ESI Group reported reasonably good results for the third quarter today, as total revenue grew 3.2% to €13.8 million in what is typically the company’s weakest quarter. License revenue declined almost 6% to €8.5 million when compared to a year ago, slowing the steep year/year decline seen in Q2. Services recorded an increase of +21.9% in sales, to 5.3 million euros. The Mindware acquisition made the difference this quarter, contributing about €1.2 million to the services total in Q3 2009 — which, as ESI points out, is almost equal to the €1.4 million purchase price of the company.
For the first 9 months of its fiscal year, ESI saw a 3.6% decline in licenses revenue — far smaller than its competitors — as its repeatable revenue increased slightly to 78% over the last year. MSC Software, DS and ANSYS all have comparable recurring revenue levels, yet suffered far greater drops in total license revenue this year. ESI’s business model is based much more strongly on ratable licenses, which somewhat protected it from the larger fluctuations seen by rivals.
Mindware, which “recorded significant organic growth” according to ESI, contributed €4.2 million in revenue during the first 9 months.
Chairman and CEO Alain deRouvray said in prepared remarks that “these figures reveal a continuation of the … wait-and-see attitude on behalf of clients in terms of new diversification orders, but a reaffirmation of the renewal of the installed base for (l)icenses.” M. deRouvray still sees significant uncertainty ahead. ESI never offers forward-looking guidance but typically has almost 40% of its revenue during the fourth quarter.