Operator : Good day, and thank you for standing by. Welcome to Dassault Systèmes Second Quarter and Half Year 2026 Earnings Presentation. Please be advised that today's call is being recorded. I would now like to hand the conference over to your first speaker today, Marie Dumas, Investor Relations Director. Please go ahead.
Marie Dumas : 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 Dassault Systèmes; and Rouven Bergmann, Chief Financial Officer. They're both on the line with me to discuss our second quarter 2026 results. Dassault Systèmes 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 2025 Universal Registration Document. 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 Daloz.
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 the 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 far much more. Transforming industry does not happen in a single quarter. It happens one 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 have. 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, company 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. 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, needs virtual model of products, factories, operations, and this is exactly why the 3DEXPERIENCE 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 3 priorities for this year: first, helping our existing customers [ transfer ]. More of the world-leading industrial company are adopting the 3DEXPERIENCE platform, and the cloud are their digital foundations. They are connecting engineering, manufacturing and operation 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 ArisGlobal, we are significantly strengthening our position in life sciences. Each of those industry 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 feature, it's to build an agentic platform where the virtual companion become the trusted collaborator for engineers, scientists and business leader. In the first quarter, we introduced the architecture behind those visions. This quarter, we are bringing it to life. We are delivering the first agentic 3DEXPERIENCE platform, following 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, they operate in a very different industry. Maybe in car, aircraft, semiconductors, machine, consumer products. But today, you know why all of them, they are facing the same reality. Complexity is growing faster than ever. Products are becoming smarter. Engineering is becoming more collaborative, supply chain are more connected, regulation are more demanding. And now AI is fundamentally changing how product will be imagined, developed and produced. To take advantage of AI, company needs 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 life cycle. This is why we are seeing the momentum across every industry we serve. In transportation and mobility, manufacturers are accelerating the vehicle developments while connecting engineering team across increasingly complex global ecosystems. In aerospace and defense, the [ world ] established leader are scaling their productions, while at the same time, the growing new space ecosystem is building its next generation of program on 3DEXPERIENCE platform. In high-tech, consumers are managing unprecedented semiconductor complexity by connecting design, engineering, manufacturing and life cycle in one single environment. And across consumer industry, company are transforming the product creation by connecting design, sourcing, manufacturing and the consumer experience, again on one single platform. In life sciences, I think the organization are bringing together research, development, manufacturing and patient outcomes through the virtual twins. And now with the acquisition of ArisGlobal, we are taking an important step forward, a unified AI intelligence platform that connect molecules, patients and the real work outcomes. In infrastructure and cities, customers are also using the virtual environment to design, build and operate more resilient and more sustainable infrastructure. And finally, our mainstream innovation business continue to demonstrate the breadth of this opportunity. SOLIDWORKS this quarter delivered a broad-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 strength of the portfolio and our ability to attract the new generation of engineers, designers and innovators. Let me bring this to life with a 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 software, they really need the platform. So Mahindra Mahindra expanded its deployment of the 3DEXPERIENCE 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 twin 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 their 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 3DEXPERIENCE platform to create the digital continuity across the entire product life cycle. From engineering with CATIA, the product information with ENOVIA to manufacturing with DELMIA. One platform, one single source of truth from one -- from the concept, to productions. In consumer industries, we have an interesting case. You don't know this company. I discover it. It's very famous in the U.S., a so-called polyconcept in North America. They are the leader in the personalized goods. And what do they do? They are selecting CENTRIC to connect the product design and the manufacturing and the consumer experience while they are embedding AI in their innovation process to generate automatically this personalization. So across every industry, we see against the same patterns. Customers are no longer investing simply to improve today's engineering. They are standardizing on 3DEXPERIENCE platform and the cloud because building the digital foundation for tomorrow AI product enterprise is becoming a must. And they are standardizing on 3DEXPERIENCE 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 the 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 ArisGlobal. 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 closed 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 formed by AI. So why this matter? Because life sciences face a remarkable paradox. It's the industry investing the most in research and development, but yet fewer than 1 in 10 of drugs entering into the development reach the patients. So the challenge is definitively not the like of science. It's not the likes of data. It's coming from the fact that the data remains fragmented, scientific data, clinical data, manufacturing and quality data, safety data to offer -- you know why they live in a separate systems, and 2 of them, 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 tools as soon as the data is there to support it. This is the reason why this entire industry is moving now towards a connected platform that bring together science, operation and AI in one single environment. This has been our strategy for years. You know it. BIOVIA for the discovery, MEDIDATA for the clinical development, DELMIA for manufacturing. And now with ArisGlobal, we had the final missing dimension, the real world evidence. Why ArisGlobal is so important? Because this company is a leading enterprise platform for pharmacovigilance, regulatory affair 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 company rely on them. Their software processed 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 rich resource of the real-world dividends to train your systems for AI. So this is the reason why this is a very important asset for the entire Dassault Systèmes strategy. Now ArisGlobal, they have already demonstrated how AI can create fungible value with their AI capabilities. It's already deployed, delivering productivity gains of more than 30%. They are helping customers to identify safety signal 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 ArisGlobal 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 against discovery, clinical development, manufacturing, regulatory compliance and real-world safety. Every new pieces of evidence improved every stage that comes before. For example, the scientific model becomes smarter because you could anticipate some adverse effect. The clinical trial become much more informed because when you test the drug, if you already know, there are adverse effects at [indiscernible] you should do this. Manufacturing become more adaptive and patient outcome continuously improve future innovation. So instead of disconnected systems, the customer again have a lot of to gain with the continuous learning loop. And this is what AI needs, not isolated models, but connected 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 continuously become knowledge, where AI continuously improve decisions and where every customer interaction make the platform stronger. And ArisGlobal is an important milestone in that journey. But it also preview of where all the industry are heading because whether our customers design aircraft, develop medicines or build factories, the future belongs to the platform that continuously learn, and this is exactly what we are building. Now 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 3DEXPERIENCE platform is becoming an agentic platform, following the virtual companion and a new generation of AI native solutions. And this is an important distinction. Why so? Because much of today's AI has been added on top of existing software, a kind of chat box, if you want, layer over the legacy applications. We took a different approach. We build 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 digital 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 AURA project management, a business objective can become an executable project plan up to 10x faster. LEO support engineers are the design, optimize and validate the complex products. And again, an example, LEO mechanical engineer can begin with an ID, generate high-performance manufacturable designs while maintaining the full engineering traceability. MARIE, as is the scientific with the modeling and simulations and scientific decision making across the research life cycle. They are not general purpose assistance. They are ready domain experts, and each companion understand the language, the objectives and the constraint of the people it work with. So because each one is built on a decade of engineering expertise, scientific knowledge and industry practice. This is how we are making the difference. So now every quarter, those companions, they are becoming more capable. This quarter alone, we introduced more than 11 new industrial competencies, and every new competencies strengthens every customer using the platform. This is the power of the AI native architecture. Everything I just say is orchestrated by the 3DEXPERIENCE agentic 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 running on our sovereign AI infrastructure, our scale, 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 system can retreat information. Some can generate content, some can predict the outcomes, but in industrial AI must do something far more demanding. It must generate results that engineers can trust. Result and scientific can validate, result and manufacturers can certify. And you cannot certify an aircraft engine with an AI that understand only the language. You cannot develop life-saving therapeutics with an AI that understand text but not biology. Trust come from understanding how the physical world behave, and this is why our industry world model 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 allows 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, 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 view, the one doing the job on a daily basis. BMW is in designing increasingly sophisticated vehicle under constant pressure to innovate faster, to reduce the cycle time and to meet ever more demanding performance requirements. Take something as familiar than the car door or the central console of the car. Behind, that looks very simple. You have components, which have 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. It's 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, they 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. 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 far from time-consuming analysis, which limits how many design possibility their engineer can be -- 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 contribute to build what we call a trusted surrogate model of the design space. Using these surrogates, the engineers, they 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 magnitude. Watch how this play at BMW. As you saw, more [indiscernible] 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 high level of accuracy. And this is where our 3DEXPERIENCE agentic platform brings everything together. In the platform, users can interact naturally with LEO, our mechanical engineering virtual companion. And you know why 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 certifications. So here is LEO orchestrating the entire [indiscernible] at BMW. Please launch the video. 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 product simulations predict and the virtual companion, they do the orchestration. And when explored by the agentic 3DEXPERIENCE platform, you know why the engineers, 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 are already deliver value to our customers today. Now let me summarize before the transition to Rouven. This quarter reflects a continued execution against our strategy. We delivered solid results in line with our objectives. Two, customers are deeply -- their commitment to the 3DEXPERIENCE platform and is visible through the adoption of the cloud, which continue to accelerate. Third, industrial AI is moving from visions to deployments. And with the acquisition of ArisGlobal, we are taking a major step forward in life sciences. I think now Rouven will lead and go through all the financial performance in detail and explain why ArisGlobal financial opportunity is a compelling as a strategic one. Rouven, the floor is yours.
Rouven Bergmann : 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 while improving cash flow and the margins. This is growth and discipline together. Now looking -- now let me look at the details of the financials for the quarter. Total revenue reached EUR 1.556 billion, up 4%, with subscription growing twice as fast at 8%. Service revenue was up 6%. Our recurring revenue continues to perform well, rising 5% ex FX. And thanks to a 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 ex FX. EPS was EUR 0.31, growing at 8%. Year-to-date, that brings us to [ EUR 3.065 billion ] 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 EUR 0.61, 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 EUR 73 million in annualized contract value when compared to Q1. This brings total ARR to EUR 4.443 billion. And this includes, as you know, all active subscriptions and maintenance contracts as well as the annualized value of multiyear subscriptions. So what drove our ARR growth this quarter? We continue to grow the share of cloud bookings and the contribution from multiyear 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 at Mahindra Mahindra, [ Orano ], [ Vinos ] Aerospace and [ Expand ], 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 3DEXPERIENCE and 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, 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 3DEXPERIENCE and cloud, the CATIA, ENOVIA and DELMIA driving the momentum. Overall, key competitive wins across automotive, I have 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, up 8%. SOLIDWORKS continues its broad-based momentum across this, with unit growth up 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 the global leader in sports merchandising and licensing, both are U.S. 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 apparel, 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 MEDIDATA 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 WTT 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 have from Pascal, now a few words to ArisGlobal as I'm discussing the life sciences sector. With the acquisition of ArisGlobal, 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, ArisGlobal is a premier AI-enabled life sciences safety and regulatory platform providing a mission-critical system of record. The market is objected 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 TAM today. ArisGlobal brings an outstanding financial profile, $175 million in estimated 2026 revenue, a highly recurring SaaS model and an operating margin profile, which is consistent with Dassault Systèmes. In doing this transaction, we are establishing the industry's first continuous real-world evidence loop spanning the entire therapeutic life cycle. And by uniting ArisGlobal's compliance data with our molecular design, clinical trial and manufacturing domain, we transform the life sciences industry from fragmented document heavy workforce to unified motor-based intelligence platform. Now coming to the transaction fund. We structured this acquisition with disciplined 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 3 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. ArisGlobal brings an attractive financial profile with good stand-alone 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 ArisGlobal's exceptional leadership team and 1,300 global employees to Dassault Systèmes 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, EUR 1.237 billion, up 8% year-over-year and 11% ex FX. 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 2 factors: first, collections that shifted into July, which have all been secured in the first 2 weeks of Q3. So it's only a temporary effect. And second, we have lower accrued compensation. Free cash flow was up 13% ex FX 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%, an improvement versus 123% versus last year. And important to note, we remain on target for full year 2026 cash conversion. This consistent transition of -- the 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 EUR 5.660 billion at June '26, reflecting a half year increase of EUR 1.535 billion. It was EUR 785 million in Q2. This was positively impacted by the issuance -- successful placement of the new EUR 1 billion senior bond which we did in June, the proceeds of which we will be using to refinance the upcoming maturity of EUR 900 million due in September '26. The net cash position strengthened to EUR 2.3 billion, plus EUR 750 million during the first [ 6 ] months. And you can see that this has also put us in a solid cash position to fund the ArisGlobal transaction from our own strong balance sheet. Now let me turn to our objectives for the -- 2026. We entered the second half of the year with a solid foundation, and we confirm our full year outlook. Total revenue of EUR 6.296 billion to EUR 6.416 billion, representing 3% to 5% growth ex FX, operating margin in the range of 32.2% to 32.6% and EPS of EUR 1.30 to EUR 1.34, representing 3% to 6% gross ex FX. Now for Q3, we expect total revenue in the range of EUR 1.497 billion to EUR 1.537 billion, up 3% to 5% ex FX, 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 EUR 0.30 to EUR 0.31, and it's growing between 4% to 7% ex FX. 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 ArisGlobal acquisition following the close of the deal, which as mentioned, is expected in late Q3, early Q4. However, the financial impact on 2026 would 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 confirm full year guidance objectives. Our growth drivers show the strategy is working, subscriptions growing twice as fast as total revenue and 3DEXPERIENCE and cloud are accelerating. We remain squarely focused on execution as we enter H2 with operating discipline to drive solid margins and strong cash conversion. 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 listening. And now Pascal and I look forward to take your questions.
Operator : The first question comes from the line of Laurent Daure from Kepler Cheuvreux.
Laurent Daure : I have 2. The first one is if we look for, I would say, the next 3 to 5 years for ArisGlobal, 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 AI is targeting in terms of sales outlook? And my second question is on the transport and mobility segment. You keep winning deals, but at the same time, the news flow in 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, 3, 4 quarters about this transport and mobility unit, whether it's going to be a drag to your revenue or not?
Pascal Daloz : 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. The regulatory and safety market, as I was saying, is anyway growing at double digit. 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 stand-alone, below than the growth of the market. Where the levers are coming from? There are 3 levers. You remember in my introduction speech, I say ArisGlobal is covering only half of the top 50 pharma. Dassault Systèmes has a presence in most of them. So there is a way, thanks to the unified intelligent 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 definitely an opportunity on this. The second point, which is more important, is the mid-market. ArisGlobal 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, ArisGlobal is having 200 customers. We have 4,000 customers. And 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. It's -- there is no additional investment we should do, except basically enabling the sales force 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, it's not the cleanups guy or the head of engineering, head of development 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 lever we can bring. There are another lever is obviously the product side and mainly the AI side. You remember in my speech, I emphasized the fact that in Aris, record of systems -- system of record, sorry, 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 MEDIDATA 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 2, it's a unique asset we can leverage to accelerate the AI strategy and to build the world model for the life science industry. So this is really where the growth will come from. But I will let Rouven, 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 [ Expand ]. So all the newcomers, all the one having basically the good momentum, they are our customers. And that's basically what we do. We are, in fact, with them accelerating our deployment, and they have exactly the same issues than 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 spaces, but also with the incumbent, they need to transform themselves. You remember me telling you that to develop a car in average in Europe, 52 months, 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 life cycle. So it's not becoming an option. It's a must, including for the large incumbent you are referring to. That's it for the 2 questions.
Operator : Now we're taking the next question. And the question comes from the line of George Webb from Morgan Stanley.
George Webb : Congratulations on the deal. I have 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 see on deal closures in Q2 within that performance? 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 ArisGlobal, can 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 transition or accelerated that. And to what extent is that giving you an additional layer of visibility over ArisGlobal's growth over the coming years?
Rouven Bergmann : Yes, I can start, Pascal.
Pascal Daloz : Yes, please.
Rouven Bergmann : So on the business mix and the business performance and deal 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 are right, we had an excellent performance with 8%, thanks to strong 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 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 2 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're also expecting Europe to return to growth. Americas had a very solid performance, improving visibility essentially week-to-week over the quarter. And there also, I think, good line of sight and good management of pipeline. So well done by the American -- by the team in America as well. So overall, things are under control. Now to the revenue mix of [ Nordic ] -- ArisGlobal and your question regarding what did Nordic do and focus on in the last 2, 3 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 has a high recurring share. And it's clear. The business model transition has been done and it's implemented. Nordic was, together with the Aris management team, very much focused on driving that recurring business growth, building the AI road map with tangible outcomes in their industry. Today, they are the leaders in AI, in safety and compliance. This is done. They're generating revenue. They're seeing real productivity gains from clients. So these are the 2 things I would highlight. Other than that, I think the company is well run across 3 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?
Pascal Daloz : No. And maybe one additional comment from a product architecture standpoint, it has been completely rearchitected. So it's really a full cloud and SaaS model with multiple instance. So there is no technical debt, if you want. We have to take care for the future. So this is also an important point to move forward and to accomplish the synergy we want to do.
George Webb : That's great. Maybe, Pascal, I could ask you one follow-up to that. When you think about the integration of ArisGlobal into Dassault, will you run as a stand-alone business within life sciences for the foreseeable future? Or would you look to integrate into MEDIDATA? Sorry, I lose my voice.
Pascal Daloz : 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 time frame. But to make it simple, again, we have a lot of synergy from a commercial standpoint. We have already the go-to-market. It's independent from MEDIDATA, from BIOVIA, 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 3 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 BIOVIA and DELMIA. So this is, in a way, a stand-alone 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 record. 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 Systèmes 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.
Operator : Now we're going to take our next question. And the question comes from the line of Michael Briest from UBS.
Michael Briest : Just in terms of the Nordic -- sorry, ArisGlobal, I think Nordic Capital have it on their website with revenues of EUR 150 million last year, which is just shy of $170 million. I appreciate it's not a euro business or 100% dollar business. But can you talk about that implied growth rate of sort of mid-single digits? It doesn't seem to accord or is there some definition of revenues, which is different? And then in terms of the average customer spend, I know not everyone is going to be the same, but it's less than $1 million each if you've got 200 customers. Can you talk about the span there and maybe what the largest customers are because I know MEDIDATA is in the tens of millions. But then 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 here on? And how do you think about headcount?
Pascal Daloz : Rouven, you take it?
Rouven Bergmann : 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, FX, 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 forecast at [indiscernible] because we don't run the business. We do not control it. I cannot only say what we see today in the books, which is pretty much actualized course for 2026. And I cannot -- we have analyzed and reviewed their, of course, the schedule and growth over the last 5 years, and it's sort of double digit. So we're -- that's what we are planning for, and that's why the business as we integrated into our financials is revenue growth accretive. On -- 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.
Pascal Daloz : And I think the question from Michael was if you do an average, you divide the revenue by the number of [indiscernible], it's 1 million in average. You're right, Michael, but at the 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 ArisGlobal, I mean on the ArisGlobal scope, do we have customers spending more than 5 million? The answers is yes. So just for you to have this in mind. Now where are the levers? Rouven made a very important statement, when you say 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, it's still manual. And you have a specialized company be doing business, process management. And also, you have a lot of large pharma do we need in-house. This is against where AI is coming at stake, and the NavaX products, which are the one Aris has developed, has been already on the market. And we already have some feedback 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 reinsource some of the jobs they were subcontracted to a 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 ArisGlobal, we could expand the share of wallet. And last but not least, you have all the synergy I was explaining upfront, which is again a way to continue to nurture the development and to size the deal up. So pretty confident about this. And again, that's probably one of the value of the combination of the 2 companies.
Rouven Bergmann : And then you had the third question on the marginal head count. I'll come back to that. You're right, head count is slightly down year-over-year and also for the first 6 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 G&A. 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. So we're confident about the margin outlook.
Michael Briest : Maybe just a 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?
Rouven Bergmann : Yes. Yes. Absolutely, we have that opportunity, but also we have the opportunity to reaccelerate the top line. And as you are reaccelerating the top line, we will have a bigger lever on margin expansion because the cost -- or the OpEx growth should be contained. We are not going to cut, right? We want to invest in growth, and we want to expand this profitable growth. That's the formula.
Operator : And now we're going to take our final question for today, and it comes from the line of Balajee Tirupati from Citi.
Balajee Tirupati : Two from my side as well, if I may. Firstly, on life sciences and MEDIDATA, 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 MEDIDATA revenue to return back to positive growth in the 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?
Pascal Daloz : You take the first one?
Rouven Bergmann : Yes, I do. Thank you for your question, Balajee. Some color on the positive ARR momentum related to the life sciences and MEDIDATA. Yes, ARR is back to growth for MEDIDATA. 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 that we had the last 2 years. So this market is stabilizing. It's important. But mid-market is very consistent. We had also, as you rightfully point out, the headwind of Moderna in the large enterprise, which is now more behind us in -- after H1. There's only a marginal impact in the second half of the year. So the ARR growth for MEDIDATA has turned positive. And in H2, we expect another step-up in terms of ARR contribution for MEDIDATA from a sequential standpoint. It's not yet at the level of cost of the subscription ARR for the company, because the subscription ARR for the company is growing double digit, as I mentioned in my prepared remarks, while the total ARR is 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.
Pascal Daloz : Okay, coming back to the second part of your question. Are we a competitor or partner with the providers of the frontier model? It's both, right? Why so? Because on one hand, we are vertically integrated, but horizontally open, and you have seen this in the architecture side, which means I do not intend to redevelop a [ Netherlands ]. 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, Mistral is the solutions -- sovereign solution for Europe, but in China is another one. And you could be sure that in the U.S. and the rest of the world, it will 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 Mistral. 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 missing it is the people doing the job, the real one, not the CIOs, the people who are, on daily basis, needs to produce and design the car, they are seeing 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 cost you a fortune to run the [indiscernible] model with the tokens and you are creating an extra value in terms of number of alternatives, which are really fitting the requirements. This is not the way to go. And again, if you have listened carefully what I said, the last approach is using the 3DEXPERIENCE agentic platform, leveraging LLMs for what they are good at, including Mistral, but using the vertical integration with the world model, with our companions, with our applications to deliver the best of the both world. So believe me, I have enough -- I 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 specialist. And last but not least, everything you do, you have to certify it and you need to trace it. And this is what means if you want to put AI at scale within an industrial company. So if you do not have an equivalent to the 3DEXPERIENCE 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 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 text, to generate content, whatever the content is a text and image or 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. Okay. So thank you, all of you, for your questions. I think what you have heard today is our strategy is progressing on the multiple front. 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 3DEXPERIENCE platform, and the cloud adoption continue 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 to improve the patient outcome is making a step forward with ArisGlobal, now we are creating this unified AI intelligent platform, connecting molecules, patients and real-world 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 3DEXPERIENCE platform is becoming an agentic platform. We deliver it on the market. This agentic platform is powering AI native applications. The companion is 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.
Operator : This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
