Ladies and gentlemen, thank you for standing by. Welcome to today's Dassault System 20 Q2 and twenty half year earnings presentation. At this time, I must advise you that this conference is being recorded today. Thursday 23rd July 2020. I would now like to hand the conference over to your speaker today, Francois Bardenardo.
Please go ahead, sir.
Thank you very much, Sharon. And Pascal Delos, Chief Operations Officer And Chief Financial Officer. I hope you and your families are keeping safe, and I would like to welcome you to Dassault Systemes, Second quarter 2020 webcasted presentation meeting. At the end of the presentation, we'll take questions from participant. Later today, we'll also hold a conference call.
VASO systems result are prepared in accordance with IFRS. Most of the financial figures are presented on a non IFRS basis with revenue growth rate in constant currency unless otherwise noted For an understanding of the differences between the IFRS and non IFRS, please see the reconciliation tables included in our press release. Some of the comments we'll make during today's presentation will contain forward looking statements, which could differ materially from actual results. Please refer to our risk factors in our 2019, Doctor. Mondan Rios Espolon Yvessel.
Let me now introduce Bernard
Thank you, Francois. Thank you for joining and good morning or good afternoon. Well, the first thing I would say for this, 2nd quarter announcement is that in this incredible, pandemic and crisis, I think it's a special moment to reveal resiliencies of companies. On the differentiation between themselves. It's true or so for our customers and partners.
And it does apply and it reveals a lot of a lot of different attitudes, it also reveal about not only the resiliencies of companies, but also the values which are associated with the companies. And I think the way we have prepared a program for you this morning is really provide you with some insights, which are not only about numbers, but about what actually do we do with our clients on how do we observe the evolution across the world of the so many sectors we cover. So the financial results are well aligned with the new guidance we set up at the end of Q1 with the total revenue up 10 percent on which in Q2 and 14, excluding exchange rate for the first half. The recurring revenue is strong and represents 83% of the total revenue, up 30%, of course, also with the effect of the diversification acceleration we initiated at the end of last year. Solid renewal on an organic basis as well as a good performance will come back on this.
The operating margin on EPS at the high end of the guidance on a strong operational performance, I think Pascal and the new executive team did a lot of creative things to really not only cost control, but very selective investment. He will talk about that. I think what, is common across all the sectors And we have a wide scope of observation right now is that the virtual twin experience is relevant. It's and don't make the confusion between digitization on virtual twin experience. Virtual Twin experience means you can evaluate the what if on the way you operate on the what you develop on how your customers are using your products, you can do the what if and evaluate them.
Real time. It's very different from having a static digital view of your company. More to be said, And as you remember, on February 6th this year, we said, we want to apply this to life. We want to apply for everything we do with them. And we want to transform the modeling and simulation approach to the work we have been serving for almost 40 years now in the industry, with AI based engines that allows you to create things, your mankind will not create.
That's what we call make to grow. Tangible example of that is when you do 3 d printing, the process give birth of the part, not the other way around. On the human aspect of it is very important, more than the social aspect for us. The human aspect of it is is about usability, adoption by people, the way we can look at the way our software is used on the relevancy of it in the different sectors we serve. The last point on this purpose driven aspect which is important.
In that time, a purpose is at the core of what I think makes difference between companies. And what I would like to say here is the toxin, a beautiful startup, top top for five people, in France, we have, are joining together what we want to do is we have exactly to tag, search, find reveal information. We have net Vikes, to dashboard them. And while now with FOXEM, we are going to be able to build ontology and semantics and basically take a document and be able to, between code, increase the level of understanding of this document as opposed to the keyword, more to be said, but as you can understand, it will serve in a big way, in the life science sector because everything is documented life science. And we reaffirm our 2020 EPS with the objectives on Pascal will give you the details about that.
Even though we are frustrated with the consulting on service, like many companies, I think the software dynamic is good. So in the Q2 was marked by the importance of how we revealed the purpose. But before I talk to you about that. Let's have a quick video.
So,
when everyone is observing the dynamics, the economical challenge on everything, it might be irrelevant to, to build upon this video, but what I want to tell you is that in a tremendous crisis, as I said in my previous comments, people are important. Behavior on willpower is important. And I have to tell you that really when Pascal and I Without knowing the duration of the crisis, the impact of the crisis early April, we said we are not going to we are going to keep all the profiles of people we have, and we are going to continue to sustain and make sure that our partners can continue to stay in the business. It was not a minor engagement, and it's not a minor engagement when you are in an unpredictable economy like what we have seen. But I have to tell you that the customers were extremely deeply associated with that, that also they noticed that we were there to help them stay and run their business.
Not disable. For example, the ecosystem of SOLIDWORKS that said we have never seen so much empathy in the relationship that you have with us. We think that this is also driving the business in certain ways. So basically the purpose we have that you know now harmonizing product media unlike it's on the agenda. And I think we are working the talk you would see in a moment.
No doubt that the perception of what we do moving from tool to an infrastructure to use the virtual world to improve the real one has never been accelerated as in the last 3 or 5 months When big companies developing complex products had to work from home, it was not a toolkit question or a conversation question. Or video conference question. It's where are the data? Can I manage the process and can we work together? And that's what I believe is more revealed today on making the difference.
The second thing that we formulated on February and the ambition, things to life, ongoing relationship with clients, instead of only connecting, making to growing, making to growing, let me give you a very simple example. We believe that technician can do what engineers in most companies are doing now in our company. The direct effect is cost reduction by 50%. For the same job. That's a tangible thing.
And when companies are reducing their workforce, it's becoming so important, and it's not a question of functionalities. It's a question of OpEx, selective CapEx, in terms of investment under human centricity, of course. An example of that is if we can simulate our plant is working and now we can make the workers' work in a safe environment, I think we have an impact. So we continue on the line of what we said in February, despite the gigantic crisis that the world is facing, And we are going to work on many topics that we continued. You will see all of the year actions in the context of water, city, energy, mobility, consumption, nature, health, and others.
And so in order to make proposed driven company. Let me translate this now to how we are orchestrating that. As you remember, the platform is operated in two manners as a system of operation, on to create new business models. I'll give you a few examples, but new business models means that you are one click away to be able to find someone who's going to be able to produce a part for you, even if it was not in your supply chain. Which is incredible agility.
And system of operation means that when you have the digital information, you can do that are intelligence on it. I will take a few example on those. The next example I want or next statement I want to make is, as you know, we have announced today Bouygues with cloud on Mobility Moderna for Phase III and clinical trial. We have also announced Ericsson, and we are going to talk about it.
Ladies and gentlemen, thank you for standing by. Welcome to today's Dassault System 20 Q2 and twenty half year earnings presentation. At this time, all participants are in a listen only mode. There'll be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Thursday 23rd July 2020.
I would now like to hand the conference over to your speaker today Francois Bordenardo. Please go ahead, sir.
Thank you very much, Sharon. Good morning, everyone. From the company, we have Bernard Thales, our Vice Chairman, Chief Executive Officer and Pascal Delos, Chief Operations Officer and Chief Financial Officer. I hope you and your families are keeping safe, and I would like to welcome you to Dassault Systemes second quarter 2020 webcasted presentation meeting. At the end of the presentation, we'll take questions from participant.
Later today, we'll also hold a conference call. Vassault Systemes result are prepared in accordance with IFRS. Most of the financial figures are presented on a non IFRS basis with revenue growth rate in constant currency unless otherwise noted. For an understanding of the differences between the IFRS and non IFRS, please see the reconciliation tables included in our press release. Some of the comments we'll make during today's presentation will contain forward looking statements, which could differ materially from actual results.
Please refer to our risk factors in our 2019, Doctor. Mondelez Espolon Yvester. Let me now introduce Bernard Thank you, Francois. Thank you for joining and good morning or good afternoon.
Well, the first thing I would say for this, 2nd quarter announcement is that in this incredible, pandemic and crisis, I think it's a special moment to reveal resiliencies of companies. On the differentiation between themselves. It's true also for our customers and partners. And it does apply, and it rebuilds a lot of, a lot of, different attitudes. It's also reveal about not only the resiliencies of companies, but also the values which are associated with the companies.
And I think the way we have prepared a program for you this morning is really to provide you with some insights, which are not only about numbers, but about what actually do we do with our clients on how do we observe the evolution across the world of the so many sectors we cover So the financial results are well aligned with the new guidance we set up at the end of Q1, with the total revenue up 10% on, which in Q2, on 14, excluding exchange rate, for the first half. The recurring revenue is strong and represents 83% of the total revenue, up 30%, of course, also with the FX of the diversification acceleration we initiated at the end of last year. Solid renewal. On an organic basis as Airbus difference on space. What?
If you try to connect that, may people say, what is connecting those together? Is it the 2 key questions? No, it's virtual twin experience for all of them. Here, I have a few observation for the 3 sectors, economical sectors that we are now looking to recognize. Manufacturing industry, like science said, on infrastructuring Cities, in short, in the manufacturing industry, what we see to reduce cost of operation.
I took the example of a technician doing what an engineer is doing. Or, reducing the workforce, but still having the same plan. But it's also related to the speed at which a portfolio can be transformed. Of the service associated can be transformed. I have an example in aerospace, which I want to take now.
I will now name the company, But that company has adopted the 3DEXPERIENCE platform for a while now on what they said they have cut all their IT investment. But one, they are using our data science to improve and reduce massively the warranty cost of the product in operation with predictive to be able to increase the the service level. So they have, in a few months, added 7000 double the size of the user community just doing data science on the data we have they have accumulated with our platform. That's a tangible example. Of rapid return on investment.
Many companies are also looking at value chain transformation, and also, of course, a concern about survival of some of the players in the supply chain. On the sovereignty topic, we see highly visible. And I think it's going to increase. Life science is another dynamic. It's innovation and simplicity and the passion.
And for infrastructure on cities, no doubt that a lot of money will be invested in constructing and improving the infrastructures are large on energy. We want to play a role there, and we feel we have something to do there. Let's take a few examples, but they are now, we are very pleased that it can be revealed My friend, Stephane Bancel, was talking a lot about what he was doing. And one day, I called him and I said, should also talk about the fact that you use our platform. So I think they are using our platform.
It's, it's an incredible, showcase for our clinical trial with a Medidata platform, on its video about electronic data capture clinical customer assessment on centralized statistical analysis. This is the data science associated with it. I think it's a big usual case. They are in phase 3. We've almost 33,000 passion, as you can see here on the slide.
And we believe that it translates to reality the importance of data driven platform. And more than that, as you know, we are doing a lot for virtual, as well as a good Medidata performance will come back on this. The operating margin and EPS at the high end of the guidance On a strong operational performance, I think Pascal on the new executive team did a lot of creative things to really not only do cost control, but very selective investment. We'll talk about that. I think what, is common across all the sectors And we have a wide scope of observation right now is that the virtual twin experience is relevant.
It's don't make the confusion between digitization on virtual twin experience. Virtual twin experience means you can evaluate the what if on the way you operate on the what you develop on how your customers are using your products, you can do the what if and evaluate them real time. It's very different from having a static digital view of your company. More to be said, As you remember, on February 6th this year, we said, we want to apply this to life. We want to apply this to our relationship with our clients and partners by using the platform for everything we do with them And we want to transform the modeling and simulation approach to the work we have been serving for us was 40 years now in the industry, with AI based engines that allows you to create things your main kind will not create.
That's what we call make to grow. A tangible example of that is when you do three d printing, the process give birth of the part, not the other way around. And the human aspect of it is very important, more than the social as the human aspect of it is about usability adoption by people, the way we can look at the way our software is used on the relevancy of it in the different sectors we serve. The last point on this purpose driven aspect, which is important. In that time, a purpose is at a core of what I think makes difference between companies.
And what I would like to say here is the PoXAN, a beautiful startup top top qualified people in France, we have We're joining together. What we want to do is we have exactly to tag, search, find reveal information. We have Net Vibes, to dashboard them. And while now with proxy, we are going to be able to build ontology on semantic and basically take a document and be able to, between code, increase the level of understanding of this as opposed to the key work, more to be said, but as you can understand, it will serve in a big way, on the in the life science sector because everything is documented life science. And we reaffirm our 2020 EPS with the objectives on Pascakal, we'll give you the details about that.
Even though we are frustrated with the consulting on service control arm, which is basically a way to use massive data and use them to compare with real therapeutic supply to passion to evaluate risk, efficiency, on, validate the approach. Galapagos, another example, by the way, I should mention that the 3 phase 3 biggest clinical trial now without naming anyone, are based on Medidata platform. Galapagos adopted also the 3DEXPERIENCE platform. This more on the 1 lab solution. This is associated 1 lab solution is associated to Biovia brand, but it's really integrating the lab develop as you know, research, development on lab are very disconnected today in that sector when we are connecting them.
And the other showcase that we want to mention today is, Ericsson. We had a, we have a very important program going on for a multi year program. To really use the Exam's platform to improve the operational efficiency, increase the flexibility of manufacturing. As well as being able to read that related to political constraint, where do you produce what? And how do you do it?
Because the current political situation is creating new type of constraints where the agility to relocate is becoming obvious. I don't need to say more about that, but I think that the platform is a critical element. I was pleased to see that our friends from Tesla who are the early adopter of the 3DEXPERIENCE platform, positive for, four quarters in a row now. So, I think it shows that, I think we are for something there. Because, the platform has been used to all the, do all the development engineering and also improve their processes.
I'm now having nicholas which is on the news from what I've seen in the last weeks, they have also widely adopted the 3DEXPERIENCE platform I think that the, electromobility accelerator Industry solution, you notice we just say what it does. Electrical mobility accelerator industry solution. So we don't sell functionalities anymore. We sell industry solutions. Unlike our friend competitor.
So this is changing the approach for many of the companies adopting our solution. So that's a reference. By the way, it's a strong signal for all the legacy customers that we love for years. Because they know that as we win all the new player, we are also probably the best solution for them for the new portfolio they want to do. GDC Techniques also adopted the experience platform to, with the, clear to operate industry solution experience.
This is really related to, reducing costs to time to reach clients on, at creating a attractive environment for BMO. Another important aspect Airbus development space, this is important because I think the, like many companies, I think the softer dynamic is good. So, in the Q2 was marked by the importance of how we reveal the purpose. But before I talk to you about that, Let's have a quick video So when, everyone is observing the on day mix the economical challenge on everything, it might be irrelevant to, to build upon this video. But what I want to tell you is that in a tremendous crisis, as I said in my previous comments, people are important.
Behavior on willpower is important. And I have to tell you that really when Pascal and I, without knowing the duration of the crisis, the impact of the crisis early April, we said we are not going to we are going to keep all the profiles of people we have and we are going to continue to sustain and make sure that our partners can continue to stay in the business. It was it was not a minor engagement, and it's not a minor engagement when you are in an unpredictable economy like what we have seen. But I have to tell you that the customers were extremely deeply associated with that. That also they noticed that we were there to help them stay and run their business.
Not disable, for example, the ecosystem of SOLIDWORKS, they said, we have never seen so much empathy in the relationship that you have with us. We think that this is also driving the business in certain ways. So basically the purpose we have that you know now, amortizing product, the ambition of the programs, in the space and defense sector, is visible in all key countries in the world. So adopting program excellence co designed to target ready for rate. It says it speaks about the outcome of the solution, not what it does, but the outcome of it clear to operate, which is certification and keep them operating cost reduction in your operation those are the solutions which are being adopted on 3DEXPERM platform for Airbus.
Bouygues Construction, we start strengthening our partnership with Cloud And Mobility. And the solution here is, creative building design. No doubt that the construction sector will become more modular, will use manufacturing discipline to build modules and assemble them and will become parametric in the way things are constructed. So we have a huge, potential there it's slow because it's a long transformation from the workforce. I think the limit here in speed is the workforce.
And finally, through the experience, it's a data centric platform. We don't think our clients using the 3DEXPERIENCE platform will need to use some players, which are doing data science side, we think we can do all of these with a collaborative data intelligence. This is an example that situates why we are making the acquisition of of Proxem, simply said, when you have the real world on the virtual world, there are 3 phenomenons First, before the real is happening, the virtual need to be imagined developed and produced. When it's done, it's going in the real world for production or usage on operation. You want to connect those worlds, on you want then to learn from what we call experiences, how you're going to improve the business.
So In order to do that, we are massively using our 3DEXPERIENCE cloud infrastructure, building on the data, what we call knowledge graph on ontology using machine learning and using semantic processing, which is the reason of proximity to really enable to continue to improve and invent new type of solutions for the product and services our clients are doing. This is the east side of the compass. It's called Information Intelligence. So we now know how to do tagging, search with keywords, dashboarding, we can integrate now the semantic with it, built ontology and create things that people cannot observe without those systems. So we are moving from a product centric capability from centric to solutions on experiences because real world evidence apply to can apply to manufacturing systems also, not only to health care.
This is the Proxem acquisition and why it's done if it's a core technology related to collaborative data science. With that, I'll give the floor to Pascal. My message to you is very simple. We are working to talk despite the challenge in the economy. I think the echo with our clients is positive.
We are there for them, and we will continue to do so.
Thank you, Bernard. Good morning to all of you. We hope you and your family are well. I would like to begin my comments with a cover view on our financial performance for this quarter. So let's start a revenue of EUR 10,071,000,000 growing at 10% excluding the currency effects, 14% for the 1st semester.
For the quarter, it's at the midpoint of the guidance, the gross. Moving to the operating margin, 26.7 percent, which is at the high end of the guidance. And to achieve this performance, we have been able to contain the operating fences from an organic standpoint by reducing them by 5% and delivering an EPS at which is at the high end of the guidance because you remember, the guidance I gave the last quarter was $0.72 to $0.77. Zooming in our revenue details. 1st, the software revenue is growing at 12% excluding currency effects.
Well aligned with the Q2 objective. You remember, between 11% 13%. The organic is decreasing by 7% and it's due to the impact of minimal dance on a new business activities. Zooming and focusing on the subscription and support revenue, which you remember, represent 83% of the software revenue. We are growing at 30%.
And it's the demonstration of the solid renewal and it's true across all the deals as well as the excellent momentum of many data growing at double digits. The organic growth has been 4% for the Q2 and 5% for the 1st semester. Zooming on the licenses and other software revenue, we are decreasing by 32%, which was what we were expecting. It's at the lower end of the Q2 objectives we gave, but nevertheless, we expect Q2 to be the weakest quarter of the year. That's probably the most important message.
And we expect a slow ramp I'll buy much better for H2 compared to Q2. The services revenue, has been impacted this quarter and the COVID-nineteen as, in fact, creating some significant headwinds. And you see, we are decreasing by 5% excluding the currency effects. We have almost 10% of the project being traced for time being, It does not mean they are lost. They will start again in a few quarters from now.
And that's the reason why to echo what they're say we decided to keep all the people, I believe we have more than 300 people on the bench. The people we have internally are control arm, which is
basically a way to use massive data and use them to compare to compare with real therapeutic supply to passion to evaluate risk efficiency and validate the approach. Galapagos, another example, by the way, I should mention that the 3 Phase III biggest clinical trial now without naming anyone, are based on Medidata Platform. Galapagos, yeah, adopted also the 3DEXPERIENCE platform. This is more on the 1 lab solution. This is associate, one map solution is associated to Biovia Brown, but it's really integrating the lab development.
As you know, research, development on lab very disconnected today in that sector, and we are connecting them. And the other showcase that we want to mention today is Ericsson. We had a we have a very important program going on for a multiyear program to really use the Exane platform to improve the operational efficiency and increase the flexibility of manufacturing as well as being able to read that related to political constraint? Where do you produce what? And how do you do it?
Because the current political situation is creating new type of constraints where the agility to relocate is becoming obvious. I don't need to say more about that, but I think that the platform is a critical element. I was, pleased to see that, our friends from Tesla who are the early adopter of the 3DEXPERIENCE platform, positive four quarters in a row now. So, I think it shows that I think we are for something there because, the platform has been used to do all the development engineering and also improve their processes and now having nickel amateurs, which is on the news from what I've seen, in the last weeks, they have also widely adopted the, 3DEXPERIENCE platform. I think that the, electromobility accelerator industry solution You notice, we just say what it does.
Electrical Mobility Accelerator Industry Solution. So we don't sell functionalities anymore. We sell industry solutions unlike our, friend competitor. So this is changing the approach for many of the companies adopting our solution. So that's a reference.
By the way, it's a strong signal for all the legacy customers that we love for years because they know that as we win all the new player, we are also probably the best solution for them for the new portfolio they want to do. GDC techniques also adopted the Experience Platform to, with the CLEAR to operate industry solution experience. This is really related to, reducing costs to time to reach clients on, at creating a attractive environment for VMAO.
Another important aspect Airbus dependent space, this is important because I think the, are very high skilled people and it's difficult to hire, difficult to replace them. And I think it's valuable since we do to contain, nevertheless, the impact. What we did, we have reduced the subcontracting and we are reallocating them to a very strategic project, whatever is internal or external. Moving to the review by regions. Let's start with Asia.
Asia is growing at 3%. For the quarter, 5% since the beginning of the year and represent 25% of the total revenue. We saw a very good resilient in China And as well as Japan, China is growing at 9% for this quarter, 5% for Japan. Versus this performance has been offset partially by a strong decline in India. And I do not expect the situation in India to improve significantly in Q3, given the health situation they are facing.
You will see we have a significant transaction in China in many different sectors. Construction, transportation and mobility, as well as high-tech. Europe, is decreasing by 4% in Q2, minus 1% since the beginning of the year, representing 33% of the total revenue, The key point is, you know, the impact is almost the same across the different countries, whatever it's from Germany or the north of Europe. The crisis has been slowing down the decision process and you can see the impact. Nevertheless, we had some very honestly industry is still growing.
Life Sciences being one of them. Americas, growing at 43% this quarter, 44 in the beginning of the year and now representing a 39% of the revenue. So it's a significant change. If you remember, compared to to last year. And obviously, it's due to the contribution of Medidata, but not only.
You still have industry like aerospace, believe it or not, despite the difficulty they are facing, we are growing at 4% for the semester overall. And especially in Americas, Aerospace was growing at 7%. Zooming on some key, key wins. Page 23, you know, zooming in China our direct sales had a best performance continuing to show pickup activities we saw at the end of Q1. With deal in high-tech, Marine And Offshore And Transportation And Mobility.
And here is an interesting case. NIO, it's a high end smart electric vehicles, OEMs, headquarter in China, 7500 employees. So when we say there are newcomers, they are not small company anymore. I was just this to be clear. And they have selected the 3DEXPERIENCE platform against with the electoral mobility accelerators.
In order to roll out an LNG platform to support rapid global expansion, design and launch new model faster. The ambition of the
programs in the space and defense sector is visible in all key countries in the world. So adopting program excellence co designed to target read it for rate, it says it speaks about the outcome of the solution, not what it does, but the outcome of it clear to operate, which is certification and keep them operating cost reduction in your those are the solutions which are being adopted on 3DEXPERIENCE platform for Airbus. Bouygues Construction, we start penciling our partnership with Cloud And Mobility. And the solution here is, creative building design. No doubt that the construction sector will become more modular, will use manufacturing discipline to build modules on assemble them and will become, parametric in the way things are constructed.
So we have a huge potential there. It's slow because it's a long transformation from the workforce. I think the limit here in speed is the workforce. And finally, the 3DEXPERIENCE is the data centric platform. We don't think our clients using the 3DEXPERIENCE platform will need to use some players, which are doing data science side, we think we can do all of this with a collaborative data intelligence.
This is an example that situates why we are making the acquisition of of Proxen, simply said, when you have the real world on the virtual world, There are 3 phenomenons. First, before the real is happening, the virtual need to be imagined developed and produced, When it's done, it's going in the real world for production or usage on operation. You want to connect those words a new one then to learn from what we call experiences, how you're going to improve the business. So in order to do that, we are massively using our 3DEXPERIENCE cloud infrastructure, building on the data, what we call knowledge graph on ontology, using machine learning and using semantic processing, which is the reason of proximity to really enable to continue to improve and invent new type of solutions for the product and service our clients are doing. This is the east side of the compass.
It's called information intelligence. So we now know how to do tagging, search with keywords, dashboarding, we can integrate now the semantic with it, build ontology and create things that people cannot observe without those systems. So we are moving from product centric capability from centric to solutions on experiences because real world evidence applied to can apply to manufacturing systems. Also not only to health care. This is the Proxem acquisition and why it's done.
It's a core technology related to collaborative data science. With that, I will.
And the COGS is really improving the collaborations bringing together all the different disciplines and accessing complex, complete and complex vehicle data at any time. That's what we do for them. Zooming in Europe. Our traction in Life Science is further demonstrating with Miguel Bigal is a research and development center in Israel, and they have selected also the 3DEXPERIENCE platform with design to cure industry solutions. That's an interesting one because we say a lot about Medidata having a significant positions in the to develop the new vaccine.
But here, you also have the proof that BioVIA is extensively used in conjunction with the research. They are doing. And what they want to do is just to fast track the development of the vaccine based on the existing virus research. That's what they do. Zooming to North America, we had the most of the deals in the top 20 in Q2.
So spread across the number of industries such as energy and materials, consumer packaged goods. And here is an interesting example, but foods is the largest food services redistribution. You know, what they do, they are they sell the product to distributors in all the 50 U. S. States and more than 35 countries.
They have decided to expand their use of DELMIA Quintiq to optimize the pickup sequenceings in their warehouse. Across the U. S. And Canada. And at the same time, they are integrating also the supply chain processes.
It's a significant differentiator for them. And you could consider that you will see on a regular basis this kind of win because I think with Quintiq, we have something unique to make it happen. Moving to software revenue by product lines. Industrial Innovation Software Revenue decreased by 9% this quarter, minus 11 for KTia as well as Zenovia, despite a good resilience of the port revenue against across all the different countries. You have to remember that last year, the base of comparison is not helping because we had a very good quarter for and semester for Catian Innovia.
Plus license up 10% and 20% for Innovia last year. I was checking anyway for Innovia, the competitive win rate, And I think you will be interested to know that the competitive rates have improved significantly against Siemens we used to win in 71% of the cases and we have exceeded 80% since the beginning of the year. So I think This maybe could explain why they are trained to do something with another partner. Moving to Life Sciences software revenue. As you can see, plus 526 percent, Medidataperformance is extremely good with a double digit growth in Q2.
We had some headwind and the Tarek see if you wrote about it, to some investors because, you know, the study by study has been in the floor to Pascal.
My message to you is very simple. We are working the top despite the challenge in the economy. I think the echo with our clients is positive. We are there for them and we will continue to do so.
Thank you, Bernard. Good morning to all of you. We hope you and your family are well. I would like to begin my comments with a quick overview on our financial performance for this quarter. So let's start.
The revenue of EUR 1071,000,000 growing at 10%, excluding the currency effects, 14% for the 1st semester, For the quarter, it's at the midpoint of the guidance, the gross. Moving to the operating margin, 26.7 percent per which is at the high end of the guidance. And to achieve this performance, we have been able to contain the operating expenses from an organic advanced by reducing them by 5% and delivering an EPS at which is at the high end of the guidance because you remember the guidance I gave the last quarter was $0.72 to $0.77. Zooming in our revenue details. 1st, the software revenue is growing at 12%, excluding currency effects, well aligned with the Q2 objective.
You remember, between 11% 13%. The organic is decreasing by 7% and it's due to the impact of minimal dance on a new business activities. Zooming and focusing on the subscription and support revenue, which you remember represent 83% of the software revenue. We are growing at 30%. And it's the demonstration of the solid renewal and it's true across all the deals as well as the excellent momentum of Mini Data growing at double digits.
The organic growth been 4% for the Q2 and 5% for the 1st semester. Zooming on the licenses and other software revenue, we are decreasing by 32%, which was what we were expecting. It's at the lower end of the Q2 objectives we gave, but nevertheless, we expect Q2 to be the weakest quarter of the year. That's probably the most important message. And we expect a slow ramp I'll buy much better for H2 compared to Q2.
The services revenue has been impacted this quarter and the COVID-nineteen has, in fact, creating some significant headwinds. New seats, we are decreasing by 5%, excluding the currency effects. We have almost 10% of the project being phrase for time being does not mean they are lost. They will start again in a few quarters from now. And that's the reason why to echo what Barrons say, we decided to keep all the people, I believe we have more than 300 people on the bench.
The people we have internally are affected by the difficulty to hire, to enroll new patients, but also we had some delay. But nevertheless, the situation is back to almost normal on a global worldwide basis. And we are very confident to deliver to demonstrate this, I think we have very good indicators on the booking side, up more than 20%. And we see also an acceleration of the backlog growth, specifically driven by Patient Cloud. We introduced last time MyMedi data, and my BD data is a way to shift the trial from being site centric to patient centric.
And we saw also a significant backlog considerations on the data analytics, which are used to unroll the data overall the patient more specifically, you know, to identify the right profile, but also to accelerate the trial with what Bernard said, the virtual control arms. Related to the mainstream innovation software revenue minus 2% with a decent performance of SOLIDWORKS minus 3 compared to CATIA, which is a good sign because SOLIDWORKS is usually used as an early indicators of the situations. And we saw not only a very strong recurring revenue, even if it has been offset by the license decline, but much more contained compared to CATIA. We could notice also that in Q2, we had a growth for Centric PLM and DELMIA works, very small growth, but nevertheless, given the situation happening in the fashion industry, And for the midsize market, I think it's a good performance. Zooming in our profitability, our operating margin of 26.7 percent came near to the high end of our objective range.
And you remember, 25% to 26.5% with 2 principal factors The first one is really a strong performance in our core business. And you can notice is plus 120 basis points. She's approved that the savings plan is ready in operations, but also we had a good contribution from Medidata coming ahead of the plan It's almost a 500 basis point additions on the operating margin compared to last year. And now the operating margin is exceeding 20%. So it's a they are not only on plan, but they are going a little bit faster.
However, this compared to the previous guidance, on the profitability, the lack of revenue has been a slightly impact the Centric and the Mail works. So it's minus 15 basis points compared to the previous guidance. So I just want to remind you that our savings plan targeting $117,000,000 and offsetting half of the revenue reduction is really well in place. At the end of each one, we are in line with the target with more than half of the saving being achieved. And at the same time, which is a very important message to you guys.
And the call is really improving the collaborations bringing together all the different disciplines and accessing complex, complete and complex vehicle data at any time. That's what we do for them. Zooming in Europe, our traction in life science is further demonstrating with Miguel Bigal is a research and development center in Israel, and they have selected also the 3DEXPERIENCE platform with designed to cure industry solutions. That's an interesting one because we say a lot about Medidata having a significant positions in the to develop the new vaccine. But here, you also have the proof that Biovia is extensively used in conjunction with the research.
They are doing. And what they want to do is just to fast track the development of the vaccine based on the existing virus research. That's what they do. Zooming to North America, we had the most of the deals in the top 20, in Q2. So spread across the number of industries such as energy and materials, consumer packaged goods.
And here, it's an interesting example, but foods is the largest food services redistribution. What they do is they are they sell the product to distributors in all the 50 U. S. States and more than 35 countries. They have decided to expand their use of DELMIA Quintiq to optimize the pickup sequenceings in their warehouse.
Across the U. S. And Canada. And at the same time, they are integrating also the supply chain processes. It's a significant differentiator for them.
And, you could consider that you will see on a regular basis this kind of win because I think with Quintiq, we have something unique to make it happen. Moving to software revenue by product lines. Industrial Innovation Software Revenue decreased by 9% this quarter. Minus 11 for KT as well as Zenovia, the by the good resilience of the support revenue against across all the different countries, You have to remember that last year, the base of comparison is not helping because we had a very good quarter for and semester for Catier and Inuvia, plus license up 10% and 20% for Inuvia last year. I was checking any way for Innovia, the competitive win rates.
And I think you will be interested to know that the competitive rates have improved significantly against Siemens. We used to win in 71% of the cases. And we have exceeded 80% since the beginning of the year. So I think this maybe could explain why are trained to do something with another partner. Moving to Life Sciences software revenue, as you can see, plus 5 26%.
Media data performance is extremely good with a double digit growth in Q2. We had some headwind and, Tarek, see if you heard about it, to some investors because the study by study has been We continue to reinforce and hire additional capacity in research And Development. And you will notice in the appendix that we have increased by 5.5 percent, the number of people we have in research and developments organically. If you had many data, it's much more. We continue to do some M and A to reinforce.
And the reason is because we want to focus on the value creation for our customers, and this is the right time to do it. So despite the savings plan we are putting in place, we continue to invest and to create the differentiations. Moving to EPS. The good operational performance has a direct impact on the EPS. I'd say, already, it's $0.80 and the contribution of the currency effect is adding $0.02.
So it's not explaining everything. The good performance on the operating margin is really reflecting into the EPS. Our operating cash flow for the 1st semester reach 800,000,000, strong level overall and just 4% below the 1, 2019. And there are a few things I want to say. 1st, we benefited from against Medidata improve can flow situation.
It's almost more than EUR 50,000,000 and it's three times more compared to last year. And we also did very well the way we were we are collecting the cash you will see afterwards. However, this has been offset by extending the payment terms. If you remember, we gave 30 additional days to the customers and to the resellers to ease their cash flow. And this is reflected in the cash flow situations.
Having said that, you know, our cash position in banks has increased by 23% in H1 And we are almost back to the level we were before spending 1,000,000,000 for Medidata. And if you combine this cash generation and this cash position with the level of debt, of 1,000,000,000, our net financial position improved by 1,000,000 this quarter and we are well aligned with our deleverage trajectory. A few words about the operating cash flow. So you saw it minus 4%. So it's almost 1,000,000 below compared to last year.
On the net income adjusted for the cash items, it's mainly driven by Medidata, as I was telling you, representing 80% of the plus 16. The trade accounts receivable, as I told you, we had a good collections. And the DSO is stable, excluding Medidata, with Medidata, it's plus 4 days. The contract liabilities, the deferred revenue, plus 3%, which has to be compared with plus 4% on the recurring software. So it's relatively consistent.
The key point, I could say, we had some delays so backed by the difficulty to hire, to enroll new patients, but also, we had some delay But nevertheless, the situation is back to almost normal on a worldwide basis. And we are very confident to deliver the full year total revenue up 13%. And to demonstrate this, I think we have very good indicators on the booking side, up more than 20%. And we see also an acceleration of the backlog growth, specifically driven by patient cloud. We introduced last time my media data.
And my BD data is a way to shift the trial from being site centric to patient centric. And we saw also a significant backlog considerations on the data analytics, which are used to unroll the data enrolls the patient more specifically, you know, to identify the right profile, but also to accelerate the trial with what Bernard said, the virtual control heart. Related to the mainstream innovation software revenue minus 2% with a decent performance of SOLIDWORKS minus 3 compared to CATIA, which is a good sign because SOLIDWORKS is usually used as an early indicators of the situations. And we saw not only a very strong recurring revenue, even if it has been offset by the license decline, but much more contained compared to CATIA. We could notice also that in Q2, we had a growth for Centric PLM and DELNIA Works, very small growth, but nevertheless, given the situation happening in the fashion industry, And for the midsize market, I think it's a good performance.
Zooming in our profitability, our operating margin of 26.7 percent came near to the high end of our objective range, And you remember 25 percent to 26.5 percent with 2 principal factors. The first one is really a strong performance in our core business, and you can notice is plus 120 basis points. Is approved that the saving plan is really in operations, but also we had a good contribution from Medidata coming ahead of the plan It's almost a 500 basis point additions on the operating margin compared to last year. And now the operating margin is exceeding 20%. So it's a they are not only on plan, but they are going a little bit faster.
However, this compared to the previous guidance, on the profitability, the lack of revenue has been a slightly impact the Centric and the Mail works. So it's minus 50 basis points compared to the previous guidance. So I just want to remind you that our savings plan targeting $170,000,000 and offsetting half of the revenue reduction is really well in place. At the end of H1, we are in line with the target with more than half of the saving being achieved And at the same time, which is a very important message to you guys. Not only we gave some, extended delay for the payment, but also, some of the customers were supposed to renew on time.
They took some additional weeks. Nothing to say on the accrued compensation. It's mainly driven by Medidata. It's a 2019 bonus payment. On the accounts receivable, we do not have too much activity with the lockdowns.
So it's not a big deal. And the difference is really coming from the Medidata acquisition fee. And in the income and payable tax, we the combination of a lower profit before tax and in the effective tax rate and the last payment of the non tax litigation we had. So that's what is explaining the variation of the cash flow. Moving to the objective for the full year.
As outlined last quarter, our key objective and our commitment is to achieve a stable EPS for 2020. Compared to 2029. So I want you to keep this in mind. And based upon the results and the assessment of the second the assessment for the first, the second half, sorry, here are the update, the update we are doing. On the revenue side, we are maintaining our revenue growth range at 12% to 13% excluding the currency effect with some puts and takes, plus 1,000,000 for the currency effects.
Minus EUR 30,000,000,000 for the services, which is not small than the gap we had in Q2. And we took the decisions to almost roll out this gap for the Q3 and Q4. However, we are a better visibility on the pipe and we are capable to offset with 20,000,000 additional software revenue. That's for the revenue. So a mix slightly changing, but the overall performance equivalence.
For the EPS objective, we are now targeting a $3.70 to $3.75. We had the $0.02 of the currency gains, plus $0.01 on the operational performance. Which explains the 3 75 and we narrow the range on the low end to 3 70. And this is reflecting in the proposed objective for the full year now targeting 4,000,00515 to 1000000 to 1000000 revenue, growing at 12% to 13%. Based upon on the pipeline, we saw.
If I zoom on a software revenue, it's 14+15 percent. A slight improvement compared to the previous guidance because it's last time I was mentioning plus 13% to 14%. And this improvement is based on the updated pipeline for the year. And we do see the willingness of part of the clients to resume their investment. And we also have less risk in the pipelines.
We have less dependency on large deals. That's the reason why we the visibility has improved. Not only we gave some extended delay for the payment, but also some of the customers were supposed to renew on time they took some additional weeks. Nothing to say on the accrued session. It's mainly driven by Medidata.
It's a 2019 bonus payment. On the accounts receivable, we do not have too much activity with the lockdowns. So it's not a big deal. And the difference is really coming from the Medidata acquisition fee. And in the income and payable tax, we took combination of a lower profit before tax and an effective tax rate.
And the last payment of the non tax litigation we had. So that's what is explaining the variation of the cash flow. Moving to the objective for the full year, as outlined last quarter, our key objective our commitment is to achieve a stable EPS for 2020 compared to 2029. So I want you to keep this in mind. And based upon the result and the assessment of the second half, the assessment from the first the second half, sorry, Here are the update, the update we are doing.
On the revenue side, we are maintaining our revenue growth range at 12% to 13%, excluding the currency effect, with some puts and takes, plus 26 1,000,000 for the currency effects minus EUR 30,000,000 for the services, which is not small than the gap we had in Q2, and we took the decisions to almost roll out this gap for the Q3 and Q4. However, we are a better visibility on the pipe and we are capable to offset with 20,000,000 additional software revenue. That's for the revenue. So a mix slightly changing, but the overall performance equivalence. For the EPS objective, we are now targeting a $3.70 to $3.75.
We had the $0.02 of the currency gains, plus $0.01 on the operational performance. Which explains the 3 75 and we narrow the range on the lower hand to 3 70. And this is reflected in the proposed objective for the full year. Now targeting 4,000,00515 to 1000000 to 1000000 revenue growing at 12% to 13%. Based upon on the pipeline, we saw.
If I zoom on the software revenue, it's 14 +15 percent. A slight improvement compared to the previous guidance because it's last time I was mentioning plus 13% to 14%. And this improvement is based on the updated pipeline for the year. And we do see the willingness of part of the clients to resume their investment. And we also have a less risky the pipelines We have less dependency on large deals.
That's the reason why we the visibility has improved. The recurring revenue is unchanged. And we have, remove a 20,000,000 from the services and consulting, now decreasing between minus 2 to +1 percent compared to +3.7 percent last time. And this is really reflecting what I told you, the effect we have on some services. Projects.
On the operating margin, 29.3to29.4 and the organic operating margin decreased by between 1.4to1.3. So no nothing to say. And the EPS, I already said, the key point is the tax rate of 25.2 is unchanged. Volatility to the currency effects, we did not change. I just want to draw your attention that we have some volatility on the exchange rate between euro and dollar recently.
Just after the announcement of the EU government stance, that's, needs to be taken into account. But I was checking with the consensus, and most of you are still at 1.1. So I think all of us, we have to do our job to update if things are moving forward. For the Q3, a 1,000,000,000 dollars, $55,000,000 to $1,185,000,000, a growth of 18% to 21% excluding the currency effects, reflected in the good software revenue growth at plus 20% to 23%. With a license in between minus to minus 8% to minus 18%, which is compared to last time almost in the same range, except the lower hand was minus 20, now it's minus 18.
So it's I think we have a slightly better visibility and the recurring software growing at 33%. Which is in line with what we said last time. The services revenue is now expected between 0% to 10%. So the range could be seen a little bit large but it's, I want to be cautious. So when I took the 10% the 1,000,000 impact on a quarterly basis, it's reflected into the services guidance.
The operating margin, 26% to 26.5%, And the EPS range between $0.75 to $0.80, which is consistent. In summary, while our business is not immune to the COVID-nineteen crisis, our financial results demonstrate the resilience of our business model. Moreover, I think the strong level of profitability and financial strength allow us to continue to invest in our strategic priorities, to create value for our customers and position us for the growth reacceleration when we will exceed the global has crisis. That's it for me. And I think Bernard and I now would like to answer to your questions.
Operator, Sharon, can we can you open the Q And A?
Thank you. Ladies and gentlemen, you.
The recurring revenue is unchanged. And we have, remove a 20,000,000 from the services and consulting, now decreasing between minus 2 to +1 percent compared to +3.7 percent last time. And this is really reflecting what I told you, the effect we have on some services. Projects. On the operating margin, 29.3to29.4 and the organic operating margin decreased by between 1.4to1.3.
So no nothing to say. And the EPS already said, the key point is the tax rate of 25.2 is unchanged. Validity to the currency effects, we did not change. I just want to draw your attention that we have some volatility on the exchange rate between euro and dollar recently. Just after the announcement of the EU government plans, that's indeed taken into account.
But I was checking with the consensus, and most of you are still at 1.1. So I think all of us, we have to do our job to update if things are moving forward. For the Q3, 1,000,000,000 dollars, $55,000,000 to $1,855,000,000, a growth of 18% to 21% excluding the currency effects reflected in the good software revenue growth at plus 20% to 23% with a license in between minors to -8 to-18 percent, which is compared to last time almost in the same range, except the lower hand was minus 20. Now minus 2018. So it's I think we have a slightly better visibility and the recurring software growing at 33%.
Is in line with what we said last time. The services revenue is now expected between 0% to 10%. So the range could be seen a little bit large but it's, I want to be cautious. So when I took the 10% the 1,000,000 impact on a quarterly basis, it's reflected into the services guidance. The operating margin, 26% to 26.5%, and the EPS range between $0.75 to $0.80 is consistent.
In summary, While our business is not immune to the COVID 19 crisis, our financial results demonstrate the resiliency of our business model, Moreover, I think the strong level of profitability and financial strength allow us to continue to invest in our strategic priorities. To create value for our customers and position us for the growth reacceleration when we'll exceed the global health crisis. That's it for me. And I think Bernard and I now would like to answer to your questions.
Operator, Sharon, can we can you open the Q And A?
Thank you. Ladies and gentlemen, you. Your first question comes from the line of John King, Bank of America.
2, please. And maybe first one on Medidata. Any further comments you can make around, it feels like you've had a positive from in terms of the bookings growth be offsetting some of the negatives in terms of delays on trials. Any further comments on perhaps quantifying what you've seen in terms of bookings growth Is that above or below the revenue growth for the business? And where that nets out, I guess, as you look out into the medium term or on Medidata, growth rates because obviously the backdrop feels like it should be supportive in the medium term at least.
And then the second question was just more generally outlook on on larger deals. Are there any big deals now within the guidance that you've provided? I think that feels like at least 3 months ago, they dropped away quite significantly. So perhaps your updated thoughts around whether you could see some larger deals closed this year and how much is included in the guidance on that?
Thank you, John, for the two questions. I will take them. Again, the headwind I was talking about is an equivalent of about 3,000,000. So I mean, it's real, but it's not material. Now giving some visibility on the backlog.
There are a few things you know, we are, one of the indicators we are following is what we call the 12 months renewal at par to track the 2 12 months backlog at par, meaning that you make the assumption that the renewal will be at parity. And it's growing at double digit, so well aligned with our plan. And I was also checking another indicators, which is how much we are increasing the spending when people are renewing with us. And I did this analysis for the last 12 months. And in general, we are improving the build by more than 20% when we renew.
So the 2 combined has definitively an impact on the backlog. And I also, I checked, and I want to thanks, Tarek and the team there. They did a great job to monitor this The customer retention is 100%. So that's what I could say on Medidata. And you saw it, it's widely reflected in the operating margin as well.
Coming back to the second question you had related to the mix in the pipelines between the small and the large deal, we still have large deals. However, I think the Salesforce did a great job to slice them. Rather than to have one big deal where all the different topics are linked together, they have decided to have a much more tactical approach looking for a very short return of our investment, and they have slight the opportunity in a smaller piece, if you want. So that's the reason why when I say we do not have any more large deal. I say, in fact, the the number of opportunity being a little bit less in term of value is more, more prominent in the pipeline.
Because it was a way to manage your risk. And it's a way it's a new way to engage. The small topic I could say also it's much more easy right now with some customers to start with a subscription model that it used to be. Why so? Because in this current time frame, the subscription is a way for them to start without having to do to spend too much CapEx upfront.
And I think we see this change happening and, and especially in Americas. That's what I can say. Same sure about the pipeline, maybe. Compared to last year, we are at between 85% to 87% the pipe, but the quality is much better. It's almost 10 points better in term of maturity.
And we have less dependency on some significant deal. That's the reason why for Q3, I think, the guidance are slightly improved and Q4 stay almost unchanged. Q4 is not done. Because it's a significant numbers. In term of PLC, we have to deliver, but I think the pipe coverage is enough.
To make it happen.
And actually could I just squeeze 1 more in on China? It seems like there's a little bit of pressure there in the automotive segment, whether that's related to COVID or not, but maybe any comments about what you're seeing in China given your license exposure?
On a strong dynamic for us, even automotive, almost all sectors. With a very decisive approach in terms of using the experience platform across across the digital pipeline. So it's a positive dynamic in China, Pascal. Can you mention that in your comments? I think China and Japan are compensating for the significant slowdown in India, but China is quite quite strong.
Yes, remember, just 9% in China. And as I was explaining, The growth is mainly coming from the direct sales force. So Portation And Mobility, Marine And Offshore, high-tech, has been the industry, driving the growth since the beginning of the year. And also just for you to know, I made a quick check on transportation and mobility in the pipeline to understand if were slightly below or in line. In fact, it's pretty stable.
The contribution of the transportation and mobility is stable compared to the beginning of the year. So exceeding a little bit more than 20% of the pipe. Where I see some differences for H2 is really on the aerospace and defense. Where we see less contribution from this industry into the pipeline. Quite a bit less in term of value is more, more premium in the pipelines.
Because it was a way to manage a risk. And it's a way it's a new way to engage. The small topic I could say also it's much more easy right now with some customers to start with a subscription model that it used to be seen. Why so? Because in this current timeframe, the subscription is a way for them to start without having to do to spend too much CapEx upfront.
And I think we see this change happening and, and especially in Americas. That's what I can say. Same few words about the pipeline, maybe. Compared to last year, we are at between 85% to 87%. The pipe But the quality is much better.
It's almost 10 points better in term of maturity. And we have less dependency on some significant deal. That's the reason why for Q3, I think, the guidance slightly improved and Q4 stay almost unchanged. Q4 is not done now. Because it's a significant numbers in term of PLC we have to deliver, but that's the pipe coverage is enough.
To make it happen.
And actually could I just squeeze 1 more in on China? It seems like there's a little bit of pressure there in the Automotive segment, whether that's related to COVID or not, but maybe any comments about what you're seeing in China given your license exposure?
China is on a strong dynamic for us, even automotive, almost all sectors. With a very decisive approach in terms of using the experience platform across across the digital pipeline. So it's a positive dynamic in China, Pascal. You mentioned that in your comments. I think China and Japan are compensating for the significant slowdown in India, but China is quite very strong.
Yes, remember, I'm just 9% in China. And as I was explaining, The growth is mainly coming from the direct sales force. So Portation And Mobility, Marine And Offshore, high-tech. Has been the industry, driving the growth since the beginning of the year. And also just for you to know, I made a quick check on transportation and mobility in the pipeline to understand if were slightly below or in line.
In fact, it's pretty stable. The contribution of the transportation and mobility is, is stable compared to the beginning of the year. So exceeding a little bit more than 20% of the pipe. Where I see some differences for H2 is really on the aerospace and defense. Where we see less contribution from this industry into the pipeline.
Great. Thank you.
Welcome.
Thank you. And your next question comes from the line of Stacy Pollard from JP Morgan. Please go ahead. Your line is open.
Hi, thank you. Just again looking at pipeline in demand from the core industries as we go into H2, any other color you can give on Boeing, short term delays perhaps but do you think they will continue into 2021 and get back on track, or that's just not clear yet? Also, any other call outs from Diversified Industries with regards to H2 expectations. I guess you touched on High-tech in China, but maybe more broadly, geographically, And then second question, how do you think the COVID-nineteen crisis has impacted your midterm outlook? Do you think there will be faster, a faster drive towards digital transformation in your key industries?
Or do you think the delays sort of that are happening now are causing more fundamental reconsiderations and maybe things turn out a bit slower for
the midterm. Just kind of thinking a little bit longer term there.
Good morning, Stacy, and thank you. Hassan, do you want to take the first
and also the diversification and you will address the midterm outlook, right? So Coming back to Boeing, I told you the negotiation is not yet finalized, but we are very we are close. And We will still grow with Boeing this year. To remember, the incremental growth was a 20,000,000 additional We did the plus 10,000,000 for H1 and I consider we will be pretty stable for H2. That's the concession we did For the software.
And on the services, I took this into account in the guidance because we are expecting to going to reduce their spending on the services side by 10,000,000. So it's already reflected. That's for 2020 and for 2021. I think, we are supposed to be back to the normal. Related to the diversification, and the trend we're observing.
So Aitek is not only in China. It's also almost everywhere, we see, Bernard was mentioning Ericsson. It's a good it's a good proof point. And you remember We signed this partnership a few years ago with them and we continue to expand what we do. The 5G is really driving this the cycle.
For many industries related to high-tech. So that's one. Consumer Packaged Goods is also an industry delivering a good momentum for us. And the last one is the construction, Bernard, say a few words, when he was mentioning Bouygues, we could expect many government plan to focus on construction. But as Bernard said, it's time to think it to think differently because, the infrastructure Welcome.
Thank you. And your next question comes from the line of Stacy Pollard from JP Morgan. Please go ahead. Your line is open.
Hi, thank you. Just again, looking at that pipeline and demand from the core industries as we go into H2, any other color you can give on Boeing short term delays perhaps, but do you think they will continue into 2021 and get back on track? Or that's just not clear yet? Also any other call outs from diversified industries, with regards to H2 expectations? I guess you touched on High-tech in China, but maybe more broadly geographically?
And then second question, how do you think the COVID-nineteen crisis has impacted your midterm outlook? Do you think there will be faster, a faster drive towards digital transformation in your key industries? Or do you think the delays sort of that are happening now are causing more fundamental reconsiderations and maybe things turn out a bit slower for the midterm. Just kind
of thinking a little bit longer term there.
Good morning, Stacy, and thank you. Hassan, do you want to take the first
and also the diversification and you will address the midterm outlook, right? So Coming back to Boeing, I told you the negotiation is not yet finalized, but we are very we are close. And We will still grow with Boeing this year. If you remember, the incremental growth was a 20,000,000 additional We did the plus 10,000,000 for H1 and I consider we will be pretty stable for H2. That's the concession we did for the software.
And on the services, I took this into account in the guidance because we are expecting to going to reduce their spending on the services side by EUR 10,000,000. So it's already reflected. That's for 2020 and for 2021. I think, we are supposed to be back to the normal. Related to the diversification?
And the trend we're observing. So Aitek is not only in China. It's also almost everywhere, we see Bernard was mentioning Ericsson. It's a good it's a good point. And you remember We signed this partnership a few years ago with them and we continue to expand what we do.
The 5G is really driving this the cycle. For many industries, related to high-tech. So that's one. Consumer Packaged Goods is also an industry delivering a good momentum for us. And the last one is the construction, Bernard, say a few words, when he was mentioning Bouygues, We could expect many government plan to focus on construction.
But as Bernard said, it's time to think it to think differently because the infrastructure needs
at the last meeting altogether, we keep the same we came to the same horizon. We've gone back on that topic regularly, but the case are strengthening. The value of what we have.
Thank you. Your next question comes from the line of Julian Sarrafani from Jefferies. Please go ahead.
Hi, thank you. So, Pascal, I think last quarter you had talked about the churn and you've mentioned you were not expecting churn from larger accounts, but potentially a step up from the mid market and you had talked about a one point increase in churn. Is that still the case that did you actually see that in 2Q and are expecting that to go forward through the rest of the year? And then the second question is on the payment terms as well. Similarly, I think you had talked about a $200,000,000 impact or $200,000,000 impact to cash flow.
Is that still the expectation this year that that might slide into the 2021 to the just the values and payments with customers?
Julian, for the questions. The churn, I mean, so Q2 has been an interesting quarter. We have not seen a radical change on the churn. That's by the way, the reason why the recurrent revenue is delivered at the high end of the guidance. Nevertheless, if you look at the impacts of the crisis, I still do expect to see the churn increasing in Q3 and Q4.
Take what's happened in Europe the vast majority of the company who are supposed to be in bankruptcy will be in September. So all the measure has been taken by the government in many countries, pre, I mean, that has helped the company to survive and to be to start against, but not all of them will be able to continue. So that's the reason why I did not change the guidance for the churn. So I still do expect to have plus one additional churn, for H2, but it did not happen in H1. That's a fact.
The payment terms, yes, you are right. I'd say on the cash flow, you should expect at least 1,000,000 impacts. Maybe 2. You the COVID I mean, the extended payment terms, has an impact of roughly 3 days on the DSO. That's probably the best way I could answer to your questions.
Until now, we have been able to counterbalance it by having a good collection. That's the reason why you are not seeing
the impact improve for Medidata.
And improvement for Medidata as well. So If you combine the 2, I mean, that's the reason why we are slightly decreasing on the cash flow. For the full year, I'm probably a little bit more optimistic, and we could expect to be almost a stable compared to last year. In the 1,200,000,000 cash flow generation. So the key point is not Q3 because you remember, Q3, usually we are, we have a case to be designed in context of the city.
In context of the territory. And as you may know, that's what we do with the platform. It's a system by itself. Each time you want to, for example, to introduce an electrical vehicle into the city, you need to have this electrical vehicle to communicate with the different systems inside the city and you did a virtual model, you need a virtual twin to make it happen. And that's the big differentiators we have.
So we could expect maybe not now, on the short term, but when those plan will be put in place, us to see some tailwind in this sector. And last but not least Life Sciences is really, having interactions, not only for Medidata, but also for BioVIA. And also for the medical devices, which is a core market for SOLIDWORKS.
On the midterm, on a longer
term,
I think we have a very positive analysis of the perspective. Make it simple. I think that, unfortunately, but the reality is this crisis is revealing and increase selectivity in on where companies should transform. We see it very visible. In fact, we have learned a lot over the last 4 months, even in terms of how to obtain the dialogue with executives across the world, in their sector on, the initial talk about reducing the software bill, let's say, the software line, just as a, is really moving to wow, we can get quick return on investment on reducing our global OpEx by better
leveraging what we have already
done that Assions and others or what we can do with, investments which are important as seen buyers and relatively modest as compared to the cost of operation of those companies. And, I've been animating several top executive reviews across the world in, they see in the last, almost 10 per week in the last weeks. On the tone has moved in that direction. Now I don't want to overstate things But, I think the mission critical aspect of what we do is becoming even more visible than ever. On building good rational for the future.
So we remain we remain very positive on the midterm long term. As a matter of fact, Pascal and I believe that We have not changed in some way. If we consider this year as kind of neutral as compared to 2019 over the long term that we discussed at the last,
the negative cash flow. So everything will be at stake with the Q4. But that's where my indicators are telling me right now.
Okay, great. Thank you. This is helpful.
Your next question comes from the line of Nicholas David from ODDO. Please go ahead.
You for taking my question. First one is regarding the recurring revenue guidance for Q3. I mean, you expect an acceleration of constant currency growth recurring revenue despite, I think, tougher comps. You mentioned higher churn delays on on the Boeing ramp up. So I'm trying to understand what are the drivers?
Should we expect the data to accelerate sharply as soon as Q3 above 13% or do you see was a driver on your core business, extending this acceleration? And my second question is, regarding the margin guidance, what is prompting you to be more cautious regarding your full year margin despite the fact that you did well in H1. And actually, your revenue mix for H2 is slightly better than what you initially expected with more review on software and of course less on services, but the mix is supposed to be better. Thank you very much.
Thank you, Nicolas, for your questions. So the first one related to the recurring software revenue, it's a combination of things. But the first one, I still expect the chance to increase. However, I was expecting this to happen in Q2 to the base is not the same. That's the first, the first point.
The second one, yes, Medidata, just Q3 for Medidata is probably an interesting quarter because we have some renewals. And when we do renewals, usually we are improving the spending, increasing the spending with the key customers. And last but not least, if you look at the renewal, has been pretty stable across all the different geos. And I was expecting also some geo effects. And it seemed that, whatever the geo we are talking about, it's almost the same.
So that's the reason why you see some improvement on the recurrent on the recurring Moving to the margin expansion, yes, but you make the assumption. I will not continue to invest, and I won't. Because I think it's the right time to do it. If you, obviously, if you have the capability to do it, And that's the reason why, I think, I committed to you to have a stable EPS It's also our interests, and I think it's also your interests for us to if we have the ability to do it, to start to to hire people and especially on the sales side to prepare 2021. That's the reason why maybe you You can see me a little bit conservative.
In fact, I'm not because I think I still wants to invest.
Okay, that's clear. Thank you very much.
Next question please.
Thank you. Your next question comes from the line of Dushika Agua. Please go ahead.
Questions. 2 from my end. So firstly, can you comment on the shape of recovery that you're currently expecting to see over the near term? Especially in the context of the rebound of digitalization spend in your core market.
I'm sorry. We cannot hear you. Oh, the am I audible? Line is the report.
Am I audible now?
Hey, it's better. It's better. Thank you. Thank you.
Yes. So coming back to my first question. Please can you comment on the shape of recovery that you're currently expecting to see over the near term, especially in the context of the rebound of digitalized patients spend in your core markets? And what are the kind of projects that you're seeing there and what this would mean for 2021? Then the second question would be following up more on MedData.
Can you elaborate more on the scope for growth acceleration going forward and whether the Bautner deal will capitalize the pipeline driving further conversion of the pipeline?
I think this is all related to 2021.
So to answer what 2021, please wait the end, at least the end of the year because we will have more visibility and when we provide the guidance. Nevertheless, coming back to the first part of your question related to the rebound, I don't know if it is a rebound or a base effect. You remember last year Q3 was probably not the best quarter we had. That's point number 1. So it was not the case.
The first half has been good last year, especially for the new license. So I feel that's the reason why you are to be perceived as a significant rebound, but the part of it is coming from the base And the second thing is really what I told you is the maturity of the pipe is a little bit better. And the conversion rate, which is a way to check you know, you take the pipe you have and at the end of the quarter, you look at how much you have been able to convert into revenue. And I did this exercise in Q2 compared to last year. And in fact, it's better despite the fact that we are not, you know, we are decreasing in term of new license.
Nevertheless, our the ability to convert the pipe has been better. Slightly better. That's the explanation of what you are calling a rebound. I don't know if there is a rebound for an economic standpoint, but at least, that's the way I'm explaining. Nevertheless, I could echo something which is probably important.
Why Americas perform relatively correctly, I should say? In Q2. It's because they have anticipated the lockdown. And at the early days of the quarter, we saw some transactions being closed. And usually, you know, we have to wait the end of the quarter to see them because people, they were expecting the lockdowns to happen and they decided to transact before.
In Europe, we have been in a situation whereby we had almost no real decisions, in Q2. Because people, they were taking their time to think about how they will plan the rest of the year and we see the situation improving. We Bernard was mentioning is doing a lot of a lot of calls with many customers. And now they start to have a plan. They have been very selective in what they want to keep in terms of investment, where do they want to disinvest, but they have a plan.
Which was not the case other than Q2. And Asia, it's almost the opposite. Since Q2 and especially in China, we it's obvious that they want to accelerate and to do the catch up. That's the reason why we see some traction in China. That's the early indicators I can give to you to make your mind about what you call the rebound.
Okay. And on MedData, basically, like, with the question more on the Can you give some color what can drive further growth acceleration in Medidata and how like will Moderna be capitalized in the pipeline for VEG data going forward?
So, I told you that I'm pretty confident to deliver the 13% growth for the full year. And H2, we have a good visibility. In fact, we have a 95% coverage for H2 already. So it gives you a sense of how much we should close. And for 2021, please accept that I need to keep some good information with me.
We will take
Thank you. Your last question comes from the line of Michael Bruce, UBS. Please go ahead.
Great. Thank you. Good morning. Just a couple from me as well. Just commenting on SolidWorks.
I mean, it's a very robust performance. I think you said on the Q1 call that the licenses there were down 7%. They're obviously down a bit today, but could you maybe say by how much and your comments Pascal about sort of churn, 1 would have assumed SME Centric customers might be more vulnerable to that. What are you expecting for solid work in the second half of the year? And then just on Centric PLM, I think there's an earn out due on that quite soon.
Have you got any more clarity on how much that might be? And then finally, Bernard, obviously, everybody's been working from home for the last 3, 4 months as, you know, talk about changes of work patterns and cloud has been a big beneficiary of that. Are you seeing anything or preparing anything in terms of the portfolio shifting more quickly to the cloud? Is that something you anticipate in the next year or 2? Thank you.
Okay, Michael. Thank you for your questions. So I will try to answer rapidly related to the performance on the new license. The decrease for SOLIDWORKS was twice less than CATIA. Which is between the negative cash flow.
So everything will be at stake with the Q4. But that's where my indicators are telling me right now.
Okay, great. Thank you. This is helpful.
Your next question comes from the line of Nicholas David from ODDO. Please go ahead.
For taking my question. First one is regarding the recurring revenue guidance for Q3. I mean, you expect an acceleration constant currency growth for recurring revenue despite, I think, tougher comps. You mentioned higher churn. Delays on the Boeing ramp up.
So I'm trying to understand what are the drivers? Should we expect media that to accelerate sharply as soon as Q3 above 13% or do you see also a driver on your core business extending this acceleration? And my second question is regarding the margin guidance, what is continue to be more cautious regarding your full year margin despite the fact that you did well in H1 and actually your revenue mix for H2 is slightly better than what you initially expected with more review on software and, of course, less on services, but the mix is to be better. Thank you very much.
Thank you, Nicolas for your questions. So the first one related to the recurring software revenue It's a combination of things. But the first one, I still expect the chance to increase. However, I was expecting this to happen in Q2. So the base is not the same.
That's the first point. The second one, yes, Medidata, the Q3 for Medidata is probably an interesting quarter because we have some renewals when we do a renewal, usually we are improving the spending increasing the spending with the key customers. And last but not least, If you look at the renewal, has been pretty stable across all the different geos. And I was expecting also some geos effects. And it seemed that, whatever the geo we are talking about, it's almost the same.
So that's the reason why you see some improvement on the recurrent on the recurring revenue. Moving to the margin expansion. Yes, but you make the assumption. I will not continue to invest, and I won't because I think it's the right time to do it. If you, obviously, if you have the capability to do it.
And that's the reason why, I think, I committed to you to have a stable EPS. It's also our interests, and I think it's also your interest for us to if we have the ability to do it to start to hire people and especially on the sales side to prepare 2021. That's the reason why maybe you can see me a little bit conservative In fact, I'm not because I think I still wants to invest.
Okay, that's clear. I
think the minus 15% to 20% depending the countries. And this is also a good demonstration of the solid growth we had on the renewal as well. Related to the churn, as I told you, I was expecting a plus one point. For SOLIDWORKS. In fact, 2 points, sorry, for SOLIDWORKS, one point in total.
And I was expecting to move from 8% to 9% to 10% to 11% sure. So this is what I have in the guidance. But right now I'm still on the historical level. And related to the earnout for Centric, So this earnout is due next year, because we have to finalize the transactions in each one next year. So let's wait the end of the year to understand where they will land.
It's true that if it's based on the H1 we will not have to pay too much. But I do expect them to recover a little bit the situation in H2.
The cloud, we continue with the approach, Michael, that we already explained, which is, as you may have seen, with the 2021x that was just released a few days ago, to create add value value added with cloud connected to the client solution. We have a new packaging offer for SOLIDWORKS Cloud, a new packaging offer for SOLIDWORKS Cloud Mobile We have new packaging offers on the 2021 X, the same thing for what we call Power Buy. So we do expect a growing effect of cloud as supplemental to the solutions we have. Which I think is pleasing clients. And now, but at the same time, There are new type of customers we are reaching now.
The Bouygues announcement is a quite interesting one because it's all cloud. As well as many of the other on startup midsized companies So we are leveraging the 2 aspects, cloud as supplemental and cloud as native in sectors where the simplicity of accessing and deploying is such that it works. And I will not remind everyone, we are truly with a native cloud architecture unlike all the current players, all but one
of the current players on the bad one is a niche
solution. So I think it's a very, very credible architecture. Okay, thank you. Sorry, Pascal is the 15% to 20% what you
were saying was solid work decline or Coteers decline?
So it works.
For participating to this call. We, we really appreciate your question, and we take them to continue to even improve the way we manage our business. And we'll continue to do so. It's a tough time for the economy, but I think we have also a lot of flavors to contribute to help our customers go through it. And that's what we want to do, customer focus.
Thank you very much on maybe you will be connected to this afternoon call. Have a good day on a good summer if we don't talk more later on.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.
Next question, please.
Thank you. Your next question comes from the line of Deepika Agwal. Please go ahead.
Hi, everyone. Thanks for taking my questions. Since from my end, the first thing, please give me a comment on the sheet would probably that you're currently expecting to see over the near term, especially in the context of the rebound of the supply patient spend in your core market.
I'm sorry. We cannot hear you.
Am I audible now? Yes. So coming back to my first question. Please can you comment on the shape of recovery that you're currently expecting to see over the near term? Especially in the context of the rebound of digitalized patients spend in your core markets?
And what are the kind of projects that you're seeing there? And what this would be for 2021. Then the second question would be following up more on mediator. Can you elaborate more on the scope for growth acceleration going forward and whether the Wartner deal will capitalize the pipeline driving further conversion of the pipeline?
I think this is all related to 2021.
So to answer for 2021, which I believe, wait the head, the at least the end of the year because we will have funding more visibility and when we provide the guidance. Nevertheless, coming back to the first part of your question related to the rebound, I don't know if it is a rebound or a base effect. You remember last year, Q3 was probably not the best quarter we had. That's point number 1. So it was not the case.
The first half has been good last year, especially for the new license. So I still that's the reason why, you know, to be perceived as a significant rebound, but a part of it is coming from the base And the second thing is really what I told you is the maturity of the pipe is a little bit better. And the conversion rate, which is a way to check you take the pipe you have and at the end of the quarter, you look at how much you have been able to convert into revenue And I did this exercise in Q2 compared to last year. And in fact, it's better despite the fact that we are not, you know, we are decreasing in term of new license. Nevertheless, how the ability to convert the pipe has been better.
Slightly better. That's the explanation of what you are calling a rebound. I don't know if there is a rebound for the economy's take points but at least, that's the way I'm explaining. Nevertheless, I could echo something, which is probably important. Why Americas performed relatively correctly, I should say?
In Q2. It's because they have anticipated the lockdown. And at the early days of the quarter, we saw some transactions being closed And usually, you know, we have to wait the end of the quarter to see them because people, they were expecting the lockdowns to happen and they decided to transact before. In Europe, we have been in a situation whereby we had almost no real decisions in Q2, because people that were taking their time to think about how they will plan the rest of the year and we see the situation improving. We Bernard was mentioning is doing a lot of a lot of calls with many customers and now they start to have a plan.
They have been very selective in what they want to keep term of investment, where do they want to disinvest, but they have a plan, which was not the case at the early Q2. And Asia, it's almost the opposite since Q2 and especially China, we it's obvious that they want to accelerate and to do the catch up. That is the reason why we see some traction in China. That's the early indicators that keep I can give to you to make your mind about what you call the rebound.
Basically like the question more on the FX or can you give some color what can drive further growth at utilization in MedData and how like will Moderna be capitalized in the pipeline for VEG data going forward?
So I told you that I'm pretty confident to deliver the 13% growth for the full year. And H2, we have a good visibility. In fact, we have a 95% coverage for H2 already. So it give you a sense of how much we should close. For 2021, please accept that I need to keep some good information with me.
We will take one
Thank you. Your last question comes from the line of Michael Briest UBS. Please go ahead.
Great. Thank you. Good morning.
Just a couple for
me as well. Just commenting on SOLIDWORKS. I mean, it's a very robust performance. I think you said on the Q1 call that the licenses there were down 7%. They're obviously down a bit today, but could you maybe say by how much and your comments Pascal about sort of churn, one would have assumed SME Centric customers might be more vulnerable to that.
What are you expecting for solid works in the second half of the year? And then just on Centric PLM, I think there's an earn out due on that quite soon. Have you got any more clarity on how much that might be? And then finally, Bernard, obviously, everybody's been working from home for the last 3, 4 months as talk about changes of work patterns and cloud has been a big beneficiary of that. Are you seeing anything or preparing anything in terms of the portfolio shifting more quickly to the cloud?
Is that something you anticipate in the next year or 2?
Thank you. Okay, Michael. Thank you for your questions. So I will try to answer rapidly. Related to the performance on the new license, the decrease for SOLIDWORKS was twice less than CATIA.
Is between minus 15% to 20% depending the countries. And this is also a good demonstration of the solid growth we had on the renewal as well. Related to the churn, as I told you, I was expecting a plus one point for SOLIDWORKS. In fact, 2 points, sorry for SOLIDWORKS, one point in total. And I was expecting to move from 8% to 9% to 10% to 11% sure.
So this is what I have in the guidance, but right now I'm still on the historical level. And related to the earnout for Centric. So this earnout is due next year. Because we have to finalize the transactions in H1 next year. So let's wait the end of the year to understand where they will land.
It's true that if it's based on the H1, we will not have to pay too much But I do expect them to recover a little bit the situation in H2.
The cloud, we continue with the approach, Michael, that we already explained which is, as you may have seen, with the 2021x that was just released a few days ago, to create add value value added with cloud connected to the client solution. We have a new packaging offer for SOLIDWORKS cloud, a new packaging offer for SOLIDWORKS cloud mobile. We have new packaging offers on the 2021 X, the same thing for what we call Power Buy. So we do expect a growing effect of cloud as supplemental to the solutions we have. Which I think is pleasing clients.
And now, but at the same time, There are new type of customers we are reaching now. The big announcement is a quite interesting one because it's all cloud, non cloud. As well as many of the other on startup or midsize companies So we are leveraging the 2 aspects: cloud as supplemental and cloud as native in sectors where the simplicity of accessing and deploying is such that it works. And I will not remind everyone, we are truly with a native cloud architecture unlike all the current players, all but one
of the current player on the bat 1 is a
niche solution. So I think it's a very, very credible architecture. Okay, thank you. Sorry, Pascal, is the 15%
to 20% what you were saying was solid work decline or continuous decline?
Okay.
Thank you. With that, thank you very much for participating to this call. We really appreciate your question and take them to continue to even improve the way we manage our business and we continue to do so. It's it's a tough time for the economy, but I think we have also, lot of flavors to, contribute to help our customers go through it. On that what we want to do, customer focus.
Thank you very much on maybe you will be connected to this afternoon call. Have a good day on a good summer if we don't talk more later on.
Thank you. That does conclude our conference for today. Thanks for participating. You may all disconnect.