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Nemetschek’s Earnings Surge: Is This Growth Too Good to Be True?

Wesley ParkWednesday, May 7, 2025 6:20 pm ET

39min read

The construction tech sector is booming, and Nemetschek SE (ETR:NEM) is at the forefront. The German software giant just delivered a Q1 2025 earnings report that left analysts scratching their heads: revenue soared 26% year-on-year, yet profitability metrics like EBITDA came in below estimates. Is this a sign of conservative guidance, or are there hidden risks lurking beneath the surface? Let’s dig in.

Revenue Growth: A Bullish Start, But Is It Sustainable?

Nemetschek’s Q1 revenue hit €282.8 million, easily surpassing estimates and marking the 13th consecutive quarter of double-digit growth. The real star here is the subscription/SaaS revenue, which skyrocketed 83.6% to €195.1 million. This is the magic number—recurring revenue now accounts for 91.8% of total revenue, up from 83% a year ago.

The Build segment, fueled by the GoCanvas acquisition, delivered a staggering 66.4% revenue jump, while the Design segment’s SaaS revenue nearly doubled. This isn’t just growth—it’s a strategic shift away from one-time software licenses to recurring revenue streams. For investors, that’s music to the ears because recurring revenue breeds predictability.

Profitability: The One-Off “Headwind” That Hid the Real Story

On paper, Nemetschek’s EBITDA margin dipped to 28.5% in Q1, below the estimated 30.7%. But here’s the catch: management highlighted a mid-single-digit million euro loss from a payment provider’s insolvency—a one-time hit. Strip that out, and the adjusted EBITDA margin soared to 31.4%, handily beating the prior-year’s 30.5%.

This is classic conservative accounting: management is airing the dirty laundry upfront to avoid overpromising. The full-year guidance for a ~31% EBITDA margin now looks achievable, not optimistic.

The Guidance Tightrope: Caution vs. Confidence

Nemetschek’s 2025 guidance calls for 17–19% revenue growth, which, while ambitious, is actually conservative given Q1’s 26% surge. The company is wisely tempering expectations because:
1. GoCanvas’s full impact is delayed due to accounting rules, suppressing near-term EBITDA.
2. Geopolitical risks in construction markets (e.g., Europe’s slow digitization adoption) could stall demand.

But here’s the kicker: the Annual Recurring Revenue (ARR) is already up 39.6% year-on-year, hitting €1.038 billion. That’s a run rate that could sustain growth well beyond 2025.

Valuation: A Premium Price for a High-Growth Stock?

Analysts are divided. The consensus price target is €113, but the stock is currently trading at €122—a 22% premium to its 12-month average.

The worry? Nemetschek’s Price/Sales ratio is nearly double that of Autodesk. But here’s why it might still be worth it:
- ARR growth is outpacing revenue, a sign of margin resilience.
- The Design and Build segments—the engines of growth—are expanding their margins despite headwinds.

The Risks You Can’t Ignore

Integration Costs: GoCanvas’s full benefits won’t hit EBITDA until 2026. Until then, margins will lag.
Geopolitical Uncertainty: A slowdown in construction spending could crimp demand.
Valuation Backlash: If growth slows, the premium valuation could crumble.

Conclusion: Buy the Dip, but Keep an Eye on the Margins

Nemetschek’s earnings are not conservative—they’re conservatively reported. Management is being prudent with guidance, but the underlying trends—91.8% recurring revenue, 31.4% adjusted margins—are bulletproof.

For investors:
- Buy on dips below €115.
- Avoid chasing the stock above €130 unless ARR growth accelerates further.
- Watch the Design segment’s margins: If they rebound post-insolvency loss, it’s a green light.

The construction tech revolution isn’t slowing down, and Nemetschek is the undisputed leader in Europe. This is a long-term play—but with short-term risks. If you’ve got the stomach for volatility, this could be a decade-long winner.

Final Takeaway: The earnings beat is real, the guidance is cautious, and the valuation is a risk. But if you’re in for the long haul, Nemetschek’s dominance in SaaS-driven construction software makes it a must-watch stock.

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