AVEVA’s share price was up and down like a frog on a trampoline in early trading as the Cambridge-based industrial technology heavyweight produced a Q3 trading update which reflected mixed fortunes.
The stock started to head north before making a sharp U-turn south as AVEVA reported solid ARR growth and confirmed the board’s full-year outlook to December 31, 2021.
With its market cap still over £8 billion, AVEVA had to concede that it was relying on a strong Q4 to hit expected targets.
AVEVA increased Annualised Recurring Revenue (ARR) by 9.6 per cent year-on-year in the 12 months to December 31, driven by growth in the annualised value of the group’s subscription contracts.
ARR growth in Q3 was broad based with increases from key industries, including Food, Manufacturing, Energy, Pharmaceuticals and Mining.
AVEVA said it intends to accelerate ARR growth during the next financial year, driven by a focus on growth in SaaS, new business wins, the launch of integrated AVEVA/OSIsoft products and pricing uplifts that reflect the global inflationary environment.
As expected, given a very strong comparator in the prior year that included the benefit of several large contract renewals with point-in-time revenue recognition, AVEVA’s revenue declined by a low single digit rate year-on-year in Q3 FY 2022 on a constant currency basis. This included a large contract renewal and expansion with Schneider Electric.
The group’s sales pipeline for the remainder of the financial year is solid, supporting management plans for good revenue growth in the final quarter, giving a revenue outlook for the full year that is in line with expectations.
AVEVA says the integration of OSIsoft continues to progress very well and the company is on-track to achieve at least the previously announced cost synergies and is making strong progress towards achieving the targeted revenue synergies.
For example, excellent progress has been made with product integration, which is key to achieving revenue synergies. AVEVA Data Hub, a product that allows customers to access and share a variety of significant operations and engineering data streams, including PI System data, on the Cloud, will be fully available early in the next quarter.
In the boardroom there has also been significant decision-making:
AVEVA announces that, after careful consideration, the directors have asked that Philip Aiken remains as chairman for a further year beyond the 2022 AGM.
The company says he continues to provide exceptional leadership, which is particularly valuable as AVEVA completes the successful integration of OSIsoft and embed the foundations to support the next phase of subscription-led growth.
In addition, from March 1, James Kidd, AVEVA’s deputy CEO and CFO, will become chief strategy and transformation officer. He will remain on the board as one of the two executive directors. This role will focus on driving both organic and inorganic growth initiatives.
The role of chief financial officer will be assumed by Brian DiBenedetto, also starting on March 1.
AVEVA says: “Brian has made a valued contribution to AVEVA’s finance function during James’ recent period of compassionate leave, having transferred from Schneider Electric.”