Q3 2022 Autodesk Inc Earnings Call

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Speaker 1: Thank you for standing by, and welcome to Autodesk Third Quarter 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 this session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded.

Thank you for standing by and welcome to Autodesk third quarter 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 this session you will need to press star one on your telephone. Please be advised that today's conference maybe recorded should you require any further assistance. Please press star zero I would now like to hand, the conference over to the V P of inverse.

Speaker 1: Should you require any further assistance, please press star 0. I would now like to hand the conference over to the VP of Investor Relations, Simon May Smith. Please, go ahead.

The relations Simon Mays Smith. Please go ahead.

Speaker 2: Thanks, operator, and good afternoon. Thanks for joining our conference call to discuss the results of our third quarter of fiscal year 2022. On the line with me are Andrew Alignost, our CEO , and Debbie Clifford, our Chief Financial Officer.

Thanks, operator, and good afternoon. Thanks for joining our conference call to discuss the results for the third quarter of fiscal year 2022 on the line with me are Andrew Alex Oh, CEO, and Debbie Clifford Chief Financial Officer.

Speaker 2: Today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available at autodesk.com forward slash investor. You can find the earnings press release, slide presentation and transcript of today's opening commentary on our investor relations website following this call.

Today's conference call is being broadcast live via webcast.

In addition, a replay of the call will be available at Autodesk Dotcom forward Slash investment you.

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

During the course of this call we may make forward looking statements about our outlook future results and the related assumptions acquisition product some product capability and strategy.

Speaker 2: During the course of this call we may make forward-looking statements about our outlook, future results and related assumptions, acquisitions, products and product capabilities and strategies.

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

Speaker 2: These statements reflect our best judgement based on currently known factors. Actual events or results could be identified as actual events.

Actual events or results could differ materially please.

Speaker 2: Please refer to our SEC filings, including our most recent Form 10-K , for important risks and other factors, including developments in the COVID-19 pandemic and the resulting impact on our business and operations that may cause our actual results to differ from those in our forward-looking statement.

Please refer to our SEC filings, including our most recent Form 10-K for important risks and other factors, including developments and the COVID-19, pandemic and the resulting impact on our business and operations.

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

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

Speaker 2: Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statement.

This call is repaid or reviewed after today.

Formation presented during the call may not contain current or accurate information.

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

Speaker 2: During the call, we will quote a number of numeric or growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-on-year comparison.

During the call we were quite 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.

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

Speaker 2: All non-GAAP numbers referenced in today's call are reconciled in our press release to Excel Financials and other supplemental materials available on our Investor Relations website. And now I will turn the call over to Andrew. Thank you.

Now I will turn the call laboratory Andre.

Thank you Simon and welcome everyone to the call.

Our third quarter results were strong driven by one of our best ever quarters for new subscriptions record subscription renewal rates, our net revenue retention rate towards the high end of our range and our solid competitive performance. We also grew our Poe and billings, 18% and 16% respectively. Despite a tougher compare versus last.

Speaker 3: Our third quarter results were strong, driven by one of our best ever quarters for new subscriptions, record subscription renewal rates, a net revenue retention rate toward the high end of our range, and a solid competitive performance.

Speaker 3: We also grew RPO and billings 18% and 16% respectively, despite a tougher compare versus last year.

Yes.

Relative to the first and second quarters the rate of improvement accelerated during the third quarter more than we expected while demand is robust, we believe supply chain disruption and resulting inflationary pressures, our global labor shortage, making it harder for our customers to staff new projects and the ebb and flow of Covid are contributing to the deceleration.

Speaker 3: Relative to the first and second quarters, the rate of improvement decelerated during the third quarter more than we expected. While demand is robust, we believe supply chain disruption and resulting inflationary pressures, a global labor shortage making it harder for our customers to staff new projects, and the ebb and flow of COVID are contributing to the deceleration, as well as documented country-specific disruption to AEC and CEP.

As well as documented country specific disruption to ADC in China.

Our conversations with customers and channel partners reinforce our view.

Speaker 3: Our conversations with customers and channel partners reinforce our...

Speaker 3: We're encouraged that embracing digital transformation to drive efficiency and sustainability remains a priority for our customers.

We're encouraged that are embracing digital transformation to drive efficiency and sustainability remains a priority for our customers.

Speaker 3: Our end-to-end solutions, business model flexibility, and platform position us well competitively and enable more customers to enter and remain in our ecosystem.

Our end to end solutions business model flexibility and platform position us well competitively and enable more customers to enter and remain in our ecosystem.

Speaker 3: As you heard at our recent Investor Day and at Autodesk University, we are rapidly innovating and optimizing our business to increase and realize the opportunity ahead.

You heard at our recent Investor day, an unaudited University, we are rapidly innovating and optimizing our business to increase and realize the opportunity ahead.

Notable milestones during the quarter included the launch of our flex consumption model and our plans to combine technologies connect processes automate workflows and unlock valuable insights for customers to our forge platform.

Speaker 3: Notable milestones during the quarter included the launch of our Flex Consumption Model and our plans to combine technologies, connect processes, automate workflows, and unlock valuable insights for customers through our Forge platform.

Speaker 3: The recent report from the Intergovernmental Panel on Climate Change and the United Nations Climate Change COP26 meeting in Glasgow both underscore the urgency of reducing carbon in Earth's atmosphere and the role that everyone, including corporations, needs to play.

The recent report from the Intergovernmental panel on climate change and the United Nations Climate change Cop 26 meeting in Glasgow, both underscore the urgency of reducing carbon and earth atmosphere, and the role that everyone, including corporations needs to play.

Speaker 3: Sustainability needs to be designed, made, and in many cases, retrofitted in construction and manufacturing.

Sustainability needs to be designed made and in many cases retrofitted in construction and manufacturing.

Speaker 3: This cannot be achieved efficiently or effectively without end-to-end software like ours to drive the process.

This cannot be achieved efficiently or effectively without end to end software like ours to drive the process is.

Speaker 3: This organizing principle affects not just how we deploy capital, for example, through our investments to develop sustainable tools and our recent acquisition of Innovize, but also how we source capital. Many of our largest equity holders already aligned to our sustainability goals. And in the third quarter, we began to align our debt holders by issuing our first sustainability bond linked to our sustainability goal.

Organizing principal effects not just how we deploy capital for example through our investments to develop sustainable tools and our recent acquisition of antivirus, but also how we source capital many of our largest equity holders already aligned our sustainability goals and in the third quarter, we began to align our debt holders by issuing our firm.

Sustainability bonds linked to our sustainability goals.

Now, let me turn the call 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.

Speaker 3: Now let me turn the call 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 initiative.

Thanks, Andrew.

Speaker 4: As Andrew said, our third quarter results were strong.

As Andrew said, our third quarter results were strong.

Speaker 4: Several factors contributed to that, including robust growth in new product subscriptions, rapidly expanding digital sales, and increasing subscription renewal rates.

Several factors contributed to that including robust growth and new product subscription.

Rapidly expanding digital sales and increasing subscription renewal rates.

Total revenue growth in the quarter accelerated to 18% and 17% in constant currency.

Speaker 4: Total revenue growth in the quarter accelerated to 18% and 17% in constant currency, with subscription revenue growing by 21%.

Subscription revenue growing by 21%.

Looking at revenue by product the growth. We saw was broad based auto CAD and Autocad LT revenue grew 14%.

Speaker 4: Looking at revenue by product, the growth we saw was broad-based. AutoCAD and AutoCAD LT revenue grew 14 percent.

Speaker 4: AEC revenue grew 22 percent and manufacturing revenue grew 16 percent. M&E revenue

E C revenue grew 22% and manufacturing revenue grew 16%.

And then he revenue grew 17%.

Across the globe revenue grew 18% in the Americas, 19% in EMEA and 18% and APAC.

Speaker 4: Across the globe, revenue grew 18% in the Americas, 19% in EMEA, and 18% in APAC.

Direct revenue increased 34% and represented 35% of our total revenue up from 31% last year due to strength from both enterprise and E Commerce.

Speaker 4: Direct revenue increased 34% and represented 35% of our total revenue up from 31% last year due to strength from both enterprise and e-commerce.

Speaker 4: As you heard at our investor day, about three quarters of new customers to Autodesk are now generated through our digital channels, reflecting the strength of our simplified buying experiences.

As you heard at our Investor day about three quarters of new customers to Autodesk are now generated through our digital channels, reflecting the strength of our simplified buying experiences.

Our product subscription renewal rates reached record highs and our net revenue retention rate was toward the high end of our 100% to 110% range.

Speaker 4: Our product subscription renewal rates reached record highs and our net revenue retention rate was toward the high end of our 100 to 110% range.

Speaker 4: Billings increased 16% to $1.2 billion, reflecting robust underlying demand and a tough comparison versus last year when we signed two of our largest ever EBAs, including a nine-digit deal.

Billings increased 16% to $1 2 billion, reflecting robust underlying demand and a tough comparison versus last year. When we signed two of our largest ever E D A's, including a nine digit deal.

Speaker 4: Total deferred revenue grew 14% to $3.3 billion. Total RPO of $4.2 billion and current RPO of $2.9 billion grew 18 and 21% respectively.

Total deferred revenue grew 14% to $3 3 billion total RPI O $4 2 billion and current RP O of $2 9 billion grew 18% and 21% respectively.

Turning to the P&L non-GAAP gross margin remained broadly level at 92%, while non-GAAP operating margin increased by two percentage points to approximately 32%, reflecting strong revenue growth and ongoing cost discipline.

Speaker 4: Turning to the P&L, non-GAAP gross margin remained broadly level at 92% while non-GAAP operating margin increased by 2 percentage points to approximately 32%, reflecting strong revenue growth and ongoing cost discipline.

We delivered healthy free cash flow of $257 million during the quarter against a tough comparison from last year, which benefited from pandemic related payment term extensions.

Speaker 4: We delivered healthy free cash flow of $257 million during the quarter against a tough comparison from last year, which benefited from pandemic-related payment term extensions.

Speaker 4: Consistent with our capital allocation strategy, we continued to repurchase shares to offset dilution from our equity plan.

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

Speaker 4: During the third quarter, we purchased 980,000 shares for $287 million at an average price of approximately $293 per share.

During the third quarter, we purchased 980000 shares for $287 million at an average price of approximately $293 per share.

Year to date, we've repurchased 166 million shares at an average price of approximately $287 per share for total spend of $476 million.

Speaker 4: Year-to-date we've repurchased 1.66 million shares at an average price of approximately $287 per share for total spend of $476 million.

Looking forward as Andrew said, we're rapidly innovating and optimizing our business to realize the opportunities ahead.

Speaker 4: Looking forward, as Andrew said, we're rapidly innovating and optimizing our business to realize the opportunities ahead.

Speaker 4: As we discussed last quarter, the shift of multiyear contracts to annual billings as we move into fiscal 24 will drive more predictable free cash flow and better price realization over time, which will make Autodesk a more valuable company.

As we discussed last quarter, the shift of multiyear contracts to annual billings as we move into fiscal 'twenty four will drive more predictable free cash flow and better price realization over time, which will make autodesk a more valuable company.

This quarter, we took steps to optimize our capital structure by issuing our first sustainability bond.

Speaker 4: This quarter we took steps to optimize our capital structure by issuing our first sustainability bond, which aligns our capital strategy with our sustainability goals, while also extending our debt maturity profile by almost two years and reducing our weighted average cost of debt by 40 basis points.

Which aligns our capital strategy with our sustainability goals, while also extending our debt maturity profile by almost two years and reducing our weighted average cost of debt by 40 basis points.

As we enter Q4, we intend to take steps to reduce our real estate footprint because the pandemic has spurred changes in the way we work and we've moved to a hybrid workforce.

Speaker 4: As we enter Q4, we intend to take steps to reduce our real estate footprint because the pandemic has spurred changes in the way we work and we moved to a hybrid workforce.

Speaker 4: As a result, we anticipate we will reduce the square footage of our facilities portfolio by approximately 20% worldwide, and that we will take a gap-only charge of up to approximately $180 million, the bulk of which will be recognized over the next several months as we execute our plan.

As a result, we anticipate we will reduce the square footage of our facilities portfolio by approximately 20% worldwide and that we will take a GAAP only charge of up to approximately 180 million the bulk of which will be recognized over the next several months as we execute our plan.

Optimizing our facilities costs will allow us to better deploy capital to further our strategy and drive growth.

Speaker 4: Optimizing our facilities costs will allow us to better deploy capital to further our strategy and drive growth.

Now, let me finish with guidance.

Speaker 4: Demand was robust in Q3, and we expect it to remain so in Q4.

Demand was robust in Q3, and we expect it to remain so in Q4.

Speaker 4: However, as Andrew said, macroeconomic headwinds, such as supply chain disruption and resulting inflationary pressures, a global labor shortage, the ebb and flow of COVID, and AEC in China are impacting the pace of our recovery.

However, as Andrew said macro economic headwinds, such as supply chain disruption and resulting inflationary pressures.

Global labor shortage.

Ebb and flow of Covid and E C. In China are impacting the pace of our recovery.

As an example, the growth in new product subscription volume decelerated from approximately 30% in the first half to mid Twenty's percent in Q3, which is more than normal seasonality and a tougher comparison versus last year would suggest.

Speaker 4: As an example, the growth in new product subscription volume decelerated from approximately 30% in the first half to mid-20s percent in Q3, which is more than normal seasonality and a tougher comparison versus last year would suggest.

Speaker 4: This dynamic drove strong billings growth in Q3 that nonetheless fell short of our expectations.

This dynamic drove strong billings growth in Q3 that nonetheless fell short of our expectations.

In light of this macroeconomic uncertainty as we enter Q4, we're taking a pragmatic approach and are assuming that the supply chain labor COVID-19 and country specific challenges will persist.

Speaker 4: In light of this macroeconomic uncertainty, as we enter Q4, we're taking a pragmatic approach and are assuming that the supply chain, labor, COVID, and country-specific challenges will persist.

As a result, we're reducing the midpoint of our billings and free cash flow guidance by approximately $150 million and 100 million respectively for full year fiscal 'twenty two.

Speaker 4: As a result, we're reducing the midpoint of our billings and free cash flow guidance by approximately $150 million and $100 million, respectively, for full year fiscal 22.

Given the nature of our subscription business model and the greater degree of near term visibility it provides to us.

Speaker 4: Given the nature of our subscription business model and the greater degree of near-term visibility it provides to us,

And our expectation of continued strong spend discipline the midpoint of our full year revenue and margin guidance is broadly unchanged.

Speaker 4: and our expectation of continued strong spend discipline, the midpoint of our full year revenue and margin guidance is broadly unchanged.

We continue to target $2 4 billion of free cash flow in fiscal 'twenty, three and constant currency because we believe the current macro headwinds we're seeing are transient.

Speaker 4: We continue to target 2.4 billion of free cash flow and fiscal 23 and constant currency because we believe the current macro headwinds we're seeing are transient.

Speaker 4: But if the growth deceleration and strengthened dollar continue through next year, we could see potential risk to that target of about 100 to 200 million based on what we know today.

So that's the growth deceleration and strengthened dollar continue through next year, we could see potential risk to that target of about $100 million to $200 million based on what we know today.

FX volatility is a big factor.

Great moves in the first half of the year created about $55 million in potential headwinds for fiscal 'twenty free cash flow.

Speaker 4: rate moves in the first half of the year created about $55 million in potential headwind to fiscal 23 cash flow.

Since then and in the last 90 days alone further rate moves created about another 45 million in potential headwind to cash flow.

Speaker 4: Since then, and in the last 90 days alone, further rate moves created about another $45 million in potential headwind to cash flow.

We're obviously watching FX rates closely but it's clear that if the current rates persist through next year that could materialize in free cash flow.

Speaker 4: We're obviously watching FX rates closely, but it's clear that if the current rates persist through next year, that risk could materialize in free cash flow.

Beyond cash, though if you've further take the risk into account revenue growth could end up at the low end of the CAGR, we talked about at Investor day.

Speaker 4: Beyond cash flow, if you further take the risk into account, revenue growth could end up at the low end of the kegger we talked about it investor day, and fiscal 23 margin could be impacted by about a point.

In fiscal 'twenty, three margin could be impacted by about a point.

Speaker 4: We will, of course, update you on our next earnings call when we expect to have more visibility into any impacts from macro or FX movement on our fiscal 23 outlook.

We will of course update you on our next earnings call. When we expect to have more visibility into any impact from macro or FX movement on our fiscal 'twenty three outlook.

We remain optimistic about our growth potential beyond fiscal 'twenty three continue to target double digit revenue growth non-GAAP operating margins in the 38% to 40% range and double digit free cash flow growth on a compound annual basis.

Speaker 4: We remain optimistic about our growth potential beyond fiscal 23, continue to target double-digit revenue growth, non-GAAP operating margins in the 38 to 40% range, and double-digit pre-cash flow growth on a compound annual basis.

These metrics are intended to provide a floor to our revenue growth ambitions and a ceiling to our spend growth expectations.

Speaker 4: These metrics are intended to provide a floor to our revenue growth ambitions and a ceiling to our spend growth expectations. Andrew?

Andrew back to you.

Speaker 3: Thank you, Debbie. Now, let me turn to our strategic growth.

Thank you Debbie now, let me turn to our strategic growth initiatives sustained and purposeful innovation to enable digital transformation in the industries. We serve has changed our relationship 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 solution to connect data and workflows.

Speaker 3: Sustained and purposeful innovation to enable digital transformation in the industries we serve has changed our relationship with our customers from software vendor to strategic partner, and that is enabling us to create more value through end-to-end cloud-based solutions that connect data and workflows, and through business model evolution.

And through business model evolution.

Speaker 3: Our model is scalable and extensible into adjacent verticals, from architecture and engineering, to construction and owners, and from product engineering, to product manufacturing, and product and data lifecycle.

Our model is scalable and extensible into adjacent verticals from architecture, and engineering through construction and owners and for product engineering to product manufacturing and product and data lifecycle management.

Speaker 3: By helping our customers grow and navigate their digital transformation, we will grow too.

By helping our customers grow and navigate their digital transformation, we will grow too.

For example, weak construction and colas are leading construction and infrastructure firms based in France with over 100000 construction employees operating in 60 countries across the globe.

Speaker 3: For example, WIEG, Construction, and Colas are leading construction and infrastructure firms based in France, with over 100,000 construction employees operating in 60 countries across the globe. In the third quarter, they significantly increased their commitment to Autodesk products, such as Revit, AutoCAD, and Civil 3D, following an accelerated move to BIM and digital workflows over the last three years, which significantly increased monthly average use.

In the third quarter, they significantly increased their commitment to autodesk products, such as rabbit Autocad Civil Treaty following an accelerated move to Bim and digital workflows over the last three years, which significantly increased monthly average users. Similarly, Ohbayashi Corporation, one of the largest construction firms and <unk>.

Speaker 3: Similarly, Obayashi Corporation, one of the largest construction firms in Japan, which operates in 16 countries worldwide, is accelerating its global consolidation around BIM and a unified 3D technology platform to enable greater efficiency and sustainability. In the third quarter, it expanded its 3D technology platform to enable greater efficiency and sustainability. In the third quarter, it expanded its 3D technology platform to enable greater efficiency and

Japan, which operates in 16 countries worldwide is accelerating its global consolidation around them in a unified <unk> technology platform to enable greater efficiency and sustainability.

In the third quarter it expanded the TVA with us.

Speaker 3: Over the last two years, it has more than doubled the number of Revit users and expanded its usage of RDS Construction Cloud to connect workflows from design to construction.

Over the last two years it has more than doubled the number of rapid users and expanded its usage of autodesk construction cloud to connect workflows from design to construction.

We were further extending our reach into the construction mid market with the recent launch of Autodesk built introduction of an account based pricing business model and distribution through our channel partners.

Speaker 3: We are further extending our reach into the construction mid-market with the recent launch of Autodesk Build, introduction of an account-based pricing business model, and distribution through our channel partners.

Speaker 3: For example, this quarter, Jacobson Construction Company, an ENR 400 general contractor in the United States, was looking for a long-term technology partner and to consolidate around a single project management solution that would increase the efficiency of its field teams while also seamlessly integrating with its accounting services.

Example, this quarter Jacobson construction company.

Our 400 general contracting United States was looking for a long term technology partner and to consolidate around a single project management solution that would increase the efficiency of its steel teams, while also seamlessly integrating with its accounting solution.

Speaker 5: While it previously used a competitive solution for some projects, Jacobson ultimately chose Ardus Construction Cloud because Ardus builds robust field and cost management.

While it had previously used a competitive solution for some projects Jacobson and ultimately chose autodesk construction cloud because of the artist builds robust field and cost management functionality.

The opportunity to integrated smoothly with existing technology.

Speaker 5: and the opportunity to integrate it smoothly with existing technology.

Speaker 5: With new Autodesk Build features and capabilities launched every two months or so, and the recently launched ACC bundles for pre-construction and construction operations, we remain optimistic about the opportunities ahead.

With new artists build features and capabilities launched every two months or so and the recently launched ACC bundles for pre construction and construction operation.

We remain optimistic about the opportunities ahead.

We're connecting the dots on the infrastructure too for.

Speaker 5: We're connecting the dots in infrastructure too. For example, the administrator of railway infrastructures in Spain, or ADIF, selected RDS products over competitor offerings to support its digital transformation.

For example, the administrator of railway infrastructure in Spain, or a T. I S selected rguest products over a competitor offerings to support its digital transformation.

Speaker 5: Backed by our common data environment, ADIF will leverage the Autodesk Construction Cloud to collaborate on project information, on-site development, and model coordination to ensure efficient and accurate construction of the railway network.

Backed by our common data environment ATI F will leverage the rguest construction cloud to collaborate on project information on site development and model coordination to ensure efficient and accurate construction of the railway network.

Infrastructure remains an important opportunity for audit us across the globe, our end to end solutions, which boosted the efficiency and sustainability of customers like a D. I F as well as our ability to seamlessly integrate vertical and horizontal design and construction.

Speaker 6: Infrastructure remains an important opportunity for Autodesk across the globe. Our end-to-end solutions, which boosts the efficiency and sustainability of customers like ADIF, as well as our ability to seamlessly integrate vertical and horizontal design and construction, give us a competitive advantage.

Give us a competitive advantage.

Needed additional investment in infrastructure in the United States and across the globe will restore ageing infrastructure and increase the productivity of the economy.

Speaker 5: Much needed additional investment in infrastructure in the United States and across the globe will restore aging infrastructure and increase the productivity of the economy.

Speaker 6: Perhaps more consequentially, in the long term, provisions in the U.S. Infrastructure Bill, which encourages Department of Transportation to digitize their process.

Perhaps more consequentially in the long term provisions in the U S infrastructure, Bill, which encourages department of transportation to digitize their processes should accelerate adoption of digital workflows and enable all infrastructure investment to become more efficient and sustainable.

Speaker 6: should accelerate adoption of digital workloads and enable all infrastructure investment to become more efficient and sustainable.

Turning to manufacturing.

Speaker 6: We sustain strong momentum in our manufacturing portfolio.

We sustained strong momentum at our manufacturing portfolio this quarter.

Speaker 6: In automotive, we continue to grow our footprint beyond the design studio into manufacturing and connected factories. As automotive OEMs seek to break down work silos and shorten handoff and design side.

Automotive, we continue to grow our footprint beyond the design studio into manufacturing and connected factories as automotive Oems seek to break down to work silos and shortened handoff and design cycles Port one of the largest automotive Oems in the world renewed and expanded its E. P. A with autodesk during the third quarter growing.

Speaker 6: Ford, one of the largest automotive OEMs in the world, renewed and expanded its EBA with Autodesk during the third quarter, growing users in Alias and Brad in design, and AutoCAD, Inventor, and NavVis worked in manufacturing, while adding Autodesk Construction Cloud and Autodesk Build in facilities and manufacturing to enable field access to plant drawings during maintenance and operations and equipment changeover.

There's an alias and Brad and design and Autocad inventor and now that's worked and manufacturing, while adding autodesk construction cloud and Ara doesn't build in facilities and manufacturing to enable field access to plant, drawing straight maintenance and operations and equipment changeover.

Fusion 360 commercial subscribers again grew strongly without any systematic sales promotions ending the quarter with 175000 subscribers.

Speaker 6: Fusion 360 commercial subscribers again grew strongly without any systematic sales promotion, ending the quarter with 175,000 subscribers. While still early days, our new extensions including Machining, Generative Design, and Nesting and Fabrication are performing well and there is major interest in our upcoming simulation and design expansions.

Still early days, our new extensions, including machining generative design investing in fabrication are performing well and there was a major interest in our upcoming simulation and design interventions.

Speaker 3: Fewer promotions and growing demand for Fusion 360's extensions are enabling us to capture more of the potential market opportunity and accelerate our growth.

Promotions and growing demand for fusion to fix these extensions are enabling us to capture more of the potential market opportunity and accelerate our growth.

Fast radius as a leading digital manufacturing and supply chain company. The company's proprietary cloud manufacturing platform combined software and advanced micro factories that enable its customers to flexibly design make and move certified products fast radiate already uses several autodesk products this quarter it.

Speaker 6: Fast Radius is a leading digital manufacturing and supply chain.

Speaker 6: The company's proprietary cloud manufacturing platform combines software and advanced microfactories that enable its customers to flexibly design, make, and move certified products. Fast Radius already uses several Autodesk products. This quarter, it added Fusion 360 with the machining extension to support its in-house CNC operation and integrate it alongside its existing additive manufacturing.

Added fusion 360, with the machining extension to support in house, CNC operation and integrated alongside its existing additive manufacturing offering.

Speaker 6: Fusion 360 enables FastRadia to program a wide variety of parts more quickly, resulting in faster product cycles.

Fusion 360 enables fast radius to program a wide variety of parts more quickly, resulting in faster product cycle times.

Speaker 6: Outside of commercial use, there is a large and rapidly growing ecosystem of users that are taking Fusion 360 from education and home into the workplace.

Outside of commercial use there was a large and rapidly growing ecosystem of users that are taking fusion 360 from education and hold into the workplace.

These will fuel commercial usage in the future as one measure of this ecosystem. We ended the third quarter with 1 million monthly active users up over 50% year over year and they are doing some amazing work.

Speaker 6: These will fuel commercial usage in the future. As one measure of this ecosystem, we ended the third quarter with 1 million monthly active users, up over 50% year over year, and they are doing some amazing work.

Speaker 6: On September 12th, the Technical University of Munich's TUM Boring Team beat more than 400 applicants and 12 finalists to win the inaugural Not a Boring competition. As Heuken Zhang, one of the five leads responsible for project operations said, quote, Fusion 360's cloud-based solution enabled our 60-member team to collaborate remotely during the pandemic and design and build an award-winning 40-foot long 22-ton tunneling machine.

On September 12, the technical University of Munich come boring team beat more than 400 applicants and 12 finalists to win the inaugural not a boring competition.

Who can change one of the five leaves responsible for project preparation said quote.

360 is cloud based solution enables our 60 member team to collaborate remotely during the pandemic and design and build an award winning 40 foot long 22 ton tunneling machines throughout the year, we repeatedly told by industry experts with the timeline, we were aiming for was borderline impossible. The fusion 360 <unk> ease.

Speaker 6: Throughout the year, we were repeatedly told by industry experts that the timeline we were aiming for was borderline impossible. The Fusion 360's ease of use and integrated CAD, CAM, and SEM enabled rapid simulation and improved the speed and efficiency of the design workflow."

Abuse integrated CAD Cam and SDN enabled rapid stimulation and improve the speed and efficiency of the design workflow and quote.

And finally, we continue to enable more users to participate in our ecosystem more productively through business model innovation and our license compliance initiatives. For example, a sustainable building engineering design solutions consultant in Australia, which has been an autodesk AUC customer for more than a decade added our premium offering in the third quarter or two.

Speaker 6: And finally, we continue to enable more users to participate in our ecosystem more productively through business model innovation and our license-compliant

Speaker 6: For example, a sustainable building engineering design solutions consultant in Australia, which has been an Autodesk AEC customer for more than a decade, added our premium offering in the third quarter to enable it to better manage its subscriptions and provide more secure single sign-on across multiple offices.

Table it to better manage its subscription and provide more secure single sign on across multiple offices.

Speaker 6: Across Autodesk, the number of premium subscribers increased more than 500% year over year.

So autodesk the number of premium subscribers increased more than 500% year over year.

Speaker 6: In the Middle East, a large telecoms company undertaking its own digital transformation was seeking to increase efficiency and sustainability by adopting BIM standards and streamlining digital workloads while also ensuring license compliance across a fragmented employee base.

And in the Middle East a large telecom company undertaking its own digital transformation, we're seeking to increase efficiency and sustainability by adopting Vince standards and streamlining digital workflows, while also ensuring license compliance across the fragmented employee base. During the process, we became the trusted partner of choice, resulting in.

Speaker 6: During the process, we became the trusted partner of choice, resulting in a significant investment in AAC Collections, AutoCAD, Revit, and 3DS.

Our significant investment in AC collection, Autocad Rabbit and three D. S next year.

Year to date license compliance billings across Autodesk as a whole are up 20% when compared to the same period, two years ago, and almost 50% year over year.

Speaker 6: Year-to-date, license compliance billings across Autodesk as a whole are up 20% when compared to the same period two years ago, and almost 50% year-over-year.

In speaking with customers partners and employees, we are very optimistic about the future. They have demonstrated grit and determination inspiration and innovation and agility and transformation during the pandemic and while there will certainly be twists and turns on the road ahead in many ways. The pandemic has accelerated the future and increase my car.

Speaker 5: Speaking with customers, partners, and employees, we are very optimistic about the.

Speaker 6: They have demonstrated grit and determination, inspiration and innovation and agility and transformation during the pandemic. And while there will certainly be twists and turns on the road ahead, in many ways, the pandemic has accelerated the future and increased my confidence that we are on the right path.

And since we were on the right path.

We are executing well in challenging times and believe we have only significant opportunities ahead of us.

Speaker 5: We are executing well in challenging times and believe we have only significant opportunities ahead of us.

Speaker 6: I am reminded again that Autodesk Purpose has never been more important or urgent.

I'm reminded again that Autodesk purpose has never been more important or urgent.

Speaker 6: Empowering innovators with design and make technology so that they can achieve the new possible also enables them to build and manufacture efficiently and sustainably.

Powering innovators with design and make technology, so that they can achieve the new possible also enables them to build and manufacture efficiently and sustainably.

Speaker 6: Together we can meet the challenges posed by carbon, water, and waste, while also advancing equity and access to the in-demand skills of the future.

Together, we can meet the challenges posed by carbon water and waste, while also advancing equity and access to the in demand skills of the future.

Speaker 5: Autodesk's central role in meeting these challenges underpins my confidence this year and my confidence in the future. Operator, we would now like to open the call for questions.

Autodesk central role in meeting these challenges underpins my confidence this year when my confidence in the future operator, we would now like to open the call for questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Speaker 1: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster.

Speaker 1: Our first question comes from the line of Saqib Khalil Barclays. Your line is open.

Our first question comes from the line of second career of Barclays. Your line is open.

Okay, Great Hey, guys. Thanks for taking my questions here.

Speaker 6: Okay, great. Hey guys, thanks for taking my questions here.

Speaker 3: Debbie, maybe we'll just start with you, just given some of the moving parts. I'd love to zoom in on the FY22 guidance a bit. You touched on this a little bit in your prepared remarks, but can you just talk about what drove the change to guide in billings and free cash flows specifically? You talked about supply chain and FX. I was wondering if you could just go one level deeper, just help us parse that out a little bit. Does that make sense? It does.

Debbie maybe we'll just start with you just given given some of the moving parts I'd love to zoomed in on on the FY 'twenty two guidance a bit.

You touched on this a little bit in your prepared remarks, but could you just talk about.

What drove the change to died in billings and free cash flow to specifically you talked about supply chain and FX I was wondering if you can just go one level deeper just help us parse that out a little bit does that makes sense.

It does and I think we'll start with Andrew here.

Speaker 6: Yeah, let me start and then Debbie and I will kind of tag team here on some of this. So, first off, Sackett, let's make sure we all kind of level set on the business is strong. All right. You saw the numbers.

Yeah, Let me start and then depending on what kind of tag team here on some of this so first off let's let's make sure. We all kind of level set on the business is strong right you saw the numbers.

Speaker 6: We're seeing tremendous growth, we're seeing record renewal rates, we're approaching net revenue retention rates at the high end of our guide and they're continuing to go up.

We're seeing tremendous growth, we're seeing record renewal rates, we're approaching we're approaching net revenue retention rates at the high end of our guide and they're continuing their continuing to go up.

Speaker 6: All right, that's super, super important here. And we feel pretty good about where the business is going. So the business is strong, and we're seeing a lot of strength there.

Super Super important here and we feel pretty good about where the business is going so the business is strong and we're seeing a lot of strength there.

Speaker 6: If you look at what we're talking about here, we saw several things happen.

If you look at if you look at what what what we're talking about here. We saw several things happened during the quarter and we've got this reinforced by our customers and by our.

Speaker 6: during the quarter and we got this reinforced by our customers and by our channel partners.

Channel partners.

We saw it.

Speaker 6: We saw a deceleration in what we were seeing around monthly active usage and all the things associated with that. And that then translated into us kind of looking at our guide and looking at things going forward. And we pragmatically just assumed at this point that what we saw in the quarter is going to continue into Q4.

Deceleration deceleration and in what we were seeing around monthly active usage and all the things associated with that and that that's been translated into to us kind of looking at our guide and looking at things like forward and pragmatically just assumed at this point that what we saw in the quarter is going to.

Can you into Q4, and that's what you're seeing is a pragmatic pragmatic assessment that hey, this kind of supply chain pressure. This inflationary pressure that kind of squeezing the margins with some of our customers is going to continue into Q4.

Speaker 6: And that's what you're seeing, a pragmatic assessment that, hey, this kind of supply chain pressure, this inflationary pressure that's kind of squeezing the margins of some of our customers is going to continue into Q4.

If we look forward in terms of the guide in terms of what's going on into next year look we see two things one is interesting.

Speaker 6: If we look forward in terms of the guide, in terms of what's going on into next year, look, we assume two things. One, this interesting effects environment we're in, which I want Debbie to kind of comment on again and kind of reinforce some of the things she said in the opening commentary, presents some potential risks. So, we want to flag those.

<unk> environment, where we're in which I wont Debbie to kind of comment on again and kind of reinforce some of the things you said in your opening call opening commentary presents some potential risks. So we want to fly those risks. In addition, if some of these supply chain issues bleed over into the beginning into the beginning of of next year. We wanted to flag. Some additional risks there, but there is.

Speaker 6: In addition, if some of these supply chain issues bleed over into the beginning of next year, we wanted to flag some additional risk there, but there's certainly a large currency headwind that we're seeing. And I'd like Debbie to just kind of reiterate some of the things she said in the opening commentary so we can all get on the same page about that.

Certainly a large currency headwind that we're seeing and I'd like to just kind of reiterate some of the things. He said in the opening commentary. So you can only get on the same page about that.

Speaker 4: Yeah, let me go back to the fiscal 22 guide first because I think one of the metrics that I talked about in the opening commentary pretty much says it all. And that is that

Yeah, but let me go back to the fiscal 'twenty two guide first because I think one of the metrics that I talked about in the opening commentary pretty much says it all and that is that for a new volume growth. We saw 30% growth for the first half of fiscal 'twenty two and then in Q3. It was in the mid Twenty's. So it was still very strong growth. It just felt.

Speaker 4: For our new volume growth, we saw 30% growth for the first half of fiscal 22, and then in Q3, it was in the mid-20s. So it was still very strong growth. It just fell short of our expectations.

Short of our expectations.

Speaker 4: As we look ahead, we did highlight the potential risk that we see to crystal 23.

As we look ahead.

Did highlight the potential risks that we see to fiscal 'twenty three.

Speaker 4: And it's true that FX, based on what we know today, is a big factor. It's been highly volatile. The rate moves that we saw in the first half of the year created about $55 million in potential headwinds to fiscal 23 cash flow.

Cash flow and it's true that FX based on what we know today and he is a big factor it's been highly volatile the rate moves that we saw in the first half of the year created about 55 million in potential headwind to fiscal 'twenty free cash flow.

Speaker 4: And since then, and in the last 90 days alone, further rate moves created about another $45 million in potential headwind to cash flow. So, as you can imagine, we're obviously watching FX rates closely, but it's clear that if the current rates persist through next year, that risk could materialize in free cash flow.

And since then and in the last 90 days alone further rate moves created about another $45 million and potential headwind to cash flow. So as you can imagine, we're obviously watching FX rates closely but it's clear that if the current rates persist through next year that risk could materialize in free cash flow. Our goal today was just too.

Speaker 4: Our goal today was just to highlight the risk as we look ahead to next year.

Highlight the risks as we look at.

So next year, but it's important to remind that overall the strategy is working and we have numerous growth levers to capitalize on over the long term.

Speaker 4: But it's important to remind that overall the strategy is working and we have numerous growth levers to capitalize on over the long term.

Got it.

We still.

Speaker 6: We still see a constant currency path to $2.4 billion next year, but we want to flag these risks because we think that's a prudent thing to do at this time, given what we're seeing today, right now. It's not a guy, it's a risk.

We still have got constant currency passed the 2.4 billion next year, but.

Do you want to flag these risk because we think that's a prudent thing to do at this time given what we're seeing.

<unk> right now.

Not a guy it's it's a risk flex.

And I think that is prudent.

Speaker 7: Andrew, maybe just for the follow-up for you, just to maybe zoom out from the numbers and some of the moving parts as we start to think about next year and the years after. One of the things I'd love to just get your view on is.

Andrew maybe just for the follow up for you.

Just to make these human health through the numbers and some of the moving parts as we start to think about next year and the years after.

One is the one thing that I'd love to just get your view on is.

Speaker 7: Now that we have an infrastructure bill in the U.S., can you just talk about a couple of the components that you feel could be particularly helpful for Autodesk's business, and maybe when you think we start to see some of that benefit in your customer base?

Now that we have an infrastructure bill in the U S.

Can you just talk about a couple of the components that you feel could be particularly helpful for Autodesk business in and maybe when do you think we start to see some some of that benefit in your customer base.

Yeah, Yeah. So first off let's be very clear, we don't have any infrastructure uplift built in any of our guidance or anything that we're talking about right now okay. These things play out over multiple years. This is this is a great Bill we're really happy to see it included in the Bill is a $100 million.

Speaker 7: Yeah. Yeah. First off, let's be very clear.

Speaker 6: We don't have any infrastructure uplifts built in any of our guidance or anything we're talking about right now, okay? These things play out over multiple years. This is a great bill. We're really happy to see it. Included in the bill is a $100 million fund to accelerate investment in digital tools for Departments of Transportation. We feel that that's a good thing and it's an important part of this bill from our perspective because it's going to change the ecosystem. But these things play out over a long

One to accelerate investment in digital tools for department of Transportation, we feel that that's a good thing and it's an important part of this bill from our perspective, because it's going to change the ecosystem, but these things play out over over a long term.

Speaker 6: We're certainly really happy about the fact that we have invested in water ahead of these

We're certainly really happy about the fact that we have invested in water ahead of these.

Speaker 6: critical investment in infrastructure because water is going to matter a lot. Clean water, water management in terms of flooding or storage of water, waste water processing, all these things, water is going to be a big deal. So we're going to see our engagement in water projects probably increase over the next couple of years.

Critical investments in infrastructure, because water is going to matter a lot clean water water water management in terms of flooding or storage of water wastewater processing. All of these things water is going to be a big deal. So we're going to see our engagement in water projects probably increase over the next couple of years, but I want to make sure that we're all clear.

Speaker 6: But I want to make sure that we're all clear that we don't build these into our numbers right now, and we're going to wait and see how these things play out over the next couple of years, but we will absolutely see some of our investments in road, rail, and water pay off over a multi-year period here.

Don't build these into our numbers right now and we want it we're going to wait and see how these things play out over the next couple of years, but we will absolutely see some of our investments in road rail and water pay off over over a multiyear period here and we're pretty excited about it but it still was a longtime coming and I think the emphasis on digital transformation inside the.

Speaker 7: And we're pretty excited about it, but this bill was a long time coming.

Speaker 7: And I think the emphasis on digital transformation inside the...

Speaker 6: the infrastructure industry is going to be an important.

The infrastructure industry is going to be an important.

Speaker 7: catalyst to modernizing and expanding what's happening in our infrastructure world in the United States.

Catalyst to modernizing and expanding what's happening in our infrastructure and growth in the United States.

Very helpful. Thanks, guys.

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

Speaker 1: Thank you. Our next question comes from Adam Borg of Spiefel. Your line is open.

Hey, guys. Thanks, so much for taking the question Andrew I'd Love to kind of just go maybe another step cheaper than what socket was talking about you know if a bunch of the year. We've talked about this on winding of uncertainty and we know that several factors today of where it sounds like certainty has uncertainty has kind of gotten higher again could you just talk maybe a little bit more.

Speaker 8: Hey, guys, thanks so much for taking the question. Andrew, I'd love to kind of just go maybe another step deeper in what Sackett was talking about. So, you know, for much of the year, we've talked about this unwinding of uncertainty.

Speaker 8: And we talked about several factors today of where it sounds like uncertainty has kind of gotten higher again. Could you just talk maybe a little bit more about an example or two of how supply chain issues or even pricing is impacting or inflation is having a direct impact on the ability to close deals? Just kind of help give an example of what's happening from that. That'd be really great.

Like an example lift or two of how you no supply chain issues or even pricing is impacting our inflation is having a direct impact on the ability to close deals just kind of help given examples like what's happening from that that'd be really great.

Yeah, Yeah, and it was an excellent question. So what's what's kind of like back up to three months ago. I said some of the context of fuel. So that we can kind of get a sense for just three months ago, we were heading into the quarter seemed strong renewal rates projecting strong renewal rates heading and we saw those strong renewal rates were at record renewal rates, we're continuing to see those things. We also saw monthly active.

Speaker 7: Yeah, yeah, Adam, it's an excellent question. So let's kind of like back up to three months ago and set some of the context, too, so that we kind of get a sense for this. Three months ago, you know, we were heading into the quarter, seeing strong renewal rates, projecting strong renewal rates heading in. We saw those strong renewal rates. We're at record renewal rates. We're continuing to see those things. We also saw monthly active usage increasing robustly heading into the quarter. As the quarter progressed,

Usage, increasing robustly heading into the quarter as the quarter progressed that that increase in monthly active usage decelerated a little bit. It continued to grow its just the second derivative kind of went negative on us and it didnt continue to accelerate at the pace, we expected to see so what what's driving that right for a lot of our customers.

Speaker 6: that that increase in monthly active usage decelerated a little bit. It continued to grow. It's just the second derivative kind of went negative on us and it didn't continue to accelerate at the pace we expected to see. So what's driving that? For a lot of our customers, the book of business they're seeing is

Book of business, they're seeing is robust they have more demand than there actually able to fulfill on right now and you can see it in all the indices and all the indicators, but you also saw during the quarter the supply chain backlogs in these inflationary pressures peaked in the quarter and continued consistently throughout the quarter. So while they had this big book of business.

Speaker 6: robust. They have more demand than they're actually able to fulfill on right now. And you can see it in all the indices and all the indicators.

Speaker 6: But you also saw during the quarter, the supply chain backlogs and these inflationary pressures peaked in the quarter and continued persistently throughout the quarter. So while they have this big book of business.

Speaker 7: or they have existing ongoing projects if you're on the AEC side, and say you're on a fixed bid contract.

Or they have an existing ongoing projects if you're on the AUC side and say you are on a fixed bid contract you're going to see margin pressure because your cost of goods to deliver the project that you're working on is going up as is your cost of labor and actually your labor pool is tight and constrained so you're seeing all of these factors increased pinching your margins.

Speaker 6: you're going to see margin pressure because your cost of goods to deliver the project that you're working on is going up as is your cost of labor and actually your labor pool is tight and constrained. So, you're seeing all these factors pinching your margins and it's affecting your buying behavior sometimes. So, even in this environment where we saw all of these forces including the labor shortages and things associated with that, we actually continued to grow robustly, just not where we expected to. Now, if you're on the manufacturing side, which you know...

And it's affecting your buying behaviors, sometimes so even in this environment.

Where we're at where we saw all of these forces, including the labor shortages and things associated with that we actually continued to grow robustly, just not where we expected to know if you're on the manufacturing side, which you noticed we did.

Speaker 7: very well, and especially relative to our competitors.

Very well, especially relative to our competitors.

They're they're they're not able to fulfill all of the all of the demand they have heading into their into their businesses. So they're not collecting cash as fast because they're not shipping the products products that they're that they would be getting ordered from their customers. So all of these things are playing out it didn't stop people from buying technology, but it's certainly.

Speaker 7: Even there, they're not able to fulfill on all of the demand they have heading into their businesses, so they're not collecting cash as fast because they're not shipping the products that they're getting ordered from their customers. So all of these things are playing out. It didn't stop people from buying technology, but it certainly slowed down some of the activity relative to our expectations around people buying and investing in their technology portfolio. Does that make sense?

Slowed down some of the activity relative to our expectations around people buying and investing in their technology portfolio because that makes sense.

Speaker 8: Yeah, that was really helpful. And maybe just as a quick follow-up, obviously, you know, at Analyst Aid, we talked about some changes around billing terms, and you referenced that a little bit earlier in the call. Just curious how kind of early receptivity has been with customers as you kind of explain to them the changes that are coming. Thanks again.

Yes that was really helpful and maybe just as a quick follow up obviously you know at analyst day, we talked about some changes around billing terms and you referenced that a little bit earlier in the call. Just curious how kind of early receptivity has been good customer does he kind of explain to them. The changes that are coming thanks again.

Yeah. So look R. R. R. R moves with regards to a change in billing terms and smoothing out our free cash flow trajectory over multiple years are unchanged by any of this we believe it was a right for the business. We believe it's right for our customers customers are generally positives around these things because they prefer annual billings for in most cases they don't.

Speaker 7: Yeah, so look, our moves with regards to changing billing terms and smoothing out our free cash flow trajectory over multiple years are unchanged by any of this. We believe those are right for the business. We believe it's right for our customers.

Speaker 6: Customers are generally positive around these things because they prefer annual billings for in most cases. They don't want to have to pay up front if they don't have to.

I have to pay upfront if they don't have to.

Speaker 5: Also, a lot of these things we've been talking about with regards to supply chain pressures are viewed as pretty transient by us. These are not going to be persistent types of things. Customers view these fairly well. Our partners are getting themselves around some of these activities right now, but those plans are completely unchanged relative to anything we're seeing right now, and it's all full scheme ahead on that transition.

Also you know a lot of these things we've been talking about with regards to supply chain pressures are viewed as pretty trenching by US you know these are not going to be persistent types of things. So customers view. These fairly well our partners are getting themselves are around some of these these activities right now, but those plans are completely unchanged relative to anything we're seeing right now.

It's all it's all full steam ahead on that transition.

Great. Thanks again for the color I appreciate it.

Speaker 1: Thank you. Thank you. Our next question comes from Jay Blishar of Griffin Securities. Please go ahead.

Thank you. Our next question comes from Jay Li Shar of Griffin Securities. Please go ahead.

Thank you good evening Andrew.

Speaker 6: Yeah, thank you. Good evening. Andrew, let me start with the circumstantial question. And that is, are there any operational changes that you foresee having to make?

Andrew Let me start with the circumstantial question.

And that is are there any operational changes that you foresee having.

Having to make.

Speaker 6: You just said that the circumstances are perhaps transitory, but in terms of, let's say, what you called your early warning system, your usage telemetry, anything along those lines.

You just said that the circumstances are perhaps transitory, but in terms of let's say would you called your early warning system is your usage telemetry or anything along those lines.

Speaker 7: that you feel need to be updated, modified, amended in some way to at least take account of the current circumstances.

Do you feel need to be updated modified amended in some way to at least take account of the of the current.

Stances and then.

Speaker 6: The point you made with regard to customers having a robust pipeline themselves, do you expect to be able to recoup at some point or over time the delta in the billings guidance that you've given now for fiscal 22, do you think that amount of billings can come back to Autodesk? Then a follow-up for you.

The points you made with regard to customers, having a robust pipeline themselves do you expect to be able to recoup at some point over time.

Delta in the billings guidance that you've given now for fiscal 'twenty. Two do you think that amount of billings a cam.

Come back to Autodesk, and then a follow up for you.

Yeah. So first off let me comment on that the tracking so we believe our tracking is good because it actually showed us the outcome as the quarter progressed, we saw the knee over of the growth in monthly active usage and the associated impact there. So it wasn't it wasn't lifting the way we expected it.

Speaker 6: First off, let me comment on the tracking. We believe our tracking is good because it actually showed us the outcome as the quarter progressed. We saw the kneeing over of the growth in monthly active usage and the associated impact there. It wasn't lifting the way we expected it to in the second half. In fact, like I said, the second derivative changed a little bit. These predictors, these tracking mechanisms we have, I think are still good.

Two in the second half in fact, like I said, the second derivative changed it eat over a little bit alright. So these predictors. These these tracking mechanisms. We have I think are still valid powerful they actually gave us indications of things that were going on.

Speaker 6: powerful. They actually gave us indications of things that were going on. I think we're also, frankly, tracking the inflationary environment a bit more right now, trying to make sure what's happening with the goods and labor pool that our customers are engaging with. We're going to be paying attention to that. There's hopeful signs out there that some of this is loosening up in some respect, but we're going to be watching.

I think we're also frankly tracking the inflationary environment a bit more right now trying to make sure what's happening with the good the goods and labor pool that our customers are engaging with what we're gonna be paying attention to that theres hopeful signs out there that some of this is loosening up in some respects, but you know we're going we're gonna be watching that now with.

Speaker 6: Now with regards with some of the business coming back, it is absolutely possible that

Guards with some of the business coming back it is absolutely possible that that's the case alright. Our customers are are definitely looking at a backlog of projects in our backlog of orders and all the things associated with that I think it's prudent at this point for us to kind of.

Speaker 7: I think it's prudent at this point for us to kind of, with the information we have right now, assume that we're just going to see kind of an ongoing kind of impact of these things until something changes. But it is possible that some of this could come back as a result of releasing pressure. But I don't think it's prudent right now to declare that. I think we should watch this because we were all kind of surprised by the pace at which these supply chain pressures put pressure on us.

With the information we have right now assume that we're just we're just going to see kind of an ongoing kind of impacts of these things until something changes, but it is possible that some of this could come back as a result of releasing pressure, okay, but it's not I don't think it's prudent right now to declare that I think we should watch. This because you know we were all kind of surprised by the pace at which these.

Supply chain pressures put pressure on our customers.

Speaker 6: Right, understood. Now, the longer term, looking past these circumstances, I'd like to ask you about something you said in your remarks at AU last week.

Understood now.

The longer term looking past these circumstances I'd like to ask you about something you said.

Our remarks with a U.

Last month.

Speaker 6: You said, quote, Autodesk will fundamentally shift how the company delivers value, end quote. And my question for that is, was that another way simply of referring to subscriptions and consumption and flex?

You said quote Autodesk will fundamentally shift how the company delivers value and quote.

And my question for that is was that in other way simply referring to subscriptions and consumption and flex or were you referring to something else.

So I just the licensing model in terms of how youre thinking about delivering that that fundamental value over time.

Yeah actually Jay.

Speaker 6: Yeah, actually, Jay, that statement was not related to the business models. While the business models will help facilitate delivering some of that value, what we were really talking about was how the platform and the tools are going to become these co-designers with our customers.

That statement was not related to the business models. The business models will help facilitate delivering some of that value. What we were really talking about was how the platform and the tools are going to become these co designers with our with our customers how we're gonna be driving much more facilitated action.

Speaker 6: how we're going to be driving much more facilitated action with our customers through our products. There's going to be a lot more real-time data visibility, real-time option visibility, real-time collaboration between the system.

With our customers through our products, there's going to be a lot more real time data visibility real time auction visibility real time collaboration between the system and the designer or the engineer that cause a major value driver change that we're talking about it's not the business model.

Speaker 7: and the designer or the engineer. That's the major value driver change that we're talking about. It's not the business model changes per se. Those are enablers. They allow us to get some of this capability more effectively to a broader set of customers, which we're actually pretty happy about. It's that fundamental relationship with the product, this notion of co-designing with a computer and with a system that's really going to change the way we deliver value.

As per se those are enablers, they allow us to get some of this capability more effectively to a broader set of customers, which we're actually pretty happy about but it's that fundamental relationship with the product distribution of co designing with a computer.

And with our system, that's really going to change the way we deliver value.

Understood. Thank you very much.

Thank you.

Speaker 1: Thank you. Thank you. Our next question comes from galanda of barrenberg. Please go ahead.

Thank you. Our next question comes from gum under of Baron Berg. Please go ahead.

Speaker 9: Hey, thank you for taking my questions. The first one I'd just like to kind of focus on the reduced free cash flow outlook in 2022 and then how that

Hey, Thank you for taking my questions. The first one I'd just like to kind of focus on the.

Reduced free cash flow outlook in 'twenty, two and then how would that potentially translate in 'twenty three the way I read your or listened to your remarks was that FY 'twenty three risk no. They change and those folks are de risked it kind of all to do with FX rates, rather than the impact that you're seeing on the lower billings.

Speaker 9: potentially translates in 23. The way I read or listened to your remarks was that FY23

Speaker 9: not the change in outlook, so the risk. It's kind of all to do with the FX rates rather than the impact that you're seeing on the lower billings for FY22. Is that correct to understand it that way, or do you think there's a carry-on momentum from lower billings of FY22 based on supply chain shortage and all that stuff into free cash flow for FY23? Yeah, so Val, the answer…

For FY 'twenty, two is that correct to understand it that way or do you think there is a carry on the momentum from lower billings Hooker for 22 based on supply chain shortage, when all that stuff into free cash flow for 'twenty three.

Yeah. So go.

It's a bit of it.

It's a bit of a mix.

Speaker 4: The answer is that it's a bit of a mix. So the way to think about it, I highlighted risk of approximately 100 to 200 million based on what we know today, and part of it relates to the subscription basis of our business model. So given that billings are falling short of our expectations for this year, we're flowing through that risk into the free cash flow that we're talking about next year, and the other part of it is FX, so it's roughly half and half.

Okay. Yeah. The answer is that it's it's a bit of a mix. So the way to think about it I highlighted risks of approximately $100 million to $200 million based on what we know today and part of it relates to the subscription basis of our business model. So given that billing are falling short of our expectations.

This year, we're flowing through that risk into the free cash flow that we're talking about next year and the other part of it is FX, so it's roughly half and half.

That's really helpful and very clear thank you.

Speaker 9: That's really helpful and very clear. Thank you. I just want to really focus on the different drivers of that kind of changed outlook, especially for this year. The long-term deferred driving is a proportion of total deferred driving is falling kind of

<unk>.

And then just wanted to really focus on the on the.

The drivers of that kind of changed outlook, especially for this year.

You know that long term deferred revenues the proportional so too.

If our driving school and kind of just below that mid or whatever we say mid 20th symptoms like let's say 23 is kind of towards the lower end of that.

Speaker 9: just below that mid-20s. Is that something you'd expect in Q4 to pick up towards the 25% or do you think that the acceleration of the transition away from multi-year billings is also something that is really driving the outlook for the billings itself because the revenue numbers seem to be strong?

Is that something you would expect in Q4 to kind of pick up towards the 25% is a person.

Or do you think that the acceleration of the transition away from multiyear billings is also something that is really driving.

The outlook for the billings itself, because the revenue numbers seem to be strong.

Yeah. So the way, we think about deferred revenue in the long term contribution to deferred revenue being in roughly that mid twenty's, there's not going to change and.

Speaker 4: Yeah, so the way that we think about deferred revenue and the long-term contribution to deferred revenue being in roughly that mid-20s is not going to change. So, what we're seeing here is an impact from macro on our billings outlook for this year that we're then highlighting risk as we get into next year.

So what we're seeing here is an impact from macro on our billings outlook for this year that were then highlighting risk as we get into next year.

Speaker 4: But the proportion of our business from multi-year contracts billed up front for this year and into next year is in line with our expectations. We've been monitoring the multi-year cohort this year, and even in Q3, it was quite strong. And so that's not something that's changing. And so the follow on impact of deferred revenue is that that wouldn't change as well. We still would see roughly 20% being that long term deferred revenue.

But the proportion of our business for a multiyear contract build upfront for this year and into next year is in line with our expectations. We've been monitoring the multi year cohort this year and even in Q3. It was quite strong and so that's not something that's changing and so the follow on impact of deferred revenue was that that wasn't changed.

We still would see roughly a 20% being that long term deferred revenue.

Okay. So it doesn't.

Speaker 9: Okay, so the multi-year billings contribution change didn't have any impact on the billings outlook change.

The the multiyear billings contribution change didn't have any impact on the billings.

Outlook changed it yet.

That's correct, yes, okay perfect. Thank you so much.

Speaker 10: That's correct. Yes. Okay. Perfect. Thank you so much.

Thank you. Our next question comes from Matt Hedberg of RBC capital markets. Your question. Please.

Speaker 1: Thank you. Our next question comes from Matt Hedberg of RBC Capital Markets. Your question please.

Speaker 6: Okay, thanks for taking my question. Debbie, maybe just a clarification for you. I think you noted in your script that you believe the fiscal 20 to fiscal 23 revenue kegger will be at the lower end of that 16 to 18 percent guide. If I do some quick math, does that imply fiscal 23 revenue will grow about 17 percent per your comments?

Oh, Hey, thanks for taking my questions Debbie maybe just a clarification for you I think you noted in your script that you believe the fiscal 'twenty to fiscal 'twenty three revenue CAGR will be at the lower end of that 16% to 18% guide.

If I do some quick math does that imply fiscal 'twenty three revenue will grow about 17% for your comment.

Well yeah.

Speaker 4: Well, you are interpreting correctly that I said that if the risk materializes that we're seeing today in our numbers next year, we would be at the low end of the revenue CAGR of 16 to 18 percent that we talked about at our investor day. And while we're not providing specific guidance on revenue for next year, directionally your math computes.

You are interpreting correctly that I said that if the risk materializes that we're seeing today in our numbers next year, we would be at the low end of the revenue CAGR of 16% to 18% that we talked about at our Investor day, and while we're not providing specific guidance on revenue for next year Directionally. Your math continues.

Got it Okay and then maybe just one other you know I think we're all kind of looking at sea or P. O S. A helpful metric.

Speaker 6: Got it. Okay. And then maybe just one other, you know, I think we're all kind of looking at CRPO as a helpful metric, you know, kind of judge the judge of the business as well, you know, and I know you don't guide the CRPO, but then any sort of commentary on how that might trend into 4Q?

I'm trying to judge the judge the business as well.

And I know you don't guide to see your appeal, but any sort of commentary on how that might trend into.

<unk>.

Speaker 4: Yeah, so let's start with Q3. The CRPO growth decelerated mainly because of

Yeah, So let's start with Q3 D. C. R. P O growth decelerated, mainly because of declining contribution from multiyear EMEA deals that closed in fiscal 'twenty, which are entering the final year of their terms are that growth deceleration was in line with our expectations and it's something that we signaled on our last earnings call.

Speaker 4: declining contribution for multi-year EDA deals that closed in fiscal 20, which are entering the final year of their term. That growth deceleration was in line with our expectations and is something that we signaled on our last earnings call.

Speaker 4: We anticipate over time that the growth rates for CRPO and revenue will gradually converge over time, but also that that RPO growth rate is going to continue to be influenced by the timing and volume of EBAs. And so given that

We anticipate over time that the growth rates for CRE P O and revenue will gradually converge over time, but also that that growth rate is going to continue to be influenced by the timing and volume of EMEA and so given that Q4 is the big EMEA corridor for us that's going to have a big impact on the growth rate next quarter.

Speaker 4: Q4 is a big EBA quarter for us. That's gonna have a big impact on the growth rate next quarter.

Got it thanks very much.

Thank you. Our next question comes from Phil Winslow of Credit Suisse. Please go ahead.

Speaker 1: Thank you. Our next question comes from Phil Winslow of Credit Suisse. Please go ahead.

Hey, guys. Thanks for taking my question you answered just wanted to dig in a little bit on where you're seeing those changes the second derivative, particularly on the AUC side of the house one of the things you talked about a lot of it.

Speaker 11: Thanks for taking my question. Andrew, I just wanted to dig in a little bit on where you're seeing those changes in the second derivative, particularly in the AEC side of the house. One of the things you talk about a lot is that

And as that alternative solutions in different parts of the lifecycle. The AUC World you know planning actually putting together the nail in the wood et cetera. When you look at the second derivatives, where did you see that in the lifecycle and how are you thinking about that in Q4.

Speaker 11: is that Autodesk has solutions in different parts of the lifecycle in the AEC world, planning, actually putting the nail in the wood, etc. When you look at those second derivatives, where did you see that in the lifecycle and how are you thinking about that in Q4?

Yeah, So again I want to make sure that we're clear on some of these things the business was very strong alright, and that second derivative was a slowing down of the acceleration that we're expecting to see coming into the second half of the year alright. So it's it's a slowing down it's not a it's not a decline okay. I just wanted to be super.

Speaker 6: Yeah, so again, I want to make sure that we're clear on some of these things, the business was very strong.

Speaker 6: And that second derivative was a slowing down of the acceleration that we were expecting to see coming into the second half of the year. So it's a slowing down, it's not a decline, okay? I just want to be super clear on that so that we can get all position done.

Clear on that so that we can get our position on that now in terms of in terms of where we were we think this is going to head out. We we continue to think that these these monthly active usage rates are going to continue to grow and that we're going to continue to see incur.

Speaker 6: Now, in terms of in terms of where we where we think this is going to head out, we continue to think that these these monthly active usage rates are going to continue to grow and that we're going to continue to see increases associated with these things. We're just prudently.

Increases in associated with these things, we're just prudently assuming that what we saw in Q3 continues into Q4, because based on what we wanted to see what it was like this uplift in monthly active usage at a higher rate than what we saw it's probably a safe bet to just assume this is going to coast into into Q.

Speaker 7: that what we saw in Q3 continues into Q4.

Speaker 7: Because based on what we wanted to see was like this uplift in monthly active usage at a higher rate than what we saw.

Speaker 6: probably a safe bet to just assume this is going to coast into Q4. If something changes, if these pressures start to relieve and start to relax, we could absolutely see an improving environment. The business is strong. The renewal rates are strong. The underlying fundamentals of the business are strong. The net retention revenue rates are strong. The slowdown was rather broad brush.

Four if something changes if these pressures start to relieve and start to relax, we could absolutely see an improving environment, but the business is strong the renewal rates are strong the underlying fundamentals of the business are strong the net prepaid tension revenue win rates are strong the slowdown was rather broad brushed except for the country specific issues that we.

Speaker 7: for the country-specific issues that we highlighted in China. So there was no one product area that saw a slowing. But I want you to note something pretty important here. Look at the competitive position that we came out of this year, particularly in manufacturing and other places.

Highlighted in China. So there was no one product area that saw a slowing but I want you to note something pretty important here look at the competitive position that we came out of this year, particularly in manufacturing and other places we're growing much more robustly than any of our competition in this space. It's just we have high expectations.

Speaker 6: we're growing much more robustly than any of our competition in the space. It's just we have high expectations and we wanted to see some of those high expectations fulfilled. So that's how we view this right now and that's how we're viewing it heading into the rest of the year. Does that answer your question or did you want to clarify?

And we wanted to see some of those high expectations fulfilled. So that's how we view this right now and that's how we're viewing it heading into the rest of the year does that answer your question or did you want to clarify something no no that's helpful.

Speaker 11: No, no, that's helpful. Thank you. And then also, just help me if you drill in just in the markets by geography, I mean, obviously, we have the reported numbers, but anything you'd sort of call out within that, whether it be by vertical, by geography, or how you're thinking about Q4, and then I'll go back into Q. Thanks.

Helpful. Thank you and then also just what how many of your drilling just in the AR in the markets by geography, I mean, obviously, we have the reported numbers, but anything you'd sort of call out within that but whether it be by vertical by geography, or how youre thinking about Q4, and then I'll go back in the queue. Thanks.

Speaker 6: The one thing I'll just highlight, we talked about the softness in China, that was specifically in the 80s. We actually did well in manufacturing in China. So the softness was not uniform in China across all of our businesses. But in general, what we saw was a kind of a broad brush

You know the one the one thing I'll just highlight let's say you know we talked about the softness in China that was specifically an ADC, we actually did well in manufacturing in China. So not the softness was not uniform in China across the across all of our businesses, but in general what we saw was a kind of a broad brushed impact okay. So like I couldnt.

Speaker 7: So, I couldn't point to 1Z, 2Zs in any particular country that was kind of different or offset from anything else we were seeing. It was kind of a broader impact and kind of this slowing down of the acceleration that we saw. Great.

I Couldnt point to onesie Twosies in any particular country that was kind of different or offset from anything else. We were seeing it was kind of a broader impact and kind of the slowing down of the acceleration that we saw.

Great. Thanks, I'll get back in queue.

Thank you. Our next question comes from Joe <unk> of Baird. Your question. Please.

Speaker 1: Thank you. Our next question comes from Joe Berwink of Baird. Your question, please.

Great Hi, everyone Hum I'm curious as the persona of customer that you'd think about SBA kind of key to autodesk, new biz that scrap is that customer more susceptible to some of the macro issues youre, calling out if I'm understanding all the detail right.

Speaker 8: I'm curious, is the persona of customer that you think about as being kind of key to Autodesk new business growth, is that customer more susceptible to some of the macro issues you're calling out? If I'm understanding all the detail right, the established base is growing nicely. There is moderation on the incremental growth.

Established space is growing nicely there is moderation on the incremental growth.

Speaker 8: So I suppose a question might be, are there risks of the latter starting to impact the former and starting to maybe trickle into the installed base at the same time?

I suppose a question might be or the rest of the ladder it starting to impact the former and starting to maybe trickle into the installed base at the same time.

Speaker 6: That's not what we're seeing. If that's what we were seeing, the net revenue retention rate trend that we saw during the quarter would have been different. I want to focus you back on, remember, we came in at the high end of our range on net revenue retention. What that does is it shows a strong

That's not what we're seeing if it's got some what we were seeing the net revenue retention rate trend that we saw during the quarter, which would've been different okay. So I wanted to focus you back on remember we came in at the high end of our of our range on net revenue retention and what that does is it shows a strong a kind of a strong affinity and Willy.

Speaker 6: kind of a strong affinity and willingness to keep upping their game with regards to our products and offerings. And that did not soften. If anything, that's continuing to strengthen. So that feels really good. So it really was affecting the new book of business, which kind of bleeds into the long tail of our business at some points and at some levels, which is to be expected.

Just to keep upping their game with regards to our products and offerings and that did not soften okay. If anything that's continuing to strengthen so that feels really good. So there's there's really it's really what's affecting that the new book of business, which kind of bleeds into the long tail of our business that at some point into some levels, which is to be expected in environments. Like this you know that those who are.

Speaker 6: in environments like this. Those who are most cash flow constrained tend to slow their buying down the most.

Most cash flow constrained tend to slow their buying down the most so I don't see any bleed over potential in fact, it and a lot of our our newer businesses. We saw a real robust growth associated with some of these things. So I do not see a crossover or a bleed over between these things in fact, we continue to.

Speaker 6: So I don't see any bleed over potential. In fact, in a lot of our newer businesses, we saw robust growth associated with some of these things. So I do not see a crossover or a bleed over between these things. In fact, we continue to

Speaker 7: expect continued strengthening of net revenue retention rates in the base.

Expect continued strengthening of net revenue retention rates in the base.

Yeah.

Okay. That's helpful and then on the supply chain topic. This was addressed at the Investor day, as maybe being a risk area, but also an opportunity perhaps for technology adoption. Even recently it seems like engineering firms are acknowledging that hiring support bigger bag.

Speaker 8: Okay, that's helpful. And then on the supply chain topic, this was addressed at the investor day as maybe being a risk area, but also an opportunity perhaps for technology adoption.

Speaker 8: Even recently, it seems like engineering firms are acknowledging that hiring support, bigger backlogs might be tough, but technology, again, could be an opportunity. So I guess the question is, how do you think about

Logs might be tough, but you know technology again, it could be an opportunity. So I guess the question is how do you think about the new seat contribution for your growth algorithm in the context of double digits being sustainable or would you expect a bigger contribution from the Apple.

Speaker 8: the new seat contribution for your growth algorithm in the context of double digits being sustainable, would you expect a bigger contribution from the application and content side of the growth model and how to think about seats given the current macro backdrop?

Patient and content side of the the growth model and how to think about seats given the current macro backdrop.

Yeah. So we.

Speaker 7: Yeah, so we absolutely think that we continue to see digitization tailwinds here, okay. Customers are absolutely turning to technology to wrestle with some of these problems and solve some

We absolutely think that we continue to see Digitation digitization tailwind here okay.

<unk> are absolutely turning to technology to wrestle with some of these problems and solve some of these things and if you look at the strategy around double digit growth and where were going you see a lot of things working first off let's just pausing them.

Speaker 7: And if you look at the strategy around double-digit growth and where we're going, you see a lot of things work.

Speaker 7: First off, let's just pause, and I don't want to say this too many times, but the business is doing strong, and that's setting a floor on some of our growth. Also, I wanted you to notice some of the things that happened with noncompliant revenue. We grew 50% year over year, reflecting the compare to kind of the slowdown we did in the COVID in 2020 and around the pandemic.

When I say this too many times, but the business is doing strong in that setting a floor on some of our growth also I wonder if you didn't notice some of the things that happened with Noncompliant revenue, we grew 50% year over year, reflecting the compare to kind of a slow down we did in the in the Covid you're in the 2020.

The pandemic and we normalize the kind of like a 20 year plus 20% growth over the two year period, which shows nice steady growth in some of these things. So when you look at the business you see a lot of things working really well now if you look at the long term trends that are going to contribute and add it would be additive in terms of driving.

Speaker 7: and we normalized it kind of like a 20% growth over the two-year period, which shows nice steady growth in some of these things. So, you look at the business, you see a lot of things working really well. Now, if you look at the long-term trends that are going to contribute and be additive in terms of driving

The the double digit growth Digitization there.

Speaker 7: the double-digit growth, the digitization is there.

Speaker 7: The tailwinds continue, customers are telling us more and more they want to go deeper, deeper, deeper in digitization. And we're seeing strong adoption, like for instance in construction with our largest DBA customers and some of our largest GCs, we're seeing strong adoption of construction cloud or integrating construction cloud more deeply into some of these relationships.

The tailwind continue customers are telling us more and more they want to go deeper deeper deeper in digitization and we're seeing strong adoption like persons in construction with our largest EMEA customers and some of our largest G fees, we're seeing strong adoption of construction cloud or integrate and construction cloud more deeply into some of these relationships. If you look at some of the incremental.

Speaker 7: If you look at some of the incremental drivers we were talking about with regards to business model capabilities and some of the things associated with this, we're continuing to see strong growth there in terms of new types of subscription models, non-compliant users. And then when we talk about the long tail,

Drivers, we were talking about with regards to business model capabilities and some of the things associated this we're continuing to see strong growth. There in terms of new types of subscription models Noncompliant users and then when we talk about the long tail well, it's really early days with the flex model and I want to make sure that we always say, it's early days with the flex model one of the things.

Speaker 7: Well, it's really early days with the Flex model, and I want to make sure that we always say it's early days with the Flex model.

Speaker 6: One of the things we're seeing with Flex is exactly what we expected to see. We're seeing a large percent of Flex business coming in as net new. Another chunk of Flex business coming in as these occasional usage buyers, people that classically bought network licenses previously. And another chunk of business where people trying and using.

We're seeing with flex is exactly what we expected to see we're seeing a larger a large percent of flex business coming in just net new.

Another chunk of our flex business coming in as these occasional usage buyers quite people that classically bought.

Network licences previously and another chunk of a business where people trying and using.

Speaker 7: more advanced products and products they weren't going to use previously.

More advanced products and products, they werent going to use previously.

Speaker 6: Those trends are exactly the kind of trends we want to see with offerings like this. And as time goes on and we get more experience with Flex, we expect those trends to continue. So all of the things that we're pursuing to drive double-digit growth are working.

Those trends are exactly the kind of trends, we want to see with offerings like this and as time goes on and we get more experience with flex we expect those trends to continue so all of the things that we're pursuing to drive double digit growth are working right now and that's what gives us confidence as we move forward into the FY 'twenty three.

Speaker 6: and that's what gives us confidence as we move forward into the FY23, 24, and 25 and beyond, is that everything we're doing right now is working. If something was showing softness or not working, then I wouldn't have the confidence I have right now, but everything is working in terms of the things we're pursuing. These transient impacts that we're seeing right now.

$24 25, and beyond is it everything we're doing right now is working if something was showing softness or not working then I then I wouldn't have the confidence that I have right now, but everything is working in terms of the things. We're pursuing these transient impacts that we're seeing right now.

Speaker 7: They're obvious, they're systemic, everybody's seeing them, you can measure them systematically in terms of what's going on out there. These will pass. The question is, when will they pass?

There are obvious they're systemic everybody's seeing them you can you can measure them systematically in terms of what's going on out there. These will pass the question is when will they pass.

Great. Thank you very much.

Thank you. Our next question comes from Sterling Auty of J P. Morgan Your question. Please.

Speaker 1: Thank you. Our next question comes from Sterling Odie of J.P. Morgan. Your question please.

Speaker 1: Yeah, thanks. Hi, guys. Andrew, if you put yourself in the seat of the investor, we're all seeing the headlines of the supply chain constraints, et cetera. But what, if you were an investor, would you be looking at to help us monitor to possibly get a handle on when some of these pressures are alleviating and your business is starting to inflect upward again?

Yeah. Thanks, Hi, guys, Andrew if you put yourself in the sea of the Investor We're all seeing the headlines of the supply chain constraints et cetera.

What if you were an investor would you be looking at to help us monitor to possibly get a handle on when some of these pressures are alleviating and your business is starting to inflect upward again.

Yeah, Okay. So [laughter], so you're asking me to kind of be the predictor of when when somebody's supply chain pressures that go to unwind look I'll tell you won't work.

Speaker 12: Yeah, okay, so you're asking me to kind of be the predictor of when some of these supply chain pressures are going to unwind. Look, I'll tell you what we're looking at. No, Senator, I'm not asking for a time. I'm asking for what are some of the data points that would signal that it's getting better.

I'm not I'm not asking for a time I'm asking for what are some of the you know the data points that would signal that getting a better time.

Yeah, Okay. So look one of the one of the one of the data points. We look at is the cost of freight okay. So for instance.

Speaker 6: One of the data points we look at is the cost of freight. For instance, the cost of freight has been going up and up and up, as you've been seeing this capacity compaction with regards to moving things. That's one metric you just sit there and look at and say, hey, if the cost of freight goes down, that's a sign that...

People are just.

The cost of freight has been going up and up and up as you've been seeing this capacity compaction with regards to moving things. So you know that's one metric you just sit there and look at it and say hey, if the cost of freight goes down that's a sign that.

Speaker 7: flow through and throughput is starting to soften up. That's one thing that's out there. Another thing is some of the costs of the core commodities that our customers—I mean, let's face it, wood. I mean, I know that sounds trivial, but the cost of wood.

Go through and throughput is starting to soften up okay. So that's one that's one thing that's.

That's out there and the other thing is as some of the cost of the core commodities that our customer I mean, let's face it would okay. I mean, I know that sounds trivial, but the cost of wood and some of them in some of our AC is a big deal right. If you. If you would if your cost of wood or wood based materials goes up 2030, 40% on a <unk>.

Speaker 6: in some of our ACs, it's a big deal, right? If your cost of wood or wood-based materials goes up 20, 30, 40% on a fixed bid contract, what is that doing to your ability to export?

Fixed bid contract what is that doing to your ability to execute so you look at cost of freight we look at cost of wood.

Speaker 6: So you look at cost of freight, you look at cost of wood and the things associated with that, and those have direct impact. The cost of any commodity going into manufacturing is going to have have impact. So the last thing that I think is.

The things associated with that and those have direct impact the cost of any commodity going into manufacturing is going to have have impacts, but the last thing that I think is really interesting with regards to manufacturing. Some of these chip shipments starting to loosen loosen up and allowing people to kind of finish their machines.

Speaker 7: really interesting with regards to manufacturing is some of these chip shipments starting to loosen up and allowing people to kind of finish their machines.

And make sure all the electronics are actually assembled together. So these are some of the things that all of US can look at to see how things are going.

Speaker 7: and make sure all the electronics are actually assembled and together. So these are some of the things that all of us can look at to see how things are going. The cost of freight being right up there, the cost of wood and commodities associated with building things being out in front. We're going to continue to look at the monthly active usage because for us that's a predictor of people doing more with the products.

Afraid thing right up there the cost of wood and commodities are associated with building things being out in front, we're going to continue to look at the monthly active usage because for us that's a predictor of people doing more with the products and that will probably follow some of these other indicators changing.

Speaker 6: and that will probably follow some of these other indicators changing. Does that make sense?

That makes sense Sterling.

It does thank you.

You're welcome.

Thank you at this time I'd like to turn the call back over to Simon Mays Smith for closing remarks, Sir.

Speaker 1: Thank you. At this time, I'd like to turn the call back over to Simon Mae Smith for closing remarks, sir.

Yeah.

Yeah.

So I'm gonna go clothes in a minute as soon as he assumes his new button.

Speaker 13: Clarence, we'll close in a minute as soon as it's re-buttoned.

It works properly here.

Speaker 2: Sorry, I was muted. I apologize. I'll repeat myself. Thanks. Thank you, Lateef. Thanks, everyone, for attending. We'll look forward to catching up with you next quarter. If you have any follow-up questions, please do ping the IR team. In the meantime, have a very happy Thanksgiving and happy holidays. Thanks very much, everyone.

Sorry, I was on mute.

I'll, probably repeat myself. Thanks, thanks, everyone for attending.

Look forward to catching up with you next quarter. If you have any follow up questions. Please to ping the IR team in the meantime have a very happy Thanksgiving and happy holidays, thanks, very much everyone.

Speaker 1: And this concludes today's conference call. Thank you for participating. You may now.

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

Yeah.

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Thank you for standing by and welcome to Autodesk third quarter fiscal year 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Speaker 1: Thank you for standing by and welcome to Autodesk third quarter fiscal year 2022 earnings conference call. At this time all participants are in a listen only mode.

Speaker 1: 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 may be recorded.

Please be advised that today's conference maybe recorded should you require any further assistance. Please press star zero I would now like to hand, the conference over to the VP of Investor Relations Simon Mays Smith. Please go ahead.

Speaker 1: Should you require any further assistance, please press star zero. I would now like to hand the conference over to the VP of Investor Relations, Simon May Smith. Please, go ahead.

Speaker 2: Thanks, Operator, and good afternoon. Thanks for joining our conference call to discuss the results of our third quarter of fiscal year 2022. On the line with me are Andrew Adegnost, our CEO , and Debbie Clifford, our Chief Financial Officer.

Thanks, operator, and good afternoon. Thanks for joining our conference call to discuss the results of our third quarter of fiscal year 2022.

On the line with me are Andrew Alex <unk>, 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 in the order that dot com forward Slash investor you.

Speaker 2: Today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available at autodesk.com forward slash investor. You can find the earnings press release, slide presentation and transcript of today's opening commentary on our investor relations website following this call.

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

During the course of this call we may make forward looking statements about our outlook future results and the related assumptions acquisition products and product capability and strategy.

Speaker 2: During the course of this call, we may make forward-looking statements about our outlook, future results, and related assumptions, acquisitions, products and product capabilities, and strategies.

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

Actual events or results could differ materially please.

Please refer to our SEC filings, including our most recent Form 10-K for important risks and other factors, including developments and the COVID-19, pandemic and the resulting impact on our business and our pricing.

Speaker 2: Please refer to our SEC filings, including our most recent Form 10-K , for important risks and other factors, including developments in the COVID-19 pandemic and the resulting impact on our business and operations that may cause our actual results to differ from those in our forward-looking statement.

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

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

Speaker 2: Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statement.

This call is repaid or reviewed after today the <unk>.

Formation 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 were quite 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.

Speaker 2: During the call, we will quote a number of numeric or growth changes as we discuss our financial performance. And unless otherwise noted, each such reference represents a year-on-year comparison.

Speaker 2: All non-GAAP numbers referenced in today's call are reconciled in our press release to Excel Financials and other supplemental materials available on our Investor Relations website. And now I will turn the call over to Andrew. Thank you.

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

Now I will turn the call laboratory Andre.

Thank you Simon and welcome everyone to the call.

Our third quarter results were strong driven by one of our best ever quarters for new subscriptions record subscription renewal rates, our net revenue retention rate towards the high end of our range and our solid competitive performance. We also grew our Poe and billings, 18% and 16% respectively. Despite a tougher compare versus last.

Speaker 6: Our third quarter results were strong, driven by one of our best ever quarters for new subscriptions, record subscription renewal rates, a net revenue retention rate toward the high end of our range, and a solid competitive performance.

Speaker 6: We also grew RPO and billings 18% and 16% respectively, despite a tougher compare versus last year.

Yes.

Relative to the first and second quarters the rate of improvement accelerated during the third quarter more than we expected while demand is robust, we believe supply chain disruption and resulting inflationary pressures, our global labor shortage, making it harder for our customers to staff new projects and the ebb and flow of Covid are contributing to the deceleration.

Speaker 6: Relative to the first and second quarters, the rate of improvement decelerated during the third quarter more than we expected. While demand is robust, we believe supply chain disruption and resulting inflationary pressures, a global labor shortage, making it harder for our customers to staff new projects, and the ebb and flow of COVID are contributing to the deceleration, as well as documented country-specific disruption to AEC and

As well as documented country specific disruption to ADC in China.

Our conversations with customers and channel partners reinforce our view.

Speaker 7: Our conversations with customers and channel partners reinforce our.

Speaker 6: We're encouraged that embracing digital transformation to drive efficiency and sustainability remains a priority for our customers.

We're encouraged that embracing digital transformation to drive efficiency and sustainability remains a priority for our customers.

Speaker 7: Our end-to-end solutions, business model flexibility, and platform position us well competitively and enable more customers to enter and remain in our ecosystem.

Our end to end solutions business model flexibility and platform position us well competitively and enable more customers to enter and remain in our ecosystem.

Speaker 5: As you heard at our recent Investor Day and at Autodesk University, we are rapidly innovating and optimizing our business to increase and realize the opportunity ahead.

As you heard at our recent Investor Day, and then Autodesk University, we are rapidly innovating and optimizing our business to increase and realize the opportunity ahead.

Speaker 6: Notable milestones during the quarter included the launch of our Flex Consumption Model and our plans to combine technologies, connect processes, automate workflows, and unlock valuable insights for customers through our Forge platform.

Notable milestones during the quarter included the launch of our flex consumption model and our plan is to combine technologies connect processes automate workflows and unlock valuable insights for customers to our forge platform.

A recent report from the Intergovernmental panel on climate change and the United Nations Climate change Cop 26 meeting in Glasgow, both underscore the urgency of reducing carbon and earth atmosphere, and the role that everyone, including corporations needs to play.

Speaker 6: The recent report from the Intergovernmental Panel on Climate Change and the United Nations Climate Change COP26 meeting in Glasgow both underscored the urgency of reducing carbon in Earth's atmosphere and the role that everyone, including corporations, needs to play.

Speaker 6: Sustainability needs to be designed, made, and in many cases, retrofitted in construction and manufacturing.

Sustainability needs to be designed made and in many cases retrofitted in construction and manufacturing.

This cannot be achieved efficiently or effectively without end to end software like ours to drive the process.

Speaker 6: This cannot be achieved efficiently or effectively without end-to-end software like ours to drive the process.

Speaker 6: This organizing principle affects not just how we deploy capital, for example, through our investments to develop sustainable tools and our recent acquisition of Innovize, but also how we source capital. Many of our largest equity holders already aligned to our sustainability goals. And in the third quarter, we began to align our debt holders by issuing our first sustainability bond linked to our sustainability goal.

This organizing principal effects not just how we deploy capital for example through our investments to develop sustainable tools and our recent acquisition of the enterprise, but also how we source capital many of our largest equity holders already aligned our sustainability goals and in the third quarter, we began to align our debt holders by issuing our <unk>.

Sustainability bonds linked to our sustainability goals.

Speaker 6: Now let me turn the call 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 initiative.

Now, let me turn the call 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 said, our third quarter results were strong.

Speaker 4: As Andrew said, our third quarter results were strong.

Speaker 4: Several factors contributed to that, including robust growth in new product subscriptions, rapidly expanding digital sales, and increasing subscription renewal rates.

Several factors contributed to that.

<unk> robust growth and new product subscriptions.

Rapidly expanding digital sales and increasing subscription renewal rate.

Total revenue growth in the quarter accelerated to 18% and 17% in constant currency with subscription revenue growing by 21%.

Speaker 4: Total revenue growth in the quarter accelerated to 18% and 17% in constant currency, with subscription revenue growing by 21%.

Looking at revenue by product the growth, we saw was broad based autocad and Autocad LT revenue grew 14%.

Speaker 4: Looking at revenue by product, the growth we saw was broad-based. AutoCAD and AutoCAD LT revenue grew 14 percent.

Speaker 4: AEC revenue grew 22 percent and manufacturing revenue grew 16 percent. M&E revenue

<unk> revenue grew 22%.

Manufacturing revenue grew 16%.

And any revenue grew 17%.

Speaker 4: Across the globe, revenue grew 18% in the Americas, 19% in EMEA, and 18% in APEC.

Across the globe revenue grew 18% in the Americas, 19% in EMEA and 18% and APAC.

Direct revenue increased 34% and represented 35% of our total revenue up from 31% last year due to strength from both enterprise and E Commerce.

Speaker 4: direct revenue increased 34% and represented 35% of our total revenue up from 31% last year due to strength from both enterprise and e-commerce.

As you heard at our Investor day about three quarters of new customers to Autodesk are now generated through our digital channels.

Speaker 4: As you heard at our investor day, about three quarters of new customers to Autodesk are now generated through our digital channels, reflecting the strength of our simplified buying experiences.

The strength of our simplified buying experiences.

Our product subscription renewal rates reached record highs and our net revenue retention rate was toward the high end of our 100% to 110% range.

Speaker 4: Our product subscription renewal rates reached record highs and our net revenue retention rate was toward the high end of our 100 to 110% range.

Speaker 4: Billings increased 16% to $1.2 billion, reflecting robust underlying demand and a tough comparison versus last year when we signed two of our largest ever EBAs, including a nine-digit deal.

Billings increased 16% to $1 2 billion, reflecting robust underlying demand and a tough comparison versus last year. When we signed two of our largest ever EMEA, including a nine digit deal.

Speaker 4: Total deferred revenue grew 14% to $3.3 billion. Total RPO of $4.2 billion and current RPO of $2.9 billion grew 18% and 21% respectively.

Total deferred revenue grew 14% to $3 3 billion total RPE O $4 2 billion and current RPI of $2 9 billion grew 18% and 21% respectively.

Speaker 4: Turning to the P&L, non-GAAP gross margin remained broadly level at 92% while non-GAAP operating margin increased by 2 percentage points to approximately 32%, reflecting strong revenue growth and ongoing cost discipline.

Turning to the P&L non-GAAP gross margin remained broadly level at 92%, while non-GAAP operating margin increased by two percentage points to approximately 32%, reflecting strong revenue growth and ongoing cost discipline.

We delivered healthy free cash flow of $257 million during the quarter against a tough comparison from last year, which benefited from pandemic related payment term extensions.

Speaker 4: We delivered healthy free cash flow of $257 million during the quarter against a tough comparison from last year, which benefited from pandemic-related payment term extensions.

Speaker 4: Consistent with our capital allocation strategy, we continue to repurchase shares to offset dilution from our equity plan.

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

Speaker 4: During the third quarter, we purchased 980,000 shares for $287 million at an average price of approximately $293 per share.

During the third quarter, we purchased 980000 shares for $287 million at an average price of approximately $293 per share.

Year to date, we have repurchased 166 million shares at an average price of approximately $287 per share for total spend of $476 million.

Speaker 4: Year to date, we've repurchased 1.66 million shares at an average price of approximately $287 per share for total spend of $476 million.

Looking forward as Andrew said, we're rapidly innovating and optimizing our business to realize the opportunities ahead.

Speaker 4: Looking forward, as Andrew said, we're rapidly innovating and optimizing our business to realize the opportunities ahead.

Speaker 4: As we discussed last quarter, the shift of multiyear contracts to annual billings as we move into fiscal 24 will drive more predictable free cash flow and better price realization over time, which will make Autodesk a more valuable company.

As we discussed last quarter, the shift of multiyear contracts to annual billings as we move into fiscal 'twenty four will drive more predictable free cash flow and better price realization over time, which will make autodesk a more valuable company.

This quarter, we took steps to optimize our capital structure by issuing our first sustainability bond.

Speaker 4: This quarter, we took steps to optimize our capital structure by issuing our first sustainability bond, which aligns our capital strategy with our sustainability goals, while also extending our debt maturity profile by almost two years and reducing our weighted average cost of debt by 40 basis points.

Which aligns our capital strategy with our sustainability goals, while also extending our debt maturity profile by almost two years and reducing our weighted average cost of debt by 40 basis points.

Speaker 4: As we enter Q4, we intend to take steps to reduce our real estate footprint because the pandemic has spurred changes in the way we work and we moved to a hybrid workforce.

As we enter Q4, we intend to take steps to reduce our real estate footprint because the pandemic has spurred changes in the way we work and we've moved to a hybrid workforce.

As a result, we anticipate we will reduce the square footage of our facilities portfolio by approximately 20% worldwide and that we will take a GAAP only charge of up to approximately 180 million the bulk of which will be recognized over the next several months as we execute our plan.

Speaker 4: As a result, we anticipate we will reduce the square footage of our facilities portfolio by approximately 20% worldwide, and that we will take a gap-only charge of up to approximately $180 million, the bulk of which will be recognized over the next several months as we execute our plan.

Optimizing our facilities costs will allow us to better deploy capital to further our strategy and drive growth.

Speaker 4: Optimizing our facilities costs will allow us to better deploy capital to further our strategy and drive growth.

Now, let me finish with guidance.

Speaker 4: Demand was robust in Q3, and we expect it to remain so in Q4.

Demand was robust in Q3, and we expect it to remain so in Q4.

Speaker 4: However, as Andrew said, macroeconomic headwinds, such as supply chain disruption and resulting inflationary pressures, a global labor shortage, the ebb and flow of COVID, and AEC in China are impacting the pace of our recovery.

However, as Andrew said macroeconomic headwinds such as supply chain disruption and resulting inflationary pressures.

Global labor shortage.

Ebb and flow of Covid and AUC in China are impacting the pace of our recovery.

Speaker 4: As an example, the growth in new product subscription volumes decelerated from approximately 30% in the first half to mid-20s percent in Q3, which is more than normal seasonality and a tougher comparison versus last year would suggest.

As an example, the growth in new product subscription volumes decelerated from approximately 30% in the first half.

Mid twenty's percent in Q3, which is more than normal seasonality and a tougher comparison versus last year would suggest.

This dynamic drove strong billings growth in Q3 that nonetheless fell short of our expectations.

Speaker 4: This dynamic drove strong billings growth in Q3 that nonetheless fell short of our expectations.

In light of this macro economic uncertainty as we enter Q4, we're taking a pragmatic approach and are assuming that the supply chain labor COVID-19 and country specific challenges will persist.

Speaker 4: In light of this macroeconomic uncertainty, as we enter Q4, we're taking a pragmatic approach and are assuming that the supply chain, labor, COVID, and country-specific challenges will persist.

As a result, we're reducing the midpoint of our billings and free cash flow guidance by approximately $150 million and $100 million, respectively for full year fiscal 'twenty two.

Speaker 4: As a result, we're reducing the midpoint of our billings and free cash flow guidance by approximately $150 million and $100 million, respectively, for full year fiscal 22.

Speaker 4: Given the nature of our subscription business model and the greater degree of near-term visibility it provides to us,

Given the nature of our subscription business model and the greater degree of near term visibility it provides to us.

And our expectation of continued strong spend discipline the midpoint of our full year revenue and margin guidance is broadly unchanged.

Speaker 4: and our expectation of continued strong spend discipline, the midpoint of our full-year revenue and margin guidance is broadly unchanged.

We continue to target $2 4 billion of free cash flow in fiscal 'twenty, three and constant currency because we believe the current macro headwinds we're seeing are transient.

Speaker 4: We continue to target 2.4 billion of free cash flow and fiscal 23 and constant currency because we believe the current macro headwinds we're seeing are transient.

Speaker 4: But if the growth deceleration and strengthened dollar continue through next year, we could see potential risk to that target of about 100 to 200 million based on what we know today.

So that's the growth deceleration and strengthened dollar continue through next year, we could see potential risk to that target of about $100 million to $200 million based on what we know today.

FX volatility is a big factor.

Great moves in the first half of the year created about $55 million in potential headwind to fiscal 'twenty free cash flow.

Speaker 4: rate moves in the first half of the year created about $55 million in potential headwind to fiscal 23 cash flow.

Speaker 4: Since then, and in the last 90 days alone, further rate moves created about another $45 million in potential headwind to cash flow.

Since then and in the last 90 days alone further rate moves created about another $45 million in potential headwind to cash flow.

We're obviously watching FX rates closely but it's clear that if the current rates persist through next year that could materialize in free cash flow.

Speaker 4: We're obviously watching FX rates closely, but it's clear that if the current rates persist through next year, that risk could materialize in free cash flow.

Beyond cash flow if you further take the risk into account revenue growth could end up at the low end of the CAGR, we talked about at Investor day.

Speaker 4: Beyond cash flow, if you further take the risk into account, revenue growth could end up at the low end of the CAGR we talked about it investor day. And fiscal 23 margin could be impacted by about a point.

In fiscal 'twenty, three margin could be impacted by about a point.

Speaker 4: We will, of course, update you on our next earnings call when we expect to have more visibility into any impacts from macro or FX movement on our fiscal 23 outlook.

We will of course update you on our next earnings call. When we expect to have more visibility into any impact from macro or FX movement on our fiscal 'twenty three outlook.

We remain optimistic about our growth potential beyond fiscal 'twenty three continue to target double digit revenue growth non-GAAP operating margins in the 38% to 40% range and double digit free cash flow growth on a compound annual basis.

Speaker 4: We remain optimistic about our growth potential beyond fiscal 23. Continue to target double-digit revenue growth, non-GAAP operating margins in the 38 to 40 percent range, and double-digit pre-cash flow growth on a compound annual basis.

These metrics are intended to provide a floor to our revenue growth ambitions and a ceiling to our spend growth expectations.

Speaker 4: These metrics are intended to provide a floor to our revenue growth ambitions and a ceiling to our spend growth expectations. Andrew.

Andrew back to you.

Speaker 3: Thank you, Debbie. Now let me turn to our strategic growth.

Thank you Debbie.

Let me turn to our strategic growth initiatives sustained and purposeful innovation to enable digital transformation in the industries. We serve has changed our relationship 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 that connect data and workflows and true business model.

Speaker 6: Sustained and purposeful innovation to enable digital transformation in the industries we serve has changed our relationship with our customers from software vendor to strategic partner, and that is enabling us to create more value through end-to-end cloud-based solutions that connect data and workflows, and through business model evolution.

Evolution.

Our model is scalable and extensible into adjacent vertical from architecture, and engineering to construction and owners and for product engineering to product manufacturing and product and data lifecycle management.

Speaker 6: Our model is scalable and extensible into adjacent verticals from architecture and engineering to construction and owners and from product engineering to product manufacturing and product and data life cycle management.

Speaker 6: By helping our customers grow and navigate their digital transformation, we will grow too.

By helping our customers grow and navigate their digital transformation, we will grow too for.

Speaker 6: For example, WIEG Construction and Colas are leading construction and infrastructure firms based in France, with over 100,000 construction employees operating in 60 countries across the globe. In the third quarter, they significantly increased their commitment to Autodesk products, such as Revit, AutoCAD, and Civil 3D, following an accelerated move to BIM and digital workflows over the last three years, which significantly increased monthly average use.

For example, weak construction and colas are leading construction and infrastructure firms based in France with over 100000 construction employees operating in 60 countries across the globe.

In the third quarter, they significantly increased their commitment to autodesk products, such as rabbit Autocad and civil Treaty following an accelerated move to Bim and digital workflows over the last three years, which significantly increased monthly average users. Similarly, Ohbayashi Corporation, one of the largest construction firms and <unk>.

Speaker 6: Similarly, Obayashi Corporation, one of the largest construction firms in Japan, which operates in 16 countries worldwide, is accelerating its global consolidation around BIM and a unified 3D technology platform to enable greater efficiency and sustainability. In the third quarter, it expands its global platform.

Pan which operate in 16 countries worldwide is accelerating its global consolidation around them in a unified <unk> technology platform to enable greater efficiency and sustainability.

In the third quarter it expanded the TVA with us.

Over the last two years it has more than doubled the number of revit users and expanded its usage of autodesk construction cloud to connect workflows from design to construction.

Speaker 6: Over the last two years, it has more than doubled the number of Revit users and expanded its usage of RDS Construction Cloud to connect workflows from design to construction.

Speaker 6: We are further extending our reach into the construction mid-market with the recent launch of Autodesk Build, introduction of an account-based pricing business model, and distribution to our channel partners.

We are further extending our reach into the construction mid market with the recent launch of Autodesk built introduction of an account based pricing business model and distribution through our channel partners.

Speaker 6: For example, this quarter, Jacobson Construction Company, an ENR 400 general contractor in the United States, was looking for a long-term technology partner and to consolidate around a single project management solution that would increase the efficiency of its field teams while also seamlessly integrating with its accounting system.

Sample this quarter Jacobson construction company.

Our 400 general contracting under states was looking for a long term technology partner and to consolidate around a single project management solution that would increase the efficiency of its field teams, while also seamlessly integrating with its accounting solution.

Speaker 6: While it had previously used a competitive solution for some projects, Jacobson ultimately chose Autodesk Construction Cloud because Autodesk builds robust field and cost management.

While it had previously used a competitive solution for some projects Jacobs said ultimately chose autodesk construction cloud because of all of this builds robust field and cost management functionality and the opportunity to integrated smoothly with existing technology.

Speaker 5: and the opportunity to integrate it smoothly with existing technology.

Speaker 6: With new Autodesk Build features and capabilities launched every two months or so, and the recently launched ACC bundles for pre-construction and construction operations, we remain optimistic about the opportunities ahead.

With new Autodesk build features and capabilities launched every two months or so and the recently launched ACC bundles for pre construction and construction operation we remain optimistic about the opportunities ahead.

We're connecting the Doctor and infrastructure to for example, the administrator of railway infrastructure in Spain, or a D. I F selected rguest products over a competitor offerings to support its digital transformation.

Speaker 6: We're connecting the dots in infrastructure, too. For example, the Administrator of Railway Infrastructures in Spain, or ADIF, selected RBS products over competitor offerings to support its digital transformation.

Speaker 6: Backed by our common data environment, ADIF will leverage the Autodesk Construction Cloud to collaborate on project information, on-site development, and model coordination to ensure efficient and accurate construction of their railways.

By our common data environment Adi F will leverage the autodesk construction cloud to collaborate on projects information on site development and model coordination to ensure efficient and accurate construction of the railway network.

Infrastructure remains an important opportunity for audit us across the globe.

Speaker 6: Infrastructure remains an important opportunity for Autodesk across the globe. Our end-to-end solutions, which boosts the efficiency and sustainability of customers like ADIF, as well as our ability to seamlessly integrate vertical and horizontal design and construction, give us a competitive advantage.

Our end to end solutions, which boosted the efficiency and sustainability of customers like Adi F as well as our ability to seamlessly integrate vertical and horizontal design and construction Europe.

Our competitive advantage much.

Much needed additional investment in infrastructure in the United States and across the globe will restore ageing infrastructure and increase the productivity of the economy.

Speaker 6: Much needed additional investment in infrastructure in the United States and across the globe will restore aging infrastructure and increase the productivity of the economy.

Speaker 6: Perhaps more consequentially in the long term, provisions in the U.S. infrastructure bill which encourages Department of Transportation to digitize their

Perhaps more consequentially in the long term provisions in the U S infrastructure, Bill, which encourages department of transportation to digitize their processes should accelerate adoption of digital workflows that enable all infrastructure investment to become more efficient and sustainable.

Speaker 6: should accelerate adoption of digital workloads and enable all infrastructure investment to become more efficient and sustainable.

Turning to manufacturing.

Speaker 6: We sustain strong momentum in our manufacturing portfolio.

We sustained strong momentum in our manufacturing portfolio this quarter.

Speaker 6: In automotive, we continue to grow our footprint beyond the design studio into manufacturing and connected factories. As automotive OEMs seek to break down work silos and shorten handoff and design side.

Automotive, we continue to grow our footprint beyond the design studio into manufacturing and connected factories as automotive Oems seek to break down work silos and shortened handoff and design cycles Port one of the largest automotive Oems in the world renewed and expanded its EMEA with Autodesk during the third quarter growing.

Speaker 6: Ford, one of the largest automotive OEMs in the world, renewed and expanded its EDA with Autodesk during the third quarter, growing users in Alias and Brad in design and AutoCAD, Inventor, and NavVis works in manufacturing, while adding Autodesk Construction Cloud and Autodesk Build in facilities and manufacturing to enable field access to plant drawings during maintenance and operations and equipment changeover.

There is an alias and Brad and design and Autocad inventor and now that's worked and manufacturing, while adding autodesk construction cloud and order doesn't build in facilities and manufacturing to enable field access the plant drawing three maintenance and operations and equipment changeover.

Fusion 360 commercial subscribers again grew strongly without any systematic sales promotions ending the quarter with 175000 subscribers, while still early days, our new extensions, including machining generative design investing in fabrication are performing well and there is major interest in our upcoming.

Speaker 6: Fusion 360 commercial subscribers again grew strongly without any systematic sales promotion, ending the quarter with 175,000 subscribers. While still early days, our new extensions including Machining, Generic Design, and Nesting and Fabrication are performing well and there is major interest in our upcoming Simulation and Design extensions.

Simulation and design extensions.

Speaker 6: Fewer promotions and growing demand for Fusion 360's extensions are enabling us to capture more of the potential market opportunity and accelerate our growth.

Promotions and growing demand for fusion 366.

Tensions are enabling us to capture more of the potential market opportunity and accelerate our growth.

Fast radius as a leading digital manufacturing and supply chain company. The company's proprietary cloud manufacturing platform combined software and advanced micro factories that enable its customers to flexibly design make and move certified products fast radius already uses several autodesk products this quarter it.

Speaker 6: Fast Radius is a leading digital manufacturing and supply chain.

Speaker 6: The company's proprietary cloud manufacturing platform combines software and advanced micro factories that enable its customers to flexibly design, make and move certified products. Fast Radius already uses several Autodesk products. This quarter, it added Fusion 360 with the machining extension to support its in-house CNC operation and integrated alongside its existing additive manufacturing.

Added fusion 360, with the machining extension to support in house, CNC operation and integrated alongside its existing additive manufacturing offering.

Speaker 6: Fusion 360 enables Bass Radiant to program a wide variety of parts more quickly, resulting in faster product cycle.

Fusion 360 enables fast radius to program a wide variety of parts more quickly, resulting in faster product cycle times.

Speaker 6: Outside of commercial use, there is a large and rapidly growing ecosystem of users that are taking Fusion 360 from education and home into the workplace.

Outside of commercial use there was a large and rapidly growing ecosystem of users that are taking fusion 360 from education and hold into the workplace.

These will fuel commercial usage in the future as one measure of this ecosystem. We ended the third quarter with 1 million monthly active users up over 50% year over year and they are doing some amazing work.

Speaker 6: These will fuel commercial usage in the future. As one measure of this ecosystem, we ended the third quarter with 1 million monthly active users, up over 50% year over year. And they are doing some amazing work.

Speaker 6: On September 12th, the Technical University of Munich's TUM Boring Team beat more than 400 applicants and 12 finalists to win the inaugural Not a Boring competition. As Heuken Zhang, one of the five leads responsible for project operations said, quote, Fusion 360's cloud-based solution enabled our 60-member team to collaborate remotely during the pandemic and design and build an award-winning 40-foot long 22-ton tunneling

On September 12, the technical University of Munich come boring team beat more than 400 applicants and 12 finalists to win the inaugural not a boring competition.

Who can change one of the five leaves responsible for projects operation said quote.

360 is cloud based solution enables our 60 member team to collaborate remotely during the pandemic and design and build an award winning 40 foot long 20 to turn this tunneling machines throughout the year. We were repeatedly told by industry experts with the timeline, we were aiming for was borderline impossible the fusion 360 to ease.

Speaker 6: Throughout the year, we were repeatedly told by industry experts that the timeline we were aiming for was borderline impossible, but Fusion 360's ease of use and integrated CAD, CAM, and SEM enabled rapid simulation and improved the speed and efficiency of the design workflow."

Have you integrated CAD Cam and SDN enabled rapid stimulation and improve the speed and efficiency of the design workflow and quote.

Speaker 6: And finally, we continue to enable more users to participate in our ecosystem more productively through business model innovation and our license compliance.

And finally, we continue to enable more users to participate in our ecosystem more productively through business model innovation and our license compliance initiatives. For example, a sustainable building engineering design solutions consultant in Australia, which has been an autodesk AUC customer for more than a decade added our premium offering in the third quarter or two.

Speaker 6: For example, a sustainable building engineering design solutions consultant in Australia, which has been an Autodesk AEC customer for more than a decade, added our premium offering in the third quarter to enable it to better manage its subscriptions and provide more secure single sign-on across multiple offices.

Table it to better manage its subscription and provide more secure single sign on across multiple offices across autodesk the number of premium subscribers increased more than 500% year over year.

Speaker 6: Across Autodesk, the number of premium subscribers increased more than 500% year over year.

Speaker 6: And in the Middle East, a large telecoms company undertaking its own digital transformation was seeking to increase efficiency and sustainability by adopting BIM standards and streamlining digital workloads while also ensuring license compliance across a fragmented employee base.

And in the Middle East a large telecom company undertaking its own digital transformation, we're seeking to increase efficiency and sustainability by adopting Vince standards and streamlining digital workflows, while also ensuring license compliance across the fragmented employee base. During the process, we became the trusted partner of choice, resulting in.

Speaker 6: During the process, we became the trusted partner of choice, resulting in a significant investment in AAC Collections, AutoCAD, Revit, and 3DS.

Our significant investment in AC collections, Autocad Rabbit and three D. S next year.

Year to date license compliance billings across Autodesk as a whole are up 20% when compared to the same period, two years ago, and almost 50% year over year.

Speaker 6: Year-to-date, license compliance billings across Autodesk as a whole are up 20% when compared to the same period two years ago, and almost 50% year-over-year.

Speaker 6: Speaking with customers, partners, and employees, we are very optimistic about the future.

Speaking with customers partners and employees, we are very optimistic about the future. They have demonstrated grit and determination inspiration and innovation and agility and transformation during the pandemic and while there will certainly be twists and turns on the road ahead in many ways. The pandemic has accelerated the future and increase my car.

They have demonstrated grit and determination, inspiration and innovation, and agility and transformation during the pandemic. And while there will certainly be twists and turns on the road ahead, in many ways the pandemic has accelerated the future and increased my confidence that we are on the right path.

Instead, we were on the right path.

We are executing well in challenging times and believe we have only significant opportunities ahead of us.

We are executing well in challenging times and believe we have only significant opportunities ahead of us.

I am reminded again that Autodesk Purpose has never been more important or urgent.

I'm reminded again that Autodesk purpose has never been more important or urgent.

Empowering innovators with design and make technology so that they can achieve the new possible also enables them to build and manufacture efficiently and sustainably.

Powering innovators with design and make technology, so that they can achieve the new possible also enables them to build and manufacture efficiently and sustainably.

Together we can meet the challenges posed by carbon, water, and waste while also advancing equity and access to the in-demand skills of the future.

Together, we can meet the challenges posed by carbon water and waste, while also advancing equity and access to the in demand skills of the future.

Autodesk central role in meeting the challenges underpins my confidence this year and my confidence in the future operator, we would now like to open the call for questions.

Autodesk's central role in meeting these challenges underpins my confidence this year and my confidence in the future. Operator, we would now like to open the call for questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster.

Our first question comes from the line of Saqib Khalil Barclays. Your line is open.

Our first question comes from the line of second career of Barclays. Your line is open.

Okay, Great Hey, guys. Thanks for taking my questions here.

Okay, great. Hey guys, thanks for taking my questions here.

Debbie, maybe we'll just start with you, just given some of the moving parts. I'd love to zoom in on the FY22 guidance a bit. You touched on this a little bit in your prepared remarks, but can you just talk about what drove the change to guide in billings and free cash flows specifically? You talked about supply chain and FX. I was wondering if you could just go one level deeper, just help us parse that out a little bit. Does that make sense? It does.

Debbie maybe we'll just start with you just given given some of the moving parts I'd love to zoomed in on on the FY 'twenty two guidance a bit.

You touched on this a little bit in your prepared remarks, but can you just talk about.

You know what drove the change to guide in billings and free cash flow, specifically, you talked about supply chain and FX I was wondering if you can just go one level deeper just help us parse that out a little bit does that makes sense.

It does and I think we'll start with Andrew here.

Yeah, let me start and then Debbie and I will kind of tag team here on some of this. So first off, Zach, let's make sure we all kind of level set on the business is strong. All right, you saw the numbers.

Yeah, Let me start and then depending on what kind of tag team here on some of this so first off talking let's let's make sure. We all kind of level set on the business is strong alright, you saw the numbers.

We're seeing tremendous growth, we're seeing record renewal rates, we're approaching net revenue retention rates at the high end of our guide and they're continuing to go up.

We're seeing tremendous growth, we're seeing record renewal rates, we're approaching we're approaching net revenue retention rates at the high end of our guide and they're continuing their continuing to go up alright, that's super Super important here and we feel pretty good about where the business is going so the business is strong and we're seeing a lot of strength there.

All right, that's super, super important here. And we feel pretty good about where the business is going. So the business is strong and we're seeing a lot of strength there.

If you look at what we're talking about here, we saw several things happen.

If you look if you look at what what what we're talking about here, we saw several things happened during the quarter and we've got this reinforced by our customers and by our channel partners.

during the quarter, and we got this reinforced by our customers and by our channel partners.

We saw a deceleration in what we were seeing around monthly active usage and all the things associated with that. And that then translated into us kind of looking at our guide and looking at things going forward and we pragmatically just assumed at this point that what we saw in the quarter is going to continue into Q4.

We saw a deceleration.

<unk> deceleration and in what we were seeing around monthly active usage and all the things associated with that and that that's been translated into to us kind of looking at our guide and looking at things going forward and pragmatically just assumed at this point that what we saw in the quarter is going to continue.

Into Q4, and that's what you're seeing is a pragmatic pragmatic assessment that hey, this kind of supply chain pressure. This inflationary pressure that kind of squeezing the margins with some of our customers.

And that's what you're seeing, a pragmatic assessment that, hey, this kind of supply chain pressure, this inflationary pressure that's kind of squeezing the margins of some of our customers is going to continue into Q4.

Continue into Q4.

If we look forward in terms of the guide in terms of what's going on into next year look we assume two things one is interesting.

If we look forward in terms of the guide, in terms of what's going on into next year, look, we assume two things. One, this interesting effects environment we're in, which I want Debbie to kind of comment on again and kind of reinforce some of the things she said in the opening commentary, presents some potential risks. So, we want to flag those.

Effects environment, where we're in which I want to kind of comment on again kind of reinforce some of the things you said in the opening commentary presents some potential risks. So we want to fly those risks. In addition, if some of these supply chain issues bleed over into the beginning into the beginning of next.

In addition, if some of these supply chain issues bleed over into the beginning of next year, we wanted to flag some additional risk there, but there's certainly a large currency headwind that we're seeing. And I'd like Debbie to just kind of reiterate some of the things she said in the opening commentary so we can all get on the same page about that.

Next year, we wanted to flag some additional risks there, but there's certainly a large currency headwind that we're seeing in I'd like Debbie to just kind of reiterate some of the things. He said in the opening commentary. So you can only get on the same page about that.

Yeah, but let me go back to the fiscal 22 guide first because I think one of the metrics that I talked about in the opening commentary pretty much says it all, and that is that

Yeah, but let me go back to the fiscal 'twenty two guide first because I think one of the metrics that I talked about in the opening commentary pretty much says it all and that is that for a new volume growth. We saw 30% growth for the first half of fiscal 'twenty two and then in Q3. It was in the mid Twenty's. So it was still very strong growth. It just fell short.

For our new volume growth, we saw 30% growth for the first half of fiscal 22, and then in Q3, it was in the mid-20s, so it was still very strong growth. It just fell short of our expectations.

Our expectation.

As we look ahead, we did highlight the potential risks that we see to fiscal 'twenty three free cash flow and it is true that FX based on what we know today is a big factor it's been highly volatile the rate moves that we saw in the first half of the year created about 55 million in potential headwind to fiscal 'twenty free cash flow.

As we look ahead, we did highlight the potential risks that we see to FISL 23.

free cash flow. And it's true that FX, based on what we know today, is a big factor. It's been highly volatile. The rate moves that we saw in the first half of the year created about $55 million in potential headwinds to fiscal 23 cash flow.

And since then, and in the last 90 days alone, further rate moves created about another $45 million in potential headwind to cash flow. So, as you can imagine, we're obviously watching FX rates closely, but it's clear that if the current rates persist through next year, that risk could materialize and create cash flow.

And since then and in the last 90 days alone further rate moves created about another $45 million and potential headwind to cash flow. So as you can imagine, we're obviously watching FX rates closely but it's clear that if the current rates persist through next year that risked could materialize in free cash flow. Our goal today was just.

Our goal today was just to highlight the risk as we look ahead to next year.

To highlight the risk.

Looking ahead to next year, but it's important to remind that overall the strategy is working and we have numerous growth lever is to capitalize on over the long term.

But it's important to remind that overall the strategy is working and we have numerous growth levers to capitalize on over the long term.

Got it.

We still.

We still see a constant currency path to $2.4 billion next year, but we want to flag these risks because we think that's a prudent thing to do at this time, given what we're seeing today, right now. It's not a guy, it's a risk.

We still feel you have got constant currency path to $2 4 billion next year, but.

Do you want to flag these risk because we think that's a prudent thing to do at this time given what we're seeing.

<unk> right now.

Not a guy it's it's a risk flex.

And I think that is prudent.

And Andrew, maybe just for the follow-up for you, you know, just to maybe zoom out from the numbers and some of the moving parts as we start to think about next year and the years after, you know, one of the things I'd love to just get your view on is

Andrew maybe just for the follow up for you.

Just to make the zoom out from the numbers and some of the moving parts as we start to think about next year and the years after.

One is the one thing that I'd love to just get your view on is.

Now that we have an infrastructure bill in the U.S., can you just talk about a couple of the components that you feel could be particularly helpful for Autodesk's business, and maybe when you think we start to see some of that benefit in your customer base?

Now that we have an infrastructure bill in the U S.

Can you just talk about a couple of the components that you feel could be particularly helpful for Autodesk business and maybe when do you think we start to see some some of that benefit in your customer base.

Yeah. Yeah. First off, let's be very clear.

Yeah, Yeah. So first off let's be very clear, we don't have any infrastructure uplift built in any of our guidance or anything that we're talking about right now okay. These things play out over multiple years. This is this is a great bill where we're really happy to see it included in the Bill is a $100 million fun.

We don't have any infrastructure uplift built in any of our guidance or anything we're talking about right now, okay? These things play out over multiple years. This is a great bill, we're really happy to see it. Included in the bill is a $100 million fund to accelerate investment in digital tools for departments of transportation. We feel that that's a good thing and it's an important part of this bill from our perspective because it's going to change the ecosystem. But these things play out over a long

To accelerate investment in digital tools for department of Transportation, we feel that that's a good thing and it's an important part of this bill from our perspective, because it's going to change the ecosystem, but these things play out over over a long term.

We're certainly really happy about the fact that we have invested in water ahead of these

We're certainly really happy about the fact that we have invested in water ahead of these.

critical investments in infrastructure because water is going to matter a lot. Clean water, water management in terms of flooding or storage of water, waste water processing, all these things, water is going to be a big deal. So we're going to see our engagement in water projects probably increase over the next couple of years.

Critical investments in infrastructure, because water is going to matter a lot clean water water water management in terms of flooding or storage or water wastewater processing. All of these things water is going to be a big deal. So we're going to see our engagement in water projects probably increase over the next couple of years, but I wanted to make sure that we're all clear.

But I want to make sure that we're all clear that we don't build these into our numbers right now, and we're going to wait and see how these things play out over the next couple of years, but we will absolutely see some of our investments in road, rail, and water pay off over a multi-year period here.

Don't build these into our numbers right now and we want it we're going to wait and see how these things play out over the next couple of years, but we will absolutely see some of our investments in road rail and water pay off over over a multiyear period here and we're pretty excited about it because this bill was a long time coming and I think the emphasis on digital transformation inside the.

And we're pretty excited about it, this bill was a long time coming.

And I think the emphasis on digital transformation inside the...

The infrastructure industry is going to be an important.

the infrastructure industry is going to be an important.

catalyst to modernizing and expanding what's happening in our infrastructure world in the United States.

Catalyst to modernizing and expanding what's happening in our infrastructure and growth in the United States.

Very helpful. Thanks, guys.

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

Thank you. Our next question comes from Adam Borg of Stiefel. Your line is open.

Hey, guys. Thanks, so much for taking the question Andrew I'd Love to kind of just go maybe another step deeper on what stock. It was talking about you know how much of the year. We've talked about this unwinding of uncertainty and we know that several factors today of where it sounds like certainty has uncertainty has kind of gotten higher again.

Hey, guys, thanks so much for taking the question. Andrew, I'd love to kind of just go maybe another step deeper in what Sackett was talking about. So, you know, for much of the year, we've talked about this unwinding of uncertainty.

And we talked about several factors today of where it sounds like uncertainty has kind of gotten higher again. Could you just talk maybe a little bit more about an example or two of how supply chain issues or even pricing is impacting or inflation is having a direct impact on the ability to close deals? Just kind of help give an example of what's happening from that. That'd be really great.

Can you just talk maybe a little bit more about like an example, or two of how you no supply chain issues or even pricing is impacting our inflation is having a direct impact on the ability to close deals just kind of help given examples like what's happening from that that'd be really great.

Yeah, Yeah, and it was an excellent question. So what's what's kind of like back up to three months ago and that's some of the context of fuel. So that we can kind of get a sense for the three months ago, we were heading into the quarter seeing strong renewal rates projecting strong renewal rates heading in we saw those strong renewal rates were at record renewal rates, we're continuing to see those things. We also saw monthly active.

Yeah, yeah, and it was an excellent question. So let's let's kind of like back up to three months ago and set some of the context too, so that we kind of get a sense for this. Three months ago, you know, we were heading into the quarter, seeing strong renewal rates, projecting strong renewal rates heading in. We saw those strong renewal rates. We're at record renewal rates. We're continuing to see those things. We also saw monthly active usage increasing robustly heading into the quarter. As the quarter progressed,

Usage, increasing robustly heading into the quarter as the quarter progressed that that increase in monthly active usage decelerated a little bit. It continued to grow its just the second derivative kind of went negative on us in it and it didnt continue to accelerate at the pace, we expected to see so what what's driving that right for a lot of our customers.

that that increase in monthly active usage decelerated a little bit. It continued to grow. It's just the second derivative kind of went negative on us and it didn't continue to accelerate at the pace we expected to see. So what's driving that? For a lot of our customers, the book of business they're seeing is

Our book of business, they're seeing it.

Robust they have more demand than there actually able to fulfill on right now and you can see it in all the indices and all the indicators, but you also saw during the quarter the supply chain backlogs in these inflationary pressures peaked in the quarter and continued consistently throughout the quarter. So while they had this big book of business or they have an existing ongoing projects if you're.

robust. They have more demand than they're actually able to fulfill on right now, and you can see it in all the indices and all the indicators.

But you also saw during the quarter, the supply chain backlogs and these inflationary pressures peaked in the quarter and continued persistently throughout the quarter. So while they have this big book of business.

or they have existing ongoing projects, if you're on the AEC side, and say you're on a fixed bid contract.

On the AUC side, and say you are on a fixed bid contract you're going to see margin pressure because your cost of goods to deliver the project that you're working on is going up as is your cost of labor and actually your labor pool is tight and constrained. So you're seeing all of these factors increased pinching your margins and its affecting your buying behaviors sometimes.

you're going to see margin pressure because your cost of goods to deliver the project that you're working on is going up as is your cost of labor and actually your labor pool is tight and constrained. So you're seeing all these factors pinching your margins and it's affecting your buying behavior at this time. So even in this environment where we saw all of these forces including the labor shortages and things associated with that, we actually continued to grow robustly, just not where we expected to. Now if you're on the manufacturing side, which you don't...

So even in this environment.

Where we're at where we saw all of these forces, including the labor shortages and things associated with that we actually continued to grow robustly, just not where we expected to know if you're on the manufacturing side, which you noticed we did.

very well, especially relative to our competitors.

Very well, especially relative to our competitors, even they're there they're not able to fulfill all of the all of the demand they have heading into their into their businesses. So they're not collecting cash as fast because they're not shipping the products products that they're that they would be getting ordered from their customers. So all of these things are playing out.

Even there, they're not able to fulfill on all of the demand they have heading into their businesses, so they're not collecting cash as fast because they're not shipping the products that they're getting ordered from their customers. So all of these things are playing out. It didn't stop people from buying technology, but it certainly slowed down some of the activity relative to our expectations around people buying and investing in their technology portfolio. Does that make sense?

It didn't stop people from buying technology, but it's certainly slowed down some of the activity relative to our expectations around people buying and investing in their technology portfolio because that makes sense.

Yeah, that was really helpful. And maybe just as a quick follow up, obviously, you know, at Analyst Day, we talked about some changes around billing terms, and you referenced that a little bit earlier in the call, just curious how kind of early receptivity has been with customers as you kind of explain to them the changes that are coming. Thanks again.

Yes that was really helpful and maybe just as a quick follow up obviously you know at analyst day, we talked about some changes around billing terms and you referenced that a little bit earlier in the call. Just curious how kind of early receptivity has been with customers as you kind of explain to them. The changes that are coming thanks again.

Yeah. So look R. R. R. R moves with regards to a change in billing terms and smoothing out our free cash flow trajectory over multiple years are unchanged by any of this we believe those are right for the business. We believe it's right for our customers customers are generally positive around these things because they prefer annual billings for in most cases they don't.

Yeah, so look, our moves with regards to changing billing terms and smoothing out our free cash flow trajectory over multiple years are unchanged by any of this. We believe those are right for the business. We believe it's right for our customers.

Want to have to pay upfront if they don't have to also.

Also you know a lot of these things we've been talking about with regards to supply chain pressures are viewed as pretty trenching by US you know these are not going to be persistent types of things. So customers view. These fairly well our partners are getting themselves are around some of these these activities right now, but those plans are completely unchanged relative to anything we're seeing right now and it's all.

are viewed as pretty transient by us. These are not going to be persistent types of things. So customers view these fairly well. Our partners are getting themselves around some of these activities right now, but those plans are completely unchanged relative to anything we're seeing right now, and it's all full steam ahead on that transition. Great. Thanks again for the call. I appreciate it. Thank you. Thank you. Our next question comes from Jay Blishour of Griffin Securities. Please go ahead. Yeah. Thank you. Good evening.

Oh, it's all full steam ahead on that transition.

Great. Thanks again for the color I appreciate it.

Great. Thanks again for the color. I appreciate it.

Thank you. Thank you. Our next question comes from Jay Blishar of Griffin Securities. Please go ahead.

Thank you I think you are.

Next question comes from Jay Li Shar Griffin Securities. Please go ahead.

Yeah, thank you. Good evening. Andrew, let me start with the circumstantial question. And that is, are there any operational changes that you foresee having to make?

Thank you good evening.

Andrew Let me start with the circumstantial question.

That is are there any operational changes that you foresee.

Having to make.

You just said that the circumstances are perhaps transitory, but in terms of, let's say, what you called your early warning system, your usage telemetry, anything along those lines.

You just said that the circumstances that are perhaps transitory, but in terms of let's say would you called your early warning system is your usage telemetry or anything along those lines.

that you feel need to be updated, modified, amended in some way to at least take account of the current circumstances.

You feel need to be updated modified amended in some way to at least take account of the of the current.

Kansas and then sort of.

The point you made with regard to customers having a robust pipeline themselves, do you expect to be able to recoup at some point or over time the delta in the billing guidance that you've given now for fiscal 22? Do you think that amount of billings can come back to Autodesk? Then a follow-up for you.

But the points you made with regard to customers, having a robust pipeline themselves do you expect to be able to recoup at some point over time the delta in the billings guidance that you've given now for fiscal 'twenty. Two do you think that amount of billings.

Can come back to Autodesk and then a follow up for you.

Yeah. So first off let me comment on that the tracking so we believe our tracking is good because it actually showed us the outcome as the quarter progressed, we saw the knee over of the growth in monthly active usage and the associated impact there. So it wasn't it wasn't lifting the way we expected.

First of all, let me comment on the tracking. We believe our tracking is good because it actually showed us the outcome as the quarter progressed. We saw the kneeing over of the growth in monthly active usage and the associated impact there. It wasn't lifting the way we expected it to in the second half. In fact, like I said, the second derivative changed it over a little bit. These predictors, these tracking mechanisms we have, I think are still

At two in the second half in fact, like I said, the second derivative change that eat over a little bit alright. So these predictors. These these tracking mechanisms. We have I think are still valid powerful they actually gave us indications of things that were going on I think we're also frankly tracking the inflationary environment a bit more.

powerful. They actually gave us indications of things that were going on. I think we're also, frankly, tracking the inflationary environment a bit more right now, trying to make sure what's happening with the goods and labor pool that our customers are engaging with. We're going to be paying attention to that. There's hopeful signs out there that some of this is loosening up in some respects, but we're going to be watching.

Right now trying to make sure what's happening with the good the goods and labor pool that our customers are engaging with what we're gonna be paying attention to that theres hopeful signs out there that some of this is loosening up in some respects, but you know we're going we're gonna be watching that now with regards with some of the business coming back. It is absolutely possible that that's the case.

Now, with regards with some of the business coming back, it is absolutely possible that.

All right. Our customers are definitely looking at a backlog of projects and a backlog of orders and all the things associated.

Alright, our customers are are definitely looking at a backlog of projects in our backlog of orders and all the things associated with that I think it's prudent at this point for us to kind of with the information we have right now assume that we're just we're just going to see kind of an ongoing kind of impact.

I think it's prudent at this point for us to kind of, with the information we have right now, assume that we're just going to see kind of an ongoing kind of impact of these things until something changes. But it is possible that some of this could come back as a result of releasing pressure. But I don't think it's prudent right now to declare that. I think we should watch this because we were all kind of surprised by the pace at which these supply chain pressures put pressure on us.

These things until something changes, but it is possible that some of this could come back as a result of releasing pressure, okay, but it's not I don't think it's prudent right now to declare that I think we should watch. This because you know we were all kind of surprised by the pace at which these supply chain pressures put pressure on our customers.

Right, understood. Now, for the longer term, looking past these circumstances, I'd like to ask you about something you said in your remarks at AU last week.

Right understood.

Longer term looking past these circumstances I'd like to ask you about something you said in your remarks that Hey, you last month.

You said, quote, Autodesk will fundamentally shift how the company delivers value, end quote. And my question for that is, was that another way simply of referring to subscriptions and consumption and flex?

You said quote Autodesk will fundamentally shift how the company delivers value end quote.

And my question for that is it was that in other way simply referring to subscriptions and consumption and flex or were you referring to something else.

or were you referring to something else besides just the licensing model in terms of how you're thinking about delivering that fundamental value all the time?

Besides just the licensing model in terms of how youre thinking about delivering that that fundamental value overtime.

Yeah actually Jay.

Yeah, actually Jay, that statement was not related to the business models. While the business models will help facilitate delivering some of that value, what we were really talking about was how the platform and the tools are going to become these co-designers with our customers.

That statement was not related to the business models. The business models will help facilitate delivering some of that value. What we were really talking about was how the platform and the tools are going to become these co designers with with our with our customers how we're gonna be driving much more facilitated action.

how we're going to be driving much more facilitated action with our customers through our products. There's going to be a lot more real-time data visibility, real-time option visibility, real-time collaboration between the system.

For our customers through our products, there's going to be a lot more real time data visibility real time auction visibility real time collaboration between the system and the designer or the engineer that cause a major value driver change that we're talking about it's not the business model changes per se those are.

and the designer or the engineer. That's the major value driver change that we're talking about. It's not the business model changes per se. Those are enablers. They allow us to get some of this capability more effectively to a broader set of customers, which we're actually pretty happy about. But it's that fundamental relationship with the product, this notion of co-designing with a computer and with a system that's really going to change the way we deliver value.

Enablers, they allow us to get some of this capability more effectively to a broader set of customers, which we're actually pretty happy about but it's a fundamental relationship with the product.

Notion of co designing with a computer.

And with our system, that's really going to change the way we deliver value.

Okay.

Understood. Thank you very much.

Thank you.

Thank you. Thank you. Our next question comes from galanda of barrenberg. Please go ahead.

Thank you. Our next question comes from God I'm under of Baron Berg. Please go ahead.

Thank you for taking my questions. The first one, I'd just like to kind of focus on the reduced free cash flow outlook in 2022 and then how that's

Hey, Thank you for taking my questions. The first one I'd just like to kind of focus on the reduced.

Reduced free cash flow outlook in 'twenty, two and then how would that potentially translate into 'twenty three the way I read your or listen to your remarks was that FY 'twenty three risk.

potentially translates in 23. The way I read your or listened to your remarks was that FY23

not the change in outlook, so the risk. It's kind of all to do with the FX rates rather than the impact that you're seeing on the lower billings for FY22. Is that correct to understand it that way, or do you think there's a carry-on momentum from lower billings of FY22 based on supply chain shortage and all that stuff into free cash flow for FY23? Yeah, so, Gael, the answer

And those folks are de risked it kind of all to do with FX rates, rather than the impact that you're seeing on the lower billings for FY 'twenty. Two is that correct to understand it that way or do you think there is a carry on the momentum from lower billings Hooker for 22 based on supply chain shortage and all that stuff into free cash flow for 'twenty.

Great.

Yeah. So go.

It's a bit of a mix.

The answer is that it's a bit of a mix, so the way to think about it, I highlighted risk of approximately $100 to $200 million based on what we know today, and part of it relates to the subscription basis of our business model, so given that billings are falling short of our expectations for this year, we're flowing through that risk into the free cash flow that we're talking about next year, and the other part of it is FX, so it's roughly half and half.

Andrew the.

Yeah. The answer is that it's it's a bit of a mix. So the way to think about it I highlighted.

Cost of approximately 100 to 200 million based on what we know today and part of it relates to the subscription basis of our business model given that billing are falling short of our expectations for this year, we're flowing through that risk into the free cash flow that we're talking about next year and the other part of it is <unk>.

So it's roughly half and half.

That's really helpful and very clear thank you.

That's really helpful and very clear, thank you. And then I just want to really focus on the different drivers of that kind of changed outlook, especially for this year. You know, the long-term deferred revenues of a portion of total deferred revenues falling kind of

Just wanted to really focus on the on the different drivers of that kind of changed outlook, especially for this year.

You know that long term deferred revenue as a proportion of total deferred revenues falling kind of just below that.

just below that mid-20s. Is that something you'd expect in Q4 to pick up towards the 25%? Or do you think that the acceleration of the transition away from multi-year billings is also something that is really driving the outlook for the billings itself because the revenue numbers seem to be strong?

Whatever we say mid twenties symptoms. So if like let's say 23 is kind of towards the lower end of that.

Is that something you would expect in Q4 to kind of pick up towards the 25% is a pretty sensible or do you think that the acceleration of the transition away from multiyear billings is also something that is really driving.

The outlook for the billings itself, because the revenue numbers seem to be strong.

Yeah. So the way, we think about deferred revenue in the long term contribution to deferred revenue being in roughly that mid twenty's, there's not going to change.

Yeah, so the way that we think about deferred revenue and the long-term contribution to deferred revenue being in roughly that mid-20s is not going to change. So, what we're seeing here is an impact from macro on our billings outlook for this year that we're then highlighting risk as we get into next year.

What we're seeing here is an impact from macro on our billings outlook for this year that were then highlighting risk as we get into next year.

But the proportion of our business from multi-year contracts billed up front for this year and into next year is in line with our expectations. We've been monitoring the multi-year cohort this year. And even in Q3, it was quite strong. And so that's not something that's changing. And so the follow-on impact of deferred revenue is that that wouldn't change as well. We still would see roughly 20% being that long-term deferred revenue.

But the proportion of our business for a multiyear contract build upfront for this year and into next year is in line with our expectations. We've been monitoring the multi year cohort this year and even in Q3. It was quite strong and so that's not something that's changing and so the follow on impact of deferred revenue is that that would change that.

Are we still would see roughly 20% being that long term deferred revenue.

Okay. So it doesn't.

Okay, so the multi-year billings contribution change didn't have any impact on the billings outlook change.

The multiyear billings contribution change did not have an impact on the billings.

Outlook changed it yet.

That's correct, yes, okay perfect. Thank you so much.

That's correct. Yes. Okay. Perfect. Thank you so much.

Thank you. Our next question comes from Matt Hedberg of RBC capital markets. Your question. Please.

Thank you. Our next question comes from Matt Hedberg of RBC Capital Markets. Your question please.

Okay, thanks for taking my question. Debbie, maybe just a clarification for you. I think you noted in your script that you believe the fiscal 20 to fiscal 23 revenue kegger will be at the lower end of that 16 to 18 percent guide. If I do some quick math, does that imply fiscal 23 revenue will grow about 17 percent per your comment?

Oh, Hey, thanks for taking my questions Debbie maybe just a clarification for you I think you noted in your script that you believe the fiscal 'twenty to fiscal 'twenty three revenue CAGR will be at the lower end of that 16% to 18% guide.

If I do some quick math does that imply fiscal 'twenty three revenue will grow about 17% for your comment.

Well yeah.

Well, you are interpreting correctly that I said that if the risk materializes that we're seeing today in our numbers next year, we would be at the low end of the revenue CAGR of 16 to 18 percent that we talked about at our investor day. And while we're not providing specific guidance on revenue for next year, directionally your math computes.

You are interpreting correctly that I said that if the risk materializes that we're seeing today in our numbers next year, we would be at the low end of the revenue CAGR of 16% to 18% that we talked about at our Investor day, and while we're not providing specific guidance on revenue for next year Directionally. Your math continues.

Got it Okay and then maybe just one other you know I think we're all kind of looking at CRM is a helpful metric.

Got it. OK. And then maybe just one other, you know, I think we're all kind of looking at CRPO as a helpful metric, you know, kind of judge the judge of the business as well. You know, and I know you don't guide the CRPO, but any sort of commentary on how that might trend into 4Q?

I'm trying to judge the judge for the business as well.

And I know you don't guide to see your appeal, but any sort of commentary on how that might trend into.

<unk>.

Yeah, so let's start with Q3. The CRPO growth decelerated mainly because of

Yeah, So let's start with Q3 D. C. R. P O growth decelerated, mainly because of declining contribution for multiyear EMEA deals that closed in fiscal 'twenty, which are entering the final year of their time on that.

Declining contribution for multi-year EBA deals that closed in fiscal 20, which are entering the final year of their term. That growth deceleration was in line with our expectations and is something that we signaled on our last earnings call.

<unk> deceleration was in line with our expectations and it's something that we signaled on our last earnings call. We anticipate over time that the growth rates for CRE P. O and revenue will gradually converge over time, but also that that growth rate is going to continue to be influenced by the timing and volume of EMEA and so given that Q4 is a big E D a quarter for them.

We anticipate over time that the growth rate for CRPO and revenue will gradually converge over time, but also that that RPO growth rate is going to continue to be influenced by the timing and volume of EBAs. And so, given that Q4 is a big EBA quarter for us, that's going to have a big impact on the growth rate next quarter.

That's going to have a big impact on the growth rate next quarter.

Got it thanks very much.

Thank you. Our next question comes from Phil Winslow of Credit Suisse. Please go ahead.

Thank you. Our next question comes from Phil Winslow of Credit Suisse. Please go ahead.

Hey, guys. Thanks for taking my question just wanted to dig into a little bit on where you're seeing those changes the second derivative, particularly on the AUC side of the house one of the things you talked about a lot is that.

Thanks for taking my question. Andrew, I just wanted to dig in a little bit on where you're seeing those changes in the second derivative, particularly in the AEC side of the house. One of the things you talk about a lot is that...

And as that alternative solutions in different parts of the lifecycle. The AUC World you know planning actually put them through.

is that Autodesk has solutions in different parts of the lifecycle in the AEC world, planning, actually putting the nail in the wood, etc. When you look at those second derivatives, where did you see that in the lifecycle and how are you thinking about that in Q4?

The nail on the wood et cetera, when you look at the second derivative.

Where did you see that in the lifecycle and how are you thinking about that in Q4.

Yeah, so again, I want to make sure that we're clear on some of these things, the business was very strong.

Yeah, So again I want to make sure that we're clear on some of these things the business was very strong in that second derivative was a slowing down of the acceleration that we're expecting to see coming into the second half of the year alright. So its slowing down it's not a it's not a decline okay. I just wanted to be super.

And that second derivative was a slowing down of the acceleration that we were expecting to see coming into the second half of the year. So it's a slowing down, it's not a decline, okay? I just want to be super clear on that so that we can get all position done.

Clear on that so that we can get all positioned on that now in terms of in terms of where we were we think this is going to head out. We we continue to think that these these monthly active usage rates are going to continue to grow and that we're going to continue to see.

Now, in terms of in terms of where we where we think this is going to head out, we continue to think that these these monthly active usage rates are going to continue to grow and that we're going to continue to see increases associated with these.

Increases in associated with these things, we're just prudently assuming that what we saw in Q3 continues into Q4.

We're just prudently assuming that what we saw in Q3 continues into Q4 because based on what we wanted to see was like this uplift in monthly active usage at a higher rate than what we saw.

Because based on what we wanted to see what was like this uplift in monthly active usage at a higher rate than what we saw it's probably a safe bet to just assume this is going to coast into into Q4, if something changes. If these pressures start to relieve and start to relax, we could absolutely see an improving environment, but the business is strong the renewal rates are strong.

probably a safe bet to just assume that this is going to coast into Q4. If something changes, if these pressures start to relieve and start to relax, we could absolutely see an improving environment. But the business is strong. The renewal rates are strong. The underlying fundamentals of the business are strong. The net retention revenue rates are strong. The slowdown was rather broad-brush.

The underlying fundamentals of the business are strong the net retention revenue rates are strong the slowdown was rather broad brushed except for the country specific issues that we highlighted in China. So there was no one product area that saw a slowing but I want you to note something pretty important here look at the <unk>.

for the country-specific issues that we highlighted in China. So there was no one product area that saw a slowing. But I want you to note something pretty important here. Look at the competitive position that we came out of this year, particularly in manufacturing and other

Competitive position that we came out of this year, particularly in manufacturing and other places we're growing much more robustly than any of our competition in the space. It's just we have high expectations and we wanted to see some of those high expectations fulfilled. So that's how we view this right now and that's how we're viewing it heading into the rest of the year does that answer your question or did you want to.

we're growing much more robustly than any of our competition in the space. It's just we have high expectations and and we wanted to see some of those high expectations fulfilled. So that's how we view this right now and that's how we're viewing it heading into the rest of the year. Does that answer your question or did you want to clarify?

Verify sometimes no no that's helpful.

No, no, that's helpful. Thank you. And then also just help me if you drill in just in the markets by geography, I mean, obviously, we have the reported numbers, but anything you'd sort of call out within that, whether it be by vertical, by geography, or how you're thinking about Q4, and then I'll go back in the queue. Thanks.

Helpful. Thank you and then also just what how many of your drilling just in the AR and the markets by geography, I mean, obviously, we have the reported numbers, but anything you'd sort of call out within that whether it be by vertical by geography, or how youre thinking about Q4, and then I'll go back in the queue. Thanks.

The one thing I'll just highlight, we talked about the softness in China, that was specifically in AEC. We actually did well in manufacturing in China. The softness was not uniform in China across all of our businesses, but in general, what we saw was a kind of a broad brush.

You know the one the one thing I'll just highlight let's say you know we talked about the softness in China that was specifically an ADC, we actually did well in manufacturing in China. So not the softness was not uniform in China across the across all of our businesses, but in general what we saw was a kind of a broad brushed impact okay. So I couldnt.

So, I couldn't point to one Z, two Zs in any particular country that was kind of different or offset from anything else we were seeing. It was kind of a broader impact and kind of this slowing down of the acceleration that we saw. Great.

I Couldnt point to onesie Twosies in any particular country that was kind of different or offset from anything else. We were seeing it was kind of a broader impact and kind of the slowing down of the acceleration that we saw.

Great. Thanks, I'll get back in queue.

Thank you. Our next question comes from Joe <unk> of Baird. Your question. Please.

Thank you. Our next question comes from Joe Berwink of Baird. Your question please.

Great Hi, everyone.

I'm curious, is the persona of customer that you think about as being kind of key to Autodesk new business growth, is that customer more susceptible to some of the macro issues you're calling out? You know, if I'm understanding all the detail right, the established base is growing nicely. There is moderation on the incremental growth.

I'm curious as the persona of customer that you'd think about SBA kind of key to autodesk scrap.

Scrap is that customer more susceptible to some of the macro issues youre, calling out if I'm understanding all the detail right.

Tablet space is growing nicely there is moderation on the incremental growth.

So I suppose a question might be, are there risks of the latter starting to impact the former and starting to maybe trickle into the installed base at the same time?

I suppose a question might be or the rest of the ladder it starting to impact the former and starting to maybe be a trickle into the installed base at the same time.

That's not what we're seeing. If that's what we were seeing, the net revenue retention rate trend that we saw during the quarter would have been different. I want to focus you back on, remember, we came in at the high end of our range on net revenue retention.

That's not what we're seeing it's gone from what we were seeing the net revenue retention rate trend that we saw during the quarter, which would've been different okay. So.

I wanted to focus you back on remember we came in at the high end of our of our range on net revenue retention and what that does is it shows a strong a kind of a strong affinity and willingness to keep upping their game with regards to our products and offerings and that did not soften okay. If anything that's continuing to strengthen so that feels really good. So there's there's really it's.

And what that does is it shows a kind of a strong affinity and willingness to keep upping their game with regards to our products and offering. And that did not soften. If anything, that's continuing to strengthen. So that feels really good. So it really was affecting the new book of business, which kind of bleeds into the long tail of our business at some point and at some levels, which is to be expected in environments like this. Those who are most cash flow constrained tend to slow their buying down the most.

Really what's affecting that the new book of business, which kind of bleeds into the long tail of our business that at some point into some levels, which is to be expected in environments. Like this you know that those who are most cash flow constrained tend to slow their buying down the most so I don't see any bleed over potential in fact, it and a lot of our our newer businesses, we saw a real robust growth associated.

So I don't see any bleed over potential. In fact, in a lot of our newer businesses, we saw robust growth associated with some of these things. So I do not see a crossover or a bleed over between these things. In fact, we continue to expect continued strengthening of net revenue retention rates in the base.

With some of these things so I do not see a crossover or a bleed over between these things in fact, we continue to.

Expect continued strengthening of net revenue retention rates in the base.

Okay.

Okay. That's helpful and then on the supply chain topic.

OK, that's helpful. And then on the supply chain topic, this was addressed at the investor day as maybe being a risk area, but also an opportunity perhaps for technology adoption.

This was addressed at the Investor day, as maybe being a risk area, but also an opportunity perhaps for technology adoption. Even recently it seems like engineering firms are acknowledging that hiring support bigger backlogs might be tough, but technology again, it could be an opportunity.

Even recently, it seems like engineering firms are acknowledging that hiring support, bigger backlogs might be tough, but technology, again, could be an opportunity. So I guess the question is, how do you think about

So I guess the question is how do you think about the new seat contribution for your growth algorithm in the context of double digits sustainable would you expect a bigger contribution from the application and content side of the the growth model and how to think about seats give then.

the new seat contribution for your growth algorithm in the context of double digits being sustainable, would you expect a bigger contribution from the application and content side of the growth model and how to think about seats given the current macro backdrop?

The current macro backdrop.

Yeah. So we.

Yeah, so we absolutely think that we continue to see digitization tailwinds here, okay. Customers are absolutely turning to technology to wrestle with some of these problems and solve

We absolutely think that we continue to see Digitation digitization tailwind here okay.

<unk> are absolutely turning to technology to wrestle with some of these problems and solve some of these things and if you look at the strategy around double digit growth and where were going you see a lot of things working first off let's just pausing them.

And if you look at the strategy around double-digit growth and where we're going, you see a lot of things work.

First off, let's just pause and I don't want to say this too many times, but the business is doing strong and that's setting a floor on some of our growth. Also, I wanted you to notice some of the things that happened with non-compliant revenue. We grew 50 percent year over year, reflecting the compare to kind of the slowdown we did in the COVID in 2020 and around the pandemic.

When I say this too many times, but the business is doing strong in that setting a floor on some of our growth also I wonder if you didn't notice some of the things that happened with Noncompliant revenue, we grew 50% year over year, reflecting the compare to kind of a slow down we did in the in the Covid you're in the 2020.

The pandemic and we normalize the kind of like a 20 year plus 20% growth over the two year period, which shows nice steady growth in some of these things. So if you look at the business you see a lot of things working really well now if you look at the long term trends that are going to contribute and add it would be additive in terms of driving.

and we normalize the kind of like a 20-year, 20% growth over the two-year period, which

shows nice, steady growth in some of these things. So you look at the business, you see a lot of things working really well. Now, if you look at the long-term trends that are gonna contribute and be additive in terms of driving

The double digit growth the Digitization is there.

the double-digit growth. The digitization there.

The tailwinds continue, customers are telling us more and more they want to go deeper, deeper, deeper in digitization. And we're seeing strong adoption, like for instance, in construction with our largest EBA customers and some of our largest GCs. We're seeing strong adoption of Construction Cloud. We're integrating Construction Cloud more deeply into some of these relationships.

The tailwind continue customers are telling us more and more they want to go deeper deeper deeper in Digitization and we're seeing strong adoption like for instance in construction with our largest EMEA customers and some of our largest GCE is we're seeing strong adoption of construction cloud or integrate and construction cloud more deeply into some of these relationships. If you look at some of the incremental.

If you look at some of the incremental drivers we were talking about with regards to business model capabilities and some of the things associated with it, we're continuing to see strong growth there in terms of new types of subscription models, non-compliant users. And then when we talk about the long tail,

Drivers, we were talking about with regards to business model capabilities and some of the things associated this we're continuing to see strong growth. There in terms of new types of subscription models Noncompliant users and then when we talk about the long tail well, it's really early days with the flex model and I want to make sure that we always say, it's early days with the flex model one of the things.

We're seeing with flex is exactly what we expected to see we're seeing a larger a large percent of flex business coming into net new.

Another chunk of our flex business coming in as these occasional usage buyers quite people that classically bought.

Network licences previously and another chunk of a business where people trying and using.

more advanced products and products they weren't going to use previously.

More advanced products and products, they werent going to use previously.

Those trends are exactly the kind of trends we want to see with offerings like this. And as time goes on and we get more more experience with Flex, we expect those trends to continue. So all of the things that we're we're pursuing to drive double digit growth are working.

Those trends are exactly the kind of trends, we want to see with offerings like this and as time goes on and we get more experience with flex we expect those trends to continue so all of the things that we're pursuing to drive double digit growth are working right now and that's what gives us confidence as we move forward into the FY 'twenty three.

$24 25, and beyond is it everything we're doing right now is working if something was showing softness or not working then I then I wouldn't have the confidence I have right now, but everything is working in terms of the things. We're pursuing these transient impacts that we're seeing right now.

There are obvious they're systemic everybody's seeing them you can you can measure them systematically in terms of what's going on out there. These will pass the question is when will they pass.

Great. Thank you very much.

Thank you. Our next question comes from Sterling Auty of J P. Morgan Your question. Please.

Thank you. Our next question comes from Sterling Odie of J.P. Morgan. Your question please.

Yeah, thanks. Hi, guys. Andrew, if you put yourself in the seat of the investor, we're all seeing the headlines of the supply chain constraints, et cetera. But what, if you were an investor, would you be looking at to help us monitor to possibly get a handle on when some of these pressures are alleviating and your business is starting to inflect upward again?

Yeah. Thanks, Hi, guys, Andrew if you put yourself in the sea of the Investor We're all seeing the headlines of the supply chain constraints et cetera.

What if you were an investor would you be looking at to help us monitor to possibly get a handle on when some of these pressures are alleviating and your business is starting to inflect upward again.

Yeah, Okay. So [laughter], so you're asking me to kind of be the predictor of when when somebody's supply chain pressures that go to unwind look I'll tell you what worked well.

Yeah. Okay. So you're asking me to kind of be the predictor of when some of these supply chain pressures are going to unwind. Look, I'll tell you what we're looking at. No. I'm not asking for a time. I'm asking for what are some of the data points that would signal that it's getting better out of time.

I'm not I'm not asking for a time I'm asking for what are some of the you know the data points that would signal that's getting better.

One of the data points we look at is the cost of freight. For instance, the cost of freight has been going up and up and up as you've been seeing this capacity compaction with regards to moving things. That's one metric you just sit there and look at and say, hey, if the cost of freight goes down, that's a sign that...

Yeah, Okay. So look one of the one of the one of the data points. We look at is the cost of freight okay. So for instance.

People are just.

The cost of freight has been going up and up and up as you've been seeing this capacity compaction with regards to moving things. So you know that's one metric you just sit there and look at it and say Hey is the cost of freight goes down that's a sign that.

Flow through and throughput is starting to soften up okay. So that's one that's one thing.

flow through and throughput is starting to soften up. Okay, that's one thing that's out there. Another thing is some of the costs of the core commodities that our customers, I mean, let's face it, wood.

Out there and the other thing is as some of the cost of the core commodities that our customers are I mean, let's face. It would okay. I mean, I know that sounds trivial, but the cost of wood and some of them in some of our AC is a big deal right.

Okay, I mean, I know that sounds true, but the cost of wood.

in some of our ACs, it's a big deal, right? If your cost of wood or wood-based materials goes up 20, 30, 40% on a fixed bid contract, what is that doing to your ability to export?

If you would if your cost of wood or wood based materials goes up 2030, 40% on a fixed bid contract what is that doing to your ability to execute so you look at cost of freight we look at cost of wood.

So you look at cost of freight, you look at cost of wood and the things associated with that, and those have direct impact. The cost of any commodity going into manufacturing is going to have impacts. The last thing that I think is...

And the things associated with that and those have direct impact the cost of any commodity going into manufacturing is going to have have impacts.

The last thing that I think is really interesting with regards to manufacturing some of these chip shipments starting to loosen loosen up and allowing people to kind of finish their machines.

really interesting with regards to manufacturing is some of these chip shipments starting to loosen up and allowing people to kind of finish their machines.

and make sure all the electronics are actually assembled and together. These are some of the things that all of us can look at to see how things are going. The cost of freight being right up there, the cost of wood and commodities associated with building things being out in front. We're going to continue to look at the monthly active usage, because for us, that's a predictor of people doing more with the product.

And make sure all the electronics are actually.

Symbols and together. So these are some of the things that all of US can look at to see how things are going.

The cost of freight being right up there the cost of wood and commodities associated with building things being out in front, we're going to continue to look at the monthly active usage because for us that's a predictor of people doing more with the products and that will probably follow some of these other indicators changing.

and that will probably follow some of these other indicators changing. Does that make sense?

Does that makes sense sterling.

It does thank you.

You're welcome.

Thank you at this time I'd like to turn the call back over to Simon Mays Smith for closing remarks, Sir.

Thank you. At this time, I'd like to turn the call back over to Simon Mae Smith for closing remarks, sir.

Okay.

Yeah.

Clarence, we'll close in a minute as soon as it's here, as soon as it's debutted.

So I'm gonna go clothes in a minute as soon as he or she.

This new patent.

Well, it's properly here.

Sorry, I was muted. I apologize. I'll repeat myself. Thanks. Thank you, Lateef. Thanks, everyone, for attending. We'll look forward to catching up with you next quarter. If you have any follow-up questions, please do ping the IR team. In the meantime, have a very happy Thanksgiving and happy holidays. Thanks very much, everyone.

Alright.

Is it.

As always I repeat myself. Thanks, Thank you Lucy.

Thanks, everyone for attending.

Look forward to catching up with you next quarter. If you have any follow up questions. Please to ping the IR team in the meantime have a very happy Thanksgiving and happy holidays, thanks, very much everyone.

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

And this concludes today's conference call. Thank you for participating. You may now.

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