Nemetschek SE

Earnings Release • Apr 27, 2023

Key Figures

NEMETSCHEK GROUP

Operative figures Revenues - thereof software licenses - thereof recurring revenues - subscription + SaaS (as part of the recurring revenues) EBITDA as % of revenue EBIT as % of revenue Net income (group shares)	3 months 2023	3 months 2022	Change
	204.6	192.2	6.5%
	47.6	63.7	–25.2%
	149.4	121.0	23.5%
	63.8	45.4	40.6%
	61.0	69.8	–12.7%
	29.8%	36.3%
	46.6	56.3	–17.2%
	22.8%	29.3%
	36.3	42.6	–14.9%
per share in €	0.31	0.37
Net income (group shares) before purchase price allocation	41.7	47.9	–13.0%
per share in €	0.36	0.41
Cash flow figures
Cash flow from operating activities	74.9	72.0	4.1%
Cash flow from investing activities	–6.0	–10.7
Cash flow from financing activities	–29.9	–14.8
Free cash flow	68.9	61.3	12.4%
Balance sheet figures
Cash and cash equivalents*	234.1	196.8	19.0%
Net liquidity/net debt*	189.1	124.9
Balance sheet total*	1,239.0	1,198.1	3.4%
Equity ratio in %*	58.0%	57.5%
Headcount as of balance sheet date	3,436	3,185	7.9%
Share figures
Closing price (Xetra) in €	63.28	87.80
Market Capitalization	7,308.84	10,140.90

* Presentation of previous year as of December 31, 2022.

Interim Group Management Report

Report on the earnings, financial and asset situation

Results of Operations

Successful start to the year in Q1 2023: Revenue growth of 6.5% with an EBITDA margin of 29.8%

Group revenues increased by 6.5% to EUR 204.6 million in the first three months of 2023 (same period of previous year: EUR 192.2 million) during the simultaneous transition to subscription and SaaS models. Adjusted for currency effects, i.e. on the basis of constant exchange rates, revenue growth would have amounted to 5.5%.

The transition to subscriptions and SaaS models and its accounting-related effects had the expected short-term dampening effect on the Group's earnings. EBITDA was correspondingly –12.7% below last year at EUR 61.0 million (same period of previous year: EUR 69.8 million). This meant EBITDA margin decreased from 36.3% in the first three months of 2022 to 29.8% as of March 31, 2023.

Revenue development

Revenues by business type – Subscription and SaaS remain growth drivers

All in all, the first three months of 2023 saw an encouraging revenue development. Simultanously, the Group made further progress toward its strategic objective of increasing the share of recurring revenues – especially subscription and SaaS – in total revenues. In total, recurring revenues rose to EUR 149.4 million (same period of previous year: EUR 121.0 million), corresponding to a growth of 23.5% (currency-adjusted: 22.2%). Subscription and SaaS revenues alone increased significantly by a further 40.6% (currency-adjusted: 38.9%), from EUR 45.4 million in the same period of the previous year to EUR 63.8 million. The ARR increased by 23.5% in Q1 (adjusted for currency effects: 22.2%) to EUR 597.4 million, which was significantly stronger than the total revenue growth. Consequently the share of recurring revenues improved significantly from 62.9% in the first three months of 2022 to 73.0% this year. This development is in line with the strategic objective of expanding the proportion of recurring revenues.

Revenues from software licenses amounted to EUR 47.6 million in the first three months of the financial year, a decline of –25.2% compared to the same period of the previous year (EUR 63.7 million). Adjusted for currency effects, the decrease amounted to –25.7%. The share of total revenues attributable to revenues from software licenses declined to 23.3% (same period of previous year: 33.1%).

Revenues by region – Internationalization

The increasingly global alignment of the Group is an important factor in its diversification. In the first three months of 2023, domestic revenues increased by 4.9% to EUR 47.5 million (same period of previous year: EUR 45.3 million). In its foreign markets, the Nemetschek Group generated revenues of EUR 157.1 million (same period of previous year: EUR 146.9 million), corresponding to an increase of 7.0% compared to the previous year period. Foreign markets accounted for 76.8% of total revenues in the first three months of 2023 (same period of previous year: 76.4%). In particular, the Americas focus region contributed to the pleasing development in the Group, while the development in Europe was overshadowed by the challenging geopolitical situation.

Overview of segments

The Design segment, whose business activities are mainly focused on Europe, generated revenues of EUR 104.2 million in the first three months of 2023 (same period of previous year: EUR 92.8 million). This corresponds to a growth of 12.2% (currency-adjusted: 12.1%). The uncertain market environment, especially in Europe, and longer sales cycles among customers stabilized slightly in the first quarter. In addition to catch-up effects from Q4 2022 also pull-forward effects from the second quarter 2023 due to announced prices increases contributed to this development

EBITDA grew by 2.0%, from EUR 29.6 million in the first three months of 2022 to EUR 30.2 million in the first three months of 2023. This led to a margin of 29.0%, (same period of previous year: 31.9%).

In the Build segment, which primarily targets construction companies in the USA and the German-speaking countries, Bluebeam's transition to subscription and SaaS models continued to progress as planned. The majority of new customers are opting for the high-value Subscription and SaaS packages with more extensive cloud features. As a result of the transition, the revenue declined slighty by –1.5% in the first three months of 2023 (currency-adjusted: –3.9%) to EUR 62.0 million (same period of previous year: EUR 62.9 million).

EBITDA decreased because of the transition by –22.8% to EUR 21.8 million in the first three months of 2023 (same period of previous year: EUR 28.3 million). At 35.2%, the EBITDA margin in the first three months of 2023 was at expected below the previous year's level of 44.9%.

In the Manage segment, which focuses on European commercial construction, the market situation stabilized slightly, even though the volume of investments by facility managers remains below pre-crisis levels. Revenues totaled to EUR 13.4 million in the first three months of 2023. This represents a growth of 5.1% (currency-adjusted: 5.9%) compared with the first three months of 2022, when revenues amounted to EUR 12.8 million. Since January 1, 2023, the dRofus brand has been consolidated in the Manage segment, having been moved from the Build segment to the newly created Digital Twin business unit.

Segment EBITDA amounted to EUR –0.5 million in the first three months of 2023 (same period of previous year: EUR 0.7 million), with the result that the margin declined from 5.6% in the first three months of 2022 to –3.4% in the first three months of 2023.

In the Media segment revenues rose by 5.0% (currency-adjusted: 4.2%) to EUR 26.8 million (same period of previous year: EUR 25.5 million) in the first three months of 2023. The lower growth compared to the previous year's quarters is attributable to the particularly high comparison base from the previous year. Q1 2022 profited from an inorganic growth contribution as well as from a strong, positive one-time effect from the last time sale of perpetual licenses in China. Starting in Q2, the segment's growth is expected to return to a double-digit percentage range.

Segment EBITDA amounted to EUR 9.4 million in the first three months of 2023 (same period of previous year: EUR 11.2 million). Accordingly, the EBITDA margin declined from 44.0% in the first three months of 2022 to 35.2% in the first three months of 2023.

Earnings performance – Earnings per share at EUR 0.31

Operating expenses increased by 15.0% in the first three months of 2023 from EUR 139.0 million to EUR 159.8 million. The cost of materials included in this item increased to EUR 7.8 million (same period of previous year: EUR 6.9 million). Personnel expenses rose by 13.5% from EUR 78.2 million in the first three months of 2022 to EUR 88.8 million. Other expenses increased by 21.1% from EUR 40.3 million to EUR 48.9 million. Depreciation and amortization of fixed assets increased by 6.1% from EUR 13.5 million to EUR 14.4 million.

In the first three months of 2023 the net income (group shares) decreased by –14.9% to EUR 36.3 million (same period of previous year EUR 42.6 million) due to the transition to subscriptions and SaaS models. The corresponding earnings per share amounted to EUR 0.31 (same period of previous year: EUR 0.37). Adjusted for amortization from the purchase price allocation after tax, net income decreased by –13.0% to EUR 41.7 million (same period of previous year: EUR 47.9 million), resulting in earnings per share of EUR 0.36 (same period of previous year: EUR 0.41).

The Group's tax rate amounted to 20.2% in the first three months of 2023 (same period of previous year: 20.9%).

Financial position

Development of cash flow – Operating cash flow at EUR 74.9 million – Cash and cash eqivalents at EUR 234.1 million

Cash flow from operating activities was mainly used for investments in fixed assets and start-ups, repayments of loans and repayments of lease liabilities.

The Nemetschek Group generated a cash flow from operating activities of EUR 74.9 million in the first three months of 2023 (same period of previous year: EUR 72.0 million).

Cash flow from investing activities amounted to EUR –6.0 million in the first three months of 2023 (same period of previous year: EUR –10.7 million) and includes payments for investments in start-ups in the amount of EUR 3.3 million (same period of previous year: EUR 0.3 million) and capital expenditures of EUR 2.6 million (same period of previous year: EUR 3.1 million).

The cash flow from financing activities amounted to EUR –29.9 million (same period of previous year: EUR –14.8 million) and primarily consisted of repayments of bank loans of EUR 27.1 million (same period of previous year EUR 49.1 million) and payments of lease liabilities in the amount of EUR 4.1 million (same period of previous year EUR 4.0 million). These payments were offset by cash inflows from bank loans in the amount of EUR 2.5 million (same period of previous year: EUR 39.0 million).

As at March 31, 2023, the Nemetschek Group held cash and cash equivalents of EUR 234.1 million (December 31, 2022: EUR 196.8 million).

Equity ratio at 58.0%

The balance sheet total increased from EUR 1,198.1 million to EUR 1,239.0 million compared to December 31, 2022. Equity amounted to EUR 718.1 million (December 31, 2022: EUR 689.2 million), resulting in an equity ratio of 58.0% compared to 57.5% as of December 31, 2022. The increase was driven by the net income for the year (EUR 36.8 million), compensated by the currency-related decrease of Group assets (EUR –7.7 million).

Significant events after the interim reporting period

There were no significant events after the end of the interim reporting period.

Employees

As of March 31, 2023, the Nemetschek Group employed a staff of 3,436 (March 31, 2022: 3,185), an increase of 7.9% on the prior-year quarter. In the following quarters, the Nemetschek Group intends to further increase the number of employees in order to ensure future growth.

Report on opportunities and risks

The Group management report for the year ended December 31, 2022, describes the opportunities and risks that could have a significant impact on the net assets, financial position, and results of operations of the Nemetschek Group. It also describes the features of the risk management system. During the first three months of 2023, the overall risk situation for the company did not change significantly compared with December 31, 2022.

Report on forecasts and other statements on expected development

Following the successful start to the year, the Executive Board is reaffirming its current targets for the financial year 2023. The Executive Board therefore continues to expect a revenue growth at constant exchange rates in the range of 4% to 6% for the Group in 2023. Growth in recurring revenues, represented by the key figure ARR (Annual Recurring Revenue), is expected to grow at a significantly over proportional rate of around 25%. The share of recurring revenues in total revenues is therefore expected to increase further to over 75% by the end of the current financial year. The EBITDA margin is targeted to be between 28% and 30%.

The outlook is based on the assumption that there will be no significant deterioration in the global macroeconomic as well as industry-specific conditions in 2023, in particular in the light of the recent growing global economic risk due to the war in Ukraine.

Consolidated statement of comprehensive income

for the period from January 1 to March 31, 2023 and 2022

STATEMENT OF COMPREHENSIVE INCOME

Thousands of €	3 months 2023	3 months 2022
Revenues	204,627	192,224
Other income	1,813	3,047
Operating income	206,440	195,271
Cost of goods and services	–7,795	–6,916
Personnel expenses	–88,799	–78,203
Depreciation of property, plant and equipment and amortization of intangible assets	–14,354	–13,532
thereof amortization of intangible assets due to purchase price allocation	–7,171	–7,083
Other expenses	–48,867	–40,336
Operating expenses	–159,815	–138,987
Operating result (EBIT)	46,626	56,284
Interest income	417	60
Interest expenses	–622	–634
Other financial expenses/income	–312	296
Net finance costs	–516	–277
Earnings before taxes (EBT)	46,110	56,006
Income taxes	–9,302	–11,723
Net income for the year	36,808	44,283
Other comprehensive income:
Difference from currency translation	–7,669	7,455
Items of other comprehensive income that are reclassified subsequently to profit or loss	–7,669	7,455
Gains/losses from the revaluation of defined benefit pension plans	41	270
Tax effect	–12	–76
Items of other comprehensive income that will not be reclassified to profit or loss	29	193
Subtotal other comprehensive income	–7,640	7,649
Total comprehensive income for the year	29,168	51,932
Net profit or loss for the period attributable to:
Equity holders of the parent	36,252	42,597
Non-controlling interests	555	1,686
Net income for the year	36,808	44,283
Total comprehensive income for the year attributable to:
Equity holders of the parent	29,173	49,852
Non-controlling interests	–5	2,080
Total comprehensive income for the year	29,168	51,932
Earnings per share (undiluted) in euros	0.31	0.37
Earnings per share (diluted) in euros	0.31	0.37
Average number of shares outstanding (undiluted)	115,500,000	115,500,000
Average number of shares outstanding (diluted)	115,500,000	115,500,000

Consolidated statement of financial position

as of March 31, 2023 and December 31, 2022

STATEMENT OF FINANCIAL POSITION

Assets Thousands of €	March 31, 2023	December 31, 2022
Current assets
Cash and cash equivalents	234,133	196,821
Trade receivables	91,416	84,520
Inventories	1,025	890
Income tax receivables	12,612	11,289
Other financial assets	2,275	2,492
Other non-financial assets	35,786	31,120
Current assets, total	377,248	327,132
Non-current assets
Property, plant and equipment	26,501	26,568
Intangible assets	163,239	171,703
Goodwill	549,514	557,047
Right-of-use assets	71,095	69,795
Investments in associates	4,010	4,010
Deferred tax assets	24,213	21,465
Other financial assets	21,610	18,377
Other non-financial assets	1,596	2,031
Non-current assets, total	861,778	870,996

Total assets	1,239,026	1,198,128

Equity and liabilities	Thousands of €	March 31, 2023	December 31, 2022
Current liabilities
Short-term borrowings and current portion of long-term loans		39,801	65,072
Trade payables		12,343	15,712
Provisions and accrued liabilities		50,589	70,251
Deferred revenue		258,211	206,939
Income tax liabilities		11,726	10,660
Other financial liabilities		3,384	1,494
Lease liabilities		15,242	14,854
Other non-financial liabilities		27,875	18,858
Current liabilities, total		419,172	403,841
Non-current liabilities
Long-term borrowings without current portion		5,212	6,873
Deferred tax liabilities		18,035	19,802
Pensions and related obligations		2,469	2,455
Provisions		1,114	1,582
Deferred revenue		2,613	2,631
Income tax liabilities		5,853	6,035
Other financial liabilities		417	390
Lease liabilities		63,426	62,443
Other non-financial liabilities		2,646	2,853
Non-current liabilities, total		101,785	105,065
Equity
Subscribed capital		115,500	115,500
Capital reserve		12,485	12,485
Retained earnings		570,430	533,871
Other reserves		–15,689	–8,586
Equity (group shares)		682,726	653,270
Non-controlling interests		35,343	35,953
Equity, total		718,070	689,223
Total equity and liabilities		1,239,026	1,198,128

Consolidated cash flow statement

for the period from January 1 to March 31, 2023 and 2022

CONSOLIDATED STATEMENT OF CASH FLOWS

Thousands of €	3 months 2023	3 months 2022
Profit (before tax)	46,110	56,006
Depreciation and amortization of fixed assets	14,354	13,532
Net finance costs	516	277
EBITDA	60,980	69,816
Other non-cash transactions	443	369
Cash flow for the period	61,422	70,184
Change in trade working capital	42,595	31,372
Change in other working capital	–15,126	–23,105
Financing effects and tax cash flow	–13,963	–6,480
Cash flow from operating activities	74,928	71,971
Capital expenditure	–2,634	–3,074
Changes in liabilities from acquisitions	–239	–7,276
Cash received from disposal of fixed assets	172	2
Cash paid for acquisition of other investments	–3,332	–306
Cash flow from investing activities	–6,032	–10,654
Dividend payments to non-controlling interests	–604	–107
Cash received from bank loans	2,462	39,000
Repayment of borrowings	–27,072	–49,125
Principal elements of lease payments	–4,054	–4,000
Interests paid	–617	–571
Cash flow from financing activities	–29,885	–14,803
Changes in cash and cash equivalents	39,011	46,514
Effect of exchange rate differences on cash and cash equivalents	–1,698	1,944
Cash and cash equivalents at the beginning of the period	196,821	157,095
Cash and cash equivalents at the end of the period	234,133	205,552

Consolidated statement of changes in equity

for the period from January 1 to March 31, 2023 and 2022

	Equity attributable to the parent company's shareholders
Thousands of €	Subscribed capital	Capital reserve	Retained earnings	Translation reserve	Total	Non-controlling interests	Total equity
As of January 1, 2022	115,500	12,485	415,410	–17,533	525,862	33,830	559,693
Other comprehensive income	–	–	162	7,094	7,256	393	7,649
Net income for the year	–	–	42,597	–	42,597	1,686	44,283
Total comprehensive income for the year	0	0	42,758	7,094	49,852	2,080	51,932
Dividend payments to non-controlling interests	–	–	–	–	0	–107	–107
As of March 31, 2022	115,500	12,485	458,168	–10,439	575,714	35,803	611,517
As of January 1, 2023	115,500	12,485	533,871	–8,586	653,270	35,953	689,223
Other comprehensive income	–	–	24	–7,103	–7,080	–561	–7,640
Net income for the year	–	–	36,252	–	36,252	555	36,808
Total comprehensive income for the year	0	0	36,276	–7,103	29,173	–5	29,168
Dividend payments to non-controlling interests	–	–	–	–	0	–604	–604
Share-based payments	–	–	283	–	283	0	283
As of March 31, 2023	115,500	12,485	570,430	–15,689	682,726	35,343	718,070

NEMETSCHEK SE Konrad-Zuse-Platz 1 81829 Munich Tel.: +49 89 540459-0 Fax: +49 89 540459-414 investorrelations@nemetschek.com www.nemetschek.com