DS reports a good Q2 and tweaks full-year forecast

Jul 23, 2020 | Hot Topics

Very quick because it’s that kind of day — but need to let you know that Dassault Systèmes reported that Q2 results met expectations and an acquisition:

DS Q2 non-IFRS revenue was €1,071 million, down 8% on an organic basis but up 11% including the Medidata acquisition (up 10% in constant currencies, cc). That was just above the top end of the company’s earlier guidance. On an IFRS basis, total revenue was €1,069 million, up 11% (up 10% cc) driven by software revenue, which was €959 million, up 13% (up 12% cc).

Within the software category, we see the pattern we expect from all of the vendors who sell in both subscription and more traditional ways: Non-IFRS recurring software revenue was up 30% cc (including the Medidata acquisition) while licenses and other software revenue decreased 32% cc on lower end-market demand as Covid-19 shut down companies around the world, and complicated selling processes.

Services revenue was down 5% cc as new projects were delayed and existing projects saw their timelines extend.

Taking all of this into account, DS tweaked its guidance for the rest of the year. It continues to assume “a significant deceleration in global GDP for the full year 2020 compared to 2019 and restrictions in a number of industries based upon current governmental plans in the Americas, Europe and Asia.” This leads it to believe that licenses and other software revenue will be down about 17% cc from last year (while not great, that’s an improvement over last quarter’s forecast, which was for a decline of 20% to 17% previously). Recurring revenue will remain strong, growing 26% to 27% cc. All of that leads DS to expect total non-IFRS revenue of €1.05 billion to €1.08 billion (up 18% to 21% cc) for Q3 and non-IFRS total revenue of €4.51 billion to €4.56 billion (up 12% to 13% cc) for the year.

DS also announced that it has acquired Proxem, which makes AI-powered semantic processing software. According to DS, “Proxem’s strong AI-driven semantic data interpretation and automation capabilities offer new opportunities for 3DEXPERIENCE platform customers. They accelerate a close connection with consumers, patients, and citizens, capturing insights on experiences and expectations, and empowering business innovators with contextual, accumulated knowledge and know-how. Virtual twin experiences on the 3DEXPERIENCE platform now take AI to the next level, revealing information intelligence and creating strong levers in new areas. Companies can elevate product design and quality to become more competitive.”

DS has already integrated Proxem Studio into the 3DEXPERIENCE platform to complement NETVIBES EXALEAD information intelligence applications. Proxem Studio delivers a combination of rule-based natural language understanding, natural language processing, and machine learning technologies used by companies like Air Liquide to better understand supply networks, customer expectations, market trends and other aspects of their business.

Why? “The combination of AI with modelling and simulation applications will enable 3DEXPERIENCE platform users in any industry to elevate and represent their data. They can automate the interpretation of knowledge found in requirements, regulations, customer and quality feedback, contracts, as well as in scientific publications, research reports or clinical trial results, and transform it into a complete virtual twin experience.”

Finally, there were some interesting customer announcements, including the fact that Medidata is working with Moderna to support clinical trials of mRNA-1273, Moderna’s COVID-19 vaccine candidate.

Lots more detail to parse on all of this — later.

Update: Regretting that headline a bit … “good” is so relative right now. By any sane measure, an 8% decline in total revenue and a 30% decline in a category isn’t “good”. But given how bad it could have been … I’ll stick with good.