SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Report on Form 6-K dated February 14, 2007
Commission File No. 0-28578
DASSAULT SYSTEMES S.A.
--------------------------
(Name of Registrant)
9, Quai Marcel Dassault, B.P. 310, 92156 Suresnes Cedex, France
---------------------------------------------------------------
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F |X| Form 40-F |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes | | No |X|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes | | No |X|
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes | | No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-___________
ENCLOSURES:
Dassault Systemes S.A. is furnishing under cover of Form 6-K a press release
dated February 14, 2007, reporting financial results for the fourth quarter and
year ended December 31, 2006.
[DASSAULT SYSTEMES LOGO OMITTED]
DS Achieves its 2006 Objectives and Reaches 25% PLM Market
Share Milestone
Paris, France, February 14, 2007 - Dassault Systemes (DS) (Nasdaq: DASTY;
Euronext Paris: #13065, DSY.PA) reported financial results for the fourth
quarter and year ended December 31, 2006.
Summary Financial Highlights
o Financial results well in line with objectives for the fourth quarter
and full year
o Acquisitions achieved key financial targets
o 2006 GAAP revenue of (euro)1.16 billion and GAAP EPS of (euro)1.51
o 2006 total non-GAAP revenue of (euro)1.18 billion or 27% growth in
constant currencies and non-GAAP EPS growth of 15% to (euro)1.83
o Non-GAAP revenue growth of 12% in constant currencies before including
ABAQUS and MatrixOne
Bernard Charles, Dassault Systemes President and Chief Executive Officer,
commented, "2006 was a remarkable year for DS. We delivered strong financial
results growing revenue by 27% in constant currencies and earnings per share by
15%. We successfully integrated two major acquisitions within a twelve-month
period. And we redesigned our 25-year strategic partnership with IBM to jointly
expand the enterprise PLM offering sold by IBM and to transition to a DS-managed
PLM indirect channel. Thanks to everyone's focus across DS on innovation and
execution to serve our customers, DS reached an important leadership milestone,
with a total PLM market share estimated at 25%.
"Our market leadership reflects the confidence that our customers and partners
have placed in us and our passion to invent new approaches to help them take
advantage of the 3D virtual world as a vehicle for advancing innovation, global
collaboration and productivity.
"During 2006 we completed our first ten years as a public company. Over this
timeframe, DS has established a strong performance track record, delivering
compound annual growth of 18% for revenues and 15% for earnings and maintaining
a very attractive financial model. 2006 also serves as a very solid foundation
for the coming years. With leading brands in growing markets, I believe we are
well-positioned to attain our 2005-2010 goals of doubling both revenue and
earnings."
1
Fourth Quarter and Full Year 2006 Financial Summary
Dassault Systemes completed the acquisition of ABAQUS, Inc. in October, 2005 and
MatrixOne Inc. in May, 2006 and has accounted for these acquisitions pursuant to
U.S. GAAP ("GAAP"). In addition to GAAP information, this press release presents
supplemental non-GAAP financial information which reflects certain adjustments
to our GAAP information. The supplemental non-GAAP financial information adjusts
our GAAP financial information to exclude: (i) deferred revenue adjustments,
(ii) amortization of acquired intangibles, (iii) stock-based compensation
expense and (iv) one-time tax restructuring effects. See Attachment A of this
press release for an explanation of these adjustments, and tables which set
forth the most comparable GAAP financial measures and a reconciliation of the
GAAP and non-GAAP financial data.
Fourth Quarter 2006 Financial Highlights:
-------------------------- --------------------------------- ---------------------------------
Fourth Quarter 2006
In millions of Euro,
except per share data GAAP Non-GAAP
-------------------------- --------------------------------- ---------------------------------
Q4 2006 Growth Growth Q4 2006 Growth Growth
in cc* in cc*
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
Total Revenue 349.4 15% 20% 353.2 13% 18%
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
E.P.S. 0.66 14% 0.72 7%
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
Operating margin 29.9% 34.3%
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
* in constant currencies
GAAP total revenue increased 15% to (euro)349.4 million (20% in constant
currencies) for the 2006 fourth quarter on a 14% increase in software revenue
and a 21% increase in services and other revenue.
Non-GAAP total revenue increased 13% to (euro)353.2 million (18% in constant
currencies) with non-GAAP software revenue increasing 11% (17% in constant
currencies) and non-GAAP services and other revenue rising 21% (27% in constant
currencies). CATIA and SolidWorks new seats licensed in the quarter increased 4%
to 23,280 seats.
From a regional perspective, all regions contributed to the increase in non-GAAP
revenue, led by the Americas with 28% growth (39% in constant currencies) and
Asia with 7% growth (19% in constant currencies). Europe increased 7%
year-over-year, following a very strong performance in the year-ago quarter.
From a segment perspective, both Product Lifecycle Management ("PLM") and
SolidWorks achieved strong growth. Specifically, non-GAAP PLM revenue increased
12% to (euro)293.9 million (18% in constant currencies), and included non-GAAP
ENOVIA revenue of (euro)71.1 million. Non-GAAP SolidWorks revenue increased 14%
to (euro)59.3 million (20% in constant currencies).
GAAP earnings per diluted share increased 14% to (euro)0.66 in the 2006 fourth
quarter, on higher GAAP operating income and financial revenue and a lower
effective tax rate.
Non-GAAP earnings per diluted share increased 7% to (euro)0.72 in the 2006
fourth quarter, primarily reflecting higher operating income and financial
revenue and a lower effective tax rate.
2
Full Year 2006 Financial Highlights:
-------------------------- --------------------------------- ---------------------------------
Full Year 2006 GAAP Non-GAAP
In millions of Euro,
except per share data
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
FY 2006 Growth Growth FY 2006 Growth Growth
in cc* in cc*
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
Total Revenue 1,157.8 24% 26% 1,177.5 25% 27%
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
E.P.S. 1.51 1% 1.83 15%
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
Operating margin 21.2% 26.9%
-------------------------- ---------- ----------- ---------- ---------- ----------- ----------
* in constant currencies
GAAP total revenue increased 24% to (euro)1.16 billion (26% in constant
currencies) on a 23% increase in GAAP software revenue and a 29% increase in
GAAP services and other revenue.
Non-GAAP total revenue increased 25% to (euro)1.18 billion (27% in constant
currencies) reflecting a 24% increase in non-GAAP software revenue (26% in
constant currencies) and a 29% increase in non-GAAP services and other revenue
(31% in constant currencies). CATIA and SolidWorks new seats licensed increased
9% to 78,684.
From a regional perspective, 2006 non-GAAP revenue increased 24% in Europe, 28%
in the Americas (29% in constant currencies) and 22% in Asia (29% in constant
currencies). As a percentage of total non-GAAP revenue, Europe accounted for
47%, the Americas 31% and Asia 22%.
Bernard Charles commented, "DS 2006 financial performance was driven by
broad-based strength.
o CATIA had a very good year, growing almost twice the estimated 6%
growth of the CAD market, with strategic wins and increased
penetration of the supply chain and target industries. As the number
one PLM CAD software, we continue to see good opportunities to extend
our leadership. Looking ahead, CATIA should be a key beneficiary of
our new go-to-market model for the PLM indirect channel.
o SIMULIA grew twice as fast as the overall simulation market on
expanding relationships with its largest customers as well as a broad
level of interest across a diversified set of industries. We expect
our simulation performance in 2006 to have led to market share gains
for DS in this segment of the PLM market.
o SolidWorks delivered a significant increase in revenues. Working
closely with its dynamic network of resellers, SolidWorks has
consistently outpaced market growth and won nearly two-thirds of its
new business from conversion of legacy 2D seats.
o DELMIA attained important wins during 2006. We believe that the
adoption of our digital manufacturing solutions by our largest
customers underlines the potential of our solutions to enable global
and flexible production systems.
o ENOVIA finished 2006 with the most comprehensive collaborative
offering in the PLM market, following the acquisition of MatrixOne in
May 2006. We have significantly increased our ability to serve our
eleven targeted industries."
From a segment perspective, non-GAAP PLM revenue grew 26% to (euro)959.4 million
(28% in constant currencies) on broad strength. Non-GAAP PLM revenue included
non-GAAP ENOVIA revenue, which increased 64% (66% in constant currencies) to
(euro)199.7 million. SolidWorks non-GAAP revenue grew 20% to (euro)218.1 million
(22% in constant currencies) and represented 19% of non-GAAP total revenue.
3
GAAP earnings per diluted share increased 1% to (euro)1.51. GAAP operating
income decreased 2% to (euro)245.9 million. These results largely reflected the
impact of amortization of acquired intangibles in connection with 2005 and 2006
acquisitions.
Non-GAAP earnings per diluted share increased 15% to (euro)1.83, on strong
growth in non-GAAP operating income. Specifically, non-GAAP operating income
increased (euro)46.3 million or 17% to (euro)316.2 million in 2006. The non-GAAP
operating margin was 26.9% for the full year 2006, in line with the Company's
financial objective.
Cash flow and other financial highlights
Net operating cash flow was (euro)38.3 million and (euro)262.9 million for the
fourth quarter and year ended December 31, 2006, respectively. Cash and
short-term investments totaled (euro)459.2 million and long-term debt was
(euro)204.3 million at December 31, 2006.
Business Outlook
Thibault de Tersant, Senior Executive Vice President and CFO, stated, "By
achieving all of our objectives for 2006, attaining our revenue and earnings
growth objectives and meeting our profitability goals, we have demonstrated our
ability to select the right acquisitions and to integrate them while achieving
double-digit core revenue growth.
"Looking to 2007, our objectives are to deliver a good level of non-GAAP revenue
and earnings growth accompanied by a stable operating margin in comparison to
2006. Specifically, we are raising our 2007 non-GAAP constant currency revenue
growth objective to 12% to 13% from the range of 11% to 12% given in October
2006. We are initiating our 2007 non-GAAP earnings per share growth objective of
9% to 12% growth, with acceleration in earnings growth as we move through the
year. And we expect a stable non-GAAP operating margin of about 27% thanks to
profitability improvements enabling us to make PLM channel investments as well
as compensating for unfavorable changes in currency exchange rates."
The Company's objectives are prepared and communicated only on a non-GAAP basis
and are subject to the cautionary statement set forth below.
o First quarter non-GAAP total revenue objective of about (euro)282 to
(euro)287 million, non-GAAP EPS of about (euro)0.31 to (euro)0.32 and
non-GAAP operating margin of about 18% to 19%
o 2007 non-GAAP total revenue objective of about (euro)1.29 to
(euro)1.30 billion, representing about 12-13% growth in constant
currencies
o 2007 non-GAAP EPS of about (euro)2.00 to (euro)2.05, representing
about 9% to 12% growth
o 2007 non-GAAP operating margin of about 27%
o Objectives based upon exchange rate assumptions for the first quarter
and full year of US$1.30 per (euro)1.00 and JPY 155 per (euro)1.00
The non-GAAP objectives set forth above do not take into account the following
accounting elements: deferred revenue write-downs estimated at approximately
(euro)8 million for 2007; stock-based compensation expense estimated at
approximately (euro)13 million for 2007, and amortization expense for acquired
intangibles estimated at approximately (euro)11 million per quarter. These
estimates do not include any new stock option or share grants, or any new
acquisitions in 2007.
4
Strategy, Technology, Customers and Partnerships
Dassault Systemes and IBM Expand Strategic Partnership, with IBM to Sell
Additional DS Solutions. DS and IBM recently announced a significant expansion
of their 25-year partnership. Under the terms of the new agreement, both IBM and
DS will increase the scope of their responsibilities, with IBM selling DS's
expanded portfolio of PLM solutions, and DS assuming management of the PLM
indirect sales channel through a transition expected to be completed in early
2008.
Boeing Simulates and "Manufactures" 787 Dreamliner at Industry-First Event with
3D PLM from Dassault Systemes. On December 7, 2006 Boeing completed a virtual
roll-out of its 787 Dreamliner. This first-ever virtual rollout was not simply
an animation of the completed airplane, but a virtual simulation and validation
of the entire manufacturing process. Dassault Systemes' PLM solutions used by
Boeing on the 787 Dreamliner include DELMIA for virtual planning and production,
CATIA for virtual product design, and ENOVIA VPLM for enterprise-wide
collaboration.
OMRON Corp., a Leading Manufacturer of Control Equipment for Factory Automation,
Integrates DELMIA Automation into its New Generation of Control and Network
Solutions. DELMIA Automation V5 enables the optimization and validation of a
given manufacturing process in a 3D virtual environment from control design
processes to the shop floor environment. By performing pre-validation in 3D,
"virtual commissioning", DELMIA Automation V5 allows control departments to work
in parallel and share information with mechanical and electrical departments
earlier in the development process, optimizing engineering processes.
Conference call information
Dassault Systemes will host a teleconference call today, Wednesday, February 14,
2007 at 3:00 PM CET/2:00 PM London/9:00 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 at 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.
Cautionary statement regarding forward-looking statements: Statements above that
are not historical facts but express expectations or objectives for the future,
including but not limited to statements regarding our financial performance
objectives are forward-looking statements (within the meaning of Section 21E of
the Securities Exchange Act of 1934, 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, particularly the value of the U.S. dollar or Japanese yen
with respect to the euro; (ii) reduced corporate spending on information
technology as a result of a decrease in the market demand for our products and
services; (iii) difficulties or adverse changes (a) affecting our partners or
our relationships with our partners, including our longstanding, strategic
partner, IBM, and (b) arising from the current reorganization of our PLM sales
channels; (iv) new product developments and technological changes; (v) errors or
defects in our products; (vi) growth in market share by our competitors; and
(vii) the realization of any risks related to the integration of MatrixOne or
any other newly acquired company and internal reorganizations. 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, 2005, which was
filed with the SEC on June 30, 2006, could materially affect the Company's
financial position or results of operations.
###
5
About Dassault Systemes
As a world leader in 3D and Product Lifecycle Management (PLM) solutions,
Dassault Systemes brings value to more than 90,000 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 lifecycle of products from conception to
maintenance. The Dassault Systemes portfolio consists of CATIA for designing the
virtual product - SolidWorks for 3D mechanical design - DELMIA for virtual
production - SIMULIA for virtual testing and ENOVIA for global collaborative
lifecycle management, including ENOVIA VPLM, ENOVIA MatrixOne and ENOVIA
SmarTeam. Dassault Systemes is listed on the Nasdaq (DASTY) and Euronext Paris
(#13065, DSY.PA) stock exchanges. For more information, visit:
http://www.3ds.com
CATIA, DELMIA, ENOVIA, SIMULIA and SolidWorks are registered trademarks of
Dassault Systemes or its subsidiaries in the US and/or other countries. All
other companies and products mentioned herein may be the trademarks of their
respective owners.
(Tables to follow)
CONTACTS:
Dassault Systemes: Financial Dynamics:
Valerie Agathon/Geraldine Nithart-Riva Harriet Keen/Haya Chelhot
33.1.40.99.69.24 44.20.7831.3113
Pierre Mas/Carole Richon
Florence de Montmarin
33.1.47.03.68.10
6
DASSAULT SYSTEMES
CONSOLIDATED STATEMENTS OF INCOME (U.S. GAAP)
(in millions of Euro, except per share data)
-------------------------------------- -------------------------------- --------------------------------
Three months ended Twelve months ended
-------------------------------- --------------------------------
December 31, December December 31, December
2006 31, 2005 2006 31, 2005
-------------------------------------- ---------------- --------------- ---------------- ---------------
New licenses revenue 134.4 134.2 432.3 375.6
Recurring licenses and product 152.2 118.0 530.8 408.0
development revenue
---------------- --------------- ---------------- ---------------
Software revenue 286.6 252.2 963.1 783.6
Services and other revenue 62.8 52.0 194.7 150.9
---------------- --------------- ---------------- ---------------
Total Revenue (euro)349.4 (euro)304.2 (euro)1,157.8 (euro)934.5
Cost of software revenue 13.4 8.3 49.6 26.8
Cost of services and other revenue 39.3 33.0 143.7 115.3
Research and development 75.1 70.1 299.9 250.0
Marketing and sales 84.3 66.5 296.0 223.0
General and administrative 24.4 16.9 83.7 58.6
Amortization of acquired 8.6 8.7 39.0 9.8
intangibles
---------------- --------------- ---------------- ---------------
Total Operating Expenses (euro)245.1 (euro)203.5 (euro)911.9 (euro)683.5
================ =============== ================ ===============
Operating Income (euro)104.3 (euro)100.7 (euro)245.9 (euro)251.0
Financial revenue and other, net 5.5 2.6 4.7 15.3
---------------- --------------- ---------------- ---------------
Income before income taxes 109.8 103.3 250.6 266.3
Income tax expense (31.6) (34.3) (70.8) (90.8)
---------------- --------------- ---------------- ---------------
Net Income (euro)78.2 (euro)69.0 (euro)179.8 (euro)175.5
================ =============== ================ ===============
Basic net income per share (euro)0.68 (euro)0.60 (euro)1.56 (euro)1.54
================ =============== ================ ===============
Diluted net income per share (euro)0.66 (euro)0.58 (euro)1.51 (euro)1.49
================ =============== ================ ===============
Basic weighted average shares 115.5 114.6 115.2 114.0
outstanding (in millions)
================ =============== ================ ===============
Diluted weighted average shares 119.0 119.2 119.1 117.6
outstanding (in millions)
-------------------------------------- ---------------- --------------- ---------------- ---------------
7
DASSAULT SYSTEMES
CONDENSED CONSOLIDATED BALANCE SHEETS (U.S. GAAP)
(in millions of Euro)
-------------------------------------------------- --------------------- ---------------------
December 31, 2006 December 31, 2005
-------------------------------------------------- --------------------- ---------------------
ASSETS
Cash and short-term investments 459.2 379.9
Accounts receivable, net 303.6 287.8
Other assets 1,091.8 745.6
--------------------- ---------------------
Total assets (euro) 1,854.6 (euro) 1,413.3
-------------------------------------------------- --------------------- ---------------------
LIABILITIES
AND SHAREHOLDERS' EQUITY
Long-term debt 204.3 1.5
Other liabilities 542.0 425.7
Shareholders' equity 1,108.3 986.1
--------------------- ---------------------
Total liabilities and shareholders' equity (euro) 1,854.6 (euro) 1,413.3
-------------------------------------------------- --------------------- ---------------------
8
DASSAULT SYSTEMES
CONDENSED CASH FLOW STATEMENT (U.S. GAAP)
(in millions of Euro)
------------------------------ ---------------------------------------- ----------------------------------------
Three months ended Twelve months ended
-------------- ------------- ----------- -------------- ------------- -----------
December 31, December Variation December 31, December Variation
2006 31, 2005 2006 31, 2005
------------------------------ -------------- ------------- ----------- -------------- ------------- -----------
Net income 78.2 69.0 9.2 179.8 175.5 4.3
Changes in working capital
and non-cash P&L items (39.9) (31.9) (8.0) 83.1 21.2 61.9
-------------- ------------- ----------- -------------- ------------- -----------
Net Cash provided by
operating activities (euro)38.3 (euro)37.1 (euro)1.2 (euro)262.9 (euro)196.7 (euro)66.2
Acquisition and sale of
assets (6.7) 0.2 (6.9) (25.9) (22.0) (3.9)
Acquisitions net of cash
acquired 0.2 (305.0) 305.2 (260.9) (329.4) 68.5
Loan and other 0.1 (0.4) 0.5 1.9 (2.3) 4.2
-------------- ------------- ----------- -------------- ------------- -----------
Net Cash provided by (used
in) investing activities (euro)(6.4) (euro)(305.2) (euro)298.8 (euro)(284.9) (euro)(353.7) (euro)68.8
Proceeds from long-term 0.0 0.0 0.0 200.0 0.0 200.0
borrowings
Share repurchase and
proceeds from stock option
exercise, net (19.6) (3.0) (16.6) (25.2) 0.1 (25.3)
Payments on capital lease
obligations (0.4) (1.9) 1.5 (1.7) (1.9) 0.2
Cash dividends paid 0.0 0.0 0.0 (48.2) (43.1) (5.1)
-------------- ------------- ----------- -------------- ------------- -----------
Net Cash provided by (used
in) financing activities (euro)(20.0) (euro)(4.9) (euro)(15.1) (euro)124.9 (euro)(44.9) (euro)169.8
(1)
Effect of exchange rate
changes on treasury (2) (euro)(8.0) (euro)1.5 (euro)(9.5) (euro)(23.6) (euro)29.0 (euro)(52.6)
============== ============= =========== ============== ============= ==========
Increase (Decrease) in
treasury 2) (euro)3.9 (euro)(271.5) (euro)275.4 (euro)79.3 (euro)(172.9) (euro)252.2
------------------------------ -------------- ------------- ----------- -------------- ------------- ----------
------------------------------ -------------- ------------- ----------- -------------- ------------- ----------
Treasury (2)
at beginning of period (euro)455.3 (euro)651.4 (euro)379.9 (euro)552.8
Treasury (2)
at end of period (euro)459.2 (euro)379.9 (euro)459.2 (euro)379.9
------------------------------ -------------- ------------- ----------- -------------- ------------- ----------
(1) Excluding changes in short-term investments.
(2) Treasury includes cash, cash equivalents and short-term investments.
9
Attachment A
Supplemental 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 are set forth below. 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.
In evaluating and communicating our results of operations, we supplement our
financial results reported on a GAAP basis with additional non-GAAP financial
data, including non-GAAP revenue, operating income, operating margin, net income
and diluted earnings per share. As further explained below, the supplemental
non-GAAP financial information excludes certain income statement elements:
deferred revenue adjustments, amortization of acquired intangibles (which arise
from our acquisitions of companies and certain technology related intangible
assets), stock-based compensation expense and one-time tax restructuring
effects. For this reason, and subject to the limitations set forth above and
below, we believe that the supplemental non-GAAP data provides a consistent
basis for period-to-period comparisons which can improve investors'
understanding of our financial performance.
Our management uses the supplemental non-GAAP financial information, together
with our GAAP financial information, to evaluate our operating performance, to
make operating decisions and to plan and set objectives for future periods.
Compensation of our executives is based in part on the performance of our
business measured with the supplemental non-GAAP financial information. We
believe that the supplemental non-GAAP data also provides meaningful information
to investors and financial analysts who use them for comparing our operating
performance to our historical trends and to other companies in our industry, as
well as for valuation purposes.
The supplemental non-GAAP financial information adjusts our GAAP financial
information to exclude:
o Deferred revenue adjustment: Under U.S. GAAP, deferred revenue of an
acquired company must be adjusted by writing it down to account for
the fair value of customer support obligations assumed under support
contracts acquired through the acquisition. As a result, in the case
of a typical one-year contract, our GAAP revenues for the one-year
period subsequent to an acquisition do not reflect the full amount of
revenue on assumed contracts that would have otherwise been recorded
by the acquired entity.
In our supplemental non-GAAP financial information, we have excluded
this write-down to the carrying value of the deferred revenue, and we
reflect instead the full amount of such revenue. We believe that the
non-GAAP measure of revenue is useful to investors and management
because it reflects a level of revenue and operational results that
corresponds to the combined business activities of DS and the acquired
company. In addition, the non-GAAP financial information provides a
consistent basis for comparing our future operating performance, when
no further adjustments to deferred revenue are required, against
recent results.
However, by excluding the deferred revenue adjustment, the
supplemental non-GAAP financial information reflects the total revenue
that would have been recorded by the acquired entity but may not
reflect the total cost associated with generating the non-GAAP
revenue, since such cost may have been partially incurred by the
acquired company prior to the acquisition.
o Amortization of acquired intangibles: Under U.S. GAAP, the cost of
acquired intangible assets, whether acquired through acquisitions of
companies or of technology or other intangible assets must be
recognized according to the assets' fair value and amortized over
their estimated useful life.
10
In our supplemental non-GAAP financial information, we have excluded
the amortization expense related to acquired intangibles in order to
provide a consistent basis for comparing our historical results. For
technology and other intangible assets we develop internally, we
typically expense costs in the period in which they are incurred. For
example, because we typically incur most of our research and
development costs prior to reaching technical feasibility, our
research and development costs are normally expensed in the period in
which they are incurred. By excluding the amortization expense related
to acquired intangibles, the supplemental non-GAAP financial
information provides a uniform approach for evaluating the development
of all our technology, whether developed internally or acquired
externally. As a result, we believe that the supplemental non-GAAP
financial information offers investors a useful basis for comparing
our historical results.
However, the acquired intangible assets whose amortization costs are
excluded contributed to revenue earned during the period, and it may
not have been possible to earn such revenue without such assets. In
addition, the amortization of acquired intangibles is a recurring
expense until their total cost has been amortized.
o Stock-based compensation expense: Under U.S. GAAP, we are required to
recognize in our income statement all share-based payments to
employees, including grants of employee stock options, based on their
fair values over the period that an employee provides service in
exchange for the award. This requirement, which is set forth under
SFAS 123(R), became effective for us as of January 1, 2006.
In our supplemental non-GAAP financial information, we have excluded
this expense to help investors compare our 2006 financial information
with financial information for periods prior to January 1, 2006, when
stock-based compensation costs were not expensed. In addition, because
financial analysts and investors were using a valuation model which
did not take into account our stock-based compensation expense for
prior periods, the exclusion of stock-based compensation expense in
our supplemental non-GAAP financial information helps them ensure the
consistency of their valuation metrics. Our management also considers
this non-GAAP information when reviewing our operating performance,
since stock-based compensation costs can fluctuate due to factors
other than the level of our business activity or operating
performance.
However, stock-based compensation is one component of employee
compensation. By excluding stock-based compensation expense, the
supplemental non-GAAP financial information does not reflect our full
cost of attracting, motivating and retaining our personnel.
Stock-based compensation expense is a recurring expense.
o One-time tax restructuring effects: Our U.S. GAAP financial statements
reflect the impact of a tax restructuring effected during the third
and fourth quarters of 2006 in the U.S.
In our supplemental non-GAAP financial information, we have excluded
the one-time impact attributable to this tax restructuring because of
its unusual nature in both qualitative and quantitative terms. We do
not expect such tax effects to occur as part of our normal business on
a regular basis. As a result, we believe that by excluding the
one-time effects of the tax restructuring, our supplemental non-GAAP
financial information helps investors understand the current trends in
our operating performance. We also believe that the exclusion of the
one-time tax restructuring effects facilitates a comparison of our
effective rate of income tax between different periods.
However, the one-time tax restructuring effects are a component of our
income tax expense for the period during which the restructuring took
place. By excluding these effects, the supplemental non-GAAP financial
information overstates our income tax expense for the relevant period.
The following tables set forth our supplemental non-GAAP revenue, operating
income, operating margin, net income and 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, stock-based compensation and one-time tax restructuring effects (as
explained above). The tables also set forth the most comparable GAAP financial
measure and a reconciliation of the GAAP and non-GAAP information.
11
DASSAULT SYSTEMES
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
US GAAP - NON-GAAP RECONCILIATION
(in millions of Euro, except per share data)
----------------------------------------------------------------------------------------------------------------------------------
Three months ended December 31, Variation
-----------------------------------------------------------------------------------------------------
2006 GAAP Adjustment 2006 2005 Adjustment 2005 Non-
(1) Non-GAAP GAAP (1) Non-GAAP GAAP GAAP(2)
----------------------------------------------------------------------------------------------------------------------------------
Total Revenue (euro)349.4 3.8 (euro)353.2 (euro)304.2 9.1 (euro)313.3 15% 13%
Total Revenue breakdown
by activity
Software revenue 286.6 3.8 290.4 252.2 9.1 261.3 14% 11%
Services and other
revenue 62.8 52.0 21%
Total Revenue
breakdown by segment
PLM revenue 292.2 1.7 293.9 253.2 8.2 261.4 15% 12%
of which ENOVIA revenue 69.3 1.8 71.1 47.1 47% 51%
SolidWorks revenue 57.2 2.1 59.3 51.0 0.9 51.9 12% 14%
Total Revenue breakdown by
geography
Americas revenue 108.3 1.8 110.1 82.4 3.3 85.7 31% 28%
Europe revenue 170.9 1.4 172.3 157.8 3.6 161.4 8% 7%
Asia revenue 70.2 0.6 70.8 64.0 2.2 66.2 10% 7%
----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (euro)245.1 (13.0)(euro)232.1 (euro)203.5 (8.7)(euro)194.8 20% 19%
Stock-based compensation
expense 4.4 (4.4) - - n/a n/a
Amortization of acquired
intangibles 8.6 (8.6) - 8.7 (8.7) - n/a n/a
----------------------------------------------------------------------------------------------------------------------------------
Operating Income (euro)104.3 16.8 (euro)121.1 (euro)100.7 17.8 (euro)118.5 4% 2%
Operating Margin 29.9% 34.3% 33.1% 37.8%
Income before Income Taxes 109.8 16.8 126.6 103.3 17.8 121.1 6% 5%
Income tax expense (31.6) (9.3) (40.9) (34.3) (6.8) (41.1) n/a n/a
Income tax effect of
adjustments above 4.6 (4.6) - 6.8 (6.8) - n/a n/a
One-time tax restructuring
effects 4.7 (4.7) - - n/a n/a
Net Income (euro)78.2 7.5 (euro)85.7 (euro)69.0 11.0 (euro)80.0 13% 7%
Diluted Net Income Per
Share (3) (euro)0.66 0.06 (euro)0.72 (euro)0.58 0.09 (euro)0.67 14% 7%
----------------------------------------------------------------------------------------------------------------------------------
(1) In the reconciliation schedule above, (i) all non-GAAP adjustments to
GAAP revenue data reflect the exclusion of the deferred revenue adjustment;
(ii) non-GAAP adjustments to GAAP operating expenses data reflect the
exclusion of the amortization of acquired intangibles or stock-based
compensation expense (as detailed below), as indicated; and (iii) all
non-GAAP adjustments to GAAP income data reflect the combined effect of
these non-GAAP adjustments, plus, with respect to net income and diluted
net income per share, the exclusion of one-time tax restructuring effects.
-----------------------------------------------------------------------------
Three months ended December 31,
-----------------------------------------------------------------------------
2006 GAAP Adjustment 2006 2005 GAAP
Non-GAAP
-----------------------------------------------------------------------------
Cost of services and other revenue 39.3 (0.2) 39.1 33.0
Research and development 75.1 (2.5) 72.6 70.1
Marketing and sales 84.3 (0.9) 83.4 66.5
General and administrative 24.4 (0.8) 23.6 16.9
Total stock-based compensation (4.4)
expense
-----------------------------------------------------------------------------
(2) The non-GAAP percentage increase (decrease) compares non-GAAP measures
for the two different periods. In the event there is a non-GAAP adjustment
to the relevant measure for only one of the periods under comparison, the
non-GAAP increase (decrease) compares the non-GAAP measure to the relevant
GAAP measure.
(3) Based on a weighted average 119.0 million diluted shares for Q4/2006
and 119.2 million diluted shares for Q4/2005.
12
DASSAULT SYSTEMES
SUPPLEMENTAL SELECTED NON- GAAP FINANCIAL INFORMATION
US GAAP - NON-GAAP RECONCILIATION
(in millions of Euro, except per share data)
----------------------------------------------------------------------------------------------------------------------------------
Three months ended December 31, Variation
-----------------------------------------------------------------------------------------------------
2006 GAAP Adjustment 2006 2005 Adjustment 2005 Non-
(1) Non-GAAP GAAP (1) Non-GAAP GAAP GAAP(2)
----------------------------------------------------------------------------------------------------------------------------------
Total Revenue (euro)1,157.8 19.7 (euro)1,177.5 (euro)934.5 9.1 (euro)943.6 24% 25%
Total Revenue breakdown by
activity
Software revenue 963.1 19.7 982.8 783.6 9.1 792.7 23% 24%
Services and other revenue 194.7 150.9 29%
Total Revenue breakdown by
segment
PLM revenue 943.3 16.1 959.4 753.6 8.2 761.8 25% 26%
of which ENOVIA revenue 190.4 9.3 199.7 121.9 56% 64%
SolidWorks revenue 214.5 3.6 218.1 180.9 0.9 181.8 19% 20%
Total Revenue breakdown by
geography
Americas revenue 356.0 10.5 366.5 283.0 3.3 286.3 26% 28%
Europe revenue 541.9 6.4 548.3 438.2 3.6 441.8 24% 24%
Asia revenue 259.9 2.8 262.7 213.3 2.2 215.5 22% 22%
----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses (euro)911.9 (50.6) (euro)861.3 (euro)683.5 (9.8)(euro)673.7 33% 28%
Stock-based compensation
expense 11.6 (11.6) - - n/a n/a
Amortization of acquired
intangibles 39.0 (39.0) - 9.8 (9.8) - n/a n/a
----------------------------------------------------------------------------------------------------------------------------------
Operating Income (euro)245.9 70.3 (euro)316.2 (euro)251.0 18.9 (euro)269.9 (2%) 17%
Operating Margin 21.2% 26.9% 26.9% 28.6%
Income before Income Taxes (euro)250.6 70.3 (euro)320.9 (euro)266.3 18.9 (euro)285.2 (6%) 13%
Income tax expense (70.8) (32.6) (103.4) (90.8) (7.2) (98.0) n/a n/a
Income tax effect of
adjustments above 21.1 (21.1) - 7.2 (7.2) - n/a n/a
One-time tax restructuring
effects 11.5 (11.5) - - n/a n/a
Net Income (euro)179.8 37.7 (euro)217.5 (euro)175.5 11.7 (euro)187.2 2% 16%
Diluted Net Income Per
Share(3) (euro)1.51 0.32 (euro)1.83 (euro)1.49 0.10 (euro)1.59 1% 15%
----------------------------------------------------------------------------------------------------------------------------------
(1) In the reconciliation schedule above, (i) all non-GAAP adjustments to
GAAP revenue data reflect the exclusion of the deferred revenue adjustment;
(ii) non-GAAP adjustments to GAAP operating expenses data reflect the
exclusion of the amortization of acquired intangibles or stock-based
compensation expense (as detailed below), as indicated; and (iii) all
non-GAAP adjustments to GAAP income data reflect the combined effect of
these non-GAAP adjustments, plus with respect to net income and diluted net
income per share, the exclusion of one-time tax restructuring effects.
-------------------------------------------------------------------------------
Three months ended December 31,
-------------------------------------------------------------------------------
2006 GAAP Adjustment 2006 2005 GAAP
Non-GAAP
-------------------------------------------------------------------------------
Cost of services and other revenue 143.7 (0.4) 143.3 115.3
Research and development 299.9 (6.8) 293.1 250.0
Marketing and sales 296.0 (2.5) 293.5 223.0
General and administrative 83.7 (1.9) 81.8 58.6
Total stock-based compensation (11.6)
expense
-------------------------------------------------------------------------------
(2) The non-GAAP percentage increase (decrease) compares non-GAAP measures
for the two different periods. In the event there is a non-GAAP adjustment
to the relevant measure for only one of the periods under comparison, the
non-GAAP increase (decrease) compares the non-GAAP measure to the relevant
GAAP measure.
(3) Based on a weighted average 119.1 million diluted shares for FY 2006
and 117.6 million diluted shares for FY 2005.
13
DASSAULT SYSTEMES
NON-GAAP KEY FIGURES
(in millions of Euro, except per share data, headcount and exchange rates.)
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 one-time tax restructuring effects.
Comparable U.S. GAAP financial information, and a reconciliation of the GAAP and
non-GAAP measures, are set forth in the preceding tables in this Attachment A.
---------------------------------------------------------------------------------------------------------------------
Three months ended Twelve months ended
----------------------------------------------------------------------------------------
December 31, December 31, Variation December 31, December Variation
2006 2005 2006 31, 2005
---------------------------------------------------------------------------------------------------------------------
Non-GAAP Revenue (euro) 353.2 (euro)313.3 13% (euro)1,177.5 (euro)943.6 25%
Non-GAAP Revenue breakdown
by activity
Software Revenue 290.4 261.3 11% 982.8 792.7 24%
Services and other Revenue 62.8 52.0 21% 194.7 150.9 29%
Non-GAAP Revenue breakdown
by segment
PLM revenue 293.9 261.4 12% 959.4 761.8 26%
of which ENOVIA revenue 71.1 47.1 51% 199.7 121.9 64%
SolidWorks revenue 59.3 51.9 14% 218.1 181.8 20%
Non-GAAP Revenue breakdown
by geography
Americas 110.1 85.7 28% 366.5 286.3 28%
Europe 172.3 161.4 7% 548.3 441.8 24%
Asia 70.8 66.2 7% 262.7 215.5 22%
---------------------------------------------------------------------------------------------------------------------
Non-GAAP Operating Income 121.1 118.5 2% 316.2 269.9 17%
Non-GAAP Operating Margin 34.3% 37.8% 26.9% 28.6%
Non-GAAP Net Income 85.7 80.0 7% 217.5 187.2 16%
Non-GAAP Diluted Net 0.72 0.67 7% 1.83 1.59 15%
Income Per Share
---------------------------------------------------------------------------------------------------------------------
Closing headcount 6,840 5,693 20%
---------------------------------------------------------------------------------------------------------------------
Average Rate USD per Euro 1.29 1.19 9% 1.26 1.24 1%
Average Rate JPY per Euro 151.9 139.4 9% 146.1 136.9 7%
---------------------------------------------------------------------------------------------------------------------
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DASSAULT SYSTEMES S.A.
Date: February 14, 2007 By: /s/ Thibault de Tersant
--------------------------------
Name: Thibault de Tersant
Title: Executive Vice President,
Finance and Administration