DS Reports Second Quarter 2009 Financial Results At High End of Company Objectives

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30 July 2009

Financial News

DS Reports Second Quarter 2009 Financial Results At High End of Company Objectives

Dassault Systèmes (DS) reports IFRS unaudited financial results for the second quarter and first half ended June 30, 2009. These results have been reviewed by the Company’s Board of Directors.

Summary Financial Highlights

(unaudited)

Second Quarter 2009 non-IFRS financial results at high end of DS objectives
Cost-savings initiative on track with €55 million realized year-to-date
Net operating cash flow of €177 million for First Half; Net cash position of €733 million
Shareholders approved annual cash dividend of €0.46 per share, stable with prior year
DS reconfirms 2009 constant currency financial objectives and updates for currency exchange rates

Second Quarter 2009 Financial Summary

In millions of Euros, except per share data	IFRS			Non-IFRS
		Growth	Growth in cc*		Growth	Growth in cc*
Q2 Total Revenue	310.9	(5%)	(11%)	311.2	(5%)	(11%)
Q2 Software Revenue	271.3	(2%)	(9%)	271.6	(2%)	(9%)
Q2 EPS	0.22	(39%)		0.37	(20%)
Q2 Operating Margin	13.6%			21.9%

*In constant currencies.

Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “The second quarter unfolded as anticipated. Revenue, margin and earnings results came in at the high end of our objectives, thanks to continued strong interest in DS solutions across a diversified number of industries, and to our cost savings program which is being implemented without impacting our R&D and sales capacities.

“On balance, business conditions during the second quarter were similar to the first quarter with customers remaining cautious with respect to new business investments. We started to see some increase in activity among larger companies, for which design excellence, simulation and compliance were significant drivers. For smaller companies, in general, it was not the case as we observed some slight further weakening from the first three months of the year.

“We are dedicated to the success of our customers with our investments in R&D. In June, we introduced Version 6 Release 2010 for the PLM market. We are just at the start of the adoption ramp of our V6 platform and software solutions and are therefore pleased by the number of wins we are seeing with more than 130 companies to date, representing the apparel, aerospace, automotive, energy, life sciences and high tech industries, among others.

“This quarter, we obtained a milestone decision, with Renault Group selecting our V6 PLM solution, which will be deployed as their global collaborative innovation platform for all functions involved in engineering and product development, thus replacing legacy PDM and reducing Renault Group’s cost of operations.

“In the Mainstream market, SolidWorks 2010 is set to be released in the fall of 2009 as scheduled. This latest release is uniquely positioned to offer users the ability to easily evaluate design and material alternatives for sustainable product development.”

Second Quarter 2009 Financial Review

In millions of Euros	IFRS			Non-IFRS
	Q2 2009	Q2 2008	Growth in cc*	Q2 2009	Q2 2008	Growth in cc*
Total Revenue	310.9	326.2	(11%)	311.2	326.2	(11%)
Software Revenue	271.3	278.0	(9%)	271.6	278.0	(9%)
Services and other Revenue	39.6	48.2	(24%)	39.6	48.2	(24%)
PLM software Revenue	206.5	211.6	(9%)	206.8	211.6	(9%)
Mainstream 3D software Revenue	64.8	66.4	(10%)	64.8	66.4	(10%)

Americas	96.5	95.9	(12%)	96.6	95.9	(12%)
Europe	144.2	157.1	(8%)	144.2	157.1	(8%)
Asia	70.2	73.2	(18%)	70.4	73.2	(18%)

*In constant currencies.

On a reported basis, IFRS and non-IFRS total revenue and software revenue decreased by 5% and 2%, respectively, benefiting from favorable currency effects which helped mitigate the impact of lower activity.

On a constant currency basis, non-IFRS software revenue performance benefited from recurring software revenue which increased 6% (representing 74% of total software revenue) but was negatively impacted by a decline in new licenses revenue of 36%.

Excluding currency effects non-IFRS PLM software revenue declined by 9% with CATIA and ENOVIA software revenue lower by 13% and 15%, respectively. Overall PLM performance benefited from higher simulation revenue, with SIMULIA posting double-digit software revenue growth. Mainstream 3D software results also reflected lower new licenses revenue partially offset by growth in subscription revenue.

In order to mitigate the impact of the global recession on its operating results, the Company has in place a cost savings program with the goal of reducing expenses while maintaining its research and development and sales capacities.

Since the start of the year, the Company has realized over €55 million in savings across such areas as revenue-related costs, travel, marketing, procurement, outside services and other areas.

In addition to the savings program, the Company had previously begun and is continuing an operational efficiency program organized around several key initiatives including shared services and co-location of offices. The Company anticipates that these efficiency programs will bring additional benefits in 2010.

Looking at financial results on a sequential basis,

Non-IFRS total revenue was €311.2 million in the second quarter, compared to €310.7 million in the first quarter, and excluding quarter to quarter currency effects increased 2%.

Non-IFRS total software revenue was €271.6 million, similar to first quarter non-IFRS total software revenue of €272.8 million. Excluding currency effects, non-IFRS total software revenue increased 2% sequentially, with new licenses revenue higher by 10% and services and other revenue growing 7%. As anticipated, non-IFRS recurring software revenue was lower by 1% on a sequential basis in constant currencies.

The non-IFRS operating margin improved to 21.9% in the second quarter from 19.4% in the first quarter benefiting from the ongoing implementation of the Company’s cost savings program.

Global headcount at June 30th was 7,903, down 1.5% from 8,020 at March 31, 2009.

First Half 2009 Financial Summary

In millions of Euros, except per share data	IFRS			Non-IFRS
		Growth	Growth in cc*		Growth	Growth in cc*
H1 2009 Total Revenue	620.6	(2%)	(9%)	621.9	(2%)	(9%)
H1 2009 Software Revenue	543.1	(1%)	(7%)	544.4	(1%)	(7%)
H1 2009 EPS	0.46	(45%)**		0.74	(15%)
H1 2009 Operating Margin	13.3%			20.7%

*In constant currencies.
**In the 2008 First Half DS recorded a €17 million (€0.13 per share) gain on sale for its prior corporate headquarters facility in other operating income and expense, net.


In millions of Euros	IFRS			Non-IFRS
	H1 2009	H1 2008	Growth in cc*	H1 2009	H1 2008	Growth in cc*
Total Revenue	620.6	633.6	(9%)	621.9	634.1	(9%)
Software Revenue	543.1	547.1	(7%)	544.4	547.6	(7%)
Services and other Revenue	77.5	86.5	(16%)	77.5	86.5	(16%)
PLM software Revenue	407.2	413.5	(8%)	408.5	414.0	(8%)
Mainstream 3D software Revenue	135.9	133.6	(6%)	135.9	133.6	(6%)

Americas	193.9	189.8	(11%)	194.4	190.0	(11%)
Europe	281.8	295.8	(4%)	281.9	296.0	(4%)
Asia	144.9	148.0	(15%)	145.6	148.1	(15%)

*In constant currencies.

IFRS and non-IFRS total revenue was lower by approximately 2% as reported and 9% in constant currencies. Revenue growth rates on a reported basis benefited from the strengthening of both the US dollar and the Japanese yen during the first half of 2009 compared to the 2008 First Half which helped mitigate the impact of lower activity.

Revenue distribution by geographic region in the 2009 First Half remained similar to that of the same period in 2008. As a percentage of total revenue, Europe represented 46% (47% in 2008 First Half), the Americas accounted for 31% (30% in 2008 First Half) and Asia represented 23% (23% in 2008 First Half).

For the 2009 First Half, IFRS and non-IFRS software revenue was lower by approximately 1% as reported and 7% in constant currencies, reflecting periodic licenses, maintenance, and product development revenue growth of 11% which was largely offset by a decrease in new licenses revenue of 38% (all figures in constant currencies except as noted).

Non-IFRS recurring software revenue, comprised of periodic licenses and maintenance revenue, increased 10% in constant currencies and totaled €407.8 million for the 2009 First Half, compared to €345.6 million in the 2008 First Half. Recurring software revenue represented 75% of total software revenue in the 2009 First Half and 63% in the 2008 First Half.

Software revenue growth trends were similarly impacted in both the PLM and Mainstream segments of the Company’s business with a significant decrease in new license revenue activity offset in part by growth in periodic licenses and maintenance revenue.

IFRS net income per diluted share decreased 45.2% principally reflecting the year-over-year decrease in revenue as well as the year-ago benefit from the gain on sale of part of the Company’s prior corporate headquarters facility. Non-IFRS net income per diluted share decreased 14.9%, principally reflecting lower revenue activity.

Cash Flow and Other Financial Highlights

IFRS net operating cash flow was €81.0 million and €177.3 million for the second quarter and first half ended June 30, 2009, respectively.

Cash and short-term investments totaled €932.8 million at June 30, 2009, compared to €840.4 million at December 31, 2008. The Company’s net financial position amounted to €732.6 million at June 30, 2009, net of outstanding debt consisting of €200.2 million of financial long-term debt. During the second quarter 2009, the Company paid cash dividends totaling €54.8 million.

Annual Shareholders’ Meeting Approved Cash Dividend Payment

The Annual Shareholders’ Meeting was held on June 9, 2009. At the meeting shareholders approved for the fiscal year ended December 31, 2008 the payment of an annual cash dividend equivalent to €0.46 per share, equal to the prior year. The Company has consistently paid annual cash dividends since its initial public offering in 1996. The cash dividend was paid on June 25, 2009.

Key Business and Corporate Highlights

Renault Chooses DS Full V6 PLM to Improve the Company’s Productivity and Product Quality. Renault has selected Dassault Systèmes’ V6 PLM as its new global product development solution, in order to improve productivity, and product quality. Renault has already started to implement the ENOVIA V6 based collaborative platform and CATIA V6, and will rapidly move to the full DS V6 portfolio to enable the company and its suppliers to collaborate on the creation of new product designs in real time.

Piaggio Aero Selects DS V6 for Global Product Development. Piaggio Aero Industries, one of the world’s most prestigious aircraft manufacturers, has selected DS V6 as its global product development platform including all required applications to support the company’s business needs and industry leadership strategy. Piaggio Aero Industries is implementing the ENOVIA V6 platform and DS PLM applications including ENOVIA and CATIA to enable the company and its core risk-sharing partners to collaborate on the creation of new product designs in real time.

ELDO Selects DS PLM Solutions for its Italian Fashion Label, FREESOUL. Eldo S.r.l, a Florence, Italy-based holding company, has selected Dassault Systèmes’ ENOVIA Apparel Accelerator for Design and Development to rapidly bring new clothing lines for its FREESOUL brand of denim products to the market. Launched in 1994, FREESOUL is one of Europe’s top denim fashion brands.

Wittur Group Standardizes on SolidWorks Enterprise PDM to Create Global Collaboration Network of Designers. The Wittur Group has selected SolidWorks Enterprise PDM for document and workflow management to unify and organize its global offices more transparently. Its goals are improved teamwork between designers, optimized development processes, and more secure and efficient data management through a consolidated database.

Sanjel Corp. Slashes Development Time with SolidWorks 3D CAD and Simulation Software. In developing the custom cementing unit, Sanjel is using SolidWorks’ simulation software to ensure it is rugged enough to withstand being loaded up onto the back of a winch truck, being lifted onto a cargo ship by crane, sustaining impacts from vehicles and machinery, and enduring conditions commonly encountered in the oilfield.

DS Launches V6R2010. On June 23rd, DS announced the launch of its Version 6, Release 2010. Dassault Systèmes’ V6 collaborative platform has been widely adopted in industries including:

Apparel (Guess, Under Armour, Trent Ltd.);

Consumer Packaged Goods (Procter & Gamble);

Life Sciences (Beckman Coulter);

High Tech (Lexmark International, novero GmbH);

Semiconductors (Dialog Semiconductor, INSIDE Contactless);

Energy (Oceaneering, Stork GLT);

Aerospace (Piaggio Aero Industries, Eaton Aerospace);

Automotive (EATON, Great Walls Motors, Johnson Controls);

Business Services (TÜV Rheinland); and

Construction (Skanska).

DS Reaffirms Its Position as the Leading Supplier of PLM Solutions to the Aerospace Industry. On June 15, 2009, DS made a series of customer announcements at Le Bourget International Air Show that reinforces the company’s position as the leading PLM provider for the Aerospace and Defense industry. Already recognized for working with the world’s Top 20 Aerospace Companies and the world’s major OEMs, Dassault Systèmes’ technology has become the standard for all new major aircraft programs.

DS SolidWorks Surpasses One Million Licenses. On April 30, 2009 DS SolidWorks announced that a cutting-edge athletic equipment company purchased the one millionth license of its 3D CAD software. In the 14 years between this landmark and DS SolidWorks’ first sale to a robotic arm designer, thousands of innovative products have been developed with SolidWorks software.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, commented, “Our results for the second quarter confirm our realistic assessment of market conditions which we made at the time of our first quarter press release.

“With respect to operating profitability, our focus on cost containment is proceeding as planned, with over €55 million in cost savings realized during the first half of this year. We also continued with our broader goals of improving our operational efficiency across DS with shared services and co-location initiatives, all of which will bring additional benefits to DS as we move into 2010. Our progress quarter to quarter is evident in the sequential improvement in our non-IFRS operating margin. And, for the full year, we continue to target an operating margin of about 25% on a non-IFRS basis, unchanged from our previous goal.

“Looking ahead to the third quarter, we are assuming no change to business conditions and historical seasonal revenue patterns, leading to the assumption of a sequential decrease in revenue results in comparison to the second quarter. But with our ongoing cost actions, and based upon our revenue objective, we are targeting a stable to improving sequential performance from an earnings and operating margin perspectives for the third quarter.

“As we move into the second half of the year, we are narrowing our full year revenue objective range but otherwise holding the mid-point unchanged on a constant currency basis. Similarly we are narrowing our EPS objective range. Given the strengthening of the Euro we think it is appropriate to update our US dollar and Japanese yen exchange rates assumptions in comparison to the Euro, and therefore are adjusting our reported revenue range and earnings per share, accordingly.”

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

Third quarter 2009 non-IFRS total revenue objective of about €285 to €300 million and non-IFRS EPS of about €0.36 to €0.42;

2009 non-IFRS revenue growth objective range of about (8%) to (6%) in constant currencies (€1,250 to €1,280 billion based upon the 2009 currency exchange rate assumptions below);

2009 non-IFRS operating margin of about 24% to 26%;

2009 non-IFRS EPS range of about €1.76 to €1.91;

Objectives are based upon exchange rate assumptions for the 2009 third quarter of US$1.50 per €1.00 and JPY140 per €1.00 and a full year average of US$1.42 per €1.00 and JPY134 per €1.00.

The non-IFRS objectives set forth above do not take into account the following accounting elements and are estimated based upon the 2009 currency exchange rates above: (i) deferred revenue write-downs estimated at approximately €1.4 million for 2009; (ii) share-based compensation expense estimated at approximately €22 million for 2009, and (iii) amortization of acquired intangibles estimated at approximately €40 million for 2009. The above objectives do not include any impact from other operating income and expense, net principally comprised of restructuring expenses. These estimates also do not include any new stock option or share grants, or any new acquisitions or restructurings completed after July 30, 2009.

Webcast and Conference Call Information

Dassault Systèmes will host an analyst meeting in Paris which will be webcasted and a conference call today, Thursday, July 30, 2009. The webcast and conference call will be available via the Internet by accessing http://www.3ds.com/company/finance/. The webcast and conference call will be archived for 30 days.

Additional investor information can be accessed at http://www.3ds.com/company/finance/ or by calling Dassault Systèmes’ Investor Relations at 33.1.61.62.69.24.

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