Nemetschek SE Q1 2025 Results Highlight Strong SaaS Growth Amid Strategic Shifts: Analyst Forecasts and Investment Implications

Nemetschek SE (ETR:NEM) delivered robust first-quarter 2025 results, underscoring its transition to subscription-based revenue models and the impact of recent acquisitions. With revenue surging 26.3% year-on-year and Annual Recurring Revenue (ARR) hitting a record €1.038 billion, the company reaffirmed its full-year outlook. However, challenges such as geopolitical risks and short-term margin pressures from integration costs remain. Here’s what investors should know.

The stock’s trajectory reflects investor sentiment on its strategic moves, though recent volatility highlights valuation concerns.

Key Financial Highlights: A Subscription-Driven Surge

Nemetschek’s Q1 performance was powered by its shift to SaaS and subscription services. Subscription/SaaS revenue jumped 83.6% to €195.1 million, contributing to a 39.6% rise in ARR. This growth is critical, as recurring revenue now accounts for 91.8% of total revenue, up from 83% in 2024.

While reported EBITDA rose 18.2% to €80.7 million, an unexpected loss from a payment provider’s insolvency (mid-single-digit million EUR) dampened margins. Adjusted for this one-off effect, EBITDA margin expanded to 31.4%, outperforming the prior-year’s 30.5%. Net income grew 5.5% to €44.9 million, but adjusted EPS (excluding the loss) would have hit €0.45, a 22% year-on-year increase.

Segment Performance: Winners and Losers

• Design Segment: Revenue rose 11.6% to €128.9 million, driven by 111% SaaS growth. However, EBITDA fell 13.5% to €30.7 million due to transition costs and the payment provider’s loss, compressing margins to 23.8%.
• Build Segment: A standout performer, with revenue up 66.4% (63% organic) to €112.4 million, fueled by the GoCanvas acquisition. EBITDA surged 88.1% to €39.5 million, with an impressive 35.1% margin.
• Manage Segment: Revenue dipped slightly to €12.8 million due to the discontinuation of a low-margin consulting unit. However, EBITDA margin improved to 10.9%, signaling operational discipline.
• Media Segment: Revenue was flat at €29.4 million, with the payment provider’s issue shaving margins to 31% from 37.4%. Adjusted for this, margins would have exceeded prior-year levels.

Full-Year Outlook: Ambitious but Challenging

The company reaffirmed its 2025 targets:
- Revenue Growth: 17–19% currency-adjusted (including 350 basis points from GoCanvas).
- EBITDA Margin: ~31%, with GoCanvas’s dilutive impact temporarily limiting profitability.

Analysts project Nemetschek’s revenue to grow 13% annually over the next three years, slightly outpacing Germany’s software sector average of 11%. However, valuation concerns linger. Nemetschek’s current multiples—particularly its Price/Sales ratio—appear elevated relative to peers like Autodesk (ADR:ADSK) or Trimble (NASDAQ:TRMB).

Risks and Considerations

• Acquisition Integration: While GoCanvas boosted Build segment growth, its full impact won’t materialize until 2026 due to IFRS-related purchase price allocations.
• Geopolitical Uncertainties: Nemetschek highlighted risks of macroeconomic slowdowns and geopolitical tensions, which could delay digitization projects in construction.
• Margin Pressures: Transition costs and the one-off loss in Q1 underscore the need for disciplined cost management.

Conclusion: A Story of Growth, but at What Price?

Nemetschek’s Q1 results reaffirm its position as a leader in SaaS-driven construction software, with ARR growth and segment-specific wins proving its strategic agility. The Design segment’s SaaS momentum (111% growth) and Build’s explosive expansion (66.4% revenue growth) suggest long-term resilience. However, investors must weigh these positives against valuation risks and execution hurdles.

With an adjusted EBITDA margin of 31.4% in Q1 and a reaffirmed 31% target for 2025, profitability remains on track. Yet, the stock’s premium valuation—especially versus peers—could limit upside unless revenue growth accelerates beyond analyst expectations.

Final Take: Nemetschek’s fundamentals are strong, backed by secular tailwinds in construction tech and a robust SaaS pipeline. However, investors should remain cautious on valuation and monitor margin trends closely. The company’s ability to integrate GoCanvas seamlessly and navigate geopolitical risks will be pivotal in sustaining its growth narrative.

This data underscores Nemetschek’s outperformance, but the gap with peers’ valuations could test investor patience in the near term.