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Dassault Systemes SE (NASDAQOTH:DASTY)
Q4 2018 Earnings Conference Call
February 6, 2018, 3:00 a.m. ET

Contents:

Prepared Remarks:

Francois-Jose Bordonado -- Vice President of Investor Relations

Good morning everyone. I'm Francois-Jose Bordonado, Dassault Systemes Investor Relations. From the company, we have Bernard Charles, our Vice Chairman, Chief Executive Officer, and Pascal Daloz, Chief Financial and Chief Strategy Officer. I would like to welcome you to Dassault Systemes fourth quarter and full year 2018 earnings presentation, which is also being webcast. At the end of the presentation, we'll take questions from the audience and from participants on the webcasted call. Later today, we will also hold a conference call.

Dassault Systemes financial results are prepared in accordance with IFRS. In addition, we have provided supplemental non-IFRS financial information. For an understanding of the differences of the two, please see the reconciliation tables included in our press release. Some of the comments we'll make during today's presentation will contain forward-looking statements which could materially from actual results. Please refer to our risk factors in our 2017 Document Reference.

Let me no introduce Bernard Charles, President and Chief Executive Officer.

Bernard Charles -- Vice Chairman and Chief Executive Officer

Good morning, everyone. I'm delighted to share this presentation with Pascal Daloz to share with you, first of all, our comments on 2018. I know you know all the numbers by now and have read between the lines about the interpretation for 2019. In short, we are very pleased about 2018 on many fronts. The organic growth, first of all, all the parameters that we committed to deliver are there. Second, the organic growth is also strong. Third, we did some movement, moves last year related to acquisitions which are very key to continue to expand our footprint.

Last but not least, I believe that with 27,000 new enterprise clients small and large, we continue to expand our footprint. That's my summary. Of course, with the preview for 2019, we can have a long debate about the economy but we plan to have 2019 with a similar profile to 2018. With that, let's go on the data that supports what I just said.

The revenue is up 10%. The license revenue is up 11% with EPS up 16%. I think the second thing, every year I share with you an update on our strategy. What is noticeable when I read some letters from investors is a long time ago, we formulated a very powerful purpose. It's at the core of what we do. I remember the eyes of people when we explained we're going to create a virtual universe that will [inaudible], the eyes were bubbling. It was February 9th, 2012 I think we put this in action in a serious way and I think this is at the core of what Dassault Systemes is and what we do. I will illustrate that, the purpose.

The platform is taking shape with software revenue up 24% for the 3DEXPERIENCE, our system of operation. It is also our system for new business model with the marketplace. Everything that Dassault Systemes is doing for the future will be based on this platform with most of the current large customer industry solution already there.

Industry diversification, 11 industries, 61 segments -- that industry diversification is also working, but we continue to work on three things -- geo-diversification to reach the different countries around the world, domain diversification, expand upon design, production lifecycle management, and of course, industry diversification, which is to serve industries we were not serving before.

Cloud is in good shape for us. We probably one of the only platforms on the planet to have a common platform between cloud on solution, what we call on-promise, installed at customer location and it's the same platform. There are no players doing that, none of our competitors. It's a very important factor for the future.

27,000 new clients and expanding with the other several markets -- we've come back on these acquisitions that we did, some very specific talent on technology, others related to reaching new types of markets like Centric software, Centric PLM as well as IQMS.

So, strategy update -- you know now, simply said, what the system is doing, we are creating the 3D digital twin experience of everything mankind produces, whether it's a car, a plane, a railway, a train, computer. We want to create the full twin in the digital world that you can experience, simulate before you actually produce it. We are very serious about making this happen. We want to do that for construction tools. So, I state what I said last year. We will make this happen for construction, territories, and cities.

That's what is illustrated here. Starting from 3D, we did the mockup, which is a static view of things. The lifecycle, you add time to it, aging of the system, and now, the full experience -- how will it work? What kind of service will be provided to consumers or customers? That's all here. And then the little illustration shows you the topics on which we do the showcase. Mechanical ports at the beginning, an entire airplane in '89, a manufacturing plant and car product families later on with Toyota, especially, at that time. Now, we say we are going to apply it to cities.

So, we are not here for the next quarter. We are here for the long-term. The purpose is very clear. February 9th, 2012, this is what was announced. We have invested billions to make this happen and we will continue to do so. When I say billions, it's billions. We invested €1.2 billion in life science in order to reach that sphere, which is illustrated here. So, it's about creating digital twin to really harmonize product nature online because we sustainable innovative to work.

The last point of what we call this equity system is the fact that we believe that this virtual world helps improve the real one. We can prove it. So, here is an example. There was another study last year that demonstrated that when a system produces one ton of CO2 to run our business. Through our clients, we save 10,000 tons. It's called the handprint and footprint, what we produce, unfortunately, and we need to work to continue to reduce that.

But the effect of what we deliver to clients is gigantic. That's why last year we were named the world number one most sustainable company. I think it fits very well with the purpose. There are many other topics on that. But I believe this is what makes people join Dassault Systemes and why they stay and advance things no one has invented.

A lot of things -- the world of construction -- I remember it was a question last year and I gave a provocative answer when I said we have decided to change this market that is probably a slow market, construction, with fairly limited progress in the last 30 years, very limited. That's not truly acceptable. So, we are going to be active there. We have great customers.

It goes far beyond 3D. It's about big data analytics, how the city -- how people are living in the city, how they are moving in the city, how energy waste is managed, and connecting those dots together. So, if you have the possibility, try to influence grand Paris because maybe in 20 years, they will decide to do something. That's a local message.

The platform is built -- by the way, they are not doing any simulation -- the platform is aimed at doing two things -- being the system of operation for everything we develop because then things can be connected. Being a platform to trade things, we call it a marketplace. Can someone produce something for me? How fast? Online, one click away. That's what we are doing with the 3DEXPERIENCE platform. It's not a technical thing. It's a new business model. Of course, we need to build, not only solution but partner network, who are going to be the producers on that platform and that's what we have initiated.

The news, I hope, is out for the Airbus announcement this morning. They were nice to publish this announcement together. We are pleased to see Airbus confirming the adoption of the 3DEXPERIENCE for all of their airplane programs. It's more than a tool decision, as Guillaume Faury is quoted in the press release talking about a real group transformation for Airbus because basically, he wants to use the platform as the catalyst and enabler for a new way to develop, produce, and lifecycle maintain airplanes for its clients.

So, it's a big program. It's another step -- the 350 program was a very successful program in creating a full digital twin and it created the proof points that they could go further. We are very pleased with that decision. Of course, it's not only Airbus, it's the ecosystem. It's a first phase. Don't try to extrapolate as compared to previous gigantic contracts that we signed 18 months ago with other players, but it's a serious one and an important one. So, we are very pleased with that.

Safran continues to adopt the platform. This is for [inaudible]. By the way, those things are very complex, extremely complex and they continue to adopt the platform for that. Safran is a very diversified group. They do landing gears and so and we are very, very well-adopted inside the group for many, many kinds of disciplines.

More importantly, I want to comment briefly on the cloud dynamic. It's not going to be so visible on the numbers from a revenue standpoint yet because it's a subscription. So, it takes time to build a snowball. What we measure is the number of users and also the data volume on our cloud. But here are a few, I think, impressive examples of what our cloud solution is doing.

So, picture this -- you have an iPad or a PC. You take one link, you click, and you have the power of software of the biggest companies in the world are using online without installing anything on your computer. You will see a quick video in a few seconds. ECCO, they are doing customized shoes using the cloud. McGrath, they are doing these kinds of impressive façade buildings that you see here in the picture, everything on the cloud.

This Skyway company, a new company creating new type of mobility for cities, as you can see here, they are designing and producing using the cloud. [Inaudible], well-known for many of you, I suspect, all their equipment now are designed and produced using the cloud system of Dassault Systemes.

Takemoto, you see the packaging here, quite sophisticated. It's a lot of science to do that packaging. It's not a minor job. They are also using our cloud solutions. Evelozcity, that's an amazing company that started as a start-up to build electrical autonomous vehicles in the city. They started with a team of 15 people. They are now several hundred. Everything is done on the cloud.

So, the cloud is not for fun. Those projects are real. We are doing projects and managing complexity of projects, which are similar to what clients have been doing buying our software and installing them at their own location. So, the cloud approach is very essentially to which new types of clients increased the speed at which the services are available and I think it's an important factor for the long-term growth of Dassault Systemes.

Mass customization -- all of this is done with our AI platform that can do the interpretation of the data and create a 3D printed structure of the shoe all on the cloud. So, Naval Energies, this is a subsidiary of Naval Group, they are also creating this new energy system. They are also using the platform. Why? When you're a start-up, you have to have the capacity to get the best possible tools and for them, using cloud is a way to do that.

The acquisition of IQMS -- this is something that might have been a surprise to you. This is manufacturing ERP. The ERP market was not, up to now, the Dassault Systemes target. Why are we, therefore -- they are big players around the world. Why have we done this investment? We think the small, midsize companies are underserved. The current solution are too expensive for them, too complex. We think we can fix that the same way we did fix the design world in the last 22 years with SOLIDWORKS, with a brand that is almost a €1 billion brand today, making ERP and digital continuity between design and production affordable for small midsize companies from both simplicity, cost, and speed of deployment. That's our goal.

We did the market analysis. It's about €5 billion market. We think that only 15% of these customers are equipped, but more than that, they are not very satisfied. So, we are taking the challenge to take this company, create this integration, and do on the business management of those companies what we did for design with SOLIDWORKS. We're going to have fun doing that. It will come on the cloud too at the proper time with the experience platform.

Next week, we have the SOLIDWORKS World in Dallas. It will be about 6,000 to 8,000 users and we're going to explain how we plan to serve them in this way. I think we can simplify their life and make them more efficient. That's what is going to be announced, a new category. So, basically, if you have understood the power of CATIA for the world of large industry and the power of SOLIDWORKS to make design available to the small companies, we are going to replicate that for the platform on the ERP functionalities.

IQMS will be rebranded as a part of DELMIA, which is our brand for production. It will be called DELMIAWORKS. The platform that we serve those clients will be called 3DEXPERIENCE WORKS, which is basically to make a clear statement of a category of solutions aimed at serving those clients in a simple way, affordable way with the proper speed. So, it's consistent and the clarity is going to be an element of importance for customers to make their decisions.

With that, Pascal, it's your turn to make some more precise comments about the numbers. Thank you very much.

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

Thank you, Bernard. I think we have good results. It's always a pleasure. Let's zoom on the business highlights. The key point I would like to address here is the organic growth. Behind the 11% growth on the license side, 9% is coming organically and the vast majority of this organic growth has been driven by the 3DEXPERIENCE platform. Here, you have data highlighting the tipping points.

Point number one on the full year, the 3DEXPERIENCE platform represents 25% of the total software revenue compared to 21% last year. The growth is 24% for the full year. More important, if you look at on the license side, the incremental growth, you notice that on the full year, the 3DEXPERIENCE platform represents 40% of the new license growing at 31%. For the last quarter, it represents half. Half of the new licenses are coming from this product line.

When we highlight the real economic cycle for us, it's much more the adoption of technology by our customers, this is proof because when the adoption is starting, the organic growth improves and increased.

From a regional standpoint, the growth has been driven by Asia this quarter, with 19% growth, 16% for the full year. It's true in every region of this world -- China, Japan, South Korea, and India. It's true not only on the license side, but also on the recurrent part, which is a concern because as you know, it's a region of the world where subscriptions is something we pay attention to make sure we have the same rates as the others.

Europe is going well, 12% for this quarter, 8% for the full year. Here, the growth has been driven by the large projects related to 3D experience. It's particularly true in France, but it's also true in Germany and other countries in Europe.

Americas, growing at 7% for the full year, 4% for this quarter. So, there is a mix of performance for this quarter. We had good traction from the indirect channels and also from Latin America, but North America has been penalized, to a certain extent, by modest performance on the direct sales, mainly due to some slipping from Q1 to Q2. But for the full year, 7% is still a good number.

Moving to the brands, to the product lines, ENOVIA is the star for this quarter with 33% growth. 84% growth for the license recalled for ENOVIA. So, this is proof that when the 3D experience platform is deploying and gaining traction, automatically, ENOVIA is into those deals, 14% for the full year. Those are really good numbers.

SOLIDWORKS, back to double-digit growth, 12% for this quarter, 10% for the full year, well in line with what I told you last quarter when I was telling you that in Q4, we had the base comparisons and we'll be back on track. I think this is important. Also, as you may know. SOLIDWORKS is the indicator for us to understand what is going on in our sector because it's definitely the product line being sensitive to the economic conditions. So, the fact that we are double-digit growth is a good sign in the investments continuing in our domain.

CATIA, 2% for this quarter, 4% for the full year. Keep in mind that last year, CATIA was growing at 10% for Q4. We really have a base comparison, so it's in line with our expectations. The other software, good growth for the full year, up 15%, 13% for this quarter. The growth has been driven by DELMIA in the manufacturing space, specifically in aerospace and defense, the simulations domain at large, thanks also to an acquisition we did a year ago.

The good news is also coming from EXALEAD and NETVIBES. Why? We have now the proof that we can win significant deals with only selling the platform and the analytics, not having to sell CATIA or all the larger tools. For example, we signed big deals in the states related to aerospace and defense using EXALEAD and NETVIBES as a way to dashboard the entire business.

We also had good traction on the BIOVIA license in Q4, which is a good sign. You remember BIOVIA since the acquisition, the growth on the license was relatively modest. Now, we see the investment paying off. This life science sector is really dynamic at large.

Zoom into the industry -- 8 of the 12 industries are growing double-digits. The good point is all the core industries, mainly automotive and transportation, aerospace and defense, industrial equipment are also growing in double digits. It's not only the diversifications, it's all the industries at large.

In terms of mix, we are at 32% of the total revenue coming from the diversification. It's relatively stable compared to last year despite the acquisition we did, which are usually reinforcing this percentage. This is a sign the core industry is really dynamic for us.

In terms of acquisitions, let's make a quick zoom. Not only '18 did we deliver the organic growth and we are playing with all the drivers, but we are preparing the future. So, with Centric PLM, we are reinforcing our PLM positions in the consumer goods and apparel and fashion industry at large. We did this acquisition in July last year. With IQMS, Bernard spoke about it. We closed the transaction in January, to be precise.

We did some very interesting acquisitions in the system design. This is key. All the products are now connected. The point is not anymore to develop the electronics or embedded software in the products, but also design the way those products will interact between them. This is what we call system of systems. It's a new generation of systems that are developing. We did No Magic last year. I spoke about it. We did a small one, ARGOSIM. We closed this acquisition and now we come back to give more details.

Last but not least, we are differentiating our solutions in the simulation space, specifically for the formulated industry, which is usually not the one where we are strong. We are gaining a lot of traction with this acquisition, COSMOlogic and we closed this acquisition late December.

Let's zoom and I will give you some data. On IQMS, I do not want to come back to the profile of the company. Bernard did it. Keep in mind €56 million revenue in '17. We closed the transaction on January 3rd. In the guidance for '19, the revenue will be integrated. To simplify your life, I am supposed to give you the number in the guidance. So, I put €59 million compared to €69 million due to the exchange rate.

So, clearly, keep in mind this product line is growing at a little bit more than 10% per year. We will accelerate, but for the time to put in place, we are stabilizing on the growth rate. This will have an impact on the operating margin, around 30 basis points. There's an estimated positive impact on EPS of about €0.02.

The market opportunity is very large. Bernard highlighted you have more than 250,000 companies to be equipped and the penetration rate is still below 15%. It's a large market, close to €5 billion US and I think it's an avenue for us to fulfill this need.

ARGOSIM, I spoke about it. On the picture, you have our system strategy. So, with CATIA, ten years ago, we started to develop this mechatronic approach. Five years ago, we started to develop what we call cyber physical system. It's really the way you connect all the different equipment between them. An autonomous car, this is what you need to do, otherwise it will never work.

This is introducing a new level of complexity in the way to design things. So, No Magic was a way to do the modernization. With ARGOSIM, what we do, we are capable to validate the specification. Why? When you do design, usually you have a gap between the requirements and the test. You have to wait until the end to test if you are fitting the requirements. With this new technology, it's a way to specify semantically. We know how to run simulations and test it in the process and discover some inconsistency, for example, for under-specification or sometimes functional scope, which is missing. Small team, 12 employees in France, but it is very hands on technology.

COSMOlogic, it's a new acquisition, we closed late December. So, this company is based in Germany. What they do, they develop chemical process simulations capability and especially in the fluid face. So, for all the industries mentioned on the charts, the chemical industry, the consumer goods, the pharmaceutical industry -- all those guys, when they are use our solutions, they are doing a lot of simulations.

This capability is unique because they have very advanced computation methods and this is creating differentiations at this level. So, a small company, again, it's €2 million revenue, 16 employees, state of the art in terms of technology. So, we continue to infuse these talents inside the organic.

Moving to the financial highlights. So, the organic growth for the revenue for this year -- 7%, 10% for Q4. So, collectively in line with what we were expecting. On the software side, 8% for the Q4, 7% for the full year. Clearly, you see this acceleration is coming. If I zoom between license and subscription, same thing -- license side, the revenue up 11% organically, speaking in Q4 and 9% for the full year. On the recurrent path, 6% for Q4 and for year 2018.

On the services side, you notice in the press release we had a good recovery for Q4. So, we catch up on two fronts. We still have very good growth on all the 3D expense-related activities, which is a way to support the last deployments we are doing. We had some good recovery with QUINTIQ. So, they had good growth, +24% of the services for Q4. You see automatically the impact on the gross margin because we are 12% for the full year, a little bit better compared to last year and significantly better in Q4. So, this situation is much better than it has been.

Operating margin, it's relatively easy. The organic performance is almost offsetting the dilution coming from the acquisitions. So, if you have 0.7% organic improvement and you have 0.8% coming from the dilution from the acquisitions.

On the EPS, good news, now at 24% for the quarter, 16% for the full year, €3.11 compared to €3.1, which was the guidance we gave. So, we are slightly better, if not a lot better. The reason it's coming on one hand from the activities, which is a little bit better compared to what we were expecting. Also, we had some tax benefits because I put the tax rate for the full year, so it's 5 points less compared to last year. This is having almost a €0.14 impact for the full year. The organic improvement is contributing to €0.41.

Cash flow -- the cash flow is growing accordingly to the EPS, almost 21%, €19 million. The growth is coming from the good activities we have. We are closing with a net financial position of €10 billion. Not too much to say on the operating cash flow. The strong billing activities at the end of the year -- it's well-aligned with the balance of 15%, excluding the currency effects.

On the non-revenue, the balance is up 10%, relatively consistent with the growth of the recurrent path of 6% and the decrease in the income taxes payable, it's mainly due to the fact that we pay some '17 tax in Q2 and we had a lower tax rate in the US.

Coming to the financial objectives, a few things -- you remember we now completely are implementing the IFRS 15 for the full year. I will give my guidance for the full year in IFRS. So, just a quick remind for you -- this is impacting only the rentable recognition of the subscription revenue. Previously, we recognized all the time and now we have to split between the rental fee and license portion and subscription portion. We have to separate the two.

There is no real impact on the full year, as you can see because applying this method, it's only €8 million difference, so very consistent with what I told you this year, €11 million. The real impact is in Q1. The reason is because this is really a quarter where we have a lot of renewal contracts. This is the reason why you have €15 million addition revenue recognized in Q1.

Coming back to the guidance, what are we expecting this year? We are expecting a 10% to 12% growth in license revenue trading the currency effects, recurrent revenue growth up to 9% to 10%, services revenue growth of 14%, an increase of the organic operating margin by 1.1% and 80% basis points coming from the organic improvements and then we'll give you more detail afterwards.

The tax rate at 29% and as an exchange rate, we took those assumptions. So, 1.16 exchange rate for US dollar in Q1 and we are pretty well advanced in the quarter, so it's easy to do. For the rest of the year, we took an assumption of 1.20. We are stabilized for the yen for the rest of the year.

So, for the full year, you can see '19 almost in the same spirit, in the same dynamic than '18. 9% to 10% growth for the total revenue, 10% to 11% if you exclude the currency effect. If you split between software and license, you will see 10% to 11% in software. If I zoom on the license 10% to 12%.

The most important thing for you is the recurrent part. You remember when we signed the Boeing contract, we told you that in '19, you would see the full effect. Here is one of the effects. The recurrent growth is improving by 1 to 2 points compared to '18 and 2 to 3 points compared to '17. This is a combination of the Boeing contracts for the year and also the good subscriptions we have thanks to the simulation.

The growth for the operating margin will be at 32 to 32.5. It's an improvement. Against the acquisition, trading some dilutions 0.7 and we were offset by the organic improvement of 0.8. You have the IFRS 16, the one I just explained to you, the fact that you have +€11 million on the operating margin and this is creating 0.3 additional benefit. On the EPS, 3.35 to 3.40 range with a tax rate at 29, which is almost a growth of 9% to 11% if you include the currency effect.

For the Q1, good dynamic, which is proof we are not drying the pipeline in Q4 to do the number. Specifically, if you zoom on the license part, +16% to 18%, so it's really a sign that the business dynamic is solid. This is translated in total software growth of 9% to 12% and an EPS to €0.78 to €0.72.

I think those '19 objectives are well-aligned with what we told you last year. We are pretty confident we would be able to achieve our five-year plan. We communicate to you in year 2014. So, five years back, with 350, the guidance is at 340, but we are still confident things will improve and we have some acquisitions we can do. The 350 is achievable. It's a good start for the next five-year plan, the one targeting €6 in year 2023 for one single reason -- if you look at '18 and '19, all the growth drivers are in place -- the industry part, the good dynamics on the mainstream market, those are the ones that are going to fulfill the long-term growth.

That's it for today. Bernard and I will be very pleased to take your questions. Thank you.

Questions and Answers:

Francois-Jose Bordonado -- Vice President of Investor Relations

We'll start first with questions from the room and then we'll go the call.

Unknown Analyst -- Unknown -- Analyst

Thank you. Good morning, [inaudible]. I would like to come back on the guidance of operating margin, organically 0.8%, but it looks to be some seasonality between each one, maybe when we look at the total operating margin growth between Q1 and the full year. So, could it just come back on maybe the productivity gains that you could generate or maybe some plans which could be delayed?

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

So, the 0.8% is significant because we did 0.7% in '17. It's a sign we are capable of improving the productivity on the sales side. This productivity gain is coming from all the different functions and it's mainly due to the size. Coming back specifically to your questions. On the sales side, we have improved the productivity for the last four years. I'm still expecting we are in the middle. I still believe we have 2 points to gain over the next five years.

The main lever we have is coming from the transactions. The more we sign 3DEXPERIENCE platform deals, the bigger are the transactions. This has a direct impact on the productivity for the sales.

Francois-Jose Bordonado -- Vice President of Investor Relations

Next question from the room? If no questions from the room, Operator?

Operator

Thank you. As a reminder, for everyone on the phone, if you wish to ask a question, you can press *1 on your telephone keypad and wait for your name to be announced. Once again, for any questions, please press *1 from your telephone keypad. First question comes from the line of Michael Briest. Please ask your question. The line is open.

Michael Briest -- UBS -- Analyst

Good morning, a couple from me -- Pascal, in terms of the acquisition contribution this year, you've highlighted the impact on recurring. Can you say how much software and total sales will benefit. Bernard, in terms of the Airbus news today, could you give some more color? Obviously, Boeing was something you called out as impacting your financials coming forward. Does Airbus have the same impact?

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

I'm going to take the first one relative to the acquisitions. You have the numbers in the presentation. Again, to simplify your life, No Magic is growing at 10%, so it's easy for you to compute the number. AGROSIM, COSMOlogic, €1 million for AGROSIM, €2 million for COSMOlogic, also growing at slightly larger than 10%. IQMS, I gave the number, €58 million for '19.

The remaining part is Centric software -- Centric, when we did the acquisition, they were doing €61 million. They are growing at 35%. The reason why, it's a little bit less compared to what they did previously, it's because they are transitioning their life science model to a subscription base. Clearly, it's a good dynamic. With this, you will be able the compute the number into the guidance.

Bernard Charles -- Vice Chairman and Chief Executive Officer

That's a lot of detail, maybe too much. We want to deliver what we said for the full year and that's it. The Airbus -- please don't do computations compared to previous contracts because we are in a different phase of the development of the cooperation with Airbus. To be explicit, we did a great program with them as you know with the 350, making the digital reference for the Airbus 350 extremely successful. As Guillaume Faury mentioned, he sees that decision of the 3D experience platform as the catalyst and enabler for deep transformation of the Airbus group. So, the decision is groupwide.

By the way, it was already announced the cooperation of military program that the decision for the 3DEXPERIENCE was taken between France and Germany and between [inaudible] and Airbus. So, it's groupwide. However, the reason why it's not ten years or more like the contract you're referring to is because we are in a phase where we are introducing the next generation after V.5, which is called 3DEXPERIENCE and we are implementing it as a delta improvement of existing programs.

So, this three to five-year contract is there to reorganize and transform so that the evolution of it is to make sure all programs are done that way. That's it. It's a very important decision. But the scale of the contract is more multiple tens of millions, not the scale of billion yet. It will come.

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

The last question is related to CATIA. So, for year 2019, we expect CATIA to be between 5% to 6% growth for the full year. Relative to the 3DEXPERIENCE penetration in the CATIA install base, we are exceeding the 20%.

Michael Briest -- UBS -- Analyst

Thank you. Was Airbus a contributor to the strength of Western Europe in Q4 or is it more a 2019 event?

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

I can answer to this one if you want. There is a piece in Q4. It's reflected in the end of year number. You will not explain the recall performance of ENOVIA just only due to Airbus. We have plenty of different contracts. There is a piece of Airbus being referred to in this number. Coming back to your question, you could expect to have contribution in '19 and '20.

Michael Briest -- UBS -- Analyst

Thank you.

Operator

Next question comes from the line of Stacy Pollard. Please ask your question.

Stacy Pollard -- JP Morgan -- Analyst

Thank you. A few questions from me as well -- can you talk more about the 3D experience pipeline? I know you spoke about some things bumping into Q1, in terms of large deals, where are the industries that you're seeing the highest amount? Maybe a comment on Toyota, if you can. In that bigger picture view, what penetration have you had with the install base or penetration of your total opportunity? How do you think of it that way? Second question -- is the services growth a bounce off of the 3D experience? Is that a short-term effect or is that kind of double-digit growth that could last for several more years?

Bernard Charles -- Vice Chairman and Chief Executive Officer

The 3DEXPERIENCE platform is now for new sectors or new customers. It's a systematic decision for 3DEXPERIENCE. So, when we expand, diversify, reach new clients, it's the 3DEXPERIENCE platform. Of course, there is a huge install base which is highly diversified. You have an install base using the 3DEXPERIENCE platform to integrate their legacy. We call it power buy, which is really to connect multiple CAD to one platform on other things like simulation. That dynamic is very well-appreciated by clients to prefer the simplification of their own environment.

So, basically, the third lever -- the first lever is new markets, new clients, second lever, how you prefer the simplification of your environment using the 3DEXPERIENCE platform. The third is to use the platform to do things we have never done before, big data analytics with a new type of approach to digitalization of production.

So, you see in the dynamic of new license of the 3DEXPERIENCE platform, all those levers are playing. There is one I hope we are going to make it much more feasible in the experience platform -- and, of course, cloud -- the adoption of 3DEXPERIENCE platform for the small-midsize companies using the cloud. There is a lot of new product portfolio coming to connect SOLIDWORKS with the 3DEXPERIENCE platform to provide browser-based design tools. So, you take a mobile phone, iPad, zero download and you can design online. Those are coming next year. It's coming next week at SOLIDWORKS World.

So, the question should not be, "Is this 3DEXPERIENCE platform replacing V.5?" It is, but the 3DEXPERIENCE platform is changing the game for clients to change the way they utilize their enterprise. That's the focus we have to make those companies platform-based companies.

So, it means like for Amazon, if you look at Amazon, platform-based, everything is one platform. We are doing the same with clients. You asked a question with Toyota. It's going in a great direction. We are enjoying the partnership with them. I cannot quantify anything, but they love us and we love them. Let's put it this way. We also mentioned a lot of wins of competitors' clients who are now moving to 3DEXPERIENCE, a long list. If you take the past quarter's announcement, in the last eight question, it's hundreds of companies migrating from our competitors' landscape for one reason -- the platform.

So, it's the future. The question is not now, "Is it on or not on?" Everything we sell, everything we do going forward is one platform -- cloud on-premise for the future.

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

To answer the question related to the penetration of the install base. I gave them number of 25% of the total software revenue coming from 3DEXPERIENCE platform. It's a good indicator. To give you some perspective, when we announced last year the next five-year plan, the one reaching the €6 in 2023, as an underlying assumption, we have 66% of the total install base being equipped with 3DEXPERIENCE platform. In terms of dynamics, 40% of the licenses are coming from 3DEXPERIENCE platform. So, same mechanisms. You have to assume that more than 50% for the next few years will come from 3DEXPERIENCE platform.

Stacy Pollard -- JP Morgan -- Analyst

Comment on services?

Bernard Charles -- Vice Chairman and Chief Executive Officer

Pascal mentioned it, Stacy. We are learning how to improve the speed at which we can deploy our solutions with customers because of the maturity, the completeness of what we call industry solution. I think that has a direct effect. We think that it will continue to play a good role. However, I must mention that our priority is to continue to develop relationships with system implementers because we want them involved, some of the implementations are so large, we need them.

Stacy Pollard -- JP Morgan -- Analyst

Thanks for that.

Operator

Next question comes from the line of Adam Wood. Please ask your question, the line is open.

Adam Wood -- Aptigon Capital -- Analyst

Good morning, Bernard. Good morning, Pascal. First of all, on the guidance, a quick back of the envelope suggested you're guiding to about 4 points of revenue contribution from acquisitions in 2019, which is I take from the revenue growth gets us to a 6% organic growth in revenues in total. If I remember correctly, you were suggesting that the large deals might add two points of growth to 2019 and that feels a little bit slower in 2018. Is there an element of caution in there in terms of how quickly those deals run pub or am I wrong on the M&A contribution? Just help us on the guidance, first of all, that would be great.

Second question on Airbus -- given you've now got Boeing and Airbus here, could you help us understand what the benefit could be on the supply chain side of things and maybe help us with what the big delta is with Airbus and Boeing? Is it adoption on the manufacturing side? Then finally, you mentioned selling the platform for dashboarding and analytics. Could you talk about who the competitors are in that space? Is it the usual SAP, Oracle, IBM, more modern Silicon Valley players? What's the big differentiation for you selling against those players?

Bernard Charles -- Vice Chairman and Chief Executive Officer

Can I start on the last one? I think analytics for everything we do as we do the digital experience twin is our job. I think what a player like Palantir is doing with our clients is temporary and will be legacy soon. We don't plan to leave this market open to anyone else. We plan to use the platform effect to provide all the analytics tools because they are already there. The reason why some companies have been using those legacy environments or third-party solution is because things were not integrated. When things are integrated, then the platform is the place where you do all the information intelligence. We are very focused to make sure that this provides great value to clients.

I have a good example with what we do with Gulfstream, with Safran, for example. You take the flying data. We look at buying profile of parts and we optimize the entire buying process supply parts. There are many examples which are in operation today, but Adam, we are very serious about making sure this is part of the services of the platform.

On the previous question related to Airbus. I don't want to mention the other name because I want to make Airbus the visible partner for today. It's a dual-pulley, this world. I will say each of them have their own plan, incredible renaissance on the industry infrastructure, incredible possibilities. You will understand we don't want to talk too much.

We have a track record of 35 years of doing very specific things with very specific clients, a lot of secret projects with clients making them successful that are differentiating them in their offer. Even your question, Adam, I understood it, believe me, about the touchpoint production rate and now they will deliver the backlog -- we are there everywhere serving their objectives. That's the best I can say. I forgot the one question about the pipeline. The pipeline is good. Next question.

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

Adam, your computation on the guidance for the license is right. This is a good number. Having said that, we are almost in the same position that we have been in '18, good start to the year, but collectively backloaded, especially for the last transactions. This is the reason why I want to follow the same path. It's much better to come back to you and explain we are beating the expectation than explain we are missing.

So, this is a reason. Again, if you step back a little bit, this year is more secure because we have this organic growth on the recurrent path. To a certain extent, we do not have macro signs specifically impacting us right now, but just to be sure that we will not be impacted any way, this is the reason why we took this guidance.

Operator

The next question comes from the line of [inaudible], please answer your question. The line is open.

Unknown Analyst -- Goldman Sachs -- Analyst

Hi. This is [inaudible] from Goldman Sachs. So, a few questions from my end -- to what extent is PLM now going more mainstream and now not viewed as discretionary anymore? Further, are corporates accelerating their standardization around single end-to-end integrated platforms like yours? How big is the land grab opportunity over the next three years? Further, on the Airbus, how big is a validator is this deal in terms of data replacing other [inaudible], opening additional opportunities for you?

Bernard Charles -- Vice Chairman and Chief Executive Officer

Maybe on the mainstream question, if you look at what we did in the last 20 yaers with the design world of mainstream, named SOLIDWORKS, I think we have created a new standard. It was a high-value for many of those professionals. You remember 20 years ago, those guys were doing drawing systems. We have created an industry work standard, which is a real value for many of those companies.

We want to expand by integrating the business aspect and the collaborative aspect needed by those companies in the mainstream market. It's a lot of companies. You remember over 27,000 new enterprise clients, some are small, some are big, in one year. We think that's a very important blueprint for the future. The attention we have now is to add to design to design simulation, manufacturing on business applications, IQMS for ERP manufacturing companies in the mainstream. So, this segment, we believe it's important because it's not well-served and there is a lot of value to bring.

The second -- those players are important in the supply chain. Our [inaudible] value our action with those players because it becomes a consistent digital thread for collaboration. The third is there are sectors like construction, like life science equipment, personalized equipment, where a lot of innovation is coming from those small, midsize companies, not from the big one. On the cloud, on the mainstream solution, therefore for all those reasons, it's an exciting market that we do want to serve and serve well. There's a lot of innovation in every aspect, even mobility now on others, never seen before, by the way. We want to be there.

So, that's the dynamic that we have and why we did the move. I think they are not risky moves. We need to do it well, like what we did with the solid works experience, quality, speed, and affordable for those companies. So, it's a good play from that standpoint.

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

Airbus, the question that was related, which system we are replacing -- we are replacing the one being developed by our Boston friends. So, definitively, this will be standardized on 3DEXPERIENCE platform and ENOVIA, CATIA, all the product suite. Is that OK for you?

Unknown Analyst -- Goldman Sachs -- Analyst

It was basically how do you see it going forward. Are there still investor opportunities going forward for you? In terms of the competitive environment, how do you see that?

Bernard Charles -- Vice Chairman and Chief Executive Officer

The dynamic for -- we are a game-changer player. When customers select us and replace their legacy, it's because we are changing the game. We have won almost all electrical car companies in the world, all start-ups. It's not all, but one. All those start-ups are not big, but we are there with the 3DEXPERIENCE platform and the second, we are everywhere. So, we are a game-changer. We want to be a game changer in industry, in energy because I don't care about replacing legacy. I care about doing sustainable innovation for all industry we serve. This is what is happening.

You cannot have a purpose that is a paper thing and not act accordingly. We act accordingly. That's what makes us different from most of the players, if not all of them. In life science, same thing is happening. So, that makes our job fun every day. It's important to have it relevant, useful, and creating sustainable innovation that has not been done before.

We are not going through industry digitization. It's a renaissance of the industry. If we don't do it in Europe, China will do it because they are there already. They are building railways, energy system with full digital twin already. So, this is not a minor thing of selling software, it's transforming the way the world produced service and product for citizens and people. It's not less than that.

This is why having a family control owner is essentially. We are not subject to takeover and we have a plan. This is what we are executing. I mentioned that last year, you see new leaders in the ecosystem coming. We are building up the team for the next 20-30 years. That's the definition of our company. It needs to be understood because this is what is inside the numbers, the long-term view of what we do.

This is why big companies are trusting us. There are companies coming to us and saying, "We don't do benchmark. We are going to select you." We have to transform them. They tell us, "We trust you." Look at carefully what the invoice said. Don't look at the number. There is a declaration of trust. My future company is going to be transformed thanks to the platform. That's the game plan. It's more than just pushing pieces of software.

Operator

We have one question left. It comes from the line of Mr. John King. Please ask your question.

 John King -- Unknown -- Analyst

Thanks for taking the questions. Two quick ones -- Pascal, following up on Adam's point about the guidance for the full year. I haven't done the numbers, but I'm guessing it would encompass not particularly strong growth in services, which somewhat surprises me given the ramp you're doing with Boeing. Is that further weakness on the other side of the services? Another clarification -- I think you called out China as being strong in Q4, but obviously CATIA was weak. I think you said in the past that a lot of the Chinese [inaudible] comes through the CATIA line. So, perhaps just an explanation of what they're buying in Q4. Thank you.

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

On the services side, I gave the number. For the guidance, it's 14% for the full year. It's taking into account of a slide recovery of our 3DEXCITE. I think it's going better, not much better, but better. This market is still tough. The reason is we are transitioning a services business into a software business. I think the core value of what we do is not anymore to have a bunch of people working like an agency.

It's to have all the tools and the content being ready to be repurposed on the web, on a mobile, on a configuration engine, in a shop. This is what 3DEXCITE is about. We did a lot of R&D investment for the last few years. Now, we have the product on the market. We see the [inaudible] of the software. We progressively are rebalancing the services activity into the software. This is what we do.

China, I think the [inaudible] is still good. I did not mention, but we signed a lot of large deals across the world. China was definitively a dynamic region of the world, including for the large deal and we will continue with greater opportunity to improve sales.

Operator

There is a last question from the room from Erik [inaudible].

Erik -- Unknown -- Analyst

Thank you. Pascal, you mentioned at the last Capital Market Day a 50-basis point margin increase on an organic basis. You did better in 2018. You still shoot for better in 2019. How do you explain this upside compared to what you saw a few months ago?

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

So, for the capital market there, I have to give a perspective for the next five years. So, I did an average. But I think the discipline which continues to offset the dilutions coming from the acquisition with an organic improvement, I think it's a good one. You can count on me to continue to do it this way.

Francois-Jose Bordonado -- Vice President of Investor Relations

With that, thank you very much for participating in this event. We put a lot of comments on the strategy because it's a full-year review. The next quarters will be much shorter on the numbers. Keep in mind, investors, they need to look at the raison d'être, not only the numbers. Thank you very much and have a good day.

Duration: 85 minutes

Call participants:

Francois-Jose Bordonado -- Vice President of Investor Relations

Bernard Charles -- Vice Chairman and Chief Executive Officer

Pascal Daloz -- Chief Financial Officer, and Chief Strategy Officer

Unknown Analyst -- Unknown -- Analyst

Michael Briest -- UBS -- Analyst

Stacy Pollard -- JP Morgan -- Analyst

Adam Wood -- Aptigon Capital -- Analyst

Unknown Analyst -- Goldman Sachs -- Analyst

John King -- Unknown -- Analyst

Erik -- Unknown -- Analyst

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