CIMdata PLM Industry Summary Online Archive

11 February 2009

Financial News

DS Reports Growth in Revenue and Earnings for 2008

Dassault Systèmes (DS) reported U.S. GAAP and IFRS unaudited financial results for the fourth quarter and year ended December 31, 2008. These results have been reviewed by the Company’s Board of Directors. Commencing with the fiscal year 2009, DS will solely report and publish its financial information in accordance with IFRS as previously disclosed.

Summary Financial Highlights

(unaudited)

  • Q4 non-GAAP financial results in line with preliminary announcement

2008 GAAP software revenue up 11% and non-GAAP software revenue up 10%, both in constant currencies on strong growth of recurring software revenue

  • 2008 GAAP EPS up 11% and non-GAAP EPS up 2%
  • Net cash position of €640 million at December 31, 2008
  • DS initiates 2009 financial objectives with growth in revenue and earnings

Fourth Quarter and Full Year 2008 Financial Summary

In millions of Euros, except per share data

U.S. GAAP

Non-GAAP

Growth

Growth in cc*

Growth

Growth in cc*

Q4 Total Revenue

382.9

5%

(1%)

384.4

4%

(3%)

Q4 Software Revenue

330.8

7%

1%

332.3

5%

(1%)

Q4 EPS

0.60

(6%)

0.66

(15%)

Q4 Operating Margin

26.4%

29.7%

In millions of Euros, except per share data

U.S. GAAP

Non-GAAP

Growth

Growth in cc*

Growth

Growth in cc*

FY 2008 Total Revenue

1,334.8

6%

9%

1,338.2

5%

8%

FY 2008 Software Revenue

1,154.4

9%

11%

1,157.8

7%

10%

FY 2008 EPS

1.66

11%

2.02

2%

FY 2008 Operating Margin

20.4%

25.6%

Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “Looking back at 2008, despite a disappointing fourth quarter caused by the economic crisis, Dassault Systèmes ended the fiscal year with growth in revenue and earnings, a high level of recurring software revenue and a strong balance sheet. Thanks to our strategic investments in our product portfolio and sales channels, DS gained one point of market share in 2008.

“We expect 2009 to be a difficult global economic environment in which to operate, but we move into the year with an expanded addressable market, strengthened sales channels, and a richer product portfolio to serve our customers. Moreover, our new Version 6 collaborative platform enables us to bring more flexibility and value to our customers through further coverage of industry processes. We are pleased that a number of companies, across consumer goods, energy, life sciences, high tech, as well as aerospace and automotive, have become strategic partners with DS as we work closely with them to leverage 3D PLM for sustainable product development.”

Fourth Quarter 2008 Financial Highlights

In millions of Euros

U.S. GAAP

Non-GAAP

Q4 2008

Q4 2007

Growth in cc*

Q4 2008

Q4 2007

Growth in cc*

Total Revenue

382.9

363.1

(1%)

384.4

371.1

(3%)

Software Revenue

330.8

308.3

1%

332.3

316.3

(1%)

Services and other revenue

52.1

54.8

(11%)

52.1

54.8

(11%)

PLM software revenue

255.8

241.3

0%

257.3

249.3

(3%)

Mainstream 3D software revenue

75.0

67.0

4%

75.0

67.0

4%

Americas

118.9

106.0

2%

119.2

107.8

0%

Europe

178.3

181.4

(2%)

178.8

186.2

(4%)

Asia

85.7

75.7

(3%)

86.4

77.1

(4%)

Overall, fourth quarter financial performance reflected an increasingly difficult macroeconomic environment at year-end, leading to contract deferrals and resulting in lower revenue than the Company’s objective, affecting both margin and earnings results. The Company noted, however, that subscription renewals continued at a good level. Currency exchange rate changes during the quarter had a net beneficial impact on reported revenue, margin and earnings.

  • GAAP and non-GAAP total revenue increased on a reported basis, but decreased 1% and 3%, respectively, in constant currencies.
  • GAAP and non-GAAP software revenue both increased on a reported basis. In constant currencies GAAP software revenue increased 1%. Non-GAAP software revenue decreased 1% reflecting non-GAAP recurring software revenue growth of 17% offset by new licenses revenue decrease of 22% (all figures are in constant currencies). Non-GAAP recurring software revenue accounted for 64% of total non-GAAP software revenue in the quarter.
  • GAAP PLM software revenue was flat and non-GAAP PLM software revenue decreased 3%, both figures in constant currencies. In non-GAAP and on a constant currencies basis, CATIA software revenue decreased 7%, ENOVIA software revenue decreased 3%, and SIMULIA software revenue increased double-digits.
  • Mainstream 3D GAAP and non-GAAP software revenue increased 4% in constant currencies on growth in SolidWorks installed base recurring revenue and higher sales of SolidWorks product data management and simulation software.
  • GAAP services and other revenue decreased 11% in constant currencies, principally reflecting the DSF divestiture at the end of the 2008 second quarter and winding down of certain historical channel management activities.
  • GAAP operating margin was 26.4% compared to 28.9% in the year-ago quarter. Non-GAAP operating margin decreased to 29.7% compared to 34.9% in the 2007 fourth quarter, reflecting the lower than anticipated revenue results.
  • GAAP earnings per diluted share decreased 6% to €0.60. Non-GAAP earnings per diluted share decreased 15% to €0.66 primarily reflecting a decrease in non-GAAP operating income of 12%.

Full Year 2008 Financial Highlights

In millions of Euros

U.S. GAAP

Non-GAAP

FY 2008

FY 2007

Growth in cc*

FY 2008

FY 2007

Growth in cc*

Total Revenue

1,334.8

1,258.8

9%

1,338.2

1,275.9

8%

Software Revenue

1,154.4

1,063.3

11%

1,157.8

1,080.4

10%

Services and other revenue

180.4

195.5

(5%)

180.4

195.5

(5%)

PLM software revenue

878.2

811.0

11%

881.6

825.4

10%

Mainstream 3D software revenue

276.2

252.3

13%

276.2

255.0

11%

Americas

410.1

391.8

12%

411.9

397.9

11%

Europe

620.2

575.9

8%

621.0

584.3

6%

Asia

304.5

291.1

7%

305.3

293.7

6%

*in constant currencies

  • GAAP and non-GAAP total revenue increased 9% and 8%, respectively, in constant currencies.
  • GAAP and non-GAAP revenue grew approximately 40% in constant currencies in the faster growing markets comprised primarily of China, India, Brazil, Eastern Europe and Russia.
  • GAAP software revenue increased 11% in constant currencies and represented 86% of total revenue. Non-GAAP software revenue increased 10% on non-GAAP recurring software revenue growth of 18% offset in part by new licenses revenue decrease of 2% (all figures in constant currencies). Non-GAAP recurring software revenue represented 64% of total non-GAAP software revenue during 2008.
  • GAAP PLM software revenue increased 11% in constant currencies. Non-GAAP PLM software revenue increased 10% in constant currencies.
    • CATIA non-GAAP software revenue increased 10% in constant currencies benefiting from growth in subscription and higher activity in both PLM sales channels.
    • ENOVIA non-GAAP software revenue increased 7% in constant currencies and reflected growth with customers across a diversified group of industries.
    • SIMULIA non-GAAP software revenue increased over 20% in constant currencies, primarily reflecting strong growth within the customer base across all geographic regions and market share gains.
  • GAAP Mainstream 3D software revenue increased 13% in constant currencies. Non-GAAP Mainstream 3D software revenue increased 11% in constant currencies on growth in SolidWorks subscription revenue, 49,472 new seats and double-digit growth of SolidWorks product data management and analysis software.
  • Services and other revenue trends during 2008 primarily reflected the changing scope of this line item. For 2008, GAAP services and other revenue, representing 14% of total revenue, decreased 5% in constant currencies reflecting the DSF divestiture and winding down of certain historical channel management activities and related fee revenues. However, DS PLM consulting services revenue posted year-over-year growth in constant currencies.
  • GAAP operating margin was 20.4% for 2008. Non-GAAP operating margin was 25.6%, decreasing in comparison to 2007 due to the impact of the economic crisis at the end of the year.
  • Financial revenue and other totaled €8.9 million, compared to €7.3 million in 2007. 2008 financial revenue and other were principally comprised of net interest income of €13.9 million and net exchange losses of €6.9 million.
  • GAAP earnings per diluted share increased 11%. Non-GAAP earnings per diluted share increased 2% principally reflecting an increase in non-GAAP operating income of 2%.
  • 2008 new business activity by industry included the following companies among others:
    • Aerospace: Bell Helicopter, Boeing, Chengdu Aircraft, EADS, Parker Hannifin, Piaggio Aero;
    • Consumer and Consumer Packaged Goods: Barilla, Pacific Brands, Procter & Gamble;
    • High Tech: Lenovo, Leviton, L-3 Communications, Nikon, Nokia Siemens Network, Panasonic, Toshiba;
    • Business Services: Cambric, TUV Rheinland, American Bureau of Shipping;
    • Industrial Equipment: Komatsu, Sanyo Machine Works, Stara S.A.;
    • Energy and Construction: Arup, OKG, Skanska;
    • Automotive: EDAG, Johnson Controls, Tenpaku. R Corporation.

Cash Flow and Other Financial Highlights

GAAP net operating cash flow was €306.5 million for the year ended December 31, 2008.

During 2008 DS paid cash dividends and repurchased shares totalling €132.7 million. Cash dividends paid amounted to €53.7 million in total. The Company repurchased 2,261,986 shares during 2008 for an aggregate investment of €79.0 million.

At December 31, 2008, cash and short-term investments totaled €840.4 million and long-term debt was €200.7 million.

IFRS Summary Financial Information

The Company noted that the fiscal year reporting above for U.S. GAAP and non-GAAP total revenue, software revenue, services and other revenue as well as discussions by geographic regions, market segments and major brands would be similar under IFRS and non-IFRS (“non-IFRS” were referred to as “adjusted IFRS” in DS previous earnings announcements as well as in the Document de référence for the year ended December 31, 2007 filed with the Autorité des marchés financiers on April 4, 2008).

With respect to fiscal year operating expenses, each of the line item categories and amounts are the same under both U.S. GAAP and IFRS with the exception of the line item amortization of intangible assets which totals €44.9 million under U.S. GAAP and €42.9 million under IFRS. This difference and its related tax effects account almost entirely for the fiscal year differences in IFRS operating income, operating margin and earnings per share in comparison to U.S. GAAP.

With respect to the fiscal year, the non-IFRS operating income, operating margin and earnings per diluted share figures are identical to their respective non-GAAP figures.

For the 2008 fourth quarter IFRS total revenue was €382.9 million and non-IFRS total revenue was €384.4 million. IFRS total software revenue was €330.8 million and non-IFRS software revenue was €332.3 million. IFRS services and other revenue were €52.1 million. IFRS operating margin was 21.3% and the non-IFRS operating margin was 29.7%. IFRS earnings per diluted share was €0.47 and non-IFRS earnings per diluted share was €0.66.

For fiscal year 2008, IFRS total revenue was €1.33 billion and non-IFRS total revenue was €1.34 billion. IFRS total software revenue was €1.15 billion and non-IFRS software revenue was €1.16 billion. IFRS services and other revenue were €180.4 million. IFRS operating margin was 20.5% and non-IFRS operating margin was 25.6%. IFRS earnings per diluted share was €1.68 and non-IFRS earnings per diluted share was €2.02.

The tables in the Appendix of this press release set forth the Company’s financial results as prepared under IFRS and provide a summary reconciliation of the Company’s financial results as presented under U.S. GAAP to its financial results as presented under IFRS and a summary reconciliation of its supplemental non-GAAP financial information to its supplemental non-IFRS financial information.

Key Business and Corporate Highlights

DS launched V6R2009x, the latest release of its new platform. From leveraging online communities, such as 3DVIA.com, to integrated requirement, functional, logical, and physical definitions of products, the V6 platform is harnessing the collective intelligence of all participants in a product’s lifecycle. This new release delivers industry-specific solutions for customers in the consumer goods, high-tech, industrial equipment, life sciences, automotive, and aerospace industries.

Bell Helicopter standardizes on DS’ PLM Solutions to maximize efficiency and improve compliance efforts. Bell Helicopter has embarked on a multi-year, multiple stage upgrade of its PLM and CAD/CAM/CAE/CAI systems using ENOVIA V6 and its pre-existing CATIA V5 implementation. Using Dassault Systèmes’ solutions as its PLM foundation, Bell Helicopter will support its growth by using the ENOVIA Aerospace and Defense Accelerator™ for Program Management to meet regulatory requirements while also standardizing a number of key business processes to enable employees and suppliers across the globe to securely and more efficiently share updated product information.

EADS chooses DS for collaborative 3D design and manufacturing to help reshape the future of aerospace and defense products and services. EADS’ goal is to integrate Dassault Systèmes’ tools such as product design (CATIA), digital manufacturing (DELMIA) and collaborative solutions (ENOVIA-VPM) into EADS’ PLM processes as key enablers for excellence and harmonization.

STX Shipbuilding, one of the world’s leading shipbuilding companies, has implemented DS’ ENOVIA solution as its enterprise-wide PLM backbone. The deployment of the ENOVIA backbone has enabled STX Shipbuilding to reduce engineering work by 50% and production work by 30%. The company has also shortened lead times by providing customers with a broad range of ship modeling information, ensuring more accurate plan development and helping to eliminate work loss issues.

Chanel and DS announced the formation of a strategic partnership to drive scientific innovation. By combining Chanel’s expertise in cosmetics and Dassault Systèmes’ expertise in 3D technologies and virtualization, the partners aim to develop unique concepts and explore new territories in life sciences.

Gantry Group survey finds that Dassault Systèmes’ ENOVIA helps semiconductor companies meet industry challenges by managing multi-site design, improving productivity and maximizing IP re-use. A white paper from the Gantry Group found that semiconductor companies using ENOVIA PLM solutions reported a number of clear benefits including a 74% increase in multi-site designs, a 46% savings in design engineering time and a 32% increase in product quality.

Other Corporate Information

On October 16, 2008, Dassault Systèmes’ voluntary delisting from Nasdaq was completed. On January 15, 2009, Dassault Systèmes’ deregistration and termination of its reporting obligations under the U.S. SEC Exchange Act became effective. The Company does not plan to publish a Form 20-F for the fiscal year ended December 31, 2008; however it will be providing an English translation of its 2008 Document de référence, when filed with the French “Autorité des marchés financiers”.

Dassault Systèmes continues to maintain its American Depository Receipt (ADR) program, which will enable investors to retain their ADRs and facilitate trading on the U.S. Over-The-Counter (OTC) market.

Dassault Systèmes will continue to publish its financial reports, statements and press releases in English as well as information for investors on its website (www.3ds.com) pursuant to section 12g3-2(b) of the U.S. Securities Exchange Act.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, commented, “At the end of the third quarter we were well on track to achieve our revenue and margin objectives for 2008, but we finally came in below them for the full year due to the significant slowdown in the macroeconomic environment which impacted us at the end of the fourth quarter. Nonetheless, thanks to our recurring software revenue and services and other revenue, which in combination represented about 69% of our total revenue in 2008, we were able to deliver over 8% growth in total revenue on a constant currency basis for the full year.

“For 2009, our initial objectives have been developed with the key assumption that market conditions throughout the year remain quite similar to what we experienced during the 2008 fourth quarter. Based upon this assumption, we have set an initial 2009 non-IFRS revenue growth objective range of about 1% to 3% in constant currencies. Incorporating this revenue objective with our productivity and cost initiatives, as set out below, leads us to target a stable non-IFRS operating margin in comparison to 2008 at about 25.5% and growth in non-IFRS earnings per share with an objective range of about €2.02 to €2.12. We will revise our initial objectives as warranted by changes in market conditions.

“From a cost management perspective, we undertook several restructuring initiatives during 2008. On top of this, we are moving ahead with new cost and productivity optimization measures in 2009. In combination, these programs will bring positive effects progressively during 2009 and yield further savings as we move into 2010.

“In summary, we expect 2009 to be a challenging year, but we believe our focus on operational efficiencies will both help us during the downturn and better position DS when market conditions improve.”

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 initial objectives are the following:

  • First quarter 2009 non-IFRS total revenue objective of about €325 to €335 million and non-IFRS EPS of about €0.36 to €0.42;
  • 2009 non-IFRS revenue growth objective range of about 1% to 3% in constant currencies (€1.405 to €1.425 billion based upon the 2009 currency exchange rate assumptions below.)
  • 2009 non-IFRS operating margin of about 25.5%;
  • 2009 non-IFRS EPS range of about €2.02 to €2.12;
  • Objectives are based upon exchange rate assumptions for the 2009 first quarter of US$1.30 per €1.00 and JPY 125 per €1.00 and a full year average of US$1.38 per €1.00 and JPY 129 per €1.00.

Objectives are based upon exchange rate assumptions for the 2009 first quarter of US$1.30 per €1.00 and JPY 125 per €1.00 and a full year average of US$1.38 per €1.00 and JPY 129 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: deferred revenue write-downs estimated at approximately €1.4 million for 2009; share-based compensation expense estimated at approximately €22 million for 2009 and 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 February 11, 2009.

Webcast and Conference Call Information

Dassault Systèmes will host a webcast and a conference call today, Wednesday, February 11, 2009. Management will host a webcast at 10:00 AM London time/11:00 AM CET time and will then host the conference call at 2:00 PM London time/3:00 PM CET/ 9:00 AM New York time. 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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