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Dassault Systèmes Announces IFRS and non-IFRS New Licenses Revenue Up 16% in Fourth Quarter and Up 11% for 2017 at Constant CurrencyRegulatory News: Dassault Systèmes (Euronext Paris: #13065, DSY.PA), announces IFRS unaudited financial results for the fourth quarter and year ended December 31, 2017. These results were reviewed by the Company's Board of Directors on January 31, 2018. This press release also includes financial information on a non-IFRS basis with a reconciliation included in the Appendix to this communication.
Summary Fourth Quarter and Full Year 2017 Highlights
2017 Fourth Quarter and Full Year Financial Summary
Bernard Charlès, Dassault Systèmes' Vice Chairman and Chief Executive Officer commented, "2017 was a very good illustration of the value of our strategy with companies adopting our Industry Solution Experiences and 3DEXPERIENCE platform to innovate and create new categories of Customer Experiences. This new approach to innovation goes beyond digitalization, and helps enable the transformations driving Industrial Renaissance of the 21st century. "This strong business value was visible in our Core industries where we saw very good traction for 3DEXPERIENCE in Aerospace & Defense, with Boeing and multiple other customers; in Transportation & Mobility, with a number of important transactions especially in the second half of the year, and in Industrial Equipment. In Architecture, Engineering & Construction, we were pleased to enter into an agreement with Bouygues Construction to help them accelerate the digital transformation of their construction projects. In total, the momentum with 3DEXPERIENCE was very strong during our fourth quarter with more than 20 decisions greater than 1 million euros in Core and Diversification industries. "Thanks to our robust 3DEXPERIENCE cloud portfolio, the largest on the market in terms of capabilities, we are winning business with large companies such as Schindler, where our 3DEXPERIENCE on the Cloud solutions were a major decisive factor in the adoption of the 3DEXPERIENCE platform for its escalator business. In parallel, start-ups are able to accelerate their time to value, whether developing aircraft on the Cloud, electric vehicles or entire buildings. "Finally, we were honored to have Dassault Systèmes recognized and ranked first among the 2018 Top 100 Most Sustainable Corporations by Corporate Knights for our vision of harmonizing product, nature and life and for implementing this vision in everything that we do. Empowering industry and people to create 3DEXPERIENCE universes to imagine, invent, and deliver disruptive solutions that advance sustainability in domains as large as energy, mobility, cities, life sciences and high-tech is at the core of our purpose and DNA."
2017 Fourth Quarter Financial Summary
2017 Full Year Financial Summary (Unaudited)
Cash Flow and Other Financial Highlights Net operating cash flow rose 20% to €745.0 million for the year ended December 31, 2017, compared to € 621.7 million for 2016, reflecting a strong improvement in working capital and strong growth in net income. The Company's uses of cash for 2017 were principally for payment for acquisitions, net of cash acquired of €338.2 million and for acquisition of non-controlling interests of €37.5 million; share repurchases of €133.0 million; cash dividends of €51.3 million (based on the shareholders electing payment of the dividend in cash); and capital expenditures, net of €84.5 million. The Company received cash for stock options exercised of €62.4 million. Dassault Systèmes' net financial position totaled €1.46 billion at December 31, 2017, compared to €1.49 billion at December 31, 2016, with a decrease in cash, cash equivalents and short-term investments, from €2.49 billion to €2.46 billion and long-term debt of €1.00 billion. Summary of Recent Business, Technology and Customer Announcements Corporate: On January 23, 2018 Dassault Systèmes announced that it has been ranked first by Corporate Knights in the 2018 Top 100 Most Sustainable Corporations in the World (Global 100) index. The Corporate Knights Global 100 index is recognized globally as the gold standard for corporate sustainability analysis. The ranking relies on the computation of many key performance indicators - including environmental, social, financial, and innovation capacity - but also, as of this year, on the sustainability value of a company's products. This is the seventh consecutive year that Dassault Systèmes has been included in the Global 100 index. The 2018 ranking is a clear recognition of Dassault Systèmes' holistic sustainability strategy, from reducing its environmental footprint, to developing the workforce of the future, and driving the definition of new business models in today's Industry Renaissance. On January 17, 2018 Dassault Systèmes announced evolutions to its Executive Committee. Philippe Forestier, Executive Vice President, Global Affairs & Communities and a founding member of Dassault Systèmes when it was created in 1981 will retire. Monica Menghini, Executive Vice President, Chief Strategy Officer, is resigning for family reasons. Both departures are effective as of February 28, 2018. Thibault de Tersant, currently Senior Executive Vice President and CFO, will take the position of General Secretary (Secrétaire Général) and Pascal Daloz, currently Executive Vice President, Brands and Corporate Development, has been named Chief Financial Officer & Corporate Strategy Officer, with the changes effective February 5th. Florence Verzelen has joined as Executive Vice President, Industry Solutions, Marketing, Global Affairs and Communication, effective January 15, 2018. Customers: As announced on December 11, 2017, Bouygues Construction is teaming with Dassault Systèmes and Accenture to accelerate the digital transformation of its construction project activities. The initiative is a logical extension of Bouygues Construction's commitment to further industrialize its operations and enhance collaboration with its supply chain partners. It follows the company's adoption several years ago of the Building Information Modeling (BIM) methodology, a framework for integrating technologies and processes to drive end-to-end efficiency in construction operations. To support Bouygues Construction in this pioneering initiative for the construction industry, the three companies have signed an agreement to develop a digital environment for collaborative construction project management, based on Dassault Systèmes' 3DEXPERIENCE platform. On January 3, 2018, TactoTek® and Dassault Systèmes Announced Plans to Collaborate to Bring the Injection Molded Structural Electronics (IMSE) Process to the 3DEXPERIENCE Platform to enable users of the 3DEXPERIENCE platform to digitally experiment with TactoTek IMSE parts. This will empower designers and engineers from Automotive, Home Appliances, Industrial and Wearable Electronics leaders to accelerate the development of their next generation consumer electronic experiences. Consumers want to be delighted, surprised, and projected into new experiences, yet differentiation is a continuous challenge for brands. On January 9, 2018 Dassault Systèmes Signed a Strategic Cooperation Agreement with China Aerospace Science and Technology Corporation (CASC). Dassault Systèmes' partnership with CASC, signed in the presence of the Presidents of France and of China, as well as its participation in the France-China Business Council and one of the founding members, will help drive cooperation between the two countries for industrial transformation. On January 8, 2018, Dassault Systèmes and Toyota Motor Europe announced the signing of a three-year contract to collaborate on an optimized digital production process to create next generation digital marketing solutions for all new car launches in Europe. These solutions will feature localized and personalized content targeting consumers seeking new, customized experiences in the car buying journey. Acquisitions On November 17, 2017 Dassault Systèmes announced the completion of the acquisition of Burlington, Massachusetts-based Exa Corporation, a global innovator in simulation software for product engineering, for 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 supported by nearly 350 highly experienced simulation professionals. Exa's software is used by designers and engineers at more than 150 leading companies in Transportation and Mobility, as well as Aerospace and Defense, Natural Resources, and other industries to evaluate highly dynamic fluid flow throughout the design process. On October 25, 2017, 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. Business Outlook Thibault de Tersant, Dassault Systèmes' Senior Executive Vice President & CFO, commented, "Strong new licenses revenue growth in the fourth quarter drove both the Q4 outperformance and full year financial results above our objectives, with 2017 non-IFRS software revenue up 8% in constant currencies, non-IFRS operating margin of 32%, and non-IFRS EPS up 8%, or 10% at constant currency. Cash flow was also strong, with net cash from operations up 20% to €745 million. "The strength of our brand portfolio underpinned this growth. During the fourth quarter non-IFRS new licenses and other revenue rose 16% at constant currency, all organically, with strong performances for CATIA, up sharply, and for DELMIA, EXALEAD and GEOVIA. For 2017 new licenses revenue and other software was higher by 11% (10% on an organic basis) led by SOLIDWORKS on an exceptional performance, QUINTIQ and SIMULIA. "Turning to the first quarter of 2018, we expect a strong start to the year. This is reflected in our new licenses and other software revenue growth objective of about 9% to 15% on a constant currency basis for the first quarter. "For the full year 2018, we expect to deliver a very solid performance, with non-IFRS total revenue growth of about 8% to 9% at constant currency. During 2017, we exceeded our targeted organic operating margin improvement of 50 basis points, coming in double that at about 100 basis points and therefore are ahead of our internal plans. As a result, our 2018 non-IFRS operating margin target of 31% to 31.5%, which embeds acquisition dilution as well as a significant currency impact, is showing a moderate constant currency organic improvement. We are targeting non-IFRS earnings per share of €2.83 to €2.88, representing growth of about 6% to 8% or about 11% to 13% at constant currency for 2018. The Company is implementing IFRS 15 effective as of January 1, 2018. While the implementation is not expected to have a material impact on overall growth rates for the full fiscal year, the Company expects that the implementation will cause a variation in quarterly revenue recognition, more specifically for recurring software revenue. To aid investors and analysts, the Company will provide the following information:
The Company's first quarter and full year 2018 financial objectives are given in IAS 18 on a non-IFRS basis.
These objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below. The 2018 non-IFRS objectives set forth above do not take into account the following accounting elements and are estimated based upon the 2018 principal currency exchange rates above: deferred revenue write-downs estimated at approximately €5 million, share-based compensation expense, including related social charges, estimated at approximately €60 million and amortization of acquired intangibles estimated at approximately €160 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 February 1, 2018. Today's Webcast and Conference Call Information Today, Thursday, February 1, 2018, Dassault Systèmes will first host from Paris a webcasted meeting at 9:00 AM London time/ 10:00 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
First Quarter 2018 Earnings, April 25, 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 2018 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$1.25 per €1.00 for the 2018 first half and US$1.20 per €1.00 for the 2018 second half as well as an average Japanese yen to euro exchange rate of JPY135 to €1.00 for the 2018 first quarter and the full year 2018 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. In the tables accompanying this press release the Company sets forth its supplemental non-IFRS figures for revenue, operating income, operating margin, net income and diluted earnings per share, which exclude the effect of adjusting the carrying value of acquired companies' deferred revenue, share-based compensation expense and related social charges, the amortization of acquired intangible assets, other operating income and expense, net, certain one-time items included in financial revenue and other, net, and the income tax effect of the non-IFRS adjustments and certain one-time tax effects. The tables also set forth the most comparable IFRS financial measure and reconciliations of this information with non-IFRS information. About Dassault Systèmes Dassault Systèmes, the 3DEXPERIENCE Company, provides business and people with virtual universes to imagine sustainable innovations. Its world-leading solutions transform the way products are designed, produced, and supported. Dassault Systèmes' collaborative solutions foster social innovation, expanding possibilities for the virtual world to improve the real world. The group brings value to over 220,000 customers of all sizes, in all industries, in more than 140 countries. For more information, visit www.3ds.com. 3DEXPERIENCE, the Compass logo and the 3DS logo, CATIA, SOLIDWORKS, ENOVIA, DELMIA, SIMULIA, GEOVIA, EXALEAD, 3D VIA, BIOVIA, NETVIBES and 3DEXCITE are registered trademarks of Dassault Systèmes or its subsidiaries in the US and/or other countries. (Tables to Follow) TABLE OF CONTENTS Glossary of Definitions Non-IFRS Financial Information Condensed consolidated statements of income Condensed consolidated balance sheets Condensed consolidated cash flow statements IFRS - non-IFRS reconciliation DASSAULT SYSTEMES Glossary of Definitions Information in Constant Currencies When the Company believes it would be helpful for understanding trends in its business, the Company provides percentage increases or decreases in its revenue and EPS (in both IFRS as well as non-IFRS) to eliminate the effect of changes in currency values, particularly the U.S. dollar and the Japanese yen, relative to the euro. When trend information is expressed herein "in constant currencies", the results of the "prior" period have first been recalculated using the average exchange rates of the comparable period in the current year, and then compared with the results of the comparable period in the current year. Information on Growth excluding acquisitions ("organic growth") Growth excluding acquisitions have been calculated using the following restatements of the scope of consolidation: for entities entering the consolidation scope in the current year, subtracting the contribution of the acquisition from the aggregates of the current year, and for entities entering the consolidation scope in the previous year, subtracting the contribution of the acquisition from January 1 of the current year, until the last day of the month of the current year when the acquisition was made the previous year. Information on Industrial Sectors The Company's global customer base includes companies in 12 industrial sectors: Transportation & Mobility; Industrial Equipment; Aerospace & Defense; Financial & Business Services; High-Tech; Life Sciences; Energy, Process & Utilities; Consumer Goods & Retail; Natural Resources; Architecture, Engineering & Construction; Consumer Packaged Goods & Retail and Marine & Offshore. Commencing in 2012 the Company implemented an industry go-to-market strategy with the dual objectives of broadening and deepening its presence in its largest industries as well as increasing the contribution from a diversified set of industrial sectors. "Diversification Industries" include: Architecture, Engineering & Construction; Consumer Goods & Retail; Consumer Packaged Goods & Retail; Energy, Process & Utilities; Finance Business Services; High-Tech; Life Sciences; Marine & Offshore; and Natural Resources. "Core Industries" include: Transportation & Mobility, Industrial Equipment, Aerospace & Defense and a portion of Business Services. 3DEXPERIENCE New Licenses and Software Contribution To measure the progressive penetration of 3DEXPERIENCE software, the Company utilizes the following ratios: a) for new licenses revenue, the Company calculates the percentage contribution by comparing total 3DEXPERIENCE new licenses revenue to new licenses revenue for all product lines except SOLIDWORKS and acquisitions; and, b) for software revenue, the Company calculates the percentage contribution by comparing total 3DEXPERIENCE software revenue to software revenue for all product lines except SOLIDWORKS and acquisitions. DASSAULT SYSTEMES
NON-IFRS KEY FIGURES Non-IFRS key figures exclude the effects of adjusting the carrying value of acquired companies' deferred revenue, share-based compensation expense and related social charges, amortization of acquired intangible assets, other operating income and expense, net, certain one-time financial revenue items and the income tax effect of the non-IFRS adjustments and certain one-time tax effects. Comparable IFRS financial information and a reconciliation of the IFRS and non-IFRS measures are set forth in the separate tables within this Attachment.
DASSAULT SYSTEMES
IFRS revenue variation as reported and in constant currencies
DASSAULT SYSTEMES
DASSAULT SYSTEMES
DASSAULT SYSTEMES 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 Document de référence for the year ended December 31, 2016 filed with the AMF on March 22, 2017. To compensate for these limitations, the supplemental non-IFRS financial information should be read not in isolation, but only in conjunction with the Company's consolidated financial statements prepared in accordance with IFRS.
(1)In the reconciliation schedule above, (i) all adjustments to IFRS revenue data reflect the exclusion of the deferred revenue adjustment of acquired companies; (ii) adjustments to IFRS operating expense data reflect the exclusion of the amortization of acquired intangibles, share-based compensation expense and related social charges, and other operating income and expense, (iii) adjustments to IFRS financial revenue and other, net reflect the exclusion of certain one-time items included in financial revenue and other, net, and (iv) all adjustments to IFRS income data reflect the combined effect of these adjustments, plus with respect to net income and diluted net income per share, the income tax effect of the non-IFRS adjustments and certain one-time tax effects.
(2) The non-IFRS percentage increase (decrease) compares non-IFRS
measures for the two different periods. In the event there is non-IFRS
adjustment to the relevant measure for only one of the periods under
comparison, the non-IFRS increase (decrease) compares the non-IFRS
measure to the relevant IFRS measure. DASSAULT SYSTEMES SUPPLEMENTAL NON-IFRS FINANCIAL INFORMATION IFRS - NON-IFRS RECONCILIATION (unaudited; in millions of Euros, except per share data) 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 Document de référence for the year ended December 31, 2016 filed with the AMF on March 22, 2017. To compensate for these limitations, the supplemental non-IFRS financial information should be read not in isolation, but only in conjunction with the Company's consolidated financial statements prepared in accordance with IFRS.
(1)In the reconciliation schedule above, (i) all adjustments to IFRS revenue data reflect the exclusion of the deferred revenue adjustment of acquired companies; (ii) adjustments to IFRS operating expense data reflect the exclusion of the amortization of acquired intangibles, share-based compensation expense and related social charges, and other operating income and expense, (iii) adjustments to IFRS financial revenue and other, net reflect the exclusion of certain one-time items included in financial revenue and other, net, and (iv) all adjustments to IFRS income data reflect the combined effect of these adjustments, plus with respect to net income and diluted net income per share, the income tax effect of the non-IFRS adjustments and certain one-time tax effects.
(2) The non-IFRS percentage increase (decrease) compares non-IFRS
measures for the two different periods. In the event there is non-IFRS
adjustment to the relevant measure for only one of the periods under
comparison, the non-IFRS increase (decrease) compares the non-IFRS
measure to the relevant IFRS measure.
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