Autodesk, Inc. BUY Company Update : Software

August 4, 2020 Autodesk, Inc. BUY Company Update : Software

AECX: AEC in the age of customer experience

A group of Autodesk customers in the U.K. (at least initially) have Jay Vleeschhouwer sent an open letter to the company about a variety of concerns [email protected] vis-à-vis their Autodesk relationship. We have copied, and 646-442-4251 annotated below, the original letter, Autodesk’s initial response (via the channel), a subsequent letter, and Autodesk’s additional, technical response. We have had the opportunity to speak with a Stock Symbol NASDAQ: ADSK group representing several of the firms in the U.K. and with the Current Price $239.90 company. 12 mos. Target Price $249.00 Market Cap $53,089.9 mln This is a complex, unusually public, and evolving situation wherein the customers’ concerns fall into three separate but related Shares O/S 221.3 mln categories: technical, licensing, and “culture” (i.e., customer Avg Daily Vol. (3 mos.) 2,176,699 shs. engagement). Under technical, Revit is the center of customers’ 52-Week Price Low/High $125.38 - $251.39 attention and under licensing the customers have brought up P/B (269.6)x pricing and design software cost of ownership; we have inserted Price/ FCF 0.8x our comments below on these subjects. Fiscal Year End Jan Revit, which Autodesk acquired almost two decades ago, has ROE (106)% become its largest product in the AEC reporting segment and has become a de facto BIM standard (based on the .rvt format, EPS supplementing Autodesk’s longtime .dwg de facto standard). We FY 21E FY 22E FY 23E have calculated that the cumulative licenses to date exceeds 1.6 million, more than double the cumulative licenses to date Q1 (Apr) $0.85A $1.24E $1.79E for Inventor, Autodesk’s principal brand in the Manufacturing Q2 (Jul) 0.90E 1.45E 1.97E segment. Revit is sold as a standalone product and as part of the Q3 (Oct) 0.96E 1.72E 2.03E AEC Collection (and before that, the Building Design Suite). We Q4 (Jan) 1.14E 1.85E 2.15E estimate that Revit accounted for more than a fifth of Autodesk’s $3.86E $6.26E $7.94E imputed new license volume in FY20, exceeded only by AutoCAD P/E 62.2x 38.3x 30.2x and LT. EV/Sales 9.2x 7.5x 6.5x The critiques ought to be taken – and seem to be taken as such

280 – constructively (or, constructionally). 260 We found the U.K. customer group to be sincere and cogent in their concerns about Revit’s functionality; the company has 240 acknowledged that the stated concerns are “ ” with 220 legitimate overdue redevelopment (while refuting a number of the licensing 200 and cost statements; see below) and that while more could and 180 should have been done earlier (as Autodesk acknowledges), it is 160 now investing more in advancing the state of Revit’s “capacity” 140 and “performance”. 120 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 While the software engineering developments necessarily take Autodesk, Inc. time, we may see some tangible signs of the roadmap at AU 2020. In parallel with the engineering work, it will also be essential for Autodesk to sustain customer communication and engagement - not only with the initial customers in question (which may become larger customers if there is a period of consolidation in the A of AEC) - via online, as done so far, and direct means from management and the Autodesk field.

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THE U.K. LETTER

“To Andrew Anagnost, President and Chief Executive Officer, Autodesk Subject: An open letter that reflects customer perspectives on Autodesk in 2020.

Industry Context

The RIBA (Royal Institute of British Architects) Chartered Practice Benchmarking Report highlights the increasing cost of ownership of design‐based software as part of the overall growth in costs that the design industry is facing. Even before the Covid‐19 pandemic costs were under significant scrutiny and the value added by software vendors is now being questioned as never before.

Diagram 1 ‐ Copyright RIBA

It is in this context that a number of practices, who represent a revenue stream for Autodesk of over $22m over the last 5 years and thousands of users have come together to express their concerns in a survey which was carried out in June 2020. Their concerns relate to the increasing cost of ownership and the operation of Autodesk's Revit software and fundamentally its lack of development.

In the period between 2015 and 2019 most practices who participated in the survey have had at least 5 different licence models in play, moving from individual product licences, to suites, through to collections and now, in 2020 to individual user licences. Overall, those surveyed have seen costs increase up to 70% and beyond to the end of 2019. Practices would be less worried by these cost increases if they were mirrored by productivity improvements and a progressive software development program.

Where once Autodesk Revit was the industry enabler to smarter working, it increasingly finds itself a constraint and bottleneck. Practices find that they are paying more but using Revit less because of its constraints.

Computing Context Every day digital design leaders around the world wrestle with software which at its core is twenty years old and incapable of the potential of multi core computing and graphics power designed to process within today's real and virtual workstations. Project productivity in architectural and engineering practices is hit daily because of the lack of scalability and product performance, which then requires sophisticated and practice specific ‘work arounds’. [JV note: this in our view is the most important point made by the customers; we should note that a number of the respondents are in customers’ IT departments].

Griffin Securities Equity Research 2 Autodesk, Inc. August 4, 2020

(Question 2). Most practices think that the platform is not meeting current industry requirements.

(Question 3) Autodesk has tabled a variety of initiatives for the next generation of tool(s) to replace Revit but failed to prioritise investment and failed to communicate the roadmap for the delivery of a viable platform to users.

(Question 8) Cost increases on existing software portfolios continue but little value is added to create improved productivity in the core product for design practices in the industry. Project design outcomes thrive on ever‐increasing collaboration between different design disciplines requiring many forms of data interoperability between software platforms as well as compliance to international data standards.

Greater collaboration on interoperability between software platforms and providers could lead to a larger market for all, given the industry is on the cusp of a 'design for manufacturing' revolution. (see McKinsey & Company "The next normal in construction ‐ How disruption is reshaping the world's largest ecosystem").

Designers are in a continuous mode of innovation and improvement as they recycle and evolve data between an ever‐expanding portfolio of applications. It is essential to effect better interoperability between Autodesk products as well as with the rest of the industry.

Organisational Context

Microsoft's reinvigoration under Satya Nadella and his focus on a growth mindset and cultural change is exemplified by this quotation:

"First we needed to obsess about our customers. At the core of our business must be the curiosity and desire to meet a customers unarticulated and unmet needs with great technology. There is no way to do that unless we absorb with deeper insight and empathy what they need."

(Satya Nadella ‐ Hit Refresh ‐ The quest to rediscover Microsoft's soul and imagine a better future for everyone. page 101).

This approach would be hugely appreciated by the design community. However, there does appear to be a lack of trust and empathy from practices regarding the use of Autodesk's cloud services.

(Question 9).

Cloud services must be an area of potential future expansion for design businesses as well as for Autodesk as a provider. However, trust, empathy and respect need to be at the core of any such future business relationship.

The protection of intellectual property will be at the centre of the debate for cloud based common data environments. Users want to know what any data that resides in the Autodesk cloud is going to be used for beyond individual project collaboration. Further the robustness and performance of the Autodesk cloud platform remain a cause for concern.

It is important to note that not all practices felt comfortable adding their name to the list of

Griffin Securities Equity Research 3 Autodesk, Inc. August 4, 2020

signatories to this letter for the fear of commercial reprisals but have added their revenues and user count as support for this initiative. Fear, real or perceived in what should be a positive relationship with a key software provider illustrates that there are issues that need to be addressed in Autodesk's powerful relationship with the industry and the industry's relationship with Autodesk's sales structure and processes.

(Question 5) It should be noted that most organisations record a positive relationship with the technical and product support teams in Autodesk.

The Future The practices involved in this initiative seek from Autodesk a transparent action plan that is customer centric, non‐adversarial, innovative, progressive, and deliverable that includes:

. A vision, roadmap and investment strategy that targets adding value and performance for design based organisations that prioritises the replacement of Revit from the ground up to reflect the functionality needed for a 21st century digital industry.

[JV note: this would seem to be an impracticable request within the timeframe the customers care about, and not something Autodesk means to do now: it acknowledges however working on “re- engineering” Revit. In the context of Autodesk’s cloud-y strategy, we may see what would in effect be a Fusion for AEC].

. A commitment to continuously improving application, and industry interoperability (including IFC) as well as expanding geometry support and alignment to international data standards.

. Engagement to build a cultural partnership with all customers based on trust, empathy and respect.

. A proposal for cost stability

[JV note: it’s not clear if this means “stability” in ARPU or total costs even as usage grows over time. Also, or alas, those customers that expressed an interest in, or preference for, a consumption-model, would not necessarily see stability as such].

. Research and development commitment that is, focused on the needs of the global design community.

We would welcome your response.

From

A community of national and international design practices including: AHMM Allies and Morrison Aukett Swanke BVN Architectural Services Corstorphine + Wright Fletcher Priest Architects Glenn Howells Architects Grimshaw PRP Rogers, Stirk, Harbour + Partners Scott Brownrigg Sheppard Robson Simpson Haugh Stephen George + Partners TTSP Wilkinson Eyre Architects Zaha Hadid Architects

If you feel you would like to add your practice to this letter and be included in the response

Griffin Securities Equity Research 4 Autodesk, Inc. August 4, 2020

from Autodesk.

Questions ‐ Your Practice Perspective Question 1 The Revit platform has seen major development investment in the last 5 years and warrants the substantial increase per head in licence costs and subscriptions.

Question 2 The Revit Platform is written to fully utilise the facilities available in today's real and virtual PC workstations and laptops such as multi‐core processors and powerful GPU's.

Question 3 Despite being 20‐year‐old Revit meets the industry needs now and for the foreseeable future. Current development initiatives are well communicated and are progressing successfully and are well resourced to meet future industry needs and should be realised in the near future.

Question 4 Autodesk's proactive support of International ISO standards and industry interoperability standards such as IFC is competitive and innovative and opens access to projects by complimentary technologies.

Question 5 The consistent sales model that Autodesk continues to deploy is in the spirit of client and supplier partnership, consistently providing added value and includes the ability to effectively administer and visualise all forms of product licencing, installation, upgrades, user reallocation, uninstallation and enterprise deployments.

Question 6 Autodesk's software collections are streamlined, fit for purpose and successfully interoperate across platforms adding sufficient value to justify today's costs.

Question 7 The Revit platform natively supports all the required forms of geometry for computational design and the complex design forms required for manufacture and construction.

Question 8 Autodesk has a clear vision and roadmap for the future of its digital design platform built upon a culture of partnership with its customer base.

Question 9 Autodesk is a trusted partner that has empathy with our business dynamics and the need for the security of our intellectual property we have no issues in utilising Autodesk cloud tools for internal and external collaboration”.

Our comments. As with any survey, the framing of the questions, and the sample size, matters. In our conversation with a representative group of the respondents, we found them to be sincere and to be committed to engaging with the company. The technical concerns (the part we found most compelling) were focused on Revit (there were on the other hand positive comments about Fusion and Max), and the company has acknowledged this concern as “legitimate” (we have also spoken with a number of longtime Autodesk channel sources who concurred in the need to redevelop Revit, while not concurring with the specific cost of ownership comments made by the U.K. group). .

Griffin Securities Equity Research 5 Autodesk, Inc. August 4, 2020

With respect to the business and licensing aspects of design software, the chart above shows that architectural practices may by nature be a low margin business, or that the group of firms included in the survey/letter may have been facing, or are facing, their own especially challenging conditions (even pre- bioeconomic conditions). Design software productivity, technical advancement and product value are essential (and we wholly concur with the customer group that vendors ought to be held accountable on this), but design software (or at least Autodesk in this case) is only a fraction of a percent of customers’ revenues and margin structure. That doesn’t absolve vendors from delivering value but it does suggest that design software spending per se is not especially onerous.

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Griffin Securities Equity Research 6 Autodesk, Inc. August 4, 2020

AUTODESK: COMPANY RESPONSE (“AUTODESK CHANNEL FLASH”)

On July 31st, the company disseminated the following (highlighting added):

Open Letter to Andrew | Partner FAQs

On July 25, 17 Autodesk architecture customers issued an open letter to Andrew Anagnost, which was published in AEC Magazine. These customers are primarily in the UK with one in Australia. In the letter, they express concerns about perceived lack of product development on Revit and business model changes. This letter was accompanied by critique from several media sources.

Engaging, listening to and addressing the concerns of our customers is a top priority for Autodesk, and we appreciate the feedback we received in the open letter. While there are points it raised that we disagree with, there are also issues raised that we must take to heart, which highlight areas where we’ve fallen short. Over the past several years, we increased our product development to serve engineering and construction customers, because we believe having a multi-disciplinary BIM model connected to construction enables better collaboration among all project team members. As with any business, there is the need to prioritize resources. We do recognize the need to balance and have recently increased our development on the architectural capabilities of Revit. Expect to see progress here in the future. Our current roadmap for Revit is publicly available at: www.autodesk.com/revitroadmap. We also empathize with customers that have gone through different license models in the last few years as we’ve transformed Autodesk to become a subscription-based company that can serve our customers better. We’ve done our best to balance these changes with a more valuable experience and trade-in offers that give longtime customers a path to experience these benefits at a cost consistent with what they pay today. But we must always be open to customer feedback. We’re planning to continue engaging with these customers directly, to have an open and honest dialogue, helping us further understand their needs. We have more to say, but first we will listen.

FAQs

What is Autodesk doing to respond to the letter?

As with all customer feedback, Autodesk is taking the open letter very seriously. We have assembled a cross-functional team to address the customers’ concerns. Immediately, we are publishing a post on our corporate blog, ADSK News, that will address the letter publicly. We will also host listening sessions in early August with our customers who signed the letter to engage in an open and honest dialogue to help us further understand their needs.

I have feedback to provide Autodesk regarding the Open Letter. How can I provide that feedback?

You should reach out to your partner manager with any feedback or concerns. You can also reach out to [email protected].

How do Autodesk product development teams listen to customers and partners?

Engaging in open dialogue with customers and partners is fundamental to how we shape our products. We do this through regular briefings with AEC firm leaders and partners, Customer Executive Councils, User Groups, Revit Ideas board, the Revit Preview beta release program, user research, and product usability testing. We bring customers and partners into our offices worldwide to test new features and have a standard practice for our agile scrum teams to include several customers in their bi-weekly reviews to provide feedback. We also make the Revit roadmap publicly available for our customers to openly see at

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www.autodesk.com/revitroadmap.

How can customers and partners get involved with product roadmap planning? If customers and partners don’t see something listed on the product roadmap, it doesn’t mean that it isn’t on our radar. Specific suggestions on how to make the product better can be submitted to Revit Ideas.

The Autodesk team is committed to receiving feedback on current Revit capabilities. For interested customers, we would be happy to consider their participation in our Revit Preview beta program. Customers can reach out to [email protected] to request to join.

Is it true that we’ve increased prices 70% since 2015 as stated in the letter?

The short answer is no, but the full answer requires a more detailed explanation. At Autodesk, like many companies that have a channel sales model, we set Suggested Retail Prices (SRP). Channel partners set their prices to customers. We have not raised SRP 70% since 2015. In fact, for longtime customers like these firms, they have likely taken advantage of our Move to Subscription offer, which let customers trade in their maintenance plans for subscription at a substantial discount off SRP. Our subscription business model has given a whole set of new customers access to our software, without requiring large upfront investments. There are also positive business drivers that will naturally increase customers’ costs over time – such as adding more subscriptions as their company grows, moving to BIM, and upgrading to industry collections to advance the skills of their employees.

We are listening and we value partner and customer feedback. If you have feedback or concerns, please reach out to your partner manager or use [email protected].

Our comments. With respect to the license cost/pricing concern raised in THE LETTER, our Autodesk model shows that the combined ARPU for maintenance (all products) increased from about $521 as of the end of FY16 to nearly $800 by the end of FY20. This average is of course heavily influenced by mix and the effect of the M2S program. Similarly, subscriptions ARPU increased from nearly $600 as of the end of FY16 to nearly $700 as of the end of FY20, and that therefore the combined maintenance/subscriptions ARPU increased from about $534 to slightly more than $700 (a net increase of not much more than 30%).

It stands to reason that much of the increase in costs (as compared with ARPU only) would have been attributable to usage increases, and perhaps mix, e.g., more Collections. Subscriptions by their nature entail less initial and annual expense, until such time as the breakeven period is reached (vs. comparable perpetual and maintenance pricing, i.e., more than three years). We did not ascertain the precise degree to which customers in the letter group partook of the M2S (maintenance to subscription) program), though our understanding is that many did so, nor did customers say they had dropped maintenance/subscriptions or reduced seat retention.

The customers with whom we spoke were not looking forward to the implementation of named-user licensing by Autodesk (the company will hardly be unique in having that), preferring the former multi-user, networked licensing model; nonetheless…named-user is imminent. The customers were on the other hand positive on the possibilities of a consumption (pay-per-use) model, something that Autodesk is intending to bring to the broader SMB market (it has been available to date for the large, EBA customers). There is, however, as we see it, a connection between a named-user model and a consumption-model.

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Griffin Securities Equity Research 8 Autodesk, Inc. August 4, 2020

THE LETTER (#2)

“Open letter to Autodesk grows & goes global

Friday 31 July 2020

On Monday, 27 July, a collective of architectural practices sent an open letter to Autodesk CEO, Andrew Anagnost, to relate their dissatisfaction on the company’s BIM development and business practices. The overwhelmingly positive response from other Autodesk customers has led to an influx of firms wishing to add their names to the letter. The letter can be seen here www.letters-to-autodesk.com

This morning, the group announced an additional 18 practices from around the world, who stand alongside the original letter’s signatories. (The group also had support from a further 10 practices, who did not sign). The new firms are:

BC Architects, South Africa Cooper Carry, US Portman Architects, US Atelier Tissot, France CGL, UK Shepheard Epstein Hunter, UK Vibes, Netherlands SAOTA, South Africa MIZA, Canada Idesign-solutions, US Studio 3 Architecture, US Goody Clancy, US Oslo works, Norway SGA, US PDP, London, UK Bohlin, Cywinski, Jackson, US Workshop collaborative, US Mochly-Eldar Architects, Israel

About the group and its aims The original group of 17 firms (now 35 firms), co-ordinated by industry veteran and IT consultant Iain Godwin, created the open letter as price increases of Autodesk’s flagship BIM tool, Revit, had dramatically increased the cost of ownership. This was combined with a fundamental lack of development of the software which suffers a lack of scalability and product performance.

Other issues raised included: The complex and ever-changing licence models, lack of commitment to open standards for data exchange, a loss of trust and a lack of communication on a roadmap for the next generation architecture tools.

The original signatories are:

Griffin Securities Equity Research 9 Autodesk, Inc. August 4, 2020

AUTODESK: “A REPLY TO OUR CUSTOMERS’ OPEN LETTER ON AUTODESK REVIT”

The following was posted by Autodesk’s senior vice president, Design & Creation Products, on July 31st, 2020 (highlighting added):

“To our customers who wrote the open letter to us about Revit – thank you. You raised important concerns about the development of Revit and functionality needed to do your jobs in a rapidly changing industry. You identified issues that we must take to heart, and which highlight where we’ve fallen short. And while we don’t agree with everything in the letter, we are committed to listening.

We also want to address a few key themes from the letter.

Striking a balance

Like any company, we have finite resources and we make investment decisions and trade-offs based on our understanding of customer and industry needs. And, like any company, we don’t always get it right. (Some of our long-time customers will remember the problematic Revit ribbon from 2010. We own that, and we’ve fixed it.) We have underinvested in architectural modeling functionality in recent years and are working to make that right.

[JV note: an important acknowledgement, repeated in our conversation with the company. We should note that it is not only smaller customers, such as those which originated the letter, that are pressing are pressing Autodesk to advance Revit, e.g., for large model visualization performance.

For FY21, we’re estimating total spending of more than $910 million, vs. $851 million in FY20 (we should note though that in FY18. R&D spending declined by $12.5 million, or 2%, to $755 million, and by $30 million in FY19, or 4%, in part due to the paring of subscale, unessential businesses, e.g., consumer, though there may have been some limiting effect on the “A” of AEC. Over the past 6-9 months, Autodesk has had two to four dozen job openings per month having something to with “Revit”].

We want to share some of the thinking behind our decision-making with Revit over the past years.

Our goal with Revit has always been to maximize the value it brings to the AEC market, and to do that we must enable all major stakeholders to participate in the BIM process. In pursuit of this goal, we increased our product development to better serve engineering and construction customers. This required several platform projects to improve scalability and performance to support fabrication detail for engineering that also benefited all disciplines. The result of this was a slowdown in development on core architectural modeling capabilities. We recognize the impact this has had on our architectural design customers and at the end of last year we increased our investment and resources for architectural capabilities in Revit. It will take some time for this impact to be fully realized and you can follow our progress at the Revit Public Roadmap.

Our investment in cloud and your data privacy

We heard in the letter how important collaboration is as well as the importance of a robust and high- performing cloud platform. We believe the cloud is the best way to drive transformational change in how teams connect to deliver project outcomes, so we’ve enabled multi-user authoring within and across firms with BIM 360 Design and Revit Cloud Worksharing, a major investment that’s already allowed hundreds of thousands of design professionals to connect. And since trust and confidence are first order principles for the opportunity to manage your project data, our cloud solutions must be highly resilient, secure, and scalable. This foundation, built over the past 7 years, has allowed us to respond to EU-based customers

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with a new Europe data center. Learn more about our cloud security standards here and more about the measures we take to care for your data here.

Performance

Along with expanding the value of BIM to all stakeholders on a project, it’s critical that our technology is fast and reliable. We won’t nerd out on reliability and performance metrics today, but we spend a substantial percentage of our development resources every year focused on quality and performance in Revit. You can learn more about this in an upcoming series of articles on the Revit Blog.

Openness & Interoperability

We believe opening up access to the Revit engine and data through Forge web-based APIs will enable new, targeted tools to be created to serve the industry. However, since every project will always have a multitude of software products required to deliver the best outcomes, the tools we develop – much less a single tool like Revit – cannot solve all problems. We continue to invest in supporting IFC and based on customer feedback we’ve recently increased development for new industry requirements, focusing on IFC4 certification. This platform-first approach has enabled the strong, open ecosystem we have today. Hundreds of partners and customers continuously customize our products to their individual workflows.

Where we have not been as successful, is taking advantage of those same APIs to build better connections between our products. This is something we are actively working to improve. We have recently shipped better interoperability between Civil 3D and Revit, Revit and Inventor, SketchUp and Revit, and are actively working on improving data flows with these and other products.

[JV note: these planned integrations and flows relate to the former Quantum/Plasma internal projects at Autodesk, which, at the time they were presented, were appealing platform visions; the architectural ideas – i.e., microservices - were technically sound but rebuilding a major product is no small undertaking (as we’ve seen with the two largest EDA companies and their platform evolutions) – but doable and necessary (and once the work is done, or becomes commercially available, it should be foundational for a decade or more across multiple products and functions).

The mechanics and permeation of Quantum and Plasma have not been quite so outwardly visible (maybe inwardly too), but it is worth requoting a management comment during the 1QFY21 conference call in response to a question on roadmap…new platform, collaboration, data orchestration and the like: “…we don't call it Plasma anymore, by the way. It's a different name, which you'll get some view of later, probably around AU time frame…So I'm going to be careful about what I talk about there. But…I want to make sure you understand. There's a lot in our cloud, all right? A lot in our cloud platform, a lot that has been exposed, a lot that hasn't yet been exposed.

Some of those things you're talking about allowing multidisciplinary collaboration, simultaneous access to a common model that updates based on different disciplines, but maintains control with, say, the architects or the engineers, you're going to hear a lot more about that in the coming months and probably around Autodesk University…What I will say at this point is, we've got a lot going on, and we're big believers in the app model. And what I mean by that is we believe that relatively modestly-sized to big clients with a really robust cloud back-end are the future. So, for instance, Fusion has a big client….but it has a very, very, very fine-grained multitenant cloud data infrastructure hidden behind it. Fusion's cloud will get thinner – the client will get thinner over time. You could also see an evolution with Revit that's similar to that. That's going to take a little longer. And we made that choice very deliberately, Jay, because we've had lots of experience in pure browser-based applications”.

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Autodesk’s priorities for advancing Revit focus on “capacity” and “performance”; we may some (initial) signs of this work at the virtual Autodesk University in November. What we would like to see – and we suspect the customers might agree – is ongoing Adobe-like {ADBE, $445.49, Buy) investing in advancing the state of the art of leading, predominating brands, including perhaps regular “sneak peeks”, one of the best parts of Adobe’s annual Max conference].

What’s next for Revit

Looking to the future, we believe that ways of working will evolve, from the direct modeling of today to outcome-based design driven by analysis (of which Generative Design in Revit is one small step), to the convergence of manufacturing and construction, and that data needs to be unlocked from native formats and flow more readily throughout Autodesk and non-Autodesk products. Powered by the cloud, with experiences spanning desktop, mobile and extended reality, this future looks quite different than a desktop application with hundreds of buttons in the ribbon. Over the next major and point releases you’ll start to see proof points of this direction that you can react to and provide feedback on.

[JV note: see too our April 20th, 2020 company report on generative design. Just as Autodesk is committed to the named-user/consumption-model plan on the business side of the equation, it is committed to cloud-y deliverables on the technology side of the equation, including “collections in the cloud”, a la Creative Cloud].

License model changes

We also empathize with customers who have gone through different license models in the last few years as we’ve transformed Autodesk into a subscription-based company that can serve our customers better. Our subscription business model has given a whole set of new customers access to our software, without requiring large upfront investments. There are also positive business drivers that will naturally increase customers’ costs over time – such as adding more subscriptions as their company grows, moving to BIM, and upgrading to industry collections to advance the skills of their employees. We’ve done our best to balance licensing changes with a more valuable experience and trade-in offers that give longtime customers a path to experience these benefits at a cost consistent with what they pay today. For example, we introduced product usage reporting so customers can ensure they’re getting the most from their investment and accurately forecast future spend.

It takes a partnership

Engaging in open dialogue with customers remains fundamental to how we plot our path forward. We do this through forums like Revit Ideas, Revit user groups, and customer executive councils. We bring customers into our offices worldwide to test new features and have made it standard practice for our agile scrum teams to include several customers in their bi-weekly reviews to provide feedback. We also make the Revit roadmap publicly available.

Each year we run a global satisfaction survey, which normally goes to a random sampling of customers. In the spirit of listening first, we are re-opening it, and would value additional customer responses. This survey is entirely anonymous unless you choose to include your email address. The survey can be accessed here.

We will be reaching out to you directly to help us further understand your needs. Your feedback is critical to helping us innovate. And we remain committed to the architecture community and the future of the industry”.

Griffin Securities Equity Research 12 Autodesk, Inc. August 4, 2020

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AUTODESK: REVIT ROADMAP

See https://blogs.autodesk.com/revit/2020/04/20/revit-public-roadmap-update-april-2020/

Griffin Securities Equity Research 13 Autodesk, Inc. August 4, 2020

Chart 1. Autodesk, quarterly R&D expenses, FY14-FY24E

$300.00

$275.00

$250.00

$225.00

$200.00

$175.00

$150.00

$125.00

$100.00

$75.00

$50.00

$25.00

$0.00

ADSK - R&D

Source: Company data, Griffin Securities.

Chart 1 comments. We estimate that Autodesk’s R&D will exceed $1 billion by FY24, or more than 18% of estimated revenues.

Chart 2. Autodesk, cumulative Revit licenses, FY06-1QFY21

2,000,000 1,950,000 1,900,000 1,850,000 1,800,000 1,750,000 1,700,000 1,650,000 1,600,000 1,550,000 1,500,000 1,450,000 1,400,000 1,350,000 1,300,000 1,250,000 1,200,000 1,150,000 1,100,000 1,050,000 1,000,000 950,000 900,000 850,000 800,000 750,000 700,000 650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0

Revit - cumulative

Source: Company data, Griffin Securities.

Griffin Securities Equity Research 14 Autodesk, Inc. August 4, 2020

Chart 3. Autodesk, subscriptions & maintenance ARPU, FY16-1QFY21

$900 $875

$850 ADSK - subscriptions plan ARPS ADSK - maintenance plan ARPS ADSK - total ARPS $825 $800 $775 $750 $725 $700 $675 $650 $625 $600 $575 $550 $525 $500 $475 $450 $425 $400

Source: Company data, Griffin Securities.

Griffin Securities Equity Research 15 Autodesk, Inc. August 4, 2020

Disclosures

ANALYST(s) CERTIFICATION: The analyst responsible for covering the securities in this report certify that the views expressed in this research report accurately reflect their personal views about the subject Companies mentioned and its securities. The analyst responsible for covering the securities in this report certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation or view contained in this research report.

MEANINGS OF RATINGS: Our rating system is based upon 12 to 36 month price targets. BUY describes stocks that we expect to appreciate by more than 20%. HOLD/NEUTRAL describes stocks that we expect to change plus or minus 20%. SELL describes stocks that we expect to decline by more than 20%. SC describes stocks that Griffin Securities has Suspended Coverage of this Company and price target, if any, for this stock, because it does not currently have a sufficient basis for determining a rating or target and/or Griffin Securities is redirecting its research resources. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. NR describes stocks that are Not Rated, indicating that Griffin Securities does not cover or rate this Company.

DISTRIBUTION OF RATINGS/IB SERVICES: IB Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [BUY] 10 83.33 0 0.00 HOLD [HOLD] 2 16.66 0 0.00 SELL [SELL] 0 0.00 0 0.00

COMPANIES MENTIONED:

Ticker Company Name Rating

ADSK Autodesk, Inc. Buy ADBE Adobe Buy ADSK Autodesk, Inc. Buy

MARKET MAKING: Griffin Securities does not maintain a market in the shares of these Companies or any other company mentioned in the report.

COMPENSATION OR SECURITIES OWNERSHIP:

The analyst Jay Vleeschhouwer who is responsible for covering the securities in this report receives compensation based upon, among other factors, the overall profitability of Griffin Securities, including profits derived from investment banking revenue. Jay Vleeschhouwer who prepared the research report, did not receive any compensation from the Companies or any other companies mentioned in this report in connection with the preparation of this report.

The analyst Jay Vleeschhouwer who is responsible for covering the securities in this report currently does not own common stock in the Companies or any other companies mentioned in this report, but in the future may from time to time engage in transactions with respect to the Companies or other companies mentioned in the report.

Griffin Securities from time to time in the future may request expenses to be paid for copying, printing, mailing and distribution of the report by the Companies and other companies mentioned in this report. Griffin Securities expects to receive, or intends to seek, compensation for investment banking services from the Companies in the next three months. Griffin Securities Equity Research 16 Autodesk, Inc. August 4, 2020

Rating and Price Target History for: Autodesk, Inc. (ADSK US) as of 08-03-2020

08/25/17 03/07/18 08/24/18 11/21/18 03/01/19 05/24/19 08/28/19 11/27/19 02/11/20 06/03/20 B:$135 B:$165 B:$170 B:$175 B:$188 B:$193 B:$184 B:$186 B:$235 B:$249 260 240 220 200 180 160 140 120 100 Q3 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2

Created by: BlueMatrix

Rating and Price Target History for: Adobe (ADBE US) as of 08-03-2020

10/19/17 12/15/17 01/22/18 03/16/18 06/21/18 09/14/18 03/15/19 06/19/19 09/18/19 11/05/19 12/13/19 06/12/20 B:$192 B:$210 B:$226 B:$242 B:$278 B:$296 B:$300 B:$303 B:$317 B:$330 B:$334 B:$427 500 450 400 350 300 250 200 150 100 Q3 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2

Created by: BlueMatrix

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Griffin Securities Equity Research 17 Autodesk, Inc. August 4, 2020

for the general information of clients of Griffin Securities. It does not take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. Certain transactions - including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The information contained in this report is subject to change without notice and Griffin Securities assumes no responsibility to update the report. In addition, regulatory, compliance, or other reasons may prevent us from providing updates.

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Griffin Securities Equity Research 18