Dassault Systemes Reports Solid First Quarter Performance, with Revenue, Operating Margin and EPS above Objectives

Business Wire, April 29, 2004

Business Editors

PARIS--(BUSINESS WIRE)--April 29, 2004

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 first quarter ended March 31, 2004.

First Quarter Financial Highlights

-- Total revenue EUR 176.2 million, up 4% as reported and up 10%

in constant currencies

-- Software revenue EUR 148.9 million, up 3% as reported and up

9% in constant currencies

-- PDM revenue up 15% as reported and 22% in constant currencies

-- Design-centric revenue up 7% as reported (up 25% in U.S.

dollars)

-- Operating margin 24.3% and EPS EUR 0.24 on U.S. GAAP Basis

-- EPS excluding acquisition costs up 19% to EUR 0.25 per diluted

share in the 2004 first quarter on 3 percentage point

operating margin improvement to 24.7% before acquisitions

costs

"The first quarter was a period of very solid performance for Dassault Systemes. Our financial results exceeded our objectives, with revenue, operating margin and earnings per share coming in higher than targeted. These results are mainly attributable to our better than anticipated performance in Europe. We continued to benefit from our diversification strategy, as illustrated by the good growth of our PDM business. SolidWorks also had a good start to the year, with revenue increasing 25% in U.S. dollars during the first quarter. We are raising our revenue and earnings growth objectives for 2004 to reflect the fact that our first quarter came in above our objectives," commented Bernard Charles, President and Chief Executive Officer of Dassault Systemes.

Revenue

In the first quarter of 2004, total revenue increased 4% to EUR 176.2 million as reported and increased 10% in constant currencies, compared to the 2003 first quarter. Both software and services posted year-over-year growth as reported and in constant currencies.

Software revenue increased 3% as reported and 9% in constant currencies in the 2004 first quarter in comparison to the first quarter of 2003. Software revenue, accounting for 85% of total revenue, totaled EUR 148.9 million in the first quarter of 2004, compared to EUR 145.1 million in the year-ago quarter. Recurring software revenue represented 56% of total software revenue in the 2004 first quarter. New CATIA and SolidWorks seats licensed in the 2004 first quarter increased 9% to 14,082 seats, compared to 12,917 seats in the 2003 first quarter. Service revenue, representing 15% of total revenue, increased 12% to EUR 27.3 million in the 2004 first quarter, compared to EUR 24.3 million in the year-ago period.

Thibault de Tersant, Executive Vice President and CFO of Dassault Systemes, commented, "The Company continued the positive momentum from the second half of 2003, with software revenue showing year-over-year growth for the third quarter in a row. From a regional perspective, we are seeing signs of improvement in Europe slightly earlier than anticipated, with our revenue increasing 4% compared to the year-ago quarter. In the U.S., business activity continued to reflect the more positive trends of 2003, leading to 13% revenue growth in constant currencies for the Americas region in the first quarter. Asia, following on a very strong showing in the fourth quarter, achieved record revenue results in the first quarter with total revenue up 12% as reported and 19% in constant currencies in comparison to the first quarter of 2003. Within the Asian region, our strongest performance came from Japan, with a good level of activity from our PLM businesses and our design-centric segment."

PLM performance in the first quarter improved over the year-ago period, led by activity in the aerospace end-market. Process-centric revenue, including PDM revenue, totaled EUR 143.6 million in the 2004 first quarter, an increase of 3% as reported and an increase of 9% in constant currencies. PDM revenue increased 15% as reported and 22% in constant currencies in comparison to the year-ago period. PDM revenues totaled EUR 19.9 million in the 2004 first quarter and represented 11% of total revenue. PDM end-user software revenue totaled US$33.5 million in the first quarter of 2004. PLM orders in the first quarter included customers such as The Boeing Company, Beneteau Group, Meyer Werft Shipyard and Sunten Electric Co. Ltd.

Design-centric revenue totaled EUR 32.6 million in the 2004 first quarter, up 7% compared to the 2003 first quarter. Design-centric revenue increased 25% if reported in U.S. dollars, the reporting currency of most of its competitors. In addition to business with existing customers, SolidWorks added over 2,400 new customers in the quarter.

Operating Income and Margin, EPS and Financial Position

As reported, operating income increased 24% to EUR 42.9 million in the first quarter of 2004 (24.3% operating margin), compared to EUR 34.7 million in the 2003 first quarter (20.5% operating margin). Operating income before acquisition costs increased 18% to EUR 43.5 million in the 2004 first quarter, up sharply from EUR 36.8 million in the 2003 first quarter. The operating margin before acquisition costs increased 3 percentage points to 24.7% in the first quarter of 2004, compared to the year-ago quarter where the operating margin was 21.7% before acquisition costs.