DS Reports Strong First Quarter Execution With Total Revenue Up 15%

CIMdata PLM Industry Summary Online Archive

27 April 2007

Financial News

DS Reports Strong First Quarter Execution With Total Revenue Up 15%

Dassault Systèmes (DS) reported financial results for the first quarter ended March 31, 2007.

• Summary First Quarter 2007 Financial Highlights

• GAAP revenue of €290.9 million and GAAP EPS of €0.28

• Non-GAAP revenue of €294.7 million, up 15% (up 21% in constant currencies)

• Non-GAAP EPS of €0.39, up 15% after absorbing an estimated 9 point currency impact

• Total ENOVIA non-GAAP revenue up 139% in constant currencies, and up 29% in constant currencies before including MatrixOne

DS announces plans to acquire ICEM to complement DS' offering in high-end surfacing and styling

Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, "Dassault Systèmes had a very solid start to the year as the implementation of our new PLM mid-market channel and redesigned partnership with IBM are delivering results. DS achieved a 21% constant currency increase in non-GAAP revenue and non-GAAP earnings per diluted share increased 15% in the first quarter."

First Quarter 2007 Financial Summary (1)

First Quarter 2007 Financial Highlights:

First Quarter 2007 In millions of Euro, except per share data	GAAP			Non-GAAP
	Q1 2007	Growth	Growth in cc*	Q1 2007	Growth	Growth in cc*
Total Revenue	290.9	15%	21%	294.7	15%	21%
EPS	0.28	8%		0.39	15%
Operating margin	15.8%			22.1%

* in constant currencies

GAAP total revenue increased 15% to €290.9 million (21% in constant currencies) in the 2007 first quarter, with a 15% increase in software revenue and a 16% increase in services and other revenue.

Non-GAAP total revenue increased 15% to €294.7 million (21% in constant currencies), driven by a 15% increase (21% in constant currencies) in non-GAAP software revenue and a 16% increase (22% in constant currencies) in non-GAAP services and other revenue.

• All geographic regions contributed to the increase in total GAAP revenue, with Europe up 10%, the Americas up 27% (38% in constant currencies) and Asia increasing 11% (22% in constant currencies).

• From a segment perspective, both Product Lifecycle Management ("PLM") and Mainstream 3D posted strong year-over-year growth. PLM non-GAAP revenue increased 16% (23% in constant currencies). In Mainstream 3D, non-GAAP revenue increased 10% (16% in constant currencies) with new licenses increasing 15% to 11,813 driven by strong SolidWorks results.

• ENOVIA helped drive the year-over-year growth in PLM, with ENOVIA non-GAAP revenue increasing 139% in constant currencies; excluding MatrixOne, ENOVIA non-GAAP revenue increased 29% in constant currencies.

• DS' PLM results in the first quarter also benefited from a good performance by CATIA, a strong start of the year from SIMULIA in the simulation market, and increased traction in the aerospace industry for DELMIA in digital manufacturing.

• Both CATIA and SolidWorks contributed to the 9% growth in new licenses which totaled 19,625 in the 2007 first quarter.

Bernard Charlès stated, "The first quarter reflected a good dynamic with large companies and our indirect channels. We enjoyed solid PLM mid-market end-user results, demonstrating this market's potential to drive CATIA growth. In PDM, our ENOVIA portfolio is building momentum as evidenced by its strong performance during the first quarter. It is clear that we are advancing our ENOVIA market position with key wins in automotive, aerospace and heavy industries, increased traction in the mid-market and continued diversification into new market segments."

GAAP earnings per diluted share increased 8% to €0.28 in the 2007 first quarter.

Non-GAAP earnings per diluted share increased 15% to €0.39, largely reflecting higher operating income, which enabled DS to absorb an estimated nine point negative currency impact. In the 2007 first quarter the US dollar and Japanese yen weakened on average approximately 9% and 11%, respectively, compared to the 2006 first quarter.

Cash flow and other financial highlights

Net operating cash flow was €108.4 million for the first quarter ended March 31, 2007. Cash and short-term investments totaled €562.1 million and long-term debt was €204.1 million at March 31, 2007.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, commented, "The first quarter was rewarding with non-GAAP revenue, non-GAAP operating margin and non-GAAP EPS coming in above our objectives. We are raising our full year 2007 non-GAAP revenue growth objective in constant currencies to about 13% to take into account a portion of the over-performance during the first quarter. Thanks to our first quarter as well as anticipated operating leverage, we are maintaining our full year 2007 non-GAAP operating margin and non-GAAP EPS objectives, in spite of having to absorb additional currency impact, as we have updated our dollar and yen currency exchange rate assumptions."

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

• Second quarter non-GAAP total revenue objective of about €298 to €302 million, non-GAAP EPS of about €0.38 to €0.40 and non-GAAP operating margin of about 22%;

• 2007 non-GAAP total revenue objective of about 13% growth in constant currencies (previously 12-13%);

• 2007 non-GAAP EPS objective of about €2.00 to €2.05, representing about 9% to 12% growth, unchanged from the prior outlook;

• 2007 non-GAAP operating margin objective of about 27%, unchanged from the prior outlook;

• Objectives based upon exchange rate assumptions for the remaining 2007 quarters of US$1.35 (from 1.30 previously) per €1.00 and JPY 160 (from 155 previously) per €1.00, which are updated from the prior outlook;

• 2007 non-GAAP revenue range of about €1.275 to €1.285 billion, updated from the prior outlook.

The non-GAAP objectives set forth above do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €8 million for 2007; stock-based compensation expense estimated at approximately €13 million for 2007, and amortization expense for acquired intangibles estimated at approximately €11 million per quarter. These estimates do not include any new stock option or share grants, or any new acquisitions completed during 2007, including today's announcement regarding the proposed acquisition of ICEM.

Annual Shareholders' Meeting date and cash dividend recommendation

The Annual Shareholders' Meeting has been scheduled for June 6, 2007. The Board of Directors has recommended an annual cash dividend equivalent to €0.44 per share, representing €50.9 million in the aggregate, for the fiscal year ended December 31, 2006. The declaration and payment of any cash dividend is subject to approval by shareholders at the Annual Shareholders' Meeting.

Strategy, Technology, Customers and Partnerships

In a separate press release being issued today, DS announced that it has entered into an acquisition agreement, pursuant to which DS would acquire ICEM, a leading provider of styling, high quality surface modeling and rendering solutions, for an estimated cash purchase price of €51.4 million. The completion of the agreement is subject to closing conditions. DS has not included ICEM in its current financial objectives, but if the transaction is completed, ICEM is not expected to be dilutive to DS' non-GAAP earnings.

In April, Dassault Systèmes was named the PLM market leader in CIMdata's 2006 PLM Market Analysis. In the report, CIMdata calculated Dassault Systèmes 'market footprint' at $2.9 billion or over $800 million more than the nearest competitor. The report defines 'market footprint' as the company's direct and partner-generated PLM revenues. CIMdata also ranked Dassault Systèmes as the leader in direct revenues at $1.5 billion, or almost $300 million more than the nearest competitor. The report also ranked DS first in revenue of the PLM 'mindshare leaders'. Mindshare leaders, as defined by CIMdata, are the companies with the largest and most innovative PLM implementations, and those perceived by customers as thought and technology leaders.

In March, DS announced that Volkswagen AG will implement DELMIA Process Engineer (DPE) software throughout its organization. On the basis of a group-wide agreement, DPE will be employed in all production sites for strategic assembly planning for the Volkswagen, Audi, Skoda and Seat brands. This will lead to improved planning reliability, shorter planning times, and a reduction of development costs.

Conference call information

Dassault Systèmes will host a teleconference call today, Friday, April 27, 2007 at 3:00 PM CET/2:00 PM London/9:00 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 at 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.

(1) Dassault Systèmes completed the acquisitions of ABAQUS, Inc. in October, 2005 and MatrixOne Inc. in May, 2006 and has accounted for these acquisitions pursuant to U.S. GAAP ("GAAP"). In addition to GAAP information, this press release presents supplemental non-GAAP financial information which reflects certain adjustments to our GAAP information. The supplemental non-GAAP financial information adjusts our GAAP financial information to exclude: (i) deferred revenue adjustments, (ii) amortization of acquired intangibles and (iii) stock-based compensation expense and (iv) one-time, tax restructuring effects, as applicable. See Attachment A of this press release for an explanation of these adjustments, and tables which set forth the most comparable GAAP financial measures and a reconciliation of the GAAP and non-GAAP financial data.

Forward-looking information

Statements herein that are not historical facts but express expectations or objectives for the future, including but not limited to statements regarding our non-GAAP financial performance objectives, are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended).

Such forward-looking statements are based on our management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results or performances may differ materially from those in such statements due to a range of factors. In preparing such forward-looking statements, we have in particular assumed an average euro to U.S. dollar exchange rate of $1.35 per €1.00 and an average euro to Japanese yen exchange rate of JPY160 to €1.00 for the last three quarters of 2007; however, currency values fluctuate, and our results of operations may be significantly affected by changes in exchange rates. We have also assumed that there will be no substantial decline in general levels of corporate spending on information technology, and that our increased responsibility for both indirect and direct PLM sales channels, and the resulting commercial and management challenges, will not prevent us from maintaining growth in revenues or cause us to incur substantial unanticipated costs and inefficiencies. Our actual results or performance may also be materially negatively affected by difficulties or adverse changes affecting our partners or our relationships with our partners, including our longstanding, strategic partner, IBM; new product developments and technological changes; errors or defects in our products; growth in market share by our competitors; and the realization of any risks related to the integration of MatrixOne or any other newly acquired company and internal reorganizations. Unfavorable changes in any of the above or other factors described in the Company's SEC reports, including the Form 20-F for the year ended December 31, 2005, which was filed with the SEC on June 30, 2006, could materially affect the Company's financial position or results of operations.

Additional financial information is available at http://www.3ds.com/corporate/investors/earnings/ .

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