ESI reported Q2 results last month (apologies for the delay in getting to this) that show that its vision for virtual prototyping may be starting to take hold.

The company reported that H1 revenue was up 16% as reported, led by license growth. Acquisitions, namely ITI, added €3.1 million for the half; organic growth was, therefore 9%.

The details:

• Q2 revenue was €28.6 million, up 18%. ESI comments that H1 license revenue was 16% in constant currencies in H1 on strong performance in Asia. Similarly, in H1 new license revenue was up 25% for the business as a whole and up 11% on an organic basis — it seems that Q2 continued the trends seen in Q1. Maintenance revenue was up 14% (up 9% organically). Foreign exchange effects were negligible for the half year, amounting to €0.7 million.
• Q2 license revenue was €20.6 million, up 17%, as ESI was able to grow its high value engineering studies business, especially in Japan
• Q2 services revenue was €7.9 million, up 18%
• By geo, revenue from Asia was roughly €12.5 million, up 20%. Revenue from the Americas was about €5.2 million, down 10%. Revenue from Europe was €11.3 million. (These are estimates; ESI offers percent of total revenue by half year.)

ESI’s overall organic growth rate is impressive. H1 revenue was up 9%; ANSYS, in comparison, posted growth of 4%. Why? It’s likely that the company’s differentiated approach with its offerings resonates with some of its large enterprise clients. ESI’s latest thing is its Immersive Virtual Engineering (IVE) solution for the engineering and fabrication of industrial products. This aims to create a physics-based virtual prototype of the manufactured product, not an idealized as-designed version. Building on ESI’s historic strength in manufacturing studies, the acquired IC.IDO virtual reality (VR) then lets stakeholders interrogate and collaborate about the product.

ESI’s next step, they’ve said, is to extend this to include IoT/Smart Factory/Industrie 4.0 feedback from products in service. Predictive maintenance, based on an understanding of the as-assembled, as-manufactured parts, throughout the service life of the product. ESI also throws in autonomous products, big data analytics, machine learning, and the cloud, which creates a somewhat confusing story. But, overall, it makes sense: stop focusing on the ideal and realize that fabrication introduces flaws. Work with those flaws, figure out how to appropriately service it, and you’ve got a great vision.

ESI doesn’t give guidance but the Financial Times has the analyst consensus at €145 million for the 2016/2017 fiscal year, which would be growth of about 16%. Remember that ESI’s year is typically weighted towards Q4; it’s entirely possible that the company will blow by this forecast given the performance through the first half of the year.