Dassault Systèmes SE (DSY) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Dassault Systemes 2024 Q3 Earnings Presentation. [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. Please go ahead.

Thank you, [ Sonja, ] and thank you for joining our third quarter 2024 earnings conference call with Pascal Daloz, CEO; and Rouven Bergmann, CFO. Dassault Systèmes results are prepared in accordance to -- 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 now like to hand it over to Pascal.

Thank you, Beatrix. Good morning to everyone. Good afternoon for the ones who are in Europe. Thank you for joining us on the call. So this morning, we issued the press release for our third quarter 2024 and let me give -- take a few minutes to give a summary of it. So first, our Q3 results were in line, showing 4% revenue growth, driven by an 8% increase in subscriptions. The year-to-date subscription grew by 9%, and EPS increased 8%, reflecting the solid overall performance. Now, I would like to highlight 3 key elements of the quarter. First, we have seen several end markets getting momentum. We start with Life Sciences, where, MEDIDATA is back to sequential growth. At the same time, we had an excellent performance in consumer industries driven by CENTRIC PLM and SOLIDWORKS accelerated growth in revenue and seats. Importantly, aerospace and defense demonstrate resilience, delivering a solid performance this quarter. The second topic is we have seen since last summer, the automotive customers in Europe and in U.S., which have been impacted by contraction in volumes. This accelerates the need for transformative decisions while at the same time, it can elongate the decision-making in the short term. In contrast, in Asia and especially in China, momentum remained extremely strong. The third observation is, I think, more than ever, we are well positioned to continue gaining market share with a robust pipeline in the industrial sectors and we are confident that our 3DEXPERIENCE data-centric platform will serve as a catalyst for customer transformation. In the age of AI, virtualizing industrial processes from design to manufacturing will be a prerequisite for our OEMs and suppliers to compete successfully in the next decade. In light of these factors, we reconfirm our full-year EPS target range of EUR 1.27 to EUR 1.30, unchanged. And we anticipate the revenue growth acceleration in Q4. Nevertheless, adjusted due to the slowdown in the automotive sectors, and Rouven will give more detail about this. This acceleration is driven by the strength of the 3DEXPERIENCE pipeline. And now I want to share with you and take a few minutes to share some observations in the 3 sectors of the economy we serve. First, in the manufacturing industry, the automotive makers have downgraded their 2024 forecast since last summer, now operating a 1% to 2% decline in car production instead of previously anticipated growth. These downgrades primarily impact us in Europe, to a lesser extent in the U.S., while we continue to see strong growth in China. Simultaneously, several other end markets are showing momentum. So Aerospace and Defense delivered a good performance this quarter, driven by a robust defense contract and supplier contributions. On the diversification front, we achieved an exceptional performance in home and lifestyle CENTRIC PLM consistently winning new testers and new clients and securing several large strategic deals. In Hi-Tech, we also delivered robust growth, notably in Asia. As I was telling you, SOLIDWORKS accelerated its revenue growth to mid-single digits with seats growth in the high single digits while we transition to subscription and cloud continues now representing about 1/3 of our bookings. This diversity of the market we address brings resilience to our business model. In addition to those observations, I want to make a few comments about the competitiveness. It remains extremely robust. In Q3, we secured almost 100 significant competitive deals across key markets including China, Korea, France, Germany, and North America and covering industries such as aerospace, defense, high-tech industrial equipment and also transportation and mobility. But the most important thing is over 1/3 of those deals involve the competitive displacements. I think this is demonstrating that clients recognize the value of our solutions. In Life Sciences, I think, Q3 demonstrated a broad-based improvement for MEDIDATA, driven by several factors, the first one being the market recovery with a second consecutive quarter of growth in global clinical trial starts. And we experienced a positive engagement with our customers across our enterprise and mid-market clients as well as with our CRO partners leading to several expanded relationships. As we previously discussed, the new innovation cycle is also contributing to this improvement. The launch of MEDIDATA Clinical studio at the end of June has already produced significant success helping us win back clients and serving as a key competitive differentiators that enhance our value proposal far beyond EDC. And this quarter, we are also introducing Rave Lite which is a design solutions for early and late phase studies. And why so? Because our goal is really to standardize this fragmented market, which includes many, many, many small players. And I think we can leverage Rave across all the states. In terms of market share, I think, we continue to strengthen our position and extend our reach from clinical trials to manufacturing as well as PLM. In conclusion, I think the new innovation cycle is starting to pay off, and we are on track for the MEDIDATA recovery. Now moving into infrastructure sectors. We know there is a few dominant players in this space, but we continue to gain references in the energy sector, which is, I think, a way to demonstrate our ability to disrupt the market with our data-centric 3DEXPERIENCE platform and support customers with their build and run processes. Now I want to take a few minutes to spotlight on key wins from this quarter and how they are accelerating the transformation and shapening our client competitive edge. First, I want to start with BYD, and I'm glad to announce we are expanding the partnership with them. As you may know, BYD is a world-leading EV producer. And this deal, we have signed this quarter is an expansion of the 3DEXPERIENCE platform and modeling and simulations for batteries and new energy vehicles. And we are helping BYD not only to remain the top OEM globally, but also cutting costs across the entire process. They also aim to enhance their performance to meet the rising efficiency demand in student markets. This win was highly competitive, almost against all the simulation players and BYD recognized Dassault Systèmes as a best-in-class solution for high-performance battery design and simulation. And this collaboration brings over more than 500 advanced new users within BYD. The second example or second customer case I want to focus on is Merck. Why so? Because we are expanding our partnership with them focusing on patient-centricity. And you know that some of our competitors claim these customers as a reference, and this is proof that we are growing through innovative solutions and our collaboration with Merck shows that they trust us to enhance the patient experiences in clinical trials. In fact, we are broadening our partnership to support key studies in various therapeutic areas, including the Phase III infectious disease studies, and also involve more patients over the longer duration, and we are also adding support for the new oncology study. This partnership bring an additional 1,400 patients across over 400 sites. And this is adding to the tens of thousands who already serving, the one participating in the decentralized clinical trial we support. Overall, these expansion highlights our growth potential through innovation and patient focus, further diversifying our offering beyond [ Rave. ] The last one as a customer case is Snam. Snam is a leading natural gas transport operator in Europe, and they are managing 38,000 kilometers of pipeline network. The interesting thing is Snam chose our 3DEXPERIENCE platform to digitally transform the management and the optimization of its gas network, but successfully replacing their outdated [ win back ] solutions. And this win back is very similar to the one we presented a few quarters ago with Red Electrica. The key point is, in fact, Snam is relying on Dassault System solutions to create the virtual twin of their existing and future assets, which is enabling them to manage and optimize their assets operations collaboratively, but also improve the structural safety and the reduction of the emissions. As a result, Snam extensive ecosystem of assets and operators will ensure a predictable supply of energy throughout Italy but also internationally. And I think our differentiation lies in our ability to combine the virtual and the real data, seamlessly integrating information collected by sensors, allowing Snam to gather, analyze and act on real-time information. And I think these wins demonstrate our relevance in the sectors and highlight our growing reputation for modernizing energy infrastructure while enhancing operational efficiency and energy sovereignty at the same time. My last comment will be related to the AI momentum within our portfolio. I want you to keep in mind a few things. First, I think we have the largest and the most diversified installed base in the market. This means we get access to the largest corpus of data, and it's not only industrial data, but it's also business and science data. And I think we are using this as a strategic asset to maximize the potential of AI. How we do this? We, in fact, have been combining AI with modeling and simulations to transform the data into knowledge and expertise and ultimately creating generative experiences. This approach apply to everything we do across all the industry and the domain we serve. And today, we leverage the 40 years legacy of industry knowledge and know-how, and it's a way for us to elevate the way people work. In 2024 with AI, our customers can put expert knowledge and know-how in the hands of the nonexperts, connect design, engineering and manufacturing in an easy way, activate the life cycle of the products, master the systems of systems and achieve personalization at scale. And I believe no competitor can offer this level of transformative power. Before handing over to Rouven, I want to highlight 3 key points. First, our 3DEXPERIENCE platform is a powerful differentiation. Why so? Because it's a unified environment, it's cloud-native and it's data-centric. And it's a very powerful technology to empower the OEMs and suppliers to excel in a rapidly evolving environment, while at the same time giving the ability to leverage the AI. Second, I think our differentiation resonates with customers as demonstrated by our significant competitive wins and win back, reflecting the dangerous value of what we offer. And third, I think the 3DEXPERIENCE robust pipeline supports our confidence in the growth acceleration in Q4. Now I think Rouven, the floor is yours.

Thank you, Pascal. And hello to all of you who are joining our call this afternoon and also good morning to our investors and participants in the U.S. So Q3 results were overall in line with objectives. Total revenue growth was at 4%, software revenue growth at 3%. It came in at the lower end of our guidance range. Profitability was good with operating margin at 29.6% at the midpoint and EPS of EUR 0.29 at the high end of our objectives. As you heard from Pascal in Q3, we faced headwinds with our automotive customers in Europe and the U.S. due to volume contractions. You see this as a short-term challenge impacting the timing of decision-making. This was a factor in several pursuits in Q3. However, we are confident that the 3DEXPERIENCE platform addresses the needs of this industry as evidenced by our midterm pipeline. To complete the Q3 picture. Subscription revenue was up 8% year-over-year and upfront license was down by minus 7%. Two additional comments. First, as you know, Q3 is the anniversary of the mega deal from last year, which added a significant headwind to growth this quarter on software revenue. Second, subscription growth remains strong when excluding the temporarily lower contribution for MEDIDATA, it was up 19% for the quarter and 20% year-to-date. This momentum reflects the continued healthy demand for 3DEXPERIENCE platform and cloud. Important to highlight that MEDIDATA performance was in line with our expectations, which I will discuss in more detail shortly. Looking at the first 9 months, total revenue was EUR 4.5 billion, up 4%, driven by subscription revenue growth of 9% and operating margin of 30.2% and EPS growth of 8%, highlighting the resilient financial model despite a more back-end loaded year. Now let me briefly review the deviations to the midpoint of our objectives set for Q3. Further revenue came in at EUR 1.464 billion in the third quarter, at the low end of our objectives, excluding a negative currency impact of minus EUR 2 million. This performance reflects the headwind evidenced by our automotive clients. The operating margin was 29.6% in the middle of our guidance range, while lower revenue was offset by effective cost containment. OpEx growth in Q3 was 6%. EPS was EUR 0.29, with the tax rate largely in line with guidance and financial income at peak, starting in Q4, we expect the contribution from financial income to be more muted due to rate cuts and bond repayment that which occurred in Q3. We continue to take a disciplined approach to managing our business in the current environment in order to preserve our EPS objectives, while we continue to invest in innovation to support our long-term growth potential. Now I'd like to spend some time on our growth trends. And going forward, I will focus on the year-to-date trend as there can be quarter-to-quarter fluctuations impacted by the timing of large deals. The key message is that despite the current headwind, the growth momentum with 3DEXPERIENCE in Cloud remains resilient. Subscription revenue growth in 3DEXPERIENCE was up 57% year-to-date driving the share of 3DEXPERIENCE platform to now 37% of software revenue, which is up 3 points versus year-to-date Q3 last year. This highlights the strength and the potential for revenue acceleration in the midterm. Our top 5 new 3DEXPERIENCE subscription deals in the quarter generated 1/4 of the growth. Cloud revenue grew 7% year-to-date and excluding MEDIDATA, cloud growth increased 52% for the first 9 months, driven by strong momentum in the adoption of 3DEXPERIENCE Cloud. We have several customers expanding their adoption on the 3DEXPERIENCE platform on the cloud this quarter such as EDF, BoConcept, Conforama France, Dallara Automobili and Horse Powertrain to name a few. Now let's go over our performance by geo and product lines. Across Europe and the Americas, the weak automotive sector impacted Q3 performance. In the Americas, software revenue was up 6% in the quarter. It was led by mainstream innovation with an exceptional performance in Home and Lifestyle and increasing momentum of SOLIDWORKS. Europe was down minus 4% in the third quarter, largely due to the very high comps. At the market segment level, the performance across the region was mixed, highlighted by good results in the West and Central parts of Europe, while North due to the high comps and Mediterranean regions were soft. Performance in Asia remained on track, 9% growth in the quarter and year-to-date. Unlike Europe and the Americas, Transportation & Mobility was strong in China. Also Hi-Tech had a good quarter in the region. China up double digits in the quarter and year-to-date as investment in the technology sector continued at healthy levels. Japan, Korea and India were up mid-single digits in Q3. Now switching to the product lines. The impact of delayed decision-making headwinds on growth is most visible in Industrial Innovation, up 4% for the first 9 months and minus 1% for the quarter. The reacceleration of growth is associated with deals in our pipeline that will drive this segment. One of the highlights of the quarter was clearly the strong progression of SIMULIA, up high single digits. Pascal talked about BYD. They expanded the use of our SIMULIA solutions for multi-physics simulation, including all domains. To complement, we also signed deals with [ Saba, ] HKMC and Honda Motors in China. Despite the lower total software revenue growth in Industrial Innovation, the momentum in subscription continued strongly at 20% growth. In Life Sciences, we saw in Q3, the anticipated acceleration with sequential growth improvements for MEDIDATA. This uptick was driven mainly by a continuous rebound in our study-based bookings growth over the last 4 consecutive quarters. Also, we saw broad-based momentum across enterprise and mid-market clients. Just to name a few customers that expanded relationships, Otsuka, Merck, Daiichi Sankyo, Revolution Medicine, Immunovant, Ipsen, BeiGene, Abbott and Solventum to mention a few. We are signing more deals. However, on the flip side, we saw fewer large deals in the quarter, similar to Q2. As mentioned during our second-quarter earnings call, we expect this trend to normalize as the share of large transactions will grow with upcoming renewals over the next quarters. From a market perspective, it is now the second consecutive quarter with sequential growth in global clinical trial starts. While the increases over the last 6 months remain rather small in absolute terms, the trend is positive. In terms of market share, we continue to gain share across all phases by 1 point on a trailing 12-month basis. This is driven by resilient momentum in Phase III and an uptick in late Phase IV studies. Phase I and II market share remain marginally unchanged. And as you probably saw in our press release from last week, we are doubling down on the early and late phase market. This is a very fragmented space, as Pascal mentioned, and we believe we can consolidate it with our new offer Rave Lite. The highlight this quarter was clearly mainstream innovation with 15% growth in Q3. SOLIDWORKS had a good start into the second half of 2024, up mid-single-digit growth in revenue and volumes. Centric delivered an outstanding quarter, featured by competitive displacements and strong renewals with healthy expansions across the platform. Now let me share a few more observations on the strong performance of Centric PLM. The Centric team has made significant progress over the last 4 to 6 consecutive quarters, scaling the operation at the global level. This is evident in the growth trajectory and value capture reflected in large deal sizes. The deals this quarter are spanning across retail, apparel, sports and cosmetics and include significant platform expansions. In Q3, key competitive wins were PVH in the U.S., ASOS in the U.K. and Kmart, a leading retailer in Australia. Now turning to the cash flow and balance sheet items. Cash and cash equivalents totaled EUR 3.658 billion compared to EUR 3.568 billion at the end of 2023, an increase of EUR 89 million. At the end of September, our net cash position totaled EUR 1.066 billion versus net cash of EUR 578 million at December 31, 2023. Now let's look at key levers impacting our cash position at the end of the third quarter. We generated EUR 1.353 billion operating cash flow year-to-date versus EUR 1.272 billion last year or growth of 6%. For the first 9 months, cash conversion from non-IFRS operating income was 100% versus 95% at the same time last year. For further detail, please see our operating cash flow reconciliation in our presentation published this morning. The main drivers are the increase in net income adjusted for noncash items and lower tax payments, which are partially offset by lower compensation accruals and a timing effect of payments for accounts payables. Operating cash flow uses were as follows year-to-date. First, for financing purposes, we repaid EUR 700 million of bonds used to finance the MEDIDATA acquisition, which came due in September, offset by EUR 300 million in new commercial paper issuance. We repurchased treasury stock net of proceeds from the exercise of stock options of EUR 329 million and paid EUR 303 million in dividends. Second, in terms of investing activities, we invested EUR 142 million in property, plant and equipment, of which EUR 89 million is related to IT CapEx supporting our growth and the rest of EUR 53 million mainly to expand and modernize our office space and presence in France, U.S. and India. We reiterate our commitment to invest and foster our culture of collaboration and innovation across our locations and workspaces. Now let's take a closer look at our full year outlook. Over the first 9 months, we experienced a certain volatility in key end markets such as aerospace and now automotive impacting the time to advance our large deal pipeline. It is clearly visible in Industrial Innovation. On the flip side, we are seeing the Life Sciences market stabilizing, also SOLIDWORKS accelerating growth in Q3. And CENTRIC PLM continues to outperform, expanding deal sizes across an increasing scope of verticals. Now with this in mind, I have 3 key messages before outlining our Q4 and full year objectives. First, we are committed to deliver the EPS growth unchanged versus previous guidance of EUR 1.27 to EUR 1.30. This reflects strong operating efficiency and commitment to our midterm objectives. Second, our pipeline of large 3DEXPERIENCE opportunities remains strong over the next quarters, and we are confident in growth acceleration in Q4. Provided that the timing of decision-making can be less predictable in the current environment, we want to be cautious and adjust total revenue growth for the next year -- for this year from -- to now 5% to 7% growth, down from 6% to 8% previously. Consequently, total revenue is now in the range of EUR 6.155 billion to EUR 6.275 billion versus previously EUR 6.260 billion to EUR 6.335 billion. As you can see, we are increasing the range to EUR 120 million to reflect a larger variance of outcomes in Q4, while still expecting solid acceleration at the midpoint to 8% growth in Q4. For software revenue, we expect 5% to 7% growth for 2024 with an upfront license revenue in the range of minus 1% to plus 6% and recurring revenue up 6% to 7%. Subscription revenue is anticipated to be in the 10% to 12% range and service revenue will be in the range of 4% to 6%. From a bottom line perspective, we now expect the operating margin in the range of 31.8% to 32.2% versus 32% and 32.4% previously. This guidance excludes any impact for the exceptional tax applied by the French state, which we cannot quantify at this stage. However, it will be excluded from the non-IFRS reporting as it's an exceptional and temporal item. Now I would like to share some additional points to help shape your models reflecting Q4. As mentioned, we are increasing our range to EUR 120 million. For Q4 revenue, this translates to 5% at the low end and 12% at the high end or in absolute terms to EUR 1.696 billion to EUR 1.816 billion. The new high end of the range was the midpoint of the previous guidance. Our pipeline reflects the potential for revenue acceleration. We adjusted the low in 2 steps: first, to reflect the potential of large deals being pushed out to 2025; and second, the pipeline in automotive converting to revenue at the same rate as in Q3. The increased range is most visible in upfront license revenue between 0% to 20% growth. We expect subscription revenue in the range of 12% to 19%, reflecting strong acceleration driven by 3DEXPERIENCE deals. In this outlook, we expect MEDIDATA to continue to improve sequentially. Operating margin is expected in the range of 35.9% to 36.9% and EPS of EUR 0.38 to EUR 0.41, up between 5% to 13% ex-FX year-over-year with usual strong seasonality of Q4. Now in conclusion, I want to reiterate our commitment to investing and support our long-term growth objectives while expanding our margins and delivering EPS growth. We continue to see strong customer demand and engagement across our 3DEXPERIENCE portfolio, Centric PLM and MEDIDATA. While we experienced the current volatility in some of our end markets, our pipeline highlights the potential for growth acceleration. And now Pascal and I look forward to your questions. Thank you.

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

I'd like to start with a question on your sales model and strategy. That is -- there was, of course, in the last few weeks, an important consolidation event here in the U.S. in your CTE and CRE channel, which is already highly concentrated and now even more so. The question is, tactically, how are you thinking about leveraging that more consolidated U.S. channel in terms of, for example, cross-sell opportunities and perhaps more importantly, strategically over time, how are you thinking about the structure of your channel? Do you retain CPE and CRE separately? Would it make sense at all perhaps to even acquire some portion of your channel capacity as you did in 2010? And then I have a few more questions.

Thank you, Jay. So I will start with the first question. So first of all, the separation between what we call CPE and CRE will stay. And why so because it's 2 different ways to engage with customers. And sometimes even if the product would be the same. But at the end of the engagement, the customer are not expecting the same thing. If you are a CPE customer, you are looking for not only the fact that you have people being knowledgeable on the software to help you to run this software to train you, but also you need to be guided in the way you are transforming your company. So it's a consultative approach. It's also a way to guide the business reengineering of the company, at the same time to also help the company interchange management, which is very different from what CRE is about because CRE is really here to build the footprint in a very transactional way with a volume approach for the products where we do not need too much services or o management, if you want associated to. So that's the first part of the question. Second one is you are right to mention that in North America, we have the consolidations happening. It's not new why it started a few years ago. Is it a concern? I don't think so. Let me explain to you why because I think given the size of the business we are running right now, this is important also to have very strong partners and having not only the human resources, but also the financial capacity to continue to expand to cover all the new verticals we are willing to cover. So in a way, having stronger partner is going in the right way. There is nevertheless something where I'm paying a lot of attention, which is exactly what you are suggesting, which is not to mix too much the 2 models. Because one is really related to what we call the value wise, which is how you continue to conquest the footprint. And the other one is what we call value up is how when you have an installed base, how you are basically enlarging and improving the penetration with all the solutions which are suitable for them. And those 2 mechanisms are complementing each other, but we should not mix the 2 different way to engage. Now coming back to the question, which is you are referring to the acquisition of Inceptra by GoEngineer. I think I had a chance to meet with them 2 weeks ago, and we discussed this topic. So there is definitely some synergy can be played between the 2 because there are a number of opportunity we have identified in the large installed base especially, for example, around the [indiscernible] supply chain management could be served by the Inceptra, the other part of the company. And I'm fine with this as soon as again, it remains 2 different engagement model with 2 different set of skills with 2 different business model with 2 different value proposals ultimately to the customers. And there is some synergy we can play. Last but not least, indeed our strategy to acquire our partners. If I start to do this, Jay, I would not scale anymore. So I think it's important for us to keep this ecosystem approach. It has always been a lever for us in order to continue to expand to basically specialize also some of the partners on new verticals, and we will continue to do so.

Okay. So let's turn to SOLIDWORKS. I think if I heard you correctly, you mentioned high single-digit volume growth for the quarter which would have been in line with our model and implying around 20,000 units for the quarter. But for the year-to-date, you're looking at about flat, maybe a little bit better from year-to-date volume. If that's correct, is it realistic to adhere to the 14% unit growth quota you gave to the channel, at least earlier this year? Is that something you can still realistically attain? And then can you comment on the objectives you've had with regard to doing more large transactions and as well the effect of the new packages that we talked about a quarter ago for the smaller accounts?

I do not have the year-to-date in mind. So maybe -- Beatrix is telling me it's mid-single digits. It's not flat, right? And for this quarter, we are -- we are at 8%, growth in terms of number of units. So as you can see, it's really an acceleration. It is confirming the fact that -- despite the fact that we are moving progressively to subscriptions, subscription is now representing 1/3 of the new [ CAS ] units each quarter. I think we continue to have a good momentum in terms of units. Now if you look at the installed base of SOLIDWORKS, if I oversimplify, you have basically a subsegment in 2 different categories. The large majority of the customer, they have between 1 to 3 seats and you have the one having more than 10 seats. The reality is we are growing extremely well in the one having more than 10 seats. And this is exactly what we just discussed previously, which is the value mechanisms. However, we need to reenergize the 1 to 3 seats, which is really the core of SOLIDWORKS. If you remember, we have been able to establish a footprint by addressing specifically this mainstream market composed by very -- sometimes very small companies. So -- and we have adjusted the offer in order to be much more suitable for this subsegment of the market. And I think we start to see the benefit of it because this quarter was really the first quarter after all the decisions we took almost a quarter ago in order to put against the focus on this subsegment of the market. So I think we want to be balanced. CRE is really about the volume and the footprint. At the same time, there are different large accounts, which are having different needs. And we are more and more giving the ability to do both without compromising the fact that it's still a volume approach.

Okay. My 2 final questions. With regard to the vertical integration strategy you have for your cloud business, back in April, the company disclosed that you were planning to add 3 new DS data centers, including here in North America, and the question is, have those 3 impacts gone live? And how are you thinking about adding further DS data center capacity into 2025? And then finally, with regard to infrastructure and cities, would you say that the strategy is largely process or data-management-oriented? Or would you say that you are reverting to more of a design or model-centric strategy for what most of us refer to as AEC? And with that in mind, can you talk about your plans to reinstate CATIA for the AEC market as you seem to be planning to do.

Okay. So relating to the data center, I think usually taking a quarter to open the data centers as soon as we took the decision. So I think we are on plan. Now the way it works, Jay, it's a business case for me. If I do not have the critical mass in terms of number of customers and users, it's much better for me to use the hyperscaler. And as you may know, we have the full compatibility with AWS. So it's very transparent to use AWS or to use our 3DS scale infrastructure. So I did not yet review the 2025 plans, but I do expect the need to open new data center will be limited given the coverage we have already built for the last few years. On infrastructure and cities, you are right. I mean, we are the challenger. And for a long time, we were willing to address this market with the traditional modeling and simulation approach. And now we discovered that with the platform, it was probably a much better way to penetrate this sector because this sector has digital data for the last 40 years. But the truth is they are not well equipped to collect those data, build the referentials and more importantly, to connect the virtual twin, if you want, with the real-time operation of those assets. I think this is where we have find the sweet spot for the platform, and we have a collection of wins since the last, I say, the last 3 years, where we have been able to demonstrate that the platform is extremely relevant. Does it mean we are not betting on the modeling and simulation tools? The answer is obviously no. We are -- but we reverse if you want, the go-to-market. We first are tackling this market with the platform. And when the platform is used in production, we are coming on top of it with the modeling and simulation capability. It's a much better way for us to establish a footprint and try to compete head-to-head with the modeling and simulation without having the platform value proposal to be established.

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