Equity Research 14 November 2019

manufacturingTech primer vol. 2 Deep dive into constructionTech FOCUS With limited innovation in the construction industry over recent decades, digitalisation is low and inefficiencies are high. European Software & IT Services This creates opportunities, not only for construction firms to Sven Merkt, CFA +44 (0)20 3134 1254 reduce cost, but also for software vendors to address this [email protected] nascent market and achieve high sustainable growth in the Barclays, UK years to come. James Goodman +44 (0)20 3134 1038 [email protected] Barclays, UK

Corey Gayle + 44 (0)20 3134 0594 [email protected] Barclays, UK

U.S. Software Saket Kalia, CFA +1 212 526 8465 [email protected] BCI, US

Andrew Thomas +1 212 526 8081 [email protected] BCI, US

Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. Please see analyst certifications and important disclosures beginning on page 30. Barclays | manufacturingTech primer vol. 2

CONTENTS

AEC SOFTWARE – A NASCENT HIGH GROWTH SOFTWARE MARKET3

INTRODUCTION TO SOFTWARE FOR THE AEC INDUSTRY ...... 4 Design & engineering software ...... 5 Construction software...... 6 Management software ...... 8 Addressable market and market shares...... 10

THE FUTURE OF AEC ...... 12 BIM – Bringing point solutions together ...... 12 Regulation driving regional adoption ...... 13 The China opportunity ...... 16 Industry consolidation...... 17

CONCLUSION – NEMETSCHEK AND AUTODESK WELL POSITIONED19

KEY PLAYERS ...... 21 Autodesk ...... 21 AVEVA ...... 22 Bentley Systems ...... 22 Dassault ...... 23 Hexagon ...... 23 Nemetschek ...... 24 Oracle ...... 25 RIB ...... 25 Trimble ...... 26

OTHER RELEVANT PLAYERS ...... 27

APPENDIX ...... 28 Construction industry trends ...... 28

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AEC SOFTWARE – A NASCENT HIGH GROWTH SOFTWARE MARKET

The AEC (Architecture, Engineering, Construction) software market is nascent and offers high growth, similar to ERP software in the ‘80/90s and packaged core banking software in the ‘90/00s. The global construction industry is worth ~€7.5tn a year, offering a potentially massive end-market; one that is growing with the global population and increased urbanisation. Compared with other industries, there has been very limited innovation in the sector over the past 50 years, leading to flat or even declining productivity. But this is going to change, and we expect software vendors in the space to benefit from high and long-term sustainable growth. We see Nemetschek (coverage of which we initiate in a separate report published today) and Autodesk (covered by Saket Kalia) as especially well positioned to benefit from this growth. We rate both Overweight.

Key drivers of this change are both public and private-sector initiatives to reduce cost and increase quality and on-time delivery of construction projects. There is ample low- hanging fruit for software firms to target, given high wastage levels, the environmental impact of buildings (which account for ~40% of global annual resource consumption), and a high error rate that leads to significant cost overruns and delays.

Innovative construction companies realise that, given single-digit margins within the industry, solutions that offer a ~10% reduction in costs can have a significant impact on their profitability. Beyond construction, there is the opportunity to digitalise the management of existing buildings to increase their capacity and reduce operational costs. We see here especially significant opportunities for landlords and service companies to increase profitability by optimising the number of people per sqm of office space through hot-desking.

Digital adoption remains low in both construction and the management of buildings. To accelerate the uptake of software and technology, governments around the globe are adopting building information modelling (BIM) regulations and making the use of software mandatory for public projects. While it will take time for penetration to reach mature levels, the opportunity is clear to us, with a highly attractive end-market that we expect to experience double-digit growth over the mid to long term.

Key players in the industry include Autodesk, Nemetschek, Bentley Systems, Trimble, Oracle, Procore and RIB Software. While there has been significant M&A in recent years, the industry remains fragmented and we expect consolidation to continue.

In this report we provide a detailed overview of the various sub-segments of constructionTech software solutions, covering the whole lifecycle of the real-estate and infrastructure industry, including key players, TAM and market share estimates. In addition, we look at the key trends in the industry: BIM; regulation driving adoption; and the China opportunity (we visited Nemetschek with one of our Chinese industry contacts). Finally, we also provide detailed company profiles on the key players and a list of smaller private companies. In a separate report published today, we initiated on Nemetschek at Overweight: see Consolidator in a nascent vertical, OW.

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INTRODUCTION TO SOFTWARE FOR THE AEC INDUSTRY

Software for the AEC (Architecture, Engineering, Construction) sector covers every stage of the value chain. We delineate three main categories: design & engineering, construction, and management. Design & Engineering is the most digitalised subsector, with a transition underway from 2D modelling to 3D, providing decent growth. Construction is the least digitalised subsector, with basic software solutions often replacing pen and paper, offering significant growth potential. While management is, strictly speaking, not part of AEC, we include it for the purposes of this report as part of our whole-of-lifecycle approach for buildings and infrastructure. There are basic software solutions used in some instances to manage buildings, but penetration is low and we see next-generation products out there that could provide significant growth opportunities. Finally, we provide estimates for the addressable market as well market share data on the key players.

FIGURE 1 Software segment overview

Design & Engineering Construction Management

Software • Computer aided design (CAD) • PDF mark up and collaboration • Real estate management solutions • Computer aided engineering • Time and cost estimation • Integrated workspace (CAE) • Construction ERP and workflow management system (IWMS) • Quality assurance and design management • Smart building validation • Other • Long-term maintenance planning

Key challenges • Designing increasingly complex • Reduce construction time and • Increase number of people per for industry building and infrastructure cost sqm office space • Reduce errors and deliver • Reduce maintenance costs projects on time • Collect and make use of data • Digitalise processes/workflow

Key players • Autodesk • Autodesk • Autodesk • Bentley Systems • Bentley Systems • AppFolio • Nemetschek • Nemetschek • Fortive • Trimble • Oracle • IBM • Procore • Nemetschek • RIB • Oracle • Trimble • Planon • Realpage • SAP • Trimble

Source: Barclays Research

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Design & engineering software

Who are the users and what does the software do? The design & engineering of buildings and infrastructure involves primarily architects (design), structural engineers (structure of the building) and technical engineers (fire safety, plumbing etc.). Their needs depend on how integrated their approach is. A small architecture office that is outsourcing the structural engineering to a third party has different needs than a general contractor that covers the whole process. In essence, architects use computer-aided design (CAD) and engineers use computer-aided engineering (CAE) software to create 2D and 3D models of building and infrastructure. The software can be split or integrated across the two functions. Capabilities of the software range from basic 2D models to more advanced 3D models, with engineering capabilities and reality capture, which enables users to plan and design in a model representing the existing environment in the real world. In addition, this vertical includes software for quality assurance and design validation. This is used, for example, to check the building design vs. the building requirement set by owners (i.e. certain regulatory requirements, for example for a hospital).

FIGURE 2 Design & engineering software

Source: Barclays Research

What are the key challenges the software addresses? Traditionally, architects and engineers worked primarily with pen and paper or, if digital, 2D models. This limits the information and complexity that can be managed and often involves unnecessarily high margins of safety. However, clients are becoming increasingly demanding when it comes to design, function and costs of real estate and infrastructure. Higher buildings, longer bridges and more complex designs are challenging the old approach and require more sophisticated 3D software. With increasingly complex projects, the collaboration between architects and engineers is also becoming more difficult. They often work on duplicated data, which increases, without appropriate collaboration software, the risk of unsynchronised plans. It also slows down the decision- making process, leads to higher costs, and increases the risk of errors as changes by one party are lost or not properly considered in the overall building design. Modern 3D design & engineering software promises to solve most of these issues and eliminate many inefficiencies. It increases the functionality and design that is possible by enabling architects and engineers to handle significantly higher complexity, while reducing cost by optimising resource usage and avoiding the risk that information is lost at handover points. This is driving an upgrade cycle in design & engineering software for buildings and infrastructure, with users moving from 2D to 3D software.

Who are the main players? The main players in the design & engineering market are Autodesk and Nemetschek.

Autodesk’s flagship product Revit is an integrated 3D design & engineering solution with work sharing and collaboration tools. AutoCAD is the company’s design product that is used also outside building design. The product was not built for 3D and while some 3D

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functionality was added, we understand from industry contacts that it is not comparable to Revit. Civil 3D is Autodesk’s engineering and design solution for infrastructure, while Navisworks is the company’s quality-assurance and clash-detection solution.

Nemetschek has a broad portfolio of products and brands in the design & engineering segment. Allplan and Graphisoft are the main flagship brands that provide design & engineering software as well as collaboration tools. Vectorworks is another key brand that offers design as well as more specialised solutions such as landscapes, entertainment and lighting design. Data Design System is a solution for Mechanical, Electrical and Plumbing design (MEP), while SCiA and RISA make software for structural engineering. Frilo is an engineering solution focused on reinforced concrete, while Precast is a specialised solution for the precast element construction industry. Finally, Solibri is a solution for quality assurance and clash detection.

Autodesk and Nemetschek also both provide rendering and visualisation software with 3ds Max and Maxon respectively. This software is primarily used in the media & entertainment industry, but also for the visualisation of buildings and infrastructure.

Bentley Systems is a sizeable player in infrastructure design software for bridges, skyscrapers, airports and power stations. Trimble is another key competitor, having entered this segment with the acquisition of Sketchup in 2012. Hexagon is also active in the space following the acquisition of Bricsys in 2018, but it remains small in the traditional design & engineering segment. Beyond this, the market is very fragmented with many smaller brands and companies.

Construction software

Who are the users and what does the software do? The construction segment comprises a range of different players, from suppliers, to general contractors, to speciality trade contractors. The size of these varies from small local businesses to large enterprises. Generally, the industry is highly fragmented with multiple players involved in a building project; even general contractors often outsource parts of the projects to specialised providers such as electricians, painters or plumbers. Therefore, collaboration, teamwork and work-flow management are crucial to deliver projects on time and within budget. Software for the construction vertical includes material requirements planning (MRP)/enterprise resource planning (ERP), collaboration platforms, solutions for tendering, awarding, and invoicing (TAI), and other specific software solutions for the construction industry, such as steel detailing. MRP and ERP software provides construction companies with the requisite tools to deal with suppliers, human resources, project planning and accounting. Collaboration platforms hold a digital copy of the building blueprints and enable users to mark up and share these blueprints, facilitating real-time collaboration between all participants involved in a project. TAI software is used to estimate the time and costs of a project (based on the 3D CAD model), the tender and award of the project, and the invoicing and accounting. In addition, there are many specific software solutions that we categorise under ‘Other’. One area to highlight is that of steel detailers, which provide solutions for steel connection design, the fabrication of steel, the estimation of costs and the construction. Another is construction bid management tools, one of which is BuildingConnected, which was recently acquired by Autodesk. We think of this tool as a LinkedIn for subcontractors.

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FIGURE 3 Construction software

Source: Barclays Research

What are the key challenges the software addresses? The construction industry generally has a bad reputation when it comes to delivering projects on time and within budget. Every year a couple of large construction projects around the globe can be added to the list of construction project flops. Recent examples include Berlin Brandenburg Airport or Crossrail in London. Berlin Brandenburg Airport was originally scheduled to open in October 2011, then in June 2012, March 2013 and then June 2017. One of the scheduled openings was even called off with just a couple of weeks’ notice. The 2018 opening was missed too and the latest expectations is October 2020. The project costs also skyrocketed from the initially planned €2.8bn to the most recent estimate of €7.9bn 1 . Crossrail, which is a 117km railway line, crossing London from west to east, was originally scheduled to open in December 2018 but was postponed until the end of 2019 and then to late 2020 or early 2021. There is still uncertainty around the precise opening date and cost of the project, but latest estimates suggest it could amount to as much as £17.6bn vs. the initial £14.8bn2. As a result of the industry’s poor track record, buyers (particularly governments as some of the biggest building and infrastructure spenders) are increasingly putting pressure on the industry to iron out these inefficiencies. Software solutions such as tendering, awarding, and invoicing (TAI), MRP/ERP, and collaboration platforms can help attain this goal.

Broadly speaking, TAI software estimates time and costs as the fourth and fifth dimensions beyond the initial 3D CAD. This information is then used for the award of the contract. The software helps to keep estimates realistic and consistent between different project proposals. In addition, it helps with project-cost invoicing and cost accounting. MRP/ERP keeps track of the planned materials required to build a building, manages relationships with suppliers and also supports the accounting of all project costs. Finally, collaboration software significantly reduces inefficiencies and the risk of error during a project by enabling everyone to work on the latest blueprints, share mark-ups and changes, create a track record of changes (who has done which changes when?), increasing accountability, while some software even enables updated budgeting and cost forecasting as the project evolves. Overall, these software solutions all aim to minimise inefficiencies, while reducing the cost and time incurred by construction projects so construction firms can deliver on time and within budget.

Who are the main players? The construction industry is much more fragmented than the design & engineering space. Many new participants are also emerging, such as Oracle with its Aconex acquisition or Hexagon, organically, with its SMART Build offering.

In the collaboration space, which generally entails an advanced PDF viewer with mark-up and collaboration functions, Bluebeam (Nemetschek), Plangrid (Autodesk), Aconex (Oracle) Procore, Bentley ProjectWise and Viewpoint (Trimble) are active. Adobe is used as well, although it is clearly not built specifically for this vertical, and has limited tailored functionality.

1 https://www.telegraph.co.uk/travel/news/berlin-new-airport-delayed-again/ 2 https://www.theconstructionindex.co.uk/news/view/crossrail-cost-overruns-spiral-to-2bn

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MRP and ERP solutions for the industry are provided by players such as Bentley with its Advanced Work Packaging, Hexagon through its SMART Build solution, Sage Construction Accounting, Pentra Construction ERP and Vista (Viewpoint owned by Trimble)

Tendering, awarding, and invoicing software solutions vary by geography and were first developed in Europe. Generally, the software is quite specific for a certain jurisdiction but some vendors attempt to serve different markets. Some of the key players are Nevaris (Nemetschek), RIB, BRZ, California (G&W), Vico Office (Trimble), Assemble Systems (Autodesk), BID2WIN (Software Connect). Other software that is purely used for cost estimation but not for the project tender/award includes PriMus IFC (Acca), Sage Estimating and WinEst (Trimble).

In the other category there are many different players. Focusing on steel detailing, the key players are SDS/2 (Nemetschek), Tekla Structures (Trimble), Pro Steel (Bentley Systems), Advance Steel (Autodesk) and Bocad (AVEVA).

Management software

Who are the users and what does the software do? Once built, buildings and infrastructure need to be managed and maintained. The management part of the lifecycle involves the asset owner, facility manager and other service providers. The costs of running a property are often not considered in the design phase but are actually highly relevant as 75-80% of lifecycle costs occur during the management phase. Some vendors provide design solutions through which the cost of running a property can be already considered before it is built, which can reduce the total cost of ownership. Verticals in the management phase include real-estate management software, integrated workspace management systems (IWMS), smart-building IoT solutions, and maintenance planning software. Real-estate management software is used by asset owners or managers and is essentially an ERP software for real estate. It includes functionality such as accounting, controlling, contract and tenancy management, and maintenance of real estate. An integrated workspace management system (IWMS) is not only used for facility management and maintenance but also to optimise space occupancy, energy usage and the financial performance. Features include hot desks, meeting and reservations tools and a digital overview of all relevant information about the building (i.e. contracts, spaces, costs). Smart Building IoT solutions use information from sensors spread across a building to optimise the usage of space and resources, and to monitor comfort (humidity and temperature). Finally, maintenance software optimises the long-term maintenance costs of buildings. Features include the assessment of the current condition of the building, long-term maintenance cost estimates, planning and budgeting, scenario analysis, and financial planning.

FIGURE 4 Management software

Source: Barclays Research

What are the key challenges the software addresses? One of the key challenges for landlords and tenants of commercial real estate is to make the best possible use of capacity. Traditionally, about 10 sqm per employee has been needed in an

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office building. However, today, many businesses are under pressure to reduce their costs and as office rent is a significant cost for many businesses, they attempt to reduce their office space by putting more people into the same office. At the same time businesses such as WeWork are raising awareness around hot desks. With the right software solutions, concepts such as hot desks can be realised and employees per desk doubled without losing significant comfort. This represents a significant potential source of cost-saving, especially for service companies, which can spend about 3-7% of their revenues on office rent but have operating margins of only ~10%. IWMS and smart-building IoT solutions address this.

There are also costs associated with running and maintaining an office building. The five largest costs in the management phase of a commercial building are catering, energy, technical maintenance, gardening/landscaping and cleaning. The latter four can be reduced through predictive maintenance, just-in-time services such as cleaning, and smart solutions around energy usage. However, while cost savings are certainly possible, we think the potential is lower than that of hot desks. If office space is rented, the tenant usually bears the energy and cleaning costs, while the landlord generally pays for maintenance and gardening/landscaping. These costs generally represent around ~15% of the gross rental yield for landlords. A 10% reduction in this costs, would therefore only have about 1.5% impact on the margin of a landlord on a very high base (>80%). If a business owns its office space, it has to pay all of the aforementioned costs, meaning the potential is somewhat higher, however, the profit boost really depends on the starting margin of the business.

Another challenge many landlords and owner occupiers struggle with is the low visibility around maintenance costs, the useful life of a building and what it would cost to increase the useful life. Software solutions can address this. Usually, as a starting point, facility managers or owners carry out an on-site inspection with a property condition reporting app to assess the current condition of the buildings. The app includes a library of standard elements with costs and useful life, which can also be customised. Based on this data, scenario analysis and short and long-term maintenance plans can be established.

Finally, property and real-estate management companies need digital processes to serve their customers and tenants in the most efficient and convenient way. This part is, in our view, already quite digitalised although there is still room to increase the penetration of fit- for-purpose solutions.

Who are the main players? The management segment is much more fragmented than the design & engineering and construction segment. In addition, some players operate across all verticals within management, while others only offer specialised solutions in one vertical. The other complexity is that some solutions are very comprehensive and include functionality of other verticals, while others don’t. Despite that we attempt to provide an overview below.

One of the main players in the market is IBM with its TRIRIGA and Maximo solutions. TRIRIGA is a comprehensive IWMS solution, while Maximo is a mix of real-estate management and maintenance planning. Planon and Nemetschek (Spacewell and Crem) are two of the other key players, with software solutions covering all verticals. Additionally, as a part of the BIM 360 portfolio of products, Autodesk has BIM360 Ops which is a facilities asset management tool that helps manage predictive, preventive and reactive maintenance needs. Trimble also provides software solutions with Manhattan (IWMS), Altrium EAM (property management) and Proliance (maintenance), while space scheduling is a solution to manage and book desks and meeting rooms. SAP and Oracle also both have IWMS solutions with SAP Cloud for Real Estate and Primavera Facilities and Asset Lifecycle Management. iOffice is another large IWMS vendor with focus on the US, along with Infor and Accruent (Fortive). Two large vendors in real-estate management software are

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AppFolio and Realpage. Beyond these, the space is very fragmented, especially in the area of real-estate management where countless solutions exist to manage rental property.

There has been a considerable amount of M&A in the sector of late, with Nemetschek acquiring MCS (now Spacewell) in 2018 and Axxerion in 2019, and Fortive buying Accruent for $2bn in 2018, which itself has made a significant number of acquisitions over the last three years. In addition, iOffice was acquired by private equity in 2018. We expect M&A to continue and the space to consolidate further, reducing the current high fragmentation.

Addressable market and market shares In this section, we discuss the addressable market for AEC software. From a top-down perspective, worldwide IT spend was around €3.2trn in 2017 according to Gartner; of this, ~€320bn was related to software, while from a vertical perspective the IT combined spend for construction was €75bn for the architecture, engineering, and construction verticals (or 2.3% of the total).

Assuming a similar split of software revenue in the AEC vertical to the overall industry, we estimate an addressable market of ~€7.5bn. The total global construction market by revenue is ~€7.5trn, according to PWC3. This indicates that the current software spend by the construction sector is small relative to revenue and has significant room to expand if software solutions are able to reduce other costs within these industries or enable additional revenue sources.

We note that Nemetschek and Autodesk both provide their own estimates of the addressable market. Nemetschek expects the market for AEC software to grow from €4.8bn in 2015 to €9.9bn in 2021, growing at a CAGR of 11%; within that it expects Americas and Europe to grow at 12%, ahead of APAC at 9%. For 2019, it estimates the TAM to be €6.8bn. Autodesk on the other hand estimates that the TAM for design & construction will be $27bn (€24bn) by 2023, of which $15bn (€13bn) from design and $12bn (€11bn) from construction, which is arguably high. We estimate that the AEC software market will grow at a low double-digit rate over the next five years in the absence of a recession, ahead of Gartner’s estimate for overall IT spend growth at ~4%. If we were to discount Autodesk’s €24bn TAM at 11%, we would get to ~€15bn, nearly twice our estimate above. While we don’t know the exact assumptions Autodesk has made to arrive at its TAM, we prefer to remain conservative and use an average of our TAM and Nemetschek’s assumption of ~€7bn to calculate the market shares below. We would point out that the estimate of the AEC market is an amalgamation of several verticals and generally players have certain strengths in one or more of these verticals. As a result, the market shares of the leading vendors in any single vertical tend to be much higher. Autodesk and Nemetschek, for example, should have a much higher market share in the design of residential and office building.

3 https://www.pwc.com/vn/en/industries/engineering-and-construction/pwc-global-construction-2030.html

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FIGURE 5 Industry market share

Autodesk 13%

Nemetschek 8%

Bentley Systems 7%

Trimble Other 5% 61% Oracle 4% RIB Software 2%

Source: Company data, Barclays Research

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THE FUTURE OF AEC

In this chapter, we look at key trends in the industry and the prospects for AEC software. One of the key developments is the move towards building information modelling (BIM), which brings all building-related information together into a single resource and provides access to all stakeholders involved in the project. The goal is to enable collaboration to drive efficiency, reduce repetition and avoid errors. Adoption of BIM is being driven in particular by regulation – we detail the rules across key markets. Furthermore, we look at the opportunity in the largest global construction market, China, which has not yet seen significant uptake in AEC software solutions. Finally, we look at industry consolidation, the key players, and the outlook for M&A.

BIM – Bringing point solutions together The digitalisation of the AEC industries offers the prospect of significant efficiency gains; however, to reach the full potential building information needs to be exchanged without the usual loss of information between all relevant stakeholders, which include architects, engineers, construction firms, sub-contractors, facility managers, asset owners and others. Therefore, even if industry participants use software, the real challenge faced by the industry is that not all information is available at all times to all participants. Building information modelling (BIM) seeks to address this, enabling collaboration through the sharing of information.

Definition: Building information modelling (BIM) BIM is a key term in the AEC industry and probably best defined by the US National BIM Standard Project Committee:

Building Information Modelling (BIM) is a digital representation of physical and functional characteristics of a facility. A BIM is a shared knowledge resource for information about a facility forming a reliable basis for decisions during its life-cycle; defined as existing from earliest conception to demolition.

An important part of this is to enable collaboration between different project stakeholders throughout the lifecycle of buildings and the ongoing maintenance of the building information model by inserting, deleting, updating and modifying the information in the model.

The creation of a building information model usually starts with a 3D model of the building, which is extended by further dimensions such as time (4D) and cost (5D). Information usually includes not only the blueprint of the building but further details about quantities and building components, such as manufacturer details and component identification numbers. Ideally, all changes are then tracked (i.e. who made which changes when).

To enable effective collaboration through BIM, ideally participants work with non- proprietary file formats, something that is called ‘open BIM’. However, despite regulatory efforts some software is still run in proprietary formats (closed BIM).

In a closed BIM environment all project stakeholders are required to use the same software. The vendor of the software essentially locks all the participants into using the software as the format is not compatible with the software solutions of competitors. In this structure, stakeholders rely on a single software vendor and a proprietary format that might become

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useless if the software vendor stops providing updates of its software in the future; this is a crucial point when considering the lengthy useful life of buildings and infrastructure. The advantage is that no file conversion is required and that it reduces issues with the interoperability between different software solutions. For example, we think Autodesk’s Revit solution works best with other Autodesk solutions like BIM360, which can leverage the Forge platform and APIs to bring in other vendors’ data. Without BIM360, we think it would be a challenge to integrate external data, creating a slight dependency on Autodesk.

On the other hand, the open BIM approach uses common protocols and standards. Industry Foundation Classes (IFC) and Construction Operations Building Information Exchange (COBie) set the most common open BIM standards. Software vendors that use the open BIM approach use non-proprietary and standardised formats that are transferable between different software applications even from different vendors. The advantages are that it is more inclusive, asset owners can be sure that the format will still be supported in the future even by another vendor, and it doesn’t lock participants into a specific software solution. Despite these advantages, there are also disadvantages, primarily around interoperability. This can be improved over time but nonetheless is a consideration. Nemetschek and the majority of other vendors use the open BIM approach.

Ultimately, in the long term we expect the open approach to win over the closed one in most regions, partly driven by regulators’ desire to enable collaboration to drive efficiency and reduce costs of buildings. Furthermore, to encourage the use of BIM, regulators around the globe are adopting standards and regulations or undertaking initiatives to encourage or mandate the use of BIM. In the following section we discuss these along with current software penetration to determine further market potential.

Regulation driving regional adoption In the following we discuss the BIM standards, regulation and initiatives across regions that enable, encourage or require the use of BIM modelling and set related standards. We then discuss the penetration of AEC software solutions to assess further growth potential.

Europe In Europe there are several directives and initiatives around BIM set by the European Union, but there is currently no single European wide regulation, which is still primarily set by local national governments. We thus discuss both EU and country-specific regulation.

European Union At the EU level there is currently no regulation requiring businesses to use BIM qualified software. However, several directives and initiatives are in place to encourage its use. The most important of these is the European Union Public Procurement Directive 2014/24/EU, which states that for public works contracts and design contests, Member States may require the use of specific electronic tools, such as building information electronic modelling tools or similar. The purpose of this was to allow national policy makers to require the use of BIM software including in countries where the use of such software has not (yet) become ‘generally available’. This regulation was an important enabler of further BIM regulation and also a strong recommendation for adopting it. But it clearly didn’t require companies to use it. When the directive came into force in 2016, some countries already had BIM requirements in place for publicly funded projects – e.g. UK, Netherlands and Nordic countries. Beyond that there is one main initiative to drive the adoption of BIM software. The EU BIM Task Group is funded by the European Commission to deliver a common European framework for the use of BIM in public works. They developed a handbook with common principles. However, none of this became standards by law. Overall, policy makers at the EU level appear to be supportive of more BIM regulation and requirements, which should drive adoption across the region. Overall, the adoption of BIM software and 3D remains modest compared to markets such as the US. However, adoption also varies hugely between countries, as we show below.

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UK The penetration of BIM is relatively advanced across the UK, largely thanks to the government’s 2011 Construction Strategy, which embraced the use of BIM and made it mandatory to a high level across all centrally-procured government projects from April 2016. The UK government mandates that all projects use a fully collaborative version of 3D BIM. Thanks to this legislation, the UK has arguably developed the most well-defined BIM standards globally. The government’s hypothesis was that, as a significant purchaser of construction services, it could gain significant savings in both upfront and ongoing costs, as well as increased performance and reduced carbon impact, through the use of collaborative and open asset information. The government uses a defined set of levels to describe the maturity of BIM adoption on any specific project: level 0 suggests no collaboration; level 1 includes a mix of 3D and 2D documentation; level 2 involves considerable collaborative work, which is the level that has been mandated on the above projects; level 3 is not yet fully defined but is likely to include new open data standards.

In order to support and help to implement the above legislation, the government also set up the UK BIM Task Group, a group which still operates within the Centre for Digital Built Britain, a partnership between the Department of Business, Energy & Industrial Strategy and the University of Cambridge. This broader group has the objective of understanding how the construction and infrastructure sectors can better use a digital approach to designing, building, operating and integrating the built environment.

In addition, the government’s “Industrial Strategy – Building a Britain fit for the future” builds on the above specific BIM regulation and envisages a significant increase in productivity in the construction sector through the use of more advanced digital tools, including broader adoption of digital twin methodologies.

The private sector has also identified the profitability opportunity of BIM on a large scale and has drawn upon the government initiatives noted above. Looking forward, we expect an ongoing commitment by the government to evolving levels of BIM adoption. In 2016, the government began to note a further commitment to the adoption of a new level of BIM adoption, likely the as yet unspecified level 3. We expect the private sector to follow the government’s lead and for the UK to continue to adopt BIM at a rapid rate. Most recently, the government considered making BIM mandatory for buildings with six storeys or more.

Nordics The Nordic countries were early adopters of BIM and have an established framework of legislation around its use. Given the long-term use of the technology, the Nordics have arguably the highest adoption of BIM globally, and the region is therefore highly mature in this regard. Finland began to draft BIM legislation in the early 2000s and, by 2007, already required software to be certified as compliant with national BIM standards. The development of governmental BIM standards has continued since then and the private sector has followed.

There is widespread encouragement or mandating of BIM adoption across various government organisations across the Nordic countries. However, adoption of BIM in the region goes over and above this and is the result of a more widespread take-up of digitalisation in the region. The organisation buildingSMART Nordic, part of buildingSMART International, is a non-profit organisation with representation from Denmark, Finland, Norway and Sweden, which has the objective of developing open international standards for BIM and accelerating its adoption across the construction market.

Germany Germany has seen decent adoption of 3D design & engineering software but is still lagging countries such as the US, UK and Nordics. However, in 2015 the government announced the digital construction plan, which made the use of BIM mandatory for all transportation and

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infrastructure projects by 2020. To facilitate the adoption of BIM, a pilot phase was started in 2017 to gather practical experiences, develop guidelines and checklists, and further fine- tune and clarify regulation. From 2020 the use of BIM will then be mandatory. Beyond that in 2015, an initiative was set up by industry associations, major companies and non- government organisations to further support the adoption of BIM, called Planen Bauen 4.0. According to the initiative, the main impediment to the adoption of BIM is not the availability of software but rather companies’ knowledge of it. The initiative aims to set clear guidelines for the adoption of BIM software and increase adoption in the private sector by leveraging what has been learnt in public projects. Overall, all of the above regulations and initiatives should appear likely to drive the adoption of BIM software, which should benefit software used in design & engineering but also the construction phase. Given the low penetration, we expect Germany in particular to remain a good growing market for AEC software, especially considering the country’s ongoing housing shortage.

US The US is considered, alongside the UK and the Nordics, to be at the forefront of BIM adoption. However, the reality is that, while it was early to the BIM industry, and adoption of BIM is relatively high, its setting of governmental standards has not progressed to the same stage of enforced adoption as, say, the UK. In the US’ favour has been strong adoption of software generally and a number of strong domestic vendors operating in the space, including industry leaders Autodesk and Bentley. As these businesses have grown over the decades in the US, so too has the adoption of BIM generally. However, this is more due to the advantages of digitalisation in the construction process, as opposed to a strict mandate around BIM standards.

The General Services Administration did introduce the National 3D-4D-BIM Program back in 2003, which has evolved into a collaboration between various public entities to encourage adoption of BIM. In addition, there is wide collaboration on BIM standards across the country with professional associations, academic institutions, government agents and software vendors pushing for common standards. However, without one central organisation being responsible for all public construction, like in the UK, the US has stopped short of being able to mandate a highly specific level of BIM across all public projects. Deliverables vary state to state and department to department. It is the decentralisation of the US that constitutes the key barrier to a more inclusive BIM mandate such as is seen in the UK. In 2010, Wisconsin mandated BIM on public projects over $5m in value and other states have followed this lead, but the delineated authority of the states to legislate on this topic does create considerable additional complexity in the national BIM picture. BIM legislation is likely to continue developing in the US, but it seems unlikely that it will adopt a country-wide mandate in the near future, in our view.

Asia-Pacific APAC is highly diverse from a BIM perspective with strong adoption in Singapore, and increasingly Japan and Australia, but extremely low penetration in the key growth markets of China and India. Singapore, for example, has been mandating BIM on the majority of public projects since 2015 and this is a key aspect of its ambition to become a “smart nation.” Japan has been slower to adopt BIM standards, but legislation is gathering pace and digital adoption generally is reasonably high. Australia focuses on BIM primarily for infrastructure projects and has a somewhat disjointed approach across other construction sectors. Both countries have growing adoption, but with clear room for improvement.

According to Autodesk, China has just 2% penetration of BIM and is therefore among the least developed countries globally in this regard (alongside India at just 1%). We conduct a deep dive into the China opportunity in the following section and therefore only cover briefly the legislative picture in this section. China was late to begin its adoption of BIM and

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this is itself a key reason for its immaturity. There are efforts afoot to correct this, although across such a large country implementation of standards will take time. In the most recent five-year plan for the country, there is an ambition to have realised a greater framework around BIM standards by 2020. In India, BIM legislation is very light and the country can best be described, in our view, as at the beginning of its BIM journey.

We think it worthy of note, however, that the complete immaturity of the Chinese and Indian markets, combined with their extremely large and fast-growing construction industries, suggest these markets will be among the greatest contributors to the BIM software industry growth over the comings years and decades. In the near to medium term, China is likely to be the more significant of the two markets, in our view, hence we go on to consider China separately as a growth opportunity.

The China opportunity China is the largest construction market globally with a ~€2.2trn market size and software penetration remains extremely low. If this market were to transition by 2025 towards the 10bp spend on software of the construction industry seen today in the rest of the world (where it is still increasing), China could be a €2.2bn AEC software market vs. ~€400m today. This would put upside pressure on our industry growth estimate; although there is arguably considerable uncertainty around the timing and adoption. Given the significant growth potential, we discussed the China opportunity with our Chinese industry contacts and visited Nemetschek to further assess the market growth prospects for BIM in the country.

From our discussions, we understand that some Chinese developers use foreign firms for the design of buildings, especially in higher-end developments. They often use the software from global key players such as Autodesk and Nemetschek. Local design firms generally use local CAD software. The engineering part is generally done locally in China by local firms with local software. Often different cities and provinces have different requirements for software and providers, which is leading to a fragmented market. In the planning and construction phase companies are still working on paper 2D blueprints that are frequently updated by various people involved in the project (something that Bluebeam is addressing in the US and some European markets). The overall use of software is relatively low and our Chinese industry contacts agreed that the use of software could increase efficiency significantly.

However, from our discussions with our industry contacts and other software vendors that have already entered China, we understand that it is very difficult to conquer a Chinese software market. First, piracy of intellectual property is a huge issue, which likely only can be addressed through SaaS solutions. This, however, often comes with its own complexity as data for example need to be hosted in the country. Secondly, there is a strong desire to promote local software providers. Finally, software solutions need to be generally completely localised (i.e. language, etc.). Entering the market is costly and the prospects generally uncertain.

That said, our industry contacts in China were enthusiastic about the software solutions and were keenly watching trade negotiations between the US and China, which have focused particularly on intellectual property and protections for foreign technology firms. SaaS solutions could also address issues around piracy. Therefore, while we believe that the near- term prospects are less attractive, it is not completely inconceivable that Western AEC software vendors could benefit from China’s significant market size over the next decade, although, they would likely only achieve a modest market share, in our view.

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Industry consolidation A key feature of the industry has been consolidation with players such as Autodesk, Bentley Systems, Nemetschek and Trimble being extremely acquisitive since the mid-2000s. Later also Oracle increased its footprint in the sector through M&A. Acquisitions were mostly relatively small and could be considered more bolt-on. More recently some new trends have emerged. For the first time, a mid-sized consolidator has been acquired by one of the big four players with the acquisition of Viewpoint by Trimble in 2018 being an example. In addition, there has been a more aggressive push into construction by design & engineering players with the acquisition of Bluebeam (2014) by Nemetschek and PlanGrid (2018) by Autodesk.

With 59% of the TAM still controlled by smaller vendors, we expect consolidation to continue. There is clear industrial logic to that as R&D and distribution costs can be leveraged over a larger revenue base. We expect the big four companies to remain acquisitive. The main focus for Nemetschek will be on acquisitions in construction and management, while for Autodesk we think the focus will be on integrating the assets it has acquired.

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FIGURE 6 Industry consolidation Date Acquirer Target Description

Aug-19 Procore Construction BI Business intelligence solutions to construction firms Jul-19 Procore Honest Buildings Project management software for owners and developers Jul-19 RIB Software Construction Computer Soft. Digital technologies for construction enterprises offered to various industries Jun-19 RIB Software Building Systems Design Cloud software platform for building specifications May-19 Bentley Keynetix Digital twin services and software for design, construction, and operation of infrastructure Jan-19 Nemetschek Axxerion SaaS provider for digital building management Dec-18 Autodesk BuildingConnected Bid management, risk analysis and other preconstruction solutions Nov-18 Autodesk PlanGrid Collaboration tool for the construction industry Oct-18 Hexagon Bricsys 2D and 2D CAD solution for AEC industry Aug-18 Nemetschek MCS Solutions Offers integrated building management software Jul-18 RIB Software MS GmbH Provider of facility management solutions Jul-18 Autodesk Assemble Systems Construction software for bid management, estimating, scheduling, site management Apr-18 Trimble Viewpoint Provider of construction-specific software solutions Mar-18 Hexagon AGTEK Development Planning and productivity solutions for the heavy civil construction industry Feb-18 Trimble e-Builder Software provider of project management and collaboration tools Dec-17 Oracle Aconex Cloud-based collaboration solution for construction projects Nov-17 RIB Software Exactal Group (75%) Quantity surveying and estimating software for the construction industry Oct-17 Dassault Systemes No Magic Software modelling tools for architects and other use cases Oct-17 Nemetschek RISA Technologies Structural engineering software Jun-17 WeWork FieldLens Software for construction project management Dec-16 Nemetschek dRofus BIM Solution for public building projects Aug-16 Hexagon Multivista Systems Provider of visual, cloud-based construction documentation solutions Apr-16 Oracle Textura Corp Collaboration software and payment solutions for the construction industry Feb-16 Trimble Sefaira cloud-based software for the design of sustainable and high-performance building Dec-15 Nemetschek Solibri Software vendor of quality assurance and control in BIM Jul-15 RIB Software Soft SA Construction software business with a focus on Spanish-speaking markets. Apr-15 Viewpoint Jobpac International Systems Provider of construction software solutions in ANZ Mar-15 Bentley Systems Eadoc Collaboration tool for the construction industry Oct-14 Nemetschek Bluebeam Software PDF viewer, markup and collaboration tool for the construction industry Sep-14 Bentley Systems SITEOPS Site optimisation software for civil engineers, architects, and land developers Sep-14 Trimble Gehry Technologies Provider of 3D project collaboration and BIM software Jul-14 RIB Software Docia SaaS company for construction collaboration Feb-14 Viewpoint Maxwell Systems Software for takeoff and estimating, project management and accounting Dec-13 Nemetschek Data Design System 3D modeling software for steel structures Nov-13 Topcon DynaRoad Oy Project management software for heavy construction projects Nov-12 Trimble Vico Software Award, tender, invoice solution with cost and time estimation (5D) Nov-12 RIB Software U.S. COST Offers a platform that supports aspects of project management. Oct-12 RIB Software ProjectCentre SaaS based collaboration tool for construction. Sep-12 RIB Software MC2 (Tenn) Provider of cost estimation software for the construction industry May-12 Aveva Group Bocad Steel detailing software for steel structures Apr-12 Trimble SketchUp 3D design and engineering software Nov-11 Autodesk Horizontal Systems Cloud-based collaboration solutions for the AEC industry May-11 Trimble Tekla BIM solution for the infrastructure and energy industries Jun-10 Aveva Group Logimatic Software Developer of software for the plant construction industry Oct-08 Oracle Primavera Enterprise Project Portfolio Management Solution for Project-Intensive Industries Jan-08 Bentley Systems ECT International Software for electrical system design and operation Nov-07 Autodesk RoboBAT Software for structural engineering analysis, design, and steel and concrete detailing Nov-07 RIB Software abacus computer GmbH Civil engineering software developer. Nov-07 NVIDIA mental images GmbH Rendering software to entertainment, CAD, architecture and other. Jul-07 Maxwell Systems Quest Solutions Provides an estimating and job costing software for the construction market Dec-06 Nemetschek Graphisoft Design software (ArchiCAD) for the AEC industry Jul-06 Nemetschek SDS/2 Software solutions for the structural steel detailing industry May-06 Trimble Navigation BitWyse Solutions 2D and 3D software applications for engineering and construction plant design Mar-06 Maxwell Systems Cheetah Holdings Provider of highway heavy construction software services. Feb-06 Nemetschek SCIA Scia is a developer and marketer of software products for structural engineering Feb-06 Bentley Systems Cook-Hurlbert Developer of engineering design software for electric and gas distribution networks Dec-05 Bentley Systems RAM International Provider of structural engineering software Jul-03 Sage Timberline Software Accounting, cost-estimating and service management software for AEC Dec-00 Maxwell Systems American Contractor Offers business management software solution for the construction industry Apr-00 Nemetschek Vectorworks Design software for the architecture, landscape and entertainment industries Source: Company data, Barclays Research

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CONCLUSION – NEMETSCHEK AND AUTODESK WELL POSITIONED

Digitalisation in the global AEC software market remains nascent. From a vertical perspective the degree of digital penetration across the category varies but in all segments we see good growth and distinctive trends. In Design & Engineering it is the shift from 2D to 3D software. In Construction, growth is being driven by the first-time adoption of software and a move away from pen and paper. Management of buildings is seeing the uptake of improved solutions replacing old systems and in many cases the first-time adoption of software. We see the highest near-term growth potential in Construction, followed by Management, although the latter has the better mid- to long-term prospects, in our view.

While BIM regulation is an important driver for the industry, we think the software’s ability to deliver cost savings and competitive advantages will also drive adoption. The construction industry generates massive waste through over-ordering building material, inefficient processes and the high frequency of errors, which often lead to significant cost overruns and projects delays. At the same time the industry has only single-digit margins. Cost savings, therefore, could significantly increase profitability for firms adopting the technology. While competition will likely whittle those advantages away over time, these innovations offer first adopters a competitive advantage and a chance to consolidate market share.

In Management, we see the highest potential in applications that help to optimise the number of people per sqm of office space through approaches such as hot-desking. The economics are obvious. For landlords with business models such as WeWork’s it could mean significantly higher rental yields and for companies it could mean a significant reduction in their rent or real-estate expense. We see this as especially attractive for service companies with rental/real-estate expenses equating to 3-7% of revenues in an industry where most of them have low double-digit margins.

In Design & Engineering, the advantages are less apparent and less focused on costs. Architects and engineers already use software tools but to stay relevant and work on the most complicated projects they have to adopt the next generation of 3D design & engineering software as well as collaborative tools to increase efficiency.

BIM regulation will drive further adoption and open up new markets and thereby create an attractive backdrop for software vendors in the space. We especially see the opportunity for higher adoption in Europe and, over the longer term, in Asia. While China as the largest construction market would be a significant game changer for the industry, we view the near-term prospects as less attractive. Over a longer horizon, we see the opportunity for western players to enter this market successfully, although, we believe they will in any case only be able to gain a modest market share. Overall, we see the global prospects for the industry as very attractive and expect double-digit growth for the next five years (in the absence of a severe economic downturn). While the risk of a global recession has increased, with many macro indicators pointing towards a slowdown, global growth overall remains robust with especially strong domestic demand. Additionally, we assessed the construction market in key countries and concluded that the end market remains robust and should not upset the growth potential of the AEC software market in the near-term.

While high growth and an expansion of the TAM are the key value drivers in the industry, we also see a significant opportunity for further consolidation of the industry. While there are clear industry leaders, around half of the sector remains highly fragmented. In software there is clear industrial logic in consolidating the space to drive synergies through the bundling of R&D and distribution power. We, therefore expect consolidation to continue and see this, next to the organic growth of the sector, as the next most important value driver.

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Who is well positioned? On a high level, we see Nemetschek and Autodesk as well positioned, especially on the residential and commercial building side, to benefit from this attractive industry backdrop. While Trimble and Bentley Systems are well positioned in the infrastructure vertical, AEC software remains smaller in the mix for Trimble, and Bentley Systems is not listed.

With the largest market shares in the space both Autodesk and Nemetschek have the highest operating gearing over their R&D and distribution expenses. We, furthermore, see limited competitive threat in their key design & engineering verticals where they are both the leading two players by a wide margin and benefit from barriers to entry as most professionals are trained in the software solutions of one or other of the two companies. In construction both have leading products with Plangrid (Autodesk) and Bluebeam (Nemetschek) and while competition here is higher, so is market growth. Both products appear to be competitively priced, although Bluebeam is significantly cheaper. Overall, we see Autodesk and Nemetschek as well positioned in the construction vertical and with an increasing move towards a higher level of BIM regulation and collaboration requirements, the ability to integrate design & engineering with construction should provide a competitive edge. In Management, Nemetschek with Crem and Spacewell and Autodesk with BIM 360 Ops are active and this should turn out to become an advantage once this market accelerates over the mid to long-term. Hence, we see Autodesk and Nemetschek both as well positioned.

For an investment recommendation it is more than just market positioning that is important. For in-depth analysis of the investment case for these two companies, we point investors towards the following reports:

 Autodesk Inc.: 14M Non-Compliant Users is Multi-Year Opp; 40% FY23 Margins (28/03/19)

 Nemetschek: Consolidator in a nascent vertical, OW (14/11/19)

We rate both stocks Overweight.

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KEY PLAYERS

Some of the companies profiled in this section are not under coverage by Barclays Research (as indicated next to the company names). Information about these companies is being provided for information purposes only and is not an investment recommendation by Barclays Research.

Autodesk AEC market share: 13% | HQ: San Rafael, U.S. (publicly listed, covered by Saket Kalia)

Autodesk was founded in in 1982 by John Walker with the introduction of AutoCAD. Today the company splits its operations into Architecture, Engineering and Construction (AEC), Manufacturing, and Media & Entertainment and is headquartered in San Rafeal, CA. Autodesk has transformed itself into a subscription business model with 95%+ of the business being recurring, driving higher lifetime value. We view ADSK as a leader in the AEC space with its AutoCAD and Revit offerings and the newly expanded portfolio of construction specific assets, which we explore below.

Autodesk has been active in building out its Construction component of AEC with three notable acquisitions to capture more of the 18m worldwide professionals and $12bn TAM it sees by 2023: 1) Assemble Systems, 2) PlanGrid; and 3) BuildingConnected. These acquisitions augment the organic construction offering, BIM360. With these acquisitions ADSK built out a robust construction portfolio that spans the construction lifecycle and is additive to the Design TAM of $15bn. Digging into the acquisitions, Assemble Systems focuses on BIM data extraction to make it simple to quantify construction materials needed to drive preconstruction cost estimates. BuildingConnected connects general contractors to subcontractors to aid bid management and can be thought of as the LinkedIn of the construction industry. PlanGrid is a site execution tool to improve field productivity and because most of the users are in the field, there is a network effect with this offering.

From a business model perspective, Autodesk has gone through a subscription transition where it focused on converting maintenance users to subscription users. This has been a multi-year journey for Autodesk and it is currently the last year of the programme. With this program Autodesk levered price on maintenance to drive adoption of subscription. For these subscribers who were previously maintenance payers, Autodesk has laid out a pricing plan through 2028. As this transition completes, investors will focus on Core and Cloud ARR in our view. Core ARR includes Product and EBA while Cloud ARR includes offerings like BIM360 and other construction/manufacturing products in the cloud.

An added benefit of the subscription transition has been incremental visibility into the non- paying user base, which includes legacy maintenance users and pirates. With subscription software, pirating is much more difficult so as the software pirates are using becomes obsolete these users could be drawn back to the platform as high-value-subscription subscribers. ADSK has increased visibility into the geographies and products pirates are using, which allows for more targeted methods to convert these users to paying users by making the pirated software less effective though in-product messaging. With subscription offerings, ADSK is able to leverage its e-Store where it captures more favourable economics while enabling the channel to focus on new business and high value Collections.

Looking at reporting segments, Autodesk generates ~40% of revenue from each of Americas and EMEA, with the remaining ~20% from APAC. From a product family perspective, ADSK reports under AEC, Manufacturing, AutoCAD and LT, Media and Entertainment segments. As of end FY19 40% of the business is from AEC, 24% from Manufacturing, 29% from AutoCAD and LT, and 7% from Media and Entertainment.

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AVEVA AEC market share: <1% | HQ: Cambridge, UK (publicly listed, covered by James Goodman)

AVEVA has a broad portfolio of software across computer-aided design, process simulation, asset performance management, supervisory control & data acquisition and manufacturing execution systems, as well as consulting services. It was listed on the London Stock Exchange in 1996 and recently joined the FTSE100 index. AVEVA’s genesis was a government-funded computer aided design project (CADCentre), established in 1967 in Cambridge. This was an initiative of the UK government to develop CAD techniques and promote its usage across British industries, its funding requirements fulfilled by the Ministry of Technology. The group created an object-based engineering database called Dabacon and launched its core Plant Design and Management System (PDMS) in 1976. CADCenter went on to become a private company in 1983 with the government diluting its ownership and this was followed by a management buyout in 1994. CADCenter listed in 1996 and changed its name to AVEVA in 2001.

AVEVA is not focused on the AEC segment and therefore only has limited overlap with this part of the manufacturingTech industry. AVEVA has highly technical, industry-specific design tools; even where AVEVA’s software is used in the design process of, for example, a nuclear power plant, additional third-party AEC software is used in the design of the outer building shell, concrete work etc. However, in order to build on its 3D structural detailing capabilities, AVEVA acquired Bocad, a provider of building information modelling software in 2012 and therefore does have direct overlap in this area, focused on steel fabrication. It also has AVEVA FabTrol in this space. In addition, in early 2018, AVEVA merged with the industrial software business of Schneider Electric. The merger created a substantially larger global business and did bring additional overlap with the AEC space. Specifically, Wonderware, the leading brand from Schneider in the monitoring and control segment, can be used across almost any industry; in addition to core competencies, monitoring assets like oil installations and manufacturing plants, it can also be used in the monitoring of transport systems such as airports and infrastructure assets such as tunnels, as well as in the deployment of smart city projects.

Bentley Systems AEC market share: 7% | HQ: Exton, United States (privately owned)

Bentley Systems, founded in 1984 by Keith and Barry Bentley, is a design software company, focused on the Architecture, Engineering & Construction (AEC) vertical. The company provides a range of software across the lifecycle of assets such as bridges, skyscrapers, airports and power stations from design through to operations and asset performance. The company is based in the US and is private, however, its shares can be bought on invitation on the NASDAQ Private Market. Siemens has, over the years, acquired a 9% stake in the business. The companies have a strong partnership, including a €100m innovation investment programme. In the most recent initiative, Bentley is integrating Siemens’ Teamcenter and MindSphere products with its engineering and project management tools to create a digital twin offering for the engineering and construction industry.

The company’s first product in 1984 was PseudoStation, a software that allowed low-cost terminals to access Intergraph (now owned by Hexagon) design files, instead of using the more expense Intergraph workstations. In 1985 the company released its first version of MicroStation, which was an early, stand-alone CAD system that could now be used on an early PC. Alongside ProjectWise and AssetWise, it remains today one of three key products of the company. MicroStation is a 2D and 3D design software primarily used for the architectural and engineering verticals. ProjectWise, as the name suggests, is a project

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management and collaboration tool for the design through construction to handover of infrastructure assets. AssetWise is a product data management software to facilitate capital planning, efficient maintenance, risk reduction and legislative compliance.

In addition to organic growth, the company has also expanded via considerable M&A. Since the first acquisition of IdeaGraphix in 1997, the business has completed over 30 business acquisitions.

Dassault AEC market share: <1% | HQ: Paris, France (publicly listed, covered by James Goodman)

Dassault Systèmes is a European software company founded in 1981 as a subsidiary of Dassault Aviation Group. The company is headquartered in France and develops design, simulation and product lifecycle management software. In 1996 the company spun out from its parent and went public in France with a listing also on the NASDAQ, where it delisted voluntarily in 2008 and remains to date listed on the Euronext Paris. The Dassault family remains the largest shareholder with a ~41% stake. The company was originally founded to develop the next generation of computer-aided design (CAD) software (CATIA) but the business has expanded its software solutions to a number of new markets over time.

Dassault does serve the AEC segment and these assets have been developed and borne out of acquisitions. The first purchase came in 2008 of Engenious Software ($40m) a company that specialises in providing software for engineering design optimisation. In 2017, No Magic was acquired (undisclosed sum), a business that provides software modelling tools for architects but the software does have a number of use cases. From these purchases and further advancements Dassault now has two specific solutions aimed at the AEC segment, which are both powered by the 3DEXPERIENCE platform. The first is ‘Design for Fabrication’, which is a cloud-based software solution that creates a single source for collaborative working in construction projects; the software enables those involved in a project to seamlessly share and view data from the design phase of project allowing designs to be modelled and transformed into the basis for fabrication. Any building or structure can be designed or simulated using software with very high detail, enabling waste to be reduced as well as time and costs to be saved. Another solution that sits in the Dassault AEC portfolio is an on-premise solution called Optimized Construction. Optimized Construction enables building design, modelling and simulation of up to five dimensions to allow better project planning and execution. This is all done on a collaborative platform enabling all stakeholders to access information accordingly. Project data is readily available and shared and this can be managed along with the project while under construction and even when operating.

Hexagon AEC market share: <1% | HQ: Stockholm, Sweden (publicly listed, covered by Sven Merkt)

Hexagon is a Stockholm-based software and capital goods group providing products to design, measure and position objects, which are used by various end-users like surveyors, construction companies, security companies, defence-related industries and government agencies.

Hexagon was founded in 1992 when a consortium of private individuals acquired a major shareholding in the stock exchange-listed company Eken Industri & Handel AB, which was subsequently renamed Hexagon. In 1998 current Chairman, Melker Schorling, started to build his stake in Hexagon and he brought in current CEO Ola Rollen in May 2000.

Following a series of acquisitions under Rollen’s leadership the business acquired a number of businesses to form its current structure, which is split into two segments: Geospatial

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Enterprise Solutions (GES) and Industrial Enterprise Solutions (IES) with each having several sub divisions. GES and IES represent each roughly half of the company’s revenues.

Hexagon does have software assets focused directly on serving the AEC segment and this sits in the IES half of the business within the PPM sub-segment. Hexagon is currently testing HxGN SMART Build in beta with a major customer. The product, which is expected to be released out of beta by year-end, is a solution combining multiple software capabilities. The solution supports project management such as scheduling, cost controls, task allocation, reporting and document management. A differentiating factor will be that the software will be integrated with Hexagon’s scanners of the BLK series, enabling data collected via the scanners to report back to the software. Hexagon has engaged in a series of acquisitions to enhance its offering in the space. Bricsys was acquired in 2018 and the business offers 5D modelling and design software for construction. Prior to Bricsys, Hexagon acquired AGTEK Development in the same year and this specialises in the provision of software for the heavy civil construction industry.

Nemetschek AEC market share: 8% | HQ: Munich, Germany (publicly listed, covered by Sven Merkt)

Nemetschek, founded in 1963 by Prof. Georg Nemetschek, is a Munich-based company providing software for the architecture, engineering and construction (AEC) industry. The company has several brands, products and end-markets. The core offering is used by AEC professionals for the design and build of real estate and infrastructure. These segments represented 59% and 33% of group revenues in FY18. Beyond that the company has a small offering (3% of FY18 revenues) for the management of buildings and for the visualisation, 3D modelling and animation for the Media & Entertainment end market (6% of FY18 revenues). The company went public in 1999 and is listed in the Prime Segment on the Frankfurt stock exchange.

The company was founded as an engineering firm with the name Ingenieurbüro für das Bauwesen. The company quickly made use of emerging computer technology, and in 1968 was the first company in the construction industry to make use of computers. In 1977 it developed its first software, which uses magnetic strips to perform calculations. In 1980 the company released its first computer-aided engineering software (CAE), which remained a unique offering of the company for many years. In 1981 Nemetschek Programmsystem GmbH was founded for the distribution of the company’s software offering. In 1982 the company started to expand internationally, first to Switzerland and Austria. In 1984 the company launched one of its core products, a CAD system, for architects and engineers called Allplan. In the following years the company continued to expand internationally and continuously improved its Allplan CAD offering.

In 1998 the company started on its inorganic growth strategy with four acquisitions, Frilo, Glaser, Bausoftware and Crem, and since then has remained very acquisitive.

Following the first acquisitions, the company went public in 1999 on the Frankfurt stock exchange and acquired two further companies, Maxon and Auer (now Nevaris). In 2000 the company expanded by acquiring Vectorworks, in 2006 it acquired Graphisoft and Scia, in 2013 Data Design System, in 2014 Bluebeam, in 2016 Solibri and SDS/2, in 2017 dRofus and RISA and in 2018 MCS Solutions. In 2019 it acquired Axxerion.

One of the key differentials of Nemetschek’s acquisition strategy is that Nemetschek AG itself acts as a holding company for the brand it owns and does not integrate the acquired companies. Instead the acquired brands operate independently with each brand having its own CEO and CTO. Everything that is important for the operations and product developments remains within in a brand, which the company argues is attractive for smaller firms that they acquire. According to the company, this has given it advantages in M&A transactions relative

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to competitors. It is interesting to note that at the headquarters in Munich there are only around 40 employees across controlling, finance, HR and strategy.

Oracle AEC market share: 4% | HQ: Redwood, U.S. (publicly listed, covered by Raimo Lenschow)

Oracle is a multinational software business providing a range of software solutions to many industry verticals. Oracle provides software solutions for database management systems (DBMS), enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (SCM), among others. The business takes a hybrid approach to deployment of its software with both on-premise and cloud solutions available.

Oracle offers solutions for the construction and engineering market via three software products. Oracle Aconex (cloud solution) is a building coordination tool that enables stakeholders in a building project to effectively collaborate within a common data environment for the management and execution of models in a build project. The software functionality involves model viewing, identification of model clashes and resolutions that communicate and report these results. Aconex was acquired in 2017 for $1.2bn. Oracle Primavera (on-premise & cloud solution) is project management software that allows project planning, managing and evaluation. The solution provides capabilities so that projects can be optimised for maximum efficiency as well as compared to the plan to assess the quality of execution. This allows assessment of cost, time and risk management across industries and is personalised to the given roles in the project. Primavera was acquired in 2008 for $1.2bn. Oracle Textura is a payment and contract management software focused on the construction vertical. The software enables project payments to be managed easily as well as automating aspects of the procure-to-pay process. Textura can also assess contractors’ risk and their status of qualification to become a supplier for the specific business/project. Textura was acquired in 2016 for $663m.

RIB AEC market share: 2% | HQ: Stuttgart, Germany (publicly listed, not covered)

RIB Software, founded in 1961 in Stuttgart as Recheninstituts im Bauwesen, provides software for the architecture, engineering and construction (AEC) industry. The company’s software is used for model-based design and construction of real estate and infrastructure. The company is listed on the Frankfurt Stock Exchange

The company was founded as an engineering firm and made early use of emerging computing technology for the construction industry, for example to compute relevant figures for bridges. In 1968 the company developed a software to calculate the visibility of planned roads and extended into other areas such as tunnelling and hydraulic engineering. In 1979 the company introduced IDEALOG, a software that was used in Germany for AVA (Ausschreibung, Vergabe und Abrechnung), a standardised method for tendering, awarding and accounting for building work.

In the 1980s the company consolidated its software offering with STRATIS for road construction and civil engineering and with RIBTEC for structural engineering. It also introduced ARRIBA, which we understand is the follow-up solution for IDEALOG for AVA. ARRIBA was used for tendering, awarding and accounting for building work. During that time all the software was converted to run on Windows.

In 2004 the company started its international expansion and established an R&D centre in Guangzhou, China. In 2009 and 2010 the company opened 10 new regional offices – three in the US, two in China, and one each in Dubai, India, Australia, Singapore and Hong Kong.

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In 2009 the company introduced a German version of iTWO, which is a cloud-based 5D building information modelling (BIM) solution. It is 5D as it is not only used for the virtual design (3D) but also cost and time. In 2010 the company launched the English and Chinese version of iTWO. In 2011, the company was listed on the Frankfurt Stock Exchange.

Since 2012 the company has expanded its business through M&A, starting with three acquisitions in 2012: MC², a US based developer of construction estimating software, ProjectCentre, Australia-based SaaS construction software developer, and U.S. COST, a US- based construction software vendor. With this acquisition, RIB expanded its geographical footprint in key construction markets. In 2013, RIB purchased majority stake in the German based Cosinus Information Systemes GmbH, a provider of ERP software the building and construction verticals. In 2014, it acquired Docia, a Denmark-based SaaS company for construction collaboration, and a majority stake in Iceprice, a provider of an e-com platform for the construction and building verticals. In 2015 RIB acquired Soft SA, a Spanish construction software company, which gave it access to Spanish-speaking markets (Spain and Latam). In 2016 it purchased a 25% stake in the Hong Kong-based construction software company called Exactal, which it enlarged incrementally to a 100% stake in January 2018. In 2018, it also acquired a 51% stake in Datengut Leipzig GmbH, a provider of mobile solutions for the construction industry, and 80% of MS Gesellschaft für Informations- und Managementsysteme mbH, a provider of facility management solutions.

Trimble AEC market share: 5% | HQ: Sunnyvale, U.S. (publicly listed, not covered)

Trimble develops and provides technology solutions for a number of industries including agriculture, building construction, civil engineering and geospatial as well as many others. Trimble’s core technologies include positioning, modelling, connectivity and data analytics. Trimble has been increasing its focus on the AEC segment through a series of acquisitions to bolster its existing software portfolio.

This began with the acquisition of Tekla Corporation a provider of BIM software that enables the modelling of different building materials. Trimble acquired 3D modelling platform SketchUp in 2012 from Google, the software allows architectural modelling, interior design as well a civil and mechanical engineering use cases. In the same year Vico Office was acquired which specialised in 5D BIM for construction – enabling the modelling of time and cost. The portfolio was extended further in 2014 with the acquisition of Gehry Technologies, which offers 3D project collaboration and BIM modelling focused on the AEC segment. In 2016 Sefaira was acquired – the company specialises in cloud-based software solutions for the design and construction market focusing on detailed analysis in relation to energy cost estimation as well as temperature management and HVAC sizing for building designs. The latest acquisition came in 2018 with Viewpoint being acquired for $1.2bn at 6x sales. Viewpoint offers project management and accounting software in conjunction with BIM services for construction projects. This is available via traditional channels as well as through mobile solutions. e-Builder was acquired in 2018 as well, which is a cloud-based software solution that supports cost management, project scheduling and document management.

Following Trimble’s series of acquisitions and in-house developments within the AEC space the product portfolio is becoming well developed with software solutions spanning ERP, accounting, project management as well as having design solutions for architecture and civil engineering. Trimble offers these software solutions, and services at every stage of the project to improve productivity, reduce waste and re-work, and enable more informed decision- making through enhanced situational awareness, data flow, and project management.

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OTHER RELEVANT PLAYERS

Below we provide an overview of other players including smaller and private companies in the space.

FIGURE 7 Other relevant players

Name HQ Description

4MSA New York, USA Software for CAD design, building services (HVAC, Gas, Electricity) and estimation Acca Bagnoli Irpino, Italy Software for design, BIM estimation and construction management Accruent Texas, USA Engineering document management software (Meridian) that integrates with Revit Aspen Technology Bedford, USA Bidding and estimation as well as project collaboration software Asuni CAD Barcelona, Spain BIM software build on the Rhinoceros modelling tool for designer and architects. B2W Estimate Portsmouth, USA Estimation & bidding and scheduling & maintenance software for construction market Beck Technology Dallas, USA Design, estimation and management software that utilises BIM for collaborative working BIM Track Canada BIM Track offers a project coordination software enabling users in the project BRZ Nuremberg, DE Tender, award and invoice solutions with cost and time estimation Buildertrend Omaha, USA ERP solutions for construction vertical Cadsoft Envisioneer Ontario, Canada Software for design, visualisation, cost estimation as well engineering analysis CMiC Toronto, Canada Project management SW incl. drawing management, document control, forecasting tools CoConstruct Virginia, USA Web-based project management software aimed at home builders and re-modellers CYPE Ingenieros Alicante, Spain Software for design, management, maintenance of buildings and open BIM solutions DesignBuilder Software Gloucestershire, UK Software for 3D modelling, visualisation, simulation and cost estimation EclispseCS Australia Estimating, tendering and post contract software solutions for the AEC industry Fieldwire California, USA Field and document management software to the construction market G&W Munich, Germany Tender, award and invoice solutions with cost and time estimation Glodon Software Beijing, China Software for the modelling, estimation, and management of projects plus collaboration tool GroupBC Reading, UK Bidding & estimation software plus common data environment for collaborative working HCSS Texas, USA A range of software including estimation, bidding and scheduling software Innovaya Oregon, USA Software for design, visualisation, 4D simulation and cost estimation IES Glasgow, UK Software for design, visualisation, simulation and cost analysis iOffice Texas, USA iOffice provides facilities management and other real estate management software Jonas Construction Software Ontario, Canada Software for scheduling, estimation and document management Lubansoft Shanghai, China Software solutions for the construction industry based on BIM technology Methvin Auckland, NZ Methvin offers and online estimation and procurement tool for the construction market Midasoft New York, USA Software for design, modelling, 3D visualisation and generation of building calculations Newforma Manchester, USA Collaboration and project management software Nomitech Bradford, UK Cost estimating solution under the brand CostOS offered as a cloud and on premise solution PlanSwift Utah, USA The business provides takeoff and estimation software for the construction vertical. Raken California, USA Raken offers a reporting and field management software for construction projects Robert Mcneel & Associates Barcelona, Spain Rhinoceros 3D modelling software which supports design, modelling, and visualisation STACK Ohio, USA Takeoff and estimating software for professional construction contractors thinkproject! Munich, Germany Common data environment (CDE) for construction and engineering projects Topcon Tokyo, Japan Software for the construction segment including design, BIM modelling and site/project UDA Technologies Alabama, USA Project management including cost estimation, scheduling, and accounting integration. Virtual Build Technologies Salt Lake City, USA The company offers software to enable 3D modelling based on BIM WRENCH Solutions Bangalore, India Project management software including estimation, CRM, contract management Source: Company data, Barclays Research

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APPENDIX

Construction industry trends In this section we discuss the main industry trends that impact the AEC industries and therefore directly or indirectly the AEC software vendors.

Growing world population The world population is expected to grow from 7.6bn people to 9.8bn over the next three decade to 2050, according to the UN 4 . This will put a significant strain on existing infrastructure and even further increase the need for housing. As a result, there will be ongoing demand for construction not only to modernise and replace existing infrastructure and buildings but also to expand.

Increased urbanisation The world population is not only growing but the trend to increased urbanisation is still ongoing, putting extra strains on large cities and capitals all across the globe. With that comes the need to realise ever more complex building and infrastructure projects on smaller space and combining historical buildings with new buildings. This requires architects, engineers and construction firms to find new ways to realise the ever-increasing requirements of their customers. This will require advanced software to manage the requirements and related complexity.

Increasing environmental regulation While there are setbacks, governments, business and households are increasingly focusing on the environmental impact in all domains. While not the only driving force, regulation is a key driver for reducing the environmental impact in all sorts of industries, including construction, and managing the resource consumption of buildings and infrastructure. Software can be used to optimise the resource consumption of building and infrastructure in their construction phase but also in their utilisation phase.

Public finances under pressure Following years of low global GDP growth, public finances in many markets are increasingly under pressure, while governments need to do more with less. According to the EU BIM Taskgroup the adoption of BIM software could unlock 15-25% savings to the construction sector. On more conservative estimates of 10% savings, this would equate on a global scale to €750bn of savings that could be reinvested into the sector or used to consolidate public finances.

Building material export and import Some countries run large trade deficits in construction material and components. The UK for example has a clear goal to reduce its £10bn5 trade deficit in 2017 by 50% to 2025 (Industrial Strategy Policy – Construction 2025). Software can help to optimise the material requirement for building and infrastructure and thereby also help to reduce the trade deficits of countries.

Increasing expectation for design and functions of buildings This relates to the point above on urbanisation but of course also outside large cities and for different reason than urbanisation, governments, businesses and households have an increasing demand for design and the functionality of buildings. Software can help to realise this increasingly demanding requirements.

4 https://www.un.org/development/desa/en/news/population/world-population-prospects-2017.html 5 https://www.ons.gov.uk/businessindustryandtrade/constructionindustry/articles/constructionstatistics/number192018edition

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Regulation Regulation is also impacting the AEC sector; primarily through buildings regulation and approvals, but also through environmental and other regulations. One regulation that is particular impacting the AEC software vendors is the building information modelling (BIM) standards, regulations and initiatives by governments. Given their importance, we discuss these in detail by region in the following section.

Get more out of existing and future buildings Given increasing costs and urbanisation, there is increasing pressure to get more out of buildings and infrastructure. This includes better usage of office buildings through hot desks and mobile working or designing infrastructure or residential buildings in such a way that maximises capacity, while at the same time maintaining the level of comfort. Software and IoT solutions can facilitate the use of hot desks and optimise resource usage, while design software can be used to address the maximisation of capacity.

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ANALYST(S) CERTIFICATION(S): We, Sven Merkt, CFA, James Goodman and Saket Kalia, CFA, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

IMPORTANT DISCLOSURES CONTINUED

Barclays Research is produced by the Investment Bank of Barclays Bank PLC and its affiliates (collectively and each individually, "Barclays"). All authors contributing to this research report are Research Analysts unless otherwise indicated. The publication date at the top of the report reflects the local time where the report was produced and may differ from the release date provided in GMT. Availability of Disclosures: Where any companies are the subject of this research report, for current important disclosures regarding those companies please refer to https://publicresearch.barclays.com or alternatively send a written request to: Barclays Research Compliance, 745 Seventh Avenue, 13th Floor, New York, NY 10019 or call +1-212-526-1072. The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities, the profitability and revenues of the Markets business and the potential interest of the firm's investing clients in research with respect to the asset class covered by the analyst. Research analysts employed outside the US by affiliates of Barclays Capital Inc. are not registered/qualified as research analysts with FINRA. Such non-US research analysts may not be associated persons of Barclays Capital Inc., which is a FINRA member, and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst’s account. Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from accepting payment or reimbursement by any covered company of their travel expenses for such visits. Barclays Research Department produces various types of research including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of Barclays Research may differ from those contained in other types of Barclays Research, whether as a result of differing time horizons, methodologies, or otherwise. In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer to https://publicresearch.barcap.com/S/RD.htm. In order to access Barclays Research Conflict Management Policy Statement, please refer to: https://publicresearch.barcap.com/S/CM.htm. Materially Mentioned Stocks (Ticker, Date, Price) Autodesk Inc. (ADSK, 12-Nov-2019, USD 158.06), Overweight/Positive, CD/CE/J Nemetschek (NEKG.DE, 12-Nov-2019, EUR 52.60), Overweight/Neutral, J Unless otherwise indicated, prices are sourced from Bloomberg and reflect the closing price in the relevant trading market, which may not be the last available price at the time of publication. Disclosure Legend: A: Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of the issuer in the previous 12 months. B: An employee or non-executive director of Barclays PLC is a director of this issuer. CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by this issuer. CE: Barclays Bank PLC and/or an affiliate is a market-maker in equity securities issued by this issuer. D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from this issuer in the past 12 months. E: Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from this issuer within the next 3 months. FA: Barclays Bank PLC and/or an affiliate beneficially owns 1% or more of a class of equity securities of this issuer, as calculated in accordance with US regulations. FB: Barclays Bank PLC and/or an affiliate beneficially owns a long position of more than 0.5% of a class of equity securities of this issuer, as calculated in accordance with EU regulations. FC: Barclays Bank PLC and/or an affiliate beneficially owns a short position of more than 0.5% of a class of equity securities of this issuer, as calculated in accordance with EU regulations. FD: Barclays Bank PLC and/or an affiliate beneficially owns 1% or more of a class of equity securities of this issuer, as calculated in accordance with South Korean regulations. GD: One of the analysts on the fundamental credit coverage team (or a member of his or her household) has a financial interest in the debt or equity securities of this issuer. GE: One of the analysts on the fundamental equity coverage team (or a member of his or her household) has a financial interest in the debt or equity securities of this issuer. H: This issuer beneficially owns more than 5% of any class of common equity securities of Barclays PLC.

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IMPORTANT DISCLOSURES CONTINUED I: Barclays Bank PLC and/or an affiliate is party to an agreement with this issuer for the provision of financial services to Barclays Bank PLC and/or an affiliate. J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities of this issuer and/or in any related derivatives. K: Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation (including compensation for brokerage services, if applicable) from this issuer within the past 12 months. L: This issuer is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate. M: This issuer is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. N: This issuer is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC and/or an affiliate. O: Not in use. P: A partner, director or officer of Barclays Capital Canada Inc. has, during the preceding 12 months, provided services to the subject company for remuneration, other than normal course investment advisory or trade execution services. Q: Barclays Bank PLC and/or an affiliate is a Corporate Broker to this issuer. R: Barclays Capital Canada Inc. and/or an affiliate has received compensation for investment banking services from this issuer in the past 12 months. S: This issuer is a Corporate Broker to Barclays PLC. T: Barclays Bank PLC and/or an affiliate is providing equity advisory services to this issuer. U: The equity securities of this Canadian issuer include subordinate voting restricted shares. V: The equity securities of this Canadian issuer include non-voting restricted shares. Risk Disclosure(s) Master limited partnerships (MLPs) are pass-through entities structured as publicly listed partnerships. For tax purposes, distributions to MLP unit holders may be treated as a return of principal. Investors should consult their own tax advisors before investing in MLP units. Guide to the Barclays Fundamental Equity Research Rating System: Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the "industry coverage universe"). In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone. Stock Rating Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon. Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12- month investment horizon. Underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month investment horizon. Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including where the Investment Bank of Barclays Bank PLC is acting in an advisory capacity in a merger or strategic transaction involving the company. Industry View Positive - industry coverage universe fundamentals/valuations are improving. Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating. Negative - industry coverage universe fundamentals/valuations are deteriorating. Below is the list of companies that constitute the "industry coverage universe":

European Software & IT Services Adyen (ADYEN.AS) Alfa (ALFAAL.L) Amadeus (AMA.MC) Atos (ATOS.PA) Avast (AVST.L) AVEVA (AVV.L) Capgemini (CAPP.PA) Computacenter (CCC.L) Dassault Systèmes (DAST.PA) Finablr (FINF.L) Funding Circle (FCH.L) Hexagon AB (HEXAb.ST) Ingenico (INGC.PA) Micro Focus (MCRO.L) Network International (NETW.L)

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IMPORTANT DISCLOSURES CONTINUED

Nexi (NEXII.MI) PayPoint (PAYP.L) Sage Group (SGE.L) SAP SE (SAPG.DE) Software AG (SOWG.DE) TeamViewer (TMV.DE) Temenos (TEMN.S) Wirecard (WDIG.DE) Worldline (WLN.PA) U.S. Software Adobe Inc. (ADBE) Anaplan, Inc. (PLAN) Ansys, Inc. (ANSS) Appian Corporation (APPN) Autodesk Inc. (ADSK) Avaya Holdings Corp (AVYA) Carbonite, Inc. (CARB) Ceridian HCM Holding Inc. (CDAY) Check Point Software Technologies Ltd. (CHKP) Citrix Systems (CTXS) Cloudera, Inc. (CLDR) Cornerstone OnDemand Inc. (CSOD) Coupa Software Inc. (COUP) CrowdStrike Holdings, Inc (CRWD) CyberArk Software (CYBR) Datadog, Inc. (DDOG) Descartes Systems Group (DSGX) Dynatrace, Inc. (DT) Elastic N.V. (ESTC) FireEye (FEYE) Five9, Inc. (FIVN) Fortinet, Inc. (FTNT) Intuit Inc. (INTU) LivePerson, Inc. (LPSN) LogMeIn, Inc. (LOGM) Microsoft Corp. (MSFT) Mimecast Ltd. (MIME) MobileIron, Inc. (MOBL) MongoDB, Inc. (MDB) New Relic, Inc. (NEWR) NortonLifeLock (NLOK) Nuance Communications, Inc. (NUAN) Open Text Corp. (OTEX) Oracle Corp. (ORCL) Palo Alto Networks (PANW) Paycom (PAYC) Ping Identity Holding Corp. (PING) Pivotal Software, Inc. (PVTL) Pluralsight, Inc. (PS) PTC Inc. (PTC) Rapid7 (RPD) Salesforce.com Inc. (CRM) SAP SE (SAP) SecureWorks (SCWX) ServiceNow, Inc. (NOW) Slack Technologies (WORK) SolarWinds Corporation (SWI) Splunk Inc. (SPLK) Talend S.A. (TLND) Teradata Corp. (TDC) Tufin Software Technologies (TUFN) Varonis Systems, Inc. (VRNS) Veeva Systems Inc. (VEEV) VMware Inc. (VMW) Workday Inc. (WDAY) Zscaler, Inc. (ZS)

Distribution of Ratings: Barclays Equity Research has 1593 companies under coverage. 44% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 55% of companies with this rating are investment banking clients of the Firm; 76% of the issuers with this rating have received financial services from the Firm. 39% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 48% of companies with this rating are investment banking clients of the Firm; 68% of the issuers with this rating have received financial services from the Firm. 15% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 32% of companies with this rating are investment banking clients of the Firm; 65% of the issuers with this rating have received financial services from the Firm. Guide to the Barclays Research Price Target: Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over the same 12-month period. Top Picks: Barclays Equity Research's "Top Picks" represent the single best alpha-generating investment idea within each industry (as defined by the relevant "industry coverage universe"), taken from among the Overweight-rated stocks within that industry. Barclays Equity Research publishes "Top Picks" reports every quarter and analysts may also publish intra-quarter changes to their Top Picks, as necessary. While analysts may highlight other Overweight-rated stocks in their published research in addition to their Top Pick, there can only be one "Top Pick" for each industry. To view the current list of Top Picks, go to the Top Picks page on Barclays Live (https://live.barcap.com/go/keyword/TopPicks). To see a list of companies that comprise a particular industry coverage universe, please go to https://publicresearch.barclays.com. Types of investment recommendations produced by Barclays Equity Research: In addition to any ratings assigned under Barclays’ formal rating systems, this publication may contain investment recommendations in the form of trade ideas, thematic screens, scorecards or portfolio recommendations that have been produced by analysts within Equity Research. Any such investment recommendations shall remain open until they are subsequently amended, rebalanced or closed in a future research report. Disclosure of other investment recommendations produced by Barclays Equity Research:

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IMPORTANT DISCLOSURES CONTINUED Barclays Equity Research may have published other investment recommendations in respect of the same securities/instruments recommended in this research report during the preceding 12 months. To view all investment recommendations published by Barclays Equity Research in the preceding 12 months please refer to https://live.barcap.com/go/research/Recommendations. Legal entities involved in producing Barclays Research: Barclays Bank PLC (Barclays, UK) Barclays Capital Inc. (BCI, US) Barclays Bank Ireland PLC, Frankfurt Branch (BBI, Frankfurt) Barclays Bank Ireland PLC, Paris Branch (BBI, Paris) Barclays Bank Ireland PLC, Milan Branch (BBI, Milan) Barclays Securities Japan Limited (BSJL, Japan) Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong) Barclays Capital Canada Inc. (BCCI, Canada) Barclays Bank Mexico, S.A. (BBMX, Mexico) Barclays Securities (India) Private Limited (BSIPL, India) Barclays Bank PLC, India branch (Barclays Bank, India) Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore) Barclays Bank PLC, DIFC Branch (Barclays Bank, DIFC)

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IMPORTANT DISCLOSURES CONTINUED Autodesk Inc. (ADSK / ADSK) Stock Rating Industry View USD 158.06 (12-Nov-2019) OVERWEIGHT POSITIVE Rating and Price Target Chart - USD (as of 12-Nov-2019) Currency=USD Publication Date Closing Price Rating Adjusted Price Target 28-Aug-2019 140.08 173.00 200 01-Mar-2019 163.94 199.00 25-Feb-2019 163.94 192.00 175 24-Aug-2018 157.20 166.00 29-Mar-2018 125.58 152.00 150 07-Mar-2018 137.70 140.00

125 21-Nov-2017 127.71 135.00 25-Aug-2017 114.97 125.00

100 18-Aug-2017 108.56 120.00 19-May-2017 109.91 114.00 75 03-Mar-2017 85.32 105.00 07-Dec-2016 80.34 100.00 50 18-Nov-2016 76.90 81.00 Jan- 2017 Jul- 2017 Jan- 2018 Jul- 2018 Jan- 2019 Jul- 2019 On 13-Nov-2016, prior to any intra-day change that may have been Closing Price Target Price published, the rating for this security was Overweight, and the adjusted

price target was 75.00. Source: Bloomberg, Barclays Research Historical stock prices and price targets may have been adjusted for stock splits and dividends.

Source: IDC, Barclays Research

Link to Barclays Live for interactive charting CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by Autodesk Inc.. CE: Barclays Bank PLC and/or an affiliate is a market-maker in equity securities issued by Autodesk Inc.. J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Autodesk Inc. and/or in any related derivatives. Valuation Methodology: Our $173 price target is based on ~18x FY23E FCF of ~$2.35B discounted back ~10% for two years. Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: We see three downside risks to our Overweight rating. First, if ADSK is unable to reach FY23 goals of $5.6B in ARR, 40% operating margin and $2.4B in FCF, estimates could deteriorate causing the stock to under-perform. Second, while there is some cannibalization expected from new licensing options, if this is greater than expected, estimates could go down. Third, ADSK sells into an economically sensitive customer base, so if the fragile recovery were to deteriorate, estimates could go down, and the stock could underperform.

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IMPORTANT DISCLOSURES CONTINUED Nemetschek (NEM GR / NEKG.DE) Stock Rating Industry View EUR 52.60 (12-Nov-2019) OVERWEIGHT NEUTRAL Rating and Price Target Chart - EUR (as of 12-Nov-2019) Currency=EUR Publication Date Closing Price Rating Adjusted Price Target 60 Source: Bloomberg, Barclays Research 55 Historical stock prices and price targets may have been adjusted for stock splits and dividends.

50

45

40

35

30

25

20

15

Jan- 2017 Jul- 2017 Jan- 2018 Jul- 2018 Jan- 2019 Jul- 2019

Closing Price

Source: IDC, Barclays Research

Link to Barclays Live for interactive charting J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Nemetschek and/or in any related derivatives. Valuation Methodology: We value Nemetschek based on a relative PE analysis, which applies a peer-derived FY21E multiple (33x) to our base case FY21E EPS plus a 10% premium for optionality around price increases and potential M&A and a further 20% premium for what we see as Nemetschek's more attractive financial profile. We benchmark Nemetschek against a peer group of high-growth software companies in manufacturingTech and constructionTech. Our DCF valuation uses a WACC of 6.8%, with terminal growth and margin assumptions of 3% and ~30%, respectively. Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: We see the growth opportunity in China as the largest driver of upside risk to our forecasts and valuation, but we also see scope for upside in the Manage segment and for price increases beyond Bluebeam. On the downside, we see risks primarily from a recession or from interest rate rises. These risks are unlikely to materialise at the same time, hence we consider them separate. Other downside risks include M&A risk, disappointing BIM adoption and increased competition in the company's key markets.

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