• On an IAS 18 basis and in constant currencies, total revenue grew 9% (IFRS and non-IFRS) with acquisitions contributing three points to the year over year total revenue growth.
• On an IAS 18 basis and in constant currencies: Total software revenue increased 10% (IFRS) and 9% (non-IFRS). Licenses and other software revenue increased 9% (IFRS and non-IFRS), with double-digit growth for CATIA, ENOVIA and DELMIA, well supported by high single-digit growth for SOLIDWORKS. Non-IFRS recurring revenue represented 73% of total software revenue, and grew 9% led by growth in subscription revenue, including the acquisition of EXA, and high support renewal rates in all three regions. On an organic basis excluding acquisitions, total software increased 7% with licenses and other software revenue growth of 8% and recurring software revenue growth of 6%.
• IAS 18 non-IFRS software revenue increased double-digits in constant currencies in Transportation & Mobility, Energy, Process & Utilities, Consumer Goods & Retail and Consumer Packaged Goods & Retail, Marine & Offshore, Natural Resources and Architecture, Engineering & Construction.
• On a regional and IAS 18 basis: Asia non-IFRS software revenue increased 14% with all countries contributing to this strong performance. In Europe non-IFRS software revenue increased 7% with notable performances in North and South Europe as well as Russia. In the Americas, non-IFRS software revenue increased 9% led by Latin America and a solid contribution from North America, including acquisitions. High Growth Countries non-IFRS software revenue increased 18% and represented about 18% of total software revenue. (All growth rates are in constant currencies.)
• 3DEXPERIENCE non-IFRS IAS 18 software revenue increased 19% in constant currencies during the first nine months of 2018 and represented approximately 22% of related software revenue.
• IAS 18 IFRS and non-IFRS services revenue increased 6% in constant currencies, with growth in 3DEXPERIENCE related services, and the contribution from acquisitions.
• IAS 18 IFRS operating income grew 7.4%. IAS 18 non-IFRS operating income totaled €718.6 million, representing an increase of 4.9% as reported and 10% at constant currency. On an IAS 18 non-IFRS basis, the operating margin was 29.4%, stable with the year-ago nine-month period, thanks to underlying operating margin improvement of about 100 basis points offsetting both acquisition dilution of about 70 basis points and negative currency impacts of about 30 basis points.
• The Company’s IAS 18 IFRS and non-IFRS effective tax rates decreased to 26.6% and 28.6%, respectively, for the first nine months of 2018 compared to 32.8% and 32.6%, respectively, in the prior year period principally reflecting US tax law changes enacted in 2017.

• Non-IFRS financial revenue, net totaled €12.4 million, compared to €(0.2) million in the year-ago period on a strong increase in financial net income as well as lower foreign currency exchange losses.
• IAS 18 IFRS diluted net income per share grew 16%. IAS 18 non-IFRS diluted net income per share increased 12% as reported and 19% at constant currency and totaled €2.01.

Business Outlook
(Discussion on an IAS 18, non-IFRS basis, with revenue growth rates in constant currencies)

Pascal Daloz, Dassault Systèmes’ Executive Vice President, CFO and Corporate Strategy Officer, commented, “Based on our solid first half and third quarter aligned with our objectives, year-to-date total revenue and software revenue are higher by 9% at constant currency, our operating margin is stable year on year thanks to underlying operational improvements of 100 basis points enabling us to absorb 70 basis points of dilution from acquisitions as well as negative currency effects. Finally, our earnings per share is up double-digits. Our cash flow from operations increased 11% year over year, reaching €747 million for the first nine months of 2018.

“Turning to the fourth quarter, we are expecting to report another quarter of solid year over year progression, with a total revenue objective of about €1 billion and earnings per share reaching about €1.00. Given the record high quarter we reported for new licenses and other software revenue in the 2017 fourth quarter, we believe these objectives demonstrate very clearly the market opportunity before us. (all figures on an IAS non-IFRS basis)

“Finally, looking to the full year, we are confirming our non-IFRS total revenue growth objective of about 9% to 10% in constant currencies. Based upon our performance to date and fourth quarter outlook, this translates to a target revenue range of €3.425 to €3.450 billion, an operating margin of about 31.5% and EPS of about €2.98 to €3.02, representing growth of 11% to 13% or 16% to 17% at constant currency.” (all figures and related growth rates on an IAS 18 non-IFRS basis)

The Company’s fourth quarter and full year 2018 financial objectives presented below are given in IAS 18 on a non-IFRS basis:

• Fourth quarter 2018 Financial Objectives
  • 2018 IAS 18 non-IFRS total revenue objective of about €982 million to €1.00 billion based upon the exchange rates assumptions below, growing about 9% to 11% in constant currencies; IAS 18 non-IFRS operating margin of about 36.5%; IAS 18 non-IFRS EPS of about €0.96 to €1.00, representing growth of 8% to 12%;
• Full year 2018 Financial Objectives
  • 2018 IAS 18 non-IFRS revenue growth objective of about 9% to 10% in constant currencies reaffirmed, and updating reported revenue range to about €3.425 to €3.450 billion. The reported revenue range reflects the principal 2018 currency exchange rate assumptions below for the US dollar and Japanese yen as well as the potential impact from additional currencies representing about 17% of the Company’s total revenue in 2017;
  • 2018 IAS 18 non-IFRS operating margin of about 31.5%;
  • 2018 IAS 18 non-IFRS EPS of about €2.98 to 3.02, representing a growth objective of about 11% to 13% as reported;
• Financial objectives are based upon fourth quarter exchange rate assumptions of US$1.20 per €1.00; and JPY135 per €1.00 before hedging.

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

The 2018 non-IFRS objectives, which are stated on an IAS 18 basis, set forth above do not take into account the following accounting elements and are estimated based upon the 2018 principal currency exchange rates above: deferred revenue write-downs estimated at approximately €14 million on an IAS 18 basis, share-based compensation expense, including related social charges, estimated at approximately €129 million and amortization of acquired intangibles estimated at approximately €171 million. The above objectives also do not include any impact from other operating income and expense, net principally comprised of acquisition, integration and restructuring expenses, from one-time items included in financial revenue and from one-time tax restructuring gains and losses. Finally, these estimates do not include any new stock option or share grants, or any new acquisitions or restructurings completed after October 24, 2018.

Cash Flow and Other Financial Highlights Under IAS 18 For Year-over-Year Comparisons

The Company’s net cash flow from operations for the three and nine months ended September 30, 2018 are identical under IFRS 15 in comparison to IAS 18 although some of the line items differ. (See pages 16 and 22 in the Appendix to this press release for further details including a reconciliation of the cash flow statement and balance sheets under IFRS 15 compared to IAS 18 for the quarter, year-to-date and period ended September 30, 2018.)

IAS 18 net operating cash flow increased 11% to €746.6 million for the first nine months of 2018 compared to €671.8 million in the 2017 period principally reflecting growth in net income and non-cash operating adjustments.

Dassault Systèmes’ uses of cash for the 2018 nine-month period were principally for payment for acquisitions, net of cash acquired and non-controlling interests totaling €348.8 million; cash dividends of €38.0 million (based on the shareholders electing payment of the dividend in cash); share repurchases of €113.9 million and capital expenditures, net of €48.2 million. The Company received cash for stock options exercised of €59.2 million.

The Company’s net financial position totaled €1.75 billion at September 30, 2018, compared to €1.46 billion at December 31, 2017, reflecting cash, cash equivalents and short-term investments of €2.75 billion and debt related to credit lines of €1.0 billion.