Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Dassault System Q1 2018 Earnings Investor Call. I listen only mode. A short overview will be given followed by a question and answer session. I must advise you this conference is being recorded today.
And I would now like to hand the conference over to Francois Colt Vanadou, Investor Relations. Please go ahead, sir.
Thank you, Valerie. Thank you for joining us on our first quarter earnings conference call. Presenting today are Bernard Charles, Vice Chairman and Chief Executive Officer and Pascal Dalo's Executive Vice President, CFO, and Corporate Strategy Officer. Some brief reminders. Data 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 both an IFRS 15 and IAS 18 basis. So all figures and comparisons on this call are presented under IAS18 and are on a non IFRS basis with revenue growth figures 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. 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 and to the risk factors section of our 2017 Document A copy of this morning's webcasted presentation is available on our website and these prepared remarks will be on our website shortly after the call.
I would now like to introduce Diana Shales.
Thank you. Good morning and good afternoon to all of you. We delivered a very good start to the year on broad basis growth with 3DEXPERIENCE software up strongly. The 1st quarter performance and activity demonstrated the improving breadth and balance of our growth. Our strong software licenses and earning per share's results were well aligned with our outlook and well support our 2018 financial objectives.
We benefited from a license revenue up 14% in total on acceleration in 3DEXPERIENCE licenses revenue, which increased over 50%. Both figures in constant currencies. All three sales channels all major brands on 9 out of the 12 geos contributed to the performance in a significant manner. The first quarter also well illustrated our social industry experience strategy at work. Social, is evident in the increasing cloud adoption and the introduction of 3DEXPERIENCE for solidworks community.
The wins we will be discussed we will discuss are illustrating how we are game changers driving customer centric innovation, whether our clients' customers are consumers, citizens, or even passions, finally based upon our first quarter achievements on outlook for the year. We are reconfirming our financial objectives with a license revenue target of 8% to 10% at constant currency. The 3DEXPERIENCE platform and industry solution experiences are bringing strong value to industry leaders who are serving, references as the lead transformations in their sectors on to industry. Shakers who are changing the game are looking to scale rapidly. And together, they are triggering a major evolution.
You can see this all around you and all around the world. We are experiencing a truly a global industry renaissance in some way, bringing new ways real and virtual of inventing, learning, producing and trading, triggered by Transformations Industry Leaders, undertaking on the impact of newcomers to different industries. The leading business of the future will be those that empower the workforce of the future under value networks with knowledge and know how to deliver new categories of sustainable solutions. From our perspective, industry 4.0 is yesterday's ways of thinking with people applying new technology to old ways of working together. That is not enough.
And digitalization is not enough either. It can be a catalyst, but it needs more. Tomorrow is about the makers and innovators, basically, the ecosystem about inventing new things and changing the way you do things in order to innovate with the end customer or consumer in mind leading also to the creation of our 3DEXPERIENCE platform functions as an functions as truly as an operating system powering our industry solution experiences, with, of course, our brand applications. And as a business model, thanks to the marketplace services. Digital experience platforms are the infra structures of the 21st century.
They have transformed retail, transportation and hospitality services. The industrial world is next. The 3DEXPERIENCE Marketplacespositions Dassault System as a catalyst as well as an enabler of this transformation by connecting buyers and sellers of design on manufacturing content as well as services worldwide. Among the first services of the 3DEXPERIENCE marketplace, which we opened, last January is 3 d printing services enabling any buyers someone who wants to produce a 3 d part to find a seller, someone who is going to produce that 3 d part. So we are becoming part of a transaction, the transaction, bringing together the buyer and the seller.
Hence, the term marketplace. The sharp increase in 3DEXPERIENCE licenses revenue in the first quarter proves that our 3DEXPERIENCE platform, thanks to the comprehensiveness of our offer, of course, coupled with the PowerBuy approach, opens up entirely new market opportunities. The platform brings unparalleled added value for customers in terms of leadership as well as innovation. Brought to clients is driving growth, increasing contribution and cloud adoption. During the first quarter, so the expense lies licenses increased 53% in constant currencies.
From a mix perspective, It contributed 34%, a 9 point increase over the year ago timeframe. Go lives are continuing with existing 3DEXPERIENCE customer extending their usage. Our new 3DEXPERIENCE investment are commencing with large customers, including adoption of the 3DEXPERIENCE powered by, offered by, customers in transportation, mobility aerospace on defense. Formerly introduced early this year, Power BI will enable all customers to benefit from the 3DEXPERIENCE platforms value immediately without any need for migration of legacy data. There are 3 levers to enable social collaboration, to leverage hybrid data for product configuration on bill of materials or to use the full capability of the built in the application on 3DEXPERIENCE platform.
We also saw our 3DEXPERIENCE cloud activity grow substantially year over year. Our cloud offer represents for a large on small companies, the possibility to reduce to 0 the distance to their own clients For the SOLIDWORKS users' community, it represents the opportunity to benefit from a wide range of cloud services. From 3DEXPERIENCE PLM services to marketplace or to SOLIDWORKSdesign a browser based solution. Fosher, the world's leading supplier of cleaning technology has adopted the 3DEXPERIENCE platform on the cloud to digitally transform its existing processes worldwide on the first two market with efficient. Resource conserving cleaning system, products and services.
Cartier is a member of the German Mittelstand, comprised of Germany's mid sized companies who are world leaders in their market segment. In transportation and mobility, e velocity, a new electronic vehicle startup in the United States focused on Urban mobility has adopted 3 d Expense on the cloud with CATIA SIMOLIA on Innovia Process And Solutions. Moving towards our new business in the quarter, Lufthansa Cargo among the world leading in air freight tires, offering tailored logistics solutions for a wide branch of challenging freight consignments has selected Quintiq to balance cost on service level for our levels for optimal customer satisfaction. More broadly, Quintiq provides solutions to complex planning puzzles that all airlines face every hours of the day. It is able to capture and request unique constraints such as contract specific requirements, labor regulation on a resource availability as well as as well as capabilities.
Airline companies can define their efficiency, customer service and profitability target on Quintiq gives the tools and the feedback needed to plan accordingly to those targets and also gives the to planning departments the flexibility to handle last minute schedule changes. Finally, just a few words on the life science business. In biopharma, companies are shifting toward passion centric innovation in order to create more personalized and effective medicine. Manufacturing and quality control of biologics are much more complex and challenging than chemical components, triggering a shift to more predictive and adaptive manufacturing processes. In this regard, Gillette Sciences selected our BioVIA brand on our made to cure industry solutions for continued process verification to produce as designed and as registered every time.
Let me now turn the call to Pascal Scott. You have the floor.
Thank you, Bernard. Good morning and good afternoons to all of you. Thank you for joining us In my presentations today, I will cover our first quarter business review, financial highlights, and finish with our financial objectives. We apologize for the technical problem last quarter, which inadvertently cut off the short, the Q and A portion of the call. So let's begin.
We expected a strong start to the year, continuing the strength we saw in the fourth quarter And that was the case. Total revenue increased 9% near the high end of our 7% to 10 and constant currency guidance range. Revenue as reported was 1,000,000 versus our guidance range of 1000000 to 1000000. So our currency assumptions were well in line with actuals. The operating margin expanded net basics point at 27% at the high end of our 26% to 27% range.
We improved our operating margin 240 basis points, which enables to absorb 110 basis points currently, currency headwinds as well as offset 50 basis points dilution from the acquisitions. EPS, thanks to the combination of the revenue, operating margin expansion and the lower tax rate, grew 11% as reported and 26% at constant currency. EPS was $0.59 compared to our range of $0.54 to $0.57, so well in line with our EPS objective. Now let's look in more details beginning with our software revenue performance by regions. So in the Americas, software revenue increased 11% led by North America with a strong performances for SOLIDWORKS, SIMOLIA, DELMIA and Violia.
In Europe, software revenue was higher by 6%, on a strong comparison base and was led by France and Southern of Europe. The most dynamic region during the quarter was Asia, up 16% where we enjoyed a broad based growth across Japan, China, Korea India and across our free channels. All of our major brands, Catia Sallyworse Innovia and Simudia deliver strong software revenue growth. The broad based growth during the quarter also benefited from the good breadth from an industry perspective. We had 6 industry with double digit software revenue growth, including Transportation And Mobility, Industrial Equipment And Aerospace And Defense within our core industry and within diversification, a very good performance from natural resources, consumer goods, and retail and architecture engineering and construction.
Moving to our brands, Catya Licenses revenue were up double digits, led by Asia on a strong growth in both our direct and indirect sales channels and in the Americas with the good progressions in indirect sales. 3DEXPERIENCE transactions represented more than half of the CACHA top 20 global wins in the quarter coming from aerospace defense, transportation and mobility, marine and Offshore And Industrial Equipment. We estimate that CATIA is involved in AT electrical vehicle programs, including the recent wins with Evolocity, and become the reference in this domain. Innovia's software revenue increased 11% this quarter, driven by a large deal and on a regional basis, was led by Asia and Europe. 3DEXPERIENCE represent over 75% of the licensed software for Innovia.
Fully Wears had the double digit license revenue growth on a strong performances in Asia and the Americas. Other software grew 14%. In addition to Simuliya, we had a good performance in manufacturing with DELMIA and in mining with Veolia. Today, let me focus on our SIMOLIA brand and share some of further detail with you. Over the last two years, we have significantly enhanced our multi physics simulations capability.
We now cover more than 70% of the core market with leading technology in structural, electromagnetis. In particular, high frequency, which is so critical to an end internet of fixed or smart products, smart mobility and smart industry. And finally, in advanced fluid simulation with the next generation Tisbalsmani Technology with the Exa acquisitions completed in November of 2017 and our earlier 3 acquisitions. In turn, we have strengthened our market leadership positions, and we believe that among all the PLN players, we are on a pro form a basis in the number 2 position from a software revenue perspective. Moving to the services.
We indicated in February that year 2018 will be a start off point for growth over the next several years given the large increase in committed services engagements that we have. In the first quarter, we had a strong growth in 3DEXPERIENCE related services. Overall services revenue was flat on a mixed performance by several brands So services came in about 1,000,000 below our targets. Operating margin, our 1st quarter operating margin of 27% came in at the high end of our objectives and increased 80 basis points compared to a year ago first quarter. As mentioned earlier, We had an underlying improvement of 240 basis points in the operating margin, absorbed currency headwinds of 110 basis points and offset acquisition dilutions of 50 basis points.
Earnings per share was also well aligned with our objectives. EPS increased 11% with currency headwinds, Heeding our true progression. In constant currency, EPS increased 26% benefiting from our revenue growth operating margin performance and lower effective tax rate. Our cash flow from our operation was up 17%. In the first quarter to 1000000, reflecting our net results and improvement in working capital.
Excluding currency effects, head on revenue under the A. IAS 18 increased 9% in total and 6% on an organic basis, well aligned with recurring revenue growth figures on a same basis. In the appendix of the earning press release, we discussed the impact that IFRS 15 has an unearned revenue, And before, the figures are not comparable at March 31st under the IFRS 15 and IAS 18. This is due to the fact that the March 31, 2018 balance sheet line items unearned revenue has been reduced by 1,000,000 under the IFRS 15, reflecting mainly the one time permanent difference of 1,000,000 and the higher amount of recurring Revenue recognized in the first quarter under IFRS 15 compared to IAS 18 in the amount of 1,000,000. Finally, we are reconfirming our full year objective for year 2018 on an non IFRS financial objectives for revenues, operating margin and earning per share as well as our principal currency exchange rate assumptions.
Underlying our objectives, let me provide key details. We are reconfirming our target for license revenue growth of 8% to 10% in constant currency for year of 2018. To reflect improving breath with an increased contribution from 3D experience and a good growth for SOLIDWORKS, but on a moderating from the year 2017 pace. We expect recurring revenue up 7% to 8% in constant currency, coming from solid growth in both subscriptions and support revenues. For services, we are confirming that it will be back on on track on growth in quarter, we did moderate the growth rate for services from the 12% growth initially.
We are confirming an effective tax rate of about 29.7 percent for 3.2% in year 2017. These assumptions aggregate to a total revenue growth of 8 to 9% in constant currency, an operating margin of 31% to 31.5%, which embeds acquisition deletion of about 60 basis points and negative currency impacts estimated at 40 basis points. And an EPS of EUR 2.83 to EUR 88,000,000, representing growth of EUR 6 to 8 or 11 to 13 at the constant currency. Turning to the second quarter. Let's begin with some key details supporting our financial objectives.
1st, with respect to the license revenue, we are targeting a growth rate of between 6 and 10% in constant currency, which will bring our 1st highest license revenue growth rate to between 9% to 12% at constant currency. 2nd, a good level of recurring software revenue growth, up between 8% 9% and services growth of about 9% to 14%. Combined altogether, we are targeting a total revenue growth of 8% to 10% and an earning per share of about $0.65 to $0.68, representing a reporting growth rate range of 5% to 10% on an heavy currency headwind, the EPS growth rate at the constant currency would be about 16% to 22%. So let me turn the call back to Bernard. Thank you, Pascal.
I believe that the first, could the first quarter of 20 18 illustrates very well where we want to go this year. First, we delivered a strong start to the year. An improved breadth on balance. Our long track record of performance with growth in revenue, earnings and cash flow have been enriched by our multiple growth drivers. 2nd, our results demonstrate our strategy at work and our focus on strengthening our execution.
As a result, We are expanding our market positions across the major value streams of our clients. Sir, the 3DEXPERIENCE platform, power both as an operating system. On as a business model are now both evident with the introduction of our 1st marketplace set of services. 4th, 3DEXPERIENCE on the cloud opens up new market opportunities for industry expansion to new type of users and for business model expansion. We look forward to welcoming many of you to our Capital Markets Day on June 5th teens this 2018 to meet with all members of the executive team.
Some of our, some of our net generation leaders on several of our clients. Pascal and I would, now like to open the call to your questions and thanks you for your participation in the call on earlier this morning at the webcast. Thank
you. You. And your first question comes from the line of Jay Felicia Griffin Securities. Please go ahead sir.
Thank you. Good afternoon, Bernard and Pascal. A couple of questions. Of a rising from, 2 to so events that occurred over the last 2 months, 1st solid works world in February. And then last week, your customer conference in San Diego.
So at Salt Works World, it was quite interesting to hear the company had communicated the objective to your channel of reaching $1,000,000,000 or more in Toddworks revenue within the next number of years. And that would be your $2,000,000,000 brand, of course. The question though is, what are you assuming in terms of any significant changes with respect to sales capacity or product mix to achieve that level of revenue And are you assuming that you're going to be able to sustain double digit, new seat license growth as you saw in 2016 in 17 to get to that level of revenue. And then a couple of additional questions stemming from co last week.
Pascal might want to give you, Jason, you for the question, by the way, and thank you for participating those 2 to those 2 events. As a lot was shared there by also customers. We don't expect any specific, levers As a matter of fact, there is a race between, I would say, if I may say, so, well, our solution there's a race between our SOLIDWORKS brand and our Similla brand. But there's no expectation of any significant challenges. I think if we extrapolate, it can be achieved, on the timeframe we discussed.
The mood of the resellers, as you may have noticed, for the what we call now, the volume channel is are very is very positive, extremely positive. They are motivated. And of course, The expansion of the services we provide with the 3DEXPERIENCE platform, as presented, at the SOLIDWORKS World will help accelerate But we don't expect this to be the only reason to make it happen Yes, Jade, thank you
for the question. I will complement what Bernard said. So point number 1, the the SOLIDWORKS model could fly over 1,000,000,000 with basically the existing foundations. And let me remind what are the goals drivers. One is basically the 2 d to 3 d migrations.
And frankly speaking, when I look at the 2 d installed base, we still have a lot we can do before to convert them into 3 d, 100%. 2,
more and more,
we are seeing traction coming from 3 d to 3 d migrations. And as you may know, with SOLIDWORKS and with basically the web package and this well defined price point. We are winning significantly significant market share against almost all the entry level and the mid range 3 d solutions on the market. And last but not least, we are basically complementing the portfolio diverse with new domain, like obviously simulations, manufacturing, and so on. So basically, if I mix those 2, you know, we have the very strong growth drivers.
Now from another standpoint, Remember, the 2 d and the 3 d migrations represent 70% of the revenue of sunwares 30% are coming from all the new extension we do like EPDM simulations, manufacturing and so on. And we the extension are growing very well as well. My last point is when I look at where the new license growth is coming for SOLIDWORKS, it's also an interesting data point. 55% is still coming from new customers we are winning. Okay.
So basically, this channel is a fantastic machine to establish a footprint on the market. And 45 of the new license are coming from existing customers extending the what they have. So this balance, I mean, between fifty-fifty almost, is also another leg, if you want, to sustain the growth on a long run basis. I hope I gave you some data point to answer your question,
Yes. Thank you. Yes. So with respect to last week's event, which is more about the rest of the business besides solidworks, There did seem to be at least anecdotally some interest in Powerbuy and adopting V6 and so forth. But how are you thinking about the metrics for the revenue impact for PowerBuy?
In other words, when you think about perhaps additional revenues per customer or adoption metrics? What, what, how are you thinking about that? And for instance, we learned last week at the conference that you now have, approximately 3200 customers on V Six. Up about 1000 over the past year. Would it be fair to say that the average size of new deployments is increasing or maybe you could just talk through some of those metrics and, regarding V6 and how or by adoption?
There are several reasons for us to go this way. The first one is remember, if I look at the SOLIDWORKS installed base, compared to the CATIA installed base, we are not at the same level of the installed base being under maintenance. Okay. So with this port by strategy, we want to give access to a new category of services. For them to be able to catch the gap we have compared to CATIA when I look at the installed base under maintenance.
So this is basically a big lever because not only you have the revenue coming from the 3DEXPERIENCE, also indirectly, you have the additional support, revenue stream coming from basically this installed base. And it's a strategy we have already put in place, partially. You remember with my SOLIDWORKS. It was exactly basically the point. 2, when we look at the type of services, and the applications we want to have to compliment the SOLUWA's desktop with the Power BI, it's also an interesting case.
Because with EPEM, we are doing very well to manage the vaulting. As well as basically the basic product structure. If you have to go a step forward and being able to manage your configurations, I think we want to use the 3DEXPERIENCE platform with PLM services in order to do it. And we see more and more cases like this, not only in the large, where Sillowars has a large installed base for a given customer. But also when people are doing a little bit more complex products, it's also, for example, it's the case in the medical devices.
In some industrial equipments. And the more you have, by the way, internet of sins and connected objects, the more the configuration is becoming something key. So this is also, basically a second reasons, is also to be able to provide an advanced, plm capabilities in an affordable way using field experience platform on the cloud. And last but not least, you also have specialized products and it's part of your tool in the simulation space. Where we do not have the capabilities available inside the desktop.
So through this approach, you're
able to
connect the desktop with the native 3DEXPERIENCE applications. And this will bring additional capability. If I take, for example, the architecture and constructions, you know, this domain by heart And you know that there are some architects or people into this space using solid words to do things. But if you are able to complement with the rest of the portfolio we have, so automatically, you have a much more broad and comprehensive product solutions. So those are basically the levers.
1, against to be to increase the subscriptions and the support, 2, to add additional capability on PLM services and 3, to be able to expand the scope of solutions by adding some specialized products, which are not part of the desktop solutions. This is the rationale behind turbine.
Okay. There wasn't quite the question, but I'll just ask the final question, regarding your cloud infrastructure,
you seem
to have now a few 100 customers, on the PLM side of the business that are, that are on the cloud perhaps more. Is it your intent to have your cloud services provided solely, by own cloud infrastructure and meaning out scale? Or do you think it would be wise to rely increasingly, for example, on working with Microsoft, or other large scale partners for cloud infrastructure.
Today, today we do leverage Amazon AWS very successfully. It's very efficient, it works well and, on way. So we have these dual possibilities we now own infrastructure on the on AWS. So So at this point in time, customers are very satisfied and it has never been a topic of doubts or debates. In the future, we will we will do more with local telcos, because we are putting a lot of attention on sovereignty for certain type of usage, where there is a need for territorial Centric Services.
And we have those type of customers. And the unique thing about our scale, which is not anymore, only seen as one element of Dassault Systemes is that we have created our own PLM for multiple cloud So we can manage unlimited number of, cloud environment including private clouds. So on premise cloud for certain large companies, more to be discussed there, but the strategy is very clear. And the precise answer is more toward telco connection. We want to look at partners who are certified by governments
I understand. Thank you, Bernard.
Next question comes from the
in the first one, Similia, I think if I remember correctly, first time you have mentioned about 15% of revenue for Q1. So fair to think that similar is at least running at 15% of the yearly revenue also? And where do you think this business could be a part of total revenue?
And feel free to add what you want. You're right. I mean, it's first time we are disclosing the weight of the SIMOLIA business in our total revenue. So I confirmed that 15% is basically, representing, I mean, it's served but basically for the overall year. So you are right.
Why we do it? There are a few reasons behind this is one is because it's now it's material, really start to be visible And also because we want you to give some capability to benchmark what we do with our peers. And I think if you look at the track record of simulation for the last few years, I think we enjoy a significant growth and good momentum. Obviously, in the structure analysis, which is a core of what we do, but also in the new extension we did recently in the high frequency as well as the fleet dynamics. So this is basically the reasons behind this, and your assumption is correct.
Monica.
Thanks. And then you have made some acquisitions simulation recently. Do you think you have all the pieces of different types of simulation? Are you still think there's something missing?
The answer to that question, as to be put in perspective of the industries we serve So we are really focusing on 12 industries, 70 segments. And if you look at physical goods. We have a quite comprehensive and complete offer if you look at Bioscience, on the BioWorld And Life Science, There are a lot of opportunities and there is also a huge market. And we have really been clear on the fact that the life science by science, bio materials, and so on are at the core. It's at the core.
It's not adjacent at the core of the future of Dassault System. So the word of modeling and simulation is expanding due to those 3 if you remember, I call them the Sears, the 1 SER is the product you make, another SER is the life science, the life work of the bio world on Narsos here is the Geo world, and we are going to balance and cover those because the world of simulation today is very fragmented. It's a collection of niche things. And the problem is the work does not work with niche things. They have to be integrated to understand what is happening in the real world.
So yes, in short, we will continue to invest.
Got it. Then I have a question on demand trends, Caterpillar, the big industrial equipment producer. Yes, they said that cost of money is going up because of some tariffs in U. S. And other reasons also said there could be some trade issues between U.
S. China, which could impact results, which they don't know yet. So the question I have is could you talk about demand trends you are seeing in all of your geographies? Has any of your customers highlighted any of these issues?
No, not really on, to be simple, the pipeline is a good pipeline, as Pascal mentioned this morning. On, the type of customers we have and we have a lot of companies on those. So a lot of midsized and small companies, they will adapt to the business constraints. And we are truly global. I mean, We grew 16% in Asia.
And, and so he has seen quarter over quarter in the last 10 years evolution from quarter to quarters between Americas, Asia, and Europe. But there is still a lot of things to be built in the world and no specific Yes, concerns expressed from a geopolitical standpoint, but not from the investment standpoint.
Got it. Thanks. Just a couple more, if I may. How much of is Boeing contributing in 2018 and how much could it be in 2019?
So I will take this one.
Maybe a bit early for 2019, Monica.
So but nevertheless, I would already answer the question this morning. So I owe you this answer. So it's less than 1,000,000 for this year.
And, Daniel, it's not the total revenue. Of course, it's the incremental.
Yes. This
is what we are talking about.
I want to make sure for the others that they do not make the conclusion between 10,000,000 on the revenue we get from Boeing.
And, and for next year, the impact will be around one point on the recurrent part of the revenue.
One point on top of the $10,000,000 of incremental this year, right? So higher, okay, got it. Thank you so much for the color. Then just can you remind the Boeing deal? Is it for all the products like for CAD Design, PLM, simulations?
Is it?
No. I mean, and I will answer any real compliment. So point number 1, in the deal right now. And we told you some indication about not giving the exact number, but we say it's more than three times what we do. On the long run.
It's basically, the 3DEXPERIENCE platform, the Innovia, as well as basically all the product lines related to manufacturing. Simulation is not part of it. It's in addition. And regarding CATIA against, it's basically not everything in CATIA example, all the new things coming from CATIA System are not part of it.
Perfect. Thank you. Very helpful. Then the last one, just here. If I look at 2018 guidance, which you are reiterating, but there, you had guided you have guided to license up 8% to 10% constant currency, I'm talking only.
Recurring revenue talked about 7% to 8%. The cushion is, are you seeing more demand that means for perpetual licenses, and that's why that growth is much higher than your recurring revenue than from subscription license?
In fact, you're right. I mean, we are offsetting basically the gap in services, which is around 6,000,000,000 not a big deal with a more subscription revenue.
So And we are pushing a lot for subscription. By the way, all the new cloud wins are by definition that way. So the snowball will come later. Which is what we like. But nevertheless,
I mean, if you look at this quarter, Monica, the subscription part of the recurring revenue is growing at 26%. And if you on a pro form a basis, if you exclude XA because XA is mainly a subscription model, it's plus 10% organically. So I think it's good traction.
Welcome, you're welcome.
Thank you.
So with that, please go on Valerie. Sorry.
I was just advising you that there are no further questions, sir.
Okay. So thank you very much all of you for participating. As always, we are available to address any further questions on please remember our June 15, right? June 15, 15 on the compass for, getting giving you more visibility. Thank you very much for following Dassault System.
Have a great day on, we are up for the next quarter.
Thank you, ladies and gentlemen. That does conclude your conference for today. Thank you for participating and you may now disconnect.