Good day, and thank you for standing by. Welcome to Dassault Systèmes' 2021 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 session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded Tuesday, 27th July 2021. If you require any further assistance, please press star zero. I'd now like to hand the conference over to your speaker today, François-José Bordonado, Investor Relations. Please go ahead.
Thank you, Nadia. Thank you for joining us on our second quarter 2021 earnings conference call with Bernard Charlès, Vice Chairman and CEO, and Pascal Daloz, Chief Operating Officer and CFO. As you all know, Dassault Systèmes results are prepared in accordance with IFRS, 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 call. I would like now to introduce Bernard Charlès.
Good morning and good afternoon to everyone. Thank you for joining us today. We delivered a strong second 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 grows 10% and represented 79% of total software sales. Earnings per share rose 35%, including currency impact, and 45% in constant currency, 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 reflects our compelling value proposition and substantiates new era imperatives for clients. We raised our full-year guidance, capturing the earnings upside from the second quarter. 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. First, they are looking to virtualization, going beyond digitalization of industries and the economy as mission-critical. Second, there is a significant orientation towards sustainability in innovation for Dassault Systèmes and our clients across all sectors, all industries of the economy we serve. Third, inclusiveness is an essential feature of new technologies as well as for open innovation. Dassault Systèmes' virtual twin experience, powered by our 3DEXPERIENCE platform, is truly a game-changer for addressing these new era imperatives. By bringing together unparalleled multi-simulation and AI data technology, we empower our clients with real-world evidence 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 patient-centric approach, new efficiencies, and higher quality outcomes. As a global leader, we bring significant assets to foster these 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 Patient Cloud, we became the first company in the world to unify direct patient data capture technology, direct-to-patient services, and study oversight and monitoring on a single platform, as Medidata is a core platform for Dassault Systèmes. 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-19 vaccine. They will leverage our technology, including Medidata's Patient Cloud, on decentralized clinical trial program to conduct these global studies involving more than 45,000 participants, initiated in less than eight weeks. This is truly remarkable and we look forward to hearing about the results of Novavax's trials. 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 multi-billion dollar provider of clinical laboratory and drug development services with over 70,000 employees, has chosen to partner with Dassault Systèmes. Labcorp will utilize our Medidata offering via the cloud to advance trial virtualization through sensor integration on digital biomarker discovery.
By providing our clients and their patient with a seamless experience, we can continue to collect important patient intelligence, even after the trials, gaining new insights into the long-term effects of disease on 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, an intent that the founders of Medidata and us decided to architect for the long term. Turning to manufacturing industries, I mentioned earlier 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 Systèmes, from that standpoint, is also changing the game.
With AI-driven intelligence through the virtual twin experience on 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 Boticário 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 on raw materials cost. Boticário Group has selected our 3DEXPERIENCE platform to transform the manufacturing of more than 300 products with connected real-time data and to well achieve 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 EUR multi-billion leader in mobility, including high-speed trains and metros, will 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 unprecedented need for sustainable mobility and to achieve a number of transformational goals to decommission 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, and 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 KiwiRail Limited, a New Zealand-based rail operator, has adopted DELMIA Quintiq to enable a multi-year confirmational 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 client stories I have shared with you today have clearly demonstrated new era 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 is a top priority for all our clients. At Dassault Systèmes, 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 truly unique position to be able to empower 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 handprint, we continue to progress against our own objectives 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 zero by 2040 with innovative, very innovative carbon removal project that leverage our 3DEXPERIENCE platform. Together, we have what it takes to make a difference. 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. Let's zoom on the financial performance. I think we deliver a strong second quarter results, thanks to the broad-based growth across regions as well as product lines. Total revenue increased 14% year-over-year to EUR 1.016 billion at the top of our 12%-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 EUR 1.1 billion. License and other revenue rose 38% to EUR 223 million during the quarter. Looking at the first half, we are now back to 2019'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%. 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, we are pleased because we were looking to have this activity back to growth and showed a significant sequential improvements. We achieved services growth margin in the double digits, also substantially better versus last year, it's really coming from all the action we took a year ago to protect the margin despite the lack of activity, now you have the benefit of this. Last but not least, the 3DEXPERIENCE and the cloud both perform very well, growing 26% year-over-year, I will give more detail afterwards.
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 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 account tailwinds we discussed with you last quarter. You remember our headcount was stable year-over-year as hiring was offset by attritions that was higher than planned. In line with 2019's level.
Within research and development, we experienced mid-single-digit net gains in terms of new team members, and we have adjusted our hiring capacity and expect to more than offset the attrition in the coming quarters. EPS grew 35% or 45% in constant currency to EUR 1.09 pre-split, or EUR 0.22 post-split, compared to our guidance of 18%-23%. Turning now to the software revenue by regions. The Americas grew 19% this quarter, benefiting from a strong performance in life sciences and healthcare. Bernard gave some good real evidence of this. High-tech also. You remember, high-tech was, I would say, not so strong Q1, but Q2, we are delivering a 26% growth in transportation and mobility. The Americas now represents 39% of the non-IFRS software revenue. Europe increased 13%, led by Southern Europe. Total 36% of the software revenue. Asia also rose 13%.
Within the region, we saw continued strength from China, which grew 24%, and a continued softness in Japan in achieving a mid-single-digit growth. Zooming now on our product lines' second quarter performance. We can say that industrial innovation software revenue rose 8% to EUR 571 million. CATIA and its solutions in product design and modeling experiences deliver a sales growth of 9%, punctuated by CATIA Cyber Systems. This is a good performance because this imply license growth exceeding 20% to be back to this level. NETVIBES in the data intelligence and ENOVIA in collaboration also benefited from positive business trends during the period. In life sciences, software revenue total EUR 218 million, an increase of 22%. 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.
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, this is very important, we are the only one having the ability to have all the applications, all the solutions to connect with the patients. 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 EUR 262 million.
Within the mainstream, SOLIDWORKS software revenue rose 25% with 3DEXPERIENCE Works family, our cloud-based solutions. The sales of this family also up sharply during the period. 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? First, the transportation and mobility still represented the first industry for us. The sale were a significant contributor to return across the regions, posting 14% software revenue growth. Infrastructure and city rose double digits, also thank in part to the sales in China. High tech and home and lifestyles also demonstrated a very extremely good strength. Lastly, aerospace and defense grew mid-single digits on the back of a strong performance last year.
Now, let's review our key growth strategy, 3DEXPERIENCE and the cloud, and how we are progressing relatively to the objective we lay out during the 2020 capital market day. First, our 3DEXPERIENCE strategy incorporate two growth axes, if you remember. The first one, we call it value up, and 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 sale 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 +25% growth of the license since the beginning of the year.
Now, I want to highlight a particularly meaningful mainstream market opportunity that encompasses both 3DEXPERIENCE and cloud, another key growth driver for the future. 3DEXPERIENCE Works family connects people, IDs, data, solutions in one single collaborative environment. When you think about it, our over 1 million SOLIDWORKS users, as well as new customers, can now benefit from the large set of solutions we have developed on top of 3DEXPERIENCE platform. Everything is on the cloud. We are seeing a good momentum in 3DEXPERIENCE Works with some examples with over 200 wins only for China alone for this quarter. With mainstream, Centric PLM clients include 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. We are very pleased with, again, what has been accomplished in the acquisition, and I want to take the opportunity to thank Chris Groves's teams. They did an outstanding work. It was a difficult time last year, but having able to relaunch the machine has been extremely powerful. Now you start to see the benefits, not only in the result, but also in the strategy. 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 representing 19% of the total software revenue, a two point increase compared to last year.
You may recall that last year, based on our end market sectors, we set the goal to reach EUR 2 billion in cloud software revenue by 2025. This would represent an estimated 1/3 of our total revenues. In terms of our cloud strategy, we value the long-term strategic relationship we have with our clients. As such, our cloud strategy is set to meet our clients wherever they are in the context of their industry. This is very important because not one thing fits all, and 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 or 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. The Power'By , which is a way to connect the large CATIA V5 and SOLIDWORKS testers install base with 3DEXPERIENCE 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 roads 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. Turning back to our financial performance and balance sheet items. Year-to-date cash flow from operation rose 21% compared to last year and reached EUR 1.030 billion.
Our deferred revenue, now called the contract liability, rose 17% in constant currency, which is relatively consistent with the performance for this quarter. Finally, our net financial debt positions at the end of June decreased by EUR 768.3 million, and now is reaching a net debt of EUR 1.3 billion, putting us back on track to reach our deleveraging goal early next year, almost nine months ahead of the schedule. Moving now to the M&A section. We are now seeing a few things. In July, we acquire a French startup called ITEROP. It's an innovative SaaS company leveraging BPMN 2.0 standards, which is a neutral graphical language, to provide business process solutions. 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 3DEXPERIENCE platform can be used only by themselves, especially in the context of the business. 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. ITEROP technology will complement what we do and empower our clients with effortless migration, if you want, from document to experiences. Together, Dassault Systèmes and ITEROP will embrace the 3DEXPERIENCE platform and 3DS OUTSCALE and extend 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 initiate a 63% equity stake in Centric in July 2018. We are happy to finalize our partnership and continue to execute, again, 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 the fashion. 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 EUR 4.745 billion–EUR 4.790 billion, incorporating second quarter outperformance and greater visibility, adding approximately EUR 10 million in software revenue coming from Medidata. Our new objective represent an increase of 10%-11% revenue growth versus 9%-10% previously.
We are also raising our non-IFRS diluted EPS objective range to EUR 0.99-EUR 0.91 on a split adjusted basis of 2023%-2025% from 17%-18% in constant currencies. This captures the earnings upside from the second quarter, the increased revenue visibility we mentioned, and the lower than expected expenses. We also expect our operating margin in a range of 32.7%-33.1% versus the 31.6%, 31.7% previously. I want to remind you all, because of the pandemic, we have implemented the cost-saving plan in the second quarter last year, and we expect the expense and the accounts tailwind we have experienced to dissipate in the coming quarter as we resume travel, increase sales and marketing spending, and accelerate to the net gains in hiring.
You will find all the details and more about the full year objective, as well as our third quarter guidance in our earnings press release and presentations. Now it's time to conclude. 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. The most important, with our 3DEXPERIENCE platform, we began preparing for these trends over a decade ago. 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. We want to thank all of our clients for the ongoing partnership, as well as our employees for their hard work and the dedication to our success. Lastly, we expect to resume in-person meetings with the investment community this fall. I hope to see you when I will be back on the road. I think Bernard and I would now like to take and answer to your questions.
Thank you. As a reminder...
Yeah
If you wish to ask a question, you need to press star one on your telephone. To withdraw your question, press the hash key. 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 the 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 would've 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-19. That would be helpful. Just secondly, on the margin, you called out the 1.4 percentage point outperformance on the OpEx. Appreciate your comments around attrition and the continuation of what we discussed at Q1. Purely just looking at the outperformance in the quarter versus the objectives, can you just clarify there, please, what was the key additional tailwind?
Was that the attrition 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 you will add whatever you want on that topic on the margin. China, I recently had many conversations with top executive from China on different sectors. They are 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 zero point. I think it's a very strong indication across all sectors, mobility, industry at large, but also of course, energy with new on infrastructure as well as construction. We have a good footprint and 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, with Renault on many more customers. We were surprised that Pascal mentioned it. We are surprised by the dynamic of adoption of cloud. We are highly respected for our cloud, the local
Cloud, we can operate it, and provide the service in China for Chinese companies. Overall, a good dynamic. Pascal, you might want to comment specifically some industries.
Yeah. James, you are right. If we improve by 1.4, the margin's coming from the OpEx effects. 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. This is representing almost half of the gain. The second half is coming from the head count. We did a great job in terms of hiring, because compared to Q1, we almost doubled the number of people we hired this quarter to exceed 800 people. However, the attrition was relatively high this quarter, and it's normal.
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. If we project for the second half of the year, we do expect to have 0.7 improvement in terms of operating margin for H2. Why so? Related to the marketing and travel, we expect to do better or to do more at least. The assumption we took is almost between 50%-60% of what usually we are spending in a normal year. That's what we expect for the second half. In terms of head counts, obviously we have increased the capacity in terms of hiring, and we do expect to hire between 900 to maybe 1,000 people.
Contain at the same time the attritions to a level which is close to 500. If you combine all those things, you will land to the 0.7 improvement of operating margin we are expecting for H2.
Yeah, 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, the events are core cost line when we do big events with large customers. We continue to invest in marketing online, of course, on creating lead generation. Needless to say that of course, we continue to invest there. The second thing that Pascal mentioned last time is we have continued to increase R&D last year and this year. We think it's an important base to prepare 2022.
Yeah. Thank you, Bernard.
Thank you. Your next question comes from the line of Jay Vleeschhouwer from Griffin Securities. Please ask your question.
Hello Bernard, Pascal and François. Pascal, let me start with you on headcount and the hiring that 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. That would seem to corroborate what you were just saying. 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 total open positions. 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 to perhaps inside sales?
Just help us understand the deployment strategy vis-a-vis your sales capacity and then my usual list of follow-up questions.
Jay your analysis is right. You are right. The sales opening position is almost a third of the opening position we have. Why so? There are a few reasons. First of all, we still have some sub-segment 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 conquer 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. Among the third, I would say probably 20% of this number is really to fill some gaps we have in term of sub-segment coverage.
After, we lost some of the salespeople with the attritions, especially in the U.S. We also have to re-energize or to give more capacity, again, especially in North America where I think we could do much better in term of sales capacity. Last but not least, your point is also excellent, Jay. We are investing in online sales. This is what Bernard presented last time. It’s a general approach. We call it distributed direct model, whereby not only we are contacting all the large install base we have in order to detect the new opportunity, but also we have the capacity to do some online transactions. This revenue stream is still marginal, I would say right now, but we see more and more traction coming from there. It’s not only for the mid-size 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 persons. The general salespeople maybe can miss this kind of opportunity. It's a mix, in order to complement the coverage we have. I think we are preparing relatively, as Bernard said, well 2022, because all the investment we are doing from a sales standpoint is really 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 second quarter of 2019. Obviously, you had a large decline 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 two years ago. Looking ahead, more broadly, you noted that SOLIDWORKS has a user base of over one million, which is true. That's how many licenses you've sold. You do have a very large dormant base, over 400,000 licenses that are no longer on maintenance. That's larger than anyone else's active base.
My question there is, what programs do you have in place to perhaps try to reactivate some part of that base? Would 3DX Works itself perhaps be some kind of a catalyst to reactivate that dormant part of the SOLIDWORKS base?
Pascal, you want to make a comment on the?
Yeah
New license first?
On the units. Yeah. 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. Right now, we are still selling SOLIDWORKS standalone, but the vast majority of the roles are gathering a piece of simulation, a piece of product data management, and more and more manufacturing also. If you look at the average selling price, it's much better. That's where the growth is coming from.
Related to the overall SOLIDWORKS install base. SOLIDWORKS is a very robust, stable, desktop-based solution. Clearly, the 3DEXPERIENCE is bringing to this very large install base a lot. Integrated simulation, basic PDM or advanced PDM, or advanced PLM, whatever the customer choice is. 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 and 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. We will see as we move in the next 18-24 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. This is the program which is put in place, which also requires that we provide the right training content and engagement with our former SOLIDWORKS partners. We call them role partners now, and with 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. The notice that we have an incredible dynamic in China for a cloud-based solution is a strong signal for a mainstream market.
Okay. 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 ENOVIA new license software revenue could surpass CATIA new license revenue, perhaps starting in 2022. The question is, do you think that's a correct anticipation in terms of ENOVIA's becoming larger like that in terms of new business? To the extent that ENOVIA has a much higher services-related component, like PLM always versus CAD, would there be any margin implications for you if, in fact, ENOVIA were to become larger vis-a-vis new business than CATIA?
One comment before Pascal put some data metrics on it. We are doing a lot to have ENOVIA 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-adopted by the SOLIDWORKS community. They love project management. They love also data analytics, which are now part of both the connection between NETVIBES and ENOVIA. The off-the-shelf set of business applications, which basically are encompassed with the ENOVIA brand, are very key for the future, of course, for large companies when they need to do highly sophisticated PLM implementation. 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 PLM to the customer needs in a very efficient way. That's the context on the direction we are going, which provides traction. Pascal?
Yeah. Jay, if you look at the absolute number, I would say CATIA incremental revenue is still 2x bigger than the ENOVIA one. The line could cross at some point of time, but definitively not in the next two to three years.
Okay. Understood.
Keep in mind that CATIA is growing at 9% on this quarter, total revenue. The dynamic in term of new licenses is not over, and especially thanks to CATIA Cyber Systems, this new generation of CATIA to design embedded 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. I was checking, I took some car makers, for example, and I was looking how many people we can equip compared to the traditional mechanical CAD guy, is as much as the install base we have. 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 of our clients.
To complement what Bernard said, also on the services side for ENOVIA, keep in mind that in the vast majority of the case, which almost is two-third of the cases, we are engaging with SI with ENOVIA. Our strategy has always been to leverage the ecosystem for the services piece surrounding. I think, this is also the reason why from a margin standpoint, we are relatively protected, I would say.
Understood. Thanks for your commentary.
Thank you.
Your next question comes from the line of Johannes Schaller from Deutsche Bank. Please ask your question.
Thanks for taking my question and congratulations on the good results. Firstly, maybe on 3DEXPERIENCE. In the context of Medidata, you called out Veeva. Can you maybe for 3DEXPERIENCE, where you clearly see 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 then maybe which competitor? That would be quite helpful. Thank you. 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 then obviously you have the hiring.
I know it's early days, but as we look into next year, 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 winning dynamic with 3DEXPERIENCE last quarter. Maybe you can formulate what you said, clearly against Siemens, against PTC with Centric PLM. The dynamic was very strong.
The three competitors we are competing with in the, I would say, in most of the cases with 3DEXPERIENCE platform is Siemens Teamcenter, SAP PLM, even if SAP decided to exit from this market, but you still have an install base.
PTC Windchill. If I look at the winning rate against Siemens, it's still higher than 80%. If you look at what we did in aerospace, whether it's in the OEM and also the supply chain, clearly, we have been able 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. That's for Siemens. SAP, we are against winning all the case against them because they are exiting of this market anyway. PTC Windchill, the last time I checked, we were having a winning rate which was exceeding 85%.
Clearly, the vast majority of the case, we are much stronger, much better. One of the reason is against none of them, they have a platform. What they have is a PDM systems. There is a big difference between a platform and a PDM. The platform, all your application are natively developed on top of. You have a consistent experience, you have a consistent resources shared between all the different roles and applications. In term 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 two, if sometimes three different platform or three different technology in order to make the same things.
That's the reason why we have such a winning rate. Coming back to the margin, and the question is for next year. Thank you for asking these questions because you are right. Achieving 33% operating margin in 2021, it's not something I do expect to achieve in 2022. We will have to invest. We spoke about it not only on sales side, on marketing side, we need to continue to expand what we do from a research and development. It's probably early to give you a guidance, but, let's say it's probably between 31.5% and 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 3DEXPERIENCE, while the traditional players maybe a bit more lukewarm or 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 one's, 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 one, specifically in Germany, but in many tier one, Japan also, China. Even if the OEM is still on legacy, we have a lot of very influential tier one which are already on the 3DEXPERIENCE platform. In fact, they are really promoting the 3DEXPERIENCE platform based on the value they see. On the tier one, 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.
Great. Thank you.
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.
Yep.
This was also an opportunity for us to expand outside of the traditional tier one and tier two suppliers, you know. The significant presence we have, keep in mind that we are counting almost 800 new EV or autonomous car programs worldwide, and more than 80% of them are equipped with 3DEXPERIENCE platform. 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. Your next question comes from the line of Jason Celino from KeyBanc Capital Markets. Please ask your question.
Great. Thanks for being able to.
This will be our last question. Please go on, Jason.
Okay. Thank you. 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. Can you give some reasons as to why Q4 new license may further decelerate from Q3?
I will take this one, Bernard, and maybe you will have an opportunity to ask another questions. Because this one is relatively easy, if you look at the new license, Q4 is almost twice the size of Q3. It's easy to conclude that it cannot be exactly the same percentage, because the absolute number is not the same. That's the reason. If you remember, the Q4 last year was also much better than the Q3. That's the two reason why you could have the feeling that I'm conservative for Q4. Trust me, I'm not. I will 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 3DEXPERIENCE Works. Good to see, but historically, China's favored these perpetual licenses, you know, 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 are also around the world, I would say, not to mention explicitly 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 a 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, François. Thank you very much. Most of the question's been asked, just a couple of final one 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 Medidata 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 at Q3 over Q2. I guess my question is the same as the previous question, which is, doesn't that look conservative? 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-Medidata.
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, I will start with Medidata. Yeah. If you do the math, you are right, except you miss something very important. You are remembering the performance of Q1 and Q2 this year, but you should also remember the performance of last year. Last year, the performance of Medidata was around 13%, and we landed at the end to 18%. There is almost five points difference between the Q1 and the Q4. 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, Stefan. Now, is the Medidata capable to do slightly better? To a certain extent, but I already add the EUR 10 million into the guidance.
Keep in mind that the bookings, the commercial activity we have right now, will have an impact not this year, but next year. Even if we are still having 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%-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. 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%. This is having several additional point of growth. I do expect this growth to be sustainable at least for H2. For 2022, it's too early to say.
The growth is specifically coming from simulations, and as you may know, and also some subscriptions. 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. Just to confirm, that Medidata growth, 16%-17%, is for the full year, right? Not for H2.
Yeah. Of course, for the full year.
Okay. Yeah.
For the full year.
Yeah. Right. Okay, great. Thank you for the precision. Thank you very much.
You're welcome.
François-José, I think with that, it was the last question. Thank you very much for participating to this conference call. As always, we will be delighted to address any further questions with you. 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 now.
This concludes today's conference call. Thank you for participating. You may now disconnect.