Dassault Systèmes (Paris:DSY) (Euronext Paris: #13065, DSY.PA) reports IFRS unaudited financial results for the third quarter and nine months ended September 30, 2011. These results were reviewed by the Company’s Board of Directors on October 26, 2011.
Revenue, operating margin and earnings per share above Company’s objectives
EPS up 18.5% (non-IFRS) and 34.8% (IFRS)
Increasing Full Year 2011 financial objectives for Q3 outperformance
Setting 30% non-IFRS operating margin objective for 2011
Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “We are pleased with our third quarter financial performance. Our non-IFRS total revenue, up 9% in constant currencies, was particularly gratifying given the very high year-ago comparison base. The quarter’s performance was driven by solid demand from customers and the benefits we are deriving from our addressable market expansion. With a dynamic first half and third quarter above our expectations, we are increasing our full year financial objectives.
“The third quarter’s sales growth benefited from favorable dynamics across our three sales channels. In Enterprise direct sales, the value of V6 as an open integration platform was demonstrated by leading companies’ engagements in the automotive, high tech, energy and industrial equipment sectors as well as a number of mid-sized transactions. In addition to new V6 clients, several large customers have moved into the deployment phase with V6. Along with our direct sales channel, our SMB sales channels have been experiencing good demand, driven by the value of supply chain integration and this quarter was no different.”
IFRS and non-IFRS total revenue increased 11% and 9%, respectively, reflecting growth in both software and services and other revenue. IFRS and non-IFRS software revenue increased 11% and 10%, respectively. Services and other revenue increased 8%. (All figures in constant currencies.)
By region, revenue growth was highest in Europe during the third quarter reflecting several multi-brand transactions in the automotive, high tech, energy and industrial equipment sectors.
New licenses revenue increased 7% (IFRS and non-IFRS) in constant currencies and reflected a strong comparison base to the year-ago period where new licenses revenue increased 54% in constant currencies.
Recurring software revenue rose 12% (IFRS) and 10% (non-IFRS) in constant currencies reflecting growth in maintenance from higher new licensing activity and strong maintenance renewals and rental licensing.
IFRS PLM software revenue increased 11% in constant currencies. Non-IFRS PLM software revenue increased 9% with CATIA software revenue higher by 7%, ENOVIA by 10% and Other PLM by 16% which includes SIMULIA and DELMIA as the largest components. (All growth comparisons in constant currencies.)
SolidWorks (Mainstream 3D) software revenue increased 11% in constant currencies on both an IFRS and non-IFRS basis. New SolidWorks commercial seats licensed in the third quarter increased 11% to 11,748 seats.
Earnings per diluted share and operating margin increased significantly on both an IFRS and a non-IFRS basis, reflecting principally revenue growth and operating margin expansion. IFRS earnings per diluted share increased 35% to €0.62. Non-IFRS earnings per diluted share increased 18% to €0.77 and non-IFRS operating margin increased 400 basis points to 32.0%.
2011 Nine Month Financial Summary
IBM PLM operations acquired by Dassault Systèmes have been merged into the Company’s operations within its PLM business segment since April 1, 2010. As previously disclosed, the IBM PLM share of Dassault Systèmes software revenue was estimated at approximately €50 million for the 2010 first quarter.
IFRS total revenue increased 18% and non-IFRS total revenue increased 17% primarily driven by software revenue growth of 19% (IFRS) and 17% (non-IFRS), respectively, and by services and other revenue growth of 9%. (All figures in constant currencies.)
By region, revenue growth was well balanced across Europe, the Americas and Asia.
IFRS and non-IFRS Software revenue growth reflected new licenses revenue growth of 22% in constant currencies and double-digit growth in recurring software revenue.
Specifically, recurring software revenue increased 17% (IFRS) and 15% (non-IFRS) in constant currencies benefiting from growth in maintenance from new licensing activity, high renewal rates and the IBM PLM acquisition and growth in rental licensing.
IFRS PLM software revenue increased 21%. Non-IFRS PLM software revenue increased 19% with CATIA, ENOVIA and Other PLM all growing by 19%. (All figures in constant currencies.)
SolidWorks software revenue increased 13%. New SolidWorks commercial seats licensed during the first nine months of 2011 increased 18% to 35,769 seats. (All growth figures in constant currencies.)
Net income per diluted share increased 39.8% to €1.65 (IFRS) and 22.8% to €2.05 (non-IFRS) per share. IFRS operating income increased 48.1% to €292.2 million and the operating margin improved to 23.0%. On a non-IFRS basis, operating income increased 27.8% to €374.7 million and the non-IFRS operating margin expanded 320 basis points to 29.5%. The strong increase in earnings per share on both an IFRS and non-IFRS basis was driven by revenue growth and operating margin expansion offset in part by higher income tax expense for the 2011 nine-month period.
Cash Flow and Other Financial Highlights
IFRS net operating cash flow increased to €101.1 million for the 2011 third quarter, compared to €51.1 million in the year-ago period. IFRS net operating cash flow increased to €382.4 million for the 2011 nine-month period, compared to €316.7 million for the 2010 respective period. During the 2011 third quarter, the Company received cash of €19.9 million for stock options exercised and completed share repurchases in the amount of €54.4 million to offset share dilution from the exercise of options in connection with the 2011 expiration of several major ten-year stock option programs.
The Company’s net financial position, comprised of cash, cash equivalents and short-term investments less long-term debt, was €1.04 billion at September 30, 2011, compared to a net financial position of €845.7 million at December 31, 2010. The Company’s cash, cash equivalents and short-term investments totaled €1.33 billion and long-term debt was €289.2 million at September 30, 2011 compared to €1.14 billion and €293.4 million, respectively at December 31, 2010.
Summary Business, Technology and Corporate Highlights
International Fashion Company, s.Oliver, Improves Collaboration and Increases Efficiency in the Garment Manufacturing Process with Dassault Systèmes. s.Oliver has selected Dassault Systèmes’ Version 6 PLM solution as its global platform for design and development, to ensure constant availability of all the up-to-date information required to create and manufacture new collections. s.Oliver is using ENOVIA Version 6 to streamline product line complexities, achieve lead-time reduction, and enhance global collaboration. The ENOVIA Apparel Accelerator for Design & Development provides deep, domain-specific apparel design and production capabilities to meet fashion industry needs.
First Online, Co-Created Military Vehicle Delivered Through Collaboration of Local Motors, Dassault Systèmes and Over 12,000 Community Members. Dassault Systèmes has teamed with Local Motors to deliver the first co-created military vehicle. Local Motors’ community was asked to develop a vehicle body design that could support two types of missions – Combat Reconnaissance and Combat Delivery & Evacuation. Thanks to Dassault Systèmes’ Version 6 platform and Local Motors’ expertise in crowd-based design and manufacturing, the winning vehicle went from concept to working prototype in less than six months.
SolidWorks 2012 Delivers Design Solutions to Drive Business and Design Team Productivity. Dassault Systèmes SolidWorks unveiled SolidWorks 2012, a comprehensive 3D design solution that enables users to work more efficiently and access the data they need to make better design decisions throughout the product development process. Benefits take shape throughout SolidWorks 2012 with a variety of improvements in areas such as assembly and drawing capabilities, built-in simulation, design costing, routing, image and animation creation and product data management that will positively impact design teams each and every day.
Dassault Systèmes Reinforces Electrical Strategy with Acquisition of Elsys. As detailed further in a separate press release issued today, Dassault Systèmes has acquired Elsys, a privately-held company based in Brussels and Lyon providing electrical engineering PLM solutions. With this acquisition, the CATIA Version 6 portfolio is extended with the capability to address all aspects of the electrical Logical and Manufacturing definitions to meet today’s compelling need for an end-to-end, fully integrated, electrical design to manufacturing solution. ELSYS has been selected by major international companies from aerospace, automotive and shipbuilding industries as their preferred solution to cover their electrical engineering needs.
Dassault Systèmes at the Forefront of Next-Generation PLM Composites Solutions. As previously disclosed, on October 4th, Dassault Systèmes acquired Simulayt Limited, a leading composites simulation and advanced draping simulation technology provider. This acquisition reinforces Dassault Systèmes longstanding leadership in providing PLM composites solutions for sustainable innovation, addressing a key challenge facing manufacturers in industries ranging from aerospace and automotive to consumer goods and energy ─ how to predict and optimize the behavior of materials, minimizing their weight while increasing their performance.
Launched “Staying Alive” - Teaching People How to Administer First Aid Using 3D Online Experience Platform. Developed in partnership with iLUMENS, a medical laboratory from Paris Descartes University, this project uses simulation technologies for medical training and demonstrates Dassault Systèmes commitment to combating the issue of heart attacks, one of the public health sector’s biggest concerns, and it also explores new horizons for its digital solutions.
Dassault Systèmes will hold its US Customer Conference 2011 November 8-10th. This year’s theme is “Innovation in Life” and is dedicated to revealing how industry and technology leaders are using Dassault Systèmes’ software solutions, including Dassault Systèmes groundbreaking Version 6 technology, in order to innovate and develop new ideas, products and experiences in an immersive lifelike environment. Conference keynote speakers will include Bell Helicopter, Johnson and Johnson’s Medical Devices and Diagnostics Sector, Local Motors and KLA-Tencor.
Other Corporate Information
On July 29, 2011, Dassault Systèmes filed its 2011 Half Year financial report with the French “Autorité des marchés financiers”. The 2011 Half Year financial report and an English language translation of this document are available on the Company’s website.
Thibault de Tersant, Senior Executive Vice President and CFO, commented, “Broad customer demand for our software products drove third quarter results, with revenue, operating margin and EPS coming in above the high end of our objectives. All of the revenue upside came through to earnings contributing to non-IFRS EPS growth of 18.5% and a non-IFRS operating margin of 32% in the third quarter, well ahead of our goals.
“We are increasing our 2011 financial objectives to incorporate the third quarter revenue over-performance leading to a 2011 non-IFRS total revenue growth outlook of 12% to 13% in constant currencies and non-IFRS earnings per share growth of about 14% to 16%.
“Thanks to our top-line dynamic in tandem with our work in leveraging the Company’s infrastructure, we are well positioned to reach our 30% non-IFRS operating margin goal this year, substantially in advance of our plans. Importantly, this approach has enabled us to increase staffing by 7% over the last 12 months to drive forward our customer, technology and market initiatives.”
The Company’s current objectives are as follows:
Fourth quarter 2011 non-IFRS total revenue objective of about €455 to €465 million, non-IFRS operating margin of about 33% and non-IFRS EPS of about €0.80 to €0.85;
Upgrading 2011 non-IFRS revenue growth objective range to 12% to 13% in constant currencies from 11% to 12% previously; (increasing the reported revenue range to €1.725 to €1.735 billion from €1.70 to €1.72 billion previously);
Increasing 2011 non-IFRS operating margin to 30% from slightly in excess of 29%;
Upgrading 2011 non-IFRS EPS range to €2.85 to €2.90 from €2.69 to €2.80 previously; representing growth of about 14% to 16% from 8% to 12%, previously;
Objectives are based upon exchange rate assumptions for the 2011 fourth quarter of US$1.45 per €1.00 and JPY120 per €1.00 and a full year average of US$1.42 per €1.00 and JPY115 per €1.00.
The Company’s objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below.
The non-IFRS objectives set forth above are estimated based upon the 2011 currency exchange rates above and do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €1 million for 2011; share-based compensation expense estimated at approximately €21 million for 2011 and amortization of acquired intangibles estimated at approximately €82 million for 2011. The objectives outlined above do not include any impact from other operating income and expense, net principally comprised of acquisition, integration, restructuring and relocation expenses and certain one-time gains in financial revenue and other, net. These estimates do not include any new stock option or share grants, or any new acquisitions or restructurings occurring after October 27, 2011.
Webcasted Meeting and Conference Call Information
Today, Thursday, October 27, 2011, Dassault Systèmes will first host a meeting in Paris, which will be simultaneously webcasted 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/ 2:00 PM London time/3:00 PM Paris time. The webcasted meeting and conference call will be available via the Internet by accessing http://www.3ds.com/company/finance/. Please go to the website at least 15 minutes prior to the webcast or conference call to register, download and install any necessary audio software. The webcast and conference call will be archived for 30 days.
Additional investor information can be accessed at http://www.3ds.com/company/finance/ or by calling Dassault Systèmes’ Investor Relations at 220.127.116.11.69.24.
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