Autodesk's Latest Acquisition Expands Construction Portfolio

Autodesk ADSK is set to acquire preconstruction software tools provider BuildingConnected for $275 million. The all cash deal is expected to close by Jan 31, 2019.

The latest deal is in line with Autodesk’s strategy to offer end-to-end construction management solution. The addition of BuildingConnected’s bid management platform improves the company’s visibility into new construction projects and bidding phase. Autodesk’s customers can use the tools to save time and money.

Moreover, BuildingConnected’s network of more than 700,000 construction professionals’ helps general contractors to find and hire qualified contractors for their projects. Further, the company offers TradeTapp, a subcontractor risk analysis platform, and Bid Board Pro, a platform that helps subcontractors manage and win more bids.

The addition of these solutions expands and strengthens Autodesk’s construction portfolio. The company’s focus on connecting construction processes across designs, buildings and operations is a major long-term growth driver.

BuildingConnected will be integrated into Autodesk’s construction solutions team that includes Autodesk BIM 360, Revit, AutoCAD, PlanGrid and Assemble Systems. The deal will help Autodesk further penetrate the construction market, which is currently worth $10 billion.

Acquisition Expands Construction Solution Portfolio

BuildingConnected is expected to have no material impact on fourth-quarter fiscal 2018 results. For fiscal 2020, Autodesk expects immaterial contribution from BuildingConnected toward annualized recurring revenues (ARR). However, it is expected to be slightly dilutive to profitability and cash flow.

Notably, in the last reported quarter (third-quarter fiscal 2019), total ARR jumped 33% from the year-ago quarter to $2.53 billion. Cloud business ARR increased 36%, driven by robust BIM 360 sales that added 53,000 subscribers. Moreover, subscription plan ARR surged 108% year over year to $1.93 billion, driven by growth in enterprise business agreement (EBA).

Autodesk, Inc. Revenue (TTM)

 

Autodesk, Inc. Revenue (TTM) | Autodesk, Inc. Quote

For fiscal 2019, Autodesk maintained its earlier guidance for subscription additions of 500-550K. Total ARR growth is still expected to be 30-31%.

Acquisitions like BuildingConnected, PlanGrid and Assemble Systems expand Autodesk’s portfolio. The company is also benefiting from rapid adoption of the BIM 360 product that is rapidly replacing legacy document management tools and preconstruction planning software. In fact, Autodesk expects BIM 360 to encompass the entire construction process from start to finish over the next five years.

Moreover, Autodesk is benefiting from solid growth in product subscriptions and the surging maintenance-to-subscription program. In fact, continuing investments in digital infrastructure like e-store and EBA programs are positives. We expect these trends to drive growth in the near term.

Zacks Rank & Stocks to Consider

Autodesk currently has a Zacks Rank #3 (Hold).

Cadence Design Systems CDNS, Synopsis SNPS and Symantec SYMC are better-ranked stocks in the same industry. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Expected long-term earnings growth rate for Cadence Design Systems, Synopsis and Symantec is 12%, 10% and 7.9%, respectively.

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