Nemetschek Se Unsp/Adr

Thank you, operator, and hello, everyone, and a warm welcome. Thanks for joining our earnings call today to discuss the results for the first quarter of 2026 with us. With me today are our CEO, Yves Padrin, and our CFO, Louise Silberström. 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 quarterly report, the presentation and the press release on our investor relations website as well. But now let's get started. So I would like to turn over to our CEO, Yves. Yves, go ahead.

Thank you, Stephanie. Welcome, everyone, to our earnings call for the first quarter of 2026. Last month, as part of our full year 2025 results, we shared a substantial amount of detail on our key strategic priorities, including our AI and M&A strategy. Today, we are taking a more streamlined approach again and have returned to our usual short but informative slide deck. our Chief Financial Officer, Louisa Verström and I will share, therefore, and give you a brief overview of the highlights of the first quarter of 2026 before leaving sufficient time for your questions. To begin with, please see the most important points of the first quarter of 2026 in a few key messages on page number three. Firstly, I would like to summarize our start to the year as very successful. We continued the remarkable momentum from 2025 into the first quarter of 2026, driven first by an excellent performance in our build segments, which once again showed an outstanding growth internationally and in North America. At the same time, the design segment continued to perform very well and re-accelerated its growth. After last quarter's exceptionally high comparison base, supported by positive subscription momentum from very strong new unit growth, as well as subscription migration effects, including multi-year contracts. Thirdly, in the first few months of the year, alongside our strong financial performance, we also made important progress across several of our key strategic focus areas. Let me highlight two strategic priorities in particular. First, artificial intelligence remains the key strategic focus for the Nemetschek Group. We are increasingly evolving from a leading vertical software player into an AI leader in our industries. by leveraging our deep domain expertise, unique data intelligence, as well as our trusted customer relationship and strong network effects to ultimately deliver tangible value to our customers in their day-to-day operations. A recent example for that is our new Bluebeam Max package, which was successfully launched as planned in Q1 and which further strengthens our AI-enabled product offerings. In addition, we were extremely pleased to announce that we have signed a definitive agreement to acquire Heavy Construction Systems Specialists, or short, HCSS, just two weeks ago. The closing of this deal is expected to be in the second half of this year. With the acquisition of HCSS, we are substantially increasing our market opportunity by 30% in the highly attractive infrastructure and heavy civil construction market and are creating the next global construction tech giant. By combining HCSS with our leading brands in the build segment, we are creating a unique combination of scale, growth, and profitability, forming a global construction AI and technology powerhouse covering the full range of end markets and customer segments. At the same time, and this top height is being by far the largest acquisition in the data group's history, The tailored transaction structure preserves our balance sheet flexibility and strength, while ensuring that the build segment will continue to be an integral part of the Nemechek Group and will continue to be managed, steered, controlled and fully consolidated by the Nemechek Group. The acquisition of HESS, therefore, marks a major milestone for the Nemetschek Group and represents an important step forward in our ambition to become the global leader in the AECO industry. Therefore, thanks to a very successful start to the year, we are well on track to achieve all of our financial targets for the financial year 2026. Combination over strong operational performance, targeted strategic acquisition, and AI-driven innovations creates a uniquely attractive growth and profitability profile in our growing industry. So in short, we are well on the way to deliver again on all our goals. On the next slide, number four, you can see these key messages translated into the development of our most important financial indicators in the first quarter of 2026. Starting with the revenue growth, for the period from January to March, we recorded a reported growth of 10.7% to €313.1 million. Adjusted for the continued FX headwinds in the first quarter, mainly stemmed from the weaker US dollar, we achieved a strong growth of plus 17%. In line with our key strategic priorities, the transition to a subscription and SaaS-based business model, the main contributor to our growth was once again recurring part of our business, reflecting in our annual recurring revenue. In Q1, ARR grew by 14.4% on a reported basis and plus 21% FX adjusted, reaching almost 1.2 billion euros. This continued strong increase in ARR is an important indicator of the group's revenue and cash flow growth potential over the next 12 months. Looking at the different components of our ARR growth, it is not surprising that, in line with our plans to migrate existing maintenance customers to subscription and SaaS, the related revenue category subscription and SaaS revenue was a main driver with a plus of 5%. 27.3% on a reported basis, and plus 35.4% on an ethics-adjusted basis. EBDA increased even more strongly than revenue, growing by plus 22% reported and almost plus 30% ethics-adjusted to 98.4 million euros. This over-proportional increase resulted in an EBDA margin of 31.4%. driven by our ability to scale, healthy operating leverage, continued focus on our cost base, and continuous improvement in internal efficiency. And despite continued investment into the future growth of our business, including AI, ongoing subscription transition, and to a smaller extent, transaction-related costs associated with the SGSS acquisition. In addition, supported by our strong earnings and a cash conversion of more than 140%, we once again further strengthened our balance sheet, which Louise will elaborate in more detail. As I mentioned at the beginning, the acquisition of HESS, one of the world's largest providers of infrastructure and heavy civil construction technology, marks several steps forward to further strengthen our global leadership in the AECO industry. Let me now briefly walk you through the key elements of our strategic rationale and why we are so confident that this transaction will create substantial value for the Nemetsche Group as well as for our customers and shareholders. First, transaction is about creating a global leader in construction technology. It significantly scales and strengthens our position in the highly attractive infrastructure and heavy civil construction market. HSS is one of the most attractive assets in the HCO software space and combines strong and profitable growth with very close customer relationships and an extremely low churn, below 2%. By bringing together HCSS, which is the number one leader in heavy construction and infrastructure software in North America, with Nemetschek Group in general, and with our existing leading build and construct portfolio, Bluebeam, GoCanvas, including, of course, SideDocs and Nevaris, we are combining highly complementary capabilities across infrastructure and buildings. covering the entire construction lifecycle and all end markets. Second, we are significantly expanding our addressable market and further strengthening and scaling our position in infrastructure, thereby making the overall Nemetschek portfolio even more balanced and ultimately even more resilient and excellently positioned for further growth. Infrastructure and heavy civil construction is a highly attractive segment, supported by very strong structural growth drivers, which has aging infrastructure, large-scale government investment, and the ongoing urbanization. With HCSS, we gain direct access to this growing segment and significantly expand our opportunity in building and construction by more than 30%. The market expected to grow at a cargo of around 11% and reaching approximately $12 billion by 2028. Third, transaction creates competing synergies. Complementary technology creates a comprehensive end-to-end construction technology portfolio, strong cross-selling opportunities, access to new customer groups, and the opportunity to further leverage our global presence. In addition, and very similar to the Nemetschek group, HCSS, as a vertical software provider in infrastructure and heavy civil, is ideally positioned to win in AI due to its deep domain expertise, trusted customer relationship and network effect, as well as 40 years of proprietary industry-specific data. Combining that with Nemetschek's advanced AI capabilities will enable us to benefit from the huge workforce-related time opportunity in the construction industry, also now in infrastructure and heavy civil. And finally, we are doing all of this by having an impact of only €450 million on the group's net debt position. We preserve our balance sheet strength our strategic flexibility, as well as our group structure and the successful way we operate our business, all enabled by this tailored transactional structure. As I highlighted earlier, the build and construct segment, including HCSS, will continue to be fully steered, consolidated, and managed by the Nemetsha Group, who will own around 72% of the segment. In addition, Bravo, the world's largest software-focused investment firm, has become a minority shareholder and partner with a share of around 28% in the build and construct segment. Together, combining their strong technology and software expertise with our deep industry knowledge and operational capabilities, we are very well positioned to capture the significant growth opportunities in the build and construction market. Looking at the financial side of this deal, which is also highly compelling, HCSS, with over 4,000 customers, combined strong growth with a very attractive profitability profile, comparable to our standalone build and construct segment. In 2025, HCSS generated around $250 million in mainly recurring subscription-based revenues. Over the last years, the company has built an impressive track record, combining sustainable strong top line with an ARR increase of plus 21% in 2025, combined with a very high profitability reflected in an EBITDA margin of around 40% under US GAAP. The mission-critical nature of this solution, deeply embedded in its customer daily workflows, drives a very high customer loyalty and strong retention, as reflected in KPI, such again as a very low churn rate below 2%. The transaction translates into a very attractive and significantly strengthened financial profile for our build and construct segment, and therefore for the Nemetschek Group as a whole. The addition of HESS we are maintaining in part even enhancing our strong growth and profitability while significantly increasing the scale of the business. To give you a sense of this, by 2028, we expect the combined build and construct segment on a standalone basis to generate clearly more than 1 billion euros in revenue. This is a milestone that we have only just achieved at the entire group level for the first time in our history last year. At the same time, business will be characterized by a highly recurring revenue base of around 95%, exceptionally strong customer retention, and an EPDA margin of at least 40%, a level clearly above the group average. All of these means that we are building not only a rule of 40 business, but a segment close to a rule of 60 profile. Just as a reminder, the acquisition is expected to close in the second half of 2026 and is, of course, subject to customary regulatory approval and closing conditions. More details regarding the transactions, potential synergies, as well as the expected impact on Nemechek Group's financials and the outlook for the current financial year will be disclosed after closing. And with that, I will now hand it over to Louise.

Thank you, Yves, and a warm welcome to our first quarter 2026 earnings call also from my side. Yves has already touched on some of our key financial indicators, and I would therefore now like to look in a bit more detail at the most important financial aspects of our results in the first quarter, as well as also at the underlying service thereof. On slide number eight, we have, as usual, an overview of the development of our four segments in the first quarter of 2026. Let's start with our design segment from the left. In the first quarter, the segment recorded a growth of 5.7% and even 9.5% on a constant currency basis, 136.2 million euros. The continued good performance includes a strong growth in new units. And at the same time, the transition to a subscription and SaaS based business model continued to progress successfully and according to plan. And that is also reflected in the strong growth of this revenue category that amounted to 54.7% on an FX adjusted basis. In addition to this, growth was impacted by FX or revenue recognition impacts multi-contracts. And these contracts are, as you know, being used to support the migration of existing maintenance customers to a subscription-based model after Graphisoft and Alplan brands. Reported EVTA margin of the segment improved to 25.2% from 23.8% in the same quarter previous year. Moving on, our build segment once again delivered a stellar performance in the first quarter, predominantly driven by high underlying growth in new users, both in the US as well as also internationally. And just as a reminder, in 2025, this segment benefited from the inorganic contribution of GoCanvas, as well as by temporary positive effects following the successful completion of Bluebeam subscription transition. Consequently, as expected, growth moderated somewhat in Q1 26, yet at a still outstanding high level. In Q1, reported growth of the segment reached 19.8%. When adjusting for the strong FX headwind that is stemming from the weaker US dollar, growth reached an impressive 29.8%. In addition, Bluebeam also successfully launched its agentic AI-based product suite, Bluebeam Max, as planned in the quarter, marking an important further step towards our AI-powered solutions to further enhance the efficiency, effectiveness, and the collaboration across construction workflows. The reported EBITDA margin in the quarter in this segment reached a very strong 39.5%, an increase of around 440 basis points year on year, and despite the continued investments to support the future growth of this very strong segment. Moving on to our smallest segment, Manage, which recorded a growth of 3.2% for the first quarter of 2021. Whilst the development in Q1 might seem modest, the strong growth in demand and sales performance with existing and new customers, particularly in the public and financial sectors, provide a strong foundation for dynamic acceleration in the growth in the coming quarters in line with our business acceleration plans. The EBITDA margin in this segment remained broadly stable at 10.4%. Concluding with the media segment, here revenue increased by 0.8% on a reported and a 6.6% on a constant currency basis to 29.6 million euros. And the segment's business performance continues to be influenced by, we still see a mixed market environment with ongoing longer customer investment decision cycles and therefore still longer sales cycles. Nevertheless, during the quarter, the media segment has laid important foundations for higher future growth. including the launch of its ArchVis rendering solution to further drive expansion in the ACO industry, the introduction of a digital twin solution for real products, important for AI, and the partnership with Tencent Cloud to enable artists to accelerate early-stage 3D concepting using Tencent's 3D global AI engine. The EBITDA margin in this segment increased to 32% in the quarter. Prior year quarter included a non-operating effect resulting from the insolvency of a service and payment provider. However, prior year quarter also included strong and consistent cost measures to mitigate the negative extraordinary effects. Let us move on to slide number nine, which summarizes well the progress and impacts of one of our key strategic priorities, which is also a regular topic here in our earnings course. And that is our transition to a subscription and sales centric business model. On the right hand of this slide, you can see why we are so pleased with the development of our transition. In line with prior quarters, the recurring part of our business, which recorded an FX-adjusted increase of 21% in the quarter, was once again the key driver of our strong growth in the first quarter. With a new record high share of recurring revenues of 95%, it is also the logical and also the expected consequence that the gap that we now see between ARR and revenue growth continues to narrow. Looking at the different moving parts within the recurring revenue category, it becomes clear what has been driving the strong increase of this revenue category. And that is our systematic and highly successful transition to a subscription and SaaS-centric business model, which is reflected in an FX-adjusted growth of 35.4%. while revenues from maintenance contracts continue to decline, perfectly in line with our plans, by more than 20% year on year. At the same time, and fully in line with our strategy, license revenues declined strongly, 53.7% year-over-year in Q1, reflecting the continued shift from perpetual licenses to a fully subscription-based model. As expected, this more volatile and less predictable revenue stream now accounts for only 2% of topical growth revenues. The left hand side of the slide also provides a longer term view of the development of our subscription and SaaS revenues. While we started with a subscription base of just 45 million euros in the quarter in 2022, we have increased these more resilient and predictable revenues to almost 250 million euros over the past four years. Let us conclude our financial review of the first quarter by looking at a few highlights and developments beyond our revenue and EBITDA. As usual, you will find a more comprehensive overview of our income statement, as well as the most important cash flow and balance sheet KPIs on slide number 10. Starting with the largest component of our overall cost base here, the personnel cost, here we saw only a very modest increase of 4.4% year over year to 123 million euros. This is in line with the growth we already saw in the second half of 2025, and it reflects our strong ability to scale and leverage efficiently, and also the continuous enhancement of our operational excellence and of the underlying resource efficiency. The increase in operating income and expenses of 9.7%, as you can see here, is showing a business volume growth related increase and to a lesser extent is also impacted by M&A related costs in the quarter. Let us move further down the PML. Here you will notice that our healthy operating leverage is also evident in the over-proportional growth in profitability below the EBITDA line, resulting in an increase in our earnings per share of 34.5% year over year. Turning to our cash flow development, the seasonally very high cash conversion in the first quarter. You know that our cash conversion is defined as operating cash flow in relation to EBITDA. Here we saw 143%. And this, along with our strong fee cash flow generation in Q1, underlines the high quality of our earnings. Going forward, we remain very confident in our cash generating capabilities, with a cash conversion rate expected to remain above 100%. Finally, driven by our strong earnings and cash flow development, we further improve the quality of our strong balance sheet, reaching an equity ratio of 47.3% and a net debt position of just 7.8 million euros. And here you can see that since the closing of the GoCanvas acquisition on July 1st, 2024, and the associated increase in the net debt to 370 million euros at the time, we have now deleveraged in full in less than two years, despite continuing to successfully execute smaller value acquisitions such as Firmus.ai in the meantime. This strength of our balance sheet and our strong underlining earnings and cash flow generation enables us to comfortably absorb the approximately 450 million euro impact on the group's net debt position following the expected closing of the HTSS acquisition in the second half of the year. And this without losing our strong financial flexibility for further growth, and enabling us to act should M&A or venture investment opportunities emerge. So all in all, I believe it's very fair to say that the financials of the first quarter of fiscal 2026 are mirroring a very successful start to the year. And with that, I'll hand it back to you.

Thank you, Louise, for that detailed overview of financial results. To wrap up our presentation, let's turn to page number 12 and take a look at our outlook for the full financial year 2026. Building on a very successful start to the year, the strength of our underlying operational business, our clear strategic direction, and our very strong innovation capabilities, in particular our clear focus on artificial intelligence, We remain very confident in our ability to achieve our goals for 2026 and beyond. Consequently, we fully confirm our guidance for 2026 after the first quarter. In particular, it means that today's perspective, the Executive Board expects a currency-adjusted organic revenue growth for the Nemechek Group in a range between plus 14% and plus 15%. At the same time, the EBITDA margin is expected to expand to between 32% and 33%. Therefore, expect to continue our strong and profitable growth trajectory even against high comparison base and despite the ongoing subscription and SaaS transition in our design segment, thereby delivering one of the most attractive combination of growth and profitability in our industries. As I highlighted last month when we introduced our full year 2026 guidance, please note that these forecasts are based on the assumption that global economic and industry-specific conditions will not deteriorate significantly during the current financial year. In addition, we assume that the geopolitical situation, particularly in the Middle East, will not escalate further or persist for a prolonged period. In addition, more details regarding the HCSS acquisition, potential synergies, as well as the expected impact on MNC Group's financials, as well as the outlook for the current financial year, will be disclosed after closing. And with that, I would like to thank you for your attention. We are now happy to take your questions. Operator, please, back to you.

Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. The first question from the phone comes from Joe George with JP Morgan. Please go ahead.

Yes. Hi, guys. And thank you for taking my question. And I might have missed it in the opening remarks, but just a quick one on the design growth through the quarter. Could you just touch on what proportion of growth through Q1 came from upfront revenue recognition of multi-year deals, please? And then secondly, a question just on M&A within the guidance. Can you just confirm, please, what impact from M&A is baked into the 14% to 15% growth guidance? Or is this all organic? Because even if we exclude HCSS for now, I know there's been a number of smaller acquisitions in the last 12 months, like Firmus AI, Morfolio, and I think a few resellers as well. It looks like there was a small impact from M&A in Q1. So could you just confirm, please, what M&A, if any, is baked into the current guide, again, pre-HCSS? All right. Yeah, and that's it for now. Thanks.

Okay. Thanks, Joe. Thanks. Regarding your question on M&A, so when we guide, we guide only organically. So it is true that we always expect to have some level of M&A costs. I mean, we do some small ones, et cetera, here and there. So there are some. M&A costs, of course, already included in Q1, but we will give you more details on the full M&A cost impact after closing of the HSS deal, which is purely related then to HSS.

Yeah, and let me take, Joe, so thank you, the question regarding design and the multi-year contract. I think it's, we need to look a little bit broader on that in this year, whereas in 2025, it was easier to say what is really the impact of the three-year deals, because there it was the first year where we had these impacts really in Graphisoft and Let me make the answer a bit longer just to make sure that we get the different factors here. So just simply answering to your question, like for like in the first quarter, as we have alluded to before, we still expect as we use these contracts in a different markets and a more conservative markets where this move to subscription based contracts is maybe not as natural as in some other markets, we expect 2026 to have approximately the same level as we saw in 2025. And that's also what we saw in Q1. We cannot quite steer that and we don't want to quite steer that either, because that's depending on our customer groups, a little bit of country by country. But in Q1, it's approximately the same level as the Q1 2025. We had an additional as the absolute amount is a bit higher, though, because the share is the same. You could say that you can calculate that we had a mid single digit million euro figure tailwind lower to mid somewhere there. But you should all you need to look broader on it because. This also covered for a part of the license decline. I just alluded to that, as you see, by over 50 percent decline year on year as well. Of course, that mitigated that by a factor as well. And then you have to look at the broader case. If I were to do the analysis, if we would have only had annual contracts, and not have the three-year contracts, then we will, of course, have had a higher growth now in the Q1 in 2026, because then, you know how it is, we recognize a larger part up front, and then in the residual of those three years, you have a lower revenue recognition. So if you would look at it like that, we would have had a few percentage points higher growth. So you can, it's a, I mean, I don't think it's that complicated. It's mechanics behind the scenes, as you know, but to answer a very short question with a long answer, as I just did, you can, you can take this, it is a low to mid syndrome disease, So low to mid single digit tailwind in addition. Share is approximately the same. But if you would say what is really the impact of three year contracts, you would have to look at it broader because then we will actually have had a more of a headwind, if you may, I suppose. So that's the mechanics on it. And we expect this level to sort of say the same kind of share throughout the year. But as said, it can deviate a bit between the quarters as well, depending on which markets are really taking on the subscription or the SSA to subscription transformation in the one or the other way. And we will continue to disclose the way we do it now, what was the impact on the quarter. But I think if you want to calculate something for the year and drew conclusions, my take would be to look at it at the same level approximately from a quarter-to-quarter basis and approximately the same share as in 2025.

That's very helpful. Thanks very much.

The next question from the phone comes from Balaget Tirupati with Citi. Please go ahead.

Hi, good afternoon and thanks for taking my questions. Two from my side, if I may. Firstly, could you kindly share your view on demand involvement and changes you might have observed since the beginning of escalation in Middle East? I appreciate limited direct exposure to the region. Still, if you could share a broader color on what are you seeing or expecting in wake of current environment. And the second question on If you could share, how do you see the first quarter result across different parts of the business against your initial expectation? And in particular, there in media segment, given the dynamics you saw in first quarter, do you expect to return to double digit growth for 2026? Thank you.

Thank you, Balaji. So clearly, if you look at the overall macro and then also in the Middle East, we do not see any specific large growth. changes in the overall macro dynamic for our industry in AEC technology and software in general. I mean, the region is still the same compared to last quarter. It is clear that the good news is that Germany which was partially challenged clearly in the past, there is a better, stronger, positive momentum, which is already reflected a little bit in the numbers. But of course, we should not draw directly a conclusion that Germany is back to high growth. But clearly, there is a positive momentum. And we saw in Q1 also of 2026, a very good performance in Germany. So again, it's too early to tell when and how exactly it will affect really the demand. But the mood and sentiment in Germany has improved. So then regarding Middle East. So we... are not too much impacted yet. I think, of course, if the situation is deteriorating or if it is much prolonged, we won't be immune completely to a potential big economical crisis. Nevertheless, we are not there yet. And the business that we are currently doing in the Middle East, yes, has been slower than expected, but we are talking about a very low base because we just started really our activity directly in the region in May of last year. Therefore, there is no big... big impact for us. So the direct exposure in the region for us is very small, and our guidance is based on the assumption that global economics and industry-specific conditions will, of course, not deteriorate any further. And we follow the development closely. We'll act quickly, of course, with changes occurring.

I think the second question was more on the media segment, right?

Yeah, and I think here, clearly, the market is still highly balanced. We have a lot of customers who have some cost constraints, large ones, but also medium-small ones. The dynamic in the regions is still different between Europe, Asia and North America. Frankly, Asia and Europe is doing better than North America. Concluding that it's because of AI, it's not the case yet. But clearly, there is a mixed environment and slower demand and, of course, longer decision process in general for Maxon brands and products. This is why we decided, as you know, to diversify more portfolio. We launched commercially in Q1 now our architecture visualization rendering software, which is first on Vectorworks. And then it will be on Autodesk Revit this summer and later in the year also on Archicad. And then, of course, we will roll out this Archviz Red Giant rendering software solution for architects on multiple, also third-party solutions. And then we also announced at CES in January 2020 In Las Vegas, the fact that we are launching a new product, which is going to be a digital twin, mainly for web store and e-commerce business, which we are going to launch commercially more toward the end of this calendar year. Of course, we are also accelerating our AI roadmap with Maxon. This is why we did this Tencent Cloud partnership on their 3D AI engine, which is highly powered and full with many data that they have from their own games. And therefore, today, and also when you see, okay, it's too early to say for Q2, obviously, that's already the beginning of Q2, etc. We see that, you know, for the full year, the revenue growth, that constant currency for the media segment should be as expected still in the higher single digit growth on the revenue side. So, no change there.

Thank you.

Just in terms of M&As, I think there was 33 million in the quarter. The only thing I could see is you announced in the end of February you bought your resellers in Australia and New Zealand. Can you explain what the strategy is on buying resellers? Because you bought the Japanese one in 2024, Swiss one in 23, and a Vectorworks one in 2021. Is there a sort of desire to own the distribution? Is there some leverage you get from that? And I guess, why are you spending 30 million on a company that sells your intellectual property? And then I've got a second one. Thank you.

Clearly, this is part of our overall strategy to really control more or go to market, to go more directly. In some cases, if you look at ANA in Japan, in 2024, you know, that was a distributor. So it means that they are still working with resellers. So we want to avoid these two-tier indirect channels. Yes, of course, we will continue to do indirect. We like our channel partners. We have very, very strong partners and resellers, but we want to have a direct touch with them. And in addition, in some other markets, also want to have that more direct touch with some of our end customers. And that's why also we have this approach. But in general, we still have here and there some distributors and therefore a two-tier approach. But we really would like to avoid this two-tier approach and really go more direct to our resellers or ultimately at the end of the day, to our end users and our customers. So that's the main reason.

And can you just say, on the resellers, do they typically take a revenue share or are they paid on commission? I mean, let's say you... It's both.

I mean, it's really mixed. It's really, really mixed. So if you take... Some resellers, they are pure agent model and commission. Some others, they are just reselling the product. So it's really depending on the products, on the region, on the reseller, the contract that they have. So it's not one solution fits all. It would be too easy.

Yeah.

please go ahead please go ahead well i was going to say well why don't you just let their contracts run out and then take over the business you know organically it seems expensive to spend 30 million on someone that's selling your intellectual property

they develop also their own uh so the thing is that all the localization have been done by these distributors so for example in a a a they did a lot of ip we are buying their their ip that they developed on top of our products for example on top of vectorworks so you have here uh a lot of localization and ip dedicated and also sometimes add-on products that they have developed that they are selling on top of Vectorworks, for example, or Archicad, et cetera. So it is not only the pure go-to-market, it is also IP and intellectual property that we are buying that they developed on top of a product or for the localization of the product for the specific market.

Yeah, and I think in addition, just to correct that a little bit, that was one, but we also, as you might have seen also, announced our portfolio acquisition. So we also, the whole sum, as you can see in the Q1 balance sheet, What we have spent there is not only on the reseller. We also continue to acquire tech, smaller tech, portfolio, highly interesting solution, but also smaller tech acquisitions. It's also not the full sum that should be allocated to that. I think it's really important what Yves alluded to. I think our resellers that we are acquiring are specific in that aspect, that they have really been developing a lot of interesting add-on products and added services, so to say, that we are acquiring with that.

And Morfolio, this is an acquisition that Vectorworks has done at the beginning of the year. So it was in February. And Morfolio is very strong. So they have almost no revenue, but the tech is very strong. And by the way, as soon as we acquired them, we launched a completely new AI-powered solution on top of Morfolio. And Morfolio, they are very dedicated to iPad. So they create mobile-first design and sketching applications. specifically for architects or designers and other creative type of professionals. And it's a very strong solution. So they have a lot of free users, close to 1 million free, so non-paid users. But now we are taking their Sketch CAD capabilities and other solutions on top of our different BIM authoring tools. adding that with some other data intelligence and also now our AI assistant and adjunct AI solution. So I'm very pleased with this acquisition, which is now first going to be which is deployed now on top of Vectorworks. But of course, as you can imagine, we are planning also to have a portfolio solution on top of Archicad soon. But that was almost no revenue. And it's mainly a tech and also a product and brand which we acquired. So it's also part of the 30 million.

Okay. And then just a quick one, Louise. Can you just walk us through the policy on capitalizing commissions on the long-term contracts? Is it sort of spread rateably over the presumable three years of the life? And would you expense on day one on a one-year deal 100% of the commission? I'm just trying to understand the difference in cost allocation.

So you're correct. So the policy, which is our first policy, we are showing that relatively over the three years in our balance sheet. And yes, the expense on the first day, we recognize the revenue as well. So that's correctly understood.

And how would you pay the salesperson or partner? Would you pay them annually or all up front on a three year deal?

No, that is a little bit depending on the partner and the country and the brand and the setup. And that's why there's difficult to, that's a different payment patterns, I can't really say, but I would say most of them are not paid up front, but more so to say on a more spread version. That's the more normal sequence, if you may, right? But there are, as you know, we have We have been quite direct with our different brands in different setups in different countries. So there are differences there in the setups, but I would say the installment somehow spread over the time, maybe on average. But that's to say, shooting from the hip a little bit, three installments somehow is the majority of the contract, I would say. But don't take it too, not down to the last digit, but that would say directionally correct, at least, if you assume that.

Yes, that makes sense. Thank you very much. Thank you.

The next question from the phone comes from Ines Mauer with PNP Paribas. Please go ahead.

Hi, thank you. I have two questions about the build segment. The first one is following a pretty strong quarter, year over year in Q1, how should we think about the growth trajectory in the build segment for the remainder of the year? And my second question is about Bloombeam and GoCanvas cross-selling. So can you help us quantify what's actually happening today, for example, What percentage of customers are currently using both products and how fast is the penetration increasing between the two products? Thank you.

Thanks Ines. So we still clearly see a highly, highly strong momentum in the build segment, which is a combination of all our brands. It's, of course, Bluebeam very, very significantly, but also GoCanvas. SideDocs on the safety side is running very, very nicely. And GoCanvas are according to plan. Nevaris, despite the fact that they are in Germany, I mean, there is also a very good, strong momentum there. So for GoCanvas, For the rest of the year, and as also described also beyond 2026, we see the build segment being able to have a strong double-digit growth and clearly for 2026, above 20% revenue growth at constant currency. If you look at GoCanvas and Bluebeam, there is, of course, still a small portion of Bluebeam customers who are GoCanvas customers. Bluebeam has now close to 4 million users. Now, of course, these 4 million users cannot necessarily become Or it would be appropriate for them to be a GoCanvas customer. For example, there are Bluebeam users who are people working in a municipality doing a permitting in California, for example. Or you have some of them who are architects or some of them who are doing mainly design reviews, etc., in engineering firms, etc., etc. But of course, when you have Ruby more linked to construction workers and therefore like a link between the office to the field, et cetera, here there is clearly a link. I cannot give you an exact percentage. I don't have it here yet on how many Bluebeam customers are also GoCanvas customers, but it's a small base, especially as also Bluebeam internationalization is going on. better and better. Clearly, we are growing very nicely internationally and yet GoCanvas, internationally, it's only in some small pocket that we started to be more aggressive outside North America, mainly in UK and in the Pacific. But the rest of the world, we don't have yet GoCanvas and SideDocs. And therefore, we're not targeting Bluebeam customers with this solution yet. Doesn't mean that we're not planning to, but that's not the case. So clearly, very, very strong momentum on Bluebeam. I mean, and we had a phenomenal growth again in Q1, which was driven, as I said, not only in North America and in the US, but also strongly in Europe. in international regions, especially in Europe. But Bluebeam Max also has been quite successful, the launch. Of course, as we discussed last time, Bluebeam Max is really a segmented approach on the launch. So we launched it first to our direct touch customers, so the large enterprise customers, first in the US and now since last month also more internationally. And at this quarter, we are planning to have now also our resellers of Bluebeam who will be authorized to sell Bluebeam Max. And later in the year, Bluebeam Max will be also available on our web store. Again, it's all about adoption now, but so far we got excellent feedback from our enterprise customers and we look forward to have very nice growth coming from RubyMax over the years, especially as over the next quarters, we are also planning to add additional use cases on top of RubyMax. And as mentioned, RubyMax pricing today is an introductionary pricing. which therefore may increase next year. And then depending on the type of features we may also launch in the future, we may also have more hybrid type of model of pricing, but that's overall in our AI strategy, not necessarily to do in Max, where there will be not only a pricing link to licensing the product or to do via subscription or whatever type of licensing of the tool, if you want. In addition, there will be also token, of course, token-based type of pricing model, but that's more for the future, not yet implemented.

Can I just ask one last question about the group adjusted a bit down margin? Can you give us more color if we exclude the cost rating to HSS acquisition approximately? Because I understand it was a headwind in Q1.

Again, the acquisition costs are very small. We are talking about low single-digit number for Q1. As you can imagine, we had already some acquisition costs also in Q4 with some advisor fees, legal fees, etc., because it was not a quick, let's say, negotiation. We had with our new strong partner, Toma Bravo, which we really like. But, therefore, yes, it will, yeah, it's small, small impact on the EBITDA margin into one. We will give you, again, the full picture of the M&A impact of HGSS after closing.

Okay. Thank you, Yves. Thank you.

The next question from the phone comes from Nace09 with Bernberg. Please go ahead.

Hi, hello, good afternoon. Thank you for taking my questions. I've got two as well, if I may. My first one is a follow-up question on the previous question about the built segment. The growth momentum is really strong, almost 39% this year. And I noticed this is the second quarter in a row now you've called out international growth contributions. I would love to get some more colour on what's now working internationally for Bluebeam that it wasn't before. And then second part of this question is, given the current momentum behind the business, any indication as to how much longer this segment could continue growing at 20% plus, please? And the second question, I'll just ask the second question at the same time. It's around your AI partnership strategy. It's only because I've noticed that earlier in the week or maybe last week, some of your peers have announced product and route to market partnership with Claude. I was wondering if this would be something that you would consider yourself as well. Thank you.

Thanks, Victor. So on the AI piece, I'm not sure I got exactly your question. So can you please repeat?

Yes, of course. It was SketchUp and also Fusion. Both of them announced integration with Claude. where you will be able to access the software applications through Claude.

Yeah, but this is what we already announced. So Bluebeam Max is a partnership with Anthropic. So we have integration with Cloud. There will be also MCP integration. Therefore, as soon as other providers and AI solutions such as Copilot and Gemini also will be integrated part of our MCP, a strategy so yes and that's for all our portfolio of product by the way we are doing MCP integration so it's not only for Bluebeam and with Cloud and Anthropic it's already launched since the launch of Bluebeam Max in February

But the intelligence is simply max, right? Absolutely. That's what we have been working with. And as Eva alluded to, we have introduced quite some time about. And that's also our approach and how we see it. Let's say we see that the intelligence in the very specific vertical AI impacts in the ACO industry. That's the intelligence core that we are offering. And then you have an interface over the NYC with Claude. That's something we have. Yeah.

Monet, to answer your question on the build side, I mean, I think sky's the limit for the build growth. I mean, clearly, I don't see that stopping. And I cannot even give you a date. I may not be part of this world any longer. But seriously, I think, look, we are, yes, the de facto standard in U.S., But we have the entire world now to conquer and we are going very nicely. But even in the US, you know, the SMB market is huge and we still have a long, long way to go to have a... even further full penetration. And even when the penetration will be there, as we are becoming an AI leader in AEC, you will have all this pricing and with more consumption, token-based on top of licensing or tools, which is going to de facto increase the average revenue per user. And as you know also, build and Bluebeam in particular pricing is very low. So it's less than the price of a coffee in the U.S. And U.S. coffee price is quite expensive, as you know, but it's less the price of a coffee per day. We have huge leverage also on the pricing power over time if we see that the volumes potentially slow down. And then in addition to that, now we have Dante's deal where we are now putting together unique products very, very strong assets in construction technology, building these construction tech giants, combining HCSS with our build segment. And HCSS, as I said, is the leader in heavy civil construction and infrastructure in North America. They are the number one player from far. And they have huge potential of growth, huge, for the coming many years. Clearly, we see this strong momentum being there for a long time, in particular because the structural drivers of this growth are completely intact. The build segment market growth is much higher even than the rest of the lifecycle of construction. If you look at design and planning, for example, and also because even in infrastructure, the level of digitalization is even lower than in buildings. But the momentum is there. The drive is there. All our infrastructure are aging, especially in North America. So you have these huge investments coming for the next many, many years cycle. So very strong momentum. And we are very, very optimistic and positive about the very long-term growth and strong growth of the build segment for many, many, many years.

Yeah, and I think, Nate, to add to that, I think you also asked what is now, because we see very nice growth also internationally, not only in North America and the US for Bluebeam, and what has now changed, what is working well. I think, whilst Bluebeam is a product where they are extremely strong, from the network effect. They're extremely strong in collaboration and pre-construction. That's where all the pain points are, as Liv alluded to, so that the market sentiment is really there. But it's also, you need to educate the market a bit. Every market, if you look at Europe, every market is different. So I think it would be wrong to say that we were not successful internationally, because if you look at the Scandinavian countries, so in Sweden, for example, with all the huge construction companies, Glubium has been number one in And they have actually even formed over the business associations. Bluebeam was the standard they concluded years ago because they said this is the way that we need to collaborate. So that set standards in other European markets like Germany, etc., France, Italy. that has taken longer. And that's why you also need to make sure that you find the right approach and the education of the market into this product. And that's what we have done now, invested in in the last couple of years, making sure that we really have the, it's not changing the product, but really the approach to the market, the education of the market. And that's really the payoff you see now. So it's a very sticky product when you have it into, and when you start to develop this network effect that we see so nicely in the US, that happens elsewhere as well. And if you then now see in Asia Pacific, where we have been strong in New Zealand and Australia, but we may now open up India, etc. I mean, you can just imagine when we create that network effect there. So it takes time to enter into the market to make sure that you get it spread out. But then you also have this network effect through Bluebeam, which is very, very compelling.

Absolutely. As you said, Louise, Bluebeam is viral. in North America, especially in the US now. And our goal is to make it viral everywhere in the world.

Thank you very much both for all the helpful additional color. And Yves, I look forward to continue talking about good growth and build for many more quarters and years to come.

Many thanks, Nick.

Thank you both.

The next question from the phone comes from Victor Chang with Bank of America. Please go ahead.

Hi. Thanks for taking my questions and congrats on the solid quarter. Maybe if we just want to elaborate on the questions just now, thinking maybe a bit more about medium term, do you have a maybe updated view, elaborate a bit on how you monetize AI? Obviously, with LubyMax, you have a higher subscription, but then it's somewhat like a bring your own LLM model, where I think if you think about from the customer side, the total cost of ownership is not only a higher subscription, but also a separate LLM that they bring themselves. Should we expect similar models in the design segment? I guess that would somewhat protect you from maybe impact on margins from AI compute. But how should we think about this?

victor yeah good point and i think it's really depending on on the features and and the solution and the ai product it is true that for bluby max for the moment um you know if people are using cloud i mean they you know they have their cloud pro uh subscription and licensing and tokens etc or you know with mcp they will have probably other other solutions so we are not providing this piece, people will have to pay for Bluebeam Max, which is today purely a subscription per user. And as you know, the introductionary price is around 150 US dollars per year, more in addition to the higher package that we have today of Bluebeam without the AI package from Bluebeam Max. Now, We are not going to disclose yet what may change, but as I said, when we are going to launch additional features in the future, there will be different options. Some option is that these additional features can be in the current pricing package. Some additional features may have to be paid on top, maybe even still under subscription, or some additional features might be a little bit more token-based, which will be purely consumption-based. etc. If you look at other brands, they will probably and they are planning some of them to have and they have the same approach. Some others, they even just put their AI features on the higher tier package of their current subscription packages. So it's not a pure AI package. Even it's included in the premium package, including all the things. But it is clear that over time you will see more and more consumption and token based type of pricing coming from all different product line and all different solutions and brands. Are we planning to put the cost of clothes and others part of our price? Today, no. But again, this may evolve depending on the type of solution that we are planning to launch. But for the moment, that's not the case.

No, and I think just to add to that, which I think is also something that we will see going forward, and we are depending on product also, as Yves said, I think it's also our job, as I said, we see our job also to make sure that we deliver the intelligence you need for our products, right? So it's also very much about the ontology and the intelligence graph, et cetera, that we are ensuring. And maybe, and I'm not saying that that's really the product, pricing strategy we will have but it's also our job to direct so to say to the most efficient usage maybe of token etc because you might not need to use one model for everything you do etc so that's also part of the intelligence so so we'll have to we'll have to come back to that also when we have launched it but there as you can hear there are different avenues that we are taking on that to make sure that we monetize it, yes, for sure. And that's something that is clear because there's a lot of value in the additions that we have here, but that we can also support our customers to use this in the most effective and efficient manner, also in cost effectiveness, et cetera. So that was part of also the value creation that we also do for the customers.

Very clear. Thank you.

The next question comes from Nicolas David with Odo. Please go ahead.

Yes, good afternoon, Yves and Louise. Thank you for taking my question. I would like to come back on the margin side regarding Q1. Through that, if we look at design and media, margin is improving, but actually if we were to restate from the provision you took last year, actually it looked like the margin of both divisions is slightly down. I think, Louise, you already mentioned for media, some action plan in paying some costs. Could you elaborate a bit more on those actions and on the fact that those costs are purely exceptional or should we expect more costs going forward? And on the design side, could you explain why the margin was slightly down if we had just Q1 2025 basis from the provision and what we should expect for the coming quarters? And still on the margin, a follow-up question, Regarding the MLA transaction cost, what should we expect for Q2? Because you're not going to close, probably not to close the deal before you release the Q2 numbers. So could you help us understand if you need to put a bit of MLA transaction cost into the BDA for Q2? Thank you.

Yeah, well, so in general, we are actually very satisfied with both the margin improvement and continuation of designers and also media. So I think it is progressing. I think what I alluded to before, and that goes for both design and for media. that in the first quarter last year, where we had the extraordinary effect of the insolvency of the service and payment provider. Of course, we are very focused on cost sharing. So we are balancing the cost when we have extraordinary expenses. You have seen that throughout the quarters here as well. So, of course, we balanced out our costs and our investments as well to balance also our profitability and cost management. that's why also in q1 last year took cost measures and postponed some investments etc through later in the year to see how especially on the media side where we actually had more impact on revenue etc to see how that played out so that's why you cannot just say that that should automatically come back this year because we also of course we are continuously investing into our business and there in the first quarter last year we also postponed some of those course positions And I think in general, also, as you see, we are investing into our business and that's what you see now as well. So that's a little bit also depending on when when what is coming right and what what quarter. But in general, the underlying profitability is well in line. with what we have seen for this year and even above what we have seen for this year. So I think that goes for both. Looking at the acquisition costs for Q2. Well, we always have, as you say, we are, as you know, we are growing quite well over different inorganic deals as well. And the costs do not always show up when we announce the deal, right? So we always have a general impact on M&A costs. So if you look at the HTSS impact as Eva alluded to before, let us come back to that when we have closed the deal. But I would say if you expect something around what we have now announced with Q1, that will not be totally off. But that's also a little bit depending. That might not only be related to HTSS. We will have an impact of that, of course, in Q2 as well. But we will also have other days impacting that. But maybe, yeah, round that a little bit more. But let us come back to that when we have closed the deal.

Thank you, Louis. So the action plan you took on media, you were referring to something last year, not this year, right?

Last year, exactly. That was what I alluded to. So as we saw, we have a strong impact. We, of course, also mitigated our cost. And then, of course, we have also... So that's why you cannot just put that effect back in this quarter, right? Because normally we would have invested more in that quarter as well. But But in general, I would say that we are always, we are very, as you can see as well, we are very focused on operational excellence to really leverage when we scale. We're very focused on bundle investments. And that's what we are doing as well. And of course, when we have extraordinary effects, we always look out for ways to mitigate that. But currently there is also, we are investing into our business in different directions. And I think that is also, we will continue to do in order to ensure the growth.

that's very clear so i just misunderstood your first comment in the prepared remark and it's true that when we said for the provision it's true that the underlying margin of both design and media last year was super high thank you thank you the last question comes from florian price with kepler please go ahead yes uh thank you good afternoon um so before listening to making the call too long just a quick one left on my end um in the design segment you mentioned that you have seen

Strong growth in new units. I think that's the first time you're flagging it. Has something changed here that you see more new business momentum? Thank you.

Well, Florian, clearly I think there is good momentum in terms of new units. I mean, especially internationally. As you know, we were working on internationalizing our design business, which is fantastic. mainly European, and we see some very nice growth outside Europe. But even in Europe, there's been some good momentum. And as I said, even in Q1, in our local market here in Germany, there's been also some good positive momentum, which was not the case for a very long time. So, yes, the new units growth is there for existing customers, but also, of course, quite a lot of new logos, especially internationally.

Great. Thank you very much.

Ladies and gentlemen, that was the last question.

So wonderful. Thank you, everyone, for attending. And we are looking forward to catching up with you soon. If you have any further questions, please come to me or Patrick. So we are always available for you. And thank you again for joining the call. And then let's conclude the call for today. Thank you very much.