EarningsESI Group yesterday announced results for the quarter and year ended January 31, 2014. Total revenue for the quarter was €45.5 million, up 7% as reported and up 13% in constant currencies (cc). For the year, total revenue was €109 million, flat year/year as reported and up 7% in cc. Organic revenue was up 6% in cc.

ESI refers to the fiscal year ended January 31, 2014 as “2013”, so we will too. The company says 2013 looks unimpressive when compared to 2012 because of the strong comparable in many categories in 2012, and because the unfavorable development of the Euro versus the Japanese Yen caused a negative impact on 2013 revenue of €7.0 million.

The details:

  • License revenue was €38 million in Q4, up 15% as reported y/y. The company reports a return to “buoyant” sales of new licenses in Q4. For the year, license revenue was €81 million, up 4%.
  • ESI uses terminology that’s a bit different from what we’re used to. The company says that New Business (that is, sales to new customers or of new products to existing customers) was €7.8 million, up 13%.
  • Services revenue in Q4 was €7.5 million, down 19% as reported, and for the year, it totaled €29 million, down 9%. ESI says that some of this decline is due to the unusual growth a year ago; but much of it is due to a planned exit from “non-strategic activities not related to our core business interests.
  • ESI’s revenue was extremely weighted towards the fourth quarter, with €45.5 million of the year’s €109 million being recognized in the quarter. That’s slightly more than a year ago, but typical for ESI.
  • For the year, revenue held stable in Europe in cc; as reported, revenue was up 5% to €49.4 million. Revenue from Asia went up in cc; as reported went down €1 million to €39.1 million. Finally, revenue from the Americas was down around €1 million, to €20.8 million, as part of the planned reduction in services. (ESI gives geo revenues as percentages in its press release. Some rounding creeps in, and the data reported in the annual report could differ from what we’ve noted here.)
  • ESI reports that revenue from the BRIC countries was up 18%, to €15 million. ESI says this is a direct result of its strategy of “accompanying industrialists in emerging regions demonstrating economic potential.”

It’s interesting how concentrated ESI’s revenue is: its top 20 clients accounted for 46% of revenue in 2013, up from 43% in 2012. For comparison, no single direct customer accounted for more than 5% of the ANSYS’ revenue in 2013, and its largest reseller represented only 6% of total revenue. ESI’s tight relationship with top accounts is both good and bad. Good, in that the relationship is strategic and likely to be long-term. Bad, because ESI’s resources focus on the needs of its top customers, limiting its scope to address the needs of a broader audience.

ESI didn’t break out acquired revenue, though the total appears to have been a bit more than €1 million. That includes OpenCFD since September 2012, and CyDesign since October 2013. ESI says that CyDesign didn’t generate any revenue in Q4, so all growth was organic. The new office in Vietnam was acquired in February 2014 and has no bearing on these numbers.

The impact of the acquisitions may be greater than the numbers would indicate. ESI says that OpenCFD contributed to the deployment of ESI’s solutions at Volkswagen; IC.IDO immersive virtual reality helps to sell ESI’s overall virtual prototyping solution. Finally, CyDesign’s systems modeling and adaptive control technologies (creating 0D and 1D models), both in the Cloud and in SaaS mode, will “[position] ESI Group’s solutions to deliver value right from the product inception phase, and to address a broader base of innovative users.”

In all, ESI’s 2013 ended on a high note. CEO Alain de Rouvray said in prepared remarks that “the buoyant growth in Licensing activity observed over the final quarter of 2013 was a source of real satisfaction. This positive dynamic reflects the development of our industrial partnerships concretised by the signing of three-year contracts with major strategic customers. More generally, it illustrates the transition to digital technology by a growing number of industrial sectors, gradually leading the way towards an extended deployment.”

ESI doesn’t issue forward-looking guidance, but investment analyst consensus is for revenue of €123 million for the year ended January 2015, which would be an increase of 13%.