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Good morning, everyone. I'm François Bordonado, Dassault Systèmes Investor Relations. From the company, we have Bernard Charlès, our Vice Chairman, Chief Executive Officer; and Pascal Daloz, Chief Financial and Chief Strategy Officer. I would like to welcome you to Dassault Systèmes First Quarter 2019 Earnings Presentation Meeting, which is also being webcasted. At the end of the presentation we will take questions from the audience and from participants of the webcasted call. Later today, we will also hold a conference call. Dassault Systèmes results are prepared in accordance with IFRS. We adopted IFRS 15 in 2018, so all comparative information is presented under IFRS 15. In addition, we adopted the new IFRS 16 lease standards as of January 1, 2019. Most of the financial figures on this conference call are presented on a non-IFRS basis with revenue growth rate in constant currency unless otherwise noted. For an understanding of the differences between the IFRS and non-IFRS figures, please see the reconciliation tables included in our press release. Some of the comments we will make during today's presentation will contain forward-looking statements, which could differ materially from actual results. Please refer to our risk factors in our 2018 Document de Référence. Let me know introduce Bernard Charlès.
We are on a good start for 2019 with a strong Q1. Total revenue is up 13%. The license revenue is also up 15% and all of this is really driven by 3DEXPERIENCE software revenue, which is up 26% excluding exchange rate. So we are delivering on the high end of the guidance on 7 out of the 11 industries that enjoyed double-digit growth. Transportation, mobility, Aerospace & Defense, industrial equipment, Home & Lifestyle for example, as well as High Tech, Life Science, Marine Offshore. We'll show a few examples of customer news flow from that standpoint. So basically, what can be said about the Q1 is that we are implementing our purpose with positive impact. Also, on the collaborative social innovation, we have very interesting news with the cloud adoption industry. I talked about it, especially industrial equipment and fashion as well as mining with the BHP selection of Dassault Systèmes with the experience platform. And of course, also under life science standpoint. So we are confirming on upgrading our 2019 guidance, upgrading it for currencies effect.So if we look at the strategy at work, we feel the purpose has been very well established for the company. Dassault Systèmes provides business and people with 3DEXPERIENCE universe to imagine, sustainable innovation, capable of harmonizing product nature [ on hive ].There are 3 spheres of digitalization that we are contemplating to serve products that [ fabbers here ]. The bio world and the move [ on biovia ] was a very significant one on that standpoint for the life science sector. On the energy and resources, natural resources, with the GEOVIA brand on the 3DEXPERIENCE platform. I will have a few examples today about those 3 world, if you wish, of how the digital world is transforming the real one. The first is in life science with really the digitalization of the life science sector on the healthcare system at large, which is having a huge impact on how there is a new setup being done for the ecosystem in life science. Here is an interesting connection, a showcase that we are doing between the bio world and the physical equipment with this wearable used for bio molecules biologics.It's really -- it's well known that Dassault Systèmes is very well-positioned in the personalized equipment for personalized health, especially with SOLIDWORKS on catch up of the design on simulation like stents, bulbs and miscellaneous equipment. But here is another illustration where the connection between equipment on the biologics create a fully innovative protocol for injectables. This device market is a huge market. We estimate it to be $8 billion by 2025 and of course, the biologic drugs represent today more than 50% of the pharmaceutical R&D pipeline. So let's look at the video.[Presentation]The cost of healthcare is also related to transforming the entire ecosystem. On this illustration shows the importance of connecting the dots between the Biologics and the equipment. We believe we have a unique position to serve this market in a different way and as many observers notice. The level of compliance when it comes to the certification of the equipment and the certification of the protocol for -- are significant in the sector, which calls for traceability, which basically is the value of the experience platform demonstrated in other sectors like aerospace. Talking more widely about the industry renaissance, we believe that it's far more than digitalization of the past. It's about game changer in many sectors. Production are focusing now of produced of one as opposed to volume only with personalized -- highly personalized capacity in the production line. So the digital production is key. Product as a service with key operation, that's why we see today visible the growth of the [ tenniel ] portfolio in digital manufacturing. Of course, the industrial experience to provide really [ a first of ] integration between design, production on product and operation, including the support of machine in operation. You will see in a moment the -- also the importance of this 3DEXPERIENCE platform for digital analytics. An example of that is in pharma biotech. One of the biggest challenge is the process, the molecule is the process in large molecules in the Pharma sector, which means that the process will decide if you can have a successful molecule or not or if you can produce it in volume, which means that intelligent connected system of production are essential. Good traction on this quarter, a confirmation of what is happening on the cloud. As we announced last year, Schindler has been adopting the cloud for escalators, which was in large scale an impressive showcase for illustrating the maturity completeness of our solution, creating the 3DEXPERIENCE twin of the escalators, and this quarter Schindler adopted the same approach for all its elevators activities. It's a breakthrough because it does change the full lifecycle about how you define with the contractor of the developer of the building, the product specification. And how those product specifications are feeding R&D and production to deliver the right configured solutions.So also noticeable was the proof from the marketers on the safety [ per ] from the Schindler company saying this is what we need to ensure that our contracts with developers are clear and well understood. A great showcase on a confirmation that it can scale in a large way. And also a mittelstand company in Germany, CLAAS, Schindler of course in Switzerland, CLAAS in Germany, they are doing agricultural equipment and they are investing also in China, having both companies in China and the way they are integrating those activities in China is using the 3D language as a way to remove ambiguity between China and Germany. It was quite intriguing for us to discover the extreme collaborative environment that has been established globally of such kind of equipment.And the incredible results in terms of quality of communication for the design and production integrating companies in China and Germany to provide new product portfolio for the Chinese market. They are also using the digital experience twin on incorporating IoT data intelligent machine connection to really improve the overall delivery. Those equipments are highly, highly customized for each markets of the world, and that's why the agility and flexibility of production systems are so key and also very strongly illustrated.The ABB Dassault Systèmes partnership was announced. We simply said we are demonstrating that horizontal integration can bring more value to clients as opposed to vertical integration. Customers want to have the choice with the equipment. ABB is a great company, highly diversified, they want to use our platform for their own businesses, and we want to use the ABB relationship so they can become an integrator, an industry integrator of the solutions to our clients. It's well-known that in the highly flexible manufacturing environment at Boeing, for example ABB equipments are being used, but there are many, many other clients that we have in common where the value has been well appreciated by clients to see this announcement going to -- this partnership going to a new level of integration. Horizontal integration is I think higher value to client as opposed to vertical integration.We have seen it in our own software in the past, and I think this will continue. Great partnership and we are satisfying our clients. One quick word on the trends on manufacturing. There is a big difference between digitalization of the manufacturing process and creating a platform-based manufacturing environment. The analogy would be the analogy of an Amazon. What Amazon did with the platform for retail, a similar thing is happening in production.The digitalization of each of the stage in production does not provide the results which are expected by clients. Creating a common platform-based manufacturing environment is a game changer, and basically this is what Dassault Systèmes is doing with the 3DEXPERIENCE platform. It's a differentiator from that standpoint and that also explains the double-digit growth in this area on the adoption by extremely large manufacturer.Quick come back on the move that we did with Centric PLM, Centric Software. As you know, we own about 66% of Centric PLM. We will buy their remaining shares in the next 2 to 3 years. And the dynamic of our success in the Home & Lifestyle sector is really very impressive. We are now reaching over 800 brands where, while you see them here of course, those are very, very well-known logos. And the reason why the adoption is so successful is because the product is simple, configurable, extremely easy to deploy and basically users love it. And it's used to do the PLM process, the product lifecycle process, to manage collection-based set of offers. It's also being used more and more to create the trading between the brand manufacturer and its points of sales around the world. So when point of sales are establishing the categories they want to sell and the pricing they want to do for a given market, they use this trading environment, the Centric PLM platform, to do so. We have a very good dynamic. We are very pleased to have done this acquisition. The results from a financial standpoint for those companies are significant in terms of impact on sales, reduction of inventories, on significant reduction of inventories, you see between 20% and 40% on the reduction on logistics cost. So basically, this is a small team that could reach the world because the value clarity and the simplicity on adaptation of the product to the specific market is extremely strong. And you see many, many new clients here like Adeo, a leading international home improvement retailer based in France, and you have the list on this presentation.Milano design week 2019 was 2 weeks ago, was very, very successful. Our objective there is to show that we are connecting the B2B2C and showing the impact of the design world. 25,000 visitors came and saw what we were presenting here with our clients like Honda and many others were presented. The Milano Design Week is like the fashion week of design. There are so many creative things going on. We had high visibility in the media. And also, the world's best designer came and spoke on these roundtables to show how both SOLIDWORKS, CATIA and 3DEXPERIENCE platform can change the world, moving from design thinking to experience thinking.So this week, this morning, we announced a milestone cooperation with -- that was started 2 years ago, over 3 years ago with BHP Billington, the largest mining company in the world. And we have announced that we have reached an agreement for a strategy partnership for long term. This is I believe as important as the partnership we announced with Boeing when we did the 777 functions, the future of aerospace with digitalization of aircraft. Creation, production and operation. And this is an holistic approach from basically bid to port, it's really the digitalization and the optimization of core process to improve profitability, to really increase the capacity to really plan based on market conditions, to really elevate the workforce and allocate that best workforce and also of course, fundamentally to increase safety and comply with very strict environmental regulations.So the BHP Dassault Systèmes cooperation is based on significant pilots that we have been doing for -- showcased in this we have been doing for the past years, which have provided significant results leading to this agreement, which is a multi-year agreement for the sector. We believe that this sector is behind in terms of digitalization, and the [ 3 extend ] platform will be [ an ease ] becoming game changer to connect the dots in this highly complex CapEx, OpEx-intensive sector. Here is a quick illustration.[Presentation]This is game changer for the sector because many things have been done as point solutions in creating a platform-based operation where all the data connected together is #1 possible has been demonstrated now on this changing the capacity to adapt the mining operation to the market conditions basically, which is, for them, very, very differentiating. So we are very pleased to announce this partnership and I think it will probably resonate in the entire sector and create a new will for the sector to move from highly intensive consulting on highly customized software solutions to a more -- a set of generic industry solution approach.Now while we transition to Pascal, who is going to comment to you on both the top line, the growth, 17%, as well as software growth on the new license growth, the improvement in margin. As you noticed, we did several acquisition last year, the 2 main one being Centric PLM, Centric software and the second one being IQMS, now DelmiaWorks -- remember we want to do mainstream ERP for the SOLIDWORKS clients, which, by the way, is on a good start. Despite that, we are improving the operating margin, which shows that I think we have the business in good health. Back to you Pascal.
Thank you, Bernard. So you can notice it's a good start for the year, I mean the goal drivers are put in place, and the contribution of the 3DEXPERIENCE platform, which is really the core of the engine to a certain extent, growing at 26% and represents 40% of the new license, which is almost in the same trend as what we have seen in Q4 last year.If we zoom and we go a little bit more in detail, let's start the business review and let's start with by the geo view. So Americas is growing very well, 18% for the software revenue for this quarter. Remember that Q4 was a little bit disappointed for this region so we had some catch up. We had some large deals shifting and we have been able to close those deals in Q1.The second point is the growth is driven for Catia, sorry, for Americas by also the good subscriptions. You have the impact of Boeing, but this is not the only one. And last but not least, you also have some contributions of the acquisition, especially Centric PLM and IQMS [ software ].Europe is growing at 10%. And it gets, in Europe, it's mixed, you have a good growth in South part of Europe, Central and the North. And you have a modest growth, I should say, in the rest and especially in what we call [ Euro West ], growing at around 5 to 6. Asia, 8%. The good point is notice here we have a very good performance in China and AP South with the growth being close to 20%. So I think it's really steady. Interest on the consequence, the growth is a little bit more modest from the rest. We had again a good quarter in Q4 in Japan and we have some catch up coming for the rest of the year.If you look at by product line, CATIA is growing at 6% so it's some improvement compared to Q4 last year. And the improvement is coming again from North America, with a good subscription revenue. But also, the vast majority of the growth for CATIA is coming from 3DEXPERIENCE platform, which is again a good sign because it means that this new product line is gaining traction in the core industry as well as in the diversification industry.ENOVIA is a star for this quarter, 19% growth. I mean it's -- and from an organic standpoint, it has a growth here that's high double-digit license revenue growth. This is a proof that when we have a good traction with 3DEXPERIENCE platform and also we are signing [ lass ] transactions automatically the ENOVIA performance is here. That's really the correlation you can extract and conclude from this analysis.SOLIDWORKS is growing at 5%. Keep in mind a few things. One, we had a strong base of comparison with revenue up 13% last year, and also if you remember I committed to you that we will achieve the 10% growth for the full year last year so I think I put some pressure on the channel and I probably drive it a little bit the pipeline early this year. For the full year, I'm still expecting to have SOLIDWORKS growth between 5% to 10%, is in line with the guidance I gave to you early this year.There is also an important point for SOLIDWORKS. We are introducing the experience -- the 3D experience that works finally, with not only the introduction of IQMS, a recent acquisition we did, but also all the other product line we have available on 3DExperience platform. So this is also a key point, because it's a way we will continue to fulfill the growth for SOLIDWORKS over the time. The other software line is growing nicely at 22%, so this is also the proof that all the decision we took few years ago to enlarge the scope the domain we were serving is starting to pay off, because it's a nice growth. And specifically, this growth has been driven by the manufacturing space and we do a zoom just afterwards, but also the simulation space. So those are 2 product lines growing very well and having a strong demand on the market right now.If I zoom on the manufacturing space, so the Delmia performance is up 25%. Total software revenue, it's a pure organic software revenue, because IQMS, so-called DelmiaWorks is not yet integrated into this number and the Delmia Quintiq, which is a subset of the plan right now, dedicated to logistics, the inbound logistics and the outbound logistics as well as the supply chain is growing at 78%, which is quite impressive. And the growth is really coming from the core industry. So that is also a proof point that the strategy is paying off because we have been able to leverage large incentives we have in the aerospace and defense firm position and mobility to expand in this space. And now the combinations of DELMIA, which is unique, it's the only product suite having the ability to do the engineering of the production processes, to run the manufacturing facilities, and at the same time to manage and optimize a supply chain with one single platform. This is unique on the market, this is highly competitive against the competition and here you have the proof.If I zoom on the Quintiq we have this win, Eurostar, but it's one amongst many we have in this space. In fact we have a good market share in the [ highways ], and the reason is because we have been able to improve the frequency of the trip by doing something which is key, by optimizing the planning of trains with the drivers, but also all the maintenance of the trains. So it's a mix between the workforce management and the maintenance activities you have to do. And this is the way we improve the trip frequency and this has a direct impact on the bottom line.So we had a significant win in the suite highway for the London tube as well, and the Italian as well. So clearly, we have a significant market share in the space.From an industry standpoint, Bernard already mentioned it, so 11 of -- 7 of them are growing double digits. It's all the core industries, so the auto sector, the aerospace and defense industry equipment and also some of the diversification industry, the Home & Lifestyle, so Bernard made a few comments on this. The itech, the itech is going well for us, and it's not only in the semiconductor but also in the consumer electronics as well as in the telecommunications. So clearly, in all the different segments, we are seeing double-digit growth.In life science, specifically in the biotech and pharma and in Marine & Offshore. A few points for you guys, you remember we used to have 12 industries and we have decided to fine-tune a little bit the industry segmentation so now we have only 11. It's not because we are [disinterested], it's because we are more precise. And the changes are the following: we used to have consumer goods, retail and now it's so-called Home & Lifestyle because this is really where we focus and it is coming from the acquisition of Centric, but also with the rest of what we do. We have also renamed what we used to call energy process and utility, it's so-called now Energy & Materials because the materials part is all the upstream and downstream activities in fact. And also, which is probably key for you guys, we have decided to rename ADC by construction, cities and territories because we are convinced this is the way we're going to displace this sector by combining the 3 things together. Okay? So if we zoom a little bit more on the financial highlights. On the total revenue, you'll remember, up 13% excluding the currency effects, the organic growth is 8% so an improvement compared to last year for sure.On the software revenue, 12% growth excluding the currency effects, also 8% organic growth. And if we split the software revenue between the license and the subscriptions we have the results 15% growth for the license, which is in the range I gave to you. More important, the organic license is up 9%, so clearly, we are getting close to the 10% you expect [from us]. And the recurring revenue is up 8% and it is a significant improvement compared to last year because it's plus 2 points. And you remember one of the key points for this year is in fact we don't know what will be the macro impact on this front half of the year, but when we gave the guidance to you, I was pretty confident on our ability to improve and accelerate the recurrence of any growth, and here you have the proof, 2 points compared to last year for Q1.On the services, again, 20% growth excluding the currency effects, 9% organic growth. I think it's relatively aligned with the software performance. We see a very good traction on those services related to 3DEXPERIENCE platform, as usual. We also see a good recovery on the services coming from Quintiq and Apriso, there we have Apriso and then Quintiq, because you have seen we have a higher growth in software so we also have to fulfill the related services activities. And 3DEXCITE is going a little bit better so we have not yet fully recovered, but compared to last quarter, I think we did some improvement. The midpoint on the services is the gross margin, it's .5 point below and it's mainly coming from the fact that not only we are giving more and more to the third party, so remember we decided a few years ago to reinforce the partnership with companies like CAPGEMINI, Accenture, Deloitte, TCS and this is what is happening. But also we are a little bit slow in the hiring process, and we had to subcontract a little bit more than expected for the first quarter. So nothing structural, we will recover the gross margin on the services side.If we look at the operating margin, here you have the detail. So the activity improved by more than 2 points, so it's really a good performance. And the main reason is you have more contribution of the recurring part of the software and automatically these have a direct impact on the EBIT margin. But also, we are a little bit slow in the hiring, as I was telling you. And I'm expecting to catch up in Q2 and Q3.The currency effect is also having a positive impact, .5 point, and the dilutions continue to have -- the acquisition continues already to have some dilution with minus 1.2.This is for the operating margin. On the EPS side, EUR 0.87, so in the high end of the guidance, just only 1%, plus 13% if you include the currency effects and it's a direct consequences of the top line growth and the operating margin improvement. Point I would like to notice is the tax rate for Q1 is 29.7% so it's almost a point higher compared to last year, and it's coming from the fact that in the U.S, you have the new tax reforms and there is a specific topic related to what we call beat. And it's all the -- it's the minimum tax payment for all the foreign related parties and this has an impact on the intercompany royalty or taxation. Again it's not new for us, it's well integrated into the guidance for the full year, but I just want you to be aware and understand the reason why you have this change. On the cash flow side, very good performance of EUR 489 million cash flow for Q1. We are getting close to EUR 0.5 billion, plus 20% compared to last year and we are lending with a cash net financial position of EUR 1,897 million, which is a nice position to have.Nothing to say specifically on the operating cash flow. The vast majority of the improvement is coming from the activities and it's in line with the growth on both sides on the liability and the receivables.For the financial objectives, 2 things. As Bernard stated, we have decided to upgrade the revenue having EUR 19 million coming from the currency effect in Q1 and also we have adjusted the Q2 currency for the dollar. You remember, we used to have EUR 1.1 for $1.20 and we have adjusted to 1.15, so these are the direct impact of increasing the revenue by EUR 16 million. And on the EPS side, we are adding EUR 0.05 on the same mechanism, EUR 0.03 coming from Q1 and EUR 0.02 expecting coming from Q2 from the currency effect. That's it for the full year.The rest is unchanged, you can -- you will see. So we are still expecting license growth between 10% to 12%, a recurrent organic improvement by 2 points, 1 to 2 points and an organic improvement of EBIT margin by 80 basis points.For Q2, the guidance we are giving is -- for the revenue is EUR 920 million to EUR 940 million for the revenue. Growth including the currency effects between 10% to 13%. And the split between software license and the recurring is the following. 10% to 12% for the software, 11% to 14% for the license and the recurrent part between 9% to 11%. Again, if you compare to last year on the recurrent side, it's 2 points higher than what we did. The EBIT margin is pretty stable at 29.5% and the EPS range is between EUR 0.74 to EUR 0.77 and a growth between 7% to 12%. That's it for the objectives.I think it's a good start for the year. You will be in agreement with me. And at this stage, the visibility is good to confirm the objective for the full year. I think we have been able to demonstrate that we are still having a good momentum to capture new domain like the manufacturing space and also to win new customers, significant one like BHP. The cloud is also something starting to be visible from you guys and we have been able to display the competition thanks to the cloud solution and this is what happened at Schindler. So I think the foundations to continue to fulfill the growth are well in place. Bernard and I are ready to take your questions. Thank you very much.
We'll take the first question from the room and then from the webcast.
So maybe my first question was really around your visibility into the rest of the year. It's encouraging to see a lot of larger or strategic wins, and more importantly both in core and diversification industries. So what sort of conversation are you having with the customers now based on the references, how is the pipeline building and how do you think about the second half of the year and the kind of puts and takes in terms of how you get there? And then secondly, my question was really around, there's been some speculation in the press around M&A, maybe you can sort of, remind us sort of on M&A, kind of where the priorities are either by vertical or by product area and to the extent that you're in a position to comment on any sort of speculation that's out there.
Thank you. Pascal, you want to take -- I just made a comment on the visibility, but maybe additional commentary.
So like last year, we are relatively backloaded, so you were mentioning the last -- potentially the large additional contract we could have in the pipe. We have some. It's probably too early to give some indication about where we are but I think the visibility is still good. It's not only in the core industries, also as you mentioned the new industry, mining is a good example but energy, process and utilities, itech is also growing very well. So I think that's it what we can say. On the channel side, the visibility is also a little bit better in the second half of the year so I just want you to take this into account, the pipeline is well in line with what we could expect at this stage of the year.
It's quite well spread across geographies, Asia of course is strong but we think also Europe can sustain its past growth. Related to the second question, of course, it's a good practice to not comment so much on rumors. But I think your question is related to the strategy. If you look at, back at what the moves we have done in the last years, I think they were aligned with the strategy on innovative. So from a strategic standpoint, many reactions were it makes sense. If you think about Centric PLM, it's a significant acquisition overall, but it's about making mainstream PLM now accessible to new sectors. Same for IQMS, as Pascal said DelniaWorks I think this was extremely welcome. So aligned with the strategy on innovative because people did not necessarily predict that those would be the target. Now the second part of your question is relating to the priorities on the arbitration between sectors. I think the arbitration is relatively easy for us to do. It's related to the maturity of the market, of the readiness of the market to adopt the platform, what I call the platform phenomenon for design simulation production and operation. [indiscernible] from that standpoint. We know that many that we serve have been showing the way. Clearly, the announcement today with BHP is a significant move for the natural resources. The success we are seeing on the R&D with BIOVIA on 3DEXPERIENCE give us some very interesting perspective about the life science market at large, for 2 reasons. Biologics are complex, and for us connecting R&D with manufacturing is a differentiator and there is not many players in town on that. Connecting the Biologics with the equipment as illustrated today is very unique because Dassault Systemes is almost a de facto stronghold in medcare equipment. So it's a sector which is big and we have to find out what is the best way to expand the solutions in the future on that side as we did for other sectors. So let's see.
Another question from the room? Michael?
Carrying on the theme out there, I mean, you had EUR 1 per share acquired earnings target for 2023, clearly that is not a trivial number so larger deals should be in your M&A pipeline, I mean, would the business be willing to go into a net debt position for the right acquisition? And then I've got a couple more.
Well, I think with the dynamic of organic growth on the perspective that we have with the huge sector that we serve, 11 industries on 61 segments, we are not prisoners of having to do acquisitions to reach our objectives. When we did the analyst meeting, we provide a framework about where those factors could be coming from. But that should not be the spec of what we do. The specs of what we do is roughly, to make it simple, double the EPS every 5 years. That's the specs. Where it's coming from is more driven by the industry dynamic. So don't take the split between M&A contribution to EPS growth in the existing sector as a static split. It can evolve. That's important to keep in mind because I don't want to be a prisoner of doing moves that maybe should not be the right move to do. Related to the second aspect of your question, which is possible targets in sight, that has always been on the radar. We look at every year so many possible options. I think we are financially in good health. And while we have been kind of conservative, but very focused on technology and talent more than new space acquisition -- not in the case of BIOVIA because with Biovia we are going in life science and we are seriously going into life science, I think we have a lot of flexibility on the -- we have a decision process in the company. We are a family-controlled company and we can make decisions quickly. So if good opportunities occur, we will do the right moves because we are long-term oriented. It has always been the case in the last 30 years, I think we have proved it. We are long term and I think [the fact that we are good managed company is there]. So we have a wide scope of possibilities on scale, too.
A couple of follow-ups. On Boeing, there's obviously been some operational issues with the MAX jet. Can you say if that has had any impact on the timing or rollout as they work with you? And then, Pascal, just on DSOs, the cash flow seems to show a sort of, a good reduction in DSOs or debt, so working capital positive but the actual back of the notes shows an increase in DSOs from 82 to 86. I'm just a bit puzzled. It may be time for a [ 15 ] but can you walk through that?
Thank you for asking the question on Boeing. When a customer is facing challenges, we are always all concerned. Zero impact on both visibility contracts and the type of scope of activities we are doing together. It's really zero impact. Why so? Because it is a multiyear contract. It's already established and any companies of that size are facing difficulties for one piece of the portfolio. It's not -- Boeing is not the first, it's happened to many others. You remember the Toyota challenges back years ago or the Volkswagen challenges not long ago. So those are extremely professional high-quality groups, their focus is of course, to fix the technical problems and also the capacity to continue to do the product plans. The product plans as well as production of the backlogs when those are in fact resolved are their priority. So zero impact for Dassault Systèmes. And we feel even closer to companies when they face challenges to see if we can find new ways to help, especially on those types of highly integrated systems.
Coming to the DSO. The DSO increased by 3.5 days. One day is coming from the acquisitions because when we acquire a company, usually they do not have the discipline we have to do it. So this will be fixed. And then you have 2.5 day coming from the fact that when we signed those big contracts, usually 90 days is standard, more than 45 days so this is the flip side with those large contracts it has this impact. So we will be able to resolve and to absorb some of them, but not all of them.
We'll take now questions over the call. Alice?
[Operator Instructions] Your first question comes from the line of John King from Bank of America.
Two questions please. The first one was on the dynamics within SOLIDWORKS. Clearly, the growth is a bit slower this year at the moment than in prior years. Maybe just talk about the situation competitively, any changes there? And we tend to think of SOLIDWORKS as a lead indicator, so just your commentary on that would be interesting. And then more widely for the group, we continue to see good deal flow momentum and so I guess, following up on [ Mo's ] question, how is the outlook, how is the pipeline looking for you as you head to even into 2020, are you still confident of accelerating towards the guided range? I think you were talking about 9% organic growth in the medium term so maybe any thoughts about how plausible that looks in the next 12 months?
Pascal, would you allow me to comment on SOLIDWORKS?
Yes, please.
The SOLIDWORKS world [ on plan this year ] was very successful. The user base is highly satisfied, they continue to grow. You're right, John, it's -- the organic growth is lower at this point in time. I don't think it's related to any competitive -- special competitive situation, by the way. I believe that it's more related to our transition to expand the SOLIDWORKS offer, our position with our resellers. To expand our SOLIDWORKS offer with cloud, analytics, manufacturing, what I call added value to the current SOLIDWORKS world, which is designed [ subject of ] values. That's a bit perturbating for our resellers. I think it's normal. They have been running for 22 years, selling only one thing, SOLIDWORKS, successfully. I believe that the time they invest to expand our knowledge, our know-how, our sales force, to sell the platform, the cloud is having an impact on the productivity of the sales force. But we have to go through it and I think it's an [actually] good discipline to do it. Our products like xDesign, this is design through a browser of any device, is extremely welcome by the SOLIDWORKS community. Design anytime, any device, anywhere through a browser, that's unique. Collaborative platform on the cloud we are replacing Dropbox, which is unsecure for our clients, with a secure on the cloud environment including -- we are replacing Dropbox and WhatsApp for our clients to do secured collaboration. That's what we're doing with the 3DEXPERIENCE platform on what we [ call swim ]. So it takes a bit of time for our resellers to understand that and to know how to engage with them. The last factor, which we should not underestimate is -- and I want to take the opportunity also because I know resellers are listening to the investor call. They are questioning all our competitor are bypassing the reseller network, get rid of it, I don't need you, I'll try to reach the customer myself. That's not our policy. We will continue to use our resellers to provide service consulting on high value to our clients because they need it. But the fact that we go cloud, we get the connection to users, with Dassault Systèmes. We have to build the trust to demonstrate that there is no risk for them. I think this progress has been done in the last 12 months. We still need to make it -- make them comfortable with it. On the last point that we discussed before is related to the business model. When you sell desktop, you get an initial revenue, therefore royalties on your license and then you get the revenue, the annual subscription fee. When you sell cloud, it's native subscription. And there is a little bit of cash flow challenge for them, we find out new solutions to help them solve that cash flow that is an issue, probably for 2 years. So when you upgrade the snowball of subscription, then it's sustainable business. But before moving from desktop selling to cloud with the proper business model requires a little bit of tuning. Those are basically the 3 or 4 things which are impacting that transition. But I am very comfortable with the fact that it's going to happen in the proper way this year to build up this growth that we want to build up with expanded portfolio. Long story, but 4 parameters, training, new offer, cloud, and the adoption -- adaptation of the new business model.
John, the second question was related to the visibility of the pipeline for 2020. I think we signed a decent number of large deals multi years. So Airbus, Boeing, EDS, BHP now, ExxonMobil, to name only a few. So definitely this give us some additional visibility on a multiple year basis. So it's point #1. Point #2 is the recurrent part of the revenue is also improving. So I think we are gaining in terms of visibility over time. Now coming back to the questions related to the organic growth. If you look at Q1, we are at 8% on the recurrent part, it represents 75% of the software revenue, it's plus 2 points compared to last year. We are growing at 9% on the license side, organically speaking. So we are pretty close to the target. That's it.
Your next question comes from the line of Adam Wood from Morgan Stanley.
I wanted to dig in on a few things, if I could. Maybe just first of all on the mining space for the deal with BHP. You mentioned, Bernard, that different industries are at different stages of adoption. Can you talk a little bit about where you see the mining industry? The fact this is one of the later deals that you signed, does that suggest this industry is lagging a little bit? And then when it comes to contracts with other companies in the space, could you talk a little bit about the competition and what those other mining companies are using today. Is it a mix of solutions, homegrown solutions? So is this going to be more displacement of competitors versus greenfield? Just a bit more background on the mining industry would be very helpful. And maybe just on the life sciences space. If I kind of think about it between data management and process management versus the design and simulation or rather the modeling and simulation of molecules and therefore the drugs, could you talk a little bit about where your business is today and where you see the biggest opportunity over the next 3 to 5 years and again the competitive landscape is there anyone very big in those areas that would be a hindrance to you getting to those ambitions? If you could give us a few thoughts on those 2, that would be great.
Thank you. On the mining side or natural resources at large, this market is very large. And if you look at the current situation of the big players, it's a lot of homegrown legacy systems. In fact in some way it's astonishing from that standpoint. It's really -- it has been said by a lot of consulting services. We have incredible numbers in terms of spending. We want to change that basically with the platform approach and that is what we are doing with BHP. I think so that BHP announcement I think is a tipping point. I think it's showing that the platform, the 3DEXPERIENCE platform, can connect things which have never been connected before, which means planning, responsiveness to market situation, commodity market situations. On the management on allocation of resources, which are gigantic, frankly speaking. So as you know, we started with the geology and geophysics aspect with the acquisition of [ Gencom ] now called GEOVIA. We wanted to show to the sector that we could address the core topics from understanding the business. I think the sector through that conversation has discovered that we can do the full pipeline with the 3DEXPERIENCE platform on the collaborative aspect. This is what is happening. I believe that the other players -- this is an eye-opener for all the players and we have been interacting with them. And I see this sector as midterm as a big sector as strategic as many of the other heavy industries that we serve, so I'm very confident. There is no -- the competitive landscape is a collection of niche software. It's more consulting, customized software, niche software. No one provides the kind of solutions. As a matter of fact, in the case of what we have announced, there was not really competitors, it was about showing can we do the job or not bid to port? So that's exactly a sweet spot for Dassault Systèmes when it comes to serving CapEx, OpEx-intensive industries where there is a lot of spending, but that could be redirected for the right solutions. So we are very positive on that. So I think I have answered question 1 and 2 on the competitive landscape, Adam. On the question 3, which is related to life science, we start where we are on this side with GEOVIA and 3DEXPERIENCE. We have outstanding showcase we've announced already with Amgen, for example. For the Biologics on many other clients because biologics is very complex and it's connected to the way you manufacture things. You cannot get the large molecules without the process; being able to manage the process, manufacturing process, is so key. We see successes in manufacturing in life science. BIOVIA [ discover ] is big data analytics and data from production and we do reverse engineering of data and production to improve their production process of Biologics. This is under deployment. I cannot refer yet to new wins there. It's too early but we will come back to you with the wins there related to the deployment in manufacturing process of Biologics, which is very strategic for them because you have no molecules without the process. Now of course, between R&D, you have a lot of phases, specifically 3 phases, which are called Phase I, Phase II, Phase III of a clinical trial where there is a lot going on there, both in modeling, simulation and data acquisition, to really observe the way those tests are being done. On the platform for us is always a platform with one target, connect things which have never been connected, we will have to decide with our customers how we connect those dots. There are multiple ways to do it, integration, open data format. So still things need to be defined, but the dialogue with our clients are going extremely well and they are open to share with us the comparison between the different approach on that sector.
We'll take one last question from the webcast. Alice?
This final question comes from the line of Stacy Pollard from JPMorgan.
Just at the very beginning you mentioned cloud adoption. Can you say what percentage of revenues that is today and where you see that going? And then maybe a little dig in on SOLIDWORKS. I know you discussed this, but specifically around the cloud, what investor interest are you seeing there and is it possible to quantify, I mean, just big picture the approximate percentage of customers that are now looking to take SOLIDWORKS in the cloud, just to see if there is a little bit of a shift there since you really launched it quite strongly in February at your SOLIDWORKS event. And then last question on ENOVIA was particularly strong again. Is some of that Boeing and if you look across the board, do you think that you're really gaining market share here now?
I will let Pascal comment on the revenue. I would like to address 2 things with cloud. First of all, how do we measure our cloud dynamic? Number of customers, number of users on data volume. Number of customers, number of users on data volume, it's really growing extremely fast. We also look at real project versus trial. Most of what we see on the cloud for Dassault Systèmes is a real industrial project. Airplanes, e-airplanes, e-vehicles, medical equipments, escalators, elevators, you've seen that with Schindler, [ with capture ] is also an example of the cloud. So we -- the footprint we have with the cloud showcase is extremely strong from real industrial implementation in large scale. The revenue yet is not big because it's a subscription, it takes a little bit of time and Pascal might give you a little bit more on that. The last point is related to the nature of our clients for cloud. We target public, private cloud, On-Premise cloud. The customers you mentioned in your -- the biggest one we have are seriously looking at On-Premise cloud, which is basically what we did for Jaipur, India, for a city, where basically it's On-Premise cloud administrated by Dassault Systèmes with Dassault Systèmes norms. So we see that cloud as exactly a public cloud that we provide service to someone else. It's a single point of administration. That's the way we are doing it also for Singapore. That's the way we will be doing for very large clients who are going to delegate to us the seamless operations of the cloud so they can every x weeks enjoy the full update, seamless because today, we think we master totally DevOps from the cloud standpoint. We had in the last year about 8 major online updates that took just a few hours on all users that, hundreds of thousands of users in the world were up and running in the next hour as we see if we update version. So the system is now fully industrialized. And as you remember, last time I think I showed you the map around the world, the map of our cloud continuing to expand for Dassault Systèmes, what we call upscale cloud. We continue to put them in place and we use that elasticity of Amazon for it. So yes, Stacy, very large clients are working with us to build the roadmap to private cloud.
So for the revenue coming from the cloud, we are not communicating about this. and there is a good reason for that and Bernard said it. The point for us is not to transform the model from a pure upgrade model to a subscription space model because we have already 75% of the software which is recurrent. I think we are in completely different positions compared to the competitions, the cloud is for us a way to reach new users, to develop new usages and this is where we are focusing on. I think this is probably more important for you to listen carefully the story we are giving to you, telling to you, related to how we could expand the scope of what we do, how could we reach users, we are not able to reach with the traditional model. I think this is where the growth is really coming from. Coming back to the question related to SOLIDWORKS, I think there is one thing you should keep in mind, Stacy, we are offering the 3DEXPERIENCE platform to the SOLIDWORKS installed base only on the cloud. So this is I think a good indicator about the penetration rate we are expecting, which is almost 100% at some point of time. So this market is really suitable for the cloud. And again, the value is not to substitute the desktop solutions with an equivalent on the cloud. We are not bringing too much value if we do this, it's by providing a platform proposal, which is different because it's a way to connect the dots, it is a way to collaborate easily with the rest of the world. And this is what this market is looking for.
On the ENOVIA side, I think your summary, Stacy, about -- ENOVIA is unstoppable on the 3DEXPERIENCE platform. All the wins which are coming are really 3DEXPERIENCE on ENOVIA. Frankly speaking, I don't see how a Dassault Systèmes client will select something else.
So would you say you're replacing some...
Why, because the value is platform.
So it's fair to say you think you are...
Game-changer is platform. That's why we believe that ENOVIA from that standpoint is a logical easy decision for clients.
With that, thank you very much for participating, connected to this call this quarter. We're in good shape for the full year 2019 [ says 2 ]. And don't push too much the rumors, thank you very much.