DS’ 2018 sets the stage for expansion in 2019
Dassault Systèmes announced results for Q4 and fiscal 2018 just as I was boarding a plane earlier this month, and I only had time to post a very quick recap of the highlights as I saw them then. This week brings us earnings from ANSYS (tonight/tomorrow morning), as well as 3D Systems, Altair and Autodesk — all late tomorrow. It’s time to get caught up on DS!
The day DS reported results, I focused on total Q4 non-IFRS IAS 18 revenue, which was €1,045 million, up 13% in constant currencies (cc), and up 10% on an organic basis. 3DEXPERIENCE software revenue was up 33%, to 30% of total software revenue, up from 25% a year ago. By brand, ENOVIA software revenue was up 33%, SOLIDWORKS was up 12%, Other software was up 13%, but CATIA revenue was up only 2%. And there was a big Airbus deal — let’s start there.
The biggest companies in the world, especially in auto and aero, have used CAD and all of the evolutions in related software, for decades. They’re not green accounts; they’re typically expansions or competitive displacements. In the case of Airbus, it’s some of each. Airbus has long used CATIA and it seems that the “collaborative 3D design, engineering, manufacturing, simulation and intelligence applications” means that Airbus will use more the broader DS offering –DELMIA, SIMULIA and so on– to ultimately achieve a “single data model” that’s used from design through to manufacturing. I’m not sure what that “single model” will be, and that’s why it’s in quotes; I’m guessing it’s more likely a set of models from a common base, targeted at specific uses. It’s interesting to note that operations and maintenance weren’t explicitly mentioned, even though that is a critical part of many manufacturers’ value propositions, but perhaps that’s an unstated end-goal at this point, omitted for Airbus’ competitive reasons.
Also interesting is that DS didn’t say it had displaced any of its competitors –and, if it could have, I bet it would have. Aras not that long ago announced a huge Aras Innovator installation at Airbus, PTC’s Windchill has been in there, too, for decades. I also wouldn’t be surprised to see a broad range of simulation vendors, competing agains the SIMULIA brand.
My take? Even in a company as technologically advanced as Airbus, that tech usage isn’t evenly distributed. Some groups, projects, programs, roles, functions, partners aren’t at the leading edge and agreements like this one with DS are intended to level that digital-ity (is that even a word?) across the enterprise. And, as with Boeing, it’ll take years to move already-digital functions to whatever the end-platforms are. DS said planning has begun.
The announcements of expansive relationships with Airbus, Boeing, ExxonMobil and others shows that DS’ messaging around the 3DEXPERIENCE is finally on solid footing. DS said on the earnings call that, for the year, about one third of new licenses are for 3DEXPERIENCE products, with non-IFRS IAS 18 software revenue up 24% cc during 2018 to about 25% of related software revenue, up from 21% in 2017. And that trend seems to be accelerating: in Q4, 3DEXPERIENCE software revenue grew 33% cc to about 30% of software revenue, up from 25% in Q4 2017. That’s a word salad, so here is the important fact: 3DEXPERIENCE is growing faster than total revenue.
Why does this matter? Because it’s been a long road. Remember that V6 debuted in 2011 or so, with the 3DEXPERIENCE platform following around 2013. The messaging was confusing, and I do think that slowed things down — but the real issue is that DS sells into the Airbuses etc. of the world, and they can’t switch platforms until the current airplane program or project is completed, and that often takes years. For comparison, my notes show that V5 adoption was similarly slow — and likely for the same reasons.
Finally, let’s look at industries: DS got its start in aerospace, diversified into automotive and today still sees more than 60% of software revenue from its aerospace, automotive, and industrial equipment clients. But other industries are creeping in, as DS’ “Diversification Industries” category was 32% of software revenue, same as last year — but that means revenue from these new industries grew at the same rate as overall software revenue, or around 10%. That’s impressive, especially since it seems many of them are new accounts that move straight into 3DEXPERIENCE.
And this diversification is one of the factors that leads DS’ management to optimism for 2019. The Marketplace, its push into business processes via IQMS, more on the cloud … all lead DS to see cc revenue growth of 10% to 11% to just over €3.81 billion, and Q1 2019 non-IFRS revenue of €925 million to €945 million, up 11% to 13% cc.
Added on 2 March:
Over on LinkedIn, DS Solution Architect Yannick Vogel commented:
Great article, thank you very much for sharing @Monica Schnitger.
The “single data model” you’ve put in quotes is the #3DEXPERIENCE data model which is used across all domains, like CATIA for design, SIMULIA for simulation, DELMIA for manufacturing and ENOVIA for governance applications. That means, users could connect online to a single digital definition and collaborate in real-time.
Please allow one comment on your note “operations and maintenance weren’t explicitly mentioned”: the press release states that ” Airbus will deploy Dassault Systèmes’ 3DEXPERIENCE platform […] for a unified user experience, making digital design, manufacturing and services (DDMS) a company-wide reality“ – and later: “DDMS paves the way for breakthroughs in new product design, operational performance, support and maintenance“ – so it appears that indeed, operations and maintenance are part of this MOA. (edited)
He’s right, and here’s my reply:
Thanks for your comments, Yannick. I guess I was hoping for a stronger statement from Airbus that the reason to implement 3DEXPERIENCE is to support maintenance — it’s lumped in with a long list of functions — because that would imply a shift in the relationship between Airbus and its clients, and between DS and Airbus. I will be really interested to see Airbus pull that digital thread from design through to operations!