Resiliency in a time of “business not as usual” 

• First quarter revenues decrease 6.1%, primarily due to the impact of the Covid-19 context with postponements in New Business
• Strong fundamentals: Solid installed base and renewals with mission-critical solutions in key industries

PARIS — (BUSINESS WIRE) — May 12, 2020 — Regulatory News:

As a pioneer in virtual prototyping solutions and a key player in industrial digital transformation, ESI Group (Paris: ESI) empowers manufacturers to navigate increasing complexity by replacing real tests and prototypes with highly accurate, predictive and representational virtual prototypes. ESI Group’s software solutions are built from decades of expertise in physics of materials, essential to the creation of realistic virtual prototypes and to the anticipation of asset performance in-service. ESI’s customers are an enviable list of industry leaders worldwide, who benefit from enhanced innovation, competitiveness, performance and productivity thanks to ESI Group’s most innovative solutions.

ESI Group, Paris, France, (ISIN Code: FR0004110310, Symbol: ESI), today releases its sales for the first quarter of 2020 (period from January 1^st to March 31^st).

Cristel de Rouvray, Chief Executive Officer of ESI Group, comments:
“First quarter revenues decreased 6.1%, partly as sales adjusted to the new Fiscal Year and the timing of some important Renewals and, partly, on the impact of Covid-19 on the completion of New Business transactions. The Covid-19 crisis, impacted us first in China, and now on other territories with the following pattern: while new business conversations are delayed & adapted by confinement measures, license renewals and repeatable services are holding up strong across our four main industries creating a foundation of stability to navigate the current uncertainty. As a positive collateral, we are experiencing an acceleration of our own transformation as we adopt a more efficient global organization. Overall, we have confidence that the Group will see its value proposition even strengthened when the world adjusts with increased digital commitment to its ‘new normal’.”

Solidity and resilience strengthened by unchanged high Licensing recurrence, New Business delays

In the first quarter of its new fiscal year (January 1, 2020 - March 31, 2020), ESI recorded sales of €54.9m, down 6.1% (-6.9% cer). Due to the recent change of fiscal year, the first quarter should now represent approximately 40% of annual revenues (vs. 20% in the old fiscal year format), allowing better fiscal year visibility.

Licensing revenues were €48.8m (-4.0%, -4.8% cer, 89% of total revenues) and Services revenues were €6.1m (-20.3%, -20.9% cer, 11% of total revenues). In the current context of the Covid-19 crisis, new business in Licenses and Services has been largely delayed, though the performance of repeat business highlights the Group’s fundamental resilience:

• New business is impacted both in software licenses (new business at €3.3m, -52%), and in services, where projects were delayed as face to face meetings became progressively more difficult, thus triggering a year-on-year decrease in quarterly revenues (€6.1m, -20.3%). This new business contraction began in China where the Covid-19 crisis started and stopped most activities in Q1.

• The Group’s business model shows strong resilience with high repeat business (90.2%) mainly on Licenses where repeat business grew 1.9% before deferred revenues. Such a resilience rests on the solidity and depth of the Group’s unrivalled installed base of leading industrial clients around the world who reinforce their confidence in ESI's solutions to carry them through and beyond the crisis.

Robust dynamic maintained in all regions and every focus industry sector

The geographical breakdown of quarterly revenues is almost identical to that of Q1 2019: EMEA represents 58.2% (vs. 58.6%) of total revenues, ASIA represents 29.4% (vs. 29.8%) of total revenues and the Americas represent 12.4% (vs. 11.7%) of total revenues. EMEA and Asia (mostly China) were impacted during the quarter, while Americas remained stable.

The Group's four priority focus industries - Automotive & Ground Transportation, Aeronautics & Aerospace, Heavy Industry, Energy - accounted for around 90% of total orders. In Licensing activities, Automotive & Ground Transportation remained stable and the Group secured its largest annual automotive quarter despite turmoil in the sector which began even before Covid-19. Notably, in January 2020, ESI renewed its 11^th three-year contract with its first customer, one of the largest automotive global OEMs.

For the three other focus industries, the revenue is more evenly distributed across the year both for renewals and new business. The situation in China more heavily impacted the performance of Aeronautics & Aerospace during this quarter.