DS’s needle moved in 2020, mostly in life sciences — and SolidWorks is a billion-dollar brand!

Earlier this month, Dassault Systèmes (DS) reported results for its fourth quarter and, therefore, the full year of 2020. First a quick recap, then a bit about what it all might mean, and then some reflections on this month’s 3DExperience World (aka SolidWorks World) virtual event.

First the earnings:

• Q4 revenue was €1.22 billion (flat on an organic basis, up 3% as reported and up 7% in constant currencies, cc)
• Software revenue was €1.11 billion (up 6% as reported, up 11% cc) due to what the company characterized as “large 3DExperience deal activity in both licenses and subscriptions” and the contribution from Medidata. I’m using IRFS accounting in this report; DS said that on a non-IFRS basis, “subscription revenue was up double-digits in the aggregate and on an organic basis … [while] support revenue increased single-digits with renewals well in line … During the fourth quarter, the Group benefited from a strong performance in Life Sciences, Mainstream Innovation and 3DExperience activity in Industrial Innovation.”
• Within the Software total, recurring software revenue of €806 million was up 16% as reported (up 7% cc) and 9% organically while license revenue and other software revenue of €299 million was down 12% (down 9% cc).
• CATIA revenue was €295 million, up 1% (up 4% cc). DS said this was a record year for CATIA Systems; I’m trying to find out what that means
• ENOVIA revenue was €99 million, down 5% *down 1% cc)
• CATIA and ENOVIA are part of what DS now calls its Industrial Innovation reporting segment. Its total revenue in Q4 was €624 million, down 4% (down 1% cc). DS said that it saw significant 3DExperience transactions in Aerospace, Transportation & Mobility, and Energy & Materials during Q4. This segment also includes the SIMULIA, DELMIA, GEOVIA, NETVIBES/EXALEAD, and 3DEXCITE brands, and we know nothing about how they individually performed in Q4 – that said, as a group, their total revenue was €230 million in Q4 (and €876 million for the year), down 9% for the quarter and down 5% for the year. More below.
• SolidWorks revenue was €235 million, up 1% (up 7% cc)
• SolidWorks is part of the Mainstream Innovation reporting line; its revenue was €263 million, up 3% (up 10% cc). DS doesn’t break out Centric but did comment that its “results were up sharply in Q4 on a strong catch-up from prior quarters”. Also, that the company is seeing a “promising early ramp of 3DExperience platform and 3DExperience WORKS cloud-based family of solutions”. More on that below
• Finally, the Life Sciences segment, which includes Medidata and BIOVIA, reported revenue of €218 million, up 62% (up 67% cc)
• And, by geo, software revenue from the Americas was €411 million (up 25%, up 32% cc); from Europe, €437 million (down 2%, flat cc); and from Asia, €257 million (flat, up 3% cc). DS said “results were animated by North America, China, Asia Pacific, and Western Europe” all offset by a “weak” Southern Europe, “soft” Korea, and a “difficult environment” in India.

For the year, total revenue was €4.45 billion, up 11% as reported and up 12% in cc. Organic, non-IFRS revenue was down 1%. Finally, total software revenue was €4.01 billion, up 13% (up 15% cc).

Such a lot of numbers, up, down, as reported, cc, organic, and with acquired revenue. What can we make of it all?

First, if we look at the different parts of DS’ business, we see that growth mostly came from the life sciences. On an organic basis, non-IFRS total revenue for 2020 was down 3% cc; but including Meditata, it was up 12%. That makes total sense given where we are right now, as drug developers hustle to get vaccines and therapies to market. But DS’ largest PLMish brand, CATIA, was down 2% for the year and its fastest-growing PLMish brand, SolidWorks, was up only 4% (versus 6% in FY2019). Both of those are worrisome.

And if we look at the bucket of “Other” in the Industrial Innovation segment –SIMULIA, DELMIA, GEOVIA, EXALEAD, 3DEXCITE– we see that their total revenue was down 9% for the quarter and down 5% for the year. For comparison, ANSYS revenue is likely to be up 7% or so for the year (not including its LSTC acquisition); if SIMULIA did something similar, the other brands declined sharply. We can’t, of course, know how much of this perceived decline is due to a switch from perpetual licenses to subscriptions, but taking this on its face value, it’s not a good trend. (ANSYS reports results later this week.)

Of course, as CFO/COO Pascal Daloz pointed out, many aspects of Q4 came in better than expected. Software revenue was up a percentage point more than forecast, license revenue decreased less than expected and so on. M. Daloz said that some of this was due to larger deals from geos outside North America and China, which had been strongest in prior quarters.

The second major takeaway for me is that we continue to be in an unpredictable economic climate. It seems to be getting better, in general, but no one seems to have enough confidence to say how that the improvement will smooth out across industries and geos. The good: improving. The not-awesome: uneven.

Last, let’s talk SolidWorks. Its revenue was up 1% (up 7% cc) to €235 million in Q4, for a total of €841 million for the year. That’s just over $1 billion at today’s exchange rates, so: Congrats to the SolidWorks team on becoming a billion-dollar brand! [UPDATE: I used today’s exchange rate for this math. A stricter methodology would have used the 2020 average exchange rate of 1.14, which would get SolidWorks to $959 million. No matter how you do it, SolidWorks is thiiiiiiis close.]

The 3DExperience World (fka SolidWorks World) event last week continued DS’ evolution of the brand to appeal to a broader audience. As DS CEO Bernard Charlès told investors during the earnings call, the 3DExperience Works platform of integrated solutions is intended to “reach new types of users. They want browser-based access on mobile and so on … expanding what they are used to getting on the desktop with cloud roles. A lot of customers are now considering [how] manufacturing connects with the supply chain. That’s another area where we are moving out from pure manufacturing engineering to really manufacturing execution — not to forget that DELMIAworks is [already] part of the 3DExperience Works family, because I think we’ve got good data points on that aspect.” M. Daloz said that 3DExperience Works could ultimately see “double-digit growth … not only coming from the traditional sectors (aerospace and defense, transportation and mobility), but also from the high tech, medtech, life sciences at large and also coming from the fashion industry as well.”

That said, M. Charlès was clear that he wasn’t abandoning the current product set and its customers: “We [want to] expand the portfolio available to the current vibrant, large, SolidWorks community [with], for example, project management, integrated analysis on the cloud, collaborative innovation on the cloud.” Listening to the sessions at the user event, the main themes were “do what you do, but better/more” and reaching out to those new user types. To that end, DS announced Maker and Student editions (available later this year), that offer access to much of the platform at significant discounts.

Back to the bigger, broader DS. What’s 2021 going to hold? The company is guiding for non-IFRS to be in the range of €4.715 billion and 4.765 billion, or cc growth of 9% to 10%. The company expects non-IFRS revenue of €1.145 billion to €1.170 billion, which would be constant currency growth of 6% to 8%.