In a separate press release issued today, Dassault Systèmes announced the signing of a definitive agreement to acquire No Magic, a global solutions company focused on model-based systems engineering and architecture modeling for software and system of systems. Aerospace & Defense, Transportation & Mobility and High-Tech industries, among others, can digitally address all aspects of embedded systems and system of systems design. The proposed acquisition of No Magic will strengthen Dassault Systèmes’ industry solution experiences based on the 3DEXPERIENCE platform for developing the “Internet of Experiences” – the smart and autonomous experiences that are digitally connecting products, nature and life in the physical world. Closing of this acquisition is subject to the satisfaction of customary conditions, including required regulatory approvals.
Products and Industry Solution Experiences
On September 26, 2017 Dassault Systèmes announced the launch of SOLIDWORKS 2018, the latest release of its portfolio of 3D design and engineering applications. With SOLIDWORKS 2018, teams can collaborate concurrently to more rapidly and cost-efficiently design a product or part, validate its function and manufacturability, manage its data and related processes, streamline and automate its manufacturing, and inspect it. Any changes in design or manufacturing are fast and easy to manage and automatically flow to all related models, programs, drawings and documentation, thanks to intellectual property embedded early on in the design process. A key feature of SOLIDWORKS 2018 for this process is SOLIDWORKS CAM, a new application that provides rules-based machining with knowledge capture to allow for the automation of manufacturing programming. Designers and engineers can gain a greater understanding of how their designs are made, make more informed decisions, and quickly create prototype parts and manufacture in-house to control quality, cost and delivery.
Business Outlook
Thibault de Tersant, Dassault Systèmes’ Senior Executive Vice President & CFO, commented, “Our key performance indicators during the third quarter were well aligned with the high end of our non-IFRS guidance, with new licenses revenue up 12% and total software revenue up 8% in constant currencies, operating margin at 32% and earnings per share of €0.64. Total revenue growth of 6% in constant currencies came in at the low end of our 6-8% range due to services activity.
“New license revenue growth reflected solid performances across a majority of geos, all Core Industries with notable performance in Industrial Equipment and in multiple Diversification Industries including High-Tech, Energy, Process & Utilities and Consumer Goods & Retail. China’s overall results were disappointing, but strength in other geos compensated for this. From a product line perspective, SOLIDWORKS continued to perform well, and SIMULIA and GEOVIA also stood out.
“Based upon our performance to date and updated fourth quarter outlook, we are reaffirming for 2017 new licenses revenue growth of 8 to 10% and recurring revenue growth of about 6%, both goals in constant currencies and on a non-IFRS basis. Since late July, the Euro has strengthened against all other currencies, and as a result we have updated our 2017 reported non-IFRS revenue range to €3.185 to €3.205 billion to reflect these currency effects and reduced services activity. Our non-IFRS operating margin is now 31.0% to 31.5% and our non-IFRS EPS range is €2.57 to €2.61 for 2017, both solely reflecting increased currency headwinds.”
The Company’s fourth quarter and full year 2017 financial objectives are given on a non-IFRS basis and are as follows:
- Fourth quarter 2017 non-IFRS total revenue objective of about €856 to €876 million based upon the exchange rates assumptions below, growing about 3% to 5% in constant currencies; non-IFRS operating margin of about 36% to 37%; and non-IFRS EPS of about €0.78 to €0.82;
- 2017 non-IFRS revenue growth objective of about 6% in constant currencies at €3.185 to €3.205 billion (reflecting the principal 2017 currency exchange rate assumptions below for the US dollar and Japanese yen as well as the potential impact from additional currencies representing about 10% of the Company’s total revenue in 2016);
- 2017 non-IFRS operating margin of about 31% to 31.5% compared to 2016 where the non-IFRS operating margin was 31.2%;
- 2017 non-IFRS EPS of about €2.57 to €2.61, representing a growth objective of about 3% to 5%;
- Objectives are based upon exchange rate assumptions of US$1.20 per €1.00 for the 2017 fourth quarter and US$1.14 per €1.00 for the full year; and JPY135 per €1.00 for the 2017 fourth quarter and JPY127.2 per €1.00 for the full year before hedging.
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 2017 non-IFRS objectives set forth above do not take into account the following accounting elements and are estimated based upon the 2017 principal currency exchange rates above: deferred revenue write-downs estimated at approximately €12 million, share-based compensation expense, including related social charges, estimated at approximately €108 million and amortization of acquired intangibles estimated at approximately €158 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, from one-time items included in financial revenue and from one-time tax restructuring gains and losses. Finally, these estimates do not include any new stock option or share grants, or any new acquisitions or restructurings completed after October 25, 2017.
Today’s Webcast and Conference Call Information
Today, Wednesday, October 25, 2017, 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/ 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/investors/. 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 one year.
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.
Key Investor Relations Events
Fourth Quarter 2017 Earnings, February 1, 2018
Forward-looking Information
Statements herein that are not historical facts but express expectations or objectives for the future, including but not limited to statements regarding the Company’s non-IFRS financial performance objectives, are forward-looking statements.
Such forward-looking statements are based on Dassault Systèmes management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results or performances may differ materially from those in such statements due to a range of factors. The Company’s current outlook for 2017 takes into consideration, among other things, an uncertain global economic environment. In light of the continuing uncertainties regarding economic, business, social and geopolitical conditions at the global level, the Company’s revenue, net earnings and cash flows may grow more slowly, whether on an annual or quarterly basis. While the Company makes every effort to take into consideration this uncertain macroeconomic outlook, the Company’s business results, however, may not develop as anticipated. Further, there may be a substantial time lag between an improvement in global economic and business conditions and an upswing in the Company’s business results. The Company’s actual results or performance may also be materially negatively affected by numerous risks and uncertainties, as described in the “Risk Factors” section of the 2016 Document de Référence (Annual Report) filed with the AMF (French Financial Markets Authority) on March 22, 2017, and also available on the Company’s website www.3ds.com.
In preparing such forward-looking statements, the Company has in particular assumed an average US dollar to euro exchange rate of US$1.20 per €1.00 for the 2017 fourth quarter and US$1.14 per €1.00 for the full year 2017 as well as an average Japanese yen to euro exchange rate of JPY135 to €1.00 for the fourth quarter and JPY127.2 to €1.00 for the full year 2017 before hedging; however, currency values fluctuate, and the Company’s results of operations may be significantly affected by changes in exchange rates.
Non-IFRS Financial Information
Readers are cautioned that the supplemental non-IFRS information presented in this press release is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for IFRS measurements. Also, the Company’s supplemental non-IFRS financial information may not be comparable to similarly titled non-IFRS measures used by other companies. Further specific limitations for individual non-IFRS measures, and the reasons for presenting non-IFRS financial information, are set forth in the Company’s 2016 Document de Référence filed with the AMF on March 22, 2017.
