by Jay Vleeschhouwer
Dassault has released its Document de Reference (annual report) for 2010. Following are some highlights in the text and data, including revenues by channel, customer concentration, and segment profitability.
Sales & Distribution
Dassault defines its channels as:
- “PLM Enterprise Business Transformation”, or BT (now including the IBM PLM acquisition, and formerly IBM as its principal partner, plus Dassault’s direct sales);
- “Value selling channel” (the VAR network for its various CAD and PLM products, not counting SolidWorks);
- “Professional channel”.
The BT channel has typically accounted for the majority of revenues - and will continue so now with the IBM PLM acquisition - and the other two channels account for roughly the same proportion each.
In the table below I show the software-only revenues for each channel, converting from the annual proportions for 2006-2010.
Euro, millions FY06A FY07A FY08A FY09A FY10A
IBM PLM/Dassault direct 509.0 534.5 571.9 552.6 33.2
Dassault Value channel 221.5 276.5 306.2 286.4 366.3
Dassault Pro. Channel 232.6 252.4 276.2 260.8 311.5
SOFTWARE 963.1 1,063.4 1,154.4 1,099.8 1,411.0
IBM (pre-acquisition) 521.0 440.0 360.0 288.0 ***
The decline shown above in the annual revenues from IBM, over the course of 2006-2009, i.e., pre-acquisition, can be attributed in part to the changes in the terms and conditions of the VAR channel arrangement and to other changes in revenue sharing between Dassault and IBM.
*** The Dassault annual includes a table that summarizes the combined results of operations for the period ended December 31, 2010 as if the acquisition of IBM PLM had occurred at the beginning of the period (in fact, the results from the IBM PLM acquisition were included as of April 1st, 2010). The table in the annual report shows that 2010 revenues would have been e1.6348 billion, a different of about e71 million more re than actual reported results (in addition, net income would have been about e23 million higher). It has been previously disclosed that IBM’s share of the named-accounts revenue in 1Q10 had been about e50 million; the “remainder” of about e21 million would have been attributable to “unearned” revenues. In any event, Dassault has not otherwise separated out what the incremental revenues were from IBM PLM from the time the acquisition closed; as a rough inference, I calculate that, all else being equal, the acquisition added about e170 million to 2010 revenues.
Regional Results
Europe remains (as is the case for Autodesk and PTC) the largest region by revenue. In my comments dated April 10th on the description of the regional results, I used “the data by geographic operations of the Company [that] is established according to the geographical location of the consolidated companies”.
In addition, that same section of the annual report notes that Dassault “also receives data that identifies the location of the Company’s end-user customer” (italics added). This is the data that is the basis of reporting the IFRS geographic results each quarter
- In 2010, based on end-user location, total revenues in Europe were e703 million (about $935 million), up 22% vs. e577.5 million.
- France alone accounted for e173.4 million (about $230 million), up 15% vs. e150.6 .6 million in 2009 (less than the 25% growth in total revenues last year). France accounted for about a fourth of the business in Europe, and about 11% of total revenues.
- Revenues in Europe other than in France were e529.5 million (just over $700 million), up 24% vs. the e426.9 million in 2009.
- Revenues in the Americas were e456.5 million (over $600 million), up 18% vs. e386.3 million.
- Finally, Asia Pacific was e404.3 million (about $538 million), up 41% from e287.5 million in 2009.
Customer Concentration
Dassault discloses each year the proportion of revenues from its largest customer, top five, top ten, and top twenty customers. I have converted the data for 2006-2010 into the following table (there are bound to be some rounding errors but probably less e5 million a year per category).
The contribution from the various segments of largest customers dropped in 2009, coinciding with the economic downturn, but then picked up in 2010, reflecting, at least in part, the effect of the IBM PLM acquisition.
Euros, Millions FY06A FY07A FY08A FY09A FY10A
#1 57.9 62.9 66.7 37.5 46.9
Top 5 185.2 188.8 186.9 162.7 187.7
Top 10 243.1 251.8 267.0 237.8 281.5
Top 20 289.5 302.1 307.0 287.8 359.7
#2-#5 127.4 125.9 120.1 125.1 140.7
#6-#10 57.9 62.9 80.0 75.1 93.8
#11-#20 46.3 50.4 40.0 50.1 78.2
Segment Profitability
The following table shows the GAAP/IFRS segment profitability for 2006-2010 for “PLM” and for “Mainstream 3D” (SolidWorks). PLM includes Catia, Dassault’s largest product, whose operating margin is likely to be comparable to SolidWorks’, if not more owing to its higher revenues.
The lower overall margin for PLM, however, can be attributed to the low-margin services portion of revenues, especially for the Enovia brand (we can infer that the non-CAD/simulation part of the PLM business has perhaps juts a single-digit operating margin). The improvement in the 2010 margin is attributable in part to the acquisition of IBM PLM (the pre-acquisition margin of IBM PLM, if maintained post-acquisition, suggests that the acquisition might have accounted for the majority of the roughly e91 million more in operating income in 2010). Further improvements in the Dassault PLM margin will depend of course on overall license revenue growth and a declining proportion from services revenues.
There is a similar issue with respect to PTC’s segment profitability insofar as the “enterprise” business (comprising Windchill and other PLM-ish brands) has a lower margin than the larger “desktop” (CAD-ish) business, owing largely to the high services proportion within enterprise (about a third vs. about a tenth in “desktop”, though the trend is right in that license and maintenance revenues are growing, while services are becoming a smaller proportion within Windchill, with room to bring it down even more).
Segment operating margin 2006 2007 2008 2009 2010
PLM 18.5% 16.8% 16.0% 13.3% 16.1%
Mainstream 3D 31.7% 32.8% 37.4% 37.8% 38.7%
Questions/comments are welcome at jvleeschhouwer at earthlink dot net
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