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Thesis
Autodesk is a global leader in 3D design in a niche market targeting the architecture, engineering, construction, manufacturing, media, and entertainment industries. Autodesk has implemented a disruptive SaaS business model (most competitors still use a license model) which has proven to be sticky and holds pricing power. Most importantly the company is profitable and has been around for over 40 years.
Description
Autodesk, Inc. operates as a software design and services company worldwide. Autodesk is a global leader in 3D design, engineering software, and services offering customers productive business solutions through powerful technology products and services.
Qualitative
Overview
Sector: Information Technology
Industry: Software
Competitors: SNPS, CTXS, DSY
Strategy: Make software for people who make things
Deliver on the promise of subscription. In 2016 ADSK discontinued software licenses and converted to 100% device independent cloud-based SaaS products
Digitize the company. ADSK is a global leader in 3D design and tirelessly works to improve its product.
Re-imagine construction, manufacturing, and production.
Business Model: SaaS
Fusion 360 – outcome-based pricing for generative design
Forge ecosystem – vertical SaaS Services with a multi-tenant cloud data model
ADSK sells products and services globally, primarily through indirect channels consisting of distributors and resellers.
Market
Autodesk makes software for people who make things
Architecture, engineering & construction (AEC) ~60% of sales
Manufacturing ~30% of sales
Media & Entertainment ~10% of sales
$69B Design & Make TAM by FY25
Moat/Differentiation: Winning across the value chain
Leadership in design & BIM
Breadth of portfolio
Global presence & support
X-Factor: Sustainability
~50% of ADSK customers have explicit commitments to implement sustainable practices. We believe more and more companies will be looking for sustainability features and reducing their eco-footprint. This movement could be a driving force for future demand and customer adoption.
Reduce waste, time, and costs by decreasing the amount of re-work and materials
Reduce energy and costs needed for operations & create net-zero energy structures and greenhouse gas emissions
Implement industrialized construction designing efficiently for resilience
Cash Cow: Subscription Revenue
Subscription revenue made up 96% of ADSK’s total revenue totaling $3.14B in 2020
ADSK has over 5.3M total subscriptions, $1.3B in free cash flow, and over $3.8B in total revenue
In 2020 the AEC segment was the largest segment of revenue (43%) & most sales came from the Americas (39%)
Growth Opportunities:
Monetize non-compliant & legacy users
Accelerate digitization in AEC
Convergence of design & make in manufacturing
Quantitative
Risks
Switching costs in the industry are high so it is expensive to acquire new customers
The CEO does not have a large ownership stake. Not inherently a risk but we like founder-run companies (that is not the case with ADSK) and we want to make sure incentives align. However, ADSK does have a mandate that requires the CEO to own 6x’s their base salary in stock.
Construction and related industries take a cyclical downturn globally
Learn Something
Company Materials: 10-K | Investor Overview | Investor Relations
The Motley Fool: Is Autodesk a Risky Stock?
Martech: It’s about teams: How Autodesk boosted conversions, retention and trimmed its sales cycle
Gini Index: The Gini index, or Gini coefficient, is a measure of the distribution of income across a population developed by the Italian statistician Corrado Gini in 1912.