Good day, and thank you for standing by. Welcome to the Dassault Systèmes twenty twenty-four Q3 earnings presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Béatrix Martinez. Please go ahead.
Thank you, Sandra, and thank you for joining our third quarter twenty twenty-four earnings conference call with Pascal Daloz, CEO, and Rouven Bergmann, CFO. 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 twenty twenty-three Universal Registration documents. All earnings materials are available on our website, and these prepared remarks will be available shortly after this call. I would now like to hand over to Pascal.
Thank you, Béatrix. Good morning to everyone. Good afternoon to those who are in Europe. Thank you for joining us on the call. This morning, we issued the press release for our third quarter 2024, and let me give, you know, take a few minutes to give a summary of it. First, our Q3 results were in line, showing 4% revenue growth, driven by 8% increase in subscriptions. The year-to-date subscription grew by 9%, and EPS increased 8%, reflecting the solid overall performance. Now, I would like to highlight three key elements of the quarter. First, we have seen several end markets gaining momentum. It starts with life sciences, where Medidata is back to single-digit growth.
At the same time, we had an excellent performance in consumer industries, driven by Centric PLM, and SOLIDWORKS accelerated growth in revenue and seats. Importantly, aerospace and defense demonstrate resilience, delivering a solid performance this quarter. The second topic is, we have seen since last summer, the automotive customers in Europe and in U.S., which have been impacted by a contraction in volumes. This accelerates the need for transformations, for transformative decisions, while at the same time, it can elongate the decision-making in the short term. In contrast, in Asia, and especially in China, momentum remain extremely strong. The third observation is, I think, more than ever, we are well positioned to continue gaining market share with a robust pipeline in the industrial sectors, and we are confident that our 3DEXPERIENCE data centric platform will serve as a catalyst for customer transformations.
In the age of AI, virtualizing industrial processes from design to manufacturing will be a requisite, a prerequisite for our OEMs and suppliers to compete successfully in the NEXT decades. In light of these factors, we reconfirm our full-year's EPS target range of EUR 1.27-EUR 1.30. They are unchanged, and we anticipate the revenue growth acceleration in Q4. Nevertheless, adjusted due to the slowdown in the automotive sectors, and Rouven will give more detail about this. This acceleration is driven by the strength of the 3DEXPERIENCE pipelines. Now, I want to share with you and take a few minutes to share some observations in the three sectors of the economy we serve.
First, in the manufacturing industry, the automotive makers have downgraded their 2024 forecasts since last summer, now predicting a 1%-2% decline in car production instead of previously anticipated growth. This downgrade primarily impacts us in Europe, to a lesser extent in the US, while we continue to see a strong growth in China. Simultaneously, several other end markets are showing momentums, so aerospace and defense deliver a good performance this quarter, driven by a robust defense contract and supplier contributions. On the diversification front, we achieved an exceptional performance in home and lifestyle with Centric PLM, consistently winning new customers and new clients and securing several large strategic deals. In high-tech, we also deliver a robust growth, notably in Asia. As I was telling you, SOLIDWORKS accelerated its revenue growth to mid-single digits, with a seat growth in the high single digits, while we...
The transition to subscription and cloud continues, now representing about a third of our bookings. This diversity of the market we address brings resilience to our business model. In addition to those observations, I want to make a few comments about the competitiveness. It remains extremely robust. In Q3, we secured almost 100 significant competitive deals across key markets, including China, Korea, France, Germany, and North America, and covering industries such as aerospace, defense, high-tech, industrial equipment, and also transportation and mobility. But the most important thing is over a third of those deals involve the competitive displacements. I think this is demonstrating that clients recognize the value of our solutions. In life sciences, I think Q3 demonstrated a broad-based improvement for Medidata, driven by several factors. The first one being the market recovery, with a second consecutive quarter of growth in global clinical trial starts.
And we experienced a positive engagement with our customers across our enterprise and mid-market clients, as well as with our CRO partners, leading to several expanded relationships. As we previously discussed, the new innovation cycle is also contributing to these improvements. The launch of Medidata Clinical Studio at the end of June has already produced significant success, helping us win back clients and serving as a key competitive differentiator that enhance our value proposal far beyond EDC. And this quarter, we are also introducing Rave Lite , which is a design solutions for early and late-phase studies. And why so? Because our goal is really to standardize this fragmented market, which includes many, many, many small players, and I think we can leverage Rave across all the stages.
In terms of market share, I think we continue to strengthen our position and extend our reach from clinical trials to manufacturing, as well as PLM. In conclusion, I think the new innovation cycle is starting to pay off, and we are on track for the Medidata recovery. Now, moving in infrastructure sectors, you know, there is a few dominant players in this space, but we continue to gain references in the energy sector, which is, I think, a way to demonstrate our ability to disrupt the market with our data-centric 3DEXPERIENCE platform, and support customers with their build and run processes. Now, I want to take few minutes to spotlight some key wins from this quarter, and how they are accelerating the transformation and sharpening our client competitive edge. First, I want to start with BYD, and I'm glad to announce we are expanding the partnership with them.
As you may know, BYD is a world-leading EV producers, and this deal we have signed this quarter is an expansion of the 3DEXPERIENCE platform and modeling and simulations for batteries and new energy vehicles. We are helping BYD not only to remain the top OEM globally, but also cutting costs across the entire processes. They are also aimed to enhance their aerodynamic performance to meet the rising efficiency demands into their markets. This win was highly competitive, almost against all the simulation players, and BYD recognized Dassault Systèmes as the best-in-class solution for high-performance battery design and simulation. This collaboration bring over more than five hundred new users within BYD. The second example, or second, customer case I want to focus on, is Merck. Why so? Because we are expanding our partnership with them, focusing on patient centricity.
And you know that, some of our competitors claim these customers as a reference, and this is a proof that we are going through innovative solutions, and our collaboration with Merck shows that they trust us to enhance the patient experiences in clinical trials. In fact, we are broadening our partnership to support key studies in various therapeutic areas, including the phase 3 infectious disease studies, and also involve more patients over the longer durations. And we are also adding support for the new oncology study. This partnership brings an additional 1,400 patients across over 400 sites, and this is adding to the 10,000 we are already serving, or the one participating in the decentralized clinical trial we support. Overall, this expansion highlights our growth potentials through innovation and patient focus, further diversifying our offering beyond Rave.
The last one, as a customer case, is Snam. Snam is a leading natural gas transport operator in Europe, and they are managing 38,000 kilometers of pipeline network. The interesting thing is Snam chose our 3DEXPERIENCE platform to digitally transform the management and the optimization of its gas network by successfully replacing their outdated Bentley solutions, and this win-back is very similar to the one we presented a few quarters ago with Red Eléctrica. The key point is, in fact, Snam is relying on Dassault Systèmes solutions to create the Virtual Twins of their existing and future assets, which is enabling them to manage and optimize their assets, operations collaboratively, but also improve the structural safety and the reduction of the emissions. As a result, Snam's extensive ecosystem of assets and operators will ensure a predictable supply of energy throughout Italy, but also internationally.
And I think our differentiations lie in our ability to combine the virtual and the real data, seamlessly integrating information collected by sensors, allowing Snam to gather, analyze, and act on real-time information. And I think these wins demonstrate our relevance in the sectors and highlight our growing reputation for modernizing energy infrastructure, while enhancing operational efficiency and energy sovereignty at the same time. My last comment will be related to the AI momentum within our portfolio. I want you to keep in mind two things. First, I think we have the largest and the most diversified installed base in the market. This means we get access to the largest corpus of data, and it's not only industrial data, but it's also business and science data. And I think we are using this as a strategic asset to maximize the potential of AI. How we do this?
We, in fact, have been combining AI with models, modeling, and simulations, to transform the data into knowledge and expertise, and ultimately creating generative experiences. This approach applies to everything we do across all the industries and the domains we serve. Today, we leverage a 40-year legacy of industry knowledge and know-how, and it's a way for us to elevate the way people work. In 2024, with AI, our customers can put expert knowledge and know-how in the hands of the non-experts, connect design, engineering, and manufacturing in an easy way, activate the life cycle of the products, master the systems of systems, and achieve personalization at scale. I believe no competitor can offer this level of transformative power. Before handing over to Rouven, I want to highlight three key points. First, our 3DEXPERIENCE platform is a powerful differentiation. Why so?
Because it's a unified environment, it's cloud native, and it's data centric. And it's a very, powerful technology to empower the OEM and suppliers to excel in a rapidly evolving environment, while at the same time, it's giving the ability to leverage the AI. Second, I think our differentiation resonates with customers, as demonstrated by our significant competitive wins and win backs, reflecting the digital value of what we offer. And third, I think the 3DEXPERIENCE products pipeline support our confidence in the growth acceleration in Q4. Now, I think, Rouven, the floor is yours.
Thank you, Pascal. And hello to all of you joining our call this afternoon, and also good morning to our investors and participants in the U.S. So Q3 results were overall in line with objectives.
Total revenue growth was at 4%, software revenue growth at 3%. It came in at the lower end of our guidance range. Profitability was good, with operating margin at 29.6% at the midpoint, and EPS at €0.29 at the high end of our objectives. As you heard from Pascal, in Q3, we faced headwinds with our automotive customers in Europe and the US due to volume contractions. We see this as a short-term challenge impacting the timing of decision making. This was a factor in several pursuits in Q3. However, we are confident that the 3DEXPERIENCE platform addresses the needs of this industry, as evidenced by our midterm pipeline. To complete the Q3 picture, subscription revenue was up 8% year over year, and upfront license was down by -7%. Two additional comments.
First, as you know, Q3 is the anniversary of the mega deal from last year, which added a significant headwind to growth this quarter on software revenue. Second, subscription growth remains strong when excluding the temporarily lower contribution from Medidata. It was up 19% for the quarter and 20% year to date. This momentum reflects the continued healthy demand for 3DEXPERIENCE platform and cloud. Important to highlight, the Medidata performance was in line with our expectations, which I will discuss in more detail shortly. Looking at the first nine months, total revenue was EUR 4.5 billion, up 4%, driven by subscription revenue growth of 9%, an operating margin of 30.2%, and EPS growth of 8%, highlighting the resilient financial model despite a more back-end loaded year.
Now, let me briefly review the deviations to the midpoint of our objectives set for Q3. Total revenue came in at EUR 1,464 million in the third quarter, at the low end of our objectives, excluding a negative currency impact of -EUR 2 million. This performance reflects the headwind evidenced by our automotive clients. The operating margin was 29.6% in the middle of our guidance range, while lower revenue was offset by effective cost containment. OpEx growth in Q3 was 6%. EPS was EUR 0.29, with the tax rate largely in line with guidance and financial income at peak. Starting in Q4, we expect the contribution from financial income to be more muted due to rate cuts and bond repayment that which occurred in Q3.
We continue to take a disciplined approach to managing our business in the current environment in order to preserve our EPS objectives, while we continue to invest in innovation to support our long-term growth potential. Now, I'd like to spend some time on our growth drivers. And going forward, I will focus on the year-to-date trend, as there can be quarter-to-quarter fluctuations impacted by the timing of large deals. The key message is that despite the current headwind, the growth momentum with 3DEXPERIENCE and Cloud remain resilient. Subscription revenue growth in 3DEXPERIENCE was up 57% year to date, driving the share of 3DEXPERIENCE platform to now 37% of software revenue, which is up three points versus year to date, Q3 last year. This highlights the strength and the potential for revenue acceleration in the midterm.
Our top five newest 3DEXPERIENCE subscription deals in the quarter generated one-fourth of the growth. Cloud revenue grew 7% year to date, and excluding Medidata, cloud growth increased 52% for the first nine months, driven by strong momentum in the adoption of 3DEXPERIENCE Cloud. We had several customers expanding their adoption on the 3DEXPERIENCE platform on the cloud this quarter, such as EDF, BoConcept, Conforama France, Dallara Automobili, and HORSE Powertrain, to name a few. Now, let's go over our performance by geo and product lines. Across Europe and the Americas, the weak automotive sector impacted Q3 performance. In the Americas, software revenue was up 6% in the quarter. It was led by mainstream innovation, with an exceptional performance in home and lifestyle and increasing momentum of SOLIDWORKS. Europe was down -4% in the third quarter, largely due to the very high comps.
At the market segment level, the performance across the region was mixed, highlighted by good results in the west and central parts of Europe, while north, due to the high comps and Mediterranean regions, were soft. Performance in Asia remained on track. 9% growth in the quarter and year to date. Unlike Europe and the Americas, transportation and mobility was strong in China. Also, high tech had a good quarter in the region. China, up double digits in the quarter and year to date, as investment in the technology sector continued at healthy levels. Japan, Korea, and India were up mid-single digits in Q3. Now, switching to the product lines. The impact of delayed decision-making headwinds on growth is most visible in industrial innovation, up 4% for the first nine months and -1% for the quarter.
The re-acceleration of growth is associated with deals in our pipeline that will drive this segment. One of the highlights of the quarter was clearly the strong progression of SIMULIA, up high single digits. Pascal talked about BYD. They expanded the use of our SIMULIA solutions for multiphysics simulation, including all domains. To complement, we also signed deals with Sauber, Hozon, and Honda Motors in China. Despite the lower total software revenue growth in industrial innovation, the momentum in subscription continues strongly at 20% growth. In life sciences, we saw in Q3 the anticipated acceleration with sequential growth improvements for Medidata. This uptick was driven mainly by continuous rebound in our study-based bookings growth over the last four consecutive quarters. Also, we saw broad-based momentum across enterprise and mid-market clients.
Just to name a few customers that expanded relationships: Otsuka, Merck, Daiichi Sankyo, Revolution Medicines, Immunovant, Ipsen, BeiGene, Abbott, and Solventum, to mention a few. We are signing more deals. However, on the flip side, we saw fewer large deals in the quarter, similar to Q2. As mentioned during our second quarter earnings call, we expect this trend to normalize as the share of large transactions will grow with upcoming renewals over the NEXT quarters. From a market perspective, it is now the second consecutive quarter with sequential growth in global clinical trial starts. While the increases over the last six months remain rather small in absolute terms, the trend is positive. In terms of market share, we continue to gain share across all phases by one point on a trailing twelve-month basis.
This is driven by resilient momentum in phase three and an uptick in late phase four studies. Phase one and two market share remains marginally unchanged, and as you probably saw in our press release from last week, we are doubling down on the early and late phase market. This is a very fragmented space, as Pascal mentioned, and we believe we can consolidate it with our new offer, Phase Lite. The highlight this quarter was clearly mainstream innovation, with 15% growth in Q3. SOLIDWORKS had a good start into the second half of 2024, up mid-single-digit growth in revenue and volumes. Centric delivered an outstanding quarter, featured by competitive displacements and strong renewals, with healthy expansions across the platform. Now let me share a few more observations on the strong performance of Centric PLM.
The Centric team has made significant progress over the last four to six consecutive quarters, scaling the operation at global level. This is evident in the growth trajectory and value capture reflected in large deal sizes. The deals this quarter are spanning across retail, apparel, sports, and cosmetics, and include significant platform expansions. In Q3, key competitive wins were PVH in the US, ASOS in the UK, and Kmart, a leading retailer in Australia. Now turning to the cash flow and balance sheet items. Cash and cash equivalents totaled €3,658 million, compared to €3,568 million at the end of 2023, an increase of €89 million. At the end of September, our net cash position totaled €1,066 million, versus net cash of €578 million at December 31, 2023.
Now let's look at key levers impacting our cash position at the end of the third quarter. We generated one billion three hundred and fifty-three million operating cash flow year to date, versus one billion two hundred and seventy-two million last year, or growth of 6%. For the first nine months, cash conversion from non-IFRS operating income was 100%, versus 95% at the same time last year. For further detail, please see our operating cash flow reconciliation in our presentation published this morning. The main drivers are the increase in net income adjusted for non-cash items and lower tax payments, which are partially offset by lower compensation accruals and a timing effect of payments for accounts payables.
Operating cash flow uses were as follows year to date: First, for financing purposes, we repaid EUR 700 million of bonds used to finance the Medidata acquisition, which came due in September, offset by EUR 300 million in new commercial paper issuance. We repurchased treasury stock net of proceeds from the exercise of stock options of EUR 329 million, and paid EUR 303 million in dividends. Second, in terms of investing activities, we invested EUR 142 million in property, plant, and equipment, of which EUR 89 million is related to IT CapEx, supporting our growth, and the rest of EUR 53 million, mainly to expand and modernize our office space and presence in France, U.S., and India. We reiterate our commitment to invest and foster our culture of collaboration and innovation across our locations and workspaces.
Now let's take a closer look at our full year outlook. Over the first nine months, we experienced a certain volatility in key end markets, such as aerospace and now automotive, impacting the time to advance our large deal pipeline. It is clearly visible in industrial innovation. On the flip side, we are seeing the life sciences market stabilizing. Also, SOLIDWORKS accelerating growth in Q3, and Centric PLM continues to outperform, expanding deal sizes across an increasing scope of verticals. Now, with this in mind, I have three key messages before outlining our Q4 and full year objectives. First, we are committed to deliver the EPS growth unchanged versus previous guidance of EUR 1.27-EUR 1.30. This reflects strong operating efficiency and commitment to our midterm objectives.
Second, our pipeline of large 3DEXPERIENCE opportunities remains strong over the NEXT quarters, and we are confident in growth acceleration in Q4. Provided that the timing of decision-making can be less predictable in the current environment, we want to be cautious and adjust total revenue growth for the NEXT year, for this year, from, to now 5-7% growth, down from 6-8% previously. Consequently, total revenue is now in the range of EUR 6.155 billion to EUR 6.275 billion, versus previously EUR 6.260 billion to EUR 6.335 billion. As you can see, we are increasing the range to EUR 120 million to reflect a larger variance of outcomes in Q4, while still expecting solid acceleration at the midpoint to 8% growth in Q4.
For software revenue, we expect 5-7% growth for 2024, with an upfront license revenue in the range of -1% to +6% and recurrent revenue up 6-7%. Subscription revenue is anticipated to be in the 10-12% range, and service revenue will be in the range of 4-6%. From a bottom-line perspective, we now expect the operating margin in the range of 31.8-32.2%, versus 32% and 32.4% previously. This guidance excludes any impact for the exceptional tax applied by the French state, which we cannot quantify at this stage. However, it will be excluded from the Non-IFRS reporting, as it's an exceptional and temporary item. Now, I would like to share some additional points to help shape your models, reflecting Q4.
As mentioned, we are increasing our range to €120 million. For Q4 revenue, this translates to 5% at the low end and 12% at the high end, or in absolute terms, to €1,696 million-€1,816 million. The new high end of the range was the midpoint of the previous guidance. Our pipeline reflects the potential for revenue acceleration. We adjusted the low in two steps. First, to reflect the potential of large deals being pushed out to 2025, and second, the pipeline and automotive converting to revenue at the same rate as in Q3. The increased range is most visible in upfront license revenue between 0%-20% growth. We expect subscription revenue in the range of 12%-19%, reflecting strong acceleration driven by 3DEXPERIENCE deals.
In this outlook, we expect Medidata to continue to improve sequentially. Operating margin is expected in the range of 35.9%-36.9%, and EPS of EUR 0.38-EUR 0.41, up 5%-13% ex-FX year-over-year, with the usual strong seasonality of Q4. Now, in conclusion, I want to reiterate our commitment to investing and supporting our long-term growth objectives, while expanding our margins and delivering EPS growth. We continue to see strong customer demand and engagement across our 3DEXPERIENCE portfolio, Centric PLM, and Medidata. While we experience the current volatility in some of our end markets, our pipeline highlights the potential for growth acceleration. Now, Pascal and I look forward to your questions. Thank you.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. Coming from the line of Jay Vleeschhouwer, from Griffin Securities. Please go ahead.
Mm-hmm. Thank you. Good afternoon. I'd like to start with a question on your sales model and strategy. That is, there was, of course, in the last few weeks, an important consolidation event here in the U.S. in your CPE and CRE channel, which was already highly concentrated and now even more so. The question is, tactically, how are you thinking about leveraging that, you know, more consolidated U.S. channel in terms of, for example, cross-sale opportunities? And perhaps more importantly, strategically over time, how are you thinking about the structure of your channel? Do you retain CPE and CRE separately? Would it make sense at all perhaps to even acquire some portion of your channel capacity as you did in twenty ten? I then have a few more questions.
Thank you, Jay. So we start with the first question. So first of all, you know, the separation between what we call CPE and CRE will stay. And why so? Because it's two different way to engage with customers. And sometimes even if the product could be the same, but at the end of the engagement, the customer are not expecting the same thing. If you are a CPE customer, you are looking for not only the fact that you have people being knowledgeable on the software to help you to run this software, to train you, but also you need to be guided in the way you are transforming your company. So it's a consultative approach. It's also a way to guide the business reengineering of the companies, at the same time, to also help the company in their change management.
Which is very different from what CRE is about, because CRE is really here to build the footprint in a very transactional way, with a volume approach for the products where we do not need too much, services or program management, if you want, associated to it. So that's the first part of the questions. Second one is, you are right to mention that in North America, we have the consolidations happening. It's not new, it started a few years ago. Is it a concern? I don't think so. Let me explain to you why. Because I think, given the size of the business we are running right now, this is important also to have very strong partners.
Having not only the human resources, but also the financial capacity to continue to expand, to cover all the new verticals we are willing to cover. So in a way, having stronger partner is going the right way. There is, nevertheless, something where I'm paying a lot of attention, which is exactly what you are suggesting, which is not to mix too much the two models. Because one is really related to what we call the Value Wide , which is how you continue to conquest, you know, the footprint. And the other one is what we call Value Up, is how when you have an install base, how you are basically enlarging and improving the penetrations with all the solutions which are suitable for them. And those two mechanisms are complementing each other, but we should not mix the two different way to engage.
Now, coming back to the questions, which is you are referring to the acquisition of Inceptra by GoEngineer. I think I had the chance to meet with them two weeks ago, and we discussed this topic. There is definitely some synergy which can be played between the two, because there are a big number of opportunities we have identified in the large SOLIDWORKS installed base... especially, for example, around the MES or the supply chain management, could be served by the Inceptra, the other part of the company. I'm fine with this as soon as, again, it remain two different engagement models with two different set of skills, with two different business models, with two different value propositions to give it to the customers. There is some synergy we can play.
Last but not least, we need our strategy to acquire our partners. You know, if I start to do this, Jay, I will not scale anymore. So I think, it's important for us to keep this, ecosystem approach. It has always been a lever for us. In order, we need to expand to basically specialize in some of the partners on new verticals, and we will continue to do so.
Okay, thank you for that. So let's turn to SOLIDWORKS. I think if I heard you correctly, you mentioned high single-digit volume growth for the quarter, which would have been in line with our model and implying around 20,000 units for the quarter. But for the year to date, you're looking at about flat, maybe a little bit better for year to date volume. If that's correct, is it realistic to adhere to the 14% unit growth quota you gave to the channel, at least earlier this year? Is that something you can still realistically attain? And then can you comment on the objectives you've had with regard to doing more large transactions and as well, the effect of the new packages that we talked about a quarter ago for the smaller accounts?
I do not have the year to date in mind, so maybe... Béatrix is telling me it's mid-single digits. It's not flat, right? For this quarter, we are at 8% growth in terms of number of units. So as you can see, it's really an acceleration, which is confirming the fact that despite the fact that we are moving progressively to subscriptions, because subscription is now representing a third of the new CAD units each quarter, I think we continue to have good momentum in terms of units. Now, if you look at the install base of SOLIDWORKS, if I oversimplify, you have, basically, you could sub-segment in two different category.
The large majority of the customer, they have between one to three seats, and you have the one having more than ten seats, right? The reality is we are growing extremely well in the one having more than ten seats, and this is exactly what we just discussed previously, which is this Value Up mechanisms. However, we need to re-energize the one to three seat, which is really the core of SOLIDWORKS. If you remember, we have been able to establish a footprint by addressing specifically this, mainstream market composed by very, sometimes very small companies. So, and we have adjusted the offer in order to be much more suitable for this, sub-segment of the market.
I think we start to see the benefit of it, because this quarter was really the first quarter after all the decision we took almost a quarter ago, in order to put the focus on this sub-segments of the market. So I think we want to be balanced. CRE is really about the volume and the footprints. At the same time, there are different large accounts which are having different needs, and we are more and more giving the ability to do both without compromising the fact that it is still a volume approach.
Okay, my two final questions. With regard to the vertical integration strategy you have for your cloud business, back in April, the company disclosed that you were planning to add three new DS data centers, including here in North America, and the question is: Have those three, in fact, gone live, and how are you thinking about adding further DS data center capacity into 2025? And then finally, with regard to infrastructure and cities, would you say that the strategy is largely process or data management oriented, or would you say that you are reverting to more of a design or model-centric strategy for like what most of us refer to as AEC?
With that in mind, can you talk about your plans to reinstate CATIA for the AEC market as you seem to be planning to do?
Okay. So related to the data center, I think usually it's taking a quarter to open the data centers as soon as we took the decision, so I think we are on plan. Now, the way it works, Jay, it's a business case for me. If I do not have the critical mass in term of number of customers and users, it's much better for me to use the hyperscaler. And as you may know, we have the full compatibility with AWS, so it's very transparent to use AWS or to use our 3DS OUTSCALE infrastructure. So I did not yet review the 2025 plans, but I do expect the needs to open new data center will be limited given the coverage we have already built for the last few years. On infrastructure and cities, you are right.
I mean, we are the challenger. And for a long time, we were willing to address this market with the traditional modeling and simulation approach. And now we discover that with the platform, it was probably a much better way to penetrate this sector, because this sector has digital data for the last 40 years. But the truth is they are not well equipped to collect those data, build the reference models, and more importantly, to connect the Virtual Twin, if you want, with the real-time operation of those assets. I think this is where we have found a sweet spot for the platform, and we have a collection of wins since the last, I say the last 3 years, where we have been able to demonstrate that the platform is extremely relevant. Does it means we are not betting on the modeling and simulation tools?
The answer is obviously no, we are, but we reverse, if you want, the go-to-market. We first are tackling this market with the platform, and when the platform is used in productions, we are coming on top of it with the modeling and simulation capability. It's a much better way for us to establish a footprint than try to compete head-to-head with the modeling and simulation without having the platform value proposal to be established.
Okay. Thank you, Pascal. Thank you, Bill.
Thank you, Jay.
Thank you. We will now take the NEXT question from the line of Jason Celino from KeyBanc Capital Markets. Please go ahead.
Great. Thank you. Maybe just to follow up from last quarter. I think last quarter, you cited some large deal delays, in particular, you know, one, a larger one on the aerospace and defense side. Any update there? Do you still expect that to close in Q4? And any reason... And, yeah, you know, is that the reason for the implied acceleration next quarter?
Yeah, so of course, this all of the deals are active in our pipeline. And related to the aerospace and defense, as Pascal mentioned, we have seen resilient activities and demand in Q3 and continue to project that for Q4. Unlike in Q2, where things really started after the first semester to the summer, the discussion started to become active again. So it's I'm not going to preempt a closure of a transaction here, but what I can tell and share is we are in very active discussions and we have several options. It could be a mega, large, larger transaction. It can also be a series of transactions over several quarters.
These options are still in discussion, and for us, more than ever important in this time where it's challenging to predict the timing of events to happen. It is for us to be very focused and disciplined on the value and pricing and the discussion with our clients to ensure we are completing this at the right time, with the right value and the long-term view. That's also part of us adjusting our outlook to have the timing and flexibility to exactly time the closure as good as possible of transactions and certainly the large one.
Okay. And then if we take a step back, you know, even from the beginning of the year, you've been confident in your robust large deal pipeline. You know, progressing through the year, it seems that conversion of these large deals has been challenged for different reasons, with most recently, you know, this quarter. I guess when we think about Q4, you know, what gives you confidence that close rates, deal conversions won't deteriorate further? Thank you.
I can start and Pascal please, add. First of all, we have not lost any of the deals. They are active in our pipeline. And you know, it's a, it's a reality, in fact, that many of our customers have gone through also some of their business challenges that we have to work with them through. The pipeline was always geared towards an H2 acceleration versus H1. So from that angle, you know, we are still on track. We are in H2. Of course, our objective was entering in the second half of the year is to try to have a much more balanced view, balanced allocation between Q3 and Q4, which you know, as you see in the current quarter results, was not possible.
This is attributed to the delay in decision-making in the auto sector, which impacted us in the third quarter by about €40 million of deals that shifted out. They're still in our pipeline, but that's the difference between the low and the high end of the third quarter revenue range. You take that into account, the deals are still in our pipeline. We are advancing the discussions, but we want to preserve the right timing of the decisions with the possible value, short, mid, and long term, the best possible value. That gives us a variety of outcomes, and that's what's reflected in the current range of 5%-12% of €120 million.
We preserve the upside, but also we want to make sure that we have a strong start in 2025, depending on how decision timelines and cycles will unfold in the fourth quarter. So that's my summary of where we stand and the dynamics that we have faced. But the confidence really comes from the fact that the pipeline remains intact, strong. The discussions are active, certainly in the aerospace and defense part, while the auto sector, which has always been a big part of our business, is right now under stress and crisis. And this is something. It's not creating an opportunity for us, while it could be short-term, a distraction.
Okay, perfect. No, that's very helpful. Thank you, Rouven. Thank you.
Thank you. We will now take the NEXT question from Sven Merkt from Barclays. Please go ahead.
Hi, thank you for taking my question. You've said upcoming contract renewals from Medidata, and renewals come obviously with opportunities, but potentially also with risks. Therefore, it would be great if you'd comment at what rates you expect deals to renew, and what variants you see around this to the up and downside. And then secondly, can you please remind us on the revenue mix for Centric between cloud license, on-premise, subscription, maintenance, so we can get a sense how sustainable the 90% growth from Q2 is? Thank you.
Of course. Thank you for the questions. For Medidata, we are entering a cycle of larger contracts that are up for renewal. Remember, already in twenty twenty-four, we renewed with our biggest client, BMS, Bristol Myers Squibb. And there are several upcoming renewals in the fourth quarter and early next year, which give us a potential of an increase. And what we are expecting here is an increase in the range of 10% on top of the par value. And what gives us the confidence is the value of the new innovation that we have introduced last year and continue to bring into the market now. It's resonating very well with our customers, and this is giving us the potential to expand across the platform and expand in terms of value that we can create.
It's not anymore so much dependent on the number of studies and rate, well, it used to be in the past. We have much more of the portfolio is much richer. It can be expanded across Patient Cloud , but also, clinical operations. You remember where CTMS has been a category where there was always a lot of debate, you know, how strong we are versus others, but with Clinical Data Studio, we are winning. We are back in this market. So that to the upcoming contract renewals. On the revenue mix question regarding Centric, it's simply said, it's a mix of around 50-50 between the cloud and the on-premise, and there's a few legacy clients that are still on-premise. The new ones, the majority are cloud-based, and the progression towards cloud is going fast.
Remember, when we acquired this business a few years ago, it was all perpetual license-based. Now, we first converted it to subscription, and now we're converting it to cloud. And in terms of the sustainability of the growth rate, well, we do not expect the very high level, high growth that we had this quarter, almost triple digits, to sustain in twenty twenty-five. It will be much less, but it will be a decent growth that I would call sustainable for on our path, which is to achieve one billion over the NEXT years. That's the ambition we have for now.
Great. Thank you.
Thank you.
For now, I guess we will stop the call here.
I would like to hand back over to Pascal for closing remarks.
Thank you so much for participating to this call and, as usual, the good Q&A sessions. I hope to see you face-to-face in the coming weeks, if not months. There is an important rendezvous, which is in a few weeks from now, in November the thirteenth and the fourteenth, for the big event, which is the NEXT in New York is the events related to Medidata and life sciences at large. And Rouven and the investor relations team are organizing specific sessions for you investors to have a chance to discover the new positioning of Medidata, the new partnership also we are doing, and also meeting with customers. I think this is important if you have a chance to participate, to be available for this. And also, you will have a chance to see the leaders.
The new leadership team is driving the Medidata. So it's, I think it's, a rendezvous you should not miss, and I hope to see many of you at that time. So thank you so much, and again, have a good day and see you soon.
This concludes today's conference call. Thank you for participating. You may now disconnect.