Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Call Start:

Call End:

Dassault Systèmes SA (OTCPK:DASTY)

Q1 2012 Earnings Call

April 26, 2012

Executives

François-José Bordonado - VP, IR

Bernard Charlès - President & CEO

Thibault de Tersant - Senior EVP & CFO

Analysts

Josep Bori - Exane BNP Paribas

Gregory Ramirez - Bryan Garnier

François-José Bordonado

Good morning everyone. I am François-José Bordonado, Investor Relations. From Dassault Systèmes, we have Bernard Charlès, our President and Chief Executive Officer, and Thibault de Tersant our Senior Executive Vice President and Chief Financial Officer. I would like to welcome you to Dassault Systemes’ first quarter 2012 presentation which is also being webcasted. At the end of presentation we will take questions from the audience and from participants on the webcast call. Later today we will also hold a conference call. Dassault Systemes financial results are prepared in accordance with IFRS.

In addition we have provided supplemental non-IFRS financial information. For an understanding of the differences between the two, please see the reconciliation tables included in our press release. Some of the comments we will make during today's presentation will contain forward-looking statements which could differ materially from actual results. Please refer to our risk factors in our 2011 Document de reference. Let me now introduce Bernard Charlès, President and Chief Executive Officer.

Bernard Charlès

Thank you François-José Bordonado. Good morning everyone. I think we have a lot of news for you today. And as you remember on February 9, 2012 we announced the new horizon, what could be after PLM. And as you will notice today we are starting to put this strategy on the move especially in the context of natural resources, but let's start first with the highlights that we delivered on Q1 2012 18% increase in new software licenses as you can notice in our press release this morning.

We believe that this demonstrate very well the adoption of the PLM Solutions across many sectors. And also we noticed this quarter starting to communicate about where do we go to expand the usage of PLM across all functions in the company from marketing sales, engineering, production and customer support. With the 3D Experience Platform that it's creating a vibrant attention on the market, there is more to say moving forward.

We announced also the acquisition of Gemcom Software International, an acquisition of this company which does modeling and simulation of mining. And the creation of a new brand because we believe that this base is an excellent technology to really do modeling and simulation of the entire planet itself. So even water, geologic environment and more.

And we are finally based on the better-than-expected Q1 abating our 2012 objectives taking this into account as well as the evolution of the currency assumption. So a review under the business and the strategy, first with the performance, then the growth strategy on the acquisitions. Once again the new license is strong excluding exchange up 18%. Operating margin at %29.3 is also the objective we planned. We have improved this by one point. EPS at $0.71 and EPS growth is up 13%.

So new business double-digit topline growth on the operating margin expansion. I think you have seen it before. What else can we say about the product lines. PLM is up 9%, CATIA is up 6% but remember the Q1, 2011 was extremely, extremely high and strong. ENOVIA is up 17%, and other PLM 12% with SolidWorks 13% making it a double-digit 10% overall. So strong diversification, I think the growth is also generated from all the brands with a noticeable point on ENOVIA adoption which is going very well and as you know all the ENOVIA installation now are V6 platform and very good SolidWorks performance as the numbers shows here.

When it comes to the region, Asia is accelerating with 15% growth driven by India, China but also Japan is really now on a new dynamic after a very difficult 2011 and we continue to see a good performance in Europe and situation improving in America. I mentioned India and Japan, and I should on China, I should also mention a strong dynamic in Korea. So when it comes to the growth strategy, we continue to increase the footprint of V6 platform. As you know V6 is the name of the architecture. It’s the name of the technology and we are creating an holistic platform to really create what we call 3D Experience. So we have very strong adoption in large companies, on midsize also. On the so called migration layer, why I don’t like this word because it is really the expansion of the V6 platform with different application usage, on the application experience in which CATIA is one of them because as you know in the V6 world, each time we provide new experiences, the customer built is IP backbone on the go and basically the more you expand the 3D experiences for different users, the more you built the intellectual property pipeline for product development creation delivery and services. That’s the very special differentiation between connecting application together and creating an infrastructure that enrich the way our customers are developing the whole product.

On Q1, the revenue of ENOVIA was very strong and we believe that this is essential to continue to connect the dots in all activities which our customers are doing with our software on the broad portfolio we have and the new license revenue and the V6 was up 15%. Great showcases as you know we have many, many more showcases. We selected only a few and fortunately or unfortunately there are also lot of customers who do not want to communicate. We have very special wins in very special industries, in asset management, in IP management, project management customers and I think that this is competitive advantage. They are necessary vocal, they want us to wait which is okay, but so we have selected a few ones. Valeo. Why I like this example is because it’s really truly a global company, a Tier-1 on the auto and mobility sector. They do a lot of innovation. They have a lot of R&D labs around the globe. I believe the rules are changing in the transportation and mobility. In the past, OEMs were really imposing all the rules. Now the Tier-1 large suppliers are really becoming strong value creators in terms of innovation. And we believe that for us, the focus on the ecosystem is as important as the focus on OEMs. Before we were occasionally saying when the OEM has made the decision, we will go to the ecosystem. In some way now, we are going in parallel on those segments. And I think there is a lot of potential, especially, because the mechatronics, the integration of mechanical, electronic and software is creating, what do we call, spot mobility on optimization of resources in many ways.

There are 185 sites. It’s a very large worldwide adoption of the ENOVIA V6 product line. We've a large number of users who will have single access, access to single product information on the globe. So it’s a nice showcase and it’s a good trend for this sector. We are also broadening the diversification, mainly focusing on the 11 industry sectors we communicated to you. We have excellent performances in transportation and mobility and especially automotive. There is a lot of new product development going on right now around the world in different categories, and if you notice and if you go to automotive shows, even transportation shows at large, the member of new product innovation are just amazing. The global production is soft but the innovation on the product portfolio is very strong.

Consumer goods -- consumer package goods also create nice traction and we have lot of focus on that as you may have seen in the past quarters. On the high-tech side, Lenovo has adopted our solutions with SIMULIA. It’s a very interesting adoption because this is really about simulating the user feeling when they use equipments. It’s not only about the design. It’s really about the user experience in this context is really simulating key stroke feelings when you use a computer.

So its shows the level of sophistication in terms of simulation that we can do now on really doing the close correlation between the virtual design on the physical behavior of the end product. The diversification from a geographical standpoint, there is a nice balance by region between America, Europe, and Asia, as you can see here, with 27% in America; Europe, 44; and 29 on the total revenue base. And the high growth countries are contributing to -- expanding faster with basically up 17% in terms of growth.

Speaking upon diversification in both geography on the industry, it is interesting showcase in China. Hisense; they are really adopting the ENOVIA V6 to reduce development costs and the achievement is significant because they told us they reduce it by 70%. They are optimizing supply chain, reducing cost of unnecessary purchases due to incorrect data, really streamlining the entire digital process and this is electronic equipment in China.

Now about the 3D Experience. We believe that the time to create products with different kind of attributes and characteristics is over. Everyone is looking for our customers or consumers -- of our customers are looking for experiences. How do I use the product, what kind of value does it bring to me? That’s what we need to simulate. So the connection between what consumer value the most and what engineering are going to do, and manufacturing are going to do, and how they are going to do it and produce it, and deliver it, and serve it, is becoming at the very heart of what we call the 3D Experience Platform.

We are learning a lot with some of the leaders in this area. What we believe now is that there is really something new in terms of horizon, in terms of using the 3D Experience to really invent or innovate. We are connecting engineering, marketing, R&D, on really the executive dashboard. How companies understand how they are running our businesses. We have a true illustration of that in optimization of production. The PSA Showcases is an outstanding showcase whereby the digital production system is really becoming, really something of a benchmark for the industry and they are really adopting the full digital visibility of dashboarding for production with DELMIA.

Gemcom acquisition. On February 9th we announced that we were making an evolution of the purpose of Dassault Systèmes whereby we want to serve business and people to provide 3D experience universe, things that you can do in the virtual world to validate what will happen in the real world and we want to better understand when products are developed, their effect on the planet, on their effect on their life. It is a serious topic. It is a long-term topic but it’s sort of topic that must be addressed. I think today it is almost impossible for any companies in the world to really understand the real true usage of energy on materials when they do something. So the bill of Energy on material is not achieved yet. We want to address that topic and that’s what we call our (Inaudible) product Nature On Life.

This is not coming from a black room, secret room somewhere. We are listening to customer. We are listening about what they value the most, and what they are telling us is help us understand better the entire, the eco bill, how do we comply to the new rules So it’s not about data management. It is not about additional IT system. It’s about being able to see the reality of what of what will happen in the future before we actually do it. Our motto, our communication idea is very simple. It takes a special compass to understand the presence and navigate the future and this compass is the symbol of the 3D Experience Platform.

Today, we are making one more step toward achieving that long-term vision. With the acquisition of Gemcom, which I will talk about, we are creating simultaneously a new brand called Geovia. Geo is the Greek root of planet. And I think it fits very well with the branding system we have as you know we have eight brands right now. We are going to add a ninth one.

And the goal is going beyond of course mining, modeling and simulation; it is really about better modeling of the planet. We want to improve in this case, predictability, efficiency, safety and sustainability.

So let's talk about Gemcom. Gemcom is the number one in its own sector which is modeling and simulation of mining and mining exploitation. Their revenue is about $90 million, growing double digit at 25%. It’s a privately held company, worldwide coverage, headquarter in Vancouver, 360 employees and they provide software and services.

They are really very industry focused, what I love about this great company is they really are considered as a true partner working with their customers, highly skilled people, really understanding their industries in terms of how the discovery, the management, the exploitation of natural resources. They have a great customer base on mining groups, serving companies within the top 40 and over 2,200 customer locations.

This is Gemcom and here is a little video that I will just go with to tell you about Gemcom.

[Commercial Video]

When exploration and mining company seek to drive productivity they turn to Gemcom for world renowned and award wining software and services. As the largest global supplier of mining software solutions, Gemcom has worked hard to earn the trust of our customers. No matter your role, whether you are a geologist, surveyor, engineer or mine manager, we have a solution that’s right for you. We support all mine types mining methods and commodities.

Our software solutions enable use of better quantify plan and manage the production of mineral resources. These world renowned brands include Surpac, Gems and Minex for geology and mine planning; MineShed, Whittle and PCBC for engineering and shuttering; InSite for mine production managements and Hub to secure remote collaboration. Combined with our services Gemcom can provide you with the technical expertise to help you mine more effectively. Today’s challenges require increased productivity with fewer available staff.

To help our customers realize their mining objective and maximize the value of our software, more than 130 of our 360 staff work and services and support roles. These geologists, engineers, surveyors and metallurgists work with you to document, automate and improve your workflows to establish the best practices you need to ensure your operation run smoothly even when your turnover is high. Our unique global reach and local presence has at every major mining center around the world enabling us to work closely with our customers because we understand their business, share their culture and speak the same language.

So that’s a nice summary of what we do. It was discovery for us to discover this great company. I would say it’s a gem in terms of, not only the performance, but capabilities they have and as you can imagine, nothing of what they do is flat. Everything is really is modeling in its own region. So it is very well with our global vision of creating a global platform for people to be able to do better decision and daily run the business in a more efficient way.

The team is very excited, highly professional. They wanted to join us. It was their desire and we welcome them at Dassault Systèmes and we think that this is going to be a serious value for their customers who are becoming our customers moving forward.

It’s also interesting to see that while we have to pay a little bit for that in cash, $330 million. So it’s a little bit less in Euro, but I think they have been performing well. We will probably add a few things respective on that. It will be attractive to Dassault Systèmes running which is not easy to do these days, and neutral to the operating margin once integrated.

And I think what is also interesting is they are in countries where we are not; because basically mining’s are not in cities or when manufacturing is happening to make it short. So it’s a large market, $1.8 trillion; the GDP of that sector, not the software side of it of course, but because there are a lot of spendings we believe there is a lot of optimization that can be done and I think there is a nice long-term growth. And on those companies are facing multiple challenges as you know natural resources is becoming a serious topic for the society at large, so I think we can do more in this area.

So the target is not only mining, we think that this kind of technology can also be used in the context of water, potentially oil and gas and also the main landscape and landscape management, territory and management and these kind of things. So the frugal aspect of exploiting natural resources, the safety, the compliance and the skill challenges all those drivers are interesting driver to really provide infrastructure on software solutions to improve what we do there.

So let’s go to the business highlights. I think Thibault it’s your turn to provide further details.

Thibault de Tersant

Sure, thank you Bernard. So I will go quickly on the figures; you already know them. The total and software revenue went up by 10% and our service revenue went up by 11% very much in line with the software growth.

And in terms of split between new license revenue and recurring, we grew by 18% for new license revenue that is totally one of the good and high points of the quarter. And recurring went up by 7% pretty much in line with what it did in Q4 with the same kind of sequencing between Q4 and Q1 as we had in former years. In addition, on the recurring revenue, the renewals were again at the highest level at 98% in our PLM business. Operating income was also one of the good points of the quarter, going up by 1 point to 29.3% and EPS grew by 13% as you have seen to 0.71.

Another chart that I like in the presentation is the change in financial position. I know we may have different opinions on that, but I continue to believe that it’s a great asset for us to have a net cash position that is now close to $1.3 billion. And this is really thanks to good operating cash flow in first quarter at 166 million compared to 134 million in first quarter of last year with particularly a good change in working capital of 55 million as you can see on the chart.

But, we will start to spend a little bit of that pile of cash you know and Gemcom of course is going to contribute to that when we close the acquisition. So we are updating, based on this first quarter we are slightly updating our guidance for the year. First of all we are injecting the over performance of first quarter, we’re also changing a little bit our currency assumptions. Because as you remember we had prepared our original guidance with US dollar rate at 140 and we are now taking it to 135 for the next quarters you know after a thorough examination of the economic situation.

But in fact we are also keeping the remainder of the year from an activity standpoint unchanged and I will come back to that point. The Gemcom acquisition is not included yet. It is probably going to close in July you know so when we will get closer to closing the acquisition, then we will be able to update the guidance, but of course there is still uncertainty with the exact closure date because of the different governmental approvals that we need to gather and we need to gather them in new countries for us. I could give you a small list of them you know, but for example Kazakhstan is part of them and our experience with getting an anti-trust approval from Kazakhstan is close to zero today.

So to be clear, when looking at the reported euros figures for the year, we are adding 35 million coming from our change in dollar rate and 15 million from activity, the better activity of first quarter. So we are now targeting this new range we can see at here, €1.905 billion to €1.935 billion. Ex-FX that would be a growth of 6% to 8%. So it’s slightly better than our former growth by one point actually and we are also adding €0.10 to EPS to €3.10 to €3.20. So it would be now a growth of 6% to 10%.

I know you are only looking at high end of the guidance. So we are now targeting the double-digit growth of EPS, if I want to do a little bit of marketing just for a while. Based on first quarter trends, we believe that second quarter is not going to be very different because we see, we continue to see a good dynamic actually for our business inside customer accounts.

So the second quarter guidance is for a 7% to 9% growth excluding currency impact, pretty close to the 10% of first quarter and we are planning also on a 6% to 12% growth in EPS for the second quarter. So we believe that second quarter should be quite a decent quarter and we want to remain prudent with the second half because I don’t need to lecture you on the economic environment, it's all but clear. So there is an appetite for solutions inside customer accounts. This is absolutely clear but at the same time we need the credit to continue to work and we believe that this is probably the most uncertain part for forecasting second half. So we prefer to have a second half that can be achieved even if the conditions, the current conditions worsen and now I think with Bernard we will try to answer your question.

Question-and-Answer Session

Unidentified Analyst

I wanted to follow up on Gemcom if I could. Could you may be help us understand a little bit the potential for topline synergies between the two business, so may be the opportunities that you have to put some of the existing data software into Gemcom and sell that through their channels and then you know perhaps more importantly, extending Gemcom into other areas. You kind of alluded to the oil and gas space, I imagine some of the simulation that is used in mines could potentially be used in the oil and gas space.

And then may be just on the figures, the 25% growth they reported, was that an organic growth number they reported and then how sustainable do you think that was and on the margins you show to your margins after integration. So is that kind of after all the synergies. I imagine there won’t be many, but after the deal closes. And then may be just on the outlook for the second half we have seen some of the software companies have some issues in the first quarter, PGC, SAP both had weaker results, may be just to clarify again that you are not seeing any change may be if you talk about the linearity of the quarter and the pipeline that you see going into 2Q just to reassure us that the second half of outlook is just kind of you are more cautious on the macro, thanks.

Bernard Charlès

I will start. Thibault on the new will add whatever you want of course. The Gemcom, today Gemcom has done an outstanding job to provide industry solutions, specialized solutions for mining. When I say specialized, it means that it’s really the value of what they do and what they do represent for the customers is on the in the physical knowledge they have to do modeling and simulation of mining exploitation.

But of course, as this industry is discovering on leveraging the value of the digital world to help predict on plan, the needs for collaborative platform, the needs for connecting the people around the globe, the needs to provide easy business decision support to what they do on the field are growing.

And when we came together it was very obvious that to go forward, this very tip of the iceberg kind of application wouldn't need a powerful platform that basically we do with V6. So the answer is yes, absolutely of course, there is an expectation from customers that we talk with about multiple things.

First of all, they are very pleased to see that now the company is really supported by a more global set of capabilities for research and development on the solution, which was a topic of concern for the customer, so basic scale count in this case.

The second is expanding the capabilities to manage properly the resources on the collaboration. So the synergies are very strong and even on the basic sense quality to modeling or modeling to simulation as you know there is an incredible raise; this is not commodity in any of the sectors. I know some of my competitors said that many of those things were becoming commodity; we think completely the opposite. We think that that is even more value to create there.

So the synergy is out there, the mind set is there, the will is there, the team want to work together and I think the value is already perceived to be competitive and I compared to personally one of their largest customer even before concluding on signing on the message from that customer were very clear.

We need to make sure that is a big picture of this kind of software that we use. We need to make sure they can expand the platform and we need to make sure we can connect this to a real environment which we should be oriented to our business decision. So more to come, everything is going to be fine, but I think this is going to be welcome.

Related to the financial aspect, I think Thibault will answer. We are significant actor to (inaudible) about selling this company to us; he might want to say more.

Thibault de Tersant

Well, like you say, it’s a small agenda. This company from a profitability standpoint and from a growth trajectory also, and you know this market of the software for mining is a growing market, fast growing market; as a leader and so they are growing faster than the market and continuing to gain market share. They did well in 2011 at about 25% growth in revenue and their margin, the new turn margin, so yeah, the financials are pretty steady.

So I don’t want to comment much more than that, I think they didn’t know when we closed the acquisition, there is a new story and a new ambition of course that they have seen, they have adopted and we know we need to hold our sleeves in order to capture this natural resources industry and also the right solutions.

There is a lot of work to be done in this field, but we like that; it’s an open territory with actually scarce human skills and the software offer for natural resources is also relatively limited today. So what we find with Gemcom is a good set of extremely good skills, good culture and particularly good algorithms for geology, but very obviously that’s a starting point from where to expand.

You had the question on the second half and so very shortly, today if we look at right, it’s a good bite itself. The level of dialogue with customers is pretty quite. So we don’t see concerns from the standpoint of the appetite of customers for what we offer. They need to continue to improve on product innovation. You know petty experience is theme I believe that is catching their interest, I think Bernard will tell you that it is the case in every single meeting it has with customers.

So the concern is macro concern. I think even today the situation of course is not completely satisfactory, because customers also feel an anxiety on how to finance their development. But there is still credit available in the current circumstances and that’s my number one worry for the future. And of course, I am not certain you know the macro environment will deteriorate, but I think there are few elements that are worrying and they need to be factored into the guidance.

Unidentified Analyst

You did well this year, this quarter in the Americas and could you maybe a little talk about execution, if you have changed something why you seem to be a bit more confident there? And secondly, I think Thibault you talked about CATIA V6 migration cycle into 2015 was maybe 50% and migration of seeds could you talk a little bit about the linearity and what we should expect in 2012 and whether we have seen any -- what you have seen in the first quarter? Thanks.

Bernard Charlès

On the first question, thank you for the question, on the first related to America, we have a lot to do in America. I think we have great customers, but I don’t think we have the market share market which we should be targeting. So we are really leveraging the integration that we did in the last 18 months that you know well strengthening our focus by industry sectors. Life Science, mobility, energy, and there is a good dynamic in America in terms of even in sourcing of manufacturing jobs. It is an incredible dynamic we observe on the manufacturing ecosystem itself, you know small midsized companies. It's not a theory we see it. We see it physically. We remember the period 15 years where things were going out of America for manufacturing, there are a lot of activities coming back in America.

So the opportunity is there, the needs are there. We need to and our efficiency has been below what we have been doing in Europe. It’s a lot of opportunities for us to improve so yes we are addressing the topic. It takes time. We need to hire new profiles. We need to quickly profile activities. There's a lot of attention on this topic and it’s a not only a valid question, but a valid topic and a valid opportunity for us to improve and we will do it. And before I let Thibault make the comment about what is so called migration between CATIA V5 and V6. I want to insist on one point on this. V5 to V6 is not a migration. You know from far you can say okay yes you take a new version of architecture. The way we are going to sell is completely different, so we are not coming back to our customers and telling them okay you have CATIA Version 5, are you interested with CATIA Version 6.

That's not the way we are approaching the market anymore. We are really taking an industry approach and industries becoming critical, you remember some of the well known ERP companies back years ago moved really from you know technical capabilities to industry approach. We think now it's becoming relevant to what we do. So that’s one point. The effect of taking an industry approach is we don’t focus only on certain type of roles let's say engineering or design and then trying to sell something to manufacturing. We are focusing now on the business process.

And the way our customers are transforming, the way they connect to the consumers or customers, what we call crowd sourcing of ideas, what do I need to do to be successful on the market. If we are in their shoes, that's the problem today and even in traditional industries like automotive and transportation, it's a major topic for them. It's not about adding characteristics to the product, it's about creating and expect a really good experience.

So on that standpoint to make it short, the configurations on what we offer is not, here is CATIA V5, go and get V6, it's really the collaborative platform with collection of usage, of user experiences. And I think this has been visible in terms of the V6 transaction themselves because we basically offer a package to address a business need as opposed to cover up our set of capabilities. And that’s a big differentiation which we believe is going to be having any impact on the way we can leverage the condition to this environment. That being said Thibault, you want to add anything, please do.

Thibault de Tersant

I will try. So yes I think of course when trying to do some financial modeling for the future, I think it’s important to bear in mind that with V6, when a customer goes to V6 in order to support business processes, the expansion of business available inside the customer account is important than what we are getting from the pure migration, from whatever seats of V5 he has to V6. However there is also this aspect and if we trust you know former patterns in terms of migrating, it is true that there is an acceleration phase in the migration, during generally three to five years and this is essentially the position where we are. We are the beginning of this slope.

François-José Bordonado

We will take now one question from the call, operator.

Operator

Thank you very much. (Operator’s Instructions). We will take our first question from Josep Bori of Exane BNP Paribas.

Josep Bori - Exane BNP Paribas

If I may, I would like to come back again to one of Adam’s question, a competitor of yours in the US recently talked about certain softness in the Americas and also large European transaction they were competing for and was finally lost and SAP also talked about the execution issues in the Americas. So two quick questions in this, first what are you seeing specifically in the Americas region in terms of customer behavior compared to Europe because it looks like things seem to be improving a little bit for you there and secondly, assuming you are still competing for that large European deal your competitor talked about had you also incorporated that transaction in your 2012 guidance or there is potential upside if you manage to win it? And then secondly if I may just a house keeping question. I apologize if I missed it during the prepared remarks, but how many ENOVIA V6 customers did you sign up this quarter, please? Thank you.

Bernard Charlès

As I said the customer or dynamic, on the market dynamic in America when it comes to manufacturing, taken in a wide spectrum is very positive. So we want to leverage that and we need to leverage that and we also need to improve the efficiency of what we believe has been for us really related to Dassault Systèmes itself probably a less efficient team that what we have been doing in Europe. So we want to take the opportunity of the positive dynamic in America and top of that strengthen our go to market and that's our own work. So I see it in a positive way. Related to your second question related to big transactions, if you look at what happened in the last three or four years you may have heard about the domino effect, I think we have inverted the domino effect. It's coming back on the one who has pushed the domino in the wrong way. We are really now I think we will take the list one by one and we will show you that the domino effect is in fact against the one who invented it because we are fixing all those topics in a very precise way. We don't basically -- we try to be conservative in the way we look at those big deals. As you know, the rule is very simple. We want the big contracts, multi-years and after we’ll look at the whole revenue as we do deploy and install the software. So even the contracts are long-term, big contracts, we know the footprint is going to increase. We are very careful of not taking this into our account upfront and only taking it into account as we deploy. But the dynamic of this big contract is very positive.

I am confident we are in a very good position and we are going to battle on each of them because the footprint we can reach is in a magnitude order, bigger than what it was before. Many of those companies, ones who have global, consistent platform. Many of them want to do mechatronics, which means mechanical, electronic software. We can address those and most of our competitors cannot address those topics. So it’s a -- we have to reveal that in relative to numbers, but I am very confident in terms of the reality of the needs on our capacity to fulfill them.

Thibault de Tersant

Joseph, continuing with your question on ENOVIA V6, we actually are now switching to a new indicator for V6, which is the weight of V6 in our new license revenue. The reason for that is because at the beginning we were only selling ENOVIA V6 to large enterprises, and we were essentially adding a 100 of them every quarter. We are now starting to sell ENOVIA V6 also to more mid-size companies. So the number of new wins and new customers is in fact accelerating but would give you probably too good opinion about what we are doing in this field. It’s also because we are now starting to sell to smaller customers. So we think that as a good indicator as we did for V5 by the way, is what is the weight in our new license revenue of V6, and so we are starting with this indicator of this quarter. We’ll keep it for the next quarter you know and as Bernard highlighted in his presentation, in first quarter we did 15% of our new license revenue in V6.

François-José Bordonado

We’ll take now the questions from the room.

Josep Bori - Exane BNP Paribas

Yes, thanks. Thibault, if I recall on Q1, also Q4, last year there was a number of SolidWorks shipments which slipped over from Q4 and Q1. Looks like a very strong revenue, presumably license contribution this quarter. Can you say, if then, we were really looking at about 11% of in quarter unit sales and maybe 9% further of slippage from Q4 and so there is no more of this issues around slippage in the SolidWorks figures and then in terms of the product road map there, you’ve talked about moving to the CATIA from solid edge. It doesn’t seem to be in the current year what sort of beta program is. Is it plan for next year? And finally, Bernard, maybe, comment on further M&A. You talk about having a good cash positions. Is it likely to be more deals this year perhaps?

Thibault de Tersant

So on the SolidWorks, Q4, this is true. I remember that we were little bit shy in new license revenue for SolidWorks in Q4 and we had actually good peak of customer deliveries at the end of December and as you will all know for SolidWorks, we wait until activation of the license to recognize the same, right? So, we had a higher number of activations seeping to first quarter, and last Q4 than usual. I don’t remember precisely the number of them but it was several hundreds certainly. But this is in fact something that we do every quarter. You know, it was higher than usual in Q4 but each quarter there is an activation delay which between two and three weeks for these licenses, you know, so the licenses we ship at the end of the quarter are recognized in the next quarter and it is also the case for the first quarter but at somewhat lower level. So if you want to have a view on what is the underlying trend right now, in SolidWorks new license revenue, it is in fact between 7% and 8%.

Bernard Charlès

Related to the certain aspect of your question to, the old Dassault Systèmes application will go to the 3D Experience Platform, the value of this is the fact that there we have the common architecture between on premise online but also many of the sight and significant values which is the synergies of the product portfolio. So the question about the next generation of SolidWorks adopting V6 technology is part of that strategy and we think now that the time has come to do this in a proper way where more and more SolidWorks customers who wants to buy and use ENOVIA platform. We have great references there. We have also more and more SolidWorks customers who want to expand to the PLM world. So it’s a huge foot print of value creation for the future. We have a nice product band. We are going to do this in a progressive step and you can expect this in 2013.

And the other thing is we already did some previews with at the SolidWorks World this year. They were extremely, extremely well received. Related to the last part of your question about further acquisition, I wish I could tell you but we will continue -- the plan we have now is with the new horizon is exciting. I think the possibility to create for rich industries, 3D experiences that people will understand, will pay with before they actually do the real job of producing the products. It is really a new horizon, customers are getting it, they say wow, can you connect social innovation and cloud sourcing together, with the way I represent the product I want to do for the future. Are you telling me that I can continue to reduce or remove the physical testing and converge quickly the quality of the product between the physical product and what was the digital master. And by the way can you connect this with all information which are available on the web about what consumers are saying about my product, the information intelligence of the compass, I just went through the compass here in my description, that's unique, that's very unique.

And you talk with customers those days its not about optimizing engineering, its about connecting what consumers value the most with the way they are going to develop the product. That's what we are going to do which to conclude on your question, create a new situation for us to really look at carefully, but what else do we need in terms of skills and technology to make this possible because we believe that there is a very high potential to address new customer challenges that no one else has been able to address.

But we will be very consistent with all that we have seen from the past, the right technology was at a point solution, the right team, that we share the vision, can we afford it, of course. Does it make sense in terms of the visibility we are providing to you, so we can stay in line with what we said and do hopefully even better and when a newcomer you can expect continuity on innovation.

Josep Bori - Exane BNP Paribas

Guys can you talk a bit about ENOVIA, if I recall correctly at the time of Q4 you had also shipped a fair amount of product which need some customization and you couldn’t recognize the revenue related to that. So if I just sort of the Q1 revenue numbers for that and ENOVIA growth would be relatively muted.

Can you just help us understand some of that ENOVIA dynamic and especially how that’s going to unfold over the rest of this year. And you know there is any other supporting metrics whether its bookings or something else you can gave us to see higher tracking?

Thibault de Tersant

Okay. Well, in fact you probably remember us well that I insisted on the fact that this unrecognized or this deferred revenue was not going actually into Q1; it was going to be spread over four quarters starting Q2, because of the precisely the time to develop the functionalities, you know before the revenue could be recognized.

So if we look at the first quarter and if we assume on ENOVIA, the revenue growth you see in first quarter is a pure growth, is absolutely not influenced by the Q4 deferred revenue. Actually, there is 0.5 million of it recognized in Q1 to be precise. So it doesn’t change the trend.

Josep Bori - Exane BNP Paribas

And what point does ENOVIA sort of breakthrough this 120% growth barrier or what were license revenue in Q1, can you give us that for an overview?

Thibault de Tersant

If I give it to you, you are going to ask me every quarter. No; I would tell you I am tempted because it’s a nice new license revenue for this quarter.

François-José Bordonado

We will pick another question from the webcast, operator?

Operator

Thank you very much. Our next question comes from Gregory Ramirez of Bryan Garnier. Please go ahead.

Gregory Ramirez - Bryan Garnier

Three, if I may, and the first one on, could you expand a little bit on Gemcom’s geographic presence, how do you spilt it between Asia, Europe and Americas? And my second question, this is regarding (inaudible) operating, what are your thoughts about the new cloud based product and how do you think bringing it from product here and on your entry level segment and customer base and distribution channel?

Bernard Charlès

On the Gemcom implementation around the globe, I don’t think we have done the full analytics about the mapping in the way we usually do mapping of this. You will notice, they have a very nice site. If you go on their our site, you will see the location. They are basically in countries where mining’s are basically. And the map is very well done. Thibault, I don’t know if you have done the revenue mapping from that; it was bought by countries you know, they are in countries where I have never been personally, but they are probably nice countries. So we are ready to eat and someway exciting to even think about serving those businesses that way and we want to say something or….?

Thibault de Tersant

We have not mapped exactly what they call how they divide in the geographies to a way of defining geographies, but in their own definition, they have a very broad Asia region which is between 40% and 45% of the revenues. So it is very high sharing in Asia and it’s followed by Africa with 20% and the remainder is between Europe and Americas.

Bernard Charlès

The second question is about, the second question you asked was about the competitors offer related to cloud. We have a lot of experience in cloud now, please keep this in mind, with EXALEAD, with Netvibes, with what we are doing with ENOVIA cloud, we first (inaudible) with SIMULIA, so those pieces are coming together, we want to provide a 3D expense platform on the cloud and that’s where we are going.

Now related to the immediate aspect of your question, do we see special trends? No, we don’t see special trends, as a matter of fact the adoption of PPN works, with solid works and even the adoption of ENOVIA, the backbone for enterprise, with SIMULIA customer is very strong and evolving nicely.

I think today the question is not about providing the same thing online; I think its about providing new type of experiences online that we create the upside effect; no, I don't want to comment more about their strategy and I think the reality is what customers are buying and I think for us the highest priority is making sure we can do secure social innovation online, (inaudible) is a very key component of that and we are getting a nice plan for it, but more to say in the future, we don't want to announce anything special now.

François-José Bordonado

If there is no more question…

Bernard Charlès

Thank you very much for your attention. Of course, we are always there to address any of your specific topics you would have and as I would like to conclude on the fact that we are very excited with the perspective of expanding the footprint and I think it creates a new nice avenue of growth. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Dassault Systèmes' CEO Discusses Q1 2012 Results - Earnings Call Transcript
This Transcript
All Transcripts