Wed. Oct 5th, 2022

Start Time: 16:30 January 1, 0000 5:05 PM ET

Autodesk, Inc. (NASDAQ:ADSK)

Deutsche Bank 2022 Technology Conference

August 31, 2022, 16:30 PM ET

Company Participants

Theo Agelopoulos – VP of AEC Design Strategy

Simon Mays-Smith – VP of IR

Conference Call Participants

Bhavin Shah – Deutsche Bank

Bhavin Shah

Great. Good afternoon, everyone. For those of you that don’t know me, I’m Bhavin Shah, a member of the software research team at Deutsche Bank. I’m pleased to be hosting Autodesk here today for a fireside session with Theo Agelopoulos, Vice President of AEC Design Strategy; and Simon Mays-Smith, VP of Investor Relations. Theo, Simon, great to have you with us.

Theo Agelopoulos

Thank you.

Bhavin Shah

I guess before we start, Simon, if you want to kickoff with Safe Harbor.

Simon Mays-Smith

Yes. Good job with my surname [ph] by the way. We may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements. Thank you.

Bhavin Shah

I guess, Theo, before we dive into the business, can you just provide us a brief background on yourself and your key responsibilities at Autodesk?

Theo Agelopoulos

Yes, happy to. So I’ve been with Autodesk for roughly 13 years. Last eight years, I’ve worked primarily in our AEC Strategy team. So we basically set long range industry strategy, lead M&As, partnerships, and go-to-market.

Bhavin Shah

A lot of interesting things there that I want to dive into, but I guess to start with near term, you guys reported 2Q results last week, and just maybe talk about what you’re seeing in the demand environment for infrastructure software, and what you’re seeing as you talk to customers?

Theo Agelopoulos

Yes. So I would say, just in our engagement with customers, there’s lots of demand. A lot of our customers continue to win projects. They’re winning new projects. There was recently an AEC report that came out, which is the Association of Engineering, like all the consulting engineering companies are part of this. And the two areas of most positive influence is actually transportation and water. So we definitely see a lot of pent-up demand. We’re beginning to see some of the money flow from a government perspective, and not just in the U.S. but globally. So I think just in general, there’s a lot of positive sentiment, a lot of demand with our customers to implement and go digital faster. All very positive, I would say.

Bhavin Shah

And thinking what you’re seeing near term and maybe thinking longer term, bigger picture, like, can you just talk about the overarching strategy that you’re thinking about over the next 5, 10 years for that group?

Theo Agelopoulos

Yes. I would say — our strategy is I think pretty simple. Obviously, we want to continue to grow our core design business by targeting more architects and engineers to grow the adoption of digital technologies. In addition, it’s to move digital transformation downstream into construction and then into operations. And that, in turn, opens up a lot more TAM for us as a company. But underlying all of that is to provide kind of a digital backbone to connect the complete asset lifecycle, regardless of whether it’s a building asset or an infrastructure asset, or an industrial asset.

Bhavin Shah

And then on that point, I guess, tying to some of that stuff, like what is the architecture and engineering industry look like 5, 10 years? You talked about completing that lifecycle. But how do you kind of get there? Like, what do you need to do and what are the milestones?

Theo Agelopoulos

Yes. So I think from an architecture and engineering perspective, what we see is architects and engineers spending a lot more time on higher value activities, making better decisions earlier that ultimately drive more sustainable, better outcomes. So if you think about what’s driving our industry, there’s a big pivot towards sustainable solutions. 80% plus of the long-term operating cost of an asset is generally in operations and maintenance, which means we have to design and build better assets, more resilient assets. So a lot of the emphasis I think is going to be around more — using analysis simulation earlier to drive better long-term outcomes. And underlying all of that, I think one of the key statistics that you see in the industry is 95% of data goes unused, as you progress through the digital life of the asset lifecycle. So our goal is to eliminate redundancy of data, reduce risk, reduce cost, produce higher quality, more resilient, and more sustainable outcomes as a result. So our goal is to obviously continue to grow the markets we’re in, but expand and then really ultimately connect the asset lifecycle.

Bhavin Shah

That makes sense. And I guess compared to where we are today, when you speak to customers and look at customers’ journeys, like what do you think are some of the catalysts to get people to adopt fully the workflows and adopt more of that data that you talked about that’s required?

Theo Agelopoulos

So I think it’s multiple things. I think one thing we definitely see is more owners, regardless of public or private owners, beginning to kind of think about more sustainable outcomes. So that’s in turn driving them to kind of request or not always have a mandate always, but in some cases mandate digital technologies to achieve those outcomes. In some cases I think what we’re seeing also is, as we move to the cloud, adoption of technology, which has been a big barrier, is being lowered. So it’s easy for a lot of our customers in the industry to adopt digital technology. And then I think the other thing is, a lot of the young engineers and architects coming out of the workforce are more open to using 3D modeling technologies, more innovative technologies, so the gap to onboard them and get them to use a lot of these technologies is much smaller than in the past. And then I think the final one is we’re seeing kind of a change in the types of business models and funding models, especially in the infrastructure space, as we move from traditional design bid build to private public partnerships to alliances. So once you move into these different business models, it kind of breaks down some of the artificial silos of risk and reward. And so all of those collectively I think is what we see happening.

Simon Mays-Smith

There’s also an element of sort of lived experience in the same way that sort of COVID forced people to enable working through the cloud, because you can’t work unless you did that. Similarly, in construction, it’s something like 30% of that project cost is waste, and that becomes a lot more important when those waste materials suddenly cost you 10% more in an inflationary environment. The lived experience also sort of reinforces the need to digitalize and generate efficiency and sustainability.

Bhavin Shah

And you talked about cloud and how it makes it easier for people to adapt. But have you seen that also kind of accelerate the network effects that go into it and drive more people to the product versus maybe the way you guys sold products and the way you guys had product [ph] years ago?

Theo Agelopoulos

Yes, absolutely. I would say — and I think to Simon’s point, what we saw with COVID, a lot of our customers in the industry were already on a digital transformation journey. And actually what COVID did was really accelerate that journey. And there’s some interesting research out there by BCG and KPMG that says it accelerated for many of our customers by four to six years on average, right? So customers are going faster. But I also think the fact that we can rapidly deploy a lot of our solutions in the cloud, it makes it easy for a lot of our existing customers to attach a lot of those cloud offerings and ultimately help them be more optimized in how they deliver projects, reduce risk. And one of the biggest benefits is collaborate better with the broader ecosystem of stakeholders on a project. So that’s been some of the immediate benefits, I would say.

Bhavin Shah

Makes sense. And maybe just getting into some of the sub verticals, when we think about vertical construction, transportation, water, can you just break down how the categories within — can you break down the subcategories within A&E? And how the workflows and competitive landscape is going to change?

Theo Agelopoulos

Yes. So when we think about the AEC industry, we kind of think of it in kind of a couple of different buckets. So we think of it from a design perspective, we think of it as building buildings, civil infrastructure, and then I would say utilities, mining. So most of our focus has been around buildings and civil infrastructure, because it represents the biggest opportunity. Within the building space, we kind of look at it as there’s an architecture discipline and then a structural MEP discipline. The architecture discipline is where we’ve seen the most maturity of the last 15 years. But now we’re seeing kind of the building engineering space rapidly pick up and primarily because now we have an integrated way to deliver a complete project. On the infrastructure side, which has been predominantly, I would say, historically more of a laggard, in the last several years, we’ve seen them really follow kind of the same kind of trajectory, especially on the transportation side. And a lot of that has been driven around the fact that transportation is really built around three primary markets; airports, rail, and roads and highways. And if you start with airports, it’s very much vertical infrastructure. And then rail projects are a combination of vertical and linear infrastructure. And then roads and highways are primarily linear. So the benefits have been very strong and bringing a lot of value. Vertical infrastructure has helped us go faster in the infrastructure space, starting with airports and then rail and now into roads and highways. So that’s kind of how we think about market segmentation.

Bhavin Shah

And then in terms of market leadership and the competitive landscape, how you kind of think about that? And the go-to-market strategies, does that differ between these different subcategories?

Theo Agelopoulos

I think underlying for us, I think we look at digital delivery as a common managed process all the way through, regardless of the asset type. So our goal is to allow architects and engineers to kind of better collaborate, deliver projects faster, better, cheaper, et cetera. Definitely in the building space, we’ve always been very strong I would say in that market. It’s been generally a lot more competitive in the infrastructure space. And we have other companies out there that we’ve historically competed with, like Bentley and others. But I’d say the benefits we’ve had of being a leader in VIM has helped us tremendously grow faster in that space than in other markets because we’ve been able to bring a lot of best practices from building infrastructure.

Bhavin Shah

Then I guess from a market opportunity standpoint, is there any way to think what the relative size of each of those markets in terms of TAM and I guess where we are in terms of that penetration curve? I think you talked about vertical being a —

Theo Agelopoulos

Vertical is the biggest. When you think about TAM, planning is probably the smallest TAM, around 2 billion. I think if you move into design, it’s around 7 billion to 8 billion. Construction is more like 15 billion. Then you get into the operation space, it’s like I think 13 billion. So from an asset lifecycle perspective, that’s what it looks like. Within I would say the design space, the building design space is by far the largest TAM, followed by transportation and then water, I would say, that is one of the — more of the three.

Bhavin Shah

Is that the same way we should think about where we are in terms of penetration in terms of –?

Theo Agelopoulos

Yes, I think so. I think the building industry in general, I would say — I don’t want to give you a timeframe, but it’s further ahead in general. But even within the building space, geographic adoption is different depending on what market you’re talking about. So we have generally seen Northern Europe, the UK, have historically been the fastest adopters. The last several years, Germany and France have really accelerated their adoption. The U.S. is one of the early adopters as well. And now we’re starting to see a lot of the emerging markets like India, ASEAN, Brazil really beginning to go faster as well. So we’re seeing kind of an on ramp, I’d say, more broadly, but most mature, it’s generally —

Bhavin Shah

Just on the water side, can you just talk about the integration with Innovyze and where are we in terms of that product portfolio? And can you just maybe give some customer examples that highlight the longer term opportunity?

Theo Agelopoulos

Yes. So one of the first things we focused on — so just to kind of set up a little context, probably half of the enterprise’s business is around analysis and simulation. So think of engineers doing water analysis. The other half of their business is around asset management and operational analytics of our plants and water infrastructure. So the acquisition helped us not only grow our portfolio and be able to access more TAM on the design side, it also opened up a whole new market opportunity around servicing owners, primarily water utilities. One of the first things that we focused on in year one was really about moving them to the new business model that Autodesk has by subscription. But the good news is, we’ve completely moved all their offerings over to a subscription model. We’ve reduced the complexity of the portfolio from 35 to 7. And we’ve started to have some really good synergy, especially in our enterprise accounts, operating in the enterprise portfolio as part of our enterprise agreement. So that’s already kind of happened. Some key value props for our customers has been around the fact that we now can — in the water market, we actually have a full asset lifecycle solution because we have the Innovyze solutions from a planning and design perspective. A lot of our core traditional design tools of designing pipes in the ground and stuff we’ve always done at Autodesk. Our ACCL, Auto Construction Cloud can service a lot of the construction projects for water infrastructure. And now we’re also, obviously as I mentioned, in the asset management, operation, analytics space. So right now, I’d say we are probably the most complete end-to-end digital solution provider in the water market.

Bhavin Shah

Are you seeing just accelerating adoption of ACC within that water market and like what are kind of some of the drivers that –?

Theo Agelopoulos

We’re just starting — I’d say early stages on the ACC side. Where we are starting to see some new adoption is on — Innovyze is developing their own digital twin platform for asset owners. That product just launched recently. And we’re already seeing some early uptake of customers trying to move away from on-premise solutions to cloud and then using more of a digital twin kind of frontend to how they operate and maintain a lot of the physical.

Bhavin Shah

And then you talked about kind of reducing the product portfolio, which is kind of similar to the transition to Autodesk. What were some of the — what was the feedback from customers? Is it different than the feedback you’ve gotten just from your traditional?

Theo Agelopoulos

I think the feedback, it changes always a tad. But I think on the commercial side for a lot of our engineering customers, they’re well trained. So for them that were very positive on the change because it simplifies what they buy from what it is, how they manage it, how they deliver it and deployed to their users? So I’d say very much a very positive thing. I think on the public sector side, because of a lot of water utilities, it’s still early, so we’re still trying to train them. Even though a lot of those owners have been using Autodesk technology, it’s just new. So still early, but I wouldn’t say it’s been negative. It’s just more about educational.

Bhavin Shah

And then I guess more broadly in M&A, can you just help us understand the framework in which you and Autodesk assess potential acquisitions? What are kind of the key qualities that you look at in assets and maybe how to devise change or change in thinking in terms of –?

Simon Mays-Smith

Let me start, so broadly across Autodesk as a whole, and then maybe talk — I’d say the whole strategy setting out is we’re trying to connect workflows, which have historically been siloed, and by connecting together, you increase the efficiency and also your ability to build or manufacture more sustainably as well. And so what we’re doing when we add adjacent workflows, we can either do it through organically internally, we can do it through acquisition, or we can do it through partnerships. So there’s always that buy, build, partner sort of decision is we are adding sort of new potential customers to the business. And that allows — it gives the new customer base to sell into and to add value too. But also by connecting those new customers to our existing customers, we bring incremental value to our existing customers as well. And that grows our sort of total market opportunity. So we have new customers and we have the ability for add new value to our existing customers as well. So that’s what we’re trying to do and it’s sort of buy, build, partner, but as it relates to sort of Theo [ph] as well.

Theo Agelopoulos

Yes. Our one range plan that we are religious of that, a lot of the decisions we make around priorities and the build, buy, partner decisions. And so, as an example, on the partner side, we’ve been fostering for last five years a close relationship with Esri, which is the world’s largest provider of GIS solutions, because GIS generally feeds our BIM process, and ultimately also ends up in GIS from an asset management and operational management perspective. Schneider is another example where we’re trying to move electrical engineers to building information modeling, and the Schneider partnership allows us to go deep into the electrical space and go faster. And then obviously, acquisitions like Innovyze where we made a very deliberate decision where we’re already in the water market, but it was primarily around designing water assets, now we actually have full lifecycle. So that was kind of very much a market expansion as well as asset lifecycle M&A decision. But in general, I would say, when we think about the investments from an acquisition perspective, a lot of the decisions are can we open up more serviceable TAM in the markets we’re already in? Can we geographically expand to get that more serviceable TAM? Or are we going into an adjacent space, for example, when we made the PlanGrid acquisition, it was a very deliberate decision downstream and take digital transformation into construction. And then we make investments. As you know, we’ve made some investments in third party companies in the operation space, like SpaceIQ, and that is again about connecting the BIM process all the way through.

Bhavin Shah

Got it. That’s helpful. And then Autodesk was early to capitalize on the convergence of design. What innings do you think we’re in, in terms of just that process and how it’s oriented itself to take advantage –?

Theo Agelopoulos

Yes. So I think it’s hard to give you like an inning because I think the inning depends on what sub-segment you’re in —

Simon Mays-Smith

…company within the segment.

Theo Agelopoulos

Yes. But I would say that we’re probably in the third or fourth inning when it comes to really getting the real benefits out of conversion. We have certain customers that are very progressive. [Indiscernible], which is one of our largest enterprise customers, is very aggressive in their goal to be the number one in design and manufacturer. So we’re making a lot of really positive progress. Actually, I was in Tokyo last week in a meeting with them. So they’re a good example. They’re probably in the sixth inning, right, in some of the things that they’re doing. But in general, I think there’s no question there’s a convergence happening. We see lots of good examples. I think what we haven’t seen yet is it happened at scale. And I think that’s kind of what we’re kind of investing in now to see it happen ex scale.

Simon Mays-Smith

And lastly, as we made those investments, they make the runway of opportunity longer for us. Because as we move from file based data in the cloud and also having building information modeling, which at its heart is structured information, so you move structured information from files into the cloud, you can then start applying AI and machine learning to it, then allows you to add even more value on to it and also new charging models around consumption similar to sort of Azure and AWS, the whole sort of runway of opportunity to build out the platform, and then also a third party ecosystem on the platform. So there’s a lot of runway of opportunity.

Bhavin Shah

Plenty of opportunity still to come. But I guess to get customers closer to what [indiscernible] is doing, what needs to happen? Is it more on the operation side, them kind of pushing down and saying, hey, we want better operations, we want better data management to be able to have a cohesive strategy, like what do you think gets people to that sixth inning?

Theo Agelopoulos

Yes. So I think what Simon was just alluding to is historically in the AEC industry, a lot of the data and content that gets produced has been very file based. And we’re in the process of building out more granular based, more of a data backbone to connect a lot of these processes. I would say we’re already on their journey. And that is kind of a key requirement or a critical dependency to get the outcome you’re talking about. So I think if you think about other markets where you’re managing data at the asset level, at a parts level, that’s when you can start to really achieve some of those convergence outcomes that you want. So that’s — a lot of the work we’re actually doing the foundation of what we’re doing right now, that will help that actually happen.

Bhavin Shah

Does this process have to change [indiscernible] taking advantage of more data –?

Theo Agelopoulos

So I think the biggest change management happened when our customers moved away from traditional design delivery, building information modeling, right, because building information modeling is actually a change process. So we’ve kind of trained I think the industry a little bit on change their processes to have a better digital delivery outcome. And to just close the gap between design and manufacture, the big difference that I think still — we think a little bit early on is that I’m a civil engineer is that historically, when a civil engineer designs a project, they’re not thinking about how it gets made, right? What happens is they throw it over the fence and the contractor deconstructs and rebuilds the project based on how it’s going to get built. So the one big shift is, and I think moving to more of a granular data model and using things like AI and machine learning, will help us think about constructability earlier on, the digital process, which will be a key barrier that I think we need to overcome as an industry.

Simon Mays-Smith

And also introducing manufacturing techniques and stuff like that in construction as well so that you can sort of replicate and scale as you can of manufacturing.

Bhavin Shah

Makes sense. We talked about international a little bit earlier. You were talking about some countries and you guys are certainly a very global business. What are some of the key trends you’re seeing within A&E and other parts of the market that we might miss?

Theo Agelopoulos

I think in the AEC industry, what we’re seeing is some of the emerging markets really accelerating faster than the more mature markets, like they have the benefits of taking a lot of best practices of what’s been happening in the UK or the U.S. A good example would be the UK has done a really nice job of developing self concept and final work. And we’re seeing a lot of countries like Singapore, Japan kind of implementing diversion of a lot of those best practices. So in general, we’re seeing a lot of these less mature markets just growing faster, number one, right? I think number two, we’re seeing a lot of public sector owners in those markets really being progressive and looking to implement and mandate on one of those digital delivery processes at the government level. And one of those markets, that organizations from like the U.S., we had federal, state and local. A lot of that gets mandated at the federal level. And generally everyone else falls. So there’s a lot of different market dynamics I think that will definitely help those countries go faster, but also helps us grow our position faster as well.

Bhavin Shah

And you have to do things differently from a go-to-market perspective as people kind of [indiscernible] kind of differently, any thoughts about them kind of mandating things that make it easier and doesn’t make it a little more challenging?

Theo Agelopoulos

From a go-to-market perspective, I would say the way we sell, the way we deploy, not so much. It’s generally more around quantification, localization, data security, like it’s more those things that we have a long range plan when we’re delivering on. And to give you an example, and it’s not even just overseas but even just as we move to cloud to do business, federal government has to be federal [ph] moderate compliance. So we’re in the process of launching that this year. We’re working on C5 for Germany, deploying new data centers in Australia, adding more compliance for other countries. So we’re doing that concurrently. And then it’s the ability to meet local design standards, which is not a new problem for this. We’ve been doing this for 40 years. But we have to do everything kind of in concert, I would say.

Bhavin Shah

And then we talked about mandates kind of being a catalyst for revenue in the past and driving more adoption. What’s the tipping point here where we can see [indiscernible] of like, hey, at some point not everybody, but almost every project –?

Theo Agelopoulos

Yes, I don’t think there’s a tipping point. I just think it’s going to be a gradual acceleration, because even when some of these mandates are kind of in discussion, a lot of the ecosystem is trying to adopt early. So you kind of see a little bit of an on ramp before it happens. And that’s happening right now in Japan. We’ve seeing in growth faster in Japan in the last several years, just because a lot of the ecosystem knows the Japanese government. That’s the intent. So I don’t think there’s a magic level, but it’s going to be an ongoing thing I would say.

Bhavin Shah

And is that driven mostly by the operators for more data to be able to see that it’s better or like, what are the kind of the key constituents that are really driving some of –?

Theo Agelopoulos

So I would say all of the above, right. So one of the things — one of the key things that owner operators want is at handover, they want a better digital asset to optimize the way they operate and maintain. So if you think about a certain industry standard, ISO 19650 is one of them. But what the first thing you do in that process is defined, what’s the asset information that you need for operations? But that kind of tends to drive the whole digital process, so that we may only get to the asset that can turn it on, operate it, maintain it, and ultimately deliver it back from innovation and retrofit. So I think it’s that. I think sustainability is one of the biggest drivers in the U.S. We’re seeing things even like companies, there’s going to be SEC mandates about delivering — operating more sustainable assets. In the U.S., we saw more renovation projects in the building space than new projects. So sustainability is going to be one of the big market drivers. The good news for us certainly is that we’ve always delivered sustainable design workflows and we have tools to do things like carbon analysis. We’ll continue to make more investments in that area, both organically and inorganically. So I’d say there’s several factors that are driving the demand, not just one.

Bhavin Shah

Got it. And then turning to the U.S. infrastructure build, can you just talk about the timeline of things [indiscernible]? I know you’ve talked about the past, it’s always a slow build, but like what are the things that you guys are looking to, to kind of see some acceleration and like what do you see in terms of pipeline or what are the first things that you look forward to kind of where you kind of see that spend turn into actual dollars?

Theo Agelopoulos

Yes. So I’d say we’ve already seen incremental dollars, but there’s been kind of very targeted around things like changing lead pipes in the U.S. But there’s $300 billion out there that have to get spent in the next five years, right, 5 to 10 years. And we’re seeing some trickles of it come through. Generally where we see the biggest impact is when the DoD start turning on big highway projects, that generally has a big impact. And obviously, we’re focused on the OTs and general roadway infrastructure. Transit and water are probably the two other big ones, I would say.

Bhavin Shah

How do you position yourself to take advantage of some of these –?

Theo Agelopoulos

So at the end of the day, the supply chain that does the design and construction work, a lot of our customers, right, and the way we position ourselves is we want to give them kind of a unified experience. And regardless of the asset type, whether they use buildings or infrastructure, they can use all of their solutions consistently [indiscernible] and many of our customers are trying to rationalize and standardize our digital delivery method, because we serve as multiple industries, we feel in a really good position to do that.

Simon Mays-Smith

The important thing to understand with infrastructure is that infrastructure build — with no infrastructure build, there’s going to be billions and billions of dollars spent on infrastructure. So does it dramatically change the game? No, it doesn’t. There’s still a bunch of money. And the reason is the more important thing, which is most of the infrastructure in the U.S. and elsewhere is coming to the end of its serviceable life. It needs to be replaced or upgraded. And that problem is becoming more acute as we can see across the globe because of climate change. And so you’ve got weather turning up in intensities, rather than having one standard deviation event every 100 years, you’re having three standard deviation events every other year sort of thing. And just the infrastructure is not built to deal with it. So that’s what’s driving it.

Theo Agelopoulos

The one thing I would add just in some [indiscernible], right, it was even before COVID and the stimulus builds, we’ve had a $1 trillion gap in infrastructure. Look at the forecast. We’ve been under spending on maintaining a lot of the existing infrastructure or building a lot of new infrastructure to meet a lot of the sustainability goals, for example, things like COP26. So we’re always going to have demand, right. I think this helps accelerate and hopefully close some of the initial gap. But again, it’s always going to be an issue because the minute you build some infrastructure, it deprecates slowly —

Simon Mays-Smith

It’s a great metaphor when President Biden turned up in I think it was in Philadelphia to speak about infrastructure and the bridge fell down when he was there. It’s like you can’t make — so that’s the issue. You see these problems before your eyes.

Bhavin Shah

How often does the conversation of sustainability and reducing asset waste like that’s all people — people are very mindful about these days come up in your customer conversation? And how’s that trended over the last –?

Theo Agelopoulos

Yes, it’s an interesting question. So I would say it’s always been part of the conversation the last 10 years. I would say in the last two years, we’ve seen an extreme on ramp when it comes to sustainability. And if you actually go and look at a lot of our customers’ Web sites, every single one of our customers has something about sustainability on their Web site, including ourselves. So there’s no question I think we’ve seen an on-ramp. It’s forcing us to think about what we can do to better service that need and demand. So I said the last two years is very different than say the previous.

Simon Mays-Smith

Actually, you can see this in our impact report is that what’s interesting is that if you go back a year or two, the previous year’s impact report, you could see that our largest customers to this point had — a lot of them had sustainability goals, but sort of some of the medium and smaller customers [indiscernible]. So you’ve seen an increase in both proportionately from a lower base, it’s now trickling down into the mid and small part of the market as well. So it’s really permeating down. So it started with the big guys and now it’s permeating down through the market.

Bhavin Shah

And how has that impact just demand for your products. Where do you kind of see people gravitate towards like, hey, this is something that I’m really focused on? They come to you like what are you kind of offering them –?

Theo Agelopoulos

Yes. So I’d say right now, a lot of the demand has been around buildings, because they’re one of the largest producers of CO2. In the last six months, a lot has been electrification. So a lot of the investments — we accelerated certain things around electrical design because of that. So I’d say they’re probably the two obvious areas right now and then water. And that was one of the reasons we also actually acquired Innovyze. So I’d like to believe there’s method to the madness and the decisions we make. But they’re probably the three key areas that are driving the biggest demand.

Simon Mays-Smith

The other thing to remember is that sustainability and efficiency go hand in hand with each other. The reason why things haven’t been built sustainably is because they don’t reflect the externalities of building with that particular material around climate. They build in the cost of the externalities. All else being equal, some of the stuff is going to cost more. Then you’re going to build sustainably, you have to mitigate that cost somehow. And the way you mitigate the cost is by doing it more efficiently. And there’s both ways and you can get prices, either around the amount of materials you’re consuming or around the inverse of that, which is the amount of material you’re wasting as part of the process. It’s also around the efficiency and the connectivity of the workflow. So sustainability, efficiency, they are both tied to the hip.

Bhavin Shah

I’ll pause here quickly. I know we have a few minutes left. Does anyone in the audience have a question? It doesn’t seem like it. Just one last one from me just in terms of your last call, you talked about seeing a lot of — getting activity, you talked about seeing your customers have a lot of pipeline. How do we think about just the inability of that? And what drives the competence of some of that stuff kind of sustaining and what do you see just in the metrics behind that that drives –?

Theo Agelopoulos

That was on sort of building connected, which is sort of where the rubber hits the road where projects go from theory to bidding out to get the contractors involved and the subcontractors. And really what you have is this massive backlog of work, two or three years during the pandemic where everything was frozen. And then really that becoming unblocked over the last 12 months or so, and sort of money beginning to flow from planning into breaking ground sort of thing. And that sort of — there’s still a huge backlog of work that still needs to be done just to catch up with stuff that was put into the pandemic. So that’s kind of I guess that’s why we keep on saying our customers are very busy with a slight caveat that some of them as we’ve been talking about since Q3 last year had supply chain issues, because if the materials don’t turn up on site, you’ve got a problem. If you can’t find labor, that’s the other labor shortage, a huge issue across the industry. And then in certain markets, most notably recently China, you’ve had a resurgence of COVID causing problems.

Simon Mays-Smith

That one thing I would add is the good news is that we’re not — we are definitely seeing some projects delayed as a result of everything, but they’re not going away. I think that’s the one key difference between now and other possible downturns. So I think all the signs are still very positive at this point.

Bhavin Shah

Last question for me is certainly obviously a lot of things on that [ph]. What’s the most exciting thing that you’re thinking about over the next 5, 10 years?

Theo Agelopoulos

For me, I’d say the biggest shift we’re going to make as a company is moving away being a product company to a data and platform company. And the investments we’re making there I think will transform our company and the industry.

Question-and-Answer Session

Bhavin Shah

Thank you guys for attending.

Theo Agelopoulos

Thank you.

Simon Mays-Smith

Thank you.



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