Alain de Rouvray, ESI Group’s Chairman and CEO, comments: “The growing use of our Virtual Prototyping solutions, illustrated notably by the strength of New Business in the Licenses activity, was mitigated in the first half by adverse economic effects such as the persistence of significant foreign exchange impacts, the effects of the refocus of non-core Services and the one-off deferral of significant License contracts at year-end. These effects, which will attenuate during the second half, are not expected to undermine the Group’s business momentum, leaving intact the potential for revenue growth over the full year. We will therefore continue to follow with confidence our roadmap as a strategic and critical partner of major OEMs who aim to accelerate the elimination of physical prototypes in the development of innovative industrial products.”
Second-quarter 2014 revenue: buoyant Licenses revenue
Second-quarter 2014 revenue amounted to €22.5 million, a slight increase of 1.6% at constant exchange rates on a purely organic basis compared with the same period in 2013. Change in the product mix continued to shift towards Licenses, which represented 68.8% of revenue, compared to 67.5% in Q2 2013.
Licensing: At constant exchange rates, Licenses revenue grew by 3.6%, reflecting the strength of demand for virtual prototyping solutions and highlighting an improving trend compared with Q1 2014. This trend is reflected in growth in the installed base (+0.6%, despite the impact of the exceptional repositioning of major contracts in the fourth quarter) and the robustness of the rate of recurring revenue in Licenses (+4.1 points). In addition, New Business was buoyant in Licenses (new products, new customers), with a significant 5.6% increase over the period.
Services: The revenue of the Services business continued to consolidate following the strategic refocus on high end services. Services revenue was down 2.7% at constant exchange rates.
Revenue for the 1st half of 2014: impact of the business cycle
Revenue for the 1st half of 2014 amounted to €42.6 million (-0.6% at constant exchange rates). The product mix is changing in favor of Licenses, which represented 69.8% of revenue at constant exchange rates, compared with 67.4% in the same period in 2013.
Licenses: robust business
Licenses revenue amounted to €29.7 million, an increase of 2.9% at constant exchange rates. As was the case during the first quarter, the trend in Repeat Business in Licenses was mitigated by the repositioning of major contracts in the fourth quarter. The rate of recurrence of the installed base was 76% at constant exchange rates, compared with 75.3% in H1 2013. Strong growth was recorded in New Business (new products and new customers) (+9.1% at constant exchange rates), driven by the registration of new accounts, notably in the United States, Japan and South Korea, mainly around our virtual manufacturing and virtual reality (IC.IDO) solutions.
Services: continued refocus focus on high value added projects
At constant exchange rates, Services revenue amounted to €13.3 million, a decline of €1.1 million. This reflects the Group’s strategic refocus on high-end projects demanding expertise, more closely aligned with our core business and chiefly in the United States. This effect is expected to ease in the second half.
Geographical mix: strong growth in Asia
Over the period, and at constant exchange rates, the share of revenue by geographical region increased by 1.1 points to 41.3% in Asia and by 0.4 points to 41.5% in Europe, but fell by 1.5 points to 17.2% in the Americas (effect of Services refocus). The share of revenue derived from the BRIC countries reached 13.3% (vs 14.3%) taking into account some repositioned contracts in Russia and China at end of the fiscal year.
To view an unabridged version of this press release, visit: http://www.esi-group.com/company/investors/news/revenue-1st-half-2014
