ESI’s new services strategy pays off; Q1 up 20% as reported

ESI yesterday reported that Q1 revenue was up 20% as reported, with a healthy boost from currency effects. Even so, constant currency growth was strong, with license and services revenue each up 10%. The company doesn’t offer much color on its results, but this appears to be a significant and positive change from a year ago. Recall that ESI shifted its services focus to helping customers add more simulation into their product development processes. That seems to have led to increased services engagements and to higher license revenue, reversing the Q1 stall seen a year ago to solid growth in Q1 2015/6. The details for the quarter just ended:

• Total revenue was €24 million, up 19.5% as reported and up 10% in constant currency (cc). Remember that ESI reports in Euros, which weakened against the US dollar and the Japanese Ye over the last year — as a result, ESI see the inverse effect of US companies.
• License revenue was €17 million, up 20% as reported (up 10% in cc). ESI reports recurring revenue continues to be strong, but that new license revenue was down 19% as reported (down 24% cc) because a number of large contracts signed last year are now in maintenance and what the company characterizes as “an unchanged adverse situation in Russia.” In general, said CEO Alain de Rouvray “licenses activity showed an especially high rate of repeat business on the installed base, and grew in every geographic area”.
• Services revenue was €7 million, up 17% as reported (up 10% cc). ESI says this is a direct result of the strategic shift in the US implements last year; ESI wants now to focus on high value-added projects related to its vision of “the art of realistic modeling”, where ESI builds and operates multi-domain predictive simulation models for customers’ products and processes.
• By geo, revenue from Asia was €9.7 million, up 24%; from the Americas, €4.2 million, also up 24% and from Europe, €10.1 million, up 14% on gains in Germany and the United Kingdom.

CEO Alain de Rouvray commented in the press release that Q1’s “very good performance, in line with our expectations, attests to the solid sales momentum at the beginning of the fiscal year across all our business activities … Our disruptive offer enables simultaneous multi-domain optimization all the way to the virtual pre-certification of our customers’ innovative products. The continued rollout of our virtual engineering products, combined with our recent, future-oriented acquisitions, gives us confidence in the success of our short- and medium-term corporate development plans.” About those acquisitions: ESI announced that it had snapped up Ciespace, CIVITEC and Picviz during the quarter. I’ve asked how these companies contributed, if at all, to the reported growth and will update later with what I find out. UPDATE 8 June: The acquisitions will be consolidated into the Q2 financial reports.