MCAD Industry View – A May 2009 Update

The Enovia brand which includes Enovia, MatrixOne and SmarTeam generated $44 million in the quarter or 11% of total revenue. This was down 22% year-over-year and down 37% sequentially. Note that MatrixOne was acquired in May 2006 for $410 million. Dassault has now combined SolidWorks and CosmosWorks into Mainstream 3D. This category generated $92 million accounting for 23% of total revenue. This represented a decrease of 8.3% year-over-year and a decrease of 6.6% sequentially. CAD generated $151 million or 37% of total revenue. This was down 17.5% year-over-year and was up 24% sequentially. See Table 3.

Net income for the quarter was $37 million which included a gain of $22 million in the sale of company headquarters. Earnings were down 56% from the net income of $86 million in the year ago quarter and a 60% drop from the $95 million in the prior quarter.

Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “As previously announced, the first quarter brought further deterioration of the economic environment which led to a significant decrease in our new license activity across brands and geographic regions. Despite this, first quarter earnings and margin results were well in line with our objectives, thanks to our cost savings.

Readers may see above the previous and the new ESI Group logos referred to in Recent MCAD News Highlights at the start of this May MCAD Commentary.

On April 29, 2009 ESIGroup reported financial results for its fourth quarter and for the fiscal year ended January 31, 2009. Total sales for the quarter were $35.8 million, a drop of 15.8% from the $42.5 million in the same quarter a year earlier, but an increase of 102% from the $17.7 million in the previous quarter. License revenue was $28.9 million or 81% of total revenue. This was a drop of over 19% from the year ago quarter, but an increase of 140% sequentially. Services and other revenue was $6.9 million, an increase of 2.1% year-over-year, and an increase of 21% from the previous quarter.

For fiscal 2009/2008 total revenue was $103 million, a 9.3% increase over the $94 million in fiscal 2008/2007. License revenue was $77 million accounting for 74% of total revenue. This was an increase of almost 5%. Service and other revenue was $26 million, an increase of 26%.

Excluding the new acquisitions of the Vdot team and of Mindware, consolidated since October 15, 2008 and December 16, 2008, respectively, sales would have been down -4.6% in actual terms and -8.7% by volume compared to the same period of the previous year.

For Licenses, the drop in activity over the fourth quarter “was essentially a result of the substantial fall of -35% in new business associated with the brutal slowdown in investments within the context of the economic crisis,” according to an ESI Group spokeman. However, the installed base remained stable, and “lays witness to the solidity of ESI Group’s business model, which is based on annual rentals and leads to substantial repeat License revenue,” per the same spokesman.

For Services, as in previous quarters, organic growth remained “buoyant” at +9%. Once external growth is taken into account, Services activity for the 4th quarter of 2008/09 came to €5.3 million, the highest level of quarterly activity ever recorded by the ESI Group.
The breakdown by geographical region was almost unchanged, with 49% of sales recorded in Europe, 35% in Asia and 16% in America. 82% of sales were recorded outside of France.

By business sector, 40% of booked orders came from the automotive sector, 24% from heavy industry, 8% from aeronautics and 6% from defense. “This stable split by sector highlights the necessity and advantages of using ESI Group solutions for major car manufacturers and their subcontractors, despite the economic context that is hitting them hard.”

Alain de Rouvray, ESI Group’s Chairman and CEO, said, “Although the current context of a global economic crisis reduces visibility on the increasing adoption of our solutions, and in particular regarding new orders, it also highlights the solidity of our activity’s recurrent nature and amplified client confidence. In a rationale of heightened competitiveness and given the need to innovate whilst reducing costs and delays, our End-to-End Virtual Prototyping solutions allow to manage with remarkable efficiency the virtual prototyping of industrial products from creation through to end development, to limit its complexity and risks, resulting in the successful validation of real prototypes “to get it right the first time”. Backed by a solid financial structure and by the proven pertinence of our strategic and commercial positioning, notably amongst our major corporate clients, we remain fully confident in ESI Group’s development and in the pursuance of the improvement in our profitability.”

On May 7, 2009 MSC.Software Corporation reported financial results for the first quarter ended March 31, 2009. Total revenue for the quarter was $53.6 million, a decrease of 12.4% from the $61.2 million in the first quarter of 2008 and a 5.8% drop from the $65 million in the fourth quarter of 2008. Software revenue was $17.4 million accounting for 36% of total revenue. This was a 21% decrease from the year ago quarter and an 11% decline from the previous quarter. Maintenance revenue was $31 million or 54% of the total. This was a 6% decrease year-over-year but a just over a 1% dip from the prior quarter. Services revenue was $5.2 million or 10% of the total revenue. This was down 16% from the first quarter a year earlier and down 5.8% sequentially.

On a geographic basis the Americas accounted for over 31% of total revenue, EMEA and AP each for over 34% of the revenue. See Table 4 for more details.

Net income for the quarter was $47 thousand compared to a net loss of $2.2 million in the year ago quarter and to a net loss of $22.4 million in the previous quarter.

On March 12, 2009 MSC.Software announced that its Board of Directors named 47-year-old Ashfaq A. Munshi interim Chief Executive Officer and President of the Company. These actions followed the relatively sudden resignations of William J. Weyand, Chairman and CEO and Glenn Wienkoop, President and COO, after four years. According to The Sunday Indian, Chief Executive William Weyand and President Glenn Weinkoop resigned because the company moved its governance structure towards current best practices and sought to separate the roles of CEO and Chairman. Photo of Mr. Munshi below.

The Board of Directors also named current board members Donald Glickman and Robert A. Schriesheim to serve as non-executive co-chairmen, effective March 12. The Board of Directors also retained a national firm to conduct a search for a permanent CEO. Munshi has been a Director of MSC since July 2005. Earlier, he was a corporate vice president at Applied Materials, responsible for software and automation. Previously he was VP/GM of the Enterprise Business Unit at Silicon Graphics and prior to that he was director of development and marketing at Oracle.

Ashfaq Munshi said of Q1 results, "In line with our guidance, total revenue decreased 12% in the first quarter versus last year. While software declined 21%, we achieved profitability and delivered $1.5 million of operating income. As a consequence of cost containment measures, we continue to see favorable trends in our cost structure." He concluded, "My focus as interim CEO is to evaluate and allocate resources consistent with a performance-driven approach to managing the business, while at the same time making sure that our products and the way we do business is aligned with our customers' requirement."

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