Dassault Systèmes SE (DSY) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to Dassault Systèmes 2023 Third Quarter Earnings Presentation Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Beatrix Martinez. Please go ahead.

Thank you. Thank you for joining us on our third quarter 2023 earnings conference call with Bernard Charles, Chairman and CEO; Pascal Daloz, Deputy Chief Executive Officer and Chief Operating Officer; and Rouven Bergmann, Chief Financial Officer. Dassault Systèmes results are prepared in accordance with IFRS. The financial figures discussed on this conference call are on a non-IFRS basis with revenue growth rates on a constant currency basis unless otherwise noted. Some of the 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 2022 universal registration documents. All earnings materials are available on our website, and these prepared remarks will be available shortly after this call. I would now like hand it over to Bernard Charles. Bernard.

Thank you, Beatrix. Good morning and good afternoon, everyone. Thank you very much for joining us today. It's always a pleasure to be with you. In the third quarter, we outperformed in both revenue and profitability. We delivered a strong acceleration in growth driven by large deal momentum with software revenue up 12%, above the high end of our target branch. In particular, subscription revenue grew 18%, accelerating sequentially. We also delivered above our profitability objective. Objectives with an operating margin of 31%, while continuing to invest in our future growth, increasing count by 5%. Our EPS was consistently strong, up 20% at constant currency. Consequently, this strong results position us well to confirm the full year objective. And by the way, most probably achieve our current 5 years plan that was initiated at the end of 2018. What I would like to convey today is that we find ourselves in a pivotal moment. Found transformations are currently reshaping every sector of the economy. Our strategic positioning, unique positioning, I should say, with the virtual twin and the capacity to experience it for everything, what, how, on who is really unique. Not only it provides us the opportunity to power our growth for the future, but more importantly, to bring significant value even more to our gigantic customer base. We can assist our clients in [ mainstream ] innovation of [ products ]. Rouven will provide more detail inside into our financial performance, while Pascal will update you on how we have executed our vision and provide a business overview by sector domains and geography. So now, Pascal, it's your turn.

So let's start with a few comments following the Capital Markets Day. Today, our clients are driven by the ambitions to bring about metamorphosis, which is much more than the transitions where they not only embrace the sustainable economy, shifting from linear to circular approaches, but also to achieve with fewer resources, their goal. We are also focusing on nurturing the experience economy, transitioning from product to experiences characterized by personalization, contextualization and automatic updates. This dual forces of sustainability and experience are essential element to our heritage but also to our ambition, the next horizons we just defined for 2040. Within this landscape, the virtual twins are center pillars of the company's knowledge and know-how proved to be essential not only delivering the innovation phases but throughout the entire product life cycle. Over the last 40 years, our primary focus has been on innovation. Now we are increasingly expanding our focus from innovation to experiences. And virtual twin comes into play to ensure the delivery of the experience itself, thereby facilitating its continuous improvement. They enable the management of the entire product life cycle, the life of the 6, including the experience as well as promote the concept of the multiple life for the products, thus fostering circularity. The virtual twin enable also what we call the human center generative experiences. Each ones matters, in fact. Human center means empowering humans. Generative means automatically creating based on the data sets and experience refer to the overall interaction and responses of the users. So these human center generative experiences are shifting the value from the physical asset to the software. And our clients today rely on them to establish direct connections with their new customers, delivering personalized connected smarter and safer experiences. This is truly the essence of the experience economy. And as an example of these rapid adoption is the development of the software-defined vehicles by the automotive industry and this trend may further accelerate the uptake of the virtual twin. At this stage, you might be wondering how we are fundamentally different from our competitors. What sets us apart is our capacity to offer a scientific representation of the world's complexity through our science-based virtual twin experiences. When suitable, we combine our modeling and simulation capability with generative artificial intelligence to create human center generative experiences. And this concept is already implemented in the industry. And on the -- you have some examples of this. For example, engineers can use the generative experience to explore new materials for the next generation of battery creating a space of possibilities that open up new possibilities. We empower the shop floor workers to seamlessly bridge the virtual and the physical world to enhance their experience fostering synthesis that elevate their capabilities. And we also assist business people and engineers in making informed business decisions, helping them to navigate the complexity of fluctuating raw material prices. Those are examples. Now let's turn now to our operational highlights for the third quarter. During the third quarter, we saw a significant number of large commercial agreements, notably in the manufacturing sectors. And what is motivating the customer to sign this transaction now is primarily the response to our customers' pressing needs to gain a competitive advantage, maintain profitability, meet regulatory sustainability deadlines and decouple the economic growth from the resource consumption. Now let's see what is happening in each sector. Our solutions are gaining momentum in the manufacturing sector for the reasons mentioned, specifically in transportation and mobility, aerospace and defense, home and lifestyle, and consumer packaged goods and retail. While we are entering in the less available investment cycle in Life Sciences, we firmly believe that the demand for new efficient and affordable drugs will necessitate a breakthrough innovations. And regarding infrastructure, I've mentioned on several occasions that our virtual twins are relevant for addressing the sector challenges. Our focus now is really on the go-to-market strategy to address the problem of the market fragmentation. And to tackle this, we plan to establish partnership, and I will say a few words about one of them. Now let's see and let's zoom on some specific example. Starting with manufacturing industry. During the quarter, we reached a significant milestone in our partnership with Jaguar Land Rover. We renewed and extended our collaboration for the next 5 years. Aligning with their reimagine strategy, which center on their transformation into what they call the Digital First company. And this partnership is built on the 4 key pillars. First, expanding the 3DEXPERIENCE platform usage from a little bit more than 8,000 to a little bit less than 20,000 new users. This is also enabling their value network to operate globally within a unified environment. We are also providing a hybrid subscription model, cloud and on-premise to support their flexible cloud migrations. And finally, we are committed to achieving the net zero carbon emission by 2039 with our solutions. The point which is probably new for you is this cloud-native model play which is playing a crucial role in their decisions and underscore our leadership also in the cloud market. Now turning next to Life Sciences. As you know, over the last years, we have strategically directed our investment to support the growth of the therapeutic domain but also the domain expertise of the clinical trial. This brings us differentiation and position us to anticipate the next transformation in the clinical trial through patient-centricity first and generative AI segment. One of those domains really a decentralized clinical trial, which is a primary driver of our growth for Dassault Systèmes MEDIDATA. And here is a customer example that substantiate my point. ABBVIE, along probably with Moderna, are strong advocates of the decentralized clinical trial at scale, making them references in the field. And their commitment to decentralized clinical trials come with 3 key reasons. Firstly, this approach helps to increase the frequency of the data capture in the clinical trials, thereby providing a more substantial amount of data and measurement. And this data richness is really the pivotal for informed decisions making and announcing the understanding of the trial outcomes. Secondly, decentralized clinical trials offered the opportunity to gather much more comprehensive contextual information and holistic data. This broadens the perspective and helps to better grasp the factor influencing clinical trial outcomes. This obviously improving the data analysis quality. Thirdly, this approach broadens the diversity of patients participating in clinical trials and it's not limiting to the patient available in the specific hospital or site, thereby promoting a much more accurate representation of the general population. Now let's move to Infrastructure & Cities. Here is the example of the partnership I was mentioning previously, which enable us to start addressing the highly segmented infrastructure market at scale. And this is involved WSP. WSP is an interesting company. It's 1 of the largest engineering firm in Infrastructure. Their headquarters in Canada, and they are the industry leaders in the various sectors such as energy, waste, construction and transportation infrastructure. And WSP is making a significant investment in virtual twins to expand it's portfolio and introduce new services for efficiently managing infrastructure projects. So with WSP, we are doing 2 things. First, we advanced our infrastructure strategy in order for them to be equipped and to basically use the 3DEXPERIENCE platform for all the major infrastructure projects worldwide. And secondly, they want to use the virtual twin as a way to develop new services to operate the infrastructure projects when it's done. So to conclude, I think we are confident that this kind of partnership will really enable us to scale our virtual twin in this sector and promoting a greater efficiency and sustainability. Now let's move to our third quarter results across our geographies. In Europe, we saw an acceleration with a revenue growth of 21%. This growth is broad-based with an increased subscription adoption and is driven by large transportation deals and also large deals in Home & Lifestyle. In the Americas, revenue growth was 9%, benefiting from continued momentum from subscriptions. And by sector, there were strong performances in Transportation & Mobility, Aerospace & Defense, Infrastructure, Energy & Materials. And in Asia, there was an improvement with a revenue growth of 5%, thanks to a double-digit growth in India and a solid performance in Japan. While there was some softness in Korea, China demonstrated resilience with a 6% increase despite more challenging macroeconomic condition in this country. Turning now to the product line performance for the third quarter. Industrial Innovation software revenue saw an excellent performance and rose by 18% and now represents 54% of the total software revenue. Our brands benefited from the large 3DEXPERIENCE deal activity with the market share gains, demonstrating the unique positioning of Dassault Systèmes. And CATIA, SIMULIA, ENOVIA, DELMIA and NETVIBES show a double-digit growth during this period. In Life Sciences, software revenue rose by 3%. MEDIDATA achieved a mid-single-digit growth in the cloud subscription revenue, building on a stronger comparison base, even stronger this quarter than the last one. And as previously mentioned, this performance is affected by an industry-wide reduction in start following the post-COVID surge. However, we are seeing substantial growth in the areas like decentralized clinical trial with MEDIDATA Patient Cloud. And this transformative approach is shaping the future of the clinical trial and will compare or balance the value compressions. We really -- I really invite you to learn more about the industry transformation at our upcoming events next, taking place on November 6, 7 and 8, 2023 in New York City. In the mainstream innovations, SOLIDWORKS, we see an increase by 7%. And SOLIDWORKS transition to subscription is really accelerating at the high double-digit rate and the 2 catalysts behind the shift released the 3DEXPERIENCE cloud-based solutions and options. Please note that we are navigating this transition with SOLIDWORKS year-to-date growth in the mid- to high-single digits. And subscription is now representing 1/3 of the new bookings as well. Additionally, we observed a consistent momentum with CENTRIC PLM, driven by the Home & Lifestyle, and Consumer Packaged Goods and Retail and this momentum is notably reflected in an increasing contribution from the large deals. And I think we are well positioned to become a global leader and make this a big impact on these 3 consumer-driven industries. So conclusions, the strength of our performance in the core industry together with our diversification across sector and domain position us extremely well to achieve our 2018 -- 2023 objectives, of doubling EPS within the 5-year period as initially planned. And our plans are always being ambitious. And we -- and when we craft them, we are highly motivated to achieve them. While it may be a little bit premature to claim early success. But our performance for this quarter has put us in a very good position to reach our goal. Furthermore, this accomplishment lay a solid foundation for the upcoming financial plan. Now, I think it's time for Rouven to say a few words about the Q3 performance and the outlook for Q4. Rouven, you have the floor.

Thank you, Pascal. And also thank you for joining our call. Good morning, and good afternoon. As you heard, clearly, Q3 highlights strong performance and the anticipated acceleration in the second half of 2023 with software revenue up 12% year-on-year, above the high end of our objective. This momentum is driven by continued acceleration of subscription revenue growth up 18% year-over-year, reflecting an increasing share of large 3DEXPERIENCE wins. Continued good momentum with SOLIDWORKS adopting the subscription model and strong performance from CENTRIC PLM. These subscription growth drivers are broad-based and evidence across geos and industries. And they give us the confidence that our annual subscription revenue growth will continue to accelerate moving forward. Despite the temporary lower contribution of MEDIDATA as explained during our last earnings call. For the first 9 months, recurring revenue now accounts for 81% of total software revenue which is up 80 basis points versus last year. To complement the strong software revenue growth, we also saw a rebound in upfront license revenue up 20%. All of the above is reflecting the strength in new business growth and the anticipated acceleration versus the first half of the year. Services revenue was up 2% at constant currency, in line with our objective. Following the strong top line performance, we also advanced towards expanding our profitability as evidenced by an operating margin at 31%, up 50 basis points year-on-year and EPS at EUR 0.28, all above the objectives. Consequently, with these strong results in Q3, we confirm our full year objectives. And before moving to our long-term growth drivers, let me briefly share a few remarks highlighting the impact of the large transactions this quarter. The framework is the following: we are expanding our relationships with existing clients as well as winning new ones, which we refer to as value-up and value-wide. From a revenue growth perspective, you see a healthy contribution to in-quarter growth in upfront license revenue, but more importantly, we are building the run rate and momentum in our subscription growth. To this end, we signed several multiyear subscription deals where the customers have the flexibility to adopt our cloud at day 1, laying the foundation for long-term ratable revenue growth. Consequently, the increasing share of predictable revenue provides greater visibility and resiliency. Our strategic growth drivers of 3DEXPERIENCE and Cloud are at the center of the shift to our subscription model. 3DEXPERIENCE revenue rose 46% in Q3 at constant currencies. This reflects a share of 40% of 3DEXPERIENCE addressable software revenue, the highest contribution ever. In the first 9 months, 3DEXPERIENCE revenue grew 18% to represent 34% of software revenue. Cloud revenue rose 10% in Q3, representing 25% of software revenue. While MEDIDATA's growth contribution was lower this quarter, as anticipated, due to the strong comparison base of the growth in 3DEXPERIENCE Cloud remains at a very healthy clip. So we are well-positioned to continue to capitalize on our leading position in key industries capturing above-market growth with 3DEXPERIENCE and Cloud. Now let's review how we performed relative to the objectives we set for the third quarter. To make it simple, we delivered strong results, beating all our key objectives. Total revenue was EUR 24 million above the mid and EUR 13 million above the high end, offsetting a negative currency impact of EUR 12 million. The operating margin was 70 basis points above the midpoint at 31%, net of negative currency impact of 40 basis points and we continue to invest to support our strategic initiatives with a net headcount growth of over 1,100 for the first 9 months, which is up 5%. Most importantly, this over-performed in Q3 highlights the impact of our expense highlighted the impact of the expense carryover, which muted the margin performance in the first 6 months is now behind us, and we are back to a normal trend with a year-over-year improvement of 50 basis points. The strong operating performance of Q3 translates to EUR 0.28 in EPS driving the upside which is the high end of our objectives. In addition, the contribution of higher financial income was neutralized by negative FX impact. In summary, I've been talking with you about our revenue growth acceleration since the beginning of the year. As evidenced by the strong Q3 results, we are delivering against what we said. While I will be addressing the full year outlook in a moment, it is important to highlight that we are trending well within our objective ranges for the first 9 months. This further strengthens our confidence in our full year financial plan, for revenue and profitability. Now turning to cash flow and balance sheet items. Cash and cash equivalents totaled EUR 3.368 billion, compared to EUR 2.769 billion at the end of 2022, which reflects an increase of EUR 599 million. At the end of the quarter, our net cash position totaled EUR 378 million, an increase of EUR 605 million versus the net financial debt of EUR 227 million at December 31, 2022. Now let's look at what's driving our cash position at the end of the third quarter. We generated EUR 1.272 billion operating cash flow year-to-date, in line with last year. Net income adjusted for noncash items and the balance of changes in working capital are almost flat year-to-date versus the first 9 months of last year. And we expect the operating cash flow to resume to growth in Q4. To sum up, operating cash flow was mainly used for the cash dividend paid in Q2 of EUR 276 million, the net purchase of treasury shares for total of EUR 240 million, CapEx of EUR 103 million and repayment of lease liabilities of EUR 63 million. Lastly, the total FX impact is not significant this year as compared to the first 3 quarters of last year. Now let's turn to our fiscal year 2023 objectives. There are 2 key messages that I want to share with you. First, we are confirming our guidance for revenue and operating margin while increasing the outlook for EPS to EUR 1.20 at the midpoint of our range, which used to be the high end previously. The second point addresses the notion of risk associated with a back-end loaded year, which some of you expressed. As mentioned before, Q3 highlights the anticipated growth acceleration in the second half and this puts us in a position of strength to derisk our Q4 -- for our Q4 outlook and remove these concerns. As such, we keep the midpoint of our total revenue objectives unchanged while narrowing the range of total revenue to be now at EUR 5.945 billion to EUR 5.985 billion. For the margin, we apply the same logic, no change to the midpoint of 32.5%. In fact, we are compensating the FX settlement with a stronger operating performance. This reflects the positive trend of the margin uplift in the second half of the year versus the first 6 months, as mentioned before. To summarize our full year 2024 objectives, we maintain growth rates at constant currency for software revenue at 8% to 9% and total revenue at 8% to 9%. This implies upfront license revenue in the range of 3% to 4%, and recurring revenue to be in the range of 10% to 11%, with subscription growth unchanged in the range of 16% to 17%. Services revenue is expected at 8% to 9% growth. The operating margin remains at 32.3% to 32.6%, with no change to the midpoint. Before closing, let me provide you with a few additional data points that will help to shape your models for Q4. Given the strong operating performance of Q3, we now project software revenue to grow 8% to 10% in Q4. This implies recurring revenue growth in the range of 10% to 13% -- of 11% to 13%, with subscription revenue increasing in the range of 18% to 23%. We slightly adjust upfront license revenue to be now in the range of minus 1% to plus 3%. As we remain confident for the full year on the range of 3% to 4%, as mentioned before. These objectives reflect continued momentum in subscription revenue growth from new deals and an increasing contribution from our run rate. Now one additional comment regarding MEDIDATA. We expect growth to reaccelerate in Q4 to achieve double-digit growth for the full year. In terms of profitability, we expect the operating margin in the range of 35.8% to 36.6% and diluted EPS of EUR 0.35 to EUR 0.37. This reflects a year-over-year improvement of 190 basis points and 10% to 14% growth ex-FX, respectively. Of course, for additional information and to review what we've just discussed, please take a look at today's earnings presentation. In conclusion, as evidenced by the strong Q3 results, we are on track to achieve our full year plan for revenue and profitability. Q3 performance is broad-based, driven by growth in 3DEXPERIENCE closely aligned with the growth strategy as discussed during the Capital Market Day. Our subscription revenue is driving the momentum of the company while we deliver the productivity gains in the second half as planned. Finally, the confidence in the full year plan is supported by rebalancing our Q4 growth with a strong Q3 upside. And now Bernard, Pascal and I will be very happy to take your questions.

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

Let me start with you, Rouven, with regard to structural segment profitability. That is to say profitability of the segments, not just this quarter but over time. Once upon a time, you used to disclose the margins for CATIA and SOLIDWORKS has been over 40%, and I assume that given their scale, that remains the case. But there must be other businesses, therefore, that are well below that or below the corporate average. So perhaps you could discuss those businesses that you think could or should see margin leverage from where they are today? That would be the first question then a couple of others.

Well, I'll take a start at this. And for sure, I think Pascal has a few points to add as well. Jay, good morning to you. Maybe I give you the example of MEDIDATA, where you remember when at the time of the acquisition, the margin was up 20% and the growth we've generated since the acquisition plus the margin and cash flow progression was about 150 to 250 basis points year-over-year improvement. This is typically what our ambition is. But we've also been at the right time to take the decision to invest to ensure that we have the right level of resources and focus. We have done that for MEDIDATA. We have more than doubled the size of the company in terms of head count. While at the same point in time, we were able to significantly elevate the profitability and drive the growth and set it up for long-term success. And the current slower performance is more -- that's a temporary situation, which we'll fix. Of course, we have various businesses with different margin profiles. I will not go down the path of going into each segment. Of course, the more mature businesses have is a good profitability, which allows us to invest into the businesses that we are starting new, and that will be the future of Dassault Systèmes like CENTRIC PLM where we very focusly invest to build the muscle and the infrastructure, the expansion with the right level of resources to grow across all segments. We are signing very large deals with CENTRIC today, and we can only do that because we have invested and expanded our reach and our ability to serve these clients. So it is an ongoing portfolio exercise to ensure that we do the right level of investment while ensuring the overall profitability of the company.

Maybe, Jay, what I could add is none of our brands or product line are loss making. None of them, right? And if the question is, do we still have a potential to -- for improvements? The answer is yes. And Rouven committed to improve on a yearly basis by 40 to 50 basis points the operating margin organically which means probably we also have the ability to do a little bit more if we consider that we could do also some acquisition and having a dilutive impact on top of this.

Okay. Pascal, for you, let me ask you about something that we've been talking about since December of 2020, namely your vertical strategy for your cloud infrastructure. And then more recently, you'll recall that we spoke briefly at the analyst meeting in June about your product road map. And they may be related. But in any case, I'd like to ask about both. So with cloud infrastructure, how do you think about the capacity that you need to have in place to hit your 2025 revenue objective of EUR 2 billion? For example, as of the spring of this year, you had about a dozen data centers, and that number doesn't seem to have changed over the last year or so to get the EUR 2 billion or to support EUR 2 billion of cloud revenue, how are you thinking about the expanded capacity in regions or a number of data centers to do that? And then with respect to product road map, when we think about what some of your competitors are doing in terms of their architecture and where V6 is going to be by the end of your current forecast period, namely 15 years or so, is it too soon to start talking about what we perhaps could call now V7? In other words, what's your next generation that you think gets you to the end of the forecast period and beyond?

Thank you, Jay, for the questions. Let's start with -- yes, yes. And maybe the last part could be also for Bernard, if he wants to have a few things. But anyway, let me start with the first part of the question, which is related to the strategy by verticals. So you're right. I mean, it's -- you remember a few years ago, almost the new -- the diversification industry we're the one adopting the cloud first. Now we can see different patterns. We have a decent number of significant deals having this hybrid model, whereby we are giving the ability to ease the transition to the cloud over the next 5 years. And JLR, for example, is one of them. This is also happening for the SOLIDWORKS. Because, as you know, the move to subscription with -- for SOLIDWORKS is linked also to the move to the new generation of SOLIDWORKS, which is the one being connected with the 3DEXPERIENCE platform on the cloud as well. Having said that, if you look at the capacity we have on the cloud today, there is no need to expand significantly with new data center. I mean, we probably have to open 1 or 2 more to cover different region of the world because you remember, it's -- the most important is to basically to have the data center being placed to have a latency, which is roughly a car around 10 milliseconds, right? That's the way to define how to -- basically to define the territory we could cover with 1 data center. But in parallel, you remember it's an hybrid model. We are also using external capacity because the system is transparent whenever we use 3DS OUTSCALE as an infrastructure, if we are using, for example, AWS. By doing so, there is no need for us to invest significantly in order to basically have the full capacity to support this EUR 2 billion revenue you were just mentioning. So I think we are relatively well equipped and this hybrid model, I think it's really the right way to go because depending the usages, we have an ability to subsegment the market in a smart way, if you want. Now relative to the product road map. I think as you say, we have introduced the 3DEXPERIENCE platform on the market in 2012. Now a little bit more than 10 years after the 3DEXPERIENCE platform is the standard in aerospace and defense is also the standard in the auto sector. And we see also the adoption in the large verticals such as industrial equipment, accelerating also. So to a certain extent, I think it's probably too early to discuss about what's next. Especially in the context that the 3DEXPERIENCE platform has been designed to be cloud-based first to be modeling and simulation on one hand, but also to have the data science capability on the other hand. And we have enough to some extent, to continue to conquest the verticals and the customers we are serving today with it. So that's my answer at this stage. Jay?

Okay? And maybe to conclude, of course, on SOLIDWORKS, would it be accurate to say Pascal that new SOLIDWORKS seats declined sequentially from the very strong Q2 into Q3. And moreover, that perhaps new SOLIDWORKS volume was even lower than in Q1. And perhaps up some still year-over-year, but was Q3, in fact, the lowest quarter for new SOLIDWORKS units of 2023?

No, Jay. I think it's not true. In fact, knowing that we're going to speak together. I checked this before the call. So no, we are -- to give you the order of magnitude. We are a mid-single-digit growth in terms of units compared to last year of Q2. And if you look at per quarter, it's almost relatively in the same order of magnitude. It's a little bit more than 20,000 units per quarter. What is nevertheless, maybe taking a little bit your model is the fact that 1/3 of the new booking is subscription-based now right, which is -- and it was 15% last year. So that's the reason why maybe when you do your computation, you have our time to recover the numbers. But partly speaking, the growth in terms of units is still a good one, solid one. It's going extremely well in Europe as well in Asia. And where we see low single-digit growth is much more in North America in terms of number of units, right?

The next question comes from the line of Jason Celino from KeyBanc Capital Markets.

Good quarter. It seems like the macro environment, the business environment seems to be holding in doing well. When you think about linearity of the strength or linearity of the new business momentum in the quarter, curious how it kind of shaped out. And if you're able to maybe have some of the early weeks of this quarter soon be tracking.

Jason, yes, in terms of linearity in Q3 I think one of the key characteristics of this quarter is the acceleration in subscription revenue from 13% to 18% plus the strong contribution from large transactions that we were referring to that Pascal discussed. And there's a part of this, I mentioned in my prepared remarks that you see visible in the quarter, but the majority of the contracted value is going to come in future periods. So from a linearity standpoint, right, this has improved our visibility into the future periods for the subscription revenue, which also gives us, I think, a good view on the rest of the year. And it helps us then to be prepared for 2024. And in terms of -- if you mentioned this linearity, for example, Q3, Q4 pull-forward topic. In Q3, we -- there was no really significant change between the what not was initially in Q4. So what we reported in Q3 was really part of our Q3 visibility. And Q4 from that regard, we have also a solid pipeline towards the end of the year, that's not affected by the Q3 performance. Nevertheless, for the full year, we kept our guidance unchanged for the reasons I mentioned, that now we have improved visibility and achieving our guidance of 8% to 9% in total revenue is now what we are focused on.

Great. And then maybe a follow-up on Jay's question on SOLIDWORKS. So the 1/3 of new bookings being subscription-based up from 15% last year. That's nice momentum. Is there anything on the go-to-market side that you'd say has been a real catalyst that's been driving that? And then of which maybe 3DEXPERIENCE works family of the brands are seeing the greater strength there?

Jason, there are a few things behind this. One is definitively the majority of the portfolio of the WORKS family which has been -- we have enough reference cases to give confidence to the market. But the other part is also, I think, our resellers they prepare themselves. It was -- if you remember, we had many times this discussion a few years ago about the ability for our distribution network to adopt the cloud solutions, to adopt the new generation of SOLIDWORKS and the work stability at large and also to slightly change the business model to foster or to promote in an extensive way, the subscription model. And I think we are at a point where it's done. I think the resellers, they know how to do this. They are comfortable with basically the transitions. They have made the adjustment also for their own business model. So that's the reason why you are seeing such an acceleration between last year and this year.

Okay. Great. And then maybe one quick one if I can fit it in on SIMULIA. It seems like we've seen some good strengths, double-digit growth in multiple quarters. I guess, are you seeing kind of that being driven from more cross-sell activity and expansions? Or have there been some competitive displacements?