4+ on a Friday, earnings edition: Addnode, AspenTech, Cadence and Schneider Electric

Oct 28, 2022 | Hot Topics

So much news this week! A quick recap:

Addnode gets two spaces in this roundup, one for acquisition and the other for earnings. First, the company announced that it has acquired JBL’s Dassault Systemès-related business, which will merge into Addnode’s TECHNIA’s North America Simulation Division. “With the acquisition, TECHNIA improves its capacity to both develop existing client relationships, as well as strengthening its position as a Dassault Systemès partner in the US market.” No details.

Addnode also announced results for the third quarter. Reported revenue was up 75% ( to SEK 1,624 million; on an organic basis, revenue was up 27% and up 23% in constant currencies. The company highlighted “strong organic growth of Symetri in the UK, the positive progress of recent acquisition Microdesk of the USA, and a higher sales share from multi-year agreements”, said that PLM “demand remained good, but the German PLM market has started to show signs of slowing” and that it saw “continued good demand from public sector customers, especially from technical services departments in Sweden’s municipalities and the country’s armed forces.” In general, “Demand is good, but we’re attentive to how an uncertain business environment may impact us … Our customers’ needs for digital solutions for mission-critical processes in R&D, design, manufacturing, construction, infrastructure, facility management and public administration will not disappear.” 

Why tell you about Addnode? We need to keep an eye on how resellers like Mensch und Machine and Addnode fare given the economic and geopolitical uncertainties manufacturing companies face. These VARs are large enough to be geographically and end-industry diverse yet are the front-line when it comes to their OEMs’ pricing and marketing patterns. They are canaries in the ecosystem coalmine.

AspenTech reported results for the first quarter as the “new AspenTech,” which includes the OSI and SSE software groups that came into AspenTech via its merger with Emerson. (Recap: Aspen got reams of cash plus the two businesses; Emerson got a 55% ownership stake in a new AspenTech.) AspenTech says the integration of OSI and SSE is moving ahead as planned, with a new license model (tokens) release of SSE out last week. For its fiscal Q1, total revenue was $251 million. License and solutions revenue was $160 million; maintenance revenue was $78 million, and services revenue was $12 million. The company reported seeing a solid start to the year in refining and upstream, with chemicals customers increasing investments. Much more here.

Cadence also reported results this week. Total Non-GAAP revenue for the fiscal Q3 was up 20% to $903 million. That result caused the company to raise its guidance for fiscal 2022 outlook to non-GAAP revenue of around $3.55 billion (up 19% or so). One possible sour note on the optimism: the US is placing export controls on technology transfers to China, accounting for 14% of Q2 and 17% of sales in Q3. Cadence management said it expects the impact of the restrictions to be limited and has already baked that into its guidance — and, anyway, has confidence in its vertical and geographic spread. Cadence didn’t mention its CFD offerings other than to say they are pleased with the Fidelity CFD rollout and the Future Facilities acquisition integration. Go here for more details.

Finally, Schneider Electric reported results, which you can read here. I was mainly interested in an update on their acquisition of AVEVA but there was no new news. The companies expect to close the deal sometime in Q1 2023. “This proposed transaction, though not compulsory, presents an opportunity to accelerate the growth of our software strategy, provide one data hub and a fast track to the Enterprise Metaverse.” Schneider Electric said that revenue from Software and Digital Services “grew double-digit organic in Q3. Software [revenue] for Energy Management grew over 20% in the quarter, with strong contributions from IGE+XAO, ETAP, ALPI, and RIB Software.” An RIB shoutout! The only mention of AVEVA: “Agnostic software offers for Industrial Automation are represented through AVEVA, which remains focused on its transition to subscription and the growth of Annualized Recurring Revenue (ARR), which has been growing double-digit year-on-year. This transition has a negative impact on sales growth and profitability, which is expected to last for some time.” In other words, the perpetual-to-subs transition strikes again.

Bottom line? With one very full earnings week behind us, things are looking … OK. Maybe a little better than OK. DS’ license revenue miss was really the only negative news, and it’s possible that DS can recoup those sales once business in China returns to a more normal pattern. The overall tone has been cautious, and perhaps a bit surprised that the economic rumblings swirling all around us haven’t led to worse performance. It feels like everyone is holding their breath to see how the rest of the year goes. More news coming next week.

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