Schnitger Corporation

DS reports OK Q1, adds FE-DESIGN & Archividéo

NewsDassault Systèmes’ earnings announcements are usually a welter of numbers, currencies, products, markets and geographies. Today, DS threw two acquisitions into the mix, too. Grab a cup of coffee and let’s see what it all means.

DS reports that the March quarter was pretty good, with IFRS revenue up 5% year/year as reported to €485 million (up 6% in constant currencies). Software revenue was up 6%year/year (y/y) as reported and up 8% constant currencies (cc) to €446 million. On an organic basis, software revenue was up 6% in cc (so probably up around 4% as reported).

The details:

CEO Bernard Charlès highlighted DS’ presence in the energy markets, saying that customer spend on its solutions was up 13% in cc in 2011 and another 18% in cc in 2012. He told investors about DS’ potential alternative and sustainable energy sources, distribution networks like smart grids, nuclear power (safety, asset lifecycle, operations)  especially in markets such as India, China and Russia. He said that DS has a unique solution for managing contract-based delivery and program management –I need to research this– in the Optimized Plant Construction solution that was announced last year. Netvibes plays a big part in all of this, enabling DS to dashboard data from many different sources, so that casual and expert users can interact for a better project outcome.

M. Charles also spoke of needing to work with large systems integrators like Tata on energy implementations, to enable DS to scale its various lines of business more rapidly than it could on its own. (Hmm. Remember IBM PLM?)

DS is more bullish about 2013 than is PTC, believing that license revenue will pick up starting in Q2. For Q2, DS sees total non-IFRS revenue of about €515 million, up 7% in cc; for the year, the company sees total revenue of between €2.07 billion and €2.10 billion, and increase of 6% to 7% — including €4 million from the acquisitions announced today.

DS announced two acquisitions today, too. FE-Design Group, makers of TOSCA for non-parametric structural and fluid design optimization. The transaction closed on April 23 and financial terms were not disclosed. Archividéo, which creates and manages large 3D urban environments and landscapes, extends DS concept of 3D to urban planning and landscape modeling technology.  Archividéo will be added to the GEOVIA business; the amount of this transaction was not also disclosed. Neither company is large enough to really affect DS’ revenue or earnings in any meaningful way.

FE-Design and TOSCA have been around for a long time, and add some great optimization technology to the SIMULIA toolkit. In the funniest moment of the earnings call, M. Charles said this acquisition was “very techy”, and turned the floor over to M. de Tersant to explain it. M. de Tersant, an award-winning finance guy, recovered quickly and told investors that he believes TOSCA to be the best non-parametric optimization technology on the market.

I have a call with the SIMULIA team tomorrow; I’ll post an update if warranted.

Right. Again, a lot of numbers and factoids. What does it all mean? DS seems to weather manufacturing industry uncertainty better than its peers, probably because it has diversified (even if only to a limited extent so far) into fashion and retail, energy, core informatics and other areas. A more diverse base can help when there are pockets of weakness and strength, as we seem to have right now. But even DS isn’t too excited about the rest of 2013, using cautionary language in its forecasts and projections.

What surprised me most about today’s news is how few customers are on the V6 platform (DS said 15% of revenue; I’m extrapolating to customers). It’s not new by any means, so why aren’t there more? For one, CAD and related solutions are incredibly sticky — it takes a lot to get people to move off a tool that works for them. Even if it’s not perfect, they know where its flaw are and can work around them. But even if one wanted to buy CATIA V6, I’m not sure that it’s easy to do. V6 is a platform, much more than a simple swap of one tool for another. By making everything V6 a 3D Experience, I wonder if DS hasn’t over-complicated things and made it too hard to understand the benefits of smaller parts of the whole. Are we approaching an “all or nothing” impasse?

In all, organic growth of 4%-6% isn’t huge, it isn’t awful — it’s OK. And if the company manages to turn a profit on OK revenue growth, that’s actually good. And if the company has a plan to grow revenue more, that’s even better. DS has a plan; let’s see what happens.

Exit mobile version