François-José Bordonado - Vice President, Investor Relations Bernard Charles - Chief Executive Officer Thibault de Tersant - Chief Financial Officer

Jay Vleeschhouwer - Griffin Securities, Inc Nicolas David - Oddo Securities Neil Steer - Redburn Partners

Thank you for standing by, and welcome to the Dassault Systemes First Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to François-José Bordonado, Vice President, Investor Relations. Please go ahead, sir. François-José Bordonado: Thank you, Jennie. Thank you for joining Bernard Charles, CEO and Thibault de Tersant, CFO to discuss our 2015 first quarter financial performance. This conference call follows our webcasted presentation early today in London. For your information Dassault Systemes’ financial results are prepared in accordance with IFRS. We have provided supplemental non-IFRS financial information and reconciliation tables in our earnings press release. Some of the comments on this call will contain forward-looking statements that could differ materially from actual results. Please refer to today’s press release and to the risk factors section of our 2014 Document de Référence. Revenue growth figures are in constant currencies, unless otherwise noted. I would now like to introduce Bernard Charles.

Thank you for joining us here on the earlier webcast. On February we should review our financial and business goals. Let me commence today’s call with this point in mind. First we expect 2015 to be a year of solid revenue growth on double-digit earnings per share gross on the first quarter [indiscernible] trade the subject. Second we indicated we would continue to focus on improving our operating efficiency and this is visible in the organic operating margin provision during the first quarter. So we are focused on strengthening our execution demonstrated by the increase of our organic revenue performance compare to last year at this time. Furthermore our first quarter activity also illustrate that we are benefiting from diverse growth engines. Industries choose phase channels on by multiple purpose access into companies. Most importantly our focus is on continuing to enhance the value provide to customers while demonstrated by our most recent 2015 3DEXPERIENCE platform on Industry Solution Experience is release. To deliver on their objective of successful and consumer experiences industries now need to take into account a border more complex set of processes and we believe our open platform on Industry Solution Experiences are very well suited to help companies in different industries take collaboration, modeling and simulation to a much higher level. Turning now to the first quarter our financial results where well aligned with our objectives non-IFRS total revenue increase 19% in compound currencies. We were particularly pleased with our new licenses revenue which increased 14% organically in constant currencies. We also add a good evaluation of regarding software revenue. Non-IFRS EPS rose 18% on organic results currency benefit. Looking in a great detail our regional performance was driven by a number of [indiscernible] in Asia, Korea and India where the strongest in addition Japan representing 50% of our revenues in Asia on annual basis deliver a solid quarter two. It was fiscal year end in Japan so we benefited also from some larger transactions. While the was weaker in China there is a certainly volatility as we are noted seriously. In total we continue to see many opportunities, in Europe we have did come growth across most of our major dues. In addition activity continues to pick in 1000 Europe. India, Americas, North America add solid performance especially with our larger clients. Latin America while a small part of our sales was negatively affected by weakness in several of its key industry. Moving to our bronze they illustrate very well the different type of users and disciplines we are reaching with our software applications. In the first quarter of this year SOLIDWORKS and SIMULIA delivered the strongest results. CATIA add even performance across regions on is coming off the first quarter which is seasonally high quarter for activity, ENOVIA as you may recall at a very large Q1 2014 with new licenses revenue at this time growing 55% in constant currency. As we look to its pipeline for 2015 we see a year of good growth coming over. Within OSOR software SIMULIA represents the largest portion, it had double digit growth and balance demand around the globe and also benefited from some larger transactions in data intelligence, EXALEAD also did well. Our 2014 acquisition of BIOVIA and QUINTIQ as well as SIMPACK where in line with plans and are also including in our OSOR software revenue line. Finally on an organic basis first quarter software revenue increased 9% in constant currency providing good support to our full year revenue growth objective. Providing some further detail on SOLIDWORKS its software revenue was at 17% in constant currency activities were particularly strong in Asia and Europe. Units sold increased 18% with average seat price of average license price being stable. SOLIDWORKS is on its way to reach a new milestone 3 million users in total for education and commercial users. Our focus is on continuing to provide additional value to the SOLIDWORKS community in that regard, the website mysoildworks is available to users under subscription with many benefits that are well appreciated by the user community visible in renewal rate increases for maintenance of subscription. We also are focused on bringing the benefit of all our technology both on-premise and on the cloud to the SOLIDWORKS users and to provide it in a form of consumable for them. And we continue to support and expand our network [indiscernible] serving this communities of users of around the globe. Turning to an industry review we saw a favorable dynamic with customers across the number of industries including our too largest transportation and mobility and industrial equipment as well as in marine and offshore, life science, consumer package goods and retail. On energy process utilities show solid progress in our core industries and solid progress in industry diversification. Based upon our growth and acquisition, diversification industries represented 29% of first quarter software increasing year-over-year by four percentage points. Looking first at our co industries we are seeing continued strong demand from our largest industry transportation and mobility and industrial equipment with new licenses revenue at double-digits, why it is a small part of our core industry marine and offshore at several key wins. We are seeing a good uptake of our industry solutions experiences in our co-industry as they well matched on response to our clients, strategic priorities around collaboration, modularization, smarter vehicle, energy efficiency and program management. An illustration of this is with our customer Ashok Leyland as many of you know it is the second largest manufacturer of commercial vehicle in India and the fourth largest manufacturer of buses in the world. We are pleased that our 3DEXPERIENCE platform and of our CATIA and ENOVIA applications are being used to held them to use design lead time by managing the valiant complexity and to our platforms power of integration, decision-making is improved to a unified view of design, manufacturing and sourcing. Moving to our diversification industries, some of the areas where expanding our footprint include lifescience, a key priority for us. First, the newly created BIOVIA, energy process and utilities and consumer packaged goods retail. Our decision to introduce move to industry solution experiences has been very helpful in articulating the benefits of our solution to address the critical problems of companies in the current industries and with the addition of rolls which I will discuss shortly, we are taking the same approach to the conversation at the user level that we have taken at the industry level and those are for you an example is [indiscernible] the largest department store group in Europe and largest in the world is using our 3DEXPERIENCE platform and solution called My Collection for fashion industry. The group’s goal is to accelerate time-to-market of its fashion collections. Turning to lifescience, here we are taking the same approach to cover the key business process with our license to cure industry solution experience for the pharmaceutical industry. Roche Diagnostic was attracted to our license to cure industry solution experience to reduce time-to-market, reduce the number of physical prototypes and to connect the value discipline using the 3-D data from R&D to marketing customer support on regulatory compliance. Two years ago we introduced our first industry solutions experience and today we know cover all 12 of our industries with multiple experiences, underneath the experience which is addressing key objectives for our company. We have our industry solutions process as a subset of it based on our applications set. Those applications are also group overall to best match the user’s needs. Therefore, to further advance and support the multiple access points of our software, we have introduced role-based offerings in the 3DEXPERIENCE platform called 2015 to increase productivity and enrich the user experience. These roles are designed to cover a broader set of activities well matched to the needs of say a creative designer, project manager, stress analyst engineer, process planner for example. Introduction of our 2021 horizon which we experienced, we have been expanding our addressable market in a very meaningful scope. So we have built multiple coupons into customers with multiple roles. For the sake of time let me illustrate two today, system engineer with CATIA under business process planner with QUINTIQ. Our leadership of the market began with the introduction of the Digital Mock Up of product understanding through discussions we brought clients how important it was for them to have complete digital representation I would say digital twin of the physical goods that they produce, not just a part, but a complete product definition including the most complex products in the world like satellites and airplanes. Now clients need more in order to be able to create successful customer experiences they need to be able to design and experiment in the world with any type of product up to the smartest building upon our leadership in Digital Mock, smart system engineering is therefore [indiscernible] of CATIA delivering the functional mock which you can experience with. In plain English what differentiate our offering is that we can both model and simulate embedded system. Our goal in system engineering is to enable any user from non-specialist to specialist to design smart system by assembling ready to experience compound in a modular and usable way. Our acquisition of SIMULIA fits very well with this objective benefiting in particular our work with automotive companies around smart system of all kinds. Moving to QUINTIQ, it is working with London Underground to help manage its subway system business planners there are using QUINTIQ to improve organizational effectiveness by integrating and optimizing workforce planning leading to improved satisfaction for both the London’s Undergrounds and consumer, customer and passengers and for the employees. With that summary let me pass the call over to Thibault.

Good afternoon, and good morning to all. My comments today are based upon our non-IFRS financial results. In our press release table, you can find the reconciliation of our non-IFRS to IFRS data. In addition, revenue growth rates are stated in constant currencies. In all cases the reported revenue reserves were generally significantly higher. Looking first at our software results. We had very good new licenses revenue dynamics. Our recurring software revenue also had a steady revolution, we are seeing the increase in new activities from last year as well as strong momentum and renewals. On the rental side, we have continued to have a mixed dynamic as we have discussed in previous quarters. Rental represented about 22% of recurring software revenues. On an organic basis, new licenses revenue increased 14% in constant currencies, so we are in line with full-year goal here. And on an organic basis recurring software revenue increased 7%. Altogether total software increased 9% on an organic basis up significantly from last year at this time. Turning to services and other revenue the results were mixed this quarter from a revenue perspective, revenue and services increased 29% in constant currencies coming from the addition of our acquisitions. In our cost services business we have been pushing more work to system integrator partners, so here the quarter has been flat in constant currencies. In terms of gross margin it decreased to about €3.3 million or 4.5% compared to €6.4 million or 12% reflecting several factors including a higher level of presales activity by services teams during the first quarter and work to help our service integration partners to ramp up and to let them work on customer assignments. Turning to our operating margin, our objective is stable to slightly increasing non-IFRS operating margin for 2015 at about 30%. To do so our goal is to deliver organic operating margin expansion about 100 basis points excluding currency effects to offset the estimated dilution from the 2014 acquisitions which is also about 100 basis points. During the first quarter our non-IFRS operating margin was 25.8% as we mentioned last year this time the 2014 first quarter included a one-time R&D tax credit benefit, excluding this benefit the comparative figure is 26.6%. We benefited from an improvement in the organic operating margin of about 70 basis points in the first quarter. We were negatively impacted from acquisition dilution of about 2.3 percentage points in an addition to 60 basis points impacts from an accounting trench was taken in the first quarter but it suggested timing and is not going to impacted full-year. Currency was a tailwind this quarter and it came from a number of currencies I would tight of our largest one. Turning to our earnings non-IFRS EPS increased 18% to $0.43 from $0.37 in the year ago quarter. So very nice level of growth despite the seven points impact in the year ago quarter coming from the one-time R&D and tax credit benefit dimension before. Moving to cash flow we had a very favorable evolution in the first quarter with the cash flow from operations increasing to €265 million compared to €182 million in the year ago quarter. In addition to substantially higher net income we had very positive influence from working capital evolution. Total revenue increased 8% on a full-year organic basis and excluding currency compared to the one-year ago quarter or it is in line with our organic software revenue growth, so total revenues should at $840 million at the end of March. Our DSOs where at 86 days compared to 83 in the year ago quarter with improvement in Europe and Americas and slight determination in Asia and we also saw that increase of [indiscernible] with the acquisitions that we need. Our working capital improvement also benefited from lower tax reassessments in the first quarter compared to the year ago period. I think it is handful to separate our influence ongoing tax proceedings of timing of which various and more importantly while we are making with payments Europe certainly also this treating them as we are find them legally unfounded. Excluding the year ago tax reassessment payment of €22 million, operating cash flow therefore increase 30% in the 2015 first quarter. Looking forward we will be negatively effected in the second quarter from the working capital and operating cash flow perspective with further tax payment reassessment covering three years of about 60 million that we will also dispute. Turning to our net financial position we are never back over €1 billion with €308 million increase in cash compared to December 31, 2014, changes in exchange rate added positive influence of about €67 million and cash increase. First quarter was a quite quarter in terms of capital expenditure and share repurchase however based upon the share that we repurchase last year our share counts during the first quarter on a fully diluted basis is flat year-over-year. Turning now to our financial objective as we outline in this morning’s earnings press release we are leasing unchanged our revenue growth objective range in constant currencies. But we are debating for transit currency exchange rate assumption and moving the US dollar exchange rate to $1.14 the euro for the full year and the yen exchange rate to ¥134.8 per euro. Looking first to revenue our pipeline for the remaining three quarters remain very consistent with what we saw in February therefore we remain comfortable with our revenue growth objective 11% to 12% in constant currencies for 2015 and while we are affirming taking into account changes in our currency assumptions leads to an increase of about 60 million February board currency impact reported revenue range which no increases to €2.760 billion t €2.780 million. With respect to our operating margin our goals to deliver as table to slightly imposing non-IFRS operating margin and comparison to 2014 to personal improvements - from the 2014 acquisition. We estimate an organic improvement target was about the 100 basis points to offset estimate dilution impact of 2014 acquisition which is about 100 basis points. With update external rate assumptions we also estimate about 20 basis points benefit from currencies within that in mind our non-IFRS operating margin target for 2015 is now about 30% compared to 29.8% previously. At the EPS level change in currency add about $0.04 so we are now targeting in non-IFRS EPS growth objective of 15% to 17% compared to 12% to 15% previously. On a per share basis we are targeting of earnings of €2.10 to €2.13. For the second quarter our objective for non-IFRS revenue growth of 8% to 10% in constant currency a non-IFRS operating margin of about 27% and non-IFRS EPS growth of above 6% to 11% or about $0.45 to $0.47. In addition to the sales territory assignments I mentioned I would also remind you that recurring revenue in 2014 second quarter benefited from maintenance catch up payments as discussed one year ago. To summarize I think our initial revenue target for 2015 which we are confirming today well reflects the opportunities we see and takes into account the various fluctuations created by the macro environment as well as by our business and our different initiatives. Let me now turn the call back to Bernard.

In summary I think we are well positioned coming up of our first quarter to deliver a year of strong revenue on earnings growth well supported by strengthening organic performance. We are focused on advancing our client engagements on delivering on our R&D initiatives. At the same time we are continuing to improve our sales execution on operational processes. Thibault and I are now happy to take any questions, and we thank everyone for their participation on this call on earlier today.

Thank you very much indeed. [Operator Instructions] And your first question from Griffin Securities comes from the line of Jay Vleeschhouwer. Your line is now open.

Thank you, good afternoon. Thibault, couple of questions first for you. Could you comment on your 2015 operating cash flow expectations? After having shown a quite strong number in Q1, what's your expectation for the year? And could you also talk about your capital spending expectations, particularly in support of your new Cloud operations? Secondly, also for Thibault, last year at the analysts' meeting, you mentioned that your long-term expectation for recurring revenue as a percent of total software revenue was about 80% to 85% versus low 70s today. When we consider that CATIA and SIMULIA are already well above the corporate average of recurring revenue in terms of their brand revenue, where in terms of other products would you expect the most significant growth to come from vis-à-vis proportionate growth of recurring revenue? Thanks.

Thank you, Jay. So operating cash flow first of all I think that for the year, what we are forecasting is an increase in the operating cash flow in the bulk of 20% compared to last year to be exactly corrected by the tax reassessment, but that is more or less what we should expect so first quarter is a stronger based on the high level of activity of course in fourth quarter of last year. But more or less what we are expecting what I am saying is that we are expecting this kind of transformation of net income into cash flows. Capital spending is if we put a side of course acquisitions which are hard to predict, we don’t have a budget to spend for acquisitions ENOVIA, simply trying to convince companies to join our strategy. Capital spending is not going very much I think that going to be below €50 million actually for 2015 and of course we continue to hold out our cloud operations with right now 115 holes available on the cloud. So you have a good memory and I think overall the mid-term and essentially because of the fact that the cloud portion of our business will progressively takes that. I think it is true that we can expect the recurring to go from essentially 72% right now to about 80%. This will be done actually by essentially all our products because of the contribution of CATIA and 3DEXCITE on the cloud side. Now, certainly there are some other newer brand where our business model is going to drive more recurring revenue and it’s going to be the case for QUINTIQ going to be the case for 3DEXCITE and some others and EXALEAD as well by the way. So the combination of cloud and our recurring business model for newer brands which is going to lead to that outcome. It’s hard to predict exactly when because in fact there is on the other side the positive momentum right now of setting new licenses which we are not going to refuse right and can slow down actually the pace which recurring revenue or proportion can increase.

Okay. Thanks. Just one more for you; then a final one for Bernard on the long term. In Q1, Thibault, was there any unusually high maintenance renewal activity? Was there, for example, a concentration of large renewals with any of your largest customers in aero, auto, or anything like that? Or was it fairly broadly based in terms of the maintenance activity? And then the last one for Bernard. In your annual report, it's interesting to see that you rank user expansion as the first item in your strategic goals. You have several goals, but user growth is the largest, or first one mentioned. Could you talk about in which products and/or industries you think you have the best potential for meaningful expansion of the numbers of users using your products? Thanks.

So Jay, first quarter is our strongest quarter in terms of our maintenance renewals based on the agreements and the I mean anniversary dates we have in this agreements with customers which are generally first for practical reasons. So that’s also visible of course in available of revenue. However, that’s a normal renewal cycle for us in fact the recurring revenue in first quarter was essentially at its normal level without exceptional items.

As it relates to use growth the power of our brands is really to build powerful user community, we don’t want the industry solution experience to hide that, but the opposite to leverage it because digitalization of the industries we serve, we want the digital to be used in as many roles as we can. So we can create the real value for the clients because they can do a lot of saving by having digital continuity in the way that we do our business. So that’s why we are decided to really measure and qualify very precisely the expansion in terms of user. Now in which sector I think all of them will drive it, if you look at even the traditional industries with the expanded number of holes we can support from program management, cost analysis, portfolio management, supply chain management we think that the footprint from pure user presence is going to increase significantly and this will have new types of categories of application also by definition on mobile format and mobile environment. So we don’t talk one specific industry we think that all of them will drive more roles on the digital continuity standpoint.

Thanks very much.

Welcome.

Thank you very much sir. And now your next question from Credit Suisse comes from the line of Charles Brennan. Your line is open sir.

Thanks, It's just a question for Thibault, actually. I'm trying to get my forecast up together and I'm struggling to get my numbers as low as your guidance for the second quarter. I was wondering if you can just help us with the pro-forma acquisition contribution that you're expecting from Accelrys and Quintiq that could be the missing piece in my analysis?

Charles, you know I don’t think I want to slide by acquisition the contribution each quarter I think that could not be relatively enabled but I can say that there are two elements we need to bear in mind to understand the guidance for second quarter, which are the exceptional recoveries of recurring in second quarter of 2014 of €7 million and this of course has an influence, because its [indiscernible] figure. And the second item is now question. We see the strengthening of our business in the second half this is really what we saw when we initiated our guidance in February and so what I am actually trying to do is to keep potential first half unchanged you know and the strength of the second half remaining the same in the guidance.

I can appreciate you don't want to give us line by line acquisition contributions, but can you just give us an aggregate number that sums it all up for us?

Yes, I can. I think the contribution of acquisitions in the second quarter is between 6 and 7 points of growth.

Perfect. Thank you.

Welcome.

Thank you very much sir. Now Oddo Securities your next question comes from the line of Nicolas David. Your line is open sir.

Yes, good afternoon gentlemen. Could you please come back on the performance of CATIA in Q1? Was it in line with your budget [or quite disappointing]? And what kind of growth do you have for that brand in your full-year guidance? And also, you highlighted some well-balanced growth across geographies, but could you give us a sense of the growth of CATIA within different sectors and, for example, give us the growth excluding the aero sector? And finally, did you feel an impact of basis migration on CATIA growth on Q1? Or what are you expecting for the full year? Thank you.

The CATIA performance in the first quarter we were not expecting it’s to be very strong because of the large Q4 that we did last year. The time needed you know in order to because the sale cycle of CATIA not very shot one, an in fact it’s one of this cases were customer to spend the projects more in second half and first half. And also because we have as I said you know reassigned territories direct sales force. So CATIA performance in Q1 was not a big surprise for us. However the growth of CATIA for the full-year is going to be better than this one of course. And likewise for CATIA by the way we are also expecting very decent growth for 2015 in our current guidance.

Thank you and can you just I like the trend on the three main sector you have aero and share equipment. Could you give us a sense?

Well depends our positive in industry equipment if you want to mentioned the CATIA performance it’s certainly industry equipment is overall healthy sector for us as well as by the way ship building in first quarter.

IFRS more focusing now on manufacturing ramped because the number of planes to produce the backlog is so huge that we are focusing now on helping our clients to ramp up that policy system, which they are all facing challenges we it with additional cycle and I think the backlog aerospace has never been us in the entire history of the industry. So we are very well-positioned with decision that we are communicated in the last quarters and to help them on really transform that piece of the sector.

Thank you. That’s really helpful.

Welcome thank you.

Thank you. And you have one last question to come from Neil Steer from Redburn Partners. Your line is open.

Thanks very much. Just a quick follow-on really from the response, Thibault, you gave to Charlie's question. And sorry to drill down on this, but if the impact from acquisitions in the second quarter will indeed be something in the range of 6% to 7%, yet you are guiding 8% to 10% growth excluding currencies as the guidance for the second quarter, I'm just trying to understand what potentially you may see that would encourage you to be, if I can phrase it this way, more conservative over the second quarter than we have seen the typical Thibault conservativeness in the past? I think it's difficult for us to square the comments you've made with the guidance for the second quarter.

Okay instead of playing - let will be clear, let will be clear the organic growth that we see for second quarter and guidance is between 4% and 5%.

Okay.

Right I think probably simple us to say [indiscernible]

Okay. So the question would be: What encourages you to assume a slowdown in organic growth given the fairly favorable commentary we hear with regards to the pipeline and so forth?

Well I - on one part would repeat the 7 million of recurring revenue which on the road.

Okay

And on the other side again we have been to see our business first half and second half and what we are doing here as we are essentially keeping the first half as we saw it.

Okay that’s understood thank you. End of Q&A

Okay with that thank you very much for all of you to participate to this call and for attending the presentation in London this morning and of course we continue to be there to address any further question. Have a great day and talk to you soon.

Thank you and with many thanks to François-José Bordonado and all the other speakers today. That does conclude our conference. Thank you all for participating. You may now disconnect.