ESI’s Q3 shows slowing declines — no upturn just yet, though
ESI Group just reported its Q3 results — and they pretty much reflect the patterns seen so far this year but hint that things may soon improve. Total Q3 revenue was €22 million, down 12% as reported, and down 9% in constant currencies (cc).
- License revenue was €17 million, down 8% (down 4% cc)
- Within license revenue, Repeat Business was €11 million, up 2% cc, an uptick from the increase of 0.5% cc reported for the first half of the year. This category is renewals, add-on seats and product, etc. so is a reflection of continuation and expansion in existing accounts
- New Business, which for ESI is new products sold into existing accounts as well as new customer acquisitions, at €2.6 million, also improved in Q3, declining 23% cc from a year ago, compared to 53% cc in H1. That doesn’t sound like much of an improvement but it’s at least in the right direction — everyone is finding new business incredibly hard to close right now
- Services revenue was €5 million, down 24% as reported and down 22% cc
- For the year to date, total revenue was €103 million, down 9% as reported and cc
- By geo for the 9 months, revenue from EMEA was €50 million, down 11% as reported and 11% cc, mainly in France and Southern Europe. Revenue from the Americas was €15 million, down 6% (down 6% cc); and from Asia, revenue was €38 million, down 3% (down 3% cc)
- In terms of end industry, the company says license activity remained stable in automotive and ground transportation, while new business in aerospace was affected by that industry’s slowdown due to Covid 19
CEO Cristel de Rouvray told investors that some of ESI’s customers are pausing projects, and therefore slowing revenue to ESI — but not giving that business to competitors. She sees this having a positive side: demand is building as customers use this time to consider their digitalization strategies, which ultimately builds demand for ESI solutions.
Will we see a rebound in Q4? That’s the million-dollar question, said Ms. de Rouvray. She expects a “gradual erosion of the paralysis” she sees on a global level, but not a dramatic reopening. So far, she said, ESI hasn’t had “any bad surprises around renewals and no big indications that there are going to be bad surprises”. ESI sees Q4 benefitting from the “robustness of [its] existing business and a revival of innovative new business”. From everything said on the call, Q4 will be all about that repeat business — any new business will be additive, as work spins back up and people reimagine how they will work in the future.