Q1 2022 Autodesk Inc Earnings Call

May 27, 2021

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Good day, and thank you for standing by and welcome to the Autodesk, Inc. Q1, 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session..2 asked the question. During the session you will need to press star 1 on your telephone please be advised the today's.

The 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 Mays Smith VP Investor Relations. Please go ahead.

Thanks, operator, and good afternoon. Thank you for joining all of corporate school to discuss the results of our first quarter of fiscal year 2022 on the line with me on Andrew I'll stop the on.

Debbie Clifford our Chief Financial Officer.

Corporate school is being broadcast live via webcast. In addition, a replay of the call will be available at Autodesk Dotcom forward Slash Investor you.

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

During the course of the school, we may make forward looking statements about the outlook future results of related assumptions acquisitions products and product capabilities and strategies.

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

Actual events or results could differ materially.

Please refer to our SEC filings, including on most recent form 10-K for important risks and other factors, including developments and the COVID-19, pandemic and the resulting impact on our business and operations that may cause our actual results to differ from those in our forward looking statements.

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

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

<unk> disclaims any obligation to update or revise any forward looking statements.

During the Covid, we will quote the 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 referenced in today's call are reconciled in our press release <unk> financials on the other supplemental materials available on our Investor Relations website.

And now I will turn the call over to Andrew.

Thank you Simon and welcome everyone to the call I Hope you on your families remain safe and healthy.

Now a part of the parts of the world emerge from the pandemic others are entering the eye of the storm.

I, especially want to acknowledge our colleagues family and friends and India. We are thinking about you and we are helping wherever we can.

Thank you to all of our employees and their families our partners and customers for their continued resilience patients and commitment on.

The first quarter marks an important inflection point.

While solid execution of resilient subscription business model and continued secular shift to the cloud underpinned our strong first quarter results waning of uncertainty and growing confidence in our end markets generated momentum low.

Robust growth in new product subscription combined with improving usage and renewal rates accelerated billings in RPM growth to 10% and 22% respectively.

Together these reinforce our confidence that we are through the revenue growth trough and on track to achieve our fiscal 'twenty, 2 and 'twenty 3 goals.

In mid May we completed the acquisition of upstream of <unk>.

Cloud native product data and lifecycle management solution.

Bind with existing all of this offerings like fusion 360 of chain will profoundly simplified data sharing and collaboration for engineers manufacturers suppliers and other products stakeholders, enabling customers to bring products to market faster and build a stronger supply chain.

Its next generation platform enables it to be rapidly deployed scaled maintained and updated without the expensive inflexible and time consuming integrations of legacy systems.

We'll grow up change to our enterprise and channel partnerships and expect it to become a meaningful on ramp the legacy design tools to the fusion 360 cloud ecosystem and facilitate further expansion into adjacent verticals.

As we highlighted in our recently published impact of Port the convergence of design and make brings both greater efficiency and sustainability to buildings and a broad range of manufactured goods stretching from E vs and bicycles to high performance skis and low cost ventilators.

While we are enabling customers to achieve their sustainability targets. We continue to lead by example, reaching our carbon neutral goal across our business and value chain in fiscal 'twenty 1.

The report also sets out new diversity equity and inclusion goals.

And while I'm proud of the 50% of Autodesk Board and 45% of our executive team of women, we can and will do more both internally and through partnerships with organizations like ISS labs externally.

As we recently announced Pascal Difonzo Autodesk, the executive Vice President of Corporate Affairs, and Chief Legal officer will be retiring in December after 'twenty 3 very successful years of the company he's been a trusted counselor and steward of the company. His contributions the autodesk are many and have been incredibly impactful and I Wanna.

Thank him for his dedication and wish him all of the best in retirement.

I am very excited to welcome Debbie back to Autodesk and will now turn the call over to her to take you through the details of our quarterly results and guidance for the year I will then come back to provide an update on our strategic growth initiatives.

Thanks, Andrew I'm very excited to be back.

Looking at the first quarter's results.

Several factors contributed to our strong financial performance, including the.

Robust growth in new product subscriptions.

Accelerating digital sales.

Stronger than expected upfront revenue and improving subscription renewal rates.

In addition of 1 month contribution from <unk> and foreign exchange rate provided a modest tailwind to the corner.

Total revenue in the quarter grew 12% and 11% in constant currency with subscription revenue growing by 18%.

Looking at revenue by product and geography.

CAD and Autocad LT revenue grew by 9%.

<unk> revenue grew 16%.

The manufacturing revenue grew 8%.

Excluding the impact of moving our bulk product to ratable revenue recognition.

Manufacturing revenue grew double digits.

And many revenue grew 5%.

Across the globe revenue grew 8% from the Americas, 11% in EMEA and 20% in APAC.

Direct revenue increased 25% and represented 33% of our total revenue.

From 30% last year due to strength from both enterprise and E Commerce.

Our ecommerce site had their highest new billings growth rate in 2 years, driven by strong traffic growth and recent site enhancement.

Reflecting the business critical nature of our products to our customers.

Our net revenue retention rate remained within the 100 to 110 per cent range and our product subscription renewal rates strengthened.

Our billings accelerated to 10% to $974 million.

Total deferred revenue grew 11% to 335 billion.

Short term deferred revenue increased 17%, primarily reflecting growth in new product subscriptions and increasing renewal rates, but also the inclusion of <unk>.

This was partly offset by a smaller contribution from long term deferred revenue, resulting from fewer multi year contract when compared to last year.

Total <unk> of $4 to $3 billion and current <unk> of $2.86 billion both grew 22%.

Current RPI growth was primarily driven by the increase in short term deferred revenue, but also by strong growth in enterprise business agreements and to a lesser extent early renewals ahead of anticipated price increases.

Excluding the contribution from early renewals and advised.

Current RPI grew approximately 20%.

Non-GAAP gross margin and operating margin remained strong at 92% and 28% respectively.

The level of year over year, and reflecting the trough in revenue growth relative to cost growth.

We delivered healthy free cash flow of $316 million during the quarter.

Driven by collections of prior quarter billing and strong results in the current quarter.

Consistent with our capital allocation strategy, we continued to repurchase shares with excess cash to offset dilution from our equity plans.

During the first quarter, we purchased 515000 shares per $143 million at an average price of approximately $277 per share.

Now I'll shift to giving you my initial thoughts and CFO and then finish with our outlook.

Since I rejoined Autodesk about 2 months ago I've been focused on 2 things.

First reacquaint myself with everything Autodesk the team our strategy and how we've evolved during the 2 years away.

And second I've been digging deep to gain of solid understanding of our fiscal 'twenty 2 budget in fiscal 'twenty 3 financial goal.

On the first point well much at Autodesk is familiar to me.

We've been pleasantly surprised by how much has changed for the better reflecting the enormous progress Autodesk has made over the last 2 years.

Autodesk has undergone a cultural revolution.

Ben of powerful shift in the company's values and ways, we work and the pace of decision making has accelerated.

As a company, we know of benefit not only from the scale of our operation, but also from a new found agility that is enabling our success in newer markets like construction and manufacturing in the cloud.

I'm also struck by the compelling and expanding opportunities ahead of us.

Digital transformation is happening now it is real and we are well positioned to capitalize on that trend in the industries we serve.

As I begin to turn my attention to our long range financial plan. These initial learnings gives me confidence in our growth potential in fiscal 'twenty 4 and beyond.

Let me finish with our guidance, which now includes antibodies and obtain.

We still expect that an improving economic environment. During the year will result in strong growth in new business over the course of fiscal 'twenty 2.

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

And our net revenue retention rate to remain between 100 and 110%.

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

We continue to expect about 3 quarters of our free cash flow to again be generated in the second half of the year due to our economic phasing assumptions and normal seasonality.

For fiscal 'twenty, 2 we are raising our full year revenue guidance to a range of $4.3 O 5 to 4.385 billion or of 14% to 16% increase over last year.

Reflecting a partial year contribution from acquisitions net of the deferred revenue write downs.

Given our results are weighted in the second half and Q1 is our seasonally smallest quarter. It's obviously too early to change our view on the underlying trajectory of the year, but we're off to a good start.

We expect non-GAAP operating margin to expand to between 30 and 31%.

Which includes approximately 1 percentage point of negative headwind from acquisitions.

Finally, we still expect free cash flow to be around 1.6 billion with the broadly neutral impact from acquisitions.

The slide deck on our website has more details on modeling assumptions for the second fiscal quarter and full year 'twenty 2.

With improving economic conditions and easier Comparables, we still expect our first quarter revenue growth will be the trough.

Our accelerating momentum in fiscal 'twenty, 2 will propel us into fiscal 'twenty, 3 and I am therefore confident in our fiscal 'twenty 3 revenue growth potential and free cash flow target of $2.4 billion.

As I begin to look beyond fiscal 'twenty 3 the.

The digital transformation of the industries, they serve our sustained investment in the cloud and our flexible business model gives us a robust platform for double digit growth.

Andrew back to you.

Thank you Debbie let.

Let me finish by giving you an update on our strategic growth initiatives.

Secular trends, we have been investing in for years have accelerated during the pandemic the <unk>.

The utilization of ADC, the convergence of the design in May and our expansion into adjacent verticals through organic investment and acquisitions are growing our total addressable market the.

Evolution of our business model the value generated by the growing connectivity of our platform for new and legacy customers and the hardening of our systems to Noncompliant users enables us to attract and retain more of that potential opportunity growing our ecosystem and the usage and value we generate from it.

Turning to AUC.

Our unique vision is to connect all of the phases of construction with end to end our based solutions that combine horizontal data flow with best in class of functionality to enable seamless collaboration complaining design preconstruction construction asset operations and maintenance.

The breadth and depth of our solutions distinguishes from the market and we continue to build on that advantage to industry, leading R&D, which we sustained through the pandemic pandemic and acquisitions.

Our latest product releases reflect that.

For example, rather 2022 is a bridge to more open and interoperable ways of working that accelerate our design customers' digital transformation and improved communication of design intent across all disciplines and project phases for.

The construction teams, we released all of the Bill Autodesk takeoff and Autodesk Bim collaborate as well as product enhancements will further empower construction teams to drive better business outcomes, such as winning more business, reducing rework delivering projects on time and improving the safety by connecting data workflows and teams.

Across the project lifecycle.

As the construction backlog comes back online and the New project pipeline builds we are emerging from the pandemic stronger. This is reflected in our success during the quarter.

For example, Burns <unk> Mcdonnell as a family of companies, bringing together unmatched team of 7600 engineers construction professionals architects planners technologists and scientists to design and build critical infrastructure projects. It is at the forefront of technology use.

Having invested in rabbit and Bim 360 design some time ago. Most of this data is already in the cloud.

Monthly active users or M. A use on all of their software has grown by 80% since 2018 this quarter Burns <unk> Mcdonnell renewed its autodesk ebay and increases the investment with us, adding more cloud based products from the out of the construction portfolio, including all of the bill pipe assemble and <unk>.

Building connected.

Our unified common data platform enables us to move and collaborate seamlessly from design to construction and to implementation with common workflows across multiple global practices.

18, 98 company part of Burns of Mcdonalds is its future focused consulting and technology solutions Division and it is a founding participant in our tandem digital twin programs.

The bolt company has a 1 billion professional construction services firm in the U S. Focusing on integrated delivery of complex vertical construction projects that require extremely tight collaboration between stakeholders and integrated workflows between industry partners the office and field.

Bulk was already relying on Jim collaborate pro and planned grid win this quarter is collected all of the build over of directly competitive construction project management solution and also invested in pipe.

Autodesk construction cloud unified platform connects previously Siloed data reduces rework and saves time for both across the company, enabling teams to easily manage projects from the planning and design through the appeals on hangover.

In multi green of.

Real estate development and operating company specializing in sustainable and tech enabled multifamily housing and high growth and supply constrained markets standardized on Autodesk construction cloud.

In order to build more efficiently and sustainably they knew they had to standardize on a single platform to connect their teams from concept and design to project completion and day to day operations.

In addition to rabbit inventor building connected Autodesk takeoff and all of the build they will be using bim 360 of integration with the embodied carbon calculator to analyze material carbon emissions with all of their data connected to our common data environment.

And the infrastructure, we released civil III, the Emperor works and Autocad map 3 D and Autocad plant <unk> and recap pro with enhancements in transportation water plant land development and reality capture.

Most importantly, we continue to mature our project delivery platform across design and construction to better support digital project execution that helps our customers increase operational efficiencies make better design decisions increase quality and reduce cost and material waste.

During the quarter, we received notice of an award in design from the Montana Department of Transportation, Inc.

Net of a competitor offering they will be using our AUC collection, which includes civil <unk> rabbit and per works now the worst recap and our common data environment Autodesk docs.

The Department was particularly impressed by connected bridge design workflows between revenue and infer works that drive efficiency and sustainability.

Turning to manufacturing.

We have made significant organic investments in addition to obtain.

Inventor of 2020 to introduce new features and enhancements to speed of product development and interoperability with Autocad fusion 360, and Rabbit Inc.

Fusion 360, we have introduced new functionality across the entire product development process and numerous integrated extensions that unlock advanced design and manufacturing technology involved.

In bulk we introduced the new mobile applications and web browser experience for engineers and non cash users to access their real time data anywhere and on any device the.

The potential to converged on design and making the cloud is becoming more of a reality every day to our customer Autodesk continues to lead that transition.

AAC technologies, the world's leading solutions provider for smart devices grew its investment with Autodesk, having struggled with data management and data integrations and their product lifecycle management using a competitor through the modeling product AUC technologies switched to our product design and manufacturing collection with vault to manage all of their data.

They found our connected workflows, particularly attractive and believe they will improve productivity and collaboration across their teams and enable them to go to market more effectively by increasing flexibility in their supply chain for data management, our customers can now choose vault for on Prem and up chain as they transition to the cloud.

With the largest number of new commercial users in 2020 fusion 360, <unk> strong momentum continued growing commercial subscriptions to 152000 and without any systematic cost promotions.

While still early in its lifecycle of the whole. We believe fusion 360 has reached an adoption tipping point and with extension to end up chain. We're excited about its future.

During the quarter of UK based design manufacturing and installer of architectural precast the thought investing in fusion 360 <unk>.

<unk> and fabrication extension.

By converting the benign and manufacturing process into a single unified experience on the cloud.

Fusion 360 enables faster design prototyping and go to market by.

By creating optimized and associated multi sheet layouts for sheet metal and non sheet metal parts in preparation for cutting on CNC machines on nesting and fabrication extension helps them to significantly reduce waste.

Last month 3 students from Danville Community College in Virginia, 1 of the inaugural project Mfg National Championship.

And advanced manufacturing competition sponsored by the U S Department of Defense Jeremy.

Jeremiah Williams director for integrated machining technology at Danville Community College said quote.

By testing a variety of advanced skills, like welding and multi axis machining as well as communication and teamwork. The project. The Mfg National Championship is 1 of the most challenging skilled trade competitions in the country.

Fusion 360 is next generation platform enabled our team to complete all required and optional objectives from prototype to the welding and machining the finished product.

To win this prestigious price and quote.

As announced last quarter, we extended our multi user trade in to August 2023, but we are still seeing customers convert and benefit from kind of transitioned to named user.

S. P..1 of the leading integrated design offices in Germany traded in their multi user licenses with us this quarter and significantly increased their investment by purchasing additional AUC collections and premium subscriptions in the process the completely replace the competitive design solution standardizing their workflow on our cloud platform.

The premium plan is especially valuable to them as they improve their site the site management using single sign on which enables more digital collaboration and efficiency, while increasing employee satisfaction.

While we continue to be sensitive as the economy recovers we are successfully converting noncompliant users the paying customers with Q1 license compliance billing almost doubling year over year during the quarter.

For example on non compliant client customer converted into 1 of our largest premium customers to date over 500 branches in Indonesia made it difficult to track and manage software usage and this customer was inadvertently using more licenses than it was paying for.

After the cleaning of self audit, which confirm the software GAAP.

Purchase premium to help manage the complex rollout of compliant licenses. They are now a happy premium customer with the detailed usage insights and the ability to flexibly manage their licenses from headquarters across their entire branch network.

Now, let me finish of the story.

Construction began on north Sudan, because visual and 11.63, but was not completed from more than 100 years.

And of 12 century version of light weighting Neutra Dom was the first Gothic structure to use client buttresses, which are slanted themes that support the heavy walls and ceilings that enabled giant low as glass and stained glass windows in large edifices with open air spaces the Nissan.

Following a catastrophic fire in 2019, the cathedral is being rebuilt with traditional and sustainable the material enhanced by next generation building information modeling provided by Autodesk <unk>.

Combining traditional design and build knowhow with modern work flow solutions reconstruction is expected to be completed in 2024 in time to welcome athletes at the Summer Olympics in Paris, and future generations from across the globe.

I share of this because of the world rebuilds after the catastrophic impact of the pandemic I am reminded again, the autodesk purpose to enable its customers to build and manufacture of efficiently and sustainably has never been more important or urgent.

Together, we can meet the generational challenge is posed by carbon water and waste out.

Out of the central role in meeting these challenges underpins my confidence this year and my confidence in the future.

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

Thank you as a reminder, task of question you will need to press star 1 on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from the line of James The shore from Griffin Securities. Your line is now kind of.

Thank you good evening, Andrew and Debbie.

Let me ask you Andrew first a couple of business and technology, our technology evolution questions.

You highlighted infrastructure and the company has been in that business for many many years and Youll recall that once upon a time because we've got the reporting segment of it should be again of some point could you describe of the main ways in which that business has evolved over the last number of years in terms of its scope of customer base and what the vision really is for that.

The business in terms of perhaps adding.

The new types of customers such as owner operators that have not really been a large part of your business profile to date.

Secondly, since we're halfway between the <unk> 2020 of <unk> 2021.

Could you update us on some of the important initiatives that you yourself highlighted during the Q&A session of day, you 6 months ago.

Mainly the <unk> roadmap and its implications for you long term and then secondarily sharing technology across the portfolio on across industries in other words, leveraging your R&D more and more across the company in that respect.

Yeah, all right well, let me start with the infrastructure discussion so here's what fundamentally strains of the business 1 of 1 we've been winning more and more departments of transportation as we've progressed since the last time the the.

Infrastructure business was broken out and what we did is we focused on organic portfolio very much on road and rail work bridges roads and rails and created a lot of workflows between simple III D and input works in some of our specific tools and we've been very happy with the progress we've been making there.

And we continue that organic investment targeting the pieces of infrastructure, we don't need to feel it needs to be broken out into a separate business. Because you know I think you might recall since those days, we've moved our entire sales organization to account based sales. So it is very easy to cover these types of customers with with the kinds of.

Of support that we need to to engage with them directly look waters net.

As you can see with what we've been doing with tandem and the digital twin work and also with what we've acquired with antivirus with their info of 360 solution and some of the tools around there with digital twins.

Sure.

What waste management and water management, we're definitely moving closer to the things that are directly relevant to owner operators and I would you would expect to see of do more of that as time progresses. Okay. So that kind of gives you a sense for what we're looking at and the.

And how we've gotten here.

With regard to the au initiatives.

I don't want to I don't want to kind of preempt net they use the announcements, but what I will tell you as you know we continue to add additional capabilities of origin to the API and I think this coming of you you're you're going to hear me talk a lot more about some of the common experiences we're creating across some of our new environment that we're building for our various.

Customers, so I want to hold on to some of that news.

As we move forward to the next day you, but the hint is theres. Some common data experiences. There's some common ways of of managing and accessing projects that we're developing and deploying all things that are relevant to making the platform more powerful for bringing together the various products that our customers use.

Okay from that.

The quickly you highlighted strong growth in product subs.

If you were able to look at that in absolute terms, how would that product subs level of business compare with let's say the second and third quarter of last year and perhaps people on the fourth quarter are you at now perhaps the highest level you've been in 4 of 5 quarters of forest product subs are concerned.

Short answer is yes, we've returned to growth after a period of several quarters that were impacted by Covid and so we're pleased with the growth that we saw in Q1 and thats evidenced in the revenue results.

Great. Thank you.

Thank you. Our next question comes from the line of sockets Calia from Barclays. Your line is now open.

Okay, Great Hey, can you hear me okay.

Oh, yes.

Excellent excellent alright, thanks, so much of the for taking my questions and welcome Debbie.

Maybe first for you Andrew.

I'd love to dig into the new business acceleration you've touched on.

As we are starting this recovery.

You know maybe in particular.

How much of this recovery do you feel is in demand that is do you feel is tied to increased engineering hiring.

Versus perhaps pent up demand.

For tools post pandemic, just as we kind of think about the pace of this recovery going forward is it that makes sense.

Yeah, it's hard for me to break it in break it down into increased engineering hiring versus kind of pent up demand. So I really I can't really give you a fine grained view on that but what I can tell you is the usage of some of our more of an engineering intensive products is going up pretty significantly okay, and we <unk>.

A lot about usage every year with regards to how the monthly active usage of the daily active use of it going in various countries. What we've seen is the majority of our countries are now.

At or above pre COVID-19 levels. The U K is now above pre COVID-19 levels. The U S still struggling a little bit to get above pre COVID-19 levels, but showing a lot of of robust impact. You also noticed that I think he probably watch the index is out there of the PMI and the Abi Index has in particular, we have.

Always found those yeah.

Index to the lagging indicators of our business they actually tell us that something has already happened with the with the purchasing behavior of our customers and what you've seen is those those indices continuing to shift towards growth, which with the kids at crack at that.

It's the book of work, that's going up alright, which means people are going to hire more engineers, they're going to hire more people and theyre going on there gonna engaged they're gonna be using our products more so it's probably.

Driven mostly by hiring related to the book of business of our customers is going up the end of <unk> seem to indicate that as a as a lagging indicator of what we've seen in terms of purchasing behavior on usage, but that's kind of as much granularity as I can give you on that.

No that's it.

Super Super helpful. Andrew Thanks.

Maybe maybe from a full up for you Debbie.

You touched on in the sort of it in the prepared remarks, but I want to just talk about the acceleration of revenue this year.

I think we get some of the drivers.

That's the sort of get you.

Were taken and perhaps as part of the your confidence on that growth lasting into fiscal 'twenty, 3 and for that matter of named returned as well.

Oh thanks.

On.

The survey, saying, so Q1 is our seasonally smallest quarter.

And our guidance.

Gives me assumes that we'll see improving results as the year progresses, which is consistent with what we're seeing we're seeing uncertainty lessening growing confidence from our customers on our channel and improving demand on our end markets, which has resulted.

Hosting and accelerating growth in new business, we're also seeing increasing renewal rates.

Strong direct business, particularly through the E store or total direct revenue grew 25% year over year in Q1, and now represent 33% of total revenue.

We're also pleased that we're starting to see momentum in key indicators like RP O, which grew 22% year over year in Q1.

Because of these factors that we're confident in the ramp during fiscal 'twenty 2.

Now if I shift attention to fiscal 'twenty, 3 and even beyond that let me just break that down a little bit.

I mentioned on the call that since I rejoined the Autodesk I've been focused on 2 primary things the.

First is reacquaint myself with everything out of the team the strategy what's happened while it was the way for a couple of years.

And the second the digging deep to get a solid understanding of the fiscal 'twenty 2 budget and our fiscal 'twenty 3 financial goals.

It's because of that work that I see significant opportunities for growth.

<unk> of growing Tam from things like accelerating digitization of AUC, the convergence of design and make and manufacturing.

And expansion into adjacent verticals like you saw the recently with the acquisition of antibodies that got us into the water infrastructure.

We're also focused on further monetizing our Tam in a variety of ways. Some examples include conversion of Noncompliant users Andrew mentioned that billings from Noncompliant users almost doubled year over year on Q1.

And we're seeing more direct selling as I, just mentioned that direct selling gets us greater price realization that is another growth driver for us.

This is all against the macroeconomic backdrop that we see improving and it's because of all of them that we're confident in our fiscal 'twenty 3 revenue growth potential and the free cash flow target of $2.4 billion of not period.

Now I've been back for 90 day less than 90 days actually so next up for me is more work on the long range financial plan and getting a deeper understanding of our path in fiscal 'twenty 4 and beyond them. Our goal is to drive double digit growth using some kind of rule of 40 type framework over time.

Very helpful. Thanks for time guys.

Yeah.

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

Hey, guys and thanks for taking the question maybe just on obtain so obviously I know that just closed a few weeks back and.

So I was just curious if you could talk more about the vision over time of integrating of chain with fusion and forge and how we should even think about the convergence of both vault and of change just given the the similar similarities obviously once on kind of a ones on the cloud.

Yeah.

Excellent question Adam.

And as you know obtain is P. L M and P M product data management product and product lifecycle management in the cloud so of the fully cloud native application.

Got both product data management and P. O M. It understand both files and cloud information models like what power fusion for example R.

Our vision for how this is going to work is fusion already has the stack built on its cloud information model that goes all the way through simple data management.

True into product lifecycle management.

Alright.

Jim will likely replace that capability with the infusion over time, but more importantly went up chain does is it supports the whole swath of legacy applications from our competitors and from other other other places so what we're what we're going to do is we're going to go into cash.

Talents with legacy applications, or where are we where we see overlap with other other applications and combine the fusion stack in the upstream staff to handle the whole swath of data our customers use now ultimately as well what we're gonna do is we're going to integrate up chain with vault. So that vault can now.

Have a extension to the cloud, we're not going to force our vault users the move from on Prem to the cloud, but also very popular application, we sell a lot of it every quarter and we're going to continue to update and maintain it you might have noticed that we just released on mobile and extension to it in some web extend additional web extension capability for for bulk so we continue to draw.

The bulk, but we are going to integrate volte and obtain over time, which will give our vault customers of path to putting all of their data in the cloud as they see fit to do it but we're not going to force that migration. So look for it to replace.

The got the fusion lifecycle of overtime.

And and integrate with fusion cloud information model and look for it to integrate with vault over time and provide a path for a vault customers of the cloud and then ultimately look for us to be going after the legacy systems, where the combination of our fusion offering and up chains capability to bring all of the customers.

Data and all of the applications of the customer used together in 1 robust cloud environment.

That's great Andrew on maybe just a quick follow up just on the Autodesk construction cloud decided some nice examples of some customer wins in the quarter. Just as you think about that business over the course of the year, especially with the improving macro kind of where you're thinking of how youre thinking about that business as the of progressive. Thanks. So much.

So we we are we have really high expectations for how that business progresses as of the year progresses, and we're getting we're definitely getting some good indications of 1 of the things. We watch are the are the bids the activity on bid board through our building connected service that activity has been going up from Q1, it's been progressively building up each month, which is great. So we see.

A lot of activity heading into the into there just like the lot of a lot of our businesses. We expect some of the the new business to be backend loaded, but we're super happy with where we are right now we had a good launch of Autodesk build it's getting good take up in monthly active usage from some of our customers new customers are embracing it on our international.

Expansion efforts that we put on hold last year because of the pandemic are now moving into full gear. This year. Later this year, we roll out all of the build to the channel and the and that's going to that's going to accelerate the business and you know 1 of the thing I just want to highlight is <unk>.

Is why why were winning okay and why we continue to win business and why we are so incredibly confident about the future here's what customers tell us the right. The end to end solution that we offer all the way from planning early planning through design to pre construction Preconstruction planning to site execution, all the way the digital handoff to the actual maintenance and.

Patients of of the of the asset nobody has the especially to the depth that we have in each 1 of those disciplines. The.

The other thing that people are really excited about is the deep integration with them and the fact that the bim native platform. It speaks stem from the get go it will always speak them and it's really good at it this is driving more and more displacement of AR.

Competitive solutions in accounts, where where we overlap and 1 of the other big things that we hear from customers is our business model of flexibility alright customers love that they can buy from us where they need to buy from us on how they need to buy from US Alright, if you need of project based license. We've got it if you need the consumption base.

Model, we got it if you need a per user model, we got it.

We adapt and flex our business model to whatever the particular customers' needs are or their ecosystems needs are and we can do it anywhere in the world. So if we're dealing with an international customer they know that when they standardize on us they can get everywhere with the solution. We do so that's that's why we're winning that's why we're bullish as we.

Moving to into the next year and why we're excited about the construction market, becoming hot and active again.

Utilization of this market of multi year trend. So there's lots of opportunity for lots of people and we're seeing lots of the validation of the direction, we're heading and I think it's going to be an exciting year for digital construction.

Great. Thanks again.

Thank you. Our next question comes from the line of Joe Frank from Baird. Your line is now open.

Hi, everyone.

Just the focus on infusion 36, yes, I think the first disclosure on commercial subs was about a year ago and 153000 is up about 80% since then Andrew.

Andrew when you mentioned that business being out of tipping point or I think you've had this on past. The tipping point is it just a function of scale and customer awareness now that the product is as large as it is or are there other dynamics at play.

You would point to I was kind of support supporting the business through this fiscal year.

Well you know there is theres a lot of things 1 there is the increased interest in the cloud alright.

Alright.

There is the simple network effect of people, saying you know what I displaced.

Mr. Kevin solid works with fusion you should try to 2 of its awesome. So we're getting we're getting that network effect of people basically encouraging each other to to move forward and get off the legacy systems and moved to the cloud, which with fusion. So we're seeing some of that we're also seeing and this is this is super important we're seeing increased purchase.

Within accounts, we penetrated previously which means we're moving from kind of being a niche solution inside these companies or maybe up.

Beyond the FY 'twenty, 3 and in FY 'twenty 4 'twenty 5 beyond the early success, we're seeing in infusion right now is going to be a growth engine that continues to accelerate over the next 5 years, especially as we start introducing our new design of our extensions.

We already have 1 for advanced manufacturing, we have various other extensions is going to be new extensions of the second half of the year those extensions of continued to be out there.

We're particularly excited that the we sold more fusion than than than other.

The other applications in Q1 without any type of promotional activity all of this points towards increasing customer demand for what we're doing.

Okay. That's great and then just on the comment that.

In regards to your construction end markets on certainty is lessening I. Appreciate yeah, no sales is ever easy, but are there things that become easier. The fact that our license compliance of billings seem to have had a good quarter, coinciding with a better backdrop.

Is that something that accelerates as the year goes on or would you maybe point to other areas of your business as well.

I'm sorry could you could you would you went out of a little bit from you on the last part of that but the part of the question. What's the what's the key point of the question here, sorry with uncertain, the lessening license compliance and having those conversations it seems like that could be 1 area to the benefits are there other areas as well.

Okay. So you know as I've said many times license compliance is 1 of these areas that will just kind of build a steady drumbeat of con alright, its going to be the gift that keeps giving for years and years to come we do not want to accelerated on naturally because we want to bring our customers along with US we want to keep them happy help them get compliant you noticed the <unk>.

The worry that I offered up in India, and Indonesia about the calc customer actually buying premium subscription as well as becoming compliant and being happy about how they were able to deploy it that's the kind of outcomes. We want from the solution. So we did see some acceleration you thought you saw the growth numbers and in the opening commentary around.

Around Noncompliant billings in Q1, but that was off of a of a Q1 that was previously off so we had a really strong compare don't expect any hockey sticks, though the Q1 of this year was better than the Q1 of fiscal 'twenty. So youre seeing continued growth, which is what we want to see is nice steady growth in this business, but don't don't look for any of <unk>.

It takes this year.

We're back to the path we were on previously.

Great. Thank you very much.

Thank you. Our next question comes from the line of Matt Hedberg from RBC Capital. Your line is now open.

Oh, great. Thanks for taking my questions Andrew I wanted to go back to the the construction side again.

Obviously the cost of building just continues to go up from a materials spaces.

And I know you guys have talked about the amount of waste globally. The comes from construction site.

Is that having a positive impact on pipeline generation and there's a lot of these construction fronts I just have to think and Ed and customers that could become more way more efficient is that a part of portion of your pipeline growth there.

Well, yeah, so Matt that that's a very astute observation right. It's too early to say if the the the cost of with the increases in the cost of material is driving increased focus on digitization, but it is 1 of those things that we are constantly highlighted as 1 of the reasons why the the the value chain for construction needs.

The digitized because when material prices have gone up the way. They have you you can't afford to over purchase and waste materials. So I can't tell you precisely if this is 1 of the pipeline drivers, but I can tell you that we're mentioning at the customers and we're having the customers about hey conversation with customers, who want to keep your material cost down dip.

<unk> Alright plan per less ways only order what you need so it's definitely entering into the conversation I think it's too early to say, if it's driving acceleration in the in the pipeline, but I.

I think its likelihood of death.

That's really great to hear and then thank you for that and then Debbie welcome from me as well.

Yeah, I guess, you know 1 of the questions that we always get and of course, you get as well as the sort of what gives you confidence of that kind of the hockey stick cash flow guide for fiscal 'twenty 3 none of you had a little bit of time to kind of reflect on the model what are sort of what's your sort of your view on some of the major drivers I know we've heard Scott.

About the end of the past I'm just sort of curious on your perspective that gives you really the confidence that D C. The script.

Clear on your in your remarks.

Yeah sure.

Good to talk to you too it's.

Large part is a lot of the things that I mentioned before I think it's the combination of of growing Tam as well as further monetization of our Tam and so that continued digitization of AUC with more innovation and rather it with expanding the mandates and ongoing them proliferation around the world with the.

Digitization of construction that Andrew just talked about.

Even the infrastructure bill it could be a wildcard for us and we're hopeful although nothing is baked into our numbers at this point, but these are all the multiple growth drivers that give me confidence in the ramp.

I think some of the other data points that we have out there I'll repeat because these are the things frankly that I've been looking at to get my own sense of confidence since of that ramp into fiscal 'twenty 3 the conversion of Noncompliant users. The fact that those billing doubled in Q1, and we're seeing more success with that program. The fact that we are selling more.

Our direct that's the driver of growth for us and ultimately will translate to free cash flow over time, the improving macroeconomic backdrop. All of these factors combined are what gives me confidence in our ability to achieve our revenue growth potential in fiscal 'twenty, 3 as well as that free cash flow of number of $2.4 billion.

Thanks, David.

And Matt I'll, just reinforce some of the things that the Debbie said because I don't think we can talk about this enough because did you notice the list of things. She gave the right. There's a whole set of horizontal things just around the the normal business. The the noncompliance of the new types of subscription models, the rollouts of consumption the accelerating growth in our in our end markets on.

All of that combined also with the strategic levers around Digitization and AUC around the convergence of design and make of what we're seeing with fusion and then the whole move into new Adjacencies that we're doing any of 1 of those things contribute to viable long term growth. We have all of those levers. The poll alright, I just wanted to remind me of all of those levers.

The poll and in all of that we're really good at picking and choosing the leverage the pull when we need to pull up.

Sounds great. Thanks, a lot guys.

Thank you. Our next question comes from the line of standard Sterling Auty from Jpmorgan. Your line is now open.

Yeah. Thanks, Hi, guys, 1 housekeeping 1 to start can.

Can you be specific in terms of what the contribution to the guidance from the acquisitions.

Sure Sterling.

So the impact on the acquisitions was the 1 point increase to our revenue guidance range on the year, a 1 point decrease to our operating margin range on the year and it was neutral to the free cash flow that's consistent with what we said on the last call.

Alright, perfect and then Andrew as we think going forward.

Is fusion 360, oes incremental to kind of the installed base of traditional seats or have you already started to see a little bit of a conversion 1 to the other and if that's the case what kind of change does that have on.

Kind of the IRR of contribution.

Yeah. So nobody is moving from inventor of the season right now okay.

There is just its just not happening right now.

Actually most of the business is about going after incremental seats inside of competitive accounts, especially down market.

On the 1 great thing about our strategy is most of the inventor of has bought through collections, which includes fusion. So if an inventor user does start to move the fusion overtime.

They continue on the same subscription path will do and what and what we'll do with our collections as some of the extension that would be available to of vanilla.

Vanilla.

Fusion user of that they'd have to pay for it would be included with the collections version. So essentially what you see is kind of on a S. P's neutral conversion from inventor to fusion, but that's going to take a long time most of the inventor customers are going to stay comfortably, where we where they are but when they do move it's essentially AFP neutral in terms.

In terms of of impact on <unk> It doesn't change the <unk> trajectory.

Excellent. Thank you Didnt really.

Thank you. Our next question comes from the line of Jason <unk> from Keybanc Capital. Your line is now open.

Great. Thanks.

Picking my questions.

Maybe maybe 1 on the ambitions in infrastructure you know Andrew are you talking about the gains on roads and bridges with improvements to the civil 3 D and the expansions in the water here, but how do you think about some of those other areas of infrastructure.

Maybe some like some of the electric utilities or other areas.

Yeah. So right now Jason we're gonna stay focused on road and rail and and bridges and the things that go along with road and rail and water that's going to be our focus area.

There is a lot of exciting things happening with elastic grid designs on the than in the electrification and things associated with that we're not going to be focusing on that right. Now we may in the future, but right now if you look at even if you look at where the infrastructure Bill is going for instance, most of it is going to the to the upgrading.

And expanding the the deteriorating infrastructure, we have on the company around road rail bridges civil in water infrastructure and that that's going to be our sweet spot for a while.

The program wins in that respect and the.

Then you also talked about the why Autodesk wins in construction, which was quite helpful. We also alluded to the digitization of opportunity Theyre, just being more broadly bigger maybe can you talk on how much of that Tam might be coming from pure greenfield versus displacements of legacy or in house or other competitor tools. Thank you Oh, yes.

A lot of the Tam is is Greenfield you know really sometimes of what's you're competing with here with some kind of a free tool and excel spreadsheets.

We're on or a lack of any digital process whatsoever beyond emailing Pdfs alright. So.

There's a lot of Greenfield opportunity here in addition to kind of just flipping.

Existing customers off of legacy systems are of consolidating their systems. So this is there.

There is a very robust long tail of growth here that that's going to go on for years. That's why it's so exciting to see all the activity in this space because it's going to take the village to deal with digitize this entire market and we're at the very very early stages of the.

Which is great.

Great I appreciate the color. Thank you.

Thank you. Our next question comes from the line of Gal Munda from bearing Baird. Your line is now open.

Hi, Andrew Hi, Debbie and team thanks for taking my questions.

First 1 Andrew maybe just a little bit on construction of construction portfolios really expanded the installed base strong now.

Just wondering how should we think about the individual brands that you acquired between.

Planned growth assemble building connected pipe on.

On 1 side and then Autodesk construction cloud on the other side in terms of.

Use of adoption and do you see users that came in from individual brands now starting to kind of move towards the platform approach as well.

Yeah.

Excellent question Gal, So as you know the Autodesk bills on the construction cloud in general is the unification of all of those brands and it's where we lead with new customers. Absolutely you know when we're going out there chasing your business with all of this build it's all of the capabilities that are built into all of the build of thought of as takeoff. It's all of those tools associated with the construction cloud and Thats.

Where we lead but we're also seeing people migrate off of off of the individual brands and move forward alright. So so we're seeing the same kind of thing happening happened.

Happening incrementally, but that's not going to let those people move at their own pace right. So when the when they're choosing the move on to the consolidated cloud, they're doing that they're doing that by choice and as part of the process over time, we will ultimately migrate all of them to construction cloud and all of this build but right now, we're leading leading us with our new.

Customers of all of this build and helping customers consolidate on the audit of build when they want to bring some of those old brands along with them, but all of the best technology from all of those brands is in the construction cloud now.

Understood. Thank you.

Maybe that would be just the another.

Another question for the year.

I completely understand the Q1 is the smallest.

Quarter on claims with the new business generation and in Pennsylvania as well so what.

What I wanted to touch those it might not have been of great time to kind of organically think about raising the guidance for the year. So early in the year I'd like to just kind of take a step back and think about what happened during Q1, and what you're seeing so far in Q2.

If that kind of the level of trading on recovery continues is it fair to say that you feel pretty confident about your full year guidance then.

I mean, we we issued the guidance today that we feel comfortable with and I would say that we certainly have a strong sense of optimism.

Based on the results that we had in Q1, but it's just too early for us to change the underlying view on the year after only 1 quarter, but we're off to a good start.

Okay. Thank you.

Thank you that is all the time, we have for Q&A today, I would like to turn the call back over to Simon Mays Smith for closing remarks.

Thanks, everyone for joining us.

Look forward to chatting to you next quarter of updating you on our performance.

If you have any questions in the meantime, please the spend money directly happy to answer your questions. Thanks very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

Yeah.

[music].

Good day, and thank you for standing by and welcome to the Autodesk, Inc. Q1, 2022 earnings conference call at the time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like the hand the conference over to your Speaker today, Simon Mays Smith VP.

<unk> Investor Relations. Please go ahead.

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss the results of our first quarter of fiscal year 2022 on the line with me on Andrew addict non stop the Yahoo.

Our Chief Financial Officer.

Today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available at Autodesk don't come forward Slash investment.

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

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

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

Actual events or results could differ materially.

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

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

<unk> disclaims any obligation to update or revise any forward looking statements.

During the Covid, we were quite the number of numerical growth changes as we discussed on financial performance and unless otherwise noted.

Such reference represents the year on year comparison.

All non-GAAP numbers referenced in today's call are reconciled in our press release, <unk> financials, and all of the supplemental materials available on our Investor Relations website.

And now I will turn the call over to Andrew.

Thank you Simon and welcome everyone to the call I Hope you on your families remain safe and healthy.

Now a part of the parts of the world emerge from the pandemic others are entering the eye of the storm.

I, especially want to acknowledge our colleagues family and friends and India. We are thinking about you and we are helping wherever we can.

Thank you to all our employees and their families our partners and customers for their continued resilience patients and commitment.

Our first quarter marks an important inflection point.

While solid execution of resilient subscription business model and continued secular shift to the cloud underpinned our strong first quarter results weighting of uncertainty and growing confidence in our end markets generated momentum.

Robust growth in new product subscription combined with improving usage in the renewal rates accelerated billings in RPM growth to 10 per cent and 22% respectively.

Together these reinforce our confidence that we are through the revenue growth trough and on track to achieve our fiscal 'twenty, 2 and 'twenty 3 goals.

In mid May we completed the acquisition of <unk> chain of cloud native product data and lifecycle management solution combined with existing all of this offerings like fusion 360 of chain will profoundly simplified data sharing and collaboration for engineers manufacturers suppliers and other product stakeholders.

Enabling customers to bring products to market faster and build a stronger supply chain.

The next generation platform enables that can be rapidly deployed scaled maintained and updated without the expensive inflexible and time consuming integrations of legacy systems.

We will grow up change to our enterprise and channel partnerships and expect it to become a meaningful on ramp the legacy design tools to the fusion 360 cloud ecosystem and facilitate further expansion into adjacent verticals.

As we highlighted in our recently published impact of the Port the convergence of design and make brings both greater efficiency and sustainability to buildings and a broad range of manufactured goods stretching from evs and bicycles to high performance skis and low cost ventilators.

We are enabling customers to achieve their sustainability targets. We continue the lead by example, reaching our carbon neutral goal across our business and value chain in fiscal 'twenty 1.

The report also sets out new diversity equity and inclusion goals and why.

I'm proud of the 50% of all of the board and 45% of our executive team of women, we can and will do more of both internally and through partnerships with organizations like ISS labs externally.

He's been a trusted counselor and steward of the company. His contributions the autodesk are many and have been incredibly impactful and I want to thank him for his dedication and wish him all of the best in retirement.

I am very excited to welcome Debbie back the Autodesk and will now turn the call over to her to take you through the details of our quarterly results and guidance for the year.

I'll then come back to provide an update on our strategic growth initiatives.

Thanks, Andrew and they're excited to be back.

Looking at the first quarter's results.

The real factors contributed to our strong financial performance, including.

The robust growth in new product subscriptions.

Accelerating digital sales.

Stronger than expected upfront revenue and improving subscription renewal rates.

In addition of 1 month contribution from the Antivirals and foreign exchange rate provided a modest tailwind to the quarter.

Total revenue in the quarter grew 12% and 11% in constant currency the subscription revenue growing by 18%.

Looking at revenue by product and geography.

The cat and Autocad LT revenue grew by 9%.

<unk> revenue grew 16%.

The manufacturing revenue grew 8%.

Excluding the impact of moving our bulk product to ratable revenue recognition, which we discussed last quarter.

The manufacturing revenue grew double digits.

And the knee revenue grew 5%.

Across the globe revenue grew 8% from the Americas, 11% in EMEA and 20% in APAC.

Direct revenue increased 25% and represented 33% of our total revenue.

From 30% last year due to strength from both enterprise and E Commerce.

Our E Commerce site had their highest new billings growth rate in 2 years, driven by strong traffic growth and recent site enhancement.

Reflecting the business critical nature of our products to our customers.

Our net revenue retention rate remained within the 100 to 110 per cent range and our product subscription renewal rates strengthened.

Our billings accelerated to 10% to $974 million.

Total deferred revenue grew 11% to 335 billion.

Short term deferred revenue increased 17%, primarily reflecting growth in new product subscriptions and increasing renewal rates, but also the inclusion of <unk>.

This was partly offset by a smaller contribution from long term deferred revenue, resulting from fewer multi year contract when compared to last year.

Total <unk> of $4.2 3 billion on current RP O of 286 billion both grew 22%.

Excluding the contribution from early renewals and advised.

Current RPI grew approximately 20%.

Non-GAAP gross margin and operating margin remained strong at 92% and 28% respectively.

The level of year over year, and reflecting the trough in revenue growth relative to cost growth.

We delivered healthy free cash flow of $316 million during the quarter.

Driven by collections of prior quarter billings and strong results in the current quarter.

Consistent with our capital allocation strategy, we continued to repurchase shares with excess cash to offset dilution from our equity plans.

During the first quarter, we purchased 515000 shares per $143 million at an average price of approximately $277 per share.

Now I'll shift to giving you my initial thoughts and CFO and then finish with our outlook.

Since I rejoined Autodesk about 2 months ago I've been focused on 2 things.

First reacquainted myself with everything out of that the team our strategy and how we've evolved during the 2 years away.

And second I've been digging deep to gain of solid understanding of our fiscal 'twenty 2 budget in fiscal 'twenty 3 financial goal.

On the first point well much at Autodesk is familiar to me.

Been pleasantly surprised by how much has changed for the better reflecting the enormous progress Autodesk has made over the last 2 years.

Autodesk has undergone a cultural revolution.

Then of powerful shift in the company's values and ways, we work and the pace of decision making has accelerated.

As the company, we know benefit not only from the scale of our operation, but also from the new found agility that is enabling our success in newer markets like construction and manufacturing in the cloud.

I'm also struck by the compelling and expanding opportunities ahead of us.

It'll transformation is happening now is real and we are well positioned to capitalize on that trend in the industries we serve.

As I begin to turn my attention to our long range financial plan.

The initial learnings gives me confidence in our growth potential in fiscal 'twenty 4 and beyond.

Let me finish with our guidance, which now includes in advising of chain.

We still expect that an improving economic environment. During the year will result in strong growth in new business over the course of fiscal 'twenty 2.

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

And our net revenue retention rate to remain between 100 on 110%.

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

We continue to expect about 3 quarters of our free cash flow to again be generated in the second half of the year due to our economic phasing assumptions and normal seasonality.

For fiscal 'twenty, 2 we are raising our full year revenue guidance to a range of $4.3 O 5 to 438.5 billion or of 14% to 16% increase over last year.

Reflecting a partial year contribution from acquisitions net of the deferred revenue write downs.

Given our results are weighted in the second half and Q1 is our seasonally smallest quarter. It's.

It's obviously too early to change our view on the underlying trajectory of the year, but we're off to a good start.

We expect non-GAAP operating margin to expand to between 30 and 31%.

Which includes approximately 1 percentage point of negative headwind from acquisitions.

Finally, we still expect free cash flow to be around $1.6 billion with the broadly neutral impact from acquisitions.

The slide deck on our website has more details on modeling assumptions for the second fiscal quarter and full year 'twenty 2.

With improving economic conditions and easier Comparables, we still expect our first quarter revenue growth will be the trough.

As I begin to look beyond fiscal 'twenty 3 the digital.

Transformation of the industries, we serve our sustained investment in the cloud and our flexible business model gives us a robust platform for double digit growth.

Andrew back to you.

Thank you Debbie let.

Let me finish by giving you an update on our strategic growth initiatives.

Secular trends, we have been investing in for years have accelerated during the pandemic.

Digitization of H C. The convergence of the design in May and our expansion into adjacent vertical to organic investment and acquisitions are growing our total addressable market the.

Evolution of our business model the value generated by the growing productivity of our platform for new and legacy customers and the hardening of our systems to Noncompliant users enables us to attract and retain more of that potential opportunity growing our ecosystem and the usage and value we generate from it.

Turning to AUC.

Our unique vision is to connect all of the phases of construction with end to end our based solutions the combined.

The data flow with best in class functionality to enable seamless collaboration complaining design preconstruction construction asset operations and maintenance the.

Breadth and depth of our solutions distinguishes from the market and we continue to build on that advantage to industry, leading R&D, which we sustained through the pandemic pandemic and acquisitions.

Our latest product releases reflect that for.

For example, whether 2020 to ease of bridge to more open and interoperable ways of working that accelerate our defined customers' digital transformation and improved communication of design intent across all disciplines and project phases.

For the construction teams, we released all of the Bill Autodesk takeoff and all of that's been collaborate as well as product enhancements, which further empower construction teams to drive better business outcomes, such as winning more business, reducing rework delivering projects on time and improving safety by connecting data workflows and team.

Across the project lifecycle.

As the construction of backlog comes back online and the New project pipeline builds we are emerging from the pandemic stronger. This is reflected in our success during the quarter.

For example, Burns <unk> Mcdonnell as a family of companies, bringing together unmatched team of 7600 engineers construction of professionals architects planners technologists and scientists to design and build critical infrastructure projects.

Is at the forefront of technology use and having invested in rabbit and Bim 360 design sometime ago. Most of the data is already in the cloud.

Simply active users or M. A use on all of the software have grown by 80% since 2018 this quarter Burns <unk> Mcdonnell renewed its autodesk ebay and increases the investment with us, adding more cloud based products from the Autodesk construction portfolio, including all of the Bill pipe assemble and built.

The <unk> connected.

Our unified common data platform enables us to move and collaborate seamlessly from design through construction and to implementation with common workflows across multiple global practices.

18, 98 of the company part of Burns of Mcdonalds is its future focused consulting and technology solutions Division and it is the founding participant in our tandem digital twin programs.

The bold company is a 1 billion professional construction services firm in the U S. Focusing on integrated delivery of complex vertical construction projects that require extremely tight collaboration between stakeholders and integrated workflows between industry partners the office and field.

Volume was already relying on Jim collaborate pro and plan grid win this quarter, if selected autodesk build over of directly competitive construction project management solution and also invested in pipe.

Autodesk construction cloud unified platform connects previously Siloed data reduces rework and saves time for bulk across the company, enabling teams to easily manage projects from the planning and design through 1 of the appeals and hangover.

And multi green of.

Real estate development and operating company specializing in sustainable and tech enabled multifamily housing in high growth and supply constrained markets standardize on audit of construction cloud.

In order to build more efficiently and sustainably they knew they had the standardized on a single platform to connect their teams from concept and design to project completion and day to day operations.

In addition to rabbit inventor building connected all of this takeoff and all of this build they will be using Bim 360 is the integration with the embodied carbon calculator to analyze material carbon emissions with all of their data connected to our common data environment.

During the quarter, we received notice of an award in design from the Montana Department of Transportation, Inc.

Net of a competitor offering they will be using our AUC collection, which includes civil <unk> rabbit and per works now that's worth recap and our common data environment Autodesk docs.

The Department was particularly impressed by connected bridge design workflows between revenue and infer works that drive the efficiency and sustainability.

Turning to manufacturing.

We've made significant organic investments in addition to obtain inventor.

Inventor of 2020 to introduce new features and enhancements to speed up product development and interoperability with Autocad fusion 360 and wrap it.

Infusion of 360, we have introduced new functionality across the entire product development process and numerous integrated extensions that unlock advanced design and manufacturing Technology, Inc.

Bulk we introduced the new mobile application and web browser experience for engineers of non cat users to access their real time data anywhere and on any device.

The potential to converged on design and making the cloud is becoming more of a reality every day to our customer.

All of the desk continues to lead that transition.

Amy C Technologies' switch to our product design and manufacturing collection with vault <unk> to manage all of their data.

With the largest number of new commercial users in 2020 fusion 360 of strong momentum continued growing commercial subscriptions to 152000 of without any systematic cost promotions.

While still early in its lifecycle of all we believe fusion 360 has reached an adoption tipping point and with the extension to end up chain. We're excited about its future.

During the quarter of UK based design manufacture shrink and installer of architectural precast the thought invested in fusion 360 net.

<unk> and fabrication extension.

By converting the design and manufacturing process into a single unified experience on the cloud.

<unk> hundred 60 enables faster design prototyping and go to market by.

By creating optimized and associated multi seat layouts for sheet metal and non sheet metal parts in preparation for cutting on CNC machines on nesting and fabrication extension helps them to significantly reduce waste.

Last month 3 students from Danville Community College in Virginia, 1 the inaugural project and the F. G National Championship.

In advanced manufacturing competition sponsored by the U S Department of Defense Jeremy.

Jeremiah Williams director for integrated machining technology at the Anvil Community College said quote.

The testing a variety of advanced skills, like welding and multi axis machining as well as communication and teamwork. The project. The Mfg National Championship is 1 of the most challenging skills trade competitions in the country.

Fusion 360 as of next generation platform enabled our team to complete all required and optional objectives from prototype to the welding and machining the finished product and to win this prestigious price and quote.

As announced last quarter, we extended our multi use of trade in to August 2023.

But we are still seeing customers convert and benefit from kind of transitioned to named user.

Clearly replace the competitive design solution standardizing their workflow on our cloud platform the.

Premium plan is especially valuable to them as they improve their site the site management using single sign on which enables more digital collaboration and efficiency, while increasing employee satisfaction.

For example on Noncompliant client customer converted into 1 of our largest premium customers to date.

Over 500 branches in Indonesia made it difficult to track and manage software usage and this customer was inadvertently using more licenses than it was paying for.

After the cleaning of self audit, which confirm the software GAAP purchase premium to help manage the complex the rollout of compliant licenses.

We are now a happy premium customer with the detailed usage insights and the ability to flexibly manage their licenses from the headquarters across their entire branch network.

Now, let me finish of the story.

Construction began on Norcia, Dom Cathedral, and $11.63, but was not completed from more than 100 years.

In the 12th century version of light weighting Neutra Dom was the first Gothic structure to use client buttresses, which are slanted themes that support the heavy walls and ceiling that enabled giant Lowe's glass and stained glass windows in large edifice is with open air spaces. The Nissan.

Following a catastrophic fire in 2019, the cathedral is being rebuilt with traditional and sustainable the materials enhanced by next generation building information modeling provided by Autodesk <unk>.

I share this because as the world rebuilds after the catastrophic impact of the pandemic I am reminded again, the autodesk purpose to enable its customers to build and manufacture of efficiently and sustainably has never been more important or urgent.

Together, we can meet the generational challenge is posed by carbon water and waste.

All of the central role in meeting these challenges underpins my confidence this year and my confidence in the future.

With that operator, we'd like to open the call up for questions.

Thank you as a reminder, task of question you will need to press star 1 on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from the line of James The shore from Griffin Securities. Your line is now open.

Thank you good evening, Andrew and Debbie.

Let me ask you Andrew first a couple of business and technology, our technology evolution questions.

You highlighted the infrastructure and the company has been in that business for many many years and Youll recall that once upon a time of course in fact, the reporting segment and it should be again of some point could you describe the main ways in which that business has evolved over the last number of years in terms of the scope or the customer base and what the vision really is for that.

Business in terms of perhaps adding new types of customers such as owner operators that have not really been a large part of your business profile to date.

Secondly, since we're halfway between the <unk> 2020 of a 2021.

Could you update us on some of the important initiatives that you yourself highlighted during the Q&A session of day, you 6 months ago.

Mainly the <unk> roadmap and its implications for you long term and then secondarily sharing technology across the portfolio under cross industry. Its not the worst leveraging your R&D more and more across the company in that respect.

Yeah, all right. So let me start with the infrastructure of discussion so here's what's fundamentally staying with the business 1 we've been winning more and more departments of transportation as we've progressed since the last time the the.

Infrastructure business was broken out and what we did is we focused on organic portfolio very much on road and rail work bridges roads and rails and created a lot of workflows between simple 3 D and input works in some of our specific tools and we've been very happy with the progress we've been making there.

And we continue that organic investment targeting the pieces of infrastructure, we don't need to feel it needs to be broken out into a separate business. Because you know I think you might recall since those days, we've moved our entire sales organization to account based sales. So it's very easy to cover these types of customers with with the kinds of.

The support that we need to to engage with them directly look waters next.

As you can see with what we've been doing with tandem and the digital twin work and also with what we've acquired with <unk> with their inflow of 360 solution and some of the tools around there with digital twins.

Sure.

What waste management and water management, we're definitely moving closer to the things that are directly relevant to owner operators and I would you would expect to see us to more of that as time progresses. Okay. So that kind of gives you a sense for what we're looking at.

And how we've gotten here.

Now with regards the au initiatives.

I don't want to I don't want to kind of pre.

Preempt next day use announcements, but what I'll tell you as we continue to add additional capabilities of the forwards into the API and I think this coming of you Youre going to hear me talk a lot more about some of the common experiences we are creating across some of our new environment that we're building for our various customers. So I went on.

Hold on to some of that news.

As we move forward to the next day, you, but you know the hint is theres. Some common data experiences theres, some common ways of of managing and accessing projects that we're developing and deploying all things that are relevant to making the platform more powerful for bringing together the various products that our customers use.

Okay. Debbie quickly you highlighted strong growth in product subs.

If you were able to look at that in absolute terms, how would that product subs level of business compare with let's say the second and third quarter of last year and perhaps even the fourth quarter are you at now perhaps the highest level you've been in 4 of 5 quarters of the forest product subs are concerned.

Short answer is yes, we've returned to growth after a period on several quarters that were impacted by Covid.

So we're pleased with the growth that we saw in Q1 of them that's evidenced in the revenue results.

Okay. Thank you.

Thank you. Our next question comes from the line of <unk> Kalia from Barclays. Your line is now open.

Okay, Great Hey, can you hear me okay.

Oh, yes.

Excellent excellent the hey, thanks, Thanks, so much of the for taking my questions on bulk and Debbie.

Maybe first for you Andrew.

Look the dig into the new business.

Acceleration you've touched on.

As we are starting this recovery.

Maybe in particular.

How much of this recovery do you feel is in demand that is do you feel is tied to increased engineering hiring.

Versus perhaps pent up demand.

The tools post pandemic, just as we kind of think about the pace of this recovery going forward does it that makes sense.

Yeah, it's hard for me to break it in break it down into increased engineering hiring versus kind of pent up demand. So I really I can't really give you a fine grained view on that but what I can tell you is the usage of some of our more engineering intensive products is going up pretty significantly okay, and we talk.

A lot about usage every year with regards to how the monthly active usage of the daily active user of it going in various countries. What we've seen is the.

The majority of our countries are now.

At or above pre COVID-19 levels. The U K is now above pre COVID-19 levels. The U S still struggling a little bit to get above pre COVID-19 levels, but showing a lot of of robust impact. You also noticed that I think he probably watch the index is out there the PMI and the Abi Index has in particular, we have on.

Always found those index.

The index has to be lagging indicators of our business. The they actually tell us that something has already happened with the with the purchasing behavior of our customers and what you've seen is those those indices continuing to shift towards growth, which which tends at socket that.

It's the book of work, that's going up alright, which means people are going to hire more engineers, they're going to hire more people and they're going to they're going to engage theyre going to be using our products more so it's probably.

Driven mostly by hiring related to the book of business of our customers is going up the end of <unk> seem to indicate that as a as a lagging indicator of what we've seen in terms of the purchasing behavior on usage, but that's kind of as much granularity as I can give you on that.

No that's it.

Super Super helpful. Andrew Thanks.

Maybe maybe for my follow up for you Debbie.

You touched on on the food and in the prepared remarks, but I want to just talk about the acceleration of revenue this year.

I think we get some of the drivers.

That's the sort of gets you.

Were taken and perhaps as part of the your confidence on that growth lasting into fiscal 'twenty, 3 and for that matter of named returned as well.

Oh thanks.

On.

The survey, saying, so Q1 is our seasonally smallest quarter.

And our guidance.

Gives me assumes that we will see improving results as the year progresses, which is consistent with what we're seeing we're seeing uncertainty lessening growing confidence from our customers on our channel and improving demand on our end markets, which is resulting in accelerating growth and new business. We're also seeing.

Increasing renewal rate.

The strong direct business, particularly through the E store or total direct revenue grew 25% year over year on Q1, and now represent 33% of total revenue.

We're also pleased that we're starting to see momentum in key indicators like RP O.

Which grew 22% year over year in Q1.

Because of these factors that we're confidence in the ramp during fiscal 'twenty 2 no.

If I shift attention to fiscal 'twenty, 3 and even beyond that let me just break that down a little bit.

I mentioned on the call that since I rejoined the Autodesk I've been focused on 2 primary things the.

First is re acquainting myself with everything out of that the team the strategy what's happened while it was the made for a couple of years.

And the second the digging deep to get a solid understanding of the fiscal 'twenty 2 budget and our fiscal 'twenty 3 financial goals.

And because of that work that I see significant opportunities for growth.

<unk> of growing Tam from things like accelerating digitization of AUC, the convergence of design and make and manufacturing and expansion into adjacent verticals like you saw the recently with the acquisition of antibodies that got us into the water infrastructure.

And we're seeing more direct selling as I, just mentioned that direct selling gets us greater price realization that is another growth driver for us.

This is all against the macroeconomic backdrop that we see improving and it's because of all of this that we're confident in our fiscal 'twenty 3 revenue growth potential and the free cash flow target of $2.4 billion of not period.

Now I've been back for a 90 day less than 90 days actually so next up for me is more work on the long range financial plan and getting a deeper understanding of our past in fiscal 'twenty 4 and beyond.

Our goal is to drive double digit growth using some kind of rule of 40 type framework over time.

Very helpful. Thanks for time guys.

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

Hey, guys and thanks for taking the question maybe just on obtain so obviously I know that just close the few weeks back.

And so I was just curious if you could talk more about the vision over time of integrating of chain with fusion and forge and how we should even think about the convergence of both vault and of change just given the similar similarities obviously ones on kind of the ones on the cloud.

Yeah.

Excellent question Adam So.

You know obtain is P. L M and P M product data management product and product lifecycle management in the cloud so of the fully cloud native application, it's Scott product data management and P. O M. It understand both files and cloud information models like what power fusion for example.

Our vision for how this is going to work is fusion already has the stack built on its cloud information model that goes all the way through simple data management.

True into product lifecycle management.

The upstream will likely replace that capability with infusion over time, but more importantly went up chain does is it supports the whole swath of legacy applications from our competitors and from other other other places so what we're what we're going to do is we're going to go into.

Have a extension to the cloud we're knocking on a fourth of our vault users the move from on Prem to the cloud vault. The very popular application, we sell a lot of it every quarter and we're going to continue to update and maintain it you might have noticed that we just released the mobile an extension to it in some web extend additional web extension capability for for bulk so we continue to draw.

Hi, Bob, but we are going to integrate vault and obtain over time, which will give our vault customers of path to putting all of their data in the cloud as they see fit to do it but we're not going to force that migration. So look for it to replace.

The guts of fusion lifecycle of overtime.

And and integrate with fusion cloud information model and look for it to integrate with vault over time and provide a path for a vault customers to the cloud and then ultimately look for us to be going after the legacy systems with the combination of our fusion offering and up chains capability to bring all of the customers.

Data and all of the applications the customer used together in 1 robust cloud environment.

So we we are we have really high expectations for how that business progresses as the year progresses, and we're getting we're definitely getting some good indications 1 of the things. We watch are the are the bids the activity on bid board through our building connected service that activity has been going up from Q1, that's been progressively going up each month, which is great. So we see.

A lot of activity heading into the into there just like the lot of a lot of our businesses. We expect some of the the new business to be backend loaded, but we're super happy with where we are right now we had a good launch of Autodesk build it it's getting good take up in monthly active usage from some of our customers new customers are embracing it our international expansion effort.

That we put on hold last year because of the pandemic are now moving into full gear. This year. Later this year, we roll out all of the build to the channel and that's going to that's going to accelerate the business and you know 1 of the thing I just want to highlight is.

Is why why were winning okay and why we continue to win business and why were so incredibly confident about the future here's what customers tell US right. The end to end solution that we offer all the way from planning early planning through design through Preconstruction Preconstruction planning to site execution, all the way the digital handoff to the actual maintenance and on.

Operations of of the of the asset Nobody has this especially to the depth that we have in each 1 of those disciplines. The other thing that people are really excited about is the deep integration with them and the fact that the bim native platform. It speaks stemmed from the get go it will always speak them and it's really good at it this is driving more and more displacement.

In.

Of competitive solutions in accounts, where where we overlap and you know 1 of the other big things that we hear from customers is our business model flexibility alright customers love that they can buy from us where they need to buy from us on how they need to buy from US Alright. If you need of project based license. We've got it if you need of consumption.

The model, we got it if you need of per user model, we got it we adapt and flex our business model to whatever the particular customers' needs are or their ecosystems needs are and we can do it anywhere in the world. So if we're dealing with an international customer they know that when they standardize on us they can get everywhere with the solution we do.

That's that's why we're winning that's why we're bullish.

We move into into the next year.

Excited about the construction market, becoming hot and active again, the digitization of this market of multiyear trend, there's lots of opportunity for lots of people and we're seeing lots of validation of the direction, we're heading and I think it's going to be an exciting year for digital construction.

Great. Thanks again.

Thank you. Our next question comes from the line of Joe from from Baird. Your line is now open.

Okay, Hi, everyone.

Maybe just the focus on fusion 360, I think the first disclosure on commercial subs was about a year ago and the 152000 is up about 80% since then Andrew.

Andrew when you mentioned that business being added tipping point or I think about this on past the tipping point is it just a function of scale and customer awareness now that the product is as large as it is or are there other dynamics at play.

You would point to I was kind of support supporting the business through this fiscal year.

Well there is theres a lot of things 1 there is the increased interest in the cloud alright, there is the.

Simple network effect of people, saying you know what I displaced.

The Mastercard of a solid works with fusion you should try to 2 with awesome. So we're getting we're getting that network effect of people basically encouraging each other to to move forward and get off the legacy systems and move to the cloud.

With fusion. So we're seeing some of that we're also seeing the and this is this is super important we're seeing increased purchases within accounts, we penetrated previously which means we're moving from kind of being a niche solution inside these companies or maybe up.

Partially in the pilot of solution to production and that's also an important driver and we expect these trends to continue this year and continue moving forward and you know 1 of the really exciting things about this is we talk about growth beyond the FY 'twenty 3 in and therefore 24 of 25 beyond the early success, we're seeing in infusion right now.

It's going to be a growth engine that continues to accelerate over the next 5 years, especially as we started introducing our new design extension, we already have 1 for advanced manufacturing of various other extensions is going to be you extensions of the second half of the year. Those extensions of we've continued to be out there we're particularly.

Really excited that that we sold more fusion than than than other.

The other applications in Q1 without any type of promotional activity all of this points towards increasing customer demand for what we're doing.

Okay. That's great and then just on the comment that.

In regards to your construction end markets on certainty is lessening I. Appreciate yeah, no sales is ever easy, but are there things that become the easier the fact that a lot.

License compliance billings seem to have had a good quarter, coinciding with a better backdrop.

Is that something that the accelerates as the year goes on or would you maybe point to other areas of your business as well.

I'm sorry could you could you would you went out of a little bit for me on the last part of that but the part of the question. What's the what's the key point of the question here, sorry with uncertain, the lessening license compliance and having those conversations it seems like that could be 1 area to benefit are there other areas as well.

Okay. So as I've said many times license compliance is 1 of these areas that we're just going to build a steady drumbeat on alright, its going to be the gift that keeps giving per years and years to come we do not want to accelerated unnaturally, because we want to bring our customers along with US we want to keep them happy helped them get compliant you noticed the <unk>.

Corey that I offered up in India, and Indonesia about that kind of customer actually buying premium subscription as well as becoming compliant and being happy about how they were able to deploy it that's the kind of outcomes. We want from the solution. So we did see some acceleration you thought you saw the growth numbers and in the opening commentary around.

Around Noncompliant billings in Q1, but that was off of the Q1 that was previously off so we had a really strong compare don't expect any hockey sticks, though the Q1 of this year was better than the Q1 of the fiscal 'twenty. So youre seeing continued growth, which is what we want to see a nice steady growth in this business, but don't don't look for any <unk>.

It takes this year.

We're back to the path we were on previously.

Great. Thank you very much.

Welcome. Thank you. Our next question comes from the line of Matt Hedberg from RBC Capital. Your line is now open.

Oh, great. Thanks for taking my questions Andrew I wanted to go back to the the construction side again.

Obviously the cost of building just continues to go up from a materials basis.

And I know you guys had talked about the amount of waste globally. The comes from construction site.

Is that having a positive impact on pipeline generation and there's a lot of these construction firms. They just have to think.

And customers should have to become more way more efficient is that of parse a portion of your pipeline growth there.

What are you so Matt that that's a very astute observation right. It's too early to say if the the the cost of with the increases in the cost of material is driving increased focus on digitization, but it is 1 of those things that we are constantly highlighted as 1 of the reasons why the the value chain for construction needs.

The digitize because when material prices have gone up the way. They have you you can't afford to over purchasing of waste materials. So I can't tell you precisely if this is 1 of the pipeline drivers, but I can tell you that we're mentioning at the customers and we're having with customers about hey, like conversation with customers, who want to keep your material cost down dip.

The ties right plan for less waste only order what you need so it's definitely entering into the conversation I think it's too early to say, if it's driving acceleration in the in the pipeline but.

I think its likelihood of this.

That's really great to hear and then thank you for that and then Debbie and welcome from me as well.

I guess 1 of the questions that we always get and of course, you get as well as sort of what gives you confidence in that kind of the hockey stick cash flow guide for fiscal 'twenty 3.

You had a little bit of time to kind of reflect on the model what are sort of what's your sort of your view on some of the the major drivers I know we've heard Scott talk about the end of the past I'm just sort of curious on your perspective that gives you really that confidence that the C U E.

Clear on your in your remarks.

Yeah sure.

Matt Good to talk to you too it's.

In large part is a lot of the things that I mentioned before I think it's the combination of a growing Tam as well as further monetization of a number of Tam and so that continued digitization and AUC with more innovation and rather than expanding the mandates and ongoing Jim proliferation around the world with the.

The digitization of construction that Andrew just talked about even the infrastructure bill it could be a wildcard for us.

We're hopeful although nothing is baked into our numbers at this point, but these are all of the multiple growth drivers that gives me confidence in the ramp.

That's the driver of growth for us and ultimately will translate to free cash flow overtime, the improving macroeconomic backdrop. All of these factors combined are what gives me confidence in our ability to achieve our revenue growth potential in fiscal 'twenty, 3 as well as that free cash flow of number of $2.4 billion.

Thanks, David.

Accelerating growth in our in our end markets all of that combined also with the strategic levers around Digitization and AUC around the convergence of design and make of what we're seeing with fusion and then the whole move into new Adjacencies that we're doing any of 1 of those things contribute to viable long term growth we have all of those.

Average the poll Alright, I just wanted to remind me of all of those levers the poll and in all of that we're really good at picking and choosing the levers to pull when we need to pull up.

Sounds great. Thanks, a lot guys.

Thank you. Our next question comes from the line of standard.

Sterling Auty from Jpmorgan. Your line is now open.

Yeah, Thanks, Hi, guys, 1 housekeeping 1 to start.

Can you be specific in terms of what the contribution to the guidance from the acquisitions.

Sure Sterling.

So the impact on the acquisitions, whereas the 1 point increase to our revenue guidance range on the year, a 1 point decrease to our operating margin range on the year and it was neutral to the free cash flow that's consistent with what we said on the last call.

Alright, perfect and then Andrew as we think going forward.

Is fusion 360, oes incremental to kind of the installed base of traditional seats or have you already started to see a little bit of conversion once of the other and if that's the case what kind of change does that have on.

Kind of the IRR contribution.

Yeah. So nobody is moving from inventor of the season right now okay.

There is sort of it's just not happening alright.

Actually most of the business is about going after incremental seats inside of competitive accounts, especially down market.

On the 1 great thing about our strategy is most of the inventor is bought 2 collections which includes fusion.

So if an inventor user does start to move the fusion over time.

They continue on the same subscription path will do and what and what we'll do with our collections as some of the extension that would be available to a vanilla.

Vanilla.

Fusion user of that they'd have to pay for it would be included with the collections version. So essentially what you see is a kind of an ASP PS neutral conversion from inventor to fusion, but that's going to take a long time most of the inventor customers. We're gonna stay comfortably, where we where they are but when they do move it's essentially AFP neutral in <unk>.

In terms of of impact on it.

It doesn't change the <unk> trajectory.

Excellent. Thank you don't really.

Thank you. Our next question comes from the line of Jason <unk> from Keybanc Capital. Your line is now open.

Great. Thanks for taking my questions maybe.

Maybe 1 on the ambitions in infrastructure Andrew are you talking about the gains in roads and bridges with the improvements to the civil 3 D. On the expansions in the water here, but how do you think about some of those other areas of infrastructure.

Maybe some like some of the electric utilities or other areas.

Yeah. So right now Jason we're going to stay focused on road and rail and the Enbridge is in the things that go along with road and rail and water that's going to be our focus area.

There is a lot of exciting things happening with elastic grid designs in the end the electrification and things associated with that we're not going to be focusing on that right. Now we may in the future, but right now if you look at even if you look at where the infrastructure Bill is going for instance, most of it is going to the to the upgrading of.

And expanding the of deteriorating infrastructure, we have in the company around road rail bridges civil in water infrastructure and that that's going to be our sweet spot for a while.

Hopefully on wins.

And then you also talked about the why Autodesk wins in construction, which was quite helpful. We also alluded to the digitization of opportunity Theyre, just being more broadly bigger maybe can you talk about how much of that Tam might be coming from pure greenfield versus displacements of legacy or in house or other competitive tools.

Oh, yes.

A lot of the Tam is is Greenfield you know really sometimes of what's you're competing with here with some kind of a free tool and excel spreadsheets.

We're or a lack of any digital process whatsoever beyond emailing Pdfs, alright, so theres a lot of Greenfield opportunity here. In addition to kind of just flipping existing customers off of legacy systems or of consolidating their systems. So.

There is a very robust long tail of growth here that that's going to go on for years. That's why it's so exciting to see all of the activity in this space because it's going to take the village to deal with the digitize this entire market and we're at the very very early stages of this.

Which is great.

Great I appreciate the color. Thank you.

Thank you. Our next question comes from the line of Gal Munda from bearing Baird. Your line is now open.

Hi, Andrew Hi, Debbie and team thanks for taking my questions.

First 1 Andrew maybe just a little bit on construction of construction portfolios really extend it and stay very strong now.

I'm just wondering how should we think about the individual brands that you acquired between.

The planned growth assemble building connected pipe.

On 1 side and then what's the rest of construction cloud on the other side in terms of user.

Ease of adoption and do you see users that came in from individual brands now starting to kind of move towards the platform approach as well.

Yeah.

Excellent question Gal, So as you know the Autodesk bills and the construction cloud in general is the unification of all of those brands and it's where we lead with new customers. Absolutely you know when we're going out there chasing your businesses all of this build it's all of the capabilities that are built into all of the filled if all of this takeoff. It's all of those tools associated with the construction cloud and Thats.

Where we lead but we're also seeing people migrate off of off of the individual brands and move forward alright. So so we're seeing the same kind of thing happening happened.

Happening incrementally, but that's not going to let those people move at their own pace right. So when the when they're choosing the move on to the consolidated cloud, they're doing that they're doing that by choice and as part of the process of overtime, we will ultimately migrate all of them to construction cloud and all of the build but right now, we're leading leading us with our new.

Understood. Thank you.

That would be just the.

Another question for the year.

I completely understand the Q1 is the smallest.

Quota in terms of new business generation in Pennsylvania, as well so what.

What I wanted to touch the might not have been a good time to kind of organically think about raising the guidance for the year. So early in the year I'd like to just kind of take a step back and think about what happened during Q1, and what youre seeing so far in Q2.

If that kind of the level of trading in the recovery continues is it fair to say that you feel pretty confident about your full year guidance then.

I mean, we issued the guidance today that we feel comfortable with and I would say that we certainly have a strong sense of optimism based on the results that we had in Q1, but it's just too early for us to change the underlying view on the year after only 1 quarter, but we're off to a good start.

Okay.

Okay. Thank you.

Thank you that is all the time, we have for Q&A today, I would like to turn the call back over to Simon Mays Smith for closing remarks.

Thank you everyone for joining us.

We look forward to chatting to you next quarter on taking on our performance.

Do you have any questions in the meantime, please the spend money directly and happy to answer your questions. Thanks very much.

This concludes today's conference call. Thank you for participating you may now disconnect.

Q1 2022 Autodesk Inc Earnings Call

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