Apr 29 - Dassault Q1 Revenue Up 6% to 307M Euro with 41M Profit

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Dassault Q1 Revenue Up 6% to 307M Euro with 41M Profit

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PARIS, France, Apr 29, 2008 - Dassault Systems (DS) (Nasdaq: DASTY; Euronext Paris: #13065, DSY.PA) reported U.S. GAAP unaudited financial results for the first quarter ended March 31, 2008.

Summary Financial Highlights

Q1 GAAP total revenue up 12% on GAAP software revenue growth of 16%, both in constant currencies
Q1 non-GAAP total revenue up 10% on non-GAAP software revenue growth of 14%, both in constant currencies
Q1 EPS €0.34 on GAAP basis and €0.41 on non-GAAP basis
DS reconfirms 2008 Business Outlook: reconfirms constant currencies non-GAAP software and non-GAAP total revenue growth objectives for 2008; reconfirms non-GAAP operating margin expansion objective for 2008; adjusts non-GAAP EPS growth objective for 2008 to between 6% and 10% growth solely due to US dollar weakness

First Quarter 2008 Financial Summary

In millions of           US GAAP             Non-GAAP
Euros,              Growth   Growth        Growth   Growth
                             in cc*                  in cc*
except per
share data

Q1 Total
Revenue        307.4   6%     12%     307.9   4%      10%
Q1 Software
Revenue        269.1   9%     16%     269.6   8%      14%
Q1 EPS          0.34 21%              0.41   5%
Q1 Operating
Margin         17.3%                   22.8%

* In constant currencies.

Bernard Charlès, Dassault Systems President and Chief Executive Officer, commented, “Dassault Systems had a solid start to 2008, meeting all of our financial objectives for revenue, operating margin and earnings per share. We are seeing good dynamics in our core industries and new verticals. In particular, we had a very strong quarter for CATIA benefiting from broad-based demand among automotive and aerospace companies and good execution in our Business Transformation Channel for large accounts.

“This year will mark the final steps in the creation of our PLM indirect channel. In this regard, our first quarter was an important milestone as we moved ahead with the planned country transitions, including Germany and Japan. In less than fifteen months, a remarkably short period of time, we have developed an indirect PLM channel spanning more than 60 countries.

“Looking ahead, our number one focus is our customers - helping our customers improve their product innovation, product quality, business processes and investment returns. By doing this, we are confident in our ability to continue to grow our PLM market footprint.”

First Quarter Financial Highlights

GAAP total revenue increased 12% in constant currencies and non-GAAP total revenue increased 10% in constant currencies.
By geographic region and in constant currencies, total GAAP revenue in Europe was up 13% (non-GAAP up 12%) followed by the Americas with growth of 12% (non-GAAP up 10%) and Asia with growth of 10% (non-GAAP up 9%). From a regional perspective, software revenue grew in double-digits in constant currencies in the Company’s three geographic regions.
GAAP software revenue increased 16% in constant currencies. Non-GAAP software revenue increased 14% on new licenses revenue growth of 11% and non-GAAP recurring software revenue growth of 17%, all figures in constant currencies.
GAAP PLM software revenue increased 15% in constant currencies. Non-GAAP PLM software revenue growth of 14% in constant currencies was led by CATIA with non- GAAP software revenue growth of 21% in constant currencies, on strong dynamics with automotive and aerospace companies, channel capacity increases and the inclusion of ICEM. CATIA new seats licensed in the first quarter increased 7% to 8,325 seats. ENOVIA non-GAAP software revenue performance in the first quarter increased 1% in constant currencies, on a strong year-ago comparison.
GAAP Mainstream 3D software revenue increased 18% in constant currencies. Non- GAAP Mainstream 3D software revenue increased 15% in constant currencies on new SolidWorks seat growth of 15% (13,536 new seats licensed) and strong growth in maintenance revenue.
Services and other revenue, representing 12% of total revenue, decreased approximately 10% in constant currencies. These results largely reflect the winding down of certain historical channel management activities and related fee revenue which will continue over the course of 2008 as the Company completes the formation of its indirect PLM channel.
GAAP operating margin was 17.3%. Non-GAAP operating margin increased 70 basis points to 22.8%, compared to 22.1% in the year-ago period.
GAAP earnings per diluted share increased 21%. Non-GAAP earnings per diluted share increased 5% to €0.41 reflecting an increase in non-GAAP operating income of 8% offset by a significant decrease in financial revenue and other, net. While net interest income increased 26%, quarter-end currency exchange losses largely offset this increase.
New wins in the first quarter included: Skanska in construction in Europe; Bell Helicopter in aerospace and Leviton in high tech in the Americas; and Tata Motors in automotive in Asia. Re-orders included: Gulfstream and Spirit in aerospace and Northrop Grumman in shipbuilding in the Americas, and Honda, Mitsubishi and Toyota in automotive in Asia.
During the first quarter, DS repurchased 961,986 common shares for a total cost of approximately €35 million.

Cash flow and other financial highlights

Net operating cash flow was €88.4 million for the first quarter. Cash and short-term investments totaled €682.9 million and long-term debt totalled €202.7 million at March 31, 2008.

Annual Shareholders’ Meeting date and cash dividend recommendation

The Annual Shareholders’ Meeting has been scheduled for May 22, 2008. The Board of Directors has recommended an annual cash dividend equivalent to €0.46 per share, representing about €54 million in the aggregate, for the fiscal year ended December 31, 2007, and a 5% increase from last year’s dividend per share. The dividend is subject to approval by shareholders at the Annual Shareholders’ Meeting.

Other Corporate Announcements

On April 8th, 2008 DS announced that it has been named the leader in several categories of CIMdata’s newly published “2008 PLM Market Analysis Report” and that 2007 was DS’ third consecutive year at the top of the industry mindshare rankings. In the report, CIMdata ranked Dassault Systems the leader in overall PLM industry market presence among the industry’s Mindshare Leaders – rankings which reflect Dassault Systems’ leadership in both the “mainstream PLM” and more expansive “comprehensive PLM” market sectors. CIMdata defines a mindshare leader as the company end-users most readily identified with the term “PLM”.

Business Outlook

Thibault de Tersant, Senior Executive Vice President and CFO, commented, “Our 2008 outlook remains good and essentially unchanged from when we released it in February. We, therefore, are reconfirming our 2008 non-GAAP constant currency objectives for total revenue growth of about 10% and slightly increasing our software revenue growth to about 12% to 13%. We are also reconfirming our objective to increase our 2008 non-GAAP operating margin by 80 to 130 basis points in comparison to 2007. We are reducing our 2008 non-GAAP earnings per share growth objective to a range between 6% and 10% solely to reflect the severity of the US dollar weakness as our overall business outlook remains unchanged.”

The Company’s objectives are prepared and communicated only on a non-GAAP basis and are subject to the cautionary statement set forth below:

Second quarter 2008 non-GAAP total revenue objective of about €315 to €320 million and non-GAAP EPS of about €0.44 to €0.46;
2008 non-GAAP total revenue objective reiterated at about 10% growth in constant currencies; 2008 non-GAAP software revenue objective reiterated at about 12% to 13% growth in constant currencies;
2008 non-GAAP EPS objective adjusted down solely on U.S. dollar weakness from previous guidance to about €2.10 to €2.17, representing about 6% to 10% growth;
2008 non-GAAP operating margin objective reiterated at about 27% to 27.5%;
Objectives based upon exchange rate assumptions for the 2008 second quarter of US$1.60 per €1.00 and JPY 160 per €1.00 and 2008 full year exchange rate assumptions of US$1.57 per €1.00 and JPY 159 per €1.00.
The constant currency revenue objective leads to a reported 2008 non-GAAP revenue range of about €1.325 to €1.340 billion based upon the above assumed currency exchanges rates for 2008;

The non-GAAP objectives set forth above do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €1 million for 2008; stock-based compensation expense estimated at approximately €18 million for 2008; amortization of acquired intangibles estimated at approximately €48 million for 2008. The above objectives do not include any impact from one-time costs and one-time gains related to the anticipated DS global headquarters’ relocation in 2008. These estimates also do not include any new stock option or share grants, or any new acquisitions completed after April 29, 2008.

Recent Business News Highlights

On April 3rd, DS announced the new Abaqus release for CATIA V5.
On March 12th, DS launched PLM solutions for Life Sciences.
On March 3rd, DS unveiled Dymola 7.0, its next-generation Modelica-based multi-engineering modeling and simulation solution.

Webcast and conference call information

Dassault Systems will host a webcast and a conference call today, Tuesday, April 29, 2008. Management will host the webcast at 8:15 AM London time/9:15 AM Paris time and will then host the conference call at 3:00 PM CET/2:00 PM London time/9:00 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. T

he 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 Systems’ Investor Relations at 33.1.40.99.69.24.

Non-GAAP financial information

Readers are cautioned that the supplemental non-GAAP information presented in this press release is subject to inherent limitations. It is not based on any comprehensive set of accounting rules or principles and should not be considered as a substitute for U.S. GAAP measurements. Also, our supplemental non-GAAP financial information may not be comparable to similarly titled non-GAAP measures used by other companies. Further specific limitations for individual non-GAAP measures, and the reasons for presenting non-GAAP financial information, are set forth in the Company’s annual report for the year ended December 31, 2007 on Form 20-F filed with the SEC on April 4, 2008 and in the paragraph below.

In addition to the individual non-GAAP measures described in our most recent Form 20-F, our unaudited U.S. GAAP 2008 quarterly financial statements will reflect income and expenses related to the relocation of our corporate headquarters during 2008. In our supplemental non-GAAP financial information, we exclude the income and expense effects directly attributable to this corporate headquarters relocation because of their unusual nature. As a result, we believe that our supplemental non-GAAP financial information helps investors better understand the current trends in our operating performance. However, the one-time effects of our corporate headquarters relocation are components of our income and expenses for 2008 and by excluding these effects, the supplemental non-GAAP financial information understates the net impact to our net income in 2008. These corporate headquarters relocation effects are not recurring, and we do not expect such effects to occur as part of our normal business on a regular basis.

To compensate for these limitations, the supplemental non-GAAP financial information should be read not in isolation, but only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP.

The tables on pages 10 and 11 of this press release set forth our supplemental non-GAAP revenue, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per share, which exclude the effect of adjusting the carrying value of acquired companies’ deferred revenue, the expenses for the amortization of acquired intangible assets and stock-based compensation expense (in each case, as explained in our Form 20-F), as well as the effects attributable to our corporate headquarters relocation (as explained above). The tables also set forth the most comparable GAAP financial measure and a reconciliation of the GAAP and non-GAAP information.

Information in constant currencies

When we believe it would be helpful for understanding trends in our business, we provide percentage increases or decreases in our revenue (in both US GAAP and on a non-GAAP basis) to eliminate the effect of changes in currency values, particularly the U.S. dollar and the Japanese yen, relative to the euro. When trend information is expressed herein "in constant currencies", the results of the "current" period have first been recalculated using the average exchange rates of the comparable period in the preceding year, and then compared with the results of the comparable period in the preceding year.

DASSAULT SYSTEMES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (U.S. GAAP)
(in millions of Euro, except per share data, unaudited)

Three months ended

March 31, March 31,
2008 2007

New licenses revenue                 100.7          95.8
Periodic licenses,
maintenance and product
development revenue                  168.4         150.0
Software revenue                     269.1         245.8
Services and other
revenue                               38.3          45.1
Total Revenue                      € 307.4       € 290.9
Cost of software revenue
(excluding amortization
of acquired intangibles)              14.6          12.7
Cost of services and
other revenue                         35.6          40.2
Research and development              73.7          76.5
Marketing and sales                   92.5          83.1
General and administrative            26.4          21.4
Amortization of acquired
intangibles*                          11.5          10.9
Total Operating Expenses           € 254.3       € 244.8
Operating Income                    € 53.1        € 46.1
Financial revenue and other, net       0.2           3.0
Income before income taxes            53.3          49.1
Income tax expense                   (12.7)        (16.2)
Minority interest                      0.0           0.0
Net Income                          € 40.6        € 32.9
Basic net income per share             0.35          0.28
Diluted net income per share         € 0.34        € 0.28
Basic weighted average
shares outstanding (in
millions)                            116.9          115.6
Diluted weighted average
shares outstanding (in
millions)                            119.6          118.8

* Including relocation of headquarters

U.S. GAAP revenue variation as reported and in constant currencies

                          Three months ended March 31, 2008
                              Variation* Variation in cc**
GAAP Revenue                     6%             12%
GAAP Revenue by activity
Software Revenue                  9%             16%
Services and other Revenue      (15%)           (10%)
GAAP Software Revenue
by segment
PLM software revenue              9%             15%
of which CATIA software
revenue                          15%             21%
of which ENOVIA software
revenue                          (1%)             6%
Mainstream 3D software
revenue                          11%             18%
GAAP Revenue by geography
Americas                         (2%)            12%
Europe                           13%             13%
Asia                              4%             10%

* Variation compared to the same period in the prior year.
** In constant currencies.

DASSAULT SYSTEMES CONDENSED CONSOLIDATED BALANCE SHEETS (U.S. GAAP)
(in millions of Euro, unaudited)

                                       March 31,   Dec. 31,
                                         2008        2007
TOTAL ASSETS
Cash and short-term investments         682.9       626.6
Accounts receivable, net                283.0       320.0
Other assets                            968.8     1,004.5
Total Assets                        € 1,934.7   € 1,951.1
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
Long-term debt                          202.7       202.9
Other liabilities                       585.4       552.4
Shareholders' equity                  1,146.6     1,195.8
Total Liabilities and
Shareholders' equity                € 1,934.7   € 1,951.1

DASSAULT SYSTEMES CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (U.S. GAAP)
(in millions of Euro, unaudited)

Three months ended

March 31, March 31, Variation
2008 2007

Net Income                    40.6       32.9        7.7
Depreciation and
Amortization of Property,
Plant & Equipment              6.0        5.9        0.1
Amortization of
intangible assets             12.1       12.1        0.0
Other Non Cash P&L Items      (1.7)       0.0       (1.7)
Changes in working capital    31.4       57.5      (26.1)
Net Cash provided by
operating activities          88.4      108.4      (20.0)
Acquisition of assets
and equity, net of cash      (10.3)      (6.7)      (3.6)
Sale of assets
and equity                    36.2        0.0       36.2
Loans and others              (0.2)       0.0       (0.2)
Net Cash provided by
(used in) investing
activities                    25.7       (6.7)      32.4
Borrowings                     0.0        0.0        0.0
Share repurchase             (35.0)       0.0      (35.0)
DS Stock Option and
preferred Stock Exercise       4.2        5.2       (1.0)
Cash dividend paid             0.0        0.0        0.0
Payments on capital
lease obligations              0.0       (0.4)       0.4
Net Cash provided by
(used in) financing
activities (1)               (30.8)       4.8      (35.6)
Effect of exchange
rate changes on
treasury (2)                 (27.0)      (3.6)     (23.4)
Increase in treasury (2)      56.3      102.9      (46.6)

Treasury (2) at beginning
of period 626.6 459.2
Treasury (2) at end
of period 682.9 562.1

(1) Excluding changes in short-term investments. (2) Treasury includes cash, cash equivalents and short-term investments

DASSAULT SYSTEMES
NON-GAAP KEY FIGURES
(in millions of Euro, except per share data, headcount and exchange rates, unaudited)

Non-GAAP key figures exclude the effects of adjusting the carrying value of acquired companies’ deferred revenue, amortization of acquired intangible assets, stock-based compensation expense and the effects related to the corporate headquarters relocation.

Comparable U.S. GAAP financial information and a reconciliation of the GAAP and non-GAAP measures are set forth in the preceding tables.

Three months ended

                                        March March Variation Variation
                       31,2008 31,2007              in cc*
Non-GAAP Revenue       € 307.9 € 294.7    4%          10%
Non-GAAP Revenue
breakdown by activity
Software Revenue         269.6    249.6    8%          14%
of which New Licenses
Revenue                  100.7     95.8    5%          11%
of which Periodic
Licenses, Maintenance
and Product Development
Revenue                  168.9    153.8   10%          16%
Services and other
Revenue                   38.3     45.1 (15%)        (10%)
Non-GAAP Software
Revenue breakdown by
segment
PLM software Revenue     202.4    187.3    8%          14%
of which CATIA software
Revenue                  122.7    106.3   15%          21%
of which ENOVIA
software Revenue          38.3     40.9   (6%)          1%
Mainstream 3D software
Revenue                   67.2     62.3    8%          15%
Non-GAAP Revenue
breakdown by geography
Americas                  94.1     98.0   (4%)         10%
Europe                   138.9    124.2   12%          12%
Asia                      74.9     72.5    3%           9%
Non-GAAP Operating
Income                  € 70.2   € 65.1    8%
Non-GAAP Operating
Margin                    22.8%    22.1%
Non-GAAP Net Income       48.7     46.3    5%
Non-GAAP Diluted
Net Income Per Share     € 0.41 € 0.39    5%
Closing headcount         7,628   6,967
Average Rate USD
per Euro                   1.50    1.31   14%
Average Rate JPY
per Euro                 157.7   156.5     1%

* In constant currencies.

For more information, visit http://www.3ds.com.

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