Everyone. I'm Oscar Babinado, the system, investor relations. From the company, we have Bernard Chales, our vice chairman, chief executive officer, and Pascal Delos, Chief Financial And Chief Strategy Officer. I would like to welcome you to Dassault System First Quarter 2019 Earn presentation meeting, which is also being webcasted. At the end of the presentation, we'll take questions from the audience and from participant to the webcasted call.
Later today, we'll also hold a conference call. Dassault Systemes results are prepared in accordance with IFRS We adopted IFRS 15 in 2018, so all comparative information is presented under IFRS 15. In addition, we adopted new IFRS 16 lease standard as of January 1, 2019. Most of the financial figures on the conference call are presented on a non IFRS basis with revenue growth rates in constant currency unless otherwise noted. For an understanding of the differences between the IFRS and non IFRS figures, please see the reconciliation tables included in our press release.
Some of the comments we'll make during today's presentation will contain forward looking statements, which could differ materially. From actual results. Please refer to our risk factors in our 2018 document refinance. Let me now introduce Bernard Alice.
We are on a good start for 2019 with a strong Q1. Total revenue is up 13%. The license revenue is also up 15% on, all is of this is really driven by software, revenue, which is up 26% excluding exchange rates. So so we are delivering on the of the guidance, on 7 out of the 11 industries at it joint double digit growth, transportation, mobility, aerospace, some defense, industrial equipment, home, on lifestyle for example, as well as I I take Life Science, Marine Offshore, will show a few examples of customer news flow from that standpoint. So, basically, what can be said about the q 1 is, that we are implementing our purpose.
With positive impact. Also, on the collaborative social innovation, we have very interesting news with the cloud adoption industry. I talked about it, especially industrial equipment on fashion when as mining, with the BHP, selection of Dassault Systemes with the experience platform. And of course, also on the life science standpoint. So we are confirming on upgrading our 2019 guidance upgrading it for currencies, effect.
So if we look at the strategy at work briefly, the purpose has been very well established for the company. That's a system provides business on people with 3DEXPERIENCE universe to imagine sustainable innovation. Capable of harmonizing product into your own life. There are 3 spheres of digitization that we are contemplating serve, products, the fibers here, the bio world, on the move on bio and one on that standpoint for the life science sector on the energy and resources, natural resources with, the Jovia brand on the 3 d experience platform. I will, I have a few example today about those 3 world, if you wish, of how the digital world is transforming the real one.
The first is in life science, with, really the digitalization of the life science sector on the health care system at large, which is having a huge impact on how there is a new set up being done for the ecosystem in life science. Here is an interesting connection, a showcase that we are doing between the bio world and the physical equipment, with this variable used for biomolecules, biologics. It's really it's well known that, Dassault System is very, well positioned in the personalized equipment for Perro's personalized health. Especially with solid works on CATIA for the design and simulation, like stents, valves, and many others' equipment, but here is another illustration where the connection between the equipment on the the biologics, create a fully innovative, protocol for engine injectables. This device, market is a huge market.
We estimate it to be 8,000,000,000 by 2025. On, of course, the biologic drugs represent today more than 50% of the pharmaceutical and anti pipeline. So let's look at the
This industry is undergoing a paradigm shift towards large molecule biologics and the required high volume injectors to deliver them with the global market for biologics growing to $375,000,000,000 by 2022. The market opportunity for large volume injectable devices alone is estimated to be drugs now account for more than 40% of pharmaceutical R And D pipelines. These novel biologic solutions dosed with connected, wearable, and reusable delivery devices are transforming the patient experience by shifting the point of care from the clinic to the pay home. Named for the Greek Goddess of Recovery. IASO is a showcase for the life cycle of a combination product in oncology.
From upstream thinking through commercialization, I also demonstrates the value that the can deliver to stakeholders the patient experience. The I also showcase features collaborative design, delivering market and competitive intelligence to prototyping and validation, therapeutics design and development, accelerating drug design with unified predictive science, device design and development, leveraging 3 d design, collaborative engineering, and simulation, manufacturing excellence, re imagining engineering operations, and commercialization. And and prize operational excellence, featuring the 3 d experience as a platform to expedite product innovation and manage regulatory and quality activities. Providing a true 360 degree view of the product.
The cost of health care is also related to transforming the entire ecosystem, on this illustration shows the importance of connecting the dots between the biologics and the equipment. We believe we have a unique position, to serve this market in a different way on us, maybe observers notice the level of compliancy when it comes to the certification of the equipment and the certification of the protocol for a a significant, in the in the sector, which calls for stability, which basically is the value of the experience platform demonstrated in other sectors like aerospace. Talking more widely about the industry renaissance. We believe that it's far more than digitalization of the past. It's about game changer in many sectors.
Production are focusing now of produced of 1 as opposed to volume only with personalized, highly personalized capacity in the production line. So the digital is key for the product as a service, with key operation. That's why we see today, visit the growth of the DELMIA portfolio in in in digital Manufacturing. Of course, the industrial experience to provide freely a further integration between design, production, and product in operation, including the support of, Machining operation. And, you will see in the in the moment the, also the importance of this experience that for for, digital analytics.
An example of that is in Pharma Biotech, one of the biggest challenge is the process. The molecule is the process. In large molecules in the pharma sector, which means that the process will decide for molecule or not. Only if you can produce it in volume, which means that intelligent connected system for production are a Sure. Good traction on this quarter, confirmation of what is happening on the cloud, as we announced the last here, Schindler has been adopting the cloud for escalators, which was in large scale, an impressive showcase for illustrating the majority completeness of our solution, creating the 3 d experience twin of the escalators on this quarter, Schindler adopted the same approach for all its elevators activities.
It's a breakthrough because it does change the full life cycle about how you define with the contractor of the developer of the building, the product specification, and how those products patients are feeding R And D on production to deliver the right configured solutions. So, also noticeable was the push from the marketers on the salespeople from the Schindler company saying, this is what we need. To ensure that our contracts with developers are clear on a well understood. A great showcase on a a confirmation that, it can scale, in a large way. And also, Midelstand, company in Germany, class in Los Angeles, of course, in Switzerland class in Germany.
They are the way a agricultural equipment, and they are investing also in China, having both companies in China. And, the way they are integrating those activities in China is using the 3 d language as a way to remove ambiguity between China and Germany. It was quite intriguing for us to discover, the extreme collaborative environment that has been established globally for such kind of equipment on the incredible results in terms of quality of communication for the design and production, integrating companies in China on Germany to provide new product portfolio for the Chinese market. They're also using the digital experience twin on incorporating IoT data intelligent machine connection to really improve the overall delivery. Those equipments are high, high customized for each markets of the world, and that's why agility and flexibility of production systems are so key, and those are very strong illustration.
The ABB that's a system, a partnership was announced, we simply said we are demonstrating that, horizontal integration can bring more value to clients as opposed to vertical integration. Customers want to have the choice with the equipment, ABB, a great company, highly diversified. They want to use our platform for their own businesses, and we want to use the ABB relation ships so they can become an integrator, an industrial integrator of the solutions to our clients well known that, in the highly, flexible manufacturing environment that Boeing, for example, the equipments are are being used, but there are many, many other clients that we have in common where the value has been well needed by, clients to see this announcement going to, this partnership going to a new level of integration Horizontal integration is, I think, a higher value to client as opposed to vertical integration We have seen it in hardware and software in the past, and I think this will continue. Great partnership, and we are, satisfying our clients one quick world on the trends on manufacturing. There is a big between digitalization of a manufacturing process on creating a platform based manufacturing environment.
The analogy would be the analogy of an Amazon. What Amazon did with the platform for retail, a similar thing is happening in production. The digitization of each of the states in production does not provide the results, which are expected by clients, creating a common platform based manufacturing environment is game changer And basically, this is what the system is doing with the 3DEXPERIENCE platform. It's a it's a differentiator from that standpoint, and that's also explained the double digit growth this area on the adoption by extremely large manufacturer. Quick come back on the move that we did with Central PLM, Centric Software.
As you know, we own about 66% of Centric PLM. We will buy the remaining shares in the next 2 to 3 years on, the dynamic of, our successes in the home and lifestyle sector is really very impressive. We are now reaching a over 800 brands worldwide. You see them here. Of course, those are, very, very well known logos.
And the reason why the adoption is so successful is because the product is simple, configure labor, extremely easy to deploy. And, basically, users love it, and it's used to do the PLM process, the product life cycle process. To manage collection based set of offers. It's also being used more and more between the brand manufacturer on its point of sales around the world. So when point of sales are establishing the categories they want to sell and the pricing they want to do for a given market.
They use this trading environment, the PLM platform to do so. A very good dynamic. We are very pleased to have done this acquisition. The results from a financial standpoint for those companies are significant in terms of impact on sales, reduction of inventories on significant significant reduction of inventories, you see between 20 and 40% on reduction on loss logistics cost. So, basically, this is a small team that could reach the work, because the value clarity on the simplicity on adaptation of the product to the this specific market is extremely strong, and you see many, many new, clients here like Adeo, leading international home improvement, retailer based in in France, on you you have you have the list on on this presentation.
Milano Design Week 2019 was 2 week ago was very very successful. Our objective there is to show that we are think the b to b to c on showing the impact of the design world. 25 1000 visitors came and so what we're representing here with clients like Honda and many other when, please note that the, you know, the Milano Design Week is like the fashion week, of design. And there are so many trade if sync going on. We had a high visibility in the media and also the world best designer came on spoke.
On the roundtables to show how both SOLIDWORKS CATIA on the street experience platform can churn the world moving from design thinking to experience thinking. So, this week, this morning, we announced a milestone, cooperation with that was started 2 years ago, over 3 years ago, with BHP billington, the largest mining company in the world, And, we have announced that, we have reached an agreement for a strategic partnership for long term. This is, I believe, as important as the partnership we announced with Boeing when did the 3.7 and changed the future of aerospace with digitization of aircraft creation production from operation. On this is an holistic approach on basically, pit to port. It's really the digitalization on the optimization of all process, to improve profitability, to really increase the capacity, to bring plan based on market conditions to really elevate the workforce on, allocate at best the workforce and also, of course, fundamentally to increase safety and comply with, very strict environmental regulation.
So the BH be that's a system corporation is based on significant pilots that we have been doing for and showcase in this way have been doing for the past years, which have provided significant results, lead into this agreement, which is a multi year agreement, for the sector. We believe that this sector is behind in terms of digitalization and the 3 expand platform will will be on ease becoming game changer to connect the dots in this highly plex CapEx, OpEx, Intensive Sector. Here is a quick illustration.
Driven by volatile commodity prices, declining resource quality, deeper deposits, and increased social pressures, mining companies are seeking trans formative change to of things. And there have been improvements realized in verticals such as resource modeling, short term scheduling, and sleep management. But there is more the industry to do to truly transform itself, the virtual experience platform makes it possible to connect the dots. Break down the silos between departments and also disjointed hardware software systems, enabling superior visibility and enhanced collaboration, but between upstream and downstream functions, which use the same data. With this comes improved productivity.
This is game changer for the sector because many things have been done as point solutions. On creating a platform based operation where all the data are connected together is number 1 possible has been demonstrated now and is changing the capacity to adapt the mining operation to the market conditions, basically, which is for them very, very if you're on cheating. So we are very pleased to, to announce this partnership, and I think it will probably, place an in the entire sector and create a new, new will for the sector to move from highly intensive searching on highly customized software solutions to a more, set up generic industry solution approach. Now while we transition to Pascal, we're going to command to you, on both the top line to grow 17%. As well as software growth and new license growth.
The improvement on margin, as you noticed, we did a simple acquisition last year. The 2 main one being Centric PLF, Centric Software, and on the second one being IQMS now, DELMIA works. Remember, we wanna to do mainstream ERP for the SOLIDWORKS clients, which, by the way, on a good start, And despite that, we are improving the operating margin, which shows that, I think we have a business in good health back to you, Pascal.
Thank you. Bye now. So you can notice it's a good start for the year. I mean, the whole divers are winning plays. And the contribution of the 3 gixson platform, which is really the core of the of the engine to a certain extent is growing at 26% and represent 40% of the new license, which is almost in the same trend that what we seen in Q4 of last year.
If we do, and we go a little bit more in detail, let's start the business review, and let's start with by the geo view. So America's growing very well. 18% for the software revenue for this quarter. Remember that q 4 was a little bit disappointed for this region. So we had some catch up.
We had some large deal shifting. And we have been able to close the deal in Q1. The second point is the growth is driven for CATIA for, sorry, for Americas, but also the good subscriptions. Do you have the impact of Boeing, but this is not the only one? And last but not least, you also have some contributions of the acquisition, especially Centric PLM and IQM as well.
Europe is growing at 10%. And against in Europe, it's it's fixed. You have a good growth in South, part of Europe, Central And the North. And you have, a modest growth I should say, in the red and especially in, what we call it, Yohave, growing at around 5 to 6. Asia, 8%.
The good point is notice here, we have a very good performance in China and EBIT sales is a a gross cover being close to 20%. So I think it's really steady. Interest. On the consequence, the growth is a little bit more modest for the rest. We had again the good quarter in Q4 in Japan, and we have some, you know, ketchup coming from the rest of the year.
If you look at by product line, Catya is growing at 6%. So it's, some improvement compared to q 4 last year. And the improvement is coming again from North America with a good subscription revenue But, also, the vast majority of the growth for Katya is coming from 3DEXPERIENCE platform, which is, again, a good sign because it means that the this, new product line is gaining traction in the car industry as well in the efficacious industry. Innovia is a star for the, for this quarter, 19% growth. I mean, It's, and from an organic standpoint, it's, as I wrote here, it's a high double digit license revenue growth.
This is a proof that when we have a good traction with 3DEXPERIENCE platform and also we are assigning last transactions, automatically, the note gap performance is here. That's really the correlations you can extract and conclude from this, this see. So it works. It's growing at 5%. Keep in mind a few things.
1, we had a strong base of comparison with the revenue hub, 13% last year. And also, if you remember, I commit to you that we will, achieve the 10% growth for the full year last year. So I think I put some pressure on the channel, and I probably drive a little bit pipeline early this year. For the full year, I'm still expecting, to have the steady work growth between 5 to 10% is in line with the guidance I gave you early this year. There is also an important point for solidworks.
We are introducing the experience 3DEXPERIENCE dotworksfamily, with, not only, you know, the introduction of IQMS, the recent issue we did, but also all the other product line we have available on 3 different platforms. So this is also the key points because it's a way we will continue to fulfill the growth for SOLIDWORKS over the time. The other software line is growing nicely at 22%. So this is also the proof that, you know, all the decision we took a few years ago to a larger scope, the domain we were serving is starting to pay off because it's a nice growth. And spec specifically, this growth has been driven by manufacturing space, and then we do a Zoom just afterwards, but also the simulation space.
So those are 2 quarter line going very well and having a strong demand on the market right now. If I do among the manufacturing space, So the DELMIA performance is up 25%. Total software revenue, it's a pure organic software revenue, because IQMS so called DELMIA Works is not yet integrated into this number. And the DELMIA quit which is a subset of, the brand right now dedicated to logistics, the inbound logistics, and the outbound logistics, as well supply chain is growing at the 78%, which is quite impressive. And the growth is really coming from the car industry.
So that's also, a proof point that this traded is a strategy is paying off because we have been able to operate large installed base we have in aerospace and different transportation and mobility to expand, in this space. And now the combination of DELMIA, which is unique. It's the only product suite having the ability to do the engineering of the production processes to run the manufacturing facilities and at the same time to manage and optimize your supply chain with one single platform. This is unique on the market. This is highly competitive against the competition, and here you have the proof.
If I zoom on the, you know, Quintage. We we have this win. Your star, but it's 1 a month many we have in this base. In fact, we have a we have a a good market share in the highway. And the reason is because we have been able to improve the frequency of the trick by doing something which is key by optimizing the planning of train, the drivers, but also all the maintenance of the trades.
So it's a mix between the workforce management and the maintenance activities you have to do This is the way we improve the trip frequency, and this has the airline impact on the bottom line. So we we had significant win in the suite highway in the for the London tube as well, in the Italian as well. So clearly, we have a significant market share in this space. From an industry standpoint, Bernard already mentioned it. So 11 of 7 of them are growing double digits.
It's all the core industries. So the auto sector, the aerospace, defense, and to the equipment. And also, some of the diversification industries, the home and lifestyle for Bernard made few comment on this. The high-tech the high-tech is going well for us, and it's not only in the semiconductor, but also in the consumer electronic as well as in the telecommunications. So clearly, in all the different segments, we are seeing double digit growth.
In Life Science, specifically in the biotech and pharma and in Marine and Offshore. A few points for you guys. You remember, we used to have 12 in the is, and we have decided to fine tune a little bit the industry segmentation. So now we have only 11. It's not because we are disinteresting.
Because we are more precise, and the changes are the following. You we we used to have consumer goods, retail, And now it's so called home and lifestyle because this is really where we focus, and it's coming from the acquisition of Centric, but also with the rest of what we do. We have also renamed, what we used to call energy process and utility. It's so called energy and material because the materials part, it's all the upstream and downstream activities in fact. And also, which is probably key for you guys.
We have decided to rename AAC by Construction Cities And Territories. Because we are convinced this is the way we're gonna displace this sector by combining the 3 things together. Okay. So if we zoom a little bit more on the financial highlights, on the total revenue, remember, 13% including the currency effect. If you have any growth, it's 8%.
So to last year, for sure. On the software revenue, 12% growth, excluding the currency effects, also 8% organic growth. And if we split the software revenue between the license and the subscriptions, here are the results, 15% growth for the license, which is, in the range I gave to you. More important, the organic light is up 9%. So clearly, we are getting close to the 10% you expect guys.
And the recurrent review is up 8%. And it's a significant improvement compared to last year because plus two points. And you remember, one of the key points for this year is insights in we don't know what will be the backcourt impact on the second half of the year. But when we gave the guidance to you, I was pretty confident on a hardly to improve and accelerate the recurrent organic growth. And here, you have the proof 2 points compared to last year for Q1.
On the services, again, 20% growth excluding the currency effects, 9% organic growth. I think it's, relatively aligned with the software performance. We see a very good traction on those services related to 3DEXPERIENCE platform as usual. We also see a good recovery on the services coming from Quintiqs and Apprisso, Demia Apprisso, and Demya Quintiqs. Because you have seen we have a higher growth in software.
So we also have to fulfill the related services activities. And three d x height is going a little bit better. So we are not yet fully recovered, but compared to last quarter we we did some improvements. The the mix point on the services is the gross margin. It's half a point below, and it's mainly coming from the fact that not only we are, giving more and more to the to the third party, You'll remember, we we decided 2 years ago to reinforce the partnership with company like Capgemini, Accenture, Deloitte, TCS, and this is what is happening.
But, also, we are a little bit slow in the hiring process, and we had to subcontract a little bit more than expected for the first quarter So nothing structural, we will recover the gross margin on the services side. If we look at the operating margin, here you have the the detail. So the activity improved by more than 2 points. So it's really a good performance. And the main reason is you have more contribution of the recurrent part of the software and automatic this as a direct impact on the EBIT margin.
But, also, we are a little bit slow in the hiring as I was telling you, and I'm expecting to catch up in Q2 and Q3. The currency effect is also having a positive impact at the point, and the deletions continue to have the acquisition continue have some dilution with minus 1.2. This is for the operating margin. On the EPS side, it 7¢. So in the high end of the guidance, just 21%, just 13 percent if you include the currency effects.
And it's a direct consequences of the top line growth and the operating margin improvements. Point I would like to to to notice is the tax rate for q 1 is 29.7 person. So it's almost a point higher compared to last year. And it's coming from the fact that in the US, you have the new tax reforms, and there is a specific topic related to what we call BEAT, PE18. And it's all the it's a minimum in the minimum tax payments for all the fine related party, and this has an impact on the intercompany royalty taxisians.
Again, it's not new for us. It's well integrated into the guidance for the full year, but I just want you to be aware and understand the reason why you have, this change. On the cash flow side, a very good performance. €489,000,000 cash flow for Q1. We are getting close to half a 1,000,000,000.
Plus 20% compared to last year. And we are lending with a a cash a net financial shown on 1,897,000,000, which is, which is a nice position to have. Nothing to say, specifically on the European cash flow. The vast majority of the improvement is coming from the activities, and it's in line with, you know, the growth on both sides on the liability and the receivable. For the financial objectives, few things.
As Bernard stated, we had decided to upgrade the revenue having, you know, 19,000,000 coming from the currency effect in Q1. And, also, we have just did the q 2 currencies for the dollar. If you remember, we used to have 1.10 for 120 dollar, and we have adjusted to 1.15. So this has a direct impact of increasing the revenue by 16,000,000. And on the EPS side, we are adding 5¢ and the same mechanism, so 3¢ coming from Q1 and 2¢ a expecting coming from q 2 from the currency effects.
That's it for the for the full year. The rent is unchanged. You can. You will see. So we are still expecting, a license growth between 10 to 12, a recurrent, organic improvement by two points, 1 to 2 points, and an organic improvement of the EBIT margin by 80 basis points.
For q 2, the the the guidance we are giving is for the revenue is 900, 20,000,000 to 940,000,000 for the revenue, a growth, including the current CSS between 10 to 13%. And the split between software, license, and the recurring is the following. 10 to 12 for the software. 11 to 14% for the license and the recurrent parts between 9 to 11%. Again, if you compare to last year on the recurrent side, it's 2 points, higher than what we need.
The EBIT margin is pretty stable at 29.5% and the EPS ranges between 74¢ to 77¢ and a gross between 7 to 12 on. That's it for the for the objectives. I think it's a good start for the year. You will be in agreement with me. And, at this stage, the visibility is good to confirm the the objective for the full year.
Think we have been able to demonstrate that we are still having a good momentum to, you know, to capture new domain, like the manufacturing space. And also to win new customers, significant one like DHP. The cloud is also something starting to be visible from you guys. We have been able to display the competition, thanks to the cloud solutions, and this is what happened at Schindler. So I think the foundations to continue fulfill the growths are well in place.
Bernard and I are ready to take your questions. Thank you very much. We'll take first question from
the room and then from the webcast.
Hello? Great. Thank you.
So maybe my first question was really around through your visibility into the rest of the year. I mean, it's encouraging to see a lot of, kind of larger or strategic wins and, more importantly, both in core and diversification industries. So, you know, what's the sort of conversation you're having with the customers now based on the references? How's the pipeline building and how do you think about sort of the second half of the year, and and the kind of puts and takes in terms of sort of how you get there? And then secondly, my question was really around.
There's been some speculation in the press around sort of M and A. Maybe you can sort of remind us sort of sort of on M and A, kind of where the priorities are either by vertical, or or by product area. And and I don't know the extent that you're you're in a position to comment on any source of speculation that's out there. Thank you.
Something what Pascal, you want to, take you just made a comment on the on the visibility, but maybe, yeah, additional information.
So like, last year, we are volatility backloaded. So you more you are mentioning the potentially is the large additional contract we could have in the pipe. We have some. It's probably too early to to give her some indication about, where we are, but I think the visibility is still good. It's not only in the car industry, it's also, as you mentioned, in the new industry, mining is a good example, but energy processing which is high-tech also in very well.
So so so I think That's it, what we can say. On the channel side, the visibility is also a bit better in the second half of the year. So I just want you to take this into account. The pipeline is well in line with what we could expect at this stage of the year.
By the way, so if I may add, it's quite well spreaded around the on the globe or across geographies. Asia, of course, is still strong, but, we think also Europe can sustain its past growth. Related to the second question, of course, it's, it's a good practice to not comment so much on rumors. But I think your question is related to the strategy. If you look at back at what to move we have done in the last years.
I think they were aligned with the strategy. On innovative. So from a strategic standpoint, many reactions were makes sense. If you think about Centric PLM, it's a significant acquisition, overall, but it's about making mainstream ELM now accessible to new sectors. Same for IQMS, as Pascal said, DELMIA works.
I think this was me welcome. So align with the strategy on innovative because people do not necessary predict that those would be the target. Now the second part of your question is related to the is on the arbitration between sectors. I think the arbitration is relatively easy for us do, it's related to the maturity of the market or the readiness of the market to adopt the platform, what I call the platform phenomena for design simulation, production, and operations. All industries are not at the same level, from that standpoint, We know that, many that we serve have been showing the way.
Clearly, the the announcement today with BHP is, is a significant move for the natural resources. The success we are seeing on the r on d with Biovia on 3 d experience, give us some very interesting perspective about the life science market a lot for 2 reasons, biologic a complex. And for us connecting on the with manufacturing, is a differentiator. There is no many players in town that are connecting the biologics with equipment, as illustrated today, is very unique because that's the system is, almost a defect to a stronger in a per a med care equipment. So it's a sector which is big, and we have to find out what's the best way to expand the solutions, in the future on on that side as we did for other sectors.
So let's see.
Another question from the room, Michael?
Yeah. Thank you. Sort of carrying on on the theme that are there, I mean, you had a €1 per share, acquired earnings target for 2023. Clearly that's a not not a trivial number. So larger deals should be in your M and A pipeline.
I mean, would would the business be willing to go into a net debt position for the right acquisition. And then I've got a couple more.
Well, I think with the dynamic of organic growth. On the perspective that we have with the, huge sector that we serve, 11 industries on, sixty one segments. We are not prisoners of having to do acquisitions. To reach our objectives. When we did the, analytics meeting, we provide a framework, about where those factors could be coming from.
But that should not be the spec of what we do. The specs of what we do is roughly to make it simple, double, EPS every 5 years. That's the specs, where it's coming from is more driven by the industry dynamic. So, so don't take, the split between money contribution to VPS or growth in the existing sector. As a static split.
Don't want to be presunurl of doing, moves that maybe look at every year so many possible options. I think we are financially in good health. And, while we have been kind of a conservative but very focused on technology on talents more than a new space acquisition. Not the case of Biovia, because for Biovia, we're we're going in life science on who are seriously going on throwing in life science. I think we have a lot of flexibility on We have a decision process in the company.
We are a family controlled company, and we can make decisions quickly. So if good opportunities are cured, we will do the right moves because we are long term oriented. It has always been the case in the last 30 years. I think we have proved it. We are long term on I think you practically called off a a good managed company, is is there.
So we have white scope possibilities on scaling 2. Thank you. And then
a couple of follow ups on of Boeing. There's obviously been some operational issues with the Max Jet. Can you say if that's any impact on the timing or roll out as they work with you. And then Pascal, just on DSOs, the cash flows seem to show a a good sort of, reduction in DSOs or or debtors, so a working capital positive. But the actual back back of the notes shows an increase in TSOs from 82 to 86.
I'm just a bit puzzled. Maybe it's IFRS 15 or something, but can you
can you walk through that thank you for asking the question on Boeing. When a customer is facing challenges, we are all all always all concerned. Zero impact on, both visibility contracts on the the type of scope of activities are doing 2 together. It's really zero impact. Why so?
Because it's a bacteria contract. It's already established. And, any companies of that size are facing, difficulties for one piece of the portfolio. It's not going the first. It happened to many users.
You'll remember the Toyota, challenges back years ago or 2 42nd. Challenges not long ago. So those are extremely professional high quality groups. Their focus is of course, to fix their tactical problems and also the capacity to continue to do the product plans. On the product plans as well as production of the backlogs, when when those columns are resolved, their priority So zero impact for the system.
And, we feel even closer, to companies when they face challenges to see if we can, find new ways to help on, especially especially on those type of highly integrated systems.
Coming to the DSO, the DSO increased by 3 day and half. 1 day is coming from the acquisitions. Because, you know, when when you acquire company, you know, usually, they are do not have the disciplines we have to do it. So this will be fixed. And then you have a 2 and a half a day coming from the fact that when we sign those big contracts, usually 90 days is the standard more than 45 days.
So this is basically the flip side of those large contracts. It has this impact. So we will be able to resolve and to absorb some of them but not all of that.
We take no question from the call. Alice.
Thank you. Your first question comes from the line of John King from Bank of America. Please go ahead and ask your question.
Yeah, good morning. Two questions please. The the first one was on the dynamics within SolidWorks. Clearly, the growth is a bit slower this year at the moment than than in prior years. Maybe just talk about the situation competitively, any changes there, you know, and we tend to think of SOLIDWORKS as a lead indicator.
So just your commentary on that would be interesting. And then more widely for the group, we continue to see good deal flow momentum. And I so I guess following up on those questions, how does the out how's the outlook? How's the pipeline looking for you as you you head even into 2020, are you still confident of accelerating towards the the guided range? I think you were more talking about 9% organic growth in in medium term.
So, maybe any thoughts around how plausible that looks in the next 12 months. Thank you.
John, on, Pascal, you allow me to make a comment on the
Yes, please.
So it works. The The SOLIDWORKS World event last year was very, very, very successful. The the user base is highly satisfied. They continue to grow. You're right, John.
It's the organic growth is is is lower at this point in time. I don't think it's related to any competitive special competitive situation, by the way. I believe that it's more related to, our to expand the SOLIDWORKS offer, our transition with our resellers. To expand our SOLIDWORKS offer with cloud analytics, manufacturing, what I call added value to the current solid works world, which is designed centric values. That's a big picture waiting for our, pay sellers.
I think it's normal. They have been running for 22 years selling only one thing so it works successfully. I believe that the time they invest to expand on knowledge on Noah and Salesforce to sell the platform, the cloud. Is, is having an impact on the productivity of the Salesforce. But we have to go through it, and I think it's an Etsy good discipline to do it.
Our products, like X Design. This is designed through a browser of any device is extremely welcomed by the SOLIDWORKS community. You know, design anytime, any device, anywhere, through a browser. That's unique. Collaborative platform on the cloud.
We are replacing Dropbox, which is unsecure for our clients. With a secure on the cloud online, including we are placing basically Dropbox on WhatsApp for our clients to do secured collaboration. That's what we are doing with the 3DEXPERIENCE platform on what we call swim. So it takes a bit of time for our resellers to stand that and to know how to engage with them. The last factor which we should not underestimate is and I I want to take the opportunity also because I know resellers are listening to the to the investor call.
They are questioning all our competitors are bypassing domicile network. Get rid of it. I don't need you. I try to reach the customer myself. That's not our policy.
We will continue to use our resellers to provide service consulting. On high value to our clients because they need it. But the fact that we go cloud, we get the connection of the user. With as a system. We have to build the trust to demonstrate that there is no risk for them.
I think big progress has been done in the last 12 months. We still need to make it make them comfortable with it. On the last point that we discussed before is related to business model. When you sell desktop. You get an initial revenue, therefore, royalties on your license, and then you get the revenue, the annual subscription when you sell cloud, it's native subscription.
And there is a little bit of cash flow, challenge for them. We find out new solutions to help them solve that cash flow that is, that is an issue probably for 2 years. So when you have built a snowball of substrate then it's a sustainable business. But before moving from desktop selling, to cloud with the proper business model requires a little bit of tuning. Those are basically the 3 or 4 things which are impacting, that condition.
But I am very comfortable with the fact that it's going to happen, in a proper way this year, to build up this growth we want to, build up with extended portfolio. Long long story, but 44 parameters training, new offer, cloud, on the adoptions adaptation of the new business model.
Just the second question was related to the visibility of the pipeline
for 2020. I
think we we signed a decent number of large deals, multi years.
So Airbus, Boeing, EDF, BHP now,
Exxon mobile to name only few. So definitively, this give us some additional visibility on a multiple year basis. So it's point number 1. Point number 2, the recurrent part of the revenue is also improving. So I think, we are getting in terms of visibility over the time.
Now coming back to the questions related to the organic growth, you know, if you look at, Q1, we are at 8% on the recurrent part. It represents 75% of the software revenue. It's plus two point compared to last year. We are growing at 9% on the license side organically speaking. So we are pretty close to to the target.
Isn't it?
That's all. Well, thank you.
Tell me who's that?
His line has been released. Your next question comes from the line of Adam Wood from Morgan Stanley. Please ahead and ask your question.
Hi. Good morning, Bernard. Good morning, Pascal. Thanks for taking the question. I wanted to dig in, on a few things, if I could.
Maybe just, first of all, on the mining space, the deal with with BHP, you know, you mentioned Bernard that different industries are at different stages of adoption. Could you talk a little bit about where you see the mining industry The fact this is one of the the later deals you signed, as that suggests this industry is lagging a little bit. And then when it comes to contracts with other companies in space. Could you talk a little bit about the competition and what those, other mining companies are using today? Is it a mix of solutions, homegrown solutions, this gonna be more displacement of of competitors versus the screen field.
So just a bit more background on the mining industry would be would be very helpful. Then maybe just on the life sciences space, if I kind of think about it between data management and process management versus the design and simulation rather the modeling and simulation of of molecules and therefore the drugs. Could you talk a little bit about where your business is today and where you see the biggest opportunity over the next 3 to 5 years. And again, the competitive landscape, is there anyone very big, in those areas that would be a hindrance to you getting to those ambitions, you could give us a few thoughts on those 2, that'd be great. Thank you.
Thank you, Adam. On the mining side, our natural resource is a part. This this market is very low. And if you look at the current situation of the big players, it's a lot of homegrown, legacy systems. In fact, in some ways, astonishing from that standpoint.
It's really, that's been fed by a lot of consulting, you know, services. It we've we've incredible numbers, in terms of spending. We want to change that, basically, with the platform approach on on that, what we're doing with BHP. I think so the PHP the PHP announcement, I think it's a tipping point. I think it's showing that the platform, the 3DEX panel platform, can connect things which have never been connected before.
Which means planning, responsiveness to market situation, commodity market situations. On the management on allocation of resources, which are gigantic, frankly speaking. So as you know, we started with the the geology and geoph geophysics aspect with the acquisition of Gencom now called geophia. We wanted to show to the sector that we could address the core, topics. From understanding their business.
I think the sector through that conversation has discovered that we can do the full pipeline. With the experience platform on the collaboration aspect. This is what is happening. I believe that he also a player this is eye opener for all our players. And we have been interacting with them.
On I see this sector as midterm as a big sector, as strategic as many of you, sir, or even the streets that we serve. So I'm very confident. There is no, you know, the competitive landscape is a collection of niche software. It's more concerning customized software on niche software. No one provides the kind of solutions.
As a matter of fact, in the case of what we have announced, there was not really competitors. It was about showing can we do the job or not from pit to port? So, that's exactly a sweet spot for Dassault System when it comes to serving, CapEx, OpEx, intensive industries, where there is a lot of spending, but that could be redirected for the right solutions. So, we are we are very positive on that. So I think with that, I have addressed quick question 1 and 2 on the evloxcape Adam, on the qs, question 3, which is related to life science, we start on the r.
On this side, with biofuels with the experience, we have a outstanding showcase we've announced already with, for example, for the biologics on many user clients, because biologic is very complex, and it's connected to the way you manufacture things. You cannot get the last choose without the process. Being able to manage the process is manufacturing process is so key. We see successes in manufacturing in life science. Bio VR Discoverance, for example, it's big data analytics, on data from production.
And we do reverse engineering of data in production to improve the production process of This is under deployment. I cannot refer yet to new wind stairs too early. But we will come back to you with wins there related to, the deployment in, manufacturing process for biologic, which is, very strategic for them because you have no way to resolve the process. Now, of course, between r and d, you have, a lot of phases, some specifically 3 phases, which are called, phase 1, phase 2, phase 3 of a clinical trial, where there is a lot going on there. Both modeling simulation on, on data acquisition, to really observe the way those tests are being done.
And, the platform for us is always a platform with one target, connect things which have never been connected, we will have to decide with our customers how we connect those dots. There are multiple ways to do it integration, open data format. So still things need to be, defined, but the dialogue with our clients are going extremely well and they are open to share with us the comparison between the different approach on that sector.
Perfect. Thank you very much.
We'll take one last question from the webcast, Alice.
Thank you. This final question comes from the line of Stephanie Pollard from JP Morgan. Please go ahead and ask your question.
Hi, thank you very much. Just at the very beginning, you mentioned cloud adoption. Can you say what percentage of revenues that is today and where you see that going. And then maybe a little dig in on solid work. I know you've discussed this, but specifically around the cloud, what the what investor interest are you seeing there?
And is it possible to quantify, I mean, just big picture, the approximate percent of customers that are strongly in February at your SolidWorks event. And then, uh-uh, last question on Innovia was particularly strong again. Is some of that Boeing. And if you look across the board, do you think that you're really gaining market share here now?
Saint Tuesday, see. I will let Pascal comment on the revenue. I would like to address two things with cloud. First of all, how do we measure our cloud dynamic number of customers, number of users on day w? Number of customers, number of users on day w.
On the on number of users on data volume, it's it's it's really growing extremely fast. We also look at, real project versus trial. Most of what we see on the cloud for that system is our real industrial project, airplanes, e e airplanes, e vehicle, medical equipments, you know, escalators, elevators, you have seen that with Schindler, with, cough, short, is another example on the cloud. So we the footprint we are with the cloud showcase is extremely strong from here in to your implementation in large scale. The revenue yet is not big because it's a subscription.
It takes a little bit of time, and Pascal might give you a little bit more on that The last point, is related to the nature of our clients for cloud. We target public, private cloud, on premise cloud. The customers you mentioned in your The biggest one we have are seriously looking at on premise cloud, which is basically what we did for jaipur, India, for city. Where basically it's, on premise cloud, administrated by Dassault Systemes with Dassault Systemes, So we see that cloud as exactly a public cloud that we provide service to someone else. It's a single point of administration.
That's the way we are doing it also for Singapore, and that's the way we will be doing for very large clients who are going to delegate to us the seamless operations of the cloud so they can every, next week. Enjoy the full, update, seamless because today, we think we master totally DevOps from the cloud's standpoint. We add in the last year about, about 8 major online updates that took just a few hours on all users, the hundreds of thousands of users around the world were up and running running in the next hours with the fully update version So the system is now fully industrialized. And as you remember, I think last time I showed you the map around the world, the map of our cloud continue to expand for our Dassault system, what we call outscaled yes, outscaled cloud. We continue to put them in place, and we use the elasticity of Amazon for it.
So, yes, Stacy, very large clients are working with us to build brought back to private cloud for them.
So related to the revenue coming from the cloud, we are not communicating on this. And the reason the good reason for that and Bernard said, the the point for us is not to transform the model from a a pure upgrade model to, a subscription based model because we have already 75% of the software. Is recurrent. So I think we are in a completely different positions compared to the competitions. The cloud is for us a way to reach new user to develop new usages, and this is where we are focusing on.
I think this is probably more important for you to listen carefully the story we are giving to you, telling to you, relating to how we could expand the scope of what we do, how could we reach, users, we are not able to reach with a traditional model. I think this is where the growth is really coming from. Coming back to the question to SOLIDWORKS. I think there is one thing you should keep in mind, Stacy. We are offering the 3 d externs platform to the SOLIDWORKS installed base only on the cloud.
So this is, I think, a good indicator about, the penetration rate we are expecting which is almost 100% at some point of time. So this market is really suitable for the club and again, value is not to substitute the desktop solutions with, an equivalent on the cloud. You are not bringing too much value if do this is by providing a platform, proposal, which is difference because it's a way to connect the dots. It's a way to collaborate easily with the rest of the world, and this is what this market is looking for.
On the Innovia side, I think your summary, Stacy, about I I Inovia is unstoppable on the speedy experience platform. All the wind which are coming, really 3dexperience on Inovio. Frankly speaking, I I don't see how Odessa System client. We select something else.
So would you would you say you're replacing some based
on these? Why? Because the value is platform.
So, firstly, you think you were
The game changer is platform. That's why we need that, Innovia from that standpoint. It's a a logical easy decision for clients.
Okay. No. That's good. Thanks.
With that, thank you very much for participating connected to the to this call, this quarter, we're in good shape for the full year 2019. And don't push too much the rumors. Thank you very much.