Dassault Systemes Reports Revenue Growth In Q1

PARIS—(BUSINESS WIRE)—May 4, 2006— Dassault Systemes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA), a world leader in 3D and Product Lifecycle Management (PLM) solutions, reported financial results for the first quarter ended March 31, 2006.

First Quarter Highlights

-- GAAP total revenue of EUR 252.1 million, up 27% as reported and 23% in constant currencies

-- Non-GAAP total revenue of EUR 256.0 million, up 29% and 25% in constant currencies, with revenue excluding ABAQUS up 14% in constant currencies

-- GAAP software revenue of EUR 213.1 million, up 27% and 24% in constant currencies

-- Non-GAAP software revenue of EUR 217.0 million, up 30% and 26% in constant currencies

-- GAAP EPS of EUR 0.26; Non-GAAP EPS up 26% to EUR 0.34 with operating margin of 23.6%

-- Proposed acquisition of MatrixOne on track for possible mid-May completion

-- 2006 financial objectives updated due to better first quarter performance, change in yen/euro exchange rate assumption and MatrixOne proposed acquisition

Bernard Charles, Dassault Systemes President and Chief Executive Officer, commented, "Dassault Systemes delivered a very solid first quarter with revenues up 25% in constant currencies and earnings per share increasing 26%. Strength across our product lines and across all geographic regions drove our results. This strong financial performance demonstrates the benefits of our focus on continued expansion of our SolidWorks channel capacity as well as further enhancement of the coverage and value of our PLM channel working with IBM. Good progress has been made on the ABAQUS integration front, thanks to our V5 infrastructure, with its open architecture, enabling the integration of a wide range of applications."

"The proposed acquisition of MatrixOne is ahead of our initial timetables, and subject to their shareholders' approval, we expect to close by mid-May. MatrixOne brings important assets to our product portfolio, as its capabilities support business process modeling and bring wider industry coverage, positioning us to extend our presence in such industries as high tech, semiconductors and consumer goods. Moreover, these assets will also benefit our partners through enterprise integration of heterogeneous systems to accelerate PLM implementations."

First Quarter Financial Results

Dassault Systemes completed the acquisition of ABAQUS, Inc. in October, 2005 and has accounted for the acquisition pursuant to U.S. GAAP (hereinafter GAAP) purchase accounting rules. Certain supplementary information is provided in this press release which is not in conformity with GAAP. See tables for a reconciliation of 2006 and 2005 first quarter GAAP and Non-GAAP financial data.


GAAP Revenue Discussion

Both GAAP and Non-GAAP revenue growth reflected broad-based strength across DS product lines. For the first quarter of 2006 GAAP total revenue increased 27% to EUR 252.1 million (23% in constant currencies), compared to EUR 199.2 million in the first quarter of 2005. GAAP software revenue increased 27% to EUR 213.1 million and increased 24% in constant currencies.

In the 2006 first quarter, service and other revenue increased 22% as reported to EUR 39.0 million and increased 19% in constant currencies, compared to EUR 32.0 million in the year-ago quarter.

Non-GAAP Revenue Discussion

Total revenue increased 29% to EUR 256.0 million and increased 25% in constant currencies compared to the year-ago quarter. Software and service revenue represented 85% and 15% of Non-GAAP total revenue in the 2006 first quarter.

Software revenue increased 30% to EUR 217.0 million and increased 26% in constant currencies on strong growth of the Company's major software applications and the inclusion of ABAQUS. In the 2005 first quarter software revenue was EUR 167.2 million. New CATIA and SolidWorks seats licensed in the 2006 first quarter increased 11% to 17,944 seats, compared to 16,122 in the 2005 first quarter.

PLM (Process-centric) revenue increased 28% and 24% in constant currencies in the 2006 first quarter, primarily due to year-over-year growth of design and PDM applications and the inclusion of ABAQUS. PLM revenue was EUR 203.7 million in the first quarter of 2006, up from EUR 159.3 million in the year-ago quarter. PDM revenue, on a stand-alone basis, increased 15% as reported to EUR 26.3 million and increased 12% in constant currencies, compared to EUR 22.8 million in the 2005 first quarter on a good ENOVIA performance. CATIA seats licensed in the first quarter totalled 7,673, representing year-over-year growth of 2%.

First quarter 2006 financial results included ABAQUS, which the Company acquired in early October, 2005. For the 2006 first quarter, ABAQUS' revenue contribution, which is included in PLM results, was EUR 23 million before the impact of the deferred revenue write-down required under GAAP purchase accounting treatment.

Mainstream 3D market (design-centric) revenue increased 31% as reported and 28% in constant currencies to EUR 52.3 million in the 2006 first quarter, up from EUR 39.9 million in the 2005 first quarter. SolidWorks seats licensed increased 19% to 10,271 licenses.

From a regional perspective, all regions contributed to the strong growth in total revenue, led by Asia. Specifically, in Asia, revenue was higher by 32% as reported and 31% in constant currencies. In the Americas, revenue rose 39% and 28% in constant currencies. In Europe, revenue increased 21%. For the 2006 first quarter, Europe represented 44% of total revenue, the Americas represented 30% and Asia accounted for 26%.

Operating Income and Margin and EPS

GAAP earnings per diluted share decreased 4% to EUR 0.26 in the 2006 first quarter, compared to EUR 0.27 in the first quarter of 2005. GAAP operating income increased 5% to EUR 47.2 million (18.7% operating margin) in the recently completed quarter, compared to EUR 45.1 million in the 2005 first quarter (22.6% operating margin).

Non-GAAP earnings per diluted share increased 26% to EUR 0.34 in the 2006 first quarter, up from EUR 0.27 in the year-ago quarter. Non-GAAP operating income increased 33% to EUR 60.5 million in the 2006 first quarter, up from EUR 45.4 million in the 2005 first quarter. The Non-GAAP operating margin was 23.6% in the 2006 first quarter, ahead of the 22.8% for the 2005 first quarter.

Other financial highlights

At March 31, 2006, cash and short-term investments totaled EUR 684.0 million, compared to EUR 379.9 million at December 31, 2005. In December 2005, DS signed a 5-year revolving credit facility for up to EUR 200 million and during the first quarter the Company drew down the entire amount in connection with the anticipated funding of the MatrixOne acquisition. Net operating cash flow was EUR 101.2 million for the 2006 first quarter.

Highlights of first quarter wins included among others:

-- Airbus is expanding its usage of DELMIA, adding DELMIA V5 Robotics to simulate, validate and program the robotics assembly lines in association with CAA V5 partner, CENIT.

-- CLAAS is moving ahead with a full migration to DS Version 5 PLM with CATIA, ENOVIA and SMARTEAM as well as adding DELMIA.

-- Mayer & Cie is taking additional seats of CATIA V5 and SMARTEAM.

-- Daehan is purchasing CATIA and SMARTEAM licenses.

-- SolidWorks commercial wins in the quarter included Baker Oil Tools and Garmin Inc, and educational highlights included Knox County Schools, Middle Tennessee State University and Instituto Tecnologica de Durango.

Annual Shareholders' Meeting date and cash dividend recommendation

The Annual Shareholders' Meeting has been scheduled for June 14, 2006. The Board of Directors has recommended an annual cash dividend equivalent to EUR 0.42 per share, representing EUR 48.3 million in the aggregate, for the fiscal year ended December 31, 2005, and an 11% increase from last year's dividend per share. The declaration and payment of any cash dividend is subject to approval by shareholders at the Annual Shareholders' Meeting.

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