Dassault Systèmes SE (DSY) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Dassault Systèmes 2024 Second Quarter and First Half Earnings Conference Call. [Operator Instructions]. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Beatrix Martinez, Vice President, Investor Relations. Please go ahead.

Thank you, Sonja and thank you for joining our Second Quarter 2024 Earnings Conference Call with Pascal Daloz, Chief Executive 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 2023 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 hand over to Pascal Daloz.

Thank you, Beatrix. Good morning, good afternoon to everyone joining us on the call. This morning, we issued our earnings press release confirming the information we shared 2 weeks ago during our primary release and call. So if I go straight to the point, our second quarter total revenue increased by 4% and earning per share rose by 8%. What did we learn from that? First, the delays in the customer decisions caught us by surprise in Q2. And at the same time, looking ahead, we can confirm we have a robust pipeline which is structurally stronger in the second half compared to the first one. Additionally, we remain on track to close this year the majority of the deals that have been delayed and we see the majority of those opportunity as improving as we advance through the year. From a profitability standpoint, we are taking the required measure to preserve not only the operational efficiency but at the same times, protect also the long-term investment. Therefore, I think we are in a position to confirm what we expect the EPS to be up 8% to 11% this year. Now let's start by discussing our business environment across the 3 sectors. First, in the manufacturing industry, despite the recent volatility in customer decisions, particularly in Aerospace & Defense, the demand for 3DEXPERIENCE solution remained extremely strong, plus 23% for the first semester. And we have several deals, including extensions and significant win backs. I think our customers are still seeking innovative way to differentiate in the market and strengthen their customer relationships. Now zooming in Aerospace & Defense. Customers have a huge backlogs due to the manufacturing ramp-up delays, which is caused by the supply bottlenecks. This has created a cash flow issues for them and impacts, obviously, their investment plans. However, despite the investment pause in the near term, we are extremely confident that our solutions can help them to address their current issues. At the same times, we see Transportation & Mobility extremely resilient and well representing in our second half pipelines as we are not subject to the volume of production. Now speaking about consumer industry, I think we are growing strongly and we expect this trend to continue in the second half. And in addition, we have a much better pipeline in H2 compared to H1, with the right mix of volume and larger transactions. Speaking about Life Sciences, we believe we are at a turnaround point and that the market contraction is behind us. In another word, I think we have reached the bottom. At the same time, we have reinforced our position with an increased market share and a new innovation cycle is starting. And the evidence of this is the launch of our new products, MEDIDATA Clinical Data Studio. We officially launched this product at the end of June and we already have achieved remarkable success, including significant win backs, clients and we are using this as a competitive differentiator to expand the value proposal beyond the traditional EDC. And we believe this will completely transform the clinical trial in the years to come but Rouven and I will come back and I will explain why in a moment. In Infrastructure, the momentum continues driven by the development of the 3DEXPERIENCE in our existing accounts. Now I would like to highlight 3 major competitive win this quarter. The first one is Mahindra & Mahindra. They have selected the complete 3DEXPERIENCE portfolio for Transportation & Mobility, which means all the solutions we have, fully adopting it for all the future vehicle programs. And at the same time, we are displacing competitor solution, which was widely used. This being said, the innovative thing is also it's 100% cloud-based. And it provide an out-of-the-box industry solutions for 3,500 users, including engineering services suppliers. And initially, they will start with 3 vehicles program, including their best sellers. The key point also in this case is the data centricity part of the platform was a key decision factor because it aims to reduce the cycle time and gain an edge against increasing competitions from China. In this regard, the ability to source locally is really critical and this is also the reason why they have chosen us as we enable all the business decisions capability to be integrated into the early design phases thereby maintaining the low costs. And ultimately, the adoption of our platform enables Mahindra & Mahindra to gain unique competitive advantage and electrify most of their costs. My last comment is this win is also emblematic especially to strategically reposition us in India because for a long time, we have built the capacity in India to serve the rest of the world. And now we are redirecting some of this capacity to expand and to accelerate our penetration of the Indian economy. Moving to Life Sciences, we also have an interesting case this quarter with Bristol-Myers Squibb, BMS, because they have renewed its partnership with us after a deep benchmarking exercise. And you can count on us -- on them, sorry, to evaluate all the solution on the markets. And at the end, they have reconfirmed the collaboration with MEDIDATA expanding the successful 10 years partnership by an additional 5 years. These new contracts include access to MEDIDATA Rave but also the AI capability, the new clinical data studios and also all the rest of what we do. Because this is -- I think those solution are giving really the ability for BMS to manage the complex and diversified clinical trial portfolio, which include the cells and the gene therapies, which is pretty unique. BMS has also adopted the MEDIDATA clinical data studios to integrate data sources -- data from multiple sources. And it starts, from obviously the electronic data capture, the EDC but more and more, the electronic health record, the system which is used at the hospital to collect the clinical information when people are under treatments. And more recently, we are expanding it with the sensor data also. These expanded partnerships reflects BMS commitments to advancing clinical research processes and reinforce its dedication to improving patient outcomes and also obviously, the personalized medicines. My last example is an interesting company. Maybe you don't know them. My Marmon's, it's a highly diversified company owned by Berkshire Hathaway and they are operating in many industries, such as construction, energy, industrial equipments and transportation. And what is interesting, they have chosen the 3DEXPERIENCE SOLIDWORKS on the cloud for an integrated approach. And this decision involves replacing all the design and simulations point solution they were, using while incorporating advanced collaboration capability at the same times. And I think with this -- it's another proof point that the 3DEXPERIENCE Works family is pretty unique because we offer unified solutions on a market which has delivered an unmatched return over investments. And I think this is demonstrating that the platform concept is also relevant for the mainstream market. In parallel of those wins, where many of them are -- by the way, we are displacing the competition, we continue to invest and we are actively developing the AI-driven use cases to accelerate the future growth, again, across the 3 sectors of the economy we serve. Why I think it's -- we are uniquely positioned. It's because we are leveraging our largest multi-industry datasets. As many of, if not most of the products, manufacturing products, the drugs, the large infrastructure equipments are created with our software and the combination is allowing us to generate these experiences. There are 3 examples of those experiences available for our customers, I want to highlight. The first one is so-called system standard compliance by design. It improves the process of writing requirements by using artificial intelligence to read and interpret all the relevant regulation and norms. And when it's done, automatically, it verify that the design meets the established performance criteria. This solution is playing a critical role in helping the EV makers to address their current challenges specifically clearly reducing the sales cycle and the time to market. It also ensures the accuracy the first time and enables the lifetime changes for the over-the-air updates. And as you may know the increasing level of autonomy of the smart products and connected products employ a rigorous traceability along the entire design processes, from the definition of the requirements to the end of the verification and the validation processes. And I think we are currently collaborating with early adopters among the automotive OEMs and the Tier 1 suppliers and our plan to expand in Aerospace & Defense shortly. Following this initial engagement, we also scale our solutions to other players. The second domain where I think there is new things coming and I already start to speak about it. It's the Clinical Data Studio, is in fact a new generation of data management solutions, providing a seamless access to integrate data from various sources. Previously, you know all those information coming from the EDC, the EHR or the sensors was added manually to the systems. And --but now with the clinical data simplified massively the data aggregation, standardization and the management workflow using artificial intelligence to do this. And the net result is what? This is enabling multiple user to work with real-time data to reduce the workload, to speeding up the reviews, to improve the qualities, to lower the risk and obviously, enhancing the patient safety. I think this new approach will really reshape the future of the clinical trial, providing a single source of truth for compliance and regulations. I encourage you to attend to the next event in New York. We will discuss in deep this topic. The last example I want to use is so-called perfect consumer products. In fact, this solutions is enabling the creation of unique experiences for mass personalization. And you know to serve a large number of customers quickly, automation for AI is really crucial, in fact, because it's the only way to leverage the massive customer data to drive generative experience. And this quarter, we have an interesting case for this. As you know, we are partnering with ASICS, the well-known Japanese sportswear brand to offer personalized shoes. And we are currently building on the momentum of the Olympic Games in Paris. And if you have a chance to come in Paris, ASICS opened several locations across the city where people can scan their feet to create customized running shoes with unique sole tailored for each individuals. The most interesting thing is also these shoes will be manufactured on-demand and locally and this is reducing massively the CO2 emission footprint. So if you visit our Paris campus in the coming months, you will have a chance to see this modular 3D printing manufacturing unit in actions. And I think this would be an interest for you. Now let's -- before to conclude, let's come back to a little bit the business environment. And now I would like to conclude on -- to give you the trends by regions. Europe remains resilient and continue to be a key anchor for growth. There is definitively a strong demand to transform the European industry, particularly in Transportation & Mobility, Aerospace & Defense and Home & Lifestyle. In North America, we expect accelerated growth in the second half of the year in the coal industry with notable progress in Aerospace & Defense and ongoing contribution from Transportation & Mobility but also in Life Sciences. And in Asia, the growth dynamics are well balanced across different countries. India represents a strong opportunity ahead, as I was saying, while Korea and Japan are expecting to deliver consistent and durable performance. China is also projected to grow but remain subject to volatility. To wrap up and before handing over to Rouven, I want to emphasize that we have achieved multiple win backs this quarter. And meaning that not only we are competing successfully but also we are displacing the competition. I'm convinced that our platform approach is a key differentiator and more and more relevant for the industry we want to serve. This is giving us the confidence in our growth potential for the second half of the year and beyond. While we may experience short-term volatility, it's a topic we discussed a few weeks ago, you know our game-changing visions attract customers who value our long-term approach. After this, I think Rouven, you have the floor.

Thank you, Pascal and hello to you joining our call today. First, I want to confirm our results of Q2 are in accordance with the preliminary announcement from July 9. Now let's review the performance of Q2 and the first 6 months in a bit more detail. Q2 software revenue was up 3% with subscription revenue at 8% and upfront license revenue down by 1%. As discussed, we closed fewer large deals as we experienced cautiousness and customer signings towards the very end of the quarter in a complex geopolitical environment. The relative strength in the bottom line with an EPS at EUR 0.30, growing at 8%, was driven by a lower expense growth, strong interest income from cash invested and a lower tax rate. The operating margin was at 29.9%. Looking at the first 6 months, total revenue was EUR 2.995 billion, up 5% and with an operating margin of 30.5% and an EPS growth of 10% versus H1 of last year. Subscription revenue was up 9%, however, when excluding MEDIDATA subscription growth was up 20% in H1 and 29% on a trailing 12-month basis at the end of June. Clearly, the momentum continues to be strong, reflecting our customers' appetite for 3DEXPERIENCE platform and cloud adoption. Important to highlight the MEDIDATA performance was largely in line with our expectations, which I will discuss in more detail shortly. Now let me briefly review the deviations to the midpoint of our objectives for the second quarter. Total revenue came in at EUR 1.496 billion in the quarter, which was EUR 44 million below the midpoint and EUR 29 million below the low end of our objective, including a positive currency impact. This reflects the volatility in customer decision-making. However, all important deals that have been delayed are still in our road map for future quarters. And when purchase decisions are made, our win rates remain very strong. Operating margin was 29.9%, below the low end of guidance. OpEx growth in Q2 was 5% and offset approximately half the impact from the shortfall in revenue. Thanks to an effective hiring and expense policy, we reduced net head count growth in the first 6 months of 2024 to 270 FTEs. Additionally, Q2 OpEx growth included a onetime benefit of approximately 1 point. Now going forward in H2, we will dial up the hiring to support our long-term growth strategy and as every year in Q3, we are onboarding interns and young graduates to fuel our talent pipeline. As mentioned, EPS was EUR 0.30 in line with our objective. The combination of lower OpEx cost, very healthy financial income and a lower tax rate offset the miss in revenue. As you can see, we have taken a prudent approach to preserve our EPS objective while ensuring the necessary long-term investments. Now turning to our growth drivers. Despite the more challenging business context in the second quarter, we saw sustainable growth in 3DEXPERIENCE revenue, up 18% in Q2 and 23% in H1, driving the share to 36% of software revenue. This quarter, over 2/3 of our 3DEXPERIENCE growth was driven by deals over EUR 3 million with the remainder generated by midsized deals. Overall, this highlights the broad-based momentum and resilience of the 3DEXPERIENCE growth despite the elevated scrutiny in some of our sales cycles at the end of Q2. Cloud revenue grew 10% in Q2 and 8% in H1. Excluding MEDIDATA, cloud growth was up 70% in Q2 and 60% in H1, driven by strong momentum in the adoption of 3DEXPERIENCE cloud. In Q2, we had several large customers expanding their adoption of the 3DEXPERIENCE platform on the cloud such as Mahindra & Mahindra, Honda, Biogen and Safran. With this, let's review our performance for Q2 and the first half of -- by product line. Software revenue of Industrial Innovation grew 6% for the first 6 months, led by strong growth in NETVIBES and data science and a solid performance of ENOVIA and DELMIA, growing at high single digits. CATIA and SIMULIA growth was particularly affected by the increased deal scrutiny and delay in decision-making. While the subscription run rate remains solid and embarked for future growth. Life Sciences growth was minus 2% for H1 with MEDIDATA growth at minus 3%. This scenario was factored into our plan for the first half. And as we now transition to the second half, we believe that the period of post-COVID market contraction is largely behind us. In Q2, we saw steady start volumes up sequentially for the first time since early 2002, after 2 full years. The trend of progressive recovery continued in Q2. This is evident in the bookings performance, most notably in the study-based volume business, thanks to an increase in CRO partner consumption. Also, patient cloud bookings were up. While still early, we saw a good trend in bookings from new products launched in 2024. For the first time this quarter, Clinical Data Studio was adopted by several enterprise customers, as Pascal highlighted during his presentation. We also renewed with our largest sponsor, BMS, our multiyear contract. Importantly, BMS expanded their commitment ramping up in 2025. On the flip side, we saw fewer large deals in the quarter. However, we expect this trend to normalize as the share of large transactions will grow with upcoming renewals in the next quarters, including 2025. To conclude on Life Sciences, it is clear that we are competing well in the market. We continue to expand our market share in Phase III trials by over 2.5 points and also in Phase I by over 0.5 point. All of the above contributes to the path of progressive recovery. Now moving to Mainstream Innovation. We continue -- we see continued strength, mainly driven by CENTRIC PLM. And for SOLIDWORKS, the continued adoption of subscription contracts with existing and new customers more than offset the decline in upfront license. Now I would like to briefly expand on the continued momentum of CENTRIC PLM. This quarter, we signed several large enterprise deals with leading brands such as Lacoste, HUGO BOSS and Shopsense, a Reliance Industries' company in retail tech in India. Many of those wins are displacements. As evidenced by the track record, CENTRIC PLM offers a highly integrated business platform for consumer driven industries, that encompasses all aspects of product development from planning, pricing, inventory, market intelligence and more. By bringing together product developers, planners, quality and compliance teams, buyers, merchandisers and designers, CENTRIC PLM optimizes every step of bringing a product to market. Consequently, we are well positioned to secure large-scale enterprise PLM contracts. It's now a completely different game. Turning now to the cash flow and balance sheet IFRS items. Cash and cash equivalents totaled EUR 4.31 billion, compared to 3.568 billion at the end of 2023, an increase of EUR 463 million. At the end of the quarter, our net cash position totaled EUR 1.036 billion, an increase of EUR 458 million versus December 31, 2023. This clearly highlights the disciplined and efficient capital allocation. Now let's look at what drove our cash position at the end of the first half. We generated EUR 1.130 billion in operating cash flow for the first 6 months versus EUR 1.026 billion last year, or a growth of 10%. As highlighted already in Q1, we delivered a positive catch-up in the second quarter, thanks to strong collections and improvements in the nonoperating working capital, mainly from lower cash tax payments and expected reimbursements. For the first 6 months, cash conversion from non-IFRS net income improved to 1.42x versus 1.39x last year. For any additional information, you will find the detailed operating cash flow reconciliation in our press release published this morning. To sum up, operating cash flow was mainly used for the net repurchase of treasury shares of EUR 273 million and a dividend payment of EUR 303 million. In terms of CapEx, we invested EUR 106 million in property and equipment, which is around EUR 40 million above last year's level for H1. This is mainly due to the global office expansions and IT-related CapEx to support our cloud costs. We are investing in our operations in India. We are modernizing our DELMIA location in Detroit to strengthen our manufacturing presence in the United States and we are further expanding at our headquarters in Paris. Evidently, we are investing long term to support our growth and we are convinced that our workplaces are the foundation for collaboration, innovation and our strong culture. Now let's transition to our full year outlook. Over the first 6 months, we made continued progress in advancing our growth drivers of 3DEXPERIENCE and cloud. While we signed a fewer large deals in H1, the number of midsized transaction is actually up by 8% in the quarter and over 10% for H1. At the same time, we experienced an elevated scrutiny in our sales cycles across major geos in Europe and [indiscernible], specifically in the aero and defense industry, at the end of the second quarter, which we discussed. Now let's look ahead to H2. We see a healthy demand of our solutions in and our customer base, primarily from platform adoption, value network and domain expansion. Our pipeline coverage is well aligned with historical trends. Now taking all these factors into account, consistent with our pre-announcement from July 9, we are updating our full year objectives with total revenue now in the range of EUR 6.26 billion to EUR 6.325 billion. This represents a growth now of 6% to 8% versus previous guidance of 8% to 10% cost. For software revenue, we now expect 7% to 8% growth, driven by upfront license revenue in the range of 3% to 5% versus 2% to 5% previously and recurring revenue of 8% to 9% versus 10% to 11% previously. Subscription revenue is now in the range of 13% to 15% and versus 17% to 19% previously. This reflects the delay in customer signings, which impacted mainly large subscription contracts. Finally, we expect services revenue to be in the range of 3% to 5% versus 8% to 9% previously. From a bottom line perspective, we now expect an operating margin in the range of 32% to 32.4%, which is flat year-over-year at the midpoint and an EPS in the range of 8% to 11% growth or EUR 1.27 to EUR 1.30. The tax rate is updated to 19.5% for the full year versus 20.5% previously. Now I would like to share some additional points to help shape your models, reflecting the Q3 outlook. First comment is regarding the baseline comparison. Q3 2024 is the anniversary of the JLR mega deal, creating a challenging year-over-year comparison. As such, we expect total revenue growth in the range of 4% to 7% with software revenue of 3% to 6%, driven by recurring revenue of 7% to 9%. Subscription revenue is estimated to grow between 12% to 17%. In this outlook, we expect MEDIDATA to improve sequentially and be flattish. Operating margin is expected in the range of 29.4% to 30.2% and EPS between EUR 0.28 to EUR 0.29, which is up 1% to 6% year-over-year. The JLR effect is over 3 points on the revenue, visible in upfront license and about 120 basis points on the operating margin. EPS impacted by about EUR 0.03. You can find all the details in the appendix of our earnings presentation. Now before I conclude, I would like to share a few remarks on the trajectory of the second half for which we are now expecting 9% growth. This implies an increase of around EUR 300 million in revenue versus H1. 2/3 of this sequential growth is related to normal seasonality. The remaining 1/3 is roughly split between the slipped deals to be signed in H2 and the impact of the back-end loaded year, which encompasses both 3DEXPERIENCE and MEDIDATA. In conclusion, I want to reiterate our commitment to investing to support long term while expanding our margins. We continue to see strong customer demand and engagement across our 3DEXPERIENCE portfolio, CENTRIC PLM and MEDIDATA, all supporting our financial objectives, near and midterm. Now Pascal and I look forward to your questions.

[Operator Instructions] We will now take the first question from the line of Jay Vleeschhouwer from Griffin Securities.

Let me start with 2 longer-term questions and then turn to the near term. So Pascal, for the longer term, for next year, does it still make sense for you to think about EUR 2 billion of cloud revenue for the entire year? Or would it make more sense to think about that EUR 2 billion objective as perhaps more of an annualized rate towards the back half of 2025, particularly when we think about the lower base from which you're starting for MEDIDATA. And then second longer-term question, in your prepared remarks, you referred only briefly to Infrastructure & Cities. Could you talk about how you're thinking about the game plan there, particularly in 2025 and beyond? DS was at a conference in London last month on EC. So it's clear you're looking to reboot your plans there. But perhaps you could be a little bit more specific about how you foresee becoming more significant in that strategic market.

Okay. Thank you, Jay. I like the long-term question for 2025. Anyway, I think you got the answer. I mean, the EUR 2 billion is annualized for sure. I mean that's the only way and it's not because I think there is something to hide, it's because, at the end that's the way we measure the real contributions because if we want to have a snapshot is to understand at the moment but we automatically, you have the dynamic coming on for the next 12 months. So you got it. And I think, by the way, outside of MEDIDATA, the cloud is growing nicely at 70% this quarter and 60s, if I remember well, since the beginning of the year. So I think we are on plan on this, including with SOLIDWORKS, by the way, where we see a lot of traction going on. Coming back to Infrastructures & Cities, there are 2 or 3 key initiative for us. The first one is we do not want to do like the competition they have done in the past, which is to address the company one by one. I think this market is highly fragmented. You know it and it will take a while to have the proper coverage even if we have some of our resellers, which are capable to address this market. So the way to a certain extent to defragment this market is to address the large projects. And this is what we do. We are targeting the large infrastructure projects, whereby we offer the platform as the foundation for the collaboration between all those different stakeholders and it's a way for us to address, if you want, the entire chain with 1 engagements, sales engagements. There are a couple of project where we are part of the consortium. So we put ourself equivalence to the large civil engineering companies, the large construction company. And that's, I think, an innovative way to address this market. The second breakthrough we are bringing to this market is the modular approach. So -- and this topic is becoming more and more relevant in the constructions, not only for the residentials but also for the commercials. Why so? Because you need to reduce the cost for -- to build and the modular approach is really the way to have basically to capitalize on the knowledge and the know-how and have the efficiency on all the projects you do. So this is also changing the value chain because if you are modular, it means you will have local facilities producing the sub-assembly and when you are on site, what you do, you do only the final assembly and you are not transforming the raw materials on site. I think we are pretty well advanced on this. The best example I can use right now is what we do with Bouygues but they are not the only one. And last but not least, there are certain subsegments of the market where we -- I think we have a unique value proposal. One of them is, for example, for the data centers, where, as you may know, you will have more data centers being built in the next decade than the nuclear plant. And the specificity of those kind of things is, you design your system and then after, you build the concrete around. So for this, we have many engagements going on with hyperscaler directly and the most well-known one but also some specialists, the people like Equinix and others which are developing this. So those are -- and we have other initiatives like this. We're targeting the subsegment of the market. So with this, I think you have a comprehensive understanding how we are addressing the market, how we are repositioning ourselves and how we are taking the benefit of the platform, the multiphysics and the multi-scale capabilities we have, the combination between modeling, simulation and AI together, which is, I think, is a game changer for this industry. But it's a long run. You're right.

Coming back to the near term then, for you then first and I'll finish up with you Pascal, on SOLIDWORKS. So you refer to, then to operational efficiency but at the same time, you're going to have a steeper trajectory of hiring for the second half. So could you elaborate on what you mean by that efficiency? Are you making any internal systemic changes or other things of that kind? And how are you thinking about the trajectory of MEDIDATA operating margin expansion year-over-year, if any, for this year. And then back to you, Pascal.

Thank you, Jay. I think the trick on the operational efficiency is to plan from the beginning of the year and have an ongoing planning cycle because throughout the year, it's very hard to catch up if you want to be sustainable. So you see we have been controlling investments at the beginning of the year with the objective to create the room to invest right. And that's what we will be doing in the second half of the year. We're coming in with a lower expense run rate into the second half, which gives us flexibility that we want to leverage. In Q3, we are going to bring in, as typically every year, a large number -- a larger number of graduates, young talents into the company. And they have already been identified. So we have clear visibility on the cost impact of this. And other than that, related to MEDIDATA, you know we have -- we are initiating a new cycle of innovation, a new cycle of leadership and management that we started. And as a result of that, we also reviewed properly our priorities, the organization and we came to the conclusion that there is an opportunity to make some changes that we did in the second quarter. You see there is an expense in -- restructuring expenses in the IFRS financial statement, which is related to MEDIDATA and that impacted about 150 people in the second quarter. But this is more about making some -- making the necessary adjustment to have the flexibility to invest right and accelerate our road map.

And maybe in addition to what you say, Rouven, there is an initiative going on also at MEDIDATA is, redirecting some of the people to the new growth area. And as you may know, especially in the development side, it's not an easy thing to do. But we are using the business environment, if you want, as a way to force this realignment to happen in the short term.

Okay. To finish up with you Pascal on SOLIDWORKS. The company earlier this month, at least here in the U.S. introduced as expected, some new packaging around various SOLIDWORKS functionality. How are you thinking about the impact of those? Will those be meaningful for you in terms of getting to your mid-teens volume growth expectation that you've given to the channel for growth this year? And is that new form of packaging, something that could be applicable elsewhere in the business, for example, would it make sense to do something like that as well for Industrial Innovation? Or is that really more unique to the SOLIDWORKS business?

It's a good question, Jay. If you look at the dynamic of SOLIDWORKS, I think we are doing a good job for -- with our installed base, which have more than 10 seats. I think we have a lot of traction and growth coming from there. However, the packaging we did in the past was not relevant for the segment of the company having 1 to 5 seats. And this is the entire purpose of this new offer you are talking about. So this is really where we are right now focusing because we want to do the value up but also, we want to continue to have the volume effects. Now coming back to your questions. I think this approach is something also we can do and we are partially doing it for CATIA, for the same reasons because we have a subsegment of the market having between 1 to 10 seats for CATIA and we want this to be a volume-based approach more than only a value-up approach, if you want.

We will now take the next question from the line of Jason Celino from KeyBanc Capital Markets.

Just 2 questions for me. So the large deals that slipped out of Q2, excluding the mega deal, have you been able to close any of these deals so far in Q3?

Yes, we have already closed some of them, which is, by the way, giving a good sign of the start of Q3.

And then when we think about your large deal pipeline for the second half, given you've seen some geopolitical delays already, how much of your large deal pipeline is for U.S. companies, given the upcoming U.S. election, just trying to wonder how much variability you've built into the framework.

Yes. So when you recap the overall situation, H2 over H1, we have about a ramp of EUR 300 million of increase, of which 2/3 is the normal historical run rate. So there's EUR 100 million of surplus when you compare that to the historical trend of which about half is related to the deals that slipped from Q2 into the second half. And that's about 40% of the deals that slipped. They are clearly identified and when you take those, about 60% are in the Americas and 40% are in Europe.