Autodesk, Inc. (ADSK) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. I'm Johannes Schaller from Deutsche Bank's European software team. With me today, I have my colleague, Bhavin Shah from our U.S. software research team. And together, we're pleased to be hosting Autodesk for a fireside session today. From Autodesk, we've got, Theo Agelopoulos, Senior Director of Architecture and Engineering Design. We've got Sid Haksar, Senior Director and Head of Construction Strategy. Theo, Sid, great to have you with us. We also got Simon Mays-Smith, Vice President of Investor Relations from Autodesk on the line. Simon, I'll quickly hand over to you. Thanks for attending, to read the safe harbor statement. And then from there, we go into Q&A. Thank you.

Great. Thank you, Johannes. Yes, just to say we may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements.

Awesome. Thank you, Simon. So Theo, Sid, before we dive into the business, maybe can you just provide us with a brief background of yourselves and what your key responsibilities are within Autodesk?

Yes. I mean I'm happy to go first, if you want. So yes, so my responsibility at Autodesk is I lead our industry and business strategy for our buildings and infrastructure business, which has been historically the big core of where Autodesk has starting to be focused and growing in the biggest part of our business. I've been with Autodesk for about 13 years. Last 7 years in a business strategy role. Prior to that I've spent 13 years at Intergraph, which is now part of Hexagon. But it's been a lot -- the majority of my career, I would say, on the building and infrastructure design side -- design software side, just to be clear.

Perfect. Theo, I'll go next. So I'm Sid Haksar. I'm -- I head up construction strategy. I joined Autodesk 7 years ago, really in a role in corporate development. I was leading our M&A activities for really our AEC business. Spend the better part of the 7 years really focused on executing our inorganic construction strategy. So all the acquisitions we've done to this date that now comprise the bulk of the Autodesk Construction Cloud were done during my time there. More recently at the start of the year I took on a new role went into the business release strategy. And so in terms of what we do, it revolves around everything from really reflecting upon and developing our 3-year plan to all the M&A. Investments in organic approaches we're going to take to also determining where do we want to be investing our dollars from a development standpoint organically.

Yes. Sid, maybe just one additional thing is like Sid and I have very similar roles on the design and construction side, but we also manage a lot of our strategic partnerships. So things like Esri or Schneider, a lot of the construction partnerships, obviously that we've been investing in. So that's in addition to all the other cool things we do.

Great. Now thanks for the introduction and that detail. So you both clearly have a lot of history, not just in the industry, but obviously also at Autodesk over the last years. I mean, given you've been with the company throughout the subscription transition, and I know you haven't been in the driving seat, but also Autodesk's own internal traditional transformation. So as you look back, what has surprised you the most, you would say, from an internal process perspective from what you have seen in your roles and from a feedback perspective maybe from customers on those transitions and transformations? And following up on that, what would you maybe do differently today if you had to go through that kind of transition again?

I'm happy to -- I can maybe start, Sid, if you want. So I think when we began the business model transformation, obviously, we were at the forefront in our industry. So we were very cautious, I would say, in trying to provide customers kind of a multistep approach, originally starting with perpetual to subscription and then we went from multiuser to single user. And so we've tried to do this in a way to not completely disrupt the industry, make it more of an evolution than a revolution. I think what we've learned, quite frankly, and we're implementing some of these changes in some of the new acquisitions we've made, things like Innovyze, which is primarily a perpetual business is, customers actually wanted the whole thing laid out really at the front end of it, and they wanted to compress that time line. So I think what we learnt is we should have probably been a little more aggressive in the way we did it. And I think we're looking to some of the -- to implement some of those best practices as we go forward in some of the new companies we're integrating as we speak. So I think that will at least by my kind of summary, I would say. Sid, I don't know if you want to add anything.

No, I think for us on the construction side, I mean, we've been -- historically, it's a SaaS-based business model. So we really haven't gone through a perpetual to a subscription transition. I think what I will say is, we have evolved our business models based on customer needs. So if you think about it, we do believe, we have a very flexible approach, whether it is user-based pricing to account-based pricing. So we've evolved it and part of it has been as we've acquired companies that have been servicing the end markets with contractors. It's really helped us really better understand what they want. And I think what we've realized along the way is that there isn't a one size fits all, and I think they want to consume our software or just generally software in different forms. And I think we spend a lot of time making sure we're able to give that to them.

That's super helpful. Maybe just bigger picture. The entire industry is in the middle of digitizing the entire workflow from design to make to operate. What inning do you think the industry is in adopting this kind of process? And what do you think helps accelerate that adoption?

So maybe I'll take a stab here. So I'll say just it's really early stages. I think at Investor Day, we put out a TAM of $16 billion by 2026. I mean there's a massive opportunity. Most of the business that's happening today, believe it or not, is using paper, pencils. I mean we've been talking to some customers that are still cutting checks today for payments to their supply chain. Electronic wire transfers is something that's supposed to be really next-gen, if you will. So we do believe that there is a tremendous amount of runway just -- in just getting people off of paper and pencil and starting to use digitized processes. I think I will say that the pandemic, if anything, there's a silver lining has accelerated adoption to the cloud because a lot of it was driven by remote work. And the only way you can actually collaborate is if you're connected. And so we've seen a big uptick both within our customer base. And as we talk to even prospects that they have historically been averse to actually taking on new technologies or actually adopting our software. I think the third part, I think, which is also driving the demand outside of the pandemic, is there's just fundamental macro challenges that are impacting the business. And so construction companies are looking at themselves differently having to evolve. So one could be things like material prices increasing. So if material prices are increasing, which is a big issue for the industry, rework costs can be really punitive to their bottom lines. And so you need to start getting digital so that you can avoid making mistakes out in the field. That's number one. Number two is, you've got massive labor shortages, right? And it's going to only perpetuate further on. The only way you can improve that is you start developing -- it's getting on to software, developing processes using software, so you can actually decode what's in the mind of folks that are going to end up retiring over the next 10 years. So I think there's a couple of just macro headwinds facing the industry, coupled with the fact that, I think, COVID, which is really driving an inflection point and using more and more software and cloud-based tools.

Yes. The one thing, Bhavin, I would add just because I think you asked also a kind of a high-level question, which was about the whole design build to operate asset life side, right? I think here's how we kind of look at it, right. Autodesk as a company has been highly focused and highly tuned historically on -- if you look at the capital asset part of the business, we look at it as digital engineering, digital design and engineering, digital construction and digital operations, right? For the last, I would say, 40 years, we've been making this transition in digital engineering from CAD to BIM, right? And we've been a leader and leading the industry transitioning from 2D to model-centric digital delivery, right? And I'd say the industry has very much been adopting, and that's been driving a lot of our revenue opportunities, right? What Sid just described is where we see this massive opportunity in transitioning that industry at an accelerated rate compared to what we did in digital design in because we've done it before, right? And so that's where there's a ton of opportunity, and we're growing rapidly, and we're investing. And quite frankly, what we're building out is a unified platform to enable that transition from design to construction, okay? The next phase is really around digital operations. And you would have seen some of the investments we've been making around digital twins. And digital twins is really the, I would say, the incubator of accelerating the digital operations space, right? But what's common to all of those 3 phases is building information modeling. Building information, modeling, is not a product, it's a managed process. And we are the leader, okay, in the industry in deploying that managed process across all 3 phases, right? And we're taking what we did in digital design and construction, accelerating the digitization of construction. And now we're emerging into this next phase, which is digital twin and operations. So that's -- that's what we're good at, right? And that's why we're pretty bullish about the -- being able to address this available TAM and really transforming the industry. And I think if you look at all the emerging trends that are driving that digital transformation, like Sid just talked about cloud, but it's big data, it's AI machine learning. It's AR/VR. It's mobile. We're investing heavily in all of those to accelerate that digital transformation. So just to maybe help let us say the bigger picture and why -- what Autodesk is actually trying to do as part of its technology and go-to-market strategy, that's really what we're trying to achieve.

That's super helpful. And then maybe just a step further, as we think about all the layers of kind of growth to driving more adoption within organizations in terms of this digital transformation, I mean where does BIM stand in terms of those layers? Is that at the higher end? And how important or relevant are BIM mandates into kind of driving and improving that kind of make to design -- sorry, from design to make to operate process?

Yes. I mean I'm happy to maybe tackle it first. So what I would say is historically, what we've seen is, especially in the digital design and engineering, it was driven by a lot of customers that were looking to automate and minimize errors and improve quality through the design process, okay? And a lot of the companies that could afford to invest in that, okay, were the, I would say, the larger and larger enterprise customer. But what's happened and what we've been focused on is really taking it down to the long tail. That's what we've been really focused on for the last 14 years is making that BIM process available to the masses, and I think we've been very successful in doing that. And a big part of our focus in that arena was really expanding from the building market, which is very mature into the infrastructure market, and we're seeing tremendous growth in that market because it's an adjacency in the design and engineering market. And then the stuff that you're seeing now in construction and DCs and over subcontractors, BIM mandates are driving standards like ISO 19650 to enable the connection point from owner to designer to contractor. And a lot of the work we've been doing has been deploying our technology in a way to support that for those types of managed processes where it services the whole ecosystem. Okay. And one thing that we've always done well at Autodesk, and we have precedence is we know how to take complex, expensive technology, simplify and package it up and scale it to the masses. And that's a big part of our growth go-to-market strategy. And part of the business model that Sid was talking about is eliminate barriers to entry and provide commercial offerings that don't require a lot of consulting, but can be easily adopted through the whole asset life cycle.

And I think I'll just add to what Theo said is the more we have BIM mandates, I think it's greater for us as we go into with the construction portfolio because what that does is it creates like up levels, the digital maturity of those construction companies. And so we definitely like the BIM mandates. If you think about international expansion, which is a great growth area for us. We do believe we have a very extensive coverage there. We are looking at countries where there is BIM mandates in place, where there is BIM maturity because it just makes that pull through the -- our platform resonates so much quicker and so the time to market there for us is a lot shorter.

And the one thing I would just add also is, I would challenge anyone to tell me which competitor in the space, right, is servicing the building infrastructure, design, construction operations based the way we are. There isn't one, right? I mean -- so I think that's one of the clear differentiators and why we've been executing on this long-term business model transformation as well as a technology transformation from product to cloud, data to platforms, files to date. So that's all been part of how we're getting there and how we're doing it.

That clearly resonates with us. And I think Theo you mentioned this a little bit in terms of just vertical buildings versus infrastructure. I think many investors understand Autodesk's market leadership within vertical buildings. But as we think about infrastructure and horizontal design, can you help us just understand the difference from an end user or a workflow perspective versus traditional vertical buildings?

Sure. Yes. So the way I always like to describe civil infrastructure is like this, right? If you think about -- and I'll use transportation as an example, okay? So in transportation, Roads & Highways represents the biggest opportunity. If you look at the construction spend globally, rail is roughly about half of that. And Roads & Highways is a very linear infrastructure design process. Rail is an integrated building and infrastructure design. If you can't deliver rail projects without stations and facilities and all the other things, right? And then airport is very much a building-centric process, right? So that's if you look at the landscape like that. So if you're going to really be a provider of digital technologies in capital -- those types of capital assets, you're going to do both, right? So today, Revit is pretty much -- I don't want to say arrogant, but pretty much the standard in that vertical type of infrastructure. So facilities, train stations, airports, all of those assets are all being designed in Revit, okay? And what people don't realize on the linear side, we've had offerings in market like Civil 3D for designing, Roads & Highways and rail for 20-plus years, right? But we've been positioning our solutions as an integrated digital delivery solution that does both, right? So when a customer of ours is deploying our technology as a digital delivery platform, they're servicing both asset types and they're integrating it into a coordinated digital workflow. So ironically, the question I get asked a lot is because people see -- as the infrastructure. And the reality is we -- if you look at AutoCAD and all the different digital solutions we put in into the infrastructure space around civil infrastructure were bigger than the BIM. But we don't just target infrastructure. We target all the capital assets that make up an infrastructure project. So that's how you should be thinking about the infrastructure player. And again, you can -- I can point you to many examples where every major airport has been primarily delivered for the most part, in a Revit environment. Most rail projects and a good example is the rail project in New Zealand right now, it's an integrated delivery between Civil 3D on the linear side, and Revit on the vertical side. And then in Roads & Highways, every year, we've been chipping away at some of the DOTs in the U.S. and other transportation agencies as their preferred digital delivery solution for design in Roads & Highways and Bridges. So that's kind of -- hopefully, that gives you a little bit more of a -- little more clarity about how we think of the market and the fact that infrastructure is a collection of different types of assets. And we're uniquely positioned, okay, we believe in order to service all of those.

Super helpful. You kind of talked about your market position there. But maybe from less of a prior perspective or maybe more from a go-to-market perspective, is there anything unique that we should think about addressing the opportunity with road, rail, airports, et cetera, versus kind of the traditional vertical buildings? And then maybe just touch on if there's any major differences in the competitive environment as well?

Yes. No, it's a great question. So number one, I would say the owners generally have much more of an influence on the infrastructure side because they tend to drive a lot of the requirements, right? So that's basically why we've been focused on selling to DOT, selling to rail owners and to others and helping them through their own digital transformation, okay? So -- and generally, the bigger challenge here is you're selling to public sector. So a big part of our go-to-market has been to continue to invest in selling to public sector. It's part of the reason, for example, we're investing in Fed Ramp -- moderate for our cloud solutions to allow our public sector customers to better manage a lot of their secured data and meet those different types of anticipations and compliance requirements. But we're doing all over the world and looking at how do we deploy our cloud infrastructure to allow more public sector customers to leverage our solutions, right? So just from a go-to-market perspective, you're going to see us continue to expand the scope of what we do to better service those types of owners because there's a long tail, right? There's the engineering companies, the contractors that have to participate in that project ecosystem.

Got it. Super helpful. Johannes, I don't know if you have any questions next to ask.

Yes. Thanks, Bhavin. So I mean you touched both a little bit already on the competitive environment. So maybe if we could dig a little bit deeper on that, just maybe starting with the competitive situation, especially in Europe on the BIM side. I mean, there are some smaller players here such as Nemetschek. They do have a strong BIM focus, but obviously a much smaller company than Autodesk. Can you talk us a little bit through the competitive dynamics you're seeing against them and then more broadly in the European market right now?

Yes. So I think one interesting thing I would say about Europe, right, is early BIM adoption was very U.S.-centric driven. 14 years ago, we saw a lot of the commercial companies really adopted. But I would say Europe, in particular, the government have really driven, I would say, the adoption of BIM, okay? And as a part of governments driving that, the governments have also been driving interoperability and open standards, okay? So Autodesk, we've always been actively engaged in different industry bodies and open standards. And I talked a little bit about ISO 19650, which is the in mandate standard. That's part of the reason we've been investing in that standard so that we can coexist with a lot of the different vendors in the space. but it opens up the market for us to then go head to head and position our solutions as a better alternative in many cases in some of those niche markets. So you're absolutely right. Like we see more Nemetschek, say, in Germany versus maybe Revit use in the U.K. But the fact that we're able to interoperate in these multi-design environments and we recognize that our customers need to operate in those environments. It allows us to participate and then land and then expand over time. And we're seeing numerous examples where we may land in a particular project. And we actually end up expanding because our customers want to rationalize the design and deliver a tool they use on those projects. So we feel like the European market, in particular, driven by IFC as an interoperability standard, driven by ISO as a digital delivery standard, it helps us expand in those markets.

Perfect, Theo. Maybe Sid a question for you then. Just in terms of talking about the Autodesk Cloud, what would you say have been some of the biggest learnings since launching the Unified Autodesk Cloud? And what would you say were some of the largest pain points you're helping your customers with today?

Sure. So I think on the learnings is we should have launched the Unified Cloud a lot sooner. I'm only half joking, but I say that because we've seen very strong response from the market really for a platform that brings together the best of breed of best-in-class field solutions, which was what was our -- the PlanGrid acquisition. And then, obviously, really strong, very robust project management and cost management capabilities that was BIM 360, which is a native solution. So the fact that we brought it together under this Unified platform is resonating extremely well with customers. I will tell you, you've seen some of the stacks that I think Jim mentioned during Investor Day, we've got in the 6 months since we launched. We've had over 11,000 projects unbilled, MAUs growth is up 35%. So that's generally -- this is being received very well. I think what's coming down to the fact is customers today are really suffering massively from fatigue. There are several point solutions that are out there. And when we talk -- when I talk to customers, the one thing that they say is they're looking for an integrated and open platform that can provide compelling value for them. They're not looking for a company that provides everything, but they do want the base functionality and the ability to integrate with solutions that they might be using. In terms of -- I think you asked about pain points for customers today. I mean, I think, look, if you think about contractors, what do they really care about? I think I'll characterize them across like 5 areas. One is they want to win not just work. They want to win profitable work. And we -- today, if you look at our solutions, we've got a very robust reconstruction solution out there for them. The other areas that they're focused on is around quality, safety, cost and schedule. And so if you think about it, we spend across all of that. And then the final piece of all of this is getting paid on time, so -- and effectively. So we have everything there today that helps drive towards it, and we have consistently and continually investing in that area. And so what pain points are we looking to solve? I mean, people today are really wanting a system of record, and I use this very judiciously. They're looking for a system of record for project data. Because your ERP or accounting system is really your true system of record, right? And so this is an industry that really suffers, as I said, really from chronic existence of data silos. For putting it in context, about 95% of data that is generated between engineering and construction goes unused. So if you think about the implications of that, every project is bespoke. It starts from scratch. You can't take learning some previous projects to drive better future outcomes. And then the second area that customers are already struggling with, as I mentioned earlier on, is really around this notion of rework and waste. And so rework costs about globally about $280 billion. So this is the reason when you have disconnected solutions, data not flowing back and forth, and then you end up doing things out in the field which then need to be rectified, right? So these are areas that our customers are acutely facing. And as I said, compounded by rising material prices, lack of labor, a solution like the Autodesk Construction Cloud is definitely resonating with them.

Actually, one thing I just want to add because Sid actually raised a really good point around data, right? I think the one thing that you guys should really understand is that we're transitioning from being a product company to a data company, right? And the reason why that's important, and I see one of the questions around Procore is because you can't deliver a project unless you connect design, construction back to the owner. And that's what's driving a lot of these BIM mandates around ISO and so forth, right? But if you -- at the end of the day, how do customers manage risk and quality, right? They basically put these very, I would call a manual methods in place to manage that, okay? But once you can manage all that data and you can start to do things like predictive analytics and real-time insights, you can manage that risk earlier in the process, okay? So the early on, you match that in the process, okay, to less risk and stuffing causes downstream. If you look at your typical infrastructure project, 80% end up being over time and over budget, right? So a lot of that transition is happening right now in our platform, and we -- we're becoming a data company, we're going to overlay a lot of these emerging trends to help our customers make better decisions earlier, both in design and in construction and ultimately, as we continue to evolve our digital twin platform in real-time operations, okay? So I think there's a method to the madness that of what we're doing. So I just want to make sure that's clear.

And I just want to add one more point to what Theo said, and this is when Bhavin was asking about what innings are we in construction? I just -- because this is -- I've been in Autodesk 7 years. I've actually seen where we were from a construction standpoint right at the start to where we are. And I'll be very honest, this is probably the most exciting time for us. And to put it in context, construction, and we talked about Investor Day, we grew 30% plus, right? Keep in mind, we grew at the time with 2 distinct separate applications in the market, and we still grew at that rate. Where we are today is we have a Unified platform. I mean that just opens up the runway. And I will say we are running into situations where the incumbent customers or with an incumbent are really putting us in there in the mix. These are not conversations we were having previously, and we're winning. So I think there is excitement there. I won't say it's a blue sky and Rainbows, but we feel very, very excited about where we stand today.

Sid, that's super helpful. Maybe just a follow-up for you. Just in terms of the pricing strategy you guys have around construction cloud like -- construction cloud. Why do you think that's the appropriate strategy to take as you're trying to further adapt your solution within GC, subcontractors, et cetera?

Yes. So I think -- look, we historically had started with user-based pricing. I mean if you look at language pricing, it was primarily user base, right? And it was aligning as the way we had as well. But that can work -- and what we did was we listened to our customers and how they wanted to purchase. And especially as you think about the larger companies, contractors. They don't want to potentially have to deal with. I need to buy 10,000 -- I mean 10 licenses or 100 licenses for their supply chain. They just want to have the ability to say, okay, I'm buying this is all my supply chain, my subcontractors get access to my software. So we were hearing this from them. But at the same time, we did hear that these account-based models may not necessarily work for the smaller deal, right? They may know exactly how much we need to purchase from a software standpoint. So what we did was we decided -- we said we would provide the ability for customers to purchase whichever way they want, and we will leave it up to them. And we've seen that really resonate. There are folks that still prefer user-based pricing. And that's the way they consume and there are others that want to count base, and we have that available to them. I think what we didn't want to do was to just go in one type of pricing model. Because we have heard enough like that there are people that consume software differently, very differently. People that -- on the account base, there's always been that pushback. "Hey, why are you tying it to my construction volume? If I do well, why do I need to pay more for software," right? So -- there are others that are just fine with that because they're scaling a lot quicker, and they need to not focus on how licenses that they're buying for their supply chain. So we provided that flexibility.

Perfect. Helpful. Theo, just one for you. We talked a little bit about just rail and road. But just on the water side, can you help us understand the acquisition of Innovyze a bit better? How important is water infrastructure? And then how does it complement some of the assets you currently have?

Yes. Yes. No, it's a great question. So when I talked earlier about -- if you think about civil infrastructure, it's transport, land and water, right? I mean that's pretty much makes up that part of the business. We've historically been very focused, I would say, on the transportation and land side. That's where most of our business comes from. We've been selling differently into water. But it's been very targeted around, I would say, the geometric design of Dans and Levies and plants and that kind of stuff, right? But that industry is very much driven around hydraulic analysis and simulation, right? So what we were lacking was that. So the Innovyze tools opens up the whole hydraulic modeling, asset management and operational analytics space that we were not basically part of. So it extended the TAM that was available for us in the design and operate part of the business. And as a result, right, when you match it up with our design and documentation tools, okay, as well as our construction portfolio, we now have an end-to-end solution from planning all the way through operations. And just to give you an example, I talked a little bit about these emerging technology trends, things like IoT and predictive analytics. Well, Innovyze is already doing some of that, right? So they're already basically doing real-time analytics of water treatment plants, okay, where the owner, which is generally municipal government can optimize how they run those facilities, right? And in some cases, they can optimize those down to 50%. Now -- so that's the strategic rationale where it fits in our portfolio. Look at what's going on right now with all the water bills, look at the water challenges we're having coastal cities, floods, fires. Waters is resource that also is going to drive a lot of our sustainability strategy, okay? Various governments need to make better decisions to mitigate those climate change threats and so forth. And just to give you an example why the city of Houston just recently made a big investment in their air lives and they're mandating a lot of their supply chain, use their analytics and simulation tools on their projects. So strategically, just coming -- to summarize, what is the gap we had in water, okay? It expands our presence in analytics and simulation. It accelerates our move into the digital operations space that I talked about earlier in the water, and it opens up a ton more TAM.

Got it. Helpful. One last question for me before I turn it over to Johannes. Just from an overall U.S. infrastructure spending perspective. Can you just talk about the opportunity with the U.S. infrastructure Bill? What areas within Auto portfolio could potentially benefit the most? And what can you perhaps do to make sure the company is well positioned to benefit from any increase in spending?

Yes. No, it's a great question, right? So the Bill is almost there, right, so fingers crossed. But if you break down the infrastructure build, there's about $550 billion in new funding and about $450 billion in renewed fund. If you break that further down, there's $110 billion in Roads & Highways, $105 billion in rain and transit, $25 billion in airports, I think $72 billion in water, right? But there's also a whole bunch of money around building. So every single one of those markets we service, okay, it's the main reason why we've been targeting DOTs and transit authorities and water utilities and public sector to help influence their adoption and accelerate their digital transformation. But it's also a lot of the customers that deliver those projects to those news of honors -- RSM customers. So what we expect is an acceleration in adoption in the industry. And it's going to help all of our core businesses, both in building and in infrastructure. And it's also the reason why we've been investing in essentially addressing one of the cloud security, data localization requirements. We have a plan wrapped around ensuring that we can meet a lot of those needs of governments, not just in the U.S. but over the world quite frankly.

Right. In the interest of time, maybe a last quick one from my side. I mean, we're obviously seeing -- we have seen some shortages of certain construction materials and there is a bit of a concern for some of the exposed companies here. I mean, you talked earlier about how you're actually helping your customers with your products if there is a redesigned process to keep the cost down. So should we see those shortages of construction materials continue? Did you actually believe that is a negative for your business? Or could it be a positive?

I'll say we look at it as a positive. Look, I mean, this is the reason why companies have been struggling with rising prices. I mean one is the ability to pass that on to the owners, but it's also because the archaic ways of doing business. And I think in times like this, they're going to have to look to optimize business processes to drive higher margins, right? Because it is going to compress in what is an anemic margin profile to begin with. So we believe that's a net positive for our business. I mean it helps, it angelize why companies need to get on to the digitization train sooner rather than later.

Yes. The one thing I would just add to that is we do -- so we do spend a lot of time monitoring commodity prices, employment project backlog, all of these things. And what I would tell you is like right now, we're seeing 33% shortages in more than lumber, 29% in steel, 12% in PVC pipe. And so -- but we haven't seen a direct impact on the business yet or either adopting different technics or picking different materials to mitigate some of that. But we are definitely continuing to monitor it as we look forward. But I would say, as of right now, it hasn't changed the -- there's a construction positivity index. It hasn't really changed our index much so far. So -- time will tell but that's what we see up until now.

Great. On that positive note, I think we ended here in the interest of time. Sid, Theo, thanks very much for attending. Simon, many thanks for the TEO nas well from both Bhavin and me, and have a good rest of the conference.

Thank you for having us.

Thank you.

Thank you.

Thank you.