Dassault Systemes Shares Drop Despite Positive Q4 Results


By Nina Kienle

Shares of Dassault Systemes, the French software maker, took a hit after the company released its fourth-quarter results and provided 2024 guidance that fell below analysts’ expectations.

As of 1002 GMT, shares were down 9.3% at EUR43.74. However, it’s worth noting that shares are still higher than they were a year ago, when they traded at approximately EUR38.00.

On a non-IFRS basis, Dassault Systemes reported that overall revenue increased to 1.64 billion euros ($1.77 billion) in the fourth quarter of 2022, up from EUR1.58 billion in the previous year. Software revenue also saw growth, rising to EUR1.48 billion from EUR1.43 billion, while services revenue increased to EUR167.3 million from EUR155.3 million.

Operating profit showed improvement as well, reaching EUR589.8 million compared to EUR552.1 million in the previous year. Dassault Systemes’ operating margin also saw an increase, rising to 35.9% from 34.9%.

While Citi analysts had expected overall revenue of EUR1.67 billion and an operating margin of 36.3%, the results fell short of these predictions.

Jefferies analysts noted that net cash from operating activities for the quarter amounted to EUR293.4 million, below the consensus of EUR455 million. For the full year of 2023, net cash from operating activities came in at EUR1.57 billion, also below the consensus of EUR1.74 billion.

The analysts commented on the company’s contract structures, mentioning that there is a risk involved in upfront revenue recognition. They noted that the payment schedules of customers may not align with the revenue recognition profile, resulting in a mismatch between cash flow and profit and loss. This ongoing concern regarding cash flow is likely to contribute to the revenue recognition debate, the analysts added.

Looking ahead, Dassault Systemes expects non-IFRS total revenue of EUR6.35 billion to EUR6.43 billion, representing growth of 8% to 10%, for the year 2024. The company also anticipates an operating margin of 32.5% to 32.8%. However, Citi analysts had projected higher revenue growth of approximately 9.5% and a margin of 33.3%.

Despite the drop in shares following the Q4 results, Dassault Systemes remains optimistic about its future performance.

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