MCAD Industry View – A March 2010 Update

Looking forward, we have laid the ground-work for our growth over the next five years, thanks to the industry's largest sales capacity, our Version 6 platform and our wide applications portfolio. All this is coming at the right time to help our customers address their new challenges to advance sustainable innovation. As a result, we believe Dassault Systèmes will be very well positioned to leverage market conditions as they improve.

Headquartered in Paris, the ESI Group will not report the results of its fiscal year until March 15, 2010, for the quarter and year ending January 31, 2010. However, the abridged results for the quarter ending October 31, 2009 were released by ESI Group on December 15, 2009, and are summarized below.

Revenue for the third fiscal quarter ending October 31, 2009 was 13.8 million euros, compared to 16.4 million euros in Q1 (ending April 30, 2009) and 14.8 million euros in Q2 (ending July 31, 2009). These revenue figures compare to 13.4, 14.7 and 14.6 million euros for equivalent quarters a year ago, respectively.

Repeating the above quarterly figures in US$, using average quarterly currency exchange rates, revenue for the third fiscal quarter ending October 31, 2009 was 19.7 million dollars, compared to 21.3 million dollars in Q1 (ending April 30, 2009) and 20.1 million dollars in Q2 (ending July 31, 2009). These revenue figures compare to 20.1, 22.0 and 22.8 million dollars for equivalent quarters a year ago, respectively.

So for the full nine months ending October 31, 2009, ESI Group's revenue was 45.0 million euros, up 5.4% from the equivalent 9 months a year ago. While license revenue of 29.3 million euros was down 3.6%, Services and other revenue increased 27.7% year-over-year to 15.7 million euros. Of the latter, Mindware, whose business recorded significant organic growth, contributed 4.2 million euros to sales. (Mindware was acquired on December 16, 2008).

Repeating the nine month figures just above, but in $US, ESI Group's revenue was 61.1 million dollars, down 5.8% from the equivalent 9 months a year ago.

On a geographic level, over the first 9 months of the current fiscal year the Americas accounted for 23% of sales, versus 15% a year earlier. This reflects the integration of Mindware, whose business is highly concentrated in the United States.

Alain de Rouvray, ESI Group's Chairman and CEO, said, “Our third quarter is traditionally the least significant, given the seasonality of our business. Nonetheless, these figures reveal a continuation of the trend observed since the start of the year, i.e. a wait-and-see attitude on behalf of clients in terms of new diversification orders, but a reaffirmation of the renewal of the installed base for Licenses, essentially in rental mode, and the maintaining of Services with a highly innovative dimension. In a period marked by weak visibility, albeit with a slight improvement but with significant uncertainty still remaining, this is a positive sign for us that reflects the confidence our clients have in our virtual prototyping solutions, which generate exceptional gains in productivity and competitiveness.

Back on September 15, 2009 the ESI Group announced limited financial results for the second quarter and half year ended July 31, 2009. First-half sales had totaled 31.2 million euros, up +6.4% year-over-year. The integration of Mindware contributed 2.8 million euros to sales over the first half. The product mix had already moved significantly towards services by July 31, 2009.

ESI also said the following about Mindware on September 15, 2009: “Mindware, an American company acquired at the end of December 2008, has been for the first time fully integrated in ESI Group's consolidated accounts. Mindware is a recognised player in, notably, high value-added engineering services in Computational Fluid Dynamics (CFD). With sales of 2.8 million euros over the first half of 2008/09, Mindware has continued to record significant growth in activity and has confirmed its fine integration within ESI Group.

On January 26, 2010 PTC (NASDAQ: PMTC) reported results for its first fiscal quarter ended January 2, 2010.

Total Revenue for the first fiscal quarter was $258.4 million, a 7.5% increase compared to the $240.4 million achieved in the corresponding quarter a year ago, but only a 4.6% rise over the $246.3 million recognized in the sequential quarter that ended September 30, 2009. The $258.4 million in fiscal Q1 was well above the top-of-the-range figure of $240 million given as guidance last quarter.

Net income for the first fiscal quarter was $17.86 million, 283% better than the meager $4.66 million delivered in the corresponding quarter last year. Even the $17.86 million represents only a 6.9% return on sales (ROS). PTC delivered $15.90 million in net income in the just prior quarter that closed September 30, 2009.

Diluted EPS was $0.15 for the first fiscal quarter, compared to $0.04 in the year ago quarter and $0.13 in the sequential quarter that closed September 30, 2009.

C. Richard Harrison, PTC chairman and chief executive officer, commented, "We begin fiscal 2010 with strong performance in Q1: total revenue was up 8% year-over-year with license revenue up 48%. Our better than expected performance was driven by large enterprise PLM contracts in North America." On a constant currency basis total Q1 revenue was up 3% and license revenue was up 43%. Our PLM license revenue was $45 million, up 143% year-over-year, highlighting our leadership position in a large and growing segment of the enterprise software market," continued Harrison. "Our pipeline for new business opportunities with new and existing customers remains strong. During the quarter we recognized revenue from leading organizations such as Airbus, BAE Systems, Bucyrus International, Cummins Inc., DRS Technologies, The Danfoss Group, IKEA, Raytheon, Quanta Computer Inc., the United States Army and the United States Navy."

James Heppelmann, president and chief operating officer added, "Our ongoing investment in technology leadership is clearly paying off and our market momentum is becoming increasingly clear: our total PLM revenue is approaching a $500 million per year revenue run rate, we are engaged in more than 200 active competitive displacement opportunities on a world-wide basis, and we secured 4 additional strategically important "domino" account wins during the quarter."

"Our product portfolio has never been more compelling and we are continuing to invest to extend our technology leadership position," continued Heppelmann. "We have significant new releases of Windchill, Pro/ENGINEER, Arbortext, CoCreate and Mathcad coming out in FY'11, and we are progressing on our new embedded software and program portfolio management initiatives. We also continue to add to our product analytics platform; we recently acquired leading technology in the fast-growing carbon information management market, enhancing our "green product development" capabilities. Our product analytics platform enables customers to perform business intelligence-like analytics on their in-process product designs." Heppelmann concluded, "We are very optimistic about the long-term opportunity for PTC and will continue to make strategic investments that we believe are critical to delivering value to our customers and gaining market share. We expect these investments to enable us to achieve our goal of 20% non-GAAP EPS CAGR over the next 5 years."

Neil Moses, chief financial officer, commented, "PTC's strong license revenue was, as expected, partly offset by a slight year-over-year decline in our maintenance and services revenue as we continue to work through the impact of soft license sales in 2009. Our CAD and SMB-related businesses were down modestly on a year-over-year basis, as expected, given the maturity of the CAD market and the ongoing impact of the global economy on the SMB space. Importantly, however, we are beginning to see signs of improvement in the SMB market and in the European and Asian markets as well. Our balance sheet remains solid with $231 million of cash."

G4 MCAD Vendor Stock Performance

Table 3 below reveals that the combined total stock price of the G4 advanced 8.2% over the course of calendar Q4 2009, which slightly outpaced the 6.9% rise of the NASDAQ Composite index over the same period. (Interestingly, the generally more lethargic DJI delivered a slightly better percentage rise (+7.4%) in calendar Q4 2009 than the NASDAQ). Both ANSYS and PTC individually outpaced the NASDAQ's percentage rise by wider margins than the G4 sum, but neither AUTODESK nor DASSAULT kept up with the NASDAQ'S modest 6.9 percentage rise in calendar Q4 2009.

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