Germany’s The Nemetschek Group (aka. Nemetschek Group) has reported a strong start to 2021 with its first-quarter financial results.
Results in Brief
Q1 2021 revenues were EUR 158.4 million compared to EUR 146.6 million in the year-ago quarter, up 8.1 percent and 12.1 percent with currency adjustments. Net income for the Group EUR 49.6 million versus EUR 41.8 million in the year-ago quarter, up 18.5 percent and 26.5 percent when adjusted for currency.
Margins for Q1 2021 were up 32.6 percent compared to margins for Q1 2020, at 31.3 percent and 28.5 percent, respectively. Earnings per share in EUR was 0.25 versus 0.19 year over year for a 37.5 percent increase.
The strong financial performance is attributed to the Group’s updated strategic plans—focused on further internationalization, expansion of recurring revenues driven by subscription and SaaS, a reduction in the Group’s complexity, and continue development of software solutions combined with new customer acquisition.
“We had a very good start to the new year under friendly market conditions and achieved considerable growth across all segments in an improving environment. Our strategic initiatives are fully on track and are starting to take effect,” announced Dr. Axel Kaufmann, Spokesman of the Executive Board and CFOO. “We have laid a strong foundation in the first quarter to achieve our targets for the financial year 2021.”
The Nemetschek Group says the main growth driver for the quart was again a continuation of recurring revenues from software service contracts and rental models (subscription + SaaS), which increased by 11.7 percent to EUR 96.1 million. The holding company says this above-average increase is due to a strategic change in how their software finds use in new and existing customers, principally in offering rental models.
Interestingly, the Design segment is noted in their report as centering its business activities in Europe, where it achieved double-digit currency-adjusted revenue growth for the first time since the start of the Covid pandemic. While Design segment software—of which the ALLPLAN, ArchiCAD, and Vectorworks brands, along with key engineering brands, form the heart of the offerings—have larger market shares in Europe, the Build segment is firmly centered in the USA, along with Germany. The Bluebeam brand is the flagship software company in the Build segment, with particularly deep penetration in both small and large construction firms in the USA.
The Media & Entertainment (M&E) segment—one which has benefitted from a significant round of acquisitions in the recent past few years—continues on a strong growth path, seeing revenues increased by 15.9 percent (adjusted for currency effects) to EUR 14.7 million for the first quarter. Subscription models are benefitting this segment as well and likely contributing to increased margins, rising from 23.9 percent in Q1 2020 to 33.7 percent in this first quarter of 2021.
Given the positive momentum for the larger global economy as we make positive steps post-Covid, the Executive Board for the Group is reaffirming its current financial targets for 2021. The Nemetschek Group anticipates currency-adjusted revenue growth at least in the high single digits while further increasing its share of recurring revenues.
Part of this assessment is based on an anticipated transition to a subscription and cloud-centric business model for Bluebeam in the second half of 2021.
Architosh Analysis and Commentary
The Nemetschek Group (Nemetschek SE – NEMTF) stock price (in US dollars) is currently on a gradual upswing after turning down significantly from its historical high in September of 2018. A record volume of shares moved hands in the first month of this year. Overall, compared to its chief rivals (Autodesk, Bentley, and Trimble) the German holding company’s stock price has been more static. The Covid pandemic when it struck in early 2020 did nothing to diminish the company’s stock price. A Biden Administration infrastructure bill should boost the stock of all of the companies mentioned above, particularly Bentley, the company most focused on transportation infrastructure software solutions. Brands most exposed to the potential upside for a Biden infrastructure bill include ALLPLAN, RISA, SCIA, and SDS/2.