First Quarter Financial and Business Highlights
- Revenue and earnings results exceed Company objectives
- Total revenue €199.2 million, up 13% as reported, up 15% in constant currencies (up 19% in U.S. dollars)
- Software revenue €167.2 million, up 12% as reported and up 15% in constant currencies
- SolidWorks revenue increases 22% as reported (up 28% in U.S. dollars)
- Process-centric revenue up 11% as reported and 13% in constant currencies
- PDM revenue up 15% as reported and up 17% in constant currencies Operating margin at high end of Company objective
- EPS €0.27 as reported and excluding acquisition costs
- Raising full year revenue growth objective to 12-14%, from 11-12% in constant currencies
PARIS, FRANCE, April 26, 2005 – Dassault Systèmes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA), a worldwide leading software developer of 3D and Product Lifecycle Management (PLM) solutions, reported financial results for the first quarter ended March 31, 2005.
First Quarter Financial and Business Highlights
· Revenue and earnings results exceed Company objectives
· Total revenue €199.2 million, up 13% as reported, up 15% in constant currencies (up 19% in U.S. dollars)
· Software revenue €167.2 million, up 12% as reported and up 15% in constant currencies
· SolidWorks revenue increases 22% as reported (up 28% in U.S. dollars)
· Process-centric revenue up 11% as reported and 13% in constant currencies
· PDM revenue up 15% as reported and up 17% in constant currencies
· Operating margin at high end of Company objective
· EPS €0.27 as reported and excluding acquisition costs
· Raising full year revenue growth objective to 12-14%, from 11-12% in constant currencies
Bernard Charles, President and Chief Executive Officer, commented, “Strong customer demand for our V5 PLM and mainstream 3D software solutions and services enabled us to deliver excellent year-over-year growth of 19% in U.S. dollars for the first quarter. We benefited from very good performance around the world – led by the Americas, and well supported by good growth in Europe and Asia. We are gaining traction across all of our PLM brands as a result of the visibility of customers’ successes with our integrated V5 PLM solutions. In the mainstream 3D market, SolidWorks had an excellent start to the year, with revenue growth of 28% in U.S. dollars.
“As we look ahead to the full year, we are raising our revenue growth objective, reflecting our first quarter performance and more favorable outlook for the rest of the year. In summary, in spite of the mixed economic environment, we believe Dassault Systèmes is well-positioned to significantly outpace the growth of our market sector in 2005.”
First Quarter Financial Results
In the 2005 first quarter total revenue was €199.2 million, representing an increase of 13% as reported and 15% in constant currencies in comparison to the first quarter of 2004 where total revenue was €176.2 million. From a geographic perspective, all regions contributed to the growth with the Americas increasing 18% in constant currencies, followed by Europe and Asia with revenue growth of 15% and 14% in constant currencies, respectively.
Software and service revenues both posted double-digit, year-over-year growth, reflecting increasing demand for the Company’s V5 PLM and mainstream 3D offerings. Software revenue increased 12% as reported and 15% in constant currencies in the first quarter of 2005 and totaled €167.2 million, compared to €148.9 million in the first quarter of 2004. Recurring licenses revenue represented 53% of total software revenue in the first quarter. Service and other revenue totaled €32.0 million in the first quarter of 2005, compared to €27.3 million in the first quarter of 2004 with revenue growing 17% as reported and 20% in constant currencies. New CATIA and SolidWorks seats licensed in the first quarter of 2005 increased 14% to 16,122 seats, compared to 14,082 seats in the year-ago period.
Process-centric revenue increased 11% as reported and 13% in constant currencies compared to the year-ago quarter on growth across design, PDM and digital manufacturing. Process-centric revenue, including PDM revenue, totaled €159.3 million in the first quarter of 2005, compared to €143.6 million in the first quarter of 2004. PDM revenues increased 15% as reported and 17% in constant currencies and totaled €22.8 million in the first quarter, compared to €19.9 million in the year-ago period. CATIA licenses increased 5% year over year to 7,513 in the first quarter of 2005.
SolidWorks revenue increased 22% (28% in U.S. dollars) to €39.9 million in the recently completed quarter, compared to €32.6 million in the first quarter of 2004. SolidWorks seats licensed increased 25% year over year to 8,609 licenses accompanied by stable pricing.
Operating Income and Margin and EPS
For the first quarter of 2005 operating income increased year over year, and as anticipated the operating margin decreased, reflecting the timing of investments in expanding the Company’s marketing and sales activities with small and medium-sized businesses (SMB). In addition, due to the more robust level of activity in the first quarter the Company accelerated some marketing and sales initiatives. For the full year 2005, the Company expects to maintain a stable operating margin excluding acquisition costs in comparison to 2004.
Operating income increased 5% to €45.1 million in the first quarter of 2005, (22.6% operating margin) compared to €42.9 million in the year-ago quarter (24.3% operating margin). Operating income excluding acquisition costs increased 4% to €45.4 million in the first quarter of 2005, compared to €43.5 million in the year-ago period. In the first quarter of 2005 the operating margin excluding acquisition costs was 22.8%, in line with the Company’s objective of 22-23%. In the year-ago quarter the operating margin excluding acquisition costs was 24.7%.
In the first quarter of 2005 earnings per share increased 13% to €0.27, compared to earnings per share of €0.24 in the year-ago quarter. Earnings per share excluding acquisition costs increased 8% to €0.27 per diluted share in the first quarter of 2005, compared to earnings per diluted share excluding acquisition costs of €0.25 in the year-ago period.
Annual Shareholders’ Meeting Date and Cash Dividend Recommendation
The Annual Shareholders’ Meeting has been scheduled for June 8, 2005. The Board of Directors has recommended an increase of 12% in the annual cash dividend to €0.38 per share (excluding avoir fiscal) for the fiscal year ended December 31, 2004, representing approximately €43 million in the aggregate. The declaration and payment of any cash dividend is subject to approval by shareholders at the Annual Shareholders’ Meeting.
Strategy, Technology and Partnerships
HONDA Motor, leading Japanese car manufacturer and CATIA V4 customer, has started to develop car programs, including suppliers, using CATIA V5.
In mid-April, Dassault Systèmes and Microsoft Corp. announced that, as part of their strategic alliance and commitment to jointly delivering value to their customers, they will collaborate to support Microsoft’s Extensible Application Markup Language (XAML) format in Dassault Systèmes’ 3D Extensible Markup Language (XML) format. Compatibility between 3D XML and XAML will enable users of 3D solutions to view, modify and customize 3D objects in an environment of unmatched openness and take advantage of this 3D experience in any XAML-based application.
Earlier this month Dassault Systèmes announced the availability of its new DELMIA Automation product line, which enables control engineers in all automation industries to digitally define, control and monitor automated systems entirely in a 3D virtual environment. Based upon a unique Logic Control Modeler technology, DELMIA Automation provides a digital model of control logic for an automated system independent of PLC hardware.
Dassault Systèmes and CAXA, the leading domestic PLM vendor in China, announced on April 5th, the availability of CAXA V5, a new generation of integrated and scalable 2D and 3D PLM solutions for the Chinese market that embed V5 technology components from Dassault Systèmes. These CAXA V5 solutions are the result of a Dassault Systèmes-CAXA partnership announced last November and software development carried out in a joint R&D center operated by CAXA in Beijing. The short time-frame to develop these solutions demonstrates the ease with which developers can build solutions on Dassault Systèmes’ Component Application Architecture Version 5 (CAA V5) platform.
In March, Dassault Systèmes and ICEM Ltd. signed a strategic software development agreement under which ICEM will develop and sell the next generation of its surface design and analysis and design visualization software suite for Class-A surface development based on Dassault Systèmes’ Version 5 Architecture and Components. ICEM becomes a Gold Software Partner in Dassault Systèmes’ CAA V5 software partner program. ICEM will provide a PLM solution component that will tightly connect the styling and engineering departments, further endorsing the new 3D XML open format from Dassault Systèmes.
Dassault Systèmes and ZUKEN, a leading producer of design and manufacturing solutions for electronics companies, entered into an agreement in March pursuant to which they will deliver comprehensive PLM solutions for the Electrical and Electronics industry.
Thibault de Tersant, Executive Vice President and CFO, stated, “Based upon first quarter results and the stronger outlook for the remainder of 2005 we are increasing our revenue and EPS objectives for 2005 and are maintaining our objective of a stable operating margin excluding acquisition costs for the full year 2005 in comparison to 2004. Specifically, we are increasing our revenue growth objective by about two percentage points to approximately 12-14% in constant currencies. In conjunction with this, we are raising our reported revenue objective to approximately €880-890 million for 2005, from €865-875 million. We are also increasing our EPS objective for 2005 to about €1.47-1.49 per share excluding acquisition costs, representing year-over-year growth of 8-10%. For the second quarter of 2005, our reported revenue objective is about €208-212 million and our EPS objective is about €0.30-0.31 per share excluding acquisition costs.” The Company is basing all reported revenue and EPS objectives on the assumption of a U.S. dollar to Euro exchange rate of $1.30 per €1.00.
Due to the six-month delay of the effective date of SFAS 123 (R), Share-Based Payments, the Company has decided to adopt SFAS 123 (R) as of January 1, 2006.
1. All comparative figures are given on a year-over-year basis unless specified otherwise.
2. All financial information is unaudited and reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Additional financial information is also presented that is not in conformity with U.S. GAAP, in particular the presentation of operating income, operating margin and earnings per share excluding acquisition costs (acquisition costs are primarily comprised of technology amortization in addition to other acquisition-related costs). The Company has provided in the tables to this press release and on its website www.3ds.com/corporate/investors/ reconciliations between U.S. GAAP and non-U.S. GAAP figures.
3. The Company uses constant currency revenue growth to evaluate its financial performance in comparison to prior periods and as a measure of expected growth in planning and setting objectives for future periods. The Company believes this measure is an important indicator of the Company’s progress and outlook because it provides a better gauge of the level of change in the business activity as it eliminates any changes arising from currency fluctuations. The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view revenue growth in a manner similar to the method used by the Company’s management, helps improve investors’ ability to understand the Company’s revenue growth, and makes it easier to compare the Company’s results with other companies, including competitors, whose reporting currency may be different from Dassault Systèmes. Constant currency revenue growth, as calculated by the Company, may not be comparable to similarly titled measures employed by other companies.
Conference call information
Dassault Systèmes will host a teleconference call today, Tuesday, April 26, 2005 at 4:00 PM CET/3:00 PM London/10:00 AM New York. The conference call will be available via the Internet by accessing www.3ds.com/corporate/investors/. 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 www.3ds.com/corporate/investors/. Additional investor information can be accessed at www.3ds.com/corporate/investors/ or by calling Dassault Systèmes’ Investor Relations at 18.104.22.168.69.24.
Statements above that are not historical facts but express expectations or objectives for the future, including but not limited to statements regarding the Company’s objectives for 2005 revenue growth in constant currencies, 2005 reported revenue range, 2005 operating margin objective excluding acquisition costs, 2005 EPS objective excluding acquisition costs, second quarter 2005 reported revenue range and second quarter EPS objective excluding acquisition costs, 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, (ii) reduced corporate spending on IT infrastructure 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, and (v) errors or defects in our products. 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, 2003, which was filed with the SEC on June 30, 2004, could materially affect the Company's financial position or results of operations.