Dassault Systèmes Q2 2021 Results: “Revenue growth”, need to be confirmed
On July 27, 2021, Dassault Systèmes) announced its financial results for the second quarter of 2021.
In the report, the company highlights the increase in revenue and profit, but the comparison is to last year (Q2 2020) when the performance was poor, and in the span of two years, there is no growth in key areas and the growth is below that of the industry as a whole.
Presentation content and analysis
On July 27, 2021, Dassault Systèmes announced its financial results for the second quarter of 2021.
Dassault Systèmes Reports Strong Second Quarter Results
As stated in the report, “Organic software revenue grew 15% with license revenue increasing 38%” compared to the same period last year (Q2 2020), when performance was impacted by the new coronavirus.
However, compared to the year before Covid-19 (Q2 2019), total revenue has barely increased and license revenue has decreased (248.5M€=>223.1M€), except for the revenue from Medidata, which was acquired during that period.
Looking at software sales by product line, we can see that although sales of Industrial Innovation, which includes the mainstay CATIA, ENOVIA, etc., have recovered from the previous year, they have not yet returned to the level of two years ago. (See figure below)
On the other hand, Mainstream Innovation, which mainly includes Solidworks, and Life Science, which includes Medidata, are performing relatively well.
3 Product Lines of Dassault Systèmes
Dassault Systèmes’ software product sales are categorized into three product lines.
Industrial Innovation software
High-end 3D CAD and PLM software, including the flagship CATIA, ENOVIA, SIMULIA, and DELMIA brands. It also includes the GEOVIA, NETVIBES, and 3DEXCITE brands.
Together, these brands will account for approximately 55% of software sales this fiscal year.
Life Sciences software
MEDIDATA and BIOVIA brands
Approx. 20% of software sales
Mainstream Innovation software
In addition to the so-called mid-range 3DEXPERIENCE WORKS family centered on the SOLIDWORKS, this segment also includes the CENTRIC PLM and 3DVIA brands.
About 25% of software sales
With the highest percentage of sales, industrial innovation maintains a high market share, especially among large corporations, contributes to stable profits, and is the most important target of 3DEXPERIENCE, the core strategy for the next generation.
The following discussion will focus on the status of this industrial innovation, the core business of Dassault Systèmes.
The state of industrial innovation
First of all, if you look at the orange line (4 quarter average of sales) in the Industrial Innovation sales history above, you can see that the revenue growth has already stopped in the fourth quarter of 2019, before Covid-19.
Looking at the overall market, the global PLM market is still growing at 3.8% in 2020 under Covid-19 and is expected to grow at 7.5% in 2021. (Source: CIMdata)
CIMdata Publishes PLM Market and Solution Provider Report
On the other hand, Dassault Systèmes’ Industrial Innovation is expected to show a negative growth of -4.3% in 2020 and a positive growth of 4.5% in 2021 compared to the previous year, which is not enough to keep up with the market growth.
This means that Dassault Systèmes’ Industrial Innovation product line (CATIA, ENOVIA, SIMULIA, DELMIA, etc.) has not been able to increase sales in the growing PLM market for about two years prior to Covid-19, and continues to lose market share.
As we have seen above, Dassault Systèmes’ sales of Industrial Innovation products have stagnated since the pre-Covid-19 period.
Looking at the earnings release, the examples cited as highlights are mainly life science and mainstream related, and the only example of 3DEXPERIENCE, which should be the main focus, is Alstom (a French rolling stock manufacturer).
In addition, there are only small-scale alliances and acquisitions in this field, and not much activity.
Further development of the company may need to be watched in the future.
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