Q2 2022 Autodesk Inc Earnings Call
[music].
During the course of this call we may make forward looking statements about our outlook.
Please refer to our SEC filings, including our most recent Form 10-K for important risk factors and other factors, including developments and the COVID-19, pandemic and the resulting impact on our business and operations.
That may cause our results actual results to differ from those in our forward looking statements.
Forward looking statements made during the call are being made as of today.
This call is replayed or reviewed after today the information presented during the call may not contain current or accurate information.
<unk> disclaims.
Any obligation to update or revise any forward looking statements.
During the call we will quote a number of numerical growth changes as we discuss our financial performance and unless otherwise noted each such reference represents a year on year comparison.
Non-GAAP numbers referenced in today's call are reconciled in our press.
<unk> or XL financials, and all of the supplemental materials available on our Investor Relations website.
Now I will turn the call over to Andrew.
Thank you Simon and welcome everyone to the call I Hope you and your families remain safe and healthy.
As we anticipated when we set out our guidance at the beginning of the year unwind.
Uncertainty resulted in increased business confidence investment and economic growth during our second quarter. This is reflected in strong product usage, which returned to pre COVID-19 levels across the globe increase in bid activity on building connected which reached all time highs and greater channel partner confidence when combined with strong execution.
Wining, a resilient subscription business model and the continued secular shift to the cloud our growth accelerated again in Q2 and generated further momentum.
And billings grew 24% and 29%, respectively, driven by strong new product subscription growth renewal rates and revenue retention.
I am proud.
Proud of what the team has accomplished so far this year and again I think all of our employees their families our partners and customers for their continued dedication patience and commitment I.
I will now turn the call over to Debbie to take you through the details of our quarterly financial performance and guidance for the year I will then come back to provide an update on our strategic.
Growth initiatives.
Thanks, Andrew.
As Andrew mentioned second quarter results were strong.
Factors contributed to that strength, including.
That's growth and new product subscription.
Accelerating digital sales.
And improving subscription renewal rate.
In addition in advise and foreign exchange rate provided a modest tailwind to the quarter.
Total revenue growth in the quarter accelerated to 16% and 14% in constant currency.
With subscription revenue growing by 21%.
Looking at revenue by product.
Product.
Auto CAD and Autocad LT revenue grew 12%.
<unk> revenue grew 21%.
Manufacturing revenue grew 12%.
Excluding the impact of moving our volt product to ratable revenue recognition.
Manufacturing revenue grew in the.
The mid teens percent.
And then he revenue grew 10%.
Across the globe revenue grew 14% in the Americas, 16% in EMEA and 21% in APAC.
Direct revenue increased 31% and represented 30.
4% of our total revenue up from 30% last year due to strength from both enterprise and E Commerce.
As you'll hear more about at our Investor Day next week about three quarters of new customers to Autodesk are now generated through our digital channels.
Collecting our efforts too.
To enable a simplified buying experience.
Our product subscription renewal rates remain strong and our net revenue retention rate remains within the 100% to 110% range.
Billings accelerated 29% to 1 billion, reflecting strong.
From underlying demand and an easier comparison versus last year.
Total deferred revenue grew 15% to $3.3 billion.
Total RPE O a 4.14 billion and current RP O of 2.85 billion both grew 24%.
Current RPI growth was driven by strong new product sales during the quarter.
Ongoing benefit from the record number of E. B a signed in the second half of last year.
Excluding the contribution from inter by current RP O grew approximately 23%.
Non-GAAP gross margin remained broadly level at 92%, while operating margin increased more than two percentage points to 31%, reflecting strong revenue growth and ongoing cost discipline.
We delivered healthy free cash flow of $186 million during the quarter primarily.
Really driven by strong billings growth.
Consistent with our capital allocation strategy, we continued to repurchase shares with excess cash to offset dilution from our equity plans.
During the second quarter, we purchased 164000 shares for 46 million.
At an average price of approximately $283 per share.
Year to date, we have repurchased 679000 shares at an average price of approximately $278 per share for a total spend of $189 million.
Now I'll turn to guidance.
Consistent with previous quarters, we expect that an improving economic environment. During the year will result in strong growth in new business over the course of fiscal 'twenty two.
We expect product subscription volume and renewal rates to continue.
To be healthy.
And our net revenue retention rate to remain between 210%.
With our strong start to the year, we are raising the low end of our full year revenue guidance to a range of 4.345 to 4.385 billion.
With the midpoint growth rate of 15% year over year.
We are also raising our non-GAAP operating margin outlook to approximately 31% and almost two point improvement from last year.
Our strong start to the year means we're also.
So shifting more of our EMEA customers for multi year paid upfront to annual billing, which is good for them and good for Autodesk.
Our EMEA customers retain price certainty with a multi year contract term.
But annual billings give them a more predictable annual cash.
Outlay.
For Autodesk, we generate more predictable cash flow and removed the discounts to generate upfront cash collections.
Well, we had already assumed this change in fiscal 'twenty three.
It has a modest impact on fiscal 'twenty, two billings and free cash flow.
However, we expect it to drive more predictable free cash flow growth and better price realization over time, which will make autodesk a more valuable company.
The shift of more of our EDA customers for multi year paid upfront to annual billing and.
And that back.
Account for the change in our fiscal 'twenty, two billings guidance and with a one time M&A related tax charge, our free cash flow guidance.
As we look ahead, we're anticipating revenue growth to accelerate in Q3.
Strong upfront revenue.
<unk> in Q4 of last year and with vault now ratable.
Mahler pool of non ratable products right.
Create a tougher comparison in Q4 of this year, which will reduce revenue growth a bit when compared to the third quarter.
Also our EMEA strength in the second half of last.
Including two of our largest ever deals in Q3, well impact RP O growth comparison in the second half of our fiscal 'twenty two.
The slide deck on our website has more details on modeling assumptions for the third fiscal quarter and full year fiscal 'twenty two.
As I shared last quarter. My initial focus after rejoining autodesk was digging into our fiscal 'twenty two budget in fiscal 'twenty three financial goals.
The strength, we've seen in fiscal 'twenty two.
Bind with a significant cohort of multiyear product subscription contracts.
Gear box will renew in fiscal 'twenty three.
Set us up nicely to achieve our fiscal 'twenty three revenue growth potential and free cash flow goal.
This past quarter I turned my attention to our long range financial plan with a particular focus on fiscal 'twenty four.
But we are young.
You'll hear more at our Investor Day next week, but to set the stage today, our long term strategic growth drivers and our flexible subscription business model give us confidence we can achieve our goal of sustainable double digit revenue and free cash flow growth.
<unk> and fiscal 'twenty four.
Now once we've achieved our fiscal 'twenty three goals will give you more details on our financial ambitions for fiscal 'twenty four and beyond.
But on the whole we believe we have many exciting opportunities to drive growth by further expanding our addressable market.
Get into areas like construction and infrastructure.
As well as by deepening monetization of our user base.
And we look forward to sharing more specifics with you at our Investor Day next week.
Andrew back to you.
Thank you Debbie.
Now, let me turn to our strategic growth initiatives.
<unk> gained and purposeful innovation to enable digital transformation in the industries. We serve is changing our relationships with our customers from software vendor to a strategic partner and that is enabling us to create more value through end to end cloud based solutions to connect data and workflows and business model evolution.
By.
So for our customers grow we will grow too.
You see digitization trends are accelerating the need to connect all phases of design and construction with end to end cloud based solutions. A great example of this quarter was within the Asia Pacific semiconductor manufacturer, which is rapidly expanding its manufacturing capacity around.
Hoping and looking for help to drive more efficient collaboration across project stakeholders as well as shorter design and delivery cycles.
We invested in AUC collections to accomplish this goal and is now leveraging the leveraging the power of Bim in our digital agency workflows to achieve its expansion plan.
This is a prime example.
The world of how Autodesk is positioned to help our customers as industries converge with this customer being a long time user of our manufacturing products and now expanding its footprint with us in AUC.
In construction, we believe the Autodesk construction cloud is the best end to end offering across all phases of the construction lifecycle.
Samples, starting with our industry, leading preconstruction offerings, we help our customers seamlessly convert data into a construction plan, allowing our customers to condition and coordinate models early to aid in class detection easily quantify the materials required for future construction and leverage our building connected community to power the bidding process.
As we turn to the field artist build provides a single integrated solution for project management field collaborations quality safety and cost control, which is easier to deploy adopt and use we just launched it in February but we're already we've already seen artist build in used on more than 11000 customer projects around.
The world by.
By connecting project information and teams in one common data environment. It enables efficient collaboration while providing predictive analytics and insight that increase quality and safety while decreasing risk.
As I mentioned earlier, we've transitioned to being a strategic partner to our customers and in construction that.
It means evolving our business model.
We provide customers more choice in how they buy we offer both a user and account based pricing, which gives our customers the flexibility to decide how they want to engage with us on their digital journey.
With our account based pricing model, we're seeing significant benefits from driving as many users as possible.
Possible to our construction platform.
Once all of this build has been deployed in a project we've made it frictionless for anyone involved on the project to get access to our platform within minutes.
This pattern is not unlike the evolution of fusion 360 over the last few years the more users we see on our platform the more we learn the better.
We make our products and the more value we add to our customers.
This quarter metric construction of top DNR 400 general contractor in the United States selected Autodesk build for project management over competitive offerings pipe for some middle management in Bim collaborate for native class detection as Andy Burd.
For Metro construction said quote Autodesk build comprehensive unified platform is industry, leading and by seamlessly connecting design with construction to increase our efficiency establishes a strong partnership foundation and further enables us to build better lives for our customers communities and each other and quote.
Hardness builds momentum is growing internationally to.
Stan House is a leading retail shop construction and renovation company in the Netherlands, which had already used AUC collections in general design to optimize client retail space reduce design and construction errors by 15% and improve its ROI by 10%.
This quarter and invested in our this bill to further increase efficiency reduce waste and add value for its clients by converging workflows from conceptual design to engineering and fabrication, while seamlessly collaborating with its clients our relationship with STAM house demonstrates the value of that digital construction processes can bring to customers.
Around the world with our significant international experience and resources, we are well positioned to capitalize on this large growth opportunity.
And we continue to invest to connect and converge adjacent industries to create value and help our customers achieve greater efficiency.
During the quarter in advisors info 360 cloud platform.
Launched a beta version info $3.60 asset.
Cloud based tool for the water industry is condition and performance monitoring and risk management processes. We also launched autodesk tandem or digital twin offering focused on harnessing the data from the design and construction process to create a repeatable and dynamic process with digital handover being the natural.
Natural output of the project lifecycle.
Turning to manufacturing, we continued to see strong momentum with our manufacturing portfolio. This quarter and we also saw the inclusion of up chain in its first enterprise business agreement or EBITDA with one of our larger enterprise accounts.
The convergence of design and make is accelerating and we.
We're seeing larger companies expanding our platform.
For example, after using through fusion 360, and mold flow to develop accurate digital manufacturing trends for injection molded parts, which is typically a very iterative time consuming and expensive process one of the largest American multinational medical device and pharmaceutical companies.
Renewed and expanded its EMEA with us this quarter they.
They were able to significantly reduce the time and rework costs, because they could anticipate predict and correct manufacturing issues before moving in productions.
We continue to see subscription growth for fusion 360, with paying subscriptions now at a 165000.
And fusion 360 extensions are helping to increase our average revenue per subscriber and capture more potential opportunity.
During the quarter, our U S based global leader in design engineering and manufacturing of woven wire mesh products transition to fusion 360 as their main design tool and invested in our manage extension.
The combination of fusion 360, and manage extensions is largely automated their design a change workflows.
At a new level of organization and efficiency and product design, all the way through delivery.
Our presence in education continues to expand to address the critical shortage in skilled labor.
For example, a growing number.
Number of large German companies are replacing competitive solutions and our training there and practices on fusion 360 to prepare them for the future of work.
In the second quarter energy Barton Rutenberg AG and BW, one of the biggest utility companies in Germany with 25000 employees.
<unk> fusion.
<unk> 360 to train at 600 apprentices.
Ian BW and its apprentices will benefit from the fusion 360 cloud collaboration platform, serving all of their CAD Cam and CAE needs, while they are either onsite or remote.
Education remains an important market for us and we continue to broaden our reach with.
More than $43 million, Tinker CAD and fusion 360 education users.
We continue to make progress tradition transitioning all of our users had named users, giving customers more visibility into their usage data and allowing us to better serve our paying customers. While also making it harder for noncompliant users to access our software.
The level group as a full cycle developer, which specializes in business class complex.
During the quarter it increased its investment with Autodesk by consolidating all of the single and multi user subscriptions and permanent licenses to AAC collections with our premium plan and Autodesk docks to enable more efficient collaboration and license.
Since management.
And with the help of $24 seven technical support and single sign on capability local group expects reduced design costs in the future.
As our existing paying customers navigate the complexity of digital transition, we can help them manage that complexity improve efficiency and sustainability and remaining life.
License compliant.
For example, one of the leading construction civil industrial and infrastructure service contractors and Vietnam invested in AUC collections, and Autodesk builds to balanced project safety efficiency and quality, while also reducing environmental impact and waste our license compliance team help them identify.
<unk> licensing gaps and ensure installation of compliant software. We estimate that there are about 2 million noncompliant users within our paying customer base during the quarter. We closed 11 deals over $500000 with our license compliance initiatives six of which were over $1 million.
At the end of September we will launch.
Our new pay as you go consumption model called flex that matches, our customers cost with their usage flex.
Flex is an important new way to purchase from us as we evolve our business models to offer more choice and flexibility.
It serves the long tail of customers, who want an option for occasional users that do not use subscriptions.
Every day it also lowers the barrier to entry for existing and new users to explore new products with minimal risk and upfront costs.
Now back to where I started sustained and purposeful innovation to digitally transform the industries. We serve is also transforming our relationship with our customers from software vendor.
Two strategic partner and enabling us to create more value for them through end to end cloud based solutions business model evolution and connected data and workflows by helping our customers grow we will grow too.
Pandemic has accelerated these trends and climate change is increasing the urgency.
We.
We'll continue to invest to rise to the challenges ahead and seize the opportunities. They present in the meantime, we remain on track to achieve our fiscal 'twenty three goals.
Please join us at our virtual Investor Day next week, where we will have more time to share our strategic initiatives with you.
Operator, we would now like to open the call up for questions.
As a reminder to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question to withdraw your question press the pound key.
These standby, while we compile the Q&A roster.
Yes.
Our first question comes from the line.
Subject to Leah.
Barclays.
Line is open.
Okay, Great Hey, guys. Thanks for taking my questions here.
Maybe maybe just to start with you Debbie.
I'd love to dig a little deeper into the changes to billings.
<unk> and free cash flow this year and maybe specifically I was wondering if you could just help frame the size and impact of that of that change to EMEA billings.
And maybe as part of that just talk about what sort of gives you the confidence in what's maybe.
We're a little bit of a steeper ramp in cash flow growth now implied for next year.
That makes sense.
Thanks.
Thanks for the question so.
Overall strength in the business and we continue to demonstrate discipline with our spend so that's what's driving.
Maybe just to raise our guidance for revenue and margin for the year.
For billings and free cash flow I covered the specifics in the opening commentary the key point to take away is that we're focused on making changes that are good for our customers and good for us and shifting more EMEA.
Two annual Bill.
That helps us achieve that goal now it makes sense for customers because they retain price certainty by signing a multiyear contract, but by moving to annual billings, they get a more predictable annual cash outlay.
Of course, the change is good for us too we generate more predictable annual cash flows and we.
Two of the discounts, we see today to generate cash collections upfront.
No <unk> are already on annual billing terms.
We had already assumed that EMEA is would all be on annual billing terms starting next year in our fiscal 'twenty three we're making the change now because with the strong.
<unk> start to fiscal 'twenty, two we decided to get moving earlier to execute on the ship, but the overarching driver is that we're focused on optimizing our business and the changes. He said, it's good for both our customers and for us.
As a side note the impact of our billings guidance is also pretty small it's around one percentage.
Point of impact to the total billings outlook.
No if I ship attention to the ramp to fiscal 'twenty four.
We do see accelerating momentum in multiple drivers of growth regarding multi years.
To break it down a bit we have two main pools of multiyear one for our EMEA.
One for our base product subscription business.
But I've talked about today, so far is E D E and the ongoing shift to annual billings for that cohort as we look ahead to next year as I mentioned in the opening commentary we have a material cohort of multiyear contracts that are coming up for renewal in our base.
And product subscription does not renewing.
Renewing those contracts is one factor that drives us to $2.4 billion in cash flow next year and year to date. This year the proportion of multiyear renewals that we're seeing in that cohort is in line with our expectations. So that must be strengthened our pipeline year to date gives us confidence.
The path to the $2.4 billion in free cash flow target next year.
Okay got it that's that's that's very helpful.
Andrew maybe maybe for you just just zooming out a little bit a little bit more broadly.
You talked a little bit about in your prepared remarks in the press release I think.
So you talked about sort of growing as your customers grow as well and I think you've touched on some examples in your prepared remarks.
But I was just wondering if you can expand on that a little bit and maybe just connected back to the.
The flexibility of the business model, if you will.
Yeah, Yeah exactly specifically.
What I did say was I said is as we help our customers grow we will grow and the reason I want to highlight that particular point here is a lot of the things that are going on with regards to us growing with our customers as they are increasing investment in digitization. This. This is here. It is here to stay it's continuing to accelerate its going to move forward next year.
We are continuing to continue to accelerate so the digitization engage with our customers is why we grow as we help them grow because digitization is going to help them grow as can help them to be more responsive that can help them win more business is going to help them do a whole bunch of things that they were struggling to do previously which is great for them and great for us now.
The other thing I'd add there is we're also responding to the way they want to buy I mean, I think you've noticed that we introduced blacks we haven't.
Rolled it out yet the customers can't yet by it but we introduced the concept of flex and flex is something that a lot of our customers have been waiting for as we've been moving away from our old multi user paradigm.
Single user they've been waiting to see something that allows them to manage occasional use and maybe dive deeper into some of our more advanced digital technologies and integrate some of those things into the workflow. So we're going to offer them. The flexibility they have been looking for and we're gonna mainstream and across a lot of our of our customer base in the bid market.
But the other piece that I want to highlight about flex in particular is that it's also a tool for reaching the long tail of our customers.
Flex is going to allow us to not only help with smaller businesses that use some of our tools only a couple of times a month, but it's also going to help us with smaller customers or departments within larger customers.
They want to use a particular advanced tool on an occasional basis it used to be back in the 90 is when it looks like the long tail first came out that you attack the long tail with a set of discrete products ton you'd have tons of little products.
The 2020 as ways of approaching.
Having a business model that allows people to get access to a set of capabilities and an ever growing platform of products like what we're doing with fusion. So look for those things long term can be important tools that we see for things like flex theyre not going to be short term revenue drivers, but there'll be long term ones that digitization.
This is the key.
That is lying thing here, our business models and the way we're approaching some of our vantage platform are the enablers that allow us our customers continue to Tesla.
Got it makes sense thanks, guys.
Thank you. Our next question comes from Adam Borg of Stifel. Your line is open.
Yeah.
Hey, guys. Thanks, so much for taking the questions maybe.
Maybe for you Andrew So I'm sure we'll talk more on the broader strategy next week, but you've been very clear around this idea of convergence for some time.
Early in the quarter there was the idea of converging mechanical CAD intellectual CAD and how should we think about that going forward.
A word and we're looking to do that more on the organic front with eagle or.
Strategic partnerships or acquisitions, how should we think about that.
Yes. So excellent question. This convergent piece between mechanical design intellectual design, it's something we've absolutely had our eye on for quite some time as you know we bought.
People several years back and we have now tightly integrated into the fusion platform and we're doing some very very interesting things around automation and integration between electronic PCB design and the associated mechanical design that either.
Contain it or actually interact with it in a smart.
So we're already attacking that convergence organically with our products you saw us look externally as well because we saw an opportunity to accelerate the.
The industry change we believe these processors are going to converge, we believe the leading edge customers are going to be driving and using converged processes and we saw a vision.
Smart pass out there and we engaged in a discussion around accelerating this change in the market, we're still going after that market with fusion with Eagle in the integration, we have and we're already moving up into the mid market with some of these tools. So this this is not going away. This is a continuing and ongoing place for us to focus and look look.
As a matter of us too.
Continually increase what we're doing with equal to make those convergences between mechanical and electrical design more fluid more integrated and frankly more automated.
That's really helpful and maybe just a quick follow up so just staying on the fusion 360, and then the manufacturing front.
It looks like you've talked about in the past a lot of success with fusion 360, <unk>, even in the Cam space, replacing vendors like Master Canon just curious if today's announcements of that getting acquired can help them accelerate the opportunity or change the dynamics competitively and somebody thanks again.
Yeah, and I think one of the things you also saw US I've got acquired there was a lot of visibility.
I went into the Master Cam business and I think you can kind of see that the business the business was not.
Not growing as favorite Buckley say fusion is growing both from a user and billing standpoint, so we're pretty confident that in the manufacturing side in the Cam side, we're doing a great job with fusion, but we're also reaching deeper.
Visibility deeper into People's entire process a lot of the customers. We're talking about publicly now are people that have rolled out fusion across the entire process and one of the things. That's also exciting you're seeing these large subscription counts 11000, again, breaking 11000 again this quarter, but one of the other exciting aspects here.
Deeper within our billings growth is actually growing faster than our subs growth, which is a result of the new extension strategy, which has continually adding more and more advanced capability that people can buy on a pay per use basis or on a subscription basis to one of these extensions. So we're continuing to see really good traction.
We're continuing to rollout new extensions, you'll see more extensions coming out this year into next year and you'll also see us start to do some interesting new things from a platform perspective with fusion as well. So we're pretty bullish on fusion, we feel pretty good about our position right here and we're continuing to see growth and Youre right I think the Ah.
The acquisition of Master Cam just shine a light on where the action is right now in this space.
Excellent. Thanks, so much for the color.
Thank you. Our next question comes from Jay Felicia.
Griffin Securities Your line is open.
Thank you and good evening.
Andrew you mentioned.
Gotta get my pen ready for the three part question Okay.
Okay.
So you mentioned that usage is now at pre pandemic levels and the question has to do with new.
New product subs volume.
It's an easy compare year over year versus last.
But.
Would it be reasonable to say that.
New product subs volume at the core of the business ex EMEA ex cloudy products X M to us.
Is above levels of two years ago.
And that your expectations for the remainder of this year I assume it's a next year is.
Last year that will remain the case that you're now well above where you were.
Two years ago in terms of our core product volume.
And then similarly.
For many years L. T was considered to be a good leading indicator or barometer of the of the business given.
Is that the change in the profile of your of your product mix your portfolio.
The fact that autodesk seems to be encouraging.
Full autocad adoption in lieu of LTR, you're clearly not encouraging L T.
Is there some change in the barometers or indicators that you look to.
Even the for the business.
Yeah Okay.
Question, So let me let me.
Let me address the first part of it was only a two part questions that youre disappointed us.
I can give you a thorough [laughter] so new products new product is up significantly okay.
I'm not going to give you specifics.
To tell you if it's exactly back up to two years, but let's just say it's up significantly okay. We can't we couldnt be delivering the kind of performance, we're delivering if it wasn't.
It's significantly higher than the overall growth of the business in terms of new products up and it's continued to robustly grow moving forward and we expect that to continue. So you can you can imagine.
Unlike our volumes are getting back up to the places we would have expected them to be before before COVID-19 ever hit which isn't which is a good which is a good sign and a good outcome and more and more as you can see in this quarter, we generated a lot of that new volume through digital direct channels and channels that were direct costs, which is another interesting factor here you are absolutely.
It used to be that L. T because of the price point and because of its exposure to.
Small businesses. It was a barometer of the health of our business, but the move to the subscription model is kind of scramble that a little bit because people that may have been buying L. T excuse.
Right, so I'm looking for something or buying different products and other things like that so that's why we began tracking in a deep way the monthly active daily active usage of our products in various countries, which has become frankly, our core barometer and I think you can agree that that is a much more robust.
Exclusive indicator of the health of our business than for instance, looking at LTE sales in LTE transaction and it's also interesting to note as commercial and commercial usage surgeons surgeons forward rochelle's, noncompliant usage, almost faster or something right.
So.
Disappoint, you and let me just ask you. This you made a big.
Three yeah exactly you you made a very interesting reference to a semiconductor facility in Asia that has become and AUC customer.
And so the question. There looking ahead is when you think about what Intel is going to be doing with fab <unk>.
I was asking them and others in the semi industry.
Look at data center build out and electric vehicle build out those are all mega commercial facilities. So what's your pipeline looking like for for any or all of those.
That's a very excellent point, Jerry Alright, so were already big in the data center pipeline.
Structural damage is super critical to some of these workflows I have personally engagement from customers and I will not named and in aim and see some amazing things, they're doing with our tools on the datacenter front end on the factory front. So we are actively engaged with.
Deepening the penetration of Bim in all of those areas where people.
<unk> are ramping up new factories and people are building new capacity and you're right to talk about fab capacity for Intel and other places like that bim as mature to a point, where when you combine it, especially not only with the capabilities of design and build but ultimately you'll see tandem play a role in that space as well because tandem is a digital.
For us and allows us to do a handover long term not yet you know tandem is relatively new to market, but a digital handover to the owner for for doing the the the lifetime management of the asset as well so that pipeline is robust and strong.
Already a big player in data center, and new style factory stands.
Twin and several several sectors.
Great. Thank you very much.
Thank you. Our next question comes from Gal Munda of Bamberg. Your line is open.
Hello. Thank you for taking my question. The first one is just around.
But the way you're thinking of multiyear.
Offerings going forward, we're hearing the towards the end of the year, you kind of even the product side is thinking about kind of decreasing the discounts potentially.
Is that something that could have.
Evan implications beyond the E P a.
Kind of going into product subscriptions to have lower multi air going forward or is it just something that you're kind of managing cash flow as we have been quite 23, which is a big cohorts over in Europe.
Yeah, I think so so oh, I'll say again that our goal is to do.
So that's for our customers and what's best for US you're right that we recently announced that we're reducing the discount on product subscription multiyear contract from 10% down to 5% and we're doing it because we.
And I feel that the higher discount is necessary the value proposition of a multiyear contract to our customers.
But certainty not the discount.
Of course, we benefit from the lower discount because they get higher price realization, but at the end of the day, the multiyear contracts reflect strategic longer term partnerships with our customers now we make small small price changes like that all the time in order to optimize our business and to.
The problem is the value for both our customers in France and this is just one example of that.
Got you that's really helpful and then just to.
The second question I haven't heard much about the network licenses and how the kind of the transition is going.
Well, we started in the past over the last year that obviously the first one.
Mac and them over with the ones that had entitlement that basically give them maybe more.
Under the two for one.
Or one could to effectively give them more licenses that they need it.
The others, what kind of come.
Later are you starting to see that the tip of the iceberg effectively.
When it kind of goes the other way where people that are hanging in there not correct licenses now.
Our and that's twofold, one exactly or even they need to take extra insights on that in order to being compliant.
So yeah, we are absolutely starting to see the tip of the iceberg on that part of the transition and.
Also flex, which is something that a lot of those customers were waiting for because those customers who are heavy users of our network license model Flex flex in one of his form's replaces that old model. So with the flex starts to reach the channel and reach the customers more directly you're absolutely going to see a greater.
And operation of that because they do have to ultimately transfer and name every user to use flat, but we're seeing the tip of the iceberg on that right now flex flexes availability broader availability as you move to the end of this year and into early next year will also accelerate that trend as well, which will help us retire that old business model and get to get our customers on the more.
<unk> XR advanced management systems.
Got you.
That's very helpful. Thank you so much appreciate it.
Thank you.
Thank you. Our next question comes from Matt Hedberg of RBC capital markets. Your question. Please.
Great. Thanks, guys, Andrew I want to start with you.
Or given.
Given the the U S federal infrastructure spending bill one of the most often asked questions I get is is really your exposure to infrastructure spending.
I am wondering if there any way you can help us just roughly frame up the magnitude of that business or even perhaps how fast is it growing relative to your overall portfolio.
Those businesses.
Yeah. So we don't we don't break out infrastructure of the business. So I can't give you specifics, but here's one of the things here's what I can tell you and here's what the philosophical statements I can make enough. One we do not have any impact from a federal infrastructure bill built into our financial models. Okay. So the numbers we've given.
Portfolio.
They're all business as usual usual based on our normal course and speed. So I want to be super clear about that so we're all on the same page. However.
We are big proponents of.
Infrastructure spending and the need for infrastructure spending and I I think I think you're getting a.
Given you just just over the last few weeks last month some of the.
Drivers around.
How serious it is when you have the king infrastructure I mean look at look at California, right, California, built water infrastructure for slow snow melt to catch water and habit triple down from the melting snow and run off the coast.
Sandy was happy that that world is likely gone and what people need to focus on is more reservoir, it's different types of infrastructure to capture rainwater rather than rely on on snow melt. These were things that in some cases, we're predictable 10 years ago, but we haven't made progress on also look what's happening in Tennessee.
Nevertheless, just last week these horrible tragedies with its flash floods in the middle of Tennessee unprecedented levels of speed and severity of floods all related to water infrastructure. All of these things are related to climate changes some of them were predictable some of them not all of them are our 10 year backlog now in.
Because we have to build better across the board and we believe that our tools our capabilities. The digital platforms. We're deploying are going to help people build better and when you look at how we're positioned to capitalize on this which I can talk to you about it is look we have got the solution that goes from end to end.
Many play owner with the capital planning engagement, all the way to the use of engagement with the vertical and horizontal components of our construction bim in between and I I want to point to some of our recent partnerships and acquisition on road and rail we partner with oral go to go after departments of transportation to.
To help with the capital planning, we bought in a bias, which has the capital planning tool.
Up front in the water infrastructure process, and we also have a space maker, which we.
We we haven't talked a lot about which helps in the real estate development side from from the capital planning and allocation. There. So we're actually building out.
With loadings in the upfront through partnerships and through technology and then we have all the capability that we've integrated into the construction cloud as well to help with vertical and horizontal construction. So we're ready.
We've invested in the places that we think are critical and we think people need to invest in digital technology to.
Not only.
Build what needs to be bold, but those are back better and build it back cheaper. So that we can start closing out the backlog because there's a big backlog. So there will be opportunity here. It will be long term opportunity for the company. It won't be short term, but there will absolutely be opportunity as people start to spin up these infrastructure projects.
Project that is super comprehensive and as a sidebar yeah. It does feel like you're you're actually acquisition of Inova, just given given the wording of the bill on water was certainly timely.
I wanted to go back to manufacturing just with another question.
In prior calls that fusion 360 is near a tipping point.
And there was another question on M Cabinet CAD I'm, just curious, though from a philosophical perspective.
What's left for you to do within your manufacturing portfolio in other words is there much more white space left beyond what you've got just sort of kind of getting a sense for where we're at in that sort of platform maturation.
Yeah. So there.
It's always a little white space, Okay. I think one of the things that's really important in terms of things we have to do we have to finish integrating all the end to end capabilities alright. So we have to make sure that we've gotten all of the capabilities completely integrated in a way that makes sense. We have to continue to dial down on things like generative design and cloud based and machine learning based automation.
That automate workflows between some of these things so even even less sophisticated companies can take full advantage of highly sophisticated capabilities, which is which is a goal for us now there's going to be other white spaces, we move down with with regards to connecting to production planning.
On the shop floor not just.
Not just moving geometry directly to the machines through general design, but actually managing production flow and some of the things associated that and highly automated facilities. So we're probably explore some of those areas as we start building out the platform, but really you know in terms of what what things have to happen to continue to accelerate infusions.
<unk> growth, it's all about building out the core design capabilities, because he's got a lot of touch points in there. We've got CAD. We've got some really great partnerships around stimulation, which will deepen overtime and we've also got excellent manufacturing capabilities as we deepen and professionalize the design capabilities, you'll start to see more and more purchasing of sophisticated extensions on.
On top of fusion, so look for fusion to become a more significant revenue driver as we move beyond FY 'twenty three right now we're focused on making sure the platform best in class cloud underpinnings are strong that we build off the strong foundation that we have right now and that we build out some of these core design.
But there are little bits of white space in there around production management around some of the integrations with other types of capabilities around costing and estimating that are going to be interesting as well in the future.
Super helpful. Thanks, guys.
Thank you. Our next question comes from Joe <unk>.
Baird Your line is open.
Great Hi, everyone I wanted to start with the performance and the direct channel efforts, obviously, you've had a goal to achieve 50% revenue share but.
It seems like in the last several quarters just the the movement to that level has accelerated.
But are there specific things you would maybe point to recently that help explain some of the acceleration.
You brought up enterprise and the E store is maybe one responsible more than the other and how.
How much is this factoring into kind of the confidence you speak to.
To enter in the second half of this year.
Yes, so I think Debbie and I will both both tag team. This a little bit okay. So let me let me just talk about this at a high level. Some of these things are cyclical and by the way, okay, so quarter there'll be quarter to quarter variations here.
Our fastest growing channel we have.
The business is digital.
Little channels, alright, and more and more of our products, especially new products, especially from small businesses are being bought thoughts with that channel.
It's a big driver and we've seen we've seen some acceleration there and we continue to see acceleration there. It's a very healthy channel and this is what we've expected where certainly also being successful in our EMEA business, which is driving.
The percentage in certain quarters, right, but don't look for that to be a linear transition okay.
We're going to we're going to get to the 50, it's going to take time, but there'll be some quarters, where we're trending up.
In quarters, where we're trending a little bit down, but overall as you fit the line through over multiple.
I'm, just gonna be heading up into the right direction. There are some countries, where we're getting very close to 50.50 and in other places where we're very far away from it. So you have to look at the business a little bit more discretely as we get there, but don't don't look for this to be a straight line W. Did you want to add anything.
Yeah, I mean, I think you.
Well Andrew I was he said there's just there's two main parts, there's the enterprise our EMEA business in there is our ecommerce channel now the enterprise business is the seasonal low in Q2, but we do have a strong pipeline Andrew mentioned that it was the first quarter that we saw up team included and in EMEA. So we're building momentum.
Capture dissipate that the bulk of our EMEA filing will be in the back half of this year like previous years. So things are looking good there on the ecommerce side lots of growth there we've been investing heavily in the last quarter, we talked about different things that we added like more out of out of sea capabilities more calls to action across.
We continue to invest this quarter. Some examples of the changes that we need we're a one stop re subscribe capabilities, so that expire and customers can easily re subscribe them, we have even more places for attitude capabilities throughout the site, we launched a new middle East site in June so a bunch of things and you'll just see.
And incrementally add more functionality more ways to engage with autodesk, so that it's easier to do business with us and that's gonna be part of our success to drive growth through that channel.
Okay. That's that's helpful. And then I wanted to maybe reconcile what sounds like a lot of strong trends.
And higher confidence in the second half and still having the same high end of the revenue guidance, 16% growth.
Intact for fiscal 'twenty, two are there certain areas of the business, where you look and it's still a bit held back so it could be an opportunity for.
He has proved meant overcoming corridors, but maybe it's still nice, but not the full contributor that that it could be.
I'll start Andrew and then you can chime in.
I would say that overall, we had a strong Q2, and we exited the quarter with strong momentum.
And we raised our revenue guidance on the ear.
To reflect that ongoing strength in what we've seen in the business for the year to date.
Andrew mentioned, all the leading indicators were strong usage returned to pre COVID-19 levels. The construction backlog is back online. So all we're seeing at this point is accelerating momentum the only kind of knit piece that I would highlight in the back half of this year is that.
Typically in our Q4, we do see a bit more upfront revenue recognition for some of the products that we typically sell a cyclically in that period and that's a little bit of what you're seeing in both Q3 and Q4 as we get to the back half of the year, but overall just broad strength that we're seeing in the business and that led to the increase in the revenue guidance on the year.
Okay, great. Thank you.
Yeah, I think that'd be set at all.
Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.
Hi, This is Elizabeth Elliott on for Keith Weiss. Thank you. So much I just had a quick question on the current Rps.
<unk> bookings growth it looked like year over year growth slowed a bit from last quarter. So wondering if you could just highlight some of what could be driving that and some of the trends that youre just seeing in new business demand versus what you saw maybe in the prior quarter. Thank you.
Hum.
Our RPM growth was strong at 24%.
On a year over year, and we really do see that as the leading indicator.
Of what's happening in our overall business now typically we see our P O or what we see right now is that RPM growth shot up in Q4, because we had a very strong enterprise business agreement quarter and so gradual.
P. L D. We're seeing that taper down over time, but overall, 24% growth is really solid performance and RPI when you'll start to see that bleed into revenue on the back half of the year.
Got it and then I.
Just one more the Abi data for June noted some firms just weren't able to find enough.
Lilly workers and that the challenge I think they talked about 60% of firms not being able to fill openings in the architectural stuff.
So I was wondering if any issues in employment is that a headwind for autodesk seats or is that a tailwind for you guys as firms just need to digitalize faster and improve productivity.
Sorry can you can you repeat that question.
Yep.
The architectural billings index data for June.
Highlighting that some of the architectural staff them with just having problems kind of filling seats and not being a headwind just employment being a headwind to sales and the.
Capacity that they were seeing so I was just wondering if employment headwinds in the overall kind of macro marketing driving up is that a headwind for autodesk at all or is that actually a tailwind as firms need to digitalize faster improve productivity by adopting autodesk software tools.
Yeah.
Demand great. Thank you, it's it's actually it's actually more of a tailwind because what our customers are struggling with is they're trying to do more with smaller staff and the more digital firms are able to do that the left physical firms are struggling.
The scarcity of labor.
Labor is.
It is pervasive across multiple industries and multiple factors, but we believe this is just another driver with regard to people adopting deeper digitization and digital technologies and as you can see from the fact that some of our results and some of our new seat volume well, while you're hearing some of that in the Abi pressure with regards to their book of business you're.
Seeing any kind of depressive impact in our new steep volume. So we expect long term. This is gonna be a tailwind around visualization and not not any kind of headwind for us.
Thank you.
Thank you. Our next question comes from Jason.
Oh.
You're not your line is open.
Hey.
Thanks for taking my questions.
Nice acceleration on the MC segment this quarter.
You mentioned definitely was an all time high for bid activity with building connected since building connected is kind of at the tip of the spear in terms of where they see visibility into the construction cycle.
How should investors think about this engagement activity flowing through the <unk>.
Revenues.
Yeah.
I think you should think about it exactly the way you said it it is a leading indicator of future onsite construction activity alright, so not all of that activity will convert to people buying our construction tool.
Tools, because not all of the activity is a good fit but it is absolutely a leading indicator to shovel is hitting the ground alright, and I think that that's the way you should be interpreting it and that's the way you should look at it and that's the way we use it and as we get deeper and deeper in building connected and and deeper and deeper into how big.
Bid board works will be creating more internal indices to track and watch some of these things, but that's what you said is how you should view. This is a leading indicator of shovels in the dirt and future activities, which some of that will translate into future purchases of onsite construction software tools.
Okay well.
Maybe to double click on that a little bit when we think about it from like a like a timing perspective or is most of the any help you can share on the types and and.
Timing of projects.
No I can't.
I can't give you a lagging indicator between.
You know increased bid activity I'm on the board and and the starts of new apartment project, Okay, and what that impact is on Monday.
No worries thank you.
Yeah.
Thank you and that is all the time, we have for Q&A I would now like to hand.
The call back to Simon Mays Smith for closing remarks.
Thank you Lucy and thank you everyone for joining our Q2 fiscal 'twenty two conference call.
Do you have any follow up questions. Please do contact the Investor relations team.
And we look forward to seeing you all at our Investor Day on Wednesday next week. Thank you very much goodbye.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Okay.
[music].
Yeah.
[music].
[music].
[music].
Thank you for standing by and welcome to Autodesk Q2 fiscal.
Fiscal year 2022 earnings conference call at this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one 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 to hand, the conference over to your host VP of Investor Relations Simon Mays Smith.
Yeah.
Yeah.
Great and good afternoon. Thank you for joining our conference call to discuss the results of our second quarter fiscal year 2022 on the line with me are Andrew Stott, CEO and Debbie Clifford, 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, Stockholm Ford Slashing Tesla.
Find the earnings press release slide presentation, and transcript of today's opening commentary.
Our Investor Relations website following this call.
During the course of this call we may make forward looking statements about our outlook.
Actual results unrelated assumption acquisition products and product capabilities and strategy. These.
These statements reflect our best judgment based on currently known factor.
Actual events or results could differ materially.
Please refer to the filings, including our most recent Form 10-K for important.
Risk factors and other factors, including developments and the COVID-19, pandemic and the resulting impact on our business and operations that may cause our results actual results to differ from those in our forward looking statements.
Forward looking statements made during the call are being made as of today.
<unk> is replayed or viewed.
After today the information presented during the call may not contain current or accurate information.
<unk> disclaims any obligation to update or revise any forward looking statements.
During the call we will quite number of numerical growth changes as we discussed our financial performance and unless otherwise noted.
Each such reference represents a year on year comparison.
All non-GAAP numbers referenced in today's call are reconciled in our press release or XL financial and 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 and your families remain safe and healthy as.
As we anticipated when we set out our guidance at the beginning of the year unwinding uncertainty resulted in increased business confidence investment and economic growth. During our second quarter. This is reflected in strong product usage, which returned to pre COVID-19 levels across the globe inquiry.
The bid activity on building connected which reached all time highs and greater channel partner confidence when combined with strong execution, a resilient subscription business model and the continued secular shift to the cloud our growth accelerated again in Q2 and generated further momentum.
And billings grew 24%.
And 29%, respectively, driven by strong new product subscription growth renewal rates and revenue retention.
I am proud of what the team has accomplished so far this year and again I think all of our employees their families our partners and customers for their continued dedication patience and commitment.
I will now turn the call.
All over to Debbie to take you through the details of our quarterly financial performance and guidance for the year. I'll then come back to provide an update on our strategic growth initiatives.
Thanks, Andrew.
As Andrew mentioned second quarter results were strong.
Factors contributing to that strength, including.
Robust growth.
The new product subscription.
Accelerating digital sales.
An improving subscription renewal rate.
In addition in advice and foreign exchange rate provided a modest tailwind in the quarter.
Total revenue growth in the quarter accelerated to 16% and 14.
14% in constant currency.
With subscription revenue growing by 21%.
Looking at revenue by product.
CAD and Autocad LT revenue grew 12%.
<unk> revenue grew 21%.
And manufacturing revenue grew 12%.
Excluding the impact of moving our bulk product to ratable revenue recognition.
Manufacturing revenue grew in the mid teens percent.
And then he revenue grew 10%.
Across the Globe revenue grew 14% in the America, 16% in EMEA.
And 21% in APAC.
Direct revenue increased 31% and represented 34% of our total revenue up from 30% last year due to strength from both enterprise and E Commerce.
As you'll hear more about at our Investor Day next week.
About three quarters of new customers to Autodesk are now generated through our digital channels, reflecting our efforts to enable a simplified buying experience.
Our product subscription renewal rates remain strong and our net revenue retention rate remained within the 100 to one.
<unk> hundred 10% range.
Billings accelerated 29% to 1 billion, reflecting strong underlying demand and an easier comparison versus last year.
Total deferred revenue grew 15% to $3.3 billion.
Total RPM.
For one 4 billion and current RP O of $2 eight 5 billion both grew 24%.
Current RPI growth was driven by strong new product sales during the quarter.
Ongoing benefit from the record number of EMEA signed in the second half of last year.
Excluding the contribution from <unk> current Rps grew approximately 23%.
Non-GAAP gross margin remained broadly level at 92%, while operating margin increased more than two percentage points to 31%, reflecting strong revenue growth.
And ongoing cost discipline.
We delivered healthy free cash flow of $186 million during the quarter, primarily driven by strong billings growth.
Consistent with our capital allocation strategy, we continued to repurchase shares with excess cash to offset dilution.
And from our equity plans.
During the second quarter, we purchased 164000 shares for $46 million at an average price of approximately $283 per share.
Year to date, we have repurchased 679000 shares at an average.
Price of approximately $278 per share for a total spend of $189 million.
Now I'll turn to guidance.
Consistent with previous quarters, we expect that an improving economic environment. During the year will result in strong growth.
New business over the course of fiscal 'twenty two.
We expect product subscription volume and renewal rates to continue to be healthy and.
And our net revenue retention rate to remain between 210%.
With our strong start to the year, we are raising.
<unk> the low end of our full year revenue guidance to a range of 4.345 to 438.5 billion with a midpoint growth rate of 15% year over year.
We are also raising our non-GAAP operating margin outlook to approximately 31%.
Your son, and almost two point improvement from last year.
Our strong start to the year means we're also shifting more of our EMEA customers for multi year paid upfront to annual billing, which is good for them and good for Autodesk.
Our E D a customer.
Customers retain price certainty with a multi year contract term.
But annual billings give them a more predictable annual cash outlay.
For Autodesk, we generate more predictable cash flow and removed the discounts to generate upfront cash collections.
Well, we had already assumed this change in fiscal 'twenty three.
It has a modest impact on fiscal 'twenty, two billings and free cash flow.
However, we expect it to drive more predictable free cash flow growth and better price realization over time, which will make autodesk.
A more valuable company.
The shift of more of our EMEA customers for multi year paid upfront to annual billing.
And at that account for the change in our fiscal 'twenty, two billings guidance and with a one time M&A related tax charge, our free cash flow.
Guidance.
As we look ahead.
We're anticipating revenue growth to accelerate in Q3.
Strong upfront revenues in Q4 of last year and with vault now ratable, a smaller pool of non ratable product.
Great a tougher comparison in.
Q4, this year, which will reduce revenue growth a bit when compared to the third quarter.
Also our EMEA strength in the second half of last year, including two of our largest ever deals in Q3 will impact RP O growth comparison in the second half of our fiscal 'twenty.
Two.
The slide deck on our website has more details on modeling assumptions for the third fiscal quarter and full year fiscal 'twenty two.
As I shared last quarter. My initial focus after rejoining autodesk was digging into our fiscal 'twenty two budget.
In fiscal 'twenty three financial goals.
The strength, we've seen in fiscal 'twenty, two combined with a significant cohort of multiyear product subscription contracts that we expect will renew in fiscal 'twenty three.
Set us up nicely to achieve our fiscal 'twenty three revenue growth.
Both potential and free cash flow goal.
This past quarter I turned my attention to our long range financial plan with a particular focus on fiscal 'twenty four and beyond.
You'll hear more at our Investor Day next week, but to set the stage today, our long term.
<unk> strategic growth drivers and our flexible subscription business model give us confidence we can achieve our goal of sustainable double digit revenue and free cash flow growth beyond fiscal 'twenty four.
Now once we've achieved our fiscal 'twenty three goals will give you more details on our.
Financial ambitions for fiscal 'twenty, four and beyond.
But on the whole we believe we have many exciting opportunities to drive growth by further expanding our addressable market into areas like construction and infrastructure as well as by deepening monetization of our user base.
And.
We look forward to sharing more specifics with you at our Investor Day next week.
Andrew back to you.
Thank you Debbie now.
Now, let me turn to our strategic growth initiatives.
Trained and purposeful innovation to enable digital transformation in the industries, we serve is changing our relationships with our customers.
From a software vendor to a strategic partner and that is enabling us to create more value through end to end cloud based solutions to connect data and workflows and business model evolution.
By helping our customers grow we will grow too.
And AUC Digitization trends are accelerating the need to connect.
All phases of design and construction with end to end cloud based solutions a great example of this quarter was within the Asia Pacific semiconductor manufacturer, which is rapidly expanding its manufacturing capacity around the world and looking for help to drive more efficient collaboration across project stakeholders as well as shorter design and delivery cycles.
<unk> invested in AUC collections to accomplish this goal and is now levering leveraging the power of Bim in our digital agency workflows to achieve its expansion plans.
This is a prime example of how Autodesk is positioned to help our customers as industries converge with this customer being a long time user of our manufacturing.
Factoring products and now expanding its footprint with us in AUC.
In construction, we believe the Autodesk construction cloud is the best end to end offerings across all phases of the construction lifecycle, starting with our industry, leading preconstruction offerings, we help our customers seamlessly convert data into a construction plan, allowing.
Wowing, our customers to condition and coordinate models early to 80 class detection easily quantify the materials required for future construction and leverage our building connected community to power the bidding process as we turn to the field artist build provides a single integrated solution for project management field collaboration quality safety.
<unk> and cost control, which is easier to deploy adopt and use we just launched it in February but we're already we've already seen artist build in use on more than 11000 customer projects around the world.
By connecting project information teams in one common data environment. It enables efficient collaboration.
While providing predictive analytics and insight that increase quality and safety while decreasing risks.
As I mentioned earlier, we've transitioned to being a strategic partner to our customers and in construction that means evolving our business model we.
We provide customers more choice in how they buy we offer both a user at.
Account based pricing, which gives our customers the flexibility to decide how they want to engage with us on their digital journey.
With our account based pricing model, we're seeing significant benefits from driving as many users as possible to our construction platform.
Once all of this build has been deployed in a project we've made it frictionless for anyone involved.
<unk> on the project to get access to our platform within minutes.
This pattern is not unlike the evolution of fusion 360 over the last few years.
More users we see on our platform the more we learn the better we make our products and the more value we add to our customers.
This quarter metric construction a top.
PNR 400 general contractor in the United States selected Autodesk build for project management over competitive offerings.
For some middle management in Bim collaborate for native class detection.
Andy Burd for Metro construction said quote.
<unk> build comprehensive unified platform is industry, leading and IC.
By seamlessly connecting design with construction to increase our efficiency establishes a strong partnership foundation and further enables us to build better lives for our customers communities and each other and quote.
Hardness builds momentum is growing internationally to.
Stan House is a leading retail shop construction.
Pension company in the Netherlands, which had already used E C collections in general design to optimize client retail space.
Design and construction errors by 15% and improve its ROI by 10%.
This quarter it invested in our this bill to further increase efficiency reduce waste and add value for.
For its clients by converging workflows from conceptual design to engineering and fabrication, while seamlessly collaborating with its clients.
Our relationship with STAM house demonstrates the value of that digital construction processes can bring to customers around the world with our significant international experience and resources, we are well positioned to capitalize on this.
Large growth opportunity.
And we continue to invest to connect and converged adjacent industry has to create value and help our customers achieve greater efficiency.
During the quarter in advisors Info 360 cloud platform launched a beta version of info 360 asset a cloud based tool for the water industry is condition and performance.
<unk> monitoring and risk management processes, we also launched autodesk tandem or digital twin offering focused on harnessing the data from the design and construction process to create a repeatable and dynamic process with digital handover being the natural output of the project lifecycle.
Turning to manufacturing, we continued to see strong momentum.
Mentum with our manufacturing portfolio this quarter and we also saw the inclusion of up chain in its first enterprise business agreement or EMEA with one of our larger enterprise accounts.
The convergence of design and make is accelerating and we are seeing larger companies expanding our platform. For example, after using fusion 360 and mold flow.
Low to develop accurate digital manufacturing trends for injection molded parts, which is typically a very iterative time consuming and expensive process. One of the largest American multinational medical device and pharmaceutical companies renewed and expanded its EBITDA with us this quarter.
They were able to significantly reduce the time and rework.
Rework costs, because they could anticipate predict and correct manufacturing issues before moving in productions.
We continue to see subscription growth for fusion 360, with paying subscriptions now at a 165000 and the fusion 360 extensions are helping to increase our average revenue per subscriber and capture more potential.
Okay.
During the quarter, our U S based global leader in design engineering and manufacturing of woven wire mesh products transition to fusion 360 as their main design tool and invested in our manage extension.
The combination of fusion 360, and manage extensions is largely automated their design a change workflows.
Opportunity level of organization and efficiency and product design, all the way through delivery.
Our presence in education continues to expand to address the critical shortage in skilled labor for example, a growing number of large German companies are replacing competitive solutions and our training their apprentices on fusion 360 to.
Prepare them for the future of work.
In the second quarter energy Bobbin, Rutenberg AG and BW one of the biggest utility companies in Germany with 25000 employees.
<unk> fusion 360 to train at 600 apprentices.
And BW and its apprentices will benefit from that.
<unk> hundred 60 cloud collaboration platform, serving all their CAD Cam and CAE needs, while they are either onsite or remote.
Education remains an important market for us and we continue to broaden our reach with more than $43 million Tinker CAD and fusion 360 education users.
We continue to make progress.
<unk> traditionally transitioning all of our users to named users, giving customers more visibility into their usage data and allowing us to better serve our paying customers. While also making it harder for noncompliant users to access our software.
The level group as a full cycle developer, which specializes in business class complex during the quarter.
Quarter it increased its investment with autodesk by consolidating all of its single and multi user subscriptions and permanent licenses to ae's the collections with our premium plan and Autodesk docks to enable more efficient collaboration and license management.
And with the help of $24 seven technical support and single sign on capability level.
Expects reduced design costs in the future.
As our existing paying customers navigate the complexity of digital transition, we can help them manage that complexity improve efficiency and sustainability and remain licensed compliant for.
For example, one of the leading construction civil industrial and infrastructure service contractors.
<unk> group in Vietnam invested in AUC collections, and Autodesk builds to balanced project safety efficiency and quality, while also reducing environmental impact and waste our license compliance team helped them identify licensing gaps and ensure installation of compliant software.
We estimate that there are about 2 million noncash.
<unk> client users within our paying customer base during the quarter, we closed 11 deals over $500000 with our license compliance initiatives six of which were over $1 million at.
At the end of September we will launch a new pay as you go consumption model called flex that matches, our customers cost with their usage.
Non complex is an important new way to purchase from us as we evolve our business model is to offer more choice and flexibility.
It serves the long tail of customers, who want an option for occasional users that do not use subscriptions everyday. It also lowers the barrier to entry for existing and new users to explore new products with minimal.
Risks and upfront cost.
Now back to where I started sustained and purposeful innovation to digitally transform the industries. We serve is also transforming our relationship with our customers from software vendor to a strategic partner and enabling us to create more value for them through end to end cloud based solutions.
Business model evolution, and connected data and workflows by helping our customers grow we will grow too.
<unk> has accelerated these trends and climate change is increasing the urgency.
We will continue to invest to rise to the challenges ahead and seize the opportunities they present in the meantime.
<unk>, we remain on track to achieve our fiscal 'twenty three goals.
Please join us at our virtual Investor Day next week, where we will have more time to share our strategic initiatives with your.
Operator, we would now like to open the call up for questions.
As a reminder to ask a question. Please press star one on your Touchtone telephone.
<unk> Star one on your Touchtone telephone to ask a question 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 sight to layer of Barclays. Your line is open.
Again, okay, Great Hey, guys. Thanks for taking my questions here.
Maybe maybe just to start with you Debbie.
I'd love to dig a little deeper into the changes to billings and free cash flow this year and maybe specifically I was wondering if.
Help frame the size and impact of that of that change to EMEA billings.
And maybe as part of that just talk about what sort of gives you the confidence in what's maybe just a little bit of a steeper ramp in cash flow growth now.
<unk> for next.
You could just does that makes sense.
Yeah.
Thanks for the question so.
We're seeing overall strength in the business and we continue to demonstrate discipline with our spend so that's what's driving us to raise our guidance for revenue and margin for the year.
For billings and free cash.
<unk> here I cover the specifics in the opening commentary the key point to take away is that.
We're focused on making changes that are good for our customers and good for us and shifting more EMEA two.
To annual billing helped us achieve that goal now it makes sense for our customers because they.
Gasoline price certainty by signing a multiyear contract that by moving to annual billing they get a more predictable annual cash outlay.
Of course, the change is good for us too we generate more predictable annual cash flows and we removed the discount we see today to generate cash collections upfront.
No.
T D D A's are already on annual billing terms.
And also we had already assumed that EMEA is would all be on annual billing terms starting next year in our fiscal 'twenty three we're making the change now because with the strong start to fiscal 'twenty, two we decided to get moving earlier to execute on the ship.
The overarching driver is that we're focused on optimizing our business and the changes. He said, it's good for both our customers and for us.
As a side note the impact of our billings guidance is also pretty small it's around one percentage point of impact to the total billings outlook.
No if I ship.
Attention.
But the ramp to fiscal 'twenty four we.
We do see accelerating momentum in multiple drivers of growth regarding multi years am I want to break it down a bit we have two main pools of multiyear one for R. E D A's and one for our base product subscription business, but.
But I've talked about today so far.
EMEA and the ongoing shift to annual billings for that cohort.
As we look ahead to next year as I mentioned in the opening commentary we have a material cohort of multiyear contracts that are coming up for renewal in our base product subscription does not renewing those contracts is one factor that drives.
Or is two to $2.4 billion in cash flow next year and year to date. This year the proportion of multiyear renewals that we're seeing in that cohort is in line with our expectations. So that plus the strength in our top line year to date gives us confidence in our path to the $2.4 billion in free cash flow target next year.
Okay got it.
That's very helpful.
Andrew maybe maybe for you just just zooming out a little bit a little bit more broadly.
You talked a little bit about in your prepared remarks in the press release, I think you talked about sort of growing as your customers grow as well and I think you've touched on some examples in your.
Marks.
Also but I was just wondering if you can expand on that a little bit in and maybe just connected back to the flexibility of the business model. If you will.
Yeah, Yeah exactly specifically.
What I did say was I said is as we help our customers grow we will grow and the reason I want to highlight.
For particular point here is a lot of the things that are going on with regards to us growing with our customers as they are increasing investment in digitization. This. This is here. It is here to stay it's continuing to accelerate its going to move forward next year and continue to continue to accelerate so the digitization engage with our customers is why.
We grow as we help them grow because digitization is going to help them grow its gonna help them be more responsive. It's gonna help them win more business, it's going to help them do a whole bunch of things that they were struggling to do previously which is great for them and great for US now the other thing I'd add there is we're also responding to the way they want to buy I mean, I think you've noticed.
Notice that we introduced blacks we haven't.
Rolled it out yet the customers can't yet by it but we introduced the concept of flex and flex is something that a lot of our customers have been waiting for as we've been moving away from our old multi user paradigm. The single user they've been waiting to see something that allows them to manage occasional use and.
Maybe dive deeper into some of our more advanced digital technologies and integrate some of those things into the workflow. So we're going to offer them the flexibility they've been looking for and we're gonna mainstream and across a lot of our of our customer base in the mid market, but the other piece that I want to highlight about flex in particular is that it's also a tool for reaching the long.
Long tail of our customers flip flop.
Flex is going to allow us to not only help with smaller businesses that use some of our tools only a couple of times a month, but it's also going to help us with smaller customers or departments within larger customers that want to use a particular advanced tool on an occasional basis.
It used to be.
Back in the 90 is when it looks like the long tail first came out that you attack the long tail with.
Set of discrete products ton you'd have tons of little products.
The 2020 as ways of approaching that as having a business model that allows people to get access to a set of capabilities and an.
Ever growing platform of products like what we're doing with fusion. So look for those thing long term can be important tools that we see for things like flex you're not going to be short term revenue drivers, but they'll be long term what their digitization as a key underlying thing here our business models and the way we're approaching some of our vantage platform or the.
Enable or is it allow us our customers continue to Tesla.
Got it makes sense thanks, guys.
Thank you. Our next question comes from Adam Borg of Stifel. Your line is open.
Hey, guys. Thanks, so much for taking the questions maybe for you.
You, Andrew So I'm sure we'll talk more on the broader strategy next week, but you've been very clear around this idea of convergence for some time and.
Early in the quarter there was the idea of converging mechanical CAD intellectual CAD and how should we think of that going forward.
We're looking to do that more on the organic front with eagle or.
Potentially.
Strategic partnerships or acquisitions, how should we think about that.
Yes. So excellent question. This convergence piece between mechanical design intellectual design, it's something we absolutely had our eye on for quite some time as you know we bought Eagle several years back and we have now tightly integrated into the fusion platform.
And we're doing some very very interesting things around automation and integration between electronic PCB design and the associated mechanical design that either in either contain it or actually interact with it in.
<unk> product so we're already attacking that convergence organically with our products we saw.
Look externally as well because we saw an opportunity to accelerate.
The industry change we believe these positives are going to converge, we believe the leading edge customers are going to be driving and using converged processes and we saw a vision match out there and we engaged in the discussion around accelerating this change in the market.
We're still going after that market with fusion with Eagle in the integration, we have and we're already moving up into the mid market with some of these tools. So this this is not going away. This is a continuing and ongoing place for us to focus and look look for us to you know.
Continually increase what we're doing with eagle to make those converted.
There's between mechanical and electrical design more fluid more integrated and frankly more automated.
That's really helpful and maybe just a quick follow up so just staying on the fusion 360, and then the manufacturing front you've talked about in the past a lot of success with fusion 360, even in the Cam space, replacing vendors like Macerich.
Master Canon just curious if today's announcements of that getting acquired can help them accelerate the opportunity or change the dynamics competitively and somebody thanks again.
Yeah, and I think one of the things you also saw that got acquired there was a lot of visibility into the master Cam business and I think you can kind of see that the business the business was.
No not growing a favorite Buckley say fusion is growing both from a user and billing standpoint, so we're pretty confident that in the manufacturing side in the Cam side, we're doing a great job with fusion, but we're also reaching deeper and deeper into people's entire process a lot of the customers. We're talking about publicly now our people.
<unk> rolled out fusion across the entire process and one of the things. That's also exciting youre seeing these large subscription count you know 11000 again, breaking 11000 again this quarter, but one of the other exciting aspects here is that our billings growth is actually growing faster than our subs growth, which is a result of the.
Pension strategy, which is continually adding more and more advanced capability that people can buy on a pay per use basis or on a subscription basis to one of these extensions. So we're continuing to see really good traction with fusion, we're continuing to rollout new extensions, you'll see more extensions coming out this year into.
A new exterior and you'll also see us start to do some interesting new things from a platform perspective with fusion as well. So we're pretty bullish on fusion, we feel pretty good about our position right here and we're continuing to see growth and Youre right I think.
The acquisition of Master Cam just shine a light on where the action is right now in this space.
Next check one thanks, so much for the color.
Thank you. Our next question comes from Jay Li Shower of Griffin Securities. Your line is open.
Thank you and good evening.
Andrew you mentioned that you've got to get my pen ready for the three part question, Okay, Yes, right okay.
So.
You mentioned that usage is now at pre pandemic levels and the question has to do with.
New product subs volume.
It's an easy compare year over year versus last year, but would.
Would it be reasonable to say that.
New products subs volume core.
Isn't this X EMEA ex cloudy products X M to us.
As above levels of two years ago.
And that your expectations for the remainder of this year I assume that the next year is that that will remain the case that you're now well above where you were.
Two years ago in terms of our core.
Or are the product volume and then similarly.
For many years LT was considered to be a good leading indicator or barometer of the of the business.
Given the change in the profile of your product mix your portfolio.
Plus the fact that autodesk.
Core price to be encouraging.
Full autocad adoption in lieu of LTE or you're clearly not encouraging L. T.
Is there some change in the barometers or indicators that you look to for the business.
Yeah, Okay. Great question. So let me let me let.
Let me address.
We're seeing the first part of it was only a two part question Jay you disappointed Oh.
I can give you a thorough.
So new products new product comes it is up significantly okay.
I'm not going to give you specifics I'm not going to tell you. If it's exactly back up to two years, but let's just say it's up significantly okay. We can't we couldn't be delivered.
The kind of performance, we're delivering if it wasn't.
It's significantly higher than the overall growth of the business in terms of new products up and it's continued to robustly grow moving forward and we expect that to continue. So you can you can imagine that our volumes are getting back up to the places we would've expected them to be before before COVID-19 ever hit.
<unk>, which is a good which is a good sign and a good outcome and more and more as you can see in this quarter, we generated a lot of that new volume through digital direct channels in channels that were direct to us which is another interesting factor here.
You are absolutely right it used to be that L. T because of the price point and because of its exposure to.
Which is a small.
Small businesses. It was a barometer of the health of our business, but the move to the subscription model is kind of scramble at that a little bit because people that may have been buying L. T exclusively for something or buying different products and other things like that so that's why we began tracking.
Two deep way the monthly active daily active usage of our products in various countries, which has become frankly, our core barometer and I think you can agree that that is a much more robust.
Indicator of the health of our business than for instance, looking at LTE sales in El.
And in production and it's also interesting to note as commercial and commercial usage surgeons surgeons forward Roadshows noncompliant usage, almost facts or something.
Right.
So as not to disappoint you, but let me just ask you. This you made a bim three.
Three exactly you made a very interest.
Teach reference to a semiconductor facility in Asia that has become an AUC customer.
And so the question. There looking ahead is when you think about what Intel is going to be doing with fab construction and others in the semi industry.
When you look at data center build out and electric vehicle.
Testing routers are all Mega commercial facilities. So what's your pipeline looking like for for any role of those yeah. That's a very excellent point Jay Alright, So were already big in the data Center pipeline Alright, Bim is super critical to some of these workflows I have personally engagement from customers and I will not named.
Building, an aim and see some amazing things, they're doing with our tools on the data center front and on the factories front. So we are actively engaged with.
Deepening the penetration of Bim in all of those areas, where people are standing up new factories and people are building new capacity and you're right to talk about.
Fab capacity for Intel and other places like that Bim is mature to a point, where when you combine it, especially not only with the capabilities of design and build but ultimately you'll see tandem play a role in that space as well because tandem is a digital twin allows us to do a handover long term not yet tandem relatively new to market, but a digital hand over.
Over to the owner for for doing the the lifetime management of the asset as well so that pipeline is robust and strong where we're already a big player in data center and new style factory stands up in several several sectors.
Great. Thank you very much.
Yeah.
Thank you. Our next question comes from Gal Munda of Bamberg. Your line is open.
Hello. Thank you for taking my question. The first one is just around kind of the way you're thinking of multiyear.
Offering going forward we're hearing.
But you know towards the end of the year you kind of.
Even the product side is thinking about kind of decreasing the discounts potentially.
Is that something that could.
Have an implications beyond the EMEA also going into product subscriptions to have lower multi air going forward or is it just something that.
Managing cash flow as we have been dropped by 23, which is a big cohorts are in Europe like you said.
Yes, I think so.
Well I'll say it again, our goal is to do what's best for our customers and what's best for US you're right that we recently announced that we're reducing that.
You're kind of on product subscription multiyear contracts from 10% down to 5% and we're doing it because we cannot.
Sales at the higher discount is necessary the value proposition of a multiyear contract to our customers as the price certainty not the discount.
Of course, we benefit from the lower discount because they get higher price.
Discounting, but at the end of the day, the multiyear contracts reflect strategic longer term partnerships with our customers know, we make small small price changes like that all the time in order to optimize our business and to maximize the value for both our customers and for US and this is just one example of that.
That's really helpful and then just.
The second question I haven't heard much about the network licenses and how the kind of the transition is going.
Well, we started in the past over the last year that obviously, the first ones to hand them over with the ones that had entitlement that basically gives them maybe more.
Got you know under the two for one.
Or one particular effectively they gave them more licenses that they need that.
What kind of come.
Later are you starting to see that tip of the iceberg effectively.
It kind of goes the other way where people that are hanging in there not court licenses.
Our and that's twofold, one exactly or even they need to take extra money in order to being compliant.
So yeah, we are absolutely starting to see the tip of the iceberg on that part of the transition.
And also flex, which is something that a lot of those customers were waiting for because those customers were.
Now you can think of our network license model Flex flex in one of his form's replaces our old model. So with it as flat starts to reach the channel and reach the customers more directly you're absolutely going to see a greater acceleration of that because they do have to ultimately transfer and name every user to use black but.
Having the tip of the iceberg on that right now flex flexes availability broader availability as you move to the end of this year and into early next year will also accelerate that trend as well, which will help us retire that old business model and get and get our customers on the more advanced management systems that underpin pluck ketchup.
That's very helpful. Thank you so much.
We're efficient.
Thank you.
Thank you. Our next question comes from Matt Hedberg of RBC capital markets. Your question. Please.
Great. Thanks, guys, Andrew I want to start with you.
Given the the U S federal infrastructure spending bill one of the most often asked questions I get is is really.
Your exposure to infrastructure spending.
I'm wondering if there any way you can help us just roughly frame up the magnitude of that business or even perhaps how fast is that growing relative to your overall sort of.
Portfolio of businesses.
Yeah. So we don't we don't break out infrastructure of the business. So I can't give you specifics.
Here's one of the things here's what I can tell you and here's what the philosophical statements I can make enough. One we do not have any impact from a federal infrastructure bill built into our financial models. Okay.
We've given you.
As a consequence, they're all businesses use the usual based on our normal course and speed.
Super clear about that so we're all on the same page. However, we are.
Big proponents of infrastructure spending and the need for infrastructure spending and I I think I think you're you're getting a sense just just over the last few weeks.
Months, but some of the critical drivers around.
So I wonder what how serious it is when you have decaying infrastructure I mean look at look at California, right, California adult water infrastructure for slow snow melt to catch water and have a dribble down from the melting snow and run off to the coast and everybody was happy that that world is likely gone and what people need to focus on is.
Oh reservoirs different types of infrastructure to capture rainwater rather than rely on on snow melt. These were things that in some cases, we're predictable 10 years ago, but we haven't made progress on also look what's happening in Tennessee, just just last week, the horrible tragedies with its flash floods in the middle of Tennessee unprecedented levels of speed.
Feed and severity of floods all related to water infrastructure. All of these things are related to climate changes some of them were predictable some of them not all of them are our 10 year backlog now in many places we have to build better across the board and we believe that our tools our capabilities the digital platforms.
We're deploying are going to help people build better and when you look at how we're positioned to capitalize on this which I can talk to you about it is look we have got the solution that goes from end to end with the owner with the capital planning engagement all the way to the use of engagement with the vertical and horizontal campaign.
Components of our construction bim in between and I I want to point to you some of our recent partnerships and acquisitions on road and rail we partner with or ago to go after departments of transportation to help with the capital planning, we bought in a bias, which has the capital planning tool upfront in the.
The water infrastructure process, and we also have a space maker, which we.
We we haven't talked a lot about which helps in the real estate development side from from the capital planning and allocation. There. So we're actually building out capabilities in the upfront through partnerships and through technology and then we have all the capability that we've integrated into.
The construction cloud as well to help with vertical and horizontal construction. So we're ready.
We've invested in the places that we think are critical and we think people need to invest in digital technology to not only build what needs to be bold, but those it back better and build it back cheaper so that we.
Can start closing out the backlog because there's a big backlog. So there will be opportunity here. It will be long term opportunity for the company. It won't be short term, but there will absolutely be opportunity as people start to spin up these infrastructure projects.
That is super comprehensive and as a sidebar, yes. It does feel like your acquisition.
A antibody just given given the wording of the bill on water was certainly timely.
I wanted to go back to manufacturing just with another question you.
You noted in prior calls that fusion 360 is near a tipping point and there was another question on M. CAD in the CAD I'm, just curious, though from a philosophical perspective.
What's left for you to do within your manufacturing portfolio in other words is there much more white space left beyond what you've got just sort of kind of getting a sense for where we're at in that sort of platform maturation.
Yeah. So there.
There's always a little white space, Okay. I think one of the things that's really important in terms of things we have to do we have to finish.
Integrating all the end to end capabilities alright, So we have to make sure that we've gotten all of the capabilities completely integrated in a way that makes sense. We have to continue to dial down on things like generative design and cloud based and machine learning based automation that automate workflows between some of these things so even even less sophisticated company.
We can take full advantage of highly sophisticated capabilities, which is which is a goal for us now there's going to be other white spaces, we move down with with regards to connecting to production planning.
On the shop floor, not just not just moving geometry directly to the machines through general design, but actually managing production flow and some.
Companies associated that and highly automated facilities. So we'll probably explore some of those areas as we start building out the platform, but really you know in terms of what what things have to happen to continue to accelerate infusions growth. It's all about building out the core design capabilities, because he's got a lot of touch points in there we've got.
I think we've got some really great partnerships around stimulation, which will well deepen overtime and we've also got excellent manufacturing capabilities as we deepen and professionalize the design capabilities, you'll start to see more and more purchasing of sophisticated extensions on top of fusion. So look for fusion to become a more significant revenue driver.
<unk> as we move beyond FY 'twenty three right now we're focused on making sure. The platform is best in class cloud underpinning the strong that we build off the strong foundation, we have right now and that we build out some of these core design capabilities, but there are little bits of white space in there around production management around some of the integration.
<unk> with other types of capabilities around costing and estimating that are going to be interesting as well in the future.
Super helpful. Thanks, guys.
Thank you. Our next question comes from Joe Room, Inc of Baird. Your line is open.
Great Hi, everyone I wanted to start with.
<unk> performance in the direct channel efforts, obviously, you've had a goal to achieve 50% revenue share.
But it seems like in the last several quarters just the the movement to that level has accelerated a bit or are there specific things you would maybe point to recently that helped.
With the buy and some of the acceleration.
You brought up enterprise and the E store is maybe one responsible more than the other and Oh, how much is this factoring into kind of the confidence you speak to and train in the second half of this year.
Yeah, So I think Debbie and I will both.
Opex both tag team this a little bit okay. So let me let me just talk about this at a high level. Some of these things are cyclical and by the way, okay, so quarter to quarter to quarter variations here.
This growing channel we have in our business is the digital channel, alright, and more and more of our products, especially new products, especially from small businesses.
But thoughts with that channel and it's it's a it's a big driver and we've seen we've seen some acceleration there and we continue to see acceleration there, it's a very healthy challenge.
We've expected we're certainly also being successful in our EMEA business, which is driving up the percentage.
In certain quarters, alright, but don't look for that to be linear.
There's been transition okay.
We're going to we're going to get to the 50, it's going to take time, but there'll be some quarters, where we're trending up.
Other quarters, where we're trending a little bit down, but overall as you've hit the line through over multiple years, it's gonna be heading up into the right direction. There are some countries, where we're getting very close to 50.50.
Here and in other places, where we're very far away from it. So you have to look at the business a little bit more discretely as we get there but.
Don't don't look for this to be a straight line W. Did you want to add anything.
Yeah, I mean, I think you captured it well Andrew as he said, there's just there's too many cards. There is the enterprise E D.
And then there is our ecommerce channel and now the enterprise business is a seasonal low in Q2, but we do have a strong pipeline Andrew mentioned that it was the first quarter that we saw obtain included and in EMEA. So we're building momentum and we anticipate that the bulk of our EMEA filing will be in the back half of this year like previous years. So.
Those things are looking good there on the e-commerce side, a lots of growth there we've been investing heavily in.
Last quarter, we talked about different things that we added like more out of out of sea capabilities more calls to action across the site. We continue to invest in this quarter. Some examples of the changes that we need we're.
That re subscribe capabilities, so that expire and customers can easily re subscribe them, we have even more places for attitude capabilities throughout the site, we launched a new middle East site in June so a bunch of things and you'll just see us incrementally add more functionality more ways to engage with autodesk.
Once it is easier to do business with us and that's gonna be part of our success to drive growth through that channel.
Okay. That's helpful. And then I wanted to maybe reconcile what sounds like a lot of strong trends in and higher confidence in the second half and still having the same high end.
The revenue guidance, 16% growth and intact for fiscal 'twenty. Two are there certain areas of the business, where you look and it's still a bit held back so it could be an opportunity for improvement overcoming corridors, but maybe it's still nice but not the full contributor.
And over that that it could be.
I'll start Andrew and then you can chime in.
I would say that overall, we had a strong Q2, and we exited the quarter with strong momentum.
We raised our revenue guidance on the year to reflect that ongoing strength in what we've seen in the business for the year to date Andrew.
Andrew mentioned.
Tribute leading indicators restaurant usage returned to pre COVID-19 levels. The construction backlog is back online. So all we're seeing at this point is accelerating momentum the only kind of knit piece that I would highlight in the back half of this year is that typically in our Q4, we do see a bit more upfront revenue recognition for.
And other products that we typically sell a cyclically in that period and that's a little bit of what you're seeing in both Q3 and Q4 as we get to the back half of the year, but overall just for.
The strength that we're seeing in the business and that led to the increase in the revenue guidance on the year.
Okay, great. Thank you Yep Yep.
Yeah, I think Kevin.
Some of it all.
Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.
Hi, This is Elizabeth Elliott on for Keith Weiss. Thank you. So much I kind of quick question on the current RPI based bookings growth it looks like year over year growth slowed a bit.
He said in a quarter. So wondering if you could just highlight some of what could be driving that and some of the trends that you're seeing in new business demand versus what you saw maybe in the prior quarter. Thank you.
So thanks, Elizabeth our RPI growth was strong at 24% year over year, and we really do see that.
From my leading indicator.
What's happening in our overall business now.
Typically we see our P O. What we see right now is that RPM growth shot up in Q4, because we had a very strong enterprise business agreement quarter, and so gradually we're seeing that taper down over time, but over a 24% growth is.
It would seem to lead performance in RPM, when you'll start to see that bleed into revenue on the back half of the year.
Got it and then.
And just one more the Abi data for June noted some firms.
We're able to find enough for workers and that the challenge that they talked about 60% of firm.
Really talking about a sale openings in the architectural stuff.
I was wondering if any issues in employment is that a headwind for autodesk seats or is that a tailwind for you guys as firms just need to digitalize faster and improve productivity.
I'm not I'm, sorry can you can you repeat that question.
Yep.
The architectural billings index data for June.
Highlighted that some of the architectural staff them with just having problems filling seats and not being a headwind just employment being a headwind to sales and the.
Demand capacity that they were seeing so I was just wondering if employment headwinds in the overall kind of macro marketing driving a is that a headwind for autodesk at all or is that actually a tailwind as firms need to digitalize faster improve productivity by adopting autodesk software tools.
Got it.
Okay. Thank you, it's actually it's actually more of a tailwind because what our customers are struggling with is they're trying to do more with smaller staff and the more digital firms are able to do that the left digital firms are struggling this the scarcity of labor.
Labor is.
It is pervasive across multiple industries and multiple factors, but we believe this is just another driver with regard to people adopting deeper digitization in digital technologies and as you can see from the fact that some of our results and some of our new seat volume well, while you're hearing some of that in the Abi pressure with regards to their book of business.
Seeing any kind of depressive impact in our new steep volume. So we expect long term. This is gonna be a tailwind around digitization and not not any kind of headwind for us.
Thank you.
Thank you. Our next question comes from Jason.
Keith.
Youre not your line is open.
Hey.
Thanks for taking my questions.
Nice acceleration on the MC segment this quarter.
And you mentioned that there was an all time high for bid activity with building connected since building connected is kind of at the tip of the spear in terms of where they see visibility into the construction cycle.
You bet investors think about this engagement activity flowing through the <unk>.
Revenues.
Yeah.
I think you should think about it exactly the way you said it it is a leading indicator of future onsite construction activity alright, so not all of that activity will convert to people buying our construction tool.
Tools, because not all of the activity is a good fit but it is absolutely a leading indicator to shovel is hitting the ground alright, and I think that that's the way you should be interpreting it and that's the way you should look at it and that's the way we use it and as we get deeper and deeper in the in building connected and and deeper and deeper into how big.
How should it work will be creating more internal indices to track and watch some of these things, but that what you said is how you should view. This is a leading indicator of shovels in the dirt and future activities, which some of that will translate into future purchases of onsite construction software tools.
Well.
Bobby to double click on that a little bit when we think about it from like a like a timing perspective or is most of the any help you can share on the types and.
Yeah.
Timing of projects.
No I can't I can't I can't give you a lagging indicator between.
Increased bid activity on good board and and.
The starts of new product project, what that impact is limited.
No worries, but thank you.
Yeah.
Thank you and that is all the time, we have for Q&A I would now like to hand.
The call back to Simon Mays Smith for closing remarks.
Thank you Latif and thank you everyone for joining our Q2 fiscal 'twenty two conference call.
Do you have any follow up questions. Please do contact the Investor relations team.
And we look forward to seeing you all at our Investor Day on Wednesday next week. Thank you very much goodbye.
This concludes today's conference call. Thank you for participating you may now disconnect.