Company we have Derna Chalesh, our Vice Chairman, Chief Executive Officer and Pascal Delos, Executive Vice President, Chief Financial Officer and Chief Strategy Officer. I would like to welcome you to Dassault Systemes Third Quarter 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'll also hold a conference call.
Dassault System Financial Results are prepared in accordance with IFRS. During 2018, the 1st year of implementation of IFRS 15, we're providing IFRS financial information on the both on an IFRS 15 and IAS 18 basis. All figures and comparison during the presentation are under IAS18 and are on a non IFRS basis, with revenue growth figure in constant currencies unless otherwise noted. We have provided supplemental IFRS 15 and IAS 18 non IFRS financial information and IFRS non IFRS reconciliation schedules in our earnings press release. It should arrive at an end with this double reporting in first quarter 2019.
Some of the comments on this call will contain forward looking statements that could differ materially from actual results. Please refer to today's press release to the risk factor section of our 2017 Document Affairs. Let me now introduce Bernard
Good morning, everyone. Q3 is in line with what we said. Good quarter. Double digit on year to date. Consistent growth quarter after quarter, 9% up.
Total revenue year to date for the 1st 9 months. License is also up 9% excluding exchange rate. Both on, of course, on the softer revenue. And the 3DEXPERIENCE revenue is up 19% We continue to have good success in high growth countries. As you can notice here, we've up 18% on double digit growth in Transportation Mobility And Energy Sector.
Retail, CGR retail consumer goods, consumer packaged goods, Marine Offshore and even in natural resources. So basically, we are implementing our strategy that is based on 3 directions, social industry experience industry is the value creation, social the reality of things and experiences the game changer for the 3DEXPERIENCE platform. And as you will see in some of showcases here, the priority that we have put this quarter, I will say for the second half of this year is footprint. So, we reconfirm, as you notice in our press release this morning, the guidance for 2018. And Pascal will tell give you more insight about it.
So about the strategy, we focus on twosync the platform as an operating system on the platform as a marketplace to do value network to basically move from traditional supply chain to value network. The what is noticeable this year is the number of new players in existing traditional industries. We mentioned it last year when we did the full 2017 review, but it's clear that in each of the industries we serve, the number of new commerce are significant, even in extremely heavycapital intensive like automotive, transportation and mobility, we continue to see newcomers. And as we referred to last quarter, those newcomers, they do use cloud directly. So we have car product development going on the cloud, direct without using traditional approach, 0 customization.
We just configured the software. It's a running, which provides a fast ramp up for them. And also, it's a flexibility from a business model because it's subscription based So, so you can take advantage of it. And we see it in aerospace, we see it in automotive transportation, even in the energy sector, we see it in most of them. So that's why I will show you a few things related to that, even in Life Science with a new personal equipment for the medical sector.
There is a collection of what we call 3DEXPERIENCE Lab programs going on that you can see here, and you see the diversity coming from, what we call, legal, legal car for our last mile delivery. Those are very modular car for cities, which are used really to do different type of delivery, what we call last mile. On these startup companies are doing vehicle now, on creating new categories of products that were never done before. You may have noticed also in China what it's called MicroCar, which are extremely small vehicles. And I think they sold 1,500,000 last year.
So there is really course, all the articles on the news flow goes on autonomous vehicle electrification and so on. What I observe for every industry is and why we are putting a lot of attention on the footprint is newcomers redefining product portfolio. So, I've taken the example of X YT here, also a multi sensorial robots. There's a lot of things going on with, with a mid sized small sized companies on the robotization aspect of it, which here is LeCA, digital orthopedics, energy, geomodex for printing the digital twin on making the digital twin experience before the partition will do to surgery. On UCC Bureau serenity, which is really something related to AI based variable to your bodies surveillance basically for people who are having difficulties, a heart disease or something like this.
So those are companies using our solution is and also project for solar airplane or elements for training of the partition in the medical sector. It's very noticeable in the last 24 months about the number of this new reach that we can have based on the fact that the solution is available on the cloud. And by the way, it's not for most of them, it's not with solid works, it's directly with the CATIA Solutions on all associated roles as we speak about them. This is a quick video that shows you an English that was presented at the founder forum in Boston 2 weeks ago. So this in these videos, all projects are here.
They're all over here. It's not purely a good project. They are going on and they are using the industry solutions. They are not using just a collection of small functionalities on the desktop really cloud based open innovation platform. So the question for the priority for us is taking that footprint because they will influence the big players In fact, we continue to do that even with the MIT fab lab and makers lab.
Worldwide, you see all the dots here. This is the coverage. It will go to 1000 centers where we want to put the 3DEXPERIENCE in operation. This is Neil Grenfell, very well known. I was with him 2 weeks ago, on Dassault Systemes is building out the infrastructure for those companies.
It is changing the world of manufacturing. And this is why in the press release, we said we don't believe that the 21st century industry will be digitalization of the past century. I think there is a layer of renaissance going on, and it's a big wave. On it's much more than digitalization. And those are practical examples.
Why, on proof points that this is happening Now by the way, all the example that you saw for open innovation are almost touching the 12 industries on 70 segments we target. So they are not only in one sector that is they touch everything. We are going to cover, today, mostly consumer goods retail energy process utility and transportation, while is a lot happening in the other industries. And clearly, the priority for us in the transportation mobility is a cyber system. Cyber has been used for defense, but cyber is, in reality, defined as governance.
How do you go burn automated system? That's the definition of cyber. So we are building with the acquisition of No Magic with the system approach of our 3DEXPERIENCE platform, a cyber infrastructures to do cyber systems, to do mechatronics, which are connected with smart things which really can be orchestrated altogether. The nomadic acquisition has been a significant move for that. They are used, of course, by the many of the US defense player for system modeling, enterprise modeling, on mission modeling.
And this is part of the cyber system, what we call CATIA cyber system approach. It's being used for almost all sectors. Anything that needs to be connected tested, unvalidated, not even produced. So that's a key focus here. There's, of course, electrification with battery technology You have noticed that in Biovia, we have materials science.
So it's a very core thing for chemistry, and it's a core thing for the future of modular battery and including power management, of course, the simulation. Autonomous vehicle or everything that happened with cyber system, cannot be tested physically 100% and will not in the future. So there are massive needs to do virtual simulation because it's impossible to test physically all cases. And that's why this is really an intensive focus. We had many wins, many unfortunately, we cannot speak about them yet.
To come. And I will not mention any names, but there are prestigious name who are addressing the problem of how do I test and validate those extremely complex systems. This is a quick, quick video that shows you
the trend change not only the way we drive, but the way we live. The future is all about cars that can connect to their drivers. To other cars on the road, and a city infrastructure that surrounds them.
An autonomous car is a car which takes over all the driving tasks. There are as many situations where you don't feel any joy of driving, standing in a in in in a traffic jam, finding a parking base, all this, our tasks, which can be taken over by the car.
As you look into the future of a fully autonomous world, the idea of driving become much more about what I want to do if I'm with the family and I'm driving on a trip and I want to spend time with the family. I have the opportunity to engage with him more.
Accidents caused by driver error. The autonomous car will make our road safer. Computerized driving will improve efficiency, helping to reduce traffic congestion making the city of the future a cleaner place to live.
Traffic, safety, pollution will be the primary issue that we need to solve It will be the main driver for innovation in the automotive sector.
We are connecting the dots. This is not a pre announcement, while maybe of those people in the video are good friends. And this is game changer because I think it's a big different attitude from the one of doing a software update between V5 and V6. It's really about taking a holistic approach to those problems. The same thing is happening in energy process on utilities.
Pascal will present a few significant wind there. Whether it's a capital facilities lifecycle management, you'll remember the announcement of the full nuclear value chain in France that has decided to unify the 3 year experience platform that was announced at the end of Q2. As well as in new material science where I believe it's going to also change the way the industry is working. The third point, so footprint innovation and maker's taking in all industries, cyber system to do modeling simulation on testing of things, which cannot be done. In the real world.
So we are basically here, looking at another expansion of it, which is the problem of certification. Now, this video they are going to see, don't take it lightly. Certification will become mandatory for all automated systems. It was only applied to sensitive energy sector up to now or to aerospace Sector you don't certify satellites. It just blew up if it does not work, but you have to certify airplanes.
And you have to certify in the future all autonomous vehicles will have to be certified, which means not to be tested, but to be certified. And there is a big gap between the 2. And to do certification, unit digital continuity between the 1 with designing, the one who is producing, and the one who is going to prove that it works. Not only that, in case of problems, in operation. You have to define who is accountable for what.
And as you know, in all industries, this is changing the rules. So the is the video that illustrates for an existing sector. What will happen in all sectors?
This transformation is important for Bureau Veritas and our customer to improve our processes, productivity and efficiency to better control project risks and for Bureau Veritas, to differentiate ourselves on the market. We have implemented the NC Digital solution, which connects the nuclear equipment manufacturer and Bureau Veritas. From Latome's challenges to demonstrate that after manufacturing, we have met all the requirements related to nuclear pressure equipment. As part of the certification, we tested the NC Digital platform to gradually assess the compliancy of our components. Ultimately going from document to data with this solution, we expect a continuous process that develops cooperation between stakeholders around the certification of our opponent.
With this platform, we bring a new service to the nuclear field. Beyond the digital tool, it is a collaborative platform, which allows everyone to work in real time and share information. The value of this solution lies in the shared advantage for Bureau Veritas and its customers. In terms of productivity, cost, and project deadline management and continuity of service since we can ensure the traceability for 5 to 10 years.
Once again, this was not don't look at this only for nuclear certification. It will have to be applied for all industries, which provided automated cyber system. And that's why this learning curve to really show digital continuity and predictive test coverage simulation and doing test in the virtual world that will never be done in the physical world. Otherwise, you will never ship the product what needs to be done differently. So this is what I call a platform phenomenon to have the continuity for our service in operation.
And this platform phenomenon is also necessary in their life science and chemistry. Here is illustration.
Secretary play a critical role in the research development, quality, and manufacturing of pharmaceuticals, yet they are often considered a bottleneck. One lab supports transformation of the pharmaceutical industry by improving lab collaboration and productivity, all while reducing risk. With 1 lab leading pharmaceutical companies, our plan and managing lab activities with a unified system for requesting, scheduling and reviewing work. They're consistently preparing union experiments using 1 lab to develop, manage and share procedures. Lab personnel collaborate across geographic and organizational boundaries to get work done quickly.
They are managing and tracking samples, materials, instruments, and personnel more efficiently than ever before. And they're compiling and interpreting results to generate new insights that are easily shared with key stakeholders. Using OneLab to integrate and standardized lab operations on a unified digital platform, compliance reporting is simplified and streamlined. With one lab, BioVIA customer are improving lab efficiency and productivity, reducing risk and accelerating time to market.
Acquisition of Facilities, a few years ago, people were asking us why are we doing that? I think we are doing that because we believe Material Science going to be a major factors are chemistry, especially with battery technology, but other things and it's happening and it's working well. In fact, Biovia delivered very good results this quarter on the dynamic is very positive We want to do with BioVIA what we did with CATIA for manufactured objects, but applied to chemistry on bio science. Evonik is a good illustration of that. In Germany, a great group, a long group doing highly sophisticated chemistry based products and they are really building up the platform for their development.
Certification and delivery of solutions. As you remember, we concluded the acquisition of percent of the shares of Centric Software last quarter. And we with an agreement to buy 100% in year 2 or year 3 based on the valuation of their performance. And I must say we are very, very pleased with the dynamic that Chris Grove and his team is putting there. We have decided to follow a policy that is the policy we did for solidworks for 20 years, fully dedicated channel.
Fully dedicated to this sector because we think that they have a solution, which is very innovative and very focus for the apparel on consumer goods sector. In fact, the dynamic for the footprint is quite well, gives you also beautiful pictures for marketing what they do. But those are the key wins this quarter where you see here very big names, even in sale for white label. So you see also the effect of cooperation like the win of Marklin, eyewear as having an effect on the LVMH Marklin joint venture, where we basic won the both of them for the collaboration. So the, again, here, I think it's good illustration of footprint, positioning in a sector, which is a sector with an incredible dynamic around the world.
I must turn with the numbers of companies who are really in that segment in the world. It's just of course, less concentrated than what this car planes. It's 100 of 1000 of companies are having the proper solution here is we believe a high potential. I think we have the best solution in the market. It's affordable.
And we want to do with this solution what we did for the mainstream market for with solid work. VOCAD to do it for PLM mainstream, starting with this huge number of companies around the globe. It's working well. And I think the company is on a good dynamic and we'll see more when we do the February announcement the full year. So our strategy is an action for both social industry experience.
The takeaway this quarter is footprint, diversification, platform phenomenon, on the connection between the makers and innovators and the big players. And as you will see, when you look at sector analysis. If you have colleagues doing looking sector analysis, we have an incredible view of what is happening in so many sectors around the world some sectors are under tremendous pressure. I don't think it's a bad news for us. I like it, frankly speaking, because it's going to force accelerated changes, and we are in good position to serve those With that, let me turn it over to Pascal, and thank you very much again.
Thank you, Bernard. Good morning to all of you and thanks for joining us physically. Always a great pleasure to see you face to face. With Q3 being well aligned with our objective. I think we are delivering a solid year to date performance with what I call the 9 So 9% growth for the revenue, 9% for the software and 9% for the license.
So easy to remember. And ODPS at 1,000,000, growing at 12%, 19% if you exclude the currency effects. So this growth is, in fact, fueled by the 3DEXPERIENCE platform, Bernard, if you're worried about it. So 19% growth compared to last year. And now it's represent 22 percent of the software revenue, plus 2 point compared to last year.
This quarter could be characterized by, in fact, we do not have large transactions the same way we did early this year. But as Bernard stated, we have expanded our footprint in a number of industries. And if you look at in Q3, in fact, among the 12 industry we serve, 7 of them are growing double digit in term of license. So this is, I think, a good sign. As part of this growth in multiple industry, I have extracted some examples in aerospace And Defense.
I think GE Aviation is a good case for you guys. 1, because we told you that in 'nineteen, the supply chain in aerospace will start to envision 3DEXPERIENCE platform, following basically the boring decisions. And we start to see this happening And the Aviation, you know, this in fact, we are equipping the subsidiary dedicated to the Aerostructure. Those guys, they had to ensure a digital continuity from the design to manufacturing and also being very straight on the project management. The reason is because they need to reduce their cycle time and optimize the response times to customer requests.
And GE Aviation is serving both Boeing and Evers at the same time. So this is my first message to this one. The second one is you know that GE used to be a Siemens boutique for a long time. So I think it's also a proof point that we are placing our fabric friends. And also, you know, they have their own platform with FedEx.
And they are decided to use 3DEXPERIENCE platform as their platform to collaborate with the suppliers. So I think You know, there is much more we can read behind this deal than only a simple win. The second one I'm using is in the high-tech sector, in Experia, probably, you know, this company, they used to be called NXP, part of Phillips' long time ago. So now it's an independent company, 11,000 employees, 1,000,000 of revenue and they are producing remember well 1,000,000,000 component per year. So why I'm selecting this?
Because You know, it's not because we are not involving the design of the chip. We are not the predominant players into this space. Why? Because we have decided to focus on the IP management. This is where we have established a footprint in the semiconductor space.
And we are, by far, the largest player into this space. And here is a proof point because again, they have decided to select the Swedish exchange platform with high performancemiconductor solutions on top of it. And why they want what they want to accomplish, they want to have this capability to manage your quality for the app producing billion things, but also to be able to change to manage management in a seamless way. So each time something is changing at design level, they know how to propagate the change to the rest of the company. And they are also using, by the way, the platform to collaborate with some of our customers in order to design specific chips for them.
So again, a good example of the footprint expanding with 3DEXPERIENCE platform. My last example, it's a small company in Asia. In fact, Techimoto. This company is developing, packaging for the CPG markets. And they are using the cloud solutions.
So they are using a solution called Perfect Package available on the cloud. To mid market solutions. This deal has been, I went through the channel, so through our partner, But why it is also interesting? Because this company does not have the size of PNG or ankle But to a certain extent, they need to achieve the same level of performance in terms of high quality productions. And they are producing that 3000 different packages and they produce small series.
So they do not have the time to do the ramp up. They need be at the performance very rapidly without waiting too much. So again, good example. They are using also the cloud because they have groups and teams everywhere in many, many countries close to the customer center, and they want to use the platform as a way to engage also with them. With the customers.
Now coming back to the business review. Per region, few things to notice to America, 9% growth year to date, 8% for this for this quarter. And what we can see is the situation in Latin America is improving well. Compared to what it used to be. And I think it's a good sign.
We for those who know us very well, we changed the management a year ago, and we start to see the benefit of this. And we are also seeing a solid contribution for North America Also benefiting of all the recent acquisition we did because some of them have a huge revenue coming from North America. Europe, 8% for this quarter, what we can say, Europe is split in 2 different parts. We have the north and the south growing at double digits, including Russia. And you have what we call E West, it's mainly France and Ecal which is Euro Central, mainly Germany, growing at 5% to 6%.
So this is where we are. For this quarter. Asia still leading the pack with 13% growth for this quarter And again, a double digit growth in many, many countries, specifically for this quarter, China and India leading the pack, but you can see that SARS, Korea as well as Asia Pacific South is also growing at double digit. So we still have a good momentum in all the Asian countries. From a product standpoint, Cashier is growing at 7% with a double digit organic growth.
And I think this is important to notice because this is 3rd consecutive quarter where we are seeing Katya growing at double digits. And this growth is really organic. Because in addition, we also have the contribution of Novagic on top of this. And the growth is also coming from the direct sales as well as indirect sales. So on both sides, we have a good momentum.
Inovria, growing at 5%, 7% on a year to date, I think it's relatively linked to the fact that we do not have a significant transaction, so in large transaction for this quarter. Because if you look at the year to date license revenue, it's up 14%. So still a good momentum, and we are still confident that Innovia is on a good track. So it was 4% for this quarter. So you remember in Q2, I pointed that in Q3 given the comparison base we had last year with more than 30% growth in license, we will be hard to achieve double digit growth So it's 4% 9% for the full year.
We are still expecting to reach a 10% on a full year basis for The other software line is growing well 18%. And, we should notice that DELMIA All the manufacturing space at large is growing very well for us as well as the simulation. So those are the 2 where we see a lot of momentum. I could also say a few words, the Biovia situation is also improving. We are back to growth And for this quarter, we had the double digit growth for Biovia in term of license.
If we look at the revenue growth against total revenue, we we spoke about it. So let me focus on the organic growth. Is probably the point you want to discuss. So 5% excluding the currency effects in Q3 and 6% year to date, For the total revenue and for the software is 5% as well for this quarter and 7% for year to date. If we zoom on the software and we split between license and subscription and support, so on a license, the organic license is up 4% 8% year to date, but I want to draw the attention on this on one specific point is the following.
This is, to a certain extent, the consequences of the performance of SOLIDWORKS and Professional Channel for this quarter based on the huge comparison base we had last year. Because if you look at the performance for the direct sales, and the indirect sales independently of SOLIDWORKS, the two channels are going double digit. So clearly, we still have a good momentum And there is no sign about the fact that we will not be able to achieve an organic growth better than 5% for this year. The organic recurring revenue up 6% Q3 and year to date. So reflecting basically the solid support revenue and the renewal rates we are seeing since the beginning of the year.
On the services side, we are back to growth. You remember in the first half, we were almost flat. Here, it's +13 percent, growth, including the currency effect. And the growth is coming again from all the services related to 3DEXPERIENCE platform, which is a good sign. In fact, it's relatively in line with the license growth.
And also We had some good recovery in some brands. You remember the contact performance on the first side was coming from some brands like 3Dxite Quintique. So it does not mean we are fully back on track with 3 d XI, but I think we the situation is improving. The Q3 margin, sorry, is a little bit low compared to last year. And the main reason for the services I'm talking.
And the reason is because we have to anticipate a lot of work in order to be ready for 'nineteen And the reason is, you remember, we had this big ramp up with Boeing, and we had to hire a lot of people also to train them and also to invest with certain expenditures to not to have to do this early January next year when it will be the time for us to act. So this is the reason why you can see this margin a little bit under pressure at least compared to the performance on the On the operating margin for the full year, for the full year, for the 9 months, sorry, Same stories on what I say to you in Q2. We are offsetting with an organic performance dilutions coming from the acquisition. As well as the currency. The picture is nothing like this.
We still have 1.1. Dilutions coming from the acquisitions. We have some benefits coming from the currency effects. So 0.2. And we have a minus 0.2 on the organic performance.
Again, does not mean we are not improving our organic performance. It means that you remember, we were late in terms of hiring early this year. And we have decided to catch up and especially on the services side. And also on the marketing side, it's time for us to invest to prepare next year. So this is the reason why we are launching also all the marketing programs intensively for this quarter, Q3 and Q4.
And last but not least, last year, you remember, we were a lot of we were a lot of backloaded and Tivo It used to be very cautious in the way we was controlling the costs just to be sure that the end of the year will not be squeezed. So also, we have some base effect compared. So nothing to say except that we are, I think we are on a good track on the operating margin. EPS, 11% growth at $0.71, so slightly higher than the consensus and the guidance we gave to you. 19% growth, excluding the currency effects for the full year.
And this is a direct consequences of the margin expansion and the lower tax rate And as a reminder, I put, the year or 2 dates, tax rates going from 32.6 percent to 28.6 percent. So clearly 4 points gains compared to last year. In terms of cash flow, 1,000,000 for the 9 months which is above the full year last year. If you remember last year, we generated 1,000,000 for the full year So in 9 months, we have accomplished what we did in the year last year. So I think it's a good sign.
And you see also basically the cash out from the acquisitions. As part of this, you have all the acquisition we did in the beginning of the year centric, obviously, no magic as well. And also, we had a rebuilding piece of the 3 d PLM. When we took the full control of 3 dplm. On the different line, nothing specific to say the earn of revenue is really in line with the 7% growth at Life for Life.
So that it's relatively consistent. For the financial objective for the full year, so we confirm the full year. Objectives. What we did, we have reintegrated into the revenue, the 1,000,000,000 currency gains for the Q3. And now we have a full year revenue range between 1,000,000,000 1,000,000.
And we have also reintegrated 2¢ at the EPS level and now with an EPS range between to $0.01 coming from the currency effect and the other one coming from the good activity from the organic improvements. So in a nutshell, this is the full year objectives. So I already commented the revenue. So if we go on the lower level, On the software side, it's at 9%, 10% growth, excluding the currency effects. On the license, 9% to 11% growth, the recurrent at 9%.
On the operating margin, we are landing on the high end of the range we gave to you. Early this year, 31.5%. We are still envisioning dilutions coming from the acquisitions of point 7 points and the currency effect of minus the 2 points. Back straight at 29 and an EPS, as I told you, growing at 11% to 13% like and if you exclude the currency effect 16% to 17%. I just want to remind you that compared the first guidance we gave to you early this year.
It's 1,000,000 more term of revenue out coming from the acquisition. The other coming from the currency effects. But also, we have 52,000,000,000 services by 15,000,000 software revenue. And we are adding $0.14 at the EPS level $8 coming from the activity. If I remember, $0.03 coming from the tax and $0.04 coming from the currency effects and minus $0.01 coming from the acquisitions dilutions.
So I think it's pretty decent number. We are keeping on change our exchange the exchange rate for the full year. Q4, I think I do not want to comment line by line its returns. And I think I want to draw the attention on two numbers. Because I think they are symbolic number.
1 is 1,000,000,000 of revenue. First time, we are achieving 1,000,000,000 revenue for a given quarter, and 1 euro EPS, which is also a symbolic number. So it also has a conclusion for this presentation a good sign about the opportunity we are seeing in front of us and the quality of the pipe we have. So Bernard and I will be ready to take your questions. I'm pleased to answer.
Adam Wood from Morgan Stanley. I've got 2 if I could please. And just first of all, when we look into 2019, you've commented previously you were still comfortable of doing the original guidance in the long term plan that you gave. Maybe first of all, could you just say whether you're after what you've seen in Q3? Do you stick to that?
Maybe when we think about how we get there, you've talked about a couple of points of revenue acceleration needed. We've not really seen any acceleration in Q3. I know you had a tougher base comp again on the decent side, it feels like it's in a similar range in Q4. Could you just give us some feel for the mechanics of what you see in the pipeline and the deals that you have coming through that give you gives you the confidence that that can happen. And then secondly, maybe just on the environment more broadly, I think software company has been pretty bullish about the demand environment We've actually had a relatively weak reporting season in Q3 and profit warnings of company specific until they're not and it becomes a sector thing.
Could you maybe just talk a little bit about what you're seeing in terms of demand and macro and whether what we're hearing in the kind of macro environment is putting any pressure on the Thank you. [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] Then I'm taking the first. Yes. You go through and you will say a few words. So for the next I do not want to give guidance more than what we did during the Capital Market Day. So we still have the T euro target for next year.
And as I was stating clearly during the Capital Market Day, organically, We are pretty confident to achieve a $3.30 and $0.20 will come from the acquisitions. We already did some acquisitions. So if you compute the numbers, we'll see that we are close to 10%. So we are short to sort of extend sense. This is what we have to find in terms of acquisitions between now and next year.
On the accelerations, you are right. I mean, against the Q3 performance has been hurt by the base comparisons. If you look at the what we are envisioning for Q4, I gave a range between 8% to 13%. Maybe you will challenge me about the fact that the range is a little bit large. I know you guys.
But I want to draw the attention that if you take the high end, it implies 10% organic growth,
which is what we stated to
you guys. So we are still in line with what we are seeing. And on a lower level of the guidance, it's almost organic growth we have for this quarter. Why such? It's because, as I was saying to you, we compared to Q3, we have a lot of last transaction in Q4.
And some of them are sometimes difficult to predict. So this is the reason why you have this French. But, Adam, I'm convinced you will see an acceleration.
I think with all what we have seen from the news flow for to, Alan, about your second question about the 3rd news flow, the second we cover, of course, our market target on the effect of these new flow on our business. I have 2 answers. The first one is what I try to illustrate here. There is really an increasing selective focus from those companies to invest on the right topic for the portfolio they need to do.
And when things are easy,
look at all infrastructure, like, for us to be concrete, if I was perfect. So now with electrification and so on, there is a need for battery modularization and many other things. So we see that without, again, doing any preannouncement as this acceleration decision factor. That's fine. 1st element of answer.
The second is the pipeline is good.
So just coming back on sort of the outlook, I mean, you talked about sort of footprint expansion you're clearly now a lot more diversified or getting more diversified. If we look at the last time, we sort of saw a downturn in we don't know what sort of if there is a macro slowdown, what it looks like. Digitization across all these industries is at a kind of unprecedented level. So how do you see sort of the disc to what extent is some of the spending for your customers discretionary versus necessary? And based on sort of your views on the pipeline and the product cycle dynamics, how would you sort of see the business And then how do you manage it accordingly?
And that, is that an opportunity to further accelerate the footprint expansion or land grab?
Thank you, Mo. We think that way. Okay. Exactly. The reason why two quarters ago when we thought with the team about our focus for the second half Of course, we have to focus on execution and doing the traditional business.
But, we already saw things that you are discovering in the news flows of the sectors in which we are. Of course, we don't need to speak for them. But we saw it already 6 months ago about the coming on discussion with the CEOs on executive committees, thinking about how they were preparing. So sectors to face any slowdown or face any new long escape the shaping of their market. That's the reason why we We did first the moves we did in the last, even 16 months.
No Magic is one of them. The cyber focus cyber system focuses. Another one, the chemistry for material science is a concrete Now we cannot reveal when we do this announcement why we are doing them per se except to say it fits well Sometimes people are asking us, you know, wait fits well, but is it core? I think now its goal. So the dialogue with those companies, and I can imagine the kind of names you have in mind based on your question more, is dynamic is they are deeply looking at what have they missed that they should reconsider on what do they need to reshape their portfolio?
Now, I will not do that remark exactly for Aerospace. Because for aerospace, they cannot keep up delivering on the backlog. So our backlog is gigantic, but of course, it's a very concentrated market. But the backlog is you, just looking for those of you who look at the sector, please look at it. You will see that there's a backlog 2027 or more 2030, and it's the challenge of production on ramp up.
So they have a visibility and I think it's visible on their stock too. So that's what I will say And so the footprint to really connect those things that we have never connected before, for us is very key because you need the proof point. If we want to be the world leader in, I think we are about to be the world leader in battery technology to design to power management, safety, test. You need to approve points. And I think we are the only one in the long cave that can do the connection between chemistry power management system on safety crash.
Now this is on the agenda. Before it was marginal, I did a few cars being electrified. Now it's it's called all the announcement in the last 4 months, reveals to the public So that's basically what why we focused this quarter on saying what we have been preparing. Is to lever on leverage this dynamic. It's going to take time, but I think we want to be on the preferred list for solving the problem That's true also for, not only TNM, but true for the energy sector.
It's even for the medical sector now. There is an incredible pressure on the pharma sector. You have seen all the debate about the payer, the issue on pricing of new molecules. I'll remind you all that Amgen is our biggest customer. In this sector.
And they are probably the world's biggest leader. Regeneron is another one. We are there with the platform. And those are best in class companies. And they are showing too many of the players where the biotech is going from a development, where in this area, for example, and I will stop here the product is the process, not the molecule.
The process is the product, not the molecule anymore, which and we are there for those, evolution. So last but not least, if I remember, 2008, we demonstrated resilience because of the footprint, because of the geo side and because of the diversification. But I think we are in a very stronger position today from a diversification standpoint. You have seen the number every year that we communicate.
We'll take a question from the call. Stacy?
We will now take our first question from Stacy Pollard from JPMorgan. Please go ahead. Your line is open.
Oh, thanks. Thanks very much. Sorry that I cannot couldn't make it there in time in person, but thanks for taking the call. Or the question from the call. A couple from me.
First of all, at the Capital Markets Day, you mentioned a desire you get more aggressive in the AEC space. So just asking how that's looking and what is your competitive advantage there? Secondly, when we think of 3 d experienced deals, is that usually Katia as the majority of that deal or as the leading application? Are you now driving that from other major applications, maybe that simulation or anovia or DELMIA? And then the 3rd quick one just on M and A plans.
I think your guidance, mid term guidance suggests you're going to get more aggressive there. Just wondering what the pipeline and areas of interest are?
There are multiple questions. So I missed the first one.
The first one was about the AEC?
Oh, the AEC. Well, I think that's an important question. We, I mentioned a clear statement at the beginning of the year, if you remember, Well, I think of all the win that we had that big and the mini wins we have in China proof points that something new is happening. The way I will summarize our competitive advantage here is building some not anymore constructive for being a building by itself, but being inserting the city. And many of the activities we have now are related to our building performance will be, so the dialogue is with developers, not only with the engineering firm.
Because it's about positioning the building in the city, looking at the economic performance of the investment, looking at the economic performance if it's an economical building versus, for people to live in So this sector is changing. As a matter of fact, the BIM, what is the famous BIM, is also being defined in many 3s. So I think we will be able to reveal in the next quarters We did WIG, we did those. Significant new Xandr, we did, of course, Gary, we have also mentioned many years of project in the past 16 months that there is a game changing situation in that sector. Smart Building, Cities, management of infrastructure connection between all those elements.
We are the only one that can do it, on the, on, I think I'm very confident that what we stated will happen. As a matter of fact, we have now to show the, proof points they are coming.
You want me to address the 2 other questions? So in fact, Which brand is leading the 3DEXPERIENCE platform adoptions? The first one is Innovia just for you to keep in mind because you have more than 70 of the software revenue of Innovia being already on 3 Expense platform. The second one is DELMIA, Then now you have a little bit below than the as being already 3DEXPERIENCE platform. And after KTia and Simulia at the end, And you remember, the average is 22% of the total software revenue.
The question related to the M and A, yes, this is right. I mean, when I communicated the during the Capital Market Day, we have an aggressive plan of the M and A. I think the market condition is helping us. I should say, which has been much more difficult to do research a few months ago. Now I think the opportunity are maybe much more affordable And we have built the pipeline.
We still have 5 years anyway on to execute and maybe in 5 years, we will identify new targets I hope so, but we already have a pre established target list. And the domain where we are looking after still, if you look at the 12 industry, 70 segment, we are serving. You still have vertical at a sub segment level. Could reinforce. So this is one axis.
And the second one axis is really on the 2 or the big domain we want to tackle the city at large, the territory, I should say more than the city. And also the life science outside the traditional farm vertical and med device industry. There is a lot of things we can do. And the platform is really well tuned for this market. So those are the 2 key domain where we are working on it.
Stacy, please go on. We'll take a question from the audience
It's Charlie Brennan here from Credit Suisse. Just two questions
Firstly, can
I come back to the organic growth? It feels like there's a disconnect at the moment between some of the very large deals you're winning and the relatively muted growth in the quarter. I know you've talked about tough comps from the prior year, But at the same time, we've got some softness in the services gross margins. I'm just wondering if you're encountering any implementation complexities that's deferring any of the license recognition? Or is it all due to new signings in the quarter?
And then secondly, just a number of clarification. It seemed like the M and A contribution to this quarter was slightly bigger than I was expecting. I'm sure I can do the numbers from the maths, but just to make life easy, can you break out the M and A contribution between license and subscription. And lastly, what's your M and A guess for the fourth quarter based on the current deal
Thank you. I will comment evolution of the organization for what we call value engagement, which basically is a process by which we sequence the course of action to do successful implementation. And I think we see big progress there. In fact, it's visible on the service performance this quarter. Finally, you remember, Q2 was weak.
So the practice are being well established with a new executive in charge of that globally by the way that joined us for and she was the CIO before for she went she she she was the CIO for a very big firms on shifting to Dassault Systemes for that topic. So, as a matter of fact, it's a good question. We'll probably probably give you better visibility next quarter on this, but it's improving significantly. At this point in time, It's not a factor that slow us down. The one that slow us down is higher to implementation, which is helping the client to orchestrate their transformation.
That's why what we did with Accenture on WIG is a good learning curve for us. As you remember, we announced that this is joint activity without wave Accenture. We also did, Capgemini on, for EDF. So implementation is improving in short frontend consulting to orchestrate the transformation needs further improvement.
Connected to the number, I mean, it's in the deck, by the way. If you look at the organic license, it's 4% compared to 7%. So difference, three points is coming from the acquisitions. And on the recurrent parts, It's 6% the organic growth compared to 10%. The reporting, excluding the currency effect so forth point is coming from the acquisition.
And the reason is because you have Exact. Exact is the power flow. It's really a recurrent model. So the vast majority of the revenue is in the recurrent parts. For Q4, Exxa will be, almost integrated because you will not have any more of the discrepancy because we conclude the acquisition early last Q4 last year.
Thank you. Another question. Alex?
Yeah. Hi, Alex Tal from Deutsche Bank. Taking the question. Could you please confirm the contribution from Centric from a license and a total software perspective in the quarter and is that business progressing as well as you hoped it would do? And I guess they did 16,000,000 of revenues last year growing, I think, strong double digit suggests an impact of about 1,000,000 in the quarter, which I guess would have all gone into the Innovia segment, which would suggest that the the Innovia segment barely grew excluding the acquisition.
So and given the comment that this is where most of the 3 d experience revenue is recognized given the slowdown in 3Q for 3 d experience relative to the first half. Are you kind of pleased with the performance that you're achieving in 3 d experience relative to some of the stronger growing areas like simulation and Thanks.
So there is few things I should correct. So point number 1, entry revenue is not in the Navios. It's in the, what we call, other software. The way we spread by product lines. So all the acquisition usually are here.
And when it's not the case, we see it. Point number 1, point number 2 for the quarter, it's exactly in line with what I told you last time. You remember, there is some seasonality with Centric Software. You have 55% of the revenue within the quarter, which was a July month. So July obviously is not in our revenue.
So we have only 45% of the quarter. But we have 2 thirds of the costs. So this is the reason why you have the dilutions at the margin level. Okay. So but it's exactly in line with what I told So the growth compared to last year is 48%.
So we've seen we still have the momentum. Now for the for Q4, I think this is probably the question because you remember, we also had the same effect because January is also a month usually representing 55% of their Q4 right. So what I put in the guidance is very simple. The quarter is expected to be, for them, at 1,000,000. So you take 45% of this number and then you have 60% software around 40% services.
Of course, next year, we're going to align all that. Yes. Starting January 1st, everything will be based on our calendar year. Alex, do
you have finished would you have another? Yes, I guess it's a
general observation that the growth this year, year to date has been driven more bisolid Works and simulation. I guess we don't know the exact growth number, but those look like they've been the really strong areas yesterday and stronger than 3 d experience.
I am not in agreement with your statement because as I stated, getting up 1,000,000,000 brand is growing nicely and this brand is able to deliver double digit growth for the last three quarters. So I will not be in agreement with your statement about the fact that the growth is fueled only by SOLIDWORKS. It's not true.
Thank you.
Take our next question from Shardubhos from Barclays. Please go ahead. Your line is open.
I just have a question on 2019 and perhaps beyond on the whole Boeing and the potential supply chain standardization there. Are you able to give us a bit more kind of color? How you expect that to impact 'nineteen kind of numbers? What a tailwind should we expect in 'nineteen? And when do you think that will peak between, let's say, the 'nineteen and 'twenty one kind of period when I expect that rollout will happen?
Thank you.
I think it's too early to speak about 2019. I would give you a color or not of the numbers, but the partnership we're buying is going extremely well. And as a matter of fact, we continue to expand even beyond the scope of what we signed because we are expanding in a concrete way on the manufacturing side. With their new programs. So, but too early to speak about it.
It's clear that the Boeing ambition is significant in terms of unifying all supply chain.
But I think we
will integrate that as part of the 2019.
And to compliment your answer, Bernard, it's still in line with what I what we told you. At the time of the following announcements. So 'nineteen will be the time where we start to engage with supplier we will see some revenue materializations in 'twenty. Thank you.
Next and probably last question from the call Michael.
A couple for me as well. Just on SOLIDWORKS Pascal, obviously Q3 you highlighted the tough comps there on license is what is the situation for Q4? And going into next year, I mean solidworks 2019 is out. Is there any sort of accelerated shift the cloud you foresee for that product? And then secondly, on the GE win, just to understand the context of that, I mean, it's GE Campbell, which is a single site, presumably there's a lot more to GE Aviation.
Can you talk about how this relationship may develop? It seems odd that they would to use you just in a single site, if you like?
You take, sorry to interrupt. I take next year on cloud own relationship.
Yes. So for SOLIDWORKS, for the full year, that was clearly stated, we expect a 10% growth for the full year. So if you compute the number on the year to date, we have 9% should be easy for you to extract the growth for Q4. And we are pretty confident
SOLIDWORKS 2019 is out and I think it's extremely well received by the market. Related to the cloud effect of SOLIDWORKS, we will see it as a marginal effect in 2019. A marginal effect from a revenue standpoint, but a very interesting effect from reaching new footprint because as you may remember, we are doing SOLIDWORKS web based capabilities on the 3DEXPERIENCE platform. So with 0 download it's a browser based modeling. But I think because it's a subscription model, it it will be marginal to the total SOLIDWORKS revenue in 2019 will be us about that, the GE relationship.
In fact, for cloud, I think the fastest is 3 d experience with all the industry solution. Because this is now in operation on its quite successful implementation we have for vehicle, whether they are cars or even airplane on the cloud. And we also said about packaging in the consumer packaged goods. GE relationship, there is a positive dynamic year because GE is rest fracturing massively. So that restructuring seems that what they thought was useful for them in terms of in house development is less useful than what they thought on I think our platform is going to bring them value and analytics value on many, many things that are welcome at this point in time.
And as you know, GE is already a client. There were divisions where that were not, and we are cracking the divisions that we are not on. I don't see why it should stop. I think we'll probably go news. Okay, thank you.
This morning. And of course, we continue to be available to address any further questions. Have a good day and
we're going
to enjoy the fourth quarter.