Dassault Systèmes Q1 2021 results, Industry sector on recovering
On April 28, 2021, Dassault Systèmes announced its financial results for the first quarter ended March 31, 2021.
According to the report, the main points are as follows, but it should be noted that for the same period last year (Q1 2020), new license revenue was down 20% on an organic basis and total revenue was down 1% compared to the prior year (Q1 2019). (Year-over-year comparisons below are non-IFRS, constant currency unless otherwise noted.)
Dassault Systemes announcement : Dassault Systèmes Reports 2021 First Quarter Results
“On an organic basis, non-IFRS software revenue up 10%”
This is how it is described in the announcement, but as mentioned above, the comparison is to the first quarter of last year, when performance was poor.
From this quarter, “organic” includes Mididata, which was acquired the year before last.
As for the breakdown of the revenue increase, SOLIDWORKS sales are up about 18% (including new licenses and maintenance), MEDIDATA sales are up 20%, and Industrial Innovation including CATIA/ENOVIA sales are up 4%.
Let’s take a closer look at the Industrial Innovation segment.
For Industrial Innovation, SW revenue is up 4%, of which CATIA is up 1%.
As seen in the graph, there has been no significant growth overall since 2018. For this quarter (Q1 2021), there is no growth in CATIA and ENOVIA, but there is an increase in “Others”, resulting in an overall increase of 1% YoY. As for the content of “Others”, based on the comments at the time of the announcement, SIMULIA seems to be the main contributor.
“Non-IFRS licenses and other software revenue up 25%”
“License and other software revenue” refers to “new license revenue,” which does not include recurring license and maintenance fees, and is mainly generated by CATIA and ENOVIA.
Again, the comparison is to the first quarter of the previous year (2020), which is lower than the year before last (2019) in absolute terms without taking into account currency fluctuations. (Q1 2019 €213.2M, Q1 2021 €203.8M)
“non-IFRS EPS of €1.14, up 28% in constant currencies”
EPS increased as a result of a 3.2% improvement in profit margin, with sales growth contributing 0.7 points and cost (OPEX) reduction contributing 2.5 points.
Outlook for the next quarter and beyond?
In this announcement, the company also announced its outlook for the next quarter and full year.
According to the forecast, total revenue (revenue) for the second quarter (next quarter) of this year (2021) is expected to be up 6-8% and EPS is expected to be up 18-23% due to cost reduction.
As a breakdown of the revenue increase, new license revenue is expected to increase by 29-38%, and recurring license revenue is expected to increase by 9-10%.
Although the new licenses appear to be a significant increase, they are actually about the same when compared to the same period in 2019, as the second quarter of last year (2020) was a significant decrease compared to the previous year (2019). Therefore, it seems to be a reasonable plan if they can continue with our normal business.
For the full year of 2021, new license revenue is not expected to exceed that of 2019 at the most, so the plan seems reasonable as well. Cost reduction is also expected to continue.
Status of the 3DEXPERIENCE strategy
As can be seen in the graph above, there is no significant growth trend in sales to the manufacturing industry (Industry Innovation) at this time.
For several years, Dassault Systèmes has been pursuing a strategy of “3DEXPERIENCE” that integrates all data around a platform and optimizes not only the development process but also the entire corporate activity.
With the recent industries focus on the importance of data collaboration and cloud computing in particular, Dassault Systèmes’ foresight should work well, but does not seem to be translating into business numbers at this time.
The announcement included a case study of how “Jaguar Land Rover expand its adoption of 3DEXPRIENCE” and a comment that “3DEXPERIENCE engagements are proceeding as planned, such as Toyota, today we are equipping 18,000 people, and has been deployed to 14 programs.” However, no specific details or business size have been disclosed for either of them.
We need to see if they can leverage their platform advantages to transform customer processes, thereby increasing the value of their systems and achieving business growth. New strategies, such as expanding partnerships by promoting openness and alliances with other leading companies, may be considered.
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