François-José Bordonado - VP, IR Bernard Charlès - Vice Chairman and CEO Pascal Daloz - EVP, CFO and Corporate Strategy Officer

Jay Vleeschhouwer - Griffin Securities Monika Garg - KeyBanc Capital Markets Nicolas David - Oddo Securities

Thank you for standing by. Welcome to the Dassault Systèmes Third Quarter 2018 Financial Results Call. At this time, all participants are in a listen-only mode. A short overview will be given followed by a question-and-answer-session. [Operator Instructions] I must advise you that this conference is being recorded today. And I would now like to hand the conference over to François-José Bordonado, Vice President of Investor Relations. Thank you. Please go ahead. François-José Bordonado: Thank you, Andrea. Thank you for joining us on our quarterly earnings conference call with Bernard Charlès, our Vice Chairman and CEO; and Pascal Daloz, Executive VP, 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 are 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 are on a non-IFRS basis with revenue growth figures in constant currencies, unless otherwise noted. We have provided supplemental IFRS 15 and IAS 18 non-IFRS financial information and reconciliation between IFRS and non-IFRS schedules in our earnings press release. Some of our comments on this call will contain forward-looking statements that could differ materially from actual results. Please refer to today’s press release and to the Risk Factors section of our 2017 Document de référence. A copy of this morning’s webcasted presentation is available on our website and these prepared remarks will be on our website shortly after the call. Bernard, the floor is yours. Bernard Charlès: Thank you all for joining us today. To begin, let me share my perspectives on our progress through the first nine months. We have delivered a solid year-to-date performance, on a strong first half combined with a third quarter well in line with our financial objectives. For the first nine months, total revenue, software, licenses and recurring revenue all have a common growth figure, up 9%, excluding exchange rate impact. We are building a sustainable growth driver over the medium term with our 3DEXPERIENCE platform and industry solution experiences. On a year-to-date basis, our 3DEXPERIENCE software revenue grew 19% at constant currency. A major component of expanding our reach and market leadership is through geographic diversification. High Growth Countries software revenue increased 18% year-to-date and they represented 18% of total software revenue. We saw strong growth across many countries and the results also strengthen our market position in the different industries we address. Looking at our performance by industry. Our year-to-date software revenue increased double digits in constant currencies in 7 of our 12 industries with Transportation & Mobility, Energy, Process & Utilities, Consumer Goods & Retail and Consumer Packaged Goods & Retail, Marine & Offshore, Natural Resources and Architecture, Engineering & Construction. Finally, with our progress to-date and fourth quarter outlook, we are confirming our growth objectives for 2018, targeting a total revenue growth of 9% to 10% at constant currency and double-digit earnings per share growth. As we have discussed, we see a global industry shift, we call it the Industry Renaissance. Companies across all industries are reinventing themselves to provide new categories of experiences revealing new categories of customers. This long-term trend is going to accelerate with the platform factor. Indeed, producing new experiences requires excellence in operations and high added value ecosystems. With the 3DEXPERIENCE platform, we provide an operating system for customers to power industry solutions and new business model for customers to power their value networks basically the shift between supply chain to value network. Moreover, the 3DEXPERIENCE platform on the Cloud enables companies to very quickly launch and create full digital continuity from day one, as we see both in our commercial business and in our 3DEXPERIENCE Lab, our accelerator for start-ups. 3DEXPERIENCE Lab is really access to a footprint in the world of the makers. In that regard, last quarter I discussed our 3DEXPERIENCE Innovation Centers, which are part of the global efforts by countries focused on industry and workforces of the future. In our center in Wichita in the United States, we are helping clients innovate in new experiences, adopting new technologies, exploring how to streamline tools, methods and processes in a very short period of time, thanks to the experimentation that they undertake at the center where they can basically do everything across the lifecycle. To upgrade their industry positioning at large, our 3DEXPERIENCE Innovation Center in Beijing is helping companies to prepare the workforce of the future to address new challenges. Today, I would like to discuss a second major initiative, which is our 3DEXPERIENCE Labs, giving us a footprint in the world of the makers. We want to create an environment that will effectively be an accelerator for start-ups. In our presentation this morning, we highlighted a range of projects underway. Among them are Zero 2 Infinity, creating a small satellite launcher as well as Leka, a multi-sensory robot for children with special needs. I encourage you to look at these amazing examples. Our U.S. FabLab was set up in collaboration with MIT’s Center for Bits and Atoms and continues for MIT the world benchmark. We were pleased that Professor Neil Gershenfeld, director of MIT’s Center for Bits and Atoms and a founder and key influencer on the global FabLab movement, spoke at the grand opening. Our 3DEXPERIENCE FabLab in Boston is connected to over 1,800 maker spaces worldwide through the Fab Foundation. We opened our first FabLab in Europe several years ago. We provide those maker spaces with SOLIDWORKS and more recently we added xDesign, the new generation of SOLIDWORKS products through a browser based on the 3DEXPERIENCE platform as well as the 3DEXPERIENCE Services, in particular the Social Collaboration Services, regrouping the millions of SOLIDWORKS users in the world and all the Marketplace Services are also connected to that same platform. So, from our clients to the makers’ world, there is seismic shift underway. This is why we see a significant runway and opportunity for Dassault Systèmes. We believe industries are prioritizing investments around transformation that will drive significant innovation over the next five years. In other words, these investments are indeed time sensitive. In all sectors that we serve, whether Transportation and Mobility, Aerospace and Defense or Energy, Processes and Utilities, we observe a radical transformation of the offers. All businesses are putting their next generation portfolios at the top of their agendas. In our largest industry, Transportation & Mobility, there are significant investments being made, with over 100 new start-ups around the globe; in research and development to address the technological challenges with electric vehicles and in autonomous driving where virtual simulation will be required, will be mandatory for driving certification. At the recent Paris Motor Show, which is the biggest in the world, companies shared their expectations to have an important portion of their fleet be electric vehicles within the next five years and safety acting as an accelerator for introducing higher levels of assisted driving features. So safety, pollution and traffic are key areas where innovation and resources are being focused. In Energy, Process & Utilities companies are making significant investments in two principal areas, in capital facilities lifecycle management and in advanced materials lifecycle management. Last quarter, we discussed EDF and also Exxon Mobil. EPU represents another major industry undergoing transformation. We see that clients adopting our 3DEXPERIENCE platform are also using it to enable them to become platform companies in the way that they deliver products and solutions. In 2017, we announced that Bureau Veritas, a world leader in laboratory testing, inspection and certification services, had adopted our 3DEXPERIENCE platform for Marine & Offshore. Today, it is now using the 3DEXPERIENCE platform for the Nuclear Industry. As environmental and safety-related regulations in the nuclear industry increase in number and complexity, Bureau Veritas needed to improve its efficiency when interacting with manufacturers for their device certification. It adopted an integrated approach with our 3DEXPERIENCE platform as the foundation for its compliance activities, connecting its entire ecosystem. One of Bureau Veritas clients, Framatome, is adopting the 3DEXPERIENCE platform and ENOVIA and CATIA applications and roles portfolios to manage complexity and risk, enable long-term traceability and transform the way they collaborate with Bureau Veritas throughout the certification process. In the formulation industries, the role of platforms is also crucial to support research and development. With our ONE Lab industry solution experience and our Science Cloud infrastructure, we integrate people, resources, processes, data and interfaces for improved efficiency and collaboration. Evonik, one of the world’s leading specialty chemicals companies, is adopting the ONE Lab industry solution from BIOVIA to increase speed and collaboration and simplify research avoiding unnecessary experiments and improving productivity for scientists to capture, retain, search and reuse results, basically the knowledge and knowhow. Moving to Consumer Goods, we see a similar opportunity. This industry is being up-ended in a significant manner. Today, PLM is a critical software to manage the significant business process complexity in Apparel; for Design for Goods leveraging our portfolio in design, simulation and manufacturing; and in Retail to provide white glove services everyone is looking for today, new Urban store trends for example, same day delivery or having the store do the shopping for you with same day pick-up. These are among three key trends that are driving the adoption of Centric PLM, and why we acquired a majority interest earlier this year. We see Centric PLM establishing itself as the mainstream market leader, similar to what SOLIDWORKS has done in design. Our goal is to help support Centric Software mission to accelerate the digital transformation of the Fashion, Retail and Consumer sector. I am pleased to report that Centric PLM is building on the momentum in the market and continues to expand its footprint in various geographies, in particular in China, across segments, i.e. fashion, outdoor, footwear, eyewear and even retail, as well as along the entire supply chain. With that in mind, let me now turn the call to Pascal.

Thank you, Bernard. Hello and thanks to all of you for joining us today. With our third quarter well aligned with our financial objectives, we have delivered a solid year-to-date performance, demonstrating improving breadth, with total revenue up 9%, software revenue up 9%, and new licenses revenue up 9% and recurring software up 9%. And earnings per share were up 12% or 19% excluding currency headwinds, year-to-date. Moving to a business review, let me begin with 3DEXPERIENCE. On a year-to-date basis, our 3DEXPERIENCE software revenue grew 19% at constant currency. It represented about 22% of the related sales year-to-date compared to about 20% in the same period last year. Some of the larger transactions in the third quarter were in Marine & Offshore, Aerospace & Defense, Consumer Packaged Goods, Retail, and in Transportation & Mobility. Let me zoom in on some specific examples of why companies are adopting our 3DEXPERIENCE platform and industry solution experiences. First up is GE Aviation Hamble, a subsidiary of GE Aviation that focuses on aerostructures, and it is headquartered in the UK. They will use the 3DEXPERIENCE platform from design to manufacturing to develop next generation aerostructures. The main objective is to integrate the value stream from design to manufacturing through simulation in order to provide digital continuity for the entire product development. The second value is the control of engineering activities and deliverables through project management. This represents a key win in the supply chain of aerostructure where suppliers are moving toward digital continuity from design to manufacturing. GE Aviation Hamble is a supplier to Airbus and Boeing. Our second example is in the high-tech, where our largest segment is with semiconductor companies. While we are not present in the design of the chips, we are the largest provider in the management of the semiconductor companies’ intellectual property. Nexperia, headquartered in the Netherlands, is a global leader in Discrete, Logic devices. An independent company since year 2017, Nexperia’s focus remains on efficiency, producing consistently reliable semiconductor components at the high volume, around 85 billion annually. They are adopting the 3DEXPERIENCE platform with our high performance semiconductor industry solution to improve product quality, achieve zero defects and in turn, improve their bottom line. The final example takes us to Asia, to a value solutions channel customer, Takemoto, a packaging company serving companies in the CPG industry. They are adopting our perfect package mid-market industry solution on the Cloud. With more than 3,000 different types of glass and plastics packaging containers, Takemoto’s business objectives are to improve global collaboration, increase its agility to produce and deliver products efficiently in small and large lot sizes, and drive innovation and cost performance. Now, let’s move to a regional business review. In the Americas, software revenue increased 8% in Q3, 9% year-to-date. From a growth perspective, Latin America has seen sharply improving results, we have put in place a strong team and they are making good headway. In North America, this quarter was led by CATIA, DELMIA and BIOVIA. Overall, in North America, our results are solid to-date, and we are also benefiting from the addition of acquisitions. In Europe, software revenue increased 8% in the quarter and 7% for the first nine months. Activity in Europe was led by North and South Europe, two areas becoming an increasingly important part of our European dynamics, demonstrating our geo-diversification in a very meaningful way. We also saw strong growth in Russia. ENOVIA, DELMIA and QUINTIQ all had an active quarter in Europe with large deals. Asia continued to be the best performing region in year 2018, with software revenue up 13% in Q3 and 14% year-to-date. While China and India led the quarter, for the first nine months in total, we benefited from a broad-based growth. Zooming in on brands. CATIA has continued to have a good dynamic, with three quarters consecutive of double-digit license revenue growth. Its new acquisition, No Magic, also contributed to this growth, but on an organic basis, CATIA licenses revenues were up double-digits. In the third quarter, this was driven by our direct sales channel, while on a year-to-date basis, our Value Solutions channel took the lead, with good growth across all the three regions. CATIA software revenue was higher by 7% in Q3 and 6% year-to-date. As we shared with you last quarter, SOLIDWORKS Q3 presented a very high base of comparison last year, which explains its software revenue growth of 4% in Q3 year 2018. For the year, in total, we expect SOLIDWORKS to deliver a good performance and you can see it in the year-to-date software revenue growth of 9%. ENOVIA’s software revenue increased 5% in Q3 and 7% year-to-date. 3DEXPERIENCE sales represented over 70% of ENOVIA license software through the first nine months, driving its license revenue up double-digits. Other Software increased 18% in the third quarter and 15% year-to-date. DELMIA and QUINTIQ were the strongest performers in the quarter, and we saw improving results at BIOVIA. Year-to-date growth was led by SIMULIA as well as DELMIA. Our recent acquisitions are performing well, including EXA, with PowerFLOW in fluid simulation, and Centric PLM for Apparel. Zooming in on software, our license and other software revenue increased 7% in the quarter and with a high comparison base, the organic growth was 4%. We had notably strong results for CATIA, DELMIA, QUINTIQ and BIOVIA, all delivering double-digit licenses growth, and by channel that was also the case for direct sales and indirect sales through our Value Solutions channel. On a year-to-date basis, licenses and other software increased 8% on an organic basis and 9% in total. We saw good breadth with double-digit growth for CATIA, ENOVIA as well as DELMIA, and well supported by high single-digit growth for SOLIDWORKS. As a reminder, a large majority of SIMULIA’s software is purchased on a subscription basis. Recurring software revenue increased 10% in Q3 and 9% year-to-date. On an organic basis, the growth was 6% for both periods and continued to demonstrate excellent renewal rates in all the three regions. Recurring software represented 73% of the total software year-to-date. Moving to services, we had a better performance in the third quarter with revenues up 13% at constant currency on 3DEXPERIENCE activity and the benefit of acquisitions as well. While we had softness in our smaller brands, it was to a lesser extent than in H1. Year-to-date services revenue increased 6% at constant currency and represented 11% of the total revenue. For both the quarter and year-to-date, the Americas region drove the growth in services revenue. The gross margin for services was 7.8% in the third quarter compared to 12.4% in the year-ago period. The gross margin shift reflects several factors, mix, lower utilization as we prepare for projects as well as new resource investments we are making in different parts of the world, which will take time to ramp. Moving to our operating margin. Our third quarter was in line, bringing us a year-to-date operating margin of 29.4%, stable with the year 2017 period. We generated 100 basis points of underlying organic improvement, which enabled us to absorb acquisition dilution of 70 basis points as well as negative currency impacts of 30 basis points. Earnings per share of €0.71 was also well aligned with our objectives, increasing 11% in the third quarter, with currency having a neutral impact. The effective tax rate was 29.1%, and is aligned with where we see our effective tax rate for the full year. On a year-to-date basis EPS increased 19% in constant currencies, benefiting from our revenue growth and lower effective tax rate. Our operating cash flow performance has been strong. Through the first nine months of the year, it has increased 11%, reflecting our growth in net income, non-cash elements and a strong growth in operating working capital, translating to a total of €747 million, above the 2017 full-year figure. Our unearned revenue totaled €895 million at September 30, under IAS 18. This represents an increase of 7%, compared to our organic growth for recurring revenue of 6% year-to-date with both figures at constant currency and perimeter basis. Moving to the full-year financial objectives. We are reconfirming our total revenue growth of 9% to 10% in constant currencies. On a reported basis, our revenue range moves up €12 million at the mid-point of our range to €3,425 million to €3,450 million, incorporating the third quarter currency upside. We are also tightening the range given one quarter remaining to the year. We are leaving unchanged our exchange rate assumptions for the USD and Japanese yen. In turn our operating margin objective moves to 31.5%, from 31% to 31.5% previously. I believe we are doing a good job of managing investments for the future and delivering a good level of operating margin. In comparison to the 32% non-IFRS operating margin we reported in year 2017, our underlying operating margin performance will help us mitigate the full-year estimated acquisition dilution in the range of 70 basis points and negative currency impacts estimated at 20 basis points. Combined, this brings our non-IFRS earnings per share objective range to €2.98 to €3.02, representing growth of about 11% to 13% from 10% to 12%, previously. At constant currency, our EPS growth rate range would be about 5 percentage points higher at about 16% to 17%. Underlying our year 2018 full-year objectives, we are also confirming our licenses revenue growth target of 9% to 11% in constant currencies for year 2018 and recurring revenue growth of about 9% in constant currencies. For Q4, we are targeting total revenue growth of 9% to 11%, with software revenue growth of 8% to 10% and earnings per share growth of 8% to 12%. Our financial objectives are presented under IAS 18 and on a non-IFRS basis with revenue growth rates at constant currency. All the details are in the Q3 presentation on our website. To conclude, we are expecting a solid Q4, with a total revenue objective of about €1 billion and earnings per share reaching about €1. Given the record high quarter we reported for new licenses and other software revenue in the year 2017 fourth quarter, we believe these objectives demonstrate very clearly the market opportunity before us. More broadly, as Bernard and I have discussed, we believe our strategy and offer are well aligned with our global industry investment priorities, driving a solid performance for us in year 2018 and sustainable growth opportunities for us over the near and medium term. We would be now happy to take your questions and thank you very well for your participation on this call and our earlier webcast today. Andrea, we can start the Q&A.

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

Thank you. Good afternoon, Bernard and Pascal. Pascal, let me start with you, a short-term question regarding SOLIDWORKS, and Bernard, some longer-term questions. So, on SOLIDWORKS, over the last number of years, we’ve seen that on the margin, they have become more promotional in terms of offering periodic pricing promotions and the like. And I’m wondering if you’re expecting that will continue at the pace that we’ve seen over the last number of years at the SOLIDWORKS. And then, similarly, perhaps you could corroborate some arithmetic. And I understand the difficultly of the year-over-year comparison for SOLIDWORKS. But when we look at it sequentially versus the second quarter, would it be correct to say that the volume of the new business, new CAD licenses declined more from second quarter to third quarter this year than might have been the case in previous years from second to third quarter? And then, I’ll ask the question to Bernard.

Okay. So, coming back to the promotions, I just want to draw your attention on the fact that we -- if you look at for the next -- the last five years, we have increased the price of SOLIDWORKS. And I’m not talking about the list price, I’m talking about the street price. And the reason is because we -- with SOLIDWORKS Premium, in fact, we have been able, thanks to the multi-product approach, to enrich the configurations before selecting. [Ph] So, this is really what we did. Now, coming back to the fact that sometimes we are using the promotion as a way to activate the pipeline creation. I just want to reassure you that if you look at what we did this year, we almost slowed down this practice because the reality -- now with SOLIDWORKS, we have established not only footprint but the reference for the market. And there is no need anymore, to activate commercially the promotion mechanism. Second question related to the sequential growth between Q2 and Q3. You’re right. What you’re seeing true. But, if I may, if you remember last year, Q3 was at a time when Autodesk [ph] announced the fact that they were basically asking all their customers to endorse the subscription based model. And we had flow of the users leaving in fact Autodesk to join SOLIDWORKS at that time. So, this a reason why by the way the comparison base is high with last Q3, last year. And this is a reason why also you cannot draw conclusion on the fact that between Q2 and Q3 this year you have a drop in terms of unique [ph] license being sold, because it’s not a real way to compare things. I hope I answered your question.

Yes. Thank you, Pascal. For Bernard, let me turn now to some longer term issues. When you consider the difference if there is a difference between your core customers in the aero and auto, for example, versus customer in your diversification industries, is there a material difference that you are seeing between the two classes of customers in terms of their new technology adoption or mix as one more heavily weighted towards the V6 and the other one more heavily weighted towards perhaps the DELMIA or CATIA or anything of that kind, and if you would think from a high level might distinguish the two classes of customers? And then, as well, one of the things we’ve talked about over the years with DS is seeing more consistent to growth in your manufacturing software business, DELMIA and QUINTIQ. And you had a good quarter now. But, are you in fact expecting or seeing that the growth of business for DELMIA and QUINTIQ and Apriso will be more consistent and less lumpy than you might have seen over the last number of years? Bernard Charlès: Thank you, Jay. Good to talk to you. The longer [indiscernible] between core clients on new industry, for the new industry, usually they stop directly on the 3DEXPERIENCE platform, because there is no basically value to them to stop on higher level. So, that’s a real trend, almost a de facto situation. The second, you ask me the difference in behavior. So, that’s one. The second is in new industries, we see faster adoption of cloud, 3DEXPERIENCE cloud. Those are two factors. Now, core clients do not do only [indiscernible]. For core clients, what we see for new domain, like cyber system, what we call integration of systems, and I know Jay you are familiar with No Magic and what we are doing in the system across, but to make it understandable for everyone. The cyber system, they directly start on the EXPERIENCE platform because they take this as an additional domain of coverage. So, if I ask to put a sign of extreme, I would say core clients, when they go for new domain of coverage, they go 3DEXPERIENCE. When they go for connected expansion, they go with the current V5 architecture, at the time being, for those who have not made yet the decision of the roadmap to 3DEXPERIENCE. That’s basically the profiling of things. However, I should say that -- I don’t call them core clients, but core industry. Then, the new comers in the core industry like EV startup, they directly go to 3DEXPERIENCE also, by the way, as well as some of the supply chain clients. Because we have seen and I think this all statics show in a very real number that for example in the T&M ecosystem the tier 1 and tier 2, not the OEM but tier 1 and tier 2 are very, very -- investing a lot in innovation. For example for autonomous vehicle, a lot of the technology is done by tier 1 and tier 2. That’s quick review of the profiling of things. On the manufacturing, you’re right. What we -- but it’s coming from the fact that there are two phenomena. One is, as you mentioned, DELMIA Apriso has been very successful in terms of MES, manufacturing execution system on manufacturing operation management. And we continue to see those. But there is a phenomenon. In most of the cases, we are displacing existing players, where it’s homegrown or it might be one of the automation players or it might be one of the ERP players. When you displace basically to avoid to be pushed out, they all most provide the software for free. We don’t do so. But, it creates a pricing pressure at the beginning. When we’re there on install, customers don’t see any problem to buy more at the right price, but they ask us is the price to enter [ph] or a sign to enter [ph] and then after it’s easier. So that’s the phenomenon you see on the MES MOM. On the DELMIA engineering, I think we see a very interesting trend which is basically what we call manufacturing engineering, the front end of part of it. That is clearly now a very clear conviction on customers that 3DEXPERIENCE platform connecting design configuration, what we call X bump, [ph] engineering bump, and M bump, manufacturing bump is a high-value -- and even DELMIA manufacturing and engineering is also used now for construction engineering, sequencing of construction. And we have very good feedback on the construction sector on that. That’s basically -- so, I hope, to your fundamental question, can we see a more consistent quarter-after-quarter business dynamic there. I hope so. The signs up are very positive there.

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

It’s coming. We have not done big noise about it. But, I think we have already signed contract on outcome-based pricing. By definition, it will come with the outcome. So, it’s not for this quarter. It’s probably not for the next quarter either. But, we are very pleased to have now the showcasing operation for that. Bernard Charlès: I will not oppose the two models. For example, we have real cases whereby we -- people are using our software on the cloud and we charge 15% of the end result, which is more [ph] than the kind of usage-based approach, and we are also taking the fees of 10% to do the integration with the end user. So, to follow my thinking, I think those two models could complement each other.

Understood. Thanks very much. Bernard Charlès: Welcome.

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

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

What is visible from a sector level now, in some way, as I mentioned this morning, visible to us [indiscernible]. Many of those companies were already preparing themselves for cautious time. [Ph] But, the reality, when it comes to what we do, we see that -- which is really the innovation platform, we see -- it will increase the selectivity of way of where do they invest. I believe that when it comes to the nature of -- very nature of what we do, because it’s really related to the portfolio and performance output of what they have to deliver, the signs are positive on -- I would say simply the pipeline is providing a good visibility.

Just as a follow-up like, how long would you say is your pipeline visibility, six months, nine months, 12 months? Bernard Charlès: That related to the size -- that is dependent on each of the three channels. To make it simple, the relevant pipeline, -- did we communicate that, Pascal?

No… Bernard Charlès: Okay. Without getting into it too much, we will usually use -- we don’t want to provide too much there. We will usually use the time of 12 months, six months, six months and three months.

Got it. Okay. Bernard Charlès: And you can understand which channel those 12, 6, 3 can apply to.

Yes. Thanks. The question on the construction industry, in U.S., we are seeing a lot of venture capital money being poured into a lot of construction start-ups. They are billion-plus private valuations of number of companies here. Autodesk has been talking about construction industry. [Indiscernible] has acquired company. Maybe could you just talk about how do you see this market develop for you in the software side? And what -- in general, like how do you think this market develops? Bernard Charlès: As you know, we have a collection of wonderful showcases that we have basically established from last year. Whether it’s Gary Zinner [ph], Kengo Kuma but also a very big player like with our announcement second quarter, and also with companies centered in China, like Shanghai Construction Corporation on simple orders. [Ph] So that covers the ground. Those are real case, and we are -- each of them are -- quote in a different way. I would add to that the showcase we are now doing for cities. It’s not only Singapore; there are many other projects ongoing. So, that in mind, we want to do in architecture engineering and construction, what we did for other industries, which is to change, to be game changer. How? I think developers will not continue to build building without having the context of the city. You need the city context, not only to insert [ph] the building but to look at the building performance and the impact on the inflow, outflow traffic, on many other aspects. Before it was not possible, with our platform for the first time ever, it is possible. And this is the game changer. The second remark I want to say, so, we want to accelerate that approach. The second aspect of it is related to building performance on life cycle. Today [ph] don’t do lifecycle management of building. It’s just a collection of documents which are updated from time to time. We are being asked to do building and construction lifecycle management. China has understood that it is important for them. The future program of construction in China will call, not for the old buildings, [ph] but -- which is building information [ph] management, but will be construction lifecycle management, which calls for really planning on operating the maintenance evolution of infrastructures. And China is leading by far U.S. and Europe in this area. And this is where we are, and this is where -- the territory where we are building these references. So, on last point, the cloud, we have the highest adoption of our solution for cloud is coming from AC. [Ph] In fact, we’re going to change the word AC itself next year and I will tell you more about that. I think the AC is too old. There is so much dust on it. But, I want to change the name. But, that’s for February.

Then, just a last one on demand trends across all geographies. I mean, the growth across all geographies was good. China was like double-digit. We do hear like China growth is slowing down, but you had very strong growth in China. Could you just talk about what is your view on the demand trends across different geographies? Thank you. Bernard Charlès: I will tell you what, pipeline overall is good on -- Pascal, add anything you want. But I think the pipeline is consistent with the profile of the business we have reported year-to-date, going forward. In China, I think we’re welcome.

I think, to complement what Bernard is saying, what are we seeing right now. If you Europe, you will see Europe being split in two different parts. The North and the South, plus Russia are very well, in fact. And where we see a much more modest growth is what we call Euro Central and Euro West is mainly France and Germany where the growth is modest I would say. In the Americas, we see a good recovery in Latin America, but you know we started from very low, so I wouldn’t draw too much conclusion from this statement. And North America is going well and especially in the new sector like life sciences. This is really where the growth is coming from for us. Bernard Charlès: We also do extremely well in India.

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

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

Actually, I have two questions. The first one is about recurring business. I was a bit surprised to see the material acceleration in Q3 of your organic growth on recurring business, and actually your guidance for Q4, as we expected the beginning of the ramp up of Boeing. So, could you give us a bit of detail there, what’s happening, the Boeing contract which is a bit late or sort of process is recurring which is a bit. And I have a follow up then. Bernard Charlès: I do not understand why you see -- because we had an organic growth of 6% on the recurring revenue. And you remember that we acquired Exa, PowerFLOW last year. So, clearly, in Q4, you will have comparison on organic -- on pure organic standpoint. This will increase by the integration of the Exa solution, because Exa is only a subscription-based model. So to a certain extent -- you remember, we are coming from less than 4%. So, I see this accelerating. Now coming back also to the question related to Boeing. The Boeing is going well and we are preparing the ramp-up for next year. This is the reason why we have invested in Q3 on the services side just to be ready for the ramp-up. And we always that there will be marginal effect. Since the beginning of the year we have confirmed every quarter that there were marginal margin effects on Boeing for 2018.

Okay. So, just to make sure, to reconcile the figure of organic growth for the recurring, as you mean that it was 4% in Q2, 6% in Q3, and you expect something like 7% to 8% in Q4. Is that the trend that we – because I mean -- maybe I had [indiscernible] contribution wrong for those 9, is it true, is it correct? Bernard Charlès: [Indiscernible]

Okay. Thank you for correcting me. That makes sense surely. And my second question is regarding the pipeline for Q4. Could you give us a bit more flavor around this? Is it about more large 3DEXPERIENCE deals do you expect or an acceleration, is it V6 selling to your installed base or is it an acceleration in the other software, other you have? So, could you give us a bit of flavor around that? Thank you. Bernard Charlès: We don’t communicate more than just saying the pipeline is good, because we have provided the guidance. So, it’s inconsistent statement.

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

Yes. And it’s 3DEXPERIENCE obviously signing, so good for ENOVIA. Bernard Charlès: I think so.

Good for everything.

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

Thank you. And next question comes from the line of [indiscernible]. Thank you. Please go ahead.

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

So, there is first thing, I should correct, SOLIDWORKS for this quarter is not growing high digits. I was very clear on this

I think this you on page four of your presentation, high single digits for SOLIDWORKS.

For the full-year, not for the Q3. Q3…

Okay. That makes sense. I’m sorry. My bad.

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

I’m just thinking more specifically if I can for CATIA because even if I look at for 9 months, CATIA software revenue growth is 6% and seeing double-digit growth for CATIA [ph] and ENOVIA is 7% with double-digit growth, that basically assumes the maintenance is growing much slower. Is it anything that you have on renewal side that’s different? A few years when maintenance was actually performing licenses growth, so I’m just trying to understand what the dynamic is.

CATIA growing at 6% year-to-date and the recurring growing 6% organically, it’s very consistent; ENOVIA growing at 7% year-to-date. It’s again -- those numbers are consistent and then there is no trick behind; this is first, not our style. And if we have something, we will tell you. But if you compute the numbers, you will find, it works. It really works.

Okay. Maybe we can take it offline. Than just in terms of questions on SIMULIA. You mentioned, it’s a very, very good market and simulation is something we are excited about. Can you just comment on the organic growth excluding Exa, what you are seeing in this quarter and maybe for the nine months? Is it kind of inline with that 8% to 10% growth what simulation market is growing or do you think you are doing more than that?

The new license on a year-to-date is growing double-digit for SIMULIA. And I’m not talking about the subscription; and I’m really talking about the new license. And this is a pure organic growth because Exa is only on the subscription basis. Bernard Charlès: We are winning market share there.

And which product do you think are the strongest in terms of the winning the market share? Is it Abaqus product that maybe benefited from some of the consolidation in the industry or is it some of the other that you’ve acquired recently. Bernard Charlès: Abaqus is really becoming the standard in the linear and non-linear construction analysis. So, there is not too much anymore player in the game. And on the electromagnetic, CST is also established as a standard for high frequency, not yet for the low frequency, but the high frequency for sure.

Just the last, if I can. You find a few exciting deals last few quarters, EDS is one of those that kind of stuck up. How do these deals compare with in terms of the size and maybe split within licenses and services? Is something like when you do, when you sign a Boeing deal or Airbus deal? Can you just kind of talk about is it similar impact? Should we get every excited about 2019 on the back of that? Bernard Charlès: EDS, it’s a different kind of contract we signed. Because it’s a framework; and then, after, we have commitment by business units. It’s not a commitment at the group level, which is very different compared to Boeing, because Boeing, it’s a commitment for all the different business units.

Okay. So, it’s kind of land and expand more. Okay, perfect. That’s makes sense. Thank you so much. Bernard Charlès: Thank you very much to all of you and thank you for participating to this call or this morning at our presentation in London. And see you, talk to you in February or maybe before, if you have any further questions. Have a good day.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.