Q3 2021 Autodesk Inc Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the Q3 fiscal year 2021, Autodesk earnings Conference call at this time of participant lines, there and and listen only mode. After the speakers presentation. There will be of question and answer session task of question. During the session you will need to press star one on your telephone.

Please be advised of todays conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Simon made Smith, Vice President of Investor Relations. Thank you. Please go ahead Sir.

Thank you operator and good afternoon. Thank.

Thank you for joining our conference call to discuss the results of our third quarter fiscal year 21.

On the line is Andrew Anagnost of CEO, and Scott Herron, our CFO.

Good Day conference call is being broadcast live by webcast and.

In addition, a replay of the call will be available to Autodesk dot com forward Slash investor.

You can find the earnings press release slide presentation, and transcript of todays opening commentary on our Investor Relations website. Following this call.

During the course of this call we may make forward looking statements about our outlook future results and related assumptions and strategies.

These statements reflect our best judgment based on currently known factors.

Actual events or results could differ materially please.

Please refer to our SEC filings for important risks and other factors, including development and the kind of with 19 pandemic and the resulting impact on our business and operations.

May cause our actual results to differ from those and our forward looking statements.

Forward looking statements made during the course of being made as of today.

If this call is replayed all reviewed after today the information presented during the call may not contain churns or accurate information.

The day disclaims any obligation to update or revise any forward looking statements.

During the call we will quote a number of numerical growth changes as we discuss our financial performance and unless otherwise noted.

Such reference represents a year on year comparison.

All non-GAAP numbers references day, it's cool reconciled in the press release or the slide presentation on our Investor Relations website.

And now I will turn the call over to Andrew.

Thank you Simon and welcome everyone of the call first.

First off I Hope you and your families are remaining safe and healthy and before jumping into our third quarter results I would like to thank again, our employees and their families and communities and support as.

As well as our partners and customers for their sustained commitment during uncertain times.

That commitment was reflected in our execution and demonstrated the resilience of our business model. This past quarter together they enabled us to deliver strong Q3 results with billings revenue earnings and free cash flow coming in above expectations. Despite the volatile macroeconomic conditions, resulting from the cash.

Moving.

I'm pleased to see the acceleration of our SaaS business model, the secular shift to cloud underpinning it and the competitive opportunities. It brings we have many miles of opportunity ahead of us our enterprise customers are undertaking their own digital transformation and by enabling our transformation, we are becoming a strategic partner rather than a.

Software vendor these.

These strategic partnerships are broader than in the past with our customers expanding their all of their product portfolios.

Our third quarter results reflect this trend as our enterprise deal activity with large customers accelerated.

We closed some of the largest transaction and then the company's history, including a nine digit deal I.

Im proud of our team's execution, which positions us well entering the fourth quarter with a strong pipeline of deal.

And the third quarter, we also saw the ebb and flow of the economic impact of the pandemic.

As you know our transition to the cloud means we are able to monitor the usage patterns of our products across the globe and feet of positive correlation between increasing usage level and new business growth in those regions.

China Korea, Japan, and most of Europe saw usage levels rise above previous pre covert levels, while usage trends and the U.S. and UK have not yet returned to pre coated level. They have stabilized in the U.S. and growing sequentially in the UK in line with the usage trends, our new business remains impacted by.

And a pandemic, but the diversity of our revenue stream and customer base is helping us deliver strong results.

Now as you know Scott has decided to take on the next challenge and his career by accepting the CFO role of Cisco starting mid December Scott has played a huge role in driving the business over the last six years, helping autodesk successfully navigate the business model transition we are sad to see him leave but we are also excited.

Form. Thank you Scott for your many contributions Autodesk and I wish you continued success and the next chapter of your career Scott.

Scott is leaving behind a strong team to ensure a smooth operations. While we look for his replacement we started the search process and it is my top priority in the near term now.

Now I'd like to turn it over to Scott to take you through the details of our quarterly performance and guidance for the year I'll then come back to provide insight into our strategic growth drivers.

Thanks, Andrew.

And leaving Autodesk of mixed emotions and I'm excited about what lies ahead for me, but also sad about leaving my colleagues and all of that.

Last six years of and the most on the reward of your my entire career as we transform the company from a traditional license revenue model to a cloud based recurring revenue model that.

Patrick This is now complete and and leave knowing Autodesk is well positioned for the future with leading positions and attractive markets and accelerating momentum.

Looking at the quarters results several factors contributed to our outperformance across all key metrics, including strong enterprise deal activity.

Healthy subscription renewal rates digital sales of sequential improvement and new business trends and foreign exchange rates.

Total revenue growth came in at 13% as reported 14% and constant currency with subscription plan revenue growing by 24% and operating margin expanding by three percentage points.

We previously told you that we extended payment terms for customers impacted by the pandemic.

And normalization of payment terms combined with improving business trends and strong cash collections in Q3 helped drive healthy free cash flow of $340 million.

Current ARPU, which reflects committed revenue for the next 12 months was up 16% slight improvement on the rate of growth, we saw and the second quarter.

Total RPD was up 21%.

We did benefit from the diversity of our customer base.

Business office and certain areas like the U.S. and parts of Europe was offset by strength and other areas.

Little sales continued to drive double digit billings growth through our online channel supported by accelerated growth and our cloud based fusion offerings.

We are developing broader strategic relationships with our enterprise customers with multiyear commitments and.

As is typical for most enterprise agreements the nine digit deal Andrew mentioned is a three year commitment billed annually and did not have a meaningful impact on our revenue or cash flow during the third quarter.

The run rate business with our partners also continued to perform well.

While we are seeing the traction of our transition to the new user business model. It results in a subset of our customers optimizing their install base are reducing the number of named user seats needed. After they take advantage of our cheaper one trade in program and.

These are important these overall trends are in line with our expectations.

As we've said in the past and aggregate the transition to the name of user model is a revenue neutral event for us, but enables us to offer more value to our customers and a similar way as other SaaS providers.

Our net revenue retention rate remained within the 100% to 110% range, we laid out in our guidance.

Our product subscription renewal rates remain strong reinforcing the critical nature of our products to our customers.

As of the prior quarter, approximately 40% of and maintenance customers and came up for renewal converted to subscriptions are.

Our maintenance renewal rate declined sequentially, which was expected as we are nearing the end of our maintenance program.

Industry collections remained stable share of our total business in Q3.

As anticipated multiyear payments were down year over year, but we saw modest sequential improvement in the share of multi year payments across across each geography as customers continue to make long term investments and our products.

And finally during the third quarter, we spent $196 million of the buyback 800000 shares at an average price of $231 per share.

Year to date, we have repurchased 2.12 million shares at an average price of approximately $186 per share were close and the $393 million.

Now, let me turn to our guidance, we are raising the low end of our full year guidance range to a range of 3.75 to 3.765 billion.

Bringing the midpoint growth rate up to 15% year over year.

We are also raising our non-GAAP operating margin outlook to the upper end of our prior range of four point improvement from last year.

Our fourth quarter performance will benefit from the strength of our third quarter results with the business environment remains uncertain given the current wave of covert cases.

We expect product subscription renewal rates to continue to be very healthy cash.

And on our maintenance offering will likely accelerate as we enter the final stages of ending our maintenance offerings.

And we expect our net revenue retention rate to remain between 100 and 110% for the quarter.

Our pipeline entering the fourth quarter strong, but we've assumed that new business and multiyear contracts will continue to be under pressure.

The narrowing of our billings and free cash flow outlook range is primarily driven by moderating assumptions around multi year and the uncertainty presented by the current environment.

It's a testament to the strategic value of our products to our customers and the resiliency of our model that we're still expecting to report 15% revenue growth. Despite the current economic headwinds.

Looking out to our fiscal year 2022, we expect and improving macroeconomic environment as we exit this year will result, and accelerating growth and new business over the course of fiscal 2002.

Given our subscription model revenue growth will lag the improving sales environment as.

As we've said in the past the path to fiscal 23 will not be linear we.

We expect our fiscal 22 revenue growth to be low to mid teens and free cash flow growth to reaccelerate to approximately 20%.

We are confident in our fiscal 2003 free cash flow target of 2.4 billion.

As we will benefit from improving business momentum in fiscal 22, and will provide a tailwind to our revenue and free cash flow growth.

Because of the 43 will also benefit from the renewals of our fiscal 20 transactions when we restarted multiyear payments for a part of our business.

Beyond fiscal 23, our continued and vessel and cloud products and of subscription business model backed by our strong balance sheet give us a robust foundation and platform for double digit growth and.

And now I'd like to turn it back to Andrew.

Thank you Scott.

Our strong performance in Q3, once again demonstrate the advantages of our diverse customer base resiliency of our employees the power of our SAS offerings and the strength of our business model and.

Oh, Yes University last week, we hosted approximately 100000 customers and partners and made a series of product and partnership announcement as well as our acquisition of space maker, which closed yesterday and offers leading functionality to architect space maker will enable us to support design professionals much earlier in their workflow by harnessing.

AI to rapidly create and evaluate options for of building our urban development.

Through automated data capture smart design decision support and collaboration functionality space maker enables users to quickly generate optimized and iterate and design.

Also offers a fundamental shift in how we imagine and build cities in the future and the time needed to evaluate various possible options I encourage you to check out the demo from last week and is available on our website.

We also announced the Autodesk construction cloud platform, which unifies, our HPC cloud offerings and the data held within them to enabled of connected project ecosystem of cost design and construction.

Underpinning the August of construction cloud of our common data environment Autodesk docs. This.

This provides seamless navigation integrated workflows and project controls and enables a single source of truth across the project lifecycle.

Total bill quantify and Tim collaborate, bringing together the best of planned grid and Bim 360, with new functionality to create a comprehensive field construction and project management solution pardon.

Pardon line customers and collaborate pro extends the capabilities of Bim 360 design on the new platform to create a more seamless exchange of project data between design and construction.

During the quarter Morgan simple, a leading construction group and the UK committed to Autodesk and their strategic platform partner and Lee Ramsey Morgan Tyndall Digital design Director said quote Iresearch all of the marketplace solution out of that stood out for me.

I would of construction cloud provide greater integration between different roles and functions, allowing data to be shared a cost project sales.

Sales to be broken and of vast amount of efficiency to be gained and coke.

The breadth of our APC business of underpinned this resilient performance and enabled it to be a net beneficiary of from secular and cyclical trends. Despite many construction project being interrupted delayed or navigating new ways of working because of the pandemic, we're still seeing year on year growth across all our construction offerings, our cloud based product and Amy.

While our customers and navigate the cycle today and to be more efficient and sustainable for tomorrow.

Our office based solutions continued to do well, while fuel based solutions improved sequentially boosted by several competitive wins come.

Customers continue to choose plan grid to digitize their profited because it is easy to use and they only pay for what they need this.

This quarter, our Bim 360 product set records for both worldwide weekly average users and projects.

We also continue to see adoption with our larger customers and within the infrastructure industry.

During the quarter, one of the world's leading professional services firms, which serves clients and the interest infrastructure and building sector and increase this investment with Autodesk.

We have been part and together for over 15 years and the renewal of our enterprise business agreement enables this from new expanded its use the bim 360 and planned grid in order to a debt factored industry changes and create new markets for and services.

And another instance, Japan's largest homebuilder Tyler how industry company limited renewed its enterprise business agreement with of the company of making key investments and them and has selected autodesk to be of strategic innovation partner to achieve its goals for digital transformation designed for manufacturing and industrialized construct.

And the company of adopting them at all levels of the organization and has made a commitment to adopt additional out of this product, including temporary 60, docs and design and planned growth.

Thrilled to be working with our house at the forefront of industrialized construction.

Our cloud based platform is also propelling growth and manufacturing by enabling the convergence of design and make on the commercial side, our market leading cloud based platform fusion 360 enjoyed another quarter of accelerating subscription growing scale of deployment and adding competitive displacement to end the quarter with over.

120000 subscriptions.

And you we introduced several extensions of the cadence of 60, and further encourage adoption and usage of the platform by adding specialist functionality.

As a reminder, extension to offer expanded tools and functionality that can be added on demand of the core fusion 360, offering is kind of functional flexibility and cost effectiveness enhances the value of our platform for designers engineers and manufactures.

We also announced exciting partnerships with sandvik core amount and Rockwell automation within the core of on a metal cutting tools and services company. We took the first step to realize a shared long term vision of accelerating the automation of manufacturing processes by making tool data and manufacturing recommendations available to users.

Fusion 360.

With Rockwell automation of provider of industrial automation and information technology, we combined factory layout capabilities available in our industry collection of with their factory simulation tools. Together. These solutions will help our mutual customers typically design and commission factories, and less time and with greater efficiency.

This quarter, we also announced the acquisition of Cam fleet, a leading provider of post processing and machine simulation solution.

Candidly bridges, the gap between Cam programming and shop floor machine tool operation and allowed manufacturers that digitally simulate and verify the machine code that drives the production equipment before running it on the shop floor. This will enable our customers to identify potential problems in a digital environment at the price.

Cramming phase that could otherwise scrap work or damage machine tools and production.

During the quarter of large multinational defense security and Aerospace company with an extensive global supply chain chose to increase its investment with Autodesk through and enterprise business agreement to stay at the forefront of of industry. The company is using innovative manufacturing methods to save time and money and has set a target to threed printer price.

Ultimately one third of the component and its new jet.

And it radically changes the way of designs and build the company selected ought adapted a key strategic partner.

The adoption of our products is also driving change to out of supply chain with some of which must adopt new ways of working with fusion three 360, and now have access to our advanced manufacturing solutions to help us realize of business model.

And education, we continue to expand our footprint.

Finger cab are fully browser based product development platform for aspiring designers now has over 30 million users worldwide fusion 360, and chromebooks is experiencing rapid adoption at high schools and universities and is replacing entry level browser based CAD Cam with professional grade career accelerating fusion 360.

For instance, the University of Illinois, and our bonus Champagne has now switched to fusion 360 across multiple departments, including biomedical engineering systems engineering and mechanical engineering.

Beyond our industry specific results, we are seeing early adoption of our premium subscription plan with customers taking advantage of the enhanced subscription offering of renewal many of our multi user customers who are transitioning to the named user model of finding great value and the premium plan due to its advanced user analytics single sign on capabilities and enhance support.

For example, scheu a leader in the field of innovative air and environment technology decided to commit to a long term investment and premium this quarter, primarily due to FFO and user management capabilities.

The autodesk of the strategic partner and it continues to harmonize its global infrastructure.

Let me finish by updating you on our progress monetizing non compliant users.

We continue to be sensitive to the short term economic pressure faced by our customers, but remain optimistic about the long term opportunity as we demonstrate the value of our cloud based platform for our customers.

For example, and China, our customer with locked out to try and lower lower cost competitor quickly return to do to Autocad superior functionality and invested further and autodesk by purchasing collections for the first time to focus on growth.

Our efforts to educate our customers about the benefits of staying compliant with our subscription are yielding results, we are able to convert them to paying users and a customer friendly manner. During the quarter, we closed eight deals over $500000 less and compliance team.

In closing we continue to build a strong autodesk for the long term, our early and sustained organic and strategic investment and critical critical capabilities by cloud computing and cloud based collaboration combined with the successful transition to a SaaS business model give us significant competitive advantages and confidence to grow and double digit range and of course.

Seeable future and we have multiple drivers that make us confident and our fiscal 2003 free cash flow target of $2.4 billion.

With that operator, we would now like to open the call up for questions.

Thank you and bear in mind, our task of question will any of the press star one on your telephone to withdraw your question breadth of banking. Please standby when we come out of the Q and a roster.

Our first question comes from the line of Saket Kalia from Barclays Capital. Your line is now open.

Okay, Great Hey, guys. Thanks for taking my questions here and Scott Congratulations on the next steps, you'll certainly be missed thanks.

Thanks Saket.

Hey, Andrew maybe first review of a lots of talk about but you know.

One of the questions that I feel like we got a little bit, especially during the month of October and November were what what potentially a higher and potentially higher infrastructure spending spurred by the government could mean for Autodesk and of course, we don't know what that looks like yet or frankly, even if it will happen, but I was wondering if you could share.

Here are some of what Autodesk maybe saw during the 2009 recovering reinvestment act as perhaps of frame of reference that makes sense.

Yes, and I get that makes sense.

First let me start requested by the sales.

Quickly, we don't have any kind of projections around stimulus of the impact of stimulants on our business and any of our model Alright, Thats Scott that we leave out to one does not want to leave themselves exposed to the vagaries of governments.

However, you don't give if we go back to await and own nine and I think it's important remember is one of the narratives out there about autodesk no nine as artists and so exposed the housing market Oh, My Gosh, you know and and the reality was of that aren't as revenue recovery of well significantly faster than the housing market did and that was because of the day.

Distributed you know.

No nature of our work and our customer base and the projects and the sectors that we cover.

Infrastructure spending and stimulus spending back and absolutely helps because it created it created a pipeline of projects that were new but we were already of recovering before some of the stimulus showed up and it's important to recognize that if you look and what the impact might be if if we actually see some of this show up and we actually see some important stimulant.

Obviously, it's going to increase the project pipelines of our customers and that's always good for us and it could see it could see more adoption of our portfolio. It could be really good for the construction portfolio, but against that and I want to get Super clear, we don't model of that kind of stuff in our outlook and and we're not we're not expecting it to hit our numbers yes.

Yes, so I guess the only other comment that I'd add on top of that is.

Let's say and infrastructure Bill does get passed.

And it will take some time for that build to turn into real projects and for those products that get put out to bid and for that and so downstream start to drive our business. So even if that were to happen, let's say early and the new administration I would.

And expected to have a material impact on fiscal 2002 anyway.

Got it that's Super helpful. Scott, maybe maybe for my follow up for you. Thanks for the early fiscal 22, guys. It's very helpful. I guess with with 20% free cash flow growth next year and that target of 2.4 billion and fiscal 2003 and looks like that acceleration and free cash flow.

Flow that we're seeing here and in fiscal 21 is going to come to actually in fiscal <unk>.

21, and 22 is going to continue to 23 can you just talk a little bit about some of the drivers that might contribute to that you touched and that's a little bit of repair Premier comes so im just wondering if you could double click on it once more yes.

Yes, sure side of the and by the way you are one of the one of the got it right actually as our as I recall looking at your and your previous node for what to expect on fiscal 22, and as you know we've been running multiple scenarios of them, probably driving my team and crazy running sort of hurt us over the last nine months and in each case, we run and not just for the impact of this fiscal year.

Sure and next fiscal year out through fiscal 23, Steven fiscal 25, and beyond sort of to have a good suits of how the model respond to a variety of different scenarios. That's part of what underpins our confidence in fiscal 2000 of free but if you step back and say what are the drivers behind that.

Start with the biggest driver you're seeing our renewal rates.

They study through this process and in fact, even modestly we saw a sequential increase and renewal rates.

Given the size of our renewal base, that's that's a big driver longer term and we talked about the net revenue retention rate kind of staying in that hundreds of 102% range. Even during the pandemic. So it's like a big renewal base with a high renewal rate of 100, 110% net revenue retention rate and drives a lot of growth.

And to that what we're seeing and cloud and the cloud products acceleration overall.

We still have a pretty significant opportunities of to convert non paying users of in front of us and.

We've built the leading.

And portfolio product portfolio and construction. So there is and we've talked about again today about the success of our manufacturing business and where we're headed there and some of the traction we are beginning to get with fusion 360, and the way we're monetizing that with some of the extension. So there is a there is a lot behind that.

So thats what drives our confidence not just and this year and some of the early view I gave you of fiscal 22 bits and how that ramps up out through and.

Through fiscal 2003, I think there's two other quick things that I'd like to add to that we.

We do we are seeing a modest improvement and economic activity right now that Andrew talked about certain countries are back to pre filled at levels of but it's not consistent our expectation is that we will see continued economic improvement through next year, but that will yield a.

I doubt, it's going to be a straight line that will be more pronounced and the second half of next year, which we feel will be a little bit more back and loaded and that linearity affects not just revenue and also affects where we collect cash.

A lot of of sales is that of that momentum in the second half of the year will turn into fiscal 2003 through cash flow and then one other item that I want to get on the call. So that you can build that into your model. We do see of cash tax impact year on year. This year to next year of about $50 million to $60 million and as our profitability as of grew fairly significantly.

So you're out of those together, that's what underpins our confidence the early view of fiscal 20 to cash flow and our confidence and the 2.4 billion in fiscal 2003.

Got it Thats very helpful. Thanks, guys.

Thanks Saket.

Thank you. Our next question comes from Matt Hedberg from RBC capital markets. Your line is now open.

Okay, great guys. Thanks for taking my questions and congrats on these numbers and in a really difficult situation I will also offer my congrats Scott its and great work and with your obviously, we'll Miss you with Autodesk, Congrats and best of luck.

Yes, Andrew I wanted to ask you of the nine figure three year renewal deal that is super exciting I guess I'm wondering can you give us a bit of history and how that customer has has grown to this level and maybe the opportunity for other enterprise deals of this caliber given your your sort of extended platform new says.

Yes, so we actually broke records a couple of times during this quarter. So these these deals are becoming more of the norm and Nox and our quarters and I want to and I want to tell you what would essentially underpins all of these and I think it's important and it kind of it's the same dynamic and in all of them new our customers look three years out.

They look at what they are trying to do internally transformational Lee and.

Digital transformation or with the transition to them or with the transition to the to the cloud with fusion and I think associate with that and the assets out okay, and what are they going to need and EPA and order to drive and maintain that expansion without coming back and renegotiating the contract with again, that's what's powering that a strategic discussion about what are the line.

Long term adoption requirements of these customers. So for instance customer might season, so expanding more new industrywide construction and and applying both inventor and rabbit more broadly and their profit and they want to make sure. They plan for that or they are going to see expansion of.

Construction cloud deeper into their processes. So the plan and for that they are saying line, obviously as much construction. Carl this year are going to use as much next year or the year after that the year. After that so this is what is driving these kinds of deals. This discussion about the three year expansion of usage of our portfolio and these accounts and it's not just usage.

Across users its usage across breadth of portfolio otherwise you couldn't see deals of these size coming through that's the dynamic that plays out in almost all of these deals that were seeing.

Makes sense, Matt Scott.

Yes, no Thats Super helpful. And then maybe just to double click on the SaaS side, I mean, Andrew you talked to executives.

Every day and I guess I think we're all excited about the prospects of the vaccine.

On those conversations though in a post cobot World I mean, do you get a sense that you have obviously a lot of success with 360 Hsas today, but do you think we could see even a bit of a slingshot effect as part of these larger deals as customers really effectively race to embrace SaaS.

Essentially for the next pandemic at some point.

Yes, I actually think of it hasn't even goes beyond pandemics. It. It's like once you got a taste of it you want more of it is what's going on to okay. Because remember some of these customers. They were not broadly deploying our SaaS solutions pride of pandemic and what they are seeing now is you know what this this stuff important I need to get on it and I know.

Two I need to prepare for the future and this is how I'm going to drive my Digitization. So we're we're absolutely going to see continued growth new Taf platforms. You. Didnt is you mentioned that the vaccine and things like that because what were seeing when we talked to executives right now.

Everybody, everybody does and see a change and the timeline of how that pandemics going to play out, but all of that's what we're seeing and increasing reduction and uncertainty. It starts with that theme conversations and then more than one vaccine and then it goes into hey, you and election is getting with uncertain Scott who.

Who is going to be to president and less uncertain.

So this is progressive building of of.

Of uncertainty being removed and customers are getting more and more comfortable about looking at their second half investment scenarios for next year and SAP is in every one of those conversations.

And I think of and as long as we continue on net this trajectory of uncertainty being removed you're going to seek and people being increasingly comp comfortable with how they feel about the second half of next year.

Super helpful. Thanks, guys.

Thanks for the question Matt.

Thank you. Our next question comes and a line of Philip Winslow from Wells Fargo. Your line is now open.

Hey, Thanks, guys for taking the questions and congrats on a great quarter and Scott obviously, it's been a real pleasure working with you and not just the autodesk, but going back to back of situation and we will definitely definitely much of my front.

Maybe.

Got it got of course for you in terms of your the AC portfolio obviously.

Very diversified in terms of the sort of the stages of of quarter of building from design and planning actual construction and and so I guess of to sort of a two part question here what are you seeing and sort of that portfolio right now and into Q4 of them. When you are thinking about about next fiscal year. How are you spending sort of sort of the ebbs and flows of that portfolio to play out.

Yes actually earlier.

Putting up pushing on an important competitive differentiator for us the breadth of capability, we have across the entire easy and cycle and the way we're integrating that information in the cloud is clearly unique alright, and what we're seeing and this is something that I think you'll you'll you'll see progressively again and get your right now a lot of.

People were talking about digital twins and that of a cap rate it's out there.

Lastly, we haven't used type of cat really very very often but.

What what's going on right now and it's been Threed NAND is the original digital twin alright, and this whole discussion around digital twins, and AC and think of associate with it is accelerating the dialogue around if I want to do digital too and I got to do been because theres no digital twin without of without a building information model.

And you're going to see a continuing ongoing acceleration of of the usage of them upfront and our portfolio, but then what weve layered on top of it as a couple of critical things that make the entire portfolio more valuable you may have noticed we emphasize this notion and the new construction club platform route of common data environment and all the things that go along with that can accommodate environment.

That common data environment, its not just south of base. It's also ultimately going to be ISO compliant and it's going to allow us to move that building information data all the way through the entire profit so you're going to see more and more adoption of what's going on and that's built all the way through from the Preconstruction planning cycle to the construction site and that that.

A pretty powerful differentiator for us, but one last thing I want to mention to you and.

We talked about that you and I want to make sure you paid attention to it with the rollout of our tandem of tandem and what what 10 of the tandem is it.

And then digital twin start within.

Tandem as a way to bring them data together from multiple places from our volume RPM models or our volume information from other third parties that are building control information, perhaps from other other bin bin based data from other types of applications and bring it into a single Agra.

Good view and the cloud the updates dynamically as the building project progresses. This puts us at the forefront of bringing the power of them to create digital twin two of the ability to create digital twins and the cloud and actually represent the final stage of the project no matter, where all that project data comes from so we're pretty excited about.

This progression and what it means for the company and I think you're going to see a lot of interest and uptake in that the approach we're taking.

That's awesome, and that's super exciting and and equally as exciting question for Scott and long term deferred revenue.

How are you thinking about that next year, obviously of the guidance for this year is hanging out of mid twenties, but salaries are remodeling and when you think about the about cash flow for next year and here, but you're after that.

Yes, I think for next year it stays in that range still and I don't want to get into.

Two of too much forecasting of fiscal flow through so we get to the Q4 earnings call and obviously, we can give you more and more detail at that point, but the what we're seeing this year is kind of moderating assumptions around multi year and of course, that's what drives a lot of that long term deferred and so you see it sort of sequential trends there and long term.

And how the fallen off the floor hasn't fallen off of dust and onto the floor of the multi year rates are still there of what they're not as robust as we have seen historically and maintenance I think ultimately a return to that level of but frankly I don't think the.

The moderating multiyear that we see this year is a big negative and the sense that given our renewal of the strength of our new rates will continue to get that we collect that cash flow. This collectively of subsequent two years and set of collecting all three years up from and we'll collect that without the 10% of discount that we put in and as incentive for those multi year transactions. So think of it is kind of.

Suddenly and where it is for the foreseeable future ultimately and I think that there's there's probably a little room for it to Ron.

Awesome, Thanks, guys and congrats again on a great quarter.

Thanks, Phil Thanks.

Thank you. Our next question comes from the line of Heather Bellini from Goldman Sachs. Your line is now open.

Great. Thank you so much and Scott and I will Echo my congratulations and to you as well Andrew for the company's execution on this challenging macro environment.

I wanted to ask two questions. One if you can share with us kind of and I mean, the competitive positioning and construction given your pricing model and how you might see some of the competitors responding. So if you could spend some time on that and maybe a little bit more on the differentiation of thats gotten even wider over.

Over the course of that over the course of the pandemic and then also.

If I look at your growth and Asia Pac E Comm and is the best of best wage and in terms of growth how far behind do you think the Americas is some of the recovery and the solid growth that you're seeing and APAC.

Thank you so much.

All right. So let me let me start with the competitive positioning on the construction you are absolutely right Heather the pandemic actually gave us and opportunity to to lap our competition a bit.

The slowdown definitely took the wind down of certain parts of the market. However.

However, we didnt slow down we continue to invest and we put quite a bit of money into rolling out the unified platform. So what you see with our net build which is what we're going to lead with every new deal. We are leading with all of that is built over and over again.

And we're going to lead internationally, and we're going to lead and the U.S. with that is a comprehensive project management and field management application that goes from design all the way through to site management side execution and layers on the analytics associated with construction and PQ and some of the predictive skills all growth on.

Top of.

Our net docs all rights and this is a pretty significant change that platform is highly competitive and matter of fact is differentiated and numerous ways because of an end to end capabilities in terms of pricing model, Here's what's unique about our tethadur and I think I think it's very important turn and no one no one in the industry is more flexible with.

The way, we deliver these applications and autodesk. So if you want to buy named users and deployed named users. We got named users for you. That's our primary deployment model for most of our applications. If you want to pay based on project turnover you can do that if you want to play based on pay and on usage and consumption you can do that this flexibility is.

Heavily coveted by our customers and in fact, I think this flexibility has been part and parcel of what's allowed us to continue to expand the usage of the construction cloud even during.

What's happened over the last year. So I think technologically we're now competitively differentiated because we took the pandemic of the time to double down on the platform unification and get it out there and business model line. We're differentiated so we're we're feeling in a pretty strong competitive position as we head into the recovery next year across all day.

Various market, we love that we have tough competition and the space and it's good for US I think it's good for our customers, but we're feeling really good about where we're at now with regard to the.

The American versus a path right.

And here's what I'll say, hi usage usage ramped up fairly quickly and Asia Pacific and the and like we said earlier it it definitely above pre code and levels and a lot of places not everywhere, but in a lot of places.

The U.S. and particularly just seemed to have stalled alright usage hasn't fallen back it's ramped up of little bit and as time goes on but it's not it's not seeing this kind of surge.

I think we should just kind of a whole type of a while you see what the levering out of the uncertainty does right now for the the usage and the U.S. right between the election results between the good news about vaccine between the potential of people see about stimulus and in their in their project pipeline I think we may.

And start to see a change so it will be interesting what we can talk about on the next earnings call, but I think the the unwinding of uncertainty matters a lot in our markets.

Thank you so much.

Thank you. Our next question comes from the line of James Lee Shallower from Griffin Securities. Your line is now open.

Thank you.

Andrew starting with the nine figure deal of returning to that subject, it's especially interesting when we consider that once upon a time and.

Hundred thousand dollar deal with a big deal for Autodesk. So you're obviously now many orders of magnitude beyond that but the question is to the extent that there are now as we understand additional eight figure deals and the pipeline.

How are you thinking about your license management.

And customer success requirements and capacities that you need.

To invest in and ramp up to support what is obviously going to be a larger propensity for.

These kinds of of.

Of deployments and then.

Returning to a new for a moment.

You made some interest remarks last week, having to do with some additional new possible opportunities for the company and manufacturing software supply chain, even smart products you alluded to maybe talk about how seriously you mean to pursue those.

Those new things and then for Scott first thank you for the last 25 quarters and as Youre going away and question or do a multipart question and.

Andrew earlier part of the usage data by Geo could you do the same thing by perhaps standalone versus collections.

And perhaps even by vertical in terms of what you're seeing and the usage telemetry there.

All right and it's the classic Jay multi part question all right.

So Jay let me start with of the lights and managed did something we take particularly seriously and I'm really glad you asked about it because license management and the ability to manage these line that is actually of value adds to our customers. If they want to manage this investment and autodesk assets as an enterprise.

Assets, all right and it's Super important of space that we do this one of the reasons we've been moving so quickly to retire legacy model and our user base is because of that actually hold that holds us back from delivering best in class license management for our customers every customer every every maintenance licenses still out there.

Every multi user likes that still based on.

And the old desktop paradox versus what we want to do and the cloud paradigm. It.

All of the us back from deployed and systems and the way that help our customers manage these things holistically. The good news is that our EPA customers get a totally different dashboard on on how they use our software and they're able to get more and more per day per user and usage analytics and and more data in terms of understanding their customer base, but this.

Investment indeed, the sheet of glass and our customers look through in terms of managing their relationship with Autodesk something we've been doing ongoing for years and you look for it to accelerate as we retire the last of these legacy business model and start unifying everything on of stack that really provide a high level of control of our cost.

Nurse and a high level of fidelity about what their actual usage is this we believe this is a value add of the portfolio and you'll see of continue investment now with manufacturing investments I think we want to just pay attention to what we're doing with fusion and the areas. We're targeting because we think these are important areas that we want to pay attention to.

Weve integrated certain types of technology, and usually we want to augment and itself will complement and extend though so that fusion is a professional grade solution surrounded by other professional grade solution that that tackles significant growth markets inside the manufacturing vertical.

Our first our first.

Angle of attack within the convergence of design and make and emerging advanced manufacturing method with advanced modeling method I think you're going to you're you're going to see us.

Attack the convergence of main mechanical engineering thing and I'll, let components inside designs. We've already started doing some of that thing and we're going to do it and uniquely cloud way we can.

Do it with uniquely and.

Underpinnings of cloud compute and we're going to do it and highly differentiated ways, but also in ways that no.

Some of the tools are customers are using today.

And and jail I'll jump in on the second part and I guess, thank you for the congratulations on my 25th Autodesk earnings call. If I guess of this right, if you're 120 to autodesk or less cost a.

A little bit of of different sort of considerable strength.

With that I'd like to congratulate you as well.

It's interesting if you look.

Rates were seeing less of a differentiate differential by vertical and more of a differential by country. So in other words of country ex is seeing nice robust growth, we see that and both.

You see and of manufacturing side.

If it's continuing to be somewhat some of flat and stable, we see that again by vertical so let's say the better differentiator and usage is more how is the region performing ahead of the country. Before we then it is within that country is a C or manufacturing.

And.

The industry collections versus Standalone products I'll, just reiterate what I said the opening commentary that industry collections continues to be a stable share of our overall business. So we're not seeing a significant mix shift there.

We had early on we have seen a mix shift of the new sales more toward LT and we talked about last quarter that reverted back to the media where it has been historically so nothing of significant mix shift at this point either way.

The last thing that adds because I know the detail of your spreadsheets and you're probably you probably already got everything laid out here, but to give you a sense on our new business growth and in particular product subscription new business growth from a unit standpoint, no question, we've been impacted by the pandemic more so and new business units and and other places.

That new business grew sequentially from Q2 to Q3, and that's our expectation of those units of grow again Q3 to Q4. So just to give you a sense of properties are performing.

Thanks, very much for both of you.

Thanks, Jay Thanks.

Thank you. Our next question comes from the line of Brad Zelnick from Credit Suisse. Your line is now open.

Great. Thanks, so much.

So congrats all around guys, particularly for Scott best of everything, especially in your next chapter and the topic for both of you I wanted to ask you about innovation the sheer amount of innovation on display and Autodesk University. This year was I guess I'd, just say overflowing so Andrew for you these and quite.

And what excites you the most and my parting gift for you Scott maybe a little more complex how should we think about the pace of innovation going forward, because you've always talked about high single low double digit spend growth, but were below 7% year to date. So should we think about the spend growth accelerating meaningfully to the high end of your range to recapture the tremendous.

And to your head thanks.

All right. So Brad I Love. This question and innovation is absolutely hyper critical to everything we do we believe we are powering audit transformation and a lot of dialogue in the industry right. Now we are delighted to see our competitors start to.

Talk like we've been talking for years, and I think thats a sign of of the kind of innovation, we are putting into the market.

Here's here's what I'll tell you I'm really excited about.

I am excited about the merger of Sal.

Cloud computing and machine learning and these transformational power for our industry. All right. This is what gets me up every morning right now in terms of what we're going to be able to deliver for our customers when we get more and more of their processes and the cloud when were computing more and more with their data with.

Ever and ever decreasing compute costs and the cloud and layering on machine learning, we are going to be able to provide our customers with insight and productivity enhancement there simply beyond anything they've imagined right now and it gets me extremely excited to be part of driving that change into the industry and what it means.

Now I can talk about the individual technology that play and that all of that there's lot, but if you. If you talk at a high level about what gets me excited that and one thing I think is before as a segue to Scott answering your question I think it's important to know that next year.

We're probably the largest R&D spender in our segment all right and I just want and I just want you to think about that after all the discussions we had going to the business model transformation to all of a sudden be talking about a world where you know.

Nobody is probably nobody of spending as much in this space and R&D is out of here I think that is a fundamental change and a lot of innovation comes from that much spend.

Scott.

I'm not sure what the adds of that Andrew I think you said it exactly right. We were at a fortunate position Brad and thanks for your for your kind words by the way of what we are fortunate position and the model, where we can both growth spending and increase margins year on year. So if you look at the midpoint of the GAAP. The update of guide for this year for fiscal <unk>.

21, it implies just sort of and 8% growth and total soon so.

Cost of goods sold plus opex.

Looking ahead on top of that Weve invested pretty significantly and grown our investment in R&D head count for R&D for sales capacity this year and some of the areas that Andrew just touched on earlier and Jays question about building out our internal systems and our internal infrastructure. So we've invested quite a bit and innovation already.

This year that will obviously carry on into next year and we've made a handful of not large but strategic acquisitions to continue to fuel that innovation. So we we think long term targeting double digit revenue growth.

Is somewhat dependent on us continuing to invest on the R&D side of things and I feel really good about the position we're in to be able to both drive that investment and increased margins out of the Sun 23.

Okay. Thanks, very much happy holidays, and we look forward to hosting and next week.

Thanks, Brett.

Thank you. Our next question comes from the line of Keith Weiss from Morgan Stanley. Your line is now open.

Excellent. Thank you guys for taking the question.

Scott wouldn't be out of line to try to convince you to stat, Autodesk and meanings line more interesting and Mike and networking company.

No I think of course.

No Mike.

Mike part of our Keith Keith and.

Exactly.

Good day, and you should have tried harder to keep and.

And so it. Thank you guys taking the question on the quarterly two things.

Wanted to just get a little bit more color on one is kind of like the pace of recovery that you guys are seeing and expecting.

It seems like early this year you might have thought it was going to come a little bit faster, given what you're seeing and Asia Pac maybe that spreading out a little bit of it with the turn and like the current ARPU of figures. This quarter. It looks like you guys are really actually.

Whole business is turning a corner here. So one can you give us kind of your latest thinking and on the shape of the recovery and kind of whats assumed as we look into equity by 22, and then carrying on kind of that total spend commentary a lot of companies that we talk to saw expense savings this year due to coded and low.

Our team he spending and just were able to sort of a garner efficiencies and their overall business some of which they need to get back in the year ahead as we get into a more normalized environment is there a big component of that and the Autodesk business that we should be thinking about when and where we're modeling margins. It's at about 22.

Yes, so Keith I'll start and Andrew you can you can add color too and in terms of what we're seeing we are see recover.

Recovery and Andrew alluded to every day of some of the specific countries where were seeing recovery already and we're aware of.

A level of activity that's above predictive of at rates.

If someone earlier highlighted a day package and has been quite strong for us from that standpoint, we're seeing continental Europe recovered nicely as well.

The EUR expectations for Q4 is that we'll continue to see of.

Lastly, improving economic environment and as.

We look out of next year I think we will continue to see approved and I'm not sure it's going to be a straight line improvement and especially given kind of the current way of and we'll continue to see improvement and I expect by the second half of the year that we will see some pretty good recovery and and economic activity of the yearly will will benefit us.

So think of next years being a little more back end loaded and I think thats part of what you see with the early look that we give new on what of revenue growth looks like this year.

Q4, again midpoint of the guide has revenue growth at about 12% and op margin for Q4 will be about in line with the full year and about 29% I think of looking out of next year, you'll see both of those growth revenue growth will it will it will increase from there and.

And op margin will increase from there.

On the specific kovats those savings I think we've had the city of sort of use that everyone's had deals obviously DNA travel expenses has been a big savings for us.

But as we look and events of gone more virtual that'll continue modest amount of savings from the operations of our facilities or offices as we look at next year, though I don't expect that to be a significant year on year headwind treble of course will return, but we're going to we're going to build the budget such that I don't expect it to come back.

Anywhere near to where it was in let's say calendar 2019, and our and our fiscal 2000.

I think there is nothing else Weve learn you don't have to be face to face with the customer to get that final agreements you don't have to face to face internally to get things done the way we need to get of done internally. So I think we'll continue to see ongoing savings and theyll be it will step up and this year, certainly, but it's not going to be of significant headwind for us some sense.

Got it Super helpful. Thank us.

Thanks Keith.

Thank you. Our next question comes from the line of Adam Borg from Stifel. Your line is now open.

Hi, guys and thanks for taking the question and Scott of course that congrats on the new role.

Just on.

Summing up and coming out of a new and talk a little bit more about autodesk build.

Hi, you mentioned that you are leading with that going forward, but you do of the big installed base and then 360 and planned grid. So I was just curious kind of what the migration path looks like for those that those those assets to autodesk build and maybe just quickly of the follow up on the same day for acquisition any commentary Scott on on expectation for inorganic revenue growth. Thanks, so much.

Yes, all right. Let me, let me start with the migration path of preplanning grid for those customers and fired plant grid and ultimately migrate and it's all it's actually not of.

Heavy lifts because of the way we don't the application you don't plan for its huge.

Innovation and and huge value adds in the whole stack of mobile experience. They are really good at it. So what we did is we basically use the plan great experience and the planned grid team and the mobile experience for Bill. So it can move from from plan grid to build and the progression is not of heavy lift now you're right. We have a we have.

So a long tail of customers that are up into 60 appeal of Vinci 60, Nexgen field those customers over time are going to be migrating to build and at a pace that makes sense for them, but what we've done is we've created environment that allow them to ship during and projects.

Projects and Pat and they go into New project, we've got a whole master plan with our customer success organization and construction on how they move over time, we're not going to force anybody to move ahead of their time, but we've got to of well crafted plan for how we move these people it's more of a heavy lift for people that aren't and 360 field last.

Of the heavy lift for people, who are on Bim, 360, Nexgen, which which is where dock.

And Jim.

Audit of Docs was was built off of and it's a much smaller and lift for plans of customers.

And Adam to your question of space maker.

I'm sorry.

Algae and I don't know if you've got a chance to see of Demoed a year, but if you did and I highly recommend you got to take a look at it this is a.

It's obviously true.

Tremendously exciting technology and some super talented people that we picked up with the space maker acquisition.

Impact financially is going to be non will actually be slightly dilutive and that's that's built into our expectations for next year.

There's another effect that I, probably should have mentioned earlier and I want to make sure I get it on the call, though the one thing that will change next year and if a slight headwind to us in terms of revenue growth year on year, we have almost all of our products are already ratable right, but there is there's a couple of really small products one volume that we've talked about in the past that.

But not get over the hurdle to get away from upfront revenue recognition. We've continued to work on that product continue to do things that incorporate much more cloud based functionality and I think of the first part of next year, Walt will flip from upfront Rev Rec to flow ratable Rev Rec.

And that that looks like it's about a point of growth and.

And already built into the kind of the early view of that I gave you of the low low double flow low to mid teens revenue growth for next year, but that the impact of both is built into that.

As it normalizes and fiscal 23 of the because once it becomes ratable and fair points are equivalent of that but that's one of your building your model of that level of detail think about that being a bit of it.

And that's already built into the early view that activity of fiscal two Lisa.

Yeah and great. Thanks, guys.

And I'll make one more comment on space maker, just because I kind of I kind of forgot to segue to you on that space and I could represent that perfect convergence of SAP cloud compute and machine learning and into solving real world problems for our customers I think you're going to see the impact on our business accumulate over time as.

As the technology expands and as it connects itself deeper with rabbit and other parts of the process one of the things I Love about this space maker team is they have this philosophy about making multiple constituents more successful with their objectives and that the the building owner of the developer making their their indefinite more profitable.

That's the city, making sure that the impact on infrastructure is managed and controlled and they also have a big customer or big stakeholder and this is the environment and helping architect and city planners make more sustainable decision in real time for how things are built it's a perfect example of how all of these things come together to choose.

Change the way people make design decisions and ultimately go decision look for its impact to expand over time and that team started talking and other parts of our profit built out their existing products and inevitably starts moving into other parts of the organization, which we always see with acquisitions like this.

Yeah, there's there's absolutely a lot of synergies that we see with space maker coming in.

Great. Thanks again.

Thank you. Our next question comes from the line of thieves, Ken Lang from assets and full Michael Your line is now open.

Terrific. Thanks for squeezing me in and guys I appreciate it.

And Scott Best of luck to you and thanks for all the hard work you done with us over the years definitely appreciate that.

Thank you.

Cool.

So I'll just ask one question.

You know and.

Andrew you had some pretty open transparent communication with customers of last quarter.

In terms of the letter that was written.

And and just in terms of looking at what of customers were asking for.

They were very clearly asking for accelerating the roadmap and architecture and engineering design, which we doesn't seem like we've talked a lot about on the call today, having been a focus.

And if I read between the lines and and and that communication to customers also seemed a bit frustrated with the transitions they've been going through from maintenance to subscription to collections and out of net users and it just seems like of the little bit of dissonance between what they are asking for and what I'm hearing from you on the call.

Of today that I'd love to get your thoughts on how why is that why is there that maybe misperception GAAP and one of you guys doing about it.

Thanks, very much Steven.

Hi, David is absolutely no definite alright.

One of the things I think I've said consistently in the communication and I'll take you back and communication and we started investing in the roadmap for rabbit well ahead of these communications right from the of customers because we made a deliberate choice.

Invest and construction and not in relative functionality for architects.

New customers are going to occur fairly quickly start to see a chain.

Changes in addition to wrap it from the investment we made actually at the end of last year and I think you're missing something completed we just spent.

Several hundred million dollars on the architecture segment of our space Alright space maker is squarely targeted at design and architecture and the and the founders of space maker. Our architect Alright. This technology is right on the assets and like I said, we didn't spend a lot of money.

To do that and this is right and the act is something we've been looking after a while so no. There is no distant and tier in terms of of where we're focused and where we.

With regard to the migration look you know.

You got to be we started this migration with two.

Some of the under 2 million maintenance customers most of those of come along with that we never expected and all of them are going to come along and happily and what we've done and we've reached the end of the tailwind from maintenance customers that you know are more frustrated with the changes and not but at the same time, we've added some other customers that werent able to a force.

Some of our solutions before because of the upfront costs of these solutions. So, yes maintenance customers and have been with us and seen lots of transition. They are not done yet we haven't retired all of those models yet, but remember we started with left of 2 million of those were over 5 million subscribers right now.

A fraction of those are from that maintenance space, we have to remember net look at the big picture here as one of the small make sure I understand and I amplifies the frustration of those customers and started on maintenance and journey and with it but we have reached so many more customers. So many more architecture firms. So many individual architect.

So many people that couldn't afford rabbit. So many people that couldn't afford that extra seat of autocad. So many high growth companies and they asked the they're actually spending less over five years and they would of with us adding piece and the perpetual model. That's a big story and its transformative to the industry in terms of how much value of people were able to get now so let's.

Make sure we stay focused on the big picture here.

Cool I appreciate your thoughts and thanks again for the open communication and good luck to you Scott.

Thanks, David.

And this is all the time, we have for Q and a today I would like to turn the call back over to Simon maintenance for closing remarks.

Thank you Jane and thanks, everyone for joining us today, we're looking forward to seeing many of you at conferences over the next few weeks.

Please do reach out to us if you have any follow ups and anything from this cool so.

So this concludes our open day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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[laughter].

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Ladies and gentlemen, thank you for standing by and welcome to the Q3 fiscal year Chill bells, and 21 Autodesk earnings Conference call. At this time all participant lines are in a listen only mode. After.

The speakers presentation, there will be of question and answer session talk of question. During the session, we'll need to press star one on your telephone. Please be advised of todays conference is being recorded if you require new further that's of course press Star Zero I would now like to hand, the copper so Richard your speaker today, Simon laid Smith, Vice President of Investor really.

Thank you. Please go ahead Sir.

Thanks, all right.

Good afternoon. Thank.

Thank you for joining alcohol and cold sort of Scott adult <unk> third quarter GAAP.

Yeah 21.

On the line as I grew out of most of the <unk>.

Oh yeah.

Good day conference call is being growth called <unk> <unk>.

In addition, a replay of the call will be available Autodesk Dot Com force flashing best.

You can find the earnings press release slide presentation and transcript of today's commentary on our Investor Relations website. Following this call.

During the course of the schools, we may make forward looking statements of <unk> outlook future.

Future results and related assumption and.

How did you.

These statements reflect GAAP best judgment based on terms of 29.

Actual events or results could differ materially.

Please refer to our filings were important risks and other factors, including development and the type of Nike and pandemic, and the resulting impacts and all business and operations.

That may cause our actual results to differ from those and all forward looking statements.

Forward looking statements made during the course of being made as of today.

This quarter's replagal reviewed after today.

And my son, because that's a during the call may not contain churns or accurate information.

Well, it's a day disclaims any obligation to update or revise any forward looking statements.

During the call, we will quite a number of numerical growth change it.

We just got stuff and actual performance and unless otherwise noted each such reference represents a year on year comparison.

All non-GAAP numbers referenced and stays cool reconciled in the press release, well the slide presentation on our Investor Relations website and.

Well I was kind of cool I back to Andrew.

Hey, Jim and welcome everyone to the call.

First of all I Hope you and your family of our remaining safe and healthy and.

Before jumping into our third quarter results I would like to thank again, our employees and their families and communities and support that as.

As well as our partners and customers and their sustained commitment during uncertain times.

That commitment was reflected in our execution and demonstrated the resilience of our business model. This past quarter together day enabled us to deliver strong Q3 results with billing revenue earnings and free cash flow coming in above expectations. Despite the volatile macroeconomic conditions, resulting from the cash.

Okay.

I'm pleased to see the acceleration of our business model, the secular shift to cloud under hitting it and the competitive opportunities. It brings we have many miles of opportunity ahead of us our enterprise customers are undertaking their own digital transformation and by enabling not transformation, we're becoming a strategic partner rather than a.

Software vendor.

These strategic partnerships are broader than in the past with our customers expanding their all of their product portfolio.

Third quarter results reflect this trend as our enterprise deal activity with large customers accelerate it.

We closed some of the largest transaction and then the company's history, including a nine digit deal.

I am proud of our team's execution, which positions us well and during the fourth quarter of strong pipeline of deal.

And third quarter, we also saw the ebb and flow of the economic impact and then.

As you know our transition to the cloud media, we are able to monitor the usage patterns of our products across the globe and see a positive correlation between increasing usage level and new business growth and those region.

China Korea, Japan, and most of Europe saw usage level right about prepaid pre cobra and lateral well usage trends and the U.S. and UK have not yet returned to pre cold and level, they have stabilized and the U.S. and growing sequentially in the UK in line with are you going to try and our new business remain intact.

And the pandemic, but the diversity of our revenue stream and customer base and helping us to deliver strong results.

And as you know Scott has decided to take on the next challenge and his career accepting of yeah overall with Cisco starting mid December Scott has played a huge role in driving the business over the last six years, helping autodesk successfully navigate the business model transition we are sad to see heavily but we are also excited.

Thank you Scott for your many contributions to Autodesk and I wish you continued success and the next chapter of your career Scott.

Scott, leaving behind a strong team to ensure a smooth operations, while we look for his replacement we started the search process and it is my top priority in the near term now.

Now I'd like to turn it over to Scott to take you through the details of our quarterly performance and guidance for the year I'll then come back to provide insight into our strategic growth drivers.

Thanks, Andrew.

Leaving autodesk and mixed emotions and I'm excited about what lies ahead for me, but also said about leaving my colleagues at all.

Well last six years of been the most fond of rewarding of my entire career as we transform the company from a traditional license revenue model to a cloud based recurring revenue model that's.

That transition is now complete and I leave knowing autodesk is well positioned for the future with leading positions and attractive markets and accelerating momentum.

Looking at the quarters results several factors contributed to our outperformance across all key metrics, including strong enterprise deal activity.

Help me subscription renewal rates digital sales sequential improvement and new business trends and foreign exchange rates.

Total revenue growth came in at 13% as reported 14% and constant currency with subscription plan revenue growing by 24% and operating margin expanding by three percentage points.

We previously told you that we extended payment terms for customers impacted by the pandemic.

Normalization of payment terms combined with improving business trends and strong cash collections and Q3 helped drive healthy free cash flow of $340 million.

Current Archeo, which reflects committed revenue for the next 12 months was up 16% slight improvement on the rate of growth we saw in the second quarter.

Total RPL was up 21%.

We again benefited from the diversity of our customer base.

This is the softness in certain areas like the U.S. and parts of Europe was offset by strength and other areas.

Total sales continued to drive double digit billings growth through our online channel supported by accelerated growth and our cloud based fusion offers.

We're developing broader strategic relationships with our enterprise customers with multiyear commitments and.

As is typical for most enterprise agreements the nine digit deal Andrew mentioned is a three year commitment billed annually and did not have a meaningful impact on our revenue or cash flow during the third quarter.

The run rate business with our partners also continued to perform well while.

While we are seeing the traction of our transition to the name of user business model. It results in a subset of our customers optimizing their installed base are reducing the number of named user seats needed. After they take advantage of our cheaper one trade and program.

I'm pleased to report these overall trends are in line with our expectations.

As we said in the past and aggregate the transition to the name of user model is a revenue neutral event for us, but enables us to offer more value to our customers and a similar way as other SaaS providers.

Our net revenue retention rate remained within the 100% to 110% range, we laid out and our guidance.

Our product subscription renewal rates remain strong reinforcing the critical nature of our products to our customers.

As of the prior quarter, approximately 40% of and maintenance customers, who came up for renewal converted to subscriptions are.

Our maintenance renewal rate declined sequentially, which was expected as we are nearing the end of our maintenance program.

Industry collections remained a stable share of our total business in Q3.

As anticipated multiyear payments were down year over year, but we saw a modest sequential improvement and the share of multiyear payments across across each geography as customers continued to make long term investments and our products.

And finally during the third quarter, we spent $196 million to buy back 800000 shares at an average price of $231 per share.

Year to date, we have repurchased 2.12 million shares at an average price of approximately $186 per share for a total spend of $393 million.

Now, let me turn to our guidance, we are raising the low end of our full year guidance range to a range of 3.75 to 3.765 billion, bringing.

Bringing the midpoint growth rate up to 15% year over year.

We're also raising our non-GAAP operating margin outlook to the upper end of our prior range of four point improvement from last year.

Our fourth quarter performance will benefit from the strength of our third quarter results, but the business environment remains uncertain given the current wave of covert cases, we.

We expect product subscription renewal rates to continue to be very healthy.

And on and maintenance offering will likely accelerate as we enter the final stages or ending our maintenance offerings.

And we expect our net revenue retention rate to remain between 100 and 110% for the quarter.

Our pipeline entering the fourth quarter of strong, but we've assumed that new business and multiyear contracts will continue to be under pressure.

The narrowing of our billings and free cash flow outlook range is primarily driven by moderating assumptions around multi year and the uncertainty presented by the current environment.

It's a testament to the strategic value of our products to our customers and the resiliency of our model there were still expecting to report 15% revenue growth. Despite the current economic headwinds.

Looking out to our fiscal year 2022, we expect and improving macroeconomic environment as we exit this year will result, and accelerating growth and new business over the course of fiscal 22.

Given our subscription model revenue growth will lag the improving sales environment.

As we've said in the past the path of fiscal 23 will not be linear we.

We expect our fiscal 22 revenue growth to be low to mid teens and free cash flow growth to reaccelerate to approximately 20%.

We are confident in our fiscal 23 free cash flow target of 2.4 billion as we will benefit from improving business momentum and fiscal 2002 and will provide a tailwind to our revenue and free cash flow growth.

And just the 43 will also benefit from the renewals of our fiscal 2000, new transactions when we restarted multiyear payments for a part of our business.

Beyond fiscal 23, our continued investment and cloud products and of subscription business model backed by our strong balance sheet give us a robust foundation and platform for double digit growth.

And now I'd like to turn it back to Andrew.

Thank you Scott.

Our strong performance in Q3, once again demonstrate the advantages of our diverse customer base resiliency of our employees the power of our SAS offerings and the strength of our business model.

And ordering of University last week, we hosted approximately 100000 customers and partners and made a series of product and partnership announcement as well as our acquisition of the pacemaker, which closed yesterday and offers leading functionality to architect.

Maybe maker will enable us to support design professionals much earlier in their work flow by harnessing AI to rapidly create and evaluate options for of building or urban development.

Through automated data capture smart design seems to support and collaboration functionality space maker enables users to quickly generate optimized and iterate and design.

And also offers a fundamental shift in how we imagine and build cities and the future.

And the time needed to evaluate various possible options I encourage you to check out the demo from last week. It is available on our website we.

We also announced the Autodesk construction cloud platform, which unifies, our hdc cloud offerings and the data held within them to enable a connected project ecosystem of cost design and construction.

Underpinning the obvious construction cloud is our common data environment Autodesk. This.

Jim provide seamless navigation integrated workflows and project controls and enable of single source of truth across the project lifecycle.

Bill quantify and Jim collaborate bring together the best of planned grid and Im threesixty with new functionality to create a comprehensive field construction and project management solution pardon.

Regarding line customers and collaborate pro extends the capabilities of Bim 360 design and the new platform to create a more seamless exchange of project data between design and construction.

During the quarter Morgan simple a leading construction group in the UK Committee of the Autodesk and their strategic platform partner and Lee Ramsey Morgan Tyndall of digital design Director said quote Iresearch all of the marketplace solution Autodesk stood out for me.

Average of construction cloud provide greater integration between different roles and functions, allowing data to be shared across projects.

Sales to be broken and a vast amount of efficiency to be gained and quote.

The breadth of our agency business of underpinned its resilient performance and enabled it to be a net beneficiary from secular and cyclical trends. Despite many construction project being interrupted delayed are navigating new ways of working because of the pandemic, we're still seeing year on year growth across all our construction offerings, our cloud based products and.

Well, our customers and navigate the cycle today and can be more efficient and sustainable for tomorrow. Our office based solutions continued you well well field day solutions improved sequentially boosted by several competitive wins.

Customers continue to choose planned grid to digitize their profit to because it is easy to use and they only pay for what they need this.

This quarter, our Bim 350 product set records for both worldwide weekly average users and project.

We also continue to see adoption with our larger customers and within the infrastructure industry.

During the quarter, one of the world's leading professional services firms, which serves clients and the interest infrastructure and building sector increase of investment with Autodesk, we have been part and together for over 15 years and the renewal of our enterprise business agreement enables this firm to expand its use of Bim 360, and planned grid in order to a GAAP.

After the industry changes and create new markets for its services.

And another instance, Japan's largest homebuilder die warehouse industry Company limited renewed and enterprise business agreement with of the company of making key investments and Ben and has selected autodesk to be of strategic innovation partner to achieve its goals for digital transformation design for manufacturing and industrialize construe.

Option.

The company of adopting them at all levels of the organization and has made a commitment to adopt additional out of this product, including temporary 60, docs and design and plan growth.

And we'll be working with Iowa house at the forefront of industrialized construction.

Our cloud based platform is also propelling growth and manufacturing by enabling the conversion of design and make on the commercial side, our market leading cloud based platform fusion 360 enjoyed another quarter of accelerating subscription growing scale of deployment and adding competitive displacements and the quarter with.

Over 120000 subscriptions and.

Hey, you know we introduced several extension of the cadence of 60 further encourage adoption and usage of the platform by adding specialist functionality.

As a reminder, extensions offer expanded tools and functionality that can be added on demand of the core fusion 360, offering and kind of functional flexibility and cost of afternoon enhances the value of our platform for designers engineers and manufacturing.

We also announced exciting partnerships with sandvik hormones and Rockwell automation within the core of on a metal cutting tools and services company. We took the first step to realize a shared long term vision of accelerating the automation of manufacturing processes by making tool data and manufacturing recommendations available to users of.

Fusion 360.

With Rockwell automation of provider of industrial automation and information technology, we combine factory layout capabilities available in our industry collection of with their factory simulation tools. Together. These solutions will help our mutual customers digitally design and condition factories, and less time and with greater efficiency.

This quarter, we also announced the acquisition of Cam fleet, a leading provider of post processing and machine simulation solution.

Kim bridges, the gap between Cam programming and shop floor machine tool operation and allows manufacturers that digitally simulate and verify the machine code that drives the production equipment before running it on the shop floor. This will enable our customers to identify potential problems and at digital environment at the price.

And cramming phase the other white scrap work or damage machine tools and production.

During the quarter, a large multinational defense security and aerospace company with an extensive global supply chain chose to increase its investment with Autodesk through an enterprise business agreement to stay at the forefront of of industry. The company is using innovative manufacturing methods to save time and money and instead of targets a threed printer.

And let me one third of the component and its new jet.

As it radically changes the way of designs and build the company selected ought adapted the key strategic partner.

The adoption of our products is also driving change too out of supply chain with some of which must adopt new ways of working with fusion 360, and now have access to our advanced manufacturing solutions to help and realize of business model.

And education, we continue to expand our footprint.

And your CAD are fully browser based product development platform for aspiring designers now has over 30 million users worldwide fusion 360, and chromebooks is experiencing rapid adoption and high schools and universities and is replacing entry level browser based CAD Cam with professional grade career accelerating fusion 360.

For instance, the University of Illinois, and our bonus Champagne has now switched to fusion 360 across multiple departments, including biomedical engineering systems engineering and mechanical engineering.

Beyond our industry specific results, we are seeing early adoption of our premium subscription plan with customers taking advantage of the enhanced subscription offering of renewal many of our multi user customers who are transitioning to the named user model of finding great value and the premium plan due to its advanced user and what it single sign on capabilities and enhance support.

For example, scheu a leader in the field of innovative air environment technology decided to commit to of long term investment and premium this quarter, primarily due to EPS that though and user management capabilities.

And they see audit EPS of the strategic partner and it continues to harmonize its global infrastructure.

Let me finish by updating you on our progress monetizing non compliant users we.

We continue to be sensitive to the short term economic pressure faced by our customers, but remain optimistic about the long term opportunity as we demonstrate the value of our cloud based platform for our customers.

For example in China, our customer was locked out to try and lower lower cost competitor quickly return of due to autocad superior functionality and invested further and autodesk by purchasing collections for the first time to focus on growth.

Our efforts to educate our customers about the benefits of staying compliant with our subscription are yielding results.

We are able to convert them to paying users and a customer friendly manner. During the quarter, we closed eight deals over $500000 license compliance team.

In closing we continue to build a strong autodesk for the long term, our early and sustained organic and strategic investment and critical critical capabilities like cloud computing and cloud based collaboration combined with the successful transition to a SaaS business model give us significant competitive advantages and confidence to grow and double digit range and of course.

Couple of future and we have multiple drivers that make us confident in our fiscal 23 free cash flow of target of $2.4 billion.

With that operator, we would now like to open the call up for questions.

Thank you as a reminder, task of question you wanted to press Star one on your telephone to withdraw your question press. The banking. Please standby, while we compile the Q and a roster.

Our first question comes from the line of Saket Kalia from Barclays Capital. Your line is now open.

Okay, Great Hey, guys. Thanks for taking my questions here and Scott Congratulations on the next step you'll certainly be missed thanks.

Thanks Saket.

Hey, Andrew maybe first for you a lots of talk about but you know.

One of the questions that I feel like we got a little bit, especially during the month of October and November were what what.

Essentially a higher and what potentially higher infrastructure spending spurred by the government could mean for Autodesk and of course, we don't know what that looks like yet or frankly, even if it will happen, but I was wondering if you could share some of what autodesk, maybe sort of during the 2009 recovery and reinvestment Act as perhaps a frame of reference that mix.

Yes.

Yes, and I get that makes sense.

First let me start the question by basically we don't have any kind of growth projections around stimulus of the impact of stimulants on our business and any of our model alright, that's stuff that we leave out and.

One does not want to leave themselves exposed to the vagaries of governments.

However, you know if.

If we go back to our weight and all nine and I think it's important remember as you know one of the narrative doctor about out of that no nine and art and so exposed the housing market Oh, My Gosh, you know and and the reality was that our net revenue.

Recovered well significantly faster than the housing market did and that was because of the distributed no nature of our work and our customer base and the projects and the sectors that we cover.

Infrastructure spending and stimulus spending back then absolutely helps because it created it created a pipeline of projects that were new but we were already recovering before some of the stimulus showed up and I think it's important to recognize that if you look and what the impact might be if we actually see some of this show up and we actually see some important stimulant obviously.

It's going to increase the project pipelines of our customers and Thats always good for us and I could see it could see more adoption of our portfolio. It could be really good for the construction portfolio, but against that and I wanted to get Super clear, we don't model of that kind of stuff and our outlook and and we're not we're not expecting it to hit our numbers.

Socket the only other comment that I'd add on top of that is it.

Let's say and infrastructure Bill does get passed.

It will take some time for that build to turn into real projects and for those projects to get put out to bid and for that and so downstream start to drive our business. So.

And if that were to happen, let's say early in the New administration I wouldn't expect that to have a material impact on fiscal 22 anyway.

Got it Thats Super helpful. Scott, maybe maybe for my follow up for you. Thanks for the early fiscal 22, guys. That's very helpful. I.

I guess with with 20% free cash flow growth next year and that target of 2.4 billion in fiscal 23, and it looks like that acceleration and free cash flow that we're seeing here and in fiscal 21 is going to come to actually and fiscal two.

21, and try and she's going to continuing to 23.

Can you just talk a little bit about some of the drivers that might contribute to that you touched and that's a little bit of of Paris Air Comm. So I'm just wondering if you could double click on at once more.

Sure second the and by the way you are one of the one of the got it right actually as I recall looking at your and your previous node for what to expect on fiscal 22, and as you know we've been running multiple scenarios and some of them probably driving my team crazy running scenarios over the last nine months and in each case, we run and not just for the impact of this fiscal year.

And next fiscal year out through fiscal 2003, Steven fiscal 25, and beyond sort of to have a good sense of how the model response to a variety of different scenarios. That's part of what underpins our confidence in fiscal 2003, but if you step back and say what are the drivers behind that.

Start with the biggest driver you're seeing our renewal rates stay steady through this process and in fact, even modestly we saw a sequential increase and renewal rates.

Given the size of our renewal base, that's that's a big driver longer term and we talked about the net revenue retention rate of staying in that hundreds of 110% range. Even during the pandemic. So it's like a big renewal base with a high renewal rate of 100% to 110% net revenue retention rate of drives a lot of growth.

And to that what we're seeing and cloud and the cloud products acceleration overall.

We still have a pretty significant opportunities to convert non paying users of in front of us.

And and we've built the leading.

Portfolio of product portfolio and construction. So there is a.

And we've talked about again today about the success of our manufacturing business and where we're headed there and some of the traction we are beginning to get refuse and through 60 and the way we're monetizing that with some of the extension. So there's a there's a lot behind that.

That's what drives our confidence not just and this year and some of the early view I gave you of fiscal 22 bits and how that ramps up out through and.

Through fiscal 23.

Just two other quick things that I'd like to add to that.

We do we are seeing a modest improvement and economic activity right now that and you're talking about certain countries are back to pre build levels, but it's not consistent our expectation is that we will see continued economic improvement through next year, but that will.

I doubt, it's going to be a straight line that will be more pronounced and the second half of next year, which you will be a little bit more back end loaded and that linearity affects not just revenue and also affects where we collect cash.

A lot of this sales of that momentum and the second half of the year will turn into fiscal 2003 through cash flow and then one other item that I want to get on the call. So that you can build that into your model, we do see of cash tax impact and year on year. This year to next year of about $50 million to $60 million of their profitability as of grew fairly simple.

So you add all of those together, that's what underpins our confidence the early view of fiscal 2000, or two cash flow and our confidence and the 2.4 billion and fiscal 23.

Got it that's very helpful. Thanks, guys.

Thanks Saket.

Thank you. Our next question comes from Matt Hedberg from RBC capital markets. Your line is now open.

Hey, great guys. Thanks for taking my questions and congrats on these numbers and in a really difficult situation I will also offer my congrats to Scott. It's been great working with you are obviously, we'll miss you would autodesk, but congrats and.

And dust of luck.

Yes, Andrew I wanted to ask about the nine figure three year renewal deal that is super exciting I guess I'm wondering can you give us a bit of history and how that customer has has grown.

To this level and maybe the opportunity for other enterprise deals of this caliber given your your sort of extended platform. These days.

Yeah. So we actually broke records a couple of times during this quarter. So these these deals or are becoming more of the norm than than not and our quarters and I want to I want to tell you what would essentially underpins all of these and I think it's important and it kind of the same dynamic and in all of them New York.

Customers look three years out they look at what they're trying to do internally transformational Amy.

And with with digital transformation or with the transition to Bam or with the transition to the to the cloud with fusion and other things associated with that and they often don't okay, and what are they going to need and EPA in order to drive and maintain that expansion without coming back and renegotiating the contract with US again, that's what's powering net.

Strategic discussion about what our of the long term adoption requirements of these customers.

Instead of customer might Steven so expanding more into industrial and construction and applying both inventor and rabbit more broadly and their profit and they want to make sure. They plan for that or they are going to see expansion of.

Construction cloud deeper into their processes. So the plan and for that they are saying line, obviously as much construction costs. This year I'm going to use this month next year or the year after that the year. After that so this is what is driving these kinds of deals. This discussion about the three year expansion of usage of our portfolio and these accounts and it's not just usage across.

Users its usage across breadth of portfolio otherwise you couldn't see deal of.

The size coming through that's the dynamic that plays out and almost all of these deals that were seeing.

Makes sense, Matt Scott.

Yes, no Thats Super helpful. And then maybe just to double click on the SaaS side, I mean, Andrew you talked to executives.

Every day and I guess I think we're all excited about the prospects of the vaccine.

On those conversations though in a post cobot World I mean, do you get a sense that you have obviously a lot of success with 360 Hsas today, but do you think we could see even a bit of a slingshot effect as part of these larger deals as customers really effectively race to embrace SAS.

Potentially over the next pandemic at some point.

Yeah, I actually think of it even goes beyond pandemics. It. It's like once you got a taste of it you want more of it is what's going on to okay. Because remember some of these customers. They were not broadly deploying our SaaS solutions and probably the pandemic and what they are seeing now is you know what this this stuff important I need to get on it and.

I need to I need to prepare for the future and this is how I'm going to drive my Digitization. So we're we're absolutely going to see continued growth and these platforms.

And you mentioned that the vaccine and things like that because what were seeing when we talked to executives right now and.

Everybody, everybody does and see a change and the timeline of how that pandemics kind of play out but all of that's what we're seeing is increasing reduction and uncertainty. It starts with that theme conversations and then more than one vaccine and then it goes into hey, you and election is getting rid of uncertain who's going to be the president of less uncertain.

Hi, certainty. So there is a progressive building of.

Of uncertainty being removed and customers are getting more and more kind of comfortable about looking at their second half investment scenarios for next year and SAP is and every one of those conversations.

And I think as and as long as we continue on this trajectory of uncertainty being removed you are going to seek and people being increasingly comp comfortable with how they feel about the second half of next year.

Super helpful. Thanks, guys.

Thanks for the question Matt.

Thank you. Our next question comes out of line of Philip Winslow from Wells Fargo. Your line is now open.

Hey, Thanks, guys for taking the question and getting the new congrats on a great quarter and Scott obviously, it's been a real pleasure working with you and not just the autodesk, but going back to back the situation and we will definitely definitely Miss you My front line.

Yes.

Got it got a question for you in terms of your the AC portfolio, obviously very diversified in terms of the sort of the stages of of course of building from there.

Hi, and planning actual construction and and so I guess of to sort of a two part question here what are you seeing and sort of that portfolio right now and into Q4 of them. We are thinking about about next fiscal year. How are your spending sort of sort of the ebbs and flows of that portfolio to play out.

Yes actually.

Putting on and pushing on an important competitive differentiator for us the breadth of capability, we have across the entire Amy cycle.

Cycle and the way, we're integrating that information and the cloud is fairly unique alright, and what we're seeing and this is something that I think you'll you'll you'll see progressive way again and you are right now a lot of people are talking about digital twins and ethical calculates out there. Obviously, we haven't used type of cat really very very often but.

What what's going on right now and its been Threed NAND is the original digital twin.

All right and this whole discussion around digital twins, and AC and think of associate with it is accelerating the dialogue around if I want to do digital too and I got to do been because theres no digital twin without without building information model and you're going to see a continuing ongoing acceleration of of the usage of cash upfront and our portfolio.

Ill, but Dan what we've layered on top of it as a couple of critical things that make the entire portfolio more valuable you may have noticed we emphasize this notion and the new construction cloud platform route of common data environment and all the things that go along with that can accommodate environments that common data environment is not just south of space. It's also ultimately going to be ISO compliant and it's going to allow.

All of that to move that building information data all the way through the entire profit so you're going to see more and more adoption of what's going on and Thats built all the way through from the Preconstruction planning cycle to the construction site and that that's a pretty powerful differentiator for us, but for one left and I want to mention to you and.

And we talked about this and you and I want to make sure you paid attention to it with the rollout of our tandem monitor of tandem and what what 10 of the tandem Inc.

You know if if digital twin start with them.

Tandem as a way to bring them data together from multiple places from our volume RPM model or our Bim information from other third parties that are building control of information, perhaps from other other hi, Jim beam based data from other types of applications and bring it into a single Agra.

Good view in the cloud the updates dynamically as the building project progresses. This puts us at the forefront of bringing the power of Bam to create digital twin two of the ability to create digital twins and the cloud that actually represent the final stage of the project no matter, where all that project data comes from so we're pretty excited about.

This progression and what it means for the company and I think you're going to see a lot of interest and uptake in that and the approach we're taking.

That's awesome and that's sort of.

The exciting and equally as exciting question for Scott and long term deferred revenue.

Hey, how are you thinking about that next year, obviously of the guidance for this year is hanging out of mid twenties, but how are you sort of modeling about when you think about the about cash flow for next year the year over year after that.

Yes, I think for next year it stays in that range spill and I don't want to get into.

And too much forecasting of fiscal flow through until we get to the Q4 earnings call and obviously, we can give you more and more detail at that point, but the what we're seeing this year is kind of moderating assumptions around multi year and of course, that's what drives a lot of that that long term deferred and so you see it you sort of sequential trends there and long term.

It hasn't fallen off of floor hasn't fallen off of dust and onto the floor of the multi year rates are still there, but they're not as robust as we have seen historically and maintenance I think ultimately a return to that level, but frankly I don't think the.

The moderating multiyear that we see this year is a big negative and the sense that given our renewal of the strength of our renewal rates will continue to get that collect that cash flow. This collectively of subsequent two years and set of collecting all three years upfront and will collect it without the 10% discount that we put and as an incentive for those multiyear transaction. So think of it kind of.

Suddenly and where it is for the foreseeable future ultimately and I think that there's there's probably a little room for a total Ron.

Awesome, Thanks, guys and congrats again on a great quarter.

Thanks, Phil Thanks.

Thank you. Our next question comes from the line of Heather Bellini from Goldman Sachs. Your line is now open.

Great. Thank you so much and Scott and I will Echo my congratulations and to you as well Andrew for the company's execution on this challenging macro environment.

I wanted to ask two questions one is.

If you can share with us kind of and I mean, the competitive positioning and construction given your pricing model and how you might see some of the competitors responding. So if you could spend some time on that and maybe a little bit more on the differentiation and thats gotten even wider over.

Over the course of that over the course of the pandemic and then also.

If I look at your growth in Asia Pac you can that's the best best wage and in terms of growth how far behind do you think the Americas is from the recovery and the solid growth that you're seeing and APAC.

Thank you so much.

All right. So let me, let me start with the competitive positioning on the construction, you're absolutely right Heather the pandemic actually gave us and opportunity to and to lap our competition a bit and.

The slowdown definitely took the wind down of certain parts of the market. However.

However, we didnt slowdown, we continue to invest and we put quite a bit of money into rolling out the unified platform. So what you see with auto net bill which is what we're going to lead with in every new deal. We are leading with all of that spill over and over again.

And we're going to lead internationally, and we're going to lead and the U.S. with it is a comprehensive project management and field management application that goes from design.

All the way through to site management site execution and layers on the analytics associated with construction and PQ and some of the predictive skills all built on top of.

Our new docs all right. This is a pretty significant change that platform is highly competitive and matter of fact is differentiated and numerous ways because of an end to end capabilities in terms of pricing model, Here's what's unique about our tender and I think I think it's very important driven and no one no one in the industry is more flexible with.

The way, we deliver these applications and autodesk. So if you want to buy named users and deployed named users. We got named users for you. That's our primary deployment model for most of your application. If you want to pay based on project turnover you can do that if you want to play based on pay and on usage and consumption and you can do that this flexibility is.

Heavily coveted by our customers and in fact, I think this flexibility has been part and parcel of what and allowed us to continue to expand the usage of the construction cloud even during.

What's happened over the last year, So I think technologically and we're now competitively differentiated because we took the pandemic at the time to double down and the platform unification and get it out there and business model line. We're differentiated so we're we're feeling in a pretty strong competitive position as we head into the recovery next year across all day.

Various market, we love that we have tough competition and the space. We think it's good for our rig it's good for our customers, but we're feeling really good about where we're at now with regard to.

The American versus day path right.

And here's what off day high usage usage ramped up fairly quickly and Asia Pacific and the and like we said earlier and it definitely above pre code and levels and a lot of places not everywhere, but in a lot of places.

The U.S. and particularly just seem to have stalled alright usage hasn't fallen back it's ramped up a little bit and as time goes on but it's not it's not seeing this kind of surge.

I think we should just kind of a whole tightening of the while you see what the levering out of the uncertainty does right now for the the usage and the U.S. right between the election results between the good news about vaccine between the potential that people see about stimulus and in there and their project pipeline.

I think we might start to see a change so it will be interesting what we can talk about on the next earnings call, but I think the the unwinding of uncertainty matters a lot in our markets.

Thank you so much.

Thank you. Our next question comes from the line of James Lee Shallower from Griffin Securities. Your line is now open.

Thank you.

Andrew starting with the nine figure deal of returning to that subject, it's especially interesting when we consider that once upon a time 100000 dollar deal was a big deal for Autodesk, So you're obviously and how many orders of magnitude beyond that but the question is to the extent that there are now as we understand.

Additional eight figure deals and the pipeline.

How are you thinking about your license management.

And customer success requirements and capacities that you need.

To invest in and ramp up to support what is obviously going to be a larger propensity for.

These kinds of of.

Of deployments and then.

Returning to a new for a moment.

You mentioned that you through March last week, having to do with some additional new possible opportunities for the company and manufacturing software supply chain, even smart products you alluded to maybe talk about how seriously you mean to pursue those.

Those new of things and then Chris Scott first thank you for the last 25 quarters and as Youre going away and question or do a multipart question Andrew.

Andrew earlier parts of the usage data by Geo could you do the same thing by perhaps standalone versus collections.

And perhaps even by vertical in terms of what you're seeing and the usage telemetry there.

All right. So it's a classic Jay Multipart question all right.

So Jay let me start with of the lights and managed did something we take particularly seriously and I'm really glad you asked about it because license management and the ability to manage these line that is actually a value add to our customers. If they want to manage this investment and autodesk assets as an enterprise.

Assets, Alright, and it's Super important of space that we do this one of the reasons, we've been moving so quickly to retire legacy model and our user base is because of that actually hold that holds up bass from delivering best in class license management for our customers every customer every every maintenance licenses still out there.

Every multiuser like that so based.

On the old desktop paradox versus what we want to do and the cloud paradigm.

Holding us back from the pool of systems and the way that help our customers manage these things holistically. The good news is that our EPA customers get a totally different dashboard on and how they use our software and they're able to get more and more per day per user and usage analytics and and more data in terms of understanding their customer base, but.

Net investment in the the sheet of glass and our customers look through in terms of managing their relationship with Autodesk something we've been doing ongoing for years and you look for it to accelerate as we retire the last of these legacy business model and start unifying everything on a stack that really provide.

Hi level of control to our customers and a high level of fidelity about what their actual usage is net.

We believe this is a value add of the portfolio and you'll see of continue invest and now with manufacturing investments I think we wanted to pay attention to what we're doing with fusion and the areas. We're targeting because we think these are important areas that we want to pay attention to we've integrated certain types of technology and to fusion, we want to augment.

Couple of supplement and extend though it so that fusion is a professional grade solution surrounded by other professional grade solution that that tackles significant growth markets inside the manufacturing vertical our first our first.

GAAP angle of attack within the convergence of design and make and merging advanced manufacturing method with advanced modeling method, I think you're going to you're going to see of.

Attack the convergence of main mechanical engineer and kind of line.

Components inside designs, we've already started doing some of that thing and we're going to do it and uniquely cloud way, we're going to do it with uniquely.

Underpinning of the cloud compute and we're going to do it and highly differentiated ways, but also in ways that no risk of.

Some of the tools our customers are using today.

And and jail I'll jump in on the second part and I guess, thank you for the congratulations on my 25th Autodesk earnings call. If I get that part of this right. It's your 120 to autodesk or less cost a little bit of of difference in terms of.

With that I'd like to congratulate you as well.

It's interesting.

Rates were seeing less of a differentiate differential by vertical and more of a differential by country. So in other words of country ex is seeing nice robust growth, we see that and both the agency and the manufacturing side.

Thats continuing to be somewhat somewhat flat and stable, we see that again by vertical. So it's I'd say the better differentiator and usage is more how is the region performing how's. The consist of forward. Then it is within that country is that a C or manufactured.

And that the industry collections versus Standalone, what I'll, just reiterate what I said the opening of homes barrier that industry collections continues to be a stable share of our overall business. So we're not seeing a significant mix shift there.

We had early on we have seen a mix shift of the new sales more toward LT and we talked about last quarter that reverted back to the mean, where it has been historically, so we're not sort of significant mix shift at this point of either way.

The last thing that I'd add because I know the detail of your spreadsheets and you're probably you probably already got everything laid out here.

But to give you a sense on our new business growth and in particular product subscription new business growth from a unit standpoint.

Question, we've been impacted by the pandemic more so and new business units and and other places.

That new business grew sequentially from Q2 to Q3, and that's our expectation of those you if of grow again Q3 to Q4. So just to give you a sense of properties are performing.

Thanks, very much for both of you.

Thanks, Jay Thanks.

Thank you. Our next question comes from the line of Brad Zelnick from Credit Suisse. Your line is now open.

Great. Thanks, so much.

So congrats all around guys, particularly for Scott best of everything, especially in your next chapter and the topic for both of you I wanted to ask you about innovation the sheer amount of innovation on display and Autodesk University of this year was I guess I'd, just say overflowing so Andrew for you the easy question.

And what excites you of the most and my parting gift for you Scott maybe a little more complex how should we think about the pace of innovation going forward, because you've always talked about high single low double digit spend growth, but were below 7% year to date. So should we think about the spend growth accelerating meaningfully to the high end of your range to recapture the tremendous.

And your head thanks.

All right. So Brad I Love. This question and innovation is absolutely hyper critical to everything we do we believe we are powering audit transformation and a lot of dialogue in the industry right. Now we are delighted to see our competitors start to.

Talk like we've been talking for years and I think that's a sign of the kind of innovation, we're putting into the market.

Here's here's what I'll tell you I'm really excited about I am excited about the merger of Sal.

Wow compute and machine learning and these transformational power for our industry right. This is what gets me up every morning right now in terms of what we're going to be able to deliver for our customers when we get more and more of their processes and the cloud when we're competing more and more with their data with.

Ever and ever decreasing.

Few costs and the cloud and layering on machine learning, we're going to be able to provide our customers with insight and productivity enhancements that are simply beyond anything they've imagined right now and it gets me extremely excited to be part of driving that change into the industry and what it means and I can talk about the individual technique.

Knowledge of that play and that all of that there is lot, but if you. If you talk at a high level of what gets me excited that and one thing I think is before as a segue to Scott answering your question I think it's important greenhill that next year.

And probably the largest R&D spender in our segment all right and I just want to I just want you to think about that after all the discussions we are going to the business model transformation to all of a sudden be talking about a world where no.

Nobody.

Probably nobody of spending as much in this space and R&D as Autodesk and I think that is a fundamental change and a lot of innovation comes from that much spend.

Scott.

I'm not sure what to add to that Andrew I think you said it exactly right. We were at a fortunate position Brad and thanks for your for your kind words by the way of but we're in a fortunate position and the model, where we can both gross spending and increased margins year on year and so if you look at the midpoint of the guide the update of guide for this year for fiscal two.

21, it implies just sort of an 8% growth and total soon so.

Cost of goods sold plus opex.

Looking ahead on top of that Weve invested pretty significantly and grown our investment in R&D head count for R&D for sales capacity this year and some of the areas that Andrew just touched on earlier and Joes question about building out our internal systems and our internal infrastructure. So we've invested quite a bit and innovation already.

This year that will obviously carry on into next year and we've made a handful of not large but strategic acquisitions to continue to fuel that innovation. So we we think long term targeting double digit revenue growth.

Is somewhat dependent on us continuing to invest on the R&D side of things and I feel really good about the position we're in to be able to both drive that investment and increase margins out of the 23.

Okay. Thanks, very much happy holidays, and we look forward to hosting and next week.

Thanks, Brett.

Thank you. Our next question comes from the line of Keith Weiss from Morgan Stanley. Your line is now open.

Excellent. Thank you guys for taking the question.

Scott would it be out of line to try to convince you to stat Autodesk and means a lot of more interesting and like a network and company.

No I think the horsepower.

Hi, Keith.

And.

Exactly.

Good day, and you should and try to order to keep.

And so it. Thank you guys taking the question on the quarterly two things.

Wanted to just get a little bit more color on one is kind of like the pace of recovery that you guys are seeing and expecting.

It seems like early this year you might have thought it was going to come a little bit faster, given what you're seeing and Asia Pac maybe that spreading out a little bit, but it with the turn and like the current ARPU of figures. This quarter. It looks like you guys are really actually the whole business is turning a corner here. So one can you give us kind of your latest thinking and on the shape of the recovery and kind of whats assumed.

As we look into equity by 22, and then carrying on kind of that total spend commentary a lot of companies that we talk to saw expense savings. This year due to coded and lower tier new spending and just were able to sort of a garner efficiencies and their overall business some of which they need to get back in the year ahead.

As we get into a more normalized environment is there a big component of that and the Autodesk business that we should be thinking about when and where we're modeling margins. Its F. R 22.

Yes, so Keith I'll start and Andrew you can you can add color to it in terms of what we're seeing we are see.

Recovery, you know Andrew alluded to every day of some of the specific countries where were seeing recovery already and we're aware of.

A level of activity that's above pre cobot rates if someone earlier highlighted a day package has been quite strong force from that standpoint, we'll.

We're seeing continental Europe.

And we're nicely as well.

The EUR expectations for Q4 is that we'll continue to see of modestly improving economic environment and as we look out of next year. I think we will continue to see improvement I'm not sure it's going to be a straight line improvement and especially given kind of the current way of it will continue to see improvement and I expect by the second half of the year that.

And we'll see some pretty good recovery and and economic activity that clearly will will benefit us.

And so think of next years being a little more back end loaded and I think thats part of what you see with the early looked and we've given you on what of revenue growth looks like this year.

Q4, again midpoint of the guide has revenue growth at about 12% and margins and for Q4 will be about in line with the full year and about 29% I think of looking out to next year, you'll see both of those growth revenue growth will it will increase from there.

And of marginal increase of there.

On the specific Covance those savings I think we've had the city of savings and everyone's and deals obviously DNA travel expenses.

And a big savings for us.

But as we look and events of gone more virtual that'll continue and modest amount of savings from the operations of our facilities or offices as we look and next year, though I do expect that to be of significant year on year headwind travel of course will return, but we're going to we're going to build the budget such that I don't expect it to come back.

Anywhere near to where it was and let's say calendar 2019, and our and our fiscal plenty of.

I think if nothing else. We've learnt you don't have to be face to face with the customer to get that final agreement, we face to face internally to get things done the way we need to get of done internally. So I think we'll continue to see ongoing savings and theyll be it.

And a step up and this year, certainly, but it's not going to be a significant headwind for us and said.

Scott Super helpful. Thank us.

Thanks Keith.

Thank you. Our next question comes and the line of Adam Borg from Stifel. Your line is now open.

Hi, guys and thanks for taking the question and Scott of course that congrats of the new role.

Just on.

Summing up and coming out of a new and talk a little bit more about Autodesk bill.

Hi. Thank you now you are leading with that going forward, but you do have a big installed base on been pretty 60 and planned grid. So I was just curious kind of what the migration path looks like for those.

Those as assets to Autodesk build and maybe just quickly of a follow up on day fake or acquisition any commentary Scott on.

On expectation for and organic revenue growth. Thanks, so much.

Yes, all right, let me, let me start with the migration path of prepaid growth.

Are those customers and fired plant grid, and ultimately migrate and adult it's actually not of.

Heavy lift because of the way we don't the application you don't plan for its Jude.

Innovation and and huge value add to the whole stack of mobile experience. They are really good at it. So what we did and we basically use the plan great experience and the planned grid team at the mobile experience for Bill. So the move from from planned grid to build and the progression is not of heavy lift now you're right. We have a we have.

A long tail of customers that are and Bim 360 few of them to be 60, Nexgen field those customers over time are going to be migrating to build and at a pace that makes sense for them, but what we've done is we've created environment that allow them to shift during as projects as projects some of that and they go into new project, We've got a whole master plan with our customers.

Sales organization and construction on how they move over time, we're not going to force anybody to move ahead of their time, but we've got to of well crafted plan for how we move these people it's more of a heavy lift for people that aren't and 360 field less of a heavy lift for people, who are and Bim 360, Nexgen, which which is where dock.

And just.

Audit of Docs was was built off of and it's a much smaller and lift for plans of customers.

And Adam to your question of space maker.

I'm Super excited.

Algae and I don't know if you've got a chance to see it demoed a year, but if you did and I highly recommend you go take a look at it this is a.

Obviously.

Tremendously exciting.

Technology, and some super talented people that we picked up with the space maker acquisition.

Impacts and eventually is going to be non will actually be slightly dilutive and that's that's built into our expectations for next year.

There is another effect that I, probably should have mentioned earlier and I want to make sure I get it on the call, though the one thing that will change next year and if the slight headwind to us in terms of revenue growth year on year, we have almost all of our products are already ratable growth, but theres a theres a couple of really small products one vault that we've talked about in the past that.

Does not get over the hurdle to get away from upfront revenue recognition. We've continued to work on that product continued to do things that incorporate much more cloud based functionality and I think that of the first part of next year, Walt will flip from upfront Rev. Rec to full ratable Rev Rec.

And that that looks like it's about a point of growth and.

And already built into the kind of the early view of that I gave you of the low low double flow low to mid teens revenue growth for next year, but that the impact of both is built into that obviously of normalizes and fiscal 23 of the because once it becomes ratable and fair points are equivalent of.

But that's one of your building your model of that level of detail think about that being a bit of of headwind. That's already built into the early view that activity of fiscal two Lisa.

Yeah and great. Thanks, guys.

And I'll make one more comment on space maker, just because I kind of I kind of forgot the segway to you and space and that could represent that perfect convergence of SAP cloud compute and machine learning and into solving real world problems for our customers I think you're going to see the impact on our business accumulate over time as.

As the technology expands and of that connects itself deeper with rabbit and other parts of the process one of the things I love about this space maker team is they have this philosophy about making multiple constituents more successful with their objectives and thats. The the building owner of the developer making their their indefinite more profitable.

The city, making sure that the impact on infrastructure is managed and controlled and they also have a big customer or big stakeholder and this is the environment and helping architect and city planners make more sustainable decision in real time for how things are Bill is a perfect example of how all of these things come together to chase.

And the way people make design decisions and ultimately go decision well look for its impact to expand overtime and that team started talking to other parts of our profit built out their existing products and inevitably starts moving into other parts of the organization, which we always see with acquisitions like this.

Yeah, there's there's absolutely a lot of synergies that we see with space maker coming in.

Great. Thanks again.

Thank you. Our next question comes from the line of Steve Ken Lang from assets and Theyll. Michael Your line is now open.

Terrific. Thanks for squeezing me in and guys I appreciate it.

And Scott Best of luck to you and thanks for all the hard work you've done with us over the years definitely appreciate that.

Thank you.

Total.

So I'll just ask one question.

You know.

Andrew you had some pretty open transparent communication with customers of last quarter.

In terms of the letter that was written.

And and just in terms of looking at what those customers were asking for.

They were very clearly asking for accelerating the roadmap and architecture and engineering design, which we doesn't seem like we've talked a lot about on the call today hasn't been a focus.

And if I read between the lines and and and that.

Medication the customers also seemed a bit frustrated with the.

Transitions, they've been going through from maintenance to subscription is June elections, and out of named users and there. It just seems like of the little bit of just an EPS between.

They are asking for and what I'm hearing from you on the call today I'd love to get your thoughts on how why is that why is there that maybe misperception GAAP and what are you guys doing about it.

Thanks, very much Steven.

Yeah. Thanks, Steven is absolutely no definite alright.

One of the things I think I've said consistently in the communication and I'll take you back and communication and we started investing in the roadmap for rabbit well ahead of these communications right from new customers.

Because we made a deliberate choice to invest and construction and not in rabid functionality for architects are these customers are going to occur fairly quickly start to see.

Changes in addition to wrap it from the investment we made actually at the end of last year and I think you're missing something completed we just spent.

Several hundred million dollars on the architectural segment of our space Alright space maker is squarely targeted at design and architecture and the and the founders of space maker architect Alright technology.

Right on the assets and like I said, we just spent a lot of money.

To do this and this is why did the ex it's something we've been looking at for a while so no. There is no different and tier in terms of of where we're focused and where.

With regards to migration look you know.

You got to be when we started this migration with two.

Some of the under 2 million maintenance customers most of those of come along with that we never expected and all of them were going to come along and happily and what we've done and we've reached the end of the table with some maintenance customers that you know are more frustrated with the changes and not but at the same time, we've added some other customers that werent able to a force.

Some of our solution before because of the upfront costs of these solutions. So yes maintenance customers that have been with it and see lots of transition they're not done yet we haven't retired all of those models, yet, but remember we started with less than 2 million of those were over 5 million subscribers right now.

A fraction of those are from that maintenance space, we have to remember, let's look at the big picture here as well and small make sure I understand and I amplifies the frustration of those customers and started on maintenance and journey with us.

We have reached so many more customers. So many more architecture firms. So many individual architect so many people that couldn't afford rabbit. So many people that couldn't afford that extra seat of autocad. So many high growth companies and they add seats. They are actually spending less over five years and they would of with us adding piece and the perpetual model that.

The Big story and its transformative for the industry in terms of how much value of people are able to get now so let's make sure we stay focused on the big picture here.

Cool I appreciate your thoughts and thanks again for the open communication and good luck to you Scott.

Thanks, David.

And this is all the time, we have for Q and a today I would like to turn the call back over to Simon Mays Smith for closing remarks.

Thank you Jane and thanks, everyone for joining us today and looking for to seeing many of you at conferences over the next few weeks.

Moving to reach out some of this if you have any follow ups and anything from this cool sort.

So this concludes our opening day. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.