Nemetschek Se Unsp/Adr

Good afternoon, ladies and gentlemen, and welcome to the Q3 Earnings Call 2024 of Minitech SE. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn it over to your host, Stefanie Zimmermann.

Thank you, operators.

Hello, everyone in the BigGlassCamp. Thanks for joining our earnings call today to discuss the research for the third quarter and the first nine months of 2024 with us. With me today are our CEO, Yves Patrine, and our CFO, Louis Silverspring. Today's conference call is being recorded. A replay of the call will be available at our website after the call. Additionally, you will find the report, presentation, and the press release on our investor relations website as well. But now, let's get started. I would like to turn over to our CEO, Yves.

Thank you, Stephanie. Good afternoon, everyone. We appreciate your participation in today's earnings call. We will be discussing our financial results for the third quarter and the first nine months of 2024. As usual, we've prepared a concise yet informative presentation. Our CFO, Louis Everstrom, and I will guide you through his material briefly ensuring we leave ample time for your questions after our presentation. I would like to begin the presentation with a few messages for the quarter on page number two. Q3 2024 was a successful quarter for our company. The success once again highlights the resilience and strength of our business model and strategy. We managed to achieve continued robust growth coupled with exceptionally high profitability despite the persistently challenging environment in our end markets, especially in Europe. As we already indicated in our last earning call, the plus 6.3% on an ethics-adjusted basis, the design segment showed the expected temporary impact on its revenue growth due to the very high comparison base in the third quarter versus Q3 2023, As a reminder, the reason for the high comparison base was the end of standalone sales of Alplan Perpetual License without mandatory maintenance attached, which resulted in very strong one-time Perpetual License sales in Q3 2023. And as well, as the ongoing tradition of sprawl of our design brand to a subscription business model. In comparison, the organic growth of the beer segment further accelerated to plus 15% on an ethics-adjusted basis in the third quarter. Bluebeam was once again the largest contributor to its development, which was additionally helped by a very resilient demand, especially in the US market. Furthermore, the highly successful transition of Bluebeam to a subscription model is progressing according to plan. gives us considerable confidence that we will achieve the expected growth of over plus 30% in the fourth quarter for Bluebeam. Reflecting on our performance for the first nine months of the year, we can be proud of our achievement. We recorded an organic currency adjusted revenue growth of plus 9.8%, and an organic BGA margin of around 29.9%, excluding the derivative effect from GoCanvas. His figures align precisely with our internal plans. Q3 marks also the third quarter in which we fully consolidated our GoCanvas acquisition, scoring the successful closure of the transaction July 1st. We are happy to report that GoCanva showed the expected good underlying operating performance in Q3. However, please keep in mind that the reported figures do not yet reflect the full potential of the acquisition, as both the revenue and EBITDA contribution of GoCanva reduced by a high single-digit million euro amount in the second half of the year due to the IFRS-related purchase price allocation If we look at one of our main strategic priorities, our journey to a subscription and SaaS-centric business model, we continue to execute as planned and the different missions of our brand in the design segment as well as at Bluebeam are progressing very successfully. The subscription tradition of Bluebeam is already very far advanced and will be completed by the end of the year. Consequently, main growth driver was once again the recurring part of our business. In particular, the very strong increase in our subscription and SaaS revenues, which is also reflected in all our major KPIs where we reach new record levels across the board. Therefore, based on our successful first nine months of the year, the expected very strong growth acceleration in the BIL segment in the fourth quarter, as well as the continued progress on our strategic initiatives, we are confident that we are well on track to once again reach all our goals for this year. Consequently, we fully reiterate our organic as well as our expanded outlook, including Grand Canvas, for 2024. Base number four, you can see an overview of the corresponding figures to the Q3 development that we just discussed. In line with OPEC's strategic priorities, the transition to a subscription and SaaS-centric business model, or reported annual recurring revenue, which includes the contributions from our GoCampback acquisition, recorded an increase of plus 33%. However, When he stripped out the M&A contribution, the ARR growth remained at a high level with a plus of 26%. His continued strong increase in ARR is an important indicator for the group revenue and cash flow growth potential in the coming 12 months. The main driver was once again the revenue from a subscription and class model, which grew organically by almost plus 78%. Including the additional contribution of GoCanva, which already has a fully SaaS-based business model, the growth even reached an impressive plus 94%. Thanks to this strong growth in our recurring revenue base, we're able to increase our organic revenue in Q3 by plus 8.9% and plus 9.6% on an organic and ethics-adjusted base. Despite and change-challenging economic environment in our end markets, as well as our ongoing subscription and tax conditions and its associated short-term accounting burden on our financial results. Including the contribution of Gold Canva, the reported revenue for the month from July to September increased by plus 15.1% to 253 million euros. Due to our just-mentioned transition to subscription and SaaS, the currently still lower profitability of GoCanvas, along with the IFRS-related revenue haircut, our APDA for the quarter increased with plus 6.7%, slightly under-proportional compared to our top-line development. The corresponding APDA margin reached 30.1%. However, looking at our organic APDA margin, which excludes the dilution due to GoCanva, reached a high level of 30.2%. Expected, the earnings per share fell by 12.8% in the third quarter due to the current dilution caused by GoCanva, as well as a higher interest expense and amortization charges associated with its acquisition. Slide number five. As promised, we want to keep you updated on the progress of GoCanvas, the largest acquisition in the more than 60-year history of the Nemesha Group. Before we provide you with some additional financial implications of the acquisition, I would like to provide you with an update on the integration progress. Please allow me first to briefly remind you why we are so excited about the GoCanvas acquisition and why we are convinced It will create significant value for the Nemesha Group and thus for our customers and shareholders. Firstly, GoCanvas is a leading provider of SaaS solutions for the paperless collection, both in integration of field data in construction and adjacent verticals. Their unique breadth, user-friendly solutions, GoCanvas aims to digitalize additional paper-based processes, improve safety, and ensure maximum compliance with industry standards. Secondly, GoCanvas fits perfectly with the portfolio strategy of Nemetschek's built segments and enables us to unlock the massive built worker opportunity in the construction industry, a market that grows well over 10% per year. By combining Bluebeam Already today, the more trusted name in collaboration solutions for the build and construct sector, with its massive base of office workers, together with GoCampBus customers in the field, we will create a truly unique ecosystem for the construction industry. As a pure SaaS solution provider, GoCanvas will also further accelerate our successful transition to a subscription and SaaS-centric business model, which is, as you know, one of the key priorities for the Nemeshe Group. Finally, we see a strong synergy potential in the medium to long term. The acquisition of GoCanvas and its complementary technology, customer base, as well as geographic presence, will create significant activity growth opportunities. In particular, I would like to highlight GoCanva's currently already large and diversified user base of more than 300,000 active users. We therefore have a huge opportunity to address these customers with our solutions in the build segment, and even more importantly, we can address the over 3 million users of Bluebeam with solutions from GoCanva. After an extremely intensive due diligence process in the weeks and months leading up to the signing, we were able to announce the acquisition in early June. And then four weeks later, on July 1st, we were able to officially close the deal and consolidate GoCanvas as part of the build segment. GoCanvas' strong operational performance in the third quarter and its contribution to the group's overall results is very reassuring. And those results do not yet respect the full potential of the acquisition due to the IFRS-related deferred revenue haircut. In order to maximize the potential of the acquisition, we will continue to drive the integration of GoCanva in the coming months and quarters. As you see on the right-hand side of the chart, we are currently driving various initiatives in different areas. Looking at the go-to-market activities, We are currently intensifying the training and collaboration of the GoCanvas and Bluebeam sales teams. In addition, we are defining the different routes to cross-sell the solution of GoCanvas for Bluebeam customers, for example, by launching GoCanvas with important channel partners of Bluebeam. Also, in terms of integration, we have already started to integrate and harmonize various back-office functions such as finance, IT, and HR. And last but not least, we continue to integrate GoCanvas into the Nemeshek Group family. This is already very far advanced, as GoCanvas has a similar customer-centric culture which focuses on customer proficiency and customer delight, just as we do here at Nemeshek. Nevertheless, there are of course always things and best practices that we can learn from each other. To summarize the current state of the GoCanvas acquisition after the third quarter, everything is going according to our internal planning, and we continue to be very confident that this acquisition will be a success. And with that, I will now hand over to Louise, who will dig deeper into the most important aspect of our financial results.

Thank you, and a warm welcome to our QC2024 earnings call from my side as well. Well, it has already touched on some of our key financial figures, and I would therefore now like to look a bit more in detail at the most important financial aspects of the third quarter and the first nine months of 2024, as well as the underlying drivers thereof. And as usual, I would like to begin with an overview of the key financial highlights of the first nine months of our financial year 2024, and this can be found on page number seven. What we like to underline is the sense we had a very successful three quarters of the year with continued strong and profitable growth. And this is especially encouraging given our ongoing transition to a subscription and staff-centric business model and, as you all know, the associated short-term accounting burden on our financial results. And given the continued challenging environment, especially in our European design markets, and we continue to progress in accordance with our plans. Starting with our accumulated revenue for the period from January to September, which grew by 11.5% on a reported basis to €705 million. Please be aware that after the official closing of Gokambas and the quarterly dating zero of July 1st, our reported growth now also includes the contribution of Gokambas from July onwards. And of course, after the announced RFRS-related revenue haircut of around 4 million in Q3, as already mentioned by you. However, even if we strip out the GoCanvas effect, we achieved a strong organic growth of 9.3% and even 9.8% on an FX-adjusted basis. In line with our strategy, the main contributor to our growth was once again the recurring part of our business. which is represented by the annual recurring revenue, or ARR, that increased by 33% to €883 million. If we again exclude the contribution from the GoPlanverse exhibition, the organic growth picture looks very, very similar, with a strong plus of 25.2%. This strong growth in ARR clearly indicates the continued growth outlook Very good growth outlook for our business in the upcoming 12 months. And as one would expect as well, the key driver of this strong increase in ARR was our subscription and SaaS revenue, which sustained an impressive growth of 82.1% on a reported basis and 75.9% on an organic basis to 381 million euros. We continue to achieve a very healthy operating leverage continued improvements in our efficiency, and therefore the EBITDA increased at a similar pace to our top-line development, €206 million. The corresponding EBITDA margin was at 29.2%. This development must be seen in the context of our ongoing transition and the transition in our revenue recognition patterns for our subscription and SaaS offerings. the dilution effect from GoCanvas, as well as the M&A-related one-off costs, as you can recall that we had in the second quarter, these are all items that would normally have lower EBTA increases. Therefore, please let me emphasize that if we were to exclude the dilution effect from GoCanvas, the organic EBTA margin would have been at 29.9%. We then additionally adjust the margin for the M&A-related one-off costs in the meantime single-digit million-euro amount, the adjusted organic EBITDA margin would be 160 basis points higher, and therefore with 30.8% already really well in line with our guidance rate of 30 to 31% for the full year. Well, let's look at the right-hand side of the slide. You can see our continued high cash generation and cash conversion of over 100% also in the first nine months of this year. Balance sheet metrics, such as the equity ratio of 29%, as well as the net debt position of €370 million, now show the natural and intended increase in debt in the third quarter as a result of the GoCanvas acquisition. Let's move further to page number 8, and here we will find an overview of the development of our four segments in the first nine months of the year. Let's start from the left side with our design segment. And as Eve already mentioned, the FX adjusted growth in Q3 of 6.3%. was slightly below the growth rate of the previous quarter, but this development is a result of the very high prior year comparison base, which was attributable to the strong license business that we had due to the last time buy of perpetual licenses without the software surface contract attached to it at our outland brand in Q3 2023. However, that development was fully expected and in line with our plans, and therefore, as you can recall, we already flagged for this in our earnings call in the second quarter. The first nine months of the year, we recorded a strong and resilient development in a continued challenging market environment, especially in Europe in this segment. And as a result, our design segment revenue increased by 8.1% on a reported and even 8.8% on a currency-adjusted basis to €344 million. And driven by a strong operational leverage, The EVPA margin for the design segment expanded by 110 basis points to 27.9%. Because of the gains of the canvas, as I've said, July 1st, the results for the first nine months of the year for our built segment partially reflect the impact of the canvas as part of the segment from now on. And consequently, the segment recorded an impressive nine-month growth of 18.3% on a reported and 18.6% on an FX-adjusted basis. In particular, the segment's headquartered results, the growth of 33.5%, showed the impact from the strong contribution of our GoCanvas acquisition. And that's even after the consideration of the revenue haircut. However, our bill segment also recorded a very encouraging organic development in the third quarter, with an acceleration of growth to 16% on an organic and effect-adjusted basis. So together with a continued resilient market outlook for the U.S. and the ongoing very successful transition of our blue-beam grounds, which will be nearly complemented by the end of this year, and a comparison base in Q4 that almost no longer includes license revenues for the first time since we started our transition, we continue to be very confident in our forecast that we will see a growth of more than 30% organically in the bill division in the fourth quarter. The segment profitability also declined year-on-year to 32.2%, however, There, again, adjusted for the M&A-related one-off cost, as well as the mentioned dilution due to the gold canvas, the normalized EVTA profitability margin would have been a margin expansion year-on-year. In the media segment, our brand Maxim continues to feel the ongoing weaker demand environment, especially in the important U.S. market. the reported as well as our currency-adjusted growth of 7.9% and 8.6% respectively, once again were able to outperform the overall market in the first nine months of the year from this segment. In addition, the re-acceleration in constant currency growth from 6.1% in 2022 to 8.8% in 2023 indicates that the second quarter likely marked the low point for the year in terms of growth rates. This segment's profitability with 34.3% continued to be above group average also in the first nine months of 2024. Then let's conclude with our smallest segment, Manage, which accounts for only 5% of our group's revenue. That's only a piece of 1.9% in the first nine months of the year. However, this segment's growth was partially negatively impacted by the discontinuation of the low-margin advisory service units earlier in the year, as also already mentioned. Despite the continued investments into this segment's product portfolio, as well as future growth opportunities, the margin expanded markedly to 7.3% from just 1.2% last year. Let's come to page number nine. As you all know, one of our main strategic objectives and always an important discussion point in this call is the topic of recurring revenue and, in particular, the development of our subscription and SaaS business. I already mentioned that previously. We are, again, very pleased with the development of our subscription and SaaS revenue in Q3 as well as during the entire first month of 2024. Let's hop on the right side of this slide with one of our most important KPIs, annual recurring revenues. ARR clearly grew over proportionally and in line with our goals for the full year with plus 33% on a reported and plus 25.2% on an organic basis to 883 million euros. And just as a reminder, according to our definition here as an energy group, the ARR includes all of our different recurring revenue schemes, that is subscription and staff, as well as maintenance contracts. That means if we would exclude the maintenance contract from what I just said, the ARR growth of 94% on reported and almost 78% on a organic basis would have been even substantially higher. In line with our strategy, our licensed revenue continued to decline, at 44% in QP, driven by the ongoing successful transitions of our premium brands and the design brands, Glow, Sia, and Vectorworks. And this more volatile revenue category accounted for only $25 million at the end of the third quarter. Now coming to the left-hand side of the slide, that also provides a longer-term picture of the development of our recurring revenues. And we started with recurring revenue base of just 265 million euros in 2020, more than double these more resilient and better plannable revenues within the last four years. In addition, they now account for 86% of our total revenue base. And this is a new record high after the first nine months of the year and well in line with our plans. So looking at the chart, it also, again, is becoming very, very clear what has been driving this strong increase in recurring revenues. Our systematic and highly successful transition to a subscription and SaaS-centric business model, which led to an almost six-fold increase in our subscription and SaaS revenue base from 2020 to 2024. And the corresponding organic subscription and SaaS revenue caterer reached a remarkable 55%. I believe that the chart therefore impressively shows the substantial progress we have already made here in the recent years and which we are determined to continue going forward. So then, to conclude our review of the results for the first nine months of 2024, we provide a more comprehensive overview of our key P&L and cash flow items on page number 10. We have already addressed or reported as well of our organic revenue in EBITDA development in detail. However, going down further in this P&L, you'll see that the impact of our M&A activities is now also reflected in reported development of our output space, and that can be seen clearly on this page. For example, if we take a closer look at this largest component of our overall cost base, that is our... personnel costs, naturally, you will see that after the very modest increase of only 3.8% in the first half of the year, the personnel expenses now increased only by 17.8% in 2023. However, as one would expect as well, the higher growth rate can be fully explained by the around 300 additional Blue Canvas employees that joined the membership group as of July 1st. With regard to additional employees and additional costs linked to that acquisition, the underlying organic growth in personnel costs would be substantially lower and in line with the previous quarters, which underpins our continued focus on the cost base. The earnings per share growth of only... 8.5% after the first nine months of the year, and the even negative growth of minus 4.8% in the third quarter is solely coming from the impact from Blue Canva. Apart from the already discussed margin dilution due to the currently still lower operational profitability of Blue Canva, also additional amortization charges as well as increased expenses played a major role here. For the coming quarters, we expect a run rate of around €5 million per quarter or slightly more than €20 million per year for additional amortization charges in connection with the GoCanvas acquisition. However, please be reminded that the effects of the acquisitions are subject to the fact that the important key figures that I was mentioning here, including the calculation of the PPA and amortization charges for GoCanvas, are still preliminary and will not be finalized until the later months. the latest dates of this year, and that's why it's still an assumption. The same applies to the additional interest expense that we expected as a result of the GoCanvas extension. As we have already communicated, at just over 600 million euros, we initially financed a large portion of the purchase price with new debt First, we have a revolving credit facility as well as a bridge loan. And we are currently in the process of the refinance of the bridge loan with our debut promissory note, the German Schultz line. And in addition, thanks to our continued very strong cash flow generation with a free cash flow before M&A of almost 200 million euros in the first nine months of 2024, we have already retained more than 100 million euros of the initial acquisition financing. The incremental interest expense of 7.7 million in the third quarter in connection with your canvas is therefore not necessarily a representative run rate going forward. Additional interest costs in 2025 are projected to be in the ballpark of 20 to 25 million euros, but that is very much depending on how quickly you decide to repay the loan out of the strong cash regeneration, as well as the final take-up financing conditions, of course. Furthermore, I think it's really fair to say that we still maintain a very solid balance sheet, even after the acquisition of GoCanvas, with an equity rate of 39% and a net debt to EBTA rate of currently 1.8 times, despite the GoCanvas acquisition. In addition, and thanks to our performance and strong operational performance, as well as a very strong cash flow generation capability, we will be able to very quickly deliver and recreate a substantial leverage headroom for further investments. And with that, I'll hand it back to Luis.

Thank you very much, Louise, for this comprehensive overview of our financial results. As we come to the end of our presentation on page number 12, I would like to turn to our organic guidance. as well as our expanded outlook following the acquisition of GoCampus for the current financial year 2024. On slide 12, as a result of the multitude of long-term structural growth drivers in our industry, such as a low degree of digitalization, regulation, and the pressing need for construction companies to become more efficient and sustainable, our strong operational growth in the first nine months of the year, our highly resilient and well-diversified business model, as well as our successful subscription and SaaS transition in the design and especially in the build segment, Dobro and Rubin, we continue to be very confident to achieve our outlook for the current financial year 2024. We therefore fully confirm all our organics, as well as expanded financial targets following the acquisition of GoCanvas for 2024. Despite the still challenging market environment and the ongoing transition of our business model to subscription and staff models and its accounting-related dampening effects on our revenue and earnings. In particular, teams mean that we will expect an organic revenue growth at constant currencies of 10% to 11%. In addition, the organic EBITDA margin is forecasted to be in the range of 30% to 31%. The ARR growth is expected to be around 25%. As a result, the share of recurring revenues is expected to reach around 85% by year-end. Furthermore, based on the configuration of GoCampus as of July 1st, the Executive Board continues to expect an additional qualitative effect in the forecasted revenue growth of around 3 percentage points for 2024. The APB margin is expected to be diluted by around 100 basis points due to the profitability of Gokanda, which is still below the Nemechek Group's average. The ARR growth is forecasted to increase to more than 30%, while the share of recurring revenue is expected to continue to increase to around 85%. Please let me highlight here again that these figures do not yet reflect the full potential of the acquisition. Both the revenue as well as the PTA contribution of GoCanva are reduced by a high single-digit million euro amount in the second half of 2024 due to the IFRS-related purchase price allocation. the true potential of GoCanva and the combination of Bluem's office and GoCanva's field worker communities will become even more clearly visible in the coming years. Usual or guidance is based on the assumption that there are no material changes in the global macroeconomic and or industry-specific conditions and that both and key figures, including the calculation of the PPA charges for GoCanva, will not be finalized until later in the year. To conclude and summarize our performance in the first nine months of 2024, Lemacek has once again proven its exceptional position in the market. We achieved impressive top-line growth and a height of stability in a challenging environment, while successfully transitioning to a subscription and SaaS business model. And with that said, I would like to thank you for your attention, and we are now happy to take your questions. So, operator, please, back to you.

Yes, thank you. So, ladies and gentlemen, if you would like to ask a question now, please press 9 followed by the star key on your telephone keypad. In case you wish to cancel that question, please press 9 and star a second time. And the first question comes from Alice Jennings-Barclays.

Please go ahead. Hi. Good morning. Afternoon. Sorry. Thank you for taking my question. My first question is just on the build segment. So it's expected to accelerate to more than 30% in the fourth quarter. I was just wondering, how do you expect this to continue going into 2025? And then my second question is in the design segment. So I believe that Gratisoft is going to stop selling licenses for new customers from the start of, for existing customers from the start of next year. So I was just wondering, have you seen any impact so far from people increasing their demand, wishing to take the final opportunity to purchase a license in the fourth quarter so far? Thanks.

Thank you, Alex. So, first of all, on your bill question, yes, correct, we are planning to have a revenue growth of around 33% plus in Q4. This is, again, mainly an accounting effect, especially also the fact that we have very, very low comparables in Q4 2023, remember? That was the first quarter where we didn't have any longer perpetual license, so we have a very, very low comparable. And therefore, in 2025, we will more come in a normalized where we believe the bill segment will be more around 20% revenue growth, as we already indicated in the past. Clearly, it is going to be an exceptional quarter for bills, and then we will more come back on an organic way, bills will be around 20%. Regarding the question on design, here, Graphisoft, yes, as you know, we already announced many months ago that Graphisoft will stop selling Perpetual License to new customers beginning of 2025, and that 80% of customers will still have the ability to buy Perpetual License until January 1st, 2026. So, therefore, there has been already an ongoing discussion you know, demand of a perpetual license for RaciSoft over the last few months, because, you know, it's already known in the market, also with our channel partner and reseller network. Nevertheless, you never know that, you know, this perpetual license could be up or down for a few years. For the moment, we have not seen a huge increase on perpetual license in Q3. Of course, there's still a demand, a good demand, but not like an exceptional strong demand. It may potentially change in Q4, but you have to be very careful because, again, If you look at new customers, most of the time they are buying mainly subscriptions. Why? Because, as you know, a lot of our business is here in Europe and, as you know, the European design market is still challenging, especially in the residential construction overall market segments. Therefore, yes, there might be a surprise, but also it's not necessary. So we have to be very cautious for Q4 in design in the particular graphic soft. Yes, there is still a good demand, but not exceptional demand on perpetual items yet. I hope I answered both your questions.

No, that's very helpful. Thank you very much. Thanks.

The next question comes from Knut Rølle, Vardabank.

Yeah, hi, and thanks for taking my question. First, on the new releases of Alplan 2025, ARCHICAD 28, and Spectreberg 2025, can you give us some ideas here how you impact these new releases to shape growth in the coming quarters? Then, secondly, Luis, if I understood you correctly, it was about priority for you to take down debt quickly and to deleverage to have room for further M&A. Can you just give us some help in understanding in absolute terms what that means per year? Would that be something of a pay down of around about 100 million a year? Is that a realistic assumption? And then just quickly on the short-term Detroit revenue momentum, could you help me here understand what the organic growth was as you did for ARR? Thank you very much.

Thanks, Kud. So, first of all, regarding the new releases in our authoring tool brand, so if you look at GraphiStyle, Vecoworks, and Allplan 2025, for example, this is, as you know, every year, in this period, we are launching new releases for these three large design brands. It is essential that we do that. especially for recurring business, and to make sure that our customers are continuing to subscribe, so term avoidance. And in terms of maintenance, because some of these features are available with some upgrades on the maintenance side, but also on the subscription side, it is key to provide such key new features. So this part of our plan, our plan to reach our target. So it is already based in our forecast for Q4, but also for 2025. So it is business as usual, if you want. and something that we do on a yearly basis. And for the other question, I will let Louise answer.

Yes. Hi, Kurt. Yes. Yeah, I think, of course, it's a priority to pay down the debts in order to recreate that. I think that's always a cautious thing to do. And I mean, given our unchanged, very strong cash flow generating capability that we definitely do not see that we change in any way. any time in the future, we will, of course, use that as we have already done now as well as in the last couple of weeks. So, it's really depending on how much other M&A investment opportunities we have, so they can really pay down the debt, etc. So, if we were not to do any M&As, as I say, we will use the cash to repay the debt and I will not put a number on this, but let's put it to, I mean, the 100 million euro per year that you mentioned is not fully unrealistic, but it's very much depending on, we will continue, as you know, our growth story is to grow and we have enough opportunities out there, so we will use and save the cash for the best use. Otherwise, yes, there could be something like that. And the third question I didn't really get, could you please raise that question?

Yeah, of course. And it's about deferred revenue momentum. Can you share with us what kind of growth it was organically? The short-term deferred revenue momentum.

The deferred revenue momentum, I mean, that is what is impacted. Yeah, this impact is strongly, and that's alluded to a little bit also to the build segment. You know how it is in the beginning when you start with a subscription transition, you are building up your pool, so to say, on deferred revenue. We have almost everything on yearly contracts, right? until you have built that up and then you use your deferred revenues and then you have the growth coming up to that. And the reason now for Q4 being so strong in bills as well is of course also that we now have a higher portion this year that we can recognize in revenue now out of the deferred portion than we had last year as well. So you have that kind of accounting boom or boost, if you may, right? So that's something that, of course, impacting short-term at the beginning of a transition. That levels out over time, of course. So that's one of the impacts we had. And, of course, we added the GoCanLoss acquisition now that is purely a SaaS-based model. That's, of course, a fully recurring revenue model, and then, of course, the design that is now moving out. So, I mean, in general, at the end of Q3, our deferred revenue increased by some 35, 36% year-on-year, and there was approximately 30 million that we acquired through Google CamelBus, if that's helpful.

Thanks very much, Stephen, please.

Thank you. The next question comes from Nicholas David, AutoBHF.

Yes, good afternoon. Yes, hi, good morning. Good afternoon, Yves and Ruiz. Thank you for taking my question. The first question I have is regarding the night growth reported on the bulk segment organically in Q3. Could you share some colors about the drivers of this accretion? Is it linked to some extracurricular items, not only at the Nevaris level, or is it really a nicer than expected performance from the subscription of Ruby? That would be my first question. And my second question is, again, for Canvas, is it that in Q3, the Ruby contribution was a bit higher than initially expected? Could you also give us some details about why? Were you overly cautious regarding the review haircut linked to IFRS? Or is it just Guggenbauer's performance better than expected?

Thank you. Thank you, Nicolas. So, regarding the build segment, clearly it is not only due to Bluebeam accounting effects and all of that, and of course, still strong demand. But also, you're right. thanks to Nevaris. And Nevaris had, you know, not a great H1, I would say. I mean, as you know, Nevaris is really focusing, it's mainly a construction ERP for construction companies, mainly in Germany, and also with some other construction software, so it's really, really dedicated to the German market. And they had a nice Q3, a couple of very good deals, but this really helps also a bump on the growth for Q3. So the bid segment growth is, yes, due to the accounting effect and the fact that, you know, Bluebeam is still highly successful, but the plus, let's say, that you have of what could have been probably a lower effect is thanks to Nevaris on the bid segment. And if you look at Q3 Go Canvas, this is really according to plan. It's in line with what we say, so it's a high single-digit amount for the second half haircut. And, yeah, so we do not have any exceptional performance on GoCanvas as we planned.

But it's well in line with the plan, but it's not deviated from that. And also the haircut that we assumed that is the same because it's still an assumption. So we still don't have the financial figures. That can, of course, change a little bit towards the year end. We have the final figures, but it's still the same assumption.

So it is completely in line with what we had expected, both parameters.

Alright, thank you for the critical comment. And regarding the build growth organically, could you share some comment about quantitatively the impact of Nevaris? Was it really meaningfully accretive to the growth or it's not so material for the 15% growth you showed me?

I mean, for Q3 it was good.

I mean, it was not super high, but it was a good contribution. All right, thank you very much, and congrats for this appointment.

Okay, so the next question comes from Nathan 9 from Barenburg. Excuse me if I mispronounced it.

Hi, thank you for giving me questions. I've got two, if I may. The first one is on the macro and socket one. on the GOAT contributions from the subscription transition plans. With regard to the macro question, you know, one consistency that we've had from the underlying industry throughout the year is because of political uncertainties, you know, some of the customers have delayed their decisions to begin new projects. You know, now that we've had social results over in the US, but then unfortunately with some recent developments, in your home country. I was wondering how we should think about the macro environment heading into 2025. Should we expect some of the delayed project decisions to come back in 2025, or the certainties would continue to exist, especially in Germany?

On the macro side, Clearly, there's no change. I mean, the situation is similar. Yes, we may all think that, well, because interest rates went a little bit down and planning to still go down, that the situation in the construction market, especially in the residential market, is going strongly better. Also for construction software business, no. We are not expecting big changes, so we are not expecting the situation to be better but also not worse within the coming months and quarters. Our guidance for 2025 is based on the assumption that there will be no underlying market changes. And that's the case. It's the same when I talk to peers. Peers in terms of ICO software vendors, some of them have the same feedback. It's really depending on which market they are. Some markets are probably more affected than others of strangers. But even when you talk to people who are more selling hardware and materials in the construction industry, they do not see amount of changes next year and also in Q4 in the overall demand in the conscription market. So, a change.

Understood. And then my second question for the global core transition, the sufficient transition plan, you know, of the 20, around 20% growth that you're guiding and build for 2025, how much of that will come from the tailwinds that we'll continue to see transition plan, and then over in the design segment, what level of growth headwinds should we expect from this glasses of transition, please?

Well, if you look at 2025, so clearly on the build segment side, I mean, the growth is coming from mainly user growth. That's where the growth is coming from. There is still a strong demand, especially in the US. As you know, we are taking strong investments, but also strong focus on internationalization for Bluebeam, especially since Ousmane Souja, the new CEO of Bluebeam and the new Chief Division Officer of Build, who joined us last year in September, that was his strong focus. In Europe, we are really targeting key markets such as France and Germany. UK, we are already doing okay. We see strong growth potential, which probably will have more material effects after 2025, but still strong, nice growth opportunities also in Asia and in the Middle East. Clearly, the main growth is coming to be strong at the beginning of fiscal year 2025 and then it would be a bit more moderate. So for the full year it is 20%, as said before, with higher growth due to the, of course, accounting effects, especially in 2021, but then coming to a more moderate growth and be blended around 20% for the full year. In design, the gratis top transition will give us some headwind. But other brands like Vectorworks will come out of the transition. So as you know, beginning of 2024, all markets, including Japan, the only opportunity you have to buy Vectorworks is a subscription. Then if you look at Alplan, around 75 to 80% of the new seats that we are selling with Alplan since the beginning of this year are subscription already. So the overall migration to subscription has already stated that it's going to be much, much smoother compared to build. And we do not see up from zero in terms of migration also there. So we are already... If you look at subscription revenue in design, we are already in the mid to high 20% share of the total revenue of the design revenue. Got it.

Understood. Thank you very much.

The next question comes from Florian Kreis, Kepler Silber. Please go ahead.

Yes. Hi, everybody. Thanks for taking my question as well. I have two. So you said you're very confident on reaching your guidance. Some might argue that you can be even more confident and, let's say, slightly lifting it. Is there a particular reason that you're holding back and lifting the guidance today? The second part is, and you partly answered already with your statement on the design substance, but my impression, at least, is that the transition overall is running more smoothly than we probably anticipated. Are there any specific reasons you slightly touched on? Your business is really sub-based now. Is it really that clients are now, let's say, also more proactively willing to go to subs, kind of to your surprise as well? Thank you.

Thanks, Florian. So you're right. Clearly, to start with your second point, there is clearly an effect that for the last couple of years, especially in Europe, I mean, customers are willing to are even demanding without us pushing a couple of years ago more to go with subscription. I mean, it's for economical reasons, because it's less expensive for them, especially small-sized customers. They have smaller upfront payment. And economically, also the fact that we increased over the last couple of years a little bit also our perpetual license price, and therefore it's therefore also more attractive economically to go with subscription. But then, even more importantly, you have a lot of features which are not available any longer if you go on perpetual license versus subscription, especially the cloud-based features. So that's why, yes, you're right, this is also one of the impacts that it is much smoother for us on the way to I think the brands, which is a lot of brands in design, Microsoft, they still have some good business on perpetual license. So clearly, this is where in 2025, especially in Q1, where we had a very strong Q1 in 2024. of perpetual license, remember, because we had also two pricing fees on April 1st, 2024. I mean, we will have a high comparable in Q1 in design, and therefore, it will have an impact. But overall, if you look at what we are currently planning for 2025, yes, one will be probably lower, but overall, for the full year, design will be still in the range of what we have to zero or even slightly higher in the high single digit type of revenue growth for 2025. Coming back to your question number one. Yes, we are accelerating strongly in Q4, Q4 with the build segments, you know, in purpose, plus. And design growth is planning to reaccelerate but slightly. a slight acceleration. I mean, there are still some risks. There are still uncertainties in regard to the current economic and political environment, of course. However, we continue to be very confident to reach all our targets for the financial year 2024. No saying that we are going to be in the upper hand of that is probably way too early to say.

Great. Thank you very much. Bye-bye.

The next question comes from Mr. UBS.

Thank you. Good afternoon. Apologies if I missed this, but I was wondering, have you repeated the ambition to grow organically in the mid-teens in 2025? And then given graphics after the build segment is going to be doing 20%, it feels like everything else has to be around double digit at least in order to achieve that. And then I've got a follow-up.

Yes, we are not changing our 2025 guidance. It's still at least in the mid-teens. No change on an organic basis. And of course, then you add also the positive impact of GoCanvas acquisition. So no change there. And yes, bills will be around 20% plus. then we'll have high single-digit growth to probably double-digit for design and probably similar to some other brands between the high single-digit and the low double-digit growth overall for the other segments.

And can you talk about the managed business? And I guess the German operations are flat this quarter. Your comments about macro suggest you're not expecting a pickup, but presumably Germany will get better than that for 2025, and Manage will obviously have to re-accelerate. What will drive that?

Definitely, Manage will re-accelerate, and we do not see... I remember, there are two low figures on Manage, yes, you're right, in Germany, but In 2024, the impact on Martin Operate is the fact also that we stopped his advisory business. And therefore, you know, we would have better comparable also for next year, etc. So we should be a much, much better growth for Operate and Manage in 2025 versus 2024.

And Germany was flat despite Navarro having a good quarter.

So what's going on there and what will drive a pickup?

Again, operate and manage is not only Germany. And Navarro is more in the build segment. So I'm not sure I understand your question, sorry. Navarro is build, not manage and operate.

No, but I meant Germany in aggregate was flat for the quarter. So if Navarro is strong... What were the weaker parts and what will drive their acceleration?

Well, I mean, of course, the big part of a business in Germany is design. And here, with the move to subscription, of course, it had an impact on natural accounting, also impact on the revenue piece. But in terms of sales, design was good in Germany.

Okay, thank you.

There's a subscription transition effect more, as you say, and we have a big chunk of our design business, especially outside of Germany, so that's the reason.

Okay, so Germany's growing better than that on a sort of adjusted basis.

So, I mean, the German construction market and design market, as fast as you know from the industrial perspective, they will be, right? We still have, as you say, a strong momentum on the software side. It's more challenging than the other regions, etc., But I think also the reason why we could just say in Germany for the leadership group was a little bit lower compared to what we have been, which is much higher than the industrial market growth, is of course due to the subscription transition. And that's more the same due to accounting burdens that come throughout that trust. But I mean, Germany is not a strong market right now, I think that's okay.

It is not a strong market, and that's why our focus is really around internationalization, the U.S. market, and that's why his acquisition of Gold Canvas was very key and strategic for us also to grow even further, our presence in North America, and as you know, we also are going after more aggressively in other continents, such as Asia, with India, etc., etc., so... internationalization is really the key growth driver of our overall strategy as a membership group.

Thank you.

The next question comes from Martin Jungfleisch, BNP Paribas. Your line is open.

Yes. Yes, hi. Good afternoon. About the two questions, please. First one is about AI. I mean, You've recently launched a number of AI functionalities in your brand, and I think you're also adding an AI layer into your solutions for next year. Can you just discuss a bit how these AI functionalities are being taken up by your customers, and how do you think you can monetize these investments? Are our customers actually willing to pay up for these functions? And then the second question is on GoCanvas again. Could you just close? what the growth rate year-on-year was, excluding this revenue haircut. Is it still above the 20% growth rate? Thank you.

Thanks, Martin. So, first of all, on AI, yes, you're right. So, as you know, we launched this AI visualizer. We've now deployed these three auto-intrusion brands, such as Graphicsoft with Architab and Vectorworks and Alplan. We have also AI functionality, of course, at Israel, especially in energy management, which is We have an AI-led software cloud solution. We have also AI at Bluebeam, etc. No, really just case by case. If you look at the AI visualizer, it's used actively now. We have very, very good usage of AI visualizer, especially with brands like Archicad and Vectorworks. Now, how we are monetizing it? Yes, I mean, first we want to see really the feedback from the market, making sure that, you know, it is helping them to be more efficient and more productive. It seems to be the case in some parts. And then our idea moving forward with AI, how we are planning to monetize AI, so either it is part of a premium package, so we need to push subscribers to move to, and therefore increase our average revenue per user by doing that. It is also a way, of course, to reduce churn by having this kind of guarantee, but some specific AI features, we are also planning to sell them standalone and to monetize them standalone in the future. So it's really depending on what it is, for which brand, and for what, etc. And this AI layer that we just announced at the group level a few weeks ago, we are planning to launch it sometime in 2025. And that's going to be the foundation of all our brand overall strategic technology foundation around AI for the future. Then, regarding GoCanvas, well, yes, GoCanvas continues to be a 20% revenue growth company and around 20% growth margin, I mean, ABG margin business, excluding the haircut, as we expected. So it is a rule of 40 companies, exactly, excluding the haircut.

Perfect. Thanks a lot.

The next question comes from Victor Singh, Bank of America. Please go ahead.

Hi, thanks for taking my questions, too, if I may. I think you earlier talked about Bluebeam and strategization. That obviously has been the ongoing kind of thesis. I know Bluebeam obviously is very strong in the gold standard US. Is there any reason in other markets that people actually aren't using Bluebeam as much as they should have? Is it more kind of the ecosystem or environment isn't there? Or is there a different kind of competition in other regions? And then secondly, on media, media growth has been a bit slower than historical for a few quarters now. Obviously, you talked about the $25 you expect, you know, a reacceleration. You also talked about, you know, outperformance versus the underlying market and media. Can you give us some color on sort of what gives you the confidence, what underlying market growth you're seeing?

First of all, regarding Rubin, you're right, we continue to be very, very strong in North America, but also we are growing, since we can be international. And why we are growing internationally? First of all, it's easier to grow internationally in the English-speaking markets. That's why Rubin is strong in the UK, is strong in Australia and New Zealand. is also very strong in Scandinavia, especially in Sweden. If you look at Sweden, I mean, there's a very, very strong market share. But then there are some other markets, especially France and Germany, where, frankly, we probably didn't do the right job of go-to-market, let's say, localization of building. And this has clearly changed. the last few months. We worked on proper marketing, education, on, you know, what are the value propositions of Bluebeam, and not, you know, going with Bluebeam and saying, oh, these are the nice technical features of Bluebeam, you can do each way and that. Well, really, to go through the value proposition of Bluebeam, and we see that that works. And by the way, we find some very, very important big deals of Bluebeam a very large customer in Germany, which will free in September, a very big one. So it is working, and we are very, very pleased to see that. It is really giving us high confidence that we can see that Gubin can be very strong in continental Europe. The rest of the world, Asia, Middle East, too early to say, we are pushing it, but we do not see why, especially in India or in the Middle East, there should be any difference, especially that there is no real strong competition in this market for building. Regarding media, the market growth is not fantastic for the last couple of years. As you know, we had the Hollywood strike last year, which still impacted The media grows even still this year. They are suffering. Streaming players are not necessarily in a good shape. You have less content produced. And we see that our main flow, as I said before in the presentation, is coming from the direct markets. I mean, the rest of the world is doing okay. We even have double-digit growth, or strong double-digit growth, if you look at Asia-Pacific. But as half of the business of Maxon is in North America, well, ultimately, it is really impacting, and we have only a high percentage growth on the revenue side for Maxon. The good thing, and you can compare it, for example, with our main competitor on the major side, we are clearly outperforming the growth of the competition. But clearly we see better performance in Q3 than in Q2. We foresee, again, when we look at October, that the trend is the same as in issue 3, so we are expecting Q4 to be the similar type of growth, more or less, in issue 3, and probably slightly better than even in 2025, because, of course, it is a pure subscription business. All the sales that we are doing now in the second half of 2024 will have a policy impact on the revenue side for 2025. So we are confident on the maximum side to really be, again, to come back to the probably even double-digit growth mid-term, low double-digit growth mid-term for this business.

Very good, Carlo. Thank you.

So your next question comes from . Please go ahead.

Yeah, hi. Thanks for taking the question. Congrats from my side as well. Just a couple of questions on the clarification. I was just wondering, in terms of price increases, you did quite a wide range of price increases last year in design. Build has been the third price increases over a couple of years. How are you seeing this for Bluem particularly? And also on a related note, you had the first set of renewals as well in terms of your subscriptions. So I was just wondering, have you noticed any change in terms of attrition here? Is that lowering to give you a more steady visibility on overall revenues? Thanks.

First of all, on price increase, yes, we saw a price increase that's mainly on perpetual license business in design, which is helping us in the conversion and the transition to subscription and SaaS business model. On the Bluebeam side, I mean, there has been some price adjustment, and as you know, as when we moved also to subscription with Bluebeam, there has been some new repackaging, etc., and that's why, you know, as we discussed, Bluebeam averaged yearly subscriptions, he represents around 50% plus of the perpetual license. And this is really thanks to, you can call it price increase or price adjustment, but it's really this repackaging that we have done with Bluebeam. There's been some slight also price increase with Bluebeam done, but clearly the growth of Bluebeam is mainly, I mean, it's still coming from the net user growth. On the renewal side, at the moment, I'm in a positive. I mean, we are in a churn rate which we were planning to have. Of course, when you start with some piece under the churn, therefore higher than SSA maintenance, but that's normal. But overall, there is no big change in the term rate in our renewal and subscription that we have seen so far.

So, quite positive.

Perfect. And maybe one clarification. Historically, the BAU conference in the new year has an impact on Q4 design performance. I'm just wondering, is that era behind us, even though they're pushing towards subscriptions?

A BAO is, of course, a very important conference for us here in Munich.

I'm not sure your question is related to if we are going to make a specific announcement there or... No, historically we are seeing sometimes clients wait for the BAO conference and then make the purchases instead of buying NQ4. So I'm just wondering if that's something... Not really.

Not really. I mean, not really. She will not have that. I mean, it is more for each generation. She's events, market presence. It's more marketing tools. it's not like in the case of, you know, pure construction equipment where, you know, we are seeing orders in the facial. That's not really the case. And a little bit, of course, there are some cases, but it was more in the past. Now it's really more degeneration marketing tool for, yeah, for growth. But it will not have impact on living.

Perfect. Thank you very much.

She could have an impact on cost because it's an expensive event.

But if you also have this kind of... But you have your rights.

Thanks, Sandra.

Okay, so at this point, there seem to be no further questions. That means I'd like to wrap up the Q&A segment and hand it back to the speakers for some closing remarks.

Perfect. Thanks, everyone, for attending.

So I'm looking forward to catching up with you soon if you have any follow-up questions. So please do not hesitate to contact us. Let's conclude our call for today. Thanks again for attending. Hope to speak to you soon.

Thank you very much, everyone.

Thank you.