Dassault Systemes Sa Adr

Good morning, everyone. Marie Dumas from Dassault Systèmes. Thank you for joining this presentation. Pascal Dalloz, our CEO and Chairman, and Reuven Bergman, our CFO, are on the line with me to discuss our first quarter 2026 earnings. During this presentation, results are prepared in accordance with IFRS. The financial figures discussed on this conference 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 in the Risk Factors section of our 2025 Universal Registration document. All earnings materials are available on our website. I'd like now to hand over to Pascal Dalloz. See you in chairman.

Thank you, Marie, and good morning to all of you. It's always a pleasure to be at this time of the year physically in London, and thank you for the one being with us today. I know it was not so easy because it's Friday in London. So, again, thank you for being here. Before handing over to Reuven, I really would like to put this quarter into the perspective of our trajectory. So remember what I say, 2026 is really the year of execution. Not vision, not strategy, execution. Execution to strengthen the foundation for sustainable growth, but more importantly, to accelerate our transition to subscriptions, and to deploy our industrial AI strategy. Let me start with where we are. So back in February, we set a clear commitment. Today, we are, I think, delivering on them. Q1 is on track, revenue up 3%, no surprises, no deviation. We confirm our full-year outlook, 3% to 5% growth, with an acceleration in the second half. But I think beyond the numbers, what matters is really the trajectory we are building. And the key question is really how we are delivering this. And I think we are doing it through three priorities. The first one is transforming our existing clients. The second one is expanding into new frontier to conquest new domains. And the third one is scaling industrial AI. And I think we're executing them consistently. Now let's zoom on the first one, the install base. If you look at it, globally, our clients, they are not slowing down. Because I heard you many times saying, you know, you have a large install base, but most of your customers are slowing down. I don't think so. But they are changing. They are transforming. They are adapting themselves. So why I'm saying this is because they are not constrained by the demands, but they are constrained by the complexity. Too many systems, too many regulations, too many geopolitics. And at the end, this is creating a lot of frictions between design and executions, between sourcing and supply. And this is really where we come in. And the proof of what I'm seeing, if you pay attention and you look at clearly what is underlying the performance, I would encourage you to look at the annual run rate, which is up 6% this quarter. The cloud is up 8%. It's more than twice the total growth. And 3D experience is up 7%, despite, if you remember, a high comparison base. But this is not just a shift in terms of tools. It's really a way how these companies are operating today. The second lever is the new frontier. And the new frontier is really where the growth will come next. Let's zoom first in life sciences. The environment remains challenging. But I think our platform approach is starting to deliver results. And I will come back later on this. In the consumer space, we see discipline, spin and scale, and strong growth in apparel and growing momentum in food and beverage and retails. And I think we are building strong positions. And the third lever is obviously 3D universes, which is one of the most important shifts, because this is where AI moves to promises, to reality. Not anymore pilot of proof of concept, but real use cases in productions. And all of this is powered by our AI architecture, which has been designed purposely for the industry. Now, if we step back and we look at the industry, there are a few things I want to share with you. One thing is clear. I think we are increasingly acting as a critical partner for many, many of our customers. The first comment I want to make is the performance of mainstream. Mainstream is really broad-based. And solid waste continues to drive the momentum. And why this is important? Because you know, usually it's an early indicator of the underlying demands across industries. So this is extremely important to have this momentum still going on. Now, if I zoom in transportation and mobility... Demand is holding despite the volume pressure, and I think we remain the reference for most of programs around the world. And more importantly, this quarter, we continue to expand in America. In aerospace and defense, after a strong comparison last year, you remember we had this large deal with Lockheed Martin. The next wave is ahead and we see budget increasing and we are starting to see some traction, especially in the defense part of the marine and offshore. But beyond the core, there are interesting things going on. I told you in the consumer, growth is really strong, driven by Centric, with sizable wins in apparel. I could mention Nike, for example, and growing momentum in food and beverage and retails. And this quarter, we signed landmark deals. We signed Amazon for the retails. We signed James Mucker. Ferrero in Italy. So those are really very flagship customers, and this is a good illustration of the momentum we see in this. In the high-tech, I think our solutions are benefiting from the global scale-up of AI and cloud infrastructure. I think it's something which is more and more visible in our revenue streams. And in life sciences, we are transforming a fragmented and slow environment with the platform approach. And finally, in infrastructure, growth is really driven by the complex energy program where I think sovereignty matters. There is one common piece across all the industry. I think we are helping our customers to move faster, to improve quality, and to use their capital much more efficiently. Now let's zoom on some customer examples. And let's make it concrete. The first one is Eaton. I don't know if you know Eaton. It's one of the global leaders in intelligence power management. But more importantly, they are the center of electrification. And their challenge, very simple, scale execution without adding complexity. And their answer is unifying everything on 3D experience on the cloud. As a result, today it's over 20,000 users working on one single system. And the net benefit of this is faster time to market, optimized costs, and value creation in the hundreds of millions. Another example, and I use it, I take it because we are here in London, is the UK Fusion Energy. You know one of you, you know them, because they are the one having the ambitions to deliver the fusion power plant by 2040. It's one of the most complex engineering challenges in the world. And in fact, they choose 3D experience as well as an operating system to connect the ecosystem, on one hand, to ensure the data continuity across all the different domains, all the different disciplines, and they build a secure infrastructure with this. So I think this is really a very interesting example how the transformation could be at the frontier of the innovations. Now, let's look at the second lever with concrete examples, the new frontier. I spoke about the semiconductor. And you know there is a race for AI infrastructure right now. So designing advanced chips is extremely complex. And I think with our multi-physics simulations, companies like Annapurna Labs can design and validate faster delivering the next generation of cloud infrastructure. In this specific case, Annapurna, it's an Amazon company, and they are the one developing the specific chip for the AWS data center. In life sciences, I think there are interesting things going on, and I'm sure Reuven will come back on this. We are reinventing the CRO business model. And why so? Because we are shifting them from a labor-intensive approach to an AI-driven operating model. And I think with our AI-powered media data platform, companies like WCT, Worldwide Clinical Trial, one of the largest CROs, they are moving from thousands of fragmented systems again to one unified enterprise's solutions. And this is important because for them, this has enabled them to do faster studies, better executions, and really real-time insights. And this is driving both their top lines but also their margin improvements. Now, in the consumer, speed is critical. And with Centric PLM, a GM smoker really accelerates the product development while they are maintaining the quality and the control. And the result, again, is faster innovation, better products, and a model that can scale across the industry and across all the product lines they have. Now, let me make some comments related to 3D universes, the third level. I think this quarter we are delivering tangible value. For the one who had the chance to be at NEXT last month, we demonstrated how we are connecting the full life sciences cycle from the discovery to the clinical and to the real world outcomes. How we do this? We are using virtual twins to synchronize, on one hand, the drug lifecycle, you know, all the different steps the drugs need to follow in order to be discovered, tested, produced, introduced on the market. And we do it also by synchronizing with the patient journey. This is where the drug is applied, where basically you collect the real insight. We have also introduced DOT. DOT is our virtual companions for clinical intelligence. And the results are very promising. You know, it's between 30 to 40 higher enrollment rates. And as you know, when you do clinical studies, I mean, the ability to enroll the patient is really something extremely critical. And I think this is changing the game. But more importantly, we have witnessed also the ability to create the clinical data corpus in a much faster. And in fact, we have divided the build time by five. So it's really a step change in the performance. Another thing which has been extremely important, you know, we were participating to the GTC. the larger, basically, ecosystem even around AI in San Francisco, and we showcase our industrial AI architecture. And you can see on the slides, you have basically all the different layers. But the takeaway is what? This has been built on 40 years of science, industrial data, and this is connecting design simulations, data, and the workflow with one unified systems. And the key differentiation is at the core of this system, we are putting what we call the industry world model. In the same way, companies like Anthropric, they have their foundational model with basically the language model. The ASSO system is building the entire AI strategy, putting the industry world model at the core. And it's not on the top, it's really at the core. Finally, we are releasing our virtual companions. I spoke about it many times. And you can see you have the lists there. They are becoming more specialized, more intelligent, and more connected. And why so? Because, in fact, we have this double approach. They combine industry know-how on one hand, and the domain expertise, the domain knowledge on the other hand. And we do this also by leveraging the real-time data. This is how those virtual companions are really helping us to scale intelligence across the company. If you are okay, I really want to make a quick demo just for you to see it. And if you can launch the video, please. So here, what you see on the screen, is a clear illustration of the shift underway in engineering and the market opportunity it creates. You still know that there are several millions of professionals still working in 2D, even if the 3D is already an industry standard. Now, AI helps us to make the move from 2D to 3D possible. And how do we do this? Because we are lowering the skills barrier to move. And here is a good illustration. Probably you recognize Manish. Manish is the CEO of SOLIDWORKS and the VP of Research and Development. And he's performing the same design with and without AI. So on the left is the traditional model. Extremely powerful, but in fact reserved for the experts. On the right, Manish generates an editable 3D model and interact it in a natural language with the virtual companions. And the virtual companions is the one proposing the designs, is the one basically knowing how to read the 2D to create the dimension automatically into the systems, creating the structure and configuring the 3D model to be ready for the simulations. So if you know a little bit this industry, you need to master a lot of skills in order to do these simple things. So why I use this example? Because it's more than a productivity story. It's about broadening access. It's about expanding the usage from the specialist to everyone and growing, at the end, the addressable market. So remember, with 3D universes, every object you add into the systems, every simulation makes it smarter, and every workflow makes it more valuable. This is really the power of the learning platform. To conclude, you know I already announced it, we're going to have a capital market day, but now I have the date. It will be November the 17th this year in Paris. We will go deeper into these visions, and obviously we will disclose the roadmap related to AI and how we are making the link with the financial plans. I think now it's time for me, Ruben, to over to you for more details on the financial performance and the outlook.

Okay, cool. Thank you, Pascal. Also, it's a pleasure to welcome you for our first quarter earnings call here in London and everyone following us online. As Pascal, as you mentioned, Q1 was a solid start to the year. We delivered revenue, margin and EPS well aligned with our objectives and clearly demonstrating continued focus on execution. Our recurring business continues to perform well. It's very much reflected by the consistent annual run rate growth of 6% year over year and a net ARR increase of 35 million sequentially. Also, we saw good operating discipline, which translated to strong operating cash flow performance of nearly 1 billion in the quarter that we generated, which is up 22% at constant currency. The bottom line is we are laying the foundation for acceleration throughout the year and into 2027. Now let's take a look at the details of the financial for the quarter. Total revenue reached 1,510,000,000. It was up 3% XFX, with software and services revenue all up 3%. On revenue mix, upfront license revenue came in slightly better than anticipated, up 9%, driven by a number of significant multi-year deals. Subscription revenue grew 3%, reflecting a tough comparable from the landmark Lockheed Martin deal, which we closed in Q1 of last year. Turning to our recurring business growth, the annual run rate, or ARR, as you know, provides a consistent view of annualized growth at a rate of 6%, independent of the timing of revenue recognition. And in the quarter, we added 35 million in annualized value sequentially, which brings the total ARR to 4,371,000,000, encompassing all active subscriptions and maintenance contracts, also including the annualized value of multi-year subscriptions, where IFRS requires us to record the revenue upfront. What drove ARR this quarter? A growing share of cloud bookings and continued expansion of multi-year subscription deals with higher total contract values. The broad-based momentum translated into double-digit subscription ARR growth. Turning to our growth drivers, 3DEXPERIENCE platform is at the core of our growth strategy. In the first quarter, 3DEXPERIENCE saw a 7% XFX growth and now makes up 42% of our eligible software revenue, up three points compared to last year. Cloud revenue grew 8% overall, with strong momentum in the take-up of 3DEXPERIENCE Cloud up 30%. And you heard Pascal earlier discuss some of our key wins, Eaton and UK Fusion. But there are more. We are executing on our growth drivers with a rate of growth more than two times when compared with our total software revenue. Now let's take a look at the geographies. Europe delivered healthy growth of 7% in the quarter. It was broad-based across regions, with strong contribution from home and lifestyle, as well as key deals in the energy sector. This is a clear illustration of our diversification strategy at work, delivering impactful solutions across an expanding set of end markets. Asia posted mixed performance, up 3%. with a slight decline in revenue in China, which was the primary headwind we faced. Outside of China, the business remained resilient across our geos, with Korea, Japan, and India all contributing meaningfully in core industries. America's was down 1%, reflecting the tough comparable from the Lockheed Martin contract expansion in Q1 of last year. Excluding this effect, America grew mid to high single digits. The underlying performance was strong, with double-digit growth in transportation and mobility, as well as industrial equipment, and even stronger momentum in the consumer industries. Now let's take a look at the performance of product lines. Industrial innovation was flat in Q1, mainly due to the tough comparable as mentioned before. Adjusted for this, industrial innovation was up mid-single digits, with the growth replicated across our core manufacturing brands such as Delmia, Simulia, Inovia and Catia, and driven by good traction on subscriptions. For mainstream innovation, as you see, we had an outstanding quarter, up 14%. Centric delivered a particularly strong return to growth this quarter, driven by notable new client wins, including a significant competitive displacement, and brought momentum across strategic verticals such as food and beverage, retail and sports apparel. This is a meaningful inflection point and a testament to the new leadership and the entire Centric team. Clients are validating the strengths and differentiation of our offer as they look to transform their business in a fast-moving consumer industry with AI at the center. This performance supports our full-year outlook of mid- to high-teens growth for Centric, with Q2 mainstream growth expected to normalize sequentially from this quarter's level. Also, SOLIDWORKS' momentum continued with high single-digit growth in revenue and double-digit growth in units. The performance was broad-based across geos, and it underscores our strong value proposition in the mainstream market, where short sales cycles and time to value are essential. Now to life sciences. And as expected, Q1 was still negative as Medidata's business was mainly impacted by lower revenue contribution from partners. This reflects a carryover from lower 2025 bookings, while in the quarter, we saw bookings volumes and value trending positive versus last year. Also important to highlight, as Pascal mentioned, we signed a strategic multi-year partnership with Worldwide Clinical Trials, a leading CRO, standardizing clinical activity on Medidata's platform and leveraging AI across all workflows to speed up and simplify study build and execution. We see this as a first-of-a-kind deal. For 2026, we expect H2 to improve over H1 with the objective to reach a positive run rate growth entering 2027. Now turning to cash flow, clearly a highlight of the quarter. We generated a strong 949 million in operating cash flow in the quarter, up 17% and 22% excluding the currency impact. As anticipated, this was mainly driven by positive working capital dynamics over the quarter. As account receivables decreased sequentially, reflecting strong cash collections and a favorable impact from contract liabilities due to higher billing activity. Free cash flow was up 27% in the quarter, driven by the strong operating cash flow. Cash conversion in the first quarter jumped to 208% versus 167% in Q1 last year. Seasonally, we know Q1 is a strong cash collection quarter, but at the same time, the progressive transition of our business towards subscription and cloud creates an opportunity for continued improvement in cash conversion. To complete the picture, our overall cash and cash equivalents reached 4 billion 875 million as of Q1, which is an increase of 750 million versus Q1 25. And looking at the investments in the quarter, it's also worth highlighting that we completed an acquisition of a startup to expand our cyber system strategy with ALM capabilities, application lifecycle management. Combined with 3D experience, this acquisition offers a unique advantage for companies developing software-defined products. We are excited to have a very talented team joining our Cyber Systems Katja team. Now to finalize, our net cash position remains strong and stood at 2,396,000,000 as of the end of Q1. Now to the outlook. We are confirming our full-year outlook for total revenue of €6,290,000,000 to €6,410,000,000 or 3% to 5% gross XFX with an operating margin in the range of 32.2% to 32.6% and an EPS of €130,000,000 to €134,000,000 representing 3% to 6% gross XFX. For Q2, we expect total revenue in the range of 1,518,000 to 1,568,000,000, up 2% to 5% XFX. Software and service revenues are expected to grow in line with total revenue by 2% to 5%. We target an operating margin between 29.5 to 29.9 percent, an EPS of 29 cents to 31 cents, growing in a range of 3 to 7 percent, excluding currency. And this is all based on our FX assumptions for an average rate for the year of dollar to euro of 1.18 and yen to euro of 173.37. To conclude, we had a solid start to the year. We delivered performance at objectives and confirm our full year guidance. Our growth drivers demonstrate that our strategy is working, providing the tailwinds for future growth. Focus on execution and operating discipline drove solid margin and strong cash conversion. This provides the foundation to invest in our long-term growth and accelerate our AI strategy to deliver tangible value for our clients, employees, and, of course, to our shareholders. Now, Pascal and I look forward to take your questions.