François-José Bordonado - Vice President, Investor Relations Bernard Charlès - Vice Chairman and Chief Executive Officer Pascal Daloz - Executive Vice President, Chief Financial Officer and Corporate Strategy Officer

Jay Vleeschhouwer - Griffin Securities Monika Garg - KeyBanc Capital Markets Michael Briest - UBS Investment Bank John King - Bank of America Merrill Lynch François-José Bordonado: Thank you for joining us on our second quarter and first half earnings conference call, with Bernard Charlès, our Vice Chairman and CEO, and Pascal Daloz, Executive Vice President, CFO and Corporate Strategy Officer. Some brief reminders. Dassault Systèmes' financial results are prepared in accordance with IFRS. During 2018, the first year of implementation of IFRS 15, we're providing IFRS financial information on both an IFRS 15 and IAS 18 basis. All figures and comparisons on this call are presented under IAS 18 and all on a non-IFRS basis, with revenue growth figures in constant currencies unless otherwise noted. We have provided supplemental IFRS 15 and IAS 18 non-IFRS financial information; and IFRS, non-IFRS reconciliation schedules in our earnings press release. Some of our comments on this call will contain forward-looking statements that could differ materially from actual results. Please refer to today's press release and to the Risk Factors section of our 2017 Document de reference. The copy of this morning with Pascal presentation is available on our website and his prepared remarks we will be on our website shortly after the call. I would like now to turn the call to Bernard Charlès. Bernard Charlès: Thank you, François. Thank you all for joining us today. To begin, let me share my perspective on our progress to date in 2018. Our discussion will illustrate our first half performance demonstrated good start to 2018. Confirming the expectation we shared with you in February, our both gross drivers confirmed the importance of digital continuity for our clients. With the 3DEXPERIENCE platform our clients' can connect their extended value stream across the domains of their company, externally with their value chain and with the end consumer, bring them into the innovation framework. Importantly, the 3DEXPERIENCE platform will enable our clients to become platform companies. We are increasing our market presence in our core industries. At the same time, we are expanding our footprint in diversification industry. This is evident in our industry results and in our performances by geos humdrums. For both, we are also expanding our offer. We continue to invest in market that are highly promising both in terms of digital maturity and our own growth potential. Companies focused on collection in fashion retail and the consumer space are beginning their digital journey on with Centric Software backed by Dassault Systèmes, our goal is to accelerate this sector's move. During the second quarter, we also completed the acquisition of No Magic. With its technology, No Magic and [Indiscernible] design and tech system and system of system on a enabled connected experience. Finally, based upon our results on second half plans, we are grading our full year objectives for currencies on acquisitions. Pascal will discuss our financial perspective on that side. So let me begin our review with some of our performance figures for the 2018 first half. On the new licenses side and those are software, revenue increased 10%. This growth rate is all organic. We benefited from double-digit growth in seven out of the 12 geos. We are seeing strong traction with 3DEXPERIENCE, with new licenses revenue up 27% for the first half. We are benefiting from increased breadth adjacent work ENOVIA, SIMULIA, DELMIA, GEOVIA, all growing new licenses revenue double-digit in the first half. Performance for high growth countries was strong in the first half, with software revenue up 21% on broad-based growth by the way 25% in Q2. Five of our industries posted double-digit software revenue growth during the first half. Among them our largest consultation and mobility, and architecture work, engineering and construction where our opportunities are very promising. Looking at the first half performance in total, we delivered solid growth at both the top line with software revenue up 9%, bottom line, with earnings per share at 13% or at 23% at constant currency. As you know, we held up our Capital Markets Day on June 15. Our next one will be in two years from now. I would like to thank everyone for attending to the delay on the full day representation. For those of you who could not, I want to share some of my key messages with you today. On industry side, we observe that there is a new world on the horizon. We are experiencing a global industry renaissance, bringing new ways here on virtual of inventing, learning, producing and training. If you think about Industry 4.0, it's not about the future per se, but it's about the past and in reality it started over the last 35 years and I would say, even 35 years ago, with the showcase called Boeing 777, world showcase. The second point is that digitalization is only a part of the journey. Digitalization does not describe what is happening today at the most advanced companies. What we think [indiscernible] describes it is truly an industry renaissance, so what does it mean? The industrial renaissance is actually the new categories of industrial companies, new categories of solutions and new categories of consumers. Very clearly, the leading businesses of tomorrow will be those that empowered the workforce of the future and their valued networks, with knowledge and know-how to deliver new categories of sustainable solutions. The 3DEXPERIENCE platform is unique in terms of its focus. If you look at the consumer platforms, it is all about these large technology companies serving platform, making them the center, so to speak, of [indiscernible]. In contrast, the 3DEXPERIENCE platform is a catalyst and an enabler for our clients to become themselves platform companies. The 3DEXPERIENCE platform powers the industry solution experience and powers the value networks. In addition to helping our clients become platform companies, in this new world of industrial renaissance, one of our objectives is to innovate in the new experience and new technologies as well as workforces of the future. It is in many countries a priority and most of them have launched initiatives, where we are part of it with our 3DEXPERIENCE innovation centers. Our first is in the United States opened in 2017 and offering one of the most if not the most advanced centers of aerospace industry. We are working in collaboration among Wichita State University and the National Institute of Aviation research and Dassault Systèmes. In this morning's webcast, we've run a short video where Abark spoke about the ability to streamline tools, make some processes in a very short period of time, thanks to the experimentation that they carried out at the center in China to a upgrade our industry position in at-large. Our 3DEXPERIENCE innovation center in Beijing is helping companies to figure out the workforce of the future to address the new challenges. Moving now to the performance in greater details, we are seeing strong momentum with 3DEXPERIENCE, with new licenses revenues up 27% in constant currency and accounted for one third organic sale of the 2018 first half. Among the largest transaction where companies enable Space & Defence, High Tech, Transportation & Mobility, Energy, Process & Utilities, Marine & Offshore well as Consumer Packaged Goods. We also signed new agreements that are establishing long-term relationship with industry-leading companies, with -- which may not resulted yet in revenue generation in the second quarter, but that are very strategic and illustrate very well our market position on long-term growth. And to begin with EDF group, they are being using CATIA and DELMIA solutions now. We have entered in a 20 years partnership. They are adopting our 3DEXPERIENCE platform on industry solution experiences of the nuclear industry with the creation of digital 3DEXPERIENCE and the design construction on operational phase of the businesses. There are key objectives to strengthen EDF planned performance and more broadly the competitiveness of nuclear powered solutions, not only for what they build but where they want to export. EDF is one example of working with a strategic field-side player as a partner, here we add strong partnership established with Capgemini. The second client I would like to highlight is ExxonMobil, the largest oil and gas company in the world. The company has been a long-standing client and large SIMULIA user. Exxon Mobil is adopting the 3DEXPERIENCE platform itself and our capital facility information excellence industry solutions, with ENOVIA as well as EXALEAD applications, as part of its global practices transformation initiatives. Here, Exxon group will been involved in the implementation. Looking at energy profit on utilities business more broadly, we are seeing good momentum. We are working in two principle areas, in capital project management and in capital asset management. When you think about the industry, it's very closely linked to our purpose and also to key trends, such as urbanization, urbanizing, driving convergence between and among industries. For example, increasing urbanization brings together three of our target industries, Transportation & Mobility, [Indiscernible] energy as well as process, utilities. Now just a few words on SOLIDWORKS on 3DEXPERIENCE, sums to what we call power of buying. The SOLIDWORKS offer to its clients is increasing immensely. No one else will have a comparable offer which is key competitive advantage for our clients. For PLM, [indiscernible] so user will be able to connect to PLM collaboration services online. To leverage data on intellectual property and interpret their information, they will have access to all analytics/warnings on more broadly to AI, artificial intelligence services. SOLIDWORKS users will be able to tap into a comprehensive 3DEXPERIENCE growth portfolio, especially, in extended simulation on global manufacturing operation, and some to the 3DEXPERIENCE platform, SOLIDWORKS user are able to access to all marketplace services. Now let's move to the fashion retail and consumer sectors and Centric Software. If you look at the industry, it is the early phase of digitalization, much like what we've observed in the construction sector. We have known on what Centric Software for a long time now on working together with senior management, decided now was the right time to come together. Centric have established a number one position in the emerging PLM market of companies on the industry segments run by collections. Our goals to help support Centric Software recognition, to accelerate the digital transformation of the fashion retail and consumer sector, one, on the long run, we want to offer these companies an industry renaissance pack and transform companies. From that standpoint, Centric Software is already almost considered as a de facto mainstream product. Finally, let me say a few words on CATIA. On the No Magic acquisition, which we completed this quarter. This is a very strategic investment for CATIA. No Magic technology makes it possible to design and test intelligent system of systems that we call the internet of experience. The hyper connected world we live in will need more of those solutions going forward, bBy combining these solutions with that assistance, multi-scale, multi-physic capabilities. We will enable our customers to design, simulate and operate in the digital world, the most complex systems of systems such as usage scenarios of cities or the behavior of living cells in life science. We believe that we call this sector cyber physical architecture. It's the right approach bringing together a multitude of software in [Indiscernible] connected systems, interacting together in an unpredictable world. Let me now turn the call to Pascal.

Thank you, Bernard. Hello, and thanks to all of you for joining us. Our two quarter performance was [Indiscernible] and well in line with our key financial objectives. Looking at our results for both the second quarter and the first half, we have tracked each of the [Indiscernible] and position us very well to deliver strong earnings growth in year 2018. As a reminder, all figures are on IAS 18 and IFRS 15 with revenue-related growth rate at constant currency unless otherwise noted. Zooming in the first, on the regional review. in the America, software revenue increased 7% in Q2, reflecting a strong comparison base for North America. For the first half America posted software growth of 9% and solid contributions for growth from North America and a strong growth in Latin America. In Europe, the second quarter and first half software performance was led by Southern Europe and Russia. Software revenue increased 6% in both areas. Asia was the most dynamic region this quarter. The software revenues up 14%. And for the first half, software revenues increased 15% with a double-digit growth across all the 5 geos. From a broad perspective, we saw a very good licenses revenue performance in CHANEL. CATIA license revenue were up double-digit for both the second quarter and the first half, and a good growth across all the three regions. CATIA 3DEXPERIENCE licenses and revenue increased about 3% in the first half. For both Q1 and H1, ENOVIA licenses revenue increased double-digit on the balance performance for both core and diversification industry. 3DEXPERIENCE has represented over 70% of ENOVIA license software and increased over 30% in the first half. SOLIDWORKS also added double-digit license revenue growth for both periods. Based on booking and as we can confirm, that we expect SOLIDWORKS software revenue growth rate in the third quarter to reflect the high comparison base and for this comparison base to moderate in the fourth quarter. Overall, for the year, we expect SOLIDWORKS to deliver a good performance. Other software increased 11% in Q2 and 13% for H1. We are seeing a strong interest in DELMIA manufacturing and good growth for SIMULIA in simulation and GEOVIA in modeling. The 3DEXPERIENCE platform in our industry solution experiences at-large are driving a broader addition of our software applications. The recent illustration is somehow a [indiscernible] who has strategic-sense platform and several industry solution experiences liberating our CATIA, DELMIA, ENOVIA and EXALEAD brands. Diving briefly into DELMIA, our portfolio development over the last year had created a very strong brand addressing global industrial operation. The win at Boeing in year 2017 would not have been possible from years ago, first from platform perspective and second from a portfolio perspective. Today we have a very competitive offer and it is continuing to create important opportunity for us. For the year 2018 first half, we posted a strong performance in both manufacturing and execution, and in DELMIA digital manufacturing, leading to an organic software revenue growth of 17% for DELMIA. Really thanks to the complementary nature of DELMIA offer with what printing is providing and bridges total Europe, a division of the largest player and [indiscernible] company in the world, accelerated both DELMIA from manufacturing computation system and Quintiq for advanced planning and scheduling as well as optimizations to superb its smart manufacturing comp sales. We competed against multiple parties in the EDF sectors and optimization area. Moving to our financial results. Our software revenue increased 9% at constant currency for both Q2 and H1. License and all the software revenue increased 8% in the quarter and 10% for the first half. This is also the organic growth rate. Recurrent software revenue increased 9% in total and 6% on an organic basis for both Q2 and H1. Our [indiscernible] part revenue continued to demonstrate the excellent renewal rate in all the three regions, especially in Asia. While services revenue grew in Q2 compared to Q1, performance remained mixed and came in below our expectation by about €6 million. Strategic and services engagement and our core services business performed well. It was in our smaller brands where we have been hurt by some delay and some pushouts. We had a very good evolution of our operating margin in both Q1 and Q2, bringing us to an operating margin of 28.7%, compared to [technical difficulty] last year, and on an underlying organic improvement of 160 basis points, offset in part by the currency impact of 70 basis points and the acquisition deletion of 40 basis points. Earnings per share was also well in line with our objectives, up 22% in Q2 and 23% for our H1 in constant currency, very specific from our revenue growth, operating margin performance, and lower effective tax rates. EPS was €0.72 for Q2 and €1.03 for first half of this year. Operating cash flow increased 9% to €645.5 million for the first half and was used principally for acquisitions and dividends. Excluding currency effects on constant perimeter, per NAV revenue under IAS 18 increased 8% compared to the 6% of a gross. Before moving to our financial objective, let me share some further information on the Centric Software and No Magic acquisitions. The acquisition of Centric Software is taking place in via two-step approach. We are presently acquiring 63% of the share of the privately held company for an aggregate amount of US$350 million, which include payment in advance for shareholders keeping their shares. The acquisition of the remainder shares will take place in year 2020 and year 2021. So price will be determined based on the revenue growth and profitability for Centric Software in year 2019 and year 2020 in average, and is expected to range between three times to six times year 2019 and year 2020 revenues. Centric financial information will be included in other software at the present time. Our revenue assumption and expectation that it will be slightly dilutive to our non-IFRS earnings, respect the fact that January and July are the two most important months of Centric Software. The No Magic acquisition was completed on June 20. As quarter begins in next half, 117 people join us. For the year 2018 second half, we are assuming revenue of about €6 million, and the acquisition will have a neutral impact on our year 2018 non-IFRS earning. Now moving to our financial objectives, we are affirming that our underlying growth expectations in [indiscernible] 2018, reflecting an acceleration in 3DEXPERIENCE activities as our first half result demonstrated and [indiscernible] grows for SOLIDWORKS for the year. We are then updating our financial objectives for the new acquisition. As a reminder, our objectives are under IAS 18 and on a non-IFRS basis with a revenue growth rate at the constant currency. These assumptions aggregate the total revenue growth of 9% to 10% from 8% to 9% previously in constant currency. On a reported basis, our revenue range of €3.41 billion to €3.44 billion incorporates the second quarter currency aside of €21 million. Acquisition contributing to €33 million and a refinement of our software, addition of €50 million, in fact. And services, a reduction from services for Q2 and H2 of €40 million. An operating margin of 31% to 31.5%, which embeds an acquisition dilution range of 80 to 100 basis points and if we get this currency impact estimated at 30 basis points. In turn, we are upgrading our EPS objectives targeting a non-IFRS earning per share of €2.95 to €3, representing growth of about 10% to 12%. At the constant currency, our EPS growth rate will be about 5 percentage point higher, at about 15% to 17%. The bridge in our presentation on the right side provided the tax from our previous non-IFRS EPS to date, agreed. Underlining our year 2018 full year objectives, let me provide to you some key details. We are targeting licenses revenue growth of 9% to 11% in constant currencies for year 2018. Recurring revenue growth of about 9% in constant currency, and for services, we have adjusted our outlook as I just referred. We are updating our effective tax rate, fine tuning it, to about 29.1% from 29.7% previously. For the third quarter, our key assumptions are as [indiscernible] , and reflect a strong year-over-year comparison base for SOLIDWORKS. License growth of 6% to 9%, recurring software growth of about 10%, operating margin of about 29% to 30%, lower year-over-year by about 2 to 3 points, reflecting the following combination of factors. In Q3 of 2018, we anticipate some catch up in hiring and marketing programs, the division from acquisitions, and we remain that Q3 '17 we pay a special attention to cut resisting and nonfavourable comparison base. This leads to a total revenue growth of 8% to 11% in constant currency or €805 billion and €825 billion and €of €0.64 to €0.68 for Q3. From an EPS growth perspective, that would be flat to up about 6% as reported. Let me turn back the call to Bernard. Bernard Charlès: In summary, our results for the first 6 months of the year demonstrate that we are on a good track in terms of our strategy in [indiscernible] on, of course, our financial results. As always we continue to work to improve our execution and to adopt on replicating best practices across organization and with our partners. With that, Pascal and I would be happy to take any further questions and thank you very much for your interest in Dassault Systèmes. Operator?

[Operator Instructions] Bernard Charlès: Jay, the floor is yours.

So, Pascal, let me start with you and then couple of market question for Bernard. So at the analyst meeting last month, Pascal, you mentioned that through your new forecast period ending 2023, you expect to increase your operating margin by about 50 basis points a year. Could you talk about that in terms of brand expectations? In other words, where do you think the margin leverage would occur with regard to brand? We can assume, I think, that could see in SOLIDWORKS or probably each over 40% margin, and SIMULIA's margin, I would assume is well above ENOVIA's, and perhaps, other brands are obviously below the corporate margin at the moment. So when you think about those kinds of differences by brand, where would you expect the increments to occur over the next number of years? And then secondly for Pascal, what is your expectation for 3DEX as a percentage of 2018 license revenue? Do you think that you'll have 33% for the years as you did for the first half? Or do you think the proportion will go up as the year continues? And then for Bernard?

Okay. So Jay -- so as you know, we are not disclosing the operating margin program. But nevertheless, you -- the assumption you talked about the contributions and that should be correct, at least in term of the different ways and the contribution. Now if you look at, basically, where the -- I mean, the leverage is coming from an operating standpoint, in fact, you have several points. One is, we did not invest too much on the marketing side only this year, and this is the reason why we want to recover by launching additional marketing programs in H2 in order to fulfill the demand for next year, so it's point number one. Point number two, in terms of hiring, we were a little bit behind our your plan and especially on the field, field meaning on the sell side and on services side. So on the services side, it was on purpose, because you noted that the revenue is below our expectation, so we took some cautiousness. But on the sell side, I mean we always keep up the [-- I mean early this year to launch. We took some delay and we did not catch up for the -- in Q3. But we expect anyway to do some catch up in Q3 and Q4. So my point to you, Jay, the improvement of the operating margin is really coming from the global function, especially the field functions. And this is where we have much more connectivity and efficiency, more than basically, the -- of course, we are moving on the brand side and on the pipeline side. Now for the 3DEXPERIENCE experience, I remember, you were mentioning last time that you had in your forecast a contribution of about 33% right and you're aggregating between 33% and 36%. So basically what I can say is, you are in a good range, and what you've driven -- the growth is mainly driven by ENOVIA [Indiscernible] because you remember that 75% of the revenue of ENOVIA is basically based on 3DEXPERIENCE, but also CATIA, because the contribution of CATIA is around 20% from growth coming from the 3DEXPERIENCE platform and the five others are coming from other branch. I hope this is answering your questions.

Yes. So for Bernard, just two things, perhaps related. In referring to DS or to ENOVIA specifically, as a platform, are there two or three functions or attributes that most distinguish ENOVIA as a platform now as compared with former, classical definitions or uses of ENOVIA? In other words, would it incremental to make it a platform? Would it be something like new methods of configuration management? Would it be new methods of integration across the various brands? Or perhaps just going for a little bit more, what makes it a platform? And then lastly, at the analyst meeting, there was some interesting presentation, I think, [indiscernible], your six cross-industry initiatives. How are you thinking about those, perhaps rank them in terms of which do you think would be most incremental for revenue, or particularly important to drive a new business? Bernard Charlès: I think the most important -- adding on the answer to the first question about the platform is the fact that ENOVIA is not anymore the platform for Dassault Systèmes, at all. And I will come back to this. The platform for everything we do is the 3DEXPERIENCE platform itself. As a matter of fact, the ExxonMobil capital asset management and capital project management lifecycle or even EDF, it's the native 3DEXPERIENCE platform, which is truly a platform that can be on the cloud, the same can be on-premise and that same platform powers industry solutions or trading through the marketplace, same platform, fully web architecture. So what is ENOVIA standing for now? It's basically, ENOVIA are becoming collections of architectural domains to do project management, to do really the business collection of business applications, projects, sourcing and so on, on top of the platform. In some way, the ENOVIA, in the last three years, ENOVIA has been positioned as what CATIA is in what weak relationship to the platform. You may recall, Jay, that when we introduced platform six which became the 3DEXPERIENCE platform later on, we said 05, Big Data, for everything is datalink centric, on the 3DEXPERIENCE, it's datalink centric 05. The experience platform is also fully based on data analytics and indexing, dashboarding, so basically it's a platform for business innovation and its a platform from for industry innovation, in fact, there are two labels of 3DEXPERIENCE platform, one called collaborative business innovation. This is our business. On the second lever of semantic, if I may say so, is called collaborative industry innovation, which is powering all our industry solutions, nothing that we are going to sell in the future on Dassault Systèmes will be sold without being based on that platform. So in short, the platform now is not anymore ENOVIA, because there was a confusion on the -- to answer to your question about the four or five differentiation. First is data stream in and out are all compliant with industry standards. So we adopt every standard of each industry. The third, everything is indexed like big data comes to [indiscernible]. Everything is -- all objects are dashboarding, so we can do cockpits on analytics, we have done. And last, but not least, 3DEXPERIENCE can index SAP Oracle without moving the data in there. We can even index the web through the platform, and that's what we do when you use the dashboarding capabilities of Netvibes on top of the platform. Those capabilities are not done by any other players in the industry. And to give you a very simple example, if you go and connect SOLIDWORKS that will be delivered in the second half to the EXPERIENCE platform, the day you upload the data they become -- they become zero file. They become immediately real-time analytics on dashboarding and later on indexing. They can be used by any roles based on the platform itself. On all the roles, including CATALIA roles or ENOVIA roles project management business application, can also apply to what is uploaded there. Sorry for the long explanation that the platform for everything we do now and for our customers is 3DEXPERIENCE. In fact, customers are now using the platform both as a marketplace on our -- and industry solution [indiscernible] platform. And the second part of your question was really concentrate the cross industry. Yes, there are several, I will mention there one of them, which is, of course, CGF data width, because the CGF data is going to change the landscape for AEC on large capital project management, because what we are doing is exactly the -- what happens in the large manufacturing sector. In short, when -- the reason why we won against all competitors for Digital Mock-Up on PLM is because we -- the processes we put in place was at that time called design in context. So you basically architect your plane and you design within the architecture of the plane. The feature of AEC is to design within the context of the cities of the future of rail transportation, [indiscernible] is in the context of the territories. So it's the also way around, instead of have something in pieces, you design pieces in the context of the total, in the context of the whole part. That's a very core thing. The second core thing that Olivier talked about is the Internet of Experience, and the fact that we are using now the cyber system approach. No Magic is unique on that standpoint -- perspective to really do the modeling of cyber-critical systems, which means software, electronics and hardware all together. Those are two big example of -- major example of cross industry. There are others which are related to material science, on bioscience because they goes across life science on the health science for ALM and the degree of pattern, which is not possible if you don't understand the material science of it. More to be said, but, so that's it.

Your next question is from Monika Garg. Your line is open.

First question is, I mean, we've been hearing this tariff talks right now. Could you maybe talk about if -- what you've heard from your customers? Do your customers see an impact? And do you see kind of an impact to your business on that? Bernard Charlès: Could you -- I apologize, we missed the beginning of your question. We apologize for that.

No problem. There has been a tariff talk started, of course from U.S. here, but between U.S. and different geographies, different countries. Given that your customer base is very wide across different industries, how are your customers talking about that? Bernard Charlès: It's certainly something we -- I guess, we get it. First of all, we were concerned initially on that and we see a debate, but the reality is, the way we see our clients acting is really they are concerned for their business, but they do understand at the same time that this is -- the differentiation for them is going to be on the solutions they can provide. In every sector we serve, you will notice that what is astonishing at this point in time is every single sector we serve, there are newcomers, unexpected comers playing. I was giving the example, I think, at the market day, financial market day that we have listed about 600 in transportation company, whether it's air, ground or underground transportation, which are creating new categories of solutions. We have electrification, we have fleets of robots or drones, 600, we've never seen before. So the end effect on our existing customers is they are launching more and more innovation projects to really discover themselves what could be the next evolution of the portfolio. It's not only about digitizing what they do today, but it's about looking at value network and innovation network in a different way. The second remark that I have is that this big debate is creating another side effect, which is, if you look at India and China, the immediate reaction is to create new categories of solutions for the worldwide market. Because tariff can apply to existing products when you're a solution in the country, but if you come up with a solution that does not exist, it's a different story. And then you can bid the value, which is very different on the position in your traditional product line positioning. So those are the two main astonishing remarks we get from clients related to this big debate. And the last one is, everyone is both concerned in -- they conclude that it cannot, it's not sustainable. It will be a temporary complexity, but it's not sustainable in this new world of commerce.

Then PTC announced the partnership with ANSYS, where they talked about delivering ANSYS Discovery Live real-time simulation with PTC's Creo software. Do you see that could pose a bigger competition to your CAD solution? Bernard Charlès: The -- of course, we have a lot of respect for our competitors. They do not have a platform. It's hard to move from file-based to zero file on the data lake, on big data. It does not -- it cannot be done in one year. So we find connection. There is so much you can do, but you can never integrate properly, because there is so much semantic. Look at the Microsoft Office, PowerPoint, Word and so on. And they are file-based, you cannot integrate this. It's very difficult to do in every document. In our world, it's becoming mandatory. So I think they will do nice things, but when you do ALM, additive layer manufacturing, it's not about sending the file to another application. It's much -- you have to go to the level of details to make it work. So I think from that standpoint -- and customers understand it now. They do understand the big difference between zero file. I mean, Google and Facebook are zero file. We have done zero file system for that reason, because file is a disease for the complexity management we have to manage in all large project manufacturing, high tech and so on. And they will not be able to solve that properly, we think.

Last one here for me. I think Centric Software, if I look at the presentation, it says grew 60% in 2017 year-over-year. How are you thinking about growth going forward? Bernard Charlès: By the way, just as a side note to the credit -- to the previous, question, they have turned a platform to a true platform, we like it from that standpoint, because when you do a connection-based development, you are sourcing, pricing, costing, you have a connection definition, you're always doing work around the world and so on, on all systems, which are file-based and cover doing that properly. That's just to connect with the previous question. With that, Pascal, you want to?

So to answer to your question, Monica, what we are planning to integrate for Centric Software for the second half of the year. In terms of revenue, it's close to 27 million. You have to split this 27 million, 40% in services, 60% in software. And you have to split the 60% software between 2/3 license and 1/3 maintenance and support. Why? The numbers, may be it seems a little bit low for you, because we communicated on the front end, company generated $16 million last year. And the point is the following with the mix in our forecast for the year, two very important months, which is July this year and January next year. From a Centric standpoint. The reason is because they close at fiscal year at the end of January, and as you see we just closed the transaction yesterday, so basically we're going to have few days of July. But the point is, July and January are the two largest months for Centric. So basically to make the long story a short one, we're going to take only 45% of the revenue for the third quarter of Centric, the 56% are basically in July; same story for January and have two third of the cost, because it's linear, all that on purpose. Now if you look at the... Bernard Charlès: All this will be around next year.

Yes, of course, of course, of course. But just for you to understand the 27 million where that's coming from. And last but not least, if you look at the underlying growth of the business for Centric Software for year 2018, we are close to 50%. So the dynamic and the momentum is still there.

Your next question is from Gal Munda. Your line is open.

This is actually Alex on for Gal. I was just wondering, you had significant contribution from Exa and other software revenues. Adjusting for this, the organic growth for other software is around 4% to 5%. How does that work if we're saying that DELMIA grew 17% at constant currencies. Does it mean that other brands declined in the quarter? Bernard Charlès: No. In fact, if you look at the other software, so you're right, DELMIA, SIMULIA are going well. This is because as you all take that in SIMULIA. Exa is already in SIMULIA, and we also had a good recovery for GEOVIA, because the mining at large is doing much better. So we are enjoying the double-digit growth on the license, but not on the total software. We have some relatively modest performance for BIOVIA, I have to confess, so we are growing very slowly for the time being, because as you may know, we are transitioning from a standalone application to the platform-based. But the good news is we are engaging with very large pharmaceutical company in this front and for the one who have the chance to attend the Capital Markets Day, you have seen, and Jan telling you that they're summarizing on 3DEXPERIENCE platform for everything which is related to the biologics and the data, the big data analytics they're doing. Quintiq is also going well. We are facing some weak activity on the services side, but not on software side. So with this, I think, you have a pretty good understanding about the dynamics behind the other software line.

And then also if licenses are growing around 8% organically in constant currency, why did subscription and support only grow at around 6% organically? Are you experiencing any headwinds from last year's charge backs? Bernard Charlès: You remember it's a recurring part, you have the subscriptions, the maintenance and support. And basically you have different dynamics, and the subscription is going very well, and it's also thanks to the contribution of the acquisitions coming from Exa, because it's a subscription-based model. And so maintenance and license is aligned with this organic growth. So now coming back to your points, we have been very clear on this. You will see some acceleration early next year, because you will have the full contribution of Boeing, because we'll start the massive deployment early next year.

Your next question is from Michael Briest. Your line is open.

Just a couple of follow-ups, all for Pascal. Just on the tax rate, Pascal, for next year, given your comment this morning about the earnings growth, should we assume that the current tax rate is sustained, certainly, not increasing anyway?

Yes. And you remember, we gave some indication during the Capital Markets Day, we told you that on a five years basis, we will be normalized at 27% of the tax rate. So basically, we do not expect some additional improvement on the U.S. front, but we are expecting, in the coming years, some improvements on the European one, and especially the French tax.

And then just to sort of come back on Centric. I think people are looking at the second half license guidance. By our math, what you're saying is 40% to the €27 million is licenses. That's almost 3% of the second half license growth rate. And obviously, 9% to 11% for the year, 10% in the first half. That suggests a slowdown. It's that all SOLIDWORKS-related? Or is there anything else in there or is my math wrong?

Yes, it will definitely be an impact coming from SOLIDWORKS, to answer to your points, if you do the math. And to give you some indications, we expect a growth, which is much more close to 5% to 6%, and on 43%, and in the full year, it will be 10% to 11%.

For SOLIDWORKS, that is?

Yes. Usually, we're not giving guidance [indiscernible], but just because I know that you will dig until you have the answer, I am giving it to you.

Was there anything special about the license activity last year, you mentioned 30% license growth in Q3?

Yes, but you remember, we had a very strong quarter last year for SOLIDWORKS. However, it is different time this morning, but achieving 30% growth in license, it's not something we will produce this year, and obviously, we have the data sets. So this year basically the rest -- there is nothing beyond other than what I'm just saying.

But was it around a product release SOLIDWORKS 2018 or pricing or channel, revenue split, what accelerated it so much?

Last year, because you remember it's at a time where Autodesk has forced basically their customers to move to subscription, and we had a lot of opportunity -- incoming opportunity coming from customers who were refusing to retreat to go on subscriptions or to be forced to go on subscription without having additional value in the software they were combining. So this is -- and this was not, I would say, planned in our guidance last year. So this is basically probably one of the few reasons.

And then would that have an effect on the first half of '18? Or is it just the second half of '18?

No, no, it's only for Q3.

And then just the final one. I noticed that the guidance on SO charges has gone up from €78 million to €121 million for the year. Is that in any way related to the Centric acquisition? Are you having to offer options to the management there? Or is it just the share price?

I'm not sure I catch your -- the question, Michael. Could you repeat the questions?

Yes. So for the non-IFRS items, you're guiding for €121 million of stock option charges. It was €78 million at the end of last quarter, so why has it gone up so much?

I think you know it's on the, I guess, I need to check, but it's probably the share price increase. If you take €78 million, and you multiply it by 1.45, which is basically for most acquisition of the share price, you should be very close to the numbers. And direct of this company we are, because you know [indiscernible] acquisitions or we extending the propositions, the averaging of the [indiscernible]

Your next question is from Nicolas David.

I have three, actually. Firstly, could you please come back on the reason of the slowdown you see on new license, 3DEXPERIENCE license in Q2 after a stellar performance in Q1? And should we expect the growth to catch up in next to something like 20%, 30% like you experienced in the past? And I have another one. Bernard Charlès: You know, growing at 27% the 3DEXPERIENCE license growth, I think, I will not guide you, it's a slowdown. So it could be less than what we have seen in Q1, because if you remember, in Q1, we had some large [indiscernible], and obviously, you also basically had the rate effect, but the dynamic is really consistent. There is no trick behind the numbers.

No, no. The other thing that I was saying, maybe there are some -- you mentioned the signing in Q2 that we will generate revenue in Q2 and may be rather next Q, because offsetting of contract, is there an explanation or it's just really Q1 is the base? Bernard Charlès: Yes, you're right, it is based -- because the one I was mentioning this morning on process here is related to basically the service implementation and [indiscernible] those projects. I did not compute exactly the numbers, but if we look at the dynamics on quarter-to-quarter and year-over-year, we are very consistent. And it is in line with what I told you, this year, the growth will come from both, from the 3DEXPERIENCE platform in the half year, and late from SOLIDWORKS compared to last year.

And the question is, I was a bit surprised, sorry to come back on Centric again, by the mix with the services accounting 40% of revenue. It seems quite high for a software company. Is it structural, like from LLT? Or is it just because it's a growth company and we know, the project, and what could be the profitability of the business in the midterm for Centric? Bernard Charlès: The reason is very easy to understand. They are gaining so much new logo that they have to do the setup of the platform for that. So this is the reason. And by the way, they are not using subcontractors to do it, they do it only by themselves. And the reason is because it's very well packaged, so it doesn't take too much time. So basically the services activity is driven by the new logo, the new projects. And on the long run, the business will only will be close to the one we have, which is very close to -- now exceeding 20% of the revenue coming from services. Because when a snowball is created, it creates activity sometimes, but the starting point is different, of course, than being a more permanent move.

And so it means that in terms of profitability, it can reach your standard also? Bernard Charlès: Yes, and by the way there is something I can say to you, the license and the software revenue at also Centric is growing 2x faster than the services.

And my last question is about the full year guidance, what made you increase the software contribution for H2 in your guidance right now? Is it -- I suppose, that is mainly there is a recurring part, which is contributing more. Is it because of better renewal rate or because of better conduction of the pipeline for rental or something like that? What are the reasons behind that?

Yes, you're right. The majority of the software are great. They mainly are coming from the recurring part. And one of the reason is that we seen both the renewal rate and the subscriptions are very strong. And if you look at carefully the Q2 numbers, basically we were almost 10 million higher compared to the consensus on the recurring part.

And does it mean that you see more and more contracts coming through rentals rather than license? Is it the move you see currently, or it's just... Bernard Charlès: No, we had a good performance again coming from Exa [Indiscernible] so this is trading probably half of it. And the rest is also the fact that, you know, we -- on the rest of SIMULIA, because it's a secondary approach, so it's mainly a [Indiscernible] in our charter, and the momentum in simulation is relatively good. So this is the reason why you have this increase. The benefit from Boeing will be for next year, if it is a benefit, if it is a question there.

I suppose that you're already competing your initial guidance, so it's quite clear for you, I think. Bernard Charlès: We will take one very last question.

Yes. Your final question is from John King.

It's just one on the deals with ABF, Bouygues and ExxonMobil. Obviously, companies outside the core industries and I guess typically deals in those areas have been generally smaller, but the press releases talk about some big numbers, obviously, those are three very large companies with big operations. So I was hoping you would give us a field, at least in aggregate for how impactful those deals can be to you? Maybe also Amgen as well, the one you mentioned today, how impactful those could be? How comparable those could be to, let's say, a deal in your classical industries? Bernard Charlès: I think activity of course, that ultimately we think that the [indiscernible] of those customers is high as it is in T&M on Aerospace for both the pharma sector or for the larger energy sector, because the deals are there, because the timing of doing the business differently from both asset management as well as the project management are significant, and I think it's becoming visible. For example, just one data point. ExxonMobil was a large SIMULIA client, just SIMULIA alone. I mean, in terms of installation, it was not a minor installation. It wasn't minor, because it was SIMULIA only. It's not a minor installation, so the potential in large capital asset project management is, we think, is significant, and then there are not so many modern solution assortment when you think about it. So generally, if I want have something, you know, the core of the deal with Exxon is really related to 3DEXPERIENCE platform at large, because what they're willing to do is to connect the upstream activities with the downstream. They want to ensure the digital continuity. So why I am saying that, because you're not taking the decisions if at the end, you do not understand the values, and this is related to what they are planning to do. And this is also a proof point for you guys that in [indiscernible] sector at large, despite the well established competitors, you know that, we are able to win because we disrupt the market with the platform, and none of them, they have a platform. In fact many of them are I mean, very old architecture collection of side-by-side application, which has never been the architected services, so it's a fragmented market that we are integrating. So with that, thank you very much for your interest and the great questions this morning and this afternoon. And of course, we continue to stay connected with you and don't hesitate to contact us for further questions. Talk to you in October.

Thank you. That does include the conference for today. Thank you all for participating, and you may now disconnect.