Good day and thank you for standing by. Welcome to Dassault Systèmes 2021 Q1 (sic) [Q2] Earnings Investors Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded Tuesday 27th, July 2021. [Operator instructions] I would now like to hand the conference over to the speaker today. Francois Bordonado, Investor Relations. Please go ahead.

Thank you. Nadia. Thank you for joining us on our second quarter 2021 earnings conference call with Bernard Charles, Vice Chairman and CEO; and Pascal Daloz, Chief Operating Officer and CFO. As you know, Dassault Systèmes results are prepared in accordance with IFRS. And most of the financial figures discussed on this conference call are on a non-IFRS basis with revenue growth rates in constant currencies unless otherwise noted. Some of our comments on this call contain Forward-Looking Statements that could differ materially from actual results. Please refer to today’s press release and the risk factors section of our 2020 Universal Registration Documents. All earnings materials are available on our website and these prepared remarks will be available shortly after this call. I would like now to introduce Bernard Charles.

Good morning and good afternoon to everyone. Thank you for joining us today. We delivered a strong second quarter driven by robust demand across sectors and geographies. Sector revenue increased 15% at the high end of our guidance. License revenue grew 38%, recurring software revenue grows 10% and represented 79% of total software sales. Earnings per share rose 35% percent including currency impact, 45% in constant currencies thanks to strong revenue growth on higher profitability. 3D EXPERIENCE drove important wins across large accounts resulting in revenue growth of 26% licenses were also up sharply indeed. This reflect our compelling value proposition, substantiates new era imperatives for clients. We raised our full-year guidance, capturing the earnings upside from the second quarter. Pascal will discuss the financials in more detail. Now I would like to share some observations on the economy on some updates on our business. As we emerge in a post-pandemic world, companies and individuals are awakening to a new era. They are the new vision of the world, I think. They are redefining the parameters of future leadership first. They are looking to virtualization, going beyond digitalization of industries and the economy as mission-critical. Second, there is a significant orientation towards sustainability in innovation for Dassault Systèmes and our clients across all sectors, all industries of the economy we serve. Third, inclusiveness is an essential feature of new technologies as well as for open innovation. Dassault Systèmes virtual twin experience powered by our 3DEXPERIENCE platform is truly a game changer for addressing these new era imperatives. By bringing together unparalleled much seen on AI data technology, we empower our clients with real-world dividends across sectors and experiences to imagine new solutions and foster scientific breakthroughs across all sectors of the industry. Inclusiveness is also paramount. The cloud is a powerful environment that democratizes accessibility as well as mobility, enabling everyone to leverage the experience infrastructure to deliver impactful innovation. In Life Science, virtualization will transform the sector, enabling a patient-centric approach, new efficiencies and higher quality outcomes. As the global leader, we bring significant assets to foster these endeavors. During the quarter, we continued to deliver important game-changing innovation. With the launch of MEDIDATA’s decentralized clinical trials program, which leverages MEDIDATA’s patient cloud, We became the first company in the world to unified direct patient data capture technology, direct-to-patient services on study oversight on monitoring on a single platform as maybe is a core platform for Dassault Systèmes. These technologies allow rapid deployment reduce cost on democratized access together with our clients, we are pioneering new global standard for the launch of broadly decentralized global and mega studies. This has passed implication, of course, for patients and for the society. A great example is Novavax, a biotech company. Well-known, I think, thanks to its great work on the COVID-19 vaccine. They will leverage our technology, including MEDIDATA’s patient cloud on decentralized clinical trial program to conduct these global studies involving more than 45,000 participants initiated in a less than eight weeks. This is truly remarkable, and we look forward to hearing about the results of Novavax’s trains. Continuing on the topic of clinical trial, MEDIDATA’s capabilities to - of integrating data from wearable sensors, including clinical-grade metrics to help customers successfully decentralize and virtualize clinical price is essential. LabCorp, a multibillion-dollar provider of clinical laboratory and drug development services with over 70,000 employees has chosen to partner with Dassault Systèmes. LabCorp will utilize our MEDIDATA offering via the cloud to advance trial virtualization through sensor integration and digital biomarker discovery. By providing our clients under patient with a seamless experience, we can continue to collect important patient intelligence, even after trails, gaining new insights into the long-term effects of disease and treatments. We are entering an area of accelerated innovation in life science. We are truly excited about our potential for changing the game well in the future and intend that the founders of MEDIDATA on us decided to architect for the long-term. Turning to manufacturing industries. I mentioned early that our clients are rethinking the parameters of future leadership. This a significant implication for manufacturing industries where business dynamics are changing rapidly. The amount of data used in manufacturing is growing at an accelerated pace to be competitive, to be compliant and to be sustainable, requires managing tremendous complexity. Dassault Systèmes from that standpoint is also changing the game. With AI-driven intelligence through the virtual twin experience on our 3DEXPERIENCE platform, we are empowering our customers to master the complexities of manufacturing, as well as supply chain. A great example this quarter is BotichiAro Group is one of the world’s largest beauty franchises on - well-known for its commitment to natural ingredients and sustainable practices. The company is aiming for significant reductions in manufacturing time, electricity consumption and in processing and raw material cost. [Indiscernible] selected our 3DEXPERIENCE platform to transform the manufacturing of more than 300 products with connected real-time data and to help achieve its objectives. Now I want to turn our attention to the cloud. The cloud is a powerful enabler of inclusion in innovation. It removes the silos that burden companies with disparate legacy system expensive system, it improves execution accelerates innovation and reduces cost. Importantly, we are seeing an inflection point in terms of large customers realizing the value of moving to the cloud, especially secured cloud, particularly in the context of maintaining their leadership position in the future. Alstom is a great example of that. Alstom, a multibillion euro leader in mobility including high-speed trains on metros, will deploy our 3DEXPERIENCE platform on the cloud to 15,000 team members. Our partnership will enable Alstom to respond to what it describes as an unpresented need for sustainable mobility and to achieve a number of transformational goals to decommission legacy system, standardized its engineering and manufacturing processes and to accelerate the integration of its recent acquisition of Bombardier Transportation. In High Tech, to be a leader, to win market share, requires constant innovation. Virtualization is critical on our multiphysics simulation is a game-changer for our clients. Here is an example, Honor, a spin-off of Huawei, is a global provider of smart devices. The company will expand SIMULIA adoption to improve research and development with vertical simulation and accelerate go-to-market strategies by incorporating its value chain in the process. Turning now to Infrastructure & Cities, we are a game-changer there too, because it is a market which is evolving and transforming. We talked to you last quarter about revolutionizing the construction industry with virtualization and platformization. Today, we will focus on cities and territories where resiliency and the ability to optimize logistics is vital for the success of mobility infrastructure that benefits our citizens. Here is an example with KiwiRail Limited, a New Zealand-based rail operator has adopted DELMIA Quintiq to enable a multiyear transformational project that will deliver a new level of health, safety and sustainability. It will allow also improve its business agility as well as profitability. In summary, you will notice that each of the client stories I have shared with you today have clearly demonstrated new area priorities for clients. The power of virtualization, in many cases, elevated with our 3DEXPERIENCE platform, inclusiveness and sustainability. In fact, I now want to focus on sustainability as it is an important topic. In this new era, sustainability is becoming an essential feature of leadership. And it is a top priority for all our clients. At Dassault Systèmes, sustainability has been at the core of our mission to harmonize product nature on life. We began preparing for today’s new era imperative decades ago. We are in a truly unique position to be able to empower our clients to deliver sustainable innovation and contribute to a more sustainable economy and society. In doing so, we are expanding our hundred, our positive impact indeed. While we expand our entree, we continue to progress against our own objective to reduce our footprint. Our science-based targets for greenhouse gas emission reduction were recently approved by the science-based targets initiative. After achieving these targets, we will neutralize any redial emissions to reach net zero by 2040 with innovation carbon with innovated very innovative carbon removal project that leverage our 3DEXPERIENCE platform. Together, we have what it takes to make a difference. And now I will turn the call over to Pascal.

Thank you, Bernard. Good morning, good afternoon to all of you, and thank you for joining us today. So let’s zoom on the financial performance. I think we delivered a strong second quarter results, thanks to the broad-based growth across regions as well as product lines. Total revenue increased 14% year-over-year to EUR1.16 billion at the top of our 12% to 14% range. Software revenue and its component also came in at the high end of our objectives, with our organic software revenue growth of 15% to deliver EUR1.1 billion. License and other revenue rose 38% to EUR223 million during the quarter. And looking at the first half, we are now back to 2019 level. I think this is something very important. Subscription and support revenue increased 10% year-over-year driven by subscription growth of 18%. To be noticed that if you exclude MEDIDATA, the subscription growth is around 12%. So it is not only due to the good momentum of MEDIDATA, which leads to a recurrent revenue, representing 79% of the software revenue. Services revenue was up 5% year-over-year and we are pleased because we were looking to have this activity back to growth and showed a significant sequential improvement. We achieved services gross margin in the double digits, also substantially better versus last year. And it is really coming from all the actions we took a year ago to protect the margin despite the lack of activity, and now you have the benefit of this. Last but not least, the 3DEXPERIENCE and the cloud both performed very well, growing 26% year-over-year, and I will give more detail afterwards. Now zooming on the profitability. The lower-than-planned expenses combined with the revenue at the high end of the guidance led to a significant outperformance in operating margin and earnings per share. Our operating margin came in at the 32.2% versus the midpoint of our guidance of 29.7%, an overall performance of 250 basis points. This was driven in part by the continuation of the expense and the headcount tailwinds we discussed with you last quarter. You remember, our headcount was stable year-over-year as hiring was offset by attrition that was higher than planned but in line with 2019’s level. Within research and development, we experienced mid-single-digit net gains in terms of new teams member. And we have adjusted our hiring capacity and expand and expect to more than offset the attrition in the coming quarters. EPS grew 35% or 45% in constant currency to EUR1.09 per split or $0.22 or split compared to our guidance of 18% to 23%. Turning now to the software revenue by regions. The Americas grew 19% this quarter, benefiting from a strong performance in Life Sciences and health care. Bernard gave some good real evidence of this. High Tech also, and you remember, Hi-Tech was, I would need say, not so strong Q1. But Q2, we are delivering 26% growth in Transportation & Mobility. The Americas now represents 39% of the non-IFRS software revenue. Europe increased 13%, led by Southern Europe and total 36% of the software revenue. Asia also rose 13%. Within the region, we saw continued strength from China, which grew 24% and the continuous softness in Japan in achieving a mid-single-digit growth. Zooming now on our product lines, second quarter performance, we can say that Industrial Innovation software revenue rose 8% to EUR571 million. CATIA and solutions in product design and modeling experiences delivered a sales growth of 9%, punctuated by CATIA cyber systems and this is a good performance because this implies license growth exceeding 20% to be back to this level. NETVIBES in the data intelligence and ENOVIA in collaboration also benefited from positive business trends during the period. In Life Sciences, software revenue totaled EUR218 million, an increase of 22%; and we continue to see a strong momentum across MEDIDATA product portfolio, including MEDIDATA Rave, MEDIDATA Patient Cloud and MEDIDATA Acorn AI as well as in all the attach rate. As you remember, those are the core solutions, but you have a lot of module optional and the attach rate has been extremely good this quarter. MEDIDATA is also establishing itself as a leader in decentralized clinical trial. Bernard spoke about it, but this is very important. And we are the only one having the ability to have all the applications, all the solutions to connect with the patients. But at the same time to connect with all the back-end system you need to have in order to treat this massive set of data to do the analysis. To be noticed also that this quarter, we displaced several times, Viva, which is something I’m sure you have some interest, including on their core product, the CTMS on which is against a good sign. In the mainstream innovation, software revenue rose 27% to EUR262 million. And within the mainstream, SOLIDWORKS software revenue rose 25% with 3DEXPERIENCE WORKS family, our cloud-based solutions. And the sales of this family also up sharply during the period. Last point on the mainstream, the Centric PLM delivered an excellent performance, posting near triple-digit growth and continuing to take market share in the consumer-centric industry. Adding some color on the sector and industry, what could we say? First, the transportation and mobility still represented the first industry for us. The sales were a significant contributor to return across the regions, posting 14% software revenue growth. Infrastructure and City rose double digits, also thanks in part to the sales in China. And High Tech and Home & Lifestyle also demonstrated a very extremely good strength. Lastly, Aerospace & Defense grew mid-single digits on the back of a strong performance last year. Now let’s review our key growth strategy, 3DEXPERIENCE and the cloud and how we are progressing relatively to the objective we laid out during the 2020 Capital Markets Day. First, our 3DEXPERIENCE strategy incorporates two growth axis, if you remember. The first one, we call it Value Up and we are increasing the value we bring to our existing customer. The second one, we call it Value Wide, and we are extending our value to new customers. As I mentioned, 3DEXPERIENCE sales grew 26% during the quarter and now represent 25% of the total software revenue, an increase of 200 basis points compared to last year. Importantly, 3DEXPERIENCE drove a number of significant large client wins during the period, reflected in the plus 25% growth of the license since the beginning of the year. Now I want to highlight particularly meaningful mainstream market opportunities that encompass both 3DEXPERIENCE and cloud, another key growth driver for the future. 3DEXPERIENCE WORKS family, connect people ID data solution in one single collaborative environment. And when you think about it, our over one million SOLIDWORKS users as well as new customers can now benefit from the large set of solutions we have developed on top of 3DEXPERIENCE platform and everything is on the cloud. We are seeing a good momentum in 3DEXPERIENCE WORKS with some example with over 200 wins only for China alone for this quarter. Also, with mainstream Centric PLM clients include over 2,000 of the world’s most in colleague brands, and we believe we can continue to take market share in home and lifestyle, including fashion, as well as expanding into new industries such as food and beverage, cosmetics, consumer electronics. We also plan to expand geographically in regions like China, where I think we can reinforce our presence as well. So we are very pleased with - against what has been accomplished in the acquisition, and I want to take the opportunity to thank [indiscernible] growth teams. They did an outstanding work. It was a difficult time last year, but having able to relaunch the machine has been extremely powerful and now you start to see the benefits in the - not only in the result, but also in the strategy. Turning or zooming on the cloud. The cloud adoption is another cornerstone of our growth strategy and an opportunity to expand our depth and breadth of clients. Our cloud contribution represented 19% of the total software revenue, a 2-point increase compared to last year. You may recall that last year, based on our enhanced market sectors, we set the goal to reach EUR2 billion in cloud software revenue by 2025. This would represent an estimated of one-third of our total revenues. In terms of our cloud strategy, we value the long-term strategic relationship we have with our clients. And as such, our cloud strategy is set to meet our clients wherever they are in the context of the industry. This is very important because not one things fits all. And this is the reason why we are offering different paths for them. The first one is a native cloud path, if you want, for the new customers, all the newcomers like the startups or people starting from scratch. An extent one, which is a mix between on-premise solutions and on the cloud solution when you need to extend to new usages such as simulations, such as data analytics. And the Power’By which is a way to connect the large CATIA V5 and SOLIDWORKS installed base with 3DEXPERIENCE platform on the cloud for collaboration and data technologies. To be noticed that with the release of 2021x, the one we have right now, we have no more roles on the cloud that we have on-premise, and we expect this trend to continue because this is the way we are leading the research and development for Power Solutions. Now turning back to our financial performance and balance sheet items. Year-to-date cash flow from operations rose 21% compared to last year and reached EUR1.030 billion. Our deferred revenue now called the contract liability rose 17% in constant currency, which is relatively consistent with the performance for this quarter. And finally, our net financial debt position at the end of June decreased by EUR768.3 million and now to - is reaching a net debt of EUR1.3 billion, putting us back on track to reach our deleveraging goal, sorry, early next year, almost nine-months ahead of the schedule. Moving now to the M&A sections. We are now seeing a few things. In July, we acquired a French start-up called [indiscernible], an innovative SaaS companies, leveraging BPM 2.0 standards, which is a neutral graphical language to provide business processes solutions. So let me explain what is behind. You know that the 3DEXPERIENCE platform is not only the platform to power all the roles and the industry solution we have. But the 3DEXPERIENCE platform can be used only by themselves, especially in the context of the business. What we want to do, we want to enable our customers to virtualize their enterprises and transform. If you want a document-based process into experiences, that is what is behind the move. And interop technology will complement what we do and empowering our clients with effortless migration, if you want, from document to experiences. And together, Dassault Systèmes and Interop will embrace the 3DEXPERIENCE platform and 3DSecale and extends inclusive innovations via the cloud. Turning to Centric PLM. We plan to complete our acquisition of Centric early this fall without a significant incremental cash payment. You may remember that we initiate a 63% equity stake in Centric in July 2018. And we are happy to finalize our partnership and continue to execute again centric substantial opportunity in the consumer industry, as I was describing to you because, again, this is the entire consumer industry we are targeting. It is not only the patient. Turning now to our 2021 financial objective. We expect the current business environment and profitability trends to persist in the second half. As a result, we are raising our fiscal year 2021 revenue growth objective range to EUR4.745 billion to EUR4.790 billion, incorporating second quarter outperformance and greater visibility, adding approximately EUR10 million in software revenue coming from MEDIDATA. Our new objective represent an increase of 10% to 11% revenue growth versus 9% to 10% previously. We are also raising our non-IFRS diluted EPS objective range to $0.99 to $0.91 on a split-adjusted basis of 2023 to 2025 from 17% to 18% in constant currencies. This captures the earnings upside from the second quarter, the increased revenue visibility we mentioned and the lower-than-expected expenses because we also expect our permitting margin in a range of 32.7% to 33.1% versus the 31.6%, 31.7% previously. And I want to remind you all because of the pandemic, we have implemented the cost-saving plan in the second quarter last year. and we expect the expense and the headcount tailwind we have experienced to dissipate in the coming quarter as we resume travel increased sales and marketing spending and accelerate to the net gains in hiring. So you will find all the details and more about the full-year objective as well as our third quarter guidance in our earnings press release and presentations. Now it is time to conclude. And we are encouraged by the demand we have seen across our product lines and regions and also industry, I should say. We believe many of the trends, highlights by Bernard, whatever it is virtualization, sustainability, inclusiveness, our secular drivers and we are just highlighting those trends through some real cases. But the most important, with our 3DEXPERIENCE platform, we began preparing for these trends over a decade ago. And as such, we are uniquely well positioned to help our clients to address this new area, sorry, imperative well into the future. Finally, we succeed when our clients succeed and we want to thank all of our clients for the ongoing partnership as well as our employees for their hard work and their dedication to our success. Lastly, we expect to resume in-person meetings with the investment community this fall, and I hope to see you when I would be back on the road. So I think Bernard and I now would like to take an answer to your questions.

[Operator Instructions] And your first question comes from the line of James Goodman from Barclays.

Firstly, just on China and the encouraging performance there. You called out 24% growth. Just wondered if you could go into a bit more detail there on the strength, any notable sort of industry or product strength because actually would have expected the comp in China to be toughening a little bit ahead of the rest of the business given the sort of earlier recovery from COVID. So that would be helpful. And then just secondly, on the margin, you called out the 1.4 percentage point outperformance on the OpEx. And I appreciate your comments around attrition and the continuation of what we discussed at Q1. But purely, just looking at the outperformance in the quarter versus the objectives, can you just clarify that, please? What was the key additional tailwind? Was that the attrition sort of remaining higher than you expected or was it the gross hiring not coming back or just lower travel wasn’t clear on literally this quarter’s performance?

Thank you, James. Maybe Pascal, you put some color on the first topic of China and you reline whatever you want on that topic on the margin. So China, I recently had many conversations with top executive from China and different sectors. They are very, very focused now on orienting the innovation towards sustainability. It is part of the program. It was announced a few weeks ago. They have announced the date for what they call the CO2 peak and then the zero to the point. And I think it is a very strong indication across all sectors, mobility, industry at large but also, of course, energy with new on infrastructure as well as construction. We have a good footprint on an excellent team in China. We continue to expand our partner network. And basically, I think when it comes to manufacturing, we are well positioned and going well as well as in High Tech that was mentioned today, by the way, [indiscernible] on many more customers. And we were surprised that Pascal mentioned it. We are surprised by the dynamic of adoption of cloud. We are highly respected for our client - local cloud, we can operate in and provide the service in China for Chinese companies. So overall, a good dynamic Pascal, you might want to comment specifically some industries?

Yes. So James, you are right. I mean, if we improved by 1.4 the margins coming from the OpEx effects. But the easiest way to modelize it and to understand it is half of the gain is coming from the marketing spend and the travel restrictions because we are traveling nationally, but we do not have yet back internationally and this is representing almost half of the gain. And the second half is coming from the headcount. We did a great job in terms of hiring because compared to Q1, we almost doubled the number of people we hired this quarter to exceed 800 people. However, the attrition was relatively high this quarter, and it is normal again. It is consistent with what we have seen in ‘19 because Q2, it is a time where usually we are paying the bonus to the people and the people willing to leave. Usually, they are waiting this time to do it. Nevertheless, if we project for the second half of the year, we do expect to have 0.7% improvement in terms of operating margin for H2. Why so, because related to the marketing and travel, we expect to do better or to do more at least. And the assumption we took is almost between 50% to 60% of what usually we are spending in the normal year. That is what we expect for just half. And in terms of headcount, obviously, we have increased the capacity in terms of hiring, and we do expect to hire between 900 to maybe 1,000 people and contain at the same time, the attrition to other well, which is close to 500. So if you combine all those things, you will land to the 0.7 improvement of operating margin we are expecting for H2.

Got it. Appreciate it.

Maybe to strengthen one of Pascal’s point. In marketing, you have multiple elements. Of course, the events our core cost line when we do big events with large customers. But we continue to invest in marketing online, of course, on creating lead generation needless to say, of course, we continue to invest there. And the second thing that Pascal mentioned last time is we have continued to increase R&D last year and this year. We think it is an important base to prepare 2022

And your next question comes from the line of Jay Vleeschhouwer from Griffin Securities.

Pascal, let me start with you on headcount and the hiring that you spoke of in detail on the Q1 call and now again. What is interesting to note is that as of the end of the quarter, you had a record number of job openings and our data goes back about a decade - and so that would seem to corroborate what you were just saying. But what is interesting to note is that within that number, you have a record number of sales openings which is over one-third of your total open positions. Could you talk about - assuming you can bring the people on how you are thinking about deploying that additional capacity in terms of, let’s say, what you used to call it your BT channel or to perhaps inside sales or just help us understand the deployment strategy vis-a-vis your sales capacity? And then my usual list of follow-up questions.

So Jay, your analysis is right. I mean you are right. The sales opening position is almost 1/3 of the opening position we have. And why so there are a few reasons. First of all, we still have some sub-segment of industry we are not covering properly. For example, if I look at the space industry, we can do much better compared to what we do today, and we are seeing a lot of traction coming from there, not only from the newcomers, you know the guy willing to conquer the space the new travel agency, if you want. But the one willing to develop a new category of launcher for the satellite and other things. And so among the third, I would say probably 20% of this number is really to fill some gaps we have in terms of sub-segment coverage. Then after we lost some of the salespeople with the attrition, especially in the U.S. So we also have to reenergize or to give more capacity, again, especially in North America, where I think we could do much better in terms of sales capacity. And last but not least, your point is also excellent, Jay. We are investing in online sales. This is what Bernard presented last time. We are calling it. It is a general approach. We call it distributed direct distributed model, whereby not only we are contacting all the large installed base we have in order to detect the new opportunity. But also we have the capacity to do some online transactions. And this revenue stream is still marginal, I would say, right now, but we see more and more traction coming from there. And it is not only for the midsized market or the small startups, if you want. We are also using this approach for the highly specialized products where sometimes you need to be an expert in order to get in touch with the right person. And the general salespeople maybe can miss this kind of opportunities. So it is a mix in order to complement the coverage we have. And I think we are preparing relatively, as Bernard said, well, 2022 because all the investment we are doing from a sales standpoint is really for 2022.

Okay. With regard to SOLIDWORKS, a couple of things. Just looking backwards first at second quarter, it looks, by my calculation as though your new license volume for SOLIDWORKS CAD software was just about back to where it was second quarter of 2019. Obviously, you had a large decline in Q2 of last year, but looks like your new business this year, Q2 was just over 19,000 units, just about back to where you were two years ago. And then looking ahead, more broadly, you noted that SOLIDWORKS has a user base of over one million, which is true. That is how many licenses you have sold. But you do have a very large dormant base, over 400,000 licenses that are no longer on maintenance. And that is larger than anyone else’s active base. And my question there is, what programs do you have in place to perhaps try to reactivate part of that base with 3DX works itself perhaps be some kind of a catalyst to reactivate that dormant part of the solid work space.

Pascal, you want to make a comment on the new license?

Yes. So your calculation is right. It is a little bit over than 19,000 units in terms of volume. However, to be noticed that the mix is much better because right now, we are still selling SOLIDWORKS stand-alone, but the vast majority of the roles are gathering a piece of simulation, a piece of product data management and more and more manufacturing also. So if you look at the average selling price is much better. So that is where the growth is coming from.

Related to the overall SOLIDWORKS instant base. SOLIDWORKS is a very robust, stable desktop-based solution. And clearly, the 3DEXPERIENCE is bringing to the fairly large installed base, a lot, integrated simulation, basic DM or advance PDM and PLA, whatever the customer choice is. And we clearly, to your question, Jay, what do we do to elevate the value we bring to those clients it is very clear. It is the expansion of our portfolio on the use of the platform to establish a collaborative, inclusive, mobile, cloud-based environment, in which the desktop powerful SOLIDWORKS continues to be what they like to use. So we will see as we move in the next 18 to 24 months, an ongoing dynamic in the expansion of the portfolio for mainstream. This is why we call it mainstream, as Pascal said, it is not only counting the licenses. It is about looking at the revenue growth. in total of the mainstream. And basically, this is the program which is put in place, which also requires that we provide the right training content and engagement with our SOLIDWORKS former SOLIDWORKS partners. We call them role partners now with role engagement because we want to expand the scope of the role they can sell. It is very well received. Those programs are very well received. They are there are clients, they are partners who are very successful. Others who are not there yet, and our challenge is to make this much more efficient on a global basis. The notice that we have an incredible dynamic in China for a cloud-based solution is a strong signal for mainstream market.

Okay. Finally, within industrial innovation, there seems to be a very interesting dynamic, which is to say based on the current trajectory, at least in our math, it would appear that ENOVIA new license software revenue could surpass CATIA new license revenue perhaps starting in 2022. So the question is, do you think that is a correct anticipation in terms of ENOVIA’s becoming larger like that in terms of new business? And to the extent that ENOVIA has a much higher services-related component, like PLM always versus CAD, would there be any margin implications for you if, in fact, were to become larger, vis-a-vis, new business than CATIA?

One comment before Pascal put some data metrics on it. We are doing a lot to have ENOVIA ready-to-use roles and processes available and easy to deploy without service. This is a big progress, which is going on. For example, project management is well adopted as a power are now part of both the connection between [indiscernible] and ENOVIA. So of the shelf set of business applications, which basically encompass with the ENOVIA brand are very key for the future. Of course, for large companies, when they need to do highly sophisticated PLM implementation. But more and more, we do what we call parametric PLM which reduces significantly the cost for customization and we will continue that. The example that is a benchmark in our company is from that standpoint, Centric PLM, where they have an amazing configuration engine to adapt centric control to the customer needs in a very efficient way. So that is the context on the direction we are going, which provides traction. Pascal?

Yes. So Jay, if you look at the absolute number, I would say, CATIA incremental revenue is still two times bigger than the ENOVIA one. So the line could cross at some point of time, but definitively not in the next two to three years. And keep in mind that CATIA is growing at 9% in this quarter, total revenue. So the dynamic in terms of new licenses is not over. And especially thanks to CATIA cyber systems, this new generation of CATIA to design embedded system of systems. You have so many electronics in almost all the industry we are touching at least the manufacturing one that it is an avenue for CATIA to continue to expand. And I took some carmakers, for example, and I was looking at how many people we can equip compared to the traditional mechanical cat guide is as much as the installed base we have. So to a certain extent, CATIA can double by only doing and covering all the different needs of this new category of users we have in many, many of our clients. To complement what Bernard said also on the services side for ENOVIA, Keep in mind that in the vast majority of the case, which almost is two-third of the cases, we are engaging with CSI with ENOVIA. And our strategy has always been to leverage the ecosystem for the services piece surrounding. So I think this is also the reason why, from a margin standpoint, we are relatively protected, I would say.

And your next question comes from the line of Johannes Schaller from Deutsche Bank.

Congratulations on the good results. Firstly, maybe on 3DEXPERIENCE, in the context of MEDIDATA, you called out Viva, I mean can you maybe for 3DEXPERIENCE where you clearly see accelerating momentum? Talk a little bit about who you are displacing here, how many of the contracts you are winning are actually displacing competitors and in what areas? And then maybe which competitor, that would be quite helpful. And then just on the margin commentary you made going into the second half. I would assume that the travel costs and marketing costs should then probably go up again a little bit next year, the other half that you saved during COVID comes back. And then obviously, you have the hiring I know it is early days, but as we look into next year, should we then really expect a slower year in terms of margin progress or are there other positive factors that could help you here?

Pascal, I think you commented the winning dynamic with 3DEXPERIENCE last quarter. Maybe you can formulate what you said, clearly, again, Siemens PTC with [indiscernible] So the dynamic is very strong.

So the three competitors we are competing with in the, I would say, in most of the cases with 3DEXPERIENCE platform, we Siemens Teamcenter SAP PLM even if SAP decided to exit from this market, but you still have an installed base and PTC Windchill. So if I look at the winning rate against Siemens, it is still higher than 80%. And if you look at what we did in aerospace, whatever it is in the OEM and also the supply chain, clearly, we have been able to almost replace cements in all the places. In the auto sector, you still have some Siemens presence. However, I think with the newcomers, all of them, they are equipped with 3DEXPERIENCE platform, the Tesla of the world, the Rivian of the world, all those new guys and they have standardized on 3DEXPERIENCE platform and this is accelerating what we do. And so that is for Siemens. ECP, we are against winning all the case against them because they are exiting of this market anyway. And PTC wind chills the last time I checked, we were having a winning rate, which was exceeding 85%. So clearly, the vast majority of the case we are much stronger, much better. And one of the reason is against - none of them, they have a platform. What they have is a PDM systems. And there is a big difference between a platform and the PDM. The platform, all your applications are notably developed on top of. So you have a consistent experience. You have a consistent resources share between all the different roles and applications. And in terms of capacity, - Not only it is a platform to do modeling and simulations, but it is also the same platform to do the analytics and the artificial intelligence. If you take all the competitors I just mentioned, usually, if they have something, but at least they have, if not two, sometimes three different platforms or three different technology in order to make the same thing. So that is the reason why we are - we have such a winning rate. Now coming back to the margin and the question is for next year. And thank you for asking these questions. Because you are right, I mean achieving 33% operating margin in 2021. It is not something I do expect to achieve in 2022 because we will have to invest. We spoke about it, not only on the sales side, on the marketing side. We need to continue to expand what we do from a research and development. So it is probably early to give you a guidance but let’s say, it is probably between 31.5% and 32%.

That is great. That is very helpful. Maybe just a quick follow-up on what you said on automotive. Given we are seeing all these newcomers going for 3DEXPERIENCE, where the traditional players a bit more - maybe a bit more look warmer or it is still hesitant. Do you see the guys like Tesla and others using 3DEXPERIENCE already having an impact on the supply chain on the Tier 1s that these guys are more willing to switch over?

I must say on comment, I must say that even when we have a very good penetration in Tier 1, specifically in Germany, but in many Tier 1, Japan also China. And even if the OEM is still on legacy, we have a lot of very, very influential Tier one which are already on the 3DEXPERIENCE platform. And in fact, they are really promoting the 3DEXPERIENCE platform based on the value they see. So on the Tier 1, overall, the dynamic is very positive. And it started a long time ago. We have many names in Germany in mind and also in France,

And to complement what Bernard is saying, the new EV guys are also driving a new value network. It is not only the traditional suppliers, but also you have new suppliers like the battery makers, for example. And this was also an opportunity for us to expand outside of the traditional Tier one and Tier two suppliers you know. And the significant presence we have. Keep in mind that we are accounting almost 800 new EV or autonomous car programs worldwide. - and more than 80% of them are equipped with 3DEXPERIENCE platform. So to a certain extent, it is a huge driving force to have the supply chain on the battery on the power management systems - on the new materials also because those cars are requesting new materials. We are driving this along the 3DEXPERIENCE platform.

And your next question comes from the line of Jason Celino from KeyBanc Capital Markets.

This is a last question. Please go on Jason.

Maybe for the essence of time, I will just ask one then. When we look at the implied guidance for new license growth for Q4, it looks conservative. Maybe can you give some reasons as to why Q4 new license may further decelerate from Q3?

So I will take this one, Bernard. And maybe you will have an opportunity to ask another question. Because this one is relatively easy, if you look at the new license, Q4 is almost twice the size of Q3. So it is easy to conclude that it cannot be exactly the same percentage because the absolute number is not the same. So that is the reason. And if you remember, the Q4 last year was also much better than the Q3. So that is the two reasons why you could have the feeling that we are conservative or - But trust me, I’m not and I will be glad to deliver my commitment to you guys.

Okay. Great. Well, another quick one then. I’m surprised to hear China is one of the stronger regions adopting 3DEXPERIENCE works. Good to see, but historically, China’s favored these perpetual licenses versus cloud or subscription, I guess, what do you think is mainly driving that so early?

Well, I think things are changing in China. And we think that there are lot of licenses which also around the world, I would say, not to mention specifically China around the world, and we discussed that we officials are not paid. They are basically copied licenses I think the trend to have to have this online is a good trend. They like it, and I think it will change the situation. That is the way I would articulate the future in terms of higher consistency between the use of our products and solutions and the value we get from it. Okay.

Your next question comes from the line of Stefan Slowinski from Exane BNP Pariba.

This will be our very last question.

And most of the questions have been asked. Just a couple of final one, just to clarify on my numbers. MEDIDATA, a great acceleration in growth, 20% in Q1, 25% in Q2. Pascal, I believe you said you still see only 16% growth for MEDIDATA this year, that implies, if I’m correct, just maybe 10% growth in the second half of the year, and potentially a sequential slowdown in absolute revenues Q3 over Q2. So I guess my question is the same as the previous question, which is, doesn’t that look conservative? And why is it that we would see that slowdown in growth in a subscription business model when you would expect maybe those levels of growth to continue. That is the first one. And the second one is associated with that, which is just the question on recurring software revenues, ex MEDIDATA. I believe in Q1, you gave that number and said it was 4% on my calculations that is improved in Q2, maybe to 6% or 7%. Just wondering if you can confirm that and presumably, you see that potentially still progressing to high single digits next year.

Okay. So I will start with MEDIDATA. Yes, I mean if you do the math, you are right. Except you missed something very important because you are remembering the performance of Q1 and Q2 this year, but you should also remember the performance of last year. And last year. And last year, the performance of MEDIDATA was around 13% and we landed at the end to 18%. So there is almost five points difference between the Q1 and the Q4. So you could have said that the base of comparison is not exactly the same. And that is the reason why I do not expect to maintain this 25% growth for H2. That is the only reason, Stefan. Now is the MEDIDATA capable to do slightly better? To a certain extent, but I already add EUR10 million into the guidance. And keep in mind that the bookings - the commercial activity we have right now will have an impact not this year, but next year. So I believe we are still having good commercial activities and the bookings are still growing at 20%. The impact is much more for next year than the second half of the year. That is the reason why I would say between 16% to 17%, but you should not go higher than 17%. That is the point. The recurring revenue, your calculation is right. That is exactly the point. So we have an acceleration, which is coming specifically from the subscriptions. I told you the subscription is growing 18%. And if you exclude MEDIDATA, it is growing at 12%. So this is having several additional points of growth. I do expect this growth this growth to be sustainable at least for H2. For 2022, it is too early to say, because the growth is specifically coming from simulations and as you may know, and also some subscriptions, we have some project-based transactions and I need to compute when the time of the project is supposed to end before to give you the answer.

Great. And just to confirm that MEDIDATA growth 16% to 17% is for the full-year, right, not for H2?

Yes, yes, of course, for the full-year.

Okay. Great thank you for the precision. Thank you very much.

I think with that, it was the last question. Thank you very much for participating to this conference call. And as always, we will be delighted to address any further questions with you. So in case you do not have any more questions, let’s see each other in October hopefully for a great Q3. Have a great day and enjoy your summer vacation if this is the case. Otherwise, all the best to all of you. Thank you very much and bye-bye now.

This concludes today’s conference call. Thank you for participating. You may now disconnect. Thank you.