Dassault Systemes SE

PAR:DSY

Earnings Call Transcript 2019-Q4

[François-José Bordonado]

[Audio Gap] I'm François Bordonado, Dassault Systèmes, Investor Relations. From the Company, we have Bernard Charles, our Vice Chairman, Chief Executive Officer; and Pascal Daloz, newly appointed Chief Operations Officer. Congratulations, Pascal, and Chief Financial Officer. I would like to welcome you to Dassault Systèmes Fourth Quarter and Full Year 2019 earnings presentation meeting, which is also being webcasted. At the end of the presentation, we will take questions from the audience and from participants on the call. Later today, we will also hold a conference call. Dassault Systèmes’ results are prepared in accordance with IFRS, we adopted IFRS 15 in 2018. So all comparative information is presented under IFRS 15. In addition, we adopted the new IFRS 16 lease standard as of January 2019. Most of the financial figures on this conference call are presented on non-IFRS basis, with revenue growth rate in constant currency unless otherwise noted. For understanding of the differences between the IFRS and non-IFRS, please see the reconciliation tables included in our press release. Some of the comments we'll make today during today's presentation will contain forward-looking statements, which could differ materially from actual results. Please refer to our risk factors in our Document de r?f?rence 2018. Let me now introduce Bernard Charl?s. Bernard?

[Bernard S. Charles, Vice Chairman & CEO]

Good morning, and thank you all for joining this event and those who are being online. I'm delighted to share with you the perspective about Dassault Syst?mes going forward using the results of the 2019. 2019 will be a milestone in the history of Dassault Syst?mes as will be this day, in my mind, every 5 day -- every 5 years, we have a special moment because every 5 years, I take the time to write a paper, a position paper that provides you with some maybe key information about the long-term perspective of Dassault Syst?mes. And that's what I'm going to talk to you about in this first part before I leave the floor to the newly named Pascal Daloz, Chief Operating Officer of Dassault Syst?mes. We have achieved, in 2019, our commitment to deliver on our -- the EPS from the plan that we set up originally in 2014. We have even overachieved that objective. The plan was EUR 3.5 EPS, and we are at EUR 3.65, and EUR 3.55, if you remove the year-end effect of Medidata. We have also achieved something which we believe is very important demonstration, the diversification, creating a landscape for the market of Dassault Syst?mes that really provides less sensitivity to cyclical industries. And with significant, of course, results with the evolution, the platform phenomenon in the industry, which basically, the 3DEXPERIENCE platform is demonstrating something significant, not in 2019, but in the last 5 years is that one platform can be the same for cloud, or on-premise. On one platform can serve companies doing shampoo bottles or doing satellites, and this collaborative innovation process can even be expanded to the Life Science and pharma sector. There is no other platform in the world that offers such kind of thing. And this cannot be measured in 1 year. It has to be measured on a longer term. On the -- to be more specific about the 2019 objectives. The revenue was up 13%. Pascal will give you much more detail about that. Stable margin at 32% and the EPS was up 17%. More importantly, this year, February 6, 2020, there was a February 9, 2012, which I will come back to for some of you who were there, and the one who were not there, it's good to understand the past to navigate the future of Dassault Syst?mes. So prepare the future means what is our ambition? What kind of markets do we want to serve? And why do we have strong reasons to believe that we are changing the rules of how innovation is happening in the world in so many industries? Manufacturing industries, health care and Life Science and infrastructure and construction. And also, of course, the focus on innovation in those sectors. And Pascal will give you some highlights about how we project longer term, the positioning of the company. In those 3 gigantic sector economy, company is doing things, the products we use every day, company is challenging the Life Science world and company is creating mainstream innovation for our infrastructure. And of course, what I just mentioned, starting this conference today is the choice that I did with Dominique Florack, my buddy for 35 years, to really make sure that we put the new generation in power. I don't plan to retire. I am a pupil of Serge Dassault and Charles Edelstenne, and if you know them, you know that they have been working for a long time, up to 85 or even 90 for Mr. Dassault. So that's not the point. Don't think 1 minute about that. This is not what is happening. But empowering team to take the lead to create the next 20 years of the Dassault Syst?mes is important. And I will come back to that point too. But it takes a special kind of compass to understand the past and navigate the future. So let me share with you what we published on February 9, 2012. We said 3 things. One, the platform phenomenon will apply to industries. It has been visible in retail, in banking, it's going to apply to industries. The proof point today, it does. And it's a unique positioning for Dassault Syst?mes. We are the only platform that can create such kind of collaborative environment in so many industries at the same time. The second thing we said is, we said the economy will move and that's a paper that you can track. We move from a product-centric economy to an experienced economy, the value will move from product to experience. It's happening. Look at operators' mobilities, look at new mobility equipments. The proof point is there. The economy is moving from product-centric to experience-centric. And therefore, we said, by the way, the name of our platform will be 3DEXPERIENCE because we are going to use this platform to imagine new solutions for the world. And the third thing that we said, which is a part three, which is our reason that we didn't wait for our financial community to explain that raison d'?tre, how purpose is important. We did it far before. We said we put values on sustainable innovations. And we believe we can create an innovation process for our customers that will help harmonize product nature online. You can go back to what was published February 9, 2012, this is it. I have published a paper today that not so many people understand. I don't really care because we will read it in 2025 or 2030, and people will see that what we have written, I believe, will be happening, which is related to the emergence of new type of approach that connects things to life and put things on life in the context of the environment. So that's why we published that little documents on our website, we will have a more detailed white paper on it, which is explaining that the purpose is well formulated. It has never been more true than today. And I think the society is expecting industries to change the direction in terms of how we invent the future for our children, and the harmonization through innovation is essential. It's not going to come from constraints, it's going to come from new solutions. We have been recognized in the last years based on that effort. We put a lot of attention of what we call handprint and footprint. In some way, you have seen so many companies talking about CO2-neutral, buying back CO2 rights. That's good. But the mission of Dassault Syst?mes is far more powerful than that. Because it's about how we help others massively reduce their impact, their footprint. A study was done that illustrates that when -- to run our business at Dassault Syst?mes, we produce, unfortunately, 1 ton of CO2. Our contribution to the world is to reduce by the virtue of using our platforms with those client's companies reduce by 10,000 tons what they do. This is called footprint, handprint. I believe the future is not in sustainability about absolute terms. It's about progression, on speed of progression. The measure of footprint and handprint is a significant value on relevant association to the purpose of the company. It was well recognized by Corporate Knights, it was well recognized by Fortune Future 50 and well recognized in the MSCI ESG index. Footprint, handprint delivered on the leverage to improve. It's connected to what we said. The third message to you is also the following: the digitalization of the 21st century is not the digitalization of the industry of the 20th century. It's creating a new category of solution for new categories of customers, providing a much more sustainable environment. And that's what we do at Dassault Syst?mes. Here is a quick video, illustrations. Hope to -- maybe I went too far. Those are brief illustrations of the number -- incredible number of start-ups in the world, which are using the 3DEXPERIENCE platform as a lab. We have thousands of those across the world, we are working with MIT and innovation centers. We reached 5,000 innovation centers in the world. And we believe that those innovators are creating the economy of tomorrow when it comes to the products and the service we are using. There is more on our website. Why and how this could be possible? I'm often asked question, are you doing things with AI? Are you doing big data? Of course, the platform is managing gigantic data already for many sectors of the economy. As you know, most of airplanes, 7 out of 10 cars, are done with our software. Those are gigantic, precious data, which we manage. We update, and we manage over a long-lasting life cycle, 40, 50, 60 years. So the platform being information intelligence, collaborative environment, creating the power of 3D for imagination using simulation to connect that is really changing this world. It has been proven in these 11 sectors. I will not come back to all those clients. They are really expanding the use of the platform across this. The reason why I wanted to start in on that point, at this point in time today is because we believe -- by the way, the implication of what I just said on what was published on February 9, 2012, is that we -- when we launched our new 5-years plan, the results are there. Preparing the future. We have a new ambition, moving from things to life. The Dassault Syst?mes platforms almost is used for everything that you touch in your daily life. Home products, mobility, whether it’s ground mobility or air mobility, infrastructures, we will continue to expand our solutions in that domain, but we are going to move to life. The Medidata acquisition is not a marginal expansion of our scope. It's a fundamental that we believe we can do the virtual twin experience of human. We have proved it on the heart, we have proved it on the bones, on skins for human. The Living Heart program has been adopted by the FDA, the regulator, as the great reference to help simulate all practices in surgery for especially vascular and heart surgeries, which are, as you may know, with -- oncology is the second reason of death in the world. By the way, as a side note, the third reason is medical practice errors, which is not so well known, but reality of it. And we believe that with the virtual world of simulation, we can change that. So preparing the future, having this vision, having the proof points today that the 3DEXPERIENCE platform can help us and help the world of Life Science, pharma and practices in the health care system, connect the power of Medidata for clinical trial with the power of Dassault Syst?mes to do modeling and simulation, to create world -- real-world evidence and connect them to the world of simulation will change that industry, too. So for that, we need, of course, to have something that illustrates this well and let's quickly see this video because I think it's a critical way for us to see.[Presentation] Focus for the next 20 years. And it's the result of what we have done in the past and what we want to do for the future. So this can be summarized with this little illustration. We started 40 years ago by representing shapes. We then added the complexity of things. We made the first virtual airplane on the planet. It has changed the entire industry. Because people weren't able to do that without physical prototyping. And then we said we are going to add time to it, we are going to do the life cycle. And we called it in our jargon, PLM, product life cycle management. But it's not a technical thing. It's a very profound conviction that a holistic approach to innovation will change everything. We did the virtual twin experience of things, all things you touch in your daily life, because evaluating how they are going to be done, what this should provide to people is more important before than after. And we want to do the same for Life Science. And our future is to do the same for life. We are moving from things to life. So our ambition can be summarized today in terms of market, in terms of sizing in 3 gigantic sector of the economy. The economy where people are doing things, no matter if it's a satellite or a plane or a car or a ship or something for Medicare. People who wants to transform the standard of care, the practices of health in Life Science. And of course, better understanding about how people live in cities and how infrastructure should evolve to make it more sustainable, and we have proof points. We are doing that for Singapore. We are doing other significant projects around the world with virtual cities because to apprehend, to understand how to make cities more people-centric, simulation and prediction is needed. Those are the 3 ambitions. So it can be summarized with human industry experience and more to be talked about that. So the new organization that I have decided to set up with the support of the Board, of course, even though it's quite a challenge. To do it well is to ask Pascal to build the next-generation team, the top talents of the world that will really be in charge of making sure that this does happen. And this is the core Operation Executive Committee that drive Pascal and why this position has been created. They will be well supported with a multi-generation [indiscernible]. While I still run maybe faster than him, but his key is faster than me. So for the time being, I need to recover. So that team is also unique from the fact that the Chief of all R&D global strategy on execution of Dassault Syst?mes system is an extraordinary talent, woman, talented woman, Florence Hu. She is leading now the 69 labs around the globe. She did the platform revolution at Dassault Syst?mes. Also Florence Verzelen, leading all the industries. This is the 40th generation Laurence Barth?s, managing all processes, talents across the world. So we have a great parity, young talents. And I think that they are all very -- they like each other. There is no competition in our company. The competition is outside. There is an incredible power for people on solidarity and talent to work on this. And this is not very frequent in so many companies, and that's why the purpose we have is to stay as one. And of course, around then, Dominique and I are not planning to retire. So Dominique is going to focus on the strategy for research and fundamental technology. We do a lot in deep learning on many of those things. I'm going to continue to make sure that the purpose of the company, why are we impacting the world, why should we do it that way, continues to be done properly. Pascal has committed to be the chief of outcome. Thank you, Pascal. And so this is the team you see. And the last remark I will do for this new talented team is that seasoned executive are going to be sharing those 3 strategic sectors I talked -- of the economy I talked about. Bruno Latchague has been with us for 30 years. He knows almost all functions of the company. He is extremely well-respected in all industry sectors, Aerospace, Automotive, with the top executives around the world. He is going to coach and chair that committee. Sylvain Laurent who made it possible to do Dassault Singapore and many other projects, huge infrastructural project that we are doing the BD network, for example, and many others. It is for infrastructure and Tarek Sherif, the founder of Medidata, who has developed this company from a start-up to the world leader in clinical trial, and they will be helping this bright, new talented team make the choice that they have to do and make the decisions they have to do. That's what I wanted to share with you. It does not happen every quarter. It happened every 5 years, an update about the long-term horizon. We have this ambition. And we have the luxury to have a very stable shareholder structure where we know that we can take risk to make this ambition a reality. And with that, Pascal, I leave you the floor to comment 2019 and more importantly, the ambitions for 2020. And congratulations.

[Pascal Daloz, COO & CFO]

Thank you, Bernard. So good morning to all of you. Always a pleasure to be with you at that time of the work because it's a way to do -- to step back a little bit and look at the performance. You noticed that Bernard renamed my title because I was convinced that I was Chief of Operations, now I'm Chief of Outcome. So let's speak about the outcome. That's the purpose. So start with the year 2019 performance. So if you look at the performance for '19, we are in line with our objective, plus 13% growth for the revenue as well as the software. With this shift in terms of business model because the vast majority of the growth is coming from the recurrent part and less from the license. It's totally happened in Q3, and you will see that continue in Q4. And if you look at the organic growth for the recurrent part of the full year, we are at 8%, which is 200 basis points higher compared to year 2018. So clearly, it's a significant improvement. 32% EBIT margin which is a good achievement because we did some acquisitions, large ones. So clearly, we have been able to handle and to contain the dilutions coming from the acquisitions. And finally, we are landing at EUR 3.55 EPS, which is ahead of our guidance and the consensus, growing at 17%. Q4, Q4 is almost in line with the full year with 2 effects, I will share. The software growth at 17%, flat in terms of license. And you remember, when I gave the guidance for Q4, I already stated that we were looking for between -- being flat and 5% and the 5% was assuming that we would be able to recover a little bit, Q3. So we had the pipeline, we did. And you -- I want you to remember that last year, Q4, year 2018 was a very good quarter, just 13% for the new license. So the base is really having an impact on this. So being flat means that we did well, in fact. 27% growth on the recurrent part. Obviously, you have the Medidata part of it, and then I will go much more detailed on the organic growth afterwards. And EPS, EUR 1.2. Zooming on the 3DEXPERIENCE platform. The 3DEXPERIENCE platform, as Bernard stated, in just 2012, he made the announcement and if you look at now, we are close to 30% of the total software revenue coming from 3DEXPERIENCE platform. So between '12 and '19, 1/3 of our revenue. Growing at 22% this year compared to -- it's relatively well aligned with our objective. And if you look at the license, this represents close to that. In fact, 45% of the new license are coming from 3DEXPERIENCE platform. So it's 500 basis points more than -- compared to '18. So we are right on track with our objectives on this.Speaking about the 3DEXPERIENCE platform adoption. I'm proud to say that EDF has adopted the -- or extending the adoption of the 3DEXPERIENCE platform. You remember, we signed the partnership with them in year 2018. And it was a strategic framework, and we are progressively expanding the scope. Here we are talking about the usage of the 3 experience platform to run the plan because they want to build a single source of tools to get access to all the information on plan and the -- which is at stake and you have the numbers written here, they want to reduce by 30% the operational cost. That's significant. That's part of this project and without the platform, I mean, there is a myth in the way to make it happen. The side note also, they are using the 3DEXPERIENCE platform as a way to ensure the certification process, which is very critical in this industry, as you know. Speaking about new industries, in '19, we had double-digit growth in some of them. So in overall, all the consumer-oriented industries, Home & Lifestyle, Consumer Packaged Goods and to a certain extent, Life Sciences, we see a high double-digit growth in this space. And by the way, we see the momentum to continue in 2020. We also had a very good performance in Aerospace & Defense. It's high double-digit also. This is counterbalancing some of the softness we have seen seeing in the other 2 sectors. You remember, we started the year growing at close to 10%, and we are landing at mid-single digits. And the softness is coming from the supply chains more than the OEM by itself. As you know, I already commented in Q3, but we see this trend continuing. And by the way, we -- in the guidance, I took this into account. Industrial Equipment is also growing at mid-single digits, but with almost the opposite trend. Because you remember, we started very slowly, the year, and SOLIDWORKS is a good indicator of that. And we have seen an accelerations of the growth, especially the last quarter, you will see SOLIDWORKS growing at 9%, which is a good sign. And in a nutshell, the diversification industry represents more than 1/3 of the total revenue of Dassault Syst?mes right now. And you will see that if you take the contribution of Medidata for the coming years, we -- what we call the diversification, the industry will represent half of the revenue. So clearly, 1/3 of the revenue is coming from the platform and more than 1/3 of the revenue is coming from the diversified industry, and it was the best in year 2012. A good example of this adoption of the 3DEXPERIENCE platform outside of the traditional core industry is the Life Science. So we continued to expand our coverage in this space. And here, I'm pleased to announce B.Braun. B.Braun is clearly a world leader in medical devices and pharmaceutical products. And the interesting thing here, there are 2. Point number one, we won this deal with a partner and I remember you asking me questions about the ability of our partner to start to deploy and to sell massively the 3DEXPERIENCE platform to, I would say, a mid-sized to large company. And here, you have the proof. TECHNIA is one of our partners in Germany and the Nordics. And you see it's a significant deployment because we are talking about equipping 13,000 users. So we are capable to equip a number of users, not only in the Boeing of the world or Toyota of the world. If you remember Boeing, we are talking about 70,000 people being equipped. Toyota is 40,000. But here, we are talking about 13,000. So clearly, is to prove that this platform phenomenon is touching all the industry we are targeting right now. And the core of what they do, they're going to use the license to procure solutions in order to manage all the regulatory and compliance things, which is very, very critical in this industry. If I zoom on the different regions of the world. So Americas is growing very well, 24% for the full year, 44% for the quarter. From a pure organic standpoint, the growth is exceeding, in fact, 10% for the full year with a very strong subscription and contribution. The subscription is growing at 15% in Americas. It's a proof that the market is shifting and the adoption of the subscription is taking off much more rapidly in the U.S. compared to the rest of the world. And we obviously have a good contribution of the acquisition, Medidata, for sure, for 2 months as well as Centric and IQMS. Europe, 9% growth for the full year, 7% for the quarter. You have a constructive view in Europe. The north and the south are growing double digits, and we are flat in Germany. So -- and especially because we are impacted by the supply chain in the auto sectors. This is where the slowing down or the softness is coming from. Asia, plus 7% for the full year, 6% for the quarter. And I did the specific zoom for China because I know it's one of your questions. So China is growing at 16% for the full year. And 11% for the quarter. So clearly, you have the proof that we are seeing some softness again in the auto sectors, but the rest of the economy is relatively sustainable for us. And here you have the proof. And I will come back for the guidance for -- specifically for the China situation. Korea is also growing relatively better for H2. We started by growing mid-single digit, and we are back to a good double-digit growth in Q4. If I look at from the revenue performance by product line, by brands, 6% for CATIA. Remember, last year, it was 4%. So it's 2 points growth compared to last year, 1% for the quarter. So clearly, we had a good start, and we are softening a little bit on the second half and you have the reasons. I mean it's definitively true to the automotive sector, which is a large sector for CATIA in Germany and Japan. But we are seeing a very good traction of CATIA in -- specifically in the U.S. and in the aerospace. One thing I want to share with you, the new generation of CATIA called CATIA 3DEXPERIENCE is growing relatively well, plus 30% for the full year. So clearly, again, the dynamic for the next generation of CATIA is taking off. And we are very pleased with this. ENOVIA, plus 5% for the full year, and minus 7% for the quarter. Again, on this, be careful because we have a very strong base compared to '18. And I put the numbers. If you remember, in Q4 of year 2018, the license was growing up to 48%. So -- sorry, to 84%, not 48% and 37% for the full year. So it's -- the base is really playing there. And a good point for you to prove that the competitiveness of ENOVIA is still very good is the winning rate. So I computed the statistic for the full year. And we are winning in 75% of the cases against SAP, 85% of the cases against PTC, and 70% of the cases against Siemens. Clearly, we are gaining market share with ENOVIA significantly. SOLIDWORKS. I spoke about it, 6% for the full year, 9% for the quarter. Keep in mind, Q4 year 2018, we were growing at 12%. So it's a good performance knowing that we were growing at 4% to 5% in H1. And we see a good momentum in Asia and Europe at large. The line of other software is growing at 28%, 48% for the quarter, high double-digit growth for DELMIA as well as SIMULA, BIOVIA is growing double-digit also. And we have the contribution of Medidata for 2 months. You remember, I gave the numbers to you. So I told you that it's EUR 103 million, which was in the guidance. We delivered EUR 123 million, so EUR 20 million more. And it's coming from 2 factors. We closed the deal. In fact, we got the approval from the authorities 3 days before we were expecting. So this is explaining EUR 10 million in the EUR 20 million and they overachieved by EUR 10 million in the quarter. So clearly, we are right on track with Medidata, and we are very pleased with the integration process going on. Revenue growth so 13% for the full year, as I was explaining to you, and the organic growth is 7% for the full year, plus 3% for Q4. And the organic software growth is relatively aligned because it's 7% for the full year and 3% for the Q4. If I split the software revenue between the license and the subscriptions, so the organic growth for the license is up plus 3% in year 2019 and flat in Q4. I already commented it. And the organic recurring revenue, plus 8% for the full year, 200 basis points compared to year 2018, it's 300 basis points compared to '17. So clearly, you see the improvements going on, and 5% in Q4. So this is probably the numbers I should spend time to explain because I'm going to have a lot of questions related to that. It seems to you that we are slowing down, but that's not at all the case. Let me explain to you why. In '18, we were using the IAS 18 standards, the continued standard, meaning the subscriptions was recognized on the pro rata basis, on temporary basis, if you want. With the new IFRS 15, you remember, I gave the explanation a year ago, we have to recognize 85% of the subscription within the quarter at the time of the renewal. So meaning that in year 2019, we put a lot of disciplines to renew the subscription on time. And what is the difference with '18, '18, we were using Q4 as a way to do the catch-ups for all the customer being late in the renewal. So here, you have a base effect. That's the reason why you -- the numbers, which is 5% is very consistent with what we have seen for the overall year, which is really an improvement of the recurring part. So there is no trick behind. This is only the fact that with different standards, you manage your operation in a different way, and this is the result. And you will see for the guidance for next year are fully in line with this. Services revenue. 9% organic growth for the full year, minus 1% for Q4. And again, I just want you to keep in mind few things. Last year, we were growing at 26% organically. Because we did the catch-up for Boeing in order to be ready to do the deployment in '19. So we had to accelerate in Q4 last year in order to be ready. So you have a base and by the way, just because I'm speaking about Boeing, just a few updates on this because it's probably a question I'm going to have. So Boeing, the software revenue is secured despite the difficulty they faced. So the commitments to continue the rollout of our project is under control. The only thing we are doing, we are slightly adjusting the services deal because there is no need to accelerate the deployment given the situation they faced. And second thing, is it the risk? Do we have a risk with their supply chain? I'm sure you have seen the announcement they did last week, they are committed to invest massively to sustain their supply chain. And there is a big reason for that. In the aerospace sector, if you stop, the time for you to create, to rebuild the ramp-up, it's years. So that's the reason why, despite the difficulties they are facing right now, they continue to maintain their supply chain in operations to make it happen. Because you know that for the next decade, the number of airplane has to triple. So the backlog exists. It's they are just slicing -- postponing some of the production cadence, but the supply chain stay intact. On the operating margin, 32%, plus 0.1. And here, you have the bridges, 100 basis points coming from the organic improvements. The dilution from the acquisition, 120 basis points, and a positive effect of the currency. So clearly, as I was stating to you, we have been able to handle the dilutions coming from the acquisition, and that was the plan in a way.EPS, plus 13% for the quarter, 17% for the full year to EUR 3.65. And the contribution of Medidata is EUR 0.06. So the point is this, without Medidata, we would have reached in a way, the target of EUR 3.50. That's the net of this. We have a positive tax effect for the EPS in this quarter, and it's coming from the new French Patent and Software box regime. As you may know, there is some tax advantages for the IP and the software now is part of this new regime. And you have the contribution. It's a 1.8 decrease to the tax rate. The cash flow. The cash flow is growing very nicely. We are reaching the -- close to EUR 1.200 billion, a little bit less, growing to 32%. And which is unusual because usually, I'm very proud to say that we are ending with a cash-positive situation, churn to EUR 1.8 billion. Now we are -- we had a debt situation of minus EUR 2.656 million. And the key ratio is the debt ratio, and I put the computation here. So we are at 2.5, which is well in line with our plan. At the time of the acquisition of Medidata, we were at 2.7. And again, we computed with Val?rie this ratio, taking into account the IFRS 16 rules, which consists to recognize the future lease as a debt. So we are very close to the way the Standard & Poor's rating company's calculating this ratio. Okay. And I just want to remind that our goal is to be at 1x leverage over the cycle of the investments, so which basically means the 2 to 3 years from now. Cash flow. 32%, really driven by the activities. And you see for the trade accounts receivable, the balance up 4%. You have some softness in the DSO, and it's really coming from the acquisitions, specifically Medidata. Medidata contribute to 7 days but if you exclude the Medidata and to a certain extent, IQMS, our DSO is pretty stable. On the liability, the balance up 8% at the constant perimeter, which is consistent with the organic growth. On the accrued compensations, here, we have one exceptional thing, which is the payment of the tax related to the preacquisition stock options. So this is the reason why you have this minus EUR 36 million and Medidata tax is contributing to EUR 20 million, EUR 22 million, in fact, to this number. The increase or decrease in the income tax payments, again, this is coming from the lower taxable income in year 2018 and the lower tax down payments. This is the reason why we're having this explanation, and we put another line to be fully transparent with you because you will be able to compute it. The payment of the fees related to the insurance of the bonds and the term loans. And here, you have an impact of EUR 37 million. With this, you have the complete details on the cash flow. But now this is the new ambition. You have seen it. Okay. And on the same time, we did the acquisition of Medidata. So we came to the conclusion that the revenue reporting should evolve in order to take this into account. And this is what I will explain in this section. Point #1, if you look at the diversification industry, you know what we used to call diversification industry. If I do the like-for-like, assuming that Medidata would have been with us since January 1, 2019, this is representing half of the Dassault Syst?mes revenue. So half of our revenue is coming from what we call diversified industries. So we came to the conclusion that it's not anymore the way to report to you guys because it's a significant part of the revenue. So it's much more accurate to start to slice, to split those diversified industry in the 3 sectors of the economy, they are now worth mentioning. So we are adding to the core industry, the manufacturing industry, the High Tech, the Home & Lifestyle and the Consumer Packaged Goods. We are obviously isolating the Life Science sector because this is becoming the second largest industry for us. And we are bundling all the industry related to infrastructure and cities, namely Construction, Cities & Territories as well as Materials & Energy and as well as business services. And with this, you have the split of the total revenue of Dassault Syst?mes. So still, 70% is coming from the manufacturing industry, where we have built our leadership, 20% in the Life Sciences, where we have the critical mass, and we will continue to expand. And 10% infrastructure and cities where we have reasons to believe we have certain footprint in certain industry, but we have to expand and capitalize on what we do. The goal, ultimately, on the long run, is to have those sectors being equivalent for that EBITA. This is what it means. And this is the reason why we want to report along this way because it's a way for us to prove that we walk the talk.Software revenue breakdowns. Same story. In fact, if you look at the other lines, the other software revenue. In a like-for-like, this now represents 45% of the total software. So we took the decision to split this line accordingly. Why we decided to create some category? It's because in this line, you have all the acquisition we did for the last decade. But all the acquisitions are serving different purposes, different leadership and this is the reason why we have built those 3 core domain, 3 core categories for the software. The first one, which is really related to industrial innovation, the same way you have industrial automation. We believe there is a category for industrial innovation. It's what you put usually behind PLM. The Life Science software revenue attached because now it's becoming core for us. And again, progressively, we would expand the Life Science software to the health care over the time. And mainstream innovation, and we are separating mainstream innovation from the industrial innovations because we are convinced with the platform, we can serve business, mid-sized business or sometimes business, which are not really industry like, if you want. Because with the platform, it's a different game. And this is what is behind. The way to split it. So I will continue to report the CATIA and ENOVIA numbers. But I will glue another lines in this category, gluing SIMULIA, DELMIA, GEOVIA,NETVIBES, EXALEAD and 3DEXCITE. I will give you the combination of Medidata and BIOVIA for the Life Science, so you will be able to track our footprint expansion. And mainstream, it's the combination of SOLIDWORKS, Centric PLM, 3DVIA and what we call behind the 3DEXPERIENCE WORKS family, basically, for example, IQMS, the acquisition we did. With this, I think we have the proper setup for the -- at least the next decade. And as you may know, we are not changing the revenue reporting often. They are, now, we're seeing every 5 years, is doing a press release to announce a newer reason. The last time we change it, it was almost 15 years ago. So I think we are not tricking you guys. We just want you to be able to follow the progress we are making. Financial objectives for 2020. Here are my assumptions. So total revenue growth up to 21% to 23%, excluding currency effects. Relatively consistent for the software, 22% to 23%. Here is the way I did the split between license and the recurring part. So between 5% to 10% for the license. And keep in mind that the 5% to 10% is an organic growth because, like-for-like, all the acquisitions we did are contributing this year, and you will have its pure organic growth. The recurring revenue up by 28%. And just for you to make your mind, I did this exercise to give you the like-for-like so because Medidata is obviously contributing significantly the decline. And if you do the like-for-like, we are at 9.5%. And if you do the reverse engineering of the numbers, I will simplify your life, just to calculate the organic growth of the core without Medidata for the recurrent part you will find that it's 8%. I took some assumptions for Medidata. So the Medidata total revenue growth is 13%, excluding the currency effect, very consistent with what I shared with you at the time of the Capital Markets Day, because I gave the range between EUR 13 million to EUR 15 million. And the -- on the operating margin, I'm also expecting Medidata to improve significantly the EBIT margin by 200 basis points to reach 20% EBIT margin. On an organic standpoint for the organic margin, I'm still expecting to improve by 80 to 130 basis points in order to contain, again, the dilutions of the acquisitions. Tax rate decreased to 26% compared to 26.5% in year 2019. And for the exchange rates parity euro-dollar at 1.15 and U for the Japanese yen. And here are the numbers. So revenue expected for year 2020 is between EUR 4.840 billion to EUR 4.890 billion. And operating margin of between 31% and 31.5%. So remember, we took the commitment that with the Medidata acquisition, we will no -- we will not go below 30%. In fact, it's not below 31%. I think it's a good achievement. And an EPS between EUR 4.15 to EUR 4.20 growing at 14% to 15%, which is relatively well-aligned with the consensus. For Q1 revenue, it's almost the same in terms of trend, except one thing. I took some cautiousness on the license. And there are a few reasons for that. The first one is because the pipeline is backloaded, which is usually the case for us. It's also because in China, we don't know yet what's going to be the impact of the EDF situation. We know that we're going to have some impact, and especially because the resellers, they cannot travel inside the country. So they cannot visit anymore their customers, and we have no clue how long we're going to take. So that's the reason why I took some cautiousness. It's hard to compute the risk. So I do not consider that all the risk is factored in these numbers, but I took a bit of it. Okay. And for the EPS is EUR 0.90 to EUR 0.95, growing between 3% to 9%. That's it for today. So the takeaway, just to summarize is, we believe that '19, we delivered on commitments. We think that '19, we exceed the 5 years' plan. And we believe with the acquisition of Medidata and the strategy we have developed over the last decade with 3DEXPERIENCE and the diversified industries, the new industry, we are right on plan to achieve the EUR 6 EPS for the next plan, which is the one ending in 2023. And for that, I'm going to give more details to you at the time of the Capital Markets Day in June. So please save the date. It would be in Paris in Velizy and I will be pleased to welcome you at that time. That's it for today. So Bernard and I will be happy to take your questions now.

[François-José Bordonado]

So we'll start with some questions from the room. Don't be shy.

[Unknown Analyst]

May I have explanation about your competitors in manufacturing systems? And [indiscernible] which is in difficulties now, is less a competitor for now or not?

[Bernard S. Charles, Vice Chairman & CEO]

Pascal, do you want to take it or I need to learn how to leave the questions to you. Still, the -- manufacturing is a wide -- it's a wide scope, okay? So if I read your question related to the way things are done. Basically plants, on the plants automation, we see several trends. First of all, reduction of size of plants, not because of capacity, because of modularity and because of new ways to produce things in a more sustainable way. And in this area, we are having very strong successes with a brand that you may remember in our brand portfolio called DELMIA in 3 areas, what we call manufacturing execution system, MES, it's a jargon of the sector on manufacturing operation, but also in supply logistics. So the connection between -- the flow between the different sites to really produce what you want to produce. We are very -- with what is called DELMIA Quintiq, I think this activity is -- we want to be a world leader there. We are making progress, significant progress in the past years and is well known, for example, that one of the best manufacturer in the world still is Toyota in terms of efficiency, using our solutions in a big way from that standpoint. So I think we are gaining market share, and we will to -- continue to focus there.

[François-José Bordonado]

We'll take now a question from the conference call. Operator, would you please give the floor to Stacy Pollard from JP Morgan.

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

Just you have pretty ambitious plans in Life Sciences. Can you say what portion of solutions you think you already have today? And what other products areas you might need to develop or acquire over time? So really thinking mid to long term, not necessarily short term, given the kind of existing ratio. And then just a quick second follow-up after.

[Bernard S. Charles, Vice Chairman & CEO]

We started well with BIOVIA, Stacy. We -- on the "R" side, Research side. The Life Science world is a document based world. They use digital document, very -- so basically, what you know on the [PES] or documents, office documents. They are not doing modeling and simulations. They are not able to do what the manufacturing is doing yet. That's what we want to do. We started BIOVIA. It's a modeling of cells, human cells. It's the modeling of chemical, the modeling of -- and it's the best platform for that. The modeling of organic or nonorganic. It's the world's best platform. It's now part of the 3DEXPERIENCE platform. Adding Medidata, it's about adding what we call a real-world evidence in premium trials, Big Data. So we connect the Big Data through the models to the simulation. That's why we are doing something unique on the -- Medidata is on a good -- Pascal, you might want to comment on that, but that connection with the platform is going to make the difference.

[Pascal Daloz, COO & CFO]

Yes, definitively. And I was looking, by the way, the competitive wins Medidata did last year. So Medidata, they continue to win against Oracle, against Veeva, against IBM, against many players in this space. The growth is also driven by all the new modules they have developed recently. Because you remember, they have their core product called Rave. And on top of Rave, you have a collection of new application, and 60% of the growth is coming from there. And also, the revenue coming from the exploitation of the massive set of data they have capitalized over the time is starting to take off. One of the largest deals they signed in Q4 is related to this. Now to complement what Bernard say because the question was related do we have this in the solution. There is one axis we want to continue to push from a strategic standpoint. Here, we are talking about serving the industrial or the Life Science, specifically the pharma company and the medical devices company. But we also want to touch progressively the practitioner. In the clinical trial, we are already doing it because you know the practitioners, the physicist, the doctors are part of the process. But we are convinced that more and more of the science we have developed could help the practitioner, the way they do the diagnostics, the way they prepare the surgery, for example. So there are many, many, many usages we see appearing. And this is a domain where we want to expand and to be positioned for the future.

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

That's very interesting. And then the second quick follow-up was, there are a number of large deals that you've announced. Just can you give us any sense of a pipeline for further potential large deals? And then perhaps within the deals that you've already mentioned, of course, EDF is obviously, progressing well. Are there others with such upscaling potential?

[Pascal Daloz, COO & CFO]

For the pipeline, I would say when I look at the pipeline, we have more deals exceeding the EUR 1 million. But we have probably less bigger deals. Why so? Because in this given time of the year, with the uncertainty on the economy, the bigger deals require something, it requires from our customers to implement a big change management program. And right now, we see many companies focusing much more on the short-term decision. And it's a little bit less on the long-term decision. The net of this doesn't mean the pipe is right, not at all. We have a good pipe. And as I was telling you, especially on the second half of the year, but we do not have more, I would say, sizable big strategic deals compared to what we used to have. Now we have those deals in the pipe. And as I was telling you, EDF is a good case. We continue to fulfill and to continue to penetrate those large accounts with 3DEXPERIENCE platform. And this is the driving force for 2020.

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

And that's the kind of upscaling potential? Or...

[Pascal Daloz, COO & CFO]

Probably related to how we're securing the recurrent part of the revenue. So you have our track record for the core. So I think you are able to make your mind. The -- maybe the unknown thing for you is Medidata. So in the guidance I gave to you, I have a coverage of 93% of the revenue with the backlog they have for 2020. With this, I think you will be able to assess the solidity of the recurrent part of the revenue.

[François-José Bordonado]

If we haven't a question from the room. We'll take another question from the call. Julie, can you connect Julian Serafini, please?

[Julian Alexander Serafini, Equity Analyst]

So I want to touch on the pipeline a little bit more. I think you've said pretty clearly that you have confidence in this pipeline coming through and this has been back end-loaded in the second half of the year. I mean are these specific verticals maybe that are different than automotive that you have confidence that these will close in because you have been talking at the same time about some economic uncertainty? So it'd be interesting just to gather a little bit of what gives you confidence that you can kind of close these deals, and they will come through later this year.

[Pascal Daloz, COO & CFO]

Again, on the auto sector, the softness is coming from the supply chain, not the OEMs, and we continue to have a good traction for the OEMs for the single reason side because the regulation is changing, and they have to introduce new cars, electrical car, autonomous cars, and they have to comply with this new constraint. So we have a lot of programs going on. It's point number one. Point number two, the vast majority of the auto is still using CATIA V5. And to develop this new car, the new vehicles, you need to jump to the 3DEXPERIENCE. Because there is no way you can develop a cyber system with CATIA V5. You need CATIA 3DEXPERIENCE to make it happen. So that's the reason why when we build the guidance and we look at the pipeline, still collectively confident for the large OEMs and for the supply chain, I took almost what we observed for the second half of last year, which is softness, especially in Germany, Japan and, to a certain extent, India, but that's the way we did it.

[Julian Alexander Serafini, Equity Analyst]

Okay. That's helpful. And if I can ask just one follow-on too. You mentioned factoring in China a little bit in your guidance for 1Q and some uncertainty around that. I mean, I guess, can you share -- I mean, have you already seen any impact from what's going on in China today? And then is there anything that you can share around how big is China as a percent of your revenue maybe to help us get some clarity on maybe how big the impact could be?

[Pascal Daloz, COO & CFO]

So what we have seen on the second half of the year in China, again, is the softness for the auto sector. We have not seen any specific sign related to the health issues we are facing. Now you remember, Q1 is an important quarter for China because this is their New Year. And usually, it's the largest quarter for China. And China represents a little bit less than 10% of the revenue for Dassault Syst?mes. So given the fact that it's the largest quarter, given the fact that it's representing 10% of the revenue, and the vast majority of the revenue is coming from the indirect channel, this is the reason why, in the guidance, I took some cautiousness. But again, it's hard for me at this stage to factor the competitor risk because I do -- it's too early in the quarter to do it. I will have probably a better view, I would say, at the beginning of March or mid-March.

[François-José Bordonado]

We'll take another question from the call. Operator?

[Operator]

Your next question comes from the line of Michael Briest from UBS.

[Michael Briest]

Just a question around Life Sciences. There's some interesting disclosure in Page 61 of the slides, I think you're helping us build the bridge from the new guidance for 2020. Just looking at Life Sciences, I think in Q3 2019, it's EUR 33 million, and EUR 3 million of that comes from ENOVIA. If I go back to your previous acquisition, Accelrys, I think in the last quarter, they reported in Q3 2013, was $30 million of product sales, so license, maintenance and subscription. It doesn't look like there's been a lot of growth over the last 6 years. Can you sort of square what's happened with Accelrys since you bought it? And where the growth has come or not come in Life Sciences?

[Pascal Daloz, COO & CFO]

So Michael, you missed something very important. In the Accelrys product line, you had a product called Qumas. And Qumas was related to compliance and quality management. And I've been very clear that the revenue is now part of ENOVIA. So when you do the math, you forget to take into account that we are just displacing the revenue from Acclerys to ENOVIA specifically for Qumas. If you do the computation, you will see that -- when we did the acquisition of Accelrys, the first 2 years was a little bit tough. But since then, now we see, for the last, at least 2 years, it was true in '18, but also in '19, we saw the -- we see the momentum back, and I've been very explicit. We are growing at double digits. So I would not draw the conclusion you are drawing, Michael.

[Michael Briest]

Okay. I mean I think Qumas only had $20 million of sales when Acclerys bought it. But just on SOLIDWORKS, I mean, that was a very good performance in Q4 and almost seems counterintuitive given the macro environment, and you've indicated in the past, that's a more macro-sensitive business. How would you see growth for SOLIDWORKS this year? And are you seeing much of a switch to subscription or SaaS-based delivery for that product?

[Bernard S. Charles, Vice Chairman & CEO]

I answer the first part and you take the subscription part. Yes. So if I look at the 2020 years. Again, we are in the range of what I communicated from a new license standpoint, which is a growth between 5% to 10%. This is what I'm expecting. The reason is, as I was stating to you, we see a good momentum in Europe. We see a good momentum in Asia. But China is contributing significantly to the growth for Asia. And I do not want to be -- to replicate the performance we have seen in Q4 for the full year. So I'm taking some cautiousness on there. As you notice in Pascal's presentation, we have now a section of the sector of the market, which is called mainstream. Next week, we have the what we call 3DEXPERIENCE World, which is really replacing SOLIDWORKS World, which is the big event for SOLIDWORKS. Because our users are discovering the value of a platform to expand our business as does the partner. So the portfolio is evolving from desktop to platform-based solution, including cloud. Why do I say that? Because we are not going to be too much brutal with the market, but there is a gigantic piracy on SOLIDWORKS. Please translate piracy, free software, which should be paid. So there is a lot of piracy. There is a second phenomenon, which is lack of tendency to renew subscription for all installation. To be more specific, you have a large installation and you just pay for a few users for the subscription and then you do what I would call piracy for all the rest of the users. We are going to fix that. And without being put out to the market, we are going to progressively make this 1 battery. And that's a significant factor to manage carefully because they love us. We love them. But it has to become normalized and it will. And the last point is, it's also necessary because when you have a cloud platform, by definition, we know who is online. So we know who should pay.

[François-José Bordonado]

We have one question from the room, Laurent.

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

It's Laurent Daure form Kepler Cheuvreux. In fact, I have 2 points. The first is on your guidance on Medidata, 13% growth and the visibility you already have today. I was wondering if the EUR 10 million bits you had over 2 months, which is quite significant compared to the size of Medidata, is it a one-off? Or is it something that is more structural? In another words, is there room to do much better than 13% growth for the year? And my second question is on the infrastructure and the cities, is it possible to have a kind of a trend you've enjoyed in the last maybe 2 or 3 years?

[Pascal Daloz, COO & CFO]

Okay. If I take the first question. The EUR 10 million extra, not all is coming from the software. You have a piece coming from the services as well. So keep this in mind because when I'm building the guidance, the most important for me is, obviously, the software revenue. That's for the Q4. For the full year, yes, the range is between 13% and 15%. I didn't change my mind. And just because I need to guide the market, I have to take one assumption. So I took the low part of the guidance. That's the way I'm doing it which is a good idea. Related to the second, I think there is a lot -- first of all, we use the wording city, but there are a lot of customers doing roads and bridges. We've -- in what we call infrastructure. So this what we call now this new sector of the economical infrastructure which, by the way, as a side note, it's almost 50% of the world GDP. As a side note, but very behind in terms of digitalization. So we concentrate on city and infrastructure. We have a good project, but I must admit, for the time being, they are kind of one of a kind. We mentioned that already several times. It's one-of-a-kind kind of projects. We are not at the stage where we can replicate systematically. I believe we can reach that stage in 2020 probably, provided the focus of the team now on that sector. But that still needs to be the key point to really create a sustainable double-digit growth in that sector with strong visibility.

[François-José Bordonado]

We'll take one other question from the room, and then we'll be back to the call.

[Unknown Analyst]

[indiscernible] I just wonder, are you going to give the margin in your new presentation by sector. And if yes or if not, can you give us an idea of the normative operating margin of your new sector?

[Pascal Daloz, COO & CFO]

So I'm not planning to do it for one single reason, it's because the vast majority of the cost is in research and development and half of the cost and the investment in research and development is related to the platform. And the platform is the same for all the different sectors. So it would be not relevant to give you operating margin per sector.

[Unknown Analyst]

And you give an idea of Medidata operating margin for 2020?

[Pascal Daloz, COO & CFO]

Yes, yes. I'm doing it because as part of the investment case, we are -- I've been very specific about the fact that not only I want to double the revenue of Medidata over the next 5 years. But I want to add 10 points operating margin of Medidata over the same time period. That's the reason why I'm very explicit and transparent just because it's a way for you to check if we are delivering the commitment.

[Unknown Analyst]

And this increase in margin is mainly due to increase in sales or...

[Pascal Daloz, COO & CFO]

It's both. Half of the organic improvement is coming from the revenue growth and the other half is coming from synergies on the cost side, specifically on the platform, on the cloud, on the research and development as well and some G&A costs.

[François-José Bordonado]

Okay. We're back to the conference call. Operator.

[Operator]

Your next question comes from the line of Adam Wood from Morgan Stanley.

[Adam Dennis Wood, European Technology Equity Analyst]

I've got 2, please. Just first of all, on the market share, you talked a little bit about the ENOVIA evolution. I wonder if we could just broaden that out a little bit. When we look at some of the other companies in the PLM space, we look at PTC, Autodesk MSIs, but since you're growing at a faster rate. Could you maybe just talk about how much of that is because of different end-market exposures? How much of it is maybe the kind of shift to subscription? And just talk a little bit around what you see in the market in terms of deal wins around the rest of the products rather than just ENOVIA? And then secondly, you mentioned EDF on the run side of things. Could you just talk a little bit, you've obviously been very successful on the MES side in discrete manufacturing, what are the plans on the process side? Would you look to become more competitive over time with the AspenTechs and the [ DB Schneiders ] of the world in that run piece?

[Bernard S. Charles, Vice Chairman & CEO]

Just maybe a comment, Pascal, and you provide the substance. I think one remark I will provide for this question is, Pascal mentioned the very strong winning rate in winning market share decisions. When we win let's take, for example, Ericsson, very important company for Europe 5G, they are adopting in a gigantic way the platform. They are transforming the complexity of extraordinary number of digital environment to one consistent platform. When we have these decisions, we don't get the revenue upfront. It's very progressive. We win the case. We know it's not going to be a competitor. After quarter-after-quarter, we will orchestrate the deployment based on the transformation of the company. I have many examples of that is the high tech, but in almost all sectors. It's very different when we win new customers in new sectors from evolving with the platform on existing customer base. It's a different dynamic. So that's the explanation for the perceived and the reality of the gap between the winning rate of between 65% to 85% of the case -- on case on the instant revenue reported. Because this is building up a high visibility pipeline going forward. That's for the context, especially for the platform-based decisions.

[Pascal Daloz, COO & CFO]

Adam, it's a little bit early because we need to have all the competitors reporting before to compute the market share. But as far as I understand, we are on the same trends compared to the last few years, which basically means we are gaining between 0.5 point to 1 point market share in '19 against the traditional competitors I was just mentioning before. And in the Life Science, because I do not want to mix the two, just for clarity, the combination of the Dassault Syst?mes and Medidata, we are at 9% market share. So not at the same order of magnitude compared to what we have achieved in the PLM domain. And here, if I -- again, based on my expectations, we will at least gain 0.5 point on this. So the dynamic is good. One question was related to the manufacturing and where we see the growth coming from, I guess, Adam?

[Adam Dennis Wood, European Technology Equity Analyst]

Exactly. It was also around, would you be -- where are you on the process side? There's obviously MES for discrete, but there's also the run of process factories? Is that an area? It sounded like with EDF, there's a shift. And EDF is not completely a process industry, but there's a shift in that direction. Is that something we should look to in the future from you on the manufacturing side? Or would you stick very much to the discrete when you talk about the run of factories?

[Bernard S. Charles, Vice Chairman & CEO]

Well, I want to -- Adam I know you know, but I think for everyone, I want to take your question 2. You know, now we are building 2 categories of industry solutions for manufacturing. We have -- with the acquisition of IQMS, which is now called DELMIAWORKS, please connect to SOLIDWORKS, we are creating a mainstream offer for small-midsized companies. So it's extremely well received by the market. It has been on a very slow start, unfortunately, in 2019, because we need to set up the distribution properly around the globe, for what is called DELMIAWORKS. But the idea of -- so the point is we are building mainstream for small-mid sized companies, not only for design, but for simulation and for manufacturing. And we are -- allow me to say IN offer, which are used by large companies, which is based on the DELMIA manufacturing solutions, which are really doing well. So that's the context. So the mainstream has barely not started yet. It's a 2D business. And I believe this 2020 will be a good test to see how we can accelerate that growth. It has been -- it has -- it is on a slow start right now, but we still are convinced that it's the right thing to do because there is -- there are massive needs in that segment of the sector -- of the market.

[Pascal Daloz, COO & CFO]

To complement what Bernard is saying. So keep in mind that this mainstream market for the manufacturing is a USD 5 billion market under served. So the debt is still the same. It's one single product using an indirect way to reach the massive number of companies we want to equip. By the way, half of them are using SOLIDWORKS today. So this is the leverage we want to have by touching -- to equip this market. Coming back to your question related to the process industry. Because you are right, right now, our focus is mainly on the discrete manufacturing industry, it's not too much on the process. Here, we want to be game changer. Because we believe all the company you just mentioned, they are addressing the automation of the manufacturing. They do not do what we do in the discrete manufacturing called operation management, manufacturing operation management, which consists to link the operations with the design, with the decommissioning. So it's really managing the entire life cycle, managing the operation in the context of the life cycle. And this does not exist in this industry. So that's the reason why, if you remember, we won Chevron, and they are using the platform. Despite the fact that we are -- we do -- we are not massive players in the oil and gas. And why they are using the platform? Because they want to lead the upstream to the downstream activity accordingly, and the -- because this is the only way for them to manage efficiently their operations by linking the 2. That's the way we want to penetrate this process industry rather than to try to make what the company being well-established are doing right now.

[François-José Bordonado]

We'll take one last question from the call.

[Operator]

Last question comes from the line of Nicolas David from ODDO Securities.

[Nicolas David, Analyst]

Actually, I have 2. The first is coming back on the aeronautics supply chain in the U.S., you mentioned that you are not very worried. But I remember that you expected some catch-up from contracts that you didn't sign in Q3. Did that happen in Q4 or not? And if not, is it linked to the issue of Boeing? And what do you expect for 2020 for the supply chain? And my second question is regarding your operating margin guidance. You expect a sharp improvement on organic standpoint in 2020, which is maybe more optimistic that the midterm vision you gave us a few years ago. So what is changing there? And where do you find some additional leverage?

[Pascal Daloz, COO & CFO]

Okay. So to answer to your first questions, which is related to the supply chain, the Boeing supply chain in the U.S. specifically. And yes, you are right. In Q3, we had some deals in the aerospace. But those one has not been impacted by this situation going on. And to be more precise because I was very clear that we had EUR 20 million at stake, deal shifting from Q3 to Q4, we signed half of them. So still missing EUR 10 million, but the EUR 10 million are not in aerospace. So in the other industries, such as oil and gas, specifically, okay? In Europe, it's probably a little bit different, okay? Now the second question is related to the leverage on the operating margin. Yes, there is one thing you are missing, Nicolas, which is the growth is coming from the recurrent part of the revenue. And as you may know, is the margin for this -- as this line is much higher compared to the new license. Because the cost of sales is not the same. That's the reason why you could perceive, be a little bit optimistic on the leverage on the operating margin, but I am not.

[Bernard S. Charles, Vice Chairman & CEO]

On this nice comment, Pascal. Thank you very much for participating to this session this morning. We will have a call this afternoon. You are always welcome. There is a lot of new information on the website, don't hesitate to go there. Thank you very much, and thank you for the interest that you have in the Dassault Syst?mes.