AVEVA says demand improved in H2, leading to FY2021 pro forma revenue up 2% occ — it’s complicated

There’s a lot going on at AVEVA, with the close of the OSIsoft acquisition, the end of a fiscal year, a new CEO, a global pandemic, and the recovery (or not) of the energy and manufacturing sectors — so this will, by necessity, be a two-part blog. First, a rehash of the main news of the results, then a longer piece after I listen to the earnings call and attend a briefing with the new CEO.

First the results:

• AVEVA reported several types of results today. On a statutory basis, meaning as-accounted, for the taxman, total revenue was £820.4 million, down 2%
• Looking just at AVEVA alone, total revenue was down 4% to £803 million, meaning that OSIsoft contributed £17.4 million since the acquisition closed on March 19, 2021
• And if AVEVA and OSIsoft had been merged on the first day of AVEVA last fiscal year (April 1 2020), pro forma revenue for fiscal 2021 was £1,196 million, down 1.4% as reported but up 2% on an organic, constant currency basis (occ). The occ results matter because AVEVA is both acquiring OSI and divesting itself of several businesses
• The standalone AVEVA business reported revenue up 0.2% occ, which the company called “resilient”, while OSIsoft reported revenue up 6.6% in constant currencies (cc). Funnily enough, each business says it grew 10.6% in the second half of fiscal 2021, which AVEVA says shows the improved business environment in power, chemicals, food & beverages, packaged goods, pharma, and life sciences as the world economy continues to recover from COVID. The company also said that energy and shipbuilding continue to be weak
• About AVEVA+OSI: the company expects “substantial” cross-sell opportunities, selling AVEVA into OSI and the inverse, and intends to develop new products that combine technologies from both companies
• Since for most of fiscal 2021, OSIsoft was an independent company, let’s dive into AVEVA’s results. For AVEVA only subscription revenue was £353 million, up 11% (up 14% occ) while maintenance revenue £192 million, down 5% (up 1% occ) as some buyers opted to switch traditional maintenance to subs.
• Again for AVEVA only, revenue from perpetual licenses was £137 million, down 24% (down 18% occ) as the company focuses on selling subs and Covid made larger deals hard to close.
• Still for AVEVA only, services revenue was 121 million, down 11% (down 9% occ), as the company continues to “focus on higher-margin software sales”
• For most of fiscal 2021, AVEVA was still organized into its four units; Engineering, Monitoring & Control, Asset Performance Management, and Planning & Operations. Engineering was again the largest business, contributing 42% of revenue or around £337 million. AVEVA said that revenue was down 4.3% occ overall, while recurring revenue declined by 2.4% occ, “which in the context of the difficult global capital expenditure environment was robust, helped by our ability to help customers mitigate risk in capital project execution and use engineering information management in operations”
• Monitoring & Control represented 32% of total revenue, or about £257 million. AVEVA said this was up 6.4% occ, recurring revenue was up 29% occ as “customers continued to focus on operations efficiency, remote operations and collaboration”
• Asset Performance Management represented 14% of total revenue, or around £112 million, which AVEVA said was down 2% occ as AVEVA continues to transition customers to subscriptions, while recurring revenue was up 15% occ
• Finally, Planning & Operations represented 12% of total revenue, or about £96 million. AVEVA said this was up 3% occ while recurring revenue was up 20% occ. Interesting color: AVEVA said “growth was supported by sales of Supply Chain planning solutions to help customers in the Energy sector operate efficiently in the context of the disrupted market”
• On a geo basis, for standalone AVEVA, revenue from EMEA was £328.4 million, basically flat (up 5% occ). Performance in the first half of the fiscal year was driven by customers moving work to the cloud; in the second half, “AVEVA saw material new contract extensions in the Food & Beverage, Marine, and Energy sectors, with notable new customer wins addressing renewable energy and carbon capture” as well as contract extensions with its largest EPC clients and wins at global (oil) supermajors
• Revenue from the Americas was £256 million, down 8% (down 4% occ), with “significant reductions in perpetual licences and services partly offset by good growth in subscription and Cloud sales. Trading conditions were challenging due to the depressed economy and difficult conditions in the Oil & Gas sector in particular”
• Revenue from Asia Pacific was £219 million, down 4% decline (down 2% occ) “against a very tough comparative in the previous year, which included a large Global Accounts contract. AVEVA delivered strong double-digit growth during the second half of the year, following a difficult first half due to the Covid pandemic”

In the earnings press release, new CEO Peter Herweck said, “The Group reacted quickly to the Covid crisis, so that despite a challenging first half, the second half saw double-digit revenue growth. At the same time, our transition to Subscription continues at pace. The acquisition of OSIsoft has established AVEVA as a clear global leader in operational industrial software, further enhancing our ability to lead the digital transformation of the industrial world, with a more diversified customer base, supporting their energy transition and sustainability journeys. Initial customer feedback on the combination of AVEVA and OSIsoft has been extremely positive and I look forward to capturing the significant value opportunity over the coming years. Although early in the financial year, trading has started well for the enlarged AVEVA Group and it is performing in-line with our expectations.“

AVEVA didn’t update its outlook in this release, except to say that it assists and benefits from the “ongoing digitalisation of the industrial world”, tempered somewhat in the near term by COVID-related uncertainty. AVEVA is hosting an investor event on July 1, when it says it will update its long-term targets to include the acquisition of OSIsoft.

OK. More later.