Dassault Systèmes’ Third Quarter Non-IFRS Software Revenue Up 8% with Non-IFRS New Licenses Revenue Growth of 12% in Constant Currencies

*In constant currencies

  • IFRS total revenue increased 6% and non-IFRS total revenue increased 7% in the 2017 Nine-Month period. Software revenue increased 7% on both an IFRS and non-IFRS basis. Excluding acquisitions, non-IFRS total revenue and software revenue growth was 5%. Non-IFRS service revenue increased 3% in constant currencies led by 3DEXPERIENCE and manufacturing service engagements. (All growth rates in constant currencies.)
  • Core Industries represented 68% of non-IFRS software revenue on a year-to-date basis and benefited from growth across all industrial sectors. Diversification Industries represented 32% of non-IFRS software revenue compared to 31% in the prior year period. For the first nine months of 2017, non-IFRS Diversification Industries software revenue growth was led by High-Tech, Consumer Goods & Retail and Consumer Packaged Goods & Retail.
  • Non-IFRS software revenue increased 8% in Europe on solid new licenses and recurring revenue performance; it was led by Southern Europe and France. The Company recorded a notable improvement in Russia. In the Americas, non-IFRS software revenue increased 8%, led by strong growth in new licenses revenue in North America and Latin America. In Asia non-IFRS software revenue increased 5% with strong results in Korea and India and mixed results in China and Japan. High Growth countries saw an increase in non-IFRS software revenue of 11%, with double-digit growth in a number of countries offset in part by weak results in China. (All growth rates in constant currencies.)
  • Non-IFRS new licenses revenue and other software increased 9% and represented 27% of total non-IFRS software revenue. Core and Diversification Industries represented 63% and 37%, respectively, of non-IFRS new licenses revenue on a year-to-date basis. (All growth rates in constant currencies.)
  • Non-IFRS recurring revenue increased 7% in constant currencies and represented 73% of total software revenue for the first nine-months of 2017 similar to the year-ago period. Recurring revenue is comprised of maintenance subscription, rental subscription and initial cloud revenues.
  • By product line and on a non-IFRS basis, SOLIDWORKS software revenue increased 14% to €517.1 million led by strong new licenses activity across the globe. CATIA software totaled €716.4 million with growth in the Americas and Europe offset by lower activity in Asia, notably in China. ENOVIA software revenue increased 3%. Other Software totaled €600.2 million and increased 11% reflecting the addition of the CST acquisition. Excluding acquisition impacts, Other Software growth was led by QUINTIQ and SIMULIA. (All growth comparisons are in constant currencies.)
  • IFRS operating income increased 1%. Non-IFRS operating income totaled €685.2 million, an increase of 6%. The non-IFRS operating margin was 29.4%, a 20 basis points decrease compared to 29.6% in the year-ago period. Higher investments accounted for 30 basis points partially offset by a favorable currency impact of about 10 basis points.
  • The IFRS effective tax rate increased to 32.8% compared to 27.8% for the first nine months of 2016. The non-IFRS effective tax rate increased to 32.6% from 30.7% in the year-ago period. The year-ago period IFRS and non-IFRS effective tax rates benefited from a tax reserve reversal.
  • IFRS net income per diluted share increased 3% to €1.22. Non-IFRS net income per diluted share of €1.79 increased 5% or 8% excluding a 5 cents impact from a reversal of tax reserves in the year-ago nine-months period. Currency had a net neutral impact on IFRS and non-IFRS earnings per share growth for the first nine months of the year.

Cash Flow and Other Financial Highlights

Net operating cash flow increased 28% to €671.8 million for the nine months ended September 30, 2017, compared to €525.7 million for the prior year period, reflecting higher net income and working capital improvements.

The Company’s uses of cash for the 2017 nine-month period were principally for cash dividends of €51.3 million (based on the shareholders electing payment of the dividend in cash); share repurchases of €64.0 million; capital expenditures, net of €63.5 million, payment for acquisitions, net of cash acquired of €10.8 million and for acquisition of non-controlling interests of €37.5 million. The Company received cash for stock options exercised of €33.8 million.

Dassault Systèmes’ net financial position totaled €1.79 billion at September 30, 2017, compared to €1.49 billion at December 31, 2016, reflecting an increase in cash, cash equivalents and short-term investments from €2.49 billion to €2.79 billion, with long-term debt of €1.00 billion.

Summary of Recent Business, Technology and Customer Announcements

Customers

On July 25, 2017, Dassault Systèmes announced that it had entered into a new, extended strategic partnership agreement with The Boeing Corporation. Pursuant to the agreement, Boeing will expand its deployment of Dassault Systèmes’ software across Boeing’s commercial aviation, space and defense programs to include Dassault Systèmes’ 3DEXPERIENCE platform. This decision follows a competitive process that included the rigorous analysis of technical and functional capabilities, cost and business benefits across the value chain. The 3DEXPERIENCE platform can reduce integration and support costs, improve productivity, foster new innovation, and aid in the introduction of best practice processes to deliver standard work across the value chain. The 3DEXPERIENCE platform cannot only simulate products and processes, but also find and eliminate potential risks and quality issues before production. The platform’s single source of data across all applications will provide reliable and actionable real-time information and seamless communication throughout the entire enterprise and supply chain as well as across product generations. This digital continuity will improve data and analytics capabilities.

On September 12, 2017, Dassault Systèmes announced that Valmet, a leading developer and supplier of technologies, automation and services for the pulp, paper and energy industries, is using the “Single Source for Speed” industry solution experience to unify and manage Valmet’s product development and order fulfilment across its engineering and service centers in 30 countries. In a digital collaborative environment, its teams have greater visibility on what products and services should be included in a specific offering, as well as on what future resources will be needed as a project evolves. This will help to improve the reliability and performance of its customers' processes and enhance their use of raw materials and energy.

On September 14, 2017, Dassault Systèmes announced that VE Commercial Vehicles Limited (VECV), a joint venture in India between the Volvo Group and Eicher Motors Limited, has chosen the 3DEXPERIENCE platform to cost-effectively develop and deliver innovative, high-quality trucks and buses to the growing commercial vehicle market in India. VECV is deploying “Modular, Glocal and Secure” Industry Solution Experience for an integrated approach to product development that accommodates regional requirements. The deployment is part of the company’s “Integrated Data Management” initiative, which aims to improve quality, streamline the product development process, and deliver business value across the organization by integrating the processes, data and systems of its engineering and manufacturing value chain.

On September 19, 2017 Dassault Systèmes announced that Chevron Products Company, a division of Chevron U.S.A., and a manufacturer and supplier of premium base oils and finished lubricants, selected the 3DEXPERIENCE platform to accelerate the development of lubricant products that are sold under the Chevron, Texaco and Caltex names worldwide. Dassault Systèmes’ “Perfect Product” Industry Solution Experience responds to Chevron’s lubricants business needs. “Perfect Product,” based on the 3DEXPERIENCE platform, connects users across a company’s global operations in a digital collaborative environment to help to reduce time, resources and costs associated with new product development.

On October 11, 2017, Dassault Systèmes announced an agreement with Scania, formalizing the process to deploy the 3DEXPERIENCE platform and other solutions for innovation now and in the future. The cooperation aims to enable cost-efficient design, testing and validation of the complete range of Scania’s high-quality modular products. It will improve realistic simulations of functional properties and processes, such as engineering, manufacturing, service and sales. This will further support Scania in providing the right products at high quality to customers, as well as a more cost- and resource-efficient product development process.

Acquisitions

On September 28, 2017, Dassault Systèmes and Exa Corporation (NASDAQ: EXA), a global innovator in simulation software for product engineering, announced the signing of a definitive merger agreement for Dassault Systèmes to acquire Burlington, Massachusetts-based Exa representing a fully diluted equity value for Exa of approximately $400 million. With the addition of Exa, Dassault Systèmes’ 3DEXPERIENCE platform will provide customers with a proven, diverse portfolio of combined Lattice Boltzmann fluid simulation technologies, as well as Exa’s fully industrialized solutions and nearly 350 highly experienced simulation professionals. Exa’s software is used by designers and engineers at more than 150 leading companies including Transportation and Mobility, as well as Aerospace and Defense, Natural Resources, and others to evaluate highly dynamic fluid flow throughout the design process. Completion of the transaction is expected in the fourth quarter of 2017, subject to the receipt of the majority of shares through the tender offer and the satisfaction of customary closing conditions, including required regulatory approvals.

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