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Dassault Systemes SA (OTCPK:DASTY)

Q2 2007 Earnings Call

July 26, 2007 9:00 am ET

Executives

Michele Katz - IR

Bernard Charles - President and CEO

Thibault de Tersant - Senior EVP and CFO

Jeff Ray - CEO of SolidWorks

Analysts

Jay Vleeschhouwer - Merrill Lynch

Presentation

Operator

Thank you for standing by and welcome to the Dassault Systemes Q2 2007 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. (Operator Instructions). I must advise you that this conference is being recorded today, Thursday, 26 July 2007. I would now like to hand the conference over to your first speaker today, Michele Katz. Please go ahead.

Michele Katz

Thank you for joining us for a review and discussion of our second quarter results. On the conference call are Bernard Charles, President and Chief Executive Officer, Thibault de Tersant, Senior EVP and CFO, and we would like to welcome to today's call Jeff Ray, CEO of SolidWorks.

Our financial results are prepared in accordance with US GAAP. In addition, we believe it is helpful to provide you with supplemental non-GAAP financial information. On this call, we will discuss our revenue, operating income, operating margin and EPS on a non-GAAP basis before deferred revenue write-downs, amortization of intangible assets, stock-based compensation expenses and one-time tax restructuring benefits.

For reconciliations of the differences between these figures and our US GAAP figures, please see the tables in our earnings press release, which are on the website. You will also find information explaining the impact of currency fluctuations.

Some of the comments we will make on the call, either as part of the prepared remarks or in response to questions, will contain forward-looking statements. Actual results could differ materially from those projected in those statements. Information about the principal factors that could cause these results to differ materially from forward-looking statements can be found in today's earnings press release and in Item 3 of our Form 20-F. On our website, you can also find our business and financial presentation that was given earlier today in London and Paris. I would now like to turn the call over to Bernard Charles.

Bernard Charles

Thank you, Michele. We had a strong second quarter performance coming in above our objectives. Non-GAAP revenue was up 13% in constant currencies and up 16% in US dollars. We had very nice earnings results, with non-GAAP EPS growing 14%.

I would like to emphasize that this was not a result of simply setting conservative guidance. I think you all know Thibault very well, so he wouldn't mind me saying this. Rather, this performance demonstrates the strength of our brands and our go-to market strategy. And frankly, given the unusual seasonality and size of our customer transactions in the second quarter of last year, as well as the PLM channel transformation underway, these results were really quite rewarding.

One of our most visible initiatives is the successful transformation of our PLM channel. Looking at the quarter, we had good progress in the PLM value channel and with IBM in large accounts. Our results today demonstrate that we are well in line with our plans, driving growth for CATIA and ENOVIA.

CATIA performed well with both large accounts and mid-market. We continue to invest in strengthening and broadening the CATIA product line. In mid-June, we completed the acquisition of ICEM, expanding our presence at the front-end of design. ENOVIA's strong results demonstrate that our products form a powerful combination and are clearly complementary.

In total, we have had a dynamic product release schedule during the 2007 first half. We continue to advance our technology and strategic roadmap. During the second quarter, we launched our newest brand, 3DVIA, whose goal is to enable 3D to become a universal media for online product experiences.

On today's call, I will have the pleasure of introducing you to Jeff Ray, the new CEO of SolidWorks, succeeding John McEleney. Jeff himself, he is not new to any of us, having served as Chief Operating Officer of SolidWorks over the last four years, but I don't believe many of you have had the opportunity to meet him.

If I may, I would like to publicly thank John McEleney for having set such high standards, for his business leadership and for his outstanding commitment to Dassault Systemes, our customers and our partners. John will remain a member of the SolidWorks Board of Directors and will continue to contribute to our Global Executive Management Group until the end of this year. On a personal note, I wish him all the very best for the future.

Let me now turn the call over to Thibault.

Thibault de Tersant

Thank you, Bernard. As my remarks will be based upon our non-GAAP financial information, let me begin with a brief review of our GAAP and non-GAAP reconciliation figures. For the second quarter, non-GAAP revenue excludes deferred revenue write-downs of EUR3.1 million. Operating income, operating margin and earnings per share exclude deferred revenue write-downs and before amortization expenses of acquired intangibles of EUR10.9 million and stock-based compensation expense of EUR3.4 million.

Looking more closely at our second quarter activity, we saw strength in all geographic regions, including Europe, and across all sales channels. Among our PLM brands, ENOVIA had strong growth, benefiting from the performances of ENOVIA VPLM and ENOVIA SmarTeam, as well as the inclusion of MatrixOne for the full period.

DELMIA had a massive quarter, reflecting strong activity in Asia. SIMULIA, had a very good performance, continuing its trend, and CATIA, excluding the year-ago customer transaction, would have had double-digit growth in revenues. Overall, software revenue increased 10% in constant currencies and a 29% constant currency increase in recurring software revenue.

We are benefiting from several elements, including new rental licenses activity in PLM with CATIA, SIMULIA, which is largely a rental model, ENOVIA and also DELMIA, and install base, which has grown significantly over the last year, thanks to our new licenses activity and very good maintenance in euros.

On a sequential basis and in constant currencies, recurring software revenue increased 6.4%. Recurring software revenue represented a very healthy 62% of total software revenue for the second quarter and also first half. Due to the significant customer transaction in the year-ago period, new licenses revenue decreased in the 2007 second quarter, but it would certainly have been up without that.

We enjoyed strong services growth, with revenue increasing nearly 31% in constant currencies, accompanied by very good margins. Looking to the second half, we expect this growth to moderate and anticipate that, for the full year, software revenue would grow at a faster rate than services revenue. Nonetheless, it was a very nice quarter for services.

Second quarter revenue growth led to a 14% increase in EPS, despite currency headwinds. To quantify this headwind, on a constant currency basis, EPS would have been up by about 24%. We continued to see a reasonably good regional dynamic. All geographic regions contributed to the growth in revenues. Europe represented 46% of the total revenue, the Americas 31% and Asia 23% of our total revenue in this second quarter.

Revenue in Europe increased 3% during the second quarter, reflecting the significant base of comparison to the prior year. We are pleased with the environment in Europe in general. Revenue in the Americas increased 21% in constant currencies, on strong results in aerospace and in our new PLM channel. Revenue in Asia also increased 23% in constant currencies. In PLM, we are seeing strength throughout Asia and SolidWorks good year-on-year results in most countries, with the one exception of Japan.

Turning to seat growth and pricing, the trends continued to perform in line with our expectations. Total CATIA and SolidWorks seats were level with the year-ago period at 20,457. CATIA new seats of 8,372 decreased 8% in the quarter on the strong base of comparison. CATIA Version 5 average seat price was EUR12,103 in the second quarter.

In constant currencies, CATIA V5 pricing was up in comparison to the first quarter of this year and also in comparison with the second half of 2006. With respect to the year-ago quarter, CATIA Version 5 ASP decreased 3% in constant currencies, largely reflecting the impact of the richer mix in last year's second quarter, rather than any weakening of prices in general.

SolidWorks seats licensed increased 6% to 12,085. We saw double-digit seat growth activity in the Americas and Europe. In Asia, we had good results in emerging markets and countries outside of Japan. SolidWorks ASP has been relatively stable in constant currencies over the last three quarters, consistent with our expectations. In the second quarter, its ASP in euros was EUR4,702.

Turning now to operating expenses, I think it would be helpful to look at trends, both year-over-year and then sequentially. In comparison to the year-ago quarter, operating expenses are up 14%, excluding a currency impact of about EUR9.4 million, versus a 13% increase in average headcount.

On a sequential basis, operating expenses increased 5%, excluding a currency impact of EUR3.5 million. Average headcount increased 2% sequentially. Marketing and sales investments increased, largely related to our channel initiatives across the year.

And about EUR2 million of the sequential increase in G&A expenses relates to the legal settlement benefit we received, as we disclosed it in the first quarter, as you may recalls.

Financial revenue was a nice contributor to results this quarter, with revenue of EUR3.3 million, compared to a loss of EUR3.8 million in the year-ago period. We benefited from a higher level of financial income. Following approval at the annual shareholders meeting in early June, we paid an annual cash dividend totaling EUR51 million.

Turning now to our business outlook, let me remind you that our financial objectives are presented on a non-GAAP basis. With respect to our full-year 2007 objectives, we are upgrading our non-GAAP revenue objective, thanks to the second quarter over-performance and the inclusion of the ICEM acquisition, which we recently closed. This leads to an increase in our revenue growth objective on a constant currency basis to 14% to 15%, from our former 13%.

We are updating our Japanese yen currency exchange rate assumption to 165 per euro from our former 160 yen per euro, leading to a 2007 reported revenue range of EUR1,285 million to EUR1.3 billion. To be clear, we are maintaining our US dollar exchange rate assumption of $1.35 per euro.

We are reconfirming our 2007 non-GAAP earnings per share objective of EUR2 to EUR2.05, representing a growth of 9% to 12%. Based upon our revenue and EPS objectives, we assume that our approaching margin will be about 27%, unchanged from our former objective.

With respect to the third quarter, our objectives are for a non-GAAP revenue of EUR300 million to EUR305 million, representing 10% to 12% growth on a constant currency basis. Non-GAAP EPS of EUR0.39 to EUR0.41. Let me now remind you that the effective tax rate was below 28% in the 2006 third quarter.

From a housekeeping standpoint, we will be regrouping COSMOSWorks as part of the mainstream 3D segment from the [T&L] segment, following the recent legal consolidation of it with SolidWorks, commencing in the third quarter.

Regarding 2008 objectives, we have been reviewing practices from other companies and may decide to give financial objectives at the time of our fourth quarter release instead of the third quarter. While the final decision has not been taken, I wanted to give you -- to all of you a heads up on our current thinking. Now, let me turn the call back to Bernard.

Bernard Charles

Thank you, Thibault. Looking at the second quarter, the first point I would like to highlight is the performance of CATIA. It is progressing well in large accounts and in the PLM mid market. During the second quarter, CATIA's revenue grew double digit, excluding the year-ago transaction from the comparison. CATIA is growing its leadership in our core markets and expanding its footprint more boldly in other industries and newer domains.

In the automotive industry, CATIA is helping OEMs streamline the design processes and enhance innovation. The new Mercedes C-class is being entirely designed with CATIA Version 5, including the platform, body, interior, electrical and stabilization, on our powertrain solutions. I believe we have the best powertrain solutions in the market today. In China, SAIC, the largest listed automotive company in China with 1.3 million vehicles manufactured in 2006 is standardizing on CATIA to develop its own brand.

And traction in the automotive supply chain continues to build with additional orders from Visteon in the US, Hella in Europe and among the supply-chain in Japan. Additional orders this quarter included customers in shipbuilding, industrial machinery, medical equipment and in consumer packaged goods with our styling products. All these wins illustrate our diversification progress.

Offering a complete PLM strategy is an important driver of our success and financial performance for customers wishing to maximize productivity gains. During the first half of 2007, a number of customers continued to add to their investment in our PLM portfolio.

Starting first with ENOVIA, its success this quarter demonstrates the value of each of its product families. Our configuration, designing context as well as digital mock-up capabilities with ENOVIA VPLM are driving strong market demand in aerospace and automotive.

Increasing activity in the mid market resulted in a very good quarter for ENOVIA SmarTeam products. And we see continued traction for business processes modeling with ENOVIA MatrixOne in new industries, with a solid quarter in high tech and continued momentum in apparel. In particular, we were very pleased to gain Gucci, as a new customer, following an extensive comparison by the company. During the quarter, we also closed ENOVIA MatrixOne's first major deal in China.

In simulation, Airbus have decided to standardize on Abaqus from SIMULIA for non-linear finite element analysis of aircraft structures to replace existing disparate solutions and support physical testing. And finally, in digital manufacturing, I would like to highlight DELMIA's project in aerospace as well as automotive, with recent wins including Karmann.

Turning to our indirect sales channels, let's begin with an update on our PLM value-channel transformation. We are managing the entire PLM indirect channel either on behalf of IBM or through our DS PLM VAR channel. As of the second quarter, Dassault Systemes was directly responsible for 20 countries, including three that transitioned during the second quarter - Sweden, Denmark and Finland.

Our next steps include transitioning another 15 countries to the DS VAR model by early 2008. In the third quarter, Australia, Russia/CIS, Italy, Spain and Portugal will be moving to the new model. A key part of our transformation includes continuing to grow the DS sales team, including sales and support of the VAR channel. As we have discussed before, components of our transformation include greater technical and sales support, designing product configurations that simplify the decision-making and sales process, as well as help shorten the selling cycle.

Lead generation is also a component of the support we are providing to our VARs. We have also designed a financial model to better support our new PLM VAR channel. In addition, we are carefully assessing sales coverage and looking to judiciously drive further growths by recruiting new VARs to increase sales coverage. So clearly, we have a very strong dynamic and transformation underway.

Now, looking at our results, we had solid revenue performance from our new value channel in the second quarter, are now seeing positive signs confirming our first quarter trends. First, renewed momentum in new license activity, as well as growing pipeline. Secondly, we are seeing wider adoption of our CATIA PLM Express packaging. Third, we are starting to see growth in our ability to win new customers. For example, in South Korea, we have 80%, more new customers in the first half of this year, than in the year-ago timeframe.

All IBM business partners have become DS VARs, in the new transitioning countries. And our efforts to identify and recruit new VARs are moving ahead. For example, we recently announced that CENIT North America is becoming a DS VAR in the US, with a focus on DELMIA.

Turning to SolidWorks, I would like to introduce all of you to Jeff Ray, the new Chief Executive Officer of SolidWorks. Jeff joined SolidWorks in 2003, to transform its reseller network. Today, this channel has achieved an outstanding level of performance, posting remarkable growth in sales, operating margin and market share.

Jeff's impressive track record in channel transformation, deep expertise in operation and strong leadership position in has the natural choice to run SolidWorks. With Jeff and the strong team of executives and professionals at SolidWorks, we are beginning the next chapter of the SolidWorks success story, becoming the industry's Mainstream 3DM CAD standard.

So let me stop here and turn the call over to Jeff.

Jeff Ray

Thank you, Bernard. And I'd also like to add my comments to your praise of John McEleney for his extraordinary leadership over the years. SolidWorks is a much better company because of John. Since I joined SolidWorks almost four years ago, John and I have accomplished much together. In total, our channel has never been stronger, both from a size perspective and a financial perspective.

SolidWorks, continues to invest in its VAR channel and, as a result, our resellers have responded by adding more headcount, expanding their offerings and opening new offices worldwide. We are also seeing the results of these targeted investments in India, China and Latin America. At the same time, our own infrastructure is now prepared to manage a larger footprint in the market than ever before.

We carefully track what our customers think of the entire SolidWorks experience and have seen significant growth in customer satisfaction over the past two years. We are dedicated to making the entire SolidWorks purchasing and support process a world-class experience for our global customers.

In terms of the market environment and the implications that will have on SolidWorks, Bernard, Thibault and I strongly agree that SolidWorks prospect for growth is very good, based on several key factors.

First, there is an enormous market of 2D CAD users who are embracing 3D technology. Second, we continue to advance our product offerings. SolidWorks 2008, the latest version of our core software, will ship later this summer. This is proving to widen the gap between SolidWorks and the competition in terms of both usability and performance. It is the best product for 2D CAD users who want to adopt 3D CAD software and is loaded with productivity tools and features that can significantly help ease this transition.

Finally, as I highlighted earlier in my remarks, our VAR channel continues to expand in terms of sales and support headcount and we are continuing to expand the channel geographically in every region worldwide.

Looking across our channel activities, we believe we are correctly positioned, in the Americas, Europe and the majority of Asia.

In Japan, I think it may be helpful for me to provide you with some insight in the SolidWorks current and future opportunities in this region. Recently, we saw a need to evolve the way the company was organized in Japan, due to our dissatisfaction with the level of growth in comparison to the potential market opportunity we saw and, let me add, the market opportunity we see today and into the future.

Consequently, we made the decision to reshape our SolidWorks distribution in Japan. We began taking those actions last year and accelerated them as we moved into 2007. Our actions have included establishing new leadership and VAR development programs, expanding the VAR channel and investing in sales training for our employees and resellers, among other actions. These programs are all consistent with proven best practices strategies from around the world.

It is important to note, that we are reorganizing from a two tier channel to a one tier channel, consistent with what we have in place in our other regions. Understandably, these changes have given rise to some temporary disruptions within our channel in Japan, which were significant, although well-anticipated, in the second quarter. Looking ahead, we expect the actions we have underway, to lead to concrete results by early next year.

In summary, let me share some key statistics on the strength of SolidWorks performance. Revenue increased 11% and 13% in constant currencies in the second quarter and first half respectively. Seat growth was 6% in the quarter and 10% for the first half of the year. And excluding Japan, second quarter revenue growth was 14% in constant currencies on seat growth of 13%.

Now, let me turn the call back to you, Bernard.

Bernard Charles

Thank you, Jeff. And congratulations again, on your new position.

Jeff Ray

Thank you.

Bernard Charles

Adding to Jeff's discussion let me summarize a few points. SolidWorks has built an unviable record of success, since its formation more than a decade ago. It has had the most consistent track record, of any player in its market sector. I don't think this is an accident, but rather reflects the very sound strategy approach to its markets across its product portfolio, channel strategy, financial model and people development. Based upon these factors, we are confident in the outlook for the year and are reconfirming SolidWorks 2007 revenue objectives of 10%, 15% growth in constant currencies.

We are leveraging our research and technology and advancing our 3D for all strategy. The introduction of our newest brand, 3DVIA, and www.3dvia.com for 3D online product experiences, is the sixth step in the Dassault Systemes strategy to turn 3D into a universal media for live experiences. We began with 3D, then Digital Mock-Up, then 3D PLM, collaborative business process, followed by realistic simulation and now live experience.

With 3DVIA, we are able to address new classes of users, including professionals as well as consumer communities. Our goal is to respond to the needs of many classes of users to see products in action, to see future products in their environments, whether it is within a house, supermarket, city or landscape. Importantly, 3DVIA enables these groups of users to visualize, in a simple manner, through our online services.

To help you visualize this, let me share an example of how one of our SolidWorks customers is using 3DVIA. Lumec, a Canadian manufacturer of outdoor lighting products, is using 3DVIA to enable consumers to configure online and then test how effective their customized lighting configuration works, in different environments and lighting conditions.

One of our first 3DVIA services is supplier source, available to both engineers and suppliers. For engineers, it is an easy to use one stop online resource for finding and connecting with suppliers. As a result, the time to develop a prototype can be shortened and the cost can be reduced. And for suppliers, it helps match their strengths and specialties with the needs of the buyers.

Last quarter, we introduced 3DLive, our first online product. Snecma, a leading European manufacturer of aircraft and space engines, selected 3DLive to facilitate collaboration. Since users are able to collaborate on visualized products on product parts online, they can see and fix problems when they occur, thanks to the wider access to 3D product data.

I am pleased to announce that Lynne Wilson, coming from SolidWorks, will be the General Manager of this new brand. I'm sure she will be a dynamic leader and driver for our 3DVIA vision.

During the quarter, we also formed a strategic partnership with Publicis Groupe to bring innovative 3D marketing solutions to global marketers. Marketers and consumers will be able to test new products and co-create together.

In summary, this was really a rewarding second quarter and first half. I believe our performance clearly validates and reconfirms that our brands and channel strategies are the right ones for our customers, partners and Dassault Systemes. We clearly continue to invest for the future. With that, we will be happy to answer your questions. Operator?

Question-and-Answer Session

Operator

We will now begin the question and answer session. (Operator Instructions). Your first question comes from Jay Vleeschhouwer of Merrill Lynch. Please ask your question.

Jay Vleeschhouwer - Merrill Lynch

Thanks. Good afternoon, Bernard. A question regarding the channel first or actually several questions. You are suggesting that, in the business partner channel, there has been a significant improvement in transaction run rates and revenue generation through that channel, as compared with what IBM was doing before you took over.

Could you just remind us what some of the most significant steps or levers have been to allow you to improve that channel productivity and, I assume, as well, channel profitability from what it was before, since it sounds like you've not really done anything on channel capacity yet? It's been more about productivity and the existing channel.

And then for Jeff, on the SolidWorks side, can you talk about the plans to take other DS products, maybe 3DVIA or others, through the SolidWorks channel where you hadn't done so before and what kind of leverage you foresee from doing so?

Bernard Charles

Good morning, Jay. On the new channel, called PLM value channel, as you noticed, has been a topic of our serious strategic planning for almost two years now. We initially started by helping partners to come on board. You remember we took some shareholder positions with some of those partners. Those initial moves were established to really get the professionals and the skills in the different countries to be ready for, basically, what has been a two step transition, IBM to delegate the work to us to animate the channel partners and now the step going on is taking over doing the job directly with the partners.

I think what they like about what we do is really the skill transfer; the direct access to the business process, market understanding and the core engineering with them on what should be the right solutions, which includes the software configuration plus the proper practices, so they can replicate quickly excellent references that we have established around the world. So being able to replicate successes across industry sectors on sub-segments is very critical and I think, very appreciated.

Of course, from our side we have the learning curve. As you noticed, we have not done much on the pure sales capacity yet. In fact, the first priority was to put an operational system that would support this global business and to make the channel global, lean and efficient.

The next priorities, when the transition is over in the remaining countries, is to optimize, improve the speed to replicate the successes and continue to improve the co-engineering we do to deliver the right solutions to market sub-segments. We do believe, for example, that the CATIA PLM Express, which is named CATIA PLM Express but does contain CATIA and SMARTEAM provides a very compelling value. It addresses very, very specific user roles. It simplifies the way we deploy. That's, in short the roadmap going on and we are very excited to continue to expand this capacity.

On the SolidWorks channel, many things are going on. I would just -- before I give the floor to Jeff to give you a more precise answer, I would like to mention that SolidWorks has demonstrated its capacity to sell COSMOSWorks, which is basically analysis tools for SolidWorks users. We have also acquired ADOC PDM functionalities as part of the portfolio to expand the SolidWorks MCAD solution with a good ADOC solution for better management. So the demonstration that the SolidWorks [reseller] can expand the portfolio is there. And with that, Jeff, I will let you make additional comments.

Jeff Ray

Thank you, Bernard. And hi, Jay. It's good to hear from you.

Jay Vleeschhouwer - Merrill Lynch

Hey, Jeff.

Jeff Ray

Let me comment on the process and first talk about the motivation behind the process. From the day we started and to this point and looking into the future, our principle has always been coming up with really great, easy to use products that help designers and engineers design great products for their customers. And so, as you look at how we can more tightly integrate with the Dassault Systemes family of products, we need to keep that principle foremost and we will do that. That really is our guiding principle and motivation and may help explain the behaviors behind that motivation.

First, the process is we really have to intimately understand our channel, its strengths and its weaknesses. It would be dangerous to bring in a product that they are not prepared to present, to implement and to support effectively. Second is making sure -- knowing the strengths and weaknesses of the channel, how we can better prepare them for those new products, and that has to be done without sacrificing the core business. We could very easily fall into a trap of obsessing on a new product or technology that's very exciting and shows great value, but actually disrupts the core channel's mission of selling and deploying SolidWorks.

Finally, we need to make sure that we're well-aligned, that the measurements and the benefits and the values are aligned with -- between ourselves and the channel. Out of that, you get great trust from the owners of the reseller community and that trust shows up in much, much happier customers. So the whole launch process will be done very, very carefully and it will be driven, ultimately, as it should be, by customer need.

Jay Vleeschhouwer - Merrill Lynch

But just to clarify that, I assume it will be globally throughout the entire SolidWorks channel, whatever those products happen to be, other than COSMOS, which you've had for years anyway.

Jeff Ray

Any product that we take on should have universal applicability. We may choose to deploy it in a structured way based on local market needs or our ability to work most effectively with the resellers. But yes indeed, we would want that to see a global product.

Jay Vleeschhouwer - Merrill Lynch

Okay. Two final clarifications. Bernard, you made an interesting reference in your comment vis-a-vis Mercedes - the powertrain. Where -- What are your expectations for going beyond C-class of Mercedes or beyond Mercedes itself in powertrain? That's not necessarily been a large deployment area for CATIA thus far, but there is, as you know, many thousands of seats in powertrain in the world. So how realistic is it for you to really go beyond that one example over the next number of years and really do better in powertrain, particularly since it seems, so far, that many of the car companies would seem to like having dual flows?

And then lastly for Thibault, is there anything in your models for the year that includes additional revenue from Boeing, now that you have primary responsibility for that account from IBM? And the SolidWorks growth rate is with or without Cosmos? Thanks.

Bernard Charles

Well, on the -- just as an additional comment just to recall your remark on the 3DVIA. One illustration of our products that will go through multiple channel, is Supplysource. You implied that, Jeff -- Jay, in your question, and I think we forgot to mention that, that it was a good remark.

On the powertrain, first of all, we have -- we believe we have already a strong market share in powertrain. We are now, at Mercedes, across old car programs. At PSA, at Renault, most of the Formula 1 engines are also. Honda is also a powertrain user. Mitsubishi is a powertrain user. We are replacing the solution at Ford Motor Company with powertrain. We announced it last year. BMW, we have half of it and we continue to progress there.

So we still have some situations around the world where we still have some situations around the world where it's not CATIA, but I think this is an unstoppable wave and I don't see any reason why this transition to a unified environment will not happen, for a simple reason. It costs less, it's more efficient and it enables the true digital mock-up of [configuring the actual] car.

So we are very confident, but don't underestimate the position we have. It's already a strong position. Even in customers that have been mentioned as being our competitors side, we have at least, for most of them, 50% of it, because powertrain is not only a component, it's much more.

Thibault, you have comment on the Boeing remark?

Thibault de Tersant

Yes, and the answer, Jay, on Boeing, is that the change in responsibility split was known last year and was already included in our guidance. Concerning COSMOS, well, the COSMOS that is part of the SolidWorks configuration is already in the SolidWorks figures and part of the growth rate. But the fact that we are now consolidating the rest of SRAC, starting at the end of Q2, is not included in the SolidWorks revenue growth that has been given in this call.

Jay Vleeschhouwer - Merrill Lynch

Okay. But that other piece, if I'm not mistaken, would be, what, something like EUR10 million, maybe EUR20 million a year that would start to build throughout all of next year?

Thibault de Tersant

Yes, we are going to consolidate them in mainstream 3D starting in third quarter of this year, right. But I'm not playing games with that, so the SolidWorks growth is the pure SolidWorks growth.

Jay Vleeschhouwer - Merrill Lynch

Right, okay. That's fine. Thanks very much.

Bernard Charles

And all these is simplifying the corporate structure, because it was a kind of small line aside and we want to simplify our corporate structure from standpoint.

Jay Vleeschhouwer - Merrill Lynch

Of course. Thank you.

Bernard Charles

Welcome.

Operator

(Operator Instructions).

Bernard Charles

Okay, there is no more further questions. I think, as we hosted different analyst’s presentation this morning in Europe, I would like to thank everyone for participating to the call and, of course, all your questions are always welcome. You can contact us and you can find information on the website and we'll talk to you again in October. Thank you very much and have a good day.

Operator

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

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