It’s always hard to create context around companies whose businesses, and business models, are so different but we can draw a couple of conclusions now that Autodesk, Dassault Systèmes and PTC have reported for the summer quarter:
• Starting at the top: all three companies reported seeing signs of stabilizing economic conditions. Autodesk and PTC reported flat to slightly up sequential revenue; DS reported an 8% overall decline.
• Still struggling: new license sales. Across the board, new customers are hard to sell as they hold down employment pending a recovery in their end-user markets. New license sales were down 44% from a year ago at Autodesk, down 35% at DS and down 32% at PTC even as Autodesk and PTC saw a sequential increase. PTC’s is likely due, in part, to strong incentives offered for the company’s September year-end.
• Maintenance revenue has long been the backbone on which software companies depend. Maintenance, however, is heavily dependent upon prior license sales, on the number of seats in use (and that customers therefore pay to keep current) and on the customers’ perceptions of the importance of that software to their ongoing business. Autodesk saw maintenance revenue decline year/year for the first time since at least 2005 (when it was first broken out as a revenue category) because of lower seat sales in prior quarters; PTC reported a 75 y/y decline as its maintenance base shifted from more expensive (CAD and high-end Windchill) seats to less-expensive seats. DS reported a 6% y/y increase.
• Mainstream/mid-range/mid-market CAD/CAM seat sales are down; in some cases, way down. Inventor revenue was down 29% y/y, SolidWorks was down 10% y/y, yet CATIA was down 3%. [PTC no longer breaks out desktop/MCAx per quarter, but it is a declining proportion of total revenue (though still significant at perhaps 60%).] As Autodesk pointed out yesterday, CAD seats are closely tied to jobs; until companies start hiring again, these numbers are unlikely to grow.
• On a geo basis, all companies struggled in Europe, with Autodesk reporting a 38% y/y decline; DS an 8% drop and PTC, a 29% drop. All, however, saw slight a sequential increase, leading to cautious optimism. The Americas was a more mixed bag, with Autodesk down 24% y/y, DS down 12% y/y and PTC up 1%; sequentially, Autodesk and PTC saw growth while DS did not. No one had a good quarter in Asia, with only PTC reporting 4% sequential growth, as the Japanese economy continues to drag down the region.
In addition to reporting the common items such as new vs recurring revenue, each company also highlights particular areas that are noteworthy — and, while not comparative, help to explain the market a bit more:
• Autodesk said that Moldflow showed sequential growth (by implication, a year/year decline); DS signaled that Simulia revenue is at least holding steady. Both are signs that manufacturing companies continue to invest in new product development — perhaps not detailed design, yet — for an eventual economic uptick.
• Emerging markets continue to be important for future growth but don’t seem to be contributing much right now; Autodesk in Q3 2009 saw about half of the total revenue from the BRIC countries that it did a year ago. China, however, seems to be a bright spot across the board, with comments suggesting that business there is very good.
• DS believes there will be rapid rebound in maintenance revenue once things improve, as customers pay up back-charges to reactivate licenses; all vendors should benefit from this.
• All three companies remain cash positive (thank that lovely maintenance stream) and even added a bit to the bank in Q3.
So the news isn’t all bad. Autodesk made clear yesterday that it is now recalibrating for growth (and stock analysts were not impressed, worried about how this will impact the company’s cost structure); PTC made similar comments a few weeks ago during its earnings call. DS, of course, is preparing to digest the $600 million acquisition of IBM PLM in 2010.
For Q4, Autodesk sees a slight to 6% sequential increase in total revenue; DS an 11% to 22% increase and PTC, a sequential decline of between 7% and 3% from its traditionally strong fourth quarter. This would mean that Autodesk would exit 2009 with roughly a 27% revenue decline for the full fiscal year, DS a 6% decline and PTC, a 13% decline. Only PTC has forecast 2010, and it sees a total revenue increase of about 4%.
Will 2009 prove to have been a challenging year? Of course. Did the PLM companies come out of it unscathed? No. But all, as Autodesk CEO Carl Bass said yesterday, are now smaller versions of what they used to be: leaner, more agile and, one can hope, more able to respond the next time there’s a global financial crisis.