The year is 1963, and Georg Nemetschek, a certified engineer, attends a programming course for a ZUSE Z23. Fascinated by the possibilities of this new technology, the idea behind the foundation for Nemetschek SE was set. As early as 1968, Nemetschek Engineering used a programmable computer, and in 1977, the first Nemetschek Software program was developed for the HP 97. In 1980, Nemetschek coined the term computer-aided engineering software (CAE), and in 1984, the CAD solution (ALLPLAN, still one of Nemetschek’s businesses) came to market.
Nemetschek expanded and started to become more acquisitive in the 2000s with key acquisitions like Vectorworks and Graphisoft. They have continued in this direction over the last decades to become a leading software business in the architecture, engineering, and construction (AEC) industry. Nowadays, the company is owned by several foundations set up by founder Prof. Georg Nemetschek, serving different purposes, like STEM education and R&D in the construction industry. Between Georg, his sons, and the foundations, insiders retain over 50% of the company's shares.
Business model and industry
Nemetschek’s customers are businesses in the architecture, engineering and construction industries. Construction is significantly lacking in digitalization, a crucial issue because it is also responsible for 40(!)% of global emissions. We can see some statistics shared by Nemetschek regarding this issue below. North America, Scandinavia and Australia are leaders in BIM adoption, but there is a lot of white space in central Europe, Asia, LATAM and the rest of the world. As a German company, Nemetschek has 50% of its sales in Europe, but also large exposure to NA and some Asian sales. Nemetschek estimates that all its markets are around 35-40% penetrated and it holds a small market share in each.
Advanced AEC software has large ESG tailwinds:
90% of Construction projects are delayed or have higher costs than anticipated.
40% of global CO2 emissions come from the construction industry (while it is just 12% of GDP).
35% of all waste in the EU is from construction and demolition.
>20% of materials are wasted due to remodeling and poor planning.
There is a lack of workforce in the industry.
Software can provide solutions for all of these structural issues, giving governments and companies a huge incentive to reduce emissions and waste and increase sales and profits.
The global AEC software industry is estimated to grow from $9.17 billion in 2023 to $21.9 billion in 2023 at a 9.7% CAGR. The industry has a lot of different niche software applications like computer-aided design (CAD), building information (BIM), product lifecycle management (PLM) and AR/VR solutions.
Nemetschek operates across the whole value chain in its core AEC industry and also diversified in the media industry, which contributes around 13% of revenues.
Competitive advantages and growth engine
Keep reading with a 7-day free trial
Subscribe to Heavy Moat Investments to keep reading this post and get 7 days of free access to the full post archives.