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Dassault Systemes SE  (NASDAQOTH:DASTY)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by. Welcome to the Dassault Systemes Third Quarter 2018 Financial Results Call. At this time, all participants are in a listen-only mode. A short overview will be given followed by a question-and-answer session. (Operator Instructions). I must advise you that this conference is being recorded today.

And I would now like to hand the conference over to Francois-Jose Bordonado, Vice President, Investor Relations. Thank you, please go ahead.

Francois-Jose Bordonado -- Vice President, Investor Relations

Thank you, Andrea. Thank you for joining us on our quarterly earnings conference call with Bernard Charles, our Vice Chairman and CEO; and Pascal Daloz, Executive VP, CFO, and Corporate Strategy Officer. Some brief reminders. Dassault Systemes financial results are prepared in accordance with IFRS. During 2018, the first year of implementation of IFRS 15, we are providing IFRS financial information on those in IFRS 15 and IAS 18 basis. All figures and comparisons on this call are presented under IAS 18 and all 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 reconciliation between IFRS and non-IFRS schedules in our earnings press release. Some of our 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 de reference. A copy of this morning's webcasted presentation is available on our website and its prepared remark will be on our website shortly after the call.

Bernard, the floor is yours.

Bernard Charles -- Vice Chairman, CEO

Thank you all for joining us today. To begin, let me share my perspectives on our progressive, the first-nine months. We have delivered a solid year-to-date performance and a strong first half combined with the third quarter well in line with our financial objectives. For the first-nine months, total revenue software licensees and recurring revenue, all have a common growth figure at 9% excluding exchange impact. We are building a sustainable growth driver of other medium term with our 3DEXPERIENCE platform on industry solution experiences.

On a year-to-date basis, our 3DEXPERIENCE software revenue grew 19% at constant currency. A major component of expanding our reach on market leadership is true geographic diversification. High growth countries software revenue increased 18% year-to-date and they represented 18% of total software revenue. We saw strong growth across many countries and the results also strengthened our market position in the different industries we address.

Looking at our performance by industry. Our year-to-date software revenue increased double-digit in constant currencies in seven of our 12 industries with transportation and mobility, energy, process and utilities, consumer goods and retail, and consumer packaged goods and retail, marine and offshore, natural resources, and architecture, engineering and construction. Finally, with our progress to-date on fourth quarter outlook, we're confirming our growth objectives for 2018, targeting a total revenue growth of 9% to 10% at constant currency and double-digit earnings-per-share growth.

As we have discussed, we see a global industry shift, we call it the Industry Renaissance. Companies across all industries are reinventing themselves to provide new categories of experiences revealing new categories of customers. This long-term trend is going to accelerate with the platform factor indeed producing new experiences required, excellent in operation, and high added-value ecosystem. With the 3DEXPERIENCE platform, we provide an operating system for customers to power industry solution on new business model for customers to cover the value network, basically the shift between supply chain to value network. All over the 3DEXPERIENCE platform on the cloud enables company to very quickly launch and create full digital continuity from day one, as we see both in our commercial business and in our 3DEXPERIENCE lab, our accelerated for our start-ups.

3DEXPERIENCE lab is really asset to a footprint in the world of the makers. In that regard, last quarter, I discussed our 3DEXPERIENCE innovation centers, which are part of the global effort by countries focused on industry and workforce for the future. In our center in Wichita in the United States, we are helping clients innovate in a new experiences, adopting new technologies, exploring out to streamline tools, method and processes in a very short period of time, thanks to the experimentation that they undertake at the center, where they can basically do everything across the lifecycle. To a greater industry positioning at large, our 3DEXPERIENCE innovation center in Beijing is helping companies to prepare the workforce of the people to address new challenges.

Today, I would like to discuss a second major initiative, which is our 3DEXPERIENCE lab, giving us a footprint in the world of the makers. We want to create an environment that will effectively be an accelerator for start-ups. In our presentation this morning, we highlighted a ranch of projects under way. Among them are ZERO 2 INFINITY creating a small satellite launcher as well as LEKA, a multi-sensory robot for children with special needs. I encourage you to look at these amazing examples. Our US Fablab was setup in collaboration with MIT's Center for Bits and Atoms, and continues for MIT, the world benchmark. We were pleased that Professor Neil Gershenfeld, Director of MIT's Center for Bits and Atoms and a founder on key Influencer on the global Fab Lab movement spoke at the grand opening.

Our 3DEXPERIENCE Fab Lab in Boston is connected to over 1,800 maker spaces worldwide through the Fab Foundation. We opened our first Fab Lab in Europe several years ago, we provided those maker spaces with SOLIDWORKS, and more recently, we added xDesign, the new generation of SOLIDWORKS product through a browser based on 3DEXPERIENCE platform, as well as the 3DEXPERIENCE services, in particular, the social collaboration services, regrouping the million of SOLIDWORKS users in the world on order marketplace services are also connected to that same platform.

So from our client to the makers' world, there is a seismic shift under way. This is why we see a significant runway and opportunity for the Dassault Systemes. We believe industries are rising investments around transformation that will drive significant innovation over the next five years. In other words, these investments are indeed time-sensitive. In all sectors that we serve, whether Transportation & Mobility, Aerospace & Defense, or even in Energy, Process & Utilities, we observe a radical transformation of the offers. All businesses are putting their next-generation portfolios at the top of their agenda.

In our largest industry Transportation & Mobility, there are significant investments being made with over 100 new start-ups around the globe. In Research & Development to address the technological challenges with electrical vehicles are in autonomous driving, where virtual simulation will be required, will be mandatory for driving certification. t the recent Paris Motor Show, which is the biggest in the world, companies shared their expectations to have an important portion of their fleet, the electrical vehicle within the next five years and safety acting as an accelerator for introducing higher levels of assisted driving features. So, safety, pollution and traffic are key areas, where innovation and resources are being focused. In energy, process, and utility companies are making significant investments in two principal areas. In capital facilities lifecycle management and in advanced materials lifescience management -- lifecycle management.

Last quarter, we discussed EDF and also ExxonMobil. EPU represents and also a major industry undergoing transformation. We see that clients adopting our 3DEXPERIENCE platform are also using it to enable them to become platform companies in the way to deliver product and solutions. In 2017, we announced that Bureau Veritas, a world leader in laboratory testing, inspection and certification and services, adopted our 3DEXPERIENCE platform for marine and offshore.

Today, it is now using this 3DEXPERIENCE platform for the nuclear industry, as environmental and safety-related regulations in the nuclear industry increasing number on complexity. Bureau Veritas needed to improve its efficiency when interacting with manufacturers for their device certification. It adopted and integrated approach with our 3DEXPERIENCE platform as the foundation for its compliance activities, connecting its entire ecosystem.

One of the Bureau Veritas client, Framatome is adopting the 3DEXPERIENCE platform on ENOVIA and CATIA application roles and portfolio to manage complexity and risks, enable long-term feasibility and transform the way they collaborate with Bureau Veritas through the certification process. In the formulation industry, the role of platform is also create -- crucial to support the certain development. With ONE Lab industry solution experience on our science cloud infrastructure. We integrate people, resources, processes, data and interfaces for improved efficiency and collaboration.

Evonik, one of the world's leading specialty chemicals in this company is adopting the ONE Lab industry solutions for -- on BIOVIA to increase speed and collaboration and simplify the search avoiding unnecessary experiments and improving productivity for scientists to capture, retain, serve and review results, basically their knowledge and know-how.

Moving to consumer goods, we see a similar opportunity. The industry is being abundant in a significant manner. Today, PLM is a critical software to manage the significant business process complexity in Apparel for design, for goods leveraging our portfolio in design, simulation and manufacturing and innovating to provide wide globe services, as everyone is looking for today. New urban store trends, for example, same day delivery or having the store do the shopping for you with the same day pick-up.

These are among three key trends that are driving the adoption of Centric PLM on why we acquired a majority interest early this year. And we see Centric PLM establishing itself as the main stream market leader similar to what SOLIDWORKS has done in design. Our goal is to help support Centric Software mission to accelerate the digital transformation of the fashion, retail, and consumer sector. I'm pleased to report that Centric PLM is building on the momentum in the market and continues to expand its footprint in various geographies, in particular, in China, across segments i.e. fashion, outdoor, footwear, eyewear and even retail, as well as along the entire supply chain.

With that in mind, let me now turn the call to Pascal.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

Thank you, Bernard. Hello, and thanks to all of you for joining us today. With our self cluster well-aligned with our financial objectives, we have delivered a solid year-to-date performance, demonstrating improving breadth with total revenue up 9%, software revenue up 9%, and new licensing up 9%, and recurrent software up 9% and earnings per share were up 12% or 19% excluding currency headwinds year-to-date.

Moving to our business review. Let me begin with 3DEXPERIENCE. On a year-to-date basis, our 3DEXPERIENCE software revenue grew 19% on constant currency. It represented about 22% of the related sales year-to-date compared to about 20% in the same period last year. Some of the largest transaction in third quarter were in Marine & Offshore, Aerospace & Defense, Consumer Packaged Goods-Retail and in Transportation & Mobility.

Let me zoom in some of the specific example of why companies are adopting our 3DEXPERIENCE platform and industry solution experiences. First, up is GE Aviation Hamble, a subsidiary of GE Aviation that focuses on aerostructures and it is headquartered in the UK. They will use the 3DEXPERIENCE platform from design to manufacturing, to develop next-generation aerostructure. The main objective is to integrate the value stream from design to manufacturing through simulation in order to provide digital continuity for the entire (ph) product development. This given value in the control of the engineering activities and deliverables through project management. This represents a key winning the supply chain of the aerostructure, where suppliers are moving toward digital continuity from the design to manufacturing. GE Aviation Hamble is a supplier to Airbus and Boeing.

Our second example is in the High-Tech sector, where our largest segment is with semiconductor companies. While we are not presenting the design of the chips, we are the largest providers in the management of the semiconductor companies intellectual property. NEXPERIA, headquartered in Netherlands is a global leader in discrete, logic devices, and -- sorry, an independent company since year 2017, NEXPERIA's focus remain on efficiency, producing consistently reliable semiconductor components at the high volume around EUR85 billion annually. They are adopting the 3DEXPERIENCE platform with our high-performance semiconductor industry solutions to improve the product quality, achieving zero defects, and in terms improve their bottom line.

The final example takes us to Asia to a valued provisions channel customer, TAKEMOTO. The packaging company serving companies in the CPG industry. They are adopting our perfect package mid-market industry solution on the cloud. With more than 3,000 different types of glass and plastic packaging, containers, TAKEMOTO's business objectives are to improve global collaboration, increase its agility to produce and deliver product efficiently in small and large, lot of sizes, and drive innovation and cost performance.

Now, let's move to our regional business review. In the Americas, software revenue increased 8% in Q3, 9% year-to-date. From a growth perspective, Latin America has been sharply improving results. We have put in place a strong teams and they are making good headway. In North America, this quarter was led by CATIA, DELMIA and BIOVIA. Overall, in North America, our results are solid to-date and we are also benefiting from the addition of acquisition.

In Europe, software revenue increased 8% in the quarter and 7% for the first-nine months. Activities in Europe was led by North and South of Europe, two areas becoming

an increasingly important part of European dynamics, demonstrating our agility rectification in a very meaningful way. We also saw strong growth in Russia. ENOVIA, DELMIA and QUINTIQ, all had an active quarter in Europe with large deals.

Asia continued to be the best performing regions in year 2018 with software revenue up 13% in Q3 and 14% year-to-date. While China and India led the quarter, for the first-nine months in total, we benefited from a broad-based growth. Zooming in on our brands, CATIA has continued to have a good dynamic with three quarter consecutive of double-digit license revenue growth. Its new acquisitions, No Magic also contributed to this growth, but on an organic basis, CATIA licensed revenue were up double-digits.

In the third quarter, this was driven by our direct sales channel while on a year-to-date basis, our Value Solutions channel took the lead with good growth across all the three regions. CATIA's software revenue was higher by 7% in Q3 and 6% year-to-date. As we shared with you last quarter, SOLIDWORKS Q3 presented a very high base of comparisons last year, which explain its software revenue growth of 4% in Q3 year 2018. For the year, in total, we expect SOLIDWORKS to deliver a strong performance, as you can see it's -- in the year-to-date software revenue growth of 9%.

ENOVIA software revenue increased 5% in Q3 and 7% year-to-date. 3DEXPERIENCE sales represented over 70% of ENOVIA license software through the first-nine months driving its license revenue up double-digit. Other software increased 18% in the third quarter and 15% year-to-date. DELMIA and QUINTIQ were the strongest performers in the quarter and we saw improving results at BIOVIA. Year-to-date growth was led by SIMULIA as well as DELMIA. Our recent acquisitions are performing well, including Exa with PowerFLOW included simulation and Centric PLM for Apparel.

Zooming in on our software. Our licenses and other software revenue increased 7% in the quarter and with a high comparison base, the organic growth was 4%. We had notably strong results for CATIA, DELMIA, QUINTIQ and BIOVIA, all delivering a double-digit licensees growth and by channels that was also the case for the direct sales and indirect sales for our Value Solutions channel. On a year-to-date basis, licenses and other software increased 8% on an organic basis and 9% in total. We saw a good breadth with double-digit growth for CATIA, ENOVIA as well as DELMIA and well supported by high-single digit growth for SOLIDWORKS.

As a reminder, a large majority of SIMULIA software is purchased on a subscription basis. Recurring software revenue increased 10% in Q3 and 9% year-to-date. On an organic basis, the growth was 6% for the both periods and continued to demonstrate excellent renewal rates in all the three regions. Recurring software represents 73% of the total software year-to-date.

Moving to the services. We had a better performance in the third quarter with revenues up 13% in constant currency on the 3DEXPERIENCE activities and the benefit of acquisition as well. While we had soft mix in our smaller grant, it was to a lesser extent than in H1. Year-to-date services revenue increased 6% at constant currency and represented 11% of the total revenue. For both the quarter and year-to-date, the Americas regions drove the growth in services revenue. The gross margin for services was 7.8% in the third quarter compared to 12.4% in the year-ago period. The gross margin shift reflects several factors, lower utilizations as we prepare for projects, as well as the new resources investment we are making in different part of the world, which will take time to run.

Moving to our operating margin. Our third quarter was in line, bringing us a year-to-date operating margin of 29.4% stable with year 2017 period. We generated 100 basis points of underlying organic improvement, which enable us to absorb acquisition dilutions of 70 basis points, as well as negative currency impacts of 30 basis points. Earning per share of EUR0.71 was also well-aligned with our objectives, increasing 11% in the third quarter, with currency having a neutral impact. The effective tax rate was 29.1% and is aligned with where we see our effective tax rate for the full year. On a year-to-date basis, EPS increased 19% in constant currency, benefiting from our revenue growth and lower effective tax rate.

Our operating cash flow performance has been strong. Through the first-nine months of the year, it have increased 11%, reflecting our growth in net income, non-cash elements and a strong growth in operating working capital, translating to a total of EUR747 million, above the year 2017 full year figure. Our unearned revenue totaled EUR895 million at September 30, under IAS 18. This represents an increase of 7% compared to our organic growth for recurring revenue of 6% year-to-date with both figures at constant currency and perimeter basis.

Moving to the full year financial objectives. We are reconfirming our total revenue growth of 9% to 10% in constant currency. On a reported basis, our revenue range moved up EUR12 million at the mid points of our range to EUR3.425 billion to EUR3.450 billion, incorporating the third quarter currency upside. We are also tightening the range, given one quarter remaining to the year. We are leaving unchanged our exchange rate assumptions or USD and Japanese yen. In terms of our operating margin objectives, moved to 31.5% from 31% to 31.5% previously.

I believe, we are doing a good job of managing investment for the future and delivering a good level of operating margin. In comparisons to the 32% non-IFRS operating margin, we reported in year 2017, our underlying operating margin performance will help us mitigate the full year estimate acquisition dilution in the range of 70 basis points and negative currency impact estimated at 20 basis point. Combined, this bring to our non-IFRS earnings per share objective range to EUR2.98 to EUR3.02 representing about 11% to 13% from 10% to 12% previously.

At constant currency, our EPS growth rate range would be about 5 percentage points higher at about 16% to 17%. Underlying our year 2018 full year objectives, we are also confirming our licensees revenue growth target of 9% to 11% in constant currency for the year 2018, and recurring revenue growth of about 9% in constant currency. For Q4, we are targeting a total revenue growth of 9% to 11% with software revenue growth of 8% to 10% and earnings per share of 8% to 12%. Our final objective are presented under IAS 18 and on a non-IFRS basis with the revenue growth rate at constant currency. All the details are in the Q3 presentation on our website.

To conclude, we're expecting a steady Q4 with a total revenue objective of about EUR1 billion and an earnings per share reaching about EUR1. Given the recall of the high quarter, we reported for new license and other software revenue in the year 2017 fourth quarter. We believe these objectives demonstrate very clearly the market opportunity is before us. More broadly, as Bernard and I have discussed, we believe our strategy and offer are well-aligned with our global industry investment priorities, driving a solid performance for us in year 2018 and a sustainable growth opportunity for us over the near and medium term.

We will be now happy to take your questions. And thank you very well for your participation on this call and our early webcast today.

Francois-Jose Bordonado -- Vice President, Investor Relations

Andrea, we can start the Q&A. Andrea? Operator, we are ready to take questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And your first question comes from the line of Jay Vleeschhouwer. Thank you. Please ask your question.

Jay Vleeschhouwer -- Griffin Securities, Inc. -- Analyst

Thank you. Good afternoon, Bernard and Pascal. Pascal, let me start with you. A short-term question regarding SOLIDWORKS. And then, Bernard, some longer-term questions. So, on SOLIDWORKS, over the last number of years, we've seen that on the margin, they have become more promotional in terms of offering periodic pricing promotions and the like. And I'm wondering, if you're expecting that will continue at the pace that we've seen over the last number of years for SOLIDWORKS.

And then, similarly, perhaps you could corroborate some arithmetic. And I understand the difficulty of the year-over-year comparison for SOLIDWORKS, but when we look at it sequentially versus the second quarter, would it be correct to say that the volume of new business, new CAD licenses declined more from second to third quarter this year that might have been the case in previous years from second to third quarter? And then, I'll ask the question for Bernard.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

Okay. So, coming back to the promotions, I just want to draw your attention on the fact that if you look at for the last five years, we have increased the price of SOLIDWORKS. And I'm not talking about the list price, I'm talking about the street price. And the reason is because we -- -- with SOLIDWORKS Premium, in fact, we have been able -- thanks to the new key products approach, to enrich the configurations people are selecting. So this is really what we did. Now, coming back to the fact that sometime, we are using the promotion as a way to activate the pipeline creations. I just want to reassure you that if you look at what we did this year, we almost slowed down this practice because the reality now were fully worse. We have to establish, not only a footprint, but the reference for the market. And there is no need anymore to activate commercially with the promotion mechanisms.

Your second question related to the sequential growth between Q2 and Q3, you are right. What you are seeing is true. But if I may, if you remember last year, Q3 was as a time when Autodesk announced the fact that they were basically asking all their customers to endorse a subscription-based model. And we had the flow of users leaving, in fact, Autodesk to join SOLIDWORKS at that time. So, this is the reason why, as a way, the comparison base is high with the last Q3, last year. And this is the reason why also you cannot draw conclusion on the fact that between Q2 and Q3 this year, you have a drop in terms of unique license being sold because it's not a real way to compare things. I hope I answered your questions.

Jay Vleeschhouwer -- Griffin Securities, Inc. -- Analyst

Yes. Thank you, Pascal. So, for Bernard, let me turn now to some longer-term issues. When you consider the difference, if there is a difference between your core customers and aero and auto for example versus customers in your diversification industries, is there a material difference that you are seeing between the two classes of customers, in terms of their new technology adoption or mix is one more heavily weighted toward V6 and the other, one more heavily weighted toward, perhaps, DELMIA or CATIA or anything of that kind and that you would think from a high level might distinguish the two classes of customers.

And then as well, one of the things, we've talked about over the years with DS seeing more consistent growth in your manufacturing software business, DELMIA and QUINTIQ and you had a good quarter now, but are you, in fact, expecting or seeing that the growth of business for DELMIA and QUINTIQ and Apriso will be more consistent and less lumpy than you might have seen over the last number of years?

Bernard Charles -- Vice Chairman, CEO

Thank you, Jay. Good talking to you. The longer (inaudible) between core clients on new industry, or the new industry, usually, they stop directly on the 3DEXPERIENCE platform because there is no basically value to them to stop on higher level. So that's a real trend and almost a de facto situation. The second, you asked me the difference in behavior, so that's one. The second is in new industries, we see faster adoption of cloud -- 3DEXPERIENCE cloud. Those are two factors.

Now core clients do not do only consolidate things either, for core clients what we see for new domain like Cyber Systems, what we call, integration of systems and I know Jay, you're familiar with No Magic and what we're doing in the system approach. But to make it understandable for everyone, then the Cyber System, they directly stop on the EXPERIENCE platform because they take these as an additional domain of coverage. So, if I ask to put a sign of extreme, I would say core clients when they go for new domain of coverage, they go to 3DEXPERIENCE, when they go for connected extension, they go with currently V5 architecture at the time being. For those who have not made yet the decision for the roadmap to 3DEXPERIENCE, that basically the profiling of payments.

However, I should say that if I don't call them core clients, but core industries, then the new comers in the core industry like EV start-ups, they directly go to 3DEXPERIENCE also. By the way, as well as some of the supply chain clients because we have seen on, I think these old statistic shows it -- in a very real number. For example, in the CNM ecosystem, the tier 1 and tier 2 of the OEM, but tier 1 and tier 2 are very, very -- they're investing a lot in innovation. For example, for autonomous vehicle, a lot of the technology is done by tier 1 and tier 2. That's quick review of the profiling of things.

On the manufacturing, you're right. What we, -- but it's coming from the fact that there are two phenomenon. One is, as you mentioned, DELMIA Apriso has been very successful in terms of MES, Manufacturing Execution System and Manufacturing Operation Management and we continue to see sales. But there is a phenomenon, with most of the cases, we are displacing existing players, where it's homegrown, or it might be one of the automation players. And when you displace, basically to avoid to be pushed out, they almost provide their software for free, we don't do so. But it creates a pricing pressure at the beginning. When we are there uninstalled, customers don't see any problem to buy more at the right price, but they ask us, is the price too enter (ph) or a sign to enter, and then after it's easier. So, that's the phenomenon you see on the MES model.

On the DELMIA engineering, I think we see a very interesting trend, which is basically what we call Manufacturing Engineering. the front end part of it. That is clearly now, a very clear convictions on customers that the 3DEXPERIENCE platform connecting design configuration, what we call, xBOM, Engineering BOM and MBOM, Manufacturing BOM. These are high value and even DELMIA manufacturing engineering is also used now for construction engineering, second thing of construction. And we have very good feedback on the construction site on that. That's basically, so I hope to your -- on the motor question, can we see a more consistent quarter-after-quarter business dynamic there. I hope so, just think that -- the signs up are very positive today.

Jay Vleeschhouwer -- Griffin Securities, Inc. -- Analyst

Okay. Last, if I may. You and Pascal at the parts of your answer used the term pricing. The broader question is, following up on the analyst meeting from four months ago. You've talked about outcomes based pricing as part of your longer-term strategy. As you may recall, I had some, frankly, doubts about that. And I'm wondering, if there is any progress you can report on that concept for revenue if given any further thought to instead or as well adopting more of a usage-based pricing model rather than the outcomes-based pricing model?

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

It's coming. We have not done big noise about EV yet, but I think we have already signed contract on outcome-based pricing. With high-definition, it will come with the outcome. So, it's not for this quarter. It's probably not for any quarter either. But we're very pleased to now showcasing operation for that.

Bernard Charles -- Vice Chairman, CEO

And the question on (inaudible), Jay. I will not oppose the two model. For example, we have real cases, whereby we -- people are using our software on the cloud, and we charge 15% of the end results. So, it's 15 (ph) more than a kind of usage-based approach and we are also taking a fee of 10% to do the intermediation with the end user. So, to follow my thinking, I think those two models could complement each other.

Jay Vleeschhouwer -- Griffin Securities, Inc. -- Analyst

Understood. Thanks very much.

Bernard Charles -- Vice Chairman, CEO

Welcome.

Operator

Thank you. And next question comes from the line of Monika Garg. Thank you. Please ask your question.

Monika Garg -- KeyBanc Capital Markets, Inc. -- Analyst

Hi. Thanks for taking my question. I have couple of -- on the macro side first, there is discussion between US, other countries, and some of the order suppliers have guided down, Caterpillar, the big industrial company here, talked about tariff increasing their cost of goods sold. So, the question is what are your customers telling you regarding tariffs? Do you see this could impact your growth over the next two, three quarters?

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

What is visible from a sector level now, in some way, as I mentioned it this morning was visible to us six months ago. Many of those companies were already preparing themselves, or cautious path. But the reality when it comes to what we do, we see that which is really basically the innovation platform. We see, -- it will increase the selectivity of where do they invest. I believe that when it comes to the nature of, -- very nature of what we do because it's really evaluated to the portfolio and the performance output of what they have to deliver. The signs are positive and I'd say, simply the pipeline is providing a good visibility.

Monika Garg -- KeyBanc Capital Markets, Inc. -- Analyst

Just as a follow-up. Like, how long would you say is your pipeline visibility , six months, nine months, 12 months?

Bernard Charles -- Vice Chairman, CEO

That's correlated to those site, that is dependent on each of the suite channels. To make it simple, the relevant pipeline, I'm asking myself did we communicated that, Pascal?

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

No. (inaudible-multiple speakers speaking) Something you should check.

Bernard Charles -- Vice Chairman, CEO

We will usually use, we don't want to talk too much there. We will usually use the kind of recurrence of 12 months, six months and three months. And you can understand for which channel those 12, six and three can apply to.

Monika Garg -- KeyBanc Capital Markets, Inc. -- Analyst

Got it. Yes. Thanks. The question on the construction industry, in US, I mean, we're seeing luckily lot of venture capital money being poured into a lot of construction start-ups. There are billion plus private valuations of number of companies here. Autodesk has been taking about construction industry, Nemetschek has acquired company. Maybe could you just talk about how do you see this market develop for you in the software side and generally, what are you -- in general, like how do you think this market develops?

Bernard Charles -- Vice Chairman, CEO

Yeah. As you know, we have a collection of wonderful showcases that we have basically established in the last year, whether it's Gary, Zahner, Kengo Kuma but also very big player like Wigg (ph) with our announcement second quarter, and also with companies centered in China like Shanghai Construction Corporation on simple orders, so that are the background (ph). Those are real case and we're replicating -- each of them are scoped in a different way. I'd add to that. The showcase we're now doing for cities, it's not only Singapore, there are many other projects ongoing.

So, with that in mind, we want to do in architecture engineering construction, what we did for other industries, which is to change to be game changer. How? I think developers will not continue to build buildings without having the context of the city. You need the city context, not only to insert the building but to look at the building performance and the impact on the inflow, outflow traffic on many other aspects. Before it was not possible, with our platform, for the first time ever, it's possible and this is game changer.

The second remark I want to say, we want to accelerate that approach. The second aspect of it is related to building performance on lifecycle. Today, the world don't do lifecycle management of buildings. It's just the collection of documents which are updated from time to time. We are being prospected to do building on construction lifecycle management and China had understood that this is important for them. The future program of construction in China will call, not for the fold beam, but which is going to build information management, but will be construction lifecycle management, which calls for really planning on operating the maintenance evolution of infrastructures. And China is leading by far US and Europe in this area. This is where we are and this is where the territory where our building this recurrences. So, indeed on last point, the cloud. We have the highest adoption of our solution for cloud is coming from AEC. In fact, we are going to change the world, AEC itself next year. That I will tell you more about that. I think the AEC is too old and it's almost dust on it and I want to change the name itself, but that's for February.

Monika Garg -- KeyBanc Capital Markets, Inc. -- Analyst

Got it. Then, just the last one on demand trends across all geographies. I mean the growth across all geographies was good. China was like double-digit. Do here, like China, growth is slowing down, but you had very strong growth in China. Maybe could you just talk about what is your view on the demand trends across different geographies? Thank you.

Bernard Charles -- Vice Chairman, CEO

The pipeline of all is good on -- I'd tell anything you want, but I think the pipeline is consistent with the profile of the business we have reported year-to-date going forward and in China, I think we are welcomed.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

To complement what Bernard is saying, what are we seeing right now. If you take Europe, you see Europe being split in two different parts. So, the North and South plus Russia are growing well, in fact. And where we see much more modest growth is, what we call, Euro Central and Euro West is namely, France and Germany, where the growth is modest, I would say. In the Americas, we see a good recovery in Latin America, but we started from very low, so I would not draw too much conclusions on this statement. And North America is still going well. And especially, in the new sectors like lifesciences. This is really where the growth is coming from for us.

Bernard Charles -- Vice Chairman, CEO

We also do extremely well in India.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

In India. And in Asia, in fact, we have a double-digit growth in Asia. Sorry, in China, India, Asia-Pacific South, as well as Korea for the year-to-date. So, Japan is probably the only country where the growth is likely to be low double-digit.

Monika Garg -- KeyBanc Capital Markets, Inc. -- Analyst

Got it. Thank you so much.

Bernard Charles -- Vice Chairman, CEO

Next question, please.

Operator

Thank you. Next question from the line of Nicolas David. Thank you. Please ask your question.

Nicolas David -- ODDO BHF Corporate & Markets -- Analyst

Yes. Hi. Good afternoon, gentlemen. Actually, I have two questions. The first one is about recurring business. I was a bit surprised not to see a method acceleration in Q3 of the organic growth on recurring business, and neither actually in your guidance for Q4 as maybe we expected the beginning of the ramp up of Boeing. So, could you give us a bit of detail there? What's happening, that the Boeing contract, which is a bit late or the part of the recurring, which is a bit soft. Thank you and I have follow-up then.

Bernard Charles -- Vice Chairman, CEO

No, I do not understand why you see -- because we have an organic growth of 6% on the recurring revenue. And you remember that we acquired Exa PowerFLOW last year. So clearly, in Q4, you will have the comparison on organic -- on a pure organic standpoint, this will increase by the integration of the Exa contribution because Exa is only a subscription-based model. So, to a certain extent you remember, we are coming from less than 4%. So, I think it's accelerating. Now, coming back also to the question related to Boeing, the Boeing is going well and we're preparing the ramp-up for next year. And this is the reason why we have invested in Q3 on the services side, just to be ready for the ramp up. And we've always said that there will be marginal effect. Since the beginning of the year, we have to confirm every quarter that there will be margin effects on Boeing for 2018.

Nicolas David -- ODDO BHF Corporate & Markets -- Analyst

Okay. So just to make sure to reconcile the figure of on any growth for the recurring, as you mean that 44% in Q2, 60% in Q3 and you expect something like 7% to 8% in Q4. Is that the trend, we -- because, I mean, maybe I had (inaudible) contribution wrong for those 9%. Is it true? Is it correct?

Bernard Charles -- Vice Chairman, CEO

Something like this. OK.

Nicolas David -- ODDO BHF Corporate & Markets -- Analyst

Okay. Thank you for correcting me. That makes sense, surely. And my second question is regarding the pipeline for Q4, could you give us bit more flavor around this. Is it about more large 3DEXPERIENCE deals we expect or an acceleration in the V6 apps selling to your installed base or is it an acceleration in the older software other than you have, so could you give us a bit of flavor around that? Thank you.

Bernard Charles -- Vice Chairman, CEO

Perhaps we don't communicate more than just saying that the best pipeline is good because we provided a guidance of -- don't -- inconsistent statement income.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

I could maybe give some flavor in addition to this because this is what I said this morning during the webcast, Q3 was really a quarter where we had significant new reference, so we call it as a footprint quarter. So in Q4, we have exactly the same kind of nature of pipeline plus for sure, this is the end of the year. So, usually the largest transaction are usually done in Q4, but we have a bunch of it (ph). So it is really similar to the one we had last year.

Nicolas David -- ODDO BHF Corporate & Markets -- Analyst

And as 3DEXPERIENCE, obviously, a signing good for ENOVIA.

Bernard Charles -- Vice Chairman, CEO

I think so.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

Good from everything.

Nicolas David -- ODDO BHF Corporate & Markets -- Analyst

Yes. At the end of the day for sure. Thank you very much. It was very clear.

Francois-Jose Bordonado -- Vice President, Investor Relations

We will take a last question.

Operator

Thank you. And next question comes from the line of Gal Munda. Thank you, please go ahead.

Gal Munda -- Berenberg -- Analyst

Hey. Thanks for taking my questions. I just had a few. The first one, I would like to just touch a bit on the recurring revenue growth a bit more. You said the CATIA and ENOVIA grew licenses in double-digits in constant currencies. You said that SOLIDWORKS has grown high-single digit licenses. And you look at the software revenue this quarter, its 7%, 5% and 4% respectively. This kind of implies enough growth in maintenance revenue for those three products. Can you just talk me through, is that the impact of the charge backs that kind of now gone away or what is that that's kind of causing maintenance revenue not to increase for those products? Thank you.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

So there are few things, I should correct SOLIDWORKS for this quarter. It's not growing high-digit. I was very clear on this.

Gal Munda -- Berenberg -- Analyst

High-single digit, it's on page four of your presentation. High-single digit for SOLIDWORKS.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

Yes. For the full year, not for the Q3.

Gal Munda -- Berenberg -- Analyst

The maintenance. Okay. That makes sense. Sorry, my bad.

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

And so again there is no trick behind, you remember, the recurring revenue is composed by, on one hand, the maintenance and support and on the other hand the subscription. So, the maintenance and support is really the direct consequences of the license growth you had the year before. And for the subscriptions, it's mainly the simulation space. It's driving the growth and the aerospace and defense sector, which is usually, using this rental model at large. If you look at those two domains, simulation is going very well. And Aerospace & Defense, not only Boeing, but this entire sector is also going very well. So, there is no reason that the organic recurrent revenues should not grow the way we see --

Gal Munda -- Berenberg -- Analyst

No, I'm just thinking more specifically if I can for CATIA. Because even if I look it for nine months, CATIA total software revenue growth is 6%, saying with double-digit growth for CATIA and ENOVIA is 7% with double-digit growth. That basically assumes that maintenance is growing much slower. Is it anything that you have on renewal sites that's different -- a few years when maintenance was actually outperforming licenses growth. So, I'm just trying to understand what the dynamic is?

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

There is no trick. CATIA growing at 6% year-to-date and the recurrent growing 6% organically. It's very consistent. ENOVIA growing at 7% year-to-date. Again, those numbers are consistent and there is no trick behind. This is, first, not our style. If we had something, we will tell you. But no, no, if you compute the numbers, you will find it works. It really works.

Gal Munda -- Berenberg -- Analyst

Okay, maybe we can take that offline. That might be easier. And then just in terms of questions on SIMULIA you mentioned it's a very, very good market at the moment and simulation is something where we are excited about? Can you just comment on the organic growth, excluding Exa, what you are seeing in this quarter, and maybe, for the nine months? Is it kind of in line with that 8% to 10% growth what simulation market is growing, which is including more than?

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

The new license on year-to-date is growing double-digit (ph) and I'm not talking about the subscription. I'm really talking about the new license.

Gal Munda -- Berenberg -- Analyst

Okay. Do you think you've taken market share in (inaudible)?

Bernard Charles -- Vice Chairman, CEO

And this is a pure organic growth because Exa is only on a subscription basis.

Gal Munda -- Berenberg -- Analyst

Sure. That make sense. Which -- market there?

Bernard Charles -- Vice Chairman, CEO

Yeah. We're waiting market share there.

Gal Munda -- Berenberg -- Analyst

Okay. And which products, do you think are the strongest in terms of winning the market share, is that the ABAQUS product that may be benefited from some of the consolidation in the industry, or is it some of the other progress that you've acquired recently?

Bernard Charles -- Vice Chairman, CEO

ABAQUS is really becoming the standard in the linear and non-linear structure analysis. So, there is not too much anymore player in the game. And on the electromagnetic, CST is also (ph) to be established as a standard for the high frequency. Not yet for the low frequency, but for the high frequency for sure.

Gal Munda -- Berenberg -- Analyst

Perfect. Just the last, if I can. You find a few exciting deals last few quarters. EDF is one of those that kind of stuck up. How did these deals compare with in terms of the size, and maybe split with new licenses and services to something like when you do, when you sign a Boeing deal or an Airbus deal, can you just kind of talk about how -- is a similar impact, should we got very excited about 2019 and the back of that?

Bernard Charles -- Vice Chairman, CEO

EDS, its a different kind of contract we signed because it's a framework. And then after, we have commitment by business units. It's not a commitment at the group level, so which is very different compared to Boeing because Boeing, it's a commitment for all the different business units.

Gal Munda -- Berenberg -- Analyst

Okay. So, it's kind of land and expands more. Okay. Perfect. Thank you so much.

Bernard Charles -- Vice Chairman, CEO

Thank you very much all of you. And thank you for participating to this call or this morning at our presentation in London. And see you, talk to you in February or maybe, before if you have any further question. Have a good day.

Operator

Thank you. And that conclude our conference for today. Thank you for participating. You may all disconnect.

Duration: 65 minutes

Call participants:

Francois-Jose Bordonado -- Vice President, Investor Relations

Bernard Charles -- Vice Chairman, CEO

Pascal Daloz -- Executive VP, CFO, Corporate Strategy Officer

Jay Vleeschhouwer -- Griffin Securities, Inc. -- Analyst

Monika Garg -- KeyBanc Capital Markets, Inc. -- Analyst

Nicolas David -- ODDO BHF Corporate & Markets -- Analyst

Gal Munda -- Berenberg -- Analyst

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