Dassault Systemes Sa Adr

Good day and thank you for standing by. Welcome to the SALT Systeme second quarter and half year 2026 earnings presentation. At this time all participants are in listen only mode. After this speaker's presentation there will be the question and answer session. To ask a question during the session you need to press star 1 1 on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to our first speaker today, Marie Dumas, Investor Relations Director. Please go ahead.

Good morning and thank you for joining our second quarter 2026 earnings conference call. I'm with Pascal Daloz, Chief Executive Officer and Chairman of Datso Systems and Rouven Bergmann, Chief Financial Officer. They're both on the line with me to discuss our second quarter 2026 results. Datso Systems 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 current speed 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 2025 Universal Registration Document. All learning 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.

Good morning, everyone. Thank you, Marie, and thank you all for joining us today. Before Rouven will walk through our financial results, I really would like to spend a few minutes on what I believe is a bigger story. This quarter is about much more than the numbers. It's about execution. It's about the steady progress we are making against the strategy we set at the beginning of the year. As you remember, I said From the start, that 2026 will be the foundation year. Not because we expect less, but because we are building for much more. Transforming industry does not happen in a single quarter. It happens customer at a time, one deployment at a time, and one innovation at a time. And this is exactly what this quarter reflects. This quarter, our business performed well. We are reaffirming our full year guidance. Revenue grew 4%, subscription revenue grew twice as fast as the overall business, and earnings per share increased 8%. I think these results reflect the disciplined execution we had. But the numbers, as I was saying, are only a part of the story. The more important story is what we are seeing happening with our customers. Across every major industry we serve, companies are accelerating their digital transformation. They are moving to the cloud, they are preparing their data, and increasingly, they are investing in industrial AI. The conversation has really changed. You know, customers are no longer asking whether AI will transform engineering or manufacturing. They are asking how fast they can deploy it. And this is really an important shift. Why so? Because AI needs context. It needs trusted data, it needs a virtual model of products, factories, operations, and this is exactly what the 3DEXPROM platform was built to provide. This is really why we believe we are uniquely positioned for the next era of the industrial innovation. Now, our strategy remains focused on three priorities for this year. First, helping our existing customers transform. More of the world leading industrial companies are adopting the 3D Expense Platform on the cloud as their digital foundations. They are connecting engineering, manufacturing and operations in a single platform. And they are preparing to deploy AI for virtual twin at the enterprise scale. Second, expanding into new industries. We continue to build the momentum in high-tech, new space and consumer industry. And with the acquisition of ARIES Global, we are significantly strengthening our position in life sciences. Each of those industries expands our opportunity and together they make our business stronger and more resilient. Third, we continue to invest on the platform itself. As AI is becoming the new interface to industrial software, our ambition is not simply to add AI features. It is to build an adjunct platform where the virtual companions become the trusted collaborators for engineers, scientists, and business leaders. In the first quarter, we introduced the architecture behind our vision. This quarter, we are bringing it to life. We are delivering the first adjunct 3D experience platform for the new generation of AI native experiences. And I think we believe this is the beginning of a profound shift in how industrial innovation will happen over the next decade. Now, let me show you what this strategy looks like in practice. Our customers, you know, they operate in a very different industry. They build cars, aircrafts, semiconductors, medicine, consumer products. But today, you know why? All of them are facing the same reality. Complexity is growing faster than ever. Products are becoming smarter. Engineering is becoming more collaborative. Supply chains are more connected. Regulations are more demanding. And now, AI is fundamentally changing how products will be imagined, developed and produced. To take advantage of AI, companies need first to trust the digital foundation they are building. And again, this is exactly what the 3DEXPERIENCE platform provides. It connects data, people, and knowledge. And increasingly, it connects also AI at every stage of the lifecycle. This is why we are seeing a momentum across every industry we serve. In transportation and mobility, manufacturers are accelerating the vehicle developments, while connecting engineering teams across increasingly complex global ecosystems. In aerospace and defense, the well-established leaders are scaling their productions while at the same time the growing new space ecosystem is building its next generation of programs on 3D experience platforms. In high-tech, consumers are managing unprecedented and many more. In life sciences, I think the organizations are bringing together research, development, manufacturing and patient outcomes through the virtual twins and now with the acquisition of ARIS Global, we are taking an important step forward, a unified AI intelligent platform that connects molecules, patients and real-world outcomes. In infrastructures and cities, customers are also using the virtual environment to design, build and operate more resilient and more sustainable infrastructures. And finally, our mainstream innovation business continues to demonstrate the breadth of this opportunity SOLIDWORKS this quarter deliver a growth-based growth across geography with a double-digit unit expansion. Why I took the time to give you this perspective? Because this is reflecting the strengths of the portfolio and our ability to attract the next generation of engineers, designers and innovators. Let me bring this to life with few examples. All those customers I was speaking about They are operating in a very complete different industries, but all of them, they are reaching the same conclusions. To compete in the AI era, they need more than the software, they really need the platform. So, Mahindra expanded its deployments of the 3D Expand platform on the cloud to modernize the product development across its global engineering organizations, but also to build the digital foundations ready to deploy AI-powered virtual twins at the enterprise scale. Their challenge is very simple. They want to reduce the time to market. And the value we bring to them is obvious. It's connecting all the engineering teams across the ecosystems. We are also delivering several important competitive wins this quarter. One of them is the world-leading memory semiconductor manufacturers in Korea Selecting the 3D experience platform to create the digital continuity across the entire product lifecycle. From engineering with CATIA, the product information with Enovia, to manufacturing with Delmere. One platform, one single source of truth from the concept to productions. In consumer industries, we have an interesting case. I didn't know this company, I discovered it. It's very famous in the US. the so-called Polyconcept North America. They are the leader in the personalized goods. And what do they do? They are selecting century to connect the product design and the manufacturing and the consumer experience while they are embedding AI in their innovation process to generate automatically these personalizations. So across every industry we see against the same patterns. Customer are no longer investing simply to improve today's engineering, They are standardizing on 3D Expense Platform and the cloud because building the digital foundation for tomorrow AI-powered enterprise is becoming a must. And they are standardizing on 3D Expense Platform and the cloud because they understand the competitive advantage will come from the data, the knowledge, and the people. AI is an accelerator, but the platform is a foundation. This is what brings me to the next chapter. And today, I'm extremely pleased to announce an important milestone in our life science strategy, the acquisition of ARIS Global. I think you should look at this much more than adding another software company within Dassault Systèmes. It really completes our vision for life sciences. It closes a very important loop between the scientific discovery, the clinical developments and manufacturing, and the real-world patient outcomes. And I think this is creating something the industry has never had before, a continuous intelligent platform powered by AI. So why this matter? Because, you know, life sciences face a remarkable paradox. It's the industry investing the most in research and development, but yet fewer than one in 10 of drugs entering into the development reach the patients. So, the challenge is definitely not the lack of science. It's not the lack of data. It's coming from the fact that the data remains fragmented. Scientific data, clinical data, manufacturing and quality data, safety data, too often, you know why, they live in a separate systems and too often the critical decisions still depend on documents rather than connected intelligence. And AI is a game changer in this case because we can only be a powerful tool as soon as the data is there to support it. This is the reason why this entire industry is moving now towards connected platforms that bring together science, operation and AI in one single environment. This has been our strategy for years. You know it. BioVar for the discovery, Medidata for clinical development, Delmia for manufacturing. And now with ARIS Global, we have the final mission dimension, the real world evidence. Why ARIS Global is so important? Because this company is a leading enterprise platform for pharmacovigilance, Regulatory Affairs and Safety. And it's deeply embedded in the operation of the world's leading pharmaceutical companies and the health authorities, both. To give you an order of magnitude, nearly half of the top 50 pharma companies rely on them. Their software processes approximately 12 million safety cases every year amongst 25 million worldwide, so half of the safety cases are part of their systems. And more importantly, and you will see why this is important, 80% of those safety cases are not public. They are private. So which basically means if you do not get access to it, you will never have the research tools of the real world evidence to train your systems for AI. So this is the reason why This is a very important asset for the entire Dassault Systems strategy. Now, at RIS Global, they have already demonstrated how AI can create tangible value with their AI capabilities. It's already deployed, delivering productivity gains of more than 30%. They are helping customers to identify safety signals faster, to make better informed decisions, And remember, this is not only an automation, it's an intelligent decision support in one of the most highly regulated industry of the world. So what excites us the most is what happened when ARIS Global become part of Dassault Systèmes. Because for the first time, life sciences company will be able to connect every stage of the pharmaceutical life cycle on a single intelligent platform. Again, discovery, clinical development, manufacturing, regulatory compliance, and real-world safety. Every new piece of evidence improves every stage that comes before. For example, the scientific model becomes smarter because you can anticipate some adverse effects. The clinical trials become much more informed because when you test the drug, You already know there are adverse effects. You should do this. Manufacturing becomes more adaptive and patient outcomes continuously improve future innovation. So instead of disconnected systems, the customer again has a lot to gain with the continuous learning loop. And this is what AI needs, not isolated models. but connecting knowledge, trusted data, and continuous feedback. Looking ahead, the acquisition is about much more than expanding our footprint in life sciences. I think it demonstrates the strategy we are executing across Dassault Systèmes, building an intelligent platform where data consistently become knowledge, where AI continuously improves decisions, and where every customer interaction make the platform stronger. And ARIS Global is an important milestone in that journey. But it's also a preview of where all the industries are heading. Because whether our customers design aircrafts, develop medicines, or build factories, the future belongs to the platforms that continuously learn. And this is exactly what we are building. Let me show you how that vision is coming to life through the new AI native solution we are introducing this quarter. If you remember, last quarter, we introduced our AI architecture. This quarter, we put it at work. The 3D external platform is becoming an adjunctive platform, following the Vifold Companion and a new generation of AI native solutions. And this is an important distinction. Why so? Because much of AI Today's AI has been added on top of existing software. You know, a kind of chat box if you want layer over the legacy applications. We took a different approach. We built AI at the core of the platform because industrial AI is fundamentally different. It doesn't just answer to the questions. It has to help engineers to solve their problems, to understand the products, to understand the physics, to understand the scientific model and it understands the context in which all the decisions are made. This is what makes AI useful in mission-critical industry. Now, at the center of this experience, there are the virtual companions. Each is designed for a specific role. You remember, Aura helps the business users to navigate Enterprise Knowledge, and Execute Business Processes. And to give you a concrete example, with OHA project management, a business objective can become an executable project planned up 10 times faster. LEO support engineers as they design, optimize, and validate the complex products. And again, an example, LEO mechanical engineer can begin with an idea, generate high-performance manufacturable designs, while maintaining the full engineering traceability. Marie assists the scientific with the modeling and simulations and scientific decision making across the research life cycle. They are not general purpose assistants, they are really domain experts and each companion understands the language, the objectives and the constraints of the people it works with. So because each One is built on a decade of engineering expertise, scientific knowledge and industry best practice. This is how we are making difference. So now every quarter, those companions, they are becoming more capable. This quarter alone, we introduce more than 11 new industrial competencies and every new competencies transcends every customer using the platform. This is the power of the AI native architecture. Everything I just say is orchestrated by the 3DEXPERIENCE Adjantic platform. The platform provides the governance, the security, the traceability, the digital continuity required for an enterprise-scale AI. And for some of our customers, you know, running on our sovereign AI infrastructure, outscale, It's also an extremely important topic because it's for them the way to retain the complete control of their intellectual property while they are deploying AI in the most critical environment. This matters because many AI systems can retrieve information. Some can generate contents, some can predict the outcomes, But an industrial AI must do something far more demanding. It must generate results that engineers can trust. Results that scientists can validate. Results that manufacturers can certify. And you cannot certify an aircraft engine with an AI that understands only the language. You cannot develop a life-saving therapeutics with an AI that understands text but not biology. Trust comes from understanding how the physical worlds behave and this is why our industry world models are so important. They don't simply learn the pattern from the data. They capture the scientific discipline, the engineering discipline, the industrial knowledge that governs the real world and at the same time they are protecting the intellectual property of our customers. This is what makes industrial AI trustable This is what allow our customers to move from experimentations to enterprise-scale deployment. Now, let me bring all of this to life with one example. And I took one I'm sure you will be very interested with. It's BMW. BMW Group is a very good illustration on how industrial AI look like in practice. Not from a CIO view, from a pure Engineer Vu, the one doing the job on a daily basis. You know, BMW is in designing increasingly sophisticated vehicles under constant pressure to innovate faster, to reduce the cycle time, and to meet even more demanding performance requirements. Take something as familiar than the car door or the central console of the car. Behind what looks very simple, you have components which has been designed with a lot of constraints. Weight, crash performance, stiffness, manufacturability, cost, durability. And the challenge is not to develop only one door or one central console, is really to find the best design among thousands of possible alternatives. And this is where our application and AI work together. Firstly, Using CATIA, today engineers can generate and analyze around 50 high-quality design variants from a parametric model. But you know why? Rather than me telling you the story, let's show how BMW engineers are already applying it. Please launch the video.

But the robustness is a big problem for us.

So if there are different lines crossing in a separate way, there's an error and so on. In this case, you see it here, we have a lot of different combinations, huge changes in the model, but they all work. We had a robustness of 96%. So out of 50 designs, 48 worked.

As you saw at the application level, CATIA and Simulia enable engineers to rapidly explore multiple concepts while preserving the engineering intent and the design quality. This approach gives already a strong accuracy but perform time-consuming analysis which limits how many design possibilities their engineers could explore. So, the next step is what? A better orchestration across design and simulation can accelerate the design space exploration with our application powered by the generic frontier model over an MCT protocol. Every high-fidelity simulation contributes to build what we call a trusted surrogate model of the design space. Using these surrogates, the engineers can predict the performance of hundreds of new design alternatives in minutes, not hours or maybe days. And they do it by expanding the design space explored by an order of magnitudes. Watch how this plays at BMW.

Thank you very much. created, simulated, post-processed. 101 had been successfully completed, so it means more than 84% of all designs have been created. And why is that so important? If you would want to do design exploration and search a certain design space, you want to have a high accuracy in order to train subsequent algorithms for predictions. Therefore, if a great deal of the design space will not be explored, you might miss good designs and opportunities with it.

As you saw, more variants can be explored, but the level of accuracy drops. So, ultimately, what should we do? I think BMW needs to explore the full design space with a high level of accuracy. And this is where our 3D experience adjunct platform brings everything together. In the platform, users can interact naturally with Leo, our mechanical engineering virtual companions. And you know what? Leo understands engineering objectives, he knows how to orchestrate Catia and Simulia to leverage the industrial model, to explore the best design alternatives, and more importantly, keeping every engineering decision fully traceable from the first concept to the final certification. So here is Leo orchestrating the entire DNA at BMW. Please, launch the video.

Extend the length of the armrest by 20 mm. Like Christian was saying, what about the few models which did not work? Why was that? So here you could find out, maybe we could extend the design variables. And you see here now that Leo is doing not only one model, he's doing one model, updating it. Ah, it's working great. Okay, then I add another 20 mm to the arm length. Ah, still okay. Okay, and doing another one. and you can lean back, enjoy your coffee and watch how Leo is doing the work for you until the failure is there and you don't need to iteratively change the parameter to find the best spot. And showing the technologies of today, you can do this more systemically, more holistically than being used in order to train AI. So this is really where the power is coming from. The AI is on top based on a good information foundation and Leo and all those AI tools can help you to get quicker to

So with this integrated approach, the full design space can be in floor with 100% accuracy and the full traceability. So this is really the future of the engineering. Application creates, AI for simulations predicts, and the virtual companion, they do the orchestrations. And when it's powered by the Adjantic 3D Expand platform, you know why? The engineer, they can explore more possibility make better decisions and move from concept to certification faster with a great level of confidence. And this is what I'm calling industrial AI in action. It's not a vision. All those capabilities already deliver value to our customers today. Now, let me summarize before we transition to Rouven. This quarter reflects a continued execution against our strategy. We deliver solid results in line with our objectives. Two, customers are deeply committed to the 3DX1 platform and it's visible through the adoption of the cloud, which continues to accelerate. Third, industrial AI is moving from visions to deployments. And with the acquisition of ARIZ Global, we are taking a major step forward in life sciences. I think now, Rouven, you will lead and he goes through all the financial performance in detail and explain why his global financial opportunity is a compelling as a strategic one. Rouven, the floor is yours. Thank you Pascal and good morning everyone and thank you for joining us for our Q2 earnings call. Solid Q2 performance keeps us firmly on track for the full year. As you heard from Pascal, we are not just executing, we are transforming our company Launching new AI product categories, all via improving cash flow and the margins. This is growth and discipline together. Now let me look at the details of the financials for the quarter. Total revenue reached 1,556,000,000, up 4%, with subscription growing twice as fast at 8%. Service revenue was up 6%. Our recurring revenue continues to perform well, rising 5% XFX. and thanks to the very healthy subscription growth, subscriptions now represent 50% of our recurring revenue. This is driven by good dynamics, particularly in our industrial and mainstream innovation business. Top line leverage and operating discipline translated to a nice uplift of 7% in operating profit and the operating margin of 30%, which is up 90 basis points XFX. EPS was 31 cents growing at 8%. Year-to-date, that brings us to 3 billion and 65 million in total revenue, growing 3%, underpinned by solid expansion and operating profit of 5%, driving the operating margin improvement to 40 basis points to 13.1%. EPS was 61 cents, up a healthy 6% year-to-date. So in summary, revenue and profit are well-placed versus our Q2 objectives. Let me look more closely at our recurring business growth. In the quarter, we added 73 million in annualized contract value when compared to Q1. This brings total ARR to 4,443,000,000. And this includes, as you know, all active subscriptions and maintenance contracts, as well as the annualized value of multi-year subscriptions. So what drove our ARR growth this quarter? We continue to grow the share of cloud bookings and the contribution for multi-year subscription deals with higher total contract values. This broad-based momentum translated into double-digit subscription growth. In fact, over 70% of the net increase was driven by strong SaaS growth in our core industrial business with Centric and MediData all generating sequential growth. Turning now to our growth drivers. Both 3DEXPERIENCE and cloud were up 14% in the second quarter driven by strong 3DEXPERIENCE cloud growth of 60%. We saw good traction with clients adopting and expanding on the 3DEXPERIENCE platform as they look to transform their operations to capture AI-powered virtual twin opportunities in the future. In this quarter, clients as Mahindra Mahindra, Orano, Venus Aerospace and Xpeng Just to name a few, highlight our momentum and competitive edge across many industries. All of the above creates a solid foundation for our future AI deployments. Adopting 3D experience in cloud is a critical step to fully embrace the power of our Generation 7 portfolio. From a geographic standpoint, growth was particularly strong in Asia at 8% complemented by solid performance in the Americas with 5% growth and flat growth in Europe. The excellent quarter in Asia was driven by India as well as Korea and Japan with strong momentum in transportation mobility and high tech specifically in Korea. While China was down in H1, we expect improvement in H2 driven by industrial opportunities. Americas showed the anticipated growth pickup over Q1 were driven by very solid growth in the manufacturing industries as well as home and lifestyle and high-tech. Europe had a softer quarter after strong Q1, while the automotive sector was challenging. We saw healthy growth across key segments such as energy, industrial equipment, and aerospace and defense. Moving to our performance by product lines. Industrial innovation delivered solid growth of 5% and showing the anticipated uptick over Q1. This growth was led by strong performance in 3D experience and cloud, with Satya, Inovia and Delmia driving the momentum. Overall key competitive win across automotive, I've mentioned the example of Mahindra, high-tech space and defense demonstrates that our platform adoption continues to gain traction. Continuing from the strong first quarter, Mainstream Innovation delivered an excellent second quarter of 8%. SolidWorks continues its broad-based momentum across GEOs with unit growth of double digits. It underscores our strong value proposition in the mainstream market where shorter sales cycles and time to value are essential. Centric delivered excellent performance in the second quarter, highlighted by several significant competitive wins including a global leader in retail and a global leader in sports merchandising and licensing. Both are US companies. And this reinforces a key point. Q1 was not an outlier. Centric sits at the center of consumer-driven transformation across food and beverage retail and sports appearance, powered by an integrated platform and AI. Revenue performance was in the high teens growth, which we expect to further normalize in H2. Now to life sciences. And here, as anticipated, Q2 revenue growth was impacted as a result of low booking volumes across 2025 and the Moderna impact, driving metadata to minus 3%. This was factored into our model for H1. An important point to highlight is the shift in the partner business model in light of the deal we signed with WCT, Worldwide Clinical Trials, in Q1, so last quarter. But what it highlights is that we are stabilizing the growth trend for CROs and overall it supports our growth in the volume market. The momentum in our mid-market remains healthy and as discussed last quarter for 2026, we expect H2 to improve over H1 as we are building the annual run rate momentum to support sustainable recovery. And as you heard from Pascal, now a few words to Ares Global as I'm discussing the life sciences sector. With the acquisition of Ares Global, we are entering the next phase to transform the life sciences industry. And let me provide a few additional points that help to better connect the strategic rationale as presented by Pascal with the financial profile and value creation. This acquisition is a game changer. Today, Ares Global is the premier AI-enabled life sciences Safety and regulatory platform providing a mission critical system of record. The market is projected to reach 7.5 billion by 2030, growing at a double digit rate, where importantly software and AI capture a larger share of spend every year, and it represents less than 40% of the time today. ARIS Global brings an outstanding financial profile, $175 million, in estimated 2026 revenue, a highly recurring SAS model, and an operating margin profile which is consistent with SAS Systems. In doing this transaction, we are establishing the industry's first continuous real-world evidence loop spanning the entire therapeutic lifecycle. And by uniting Ares Global's compliance data with our molecular design, clinical trial, and manufacturing domains, we transform the life sciences industry from fragmented document-heavy workflows the unified model-based intelligence platform. Now coming to the transaction terms. We structured this acquisition with discipline terms. We will pay $1.8 billion in cash at closing with up to $200 million in additional consideration tied strictly to AI-related revenue milestones over the next three years. We will fund this transaction with balance sheet cash and we are at the same point in time preserving our robust financial flexibility. It's a compelling investment case. ARIS Global brings an attractive financial profile with good standalone revenue growth and margins and in addition revenue synergy opportunities are mainly driven by cross-selling to the mid-market and leveraging the AI platform to expand our reach to capture the entire drug life cycle. Consequently, we expect the transaction to be both revenue growth and EPS accretive in the first year post-close. We aim to close the transaction by late Q3, early Q4 of 2026, of course subject to customary closing conditions and regulatory approvals. We look forward to welcoming ARIS Global's exceptional leadership team and 1,300 global employees to the Dassault Systems family upon closing. They are committed to joining us and together pioneering the next chapter of life sciences innovation. Welcome, guys. Now let me turn back to our Q2 results, specifically to cash flow performance. We generated strong operating cash flow in H1, 1,237,000,000, up 8% year-over-year and 11% XFX. This was driven by strong operating performance and working capital, which was up slightly on higher billing activities. A brief comment on Q2. Operating cash flow was mainly impacted by two factors. First, collections that shifted it to July, which have all been secured in the first two weeks of Q3. So it's only a temporary effect. And second, we had lower accrued compensation. Free cash flow was up 13% excess in H1, driven by strong operating cash flow which was mainly used for dividend payouts and the repayment of commercial paper. Overall, this first half performance demonstrates the strength of our cash generation. As a result, cash conversion for H1 reached 134% in improvement versus 123% versus last year. And important to note, we remain on target for full year 2026 cash conversion. This consistent transition of our business towards subscription and cloud creates an opportunity for us to continue improvement in cash conversion. To complete the picture, cash and cash equivalents reached 5,660,000,000 at June 26, inflecting a half-year increase of 1,535,000,000. It was 785,000,000 QT. This was positively impacted by the issuance, the successful placement of the new 1 billion senior bond, which we did in June, the proceeds of which we will be using to refinance the upcoming maturity of 900 million due in September 26. The net cash position strengthened to 2.3 billion plus 750 million during the first six months. And you can see that this has also put us in a solid cash position to fund the ARIS global transactions from our own strong balance sheet. Now let me turn to our objectives for the 2026. We enter the second half of the year with a solid foundation and we confirm our full year outlook. Total revenue of $6,296,000,000 to $6,416,000,000 representing 3% to 5% growth XFX. operating margin in the range of 32.2% to 32.6% and EPS of 130% to 134% representing 3% to 6% growth XFX. Now for Q3, we expect total revenue in the range of $1,497,000,000 to $1,537,000,000 up 3% to 5% XFX with software revenue growing 3% to 5% and services up 4% to 8%. We target an operating margin between 31% and 31.1 and EPS of 30 cents to 31 cents. And it's scoring between 4% to 7% XFX. These targets are based on FX assumptions that are consistent compared to the beginning of the year, 1.18 for dollar to euro and 170 yen to euro. And the tax rate assumption of 17% for Q3. Finally, to note, We will reflect the impact of the ARIS Global acquisition following the close of the deal, which, as mentioned, is expected in late Q3, early Q4. However, the financial impact on 2026 should not be significant, given the timing of revenue contribution and also the timing of cash payment of this acquisition. Now, in summary, we delivered a solid first half in line with our objectives, and we confirmed full-year guidance objectives. Our growth drivers show the strategy is working, subscriptions growing twice as fast as total revenue, and 3D experiments in cloud are accelerating. We remain squarely focused on execution as we enter H2, with operating discipline to drive solid margins and strong cash conversions. This gives us the foundation to invest in long-term growth, accelerate our AI strategy, and create tangible value for clients, employees, and shareholders. Now, thank you for

Thank you dear participants. As a reminder, if you wish to ask a question, please press star 1 1 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1 and 1 again. Please stand by, we'll compile the Q&A queue. This will take a few moments. And now we're going to take our first question. And the first question comes from Laurent Deur from Cadlechevron. Your line is open. Please ask your question.

Yes, good morning, gentlemen. Thank you for taking the question. I have two. The first one is if we look for, I would say, the next three to five years for Aries Global, it would be interesting to share your view on the growth potential of this acquisition and where you will focus on what are the most promising segments that ARIS is targeting in terms of sales outlooks. And my second question is on the transport and mobility segment. You keep winning deals, but at the same time, the news flow and the space is really depressing. So Pascal, it would be nice if you could share with us your view For the next, I would say, three, four quarters about this transport and mobility unit, whether it's going to be a drag to your revenue or not. Thank you.

Thank you, Laurent, and thank you for putting me on the spot. So let me start with your first question, which is a very important one, obviously. You know, the regulatory and safety markets, as I was saying, is anyway growing at double digits. and the proof of what I'm seeing, if you look at the number of adverse events, effects which has been traced and investigated, in fact is increasing, I mean the volume is increasing at double digit every year. So that's the reason why at least there is no reason for the company to do as a standalone below than the growth of the market. Where the levers are coming from? There are three levers. You remember in my introduction speech I say ARIS Global is covering only half of the top 50 farmers. Dassault Systèmes has a presence in most of them. So there is a way, thanks to the Unified Intelligence Platform, to displace some of the competitors which are already in place. And you know them. Some of them are challengers. Some of them are well established for a long time and they have a whole architecture, a whole product line and I think we have definitively an opportunity on this. The second point which is more important is the mid-market. ARIS Global is extremely well positioned for the large pharma and biotech and med devices. However, the footprint they have established on the market is quite limited for the mid-market. And you remember, ARIS Global is having 200 customers. We have 4,000 customers. The difference is coming from the fact that we are addressing extremely well this segment of the market. And this is where I think the go-to market is already in place. There is no additional investment we should do except basically enabling this Salesforce to do the promotions. So we have a significant lever on this. And this is an important point because for the regulatory and safety decision process, you know it's not the cleanups guy or the head of engineering, head of developments who are doing the choice, it's usually the public affair or the medical officers. ARIS knows how to speak to those guys. Why this is important? Because usually the selection of the tools happen when you do not have yet your molecule on the market. And this is exactly where the synergy with MediData is so important because with MediData we are already used for several years before the decision should be made and this is against the level we can bring. There are another level is obviously the product side and mainly the AI side. You remember in my speech I emphasized the fact that In ARIS system of record, you have almost half of the worldwide safety cases. And this is extremely important because it's a unique base to do the learning for the AI engine. And if you combine this with the metadata assets, which is against 20 years, more than 20 years of clinical data we have collected across many different therapeutic domains at a point whereby now more than 70% of the drug being approved every year rely on our platform and we have access to this data to train the systems. So if you combine the two, it's a unique asset we can leverage to accelerate the AI strategy and to build the world model of the life science industry. So this is really where the growth will come from. But I will let Rouven, you know, quarter after quarter, to guide you on how much you could expect on a quarterly basis. But I'm very confident on the trajectory of the growth as you could feel, I guess. The second topic related to the transportation and mobility. Let me share something with you. We grew 6% this quarter. I repeat, we grew 6%. So you can argue that this industry is suffering. It's the reality. And you can argue that probably we are impacted in Europe. This is also a reality. But we are capturing the market share in the rest of the world. We spoke about Mahindra, Mahindra. Rouven was speaking about Xpeng. So all the newcomers, all the ones having basically the good momentum, they are our customers. and that's basically what we do we are in fact with them accelerating our deployments and they have exactly the same issues and the others at some point they need to integrate their suppliers they need to trace and to do the life cycle they need to accelerate the simulation using AI capabilities and this is against where we are relevant so I will not basically conclude that the transportation and mobility is a dead sector for Dassault Systèmes It's not. We still have a lot of opportunity to expand. And not only because you have newcomers or new species, but also with the incumbent, they need to transform themselves. You remember me telling you that to develop a car, on average, in Europe, 52 months is where the best, especially the Chinese, they do it in 18 months. The only way to reduce the cycle is to have the digital continuity across the entire lifecycle. So it's not becoming an option, it's a must, including for the large incumbents you are referring to. That's it for the two questions. All right, thank you.

Thank you. Now we're going to take our next question. and a question comes from the line of George Webb from Morgan Stanley. Your line is open, please ask your question.

Hi, morning, Pascal, Rouven. Congratulations on the deal. A couple of questions, please. Firstly, just on the core business performance, you obviously delivered towards the upper end of your guidance for the second quarter. But if you could just talk a little bit about what you feel on deal closures in Q2 within that performance. You know, perhaps China was an area where you saw some of that. I mean, outside of China and Asia, the growth was still very strong. So also kind of curious how you think Asia performed versus your initial expectations in Q2. Secondly, on Ares Global, could you just scope out a little bit what the revenue mix is of that business between software and services and also from your discussions with Nordic Capital? Could you talk a bit about what they've been focused on in recent years? It looks like they've probably done a subscription transitional accelerated that. And to what extent is that giving you an additional layer of visibility over ARIS Global's growth over the coming years? Thank you.

Yes, I can start, Pascal. Yeah, please. So on the business mix and the business performance and view closure activity, We had a good line of sight in the second quarter and we came in as we had planned. So we didn't see any risk of slippage that would impact our performance for the quarter. Of course, you always have some puts and takes, how we say, but they have to be managed and we did well. In Asia, you're right, we had an excellent performance with 8%. Thanks from growth in Korea, but most notably India. Solid performance in Japan and AP South. However, China was down. That was also not a surprise to us. H1 we knew was a tougher period. We are entering now into H2 where we have a good pipeline to support returning to growth. And in China, sometimes the visibility and predictability can be challenging. But we also have to make sure that when we operate there, we are operating with a strong line of sight and are closing deals on our terms and not are trying to be under pressure. And so this flexibility is important and we apply that. So we are confident about our growth in China for the second half of the year. And overall, you mentioned Europe, I mentioned that as well, with a tough Auto Sector but nevertheless the teams performed well in closing deals in the last two weeks of the quarter so what was expected was done so we didn't face any volatility from that but this I think was well executed and now in Q3 we also expecting Europe to return to growth. Americas had a very solid performance improving visibility essentially week to week over the quarter and they're also I think good line of sight and good management of pipeline. So well done by the team in America as well. So overall things are under control. Now to the revenue mix of Nordic, not Nordic, of Ares Global and your question regarding what did Nordic do and focus on in the last two, three years. The revenue mix It's 85% recurring, so a high share of subscription SaaS revenue. So there's only 15% ish which is services. So as a high recurring share. And it's clear the business model transition has been done and it's implemented. Nordic was together with the RS management team very much focused on driving that's recurring business growth building you know the AI roadmap with tangible outcomes in their industry today they are the leaders in AI in safety and compliance this is done they're generating revenue that they're seeing real productivity gains from clients so these are the two things I would highlight other than that I think the company is It's well run across three main locations, U.S., East Coast, mainly Boston area, London, as well as in India, where there's a strong footprint in terms of service and operations. That's as much as I can say.

Pascal, do you have things to add?

No, and maybe one additional comment from a product architecture standpoint. It has been completely re-architected, so it's really a full cloud and SaaS model. with multiple instances. So there is no technical debt if you want, we have to take care for the future. So this is also an important point, you know, to move forward and to accomplish the synergy we want to do.

That's great, thank you. Maybe Pascal, I'll ask you one follow-up to that. When you think about the integration of ARIS Global into Dassault, will you run it as a standalone business within life sciences for the foreseeable future? or would you look to integrate it into metadata? Sorry, I lose my voice. It's okay.

So, in fact, it's a mix of both. Let me tell you why. And again, we have time to come back to you with the details between the signing, which was yesterday, and the closing, as you say, Rouven, will be probably somewhere October timeframe. But to make it simple, again, we have a lot of synergy from a commercial standpoint. We have already the go-to markets. It's independent from MediData, from BioVR, from all the brands. So I think it's relatively easy to push ARIS product line as part of this go-to market. From a development standpoint, you remember the slide I presented, you have three stages. You have the system of record. So it's a system of record by itself. And it will basically coexist along to MediData, to BioVR and Delmia. So this is in a way a standalone approach, except that at some point we need to have a common development processes, a common maintenance and support systems, right? And then after you have the AI story. And this is really where we probably need to bring the team together in order to have a unified AI platform crossing all the different system of recall. and that's what I'm planning to do. And last but not least, probably an important point for you guys, I am creating an executive position at the Dassault System Executive Committee level to oversee the entire life science domain. Why so? Because it was done by Rouven and myself for the last few years and I think we have many things to do now and it's important to have someone dedicated Not only to drive the integrations, but also to drive the development, the positioning, to entertain the executive level relationship. And this is something I am currently doing.

That's great. Thank you very much and good luck for the second half. Thank you. Thank you.

Thank you. Now we're going to take our next question. And the question comes from Michael Breast from UBS. Your line is open, please ask your question.

Thank you. Good morning. Just in terms of the Ares Global, I think Nordic Capital have it on their website with revenues of 150 million euros last year, which is just shy of $170 million. I appreciate it's not a Thank you very much. Can you talk about the the span there and maybe what the the largest customers are because I know metadata is in the tens of millions but then what the revenue opportunity within those customers that you have today is that fully maxed out or could you get more for them and then good performance on margins on headcount for the second half will that start to grow again or are you sort of leveraging AI and other efficiency measures to sort of keep that flattish from from here on and How do you think about headcount?

Thank you. You take it. Yes, Michael. I take some of the questions. I guess we'll go back and forth, Pascal, but I'll start. So on your revenue question, Michael, yes, ethics, of course, is a factor. The revenue outlook of $175 million that are provided is based on the visibility as of at the end of Q2. So we are not giving forecasts that go beyond because we don't run the business, we do not control it. I can only say what we see today in the books, which is pretty much actualized calls for 2026. And I cannot, we have analyzed and reviewed their, of course, the schedule and growth over the last five years and it's sort of double-digit. So that's what we are planning for and that's why the business has been integrated into our financials is revenue growth. On the revenue opportunities within clients, I think Pascal you alluded to that. We have the opportunities to expand with our large pharma clients. The AI expansion opportunity is real. We are connecting not only to safety regulatory but also quality and connecting it to clinical trial. And I think the question from Michael was if you do in average you divide the revenue by the number of customers it's a million in average. You're right Michael but same time you know there is a distribution. So the questions probably behind your question is do we already have customers spending 10 million Plus, okay, not yet the case. Do we have, with ARIS Global, I mean, on the ARIS Global scope, do we have customers spending more than five million? The answer is yes. So just for you to have this in mind. Now, where are the levers? Rouven made a very important statement when he said the TAM is 3.5 billion, of which only a fraction is captured by the technology today. So the vast majority of the spending for the safety cases and quality management is still manual. And you have specialized companies doing business process management and also you have a lot of large pharma doing it in-house. This is again where AI is coming at stake. and the NAVAT products which are the one ARIS has developed has been already on the market and we already have some feedbacks on the market that this is extremely helpful because they have developed agents who are capable to do not the full manual process but most of it. So it's a way for customers to re-insource some of the job they were subcontracting to services company and we take obviously a share of it. And there is a way also, as you say, to do more with less. And this is also the second lever we have. And this is really only on the, if you want, on the scope of Aries Global, we could expand the share of wallet. And last but not least, you have all the synergy I was explaining up front, which is again a way to continue to nurture the developments and to size the deal up. So pretty confident about this. And again, that's probably one of the values of the combination of the two companies. And then the third question on the margin and headcount. Yeah, come back to that. You're right, headcount is slightly down year over year and also for the first six months. We are leveraging, of course, AI. We are not replacing one for one. I repeat what you say, we are doing more with less or the same. Certainly we have building a very good track record in research and development, but also in customer support and in supporting functions in GNA. And we will continue to do that because this gives us the flexibility to invest into future growth, which we are doing. And I think that's what is expected. The continent about the margin outlook.

Yeah, thank you. Maybe just to follow up on the midterm targets. I mean, the revenue side is pretty challenging. I think we would all agree, but the margin ambition was fairly sort of gradual. Do you feel there's opportunities with AI that maybe you didn't appreciate a year or more whenever you did the last CMD that give you greater confidence on that profit progression?

Yes, yes. Absolutely, we have that opportunity, but also we have the opportunity to re-accelerate the top line. And as we are re-accelerating the top line, we will have a bigger lever on margin expansion because the cost of the OPEX growth should be contained.

Okay, thank you.

We do not want to cut. We want to invest and grow, and we want to expand this profitable growth. That is the formula.

Thank you, Michael.

Thank you. And now we're going to take our final question for today. And it comes from the line of Balaji Tirupati from CT. Your line is open. Please ask your question.

Hi, good morning. Thank you for taking my questions too from my side as well, if I may. Firstly, on life sciences and metadata, could you share color on the return to positive ARR growth? on how was the ARR growth adjusting out the Moderna contract? And secondly, with positive ARR growth, should we expect many data revenue to return back to positive growth in second half? And the second question, if you could please share your view on how do you expect us to see some of your leading customers partnering with AI labs like Mistral? And in that context, how is your own relationship with AI Labs Evolving when they are also coming out with AI CAD tools. Thank you.

You take the first one? Yes, I will. Thank you for your question, Baladre. Some color on the positive ARR momentum related to the life science and metadata. Yes, ARR is back to growth for metadata, so we have positive contribution in net ARR. The momentum is coming from the mid-market and we also see that the partners' activity is increasing, so we do not have that headwind any longer than we had the last two years, so this market is stabilizing, it's important, but this market is very consistent. We have also, as you rightfully point out, the headwind of Moderna in the large enterprise, which is now more behind us after H1. They don't yield marginal impacts in the second half of the year. So the ARR growth for metadata has turned positive and in H2 we expect another step up in terms of ARR contribution for metadata from a sequential standpoint. It's not yet at the level, of course, of the subscription ARR for the company, because the subscription ARR for the company is quite double-digit, as I mentioned in my previous remarks, while the total ARR, 6% subscription ARR, is in the low teens of growth. which is, by the way, very aligned with our growth in cloud revenue, which is also in the low teens this quarter. And so you see that our growth drivers are lining up and we are driving the momentum shift and the business model shift very consistently.

And we are now reaching a point where subscription revenue as a share is starting to exceed the support revenue and that will support our ARR growth overall.

Okay, coming back to the second part of your questions, are we a competitor or partner with the providers of the frontier model? It's both. Why so? because on one hand you know we are vertically integrated but horizontally open and you have seen this in the architecture sites which means you know I do not intend to redevelop an LLM there is no value because what we are focusing on is really on the world model so we are by design multi-LLMs and this is important because for sovereignty reasons you know Mistral is the solutions Sovereign Solutions for Europe, but in China is another one, and you could be sure that in the US and the rest of the world, it would be the same. That's point number one. Point number two, that was exactly the purpose of my speech for using BMW as an example, because BMW was used by Israel. And if you remember the case number two, whereby you use a frontier model with an MCP protocol to pilot the applications. There is a value, which basically you can automate certain workflows, but I hope you have understood, and it's not me saying it, it's the people doing the job, the real one, not the CIOs, the people who are on a daily basis need to produce and design the car, They are saying it's not enough because having the ability to orchestrate the workflow automatically is helping to investigate much more design alternatives. But the accuracy is low. So what does it mean? It means it costs you a fortune to run the frontier model with the tokens and you are creating an extra value in terms of number alternatives which are really fitting the requirements. This is not the way to go. And again, if you have listened carefully to what I said, the last approach is using the 3DEXPEN's adjunct platform, leveraging LLMs for what they are good at, including this trial, but using the vertical integration with the world model, with our companions, with our applications to deliver the best of both worlds. So, believe me, I have enough, I've spent enough time with many of the customers you are referring to and what I'm telling you is extremely Valid. It has been, by the way, validated by the specialists. And last but not least, everything you do, you have to certify it.

And you need to trace it.

And this is what it means if you want to put AI at scale within an industrial company. So, if you do not have an equivalent to the 3D experience platform, you cannot do that. You simply cannot. Because there is no way that if your system is working like a black box, you will be able to be certified. You need to prove by basically following the steps which have been defined by the regulations. You need at each step, at each steps, to provide the end result that someone else could understand, recreate the reasoning, and basically find the same results. Otherwise, you are not considered for the purpose of the job. So, in summary, the LLMs, they are good to read texts, to generate contents, whatever the content is, a text, an image, a code, but they are not good to generate physics, biology. They are not good to produce physics and biology. And this is where I think we are making a big difference.

So it's a little bit of both. Very clear, Pascal. Thanks a lot, Pascal and Rouven. Thank you. Thanks for the questions. Apologies. Okay, so thank you all of you for your questions.

I think what you have heard today is our strategy is progressing on multiple fronts. I think first, we are, as you say, Rouven, we are executing with discipline. The results are solid. Our customers are expanding the use of 3DXM platform, and the cloud adoption continues to accelerate. And this is giving us confidence Not only in the pace, but also on the consistency across geography, across industry, and across companies of all the different sites. I think, second, we are advancing our life sciences ambition and strategy. Our vision, which has always been since the beginning, to virtualize the entire life cycle to help improve the patient outcome is making a step forward with Ares Global. Now we are creating this unified AI intelligence platform connecting molecules, patients, and outcomes. This is unique on the market. This is really game-changing. And by doing this, we are closing the loop between the discovery, the development, and the manufacturing, and the evidence. And third, I think we are turning industrial AI to real value for the customer. I mean, the 3D experience platform is becoming an agentic platform. We deliver it on the market. This agentic platform is powering AI native applications. The companion is a category of them. They are on the market and we continue on a quarterly basis to enrich them with competency, with new skills, and this is how we are building the competitive advantage. And last but not least, I see we are capturing how the industrial world works and we make AI knowledgeable, much more accessible with an industrial platform. So thank you very much. Hope to see you on the road. If not me, it will be Rouven and Marie. And if I do not have a chance to see you in person, enjoy the summer break.

Thank you so much. This concludes today's conference call.

Thank you for participating and I'll disconnect. Have a nice day.