Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dassault Systemes SE (DASTF, Financial) reported a 4% increase in total revenue and an 8% rise in earnings per share for Q2 2024.
- The company has a robust pipeline for the second half of the year, with expectations to close the majority of delayed deals.
- Strong demand for the 3DEXPERIENCE solution in the manufacturing industry, with a 23% growth in the first semester.
- Significant competitive wins, including Mahindra & Mahindra, Bristol Myers Squibb, and Marmon, showcasing the company's ability to displace competitors.
- Continued investment in AI-driven use cases and new product launches, such as MEDIDATA Clinical Data Studio, which are expected to drive future growth.
Negative Points
- Delays in customer decisions impacted Q2 results, causing a shortfall in revenue.
- The aerospace and defense sector faced challenges due to manufacturing ramp-up delays and supply bottlenecks, affecting investment plans.
- Life sciences growth was negative for H1, with MEDIDATA growth at -3%, reflecting a challenging market environment.
- Operating margin for Q2 was below the low-end of guidance at 29.9%, impacted by fewer large deals and cautious customer signings.
- Subscription revenue growth was lower than expected at 8%, primarily due to delayed customer signings impacting large subscription contracts.
Q & A Highlights
Q: For the longer term, does it still make sense to think about EUR2 billion of cloud revenue for the entire year, or should it be considered an annualized rate towards the back half of 2025?
A: The EUR2 billion is annualized. This approach measures the real contributions dynamically over the next 12 months. Outside of MEDIDATA, cloud is growing nicely at 70% this quarter and 60% year-to-date, including strong traction with SOLIDWORKS.
Q: Could you elaborate on your game plan for infrastructure and cities, particularly for 2025 and beyond?
A: We are targeting large infrastructure projects to address the fragmented market by offering our platform for collaboration among stakeholders. We are also focusing on modular approaches to reduce construction costs and improve efficiency. Additionally, we are targeting subsegments like data centers, which are seeing significant growth.
Q: How are you balancing operational efficiency with a steeper trajectory of hiring in the second half?
A: We planned from the beginning of the year to control investments and create room for strategic hiring in the second half. We are bringing in a larger number of graduates and making necessary adjustments at MEDIDATA to align with new growth areas.
Q: How do you see the impact of new SOLIDWORKS packaging on achieving mid-teens volume growth?
A: The new packaging is aimed at companies with one to five seats, which were not well-served by previous offerings. This approach can also be applied to CATIA for similar reasons, focusing on volume-based growth.
Q: Have you been able to close any of the large deals that slipped out of Q2 so far in Q3?
A: Yes, we have already closed some of the deals that slipped from Q2, indicating a good start to Q3.
Q: How much of your large deal pipeline for the second half is for US companies, considering the upcoming US election?
A: About 60% of the deals that slipped from Q2 are in the Americas, and 40% are in Europe. We have risk-adjusted our full-year and H2 guidance to account for potential variability.
Q: Can you provide more granularity on the SOLIDWORKS subscription ramp-up and its impact on your model?
A: Subscription growth in SOLIDWORKS is picking up, with about 40% of new bookings in subscription. We expect mid-single-digit growth for SOLIDWORKS in 2024, with an acceleration in H2.
Q: Where do you stand in terms of market share for Phase I trials, and how does it compare to Phase III?
A: We have gained about 0.5 points in market share for Phase I, mainly from the biotech and mid-market segments. Phase I represents about 15% of the overall clinical trial market, while Phase II and III make up the majority.
Q: Why did the shortfall in Q2 sales mainly come from recurring revenue?
A: The shortfall was mainly due to the timing of large subscription contracts that slipped into Q3 and Q4. These contracts have an annual renewal term, and the revenue event occurs at the signing, impacting the respective quarter.
Q: How comfortable are you with the subscription growth guidance for H2, given the tougher comps?
A: We have risk-adjusted our full-year and H2 guidance. The demand for 3DEXPERIENCE and MEDIDATA is strong, and we have a healthy pipeline for H2. We expect subscription growth to accelerate significantly in H2.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
