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Dassault Systemes S.A. (DASTY.PK)

Q2 2012 Earnings Call

July 26, 2012 9:00 AM ET


François Bordonado – IR

Bernard Charlès – President and CEO

Thibault de Tersant – SVP and CFO


Josep Bori – BNP Paribas

Jack Hazman

Michael Briest – UBS



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Thank you for standing by and welcome to the Dassault Systemes 2012 second quarter financial results call. At this time our participants are in a listen-only mode. A short overview will be given followed by a question-and-answer session.

(Operator Instructions)

I must advice you that this conference is being recorded today. I would now like to hand the conference over to Francois-Jose Bordonado, Investor Relations. Please go ahead.

Francois-Jose Bordonado

Thank you. Thank you for joining Bernard Charles, CEO and Thibault de Tersant, CFO, for our 2012 second quarter conference call. We held our presentation in Paris earlier today and have placed the presentation on our website.

Two brief reminders. First, Dassault Systemes financial results are prepared in accordance with IFRS. We have provided supplemental non-IFRS financial information, which is explained in the IFRS and non-IFRS reconciliation table included in our earnings press release. And second, some of the comments we will make on this call will contain forward-looking statements which could differ materially from actual results. Please refer to our risk factors in today’s press release and in our 2011 Document de reference.

Let me turn the call over to Bernard Charles.

Bernard Charles

Thank you for joining us here on the webcast held earlier in Paris. As you read from our earnings release, the second quarter had a very good business dynamic. We saw it across all our major brands, regionally within our difference sales channels and by the diversity of industries.

Today I would like to discuss our performance, share with you some of the dynamics of our brands and wins, provide some color behind our advertising campaign for Dassault Systemes the 3DEXPERIENCE company and underscore the opportunities we see arising from the acquisition of Gemcom and our new, 12


industry, natural resources. So, let me begin.

Dassault Systemes delivered a strong quarter of growth. We expanded our customer relationships and entered into new ones leading to software revenue growth of 11% in constant currencies. Our investment in growing our sales channels capacity, particularly in indirect sales, are delivering results. Moreover, we are deepening our industry expertise in all our sales channels. This will bring significant additional value to us over time with the industry solution orientation we have taken.

Improving the management of our businesses and efficiency of our organization has enabled us to translate the revenue growth into operating leverage resulting in an increase in our operating margin of 120 basis points. In combination, we were able to grow our earnings per share by 19%. Importantly, while delivering growth I believe, we have also strengthened our resiliency.

Since unveiling our 3DEXPERIENCE strategy on February 9, 2012, I spent a good of time meeting with our customers and sales partners. I see a growing level of interest in our 3DEXPERIENCE platform and I see growing enthusiasm among our sales partners as they perceive the potential value our industry solutions experiences can bring to customers.

We are supporting the launch of 3DEXPERIENCE with global events as well as with advertising, which you may have read or viewed. We advanced our dream of sustainable innovation for products, nature and life with the completion of the Gemcom acquisition in early July. We are now working with the natural resources industry under our new GEOVIA brand.

And finally, with our updated financial objectives for 2012, we are now approaching a new threshold of EUR2 billion in annual revenues. We reached the first billion in 2006 after 25 years. If we meet our objective this year, we will reach our second billion in 2012 after six years.

Looking at our results by product line, CATIA had a very good new business dynamic in the quarter with customers expanding their V5 usage, enriching their seed profile and role adopting the V6 portfolio at a number of large accounts progressively. The activity resulted in a double digit-digit new licenses revenue growth and double-digit growth in rental licensing.

SOLIDWORKS had a good quarter all around. Seed growth, new licenses revenue and recurring revenue. SOLIDWORKS has grown its channel capacity during the year to keep up with the opportunity in front of it, moving the world to 3D. So we are well positioned in the 3D modeling quadrant.

Moving the compass to virtual and reality, our simulation software SIMULIA, had the best results in our major brands. SIMULIA had a very good quarter performing well in all geographic regions thanks to its finite element analysis and multi-physics capabilities. It also made nice progress in the quarter with its simulation lifecycle management software application set, the SLM applications.

One SIMULIA customer example is Honda, who is using SIMULIA for optimizing in early design phases, nonlinear simulations, vibration noise and design iteration automation.

ENOVIA is the key driver key driver of our industry diversification. We had a number of wins this quarter, with revenue ramps in the future periods. It also had a nice increase in rental activity. During the quarter we had a number of new V6 transactions with companies in aerospace and defense, high tech, energy, life sciences, consumer packaged goods and retail industry.

We also had repeated business with V6 customers including Renault, Jaguar Land Rover, Alstom, LG Electronics among others. V6 represented about 19% of the PLM new licenses revenue in the second quarter. In addition, a good portion of service revenue is V6 related. As you know, V6 is the architecture of the 3DEXPERIENCE platform introduction.

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