Fourth Quarter and Full Year Highlights
Paris, France, February 9, 2006 ─ Dassault Systèmes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA), a world leader in 3D and Product Lifecycle Management (PLM) solutions, reported financial results for both the fourth quarter and full year ended December 31, 2005.
Fourth Quarter and Full Year Highlights
Bernard Charlès, Dassault Systèmes’ President and Chief Executive Officer, commented, “Dassault Systèmes had a great finish to a very successful year. During 2005 revenues increased 18% and earnings rose 17%. These achievements reflect the powerful combination of significant V5 PLM implementations, the competitive advantages of our brands and the strong performance of our alliance with IBM, our partners and our investments.
“Our largest brand CATIA, for design excellence, had a good year. Our PDM solutions, with ENOVIA for collaborative lifecycle management and SMARTEAM for TeamPDM, delivered 20% revenue growth and added more than 1,000 new customers. DELMIA, for production performance, had strong revenue growth as it also broadened its customer base. And our newest brand, SIMULIA, for virtual simulation, had a remarkable start. SolidWorks, addressing the Mainstream 3D market, continued to demonstrate the strength of its offerings, delivering 25% revenue growth. The SolidWorks community continued its expansion, approaching the half million users’ milestone at the end of 2005.
“2005 was a year where we significantly expanded our addressable markets through technological innovation and complementary acquisitions. We acquired ABAQUS as the core of our realistic simulation offerings. In “3D for All” we are seeing traction from the Virtools acquisition and from our 3D XML technology. Moreover, we were pleased to receive AMR Research’s innovation award for our “3D for All” strategy and product roll-outs.
“At the heart of our vision is our belief in the power, enormous potential and pervasive applicability of 3D technology to enhance communication, businesses and the environment at large.”
Dassault Systèmes completed the acquisition of ABAQUS, Inc. in October, 2005 and has accounted for the acquisition pursuant to U.S. GAAP (hereinafter GAAP) purchase accounting rules. Certain supplementary information is provided in this press release which are not in conformity with GAAP, including: (i) Non-GAAP total revenue, Non-GAAP software revenue and Non-GAAP PLM (process-centric) revenue, which differ from such GAAP figures due to the exclusion of €9.1 million of deferred revenue write-downs for the fourth quarter and full year; and (ii) Non-GAAP operating income, Non-GAAP operating margin and Non-GAAP EPS, which exclude acquisition costs totaling €8.7 million for the fourth quarter and €9.8 million for the full year and the impacts of the deferred revenue write-downs of €9.1 million for both the fourth quarter and full year. See tables for a reconciliation of 2005 and 2004 fourth quarter and full year GAAP and non-GAAP financial data.
Fourth Quarter Financial Results
Fourth Quarter Highlights
Non-GAAP supplementary information excluding deferred revenue write-down and acquisition costs:
GAAP total revenue increased 27% to €304.2 million in the 2005 fourth quarter, compared to €239.9 million in the year-ago quarter. Non-GAAP total revenue was €313.3 million, representing increases of 31% and 27% in constant currencies compared to the year-ago period. Strong growth in both software and services revenues drove the year-over-year increase in Non-GAAP total revenue. In addition, fourth quarter 2005 financial results included ABAQUS, which the Company acquired in early October, 2005. For the 2005 fourth quarter, ABAQUS’ revenue contribution totaled €22 million before the impact of deferred revenue write-downs required under GAAP purchase accounting treatment. Software and service revenue represented 83% and 17% of non-GAAP total revenue in the fourth quarter of 2005.
In the 2005 fourth quarter, Non-GAAP software revenue increased 27% to €261.3 million and increased 24% in constant currencies on strong growth across all the Company’s software applications and the inclusion of ABAQUS. In the year-ago quarter software revenue was €206.4 million. New CATIA and SolidWorks seats licensed in the 2005 fourth quarter increased 14% to 22,484 seats, compared to 19,726 seats in the year-ago quarter.
Non-GAAP PLM (Process-centric) revenue increased 32% and 28% in constant currencies in the fourth quarter of 2005 reflecting strong software growth across design, digital manufacturing and PDM applications and the inclusion of ABAQUS. Non-GAAP PLM revenue totaled €261.4 million in the 2005 fourth quarter, compared to €198.6 million in the year-ago fourth quarter. PDM revenue, on a stand-alone basis, increased 32% as reported to €47.1 million and increased 29% in constant currencies in the 2005 fourth quarter, compared to €35.6 million in the year-ago period. PDM software end-user revenue increased 22% in the 2005 fourth quarter, compared to the year-ago fourth quarter. For the 2005 fourth quarter, CATIA licenses increased 6% year over year to 11,416.
In the Mainstream market, SolidWorks revenue increased 26% as reported and 23% in constant currencies to €51.9 million in the 2005 fourth quarter, compared to €41.3 million in the year-ago period. SolidWorks seats licensed increased 24% to 11,068 licenses.
As anticipated, service and other revenue increased significantly in the fourth quarter. Specifically, service and other revenue increased 55% as reported to €52.0 million and increased 52% in constant currencies, compared to €33.5 million in the fourth quarter of 2004.
In the 2005 fourth quarter, Europe represented 52% of non-GAAP total revenue, with the Americas representing 27% and Asia accounting for 21%. From a regional perspective, growth was strongest in Europe with Non-GAAP total revenue increasing 35%, reflecting strong software results for the Company’s PLM and Mainstream businesses as well as a sharp increase in services revenue as noted above. In the Americas, Non-GAAP total revenue increased 25% and 15% in constant currencies. And in Asia, Non-GAAP total revenue increased 28% and 27% in constant currencies. All regions benefited from the inclusion of ABAQUS in the Company’s 2005 fourth quarter results.
The fourth quarter was an active period of new contracts across all software applications, end markets and regionally.
Operating Income and Margin and EPS
GAAP earnings per diluted share increased 14% to €0.58 in the 2005 fourth quarter, compared to earnings per diluted share of €0.51 in the year-ago quarter. GAAP operating income increased 14% to €100.7 million (33.1% operating margin), compared to €88.3 million in the year-ago period (36.8% operating margin).
Non-GAAP earnings per diluted share increased 29% to €0.67 in the fourth quarter of 2005, compared to €0.52 in the year-ago period. Non-GAAP operating income increased 34% to €118.5 million in the 2005 fourth quarter, up from €88.4 million in the year-ago quarter. The Non-GAAP operating margin improved to 37.8% in the 2005 fourth quarter, compared to 36.8% in the year-ago period.
Full Year Financial Results
Full Year 2005 Highlights
Non-GAAP supplementary information excluding deferred revenue write-down and acquisition costs:
GAAP total revenue increased 17% to €934.5 million in 2005. Non-GAAP total revenue increased 18% and 19% in constant currencies on strong growth in both software and services. Specifically, Non-GAAP total revenue was €943.6 million in 2005, up from €796.6 million in 2004. In 2005 Non-GAAP software revenue increased 18% to €792.7 million, from €670.9 million in 2004 and increased 19% in constant currencies. Service and other revenue increased 20% to €150.9 million in 2005 compared to €125.7 million in 2004 and increased 21% in constant currencies. Services gross margin improved to 23.6% in 2005, compared to19.6% in 2004. Non-GAAP software revenue represented 84% of Non-GAAP total revenue with service and other revenue accounting for 16%. Recurring licenses revenue continued to represent a large component of Non-GAAP software revenue, representing 50% of Non-GAAP software revenue in 2005. Total CATIA and SolidWorks seats licensed in 2005 were 72,078, representing an increase of 15% above 2004 where seats licensed totaled 62,577. Seat pricing trends for the full year 2005 remained stable in comparison to 2004.
DS benefited from strong growth across its PLM software applications in 2005 as well as the inclusion of ABAQUS for one quarter. Non-GAAP PLM (Process-centric) revenue totaled €761.8 million in 2005, increasing 17% and 18% in constant currencies in comparison to 2004 where PLM (process-centric) revenue totaled €650.7 million. The recent acquisition of ABAQUS accounted for approximately 3 percentage points of growth in revenue for 2005 before the deferred revenue write-down. In 2005 PDM revenue on a stand-alone basis totaled €121.9 million, increasing 20% as reported and in constant currencies. CATIA licenses increased 6% to 34,798 in 2005, compared to 32,695 in 2004.
In 2005, SolidWorks revenue increased 25% as reported and in constant currencies to €181.8 million and increased 25% in U.S. dollars, the reporting currency of its peer group. SolidWorks seats licensed increased 25% to 37,280 seats in 2005 on strong demand across all major geographic markets. SolidWorks accounted for 19% of Non-GAAP total revenue in 2005.
From a regional perspective, the Americas delivered the strongest growth in 2005, increasing 24% in constant currencies, with Europe growing 19% and Asia posting an increase of 13% in constant currencies. As a percentage of Non-GAAP total revenue, Europe accounted for 47%, followed by the Americas at 30% and Asia at 23%.
Operating Income and Margin, EPS and Financial Position
Thibault de Tersant, Dassault Systèmes’ Executive Vice President and CFO, commented, “We have been able to maintain a relatively stable level of operating margin performance in 2005 compared to 2004. This achievement reflects the positive underlying trends and improvements in our businesses, which have enabled us to absorb more than one point of dilution from our recent acquisitions as well as currency impacts.”
GAAP earnings per diluted share increased 10% to €1.49 in 2005, compared to earnings per diluted share of €1.35 in 2004. GAAP operating income increased 9% to €251.0 million (26.9% operating margin) in 2005, compared to €229.8 million in 2004 (28.8% operating margin).
Non-GAAP earnings per diluted share increased 17% to €1.59 in 2005, compared to €1.36 in 2004. Non-GAAP Operating income increased 17% to €269.9 million in 2005, up from €231.2 million in 2004. The Non-GAAP operating margin was 28.6% in 2005, compared to 29.0% in 2004.
Dassault Systèmes had a strong financial position with cash and short-term investments totaling €379.9 million at December 31, 2005. In addition, net cash provided by operations was €196.7 million for 2005. During 2005, the Company paid cash dividends aggregating €43.1 million and completed acquisitions, net of cash acquired, totaling €329.4 million which were funded from cash and short-term investments.
The Company has adopted SFAS 123(R), Share-Based Payments, as of January 1, 2006. For share-based compensations granted by December 31, 2005 and not vested as of that date, the Company estimates share-based compensation expenses of about €9.2 million for the full year 2006. This amount does not include new grants that could occur in 2006.
Strategy, Technology and Partnerships
DS PLM solutions are driving a multi-national collaborative global design and manufacturing project.
In a separate press release also issued today, DS announces that the complex SEVAN Stabilized Platform (SSP) 300 global project, including China-based Yantai Raffles Shipyard, Norwegian offshore technology company Sevan Marine and Brazil’s state-run oil company, Petrobras, are utilizing CATIA, ENOVIA and DELMIA solutions for this next generation, oil platform project.
Customers can reap the benefit of customized solutions without the costs with DS’ new Business Process Content Industry Solutions. Recently, DS rolled out an exciting new concept in the world of PLM, which will make key business processes from DS Industry Solutions available to customers of all sizes. The new products, known as Business Process Content (BPC), are flexible software assets, enabling customers to implement and adapt Industry Solutions to meet their specific needs, without the cost of tailor-made software. DS’ state-of-the-art Industry Solutions are based on industry-specific PLM Practices, covering innovative and well-proven industry scenarios in the form of methodology and documentation. BPCs are easily implemented and allow customers to adapt their solution, leading to increased productivity, profitability, and rapid return on investment. DS develops BPCs by identifying customers’ specific needs and the associated industrial processes.
Fostering innovation and helping to accelerate decision-making by opening 3D collaboration to the extended enterprise. Following the successful integration of 3DXML, DS’ universal lightweight format for 3D, with IBM Lotus Notes and Domino®, announced in the third quarter of 2005, IBM and DS have integrated 3D XML inside IBM Workplace portfolio of software products and solutions, making 3D accessible to all users, beyond the engineering departments, and becoming the vehicle for better collaboration and decision-making. Workers can now share product information on all office desktops through their familiar Lotus Notes and IBM Workplace messaging e-mail interfaces. With the integrated 3DXML Player, all users benefit from an intuitive and real 3D experience and collaborate around 3D products.
Leading industry analyst firm AMR Research awards DS for its visionary “3D For All” strategy.
DS has received the Innovation Award from AMR Research for its thought leadership and vision of 3D as a democratizing force in industry and society. The company’s “3D For All” initiative, including its acquisition of pioneering 3D behavior company Virtools, as well as its development and roll-out of the Cosmic Blobs 3D design software for children, were cited by AMR Research as illustrative of how Dassault Systèmes is working to take 3D beyond the confines of the engineering domain.
Lockheed Martin moves ahead with DS PLM Solutions for the F-35 Joint Strike Fighter Program. Chosen as the prime contractor for this strategic project, Lockheed Martin has set aggressive goals and made the decision to migrate as soon as possible from CATIA V4 to CATIA V5 for product development and DELMIA for manufacturing simulation, both PLM solutions developed by DS. This will enable its teams to benefit from long-term cost savings and efficiencies at the enterprise level, including in the maintenance phase.
V5R16, DS’ latest release for PLM, empowers Innovation Networks. V5R16 helps customers create more innovative products and leverage the talents of their global supply chains. V5R16 delivers powerful new collaboration capabilities within ENOVIA V5 VPM Navigator and SMARTEAM TeamPDM, enabling extended networks of partners to work together in globally distributed 3D environments. Entire engineering packages can now be shared and managed bi-directionally while protecting intellectual property, enabling true concurrent engineering across the value chain. More broadly, V5R16 increases the power of the V5 PLM platform in three ways: by delivering unified PLM solutions for unrivalled gains in productivity; by extending the reach of 3D XML within the enterprise for ease of communication; and by accelerating performance with Microsoft Windows 64-bit support.
SolidWorks World Sets Record Attendance with over 3,500 participants. SolidWorks held its annual international user and exposition conference, SolidWorks World 2006, in January 2006. The conference set a record for participation with over 3,500 participants.
Thibault de Tersant, Executive Vice President and CFO, stated, “After a very good 2005 performance, we have carefully reviewed our objectives for 2006, which we provided at the time of our third quarter earnings announcement. We are pleased to reconfirm our objectives for 2006 revenue, operating margin and EPS.”
Conference call information
Dassault Systèmes will host a teleconference call today, Thursday, February 9, 2006 at 3:00 PM CET/2:00 PM London/9:00 AM New York. The conference call will be available via the Internet by accessing https://www.3ds.com/about-3ds/.Please go to the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. The webcast teleconference will be archived for 30 days. Financial information to be discussed in the call will be available on the Company’s website prior to commencement of the teleconference at https://www.3ds.com/about-3ds/. Additional investor information can be accessed at https://www.3ds.com/about-3ds/ or by calling Dassault Systèmes’ Investor Relations at 184.108.40.206.69.24.
Statements above that are not historical facts but express expectations or objectives for the future, including but not limited to statements regarding our: a) 2006 revenue growth objective in constant currencies, calculation of a 2006 revenue range, 2006 operating margin outlook and 2006 EPS growth objective, all such figures before deferred revenue write-down and excluding acquisition costs and share-based payments as applicable ; b) first quarter 2006 revenue objective range and first quarter EPS, both figures before deferred revenue write-down and excluding acquisition costs and share-based payments, as applicable; and c) ABAQUS estimated contribution to our 2006 revenue growth objective before deferred revenue write-down and ABAQUS estimated deferred revenue write-down for the full year 2006 are forward-looking statements (within the meaning of Section 21E of the 1934 Securities Exchange Act, as amended). Such forward-looking statements are based on management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results or performances may differ materially from those in such statements due to, among other factors: (i) currency fluctuations, particularly the value of the U.S. dollar or Japanese yen with respect to the euro; (ii) reduced corporate spending on information technology as a result of changing economic or business conditions that could negatively affect market demand for our products and services; (iii) difficulties or adverse changes affecting our partners or our relationships with our partners, including our longstanding, strategic partner, IBM; (iv) new product developments and technological changes; (v) errors or defects in our products; (vi) growth in market share by our competitors; and (vii) the realization of any risks related to the integration of ABAQUS or any newly acquired company and internal reorganizations. Unfavorable changes in any of the above or other factors described in the Company’s SEC reports, including the Form 20-F for the year ended December 31, 2004, which was filed with the SEC on June 28, 2005, could materially affect the Company's financial position or results of operations.
Dassault Systèmes, the 3DEXPERIENCE Company, is a catalyst for human progress. We provide business and people with collaborative virtual environments to imagine sustainable innovations. By creating 'virtual twin experiences’ of the real world with our 3DEXPERIENCE platform and applications, our customers push the boundaries of innovation, learning and production.
Dassault Systèmes’ 20,000 employees are bringing value to more than 290,000 customers of all sizes, in all industries, in more than 140 countries. For more information, visit https://www.3ds.com