French PLM heavyweight Dassault Systemes on Thursday reported a modest 6%
year-over-year rise in second-quarter non-GAAP revenue to €326.2 million and a 10% rise in net income to €55 million, but slightly lowered its 2008 revenue forecast following the spin-off of its DSF reseller operations.
“Dassault Systemes had an excellent second quarter and first half, reflecting the contribution of our PLM solutions to product competitiveness and innovation,“ CEO Bernard Charles said in a statement on results for the quarter ended June 30, 2008. “In particular, we had an excellent dynamic in software across our leading brands with new wins and additional business in many of our verticals, including automotive, aerospace, high tech, energy, apparel, and life sciences, among others.”
In a conference call with analysts this morning, CFO Thibault de Tersant pointed out that the quarter’s growth was “achieved without any mega-deals.”
Tersant noted that while Dassault “had a healthy growth of new license revenue,” service revenue fell 8% year over year to €48.2 million. He described the service decline as “very well-aligned with our expectations” following the
dismantling of its SMB reseller partnership with IBM.
IBM still sells Dassault software to large accounts, and “the transformation of this partnership is working very well,” Charles told analysts. IBM, he said, “is a much stronger partner than in the past.”
One product whose sales fell shy of expectations was SolidWorks, which at 9% growth in new orders was “a little bit less than in the first quarter,” Tersant said. Pressed by an analyst, he explained that although Dassault “had a stream of new business wins” for SolidWorks, those wins were for a smaller number of seats than normal. But, he said, “the SolidWorks business remains extremely healthy,” and added that “we remain aligned with our expectations of 10 to 15% for SolidWorks for the year.”
Tersant also said that the first half’s 15% (14% for the quarter) organic growth rate for CATIA will probably be “somewhat less” in the second half, in part because of the spin-off of DFS, a CATIA reseller.
One analyst asked whether Dassault was “losing footprint” among big aerospace companies, such as Boeing and EADS, which both recently announced they are buying competitors’ products, including PTC’s. CEO Charles snapped back that Dassault is gaining footprint, and he noted that the contracts in question were renewals of existing deals. He said Dassault is concentrating on selling new products rather than supporting old ones.
“You have to know what business you want to sign and what business you don’t want to sign,” Charles said. “There are contracts we don’t want to sign, because when you sign them, you sign for marginal software revenue for a lot of service ... There are things where we won’t sign with old PDM installations because I don’t think it’s worthwhile to sign, because when you come with the next generation, you can sign a bigger contract.”
He noted that Boeing has mapped out a PLM future that includes Dassault products CATIA, ENOVIA, DELMIA, SIMULIA, AND 3DVIA and that it would “unify on not only the expansion of V5, but, ultimately, V6.”
Charles expressed confidence in the company’s general outlook, noting that the V6
Web-ready, SOA framework for its new generation of products will prove popular, even if large companies take time to adopt it. “V6 will change the rules for the market because it is online,” he said.
Meanwhile, the company pushed its full-year revenue forecast slightly downward. “In July, we completed the spin-off of one of our internal reseller businesses, DSF, and also completed the acquisition of Engineous Software,” Tersant said in a statement. “Therefore, we are updating our full-year revenue range to take into account the net €6 million to €7 million estimated effect of these transactions, with the new mid-point of our range now at about €1.325 billion, from €1.332 billion previously.”
In a cost-cutting move, the company said it is delisting from the NASDAQ. The decision to delist will save the company at least €1 million in 2009, Tersant said. Charles said the company is delisting for cost savings and because “the volume was marginal on NASDAQ.” He said many U.S. investors trade Dassault on European exchange Euronext.
The company said it will report on a GAAP basis through the end of this year for the sake of comparing numbers with projections, but then will switch to IFRS (International Financial Reporting Standards).