Strong Customer Demand Drives Dassault Systemes; Revenue Growth of 13%

Strong Customer Demand Drives Dassault Systemes; Revenue Growth of 13% as Reported and 15% in Constant Currencies

    Business Editors

    PARIS--(BUSINESS WIRE)--April 26, 2005--Dassault Systemes (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA), a worldwide leading software developer of 3D and Product Lifecycle Management (PLM) solutions, reported financial results for the first quarter ended March 31, 2005.

    First Quarter Financial and Business Highlights

--	Revenue and earnings results exceed Company objectives
--	Total revenue EUR 199.2 million, up 13% as reported, up 15% in constant currencies (up 19% in U.S. dollars)
--	Software revenue EUR 167.2 million, up 12% as reported and up 15% in constant currencies
--	SolidWorks revenue increases 22% as reported (up 28% in U.S. dollars)
--	Process-centric revenue up 11% as reported and 13% in constant currencies
--	PDM revenue up 15% as reported and up 17% in constant currencies
--	Operating margin at high end of Company objective
--	EPS EUR 0.27 as reported and excluding acquisition costs
--	Raising full year revenue growth objective to 12-14%, from 11-12% in constant currencies

    Bernard Charles, President and Chief Executive Officer, commented, "Strong customer demand for our V5 PLM and mainstream 3D software solutions and services enabled us to deliver excellent year-over-year growth of 19% in U.S. dollars for the first quarter. We benefited from very good performance around the world - led by the Americas, and well supported by good growth in Europe and Asia. We are gaining traction across all of our PLM brands as a result of the visibility of customers' successes with our integrated V5 PLM solutions. In the mainstream 3D market, SolidWorks had an excellent start to the year, with revenue growth of 28% in U.S. dollars.
    "As we look ahead to the full year, we are raising our revenue growth objective, reflecting our first quarter performance and more favorable outlook for the rest of the year. In summary, in spite of the mixed economic environment, we believe Dassault Systemes is well-positioned to significantly outpace the growth of our market sector in 2005."

    First Quarter Financial Results

    Revenue

    In the 2005 first quarter total revenue was EUR 199.2 million, representing an increase of 13% as reported and 15% in constant currencies in comparison to the first quarter of 2004 where total revenue was EUR 176.2 million. From a geographic perspective, all regions contributed to the growth with the Americas increasing 18% in constant currencies, followed by Europe and Asia with revenue growth of 15% and 14% in constant currencies, respectively.
    Software and service revenues both posted double-digit, year-over-year growth, reflecting increasing demand for the Company's V5 PLM and mainstream 3D offerings. Software revenue increased 12% as reported and 15% in constant currencies in the first quarter of 2005 and totaled EUR 167.2 million, compared to EUR 148.9 million in the first quarter of 2004. Recurring licenses revenue represented 53% of total software revenue in the first quarter. Service and other revenue totaled EUR 32.0 million in the first quarter of 2005, compared to EUR 27.3 million in the first quarter of 2004 with revenue growing 17% as reported and 20% in constant currencies. New CATIA and SolidWorks seats licensed in the first quarter of 2005 increased 14% to 16,122 seats, compared to 14,082 seats in the year-ago period.
    Process-centric revenue increased 11% as reported and 13% in constant currencies compared to the year-ago quarter on growth across design, PDM and digital manufacturing. Process-centric revenue, including PDM revenue, totaled EUR 159.3 million in the first quarter of 2005, compared to EUR 143.6 million in the first quarter of 2004. PDM revenues increased 15% as reported and 17% in constant currencies and totaled EUR 22.8 million in the first quarter, compared to EUR 19.9 million in the year-ago period. CATIA licenses increased 5% year over year to 7,513 in the first quarter of 2005.
    SolidWorks revenue increased 22% (28% in U.S. dollars) to EUR 39.9 million in the recently completed quarter, compared to EUR 32.6 million in the first quarter of 2004. SolidWorks seats licensed increased 25% year over year to 8,609 licenses accompanied by stable pricing.

    Operating Income and Margin and EPS

    For the first quarter of 2005 operating income increased year over year, and as anticipated the operating margin decreased, reflecting the timing of investments in expanding the Company's marketing and sales activities with small and medium-sized businesses (SMB). In addition, due to the more robust level of activity in the first quarter the Company accelerated some marketing and sales initiatives. For the full year 2005, the Company expects to maintain a stable operating margin excluding acquisition costs in comparison to 2004.
    Operating income increased 5% to EUR 45.1 million in the first quarter of 2005, (22.6% operating margin) compared to EUR 42.9 million in the year-ago quarter (24.3% operating margin). Operating income excluding acquisition costs increased 4% to EUR 45.4 million in the first quarter of 2005, compared to EUR 43.5 million in the year-ago period. In the first quarter of 2005 the operating margin excluding acquisition costs was 22.8%, in line with the Company's objective of 22-23%. In the year-ago quarter the operating margin excluding acquisition costs was 24.7%.
    In the first quarter of 2005 earnings per share increased 13% to EUR 0.27, compared to earnings per share of EUR 0.24 in the year-ago quarter. Earnings per share excluding acquisition costs increased 8% to EUR 0.27 per diluted share in the first quarter of 2005, compared to earnings per diluted share excluding acquisition costs of EUR 0.25 in the year-ago period.

    Annual Shareholders' Meeting Date and Cash Dividend Recommendation

    The Annual Shareholders' Meeting has been scheduled for June 8, 2005. The Board of Directors has recommended an increase of 12% in the annual cash dividend to EUR 0.38 per share (excluding avoir fiscal) for the fiscal year ended December 31, 2004, representing approximately EUR 43 million in the aggregate. The declaration and payment of any cash dividend is subject to approval by shareholders at the Annual Shareholders' Meeting.

    Strategy, Technology and Partnerships

    HONDA Motor, leading Japanese car manufacturer and CATIA V4 customer, has started to develop car programs, including suppliers, using CATIA V5.
    In mid-April, Dassault Systemes and Microsoft Corp. announced that, as part of their strategic alliance and commitment to jointly delivering value to their customers, they will collaborate to support Microsoft's Extensible Application Markup Language (XAML) format in Dassault Systemes' 3D Extensible Markup Language (XML) format. Compatibility between 3D XML and XAML will enable users of 3D solutions to view, modify and customize 3D objects in an environment of unmatched openness and take advantage of this 3D experience in any XAML-based application.
    Earlier this month Dassault Systemes announced the availability of its new DELMIA Automation product line, which enables control engineers in all automation industries to digitally define, control and monitor automated systems entirely in a 3D virtual environment. Based upon a unique Logic Control Modeler technology, DELMIA Automation provides a digital model of control logic for an automated system independent of PLC hardware.
    Dassault Systemes and CAXA, the leading domestic PLM vendor in China, announced on April 5th, the availability of CAXA V5, a new generation of integrated and scalable 2D and 3D PLM solutions for the Chinese market that embed V5 technology components from Dassault Systemes. These CAXA V5 solutions are the result of a Dassault Systemes-CAXA partnership announced last November and software development carried out in a joint R&D center operated by CAXA in Beijing. The short time-frame to develop these solutions demonstrates the ease with which developers can build solutions on Dassault Systemes' Component Application Architecture Version 5 (CAA V5) platform.
    In March, Dassault Systemes and ICEM Ltd. signed a strategic software development agreement under which ICEM will develop and sell the next generation of its surface design and analysis and design visualization software suite for Class-A surface development based on Dassault Systemes' Version 5 Architecture and Components. ICEM becomes a Gold Software Partner in Dassault Systemes' CAA V5 software partner program. ICEM will provide a PLM solution component that will tightly connect the styling and engineering departments, further endorsing the new 3D XML open format from Dassault Systemes.
    Dassault Systemes and ZUKEN, a leading producer of design and manufacturing solutions for electronics companies, entered into an agreement in March pursuant to which they will deliver comprehensive PLM solutions for the Electrical and Electronics industry.

    Business Outlook

    Thibault de Tersant, Executive Vice President and CFO, stated, "Based upon first quarter results and the stronger outlook for the remainder of 2005 we are increasing our revenue and EPS objectives for 2005 and are maintaining our objective of a stable operating margin excluding acquisition costs for the full year 2005 in comparison to 2004. Specifically, we are increasing our revenue growth objective by about two percentage points to approximately 12-14% in constant currencies. In conjunction with this, we are raising our reported revenue objective to approximately EUR 880-890 million for 2005, from EUR 865-875 million. We are also increasing our EPS objective for 2005 to about EUR 1.47-1.49 per share excluding acquisition costs, representing year-over-year growth of 8-10%. For the second quarter of 2005, our reported revenue objective is about EUR 208-212 million and our EPS objective is about EUR 0.30-0.31 per share excluding acquisition costs." The Company is basing all reported revenue and EPS objectives on the assumption of a U.S. Dollar to Euro exchange rate of $1.30 per EUR 1.00.
    Due to the six-month delay of the effective date of SFAS 123 (R), Share-Based Payments, the Company has decided to adopt SFAS 123 (R) as of January 1, 2006.

    Endnotes:

    1. All comparative figures are given on a year-over-year basis unless specified otherwise.

    2. All financial information is unaudited and reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Additional financial information is also presented that is not in conformity with U.S. GAAP, in particular the presentation of operating income, operating margin and earnings per share excluding acquisition costs (acquisition costs are primarily comprised of technology amortization in addition to other acquisition-related costs). The Company has provided in the tables to this press release and on its website http://www.3ds.com/corporate/investors/ reconciliations between U.S. GAAP and non-U.S. GAAP figures.

    3. The Company uses constant currency revenue growth to evaluate its financial performance in comparison to prior periods and as a measure of expected growth in planning and setting objectives for future periods. The Company believes this measure is an important indicator of the Company's progress and outlook because it provides a better gauge of the level of change in the business activity as it eliminates any changes arising from currency fluctuations. The Company believes the presentation of this measure is relevant and useful for investors because it allows investors to view revenue growth in a manner similar to the method used by the Company's management, helps improve investors' ability to understand the Company's revenue growth, and makes it easier to compare the Company's results with other companies, including competitors, whose reporting currency may be different from Dassault Systemes. Constant currency revenue growth, as calculated by the Company, may not be comparable to similarly titled measures employed by other companies.

    Conference call information

    Dassault Systemes will host a teleconference call today, Tuesday, April 26, 2005 at 4:00 PM CET/3:00 PM London/10:00 AM New York. The 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 call to register, download and install any necessary audio software. The webcast teleconference will be archived for 30 days. Financial information to be discussed in the call will be available on the Company's website prior to commencement of the teleconference http://www.3ds.com/corporate/investors/. Additional investor information can be accessed at http://www.3ds.com/corporate/investors/ or by calling Dassault Systemes' Investor Relations at 33.1.40.99.69.24.

    Statements above that are not historical facts but express expectations or objectives for the future, including but not limited to statements regarding the Company's objectives for 2005 revenue growth in constant currencies, 2005 reported revenue range, 2005 operating margin objective excluding acquisition costs, 2005 EPS objective excluding acquisition costs, second quarter 2005 reported revenue range and second quarter EPS objective excluding acquisition costs, are forward-looking statements (within the meaning of Section 21E of the 1934 Securities Exchange Act, as amended). Such forward-looking statements are based on 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, among other factors: (i) currency fluctuations, (ii) reduced corporate spending on IT infrastructure as a result of changing economic or business conditions that could negatively affect market demand for our products and services, (iii) difficulties or adverse changes affecting our partners or our relationships with our partners, including our longstanding, strategic partner, IBM, (iv) new product developments and technological changes, and (v) errors or defects in our products. 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, 2003, which was filed with the SEC on June 30, 2004, could materially affect the Company's financial position or results of operations.

    About Dassault Systemes

    As world leader in 3D and PLM (Product Lifecycle Management) solutions, the Dassault Systemes group brings value to more than 80,000 customers in 80 countries. A pioneer in the 3D software market since 1981, Dassault Systemes develops and markets PLM application software and services that support industrial processes and provide a 3D vision of the entire life cycle of products from conception to maintenance. Its offering includes integrated PLM solutions for product development (CATIA(R), DELMIA(R), ENOVIA(R), SMARTEAM(R)), mainstream product design tools (SolidWorks(R)), and 3D components (Spatial - ACIS(R)). Dassault Systemes is listed on the Nasdaq (DASTY) and Euronext Paris (#13065, DSY.PA) stock exchanges. For more information, visit http://www.3ds.com

DASSAULT SYSTEMES NON-U.S. GAAP KEY FIGURES

1st QUARTER ----------- in millions of Euro, except per share data, headcount and exchange rates.

1Q05 1Q04 Variation ------------------------------

Process-Centric excluding PDM 136.5 123.7 10% PDM 22.8 19.9 15% Design-Centric 39.9 32.6 22% Revenue 199.2 176.2 13%

Americas 55.5 49.5 12% Europe 93.9 81.9 15% Asia 49.8 44.8 11%

Operating Income (1) 45.4 43.5 4%

Operating Margin (1) 22.8% 24.7% Net Income (1) 31.1 28.6 9% EPS (1) 0.27 0.25 8% Closing Headcount 4,834 4,185 16%

Average Rate USD per Euros 1.31 1.25 5% Average Rate JPY per Euros 137.0 134 2%

(1) Excluding acquisition costs. For U.S. GAAP figures please refer to reconciliation tables.

DASSAULT SYSTEMES CONSOLIDATED STATEMENT OF INCOME DATA PREPARED IN ACCORDANCE WITH U.S. GAAP

(in millions of Euro, except per share data)

Three Months Ended March 31, 2005 March 31, 2004 ----------------- ---------------- New licenses revenue 73.7 62.1 Recurring licenses and product development revenue 93.5 86.8 ----------------- ---------------- Software revenue 167.2 148.9 Service and other revenue 32.0 27.3 ----------------- ---------------- Total Revenue EUR 199.2 EUR 176.2

Software 6.0 4.8 Service and other 28.1 24.7 ----------------- ---------------- Total Cost of Revenue EUR 34.1 EUR 29.5

Gross Profit EUR 165.1 EUR 146.7

Research and Development 57.5 54.1 Marketing and Sales 49.1 37.8 General Administration 13.1 11.3 Acquisition Costs 0.3 0.6 ----------------- ---------------- Total Research, Selling, Administration and Acquisition expenses EUR 120.0 EUR 103.8 ================= ================ Operating Income (1) EUR 45.1 EUR 42.9 Financial revenue and Other 2.1 1.4 ----------------- ---------------- Income before income taxes 47.2 44.3 Income tax expense (16.3) (16.1) ----------------- ---------------- Net Income (1) EUR 30.9 EUR 28.2 ================= ================ Basic net income per share EUR 0.27 EUR 0.25 ================= ================ Diluted net income per share (1) EUR 0.27 EUR 0.24 ================= ================ Basic weighted average shares outstanding (in millions) 113.6 113.1 ================= ================ Diluted weighted average shares outstanding (in millions) 116.3 115.8

(1) Excluding acquisition costs, operating income, net income and diluted EPS would have been as follows:

Operating Income EUR 45.4 EUR 43.5 ================= ================ Net Income EUR 31.1 EUR 28.6 ================= ================ Diluted net income per share EUR 0.27 EUR 0.25 ================= ================

    Supplemental Disclosures Regarding Non-U.S. GAAP Financial Information: Excluding Acquisition Costs

    The following table sets forth the Company's Consolidated Statement of Income Data excluding acquisition costs for the three months ended March 31, 2005. In particular, the table presents operating income, operating margin and earnings per share excluding acquisition costs (acquisition costs are primarily comprised of technology amortization in addition to other acquisition-related costs).
    The Company uses these non-U.S. GAAP measures, among other things, to evaluate the Company's operating performance and for planning and setting objectives for future periods. The Company believes these non-U.S. GAAP measures are useful to investors because they provide an alternative method for measuring the operating performance of the Company's business by isolating the effect of acquisition costs, which do not impact the underlying business. In addition, these measures are among the primary measures used externally by analysts for purposes of valuation and for comparing operating performance of the Company to other companies in the industry.
    Since these measures of performance are not calculated in accordance with U.S. GAAP, they should not be considered in isolation of, or as a substitute for, operating income, operating margin and earnings per share including acquisition costs, as an indicator of operating performance.

DASSAULT SYSTEMES NON-U.S. GAAP CONSOLIDATED STATEMENT OF INCOME DATA PERCENTAGE VARIANCE (EXCLUDING ACQUISITION COSTS)

(in millions of Euro, except per share data)

Three Months Ended March 31, March 31, 2005 2004 Variation -------------- ------------- ---------- New licenses revenue 73.7 62.1 18.7% Recurring licenses and product development revenue 93.5 86.8 7.7% -------------- ------------- Software revenue 167.2 148.9 12.3%

Service and other revenue 32.0 27.3 17.2% -------------- ------------- Total Revenue EUR 199.2 EUR 176.2 13.1%

Software 6.0 4.8 25.0% Service and other 28.1 24.7 13.8% -------------- ------------- Total Cost of Revenue EUR 34.1 EUR 29.5 15.6%

Gross Profit EUR 165.1 EUR 146.7 12.5%

Research and Development 57.5 54.1 6.3% Marketing and Sales 49.1 37.8 29.9% General Administration 13.1 11.3 15.9% -------------- ------------- Total Research, Selling, Administration EUR 119.7 EUR 103.2 16.0% ============== ============= Operating Income EUR 45.4 EUR 43.5 4.4%

Financial revenue and Other 2.1 1.4 50.0% -------------- ------------- Income before income taxes 47.5 44.9 5.8% Income tax expense (16.4) (16.3) N/M -------------- ------------- Net Income EUR 31.1 EUR 28.6 8.7% ============== ============= Diluted net income per share EUR 0.27 EUR 0.25 8.0% ============== ============= Diluted weighted average shares outstanding (in millions) 116.3 115.8

DASSAULT SYSTEMES CONSOLIDATED STATEMENT OF INCOME DATA RECONCILIATIONS NON-U.S. GAAP / U.S. GAAP

(in millions of Euro, except per share data)

Three Months Ended March 31, 2005 ------------------------------------ Reported Acquisition Excluding Amount Costs Acquisition Costs ------------------------------------ New licenses revenue 73.7 73.7 Recurring licenses and product development revenue 93.5 93.5 ------------ ------------ Software revenue 167.2 167.2

Service and other revenue 32.0 32.0 ------------ ------------ Total Revenue EUR 199.2 EUR 199.2

Software 6.0 6.0 Service and other 28.1 28.1 ------------ ------------ Total Cost of Revenue EUR 34.1 EUR 34.1

Gross Profit EUR 165.1 EUR 165.1

Research and Development 57.5 57.5 Marketing and Sales 49.1 49.1 General Administration 13.1 13.1 Acquisition Costs 0.3 (0.3) - ------------ ------------ Total Research, Selling, Administration EUR 120.0 EUR 119.7 ============ ============ Operating Income EUR 45.1 EUR 45.4

Financial revenue and Other 2.1 2.1 ------------ ------------ Income before income taxes 47.2 47.5 Income tax expense (16.3) (0.1) (16.4) ------------ ------------ Net Income 30.9 31.1 ============ ============ Diluted net income per share 0.27 0.27 ============ ============ Diluted weighted average shares outstanding (in millions) 116.3 116.3

Three Months Ended March 31, 2004 ------------------ Reported Acquisition Excluding Amount Costs Acquisition Costs ---------------------------------

New licenses revenue 62.1 62.1 Recurring licenses and product development revenue 86.8 86.8 --------- ------------ Software revenue 148.9 148.9

Service and other revenue 27.3 27.3 --------- ------------ Total Revenue EUR 176.2 EUR 176.2

Software 4.8 4.8 Service and other 24.7 24.7 --------- ------------ Total Cost of Revenue EUR 29.5 EUR 29.5

Gross Profit EUR 146.7 EUR 146.7

Research and Development 54.1 54.1 Marketing and Sales 37.8 37.8 General Administration 11.3 11.3 Acquisition Costs 0.6 (0.6) - --------- ------------ Total Research, Selling, Administration EUR 103.8 EUR 103.2 ========= ============ Operating Income EUR 42.9 EUR 43.5

Financial revenue and Other 1.4 1.4 --------- ------------ Income before income taxes 44.3 44.9 Income tax expense (16.1) (0.2) (16.3) --------- ------------ Net Income EUR 28.2 EUR 28.6 ========= ============ Diluted net income per share EUR 0.24 EUR 0.25 ========= ============ Diluted weighted average shares outstanding (in millions) 115.8 115.8

DASSAULT SYSTEMES CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions of Euro)

March 31, 2005 December 31, 2004 ------------------- ------------------- ASSETS Cash and short-term investments 652.6 552.8 Accounts receivable, net 166.0 237.8 Other assets 328.2 308.6 ------------------- ------------------- Total assets EUR 1,146.8 EUR 1,099.2

LIABILITIES AND SHAREHOLDERS' EQUITY

Total liabilities 338.4 340.0 Shareholders' equity 808.4 759.2 ------------------- ------------------- Total liabilities and shareholders' equity EUR 1,146.8 EUR 1,099.2

DASSAULT SYSTEMES CONDENSED CASH FLOW STATEMENT PREPARED IN ACCORDANCE WITH U.S. GAAP

(in millions of Euro)

Three Months ended March 31, March 31, 2005 2004 Variation ------------------------------------ Net Profit 30.9 28.2 2.7 Working capital and other non cash P&L items 59.6 78.3 (18.7) ------------------------ Net Cash provided by (used in) operating EUR 90.5 EUR 106.5 (16.0)

Acquisition and sale of assets (6.7) (2.1) (4.6) ST investments 4.9 3.3 1.6 Acquisition net of cash (4.4) (1.0) (3.4) Loans (0.3) 0.0 (0.3) ------------------------ Net Cash provided by (used in) investing EUR (6.5) EUR 0.2 (6.7) Share repurchase and proceeds from stocks options exercise, net 10.2 11.8 (1.6) Dividend 0.0 0.0 0.0 Others 0.0 0.0 0.0 ------------------------ Net Cash provided by (used in) financing EUR 10.2 EUR 11.8 (1.6) Effect of exchange rate changes on cash EUR 10.0 EUR 5.0 5.0 ======================== Increase (Decrease) in cash & cash equivalents EUR 104.2 EUR 123.5 EUR (19.3)

Cash at beginning of period EUR 541.1 EUR 419.6 Cash at end of period EUR 645.3 EUR 543.1

--30--ML/ny*

CONTACT: Dassault Systemes Valerie Agathon/Geraldine Nithart-Riva 33-1-40-99-69-24 or Financial Dynamics: Harriet Keen, 44-20-7831-3113 or Emma Rutherford/Jean-Benoit Roquette/Nelly Dimey 33-1-47-03-68-10

KEYWORD: FRANCE INTERNATIONAL EUROPE INDUSTRY KEYWORD: SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: Dassault Systemes

Copyright Business Wire 2005