AVEVA H1 results show possible bounceback

Nov 10, 2015 | Hot Topics

AVEVA announced results for the first half of its fiscal 2015/2016 fiscal year that aren’t nearly as bad as some had suggested, given the company’s weighting towards upstream oil and gas. Lots more after I have a chance to listen to the earnings call replay, but:

  • Total revenue for the six months ended September 30 was £82 million, down 5% as reported but basically flat in constant currencies. Organic revenue was down 1% on a constant currency basis and down 8% as reported
  • Annual license (aka maintenance) revenue were £31 million in H1, up 3%
  • Rental license revenue were £31 million, down 3%
  • Initial license revenue were £11 million, down 23% as reported and down 18% in constant currencies. AVEVA’s comment in the press release is that this result “reflects the difficult market conditions particularly in specific geographies exposed to Oil & Gas and shipbuilding.”
  • AVEVA’s diversification strategy is starting to take hold, as oil & gas made up 40% of total revenue (as compared to 45% a year earlier), while seeing a higher number of smaller deals in petrochemical, food and power. AVEVA also mentions BIM and infrastructure as areas of success in H1, though it’s unclear whether these were opportunistic or targeted sales for the AVEVA NET engineering data management solution
  • The company said that constant currency revenue for AVEVA E3D almost doubled over the prior year — though it’s unclear at this point how big that really is

CEO Richard Longdon commented that the H1 performance was “resilient”and that he’s seeing a  “general strengthening of our pipeline. The focus on sales execution is beginning to deliver benefits and we have been encouraged by gaining some early momentum in diversifying into under-penetrated industries and maximising the opportunities with our existing customers through ‘One AVEVA’. This is clearly evident in the new business won in the first half of the year with new and existing customers.” Certainly the customers I spoke with at AVEVA World Summit a few weeks ago seemed to be saying that they were planning to use engineering tools like AVEVA’s to go after new business too, by offering new services to existing clients or branching into new verticals, as AVEVA is doing.

The company also reiterated that it expects the year to be weighted towards the second half (ending in March 2016), because of the renewal timing for major customer contracts.

AVEVA also published an update on the Schneider Electric deal. They’re still both working on due diligence and now expect the deal to be finalized in December with closing by mid-2016. The wording in the press release is both excited (“This will be a transformational deal for AVEVA”) and cautious (“There can be no certainty [of] a transaction”) but the intent at the Summit a couple of weeks ago was clear: AVEVA wants this.

As part of the update, AVEVA shared that Schneider Software reported revenue of $239 million for the six months ended September 30, down 7% from a year earlier. It’s a mixed picture: the total was pulled down 7% by currency effects and a 3% organic decline, but boosted 3% by the acquisition of InStep. Buried in this overall picture, Schneider Software saw organic constant currency maintenance revenue growth in “high single-digit”, a “mid single-digit” decline in license revenue and a “low double-digit” decline in engineering services revenue. Mixed but trending along AVEVA’s own results.

More info after the earnings call.