CIMdata PLM Industry Summary Online Archive
9 February 2005
Financial News
Dassault Systèmes Extends Market Leadership and Delivers Strong 2004 Revenue and EPS Growth
Dassault Systèmes (DS) reported financial results for the fourth quarter and year ended December 31, 2004.
Financial and Business Highlights
Fourth Quarter
• Fourth quarter in line with DS financial objectives
• Total revenue EUR 239.9 million, up 5% as reported and up 9% in constant currencies
• Operating expenses up 10% from targeted investments in SMB channels and R&D
• EPS EUR 0.51 as reported and EUR 0.52 excluding acquisition costs
• SolidWorks revenue increases 23% (up 33% in U.S. dollars) with new licenses up 26%
Full Year 2004
• Full year in line with DS financial objectives
• Total revenue EUR 796.6 million, up 6% as reported and up 9% in constant currencies
• Software revenue EUR 670.9 million, up 4% as reported and up 8% in constant currencies
• Process-centric up 3% as reported and 7% in constant currencies
• SolidWorks' revenue up 16% as reported (up 28% in U.S. dollars)
• PDM revenue reaches EUR 100 million milestone, with revenue up 8% as reported and up 11% in constant currencies
• Operating margin 28.8% increasing from 28.2% in 2003 on U.S. GAAP basis
• Operating margin excluding acquisition costs on target and stable at 29.0%
• EPS EUR 1.35 (up 14%) on U.S. GAAP basis
• EPS up 11% to EUR 1.36 excluding acquisition costs
Bernard Charles, President and Chief Executive Officer, commented, "Dassault Systèmes met all its financial objectives for the full year 2004. We extended our market leadership in 2004, delivering strong revenue growth of 16% in U.S. dollars. All geographic regions contributed to the growth, led by excellent results in the Americas. Our successes in both 3D and PLM during 2004 demonstrated the widespread interest in our solutions across a broad range of industries and companies of all sizes.
"Our PDM business reached the EUR 100 million milestone, with another year of solid performance building upon its consistent track record of growth over the prior three years. In digital manufacturing, our DELMIA solutions made good progress with broader adoption by OEMs and their suppliers.
"SolidWorks produced excellent results, achieving record revenues and record new licenses in 2004. It continues to win over many former 2D users with software solutions delivering significant power, ease of use and quick return on investment. Based upon its revenue performance in 2004, we are pleased that, once again, SolidWorks maintains its market leadership position in the entry 3D market.
"In summary, 2004 was a year of strong performance as well as a period in which we made significant investments for our growth in the years to come. The Company is well positioned to deliver new, breakthrough technologies in PLM based upon our strategic focus on Research and Development. These investments are enabling our end-to-end PLM software solutions to provide value to our customers in innovation and productivity, and are driving our penetration of key vertical industries and entry into new business lines as we are doing in Automation," Mr. Charles concluded.
Fourth Quarter Financial Results
Revenue
Total revenue in the 2004 fourth quarter increased 5% to EUR 239.9 million as reported and increased 9% in constant currencies in comparison to the fourth quarter of 2003 where total revenue was EUR 227.8 million.
Software revenue increased 5% to EUR 206.4 million, and increased 9% in constant currencies in the fourth quarter of 2004, compared to EUR 196.5 million in the year-ago quarter. Service and other revenue of EUR 33.5 million in the 2004 fourth quarter increased 7% and 11% in constant currencies compared to EUR 31.3 million in the year-ago period. New CATIA and SolidWorks seats licensed in the fourth quarter of 2004 increased 12% to 19,726 seats, compared to 17,561 seats in the fourth quarter of 2003.
Process-centric revenue, including PDM (Product Data Management) revenue, totaled EUR 198.6 million in the fourth quarter of 2004, up from EUR 194.1 million in the fourth quarter of 2003. Process-centric revenue increased 2% as reported and 6% in constant currencies compared to the year-ago quarter. In the fourth quarter of 2004, PDM revenues totaled EUR 35.6 million, stable with the year-ago quarter and up 4% in constant currencies. CATIA licenses increased 3% year over year to 10,786.
SolidWorks revenue increased 23% (33% if reported in U.S. dollars) to EUR 41.3 million in the fourth quarter of 2004, up from EUR 33.7 million in the fourth quarter of 2003. SolidWorks seats licensed increased 26% year over year to a record quarterly total of 8,940.
Operating Income and Margin and EPS
Operating income decreased 2% to EUR 88.3 million in the fourth quarter of 2004 (36.8% operating margin), compared to EUR 89.8 million in the year-ago period (39.4% operating margin). Operating income excluding acquisition costs decreased 3% to EUR 88.4 million in the fourth quarter of 2004, compared to EUR 90.8 million in the year-ago quarter. As anticipated the operating margin excluding acquisition costs decreased year over year, reflecting investments in expanding the Company's marketing and sales activities with small and medium-sized businesses in both PLM and the entry 3D market and investments in R&D. Specifically, the operating margin excluding acquisition costs decreased to 36.8% in the fourth quarter of 2004, compared to the year-ago period where the operating margin was 39.9% excluding acquisition costs.
Earnings per share increased 2% to EUR 0.51 per diluted share in the fourth quarter of 2004, compared to EUR 0.50 per diluted share in the fourth quarter of 2003. Earnings per share excluding acquisition costs increased 2% to EUR 0.52 per diluted share in the fourth quarter of 2004, compared to EUR 0.51 per diluted share in the year-ago quarter.
Full Year Financial Results
Revenue
Total revenue increased 6% as reported and 9% in constant currencies to EUR 796.6 million in 2004 reflecting year-over-year growth in both software and services. Software revenue increased 4% as reported and 8% in constant currencies to EUR 670.9 million, while service and other revenue rose 15% and 19% in constant currencies to EUR 125.7 million in 2004. Services gross margin improved 1.7 percentage points to 19.6% in 2004, up from 17.9% in 2003. Software revenue represented 84% of total revenue with service and other revenue accounting for 16% of total revenue in 2004. Recurring licenses revenue continued to represent a large component of total software revenue, with recurring licenses revenue accounting for 51% of total software revenue in 2004. Total CATIA and SolidWorks seats licensed in 2004 were 62,577, representing an increase of 9% over 2003 where seats licensed totaled 57,524.
Process-centric revenue, including PDM (Product Data Management) revenue, totaled EUR 650.7 million, and increased 3% as reported and 7% in constant currencies in comparison to 2003 where process-centric revenue totaled EUR 629.1 million. PDM revenue increased 8% as reported and 11% in constant currencies, reaching EUR 101.7 million. CATIA licenses increased 2% to 32,695, compared to 32,163 in 2003.
SolidWorks revenue grew 16% year over year to EUR 145.9 million and increased 28% in US dollars, the reporting currency of its peer group. SolidWorks seats licensed increased 18% to a record 29,882 seats in 2004 on strong demand in all major geographic markets.
In 2004 all three geographic regions posted improvement in revenues over 2003, with the Americas recording the largest year-over-year increase. Europe grew 5% and represented 47% of total revenues. The Americas grew 7% as reported and increased 18% in constant currencies. Asia grew 5% as reported and 8% in constant currencies. The Americas and Asia regions represented 29% and 24% of total revenue, respectively.
Operating Income and Margin, EPS and Financial Position
Thibault de Tersant, Executive Vice President and CFO of Dassault Systèmes, commented, "We were pleased with the financial performance of the Company in 2004, with strong revenue and earnings growth. We raised our revenue objectives twice during the year, primarily reflecting higher demand for our software solutions. Our operating margin was stable at 29.0% excluding acquisition costs, notwithstanding reinvesting in our businesses by growing our R&D resources, strengthening and expanding our distribution channels and undertaking new initiatives, while also absorbing negative currency fluctuations."
Operating income increased 8% to EUR 229.8 million (28.8% operating margin) in 2004, compared to EUR 212.7 million (28.2% operating margin) in 2003. Operating income excluding acquisition costs increased 6% to EUR 231.2 million in 2004, up from EUR 218.6 million in 2003. The operating margin excluding acquisition costs was stable at 29.0% in 2004. During 2004, the Company increased R&D resources, with headcount increasing 7% to 2,171 at year-end. Marketing and sales expenses increased primarily reflecting additional resources focused on the small and medium-sized businesses market.
Earnings per diluted share were EUR 1.35 in 2004, an increase of 14% in comparison to 2003. Earnings per diluted share excluding acquisition costs increased 11% to EUR 1.36 per share, compared to EUR 1.22 per share in 2003.
Dassault Systèmes financial position remained strong, with cash and short-term investments totaling EUR 552.8 million at December 31, 2004. Net cash provided by operations was EUR 209 million for 2004. During the year, the Company paid cash dividends aggregating EUR 38 million.
For financial reporting, the Company prepares its consolidated financial statements pursuant to U.S. GAAP. It also prepares its financials statements according to French GAAP, as required under French regulations. In addition to U.S. GAAP that remains the primary accounting standard for financial reporting, effective January 1, 2005, the Company will prepare consolidated financial statements under International Financial Reporting Standards (IFRS) as required for all listed European Union companies, replacing French GAAP.
Strategy, Technology and Partnerships
During the fourth quarter Dassault Systèmes and Microsoft Corp. announced a multiyear, global strategic alliance to deliver Dassault Systèmes product lifecycle management (V5 PLM) and 3D design solutions to companies of all sizes taking advantage of the Microsoft® software platform. By capitalizing on the Microsoft platform, the companies intend to deliver greater customer value through solutions that are easy to use, deploy and maintain with reduced ownership and integration costs. This alliance enables a far broader set of customers to realize the benefits of 3D collaboration and PLM. Microsoft and Dassault Systèmes have also agreed to explore opportunities to work together to encourage broad market adoption of XML for 3D applications across the design and graphics industry.
Dassault Systèmes and CAXA, the leading domestic PLM vendor in China, entered into a strategic alliance during the fourth quarter to create and sell design packages developed in China based on Dassault Systèmes V5 PLM technology. These solutions will be developed in a joint R&D center operated by CAXA in Beijing combining CAXA's R&D expertise and technology with Dassault Systèmes 3D PLM solutions and V5 technology components. Through the strategic alliance, CAXA will develop and market in China 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.
Delmia Corp. and OMRON Corp., a manufacturer of control equipment for factory automation, entered into a strategic partnership in November through which OMRON will distribute DELMIA Automation as its new collaborative programming desktop for control engineers. OMRON becomes a DELMIA business partner and will integrate DELMIA Automation into its new generation of Control and Network Solutions using Dassault Systèmes' Component Application Architecture Version 5 (CAA V5).
In early January 2005, Dassault Systèmes completed the previously announced acquisition of RAND Worldwide's subsidiaries in the United Kingdom, Sweden, Germany and Switzerland, plus the subsidiary Rand Technologies C.I.S., Inc., which serves Russia and also increased its ownership of RAND North America, Inc. to 70% from 60%.
Business Outlook
Thibault de Tersant stated, "Looking to the full year 2005, we believe the Company is positioned to accelerate revenue growth in constant currencies in comparison to 2004. We are, therefore, reconfirming our revenue growth objective of approximately 11% to 12% in constant currencies. We are adjusting our reported revenue objective to approximately EUR 865-875 million for 2005, simply reflecting a weaker U.S. dollar to Euro exchange rate of $1.30 per EUR 1.00, from $1.25. Our EPS objective for 2005 is about EUR 1.45-1.47 per share excluding acquisition costs and stock-based compensation expense and this objective is based upon the same exchange rate assumptions as for reported revenue. For the first quarter of 2005, our objective is to grow revenues year over year about 9-12% in constant currencies, translating to a reported revenue objective of about EUR 190-195 million with the same exchange rate assumption. Our EPS objective for the first quarter is about EUR 0.25-0.26 per share excluding acquisition costs and stock-based compensation expense.
"We have elected to proceed with an early adoption of SFAS 123®, Share-Based Payments, as of January 1, 2005. We estimate that stock-based compensation expense in 2005 would have less than a 1 percentage point impact on operating margin. While the actual number of stock options and their cost may vary, we believe this is a conservative assumption to take at this point in time.
"Reflecting our 2005 revenue objective, investment plans and key currency exchange rate assumptions, the Company has set a 2005 operating margin objective of about 29% excluding acquisition costs and stock-based compensation expense, unchanged from our preliminary views and stable with 2004."
Endnotes:
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 http://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
The Company will host a teleconference call today, Wednesday, February 9, 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 http://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 http://www.3ds.com/corporate/investors/ . Additional investor information can be accessed at http://www.3ds.com/corporate/investors/ or by calling Dassault Systèmes' Investor Relations at 33.1.40.99.69.24.
For more information, visit http://www.3ds.com/corporate/investors/earnings/
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