Dassault Systèmes Revenue Growth Less Than Meets the Eye

There were signs of growth and recovery in the quarterly statement from Dassault Systèmes, but digging into the numbers shows the pace is modest, not blistering.

By L. Stephen Wolfe, P.E.
Contributing Analyst

Dassault Systèmes (Paris: DSY) reported a 24% rise in revenue (in Euros) and a 90% increase in net income for the quarter ended June 30, 2010. However, this seemingly stellar performance was not the result of increased demand for Dassault Systèmes engineering software products. Most of the rise appears due to two factors: the acquisition by Dassault Systèmes of IBM’s PLM marketing business and the 8% drop in the value of the Euro compared with the US Dollar.

The second quarter of 2010 is the first in which Dassault Systèmes recognized revenue from the IBM acquisition. According to the company’s press release, the IBM “share of DS software revenue was estimated at approximately €53 million in the second quarter of 2009.” Add this figure to Dassault’s revenue from the second quarter of 2009, and its PLM revenue rose a scant 3% year-to-year, not the robust 30% suggested by the financial statements. Dassault Systèmes’ overall revenues (in Euros) rose 6% when similarly adjusted for the IBM effect, not the 24% reported. The lower figure is in line with that of US rival Parametric Technology, which reported a 7% sales increase.

Unraveling the effect of currency fluctuations on Dassault Systèmes’ revenues would make a good question on a graduate-school finance exam. Dassault Systèmes claims PLM software grew 27% and mainstream 3D (SolidWorks) grew 14% year-over-year, excluding the effects of foreign exchange. But converting Dassault Systèmes revenues to US Dollars at prevailing exchange rates gives a different picture. Dassault Systèmes PLM software revenues grew 21% from $280.8 million to $340.9 million. SolidWorks revenue grew 12% from $88.9 million to $99.1 million. Adjusting PLM dollar revenues for the IBM contribution indicates they fell 3% from last year’s levels.

With net income of 48 million ($62 million) and a cash position of almost 400 million ($507 million) net of long-term debt and other non-current obligations, Dassault Systèmes appears to be in good financial shape. But like PTC, its recovery from the recent recession is slow. Rival Autodesk appears likely to report a similarly slow turnaround when its current fiscal quarter ends.

Cash per share on June 30, 2010 was $10.97, up from $10.09 on March 31. Even with two acquisitions during the quarter (Exalead for search technology; Geensoft for embedded systems development), Dassault is sitting on more than $1 billion in cash. Compare this with PTC, which has a cash per share of $1.88.

Contributing Editor Randall S. Newton provided research and comment to this article.

Dassault Systèmes quarter revenues in Euros look strong.
The decline of the Euro relative to the US Dollar depressed revenue growth when compared with US companies.
PLM software revenue got a boost from the acquisition of IBM’s PLM Software business.
SolidWorks got no benefit from the IBM deal. Growth slowed in dollars.
SolidWorks cumulative commercial license sales topped 400,000 in the most recent quarter. We do not count educational sales.
Dassault Systèmes cash has grown, but so has its debt and other obligations.
CATIA sales made up a larger share of Dassault Systèmes’ business in the quarter.
55% of Dassault Systèmes sales came from outside the Euro zone.

Geo pie

55% of Dassault Systèmes sales came from outside the Euro zone.