ESI: 2011 shows strong growth in base

ESI Group, with a fiscal year ending January 31, 2012, reported total revenue of €94 million, an increase of 12% over last year as its large automotive and aerospace clients ramped up spending. CEO Alain de Rouvray said, “Faced with substantial competitive pressure and increasingly stringent regulations, both in terms of safety and environmental impact, some major car manufacturers are deliberately aiming for their product development to be entirely digital by 2015.” Excluding acquisitions, revenue would have totaled €91 million, or growth of 9%. For the year, total license revenue was €69 million, up 11%, while services and other revenue was €25 million, up 14%. As is typical for ESI, almost half of license revenue was recognized in Q4. Revenue for the 4th quarter was €40 million, up 15% including a €2 million contribution from IC.IDO and Efield, acquired late in the year. An interesting note: the company reports that revenue from its top twenty clients increased by 24% during the last fiscal year, double the rate of the customer base as a whole. ESI attributes this to the these interest these customers have in accelerating their use of virtual prototyping and in implementing process changes (using ESI expertise and consulting) to make that happen. ESI’s geographic results were consistent with past years, as Europe represented 43% of revenue; Asia, 36%; and the Americas, 21%. ESI’s note highlights the importance of emerging economies, which make up an increasing proportion of revenue. Three years ago, it was 8.6% of total; 2 years ago, 10.2% and last year, 11.5%. ESI sees the “systematic integration of virtual prototyping” as a key component in creating products that “maintain the competitive advantages of lower labour costs”. It’s an interesting perspective. ESI is pointing out that, at some point, low cost will no longer be enough of a differentiator. There will be so many low cost producers that they will be the “new normal” and will need to distinguish themselves on some other basis. ESI will provide more details on the year just ended on April 26.