Ladies and gentlemen, thank you for standing by. Welcome to Dassault Systèmes 2021 Q3 earnings presentation. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. I would now like to hand the conference over to François-José Bordonado. Please go ahead, sir.
Thank you, Roberto. Good morning, everyone. This is François-José Bordonado speaking, Dassault Systèmes investor relations. From the company, we have Bernard Charlès, our Vice Chairman, Chief Executive Officer, and Pascal Daloz, Chief Operating Officer and Chief Financial Officer. I would like to welcome you to Dassault Systèmes third quarter and nine months results of 2021 webcast presentation. At the end of the presentation, we'll take questions from participants. Later today, we'll also hold a conference call. Dassault Systèmes results are prepared in accordance with IFRS. Most of the financial figures in this conference call are presented on a non-IFRS basis, with revenue growth rates in constant currency, unless otherwise noted. For an understanding of the differences between the IFRS and non-IFRS, please see the reconciliation tables included in our press release. Some of the comments we'll make during today's presentation will contain forward-looking statements, which could differ materially from actual results. Please refer to our risk factors in our 2020 document. I will now hand over to Bernard Charlès.
Thank you, François- José. A good quarter, as you have noticed already, thanks to all the team and, especially Pascal. The Q3 total revenue is up 12%. On a broad base, really about 90% of the coverage of our revenue is growing double digits. It's a very healthy balanced sources of revenue. The new license revenue is up 24% and the EPS is reaching an LC 40%. For the full year, if you look at the other side of this table, we are raising the 2021 guidance on targeting an EPS growth of about 25%-27%. What can be explaining that?
I think we really see a new decision process with our clients with a preoccupation to really move from a product-centered economy to an experience economy, the value of usage, product and services. Sustainability is at the core. I think when shortage conversation will be reduced in many industries in maybe two, three or four quarters from now, I think the topic will be back about really how do we create sustainable portfolio and circular economy. We are really working hard on this topic, and I think this is creating visibility for Dassault Systèmes with new value networks for those industries. Really our focus is really deep customer focus with virtual twin experience with the platform itself, the 3DEXPERIENCE platform on really the capitalization of knowledge on know-how.
We are going to share, of course, like I'm going to share this agenda with Pascal. Let me just give you the context in which we are playing. I would say that when this year will be over, we will have well-positioned the company in these three big sectors of the economy, manufactured goods, life sciences and health care at large, and then infrastructure with energy and cities. Which basically, at the end of those loops are the consumers, the passionate human as passion, and human as citizens and workers. This is what we do. This is the core of Dassault Systèmes. I believe this third quarter on the showcase we have in each of them illustrates that shift from digitalization to true virtualization of things.
Which is really, there is a big difference. You know, when you do a digital document, you reduce the time to communicate them, make them available to everyone. When you do virtualization, you increase the prediction of what is going to happen in the real world. It's not a light difference, it's a very big one. I think I will take briefly three or four examples. An airplane does not take off by accident. You have to simulate everything. Synthetic control arm, the third group of patients, which is a virtual cohort. Wow. That speaks for itself.
You have the placebo group, you have the patients which are under treatment, and you have a third group now showing up, which is the real world of AI-based observation of long track record to really create this. It's happening. It's not just a view of the brain, it's really happening and it's in action. I will come back on this. Virtual twin experience to design, to operate companies, this is where we are going. A good example of it is the Renault showcase, and there will be many others in the future. Where really the transformation of this group is really centered on a fundamental shift from digitalization to virtualization of everything, the way products are created, produced, delivered, and even the way the company is working. My friend Luca has a 45-second message, so please run the video.
Renaulution. That's the name we've chosen for our short, mid, and long-term strategic plan. One simple slogan, it will be moving our focus from volume to value. We have three phases. First phase is resurrection, running from 2020 to 2023. It will be clearly about cost reduction, margin and cash generation. Renovation spanning from 2023 to 2025. This is when we will benefit from a completely new and revamped lineup, electric and electrified. Third phase is revolution. From 2025 onwards, it's about becoming a player in the data, energy and services.
I couldn't find a better synthetic, precise view of why they are adopting the 3DEXPERIENCE platform. Because when you know fleet's conditions of operation, you can better understand what kind of product and services could be provided. It's a great. I think we were very happy to build up this transformation roadmap with them on the deployment of the 3DEXPERIENCE platform. You see here very tangible reasons for that, you know, shortening the development of the vehicles, but also providing new types of services. The cloud platform being adopted for global collaboration on its cloud native, reaching ultimately a large percentage of the total population of the group. More will come on November ninth.
We have the 3DEXPERIENCE FORUM in Western Europe and we are very pleased to have the VP of Renault coming to speak about their transformation, and so we will do the PR at that time. That's why it was not done today, but we just wanted to give you visibility there. The second remark I want to share with you is the expansion of the scope of the 3DEXPERIENCE platform going beyond product creation and production, which is about product in operation, explore the way things are used in real world. That's a good representation, is that you will see everywhere in our solutions going forward, is this famous IFWE Loop, we call it the IFWE Loop, which is to connect the world of producing with creating and producing, with the world of using the solutions.
This is happening in all sectors of the economy. It explains a few moves we have been doing. As as Luca de Meo said, he wants to use the smart data analytics of vehicle usage to really provide new offer for his clients, which is exactly a proof point about that trend, and it's happening everywhere. As a side note, we are very pleased to have taken an equity position in a very innovative startup called Bloom here in France. What they do is smart analytics of all information on social network. Why do we think it's a value to connect with them? For a simple reason. All enterprises we serve in the world wants to improve their understanding about what their consumers, passions or citizens are expecting.
There is no better way than observing what is said on, or written on, the social networks of the world. On so that new reach, we believe, will be possible. That's why you have the blue arrow here. The blue zone here on the IFWE Loop is to demonstrate that we are connecting the 3DEXPERIENCE platform with humans to understand the value of it. Whether it's a consumer or a prosumer or a citizen. We have already great customers. They have already great customers, and we are already, as you know, all the names I presented here, and you see them, hopefully in the presentation, all those names are already, for example, Centric PLM clients. We are already there for the collection definition. We are already there for the portfolio, connecting them.
Connecting that approach to expectation from consumers is very critical, and this is happening everywhere. We continue to stick what we said, be game changer in three sector of the economy. How the ways manufacturing, the world is manufacturing things, objects. How are we transforming life science on healthcare, and how do we play to improve quality of life with infrastructure? Let's have a few illustration about why there are good reasons to believe that it's happening. The Medidata NEXT event was an amazing event. Really with 3,000 customers and partners, 200+ speakers, 55 countries represented. When you notice the names on what were their subject matter, like Moderna, you know, with next generation medicine, Amgen, with data everywhere, anywhere, anytime on analytics, on them.
Labcorp with strategic Sensor Cloud partnership, so we can connect with the patients on the new equipment that they will be using. Medidata, with integrated data science for agile therapeutic development. By the way, this is where we have synthetic control arm applications. Boston Scientific, a prestigious other name, large-scale remote monitoring for operational excellence on compliance. Even the FDA itself discovering how much synthetic control arm can bring to the evaluation of value and risk, which is always the real challenge in this world where there is so much complexity. A great event, a great dynamic, and above all, proof points from customers that we are bringing a real value to them. Few quick examples here. At Rho, they are doing this decentralized clinical trial. They have been adopting Medidata Patient Cloud for that.
It's a wonderful solution, extremely powerful solution for that. It's the best on the market. They are expecting to really improve their competitive advantage of course to accelerate the clinical development program. We provide the sponsor a complete holistic view to the operational data that they use in the clinical trial. Of course, it improves their decision-making process. So this is in America. If I look at Asia and specifically China, and the reason why I say China is, look at this, there are new players coming really in the manufacturing of extremely sophisticated machines, high-tech machines for genome sequencing. They are adopting License to Cure for Medical Device.
License to Cure for Medical Device, which is really all the process to create, produce, and certify the compliance with of course all the regulatory rules. They want to accelerate. First of all, it's a new possibility for them to reach a level of excellence never reached before. So that's another example that we selected for you just to build up proof points. BMW, we are all talking, they are all talking these days about shortage. But part of the shortage is also the restructuring of the supply chain at large. Why the supply chain is going to be restructured massively everywhere around the world, in my mind, it's not the reason of shortage only. It's because of sustainability reasons. This resetting of the world of industry is going to happen.
The one who are going to do it first will have a strategic advantage. With BMW, we are deploying a DELMIA Quintiq for production planning, scheduling. Of course, when you speak about production planning and scheduling, you speak about all the constraints for the flow of things that should come together right, and at the right time, so you can deliver the product and the cars you need to deliver. On the third example, also to show that we are focusing not only in production quality, but the global ballet, if you want, about everything that happened to make sure that companies can develop, can deliver on time and with the precision. Hexcel, aerospace supplier, where they are basically taking the same approach with DELMIA Quintiq. Mainstream market.
We have now multiple energy sources. You all associate our mainstream market to SOLIDWORKS. But we believe that the mainstream market is also driven by Centric PLM. The footprint that those companies are opening up are just gigantic. We reach with Centric PLM 500 companies, amazing logos. Over 2,000 brands are trusting now Centric PLM, and with all on the cloud subscription model. Clearly, it's about the life cycle of collection, the supply management. We are going beyond with VIP, what is called VIP, which is the trading between the stores and the one producing the collection to really commit for sale.
We are reaching a point where this platform is becoming a platform that connects the dots in a holistic manner between collection creation, store activities, and profiling of offers that are going to be part of those multichannel approach. We don't forget our existing loyal long-term customers, Airbus. We are even doing very open, very innovative things. As you know, there are many fronts of development with Airbus.
We have talked about it before, but this is a kind of a new unique expansion of our partnership because we are really investing together to create the virtual twin of Earth, to really use the way they collect data and improve services online that will be used in the world of nutrition supply, food supply, as well as the surveillance of territory, deforestation, land planning, climate change, et cetera. Why do I like this example? For a simple reason. It shows that we can reach scale. Interstellar Lab, let's go beyond the current planet. This is an amazing Franco-American company building modules for sustainable living on Earth and in space.
I'm sure that our friends from Blue Origin, who are clients, will see onboard from Arianespace on many of their launchers the value of that, where basically micro production unit will be over time turning around Earth and around the planet. This is what they do, and it's going to be used, of course, for BioPod, for example. I don't think this is an anecdote. I think this is showing an interesting expansion of our planet in terms of making things available for human. Finally, I cannot forget the COP26 challenges. The Paris Agreement was a very successful one, where many companies committed, but the question now is about how to improve the commitment on how to make it happen.
In the Financial Times survey, you know, the 36% of the executives are really considering how to start integrating sustainability on SBTi, basically, in their product development and their operations. Innovation will be probably a massive element that will trigger those transformations. I think we can connect to great showcases we have today. If you look at what we are doing with Bouygues and with new virtualization of construction process, so removing waste massively. There is a lot of waste in construction. Also we have here another use of platform with a German company.
We have many examples here which are good illustration even for wine, by the way, which shows that the platform can be used not only for planes and cars or medicine, but can be used to better manage the logistic on the packaging for this company. Last but not least, before I conclude and give the floor to Pascal, if you have the opportunity to be in London, please go and stop by at the Design Museum. We had a big event last week with the best designer on the planet, discussing about how the new way of design could radically change product sustainability.
If you look at the right side of this illustration, you have in this museum for a certain period, I think until year-end, an illustration about those tubes that you see below the car here are exactly the materials or the volume of materials. I should have put the scale, but roughly speaking, it's about 60-70 cm high, less than 1 m, of materials that are making those car. What is intriguing when you see it that way is you say, "Wow, if we do it right at the design stage, we can do circularity." Something new is going to happen there. We all agreed, the top designer of the world, and us, that this is a sweet spot for the future, and we are going to make it happen. You have a... You can click on the links. I've put several links in the presentation because I think it's useful to come back to this. In short, I think we are walking the talk with the commitment and the raison d'être, the Dassault Systèmes, the purpose which is harmonize product, nature, and life. With that, Pascal, you have the floor to illustrate that numbers are resonating.
Thank you, Bernard. Very inspiring, by the way, speech, talks. Hi to everyone, and I hope all of you you are doing extremely well, and thank you for joining us today. Turning to our financial performance, I think we deliver a strong third quarter results, thanks to the broad-based growth across regions, product line, and industries. Now starting with the top line, year-over-year comparisons. Total revenue grew organically 12% to EUR 1,116 million, near to the top of our 10%-13% range. Software revenue grew 11%, driven by the license and other revenue, which rose 24% to EUR 108.3 million, which is well above the guidance.
Subscription and support revenue increased 8%, driven by the high double-digit growth in subscriptions, reflecting not only the strong Medidata momentum, but also the 3DEXPERIENCE sales. Recurring revenue represent today 80% of the total software revenue. Services revenue was up 19%, driven by the larger 3DEXPERIENCE platform project we have. We think we achieve a very interesting, services gross margin of 20%, substantially better compared to last year, thanks to the effort we made in 2020 to preserve the margin in the face of the pandemic, but at the same time to also secure our commitment for our customers. Operating margin expanded to 33.8%, and finally, EPS grew 40% to EUR 0.22.
Now, let's turn to the software revenue by geography. The Americas grew 12% during the third quarter, benefiting from a strong performance in life sciences and healthcare, but also aerospace and consumer packaged goods. On a year-to-date basis, the Americas represented 38% of the total software revenue. Europe increased 9%, led by Northern Europe as well as France. Germany rebounded significantly during the quarter, and on the year-over-year basis, Europe represented 36% of the revenue. Asia rose 13% with India and Japan rebounding during the quarter. China grew 8% on the back of a strong year-over-year comparisons. You know, the year-to-date for China is exceeding 25%. Year to date, Asia represents 26% of the revenue. Now let's zoom on the product line performance.
Industrial innovation software revenue rose 8% to EUR 555.3 million, driven by an extremely good performance of SIMULIA and DELMIA, as well as, you know, the large customer wins we signed during the quarter. CATIA license revenue was up also double-digit, while ENOVIA experienced a strong subscription growth, which is something I want to spend one minute on this. You know, more and more, we see the subscription model becoming the standard for ENOVIA, the 3DEXPERIENCE platform, which is also understandable because they are the collaborative piece of our solutions. That's not yet the case for, I would say, the CATIA to a certain extent, SOLIDWORKS, which are still driven by the license model. Now, let's move to life sciences software.
Revenue total EUR 226.5 million, an increase of 19%. Medidata continued to experience a strong momentum across its product portfolio, including Medidata Rave, Medidata Acorn AI, and Medidata Patient Cloud, as well as across end markets, including pharmaceutical and biological companies, you know, the contract research organizations, but also the medical devices company, where we sign a new enterprise platform deal with a top 10 med- device company. We also saw a high double-digit growth in the attach rate. You remember it was one of the question you had at the beginning. Rave is basically the de facto standard in this industry. But what about, you know, all the new modules developed on top of? We are very pleased with the performance we have been able to achieve since the beginning of the year.
In summary, the life science industry is transforming rapidly, adopting decentralized trials and AI-based analytics, using Medidata's unique data science capabilities and as evidenced at the Medidata NEXT conference this month. In the mainstream innovation, software revenue rose 13% to EUR 262.9 million. I would qualify this growth as being broad-based, you know, driven by SOLIDWORKS software revenue growth of 12%. On the back of a relatively stronger comparison, if you remember last year, it was higher than 10%. As the recovery started in Q3 last year. We continue to see a good adoption of our 3DEXPERIENCE Works family, the cloud-based solutions, starting during the year, you know, during this period. As Bernard mentioned, Centric PLM executed extremely well again this quarter, reaching the milestone of 500 clients and driving a high double-digit increase in revenue. Could be triple-digit, very close. Now let g oing.
Now let's review our key growth strategies. You know, specifically, the 3DEXPERIENCE and the cloud adoptions, and how we are progressing relatively to the objective we laid out during the 2020 Capital Market Day. Year to date, 3DEXPERIENCE sales grew 18% with license and other software revenue up 36% to account for 28% of the total software revenue, an increase of 3 points when compared to last year. The strong value proposition of our 3DEXPERIENCE platform has been a key factor in driving the client wins. The cloud revenue increased 24% in the quarter and now representing 20% of the revenue, which is plus 1 point compared to last year, and is driven obviously by the strength in life sciences as well as the 3DEXPERIENCE cloud solutions.
We are focused on supporting our customers as they adopt the new business model. You know, they are coming to us in order to accelerate innovation cycles, speed up executions, drive the business transformations, all centered on improving value and experience for users and customers. Our strategy is also to enable this transformation through the native cloud applications and extensions to existing on-premise investment and the 3DEXPERIENCE platform with an open ecosystem. I think, you know, the Renault partnership is a good illustration of this momentum, not only, as you say, in the mainstream market, but also for the large corporation, which has been, you know, to a certain extent, the most difficult people to convince to adopt the cloud solution. We are moving along this way.
Now, let's say a few words about the profitability. We deliver significant outperformance in operating margin this quarter. The operating margin expanded by 560 basis points to 33.8% versus the midpoint of our guidance of 29.15%. It's another, it's an over-performance of 465 basis points. This was driven by the revenue at the high end of the guidance, point number one, then the strong operational execution as well, and the continuation of the pandemic-related expense. Last but not least, the headcount tailwind we discussed last quarter. Let's say a few words about the headcount. This quarter, we saw a strong hiring activities, up more than two times more compared to Q1. I think we did great in the way to continue to attract the talents and to onboard them.
This is resulting in a 2% overall headcount increase and driven specifically by the research and development up to 4%. I think we have a track record of delivering transformation innovation in the context of the mission-driven culture. However, the attrition remain elevated and we are, nevertheless, confident that we have the ability to continue to attract and retain the top talent. This is a top priority for Q4 and for the beginning of next year. EPS. This is reflected. I mean, the good performance in the operating margin is obviously reflecting in the EPS with a growth of 40% to EUR 0.22 compared to our guidance of 15%-22%. This represent EUR 0.03 above the mid-range of the guidance.
EUR 0.025 is coming from the profitability and the good performance, and EUR 0.005 is coming from foreign exchanges. Turning back to our financial performance and balance sheet items, let's say a few words about the cash flow. Year-to-date cash flow from operations rose 24.5% relative to last year to EUR 1,255 million, which is almost what we delivered last year for the full year. We are almost a quarter in advance. Our net financial debt position at the end of September decreased by EUR 850 million to EUR 1,200 million, and putting us on the pace to reach our deleveraging goals well ahead of schedule. It's almost a year before.
I think we have been able to manage extremely well the cash flow during the last 18 months. As you know, this is giving some new room to maneuver in the coming years. Now, let's say a few words about the 2021 financial objectives. We raised our fiscal year 2021 revenue growth objective range from EUR 4.745 billion-EUR 4.790 billion to EUR 4.800 billion-EUR 4.825 billion, which representing an increase of 10%-11%. We expect our operating margin in a range of 34%-34.1% versus 32.7%-33.1% previously. We expect the expansion and the headcount tailwind we expanded this year to dissipate in the coming quarter.
As we stated, to resume the travel, increase the sales and marketing spend, and accelerate also the net gain in hiring in the key area across the globe. Consequently, we are raising our EPS objective range to €0.99 to €1.04-€1.05, which represent a growth of 25%-27%. All the updated guidance, you know, capture in the incremental earnings upside from the third quarter and increase the revenue visibility while expenses remaining unchanged are captured in the guidance. You will find more detail about the full year objectives as well as the fourth quarter guidance in the earnings press release and the presentations. I think it's time to conclude now, Bernard. Few takeaways I want to remind to you.
One, I think we are encouraged to see the vast majority of our end market growing double digits. Bernard said a few words in the introduction, but I think this is a very key takeaway, and especially in the manufacturing core industries. It was also great to see that certain countries like India, hard hit by the pandemic, stage a comeback this quarter. The second thing which I think the clients imperatives of the virtual twin experiences includes this path by the way of platformization and the cloud, as well as the sustainability are accelerating. We view this as secular drivers. It's not something for, you know, one or two quarter. I think it's for the next decade.
Our strategy, I think, is well enabled, you know, these imperatives and our 3DEXPERIENCE platform powering the virtual twin experience is a competitive advantage as it connects ideas, people, and data with a common architecture. Our commitment to drive our strategy, you know, is clear, and we thank them for their continued trust this quarter. Lastly, we hope to resume in-person meetings with the investment community in the coming months. I know I was speaking with some of you. You start to be back to the office, and I will maybe have a chance to see you in person. I look forward to see you soon. I think Bernard and I now are ready to take your questions.
Operator?
Ladies and gentlemen, we now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone. We have the first question from the line of Adam Wood from Morgan Stanley. Please go ahead. Your line is open.
Hi, good morning, Bernard, good morning, Pascal. First of all, congratulations on another strong quarter. I've got two questions, please. The first one was around, you know, the hiring attrition and therefore margins. Probably a bit more for Pascal. Could you just talk a little bit about, you know, whether you believe you can continue to hire at the pace that you saw in Q3 or even accelerate it? And then a little bit around what the attrition means in terms of wage inflation for next year. And kind of linked to that, do you start to have any concerns about, you know, the ability to deliver the growth that you want given the difficulties of getting the headcounts up as we look into the next couple of years?
That's really on the margin side. Secondly, I wanted to ask a kind of bigger picture question around China. I mean, it's obviously been a nice growth driver this year. It's a huge opportunity for you. I guess European companies have found a nice happy medium between, you know, the U.S. and domestic players, and I think we hear in other sectors of software that, you know, a lot of U.S. companies have almost exited China. Could you just talk a little bit about the competitive landscape there in terms of the traditional companies that you would compete with, in the industry, and whether that situation is benefiting you? Maybe also from a domestic competition point of view, do you see any emerging players who, you know, over time could become more competitive and obviously, you know, privileged by the government, in terms of companies being encouraged to use their solutions rather than external ones? Thank you.
Thank you, Adam. Pascal, I think you-
Okay. I will take the first one.
First one.
Yes, you are right, Adam. Let me give you again some perspective. In Q1, we were flat in terms of number of people. In Q2, we hired a little bit more than 50 net adds. Now it's 300 for this quarter, and I do expect for Q4 to hire close to 200 net people. That gives you to a certain extent the trend. For you know, for next year, I do expect to hire 1,000 people per quarter on average. And I hope I will be able to contain the attrition. Why so? Because, you know, the normal attrition we have per quarter is around 400 people, 500 sometimes. The peak is usually in Q3, by the way, it's between 600 and 700, depending on the year.
There is something new happening, which is in the 1,000 people we are planning to hire, we could now count more than 100 of them, they will not show up. The first day, you are expecting them to come, and they are not coming. It's something new. We did not factor this in our plan in 2021, but now I'm really taking this into account and I'm working on this. The vast majority were in India, and I think we took some decisions in order to adjust the compensation. I think we were slightly below the peers. I hope in Q4 we will be able to correct this. There is a piece which is a new behavior, we just have to take this into account.
Coming back to your question for next year, if you combine the fact that I really want to improve significantly the number of people in addition in net, plus the fact that we really want to have the people be on the road visiting customers, you know, we want also to relaunch the marketing machine at the level where it should be. I think the question is really to give you some guidance for next year for the EBIT margin. You should count that between 1 point to 1.5 points less compared to this year, as a good indication of where the margin should be. It's a little bit early. Again, we are still in the middle of the budget discussion, so I hope you will not blame me if I'm coming with some adjustment early next year. In you know, with this, I think you have a good way to modelize and understand where we are going.
Related to the second question, which is quite important, the China landscape and the dynamic. We are welcome in China first. We have a trusted, stable relationship with prestigious companies, and also their partner network. The dynamic for cloud, for example, is very good in China, unlike many other foreign companies. The second thing is I think it's understood by many Chinese executive that our solutions are core to help them be more sustainable. That sustainability, even though we can discuss about the global emission factors, is really on our agenda. It's a very strong preoccupation. We see it in energy, of course, with a nuclear project or a hydro project, and we see it in infrastructure, in medical. I mentioned a few customer selection there in mobility. We are well recognized. To your specific question, Adam, about competitive landscape, you know, we are very well recognized. We have a lot of synergy with existing companies there. At this point in time, our real challenge is to continue to develop our partner network to fulfill the demand.
Okay, thanks. That's helpful. Thank you.
Next question.
Thank you for your question. The next question from Frederic Boulan from BofA. Please go ahead. Your line is open.
Bonjour, Bernard and bonjour Pascal. Couple of questions on my side. First of all, you mentioned supply chain. Interested to see how you see the supply chain issues impacting, in particular, auto space and other manufacturing, both in terms of long-term demand for, you know, for your structural solutions, but also more short-term, considering some of the constraints we're seeing in the supply chain. Secondly, on life science, very strong growth again from Medidata, 20% growth in Q3. How do you see the medium-term potential of this business? It seems to be faring very nicely versus the 13%-15% long-term outlook you have for life science. Certainly on the industry consolidation piece, I don't know if you have any thoughts on the AspenTech deal, whether you would expect further consolidation in this industry, and whether you see incremental risk from an integrator vendor model versus a pure software model like yourselves. Thank you very much.
Thank you. Supply chain, that's a very important question. There are two dimensions to it. The tactical issues right now that some industries are suffering from it, so shortage of electronic components or more, and there is the long term. My belief, my observation today is that in the years to come, in almost all industries, there will be a new fundamental setup of the supply chain for the following reason. The use of materials science is going to evolve, primary materials and the way they are transformed, and we see it now in prototyping activities, but it's going to change. The second thing is the impact of the logistics on the science-based reporting for sustainability is going to be more seriously evaluated. There is a third thing.
It's the very nature of the product structure. Like, when you think about a gasoline engine on a car versus electric car, battery-based cars, it's a massive change in terms of who is doing what. You know, do you want to delegate the battery or do you want to have it part of the OEM activity? Do you want to master the cells or do you delegate? Do you want to delegate production or not? Those three factors, science, logistics on the new nature of offerings, product portfolio and services, this is a long-term impact on the entire setting of the industry worldwide.
For us, we are in the center of that game because we can connect science with evaluation of flows around the world and with, of course, the very nature of new portfolios that are being created by those companies, and it's going to happen everywhere. We'll come back on this topic. My point on what I mentioned this morning at one of the interview is the current tactical issues. It's a small part of the resetting of the entire industry supply chain going forward. It's a very small part, because at the end, it's about who creates which value, where, for what kind of delivery to the consumer. The entire industry is going to go to a logic which is similar to what is happening in retail.
Instead of happening to retail, it's the entire industry itself on the way you deliver product and services, what we call experiences. As a matter of fact, to get understanding about what Dassault Systèmes is doing, which for me is an excitement every day. My view of the future is manufacturing companies, manufacturing industries will produce experiences, not products, and then clients will deliver experience as a service to their clients, whether they are consumers, passion or citizen. Experience as a service is going to come. It's not an IT issue, it's the use of product and services in the context of what I call experience economy. This is happening in retail. It's visible, people gets it, but it's going to happen for all industries we serve. That's why we are very different in terms of investment than any other of the competitor's player. I could go further, but we'll have opportunity to discuss that later. Do you want me to answer the second question for you?
Yeah. Please do, because.
The perspective on life sciences.
Yeah. Yeah. Yeah, you could always expect us to change the long-term plan, but there is something you know now from us, is when we have a long-term plan, we stick to the plan. I told you at the time of the acquisition that the long-term plan was between 13%-15% on the growth. Of the revenue growth. At the same time, we will also improve the EBIT margin by 200 basis points. We are committing to this plan. We are to a certain extent over-delivering this year, but the comp base will probably be less favorable for next year. Also, I want you to take into consideration something. The performance of life sciences for us will not come only from Medidata.
It will come from the other pieces we have, right? BIOVIA is obviously one of them on the research and discovery, but more and more, you know, we see more traction on the manufacturing side, on the supply chain management side, on the product introduction side. This is where we are also putting the focus in order to accelerate this piece of the software, this piece of the growth, if you want, of the exposure of the solution to this market. Considering that the life science sector will continue to deliver 13%-15% growth overall for a few years, I think it's not so bad.
Related to the consolidation to follow exactly Pascal's point. There is so much old software in the world. I don't want to buy old software. I want to buy expertise on science. The unique thing about the Dassault Systèmes portfolio these days, it's highly modern software. I mean, we have a platform which is cloud native. It's powering all our software we do. This goes across the product line. Many acquisitions are going to be based on acquiring old software where the game is changing for those industries which are using. Of course, it's slow, but it's going to happen. For example, let's be clear, we will be a big player in continuous process for manufacturing, not only discrete.
We believe we can do it with new generation of software like bioreactor for in the pharma sector, where, of course there were other players that have been there for years, but with software which are not architected for the future. We put a lot of attention on the right architecture, the science in, on the fact that we always go to the next shot. Because there is a parameter that needs to be taken into account, which is it takes time for clients to transform themselves, and we have to be there at the right time. Consolidation, yes, with the same law on the scope of what Pascal said, with smart targeting the next shot. You know, I don't want to have 3DS to be buying an old company and trying to optimize on reduced costs on things on there. I think this is not fun. That's not what we like. We leave that to certain investors who think they can clean up the house, but it's not my job. We don't want that.
The last question, which was related to, maybe, let me rephrase what I understood is the balance between integration and software. I think to answer to these questions, you are missing one specific point, which is the platform game. I think platform is changing the split. The split between system integration of software has been the one before the platform. Why so? Because the platform is by definition the way to integrate the different pieces together. It's the way to deliver the end-to-end experiences to connect the different stakeholders. It does not mean the services piece will disappear. It means the nature of the services will be different.
It will be probably much more outcome based, much more related to the company transformations, because, you know, you need to evolve to change the organization, to redefine the roles, to train and prepare the people for the work, the workforce of the future. That's really how we see the trends going on. Related to the cloud, because this is maybe also the questions behind, I think, you know, the application are defining what kind of architecture and infrastructure you need underneath, not the opposite way. Otherwise, you compromise the experiences, you compromise the user experience, you compromise the quality of the services. We have enough proof point to tell you that the decision we took a few years ago to have our own cloud architecture and infrastructure is becoming a significant competitive advantage. Because we can basically master the entire stack without having, you know, to spend our life to develop IT systems to be interoperable with all the many, you know, legacy system they have. That's really, again, the platform game is changing these borders and the strategic definition of who, what are the software, by the way. Bernard has an interesting comment. He say, "I do not want to do software as a services. I want to do experience as a services," which is much more deep if you understand what is behind.
Thank you very much.
Thank you for your question. We have the next question for the line of James Goodman from Barclays. Please go ahead. Your line is open.
Yeah. Morning. Thank you very much. Maybe following up a little bit on the platform comments. I mean, the adoption of 3DEXPERIENCE this quarter stepped up significantly. Just wondered from a product perspective, maybe you could add a little bit more color there. I think you mentioned ENOVIA on the subscription side being strong, but presumably that's only a sort of smaller part of that. Just secondly, I mean, considering the very strong Medidata performance that you spoke to just now, I think recurring ex Medidata perhaps just a little bit light, therefore, and wondered if you could just help us with any detail there across subscription or maintenance on the non-Medidata recurring performance in the quarter. Thank you.
Thank you very much. Just one remark before Pascal provide the insight about your questions. As you notice, everything we do now is platform-based. Medidata is a platform, data platform, data science platform, of course, with AI and all those technology. 3DEXPERIENCE is a platform powering everything, including the mainstream SOLIDWORKS. Centric PLM itself is a platform. They are all extremely well positioned to complement each other and provide this, what we call this future to what we call platform parameterization. We can adapt. I give you a concrete example because it was used last quarter. The big example where we have stopped an agreement with a big IT company doing too much customization and decided to do native parameterized is working extremely well.
The adoption by users is extremely well. We are demonstrating that the platform power is really suitable for a new sector of conquest like construction. That what we did for lean in manufacturing is applying to lean for construction with just parameterization, for example, that the collaborative process is working the same way. Basically, the mainstream platforms, the industry platform and the health platform are all acting in accordance to connect the dots. With that, Pascal.
Yeah. On the numbers related to the 3DEXPERIENCE platform, the plan, you know, is 2/3 of the software revenue will come to the 3DEXPERIENCE platform related software in 2025. Obviously, this is calculated outside the recent acquisition we did, Centric PLM. As Bernard said, Medidata is already a platform. To achieve this number, we need to continue to deliver, you know, the growth we have with the 3DEXPERIENCE platform solutions. The key point is we need to accelerate the adoption of the SOLIDWORKS 3DEXPERIENCE platform, which is on the way. I mean, the solution is there. The VAR are enabled. We have adjusted the compensation model for the VAR, putting more emphasis on the fact that the 3DEXPERIENCE platform is becoming a must for them. I'm pretty confident that, you know, we are on the right path to make it happen.
Noticeably, Pascal, in China.
In China.
The adoption is faster than anywhere else.
True
of the 3DEXPERIENCE platform with SOLIDWORKS.
Coming back to the second part of your question related to the recurring part of the revenue. Yes, you are right. I mean, the subscription grew extremely well this quarter, but it was not only coming from Medidata, it was also coming from the rest of the software, specifically ENOVIA and 3DEXPERIENCE platform, but also SIMULIA and also DELMIA. We have more and more subscription also on DELMIA. So which basically comes to the second part of your question, what about the maintenance and support performance? I think it's the lowest point we have touched. Why so? Because if you remember, I mean, there is a strong correlation between the growth and the new licenses sold the previous year. As you may know, last year we were decreasing in terms of new licenses. That's the reason why the growth has not been at the level it used to be historically. However, if you remember in Q4 last year, we were back on growth with the license. Clearly this is the lowest point. We achieved a 3% growth for the maintenance and support this quarter, and I do expect rapidly to come back to where it should be between 4%-5%.
Excellent. Thank you.
Thank you for your question. The next question from Jay Sole from UBS. Please go ahead.
Hi, it's Michael Briest. Just two from me. I guess following on from that, Pascal. If I look at deferred income or whatever it's called now, unearned revenues, I mean, the growth in Q1 was 19% and then 17% and then 11% this quarter. What does that say about you know, maybe the billing profile of the cloud business is different from support and maintenance, but also the growth of recurring revenue in Q4 when you've got a much tougher comp on deferred revenue and into 2022.
Then on the issue of sort of talent recruitment and retention, I think it's quite a wide issue in the sector. You announced a couple of weeks ago a new employee shareholding scheme of about 5 million shares. Is that something that's gonna be expanded? Is it gonna be an annual program? Equally on the stock-based compensation, it's about EUR 200 million this year as it was last year. Is that the new run rate, or were there any one-offs in there around Medidata? Thanks.
Okay. I'm gonna take the first questions. No, I would say the unknown revenue is you cannot use this as an early indicator. I think it's a mix between you know the maintenance and support the Medidata, and it's evenly dependent on the contractual framework. We have big differences compared to one customer to another one. I will not use this as a way to have an early indicator, if you want, of what should be the maintenance and support performance.
The best way is really to do what I was suggesting to you. You take the new licenses we sold a year before, you compute the numbers, and you will see, you will lead to exactly what I'm saying. That's really the way we modelize it, the way we plan it. To a certain extent, it's a good news because you could expect next year to have more contribution from maintenance and support. Bernard, you want to answer to the second part of the question, which is the employee, you know, plan we need.
Well, it's well received. It's part of we made it consistent with previous years' shareholder program. It will stay consistent in terms of. It's we are not going to from a pure dilution standpoint, if I may say so. We are not going to do anything that goes on top of something. It's going to be part of the total envelope. It's a very clean, clear process and I think it's well received by people.
To, to just-
Thank you.
Just give a compliment, Michael, you are right. I mean, we took these decisions to have the ability to address all the employees of Dassault Systèmes.
Yeah, because of course the LTI is only a subset.
Exactly. This is becoming critical in terms of retention, and you are right to notice it. That's the reason why we want this to be recurrent mechanisms. As Bernard said, it's already in the envelope because we're gonna make a trade-off between the LTI, the long-term incentive plan, which is specific, which is a dedicated set of actions for populations, and one of these vehicles, which is touching all the employees.
Okay. It's not on top of the EUR 200 million for this year?
No.
All right. Thank you.
Thank you for your question. The next question from Stacy Pollard, from JP Morgan. Please go ahead. Your line is open.
Thank you. Thanks for fitting mine in. A few extras from me. Can you remind us how you're progressing with sort of CATIA, ENOVIA, DELMIA within the EV arms of the large OEMs? Are most of these decisions made within the EV area? Are there more still in process? What has been your win rate? Second question, you mentioned customers like Renault leveraging smart data usage. I know Dassault has some offerings here, but is this an area that you might also consider further investment or M&A?
Thank you, Stacy. Clearly, I would say that our platform is the world standard for all EV programs, no matter where they are. As you may remember, all the early players, almost all of them, are using the 3DEXPERIENCE platform. It has been a very strong factor of confidence for existing player in that sector to say, "No doubts, that's a platform we need to use for our own internal program." Yes, the dynamic is very positive there. Of course, with different constraint like integrating with existing environment and so on. We are in a very good position and the adoption is good. It explain also why, as Pascal mentioned, we are double-digit growth in those sector.
We are already installed with powerful V5 product portfolio and going on expanding with the platform. The last point I would mention on that is that the system approach is becoming very important. The challenge with EV that was not really solved before is the energy bill of the vehicle. On the energy bill, and not only the energy bill when you get a brand new vehicle, but how does it last? Everyone will have to provide new warranties on those because if you have a manufacturer selling an EV with a certain characteristic, and three years later you get only a half of the characteristic of the vehicle, it is going to be a big issue.
You know, people smile about it, but it's a serious topic. It's a very serious topic, and I think the regulator is going to put some rules there. Not to speak about circularity, about how you recycle, where we are already in that aspect. Everything related to electrification, we are in a very strong position. Related to the consequences on smart data and so on, Stacy, you are on a very good point. We want to help our customer deliver experience as a service. We presented months ago the case for smart data analytics for civil aircraft fleet health analysis with big data, with a great client, Gulfstream. They improve massively the availability and the performance of the availability of the fleets of aircraft. Predictive maintenance included.
This is the way to go. It's provide the experience as a service to the clients they have. Big data on smart data is as illustrated with Medi data, as illustrated in manufacturing world, as illustrated with what we do with those customers for what we call operational availability of equipment. It's a core science for Dassault Systèmes. We think we are very well positioned on the platform. We'll reveal that those who are using disconnected system are not going to make it work properly.
Just to complement because Stacy question was is it an area for potential M&A.
We did Bloom.
I think, to a certain extent, you have the answer.
Got it. That's great. Thanks.
Okay.
Thank you, Stacy.
Thank you.
Next question, please.
Your question is from Mohammed Moawalla from Goldman Sachs. Please go ahead.
Great. Thank you very much. Morning, Bernard. Morning, Pascal. I had a couple of questions. Firstly, around kind of your visibility on the top line, I mean, we've obviously seen cyclical and kind of pent-up demand recovery. But as we kind of bridge to more the sort of structural drivers, I'm curious if you could kind of comment on your visibility, you know, into sort of next year, particularly around the top line. You know, you've obviously been signing a number of both kind of mid-sized but larger deals. Could you talk us through that visibility you have, where perhaps it's the strongest and where the potential areas of risk are?
My second question is, as Pascal, you mentioned you've delevered, you know, quite quickly. How should we think of, I know you've said that you don't wanna run with sort of excessive cash on the balance sheet. Are you kind of looking to potentially evaluate more transformational deals or we should look at, more kind of bolt-ons? And are there any particular areas that perhaps are matter of priority right now for you? I know you've talked about sort of simulation where you need to kind of still build out, but, curious to get your thoughts on how you think of M&A. Thank you.
Thank you. Thank you, Mo. I think for the top line, Pascal has the honor, so Pascal.
Oh.
No, again, it's a little bit early to give the perspective for next year. However, the fact that the growth is really coming from all the different sectors of the economy we are serving, I think it's a good sign. I would have a different feeling if it would have been dependent only on China or one specific set of industry like life sciences. That's not the case at all. After, you know, we have some good news. For example, Renault is one of them. We are almost tripling the revenue we do with them on a yearly basis. I would say some of the large deal we signed recently are giving confidence. However, you know, the size of the company is also increasing at the same time. At least we need to nurture this growth. If you don't mind, Mo, I will say more at the time of the, you know, the full year announcement.
Yeah.
We'll give you the perspective. I'm relatively confident.
Related to, of course, very smart question, potential transformational deals on priorities. Of course, it's on the agenda. I think we will follow the discipline we had, which is really to target the right technology, science and people, on making sure it makes sense, provided really the ambition we have set up with Pascal that was really revealed on February 6, 2020, where we said, you know, about those three sector of the economy and how we are reframing the priorities of the company from that standpoint, and I think we are proving it with Medidata and others.
It's difficult for me at this point in time, Mo, to be more specific, but you understand that with the platform aspect of things, the data science is of course core for all touch points we have. Also, being able to help our customers go and deliver with our platform experience as a service to their own customer is an exciting thing. I think in February, we'll talk about the follow-up to what we announced with, which is IKEA, because I think you will be quite interested to see how much we are discovering the potential there. Same with Centric PLM. I think we have February for that, and I think we will have the June timeframe.
Yes.
-to really cover with the
Capital Market Day.
Capital Market Day to really go deeper in those priorities.
Okay. That's great. If I could squeeze one more in. I mean, do you think the Renault deal and kind of adoption of kinda cloud native applications, does this mark an inflection point in your view, or do you think that the customers are still gonna take a much more sort of gradual approach, or are there any particular industries that perhaps you see more of an inflection in?
First, it's becoming visible for many observers that the speed at which it can be deployed is just very impressive and game changer, transformational. We have really a clear commitment from also our very large companies to go in that direction. Too early to say when, but really the clarity for them about going in that direction is there. If you remember more for Bouygues, which is going. You know, we see the number of users expanding every week. It's native cloud also, some native cloud. 3DEXPERIENCE is native cloud. One of the key factor is, of course, the cyber aspect of it. .
We have a quite interesting architecture. We are seriously demonstrating that we can do edge cloud for certain such mission-critical environment, which with the same architecture. More to be discussed at another opportunity. It's an exciting moment to leverage private, public, dedicated cloud in a smart way. As you know, we manage the stack totally. We know exactly to the chip level what we do, which we think is an important aspect for the type of customers we have.
Great. Thank you.
We will take the last question.
Yes, very last question.
Last question.
The last question is from Nicolas David from Oddo BHF. Please go ahead. Your line is open.
Yes. Good morning, Bernard and Pascal. Thank you for squeezing me in last minute. Yeah, I have two question actually, which are follow-ups of a already asked question, but with more details I think. First regarding hiring again, I mean, Pascal, you mentioned the impact on the bottom line. If you look at the top line potential impact, what is the risk as we go into 2022 if you can't fill the sales position which are open currently? Any comments regarding the situation with your sales team attrition and capacity to hire would be helpful there. My second question is regarding maintenance again. I mean, you mentioned this 4%-5% growth you are targeting rapidly. Could you talk about whether you were thinking about Q4 already, or is it most, is it rather 2022 things? And also this 4%-5% growth, is it the midterm growth you see for this this revenue stream, in the context of more subscription adoption? Or do you think that you can go back to faster growth, like you used to deliver in maintenance? Thank you.
Okay. Let's start with the first question related to the hiring. To a certain extent, you know, the situation is not the same across all the different countries. Where we have, I would say, the most open positions on the sales side is in United States, right? To a certain extent, I do not feel at risk. Why so? Because we have longstanding relationship with many of our customers. I would be, to a certain extent, much more concerned if our resellers they will have a lack of capacity because they have difficulty to hire and retain people, which is not the case. This is an important point to notice. Now, if we are not capable to fill back this position over the time, this could become an issue.
Because again, each time we hire people, we are also changing the profile of the team by infusing also sometimes, you know, different generations, different set of skills. That's my answer. I do not feel at risk for 2022. Again, we do not have the same problem with the resellers. The second question, which is an interesting one. First of all, I told you the Q3 is really the lowest point, so I do expect obviously in Q4, you know, to go back to the indication I gave to you. That's point number one. Point number two, to answer to your questions, it's related to how the mix between subscription and license will evolve. Which is probably something which is still a little bit difficult to predict. I could have a wish.
I could have, to a certain extent, a strategy to accelerate the subscriptions. As I was telling you, we discover that some products are much more suitable to the subscription. Again, people are always putting in a position subscription and license. I consider, you know, you need both. You need both depending your business model, depending also, the. For example, you know, we have some customers in the defense part. They do not want to be dependent on anything. They want to control their own destiny for obvious reasons. The best way for them is to license the software, and I'm sure we will continue to do it over the time. Let's assume that we are in the previous mix.
I'm pretty confident that the maintenance and support will go back to where it used to be, in terms of growth. We should probably take into consideration that the subscription is growing. I would say between 15% on average. You are not taking too much risk by doing so, and you will see there is some readjustment. At the end it will not change the overall plan, which is, again, the plan we have built is to deliver a 9% organic software growth, and it's a combination of the license and the recurrent part, and that's what I'm sticking. The moving part inside is basically what I'm playing with it in order to maximize the chance to deliver the plan I committed to do.
With that, thank you very much for joining this call this morning. Thank you for your question. Of course, we are always there to continue to discuss with you, and we will have the call this afternoon for our friends in America, especially. Have a good day, and thank you again for following us.
That concludes the conference for today. Thank you for participating. You may all disconnect.