ESI Q3 revenue up 10%, secures new credit line for acquisitions
- Revenue for Q3 was €21.4 million, up 10% as reported and up 7% in constant currencies (cc)
- License revenue was €14.9 million, up 16% (up 12% cc), driven by strong performance in Asia. Recurring revenue was up 22% cc and 19% as reported, while new license revenue was up 9% as reported
- Services revenue was down 1% as reported (down 4% in cc) to €6 million
- By geo, revenue from Asia was €9 million, up 25% or so; revenue from the Americas was €4 million, up 5% and revenue from Europe was €8 million, essentially flat
I spoke with Dr Vincent Chaillou, ESI Board Member and COO for Edition Operations (roughly translated to US-style software R&D) about Q3 and the business in general. Dr Chaillou told me that sales in China were so strong, especially when compared to other geographies, because Chinese companies aren’t as silo-ed as those in North America and Europe, and can see the broader benefit of simulation. They’re not interested in older technologies –they have all of that already– and want to use simulation results in a much broader context, perhaps with virtual reality as made possible by ESI’s IC.IDO business. Dr Chaillou said that IC.IDO’s virtual reality provides real-time, immersive access to CAE results, which isn’t yet valued as highly by manufacturers in the Americas and Europe. Dr Chaillou and I spoke a couple of months ago about Volkswagen and the then-breaking scandal around emissions. This week, Dr Chaillou mentioned that he had just met with VW and learned that VW’s recovery plan will focus heavily on simulation, putting ESI in a prime position to benefit from VW’s restructuring. Overall, Dr Chaillou was very upbeat about ESI’s Q3 as well as future periods. The integration of Ciespace’s cloud platform technology and ESI’s simulation solutions is proceeding well, and is starting to be a more important topic of conversation in sales meetings. Dr. Chaillou is confident that cloud-based solutions will contribute to revenue in 2016. If there’s a negative, it’s this: ESI has to work harder on generating new revenue from new customers. Dr Chaillou feels the pieces are in place in R&D and services but that sales needs to execute better, to be more aware of innovation projects that ESI could be involved in.
ESI doesn’t offer guidance but analysts are modeling total revenue of €125 million (up 13% over last year) for the year ending 31 January 2016, which implies Q4 revenue of €55 million. That’s a big quarter, but ESI’s years are typically weighted towards Q4 where the company sees 45% or so of annual revenue … €55 million is possible if ESI can bump up sales to new accounts and replicate its growth in China in other geos.