Dassault Systèmes Releases Third Quarter 2013 Preliminary Non-IFRS Results

Paris, France – October 14, 2013 — Dassault Systèmes (Euronext Paris: #13065, DSY.PA), the 3DEXPERIENCE Company, world leader in 3D design software, 3D Digital Mock Up and Product Lifecycle Management (PLM) solutions, today announces preliminary non-IFRS unaudited financial results for the third quarter ended September 30, 2013 with total revenue and earnings below the Company’s financial objectives. Dassault Systèmes will hold a conference call today to discuss preliminary results at 1:00PM London time/ 2:00 PM Paris time/ 8:00 AM New York time as described further below.

Preliminary financial results for the third quarter are presented on a non-IFRS basis to facilitate comparison to the Company’s financial objectives which are given on a non-IFRS basis. The preliminary and unaudited non-IFRS financial information which follows is based upon initial closing information and is subject to further review. Non-IFRS revenue excludes deferred revenue write-downs; non-IFRS EPS and non-IFRS operating margin also exclude deferred revenue write-downs as well as share-based compensation expense, amortization of acquired intangibles and other income and expense, net and non-IFRS EPS also reflects the net tax effects related to the items excluded herein.

 

Third Quarter 2013 Preliminary Non-IFRS Financial Results

(unaudited)

Non-IFRS total revenue of €496 million

• Non-IFRS operating margin of 31.6%
• Non-IFRS EPS of €0.88

Third quarter non-IFRS total revenue of €496 million increased 4% in constant currencies year over year. The revenue shortfall of €24 million, compared with the Company’s €520 million revenue objective is explained by about €12 million of deals slippage at the very end of the quarter, and approximately €4 million of lower than anticipated services and other revenue, amounting to a transaction miss of €16 million, and an estimated €8 million net impact from new business with SMB companies choosing rental licensing instead of upfront, purchased licenses. Non-IFRS operating margin of 31.6% was slightly better than expected and reflects the Company’s continued focus on improving operational efficiencies. Non-IFRS EPS decreased 1% to €0.88, compared to the third quarter 2012.

On a regional basis, non-IFRS total revenue increased 2% in Asia, 1% in the Americas and 7% in Europe. (All figures in constant currencies.)

Non-IFRS software revenue increased 4% in constant currencies. New licenses revenue decreased 10% in constant currencies while non-IFRS recurring software revenue totaled €349 million and increased 8% in constant currencies on growth in maintenance and rentals. Non-IFRS recurring software revenue represented 77% of total software revenue in the third quarter. 

“We have launched a major transformation towards 3DEXPERIENCE to prepare our market expansion and future growth opportunities. While I appreciate the challenge it represents, I am convinced that this strategy will broaden our addressable market and open many new growth opportunities. Therefore, it requires that we continue to strengthen our organization, support our partners’ network and keep our focus on delivering solid results as we re-orient the Company to our Industry Solutions Experiences strategy,” commented Bernard Charlès, President and Chief Executive Officer.

Thibault de Tersant, Senior Executive Vice President, CFO, added, “Despite a quarter that was on track until the very last days of the period, our preliminary financial results are below our revenue and earnings objectives and I want to apologize for that.

“Our revenue growth rate of 4% compared to our objective of 8-9% reflects two different factors which materialized at the end of the quarter. First, we had transaction delays caused by lengthening of capex decisions. Secondly, a portion of our new business activity did indeed close but in the form of a further shift to rental activity among SMB companies and this second factor represented about 1.5 points of growth. While we like the revenue accretion brought by rental licenses over the long term, and the business model alignment with our upcoming Cloud solutions, rental decisions made late in the quarter had an impact on our immediate revenue recognition.

“Looking forward, we anticipate adjusting our fourth quarter revenue objective to reflect further shifts towards rental, further transaction delays and emerging countries’ currencies weakness, in an amount of approximately €20 million, to €565 million revenue at the low-end. Compared to the same quarter of last year, this would represent a growth of about 5% in constant currencies, with new licenses revenue growth, a non-IFRS EPS objective of €0.97, incorporating an anticipated tax increase in France, and a non-IFRS operating margin of about 34%. We will provide our formal detailed updated guidance for the fourth quarter and full year at the time of our earnings release on October 24^th.”

 

Today’s Conference Call Information

Today, Monday, October 14, 2013, Dassault Systèmes will host a conference call at 8:00 AM New York time/ 1:00 PM London time/ 2:00 PM Paris time. The conference call will be available online by cliccking here.  Please go to the website at least 15 minutes prior to the conference call to register, download and install any necessary audio software. The conference call will be archived for 30 days.

Additional investor information can be accessed here or by calling Dassault Systèmes’ Investor Relations at 33.1.61.62.69.24.

The Company will return to its pre-release quiet period beginning Tuesday, October 15, 2013 and will have no further comments on its financial results until it releases its third quarter and year-to-date 2013 financial results on October 24, 2013.

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. If global economic and business conditions continue to be volatile or deteriorate, the Company’s business results may not develop as currently anticipated and may decline below their earlier levels for an extended period of time. Furthermore, due to factors affecting sales of the Company’s products and services, there may be a substantial time lag between any change in global economic and business conditions and its impact on the Company’s business results.

In preparing such forward-looking statements, the Company has in particular assumed an average US dollar to euro exchange rate of US$1.35 per €1.00 and US$1.33 per €1.00 as well as an average Japanese yen to euro exchange rate of JPY130 to €1.00 and JPY128 to €1.00   for the 2013 fourth quarter and full year, respectively; however, currency values fluctuate, and the Company’s results of operations may be significantly affected by changes in exchange rates. 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 2012 Document de Référence, filed with the AMF on April 3, 2013, and also available on the Company’s website.

Non-IFRS Financial Information

Readers are cautioned that the 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 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 annual report for the year ended December 31, 2012 included in the Company’s 2012 Document de Référence filed with the AMF on April 3, 2013. 

In this press release the Company sets forth on a preliminary basis its non-IFRS figures for revenue,  operating margin,  and diluted earnings per share, which exclude the effect of adjusting the carrying value of acquired companies’ deferred revenue, share-based compensation expense, the expenses for the amortization of acquired intangible assets, other 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.

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 (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.