Dassault Systèmes Raises EPS Guidance for 2018

(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.
(3) Based on a weighted average 260.0 million diluted shares for H1 2018 and 257.1 million diluted shares for H1 2017.

Summary of Principal Differences of IFRS 15 Compared to IAS 18

The Company has adopted IFRS 15 as of January 1, 2018 using the modified retrospective transition method (also called the cumulative effect method). Under this method, the transition effect is accounted for within the consolidated equity at the date of initial application, i.e. January 1, 2018, without any adjustment to the prior year comparative information. See also the Company’s 2017 Document de Référence (Annual Report) for further information.

  • Recurring software: Recurring software is comprised of subscription and support revenue. IFRS 15 has an impact on the timing of the quarterly recognition of subscription revenue but on a full year basis there is essentially no difference between IFRS 15 and the prior IAS 18 standard for subscription contracts of one year in length. For the 2018 second quarter, non-IFRS recurring software revenue was €525.5 million under IFRS 15 and was €14.6 million higher compared to the prior IAS 18 standard. Previously, under IAS 18, we showed a ratable quarterly amount based upon the annual contract level of our on-premise subscription software. Under IFRS 15, for new contracts entered into or for contracts renewing, we have assigned an upfront value as required which is recognized in the first quarter of the contract, and the remainder which is recognized ratably during the four quarters. We continue to report both of these amounts within recurring revenue, specifically as subscription revenue (previously called periodic revenue). Historically, a higher proportion of subscription contracts are renewed in the first quarter of the year than in the other three quarters of the year.
  • Operating expenses and sales commissions: The Company continues to expense sales commissions under the IFRS 15 standard as was done under IAS 18. Therefore, there are no capitalized sales commissions. As a result, the Company’s operating expenses are identical under IFRS 15 and the prior IAS 18 standard.
  • One-time permanent difference: The implementation of IFRS 15 on January 1, 2018 resulted in a one-time permanent difference between IFRS 15 and IAS 18, where the deferred portion of rental agreements concluded in prior years will not be recognized into revenue. As a result, the corresponding amount of €80 million, net of taxes (€110 million before) was recorded in stockholders’ equity as of January 1, 2018.
  • Initial impact on unearned revenue: At June 30, 2018 unearned revenue on the Balance Sheet under IFRS 15 is not directly comparable to the December 31, 2017 balance sheet under the prior standard IAS 18. This is due to the fact that the June 30, 2018 balance sheet line item unearned revenue has been reduced by €134 million, reflecting mainly (i) the one-time permanent difference of €94 million, and (ii) the higher amount of recurring revenue recognized in the first half under IFRS 15 compared to IAS 18 in the amount of €40 million.
  • Contract Assets: Under IFRS 15, the Company classifies the right to consideration in exchange for products or services transferred to a client as either a receivable or a contract asset. Contract assets amounted to €32 million as at January 1st, 2018 (1st application impact) and to €34 million as at June 30, 2018.

DASSAULT SYSTEMES
RECONCILIATION P&L NON-IFRS IFRS 15 vs Non-IFRS IAS 18
(unaudited; in millions of Euros except per share data)

                 
In millions of Euros, except per share data and percentages   2018 Non-IFRS   2018 Non-IFRS
QTD   Adjustment (1)   QTD   YTD   Adjustment (1)   YTD
    IFRS15       IAS18   IFRS15       IAS18
Total Revenue € 830.7 9.6 € 840.3 € 1,651.3 (39.8) € 1,611.4
Total Revenue breakdown by activity
Software revenue 743.0 9.6 752.6 1,480.0 (39.8) 1,440.2
Licenses and Other software revenue 217.5 1.3 218.9 396.6 2.7 399.3
Subscription and Support revenue 525.5 8.2 533.7 1,083.4 (42.5) 1,040.9
Recurring portion of Software revenue 71% 71% 73% 72%
Services revenue 87.7 87.7 171.2 171.2
Total Software Revenue breakdown by product line
CATIA software revenue 250.4 4.6 254.9 501.0 (9.2) 491.9
ENOVIA software revenue 87.3 0.6 87.9 162.0 (1.2) 160.8
SOLIDWORKS software revenue 185.9 1.3 187.1 355.7 4.5 360.3
Other software revenue 219.4 3.2 222.7 461.3 (34.0) 427.3
Total Revenue breakdown by geography
Americas 239.0 13.3 252.3 478.0 (0.5) 477.5
Europe 346.1 7.1 353.2 708.7 (29.0) 679.7
Asia   245.6   (10.8)   234.8   464.5   (10.3)   454.2
Total Operating Expenses (€ 586.6) (€ 586.6) (€ 1,149.5) (€ 1,149.5)
Share-based compensation expense - - - -
Amortization of acquired intangibles - - - -
Other operating income and expense, net   -       -   -       -
Operating Income € 244.1 9.6 € 253.6 € 501.8 (39.8) € 462.0
Operating Margin 29.4% +0.8pts 30.2% 30.4% -1.7pts 28.7%
Financial revenue & other, net 5.0 5.0 10.3 10.3
Income tax expense (69.3) (2.7) (72.0) (144.9) 11.2 (133.7)
Non-controlling interest 0.1 0.1 0.4 0.4
Net Income attributable to shareholders € 179.9 6.8 € 186.8 € 367.5 (28.6) € 339.0
Diluted Net Income Per Share (3)   € 0.69   0.03   € 0.72   € 1.41   (0.11)   € 1.30
                         
2018 Non-IFRS 2018 Non-IFRS
In millions of Euros 2018 Adjustment 2018 2017 Adjustment 2017
    IFRS15       IAS18   IFRS15       IAS18
Cost of revenue (118.9) (118.9) (238.1) (238.1)
Research and development (150.5) (150.5) (291.0) (291.0)
Marketing and sales (255.3) (255.3) (501.9) (501.9)
General and administrative (61.9) (61.9) (118.4) (118.4)
Total share-based compensation expense                        

DASSAULT SYSTEMES

RECONCILIATION BALANCE SHEET IFRS 15 vs NON-IFRS IAS 18
(unaudited; in millions of Euros)

           
In millions of Euros   IFRS15 Basis   IAS 18 Basis
June 30,   Difference June 30,
    2018       2018
 
ASSETS
Cash and cash equivalents 3,043.2 - 3,043.2
Short-term investments 0.5 - 0.5
Accounts receivable, net 677.2 18.3 695.5
Contract assets 36.3 (36.3) -
Other current assets 273.1 - 273.1
Total current assets 4,030.3 (18.0) 4,012.3
Property and equipment, net 169.1 - 169.1
Goodwill and Intangible assets, net 3,023.6 - 3,023.6
Other non-current assets 284.2   8.4   292.6
Total Assets   € 7,507.2   (€ 9.7)   € 7,497.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 132.7 - 132.7
Contract liabilities - Unearned revenues 882.3 133.7 1,016.0
Other current liabilities 509.3 (26.9) 482.4
Total current liabilities 1,524.3 106.8 1,631.1
Long-term debt 1,000.0 - 1,000.0
Other non-current obligations 500.3 (5.70) 494.6
Total long-term liabilities 1,500.3 (5.70) 1,494.6
Non-controlling interests 1.5 - 1.5
Parent shareholders' equity 4,481.1   (110.7)   4,370.4
Total Liabilities and Shareholders' equity   € 7,507.2   (€ 9.7)   € 7,497.5

DASSAULT SYSTEMES

RECONCILIATION CASH FLOW IFRS 15 vs NON-IFRS IAS 18
(unaudited; in millions of Euros)

         
In millions of Euros   Three months ended June 30, 2018   Six months ended June 30, 2018
    IFRS 15   Difference   IAS 18   IFRS 15   Difference   IAS 18
Net Income attributable to equity holders of the parent 129.2   6.9   136.1   265.5   (28.6)   236.9
Non-controlling interest

(0.1)

0.0

(0.1)

(0.4)

0.0

(0.4)

Net Income 129.1 6.9 136.0 265.1 (28.6) 236.5
Depreciation of property & equipment 14.5 - 14.5 28.2 - 28.2
Amortization of intangible assets 43.1 - 43.1 87.0 - 87.0
Other non cash P&L items 16.5 - 16.5 33.1 - 33.1
Changes in working capital 35.4   (6.9)   28.5   232.1   28.6   260.7
Net Cash provided by operating activities € 238.6 € 0.0 € 238.6 € 645.5 € 0.0 € 645.5
 
Additions to property, equipment and intangibles (19.3) - (19.3) (31.3) - (31.3)
Payments for acquisition of businesses, net of cash acquired (51.6) - (51.6) (51.6) - (51.6)
Sale (purchase) of short term investments, net 40.8 - 40.8 0.7 - 0.7
Investments, loans and others (1.5)   -   (1.5)   (1.5)   -   (1.5)
Net Cash provided by (used in) investing activities (€ 31.6) € 0.0 (€ 31.6) (€ 83.7) € 0.0 (€ 83.7)
 
Acquisition of non-controlling interests (26.2) - (26.2) (26.2) - (26.2)
(Purchase) Sale of treasury stock (10.6) - (10.6) (2.3) - (2.3)
Proceeds from exercise of stock-options 31.4 - 31.4 43.7 - 43.7
Cash dividend paid (38.0)   -   (38.0)   (38.0)   -   (38.0)
Net Cash provided by (used in) financing activities (€ 43.4) € 0.0 (€ 43.4) (€ 22.8) € 0.0 (€ 22.8)
 
Effect of exchange rate changes on

cash and cash equivalents

75.8 0.0 75.8 44.8 0.0 44.8
                     
Increase (decrease) in cash and cash equivalents   € 239.4   € 0.0   € 239.4   € 583.8   € 0.0   € 583.8
                         
Cash and cash equivalents at beginning of period € 2,803.8 € 0.0 € 2,803.8 € 2,459.4 € 0.0 € 2,459.4
Cash and cash equivalents at end of period   € 3,043.2   € 0.0   € 3,043.2   € 3,043.2   € 0.0   € 3,043.2

IFRS 15

DASSAULT SYSTEMES
NON-IFRS IFRS 15 FINANCIAL INFORMATION
(unaudited; in millions of Euros, except per share data, headcount and exchange rates)

         
In millions of Euros, except per share data and percentages   Three months ended   Six months ended
    June 30, 2018   June 30, 2018
Non-IFRS-IFRS15 Revenue € 830.7   € 1,651.3
 
Non-IFRS-IFRS15 Revenue breakdown by activity
Software revenue 743.0 1,480.0
of which licenses and other software revenue 217.5 396.6
of which subscription and support revenue 525.5 1,083.4
Services revenue 87.7 171.2
 
Non-IFRS-IFRS15 software revenue breakdown by product line
CATIA software revenue 250.4 501.0
ENOVIA software revenue 87.3 162.0
SOLIDWORKS software revenue 185.9 355.7
Other software revenue 219.4 461.3
 
Non-IFRS-IFRS15 Revenue breakdown by geography
Americas 239.0 478.0
Europe 346.1 708.7
Asia 245.6 464.5
 
Non-IFRS-IFRS15 operating income € 244.1 € 501.8
Non-IFRS-IFRS15 operating margin 29.4% 30.4%
Non-IFRS net income attributable to shareholders € 179.9 € 367.5
Non-IFRS-IFRS15 diluted net income per share   € 0.69   € 1.41
Closing headcount   16,221   16,221
 
Average Rate USD per Euro 1.19 1.21
Average Rate JPY per Euro   130.0   131.60

IFRS 15

DASSAULT SYSTEMES
CONDENSED CONSOLIDATED STATEMENT OF INCOME (IFRS)
(unaudited; in millions of Euros, except per share data)

         
In millions of Euros, except per share data and percentages   Three months ended   Six months ended
June 30, June 30,
    2018   2018
Licenses and other software revenue 217.5 396.6
Subscription and Support revenue 522.5   1,078.6
Software revenue 740.1 1,475.2
Services revenue 87.7   171.2
Total Revenue IFRS -IFRS15 € 827.8 € 1,646.4
Cost of software revenue (excluding amortization of acquired intangibles) (38.2) (79.0)
Cost of services and other revenue (81.8) (161.2)
Research and development (161.4) (314.0)
Marketing and sales (262.8) (515.8)
General and administrative (69.8) (139.6)
Amortization of acquired intangibles (40.7) (82.5)
Other operating income and expense, net (4.4)   (6.9)
Total Operating Expenses (659.0)   (1,299.0)
Operating Income € 168.7 € 347.4
Financial revenue and other, net 4.4   9.1
Income before income taxes 173.1 356.6
Income tax expense (44.0) (91.5)
Net Income € 129.1 € 265.1
Non-controlling interest 0.1   0.4
Net Income attributable to equity holders of the parent € 129.3   € 265.5
Basic net income per share 0.50   1.03
Diluted net income per share € 0.50   € 1.02
Basic weighted average shares outstanding (in millions) 258.9   257.9
Diluted weighted average shares outstanding (in millions)   260.4   260.0

IFRS 15

DASSAULT SYSTEMES
CONDENSED CONSOLIDATED BALANCE SHEET (IFRS)
(unaudited; in millions of Euros)

         
In millions of Euros   June 30,   December 31,
    2018   2017
 
ASSETS
Cash and cash equivalents 3,043.2 2,459.4
Short-term investments 0.5 1.3
Accounts receivable, net 677.2 895.9
Contract assets 36.3 0.0
Other current assets 273.1 242.9
Total current assets 4,030.3 3,599.5
Property and equipment, net 169.1 169.0
Goodwill and Intangible assets, net 3,023.6 2,990.1
Other non-current assets 284.2   271.2
Total Assets   € 7,507.2   € 7,029.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 132.7 149.3
Unearned revenues 882.3 876.4
Other current liabilities 509.3 501.7
Total current liabilities 1,524.3 1,527.4
Long-term debt 1,000.0 1,000.0
Other non-current obligations 500.3 506.3
Total long-term liabilities 1,500.3 1,506.3
Non-controlling interests 1.5 1.9
Parent shareholders' equity 4,481.1   3,994.2
Total Liabilities and Shareholders' equity   € 7,507.2   € 7,029.8

IFRS 15

DASSAULT SYSTEMES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (IFRS)
(unaudited; in millions of Euros)

         
In millions of Euros   Three months ended   Six months ended
    June 30, 2018   June 30, 2017   Change   June 30, 2018   June 30, 2017   Change
Net Income attributable to equity holders of the parent 129.2   123.0   6.2   265.5   208.0   57.5
Non-controlling interest

(0.1)

(0.1)

0.0

(0.4)

1.3

(1.7)

Net Income 129.1 122.9 6.2 265.1 209.2 55.9
Depreciation of property & equipment 14.5 11.1 3.4 28.2 22.9 5.3
Amortization of intangible assets 43.1 41.3 1.8 87.0 84.6 2.4
Other non cash P&L items 16.5 2.6 13.9 33.1 10.4 22.7
Changes in working capital 35.4   66.7   (31.3)   232.1   265.2   (33.1)
Net Cash provided by operating activities € 238.6 € 244.6 (€ 6.0) € 645.5 € 592.4 € 53.1
 
Additions to property, equipment and intangibles (19.3) (27.4) 8.1 (31.3) (45.8) 14.5
Payments for acquisition of businesses, net of cash acquired (51.6) (7.6) (44.0) (51.6) (8.0) (43.6)
Sale (purchase) of short term investments, net 40.8 12.5 28.3 0.7 3.7 (3.0)
Investments, loans and others (1.5)   -   (1.5)   (1.5)   6.4   (7.9)
Net Cash provided by (used in) investing activities (€ 31.6) (€ 22.5) (€ 9.1) (€ 83.7) (€ 43.7) (€ 40.0)
 
Acquisition of non-controlling interests (26.2) (14.1) (12.1) (26.2) (14.1) (12.1)
(Purchase) Sale of treasury stock (10.6) (47.9) 37.3 (2.3) (44.8) 42.5
Proceeds from exercise of stock-options 31.4 16.5 14.9 43.7 21.8 21.9
Cash dividend paid (38.0)   (51.3)   13.3   (38.0)   (51.3)   13.3
Net Cash provided by (used in) financing activities (€ 43.4) (€ 96.8) € 53.4 (€ 22.8) (€ 88.4) € 65.6
 
Effect of exchange rate changes on

cash and cash equivalents

75.8 (121.5) 197.3 44.8 (127.8) 172.6
                     
Increase (decrease) in cash and cash equivalents   € 239.4   € 3.8       € 583.8   € 332.5    
                         
Cash and cash equivalents at beginning of period € 2,803.8 € 2,765.4 € 2,459.4 € 2,436.7
Cash and cash equivalents at end of period   € 3,043.2   € 2,769.2       € 3,043.2   € 2,769.2    

IFRS 15

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