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CORPORATE REPORT 2005 DASSAULT SYSTÈMES DASSAULT CORPORATE REPORT CORPORATE Enter a New Era with 3D 2005 DASSAULT SYSTÈMES 9, quai Marcel-Dassault, BP 310 92156 Suresnes Cedex, France Telephone: 33 (0) 1 40 99 40 99 1 Company & Strategy 2 Message from the Chairman and the President 6 Q&A with Bernard Charlès 10 Dassault Systèmes at a Glance 12 A Very Successful Year 14 Management 16 Corporate Governance 18 25 Years of Innovation 20 Passion for Innovation 22 Solutions & Competitive Advantages 24 CATIA 26 DELMIA 28 ENOVIA 30 SMARTEAM 32 SIMULIA 34 DS PLM Industry Solutions 36 SolidWorks 38 3D For ALL 40 The Ecosystem 44 Corporate Responsibility 46 Shaping the Future 48 Fostering Interaction & Innovation 50 Investing in Tomorrow 52 Leveraging Eco-Design 54 Sharing Commitment Global collaboration Business transformation Profile Dassault Systèmes (DS) is the world leader in Product Lifecycle Management (PLM) software solutions powered by three-dimensional (3D) representation. The company’s applications and services enable businesses of all sizes in all industries to digitally define and simulate products, as well as the processes and resources required to manufacture and maintain those products. The DS vision is to provide solutions that allow everyone to imagine, share, and experience in 3D – enabling development knowledge, from product conception to maintenance, to be shared across the extended enterprise. Manufacturing excellence Collaborative innovation Message from The Chairman and the President 2005 Overview Financial Performance in 2005* 2005 was a year of significant progress for Dassault DS reported strong growth in revenues and earnings Systèmes. We extended our leadership of the Product in 2005 on sharply higher software and services results Lifecycle Management market adding one percentage and core margin improvement. Total revenue increased point in 2005 to reach 23% market share. In the 18.5% excluding adjustments to €943.6 million, driven aggregate we have gained eight points of market share by an acceleration of our software revenue, which since 2001. Our success reflects our consistent focus increased 18% excluding adjustments. Software on execution, the strong performance of our distribution revenue represented 84% of our total revenue. We also channels, and a clear understanding of what is benefited from growth of services, which rose 20% important to customers and partners in this $10 billion in 2005 to €150.9 million. Regionally, Americas posted plus market. a very good performance led by our PLM business and equally favorable trends in our Mainstream 3D 2005 was also a year focused on setting the stage design business. In addition, revenues were up sharply for our longer-term future. We invested in pursuing in Europe, and Asia posted solid growth. our strategic initiatives, making headway in advancing our technologies, adapting our sales and marketing Earnings growth tracked closely our revenue growth, resources to the evolving needs of our customers and with earnings per diluted share up 17% to €1.59, markets, and expanding our market reach. excluding adjustments. And our operating margin, excluding adjustments, came in on target at 28.6% On this front, one of the most important events of 2005 for 2005, relatively stable with 2004 as it reflected the was the acquisition of ABAQUS, and the unveiling positive underlying improvements in our businesses of our strategic roadmap in the simulation market. which enabled us to absorb in excess of one point ABAQUS is the star of the simulation market, of dilution from our recent acquisitions. providing human and technical excellence in finite element analysis to a much broader array of vertical PLM or Process-centric revenue was up 17.1% excluding industries than we address currently. This acquisition adjustments to €761.8 million. CATIA, our largest brand is at the core of our strategic initiatives in simulation focusing on collaborative product development, had a including the introduction of our newest brand, solid year. DELMIA, in the area of digital manufacturing, SIMULIA, for engineering and virtual testing, and R&D had strong revenue growth. Our newly-acquired company plans underway to develop an integrated open ABAQUS, contributing one quarter to revenue results, multi-physics platform for realistic simulation. had a very nice start. Our Product Data Management * Certain financial data in this letter, including total revenue, PLM and Design-centric revenue as well as operating margin and earnings per share, are presented excluding the effects of adjustments for acquired companies and technology (“adjustments”). Including the effects of these adjustments, 2005 total revenue increased 17.3% to €934.5 million and 2005 diluted net income per share increased 10.4% to €1.49. 2 DASSAULT SYSTÈMES Corporate Report 2005 In 2005, we invested in pursuing our strategic initiatives, “making headway in advancing our technologies, adapting our sales and marketing resources to the evolving needs of our customers and markets, and expanding our market reach.” Bernard Charlès (PDM) revenue, with ENOVIA and SMARTEAM, increased 20% with a particularly notable performance by ENOVIA. PDM end-user software revenue grew 25% to $227 million and total end-user spending increased 21% to $570 million. In the Mainstream 3D design market, SolidWorks performed very well in 2005, reflecting the strengths of its product offerings and distribution network. Mainstream 3D revenues increased 24.6% to €181.8 million excluding adjustments. Bernard Charlès President and Chief Executive Officer We grew our footprint in the design world, with over 72,000 new CATIA and SolidWorks licenses, demonstrating the continuous need for 3D technology across industries. In total, CATIA and SolidWorks licenses increased 15% in 2005. Delivering Unparalleled V5 PLM Benefits to Customers The PLM market offers significant growth opportunities. We are benefiting from strong adoption of our solutions in the aerospace and automotive industries, and are seeing increasing penetration in target industries, including shipbuilding, power process & petroleum, and electronics. Our V5 PLM solutions are delivering compelling, measurable benefits for our customers, adding significant value by improving design, engineering, and Charles Edelstenne Chairman of the Board of Directors DASSAULT SYSTÈMES Corporate Report 2005 3 Message from The Chairman and the President manufacturing. For example, our customers are citing Looking to the future, we have a sizable opportunity 40% to 90% improvements in development time, to grow our PDM business - increasing our penetration a reduction in engineering changes ranging from 30% rate within our current CATIA customer base, expanding to 80%, and 35% to 60% lower manufacturing costs. with new customers outside our core industry verticals, and further developing our solutions to offer the broadest With our five PLM brands, CATIA, DELMIA, ENOVIA, PDM offering on the marketplace. SMARTEAM and SIMULIA, our objective is to provide the highest possible value to our customers in each of DELMIA made significant progress in 2005 increasing their domains. When all our brands’ products are its customer base with the addition of 52 new clients. associated together, we increase value for our customers. In the automotive industry, it works closely with industry In an environment where companies are increasingly leaders and is also expanding its presence in the asked to choose between best-of-breed software and aerospace industry. DELMIA has strengthened its product an integrated solution, our objective is to pursue portfolio and improved its integration with CATIA, excellence in both. ENOVIA, and SMARTEAM. We are confident that its unique solution, integrating product design and CATIA V5 delivers breakthrough technologies that have manufacturing, should position our digital manufacturing broad applicability across multiple industries, such as brand favorably over the coming years. its Imagine & Shape, Knowledgeware, and Functional Modeling products. CATIA V5 is delivering superior Leading in Mainstream 3D productivity gains over CATIA V4 and far and above SolidWorks continues to lead the 2D to 3D migration. the competition, as affirmed by benchmark evaluations. On the basis of revenue results for 2005, it is in the number one position in the Mainstream 3D design 2005 was a year of strong growth for our PDM business market. New customers represented about 65% of total as we added 1,100 new customers. The key competitive revenue in 2005. The Mainstream 3D design market advantages of our solutions facilitate OEM/supply chain offers significant long-term growth potential for DS, collaboration. ENOVIA offers both a configured design based upon the strength of our SolidWorks offerings over the complete lifecycle and one single desktop for and the estimated four million 2D users. designers working in the context of global, distributed companies. SMARTEAM provides both CATIA integration Investing in Our Sales Channels and flexible enterprise integration. And we have During this past year, we made changes to enhance a Supply Chain Engineering Exchange to help OEMs and increase the direct support that we provide to our and their supply chains collaborate better. sales partners. In PLM, we are increasing our efforts with respect to the small- and medium-sized business market. Since mid-2005, we have taken on the role of channel management provider on behalf of IBM in the SMB 4 DASSAULT SYSTÈMES Corporate Report 2005