Net operating cash flow increased 32% to €592.5 million for the six months ended June 30, 2017, compared to €449.1 million for the 2016 First Half, reflecting higher net income and working capital improvements.

In the 2017 First Half, the Company uses of cash were principally for cash dividends of €51.3 million (based on the shareholders electing payment of the dividend in cash); share repurchases of €44.8 million; capital expenditures of €45.8 million and payments for acquisitions, net of cash acquired of €8.0 million and for acquisition of non-controlling interests of €14.1 million. The Company received cash for stock options exercised of €21.8 million.

Dassault Systèmes’ net financial position totaled €1.82 billion at June 30, 2017, compared to €1.49 billion at December 31, 2016, reflecting an increase in cash, cash equivalents and short-term investments from €2.49 billion to €2.82 billion, with long-term debt unchanged at €1.00 billion.

Summary of Recent Business, Technology and Customer Announcements

Customers

In a separate press release issued today, Dassault Systèmes announced that it has entered into a new, extended strategic partnership agreement with The Boeing Corporation. Pursuant to the agreement, Boeing will expand its deployment of Dassault Systèmes’ software across Boeing’s commercial aviation, space and defense programs to include Dassault Systèmes’ 3DEXPERIENCE platform. This decision follows a competitive process that included the rigorous analysis of technical and functional capabilities, cost and business benefits across the value chain. The 3DEXPERIENCE platform can reduce integration and support costs, improve productivity, foster new innovation, and aid in the introduction of best practice processes to deliver standard work across the value chain. The 3DEXPERIENCE platform cannot only simulate products and processes, but also find and eliminate potential risks and quality issues before production. The platform’s single source of data across all applications will provide reliable and actionable real-time information and seamless communication throughout the entire enterprise and supply chain as well as across product generations. This digital continuity will improve data and analytics capabilities.

On June 22, 2017 Dassault Systèmes and the Aviation Industry Corporation of China (AVIC) jointly announced the signing of a contract to establish a Sino-French Industry Joint Innovation Center that will operate across the complex system lifecycle specific to the aviation industry and its entire industrial chain. Dassault Systèmes and AVIC will strive to make the center an important contributor of the "Made in China 2025" and “Industrie du Futur” cooperation framework through sustained investment by both companies. The Sino-French Industry Joint Innovation Center will be located in the China Aviation Industry Science and Technology Park of Zhongguancun, Beijing.

Investments

On June 20, 2017, Dassault Systèmes announced that it had acquired a majority stake in Outscale, a leader in enterprise-class cloud services, thereby strengthening the Company’s position to provide an extensive cloud software offer in its market. Founded in France in 2010, Outscale is an ISO/IEC 27001:2013 security certified company that provides enterprise-class cloud computing infrastructure services (IaaS) to customers through its ten data centers in Europe, North America and Asia. With this investment, Dassault Systèmes is now able to adjust and control its cloud resources and services to manage peaks in activity, further diversify its industry segments, deploy new features, and provide advanced on premise, private and hybrid cloud solutions for its customers. The acquisition does not have an impact on the Company’s revenues as it was the principal customer of Outscale prior to this acquisition.

On June 12, 2017 Dassault Systèmes announced the signing of a definitive agreement to acquire AITAC BV, a Dutch company specialized in marine and offshore engineering software. With this acquisition, Dassault Systèmes will further strengthen its solutions designed to bring digital transformation to the marine and offshore industry by providing cutting-edge, industry-specific technologies for its 3DEXPERIENCE platform customers. AITAC’s Smart Drawings software application is used by shipyards and offshore companies to automate the creation of drawings from a master 3D model of a ship, platform or other structure designed using Dassault Systèmes’ CATIA applications.

Products and Industry Solution Experiences

On June 27, 2017, Dassault Systèmes announced that it is working with PSA Retail, the leading automotive distributor in France and second-leading in Europe, and the automotive distribution arm of PSA, to help it transform the customer car buying journey with a compelling digital in-store automotive dealership experience. PSA Retail is using Dassault Systèmes’ “Virtual Garage” industry solution experience to create a digital in-store retail format that infuses high-end digital visualization into the physical showroom sales process.

On June 8, 2017 the Company announced a renewed agreement with Rockwell Collins to extend their PLM journey using the 3DEXPERIENCE platform. Rockwell Collins is a pioneer in the development and deployment of innovative aviation and high-integrity solutions for both commercial and government applications. Rockwell Collins is currently deploying ENOVIA and EXALEAD applications from Dassault Systèmes’ “Co-Design to Target” industry solution experience to build a PLM environment for its engineering and technology sectors around the world. Rockwell Collins invested in Dassault Systèmes’ technologies to improve collaboration across its research, development and manufacturing processes, streamline workflows and change management, and help to reduce management costs for increasingly complex systems. Dassault Systèmes’ solution operates seamlessly on a secure government cloud environment, a vital requirement for Rockwell Collins.

Business Outlook

Thibault de Tersant, Senior Executive Vice President, CFO, commented, “During the second quarter, we delivered our key financial metrics - software, new licenses revenue, earnings per share - at the high end of our guidance and reported a strong operational cash flow increase. The signing of the extended strategic partnership with Boeing was a remarkable milestone. Its ramp-up, starting in 2018, should drive revenue growth for several years and represents a key inflection point in 3DEXPERIENCE adoption by the market.

“Looking forward, we are reconfirming for 2017 our constant currencies objectives for total revenue growth of 6% to 7%, new licenses revenue growth of 8% to 10%, which implies a two-digit new licenses revenue growth in the second half of 2017, and recurring revenue growth of about 6%, with the year as a whole reflecting further strengthening of our competitive positioning.

“While maintaining the revenue and new license growth rate of our objectives, excluding currency impact, we are reflecting the recent strengthening of the euro against all our major currencies, leading to a reduction of our reported revenue range of €50 million. While preserving our investments, we managed to keep our margin target unchanged at around 31.5% and reflected the reduction of reported revenue on EPS.” (All figures on a non-IFRS basis.)

The Company’s third quarter and full year 2017 financial objectives are as follows:

• Third quarter 2017 non-IFRS total revenue objective of about €760 to €775 million based upon the exchange rates assumptions below, growing about 6% to 8% in constant currencies; non-IFRS operating margin of about 31.0% to 32.0%; and non-IFRS EPS of about €0.62 to €0.65;
• 2017 non-IFRS revenue growth objective of about 6% to 7% in constant currencies at €3.240 to €3.265 billion (reflecting the principal 2017 currency exchange rate assumptions below for the US dollar and Japanese yen as well as the potential impact from additional currencies representing about 10% of the Company’s total revenue in 2016);
• 2017 non-IFRS operating margin of about 31.5% compared to 2016 where the non-IFRS operating margin was 31.2%;
• 2017 non-IFRS EPS of about €2.62 to €2.66, representing a growth objective of about 5% to 7%;
• Objectives are based upon exchange rate assumptions of US$1.15 per €1.00 for the 2017 third quarter and US$1.12 per €1.00 for the full year; and JPY130 per €1.00 for the 2017 third quarter and JPY125.9 per €1.00 for the full year before hedging.

The Company’s objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below.

The 2017 non-IFRS objectives set forth above do not take into account the following accounting elements and are estimated based upon the 2017 principal currency exchange rates above: deferred revenue write-downs estimated at approximately €12 million, share-based compensation expense, including related social charges, estimated at approximately €99 million and amortization of acquired intangibles estimated at approximately €161 million. The above objectives also do not include any impact from other operating income and expense, net principally comprised of acquisition, integration and restructuring expenses, from one-time items included in financial revenue and from one-time tax restructuring gains and losses. Finally, these estimates do not include any new stock option or share grants, or any new acquisitions or restructurings completed after July 25, 2017.