A couple of weeks ago, Nemetschek teased that its 2016 results would be better than expected and, on Friday, showed us why.

First, the details:

  • Total revenue in Q4 was €84 million, up 19% as reported. Organic revenue was up 15%.
  • License revenue was €43 million, up 19%
  • Maintenance and license rental revenue was €37 million, up 16%
  • For the first 9 months of 2016, Nemetschek reports that revenue from outside Germany was up 21% to €166 million, with strongest growth reported from North America, Asia and Scandinavia. International growth has been an important area of investment for Nemetschek in recent years; during the earnings call, the company said that Japan up 8% due to Graphisoft and Vectorworks expansion. China remains weak because BIM isn’t too well established, but Graphisoft is helping to define BIM standards, and it is expected that sales there will ramp up
  • By segment, YTD revenue from Design was €56 million, up 12%; Build reported €22 million, up 45% (including Solibri and Design Data, acquired during the yea; up 33% organically). The Manage segment reported revenue of €1.7 million, up 17% and Media and Entertainment reported €5 million, essentially flat year/year.

Commenting on the 9-month results, Patrik Heider, Spokesman and CFOO of the Nemetschek Group, said that “Nemetschek is in optimum shape. We are well on the way to another record year. The business development confirms our strategic initiatives such as product innovations and strengthened internationalization. We are growing organically in the two-digit range and have accelerated this growth as a result of our acquisitions.”

During his call with analysts, Mr. Heider said that the company’s revenue growth and cash generation (and access to financing, one would presume) position it well for further acquisitions. He told investors that the company has 10 to 12 targets in its sights, but emphasized that Nemetschek doesn’t have to do deals in order to grow. Asked about the deal environment, he said that it’s a sellers market right now, with high expectations. Nemetschek strives to do deals that are around 3x to 5x revenue and 15x to 17x EBITDA. Now you know.

Investors on the call seemed most interested in margins, and how acquisitions can dilute profitability. Mr. Heider pointed out the sustained growth in the Design segment, which contributes significantly to profitability. HIs target is to balance margins and growth: parts of the business that are growing at 30% per year don’t have typically have super high margins, and he’s OK with that. His priority is topline revenue growth.

One investor wanted to know about customer perception around rentals. Mr. Heider said that rentals make up less than 5% of recurring revenue; Nemetschek’s brands offer rentals where they can as part of a drive to offer whatever mechanism the customer wants.

As foreshadowed earlier, Nemetschek is very confident in its outlook for the remainder of 2016: revenue in the range of €338 million to €341 million, or revenue growth of 18% to 20%.