MuM’s Q3 down 7% — but that’s better than Q2

Oct 21, 2020 | Hot Topics

One of the earnings bellwethers in our PLMish universe, Mensch und Maschine (MuM), reported this morning that its Q3 was … not as bad as Q2 … and that it expects Q4 to start ramping back up.

For MuM, like many others in our PLMish universe, the year started strong, then dove — the chart below, from MuM’s investor presentation, clearly shows the pattern 2020 has taken so far, in bright red. In numbers, total revenue in Q1 2020 was up 24%, Q2 was down 9%, and Q3 was down 7% when compared to 2019:

MuM Investor presentation 21 October 2020

Back in Q1, MuM had every reason to expect a solid, though not spectacular Q2 and the typical seasonal dip in Q3 — instead, we can see the red columns for 2020 clawing their way back to parity with 2019. Will it get there for Q4? MuM isn’t saying, focusing instead on increased profitability and cash flows — but those can’t happen without cash coming in on the top line. (You can also see the effects of the subs transition, as the seasonal dips in Q2 and Q3 2018 and 2019 become less pronounced.)

Even more interesting, but not available in a handy chart, is how MuM’s two segments are performing. Recall that MuM is one of Autodesk’s largest software resellers. The VAR business’ revenue and profitability metrics were affected by Autodesk’s switch to subscriptions and all of the pricing and promotions that went with that transition. Its other business, M+M Software, develops and sells brands like Open Mind. MuM today said that for the 9 months so far in 2020, sales overall were up 4% to €181 million, with the VAR (Autodesk) business at €126 million, up 5%, while M+MSoftware reports revenue of €55 million, essentially flat when compared to 2019. Open Mind is sold via perpetual licenses, at a typical $50,000 per, which requires a very different selling process than a $3,000 subscription. When a pandemic makes in-person selling tough, the lower entry price and easier transaction process of a subscription offering make it easier to sign new customers, and the recurring revenue of past sales cushions shortfalls today.

CEO Adi Drotleff said in prepared remarks that he expects “a strong Q4 with earnings around previous year’s record level, so for 2020 new record earnings per share in the bandwidth of 107-118 [Euro] Cents can be expected, as well as 100-105 Euro] Cents dividend after 85 in PY. We are pleased to see cash flows already closing in on the 2 Euros level, indicating where we in the mid-term want to drive earnings per share, from 2021 onwards in steps of +18-24 Cents per year.”

Is MuM past the worst of the dip? Is our PLMish world? We’ll see. No clear signs here — but the Q3 results do show improvement, and that’s a good thing. And that 5% increase in MuM’s VAR business bodes well for Autodesk, which reports results next month.