Oct 23 1998

DASSAULT SYSTEMES ANNOUNCES 34% INCREASE IN 1998 THIRD QUARTER TOTAL REVENUE

Dassault Systemes S.A. (Nasdaq: DASTY; Bourse de Paris), a worldwide leading software developer of CAD/CAM/CAE/PDM (computer aided design/manufacturing/engineering/product data management) products, today announced financial results for the third quarter and nine months ended September 30, 1998.



As previously announced, Dassault Systemes completed the acquisition of Deneb on December 30, 1997 and IBM's ProductManager on April 1, 1998. 1997 pro forma results include those of SolidWorks as the acquisition was accounted for as a pooling-of-interests. Third quarter and nine months pooled pro forma 1997 financial results are presented for comparison purposes only and include the impact of ongoing operations of Deneb as if the acquisition had occurred on January 1, 1997. All references in the press release to 1997 figures are pro forma, unless stated otherwise. In addition, in connection with the acquisition of ProductManager, 1998 nine months financial results include an estimated pretax write-off of FF 94.2 million ($15.8 million) of in process R&D. All financial figures in this press release are before this write-off, unless otherwise noted.

For the 1998 third quarter total revenue increased 34% to FF 700.8 million, compared to third quarter 1997 total revenue of FF 524.9 million. Software revenue increased 30% to FF 603.1 million, up from FF 464.8 million in the year-ago period.

Charles Edelstenne, Dassault Systemes’ Chairman and Chief Executive Officer, stated, "Dassault Systemes continues to advance its position at the forefront of innovations. The Company’s significant investments in research and development have resulted in the recent introductions of new CATIA and SolidWorks product releases and the continuing extension of our product line around Enovia and Deneb. From a financial standpoint, the Company’s track record of strong performance continued this quarter, with total revenue rising 34%. Europe, which accounts for approximately half of our revenues, posted a 68% increase in revenue for the quarter and a 44% increase for the first nine months of 1998."

Recurring software revenue represented 48% of total software revenue in the quarter. New CATIA-CADAM workstation seats shipped in the quarter totaled 6,568 and new SolidWorks seats shipped totaled 3,610. Service and other revenue totaled FF 97.7 million and represented 14% of total revenue.

"Dassault Systemes has reached a new milestone with the introduction of the new Version 5 architecture," said Bernard Charlès, President of Dassault Systemes. "Version 5 architecture redefines application integration, ease of use, scalability and accelerates the implementation of the digital enterprise around the e-business. As a first step, our next-generation CAD/CAM/CAE solution, CATIA Version 5 became available on October 12. It is completely Windows native, can operate on both UNIX and NT platforms and is compatible with CATIA Version 4. CATIA Version 5 offers significant new advantages to users at all levels of experience thanks to its intuitive user interface. We are quite excited by the overwhelmingly positive response the initial release of Version 5 has received."

Mr. Charlès continued, "We also were pleased during the quarter to strengthen many of our key customer relationships. In July, we announced that Daimler Benz and Dassault had formed a strategic cooperation partnership to optimize the end-to-end automotive process. Later that month, we announced that Wilhelm Karmann, the automotive system supplier, will purchase 900 seats of ENOVIAPM and that Porsche, which has used CATIA Solutions as its core design software since 1990, is implementing full CATIA 3D solid modeling for its next-generation engines. And in September, Dassault signed a strategic partnership agreement with Michelin, for which we will complete installation of several hundred CATIA Version 5 stations throughout the world.

"It was an excellent quarter for SolidWorks, as well. SolidWorks 98Plus, which was introduced in September, offers improved user interface and many enhanced capabilities that are not available in any other Windows-based solid modeling solution. We are proud to announce that SolidWorks was honored at the Computer Technology Solutions Conference in September as the best overall solid modeling solution," Mr. Charlès added.

Operating income increased 23% to FF 258.2 million in the recent quarter, compared to FF 209.2 million in the 1997 period. Net income in the 1998 quarter rose 15% to FF 150.1 million, reflecting an effective tax rate of 44.1%, compared to third quarter 1997 net income of FF 130.5 million on an effective tax rate of 38.1%. The Company noted that the effective tax rate in the 1998 third quarter, in part reflected the increase in the French statutory tax rate and the Deneb goodwill amortization which is not tax deductible. On a per share basis, 1998 third quarter net income increased 12% to FF 1.32 per diluted share, compared to FF 1.18 per diluted share in the 1997 three-month period.

Dassault Systemes’ Executive Vice President, Thibault de Tersant, commented, "As a result of our technological advances and strategic acquisitions, the Company has increased the number of market segments it addresses in addition to expanding its potential customer base within the markets the Company serves. In essence, the total available market (TAM) is growing as a direct consequence of technological innovation. Also, improved investment spending in Europe translated into a quite remarkable sales performance in this region which helped balance the impacts of the crisis in Asia and some weakening of the US economic environment."

For the nine months ended September 30, 1998, total revenue increased 31% to FF 1,889.3 million, compared to FF 1,447.4 million in the 1997 nine-month period. Net income increased 30% to FF 403.3 million, compared to FF 310.0 million in the year-ago period. Net income per share totaled FF 3.54 per diluted share in the 1998 nine-month period, representing an increase of 23% over net income per diluted share of FF 2.89 in the corresponding 1997 period. New CATIA-CADAM workstation seats shipped in the 1998 nine-month period totaled 17,362 and new SolidWorks seats shipped totaled 10,250.