Dassault Systemes Sa Adr

Hello and welcome to the Deso Systems 2024 fourth quarter and full year earnings call. My name is George. I'll be coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your line is in the listen only mode. However, you have the opportunity to ask questions towards the end of the presentation and this can be done by pressing star one on your telephone keypad to answer your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. And I have to call over to host today, Ms. Beatrix Martinez, to begin today's conference. Please go ahead.

Thank you, George. And thank you for joining our fourth quarter and full year 2024 earnings conference call with Pascal Lallouz, Chief Executive Officer, and Reuven Bachmann, Chief Financial Officer. This system 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 Register registration documents. 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 Benes.

Thank you, Beatrix. Good morning, good afternoon, everyone. Thank you for joining us today. It's always a pleasure to be with you for the full year result and for the The quarterly results, the Q4. Let me give you the tone first. I think we are really pleased with our performance and the strong momentum we have this quarter. We signed major contracts driven by the 3D experience, which will accelerate the future growth. Now, let's start with some few headline figures for our Q4 and full year 2024 results. First, we deliver strong Q4 results with the software revenue accelerating to 9%. This top-line momentum was driven by a 13% increase in the new business and a 22% rise in 3D experience. EPS grew by 11%. Before I hand it over to Ruben for detail on our financial and 2025 outlooks, I want to touch three important topics. First, 2024 has been a year of competitive success, many driven by the expansion of 3D experience across industry, domain, and geography, and redefining our strategic partnership with many industry leaders. And I will share some names with you later. Second, key to this success is really the relevance of 3D experience, now contributing to nearly 40% of the software revenue. By combining the deep industry knowledge and know-how, It helps customers enhance their value propositions and empower their teams. This, again, will nurture our future growth and build the foundation for the broad cloud adoption. And third, I think today we are unveiling a major horizon for Dassault Systems, one that builds not only on the work over the past three years to define and create the game-changing solutions based on the deep and wide adoption of generative AI, but also on the positioning of our company. I think this solution will enable our customers and clients across all the sectors to take advantage of the artificial intelligence at every stage of the lifecycle of the products and services. Now let's start with the sector trends and key wins. In manufacturing industry, the automotive sector faces slowing demands, mostly driven by the lower EV adoption rates. Automakers, and you know it, are under increasing pressure to transform and to become more innovative and efficient. To achieve this, they really need to develop software-defined vehicles while also becoming more cost-effective as vehicles are currently too expensive. This is why they are turning to 3D experiments. And over the past 18 months, we have displayed the competition on many occasions. And we have significantly expanded our footprint while preserving at the same time our value. So let me remember the sequence. So at the end of 2023, we had GLR, Renault, and this year we had BMW, Volvo, Mahindra, Mahindra. And I'm extremely proud to announce that Volkswagen Group has also chosen to adopt the 3D experience. Beyond these windbacks, I think the industry continues to offer substantial growth opportunities within the supply chain, or by expanding the deployments with our existing clients. Meanwhile, the aerospace industry is facing a paradox. The order backlogs are at record levels, but the supply chain disruptions and the production ramp-up challenges make transformation even more critical to collect the cash. Aerospace OEMs rely on 3D experiments to meet demands, accelerate productions, optimize the cash flow, and streamline the supply chains. As a proof of this, in 2024, we redefined our 20 years partnership with Airbus by expanding into their value network. And we are also expanding in the U.S. defense sector with Lockheed Martin Group, which I will discuss in more detail shortly. Looking ahead, we see significant growth opportunity, particularly in the space and defense, with the U.S. being the critical market for the expansion. In the consumer-driven industry, the PLM adoption is still early stages, creating a strong growth dynamic. With Century PLM, our dedicated brand for this sector, we are uniquely positioned to capitalize on this momentum. And our solution is a perfect fit for their needs, And the addressable market remains extremely vast. Now turning to life sciences, we announce our strategic repositioning in next New York in November, and some of you have the chance or the opportunity to attend it. So this repositioning includes the expansion of the value propositions of MediData, which is now built on three pillars, the patient experience on one hand, the data experiences, and the study experience on the other hand. It has been well received by our clients, notably in the pharma sector. And this is, I mean, as an evidence, you can see it by the renewal and expansion of the major contract we achieved in 2024. We leverage our extended portfolio with clients such as BMS, Sanofi, AstraZeneca, Moderna, Regeneron, Novocate, and Bayer, which I will elaborate on shortly. Additionally, I think we signed several win-backs, displacing competitors, including strategic EDC agreement with Eli Lilly, one of our competitors' flagship customers. This repositioning in life sciences also includes an expansion into manufacturing and TLM, the integration of artificial intelligence across the portfolio, the development of the human virtual twins as a way to connect between the physical and the real world, For example, combining the real growth with software to enable personalized treatments. Consequently, I think we are confident in our ability to return progressively to WGE growth, driven by our strengthened position in life sciences and our ongoing innovation across our portfolio. In the infrastructure sector, the energy transition is driving strong demand across renewable and nuclear industries. fueling sustained green capital expenditure. In construction, the focus is really on enhancing productivity, minimizing material waste, renovating existing buildings, and reducing the CO2 emissions. This segmented industry, from hospital to nuclear plant and data centers, requires deep expertise, and we focus on key segments using 3D experience and virtual twins to integrate the knowledge and the know-how and enable a more generative approach. In addition, I think with one single platform, we are creating the value on both sides, the build, the engineering phase, and the run phase, the operational phase. In the infrastructure sector, I think more than the market share, it's the share of value that matters to us. We focus really on the transformative projects that make the real impact, where we bring disruptive approach to drive lasting change. Now, let's explore in detail some of these customer successes. As I mentioned, Volkswagen Group has selected 3DEXPERIENCE on the cloud, a decision that encompasses all the group brands, the well-known brands, including Volkswagen, Audi, and Porsche, but also Skoda, Seat, Cupra, Bentley, Lamborghini, Scania, just to name a few. This is a significant win. Once in every 20 years decisions, and I like to remember this. Facing significant strategic challenges, I think VW has selected us to support these transformations. With close to 40,000 users relying on 3D experience, we are expanding the scope of our partnerships beyond the mechanical engineering to system engineering on one hand and manufacturing on the other hand, with hundreds of VW group factories involved. This extension of our scope implies displacing the competitions. And with 3D experience, VW will benefit from a faster development cycle, an optimized resource allocation, and a shorter time to market, cutting it in half. Their choice of our cloud solutions will also accelerate the adoption and lay the foundation for artificial intelligence. We are strongly supporting Volkswagen in its radical transformations, moving from the traditional car manufacturing to the software-driven. After Volkswagen, let me focus on another major win, Lutin Martin Group. These decisions also encompass all the group divisions, including the aircrafts, the space systems, and helicopters. Facing surging defense demands, they must accelerate the productions. And as long-time partners, they are expanding their commitment by expanding the use of 3D experience to transform their manufacturing operations. In this case, too, we are displacing the competition. 3D experience for manufacturing will streamline the production, connect the suppliers and the shop floor, for a rigorous quality control and it take it a step further. Looking Martin is also becoming a model-based enterprise with a fully integrated digital spread across the entire product lifecycle. In another world, they are creating the virtual twin of the enterprise to drive the greater agility. Now moving to life sciences. Bayer reaffirmed its 90-year partnership with Medidata as a key strategic partner for the clinical research. As part of their growth strategy, they explored other solutions but realized none could meet their high standards. With this renewal and expansion, Bayer is accelerating its clinical trials, both by increasing the volume of studies conducted with us and expanding the use of our portfolio of products, to transform also their manufacturing. So they are also preparing the future with red light for early phase studies and expanding the use of patient cloud, making it easier for patients to participate remotely. This isn't just a contract renewal. It's a clear acknowledgement of the superiority of the Medisata platform. Now to conclude with the customer wins, BI AD has chosen the 3DXtrans platform to transform the hospital construction. By leveraging the virtual twin and simulations, we enhance patient care, reduce the wait times, and optimize the operations. Reducing the knowledge has increased productivity by 30% and cut costs by 15%. And with our productization approach, BIAD, is setting new standards in quality and efficiency. The first hospital, Virtual Twin, was completed in just 90 days, and another 90 will follow in Beijing alone, really transforming the industry at large. This is how we drive innovation in a specialized construction market. A final note on construction markets. You know that China accounts for more than 25% of the global construction markets. And to accelerate our market penetration, we are launching a joint venture for sustainable building and cities in China with CACDI, a leading architecture and engineering institute employing over 5,000 engineers. And for the ones who are very interested by this, you know they just published a complete scientific analysis in a famous book, which is Nature, and you have the links in the chart showing that combining 3D experience with the virtual trees reduce the construction time by 25%, the cost by 10%, the waste by 15%, and improves the quality by nearly 20% at the same time. Now, I want to move to the strategic sections. You remember just one year ago, we announced our 2040 year reasons. We call it the generative economy. which is the convergence of the experience economy. And you remember the experience economy, a product is not enough. You need an experience which goes with it. So it's a convergence of the experience economy with a circular economy. And it's really about taking the inspiration from the living world to generate rather than consume. For our customers, the generative economy provides tremendous opportunity when it comes to create sustainable products and services, reinventing circular way of life, providing accessible and quality care, for example, for all. The generative economy is a knowledge economy. It's an economy of the virtual assets in which intellectual property will serve as a new currency. And tomorrow's industry leaders will be those with the best developed knowledge and know-how assets. As a consequence, today, As part of the generative economy, we are introducing the 3D universes and their related AI-based services. In fact, the 3D universes are a new class of representation of the world. And for the ones who are following us for a long time, you know that Dassault Systèmes DNA is really inventing industry-changing representation of the world. 3D universes are the seventh generation of representations. that we introduced over the past four years. Allowing new way of imagining, creating and producing. So just a quick recap. Generation one was really about the 3D modeling for digital pre-assembly. Generation two was the digital mock-up for design in context. Generation three was PDM. on how to couple the information with the representation for collaboration through project and program management in the engineering and manufacturing domains. Generation four was related to the product lifecycle management for better traceability and a better certification. Generation five is a virtual twin, is how we can replicate the real, but by elevating it because it's all the knowledge and know-how embedded into the things. The virtual Generation 6 is about virtual twin experience, and you remember it was moving from things to life, making biology as an integrated part of the virtual twins. All of those generations are creating a rich legacy of intellectual property. It was created with our customer base, the largest in our sector, And now we have the benefit to have the largest knowledge base in our market. So what are the 3D universes? The 3D universes is, in fact, a combination of modeling, simulation, and real-world evidence with the artificial intelligence-generated content. They embedded multiple generative AI technology at the core of our platform. They will allow customers to fully explore their rich and high-quality patrimony of 3D designs, virtual twins, or PLM data. The 3D universes offer a unique and secure industry environment for combining and cross-simulating virtual twins, on one hand, and for training the multiple artificial intelligence engines, while at the same time we are protecting the customer intellectual property. As a consequence, we are introducing new artificial intelligence-based services. First one is generative experience, an experience that we are not created by humans, but with artificial intelligence. The second is virtual companions, which is really a way to upskill our role and processes portfolio. And lastly, an intelligence virtual twin experience as a services, which my view is, preparing what will be the future of the professional services in our industry. Now, let me give you an industry view of the 3D universes. In each of the three sectors, we are focusing on the value areas centered around what we call the end products and services, the core value created by our customers for their end users. With 3D universes, our ambition is to virtualize the entire cycle of life of this and products and 3d universes make it possible for customers to create the virtual twin of everything for everyone virtualizing the cycle of life is possible by connecting virtual and real and connecting the virtual twin together for instance for cars we can connect the virtual twins of its designs engineering and manufacturing and the usage of same times it's a crucial factor Because in the 3D universes, we want to make generativity trustable. Because 3D universes are really science-based spaces for understanding, experimenting, and learning at the same time. For example, in life sciences and healthcare sector, I think with our multi-physics and multi-biology modelers, we provide the virtual twin of the heart of a specific patient. And by combining the modelization and simulation with artificial intelligence, the surgeon can now generate therapeutic scenarios and validate them. So the 3D universities is becoming the virtual companion of the surgeons, helping them to make the best decisions. Protecting the patient data is just as essential as protecting the citizen data. And in the infrastructures and city sectors, I think we are also providing 3D universes being powered by artificial intelligence. And we are clearly offering a trusting environment to manage the complexity by aggregating the multiple processes of data, whatever the citizen data, the city planning, the flow, the traffic. We are integrating all of them into a unified model. And from there, we are generating life experiences. So with this plasticity, I think the 3D universes are becoming an operating system for the cities. As a consequence, with 3D universes, we are repositioning Dassault Systèmes as the most trusted IP generation and management company. This is a major strategic move for our customers across the three sectors we serve, equivalent to what we did in 2012 with 3D experiences in terms of impact. So to summarize, I think 3D experiences embedded multiple generative AI technologies at the core of our platforms. Our multi-AI platform provide customers with a world-class secure environment to reveal and generate their own knowledge and know-how with a rapid deployment. AI is really about empowering organizations, consumer, patient, and citizens with knowledge and know-how. And with this, we are expanding our offering in addition to our industry solutions process and role, by introducing new category of experience as a services, the first one being the generative experiences, the second one, the virtual companions, and the third one, the intelligent virtual twin experience as a service. And finally, all of this is about trust. And 3D universes make generativity reliable. I think we are committed to protecting our customers' intellectual property And thanks to our 40 years of industry legacy and immense customer base we have, we train our artificial intelligence engines on the most meaningful purposes to create the highest value for our customers. So those key points will be regularly addressed in our communications on a quarterly basis, but it will be also the focal point for our upcoming Capital Market Day in June. In the meantime, I think it's time now to And over it to Ruben. Ruben, you have the floor.