Dassault Systèmes SE (DSY) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Dassault Systemes call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Marie Dumas. Madam, please go ahead.

Good morning, everyone. This past Saturday, Dassault Systemes announced a governance transition. It's a pivotal moment for the company and sets the stage for our next chapter of growth and innovation. First, Bernard Charles has stepped down as Executive Chairman and Board member for personal reasons. Second, the Board has appointed Pascal Daloz as both Chairman and CEO. Pascal will now share his vision for the future of Dassault Systemes.

Thank you, Marie, and good morning, everyone. You know that for the very beginning, Dassault Systemes was built very differently. We think long term, we are a science-based company, and we build trusted relationships. That's why nearly 400,000 company around the world trust us. And our governance has never been an administrative process. It's our compass. It guides us how we think, how we decide, how we act with the convictions that defines us. Our vision for the future of Dassault Systemes is clear, leading the industrial AI transformation with 3D UNIV+RSES. And it goes far beyond the technological contributions. It represents a long-term commitment to fundamentally readvance how industries innovate, build and operate in this new economy. We call it the generative economy because it's powered by intelligence, accelerated computing and limitless possibility. And the potential is very huge. But to succeed, we need consistency, alignment and long-term stability. This change shows that we plan for decades, not just for quarters. We are building on the foundation laid by Bernard Charles over the past 40 years, in fact, 43 years. And you know him as a Co-Founder and CEO. Bernard led our company from a startup to a world leader. He didn't just grow the company. He shaped, I think, an entire software category, transforming industry for a more sustainable world. Over the past 3 years, as Executive Chairman, he has also strengthened our Board and worked closely with me on research and development, key client relationships, and our long-term directions. I think we honor his legacy as we move forward. For personal reasons, Bernard asked the Board to release him from his responsibility as Executive Chairman. After Bernard announcement, the Board appointed me as the Chairman and CEO, and I'm very grateful for their trust. My mission is to accelerate 3D UNIV+RSES and make sure Dassault Systemes lead industrial AI around the world. My top priority is simple: make ambition real for our customers and shareholders. That's why we are rebuilding the company on the map on a really new foundations architected around artificial intelligence by creating a new category of solutions with generative AI built at the core, not added on top of, by aligning every teams, every resources, and every investment behind this strategic shift and by reinventing our business model to capture the full value. Bernard remains an important part of our journey. As a product and technology leader, he has agreed to continue to work with us. For 20 years, you know that Bernard and I have built a relationship founded on trust, high standards and loyalty. I really value his inspiration and his support and the trust we share. So let me sum up in 4 points. First, continuity. I think Bernard's legacy is our foundation, and my leadership will build on it seamlessly. Second, confidence. The Board's unanimous decision shows our alignment and focus. Third, vision. 3D UNIV+RSES is more than the strategy. It's really the future of industrial AI, and we are leading it. And lastly, purpose. Our governance ensure that we turn ambition into reality for Dassault Systemes and our customers. I now look forward to your questions. Thank you.

[Operator Instructions] We will now take the first question from the line of Mo Moawalla from Goldman Sachs.

Yes. Pascal, a couple from me. First of all, could you shed any light on the specific timing of Bernard's decision? I know that it's been a sort of challenging couple of years for the company. And secondly, are there -- should we anticipate any other major strategic shifts in the business going forward following kind of Bernard's departure? And one last one. I know that you separated the role of Chairman and CEO a couple of years ago. Do you expect the Chairman and CEO structure to be more permanent going forward?

Thank you, Mo. So on the timing side, I think it's a personal decision. And you have seen that we basically acted very chicly because the Board -- I mean the governance works extremely well. The succession planning is -- has been reviewed annually by the committee, by our Compensation and Nomination Committee. And the Board really unanimously votes to reflect the confidence in the succession plan. So in a way, it works. And if you remember, that's what Microsoft and SAP, they did. They executed the founder transitions at the time where they were also repositioning the company. So that's for the timing. The second question is are we expecting changes and other things? I think, no, you know the strategy of Dassault Systemes. I think we are really focused on the 3D UNIV+RSES. And what we are executing is really 3 things. To redeploy our product offerings to shift to 3D UNIV+RSES; to align the go-to-market either to accelerate in life sciences and consumer, but at the same time, to transform our distribution partners in order to be suitable to push these 3D UNIV+RSES value prop; and last but not least, also to redesign our business model in a way to monetize those new AI-driven solutions. That's what we are doing, and this is really what we do. Now regarding the fact that we have the 2 -- the dual role in a way. First of all, it's a choice. It's a strategic choice. It's not a power play, and this has been the recommendation of our Compensation and Nomination Committee. The second one, we should remember that 50% of our directors are fully independent. So we're clearly, we're exceeding the AFEP-MEDEF standards, and we are aligned on the NASDAQ rules. All the critical committee, whatever it's the Audit, Compensation and Nomination, Scientific are 100% independent, and we also have a Lead Independent Director with Laurence Daures. And if you look at all the other company the Dassault family is really a major shareholders, whatever it's Thales or Dassault Aviation, I mean you have the Chairman and the CEO being combined in all the different cases. So that's what I can say, Mo.

[Operator Instructions] We will now take the next question from the line of Charles Brennan from Jefferies.

Just the first one, I think it's alluded to in Bernard's comments in the statement that he remains fully available as an adviser. And Pascal, I think you mentioned in your prepared remarks. Should we assume that Bernard remains on the payroll as some kind of strategic adviser? And what do you think he can do as an adviser that he couldn't have done as Chairman?

Thank you, Charles. So yes, Bernard will remain actively engaged in product and technology innovations. And in a way, if you remember that's what Bill Gates did as a technology adviser, or Hasso Plattner, if you remember, at SAP. So the goal is Bernard is very well recognized in the industry, having -- been basically been the architect of the different version of the software. He is really not only recognized but is valuated for this. So I think this is important to keep Bernard engaged with us. And in a way, he will do what he likes. In a way, it's a way for him to have the freedom to continue to push what we are -- what we started a few years ago. The way we will structure the collaboration has been defined, and he will continue to be with us for a time. That's what I can say, Charlie, at this time.

We will now take the next question from the line of Laurent Daure from Kepler Cheuvreux.

I have 3 questions. First, I think Bernard had a very close relationship with a couple of customers. Do you expect him to be still a little bit engaged with clients? Or his role will be only devoted to the AI part? My second question is you're taking more on your plate. I think there are some few changes at management level. If you could summarize a little bit the add-up that you've made or planning to do to help you on the management side? And the third question is on the 3D UNIV+RSES. You're underway, but what could be your biggest challenge in terms of AI development in the years to come?

Okay. So for -- we have built this transition for a certain time. So between me and the rest of the executive team, really, we have -- we master all the relationship between all the different customers we have. Nevertheless, I think we still have -- Bernard still have close relationship with some of them and no need to ask him to step down. He will continue. But keep in mind that we -- anyway, the company is organized and structured in a way to lead those conversations without him being involved. Now related to the changes from a management standpoint. I already started to do this. And if you remember, I made some announcement during the quarter -- during the earnings. The first one is I look at what was not working last year, specifically Centric and the go-to-market for MEDIDATA. And we took some radical decisions because we changed already the management for Centric, and we rebuild almost half of the management team. On the MEDIDATA go-to-market, we changed the leader. We have someone coming from AWS. He was the one leading the entire scope and space for AWS. So very well connected to promote large enterprise solutions, very well connected also with the IT. So I think it's a very good complement compared to what we have. I'm also reinforcing the management team, the executive team with someone coming externally in order to accelerate the transformation of the indirect channels, which is something you heard me many times saying that we need to accelerate because the solution we are bringing to the market require different specialties, different focus, different set of skills and we need to diversify our ecosystem, and he will bring this expertise to us. And I'm also hiring someone coming from McKinsey in order to lead the global transformation for the company more from, a, let's say, an efficiency and a process standpoint than a pure business standpoint. That's for the management changes. The last comment related to 3D UNIV+RSES, I think it's our focus, and you know that I'm accelerating the development of the solutions. This year, we will come with something like 60 new companions and 40 new generative experiences. So this will be a critical mass to serve all the industry we are targeting and we will continue any way to accelerate by using also the capital allocations in order to target some external companies to fulfill some of the -- or at least to accelerate some of the development we are doing. That's for the 3D UNIV+RSES topic.

There are no further questions at this time. I would like to hand back over to the speakers for closing remarks.

Okay. So thank you, all of you, for your participation. And let me close with a simple message. This transition is about continuity and acceleration on one hand, continuity because we remain true to what defined Dassault Systemes for more than 4 decades and accelerations because we are entering indeed in a new phase with 3D UNIV+RSES and we have these clear ambitions to lead industrial AI transformation and to make generative AI a concrete driver for the value creation for our customers and for our shareholders. I think the direction is clear. The governance is aligned and our commitment is strong. So again, thank you again for your trust and for joining us today. We look forward to continuing this conversation. Rouven and Marie will be on the road in the coming days. So I'm sure you will have an opportunity to discuss more. Thank you so much. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.