Q1 in AEC: looks like 2017 is a breakout year
You (and investors and entrepreneurs and many others) often ask me how the AEC market is accepting the technologies that discrete manufacturing has long relied on: 3D design, using a model as reference and not just drawings, managing those models and related workflows, embracing digital technology in AEC manufacturing aka construction … and, honestly, it’s been slow. Since many in the industry see each AEC project as unique, many of the advantages touted by the PLMish universe that apply to efficiency gains in mass production are seen to not apply. And AEC profit margins aren’t nearly as sexy as those on the latest tech toys, so the solutions are seen as expensive. But we may be turning a corner in 2017, if recent earning reports are anything to go by.
First off, Nemetschek. The Nemetschek Group is the holding company for Nemetschek and Graphisoft, whose BIM (Building Information Management, think intelligent 3D as applied to architecture) brands are among the best out there. In recent year, the company has expanded outwards from design into construction and building operations, building a portfolio that aims to address all parts of the AEC project process. Nemetschek reported, in its words, outstanding results in Q1, with total revenue of €96 million, up 24%, and with organic growth of 18%. The company is expanding its geo footprint, too, with revenue outside Germany up 27% on growth in the important North American market, as well as in Asia and Scandinavia (for comparison, revenue from Germany was up 19%.) By brand type, revenue from the Design segment was up18% to €61 million, with organic growth of 15%. Revenue from the Build segment was up 43% to €28 million (organically, up 27%, driven by the Bluebeam and Solibri brands). The Manage and Media segments continue to be small but strategic. In all, Nemetschek says this is to plan and reaffirmed its prior targets for 2017 of revenue near €400 million, up around 18% as reported with organic growth of about 14% and 15%.
Next, RIB Software. RIB is a bit different, in that it focuses on almost exclusively on construction. The company markets iTWO³ (the 3 means third gen), a cloud-based data/time/cost (5D) solution for project teams to streamline how they complete a particular asset. RIB quickly points out that it had a couple of unusually large deals in Q1 2016, making comparisons not as glowing as they might otherwise be, but the company was still able to show growth in Q1 2017. Total revenue was up 4% to €26 million, as license sales to mass market companies (all of those not considered key accounts), were up 39% to €4 million. Another way to slice it, is that Software as a Service / Cloud revenue was €4.3 million, up 13% over last year. Yes, both of those data points are small in the greater scheme of things, but still very important in showing trends. In AEC, the biggies usually lead the way. They have in-house IT departments, can vet and implement technology and tie proprietary processes to those tools to create competitive advantage. Smaller shops want to do the same, but with far fewer resources, so look to the bigger firms for successes.
Finally, Trimble. Trimble continues to expand its offering scope beyond the typical AEC, focusing on farming, forestry and other natural resources. Total revenue was up 5% to $583 million, with a 1% negative impact from currency. With the Q1 results, Trimble changed its segmentation to make it easier to compare to Bentley, Nemetschek and Autodesk, creating a Buildings & Infrastructure segment that focuses on building construction and civil engineering and construction. There’s also a GIS category, that includes the surveying, geospatial, and geographic information systems offerings (both hardware and software), and Resources & Utilities (focused on agriculture, water and electric utilities, forestry and mining) and Transportation (vehicle logistics, field service management, embedded technologies, rail and military). For Q1, Trimble reported that the B&I category reported revenue of $188 million, up 8% as reported, with growth across buildings and civil engineering & construction, and in the Tekla BIM/structural and in its real estate and space management offering. (Looked at the old way, the Engineering and Construction business reported revenue of $310 million in Q1 2017, up 6%.)
Trimble told investors on its earnings call that it sees itself “at the center of the information ecosystem for the civil engineering market [with] the advantage of being a provider of hardware and software bundles …The building-centric elements of the business were up double digits for the quarter, a reflection both of the performance of the business as well as a comparison against a relatively weak first quarter of 2016. All businesses performed well in the quarter, with concentrated strength in North America and Europe. Our civil engineering and construction business grew strongly outside of North America with double-digit increases in markets such as Germany, Japan and Australia. The North American market largely remained in wait-and-see mode.”
So, what does all this tell us? AEC projects often involve participants to partner on one project and then compete on the next. They increasingly rely on technology to just just the right amount of collaboration and holding-close of competitive information. They also look at solutions to help orchestrate, much like discrete factory planning, a job site. And, as the results above show, AEC companies are increasingly investing in commercial technology to make projects more efficient. Will 2017 be the year this all takes off? I think so.