Dassault Systemes Reports Strong Q2 Financials

PARIS—(BUSINESS WIRE)—July 27, 2006— Dassault Systemes (DS) (Nasdaq: DASTY) (Paris: DSY), a world leader in 3D and Product Lifecycle Management (PLM) solutions, reported financial results for the second quarter and six months ended June 30, 2006.

Second Quarter Highlights

-- GAAP total revenue up 29% to EUR 280.0 million; GAAP software revenue up 32% to EUR 238.0 million; GAAP EPS of EUR 0.25

-- Non-GAAP total revenue up 32% to EUR 286.0 million (up 33% in constant currencies);

-- Non-GAAP software revenue up 35% to EUR 244.0 million, (up 36% in constant currencies); excluding ABAQUS and MatrixOne, Non-GAAP software revenue up 16% (17% in constant currencies)

-- Non-GAAP EPS up 12% to EUR 0.37 on operating margin of 24.5%

-- MatrixOne achieves break-even in first period following acquisition

-- Non-GAAP PLM revenue up 35% (36% in constant currencies)

-- DS raises 2006 EPS and constant currency revenue growth objectives; reconfirms 2006 operating margin objective

Bernard Charles, Dassault Systemes President and Chief Executive Officer, commented, "DS had a great second quarter, with revenue, earnings and operating margin coming in above our objectives. Software revenue increased 36% in constant currencies on broad-based strength, with CATIA results providing a solid foundation. The strong performance of our sales organization and partners, including IBM, business partners and the SolidWorks channel, contributed to this excellent quarter.

"We continue to see good dynamics for our business in Asia, where revenues increased 49% in constant currencies for the second quarter. In particular, the level of interest in PLM remains high in Asia and we see this continuing as evidenced by record attendance at our major user conferences in Japan and China in July.

"In summary, DS is very well positioned for growth in 2006 and the coming years as the leading provider in PLM, which is mission critical for product development performance and innovation. We have continued to gain market share in the first half of 2006 and with our recent acquisitions of both ABAQUS and MatrixOne we are further expanding our addressable market. Working together with our customers and partners, we expect to continue to extend the value PLM brings to multiple industries."

Thibault de Tersant, Executive Vice President and CFO of Dassault Systemes, commented, "MatrixOne is delivering on all of our acquisition objectives. MatrixOne's performance exceeded our targets and it is already at break-even in its first period of operation as a part of Dassault Systemes. And our plans to achieve cost savings are solidly on track."

Second Quarter Financial Results

Dassault Systemes completed the acquisition of ABAQUS, Inc. in October, 2005 and MatrixOne Inc. in May, 2006 and has accounted for these acquisitions 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 second quarter and six month GAAP and Non-GAAP financial data.


GAAP Revenue Discussion

Revenue growth reflected broad-based strength across DS software applications. GAAP total revenue increased 29% to EUR 280.0 million for the 2006 second quarter, compared to EUR 217.3 million in the year-ago quarter. GAAP software revenue increased 32% to EUR 238.0 million in the recently completed quarter.

Service and other revenue increased 15% to EUR 42.0 million in the 2006 second quarter, compared to EUR 36.4 million in the 2005 second quarter.

Non-GAAP Revenue Discussion

In the 2006 second quarter, total revenue increased 32% to EUR 286.0 million and increased 33% in constant currencies compared to the year-ago period on strong growth in software revenue. Software revenue in the 2006 second quarter increased 35% to EUR 244.0 million and increased 36% in constant currencies. Excluding ABAQUS and MatrixOne, software revenue increased 17% in constant currencies on broad strength. In the 2005 second quarter, software revenue was EUR 180.9 million. Software and service revenue represented 85% and 15% respectively of Non-GAAP total revenue in the 2006 second quarter. New CATIA and SolidWorks seats licensed increased 15% to 20,485 seats in the 2006 second quarter, compared to 17,755 in the year-ago period.

For the 2006 second quarter, PLM revenue increased 35% to EUR 229.9 million, and increased 36% in constant currencies, up from EUR 170.7 million in the year-ago quarter. ENOVIA revenue increased 88% and 90% in constant currencies, and excluding MatrixOne, ENOVIA revenue grew 19% in constant currencies. Underlying the strong growth of PLM was CATIA, with a good level of activity. In particular, CATIA seats licensed increased 12% to 9,100 in the 2006 second quarter.

ABAQUS had a solid quarter with revenue of EUR 23.2 million and MatrixOne's revenue totaled EUR 17.8 million, both before the impact of the deferred revenue write-downs required under GAAP purchase accounting treatment. ABAQUS and MatrixOne software applications are included in PLM results.

SolidWorks revenue increased 20% to EUR 56.1 million and increased 22% in constant currencies in the recently completed quarter, compared to EUR 46.6 million in the 2005 second quarter. SolidWorks seats licensed increased 19% to 11,385 licenses for the second quarter.

From a regional perspective, 2006 second quarter revenue in Europe increased 35%, in the Americas it increased 20% (19% in constant currencies) and in Asia, revenue increased 42% (49% in constant currencies).

Operating Income and Margin and EPS

GAAP earnings per diluted share decreased 22% to EUR 0.25 in the 2006 second quarter, compared to EUR 0.32 in the year-ago period. GAAP operating income decreased 9% to EUR 49.7 million (17.8% operating margin) in the 2006 second quarter, compared to EUR 54.7 million in the 2005 second quarter (25.2% operating margin).

Non-GAAP earnings per diluted share increased 12% to EUR 0.37 in the 2006 second quarter, up from EUR 0.33 in the 2005 second quarter. Non-GAAP operating income increased 27% to EUR 70.2 million in the 2006 second quarter, compared to EUR 55.2 million in the year-ago quarter. The Non-GAAP operating margin was 24.5% in the 2006 second quarter, ahead of the Company's stated objective. This was a solid performance compared to the Non-GAAP operating margin of 25.4% in the year-ago quarter, given the dilution from recent acquisitions.

Other financial highlights

Net operating cash flow was EUR 63.7 million and EUR 164.9 million for the second quarter and six months ended June 30, 2006, respectively. At June 30, 2006, cash and short-term investments totaled EUR 473.5 million and long-term debt was EUR 202.9 million. In May 2006, DS finalized the acquisition of MatrixOne Inc. for an all cash purchase price of $410 million in aggregate, before reflecting a cash balance of US$93 million and estimated tax benefits.

Second quarter customer highlights included, among others:

-- In a separate press release today, DS is announcing that Airbus is standardizing product development processes on CATIA and ENOVIA VPLM for all new programs.

-- In a separate press release today, DS is announcing that Ford Motor Company has extended its multi-year contract, which designates CATIA V5 as the global design and engineering standard for all new vehicle and powertrain systems development.

-- New PLM wins and reorders included Legrand in E&E (electrical and electronics), Viking in Consumer goods, Mecasonic and Tokyu Car in F&A, the Quai Branly Museum, Keylex in Automotive and Kaji Metal in Aerospace.

-- ENOVIA MatrixOne closed 18 transactions in the Semiconductor sector, including significant orders from Qualcomm and Agere, and expanded its presence in the apparel sector with Luxottica and Quiksilver.

-- SolidWorks wins included Fuji Xerox Co. in E&E in Japan, and in F&A, Comact Equipment in Canada, Hoffman Enclosures in the United States, Knipex in Germany and Metal Saur in Brazil.

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