financial results q4 & fy 2018...3 vision and main 2018 highlights lectra - financial results q4...

Paris – February 13, 2019

FINANCIAL RESULTSQ4 & FY 2018

Daniel Harari, Chairman & CEO

Jérôme Viala, Executive Vice President

Financial Results Q4 & FY 2018

2 Lectra - Financial Results Q4 & FY 2018

Vision and Main 2018 Highlights

Q4 2018 Results

FY 2018 Results

Strategic Roadmap for 2017–2019: Second Progress Report

2019 Outlook

3


Lectra - Financial Results Q4 & FY 2018

Second year

of the roadmap

for 2017-2019

successfully

completed

according

to plan

First launch

of the new

Industry 4.0

offers

A zero-debt

company,

a particularly

robust

balance sheet

Lectra’s Ambition: to Become an Indispensable Player in Industry 4.0

Income from

operations

in line with

the objective

4



Negative Impact of Euro Appreciation

289.3 282.6

2018 convertedusing the 2017exchange rates

2018 actual

REVENUES

-6.7

INCOME FROM OPERATIONS

In millions of euros

43.540.2

2018 convertedusing the 2017exchange rates

2018 actual

-3.3

15.0% 14.2%

CONVERSION OF 2018 RESULTS USING THE 2017 EXCHANGE RATES With an average exchange rate of $1.18/€1 in 2018, the

euro strengthened by 5% against the US dollar and 2%

against the yuan compared to 2017

In parallel, in a context of distrust regarding the currencies

of certain emerging market countries, the Turkish lira

declined by 28%, the Brazilian real by 16%, the Tunisian

dinar by 12%, the Russian ruble by 11% and the Indian

rupee by 9% against the euro

= In % of revenues

1,05

1,10

1,15

1,20

1,25

Q1 Q2 Q3 Q4

2017 2018

AVERAGE $/€1 EXCHANGE RATE

1.25

1.20

1.15

1.10

1.05

5



Challenging Macroeconomic and Geopolitical Environment

The entire year was marked by a "wait-and-see" attitude by companies

in all Lectra market sectors, particularly in automotive, following the

protectionist measures announced and put in place first by the United

States and subsequently by Europe and China

In addition, the economy of those emerging countries whose currency

had experienced a sharp decline was negatively affected, leading some

customers to put investment decisions on hold

6



Acquisition of the Company Kubix Lab in January 2018

Founded at the end of 2015, Kubix Lab developed a cutting-edge technological

offer called Kubix Link, which enables fashion brands to manage from end to

end, within a single application, all product information deriving mainly from

multiple IT systems (ERP, PDM, PLM, etc.)

By combining its offerings with those of Kubix Lab, Lectra will provide its fashion

customers with a revolutionary product information management platform

The acquisition had a non-material impact on the results of 2018

7



Impact of the Sale of Certain Software in SaaS Mode (1/2)

An example of a software license order placed in the middle of the year and invoiced 3 months later:

o Perpetual license: 100

o Associated maintenance contract: 20 / year

o Subscription fee in SaaS mode: 100 / 2.2 = 45 / year1

Year 1(3 months)

Year 2(12 months)

Year 3(12 months)

Year 4(12 months)

Year 5(12 months)

Revenues in

perpetual license

mode

Revenues in SaaS

mode

100 +

(20*3/12)

= 105

20 20 20 20

45*3/12

= 11.2545 45 45 45

0

50

100

150

200

250

300

Revenues in perpetual license mode Revenues in SaaS mode

Cumulated revenues

Month

12 24 36 48 60

1 The Company applies a 2.2 coefficient to calculate the amount a yearly subscription fee in SaaS mode would represent had it been sold as a perpetual license together with a maintenance contract

1 The Company applies a 2.2 coefficient to calculate the amount a yearly subscription fee in SaaS mode would represent had it been sold as a perpetual license together with a maintenance contract

8



Impact of the Sale of Certain Software in SaaS Mode (2/2)

An example of a software license order placed in the middle of the year and invoiced 3 months later:

o Perpetual license: 100

o Associated maintenance contract: 20 / eyear

o Subscription fee in SaaS mode : 100 / 2.2 = 45 / year

Year 1(3 months)

Year 2(12 months)

Year 3(12 months)

Year 4(12 months)

Year 5(12 months)

Revenues in

perpetual license

mode

Revenues in SaaS

mode

100 +

(20*3/12)

= 105

20 20 20 20

45*3/12

= 11.2545 45 45 45

0

50

100

150

200

250

300

Revenues in perpetual license mode Revenues in SaaS mode

Cumulated revenues

Month

12 24 36 48 60

In early 2018, the Company began selling some of its software on a subscription basis, using the Software-as-a-Service model; new

software offers, available since April 2018, are sold only in SaaS mode

The corresponding orders, placed primarily in H2, represented an annual subscription value of €0.9 million and revenues of

€0.3 million in 2018 for orders already invoiced

If the SaaS sales had been made in the form of perpetual licenses, they would have accounted for total revenues of €1.5 million, with

their associated maintenance contracts

The change to the SaaS model thus had a negative impact of €1.2 million on both revenues and income from operations

While this had a low impact on revenues, it had a greater impact on income from operations, which would have increased by 14%

instead of 11% if the software sales model had not changed

In addition, this change in model had a negative impact of €1 million on free cash flow in 2018




Q4 2018 Results

FY 2018 Results


2019 Outlook

Unless stated otherwise, comparisons are ‘like-for-like’ (2018 figures restated at 2017 exchange rates).

Orders for CAD/CAM and PLM software include sales in the form of perpetual licenses and sales on a subscription basis.

10

Q4 2018 Results


Slight Decline in Orders for New Systems

ORDERS FOR NEW SYSTEMS, in millions of euros

33.332.5

Q4 17 Q4 18

-3%

ORDERS BY PRODUCT LINE, Q4 18 vs. Q4 17

3%

-4%

-4%

New CAD/CAM and PLM software licenses

CAD/CAM equipment and accompanying software

Training and consulting

Q4 was again negatively affected by the consequences of the trade war

between the United States and certain countries and regions of the world,

including China and Europe: this weighed on the investment decisions of

many customers in all Lectra market sectors

11

Q4 2018 Results


Strong Growth in Income From Operations

10.211.4

Q4 17 Q4 18

REVENUES

71.5 75

Q4 17 Q4 18

71.5 74.4

Q4 17 Q4 18

+4%

At actual exchange rates Like-for-like



FREE CASH FLOW

10.2

12

Q4 17 Q4 18

+11%

At actual exchange rates

+17%

NET INCOME1

-6%

1412.8

Q4 17 Q4 18

-8%

At actual exchange rates

9.28.6

Q4 17 Q4 18

+5%

14.3% 16.0% 14.3% 15.3%

= In % of revenues


1.18

1.14

Q4 17 Q4 18

$/€ EXCHANGE RATE

Q4 18 free cash flow

includes the receipt of

€6.9 million relating to the

2014 French research tax

credit (€6.3 million

received in Q4 17 relating

to the 2013 French

research tax credit)

1 Q4 17 net income included a net tax profit of €0.6 million in respect of non-recurring items




Q4 2018 Results

FY 2018 Results


2019 Outlook

Unless stated otherwise, comparisons are ‘like-for-like’ (2018 figures restated at 2017 exchange rates).

Orders for CAD/CAM and PLM software include sales in the form of perpetual licenses and sales on a subscription basis.

13

FY 2018 Results


Stability in Orders for New Systems


The macroeconomic and geopolitical context has created a wait-and-see attitude by some customers or

a freeze in their investments

2017 2018 ChangeAt actual

exchange rates

ChangeLike-for-like

Total 124.2 121.7 -2% stable

of which new CAD/CAM and

PLM software licenses17.0 15.8 -7% -5%

of which CAD/CAM equipment

and accompanying software92.5 91.4 -1% +1%

of which training and consulting 12.5 12.2 -3% -1%

32.3 32.1

26.6

33.3

28.2

33.4

27.6

32.5

Q1 Q2 Q3 Q4

2017 2018

Orders for CAD/CAM and PLM software include sales in SaaS

mode, with an annual value of €0.9 million (this amount was

negligible in 2017); equivalent orders for perpetual licenses

would have come to €2 million and accounted for 13% of the

total amount of software orders

14

FY 2018 Results


Contrasted Geographical Activity

37%

32%

23%

8%

Europe Asia-Pacific Americas Rest of the world

23

27.9

2017 2018

+28%

AMERICAS

47.544

2017 2018

EUROPE

-7%

43.8

38.6

2017 2018

ASIA-PACIFIC

-10%

39%

36%

19%

6%

2017 20187.6 8.9

2017 2018

REST OF THE WORLD

+18%

Figures in millions of euros

Orders for new CAD/CAM and PLM software licenses, CAD/CAM

equipment and accompanying software, and training and consulting

15

FY 2018 Results


Growth in Orders Concentrated in Fashion and Apparel

2017 2018

Fashion and Apparel Automotive Furniture Other industries

Europe

Americas

Asia-Pacific

Europe

Americas

Asia-Pacific


124.2 121.7

+7%

+34%

-12%

-8%

+7%

-13%

5%

11%

36%

48%

4%

11%

35%

50%

Change

Orders for new CAD/CAM and PLM software licenses, CAD/CAM

equipment and accompanying software, and training and consulting

-4%

-5%

-4%

+5%

The very sharp decline in Automotive orders in Q1

(-54%) was mostly caught up during the year

Fashion and Apparel orders, together with Furniture

orders, had increased strongly in Q1(31% and 61%

respectively), but then were marked by a “wait-and-see”

attitude in Q2 and Q3 (which calmed down in Q4)

16

FY 2018 Results


Record Revenues and Earnings in 2018

REVENUES

277.2 282.6

2017 2018

39.3 40.2

2017 2018

29.3 28.7

2017 2018


NET INCOME1GROSS PROFIT

277.2 289.3

2017 2018

39.343.5

2017 2018

11.5

-2%

+2% +4% +2% +11%

201.9 203.5

2017 2018

201.9 209.6

2017 2018

+1% +4%

2018 OBJECTIVE

Growth in revenues

6% 10%

+4%

72.8% 72.0% 72.8% 72.5%

14.2% 14.2% 14.2% 15.0%

1.13

1.18

2017 2018

$/€ EXCHANGE RATE

2018 OBJECTIVE

Growth in income from

operations

7% 15%


= In % of revenues

+11%

At actual exchange ratesAt actual exchange rates Like-for-like

At actual exchange rates Like-for-like At actual exchange rates Like-for-like

1 2017 net income included a net tax profit of

€0.6 million in respect of non-recurring items

17

FY 2018 Results


Strong Increase in Recurring Revenues

154.1159.8

2017 2018

154.1163.9

2017 2018


+4% +6%

123.1 122.7

2017 2018

123.1 125.4

2017 2018


+2%0%

REVENUES FROM NEW SYSTEMS SALES RECURRING REVENUESIn millions of euros

37.6CAD/CAM and PLM software evolution and online

services contracts0%

53.3CAD/CAM equipment and accompanying software

maintenance and online services contracts+9%

68.4Consumables and parts +7%

New CAD/CAM and PLM software licenses 13.9 -14%

CAD/CAM equipment and accompanying software 93.8 +5%

Training and consulting 12.7 -2%

Change

like-for-like

Change

like-for-like

CAD/CAM and PLM subscription contracts 0.5 na

18

FY 2018 Results


Strong Impact of Currency Fluctuations on Income from Operations

2017

Income from

operations

Growth in

recurring

revenues

Growth in

revenues from

new systems

sales

Increase in

fixed

overhead

costs

Increase in

gross profit

margins

2018

Income from

operations

37,3

+7,2

+6,2

EVOLUTION OF INCOME FROM OPERATIONS


Increase in recurring revenues

financed increase in fixed

overhead costs and offset the

Impact of currency fluctuations

na

39.3

+7.4+0.8 -3.9

-3.3

40.2

43.5

Impact of

currency

fluctuations

2018

Income from

operations at

constant

exchange

rate

19

FY 2018 Results


A Zero-Debt Company, a Particularly Robust Balance Sheet

Decrease in free cash flow is primarily due to the change in working capital

requirement (+€3.7 million in 18 vs. -€7.8 million in 17)

The Company is debt-free. Net cash position totaled €102.2 million, after the

disbursement of €7.1 million for the acquisition of the company Kubix Lab

and the dividend payment of €12 million declared in respect of FY 2017. A

record level, which will enable the Company to self-finance its internal

and external development

Working capital requirement at 31/12/18 includes the

current portion (€5.7 million) of the total receivable of

€17.9 million from the French tax administration (Trésor

public) corresponding to the research tax credits recognized

since fiscal year 2015; the portion receivable in over one

year is now carried on the balance sheet under Other non-

current assets

Lectra’s business model is based on generating a high level

of free cash flow and a structurally negative working capital

requirement

WORKING CAPITAL REQUIREMENT

FREE CASH FLOW AND BALANCE SHEET


33.2

21.6

2017 2018

Free cash flow

-35%

98.1 102.2

31/12/17 31/12/18

Net cash

151.2170.4

31/12/17 31/12/18

Shareholders’ equity

-16.8

-21.9

-16.5-18.3

-11

-22.9

-27

-22.8-25.1

-16.7

-30

-20

-10

0

Working capital requirement Working Capital Requirement after restatement of the current research tax credit receivable

31/12/14 31/12/15 31/12/16 31/12/17 31/12/18

20

FY 2018 Results


Stock Price Falls by 19%

Share : €20.30

Market cap. : €646 million

Enterprise Value : €544 million

EV/2018 Revenues : 1.9x

EV/2018 EBIT : 13.5x

PER 2018 : 22.5x

EVOLUTION FROM JANUARY 1, 2018 TO FEBRUARY 11, 2019, in euros, closing price

AT FEBRUARY 11, 2019

16

18

20

22

24

26

28

Lectra CAC Mid & Small CAC 40

High

January 8, 2018

€26.00

Lectra

-19%

CAD Mid & Small

-18%

CAC 40

-6%

Low

October 30, 2018

€17.00

21

FY 2018 Results


Strong Liquidity, Free Float Above 80%

Kabouter Management LLC (United States): >10% and <15%

Allianz SE (Germany): > 5% and <10%

Kempen Oranje Participaties (The Netherlands): > 5% and <10%

No other shareholder above 5%

1 Excluding the disposal by André Harari of his entire stake in Lectra in June 2017. Source: Bloomberg2 At February 12, 2019

Daniel Harari Free float

VOLUME TRADED OWNERSHIP1

83% 17%

Shares traded on Euronext and other trading platforms1

Shares: 19.3 million 17.1 million

20182017

Euronext accounted for 31% of the shares traded in 2018 (48% in 2017)

FREE FLOAT

22

FY 2018 Results


Dividend Raised to €0.40 per Share (+5.3%)

1 Subject to shareholder approval at the Ordinary Shareholders’ Meeting on April 30, 2019. Payable: May 7, 20192 Based on the December 31, 2018 closing share price3 At December 31, 2018

Cash and cash

equivalents, and

net cash

€102.2 million3

Cash preserved for

future targeted

acquisitions

Self-financed

development

Steady rising

dividend per share

DIVIDENDE FY 20181

€ 0,40 / action

44% of consolidated net income

2.2% yield2

EVOLUTION OF THE DIVIDEND

CAGR

FY 2013-FY 2018

FY 2018 vs.

FY 2013

+13% +82%




Q4 2018 Results

FY 2018 Results

Strategic Roadmap for 2017–2019: Second Progress ReportEach chapter is followed by a progress report indicated with a

2019 Outlook

24



A Long-Term Vision

Continuing to focus on the

long term, Lectra’s 2017-2019

roadmap is the first step

in the company’s development

plans for the coming decade to

become

an indispensable player in

Industry 4.0

Overall, the second year of the roadmap was successfully

completed according to plan

25



Four Major Trends Will Shape Lectra’s Market Sectors and Geographic

Markets

These four main trends and their impact continue to constitute the main evolutions for the environment of Lectra customers

The trade war between the United States and China does not call into question the fundamental change in the Chinese economy; the country’s industrialists are advancing their digitalization

transformation and incorporating the principles and technologies of Industry 4.0 in their processes, as the Chinese market confirms its potential for brands from across the globe

MILLENNIALS DIGITALIZATION CHINAINDUSTRY 4.0

At the same time as pursuing

their quest for operational excellence—more

crucial today than ever—Lectra’s customers

must adapt to emerging trends set to

significantly impact their future

26



Industry 4.0: an Unprecedented Opportunity for Lectra

A growing number of companies in developed and emerging countries alike are incorporating a digital component in their strategy

SHIFT FROM MASS PRODUCTION TO PROFITABLE, LARGE SCALE PERSONALIZED PRODUCTION

INDUSTRY 4.0

Integration of

smart solutions

and services

Replacement of

production

tools

This shift will drive all businesses to

integrate modular solutions and

connected, smart services, an

essential condition of continuing

competitiveness in the digital age

Industry 4.0 will encourage a

growing number of companies to

create fully digital value chains

around products

DIGITALIZATION

OPERATIONAL

EXCELLENCE

QUALITY AND

EFFICIENCY

Mass

customization

Mass

production

Agile production Made to measure/Made

to Order



More than ever these assets represent high barriers to entry

Lectra, an Indispensable Player in Industry 4.0

The company has everything required to achieve this ambition

+10 YEARS OF

EXPERIENCE IN THE

INDUSTRIAL INTERNET

OF THINGS

A COMBINATION OF

MACHINES, SOFTWARE,

SERVICES AND DATA

STRONG BUSINESS

EXPERTISE

+40 YEARS OF SAVOIR-

FAIRE IN ELECTRONICS

3,900 Industry 4.0-compatible

machines1 are in operation

worldwide

The only player in its

industry to propose a

complete added-value

offer, compatible with

Industry 4.0

550 consultants and

solution experts1

Real-time management

of information emitted by

hundreds of sensors

installed in cutting

solutions

1 3,000 machines and 500 consultants

and solution experts early 2017

FASHION AND

APPAREL

28



AUTOMOTIVE FURNITURE

CONTINUE TO FOCUS ACTIVITIES ON THREE MAIN

MARKET SECTORSMAINTAIN PREMIUM POSITIONING

Primarily targeting 5,000 customers or

prospects across the world: about 4,500 in

Fashion & apparel, 200 in Automotive and

300 in Furniture

The company’s

historical core

market in which it

is a leading

reference

A strongly

growing market

in which Lectra

has an unrivalled

leadership

A market with a

strong potential

in which Lectra

increases market

share year after

year

These fundementals remain the pillars of the strategy

A Strategy Based on the Same Foundations as the Previous Roadmap

29



An Offer With a Broader Scope for the Industry 4.0

Start of the development of new

Industry 4.0 compliant offers

2015

2016

Test with selected pilot customers2017

Progressive commercial launchStarting

2018

Enhancement of the offersStarting

2019

To enable its customers to implement the principles

of Industry 4.0, Lectra decided to accelerate

strongly its investment in the design and

development of new offers for the Industry 4.0

New product lines

that meet customers’

new requirements

Supplement

existing software or

cutting solutions

The year 2018 was highlighted by the launch in selected pilot countries of innovative offers enabling Lectra’s customers to implement the principles of Industry 4.0

These offers will become available progressively worldwide in 2019 and will continue to be enriched in 2019 and subsequent years

27.7

30.8

2017 2018

Net R&D costs1 : €21.5 million (€19.8 million in 2017)

346 employees (20% of the Group’s workforce) dedicated to the

design and development of the offer at December 31, 2018

Beginning of 2018, the Company has decided to broaden the

scope of R&D costs to encompass the increasingly diverse

teams involved in the design and development of the offer

R&D is not reported on the balance sheet: R&D spending is fully

expensed and included in the overhead costs for the fiscal year

30



EVOLUTION OF R&D INVESTMENT

10.0% 10.9%

= In % of revenues


1 After deducting the research tax credit, the corresponding portion of the competitiveness and employment tax credit applicable in France and grants accounted for in the period

+11%

In 2019, the Company intends to pursue its policy of substantial investments

in innovation to further extendits technological leadership and

its value proposition

Reinforced Investments in the Design and Development of the Offer

31



A digital platform in the cloud that simultaneously

manages data (products, fabric, orders), connected

cutting solutions and automatic operating rules based on

Artificial Intelligence

Lectra smart cutting solutions that connect to the

digital platform and carry out its instructions while

adapting them to the fabric thanks to hundreds of

embedded sensors

The Cutting Room 4.0

is comprised of two

distinct elements

After four years of intensive work and development by the marketing, R&D and Industrial teams, in April 2018, Lectra launched a new revolutionary offer : the

Cutting Room 4.0. Designed to satisfy Industry 4.0 needs, it enables businesses to progressively incorporate more automation and intelligence thanks to

exploitation of data, Artificial Intelligence, Internet of Things and cloud

The concept: Lectra Cutting Room 4.0

Embodying the Industrial Intelligence concept, this offer supports and

encourages Furniture manufacturers in their digital transformation by

integrating particularly innovative methods and technologies

In the production world, where orders are always different and where the

optimization of planning and resources is complex, even impossible,

Lectra’s new solution pushes the automation of each step (from ordering

to offloading) to the maximum

This offer was launched in Europe and in the US. It will be progressively

available globally in 2019

32



Lectra Launches its First Cutting Room 4.0 Dedicated to Made-to-Order

Production of Upholstered Furniture

More and more Fashion industry players are becoming interested in on demand

production, as the economic model provides numerous advantages:

o Outshine competitors and earn customer loyalty by offering one of a kind

products that make customers feel exclusive

o Avoid overstocking and markdowns, which are common in mass production

o Preserve cash, as the order is paid by the consumer before being produced

While on demand production presents an attractive economic model, those Fashion

companies wishing to adopt it can however be slowed down by internal obstacles,

such as too rigid production processes conceived for mass production, if they don’t

dispose of the necessary technology to overcome them

33



Lectra Makes History with ‘Fashion On Demand by Lectra’, Fashion’s

First End-to-End Personalization Offer (1/2)

CUSTOMIZATION OR MADE-TO-MEASURE, BOTH OFFER MULTIPLE ADVANTAGES

Fashion On Demand by Lectra makes history within the Fashion

market

With 45 years of experience working with distinguished

international distributors, manufacturers and brands, Lectra has

developed a fully integrated turnkey offer that enables these

businesses to define the product customization criteria and range

for each item depending on the package (such as altering product

characteristics for customization and pattern adjustments for

made to measure) and launch production processes right from the

get-go, without interfering with their standard workflows

This revolutionary offer is founded on Industry 4.0 principles to

automate the entire personalization process, from product

development to final cutting stages

The worldwide launch will take place progressively in 2019

34



Lectra Makes History with ‘Fashion On Demand by Lectra’, Fashion’s

First End-to-End Personalization Offer (2/2)

Virga plays an essential role in the launch of the Cutting Room 4.0 and Fashion On

Demand by Lectra

Skilled in processing data, Virga executes cut orders given automatically by the

digital platform and adapts them to the characteristics of the fabric, a first in the

industry

o Virga analyses the fabric in order to take into account fabric pattern pitch

and fabric faults for optimum single ply cut quality

o Virga transfers, in real time, data coming from its hundreds of embedded

sensors to Lectra’s digital platform, which analyses the data, creating three

advantages: constantly evaluate the state of the cutting solution, monitor the

cutting room’s performance indicators, and fine-tune algorithms that optimize

fabric

o Cutting is just as efficient for plain fabric as it is for patterned fabric

35



Virga, a New Smart and Connected Single-Ply Cutting Solution

36



Two cloud applications enrich Lectra’s current software offer and bring greater value to its users

Their launch represents the first of a series of cloud-based applications conceptualized for design, product development and production teams

QUICK ESTIMATE

Quick Estimate revs up product

development efficiency by calculating

fabric requirements instantly from

Modaris, Lectra’s 2D/3D

patternmaking and grading solution

QUICK NEST

Quick Nest provides easy access to

automatic marker making and

capitalizes on cloud technology to handle

heavy volumes of calculations in parallel,

maximizing productivity

and marker efficiency

By being able to trace data, management teams gain full visibility of fabric consumption needs, which account for as much as 70 percent of the production cost of a garment,

while operations teams can access consolidated data at any moment and integrate them into their approval and reporting process

New Cloud Applications to Enrich Existing Offer

37



Testimonials from the First Customers to Have Adopted These New Offers

Belles Roches Couture & Treize Roches Couture

France

Vilmers

Lithuania

La Redoute & Chantelle

France

38



Innovation Lab Opens its Doors

Lectra extends and reinforces its innovation process with the

opening of its Innovation Lab in October 2018 : this area for

collaborative thinking and design, based in Bordeaux-Cestas, is

dedicated to the creation of disruptive solutions

Suitable for the cross-fertilization of ideas, this space also fulfills

Lectra’s desire for open innovation : working groups bring together

customers, start-ups, research labs and internal talents to enrich

and stimulate Lectra’s product roadmap

39



Five Strategic Objectives for 2017-2019

1 Other than potential acquisitions whose scale might require additional financing

To accelerate revenue growth, both organic and

through targeted acquisitions1.

To accentuate Lectra’s technological leadership

and leverage new technologies to further enhance

the value of its products and services offer2.

To strengthen Lectra’s competitive position and

long-term relationships with customers3.

To progressively launch new software offers

in SaaS mode 4.

To maintain the Group’s profitability and

generate a high level of free cash flow in order to

self-finance internal and external development1

5.

Progress was made on all five strategic objectives, which will continue to guide

the Company’s actions in 2019

40



Many Opportunities to Accelerate Growth

China

Airbags

Digitalization of the

fashion and apparel

industry

Personalization of

consumer products

Leather INDUSTRIE 4.0

SaaS

China: as the country upgrades its manufacturing plant and expands

its domestic market, supported by the Chinese government’s strategic

‘Made in China 2025’ initiative1.

Leather: this is increasingly used in the automotive and furniture

industries. Almost all materials are still cut by hand, but cutting

processes need to be automated2.

Airbags: due to the growing number being fitted to each vehicle, and

to the potential to renew installed bases for older-generation

automated cutters3.

Personalization of consumer products: the entire value chain

needs to be fully automated and interconnected, requiring hefty

investments in cutting-edge technology4.

Digitalization of the fashion and apparel industry: which implies

adopting collaborative technologies to facilitate management of

collections and products5.Unlike the previous year, the degraded macroeconomic

and geopolitical environment in 2018 meant that not all the growth accelerators contributed to the Group’s

dynamic activity; but they are expected to drive revenue growth in 2019

The aim is to achieve a steadily rising dividend

per share

41



Use of Available Cash

Generating a high level of free cash flow and a structurally negative working capital requirement

Lectra’s

business

model

Pursuit of the dividend payment policy

Payout ratio of

around 40% of net

income1

Remaining 60% used to fund

Lectra’s growth

In the event of a major acquisition

a debt equivalent to half its

shareholders’ equity could be

envisaged

The Company has sufficient cash to finance future

targeted acquisitions

1 Excluding non-recurring items

In January 2018, the Company acquired Kubix Lab for €7.1 million

42



Lectra Strengthens its Executive Committee

In order to accelerate the execution of its strategy, the group has

decided to review the organization of its subsidiaries, refocus efforts

toward the success of its customers, and expand its Executive

Committee, which remains under the chairmanship of Daniel Harari,

Chairman and Chief Executive Officer

Lectra's subsidiaries are newly organized into four main regions.

The purpose is to better adapt the Lectra strategy to Lectra’s

different markets, accelerate business development and strengthen

synergies within each geographical area:

o Americas

o Asia-Pacific

o Northern & Eastern Europe, Middle East

o Southern Europe & North Africa

To be even closer to its customers’ needs and guarantee optimum

use of its solutions, Lectra has created a new Customer Success

organization

1 2 3 4 5 6 7

8 9 10 11

1. Daniel Harari, President & CEO; 2. Javier Garcia, President Asia-Pacific; 3. Véronique Zoccoletto, Chief Transformation Officer; 4. Holger Max-Lang, President Northern & Eastern Europe, Middle East; 5. Olivier du Chesnay, Chief Financial Officer; 6. Jérôme Viala, Executive Vice President; 7. Maximilien Abadie, Chief Strategy Officer; 8. Fabio Canali, Southern Europe & North Africa; 9. Céline Choussy, Chief Marketing & Communications Officer; 10. Edouard Macquin, PresidentAmericas; 11. Laurence Jacquot, Chief Customer Success Officer




Q4 2018 Results

FY 2018 Results


2019 Outlook

44

2019 Outlook


Internal and External Factors

The Company entered 2019 with a particularly robust balance sheet and operating fundamentals, a new organization of its subsidiaries,

and a strengthened Executive Committee

Lectra significantly enhanced its products and services offer in 2018, with new innovative solutions to empower its customers in implementing the principles of

Industry 4.0, which will be progressively rolled out worldwide in 2019

An uncertain geopolitical

environment

Still, the year ahead is fraught with

unpredictability in light of persisting

uncertainty regarding geopolitical factors and

the threat of protectionism, amid growing

fears of an economic slowdown

These considerations could continue to

weigh on businesses’ investment decisions

Impact of exchange rates

The Company has based its 2019

objectives on the exchange rates in effect

at year-end 2018, notably $1.15/€1

When converting 2018 results using the

exchange rates retained for 2019,

revenues are mechanically increased by

€1.6 million and income from operations by

€1.2 million, relative to the published

results

Growing impact of sales of

certain software

in SaaS mode

The change in sales model will have a

positive impact on the Company’s

revenues and income from operations in

the medium term

However, it has a negative impact on the

Company’s stated objectives for 2019,

which are 1 to 2 percentage points lower

for revenue growth, and 9 to 12 percentage

points lower for income from operations1

1 Than the comparable figures if all software were sold as perpetual licenses along with their associated maintenance contracts

45

2019 Outlook


Financial Objectives

Growth in revenues

+3% +7%1

Change like-for-like

Growth in income

from operations before

non-recurring items

-4% +4%2

Growth in revenues

+5% +8%1

Growth in income

from operations before

non-recurring items

+5% +16%2

Without the impact of growing sales of software

on a subscription basis

With the exchange rates retained for 2019, the growth in

revenues and in income from operations before non-

recurring items, at actual exchange rates, would be 0.6 and

3 points higher, respectively, than the like-for-like figures


Upcoming Financial Calendar

April 30, 2019

ANNUAL SHAREHOLDERS’ MEETING QUARTERLY FINANCIAL RESULTS ANALYST CONFERENCE

April 29, 2019

Q1

July 29, 2019

Q2

October 30, 2019

Q3

February 11, 2020

Q4

October 31, 2019

financial results q4 & fy 2018...3 vision and main 2018 highlights lectra - financial results q4...

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