Industry Summary Articles

Dassault Systèmes today announced IFRS unaudited financial results for the third quarter and nine months ended September 30, 2015. These results were reviewed by the Company’s Board of Directors on October 21, 2015.

Summary Highlights

(unaudited)

• Q3 non-IFRS EPS up 29% to €0.58
• Q3 revenue growth led by Europe and Americas on broad-based regional demand
• Strong dynamic in Diversification industries and in Aerospace & Defense in Q3
• Organic new licenses non-IFRS revenue up 9% in Q3 and 11% YTD in constant currencies
• Net operating cash flow of €113 million in Q3 and €530 million YTD
• 2015 financial objectives confirmed and upgraded for Q3 currency evolution and tax reserve reversal
• 2015 Non-IFRS EPS growth objective of 21% (€2.20 per diluted share)

“3DEXPERIENCE and our industry solution experiences are triggering new levels of engagements with our clients, partnering together to help them innovate, improve and transform their businesses,” commented Bernard Charlès, Dassault Systèmes President and Chief Executive Officer.

“Deployments are making a significant difference for our clients, reducing program development cycle times by more than 50% in some instances, or optimizing product costs or product reliability in a very meaningful manner, for example with DELMIA. In the broad context of digital manufacturing, we are providing strong support to our clients, helping them to leverage top-line opportunities as well as bottom-line improvement.

“We are investing in quite a few of our brands, notably ENOVIA, centered on improving our customers’ businesses and, in turn, creating a broader platform for growth for Dassault Systèmes. We believe such opportunities are building a long runway for revenue expansion in the years to come. Importantly, they are delivering an improved dynamic for us today and enable us to confirm our financial objectives.”

*In constant currencies

IFRS total revenue increased 11%. On a non-IFRS basis, total revenue increased 9%, with software revenue growth of 9% and services and other revenue growth of 13%. (All growth rates are in constant currencies.)

On a regional basis, Europe and the Americas drove the revenue growth, with non-IFRS total revenue higher by 13% and 12%, respectively. More specifically, in Europe, the Company saw growth in all regions. Growth in Americas was well-supported by North America and Latin America. In Asia, non-IFRS total revenue was flat, on a high year-ago comparison. (All growth comparisons are in constant currencies.)

Non-IFRS new licenses revenue increased 11% (9% organic) on strong broad-based growth in Europe, well supported by the Americas. Non-IFRS periodic license, maintenance and other software-related revenue increased 8%, reflecting strong maintenance growth as well as the impact of acquisitions. (All growth comparisons are in constant currencies.)

By product line, non-IFRS software revenue increased 3% for CATIA, on growth in Europe offset by a lower level of activity in Asia; ENOVIA increased 8% on 3DEXPERIENCE programs with clients. Other software increased 18%, on strong performances for DELMIA and BIOVIA, well supported by SIMULIA and the addition of Quintiq, which was acquired in September 2014. SOLIDWORKS software revenue grew 9%, reflecting principally a strong increase in maintenance revenue. (All growth comparisons are in constant currencies.)

IFRS operating income increased 45% to €148.8 million. Non-IFRS operating income increased 24% to €213.7 million on revenue growth, currency benefits and operating margin expansion. Specifically, the non-IFRS operating margin increased to 31.2% from 29.7%, principally benefiting from currency, and organic operating margin improvement, partly offset by acquisition dilution. It also includes a positive effect related to a R&D tax credit, originally anticipated to be included in the 2015 fourth quarter.

During the third quarter, the Company’s IFRS and non-IFRS effective tax rates benefited from a reversal of tax reserves related to the completion of prior years’ tax audits. Consequently, the IFRS and non-IFRS effective tax rate decreased to 28.3% and 29.9%, respectively in the 2015 third quarter compared to 33.6%, and 34.3%, respectively in the year-ago third quarter.

IFRS diluted net income per share increased 46% to €0.41 per share, compared to €0.28 per share in the year-ago period. Non-IFRS diluted net income per share grew 29% to €0.58, compared to €0.45 per share in the 2014 third quarter on higher revenue, currency benefits and operating margin expansion as well as a 4-cent tax reserve reversal noted above.

*In constant currencies

IFRS total revenue increased 15%. Non-IFRS total revenue increased 14%, with software revenue growth of 13% and services and other revenue growth of 23%. Year over year comparisons reflect the inclusion of BIOVIA (Accelrys) since April 2014 and Quintiq since September 2014. (All growth comparisons are in constant currencies.)

Excluding acquisitions and in constant currencies, non-IFRS software revenue increased 8%, with non-IFRS new licenses software revenue growth of 11% and periodic, maintenance and other software revenue growth of 7% for the 2015 nine-month period.

During the first nine months of 2015, the Company’s growth was well-supported by both its core industries, most notably Transportation & Mobility and Aerospace & Defense and its diversification industries, in particular Energy, Process & Utilities, Life Sciences, Marine & Offshore and CPG.

On a regional basis, for the nine-month period, growth was relatively balanced across the three regions from both a total software perspective and an organic software basis. (All growth rates are in constant currencies.)

Non-IFRS software revenue increased 13%, with new licenses revenue growth of 17%. Non-IFRS periodic license, maintenance and other software-related revenue increased 12% with a strong performance across all three regions. Recurring software revenue represented 72% of total software revenue for the 2015 nine-month period and was comprised of maintenance and periodic licenses (rental or subscriptions). (All growth comparisons are in constant currencies.)

By product line, non-IFRS software revenue increased 4% for CATIA, 12% for SOLIDWORKS, 2% for ENOVIA, and Other Software, which included the 2014 acquisitions of Quintiq and Accelrys, increased 35%. On an organic basis, Other Software increased 13%. (All growth comparisons are in constant currencies.)

Non-IFRS operating income increased 26% to €597.8 million, and the non-IFRS operating margin was 28.8%, compared to 28.7% in the 2014 nine-month period. The Company noted that on an organic basis, the non-IFRS operating margin increased an estimated 80 basis points year-to-date, reflecting the focus on driving improvements in the Company’s operating efficiency and productivity.

Non-IFRS financial revenue and other, net totaled €2.7 million compared to €11.2 million in the 2014 nine-month period, reflecting higher exchange losses and lower net interest income.

IFRS diluted net income per share increased 44%. Non-IFRS diluted net income per share increased 24% to €1.54 per diluted share. IFRS and non-IFRS net income reflected strong revenue growth, the positive influence from currencies and organic operating margin expansion.

Cash Flow and Other Financial Highlights

Net operating cash flow was €113 million and €530 million for the three and nine months ended September 30, 2015, respectively, compared to €90.1 and €444.7 million for the 2014 comparable periods. Year-to-date 2015 changes in working capital include the payment of €60 million in connection with ongoing tax proceedings.

For the first nine months of 2015, the Company uses of cash were principally for cash dividends of €98.5 million, capital expenditures of €30.8 million, share repurchases of €28.0 million and payment for acquisitions of €18.1 million. The Company received cash for stock options exercised of €25.0 million.

At September 30, 2015, the Company’s net financial position totaled €1.23 billion, compared to €825.5 million at December 31, 2014, reflecting an increase in cash, cash equivalents and short-term investments to €1.58 billion, compared to €1.18 billion at December 31, 2014, with long-term debt unchanged at €350.0 million.

In October 2015, the Company entered into a new five year €650 million credit facility which was fully drawn down.

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