In DS’ Q2, SOLIDWORKS was again the standout

Aug 2, 2018 | Hot Topics

I have been trying to get time to expand on this brief note, but the news is just coming too fast right now. Here is a summary of Dassault Systèmes’ (DS) fiscal second quarter results, reported last week.

Total revenue of €840 million was up 4% as reported and up 8% in constant currencies (cc).

CEO Bernard Charlès ran through a lot of figures in his remarks to investors, and announced a bunch of wins. Two stand out: EDF and Exxon. Mr. Charlès announced a 20-year partnership with EDF, the French nuclear power giant, to “strengthen EDF plant performance and competitiveness of nuclear power.” I don’t know that DS can do much to change people’s perceptions around nuclear power, but this is a big deal in ways beyond the financial (since that wasn’t disclosed). EDF designs reactor technology, builds and operates plants, and works on everything from plant design to project management, operator training, and commissioning. Teaming up with EDF gives DS insights into this entire chain, which can feed back into nuclear-specific 3DEXPERIENCE platform development.

Staying in process and power, DS also announced an expansion of its relationship with Exxon, the oil super-major. Exxon has long been a SIMULIA user; this expands the implementation across the 3DEXPERIENCE platform and from the upstream (getting oil out of the ground) and downstream (to the gas station). It would appear that DS will become the platform of record for design, procurement, and construction standards, anywhere in the world.

Why does these deals matter? Because DS has for a long time been working to grow its presence outside of automotive and aerospace — and it’s been working on process and power for at least that long. When it was just about design, the incumbent process and power CAD suppliers were hard to challenge. But widening the field to plant operations, supply chain and construction creates opportunities for other vendors, too. These are two huge, thought-leading players whose selection of DS will ripple through their industries and supply chains. Of course, as I always caution, announcing a deal doesn’t create a successful implementation. We’ll have to wait until 2019 and beyond to see how these partnerships work out.

The earnings details, using DS’ non-IFRS iAS-18 disclosures since that seems to be the most extensive set of numbers:

  • Total revenue was €840 million, up 4% as reported and up 8% in constant currencies (cc)
  • Software revenue was up 4% to €753 million (up 9% cc)
  • New license revenue grew 3% as reported (8% cc) to €219 million, while subscriptions and maintenance revenue was €534 million, up 4% as reported (up 9% cc)
  • Services revenue was flat, at €88 million (but up 4% cc)
  • By product, CATIA software revenues was up 2% to €255 million (up 5% cc)
  • SOLIDWORKS revenue was €187 million, up 6% (up 11% cc)
  • ENOVIA revenue was up 4% to €88 million (up 9% cc) and, finally
  • Other Software was €223 million, up 5% as reported and up 11% cc
  • By geo, Asia led growth, with software revenue up 14% cc to €214 million; revenue from the Americas was €222 million, up 7% cc and revenue from Europe was €314 million, up 7% cc
  • 3DEXPERIENCE software revenue was up 18% cc, with demand across DS’ verticals

There’s a lot of detail below these numbers that I have yet to dig out, but my main takeaways so far are this: With the exception of SOLIDWORKS — that brand just keeps cranking — revenue growth was just OK in most brands and geos. I wish DS would separate out Other; is the growth there coming from SIMULIA? Likely, since Exa is a new offering under the overall brand and there are opportunities to cross-sell. DELMIA probably had a good quarter, since DS said it grew 17% cc in the first half of the year. But when we take both of those out of the Other total, we need to ask: what happened to BIOVIA? GEOVIA? Quintiq? And the rest of the brands in Other? Did they shrink? Why, and does it matter?

In any case, DS increased its targets for 2018 to account for currency movements and the No Magic and Centric Software acquisitions. The company now expects revenue growth of 9%-10% cc (up about 1 percentage point from the earlier target) to €3.41 billion to €3.44 billion. For Q3, DS now expects total revenue between €805 million and  €825 million, or growth of 8% to 11% cc.