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 below 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:

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.