Thank you for standing by, and welcome to the Dassault System First Quarter 2019 Financial Results Our short overview will be given followed by a question and answer session. I must advise you that this conference is being recorded today. I would now like to hand the conference over to Francois Jose Bordonardo, Vice President, Investor Relations. Please go ahead.
Thank you, Serena. Thank you for joining us on our earnings conference call with Bernard Chales, Vice Chairman and CEO and Pascal Daloz, Executive VP, CFO and Corporate Strategy Officer. Vassosystems results are prepared in accordance with IFRS. We adopted IFRS 15 in 2018, so all comparative information is presented under IFRS 15 team. In addition, we adopted the new IFRS 16 lease standard as of January 1, 2019.
Most of the financial figures on this conference call are presented on a non IFRS basis, with revenue growth rates in constant currencies unless otherwise noted. Some of our comments on this call will contain forward looking statements that could differ materially from actual results. Please refer to today's press release and to the Risk Factors section of our 2018 Document All earnings materials are available on our website and these prepared remarks will be available shortly after this call. I would like now to introduce Bernard Charles.
Thank you for joining us. As you have seen this morning, We delivered a quarter well in line with our financial guidance with double digit, revenue software and earning per share growth. We are reconfirming our fully objectives on upgrading for currency as Pascal will discuss later. We are seeing strong momentum with the 3DEXPERIENCE platform, having reached a key inflection point last year. We have major new wins and are expanding our 3DEXPERIENCE business with clients.
With some example, I will share with you shortly. With the platform, we see a change taking place with clients today, more companies view us as a strategic partner to help them transform. The power of the 3 d experience digital platform as an enabler for today's industry renaissance is truly visible. We will discuss opportunities in several different industries as well our new global software partnership agreement with ABB, who is also adopting our 3DEX clients platform. With our capabilities on offer, we have a unique opportunity to change the game and become a leader in target industry including life sciences, energy and materials, as well as home and lifestyle.
Let me begin with, the life science industry, demonstrating our purpose in action. We have now developed a comprehensive offer to address the transformation underway in this vertical as drugs and therapeutics shift to the world of biological drugs meaning large molecules, representing an estimated 50% of the pharma R&D pipelines currently. The industry is moving to a world of personalized health with such products as combination combination products, delivering medicines through wearable devices, enabling treatment delivery within a home environment. In that regard, this quarter, we unveiled to pharmaceutical clients, pot type product, ISO, named after the Greek goddess of recovery. As a showcase for lifecycle of combination product in oncology, From upstream thinking on innovations through commercializations, This prototype demonstrates the value that Dassault Systemes and the 3DEXPERIENCE platform as well as industry solutions can deliver to stakeholders facing the challenge of bringing these critical combination products to market to transform the passion experience.
Congratulations to the Life Science Industry team working with all our brands on leveraging the 3DEXPERIENCE marketplace for 3D printing services. Now let me shift to the industrial equipment industry, which is going through another major transformation moving from product to experience delivery from mass customizations to mass personalization and from disconnected to intelligent systems. We believe a platform approach enables the real and virtual worlds to inform and reinforce each other. Our 3 d experience to win. What you can read as the virtual or the digital Twin in the daily press is very well positioned to do so as we are working in both worlds and with an offer covering all escalators business is now expanding this to its elevator business.
They are using the 3DEXPERIENCE platform on the cloud for digital twin creation. Experiencing that with digital transformation of the company and to connect the dots across their extended enterprise. Class, an agricultural equipment company, a world leader, has adopted a single digital platform all disciplines, providing rapid access to the company's extensive knowledge and know how, and facilitating high visibility collaboration to enable intelligent innovation across multiple countries and cultures. With ABB, we announced a wide standing global partnership. ABB is adopting the 3DEXPERIENCE platform to model and simulate its solutions before delivering them to its own customers.
Human lifestyle is another industry where we are positioned to be game changer. Today, more than 850 brands are using Centric PLN. It is clearly developing a unique market leadership position. Centric PLM is helping customers achieve faster time to market, translating into revenue increased of 5% to 10% lowering inventory costs as well as improving efficiency translating, for instance, into logistics cost savings on the order of 10% to 15%. Just a few words on our design in the Age of Experience Conference held in Milan a few weeks ago as you may know Milano Design Week is the similar for design to what the fashion week is about.
There is truly a new age for design on a new global community of innovators using 3d and 3d design. To bring emotion, to bring better adoption to usage, a true, so to speak, 3 d experience for all. I believe we are exam extremely well positioned to address this global community. Moving now to Energy And Materials. I would like to focus on mining where we are a major announcement this morning.
It's clear that mining companies are seeking transformative change to sustain profitability under social license to operate. Some companies have started to deploy tactical innovations, including automation, virtual reality, drones, on the intended of things. And there have been improvements realized in verticals such as resource modeling, short term scheduling and fleet management. However, there is more the industry needs to do to truly transform itself. BHP, a major global resources company, on the largest mining company in the world, is leading this effort.
We are very happy to announce that we have entered into a long term strategic partnership with BHP to leverage the application of digital Technologies. Bringing the best practices from other industries as appropriate to mining. Combining the expense on resources of each company, the ambition is to unlock value by of Geoscience And Resource Engineering. The partnership intends to create a new level of understanding of resource and operational potential underpinned by both company's commitments to safety as well as sustainability. Before passing the presentation to Pascal, let me recap the highlights of our performance in the quarter.
Our revenue results came in the high end of our objectives. Software revenue increased double digits in 7 out of the 11 industries we cover, all 3 core on several of our diversification industries, including high-tech life science and home styles included. On a regional basis, we saw strength in all three regions led by 3DEXPERIENCE on large wins in newer brands as well as newer brands as well. We are benefiting from our geo diversification as we continue to build out our market presence in key geographies several notable geos in the quarter were China, Southern Europe and North America. 3DEXPERIENCE software revenue increased 26%.
3DEXPERIENCE licenses revenue increased 25% and represented 40% of related licenses in the quarter. We have new major wins and important follow on orders with companies in transportation and mobility, industrial equipment, as well as energy and materials. In addition, our power by strategy is bringing significant value to our clients to integrate legacy. Pascal, you have the floor now.
Thank you Bernard. Hello, and thanks to all of you to all for joining us. With the financial overview, we Berner. Let me now share further business and financial details. Looking at our performance, there are two key points I would like to underscore.
First, our financial results were well aligned with our guidance. Both total revenue and software revenue came in at the high end of our constant currency growth range. We saw a strong performance for recurring revenue actually above our target range with licenses software at the lower end of our target. And in combination with our operating expense, performance and currency evolutions, EPS increased 21 percent to $0.87 ahead of our 70 $8 to $0.82 objectives. My second point, if you look at our revenue components, Our results are coming from a broad based growth, with licenses revenue up 9% organically, and recurring software revenue up 8% on an organic basis.
Moving to our software revenue growth by regions, and at constant currency. Americas software was higher by 18%, reflecting acquisitions large deals in our direct sales channel and a strong recurring revenue performance across all channels. On both reported and organic basis, the Americas had the highest growth in the quarter. From a geo perspective, North America had a strong start. In Europe, software revenue increased 10% with large deal activity in multiple geos including Southern Central And Northern of Europe.
In Asia, software revenue grew 8% led by China, Asia Pacific, both up double digits. We had a good growth in Asia in all geos in term of recurring software. Zooming in our brands, CATIA software increased 6% in the quarter to 1,000,000. Its strongest performance was in North America this past quarter. In general, CATIA had a strong increase in 3DEXPERIENCE software revenue growth.
Following on a huge 4th quarter, Innovia delivered a very strong 1st quarter with software revenue growing 19%, led by a strong growth in 3DEXPERIENCE software. Innovia had a number of large deals in Europe, in Americas and Asia, top deals include transportation and mobility with excellent traction as well as high-tech and industrial equipments among others. SOLIDWORKS software revenue increased 5%. On a regional basis, we saw very good dynamic in Asia, From a channel perspective, with the launch of 3DEXPERIENCE dotworks, a new business application family on our platform, We expect to spend a good deal of time on planning and trading with professional solutions channel given the significant opportunity to bring the power of the platform the portfolio to mainstream markets. All in all, we anticipate a solid year of growth for SOLIDWORKS with its software revenue increasing between 5% 10% in year 2019.
Other software increased 22% in the first quarter, The largest domains are simulation with Simulia followed by manufacturing with DELMIA and PLM for fashion with Centric PLM. Similia had a good set of results, including a high single digit growth on an organic basis, and we saw a solid performance for Centric PLM. Just a few comments on DELMIA. We call it the Make It Happen brand, which now include Quintiq. Delmia enables global industrial operations to design and test the manufacturability of products in a simulated and virtual environments, optimize the supply chains and factory to meet objectives and to operate the factory warehouse and distribution to manage and fulfill customer demand.
As part of the industry renaissance, global industrial operations are front and center and a core area of investment by company now. We have been making significant investment in its domains over the last 4 years. And now this is visible in DELMIA results where software revenue increased 25% in constant currency, on an organic basis. To be clear, this is before adding the revenue from DELMIA Works, which we acquired in January. As I mentioned, we have now added Quintiq to DELMIA brand portfolio, but we track its financials separately.
Its software revenue increased very substantially, plus 78% in this quarter. In total, we saw a good traction in multiple core industry as as in Marine Offshore this past quarter for DELMIA. A client example we have in today's presentation is Eurostar, who selected DELMIA Quintic applications for our buy 3DEXPERIENCE platform. With our software, Eurostar, we'll be able to optimize these resources including its trained drivers, managers and control staff and maintenance planning to increase frequency while complying with complex rules and legal regulations. Moving to our software performance by industry.
We had double digit growth in 7 of our 11 industries including all the 3 of core industries, aerospace And Defense, Transportation And Mobility And Industrial Equipment. In our diversification verticals, we had double digit software growth in high-tech, life sciences, Marine And Offshore And Home And Lifestyle. Commencing this year, we have regrouped several of our target diversification industry based upon natural synergies and a refinement of our focus. Notably in our home and lifestyle, energy and materials and construction city and territory. So we have no show relevant industry group versus well previously.
In the first quarter, total revenue increased 13%. On a good performance for both software, representing 89% of the total revenue, up 12% and services also up double digits. On an organic basis, both total revenue and software revenue grew 8%. Looking at the component of the software revenue, license and other software revenue increased 15%. On an organic basis, the growth was 9% with notable performances in Transportation And Mobility Industrial Equipment And High-tech.
Recurring software revenue increased 11% on a double digit subscription and support growth, and represented 75% of the total software revenue. On an organic basis, recurring software revenue increased 8% well aligned with our plan for the year to show further progressive and strengthening of our organic recurring revenue. Moving to services performance. Growth continues to be led by 3DEXPERIENCE Implementation And Activities. On an organic basis, services revenue increased 9% for this quarter.
Now let's zoom on our operating performance. In the first quarter, our operating profit increased 22 percent to 1000000. In turn, our operating margin was 32.8 percent ahead of our guidance of about 31% to 31.5%. This reflects both a more favorable currency, but also a better activities higher revenues as well as some slower hiring. In comparisons to the year ago quarter, the 440 basis point improvements came largely from organic improvement of 210 basis points, more than offsetting 120 basis points of the acquisition dilution.
Currency was a positive contributor in this amount of 50 basis points. As a reminder, For the full year, we are targeting to improve our underlying operating margin by about 80 basis points. Exclusive of any benefits from IFRS 16 leads. EPS increased 21% as reported 13% at constant currency, reflecting revenue growth and operating management. The tax rate increased about 90 basis points, sorry, at 29.7 percent versus 28.8 in a year ago quarter.
Our net operating cash flow increased 20 percent to 1000000 reflecting the strong growth in net income, noncash items as well as the working capital improvements. Unearned revenue now called contract liability, total 1,000,000,000 at March 30. This represents an increase of 10% at constant currency and and perimeter's impact. Now let's move briefly to our guidance begin with the full year of 2019. 1st, we are confirming our total revenue objective for growth 10% to 11% at constant currency.
2nd, we are upgrading our reported figures for a better evolution of the currency in Q1 and an update of our exchange rate assumptions for Q2. As a result, We are moving the midpoints of our reporting revenue range higher by 1,000,000. 1,000,000 come from Q1 and an estimated $16,000,000 for Q2. 3rd, we are also upgrading our EPS by $0.05 at the midpoint. As a result, our total revenue range is now 3,845,000,000 to EUR 3,875,000,000,000 and our EPS range is to.45.
Our operating margin remained the same, targeting 32% to 32.5% and reflects an underlying improvement of about 80 basis points, exclusive of IFRS 16 and currency. 2018 from a revenue perspective with a higher contribution from recurring software revenue, bringing increased visibility and predictability. More specifically, we see steady growth on an organic basis, thanks to an estimated 100 to 200 basis point increase in the organic recurring software revenue growth to about 7% to 8% for year 2019 from 6% in year 2018. By the way, this represents a 200 to 300 basis point improvement from 5% in year 2015. For Q2, we are targeting a revenue range of about 1,000,000 to 1,000,000 and an operating margin of about 29.5 percent and an EPS of about 74% to 77%.
Our revenue range embeds a license growth rate range of 11% to 14%. And a recurring software revenue growth rate of 9% to 11%. With respect to recurring revenue, let me just remind you that the sequential basis, reflecting IFRS 15, recurring revenue in Q2 would be lower than Q1. Finally, just for further reminder that our Q2 and the full year financial objectives are presented on a non IFRS basis with revenue growth rate at constant currency. For purpose of our guidance, we are using a $1.15 rate per euro exchange rate in Q2, then a 1.20 rate for Q3 and Q4.
For the Japanese yen, a EUR 130 rate per exchange rate before hedging for all three quarters. Before taking your questions, I wanted to share that our investor relation activity this quarter will include attendance at the GP Morgan Conference in Midway in Boston. The Exane Conference in June in Paris and several road shows, including 1 in Germany, I will be attending this event with member of the investor relations team. To summarize, the first quarter well illustrated the good dynamics of our key growth drivers and positioned well for the future. We will now be happy to take your questions and thank you for your participation on this call and our earlier webcasted meeting held in London.
Serena, we can take question now.
Thank you. Session. Your first question comes from the line of Jay Fletcher shower. Please ask your question.
Thank you. Hello, Bernard. Hello, Pascal. On the call a quarter ago, you may remember that we talked about your manufacturing software business. So I'd like to ask about that.
Again, particularly given, how important IQMS was at Solid Works World a couple of months ago. At that conference, management was highlighting the plan to enable your channel to, represent or absorb IQMS. And so I'd like to ask how that's proceeding. And then perhaps for the longer term. My understanding is that DS has an ambition for IQMS to grow to perhaps as much as a $500,000,000 business by sometime, let's say, the middle of the next decade, which would be a considerable multiple over the current level of revenues for that business, what has to happen over the next 6, 7, 8 years, to grow IQMS or now Delmia works to that scale?
Good morning, Jay. Thank you. You're right. First of all, we continue to, very successful dynamic of the overall, manufacturing product line, across the board, all sectors, last clients, midsize, and now of course, the new focus with mainstream ERP as you are referring to, it was announced that SOLIDWORKS World, a couple of months ago, with DELMIA WORKS. The, we are on a good start.
The IQMS now DELMIA works was mostly direct. They had some partners however, that we are doing quite well. So we are expanding those partners with a selection of the current solidworks resellers, which were 1 or we're already selling supplemental software or, who are willing to invest. On this ramp up is taking time. The IQMS team knows how to do it because they did it for several partners before.
And now, I think also what I must say, the team that, you know, can Clayton, all Adam's were really, from the professional solutions standpoint, are highly committed because they see the value for their clients. So things are going properly. We are in the scope of what Q1 was was targeting for our DELMIA Works IQMS now. I had the former IQMS And we hope that, before he ran this indirect piece, will supplement the revenue growth in a visible manner, which is not the case today. But should be the case before inland.
The ambition to to be a 500,000,000 brand is really a possible ambition. We have no doubts about it. It's more the execution now to leverage both direct and indirect. Too soon did you inform as we make progress there.
Thank you for that. Also during the quarter, there was a customer conference, as you know, a DS customer conference in New Orleans, at which there were a number of interesting presentations on PowerBuy. And my question there is, can you specifically attribute the new growth or the better growth in, in the V6 new license business, to PowerBiome? And is that in fact a significant driver to the momentum you're seeing there or are there other factors?
Yes and no. 1st of all, Power BI is a very good way to position the experience platform for existing solid works. Or CATIA V5 or even legacy card. It's working, we have connectors with 33 on CAT systems that you know, on the market. So, it's working beautifully.
The main, the main, however, related to your question about the 3DEXPERIENCE revenue, it's most of it is coming from the native industry solutions, implementation on 3dexperience, not from the power buy on legacy design environment.
Okay. Just a couple of last ones then for me. As part of your guidance for 2019, to what extent have you included a contribution or meaningful contribution from 1 or both of either the new X apps, or the marketplaces.
You're referring to X Design on X X Designer on X Shaper. And I think this year is more a market introduction, a sell you want to spend more?
So to go straight to the answer, Jay, I did not take into account the numbers in the guidance.
Okay, very good. Thank
And your next question comes from the line of Jason Celino. Please ask your question.
Hi. Thanks for taking my question. I had a couple this morning. I guess, the first one is around your BHP strategic partnership announcement. As we kind of think about the Boeing deal that you also did in the Airbus deal, I mean, how does this compare in terms of size?
Okay. Hi, Jason,
and welcome. Glad to have you in this call. Thank you. So, again, the BHP, it's a long term partnership. So the contract is for
I think you actually broke up a little bit there. Could you maybe say that again?
So it's 10 years for the contract. 5 years for the financial commitments. And every year, we are talking about 1,000,000,000. So this is for the existing commitment. And on top of this, we have developed a business model, which is an interesting one.
We have a mining we license per mine. So meaning that if we are being able to equip all the different mine inside BHP. This contract could be equivalent to what we do with Boeing.
Okay. Very nice. Very nice. I guess was So with BHP an existing customer or is this kind of a new one?
But it was, an existing one, but on a point solution, you remember when we when we acquired a company called Gemcom doing a product called Softpack, which is very, very specialized which became, by the way, geovia. This is what is geovia now or geophysics and geoscience. But so they were a very small customer, basically. The question here is much more about the 3DEXPERIENCE platform to connected dots for all operations.
Okay. No, that's good. And then, related to your ABB partnership, It's a very interesting partnership. I mean, can you maybe talk about how it came together and maybe what the go to market strategy is?
The ABB relationship has been a it's a long lasting partnership that you many of our solutions already in different divisions. And that's one aspect. 2nd aspect, we see Chooser, serving common customers There are a lot of custom system customers using ABB Machine equipment robots on even even automation system. And so the value the partnership is built on a very strong, high quality set of relationship. And also with the ambition to have ABB becoming the industrial integrator of many of the solutions we already deliver to our clients.
So what we want to do on trade basically with the ABB partnership is that horizontal integration, I call this horizontal integration is more powerful than vertical integration. And, it has been very well received by clients around the world. In fact, other, players in that sectors are now contemplating to connect further with our 3DEXPERIENCE platform. I could name Kuka. I could name, TPx.
Deepx is the a huge division of Toyota Motor Company, doing a huge robotic installation on assembly line. And, they are contemplating to connect much more in the same way So I think it's a significant way to demonstrate some of the other approach used by other industrial firms to do vertical integration might not be the best way to do things.
Okay. Thank you for the color. Last question related to the strength in China and Asia. So it looks like, Asia and other in APAC, Asia Pacific might have done better. Maybe can you talk about the environment in the, other other, other parts of, Asia?
Asia is is very diversified. You have, 80 south, and then you have India China, India, Korea and Japan. That's the way we split that area of the world. Overall, the dynamic is is on the visibility is very good. We have a lot of activities in both Japan, India, on China, you should not look at 1 quarter.
The perspective is a very good perspective for double digit growth.
Okay great. Thank you for the color.
I think I want to thank you everyone today for participating this morning in London, through the connection or with your presence and all saw this afternoon here at this phone call. Of course, we are always here for you to address your questions. Don't push the rumors too fast. That is not needed. Thank you very much.
And talk to you soon.
This does conclude our conference for today. Thank you for participating. You may all disconnect.