For many years Dassault was regarded as a proxy on capex in the aeronautical industry

Dassault Systèmes * is a spin-off of Dassault Aviation.  Until 2019, Dassault Systèmes built its business selling design software to the aerospace industry and diversified into the auto/manufacturing sector in the late 1990 which allowed Dassault to launch its product CATIA. By signing a distribution agreement with IBM, Dassault Systemes was able to give a worldwide reach to its core CATIA technology.  

As demand for digital and virtual experiences increased from 2000, Dassault launched DELMIA, which provides digital manufacturing online tools that drive innovation and efficiency based on virtual planning, simulating, and modeling of production processes.

Diversification into other sectors

In 2019, Dassault acquired Medidata for $ 5.8 billion. Meditata develops and markets software for clinical trials. These include protocol development, clinical site collaboration. Thanks to this acquisition, Dassault was able to diversify its client base outside its core aeronautical/auto base.

Last week Dassault results showed the first fruits of this successful diversification

The strategic goal for acquiring Meditata was to leverage the sophisticated 3D technology in other sectors. Last week results indicated that the strategic move is paying off.

Dassault Industries is now providing its 3D technology to many sectors ranging from manufacturing industries to Life science and infrastructures. According to last quarter numbers, life science and infrastructure software revenues have reached the same weight than the industrial legacy business.

Thanks to this diversification, there is a reacceleration of the growth rate. Life science software revenues were up 23% in Q4 2022 versus 11% for Industrial innovation as the pharma sector is under penetrated by the 3D technology.

Finally, thanks to the growth in the Life science segment, Americas (40%) became in Q4 2022 the first geographical zone, in terms of revenue, ahead of Europe (37%).

Investors often complain of the lack of successful European tech names. Dassault Systèmes is the perfect counter example. By pursuing its diversification in other industries, Dassault Systèmes has become a truly global payer in 3D software.

Investors have yet to fully price the rerating from a regional cyclical software company into a truly global player. The shares are trading on 22 times EV/EBITDA 2023 versus an historical average of 29 times.

*Dassault Systemes is owned by Deshima Certificates “Croissance Contrariante Europe” and "Deshima Smart Data"