CIMdata PLM Industry Summary Online Archive

13 February 2008

Financial News

DS Reports 2007 Full Year Software Revenue Growth Above 15% in Constant Currencies

Dassault Systèmes (DS) reported financial results for the fourth quarter and year ended December 31, 2007.

Summary Financial Highlights

Q4 GAAP total revenue up 10% and non-GAAP up 12%, both in constant currencies

2007 GAAP total revenue up 15% and non-GAAP up 14%, both in constant currencies

Q4 EPS €0.64 on GAAP basis and €0.78 on non-GAAP basis

DS outlines 2008 financial objectives: about 12% non-GAAP software revenue growth in constant currencies; 10-12% non-GAAP EPS growth; 27-27.5% non-GAAP operating margin

Fourth Quarter and Full Year 2007 Financial Summary

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Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented: “2007 was a year of exceptional progress for Dassault Systèmes. We made significant headway in transforming our go-to-market sales model, most visibly assuming control of our PLM indirect channel, while expanding the IBM PLM offering as well as better leveraging our direct sales force capacity and increasing our sales capacity in Mainstream 3D. As a result, we enter 2008 with expanded resources in all of our sales channels.

“With the introduction of PLM 2.0 our customers will benefit from PLM online for all. Following several years of development, our Version 6 platform provides an unmatched level of integration and openness, covering a wide variety of PLM business processes driven by user experiences at all stages.

“Our 2007 financial performance benefited from the strength of our brands and the diversification of our revenues by geographic regions. Our non-GAAP software revenue growth reached 16% in constant currencies in 2007.

“Looking to 2008, the investments we have made in strengthening our product portfolio and sales channels provide solid underpinnings to our financial objectives despite the potentially mixed macro-economic backdrop.”

Fourth Quarter Financial Highlights

Thibault de Tersant, Senior Executive Vice President and CFO, commented: “Fourth quarter software revenue growth, expense levels and EPS results were in line with our expectations. PLM consulting services tracked to plan. Nonetheless, total services and other revenue came in about €4 million lower than anticipated with the majority of the weakness located in our former IBM business partner operations. We saw year-on-year improvement in our non-GAAP operating margin, increasing to 35%, but the extent of the improvement was limited by the services results.”

In constant currencies, fourth quarter revenue in Asia increased 21% (non-GAAP up 22%), followed by the Americas with growth of 10% (non-GAAP up 10%) and Europe with growth of 6% (non-GAAP up 8%).

GAAP PLM software revenue increased 14% and non-GAAP PLM software revenue increased 17%, both in constant currencies.

GAAP Mainstream 3D software revenue increased 16% in constant currencies. Non-GAAP Mainstream 3D software revenue increased 12% in constant currencies in the fourth quarter. SolidWorks new seat growth was 12%.

GAAP recurring software revenue represented 55% of software revenue for the fourth quarter. Non-GAAP recurring software revenue, representing 54% of non-GAAP software revenue in the quarter, increased 24% in constant currencies.

Services and other revenue, representing 15% of total revenue, decreased approximately 7% in constant currencies in the fourth quarter principally reflecting a strong base of comparison with the year-ago quarter.

GAAP operating margin was 28.9% in the quarter. Non-GAAP operating margin increased to 34.9%, compared to 34.3% in the year-ago period.

GAAP earnings per diluted share decreased 3% for the fourth quarter. Non-GAAP earnings per diluted share increased 8% in the fourth quarter primarily reflecting an increase in non-GAAP operating income of 7% and a lower effective tax rate offset in part by a decrease in financial revenue.

New wins in the fourth quarter included: Michael Kors in apparel with ENOVIA, Pelamis Wave Power in energy with SIMULIA, and Avtovaz in automotive in Russia with CATIA.

Full Year 2007 Financial Highlights

In constant currencies, Asia posted revenue growth of 24% (non-GAAP up 24%) on strong growth in Japan and throughout most of Asia, the Americas increased 20% (non-GAAP up 19%) and Europe was higher by 6% (non-GAAP up 7%).

GAAP PLM software revenue increased 17% in constant currencies. Non-GAAP PLM software revenue increased 16% in constant currencies.

-- CATIA non-GAAP software revenue growth of 14% in constant currencies benefited from increased leasing activity, growth in maintenance, increasing interest in CATIA PLM Express in the mid-market and the inclusion of ICEM.

-- ENOVIA non-GAAP software revenue growth of 32% reflected key new wins in target industries including high tech and apparel, growth with existing customers and the inclusion of ENOVIA MatrixOne for a full year.

-- SIMULIA posted a record year on expanding relationships with customers.

-- The GAAP PLM indirect channel software revenue grew by double-digits in constant currencies during 2007. In total the PLM indirect channel accounted for approximately one-quarter of DS' total revenue in 2007. At the end of 2007 DS was directly responsible for 25 regions. In addition to revenue growth, PLM indirect channel capacity grew by over 15% during 2007.

GAAP Mainstream 3D software revenue increased 15% in constant currencies. Non-GAAP Mainstream 3D software revenue increased 14% in constant currencies on SolidWorks new seat growth of 13% and strong growth in maintenance revenue, including renewals.

GAAP recurring software revenue represented 60% of software revenue. Non-GAAP recurring software revenue, representing 60% of non-GAAP software revenue, increased 28% in constant currencies for the year reflecting growth in maintenance and periodic licenses.

Services and other revenue increased approximately 6% in constant currencies on growth of PLM consulting services, offset in part by lower revenue related to DS operations formerly known as IBM business partner activities.

GAAP operating margin was 20.1% for the year. The non-GAAP operating margin was 26.2% compared to 26.9% for 2006, with currency exchange rate variations accounting for approximately 60 basis points of the 70 basis points decrease.

GAAP earnings per diluted share decreased 1% for the full year primarily reflecting higher investments in marketing and sales and G&A, a higher effective tax rate and the impact of amortization of acquired intangibles in connection with acquisitions. Non-GAAP earnings per diluted share increased 8% for the full year 2007 due to an increase in non-GAAP operating income of 6%, higher financial revenue and a lower effective tax rate.

DS also announced initial plans to allocate up to €35 million towards the repurchase of its common stock during 2008.

Cash flow and other financial highlights

Net operating cash flow was €70.9 million and €311.0 million, respectively, for the fourth quarter and year ended December 31, 2007. Cash and short-term investments totaled €626.6 million and long-term debt totaled €202.9 million at December 31, 2007.

Other Corporate Announcements

On January 24th, DS announced the launch of PLM 2.0 and its new, next-generation platform, Version 6 (V6). PLM 2.0, PLM online for all, is a 3D online environment for everyone to experience products virtually where all user interactions generate product experience. PLM 2.0 is to PLM what Web 2.0 is to the Web, harnessing collective intelligence from online communities. Any user can imagine, share and experience products in the universal language of 3D. PLM 2.0 brings knowledge, from idea to product experience, to life.

V6 is an open platform, embracing SOA standards. V6 delivers a single PLM platform for all PLM business processes, available to anybody anywhere, spanning engineering groups, businesses and end users. V6 also gives intelligent access to all product experience information no matter the data source location, with MatrixOne technology built into the foundation.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, commented: “Turning to 2008 we are reconfirming our 12% non-GAAP software revenue growth objective in constant currencies.We see goodopportunities for growth coming from both our core and target industries. We are initiating our non-GAAP earnings per share growth objective of about 10% to 12% for 2008. In addition, we expect to see about an 80 to 130 basis points expansion in our non-GAAP operating margin in 2008 compared to 2007.

“In summary, thanks to the investments in our sales channels and product portfolio, we enter 2008 a substantially stronger company, well positioned to deliver growth in software, operating margin and earnings per share in spite of the macro-economic environment.”

The Company’s objectives are prepared and communicated only on a non-GAAP basis and are subject to the cautionary statement set forth below:

First quarter 2008 non-GAAP total revenue objective of about €305 to €310 million and non-GAAP EPS of about €0.40 to €0.42;

2008 non-GAAP total revenue objective of about 10% growth in constant currencies; 2008 non-GAAP software revenue objective of about 12% growth in constant currencies;

2008 non-GAAP EPS objective of about €2.17 to €2.22, representing about 10% to 12% growth;

2008 non-GAAP operating margin objective of about 27% to 27.5%;

Objectives based upon exchange rate assumptions for the 2008 first quarter and full year of US$1.45 per €1.00 and JPY 160 per €1.00;

The constant currency revenue objective leads to a reported 2008 non-GAAP revenue range of about €1.365 to €1.380 billion;

The non-GAAP objectives set forth above do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €1 million for 2008; stock-based compensation expense estimated at approximately €18 million for 2008; amortization of acquired intangibles estimated at approximately €48 million for 2008. The above objectives do not include any impact from one-time costs and one-time gains related to the anticipated DS global headquarters’ relocation in 2008. These estimates also do not include any new stock option or share grants, or any new acquisitions completed after February 13, 2008.

Recent Business News Highlights

On January 24th, DS launched ENOVIA MatrixOne 10.8 – a single, collaborative PLM platform foundation.

On January 23rd, DS announced that more than 4,600 attendees participated in the SolidWorks World 2008 User Conference & Exposition, the largest annual worldwide 3D CAD event.

On January 21, DS introduced 3DLive for multi-CAD PLM environments.

On January 16th, DS announced the release of SIMULIA SLM for simulation lifecycle management.

On January 15th, DS launched ENOVIA SmarTeam Engineering Express.

On December 11th, 2007, DS and Rockwell Automation announced plans to integrate the digital factory and plant operations to create a virtual design and production environment.

Webcast and conference call information

Dassault Systèmes will host a webcast and a conference call today, Wednesday, February 13, 2008. The webcast and conference call will be available via the Internet by accessing http://www.3ds.com/corporate/investors/.The webcast and conference call will be archived for 30 days. 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.

Non-GAAP financial information

Readers are cautioned that the supplemental non-GAAP information presented in this press release is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for U.S. GAAP measurements. Also, our supplemental non-GAAP financial information may not be comparable to similarly titled non-GAAP measures used by other companies. Further specific limitations for individual non-GAAP measures, and the reasons for presenting non-GAAP financial information, are set forth in the company’s annual report for the year ended December 31, 2006 on Form 20-F filed with the SEC on May 29, 2007. To compensate for these limitations, the supplemental non-GAAP financial information should be read not in isolation, but only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP.

Information in constant currencies

When we believe it would be helpful for understanding trends in our business, we provide percentage increases or decreases in our revenue (in both US GAAP and on a non-GAAP basis) to eliminate the effect of changes in currency values, particularly the U.S. dollar and the Japanese yen, relative to the euro. When trend information is expressed herein "in constant currencies", the results of the "current" period have first been recalculated using the average exchange rates of the comparable period in the preceding year, and then compared with the results of the comparable period in the preceding year.

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