François-José Bordonado - Bernard Charles - Chief Executive Officer, President, Director, Chairman of Dassault Systemes Delmia Corp and Director of Dassault Systemes Solidworks Corp Thibault de Tersant - Chief Financial Officer, Senior Executive Vice President, Director, President of Dassault Systèmes Europe Sas and President of Dassault Systèmes Holdco Sas

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division Michael Briest - UBS Investment Bank, Research Division

Thank you for standing by, and welcome to the Dassault Systemes Third Quarter 2014 Financial Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today. I would now like to hand the conference over to François Bordonado, Investor Relations. Please go ahead. François-José Bordonado: Thanks to you, Vivian. Hello, everybody. Thank you for joining Bernard Charles, our CEO; and Thibault de Tersant, our CFO, for our 2014 third quarter conference call. Several brief reminders. 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 our risk factors in today's press release and in our 2013 Document de Référence. Revenue growth figures are in constant currencies, unless otherwise noted. I would now like to introduce Bernard Charles.

Thank you, François-José. Before commenting on our financial result, let me share with you an event I attended earlier this week, the opening of the Louis Vuitton Foundation in Paris. The new glass building is the most recent example of Hungary's architectural genius in design, construction and material and in esthetic and beauty. We were honored that Frank Gehry said that the Louis Vuitton Foundation building was yet another example of making breakthroughs reality. Thanks to the contribution of our software solutions for architecture, engineering and construction around CATIA. For Dassault Systemes, this is what drives us helping make possible innovation across industries for the betterment companies and individuals, all while harmonizing product, nature and life. In short, system enabling innovation. With such motivation, we continued on our path of growth, market expansion and focus on operational excellence in this third quarter. We are continuing to prepare our future, we follow our Social Industry Experience strategy. It is visible in our elevating client engagements, a new way of connecting and demonstrating the value of our solutions in the continuing strengthening of our large account sales channel, in the very significant addressable market expansion with BIOVIA focusing on scientific innovation markets. In manufacturing, bringing together a unique end-to-end offer with Quintiq, now becoming part of our DELMIA brand along with Apriso last year to better serve our industry. And finally, we follow continual focus on improving how we operate across the company. Looking at our financial objectives, while we are certainly mindful of the fluctuation in the market on reduced economic growth projections in certain countries, we are comfortable with our fourth quarter and full year outlook and therefore, reaffirming them. We are adding Quintiq, fine tuning our currency assumptions, as Thibault will cover shortly. So let's move to our financial performance in more detail. The third quarter 2014 was a period of solid financial performance. Revenue was well in line with our objectives and operating margin and EPS were slightly ahead. We have said that 2014 would be about organic new licensees revenue growth, and it is up 14% in the third quarter, a 9% year-to-date in constant currencies. We were particularly pleased to note the performance of our direct sales. I said last quarter that we were starting to see some traction on initial results from our investments here and we are indeed. So to keep in mind -- several thoughts to keep in mind about our financial performance, our earnings dynamic is much stronger than the reported figures indicated as we are absorbing significant currency headwinds in 2014. Excluding currency effects, EPS is higher by 7% in the quarter and 9% year-to-date. Looking at our results by brands. We will continue to operate internally from a brand perspective. It guides our road map of what we want to build for users. At the same time, we are evolving. There are customer dialogues so that we are focused on a more comprehensive approach to addressing the critical business issues with our Industry Solution Experience. As you can see, we had good performances across a number of our brands, CATIA and ENOVIA, both delivering strong growth in new licenses revenue in the quarter and year-to-date. Through the first 9 months of the year, new licenses revenues is at 19% for CATIA and 28% for ENOVIA in constant currencies. Looking at total revenue, both SIMULIA and SOLIDWORKS were up double digits in the third quarter. SIMULIA is doing well in a number of industry and seeing very strong demand in Transportation and Mobility, especially. SOLIDWORKS benefited from unit growth, multiproduct sale and solid pricing. Moving to regional review. Let's begin with the Americas. We are encouraged by the improvement underway in our direct sales center, which focuses on large accounts. New licenses activities were up sharply here in the Americas. In Europe, we did see noticeable shift in the third quarter in some geos, which have been strong in Q2, particularly Germany. And of course, Russia was weak. At the same time, there were areas of improving performance, including Southern Europe and Northern Europe. Asia had a strong performance. In total and organically, this is a continuation of the trends seen at the start of the year. Multiple countries delivered good growth including Korea, India, China and Japan, which I will cover in more detail shortly. It should come as no surprise that our largest brand is a key driver in this region while supported by most of our solutions. Our Social Industry Experience strategy encompasses a new way of engaging with our customers. It is based upon providing a common link to all the dialogues we have with our clients, aligning our capabilities in a way that most clearly resonates with the best effective customer states in running their business to deliver successful end consumer experience. To have that engagement, we have been strengthening our sales channels, most notably our direct sales organization, to have the appropriate coverage of the different [ph] industries, to ensure that we have the right person leading the client engagement. And then providing that engagement that -- our engagement leader with the right level of brand and technical support. We have been doing this on a progressive basis around the world, and we'll continue to do so in the third quarter. For example, large accounts new licenses revenue were up 40% in constant currencies. As we look across our 12 geos, the payoff is starting to show this year in North America, United Kingdom, China, India, Japan, Korea, for some time, have been performing very well in this area. At the same time, we have invested in our direct sales channel for large account. Over the last 2 years, we have been working with the industry. Research and Development and brand teams to transform how we sell, what we sell to our target industries. As we discussed last quarter, we now have been produced 40 Industry Solution Experiences. Turning to customer engagement. Last quarter, I shared with you that Barilla selected our 3DEXPERIENCE platform on perfect package. On BNP Paribas chose our 3DEXPERIENCE platform on factory innovation solutions to speed the time-to-market, an estimated 20%. This quarter, Pratt & Whitney Canada selected our 3DEXPERIENCE platform based upon our basic architecture, including CATIA, ENOVIA, SIMULIA and EXALEAD applications, with the objectives of unifying marketing engineering operations and customer service on one single enterprise innovation platform. It represents a very significant IT simplification with a 33% expected reduction in business application. The reduction of 25 bill of materials sources to 1 single BOM with multiple use and the phase out of numerous legacy systems in total. We have had a great year in Japan with a significant increase in investment among companies, visible across our 3 sales channels. Japan, as you may know, represents an important component of our business in Asia. We have a leading presence with automotive OEMs and suppliers and are growing our business with companies in the High Tech, Industrial Equipment and Life Sciences industries. The recent win was with AMADA, a manufacturer of metal working machineries and devices. They selected Dassault Systemes for 3 key reasons: first, to enable global design management; second, to secure engineering data sharing; and third, to reduce cost as a result of being able to better coordinate product sources in conjunction with design. With both internal initiatives on our external investments, we are deepening our coverage of core industries and broadening our offer for new industries. Our new brand called BIOVIA represents a very significant expansion of our capabilities to serve scientific-focused innovation industries. Thanks to the deep expertise we have acquired in chemistry, biology and material science. And it represents an important expansion of our addressable market. With its material science expertise, BIOVIA is important to our core industry, on its client, which includes some of our largest customers in aerospace, for instance. BIOVIA is off to a good start this year, delivering a solid performance in the third quarter. And it is well on [Audio Gap] 2 of the world's top 3 delivery companies, carrying over 1 million packages per day. Quintiq is on track to deliver strong revenue growth in 2014, above EUR 85 million in total compared to EUR 70 million in 2013. Thibault will have more to add here, with respect to its contribution to Dassault Systemes. So let me turn the call over to him now to review our financial performance outlook on Quintiq in greater detail. Thibault?

Good afternoon, and good morning to all. My comments today are based upon our non-IFRS financial results. In our press release tables, you can find the reconciliation of our non-IFRS to IFRS data. In addition, revenue growth rates are stated in constant currencies. All in all, it was a solid quarter from a number of aspects, including revenue, operating performance and cash flow. And in the context of the softening macro backdrop, particularly in Europe, we are certainly pleased. Looking ahead, we have had an ambitious plan for the fourth quarter in our guidance. Despite the softening that has taken place, we believe we are in the position to reaffirm our business outlook for the fourth quarter and in turn, our full year financial objectives. Therefore, we are updating our financial objectives the add the Quintiq acquisition and the better evolution of currency in the third quarter and to reflect also updated currency exchange rate assumptions for the fourth quarter. And finally, we have shared with you, at the outset of the year, key goals in terms of growth and operational management. Given our progress for the first 9 months of this year, we are in very good position to reach them. Turning now to our third quarter performance. There are several key takeaways. First, we saw a very solid growth in new licenses revenue in Q3 up 14% on an organic basis and up 9% year-to-date in constant currencies. We were particularly pleased by the results of our direct sales, both the third quarter and the 9 months where we have been making important progressive changes over the last [Audio Gap] contribution of services to our operating of performance. The components to drive this improvement have come from: first, shifting the mix of services activity and here, our acquisitions have been a significant help; and second, focus on improving our service operations from an organic perspective. In combination, our services gross margin was 16.6% year-to-date. We are on track to reach our full year goal with the 8.3 percentage points of improvement already achieved through the first 9 months. Looking back, our services gross margin has improved from 5.8% in 2012 to 11.9% in 2013, and we look forward to reporting our 2014 results next quarter. Our focus on operational improvement extends to our global operations. The key financial goal this year has been to increase our organic operating margin to help mitigate the dilutive impact of acquisitions. We are well on track here, with 150 basis points of organic operating margin progression year-to-date. During the third quarter, non-IFRS EPS increased 2% as reported and 7% excluding currency effects. Year-to-date, the headwind has been stronger with a negative currency impact of 9 percentage points on non-IFRS EPS and almost the same level of impact on our non-IFRS operating income growth. Let me make a few comments on capital allocation and cash flow. First, the largest use of cash this year has been for acquisitions and reflects the fact that we are in the early years of our Quintiq experience journey. Excluding cash acquired, we have invested just under EUR 1 billion this year. Second, we have been more active in share repurchases to better manage our share count. Year-to-date, we have used 150 [ph] [Audio Gap] despite the slowing macro in Europe and updating for currency and also adding the Quintiq acquisition. Moving now to the detail. Our 2014 revenue growth objective range increases 1 percentage point to 15% to 16% in constant currencies. The reported revenue range moves up EUR 35 million to EUR 2,325,000,000 to EUR 2,335,000,000. By size, Quintiq is the largest portion of this increase, with an assumption of a EUR 29 million revenue contribution, of which EUR 22 million for the fourth quarter and EUR 7 million coming from the third quarter. Looking in more details at Quintiq. Let me remind you of its revenue mix last year, which was about 60% software and 40% services for the full year 2013. And that is -- this is an [indiscernible] mix for you to assume. Second, from a currency evolution perspective. We have the net addition of EUR 9 million in total, with a EUR 6 million positive impact to our Q3 results combined with a EUR 7 million estimated positive impact in Q4 from the strengthening of the U.S. dollar, offsetting part by an estimated EUR 4 million, negative impact in Q4 from several emerging markets' currencies. We are introducing a range of EUR 1.75 to EUR 1.80 with the low end of our prior objective. The range reflects the higher third quarter contribution of EUR 0.03. In addition, we have a higher Q4 current impact of EUR 0.01, which is -- and we expect Quintiq to be neutral to our non-IFRS EPS in Q4 as I mentioned earlier. With respect to our non-IFRS operating margin. Our target is tightened to about 29.5% compared to 29.5% to 30% previously. This assumes an estimated dilutive impact from acquisitions and divestiture ranging from 210 basis points to 230 basis points during the year and also about 140 basis points impact from the yen and other currencies. Concerning the negative impact of acquisitions. I may have created a little bit of confusion in the presentation this morning, and I'm sorry about that. My goal was to simply help factor these acquisitions and actually mainly the Quintiq and BIOVIA into the 2015 model. And this impact is just a 1-point impact. Of course, we will continue to deliver organic margin improvement in 2015, and so we are very confident that we'll be in position to offset this impact in 2015. So now to recap for 2014. Our non-IFRS revenue growth objective is 15% to 16% in constant currencies. Our non-IFRS EPS growth objective is 8% to 10%, excluding currency effects. And our goal is to generate about 150 basis points expansion of non-IFRS organic operating margin to partially offset division from acquisitions and also currency headwind. Based upon our progress to date, we are right on target and on our expense in the range of non-IFRS organic operating margin to about 33%. Let me now turn the call back to Bernard.

At the conclusion through the first 9 months of this year, we have been in a period of heightened investment as we move to rapidly implement our social industry expense strategy. These have entailed an expansion of our addressable market in a meaningful way on deepening our process coverage for users across our client enterprises. And we believe an increase in the value proposition we bring to our prospect on clients. To this expanded market operating, we bring talented teams, now totaling over 13,000 employees, representing an increase of almost 25% over the last 12 months or so. Looking forward, we are focused on meeting our strategic business and financial goals for 2014 and are excited about creating the future of Dassault Systemes all together. Thibault and I would be happy to take any questions now. And we thank everyone for their participation early today on this call.

[Operator Instructions] The first question is from the line of Jay Vleeschhouwer of Griffin Securities. Jay Vleeschhouwer - Griffin Securities, Inc., Research Division: Bernard, I'd like to ask you first a couple of longer-term addressable market and technology questions. At the analyst meeting in June, you noted that the company's highest priority is to acquire new customers and users. You've done a good deal of that, of course, with the acquisitions of companies like Accelrys and Quintiq. But when you think about that more organically, where do you think you would have the most incremental opportunities in volume terms to gain new users and new customers? On the technology front, when you think about changing -- your changing portfolio and certainly changing customer requirements, is your historical model of having 2 releases a year, the winter release and the summer release, something that you can and should alter given changing market conditions? Thanks.

Thank you, Jay. Really related to the acquisition of new customers, the attend -- the intent, sorry, of our recent acquisition was not mainly to buy existing customer base, but more importantly, to redefine Industry Solution Experiences for the new industries we target, such as life science, scientific-based companies doing a lot of innovation in new materials, biomaterials, because we know that this is a massive significant investment for many companies for -- in existing sector like EVs, electrical vehicle, but also connected vehicle and also of course, biomaterial for life science and pharma sector. So it happened with Quintiq of course, it's related to the full outbound supply chain, not only the inbound supply chain. So the intent is redefining Industry Solution Experiences for those industries. So the new diversification is working very well for us. We think we will add a multiple thousands new clients this year to the Dassault Systemes-installed base. And I think it will go on equal foot with the extension of users. Why so? Because with industry -- for existing industries, for example, we are reaching for -- the reach that we have now is significantly bigger, because as we explained in June, it goes on consumer ideation process, the initial idea, of course through the creation, design, simulation, production, supply chain and Manufacturing Operation Management, including what we call multichannel marketing content production with 3DXCITE. So we see the 2 levers in the industry on user target being significant factors for growth. Related to the cadence of developing those industry solutions, and the other mentioned about 2 major releases every year. We will keep that pace, but as we demonstrated with the V5 life cycle, by the way that we continue to update at least once a year with what we call the V5-6 product family, customers might skip one of two level. But it gives the opportunity for those who are really willing to get improvement quickly, to get that kind of advantages. And the second reason for sustaining that dynamic is because, with the expansion of the industry solutions and the connection of all the applications that we have, it provides a good dynamic to demonstrate progress in integration with the proper cadence. And I think that is a very, very strong competitive advantage. That ensures a lot benefits, of course, it's very useful when you provide On-the-Cloud services, because we can -- this is much easier for us to do and less expensive for customers because we do the job for them. Jay Vleeschhouwer - Griffin Securities, Inc., Research Division: Okay, let me follow up but still on the technology front with the subject we talked about at the analyst meeting and then just a question to Thibault. In June, I'm sure you recall, we talked a bit about your strategy for systems engineering, not just in automotive but in other markets, there's been some developments in that field over the last few months as you know. And some of your competitors are also talking about this, albeit their approaches may not be the same. But how do you think about the longer-term opportunity in systems engineering as an approach, particularly for automotive, since there's been some work going on there by some major car companies, of course, and how you can participate in that? And then lastly, for Thibault, you implemented a small price increase in some markets at the beginning of the quarter. Could you talk about the customer response to that? Did that have any discernible effect in terms of buying decisions and whether you think price increases might be a regular occurrence on an annual basis? Thanks.

Related to system engineering, there's a lot going on in this area. We started long ago from the Aerospace and Defense because for a long time already, Aerospace and Defense have been using those kind of system engineering and systematic approach on system engineering when you have unmanned vehicle or sophisticated equipment communicating with each other. So it was, at the beginning, more secret project going on with different companies. Now we decided to reveal those progress when we introduced the solutions for the smart and connected vehicles in the automotive sector. And also for the High-Tech and Energy, energy like wind equipment where you need to do remote health management and monitoring control. So it's going very well in all those sectors. It requires the confirmation from those companies because usually the system engineering was a very separated, very special discipline, not fully integrated with a product development cycle. But now it is going to become a critical factor. And we have set up the world best on for AUTOSAR, for the automotive sector in this area. And I think it sort of nice for that. On most of the both American, European and Japanese companies are now adopting the AUTOSAR standards so we can produce directly the code that goes in the car. That's, in short and quickly, what is being done. But we do more than that, because we right now, we are about to connect Internet of Things together, and not only web pages, but connect objects together to create the digital experience. So, in short, core, going everywhere, it's going to be even be added to the SOLIDWORKS world to make sure we can connect smart objects together. And it's part of what we call the 3DEXPERIENCE architecture on modeling technology. Thibault is up, the question is price?

Yes, Jay. What we're doing, to be very clear, is we are not unilaterally changing prices except that when we do, of course, a new version of our architecture, then we change the packaging, and we address prices at that time. But other than that, the only thing that we do, which is consistent with our contracts with customers, is to update our prices thoroughly to reflect the inflation. We are very much of a manpower industry, and so we need to keep in sync with the CPIs in the different countries where we operate. And of course, inflation is very low, and when it is lower than 1%, we don't do any price action. So at the moment, that means that there are many countries where we don't do any. But where there is inflation for various reasons, we believe it's fair and reasonable to change and update our prices accordingly.

Our next question is from the line of Michael Briest from UBS. Michael Briest - UBS Investment Bank, Research Division: Just a question on the cost side of things. If I look on Slide 55 in the sort of appendix, it shows that revenue was about EUR 9 million ahead of plan, costs about less than EUR 1 million ahead of plan. And I also remember in your cash flow explanations that you said that the timing of a marketing campaign was pushed out or didn't happen in Q3. I'm just wondering, were you particularly cautious on cost developments in the quarter? Obviously you do talk about the macro softness that you saw at the end. But I'm wondering if you have deferred costs already and perhaps your approach to the cost space for Q4 organically. Thanks.

Actually, Michael, I think our costs are tracking pretty well to the guidance with the valuation of EUR 1 million, which is not very substantial. And what we are doing right now is that we are actually increasing our pace of hiring in preparation for next year. So no, we are not tightening most severely our costs. We were careful in the first half of the year, because that's our normal process of being careful with new hires in the first half to be able to address, if necessary, on new hires and not on existing staff. And since we were reassured at the end of June about the prospects for the year, we have released the hiring budget in the company. Michael Briest - UBS Investment Bank, Research Division: Okay. I'm going to just ask -- I suppose if you had EUR 9 million of revenues and EUR 1 million of costs, you're doing a pretty good job of adding a point in margin. But then just on the acquisition pipeline, Bernard, maybe you can talk about your willingness to do more deals now whether the market -- it's location creates more opportunities or whether you think your hands are full integrating some of the larger ones from 2014? Thanks.

Well, I guess I would be able to answer that question and as you know we don't make a lot of comments about that question, Michael, because first of all, I think the most we have been doing in the last years, the last 2 years, have been well targeted, extremely precise, well orchestrated. And they have been architected with a lot of attention to create new brands, the brand was announced day 1, which means that we have done the job with the teams. The targets are very clear to really provide 3DEXPERIENCE industry solutions for the 12 sectors we are addressing. Many of those moves were probably not in -- on many radars, but they were on our radar, because they are very dedicated to what we want to do, which is what we call the 3DEXPERIENCE set of solutions. So the integration of those moves, whether it's DELMIA, whether it's SIMULIA, whether it's CATIA, whether it's the BIOVIA, the 3DXCITE, are going well. And customers, those existing customers see that as a real value for them. But we are always very careful about selecting top gun teams, first-class technology, differentiating technology and things that are relevant to the strategy we have set up. And as Thibault said in his comments today, you probably have seen an acceleration of our moves there, because we are in the first 3 years of creating this 2020 horizon on what we communicated through the analyst meeting in June for our goal for our 2019, between '14 and '19. We're well on track for that and that's all what I can say. We are not planning to acquire companies for the past. We are targeting technology for -- to be, really, a game-changer. And I think BIOVIA is a game-changer, 3DEXPERIENCE is a game-changer, Quintiq is a game-changer, Apriso is a game-changer. There is none of the moves we have done, which are not really focused on changing the game on the marketplace. And this is well -- very well received and they're on plan. That's all that I can say, Michael. [Audio Gap] On February 5, 2015, and then we will give you the indications for how do we see the full year 2015, which we think, as Thibault said, we are already quite confident. Thank you very much and have a great day.

Thank you. That does conclude the call for today. Thank you, all, for participating. You may now disconnect.