Dassault Systèmes (Paris:DSY) (Euronext Paris: #13065, DSY.PA), the 3DEXPERIENCE Company, world leader in 3D design software, 3D Digital Mock Up and Product Lifecycle Management (PLM) solutions, announced IFRS unaudited financial results for the fourth quarter and year ended December 31, 2014.
These results were reviewed by the Company's Board of Directors on February 4, 2015.
Summary Highlights
(unaudited)
Organic new licenses revenue up 12% in Q4 and 10% in FY in constant currencies
Organic non-IFRS operating margin growth of 150 basis points in FY
Non-IFRS EPS up 15% in Q4
2014 year of Accelerated Strategy Implementation, Acquisitions Driving Addressable Market Expansion
21,000 new customers in 2014
2015 financial objectives initiated: Targeting non-IFRS EPS growth of about 12-15%
"2014 was a significant year of advancement to achieve our purpose of providing 3DEXPERIENCE universes to harmonize product, nature and life," commented Bernard Charlès, Dassault Systèmes President and Chief Executive Officer.
"At the outset of 2014 we outlined that the objective of our Industry Solution Experiences powered by our 3DEXPERIENCE platform, was to increase the value we bring to our clients. Our investments as well as our sales and services initiatives during the year very precisely mirrored that goal. Thanks to our 3DEXPERIENCE platform, companies are now able to integrate business processes by easily leveraging existing digital assets never reused before. Further, the creation of two new brands, BIOVIA for Life Sciences and 3DEXCITE for Marketers, the expansion of GEOVIA to enable 3DEXPERIENCity and the novel approach to business processes optimization with our Quintiq acquisition, have demonstrated that the 3DEXPERIENCE platform encompasses both business and people needs, delivering a comprehensive range of capabilities, from consumer insights to innovative services critical to our clients' successes.
"And in parallel, to help our clients enjoy and benefit from the full value of our Industry Solution Experiences wherever they are deploying our solutions around the globe, we continued to expand our sales and service expertise with a network of partners well-positioned to provide the right industry-specialized resources.
"Finally, it is clear that the Industry Solution Experience approach is well resonating with companies, visible in the broad-based interest we are seeing and the expanding dialogues we are having with companies across many industries."IFRS total revenue increased 16%, with total software growth of 13%, and services and other revenue higher by 46% reflecting the service component from 2014 acquisitions. Non-IFRS total revenue increased 20%, with software revenue growth of 17% and services and other revenue growth of 54%. Excluding acquisitions, non-IFRS total revenue increased 5% and non-IFRS software revenue increased 7%. (All growth rates in constant currencies.)
From a regional perspective, non-IFRS revenue in Europe increased 17%, with Germany and Southern Europe reporting the strongest sales performance. Non-IFRS revenue in the Americas increased 29% on strengthening North American results. In Asia, non-IFRS revenue growth of 16% was led by China, Japan and Korea. (All growth rates in constant currencies.)
New licenses revenue grew 24% (IFRS and non-IFRS). On an organic basis, non-IFRS new licenses revenue increased 12%, led by strong growth in the Americas and Europe. Recurring software revenue increased 9% (IFRS) and 13% (non-IFRS). (All growth rates in constant currencies.)
By product line and on a non-IFRS basis, CATIA software increased 8% and ENOVIA software increased 5%; SOLIDWORKS software increased 14% with new seats licensed up 6% to 15,312; Other software increased 42% reflecting new acquisitions and double-digit software growth for SIMULIA, offset in part by softer results in mining and manufacturing. (All growth comparisons are in constant currencies.)
IFRS operating income of €148.6 million was lower by 10.5%, while non-IFRS operating income increased 14.2% to €225.4 million. The non-IFRS operating margin was 32.5%, lower in comparison to the year-ago period as anticipated, reflecting dilution from acquisitions mitigated in part by improvement of the organic operating margin.
The IFRS effective tax rate was 33.4% compared to 35.5% in the year-ago period, principally due to lower tax reserves. The non-IFRS effective tax rate was 34.0% compared to 35.4% in the year-ago quarter.
IFRS diluted net income per share was €0.39 per share, compared to €0.43 per share on a split-adjusted basis in the year-ago period. Non-IFRS diluted net income per share increased 15% to €0.58 per share. The Company noted that currency had a net neutral effect on non-IFRS earnings per share.
IFRS total revenue increased 14%. Non-IFRS total revenue increased 16%, on software revenue growth of 13% and services and other revenue growth of 46%. Excluding acquisitions and divestitures, non-IFRS total revenue and software revenue increased 5% and 6%, respectively. (All growth rates in constant currencies.)
On a regional basis, non-IFRS revenue in Europe increased 14%, led by Germany, the United Kingdom and Southern Europe; revenue in the Americas increased 20%, with an improved new business dynamic in the direct sales channel, well supported by indirect sales; and in Asia, revenue increased 15%, led by Korea, China and Japan. (All growth rates in constant currencies.)
From an industry perspective, the Company experienced strong new business activity in multiple industries, most notably Transportation & Mobility, High Tech, Life Sciences, CPG, Energy and Architecture, Engineering & Construction.
Non-IFRS software revenue increased 13%, with non-IFRS new licenses revenue increasing 18% and non-IFRS recurring software revenue increasing 11%. On an organic basis, new licenses revenue increased 10% led by the Company's direct channel and its CATIA and ENOVIA product lines, and recurring software revenue increased 5% principally reflecting growth in maintenance. (All growth comparisons are in constant currencies.)
By product line, non-IFRS software revenue increased 7% for CATIA; 6% for ENOVIA; 10% for SOLIDWORKS; and Other software was higher by 31%, reflecting the addition of Accelrys, Apriso for a full year, RTT and Quintiq as well as strong demand for SIMULIA. (All growth comparisons are in constant currencies.)
IFRS operating income of €430.8 million decreased 14%, while non-IFRS operating income increased 7% to €699.2 million. Excluding net negative currency effects, non-IFRS operating income would have increased approximately 13%.
The non-IFRS operating margin was 29.8% compared to 31.5% in 2013 and reflected the negative impact of currencies of approximately 80 basis points as well as dilution from acquisitions. On an organic basis, the non-IFRS operating margin increased an estimated 150 basis points in 2014 excluding currencies effects, reflecting the focus on operational improvements.
The IFRS effective tax rate increased to 34.4% compared to 31.8% in 2013, principally due to higher tax credits in 2013. The non-IFRS effective tax rate increased to 34.4% for 2014 compared to 33.1% for 2013.
IFRS diluted net income per share was €1.14 per share, compared to €1.38 per share on a split-adjusted basis in 2013. Non-IFRS diluted net income per share increased 4% to €1.82 on a split-adjusted basis, or an estimated 10% excluding net negative currency impacts.
Cash Flow and Other Financial Highlights
Net operating cash flow was €54.8 million in the fourth quarter and €499.5 million for the full year, compared to €78.4 million and €506.8 million for the respective periods of 2013. The slight decrease in net operating cash flow for 2014 principally reflected the impact of acquired companies during the year, without which it would have grown by 5%. A tax payment, made in the first quarter 2014, following a tax reassessment which is disputed by the Group with the relevant authorities, accounted for a further €22 million.
During 2014, the Company uses of cash were for acquisitions of €952.9 million, net of cash acquired; share repurchases of €171.7 million, cash dividends of €35.9 million and capital expenditures of €45.4 million. The Company received cash for stock options exercised of €57.9 million.
At December 31, 2014, the net financial position was €825.5 million, compared to €1.44 billion at December 31, 2013. Cash, cash equivalents and short-term investments totaled €1.18 billion and long-term debt was €350.0 million, compared to €1.80 billion, and €360.0 million, respectively, at December 31, 2013.
Summary of Recent Business, Technology and Customer Highlights
Software Introductions and Research Developments
Dassault Systèmes launched several new industry solution experiences, including: 1) the launch of "Engineered to Fly," its latest aerospace and defense industry solution experience. This solution, tailored for small- and medium-sized aerospace and defense suppliers, enhances productivity from bid to delivery, offering an unrivaled competitive advantage; 2) two new natural resources industry solution experiences for mining, "Lean Mine Construction" and "Perfect Mine and Plant." Based on Dassault Systèmes' 3DEXPERIENCE platform, these industry solution experiences drive transformational change in mining by helping companies develop and run more efficient mines with unprecedented decision-making agility.
Dassault Systèmes Signed Research Agreement with the U.S. Food and Drug Administration for its "Living Heart Project". The Company has reached a significant milestone in its project aimed at driving the creation and use of simulated 3D personalized hearts in the treatment and diagnosis of heart diseases and medical device development. Powered by Dassault Systèmes 3DEXPERIENCE platform's realistic simulation applications, The "Living Heart Project" announced in May 2014 has rapidly moved its first realistic 3D heart simulator into beta test. As a key step of this initiative, Dassault Systèmes has signed a five-year collaborative research agreement with the United States' Food and Drug Administration (FDA) which will initially target the development of testing paradigms for the insertion, placement and performance of pacemaker leads and other cardiovascular devices used to treat heart disease.
Expo Milano 2015, expected to be one of the largest international events of the decade, is developing an online 3D experience powered by Dassault Systèmes' 3DEXPERIENCE platform that will enable virtual visitors to discover the expo's eco-sustainability theme "Feeding the Planet, Energy for Life." The 2015 World Expo will take place in Milan, Italy from May 1 to October 31, 2015 and will examine the challenge of balancing nutrition for mankind with respect for the planet's resources. To support this focus and make the event accessible to all, Expo Milano 2015 is creating an online, virtual model of the one million square meter exhibition site, immersing virtual visitors in a real-time 3D universe. Interactive 3D features, 360° views, sound effects and high definition images will bring the event to life in a visual, vibrant and informative manner, and help contribute to global awareness of the planet's nutritional resources.
Customer Highlights
Dassault Systèmes' 3DEXPERIENCE Platform Enables PSA Peugeot Citroën to Reinforce its Zero-Defect Strategy in Manufacturing. PSA Peugeot Citroën has decided to significantly intensify the use of its DELMIA digital manufacturing applications to help simplify the innovation process of its body-in-white division. With this expansion, which provides end-to-end digital continuity between engineering and manufacturing, PSA Peugeot Citroën can now efficiently address right-first-time robotics planning. This support of the earliest stages of production layout complements final assembly simulation, painting, powertrain, and stamping.
Management Appointments
Dassault Systèmes announced several management appointments in its executive management team and in its channels, brands and geographies. Monica Menghini has been appointed Executive Vice President, Chief Strategy Officer; she will be in charge of defining the corporate strategy by integrating Corporate Planning, Industry and Brand Portfolio Strategy, Distribution Strategy and Corporate and Brand Marketing Strategy. Bruno Latchague has been appointed Senior Executive Vice President, Global Field Operations. He will take the responsibility of the Company's worldwide Industry organization, and oversee the Americas region.
Bertrand Sicot, formerly SOLIDWORKS CEO, has been appointed Vice President, in charge of the Value Solutions Channel; Gian Paolo Bassi, formerly SOLIDWORKS VP, heading up its R&D, has been appointed SOLIDWORKS CEO. Scott Berkey, SIMULIA CEO, will continue in this role and in addition, has been appointed Managing Director for North America.
Business Outlook
Thibault de Tersant, Senior Executive Vice President, CFO, commented, "The fourth quarter well concluded a gratifying year. We benefited progressively from broad-based strengthening of our performance from both a geographic and industry perspectives – with satisfactory diversification and, at the same time, very good traction in Transportation & Mobility.
"When we initiated our goals for 2014, we made two strong operational commitments (non-IFRS): Delivering two-digit organic new licenses revenue growth excluding currencies, and improving organically by 150 basis points our operating margin. It was all the more rewarding to accomplish both these goals because we did so during an extraordinary year of transformation and advancement for Dassault Systèmes.
"Looking forward, we believe our performance during the fourth quarter is a good basis for constructing our 2015 financial objectives. Our goals for 2015 include organic, double-digit growth in non-IFRS new licenses revenue on a constant currency basis as we continue to focus on broad-based growth, combined with a relatively stable non-IFRS operating margin thanks to continued focus on operational improvements leading to about 12-15% growth in non-IFRS earnings per share. We are benefiting from our growth drivers and strengthened organization and expect these factors to drive our business and financial progress during 2015."
The Company's first quarter and full year 2015 financial objectives are as follows:
First quarter 2015 non-IFRS total revenue objective of about €610-620 million based upon the exchange rates assumptions below, representing a variation of about 15% to 17% excluding currency effects; non-IFRS operating margin of about 24%; and non-IFRS EPS of about €0.38; Excluding the one-time impact from a R&D tax credit in the first quarter of 2014, the first quarter 2015 non-IFRS EPS objective represents a target growth rate of about 11%;
2015 non-IFRS revenue growth objective range of about 11% to 12% in constant currencies (€2.700 to €2.720 billion based upon the 2015 currency exchange rate assumptions below);
2015 non-IFRS operating margin of about 29.8%, stable compared to 2014;
2015 non-IFRS EPS range of about €2.04-2.09, representing a growth objective range of 12% to 15%;
Objectives are based upon exchange rate assumptions of US$1.20 per €1.00 and JPY140 per €1.00 for the 2015 first quarter and full year.
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 2015 non-IFRS objectives set forth above do not take into account the following accounting elements and are estimated based upon the 2015 currency exchange rates above: deferred revenue write-downs estimated at approximately €35 million, share-based compensation expense, estimated at approximately €19 million and amortization of acquired intangibles estimated at approximately €160 million. The above objectives do not include any impact from other operating income and expense, net principally comprised of acquisition, integration and restructuring expenses. Finally, these estimates do not include any new stock option or share grants, or any new acquisitions or restructurings completed after February 5, 2015.
