Dassault Systemes Continues to Outperform the PLM Market Based on First Half Financial Results

PARIS--(BUSINESS WIRE)--July 24, 2003--

-- Results In Line For Second Quarter With Revenue of EUR 181.3 Million, U.S. GAAP Operating Margin of 25.2% and EPS of EUR 0.25; Before Acquisition Costs, Operating Margin 25.9% and EPS EUR 0.26
-- PDM Revenue Up 26% and Design-Centric Revenue Up 13% For Second Quarter In Constant Currencies
-- Total Revenue Increased 4% For Second Quarter and 2% for First Half In Constant Currencies
-- DS Reaffirms 2003 Financial Objectives: Revenue Growth of 7% in Constant Currencies and Operating Margin Growth of Up to 1 Percentage Point, Compared to 27.7% Before Acquisition Costs in 2002

Dassault Systemes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY PA), a worldwide leading software developer of product lifecycle management (PLM) solutions, reported financial results for the second quarter and six months ended June 30, 2003.


Second Quarter

Total revenue was EUR 181.3 million in the second quarter of 2003. On a U.S. GAAP basis net income was EUR 28.2 million or EUR 0.25 per diluted share in the 2003 second quarter compared to EUR 27.7 million or EUR 0.24 per diluted share in the second quarter of 2002, representing a 4% increase on a per share basis. Net income excluding acquisition costs was EUR 29.3 million or EUR 0.26 per diluted share in the second quarter, compared to EUR 30.0 million or EUR 0.26 per diluted share in the second quarter of 2002.

Total revenue in the second quarter of 2003 decreased 5%, but increased 4% on a constant currency basis in comparison to the year-ago quarter. In the second quarter of 2003 software revenue, representing 84% of total revenue, equaled EUR 151.8 million. In comparison to the year-ago period, software revenue decreased 9%, but was flat on a constant currency basis. An important component of revenue is recurring software revenue, which represented 54% of total software revenue in the second quarter. Seats licensed in the second quarter of 2003 totaled 13,568 with 7,259 CATIA and 6,309 SolidWorks seats.

Services and other revenue increased 20% in the second quarter of 2003, primarily reflecting the increase in the number of PLM projects underway. Specifically, services and other revenue totaled EUR 29.5 million and represented 16% of total revenue in the second quarter of 2003.

Process-centric revenue, including PDM revenue, totaled EUR 150.1 million in the recently completed quarter. Process-centric revenue decreased 6% in comparison to the year-ago quarter but increased 2% in constant currencies. On a stand-alone basis, PDM revenue in the second quarter of 2003 increased 17% and in constant currencies increased 26%, both in comparison to the year-ago period. Specifically, PDM revenue increased from EUR 17.4 million in the year-ago quarter to EUR 20.3 million in the second quarter of 2003. PDM end-user software revenue totaled EUR 28.5 million. Design-centric revenue totaled EUR 31.2 million in the second quarter of 2003, a decrease of 4% compared with EUR 32.4 million in the year-ago quarter but an increase of 18% in U.S. dollars. PDM revenue represented 11% and design-centric revenue accounted for 17% of total revenue.

The Company had a strong financial position with cash and short-term investments totaling EUR 420.1 million and no bank debt at June 30, 2003.

DS held its annual general shareholders' meeting on May 28, 2003. At that time, shareholders approved the payment of a 2002 cash dividend (excluding avoir fiscal) of EUR 0.33 per share, representing approximately EUR 37.2 million or 29% of 2002 U.S. GAAP net income. The 2002 cash dividend including avoir fiscal was EUR 0.50 per share.

First Half Results

Total revenue was EUR 350.7 million for the first six months of 2003, compared to EUR 373.8 million in the year-ago period, representing a decrease of 6%, but an increase of 2% in constant currencies. On a U.S. GAAP basis net income totaled EUR 50.5 million or EUR 0.44 per diluted share for the first half of 2003, compared to EUR 53.0 million or EUR 0.45 per diluted share, representing a 2% decrease on a per share basis. Net income excluding acquisition costs was EUR 53.5 million or EUR 0.47 per diluted share for the first half of 2003, representing a decrease of 6% on a per share basis, compared to EUR 58.5 million or EUR 0.50 per diluted share for the year-ago period.

Charles Edelstenne, Chairman of DS, stated, "DS delivered solid financial performance in the second quarter, illustrating the strength of our market leadership as well as the resiliency of our business model within a weak business environment. Our focus continues to be on outperforming the PLM market under any economic scenario and I believe our financial results to date demonstrate the competitiveness of our PLM solutions."

Bernard Charles, President and Chief Executive Officer, commented, "I believe we are growing our market share in PLM and widening the gap between DS and our competitors as evidenced by our first half revenue increase of 15% when measured in U.S. dollars. We have made good progress so far this year and believe we are in a favorable position to deliver full year revenue growth of about 7% in constant currencies, as well as operating margin and EPS growth in 2003.

"Large-scale production deployments of our V5 PLM solutions (CATIA, DELMIA, ENOVIA, SMARTEAM), demonstrating significant ROI, are underway in our core markets with leading-edge customers. And we are seeing traction with the supplier networks, including new Version 5 wins in the quarter with Koito Manufacturing, an automotive lighting equipment company in Japan, CIMOS, a Slovenian automotive supplier and Heroux-Devtek, a Canadian aerospace supplier. Our PDM business, with ENOVIA and SMARTEAM continues to make strong headway, with 25% revenue growth in constant currencies for the first half. SolidWorks, focused on the design-centric market, has clearly regained momentum in 2003, with revenue growth of 16% in U.S. dollars for the 2003 first half and an expanded sales channel capacity as we move forward.

"In summary, I believe our solid performance during this extended period of economic weakness clearly indicates that DS' solutions and people are providing our customers with more than software applications - we are working closely with our customers to deliver significant business value with our PLM solutions."

Thibault de Tersant, Executive Vice President and CFO, commented, "As we had anticipated, the overall economic environment continued to be tough in the second quarter. Moreover, currency fluctuated a good deal in the quarter, with further weakening of the U.S. dollar and Asian currencies. We were, therefore, pleased to report in line financial results for the second quarter, with total revenue within our target range of EUR 180 to EUR 185 million. In fact, revenue would have been at the high end of our range if currency levels had remained consistent with our guidance assumptions. Our operating margin also came in on target and showed year over year improvement.

"While we continue to be cautious with respect to any improvement in the economic environment in the second half of the year, based upon first half results and our business outlook, we are reconfirming our full year revenue growth objective of about 7% in constant currencies and our operating margin growth objective of up to 1 percentage point above the 27.7% operating margin achieved in 2002. Currency market experts anticipate further weakness, particularly in the U.S. dollar and Asian currencies as the year progresses. At this time we believe it is prudent to assume a U.S. dollar to Euro exchange rate of $1.20 per EUR 1.00 for the remainder of the year, the consensus figure of leading banks. This new exchange rate assumption would lead to reported revenue of about EUR 760 million and an EPS range of approximately EUR 1.22 to EUR 1.25. For the third quarter we believe a revenue objective of EUR 175 to EUR 180 million is appropriate."

All financial information is unaudited and reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Additional financial information, specifically noted as such, is also presented that is not in conformity with U.S. GAAP, with the presentation of operating income, operating margin and earnings per share before acquisition costs (acquisition costs are primarily comprised of technology amortization in addition to other acquisition- related costs) or variances in constant currencies. The Company has provided on its website www.3ds.com reconciliations between U.S. GAAP and non- U.S. GAAP figures. All comparative figures are given on a year over year basis unless specified otherwise.


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