Hey everyone, I'm Tyler Radke, Citi's co-head of U.S. Software. Thank you for joining day two of Citi's Global TMT Conference. We're happy to have Autodesk back, who's a regular attender to the conference, and excited to have a great discussion with a practitioner, I would say, at Autodesk. We have Bob Bray, the VP and GM of Autodesk Tandem. Bob, thanks for making it out to New York City. I know you got a big conference in Las Vegas next week you're probably busy prepping for. But for the benefit of the folks in the room, give us a sense of your background. What are the things that you do day- to- day at Autodesk, just to set the stage?
Yeah, I live and breathe in the trenches. I build software. I run teams that build software. I've been doing it for Autodesk for almost 30 years, all through our architecture, engineering, construction business for a lot of that time. Was part of the foundation of our construction technology businesses. We did some foundational acquisitions there. Now I am kind of leading the way into the operations business for Autodesk, so that next pillar of growth for us. Excited to be here.
Yeah. What is Autodesk Tandem, just for folks that may be less familiar with it?
You can think of Tandem as an operational intelligence platform. Autodesk for years has helped customers design and build things. Tandem is more about how do we help customers operate those things effectively, efficiently, reduce downtime.
Yep.
Increase operating efficiency, whether that is throughput of a factory, whether that is helping people get through TSA lines more efficiently, whatever that may be.
Yep.
It is really about driving efficiency in operations. If you think about the flywheel that creates, that knowledge from operations then feeds back into helping people design and build things better in the future.
Right.
It really connects the value chain for Autodesk.
And-
From end to end.
And-
And for our customers.
Just to add that the operations market TAM is about $40 billion. That is about four times the size of the construction TAM. But as Bob said, there is sort of a couple of interesting attributes about it. One is it is a decades long business, whereas our construction business and design business is sort of a three to five year business. They are massively longer duration business. The second thing is it opens up a whole and massively bigger data set for us, because it is not just the new build where you get the data. It is the existing built environment, of which there is vastly more than the annual new build as well.
Yeah.
For example, a very large global retailer in Q2 signed an EBA with us to digitize their entire estate. It is not just their new build, they are digitizing their entire existing estate. That is pretty exciting, using Tandem.
And when you say it is a, I think you said 10 or 20-year opportunity versus a three to five-year, what do you mean?
It is actually a 50, 60, 70-year opportunity.
Think about, you design a building. You are going through the architecture and engineering process for maybe three to five years.
Right.
You are building that building, you are going through five years of process, typically.
That's 10 years of subscription for us.
Sure.
Whereas if you're maintaining that building, you're maintaining that building for 50, 60, 70 years. That's a long lifetime of subscription.
I see. Yeah. Thinking about the duration of the project and the use case. That makes sense. Within the building and construction design side, Autodesk has long talked about the BIM standard, I think probably for the past decade, maybe not 30 years. How is that, where are we in the adoption of BIM, and how is that driving growth for Tandem and some of the operations products that you sell?
The adoption of BIM is really about data interoperability and data flow from early-stage planning through design, through engineering, into construction, and then into operations. So keeping that data consistent and having a smooth set of data all the way from end to end. A concrete example of this in the real world, a large contractor in Europe, Royal BAM Group. They are now digitizing every project from beginning to end, with the end deliverable being a Tandem digital twin for use in operations.
They have extended their business in the last decade into facility management services. They will sign a 25-year contract to actually maintain a building after they have built it, and they use Tandem all the way through that process from beginning into operations.
Okay.
They have already called us about having a conversation with us about maintenance as well.
Yeah. No, that is super exciting. As you just kind of look at the lay of the land within the AECO segment, how are you seeing the puts and takes? Obviously, data center demand construction projects are off the charts, but there is certainly offset areas. So how would you kind of blend it together? You have been at Autodesk 30 years, seen many cycles. Where are we kind of in those ranges?
There is always an ebb and flow. Obviously commercial construction starts are not exactly high right now, but other things are high right now. So there is always an ebb and flow in the construction industry. If commercial op buildings are not being built, data centers are, or pharmaceutical facilities, or other types of facilities. So there is no shortage of demand for building things.
Yeah.
That's for sure.
Yeah. Got it. This concept of a digital twin, we've heard a number of design and simulation companies talk about that in the industry. What differentiates your approach and your digital twin product versus some of the others we might hear of?
Our approach is lifecycle based, through a whole asset lifecycle, from early-stage planning all the way through design, simulation of how that will perform, building that, and tracking the twin through construction, and using simulation of scheduling and all kinds of things through the construction lifecycle. Then into operations, and then being able to compare, is this factory producing at the rate that I simulated that it would. If not, why not?
Being able to optimize based on that. So it is really that whole life cycle approach that differentiates Autodesk and our approach to this process.
Right. Got it. You touched on MaintainX, and obviously that's a big acquisition, probably very exciting given where you sit within the organization. But how do you, I guess, you touched on some customer anecdotes, but what's sort of been the customer response and how are you sort of envisioning where that product goes versus where Tandem goes going forward?
Great question. We're super optimistic about this acquisition. Customers have started engaging with us significantly around this acquisition. And why is because if you think about what we built with Tandem, we built this system of intelligence, so we can understand when a product might fail or a component might fail in the building.
Also provide them context to what the root cause might be or what the solution might be.
So it's, again, connecting those systems together intelligently. So we go from understanding there might be a problem. What is the problem? To now assigning someone to go take action to fix the problem. So that connection through the life cycle is really important. As Simon said, we've had a global contractor who's been using Tandem for a few years now call us recently because now they see that opportunity to connect those systems end to end. That retailer also very interested in, their refrigeration units is where they started with Tandem, understanding when failure might happen, because highly expensive to throw food away.
Yeah.
Now they can assign a technician-
Right.
to go and fix that problem.
Right.
There's sort of two threads of opportunity. One is the sort of the owner thread, and the owners want a complete view of their assets end to end, both of their existing estate, and then that informs also their new build. Then you've got the sort of service companies that are servicing them-
Yeah
to help them build it, who are doing the same thing. We are serving both of those constituencies end to end. That then opens up the opportunity, which is, in AEC, and as we have told you, there is already. So MaintainX has primarily been in factories and manufacturing, but any asset, whether it be a factory, is a building with stuff in it.
as is an office block, as is a piece of infrastructure. They are all buildings with stuff in it, basically. The other opportunity is in enterprise. MaintainX has primarily been in small to medium-sized business. The third opportunity is in international. All three of those are significant opportunities for us to take MaintainX to help them expand. The longer term one, as we have been talking about, is the data, both in operations as a standalone, but then also taking operations data upstream into design.
Right. As we think about just the MaintainX business and what type of customers, what industries they are the strongest, and maybe this is also in conjunction with Tandem, but where do you have the most success, doing operations? I imagine doing operations for retail is very different than a data center or a complex manufacturing plant. Give us a sense of where you sit in kind of those today.
The highest impact in the customers that are adopting are those that have critical assets, where if the asset fails for any reason, they are losing revenue typically. So factory, industrial, healthcare, airports.
Yep
Data center and even into retail. One of the funny things about MaintainX that I learned early on is, one of their earliest customers and their largest early adopter, was actually car washes. Now think about that. If a car wash fails, they're not making money.
Yeah.
It makes perfect sense. So that notion of the asset being critical and its uptime being critical is where we see adoption.
I see. So talk to us a little bit about the data side of that, right? Because these are really complex environments, the mix of operational data, IoT data. And we've seen approaches from here at PTC, for instance, with some of the acquisitions and then subsequent divestitures they've made in terms of IoT. But where are you getting all this data from? And how do you kind of ensure that you're able to have that full view of a really critical and complicated environment?
We made a very small acquisition a couple of years ago, small enough that it did not make radar, of what was an integration platform. It was a hybrid integration platform that allows us to both connect to enterprise systems in a bidirectional way. An IBM Maximo or an SAP, systems like that, but also allows us to connect to technology that runs in the OT network within the building. That could be a building management system that is controlling temperature in this room. It could be an MQTT system or a SCADA system that is controlling the equipment in a factory or an industrial facility. We have that ability to connect to various systems and ingest that data from just about any system today.
Okay.
That is a tool that is low code, very easy to deploy, and we are starting to bring AI into that.
Yeah
To basically create the citizen integrator, if you will-
And-
to make that easier and easier to create.
The critical difference between what we're doing and what PTC is doing is that we are taking an owner view, which is of the entire asset. As you see with Tandem, also MaintainX is the same thing. Whereas PTC, with things like ServiceMax, is much more of a vendor view. So it's only a subset of the assets that are in the building, which is less useful for the owner.
Sure. Okay. That's helpful. I guess as you think about the AI opportunity, specifically within MaintainX and in Tandem, what are some of the key features that you have released thus far? What are some of the things that you are working on? I am sure we will hear a lot next week at AU, but talk to us just how you see AI out there.
You will hear a lot of things at AU. But in terms of Tandem and operational intelligence, we think about AI in three areas. One, helping customers take the massive data that they have, which is really what they have. They have a lot of fragmented silos of data, and turn it into structured information. AI is exceptionally good at that.
Yeah.
Helping them onboard and create their digital twin.
One thing. Second thing, you hear a lot of customers that complain about dashboard fatigue. I do not want to pay somebody to look at a dashboard. I want the system to understand where the problem is and tell me where that problem is. Again, using AI to infer from data, produce the right context. And then inform the customer what the challenge is.
Yeah.
Long-term, it is taking action. So using agentic AI to actually take action within a customer's facilities. Now, there is trust issues there.
Sure.
Customers need to trust that before they are going to have them control critical facilities-
Right.
in any kind of building. Customers are asking that.
Yeah.
Those barriers are starting to come down.
Yeah.
In MaintainX, it is understanding a maintenance schedule is one thing, or a manual will tell you this piece of equipment needs to be maintained every month. But i f you use utilization, you can create a predictive maintenance schedule that is much more optimized. Using AI to infer from data and then create optimized schedules, provide root cause analysis for the technician, basically give the technician at their fingertips what they need to know to fix the problem.
Yeah.
Solves a lot of problems, and it basically improves efficiency for the technician.
Right. And so it sounds like this MaintainX and maybe Tandem to a lesser extent, the target customer is the owners, right? If we look at the Autodesk business today, clearly dominant still in design, which maybe is less on the owner side. How would you sort of frame how big the owners' revenue or install base is today? And the reason I ask that is understanding is this more of a new logo or a cross-sell opportunity?
I won't rant on the term owner, but there's the capital project teams.
Yeah.
We've supported capital project teams at Autodesk for many, many years. So that's a cross-sell opportunity into their operations business.
Yeah.
At the same time, there's new logo opportunity and supporting operations businesses across the spectrum. The retailer that Simon mentioned earlier used to be an EBA years ago, walked away. They're now an EBA again. It's really because we introduced Tandem and an opportunity to digitize their operations business, and now they're working back upstream into our design, because they want to digitize our portfolio. So it's both new logo and expansion for us.
Okay. Got it. I guess as we sort of look at the AEC business, broadly and maybe manufacturing as well, but sort of separating out, MaintainX and Tandem, where are you seeing kind of the greatest interest just as customers are looking to deploy AI, broader as clearly there's a lot going on in the industry, with some of the new model releases, Astra, et cetera. But at the same time, you have massive backlogs of projects with a lot of manual processes that still haven't been automated by AI. So where do you kind of see the opportunities out there?
For AEC firms and AI, it's about automating the mundane. We do a lot of things repetitively and getting rid of the mundane constraints. We talked about that today multiple times, of just having a constraint solver that will automate constraints is a huge time saver for it. Just automating drawing production, automating the design of things that have a consistent shape to them. Bathrooms. I hear architects complain about designing bathrooms all the time. How many times do I need to design a bathroom?
Right.
There's certain things that can be automated in a repetitive way, and that's where AI is in early adoption within all AEC firms, because it takes away that kind of repetitive work and allows the architect or the engineer to do the things they do.
Well, let me tug on that thread a little bit, as you mentioned the magic word. This is going to be a longer answer, but a few things. Firstly, our customers really care that buildings don't fall down and wheels don't fall off cars, et cetera. So you can't just say, yeah, fuck it. Let's give it a go and try something. It has to work. So that means to build something that works takes time, and they're not just going to throw stuff out because they've got a whole bunch of processes to make sure the buildings don't fall down and wheels don't fall off. So they're not just going to rip it out, put AI in and stuff. So it's going to be a workflow by workflow adoption to make sure that they have accuracy, which then ensures safety and a bunch of other stuff.
That's the first thing. The second thing in terms of adoption is that there's two bits of value that you can extract from AI. One is around money, but the other is around data. And those often can be conflicting objectives, because if you charge more money, then people use it less, or you have less distribution, which means you get less data. What we're trying to do is to maximize both of those, which is, again, using the task workflow systems automation that we used at Investor Day, task being a narrow scope of work, workflow being a broader scope of work, and the system being the broadest scope of work.
Primarily focusing on task automations, which automate crap which people don't want to do. But the other attribute of a task automation is a small model, which means the compute can happen on the edge rather than in cloud.
Which means there isn't a lot of marginal cost attached to it. That means that we can deliver it as extra value to our existing products and capture value through price as we would with a typical subscription. That's how we capture value today. But what it also does is it makes the model available to all of our customers, and they use it more. Why is that important? Using an example from AutoConstrain and Fusion, at the beginning of last year when we launched it had an acceptance rate, which is demonstrated value, of about 30%. By the end of the year, because we were able to iterate with usage and data, the acceptance rate was north of two-thirds. A massive improvement in the value that we were delivering as demonstrated by the usage of it.
That's the second thing. Then the third thing, because you mentioned Astra, and to talk about it. Again, we talked a couple of weeks ago, as you know, on our earnings call, that there is going to be no single model that does everything because no single model will have access to the right data and the right context. The way to think about it, particularly in our world, which is very complex and has high stakes of things that go wrong, is that a decision a customer's taken in at any given point will reflect the combination of needs around accuracy, speed, and cost. And those three things are often competing constraints. Something that is very accurate is often slow and expensive to generate.
The choices you make between those three things will depend on the context in which you are taking that decision, and that context will then be contingent on a bunch of other things that are dependent upstream and downstream on what happens once that decision is made. That context and the decision making will be determined by the harness layer. The harness, which is for us, Autodesk Assistant, then pull on the right resources, which will be a combination of our own AI, neural CAD, it will be frontier models, it will be open models. It will be our customer's own intelligence. Also, it will build on a bunch of functionality to enable accuracy, speed, and affordability to take the right decision within the flow of work.
Where Astra fits into this is that we talked to an Investor Day, as I said, about task workflow and systems automation. As you move along that spectrum, the lead on the work shifts from being a human being to being a machine.
Yeah.
That, as we said at Investor Day, was exciting because machines generate significant new value in two ways. One is because they can make inference that human beings cannot because the human brain cannot conceive of it. Secondly, they generate new monetizable time because they work 24 hours a day, 365 days a year. You can only do that if the machines can intelligently take action. That is why Astra is important, because it enables that shift to generate that new value using our tools and drive significantly new value and more value through our ecosystem. We are pretty excited by it.
Right. Staying on that theme, it might just be slightly different definitions here, but one of the themes we were discussing yesterday with some of the private companies, heard this from some publics, is this idea of agentic labor, which I think, in your industry, you still need an agent can't build a building, right? Certainly, they can help with design, the automation of tasks, but ultimately there is sort of like this human bottleneck. Is the contractor going to show up? Are they going to have the right materials, et cetera. How do you think about the sort of agentic labor opportunity for Autodesk? Maybe it is more just agentic workflow or agentic system automation that you talked about.
How much, as you think about your customers, how much can that really accelerate their business given that there are physical and true human constraints, even if you did everything perfectly-
Okay
on the design and coordination?
This is where an economics degree is going to come be valuable again. Make economics valuable again. This is sort of lump of labor fallacy, Jevons paradox for those who want to sort of look it up, which is that AI is not about doing what you've always done with fewer people. It's about using the people you have to do a lot more, and a lot more defined as more volume of work, so solving capacity constraints, which are endemic in our industries.
Sure.
Secondly, do stuff which is previously inconceivably hard to do. If you're not trying to do more and harder stuff, and are only trying to do what you did before, you're going to die because we're going to take all of your business if you're one of our competitors. Okay? That's the sort of first thing. This is about doing more and harder stuff. It's not about doing the same as you've always done with fewer people. But the second thing, and this is important, is that the way that humans interact with machines is going to change quite significantly. From a sort of human-led with a sort of computer enabling the human to the computer doing a bunch of, actually a lot of the heavy lifting with the human defining the goals.
And validating on the sort of back end. The way that humans interact with machines is going to change quite significantly. You are already seeing this in R&D and in the software development role with things like spec-driven development and AI factory processes. That thinking is going to propagate across the entire economy. We are very optimistic that there is going to be a lot more done, a lot harder stuff, and we are going to be able to solve a bunch of problems, not least things like climate change, which are big problems that need solving. There are not enough resources to solve that problem. AI will enable that sort of stuff. But it is going to require people to work differently with machines.
Yeah.
You will see people engaging with products differently. Instead of engaging with products, they will engage with a conversational agent that will take them into their product workflows.
That is going to change.
That is going to change.
And you can see that already in how we are thinking. If you look at what Forma is doing, that is already, if you know what spec-driven development is, that is already a sort of spec-driven, whereas the human is saying, okay, what do we want to try and achieve? And then Forma is doing a lot of the compute behind that.
Right. You touched on Forma, so wanted to hit on that sort of data modernization, and I am sure we will hear a lot of updates next week. But where are your customers at, just in terms of modernizing the traditional kind of file-based models and migrating that data to the cloud?
Let us just say it is a normal distribution curve. Some are sort of right at the cutting edge, some have barely begun, and then everyone else is sort of strung out in between. Bob, do you want to?
I think the interesting thing about Autodesk is we had started that process pre-COVID.
Yeah.
COVID actually caused customers to move faster to the cloud. We saw significant adoption. It didn't go backwards.
Yeah.
They moved to the cloud, and they stayed in the cloud. That allows flexibility in their workforce, flexibility in where their people work, whether it's home, office, remote offices, engaging workforces in different parts of the world where labor is cheaper. I think that has helped our customers a lot, so we were early in that process. Customers are not going backward, they're going forward.
I think one of the underappreciated things about Autodesk is that the work that we've been doing over the last 10 years has set us up really well for the coming decades, and a lot of our competitors have not done that hard work. There's a sort of bunch of stuff around sort of business model transitions, around our platform, around the investments we've been making in AI for a decade, et cetera, that set us up really well for the future. I know they've been quite painful, some of them. Integrating more directly with our customer's another example. But all of that stuff, and that hard work that we've done over the last decade, have set us up really well.
Yeah.
Yeah. Got it. As you think about just the broader product portfolio strategy and M&A, I think certainly you've overseen quite a lot of acquisitions in your tenure at Autodesk. Construction Cloud started off with a marquee acquisition of PlanGrid, then you added BuildingConnected and Assemble, all those things. How do you kind of see the additional consolidation opportunity out there in terms of what categories you want to bring in to really have a dominant platform across the broader maintain operations market?
Yeah, I think the operations playbook is following the construction playbook, right?
Yeah.
MaintainX was that cornerstone acquisition for us. It was the PlanGrid. PlanGrid was a number two.
Yeah.
MaintainX is number one in the market.
Yeah.
We bought the number one player first and foremost.
Yeah.
Then what you'll see us do is continue to do tech tuck-in acquisitions to expand that portfolio. If you think about engineering and what we've done in engineering over the years, it's all about having data and having context. Operations is no different. We want to build rich context in operations. That means having data in different workflows that really enrich our asset intelligence.
Yeah.
That help us basically build that life cycle end to end, from planning to operations, and close that loop.
But we've been able to walk and chew gum, as you see, which is we've been able to make acquisitions, but also continue our capital return program, spending roughly 50% of our free cash flow returning to reduce share count over time.
Yeah. Simon, I think you mentioned earlier the operations TAM. It is $40 billion or so. Clearly, massive opportunity. I guess MaintainX is hundreds of millions, right? Is that all sort of that TAM? Is it more than a greenfield in terms of automating labor, manual systems? How do we kind of capture that? Where do all those dollars sit?
Where MaintainX started was more lower end of the market.
Yeah.
Digitizing paper processes.
Yeah.
Amazing number of customers today still operate and do maintenance on pen and paper.
I've seen major airports in the U.S. that still do maintenance programs on paper.
That's a little frightening.
Shocking.
That might scare you just a little bit when you take your next flight.
Yeah.
But obviously what Autodesk can bring to MaintainX is our enterprise business and our ability to tap into the enterprise. There is tons of growth potential for us in MaintainX, both in terms of bringing them up market into the enterprise, but also globally. Into the market.
It is not just the operations business. It will also help our design business and make business as well.
Right.
To pull through.
Right. Got it. Maybe in the last few minutes, I know you do not want to front run a bunch of announcements next week, but what are some themes investors should be looking out for at AU? What are some things you are excited about, Bob?
There's just a ton of announcements around AI that I think you're going to see that are really exciting for us. Pushing boundaries, helping customers do more with less, do more things and automate more tasks. That's been a big part of our focus and continues to be a big part of our focus. Changing the way customers work and how they approach their projects, focusing on outcomes. Another big thing that you'll see, the whole operations announcement, obviously, where I'm most excited because-
Yeah.
that's the world I live in.
Again, what we said at earnings, we'll put more flesh on the bone of what we said on earnings as well.
Yeah. There are a few things I can't say because
Oh, sure.
We are holding those announcements for next week.
Yeah. Got to keep some surprises for the keynote. Bob, just as we wrap up, let's talk about goals. What are your top three priorities over the next year? With this MaintainX and potentially other businesses, how do you think about the vision where you want to see the broader MaintainX operations business a few years down the road?
Yeah, I think for us, it's very much about building context around operations. So moving from system of intelligence, which we have been building organically with Tandem, into system of action with MaintainX, taking all of that information and feeding it back upstream into our design and construction business so that people can basically design and build better in the future. If we can close that loop over the next five years, I think that's a huge flywheel for us, expanding that operations business long term, but also just continuing to build our core businesses in architecture, engineering, construction, manufacturing.
Yeah. Great.
Cool.
All right. Thank you everyone for attending the session. Bob, Simon, really appreciate you coming out for the conference. Thanks.
Thank you.
Thanks.