CIMdata PLM Industry Summary Online Archive
October 25, 2004
Financial News
Dassault Systèmes Reports Third Quarter Financial Results with Software Revenue up 17%, Total Revenue up 14% and EPS up 14%
Dassault Systèmes, a worldwide leading software developer of 3D and Product Lifecycle Management (PLM) solutions, reported financial results for the third quarter and nine months ended September 30, 2005.
Third Quarter Financial and Business Highlights
• Total revenue EUR 213.8 million, up 14% as reported and in constant currencies
• Software revenue EUR 183.3 million, up 17% as reported and in constant currencies
• Process-centric revenue EUR 170.4 million, up 11% as reported and 12% in constant currencies
• PDM revenue EUR 26.5 million, up 12% as reported and in constant currencies, with PDM software end-user revenue up 33%
• SolidWorks revenue EUR 43.4 million, up 24% as reported (up 24% in U.S. dollars)
• EPS EUR 0.32 on U.S. GAAP basis and EPS EUR 0.32 excluding acquisition costs, up 14%
• Providing initial 2006 financial objectives
Bernard Charles, President and Chief Executive Officer, commented, "Strong growth across our software applications drove our third quarter financial performance, enabling Dassault Systèmes to report a 17% increase in software revenue, and a 14% increase in earnings per share. We were particularly pleased with the third quarter and year-to-date progress in the Americas region, where we are successfully further expanding our market presence and increasing our market share. Our record performance in the Americas in 2005 to-date reflects contributions across all our software applications and market segments, reflecting strong customer demand for our PLM solutions and the effectiveness of our partnership with IBM. More specifically, building upon strong growth of CATIA V5, our total PLM software sales rose 28% in the Americas year-to-date. Our performance in V5 PLM was also mirrored in the Mainstream market with SolidWorks, where software revenues increased 26% in the Americas during this same time-period.
"DS is on track in 2005 to deliver another year of accelerating revenue growth based upon our year-to-date performance and fourth quarter outlook. Looking to 2006 we believe DS is well-positioned to sustain the dynamics of strong revenue and earnings growth as we continue to penetrate and enlarge our addressable markets."
Third Quarter Financial Results
Revenue
Total revenue increased 14% as reported and in constant currencies to EUR 213.8 million in the third quarter of 2005, up from EUR 188.0 million in the year-ago quarter. Strong growth in software revenue drove the year-over-year increase in total revenue. Total software revenue represented 86% of total revenue with service revenue accounting for the remaining 14% of total revenue in the third quarter of 2005.
Total software revenue increased 17% (as reported and in constant currencies) to EUR 183.3 million in the third quarter of 2005, on strong growth across the Company's software applications. In the third quarter of 2004 total software revenue was EUR 156.7 million. Recurring licenses revenue represented 52% of total software revenue in the third quarter of 2005. New CATIA and SolidWorks seats licensed in the third quarter of 2005 increased 12% to 15,717 seats, compared to 14,002 seats in the year-ago period, with pricing up 3% for CATIA and up 4% in U.S. dollars for SolidWorks.
Service and other revenue decreased 3% as reported and 2% in constant currencies to EUR 30.5 million in the third quarter of 2005, compared to EUR 31.3 million in the third quarter of 2004, solely due to customer deferrals related to the execution of several consulting contracts in Europe. The Company noted that its CMP activity, the Channel Management Provider model, focused on PLM opportunities in the small- and medium-sized business (SMB) market, was well on track in the quarter.
Looking at total revenue by geographic regions, the Americas represented 35% of total revenue, Asia was 25% and Europe accounted for 40% of total revenue in the third quarter of 2005. In the Americas, total revenue increased 23% as reported and in constant currencies on strong year-over-year growth in software revenue among the Company's major brands. Similarly, in Asia, total revenue increased 23% as reported and 24% in constant currencies year over year, with good contributions from all major brands. In Europe, following a very strong first half performance, total revenue increased 2% year over year, largely reflecting lower than anticipated service revenue as noted above.
Process-centric revenue increased 11% as reported and 12% in constant currencies in the third quarter of 2005 largely reflecting strong software growth across design, digital manufacturing and PDM applications. In the third quarter of 2005, Process-centric revenue, including PDM revenue, totaled EUR 170.4 million, compared to EUR 153.0 million in the third quarter of 2004. PDM revenue increased 12% as reported and in constant currencies to EUR 26.5 million, compared to EUR 23.7 million in the year-ago period, on strong growth in software revenue. PDM software end-user revenue increased 33% in the 2005 third quarter, compared to the year-ago period. For the 2005 third quarter, CATIA licenses increased 7% year over year to 7,712.
In the Mainstream market, SolidWorks revenue increased 24% (24% in U.S. dollars) to EUR 43.4 million in the third quarter of 2005, up from EUR 35.0 million in the year-ago quarter. SolidWorks seats licensed increased 18% to 8,005 licenses.
Operating Income and Margin and EPS
Earnings per diluted share increased 14% to EUR 0.32 in the third quarter of 2005, compared to earnings per diluted share of EUR 0.28 in the third quarter of 2004. Earnings per diluted share excluding acquisition costs increased 14% to EUR 0.32 in the third quarter of 2005, compared to earnings per diluted share excluding acquisition costs of EUR 0.28 in the year-ago period.
In the third quarter of 2005 operating income increased 10% to EUR 50.5 million (23.6% operating margin), compared to EUR 46.1 million in the year-ago quarter (24.5% operating margin). Operating income excluding acquisition costs increased 10% to EUR 50.8 million in the recently completed quarter, compared to EUR 46.3 million in the third quarter of 2004. The operating margin excluding acquisition costs was 23.8% in the third quarter of 2005, coming in above DS's objective on a higher level of software revenue. In the year-ago quarter, the operating margin excluding acquisition costs was 24.6%.
Nine-month Financial Highlights
• Total revenue EUR 630.3 million, up 13% as reported and up 15% in constant currencies
• Software revenue EUR 531.4 million, up 14% as reported and up 16% in constant currencies
• Process-centric revenue EUR 425.6 million, up 10% as reported and up 12% in constant currencies
• PDM revenue EUR 74.8 million, up 13% as reported and up 15% in constant currencies, with software end-user revenue up 26%
• SolidWorks revenue EUR 129.9 million, up 24% as reported (up 28% in U.S. dollars)
• EPS EUR 0.91 on U.S. GAAP basis
• EPS excluding acquisition costs up 10% to EUR 0.92
Strategy, Technology and Partnerships
Bernard Charles stated, "We completed the acquisition of ABAQUS in early October. I am pleased to report that the closing process went very smoothly. In fact, at the time of the completion of the acquisition, our new organization was ready to hit the ground running, with our simulation teams at both ABAQUS and CATIA working together."
DS completed the acquisition of ABAQUS Inc., the established leader in advanced finite element analysis software on October 4, 2005. The all-cash purchase price was US$413 million, before cash balances and tax benefits. ABAQUS, a wholly-owned subsidiary of DS, employs about 500 people worldwide, with its headquarters located in Providence, RI, USA, and R&D centers in Providence and in Suresnes, France. ABAQUS has 29 offices for technical support, sales and services, plus a network of distributors in emerging markets.
In a separate press release issued today, ABAQUS announces that BMW Group has adopted ABAQUS software as the basis for all its vehicle crashworthiness simulation. The decision comes after an intensive four-year technical collaboration during which the two companies worked together to advance ABAQUS software to meet BMW's requirements on accuracy and robustness.
In a separate press release also issued today, DS announces that Spirit AeroSystems, the world's largest independent supplier of structures for commercial aircraft, will use CATIA V5 for design, ENOVIA LCA for product data management, and DELMIA for digital manufacturing simulation.
During the quarter DS announced that Northrop Grumman Corporation, the global aerospace and defense company, had reached a key milestone in the development of the U.S. Navy's first digitally designed and produced aircraft carrier, the CVN-21. As part of this project, Northrop Grumman Newport News has rolled out a 1,700 user implementation of CATIA and a 2,000 user implementation of ENOVIA. In addition, Northrop Grumman Newport News is also planning a migration to DS V5 solutions.
Working closely with the education community around the world, SolidWorks was pleased to have been selected by the Norwegian Education System, who will purchase up to 30,000 licenses of SolidWorks software as part of its program to strengthen the country's manufacturing industry. It is anticipated that more than 60,000 high school and junior high school students will learn CAD skills as SolidWorks becomes the most widely taught CAD software in the Nordic region.
SolidWorks recently announced that its DWGgatewayT data translation tool now offers the ability to publish AutoCAD designs in the popular Adobe Portable Document Format (PDF). This new capability makes it easy for design engineers to share designs with anyone, regardless of whether the recipient has AutoCAD software.
The DWGgateway tool enables any AutoCAD software user to open and edit any DWG file. In this way, the DWGgateway software tool fosters open collaboration and saves users the time and money of unnecessarily implementing new products.
DS and Microsoft announced that as part of their strategic alliance, they will make V5 PLM available for Microsoft® Windows® XP Professional x64 Edition, including versions of CATIA V5, DELMIA V5, ENOVIA V5 and SMARTEAM. These versions will take advantage of the full power of the Windows 64-bit architecture to enable customers to create, analyze and manage very large assemblies and complex products, such as entire automobiles or aircraft. This capability considerably reduces product development cycles by accelerating design and enhancing design reviews, product optimization and decision support.
DS and IBM have teamed up to integrate IBM Lotus Notes and DS 3D XML technology, which will be delivered with the next release version of 3D XML Player fully supporting Lotus Notes. The 3D XML Player for Lotus Notes gives users outside the engineering department the ability to enhance collaboration and joint decision-making by sharing product and business information with other knowledge workers from their desktops, through the traditional Lotus Notes interface.
DS and IBM recently signed an agreement in services around Product Lifecycle Management designed to help customers accelerate their business transformations, of which PLM is a key component. Clients will benefit from the combination of IBM's consulting and project management skills and DS software technology and technical expertise. This agreement, between IBM Global Service Business Consulting Group and DS Services, reinforces the nearly 25-year, strategic partnership between DS and IBM.
DS recently achieved a new milestone in its Component Application Architecture Version 5 (CAA V5) Software Community Program. The program now includes more than 360 applications to be delivered in Version 5 Release 16 of DS' PLM portfolio. The CAA V5 open software development platform enables customers, partners and independent software companies to design leading-edge applications that seamlessly complement DS' PLM portfolio.
In August, VirtoolsT a company acquired by DS earlier this year, announced the availability of Virtools Software Suite 3.5. Virtools Software Suite 3.5, a set of comprehensive software development solutions for building highly interactive 3D content, is the result of extensive client and partner feedback. Virtools Software Suite 3.5 addresses development and production needs for Virtools' target customers in the industrial, game development and multimedia markets.
Business Outlook
Thibault de Tersant, Executive Vice President and CFO, stated, "Business opportunities are good. There is strong demand for our software applications and we see this continuing. As a result, we are comfortable with our revenue growth outlook for 2005 and are raising our 2005 EPS objective, as we did in the first and second quarters of this year.
"We are adjusting our revenue objective for 2005 to reflect the inclusion of ABAQUS following the completion of this acquisition in early October. Our new objective for 2005, before the deferred revenue write-down, is to grow total revenue about 17-18% in constant currencies, with approximately EUR 20 million or two points of growth coming from the inclusion of ABAQUS. Therefore, we are essentially reconfirming our previous revenue growth objective of 15-16% which we set at the end of the second quarter.
"We are increasing our EPS growth objective to 15-16% from 12-13%, reflecting better performance in the third quarter and the inclusion of ABAQUS going forward. This objective is given excluding acquisition costs and before the deferred revenue write-down.
"Specifically, our objectives as well as key data for the fourth quarter and year are listed below:
• Fourth quarter total revenue of about EUR 300-305 million, with ABAQUS estimated revenue contribution of about EUR 20 million before the deferred revenue write-down;
• Fourth quarter EPS excluding acquisition costs of about EUR 0.64-0.66, with ABAQUS estimated contribution of EUR 0.01 before the deferred revenue write-down;
• 2005 total revenue of about EUR 930-935 million, with ABAQUS estimated revenue contribution of about EUR 20 million before deferred revenue write-down, compared to the previous objective of EUR 910-915 million;
• 2005 EPS objective, excluding acquisition costs and before deferred revenue write-down, about EUR 1.56-1.58, representing 15-16% growth, compared to our previous EPS objective, excluding acquisition costs, of EUR 1.52-1.53, representing 12-13% year-over-year-growth;
• 2005 operating margin of about 28.5-29% excluding acquisition costs and deferred revenue write-down (0.2% dilution estimated from ABAQUS before deferred revenue write-down), compared to our previous objective of about 29% for 2005;
• Estimated deferred revenue write-down of about EUR 10 million for the 2005 fourth quarter;
• No change to our currency exchange rate assumptions of US$1.25 to 1 euro;
"As has been our practice, we are providing our preliminary financial objectives for 2006. Our 2006 constant currency revenue growth objective is about 17-18%, including 7 points of growth from ABAQUS, before the deferred revenue write-down. This leads to a total revenue range for 2006 of about EUR 1.105-1.115 billion, before an estimated EUR 8-9 million deferred revenue write-down, assuming a US$1.25 per euro exchange rate. Looking at profitability in 2006, our goals are to deliver a stable operating margin and a similar level of earnings growth in comparison to 2005, before acquisition costs, deferred revenue write-down and share-based compensation."
Further details including financial charts can be found on the Dassault Systèmes website.
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