Nemetschek SE (NEMTF) Q1 2025 Earnings Call Highlights: Strong Revenue Growth Amidst Transition ...

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Thu, May 1, 2025, 1:07 AM 4 min read

Revenue Growth: Reported revenue increased by 26.3% in Q1 2025.
EBITDA Margin: Reported EBITDA margin was 28.5%; adjusted for special effects, it was 31.4%.
Annual Recurring Revenue (ARR): Increased by 39.6% reported and 30.8% organically.
Subscription and SaaS Revenue Growth: Grew by 83.6% reported and 68.2% organically.
Design Segment Revenue: Increased by 11.6% reported and 11.4% FX adjusted.
Build Segment Revenue: Grew by 66.4% including GoCanvas contribution; 41% organically.
Manage Segment Revenue: Increased by 2.6% in Q1 2025.
Media Segment Revenue: Flat at EUR 29.4 million due to insolvency impact.
Earnings Per Share: Increased by 5.5% in Q1 2025.
Free Cash Flow: Reached nearly EUR 139 million, up 69% year-over-year.
Net Debt to EBITDA Ratio: Below 1 time, indicating strong cash flow generation.

Warning! GuruFocus has detected 7 Warning Signs with NEMTF.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Nemetschek SE (NEMTF) reported high double-digit revenue growth in Q1 2025, driven by strong subscription and SaaS revenue increases.
The company's transition to a subscription and SaaS model is proceeding as planned, with significant momentum in the design segment.
The integration of GoCanvas, the largest acquisition in Nemetschek SE (NEMTF)'s history, is progressing well, contributing positively to revenue growth.
Nemetschek SE (NEMTF) achieved a strong EBITDA margin of 31.4% in Q1 2025, adjusted for extraordinary effects, exceeding full-year target levels.
The company reported a substantial increase in free cash flow, reaching nearly EUR 139 million, supported by strong growth in recurring revenue.

Negative Points

Nemetschek SE (NEMTF) faced an extraordinary non-operating effect due to the insolvency of a payment and service provider, impacting the design and media segments.
The media segment's revenue was flat due to the insolvency issue, with expected continued impact in Q2 2025.
The transition to subscription and SaaS models has short-term accounting burdens, affecting profitability in the design segment.
The EMEA business remains impacted by ongoing softness in the German construction market.
Despite strong revenue growth, the increase in EBITDA was below revenue growth, reflecting the impact of the extraordinary non-operating effect.

Q & A Highlights

Q: Can you comment on customer behavior in April and expectations for Q2, considering the insolvency impact? A: Yves Padrines, CEO: We haven't observed significant changes in customer behavior compared to previous quarters. The construction software market remains strong, particularly in Asia Pacific and the Americas, despite ongoing macroeconomic uncertainties. The insolvency impact will be smaller in Q2 and limited to the media segment. We maintain our full-year guidance.

Q: What are your thoughts on margins and cost development for the year? A: Louise Oefverstroem, CFO: The Q1 adjusted margin of 31.4% aligns with our full-year expectations. The subscription transition in the design segment will affect margins throughout the year. We anticipate stronger revenue growth in the second half, balancing costs and revenues.

Q: Are you considering curtailing investment plans due to market uncertainty? A: Louise Oefverstroem, CFO: We remain cautious but continue to invest in growth and efficiency. Our cost structure is lean, and we are harmonizing functions across the group to support growth. We aim to balance extraordinary effects with cost management.

Q: Why is the insolvency impact expected to continue in Q2 for Maxon? A: Louise Oefverstroem, CFO: Maxon relies heavily on web store sales, which were disrupted by the insolvency. It took time to reroute sales to a new system, affecting Q2. We expect to catch up in Q3 and Q4.

Q: Can you provide details on GoCanvas's performance and integration? A: Yves Padrines, CEO: GoCanvas integration is progressing well, with strong cultural fit and operational synergies. Cross-selling with Bluebeam is successful, and GoCanvas achieved over 80% growth in Q1. We are pleased with its performance and potential.

Q: How are you addressing the shift to subscription and its impact on margins? A: Louise Oefverstroem, CFO: The transition to subscription is phased across brands, impacting margins through 2026. We expect margins to normalize as the transition progresses, supported by strong growth in the design segment.

Q: What is the impact of the service provider insolvency on revenue and costs? A: Louise Oefverstroem, CFO: The insolvency affected media segment revenue due to web store reliance, while design segment revenue was rerouted through other channels. Both segments experienced profitability impacts and bad debt reserves.

Q: Can you discuss the potential of multi-year deals in the subscription model? A: Yves Padrines, CEO: Multi-year deals are limited and mainly used for transitioning existing customers. They include indexed price increases. The focus remains on 12-month contracts, with some exceptions for government sectors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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