Nemetschek SE (NEM) Earnings Call Transcript & Summary

Dear, ladies and gentlemen, welcome to the earnings call Nemetschek Group. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand over to Stefanie Zimmermann, who will lead you through this conference. Please go ahead.

Thank you, operator, and welcome, everybody, to our conference call. Thank you for joining us to discuss the results for the fiscal year 2020 and the outlook with us. Today's conference call is being recorded. A replay of the call will be available at our website after the call. We have prepared a presentation with the most important figures and strategic highlights of the Nemetschek Group. You will find the presentation, our annual report and the press release on our Investor Relations website as well. But now let's start with the presentation. I would like to hand over to our spokesman, Axel Kaufmann, who will lead you through the presentation. So go ahead, Axel.

Thank you, Steffi, and thank you to the entire Investor Relations team, who I think did a great job over the last weeks preparing this. Welcome from my side. And as Steffi already said, we have prepared a little slide deck. Let me briefly walk you through so that we have sufficient time afterwards for your questions. This is the overview. And as you can see, we have a few topics today that we would like to talk about. After a short recap of the financial year 2020, we look into the recurring revenue and subscription strategies for each of our segments and discuss what it means for the entire Nemetschek Group. Last not least, we'll also talk about our financial outlook for the current fiscal year as well as our ambition for 2023. Let me start with a short overview of the financial highlights of the past year. Summarizing 2020, we saw another successful year of the Nemetschek Group despite a very challenging environment, and thanks to our high share of recurring revenues as well as the intact structural long-term growth drivers in our end markets. We've listed the top key figures for the last fiscal year. In short, we delivered what we already indicated in the preliminary numbers we published earlier this year. We were able to increase our sales despite a slight foreign exchange tailwind by 7.2% to almost EUR 600 million, while preserving our high profitability at an EBITDA margin of 28.9%. Besides the high cash conversion of almost 91%, you can see on the right side that we once again also increased the quality of our balance sheet and at under these unprecedented circumstances, indeed. The chart on Slide #5 provides a good overview of the different dynamics and development that we faced over the course of 2020. I'm proud to say that thanks to our swift reaction to the pandemic as well as our very resilient business model, we were not only able to stabilize our top line, but also preserve our high profitability in the second quarter. Starting with the third quarter, we then saw a strong recovery that continued in the fourth quarter as well as in the beginning of the new fiscal year 2021 despite the renewed lockdown since November. In this context, please let me mention that our profitability, especially in the third quarter and fourth quarter, were not really representative for the underlying earnings potential of our business. In detail, Q3 was characterized by a stronger-than-expected recovery as well as ongoing cost savings, which led to a somewhat artificially high EBITDA margin. In contrast to Q4, where we invested in the future growth of our business as well as a leaner and more efficient group setup going forward. These one-off investments, I would call them, for example, for the integration of our brand Precast into the brand Allplan or acquisition costs in Media and Manage, thus, corresponded lower-than-usual profitability. They should not be extrapolated into the coming quarters. We'll talk about that in a minute. Moving on, if we look at the regional distribution of our business on Page #6, we proudly note that we grew in all major markets. Let's move on to Page #7. As you all know, one of our main objectives and always an important discussion point also with you is the topic of recurring revenues. If anything, the recent events around COVID-19 have further amplified the importance of these better predictable and more resilient revenues. We were able to grow those by 20% on a reported basis and still by 17.5% on an organic and foreign exchange adjusted basis. This translates into a sharp advancement of 6 percentage points of the recurring revenue category, which now accounts for 60% of our total sales. Within the recurring category, our subscription revenues almost doubled to EUR 90 million. This already represents a share of 15% of our total sales compared to the only 9% 1 year ago. Our perpetual license business recorded a less satisfying development. Main reasons for the decline were, of course, a slower customer demand due to the COVID-19 pandemic circumstances, especially in our Design and Manage segments as well as the ongoing move to a subscription only model by Maxon in media. However, it is worth noting that we're also seeing a subsequential improvement in our license sales since the beginning of Q3, and that's ongoing. Now to conclude my view on our 2020 results, let's look at the financials as well as strategic highlights of our 4 divisions quickly, starting on Page #8. Our Design segment saw a recovery in the second half of the year with an accelerating growth trajectory that continued also in 2021. We've also listed some strategic highlights. In the Design segment, we have seen the first results of the great collaboration between our brands. Architect and engineers benefit from new workflow solutions for integrated or federated design. The results are higher quality in their design and planning phase, huge time savings and an improved collaboration. That creates customer benefits. Allplan, one of our big brands in the Design segment, as many of you know, is also leaping competition with its cloud-based technology Allplan Bimplus for highly efficient data management, which the industry typically demands a lot in context of CDE functionalities. Last but not least, to streamline and harmonize our portfolio Allplan and Precast as 2 brands joined forces last year. Together, they're able to deliver a unique offering for engineering and construction companies. The Build segment felt the impact of COVID-19 only with a delay due to the well-filled order books of construction companies as well as the focus on the U.S. construction industry. As many of you know, the U.S. dollar unfortunately developed unfavorably for us, especially in the fourth quarter, where we saw a negative FX headwind of almost 6 percentage points. The strong margin expansion, which also led to an over-proportional earnings contribution to the group was mainly driven by our brand Bluebeam. In the DACH region with our brand, Nevaris, we've experienced a significant growth last year. We saw a huge demand for our offering and especially for our cloud on-site solutions for construction sites. This demand was also supported by increased BIM requirements in the DACH region as well as infrastructure investments. Over the last month, the Bluebeam team has worked passionately on its SaaS move in the second half of this fiscal year '21 as well as developments in new features and new cloud and data-centric solutions. You'll hear more about it in a minute. In the relatively new Manage division, shown on Page #10 the negative effects of COVID-19 were felt after a delay but continued through the fourth quarter due to the ongoing cautious investments by the important customer group of facility managers and the limitation to access buildings, for example, to install sensors. Worth to mention is also our acquisition that we did at the end of last year. We have enhanced our portfolio with DEXMA and its AI-powered energy management solution to provide our customers with tools to reduce energy costs for a more sustainable future. In this segment, we're talking about a very holistic view at the entire building life cycle. We're now able to leverage BIM also for facility managers and building owners, extending its value beyond design and construction. We also see that digital twins are the game changer, creating those by the help of our software-enabled landlords and operators, for example, to increase intelligence throughout the life cycle of the entire building. The result, a sustainability and substantially smarter asset management. Then moving on to Slide #11, the Media segment, which I'm proud to oversee also personally. The main achievement is the very successful subscription transition and the first group-wide fully fledged integration to form what we call one Maxon. We have a dedicated slide on the great development of this segment later in the presentation, so I suggest we move on. With this, let me share some important strategic views and updates regarding the recurring revenue and subscription strategy of the Nemetschek Group. First, let me briefly explain the why on Page #13. We believe, in general, a move to a subscription or SaaS-based model has many benefits. Of course, for a vendor, but also if it's done right, for the customers, which is paramount in our customer-first mentality here at Nemetschek . Let me highlight the most important aspects. Our customers are more flexible and don't have the high upfront investment anymore. This was especially attractive for many customers during the pandemic last year. At the same time, they also benefit from a higher speed of innovation and improved services and improved flexibility. Additionally, we see many benefits for our group. We can tap into completely new customer groups, expand our customer lifetime value and increase customer satisfaction that ultimately will lead to an even higher retention. All in all, such move will generate higher recurring revenues that lead to a better predictability and will secure our long-term sustainable double-digit growth in the future. We, therefore, believe that our subscription and SaaS business portion will grow significantly with a CAGR of more than 50% over the next 3 years. Main driver will be the above-group average growth of subscription business in the Media segment as well as the Bluebeam cloud transition, which will start in the second half of 2021. Altogether, we believe in subscription and SaaS business and wherever applicable, we'll perform a transition because we believe in the long-term value. A great example of our ability to successfully transform a classical perpetual dominated license business into a true subscription model is our brand, Maxon. As mentioned before, I'd like to talk a bit more about it today and give you an update on why we're better and stronger positioned here today than even before. Nemetschek already had acquired a majority stake in Maxon 15 years ago because of its competencies in the field of visualization, which is also an important feature for many designers and architects. However, despite these ties into the [ ASC ] space, it might have seemed, at least from the outside, that our Media & Entertainment division was more likely something of a fifth wheel on the wagon. Then came the transformation. It already started in 2018 with a strategic decision to buy out the former founders and to install a real industry expert with Dave McGavran, who joined us from Adobe. Following this and a lot of changes, we made 2 acquisitions with Red Giant and Redshift, which substantially improved Maxon's product offering, also the important requisites for the following move to a subscription model, which started in the third quarter of 2019. Today, I'm proud to report that Maxon, with its almost finished subscription transition, its attractive growth profile in the mid-teens and an above group margin, has become a second growth pillar for our company besides our core legacy business. Page #15 provides a comprehensive overview of the current state and strategy of all of our 4 segments in regard to the theme, subscription and recurring revenues. A fundamental cornerstone is to adapt our recurring revenue approach and timing to the unique characteristics and needs of each segment, which differ. This includes, for example, the specific customer focus of each segment or the region in which the majority of the revenue is currently generated. Let me give you some more details, and we go from left to right. In the Design segment, we're primarily addressing small, medium enterprises in the architecture and engineering sector in Europe. The preference for rental models is not very high in this segment, especially due to 2 factors. Consequently, we will continue with our hybrid model to offer both licenses as well as subscription in order to address new customers. We are thus confident to increase our subscription portion from 5% today to around 15% already in 2023. More importantly, we expect to already see around 60% in recurring revenues in this segment in 2023. In the Build segment, we are well positioned in the U.S. and address the large construction companies as well as small and medium ones. So the acceptance for rental models is already high. Consequently, our Bluebeam brand will move its offering to a cloud and data-centric offering, Saas, in the second half of 2021, and we will see a huge increase in subscription SaaS over the next few years. We are convinced that this is the right way to reaccelerate Bluebeam's growth in the mid to long term. In 2023, we expect that subscription and SaaS revenues will also account for around 80% of the Build segment's revenues, while the total recurring share will be more than 90% already. As a third segment, in Manage, we already have a large share of our revenues in subscription and cloud and will continue the path there. And Media, last, not least, as I just described, this completes this picture very nicely. I am personally convinced that this tailored strategy for each segment will allow the group as a whole to achieve sustainable double-digit growth again in the future. A little bit more detail about Bluebeam. With Bluebeam set to launch its subscription and cloud solutions in the second half of this year, I'd like to briefly go into a bit more because it's one of our most important brands. Bluebeam has grown rapidly in recent years and is now a leading player in the collaboration space with more than 2.2 million users globally. For months now, the Bluebeam team has been working on expanding their product portfolio to offer new features and focusing on their cloud and data-centric solutions. The team is still working on the last details, but it is already clear that with this, Bluebeam will be leading its customers into a true SaaS future. What does it mean for us? The transformation will lead to significantly higher growth rates starting in 2023 as we can significantly expand customer lifetime value while targeting our customers more effectively. To be concrete, by this strategy, we expect to double our current Bluebeam revenues by 2025. Let me put this in a simple picture for the entire Nemetschek Group so that you get the total picture. Our ambition is, first, to significantly increase our subscription SaaS revenue share from currently around 15% to around 45% in 2023. This represents an average CAGR over the next 3 years of more than 50%. Second, at the same time, we'll increase our overall recurring revenue from currently 60% to around 75% in 2023, corresponding to an average CAGR of 15% growth. While we are making these moves, we are still committed on our way there to reach at least a high single-digit growth for the company overall. Then as we're convinced that with this transition, we're laying the foundation for a significantly more dynamic growth potential for Nemetschek in the future. A sustainable growth in the mid-teens percentage range starting in 2023, marks our clear ambition. And with this, allow me to come to the end of my presentation on Page #19. As I just laid out, we target a mid-teens growth starting in 2023 as well as a recurring revenue share of around 75%. 45% will be coming from our subscription and SaaS offerings. Looking at the current financial year, 2021, after a good start, the intact long-term growth trends in our relevant markets, our already high proportion of better planable revenues as well as the broad regional and market-related diversification, we look confident into the year. In particular, that means that from today's perspective and at constant currencies, we expect at least a high single-digit percentage revenue growth in this fiscal year despite a still uncertain environment and our accelerated move to subscription. With this, we're very confident that we also achieve our normally targeted profitability range and EBITDA margin of between 27% and 29%. I think this is great, and our assessment is based on the assumption that the markets and the business environment, in general, will continue to normalize throughout the year. However, please rest assured that as we have demonstrated already last year, we will continue to monitor the ongoing COVID-19 development and its implications to our business very closely and that we are well prepared to also take market opportunities out of the current situation as we are convinced that our products have the right fit, and we have the agility and financial strength to act. And with that, I'd like to thank you for your attention, and we're now happy to take all of your questions. So operator, please, back to you.

[Operator Instructions] We have a first question. It's from George Webb, Morgan Stanley.

I've got a few different ones. Maybe firstly, when we think about the 2021 guidance, can you help us a little more with the picture you expect for Bluebeam or at least the Build segment? Because I guess given its size sort of group, it looks like you're still expecting it to grow. But is the right way to think about it being slightly below the growth rate of the overall group? That's the first one. Secondly, you called out a good start to 2021. So are you able to elaborate that a little bit more? Which geographies are performing best? And any trends you've been seeing? And then thirdly, can you talk us through the subscription model pricing equation for Bluebeam in terms of the price uplift you anticipate to achieve on current Bluebeam maintenance customers? And how does that help inform the significant acceleration in growth you expect from 2022 to 2023?

Thank you very much, George. I think your first assumption is correct given the transformation that we're going through with Bluebeam. In regards to the 2021 development in terms of the regions, I think we're equally confident on the European market as well as the American market. There is structural differences also in terms of our footprint, but in terms of the perspective, I don't think we make a big difference there. And to your last point, I'm sorry, but I think it would not be prudent that at this point, before this has been introduced really to customers, to talk about any pricing streams or dynamics there as we really want to do this together with the respected customers.

Understood. No, I understand. Maybe if I could follow-up with a slightly different angle on that question. I guess have you done any studies internally around what you perceive the stickiness of those Bluebeam customers to be? Or what you have -- what you expect to happen to churn rates, et cetera, as you go through that transition? That would be quite interesting.

Yes. Thank you very much. That, of course, I mean you must assume -- or you can assume that there is a detailed plan behind that transition. It's relatively early, us announcing this in a certain way when we talk about the second half and going toward the end of this year. This is getting really started as a transition, but we wanted to make sure that financial markets and especially you, are prepared. We'll come out -- as much as I'd like to comment on this question, we'll come out with a more detailed set of typical KPIs when you go through such a transition. That we'll be able to provide -- starting with how we did it in Maxon and then going on with Bluebeam. The customer base is enormous. The way we look at our installed base, and you mentioned the stickiness that we have. We've excellent customer relationships there, and we've really carefully prepared this in a way that we're very confident that in terms of how we want to position the product, be it from functionality, to pricing, to use cases, that's going to land very, very well. But again, that -- in respect of my colleagues in Pasadena, and the entire Bluebeam team, that -- I understand that they're being careful with giving out more details, especially on the U.S. market, where 89% of this business really has been executed today. Let's not forget that there is also international expansion that we have started higher investments to prepare the product to be taken across the Atlantic, mainly in parts of Europe, which even today's product offering still has a very low penetration. It doesn't even require a shift in the business model or new features to land well with customers. We have great success cases in the last weeks and months that we'll use as a reference, together with the enhanced infrastructure so that we're better prepared when we go into this fiscal year to also show Bluebeam making quite a difference here outside U.S. for -- which we've been hoping for, for many years, frankly.

That's helpful. And maybe if I can just squeeze one final one in. I guess the 2023 ambition doesn't have a margin ambition attached to it. How should we think about the profile of margins as you go through this transition?

Well, at the moment, I think we're giving that guidance primarily on the top line, but there's no reason to believe that we would not stay within that corridor of the bandwidth, which I think is a very high attractive range that we would give from the 27% to the 20 -- 29%. Maybe we have a good chance this year to land rather at the upper end of that range, and then we'll see what currency does, what other impacts does, what investments does, what the environment does. But there is no reason to believe that we would fall below that range and rather stay to be in the midpoint there as well. And then that, quite frankly, I'm thankful for the question -- the follow-up, George, because I -- this is something that we typically get a positive feedback for, which is unusual that you go through such a transition and still are able to report those growth rates as well as the level of profitability.

We have the next question by Sven Merkt, Barclays.

First, I have a follow-up from the last question on the margin. If we think now to 2023, you obviously expect an acceleration in growth. And should we expect that at this point in time, you would let the margin reflect upward as revenue growth accelerates? Or should we more think about that you probably will invest that additional revenues to maintain or further accelerate the growth rates? And yes, maybe I'd come back with the second question.

Yes. Thank you very much, Sven. Again, our focus is on transitioning this, particularly in the case of Bluebeam, with not letting drop the growth rates overall, below what we have indicated for this year and then also the subsequent year 2022 on the group level. And at the same time, our focus is as much and accordingly on the margin. Bottom line, we'll not allow that happening, what you -- what could have been implied in your question that we allow the margin to drop below what we see in terms of the range.

I'm not sure if you -- I -- maybe I should have phrased the question better. My point was more around growth will obviously accelerate in 2023, and at this point in time, there's quite a bit of operating leverage. And the question was more around will you then let the margin go upwards? Or will you reinvest?

No. Typically -- I mean we would have nothing against a slight increase of the margin once we're done with the majority of the transition. That assumption is correct.

Okay. Great. That's clear. And then my second question is on the U.S. government potential infrastructure program. They are currently preparing a EUR 3 trillion infrastructure program, and my question is, to what extent could this program benefit you? And also maybe increase the need for the industry to digitalize overall given the increased workload that they will probably then face over the coming decade.

Yes, I agree. In general, it's not only, I think, true for the U.S., but also the various programs we see in Europe that this is an underlying positive momentum that all of us should benefit from. The one more, the other less. But as much as the regulation over the last years, which we've been seeing, this kind of is an extra tip on top, clearly. I could not call out in regards to how much of that would we benefit. But the assumption that you had in your question that this is an underlying positive stimulus here or in the U.S. is absolutely correct.

Okay. Great. And then my final question is just on the -- again, on the margin for this year. Revenue growth will likely be very much weighted to Q2 this year. So the question is just how should we think about the phasing for the margin throughout this year?

The phasing of the margin, I mean we're still operating in an environment where we're investing a bit more than a year ago, I would say. Yet, definitely under proportional in terms of we're being cautious. So margin, overall, the more confidence comes back and the more normality that we would see, we would also then increase investments in infrastructure in the -- within the company in programs as well as in hiring headcount. So rest assured that we're steering the ship still carefully. But you're right, Q2 will be the most important quarter to see how sustainable this really is. We had the sharpest decline clearly there last year and then swift -- reacted very swiftly at -- and we'll have to see. But overall margin development over the year will start with, I would say, a good year overall and -- at the beginning and then quarter-by-quarter, we'll have to see. And the more we know, the more we can also communicate in precise, I would say, the guidance there. I think I made a -- I tried to make a point. Just as a follow-up, maybe if you allow. We tried to make a point that the year-over-year comparisons for some of those quarters of last year 2020 are difficult, and shouldn't be extrapolated just automatically. You all have your models, of course, and you do what you want to do. But the comments we made around Q3, for example, or Q4, the one being slightly better-than-expected top line as well as bottom line, the other being shadowed by some of the one-off investments, that needs to be taken into account, I think, when we go through the quarters of the new fiscal year.

We have our next question by Gal Munda, the floor is yours.

Maybe just a first one, a very quick one on Bluebeam. So you mentioned you have 2.2 million users. So those kind of monthly active users, how do you track those people? When I looked at the website, it said [ 1.3 million], so I just want to understand like what's the user base do you think is the active user base for Bluebeam today that I can kind of take as a cohort?

Yes. Thank you very much, Gal, and good to have you in the call. I mean the number that we mentioned, those are the active users. The use cases and your question how we track those, that's actually where we differentiate between what functionalities and which models and how do they use the product. As we would have one product, there would be different functionalities. So that differs, of course, by user and by region.

Okay. Perfect. So the 2.2 million is the right one to take. And how do I think about the split of the users roughly between the standard one, $350 all the way to the extreme one that would cost us $550 or something like that? I'm just thinking if there is -- as part of the subscription, if there is an upgrade opportunity as well in those cohorts? Or is it fairly equally split within the standard CAD and extreme versions?

I think it's fairly evenly spread. That's my spontaneous answer.

Okay. That's good. Just as a follow-up, and I think that's really -- you're doing the transition in a very pragmatic way, which is nice to see. And I wanted to kind of -- in 2025, when you say that you're targeting revenue to double for Bluebeam, can we get any indication of what Bluebeam revenues today would be roughly? And then secondly, what proportion of Bluebeam users of the 2.2 million do you expect in 2025 to be on subscriptions?

The last one, I cannot reveal, but I'll give you an indication for the first part of your question, Gal, and that is -- let's assume that we're talking to 70% to 75% of the Build division being represented by the Bluebeam worldwide P&L or business.

Okay. That's really helpful. And then just the last question, if I can squeeze in one more, please. Does -- when you think about the business model transition and your revenue becoming more subscription-driven, you're kind of collecting revenues upfront -- or you're collecting cash upfront. You already have best-in-class cash conversions. Is there a scenario where cash conversion could improve further as you go through this business model transition effectively through -- in the midterm? I understand the short-term impact, but in the midterm, because you're going to be collecting cash and deferred revenue is going to contribute significantly to that on the balance sheet. Is that the right way to think about it?

I understand the background of this question. I think with the state that we have today and businesses are not comparable, I could quote now from within the 15% that we have today, and that's tripling, going up to 45%, mainly driven by Bluebeam. I think it's fairly early to say. I'm not sure the Maxon numbers, for example, would be representative. What I do know, as a finance view on the balance sheet and the cash flow statement is, like you say yourself, that I think we've been able to negotiate quite competitive and excellent terms overall. And that targets, for example, also the maintenance agreement. But we have different patterns between European maintenance contracts and U.S. ones, for example, for many reasons, because of the wide, wide -- a broad variety of the portfolio overall. So let us come back maybe to that point, if you allow some time then.

No. Absolutely. Of course. No, that makes sense. That makes sense. Sorry, I'm really -- just on the Bluebeam side, you have mentioned in the past that you already had kind of significant uptake on the maintenance there. Is there any indication of what the recurring revenue for Bluebeam would be today? Just based on the maintenance offerings that you have, can you share that with us?

Yes. That is mainly the recurring part of the business today, absolutely. I'm not sure we're breaking out now this per each...

No. But you built out the Build segment. So that makes sense, yes.

Yes. Yes.

That's been really helpful. And it's nice to feel that level of disclosure. You've given us a lot to work with. So it's going to be very interesting. But thank you. I appreciate all the data and nice to see recovery at the end of the year as well.

Our next question is by Chandramouli Sriraman.

Yes. A good finish to the year. Just a couple of questions from my side. We notice, at least when companies try to make this transition, usually the pace of this adoption of subscription is quite unpredictable and they end up investing a lot more than initially anticipated. I just wanted to confirm that you said that you would ensure that margins are within the typical range that you guide to. Is that correct? I just wanted to double check on that. And my second question is on the M&A side of things. Things have been quiet for a while. Can you give us some idea as to how this should evolve in the coming quarters?

Thank you very much, Chandra. I'd like to start with a statement that there is two, yes. I think you understand -- understood it right that we're not transforming the entire company at once, which I think is very important because it makes it even more unpredictable how this will land with the development over quarters, over years, for investors, for modeling. We'll do it in a precise way to really target and focus big elements of our portfolio, such as the Maxon in the last couple of years, and it's going to be Bluebeam for the next couple of years and then a little bit of the rest. So that's phasing and that implicit message of us not transitioning the entire company at once is very important to me. And then your second point. Yes, you understood the margin comment correctly, that there is no intent, while we go through the transition, which is quite unusual, that we are eager to still show an attractive growth profile for the group and a profitability level for the group that is given with this range of previously mentioned. And then on your third aspect, the M&A. It's been quiet for us in terms of very big moves. Those moves have become very pricey as well and irrational, partially. We've been spending some money in diligence, more than -- it turned out to be in true M&A transactions. That's why in Q4, part of the explanation, where we had higher investments in the Q4 last year was also some M&A work. Some of them resulted into smaller M&As in Manage and in Media. Others resulted in a stop of the project because we felt that this is just not rational. What's -- in terms of the dynamics, the speed, the very lean diligence work that needed to be performed or could have been only performed, and then the price levels, of course. So we have a pipeline that we still would allocate a lot of our attention to Build and Manage to continue in those 2 segments. We'll come out later this year with also some fantasy on Media, but it's a bit too early to say. And as a last point, we have started to also engage a bit more in what people would call the startup and venture scenery where Nemetschek traditionally was really not an investor and not a player. But we've been seeing this as an opportunity to enrich innovation and to put a few chips on some of the future forward-looking technologies that we find attractive, so that's something I'd like to answer. M&A remains an additional growth driver, ideally a couple of percentage points, but only if we find a real good fit. So at the moment, it would be fair to say that many of the activities that the top management drives are focusing on the organic improvements.

Perfect. Maybe a quick follow-up on the Media segment. Going from one strength to the other, organic growth is accelerating. Anything specifically driving this, other than just a better product and the move to subscriptions?

It's a great team. It's a better product. It's a subscription. It's a market opportunity. It's a rare technology. And I think we've been doing a real good job. So thanks to the team that Dave has gathered around him and focusing on many important and seems to be the right actions there. And again, this is something we'd love to talk more about in the future. I think some of you feel it already that we have done so in the last 2 or 3 quarters to put a bit a greater focus on this one as more as we come to an end of the integration. It's not just a transition, it's an integration to form really one strong player. And it used to be the smallest segment of our 4 divisions, now it's at least #3. We would love to talk more about this. So let's stay tuned.

Our next question is by Florian Treisch, Commerzbank.

Florian speaking from Commerzbank. I have 2 questions, again around the whole transition. So the first question is around the Design sector. Why are you not coming up with more -- with a more aggressive push into the subscription world here? I understand that the client's preference are not necessarily on the SaaS side or subscription side. But if you look at some peers, they have simply shown that a more aggressive shift is not necessarily hurting the performance of the business as clients should be comparatively sticky. So why are you here a bit more cautious? The second part is, can you quantify what you believe the revenue impact is on '21 to '23 from the subscription shift from Bluebeam to better understand really the underlying growth dynamic of the portfolio?

Yes. Thanks for your questions. I'm not so sure I would like to talk about the competitors too much in our call here today. But as you mentioned them, we've done the calculation and the math, and we are convinced, I'm speaking on behalf of my colleague, Viktor Varkonyi and the Design division and the entire management leadership team there, that with our approach, we create on a mid- long-term consideration, a higher value and return for customers as well as for shareholders. So there is different characteristics, as we have tried to explain in the presentation, be it the customer base, be it the regional presence, be it the product technology, and this is not an apple-to-apple comparison. If you quote our American competitors, for example, they have their reasons why they did it their way. I don't know if it's true that the customers were really happy with this. And as sticky as you imply in your question, we do it a little bit with a different approach. But ultimately, what is important for us that we have a high part of the business recurring, be it from maintenance, be it from subscription, be it from SaaS and we're moving there. Slowly but surely, step by step. So overall, if you make the math of the entire transition and when you look at, let's say, the last 5 years and the next 5 years, and we would compare numbers, I would claim that our return for customers and for shareholders is greater than some of the prominent competitors that we get compared with in the Design segment. And then the -- I'm sorry, I lost Florian in the second part of his question.

Yes. You mentioned, Florian, I think the dip of the transition of Bluebeam in the next year on our revenue and growth. So to be honest, of course, in 2021, and we will not see a strong pressure because they will start in the second half of 2021. So perhaps 2 percentage points definitely, in 2022, a little bit more. And then hopefully, of course, in 2023, we have finalized the transition. And then definitely, of course, we expect a very, very strong growth rate again.

The next question is Martin Jungfleisch, Kepler Cheuvreux.

I have 2, I'll start with the first one. It's on your 2022 and 2023 targets, again. Could you provide a rough bridge of what would make up the targeted high single-digit revenue growth in 2022? Is it the case that a stronger growth in Design, M&E and Manage should absorb lower or even negative growth in Build? And then the same for 2023, what drives the expected mid-teens growth? Is it primarily driven by Bluebeam coming out of subscription? Or is there any additional factors relating to Bluebeam international expansion or any other brands accelerating that are baked into this assumption? That's the first one.

Thank you very much, Martin. Good questions. And I would be tempted to just say, yes, yes. The assumption is, of course, correct. That when Bluebeam goes through the full year transition effect in 2022, there's going to be not much of a growth, right? How can there be? So in order to achieve the high single-digit in that sense as an indicated guidance we've been given this morning for this year 2022, there must be an additional growth acceleration by those other 3 divisions, and that's what we're preparing for. And it's a continuous path of a media coming out of their transition very successfully and exploiting the full potential there. Manage as well, after they had a challenging environment last year, we will see an improvement in the growth already this year. And last, not least, our Design backbone really has the strong pillar in our portfolio. So all of that is correct. And very similar then also to the second part of your question. So a yes, yes.

Okay. Okay. And then the second question is on product development and competition. I mean last year, you developed this federated and integrated design. Could you provide an update to how client uptake or perception for this kind of product has developed, specifically for the larger customer segment, which I think is a bit more Autodesk's turf? And then maybe if you could provide an update on competition generally, so if you have seen anything more or less from Autodesk, Bently and Procore for instance.

No. We -- to start with the letter that we see Procore trying to come to Europe a bit more. I don't know how successful that really is. Other than that, no big changes in the competitive landscape to -- yes, to be frank, right? And...

Product development [indiscernible].

I think the question around the federated or integrated, I think that is a slight misunderstanding. I don't think we were targeting necessary the very big [ ASC ] end customers with those products. I mean the engineers and the architects working together in those examples, it wouldn't be completely different customers from the type and the nature of the customer or the size of the customer as we've been building them up over the last year. It's just that we can attract additional ones and we can expand the stickiness and the happiness and the satisfaction of the existing customers because now we make their life much easier. So no doubt, we have a lot of respect for some of the American competitors. The one in particular that you mentioned being very embedded in large accounts. This is something we will and cannot change overnight. And maybe we don't have to in that respect. But if anything, then we'll be successful gradually there and attack clearly with the full competence of the broad portfolio of the Nemetschek Group while defending our small and medium type of customer base. That's clear.

Next question is from Knut Woller, Baader Bank.

Actually, 2 questions. Starting with the first one. When we look at your shift to subscriptions at Bluebeam, can you share with us what of that is a conversion of your installed base to subscriptions from perpetual? And when we look at the growth targets you provided for the segment, what is really here coming from new customers? That would be the first question. And then I would have a follow-up.

Right. Two difficult ones. And sorry to say, but I think we cannot break out the precise information as you wanted for the Bluebeam customer base, especially in the moment where we haven't been officially announcing that. I think overall, again, the customer base, it's floating as well between the traditional ones, the new areas that we're winning, and competition is winning as well. So vice versa. I'm not sure we can track this really to come out with a generalistic overall answer because of the structure of the market data. And sometimes, we simply don't see it in the systems. We would have to have full visibility over all the competitors, which we don't, unfortunately, in this industry, as you probably know.

Okay. I just try to get a better feeling, I mean moving customers to subscriptions normally comes at a higher price tag. And hence, of course, if you convert them, there needs to be an acceleration of growth. And I just want to get a better feeling about the sustainability of this move. And the second part of the question would be, I think you have done 2 price increases at Bluebeam in the last years, and I think you refrained a bit from doing the next price increase. If I read the shift to subscriptions correctly on the base of other players, what they have done, there's normally a price increase factored into a move to subscriptions, at least that you can generate more money out of the customer. What do you think the impact on the churn rate of the Bluebeam space will be by that move?

Yes. Fair enough, Knut. But again, I try to repeat myself. I'm sorry to be so blunt, but we'll try to do it slightly differently than some of those competitors. In Bluebeam, we have already stopped doing price increases. In the moment, we wouldn't see any additional incremental value for the customers. So I think everything else would be just not ethically correct or unfair. And maybe also not doable, quite frankly. So to get customers to accept that product -- we've seen it in Maxon, and I think I've shown a chart to show you how successful this was. So I think it was the first true showcase for Nemetschek as a group that we can really do this, that we can manage this, be it the back-end systems, be it the customer front end. And that's the learnings that we take. So I think today, we're much more confident to do it than we would have done it 3 years ago. And in hindsight, I think it is the right timing that we now do this. Again, we're not doing this for the entire company. It is sustainable, and we'll do it together with the customers. And last but not least, Maxon was also a good example that we would have introduced this along with new features and innovations and functionalities. And that, to me, must be the core to get a customer to jump on a subscription. The alternative would be, of course, to put a pistol to their head and say, "This is basically what we force you to accept, " which wouldn't fit in our customer-centric philosophy at Nemetschek. And so you got to believe us that this has been well prepared, sufficient experience in-house as well as from external know-how, and we'll keep you updated as we go down that path.

Our next question is by Uwe Schupp, Deutsche Bank.

Two questions for me. Unfortunately, the probably more than early ones, if you don't mind. Firstly, can you specify how big the COVID-19 savings were that you had last year? Your, admittedly, big sales force was obviously not able to travel all that much and lack of client entertainment, et cetera. So I was just wondering how big those savings might have been. And any guidance that we should be fitting in for this year into our models? And then secondly, the receivable allowances actually shot up, I saw to almost 10% of receivables. I was just wondering whether you're just overly cautious or whether you're already seeing some customer filing for insolvency. Or maybe do you see even a possibility in case the economy, the vaccinated economy, recovers in the second half, whether some of those allowances might be reverted back and added to your profitability?

Great. Hello, Uwe, and don't worry, we're used to professional and well-prepared questions. They're not nasty at all. I think it's a legitimate question. We would break out probably the kind of savings, "savings" to an area of lower to mid-single-digit in the millions, I would say. And you're right, we couldn't do all we wanted. However, we've invested some of that in digital, for example, sales and marketing tools as well. And then in Q4, of course, we had the guts to also invest in some additional work as we would outline before, and that drove the margin down a little bit in that quarter. But those, I'd rather call one-off. How much of those savings will continue to be in 2021, that's a frequently asked question also in our company, and I'm sure in many other companies as well. With the announcement of a German super lockdown last night, for the Easter time, it's clear that at least in the first half, we'll carry on some of those. That we cannot do as much -- see a normalization as we maybe desire or wanted. But then as quickly as this can go as well that, that could be an acceleration because it's very easy then to catch up with some of those things that we actually would like to do. Because there is customers, especially for the more complex products, that would like to get together with us also in person. So some of that, I would say, is sustainable. Because we have just gotten used to remote work, for example, I'm sure, similar to Deutsche Bank circumstances as well. But others will -- recover is maybe the wrong word because we're talking about costs. But activities will catch up, right? So that would be my short answer to that question.

That's very helpful. And on the receivable loans, any comments?

On the -- I'm sorry, we didn't get this phonetically.

So basically, on the remark number, what is it [ 13 ] in the annual report, you basically show your detailed...

Oh, I'm sorry, yes. On the DSOs...

DSOs, yes.

I mean we -- yes, this is a cautious measure. We saw some trends and some indications and some statistics. They haven't materialized so far to a big extent, but we're rather being on the conservative side there as long as the environment, I think, gives us all reasons to do so.

You think you will be able to keep those if the -- even in the recovery scenario in the second half? Or what would be the discussions with your auditor be?

Well, the auditor was in full alignment. There was no uncorrected statement, no commentary, no nothing. I think it was very prudent. They've been running benchmarks with other companies similar to us, and similar balance sheets. And I think we were not too conservative. I think it was just prudent how we accounted for. So we'll see. That -- in the ideal case, this represents a small upside if we can release some of those. Hopefully, they'll not be needed because that would mean bad payment behavior or dropouts from our customer base. Again, with the more customer base tailored to small and medium customers that, in our case is a little bit different than maybe to what some competitors have the beauty to just serve the very large accounts. So -- and that was the rationale behind. But I think there's no reason to be worried. There's no reason to be overly optimistic. I think it was just prudent accounting.

Our next question is by Deepshikha Agarwal, Goldman Sachs.

I just have like 2 from me. So first of all, like post the focus on transition is Bluebeam to subscription, which we guess is expected to be done by the end of '22 -- early by '22 -- early 2023. Can you give some more details on potential to transition of other brands to subscriptions going forward, especially in the Design segment? As -- are there any specific brands that you expect to see more uptake of subscription there? The second one is basically following up on the questions on margins over the medium term. So first of all, just confirming that you indicated the margin in 2021 is to be potentially closer to the higher end of that 27% to 29% range? And given the 2022 top line growth is also expected to stay in the high single-digit periphery, with the transition of Bluebeam still to go, will it be fair to assume that the 2022 margins remain broadly flat versus that in 2021?

Yes. I'm not sure everyone could understand the question phonetically. At least I'll try to repeat, Deepshikha. And first of all, thanks for your question. So in terms of numbers, we would have said earlier in this call that we see the potential and the ambition to be rather at the higher end of that range of 27% to 29% this year, 2021, right, in terms of the EBITDA margin. Now this is mid-end of March. It's relatively early, and our desire is to keep investors updated while we go deeper into this fiscal year. Then in regards to 2021 as well in terms of the growth rate that's a minimum single-digit -- a high single-digit growth, and that was understood correctly by you, yes. And we'll try to carry on with this also in 2022. But with a different content probably and a different mix as one of the questions earlier and alluded to in terms of the individual businesses, right? No surprise that Build will probably be lower in '22 than in '21. But again, we're trying to elaborate on the overall group's performance. And then on your first part of your question, if I understood the comments correctly that, what is the logic within the Design segment, for example? As we said earlier in the call, given the customer base and the regional focus and footprint that we have in the Design division or segment as of today, we'll continue a hybrid model to offer both licenses as well as subscriptions in order to address also new customers and keep those customers happy that we have on board. We will, however, increase our overall subscription portion from 5% today to 15% already in 2023, which is quite a move for the Design division, which was a little bit behind the curve for those before mentioned reasons in the last, I would say, 5 years overall. So that is what we currently see. I don't want to call out another Maxon or Bluebeam as kind of what's -- who's the next one. That's not going to happen from today's perspective. We'll see a gradual move step-by-step in the Design division, in the big Design brands. Some of them, by the way, have already different characteristics, a, because they may be operating with a different type of customers or in the U.S. region, where we have different circumstances, so they have a higher share than the average. But we're talking design as a division in average and they will gradually improve not only in subscription but overall recurring revenues to become more predictable somewhat and try to create value, again, for customers as well as for shareholders.

Just a quick follow-up on the question like on your response to the margin question. What I was trying to come on to here is basically given there is still some transition of Bluebeam to go in 2022, how -- what are the dynamics of those margins in 2022 versus that of 2021? Like what are the levers that you feel that would lead to the margins maybe to expand or stay flat versus what you're expecting in 2021 and 2022?

I see only little reasons to expand margin in 2022 from that high level, frankly. That to me would be very illogical when you compare your own studies in your company or in others, and you go back the transition of the more prominent examples and bigger examples in our industry or in other industries. Typically, when you go through a transition, which we'll do in the case of Bluebeam, there's not going to be a margin improvement in the middle of that transition. And 2022 will mark the most extreme point of that transition in a positive way, right, because we'll have the most dynamics there in transforming that business from A to B. So I see little reason to expand the margin there really in 2022 over '21. Thank you, Deepshikha. And let's not forget that the main reason why we do this is, of course, the outlook and that '23 going forward, that is driving that rationale. That is driving our management's thinking that we're bullish, we're optimistic. Not only that we can do it, but also that we can do it successfully. And that will create even more return on shareholder value long term.

We have a next question Holger Schmidt.

One of your strategic goals is to reduce the complexity and also to increase the level of synergies. What are the measures behind these plans? And how would you quantify the achievable amount of synergies by '23? That's the first question. The second question is you are now planning to accelerate the move into subscriptions, do you also see a need to raise your CapEx? Where do you see the CapEx in the calendar next year?

Thank you very much, Holger. Good question. Let me start with the latter. We're not seeing a big change really in CapEx overall in terms of how we run the business model. I don't see a necessity there or a need. In terms of the -- again, the margin dynamics overall, that also -- I don't know, Steffi, if we have a comment there, but I -- no big change.

Regarding cost savings?

Yes. The cost savings in regards to the complexity. I'm thankful that someone asked the question because it was noted obviously that we did reduce the number of brands. That we negotiated some infrastructural changes that we will implement, some tools that all of the brands will use, that does decrease the complexity. I'm not sure how we are doing that in order to boost the margin. To me, my honest answer to you would be, we are doing that in order to prepare Nemetschek as a group to be able to handle EUR 1 billion of revenues in the coming years and in order to be state of the art in terms of processes, and the way how we handle really our daily work. If we were to continue to operate in an extreme decentralized, very diverse landscape of tools, organization, processes, then I would have some doubts of whether we would be well prepared, and that's what I would like to avoid.

There are no further questions, and so I hand back to you, Mr. Kaufmann.

Okay. Thank you very much.

Yes. If there are no further questions, so thank you very much for listening and the discussion. And afterwards, of course, we are happy, if you have further questions, if you send us an email, so we can set up an additional call. Thank you all for your interest and yes, let's stay tuned, and have a nice day.

Wonderful. Thank you, everyone.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect it.