under the SIMULIA brand. Dr. Eichberger said in the press release about the deal that SIMPACK and DS “have similar technology-driven cultures and a shared long-term commitment to scientific excellence. We will join forces and technologies to provide superior virtual and physical experiences, expanding industry solution experiences for transportation & mobility, aerospace & defense, and other industries.”
My take: SIMULIA knows the gaps in its offering and is aggressively going after the best technologies to build out its portfolio. SIMPACK is solid technology whose broader adoption was hampered by the company’s size — it’s very hard for a relatively small German company to compete on a global scale with the likes of MSC Software and Altair, who have bigger budgets, presence and reach. At this level of sophistication, customers want local training and support, hard for a smaller company to provide. SIMULIA has done a good job with earlier acquisitions, integrating them into the fold where it make sense but recognizing the technical expertise that made them acquisition targets in the first place, and leaving them alone to do what they do best.
I have a call with SIMULIA to discuss this later today and will update after the call. Nope. DS canceled the call because it’s in the quiet period preceding its earnings announcement. Don’t read anything sinister into this — they probably don’t want to run into trouble by foreshadowing the earnings. We’ll learn more soon enough.
Nemetschek just announced that is has invested in a startup and acquired a majority stake in another company to level up its 3D Building Information Management (BIM) portfolio to include time (4D) and cost (5D) in project planning*. As I’ve written before, 4D/5D is where many in the AEC industry are focusing their efforts: 3D design technology, by itself, can no longer yield the efficiencies asset owners and operators need — they want engineers and constructors (E&C firms) to make tradeoffs between design and construction processes and scheduling using information that isn’t visible from design alone.
Nemetschek, Hasso Plattner Ventures (Mr. Plattner was co-founder of SAP) and High-Tech Gründerfonds have invested in Sablono GmbH, a startup that creates software for construction project planning, control and monitoring. Sablono was spun out of the Technische Universitaet Berlin in 2013 and the first release of its Sablono Onsite is “imminent”. Sablono Onsite lets project managers and others use mobile devices to check and control the status construction work directly on the building site and make it available to other project partners in real-time.
In addition, Nemetschek acquired a majority interest in hartmann technologies GmbH, a developer of software for building-model-oriented processes in the construction industry. hartmann’s ice BIM products enable time-based and qualitative optimization of a building process, from the creation of the 3D model, through quantity takeoff and compiling contract documents to price calculations. Interestingly, hartmann’s ice BIM construct works with RIB Software‘s iTWO and Autodesk’s Revit — we’ll have to see how that plays out.
Financial details of the transactions were not disclosed, nor is their projected impact on Nemetschek’s results.
These are interesting moves for Nemetschek. The parent, holding company has been in a bit of disarray lately with board shakeups but the operating companies have been ticking over nicely. By partnering for technologies that engineering and construction firms know they need, Nemetschek brings to the market both a broader offering and a combo of older, proven brands (Graphisoft, Vectorworks, Allplan et al) and new, cutting-edge technologies.
Other vendors are promoting similar offerings, but the biggest stumbling blocks Nemetschek faces with its 3D/4D/5D portfolio are building awareness and displacing entrenched processes. The guy in the planning department who knows this stuff inside and out, and who creates estimates by hand for each project, is not necessarily interested in being replaced by technology. If his management decrees it, it’ll take time to map the stuff in his head to software tables and processes. Too, larger E&C firms created in-house tools to do some of what these COTS offerings have because COTS simply didn’t exist; replacing them will take time because of their interconnections to business systems. In either case, Nemetschek has to prove that its 4D/5D solutions are better, faster and save more money than what prospects are using today. But the real opportunity, at least immediately, is with those E&Cs who aren’t doing any digital planning at all — and that’s a surprisingly large number of prospects.
Note: I’ve always seen 4D as time, 5D as cost, 6D as operations or maintainability. Nemetschek’s announcement about these deals lists 4D as cost and 5D as time.
No, we’re not changing our focus to industrials! Yesterday did, however, mark the start of earnings season with Alcoa announcing that Q2 was far better than expected, which raises the bar for all other earnings releases to come.
Alcoa said that revenue for the quarter that ended on June 30 was $5.8 billion, flat year/year but 3% ahead of expectations. That helped boost the company to a profit for the quarter, as compared to a loss in the same period last year.
Are these results stunningly awesome? No, but Alcoa’s announcement means that investors will be looking for results ahead of expectations, even in industries that typically are cyclical (like metals), with increased profitability to support rising stock prices.
According to USA Today,
Analysts are calling for more than 6% earnings growth from companies in the Standard & Poor’s 500 index in the second quarter, says S&P Capital IQ. That’s up from 3.4% earnings growth in the first quarter of 2014 and 4.9% growth in the second-quarter of 2013.
The S&P 500 is a mashup of Alcoa, ExxonMobil, Facebook, FedEx, Kraft Foods, Macy’s and 494 others — the largest market capitalizations on the markets, regardless of what they actually do. When investment analysts expect 6% earnings growth across that broad a bucket of companies, it ripples through just about all verticals.
How is our PLMish universe likely to do against those expectations? During their last earnings announcements,
- Dassault Systèmes said it expected Q2 revenue of about €560 million, up 7%. That €560 million will include revenue from Accelrys. DS reports results on July 24.
- PTC said it expects calendar Q2/fiscal Q3 revenue of $325 million to $340 million, or an increase of 3% to 8%. PTC also reports on July 24.
- ANSYS, for a slightly different take on the world of engineering software, forecasted revenue of $224 million to $233 million, which would be growth of 4% to 8%, including a slight contribution from Spaceclaim. ANSYS hasn’t set the date for its next earnings release, but it’s likely to be in early August.
- Autodesk‘s quarters are off by a month, with its Q2 ending on July 31. The company forecast Q2 revenue around $600 million, up 7% or so. Look for the company to release results in late August.
It looks like revenue growth could support that 6% expectation, but only if companies report revenue at the top end of guidance. A little help from cost control and maybe some one-time benefits from tax credits or something, and 6% earnings growth looks doable, too.
Here’s hoping you have a safe and happy 4th of July holiday! Catch some sun, take in a concert, enjoy family and friends, appreciate all that it is good.
We’ll catch up next week.