Recurring software sales drive 3% revenue growth in Dassault Systèmes’ Q4 2020 financials

French engineering and 3D design software developer Dassault Systèmes has reported 7% revenue growth in its Q4 2020 financial results, outperforming its own guidance for the quarter. 

Over the course of Q4 2020, the company generated €1.22 billion in revenue, 3% more than the €1.18 billion it reported in Q4 2019. This increase can largely be attributed to the firm’s recurring software revenue, which generated €806 million and grew by 27% over the same period. 

In terms of EPS, Dassault Systèmes also outstripped the guidance it issued at the end of Q3, reporting a diluted net EPS of €0.77 for Q4 2020, a 2% jump compared to Q4 2019. The company’s better than expected results were well-received by investors, and its shares have increased from €170.30 to €183.80 since they were published, a rise of 8%. 

“Through close engagement, we have helped our clients to manage and reinvent their operations during the pandemic,” said Bernard Charlès, VP and CEO of Dassault Systèmes. “Our collaborative innovation platform has also enabled our clients to prepare for the future and advance their next generation portfolios for sustainable innovation.”

“During this unprecedented period, we have revealed the critical importance of collaborative innovation as a strategic partner in value creation.”

An image of the Dassault Systemes Providence campus.
Dassault Systèmes has reported a 3% increase in its annual revenue. Photo via Dassault Systèmes.

Dassault Systèmes’ Q4 2020 results 

Dassault mainly generates revenue from its 3DEXPERIENCE platform, a 3D design and simulation engine that powers its software portfolio. As a result, the company’s financials can largely be split across its three flagship programs: the SOLIDWORKS CAD application, CATIA product design tool and ENOVIA modelling software. 

During Q4 2020, CATIA remained Dassault’s highest earner, generating €295 million, a slight 1% increase on the €293 million reported in Q4 2019. The company’s SOLIDWORKS growth was similarly flat at 1% over the same period, while its ENOVIA software revenue declined by 5% from €104 million to €99 million. 

Dassault’s growth was driven by its Life Sciences segment, which reported revenue of €218 million during Q4 2020, a 35% rise compared to the €134 million generated in Q4 2019. Elsewhere, during the same period, the company’s licensing revenue fell by 12%, but its subscription revenue increased by 11%, playing a key role in the firm’s overall annual growth. 

In terms of geographical breakdown, the company performed best in the Americas, and its revenue there grew from €389 million in Q4 2019 to €438 million in Q4 2020. In Europe though, Dassault’s revenue fell from €509 million to €496 million over the same period, while revenue generated by its Asia-based business remained flat. 

Dassault Systèmes’ financialsLife SciencesSOLIDWORKSENOVIA CATIA Total 
Q4 2019 (€)134m233m 104m293m1.18 bn
Q4 2020 (€)218m236m 99m 295m1.22bn
Difference (%) +35+1-5+1+3

Dassault’s FY 3D printing activities 

Earlier in FY 2020, Dassault made Xometry the first “prime partner” on its MAKE marketplace. Although the company doesn’t report directly on how this influences its revenue, the on-demand manufacturing platform is an important part of its portfolio, and the move could have indirectly impacted on its financial results. 

On an earnings call with analysts and investors, Charlès explained that elsewhere, the company had also seen increased crossover between its SOLIDWORKS and ENOVIA users, and that it was seeking to build on this. “We see a connection with ENOVIA project management in the SOLIDWORKS community,” said Charlès. 

“They also use the platform to do data analytics,” he added. “We didn’t expect this to be happening in the mainstream innovation market, and it’s happening with core business analysis on the platform. This was really visible in the fourth quarter, so we expect to leverage that.”

Charlès provided an update on SOLIDWORKS too, revealing that although its Q4 revenue was flat, it had signed up 20,000 new clients over the full year. In future, Charlès committed to “expanding the platform’s portfolio,” with a focus on providing users with integrated cloud analysis and native mobile browser support. 

Direct Mesh Editing in SOLIDWORKS 2020. Image via Dassault Systèmes.
Charlès committed on the earnings call to expanding the SOLIDWORKS portfolio in future. Image via Dassault Systèmes.

Continued revenue growth in 2021?

Moving into Q1 2021, Charlès explained that Dassault has a significant order backlog that should enable it to achieve sustained growth. For instance, Aero structure manufacturer Spirit Aerosystems has already committed to expanding its use of 3DEXPERIENCE, while Lithium Valley is set to adopt the platform for civil infrastructure applications. 

The firm has projected constant currency revenue growth of 9-10% during FY 2021, with recurring revenue to increase by 8-9%. As the global pandemic continues, Dassault also anticipates a move towards a more cloud and subscription-based model, and has set its EPS range at €4.10 to €4.15 (growth of 8-10%) as a result. 

“Looking forward, we see a year of solid organic growth in 2020 and we are confident in our mid-term growth drivers,” concluded Pascal Daloz, COO and CFO of Dassault. “None of us could have imagined 2020 in advance, but despite the increase of distances, we became closer as a company.”

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Featured image shows the Dassault Systèmes Providence Campus. Photo via Dassault Systèmes.