Autodesk, Inc. (NASDAQ:ADSK) Barclays 2022 Global Technology, Media and Telecommunications Conference December 8, 2022 4:20 PM ET
Company Participants
Simon Mays-Smith – Head, IR
Sidharth Haksar – Senior Director of Strategic Business Development, Construction Strategy
Theo Agelopoulos – Senior Director of Infrastructure, Industry and Business
Conference Call Participants
Saket Kalia – Barclays
Saket Kalia
Okay. Well, hi, good afternoon, everyone. Welcome to day two of the Barclays TMT Conference. My name is Saket Kalia. I cover software here at Barclays. Very happy to have with us the team from Autodesk. To my left, we’ve got Simon Mays-Smith, Head of Investor Relations. To his left, we’ve got Sid Haksar, Senior Director of Strategic Business Development for the Construction Strategy. And to his left, we’ve got Theo Agelopoulos, Senior Director of Infrastructure, Industry and Business strategy.
So we’ve got about 30 minutes together. Let’s maybe take the first 20 or 25 minutes to do some fireside chat with these esteemed chaps, and then would love to make this interactive. So anyone’s got a question, just pop up your hand. We’ve got a mic running around, would love to make it interactive. So maybe with all that as a framework, guys, thanks so much for being with us here today.
Simon Mays-Smith
Good to be here.
Saket Kalia
Yes, absolutely.
Simon Mays-Smith
The safe harbor.
Saket Kalia
Oh, I’m so sorry. Yes, please.
Simon Mays-Smith
So 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. Okay.
Saket Kalia
Excellent, excellent. Well, let me just first say, so we have these gents last year for virtual, but it is great to see everybody here in 3D. Maybe for those of us who are not as familiar with everybody’s background here, maybe Theo and Sid, maybe you could just give us a little bit of background on what you do at Autodesk and kind of what you focus on and a little bit of your history with the company as well.
Theo Agelopoulos
Yes. So I basically lead our strategy and go-to-market strategy for our design business at Autodesk, which is predominantly AutoCAD business as well as our building and infrastructure design business.
Sidharth Haksar
I lead the strategy and industry partnerships for construction. I’ve been at Autodesk over 8.5 years. In my prior role, I was leading corporate development for AEC, and so all the acquisitions that happened that now have culminated into the Construction Cloud were done during my tenure there.
Saket Kalia
Very cool. A lot of fun stuff to talk about with both. Simon, always a pleasure to have you back. Maybe just to level set before we dive in a little bit more with Sid and Theo, can we just recap a few of the most important points that you wanted to make sure we saw from the last call, again, just to make sure we’re all on the same page.
Simon Mays-Smith
Yes. It’s really that the business is continuing to perform well, but the cycle is turning up in a way that we’d expect it to turn up, which is the core subscription business, which is the big beast in the business, is resilient as we’d expect it to be, renewal rates, net revenue retention, et cetera. And then the cycle is turning up in a way that we’d expect it to do, which is the rate of growth of new subs, accelerates in good times, decelerates in tougher times. And we saw a slight deceleration in Q3 versus Q1 and Q2, so check as expected.
Secondly, duration customers tend to buy shorter one-year contracts rather three-year contracts when they’re conserving cash, when they’re cautious. And they might sign longer contract when they’re feeling more optimistic. Check, saw that in Q3 as well.
And the third area is around mix. So customers may buy more proven products at good times and fewer in bad times. Actually, that was fine in sort of Q3. So the first point, business, competitively performing well. Business is performing well. And the cycle turning up in a sort of structured way, I think, is the most important point from the results last week.
Question-and-Answer Session
Q – Saket Kalia
Yes. Absolutely, and I’m sure we’re going to dig into that a little bit later as well. But maybe we can start with you, Sid. Let’s talk about the competitive backdrop a little bit in your market. I think we know the other players here like Procore, like Oracle, like Trimble. But maybe the question is, where does Autodesk fit in this mix? And what are you — what would you say customers point to in your solution from why they pick Autodesk more so?
Sidharth Haksar
Sure. So I think we’re in a very unique vantage point, which is all the way across from design through closeout of the project and ultimately the operations phase of the construction project. So we believe probably we’re the only company that can deliver on that vision. Are we there yet today? I’d say, no, we’ve got our work to do. We’ll be making good ground in that direction.
In terms of why customers choose us, it’s really three things at the end of the day. One is we talked about this end-to-end vision, which is pretty critical. They can understand where we are going. Construction notoriously is plagued with data silos and then efficiency. So if you can start Autodesk, stay Autodesk, it gives them the ability to do a lot more with data and insight. So they understand the bigger picture.
Number two is really our flexible pricing model. So today, we can offer customers whichever way they want to procure software. So that could be account-based pricing, which is effectively unlimited users, unlimited projects. So it’s tied to our construction volume. Some of our competitors do that. So we offer that.
The second one is project-based pricing. So if you decided I want to dip my feet into the water and understand Autodesk Build as an example, what you can potentially purchase or procure five projects and then move on to an enterprise deal.
The third one has been a historical approach to pricing, which was user-based pricing. So we found that some of our smaller construction companies do not need to have unlimited users because they don’t find exactly how many seats they may need. So that’s the third bit.
And then the fourth one, which is for enterprise customers, is that open-based consumption model. So we give a lot more optionality to our customer base.
Saket Kalia
Yes. Absolutely.
Sidharth Haksar
And then the final piece that we talk about, which is a differentiator, is our modern technology stack. So if you think about how Autodesk Construction Cloud has come about, we launched Autodesk Build about 18 months ago, and it’s been the best of PlanGrid and BIM 360. So we are fundamentally built on a very modern-day technology stack, which again is something which is based on a very nice user experience. It gives us the optionality as we do further M&A to ingest acquisitions and roll them out a lot quicker than it would have been possible in the past.
Saket Kalia
That’s interesting. That’s interesting. Theo, maybe a similar question for you. I think when many people think of infrastructure design, a lot of them think about Bentley and of, course, the microstation solution. But maybe the question for you is, is there any color that you could provide sort of on what you’re seeing in that infrastructure market competitively?
Theo Agelopoulos
Yes. So I mean, I think people think of Bentley primarily in the U.S. and DOTs, right? When you look at the broader marketplace, I mean, I think we’ve always done and delivered infrastructure globally, right? So we’re one of the largest, I would say, technology providers in the space. But in regards to what we see in the infrastructure space, I think no different than when Autodesk led the charge from paper to digital paper. We’ve kind of been at the forefront of digital — multiple digital transformations.
And I’d say in the infrastructure space, it’s really picked up in the last several years, and one of the key differentiators for us certainly is that we have kind of a unique digital platform that allows our customers to deliver all types of infrastructure. And if you think about a smart city, for example, it’s a combination of vertical infrastructure buildings in addition to horizontal infrastructure like roads and highways.
So for us, it’s been an opportunity to kind of bring the industry together with a unified delivery — a digital delivery approach. And I’d say on the infrastructure side, it’s been really digital design that has been what’s been going on for the last 20 years. And now we’re moving it to Sid’s point into this next phase of digital construction, which then is also evolving into digital operations.
So I think for us, it’s a unique opportunity to help our customers in the industry have a unified experience the whole way across the capital asset life cycle regardless of whether it’s building or infrastructure.
Saket Kalia
Yes. That’s interesting. Simon, maybe for you before we dig into two of these businesses a little bit more deeply. To the extent you can broadbrush, can you remind us what you’ve said just about the size of Autodesk construction and infrastructure businesses, respectively?
Simon Mays-Smith
So we haven’t sort of said specifically. We split out make, as you know, which is just under 10% of the business as a whole. The largest component of that is our Construction Cloud. But not — confusingly, not all of our construction business is within make. Some of it within the design business, the bit which is included in our enterprise business agreements.
So it’s a decent-sized part of our business. Infrastructure, again, we haven’t split out. As Theo said, we are one of the largest software providers in infrastructure. It’s not always easy to precisely size it because a customer who’s doing infrastructure may be using our software also to do commercial real estate and other stuff as well. But we are one of the largest infrastructure providers in the world, software providers.
Saket Kalia
No question. Sid and Theo, maybe moving back to you, folks. I’d love to talk a little bit about legislation really in both of your markets, starting with the infrastructure bill for the last year. I think we’ve seen some of the industry, right, say that we’re maybe, I don’t know, 1/4 to 1/3 of ramp-up in incremental spending. So maybe the question is, is this sort of the correct way to think about it and in terms of how much that bill has actually started to take effect? And what parts of that bill do you think Autodesk is going to particularly benefit from in the construction and the infrastructure businesses?
Theo Agelopoulos
Yes. So I think the one thing I would say is that there’s always been an opportunity to grow in infrastructure because over the last 10 years, we’ve talked about the infrastructure gap. And it’s just widening gap between what we need to spend versus what we do spend, right?
So there’s always — we’re always trying to close that gap. The bill just provides an incremental spend, like you said, for closing some of that gap. I think it’s — in the U.S. alone — and this — by the way, this is not just the U.S. It’s globally we’re seeing incremental infrastructure bills. In the U.S., the bill is $500 billion incrementally. And then probably half of that is in transportation, and the rest is split across water and other kind of markets as well.
So for us, where the money is being spent is where most of our focus is in infrastructure, which is in civil infrastructure, and we really defined it as transportation land and water. And that’s — if you go back a year ago, that’s why we spent $1 billion buying Innovyze, which is the leader — global leader in water infrastructure, both on the design side and on the asset management and plant operational analytics side.
So we think — and what we’re starting to see now is kind of an acceleration of a lot of these projects that have already been planned and shovel ready. And you’re starting to see some of that ramp up, and I think ACEC recently put out a study that talked about kind of the sentiment in the AEC industry. And a lot of the positive sentiment going into next year is predominantly in transportation and water, which we feel like we’re pretty well positioned to support our customers.
Saket Kalia
Yes. Absolutely. Sid, how about from a construction perspective?
Sidharth Haksar
Yes, I think we’re very much aligned with Theo on the design strategy side. So we look at it as well, our end markets, roads and highways and water. And in fact, we’ve been seeing a lot of success recently with the Department of Transportation that are leveraging Construction Cloud.
I think one area that is still relatively untapped for us, and that’s just because we’ve been integrating the acquisition of Innovyze is that, that has a lot of owners that are using the software. And then they also have to do the operations of all their water infrastructure, which flows very nicely to the solution center we have for them as well. So we’re very much aligned in terms of the key markets that the design team is going after. So it’s just a natural pull-through for us.
Saket Kalia
Yes. Absolutely. Maybe another question for both of you. I think one of the great things about Autodesk is really the diversity of its end markets, whether it’s the AE or CE or manufacturing, right, that part of the business. But of course, given that there are macro concerns out there, of course, we talked to Simon just around how that manifests in the business. But I’m curious just from your perspectives, maybe it would be helpful just talk about how each of your businesses, understanding construction is newer, how each of your businesses maybe did during The Great Recession. And maybe how now those — 10-plus years later, those businesses are perhaps a little different, maybe a little bit more insulated.
Simon Mays-Smith
I mean I’ll sort of start. I mean the most important thing is that we’ve changed business model since then. So back in The Great Recession, we were on a perpetual license and maintenance, and now we’re on a subscription. And so that’s why I started what I did. It’s just night and day in terms of type of business.
So back in The Great Recession, Autodesk had multiple quarters where revenues were down 30%. That just wouldn’t happen with the subscription business. So that core resilience is that’s why subscription model is one of the reasons they’re so great is that our customers are using them every day in their workflows. And so if they’re working, they will typically be using and subscribing to our products, and that just gives us a much more resilient business model. And we saw that during the pandemic, and we’re seeing it now as well.
Saket Kalia
Yes. Absolutely.
Theo Agelopoulos
The one thing I would add is I think when you look back at the last recession, to ramp up digital technologies was a huge upfront cost to Simon’s point. And now our customers have the ability to turn on and turn off usage, and we have different types of business models.
So it’s much easier for let’s fish on the design side for a lot of our customers to use a subscription and almost think of it as a rental model and to be able to charge that back to the projects, right, versus having a big upfront cost and trying to amortize it over multiple years. So just we’ve eliminated a lot of those barriers to adoption, I would say, through these business models.
And like I say, it’s not just about buying subscriptions. We even have the consumption models, which we’ve rolled out more recently. So for those customers that want incremental use, we’re bringing in a whole pool of new users that historically couldn’t justify even a subscription, right? So I think that we’ve eliminated the barriers, I’d say, to a digital adoption.
Saket Kalia
That’s interesting. Yes. Maybe just talk about sort of top down a little bit just on a macro perspective. I’d love to just dig a little bit deeper into maybe some of the product portfolios for each of you.
So Sid, maybe starting with you. I think on the last call, earnings call that as Andrew called out, I think the Autodesk Build growing its monthly active user base by about 60% sequentially, and I think it’s become Autodesk’s largest construction product. Clearly, there are lots of products in the construction portfolio. Could you maybe go through the two or three largest? And I mean maybe not talking about size, but maybe just talk about the two or three largest and how they’re performing.
Sidharth Haksar
Yes. So I think if you think about Autodesk Build, it’s good to call out what those constitute. Autodesk Build consists of project management, cost management and field management. Those are the three things that we believe are really in the site execution phase, and that’s Autodesk Build. So that, as you said, is by far our number one product.
The second piece that we have is really what we call plan, which is really all our preconstruction offerings. So those are fundamentally the two big areas of growth we’re seeing. Personally, and looking at our business and hearing from customers, what we’re finding is that there is a push for them to really take advantage of preconstruction portfolio, and I think we talk about wanting to eliminate waste and not automate waste.
What that means is when you’re out in the field, yes, RFIs get created or request for information. Creating a really nice workflow around that is all well and good, but you still end up running over budget potentially and over cost.
What we want to do is take all those RFIs and push them into the preconstruction phase so that when shovel hits the ground, you’re eliminating — you will never eliminate all of them but significantly make a dent so that all the issues that you foresee out on the job side, you’re already planning for in preconstruction. So there is this intent on our side, our customers are pushing us more towards preconstruction, and that’s an area that we’re focusing above and beyond what we’re doing currently with our build portfolio.
Saket Kalia
Interesting. And of course, you have the design data.
Sidharth Haksar
Exactly right.
Saket Kalia
And so that’s a really interesting point to be able to eliminate waste as opposed to automating them.
Sidharth Haksar
That’s the way we think about it.
Simon Mays-Smith
Just to put a number on that, where I had a customer at AU who said that 80% of the problems they have on site because of decisions made before construction starts. And so if you can sort that out, then you potentially eliminate a massive amount of problems that you’re having on site.
Saket Kalia
Very interesting. Very interesting. Theo, maybe we could do something similar for your part of the business. I mean we all know Civil 3D, obviously a marquee tool. But maybe you could provide just an overview of the rest of the infrastructure business in terms of what are some of the other products that — the bigger products that make up infrastructure as a whole?
Theo Agelopoulos
Yes. I mean, I think, obviously, for linear design, the infrastructure Civil 3D continues to be our hero product. Continues to grow year-on-year, quarter-on-quarter. So — but most of our customers don’t just use one tool to deliver infrastructure, as you said. So Revit has become the predominant digital delivery tool for vertical infrastructure. So whether it’s facilities, bridges or tunnels, it’s a critical part of our digital workflow.
And then obviously, Navisworks, to Sid’s point, a lot of our customers are using Navisworks as a model aggregator to do a lot of their virtual design and construction, which correcting areas on the PC is much cheaper than correcting areas in the field.
But the other thing that we did recently or a year ago now was we acquired Spacemaker. So to kind of carry on to what Sid was saying about having the design data, Spacemaker actually allows our customers to do a lot of conceptual modeling and analysis using AI and machine learning and making a lot of critical project decisions well before they even get into design.
So if we really want to build a more sustainable infrastructure or even sustainable buildings, a lot of those decisions happen in the planning phase and conceptual modeling phase. So now we’re bringing a lot of those decisions even earlier into the process, well before you can get into design and then, obviously, doing a lot of virtual design and construction in the office before you get to the field.
And then ultimately, what that means is we deliver a more sustainable and resilient asset during the operations phase, which also — and if you think about the total cost of ownership of infrastructure assets and building assets as a matter of fact, more than 80% is in operations. So if we want to build a more sustainable and more resilient world, we have to…
Sidharth Haksar
Go back to the beginning.
Theo Agelopoulos
Go back to the beginning. And that’s the journey we’ve been on, I would say.
Saket Kalia
Yes. That’s really interesting.
Sidharth Haksar
Saket, just one other thing if I may just add just tying back to what Theo said is the project delivery method is also changing, which is historically, there were lots of projects that were designed, bid, built.
So as I talked about the ability in preconstruction, there’s a notion of now moving more towards design, build, which is effectively where the general contractor is working very closely with the architects, with the owners, subcontractors really in that design to preconstruction phase, which again, for us, it’s great to see because it goes right back to our authoring tools, our preconstruction portfolio.
So that has really been driven by fundamentally the macroeconomic conditions. You want — owners are really demanding more visibility. General contractors want to work more closely with architects because the last thing they want to see is when you create a model and then that has constructability issues out in the field and it costs a lot of money, long lead times for product so — and components. So we’re seeing that trend as well.
Saket Kalia
Yes. Absolutely. And I want to come back to that in a second here as well. But Simon, maybe for you, I think one of the really exciting things to come out of Autodesk University, AU, is the team announcing the three industry clouds: Forma, Fusion and Flow. So maybe — and I want to go back to the team, just ask a follow-up here.
But can you just tell us a little bit about that and why that’s important?
Simon Mays-Smith
So yes, so this is sort of long-term important. It’s not something that’s sort of in the next few quarters. But it’s important, you can use as a sort of shorthand the work that Intuit have done over the last sort of three or four years, which is investing in the platform really to enable them to do and what we’re doing. And the reason I mentioned Intuit is the person who did that work joined Autodesk about — Raji about 1.5 years ago.
And it’s really designed to do three things. One is to enable us to engineer more efficiently. Build one, use many times. Secondly, it’s enabling us to move from file-based data to data in the cloud, and then we can apply AI and machine learning to it. And when we can do that, our data advantage gets much bigger because our peers only have siloed data, whereas we have data we’ve been talking about end to end.
So when we move that to the cloud and then comply AI and machine learning across the waterfront, we have a much greater data advantage than we do in the on-prem world.
And then thirdly, it’s about building a much broader and deeper third-party ecosystem on top of it, which drives value for our customers and drive work through our industry clouds. So that’s the sort of — that creates a lot of opportunity for us in the long term.
There is also a sort of flip side to this, which is the avoidance of bad stuff. And the problem is that if you don’t make these investments, there’s a risk that at some point, you have to go up and expensively pay, pick a number from the air, 50x ARR to catch up on those investments. So it’s partly around opportunity realization, and it’s also around risk mitigation as well.
Sidharth Haksar
Yes. Makes a lot of sense. Maybe just taking that and carrying it forward into your individual businesses, how do these industry clouds maybe help you think about the business differently down the road? Maybe Theo, starting with you.
Theo Agelopoulos
Yes, I can start. I mean, first of all, what I would say is we’re already focused on delivering that kind of a digital thread all the way through from plan, design, build, operate. And a lot of that digital thread is wrapped around files.
So what we have today is a very sophisticated, connected trial management, vendor management environment. What Forma does essentially is it let us not just manage files, it lets us manage much more granular data, to Simon’s point. And once you start managing more granular data across the whole asset life cycle, then you can get the benefits of doing things like AI machine learning, making better decisions earlier.
So I think that’s kind of the big kind of pivot we’re making is — but what I would also say is it’s really important, and we try and explain this to customers, is all of what we’re doing is already built on the same platform environment. So the solutions that we deliver today around design collaboration, for example, with Civil 3D or Revit is built on the same platform services.
The construction team is building the same Construction Cloud on the same platform services. And so Forma and Flow, et cetera, are also being built on the same platform. So I always like to describe it it’s more of an evolution than a revolution, and our customers are kind of on this journey and will continue to get the benefits of that by simply continuing to be Autodesk subscribers.
Saket Kalia
Yes. That makes a lot of sense. So we’ve got about seven or eight minutes left here. Maybe before I shift to some financial questions, any questions here from the audience?
Simon, maybe for you, just a couple of kind of housekeeping financial questions. I think on the last call, and we talked about some of the multiyear, some of the phenomena there. But I think on the last call, we saw the multiyear is coming a little bit lower than expected.
And maybe the question I have there is, is that something that was really focused on new business multiyears or maybe some renewals as well? And what do you think is sort of leading to that phenomenon of sort of shorter duration, if you will?
Simon Mays-Smith
I mean we think of the cycle. Just a bit in context, we were talking a bit more than $100 million. That’s in the context of $5 billion of billings. So I wouldn’t want to sort of over-index into the shift, but we did definitely see a shift in preference from — away from multiyear upfronts to annual. And that drove a small shift in the timing of the cash flows, which we think is related to the cycle. That’s the bad news.
The good news is, firstly, it’s kind of what you’d expect, given what’s going on with the macro. But secondly, and more encouraging, is you know we’re making a transition next year from multiyear upfront to annual. And what this does, we think, is make it more likely that our customers make that transition faster. And as we’ve said, we want to get through it as quickly as possible.
Bad news is that puts more downward pressure on FY ’24 cash flow. The good news is then we can get forward through that and then start rebuilding in ’25 and ’26 the subscription stack and the cash flow. So you get this mechanical build in the cash flow in ’25, ’26, which we think is — which we’re quite optimistic about.
Saket Kalia
Yes. Absolutely. So I definitely want to touch on that on the capital item. But maybe before we go there, let’s talk about the margins because we’ve talked about so many fun things just on the top line. But the profitability for all of us has always been, I think, an admirable feature, right?
So there was a lot of helpful detail that we gave in the last call. I just want to make sure we run through it. I think the wording that Debbie used when she was thinking about margins for next year was that margin expansion opportunities would be limited. And you feel free to correct me there on my wording, right?
But I guess, given the magnitude of FX has been just a huge pain in the behind for all of us, right, given the magnitude of the FX headwind, I think it’s five points year-over-year on revenue, I guess I had some folks wondering whether that might just be too big of a hill to climb. Could that actually — could we actually have a scenario where margins could be down year-over-year?
Simon Mays-Smith
So I’m not going to parse it. So just to acknowledge I’m not going to precisely answer the question. Just to understand how the currency and the margins have worked with each other is essentially this, we have a rolling 4-quarter hedge.
And what that means is that we don’t avoid the currency on the revenue side, but it comes in, in a structured way. So we had about a 1-point currency tailwind on revenue in Q1, neutral in Q2, 1-point headwind in Q3. And I think Debbie said, what, 3- or 4-point headwind in Q4 on the call.
So you can see it’s sort of rolling in. And then on a sort of annual basis, we said it’s sort of 5-point headwind, and then the absence of the rest of deferred revenue is another point of headwind. So 6 points of headwind just from currency and from Russia.
And then on the cost side, we’ve actually had some tailwind on the cost to margins, so partly offsetting that revenue pressure this year. And the issue is that we kind of get all of the revenue pressure on an annualized basis next year. And if rates don’t move, turns out to be a fine thing, then you won’t get incremental benefit on the cost side. So that’s why that revenue pressure is such a drag on the margins for next year. But we very — we chose our words carefully. I’m not going to parse out exactly what we said, but we said what we intended to do, so we said.
Saket Kalia
Understood, understood. Just wanted to make sure we understand. Maybe last modeling question here for you, Simon, and we touched on it earlier just with cash flow. I think that we want to get through this transition as quickly as possible. Because at the end of the day, the transition, I think, results in just better quality cash flow, right, with one or the more annually recurring kind of cash kind of profile, right? So — but maybe the question for you here is if we go through it quicker, the trough next year and cash flow is deeper. But does that really affect the ultimate goal here of getting to double-digit CAGR, I think, from ’23 to ’26? Maybe you could just walk through those high-level mechanics a little bit.
Simon Mays-Smith
Yes. So the short answer to the question is no. But the reason it happens is you’re essentially going from a model for roughly 1/3 of the business, where you’re getting — for a 3-year contract worth $1 a year, you’re getting paid in the old way, $3 upfront in year 1, $0 year 2, $0 year 3. So getting paid $1 a year.
And so what that means is that in fiscal ’24, when we rolled this out, for the ’24 cohort, it’s going to turn our compare to $1. Whereas before, they were paying us $3. And so that’s the sort of one of the big sources of the change in the cash flow between ’24 and ’23, the pressure — downwards pressure.
But then what happens in ’25 is the ’24 cohort will come and pay us the second dollar of their contract. And the ’25 cohort will pay us the first dollar of their contract. And then in ’26, the ’24 cohort will pay us the third dollar of their contract. The ’25 cohort will pay us the second dollar of their contract, and the ’26 cohort will pay us the first dollar of their contract.
So we’re back to that $3 again, so we’ll mechanically rebuild that. So what it means is that with the trough of cash flow in ’24, we get a mechanical rebuild. The point being is that you should be valuing Autodesk off the ’26 cash flow, not the ’24 cash flows. Because if you’re valuing it off ’24, you’re not valuing the ’25 and ’26 multi-year cohorts.
Saket Kalia
Yes. That’s right. That’s really great. Well, maybe just a couple of minutes that we’ve got left, I want to go back to Theo and Sid here. It’s funny, so some of your peers, right, have — with all the macro headlines that we see out there are talking about healthy backlogs, I mean, which is great.
And I know that both of you spend a lot of time with customers. I mean I’m kind of curious, when you talk to customers, what do they tell you about their project backlogs? And what do they point to between getting supplies or labor as kind of the biggest hindrance to kind of breaking ground? Sid, we’ll start with you.
Sidharth Haksar
Sure. So on the labor side, I think it’s still one of the biggest challenges. We speak to customers and they say they’re turning away work because they can’t stop those projects, and they can’t find skilled subcontractor worker. So that is number one, which is still front and center.
I think labor — I mean input costs continue to increase, and there’ll be very long lead times. So that’s why I kind of indicated the push was more preconstruction activity and getting it right for the first time.
On the health of just construction activity, so with BuildingConnected, we have the largest 2-sided network in North America, which we’re able to track the health of all the construction activity going on.
Saket Kalia
Kind of like LinkedIn for construction, right?
Sidharth Haksar
Exactly. And what we’re seeing is that the published projects, so these are the general contractors publishing projects to secure bids on subcontractors, that has been continuing to increase. So we’re not seeing from the data there any sort of slowdown. And this is what Andrew also called out on, I believe, in his Q3 earnings. And the bidding activity continues to be very robust. So that’s what we are seeing right now.
From a backlog standpoint, our customers are telling us backlogs are healthy. They just haven’t go through those backlogs through, and there’s a lot of work because of long lead times on getting construction work done, and this has been causing that.
Saket Kalia
Got it. Got it. Theo, how about you?
Theo Agelopoulos
I mean pretty small. I think on the design side, I mean, right now, our customers are trying to continue to optimize their businesses because they just don’t have enough architects and engineers to do the work, and they’re fairly bullish for the next couple of quarters. But going into next year, I think they’re also being very cautious, right? So I think right now, it’s not much more to add than that.
Saket Kalia
Got it. Got it. Well, a lot of fun things to talk about here with Autodesk. I wish we had a little bit more time. But unfortunately, that’s all we’ve got. Simon, Sid, Theo, thank you so much for the time. Really enjoyed that.
Simon Mays-Smith
Appreciate it.
Sidharth Haksar
Thank you.
Saket Kalia
Thank you.
Theo Agelopoulos
Thanks so much. Thank you, Saket.
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