Nemetschek's Subscription Surge Propels Q1 Growth Amid Strategic Shifts
2min read Nemetschek, the global leader in construction software solutions, has delivered a standout performance in Q1 2025, with subscription and saas revenue surging 83.6% year-on-year to €195.1 million. This meteoric rise underscores the company’s successful pivot toward recurring revenue models, positioning it as a key beneficiary of the construction industry’s digitization boom.
Subscription Dominance: A New Era for Recurring Revenue
The growth in subscription and SaaS revenue was fueled by both organic momentum and strategic acquisitions. The Design segment, which includes brands like Graphisoft and Vectorworks, saw subscription revenue jump 111%, driven by demand for Building Information Modeling (BIM) tools and cloud-based platforms. Meanwhile, the Build segment, bolstered by the integration of GoCanvas (its largest acquisition to date), reported a 66.4% revenue increase (63.0% currency-adjusted). The share of recurring revenue now stands at 91.8% of total revenue, up from 83.0% a year earlier, signaling a near-total transition away from one-time software sales.
Annual Recurring Revenue (ARR): A Measure of Long-Term Health
The company’s ARR, a critical metric for subscription businesses, rose 39.6% to €1,038.3 million. This milestone reflects not only customer retention but also the growing value of its software-as-a-service (SaaS) offerings. Even excluding GoCanvas, organic ARR grew 30.8%, demonstrating the strength of Nemetschek’s core platforms. The ARR figure now exceeds total quarterly revenue, a testament to the durability of its revenue streams.
Profitability: Navigating One-Time Hurdles
While reported EBITDA margins dipped to 28.5% due to a non-operating loss from a payment provider’s insolvency, adjusted margins (excluding this one-time impact) improved to 31.4%, up from 30.5% in Q1 2024. The Design segment faced margin pressure as it invested in SaaS infrastructure, but adjusted margins there still expanded. The company remains confident in its 2025 EBITDA target of ~31%, highlighting the long-term benefits of its SaaS transition.
Strategic Outlook: Riding the Construction Tech Wave
Nemetschek reaffirmed its 2025 guidance of 17–19% currency-adjusted revenue growth, with GoCanvas contributing a 350 basis point boost. The company’s focus on the construction industry’s digitization is well-timed: global spending on construction software is projected to grow at a 12% CAGR through 2030, driven by demand for automation, real-time data, and sustainability tools. Nemetschek’s leadership in BIM, project management, and IoT integration positions it to capitalize on this trend.
Risks and Considerations
The integration of GoCanvas, while progressing well, has delayed full revenue recognition due to IFRS accounting rules. Additionally, the payment provider’s insolvency highlighted risks tied to third-party dependencies. However, these challenges are temporary and unlikely to derail the company’s broader trajectory.
Conclusion: A Strong Foundation for SaaS Leadership
Nemetschek’s Q1 results are a clear win for its SaaS strategy, with subscription revenue growth outpacing even its ambitious targets. The 83.6% year-on-year rise and 91.8% recurring revenue mix demonstrate that the company has effectively transitioned to a subscription-driven model, a shift that reduces revenue volatility and enhances predictability. With ARR surpassing €1 billion and adjusted margins expanding, the fundamentals for sustained growth are in place.
The company’s 2025 outlook—17–19% revenue growth and a 31% EBITDA margin—appears achievable, especially as the construction industry’s digitization accelerates. Investors should note that while short-term headwinds exist, the long-term tailwinds for SaaS adoption in construction are undeniable. Nemetschek’s Q1 performance not only meets but exceeds expectations, solidifying its status as a leader in an industry poised for transformation. For those willing to look past near-term noise, the stock presents a compelling opportunity to capitalize on a software-driven future for construction.
