Good things come in twos (so far): Dassault Systèmes reported that Q3 performance was as expected, with total revenue of 291.7 million euros and software revenue of 255.6 million euros, both down 8% from a year ago but essentially flat with Q2. Keep in mind that Q3 is typically very challenging for DS, as the selling season is shortened by vacations and sales teams do not have the year-end incentive programs that helped PTC’s strong Q4 results. This means that sequential flatness is modestly good news.
DS makes available a great deal of data – following are my highlights:
• Total Q3 software revenue declined 8% from a year ago; new license revenue declined 35% to 59 million euros while recurring increased 6% to 196 million euros. For the 9 months of 2009 so far, new license revenue declined 34% while periodic licenses, maintenance, and product development revenue grew 14%.
• For comparison, PTC’s (new) license revenue was down 32% year/year while maintenance (recurring) declined 7%.
• New license revenue declined most sharply in the US, with a 47% drop year/year due to deal timing — but this isn’t a trend, says CFO Thibault de Tersant: “It is less good performance than in the first half for the US, but it is very much linked to just this quarter because there are no signs of continuation of weakness.”
• Recurring software revenue growth is slowing because of low new license revenue in the first half of the year, an effect that is likely to continue for the next few quarters. But when the economy improves, DS believes there will be a catch-up in back-charges (as licenses are reactivated) of maintenance which should cause a rapid rebound in maintenance revenue.
• DS said that customer sentiment in September showed some improvement, but DS prefers to remain cautious and not extrapolate this improvement into Q4.
• DS’s PLM revenue declined 7% to 195 million euros, led by a sharp 32% drop-off in ENOVIA software revenue. This is the lowest level of Enovia license revenue since the rejigging of DS’ accounting categories in 2007; DS ascribes this decline to the fact that the V6 roll-out is in its early stages and some large clients are deferring purchases in advance of their transition to V6.
• CATIA software revenue fell 3% to 119 million euros while Mainstream revenue declined 10% to 60.9 million euros.
• SolidWorks seat sales seem to be stabilizing as (bear with me) the decline in unit growth is getting less steep: down 25% year/year in Q3 year/year as compared to declines of 35% in Q2 and 30% in Q1. In Q3 2009, 8,661 units were sold at an ASP of 4,723 euros, down 4%.
• On a geo basis, both North America and Asia declined 16% in constant currencies (to 89.1 million and 67.8 million euros, respectively), while Europe declined 7% to 134.8 million euros. The company reports that it is seeing growth in China and Southeast Asia, but that the difficult climate in Japan weighed down overall results. In commenting on the global economy, CEO Bernard Charlès said that “Japan is still very tough; China has been showing a double digit dynamic (that we need to leverage); Brazil also has double-digit growth; India has high potential and we need to strengthen our team there — there is no reason why this growth should not continue.”
• The V6 roll-out is growing (CEO Charlès believes P&G is likely the largest single customer) but, in general, deals are still small, although transaction volume is good.
• Lots more detail at DS’s investor page.
For fiscal 2010, DS forecasts revenue to total between 1.24 billion euros and 1.27 billion euros, down 10 million euros from its most recent forecast, with Q4 revenue expected to be between 325 million euros to 355 million euros. DS says it is lowering its forecast because “preparation for the closing of the IBM PLM acquisition could have an impact on our revenue results over the next two quarters.” [Note that the IBM acquisition is not expected to close before Q2 2010.]
This was an upbeat call, albeit not as bouncy as PTC’s yesterday. A significant amount of time on the call was spent on the planned acquisition of IBM’s PLM business, but there was no real new news. Management was consistent in its cautious outlook, highlighting its cost control programs and speaking optimistically about its products and approach to the market, but saying that sales cycles continue to be long and unpredictable.