(BFM Bourse) – The publisher of computer-aided design and manufacturing software delivered both results below expectations in the fourth quarter as well as disappointing forecasts. The poor performance of licenses and lackluster growth in life sciences are highlighted by analysts.
The quarters follow one another and are not the same for Dassault Systèmes. The specialist in computer-aided design and manufacturing software had largely reassured investors with sparkling third-quarter results.
The opposite happens this Thursday. The group, led for several weeks by Pascal Daloz, suffered an impressive fall, losing 11.3% at the start of the afternoon, the biggest fall in the CAC 40.
Dassault Systèmes delivered a publication that was mixed at best. The company that owns Catia and Solidworks software has published earnings
of 1.64 billion euros in the fourth quarter, reflecting growth of 8% excluding currency effects, while the consensus expected 1.665 billion euros.
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License sales at half mast
License sales, a closely watched indicator by investors and analysts, particularly disappointed, falling 4% to 352 million euros, whereas the company had indicated that it expected a variation between -3% and +1%.
Stifel also points out the weakness of “life sciences”, one of the major areas of development for Dassault Systèmes in recent years, which “weighs” on the general dynamic. UBS, for its part, refers to “moribund” life sciences.
This segment grew by only 2% in the fourth quarter. Dassault Systèmes cites “a high basis of comparison and the continued slowdown in clinical studies in the fourth quarter (according to Dassault, 40% of clinical trials worldwide rely on its subsidiary Medidata, specializing in clinical trial monitoring software) “, to explain this modest growth. This segment had already worried the market when the second quarter results were published.
Beyond revenues, the operating margin also turned out to be lower than expected, standing at 35.9% compared to 36.3% expected on average by analysts, according to UBS. Earnings per share stood at 36 cents, in line with the consensus (37 cents).
The forecast for fiscal 2024 also disappoints. Dassault Systèmes anticipates revenues of between 6.35 and 6.425 billion euros, reflecting growth of 8% to 10% excluding currency effects. License sales are expected to fall by 1% at worst and increase by 3% at best. The operating margin would be between 32.5% and 32.8%, while net profit per share is expected between 1.29 euros per share and 1.31 euros per share.
A transition that can weigh on income
This outlook is lower than expected: according to UBS, the consensus so far for 2024 was forecasting revenues of 6.496 billion euros, a margin of 33.1% and net profit per share of 1.32 euros.
Invest Securities considers that these prospects are a priori to be linked “with the acceleration of adoption by subscription customers”.
“Even if it (the group, editor’s note) does not say it clearly at this stage, the 2024 financial year should be marked by an acceleration in subscriptions, which weighs slightly more than expected on total growth and performance. of the licensing activity and explains the 2024 outlook which is slightly lower than expected”, develops the research office in a note published before the opening of the market.
Dassault Systèmes is currently transitioning from a licensing model to a subscription model. “This migration can weigh on short-term growth, because this model does not involve large initial payments (“upfront”) but a subscription paid every year,” Nicolas David, analyst, explained to BFM Bourse in the fall. at Oddo BHF. “Which means less revenue recognition in the short term but more in the long term with more recurring revenue. As opposed to the licensing model, where a customer pays for access to the initial software. And then they only pay each year maintenance which represents around 20% of the cost of a license”, he added.
Furthermore, Rouven Bergmann, Dassault’s financial director, told analysts to expect a still “slight” contribution from life sciences in 2024. Medidata should experience growth “in the low single digit range” or even “stable” before returning to “double-digit” growth in 2025.
“The market was probably not yet expecting a year of 2024 of timid growth for Medidata; management did not warn sufficiently in advance of this trend,” points out an analyst. “This puts another piece back in the worry machine and it’s a shame because at the same time clinical trials should start again in 2024. But a gap of several months is observed between the moment when you win a contract in clinical trials and the moment when you recognize the income,” he adds.
An announcement outside the results, however, satisfies analysts: Dassault Systèmes won a contract with the German automobile manufacturer BMW which has decided to adopt 3DExperience, that is to say the Dassault platform which unifies all of its offers and functionalities in product life cycle management. “More than 17,000 employees representing numerous engineering disciplines at the automaker will rely on the 3DExperience platform to accelerate the development of all vehicles, from creation to production,” says the company.
“The continued weakness of Medidata will be mitigated by the good news regarding BMW, but the growth and margin outlook will disappoint, even if earnings per share are in line,” summarizes UBS in a note published before the market opened.
Remember that Dassault Systèmes shares had gained more than 40% since mid-October, an increase which probably left little room for the slightest disappointment.
For the sake of readability and simplification, all indicators in this article refer to non-IFRS data, favored by the company in its communication.
Julien Marion – ©2024 BFM Bourse
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