MCAD Industry View – An August 2009 Update
by Dr. Russ Henke and Dr. Jack Horgan
This August 2009 issue of the MCAD Industry Commentary recounts the financial performances of a selected group-of-six MCAD/PLM vendors for the nominal Second Quarter of 2009.
In the first MCAD Industry Commentary published May 2003 in MCADCafé.com, then-recent yearly and quarterly financial performances of a selected group of public Mechanical Computer Aided Design (MCAD)vendor companies were analyzed and compared. Expectations of future financial performances of these same MCAD entities were documented.
The May 2003 MCAD Commentary was followed by twenty-four quarterly updates in MCADCafé.com, one for each subsequent calendar quarter. URL's on all past articles are available. The entities initially covered were ANSYS, Autodesk, Dassault Systèmes, UGS PLM, ESI Group, Moldflow, MSC.Software, PTC and Tecnomatix.
As a result of the acquisition of Tecnomatix by UGS that closed April 1, 2005, Tecnomatix was eliminated from coverage thereafter as a separate entity.
On May 7, 2007 UGS announced the close of its acquisition by Siemens AG effective May 4. Thereafter, the business went to market as UGS PLM Software (and later as Siemens PLM Software), a global division of the Siemens Automation and Drives (A&D) Group. Over the years UGS itself had bounced back and forth between being a public company and a private company under different ownerships. Regrettably, we have been able to gain very little insight into UGS’ financial performance itself from public Siemens' corporate reports after the Siemens acquisition. Occasionally we will include Siemens PLM Software news items that bear on the industry as a whole, as in this August 2009 issue of the MCAD Commentary in the comments about MSC.Software. Siemens PLM was also mentioned in the May 2009 MCAD Commentary.
Then on June 25, 2008 Autodesk completed its acquisition of Moldflow Corporation, so thereafter Moldflow was eliminated here from separate coverage.
Accordingly, this twenty-sixth MCAD Industry article in the sequel recounts the financial performances of the remaining group-of-six (G6) MCAD/PLM entities for the nominal second quarter of 2009.
Recent MCAD News Highlights
On August 20, 2009 ANSYS announced its inclusion on the 2009 FORTUNE 100 Fastest-Growing Companies list. ANSYS is ranked number 33 overall, the only engineering simulation provider to make the list. Of the 24 companies in the technology sector, ANSYS was in the top 10, ranked at number eight. FORTUNE's Fastest-Growing list includes profitable, publicly traded companies with at least $50 million in annual revenue and a market capitalization of at least $250 million. Companies on the list must also have posted yearly revenue and earnings per share growth of at least 20%. To compile the list, FORTUNE ranked companies based on the last three years of revenue, profit growth and total return using data provided by Zacks Investment Research. In the past, ANSYS has been listed on the magazine's 100 Fastest-Growing Small Businesses list, which includes public companies with annual revenues of less than $200 million.
On July 01, 2009 ANSYS announced the latest release of ANSYS Icepak software, which is said to provide robust and powerful fluid dynamics technology for electronics thermal management. The 12.0 release introduces new solutions for printed circuit board (PCB) and package thermal analysis, new and enhanced technology for meshing complex geometry, and new physical modeling capabilities. Properly applied, the ANSYS Icepak software, based on the ANSYS FLUENT CFD solver, can accelerate the product development process by simulating the dissipation of thermal energy in electronic devices at the component, board or system level.
In late July 2009, Cyon Research published its 2009 Survey of Engineering Software Users. The survey takes a deep look at engineering software buying preferences and practices.
Here's a sample from the executive summary:
The economic outlook has never been more uncertain. When will customer spending on engineering software and related hardware recover?
Is the worst over, or can we expect further declines? What is the risk to recurring software maintenance or subscription revenues? How many of your firm’s competitors have already begun investing in their engineering software tools to prepare to gain market share in the eventual recovery? What factors are driving customer spending priorities in the post-recession period? How do you identify the companies that are likely to be the first to increase investments in engineering software?
Cyon Research’s recently-completed survey of technical software users helps answer these questions and others like them. This survey is based on validated responses from nearly 600 users of CAD, CAM, CAE, and PLM software and focuses on customer purchasing policies, practices, and spending expectations. Cyon Research’s Survey of Engineering Software Users is an ongoing project, intended to capture market trends early. Cyon Research customers on annual subscription receive this and other updates as part of their paid subscriptions.
More information on the survey is available from Email Contact.
On June 3, 2009, PTC acquired privately held Relex Software Corporation. Relex provides software and services for analyzing design and field data in order to evaluate and improve product reliability and safety. Relex products and services are used by thousands of customers in a variety of businesses around the world, including aerospace & defense, medical equipment, telecommunications, electronics and high-tech, automotive, and industrial equipment. Terms were not disclosed.
The following multi-paragraph news highlight discusses the July 07, 2009 MSC.Software announcement that it had entered into a definitive agreement with affiliates of Symphony Technology Group (STG) under which a company controlled by STG would acquire all of MSC's outstanding shares in a one-step cash merger transaction valued at approximately $360 million. The comments of the MCAD Commentary authors are included. This set of paragraphs ends at the section of the August MCAD Commentary entitled, “The G6 MCAD Vendors' Financial Performances in Q2 2009”.
Under the terms of the definitive agreement mentioned above, MSC's stockholders would receive $7.63 in cash for each share of MSC common stock. The transaction is subject to customary closing conditions, including approval of MSC's stockholders and regulatory approvals. This transaction is proceeding and is currently expected to close near the end of the third calendar quarter of 2009. Class action lawsuits have already been filed claiming that the purchase price should be higher, even though the $7.63 price per share represented approximately a 13% premium to the closing price per share of MSC's stock prior to the announcement and approximately a 24% premium compared to the 90 trading-day trailing closing average price per share.
The private investment firm Elliott Management Corporation ($14 billion) is MSC's largest shareholder, owning about 13%. Elliott has committed to provide debt and equity backing to help finance the transaction (around $50 million). Wells Fargo Foothill, part of Wells Fargo & Company and CapitalSource, has committed to provide senior debt financing of around $65 million. What ownership and influence Elliot will later have is not clear. Some observers think that the ways of private equity companies are mysterious, and/or that this deal is convoluted. However, MSC.Software’s cash, investments and current debt are attractive.
Headquartered in Palo Alto, CA, the Symphony Technology Group (STG) is a strategic private equity firm with the announced mission of investing in and building “great” software and services companies. In addition to capital, STG provides expertise with the goals of enabling its companies to deliver maximum value to their clients, to retain and attract the best talent, and to achieve best-in-class business performance. All STG companies are expected to grow through innovation. STG's current portfolio consists of nine global companies with combined revenues of $2.5 billion and 15,000 employees spread across North America, Europe and Asia.
Assuming that this transaction goes through as planned, MSC.Software will become privately held. The same thing happened some years ago to UGS PLM (Unigraphics); As mentioned previously, UGS PLM was ultimately acquired by Siemens AG in May 2007. Like UGS PLM when it was first taken private, it’s also entirely possible that STG may not publish any financial data regarding the acquired MSC.Software.
MSC.Software Corporation, formerly the MacNeal Schwendler Corporation, was founded in 1963. MSC was one of the original MCAE vendors, starting with NASTRAN. Accordingly, MSC was naturally included in the first of the authors’ MCAD Commentaries in May 2003, and MSC has been covered therein every quarter since that time.
Selected MSC.Software financials are presented in the chart below (Figure 1). Since 1995, the firm enjoyed its largest revenue year at $296 million in 2005. Over the last 8 years MSC.Software has averaged only about $253 million/year in revenue, with minimal profitability and several years of actual losses. Indeed, as recently as 2008, the firm lost $21 million. This loss included restructuring charges of $3.3 million and impairment charges related to intangible assets of $10.0 million. There was also a net tax charge of $17.3 million, resulting primarily from establishing a valuation allowance totaling $22.9 million.
MSC.Software’s chief market rival is ANSYS. Over 5 years, ANSYS has built its annual revenue from $134 million in 2004 to $478 million in 2008, a rise of 255%, while generating consistent and considerable profit, due to excellent management and a combination of organic growth and acquisitions. During that five year period, ANSYS went from only 50% of the level of MSC.Software’s annual revenue, to achieving 188% of it last year.
So the financial performance potential of an STG-owned and operated MSC.Sofware would appear at first glance to be proven, using ANSYS as a model. In addition, STG has apparently enjoyed great successes with its other investments to date.
Nonetheless, MSC.Software faces stern competition going forward. ANSYS is formidable and it’s certainly not going away. Moreover, several leading MCAD vendors have also moved into the analysis (or MCAE) space in recent years. Recall that Autodesk purchased Moldflow in the spring of 2008 and Algor at the end of 2008. Dassault Systemes acquired ABAQUS, Inc. in the spring of 2005. In the aftermath of an FTC action against MSC.Software, UGS PLM (now Siemens) acquired a perpetual, worldwide, free of royalties, nonexclusive license of the software program MSC.NASTRAN v2001, and other assets related to the software. (Note that historically, NASTRAN has been MSC.Software’s primary product. There are also several other niche vendors that offer access to a version of NASTRAN).
Today, MSC.Software is no longer as dependent on NASTRAN as in the past. MSC now offers sophisticated tools to perform complex analyses (structural, thermal, vibration, …) of mechanical components and systems using technologies like finite element modeling and analysis (FEM/FEA), dynamics and computational fluid dynamics (CFD). Lately, MSC.Software has been focused on Simulation. The thesis is that by employing computer simulation rather than building and testing prototypes (or reducing their use), end products get to market faster and with less cost. The use of simulation also allows for more design alternatives to be studied which should yield even better end products.
MSC says that many of its familiar and previously-stand-alone software products (NASTRAN, Marc, Dytran, Adams & Easy 5) have more recently been integrated into a “single solver solution multi-discipline framework” and delivered through what MSC calls “MD Technologies” -- MD Nastran & MD Adams - enabling engineers a to more realistically and accurately simulate the interaction between multiple physics within a single environment. MSC’s MD is said to offer interactive, coupled analysis solutions for motion-structures, structures-thermal, motion-mechatronics, composites failure chaining, nonlinear implicit contact, and others.
One key target for such simulation software is the professional community of end user analysts. The aerospace and automotive market segments are major consumers of such products. Does the size and growth of this overall analyst market hold the promise of future success of MSC? Are the software tools offered by MSC unique and powerful enough in a crowded market of rivals?
In addition, some observers envision a day when the more numerous average engineers will routinely use simulation software tools, with only occasional guidance and monitoring by the fewer expert analysts. After all, more recent mechanical engineering graduates are far more computer literate than those of a decade or two ago. And the software tools today employ largely automatic model building programs and graphical presentation of analysis results. If the average engineer could routinely use such tools successfully, the total available MCAE market gets bigger in a hurry.
Still, many professional analysts are skeptical that the average engineer will ever possess sufficient expertise to properly construct simulation models, interpret results and make the proper design modifications. Also, analysts are often too busy with complex problems to be tutoring others on how to address relatively minor issues.
Referring to Figure 2 below, MSC.Software’s stock price relative to a year ago had tumbled around 50% at the time the potential STG acquisition was announced. MSC’s stock price curve (blue curve) has the same general shape as the technology-heavy NASDAQ curve (red curve), but the MSC stock losses were deeper.
The ongoing evolution of the MSC.Software/STG deal will indeed continue to be fascinating to observe.
The G6 MCAD Vendors' Financial Performances in Q2 2009
As will be seen in the following 1H 2009 MCAD G6 results, the devastating US (and subsequently worldwide) recession is still a giant burden on the covered MCAD software providers, although there appears to be a bottoming out of the 21-month-long downturn as we publish this August 2009 edition of the MCAD Industry Commentary.
As a group, Table 1 shows that the G6 MCAD vendors generated combined revenues of $1.26 billion in Q2 2009, a significant 21% drop from the $1.6 billion in the second quarter of 2008, but essentially flat when compared to the just prior quarter.
ANSYS was the only MCAD vendor to enjoy increased year-over-year revenue at +9.7%. The largest year-over-year percentage revenue decliner in US dollars was Autodesk at -33%, followed by MSC.Software and Dassault Systems at -20% and -17%, respectively. ESI Group and PTC endured only single digit year-over-year revenue percentage decreases.
On a sequential basis, the ESI Group suffered the largest Q1 to Q2 2009 drop by far at -38%. Autodesk and MSC.Software incurred revenue dips of a few percentage points. ANSYS and Dassault Systemes posted revenue gains in the neighborhood of 5%, while PTC’s sequential revenue was flat.
Figure 3 below provides a bar graph showing the revenue trend for each of the six covered vendors, for the periods mentioned in Table 1.
For the second quarter of 2009, Dassault Systemes barely nudged out Autodesk for the top spot of a Q2 US$ revenue-to-revenue comparison. PTC was a distant third at 18%. Note that the Autodesk figure contains considerable revenue from outside the MCAD arena -- in AEC and Media/Entertainment. Also, all three of the leaders have some form of third party distribution that complicates comparisons. See Figure 4.
Table 2 below reveals that the combined Q2 2009 earnings of five of the G6 MCAD vendors was $75 million, a precipitous drop of 63% from the $201 million in the second quarter of 2008. However, Q2 2009 did provide a sequential increase of 121% from the paltry $34 million combined earnings in the just previous 2009 quarter. Each of the G5 vendors that reported Q2 2009 net earnings was in the black (except MSC.Software). Every one of the reporting MCAD vendors suffered earnings decreases relative to the second quarter of 2008. Autodesk witnessed the steepest year-over-year earnings decline at -88%. Both PTC (-74%) and Dassault Systemes (-48%) also experienced significant earnings declines from the same quarter last year.
On a sequential basis, Autodesk went from a net loss in the previous quarter to a net gain in the second 2009 quarter. MSC.Software did the reverse. ANSYS enjoyed a 28% increase in net earnings, while PTC earnings dropped -47% and Dassault Systemes earnings fell a more modest -7%.
Details on Individual G6 Vendors' Q2 2009 Performances
On August 6, 2009 ANSYS, Inc. reported financial results for the second quarter ended June 30, 2009. Total revenue for the quarter was $122 million, an increase of nearly 10% from the $111 million in the second quarter of 2008, and an increase of almost 5% from the $116 million in the first quarter of 2009. The $122 million was somewhat above the midpoint of the guidance given last quarter. License revenue was $73 million, accounting for 60% of the total. This represented a dip of 1.1% from the same quarter a year earlier, but an increase of 3.8% from the just prior quarter. Maintenance and service revenue was $48.9 million, or 40% of total revenue. This was up 31% year-over-year, and up 6.7% sequentially.
Net income for the quarter was $27 million, a drop of 3.5% from the $28 million in the year ago quarter, but an increase of nearly 29% from the $21 million in the prior quarter. Note that the ANSYS earnings for the second quarter of 2009 included $2.0 million of tax benefits related to settlements of tax years previously under audit.
Jim Cashman, ANSYS president and CEO, stated, “While the global environment remains challenging, our revenues were within the range of our outlook with the ANSYS organic business stable in constant currencies. Our non-GAAP earnings exceeded the upper end of the range and were further supplemented by approximately $.02 (per share) of favorable tax benefits. We continued to deliver on our stated objectives of strong operating margins and cash flows, even during a time when the exact timing of business intake patterns is difficult to predict.”
On August 13, 2009 Autodesk, Inc. reported financial results for the second quarter of calendar 2009 (its fiscal 2010) ended June 30, 2009. Total revenue for the quarter was $415 million, a major 33% drop year-over-year from the $620 million in the second quarter of 2008, but only a 2.8% dip from the $426 million in the first quarter of 2009. The $415 million in Q2 2009 revenue was toward the high end of the guidance given last quarter. License revenue was $231 million, or 56% of total revenue. This was a major decrease of over 47% from the year ago quarter, and a decline of 5.2% sequentially. Maintenance revenue was $184 million, accounting for 44% of the total. This was an increase of 2.6% year-over-year and a rise of 0.9% from the prior quarter.
The Platform segment, which accounts for about 35% of total revenue, includes AutoCAD and AutoCAD LT products that service multiple markets. Platform revenue was down 47% from the year ago quarter, and down 7% from the just prior quarter. Other segments are AEC (previously two segments: Building and Infrastructure) and Media/Entertainment (previously named Discreet). The Manufacturing segment (which includes the Inventor product lines) accounted for 24% of total revenue; the manufacturing segment fell 25% year-over-year, but rose 4.3% from the prior quarter. A “guesstimate” of MCAD revenue Q2 2009 would be about $180 million for the quarter. Revenue from the Inventor family of products decreased 30% compared to the second quarter last year, but increased 7% sequentially.
By geography, Q2 2009 revenue from the Americas decreased 21% compared to the second quarter of 2008, to $159 million. Americas revenue declined only 2% sequentially. Revenue from the U.S. posted a small sequential decline, while both Canada and Brazil grew sequentially. EMEA revenue was $157 million, a decrease of 41% from the second quarter of 2008 as reported, and down 32% on a constant currency basis. EMEA revenue declined 6% sequentially as reported. Q2 2009 revenue in Asia Pacific was $99 million, a decrease of 34% from the comparable quarter of 2008 as reported, and down 35% on a constant currency basis. Revenue from Asia Pacific increased 3% sequentially as reported. Revenue from emerging economies was $63 million, a decrease of 45% compared to the second quarter of 2008, and a 6% sequential increase as reported. Revenue from emerging economies represented 15% of total Q2 2009 revenue.
Design segment revenues of $368 million in Q2 2009 decreased over 32% when compared to the $545 million achieved in the second quarter of 2008. The $368 million accounted for 89% of total Q2 2009 Autodesk revenue. Design segment revenue fell 2.6% sequentially.
Combined Q2 2009 revenue from Autodesk's model-based 3D design solutions, including Inventor, Revit, Civil 3D, Moldflow, NavisWorks, and Robobat, was $124 million, a decrease of 25% compared to the second quarter of 2008, and a 2% sequential increase. Q2 2009 revenue from 2D horizontal and vertical products was $194 million, a decrease of 38% compared to the second quarter of 2008 and down 6% sequentially. Combined Q2 2009 revenue from AutoCAD and AutoCAD LT declined 39% compared to the second quarter last year, and down 7% sequentially.
Compared to the second quarter of last year, the impact of foreign currency exchange rates in the second quarter was $24 million unfavorable on revenue and $14 million favorable on expenses. Compared to the first quarter of 2009, the foreign currency impact was $9 million favorable on revenue and $7 million unfavorable on expenses.
Aurodesk’s net income for the second quarter of 2009 was down to $10.5 million, an incredible 88% drop from the $89 million in the year ago quarter, but a significant improvement from the net loss of $32 million in the just preceding quarter. Based on the progress the company made in the first half of its fiscal 2010 with its expense reduction initiatives, Autodesk now anticipates nearly $300 million in pre-tax cost savings in fiscal 2010 as compared to fiscal 2009.
Carl Bass, Autodesk president and CEO, said, "Revenue results for the quarter were in-line with our expectations and continue to reflect a challenging global business environment. We are pleased with the progress we've made to increase our efficiency and reduce our overall cost structure and as a result, we increased our profitability on a sequential basis."
"The current business environment and general business visibility remain challenging," continued Bass. "However, we are encouraged by sequential revenue growth we posted in several areas and are beginning to see some positive indicators in our business."
On July 30, 2009 Dassault Systemes reported financial results for the second quarter ended June 30, 2009. Total revenue for the quarter was $423 million, a drop of nearly 17% from the $509 million in the second quarter of 2008, but an increase of 5% from the $402 million in the first quarter of 2009. The $423 million in revenue was at the upper end of the guidance range provided last quarter when expressed in euros. Software revenue was $360 million, a decrease of 15% year-over-year, but an increase of 4.5% sequentially. Software accounted for 87% of total revenue. New license revenue of $94 million was down about 40% compared to the prior year, but up almost 13% from the prior quarter. New license revenue accounted for 26% of software revenue. Recurring revenue was $273 million, accounting for 74% of software revenue. Service revenue was $54 million, or nearly 13% of the total. Service revenue was down over 28% compared to the year ago quarter, but up over 9% compared to the previous quarter.
Dassault Systemes, a French company, reports its financial results in euros but provides average conversion factors to dollars for each quarter and year. These factors were used to calculate US dollar numbers. Revenue growth for the quarter in terms of constant currency GAAP was up 11% versus the second quarter of last year.
Revenue from North America was $131 million, or 31% of total revenue. This was a 12% decline year-over-year, but a 3.6% increase sequentially. European revenue was $196 million, accounting for 46% of the total. European revenue was down 20% from the year ago quarter, but up 9.6% from the just prior quarter. Revenue from Asia was $95 million, or 23% of the total. Asian revenue dropped over 16% year-over-year, and almost 2% from the previous quarter.
The Enovia brand, which includes Enovia, MatrixOne and SmarTeam, generated $55 million in the quarter, or 13% of total revenue. This was down 19% year-over-year, but up 23% 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 $88 million, accounting for 21% of total revenue. This represented a decrease of 15% year-over-year ,and a decrease of 4.7% sequentially. CAD generated $160 million, or 38% of total revenue. This was down almost 19% year-over-year, but was up 6% sequentially. See Table 3.
DS’ net income for the quarter was $35 million, a drop of $32 million or 48% from the $67 million in the year ago quarter, and a drop of $3 million from the $37 million in the just prior quarter. (Note that the prior quarter included a gain of $22 million from the sale of company headquarters).
Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “The second quarter unfolded as anticipated. Revenue, margin and earnings results came in at the high end of our objectives, thanks to continued strong interest in DS solutions across a diversified number of industries, and to our cost savings program which is being implemented without impacting our R&D and sales capacities.
“On balance, business conditions during the second quarter were similar to the first quarter with customers remaining cautious with respect to new business investments. We started to see some increase in activity among larger companies, for which design excellence, simulation and compliance were significant drivers. For smaller companies, in general, it was not the case as we observed some slight further weakening from the first three months of the year.
On June 11, 2009 ESI Group reported limited financial results for the first quarter of its 2009/2010 fiscal year. The statements in this section are set forth primarily in the vernacular of the ESI report.
Sales for the first quarter of ESI Group’s current financial year totaled €16.4 million euros, up +3.8% in volume terms on the first quarter of 2008/09, and up +11.6% in actual terms given the favorable evolution of exchange rates.
The change in the geographical breakdown of the Group’s activity reflects the integration of Mindware, essentially based in the United States. 39% of first-quarter activity was thus recorded in Europe, 23% in the Americas and 38% in Asia, versus figures of 47%, 13% and 40%, respectively, in 2008/09.
Driven by the ongoing growth in the Licenses installed base, which grew by +4.1% by volume compared to the first quarter of the previous year, and by the positive exchange rate effect, License sales came to €11.1 million euros, up +2.9%. Although it continued to benefit from the stability of its Repeat Business at the high level of 81% by volume and from the growth in its installed base, License sales did however continue to suffer – albeit less than during the fourth quarter of 2008/09 – from the slowdown in new investments resulting from the deterioration in the economic situation around the world, and in Japan in particular. Subsequently, the proportion of New Business at the end of the first quarter of 2009/10 was down to 14% of License sales, versus 22% at the end of the first quarter of 2008/09.
Sales from Services totaled €5.3 million euros, up +35.1% in actual terms and +31.4% by volume. Consolidated within the Group since mid-December 2008, Mindware recorded a first quarter that was in line with expectations and contributed 1.5 million euros to total Group sales. Penalized by a negative base effect given the very high rate of growth recorded by Services over the first three months of the previous financial year, Service sales totaled €3.8 million euros on a constant scope basis at the end of the first quarter of 2009/10, down -2.2% on the sales figure of €3.9 million euros recorded over the first quarter of 2008/09.
The July 7, 2009, MSC.Software announcement that it had entered into a definitive agreement with affiliates of Symphony Technology Group (STG) has already been thoroughly discussed in the upfront News Highlights section of this Commentary. By the way, the Symphony Technology Group (STG) was founded in 2002 by Dr. Romesh Wadhwani, the man responsible for the largest merger in software history when he sold Aspect Development for a landmark $9.3 billion in 2000.
On August 4, 2009 MSC.Software reported its financial results for the second quarter ended June 30, 2009. Total revenue for the quarter was $51.6 million, a drop of nearly 20% from the $64.4 million in the second quarter of 2008, and a decline of 3.7% from the $53.6 million in the prior quarter. Software revenue was $14.9 million, or nearly 29% of total revenue. This was down 29% year-over-year, and down over 14% sequentially. Maintenance revenue was $32 million, or 62% of total revenue. This was down 11% from the year ago quarter, but up 31% sequentially. Services revenue was $4.8 million, accounting for over 9% of total revenue. Services revenue was down 35% from the same quarter a year earlier and down 8% from the previous quarter.
On a geographic basis North America accounted for 27% of total revenue, Europe 41% and Asia Pacific for 32%. See Table 5.
Changes in foreign currency negatively impacted total revenue by $2.0 million in the second quarter.
Net loss for the second quarter was $1.6 million, compared to net gains of $1.031 million twelve months ago and $147 thousand three months earlier.
Ashfaq Munshi, interim CEO and President of MSC Software, said, "Our top line performance continued to be impacted by the global economic downturn and its effect on our key customers particularly in the automotive and heavy manufacturing sectors. I am pleased however that the second quarter overall results were in line with our guidance,"
On July 28, 2009 PTC announced financial results for its third fiscal quarter ended July 4, 2009. Total revenue for the quarter was $226 million, accounting for 22% of total revenue, a drop of some 16% from the $270 million in the second fiscal quarter of last year, but a tiny increase of 0.4% from the $225 million in the just prior second fiscal quarter. The $226 million was in the middle of the guidance given last quarter. License revenue was a meager $49 million, a dip of 2.1% year-over-year but an increase of 17.5% sequentially. Maintenance revenue was $122 million, or 54% of the total. This was a decline of almost 7% from the year ago quarter, and a dip of 0.7% from the prior quarter. Service revenue was $55 million, or 24% of total revenue. This was a drop of just over 7% from the same quarter last year, and a decline of over 9% sequentially.
On a geographic basis, North America accounted for 38% of total revenue, Europe for 40 and Asia for 22%. See Table 6.
Reseller revenue was $47 million, or 22% of total revenue. This represented a drop of 28% from a year earlier, and a drop of over 17% sequentially. Revenue from direct sales was $169 million, accounting for 78% of the total. This was a decrease of 3.6% year-over-year, but a bump of 0.5% from the prior quarter.
Net income for the quarter was $3.8 million, a drop of 74% from the $14.4 million in the same quarter a year ago and a drop of 47% from the $7.2 million in the preceding quarter.
C. Richard Harrison, chairman and chief executive officer, commented, “On a constant currency and non-GAAP basis, our total Q3 revenue was down 11% compared to last year, which in this challenging economy highlights the stability provided by our maintenance and services businesses. Importantly, on a sequential basis we are seeing a number of positive data points: 1) total revenue is stabilizing, 2) we delivered license revenue growth in all of our major geographies except Japan, 3) active maintenance paying seats are up, driven by Windchill seat growth, and 4) we won three additional strategically important “domino” accounts during Q3.”
G5 MCAD Vendor Stock Performances
Table 7 reveals that the combined stock prices of the covered MCAD vendors fell in absolute terms 33% year-over-year, but rose 22% sequentially. On average the combined stock prices fell over 34% year-over-year, but increased over 27% relative to the just prior quarter. The stock prices of all the MCAD vendors tumbled at least 25% year-over-year. The steepest decliner was Autodesk at -43%. ANSYS and MSC.Software fell over 30%, while Dassault Systemes and PTC dropped more than 25%.
The situation changed dramatically on a sequential basis. All the MCAD vendors saw stock price increases between 19% and 25% from Q1 to Q2 2009. ANSYS (+25%) was the percentage leader while Dassault Systemes (+19%) brought up the rear.
This MCAD stock performance compares to a year-over-year decline more than 25% for the average of the major indexes, and a rise of 17% versus the previous quarter. See Table 8.
Forecast Guidance from Individual MCAD Providers
Of those MCAD vendors giving guidance for the next quarter, only ANSYS projects year-over-year revenue growth at 3.3%. Autodesk and PTC forecast significant revenue falloff at -32% and -20% respectively. Dassault predicts a pickup in euros, but not in dollars.
As guidance ANSYS expects revenue in the next quarter to be in the range of $123.4 million to $129.4 million, compared to $122 million both in the quarter just reported and in the third quarter of 2008. For the fiscal year ANSYS expects revenue to be in the range of $510 million to $528 million, versus $478 million in the previous year.
As guidance Autodesk expect net revenue for the next quarter to be in the range of $400 million and $420 million, compared to $415 million in the quarter just reported, and compared to $607 million in the same quarter a year earlier.
As guidance Dassault Systemes revenue objectives for the next quarter are in the range of €285 to €300 million or $427 million to $450 million, compared to $423 million in the quarter just reported and compared to $470 million in the third quarter last year. The objectives for the year are €1.76 to €1.91 billion, or $1.875 to $1.920 billion versus $1.962 billion a year earlier. Objectives are based upon exchange rate assumptions for the 2009 third quarter of US$1.50 per €1.00 and JPY140 per €1.00 and a full year average of US$1.42 per €1.00 and JPY134 per €1.00.last year.
Thibault de Tersant, DS Senior Executive Vice President and CFO, commented, “As we move into the second half of the year, we are narrowing our full year revenue objective range but otherwise holding the mid-point unchanged on a constant currency basis. Similarly we are narrowing our EPS objective range. Given the strengthening of the Euro we think it is appropriate to update our US dollar and Japanese yen exchange rates assumptions in comparison to the Euro, and therefore are adjusting our reported revenue range and earnings per share, accordingly.”
As guidance PTC expects revenue in the next quarter to be in the range of $235 to $245 million, compared to $226 million inn the quarter just reported and compared to $300 million in the same quarter last year. The company expects revenue for fiscal 2009 to be approximately $931 million, versus $1,070 million a year ago.
Neil Moses, chief financial officer, commented that “Looking forward to Q4, we are initiating guidance of $235 to $245 million in revenue. Consequently, we are now targeting FY’09 revenue of approximately $931 million.”
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About the Authors:
Since 1996, Dr. Russ Henke has been president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies for Henke Associates now numbers more than forty. During his corporate career, Henke operated sequentially on "both sides" of MCAE/MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron, SDRC, Schlumberger Applicon, Gould Electronics, ATP, and Mentor Graphics.
Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. He is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from The CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (HENKE ASSOCIATES).
An affiliate of the HENKE ASSOCIATES team since 2001, LA-based Dr. John R. (Jack) Horgan co-authored this August 2009 MCAD Industry Commentary. Dr. Horgan's prior corporate career has included executive positions at Applicon, Aries Technology, CADAM and MICROCADAM, as well as a stint at IBM. Dr. Horgan is also an editor of EDAcafé Weekly.
Since May 2003 the authors have now published a total of eighty (80) independent articles on MCAD, PLM, EDA and Electronics IP on IBSystems' MCADCafè and EDACafè. Further information on HENKE ASSOCIATES, and URL's for past Commentaries, are available at http://www.henkeassociates.net. March 31, 2009 marked the 13th Anniversary of the founding of HENKE ASSOCIATES.