Hello, and welcome to today's Dassault Systèmes first quarter 2025 earnings call hosted by Bernard Charlès, Executive Chairman; Pascal Daloz, Chief Executive Officer; Rouven Bergmann, Chief Financial Officer. Throughout today's recorded presentation, all lines will be in a listen-only mode. Later, we will conduct a question-and-answer session. You may register for the questions at any time by pressing Star one on your telephone keypad. Now, it is my pleasure to introduce Mr. Pascal Daloz, Chief Executive Officer. Please go ahead, sir.
Actually, I will start. I'm Béatrix Martinez, VP Investor Relations, and thank you for joining our first quarter 2025 earnings conference call with today Pascal Daloz, Chief Executive Officer, and Rouven Bergmann, Chief Financial Officer. Dassault Systèmes results are prepared in accordance with IFRS. The financial figures discussed on this conference call are on a non-IFRS basis, with prominent growth rates on a constant currency basis unless otherwise noted. Some of the comments on this call contain forward-looking statements that could differ materially from actual results. Please refer to today's press release and the Risk Factors section on our 2024 universal registration document. All earnings materials are available on our website, and these prepared remarks will be available shortly after this call. I would now like to hand over to Pascal Daloz.
Thank you, Béatrix, and good morning or good afternoon, everyone. Thank you again for joining us today. It's always a pleasure to do this call also from London because we had the pleasure to see some of you in person this morning. Let's start with some comments related to Q1 earnings announcements. I think we have had a strong start to the year with subscription and 3DEXPERIENCE revenues driving our EPS to the high end of expectations. Here are a few key highlights: software growth, +5%, driven by subscription revenue, 14%, and experience revenue, 17%. Before handing it over to Rouven for more detail on our financial and guidance for Q2 and for the full year 2025, I really would like to emphasize three key points.
The first one is, in today's volatile environments, with tariffs affecting many sectors, I think we are well positioned to help our customers to navigate uncertainty. The second one is, in Feb this year, we introduced the next generation of our customers' virtual universities, and we call it the 3D Universes. I think companies eager to integrate AI often struggle without a unified platform to do it. This is where 3DEXPERIENCE comes in, transforming 3DEXPERIENCE into a next-generation platform for knowledge and know-how, and positioning it as a global IP management platform. My third comment is we are actively investing in 3D Universes, and I will discuss this further, including our acquisition of Contentserv and our strategic investment in Click Therapeutics. Now, let's take a closer look at the sector trends and the key wins.
Starting with manufacturing, we saw a strong resilience across the manufacturing industry in Q1. Transportation and mobility performed well in China, Japan, and North America, where we are achieving double-digit growth. We are expanding with key Chinese players, including BYD, but also Xiaomi and Xpeng, and we continue also to tackle the new entrants in the EV market. More broadly, I think the manufacturers in this industry everywhere are reassessing the strategy due to the tariff pressures, and I think we are well positioned to help them to adapt quickly and to optimize their supply and demand chains. Aerospace and defense, I think we maintain a solid momentum supported by the rising demands and continued investment in key programs in the commercial but also in the defense space.
High-tech, we saw continued momentum driven by the broader options of electromagnetic simulations for the consumer electronics, but also the energy-efficient infrastructure for the cloud data center. This quarter, specifically, we renew our contract with Google because they are massively using our software to optimize their data centers around the world. In Life Sciences, I think we are seeing a big shift, a shift from the research and development and clinical trial towards the manufacturing and supply. It is a trend which is further accelerated by the tariff. The demand for the end-to-end platform that connects research and development and manufacturing is also rising as a consequence. It is extremely visible in some of the large engagements we have right now with Sanofi or Amgen, where we see an expansion of the 3DEXPERIENCE platform across the entire value chain, reflecting these evolutions.
We also saw an expansion of Medidata with some key players such as Regeneron and also new clients such as Merck KGaA. In the infrastructures and city sectors, the demand for sovereign infrastructures is rapidly increasing, and we are accelerating our expansion. While the energy transition, and particularly the nuclear, remains a core focus for us, sovereignty today extends beyond the energy to include defense, security, but also the digital infrastructure, especially building AI capability through the high-performance data centers with national borders. Now, let's look at some key wins this quarter. In transportation and mobility, we have entered a strategic partnership with Xpeng, one of the fastest-growing EV manufacturers, driving the future of smart mobility. Xpeng is really shaping the EV landscape with innovative electric vehicles and autonomous driving technologies, but they are also expanding their international reach at the same time.
Their Xpeng G6, for example, which competes directly with the premium EVs, offers really high performance and rapid charging, 10-80% in just less than 20 minutes, and a suite of premium features such as advanced autonomous driving systems. All of this at a competitive price. This partnership leverages 3DEXPERIENCE to drive innovation, accelerate the time to market, and I think it's setting a new benchmark in smart mobility. I think it's a strong signal because even the sector is challenged by tariff and all the disruptions. You can see that the innovators, the leaders, are choosing us to accelerate and to scale at the same time. In Life Sciences, Merck KGaA has selected Medidata and its new standard for clinical developments.
This is both a new logo because we never had an enterprise agreement with this company, but it's also a competitive displacement from one of our competitors. I think Merck aimed to streamline its clinical trial and increase speed, and that's the reason why they have chosen us to make that possible. At the same time, they want to reinforce also the clinical trials they were subcontracting to the CROs. That's also the reason why they are looking for productivity into this space. I think the Medidata platform offers the end-to-end capabilities for managing the full clinical cycle. Importantly, I think now, thanks to Clinical Data Studio, we provide seamless access to integrated data from all the sources, not only the EDC, without compromising the data quality.
They are also benefiting from our deep domain expertise, particularly in oncology, thanks to what we call the pre-configured templates. In this competitive space, I think this win is underscoring our ability not only to defend our positions, but also to expand it. Now, let's shift to the sovereign infrastructure. Today, technology superiority is really critical to national security, and we see more and more startups which are playing a pivotal role in reshaping this landscape. This quarter, we signed with Raphe, an Indian defense startup, developing cutting-edge autonomous drones with in-house design and also manufacturing capabilities. Their goal is to achieve speed and sovereignty by leveraging breakthrough technologies such as 3D printing, precision-grade electronics, and to become self-sufficient in the production.
Raphe selected the 3DEXPERIENCE platform to scale quickly, cutting the development cycle from years to months, and enabling the full autonomy in manufacturing, which is extremely critical. I think with this approach, we are enabling the next wave of defense innovation. Now, let's talk about the Generation 7. Back in February this year, during our full- year results, you remember we introduced the 3D Universes, our Generation 7 of virtual universe for our customers. Keep in mind that for more than 40 years, we have been building the virtual world for the real life with one constant promise: creating a scientifically accurate representation of the world. 3D Universes mark a fundamental shift, integrating modeling and simulations powered by AI and spatial computing at the same time in one single immersive environment.
Speaking about immersive environment, I am thrilled to announce our partnership with Apple to bring these visions to life. 3D Universes powered by 3DEXPERIENCE platform is now natively integrated with Apple Vision Pro. I do not know if we have the video. For the one who had the chance to attend this morning, we had a nice video. You will hardly have my comments. Anyway, what you can do, you can immerse yourself in a life-size experience, navigating with your eyes, your hands, and voice, and bringing your entire team along no matter where they are. For us, it is a way to have the virtual twin on the 3DX platform now interacting seamlessly with the physical world, all with scientific accuracy.
This is creating a radical difference, a way to innovate, a true game changer for creativity, productivity, learning, customer experiences, design review, interview also with some practitioners. I think the possibilities are really limitless. Speaking about investments, in March, we also acquired Contentserv, a leader in the AI-powered product information management, what we call PIM. PLM is really the solutions centralizing all the product data from the specification, the description, the images, the marketing materials, all in one place. They combine it also with what we call the product experience management, which is another system which is basically gathering all this marketing data but specializing it for each channel you will use to reach the customer. This is extremely helpful to get the customer feedbacks before basically you launch the productions, but also to drive the personalization and the conversions.
This company is based in Germany with 200 employees and 1,600 clients across many industries, more specifically consumer goods, retail, and electronics. I think this is a perfect fit for our strategy because when we integrate Contentserv with Centric, we ensure that from the moment the product is developed, it is enriched, optimized, and ready to be converted for commercialization. This is really helping our customer to shorten time to market, to boost the sell- through, and to personalize it at scale. This quarter, we also reinforce our commitment to the patient journey in life sciences. We made a strategic investment in Click Therapeutics, a leader in prescription digital therapeutics and software-enhanced drug therapies. They recently received an FDA approval for the first digital treatment for episodic migraine. This partnership really extends the Medidata patient engagement beyond the clinical trials.
I think we are maintaining the continuous connections with patients throughout the commercialization and beyond. I think it's really a critical step towards integrating the patient journey, starting from the research and development to the real-world care. I think this is positioning us as key players in this evolving healthcare ecosystem. Now, in conclusion, I think we have a tremendous long-term opportunity ahead. While the markets are volatile, the need for our solution has never been greater and recognized by our customers. The 3D Universes is really an ideal environment to harness artificial intelligence, and we are committed to making it trustable for our customers, enabling them to deploy AI at scale in an operational way, while at the same time, we are safeguarding their intellectual property.
Our direction is clear: to be the trusted partner who helps customers stay ahead, while we continuously strengthen our barrier to entry. This commitment will really guide us as we move forward. I think it's time to hand over to you, Rouven, for the financial details.
Thank you, Pascal, and thank you to everyone for joining today's earnings call. As you heard from Pascal, our Q1 results were good and in line with our expectations, driven by strong subscription growth across key areas in the manufacturing industries. Also, operational efficiency was good as we reached the upper end of our EPS guidance and saw excellent growth in operating cash flow increasing by 21%. Now, let me go through the financials in a bit more detail. Total revenue was up 4%, with software revenue growth at 5%, driven by good subscription growth up 14%.
As you can see, the momentum continues to build. When excluding Medidata, subscription growth was up 21% year- over- year over the last 12 months. This was due to renewals and a baseline effect from large deals signed in previous quarters. Recurring revenue grew 7% and now reflects 86% of software revenue. Service revenue was negative in the quarter, mainly due to some timing effects related to starts of new projects, which we expect to normalize in the year. Operating margin came in at 30.9%, and our EPS was $0.32. Now, with that, let's review how our growth drivers performed in the first quarter. While 2024 set the motion in a series of competitive wins and the expansion of 3DEXPERIENCE across industries, domains, and geographies, now in 2025, we expect continued momentum in the adoption of 3DEXPERIENCE driven by AI and Cloud.
In Q1, 3DEXPERIENCE grew 17% and now makes up almost 40% of eligible software revenue, up 3 points versus Q1 2024. While cloud revenue for the group was 7% in the quarter, we saw strong momentum in the adoption of 3DEXPERIENCE cloud, up 41%. Over the last 12 months, 3DEXPERIENCE cloud revenue is growing to EUR 270 million. This confirms the very positive dynamics as our clients across the manufacturing industries embrace the potential of our platform and AI. Cloud now represents 25% of our Q1 2025 software revenues. Now, let's review briefly how we performed relative to our objectives in the first quarter. Total revenue came in at EUR 1 billion 573 million, or EUR 5 million above the midpoint, benefiting from a positive currency effect. Operating margin was 30.9%, about 10 basis points slightly below the midpoint.
Selective investments in business growth were balanced by continued disciplined expense management. EPS at $0.32 was at the high end of the range, thanks to solid operating performance, good financial income, and slightly positive currency impact. Now, let me turn the focus on our geos and product lines. Europe was marginally up in Q1 on tough comps. We saw good performance in aerospace, which was offset by lower growth and negative growth in TNM. Home and lifestyle and high-tech industries had a solid quarter in Europe as well. In the Americas, revenue was up 7% in Q1, which was led by broad-based strength across the manufacturing industries, most notably in aerospace and defense, also TNM, and High-tech. Following 3DEXPERIENCE World in the US, we saw strong engagement with our customers firming up their roadmaps to adopt 3DEXPERIENCE and accelerate the use of AI in Generation 7.
In Asia, performance was solid, with the first quarter growth led by double-digit in India, while AP South and Korea were up high single digits. The China performance was resilient, but it was impacted by high comps when compared to last year Q1. Now, let's go through our product line performance. Industrial innovation software revenue grew 8% in Q1. AI and cloud act as catalysts for the adoption of 3DEXPERIENCE. This is driven by the demand for next-generation use cases to operate in an increasingly competitive and complex world. Looking at the brands, CATIA and DELMIA were up high single digits, while NETVIBES, ENOVIA, and 3DEXCITE were all up double digits. Life sciences was flat in the quarter. 2024 was a year of transformation to reposition Medidata in our life science strategy.
The strategy was validated by good Q4 renewals with several top 10 pharmas, including several win-backs and platform expansion with our most strategic accounts. Now, in Q1, we had a mixed picture. On one side, a continued positive trend in the mid-market across the U.S. and Europe. In the large enterprise segment, we won Merck KGaA as a new customer, as you just heard from Pascal. On the flip side, CRO partners continued to adapt to a more cautionary environment of clinical trial starts, with booking levels remaining low and revenue contribution decreasing. This impacted our growth of Medidata by about one to two points. Important to highlight, despite these volume headwinds, we expanded our market share by over one point in clinical trials, driven by large share gains in phase 3 and phase 2.
Now, I would like to make one additional remark regarding the business dynamics for large pharma. We see the growth dynamics of this segment more and more driven by the innovation and transformation from the lab to manufacturing. Here, we are strategically positioned to cover the entire value chain, leveraging the strengths of our 3DEXPERIENCE platform in this industry, as evidenced by our partnerships with Sanofi and Amgen. For mainstream innovation, we grew 2% in the quarter after strong performance in 2024. SolidWorks was up low single digits. We saw solid bookings and good subscription growth, which confirms the shift in the business model and the momentum of 3DEXPERIENCE adoption. However, we noted in the last weeks of March a more muted quarter-end uptick, which we believe reflects some caution regarding purchasing behavior in a changing and more uncertain market environment.
Centric was down on timing differences of renewals after an exceptional year of growth in 2024, and we expect good performance for the remainder of the year. As you heard earlier from Pascal, we successfully completed the Contentserv acquisition in the first quarter. This positioned Centric as a business platform for consumer-centric industries. Contentserv adds a real-time feedback loop into the market to adapt product design, pricing, and sourcing strategies leveraging AI. Now, let me turn to the cash flow and balance sheet items. Cash and cash equivalents totaled EUR 4,243 million at the end of Q1 2025, compared to EUR 3,953 million at the end of 2024, an increase of EUR 290 million. At the end of Q1 2025, our net cash position totaled EUR 1,788 million, which represents an increase of EUR 329 million versus a net cash position of EUR 1,459 million on December 31st last year.
Now, let's look at what is driving our cash position at the end of the first quarter. We generated EUR 813 million operating cash flow in the first quarter, which is an increase of 21% versus Q1 2024. These are excellent results, and they were driven by working capital improvements, by positive working capital development, as it accounts for decreased receivables, trade accounts receivables, with DSO down by 10 days versus Q4. They also reflect good cash collection following strong Q4 business activities. The cash conversion was 90% from non-IFRS operating income, highlighting strong performance over the last 12 months. This reflects good collection trends across both ongoing multi-year partnerships as well as recent signings. We expect the cash conversion to be in line with our prior projections in the mid 80% range. To sum up, operating cash flow was mainly used for acquisitions and investments, totaling EUR 287 million.
This includes the acquisition of Contentserv of EUR 191 million and EUR 56 million for investments and CapEx. We also repurchased treasury shares of EUR 80 million in the quarter and repaid short-term debt of EUR 59 million. Now, let me turn to our fiscal 2025 outlook. When entering 2025, our approach was to provide a risk-adjusted financial outlook for the year. Since then, the introduction of new tariffs has created a more volatile market environment in some of our end markets. While the pipeline remains resilient, we could be impacted by delays in decision-making. Overall, our visibility for now remains aligned with the midpoint of guidance, and therefore, we keep it unchanged. As such, our full-year targets of 6%-8% growth in revenue and 7%-10% growth in EPS remain the same. As it relates to the margin, we decided to provide some headroom to make focused investments in Gen 7.
Now is the right time. The year-on-year margin improvement is now 50-70 basis points versus 70-100 basis points previously. We are a long-term company and a reliable, trusted partner to our customer. This is what our customers value the most. In this constantly changing global environment, we see the 3DEXPERIENCE platform in combination with Gen 7 as a strategic choice for our clients to be future-ready, as outlined by Pascal. Now, for Q2, let me provide some additional insights, which will help you to update your models. Like in Q1, we are guiding to a wider-than-usual range in the second quarter of 3-7% top-line growth. This takes into account market uncertainty and caution on the timing of deal closing based on current information.
To complete the picture, subscription growth is anticipated in the range of 10%-15% and upfront license revenue between -6% to +1%. For services, we expect 3%-7% growth with good bookings from prior periods converting to revenue. In terms of profitability, we expect the operating margin to be in the range of 29.8%-29.9% and the fully diluted EPS at $0.30- $0.31, up 1-5% year-over-year XFX. In conclusion, our conversations so far with our customers across geos and industries support our growth ambition. However, the recent tariff announcements have increased uncertainty in the macro environment, and the situation will most likely remain dynamic for a while. As previously stated, 3DEXPERIENCE cloud and AI continue to be the primary growth driver. It has created a shift in the market dynamics, as evidenced in several competitive wins.
Clearly, customers who are advancing the adoption of 3DEXPERIENCE benefit more than others. The pace of the adoption will support either the upside scenario or potential downside, as reflected in our 2025 revenue range. Thank you again for joining us this afternoon or this morning for you in the U.S. Pascal and I look forward to taking your questions.
Thank you, sir. As a reminder, to ask a question at this time, please signal by pressing Star 1 on your telephone keypad. Please make sure the mute function on your phone is switched out to allow your signal to reach our equipment. If you wish to cancel your request, please press Star 2. Again, it is Star 1 to ask a question. We will now take our first question from Jay Vleeschhouwer from Griffin Securities. Please go ahead.
Thank you. Hello, everyone. Two financial questions to start. First, I understand that the tariff uncertainty can depend on the time of day, but if it should turn out that the situation does become more stable or has limited proportionate effects in terms of the magnitude of the tariffs, how might you reconsider your new view on close rates in the pipeline? In other words, might you revert to a more positive view of close rates if that situation becomes more stable?
Secondly, the price increases you're planning on July 1 are mostly slightly smaller than the July 2024 price increases. Perhaps you could talk about the thinking behind the planned prices. More importantly, if you think of your business in P times Q terms with relatively limited increase in P, what do you think will be the principal drivers to the Q or the unit volumes of your software business? A couple of product questions.
Okay. Jay, thank you for the questions. Good morning to New York. I guess you are in New York today. Yes. Thank you. For the tariff uncertainty, we can't look into the crystal ball. I think we've been very transparent to reflect a range of outcomes. We are looking at a larger range in Q2, where I think possibly we see the biggest swings, possibly, as everyone's adopting to this new world. We have also our pipeline structurally, we have done detailed reviews of our pipeline by geo, by segment, by industry. Overall, the pipeline structure remains pretty stable. There are several deals that we have risk-adjusted and accounted for already in our Q2 outlook. This is all reflected in the outlook. For now, I think we are prepared for Q2. We are in the middle of Q2.
The first month is almost over. We feel that we are with this well prepared. The $60 million range, which is slightly larger than usual, does take this into consideration. For the second half of the year, our pipeline is very solid. Of course, we always have the situation that sometimes moments of crisis are creating an urgency to take decisions. In one way, we can also see that this could really have a beneficial effect on some decision cycles that need to be accelerated. Some of our larger deals in the pipeline are oriented more towards defense and aerospace sector, which are also dependent on government funding. We are fairly certain about those deals to occur. The timing could vary from quarter- to- quarter, as we have experienced previously as well. Clearly, it is a topic that is high on the agenda and urgent.
I think overall, structurally, that's also why we didn't make any changes. 6%-8% is a reasonable assumption for 2025. With what I said in my prepared remarks, with the possibility of an upside scenario, but also being protected on a downside scenario, really depending on the speed of adoption of 3DEXPERIENCE. I think the market evolution we see in clinical trials and life sciences is also a factor. That's factored into our guidance. To your second question on the price increases, you're right. July is a typical time frame where price increases come into effect. The P times Q formula is a good way to look at the possible business uplift we see. I think there's an important factor that cannot be underrepresented, which is the multiplier effect from the platform.
For example, when we look at our mainstream market with SolidWorks, and I'm sure it will be one of your next questions, so I'm going ahead here. We saw good growth in SolidWorks, which was 3.5% in Q1. We were on a trajectory to be around 5%-6% up until the last two weeks of the quarter when we realized that there is some cautiousness in purchasing decisions, which I think were very concentrated. The reason why I can say that is because looking into April right now, we see bookings actually coming back in a very healthy way. That cost us about two points of growth in SolidWorks in the last two weeks of the quarter, where we typically observe an uptick, which did not occur to the extent it normally does.
Where I want to go from here is that the growth on CRE, including SolidWorks 3DEXPERIENCE, was mid-single digit growth. It was almost double the growth of SolidWorks. The platform effect is something that's really important when we think about P times Q as well. It's not just a simple price times quantity. It's actually price times a baseline that is expanding with the platform that allows us to price across multiple domains beyond just the role when you take the Q as a role, which is an additional factor that supports our model. Nevertheless, the price increases are more moderate, as you rightfully say, in 2025, also factoring in some of the volatility in the market that we see right now, which I think is something we need to be also responsible in the way our customers are expecting that from us.
Okay. Thank you for the CRE detail. Maybe as a follow-up to that, what did you see in the quarter, or how are you thinking for the rest of the year about CSE and CPE? You had some positive comments about transportation and mobility. When we think about 2024 in that segment, it appears to have been slightly down based on the data in the annual report. Would you expect 2025 transportation and mobility to perhaps recover for the year and grow from 2024?
Look, for TNM, TNM was very strong in 2024, just to be clear. It was a very good year in TNM. Now, starting in the first quarter, we were flat in TNM overall. However, we saw good growth in North America as well as in Asia.
Not only it was, to be more precise, Japan and China, while we had negative growth in Europe for TNM. What we are planning for is the scenario that we will see a shift in growth contribution in 2025, where we expect Asia to take a larger share, where we believe that probably in Europe, we are under pressure a little bit, even though some of the deals that we signed in 2024 will impact growth in 2025, and that's still to come. It's not yet factored in Q1. I think in North America, there's a lot of dynamics that are coming into play related to Ford, GM, for example, but also Tesla, where I think we have more upside than downside.
Okay. Lastly, in your description of industrial innovation segment results, the one product that is obviously missing from the discussion is SIMULIA.
You've had some growth issues and market share issues with SIMULIA for some time now, especially in light of the consolidation that we've seen elsewhere in simulation. Siemens has done Synopsys, yet still has to complete ANSYS. How are you thinking about the strategy or growth potential for SIMULIA, which again is larger than ENOVIA and a considerably important product for you, but the growth hasn't been perhaps what you've wanted?
Yeah. Maybe start with the numbers. SIMULIA growth was more muted in Q1, but that was mainly due to baseline effect from last year. We have a good pipeline for SIMULIA and certainly in Q2. I think we are competing very well also with the new players in the auto sector, for example. We are performing. We're really taking market share. You're right.
This market is right now, due to the pending acquisitions that are in place with some of the major competitors, there are choices that our customers need to make. I think we are very well positioned for that and to take a higher market share. We are investing into SIMULIA. You're right. It's an important brand. And the growth trajectory for 2025 is in the mid to high single- digits.
Okay. Thank you. I will see you in June.
Thank you, Jay. Looking forward to that.
Yes.
We'll now take our next question from Jason Celino from KeyBanC Capital Markets. Please go ahead.
Perfect. Thank you for taking my questions. Maybe my first one. On the morning call, you mentioned that most of the large deals in your pipeline are in the defense and space. Any color on how big this business is for Dassault Systèmes today? Maybe do these deals skew to maybe more a specific region? Is it the Americas? Is it Europe? Just curious there.
The defense business for us, I think we disclosed that, Béatrix, do we?
Yeah.
Yeah. Around 5%-6%. Yes. For the defense? Defense. Yes. Not for the aerospace. Not for the aerospace. Yes. The aerospace is exceeding 12%.
Go ahead.
Again, just clarification on the deals you're speaking about or the opportunities. Is it limited to Europe, or? Because I know there's a focus on defense in Europe. I was curious if that's where you're seeing most of the opportunities. No, it's really broad-based. It includes the United States. It includes Europe for sure, but it also includes parts of Asia.
Okay. Interesting. Maybe just one on SolidWorks. I think you've been very transparent about some of the trends you saw at the last couple of weeks of March. But the slowdown that you saw, was it more specific to the Americas, or was it more broad-based than you saw kind of in Europe as well? Just trying to think about the impact because obviously, the pause per se is only for a period of time. Just curious what you kind of saw at the end of March.
It was really broad-based across all the major geos, the major SolidWorks geos, including Europe, US, Japan, to highlight maybe the three biggest ones.
Okay. Perfect. Thank you. Thank you, Rouven.
Thank you, Jason.
Thank you. We can now move to our next question from Derric Marcon from Bernstein. Please go ahead.
Yeah. Good afternoon, guys. Thanks for taking my question. Two, if I may. The first one on your pipeline. Can you give us or share with us some granularity about the structure of your pipeline? Three months ago, you said that transportation and mobility were 30% of the total, so less than a year ago. What's the situation three months later? Can you also quantify? You said that you've got these large deals in sight in defense and space. As you rightly said, around just 5% of your total revenue based on 2024 numbers. Would this large deal change the weighting of this industry if you sign these big deals? Any color about the other large deals in maybe other vertical would be helpful. My second question is about the ramp-up of the large deal you signed over the last 18 months.
You said that it should add 1.5% points to your growth rate in 2025 versus 2024. I understood this morning that the phasing of this ramp-up is not linear across the year. Would you be able to quantify the phasing between H1 and H2? Is it zero in H1 and 3% in H2 to obtain the 1.5% over the year on average, or is it different from that? Thank you very much.
When I take the first two, I'll leave the last one.
Okay. Thanks, Pascal.
On the pipeline, I mean, the pipeline doesn't change in one given quarter. The structure of the pipeline is the same that what we just told you in February, right? Remember, for the vast majority of what we do, the average cycle is anyway for the large deals exceeding 12 months.
It is relatively well-balanced between the different industries, and we have less exposure to the auto sector compared to what we used to have a year ago. Now, the question related to the defense, I mean, you are smart to ask me if it will change the percentage, right? To give you nevertheless an order of magnitude, yes, it is probably a point. With this, you have an idea about the size of what we are talking about, right? And the ramp-up, good luck.
Yeah. There is no such thing as linear trends. There can be several factors that impact and create step-ups. Some of them are committed. Some of them are in negotiation. When we, for example, look at the Airbus large partnership that we signed in Q4 and the subsequent event in Q1, that was something that was not committed as part of the Q4 transaction.
We were able to contract that in Q1. That just is an example of some variability in this. We always need to take that into account. Nevertheless, the large transactions we have signed over the last two years, they have ramps that are contributing in 2025, but also in 2026. I'm not sure. I don't know where you have the number from of 1.5 points of gross contribution year- over- year. I'm hesitating to confirm that because I don't think that I've ever given that. Derric, there is definitely a positive effect. It's an estimate from you. I don't want to confirm that. Clearly, you are on the right point that the growth in subscription revenue gives us more visibility into the next quarter and the next year.
Those subscription contracts, they are recurring, and they give us an opportunity to do what we call value-up to expand and grow with our clients. For example, the large deal with the German OEM that we signed in Q4 did not contribute yet to the Q1 number. It is going to come in later in 2025. That is just one example of validating your assumption, Derric.
Very clear. Thank you. Can I add a follow-up? When we look to the term license, capital license revenue stream, so the $1 billion ballpark per year, would you be able to quantify the percentage of that revenue coming from upfront recognition of revenue on multi-year hybrid contract, just to have a rough idea of the volatility that it could create from one year to another?
Yeah, that is difficult, Derric, because contract types, they are changing. As you see, we are converting more and more of our traditional contracts to subscriptions. If they become multi-year subscription, that could be an upfront component. If they're multi-year cloud, everything is ratable. That is a very dynamic set of numbers. I think what's very important is 86% of our software revenue is recurring. More than 50% of the recurring revenue comes from subscription, and it's growing 14%. This gives us the visibility and the direction that we are on.
Very clear.
More and more of our clients are moving to Cloud. I think that's another element to confirm that trend.
You should move to annual recurring revenue metric or billing metrics on your side.
Let's discuss this, Derric. I made some comments this morning about the evolution of the reporting anyway because, again, I'm making this statement again this afternoon.
Splitting the different components between the license, the subscription, the maintenance, and support was, I think, useful when we were transitioning from the pure license model to subscription. Now, the vast majority of the growth is anyway coming subscriptions. I think there is no need anymore. We will continue for 2025, but for 2026, we will probably redesign the way we do the reporting because at the end, even if it's in the license line, as you say, Rouven, it's an upfront component of the subscription. There is a point to communicate along this way. It is another comment I want to make, but this goes also with your suggestion, which is to communicate also on other indicators.
If I can remove a line and you add another one, it's okay for me.
Thank you.
Thank you, Derric.
Thank you. We'll stop here. Thank you for joining the call. We would like to remind you that we will have our Capital Market Day on June 6th in Paris. Thank you.
Thank you. Goodbye.
Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.