Earnings Call: Q3 2020

Oct 29, 2020

Dear, ladies and gentlemen, welcome to the earnings call of Nemetek Group. At our customers' request, this conference may 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. Conference. Please go ahead. Thank you, operator, and hello, everybody, and welcome to our conference call. Thank you for joining us to discuss the results for the Q3 and the 1st 9 months with us. Today's conference call is being recorded. A replay of the call will be available at our website after the call. As always, we have prepared a short presentation with the most important figures and highlights of the last quarter and the last 9 months. You will find the presentation, the quarterly 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, Kaufmann, who will lead you through the presentation. So go ahead, Aksel. Wonderful. Thank you very much, Stefan, and also a warm welcome and good morning or good afternoon from my side to our earnings call. As Stefanie said, we have prepared a little slide deck. We'll walk you through that quickly so that we have sufficient time for questions afterwards. Starting with Page number 3, as usual, we would start with an overview of our top key figures for the most recent 3rd quarter with a stronger than expected rebound, in particular in the month of September. Our reported growth increased by 7.5 percent to €149,000,000 Excluding the negative foreign exchange effect, mainly from the U. S. Dollar, as well as the positive contribution from our recent acquisitions, our organic growth also reached a very solid 7.1 percent. In line with these trends, we saw in the last quarters, the top line growth was mainly driven by our recurring revenues, maintenance and subscription, which increased by more than 18%. In contrast, our license revenues still recorded a negative growth of minus 6%, although the decline was far less severe compared to the minus 19% in the 2nd quarter. The EBITDA of €47,000,000 corresponds to a strong way and to the strong margin. Our strong margin is a function of a healthy operational leverage. Ongoing cost savings, for example, travel and trade fare expenses as well as the somewhat slower than expected ramp up of our headcount in the recent months. However, please let me highlight that the strong margin in the 3rd quarter should not be extrapolated into the coming quarters. As we highlighted earlier already, our main priority is to set up the company for the future growth and we will therefore substantially ramp up our investments in Q4 as long as confidence continues to come back, which will result in a markedly lower margin quarter over quarter. So again, stronger than expected rebound in the 3rd quarter concluding a very solid development in the 1st 9 months. Let's continue. By moving on to Page number 4, this is a summary and many of you are used to that, the key business highlights after the 1st 3 quarters of the year. Overall, we showed a bit more resilient development despite a challenging environment. We were able to increase our sales despite the FX tailwind and increase also the margin. Similar the Q3, the main drivers were the recurring revenues in the 1st 9 months with a strong growth of 22 percent and in particular subscription with a plus of 84%. We'll be talking about this in more depth in a moment. In addition, our high cash conversion of almost 90% once again underpins the high quality of our earnings. So to summarize, a solid performance year to date together with our swift reaction and decisive measures to cope with the effects of the global COVID-nineteen pandemic. That's why we believe we've also a good basis for the upcoming still uncertain and challenging months ahead of us. On to the next page, number 5, and just to illustrate some key parameters of the financial performance in the first three quarters. We're going to look into the main growth drivers in more detail on the next slide. But before that, please allow me to shortly address the earnings per share growth of just almost 3%, a topic that we already discussed in our last earnings call and I'm sure many of you understood the reasoning behind that. Just like in the first half, increased PPA charges were the main reason for this under proportion development. This can be seen by looking at our EPS before the PPA authorization, which grew by almost 8% and so are in line with our EBITDA. Let's move on to Page 6. As all of you know, one of our main objectives and always an important discussion point is the topic of increasing our share of the so called recurring revenues. If anything, the recent events due to the COVID-nineteen crisis have further amplified the importance of these better predictable and more resilient revenues. Let's look at the revenue distribution. As mentioned previously, we're very pleased to note that the strong increase in recurring revenues continued also in the Q3. We've a bit accelerated as we were discussing beforehand those activities. In the 1st 9 months of the year, we were able to grow our recurring revenues by 22% on a reported basis and still by 18.5% on an organic and foreign exchange adjusted basis. With the recurring category, our subscription revenues almost doubled to more than €60,000,000 This already represents a share of 15% of our total sales compared to the just 9% 1 year ago. On page number 7, we will provide an overview of our most important KPIs and without going through all the details, I think it's fair to say that we further improved the quality of our balance sheet, representing some important metrics such as the equity ratio, which is now at 45% compared to 41% last year and our very low debt position. This solid balance sheet and virtually no debt net debt, I'm sorry, provides us with a high degree of safety going forward while enabling us to act flexibly and opportunistically should interesting opportunities rise up. Now to conclude my view on the 1st 9 months, let's look at our 4 segments on the Page number 8. Starting on the left, our Design segment returned to growth in the 3rd quarter with a revenue increase of a bit more than 2%. As already mentioned previously, the slower than expected ramp up of investments resulted in an unsustainable high margin of 37.6%. A similar picture with a growth of 11% and margin of 38% can be seen when we look at our build segment. So going from left to right on the chart. With the largest contribution to the revenue and margin improvement coming from Bluebeam, the important U. S. Market held up better than actually feared. However, our order intake continues to point toward a further detailed tier reiteration of the U. S. Market. We'll talk about that in a moment when we come to the guidance. In our Managed and Operates division, the negative effects were only felt after a delay and we're expecting to continue those due to cautious investments by the important customer group of facility managers and also some limitations where we cannot access buildings in the service area of this business segment as expected due to the corona crisis and limitations. And last but not least, our Media segment presents a very satisfactory development with an organic growth of almost 12% in the 1st 9 months and even 20% in 3rd quarter. The high reported growth was strongly impacted by the first time consolidation of Red Giant. We can say that the integration so far is doing well. Integration costs as well as the recent move to subscription by Maxon posted the expected negative drag on profitability, but it's not at all to have a surprise. With that and before we move to our updated financial guidance for the remainder of this year, let me quickly follow on Page 10 on 2 important strategic innovation was the integrated design, a cross brand workflow solution that revolutionized the collaboration between architects, structural engineers and civil engineers. With this integrated approach, it's now possible for architects and engineers to work together in 1 shared 3 d model across industry and improves the efficiency in the collaboration process tremendously. Our second big innovation is our so called Federated Design solution. At the heart of Federated Design is our SCIA, the SKIA Auto Converter, which significantly improves the current BIM workflow by converting any 3 d structural model into a high quality analysis model. This automatic process involves structural engineers much early in the BIM process and saves time because there is no need to rebuild analysis models completely from scratch. The very positive feedbacks on both innovations, which we received from the market and our customers show that these address exactly the right needs and motivate us to continue with our cross brand projects with the goal to further improve the workflow in the construction industry and to make doing business with Nemechek much easier than in the past. We'll keep you in the loop about the progress and further steps. I'll basically skip the next page, number 11, with some more important cornerstones of our success and why we think Nemechek is so well positioned in today's market. Many of you have seen this before. It remains unchanged mid and long term and this is basically why we believe in further growth potential and the economic success foundation for our group going forward. So let me draw your attention on slide number 12, on which we updated our overview on where we stand in terms of the COVID-nineteen. As already mentioned, we experienced 1st in, 1st out effect with regards to COVID-nineteen on our divisions and geographies. While Asia was impacted first, we saw the top second quarter mainly in Europe. While both regions now rebounded in the Q3, the U. S. Market further deteriorated. Also as expected, our license business was hit the hardest while our recurring revenues showed a pleasantly resilient development. I believe our solid 1st 9 months also show that our initial and quickly implemented measures, in particular, our cost savings efforts as well as our adapted sales and customer support measures proved to be key in coping with the crisis and keeping the customer relationships. In addition, we also preserved our very solid financial position during that period. We therefore leave our set working assumptions, which also build the foundation of our updated 2020 guidance mostly unchanged. We continue to expect a very uncertain market environment also in the coming weeks months. This is especially and particularly true and important for the U. S. Market. At the end of my presentation, I would like to turn to our updated outlook on Page number 13. As a result of the good development so far, the intact long term growth trends in our relevant markets, our high proportion of more better planable revenues as well as the broad regional and market related diversification, we took the decision to upgrade our outlook for this fiscal year. In particular, that means that from today's and based on the current portfolio and environment, we increased our revenue outlook for this year and now expect to grow in the mid single digit percentage range. In addition, we also increased our margin guidance to a range of 28% to 29% EBITDA margin from the floor of more than 26% previously. Our assessment is based on the assumption that a certain reluctance on the part of our customers will also continue in the Q4, especially with the currently dynamic development in the number of COVID-nineteen infections across Europe and the U. S. Rest assured that we will continue to monitor the situation very closely and that Nemechek as a group is 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. It's not going to be an easy Q4. We're in the middle of that, but so far we're doing quite well, but we have to stay alert. With that, I'd like to thank you for your intention your time today and we're now happy to take any questions. So operator, please back to you. Thank you very The first question is from Karl Munda Berenberg. Your line is now open. Hello. Good morning or good afternoon, guys. Thanks for taking my question. Just the first one is around the guidance. You obviously felt compelled at this stage of the year to kind of reassess where you are, especially based on very, very strong performance and the rebound in Q3. I was just wondering actually if you can a little bit give us a little bit of an insight into what your assumptions are for Q4 when you kind of provided that guidance considering the fact that on a 9 month period you already pretty much are there. So are you expecting potential deceleration in the Q4 in terms of the momentum, especially looking at last year's comps, Q3 was actually a very, very tough quarter to kind of follow-up on, right? And I think organic growth last year was 16% and in Q4, if I'm not mistaken, it's 10%. So the comp gets a little bit easier. Your licenses were only down 6% in Q3 versus, like you said, first half of the year. So everything kind of seems to be better. If the current environment continues, would you say that guidance is highly conservative for the rest of the year? Thank you very much for your question. I think we need to differentiate what we do know and what still might happen. What we do know is that, yes, this is the end of October and some of the trends that we've been seeing since June would indeed continue. On the contrary, some of the elements that we would have projected already since a couple of months are also coming into reality. And that is mainly related to the U. S. Market as an example and to the currency development there. And they clearly go against us currently. So if I was to say, is that a conservative Q4 outlook, I would say no, because on the top line, there is still clearly a lot of work to be done And we're fighting against a sentiment that is clearly negative in Europe, particularly since, I would say, 1.5 weeks, 2 weeks kind of and a continued slightly negative sentiment in the U. S. Market overall, plus the currency situation. I don't see why any of those 3 would be really eased in the remaining quarter that is out there. Again, on the margin, I think with the 28% to 29%, we have built into a the forecast and assumption that we know that we have some year end effects. We have also investments. We have also started again hiring, bringing people on board and the confidence particularly in Europe would have come back. So, we know quite well our numbers I would say and we see some of the costs in November December and some year end effects that would not be visible in the Q3 run rate. So that's why no, actually to both aspects, although you didn't ask about to separate the question into revenues and margin. But I think it's a fairly realistic and I think it's a good guidance overall given the environment out there. Just as a follow-up, Axel. When we look at the different trends that are going on in AEC industry today, I think it's fair to say that it really the outlook is really kind of different based on the end markets you guys might be selling into. So I was just wanted to ask you if you can remind us in terms of your end market exposure between kind of the infrastructure part of the market versus the commercial buildings and the residential buildings, if it's possible to kind of touch on those, because obviously, with potential infrastructure build and things like that and people are looking about different puts and takes into it and I just wanted to see if you could provide some color on that. Yes. Thank you. Very good question. My spontaneous answer would be that if we divide the end markets into residential, commercial and infrastructure, Of course, it's a matter of definition. We have found that infrastructure that we count schools, hospitals, airports, everything into that? We would as a matter of fact. So we would go by probably a third for each of those. And we would also be somewhat optimistic that infrastructure could slightly benefit over the next couple of years from some of the programs that have been set up by governments around the world or stimulus programs. All by we're not naive seeing that the commercial building as well as the residential construction space are experiencing an environment that is not very investment friendly. And I don't mean investments into software, but more into real new construction projects overall, right? So it's hard to say will that be an offset, is that an underlying net positive. Again, even on the infrastructure, I would need to tell you that we've been hearing a lot on this one. And when I talk to our salespeople or to our customers, those funds, those large amounts of money have not been landing really in concrete projects. I don't see that much many more schools or hospitals or airports or railway whatever infrastructure would get the projected or scoped out at this point of time. I think there is more talking, which still is an underlying positive, because one day the talking and the funds will be needed to be called off and then this could translate. But that's a matter of not a few months or quarters. I think that's more a midterm light at the end of the tunnel, if you may so, or a slightly positive that we also would be discussing in our industry. On the residential and commercial, of course, the COVID-nineteen, the home office, all the numbers that fly around. Is it the previously 100% of the office space that is still needed after even after a COVID because people got used to different working modes, travel modes and what have you. It is such a tough question. I wish we would have the answer really. And the most statistics that we've seen, the most projections tend toward a slightly negative from there. And residential, I don't really have an opinion on at this point of time. That's extremely helpful. Thank you so much, Akzo. And congrats again on very, very strong quarter. Thank you. Appreciate it. The next question is from Martin Jungfleisch, Kepler Cheuvreux. Your line is now open. Yes, hi, good afternoon. Thanks for taking my questions and also congrats on a solid set of numbers. I have two questions, please. First one is on subscriptions. These have increased a lot compared to licenses. In the future, would you be willing to accelerate and steer this trend or let customers continue to decide? If you would accelerate subscriptions, by how much would you be willing to sacrifice top line growth and margins from this potential technical compression resulting from subscriptions? That's the first question. The second question is on your margins and plant investments. Your margins are obviously up quite nicely this year, but you mentioned that you want to increase investments in the coming quarters. Could you describe these investments in what areas those will be? And potentially also quantify them and if these will likely lead to a lower margin in 2021 compared to this year? That is it from my side. Thank you. Thank you very much. I think your first question was already quite well phrased and complex in itself. So let me start with this one. Two dimensions in your question the way I midst of doing. And despite the very positive momentum I see in the company currently, and this might surprise you. We still are not and that's the second part of your question, not shifting completely away from the customer optional choice for the customer, that's indeed still the case even in those areas where we in these days would start a higher subscription attention and focus. That does not mean that we wouldn't do everything to explain to the customer the value of subscription, I. E, new features, special bundling, more flexibility, right? So we're going slowly but surely in that direction. That's what I stand for. That's what the management stands for. We're going into that direction. I wouldn't promise any significant leapfrog, steep push in that respect. I think we're doing a bit more than the average of the last 3, 4 years and we'll continue with that pace probably, right? And there will be setbacks quite frankly and there will be also differences in quarters because we cannot just turn driving of being able to show different numbers. That's not the driving motivation here for us. And so you asked about whether we'd be willing to sacrifice. Well, I don't want to go into that too much, but what I'm not willing to sacrifice as a company is the customer intimacy and the customer relationship, right, and the customer acceptance. So as long as we have that, as long as I think we do it together basically and there's a win win, I don't think we need to sacrifice really anything. Of course, there is going to be a negative impact on the revenues as well as on the margins. Every time we would have seen a product shifting from perpetual to subscription or at least offering subscription in a dual mode as a licenses, which is quite natural because the frequency is higher, the turnaround is higher, and we might want to carefully look at the churn there as well as another parameter. So no surprise that whenever we will have this development, it's our eagerness and our commitment to continue to report the visibility over what has caused potential effects on the top line as well as on the bottom line. And we are foreseeing them to come clearly. On the second question, if I may answer that the investments, well, some of them I mentioned already in the slide presentation and those are the discretionary ones. Clearly, we'll have more people on board. We'll have some bookings that naturally come at the end of the quarter, at the end of the year. We'll have different target achievements, personal costs, all of those kinds, hopefully trade fairs, marketing costs. And we're really ramping them up to be prepared for another good year going forward. Although the environment, quite frankly, is not improving really in those days. But we'll try to cope with it as good as possible. The answer clearly to the guideline on or guidance on the margin expectations for next year, I cannot give you at this point of time in this call. I think we want to get go out with a full set of our guidance 21 as soon as time permits, as soon as visibility permits, as soon as I would say we've probably closed this fiscal year. But I cannot exclude that in the moment we would hire and lift the run rate of the expenditures by, for example, also product development. And we've shown you 2 examples in the presentation that we want to continue really to better connect the product, to optimize the internal processes and to prepare the company for further growth, be it systems, be it tools, be it staffing, be it locations, infrastructure, our own infrastructure. And all of that will cost money and does cost money already as we have started some of those. But it's for sake of the long term, I would say, benefit and growth for the company, I. E. Also hence for U. S. Shareholders or investors. That we would see from the 1st 9 months going into the Q4, why would that not continue at least to a certain degree in the next year. But again, we'll come out with a guidance. It's not going to be disappointing, I'm sure. And again, thanks for the compliments on the Q3. We take it as a motivation and challenge at the same time. Cool. Very helpful. Thank you. The next question is from Benoit Barclays. Your line is now open. Good afternoon. Thanks for taking my question and congratulations on the good quarter, Orest, from me. I have a couple of questions on Maxon. Firstly, could you help us understand what drove the acceleration this quarter and how we should think about growth going forward as the subscription transition annualizes? Any comments on how we should think about this dynamic would be helpful. And then secondly, could you maybe comment on what the lessons learned from the subscription transition of Maxon's are and how you might apply this to your other brands? And then just a follow-up on the earlier comments you made on subscription. You are on track to add about €40,000,000 to the subscription line this year. Is that a good assumption of the annual intake we should expect over the coming years? Thank you. Very good questions, Svein. Thank you very much. So we let me start with the letter if I may. Be careful when you look at the subscription this year. We did acquisitions in the past that really help us also drive the subscription journey. And in full transparency to all of you, that's not something we try to hide, because those were intentionally made mergers and acquisitions to enrich not only the volume of subscription, but also the know how and the skill sets around the good, bad and ugly, what you need to know about subscription and its dynamics in SaaS business going forward. So the number that you mentioned is, I think, including those effects. There was a little acquisition at the Q2 coming into effect. And there was the full impact coming from the acquisition we did at the end of last year, early this year, in particular the media and entertainment segment that you mentioned. So all of those would pay off nicely a little bit effect in the management operator, a little bit in the design and then this major acquisition paying off in the media and entertainment. All of them also drove the overall number for the subscription. So right in time, however, we're still proud of being also able to show an organic year over year growth of the subscription. And that's really the hands on efforts of the guys here. And we'll and that's a wonderful question. Thanks for asking me about Maxon because two parts of your question. Number 1, what has driven the strong Q3 is a bunch of new product features that were launched by a series of online events really to the audience. We would combine Redshift, Red Giant and Maxon into one suite that customers now can buy in a much more flexible and customizable way. So along with the subscription, the introduction of really new product features and the combination and I think a better marketing appearance really a lot of launch dates and lounge events really drove the Q3. The negative and a bit of water in the wine, I'm sorry to say, but again in the spirit of full transparency to all of you is that Maxon is experiencing quite some headwind at the moment. The entertainment industry, we have 2 businesses within Nemechek, Vectorworks as well as Maxon in particular. They are suffering from the recent setbacks, especially in the entertainment and event industry. So all of those cancellations mean that again, we're back to maybe the March, April, May timeframe where there was a lot of uncertainty over new productions, be it movies, be it commercials, be it cinema and blockbusters, be it gaming overall, wherever you need a team. And it's good that we have the technology, but then there is still a studio needed, sometimes there's actors needed, there's a camera team needed, there's whatever effect needed, all of those experience a very hard time. We've been seeing this in the last three and a half weeks and numbers are really going downwards not as much as we had liked them to see. So the trend is negative one and that's COVID-nineteen purely. However, overall, I would say, thumbs up, the integration is doing very well. We're forming to become really a relevant player in the first half next year. And that's slightly different than the AEC or AECO industry. So that was always the intent. That was always the strategy and we're executing on this promise. The subscription learnings, second part of your question, is that's a wonderful question because that is absolutely on its way. There is again good, bads and uglies. There is scarves, experiences, observations that we would have. Customers typically in that segment, however, are a bit more used to subscription and rather B2C customers than in the remaining parts or pockets of our business. So I could not say that every learning we can take and extrapolate and copy paste it to the other three divisions. But there is a working group and we're taking a lot of those learnings, try to document them, do online tutorials and trainings in house to say, okay, how do we deal with the web shop? How do we do with the back office integration, with the back office processes, with the billing, with the invoicing, with the Ts and Cs, with the rates, with the pricing, with the bundling, the customer explanations, all of those. But it will take really a long time. The big business unit, Graphisoft, has just started to introduce subscription. Vectorworks has done basically the same. Alplan, as the oldest business unit in our portfolio, has not really started subscription to a big degree. So there is a lot of homework still to be done. I'm glad that the testing now I would say of the water is over. I think we have collected sufficient experience to now stand united and drive this forward. But again, slowly but surely, we're going in that direction. And yes, we're connecting the brands and the know how amongst the business units clearly, so we can scale that better. That's very clear. Thank you very much. Thank you. The next question is from Andreas Wolfhardwerk Research. It's Andreas Wolfbarboek Research. I hope you can hear me well. So basically, I have two questions. The first would be on churn with regard to subscriptions. Do you see higher churn with customers who have chosen the subscription model? Do you already have reliable data here? And the second would be, you've spoken about customer intimacy. Do you see more demand for cloud solutions? Because we see among some software provider providers a push towards the cloud, not just a SaaS offering. So some insights here would be very helpful. Thank you, and congratulations on the quarter. Thank you very much. It seems to be windy in Hamburg and thanks for the good question. Yes, we do have some data on the churn, and I'm not overly thrilled by it quite frankly. It's I would put it in the pocket or in the category of still collecting experience in that regard. Indeed, we have seen the churn in one area, which I don't want to mention in detail, being a bit higher. And we're still trying to understand why this is the case. But I think it's not sufficient data on hand to really make a final judgment call on that. And if it was the case by the way, then of course, we need to understand what we can do about it, because the more flexibility we give to the customers that also means that we need to be prepared for them acting flexibly, especially in this kind of environment, as you can imagine, right? So do we have an opinion on the cloud and on the SaaS? Quite frankly, if I look at our portfolio and we talk about subscription, people sometimes mix everything into one big bucket, be it subscription, maintenance, SaaS, cloud, and then we all would call this recurring. In our case, I think it's fair to say that the first step that we need to the first hurdle that we need to jump over here is the full understanding of the dynamics of subscription. And if we were to understand that and introduce that in all business units, we can see how much we can drive this up. We will never give up completely the perpetual license business model, because again, there is some customers, especially with our legacy and the installed base that we come from a different background than maybe some of the American competitors. And it's not necessarily bad as a thing by the way as well. So that's the first hurdle. The next evolving stage or phase could be the true SaaS model. And we're offering some of the services and solutions on the cloud already. We're working with too many providers in my opinion. So we need to consolidate it a little bit. But it was also the kind of testing phase in the last years. Cloud provider can help you and what is their business model and the data residency and the data security issues that we had to answer on behalf of customers and so forth. So yes, I mean, of course, this is a long term vision and some of the products are already there. As baseball, for example, in the management operator is a good example that is going in that direction more than maybe others. But it's that's kind of the next phase and let's first jump over the first hurdle. Okay, great. Thank you. You're welcome. The next question is from Michelle Agarwal, Goldman Sachs. Your line is now open. Hi, everyone. This is Diksha Agarwal from Goldman Sachs. Congratulations on a good 3rd quarter. I have 2 questions, if I may. So the first one would be on the competitive landscape. So how has the competitive wins that you can talk about? Then again, on the competitive landscape and more in the beverage segment, what are the key competitors that you see across both brands, basically, Bluebeam and as well as Leverage? Then the second question would be on product integration. You did talk about a lot of positive feedback on Federated Design and Integrated Design. So can you like when do you expect it to be reflected in terms of numbers more significantly is what we wanted to So without disappointing you, I think the second question is too early to answer. I think we've just introduced really those solutions and products to the market. We're glad that the feedback is positive. We'll customer delight philosophy and get them introduced and launched more and more, I think the numbers so far are neglectable in terms of revenues. Now on the first one also quick answer. I think it's a good question and we get this a lot. The comp landscape in our opinion has not really changed. The big established players Autodesk, Bentley, Trimble, they are there. We have certainly a theme in the industry that is called platforms or marketplaces with the brokers of this world, Autodesk with their offering there. That's clearly a theme where players that don't have the AAC software itself would have entered the market with more a data centric offering, which adds value to the customers, obviously. Again, the landscape overall has not changed. I wouldn't see a lot of dynamics there that are different from maybe half a year ago or a year ago. Especially if this is a quarterly call, I wouldn't say that in the 3rd quarter we have seen any dynamics changing really, right. And those are the names by the way also that probably would compete with you particular ask about Bluebeam and Navaris. Now Navaris is a bit different. If you familiarize yourself with Navaris, there's 2 areas. The one is really the process solutions for the GCs or construction build firms. And then there's the ERP solutions. And for ERP solutions, I think you can imagine which of the infrastructure we're facing. RIB clearly is a competitor in that area that was recently acquired by Schneider as well. And then again those names that were mentioned beforehand. So no overall changes, I would say. Okay. Thank you so much. You're welcome. Your next question is from Ubers Schupp, Deutsche Bank. Your line is now open. Yes, good afternoon. Hello, Axel, hello, Stacey. Yes, just 2 generic ones really are left for me. Firstly, Axel, if you don't mind, can we try to nail you down on a few numbers regarding those investments that you have now managed sometime 4 minutes ago? Basically, I saw from the quarterly report that you roughly added 60 or so heads in the quarter. So any indication would be helpful that what would be to come on top in Q4 in order to get to the targeted margin level that you are suggesting? And then really, sorry for that. I think I asked the similar question last quarter, but I think it's still an important one regarding M and A and what your shortlist is currently looking like. In particular, I was wondering whether you are potentially making use of the current nervousness that you described yourself in the U. S. Market in order to increase your foothold there a bit further? Thank you. Thank you, Ubert. And yes, to your questions, the you can try to nail me down. I'm not sure if you're going to be successful. I would pass the ball back over the net to you yourself because if you think of our new guidance, updated guidance, mid single digit growth and you take that deduct the 3 months 3 quarters 9 months, I'm sorry, then I think it's easy to see that we're probably talking about a, let's say, 4%, 5 ish percent growth year over year in the Q4, right? And that's really somewhat the expectation. Then from that, if I was you, then I probably would try to calculate the kind of cost range that would lead us to the margin guidance and bandwidth that we have given. And so it doesn't take a lot I think to nail me down quite frankly because it's not like dropping pants. I think we don't we want to appear as visible and transparent to all of you as possible. If you were to ask about the categories of the cost, I think that would be a very interesting aspect. And those before mentioned ones, discretionary spending, product development, hiring, personnel costs and typical year end effects. I mean, the our balance sheet in P and L is not so much different from others. So typically, what we have is organizational changes that might lead to expenses, product changes or combinations that might lead to expenses, hiring that might lead to expenses, ramped up marketing preparations for some launches, then early next year, our continuous sales activities, exact amount, I do not know myself either, but I think we have a good feeling about the magnitude overall. And again, we'll come out as soon as we can early next year to report backwards on the hard facts in the Q4. On M and A, wonderful question. I love it. But again, as we wouldn't talk about really details in the pipeline, the nervousness in the U. S. Market, I think we also have some nervousness coming back to the European market. I think many business models, they get on the proof point of how they're sustainable, how valid are they, are they vulnerable, not only in our industry, but also in others. So construction industry is lagging behind. We all know this. It's a late phasing and it's a cyclical that many projects are still getting finalized. We know this. There is many statistics and expectations or projections on how the build and construction industry overall with the start of new projects could develop in the next 2 years, 2021, 2022. I've seen a projection that would show decline in commercial buildings, a slight increase in public infrastructure, for example, and that's what I was referring to earlier. Are those projections good enough already with enough substance? Or it's just a short term impact that we're currently seeing. It's so tough to tell. So M and A, I would say many people ask us, has the M and A pipeline changed? It hasn't really. I mean, those targets that would come in consideration are the same ones as this is a quarterly call as, I would say, the last quarter when we had the update call. No changes really there. We are ready. I think we have the certain firepower and willingness to do something if it's sensible, if it's a good strategic fit or another benefit to our portfolio, to our business model. And as you can imagine, we're always involved in some discussions. Some further advanced, some in early stages, some do lead to nothing, some do lead to some diligence work. It's the normal part of our work. And there's really no change to your philosophy any businesses that are overly challenged and loss making. Is that correct? I wouldn't limit it and I'm not I'm looking at Stephanie. I don't think we would have really limited to anything. I mean, we have done early investments, but the majority, of course, is more mature, certain critical mass that was reached. We would have proven business models, profitable companies, more like than loss making companies. I think that's not of a surprise. I wouldn't have said that we would have limited it, other than that average size of our transactions in the last 5 years is give you kind of an indications. But clearly, the market has changed. Our acquisitions also got bigger over the years. So we're ready for many things that could make sense, if they make sense. That's great. Thank you very much. The next question is from Knut Wolle Badabank. Just two questions. The first one, actually, if I have done the math correctly, maintenance was cropping to single digit growth in the 3rd quarter. It was down slightly sequentially. Can you break out what the currency headwind here was? Was it basically comparable to what we have seen on the group level? Then the second question is a bit looking beyond 2020, you're doing a remarkable job and holding up well in the current environment. Still, if I look at consensus expectations, it's basically expecting a return to your historical growth range of the last years. Looking at the sequential looking at the slowing deferred revenue momentum now also in the Q3, which is just natural given the license weakness, looking slowing maintenance growth. And also keeping in mind what you said about subscriptions, my feeling would be that current expectations to see such a sharp rebound in growth next year could be on the too optimistic side. Can you give us some feeling here? I know you will provide guidance at the beginning of next year, but just whether my reasoning has any material mistakes included or not? Thank you. Thank you, Knud. It's a wonderful question. I would love to answer at this point of time, but I'm afraid we don't give any guidance for next year at this point. I can understand your thinking and we haven't been commenting on the consensus for 2021 so far. But we will rest assured early next year clearly. And on the maintenance side itself, Axel? Yes. So the slowdown to 6%, is that purely currency? So would we have seen adjusted for currency still growth in absolute terms? Yes, I'm sorry, I forgot this your first question, I apologize. I think a general yes. But we need to also note that and mention that the business that typically has something beyond the pure maintenance contracts, which we have in all business pockets really, is the Space Roll business. If I'm not mistaken, then they're also having a bit of a hard time that should also show in the Q3 numbers by getting some of the service and maintenance work executed out there because of the COVID-nineteen limitations. And so generally, yes to your question. Yes. And the headwind coming from the U. S. Dollar was around 2.5%. So the growth result currently was around 8%. Okay. Great. But still decelerating a bit and reflecting the lower license trend we have seen in the 1st quarters. Okay, got it. Thank you very much. As we have no further questions, I would like to hand back to speakers for some closing remarks. Wonderful. So on behalf of the entire Nemechek group and family, a big thank you to Stefan Zimmermann and her team. Thanks for your interest and loyalty in staying interested in the Nemechek story. I think we'll keep you updated as usual and be back very soon. Thank you very much. Thank you. Ladies and gentlemen, thank you for your attendance. This call has been concluded. 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