Dear ladies and gentlemen, welcome to the earnings call of Nemetschek Group. At our customer's request, the conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand over to Stefanie Zimmermann, Vice President of Investor Relations, who will lead you through this conference. Please go ahead.
Thank you, Operator. Hello, everyone, a big welcome. Thanks for joining our earnings call today to discuss the results for the fiscal year 2022 and the outlook with us. I'm very pleased that in addition to our CEO, Yves Padrines, our new CFO, Louise Öfverström, is also on the call. 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 presentation, our annual report, the press release, also our CSR report and the remuneration report on our investor relations website as well. In addition to the figures and the strategic highlights in 2022, we will give you an update on our subscription SaaS roadmap and of course, on our outlook for 2023 and our growth ambition for the future. Now let's get started.
I'd like to hand over to our CEO, Yves. Go ahead, Yves.
Thank you, Stefanie. Welcome everyone to our full year 2022 earnings call. I'm also delighted to have our new CFO, Louise Öfverström, with me today. She joined the Nemetschek Group at the beginning of this year, and I'm very happy to have her on board and part of the Nemetschek Group. With her vast experience, expertise, and competencies in the areas of finance and operational excellence, she's a great addition to our executive board. Coming to our presentation, as usual, we have prepared a slide deck that we would like to briefly walk you through so that Louise and I have enough time to your question afterwards. 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 2022, we will look at the good progress we have already made in our migration to a subscription and SaaS centric business model and give an update on the recently launched Bluebeam transition. Last but not least, we will also talk about our financial outlook for the current fiscal year 2023, as well as our ambition for the years 2024 and 2025. To begin with, let me summarize the past fiscal year 2022 in a few key messages on page three. I believe we can be proud of our performance over the course of the last year.
We have once again delivered record results, even with more hesitation in design markets in Europe due to the higher interest rate as well as Russia's war against Ukraine, and despite also the start of the subscription SaaS migration of our largest brand, Bluebeam. This is thanks to the strong foundation of the Nemetschek Group. With the huge market opportunities in our two end markets, in AEC/O as well as media entertainment, we both enjoy a variety of structural growth drivers, we are well-positioned to further growth and continued value generation for our shareholders. Our transition to subscription and SaaS model will only further increase our visibility, resilience, and profitability even further.
I believe it's fair to say that we are only very few companies that are able to show attractive top-line growth combined with a high profitability while transitioning their business to a subscription SaaS-centric business model. If we look a bit further into the future, you will see with ambitions for 2024 and 2025, while we are doing this entire subscription SaaS transition, we are confident that we will be able to deliver very strong and above market growth rates in the mid to long term. With that, let us take a look at the review of the past fiscal year, 2022. On page four, you can see an overview of our five strategic focus areas. In line with our strategy, we accelerated our transition to subscription and SaaS centric business model.
As you know, mid last year, we successfully started the migration of Bluebeam with the launch of our Bluebeam Cloud solution. We also made progress in other segments, for example, by now having a clear subscription plan for each of our design brands or by migrating the last perpetual license market, which is China in media, beginning of last year. As a result, we were once again able to substantially increase the share of subscription SaaS revenue. We will talk about it in more detail in few minutes. Over the last year, we also improved our go-to-market strategy by upgrading our e-commerce presence, for example, such as our brand Solibri or in case of Maxon, whereby now the majority of the revenue is generated via the web store.
Our ongoing internationalization efforts resulted in an increased share of revenue that was generated outside of Germany with 79% in 2022 versus 76% in 2021. Going forward, our goal is to further reduce the dependency on the European market by continuing to focus on the higher growth region, North America and Asia Pacific. Innovation and technological leadership have always been a core part of the Nemetschek Group DNA. In 2022, we solidified our position as an innovative leader once again on various fronts. For example, in the field of digital twin or with the continued improvement of our best-in-class flagship product, Maxon One in our media segment.
Apart from the normal numerous updates and upgrades, new features and product improvements we published every year across our portfolio, we also launched new and innovative cloud offerings, such as Bluebeam Cloud or Solibri Inside end of last year. Another way to be at the pulse of the latest technological developments and trends in our industry is via our venture investment strategy. Over the last year, we made minority investments in a series of young and highly innovative companies from Europe and in the U.S., such as Imerso, which is focusing on digital twins for property development. SymTerra, a U.K.-based startup that developed a construction site communication platform. End of last year, KEWAZO, which is a robotic solution that enables automation and digitalization of offsite material flows. These companies will help us to further increase our innovative strength and to cover important future topics.
However, we were also successful in the traditional M&A field. Media further strengthened its position by acquiring Pixologic, a leading provider of free sculpting and painting software with its product ZBrush, which perfectly complements Maxon's existing product portfolio. Lastly, we continue to harmonize our structure and to reduce complexity in order to increase our operational excellence and lay the foundation for future growth. With that, I would like to hand over to our new CFO, Louise Öfverström, who will introduce herself and will talk you through our 2022 financial highlights.
Thank you very much, Yves, a warm welcome to all of you to our full fiscal year 2022 earnings call from my side as well. As you said, Yves, this is my first earnings call for the Nemetschek Group. Let me very briefly introduce myself. I've been working with strategic finance transformation for German multinationals, different aspects and in different geographies my whole working life, I'm now very glad to have joined this great company with an impressive past and a very exciting future. I'm really looking forward to continue this interesting journey together with Nemetschek. One of the reasons I choose to join this group is that I simply say that all mega trends and the fundamentals are really being in favor of Nemetschek's fantastic growth journey.
My priority is, and will be, to enable a strong basis to capture this growth, and also to enable the transformation of our business model, but also to remain financially flexible in order to make that happen in a proper manner. With that, now let us come to the financial review of the fiscal year 2022. Let me begin with a short overview of the last quarter of 2022 on page six. I would like to start with our recently introduced ARR KPI because we believe that this is the best indicator of our underlying business performance as well as our future growth process, especially during our transformation to a subscription and SaaS-based business model. The ARR grew again over proportionally and continued to be on a high level with 27% to EUR 582 million.
As we expected, subscription and SaaS revenue were once again the main growth drivers with a plus of 47%. Our reported revenues in Q4 2022 increased by 8% year-over-year. We should be mindful here that this quarter was also impacted by Bluebeam's transformation to SaaS and subscription. We continue to benefit also from FX tailwind of 410 basis points during the quarter. The EBITDA in Q4 was impacted by different factors. First and foremost, we were, of course, missing the full profit contribution of one of the most profitable brands within the group, Bluebeam. As I just said, due to the deferred character of the subscription and SaaS revenue, and we consistently started this subscription transition at the end of Q3, this was of course missing in the contribution.
In addition, we continued to invest in key resources such as MVE. Here we see the opportunity of slightly less competition during Q4 because we know that the labor market growth was impacted there. We continued to hire where we saw an opportunity to gain the resources we need for our future growth. Our earnings per share decreased accordingly in Q4. However, I think it's really worth highlighting here that if we exclude the PPA charges, our earnings per share would have been flat on a year-on-year basis. With that, on the next page seven, we show a summary of our key financial indicators and highlights for the full fiscal year 2022. I will not read them all out to you, but to summarize 2022, I think it's really fair to say that the Nemetschek Group had another very successful year.
Despite an increasingly challenging market environment. We were successful thanks to our high share of recurring revenue, as well as the very intact structural long-term growth drivers in our end markets. Our revenues increased by almost 18% to EUR 802 million. This was helped especially by the strong performances of our build and media segments, which grew by 24% and 49% effectively. We also, here for the full year, enjoyed a substantial FX tailwind, mainly stemming from the strong U.S. dollar, 560 basis points in total. The main contributor to our sizable growth was once again the recurring part of our business, which reached almost EUR 533 million. That's an increase of 28% and was mainly driven by a subscription growth of 55%.
Both figures mark new records for Nemetschek on a yearly basis, and they both underline the consistent strategic execution. In line with our high top-line growth, our earnings showed a very good development as well, with an EBITDA of EUR 267 million for the year. That's an increase of 16% year-on-year and corresponds to a margin of 32%. Last but not least, this strong operational development, combined with our very solid balance sheet, enables us to propose an attractive dividend per share of EUR 0.45. A year-over-year increase over the year of 15%, and that is the 10th consecutive increase in a row. If we go further on page eight, you will see the development of our four segments for the fiscal year 2022.
Starting on the left, the Design segment recorded an increase in revenues of almost 10%, still 6% on a currency neutral basis. Let me shortly mention here that the slowdown that we saw in Q4 to only 4.7% year-on-year was, apart from the slightly hesitant and cautious customer behavior and prolonged sales cycles in Europe, also impacted by a challenging comparison base, which was almost twice as high as in Q3. It's two effects that we need to consider there. We are very pleased to notice, though, that our subscription and SaaS revenue in the Design segment as well continued a strong growth trajectory with a spurt of 51% year-on-year for the full year.
While this continues to have a short-term negative effect on growth, we know the deferred character of the revenue, it is of course positive for the segment's future growth and margin prospects and in line with our strategy. Going further to the Build segment. Once again, in 2022, the Build segment was one of the main growth drivers of the Nemetschek Group, with an increase in revenues of 24%. This development is particularly impressive, I think, given that the segment's largest contributor, Bluebeam, already started its transition to a subscription and SaaS model, as I already mentioned, at the end of the third quarter in 2022. Although the profitability decreased somewhat due to the missing revenues, deferred character of the revenues, because of Bluebeam's transition, the EBITDA margin stayed on a comparatively high level.
Our Media segment once again had a stellar year in terms of growth, 49% year-on-year, as well as a profitability with a record margin of 43.8%. Apart from the strong organic growth behind it, the segment also benefited from the acquisition of Pixologic, Inc. As you can see, we're continuing to benefit of Maxon's fundamental transformation over the last years and its excellent market position in the media industry. With this recent addition of Pixologic, as well as the continued improvement of the Maxon One flagship product, we are preparing the segment for the next above group average growth phase that we will also see in the coming years. Last but not least, in our smaller segment, Manage, which felt the effects due to the global COVID pandemic during 2022.
That was also partly driven by a continued, somewhat cautious investment behavior of some customer groups. While we are certainly not satisfied with the current performance of this segment, we are simultaneously in the process of reshaping the Manage segment in order to set forth for higher profitability in the future. For example, we have also brought a new management and a reshaping due to that. Additionally, we also created, as you know, the new digital twin business unit in order to take maximum advantage of the enormous growth potential that we see in this segment in the future. Let's move on to page nine. As you all know, one of our main strategic priorities, and we mentioned it already, and it's also always a very important point, is our journey towards the subscription and SaaS-centric business model. It is a key strategic priority.
As you can see on the right side, we are once again very successful in our efforts and reported an over proportional growth across all KPIs for the recurring business during 2022. Starting with one of our most important KPIs going forward, I mention it, the annual recurring revenue or short ARR that we introduced during Q3 2022. We can see that the ARR clearly grew over proportionally with 22% over currency adjusted basis and 27% on a reported basis. This is a very strong indicator for us that the continued high growth potential of our business in the next time, the next 12 months will continue. A reminder, according to our definition, ARR includes all of our different recurring revenue streams. It's subscription and SaaS as well as maintenance contracts in this KPI.
That means that if we would strip out the maintenance contract, the ARR growth in 2022 would have been even substantially higher. This can also be seen when we look at the development for our subscription and SaaS revenue in Q4 as well as for the entire year 2022, which grew by 47% and 55% respectively. This is almost again the double the pace of our overall recurring revenue. As we expected, with the stop of the license sales for new customers at Bluebeam, as well as the ever-increasing share of our customers that choose to opt for our subscription offerings in Design segment, our license revenue fell steeply in Q4 by almost 30% as expected.
On the left-hand side, you can see the result of the high growth in our recurring part of the business, which translates to an increase of the share of subscription and SaaS revenue for more than 600 basis points year-over-year to now 25%. The total share of our recurring revenue, subscription and SaaS that is, along with our maintenance contracts, now account for two-thirds of our total revenue. That's a new record for the Nemetschek Group. With the successfully started transition of Bluebeam, that is our biggest brand, the share of recurring revenues will continue to substantially increase in the coming quarters and years. If we move ahead to page 10, we have also provided a more comprehensive overview of our most important operational results. I have already addressed our most important KPIs, revenue growth, ARR, and EBITDA.
When we take a closer look, you see that as one also would expect, for example, people are our greatest asset as a software company, and therefore, personnel costs account for a large part of our cost base. We had around 15% of increase in the personnel cost base, which was consequently a main driver of the total cost base in 2022. This is due to the accelerated hiring in the first nine months of the year, as we also do in order to support the growth that we see ahead. It's also a result of the somewhat higher wages that we have been rewarding for our existing staff in order to keep up the top talent in the group.
I want to use this section also to highlight that in the light of the uncertain global macroeconomic outlook that we do see out there, we have already adjusted our hiring pace accordingly, and we always ensure that our OpEx base will increase at a reasonable rate in 2023 and beyond. If we go down quickly the P&L, you'll notice that our earnings per share increased somewhat overproportional in 2022 as well. This overproportional growth is mainly a function of two factors. First, only a moderately increase in depreciation charges, and the second, we had a lower tax rate compared to last year. I would also like to draw your attention shortly to some of the numbers that we haven't touched on so far during the call. For example, the free cash flow, that is also an important KPI to us.
Reported free cash flow excluding M&A shows a decline of 5.9% versus last year. You can ask yourself why. This is mainly a function of the one-time tax repayment we saw in the U.S. and Australia. If we would adjust for this extraordinary effect, we would come to an increase in our free cash flow that is well in line with our EBITDA growth, and that should also show and understand the very high quality of our earnings. Last but not least, we also once again improved the quality of our balance sheet and represented in important KPIs such as the equity ratio of course, you can see it stands now at almost 58% as well as a net cash position of around EUR 125 million.
Therefore, the strong underlying earnings and cash flow development, along with our extremely solid balance sheet, provides us not only with a high degree of safety going forward during this time, but simultaneously it enables us to accessibly shoot value-generating M&A targets and venture investment opportunities emerged in the upcoming months and quarter. I think that's a solid base. With that, I hand it back to you, Yves.
Thank you, Louise. I would like now to give you an update on our subscription SaaS transition. A move to a more recurring and resilient business model is a key strategic priority for me as well as the entire leadership team at the Nemetschek Group. Starting with the bigger picture on slide 12. As you all know, the Nemetschek Group is quite unique in a way that we do not transition our entire portfolio to a subscription SaaS-centric model all at once. One of the advantages of our decentralized setup is that we can migrate our portfolio in a phased approach. This does not only give us more control over the entire transition process, thus significantly reducing the associated risk, it also makes the migration more easily digestible for shareholders. Furthermore, it allows us to have a tailored subscription strategy for each of our segments.
Each of our four segments is at a different stage. While the migration of our media segment is almost completed, the build segment just started its transition with the launch of Bluebeam Cloud in Q3 last year. You can see how these different strategies translate into the development of the revenue split of the entire Nemetschek Group on the right-hand side. In short, you will see a big improvement in the composition of our revenue base. In the next three years, as you can see in the chart, the vast majority of our revenue will not only be recurring, but also subscription and SaaS-based by 2025. This will not only make our business better plannable and more resilient, it will also substantially increase our cross and upselling opportunities. More details about our ambitions for the coming years will follow later.
First, as we promised, we want to keep you updated on the progress of the certainly most prominent, because certainly most important subscription and SaaS transition within the group, the Bluebeam transition. Moving to page number 13. As Bluebeam is our largest brand within the group, this is the first, and I would argue also the only time during our coming transition that we will see a material impact at group level due to the transition of a single brand. In short, we are happy to report that Bluebeam transition went exactly according to our plan in the first two quarters. By the end of 2022, we converted roughly 10% of Bluebeam customers, and as of today, this number is even closer to 20%.
This process and good progress gives us a great deal of confidence that we will be able to achieve our goal of migrating more than 90% of Bluebeam customers to the new subscription package by the end of 2024. The current pace of migration should even accelerate in the coming quarters due to various planned initiatives and also the end of the option of buying licenses for existing customers. The customer feedback also continues to be very encouraging, and it seems that our customers really see the additional value of the Bluebeam Cloud features. Our core and complete packages, which is our mid and high tier premium packages, account for the majority of the new subscription sales. If we look at our existing customer base, we observe a similar behavior. The majority of additional seats are purchased in the form of subscription.
Going forward, we will further intensify our efforts to migrate our existing customers with special incentive programs. To summarize the current state of Bluebeam transition, everything is going according to our internal planning, and we continue to be very confident that the transition will be a success. Before we come to our guidance for the current fiscal year 2023, as well as our midterm ambition, please allow me to first highlight the different building blocks that give us confidence to achieve our guidance once again, not only in 2023, but also in the coming years. Starting on page 15. First of all, let me once again highlight the massive market opportunity that still lays ahead of us in the coming years and even decades in both our markets, the AEC/O as well as media and entertainment.
Taken together, these two markets represent a combined TAM of more than EUR 50 billion. The beauty of this market is that they are constantly growing by more than 10% each year, driven by various long-term structural growth drivers such as obviously the very low degree of digitalization, green buildings, as well as the regulation in the AEC/O industry, or the ever-increasing demand for digital content creation and 3D animation or gaming in the media and entertainment space. These structural growth drivers are not just still intact, they are becoming increasingly important in the current environment and in the future. That is why we are confident that potential short-term hiccups, for example, in the global construction market, will not affect our ability to grow in the mid to long term. Going to the next slide.
The recent discussion about a potential downturn of our global economy as well as the multiple crisis and geopolitical tensions over the last year have shown that it is more important than ever to have a well-diversified business model. While Nemetschek will not be immune in the case of a global recession, I would still like to use this opportunity to highlight how well-diversified and thus resilient our business has become over the last years. Starting with the chart at the top. In the COVID year 2020, we have already shown that our AEC/O segments are affected, but by deteriorating market conditions at different points in time. This helps us to better manage a potential downturn across our portfolio.
In addition, you see that we have become substantially less dependent on a single customer group or segment. In this case, design, which today accounts for only 49% of our total revenue versus 66% of our total revenue in 2017. Lastly, with a higher share of our media segment, we have increased exposure to an industry with a completely independent business cycle versus the construction industry. The increased share of build and media, along with a successful internationalization strategy, also resulted in a better diversified geographic exposure. We are less dependent on a single country or region, which was also one of the reasons that helped us to achieve our strong growth in 2022, even despite softer design markets growth in Germany and Europe.
In this call, we have already discussed the perhaps most important development in recent years, the strong increase in the share of our recurring revenues. Along with our high customer retention rate, this revenue provides a more stable and better plannable revenue stream even during more challenging economic conditions. Now coming to the end of the presentation on page number 17. After our successful year, 2022, we will continue to lay the important foundation for the future dynamic growth of the Nemetschek Group in 2023. We will remain focused on innovation leadership or sales strength or customer proximity, as well as targeted investment in start-ups and also in innovative companies with M&A. Based on our strong fundamentals, we expect an attractive growth at a high profitability in 2023 as well. Even despite this year accelerated subscription SaaS transition of our business model.
In particular, that means that from today's perspective, the executive board expects an ARR growth of more than 25% in 2023. As a result, the share of recurring revenues is expected to exceed 75% at the end of this year. In addition, the revenue growth at constant currencies is expected to be in the range of 4%-6%, and the EBITDA margin will be in the range of 28%-30%. For 2024, we already expect our growth to return to double-digit percentage range, while the EBITDA margin will be at a level of more than 30%. Due to the significantly over proportional increase in subscription and SaaS revenue, we expect that the recurring part of our business will represent over 85% of Nemetschek total revenue.
Following the successful transition of the majority of our business to subscription SaaS model by 2025, we expect a further acceleration of growth to a range that is at least in the mid-teen, significantly above the market. I believe that with our ambitious short and midterm goals, we provide a clear picture for investors to look beyond the current transition and to see the final result. A stronger, more dynamic, and resilient Nemetschek Group than ever before. With that, I would like to thank you for your attention, and we are now happy to take your questions. Operator, please back to you.
Thank you. If you have a question for our speakers, please dial star one one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask your question. If you find your question has been answered before it's your turn to speak, you can dial star one one again to cancel your question. One moment, please, for the first question. The first question comes from Sven Merkt from Barclays. Please go ahead, sir.
Great. Thank you very much. Good afternoon. First, on the comment that you expect to grow significantly ahead of the market in 2025, is this primarily due to the mechanical tailwind of the transition, or do you also expect to gain more market share? Maybe more generally, can you comment if and where you see the scope to take market share? Is it perhaps from weaker competitors, or higher price solutions? Secondly, on the 2023 margin guidance, it looks like the incremental investments compared to Q4, are very limited and therefore the question, if you have a very high confidence on the top line acceleration over the coming two years, why have you decided to constrain cost growth this year so much? Thank you.
Hi, Sven, and thanks for your question. First of all, regarding the growth in 2025. In our forecasting exercise and in the guidance that we are giving now for ambition, on ambition for 2024 and 2025, we are not expecting that suddenly, you know, the market will change dramatically and that, you know, there will be huge growth or further accelerated growth of the market. We are expecting the market to be as is with no big difference as we are today. Clearly for 2025, the growth part is coming to the fact, of course, the big effect of the fact that majority for business will have been transformed and transitioned to subscription.
Clearly the subscription effect is one of the major parts of this nice growth in 2025. Obviously, we have some very good also or organic growth coming from the market growth in general. Here we are not expecting to suddenly gain or win again a lot of market share from competition in these numbers. We are not expecting that suddenly, you know, one of our large competitor will collapse and that we are going to eat their cake massively. You know, it's just the fact that, you know, the cake is going to grow so much that there is room for us and other players to grow. We believe that we will, as always, be above market growth. The acceleration of this growth is definitely coming mainly from the subscription model.
If I may take the second question regarding the how much we invest and how we steer our cost through 2023. We do set for growth, as you can see in our guidance as well. I think it's fair to say that it's a volatile environment right now, as always, we will steer our cost and our investments to stay in line with our revenue growth and our strategic priorities. It's not that we are investing less, it's that we are steering that in the direction of how we see that the markets are going, which should not be seen as a dampening from that perspective.
Okay, great. Thank you. One follow-up question.
Okay.
In the construction market will likely look quite different in the coming years, just given that we now are in a higher rate environment. Are there any initiatives you consider to maybe slightly differently position the group, your investment or product focus, maybe to focus a bit more on the public sector or any new features that maybe can help your customers to reduce costs?
Definitely. I think, the construction market, is changing, and will definitely change over the next few years. Definitely if you take, first of all, the design and planning phase, there will of course be a lot of changes. There will be new technologies who are going to disrupt also more, some of the architecture firms with generative AI, et cetera, that we are adopting more and more and looking on the innovation front. Clearly, also we see that the build, segment will continue to grow proportionally much bigger and higher than design and planning. That's why I think, the total share of design and planning in three years from now of the total revenue of Nemetschek will probably be a little bit smaller than what it is today.
Therefore, on the construction side, we see some innovation and additional features that we could offer, especially to our million of the Bluebeam users. That's the overall strategy that we have with the launch of Bluebeam Cloud and also with the move to subscription for the Bluebeam customer base. Last but not least, as already stated in previous earnings calls that we had in 2022, operate and manage phase is also quite an important element where we see that there are more and more opportunities and that owners and people managing buildings are going to influence more and more the decision on which type of software are used in the overall building lifecycle.
In addition to that, as also mentioned, in one of our earlier calls, in 2022, and we are going to give you more news around that in the next few months, especially when we launch the solution, is about our new initiative around digital twin. Which is the open cloud data and asset-driven digital twin solution, which is going to be an open cloud platform, targeting first, complex buildings in the operate and manage phase, but which could be also kind of a glue and a central data lake for our overall products and brands, for the overall building lifecycle.
Great. Thank you very much.
I'm sorry. Maybe also to add on your point on the areas in which industry, especially in the building, environment. Clearly, in Europe, we see that there will be more and more activity in renovation than new buildings. That doesn't mean that new buildings will not disappear, but of course, the renovation part, we see a big increase on the renovation side, mainly due to the energy crisis and the fact that everybody is looking for more energy efficiency solution, et cetera, et cetera.
Perfect. Thank you for the detailed answer.
We are now going over to our next question. Our next question comes from Knut Woller from Baader Bank. Please go ahead.
Yeah. Thank you. A couple of questions from my side. Reading or just listening to your comments, Yves and Louise, I just grasped that you're focusing now also more from on e-commerce, on solution selling, but also operational excellence. I perceive that a bit as a change of delivery models or strengthening of new delivery models and also looking on margins internally. Can you just give us some more color here on the expected tailwind you're expecting from margins looking through the transition? How should we think about here Nemetschek's growth profile and especially the margin profile going forward? Secondly, on the design segment, you have cited the difficult market environment in Europe, the slowing growth.
How should we think about design in 2023? I know you're not guiding per quarter, but you're running against tough comps, particularly in H1. Looking at your growth guidance and margin guidance, how should we think about H1 shaping up? Thank you.
Thank you very much, Knut, for your questions. First of all, on the first part, we do not see any material impact on the margin. Yes, of course, when you move to more direct business and web store, especially as I say, with Maxon and or Solibri, and, you know, a big part also of growing revenue. Not majority, but a nice part of growing revenue is also via web store. Yes, it's helping, but we are obviously reinvesting and there is a scale effect with the balance. Because we are reinvesting in new initiatives, in technologies, again, around digital twin, around AI, machine learning, et cetera, et cetera.
Where we are saving, we are definitely reinvesting on the innovation side, there will be no material impact on the margin. On the second part of your question, related to design. We are not expecting that there will be fundamental changes short term in the design market in Europe. That's why, you know, our guidance is unfortunately, linked to the trend that we started to have middle of last year, which, you know, it's a rollercoaster because then, you know, remember some months were more negative. Then we saw some nice growth again in design, but obviously, in November or October in Q4, it was not as good as expected, but very, very good in December.
We expect Q1 to be more or less a little bit better, but not much more better than Q4 for the design side. We are expecting more or less a little bit the same for the second quarter. Where we see, that's why, you know, 2023 in general, not only for design, but in general, it's really quite back end loaded in Q3 and Q4. Q1 we see some negative impact coming from Media also. Media, as you recall, had a very, very strong Q1 last year, mainly due to the last time buy of perpetual license in China. We had a very strong Q1 with a very strong growth. Of course, there was also then the acquisition of Pixologic.
The big material change is due to the perpetual license last time buy in China for Maxon. Therefore, Q1 of this year for media will be, like, more in the mid-single digit growth. Of course, that's just a one-time effect. In Q2, Q3, Q4, we are expecting again some very nice strong double-digit growth for media, but Q1 will have an impact. Overall, you will see that we are expecting that also the margin level of Q1 will not be as good as what we are currently guiding for the full year. But that will have only an impact for Q1 and will be recovered in Q2, Q3, and Q4.
Q1 expectation on the margin and EBITDA margin should be lower than our current guidance. Also on the top line, there will be an impact due to Maxon.
Thank you, Yves. That's very clear. Just one quick follow-up. I understand you're investing now in e-commerce and all that, but just looking through the investment phase, and you cited here the scale effects. If you're successful in ramping up e-commerce, it will save you some cost over time, particularly if this part of the business scales. Is it fair to assume or to see that as an additional margin tailwind midterm compared to the previous delivery model of Nemetschek?
Absolutely. I think, mid to long term.
Great. Yep.
This will have a positive impact.
Excellent.
Probably, I mean, again, your next two years will be a big transition year, especially with the move to subscription, which doesn't have only an impact, as you know, on top line, but also on EBITDA. I think onwards after 2025, definitely this will have a positive, even more positive effect. Don't forget, we are going to invest, we want to innovate. We will launch new initiatives also to potentially disrupt ourselves but also disrupt the market. Especially with the growth of and the acceleration of new technology, especially around generative AI, there will be a lot of disruption within the next 5-10 years. Not only in the construction industry, but in general in all industries.
We have to be on top of that, and therefore, we need to invest.
Great. Thank you.
We are now going over to our next question. Our next question comes from Nay Soe Naing from Berenberg. Please go ahead.
Hi. Good afternoon, everyone. Thank you for taking my questions. I've got two, if I may. If I could start with the, Clearly you're expecting a lot of your midterm growth to come from subscription. could you explain to me the growth from subscription will come from your existing subscription customer base, of course, after Bluebeam transition is completed, or will it come from further transitioning of your license and maintenance customers onto the subscription model? If it is the latter, so growth from the transition, should we expect some more growth headwinds in the license revenue and consequently as a result on the margin progression?
Clearly, on the midterm side, if you look at the growth, as I said, it is mainly coming from growth on subscription. On the subscription side, we have here planning to have majority of our overall revenue being subscription. It is true that for Bluebeam, here, there is a strong strategy to move and migrate our maintenance SSA customers to subscription. The plan there and will be implemented, and I think by 2025, it is why we believe that we will have such high potential of growth. Now, for the other brands, I know we are expecting licensed revenue to be very low. I mean, by 2025, you know, I think it will be clearly below 10% or total revenue for perpetual license.
We're not expecting additional growth, coming from perpetual license, definitely not. The growth of subscription will come, first of all, from the migration of existing customers. Second, obviously, from the growth of additional seats and additional users, especially on the Bluebeam side, we believe that will be continuing strong growth. Of course, in general, all our brands will grow because the market is growing and the level of digitalization is low in all segments.
That's very helpful. Thank you very much. Just one more question from me, again, on the midterm, growth outlook. You know, clearly you've given a very strong and confident growth outlook, well received by the market as well. It would be great to understand from you know, what gives you the confidence on this very robust midterm growth outlook.
The confidence is just mathematics on the subscription model side. You know, even with not a big growth in term of seats, which we believe will be still there, I mean, the structural growth drivers of our industry are completely intact for the next few years. It is just mathematically that with the current structural growth that we have, which is intact, the fact that we are changing completely our pricing and business model, not from perpetual license to subscription, de facto mathematically, we see such very nice growth coming in the near future.
Great. Thank you very much.
We go now over to the next question. The next question comes from Victor Cheng from Bank of America. Please go ahead.
Hi, Yves and Louise. Thanks for taking my questions, two if I may. First of all, thinking about 2023 growth, how much of that is coming from pricing? In 2024 and 2025, also, how much of the pricing upside is baked in? In the design segment, looking at Q4, were there any pull-forward effects coming from Vectorworks? Can we talk a bit about the dynamics there, with the slower growth? Is it due to, you know, higher churn as well as, fewer new wins?
Sure. Clearly, if you look at 2023, there are some parts of our growth is definitely coming also from price increase because we almost didn't do too much price increase in 2022. There will be some portion of the growth will come from the price increase in most of our brands, not all. Majority of the growth is definitely coming from volume and more users and more seats. If you look at the design segment in Q4, definitely two double effects there. First of all, as we stated, the economical environment in Europe made the fact that, yes, there is some slowdown. As you know, majority of our revenue in design is in Europe.
There have been some pockets in Europe which have been more impacted than others. In addition to that, and due to the fact that, you know, there is some uncertainty in the market, customers also wanted to go more towards subscription model than perpetual license, even with our design brand, which is, was a little bit new for some of our design brands. Because that happened without some of the design brands not pushing super strongly on it. It really came from the market and from the customers. The good news is that our churn rate is still super low. I mean, we are in design, super sticky product. We are talking about less than 5% churn. Definitely there is no churn effect. It is mainly due to more subscription than expected in the design brand.
Second, I mean, obviously as most of the business in design is in Europe, the economical situation here. Then there'll be no big effect of pull forward earning to Vectorworks.
Thank you. Very clear. Just wanna see if you have any comments on 2024, 2025 outlook. Any contribution from pricing in those years as well?
It's minimal, marginal. It is mainly a growth coming from volume.
Perfect. Thank you.
We are now going over to our next question. The next question comes from Florian Treisch from Kepler Cheuvreux. Please go ahead.
Thank you very much for taking my question. I have some questions around Bluebeam. The first question is around what are your assumptions on the subscription penetration for 2023, 2024? Now we are at above 10%. You're targeting this 90%+ at the end of 2024. Is it more like a linear development or really a 2023 heavy development? The simple idea behind it is when do you expect the subscriber growth [audio distortion] can compensate [audio distortion] and then lastly, maybe if you can share some insights when it comes to extra Bluebeam growth in measure in your number of subscriber that you get a better feeding about underlying dynamics of fluid is still a what about 10%-15% growing business. Thank you very much.
Yeah. So, Florian on the Bluebeam side we are expecting to finalize the migration or could be almost there by the end of 2024. As you know, existing customers they had up to one year options [audio distortion] which means that by [audio distortion].
We're going over to our next question. The next question comes from Deepshikha Agarwal from Goldman Sachs. Please go ahead.
Hi, thanks for taking my question. First, I have three just, I'll be quick with them. First one, on the at least mid-teens revenue growth for FY 2025, we just wanted to know what assumptions are you making on macro as in will it, are you expecting it to improve, or are you expecting it to broadly stay unchanged from where we see it? Also, we wanted to know, in that, do you still have media, the media segment growing more like 20% +? The second question is basically on the transition.
Given, you know, the conversion to subscription will be more gradual in design over 2024 and 2025, is it fair to assume a lower double digit to mid-teens decline in overall group licenses in those years? Are we thinking in the right direction or are we missing something? The third one is a more sort of a housekeeping question. CapEx as a percentage of sales tracked higher in 2022 at 2.4% versus 1.5% that we saw in 2020 and 2021. Should we expect it to go down back to those 1%-1.5% levels? Also on cash taxes.
Sorry. Can you just please repeat this question?
Which, the, all the questions?
No, the third one.
Third one. First one is basically CapEx as a percentage of sales, for 2022 was around 2.4% versus, closer to 1.5% that we saw in 2020 and 2021. Should we expect the CapEx as a percentage sales to go down more closer to 1.5 in 2023 onwards? On cash taxes, what we saw in FY 2022, it was higher than that in P&L. How should we think about cash taxes going forward versus the P&L taxes, 2023 onwards?
Okay. First of all, regarding the growth in 2025, the mid-teen that we are planning, and to be significantly above market growth, we are not expecting the macro economy to completely change and explode. We are expecting a similar situation than today. Just to confirm also on the media side, for media expectation to me to be also in the mid-teen growth. Your question regarding the transition of to subscription, especially in design. On the design side, we are planning to have also majority of our revenue by 2025 to be subscription.
Of course, there will be still work after 2025, to convert also some of the SSA customers to subscription and there will be still a move to still continue the transition. We will still propose perpetual license even in 2025, especially for large brands such as Graphisoft and Allplan. We believe that the total, again, perpetual license revenue will represent even in design, probably, around 10% of the total revenue of design by 2025 or after that. Yes, you're correct that, you know, with the current macroeconomics and also the move to subscription, you know, the design growth we are expecting to be in the, you know, high, mid-high single digits for the next few years.
Maybe let me take the third question. First to the first part of the question, CapEx in terms of sales. Yes, we saw there was an increase in 2022, and we would expect that to come down to normalized levels again in 2023. To the second question as cash taxes, there was a higher effect in 2022. There will still be an effect, but the cash taxes in 2022 will be higher than the taxes spent due to certain jurisdictions. We have that, but we expect the gap to be smaller than we had it in 2022.
Okay. Okay. Thank you so much.
We are now going over to our next question. Next question comes from Chandramouli Sriraman from Stifel. Please go ahead.
Yeah, hi. Thanks for taking my question. Good afternoon, Yves. Welcome, Nemetschek, Louise. Just a couple of clarifications from me. Based on your comments on the push towards subscriptions, I mean, your illustrative chart there, I see a significant acceleration in subscription while Q4, the first quarter of this big move, at least in my estimate, was a bit slower than expected. Just wondering, is there some kind of timing related impact of subscription revenue recognition there? Second question on subscription, I just wanted to double-check. Is there any kind of difference in terms of the quality of revenues with respect to margins when it comes to subscriptions versus maintenance? Are they at comparable margin levels? Thanks.
We're clearly on the, on the margin side, as I stated, probably in one of the previous call, but we do not see any big impact on the margin side due to subscription. Remember, a lot of these products are desktop solutions or in particular in design. We are moving to just a pricing model change and not necessarily a full technology change. Yes, there will be, of course, when we move to subscription, we want to add new features which are cloud-based, but it's a hybrid solution. You know, especially if you take. Let's take the example of Graphisoft. Graphisoft, as you may have seen this week, they launched a new package, which is a combination in a subscription model of Archicad plus BIMcloud.
Archicad is mainly desktop, but BIMcloud is purely collaboration features, et cetera, which are purely cloud-based. Obviously we have additional cost of sales from a public cloud vendor due to BIMcloud feature. That's a very small part of the overall solution. You're right that when we talk about Bluebeam, as we are going to migrate to completely Bluebeam Revu, the desktop solution over time to a cloud solution, it will have some impact on the margin, but it's not going to be huge because, you know, we are not talking about a very big complex code of software, like for example, a 3D modeling BIM solution such as Archicad or Allplan. No major impact on the margin.
There will be some, but not major one. Small.
I think the second question was also regarding to if there was a slower progress towards the subscription.
No.
I think there is absolutely no way. It's in line, absolutely in line with our plans. As said before, it's progressing really well, and very satisfied with that.
Yeah.
Okay. Thank you. Thanks a lot.
As a quick reminder, if you have a question for our speakers, please press star one one. Going over to the next question. The next question comes from Andreas Wolf from Warburg Research. Please go ahead, sir.
Yes. Hi, everyone. Congratulations on a successful year. Two quick questions. The first one is on a stronger focus on e-commerce. How are you going to make sure that the users get acquainted with the software? How are you going to deal with training that new users might need? Regarding your growth ambitions in the Americas, do you basically plan to take market share from competitors and shift users from competing software products to yours? If yes, could you also elaborate on how you are going to make sure that the stickiness that is also valid for competing software will be overcome? Thank you.
Sure. First of all, on the web store and e-commerce side, obviously this is a way to sell for, let's say, more simple solution than the complex one. We continue and a big part of our strategy and which is also in the DNA of all of our brands and of the Nemetschek Group, is to really work very closely with our resellers and channel partners. That's really one of the strong pillar and force and strength of Nemetschek and most of our brands, which is to have a very strong channel partner ecosystem with very strong resellers. Of course, we will help them also on their e-commerce journey. They are also the ones who are helping us on the training side, et cetera, et cetera.
Now, obviously, as we are moving to a more subscription-based and SaaS platform, we are also investing more and more on customer success. With customer success, you know, one of the objective that we have is of course, first of all, adoption to make sure that users are using our product. For adoption, you need to make sure that they are well trained, that they really understand, you know, what are the very nice features that you can have with the product, that they use them, that they enjoy them, and of course, also that they renew. Also, when the customer size is good enough and big enough also that we have opportunities to upsell or cross-sell solution thanks to this strong customer success team.
Regarding North America or Americas, in general. With our plan, again, the market is so big, we are not betting, you know, on eating the market share of competition. Of course, that will not refrain us to try and push for it. Our assumption currently in the guidance that we are giving is definitely that we continue the nice growth that we have by surrounding sometimes the competition and not keeping them out necessary. Also, to also strengthen our products and the stickiness of our products.
That's why, you know, for example, with Bluebeam and the move to Bluebeam Cloud, it is very important that we add on a frequent basis, additional features to make our Bluebeam customers more sticky, et cetera, et cetera. Also to upsell and cross-sell some solutions of our customer base in the U.S., like for example, Solibri to the Bluebeam customer base, et cetera. The underlying markets continue to grow and we do need to make sure that we steal the customers' growth.
Great. Thank you.
Once again, if you have a questions for our speakers, please press star one one now. I have no further questions in the queue. I will hand the call back to the speakers for the closing remarks. Oh, hold on a second. just one question just popped in. Let me just get it up on stage. The next question comes from Martin Jungfleisch from BNP Paribas. Please go ahead.
Yes. Hi, good afternoon. I thought I was in the queue already.
Just a couple of questions, please. The first one on the outlook. If you look at current construction backlogs, they're still very strong today, but new building permits have been weakening for some time. In terms of license or subscription demand, how exposed would you say you are towards new builds, and how do you benefit from a strong current construction order backlog in terms of demand in design and build, and if there's a difference between those segments, maybe? That's the first question. The second one is a follow-up on the outlook and subscription headwind in design. Can you share if your assumed top-line headwind from subscriptions for 2023 in design will be higher compared to 2022? Also, as maybe some more cash concerned customers opt for subscriptions. Thank you.
Regarding the outlook, first of all, I think on the. Yes, there are definitely different trends depending on which segments and which part of the life cycle you are. I said, the backlog in the construction industry is still full for the next two months. We see clearly, especially in Europe, some slowdown and hesitation in the design and planning side, especially with the SMB customers in the architecture and engineering side. That we foresee that to clearly continue. I said also, in term of new buildings versus renovation, there are more and more renovation projects coming, especially in Europe, due to energy efficiency measures, et cetera.
New build is still there, but of course, more delays on a really new build when you look at, you know, the number of new permits, et cetera. That's something which is general, quite globally. On the operate and manage phase, again, we see the growth now coming mainly due to two factors. First of all, the fact that post-COVID aspects where hybrid workforce management is quite complex for companies, so they need software to manage the hybrid workforce. Second, a lot of companies also need to make sure that they save their money on the energy level. That's why anything which is linked to energy management software like DEXMA, for example, is has a very, very strong momentum at the moment, especially in Europe.
Thank you.
The public sector is also clearly also growing for us more and more. Of course, infrastructure, because when you look at with potential rotation markets, infrastructure markets are also growing.
Great. Thank you. Maybe if I can add one follow-up, just on the M&A side. Autodesk yesterday mentioned that if rates continue to rise, that it will open more opportunity for M&A. Is it also a view that you would share? If so, in what area would be most interest?
On our side, still the same. We are really scouting the overall building life cycle, but also in media, but with a stronger focus in the AEC/O side. It is either to buy some technology, we know the buy versus make scenario, or also to accelerate some innovation. It is also linked to complementing our offering and our feature set that we can address to our existing customer base. It is to go more internationally and to address the markets where we see that there will be more growth coming up in the near futures. Also it is potentially to go more adjacent to where we are to also increase our TAM.
Great. Thank you.
Thank you very much. There are no further questions in the queue at the moment. A quick reminder, if you want to ask a question, press star one one. This time around, we really don't have any more questions in the queue, I will hand now over back to the speakers for the closing remarks. Thank you.
Yes. Thanks everyone for attending. Definitely we will look forward to catching up with you next quarter if you have any follow-up questions. Please don't hesitate to contact Patrick or myself. We are happy to answer your question after this call and also tomorrow or next week whenever a question arrives. Thank you very much for attending. Have a lovely day, and yeah, talk to you soon.
Thank you very much, everyone.
Thank you so much.
This concludes our conference for today. You may now disconnect.