Earnings catch up: Siemens reports FQ1, ups DI growth targets

Feb 21, 2023 | Hot Topics

Siemens recently announced upbeat results for its fiscal first quarter — so good, in fact, that the company raised guidance for Digital Industries (DI) and Smart Infrastructure and, as a result, for the group as a whole. Since the PLMish bits are primarily within DI, we’ll focus there. Siemens reports that DI Software revenue for the quarter was €1.136 billion, more or less flat as reported and down 6% in constant currencies. Within that total, PLM was “flat,” and EDA was down as “lower volumes from larger orders” couldn’t make up the difference against a terrific quarter a year earlier. Since Siemens’ fiscal year ends in September, we need to calendarize the year to compare against Dassault Systèmes and the rest. For the twelve months that ended in December 2022, DI Software had revenue of €4.681 billion, up about 6% as reported from the prior year.

Looking ahead, Siemens expects Digital Industries to achieve revenue growth of 12% to 15% in fiscal 2023 (up sharply from the prior guidance of 10% to 13%). Within that, the company says, “the software business is expected to show improved revenue growth on easy comparables, while profitability will continue being impacted by SaaS- transition and EDA orders. We expect revenue growth acceleration for the second half of the year compared to the rather soft prior-year quarters. On the other hand, the SaaS transition will continue to impact profitability, which will also be characterized by a comparatively low level of orders in the EDA business. For the second half of the fiscal year, we expect the EDA business, and the software business overall, to see clear acceleration in revenue growth as well as improving profitability”. As proof points, the company said software orders were “strong” and the SaaS licensing model “trended positively.”

To strengthen their point about SaaS adoption, Siemens said that 5,450 customers signed on to the SaaS model in the just-ended quarter, up from 3,100 in the prior quarter — continuing the near doubling we’re been seeing in sequential quarters. It’s interesting: we tend to think of Siemens as serving the biggest companies, but that’s not the case when it comes to SaaS. Of those 5,450 customers who signed on to the SaaS in the most recent quarter, “an increasing share [are] small and medium enterprises and start-ups. And among them are around 70% new customers, underpinning our ambition to expand our existing customer base.” And, of note: those are customer tallies, not users or orders. Many customers likely place more than one order as they ramp up installations, and most customers likely buy a number of seats. (Though we don’t know how many; that would be an interesting thing to track.)

In November, DI Software CEO Tony Hemmelgarn told investors that Siemens was investing on the order of €270 million per year in cloud — infrastructure and apps — and that’s what’s leading to adoption and revenue growth. We don’t have comparable data for the quarter just ended, but back then, he said that cloud PLM revenue in FQ3 (ending in June 2022) was three times what it was in FQ1 (December 2021).

So, Siemens Digital Industries Software. €4.681 billion in calendar 2022 revenue, €1.136 billion in the December quarter. Meh performance in the most recent quarter, but upbeat outlook based on orders and momentum. Keep these numbers in mind as we get to Dassault Systèmes and Autodesk.

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