A mixed bag: Schneider Electric and Dassault Systèmes announce very different Q3s

There’s much to parse with both of these companies, so this is a brief recital of facts while I figure out what, if anything it all means. Press releases and recaps were in the inbox this morning, and I was immediately struck by how different the headlines were: “Schneider Electric upgrades FY2020 outlook” because of “strong Q3 performance” on the one hand and “DS Q3 revenue misses guidance” even as revenue grew 13% as reported and was down 3% on an organic basis. One sells mainly hardware and some software; the other sells just about all software. Why so different? If anything, right now, one would expect the hardware business to be struggling, right? Inventories, shipping, installations are tough wid COVID restrictions — but apparently, it’s not that simple.

The nuts and bolts for each, until I can figure out the nuances:

Dassault Systèmes reported total IFRS revenue of €1,030 million (up 13%, up 17% in constant currencies (cc), and down 3% on an organic basis).

License revenue was down 15% as reported to €167 million, but that was up sequentially. CATIA revenue was down 3%, ENOVIA was flat, SolidWorks was up 5%. CATIA and ENOVIA sum up into the Industrial Innovation category; its revenue was down 5%. The raging bright spot was Life Sciences, which saw revenue spike 472% to €190 million — of that Medidata, was likely around €150 million.

By geo, the Americas was up 29% as reported (up 26% cc); Europe was up 5% and Asia was up 3%. So much more detail, but that’s the big picture.

DS CEO Bernard Charlès said in the earnings press release, “Recapping our progress during this quarter by our three sectors, we had a strong growth dynamic in Life Sciences & Healthcare, up double-digits on a comparable basis. Infrastructure & Cities grew 6% led by our activities in Asia. Within the Manufacturing Sector, we are seeing stable to growing year on year software performance in Industrial Equipment, High-Tech, Home & Lifestyle and Consumer Packaged Goods & Retail.”

Even so, DS management lowered revenue guidance for Q4 and FY2020, citing the global slowdown in business and consumer activity, and government shutdowns. The company now sees license revenue decreasing 19% to 20% in constant currencies for FY 2020 (that’s a bit more than the July forecast of a 16% to 18% decline). That leads to a non-IFRS forecast for total revenue of €1.19 billion to €1.22 billion for Q4, up 2% to 4%, and to €4.44 billion to €4.46 billion for the year (up 11% to 12%). DS also reconfirmed its earnings per share guidance, meaning that its cost control programs are holding — and making investors happy.

Switching to Schneider Electric, which headlined with “Strong rebound in Q3 2020; Revenue up +1.3% organic; Full Year 2020 targets upgraded”, we get the following details.

Total revenue in Q3 was €6,458 million, down 3% as reported, and up 1% on an organic basis. Product revenue (which in SE’s case means power converters, control systems and the like) was up in the mid-single digits on an organic basis, “benefiting from offers for residential & small buildings and from offers for discrete industrial markets”. Software & Services revenue was down by the low-single digits, “driven by a high base of comparison in Software and the impact of timing of specific projects of AVEVA that were pushed into Q4.”

I could go on but much of Schneider is adjacent to our PLMish world, so I’ll skip to the guidance:

Jean-Pascal Tricoire, SE CEO said, “During the third quarter, Schneider rebounded strongly, returning to growth in many economies exiting the strict lockdowns we saw in Q2. We saw a progressive recovery across the business throughout the quarter, which was boosted, in part, by pent-up demand from past orders and re-stocking in our distribution channels … While COVID-19 contagion levels continue to contribute toward uncertainty for Q4, the crisis has reinforced our customer’s agenda for sustainability and digitization, both areas where Schneider has focused its strategy, accelerating adoption of our full suite of digital solutions to serve these growing needs … Given the strong performance in Q3, the Group upgrades its 2020 targets: Revenue expected to be [down] between 5% to 7% [on an organic basis] (previously between -7% to -10%).”

One company changes its forecasts up, the other down. Interesting, no?

More later.