Nemetschek SE (NEM) Earnings Call Transcript

Thank you, operator, and hello, everyone, and a warm welcome. Thank you for joining our earnings call today to discuss the results for the second quarter and the first half of 2026 results. With me today are our CEO, Yves Padrines; and our CFO, Louise Ofverstrom. Today's conference call is being recorded. A replay of the call will be available at our website after the call. Additionally, you will find the quarterly report, the presentation and the press release on our Investor Relations website as well. But now let's get started. So I would like to turn over to our CEO, Yves.

Thank you, Stefanie. Welcome, everyone, to our H1 2026 earnings call. You have probably all seen our pre-release on Tuesday with our fully confirmed organic guidance as well as our expected outlook following the completion of the HCSS acquisition. As usual, we have prepared a short but informative presentation containing the most important information with regards to our second quarter as well as first half year results that our CFO, Louise Ofverstrom, and I will briefly walk you through so that we have enough time to address any questions you may have in the end. To begin with on Page #3, please find some highlights of the most important aspects of the second quarter as well as the first half of 2026. Firstly, I will summarize our second quarter 2026 as very successful with a continuation of the remarkable momentum we have seen at the beginning of the year. This development was again, first and foremost, driven by an excellent performance in our Build segment, which continued its outstanding growth trajectory also in the second quarter. At the same time, the Design segment continued to show a strong growth despite the exceptionally high comparison base in Q2. The reported EBITDA margin in Q2 was impacted by the slightly negative foreign currency translation effect, and in addition, an extraordinary transactional currency effect as well as M&A-related costs. If we adjust the reported EBITDA margin only for the acquisition-related one-off costs, the margin would have already been at 31%. With our H1 results, we are, therefore, where we wanted to be after the first 6 months of the year, driven by the strong increase in recurring revenue in the Design and Build segments and despite the weaker-than-expected development in our Media segment. The increase in the underlying profitability, so excluding FX and M&A effects, demonstrates our healthy operating leverage, the continued focus on our cost base and continuous improvement and operational excellence. The foundation for this very strong operational performance is the continued progress we have made across all our key strategic focus areas, whether that is in AI with a successful rollout of multiple agentic AI-based products such as Bluebeam Max, our next design intelligence platform, and of course, the ongoing subscription transition and the transformational acquisition of HCSS. These initiatives and investments are not only paying off already today, they are also making sure the Nemetschek Group is fully prepared for the future. Based on a very successful start of the year as well as the continued progress on our strategic initiatives, we are, therefore, well on track to once again reach all our goals for the financial year and therefore, fully reiterate our organic outlook for 2026. In addition, we also expand our outlook following the acquisition of HCSS, but more details on that later in our presentation. On Page #4, you see an overview of the corresponding figures to the Q2 development that we just discussed. Overall, we continued our strong growth dynamic and delivered another very good quarter and a strong finish to the first half of the year 2026. Starting with the ARR, or annual recurring revenue. As a result of one of our key strategic priorities, the transition to a subscription- and SaaS-centric business model, our annual recurring revenue recorded an increase of plus 15.9%. If we adjust for the FX headwind we had in the second quarter, mainly stemmed from the weaker U.S. dollar, our ARR increased by plus 17.4%. The main driver behind this strong growth were once again the revenue from our subscription and SaaS offerings, which increased by plus 29.6% in constant currency. Thanks to this substantial growth in our recurring revenue base, we were able to strongly increase our revenues once again despite a very high comparison base in our Design and Build segment and the weaker-than-expected performance in Media in Q2 by plus 13% on a reported basis. On an FX-adjusted basis, the growth even amounted to plus 14.5%. The main growth driver was once again the exceptional performance of our Build segment, in particular, Bluebeam, which continued to benefit from strong network effects, its successful international expansion and the unprecedented investment in data centers. In addition, we also saw a good growth in the Design segment, which continued its successful subscription transition, including the sale of multiyear contracts to convert existing maintenance customers to subscription. The EBITDA increased by 11.5%, plus 15.8% FX adjusted to EUR 98.6 million in the second quarter, corresponding to a reported EBITDA margin of 30.1%. However, in addition to a slightly negative translation currency effect stemmed from the weaker U.S. dollar, the EBITDA was also impacted by an extraordinary transactional currency effect. This effect, in the higher single-digit million euro range, resulted from the revaluation of assets and liabilities held in a nonfunctional currency of an individual group company as of the reporting date due to the significant and unexpected exchange rate fluctuation during the quarter. Furthermore, the reported EBITDA margin already includes acquisition-related one-off costs of a low single-digit million euro amount. Adjusted for this one acquisition-related cost only, the EBITDA margin in Q2 amounted to 31%. Finally, net income for the quarter, also driven by our strongly improved financial results, grew over proportionally by 20.3% to EUR 66 million, resulting in earnings per share of EUR 0.57. Before Louise will dive deeper into our Q2 financial results as well as the first half of the year, I would like to use this opportunity to also give you an update on our defined strategic focus areas and the various highlights in the first 6 months of the year on Page #5. Starting on the left side. Artificial intelligence plays a pivotal role for us, not only in optimizing our own internal processes and productivity, but especially in advancing our product development to deliver even greater value to our customers and shareholders. Our goal is clear: to become the construction AI leader. We are deeply convinced that AI represents a tremendous opportunity, and we are ideally positioned to capture it. Over decades, we have built deep knowledge expertise and strong integration into our customers' workflows as well as long-standing trusted customer relationships, strong network effects and vast industry-specific data sets across the entire life cycle, primarily for buildings, and now with the acquisition of HCSS, also in the infrastructure and heavy civil sector. Over the past months, we have already introduced several truly value-adding AI features into our product portfolio. For example, we successfully rolled out our agentic AI suite, Bluebeam Max. Bluebeam Max supports users with time-consuming tasks such as quality control in the preconstruction phase, document analysis, quantity takeoff and 2D to 3D conversion, thereby increasing productivity and efficiency throughout key construction processes. In addition, we launched our next-generation design intelligence platform that use AI and integrated simulation to help teams in the design and planning phase to make better decision during the design process. As you all know, one of our absolute top priorities over the last few years was to strengthen both our resilience and long-term growth potential by increasing the share of recurring revenue through our transition to a subscription- and SaaS-centric business model. I'm very pleased to say that this transition is progressing extremely well. We are seeing strong momentum across the group, especially in the Design segment, where the pace of the shift continued to be high. As a result, we reached a new record share of recurring revenue for the group, a direct result of the dynamic growth in our subscription and SaaS business. Over the past 6 months, we have continued to enhance our go-to-market approach even further, especially by expanding our international presence and the successful internationalization of our brands. Our goal is twofold: first, to make our business more resilient by reducing our dependency on a single market or region; and second, to unlock new growth opportunities for the Nemetschek Group in high potential regions. This is why we continued our expansion into high-growth markets such as Southeast Asia to complement our expansion into India and the Middle East as Nemetschek, representing the full portfolio of the group. Going forward, we will continue this strategy and expand into new markets and regions in the coming quarters and years. M&A has always been an integral part of the Nemetschek Group's DNA and a key driver of our long-term success story. We have a strong track record of highly successful and value-accretive acquisitions. The latest example, which is only the largest -- which is also the largest acquisition in the Nemetschek Group history is HCSS, which increased our market opportunity by 30% in the highly attractive infrastructure and heavy civil market. By combining HCSS with our leading brands in the Build segment, we create the next construction tech giant with a unique combination of scale, growth and profitability and a global construction, AI and technology powerhouse covering the full range of end markets and customer segments. In addition, we also did some smaller technology acquisitions such as Morpholio, which is a leading provider of mobile design apps for architects and designers, which strengthens our design ecosystem by seamlessly connecting early-stage conceptual design and sketching with professional BIM card workflows while adding differentiated AI and mobile capabilities. Another very small bolt-on acquisition was mbue, which strengthens our AI capabilities in pre-construction and construction document workflow and will, therefore, further enhance Bluebeam Max with specialized workflow-driven AI. These acquisitions are mainly technology-centric with almost very, very low revenue. In parallel, we are also continuing our dedicated venture investment strategy. Over the past years, as you know, we have made several minority investments in highly innovative AI-driven start-ups, which align perfectly with our long-term AI and technology strategy. A good example is our recent strategic investment in Dawex, which strengthens our long-term AI strategy by enabling trusted data ecosystem and secure data exchange, key prerequisites for the next generation of AI-powered and agentic workflows across the AEC/O life cycle. There is no construction AI without trusted AI, and this is why Dawex is helping the market with. And last but not least, in the area of business enablement, we work on the further harmonization and further enhance operational excellence across the Nemetschek Group. Artificial intelligence also plays an increasing role internally, for example, in software development, customer success and support, et cetera. And we are increasingly leveraging AI to further enhance efficiency and harmonize processes across the group. And with that, I hand it over to you, Louise.

Thank you, Yves, and a warm welcome to our earnings call for the second quarter as well as for the first 6 months of the financial year 2026 from my side as well. Yes, Yves has already touched on some of our key financial figures, so I will therefore now give a deeper look at a bit more detail on the results and underlying drivers behind the most important financial aspects of our Q2 and of the first half year of 2026. So yes, I would say, in line with what we just heard from Yves, I see the first half of the financial year 2026 as a strong testament to our strategic direction, with high and profitable growth as well as good and consistent progress in all our strategic focus areas. On Page #7, you can see a summary of the results of our strong progress in the first half year of 2026. And let us start with our top line development here. For the period of January to June, we recorded a reported growth of 11.9% to EUR 640.7 million. When adjusted for the continued FX headwinds, especially in the first quarter, and those are mainly stemming from the weaker U.S. dollar, we achieved a strong revenue growth of 15.7%. And as expected and fully in line with confirming the good progress of the execution of our strategic road map, the main growth driver was once again the recurring part of our business. And this is reflected in our annual recurring revenue, ARR, which increased by 17.4% at constant currencies to EUR 1.25 billion. And that is driven by our subscription and SaaS revenues, which grew by an impressive 32.4% at constant currencies, reaching EUR 514.7 million. Our reported EBITDA increased by 16.5% to EUR 197 million in the first 6 months of the year. And that corresponds to a reported EBITDA margin of 30.7%, however, negatively impacted by the aforementioned extraordinary transactional currency effect in the higher single-digit million euro range in Q2 and as well, as mentioned by Yves, by M&A-related costs. Adjusting for the M&A-related costs in the first half of the year only, the EBITDA margin reached 31.5% in the first half of the year. Our profitability development in the first half of the year and the expected strong underlying improvement in the second half are fully in line with the guidance we provided in March and consistent with the seasonal patterns we have seen over the past few years. We, therefore, remain very confident to achieve our full year EBITDA margin guidance of 32% to 33%, driven by our abilities to scale, our healthy operating leverage, our relentless focus on cost efficiency and effectiveness as well as continuous improvements in operational excellence despite ongoing investments into the strong future growth of our business and the ongoing subscription transition in the Design segment. Lastly, the right-hand side of the slide highlights our continued good cash generation and the high quality of our balance sheet despite the expected and deliberate increase in net debt of around EUR 100 million at the end of the quarter to prepare for the closing of the HCSS acquisition as of July 1. Let's turn to Page 8, where you will find the development of our four segments during the first half of 2026. So starting on the left side with our Design segment as usual. In the first 6 months of the year, the segment recorded a growth of 7.3%, which is 9.7% on a constant currency basis, to EUR 279.1 million. The transition to a subscription- and SaaS-based business model continued to be the main growth driver, just as expected, and progressed successfully and according to plan, reflected in the very strong growth of this revenue category of 50.4% on an FX-adjusted basis. During the first half of the year, we continue to sell monthly contracts to support the migration of existing maintenance customers to a subscription-based model at our Graphisoft and Allplan brands only. Despite a strong underlying operating performance, as you can see, the reported EBITDA margin for the first half contracted to 23.9%, and this reflects an impact from an extraordinary transactional currency effect. As mentioned, this effects in the higher single-digit million euro range resulted from the revaluation of the assets and liability held in a nonfunctional currency of one of our individual group companies. And as of the reporting date, there were significant and unexpected exchange rate fluctuations during the second quarter in that single currency. Excluding this effect, the segment's margin would have been strong and more in line at a comparable level to last year. Continuing with our Build segment. That continued to deliver a stellar performance also in the second quarter, driven by high underlying growth in new users in the U.S., but also internationally. As a reminder, in 2025, the Build segment benefited from the inorganic contribution of GoCanvas as well as by temporary positive effects following the successful completion of Bluebeam's subscription transition. Consequently, and as fully expected, growth moderated somewhat in the first half of the year of 2026, yet at a still outstanding high level. For the first half year 2026, the segment recorded revenue growth of 21.1%. Excluding the still significant FX headwind from the weaker U.S. dollar that especially hits this segment, the growth reached a high 27.1%. The EBITDA margin in the first half in this segment reached a very strong 39.8%, an increase of around 520 basis points year-on-year, and that is despite continued investments to support the strong expected future growth. Let us move on to our smallest segment, Manage, which recorded a growth of 3.9% on a reported and 3.8% on an FX-adjusted basis in the first half of the year. Here, we saw continued good demand and a well-stocked sales pipeline across both existing and new customers, particularly in the public and financial sectors. And this provides a strong foundation for growth acceleration in the second half of the year, in line with our guidance. Especially during the end of the second quarter, growth accelerated, particularly for software solutions in the areas of workspace management and energy efficiency and therefore, increased growth rates at the end of the quarter towards double-digit revenue growth already. For this -- for the first half of the year 2026, the segment's EBITDA margin amounted to 7.8% versus 9.3% amid continued investments into the future expected growth of the business. And last but not least, let me come to our Media segment, where the reported revenue declined slightly by 0.7% to EUR 59 million, while the FX-adjusted growth amounted to 3.3%. The segment's business performance was impacted by the ongoing challenging market environment, as mentioned, especially in the important U.S. market, and where customer spending simply remains cautious and decision-making and sales cycles continue to be strongly prolonged amid ongoing customer consolidation and subdued spending on content creation as well. Also here, the last month of the quarter showed first signs of stronger growth acceleration than seen in the earlier part of the second quarter, but the market remains challenging. The EBITDA margin of the segment expanded in the first half to 29.8% from 28.1% last year. In addition, during the first half of the year, the Media segment has laid important foundations for higher future growth, including diversification and the launch of new products like Archviz, rendering solution to further drive expansion into the AEC/O industry, and also the introduction of a Digital Twin solution for [ real ] products, only to mention a few in this segment. But let us now turn to Slide 9 and to a topic that has been a regular feature of our earnings call over recent years, the successful transformation of our business model towards subscription and SaaS. The progress we have made is clearly reflected in the revenue mix shown on the left of the slide. In the first half of 2026, recurring revenues reached a new record level of 95% of group revenues. Subscription and SaaS revenues now accounts for 80% in the group compared to only a small proportion of our business when we began this transition. The middle of the slide puts this whole development into a longer-term perspective. And since the first half of 2022, total recurring revenues have increased from EUR 250 million to EUR 609 million, mainly driven by the strong subscription and SaaS revenues, which have increased from EUR 93 million to EUR 515 million. This means that we have expanded this more predictable and resilient revenue stream by more than 5x within less than 4 years. The momentum also remains strong in the second quarter here. ARR and recurring revenues both grew by 17.4% at a constant currency, while subscription and SaaS revenues increased by 29.6% at constant currency. At the same time, license revenues declined by 40.8% at constant currency. And this is, as you know, intended and the consequence of our transition as customers now increasingly move from perpetual licenses or completely move from perpetual licenses to subscription offerings. Licenses, therefore, now contribute only to 2% of total group revenues and therefore, have an increasingly limited impact on our overall performance. Altogether, the figures on this slide demonstrate that our business model transition remains fully on track and continues to strengthen the quality, the visibility and the resilience of our revenues going forward. As usual, and to conclude our revenue of the first half of 2026, we provide a more detailed overview of the key P&L and cash flow items here on Page #10. We have already addressed our main KPIs such as revenue growth and EBITDA margin in more detail. And therefore, let us now have a closer look at the details of our cost base and its underlying drivers. Here, you can see that we are seeing strong leverage in our OpEx structures, driven by economies of scale in our growing portfolio and also our relentless focus on both cost efficiencies and also cost effectiveness. And that also was a clear trend throughout the first half of the year 2026. Let us have a closer look at the personnel costs, the largest component with a share of roughly 50% of our total operating expenses. Here, we saw a reported year-over-year increase of 7.1% in the first half of 2026, which is clearly below our revenue growth despite impact of personnel costs that we had from the technology acquisitions, the small acquisitions we made and also some seasonal differences. In other words, thanks to our healthy operating leverage, our various operational excellence initiatives, our cost base grows at a very reasonable pace and therefore, contributes nicely to the continuous increase in underlying profitable growth. The higher-than-usual increase in other operating income and expenses, as you can see here, is mainly attributable to the M&A-related cost of the HCSS acquisition. Going further down the P&L, you see the overproportional growth in our earnings per share with an overproportional increase of 29.9%. This strong development is supported by a strongly improved financial result, which is driven by a substantial positive effect in the other financial income and resulting mainly from the hedging we did in conjunction with the acquisition of HCSS. Coming to the cash conversion after the first 6 months of the year, that came on in below the high level of 180% in the prior year. And whilst the underlying cash conversion is unchanged, very strong and high, the quarter was primarily impacted by a number of special effects happening in the second quarter that -- the main effect coming from a change in invoicing timing for Bluebeam. As Bluebeam is a major part of our portfolio, that has an impact. It doesn't have a revenue impact. It has a onetime effect on the cash. That's why not a lasting effect, but a onetime effect. We had some tax prepayments. We had some negative foreign exchange effect that all concluded into the second quarter, and there was a smaller effect on the cash flow impact from the multiyear contract. So if I were to exclude these extraordinary effects, the cash conversion for the first half of the year would have been around 110% and therefore, broadly in line with the prior year level. And whilst we had special effects in both years, the average still circulates around and above 1, based on our operating performance, as we are used to. Despite the increase in net debt at the end of the second quarter, in line with our strategic acquisition road map as well as additional debt incurred after the closing of the HCSS deal in the third quarter, we maintained a very solid balance sheet. And in addition, thanks to our aforementioned good operating performance as well as a very strong cash flow generation, we will be able to very quickly deliver and return swiftly to our usual outstanding balance sheet metrics. So all in all, I believe it's really fair to say that the financial performance in the second quarter builds on the very strong start to the year and concludes a very successful first half of 2026. And with that, I'll hand it back to you.

Thank you very much, Louise, for this comprehensive overview of our financial results. As we come to the end of our presentation on Page #12, I would like to turn to our organic guidance for the current financial year 2026 as well as expanded outlook following the acquisition of HCSS. As highlighted earlier in the presentation, our H1 results are fully in line with our expectation, and we have laid a very good foundation to once again achieve all our targets for the financial year. Based on the strong fundamentals as well as our very resilient operational business model, we fully confirm our organic guidance for fiscal year 2026 after the first half of the year. We continue to expect an attractive growth at a high profitability in 2026 as well even despite the high comparison base of the previous year, as well as the ongoing subscription transition in our Design segment. In particular, the Executive Board continues to expect a revenue growth at constant currency of 14% to 15%. In addition, the EBITDA margin is forecasted to be in the range of 32% to 33%. Excluding only the acquisition-related one-off costs, the EBITDA margin expectation would have even been at the upper end of the guidance range. Following the first-time consolidation of HCSS as of July 1, 2026, the Executive Board estimates an additional currency adjusted contribution to the group revenue growth after taking into account the currently estimated PPA effect of around 600 basis points in the financial year 2026. Including the acquisition-related one-off costs and therefore, starting from the midpoint of the reported organic EBITDA margin guidance of 32% to 33%, a dilution of around 150 basis points is expected following the HCSS acquisition. This mainly reflects the expected impact of the purchase price allocation for HCSS as well as ongoing integration expense and recurring expense related to a newly established share-based compensation program designed to support and drive value creation in the expanded Build segment over the coming years. The mentioned PPA effects, and here, in particular, the deferred revenue haircut mandatory under IFRS will be recognized over a period of 12 months and is expected to be front-end loaded, with the majority being recognized during the first 6 months after closing. Based on preliminary estimates, it is therefore expected to reduce the revenue contribution of HCSS by a mid- to high 20s million euro amount in the second half of 2026, with a corresponding impact on the EBITDA. So please let me highlight here that these figures, therefore, do not yet reflect the full potential of the HCSS acquisition. In this context, however, I would also like to emphasize that in addition to our standard remarks, that the guidance is based on our assumption that there are no material changes in the global macroeconomic or industry-specific conditions. Our extended guidance is also based on the fact that the financial contribution of the HCSS acquisition for fiscal year 2026 remains preliminary as the final financial impact of the acquisition, including the resulting PPA charges, will only be finalized later this year. So to conclude and summarize the presentation for the first 6 months of the year 2026. Our financial results, along with our fully confirmed organic guidance, show that we are once again delivering on our promises and goals. And this is true for operational development, where we continue to show industry-leading growth and also for our key strategic initiatives, which builds the basis for our continued high and profitable growth in the future. And with that said, I would like to thank you for your attention, and we are now ready to take your questions. So operator, please, back to you.

[Operator Instructions] Our first question comes from George Webb, Morgan Stanley.

I've got three questions, please. The first one just on Bluebeam Max, given it's been available through the reseller channel for a period of time. I'm kind of curious on what you're seeing and hearing in terms of the early adoption rates and additional levels of feedback you've been getting? Secondly, on Media. Kind of acknowledge that you've got these growth initiatives going on to turn around the segment performance, but curious how patient you're willing to be if that growth doesn't start to meaningfully uplift? And I guess, relatedly, how important is the architectural visualization it brings to the Design segment? Or if this segment does remain structurally dilutive to group growth, would you consider different solutions for it? And then just lastly, a technical question around the HCSS contribution. If I look at the guidance, the 6% growth impact you've called out I think implies about EUR 70 million in the second half. And if I unwind the kind of mid- to high 20s million revenue haircut, you're kind of talking around EUR 100 million for H2, which simplistically would be EUR 200 million on an annualized basis for 2026. That feels a little light given that HCSS, I think you called out, did USD 215 million last year, which I think is about EUR 185 million. And you've obviously talked to the high teens growth plus you'd expect out of HCSS. So curious, on that bridge. Is that U.S. GAAP to IFRS translation? And if you can add anything around where you're seeing HCSS growth this year, that would be great.

Many thanks, George. So to answer your first question on Bluebeam Max. So clearly, as you know, we launched Bluebeam Max first in February, which was only for large enterprise customers. And then we are planning to roll out only in Q3, Bluebeam Max globally also to resellers and to the web, et cetera. And as you know, we have done that already, back end of May. So we have around 2 months now of rollout of Bluebeam Max, and I must say that we are extremely positive. The performance and the rollout is better than planned. But we have to be also cautious because at the end of the day, at the beginning, all the early adopters and the huge fans are the one really jumping on the product. So now we have to see what will be the adoption of Bluebeam Max over time. But clearly, the feedback that we get is that users are really happy with some of the current features available, for example, the AI-assisted Drawing Review and Smart Review. They see clearly speed and productivity gains. They report that Bluebeam Max lets them do more, do it faster and with a high degree of accuracy, which is, of course, highly important in construction, especially for preconstruction rolling reviews and [ BIM ] preparation. And then they also like this link between PDF and BIM, where we are now these architects and BIM-oriented teams, they really like the fact that we are able to connect 2D markup to BIM models and pushing comments back into, for example, Revit or Archicad and other design tools, which reduce rework and then also miscommunication between PDF review and authoring tools. And of course, as I said, we are, for the moment, onboarding the super users. And the good news is that we are clearly evolving now our product road map for Bluebeam Max. There will be also new features available within the next few months and before even the end of the year. This is why also we had made this small -- very small acquisition, which is just this small tech start-up called mbue, which is no revenue, but really helping us in their technology to accelerate our Bluebeam Max road map. So overall, highly positive. And so far, in terms of pricing, as you know, it is introduction in price. So that's why we have the opportunity to also increase the price after 12 months with some of these customers. But of course, as we are going to also inject more new features which should bring more efficiency and productivity gain to our users, we are also planning to have different type of packages and also probably more consumption pricing model in addition to the subscription that the users are paying for. But for the moment, our main focus is to make sure that we have as much adoption as possible. We need to show that the efficiency and productivity gain is here, et cetera. Second question on Media. Obviously, a disappointing performance. And here, the disappointing performance is mainly coming for contraction with our customer base. And this contraction, interestingly, is not coming necessarily by AI or whatever. It is mainly due to the fact that we have, for example, more consolidation in the market, especially when you have large M&A going on in media and entertainment. Or you have also very large, massive downsizing in media and entertainment. If you take a few weeks ago, the example of Microsoft game business unit, which downsized by around 3,000 people. And therefore, once we have renewals of some of these accounts, there is a contraction because we have less users than we used to. Now to try to counterbalance that within the next few months and quarters, which might not materialize too much short term, but more for next year, we are going to bring more consumption-based type of pricing on Maxon. And then we have also, as we said, now launching this rendering solution for architectures called Redshift [ RVs ], which was first developed on Vectorworks and now also available on Autodesk Revit since June, we announced that at AIA. And it's now also on beta test on Archicad. But of course, for that to materialize and to have significant revenue, it will also take time. So it's not like we will see big needle mover change on the revenue within the next few weeks and months. It will take a little bit longer. So yes, for the moment, it is disappointing. Now is architecture and [ RVs ] an important piece for our AEC business? Well, it is complementing it. But for the moment, we see this business in rendering and still part of the Maxon business. And we see the Maxon business in the media and entertainment division of the Nemetschek Group as still a separate business versus our core business, which is in AEC/O. So -- and we are treating this business still separated. So therefore, it's not fully integrated in terms of G&A, et cetera. And so we will do our best now to try to recover. But we are not expecting any longer, this high single-digit or even double-digit growth for Maxon this year. And we are reading our guidance to be more in the -- around the mid-single-digit revenue growth for 2026 for Maxon.

Okay. And maybe I take the third question, which was on the contribution by HCSS. And I think your train of thought is absolutely correct. I think you might be slightly off on the numbers. There's no change whatsoever on the growth in HCSS as expected of the higher teens, and it's really delivering well. So where it really different a little bit is your assumption on the deferred revenue haircut. And that's also the only adoption that we have in the revenue between U.S. GAAP and IFRS, as you know. So that's why, as we have said, it's in the mid- to higher EUR 20 million. And you should rather go to the -- I mean, it's an estimation yet. We are still working out the detail. As you know, it's customary. You have 12 months to do it. We do it as quick as possible, but it needs to do the full calculation. So you should rather go to the higher side of that. And if you add that to the normal -- also, say, deduct that from the normal growth, you are back to the high teens, higher teens, and then you have the deferred revenue effect that is impacting the first 12 months. And of course, we are back then to normal in the growth. So I think that your contribution of EUR 70 million is definitely too low from what we're expecting. It needs to be higher than that. And then that's why you need to go to the expected growth, take out the, so to say, mid- to higher 20s deferred revenue haircut. And then you are clearly above EUR 80 million, I would say. And that's to say, depending a little bit, how much deferred revenue haircut we have, but there's no change whatsoever in the very strong growth in HCSS.

Got it. I appreciate the detail. Can I just throw one last one in? I guess from an adjusted EPS perspective, which excludes the PPA effects, do you have any updated view on how you think about kind of accretion dilution, particularly for 2027 at this stage, or not so much?

Yes. Well, you have two things in the EPS calculation following the HCSS acquisition. It's PPA, as you say, but it's mainly also the noncontrolling interest. So you know that the EPS is only calculated on our shareholdings. And that, of course, we need to deduct the 28% approximately that's held now by Thoma Bravo. So that's, so to say, the bigger impact on the EPS calculation. So what we see, including all -- including the PPA and the noncontrolling interest factor, we see that 2026, as I said, that will be -- that will not be accretive. 2027 will be more or less flat, and 2028 will be -- definitely will be accretive. So it's turning somewhere '27 -- definitely in '28. If we are really good, it can be in 2027, depending a little bit also on the PPAs, et cetera. But in general, it's a very strong deal, and that's why it's accretive very early. So it's '27-'28, depending on really where it's happened. We are a bit conservative to say it will definitely be 2028, where flat in 2027. If we were then to take out the PPA effects, then you are, of course, quicker in the accretion. So then you are definitely in 2027. But I think you should also really be mindful of the noncontrolling interest there. Maybe just to give you a little bit of color on the PPA as well as we are still doing that depending on, of course, as you know, how we allocate the consideration to the different asset classes that we have acquired. And HCSS has a fantastic strong customer base and technologies that will be the main areas. And those are, so to say, in those categories, we have rather longer amortization periods, right? And that's -- we are now in the details of how really to allocate that, but that's also how you should be thinking about the amortization on the PPA. All in, it's a strong deal.

Our next question comes from Alice Jennings, Barclays.

I've just got a couple, if that's all right. So the first one is just on the guidance. So it implies a bit of a deceleration in growth in H2, which is as expected, I think, from 12% to 14%. I'm just wondering what would need to happen in order to reach kind of the upper or the lower end of that range? And then also as a bit of a follow-up, what are your expectations in terms of each division for the second half? So I know you mentioned mid-single digit for Media, but yes, some comments on the other segments would be useful. And then just my second question is about investment and what your priorities are for investment in the second half and whether there's been any changes to your planned investment based off of the impact that we saw on margins in the second quarter?

So on the guidance, clearly, we had a very strong H1 with 16% revenue growth at constant currency. We are, therefore, highly confident as of today that we will reach our guidance, which is between 14% and 16%. So obviously, we are prudent. As you know also, the Nemetschek Group, in our DNA, we are sometimes also quite conservative, and we want to make sure that with all the macro political environment that we have currently in terms of any energy crisis and others and macro political aspect, we want to be prudent. So that's why we confirm our guidance. But obviously, we are very confident that we can reach this guidance and probably in a strong way. But of course, we need to see now how Q3 will evolve and also Q4. But yes, so very comfortable view for the moment.

And if you look -- if I take then to go -- to look into the guidance on the segment, we haven't changed our guidance on any other segment, then Media is the only one that we have since taken down slightly. Of course, we see a slightly higher growth. You see that Design and Build, especially Build is performing well. So that's why I would say, to come to the higher end, we should, of course, perform very strongly in all our other segments and maybe also a little bit stronger in Media. But let's say, as Yves said, it's more on the realistic side. I think also in the guidance that we have had and seen, I think what we should also always consider that in the second half of the year, whilst Build remains extremely strong, as you saw also in the first half of the year compared due to the comparables that we had in the prior year with GoCanvas contribution, but also with the aftermath of the Bluebeam transition into a fully subscription model, you will have -- we have a plan, so to say, a slightly lower growth in the second half of the year for Build, but that's to say, in line with our expectation. So that's why we have confirmed all our other segments and then to say maybe towards a little bit the higher end here and there and Media with mid-single digit in the second half. So with our priorities and investments in the second half, we haven't changed our priorities and investment. Of course, we are very strongly invested into our products, into our AI additions in order to continue to serve this market and our customers in line with their expectations and needs, of course, as well as possible. We are continuing also to invest into interesting early-stage ventures, et cetera. We are, of course, also continue to screen the market for M&A and like. So our investment priorities have not changed.

And again, just to comment also on your point on the EBITDA margin. Purely organically, if you look at our EBITDA margin, as we already indicated, excluding the M&A cost, we will be at the upper end of the range at close to the 33%, excluding M&A.

Our next question comes from Nicolas David, ODDO BHF.

I have three, actually. The first one is still on the guidance. Can you elaborate a little bit on your assumptions regarding the multiyear deals you expect in the Design segment for H2? And maybe also for 2027, what kind of lending you expect there? My second question is on Germany. You are posting again, a nice healthy growth of 14% in H1 after the rebound of [ H2 ] last year. In H2 last year, you flagged a nice win regarding the internationalization of Bluebeam as a tailwind for Germany, notably. Is it still the case? Or did you benefit now more from also a recovery in the Design segment? Any color would be helpful there. And last topic is regarding the ForEx transactional negative impact of Q2. I fail to see the region currency we're talking about because I fail to see a currency which has been quite weak in Q2. USD has been weak for a while. So if it's USD, can you elaborate for the reason of the timing for doing it now?

Maybe I'd start with the last one with the FX impact. So what we have there, it's -- as we have said as well, it's due to the -- it's a transactional effect. It's not to say just converting one of our group companies' balance sheet into our euro balance sheet. It is a transactional effect of our -- one of our group companies. And that company is having its own balance sheet in Hungarian forint and holding assets in euro. And it was actually not any currency getting weaker. It was, as you know, after the elections in Hungary in April, the forint appreciated very, very strongly in Q2. This is an extraordinary effect. So it's not about one currency weakening, it's really about this very strong and all of a sudden strengthening in the forint. And that, of course, that revaluation effect hits that group company because the group company holds the assets and liabilities in euros have their own functional currency in forint, and that's why it changes. And when we convert it -- and if it is too difficult, please ask off, we will be able to give more details if you want. That's the effect we see in the P&L. Just to give you a little bit more detail on it. When we then convert that Hungarian balance sheet into our consolidated euro balance sheet, you can say, well, then you're there, right, your net effects off. You do. So you don't really have the -- from a full financial impact from a -- you don't incur a financial loss to the group, but you take that other conversion effect into the other comprehensive income through the equity, and it's nonrealized FX gains. So whilst we showed the one effect, the transactional effect in the P&L coming from our group company, we have the countering effect of that nonrealized FX loss and gain in our equity. So for the whole group, it's not a loss in financial contribution, but in the P&L, you have this transactional effect. So that's why it's a strongly extraordinary effect, and it's driven by the Hungarian forint appreciation. And you can see now that it's not weakening again. It's still at an elevated level versus what it was. But now it's coming back, so to say, coming back down again versus the euro, but that is the reason behind. I hope that was a little bit more detail that is understandable.

Yes, that makes sense.

Then regarding Germany, clearly, we had a good momentum in the market. First of all, we can see that the momentum is more positive. Digital permitting is increasing. Now I would not say that the residential market is booming yet. But clearly, there is a more positive momentum in the market, which is starting to be translated also by better performance also in Design. So Design had a strong performance in Germany in H1 and in Q2. Also thanks to move to subscription from some of the existing maintenance customers, but also with new seats and new logos. And then, yes, clearly, Bluebeam has a very strong growth in Europe in Q2, especially in Germany. So overall, a positive impact in the market for both coming mainly both from Bluebeam and from our Design brands.

Then let's conclude with your first question. That was the question of multi-year impact in our guidance for the second half of the year. We don't assume neither headwinds or tailwinds from that. We approximately assume the same level in the second half as we had in the first half. As you know, it's a little bit -- sometimes it's a little bit different to hit the right quarter because it's depending on which customer groups really takes up a multiyear contract versus a normal contract. So you shouldn't expect any additional FX out of that in the second half. That's at least what we have assumed in the guidance. And I think it's important to reiterate, though, that we are now in the second year of the use of multiyear contracts, and you know how the revenue recognition are for those. So if you look at really the impact of multiyear contracts in this year in 2026, we actually have a headwind from that if you compare 2025 and 2026. So why -- as we have -- if we would have only done yearly contracts in '25 and '26, we would actually have had a higher growth in the Design segment in 2026 because then those -- that revenue that was recognized already in 2025, that would have then come as yearly contracts this year. So that postponed effect that we have in 2025 would have come in 2026. This is just accounting metrics, right? So it is, of course, if we would have only yearly contracts in this year, then, of course, the revenue contribution would have been lower. But I think it's important always to look at the full circle as we have using -- we are using the 3-year contracts to make sure that our customers can convert and go into -- in a safe mode into the subscription transformation, which we know that especially some of the European countries, but also others, some of our clients really want to have this planning security for the 3 years. And that's why we need to look at 2025 and 2026. But to answer your question clearly, we are not expecting any additional -- any, so to say, higher or lower FX. We are expecting approximately the same level in the second half as we did in the first half.

Our next question comes from Nay Soe Naing from Berenberg.

In the interest of time, maybe I'll just keep it to one. I was wondering if you could maybe share how you're thinking about monetization plans for the AI features outside of Bluebeam? Obviously, within Bluebeam, we know there is a premium package of Bluebeam Max. But I noticed that you've introduced AI features in Graphisoft this year, I think also in Allplan as well. So it would be great to know more about how you're planning to monetize features outside of Bluebeam in the rest of the organization.

So clearly here, as you may have seen also, for example, at Allplan, we have this Steel Genie solution, which we are pricing mainly as a new package and is still under subscription, but at a big premium. So the same philosophy that what we are doing with Bluebeam Max. And you will see us doing that still this year mainly for all our rollout of our different Max features. So you will see, without disclosing too much also, an Allplan Max package, but other Max packages, et cetera. And the monetization will be an uplift and growing our average revenue per user by having much bigger premium subscription package still for these AI packages. And then, of course, over time, we will bring more consumption model where then, the pricing will be then a mix of both licensing plus tokens. But on the token side, we are, for the moment, not planning to sell tokens stand-alone. So it will be always part of a value-added package where we may include also some tokens in case we sell also, tokens. But for the moment, as you know, with Bluebeam Max, our users, our customers, it is for them to have a partnership or a relationship with some of the LLM vendors. So for example, they need to have a Claude Pro or whatever subscription. Now of course, we have MCP integration going on for all our different product lines. And of course, we are now embedding more and more also, additional AI features in our more basic packages. And here, we're not necessarily pricing that separately, but we want to make sure that we have more and more adoption of our AI features. Really depending now on the customer segment, but also the customer size, we still have a big variation of feedback from our customers. The great news is that our customers are adopting much more AI today than it was a year ago, of course, but that's the case for everyone, including, I assume, you on the phone. But the thing is if you take, for example, we did a small study recently with architecture firms in Western markets, so North America and in Europe. And around 70% of the people responding declare that they do not trust yet fully, the output coming from AI in general. So there is still some work to be done. The good thing is that there is a trusted relationship between our fan base and us. So they believe and strongly in the product that they use on a daily basis, if it is Archicad or Allplan or Vectorworks or in structural engineering where they are even more conservative, RISA or Scia, Frilo, et cetera. And this is why on our side, it is very important that the intelligence that we bring to our products, thanks to the Nemetschek intelligence layer, are bringing strong reliability. And therefore, it is key that we have trusted and strong data that, of course, is key to our success. But overall, I would say that it is going in the right direction. But again, we are in a highly conservative market in AEC/O in construction and also in a very SMB market. So they are probably more -- not probably, they are, in general, more conservative and more prudent than larger enterprise accounts, especially in industrial or manufacturing or automotive or the type of sector. So this is why also we want to make sure that they are not afraid on the pricing side. And in terms of monetization for the next few months and a couple of quarters and more, it will be still subscription based so that they have clear understanding. And also, they can forecast the upcoming costs that they have using our tool. But they want also prediction. Like all of us, we want to have some prediction on our costs. And that's why subscription licensing-based type of pricing is still the model that you will see from us for the short term. Midterm, we may evolve with something more hybrid. But first, we want to make sure that we have strong adoption.

And also maybe just to add on that, when we do that and when we go to that value-added consumption-based hybrid model, if we were to go that, it's also important that the AEC/O intelligence and the harness and the knowledge graph really lays with what we offer. And that is also how we can price in the value addition. And we also can link then, the routing to which LLM to use for which kind of workflows, et cetera, which also, of course, impacts the cost efficiency for our users, also for the use of LLM. So that's part of that kind of consumption-based package. It's not just to say, to use tokens, it's also that we can make sure that our clients can also then have a balanced -- a strong outcome for a balanced cost contribution. And that's why it's a little bit more than just adding tokens, but we will come back to that when we -- when that's going to -- in that direction.

Our next question comes from Joseph George from JPMorgan.

Yes, just one for me, please. I guess if we fast forward maybe 1 year, once HCSS is fully integrated, what does the organic growth outlook for the Build division then look like? I guess I'm trying to ask, to what extent does the integration of HCSS mean that the Build division is maybe now more profitable, but perhaps growing slightly slower on an underlying basis? Or do you think that with HCSS integrated, the Build division can still grow organically at 20% plus through the midterm?

Yes. That's currently our view that in a year from now, we should be still in around 20% organic. I mean, then it would be the new organic growth, including HCSS because HCSS will be fully integrated and at constant currency. Of course, the base is getting higher, but we should hold around 20%.

Okay, great.