DS Reports 2008 Third Quarter Financial Results Well in Line With its Objectives (Revenue up 12%)

In mid-September, DS announced 3DVIA Shape 2.0, the latest release of its free 3D modeling software featuring an all new and expanded 3D remix capability, which enables users to complete 3D scenes using models contributed by other users on the 3DVIA.com content library.

DS recently announced the completion of its new green global headquarters, Dassault Systèmes Campus, with employees moving to the campus starting early November. Dassault Systèmes Campus has earned the French HQE (High Quality Environment) label.

Other Corporate Information

On October 16, 2008, Dassault Systèmes voluntary delisting from Nasdaq was completed. Dassault Systèmes has filed a Form 15F with the SEC to deregister and terminate its reporting obligations under the Exchange Act. The deregistration will become effective 90 days after the filing of the Form 15F. The Company does not plan to publish a Form 20-F for the fiscal year ended December 31, 2008.

Dassault Systèmes continues to maintain its American Depository Receipt (ADR) program, which will enable investors to retain their ADRs and facilitate trading on the U.S. Over-The-Counter (OTC) market.

Dassault Systèmes will continue to publish its financial reports, statements and press releases in English as well as information for investors on its website ( www.3ds.com) pursuant to section 12g3-2(b) of the U.S. Securities Exchange Act.

The Company intends to continue reporting and publishing quarterly unaudited financial information in U.S. GAAP for the fourth quarter 2008 reporting period in addition to reporting and filing IFRS quarterly financial information as required by the French securities regulation. Starting with fiscal year 2009, DS will solely report and publish its financial information in accordance with IFRS.

IFRS Financial Information

Dassault Systèmes expects to issue a press release on October 30, 2008 summarizing its financial results under IFRS for the three- and nine-month periods ended September 30, 2008. This press release, which will be available in both French and English, will also be posted to the Companys website.

The tables on page 13 of this press release set forth a summary reconciliation of the Companys financial results as presented under U.S. GAAP to its financial results as presented under IFRS, as well as a summary reconciliation of its supplemental non-GAAP financial information to its supplemental adjusted IFRS financial information.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, commented, Our third quarter financial performance came in well in line with our objectives, in fact, at the high end with software revenue up 12% in constant currencies and earnings per share rising 26%, demonstrating the inherent earnings leverage of our business model.

Turning to our outlook, we expect 2008 to be a year of strong, organic software growth for DS. We have factored into our fourth quarter and full year outlook the signs of weakening we saw in September due to the economic crisis. However, thanks to our diversification strategy, sales channels expansion, recurring revenue model and year-to-date results, we continue to target a non-GAAP software revenue growth objective of 12% in constant currencies. Additionally, we are increasing our 2008 non-GAAP EPS objective range to 2.15 to 2.20 from 2.10 to 2.17 previously. Our fourth quarter objective assumes a US dollar to euro exchange rate of $1.45 per 1.00, reflecting the fact that the US dollar continues to be very volatile at this point in time.

The Companys objectives are prepared and communicated only on a non-GAAP basis and are subject to the cautionary statement set forth below. The Companys objectives are the following:

  • Fourth quarter 2008 non-GAAP total revenue objective of about 385 to 395 million and non-GAAP EPS of about 0.79 to 0.84;
  • 2008 non-GAAP software revenue growth objective of about 12% growth in constant currencies from 12-13%; 2008 non-GAAP total revenue growth objective of about 9% in constant currencies from 9-10%;
  • 2008 reported non-GAAP revenue range of about 1.340 to 1.350 billion from 1.320 to 1.330 billion;
  • 2008 non-GAAP operating margin improvement objective of 50 to 100 basis points (up to about 27%) from 80 to 130 basis points;
  • 2008 non-GAAP EPS objective of about 2.15 to 2.20 per diluted share from 2.10 to 2.17 per diluted share;
  • Objectives based upon exchange rate assumptions for the 2008 fourth quarter of US$1.45 per 1.00 and JPY 145 per 1.00 and 2008 full year exchange rate assumptions of US$1.50 per 1.00 and JPY 157 per 1.00;

The non-GAAP objectives set forth above do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately 4 million for 2008; stock-based compensation expense estimated at approximately 21 million for 2008 and amortization of acquired intangibles estimated at approximately 45 million for 2008. The above objectives do not include any impact from other operating income and expense, net comprised of income and expenses in connection with the relocation of the Company s corporate headquarters and restructuring expenses, which totaled 6 million in the third quarter and 8.5 million year-to-date. These estimates also do not include any new stock option or share grants, or any new acquisitions or restructurings completed after October 29, 2008.

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