Dassault Systèmes SE (DSY) Earnings Call Transcript & Summary

[Audio Gap] to earnings conference call with Bernard Charles, Vice President and CEO; Pascal Daloz, Chief Operating Officer; and Rouven Bergmann, Chief Financial Officer. Dassault Systèmes results are prepared in accordance with IFRS. Most of the financial figures discussed on this conference call are on a non-IFRS basis with revenue growth rates in constant currencies, unless otherwise noted. Some of our comments on this call contain forward-looking statements that could differ materially from actual results. Please refer to today's press release and the Risk Factors section of our 2021 Universal Registration Document. All earnings materials are available on our website, and these prepared remarks will be available shortly after this call. I would like now to introduce Bernard Charles.

Thank you, Beatrix. Good morning and good afternoon to all of you, and thank you for joining us. It's always a pleasure to be with you today. We delivered solid results, as you may have seen in the press release for the third quarter of Dassault Systèmes 2022, demonstrating the resilience of our model and broad diversification of our business. Total revenue increased 8%, driven by accelerating recurring revenue growth of 10%. We continue to show strong profitability with earnings per share up 17% while also investing for the future. Our strategic growth drivers performed well with 3DEXPERIENCE revenue increasing 15% on cloud revenue rising 21%. Looking to the remainder of 2022, we have reaffirmed our revenue objectives of 9% to 10% growth on increased of EPS target to 18% to 19%. We are well positioned and on track to achieve our 2024 EPS objective of EUR 1.2. I will give Pascal and Rouven the floor to discuss our operational and financial performance in more detail in a moment. Now I would like to share some perspectives on our strategic positioning. The first one is about virtualization, which indeed opens possibilities well beyond digitalization. For us, it's the next frontier. For 40 years, we have been a trusted partner, leveraging science to help clients overcome their most significant challenges prepare for the future and realized our greatest ambition. We have this track record, and we have recently been attending the 3DEXPERIENCE programs around the world, seeing incredible showcases. It's very clear from our conversation with customers and partners that we are for them game changers. We have supported clients first with digital markup. You remember that, it's still going on, then adding product life cycle management. It's coming back product life cycle management. And now with the platformization of everything, the 3DEXPERIENCE platform to power our industry solutions. In 2020, we announced our ambition to extend [indiscernible] from things to life. And believe me, this is much -- there is much more to come. We look forward to sharing some updates we view during the full year 2022 earnings announcement in February. The second remark is about the science. Virtualization is about applying science at scale. Using the virtual world to extend and improve the real world. And this subject is really a center of [indiscernible]. Our foundation in science is truly a differentiator. Our virtual twin experience powered by cloud-based 3DEXPERIENCE, I'm not seeing simple rendering. They are fully integrated with specific laws and principles on all of our technologies integrates these multi-physic, multi-scale, multi-discipline that we combine with modeling, simulation and data science for truly holistic approach to innovation, I will say, even creation of new businesses on solutions. We empower clients to create virtual -- indeed, the virtual universes to operate their life cycle of their products and services and also the production system. This establishes a valuable foundation to fully leverage the future of data science. As data collection and analysis accelerate virtualization of society and the economy requires the highest level of security, trust on services -- operated services. For this reason, we are announcing our strategic objective to elevate 3DS OUTSCALE to a master brand like all the 12 brands we have already. Our unified Cyber governance offers 3 levels of trusted experience cloud, dedicated, private and international cloud for obvious reasons. We provide an holistic collaborative universe to create and operate virtual twin experiences, process modeling, data science and business experiences. Today, we announced a new alliance as part of this new OUTSCALE positioning with [indiscernible] to offer sovereign cloud on cloud services to European citizens aligned with the new Data Act. Each quarter, we I want to return to our purpose and make sure we always illustrated on sustainability as always been at the core of our mission to harmonize product nature online. Virtualization is an unparalleled catalyst and enabler of sustainable innovation. It allows innovators to create the right decision the first time, using only what's necessary lean and incorporate reuse and recycle into the design and manufacturing. In fact, design your waste and design your experience is our motto. To expand the impact we can have on society on the planet. We have made the power of our 3DEXPERIENCE sustainability portfolio accessible to a broader audience. With 3DEXPERIENCE Lab, we are supporting disruptive start-ups, accelerating sustainable innovation, and there are many of them. We are preparing the workforce of the future with 3DEXPERIENCE they do a significant program. And we are driving the adoption of sustainability measurements on the standards through partnerships and coalitions. Many of them have already been communicated. Our ambition is to become the world's #1 trusty partner for reinventing a sustainable economy. I think this is clear. We walk the talk on many illustrations will be seen today. I hand over to Pascal for his presentation to discuss -- and Rouven to discuss the third quarter results. Pascal, you have the floor.

Thank you, Bernard. Hello to everyone. And again, thank you for being connected. It's a real pleasure to be with you. We are back in London, and it's, again, a pleasure to do it physically also even for this call, it's remote. Let's start with a few comments related to the customer. I think if you look at what's happened during this quarter, more than ever across all 3 sectors of the global economy we serve, the relevancy and the criticality of what we do has been extremely visible from our customer standpoint. I think we have a significant opportunity to help our clients, accelerate innovation, creation as Bernard was saying, increased resiliency and to scale it. So this is clearly demonstrated in our customer adoption this quarter, which incorporates numerous domains and use cases such as precision medicines, to modular nuclear reactors just to name few. Now let's zoom on a few examples, and I will start with transportation and mobility. As you know, it's a core sector for Dassault Systèmes. And I think many of you, you had questions related to the resiliency of this sector. So I think we had a strong -- we did a strong performance in this quarter, growing double digits almost since the beginning of the year, and we have built on this momentum with a good Q3. We continue to advance growth opportunity across several vectors. 3DEXPERIENCE being one of them with the combination of the industry solutions. And it's critical for electrification, battery design and manufacturing. And I think we are working with nearly all the new players, the new entrants, but also with a large incumbent transforming themselves. And we have many proof points in Q3, right, including Tesla, Volkswagen, Jaguar Land Rover. And Jaguar Land Rover it's an interesting case because you know that they are -- there was an early adopter of the 3DEXPERIENCE platform and our [indiscernible] solutions. And today, they are deploying the 3DEXPERIENCE platform to 500 suppliers to build their value network. So this is obviously key to drive the quality and the time to market by canvassing the critical processes, but also enabling simultaneously engineering and improving trustability. It's extremely crucial for the new programs, the electrical vehicles on both sides, the design of the systems and the architecture, but also all the downstream, which is related to the experience, we call it driving experience of the vehicles. So JLR expansion again for us is a strong reveal of the strong potential of the network effect when our large enterprise clients connect their supply chain to fully scale our technologies. Now let's zoom to Life Sciences. I think we continue to build on a strong momentum, delivering another excellent quarter. And looking to the past few years, COVID has been an accelerator of the growth. This is true. However, it has proven to be a step change. The pandemic reveal what is possible with the innovation, and it also exposed the importance of connecting the dots across research, discovery, manufacturing and commercialization. I think we continue to see biopharma, med device and CRO clients investing heavily to support programs across a number of therapeutic areas such as oncology, central nervous and infectious disease. And customers are not only adopting the core MEDIDATA but they are also expanding to MEDIDATA Patient Cloud for decentralized clinical trial and MEDIDATA AI to get more insight from the data. We are really changing the game, I think, and we are differentiating by building long-term competitive advantage. Many of the biopharma companies we support with COVID vaccine development, starting as a small customer, right? And now some of them are becoming the largest customers for us, advancing broad therapeutic candidates. And I think we have good proof point this quarter. All of you, you know biotech and as you may know biotech they leverage our MEDIDATA platform to support the development of this COVID-19 vaccine. And this quarter, the company has selected MEDIDATA AI to improve the trial design for Celgene Therapeutics in tumor, broadening the scope of our relationship for sure. And I think we are pleased to support biotech as an advanced precision medicine strategy and strive to deliver better outcome for the patient. Now moving to Infrastructure & Cities. Supply chain are becoming really the hot topic because they are facing an unprecedented challenges, including delivery dislocations, material costing, assessing the variability of substitutes and how to increase resiliency, if there are no more alternative materials or parts. So to address these issues, this is requesting managing tremendous complexity with a multiscale source planning approach. And I think that's what we do. As an example, this quarter, we put the light on one of our customers called Mammoet, a leader in the engineering heavy lifting and EV transportation. And they are deploying DELMIA Quintiq by 3DEXPERIENCE platform to maximize the resource utilization, reduce the cost and retain its workforce at the same time. So every part of the supply chain is dealing with volatility and disruption. And we do expect this to drive and continue the demand for the transformation. As you can see, we continue to deepen and expand our relationship across sectors to help advance the strategy for our customers. Now let's turn to our third quarter 2022 results, and let's see the revenue and the performance for Dassault. I think we delivered a solid Q3 performance against a challenging macroeconomics and geopolitical backdrop and once again demonstrating the resilience of our model and the diversification we have achieved in our addressable market. So if we zoom from a geo standpoint, Americas grew 7%, driven by a strong performance in Life Sciences and also in High-Tech, with a number of deals, specifically in the semiconductor space, such as NXP and KLA. Europe, demonstrating a strong resilience, increasing 9%, with a good performance in France, North and Southern of Europe, specifically in Transportation & Mobility from an industry perspective. And Asia Pacific rose 6%, with India and Korea were up double digits this quarter and year-to-date and China growing mid-single digits as expanded shutdowns continue to weight on the activity. We saw some softness in Japan in Q3. But year-to-date, Japan has increased by double digits. So clearly, it's very strong. Zooming in -- on our product line performance for the third quarter. Industrial Innovation software revenue rose 6% with KLA, CATIA, ENOVIA and DELMIA growing double digits. So if we zoom on CATIA, I think not only CATIA is growing double digits Q3 but year-to-date. And the growth is driven by the CATIA Cyber-Systems and 3DEXPERIENCE, which is widely used by the auto sector and the defense and high-tech sectors, specifically for the electrification and also the connected objects. This is where the growth is coming from. ENOVIA delivered a high double-digit growth in tandem with 3DEXPERIENCE platform and the large enterprise deployments. And then we also show a very good growth during this quarter, driven by engineering and operation on the manufacturing side and also with DELMIA Quintiq showing excellent growth on a year-to-date basis, driven by the [indiscernible] issues I was mentioning before. Now zooming in Life Sciences. Revenue grew 13%, with MEDIDATA delivering again an excellent performance, increasing 17% against a high comparison base, if you remember this last year. It's probably the time to step back a little bit and for the one who remember, we just celebrated the 3-year anniversary of MEDIDATA merging with Dassault Systèmes, and it was in October 2019. And I think it has been an incredible journey, exceeding all the expectations. If you remember, we committed to deliver to 13%, 15% growth top line and 200 basis points per year improvement on the margin side. And we have delivered well above our targets this quarter, again is a proof growing 17% after 3 years. There is nothing to have, I think. But more importantly, I think since the acquisition, we have consistently taken market share and expanding our addressable market. From multiple axis, the first one is from a solution standpoint, we are not only focusing on MEDIDATA Rave, but MEDIDATA Patient Cloud and MEDIDATA AI are strong drivers, and it's now representing more than 1/3 of the total revenue of MEDIDATA. It was almost nothing at the time of the merge. We continue also to expand the market coverage. We are again growing across multiple markets, including biopharma, med tech, CROs. And in fact, if we look at the CROs, we have doubled the revenue since 2019. And we continue also to invest strategically, doubling the size of MEDIDATA. And I think we can claim that MEDIDATA today operates at a level of scale whereby we bring the largest team of experts of the industry, having the deepest and the most relevant domain expertise and a scalable platform to advance better treatment for the patients. And I think, as a conclusion, MEDIDATA is really core to Dassault Systèmes. We are expanding virtualization from things to life. But also we are keeping with our purpose to harmonize product nature and life, and it's a deep commitment to life sciences as we have significant ambitions to start the industry's greatest challenge and ultimately have a meaningful impact on health care and for the benefit of the society. So while it has been a terrific 3 years, it's only the beginning of the journey and more than ever, we are exciting about the future. Now let's move to the Mainstream Innovation. Software revenue increased 5%. And as you may know, the mainstream market is really the one being impacted by the macroeconomic conditions right now. And it's in conjunction with some specific situation in China where COVID-related shutdown continued to have a significant headwind affecting SOLIDWORKS results this quarter and specifically on the license growth. I think on behalf of those in China, we hope the situation will improve soon. And we expect, again, the mainstream market to return to trend growth when it was when the macroeconomic conditions will normalize. In the Mainstream, we continue also to invest, and we are pleased to announce an acquisition for CENTRIC PLM this quarter. And just to give you some understanding about this acquisition. You need to remember that, again, we are expanding CENTRIC PLM along many axes. The first one is touching new industries or new subsegment of industry. PLM -- CENTRIC PLM was really addressing the fashion industry. And more and more, we're expanding in food and beverage, personal beauty, even consumer electronics. We are starting to touch new geography also, specifically opening the market in Asia. We are diversifying from brands to retailers, and we see more and more tractions coming from this side. And finally, we are also expanding the scope of solutions. CENTRIC has built a standard for the collection management for this industry, and we are more expanding to business planning and analytics as well as e-commerce. And this quarter, we -- again, we complement an acquisition called StyleSage, a cloud-based market intelligence platform of retailers, AI power tools for competitive benchmarking, price optimization and forecasting. This is extremely critical for the success of the e-commerce because you need to have a different pace, how you monitor the price and how you optimize your pricing. And this is why the company is bringing by having developed several technologies, the ability to crawl all the websites to extract the attributes to match with images, do the consolidation, build the analytics and basically provide insights to the decision maker to make it happen. So again, welcome to these teams. I think it's a game changer, and it's also a sign that we are expanding the scope and being much more related to the e-commerce topic, also because the PLM backbone is becoming the product referential for e-commerce in many, many consumer-oriented industries. I think a nice time for me to hand over the presentation to Rouven to discuss revenue, profitability, 2022 objectives. Rouven, you have the floor.

Thank you, Pascal. Welcome, and thanks for joining our call today. As you heard from Bernard and Pascal, this quarter was exceptional in highlighting the resiliency of our model -- of our business model. Total revenue grew 18% as reported and 8% at constant currency, with recurring revenue up by 10%, representing 82% of software revenue, which was driven by strong subscription growth of 16%, ex FX and also with cloud revenue up 21%. Our service revenue increased 16% at constant currency during the period. We delivered this good performance on top of a strong first half year. What was different this quarter compared to the first 6 months is that there was a shift in our expected revenue mix with a higher contribution from subscription and lower CapEx-based purchases. As such, revenue from licenses was down by 2% at constant currency. This was driven by a preference for subscription as well as the absence of a recovery in China, and I will discuss this in greater detail in a moment. Despite these shifts, as you can see in the numbers, we delivered on our profitability target as promised. This reflects strong returns on the investments we've been making over the last few years in products, infrastructure and our go-to-market. The operating margin was 31.6% and earnings per share rose 17% to EUR 0.26 as reported. Our growth drivers of 3DEXPERIENCE and cloud are very resilient and continue to propel us forward. Clients from large established enterprises to new players and disruptors. They all adopt 3DEXPERIENCE platform and cloud. They are looking for platforms to accelerate innovation, scale their operations and to drive growth. Again, this quarter, 3DEXPERIENCE was a key driver of large transformational client deals, as highlighted by Pascal. 3DEXPERIENCE revenue grew 15% and accounts now for 32% of software revenue, which represents an increase of 2 points relative to last year. Our cloud revenue rose 21% at constant currency, driven by continued strong momentum of MEDIDATA, up 17% as well as a very healthy growth in 3DEXPERIENCE cloud. Cloud now accounts for 24% of our software revenue, which is up 3 points versus last year. Now let me turn to the financial results and how we performed relative to the objectives we set. Total revenue of EUR 1.37 billion, was EUR 65 million higher than the midpoint of our target range. We benefited from an FX impact of EUR 74 million during the period. Excluding this currency impact, we landed between the low and the midpoint of our range. We reported recurring and service revenue above the midpoint by EUR 10 million and EUR 4 million, respectively. This was partially offset by the lower license revenue, which was EUR 23 million below the midpoint. This was driven by 2 factors. First, as mentioned, clients displayed a stronger preference for subscription with an impact of approximately 4 points of growth on the licenses. This means that we had a few deals that shifted to subscription at the end of the quarter which were forecasted as license revenue before. Second, we experienced continued softness in China due to the extended shutdowns and restrictions. This also affected SOLIDWORKS sales in China. As you know, China is a key market and traditionally one of our largest markets of perpetual licenses as over 50% of the total software revenue in the country come from licensees. While we had factored some weakness into the Q3 objective, the impact was higher than expected. Now this, along with some softness in the SMB market had an additional impact of approximately 4 to 5 points on the license growth. The bottom line is this. The shift to accelerated growth in subscription revenue is well underway. We are well prepared, as you can see. We are progressively increasing the share of recurring revenue, while continuing to deliver on the top line revenue and our profitability of objective, despite the lower growth contribution from license revenue. Again, as I said before, this highlights the excellent resiliency of our model, and we will continue, of course, to support our clients with the optionality that meets their needs. The reported operating margin -- the operating margin of 31.6%, as mentioned, in line with the objective while hiring nearly 800 net new team members during the quarter. We grew headcount by 10% year-over-year. So as you can see, we remain committed to our plan to make the critical investments in support of our long-term growth objectives. Also important to highlight is that more than 50% of the hires in the R&D function are based in India, of which a good portion used to continued growth of MEDIDATA. Compared to our objectives for the quarter, operating margin benefited 10 points from a positive FX impact and 50 basis points from a lower expense, offsetting the negative impact from the slightly lower revenue. Now turning to the third quarter earnings per share. We delivered strong growth of 17% to EUR 0.26, above the objective range of 6% to 11% growth. The growth in EPS benefited this quarter from a more favorable FX conversion, driven by the strengthening of the U.S. dollar with an impact of EUR 0.013 as well as a lower tax rate and a higher financial income contributing EUR 0.07. Finally, the non-IFRS tax rate for the quarter of 20.7% versus our objective or guidance of 21.6% was driven by a lower tax rate in France and continued benefit from higher PD tax deductions in the U.S. Now let me turn to our cash flow and balance sheet items. Cash and cash equivalents totaled EUR 2.787 billion compared to EUR 2.979 billion at the end of last year, a decrease of EUR 192 million. Our net financial debt on September 30, 2022, decreased by EUR 681 million to EUR 208 million compared to EUR 889 million by the end of last year. This keeps us well ahead of schedule on our deleveraging objectives. Now let's look at what's driving our cash position this quarter. First, cash from operations totaled EUR 1.281 billion for the first 9 months, which is an increase of 2% relative to last year. And please remember, this was on the back of a strong comparison base. Last year was up 24.5%. By far, the largest impact on the cash -- on the operating cash flow performance year-to-date comes from the change in nonoperating working capital. And there are 2 distinct effects related to an increase in income tax payable. And adjusting for this 2 effects, cash flow from operations would have been up 10% year-to-date. As we said before, we are committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases and prudent use of debt and our dividend policy. Consequently, in the first 9 months of this year, we used operating cash for share buyback, net of proceeds from stock option exercises at a total of EUR 359 million. We paid our dividend of EUR 224 million and we repaid the debt at the level of EUR 885 million, net of proceeds from EUR 250 million commercial paper, which we issued this quarter. Lastly, of note, we had a benefit of EUR 218 million from FX, with EUR 103 million coming just from Q3. Now let's turn to our 2022 objectives. As we look to the fourth quarter, we feel very confident about the business momentum as we continue to refine our model towards resiliency and predictability with increasing recurring revenue as a percent of total software revenue. First, we are reaffirming our 2022 total revenue growth objective of 9% to 10% to a higher absolute range of EUR 5.610 billion to EUR 5.650 billion versus EUR 5.485 billion to EUR 5.535 billion previously. This incorporates an update to the U.S. dollar rate for the remainder of 2022. This adjustment to our currency assumption, along with the third quarter FX benefit, has a positive impact of EUR 114 million on our total revenue objective, reflecting the resilient growth in subscription and support revenue throughout this year. We're confidently adjusting our recurring revenue growth target to a range of 9% to 10% from 9% previously. At the same time, we are reflecting the increase in volatility of the license sales to a range of 5% to 7% growth, which was 9% to 11% previously. This reflects the lower performance of Q3 returning to low to mid-single-digit growth in Q4. Now second, let's come to the operating margin. We are reaffirming our full year objective of 33.4% to 33.7%, reflecting continued investment in our future growth initiatives. And finally, we are raising our EPS for 2022, the diluted EPS objectives to 18% to 19% growth, reaching now EUR 1.12 to EUR 1.14 from EUR 1.08 to EUR 1.10 or 14% to 16% growth previously. To complete the picture, we are also projecting service revenue growth to be in the range of 11% to 12%. Now before closing, let me briefly share our objectives for the fourth quarter. Total revenue growth of 8% to 10% ex FX, with software revenue growing 8% to 10%. We're targeting recurring revenue growth of 10% to 11%, license revenue in the range of 2% to 7%, and service revenue up 6% to 11%. The operating margin of 34.9% to 35.9% and diluted EPS growth of 12% to 18% to EUR 0.32 -- to the range of EUR 0.32 to EUR 0.34. Of course, for additional information, I refer you to our earnings presentation from earlier today. So let me conclude. This was an excellent quarter highlighting the resiliency of our business model in terms of accelerating subscription revenue and delivering on the operating margin objective with EPS growth up 17%. What I want you to take away from this quarter is that we are well prepared for a progressive acceleration in subscription growth by continuing to support our clients with the optionality that meets the needs. Our key growth drivers of 3DEXPERIENCE and cloud continue to build the momentum. And as you see in our updated guidance, we adjusted our revenue mix with lower contribution from license revenue to address the continued volatility in China and the SMB customer segment. At the same time, we are increasing the share of the recurring revenue offsetting the lower license contribution. And in conclusion, we are reconfirming our 2022 total revenue growth of 9% to 10% ex FX to a higher absolute range, incorporating the full benefit of EUR 114 million from currency. We are raising our EPS growth objectives to 18% to 19% year-over-year growth for the full year. And now with this, Pascal, I'd like to hand the call back to you.

Thanks, Rouven. So what are the takeaways? These are a few. First of all, I think our technology have never been more relevant and critical for our clients. We are uniquely well positioned to help them overcome today and many of the challenges and realize their ambitions. And more than ever, our science-based platform approach for the long-term competitive advantages. Then I think we have demonstrated this in Q3 and since the beginning of the year that we have a strong and resilient business model with a high recurring revenue. And we are working the fostering a progressive acceleration in subscription growth, while at the same time, we are delivering revenue and profitability. As such, we, I think, reported a solid third quarter and raise our full year EPS targets. We have a solid pipeline, putting us on a trajectory to achieve our near and long-term objectives. And I think that's basically the level of confidence we have. So finally, I think we will be pleased in the coming months because we are back on the road to participate in several investor events in the U.S. and in Europe. And I think we look forward to seeing you. I think it's time now for Bernard, Rouven and myself to take your questions. Operator, back to you.

[Operator Instructions] Now we're going to take our first question. And the first question comes from the line of Jay Vleeschhouwer from Griffin Securities. .

Let me start with a question regarding your cloud revenue ambition of EUR 2 billion for 2025 and relatedly, your vertical cloud infrastructure strategy in light of the OUTSCALE news earlier today. Could you speak about how you envision building your hosting capacity, your competitors Microsoft and AWS, speak in detail about their expansion of data centers and regions and the like? What kind of capacity do you envision having to ramp to support your cloud revenue targets by 2025. Then a couple of follow-up questions. .

Bernard, you want to take this one or you want me to answer.

We can share it, Pascal. I just want to maybe explain a few words on OUTSCALE and then you can relate to the numbers on the plan. Is it okay?

Okay.

So today, we announced that OUTSCALE is [indiscernible]. We announced today that OUTSCALE is becoming our common operating infrastructure for everything we do. What does it mean is that we have a level of virtualization to be able to support multiple cloud. That's one thing. It's already in place, as you know, because today, we can transparently run our services, platforms and other industry solutions, both on Amazon as well as our own physical instances. That's the first thing. And we do plan to support new multi-scaler in the years to come also [indiscernible]. That's one dimension of it. The second dimension of it is the cyber governance that our customers are asking us to support. They are asking us to provide the services we provide with 3 levels of cybersecurity, one for international, what I call international collaborative platform that goes across frontiers. Second one, which is regional. It's a trusted environment where there is an alignment [indiscernible] on fiscal conditions. That's the level above in terms of cybersecurity. And then a level above is dedicated cloud, which means that it's physically located operated by us on its use for a very special highly sensitive program. In some way, you could have this as being analog to -- or similar to an Edge cloud. Those 3 levels of cyber governance are fully integrated in the OUTSCALE service operation framework. And that's the context in which we are providing solutions to clients, depending about what they do. So we could see clients, we will have a lot of clients using at least 2 levels of what I described at the same time on having very specific protocols to synchronize them in such a way that the cyber -- government cybersecurity is tightly respected. That's the strategy, the implementation on the framework. With that, Pascal, maybe you want to step in?

Yes. I have a few things. So the question, Jay, you asked is basically how we are building the capacity to fulfill the EUR 2 billion we are envisioning in 2025. And just to echo what Bernard is saying, against, we have developed a system whereby we can put different hyperscaler underneath. And right now, we are balanced between our own infrastructure OUTSCALE and AWS. Why I'm saying this? Because from a CapEx standpoint, there is no need to invest upfront before you have the revenue in front of. That's point number one. And point number two, we are using our own infrastructure for the dedicated and the private where basically we want to size and to delimit if you want the frontier in a very specific way for everything, which is international. I think we will rely massively on the offer on the market. So that's really how we are building the capacity without having to basically put pressure on the business model we have, without having to spend more on the CapEx, without having the revenue in front of. And I think that the benefit of the new -- the architecture we have developed 10 years ago, if not 12, to make it happen.

Okay. I'll ask my final question once for you, Pascal and for Rouven. So Pascal, on the call a quarter ago, you gave a very interesting and useful answer with regard to the question about 3DX Works adoption by brand. As I'm sure you recall, you spoke about the dynamics you were seeing for DELMIAWORKS SIMULIAworks and so forth. And perhaps you could update us on how that's all progressing and whether you're seeing a more meaningful 3DX Works penetration of the SOLIDWORKS space of what is almost certainly now over 620,000 licenses, you have to grow that penetration rate? And for Rouven, with regard to what you call the progressive adoption or movement to subscription. How are you thinking about proactively encouraging customers to do so through pricing and perhaps featuring or deep featuring the products versus a more organic progression or adoption by the customers?

Okay. So I will start briefly. I think this quarter, we were extremely pleased with the dynamics of the Works family. Starting with DELMIAWORKS. DELMIAWORKS is growing high double digit. And why so? Because now we start to see the traction coming from the reseller network. Remember, for a long time, we were selling direct this line of products, the time to build the references. And now we see again, the partners are [indiscernible] the solutions and promoting extensively by the market. And it's coming really from the U.S., from Europe and to a certain extent from Asia. The SIMULIAworks, also family is going well. As you may know, it was one of the top priority to expand with having SIMULIA capabilities within the SOLIDWORKS [indiscernible] base for advanced simulation feature, and that's what we are seeing. The ENOVIAworks family is also developing nicely, more in the large customers of SOLIDWORKS, right, because they are the one having the need for extensive collaborations for also life cycle management and program management capability. But we see also the platform capability for basic collaborations like the community ones being more and more used. So I think we see the traction. As for the next generation of SOLIDWORKS, again, we are all the, I would say, most of the new customers of SOLIDWORKS are starting directly with this new capability. This is obviously true for the start-up program. As you may know, it's an extensive program, and we are equipping many start-ups. It's also true for the incubator and all the lab -- the innovation lab. But we see more and more new companies such as the company in the medical devices, for example, using this set of features. So clearly, I think we are pleased. It's going to be a long run to substitute and progressively migrate the large SOLIDWORKS base to the WORKS family, but this is happening. This is really happening. .