Dassault Systèmes (Euronext Paris: #13065, DSY.PA) announces IFRS unaudited financial results for the first quarter ended March 31, 2021. The Group’s Board of Directors reviewed these results on April 27, 2021. This press release also includes financial information on a non-IFRS basis and reconciliations with IFRS figures in the Appendix to this communication.
First QuarterHighlights and Financial Summary
(Unaudited, revenue growth in constant currencies, EPS presented on a diluted basis)
- IFRS EPS of €0.66, up 54% and non-IFRSEPS of €1.14, up 20%, 28% in constant currencies
- On an organic basis, non-IFRS software revenue up 10%
- Non-IFRS licenses and other software revenue up 25%, on upside principally from China, North America and Northern Europe
- Non-IFRS software revenue: Mainstream Innovation up 20% on SOLIDWORKS and CENTRIC PLM;Life Sciences up 16% with strong MEDIDATA performance; Industrial Innovation up 4%
- Cash flow from operations up 40% to €642 million
- 2021 Non-IFRS objectives: Reaffirms revenue up 9-10%; Upgrades EPS to €4.24-4.28, up 17-18% in constant currencies
Bernard Charlès, Dassault Systèmes’ Vice Chairman and Chief Executive Officer commented, “It is very clear from discussions with our clients and partners that industries are entering a new cycle of innovation driven by sustainability and characterized by a human-centric approach.These trends were very recently highlighted at the Shanghai Auto Show, where companies advanced timelines for their next generation portfolios and mobility experiences.
“Similarly, in Infrastructure & Cities, we are pleased to announce the extension of our strategic partnership with Bouygues Construction.By bringing the virtual twin experience to the construction industry, we’re introducing onto the market new sustainable experiences – all on the cloud and mobile enabled – empowering all actors in the value chain to collaborate and innovate.
“The accelerated pace of innovation required in the three sectors of the global economy we are addressing, Manufacturing, Life Sciences & Healthcare, and Infrastructure & Cities, can only be achieved by the continued platformization of industries. With our 3DEXPERIENCE platform, coupling Mod-Sim with extensive data capabilities, we are well positioned to help customers become platform-driven.Building on a rich portfolio of data driven Industry Processes and Roles, the 3DEXPERIENCE platform enables to reveal real world data, from many disparate sources, elevated to a consistent actionable semantic, and activate them into virtual twin experiences of the products, assets, manufacturing facilities, or even enterprises, themselves.”
Financial Summary
| In millions of Euros, except per share data and percentages |
IFRS | Non-IFRS | ||||||||
| Q1 2021 | Q1 2020 | Change | Change in constant currencies | Q1 2021 | Q1 2020 | Change | Change in constant currencies | |||
| Total Revenue | 1,172.9 | 1,134.7 | 3% | 9% | 1,173.6 | 1,144.4 | 3% | 8% | ||
| Software Revenue | 1,067.8 | 1,014.2 | 5% | 11% | 1,068.4 | 1,023.0 | 4% | 10% | ||
| Operating Margin | 19.7% | 13.3% | +6.3pts | 33.9% | 29.2% | +4.7pts | ||||
| Diluted EPS | 0.66 | 0.43 | 54% | 1.14 | 0.95 | 20% | 28% | |||
First Quarter 2021 versus 2020 Financial Comparisons
(Unaudited, all revenue growth rates in constant currencies)
- Total Revenue: Total revenue increased 9% (IFRS). On a non-IFRS basis, total revenue of €1.17 billion increased 8%.
- Software Revenue: Software revenue grew 11% (IFRS) and 10% (non-IFRS). On an organic basis, non-IFRS software revenue increased 10%. Non-IFRS recurring software revenue,representing 81% of total software in the quarter, grew by 7%, with subscription revenue up double-digits driven by MEDIDATA. Licenses and other software revenue increased 25% (IFRS and non-IFRS on an organic basis) to €203.8 million.During the first quarter, the Group benefited from a strong performance in Mainstream Innovation and large deal activity, in particular in Transportation & Mobility. From a geographic perspective, results were particularly good in Asia, led by China and Korea, and recorded strong growth in North America, Northern and Southern Europe.
- Operating Income and Margin: IFRS operating income increased 53%. On a non-IFRS basis, operating income of €397.4 million increased 19% as reported and 27% at constant rate. The non-IFRS operating margin increased to 33.9% from 29.2%, with underlying growth of about 510 basis points offset in part by a net negative currency impact of about 40 basis points.
- Earnings per Share: IFRS diluted earnings per share increased 54%. On a non-IFRS basis, diluted earnings per share of €1.14 came in above the high end of the Company’s guidance, growing 20% as reported or 28% excluding currency headwinds.
- Operating Cash Flow:Operating cash flow totaled €641.8 million in the first quarter, up 40% reflecting both strong growth in net income adjusted for non-cash items, and non-operating working capital.
Balance Sheet Information
Dassault Systèmes’ net financial debt as at March 31, 2021 decreased by €559 million to €(1.48) billion, compared to €(2.04) billion as at December 31, 2020, reflecting cash, cash equivalents and short-term investments of €2.71 billion and debt related to borrowings of €4.19 billion as at March 31, 2021.
First Quarter 2021 Highlights by Product Line
(unaudited, all revenue growth rates in constant currencies)
Industrial Innovation IFRS and non-IFRS software revenue was €609 million in the first quarter and represented 57% of total software revenue.
- Industrial Innovation software performance was led by SIMULIA, with its multi-physics portfolio, and NETVIBES, in data intelligence.
- 3DEXPERIENCE non-IFRS software revenue increased 18%, with licenses and other software revenue up sharply.
- Industrial Innovation sales activities were a large contributor to the Group’s Transportation & Mobility software revenue results, which increased 14% (non-IFRS) in Q1, with a number of large transactions with global manufacturers and start-ups. The Group noted an initial recovery in the Transportation &Mobility supply network.
- Gartner Group published its Manufacturing Execution Systems Magic Quadrant with DELMIA positioned in the leaders’ quadrant for the fourth year in a row.
Life Sciences software revenue was €209 million (IFRS) and €210 million (non-IFRS) in the first quarter, and represented 20% of total software revenue (IFRS and non-IFRS).
- MEDIDATA delivered a strong Q1 driven by momentum with mid-market customers and key product areas including Rave EDC, Patient Cloud and Acorn AI.
- Furthermore, the Life Sciences& Healthcare sector non-IFRS software revenue grew 16%, benefiting from growth in the Life Sciences product line as well as from increased customer activity for SOLIDWORKS with Medical Devices companies and SIMULIA. The Company noted increased customer sales engagements in manufacturing with Life Sciences companies.
Mainstream Innovation software revenue was €249 million (IFRS and non-IFRS) in the first quarter,and represented 23% of total software revenue.
- Mainstream Innovation IFRS and non-IFRS software revenue increased 20% in Q1, with SOLIDWORKS non-IFRS software revenue up 18% on broad-based global demand. Sales by SOLIDWORKS’ resellers were up sharply for its 3DEXPERIENCE WORKS cloud-based solutions. New SOLIDWORKS customers increased 22% in the first quarter.
- CENTRICPLM saw significant growth in software revenue,driven by increased activity-in key geographic markets, including Asia with expansion in China. CENTRICPLM saw a strong increase in new customers in Home & Lifestyle including fashion and retail and early traction in Food & Beverage.
Corporate Information
As previously disclosed, Dassault Systèmes’ Board of Directors is proposing to the next General Meeting of Shareholders of May 26, 2021 the approval of a dividend of €0.56 per share for the year 2020, payable in cash only. Shares would be traded ex-dividend as of May 28, 2021 and dividends would be made payable on June 1, 2021.
COO & CFO Commentary (revenue growth rates in constant currencies, data on a non-IFRS basis)
Pascal Daloz, Dassault Systèmes’ Chief Operating Officer,& Chief Financial Officer, commented, “First quarter revenue results came in at the high end of our guidance range, with software above the range. On an organic basis, software revenue increased 10%, with licenses and other software revenue up 25% and subscription revenue up double-digits. Diluted EPS was well ahead of our guidance, growing 20%, or 28% in constant currencies, thanks to the combination of software growth and operating margin expansion of 470 basis points. Finally, cash flow from operations set a new quarterly record, up 40% to €642million.
“We are seeing strong momentum in Life Sciences, led by MEDIDATA where software revenue increased 20% in the first quarter driven by Rave in clinical data management, Patient Cloud and Acorn AI. In Mainstream Innovation, software revenue increased 20%, on an outstanding first quarter from SOLIDWORKS and CENTRIC PLM. In Industrial Innovation, 3DEXPERIENCE software revenue increased 18%, and its largest industry, Transportation & Mobility, benefited from a broad return to investments with global automotive leaders, EV start-ups and the supply chain as well as large deals led by our domains strengths in simulation and data analytics.
“Looking to the full year, we are confirming our revenue growth objective range of 9 to 10%, with a higher contribution from software as we saw in the first quarter. We are increasing our non-IFRS diluted EPS objective leading to expected growth of about 12% to 14%, or about 17-18% in constant currencies, capturing the earnings upside from the first quarter.”
Financial Objectives for 2021
Dassault Systèmes’ full year 2021 financial objectives presented below are given on a non-IFRS basis and reflect the principal 2021 currency exchange rate assumptions below for the US dollar and Japanese yen as well as the potential impact from additional non-Euro currencies:
| Q22021 | FY 2021 | |||
| Total non-IFRS Revenue | €1.130to €1.155billion | €4.715to €4.765billion | ||
| Growth in Constant Currencies (cc) | +12-14% | +9-10% | ||
| Non-IFRS Operating Margin | 29.4% to 30.1% | 31.6% to 31.7% | ||
| Non-IFRS EPS | €0.94to €0.98 | €4.24to €4.28 | ||
| Non-IFRS EPS Growth | +18-23% | +12-14% | ||
| US dollar | $1.22per Euro | $1.22per Euro | ||
| Japanese yen (before hedging) | JPY 126.0 per Euro | JPY 126.5 per Euro |
These objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below.
The 2021 non-IFRS financial objectives set forth above do not take into account the following accounting elements below and are estimated based upon the 2021 principal currency exchange rates above: contract liabilities write-downs estimated at approximately €2million; share-based compensation expenses, including related social charges, estimated at approximately €137million; and amortization of acquired intangibles and of tangibles reevaluation, estimated at approximately €353 million, largely impacted by the acquisition of Medidata; and lease incentives of acquired companies at approximately €3 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 stock option or share grants, or any new acquisitions or restructuring completed after March 31, 2021.
Today’s Webcast and Conference Call Information
Today, Wednesday, April 28, 2021, Dassault Systèmes will host a webcasted presentation at 9:00 London AM 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 presentation and conference call will be available online by accessing https://investor.3ds.com.
Additional investor information is available at https://investor.3ds.com or by calling Dassault Systèmes’ Investor Relations at +33161626924.
Key Investor Relations Events
Annual Meeting of Shareholders: May 26, 2021
Second Quarter 2021 Earnings Release: July 27, 2021
Third Quarter 2021 Earnings Release: October 28, 2021
Fourth Quarter 2021 Earnings Release: February 3, 2022
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 of the 2020 Universal Registration Document(‘Document d’enregistrement universel’) filed with the AMF (French Financial Markets Authority) on March 19, 2021, 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 2020Universal Registration Document set out below for ease of reference:
“In light of the uncertainties regarding economic, business,social, health, climate 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 automotive, aerospace 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 sub-contractors;
- the sales cycle of Dassault Systèmes’ products – already relatively long due to the strategic nature of such investments for customers – could further lengthen;
- the political, economic and monetary situation in certain geographic regions where Dassault Systèmes operates could become more volatile and, for example, result in stricter export compliance rules or the modification of customs tariff;
- health conditions in some geographic areas where Dassault Systèmes operates will impact the economic situation of those regions. Specifically, it is not possible to predict the impact, length and scope of damages originating from the COVID-19 pandemic as of issuance date of this document. Health conditions, including the COVID-19 pandemic, may present risks for health and ability to travel for Dassault Systèmes employees; and
- continued pressure or volatility on raw materials and energy prices could also slow down Dassault Systèmes’ industry diversification efforts.”
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 Group’s business results.
The economic context (as notably caused by the COVID-19 pandemic crisis) may also adversely impact the financial situation or financing 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 due to cash flow and profitability issues. Dassault Systèmes’ ability to collect outstanding receivables may be affected. In addition, the economic environment could generate increased price pressure, as customers seek lower prices from various competitors, which could negatively impact Dassault Systèmes’ revenue,financial performance and market position.
In preparing such forward-looking statements, the Group has in particular assumed an average US dollar to euro exchange rate of US$1.22per €1.00 as well as an average Japanese yen to euro exchange rate of JPY126.0 to €1.00 before hedging for the second, third and fourth quarters and US$1.22 per €1.00 as well as an average Japanese yen to euro exchange rate of JPY126.5 to €1.00 before hedging for the full year 2021. However, currency values fluctuate, and the Group’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. This information is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for IFRS measurements. In addition, the Group’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 Group’s 2020 Universal Registration Document filed with the AMF on March 19, 2021.
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.