FY 2020 Results
• Adjusted EBIT at €3.7 million; Net result at €1.4 million
• Gross margin rate increased to 74.5% vs 73.4% in 2019
• Clear roadmap aligning all Group efforts to accelerate revenue growth
• Committed to continuing to manage costs in 2021
• Q1 revenue currently expected to be in the range of €52m to €55m
ESI Group, Paris, France, (ISIN Code: FR0004110310, Symbol: ESI), releases its results for the financial year starting on January 1st and ending on December 31st, 2020, approved by the Board of Directors on March 15th, 2021.
2020 was a cornerstone year for Industry and ESI Group. During this unprecedented year, ESI had the opportunity to accelerate its multi-year transformation and demonstrate both the resiliency of its business model and the adaptability of its costs. We contained the impact from revenue decrease with a pro-active management of costs, and the benefit of these decisions will be further seen in 2021 and beyond. We stand on a solid foundation, aiming for sustainable gains in both topline growth and profit, as the unique value we bring to industry becomes further recognized. ESI is the essential partner for digital transformation for our key customers. Through focus and best-practice execution, we aim to expand the impact and number of these mission critical engagements, via our unique combination of predictive simulation software and industry specific application knowledge built over the past 48 years.Cristel de RouvrayChief Executive Officer of ESI Group
Control of costs and good resilience of results
Full-year sales were €132.6 million thanks to the very significant proportion of recurring revenue and an increase in the share of licenses in sales. Given the revenue challenge created by the COVID crisis, ESI Group took action to reduce costs to EBIT by 6.6% to €128.9m vs €137.9m in FY19. The full benefit of many of these cost management steps will be realized in 2021.
Gross margin rate increased to 74.5% vs 73.4% in 2019 due to licensing gross margin rate at 86.9% and relative weight of licenses in total revenue (82,4% in FY 20 vs 79.3% in FY 19). Operating costs (R&D, S&M & G&A) decreased by 4.2% at €95.1 m. Despite decrease in EBIT, net result remains positive (favorable forex result and lower income tax) at €1.4 million.
ESI has a strong cash position
ESI Group has demonstrated its capacity in a tough FY20 global environment to maintain a strong balance sheet. The net financial debt decreased to €24.9 m vs €29.4 m in 2019, with a gearing to 28.4% (Net debt/Equity) vs 34.2% end of December 2019. The Group has a strong cash position end of year at €22.5m including a new government guaranteed loan of €13.75m (PGE State guaranteed loan) versus €20.2m end of December FY19. It did not used its short term RCF (Revolving Credit Facility) end of this year versus a usage of €10m last year.
A roadmap to align all Group efforts to accelerate revenue growth
ESI was built on its ability to tackle the complex challenges of engineers across domains and across industries. During the past 18 months, the Group made a strong transformation effort to align its teams across the globe, to adopt best practices in systems, processes and tools, and to focus its strategy on its core business. The Group organization and roadmap are now set to tackle long-term objectives: deliver strong top-line growth while significantly improving the bottom-line.
Communicated a year ago, ESI has organized its value-proposition around 4 main industries and 4 main customer outcomes.
Development roadmaps are now defined for each industry. These roadmaps are used to align the multi-year investments priorities and guide the teams. ESI delivers compelling solutions in mission critical applications that enable its customers to make the right decisions at the right time. Some success stories that the Group shared in 2020 illustrate this:
- With ESI’s help, Nissan Motors succeeded to create the right methodology and took the right engineering decisions in order to industrialize a new material – the CFRP (Carbon Fiber Reinforced Polymer); a key strategic milestone to reach their CO2 reduction targets. More.
- Thanks to ESI’s human centric solution, Latécoère reduced its industrialization lead times while involving all stakeholders early in the development process to obtain their feedback and train operators in other regions of the world. More.
- A world leading heavy machinery OEM remained productive during the COVID-19 crisis while using from home ESI’s virtual reality solutions.
On the sales side, capitalizing on its strong installed base, the Group has defined a go-to-market strategy based on customer segmentation to, on one hand, strengthen the relationship and increase the business with existing top accounts and, on the other hand, drive new business opportunities globally.
This alignment has also allowed the Group to rationalize some elements of the Group’s cost structure (align software development to return-on-investment, fewer facilities, global and streamlined events and marketing) the benefits of which were partly visible in 2020, and will continue to materialize in 2021 and future years.
The Group currently expects Q1 2021 revenue, to be in the range of €52 million to €55 million, compared to €54.9 million in Q1 2020.
This release contains “forward-looking statements”. 2021 starts with a strengthened foundation allowing a stronger focus on execution toward sustainable growth and profitability. The continued support of the installed base is enabling the Group to focus on expanding business with top global accounts and increasing the new business pipeline. The Group expects Q1 2021 revenue to be in the range of €52 million to €55 million compared to €54.9m in Q1 2020. These statements are subject to a number of risks and uncertainties, including those related to the COVID-19 virus and associated further economic and market disruptions; further adverse changes or fluctuations in the global economy; further adverse fluctuations in our industry, foreign exchange fluctuations, changes in the current global trade regulatory environment; fluctuations in customer demands and markets; fluctuations in demand for our products including orders from our large customers; cyber-attacks; expense overruns; and adverse effects of price changes or effective tax rates. The company directs readers to its Universal Registration Document – Chapter 3 presenting the risks associated with the company’s future performance.
First quarter 2021 – April 29, 2021 (6pm CET)
Access the presentation HERE
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