PLMish earnings update: Nemetschek, Cadence, SAP all hold steady

The first real week of PLMish earnings went reasonably well. Dassault Systèmes gave more detail on the disappointing news from a few weeks ago but didn’t fundamentally change anything. Hexagon saw a “challenging demand environment”, with overall revenue down 1% to €1,353 million — but Hexagon and Dassault Systèmes are really complex businesses and it’ll take time to go over their earnings releases. Nemetschek, on the other hand, simply preannounced its second-quarter results after closing the acquisition of GoCanvas. Let’s start there:

Nemetschek confirmed its organic growth targets for 2024 and added to those totals the expected contribution from its GoCanvas acquisition. The company expects organic revenue growth of 10% to 11% year/year, plus an added 3% of revenue from GoCanvas. GoCanvas isn’t as profitable as Nemetschek, so overall profit will decline a tad, but Nemetschek says “these figures do not yet reflect the full potential of the acquisition, as both the revenue and EBITDA [are] reduced by a high single-digit million euro amount in the second half of the year due to the IFRS-related purchase price allocation.”

Now about Q2: revenue was up 9.7% year/year as reported and in constant currencies to €228 million. We’ll learn more on July 31, when the company will discuss this more fully.

Cadence reported Q2 results on Monday, with Q2 revenue up 9% from a year ago, to $1,061 million; that’s $21 million ahead of earlier guidance — and, interestingly, about half of that BETA CAE, which closed in early June and so contributed perhaps a month’s worth of revenue to the quarter. The company raised its guidance for 2024 to revenue of $4,630 million to $4,660 million, including an expected $40 million contribution from BETA CAE — that forecast implies that organic revenue guidance is unchanged, with stronger growth in the second half of the year. Still mind-boggling to me: Cadence paid $1.2 billion for BETA CAE, which is expected to contribute $40 million this year. Wow. (To be clear, that’s exactly what Cadence expected when it acquired BETA, so this is not disappointing at all. But that revenue multiple … ) Also of interest: Cadence lowered its expectations for revenue from China, from 14% to 15% of revenue to 13% — due to Chinese home-grown competition, economic uncertainty, and a lack of clarity in whether Chinese buyers would want upfront (big) or recurring revenue deals (with a smaller contribution to immediate revenue).

SAP also reported Q2 results on Monday, and we’re interested because of its cloud uptake. Total revenue of €8,288 million was up 10% year/year; Cloud Revenue was up 25% to €4,153 million, and the company’s Cloud backlog grew 28% to €14,808 million. Driving Cloud growth was the momentum in the Cloud ERP Suite, which grew 33% in Q2, the tenth consecutive quarter of year/year growth exceeding 30%. SAP specifically mentioned strength in large cloud transactions, as deals over €5M comprised more than half of cloud orders in the quarter. Even so, macroeconomic uncertainty led SAP’s management to leave its current guidance in place for the remainder of 2024. Also of note: SAP said that 20% of deals in Q2 included some sort of AI use case. What does that all mean? At least on the enterprise side of businesses, cloud adoption continues to grow — it’s still only half of the total revenue for SAP today. Still, a CAGR of 30%/year implies that it won’t last long. We also see that AI can make the difference between a closed deal and one that’s still under discussion. Of course, it’s one thing to use AI to create business documents more quickly; engineering and design aren’t that formulaic. However, it does argue that the acceptance of AI (in a business setting) is growing. And, FWIW, SAP didn’t have any negative comments on China, saying that “cloud revenue growth .. [in] China [was] particularly strong.”

I still need to dig through the Dassault Systèmes results announced yesterday and Hexagon’s that came out earlier today. Back soon.