Nemetschek CFO Louise Öfverström zu Q3 2023: "In München geboren, auf der Welt zu Hause" - Progno...

The board interview, quarterly report. Yes, my name is Louise Öfverström, I am the CFO of the group, and I am very pleased to speak with you today.

The symbiosis of construction and software. As you just said, I have been able to get to know many business models and industries in my career. As a CFO, it is particularly exciting to be able to do that because every business model is different, the drivers are different, and it is also fun to always have new challenges. Nemetschek was the perfect culmination for me. I have worked a lot in industry, always working on the industry side with the digitalization of processes. You have seen that it is relatively difficult, industry always has a lot of change. And now I thought the time had come to go to the other side, to the solutions side, to provide digital products for an industry, especially for the construction industry, and to help our customers digitalize their processes.

Nemetschek is a fantastic company. You can see that quickly at first glance. 60 years old and still a very research-oriented company, consisting of many different acquisitions and a very successful M&A history that has led to the success Nemetschek is today. We have almost no startups anymore; we also invest in ventures, but we have young companies and companies with a long history in the group. This portfolio is an excellent starting point for the challenges our customers face and the solutions we offer. We are certainly one of the first or the only companies in this industry that can offer solutions over the entire lifecycle of a building, and also for the media and entertainment industry. So there is a wide range of opportunities. That's how I found the company. As CFO, it is also not uninteresting that the company is extremely robust financially, and these possibilities allow us to move to the next stage of successful profitable growth in the Nemetschek group.

Yes, I think you have precisely identified the different drivers of the industry and how we need to look at our business development. The construction industry, as you say, is facing major challenges, especially in the current economic climate we see on global markets. But one must not forget that it varies greatly depending on the region. As I said, the Nemetschek group is extremely well positioned because we offer software solutions over the entire lifecycle of a building – from the very beginning, architecture software, to smart buildings, workplace management, etc. We are a very global company, headquartered in Munich but at home worldwide. A large portion of our revenue comes from North America, the USA, and we also have a distributed European share, and a smaller part in Asia-Pacific. So we are not dependent on one economic form or one industry, because we offer different solutions to different people in this industry. Therefore, the economic success of the construction industry, especially in Germany or continental Europe, is not the major issue for us. It is important to see that. We have good solutions for an industry that is very little digitalized – construction is one of the least digitalized industries in the world. It is also an industry facing great challenges: the construction industry, including all buildings, contributes about 40% of global CO2 emissions. There is a large proportion of waste in buildings or construction projects where materials are not used optimally. In today's times with supply bottlenecks and high raw material prices, that is a big challenge. It is also a very labor-intensive industry, and we all know there is a labor shortage, especially in European markets but also globally, which has intensified in recent years. All this, combined with many projects being delayed, leads to budget and time difficulties. So the need for digitalization is enormous in the industry, and digitalization solutions are in demand, especially now, to handle these challenges optimally.

Well, I think if you look at the super successful history of the Nemetschek group – successful for 60 years – we have never run out of ideas. I think we have proven that it never happened. There are not a few opportunities today. But you have raised an important point. I believe the growth does not come from the shift to a subscription or SaaS model. The growth is already in the fundamentals, in the macro drivers, in the economy, in the industries we operate in. The subscription or recurring revenue share is a business model that gives us predictability, but for our customers it is also very interesting because we can add new features to our software much more quickly, make changes without having to sell a big release. Our customers benefit because the world is faster-paced. Through such a model, we can also serve our customers better. So I think it is important to have such a base model to work on, with product structures, pricing structures, etc. That contributes to our growth, but above all it contributes to the solutions for our customers. Many companies say that, but you can feel that the Nemetschek group is always very close to its customers and its industry. And you have a wonderful tech speak – I always call it that.

Yes, that's interesting. As you said before, I come from heavy industry, where it is not unusual to have a digital twin in production. I came and asked: why is it important to have a digital twin now? Why hasn't it existed for a long time? One must not forget that in the real estate or construction industry, every building, every project is very unique; it's not mass production. In the past, the need for a digital twin was perhaps not so strong. Now we have talked about energy flows, CO2 challenges, optimization potential. Buildings need to be controlled differently, especially in the operation phase or when making changes. In the past, there was no image of all the data of a building. Now, the digital twin is gold. We can combine all historical data from the construction phase with current real-time data. In today's times with current challenges, that is a very important product. That's why we are very proud to bring such a good digital twin to market this week.

Absolutely. First of all, we have always invested a lot. I mentioned earlier that we have a very successful history with acquisitions. There are few companies that have done that as successfully as the Nemetschek group. That gives us a great breadth of exciting solutions. Now, for about a year and a half, we have also been investing in early-stage startups, in ventures as we call them. We do this for two reasons. First, to keep ourselves a bit disruptive and stay attuned to the times. Many young companies have a completely different approach, and we combine that with our wealth of know-how. Second, a lot of new technology comes from there. We can do a lot ourselves, but we want to be part of the newest solutions early on. You mentioned AI. For us, AI is nothing new. We have been working on it for a long time, also in successful collaborations through the Nemetschek Foundation and the TU Munich. So for us, it is absolutely not a buzzword but a long-standing topic. We will also be able to use generative AI in our products at some point, as well as in our internal processes, which benefits our customers by making us more efficient, answering questions faster, optimizing our R&D processes, etc. So we see a broad field, but it is not something where we will see huge changes in our products overnight. But perspectively, it is a very exciting topic, and not a buzzword.

Oh, that's a question. I think you shouldn't ask the CFO that; you should ask the analysts or the investors. Investors are the ones who need to understand our plans. I can say one thing in advance: the value generation of the Nemetschek group over the past years has shown that we pursue a very consistent strategy. We create value for our investors and for our customers, which is very important to us. I think investors also see that our continuous transformation and all the opportunities we have are very well translated into value generation. Yes, we don't just talk about it, we don't just invest in it, we also deliver, as we have seen in today's results. We deliver good results. For me, as an investor, whether I sit on the financial side of a company or on the other side where I invest in a company, that is what matters. And I think we are not running out of ideas, nor out of ideas for how to generate value for investors. We are very happy that we can always keep this promise.