Dassault Systèmes announces IFRS unaudited financial results for the first quarter ended March 31, 2019. These results were reviewed by the Company’s Board of Directors on April 23, 2019. This press release also includes financial information on a non-IFRS basis with reconciliations included in the Appendix to this communication. All IFRS and non-IFRS figures are presented in compliance with IFRS 15 and IFRS 16 standards.
First Quarter Highlights and Financial Summary
(Unaudited, all revenue growth at constant currency)
On an organic basis, Q1 non-IFRS total revenue, software revenue and recurring software revenue up 8%; licenses & other software up 9%, all at constant currency
3DEXPERIENCE software revenue up 26% at constant currency
Cash flow from operations up 20% to €489 million
Reaffirms FY Objectives & updates for currency: non-IFRS EPS €3.40-3.45, up 9%-11%
Board of Directors proposes 12% increase in annual dividend to €0.65 for the 2018 FY
BHP and Dassault Systèmes sign long-term partnership, with BHP adopting the 3DEXPERIENCE
Platform
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*In constant currencies
Bernard Charlès, Dassault Systèmes’ Vice Chairman and Chief Executive Officer commented, “With the purpose of imagining sustainable innovations capable of harmonizing product, nature and life, the 3DEXPERIENCE platform makes us a partner of choice for the world’s largest businesses and for small and medium-sized firms in all sectors as they transform themselves in the Industry Renaissance underway.
“BHP, a world leading resources company and the largest mining company in the world, has decided to establish a long-term partnership with Dassault Systèmes to digitally transform the mining industry, a world first in the sector, using the 3DEXPERIENCE twin to improve sustainability and predictability, and empower the workforce of the future.
“In Life Sciences, the largest pharmaceutical companies in the world as well as small innovative research labs, are adopting our solutions, led by BIOVIA, to transform their industry, and drive improved patient outcomes through end to end innovation.
“For the mainstream market, we introduced 3DEXPERIENCE.WORKS, a new business applications family that brings the platform advantages to small and mid-sized companies -improved collaboration, manufacturing efficiency, business agility and an empowered workforce. 3DEXPERIENCE.WORKS will leverage our POWER’BY strategy, which is proving very effective in enabling companies to connect their existing software investments to the 3DEXPERIENCE platform, and benefit from the platform’s full innovation capabilities in terms of business operations and business model.”
First Quarter Financial Summary
(Unaudited)
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First Quarter 2019 versus 2018 Financial Comparisons
Revenue Review
In constant currencies: Total revenue increased 13% (IFRS and non-IFRS). On an organic basis, non-IFRS total revenue increased 8%.
Total software revenue increased 12% (IFRS and non-IFRS). Licenses and other software revenue increased 15% (IFRS and non-IFRS). Non-IFRS recurring revenue increased 11% reflecting double-digit growth for both support as well as subscription revenue. On an organic basis, total software revenue increased 8% with licenses and other software revenue growing 9% and recurring software revenue higher by 8%. Services revenue increased 20% in total, 9% on an organic basis and represented about 11% of total revenue (IFRS). (All growth rates at constant currencies.)
From an industry perspective and in constant currencies: Non-IFRS software revenue increased double-digits in seven of the Company’s eleven industries (regrouped as of January 1, 2019, see Appendix for details): Transportation & Mobility, Aerospace & Defense, Industrial Equipment, Marine & Offshore, High Tech, Life Sciences and Home & Lifestyle.
On a regional basis and at constant currencies: Americas non-IFRS software revenue increased 18%, reflecting the contribution from acquisitions, large deal activity and strong recurring software growth. Europe non-IFRS software revenue increased 10%, on large deal activity in multiple geographies, most notably Central and Southern Europe. Asia non-IFRS software revenue increased 8% led by China and Asia Pacific, and to a lesser extent by India and Japan. On an organic basis, all three regions reported high single-digit software revenue growth.
3DEXPERIENCE software revenue increased 26% at constant currency and represented 23% of related software revenue, led by large 3DEXPERIENCE transactions, both new and expansions, with clients in Industrial Equipment, Transportation & Mobility, Aerospace & Defense and High Tech, among others.
Operating Review
IFRS operating income increased 21%. Non-IFRS operating income increased 23% to €316.4 million. The non-IFRS operating margin was 32.8% in the first quarter, compared to 31.4% in the year-ago quarter, reflecting underlying organic improvement of 210 basis points, currency favorable effect of 50 basis points and estimated acquisition dilution of 120 basis points.
IFRS effective tax rate was 28.5%, compared to 25.9% in the prior year quarter. On a non-IFRS basis, the first quarter 2019 effective tax rate was 29.7%, compared to 28.8% in the year-ago quarter.
IFRS diluted net income per share increased 17%. Non-IFRS diluted net income per share increased 21% as reported to €0.87 per share, and increased about 13% at constant currency.
CFO Commentary
(In the discussion below figures are on a non-IFRS basis, with revenue growth rates in constant currencies.)
Pascal Daloz, Dassault Systèmes’ Executive Vice President, CFO and Corporate Strategy Officer, commented, “We checked a number of boxes in the first quarter, leading to double-digit revenue and earnings per share growth exclusive of any currency benefits.
It was a dynamic quarter with important customers’ business decisions, most notably in Transportation & Mobility, High Tech, Industrial Equipment, Life Sciences and Energy & Materials.
We had strong momentum with 3DEXPERIENCE, where software revenue increased 26%, on core industries large clients’ adoption.
Our organic growth continued to strengthen, with recurring software, representing 75% of our total software, up 8% organically.
Finally, cash flow from operations set a strong performance, at €489 million, up 20%.
“We are reaffirming our constant currency non-IFRS revenue growth range of 10% to 11% for 2019. Our growth outlook for software revenue is similar to 2018, and importantly as we stated at the outset of this year, we see a stronger contribution coming from recurring software revenue.
“Based upon this visibility, we are updating our 2019 reported non-IFRS revenue and earnings per share guidance ranges for the better than expected currency upside we saw in the first quarter and updated second quarter currency rate assumptions, leading us to add €35 million at the mid-point to our revenue range, now €3.845 billion to €3.875 billion and 5 cents per share to our earnings per share range, now €3.40 to €3.45.”
2019 Second Quarter and Full Year Financial Objectives
The Company’s second quarter and full year 2019 financial objectives presented are given on an IFRS 15 and IFRS 16, non-IFRS basis and reflect the principal 2019 currency exchange rate assumptions below for the US dollar and Japanese yen as well as the potential impact from additional non-Euro currencies representing about 18% of the Company’s total revenue in 2018:
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These objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below.
The 2019 non-IFRS financial objectives set forth above do not take into account the following accounting elements and are estimated based upon the 2019 principal currency exchange rates above: contract liabilities write-downs estimated at approximately €12 million; share-based compensation expense, including related social charges, estimated at approximately €121 million and amortization of acquired intangibles estimated at approximately €196 million. The above objectives also do not include any impact from other operating income and expense, net principally comprised of acquisition, integration and restructuring expenses, and impairment of goodwill and acquired intangible assets; from one-time items included in financial revenue; from one-time tax effects; and from the income tax effects of these non-IFRS adjustments. Finally, these estimates do not include any new stock option or share grants, or any new acquisitions or restructurings completed after April 24, 2019.
Implementation of IFRS 16 Leases Summary
As of January 1st 2019, Dassault Systèmes adopted the new accounting standard IFRS 16 Leases, under the modified retrospective method. Under this method, the transition effect is accounted for within the consolidated equity at the date of initial application, therefore, there is no adjustment to prior year comparative information.
Cash Flow and Other Financial Highlights
Net operating cash flow increased 20% to €488.5 million for the 2019 first quarter compared to €406.9 million in the prior year period principally reflecting growth in net income and working capital improvement.
Dassault Systèmes’ net financial position increased to €1.90 billion at March 31, 2019, compared to €1.81 billion at December 31, 2018, with cash, cash equivalents and short-term investments of €2.9 billion and debt related to credit lines of €1.0 billion.
Cash Dividend Recommendation, Annual Shareholders’ Meeting Date and Filing of Regulatory Annual Report
The Board of Directors has scheduled the Annual Shareholders’ Meeting for May 23, 2019 and is recommending a dividend per share equivalent to €0.65 per share for the fiscal year ended December 31, 2018, representing an increase of approximately 12% compared to the prior year €0.58 per share. Shares will be traded ex-dividend as of May 29, 2019. Dividends will be made payable on May 31, 2019. These recommendations are subject to approval by shareholders at the Annual Shareholders’ Meeting. For further information, see the Company’s 2018 Document de Référence filed with the French Autorité des Marchés Financiers (AMF) on March 26, 2019. The 2018 Document de Référence and an English language translation of this document are available on the Company’s website.
Summary of Recent Business, Technology and Customer Announcements
BHP and Dassault Systèmes sign long-term partnership, with BHP adopting the 3DEXPERIENCE platform. Dassault Systèmes and BHP have engaged in a long-term strategic partnership to leverage the application of digital technologies to mining. Combining the experience and resources of each company, the ambition is to unlock value by applying technologies proven in other industries to the core mining fundamentals of geoscience and resource engineering. The partnership intends to create a new level of understanding of resource and operational potential, underpinned by both company’s commitments to safety and sustainability.
On March 26, 2019, Dassault Systèmes announced that Eurostar has chosen DELMIA Quintiq applications powered by the 3DEXPERIENCE platform to optimize its resource and maintenance planning.
On March 12, 2019, Dassault Systèmes announced that it will supply Alstom with its 3DEXPERIENCE platform to accelerate the delivery of 150 tailored trains to its customer, Trenitalia, the Italian national rail operator and part of Ferrovie dello Stato, introducing a new virtual product experience in the rail industry.
On March 5, 2019, Dassault Systèmes announced that it had acquired the startup Argosim to leverage proven artificial intelligence technology as the backbone of model-based systems engineering and architecture for embedded systems.
On February 28, 2019, ABB and Dassault Systèmes jointly announced a wide spanning global partnership to offer customers in digital industries a unique software solutions portfolio ranging from product life cycle management to asset health solutions. The companies will focus, in a staged approach, on factory automation and robotics, process industry automation, as well as electrification solutions for smart buildings.
On February 11, 2019, Dassault Systèmes announced the signing of a definitive agreement to acquire the elecworks electrical and automation design software product line from Trace Software International. Through the agreement, a team of 21 skilled professionals will join Dassault Systèmes. The acquisition of the elecworks assets will streamline and boost Dassault Systèmes’ development of an integrated mechatronics solution on the 3DEXPERIENCE platform to help its SOLIDWORKS customers address electrical design challenges in the development of smart products.
On February 7, 2019, Dassault Systèmes announced that Naval Energies, a leader in marine renewables, is using the 3DEXPERIENCE platform to develop new offshore floating wind turbines and Ocean Thermal Energy Conversion (OTEC) turnkey solutions, and drive its leadership in marine renewable energies.
On February 6, 2019, Airbus and Dassault Systèmes announced the signing of a five-year Memorandum of Agreement to cooperate on the implementation of collaborative 3D design, engineering, manufacturing, simulation and intelligence applications. Under the agreement, Airbus will deploy Dassault Systèmes’ 3DEXPERIENCE platform, which delivers digital continuity, from design to operations, in a single data model for a unified user experience, making digital design, manufacturing and services (DDMS) a company-wide reality for all Airbus divisions and product lines.
In February, 2019 Dassault Systèmes unveiled the creation of 3DEXPERIENCE.WORKS, a new portfolio of industry-aware applications on the 3DEXPERIENCE platform that is tailored to the needs of SOLIDWORKS customers and small and midsized companies. 3DEXPERIENCE.WORKS uniquely combines social collaboration with design, simulation and manufacturing ERP capabilities in a single digital environment to help growing businesses become more inventive, efficient and responsive in today’s Industry Renaissance.
On January 8, 2019, Dassault Systèmes and Cognata, Ltd. announced that they are partnering to embed Cognata’s Autonomous Vehicle Simulation Suite into Dassault Systèmes’ 3DEXPERIENCE platform. The partnership will provide a first-of-its-kind solution for autonomous vehicle makers to define, test and experience autonomous driving throughout the development cycle within the 3DEXPERIENCE platform. This will make a fully integrated autonomous vehicle development process resulting in faster, more accurate and safer autonomous vehicles on the road.
Today’s Webcast and Conference Call Information
Today, Wednesday, April 24, 2019, Dassault Systèmes will first host from London a webcasted meeting at 8:30 AM London time/9:30 AM Paris Time and will then host a conference call at 9:00 AM New York time/ 3:00 PM Paris time/ 2:00 PM London time. The webcasted meeting and conference call will be available via the Internet by accessing http://www.3ds.com/investors/. Please go to the website at least 15 minutes prior to the webcast or conference call to register, download and install any necessary software.
Additional investor information can be accessed at http://www.3ds.com/investors/ or by calling Dassault Systèmes’ Investor Relations at 33.1.61.62.69.24.
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