Ladies and gentlemen, thank you for standing by, and welcome to the Dassault Systemes 4th Quarter 2020 20 20 20 Full Year Earnings I must advise you that this conference is being recorded today. I would now like to hand the conference over to Francois Bordenado. Please go ahead.
Hello, and good morning to everybody. I'm Francois Bordenadeau, Dassault Systemes, Investor Relations. With me, I have Bernard Charles, our presentation. Vice President and CEO and Pascal Valoz, our COO and CFO. Please note that All Dassault Systemes earnings announcements are made both in non IFRS and IFRS.
We will comment essentially on non IFRS figures unless otherwise mentioned. I would like you to refer please to our presentation. And I would like now to give back the floor to Bernard Charles. Good morning, everyone. And even if it's a bit late, Happy New Year, and I hope I wish you good health.
All the best for all of you. I'm pleased to share this with Pascal to have the Full year 2020 review. The revenue, as you can see in the presentation, is up 12% excluding exchange rate. Well, it's €4,500,000,000 in euro, but we passed the bar of €5,000,000,000 So I'm happy with that one. This is there are pros and cons with the exchange rate, and I think The bar of 5 the board was happy with that yesterday.
I hope soon we will pass the bar of €5,000,000,000 in euro. Operating margin is at 30% plus, 30.2%, and EPS is up 3%. So I think at this point in time, it shows at least a strong resilience for Dassault Systemes. We committed early March last year to keep all employees. They were very happy with that.
They really Consider that we walk the talk when it comes to corporate social responsibility. And by the way, we also increased the R and D headcount by 10%. On our Sector view, you remember on Feb 6 last year, before we had this lockdown Around the world on this pandemic panic. We presented I presented To you, the horizon at 5, 10, 20 years, which basically is about looking at the economy with 3 sectors, What people are producing in the world, what we call manufacturing at large, Any physical goods. What we do in life science and healthcare and infrastructure.
And I believe that twenty 'twenty, aside of everything you know from the economical, industrial and social effect, I think for that, the system is a milestone point because we are becoming mission critical in these three sectors of the economy. I think in manufacturing industry and life science as well as infrastructure and cities, and I will come back on this topic. I think we have also Transcend our industrial innovation capacity. We are becoming a major player in life science, We are accelerating innovation in mainstream market, which I think is a very exciting momentum. On the organization, we had, I think, a very powerful transition with new generation of leaders around Carlos and Pascal himself representing that generation.
And this is true across all Structure of Dassault Systemes. We don't publish, and we don't like to publish too much on the R and D organization, for example, but it's a very, very Young organization with this capacity to innovate, and this is something which I think is very important. By the way, this is not a retirement announcement from my side. I plan to stay in the company For as long as I have a good example with Cirque Dassault and with Charlie Esteb, So purpose driven company, we really think we are contributing on the handprint side with levers As well as committing for our footprint, I will come back on this in a moment too. And I think the long term growth with the what we announced on February 6, We published the paper, 2 pages.
At that time, I think we show and we prove that the addressable market, Potentially for us, it's about €100,000,000,000 So we should be able to find out the right path for growth for the future. The last point is very important, mission critical for this year. We are adopting our platform for everything we do. It's already the case for R and D. We don't use external products to manage our R and D.
It's our platform itself. And we are going to use the platform as our channel. Ultimately, Dassault Systemes wants to have The 3DEXPERIENCE platform connected to all the users worldwide and all companies worldwide as well as all partners worldwide. We don't need CRM. The platform itself is the relationship with our clients.
So That's for the highlight. We announced on Feb 6 what you know, moving from things to life. We said that we will be focusing our investment To create the virtual twin experience of human, we are in good position to do that, Production Systems and with even cities and infrastructure. So this is not a vapor statement. This is what we do, And we put science on technology to do it.
So we are taking it seriously as we did for planes, Cars, infrastructure, energy, systems and so on. So this is what we call being the catalyst and enabler for industry renaissance. It's 40 years of work. It's structured the next 20. So that's what we do.
Four things are driving what we do. I've said already from things to life. The second thing, you understood it now, the platform is the channel. So from connection, From a way of interacting with users and customer now with a structured way. We call it the if we loop.
It's very interesting. They were an Harvard Business School publication where they presented the infinite loop. This is what we have been doing a year before in preparing our platform as a channel, for those of you who might have seen this publication a year ago. And then making from the making to the growing, please read behind this the fact that we are creating generative systems. So you don't design.
You specify on the system design for you, from social to human because we believe that human centric approach to the Industry Solution is a differentiator. There is a nice video, I think, if we launch the video that show you that we are touching You will notice that in 20 2, we try to articulate to People as workers, people as patient, people as citizen that in some way, we are behind many of the things they touch every day. I think this will become more and more true when we did the simulation of airflow in an opera. People and citizens as citizens consider it's an important topic, even when you take the train or the plane. And I want to fly again, guys.
I want to fly again. I want to stay home. So connecting industry and economy. This is what we do, manufacturing, life science and healthcare and infrastructure and cities. Now proof points.
Well, of course, the astonishing situation is the move on with Medidata in November 2019 and the fact that we became at the center of the trial for the COVID, the COXS2 on the variant that are going on with over 500 clinical trial going on, 100 and thousands of to thousands of patient in this clinical trial, Reducing by 50% to 60% study start up time and really Increasing massively data intelligent or data science for real world evidence. So There is something happening there. And I think if you take it from a little bit of distance, this sector is far behind In Connected Research, R and D, lab, clinical trial On Bioreactor or Production Systems, it's visible. Please notice the slow ramp up of many plants. They don't have they do not have the virtual twin experience of the production system.
Toyota production system would not work today without the virtual twin experience of their production system. So there is a lot of things that can be done there. A few things where you can learn a lot from. With no more disc, A beautiful video, by the way, on YouTube that they have done, where they explain how they are using the 3DEXPERIENCE with a solution called Engineer 2Cure, this is in for diabetic, and Sergius Clinical Disease. And basically, it's not only about the treatment, it's about the packaging I'm making it easy to use in real life.
And it's really about the syringe ready Therapeutics. Many people don't understand in the last public why many Of the therapeutics are not syringe ready? Well, because they cannot be produced at scale because it's complex in production system. But you know what? We can simulate everything and prove that it's possible.
So I think that the connection Applied is a new game changer in this sector and will have to change in the years to come, and we want to make sure We enabled this to happen. This is one example. There are many others, but I think it's a very practical illustration of what Dassault Systemes is doing that no other players are doing. Now on the system for Future of smart systems in manufacturing industry. Of course, you may have seen alliance we are doing with Renault.
Luca D'Amico has an amazing vision about the future and really transformational, Moving really fully the company in a new situation. We don't only like to work with For rich companies, companies who are transforming themselves, we did that with PSA, incredible result in the last 7 years. And because that's a proof point that the levers for building up the future is Strong on here in this case, we are working on smart, safe and connected vehicles. So clearly, new mobility experience, new value network, New ways of working. Again, those are not just slogan.
It's a reality of what we are doing with them. Interesting enough, we grew in A and D last year. And I know many of you were questioning that possibility. We did Because space is it need it's a one of a kind, and there is a lot of Things going on in space and in defense. And really, an example of that is Spirit.
It's just one example. But at large, we demonstrated that Despite the incredible pandemic hit on the air travel, there are a lot of things going on, driven by 3 factors: how to reduce OpEx how do you, when the demand is changing, Reorganized production system in safe conditions. If you do not have the virtually doing experience of the plant, you cannot do it. I think, for example, for Airbus in Hamburg, we did an amazing job to be able to re orchestrate Production based on demand in a few hours as opposed to months before, thanks to the DELMIA portfolio On what we call planning. So former ERP systems don't address this well.
This is Consumer goods, consumer packaged goods and we echo we continue to expand with Centric PLM, are doing a great job there to really connect products with the way the e commerce environment and the full life cycle of it. Another example is lithium balay. Really, we science based platform like the one we have with Material Science with BIOVIA to optimize the future of Battery for electrical vehicle and others, this is making the difference. So we are putting science, technology on the platform to optimize not only the battery system, but simulate it and optimize the way you produce them at scale. So this is another proof point about the adoption of the 3DEXPERIENCE platform for Duda.
You cannot solve this problem if you are connecting software which are not integrated. Strong momentum in China, in energy, transportation and health. China is not anymore about production only. They are inventing new portfolio. You have seen that In the EV mobility, you see that in space.
You see that in many other sectors like the new way of constructing building at a lower cost. And I think the alliance we announced last year, like AkilaCare with Aden and with SMEDI Construction or with Power China, those are good illustration. So to really summarize, We are putting our purpose in action to provide business and people 3DEXPERIENCE universe To imagine sustainable innovation, capable of harmonizing product mix and life. This is the journey our investors wants to have. It's a good hope.
That's what we are doing. We are communicating that along the line of the UN goals. We use experience as a way to connect with people. We are now focusing on the build For water in production system and supply chain, we look at the consumption aspect, The city aspect, the energy aspect, mobility, nature, health, the heritage and future, more to come in this. We try to illustrate how The impact of what we do with our clients can help.
We published a quite interesting study with Accenture At the opening on Davos to where we made with Accenture a very precise study about We don't use virtual by accident. We don't use experience by accident. Virtual means it's beyond digital. Digital is a mean. The virtual is the capacity to represent the real phenomenon with accuracy based on science and technology.
Experience is about simulating the unpredictable, evaluating the possibilities. So it's different from digital twin. Virtual twin experience is as profound as digital mock up. Most of our competitors were doing part assembly. We were doing an airplane or a car.
It's different. Same here. And the factors are huge, gigantic, virtual twin to bring in Between now and 2030. This is back up with interesting data. So I think the virtual twin experience applied to everything can contribute massively to improve the sustainability of the world.
Our first on our side to run the business will also have a negative impact on the environment, And we need to continue to improve it, and we are committed to do it. 1st, we are committed to science based targets initiatives, and we are building the framework, By the way, that we will offer also on our platform to our clients. And in our concrete terms, as Pascal Set up with the Board, we set up the goal for EPS by 20.24 €6 Pascal, I'm sure you remember. We said that by 2025, it's going to be 5 tons per FTE, so minus 38% versus 2018, and we'll continue to work on those topics, but also provide the decision cockpit for our clients on the platform. Related to sustainability, we believe that women's representation is, I think quite well managed at Dassault Systemes.
50% of the board, 40% of the executives are women. I have been, for the last 15 years, doing a lot in this area myself to coach It's great, woman to our leadership at Dassault Systemes. And I remind everyone that the Senior VP managing all global R and D for Dassault Systemes is a woman. And she is the Chief Architect and she is managing all the R and D we do. And 30% at the manager level, we still can improve that.
Before I give the floor to Pascal, I want to really insist on the fact that we are going to use the platform to interact real time with all our user clients and partners worldwide. We call it the if we loop. We're going to implement 4 type of Engagement for large company, we call it Industry Solution Engagement Engagement with partners, process engagement Engagement with volume, mainstream, we call it roll, click and buy online for the cloud. This is why the platform with its architecture based on human centricity, Capacity to represent the world, capacity to use data to reveal the invisible and capacity to map The virtual simulation to the real world evidence is unique. We are applying the health care real world evidence Discipline to manufacturing systems.
And for us, IoT is an anecdote. IoT is a tool like TCPIP, The reality is how you compare data you acquire to the theoretical model you want to run. That's what we do Briefly, I would like just to before Pascal, if you take over, 2 anecdotes. We made a quite interesting pilot In France, for the pandemic, in 2 regions, what we call Grande Hesse, which is only HEST, which is connected to Germany And also to Charles Estes of France, and we provided to the president of those agents the 3dEXPERIENCE Indexing all data available from the pandemics, the health and the economics to give them dashboard to understand what was happening in the region. This is available under mobile With a little customization, 2 weeks of customization of the platform, the 3DEXPERIENCE platform, and they can Really have access to it, and they can use it on their mobile because you saw in this video that their platform is running on mobile.
The reason why I mentioned this is The platform, despite its name 3d experience, is centered on business experiences. And I think we are going to demonstrate that as a channel, It's really running a business operation for Dassault Systemes. Back to you, Pascal.
Thank you, Bernard. Good morning to all of you. Always a pleasure to be with you at this time of the year, and thank you for joining us today. So let's Let me begin first with a quick overview of our financial performance in Q4. First, our financial result came In at the high head of or above our guidance, total revenue increased 5%, ahead of our 2% to 4% range at €1,220,000,000 Software review came in slightly ahead on a better licenses performance, and recurring software was well in line.
Importantly, on an organic basis, total revenue was stable year over year in Q4. Our operating margin came in at 36%, 50 basis points above the high end of our guidance Thanks to the review upside, of course, and also our operating expenses tracking to our guidance. EPS was €1.22 ahead of our €1.15 to €1.20 guidance, including the negative €0.02 currency impacts. And EPS grew 6% at constant currency in Q4. Zooming in our revenue by cap in Q4.
First, software revenue increased 8%, slightly ahead of our 6% to 7% expectation. To be noted, the top 3DEXPERIENCE transactions were across multiple industries, aerospace and defense, energy and materials, Transportation and Mobility, to name only few. And also, from a large deal perspective, we saw more GEOs contributing to the top 20 deals, thanks than we did in Q4 when they were mostly coming from North America and China. Large deal activity benefited both on our license and subscriptions revenue. Zooming on license and other software revenue, Came in a better than planned, decreasing 9% versus 12% to 15%.
It's about €10,000,000 higher compared to our guidance. America was the best performing regions with licenses and other software growth positive in Q4. Our recurring software revenue grew 60% in total and 9% on an organic basis. With a double digit subscription growth on our comparable basis. We are observing some acceleration in the adoption of Subscription on an organic basis is really up double digit in Q4.
And our Support revenue was well in line with our expectations. We saw a solid performance for renewals, both regionally and across most of our brand applications. For the full year, the recurring revenue represents 80% of the total software. Moving to the services. The services revenue decreased 19% at €114,000,000 somewhat better than the range of what we had given.
We saw an improvement in signing in Q4, helping bring more visibility for 2021. And on the margin side for the services, improvement came from the management of subcontractors specifically. And more important, along the year, our focus has been on taking action in services to ensure the 2,700 3DEXPERIENCE GO LIVE, we have accomplished, and also to advance our services work, benefiting large and multiyear deployment on our software to secure 2021 and after. That's what we can say. Moving to the regional software revenue.
A few comments. First, let's start with Asia. Asia software revenue was up 3% in Q4. China was the best performing duo, up 20% in Q4 and 50% for the full year of 2020, with good organic results as well as the addition of Medidata. Japan was stable, and softness came from Korea and India, in particular, where the environment was still difficult in Q4.
Support revenue growth was very solid across Asia in Q4, and we saw a strong uptick in growth for subscriptions in total and organically. In Europe, our software review was flat in Q4. We did see a significant number of large deals anyway in Northern Europe, France, Germany and Southern Europe as well. But in 2020, the double digit growth in Northern Europe has been partly set by the Southern part of Europe. In the Americas, software revenue increased 23% in total and 13% on an organic basis.
So it's really a good performance. And from an industry perspective, we had a strong growth in Life Sciences with Medidata and in Aerospace on an organic basis. That's what we could say for other regions. Moving to the product line. Let's start with Industrial Innovations Software.
The revenue decreased by 1% in Q4. Within that, 3DEXPERIENCE had a better performance with a number of deal, as I was saying, in Aerospace and Defense, Transportation and Mobility as well as the multiple deals coming from Energy Materials and Industrial Equipment as well. You can see that CATIA grew in Q4 and resisted well in 2020, demonstrating its leadership in some key industries, also specifically in the auto sectors. It is seeing a strong traction with Its offer in Cyber Systems and the recent acquisitions or minority stake, I should say, we took in AVE Simulation is We are foreseeing this offer. SIMULIA continues also to grow to demonstrate a good momentum in both structural and electromagnetism and has remained the case in Q4.
For the full year, Industrial Innovation software revenue amount of EUR 2,300,000,000 and represents 57% of the software revenue. Moving to Life Science product lines. In Life Science Medidata, total revenue was up 20% in the quarter on a comparable basis with a solid operating margin performance and a strong cash flow from operations. BIOVIA also had a double digit growth in both Americas and Asia, offset in part by the total comp we had in Europe last year. Looking much more carefully at Medidata, the progress over the last year.
RAVE ADC, the core products, continue to demonstrate its Strong market leadership. In addition, the attach rate of the other product solution is very strong. With the number of customers with 4 or more Medidata products up over 20% during 2020. It is also very important to notice that the run rate for Patient Cloud is up sharply, representing Medidata Next 100,000,000 product lines. Biovia, so also a strong traction with product maybe you are not aware of, so called Biovia Discoverant.
This product It's really aimed to support the entire manufacturing process life cycle from process developments, growth scale up and take transfer to the final productions. For 2020, our Life Science product line software revenue amounts for €797,000,000 accounting for 20% of the total software revenue. Finally, mainstream innovations. So mainstream innovation software revenue increased 10% in Q4 with SOLIDWORKS growing 7%. We noticed that the early quarter looks also promising for 3DEXPERIENCE platform.
We look to See progressive traction with 3DEXPERIENCEWORKS, cloud based, family of solutions. We just introduced this product line less than a year ago, and now we are starting to see the traction. For the full year 2020, mainstream innovation software revenue amount for €938,000,000 and represents 23% of the software revenue. As we outlined at the Capital Market Day in Q4 2020, and I know it's a key topic for you, We have made significant investment in developing our cloud portfolio, which cover almost 100% of what we offer on prem. We see cloud gaining accelerating tractions, and I have few examples from that.
The first one is a recent example with a company called Industry solution on the cloud. And this industry solution is really helping them to speed time to market, This is exactly the point mentioned by Bernard. Another example in the life science sectors In America, Horizon, a pharmaceutical company, extended its multiyear agreement with Medidata using ray BDC as well as a number of additional cloud products. Horizon is adding Media Data Intelligence trial solutions to give them the flexibility and the agility to scale and to grow. I think this agreement is a good example of how we could expand our portfolio at existing customers, both in terms of number of products and value we deliver thanks to the data centric approach.
And finally, another illustration. With simulation on the cloud in the mainstream innovations. TNOCO, a Korean based materials company, SOLIDWORKS customers, They are expanding its relationship. We are expanding their relationship with them with the adoption of 3dEXPERIENCE platform and the simulations capability coming from As part of 3DEXPERIENCE work again on the cloud. A quick update on Centriq PLM.
Centric PLM, the world leader PLM solution for fashion, retail and consumer goods. As you remember, it was a tough time for them In 2020, but we had a very strong finish where the results were up sharply in Q4, and we had a strong catch up from prior quarters. We are also seeing a trend towards subscription model in conjunction with the adoption of the cloud. During 2020, Centric PLM continued to increase its market presence with the customer acquisition up 11%, which is, I think, a good result because many of those companies, they have their stores being closed. So they are also extending their reach with diversification into food and beverage, and this is, again, a very large market.
And we do expect to you see the collection of logo on the slides, and we do expect to build almost the same footprint with Centric in Food and Beverage. Okay. A few words related to the acquisitions. As you know, we will continue to invest in some key specific domains. In 2020, the focus was really related to the technology, as to complement our capability within NetVipes.
In November last year, we acquired NeuroDB, cloud native distributed SQL
database leader.
We were previously we had a previously a liquidity stake in this And we decided to move forward because this is becoming so critical and it's unique because new ODB is really the only technology You can use to do 3 things: to ensure the data integrity because we are still transactional. So this is what usually the SQL database are doing. To scale, like a NoSQL database, This is what the players coming from the web they bring in terms of new technology. And us, we also have to manage The cybersecurity and the ability to be distributed is super critical. So that's the reason why We have decided to take the full control of this company, and we are using extensively UODB in our cloud infrastructure for to support our 3 d XPAN platform on the cloud but also our data science strategy.
We have also taken an equity positions In AVE Simulation in January of this year, it is a provider of ultra realistic virtual work for virtual driving simulations, Specifically, to enable automated driving certifications, which is very critical considering 2020 for Regulation is constrained. As you may know, at that time, the vast majority of the car will have some assistance in terms of driving, And they have to be certified. That's the reason why we took these minority stakes in order to complement what we have. Moving to the operating margin and EPS. So zooming first on the operating margin.
Our full year operating margin was 32.2% versus 30 sorry, 30.2% versus 32% in 2019. I think it's a good result because at the same time, we have to offset the dilutions coming from Medidata, which is Roughly 2 10 basis points. Evolif, Medidata stick to the plan to improve the profitability by improving the operating margin by 2 200 basis points, but nevertheless, still dilutive. And also, we have to offset to know the softness coming from the services activity. And Thanks to the savings plan, we have been able to counterbalance this headwind.
This translates into the bottom line With an EPS growth of 3%, 5% if you exclude the currency effect, at 3.7 Finally, a few words on the cash flow and balance sheet. So we had a solid growth for the year, up 5 percent to €1,240,000,000 We also used €382,000,000 of cash to improve our leverage ratio. And as you can see, now we are at 1.8 coming from 2.5 a year ago. We are a little bit advanced compared to our initial plan because we were targeting 2 at the end of this year. Contract liability amount 1,000,000,000 €70,000,000,000
up about
14% in constant currencies. Now let's move to the financial objective for the full year.
There are
4 takeaways. The first one, we are initiating a constant currency revenue growth objective of 9% to 10% for 2021 to reach 4,000,000,750,000,000 to €4,765,000,000 And this is essentially an organic growth because the contribution of the acquisition are very modest in 2021 given the size of the company we just we acquired. We anticipate recurring software revenue to increase about 8% to 9% and for the license revenue to grow 13% to 15%. And finally, services by 9% to 12%. We are very progressively transitioning to the subscription model, as you know, but not at the expense of the growth.
That's very important for you to keep it in mind. And the cloud represent today a little bit more than 20% of our revenue. And as highlighted in the Capital Market Day, The goal for us is to have onethree of our revenue coming from the cloud in 2025, which is more than €2,000,000,000 at that time. 2nd, we are assuming a gradual recovery in business. So this is also a key for you to understand.
And I was looking at the consensus. The consensus is relatively aligned with a normal profile of the year. And here, we are more than ever backloaded. So this is also important for you to take this into account. 3rd, with respect to Medidata, We are expecting a strong growth and a high visibility.
We anticipate the total revenue to increase about 14% at constant currency for 20 21, entering the year with a 94% coverage ratio, which is almost More than 3, if not 4 points, more compared to last year. 4th, We are targeting an operating margin of about 30.8%. This includes, obviously, continued operating margin growth at Medidata. And the plan is, as I told you, is to improve to continue to improve by 200 basis points in 2021. And finally, our EPS range is €4.10 to €4.15 Gross of about 8% to 10% with several 100 basis points of currency headwind embedded in our currency exchange rates assumptions.
We estimate also a lower tax rate for 2021, about 23.7% versus 25.1% in 2020, largely reflecting some benefits in our French taxes. And for the exchange rate versus the euro, we are using a 1.2 Q2 for U. S. Dollar and $126 for the year. For Q1, We are targeting a revenue growth objective of 9% to 10%, ex FX, to reach EUR 1,145,000,000,000 to €100,000,000 to €1,170,000,000 with software revenue increased 7% to 9%, driven by the license growth expecting between flat to 5% and the recurring software revenue growth, percent, 8% to 10% and services by minus 2% and plus 2%.
The operating margin of 30.4 percent to 31.1 percent and finally, an EPS range of €0.98 to €1.03 and a growth of about 3% to 8%. To summarize, I think we opened this past year beginning our new horizons, as Bernard said, setting the stage for the coming decades. And with the pandemic impact, we have to reset our objective outlook for 2020 and postponed by 1 year our 20, 23, 5 years EPS objectives now in 2024. Looking forward, we see a year of solid organic revenue growth for 2021, and we are confident in our midterm growth drivers with industrial innovations, mainstream innovation and life sciences, thanks to many things, in fact, but specifically to the talented team across the globe and our partners. And none of us could have imagined 2020 in advance, but despite the increased distances, We became closer as a company, and I want to do a very specific Thanks to all of our employees, partners and customers, and I should not forget the trust and support we received from you, My friends, analysts and investors, I think Bernard and I would like now to take and answer your questions.
Thank you.
Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Congratulations on the recovery in Q4. 2 from me. Bernard, can you talk a bit about Some of the sort of transformational projects you've won in the last 12, 18 months, so Boeing, Toyota, Thanks for the additional data on the cloud exposure. Just in terms of the €2,000,000,000 in 2025, Can you go into a bit more detail on which product lines will primarily drive the non metadata component? So is this more of a SOLIDWORKS Some Catalyst or Catia.
And I think that the Capital Markets Day, you started talking about yearly subscription fees and Primary and annual servicing charges, but didn't have much chance to go into detail. What is the driver of what's Going to create a sort of purely ratable revenue as opposed to one where there's not front element. And how will that play out in the P and L, do you
Good morning. Thank you, Angel. Related to Relationship basically with our customers in terms of the deployment. I think the first of all, 2020, we have Strengthen our relationship with all of them. And that's for us, that's important because at the end, it counts for the trust When we face difficulties.
So in some way, it has slowed down the deployment, But it also reframe the deployment sequence To be concrete, we saw a lot of attention in accelerating The use of the virtual twin for the connection between demand and the way the production system works. And we believe that this is a very positive factor for midterm, long term, adapting on with the timing capacity and the readjustment. That's first one thing. The second thing, as I said, is that Many companies are rethinking right now their portfolio horizon. And we are at the core of that.
Yes, it's you mentioned Toyota and others. By the way, in the case of Toyota, I think my first comment is related to the practicality of Toyota, rethinking about that, how they want to manage their production System to add, right? And we are a core system for them in that area. But on the portfolio standpoint, we have also in mobility many companies Announcing new type of product portfolio for the years to come with hybridation. It was a topic on the agenda Before in 2019, but it's becoming a very sensitive topic for them now in terms of speed to deploy To deliver those platforms and provide new mobility service.
On last, what we saw in A and D at large, For all people, we're focusing on our activity on civil airplane. We saw an acceleration in space, Telecommunications and Defense. So that's the kind of dynamic going on. So in some way, without accelerating the speed of deployment because it was a very hard year for them, We have demonstrated solidarity. I mean, we have supported customer without billing them To help them work from home, for example.
And we didn't bill for that because when you have Those loyal customers, you want to create solidarity. And we think that will pay off income? Midterm or long term. But we have changed the footprint on the understanding of them of using the platform End to end as opposed to only specialized environment. So I think it's good for a good lever for the future to come.
The second aspect, Pascal, I think you want to put some additional remarks on the So first
of all, Michael, thank you for your congratulation. I appreciate, Especially coming from you. But I will answer to your questions related to the cloud. The best way for me to answer presentation. To it is by before to move to Zoom on the product line, I want to give you the answer by the 3 sectors.
So first of all, in the Life Sciences, obviously, Medidata is a SaaS based approach, and we want to Almost standardized on the subscription and the cloud for everything we do. So that's the reason why you remember I told you I'm really pushing largely for Biovia also to move to the cloud and on subscriptions. Related to infrastructures and cities, the cloud solution are already well adopted by this sector, And there is a simple reason for that because they are project based for the vast majority of them. And the cloud is giving to them the agility Beyond the flexibility to connect on the fly all the stakeholders. So that's the reason why the vast majority of at least The incremental revenue we have from these sectors is coming from cloud solutions, specifically coming from CATIA, the 3DEXPERIENCE platform and also the simulations.
Related to the manufacturing sectors, There are a few things. First of all, all the consumer centric industries are also moving progressively to the cloud. And the best proof point of what I'm seeing is Centric PLM. You noted the subscriptions model is really taking off, And it's driven also by the cloud. So you could expect at some point of time that the vast majority of Centric PLM revenue will also come from this.
And the mainstream is also adopting the cloud, and we are seeing it. We had, for example, a good traction with a product. We are not usually spending too much time to speak about it, but DraftSight. Craft Sight, as you know, it's a product line competing against AutoCAD, and we have a significant large installed base now using DraftSight. And the vast majority of them are using DraftSight on the cloud with the subscription model.
And in the traditional sectors like auto, aerospace, I would say the traction is coming from the newcomers. If you take all the EV guys, they the vast majority of them are starting directly with the cloud solutions, Which is specifically CATIA and the 3DEXPERIENCE platform as well as SIMULIA for the vast majority of what we do. That's where the drivers are coming from. And you could expect that if you combine Centric PLM, Obviously, BIOVIA, CATIA and SOLIDWORKS and for sure, the 3DEXPERIENCE platform and also simulations,
Distinction between yearly subscription fees and primary servicing charges, what causes one drop in one form or the other?
The reality, we have to comply with the business model of our customers. And the subscription is sometimes a good model for some of them. But for the EV industry, which is really CapEx based, Sometimes, it's a difficult sell. That's the reason why we have innovating because we find a way to almost still have a subscription model, which ensures the recurrent revenue you are looking for, But with an upfront payment, that's what is behind. And this is a good model for some of our customers, And this is also potentially a good model for the partners as well because it's easier for them when they recognize some revenue upfront.
Coming from a yearly fee or than a yearly primary charge. So it's twothree, onethree, to answer to your questions.
Our next question comes from the line of Adam Wood from Morgan Stanley. Please ask your question. Your line is open.
Thank you. Good morning, Bernard. Good morning, Pascal. Thanks for taking the question and Congrats from me on a strong end to the year as well. I've got 2, please.
Maybe just first of all, if aerospace Grew in 2020, I guess that probably means that automotive was weaker. Could you talk a little bit about the cyclicality in that business? I I think some of the peers, people like Hexagon and Siemens have been talking about actually quite a strong potential pickup in that market. What are you seeing in your pipeline? What are you seeing customers doing?
That was the first one. And then secondly, just thinking about the platform and data. Clearly, getting insights from data is going to be increasingly important For your customers. We appreciate the discussion around IoT, but then there's also companies like C3AI and And hyperscalers trying to use artificial intelligence and machine learning to give customers insights into data. How do you think you stack up and compete against those?
Are they going to be Successful where data goes into the cloud and you work purely on the edge? Or do you think there's a way that you can be competitive for them around how data is analyzed in a broader sense?
Thank you, Adam. I think that on the first part of the question, what is becoming very visible to us is the higher level of comprehension Between software services, software solutions, but the platformization of them. What I can say today, as I am engaged personally with top CEOs around the world about No way to organize the transformation of the company. I can tell you that more and more they see the 3DEXPERIENCE platform as an enterprise platform, not an engineering or manufacturing, but an enterprise platform, Which has the consequence significant consequences on the second part of your question Because they want to connect to data, supply chain data, sustainability data, cost data, Purchasing data and do data science on it. And we do have Those data, not only we do have them, but we can index any system, including existing ERP in place.
And that's what We have in the cockpit functionalities of the 3DEXPERIENCE platform. And the reason why I mentioned the Interesting showcase in the region to follow the COVID pandemic It's exactly because it's data science usage of the platform. We source data which have never been generated by Dassault System software. They are coming from the health ministry. They are coming from traffic.
And we do the synthesis on that and show What is really happening? We see this as a significant growth for The platform itself, usage of it. And I think we have significant component for it. We can do Now also semantic analysis with Proxem. Pascal mentioned this acquisition.
It means that the system can do AI on a text, On the PDF text and understand the semantic of it, I don't think Palantir can do that, for example. And I don't see why we the platform will not be used for data science connecting all the dots. It's a big playground. There is room for a lot of players because we cannot reach But I think when it comes to our clients, more and more, they will keep a consistency in the way they Use the platform from that standpoint. We mentioned last year the evolution with Gulfstream, I think, with Massive adoption of data science for maintenance predictability, cost analytics and so on.
But this is also happening in many other domain, for example, for what we call maintenance in operation of Extremely complex equipment. Yes, we are a player there, and we are going to be a big player because the data are in the platform, And we can index what is outside. Do you want to add something, Pascal?
Yes. And So I think Bernard gave you a lot of reasons to believe. And also, there is one thing you should keep in mind, And Bernard said, you connect with the data, but you integrate with the processes. And if you do not have the industry solutions To make it happen, you do almost nothing. That's really what is unique in what we do.
And the platform is data centric and model based at the same time. So you connect with the data and you integrate with the virtual twin. That's our Unique positioning, I think. Related to the cycle in Aerospace, Yes, you're right. I mean, we grew by 5% for the full year and plus 12% for Q4.
So When I was telling you some large deals are back. Now you have the proof. The reasons behind, there are several I mean, This industry is a long cycle anyway. They have a long cycle, and they have to project themselves over 2021 2022. So they cannot stop everything.
2, we were relatively well engaged with The vast majority of them, and they decided to accelerate our projects because we are the solutions. We are not the problem for them. And last but not least, I would say the government stimulus package is also helping this industry and especially the supply chain. So I do expect to continue to see some tractions coming from there.
Perfect. Thank you very much.
Thank you, Adam.
Thank you. And your next question comes from the line of Julian Serafini from release. Please ask your question. Your line is open.
Hi, thank you.
So I have two questions.
So the first one, Pascal, in your prepared remarks, you talked about Protecting profitability when you were mentioning the cloud transition, if I remember correctly. I mean, I guess the bigger question is, is there a point at which the cloud revenue model Is there such a crossover point for Dassault? And if so, why not accelerate the move to the cloud? And then second question, just on Medidata, You've guided to 14% growth on Medidata for 2021. I mean, if I remember in the past, you were talking about 20% upsells upon renewal.
It seems like the business is doing good. I guess I'm struggling with the 14% number given that's roughly what Medidata was growing at when we bought the company 2 years ago, right? So can you help us just understand what's growth. Going on in that growth rate there.
Okay. So let's take the first question related to The profitability of the cloud. There are a few things I want you to keep in mind. First of all, the revenue for us is increasing 10x faster than the cost. So when some of our competitors are explaining that their profitability is under pressure when they are transitioning.
I told you it's a question of architecture of your solutions. And as this is the productivity ratio we have. Point number 1. Point number 2, related to the subscription model. It's not new again for us.
We have the subscription model for a long time, And we know that the curves are crossing after 3 years. So it's something we have already in place with some large accounts like Boeing. And but again, I want you to keep in mind that what is the difference compared to what we Because I again, I'm repeating myself, but you need to take into account the fact that for certain industry, The CapEx based approach is the only way to go. They cannot be OpEx based, simple like that. And offering this flexibility still has a value for them.
One example I could give you. Take all the Chinese owned state company. They are large company, and some of them are starting to conquest the rest of the world. Those guys, if you come with a recurrent model, they will tell you they do not want this at all. Why so?
Because they are negotiating with the governments on funding 1 year, and they are not sure they're going to have it the year after. So the only way is to have a CapEx based approach to secure this. This is a real example. And Believe me, we are fighting against the competitions. And just taking this example, I know some of our competitors are out of the game for this reason.
Now the second question related to Medidata, 14% growth But there are a few points I want you to take into account. First of all, you remember, it's a SaaS model. So clearly, the booking are increasing much faster, but it's a multiyear engagement. So the time to have this Being reflecting into the revenue, you have a lag time. So it's At least, it's a minimum of 1 point additional growth compared to 2020 for Medidata.
The second thing I want you to keep in mind, We don't know the profile of the year. We know that it's a progressive recovery. We know that the pipeline looks good for the license, and we have a relatively good coverage, but we still have some volatility. So that's the reason why to do my CFO role. I also, to a certain extent, derisk a little bit the license by start focusing on The low end for Medidata.
That's probably the best answer I can give to you.
And our next question comes from the line of Neil Sear from Redburn. Please ask your question. Your line is open.
Hi, thanks very much for taking the question. And once again, congratulations on the good end of the year. In the past, you've talked about the investments Effectively that you're making in the services side of the business. And I just want to clarify something. Have you already begun to see the benefits of that in terms of some of the new Or larger aerospace deals that you referred to as having been signed in the latter part of last year.
And the reason I asked the question is, in your guidance, it does look as though you're looking for quite strong acceleration of new licenses as we go through the year, particularly given the fact that the comp is obviously a lot of you do in the 1st part of the year in any case. And I'm just wondering to what extent that investment that you've made in the service side of the business is baked into the strong acceleration in new licenses you're expecting to see come through in the latter part
of this year? Thank you. Okay. So yes, you are first of all, thank you, Gil, for your congratulations. Yes, you're right.
I mean, we did it on purpose last year. I told you We have put more than 2,700 customers lived with 3DEXPERIENCE platform last year. So by doing so, the purpose of the 3DEXPERIENCE platform being live is, obviously, you are Giving the foundations to continue to expand by connecting the different domain, starting from engineering, going to manufacturing, simulation and so on. So this was very I mean, it was key for us to secure this. Then we had some large deployment, and I mentioned Boeing explicitly.
And by doing so, we have secured the growth in 2021 with them. So and This is a significant growth. I mean, it's not only $100,000 It's a few millions. And last but not least, I think Bernard made a very interesting comment. When it's A tough time.
People, they figure out if you are a real partner or not. And it's not because and I say very explicitly that we are not working only with rich company. We are also working with Company having sometimes difficulties, and we are ready to invest at that time. And if you look at the 2 ARR investments we did last 1 was in research and development. We have been increased by 10% the number of headcounts, which is significant Because we know that in this time, this is where we should focus because we will create the next generation of solutions for our customers to help them to adapt what they have to do.
And 2, we had those people anyway, and we committed to keep all the people. And in our industry, the most difficult thing is to hire qualified people. So when you have it, it's much better for you to keep it, So to keep them with you. So rather than to have them staying at home and doing nothing, I think it was a good choice to have them to accelerate some of the deployments even if they were not fully charged. It's towards 2020.
Neil, you can count on me that 2021, we do not have any more free services. We are back to normal things. And the proof of what I'm seeing, we had very good signing in Q4. And that's the reason why we are giving some confidence on the recovery for the services, Starting much more Q2 than Q1 because Q1 usually between the signing and the time to set up the project, it's a quarter.
Okay. Just to clarify, your visibility on the new license trajectory this year as a result of that investment You seem to be implying it's clear there's a greater level of visibility than you would have in previous years. Is that fair?
Yes. I mean, again, the pipeline coverage It's good, but we are much more back loaded. And You still have region of the world where confinement is still the reality. So it's We want to give certain flexibility on this. What we learned anyway is the largest customers, You know, whatever is happening, they are relatively sticking to their decision process, which was not the case a year ago when the crisis started.
They were almost postponing all the decisions. So that's the only thing I can say at this stage. It's only 1 month within the year.
Okay. Thanks so much. Thank you.
Thank you. Your next question comes from the line of Stacy Pollard from JPMorgan. Please ask your question. Your line is open.
Hi, thank you very much. Two questions from me then. Just around product bonds, why do you think the move deal was a little bit weaker? If you think that was market environment or higher competition? And then maybe kind of on the flip side, SOLIDWORKS up 7%, very strong.
What does the pipeline look for as you go Look, how does it look, sorry, as you go into 2021 and then on again on product centric, Really nice recovery in Q4. And so how do you expect that to go into 2021? Can I hold the second question since I Hit 3 product lines in one?
Yes. Santiago, Stacy. Give us a second because the line was breaking, and I want to consolidate if we got Your question well, Pascal, are we? Because it breaks several times.
Sorry, Innovia call it work centric. Book?
Yes. The first question was related to SOLIDWORKS and the competitive environment and how we see 2021, right? And the second question was related to Centric PLM?
It was 3 products: Innovia, SOLIDWORKS,
We have SOLIDWORKS lovers, a large community, and they love the desktop. And they do love the desktop. So I think what we have seen, 4th quarter, Pascal mentioned that, is that now they are discovering that the power powering the desktop develop With the platform, gives value. There are 2 drivers where this is being On the Innovia portfolio, which is called project management role. And we see quite interesting traction there for A SOLIDWORKS user that typically was doing design.
The second thing we have seen is data analyst, which Surprised us a lot. And of course, you remember, cloud 3DEXPERIENCE platform for SOLIDWORKS, it's only cloud. There is no on premise solution delivered for them. So it's only cloud. We saw data analyst, which is a surprise for this type of customers.
And I think we are going to put a lot of attention on that. So in overall, our project management data analyst, and
Through subscription.
We must admit, and I think we mentioned that, that we left the plate open for others On the SOLIDWORKS base, which is a gigantic base, in the past years to do analysis because we were focusing on large and complex process. But now with, I think, cloud based, this is a dynamic where Gianpaolo and team, They believe that the profiling of usage of the roles of the SOLIDWORKS community is going to evolve quickly. In fact, the Upcoming next week, 3DEXPERIENCE World is really showing high interest in that. So That's those are the phenomenon happening. And last but not least, by the end of this year, we will have native 100% SOLIDWORKS desktop functionality available through a browser native, so any mobile device.
This is a discovery for them. It's a discovery for the partners. But I think the mood is positive presentation? On the visibility, on the Q4, confirm that dynamic. Pascal, do you want to add something?
Now the question was also related to Centric PLM.
Yes. On Centric PLM, I think, first of all, the Q4 was a good sign of evolution. And we see now Centric PLM clients asking for extension of the 3DEXPERIENCE platform. It's quite interesting to see that it's a large base that they are building, great reference on grade logos. And I think we can supplement Centric PLM with 3 gs experience in many of these sectors, especially in food and beverage, For packaging and many others that we have been serving in certain sectors,
especially in
the beauty sector. So but rate? We still need to make this ripple cable process. I think the team is a great team. They are super committed.
And we are going to change the frontiers of what is offered As we move on, we need to finalize the 100% acquisition so we can put this in operation in a more
And second quick follow-up. Your midterm intentions On the database and cloud hosting side, you've done new ODB acquisition recently, Outscaler before. You're doing more hosting of the MediTel solution. So what is the kind of Mentor plan there?
We what is important, there is a lot of comparison with The company is doing consumer based services. This is for the time being, not our market. Shared cloud, so cloud that are shared between customers. This is what is happening in the consumer industry, retail. Private cloud.
So those are dedicated like what we are doing today for Europe Aerospace Network. So this is what we call dedicated. And then sovereign cloud. Sovereign cloud is really highly sensitive for many of our Compliance, and this is we have demonstrated we can do it. Of course, it has to be countries by countries because we want to be aligned fiscally On legally to the laws of the countries, which frankly speaking is not the case of consumer infrastructure, But I think at some point in time, they will have to fix that.
So those are the 3 types of clouds. And we have the 3 those 3 types of clouds in operation as we speak. The last point is that we also, I think, have done a good job with clouds in China, It's quite accepted. And we have the license to operate our environment there, Which is not easy for all companies in the world. So it's a very precise plan, share, From the data, we will have to offer the 3 categories with consistent management of the upgrades on the cloud online, what we call DevOps processes.
Thank you. And your next question comes from the line of James Goodman from Barclays. Please ask your question. Your line is open.
Good morning. Thanks very much Taking mine. A couple, please. Just firstly on the share based payments, non IFRS adjustments guidance that you've given for the year, down significantly year on year. I know we've got the maturity of some of the pre existing metadata plans, I think, within that.
But Is there anything else going on there? Anything else we should consider in terms of how that might look for the year? And just secondly, on services, Another exceptionally well managed cost of services this quarter. Pascal, I think you mentioned the Strong subcontractor management. But clearly, we're entering next year with pretty healthy services top line and Significantly lower run rate on the services costs.
So just wondered if you had a sort of gross profitability in mind next year for the services business, whether we start heading back towards The sort of slightly higher margins you saw a couple of years ago in that business.
Okay. So the first question, you remember the policy for us is to almost offset the dilutions coming from the performance shares, and we are doing the share buyback Yes, to make it happen. Last year, we covered most of the plan, including the Medidata 1, Which was a significant one. But we did not cover fully. And you know, I'm doing it In advance.
I'm not waiting the year to distribute the shares to make it. Usually, I'm doing it in the year when we decide to for the attribution of the plan. So clearly, if you take 20 2021, it's probably a little bit higher compared to last year because I did not fully cover the plan last year. But That's probably the same order of magnitude anyway. Coming back to the services.
Your question is always the same is It's a good balance we should find between the profitability of the services and the capacity. So this year, the capacity was quite limited. That's the reason why we have reinsourced most of the capacity To fulfill our own resources because when they work, they learn, and they are improving their skills. That's the goal in this industry. For 2021, I do not expect To continue with the same model, I do expect to, again, partner with the large SI Because we have common engagements, and it's also a lever for us in order to accelerate some of the projects.
So you should expect to be in the typical gross margin. Usually, we are achieving for the services for 2020
We'll take one last question.
Thank you. And our final question comes from the line of Mohammad Mowahalla from Goldman
1st one was really I remember Bernard when you sort of announced MediData, you sort of talked about The bigger opportunity in life sciences from digitizing to
be as
big as manufacturing. And You sort of you thought that it would take up to a decade to kind of execute on that vision. Clearly, post pandemic, those timelines have shifted. Is there a way to sort of quantify that what you perhaps you thought you would achieve over a decade? How much has that sort of time spent shrunk as you speak to customers, but more importantly, as customers change and embrace this sort of digitization more aggressively.
Secondly, on the sort of the core industrial business, the platform has become a 3dX has been a big differentiator for you. A lot of the kind of larger standardization contract discussions, I guess, paused during the pandemic. Where are you on that? And how much opportunities are still left? Results.
And how do you see that sort of developing, particularly as those customers also start to think about The kind of more platform approach out of the pandemic. Thank you.
Thank you, Mau. On the first aspect, which is related to Connecting on, as Pascal said, the data connection for the life science and health care and specialty pharma, for example. We are going through a discovery ourselves, to tell you the truth. I was astonished to see How little digitized is the production system. I was even shocked in some way.
And I think maybe we are guilty ourselves, But they many of those companies did not know us at all and are now interacting with them Through the Medidata footprint is opening up a new dialogue. To be simple, when you look at the number so it's difficult to put the quantification, but let me tell you my Thinking the framework here. If you look at the big pharma, the number of plants is very similar 2 big old OEM in terms of numbers. The second thing is they duplicate everything In each plans. There is no global collaborative shared processes platform to make sure They don't know virtual commissioning.
Most of them stop the line to update the equipment, Which does not happen anymore in auto sector with what we have done. So It's clear today that the dialogue we have is expanding in this area to educate and showcase What's possible, the new possibility? I think from that standpoint, we have good things to offer. And some of them, When you see the slow ramp up of some of the vaccine production related to packaging issues and many other things, There is a lot that needs to be done there. So the dialogue in less than a year has changed.
And I would say, we are now That's my so I think the pandemics from that standpoint is really a relief for us to be In that sector. So I think there's a lot to be done there. They have been acting as like rich companies. I don't want this to be negatively understood by them, but they have been acting like rich companies. And there is a lot of savings that can be done In those environment.
Related to the second part of your question, I think the dialogue We've in the manufacturing sector now, people understood that Dassault Systemes is providing far beyond engineering, manufacturing and simulation that it's becoming a business platform To drive the business, drive portfolio, drive cost, drive supply chain, new Split of work, because you know the split of work in the in all those industries between supply and OEMs is changing at speed of light, and they need to rebuild our business model from that standpoint. Look at but you can look at smart intelligent mobility and the nature of the service are different. And being considered As a business platform for those clients, for me, is essential. So you're right. I think we are building up the proof points that the 3dEXPERIENCE platform is mission critical for those industries.
Now on last point on infrastructure construction. We continue to do We leave the space open to traditional clients, traditional competitors, players. Some of them still dominate that sector. But I think the game is going to change. It takes a bit of time.
But what I stated a year ago about our commitment to the sector has not changed at all. And I hope we'll be able to bring tangible, highly interesting news flow this year. China is showing the way to the rest of the world with modular construction, virtual twin based Designed to delivery, I think, and we are pleased with progress in China on that side. So that's so of course, they are midterm indication, but I hope we'll be able to grow the proof points this year. You want to add something, Pascal?
Yes.
I maybe want to complement what you say on the first questions related to manufacturing in Life Sciences. Quarter. Why so? Because if you look at the pipelines under development right now, You will discover that half of the new therapeutics are Biologics. Yes, big molecule.
Okay. And as you may know, for the biologics, the process is the product because it's living species. So it's really from making to growing, Bernard, it's your words. And my convictions more it's much more a conviction than a demonstration at this stage. But On the long run, I'm convinced that the manufacturing space could become as big as the research and the lab space in Life Sciences.
That's it's a dividend for me. And again, if you look at All the indicators we have, everything is going along these directions. When it will happen, it's starting, But that's probably the unknown at this stage. Great. Thank you
very much.
Thank you very much for participating to this call. And as you know, we'll be hosting a call this afternoon For our friends in America that have not been able to connect this morning, thank you very much. Of course, we are always there. We are Really highly motivated to continue to execute and walk the talk. What we said on Feb 6 last year is what we are going to do.
Thank you, and see you soon.
Ladies and