Dassault Systèmes Reports Solid First Quarter Results and Reaffirms Full-Year Objectives

Dassault Systèmes announced IFRS unaudited estimated financial results for the first quarter ended March 31, 2024. The Group’s Board of Directors approved these estimated results on April 24, 2024. This press release also includes financial information on a non-IFRS basis and reconciliations with IFRS figures in the Appendix.

Summary Highlights

(unaudited, IFRS & non-IFRS unless otherwise noted, all revenue growth rates in constant currencies)

• 1Q24: Software revenue increased 7%, aligned with objectives, and services revenue grew 2%, resulting in total revenue up 6%;
• 1Q24: Combining the revenue growth from upfront licenses and subscriptions, the aggregate grew by 9%;
• 1Q24:3DEXPERIENCE software revenue was up 29%, reflecting the continued momentum in the adoption of the platform in Transportation & Mobility and Aerospace & Defense;
• 1Q24: IFRS operating margin of 21.6% and non-IFRS operating margin at 31.1%, up 50 basis points in constant currencies, above objectives, thanks to disciplined cost management;
• 1Q24: IFRS diluted EPS increased 11% as reported to €0.21 and non-IFRS diluted EPS up strong 12% in constant currencies to €0.30;
• 1Q24: Achieving net cash balance of €1.1 billion; cash flow from operations of €0.7 billion (IFRS);
• FY2024: Confirming non-IFRS objectives of diluted EPS reaching €1.29-€1.31, up 10% to 12% in constant currencies, and total revenue growth of 8%-10%.

Pascal Daloz, Dassault Systèmes’ Chief Executive Officer, commented:

“In the first quarter, our 3DEXPERIENCE business delivered strong results. A majority of key industry leaders in Manufacturing have now adopted our platform, taking advantage of its science-driven approach, integrative capabilities, and cloud flexibility. Looking ahead, we see large opportunities in Transportation & Mobility, as well as in Aerospace & Defense.

In Life Sciences, as the sector pivots towards patient-centricity, technology transfer from labs to bioreactors, and the utilization of generative AI for faster innovation, we are replicating what we have achieved in other industries by providing an end-to-end platform. This transformation lays the foundation for new sources of sustainable growth.

While we are rooted in the present, we also want to make a positive impact on the world. Shaping the Generative Economy is the next step in our journey. The Generative Economy goes beyond extending virtual twins to living organisms: it’s about learning from life to adopt net-positive ways of living ─ giving back to the planet and society more than we take. A more holistic view of the entire life cycle and impact becomes critical.

This holistic approach is made possible through our 3DEXPERIENCE platform, enabling clients to connect data from experience with models from science. Using our generative AI engines, they will nurture circularity and elevate data into valuable knowledge and know-how.”

Financial Summary

First Quarter 2024 Versus 2023 Financial Comparisons

(unaudited, IFRS and non-IFRS unless otherwise noted, all revenue growth rates in constant currencies)

• Total Revenue: Total revenue grew 6% to €1.50 billion and software revenue increased 7% to €1.35 billion. Subscription & support revenue rose 7%; recurring revenue represented 84% of software revenue. Licenses and other software revenue grew by 7% to €219 million. Services revenue increased 2% to €147 million, during the quarter.
• Software Revenue by Geography: The Americas revenue grew 5% to represent 41% of software revenue. Excluding MEDIDATA, the region was up 9% driven by the strong momentum in Home & Lifestyle, Aerospace & Defense and Transportation & Mobility. Europe increased 7% to 37% of software revenue thanks to double-digit growth in western and northern Europe, with strong results in core industries. In the Asia region, revenue increased 10% driven by China, up strong double digit. Japan, Korea and India delivered high-single digit growth. Asia represented 22% of software revenue at the end of the first quarter.
• Software Revenue by Product Line:
• Industrial Innovation software revenue rose 9% to €731 million, thanks to the continued strong momentum in the 3DEXPERIENCE. CATIA and ENOVIA recorded high-single digit growth. Industrial Innovation software represented 54% of software revenue, during the period.
• Life Sciences software revenue decreased 2%, to €285 million, to account for 21% of software revenue. As expected, MEDIDATA software revenue declined slightly.
• Mainstream Innovation software revenue increased 10% to €337 million and represented 25% of software revenue. SOLIDWORKS delivered a significant revenue growth in subscription while CENTRIC PLM maintained its strong momentum, continuing to benefit from its leading market position and successful diversification strategy.
• Software Revenue by Industry: Transportation & Mobility, Aerospace & Defense, Home & Lifestyle and Consumer Packaged Goods & Retail exhibited some of the highest growth rates during the quarter.
• Key Strategic Drivers: 3DEXPERIENCE software revenue increased 29% and represented 36% of 3DEXPERIENCE Eligible software revenue. Cloud software revenue grew 6% and represented 24% of software revenue, during the period. Excluding MEDIDATA, Cloud software revenue increased 49% in constant currencies.
• Operating Income and Margin: IFRS operating income increased 9%, as reported. Non-IFRS operating income grew 5% to €467 million, as reported. The IFRS operating margin stood at 21.6% compared to 20.8% in the first quarter of 2023. The non-IFRS operating margin totaled 31.1%, representing an increase of 50 basis points in constant currencies, compared to the same period last year.
• Earnings per Share: IFRS diluted EPS was €0.21 increasing 11% as reported. Non-IFRS diluted EPS grew to €0.30, up 12% in constant currencies.
• Cash Flow from Operations (IFRS): Cash flow from operations totaled €671 million. Q1 was lower versus last year due to the timing of collections that are expected to rebalance throughout the year. Cash flow from operations was principally used for treasury shares buy-back net of proceeds from stock options exercise for €110 million.
• Balance Sheet (IFRS): Dassault Systèmes’ net financial position totaled €1.1 billion for the quarter ended March 31, 2024, an increase of €526 million, compared to €578 million for the year ended December 31,2023. Cash, cash equivalents and short-term investments totaled €4.1 billion at the end of the quarter.

Rouven Bergmann, Dassault Systèmes’ Chief Financial Officer, commented:

“We had a solid start to the year, while remaining focused on the fundamentals of our business model. Software revenue grew by 7% in the first quarter, underpinned by strong operating leverage with operating margin increasing 50 basis points year-over-year and earnings per share up 12% in constant currencies.

Subscription revenue increased 10% with MEDIDATA weighing on this performance, as anticipated. Excluding this impact, subscription revenue rose 22%, reflecting the continued good momentum in 3DEXPERIENCE.

While 2024 is expected to be a back-end loaded year, Q1 provides increasing visibility in the 3DEXPERIENCE pipeline, mainly driven by the adoption in our customer base. For MEDIDATA, we see progress towards recovery in the second half, supported by the stabilization of the clinical trial market and good execution in terms of bookings growth and win rates.

For the full year, we are confirming our objectives with total revenue growth between 8% and 10%, and non-IFRS diluted EPS at €1.29 – €1.31, up 10% to 12% in constant currencies.”

Financial Objectives for 2024

Dassault Systèmes’ second quarter and 2024 financial objectives presented below are given on a non-IFRS basis and reflect the principal 2024 currency exchange rate assumptions for the US dollar and Japanese yen as well as the potential impact from additional non-Euro currencies:

These objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below.

The 2024 non-IFRS financial objectives set forth above do not take into account the following accounting elements below and are estimated based upon the 2024 principal currency exchange rates above: no significant contract liabilities write-downs; share-based compensation expenses, including related social charges, estimated at approximately €165 million (these estimates do not include any new stock option or share grants issued after March 31, 2024); amortization of acquired intangibles and of tangibles reevaluation, estimated at approximately €372million, largely impacted by the acquisition of MEDIDATA; and lease incentives of acquired companies at approximately €2 million.

The above objectives also do not include any impact from other operating income and expenses, 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 acquisitions or restructuring completed after March31,2024.

Corporate Announcements

• March 18, 2024: Dassault Systèmes: Filing of the 2023 Universal registration document

• March 14, 2024: Embraer Selects Dassault Systèmes’ Simulation Technology to Support Quieter eVTOL Aircraft Development for Eve Air Mobility

• March 12, 2024: Dassault Systèmes and CDR-Life Collaborate to Accelerate Scientific Innovation for Cancer Therapies

• February 29, 2024: Clarins Teams Up with Dassault Systèmes to Achieve New Levels of Efficiency at Its Two French Production Sites

• February 28, 2024: MEDIDATA and Thermo Fisher Scientific’s PPD Clinical Research Business Collaborate to Accelerate Clinical Trials Innovation

• February 27, 2024: New Dassault Systèmes Virtual Twin Experience Helps Protect Vulnerable Patients and Educate Caregivers at Saint-Louis Hospital AP-HP in Paris

• February 14, 2024: Swimwear Brand Arena Achieves Faster, More Sustainable Prototyping with Dassault Systèmes’ 3DEXPERIENCE Works

• February 12, 2024: Cadence and Dassault Systèmes Unveil the First Cloud-Enabled, Collaborative Experience to Transform the Development of Electromechanical Systems

• February 8, 2024: Italian Engineering Firm VLP and Partners Uses Dassault Systèmes’ 3DEXPERIENCE Platform to Manage Complex Architectural Projects

• February 6, 2024: MEDIDATA and Sanofi Vaccines Extend Collaboration to Improve Patient Centricity and Trial Efficiency

• February 6, 2024: Assystem and Dassault Systèmes Partner to Accelerate the Development of Advanced Modular Reactors

• February 1^st, 2024: BMW Group Partners with Dassault Systèmes to Bring the 3DEXPERIENCE Platform to Its Future Engineering Platform

• January 10, 2024: MEDIDATA Secures Top Honors in Everest Group’s Decentralized Clinical Trial Platforms PEAK Matrix Assessment

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 Group’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 Group’s actual results or performance may be materially negatively affected by numerous risks and uncertainties, as described in the “Risk Factors” section 1.9 of the 2023 Universal Registration Document (‘Document d’enregistrement universel’) filed with the AMF (French Financial Markets Authority) on March 18, 2024, available on the Group’s website www.3ds.com.

In particular, please refer to the risk factor “Uncertain Global Economic Environment” in section 1.9.1.1 of the 2023 Universal Registration Document set out below for ease of reference:

“In light of the uncertainties regarding economic, business, social, health and geopolitical conditions at the global level, Dassault Systèmes’ revenue, net earnings and cash flows may grow more slowly, whether on an annual or quarterly basis, mainly due to the following factors:

• the deployment of Dassault Systèmes’ solutions may represent a large portion of a customer’s investments in software technology. Decisions to make such an investment are impacted by the economic environment in which the customers operate. Uncertain global geopolitical, economic and health conditions and the lack of visibility or the lack of financial resources may cause some customers, e.g. within the automotive, aerospace, energy or natural resources industries, to reduce, postpone or terminate their investments, or to reduce or not renew ongoing paid maintenance for their installed base, which impact larger customers’ revenue with their respective subcontractors;
• the political, economic and monetary situation in certain geographic regions where Dassault Systèmes operates could become more volatile and impact Dassault Systèmes’ business, for example, due to stricter export compliance rules or the introduction of new customs tariffs;
• continued pressure or volatility on raw materials and energy prices could also slow down Dassault Systèmes’ diversification efforts in new industries;

• uncertainties regarding the extent and duration of inflation could adversely affect the financial position of Dassault Systèmes; and
• the sales cycle of the Dassault Systèmes’ products – already relatively long due to the strategic nature of such investments for customers – could further lengthen.

The occurrence of crises – health and political crises in particular – could have consequences both for the health and safety of Dassault Systèmes’ employees and for the Company. It could also adversely impact the financial situation or financing and supply capabilities of Dassault Systèmes’ existing and potential customers, commercial and technology partners, some of whom may be forced to temporarily close sites or cease operations. A deteriorating economic environment could generate increased price pressure and affect the collection of receivables, which would negatively impact Dassault Systèmes’ revenue, financial performance and market position.

Dassault Systèmes makes every effort to take into consideration this uncertain macroeconomic outlook. Dassault Systèmes’ business results, however, may not develop as anticipated. Furthermore, due to factors affecting sales of Dassault Systèmes’ products and services, 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.

In preparing such forward-looking statements, the Group has in particular assumed an average US dollar to euro exchange rate of US$1.10 per €1.00 as well as an average Japanese yen to euro exchange rate of JPY155.0 to €1.00, before hedging for the second quarter 2024. The Group has in particular assumed an average US dollar to euro exchange rate of US$1.10 per €1.00 as well as an average Japanese yen to euro exchange rate of JPY156.5 to €1.00, before hedging for the full year 2024. However, currency values fluctuate, and the Group’s results may be significantly affected by changes in exchange rates.

Non-IFRS Financial Information

Readers are cautioned that the supplemental non-IFRS financial 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 in isolation from or as a substitute for IFRS measurements. The supplemental non-IFRS financial information should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with IFRS. Furthermore, the Group’s supplemental non-IFRS financial information may not be comparable to similarly titled “non-IFRS” measures used by other companies. Specific limitations for individual non-IFRS measures are set forth in the Company’s 2023 Universal Registration Document filed with the AMF on March 18, 2024.

In the tables accompanying this press release the Group 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 and of tangibles reevaluation, certain other operating income and expense, net, including impairment of goodwill and acquired intangibles, the effect of adjusting lease incentives of acquired companies, 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.

Photo: Pascal Daloz, Dassault Systèmes’ Chief Executive Officer