Dassault Systemes SE

F:DSY

Earnings Call Transcript 2017-Q4

[François-José Bordonado]

Good morning. I'm François Bordonado, Dassault Systèmes investor relations.From the company, we have Bernard Charlès, our Vice Chairman, Chief Executive Officer; Thibault de Tersant, our Senior Executive Vice President and General Secretary; and Pascal Daloz, Chief Financial Officer and Chief Strategy Officer.I would like to welcome you to Dassault Systèmes' fourth quarter and full year 2017 earnings presentation. We will take question from the audience and from participants in the webcasted call. Later today, we will also hold a conference call.Dassault Systèmes' financial results are prepared in accordance with IFRS. In addition, we have provided supplemental non-IFRS financial information. On understanding of the differences between the two, please see the reconciliation tables included in our press release.Some of the comment we'll make during today's presentation will contain forward-looking statements which could differ materially from actual results. Please refer to our risk factors in our 2016 Document de référence.Just another word before giving the floor to these gentlemen. I would like you to pencil Friday, 15th June 2018, for our Capital Market Day, which will be held in Dassault Systèmes campus in Velizy.On that, let me now introduce Bernard Charlès.

[Bernard S. Charlès, Vice Chairman & CEO]

[Foreign Language] Good morning to everyone.I'm very pleased to share this presentation with newcomers, known newcomers: Pascal Daloz. And of course, Thibault is here also. And you have seen our announcement at the beginning of the year. I will come back on this topic and introduce some members of the Dassault Systèmes team. As you know, we are a long-term-oriented company so we need to make sure we continue to build up the organization for long-term growth.So I think 2017 was a good year. You'll remember we had -- we believe we -- that we have delivered on our commitment. On the new license, we announced at the beginning of last year that it will be up double digit, about 8% to 10%. And we delivered 11%, excluding exchange rate. The operating margin has also been improved by 100 basis point. And the EPS is up 8%. So I believe we have done what we said.On the strategy, which is then also an element of -- an important element, I believe that the purpose that we formulated in -- on February 9, 2012, which was really a new ambition for the company -- you'll remember what we called [Foreign Language] and what does it mean. And by the way, I will illustrate today a few examples in that area. The purpose of harmonizing product, nature and life is something happening in every industries. And clients are looking at new type of solutions to have a more sustainable innovation process. And having been recognized just at the -- during the Davos event to be the world most sustainable company is for us something relevant and meaningful. It does not deliver on the bottom line or the top line. We do know that, but I think it's something that means a lot. A lot of people, [ top ], especially scientists, from any sectors are joining Dassault Systèmes because of this raison d'etre because they feel it's a value in their professional life. And we think it's a competitive advantage, a real competitive advantage. And being #1 across all sectors, not only software, is something significant. And this consulting firm is a very comprehensive -- has a very comprehensive set of parameters. You can -- it's you can look at what they do.The 3DEXPERIENCE platform adoption. On, I think, last year, a very specific signal was given to the market, which is the kind of size of contract we can reach, with the Boeing announcement. I think we have changed the scale of the type of contract we can sign; and also the scope, with Scania for example. Adoption of the platform, I will come back on this. And you see that diversification continue to be a key element of growth for the future when we increased by 1 point the contribution of the new sectors to the total revenue. And also, the footprint, how many users do we reach around the world? We believe we are reaching more than 15 million users, so -- connected, so it's becoming a relevant number.So I will cover the strategy update. And I'm going to share with my colleagues the other section, finance and business review, with Pascal and Thibault.The purpose is not formulated lightly. There are several elements. We have already invested EUR 1.5 billion, because of one of this sphere, the life science sphere, in the last 3 years. With the creation of a brand called BIOVIA, we do want to play in the life science market. And we are gaining clients in that sector to really digitalize the innovation process and production process, especially in the biotech and other sectors. So it's, we are not taking it lightly because that's a concrete example. The second example is what is happening with new material science with especially 3D printing. So that purpose, illustrated with a Corporate Knights recognition. Many customers appreciate highly that recognition. One of them, a big client, was Toyota, who as you may know is a very sustainable-oriented company in terms of hybrid vehicle, future vehicle and so on, was -- really recognized this as a key achievement for Dassault Systèmes. And it looks at very -- they look at very -- a lot of parameters, environmental, social, financial, innovation, the way we run the company. So it's not just one number. It's a complex, a highly valuable ranking. I don't think we will stay #1 forever, but we will stay in the list.The second remark I want to do, based on what I shared with you 5 years ago and you know now that it's happening. The virtual world is expanding the real world. It's not something aside. And I believe that what is happening in digitalization of industry is not digitalization of industry. It's a redefinition of industry. I call it industry renaissance. It would be a low-profile, marginal view to consider that it's just about digitalizing the industry. It's much more profound, and I want to illustrate to you why. The third element -- so the purpose, raison d'etre, the second element of it which is what is happening in the industry. The third element is related to the way we are leveraging what is happening in terms of setting up the plan for our strategy. Social, we believe we are creating a new social connection between people and innovators with the 3D and the augmented reality. On the industry, you know it now, industry solution is not only capabilities. It's possibilities to do things that were not possible before, composite wing for an airplane. You noticed last year that there was 0 accident in civil aircraft, 0 accident. I believe that, in the last 35 years, Dassault Systèmes has massively contributed to reliability of air transportation, massively. Not -- we are not only -- of course, the only player. The airplane producer are the main one, but they can master with simulation and prediction things that were not possible before. On experience, because we all know that we are not buying products anymore for those capabilities, we are buying products because the usage of them is enjoyable and provide the value.I have a quick video here that show you, illustrate to you where this is going. So [indiscernible] on why this is important.[Presentation]

[Bernard S. Charlès, Vice Chairman & CEO]

Everything you see here has been created virtually. This is not a picture. This is created by individuals around the world, consumers around the world using our platform online and in serving new [ furniture ] inside their environment real time on a cloud platform. So the fact that 3D is expanding our world is becoming a reality. And all those are real cases. When I told you 15 million-plus users, many of those are coming from there. It's changing the way people think about the environment in -- where they want to live. They can adapt their kitchen, their homes, their -- select which appliance will be the best. So the move to use 3D and augmented reality in daily use is happening and will not stop. It will accelerate because the device cost is reducing very quickly, and we want to be there. And that's part of one of the activity we are doing.The second remark I would like to share with you in terms of strategy. You may have noticed that in every top industry of the world there are newcomer and new players. Several years ago, people said there will not be any newcomers in the auto sector. [indiscernible]. A few years ago, people -- there will be -- no be newcomer in the aerospace. Joby Aviation is there, electrical airplanes. There are more than 70 program of electrical airplanes for local transportation going on around the world. Most of them are our clients. The message I want to share with you is the industry of the 21st century is not the industry of digitalization of the existing one. There are a lot of industry shaker coming in those sectors on redefining what mobility is, what health is, how construction should be done. And you see those illustrations, and all of those are our clients. It does not create a lot of revenue at the beginning, but it's a game changer for what is happening in the years to come. That's what I call industry reference for big clients. On industry shakers with newcomers, there are about 50 or 60 newcomer in the electronic -- electrical car which are outside the automotive industry and coming in with new solutions. So that's what I call the industry renaissance. And Dassault Systèmes is there with all of them. We are in the Silicon Valley with all those new players with great references. Small revenue at the beginning, but those players are going to be significant.You have noticed also that we work a lot for cities. 50% of the people are in cities. You have transportation. You have social. You have health issues. You have many other issues. And this is an illustration of what is happening in Rennes, where basically in this midsized city they are using the platform like what we are doing in Singapore right now to really make decisions, to plan and present to citizens what they are going to do before they do it. Why is this game changer? It's because even the construction is going to be done differently. The infrastructure is going to be done differently. The analysis about [ how cities ] and to live in the city and which way they go, on what kind of infrastructure they use, they now have reference. I think I don't know if there is a video. François-José -- where is François-José? Is there a video in here or -- I don't know. Okay, but you can see on YouTube some of the 3DEXPERIENCE city on YouTube. You have those videos. We are doing the same thing for...

[François-José Bordonado]

[indiscernible].

[Bernard S. Charlès, Vice Chairman & CEO]

Okay. Sorry. So this is an illustration of the use of the platform to plan the evolution of...[Presentation]

[Bernard S. Charlès, Vice Chairman & CEO]

So those create big-scale integration capabilities which are truly unique. And I am disappointed that [ government Paris ] is not yet understanding that it's needed for them, so if you have influence, please tell them, okay? But we are doing it in Singapore. We are doing it in Japan. We are doing it in China, in several cities. This is not becoming pilot anymore. It's become -- those are becoming real project.Now another dimension that we announced was that the platform will be used not only to provide software solutions on the cloud, for example, but also will be used to trade transactions, to do trading. On January 20, a few days ago, we opened our first marketplace. This first marketplace allows any buyers, someone who wants to produce a 3D part, to find a seller, someone who is going to produce that 3D part. Our software is then free for them, and we take a percentage on the value of the part which is printed. So we are becoming the transaction buddy between the buyer and the seller, and we call this the marketplace. We think that, by end of 2019, we will probably have one of the world biggest manufacturing plant in the world on that part -- on that marketplace because more and more companies subscribe to the platform, explain that they can provide the service. And more and more users click on us for what they want to produce, to be produced by those sellers.So next week, in Los Angeles we will be presenting that to our SOLIDWORKS community. And I think it's an important event. From that standpoint, we think we can do for production what Amazon is doing for retail. And we are going to work very hard to make sure that this is successfully done around the world.The last message I want to share with you are related to the size of contracts. We have not communicated a lot about size. By the way, not a lot of the revenue of what we signed with Boeing was recognized last year, and Thibault will confirm that to you, but the point is we have moved from a point solution in engineering or manufacturing to a business platform that can manage the entire work of all people from initial [ ideas ] to the plane in operation. And that provides the visibility to have contracts with clients which are much bigger in terms of potential on long term.As you know, Dassault Systèmes is on most awards done [ out in ] all aerospace sector, de facto. Most of civil aircraft are done with our solution. Our growth is to cover all domains' subject matters, from interior design, not only the plane producing it but also life cycling of the airplane. So that sector is still growing. And Boeing was a major, major catalyst in 1990 to demonstrate to the world that the digital airplane could be possible. The Boeing 777, one of the best-ever success in the aerospace sector. And all the family they have produced since that are using our system, but now they are going to be the first on the planet to demonstrate that all things that touch the airplane are also going to be done with the Dassault Systèmes platform. We signed an agreement [ with Boeing ] to apply to construction what we have applied to our aerospace and automotive. And this is also, I think, a proof points that this sector called Architecture, Engineering & Construction is a sector that we are taking seriously and that we want to conquest.This is then also an interesting showcase, which is showcased with Schindler, where we basically demonstrated that we could do the experience twin of their escalators on the cloud. And once again, here I don't know where the video is. And if there is any video -- no video? But the proof point here is the following: How can a company that creates those equipments and sell them around the world can use the -- and can experience the twin of what they are going to sell before they actually install the equipment in the buildings where they are going to sell them? And what we have demonstrated is we could use the cloud for that. It means that their face team in Asia could virtually install the equipment inside the building on the cloud. And this equipment will become the specification for what needs to be produced to deliver that equipment in that building with 0 ambiguity. Second, to be able to predict the maintenance and to evaluate the reliability of the equipment [ but because ] for them it's a significant cost element. So this is on the cloud. And it shows that many new sectors can adopt this approach that was used before but in a way which can be easily distributed around the globe. And the dynamic of this platform now is being revealed for -- and also a dimension of it which is clearly to use the platform to integrate known Dassault Systèmes products. So we want to be able to integrate known Dassault Systèmes products so we facilitate our customer transition for integrated system. We call it Power'By.The marketplace, I've talked about it, and we are going to see this here -- yes, but you don't show me where is the link, so I don't know where to click. There is no video. You can see it on the -- our website. If you go to 3DEXPERIENCE marketplace, you can find videos that shows you what it is, basically a relationship between seller and [ player ].So the last point I want to comment today is that, first of all, welcome to Pascal Daloz. And welcome also to Florence Verzelen, who is here. Please then stand up, at least for the people who are here, Florence. A new generation of what I call top gun who have really a passion and a vision to make sure that we continue to create the best-ever dynamic for Dassault Systèmes. And Thibault is not retiring, stays with us. And he is going to work with me to really think about how the -- our corporate structure should evolve. As you noticed, when we are moving from selling software solutions to B -- what we call B2B business, to moving to B2C with what you have seen with HomeByMe or building marketplaces, we probably will have to think about what the best corporate structure should be to make this happen. You have noticed, for example, that we have a significant subsidiary called Outscale, which is one of the best cloud service in the world in terms of performance reliability and security. And it's a subsidiary of Dassault Systèmes. We took a very creative approach without scale to create that company, find the entrepreneurs. We became an investor and a banker. And 16 months ago, we decided to buy 80% of the company, but I think the future of innovation call for a new corporate structure to be highly flexible and agile to enable extremely innovative teams to do things in a work-competitive landscape. And we have proved that we could do one of the best, most efficient cloud infrastructure, most secured because most of our platforms are running on our own infrastructure, with margin which are very good for the time being.So with that, I give the floor to Thibault to give you some more explanation about what we have published today and also the trends for the next year. And after that, Pascal will give you a business update.Thibault, you have the floor.

[Thibault de Tersant, Senior EVP, General Secretary & Director]

Good morning.So another quarter equally challenging to present. This one is not a heroic adventure for me. The financial highlights are quite simple. Our revenue grew by 8% in fourth quarter and 7% for the year. The growth from an organic standpoint was 7% in Q4, 5% for the year. Software new licenses were particularly dynamic in Q4, with a 16% growth. This was all organic. Thanks to it, for the year, we had an 11% growth in new licenses, or 10% on a full organic basis. The recurring revenue was up by 6% in Q4 and 7% for the year.Services were, as anticipated, weaker in 2017. We had a decline of 5% in Q4; and flattish or 1% growth, revenue, for 2017 for services. However, due to the number of contracts that we are signing, even if we are transitioning more and more services responsibilities to system integrators, we will have to grow our services again in 2018. So this is not a trend that you should project for the future. The kind of services that we will render is certainly evolving because of the role that is now taken by a system integrator, as you know. So we are now transitioning towards higher-level services.From a geographic standpoint, Europe was the strongest region in 2017 and particularly in fourth quarter with 13% growth, in Europe, 10% for the year. This was driven essentially by all regions in Europe. France, Germany, Southern Europe, Russia had a stellar performance, so it was broad based. In Americas, North America continued to perform, but in Q4, Latin America was weaker. There were a few reasons for that. And so Americas grew 5% in Q4 and 7% for the year. And in Asia, if you remember, we were impacted in China by some waiting period until the Communist Party congress during the first 3 quarters of the year really. In India we were also impacted by a few reforms, particularly in taxation with the GST. So Asia was not our strongest region in 2017 with 6% growth, but you can see in Q4 already a pickup at 8% because China is growing again essentially.From a brand standpoint, well, some people want to bury CATIA too fast and say that it's an old brand on a mature market. I've been hearing that for 10 years now, so I'm glad that I'm not the one who is going to hear it for the next 10 years. Thank you, Pascal. But Q4 was very good for CATIA actually with 10% revenue growth driven by 29% new license growth for CATIA, with a particularly good growth in 3DEXPERIENCE for CATIA in Q4. ENOVIA was weaker, 2% growth for the full year. That was not the year of ENOVIA. We believe that the fact that we have been vocal about Power'By and this fantastic opportunity for our customers to manage products in hybrid environments without having to migrate all data upfront is certainly creating some waiting period. And we believe that ENOVIA will have a good career going forward. SOLIDWORKS was certainly having an exceptional year, 14% growth for the full year, 13% in Q4, driven by excellent new license growth across all quarters. So SOLIDWORKS is clearly gaining market share and fitting the needs of a significant market.Other Software were also performing well during the year, 11% growth for the year, 11% growth in Q4, driven by SIMULIA in simulation, DELMIA in digital manufacturing, Quintiq in optimization and manufacturing. And also EXALEAD should be highlighted. We don't speak about EXALEAD every quarter. I think Pascal will in his presentation because EXALEAD had truly a very good fourth quarter driven by analytics [ or the need ] of our customers for analytics.From a margin standpoint, if you remember, we had initiated the guidance for 2017 by saying that we had to invest for the future and in order to face a surge of 3DEXPERIENCE. So we were forecasting a 50 basis points improvement in organic operating margin for 2017, but based on the good performance of Q4, of course there is good leverage in our business, so we did 100 basis points improvement in operating margin, with a small dilution of 20 basis points coming from acquisitions in 2017. So we ended at a 32% operating margin for 2017. And I am mentioning this because you will see that, based on this good performance in '17, in 2018 we will have to target a more moderate improvement of operating margin for the exact same reasons we were highlighting at the beginning of 2017.EPS. EPS grew by 14% in Q4. Currency rates impacted it by 5 points, so the growth of EPS without currency impacts would have been 19% in Q4. And for the year, the increase in EPS was 8% and without currency impacts would have been 10%.So one of the certainly positive points about Dassault Systèmes is the cash flow generation. And 2017 is no exception to that with EUR 745 million in cash flow from operations growing 20% compared to the year before. So as you can see, in spite of the acquisitions we did for EUR 372 million in 2017, our cash position in net terms is essentially unchanged and also in spite of the evolution of currencies which were impacting it at the end of the year. Not much to say about the details of the cash flow because, as you can see, the cash flow is really very close to the net income adjusted for noncash items: EUR 745 million of cash flow, EUR 735 million of net income adjusted for noncash items. So there is a wash essentially for the rest of it. I think there's 2 highlights. Fourth quarter, cash flow is not the strongest because we do a lot of new contracts. The activity is the highest in fourth quarter, so there is an increase, of course, in accounts receivable. And then the payments follow, so the first quarter is generally our strongest in terms of cash flow generation. Just to make sure the dynamic here is clear. Another indicator that matters is the unearned revenue. And if you look at our balance sheet, you will see that unearned revenue is up significantly. Actually, on an organic basis and excluding currency impacts, unearned revenue grew by 9% in 2017, so that's a good illustration of how healthy we are in renewing the recurring revenue.A little bit of accounting is, I'm afraid, forced by the adoption of IFRS 15. As of January 1, 2018, there are some other standards to be adopted, by the way, but the one on financial instruments has 0 effect on us, so I'm only focusing here on revenue recognition.So as you know, IFRS 15 for us has essentially one impact, which is the fact that we have a significant portion of our business in subscriptions, in rental licenses, as we say. And these rental licenses will have to be splitted. Today, in IAS 18 they are recognized ratably across the year. It was making very much sense, by the way, but in IFRS 15 we will have to split them into a licensed portion and a so-called maintenance portion. And the licensed will have to be recognized upfront, and the maintenance will continue to be recognized ratably. So if we were only signing 1-year licenses, and that's actually the bulk of what we are signing, there would be no impact for the full year. And some variations are possible if we sign multiyear rental licenses, and this is very small actually in our contracting activity. We are going to adopt IFRS 15 with what is called the modified retrospective method. What does it mean? It means that we are not restating completely our 2017 accounts, which is a very cumbersome activity, but we are simply, simply recomputing our contracts for 2017 and recognizing in shareholders' equity this licensed part that was not recognized in IAS 18 and should have been in IFRS 15. So since we are not restating completely 2017, what we are doing is we are going to publish with the old IAS 18 method our statements, IFRS, non-IFRS. Our objectives that will be presented by Pascal are still done with the good, old IAS 18 method, so you will have full transparency and comparability between 2017 and 2018 in this standard. That will be audited, of course. And we will start publishing IFRS 15 financial statements for 2018 such that, when we step into 2019, we will be able to compare to a set of financial statements in IFRS 15. And the guidance then for 2019 will be given with the new accounting standard.So now what is truly the impact? The impact is very simple, as you can see. Let's assume we sign in Q3, a random choice, the contract for a rental for 1 year of our licenses worth EUR 120. We don't have such. It's more expensive, but okay, let's assume it's EUR 120. Formerly, we were recognizing EUR 30 per quarter, as long as the agreement was renewed. In IFRS 15 we will recognize -- we will split the contract into EUR 100 for the license; and EUR 20, because our average maintenance rate is 20%, so EUR 20, for the maintenance. So we will have to recognize in Q3 EUR 100 covering this 1-year contract. And we will start recognizing the maintenance portion at EUR 5 per quarter, the EUR 20 for the year, so in Q3 we would have recognized 25 -- 70 -- EUR 75 instead of EUR 30. And then in Q4, we will have only recognized -- so I'm sorry. I'll start again: In Q3, we will have recognized EUR 105 instead of EUR 30, so EUR 75 more than in the former method. In Q4, we will recognize EUR 5 instead of EUR 30, EUR 25 less, with a difference of EUR 50 at the end of the year. This EUR 50 for the 10,000 rental agreements we have will be recognized in shareholders' equity January 1 in our balance sheet.In 2018, there is an impact in first quarter, second quarter, in each quarter, but the total is the same in the old method and this new one because it's a 1-year agreement. But the seasonality is affected, and so we did a computation in 2017 in order to see what is the impact on seasonality when applying IFRS 15. And what you can see is that we were -- for recurring revenue here, what you see is recurring revenue per quarter in 2017. It was very well balanced across quarters, 25% first quarter, 25% second quarter, 24% third and 26% fourth quarter, very, very balanced. So the movement applying IFRS 15 is that, first quarter, since we have more renewals of recurring licenses in first quarter, will go to 27%, so 2 points more, EUR 50 million more in first quarter; equivalent in second quarter; and a negative impact in third quarter going to 23% of the total, so EUR 32 million less; and EUR 11 million less in fourth quarter. The net impact is that in IFRS 15, in 2017, we would have recognized EUR 11 million more in revenue. Why so? Because we had a few multiyear deals in 2017. But this can be very different in 2016, when we did the [ same exercise ] and the IFRS 15 revenue was slightly less than in our standard. So a very small difference in revenue in reality. I know there is a question that can be raised here, which is that we signed a large agreement with Boeing for a very significant number of years. This agreement, we will continue to recognize ratably. Why? Because it's too long to be sure, to be certain that the license revenue we would recognize would not change. For example, Boeing can be interested in cloud. And when you go to cloud, you recognize ratably cloud revenues. You don't recognize an upfront license for cloud. So we could not make the bet, and we were not tempted to do it, to recognize upfront the Boeing license. So it will be recognized in the old method fully ratably and in accordance with IFRS 15 standards.So a small change for full year in revenue. And the transition impact is, these licenses that should have been recognized in '17, this is an amount of EUR 110 million that will be placed in equity in our opening balance sheet January 1, 2018. Sorry for the accounting lecture, but I think it was important.And now our new CFO is going to present our business highlights and our guidance. Let me introduce you to Pascal Daloz.

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

Thank you, Thibault.It's a real pleasure to be with you today, and I look forward meeting most of you in the coming investor events with Thibault. It's also a great honor to take this role after Thibault because, 18 years ago, I was in this room asking questions to Thibault and Bernard. So it was at an extended closed loop for me. Thibault built a very strong team; and with Valerie, who is here. And Thibault will still be here to back me, just in case, so don't worry. You are safe.

[Thibault de Tersant, Senior EVP, General Secretary & Director]

[indiscernible] our head of finance. I would not have done much without her.

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

So the purpose of this section is really to focus on the word "drivers" and just to make a quick highlights for the quarter.So the first takeaway is really 3DEXPERIENCE platform is taking off. And you have 2 key measure here, KPIs. The first one is it's represent more than 25% of the total software revenue excluding SOLIDWORKS and the acquisitions, but this is really the proof that it's becoming core. And more important, we signed more than 20 transaction exceeding EUR 1 million in Q4. So this is also a game changer for us. And you have basically the list, a sample of the big names. And you'll notice that it's spread across the core industries like the Transportation & Mobility and also in the diversifications like high techs and others. And also an interesting case with Caterpillar because Caterpillar is well known to be a competitor's, I will say, accounts. And it's a proof that we can win and do some win-back with 3DEXPERIENCE platform as well.If we look at the industry. The most important things to remind is we have 7 industries, among the 12 we have, growing at double digit for this quarter. So starting from the core industries like Transportation & Mobility and industrial equipments; and in the new diversifications, a new industry such as Consumer Packaged Goods, consumer goods, retail, High Tech, Natural Resources and architecture and constructions. So this is really a proof that basically the growth is relatively strong in both diversification and also the core industry. From a pure diversification standpoint, we are increasing by 1 percentage point year-over-year at 32%; and it's driven by High Tech, consumer goods, retail and consumer packaged goods, retail.A quick highlight for the year for the core industries because industrial equipments is really growing very nicely at double digits. And it's not only due to SOLIDWORKS, because I was expecting you to think this. It's also because the cloud solution in the 3DEXPERIENCE platform is also taking off and thanks to the industry approach mainly. We are also enjoying a high single-digit growth in Transportation & Mobility for the full year, with double-digit growth for new license, so clearly it's also something important to notice on -- for the full year. If we zoom a little bit on the consumer packaged goods, retails, a few takeaways. One is software growth is up 17%, excluding the currency effects, but more important, we are basically penetrating new segments like food and beverage and retail. And it's thanks to really Quintiq, which is really opening this avenue for us and for the rest of what we do. And we are also expanding in beauty and personal care. And we are also diversifying in manufacturing with Perfect Production. So clearly, in this industry we are really tackling different subsegments and also different domain, which is very important to notice.And a good example is this Brazilian company, maybe not well known by you guys, it's Boticario. They produce 300 million products every year, so it's basically a large company. And they have selected Perfect Production's solutions based on the DELMIA brands to do few things. One is to lower the production costs and improve the efficiency, but more important is basically to ensure that the control and the trustability and the compliance is same everywhere for every manufacturing plant. And they are also fostering the collaborations between laboratory and to the shipping. So clearly, something very, very key in this -- for the -- in this industry.If we zoom on the High Tech sector, so the High Tech software growth is up 11% for the full year. And we are close to 10% of the total software revenue for Dassault Systèmes. So it's becoming key. And few takeaway, also, we are deeply expanding in the semiconductor and winning new accounts and also reinforcing existing account. We have solutions called Silicon Thinking. It's widely used by most of the semiconductor company.We are also winning multimillion deals in simulation, manufacturing and supply chain. So clearly, we are expanding also the core domains. Not only the design, it's basically all the -- what we call, the value stream. And we are also signing significant reference in the consumer electronics. And one of them, it's also an interesting case. It's electronics, the leading global science company. You know all these famous brands AEG, Frigidaire, Electrolux, Westinghouse and so on. And they sell more than 60 million products every year.And almost a same story. I mean, they had to improve the productivity and the flexibility of the plant and ensure the operational control to give the visibility. And they are using digital Manufacturing Operation Management solutions to do so. So a good proof that we are also expanding on the different domain in those core industries -- in this new industry, sorry.Moving to the brands, people say a lot. But the takeaway is also this one: among the 12 brands we have, 6 of them are growing double digits. So it's also important for you to notice this.And SOLIDWORKS is a year of record, for sure. But the more important is, we are really winning market share. If you look at -- I put some KPI on this. We are adding more than 20,000 new customer in year 2017. We are exceeding 800,000 commercial users. We are exceeding 3 million students using SOLIDWORKS in their curriculum. So clearly, the footprint is really significant.Key point also for you is, next week, at SOLIDWORKS World, which is basically the big event, because we are gathering this community. We will introduce a new web-based categories of applications. So one of them is so-called Xdesign. So it's the future generation of SOLIDWORKS based on the cloud. It's also -- we will also promote the social web services, which is a way to power SOLIDWORKS desktop with a 3DEXPERIENCE platform. And we will also offer the access to the marketplace, where we will now highlight to all the SOLIDWORKS community. So clearly, this is also very important, because I remember some of you challenging a little bit our strategy against the newcomers. I think we are not only well placed, but we are building significant competitive advantages.EXALEAD. As Thibault say, we are not saying too much, but this business is growing nicely, you saw it, plus 18% growth per year. And the most important, you heard a lot of -- about big data, artificial intelligence and so on. And thus we have built some unique capabilities. The first one is we are the only one being able to gather basically the entire web by [ crawling ] the web and basically extracting the data and the intelligence from the web and combine this with old internal data you have inside the company. So it's really a unique value proposal.And here you have some specific cases. One of them is, what we call, sourcing and standardization intelligence. We signed good reference in Aerospace & Defense. And here the point is, if you take an airplane, you have millions parts, and sometime you duplicate the parts. So this capability is helping you to find and to avoid the duplication of the part. But more important, for the procurement, it's a way to decide if they have to buy it or to make it. Because with this intelligence, we know how to compute basically the prices, the availability and all the partners having this capability to do this.Another point which is, what we call, the PLM analytics. Most of our customers and especially the large one, they have gathered a massive set of data in our systems. And now with this technology and thanks to the integration of this technology into the 3DEXPERIENCE platform, we are able to extract this intelligence and basically reveal some patterns. This is what we call the PLM analytics. So clearly, you should expect these product lines continue to grow nicely.Quintiq is also an interesting case, because you see the software revenue is plus 24% in year 2017. And since the acquisition, we are exceeding the 20% growth per year. So it's not the proof that the domain is interesting and attractive but also we have a unique value proposal, and we are continuing to expand into new subsegment. If you remember, Quintiq, we are very strong in EPU logistics, and we are expanding, in this case, in food and beverage and retail. And we are also winning by combining Quintiq with DELMIA Apriso in the supply chain management and discrete manufacturing.So good example of this is when we did last quarter the Jumbo Supermarkten. So it's well-known retailer -- food retailer in Netherlands. And they have developed an omnichannel strategy. So it's not only basically the physical shop, but also like most of the retailers you are able to order online. And this is difficult to manage, because you want -- you have to increase at the same time the choice for the customers and you need to have this flexibility. So Quintiq is unique because they provide this capability in a very efficient manner.From an acquisition standpoint, in year 2017, we have reinforced the simulations. But if you remember, since -- basically, 2 years, we have expanding the simulation scope from the structure, which is basically the core to suite and electromagnetics. And now we are covering almost 70% of the core physics of simulations. So we'll continue to expand in other domains, because life science and natural resources at large are untapped. But for the core physics, again, keep in mind that we are covering with what we have, 70% of the market. But the most important, we have unique technology. You can take the structure, you can take the electromagnetics, you can take the suite, we have built unique technology, and this is -- it will be hard for the competitors to catch up on this.We continue to reinforce CATIA, especially with system modeling, with a company called No Magic. We spoke about it, and we expect to close this transaction end of the quarter. And here we are basically complementing the -- I would say, the model-based design, with something which is much more standard, which is SysML. So it's a way to describe with a standard this kind of capabilities.And we are also reinforcing our capabilities to deliver solution on the cloud. We took the majority stake in our scale. And the point is again to ensure that we have the capability to offer these services to the large install base we have and at the same time to comply with local regulatory, because this domain is relatively sensitive. And especially keep in mind that in our platform we manage IP and knowhow, and being able to comply with local compliance and local regulatory is something key.Moving to the full year and Q1 financial objectives, and again, Thibault, feel free to add any comments you want. Here are basically the main assumption we took for the guidance, and the guidance, as Thibault explained, is based on the IaaS '18 standards.So the new license revenue growth is up to 8% to 10%. And the main difference compared to year 2017 is the mix. In '17, you had a strong contribution from SOLIDWORKS. So we still expect SOLIDWORKS and professional channel to have a solid growth, but we expect a little bit more contribution from 3DEXPERIENCE on this.And the recurring revenue, it's up. We are planning a growth of 7% to 8%, which is an improvement compared to last year.Services is back to growth, with 12% growth excluding currency effects.We expect moderate organic operating margin improvement. And if you remember, we improved a lot with 100 basis points in year 2017. So the commitment to you guys was really to improve by 100 basis point for -- over 2 years. So we did it last year. We will continue to increase organically, but not at the same pace. The tax rate is decreasing to 29.7% compared to 33.2% in year 2017, and it's mainly the effect of the U.S. tax effect.And in the exchange rate assumptions, we took 1.25 exchange rate for the dollar per euro for H1 and 1.20 per euro in H2. And for the yen, it's relatively stable, 135 per euro.So if we compute those assumptions, what does it mean? It means that for the full year, year 2008 (sic) [ 2018 ], we expect growth, excluding the currency effect of 8% to 9%, we expect an operating margin at 31% -- between 31% and 31.5%, revenue in the range of EUR 3,355,000,000 and EUR 3,385,000,000.The operating margin is really impacted by the dilution of the acquisitions, and the impact is 60 basis point as well as the currency effects is 40 basis point.The tax rate, we spoke about it. And this translate to an EPS growth of 6.8%. And if you exclude the currency effect, for the full year, it's 11% to 13% growth.I just want to draw your attention on this. Because if you take basically the consensus developed by the analysts on the exchange rates, the guidance we are giving to you on the EPS is above the consensus.Stepping in the year, if we look at Q1, we are very, I would say, confident with a 7% to 10% growth and the revenue range between EUR 750 million to EUR 770 million. But the most important is, basically, this growth is driven by a new license dynamic between 9% to 15% excluding currency effect. So it's basically a good sign that -- the outperformance we had in Q4 didn't drive the pipeline for the full year, because Q1 is still very solid and we are confident. If you look at the impact on the operating margin, we are targeting an operating margin between 26% and 27%, which is an improvement, for sure. And an EPS at EUR 0.54 -- I'm sorry, euros and EUR 0.57, which is an EPS growth between 2% to 8%. But if you, again, take into account the currency effect and you exclude this, it's a growth, a significant growth, because it's between 18% and 24%. So clearly, it's evidencing really the headwind we are facing with the currency for Q1.That's it for the guidelines for year 2018. And I think it's -- I would like to thank you. And it's probably the time to take the question.

[François-José Bordonado]

We'll take first question from the room, and after we'll take question from the call.

[Gregory K. Ramirez, Financial Analyst]

Gregory Ramirez from Bryan Garnier. I have a question regarding the operating margin in Q4. It was very strong. Hopefully, it was up by license sales, may be better than expected. But when you look into details and when you look at the operating costs are down. Obviously, there is probably some ForEx inside to explain it. But could you help us to understand how this OpEx are done? And second question, I would like also to come back to 2018 operating margin guidance. The underlying operating margin guidance is up, let's say, 0 to 0.5 percentage points but not the 1 percentage points that you mentioned in the past. So what are, I would say, the extra costs which are implied to get it?

[Bernard S. Charlès, Vice Chairman & CEO]

I'll ask Thibault, you want to comment for next year?

[Thibault de Tersant, Senior EVP, General Secretary & Director]

Yes, of course. The Q4 operating margin went up by 3 points as you have seen. The increase of expenses was real, because there was the same 5 points effect on -- coming from currency, essentially. There was another but not so strong effect, which is the fact that we got our tax audit in France finalized, and so we were able -- we have provisioned somewhat for the research tax credit. So there was a reversal, a small reversal, but a reversal. So this lowered a little bit the R&D line. All the other expense lines were really going up as forecasted. So the better operating margin is coming essentially from the better performance in Q4 from the top line standpoint.

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

Regarding the operating margin improvement organically for year 2018, I think your calculation is right. We are expecting an improvement up to 0.5 point. And the reason why it's not a point is because we are, as you say, investing. But it's -- basically, the investment is spread between research and development and sales and marketing. So we are not putting some emphasis on one piece or the other.

[François-José Bordonado]

Next question. Adam?

[Adam Dennis Wood, European Technology Equity Analyst]

It's Adam Wood from Morgan Stanley. I wonder if you could help us out a little bit with 3DEXPERIENCE, may be in 3 ways. First of all, on the penetration of the install base, where do you think that is from a total point of view, not just as a customer taking one product but how far is that migration across all of the customers and their products? Secondly, on the pipeline, you've mentioned getting references and getting references live would help that. Could you help us understand a little bit around the maturity of the pipeline, the size, as we go into '18? And then finally, maybe on the sales side. Again, we've discussed moving from point solutions to platform and how that's a challenge in terms of rescaling the sales force. Where do you think you are in that now? Do these -- better results in Q4 suggest that the big issues there are behind you?

[François-José Bordonado]

Who wants to take the first part of the question?

[Thibault de Tersant, Senior EVP, General Secretary & Director]

Yes, I can. Okay. Actually, the first question is a very good one, because -- no, but because what it shows is the fact that there is truly a good dynamic happening. Because the guidance that Pascal gave for the first quarter, 9% to 15% growth in new licenses, and you know that we -- we all know that you are all going to go to the high end of the range immediately. So there is no doubt in our minds about that. It's completely covered by the pipe today. So we are actually stepping into 2018 with a pipe whose maturity and lever is better than what we have seen in the past years. And it's very much driven by 3DEXPERIENCE as well. So we have really the coverage that is required in order to deliver this first quarter guidance. And the maturity is also better. Quite often we start first quarter with lower level of maturity because the sales teams were so busy at closing Q4 that they have less time in order to make progress on the pipe maturity. And this year, it's not the case. I'll say the teams were able also to continue to nurture the transactions in the pipe.

[François-José Bordonado]

Next question, Lauren?

[Thibault de Tersant, Senior EVP, General Secretary & Director]

Well, actually, I have 2 other questions. One on the penetration of the install base and one on the sales adjustment to platform sales. The penetration of the install base -- actually, I'd like to be able not to answer the question, because it depends on how you look at it. And it's actually very complex to give a good picture. If you -- because there are multiple ways of looking at it. If you look at ENOVIA, for example, there is already some penetration, of course, in the install base, which may seem significant. But the platform is really at the beginning of its penetration of the install base. And the potential is for the other brands as well, what we do in manufacturing, what we do in simulation, what we do in optimization, what we do in analytics. So if you look at the full potential, the penetration is very small. But I don't want to give the impression that there is no penetration at all, because it is true also that our customer base is adapting the 3DEXPERIENCE and they are going to it, and they are making very significant steps, like the ones at Scania, Boeing and all the wins you have seen. But in terms of revenue, it's still the beginning really in the install base.

[Bernard S. Charlès, Vice Chairman & CEO]

And the result of the implication of the platform is really about the multi-year growth of the company. It's a very -- a very key factor. And today, all customers have this on the agenda. It's not a question of if or even when, it's about how they transform the whole business. And many of the selection last year were justified by the platform, the uniqueness of the platform. And the Boeing decision is not a CATIA decision, not even a DELMIA decision. It's -- they want to redefine the digital pipeline of the Boeing company. So the platform is at the center of everything they do. Same for Scania. That's why we mentioned those 2. The Scania event was a significant one, because there was a German native, PDM, there; the big sign for the dynamic.

[François-José Bordonado]

Laurent, next question. And after, we'll take question from the call.

[Laurent Daure, Head of IT Software and Services Research]

Laurent Daure from Kepler Cheuvreux. I have 3 questions. You touched very briefly on LatAm and some weakness at the end of the year, while it seems that the environment there is getting better. So if you could elaborate and if you see some improvement for 2018? The second question is on your comments on the architecture. Do you think you have a solution that is good enough today or could you want -- could you look at potential add-ons in terms of M&A in that field? And my last question is more on the tax rate and the U.S. tax reform. You have taken the same for '18. And also, on the cost of sales and marketing, one of your competitor had an impact from IFRS 15, it seems you have none. So if you could help us on that.

[Bernard S. Charlès, Vice Chairman & CEO]

Thank you. LatAm, Thibault, do you want to make a comment or Pascal?

[Thibault de Tersant, Senior EVP, General Secretary & Director]

Sure. Go ahead, Pascal.

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

Well, I think in LatAm, the natural resources industry is relatively not so significant, but it's large population of the revenue. So we could expect a better situation for this year.

[Bernard S. Charlès, Vice Chairman & CEO]

Architecture. On the architecture -- Laurent, thank you for the question on the architecture. We have decided to win in the sector. It's not a light decision. We are going to win, because this sector is an old sector. It's still 2D based. So it needs to change, and we have our outstanding showcases today. As you know, of course, what we've done with Gary, what we are doing with Kengo Kuma in Japan and many other companies. But we believe now with cloud, Zahner, for example, on many users. You've seen some of the videos here, the [ big ] agreement. The [ big agreement ] is not a replacement of existing solution, it's the adoption of the platform to change the business. So the fact that the platform can swallow existing or supporting tools, tools that create certain digital content and create a platform-based business is why I believe platform plus cloud is something that does not exist for this sector, and our solution are becoming very competitive on that. It was too expensive before for many of them. But on the cloud, it's becoming affordable, and we do not want to reduce the price. We want to bring more value. So it's going to be an exciting moment. We love to conquest new industries, and we are in good shape now. The question about further acquisition. We do what -- we will do whatever it takes to win. But I wish I could say something more, but I cannot, so...

[Thibault de Tersant, Senior EVP, General Secretary & Director]

So crashlanding now with the tax rate. So the 2 impacts coming from the U.S. tax reform, one is an impact in 2017, which is a remeasurement of the tax liabilities on our balance sheet. This impact, which is actually lowering the tax rates for 2017, we have excluded it from our non-IFRS accounts because it's a onetime impact. So it plays in both directions. When there is an exceptional onetime expense, we exclude it; but when there is a onetime benefit, we [ reduce or exclude it. ] So if you look at our EPS -- Q4 EPS, in IFRS, you will see that it's growing 41%, and part of this nice growth is coming from this tax impact. So this was included -- excluded from non-IFRS accounts. And for 2018, we have taken the new tax rate in the U.S. at 21% and -- plus some precaution on the bid measures, and this is why we have this decrease of tax rate in 2018 to 29.7%. That's a bit precise, let's say, around 30% maybe, as a tax rate for 2018. I really want to thank you for the last question. On the cost of sales and marketing, because it is true that some companies are jumping into the opportunity offered by IFRS 15 to capitalize sales commissions. We don't do that. We are not capitalizing any R&D. So we're not going to start capitalizing sales commission. So this is not going to be part of our -- right, Pascal, of our accounting policy. And it's perfectly fine for us not to capitalize sales commissions. It's also according to IFRS 15, there is a possibility open. And some companies, large ones, we have seen are going to take advantage of this but not us.

[Bernard S. Charlès, Vice Chairman & CEO]

By the way, I forgot to say that the key person for attacking AEC is Pascal Daloz. So I'm sure he will deliver on that.

[François-José Bordonado]

We'll now take question -- we have many question from the call. So let's start, Cleona. Would you please give the floor to John?

[Operator]

[Operator Instructions]

[John Peter King, Research Analyst]

I've got 3, please. Two on the guidance, perhaps for Pascal. Firstly, if we look at the M&A contribution from Exa, I guess most of that will be in recurring. So it feels like that will be about a 3% boost to your recurring. Is that right? And if so, I'm just wondering the guidance for recurring, it's a little bit light at 7% to 8%. So maybe you can comment on that. And then similarly, on the margin impact, I think you called out 60 basis points of headwind. Is that all Exa? Or is there some outscale in that? And also, does outscale potentially put some upward pressure on the CapEx? And the last question would be for Bernard, follow-up from where Adam left off really. I think you've got some new versions of 3DEXPERIENCE going live in the next few months with some of your old 3DEXPERIENCE customers. Maybe you can talk about that? And just more generally, how these types of launches are influencing your confidence on the 3DEXPERIENCE adoption that we should see through the course of 2018?

[Bernard S. Charlès, Vice Chairman & CEO]

Thank you. Pascal, on the guidance?

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

Yes. And Thibault, again, feel free to come on. So the contribution of the acquisitions on full year and including especially Exa is 2 points on gross. As far as I know, it's neutral on the margin. So there is no -- no, sorry, there is 60 points on the margin. So you -- I have the ability to express it. And the last question, sorry?

[François-José Bordonado]

The last question was for Bernard, the impact of the new releases of 3DEXPERIENCE.

[Bernard S. Charlès, Vice Chairman & CEO]

Yes. We switched on the cloud 2 weeks ago, the new release for this year, called 2018 release. It was done in a few hours on all our clouds around the globe with extremely high satisfaction from the -- all the clients which are online. We don't communicate the size of the -- what is designed online, but it's multiple millions of parts, multiple millions of parts already. So it is significant data volume on the -- so we believe we now master the management of multiple cloud around the globe. And that's a very good indicator for the adoption of 3DEXPERIENCE for what we call on-premise, inside companies. This adoption is -- you have seen the numbers from last year. I'll say that most of the customer road map going forward, meaning the evolution of new installations will systematically include 3DEXPERIENCE platform or portion of it, systematically. The only case where it would not happen would be for those V5-satisfied customers who wants to just expand what they have. But for most of everything else, it's required. It's required for the cloud, it's required for project management, program management, it's going to be required for all collaboration on the cloud with SOLIDWORKS. So the platform piece is step-by-step becoming the infrastructure for Dassault Systèmes and for the clients there.

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

And I guess you had an additional question on the CapEx, right, related to the cloud investment. So the impact is around EUR 30 million additional CapEx.

[Thibault de Tersant, Senior EVP, General Secretary & Director]

But the impact is already there in 2017. So there's no incremental in 2018. And to be clear, I think I heard that the impact from the Exa acquisition would be 3 points on recurring -- it's not exactly that. To be very crisp, the impact we have taken is EUR 50 million in recurring revenues, so 2.5 points of recurring for 2018; the rest is in services. And there is 0 impact on new licenses. Exa is just renting licenses.

[François-José Bordonado]

We'll take another question. Cleona, could you give the floor to Stacy.

[Operator]

[Operator Instructions]

[Stacy Elizabeth Pollard, Head of Software and IT Equity Research]

Just 2 quick ones. Could you provide some more color on China? Was Q4 a sort of a full execution against the backlog of the pipeline? Or is there still pent up demand there? And how do you think about the sort of forward pipe there? And then secondly, on Boeing, deal revenues, that should start coming through, I guess, in 2018. Can you give us -- and I understand maybe a stronger ramp up in 2019, '20. Is there any color you can give us on how to think about modeling that?

[Bernard S. Charlès, Vice Chairman & CEO]

Regarding China, last year was a very special year in China. There was a middle of the year, kind of, all state-owned companies almost froze their purchase orders because of the election, I think or the political new nomination or if I should call this election. But whatever it is, it really froze that. However, the visibility on big contracts or the decision process, I think, are very positive in China. We have a very good image in China. Dassault Systèmes is well accepted. As you may have noticed, we have the China space sector, so satellites on launches -- they launch more than 30 satellites a year, has decided to unify all their development on the 3DEXPERIENCE platform. By the way, this was signed during the visit of President Macron as one of the big agreement. So it's a significant endorsement of the digital platform using that sector. Of course, the revenue will come slowly, because it's a transformation of so many legacy environment. In the auto sector, we are doing big progress in China as well as in infrastructure, nuclear, hydro energy; infrastructure, I said already. On High Tech, you may have noticed that last year we announced an initial agreement with Huawei on the cloud environment for China. So we are in China for the future. It's very difficult at this point in time to really quantify at which speed visibility is good to excellent. Industry is clear about the lower target. At which speed are customers going to install is a kind of question mark. But there was a better dynamic in Q4, so we are prudent on that standpoint. You had another question on the Boeing side or I think that's more -- I know it's the contract on the long term, but I will let the financial people tell you when we are going to recognize that thing. But the projects are going extremely well. They are starting quickly, and it's very core for the future, the Boeing digital -- they call Boeing 21st century product lifecycle. Bow, you want to say something? You were the one behind this contract.

[Thibault de Tersant, Senior EVP, General Secretary & Director]

That's right. Exactly. The increment in revenue in 2018 is still pretty small, actually. I hate to say nonmaterial, but it's not far from it. It's not even 20 basis points on revenue growth. The real increments are going to happen in 2019, in 2020 and 2021. These are going to be 3 years of very significant improvement of the revenue with Boeing. And that's quite normal, by the way. It's according to the deployment of the solutions.

[Bernard S. Charlès, Vice Chairman & CEO]

Yes, because we're spending so less. It's maybe not too long. Let's go ahead.

[François-José Bordonado]

Yes. We'll take one question from Charlie Brennan. Cleona, please.

[Unknown Analyst]

Is my line open? Just a quick one on the conservatism of the guidance, actually. It feels like a lot of good things happened in 2017. We are starting to get some genuine momentum in the 3DEXPERIENCE. It feels like we are at very early stages of adoption for that still. We've got Q4 expectation surprising on the upside. It feels like there's very strong momentum going into 2018. I'm just wondering what's holding you back from committing to double-digit license growth in 2018?

[Bernard S. Charlès, Vice Chairman & CEO]

You know our reputation. We prefer to focus on the business and have good news. So I think there's so many things going on, the experience, the cloud, our ambition to really conquest new sectors. We have to make it right. So I appreciate your comments, but we -- those are the numbers that we announced for this year. And we want to make sure we deliver on what we said. I think it's the most important thing, we believe, for the business we run.

[François-José Bordonado]

We'll take one question from the room.

[Derric Marcon, Equity Analyst]

Derric Marcon from Société Générale. The first one is about SOLIDWORKS Xdesign, a very important product that we have talked a lot in the past. Could you comment or give a bit more detail about the pricing policy that you will adopt for SOLIDWORKS, it's design versus the price points, let's say, chosen by your competitors, quite low? That's my first question. The second question is about the guidance. So the difference between the upper end and the lower end is 1 percentage point. Usually, Thibault, I'd like to use 2 percentage points. So why have you changed your, let's say, policy there? And is it something that reflects, let's say, visibility that you have for 2018? And the last -- and in that question, what do you expect in term of rental revenue growth or in terms of growth for rental revenues? And my last question is about the -- so trajectory for 2018, if you compare that to the trajectory of the 2 optionality that you have presented at your last Capital Market Day, so organic growth CAGR 9%. So in 2018, you are still below this potential target. So we are not seeing the acceleration that was implied by the targets. So what has changed compared to your initial thoughts?

[Bernard S. Charlès, Vice Chairman & CEO]

So I take the first one on Xdesign. So Xdesign is a full web browser CAD system, mechanical CAD system. It would be introduced, as I told you, this year. And from a price point standpoint, it's equivalent to what we have with SOLIDWORKS today. I mean it's -- we have seen -- we demonstrated over the time good disciplines to maintain the price point. If you look at the competition, they have almost divided by 2, if not 3, the price point. And SOLIDWORKS price point is pretty stable for the last decade. So there is no way we will change this mindset and this approach and this discipline. So clearly, you take a subscription model, you take the price point of SOLIDWORKS to a certain -- and to be true, it will be a little bit more expensive because you have additional capabilities coming from the 3DEXPERIENCE platform in addition to its design. And you will have the price point we are planning to announce in the coming months. No, there is a value in what we do. No, seriously. And you look at the way it happened for SOLIDWORKS, I mean, when we bought SOLIDWORKS, it was at $4,500 average license. Right, Pascal?

[Pascal Daloz, Executive VP, CFO & Corporate Strategy Officer]

$4,000.

[Bernard S. Charlès, Vice Chairman & CEO]

$4,000. We have increased it to more, over $5,000? Now over $5,600. And the competition has divided by 4 or 5. But we still continue to gain market share. I think customers want something that works, reliable and with good predictability for evolution. There is a value there. And we plan to do the same with 3DEXPERIENCE, browser-based applications, by the way. There's no reason why it should change.

[Thibault de Tersant, Senior EVP, General Secretary & Director]

So you had a question on the range.for the guidance, Derric? It's EUR 30 million range. So that's really the one we are usually taking. In percentage terms, it goes down because the revenue goes up, for sure. But EUR 30 million seems okay. We still have 72% of our revenue which is recurring. So the real bet is on new licenses. And so we think that's a very reasonable range. And you have also a question on rental growth. So we generally don't split rental growth, but it's going to be good because of the Exa acquisition and a few agreements. So it will start to show very decent growth in 2018. It's above 10%, for sure. And compared to the same -- so people always tell me that we have committed to a revenue growth at the Capital Market Day. We have not. We have committed to double EPS and to reach EUR 3.50 in EPS by 2019. And that's truly the commitment that we are aiming at delivering. And clearly, this can be done in multiple manners, with more or less acquisitions. Our preference, right now, would be to do slightly more acquisitions, but the targets has to be convinced.

[Bernard S. Charlès, Vice Chairman & CEO]

And we have to be convinced to sign the check, too. I know that there are 3 questions remaining, but we are going to call back the people who have questions pending because of -- for timing reasons. And I remind everyone that we also host a call this afternoon for all our friends around the world. So in case there are people who want to connect and ask the remaining questions, so you are welcome, always, of course. And we take them very seriously. Thank you very much, again, for this. And sorry for this long session, but it's full year and the setup for 2018. So we thought that it was good to give you a wide update. Thank you, again, and have a good day.