Good day, and thank you for standing by. Welcome to Dassault Systemes 20 21 Q1 Earnings Investors Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer Please be advised that today's conference is being recorded Tuesday, 27th July, 2021. I'd now like to hand the conference over to your speaker today, Francois Bouhdonado, Investor Relations.
Please go ahead.
Thank you, Nadia. Thank you for joining us on our Q2 2021 earnings conference call with Bernard Charles, Vice Chairman and CEO and Pascal Daloz, Chief Operating Officer and CFO. As you all know, Dassault Systemes results are prepared in accordance with IFRS And most of the financial figures discussed on this conference call are on non IFRS basis with revenue growth rate in constant currencies unless otherwise noted. Some of our 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 2020 Universal registration document.
All earnings materials are available on our website and these prepared remarks will be available shortly after this So I would like now to introduce Pierre Antoine.
Good morning and good afternoon to everyone. Thank you for joining us today. We delivered a strong 2nd quarter driven by robust demand across sectors and geographies. Software revenue increased 15% at the high end of our guidance. License revenue grew 38%.
Recurring software revenue rose 10% and represented 79% of total software sales. Earnings per share rose 35%, including currency impact, and 45% in constant currencies, Thanks to strong revenue growth and higher profitability. 3dEXPERIENCE drove important wins across large Accounts resulting in revenue growth of 26% licenses were also up Sharply indeed. This reflect our compelling value proposition and substantiates new era imperatives for clients. We raised our full year guidance, capturing the earnings upside from the Q2.
Pascal will discuss the financials in more detail. Now I'd like to share some observation on the economy and some updates on our business. As we emerge In a post pandemic world, companies and individuals are awakening to a new era. They have a new vision of the world, I think. They are redefining the parameters of future leadership.
1st, They are looking to virtualization, going beyond digitalization of industries and the economy as mission critical. 2nd, there is a significant orientation towards sustainability in innovation For Dassault Systemes and our clients across all sectors, all industries of the economy we serve. Served inclusiveness is an essential feature of new technologies as well as for open innovation. Dassault Systemes' virtual twin experience powered by our 3dEXPERIENCE platform is truly a game changer for addressing these new Era imperatives. By bringing together unparalleled ModSim on AI data technology, We empower our clients with real world dividends across sectors and experiences to imagine new solutions and foster scientific breakthroughs across all sectors of the industry.
Inclusiveness is also paramount. The cloud is a powerful environment that democratizes Accessibility as well as mobility, enabling everyone to leverage the experience infrastructure to deliver impactful Innovation. In Life Science, virtualization will transform the sector, enabling a passion centric approach, new efficiency and higher quality outcomes. As the global leader, we bring significant assets to Forster's endeavors. During the quarter, we continued to deliver important game changing innovation.
With the launch of Medidata's decentralized Clinical trials program, which leverages Medidata's Passion Cloud, we became the 1st In the world to unified direct patient data capture technology, direct to patient services and study Oversight on monitoring on a single platform as Medidata is a core platform for Dassault Systemes. These technologies allow rapid deployment, reduce cost and democratize access. Together with our clients, we are pioneering new global standard for the launch of broadly decentralized global and mega studies. This has profound implication, of course, for patients and for the society. A great example is Novavax, a biotech company, well known, I think, Thanks to its great work on the COVID-nineteen vaccine, they will leverage our technology, including Medinata's Passion Cloud on decentralized clinical trial program to conduct these global studies involving more than 40 5,000 participants initiated in less than 8 weeks.
This is truly remarkable and we look forward to hearing about the results of Novavax's trails. Continuing on the topic of clinical trial, Medidata's capabilities of integrating data from wearable sensors, including clinical grade metrics to help customers successfully decentralize and virtualize clinical trials is Essential. LabCorp, a multibillion dollar provider of clinical laboratory and drug development services with over 70,000 employees as chosen to partner with Dassault Systemes. LabCorp We utilize our metadata offering via the cloud to advance trial virtualization through sensor integration and digital biomarker discovery. By providing our clients under passion with a seamless experience, we can continue to collect important passion intelligence, even after the trails, gaining new insights into the long term effects of disease and treatments.
We are entering an area of accelerated innovation in life science. We are truly excited about our potential for Changing the game well in the future and intent that the founders of Medidata on us decided to architect for the long term. Turning to Manufacturing Industries. I mentioned Early that our clients are rethinking the parameters of future leadership. These are significant implications for manufacturing industries where business dynamics are changing rapidly.
The amount of data used in manufacturing is growing at an accelerated pace. To be competitive, to be compliant and to be sustainable requires Managing tremendous complexity Dassault Systemes from that standpoint is also changing the game. With AI driven intelligence through the virtual twin experience and our 3dexperience platform, we are empowering our Customers to master the complexities of manufacturing as well as supply chain. A great example this quarter is Botticello Group is one of the world's largest beauty franchises and well known for its commitment to natural ingredients and sustainable practices. The company is aiming for significant reductions in manufacturing time, electricity consumptions and in processing and raw materials cost.
Bottigero selected our 3DEXPERIENCE platform to transform the manufacturing of more than 300 products with connected real time data and to help achieved its objectives. Now I want to turn our attention to the cloud. The cloud is a powerful enabler of inclusion in innovation. It removes the silos That burden companies with disparate legacy system, expensive system. It improves execution, accelerates innovation and reduces cost.
Importantly, we are seeing an inflection point in terms of large customers realizing The value of moving to the cloud, especially secured cloud, particularly in the context of maintaining their leadership position in the future. Alstom is a great example of that. Alstom, a multi €1,000,000,000 leader in mobility, including high speed trains on metros, we'll deploy our 3DEXPERIENCE platform on the cloud to 15,000 team members. Our partnership will enable Alstom to respond to what it describes as an unpresented need for sustainable mobility And to achieve a number of transformational goals to decommissioning legacy system, standardize its engineering and manufacturing processes and to accelerate the integrations of its Recent acquisition of Bombardier Transportation. In High-tech, to be a leader, to win market share requires constant innovation.
Virtualization is critical on our multi physics simulation, is game changer for our clients. Here is an example. Honor, a spin off of Huawei, is a global provider of smart devices. The company will expand Simulia Adoption to improve research and development with virtual simulation and accelerate go to market strategies by incorporating its value chain in the process. Turning now to Infrastructure and Cities.
We are game changer there too, because it's a market which is evolving and transforming. We talked to you last quarter about revolutionizing The construction industry with virtualization and platformization. Today, we will focus on cities and territories where resiliency And the ability to optimize logistics is vital for the success of mobility infrastructure that benefits Our citizens, here is an example with Keywheel Rail Limited, a New Zealand based rail operator, has adopted DELMIA Quintiq to enable a multiyear transformational project that will deliver new level of health, safety and sustainability. It will allow also improve its business agility as well as profitability. In summary, you will notice that each of the clients' stories I have shared with you today, I've clearly demonstrated new priorities for clients.
The power of virtualization in many cases elevated with our 3DEXPERIENCE platform, inclusiveness and sustainability. In fact, I now want to focus on Sustainability as it is an important topic. In this new era, sustainability is becoming an essential feature of leadership and it has it is a top priority for all our clients. ADASO Systems Sustainability has been at the core of our mission to harmonize product, nature and life. We began preparing for today's new era imperative decades ago.
We are in a Fully unique position to be able to unpower our clients to deliver sustainable innovation and contribute to a more sustainable economy and society. In doing so, we are extending our handprint, our positive impact indeed. While we extend our entry, we continue to progress against our own objective to reduce our footprint. Our science based targets for greenhouse gas emission reduction were recently approved by the science based targets initiative. After achieving these targets, We will neutralize any residual emissions to reach net 0 by 2,040 with Innovation carbon with innovative, very innovative carbon removal project that leverage our 3dEXPERIENCE platform.
Together, we have what it takes to make a difference. And now, I will turn the call over to Pascal.
Thank you, Bernard. Good morning, good afternoon to all of you and thank you for joining us today. So let's zoom on the financial performance. I think we delivered a strong 2nd quarter results, thanks to the broad based growth across regions as well as product lines. Total revenue increased 14% year over year to 1,000,000,000,000 at the top of our 12% to 14% range.
Software revenue and its component also came in at the high end of our objectives with an organic software revenue growth of 15% to deliver €1,100,000,000 License and other revenue rose 38% to €223,000,000 during the quarter. And looking at the first half, we are now back to 20 nineteen's level. I think this is something very important. Subscriptions and support revenue increased 10% year over year, driven by subscription growth of 18%. To be noticed that if you exclude Medidata, the subscription growth is around 12 So it's not only due to the good momentum of Medidata, which lead to a recurrent revenue, representing 79% of the software Revenue.
Services revenue was up 5% year over year, and we are pleased because we were looking to have this activity back to growth and showed a significant sequential improvement. We achieved services gross margin in the double digits, Also substantially better versus last year. And it's really coming from all the action we took a year ago You know to protect the margin despite the lack of activity and now you have the benefit of this. Last but not least, the 3dEXPERIENCE And the cloud both performed very well, growing 26% year over year, and I will give more detail afterwards. Now zooming on the profitability.
The lower than planned expenses combined with the revenue at the high end of the guidance led to a significant outperformance in operating margin and earnings per share. Our operating margin came in at the 32.2% versus the midpoint of our guidance of 29.7 an overperformance of 250 basis points. This was driven in part by the continuation of the expense and the headcount tailwinds we discussed with you last quarter. You remember, our headcount was stable year over year as hiring was offset by attrition that was higher than planned, but in line with 20 nineteen's level. Within research and development, we experienced mid single digit net gains in term of new teams member.
And we have adjusted our hiring capacity and expect to more than offset the attrition in the coming quarters. EPS grew 35 percent or 45% in constant currency to €1.09 Pre split or $0.22 was split compared to our guidance of 18% to 23%. Turning now to the software revenue by regions. The Air America grew 19% this quarter, benefiting from a strong performance in Life Sciences and Healthcare. Bernard gave some good real evidence of this.
Hi Tec also, and you remember, Hi Tec was, I will not say, not so strong Q1, but Q2, we are delivering a 26% growth and Transportation and Mobility. The Americas now represents 39% of the non IRFS software revenue. Europe increased 13%, led by Southern Europe and total 36% of the software revenue. Asia also rose 13%. Within the region, we saw continued strength from China, which grew 24% and the continuous Softness in Japan in achieving a mid single digit growth.
Zooming now on our product lines. 2nd quarter performance, We can say that Industrial Innovation Software revenue rose 8% to €571,000,000 CATIA and its solutions in product design and modeling experiences delivered sales growth of 9% Punctuated by CATIA Cyber Systems and this is a good performance because this imply license growth exceeding 20% to be back to this level. NetVibes in the Data Intelligence and Innovia in collaboration also benefited from positive business trends during the period. In Life Sciences, software revenue totaled €218,000,000 an increase of 22% And we continue to see a strong momentum across Medidata product portfolio, including Medidata Rave, Medidata Patient Cloud and Medidata Acorn AI As well as in all the attach rate, as you remember, those are the core solutions, but you have a lot of module optionals. And the attach rate has been extremely good this quarter.
Medidata is also establishing itself as a leader in decentralized clinical Trial, Bernard spoke about it, but this is very important. And we are the only one having the ability to have All the applications, all the solutions to connect with the patients, but at the same time to connect with all the back end system you need to have in order to treat this massive set of data to do the analyzing. To be noticed also that this quarter, we displaced Several times, Veeva, which is something I'm sure you have some interest, including on their core product, the CTMS-one, which is, again, a good sign. In the mainstream innovation, software revenue rose 27% to €262,000,000 And within the mainstream SOLIDWORKS software revenue rose 25% with 3DEXPERIENCEWORKS family, our cloud based solutions. And the sales of this family also up sharply during the periods.
Last point On the mainstream, the Centric PLM delivered an excellent performance, posting near triple digit growth and continuing to take market share in the consumer centric industry. Adding some color on the sector and industry, What could we say? 1st, the transportation and mobility still represented the first industry for us. The sales were a significant contributor to return across the regions, posting 14% software revenue growth. Infrastructure and City rose double digits also sank in part to the sales in China.
And High-tech and Home and Lifestyles also demonstrated very extremely good strength. Lastly, Aerospace and Defense grew mid Now let's review our key growth strategy, 3DEXPERIENCE and the cloud and how we are progressing relatively to the objective we laid out during the 2020 Capital Market Day. First, our 3DEXPERIENCE strategy incorporates 2 growth axis, if you remember. The first one, we call it value up We are increasing the value we bring to our existing customer. The second one, we call it value wide and we are extending our value to new customers.
As I mentioned, 3DEXPERIENCE sales grew 26% during the quarter and now represent 25% of the total software revenue, an increase of 200 basis points compared to last year. Importantly, 3DEXPERIENCE drove a number of significant Large client wins during the period reflected in the plus 25% growth of the license since the beginning of the year. Now I want to highlight particularly meaningful mainstream market opportunity that encompass both 3dEXPERIENCE and cloud another key growth driver for the future. 3dEXPERIENCEWORKS family, you know, connect people, ideas, Data solution in one single collaborative environment. And when you think about it, our over 1,000,000 SOLIDWORKS users as well as new customers can now benefit from the large set of solution we have developed on top of 3DEXPERIENCE platform and everything is on the cloud.
We are seeing a good momentum in 3dEXPERIENCEWORKS with some example with over 200 wins only for China alone for this quarter. Also with mainstream, Centric PLM clients includes over 2,000 of the world's most iconic brands and we believe we can continue to take market share in home and lifestyles, including fashions, as well as expanding into new industries such as food and beverage, cosmetics, consumer electronics. We also plan to expand geographically in regions like China, where I think we can reinforce our presence as well. So we are very pleased with, again, what has been accomplished in the acquisition. And I want to take the opportunity to thank Chris' growth teams, they did an outstanding work.
It was difficult time last year, but having able to relaunch the machine has been extremely powerful and now you start to see the benefits in the not only in the result, but also in the strategy. Turning of zooming on the cloud. The cloud adoption is another cornerstone of our growth strategy and afford an opportunity to expand our depth and breadth of clients. Our cloud contribution represented 19% of the total revenue, a 2 point increase compared to last year. You may recall that last year, based on our hence Market sectors, we set the goal to reach €2,000,000,000 in cloud software revenue by 2025.
This would represent an estimated of 1 third of our total revenues. In terms of our cloud We value the long term strategic relationship we have with our clients. And as such, our cloud strategy is set to meet our clients Wherever they are in the context of the industry. This is very important because not one thing fits all. This is the reason why we are offering different paths for them.
The first one is a native cloud path, if you want, for the new customers, All the newcomers like the startups or people starting from scratch. An extended one, which is a mix Between on premise solutions and on the cloud solution, when you need to extend to new usages such as simulations, such as data analytics And the power by which is a way to connect the large CATIA V5 and SOLIDWORK testers installed base with 3dXplans platform on the cloud for collaboration and data technologies. To be noticed That with the release of 2021X, the one we have right now, we have now more roles on the cloud that we have on premise and we expect this trend to continue because this is the way we are leading the research and development for our solutions. Now turning back to our financial performance and balance sheet items. Year to date cash flow from operations rose 21% compared to last year and reached EUR 1,030,000,000 Our deferred revenue now called the And finally, our net financial debt positions at the end of June decreased by €768,300,000 And now to reach is reaching a net debt of €1,300,000,000 putting us back on track to reach our deleveraging goals early next year, almost 9 months ahead of the schedules.
Moving now to the M and A sections. We are announcing a few things. In July, We acquired a French startup called Interop, an innovative SaaS companies Leveraging BPMN 2.0 standards, which is a natural graphical language to provide business processes solutions. So let me explain what is behind. You know that the 3DEXPERIENCE platform is not only The platform to power all the roles and the industry solution we have, but the 3 gs Expense platform can be used only by themselves, especially in the context of the business.
What do we want to do? We want to enable our customers to virtualize their enterprises And transform, if you want, a document based process into experiences, that's what is behind the move. And Interop technology will complement what we do and empowering our clients with effortless migration, if you want, from document to And together, Dassault Systemes and Interop will embrace the 3dXfense platform and 3dX subscale and extends inclusive innovations via the cloud. Turning to Centric PLM. We plan to complete our acquisition of Centric early this fall without a significant incremental cash payment.
You may remember that we initiated a 63% equity stake in Centric in July 20 And we are happy to finalize our partnership and continue to execute against Centric's substantial opportunity in the consumer industry, As I was describing to you, because again, this is the entire consumer industry we are targeting, it's not only sufficient. Turning now to our 2021 financial objective. We expect the current business environment and profitability Trends to persist in the second half. As a result, we are raising our fiscal year 2021 revenue growth objective range to 4,745,000,000 to 4,007,000,000,000,000 7 €90,000,000 incorporating 2nd quarter outperformance and greater visibility, adding approximately €10,000,000 in software revenue coming from Medidata. Our new objective represent an increase of 10% to 11% revenue growth versus 9% to 10% previously.
We are also raising our non IFRS diluted EPS objective range to $0.99 to $0.91 on a split adjusted basis of 2023 percent to 20 25 percent from 17% to 18% in constant currencies. This captures the earnings upside from the 2nd quarter, The increased revenue visibility we mentioned and the lower than expected expenses because we also Our operating margin in a range of 32.7 percent to 33.1% versus the 31.6%, 31.7% previously. And I want to remind you all, Because of the pandemic, we have implemented the cost saving plan in the Q2 last year and we expect the expense and the headcount tailwind we have experienced anticipate in the coming quarter as we resume travel, increase sales and marketing spending and accelerate to the net gains in hiring. So you will find all the details and more about the full year objective as well as our Q3 guidance in our earnings press release and presentations. Now it's time to conclude.
And we are encouraged by the demand we have Seen across our product lines and regions and also industry, I should say. We believe many of The trends highlights by Bernard, whether it's virtualization, sustainability, inclusiveness, are secular drivers, and we're just highlighting those trends through some real cases. But the most important, with our 3dEXPERIENCE platform, we began preparing for these trends over a decade ago. And as such, we are uniquely well positioned to help our clients to address this new area sorry, imperative well into the future. Finally, we succeed when our clients succeed and we want to thank all of our clients for the ongoing partnership as well as our employees for their hard work and the dedications to our success.
Lastly, we expect to resume in person meetings with the investment community this fall, and I hope to see you when I would be back on the road. So I think Bernard and I are now would like to take an answer to your questions.
Thank you. And your first question comes from the line of James Goodman from Barclays. Please ask your question.
Good afternoon. Thanks for taking my questions. Firstly, just on China and then encouraging sustained Performance there, you called out 24% growth. Just wondered if you could go into a bit more detail there on the strength, any notable Sort of industry or product strength, because actually we would have expected the comp in China to be toughening
a little bit ahead of
the rest of the business given the sort of earlier recovery from COVID. So that would be helpful. And then just secondly, on the margin, you called out the 1.4 Percentage point outperformance on the OpEx. And appreciate your comments around attrition and the continuation of what we discussed at Q1. But purely just looking at the outperformance in the quarter versus the objectives, can you just clarify that please?
What was the key additional tailwind? Was that the attrition sort of remaining higher than you expected? Or was it the gross hiring not Coming back or just lower travel, I wasn't clear on literally this quarter's outperformance. Thank you.
Thank you, James. Maybe Pascal, I put some color on the first topic of China and we'll add whatever you want on that topic on the margin. So China I recently had very conversation with top executives from China and different sectors. They are very, very focused now on orienting the innovation towards sustainability. It's part of the program.
It was announced a few weeks ago. They have announced the date for what they call the CO2 peak and then the 0 to The 0 point. And I think it's a very strong indication across all sectors, Mobility, industry at large, but also of course energy with new and infrastructure as well as construction. We have a good footprint on an excellent team in China. We continue to expand our partner network.
Basically, I think when it comes to manufacturing, we are well positioned and growing well as well as in High-tech that was mentioned today by the way we for now And we were surprised that Pascal mentioned it. We were surprised by the dynamic of adoption of cloud. We are Highly respected of our client with the local cloud. We can operate it and provide the service in China for Chinese companies. So overall, a good dynamic.
Pascal, you might want to comment specifically some industries?
Yes. So James, you are right. I mean, If we improve by 1.4% the margins coming from the OpEx effects. But the easiest way to modelize it and to understand it is half of the gain is coming from The marketing spend and the travel restrictions, because we are traveling nationally, but we do not have yet back internationally. And this is representing almost half of the gain.
And the second half is coming from the headcount. We did a great job in term of hiring because compared to Q1, we almost doubled the number of people we This quarter to exceed 800 people. However, the attrition was relatively high this Quarter and it's normal again. It's consistent with what we have seen in 2019 because Q2, it's a time where usually we are paying the bonus to the people And the people willing to leave usually they are waiting this time to do it. Nevertheless, if we project for the second half of the year, We do expect to have 0.7% improvement in term of operating margin for H2.
Why so? Because related to the marketing and travel, we expect to do better or to do more at least. And the assumption we took is almost between 50% to 60% of what usually we are Pending in a normal year. That's what we expect for the second half. And in term of headcounts, Obviously, we are we have increased the capacity in term of hiring, and we do expect to hire between 900 to maybe 1,000 people And contain at the same time the attrition to a level which is close to 500.
So if you combine all those things, You will land to the 0.7% improvement of operating margin we are expecting for H2.
Got it. Thank you for the detailed commentary, guys. Appreciate it.
Maybe to strengthen one of Pascal's point. In marketing, you have multiple elements. Of course, we the events are core cost line when we do big events with large customers. But we continue to invest in marketing online, of course, on creating lead generation or needless to say, but we, of course, We continue to invest there. And the second thing that Pascal mentioned last time is we have continued to increase R and D Last year on this year, we think it's an important base to prepare 2022.
Thank you, Bernard.
Thank you. And your next question comes from the line of Jay Vleesch Haver from Griffin Securities. Please ask your question.
Hello, Bernard, Pascal and Francois. Pascal, let me start with you on headcount and the hiring, which you spoke of in detail on the Q1 call and now again. What's interesting to note is that as of the end of the quarter, you had a record number of Job openings and our data goes back about a decade. And so that would seem to corroborate what you were just saying. But what's interesting to note is that within that number, you have a record number of sales openings, which is over a third of your Could you talk about, assuming you can bring the people on, how you're thinking about Deploying that additional capacity in terms of, let's say, what you used to call your BT channel or Perhaps inside sales or just help us understand the deployment strategy visavis your sales capacity and then My usual list of follow-up questions.
So, Jay, your analysis is right. I mean, You're right. The sales opening position is almost onethree of the opening position we have. And why so? There are a few reasons.
First of all, we still have some subsegment of industry we are not covering properly. For example, if I look at the space industry, we can do much better compared to what we do today and we are seeing a lot of tractions coming from there, Not only from the newcomers, the guy willing to conquest the space for the new travel agency, if you want, But the one willing to develop a new category of launcher for the satellites and other things. So this is And among the 3rd, I would say probably 20% of this number is really to fill some gaps we have in terms of sub segment coverage. Then after we lost some of the salespeople With the attrition, especially in the U. S, so we also have To reenergize or to give more capacity, again, especially in North America, where I think we have We could do much better in terms of sales capacity.
And last but not least, your point is also excellent, Jack. We are investing in online sales. This is what Bernard presented last time. We are calling it It's a general approach. We call it distributed direct distributed model, whereby not only we are Contacting all the large installed base we have in order to detect the new opportunity, but also we have the capacity to do some online transactions.
And this revenue stream is still marginal I would say right now, but we see more and more traction coming from there. And it's not only for the midsized market or the small startups, if you want. We are also using this approach For the highly specialized products where sometimes you need to be an expert in order to get in touch with the right person And the general salespeople maybe can miss this kind of opportunity. So it's a mix in order to complement the coverage we have. And I think we are preparing relatively as Garnet said well 2022 because all the investment we are doing from a sales standpoint is ready for 2022.
Okay. Thank you. With regard to SOLIDWORKS, a couple of things. Just looking backwards first at second quarter, It looks by my calculation as though your new license volume for SOLIDWORKS CAD software was just about back to where it was Q2 of 2019. Obviously, you had a large decline in Q2 last year, but looks like your new business this year, Q2, was Just over 19,000 units, just about back to where you were 2 years ago.
And then looking ahead more broadly, You noted that SOLIDWORKS has a user base of over 1,000,000, which is true. That's how many licenses you've sold. But You do have a very large dormant base, over 400,000 licenses that are no longer on maintenance. And that's larger than anyone else's active base. And my question there is, what programs do you have in place to perhaps try to reactivate Some part of that base with 3dXWorks itself perhaps be some kind of a catalyst to reactivate that dormant part of the SOLIDWORKS space.
Pascal, you want to make a comment on the new license? Yes.
On the new lease? Yes. So your calculation is right. It's a little bit over the 19,000 units In terms of volume, however, to be noticed that the mix is much better, because right now We are still selling SOLIDWORKS standalone, but the vast majority of the roles are gathering a piece of simulations, a piece of Product data management and more and more manufacturing also. So if you look at the average selling price, it's much better.
So that's where the growth is coming from.
Related to the overall SOLIDWORKS installed base. SOLIDWORKS is a very robust, stable desktop based solution. Clearly, the 3DEXPERIENCE is bringing to this very large installed base a lot, integrated simulation, Basic PDM or advanced PDM, whatever the or advanced PLM, whatever the customer choice is. And we clearly to your question, Jay, what do we do To elevate the value we bring to those clients, it's very clear. It's the expansion of the portfolio on the use of the platform to establish a collaborative, inclusive mobile cloud based environment in which the desktop powerful SOLIDWORKS continues to be what they like to use.
So we will see as we move in the next 18 to 24 months an ongoing dynamic In the expansion of the portfolio for mainstream, this is why we call it mainstream, as Pascal said, it's not only the counting the licenses, it's about looking at the revenue growth In total of the mainstream, basically this is the program which is put in place, which also requires That we provide the right training, content and engagement with our SOLIDWORKS former SOLIDWORKS partners. We call them role partners now and we've role engagement because we want to expand the scope of the role they can sell. It's very well received. Those programs are very well received. There are clients, there are partners who are very successful, Others who are not there yet and our challenge is to make this much more efficient on a global basis.
Notice that we have an incredible dynamic in China for cloud based Solution is a strong signal for mainstream market.
Finally, within industrial innovation, there Seems to be a very interesting dynamic, which is to say based on the current trajectory, at least in our math, It would appear that Innovia new license software revenue could surpass CATIA new license revenue perhaps So the question is, do you think that's a correct anticipation in terms of Innovia's becoming larger like that in terms of new business. And to the extent that Innovia has a much higher services related component, like PLM always versus CAD, would there be any margin implications for you if in fact Innovia were to become larger visavis new business than CATIA?
One comment before Pascal put some data metrics on it. We are doing a lot to have Innovia ready to use roles and processes available on easy to deploy without service. This is a big progress which is going on. For example, project management is well adopted As a parenthesis, it's well adapted by the SOLIDWORKS community. They love project management.
They love also data analytics, which are now part of both The connection between NetVibes and Innovia. So the off the shelf set of business applications, which basically are encompassed with the Innovia brand, very key for the future. Of course, for large companies when they need to do Highly sophisticated PLM implementation, but more and more we do what we call parameterized PLM, which reduces significantly the cost for customization and we will continue that. The example that is a benchmark in our company is from that standpoint centric PLM, where they have an amazing configuration engine to adapt Centric Soundtrack PLM to the customer needs in a very efficient way. So that's the context on the direction we are going, which provides traction.
Pascal?
Yes. So, Jay, if you look at the absolute number, I would say CATIA incremental revenue is still 2 times bigger than the Innovia 1. So the line could cross At some point of time, but definitively not in the next 2 to 3 years. And keep in mind that CATIA is growing at 9% on this quarter total revenue. So the dynamic in terms of new licenses is not over.
And especially thanks to CATIA Cyber Systems, this new generation of CATIA to design embedded system, system of systems. You have so many electronics in almost all the industry we are touching, at least the manufacturing one, That it's an avenue for CATIA to continue to expand. And I was checking I took some car Car makers for example and I was looking how many people we can equip compared to the traditional mechanical cat guy is as much as the installed base we have. So to a certain extent, CATIA can double by only doing and covering all the different needs of this new category of users we have in many, many of our clients. To complement what Bernard said also on the services side for Innovia, Keep in mind that in the vast majority of the case, which almost is 2 third of the cases, we are engaging with CSI with Enovia.
And our strategy has always been to leverage the ecosystem for the services piece surrounding. So I think This is also the reason why from a margin standpoint we are relatively protected I would say.
Understood. Thanks for the commentary.
Thank you. And your next question comes from the line of Johan Schaller from Deutsche Bank. Please ask your question.
Yes. Thanks for taking my question and congratulations on the good results. Firstly, maybe on 3 d experience. In the context of Medidata, you called out Veeva. I mean, can you maybe for 3 d experience, where you clearly The accelerating momentum.
Talk a little bit about who you are displacing here. How many of the contracts you're winning are actually displacing competitors and In what areas and maybe which competitor? That would be quite helpful. Thank you. And then just on the margin commentary You made going into the second half.
I would assume that the travel costs and marketing costs should then probably go up again a little bit Next year, the other half that you saved during COVID comes back and obviously you have the hiring. I know it's early days, but as we look into next Yes. Should we then really expect a slower year in terms of margin progress? Or are there other positive factors that could help you here? Thank you.
Pascal, I think you commented the dynamic the winning dynamic which we experienced last Quarter, maybe you can formulate what you said. Clearly, again, Siemens, again, PTC with Centric PLM. So the dynamic is very strong.
So the 3 competitors we are competing with in the, I would say in most of the cases with 3dexplan platform is Siemens Teamcenter, SAP PLM, even if SAP decided to Exit from this market, but you still have an installed base and PTC windchills. So if I look at The winning rate against Siemens, it's still higher than 80%. And if you look at what we did in aerospace, whatever it's in the OEM and also the supply chain, clearly, we have been To almost replace Siemens in all the places. In the auto sector, you still have some Siemens presence. However, I think With the newcomers, all of them, they are equipped with 3DEXPERIENCE platform, the Tesla of the world, the Rivian of the world, all those new guys.
And they are standardized on 3dEXPERIENCE platform and this is accelerating what we do. And so that's for Siemens. ECP, we are against winning all the case Against them because they are exiting of this market anyway. And PTC, windshields, the last time I checked, We were having a winning rate which was exceeding 85%. So clearly the vast majority of the case We are much stronger, much better.
And one of the reason is, again, None of them, they have a platform. What they have is a PDM systems. And there is a big difference between a platform and a PDM. The platform, you know all your applications are natively developed on top of. So you have a consistent experience.
You have a consistent resources shared between all the different roles and applications. And in terms of capacity, Not only it's a platform to do modeling and simulations, but it's also the same platform to do the analytics and the artificial intelligence. If you take all the competitors I just mentioned, usually they have if they have something, but at least they have, if not 2, if sometimes 3 Different platform or 3 different technology in order to make the same thing. So that's the reason why we are we have such a winning rate. Now coming back to the margin, and the question is for next year.
And thank you for asking these questions because you are right, I mean, Achieving 33 percent operating margin in 2021, it's not something I do expect to achieve in 2022, Because we will have to invest. We spoke about it not only on the sales side, on the marketing side. We need to continue to expand what we do from a research and development. So it's probably early to give you a guidance, But let's say, it's probably between 31.5% 32%.
That's great. That's very helpful. Maybe just a quick follow-up on what you said on automotive. Given we're seeing all these newcomers going for 3 d experience while the Traditional players a bit more maybe a bit more lukewarm on it, still hesitant. Do you see the guys like Tesla and others Using 3DEXPERIENCE already having an impact on the supply chain on the Tier 1s that these guys are more willing to switch over?
We have I must say one comment. I must say that even When we have a very good penetration in Tier 1, specifically in Germany, but in many Tier 1, Japan also, China. Even if the OEM is still on legacy, we have a lot of Very influential Tier 1 who are already which are already on the 3DEXPERIENCE platform. And in fact, they are really promoting the 3DEXPERIENCE platform based on the value they see. So on the Tier 1, Overall, the dynamic is very positive.
And it started a long time ago. I have many Names in Germany in mind and also in France.
And to complement what Bernard is saying, The new EV guys are also driving a new value network. It's not only the traditional Suppliers, but also you have new suppliers like the battery makers, for example.
Yes, yes.
And this was also an opportunity for us to expand outside of the Traditional Tier 1 and Tier 2 suppliers you know. And the significant presence we have keep in mind that We are counting almost 800 new EV or autonomous car programs worldwide More than 80% of them are equipped with 3DEXPERIENCE platform. So to a certain extent, it's a huge driving force to have The supply chain, on the battery, on the power management systems, on the new materials also, because those cars are Requesting new materials. We are driving this along the 3DEXPERIENCE platform.
Great. Thank
you. Thank you. And your next question comes from the line of Jason Celino from KeyBanc Capital Markets. Please ask your question.
Great. Thanks for being the
last question. Please go on, Chisholm.
Okay. Thank you. Maybe for the essence of time, I'll just ask one then. When we look at the implied guidance For new license growth for Q4, it looks conservative. Maybe can you give some reasons as to why Q4 new license may further Decelerate from Q3?
So I will take this one Bernard and maybe you
will have An opportunity to ask another question. So because this one is relatively easy, if you look at the new license, Q4 is almost twice the size of Q3.
So
It's easy to conclude that it cannot be exactly the same percentage Because the absolute number is not the same. So that's the reason. And if you remember last quarter the Q4 last year was also much better than the Q3. So that's the two reasons why you could have the feeling that we are I'm conservative for Q4, but trust me I'm not. And I would be glad to deliver my commitments to you guys.
Okay, great. Well, another quick one then. I'm surprised to hear China is one of the stronger regions adopting 3 d experience work. Good to see, but historically China's favored these perpetual licenses Versus cloud or subscription. I guess, what do you think is mainly driving that so early?
Well, I think Things are changing in China. And we think that there is a lot of licenses, Which also around the world, I would say, not to specifically China around the world and we discussed that with officials are not paid. They are basically copied licenses. I think the trend to have this online is a good trend. They like it.
And I think it will change the situation. That's the way I would articulate the future in terms of higher consistency between the use of our products and solutions and the value we get from it.
Okay, great. I appreciate the feedback. Thank you. You're welcome.
Thank you. Your next question comes from the line of Stefan Slowinski from Exane BNP Paribas.
This will be our very last question.
Okay. Well, thanks for squeezing me in. Go ahead, Stefan. Thank you, Francois.
Thank you very much. And most of
my questions have been asked. Just a couple of final ones just to clarify on my numbers. Medidata, great acceleration in growth, 20% in Q1, 25% in Q2. Pascal, I believe you said you still see only 16% growth for metadata this year. That implies, if I'm correct, just maybe 10% growth in the second half of the year and potentially a sequential slowdown in absolute revenues Q3 over Q2.
So, I guess my question is the same as the previous question, which is doesn't that look conservative? And why is it that We would see that slowdown in growth in a subscription business model when you would expect maybe those levels of growth to continue. That's the first one. And the second one is associated with that, which is just the question on recurring software revenues ex metadata. I believe in Q1, you gave that number and said it was 4%.
On my calculations, that's improved in Q2 maybe to 6% or 7%. Just wondering if you can confirm that, and presumably you see that potentially still progressing to high single digits next year. Thank you.
Okay. So I will start with Medidata. Yes, I mean, if you do the math, you are right, Except you missed something very important because you are remembering the performance of Q1 and Q2 this year, but you should also remember the performance of last year. And last year, you the performance of Media Data was Around 13% and we landed at the end to 2018. So there is almost 5 points difference between the Q1 and the Q4.
So you could accept that the base of comparison is not exactly the same. And that's the reason why I do not Expect to maintain this 25% growth for H2. That's the only reason, Stephane, now is Medidata capable to do slightly better? To a certain But I already add the €10,000,000 into the guidance. And keep in mind that the bookings, the commercial activity we have right now We'll have an impact not this year, but next year.
So even if we are still having a Good commercial activities and the booking are still growing at 20%. The impact is much more for next year than the second half of the year. That's The reason why I would say between 16% to 17%, but you should not go higher than 17%. That's the point. The recurring revenue, your calculation is right.
That's exactly the point. So we have an acceleration, Which is coming specifically from the subscriptions. I told you the subscription is growing 18%. And if you exclude Medidata, it's growing at 12%. So this is having several additional points of growth.
I do expect this growth to be sustainable at least for H2. For 2022, it's too early to say, because the growth is specifically coming from simulations. And as you may know and also some subscriptions, it's we have some project based transactions. And I need to compute when the time of the project is supposed to end before to give you the answer.
Great. And just to confirm that metadata growth 16% to 17% is for the full year, right, not for H2?
Yes, yes, yes, of course, for the full year. Okay.
Yes, yes. Right. Okay. Great. Thank you for the precision.
Thank you very much.
Jose, I think with that, it was the last question. Thank you very much Thank you very much for participating to this conference call. And as always, we will be Delighted to address any further questions with you. So in case you do not have any more questions, let's see each other in October, Hopefully, for a great Q3. Have a great day and enjoy your summer vacation if this is the case.
Otherwise, all the best to all of you. Thank you very much and bye bye now.
This concludes today's conference call. Thank you for participating. You may now disconnect.