Dassault Systemes Delivers Total Revenue Growth And Raises Full-Year Financial Objectives

PARIS—(BUSINESS WIRE)—July 26, 2005— Dassault Systemes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA), a worldwide leading software developer of 3D and Product Lifecycle Management (PLM) solutions, reported financial results for the second quarter and first half ended June 30, 2005.

Second Quarter Financial and Business Highlights

-- Strong second quarter performance with revenue and earning above DS objectives

-- Total revenue EUR 217.3 million, up 13% as reported and 15% in constant currencies (up 18% in U.S. dollars)

-- Software revenue EUR 180.9 million, up 14% as reported and 16% in constant currencies

-- Process-centric revenue up 10% as reported and 12% in constant currencies

-- PDM revenue up 13% as reported and 15% in constant currencies

-- SolidWorks revenue up 26% as reported (up 32% in U.S. dollars)

-- EPS EUR 0.32 on U.S. GAAP basis and EPS up 6% to EUR 0.33 excluding acquisition costs

-- Raising revenue and EPS objectives for 2005

Bernard Charles, President and Chief Executive Officer, commented, "The second quarter was a period of very solid performance for Dassault Systemes with revenue growth of 18% in U.S. dollars. Both revenue and earnings came in above our objectives on strong growth in our V5 PLM and Mainstream 3D businesses, continuing our first quarter performance trends. The Americas had a phenomenal quarter, with sales up 41% in constant currencies, and in Europe, we experienced very good growth particularly in light of the overall economic climate. SolidWorks continued to deliver strong results on excellent execution as well as very positive secular dynamics within its market segment. Based upon our second quarter performance and our more favorable outlook for the second half of this year we are raising our full year objectives for revenue and earnings growth."

Thibault de Tersant, Executive Vice President and CFO, stated, "Our financial results clearly demonstrate that we have been making the appropriate investments from a strategic, technological and sales channel perspective to increase our growth and extend further our market leadership. Today, we are taking further initiatives, with our long-standing partner IBM, designed to accelerate PLM growth within the SMB market. Together, we see the opportunity to capture significantly greater market share among small and medium-sized companies within the PLM market by improving organizational efficiency and providing additional support to IBM Business Partners. Therefore, we have decided jointly with IBM to expand Dassault Systemes' successful experience as PLM SMB channel manager in France to a number of new countries."

Second Quarter Financial Results

Revenue

In the second quarter of 2005 total revenue was EUR 217.3 million, representing an increase of 13% as reported and 15% in constant currencies. Strong growth in software revenue drove the year-over-year increase in total revenue. In the 2004 second quarter total revenue was EUR 192.5 million.

Specifically, in the 2005 second quarter, software revenue increased 14% as reported and 16% in constant currencies. Software revenue totaled EUR 180.9 million in the recently completed quarter, compared to EUR 158.9 million in the second quarter of 2004. Recurring licenses revenue represented 51% of total software revenue in the second quarter. Service and other revenue increased 8% as reported (11% in constant currencies) to EUR 36.4 million in the second quarter of 2005, compared to EUR 33.6 million in the 2004 second quarter. New CATIA and SolidWorks seats licensed in the second quarter of 2005 increased 20% to 17,755 seats, up from 14,767 seats in the second quarter of 2004.

From a geographic perspective, revenue in the Americas increased 35% as reported and 41% on a constant currency basis, reflecting significant year-over-year growth in software revenue across all DS brands. In Europe, revenue increased 18% in comparison to the second quarter of 2004 on strong growth in software and services. And in Asia, revenues decreased 16% as reported and 14% in constant currencies during the second quarter of 2005, reflecting lower sales in Japan, a market which accounts for a large portion of revenues in the region.

In the 2005 second quarter Process-centric revenue increased 10% as reported and 12% in constant currencies on strong growth of design and PDM applications. Process-centric revenue, including PDM revenue, totaled EUR 170.7 million in the second quarter of 2005, compared to EUR 155.5 million in the year-ago period. In the 2005 second quarter PDM revenue totaled EUR 25.5 million, compared to EUR 22.5 million in the 2004 second quarter, representing increases of 13% as reported and 15% in constant currencies. For the 2005 second quarter, CATIA licenses increased 8% year over year to 8,157.

SolidWorks revenue increased 26% (32% in U.S. dollars) to EUR 46.6 million in the 2005 second quarter, compared to EUR 37.0 million in the year-ago period. SolidWorks seats licensed increased 32% year over year to 9,598 licenses with pricing up slightly on a more favorable product mix.

Operating Income and Margin and EPS

Earnings per diluted share increased 3% to EUR 0.32 in the 2005 second quarter, compared to earnings per diluted share of EUR 0.31 in the 2004 second quarter. Earnings per diluted share excluding acquisition costs increased 6% to EUR 0.33 in the second quarter of 2005, compared to earnings per diluted share excluding acquisition costs of EUR 0.31 in the 2004 second quarter.

Operating income increased 4% to EUR 54.7 million in the second quarter of 2005, (25.2% operating margin) compared to EUR 52.5 million in the year-ago period (27.3% operating margin). Operating income excluding acquisition costs increased 4% to EUR 55.2 million in the 2005 second quarter, compared to EUR 53.0 million in the 2004 second quarter. In the second quarter of 2005 the operating margin excluding acquisition costs was 25.4%, in line with the Company's objective of 25-26%. In the 2004 second quarter the operating margin excluding acquisition costs was 27.5%. Similar to the first quarter of 2005, operating income in the second quarter increased year over year, while, as anticipated, the operating margin decreased reflecting higher investment in expanding the Company's marketing and sales activities with small and medium-sized businesses (SMB).

First Half 2005 Financial Highlights

-- Total revenue EUR 416.5 million, up 13% as reported and up 15% in constant currencies

-- Software revenue EUR 348.1 million, up 13% as reported and up 15% in constant currencies

-- Process-centric revenue EUR 330.0 million, up 10% as reported and up 13% in constant currencies

-- PDM revenue EUR 48.3 million, up 14% as reported and up 16% in constant currencies

-- SolidWorks revenue EUR 86.5 million, up 24% as reported (up 30% in U.S. dollars)

-- EPS EUR 0.59 on U.S. GAAP basis

-- EPS excluding acquisition costs up 5% to EUR 0.59

Strategy, Technology and Partnerships

Mr. Charles stated, "In addition to our strong financial performance, the second quarter was a period in which we made good progress on important business initiatives across the Company. During the quarter we introduced our newest release for the PLM market, Version 5 Release 15 and were pleased that Boeing put it in production - only two days after we made it available - across its organization and among its partners for the 787 aircraft. We entered into an agreement to acquire ABAQUS and announced SIMULIA, a new scientific platform, both core components of our strategy to take a leadership position in the large, fast-growing and fragmented simulation market. In partnership with i2 Technologies Dassault Systemes is developing sourcing solutions as an integrated component of V5 PLM. Today, we are pleased to welcome to Dassault Systemes Virtools' team,experts in interactive web applications which give live behavior to 3D content, to exploit the power and value of 3D representations on the Web and for everyone."

In a separate press release issued today, DS and IBM announced plans to expand DS's role as PLM channel manager for SMB. This new initiative builds upon the success of the West Master Agent model, implemented a year ago in France, Belgium, Luxembourg and Monaco, where DS provided channel management and technical and marketing support to this network of IBM Business Partners. Pursuant to the expanded channel management provider (CMP) role, DS will now also act as CMP on behalf of IBM PLM with IBM Business Partners in United States, Germany, Switzerland, the United Kingdom, Sweden, Russia and the CIS countries.

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