DS Reports 2008 Third Quarter Financial Results Well in Line With its Objectives

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 Companys 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.

Webcast and conference call information

Dassault Systèmes will host a webcast and a conference call today, Wednesday, October 29, 2008. Management will host a webcast at 8:30 AM London time/9:30 AM CET time and will then host a conference call at 2:00 PM London time/3:00 PM CET/ 10:00 AM New York time. The webcast and 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 webcast or conference call to register, download and install any necessary audio software.

The webcast and conference call will be archived for 30 days. 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.

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 U.S. dollar to euro exchange rate of US$1.45 per 1.00 and an average Japanese yen to euro exchange rate of JPY145 to 1.00 for the 2008 fourth quarter and an average U.S. dollar to euro exchange rate of US$1.50 per 1.00 and an average Japanese yen to euro exchange rate of JPY157 to 1.00 for the full year 2008; 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 although we have tried to factor in the potential impact of the current global financial crisis on our fourth quarter objectives, 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 the current global financial crisis, 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 any 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, 2007, which was filed with the SEC on April 4, 2008, could materially affect the Company s financial position or results of operations.

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