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Autodesk's PlanGrid Buyout to Solidify Construction Portfolio

Autodesk ADSK is set to acquire construction productivity software provider PlanGrid for $875 million. The all cash deal is expected to close by Jan 31, 2019.

The company’s software solution facilitates real-time collaboration of general contractors, sub-contractors and building owners. Its mobile-based software-as-a-service (SaaS) solution is focused on document-centric work flows for field execution and project management. Per CEO Tracy Young, PlanGrid’s cloud hosts more than 50 million blueprint sheets.

Per Autodesk management, “There is a huge opportunity to streamline all aspects of construction through digitization and automation. The acquisition of PlanGrid will accelerate our efforts to improve construction workflows for every stakeholder in the construction process.”

PlanGrid’s software will be integrated with Autodesk’s Revit software and BIM 360 construction management solution. The deal will help Autodesk further penetrate the construction market, which is currently worth $10 billion. Also, the deal will expand customer base as PlanGrid currently serves 12,000 clients and has roughly 120,000 paid users.

Acquisition to Boost Revenues, But Hurt Profits

PlanGrid is expected to be slightly accretive to revenues but dilutive to profitability and cash flow in the fourth quarter. For fiscal 2020, Autodesk expects PlanGrid to contribute approximately $100 million in annualized recurring revenues (ARR) and be slightly dilutive to profitability and cash flow.

Autodesk, Inc. Price and Consensus

Autodesk, Inc. Price and Consensus | Autodesk, Inc. Quote


Notably, in the recently concluded 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).

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

BIM 360 Adoption Noteworthy

The BIM 360 product is rapidly replacing legacy document management tools as well as preconstruction planning software. In fact, Autodesk expects BIM 360 to encompass the entire construction process from start to finish over the next five years.

Autodesk stated that customers are deploying all modules of the BIM 360 platform. The construction management solution has been adopted by large clients like AECOM, Arcadis, Swinerton and Layton.

Notably, the integration of PlanGrid software with BIM 360 will enable seamless exchange of 2D and 3D projects information. The enhanced feature is expected to help Autodesk win more clients in the long haul.

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).

ACI Worldwide ACIW, Cadence Design Systems CDNS 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 both ACI Worldwide and Cadence Design Systems is 12%. Symantec is expected to grow 7.9%.


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