The Nemetschek Q3 2022 report has shown that the company has maintained its double-digit percentage growth in revenue and earnings, increasing by 19.8% between July and September, while its EBITDA went up by 15.7%
The report also showed that recurring revenue was again the main driver of growth and reached a new record level due to the strong demand for subscription-based and SaaS models in particular.
To present the future growth dynamics and the success more transparently in the ongoing transition of the business to subscription and SaaS models and therefore given the total recurring revenues, the Nemetschek Group is introducing the key figure ARR (Annual Recurring Revenue).
At 29.2%, the ARR growth in Q3 was significantly higher than the overall Group’s revenue growth (19.8%), which strongly indicates the continued high growth potential over the next 12 months.
‘Digitalisation is essential for making construction more efficient, less resource-consuming, and more cost-effective’
Yves Padrines, CEO of the Nemetschek Group, commented: “The industry’s efficiency shortcomings are becoming even more visible in the currently changing construction and real estate environment. Digitalization and the usage of intelligent software solutions across a building’s life cycle are essential requirements for making construction more efficient, less resource-consuming, and more cost-effective.
“This success factor for our customers leads to a continued strong demand for our solutions. On top of that, we continue to expand in the Media segment which is just at the start of a long period of growth and high demand.
“The successful transition to subscriptions and SaaS, which will lead to a strong increase in recurring revenues and make our business even more resilient. The same is true for our strong innovation pipeline.
“For example, this includes the new Bluebeam Cloud offering and our open cloud-based Digital Twin platform. Following the first nine months of the year, we are very confident that we will achieve our guidance for 2022.”
Key performance indicators in Q3 2022
The Group’s revenue maintained its double-digit percentage growth, climbing by 19.8% to €202.8 million. During the first nine months of 2022, the Group’s revenue increased to €598.9 million, equivalent to year-over-year growth of 21.3%.
The ARR increased 29.2% in Q3 to €550.6 million, which was significantly stronger than the total revenue growth. This new indicator is an important measure of the Group’s future potential for revenue and cash flow growth.
Growth drivers were the revenues from subscription-based and SaaS models, as was the case in previous quarters. They grew by 57.5% to a new record of €54.4 million in Q3, making an outsize contribution to the increase in recurring revenues.
Accordingly, the share of recurring revenues, an important strategic indicator that includes subscription/SaaS as well as revenues from service contracts, grew further in Q3 and accounted for 68% of the Group’s revenues.
In the first nine months of the year, revenue from subscriptions/SaaS increased to €146.8 million, representing growth of 57.8% compared to the corresponding previous-year period.The Group’s earnings before interest, taxes, depreciation, and amortization increased by 15.7% to €62.9 million in Q3, which corresponds to an EBITDA margin of 31.0%.
Viewed on a nine-month basis, EBITDA increased to €201.3 million, and the EBITDA margin expanded to 33.6%. The quarterly net income grew 13.3% to €38.8 million in Q3. Accordingly, the earnings per share increased to €0.34. Net income in the first nine months of the year also rose by a significant 32.1% to €127.9 million, resulting in earnings per share of €1.11.
Strategic highlights and diversification
In addition to the successful subscription and SaaS transition and the increase in the share of recurring revenues, the Group’s strategic focus continued to be on the ongoing internationalization of its business.
The result can be seen in the over-proportional increase in revenues abroad (Q3: +25%), with North America particularly showing strong growth. The increase in recurring revenues and regional diversification further boosts the quality, plannability, and resilience of the Nemetschek business model.
As part of its ongoing developments in its solution portfolio, Nemetschek has driven initiatives in its innovation focus areas of Cloud and Digital Twins.
The US brand Bluebeam has reached a milestone in its corporate history with the rollout of its Bluebeam Cloud. This new product is a suite of mobile and browser-based solutions that allows teams on construction sites to access important data and work from anywhere, including from their mobile devices.
The cloud features also ensure optimized data availability and, therefore further improve the cooperation and work processes of Bluebeam’s existing desktop solutions.
With the appointment of César Flores RodrÃguez as Chief Division Officer (CDO) for Operate & Manage, Nemetschek significantly strengthened its segment.
A particular focus of Mr. RodrÃguez will be on the go-to-market strategy, growth acceleration, and cross-selling. Additionally, he will also oversee the new business unit for Digital Twins and drive the development of an open, cloud-based Digital Twin platform.
Segment developments for Q3 2022
In the Design segment, revenue in Q3 2022 grew by 11.4% to €96.9 million. After the first nine months of 2022, revenue was €287.4 million. The strong growth in subscription revenues is a testament to the success of the segment’s strategy of offering subscriptions and licenses in parallel.
The EBITDA margin in Q3 2022 was 31.8% and almost at the previous year’s level (32.2%). During the year’s first nine months, EBITDA margin improved to 33.0%.
The Build segment has achieved strong growth again: Its revenue increased by 31.4% to €71.0 million in Q3. Customer demand remained high at Bluebeam, which also began its business transition to subscription and cloud products during the third quarter as planned.
In the first nine months of the year, the segment’s revenue increased by 32.8% to €208.8 million. The EBITDA margin in Q3 was 37.9%. The margin was 42.1% for the first nine months of the year and therefore almost at the previous year’s level (42.6%).
Revenue in the Media segment increased by 36.7% to €25.8 million in Q3. Growth in the first nine months of the year was even higher with 51.4%, climbing to €75.8 million. In addition to the strong organic growth, the Media segment also profited from the acquisition of the business operations of Pixologic, Inc. at the end of 2021.
The EBITDA margin in Q3 2022 was 41.8% and on the same level as the previous year (42.0%). During the first nine months of 2022, it expanded to 42.8% (previous year: 37.5%).
In the Manage segment, revenue in Q3 2022 increased by 2.9% to €11.3 million. It had 2.9% growth when viewed on a nine-month basis. The EBITDA margin in Q3 2022 was 4.8% and down year over year (11.6%).
Full-year guidance for 2022 confirmed
Based on the excellent developments in the first nine months of 2022, the continued long-term growth trends in relevant markets, the ever-increasing proportion of recurring revenues, and the broad diversification of regional and market risks, the Executive Board is very confident that it will achieve the targets for 2022.
Therefore, the Executive Board continues to expect revenue growth at constant exchange rates of 12% to 14% for the Group. The EBITDA margin is expected to be between 32% and 33%.
The guidance incorporates the currently increasing uncertainty in the global economic environment caused by Russia’s invasion of Ukraine and the ongoing Covid-19 pandemic, which is being accompanied by supply shortages in all industries, increased inflation, and rising costs of procurement, financing, and energy. The guidance does not reflect potential negative effects due to any escalation of this war or severe macroeconomic distortions.
