Good morning,
everyone. I'm Francois Jose Bordonado, Dassault System Investor Relations. From the company, we have Bernard Charles, our Vice Chairman, Chief Executive Officer and Pascal Delos, Chief Financial And Chief Strategy Officer. I would like to welcome you to Dassault Systemes Fourth Quarter and full year 2018 earnings presentation, which is also being webcasted. At the end of the presentation, we'll take questions from the audience and from participants on the webcasted call.
Later today, we will also hold a conference call. Dassault Systemes Financial Results are prepared in accordance with IFRS. In addition, we have provided supplemental non IFRS financial information. For an understanding of the differences between the 2, 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 2017 Document refinance. Let me now introduce Bernard Charles, President and Chief Executive Officer.
Good morning, everyone. I'm delighted to share this presentation with Pascal Delos, to shared with you, 1st of all, of course, our comments on the 2018. I know you know all the numbers by now and you have right between the lines about the interpretation for 2019. In short, we are very pleased about 2018. On many fronts, the organic growth, 1st of all, all the parameters that we committed to deliver are there.
2nd, the organic growth is also strong. 3rd, we did some movement moves last year related to acquisitions, which are very key to continue to expand our footprint. And last but not least, I believe that with 27,000 new enterprise client, small and large, we continue to expand our footprint. That's my summary. So, on, of course, with the preview for 2019, we can have a long debate about the economy, but we plan to have 2019 with a similar profile to 2000 18.
With that, let's go on the data that supports what I just said, the revenue is up 10%. The license revenue up 11% with EPS at up 16%. You have the exchange rate here. And I think the second thing that because every year, in February, we give you an update I shared with you an update on our strategy. I think what is noticeable when I read some letters published by investors is long time ago, we formulated a very powerful purpose.
It's at the core of what we do. I remember the eyes of people, when we explained, we're going to create virtual universe that help harmonize product nature on life. The eyes where bubbling in 2012. It was February 9 2012. I think we have put this in action in a serious way and I think this is at the core of what Dassault Systemes is on what we do on you.
I will illustrate that. The purpose The platform is taking shape with software revenue up 24% for the 3DEXPERIENCE you know, it's our system of operation and it is also our system for new business model with the marketplace. On everything that Dassault System is doing for the future will be based on this platform, on ease for most of the current large customer industry solution already there. Industry, Diversification11industry, 61 segments, that industry certificate is a diversification is also working, but we continue to work on 3 things. Geo diversification to reach the different countries around the world, domain diversification expands from design, production lifecycle management.
And of course, industry diversification, which is to serve industries. We were not serving before. Cloud is, in good shape for us. We are probably one of the only platform on the planet to have a common platform between cloud and solution, what we call on premise, installed at customer location, and it's the same platform. There is no much players doing that and none of our competitors It's a very important factor for the future.
27,000 new clients and expanding with the addressable market and we'll come back on these acquisitions that we did. Some are very spot specific talent on technology. Others are related to reaching new type of market like Centric, software, some PLM as well as IQMS. So strategy update, you know now simply said, what Dassault System is doing, we are creating the 3 d digital twin experience of everything mankind produce, whether it's a car, a plane, a railway, a train, computer, we want to create the full twin in the digital world that you can experience simulate before you actually produce it. We are very serious about making this happen And we want to do that for construction too.
So I state what I said last year, we will make this happen for construction territories on cities. That's what is illustrated here. Started on 3d, we did the mock up, which is a static view of things, the life cycle, you add time to it, aging of the system, and now the full experience, how will it work, what kind of service we did we will be provided to consumers or customers. That's all here. And then the little illustration shows you the topics on which we do the showcase.
Mechanical parts at the beginning, an entire airplane in 89, manufacturing plant on car product families later on with Toyota, especially at that time. And now we say we're going to apply it to cities. So we are not here for the next quarter and here for the long term. The purpose is very clear. February 9, 2012, this is what was announced.
We have invested billions to make this happen. And we will continue to do so. When I say 1,000,000,000, it's 1,000,000,000. We invested 1,200,000,000 in life science in order to reach that sphere, which is illustrated here. So it's about creating this digital twin to really amortize product net to online because we need sustainable innovation the world needs sustainable innovation.
And the last point as part of what we call this equity system, is the fact that we believe that this virtual world helped improve the real one and we can prove it. So here is an example. There was another study last year that demonstrated that when does the system produce one tone of CO2 to run our business Through our clients, we save 10,000 tons.
It's called the handprint and
footprint footprint when we produce an opportunity and we need to continue to work to reduce that, But the effect of what we deliver to clients is gigantic. And that's why last year, we were named the low world number one most sustainable company. And I think it fits very well with the purpose. And there are many other, topic on that, but I believe that this is, this is This is what makes people joined as a system and why they stay, and they invent things that no one else has invented. A lot of things.
The world of construction, I remember to have a question last year, and I gave provocative answer. When I said, we have decided to change this market that is probably slow market construction with very limited progress in the last 30 years. Very limited. And that's not truly acceptable. So we are going to be active there and we have great numbers, of course, with Gary for years, everything that Gary is doing.
We have also now the agency of, as a dig, doing amazing project but listen carefully to the very short video that, because I think it's a testimony, which is very profound.
Unlike what most people think, our technology and science are closely related In fact, what we do is celebrate the interplay and the intersection of technology, art, and science. What we require for that is an underlying infrastructure, a technological infrastructure that allows us to explore and artistic vision and provide the experience that ultimately our customers are looking for. The greatest challenge we have translating a design vision and to build reality. Wherever we operate around the world, there's a different construction context, a different level of maturity, for the construction industry in that particular location. So the tools that we use and the platforms that we use or the processes that we use are there to help ensure that that vision is achieved?
Sure. But I think it's very profound and it shows how we can improve the world, cities, infrastructures, life science using digital twin to really establish solutions that have never been constructed or designed before. That's what Dassault Systemes is about. And this is a good illustration of it. That's what I said.
We're going to change that sector. It's going to take time because they have to transform the way they do business. But we believe we are the catalyst on the enabler to make this happen. Jaiipur City is another example in incredible India where it's so messy sometime. They are using the infrastructure So innovative to, to under digital twin experience, to improve the city.
And, those decisions are significant because they are not decision by one company. It's a, it's a state decision. To use the platform to really improve basically the quality of the environment for people.
Let me
out has transformed my daily work. 1st, thanks to the 3DEXPERIENCE platform, we are able to listen in real time the to solve those traffic jams, fly over bridges. These enable to free vehicle lanes to create pedestrian areas and rethink or even create new green areas for people. Let's zoom on my latest project on Umbedkar Cross thanks to our 3DEXPERIENCE twin of our city, I can quickly assess the current traffic. It's clearly red.
I can simulate in back of a new FlyOver bridge and see the positive effects on the traffic. I can of course integrate my thinking process, all the underground infrastructures and geology. In few seconds, I can share my project with all the stakeholders and immediately leverage the power of my network, and I can start to involve civil engineers and simulation expert. Very simply, I can share all the contextual information required to design this new bridge right the first time. The bridge design is finished instantaneously and seamlessly, I can experience the great done by my engineers.
Agency in charge of green areas mentioned a new park was under close
to
for future park visitors. In a few interaction, results are immediately visible. Current park placement is definite not the best. Using the 3DEXPERIENCE platform, I can simply share an experience in creating my proposal and efficiently converged with my counterpart from Green Areas Agency. We are building a well-being.
It's
a very clear illustration that it goes far beyond 3 d. It's about big data analytics how the city, how people are living in the city, how they are moving in the city, our energy, waste is managed on getting this connecting those dots together. So if you have the possibility, try to influence Grand Paris because maybe in 20 years, they will decide to do something. That's a local message. On the platform is built for, by the way, they are not doing any simulation.
For the platform that is, is AML doing 2 things, being the system of operation for everything we develop because then things can be connected. Being a platform to trade things. We call it the marketplace. Can someone produce something for me? How fast at which cost?
Online one click away. That's what we are doing with the 3DEXPERIENCE platform. So it's not a technical thing. It's a new business model. And of course, we need to build not only solution, but partner network.
We're going to be the producers on the online platform. And that's what we have initiated. The news I hope is out. For the OC Airbus announcement this morning, so they were nice to publish this announcement together. So So, we are pleased to see Airbus confirming the adoption of the 3DEXPERIENCE form for our older airplane program.
It's a it's it's more than a 2 decision as Guillaume Faury is, coded in the press release is talking about the real group transformation. For Airbus because basically he wants to use the platform as the catalyst on a neighbor for a new way to develop produce on life cycle maintained airplanes. For its clients. So it's a big program. It's a Norris Step.
The 350 program was very successful program in creating a full digital twin, and it created the proof points that they could go further. So we are very pleased with that decision. Of course, it's not only our 60 ecosystem. It's a 1st phase. Don't try to extrapolate as compared to previous, gigantic that we signed 18 months ago with other players.
But it's a serious one on an important one. So we're very pleased with that. Safran continues to adopt the platform. This is for LaSalle, by the way, those things are very complex. Objects, extremely complex and they continue to adopt the platform for that.
Safran is a very diverse qualified group, they do landing gears and so on. And we are very, very well, adopted inside the group for many, many kind of disciplines. More importantly, I want to comment briefly the cloud dynamic. It's not going to be so visible on the numbers from a revenue standpoint yet because it's a subscription. So it takes time to build a snowball.
What, we measure is the number of users and also the data volume on our cloud. But here are a few, I think impressive examples of what our cloud solution is doing. So, picture this, you have an iPad or a PC, you take one link, you click And you have the power of software, of the biggest companies in the world are using online without installing anything on your computer. Echo, you will see a quick video in a few a few seconds. They are doing, customized shoes, using the cloud.
Magraf, they are doing this kind of impressive facade buildings that you see here in the picture. Everything on the cloud. This Skyway company, a new company creating new type of mobility for cities, as you can see here, they are designing and producing using the cloud. Well known from many of you where I suspect all the equipment now are designed, produced using the cloud system of Dassault Systemes. Takimoto, you see those packaging here.
Quite sophisticated, and there's a lot of science to do those packaging. It's not a minor job. They are also using our cloud solutions. And, Evolocity, that's an amazing company. They've started as a startup to build electrical autonomous vehicles.
In the Silicon Valley. They started with a team of 15 people. There are now several 100. Everything is done on the cloud. So the cloud is not for fun.
Those projects are here. And we are doing projects and managing complexity of projects which are similar to what at their own location. So the cloud approach is very essential to reach new type of clients increase the speed at which the services are available. And I think it's an important factor for the long term growth of Dassault System. Here is a quick
disruption in the footwear industry is represented in mass customization. With our project, 3 d printing, data driven design, I think we'll get it much closer to that. What is so interesting on this project called Quontieu is that it is a really a paradigm shift compared to what you know about food
shoes are made for the average person, but no one is truly average. So through customization, we can provide a truly unique experience for each consumer. Aren't you is a project that's sent from innovation labs of echo. It's stands for quantified you. So what that is, it's data driven customized footwear, which allows us to provide individual function in footwear for each person that purchased the pair of these shoes.
So quote is broken down to three steps. The first step is the real time analysis. That's done in store where we analyze both the structure of a foot by scanning the seat of each individual customer through wearable sensors, we can analyze how someone walks and gives a full picture of your unique walking pattern, your gates. So following this real time analysis, that biomechanical data needs to be converted into this printable functional form. We've developed a learning algorithm that converts the biomechanical data into the functional form to be 3 d printed later, 3 d printed in silicone within a store in under 2 hours.
The reason we've chosen silicone is that it has very unique It's both visco and elastic, which means that it's cushioning. With point you, we've provided a service that is simple, it's intuitive. As a consumer literally walks into the store, guess their feet scan walks for 30 seconds with wearable sensors, and within a couple of hours, they have a customized pair of shoes in their hands.
Musk customization. All this is done with our AI platform that can do the interpretation of the data and create a 3 d printed structure of the shoe, all on the plant. So Naval Energy, this is a subsidiary of, of, Naval Group. They are also creating those new, energy system see on, they are also using the platform. Why?
Because it's a, when you're a startup, you have to have the capacity to get the best possible tools, in an affordable way on for them using file is a way to is a way to do that. The acquisition of IQMS, this is, something that might have been a surprise to you. This is ERP for this is manufacturing ERP. The ERP market was not up to now the Dassault System target. Why are we, therefore, and there are big players.
You know them. Big players around the world. Why have we done this investment. For a simple reason, we think that the small midsized companies are underserved that the current solution are too expensive for them too complex. And we think we can fix that the same way we did fix the design world in the last 22 years.
With SOLIDWORKS with a brand that is almost at a $1,000,000,000 brand today. Making ERP on digital continuity between design and production affordable 4 small midsize companies from both simplicity, cost and speed of deployment. That's our goal. We did develop market analysis. It's about 5,000,000,000 market.
And we think that only 15% of this customers are equipped, but more than that, they are not very satisfied. So we are taking the challenge to take this company, create this integration and do on the business management of those companies, what we did for design with solidworks. That's the deal. So we're going to have fun doing that. And of course, it will come on cloud 2 at the proper time with the Experience Platform.
That's the why. Next week, we have the SOLIDWORKS World, in Dallas. It would be about 6,000 to 8000 users. And we're going to explain how we plan to serve them in this way. And I think we can simplify their life and make them more efficient.
That's what is going to be announced. A new category So basically, if you have understood the power of Catcher for the world of Large Industry and the power of SOLIDWORKS to make design available to the small companies. We are going to replicate that for the platform. On the ERP functionalities. IQMS will be rebounded as a part of the DELMIA which is our brand for production.
It would be called DELMIA Works on the platform that we serve those clients will be called a 3DEXPERPS Works, which is basically to make a clear statement that there's a category of solutions aimed at serving those clients in a simple way, affordable way with the proper speed. So it's consistent and clarity is, is going to be an element, of course, of importance for customers to make their decisions. With that, Pascal, it's your turn to, make some more precise comments about the numbers. You very much.
As usual, I'm always pleased to be here with you. I think we have good results went on. So it's always a pleasure. Let's zoom on the business highlights. The key point I would like to address here is the organic growth behind the 11% growth on the license side, 9% is coming organically.
And the vast majority of this organic growth has been driven by the 3DEXPERIENCE platform. And here you have few datas. I think highlighting the tipping points Point number 1, on a full year, the 3DEXPERIENCE platform represents 25% of the total software revenue. Compared to 21 last year. And the growth is 24% for the full year.
More important, if you look at on the license side, which is the incremental growth, you notice that on a full year the 3DEXPERIENCE platform represent 40% of the new license, growing at 31%. And for the last quarter, it represents half. Half of the new license are coming from this product line. So when we highlight at the Capital Market Day that the real economic cycle for us, it's much more of the adoption of our technology by our customers. This is approved because when the adoption is starting, the organic growth automatically improve and increase.
From a regional standpoint, the growth been driven by Asia this quarter. From with 19% growth, 16% for the full year. And it's true in every region of this world. China, Japan, South Korea, APSOS and India. And it's true on not only on the license side, but also on the recurrent part, which is a concern because as you may know, it's a region of the world where the subscriptions and the maintenance and support something we pay attention to be sure that we have the same rate than the others.
Europe is going well, 12% growth for the quarter, 8% for the full year. And here, the growth has been driven by the large projects related to 3DEXPERIENCE. It's particularly true in France, but not only it's also true in Germany and other countries in Europe. Americas, growing at 7% for the full year, 4% for this quarter. So the there is a mix performance for this quarter, we had a good traction from the indirect channels and also from Latin America, but North America has been penalized to a certain extent by a modest performance on the direct sales, mainly due to some large deals slipping to Q1 and Q2.
But for the full year, I mean, 7% is still a good number. Moving to the brands, to the product lines. Innovia is the star for this quarter with 33% growth, 84% growth for the license, a record for Innovia. So this is a proof that when the 3DEXPERIENCE platform is deploying and gaining traction, automatically the Innovia is also to embark into those deals, 14% for the full year. So those are really good numbers.
So it works back to double digit growth, 12% for this quarter, 10% for the full year, well aligned with what I told you last quarter when I was telling you that in Q4, we had the base comparisons and Q4 will be back on track. So I think this is important. And also, as you may know, SOLIDWORKS is the only indicator for us to understand what is going on in our sector because it's definitively the product line being sensitive to the economic conditions. So the fact that we are double digit growth is also a good sign about the investments continuing in our domain. Catia, 2% for this quarter, 4% for the full year, Keep in mind that last year, CATIA was growing at 10% for the Q4.
So we really have a base comparison. So it's relatively aligned with our expectations. The other software, good growth for the full year on a 15% 13% for this quarter. And the growth has been driven by DELMIA in the manufacturing space, specifically in Aerospace And Defense. The simulations domain at large thanks also to the acquisition we did a year ago.
And the good news is also coming from Exelid and Edviges. Why? Because we have now the proof that we can win significant deal with only selling the platform and the analytics. Not having to sell Casia or all the large offering tools. And for example, we signed big deals in the States related to aerospace And Defense using Exolidated NetPipes as a way to dashboard their entire business.
We also had a good traction on the Biovia license in Q4, which is a good sign also. You remember Biovia, since the acquisitions, the growth on the license was relatively modest. Now we see the investment we did paying off and this life science sector is really dynamic for us at large. Zooming to the industry, 8 of the 12 industries are growing are growing double digits. And the good point is all the core industries, namely Automotive And Transportation, Aerospace And Defense, Industrial Equipment are also growing at double digit So it's not only the diversifications, it's old industry at large.
In terms of mix, we had 32% of the total revenue coming from the diversification is relatively stable compared to last year. Despite the acquisition we did, which are usually enlarging this reinforcing this percentage, But this is a sign that the core industry is really dynamic for us. In term of acquisitions, let's make a quick zoom. Because not only in 'eighteen, we delivered the organic growth and we are playing with all the growth drivers, but we are preparing the future. Berner spoke briefly about it.
So with Centric PLM, you remember, we are reinforcing our PLM positions. In the industry of the consumer goods and the apparel and fashion industry at large. We did this acquisition in July last year with IQMS, Bernard spoke about it, so we are enlarging the addressable markets, and we closed the transaction in January, 3rd, to be precise. We did some very interesting acquisitions in the system design. This is key because as you may know, all the products are now connected.
And the point is not anymore to develop the electronics of the embedded software inside the products, but also to designs the way those products will interact between them. And this is what we call system of system. And it's a completely new generation of solutions we are developing and we did no magic last year. I spoke about it. And we did a small one.
Argosim, we closed this acquisition early this year, and I will come back to give more details. And last but not least, we are also differentiating our solutions in the simulation space specifically for the formulated industry is usually not the one where we are strong. I mean, it's still a unbranded market for us, but we are gaining a lot of tractions with this acquisition, cosmology, and we closed these acquisitions late December. Now let's zoom and I will give you some, some data. So on IQMS, I do not want to come back to the profile of the company, Bernard did it.
So keep in mind, 56,000,000 of revenue in 2017. We closed the transactions on January 3rd. So in the guidance for 2019, the revenue will be integrated. And to simplify your life, I am supposed to give you the number I put in the guidance. So I put 1,000,000 compared to $69,000,000 due to the exchange rate.
So clearly, keep in mind this this product line is growing at a little bit more than 10% per year. We will accelerate, but for the 1st year, you know, the time to put in place, we are stabilizing on the historical growth rate. This will have a dilutive impact on the operating margin around 30 basis points and there's an estimated positive impact on the EPS of about $0.02. The market opportunity is very large. Bernard highlighted you have more than 250,000 company to be equipped.
And the penetration rate is still below than 15%. So clearly, it's It's really a large market. It's close to $5,000,000,000. And, I think it's a it's an avenue for us to to fulfill this need. As with him, I spoke about it.
So you remember, this is on the picture, you have our system strategy. So with CATIA, we 10 years ago, we started to develop this Makeatronics approach. And recently 5 years ago, we started to develop what we call cyber physical system. It's really the way you connect against all the different equipments between them. An autonomous car, for example, this is definitively what you have to do otherwise, it will never work.
And this is introducing a new level of complexity in the way to design scenes. So no magic was really a way to do the modalities. And without wasting what we do, we have capable to validate the specifications. And why? Because when you do design, usually you have a gap between the requirements and the tests, you have to wait almost the end before to test if you are fitting the requirements.
With this new technology, it's a way to specify semantically and we know how to run simulations and test it very early in the process and discover some inconsistency, for example, for under specification or sometimes functional scope, which is missing. Small team, 12 employees based in Grenob in France, but he is very advanced technology. 1,000,000 of revenue, euro for 2018, growing at 10%. CosLogic, okay, it's a new acquisitions. We closed late December.
So this company is based in Germany. What they do They have developed a chemical process simulations, capability, and especially in the fluid phase. So for all the industry mentioned on the chart, the chemical industry, the consumer goods, the pharmaceutical industry, the petrol chemistry. All those guys when they use our solutions called perfect products, our design to cure, they are doing a lot of simulations. And this capability is unique because they have a very advanced computation methods, and this is creating a huge differentiations at this level.
So small company against 2,000,000 of revenue, 16 employees, state of the art in terms of technology. So we continue to infuse these talents inside the organizations. Moving to the financial highlights. I'll maybe quick on this because you already have the numbers. So I will really draw the attention on the organic growth.
So the organic growth for the revenue for this year 7% 10% for the Q4. So relatively in line with what we were expecting. On the software side, 8% for the Q4, 7% for the full year. So clearly, you'll see this acceleration is coming. If I zoom, if I split the software between license and subscriptions, same things on the license side, the revenue up 11% organically, speaking in Q4 and 9% for the full year and on a recurrent part, 6% for Q4 and for year 2018.
On the services side, we had, you notice it in the press release we had a good recovery in Q4. So you remember in Q1, Q2, we were relatively late in our services projects and we catch up in Q4. So we catch up on two fronts. We still have a very good growth on all the 3DEXPERIENCE Services related activities, which is a way to support all the large deployments we are doing. But also we had some good recovery with Quintiq.
You remember in Q3, I explained to you that Quintiq were a little bit late. They had a good growth plus 24% of the services for Q4. So it's a catch up. And you see, automatically, the impact on the gross margin because we are 12.9 percent for the full year, a little bit better compared to last year. And significantly better in Q4 at 24.7%.
So clearly, this situation is much better compared to what it has been on the first half of the year. Operating margin, it's relatively easy. The organic performance is almost offsetting the dilution coming from the acquisitions. So if you have 0.7 percent organic improvements, And you have 0.8% coming from the dilution of the acquisitions. And the currency is having a 0.1.
On the EPS, so good news, 24% for the quarter, 16% for the full year, 1,000,000 compared to 1,000,000, which was the guidance we gave we gave. Sorry. So we are slightly better, if not a lot of better. And the reason it's coming on one hand from the activities, which is a little bit better compared to what we were expecting, but also you have some tax benefits because I put the tax rate for the full year of 28.2 percent. So it's 5 points less compared to last year.
And this is having almost a $0.14 impact for the full year. The organic improvements is contributing to $0.41. Cash flow. The cash flow is growing accordingly to the EPS, almost 21%. 800 1,000,000.
And you notice that the growth is coming from the good activities we have And we are closing with a net financial position of 1,800,000,000. No, not too much to say on the operating cash flow. The strong bidding activities, we had a strong bidding activities at the end of the year. And it's well aligned with the balance up of 15% excluding the currency effects for the trade accountable and the receivable. On the unknown revenue, the balance up 10% relatively consistent with the growth of the recurrent part of 6%.
And the decrease in the income tax is payables. It's mainly due to the fact that we pay some 17 tax in Q2 this year, and we had a lower tax rate in the U. S. Coming to the financial objectives. A few things.
So you remember, we are now completely implementing the IFRS 15s and we'll report in IFRS 15 for the full year, and I will give my guidance for the full year in IFRS. So just a quick, remind for you, this is impacting only the retail recognitions of the subscription revenue. Previously, we were recognized over the time and now we have to split between the rental fee and the license portion and the subscription portion. So we have to separate the 2. There is no real impact on the full year, as you can see, because applying this method to 'eighteen's, it's only 8,000,000 difference.
So very consistent with what I told you last year, 11,000,000. But the real in net impact is in Q1. And the reason is because this is really the quarter where we have a lot of renewal contracts. So this is the reason why you have a plus 50,000,000, additional revenue being recognized in Q1. So it's the one impact is implementing the IFS 16.
And here, it's easy to understand. Previously, first, it concern only, it's only related to the lease for the facilities for us. That's it. Previously, it was off the balance sheet. And the only thing we have to do is to integrate the lease costs as an operating expense.
With the new method, what we have to do now is two things to put on the to put the height of use as an asset. On the balance sheet and to push the future lease payment as a liability. So and you have the impact being described here. And second point, the lease costs, we have to split between the operating expense and the financial aspects. So you're going to see, plus 11,000,000 operating margin.
And you will see a minus 13,000,000 financial results. So the net is almost neutral. Okay. So coming back to the guidance, what are we expecting for this year? We are expecting a 10% to 12% growth in license revenue excluding the currency effects.
A recurring revenue growth up to 9% to 10% services with revenue growth 14%. An increase of the organic operating margin by 1.1 and excluding the currency effects and 80% basis point coming from the really organic improvement, and I will give you more detail afterwards. The tax rate at around 29%. And as an exchange rate, we took those assumptions. So 1.16 exchange rates with the U.
S. Dollar for Q1. And we are pretty well advanced in the quarter, so it's easy to do. And for the rest of the year, we took an assumption of 1.20. And we have stabilized 130 for the year.
For the rest of the year. So for the full year, you can see 2019 almost in the same spirit, in the same dynamic than 2018. 9% to 10% growth for the total revenue, 10 11 if you exclude the currency effect. And if you split between software and license, you would see 10% to 11% in software, I zoom on the license 10% to 12%. The most important thing I think for you is the recurrent part.
Because you remember when we signed the Boeing contract, we told you that in 2019, you're going to see the full effect And here is one of the effects. The organic growth of the recurrent part is improving by 1 to 2 points. Compared to 2018 and 2 to 3 point compared to 2017. And this is a combination of the Boeing contracts playing the full I mean, the full for the year. And also the good subscriptions we have, thanks to the simulations, So the growth for the operating margin, the operating margin will be at 32% to 32.5%.
It's an improvement between 2.2to0.6. And again, the acquisition are still treating some dilutions point 7, and we will offset by the organic improvement of 0.8. And you have the IFRS 16, the one I just explained to you, the fact that you have plus 11,000,000 impacts on the operating margin and this is creating a 0.3 additional benefits. On the EPS, 3.35, sorry, to 3.40 range, with the tax rate at 29, which is almost a growth of between 7% to 9% 9% to 11% if you exclude the currency effects. For the Q1, good dynamic, so which is a proof that we are not drying the pipeline.
In Q4 to do the number. So we still have a good dynamic. And especially if you zoom on the license part, plus 15% to 18%. So it's really the sign that the business dynamic is solid. And this is translated in a total growth of 9% to 12% and an EPS to $0.78 to $0.82.
I think those 19 objectives are well aligned with what we told you at the Capital Market Day in June last year. We are pretty confident we will be able to achieve the our 5 years plan. We communicate to you in year 2014. So 5 years back with 3 50. The guidance is at 3 40, but we're still confident that things can improve within a year and we still have some acquisitions we can do.
So the $350,000,000 is really achievable. And it's a good start for the next 5 years plan, the one targeting in year 2023 for one single reason, if you look at 2018 2019, all the growth drivers are in place, the industry part, the 3DEXPERIENCE plant, the good dynamics on the mainstream market, And those are the ones we're going to fulfill the growth to achieve our long term goals. That's it for today, Bernard and I will be very pleased to take your questions. Thank you.
We'll start first with question from the room and then we'll go to the call.
Thank you. Good morning, Trego Van Nuys from Brandi. I would like to come back on the guidance of operating margin organically 0.8 percentage point, but it looks to be that there is some seasonality between H1, maybe in H2 when we look at the total operating margin growth between Q1 and the full year, So could you just come back on the maybe the productivity gains that you could generate on the sales force? Or maybe, some plants which could be delayed on the sales
force
Okay. So the 0.8 is significant, because we did 0.7 in 2018. So it's a sign that we are convinced that we are capable to improve the productivity on the sales side, but not only, I mean, this productivity gains is coming from all the different functions, and it's mainly due to the size as simple as that. Now coming back specifically to your questions, You remember, on the sales side, we have improved by 2 points of productivity for the last 4 years. And I'm still expecting we are in the middle.
So I still believe that we still have 2 points to gains over the next 5 years. And the main lever we have is coming from the size of the transactions. The more we sign 3DEXPERIENCE platform deals, the bigger other transactions, and this has a direct impact on the productivity for the sales.
Next question please from
the room.
If no question from the room, operator,
John.
First question comes from the line of Michael Breese. Please ask your question. The line is open.
Good morning. A couple from me. PASCAL, in terms of the acquisition contribution this year, you've highlighted the impact on recurring Can you say, how much software and total sales will benefit? And then Bernard, in terms of the airbus news today, Could you give some more color? I mean, obviously, Boeing was something which you called out as impacting your financials going forward.
Do Airbus have the same magnitude? There doesn't seem to be any, sort of numerical attachments that you've made to it. And then just finally for Cutia, it had a slow finish to 2018. What is the outlook for 2019 there? And what proportion of the installed base is now on Trudy Experience or V6 with Cutia?
Okay. So I'm going to take the first one related to the acquisitions. You almost have all the numbers in the presentations. Against to simplify your life, you remember no magic, 12,000,000 growing at 10%. So it's easy for you to compute the number.
Argosim Cosmologic, 1,000,000 for Argosim, 2,000,000 for Cosmologic, also growing at slightly better than 10% IQMS, I gave the numbers. So 1,000,000 for the 2019. And the remaining part is Centric Software. So Centric, when we did the acquisitions, they were doing a 1,000,000 dollars. They are growing at 35%.
And the reason why it's a little bit less compared to you know, what they did previously, it's because they are transitioning their license model to a subscription base. So this has an impact on the top line, but clearly, it's a good dynamic. So with this, you will be able to compute the number and put the right things into the guidance.
That's a lot of detail, maybe too much. At the end, we want to deliver what we said for the full year and that's it, and make the purpose reality. Airbus, please don't do, computation as compared to previous contracts. Because we are in a different phase of development of the cooperation with Airbus. To be, to be explicit.
We did a great program with them, as you know, with the 350 making the digital reference for the Airbus 350 extremely successful for them. And as Guillaume Faury mentioned in the press release in a very precise way, he sees that decision of the 3DEXPERIENCE platform as the catalyst on Enabler for a deep transformation of the Airbus group. So the decision is group wide, not only CIB. By the way, it was already announced in the corporation of military program that the decision for the Swedish Finance platform was taken between France and Germany. On between the Salvation on Airbus.
So it's a group wide. However, the reason why it's not a 10 years or more like the contract you are referring to is because we are in a phase where we are introducing the next generation after V5, basically, which is called 3DEXPERIENCE. And we are implementing it as a delta improvement of existing programs, NEO programs, production and so on. So this 3 to 5 years contract, there to reorganize on transform so that the evolution of it is to make sure all future programs are done that way. That's it.
It's a very therefore, a very important decision. But the scale of the contract is more of a tens of multiple tens of millions, not not a scale of 1,000,000,000 yet. It will come.
The last question is related to CATIA. So for Jan's 2019, we expect Catcher to be between 5% to 6% growth for the full year. And related to the 3 d experience penetrations inside the CATIA installed base, we are exceeding the 20%.
Okay, thank you. I mean, was Airbus a contributor to the strength in Western Europe in Q4 or is it more of a 2019 event?
I can answer to this one, if you want, Bernard? There is a piece in Q4. And it's inside a I mean, it's reflected in the Innovia number, but you will not explain the the record performance of Innovia, just only due to airbrush and it's ability. I mean, we have plenty of different contracts, but there is a piece of Airbus being impacted, I mean, reflected into this number. So coming back to your questions, you could expect to have contribution in 2019 and 'twenty.
Next question please.
Thank you. Next question comes from the line of Stacy Caller. Please ask your question. The line is open.
Hi, thank you. A few questions from me as well. Can you talk more about the 3DEXPERIENCE pipeline? I know you spoke about some things maybe bumping into Q1. In terms of large deals, so where are the industries that are really, you're seeing the highest demand?
Maybe a comment on Toyota, if you can. And then kind of that bigger picture view, what penetration have you had of the installed base as kind of following up on Michael's question? Or even kind of penetration of your total opportunity, how do you think of it that way? Second question would be just hopefully a shorter one. Is the services growth a bounce off of the 3 d experience?
Is that a short term effect or is that kind of double digit growth that could last for several more years?
The, the, 3DEXPERIENCE platform is now for new sectors, new customers, it's a systematic decision for 3DEXPERIENCE platform. So when we expand, diversified, reach new clients, it's to 3 d extend that one. Of course, there is a huge installed base, which is highly diversified. You have an installed base where they are using the 3 dictions platform to integrate our legacy. We call it PowerBuy, which is really to connect multiple CAD to one platform.
And then also same flex innovation. That dynamic is very well appreciated by clients to prepare the simplification of the environment. So basically, the 3rd lever so first lever is new markets, new clients, second lever, powered by how you prepare the simplification of your environment using the 3DEXPERIENCE platform. And the third is to use the platform to do things we have never done before, big data analytics. With, or a new type of approach for digitalization of production.
So you see in the dynamic of new license of the 3DEXPERIENCE platform, all those levers are playing. There is one that I hope we are going to be able to make it much more visible in the experience. But for and of course, cloud, I mentioned that clearly in the presentation, is the adoption of 3DEXPERIENCE platform for the small midsized companies using the cloud. And there is a lot of new product portfolio coming in 2019, to connect SOLIDWORKS with the excellence platform to provide web browser based design tools. So you take a mobile phone, add 0 download and you can design online.
Those are coming this year. In fact, it's going to be the main program for next week at SOLIDWORKS World. So The question should not be is the 3DEXPERIENCE platform replacing V5. It is, but the 3DEXPERIENCE is changing the game. For clients to transform the way they utilize the enterprise.
And that's the focus we have. To make those companies platform based companies, platform based companies. So it means, like, for Amazon, if you look at Amazon, a platform based, everything is one platform, all services, one platform, but when you say with clients, You asked the question about Toyota. It's going in the right direction. We're having enjoying the partnership with them.
I cannot quantify anything, but They love us and we love them. Let's put it this way, on the plan now in the good direction we also mentioned a lot of wins of competitors, clients who are now moving to 3DEXPERIENCE. A long list, if you take the quarters, the past quarters announcement in the last, 8 quarters, it's hundreds of companies migrating from our competitors landscape. To Dassault System for one reason, the platform. So it's the future And it's, the question is not now, is it an add on?
Everything we sell, everything we do, everything we do going forward is one platform. Cloud on premise for the future.
And to answer to your questions related to the penetrations of the installed base, I gave the number of 25 percent of the total software revenue coming from a 3DEXPERIENCE platform. It's a good indicator and to give you some perspective when we announced last year, the next 5 years plan, the one being reaching the €6 in 2023. As an underlying assumptions, we have 66% of the total installed base being equipped with 3DEXPERIENCE platform. And in terms of dynamics, 40% of the license are coming in 2018 from solutions platform. So same mechanisms, you have to assume that more than 50% for the next few
And comment on services?
Yes. The service, Pascal, I mentioned it, Stacy, we we are learning how to improve, the speed at which we can deploy our solutions with customers because of the maturity, the completeness of what we call industry solution. And I think that has a direct effect. And we think that it will continue to play a good role there. However, I must mention that our priority is to continue to develop relationship with system indicators.
Because we want them involve some of the implementation are so large. We need them a good example are visible today. What we are doing for the nuclear full ecosystem integration with Camgemini, or what we're doing at Bouygues with Accenture. And I could take many of our examples around the globe where we are promoting the idea, the cooperation with those partners. And, I think this is important to speed up the capacity to scale.
Thank you. Next question comes from the line of Adam Wood. Please ask your question.
Hi, good morning. Good morning, Pascal. Thanks for taking the questions. I've got a few if I could please. Just first of all, on the guidance, a quick back of the envelope, Jeff, that you're guiding to about 4 points of revenue contribution from acquisitions in 2019, which if I am if I take from the revenue growth probably gets to around a 6% to 7% organic growth in revenues in total.
If I remember correctly, you were suggesting that the large deals might be able to add two points of growth to 2019. And
that just still feels a little
bit slower than what we had in 2018, if we adjust for that. Is there an element of caution in there that you expect be a little bit more cautious in terms of how quickly those deals ramp up? Or is there a little bit of caution on the macro or am I just am I wrong on the M and A contribution? If you just help us on the guidance first of all, that would be great. Maybe secondly, on Airbus, given you've now got Boeing and Airbus here, could you help us understand what the benefit could be on the supply chain side of things and maybe help us what the big delta is between Airbus and Boeing?
Is it maybe adoption on the manufacturing side that will be the change? And then finally, you mentioned selling the platform just for dashboarding and analytics. So really kind of big data dashboard. Could you talk a little bit about who the competitors are in that space? Is it the usual SAP oracle IBM competitors, more modern Silicon Valley players?
And then what's the big differentiation for you selling there against those players?
Can I start from the last one? Yes, please. I think, analytics for everything we do as we do the digital experience twin is our job. And I think what a player like Palantir is doing with our clients is temporary and will be legacy soon. We don't plan to leave this market open to anyone else, and we plan to use the platform effect to provide all the analytics tools because they are already there.
The reason why some of our companies have been using those legacy environment, those third party solution is because things were not integrated, but when things are integrated, then the platform is the place where you do all the, what do you call, information intelligence. So we are very focused to make sure that this provides great value to clients. I have a good example with what we do with the association with with Gulfstream or with, Safran, for example, concrete example, you take the flying data and we look at the health of engines, or we look at buying profile of ports and we optimize the entire buying process for supply imports. There are many examples which are in operation today. We don't talk too much about it because we have so many topics to cover.
But Adam, we are very serious about making sure that this is part of the services of the platform. On the previous question related to Airbus on, I don't want to mention the other name because I want to make airbus the visible partner today for the announcement on it's a geopoly almost this world. I will say simply each of them have their own plan, incredible renaissance of the industry infrastructure, incredible new possibilities that they are both, but you will understand that we don't want to talk too much. We have a track record over 35 years to have done very specific things with very specific clients a lot of secret projects, which have been very successful, which are making them differentiated in their offer. So, I don't want to even your question, Adam, and I understood it, believe me, about the touch point on production, production rate and now they will deliver the backlog.
We are there everywhere. Serving the objectives. That's the best I can say. On this point. I forgot one question about the pipeline with Tracy.
The pipeline is good. Next question.
Adams, your computation on the guidance for the license is right. So this is a good number. And now having said that, we are almost in the same position that we have been in 2018. So good start of the year. But relatively back loaded also, especially for the last transactions.
So this is the reason why I want to follow the same path, Thibault did, which is it's much better to come back to you and express that we are beating the expedition rather than to explain we are missing. So I think some cautiousness is
So far, you're doing well. Transition was good.
So, so this is a, this is a reason. And, and again, if you step back a little bit, this year, it's more secure because we have this organic growth on the recurrent part. So to a certain extent, we do not have a macro signs specifically impacting us right now, but just to be sure that we will not be impacted anyway. This is the reason why we took this guidance.
Perfect. Thank you very much.
Question comes from the line of Charley Brennan.
Okay. We go to next question please.
Okay. Next question comes from the line of Dipshikoka Agarwal. Please ask your question. Your line is open.
Hi. This is Bixi Agarwal from Goldman Sachs. So a few questions from my end. To what extent is PLM now going more mainstream and now not viewed as discretionary anymore? And does is decoupled from macro.
And is and for the our corporates now accelerating their standardization around single end to end integrated platforms like yours? And that's how big is the land grab opportunity over the next few years? And further on the airbus, even how big a validator is this deal in terms of the that's all replacing other incumbent PLM players. So that's opening additional opportunities for you.
Maybe on the mainstream question.
The, if you look at what we did in
the last 20 years with the design world of mainstream namely so it works. I think we have created a new standard It was a high value for many of those professionals. You remember, 20 years ago, those guys were doing drawing systems. So we have created an industry work standard, which is a real value for many of those companies. We want to expand by integrating the business aspect on the collaborative aspect needed by those companies in the mainstream market.
It's a lot of companies. You remember, over 27 1000 new enterprise clients, some are small, some are big in just 1 year. We think that's a very important foot print for the future. So the attention we have now is to add to design simulation manufacturing on business applications, IQMS for ERP Manufacturing companies, in the mainstream. So this segment, we believe it's important because it's not well served.
And there is a lot of value to bring. The second, those players are important in the supply chain. On our large customer value our action with those players because it becomes a consistent digital thread for collaboration. And the 3rd is there are sectors like construction like life science equipment, personalized equipments, where a lot of innovation is coming from those small sized companies, not from the big one. On the cloud, on the mainstream solution, Therefore, for all those reasons, it's an exciting market that we do want to serve and serve well.
There's a lot of innovation going on on every aspect in energy systems, even mobility now on others, never seen before, by the way. So we want to be there. So that's the dynamic that we have and why we did the move. I think, they are not risky moves. We need to do it well.
Like what we did with the SOLIDWORKS experience, quality, speed on affordable for those companies. So it's a good play. From that standpoint. Airbus,
the questions was audited, which system are we replacing? I guess, but we are replacing the 1, you know, being developed by our Boston friends So definitively, this will be standardized on 3DEXPERIENCE platform and Innovial CATIA, all the products suite from LESSO system. That okay for you?
Yes, it was basically how do you see it going forward? I mean, does it open like additional opportunities going forward for you like the Airbus deal win? Like in terms of the competitive environment, how would you see that?
The dynamic for We are a game changer player. We are not when customers select us and replace their legacy is because we are changing their game. We have done in aerospace, we have done in automative, We have won almost all electrical automobile car companies in the world, all startups. It's not all, but one, all of them. All those startups are not big, but we are there everywhere.
We just reduce down the platform. On the Silicon Valley we are everywhere. So we are game changer. We want to be game changer in industry, in energy because we I don't care about replacing legacy. I care about doing sustainable innovation for all the industry we serve.
And this is what is happening. And you cannot have a purpose that is a paper thing are not act accordingly. We act accordingly, and that's what makes us different. For most of the players, if not all of them. In Life Science, same thing is happening.
So that's, makes our job fat every day. And it's important. To have it, relevant, useful on creating sustainable innovation that has not been done before. We are not going through industry digitization. Forget this idea.
It's a renaissance of the industry. We don't do it in Europe. China will do it because they are there already. They are building railways energy system with full digital twin already. So this is not a minor thing of just selling software.
It's transforming the way to produce service and products for citizens and people. It's not less than that. This is Tassault System, and this is why having a family control owner is essential. We're not subject to take over, and we have a plan. And this is what we are executing.
And I mentioned that last year, you see new leaders in Dassault System coming, Pascal Dalo's new generation, Florence versus Land new generation, we are building up the team for the next 2030 years. That's a definition of our company. And it needs to be understood because this is what is inside the numbers, the long term view of what we do. And I think it's differentiating ourselves. And this is why big companies are trusting us.
Their company is now coming to us and saying, we don't do bench mark, we are going to select you. It's hard to put it in place because we have to transform them. But they tell us we trust you. And look at carefully what Guillaume Faury said in his press release. Don't look at the number.
There is a declaration of trust. My future company, Albras Group, is going to be transformed, Sang's to the platform. That's the game plan. It's more than just pushing pieces of software.
We'll take one last question from
We have one question left. It comes from the line of Mr. John King. Please ask your question.
Hey, good morning. Thanks for taking the questions. 2 quick ones, Pascal. I think I you could follow-up on Adam's point around the guidance for the full year, haven't done the numbers, but I'm guessing it would encompass are not particularly strong growth in services, which somewhat surprises me given the ramp that you're obviously doing with Boeing. So is that further weakness potentially on the other side of the services on the 3 d X Sight side or perhaps I've got the numbers wrong.
And then another clarification think you call that China as being strong in Q4, but obviously Catia was relatively weak. It typically I think you've said in the past that a lot of the Chinese land comes through the Catia line. So perhaps just an explanation of perhaps what they're buying in Q4. Thank you.
On the services side, I gave the number. We for the guidance, it's 14% for the full year. So it's taking into account a slight recovery for 3 d X Sight. So I think it's going better not much better, but better. This market is still tough.
The reason is because you remember, we are transitioning the services business into a software business. And I think the core value of what we do is not anymore to have a bunch of people working like an agency. Is to have more and more all the tools and the content being ready to be repurposed on a web, on a mobile, on a configuration engine, in a shop. So this is what's really exciting about. And we did a lot of R and D investment for the few years.
Now we have the product on the market. We see the traction on the software, and we progressively are rebalancing the services activity into the software. So This is what we do. China, I think, no, the perspective for China is still good. I mean, we, I did not mention, but we signed a lot of large deal across the world, but China was definitively a dynamic region of the world, including for the large deal, and we will continue.
With a great opportunity to improve compliance sales. Thank you very much. I think it's the last question? Or
Yes. There is a last question from the room from Very nice. Eric Martin, very last question. Thank you for taking my question. Pascal, you mentioned at the last Capital Market Day, 50 basis point margin increase, organic on an organic basis.
You did better in 2018. You still should for better in 2019. How do you explain this upside compared to what you saw a few months ago?
So for the Capital Market Day, you know, I have to give a perspective for the next 5 years. So I did an average, but I think the discipline, which consists from the acquisition with an organic improvement. I think it's a good one. And you can count on me to continue to do it this way.
With that, thank you very much for participating to this event. Of course, we put a lot of comments on the strategy because it the full year review. The next quarters will be much shorter on the numbers, but I think keep in mind investors who are investing in Dassault System, they need to look at the result that the purpose of the company, also not only the numbers. Thank you very much, and have a good day.
Thank you. That does conclude our conference for today.