Q2 2025 Autodesk Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the Q2 Fiscal 25 Autodesk Earnings Conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw a question, please press star one one again. I would now like to hand the conference over to your speaker today, Simon Mays-Smith, Vice President, Investor Relations.

Speaker Change: Good day and thank you for standing by. Welcome to the Q2 fiscal 25 auto-desk earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1, one on your telephone, and wait for your name to be announced. To with a dryer question, please press star 1, one again. I would not like to end the conference over to your speaker today. Simon Mays Smith

Simon Mays-Smith: Thanks operator, and good afternoon. Thank you for joining our conference call to discuss the second quarter results of Autodesk Fiscal 25. On the line with me is Andrew Anagnost, our CEO, and Betsy Rafael, our Interim CFO. During this call, we will make forward-looking statements including outlook, and related assumptions, products, and strategies. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release, for important risks and other factors that 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. 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 statements.

Simon Mays-Smith: Operator, and good afternoon. Thank you for joining our conference call to discuss the second quarter results of Autodesk Fiscal 25. On the line with me is Andrew Anagnost, our CEO, and Betsy Rafael, our Interim CFO. During this call, we will make forward-looking statements including outlook, and related assumptions, products, and strategies. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release, for important risks and other factors that 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. 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 statements.

Speaker Change: Thanks, Operator, and good afternoon. Thank you for joining our conference school to discuss the second quarter results of Order that SpitzGold 25.

Speaker Change: and I'm Dr. Andrew Anagnost, our CEO and Betsy Raffell are Andrew and CFO.

Speaker Change: During this call, we will make forward-looking statements, including outlook and related assumptions, products and strategies.

Speaker Change: Actual events or results could differ materially. Please refer to our SEC findings, including our most recent form 10Q, and the former 8K, filed with today's press release, for important risks and other factors that may cause our actual results to vithers from those in our forward living statements.

Speaker Change: For looking statements made during the call, 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.

Speaker Change: Order Death Disclaimed any obligation to update or revise any forward-looking statements.

Simon Mays-Smith: We will quote several numeric or growth changes during this call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year on year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release or Excel Financials and other supplemental materials available on our Investor Relations website. Now I will turn the call over to Andrew. Thank you, Simon, and welcome everyone to the call. We finished the second quarter and first half of the year strongly, delivering 13% revenue growth and constant currency in both periods, and have raised guidance for the full year, reflecting the sustained momentum of the business and the smooth launch of the new transaction model in North America in June and expected launch in Western Europe in September. Once again, opportunity, resilience, and discipline underpinned our performance in March.

We will quote several numeric or growth changes during this call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year on year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release or Excel Financials and other supplemental materials available on our Investor Relations website. Now I will turn the call over to Andrew.

Speaker Change: We will quote several numeric or growth changes during this call as we discuss our financial performance. And that's otherwise noted each such reference represents a year-on-year comparison.

Speaker Change: All non-gat numbers reference in state's call are reconciled in our press release or Excel financials and other supplemental materials available on our Investor Relations website. And now I will turn the call over to Andrew.

Andrew Anagnost: Thank you, Simon, and welcome everyone to the call. We finished the second quarter and first half of the year strongly, delivering 13% revenue growth and constant currency in both periods, and have raised guidance for the full year, reflecting the sustained momentum of the business and the smooth launch of the new transaction model in North America in June and expected launch in Western Europe in September. Once again, opportunity, resilience, and discipline underpinned our performance in March.

Andrew Anagnost: Thank you, Simon, and welcome everyone to the call. We finished the second quarter in 1st half of the year strongly, delivering 13% revenue growth and constant currency in both periods, and have raised guidance for the full year reflecting the sustain momentum of the business.

Andrew Anagnost: and the smooth launch of the New Transaction Model in North America and June, an expected launch in Western Europe in September.

Andrew Anagnost: Once again, Opportunity, Resilience and Discipline, Under-Pend Our Performance.

Simon Mays-Smith: Last year we laid out the secular growth trends in our markets, from accelerating digital transformation in Architecture, Engineering, and Construction or AEC, to the transition to the cloud in manufacturing, media, and entertainment. These secular trends are driving customers to break down siloed workflows and seamlessly connect data end to end. Real-world experiences from remote collaboration to supply chain disruption and AI are reinforcing these trends. We are aggressively pursuing our strategy to benefit from these secular trends including the development of next generation technology and services, end to end digital transformation, and unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries.

Last year we laid out the secular growth trends in our markets, from accelerating digital transformation in Architecture, Engineering, and Construction or AEC, to the transition to the cloud in manufacturing, media, and entertainment. These secular trends are driving customers to break down siloed workflows and seamlessly connect data end to end. Real-world experiences from remote collaboration to supply chain disruption and AI are reinforcing these trends. We are aggressively pursuing our strategy to benefit from these secular trends including the development of next generation technology and services, end to end digital transformation, and unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries.

Andrew Anagnost: In March last year, we laid out the secular growth trends in our markets from accelerating digital transformation in architecture, engineering and construction, or AEC, to the transition to the cloud in manufacturing and meeting entertainment.

Andrew Anagnost: The secular trends are driving customers to break down pilot workloads and seamlessly connect data in the end.

Andrew Anagnost: Real-world experiences from remote collaboration to supply chain disruption and AI are reinforcing these trends.

Andrew Anagnost: We are aggressively pursuing our strategy to benefit from these secular trends.

Andrew Anagnost: including the development of next-generation technology and services, and the end digital transformation and you need growth and able or such as business model evolution, customer experience evolution, and convergence between industries.

Simon Mays-Smith: Our investments in cloud, platform, and AI in pursuit of these growth opportunities and ahead of our peers enable Autodesk to provide its customers with ever more valuable and connected solutions and to support a much broader customer and developer ecosystem and marketplace. While macroeconomic policy, geopolitical, and one-off factors like the Hollywood strikes have impacted industry growth, Autodesk subscriptions model and diversified product and customer portfolio have proven resilient. The underlying momentum of the business and key performance indicators remain consistent with previous quarters as evidenced by increased product usage, record bid activity on BuildingConnected, and cautious optimism from our channel partners. We realize the significant benefits of this strategy for shareholders through our disciplined and focused execution and capital deployment throughout the economic cycle.

Our investments in cloud, platform, and AI in pursuit of these growth opportunities and ahead of our peers enable Autodesk to provide its customers with ever more valuable and connected solutions and to support a much broader customer and developer ecosystem and marketplace. While macroeconomic policy, geopolitical, and one-off factors like the Hollywood strikes have impacted industry growth, Autodesk subscriptions model and diversified product and customer portfolio have proven resilient. The underlying momentum of the business and key performance indicators remain consistent with previous quarters as evidenced by increased product usage, record bid activity on BuildingConnected, and cautious optimism from our channel partners. We realize the significant benefits of this strategy for shareholders through our disciplined and focused execution and capital deployment throughout the economic cycle.

Andrew Anagnost: Our investments in cloud, platform, and AI in pursuit of these growth opportunities, and ahead of our peers, enable Autodesk to provide its customers with ever more valuable and connected solutions and to support a much broader customer and developer ecosystem and marketplace.

Speaker Change: While macroeconomic, policy, geopolitical and one-off factors like the Hollywood strike has impacted industry growth.

Speaker Change: Autodesk subscription model and diversified products and customer portfolio have proven resilience.

Speaker Change: The underlying momentum of the business and key performance indicators remain consistent with previous quarters as evidence by increased product usage, record bid activity on building connected and cautious optimism from our channel partners.

Speaker Change: We realize a significant benefit of this strategy for shareholders through our disciplined and focused execution and capital deployment to out the economic cycle.

Simon Mays-Smith: These investments mitigate the risk of expensive catch-up investments in the future and support sustained revenue, margin, and free cash flow growth. To support our growth initiatives and margin improvement, we have been modernizing our go-to-market approach to create more durable and direct relationships with our customers and to serve them more efficiently. We are transforming our platform to enable greater engineering velocity and efficiency to support a broader customer and developer ecosystem and marketplace. We have already seen significant benefits from initiatives like these, and there's more to come. Stripping out the effects on margins from FX and the new transaction model, we expect to be towards the midpoint of our fiscal '26 non-GAAP operating margin target of 38% to 40% in fiscal '25, a year ahead of schedule and representing about 300 basis points of improvement since fiscal '23.

These investments mitigate the risk of expensive catch-up investments in the future and support sustained revenue, margin, and free cash flow growth. To support our growth initiatives and margin improvement, we have been modernizing our go-to-market approach to create more durable and direct relationships with our customers and to serve them more efficiently. We are transforming our platform to enable greater engineering velocity and efficiency to support a broader customer and developer ecosystem and marketplace. We have already seen significant benefits from initiatives like these, and there's more to come. Stripping out the effects on margins from FX and the new transaction model, we expect to be towards the midpoint of our fiscal '26 non-GAAP operating margin target of 38% to 40% in fiscal '25, a year ahead of schedule and representing about 300 basis points of improvement since fiscal '23.

Speaker Change: These investments mitigate the risk of expensive catch-up investments in the future and support sustained revenue, margin and free cash flow growth.

Speaker Change: To support our growth initiatives and margin improvement, we have been modernizing our go-to-market approach to create more durable and direct relationships with our customers.

Speaker Change: and to serve them more efficiently.

Speaker Change: And we are transforming our platform to enable greater engineering velocity and efficiency to support a broader customer and developer ecosystem and marketplace.

Speaker Change: We have already seen significant benefits from initiatives like these, and there's more to come.

Speaker Change: Stripping out the effects of margins from FX and the new transaction model, we expect to be towards the midpoint of our fiscal 26 non-gap operating margin targets of 38 to 40%.

Speaker Change: in Cisco 25, a year ahead of schedule and representing about 300 basis points of improvement since Cisco 23.

Simon Mays-Smith: We are confident we will make further improvements in Fiscal 26 on the same basis. Once complete, we expect the new transaction model and subsequent go-to-market optimization to increase sales and marketing efficiency and deliver GAAP margins among the best in the industry. Non-GAAP operating profit including stock-based compensation costs will become a key metric to track as we make this transition attractive. Long-term secular growth markets, a focused strategy delivering ever more valuable and connected solutions to our customers, and a resilient business model are generating strong and sustained momentum both in absolute terms and relative to peers. Disciplined execution and capital deployment is driving even further operational velocity and efficiency within Autodesk and will underpin the multi-year build of revenue and free cash flow over the next few years and GAAP margins among the best in the industry.

We are confident we will make further improvements in Fiscal 26 on the same basis. Once complete, we expect the new transaction model and subsequent go-to-market optimization to increase sales and marketing efficiency and deliver GAAP margins among the best in the industry. Non-GAAP operating profit including stock-based compensation costs will become a key metric to track as we make this transition attractive. Long-term secular growth markets, a focused strategy delivering ever more valuable and connected solutions to our customers, and a resilient business model are generating strong and sustained momentum both in absolute terms and relative to peers. Disciplined execution and capital deployment is driving even further operational velocity and efficiency within Autodesk and will underpin the multi-year build of revenue and free cash flow over the next few years and GAAP margins among the best in the industry.

Speaker Change: We are confident we will make further improvements in fiscal 20s, it's on the same basis.

Speaker Change: One's complete, we expect a new transaction model in subsequent go-to-market optimization to increase sales and marketing efficiency and deliver gap margins among the best in the industry.

Speaker Change: Non-Gap Operating CrossFit, including stock-based compensation costs, will become a key metric to track as we make this transition.

Speaker Change: A attractive long-term, thick-of-the-growth market.

Speaker Change: A focus strategy delivering ever more valuable and connected solutions to our customers.

Speaker Change: and a resilient business model are generating strong and sustained momentum both in absolute terms and relative to peers.

Speaker Change: is the blend execution and capital deployment is driving even further operational velocity and efficiency within our desk and will underpin the mechanical build of revenue and free cash well over the next few years and get margins among the best in the industry.

Simon Mays-Smith: We expect the pace of buybacks to buy forward dilution will pick up into fiscal 2026. As our free cash flow builds from the fiscal 2024 trough, we expect this to result in a further reduction in shares outstanding over time, continuing the capital return trend of the last few years. In combination, we believe these factors will deliver sustainable shareholder value over many years. I'd like to welcome Betsy and thank her for stepping in as interim CFO, and will now turn the call over.

We expect the pace of buybacks to buy forward dilution will pick up into fiscal 2026. As our free cash flow builds from the fiscal 2024 trough, we expect this to result in a further reduction in shares outstanding over time, continuing the capital return trend of the last few years. In combination, we believe these factors will deliver sustainable shareholder value over many years. I'd like to welcome Betsy and thank her for stepping in as interim CFO, and will now turn the call over to her to take you through the details of our quarterly financial performance and guidance from the year. I'll then come back and to provide an update on our strategic growth initiatives.

Speaker Change: We expect to pay the buybacks to buy full resolution will pick up in the fiscal 2016 as our pre-cast will build from the fiscal 24-Troth. We expect this to result in a further reduction in shares outstanding over time, continuing the capital return trend of the last few years.

Speaker Change: In combination, we believe these factors will deliver sustainable, shareholder value over many years.

Speaker Change: I'd like to welcome Betsy and thank her for stepping in at interim CFO and will now turn the call over to her to take you through the details of our quarterly financial performance and guidance for the year. I'll then come back and to provide an update on our strategic growth initiative.

Operator: To her to take you through the.

Simon Mays-Smith: Details of our quarterly financial performance and guidance from the year. I'll then come back and to provide an update on our strategic growth initiatives.

Operator: Thanks, Andrew. Q2 was a strong quarter. We generated broad-based growth across products and regions in AEC and manufacturing, which was partly offset by softness in media and entertainment, primarily due to the lingering effects of the Hollywood strike. Our Make business continues to enhance growth driven by ongoing strength in construction and Fusion. Overall, macroeconomic policy and geopolitical challenges and the underlying momentum of the business were consistent with the last few quarters and included strong renewal rates but softer new business in China, and Korea. The new transaction model did not make a material contribution to our second quarter results. In his opening remarks, Andrew discussed the benefits we expect to derive from our go-to-market initiatives, which support our growth and ongoing margin improvement.

Betsy Rafael: Thanks, Andrew. Q2 was a strong quarter. We generated broad-based growth across products and regions in AEC and manufacturing, which was partly offset by softness in media and entertainment, primarily due to the lingering effects of the Hollywood strike. Our Make business continues to enhance growth driven by ongoing strength in construction and Fusion. Overall, macroeconomic policy and geopolitical challenges and the underlying momentum of the business were consistent with the last few quarters and included strong renewal rates but softer new business in China, and Korea. The new transaction model did not make a material contribution to our second quarter results. In his opening remarks, Andrew discussed the benefits we expect to derive from our go-to-market initiatives, which support our growth and ongoing margin improvement.

Betsy Raffell: Thank you, Andrew. QQ was a strong quarter. We generated broad-based growth across products and regions in ADC and Vigno Factory, which was partly offset by softness in media and entertainment.

Speaker Change: Primarily due to the lingering effect of the Hollywood strike.

Speaker Change: are make business continues to enhance growth driven by ongoing strengths and construction confusion.

Speaker Change: Overall, macroeconomic, policy, and geosculetical challenges in the underlying momentum of the business, for two systems with the last three quarters, and included strong renewal rates, and but softer business new business in China in Korea.

Speaker Change: The New Transaction Model did not make the material contribution to our second quarter results.

Andrew Anagnost: In this opening remark, Andrew just has some benefits we expect to derive from our go-to-market initiatives, which support our growth and ongoing market increasingly.

Operator: Before I discuss revenue, billings, deferred revenue, RPO, and free cash flow, let me remind you of how these metrics naturally and mechanically evolve during the shift to annual billings for most multi year contracts as well as the new transaction model. The shift to annual billings for most multi year contracts moves billed deferred revenue into unbilled deferred revenue in our financial reporting. Unbilled deferred revenue would then not be included in deferred revenue on our balance sheet but would be included in our remaining performance obligations disclosure. Initially, this reduces billing, deferred revenue, and free cash flow as you saw in fiscal 2024, but is gradually becoming a tailwind to billings and free cash flow as our annually billed multi year cohorts rebuild. Metrics that include unbilled deferred revenue like RPO give a better view of performance during our transition to annual billing for most multi year contracts.

Before I discuss revenue, billings, deferred revenue, RPO, and free cash flow, let me remind you of how these metrics naturally and mechanically evolve during the shift to annual billings for most multi year contracts as well as the new transaction model. The shift to annual billings for most multi year contracts moves billed deferred revenue into unbilled deferred revenue in our financial reporting. Unbilled deferred revenue would then not be included in deferred revenue on our balance sheet but would be included in our remaining performance obligations disclosure. Initially, this reduces billing, deferred revenue, and free cash flow as you saw in fiscal 2024, but is gradually becoming a tailwind to billings and free cash flow as our annually billed multi year cohorts rebuild. Metrics that include unbilled deferred revenue like RPO give a better view of performance during our transition to annual billing for most multi year contracts.

Andrew Anagnost: before I discussed revenue failing deferred revenue, RTO and free cash flow.

Speaker Change: Let me remind you of how these metrics naturally and mechanically evolve during the fifth to annual buildings for most multi-year contracts, as well as the Nutransaction model.

Speaker Change: The ship to annual buildings for most multi-year contracts moved bills to preferred revenue into unspilced financial reporting.

Speaker Change: Unbuild deferred revenue would then not be included in deferred revenue on our balance sheet, but would be included in our remaining performance obligations disclosure.

Speaker Change: and Nicely, this reduces billing, deferred revenue, and free cash flow as you saw at fiscal 24. But it's gradually becoming a talent to billing and free cash flow as our annually billed multi-year cohorts rebuild.

Speaker Change: Metrics that include unveiled the third revenue like RPO, give a better view of performance during our transition to annual billing for most multi-year contracts.

Operator: And as we have said before, we will continue to offer multi-year contracts billed up front in certain circumstances such as in emerging countries where there is increased credit risk if not received up front on the Autodesk store until we enable system changes to offer annual billing, and of course on an exception basis when it is driven by customer preference such as for our non-cloud-enabled offerings. Just to give you some context on scale, multi-year contracts billed up front incrementally contributed less than 5% of total billings in the second quarter. The new transaction model also has mechanical and timing impacts on billings, deferred revenue, revenue, and operating costs. The amount of impact is determined by the pace of the model rollout. In addition, channel partner and customer behavior can also impact the results.

And as we have said before, we will continue to offer multi-year contracts billed up front in certain circumstances such as in emerging countries where there is increased credit risk if not received up front on the Autodesk store until we enable system changes to offer annual billing, and of course on an exception basis when it is driven by customer preference such as for our non-cloud-enabled offerings. Just to give you some context on scale, multi-year contracts billed up front incrementally contributed less than 5% of total billings in the second quarter. The new transaction model also has mechanical and timing impacts on billings, deferred revenue, revenue, and operating costs. The amount of impact is determined by the pace of the model rollout. In addition, channel partner and customer behavior can also impact the results.

Speaker Change: And as we have said before, we will continue to offer multi-year contracts build up front in certain circumstances.

Speaker Change: Such that in emerging countries where there is increased credit risk, it's not received at first.

Speaker Change: On the other desk door, until we enable system changes to offer annual billing, and of course, on an exception basis, when it is driven by custom compressors, such as for our non-cloud enables offering.

Speaker Change: Just to give you some context on scale, multi-year contracts build up front, incrementally contributed less than 5% of total billing in the second quarter.

Speaker Change: The new transaction model also has mechanical and timing impacts on billing, deferred revenue, revenue and operating cost.

Speaker Change: The amount of impact is determined by the pace of the model roll-out.

Speaker Change: In addition, channel partner and customer behavior can also impact the results.

Operator: The mechanical impact is due to the way channel partner payments are recognized and accounted for in the P&L. Under the old or the buy-sell model, channel partner payments are deducted from gross billings and revenue. We then report net billings and net revenue. Conversely, in the new transaction model, we record channel partner payments in sales and marketing expense. So as we shift from the old model to the new, there is an increase in billing, deferred revenue, revenue, and sales and marketing expense. That increase in revenue and operating costs resulting from the change in the way the channel partner payments are recognized and accounted for flows ratably through revenue and cost in the P&L over time, and the overall pace of that transition is determined by when we launch the new transaction model into each geography.

The mechanical impact is due to the way channel partner payments are recognized and accounted for in the P&L. Under the old or the buy-sell model, channel partner payments are deducted from gross billings and revenue. We then report net billings and net revenue. Conversely, in the new transaction model, we record channel partner payments in sales and marketing expense. So as we shift from the old model to the new, there is an increase in billing, deferred revenue, revenue, and sales and marketing expense. That increase in revenue and operating costs resulting from the change in the way the channel partner payments are recognized and accounted for flows ratably through revenue and cost in the P&L over time, and the overall pace of that transition is determined by when we launch the new transaction model into each geography.

Speaker Change: The mechanical impact is due to the way channel partner payments are recognized in a counted or in between now.

Speaker Change: Under the old or the bicell model, panel partner payments are deducted from gross

Speaker Change: We then report net filling and net revenue.

Speaker Change: Conversely, in the new Transaction Model, we record channel partner payments in sales and marketing expenses.

Speaker Change: So, as we shift from the old model to the new, there is an increase in building, the bird revenue, revenue.

Speaker Change: and Sales and Marketing Service.

Speaker Change: That increase in revenue and operating cost, resulting from the change in the way the channel partners payments are recognized at accounting for.

Speaker Change: Flowed rapidly through revenue and cost in the P&L over time.

Speaker Change: and the overall pace of that transition is determined by when we launch the new Transaction Model into each geographically.

Operator: In the short term, moving the P&L geography of channel partner payments from contra revenue to sales and marketing expense creates a headwind to the operating margin percentage, but it's really broadly neutral to operating profit and free cash flow dollars. But over the long term we expect that this transition to the new transaction model will enable us to further optimize our business, which we anticipate will provide a tailwind to revenue and deliver GAAP margins among the best in the industry. On mechanically higher revenue and despite mechanically higher costs, channel partner and customer behavior during the rollout of the new transaction model are much harder to predict and model. For example, with channel partners better prepared ahead of launch, more customers in North America and Australia co-termed their contract expiration to align the timing of renewals across their business.

In the short term, moving the P&L geography of channel partner payments from contra revenue to sales and marketing expense creates a headwind to the operating margin percentage, but it's really broadly neutral to operating profit and free cash flow dollars. But over the long term we expect that this transition to the new transaction model will enable us to further optimize our business, which we anticipate will provide a tailwind to revenue and deliver GAAP margins among the best in the industry. On mechanically higher revenue and despite mechanically higher costs, channel partner and customer behavior during the rollout of the new transaction model are much harder to predict and model. For example, with channel partners better prepared ahead of launch, more customers in North America and Australia co-termed their contract expiration to align the timing of renewals across their business.

Speaker Change: In the short term, moving to P&LGography at Channel Park repayments from Contravenue to sales and marketing expense creates a headwind to the operating margin percentage, but it's really broadly mutual to operating profit in three cash worth dollars.

Speaker Change: But over the long term.

Speaker Change: We expect this transition to the new transaction model will enable us to further optimize our business.

Speaker Change: which we anticipate will provide a talent to revenue and deliver gap margins among the best in the industry on mechanically higher revenue, in the spite of mechanically higher cost.

Speaker Change: Channel partner in customer behavior during the rollout of the new transaction model are much harder to predict in model.

Speaker Change: For example, the Channel Partners better prepared ahead of launch, more customers in North America in Australia's co-turned their contract expiration to align the timing of the rules across their business.

Operator: This had a negative impact on the timing of billings and deferred revenue. As we've seen many times before, co-termed contracts actually create an opportunity for larger contracts on renewal. As we elevate our relationship with customers from subsidiary to company-wide. Along with more self-service functionality, it also enabled us to reduce administrative costs and serve our customers more efficiently. While activity in the second quarter was probably more tactical in nature, co-terming is one of the expected benefits of the new transaction model and will be one of the drivers of our margin momentum over the coming years. As I'll discuss, this creates timing headwinds but is not a change in the underlying momentum of the business.

This had a negative impact on the timing of billings and deferred revenue. As we've seen many times before, co-termed contracts actually create an opportunity for larger contracts on renewal. As we elevate our relationship with customers from subsidiary to company-wide. Along with more self-service functionality, it also enabled us to reduce administrative costs and serve our customers more efficiently. While activity in the second quarter was probably more tactical in nature, co-terming is one of the expected benefits of the new transaction model and will be one of the drivers of our margin momentum over the coming years. As I'll discuss, this creates timing headwinds but is not a change in the underlying momentum of the business.

Speaker Change: This had a negative impact on the timing of buildings in the bird rabbit.

Speaker Change: and as we see many times before, co-term contracts actually create an opportunity for larger contract on renewal, but we element our relationship with customers from the city area to come to the U.S.

Speaker Change: Along with more sub-service functionality, it also enables us to reduce administrative costs and serve our customers more efficiently.

Speaker Change: While activity in the second quarter was probably more tactical in nature, co-terming is one of the spec and benefits of the new transaction model, and will be one of the drivers of our marginal investment over the coming years.

Speaker Change: As I've discussed, this creates timing headwind, but has not a change in the underlying momentum of the distance.

Operator: We'll give you much more detail about the impact of the new transaction model on Fiscal 25 results and the expected impact on Fiscal 26 when we report our full year results next February. So now let's move on to the results. Total revenue grew 12% and 13% in constant currency by product. In constant currency, AutoCAD and AutoCAD LT revenue grew 8%, AEC revenue grew 15%, manufacturing revenue grew 17%, and in the low teens excluding upfront revenue ME grew 5%. Revenue grew 13% in all regions on a constant currency basis. Direct revenue increased 21% and represented 40% of total revenue, up 3 percentage points from last year, benefiting from strong growth in both EBAs and the Autodesk stores. Net revenue retention rate remained within the 100 to 110% range at constant exchange rate.

We'll give you much more detail about the impact of the new transaction model on Fiscal 25 results and the expected impact on Fiscal 26 when we report our full year results next February. So now let's move on to the results. Total revenue grew 12% and 13% in constant currency by product. In constant currency, AutoCAD and AutoCAD LT revenue grew 8%, AEC revenue grew 15%, manufacturing revenue grew 17%, and in the low teens excluding upfront revenue ME grew 5%. Revenue grew 13% in all regions on a constant currency basis. Direct revenue increased 21% and represented 40% of total revenue, up 3 percentage points from last year, benefiting from strong growth in both EBAs and the Autodesk stores. Net revenue retention rate remained within the 100 to 110% range at constant exchange rate.

Speaker Change: We'll give you much more detail about the impact of the Nutrients Act model on fiscal 25 results and the expected impact on fiscal 26 when we report our full year results next February.

Speaker Change: and now let's move on to the results.

Speaker Change: Total revenue groups agree 12% and 13% in continued currency.

Speaker Change: By Product and Concenting Currency, AutoCAD in AutoCAD LTE with a new Group 8% ABC revenue group 15%, manufacturing revenue group 17% and in the low teams excluding upfront revenue.

Speaker Change: and Emily Group 5%.

Speaker Change: Revenue is 13% in all regions on a constant currency basis.

Speaker Change: Directs revenue increase 21%.

Speaker Change: and Representative 40% of total revenue, up 3% of points from last year, benefiting from front growth in both EBA and the Autodesk storm.

Speaker Change: Next revenue retention rate remained within 110% range at constant exchange rate.

Operator: Billings increased 13% in the quarter, reflecting a modest tailwind from the prior year shift to annual billings for most multi-year contracts and a mechanical tailwind of approximately 2% from the transition to the new transaction models. Billings were also negatively impacted by more co-terming. Total Deferred Revenue decreased 13% to $3.7 billion and was again impacted by the transition from upfront to annual billing for multi-year contracts. Total RPO of $5.9 billion and current RPO of $3.9 billion grew 12% and 11%, respectively. Turning to margin, GAAP and non-GAAP gross margins were broadly level, while GAAP and non-GAAP operating margins increased by 4 and 1 percentage points, respectively, at current course and speed.

Billings increased 13% in the quarter, reflecting a modest tailwind from the prior year shift to annual billings for most multi-year contracts and a mechanical tailwind of approximately 2% from the transition to the new transaction models. Billings were also negatively impacted by more co-terming. Total Deferred Revenue decreased 13% to $3.7 billion and was again impacted by the transition from upfront to annual billing for multi-year contracts. Total RPO of $5.9 billion and current RPO of $3.9 billion grew 12% and 11%, respectively. Turning to margin, GAAP and non-GAAP gross margins were broadly level, while GAAP and non-GAAP operating margins increased by 4 and 1 percentage points, respectively, at current course and speed.

Speaker Change: Billings increased 13% in the quarter reflecting a modest tailwind from the prior year shift to annual billing for most of your contracts.

Speaker Change: and a mechanical tailwind of approximately 2% from the transition to the new transaction models.

Speaker Change: Billings were also negatively impacted by most more co-chirming.

Speaker Change: Total deferred revenue decrease 13% to 3.7 billion. And once again, impacted by the transition from upfront to annual billing for most of your contracts.

Speaker Change: Total RPO of 5.9 billion and current RPO of 3.9 billion grew 12% and 11% respectively.

Speaker Change: Turning to Barton, Gap and non-Gap Groups margins were proudly left.

Speaker Change: While gaps in non-gap operating margins increased by four and one percentage points effectively.

Operator: The ratio of stock-based compensation as a percentage of revenue peaked in fiscal 2024, will fall by more than a percentage point in fiscal 2025, and will be below 10% over time. Free cash flow for the quarter was $203 million. As we said might happen back in February, some channel partners in North America booked business earlier in the quarter ahead of the transition to the new transaction model to de-risk month one. After the transition, this accelerated free cash flow to the second quarter, which was partially offset by the negative impact of more co-terming. Turning to capital allocation, we continue to actively manage capital within our framework and deploy it with discipline and focus through the economic cycle to drive long-term shareholder value.

The ratio of stock-based compensation as a percentage of revenue peaked in fiscal 2024, will fall by more than a percentage point in fiscal 2025, and will be below 10% over time. Free cash flow for the quarter was $203 million. As we said might happen back in February, some channel partners in North America booked business earlier in the quarter ahead of the transition to the new transaction model to de-risk month one. After the transition, this accelerated free cash flow to the second quarter, which was partially offset by the negative impact of more co-terming. Turning to capital allocation, we continue to actively manage capital within our framework and deploy it with discipline and focus through the economic cycle to drive long-term shareholder value.

Speaker Change: at Current Course in Speed, the ratio of clock-based compensation as a percentage of revenue.

Speaker Change: Peace in fiscal 24 will fall by more than a percentage point of fiscal 25 and will be below 10% over time.

Speaker Change: Free task flow for the quarter with 203 million.

Speaker Change: As we said, might happen back in a separate, some canaltarters in North America, both business earlier than quarter, ahead of the transition to the new transaction model, to dereg, month one after the transition.

Speaker Change: is the accelerated three-cats close to the second quarter, which was partially offset by the negative impact of most more co-turning.

Speaker Change: Studies at Capital Mallocation, we continue to actively manage capital within our framework and deploy it with disciplines and focus through the economic cycle to drive long-term shareholder value.

Operator: During the second quarter, we purchased approximately 471,000 shares for $115 million, which is an average price of approximately $245 per share. We do expect the pace of buybacks to pick up during the second half of the year as we had very minimal purchases in the first half. We will also continue to deploy capital to offset dilution into fiscal 26 as our free cash flow grows from the fiscal 24 trough generated by the transition from upfront to annual billing. Again, for most multiyear contracts, we will continue to buy forward dilution, which we expect to result in a further reduction in shares outstanding over time. Continuing the capital return trend of the last few years, we have reduced our share count by about 5 million shares over the last three years, with an average percentage reduction of about 70 basis points.

During the second quarter, we purchased approximately 471,000 shares for $115 million, which is an average price of approximately $245 per share. We do expect the pace of buybacks to pick up during the second half of the year as we had very minimal purchases in the first half. We will also continue to deploy capital to offset dilution into fiscal 26 as our free cash flow grows from the fiscal 24 trough generated by the transition from upfront to annual billing. Again, for most multiyear contracts, we will continue to buy forward dilution, which we expect to result in a further reduction in shares outstanding over time. Continuing the capital return trend of the last few years, we have reduced our share count by about 5 million shares over the last three years, with an average percentage reduction of about 70 basis points Points per.

Speaker Change: During the second quarter, we purchased approximately 471,000 shares for a $150 million dollars.

Speaker Change: which is an average price of approximately 245 dollars per share.

Speaker Change: We do expect to pay supply back to kick up during the second half of the year and we have very minimal purchases in the first half.

Speaker Change: We will also continue to deploy capitals to off that solution into fiscal 26th as our free cash flow grows from the fiscal 24th drop generated by the transition from upfront to annual billing.

Speaker Change: Again, to mark most multi-year contract.

Speaker Change: We will continue to buy forward deletions, which we expect to result in a further reduction in care that standing over time.

Speaker Change: Continuing the Capitol Returning of the last few years.

Speaker Change: We have reduced our share count by about 5 million shares over the last three years, with an average percentage reduction of about 70-based supports per year.

Simon Mays-Smith: Points per.

Operator: Now, let me finish with guidance. As we said in February, the pace of the rollout of the new transaction will create noise in billing and the P&L, so we think free cash flow is the best measure of our performance. Taking out that noise, the underlying momentum in the business remains consistent with the expectations embedded in our guidance range for the full year. Our sustained momentum in the second quarter and the smooth launch of the new transaction model in North America reduce the likelihood of our more cautious forecast scenarios. Given that we're raising the midpoint of our billing revenue, earnings per share, and free cash flow guidance ranges, let me give you a little bit more detail. The underlying momentum of billings is in line with our expectations, but two of our modeling assumptions have changed.

Now, let me finish with guidance. As we said in February, the pace of the rollout of the new transaction will create noise in billing and the P&L, so we think free cash flow is the best measure of our performance. Taking out that noise, the underlying momentum in the business remains consistent with the expectations embedded in our guidance range for the full year. Our sustained momentum in the second quarter and the smooth launch of the new transaction model in North America reduce the likelihood of our more cautious forecast scenarios. Given that we're raising the midpoint of our billing revenue, earnings per share, and free cash flow guidance ranges, let me give you a little bit more detail. The underlying momentum of billings is in line with our expectations, but two of our modeling assumptions have changed.

Steve: Hi, my name is Steve.

Steve: Now let me finish with Diana.

Speaker Change: As we said in February, the pace of the blow out of the new transactions will create noise, and fillings, and the piano, so we think free cash flow is the best measure of our performance.

Speaker Change: Taking out that noise, the underlying momentum and business remains consistent with the expectations and better than our guidance range for the full year.

Speaker Change: are sustained momentum in the second quarter, and the smooth launch of the Nutrients Act in Malu, North America, reduced to likelihood of our more processed forecasts in the area.

Speaker Change: Given that, we're raising the midpoint of our building, revenue, earnings per share, and pre-castle of guidance ratio.

Speaker Change: Let me give you a little bit more detail.

Speaker Change: The underlying momentum of buildings is in line with our expectations, but two of our modeling assumptions have changed.

Operator: First, the new transaction model is expected to launch in Western Europe in September rather than in early Fiscal 25, which was our modeling assumption at the start of Fiscal 25. This is a tailwind to our reported billing. Second, more customers have co-termed contracts in North America than we model, and we have assumed the same thing will happen in Western Europe. This timing effect is a headwind to reported billings in Fiscal 25. The net effect of these is a 5 to 6 percentage point tailwind to billing from the new transaction model in Fiscal 25, which includes a 3 to 4 percentage point tailwind from North America. Specifically, we've raised our Fiscal 25 billings guidance to a range between $5.88 and 5.98 billion. The underlying momentum of revenue is also in line with our expectations.

First, the new transaction model is expected to launch in Western Europe in September rather than in early Fiscal 25, which was our modeling assumption at the start of Fiscal 25. This is a tailwind to our reported billing. Second, more customers have co-termed contracts in North America than we model, and we have assumed the same thing will happen in Western Europe. This timing effect is a headwind to reported billings in Fiscal 25. The net effect of these is a 5 to 6 percentage point tailwind to billing from the new transaction model in Fiscal 25, which includes a 3 to 4 percentage point tailwind from North America. Specifically, we've raised our Fiscal 25 billings guidance to a range between $5.88 and 5.98 billion. The underlying momentum of revenue is also in line with our expectations.

Speaker Change: First, the nuclear Zaxon model is expected to launch in Western Europe in September, rather than an early fiscal 2006, which was our modeling assumption that the start of fiscal 25.

Speaker Change: This is a talent to our reporting village.

Speaker Change: Second, we'll cover some of our cultural constructs in North America and then we model and we have assumed the same thing will happen in Western Europe

Speaker Change: This timing of fact is the headmaster reported building in fiscal 25.

Speaker Change: The net effect of the is a five to six percent inch point tailwind to Billings from the New Transaction Model in fiscal 25 which includes a three to four percent inch point tailwind from North America specifically.

Speaker Change: We've raised our fiscal 25 building guidance to arrange between 5.88 and 5.98 billion.

Speaker Change: The underlying momentum of revenue is also in one of the direct expectations.

Operator: The $40 million increase to the top end of revenue guidance reflects the expected launch of the new transaction model in Western Europe in September as well as acquisitions, and think about those in roughly equal measures. The $90 million increase to the bottom end of the guidance range includes that $40 million, with the remainder an underlying increase due to the reduced likelihood of.

The $40 million increase to the top end of revenue guidance reflects the expected launch of the new transaction model in Western Europe in September as well as acquisitions, and think about those in roughly equal measures. The $90 million increase to the bottom end of the guidance range includes that $40 million, with the remainder an underlying increase due to the reduced likelihood of our more cautious forecast scenarios.

Speaker Change: The 40 million increase to the top end of bread and bread and bread and bread collects the expected loss of the nutrient-action model in mustard, Europe, and September, as well as acquisitions and take about those in roughly equal measures.

Speaker Change: The $90 million increase to the bottom of this has a guidance to reach, includes that 49 million. With the remainder and underline increase due to the reduced likelihood of our more powerful forecast scenario.

Simon Mays-Smith: Our more cautious forecast scenarios.

Operator: At the midpoint, we are increasing revenue guidance by $65 million or $25 million. Excluding the impact of acquisitions and the new transaction model, our fiscal 25 guidance range is now between $6.08 and 6.13 billion, translating into revenue growth of around 11% at the midpoint when compared to fiscal 4 and includes 1 to 1.5 percentage points from the new transaction model. Underlying margins are slightly better than our previous guidance, and that enables us to offset higher expected costs from the earlier launch of the new transaction model in Western Europe. While we still expect non-GAAP operating margins between the range of 35% and 36% in fiscal 25, that now includes a 1 to 1.5 point underlying margin improvement that is broadly offset by the margin headwinds from the new transaction model and the incremental investment in people, processes, and automation.

At the midpoint, we are increasing revenue guidance by $65 million or $25 million. Excluding the impact of acquisitions and the new transaction model, our fiscal 25 guidance range is now between $6.08 and 6.13 billion, translating into revenue growth of around 11% at the midpoint when compared to fiscal 4 and includes 1 to 1.5 percentage points from the new transaction model. Underlying margins are slightly better than our previous guidance, and that enables us to offset higher expected costs from the earlier launch of the new transaction model in Western Europe. While we still expect non-GAAP operating margins between the range of 35% and 36% in fiscal 25, that now includes a 1 to 1.5 point underlying margin improvement that is broadly offset by the margin headwinds from the new transaction model and the incremental investment in people, processes, and automation.

Speaker Change: At the midpoint, we are increasing revenue guidance by 65 million.

Speaker Change: for 25 million, excluding the impact of its acquisition and the new transactional model.

Speaker Change: Our GIFS will 25 guide streams is now between 6.08 and 6.13 billion.

Speaker Change: Underlying Mars is a slightly better than our previous guidance, and that enables us to offer offset higher expectations from the earlier launch and the new transaction model in Western Europe.

Speaker Change: I'm in Phelix, that's not got operating margins between the range of 35 and 36% in fiscal 25. That now includes a one-to-one-and-a-half-point underlying margin improvement that is broadly offset by the margin headwind.

Speaker Change: from the New Turns Act model and the incremental investment in people, processes, and automations.

Operator: The underlying momentum of free cash flow is in line with our expectations as well. The headwind to billing from co-terming that I mentioned earlier is largely being offset by faster collections and improved underlying margins. We've raised the lower end of our Fiscal 25 free cash flow guidance, resulting in a range between $1.45 and 1.5 billion. We expect strong free cash flow growth in Fiscal 26 because of the return of our largest multi-year renewal cohort, the natural mechanical stacking of multi-year contracts built annually, and a larger overall EBA cohort. With our current trajectory, we still estimate free cash flow in Fiscal 26 to be around $2.05 billion at the midpoint.

The underlying momentum of free cash flow is in line with our expectations as well. The headwind to billing from co-terming that I mentioned earlier is largely being offset by faster collections and improved underlying margins. We've raised the lower end of our Fiscal 25 free cash flow guidance, resulting in a range between $1.45 and 1.5 billion. We expect strong free cash flow growth in Fiscal 26 because of the return of our largest multi-year renewal cohort, the natural mechanical stacking of multi-year contracts built annually, and a larger overall EBA cohort. With our current trajectory, we still estimate free cash flow in Fiscal 26 to be around $2.05 billion at the midpoint.

Speaker Change: The underlying momentum of three castles is in line with our expectations as well. They have linked the buildings from culture me, but I mentioned earlier, is largely being offset by staffs with collection and improved underlying market.

Speaker Change: We break the lower end of our fiscal 25th cast-low guidance, resulting in a range between 1.45 and 1.5 billion.

Speaker Change: Rick Beck Strong, the Casual Growl is in fiscal 26th because of the return of our largest multi-year renewal code.

Speaker Change: and Natural Mechanical Backing of Multi-Ear Contracts Guild annually, and a larger overall EVA cover.

Speaker Change: With our current trajectory, we still estimate three casphos in fiscal 26 to be around 2.05 billion as the misfortune.

Operator: While the transition to annual billing for multi-year contracts and the deployment of the new transaction model creates noise and billings in the P&L, they do provide a natural tailwind to revenue and free cash flow over the next few years. Combined with a resilient business model and sustained competitive momentum, Autodesk has enviable sources of visibility and certainty given the context of significant macroeconomic, geopolitical, policy, health, and climate uncertainty. We continue to manage our business using.

While the transition to annual billing for multi-year contracts and the deployment of the new transaction model creates noise and billings in the P&L, they do provide a natural tailwind to revenue and free cash flow over the next few years. Combined with a resilient business model and sustained competitive momentum, Autodesk has enviable sources of visibility and certainty given the context of significant macroeconomic, geopolitical, policy, health, and climate uncertainty. We continue to manage our business using a Rule of 40 framework with a goal of reaching 45% or more over time, we are taking significant steps toward our goal this year and next. We think this balance between compounding revenue growth and strong free cash flow margins captured in the Rule of 40 framework is the hallmark of the most valuable companies in the world, and we intend to remain one of them.

Speaker Change: While the transition to annual billing for both of your contracts and the deployment of the new transaction model

Speaker Change: Chris, noise and billing in the piano. They do provide a natural tailwind to revenue in free cash flow over the next few years. Combined with a resilient business model and sustained competitive momentum.

Speaker Change: Autographs have enviable sources of visibility in certainty given the context of significant macroeconomic geopolitical policy, health, and climate uncertainty.

Simon Mays-Smith: A Rule of 40 framework with a.

Operator: Goal of reaching 45% or more over time, we are taking significant steps toward our goal this year and next. We think this balance between compounding revenue growth and strong free cash flow margins captured in the Rule of 40 framework is the hallmark of the most valuable companies in the world, and we intend to remain one of them. The slide deck on our website has more details on modeling assumptions for both Q3 and full Fiscal 25. Andrew, back to you.

Speaker Change: We continue to manage our business using a rural party framework with a goal of reaching 45% or more over time.

Speaker Change: We are taking significant steps to our goal this year in fact.

Speaker Change: We think this sounds between compounding revenue growth and strong free cash flow margin captured in the rural of 40 framework that's the hallmark of the most valuable companies in the world. And we intend to remain one of them.

The slide deck on our website has more details on modeling assumptions for both Q3 and full Fiscal 25. Andrew, back to you.

Speaker Change: The Flight Deck on our website has more detail on modeling assumptions for both history and both in April 25th. Andrew back to you.

Simon Mays-Smith: Thank you, Betsy. Let me finish by updating you on our strong progress in the second quarter. We continue to see good momentum in AEC, particularly in infrastructure and construction, fueled by customers consolidating onto our solutions to connect and optimize previously siloed workflows through the cloud. The cornerstone of that growing interest is our comprehensive end-to-end solutions encompassing design, pre-construction, field execution through handover, and into operations. This breadth of connected capability enables us to extend our footprint further into infrastructure and construction and also expand our reach into the mid-market. As a sign of that growing momentum, our construction business had another strong net new customer quarter as the benefits of our end-to-end solution became more apparent. Let me give you a few examples.

Andrew Anagnost: Thank you, Betsy. Let me finish by updating you on our strong progress in the second quarter. We continue to see good momentum in AEC, particularly in infrastructure and construction, fueled by customers consolidating onto our solutions to connect and optimize previously siloed workflows through the cloud. The cornerstone of that growing interest is our comprehensive end-to-end solutions encompassing design, pre-construction, field execution through handover, and into operations. This breadth of connected capability enables us to extend our footprint further into infrastructure and construction and also expand our reach into the mid-market. As a sign of that growing momentum, our construction business had another strong net new customer quarter as the benefits of our end-to-end solution became more apparent. Let me give you a few examples.

Andrew Anagnost: Thank you, Betsy. Let me finish by updating you on our strong progress in the second quarter.

Andrew Anagnost: We continue to see good-y momentum in the latest year.

Speaker Change: Particularly in infrastructure and construction fueled by customers consolidating onto our solutions to connect and optimize previously siloed workflows through the cloud.

Speaker Change: The cornerstone of that growing interest is our comprehensive end-to-end solutions in promising design, pre-construction, field execution, through hand over and into operation.

Speaker Change: This breath of connected capability enables us to extend our footprint, further into the structure and construction and also expand our reach into the mid-market.

Speaker Change: As a sign of that growing momentum, our construction business had another strong net new customer quarter, as the benefit of our end-to-end pollution became more apparent. Let me give you a few examples.

Simon Mays-Smith: Thornton Tomasetti is an internationally recognized engineering design and analysis firm which uses Revit and other advanced technologies to enable it to deliver projects and at all scales and levels of complexity. We have been a proud partner as it has transformed its business to excellence and interoperability in BIM. The transition from BIM 360 to Autodesk Construction Cloud has optimized project workflows and cloud collaboration. Autodesk virtual reality tools have reimagined its visualization workflows, and Dynamo and Generative Design have enabled its team to focus on high-value creative work. During the quarter, Thornton Tomasetti renewed its EBA with Autodesk and expanded it by more than 50% to address challenges of a fragmented ecosystem in siloed working environments.

Thornton Tomasetti is an internationally recognized engineering design and analysis firm which uses Revit and other advanced technologies to enable it to deliver projects and at all scales and levels of complexity. We have been a proud partner as it has transformed its business to excellence and interoperability in BIM. The transition from BIM 360 to Autodesk Construction Cloud has optimized project workflows and cloud collaboration. Autodesk virtual reality tools have reimagined its visualization workflows, and Dynamo and Generative Design have enabled its team to focus on high-value creative work. During the quarter, Thornton Tomasetti renewed its EBA with Autodesk and expanded it by more than 50% to address challenges of a fragmented ecosystem in siloed working environments.

Speaker Change: Thoroughton Thomas said he is an internationally recognized engineering design and analysis firm, which uses Revit and other advanced technologies to enable us to deliver projects at all scales and levels of complexity.

Speaker Change: We have been a proud partner as it has transformed its business to excellence and interoperability in BIMB. The transition from BIMB 360 to Autodesk Construction Cloud has optimized project workloads and cloud collaboration.

Speaker Change: Our next virtual reality tool can reimagine this visualization workflow.

Speaker Change: and Dynamo and General Design have enabled the team to focus on high value creative work.

Speaker Change: During the quarter, Thornton Thomas Betty renewed its EBA with Autodesk and expanded its time more in 50%.

Simon Mays-Smith: A European consortium of nine public water operators serving millions of residents across numerous municipalities decided to expand its relationship with Autodesk by adding BIM Collaborate, BIM Collaborate Pro, and an upgraded premium plan to its existing AutoCAD Docs, AEC collections, and InfoWorks subscriptions. With these expanded capabilities, it will continue its digital transformation, accelerating its transition from 2D to 3D and its ability to manage all assets in a common data environment across all consortium members in the quarter. A leading single source specialty subcontractor based in the Midwest of the United States began looking to replace point solutions that no longer supported custom workflow with the help of a channel partner.

A European consortium of nine public water operators serving millions of residents across numerous municipalities decided to expand its relationship with Autodesk by adding BIM Collaborate, BIM Collaborate Pro, and an upgraded premium plan to its existing AutoCAD Docs, AEC collections, and InfoWorks subscriptions. With these expanded capabilities, it will continue its digital transformation, accelerating its transition from 2D to 3D and its ability to manage all assets in a common data environment across all consortium members in the quarter. A leading single source specialty subcontractor based in the Midwest of the United States began looking to replace point solutions that no longer supported custom workflow with the help of a channel partner.

Speaker Change: To address challenges of a fragmented ecosystem in siloed working environments, a European consortium of nine public water operators.

Speaker Change: Through millions of residents across numerous municipalities, decided to expand its relationship with RF by adding them collaborate and them collaborate pro and an upgraded premium plan to a existing RFF dot ADC collections and info works description.

Speaker Change: With these expanded capabilities, it will continue its digital transformation, accelerating its transition from 2D to 3D, and its ability to manage all assets and a common data environment across all consortium members.

Speaker Change: In the court, a leading single source specially subcontractor based in the Midwest of the United States, again looking to replace police solutions that no longer supported custom workforce.

Simon Mays-Smith: After a 45-day evaluation, the subcontractor chose to adopt Autodesk Build, which complements its virtual construction and design capabilities, streamlines communication between design and construction, and importantly gives us control over and ownership of its own data. Again, these stories have a common theme managing people, processes, and data across the project lifecycle to increase efficiency and sustainability while decreasing risk over time. We expect the majority of all projects to be managed this way and we remain focused on enabling that transition through our industry cloud. Moving on to manufacturing, we made excellent progress on our strategic initiatives. Customers continue to invest in their digital transformations and consolidate our design and make platform in automotive.

After a 45-day evaluation, the subcontractor chose to adopt Autodesk Build, which complements its virtual construction and design capabilities, streamlines communication between design and construction, and importantly gives us control over and ownership of its own data. Again, these stories have a common theme managing people, processes, and data across the project lifecycle to increase efficiency and sustainability while decreasing risk over time. We expect the majority of all projects to be managed this way and we remain focused on enabling that transition through our industry cloud. Moving on to manufacturing, we made excellent progress on our strategic initiatives. Customers continue to invest in their digital transformations and consolidate our design and make platform.

Speaker Change: with the help of a channel partner after a 45-day evaluation.

Speaker Change: The subcontractor chose to adopt AutoDef build, which compliments its virtual construction in design capabilities.

Speaker Change: Streamline's communication between the design and construction team and, importantly, give this control over and ownership of its own data.

Speaker Change: Again, these stories of common sense, managing people, processes, and data across the project life cycle, it increase efficiency and sustainability while decreasing risk.

Speaker Change: Over time, we expect the majority of all projects we manage this way, and we remain focused on enabling that transition to our industry cloud.

Speaker Change: Moving on to manufacturing, we made excellent progress on our strategic initiative.

Speaker Change: Customers continue to invest in their digital transformations and consolidate our design and make platforms. In automotive, we continue to strengthen and expand our partnership.

In automotive we continue to strengthen and expand our partnerships both within and beyond the design studio in the second quarter. A leading European manufacturer renewed and expanded its EBA to accelerate its time to market and help drive its business transformation initiatives. In addition to Alias for concept design, it will leverage VRED for virtual prototypes and Flow Production Tracking for project management. These solutions democratize visualization across the organization, reducing the reliance on physical prototypes, improving design collaboration, and speeding up the product development process. Additionally, as the manufacturer moves to build new battery factories, it is exploring the adoption of integrated factory modeling to reduce costs and increase collaboration across suppliers and contractors throughout the project lifecycle. Meissner, a global leader in complex tool and plant construction, is leveraging Autodesk solutions to adapt more quickly to a fast-moving automotive industry.

Simon Mays-Smith: We continue to strengthen and expand our partnerships both within and beyond the design studio in the second quarter. A leading European manufacturer renewed and expanded its EBA to accelerate its time to market and help drive its business transformation initiatives. In addition to Alias for concept design, it will leverage VRED for virtual prototypes and Flow Production Tracking for project management. These solutions democratize visualization across the organization, reducing the reliance on physical prototypes, improving design collaboration, and speeding up the product development process. Additionally, as the manufacturer moves to build new battery factories, it is exploring the adoption of integrated factory modeling to reduce costs and increase collaboration across suppliers and contractors throughout the project lifecycle. Meissner, a global leader in complex tool and plant construction, is leveraging Autodesk solutions to adapt more quickly to a fast-moving automotive industry.

Speaker Change: Both with in and beyond the design studio.

Speaker Change: In the second quarter, a leading European manufacturer renewed and expanded at BBA to accelerate its time to market and help drive its business transformation initiative.

Speaker Change: In addition to alias for concept design, it will leverage VRead for virtual prototypes and 12 production tracking for project management.

Speaker Change: These solutions democratize visualization across the organization, reducing the resilience, reliance on physical prototypes, improving design collaboration, and speeding up the product development process.

Speaker Change: Additionally, as the manufacturer moves to build new battery factories, it is exploring the adoption of integrated factory modeling to reduce costs and increase collaboration across suppliers and contractors throughout the project life cycle.

Myfner: Myfner, a global leader in complex tool and plant construction, is leveraging audit solutions to adapt more quickly to a fast-moving automotive industry.

Simon Mays-Smith: It is driving business growth through improved production cycle times while meeting high-quality reliability standards at reduced cost. To achieve this, Meissner has adopted PowerMill for complex simultaneous 5-axis milling, PowerInspect for programming 3D measurement, inspection routines of machine parts, and PowerShape to produce blow-molded plastic hollow parts while leveraging Fusion for its collaboration capabilities. Fusion remains one of the fastest growing products in the manufacturing industry as customers seek to drive innovation and growth at lower cost. Fusion extension attach rates are increasing, which is helping to drive the average sales price higher. In education, we are preparing future engineers to drive innovation through next generation design analysis and manufacturing solutions. Three years ago, Ruhr-University Bochum, a public research university in Germany, evaluated Fusion for its mechanical engineering department but determined the solution didn't fulfill existing requirements.

It is driving business growth through improved production cycle times while meeting high-quality reliability standards at reduced cost. To achieve this, Meissner has adopted PowerMill for complex simultaneous 5-axis milling, PowerInspect for programming 3D measurement, inspection routines of machine parts, and PowerShape to produce blow-molded plastic hollow parts while leveraging Fusion for its collaboration capabilities. Fusion remains one of the fastest growing products in the manufacturing industry as customers seek to drive innovation and growth at lower cost. Fusion extension attach rates are increasing, which is helping to drive the average sales price higher. In education, we are preparing future engineers to drive innovation through next generation design analysis and manufacturing solutions. Three years ago, Ruhr-University Bochum, a public research university in Germany, evaluated Fusion for its mechanical engineering department but determined the solution didn't fulfill existing requirements.

Myfner: is driving business growth to improve the production cycle time while meeting high quality reliability standards at reduced cost.

Mythner: To achieve this, Mythner is adopted power mill for complex simultaneous 5-axis milling.

Mythner: Power Inspect for Programming 3D Measurement, Inspection Reaching, the Machine Parts, and Power Shakes to produce low-molded plastic hollow parts while leveraging fusion for its collaboration capability.

Mythner: Fusion remains one of the fastest growing products of the manufacturing industry.

Speaker Change: As customer seats to drive innovation and growth at lower cost, Fusion Extension attestories are increasing, which is helping to drive the average sales price higher.

Speaker Change: In education, we are preparing future engineers to drive innovation through next generation design, analysis and manufacturing pollution.

Speaker Change: 3 years ago, Thou Holmes University, a public research university in Germany, evaluated fusion for its mechanical engineering department, but determine the solution didn't fulfill existing requirements.

Simon Mays-Smith: In the second quarter, impressed with Fusion's significantly expanded capabilities in electronics, PCB, design, configuration, drawing, automation, and collaboration, Bochum decided to replace a high-end competitive solution with Fusion for all mechanical engineering courses. With the Fusion platform, Bochum students can now acquire end-to-end workflow skills from simulation in the cloud to data management with just one installation enabling better collaborative learning and employability for students while saving time and administration costs for the university. Finally, we continue to leverage unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries to grow our market opportunities. For example, Mercury Engineering is a European leader in construction solutions. The company builds and manages complex engineering construction projects for the world's leading corporations across a range of sectors including data centers, semiconductor, and life sciences.

In the second quarter, impressed with Fusion's significantly expanded capabilities in electronics, PCB, design, configuration, drawing, automation, and collaboration, Bochum decided to replace a high-end competitive solution with Fusion for all mechanical engineering courses. With the Fusion platform, Bochum students can now acquire end-to-end workflow skills from simulation in the cloud to data management with just one installation enabling better collaborative learning and employability for students while saving time and administration costs for the university. Finally, we continue to leverage unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries to grow our market opportunities. For example, Mercury Engineering is a European leader in construction solutions. The company builds and manages complex engineering construction projects for the world's leading corporations across a range of sectors including data centers, semiconductor, and life sciences.

Speaker Change: In the second quarter, impressed with fusion significantly expanded capabilities in electronics and PCB design, configuration, drawing automation, and collaboration, and now home, decided to replace a high-end competitive solution with fusion for all mechanical engineering courses.

Speaker Change: With the Fusion Platform, now whom students can now acquire end-to-end work flow skill for the simulation in the clouds through data management, with just one installation enabling better collaborative learning and employability for students while saving time and administration costs for the university.

Speaker Change: And finally, we continue to leverage unique growth and ability, such as business model evolution, customer experience evolution, and convergence between industries to grow our market opportunity.

Speaker Change: For example, Mercury Engineering is a European leader in construction solutions.

Mercury Engineering: The company builds and manages complex engineering instruction projects for the world leading corporations across the range of sectors including data centers, semiconductor and life sciences.

Simon Mays-Smith: To support its Digital Edge initiative and the ability to deliver large-scale projects wherever its clients operate, Mercury increased its investment in Flex during the quarter, using Flex to access solutions such as Navisworks, Revit, ReCap, AutoCAD, and Plant 3D coupled with account-based Autodesk Construction Cloud. Mercury enjoys frictionless consumption, limitless cloud access, the ability to rapidly scale up new projects with the right tools, and the ability to collaborate across its ecosystem. I know many of you pay close attention to the American Institute of Architects data. We do too, but maybe not always to the same data. In 2022, the AIA said that almost half of architecture firms' total billings came from reconstruction and renovation projects, up from about a third 20 years ago, with the rest coming from new builds in commercial, industrial, and institutional subsectors.

To support its Digital Edge initiative and the ability to deliver large-scale projects wherever its clients operate, Mercury increased its investment in Flex during the quarter, using Flex to access solutions such as Navisworks, Revit, ReCap, AutoCAD, and Plant 3D coupled with account-based Autodesk Construction Cloud. Mercury enjoys frictionless consumption, limitless cloud access, the ability to rapidly scale up new projects with the right tools, and the ability to collaborate across its ecosystem. I know many of you pay close attention to the American Institute of Architects data. We do too, but maybe not always to the same data. In 2022, the AIA said that almost half of architecture firms' total billings came from reconstruction and renovation projects, up from about a third 20 years ago, with the rest coming from new builds in commercial, industrial, and institutional subsectors.

Speaker Change: To support its digital ad-genitative.

Speaker Change: and the ability to deliver large-scale projects wherever it's client's operating.

Speaker Change: Mercury increases investment in flex during the quarter.

Speaker Change: Using Clients to Access Solutions, which is Naviphorst, Revit, Recap, AutoCAD, and Plant3D, coupled with account-based AutoDF Construction Cloud.

Speaker Change: Mercury enjoys frictionless consumption, limitless cloud access, and you've going to rapidly scale up new projects at the right tool, and you've going to collaborate across the ecosystem.

Speaker Change: I know many of you pay close attention to the American Institute of Architects data and we do too but maybe not always through the same data

Speaker Change: In 2022, the AA said that on one half of our detective firm's total billings came from reconstruction and renovation projects, up from about a third 20 years ago.

Speaker Change: with the rest coming from you bill in commercial and industrial and institutional sub-dectors. Reconstruction and renovation accounted for more than 60% of bill in.

Simon Mays-Smith: Reconstruction and renovation accounted for more than 60% of buildings. From infrastructure exceeding its design life to regulations mandating greater efficiency, with climate change making action more urgent, renovation and reconstruction are growing trends both in the United States and worldwide. For buildings and infrastructure, Autodesk is a leader in BIM and digital technologies across the project lifecycle that underpin these reconstruction and resident renovation efforts. That's why we're delighted to be named as the official design and make platform of the LA28 Olympic and Paralympic Games, to support LA28's no new permanent venues plan and commitment to build LA28's footprint by adapting existing or building temporary infrastructure. Autodesk will support LA28's more than $1 billion temporary overlay and construction plan, including retrofitting more than 40 venues across the Los Angeles metro area over the next four years.

Reconstruction and renovation accounted for more than 60% of buildings. From infrastructure exceeding its design life to regulations mandating greater efficiency, with climate change making action more urgent, renovation and reconstruction are growing trends both in the United States and worldwide. For buildings and infrastructure, Autodesk is a leader in BIM and digital technologies across the project lifecycle that underpin these reconstruction and resident renovation efforts. That's why we're delighted to be named as the official design and make platform of the LA28 Olympic and Paralympic Games, to support LA28's no new permanent venues plan and commitment to build LA28's footprint by adapting existing or building temporary infrastructure. Autodesk will support LA28's more than $1 billion temporary overlay and construction plan, including retrofitting more than 40 venues across the Los Angeles metro area.

Speaker Change: from infrastructure exceeding its design life to regulations mandating greater efficiency.

Speaker Change: with climate change making action more urgent, renovation and reconstruction are growing trends both in the United States and worldwide. But building an infrastructure auto-deft is a leader in BIM and digital technologies across the project life cycle that underpins.

Speaker Change: He's reconstructing and read the renovation effort.

Speaker Change: That's why we're delighted to be named as the official design and make platform of the LA 28 Olympic in parallel with the game.

Speaker Change: The Support LA 28, no new permanent venues plan, and commitment to build LA 28 foot print by adapting existing or building temporary infrastructure.

Speaker Change: Autodesk will support LA 28 more than 1 billion temporary overlay in construction plans.

Over the next four years, LA28 will use Autodesk software and building information modeling tool to bring to life an ambitious venue plan. Consultative Support to help LA28 meet its delivery and sustainability plan, and Autodesk Construction Cloud is a central tool to facilitate better collaboration, and with thousands of critical stakeholders on the design, development, and ultimate delivery of the venue. Autodesk Technology is used every day to design and make a better world, and we're thrilled to be LA28's official design and make platform. Before I open the call for questions, I'd like to quickly update you on our CFO search. We have some excellent candidates and are making good progress. Once our new CFO is up to speed and we've launched a new transaction model in all developed markets, we'll set out our plans in more detail. We'll update you when we have more to say.

Speaker Change: including retrofitting more than 40 venues across the Los Angeles metro area. Over the next four years, LA 28 will use our desktopware and building information modeling thin to bring to life an ambitious venue plan.

Simon Mays-Smith: LA28 will use Autodesk software and building information modeling tool to bring to life an ambitious venue plan. Consultative Support to help LA28 meet its delivery and sustainability plan, and Autodesk Construction Cloud is a central tool to facilitate better collaboration, and with thousands of critical stakeholders on the design, development, and ultimate delivery of the venue. Autodesk Technology is used every day to design and make a better world, and we're thrilled to be LA28's official design and make platform. Before I open the call for questions, I'd like to quickly update you on our CFO search. We have some excellent candidates and are making good progress. Once our new CFO is up to speed and we've launched a new transaction model in all developed markets, we'll set out our plans in more detail. We'll update you when we have more to say.

Speaker Change: Consultative Support to help LA28 meet its delivery at the Sanitility Plan.

Speaker Change: and our Destruction Cloud is a central tool to facilitate better collaboration with thousands of critical stakeholders on the design, development, and ultimate delivery of the venue.

Speaker Change: Autonomous Technology is used every day to design and make a better world and work through to be LA28's official design and make-class one.

Speaker Change: Before I open the call for questions, I'd like to quickly update you on our CFO search. We have some excellent candidates that are making good progress. Once our new CFO is up to speed and we've launched a new Transaction model in all of the markets, we'll set out our plans in more detail.

Simon Mays-Smith: Operator, we would now like to open the call up for questions.

Operator, we would now like to open the call up for questions.

Speaker Change: will update you when we have more to say.

Operator: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Saket Kalia with Barclays. You may proceed. Okay, great. Hey Andrew.

Operator: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Saket Kalia with Barclays. You may proceed.

Speaker Change: Operator, we would now like to open the Call of Proquestion.

Speaker Change: Thank you. As a reminder, task a question, please press star 1, one on your telephone and wait for your name to be announced. Two with drier question, please press star 1, one again. One moment for questions.

Saket Kalia: Okay, great. Hey Andrew. Hey, Betsy. Thanks for taking my questions here, Andrew. Since you last reported, Starboard Value has issued a couple letters and a slide deck, just maybe for the benefit of the group. I was wondering if you had any high-level thoughts that you wanted to share with us.

Speaker Change: Our first question comes from Sack at Khalia with Parkley's He May Proceed.

Simon Mays-Smith: Hey, Betsy. Thanks for taking my questions here, Andrew. Since you last reported, Starboard Value has issued a couple letters and a slide deck, just maybe for the benefit of the group. I was wondering if you had any high-level thoughts that you wanted to share with us. Right to it, Saket. All right, look, first off, you know, we listen to all of our investors and we listen carefully. We've met with Starboard several times. They came and presented to our board, and I'll tell you one thing we are very much aligned with them on is there is a lot more shareholder value to be created from Autodesk for our investors.

Speaker Change: Okay, great. Hey, Andrew. Hey, Betsy. Thanks for taking my questions here.

Speaker Change: Cynthia, you last reported Starbord value has issued a couple letters and a slide deck. Just maybe for the benefit of the group, I was wondering if you had any high level thoughts that you wanted to share with us.

Andrew Anagnost: Right to it, Saket. All right, look, first off, you know, we listen to all of our investors and we listen carefully. We've met with Starboard several times. They came and presented to our board, and I'll tell you one thing we are very much aligned with them on is there is a lot more shareholder value to be created from Autodesk for our investors. Okay.

Andrew Anagnost: All right, to it, second. All right, all right.

Speaker Change: First off, we listen to Oliver Investors.

Speaker Change: and we listen carefully. We've met with Starboard.

Speaker Change: It's several times they came in for that to our board and I'll tell you one thing we are very much aligned with them on is there is a lot more shareholder value to be created from Autodesk for our investors Okay, and I think it's important to kind of talk about okay, what should we be excited about?

Operator: Okay.

Simon Mays-Smith: I think, I think it's important to kind of talk about, okay, what should we be excited about? Today's results we delivered in a pretty tough environment. We've seen macro impacts; we've had one-off impacts from Russia, from China, from writers and actors strikes. Still you're seeing the kind of results that we delivered this quarter. Revenues up, free cash flows up, the guide up percent at the midpoint. You know, those things come from work and discipline. Now, how did we get here? There's a couple of things I want to make sure we remember and highlight. Okay. You know, about two years ago we began this journey to move away from multi-year contracts billed up front to multi-year contracts billed annually. I know that created some clouds for all of you on the outlook of Autodesk for 18 months.

I think, I think it's important to kind of talk about, okay, what should we be excited about? Today's results we delivered in a pretty tough environment. We've seen macro impacts; we've had one-off impacts from Russia, from China, from writers and actors strikes. Still you're seeing the kind of results that we delivered this quarter. Revenues up, free cash flows up, the guide up percent at the midpoint. You know, those things come from work and discipline. Now, how did we get here? There's a couple of things I want to make sure we remember and highlight. Okay. You know, about two years ago we began this journey to move away from multi-year contracts billed up front to multi-year contracts billed annually. I know that created some clouds for all of you on the outlook of Autodesk for 18 months.

Speaker Change: Today's results we delivered in a pretty tough environment. We've seen macro impact, we've had one off impact from Russia, from China, from writers and after strikes, and still, you're seeing the kind of results that we delivered this quarter. Revenue's up.

Speaker Change: Frecastle's up, the guy's up, a percentage of midpoint, those things come from work and discipline.

Speaker Change: How did we get here? There's a couple things I want to make sure we remember in highlight, okay? You know about two years ago, we began this journey.

Speaker Change: To move away from multi-year contracts build-up front to multi-year contracts build annually. I know that created some clouds for all of you on the out-of-the-moda desk for 18 months, but look at the results, okay?

Simon Mays-Smith: But look, look, look at the results. Okay? Two years ago, the number of multi-year contracts built-up fronts was measured in the billions. Today you heard from Betsy. It's immaterial. Now the great thing about that is that billions from the past comes back to you, but it comes back to you in a nice smooth buildup over time. It's math. I love math. More than that. It's simple math, and we all love simple math. That money's coming, and it's building up. So one, that's something to be excited about about ongoing value from Autodesk. Another thing I want to talk about that is really important. Last year we started this journey on the new transaction model. And when we told you about the new transaction model, what did we tell you we were doing it for?

But look, look, look at the results. Okay? Two years ago, the number of multi-year contracts built-up fronts was measured in the billions. Today you heard from Betsy. It's immaterial. Now the great thing about that is that billions from the past comes back to you, but it comes back to you in a nice smooth buildup over time. It's math. I love math. More than that. It's simple math, and we all love simple math. That money's coming, and it's building up. So one, that's something to be excited about about ongoing value from Autodesk. Another thing I want to talk about that is really important. Last year we started this journey on the new transaction model. And when we told you about the new transaction model, what did we tell you we were doing it for?

Speaker Change: Two years ago, the number of multi-year contracts filled up front was measured in the billions. Today, you heard from Betsy, it's in material.

Speaker Change: Alright, now the great thing about that is that billions from the past come back to you, but it comes back to you in a nice smooth build up over time. It's math. I love math.

Speaker Change: More than that, it's simple math, and we all love simple math. That money's coming and it's building up. So that's something to be excited about about ongoing value from all of that.

Speaker Change: Another thing I want to talk about that was really important. Last year we started this journey on the Nutransaction Model. And when we told you about the Nutransaction Model, what did we tell you we were doing it for? We were doing it to get more control and visibility over our sales and marketing costs.

Simon Mays-Smith: We were doing it to get more control and visibility over our sales and marketing costs. And that is the mission going forward. Here we see line of sight to increasing productivity and effectiveness in our sales and marketing motions and driving some of those costs down on a per deal basis, which is great because that's how we see line of sight to margin growth. Now, why should you believe me? Why should you believe us? All right, let's look at what happens. What's going to happen this year? This year we are going to achieve the non-GAAP targets on an apples to apples basis that we set out two years ago, a year ahead of target. So I think you can trust that we're focused on this and that we're going to deliver.

We were doing it to get more control and visibility over our sales and marketing costs. And that is the mission going forward. Here we see line of sight to increasing productivity and effectiveness in our sales and marketing motions and driving some of those costs down on a per deal basis, which is great because that's how we see line of sight to margin growth. Now, why should you believe me? Why should you believe us? All right, let's look at what happens. What's going to happen this year? This year we are going to achieve the non-GAAP targets on an apples to apples basis that we set out two years ago, a year ahead of target. So I think you can trust that we're focused on this and that we're going to deliver.

Speaker Change: and that is the mission going forward here.

Speaker Change: We see line of sites to increasing productivity and effectiveness in our sales and marketing goat motion and driving some of those costs down on a purge deal basis, which is great because that's how we see line of site to margin growth.

Speaker Change: Now, why should you believe us? Alright, let's look at what's going to happen this year. This year, we are going to achieve.

Speaker Change: the non-gap targets on an apple's apple's basis that we set up two years ago, a year ahead of target. So I think you can trust that we're focused on this and that we're going to deliver.

Simon Mays-Smith: So we agree with Starboard that there is a lot more value creation coming out of Autodesk, and I'm really excited about it going forward. And the results that we've delivered this quarter are just the first step in that journey. Yeah, absolutely. That was super helpful, Andrew, maybe for.

So we agree with Starboard that there is a lot more value creation coming out of Autodesk, and I'm really excited about it going forward. And the results that we've delivered this quarter are just the first step in that journey.

Speaker Change: We agree with Starboard that there is a lot more value creation coming out of all the best.

Speaker Change: and I'm really excited about going forward in the results that we've delivered this quarter I'm just the first step in that journey.

Saket Kalia: Yeah, absolutely. That was super helpful, Andrew, maybe for my follow up for you as well. Maybe just moving to the business. You know, you gave some nice examples of construction wins in the quarter. Could we just go one level deeper into Autodesk Construction Cloud? Maybe talk about sort of the overall construction backdrop that you're seeing and how you feel about ACC competitively?

Operator: My follow up for you as well.

Speaker Change: Yeah, absolutely, that was super helpful, Andrew, maybe for my fall up for you as well, maybe just moving to the business

Simon Mays-Smith: Maybe just moving to the business.

Operator: You know, you gave some nice examples.

Simon Mays-Smith: Of construction wins in the quarter. Could we just go one level deeper?

Speaker Change: You know, you gave some nice examples of construction winds in the quarter. Could we just go one double beeper into Autodesk Construction Cloud, maybe talk about sort of the overall construction backdrop that you're seeing, and how you feel about ACC competitively.

Operator: Into Autodesk Construction Cloud?

Simon Mays-Smith: Maybe talk about sort of the overall construction backdrop that you're seeing and how you feel about ACC competitively? Yeah, that's a great question. Right. And look, you know, first off though, one of the things I'm really excited about with our construction business is that we're maintaining momentum in a really tough competitive environment where, you know, others are having challenges maintaining momentum. But we're maintaining momentum. And there's a couple of key reasons why we're maintaining momentum. One, there is still a large backlog in construction. Backlog matters, all right? And that backlog is still there. And construction professionals are still interested in digitization. That, in addition to our value proposition becoming more resonant with customers. One, the portfolio of Construction Cloud is competitive. People like it. They like our value proposition of going from design to construction.

Andrew Anagnost: Yeah, that's a great question. Right. And look, you know, first off though, one of the things I'm really excited about with our construction business is that we're maintaining momentum in a really tough competitive environment where, you know, others are having challenges maintaining momentum. But we're maintaining momentum. And there's a couple of key reasons why we're maintaining momentum. One, there is still a large backlog in construction. Backlog matters, all right? And that backlog is still there. And construction professionals are still interested in digitization. That, in addition to our value proposition becoming more resonant with customers. One, the portfolio of Construction Cloud is competitive. People like it. They like our value proposition of going from design to construction.

Speaker Change: Yeah, that's a great question, right? And look, first off, the one thing I'm really excited about in our construction business is that we're maintaining momentum.

Speaker Change: and a really tough competitive environment where you know others or you know, you know, traffic challenges maintaining momentum but we're maintaining momentum and there's a couple of key reasons why we're maintaining momentum.

Speaker Change: and some. Once there is still a large backlog in construction, backlog matters, all right? And that backlog is still there.

Speaker Change: Construction Professionals are still interested in digitization.

Speaker Change: That, in addition to our value proposition becoming more resonant with customers. One.

Speaker Change: The portfolio of construction clouds, competitive, people like it. They like our value profit proposition of going from design to construction. They like the flexibility of the business models we bring to them. They're looking to...

Simon Mays-Smith: They like the flexibility, the business models we bring to them. They're looking to either move to Construction Cloud net new or they're looking to move from older solutions, competitive solutions, to our solutions. The other thing is, in the mid-market in the US, we see our competition more and we win more. That's because of the strengthening of this value proposition. The last bit I think is worth talking about is the international growth for Autodesk. This is a place where Autodesk has the superpower and we're going to continue to grow internationally. We saw strong growth internationally, we're going to continue to see strong growth internationally. Long-term, that's going to continue to kind of be accretive to our construction business. A lot going on there. But I do want people to remember there's a backlog and we're definitely maintaining momentum.

They like the flexibility, the business models we bring to them. They're looking to either move to Construction Cloud net new or they're looking to move from older solutions, competitive solutions, to our solutions. The other thing is, in the mid-market in the US, we see our competition more and we win more. That's because of the strengthening of this value proposition. The last bit I think is worth talking about is the international growth for Autodesk. This is a place where Autodesk has the superpower and we're going to continue to grow internationally. We saw strong growth internationally, we're going to continue to see strong growth internationally. Long-term, that's going to continue to kind of be accretive to our construction business. A lot going on there. But I do want people to remember there's a backlog and we're definitely maintaining momentum.

Speaker Change: Either move the construction cloud, net new, or they're looking to move from older solutions, competitive solutions to our solution.

Speaker Change: The other thing is, in the mid-market, in the U.S., we see our competition more and we would more, and that's because of the strengthening of this value proposition.

Speaker Change: And the last bit I think is we're talking about is if you'd be in an Anagnostum growth for artists, this is a place where artists have superpowers

Speaker Change: and we're going to continue to grow internationally. We saw strong growth internationally. We're going to continue to see strong growth internationally. And long-term, that's going to continue to kind of be a creative direction to this.

Speaker Change: So a lot going on there, but I do want people to remember there's a backlog and we're definitely maintaining momentum

Simon Mays-Smith: Very helpful, guys.

Saket Kalia: Very helpful, guys. Thank you.

Operator: Thank you. Thank you. Our next question comes from Jay Vleeschhouwer with Griffin Securities. You may proceed.

Operator: Thank you. Our next question comes from Jay Vleeschhouwer with Griffin Securities. You may proceed.

Speaker Change: Very helpful, guys. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Jay Vlishauer with Gripping Securities you may receive.

Simon Mays-Smith: Thank you.

Jay Vleeschhouwer: Thank you. Good evening, Andrew, with regard to the new engagement or transaction model, the new channel compensation arithmetic is very readily understandable, but I'd like to ask more about the division of labor under the new model, which is to say your inside sales, your customer success investments, and the like versus the channel. So how do you see the role of your inside and other direct sales capacities versus that of the channel, particularly when it comes to renewals and or upselling? How do you see the role of the eStore versus the channel under the new model then? My follow-up.

Operator: Good evening, Andrew.

Simon Mays-Smith: With regard to the new engagement or transaction model, the new channel compensation arithmetic is very readily understandable, but I'd like to ask more about the division of labor under the new model, which is to say your inside sales, your customer success investments, and the like versus the channel. So how do you see the role of your inside and other direct sales capacities versus that of the channel, particularly when it comes to renewals and or upselling? How do you see the role of the eStore versus the channel under the new model then? My follow-up, Jay, you're asking some very specific questions. Let me kind of answer it in a very general way. With this new transaction model, with the ability to drive clear divisions of labor, there are opportunities to drive efficiencies and productivity moving forward in sales and marketing.

Jay Vlishauer: Thank you, Good evening.

Speaker Change: and through going to the New Engagement or Transaction Model, the...

Jay Vlishauer: New Channel Compensation arithmetic is very readily understandable.

Speaker Change: But I'd like to ask more about the division of later

Speaker Change: Under the new model, which is to say...

Speaker Change: Your inside sales, your customer success investments and the like.

Speaker Change: Versus the channel. So how do you see the role of your inside and other direct sales capacities versus data of the channel? Particularly when it comes to renewals and or upselling, how do you see the role of the east or versus the channel under the new model? Then I follow up.

Andrew Anagnost: Jay, you're asking some very specific questions. Let me kind of answer it in a very general way. With this new transaction model, with the ability to drive clear divisions of labor, there are opportunities to drive efficiencies and productivity moving forward in sales and marketing.

Speaker Change: Jay, you're asking for very specific questions, let me kind of answer it in a very general way.

Speaker Change: with this new Transaction model, with the ability to drive clear divisions of labor. There are opportunities to drive.

Simon Mays-Smith: So absolutely, you're highlighting some things with regards to our partners and with regards to us that we are going to continue to perfect over time. And that is where some of this margin growth is going to come from. Most of this margin growth is going to come from over the next couple of years. So you're definitely talking around some of the areas that are important to discuss. Okay, second question. With regard to the billings co-terming effects, the model effects, and the like, perhaps we can parse that to get at the organic effects of the business, which is to say how are you thinking about your license volume and mix expectations? In other words, how are you thinking near term and long term with regard to the volume assumptions that you've previously spoken about in your overall P Times Q framework?

So absolutely, you're highlighting some things with regards to our partners and with regards to us that we are going to continue to perfect over time. And that is where some of this margin growth is going to come from. Most of this margin growth is going to come from over the next couple of years. So you're definitely talking around some of the areas that are important to discuss.

Speaker Change: A Session Seasons productivity moving forward in sales and marketing.

Speaker Change: All right, so absolutely you're highlighting some things with regards to our partners and with regards to us that we are going to continue to perfect over time and that that is where some of this marching growth is going to come from most of this marching growth that comes from over the next couple years.

Jay Vleeschhouwer: Okay, second question. With regard to the billings co-terming effects, the model effects, and the like, perhaps we can parse that to get at the organic effects of the business, which is to say how are you thinking about your license volume and mix expectations? In other words, how are you thinking near term and long term with regard to the volume assumptions that you've previously spoken about in your overall P Times Q framework?

Speaker Change: here. So you're you're you're definitely talking around some of the areas that are important to discuss.

Speaker Change: Jack.

Speaker Change: Second question, with regard to the Billings, Col Termine FX, the model of the action alike.

Speaker Change: Perhaps we can parse that to get at the organic effects of the business which is to say

Speaker Change: How are you thinking about your license volume and mixed expectations?

Speaker Change: In other words, how are you thinking your term and long term with regards to the volume assumptions that you previously spoken about in your overall P times Q framework?

Simon Mays-Smith: So look, let me just start here in case Betsy wants to add anything. I think the important thing to get about the co-terming is that what it does is it take some billings out of the current renewal cycle and moves them forward. And more importantly, it creates efficiency in our renewal process. So we're going to get much more efficiency in our renewal process. A co-term contract is much more easy to wrangle at renewal time than another contract. It's also much more easy to do cross-sell, upsell, and expansion at renewal time. So you're going to get some efficiencies from this. So co-terming is good, even though it has some puts and takes on where the billings show up. So I think that's kind of the important piece to take away from that. The rest of that detail is a little harder to address directly.

Andrew Anagnost: So look, let me just start here in case Betsy wants to add anything. I think the important thing to get about the co-terming is that what it does is it take some billings out of the current renewal cycle and moves them forward. And more importantly, it creates efficiency in our renewal process. So we're going to get much more efficiency in our renewal process. A co-term contract is much more easy to wrangle at renewal time than another contract. It's also much more easy to do cross-sell, upsell, and expansion at renewal time. So you're going to get some efficiencies from this. So co-terming is good, even though it has some puts and takes on where the billings show up. So I think that's kind of the important piece to take away from that. The rest of that detail is a little harder to address directly.

Speaker Change: So, look, let me just start here for, if Beth, you want to add anything. You know, I think the important thing to get about the co-termining, is that what it does is it...

Beth: Take some buildings out of the current renewal cycle and move them forward and more importantly, it creates a efficiency.

Speaker Change: In our renewal process, all right. So we're going to get much more efficiency in our new process. A code current contract is much more easy to wrangle at renewal time than another contract. It's also much more easy to do cross-sell, upsell, and expansion at renewal time. So you're good to get some efficiencies from this. So code terming is good, even though it has some puts and takes on where the building is show up. So I think that's kind of the important piece to take away from that.

Operator: The only thing I would add is, with fewer contracts to manage, you also drive efficiency from the inside the company.

Betsy Rafael: The only thing I would add is, with fewer contracts to manage, you also drive efficiency from the inside the company.

Speaker Change: The rest of that detail of a little harder to address directly. The only thing I was at is with fewer contracts to manage. You also drive efficiency from that inside the company.

Simon Mays-Smith: Thank you.

Jay Vleeschhouwer: Thank you.

Operator: Thank you. Our next question comes from Adam Borg with Stifel. You may proceed. Awesome. And thanks so much for taking the question. Just maybe for Andrew, just going back to the new transaction model, it's great to hear that things are going smoothly.

Operator: Thank you. Our next question comes from Adam Borg with Stifel. You may proceed.

Speaker Change: Alright, thank you.

Adam Borg: Awesome. And thanks so much for taking the question. Just maybe for Andrew, just going back to the new transaction model, it's great to hear that things are going smoothly so far in North America. I was hoping you could maybe go a step deeper on what that exactly means and importantly, you know, what's given the confidence to roll out, accelerate the rollout into Europe and Japan ahead of expectations, especially given the additional complexities you've talked about rolling out internationally.

Speaker Change: Our next question comes from Adam Borgwood's feeful he may proceed.

Adam Borgwood: and thanks so much for taking the questions. Just maybe for Andrew just going back to the new transactional model. It's great to hear that things are going smoothly so far in North America. I hope you can maybe go a step deeper on what exactly we need.

Simon Mays-Smith: So far in North America.

Operator: I was hoping you could maybe go a step deeper on what that exactly?

Simon Mays-Smith: Means and importantly, you know, what's given.

Operator: The confidence to roll out, accelerate the rollout into Europe and Japan ahead of expectations, especially given the additional complexities you've.

Speaker Change: and importantly, you know, let's give in the confidence to roll out, accelerate the roll out into Europe and Japan. I had a notification, especially given the additional complexities you've talked about pulling out internationally.

Simon Mays-Smith: Talked about rolling out internationally. Yeah, good question. So remember, let's just recount the incremental journey we've taken here.

Andrew Anagnost: Yeah, good question. So remember, let's just recount the incremental journey we've taken here. Right.

Speaker Change: Yeah, it's a good question. So remember, let's just recount the incremental journey we've taken here, right? We started with Australia, really.

Operator: Right.

Simon Mays-Smith: We started with Australia, really stressed and tested the system in that environment. We always like to stress and test things in smaller markets, on smaller pools. And we have essentially completed the entire rollout in the US and during that time we've had no major issues, no major issues came up with regards to disruption to the business as we did this. Now, of course, there's all sorts of quality of life issues. There's been a backlog of issues that people want more functionality, they want more capability to do X, Y, and Z. And what we're doing is we're working that backlog and we gave ourselves a little bit of extra time, time to clear that backlog. Some of that backlog is specific to test runs that we've done in Europe as well.

We started with Australia, really stressed and tested the system in that environment. We always like to stress and test things in smaller markets, on smaller pools. And we have essentially completed the entire rollout in the US and during that time we've had no major issues, no major issues came up with regards to disruption to the business as we did this. Now, of course, there's all sorts of quality of life issues. There's been a backlog of issues that people want more functionality, they want more capability to do X, Y, and Z. And what we're doing is we're working that backlog and we gave ourselves a little bit of extra time, time to clear that backlog. Some of that backlog is specific to test runs that we've done in Europe as well.

Speaker Change: Trust and Test is a system in that environment. We always like to stress and test things in smaller markets on smaller pools.

Speaker Change: and we have essentially completed the entire row out in the U.S., and during that time we've had no major issues. No major issues came up with regards to disruption to the businesses. Now of course there's all sorts of quality of life issues. There's been a backlog of issues that people want more functionality. They want more capabilities to do XYZ, and what we're doing is we're working that backlog and we gave ourselves a little bit of extra time to clear that backlog. So I'm going to add that backlog is specific to test runs that we've done in Europe as well. So given what we learned in...

Simon Mays-Smith: So given what we learned in Australia, given how the US went even smoother than Australia and we had a much shorter recovery time as we rolled out in Australia, given that, we're probably going to see the same kind of pull forward in Europe that we saw in the US which buffers things as we move forward. We're very confident about the cascade here and how this is going to roll out.

So given what we learned in Australia, given how the US went even smoother than Australia and we had a much shorter recovery time as we rolled out in Australia, given that, we're probably going to see the same kind of pull forward in Europe that we saw in the US which buffers things as we move forward. We're very confident about the cascade here and how this is going to roll out.

Speaker Change: in Australia, given how the US went even smoother than Australia, and we had a much shorter recovery time as we rolled out in.

Speaker Change: in Australia, given that we're probably going to see the same kind of pull forward in Europe that we saw in the US, which buffers things as we move forward. We're very confident about the cascade here and how this is going to roll out.

Operator: The only thing that's different in Western Europe from North America is really that it's different currencies and there's different legal regulatory laws in place. But I think that we've learned from each step along the way, and so are very, very comfortable with the plan for the full fiscal year. That's super helpful, and maybe just as a quick follow up.

Simon Mays-Smith: The only thing that's different in Western Europe from North America is really that it's different currencies and there's different legal regulatory laws in place. But I think that we've learned from each step along the way, and so are very, very comfortable with the plan for the full fiscal year.

Speaker Change: is the only thing that's different in Western Europe from North America is really that it's different currencies.

Speaker Change: and there's different legal regulatory laws in place but I think that we've learned from each step along the way and so are very, very comfortable with the plan for the full fiscal year.

Adam Borg: That's super helpful, and maybe just as a quick follow up. Andrew, obviously US elections coming up in a few months. I was hoping you could talk a little bit more about what you're seeing in the end-market demand environment, are the AEC or manufacturing industries making any changes in the decision-making process either accelerating or slowing down decision making ahead of, ahead of the election in a few months? Thanks again.

Simon Mays-Smith: Andrew, obviously US elections coming up in a few months.

Speaker Change: That's super helpful and maybe this is a cook follow-up Andrew obviously U.S. election coming up in a few months. I hope you can talk a little bit more about what you're seeing in the end market demand environment are the AEC or manufacturing industry is making any changes in the other situation making process, these are accelerating or slowing down the situation.

Operator: I was hoping you could talk a little bit more about what you're seeing.

Simon Mays-Smith: In the end-market demand environment, are the AEC or manufacturing industries making any changes in the decision-making process either accelerating or slowing down decision making ahead of, ahead of the election in a few months?

Operator: Thanks again. Yeah.

Andrew Anagnost: Yeah. You know, the good thing here is that the issues that affect our customers are bipartisan issues. All right, infrastructure, manufacturing, go USA, you know, everything across the world, they are bipartisan issues. So I think, you know, whoever wins, there may be all sorts of other puts and takes, but with regards to the things that affect our customers end markets, I see little impact, and we're not hearing a lot of trepidation from our customers.

Simon Mays-Smith: You know, the good thing here is that the issues that affect our customers are bipartisan issues. All right, infrastructure, manufacturing, go USA, you know, everything across the world, they are bipartisan issues. So I think, you know, whoever wins, there may be all sorts of other puts and takes, but with regards to the things that affect our customers end markets, I see little impact, and we're not hearing a lot of trepidation from our customers. Incredibly helpful.

Speaker Change: and making a head on the head of the election in a few months. Thanks again.

Andrew Anagnost: Yeah, you know the good thing here is that the issues that affect our customers are bipartisan issues.

Speaker Change: All right, infrastructure, manufacturing, go USA, you know, everything across the world they are bipartisan issues.

Speaker Change: So I think whoever wins, there may be all sorts of other puts in takes, but with regards to the things that affect our customers and markets, I see little impact and we're not hearing a lot of trepidation from our customers on that.

Adam Borg: Incredibly helpful. Thanks again.

Operator: Thanks again. Thank you. Our next question comes from Jason Celino with KeyBanc Capital Markets. You may proceed. Great.

Operator: Thank you. Our next question comes from Jason Celino with KeyBanc Capital Markets. You may proceed.

Speaker Change: and incredibly helpful. Thank you again.

Speaker Change: Thank you.

Jason Celino: Great. Thanks for taking my questions. I kind of wanted to kind of dig into just the performance of the quarter. Obviously, you beat nicely. You beat margins nicely. You're keeping kind of the margin framework the same for the year, even though you're absorbing some of these incremental headwinds from the transition. So internally, did you do anything to drive leverage or sources of leverage with that? No, we did nothing unusual to do this.

Speaker Change: Our next question comes from Jason Salino with Keybank Capital Markets he may proceed.

Simon Mays-Smith: Thanks for taking my questions. I kind of wanted to kind of dig into just the performance of the quarter. Obviously, you beat nicely. You beat margins nicely. You're keeping kind of the margin framework the same for the year, even though you're absorbing some of these incremental headwinds from the transition. So internally, did you do anything to drive leverage or sources of leverage with that? No, we did nothing unusual to do this.

Jason Salino: Great, thanks for taking my questions. I kind of wanted to kind of dig into the performance of the quarter. You know, obviously you...

Jason Salino: You beat Margins, you're keeping kind of the Margin framework the same for the year, even though you're absorbing some of these incremental headwinds from the transition. So internally did you do anything to drive leverage or sources of leverage with that?

Operator: All right.

Andrew Anagnost: All right. This is all the rated pace of the business. Betsy, you want to comment a little bit more?

Simon Mays-Smith: This is all the rated pace of the business. Betsy, you want to comment a little bit more?

Speaker Change: No, we did nothing unusual to do this.

Speaker Change: This is all the rated pace of the business that you want to comment a little bit more. I think that we did see underlying improvements in the margins, and that was intentional knowing that we were going to get some headlines from some of these transitions.

Operator: I think that we did see underlying improvements in the margins, and that was intentional, knowing that we were going to get some headwinds from some of these transitions.

Betsy Rafael: I think that we did see underlying improvements in the margins, and that was intentional, knowing that we were going to get some headwinds from some of these transitions.

Simon Mays-Smith: Okay, great. And then maybe just a little more pointed on the Free Cash Flow side. So it is a $10 million raise. Nice to see. Obviously, the transition timelines have no impact to Free Cash Flow. So I know you said some customers signed earlier in Q2. So is the raise on Free Cash Flow just a function of timing or more a function like the core business?

Jason Celino: Okay, great. And then maybe just a little more pointed on the Free Cash Flow side. So it is a $10 million raise. Nice to see. Obviously, the transition timelines have no impact to Free Cash Flow. So I know you said some customers signed earlier in Q2. So is the raise on Free Cash Flow just a function of timing or more a function like the core business? Thank you.

Speaker Change: Okay.

Speaker Change: Great. And then maybe just a little more pointed on the free cash flow side. So it is a $10 million raise, nice to see.

Speaker Change: obviously the transition timelines of no impact to free cash flow.

Speaker Change: I know you said some customers signed earlier in TUQ, so it's the raise on freak out show, just a time function of timing.

Operator: Thank you. So I think a lot of it is a timing issue because we originally estimated that we didn't anticipate the significance of people buying ahead of the launch in North America. And so our original assumption for Free Cash Flow for FY25 was that roughly 2/3 of it would take place in the back half of the year. Our current modeling assumption is 1/2 of that will take place in the back half of the year.

Betsy Rafael: So I think a lot of it is a timing issue because we originally estimated that we didn't anticipate the significance of people buying ahead of the launch in North America. And so our original assumption for Free Cash Flow for FY25 was that roughly 2/3 of it would take place in the back half of the year. Our current modeling assumption is 1/2 of that will take place in the back half of the year.

Speaker Change: or more of a function like the core business. Thank you.

Speaker Change: So I think it's a lot of it is a timing issue because we are readily estimated that we didn't anticipate the significance of it.

Speaker Change: People buying ahead of the launch.

Speaker Change #100: in North America, and so our original assumption for pre-cashflow for FY25 was that roughly two-thirds of it would take place in the back half of the year. Our current modeling assumption is one half of that will take place in the back half of the year.

Simon Mays-Smith: Excellent.

Jason Celino: Excellent. Thank you.

Operator: Thank you. Thank you. Our next question comes from Elizabeth Porter with Morgan Stanley. You may proceed. Great.

Operator: Thank you. Our next question comes from Elizabeth Porter with Morgan Stanley. You may proceed. Great.

Speaker Change #101: Excellent, thank you.

Speaker Change #102: Thank you.

Speaker Change #103: Our next question comes from Elizabeth Porter with Morgan Stanley, you may proceed.

Simon Mays-Smith: Thank you so much for the question. I wanted to ask a bit on the pricing environment.

Elizabeth Porter: Thank you so much for the question. I wanted to ask a bit on the pricing environment. I believe that one of the things we picked up was the move to the transaction model should allow you to have some more control on discounting behavior and help narrow some of the price differentials you've seen. So I wanted to ask, is this a lever you expect to use, and is it something you're doing today or a future opportunity and how we could think about that going forward?

Operator: I believe that one of the things.

Speaker Change #104: Great, thank you so much for the question.

Simon Mays-Smith: we picked up was the move to the transaction model should allow you to have some more control on discounting behavior and help narrow some of the price differentials you've seen. So I wanted to ask, is this.

Elizabeth Porter: I wanted to ask if it on the pricing environment, but one of the things we picked up was to move to the transactional model, should allow you to have some more control on discounting behavior and help narrow some of the price differentials you've seen. So I wanted to ask, is this a lever you expect to use and is it something you're doing today or a future opportunity and how we could think about that going forward?

Operator: A lever you expect to use, and.

Simon Mays-Smith: Is it something you're doing today or a future opportunity and how we could?

Operator: Think about that going forward?

Simon Mays-Smith: Yeah. So the place where that has the biggest impact is with our partners. Quite frankly, what our best partners really like about the New Transaction Model is it prevents a less competent, less value-added partner coming in and undermining them on price on a big deal where they're trying to really add value. So for our partners, this is definitely going to allow them to sell to the value that they're delivering. For us, moving forward, it's all about the efficiencies of the process. So for us, it's not so much about the price. The partners are definitely going to benefit from that. What we're going to benefit is the ability to get the efficiencies and the cost out of the environment as we move forward. And I think that's where you want to look at, for us, the partners. Definitely a price advantage for our best partners.

Andrew Anagnost: Yeah. So the place where that has the biggest impact is with our partners. Quite frankly, what our best partners really like about the New Transaction Model is it prevents a less competent, less value-added partner coming in and undermining them on price on a big deal where they're trying to really add value. So for our partners, this is definitely going to allow them to sell to the value that they're delivering. For us, moving forward, it's all about the efficiencies of the process. So for us, it's not so much about the price. The partners are definitely going to benefit from that. What we're going to benefit is the ability to get the efficiencies and the cost out of the environment as we move forward. And I think that's where you want to look at, for us, the partners. Definitely a price advantage for our best partners.

Speaker Change #106: Yeah, so the pleasure that has the biggest impact is with our partners, quite frankly. What our best partners really like about the Nutrient Action Model, is it prevents a less competent, less valued partner coming in and undermining them on price on a big deal where they're trying to really add value. So for our partners, this is definitely going to allow them to sell to the value they're delivering. For us moving forward, it's all about the efficiencies of the process.

Speaker Change #106: So, for us, it's not so much about the price, the partners are definitely going to benefit from that.

Speaker Change #106: What we're going to benefit is the ability to get the efficiency.

Speaker Change #107: and the car out.

Speaker Change #107: of the Environment as we move forward. And I think that's where you want to look at for us. The partners definitely have a price advantage for our best partners for us. A cost advantage as we drive productivity.

Simon Mays-Smith: For us, a cost advantage as we.

For us, a cost advantage as we drive productivity,.

Operator: Drive productivity, enhance those strategic relationships directly with customers. Great.

Betsy Rafael: Enhance those strategic relationships directly with customers.

Great. And then, just as a follow-up, appreciate the comments on the overall demand environment. Something you could unpack a little bit more around the new business trends. You know, understand the macro means challenging, anything you're picking up from a new business standpoint in the quarter or how that outlook is changing.

Speaker Change #107: and in Hamphas for the Ticket Relationship, directly with customers.

Simon Mays-Smith: And then, just as a follow-up, appreciate the comments on the overall demand environment. Something you could unpack a little bit more around the new business trends. You know, understand the macro means challenging, anything you're picking up from a new business standpoint in the quarter or how that outlook is changing.

Speaker Change #108: Great, and it just has a follow up, appreciate the comments on the overall demand environment. But I may use unpack a little bit more around the new business trends, you know, understand the macro means change, challenging. Anything you're picking up from a new business standpoint in the quarter or how that outlook is changing.

Operator: Yeah.

Andrew Anagnost: Yeah. So let me talk about that a little bit. You know, generally, broadly, okay. We're seeing the same kind of trends that we've seen in previous quarters. There are absolutely some headwinds in new business. But there's different puts and takes here as we look at this quarter. Now, our moving forward metrics like monthly active usage and bids on BuildingConnected, those show the same kind of positive forward momentum that we've seen in the past. But if you look at the market, obviously AEC continues to do well. This has a lot to do with construction growth helping in there as well as other things driving Revit and the backlog associated with that. Manufacturing did well. It beats a lot of our competitors in the market. The drag was media and entertainment still coming out of the effects of those strikes, okay.

Simon Mays-Smith: So let me talk about that a little bit. You know, generally, broadly, okay. We're seeing the same kind of trends that we've seen in previous quarters. There are absolutely some headwinds in new business. But there's different puts and takes here as we look at this quarter. Now, our moving forward metrics like monthly active usage and bids on BuildingConnected, those show the same kind of positive forward momentum that we've seen in the past. But if you look at the market, obviously AEC continues to do well. This has a lot to do with construction growth helping in there as well as other things driving Revit and the backlog associated with that. Manufacturing did well. It beats a lot of our competitors in the market. The drag was media and entertainment still coming out of the effects of those strikes.

Speaker Change #109: Yeah, so let me talk about that a little bit. You know, generally broadly, okay, we're seeing the same kind of trends that we've seen in previous quarters. There are absolutely some headwinds and new business, but there's different puts and takes here, as we look at this quarter now, are moving forward metrics, like a monthly active usage.

Speaker Change #109: and build this on building connected. Those show the same kind of positive forward momentum that we've seen in the past. But if you look at the market, obviously, AEC continues to do well. This has a lot to do with construction growth, helping in there, as well as other things driving, driving, rev it and the backlog, associated with that. Manufacturing did well. It beats our, a lot of our competitors in the market. The drive was meeting entertainment.

Operator: Okay.

Simon Mays-Smith: That will continue to take time geographically. A few puts and takes here.

That will continue to take time geographically. A few puts and takes here okay. Most of the world was strong, but China and Korea dragged down our business geographically. That gives you kind of a lay of the land for what we see. But one of the things that you got to take away from this is autos is incredibly resilient business. There's puts and takes in one part of the business. You might be off on certain types of projects, but you're up on other sides of projects. One geography is down, another geography is up. This is the magic of Autodesk and our very distributed and resilient business. And that's what you're seeing as a result here.

Speaker Change #109: Still coming out of the effects of those strikes, okay, and that will continue to take time.

Operator: Okay.

Simon Mays-Smith: Most of the world was strong, but China and Korea dragged down our business geographically. That gives you kind of a lay of the land for what we see. But one of the things that you got to take away from this is autos is incredibly resilient business. There's puts and takes in one part of the business. You might be off on certain types of projects, but you're up on other sides of projects. One geography is down, another geography is up. This is the magic of Autodesk and our very distributed and resilient business. And that's what you're seeing as a result here. Great, thank you very much.

Speaker Change #109: Geographically, a few puts in takes here, okay? Most of the world was strong, but China and Korea were dragged on our business geographically.

Speaker Change #109: and that gives you kind of a lay of the last one we see, but one of the things that you gotta take away from this is...

Speaker Change #109: Audices incredibly resilient business.

Speaker Change #109: You know, there's puts in case in one part of the business, you know, there's, you might, you might be off on certain types of projects, but you're up on other types of projects, one geography is down, another geography is up. This is the magic of Autodesk, and our very distributed and resilient business. That's what you're seeing as a result here.

Elizabeth Porter: Great, thank you very much.

Operator: Thank you. Our next question comes from Joe Vruwink with Baird. You may proceed. Great. Hi everyone.

Operator: Thank you. Our next question comes from Joe Vruwink with Baird. You may proceed. Great. Hi everyone.

Speaker Change #110: Great, thank you very much.

Speaker Change #111: Our next question comes from Joe Brunk with Pear G. May proceed.

Simon Mays-Smith: Going back, Andrew, to your manufacturing comments.

Joe Vruwink: Going back, Andrew, to your manufacturing comments. Growth in the upper teens there or low teens for just the AEC business. Those numbers definitely stand out relative to what we've been hearing throughout the summer. I think particularly at the high end where there's been some commentary about more deal lumpiness at Enterprise. I mean, you have exposure to mid-market and enterprise. You gave anecdotes about both segments. I'm wondering if you're ultimately seeing maybe more share movement and that's ultimately explaining the strength there.

Joe Brunk: Hi everyone.

Operator: Growth in the upper teens there or low teens for just the AEC business.

Speaker Change #113: and Andrew's here, Manufacturing Commons, so it's gross in the upper teams there, or low teams for just the right of a business.

Simon Mays-Smith: Those numbers definitely stand out relative to.

Operator: What we've been hearing throughout the summer. I think particularly at the high end.

Speaker Change #114: Those members definitely stand at relative to what we've been hearing throughout the summer. I think particularly at the high-end where there's been some commentary about more the world who want to be in this at Enterprise.

Simon Mays-Smith: Where there's been some commentary about more deal lumpiness at Enterprise.

Operator: I mean, you have exposure to mid-market and enterprise.

Simon Mays-Smith: You gave anecdotes about both segments.

Speaker Change #115: I mean, you have exposure to the market and enterprise you gave anecdotes about both segments. I'm wondering if you're ultimately seeing maybe more chair movements and that's ultimately explaining the strength there.

Operator: I'm wondering if you're ultimately seeing maybe more share movement and that's ultimately explaining the strength there.

Simon Mays-Smith: We are definitely seeing share movement. Look, we feel like we're out in front on a lot of things. Fusion did well in the quarter. Its key count growth was consistent with previous quarters. More importantly, we continue to drive ASPs up for Fusion with attach rates of extensions and other actions in the Fusion base. So you are absolutely seeing share shift.

Andrew Anagnost: We are definitely seeing share movement. Look, we feel like we're out in front on a lot of things. Fusion did well in the quarter. Its key count growth was consistent with previous quarters. More importantly, we continue to drive ASPs up for Fusion with attach rates of extensions and other actions in the Fusion base. So you are absolutely seeing share shift.

Speaker Change #116: We are definitely the same sharp movement.

Speaker Change #117: We feel like we're...

Speaker Change #118: We're out in front on a lot of things.

Speaker Change #119: You should did well.

Speaker Change #120: In the corner, at C.Cown Road, we'll consider with previous quarters more important links.

Speaker Change #121: We continue to drive ASP's up for fusion with the tax rate of the extension and other other actions in the fusion day. So, you are absolutely appreciate it.

Operator: Okay. And then on the slide showing underlying.

Joe Vruwink: Okay. And then on the slide showing underlying margin improvement that's taken place since FY23, how much latent investment is still being absorbed in that normalized 39%. So you talk about making investment in cloud platform AI. Those investments are so you're ahead of peers and not needing to make up some future catch up investment. I mean, another way to say is you're spending some amount and you haven't matched it against revenues yet? Just wondering if it's possible to quantify what that is, because that would seems to be an area of future improvement in addition to what you're doing with the transaction model.

Speaker Change #121: Okay?

Simon Mays-Smith: Margin improvement that's taken place since FY23, how much latent investment is still being?

Speaker Change #121: and then John the slide showing underlying margin improvement that's taking place in FY23.

Operator: Absorbed in that normalized 39%.

John: How much?

Layton Investment: Layton Investment is still being absorbed in that normalized 39%. You talk about making investment in cloud platform AI.

Simon Mays-Smith: So you talk about making investment in cloud platform AI.

Operator: Those investments are so you're ahead of peers and not needing to make up some future catch up investment. I mean, another way to say is you're spending some amount and you haven't.

John: Those investments are your ahead of peers and not be in a make-up some future catch-up investments.

Simon Mays-Smith: Matched it against revenues yet?

Speaker Change #124: I mean, another way to say is you're spending some amounts and you have a match that against revenues, so just wondering if it's possible to quantify what that is because that would seem to be it.

Operator: Just wondering if it's possible to.

Simon Mays-Smith: Quantify what that is, because that would.

Operator: Seems to be an area of future.

Simon Mays-Smith: Improvement in addition to what you're doing.

Operator: With the transaction model.

Speaker Change #125: An area of future improvement in addition to what you're doing with the transaction model.

Simon Mays-Smith: So there's always a delay in R and D investment and return on R and D investment. Okay. So there's always a shift. We're definitely in a time of great technological advancement here. We're definitely in an environment where share shift is starting to happen. So there's always a shift in those areas. Okay. And I think we should expect that, that there's this delay between the actual value creation and the investment that's very natural in technology like this. That's why I want you to understand that we're very focused on net sales and marketing productivity moving forward because that's how we're going to drive the margin growth over the next couple of years as the investments in these new and emerging technologies start to really pick up.

Andrew Anagnost: So there's always a delay in R and D investment and return on R and D investment. Okay. So there's always a shift. We're definitely in a time of great technological advancement here. We're definitely in an environment where share shift is starting to happen. So there's always a shift in those areas. Okay. And I think we should expect that, that there's this delay between the actual value creation and the investment that's very natural in technology like this. That's why I want you to understand that we're very focused on net sales and marketing productivity moving forward because that's how we're going to drive the margin growth over the next couple of years as the investments in these new and emerging technologies start to really pick up.

Speaker Change #126: So there's always a delay in R&D investment and return on R&D investment, okay? So there's always a shift.

Speaker Change #126: We're definitely in a time of great technological advancements here, we're definitely in an environment where it's shared shift is starting to happen. So there's always a shift in those areas, okay, and I think we should expect that, that there's this delay between the actual value creation and the investment.

Speaker Change #126: That's very natural in technology like this.

Speaker Change #126: That's why I want you to understand that we're very focused on that sales and marketing productivity moving forward because that's how we're going to drive the margin growth of the next couple years as the investments in these new and emerging technologies start to really pick up.

Operator: Okay, thank you. Thank you. Our next question comes from Ken Wong with Oppenheimer & Co. You may proceed. Fantastic.

Joe Vruwink: Okay, thank you.

Operator: Thank you. Our next question comes from Ken Wong with Oppenheimer & Co. You may proceed. Fantastic.

Speaker Change #127: Okay, thank you.

Speaker Change #128: Our next question comes from Ken Wong with Oppenheimer and Company you may proceed.

Simon Mays-Smith: I wanted to maybe dig into the margins a little bit. You mentioned being ahead of schedule on the margin profile. Also confident you can make further improvements in Fiscal 26, I guess. How should we think about where that could go? We're at a point where you haven't even optimized for sales and marketing.

Ken Wong: I wanted to maybe dig into the margins a little bit. You mentioned being ahead of schedule on the margin profile. Also confident you can make further improvements in Fiscal 26, I guess. How should we think about where that could go? We're at a point where you haven't even optimized for sales and marketing. What's the right way to think about that trajectory?

Ken Wong: Fantastic. I wanted to maybe dig into the margins a little bit. You mentioned being a head of schedule on the margin profile. Also, confident you can make further improvements in fiscal 26th

Speaker Change #130: I guess, how should we think about where that could go, we're at a point where you haven't even optimized for sales and marketing. What's the right way to think about that trajectory?

Operator: What's the right way to think about that trajectory?

Simon Mays-Smith: It's a little early for me to say I'm not going to be giving the guide for an extra. So there's a couple of things that are gating here. Okay. One, we want to complete the rollout of the new transaction model. We want to hire a new CFO and get their fingers on this. And then what we'll do is we'll start giving you more color on the specifics for next year. But suffice it to say, what I'm trying to do is give you confidence that one, we're not only paying attention to this, but we've got line of sight just like we did in the move to annualized billings. Look at the results that we're delivering now as a result of that. Okay, that happened. That was two years ago. Look at the results we're delivering now.

Andrew Anagnost: It's a little early for me to say I'm not going to be giving the guide for an extra. So there's a couple of things that are gating here. Okay. One, we want to complete the rollout of the new transaction model. We want to hire a new CFO and get their fingers on this. And then what we'll do is we'll start giving you more color on the specifics for next year. But suffice it to say, what I'm trying to do is give you confidence that one, we're not only paying attention to this, but we've got line of sight just like we did in the move to annualized billings. Look at the results that we're delivering now as a result of that. Okay, that happened. That was two years ago. Look at the results we're delivering now.

Speaker Change #131: So it's a little early for me to say I'm not going to be forgiving the guy for next year, so there's a couple of things that are engaging here, okay? One, we want to complete the rollout.

Speaker Change #131: of the Nutrient Dax model, but when I hire a new CFO and get their fingers on this.

Speaker Change #131: and then what we'll do is we'll start giving you more color on specifics for next year but to find it to say what I'm trying to do is...

Speaker Change #131: and we're not only paying attention to this, but we've got line of sight. Just like we did in the move to annualized buildings, look at the results that we're delivering now as a result of that, okay? That's two years ago, look at the results we're delivering. Now I'm telling you, we have line of sight on other productivity improvements that Jose was selling and marketing in the new Transaction model. So I want you to know what we see it and you need to believe in it. And as we said before, the P&L is going to be noisy as we continue to transition to the new Transaction model.

Simon Mays-Smith: I'm telling you, we have line of sight on other productivity improvements associated with sales, marketing, and the New Transaction Model. So I want you to know we see it and you need to believe in it.

I'm telling you, we have line of sight on other productivity improvements associated with sales, marketing, and the New Transaction Model. So I want you to know we see it and you need to believe in it.

Operator: As we've said before, the P and L is going to be noisy as we continue to transition to the new transaction model. That's why we anchored you on the FY 2026 free cash flow target to give you a sense of what to expect. With our current trajectory, we still estimate that the free cash flow in fiscal 2026 to be around $2.05 billion at the midpoint. As I said earlier, we have our largest multi-year cohort renewing. We have a large EBA cohort, and we have kind of a natural transition to annual billings from upfront billings.

Betsy Rafael: As we've said before, the P and L is going to be noisy as we continue to transition to the new transaction model. That's why we anchored you on the FY 2026 free cash flow target to give you a sense of what to expect. With our current trajectory, we still estimate that the free cash flow in fiscal 2026 to be around $2.05 billion at the midpoint. As I said earlier, we have our largest multi-year cohort renewing. We have a large EBA cohort, and we have kind of a natural transition to annual billings from upfront billings.

Speaker Change #131: and that's why we anchor you.

Speaker Change #131: on the FY26 Free Cash Flow Target to give you a sense of what to expect.

Speaker Change #131: and with our current trajectories, we still estimate that the free cash flow of fiscal 26 to be around.

Speaker Change #131: 2.05 billion at the midpoint. As I said earlier, we have our largest multi-year cohort renewing, we have a large EBA cohort, and we have kind of the natural transition to annual billings from upfront billings.

Simon Mays-Smith: Okay, perfect.

Ken Wong: Okay, perfect. We will wait anxiously for these details. Maybe second, just thinking about, we talked a lot about the potential economics and kind of the partner activity on the transaction model. What are you guys hearing from customers? Do they even care? Do they even notice? Is there some sort of benefit on their side that they might be seeing that we're maybe on the analyst world not quite, quite as cognizant of?

Operator: We will wait anxiously for these details. Maybe second, just thinking about, we talked.

Speaker Change #132: Great, perfect. We will all wait anxiously for these details. Maybe second, just thinking about the...

Simon Mays-Smith: A lot about the potential economics and kind of the partner activity on the transaction model. What are you guys hearing from customers? Do they even care? Do they even notice? Is there some sort of benefit on their side that they might be seeing that we're maybe on the analyst world not quite, quite as cognizant of?

Speaker Change #133: We've talked a lot about the potential economics and kind of the partner.

Speaker Change #134: Partner activity on the transaction model. What are you guys hearing from customers? And do they even care? Do they even notice? Is there some sort of benefit on their side that they might be seeing? That we're maybe on the analysts world, not quite as cognizant of.

Operator: Yeah.

Andrew Anagnost: Yeah. So look, for most customers it's a non-event, all right? Because, you know, they're just finding themselves buying differently, some are happier. Some would prefer to go through a third party. Notice that some are taking the opportunity to true up contracts. All right. That's what they're doing right there, they're saying, oh, I have a chance to clean up my relationship with Autodesk, that's going to give me more power come the renewal cycle. So they actually see an advantage with cleaning up their relationship with us and making sure that they have visibility in their company. So that's good for them. But for the most part it's not a big customer issue, positive or negative.

Simon Mays-Smith: So look, for most customers it's a non-event, all right? Because, you know, they're just finding themselves buying differently, some are happier. Some would prefer to go through a third party. Notice that some are taking the opportunity to true up contracts. All right. That's what they're doing right there, they're saying, oh, I have a chance to clean up my relationship with Autodesk, that's going to give me more power come the renewal cycle. So they actually see an advantage with cleaning up their relationship with us and making sure that they have visibility in their company. So that's good for them. But for the most part it's not a big customer issue, positive or negative. Okay, perfect.

Speaker Change #135: Yes, hold on.

Speaker Change #135: for most customers, if...

Speaker Change #137: It's a non-events, right? Because you know, they're just finding themselves buying differently. Some are happier, some would prefer it to go through a third party, notice that some are taking the opportunity to to a true up contract, right? That what they're doing right there, the thing, oh, I have a chance to clean up my relationship with Autodesk. You know, that's going to give me more power to come to a normal cycle. So they actually see, you know, the advantages with cleaning up their relationship with Autodesk making sure that they have disability in their company.

Speaker Change #137: So, that's good for them, but for the most part, it's not a big customer.

Ken Wong: Okay, perfect. Thank you for the insight, guys.

Operator: Thank you for the insight, guys. Thank you. Our next question comes from Tyler Radke with Citi. You may proceed.

Operator: Thank you. Our next question comes from Tyler Radke with Citi. You may proceed.

Speaker Change #138: issue, what positive or negative.

Speaker Change #138: Okay, perfect. Thank you for the insight, guys.

Speaker Change #138: Thank you.

Speaker Change #138: Our next question goes from Tyler Radke with City he may proceed.

Simon Mays-Smith: Yes, thank you for taking the question. I guess just to start off on the free cash flow number for next year, I guess that's one piece of.

Tyler Radke [Managing Director and Senior Equity Research Analyst: Yes, thank you for taking the question. I guess just to start off on the free cash flow number for next year, I guess that's one piece of guidance, or at least a target that you've given. Can you just talk about the confidence behind that? And as you think about being ahead of plan in terms of some of these margin optimizations, how much margin and cost optimizations is built into that number?

Tyler Radke: Yes, thank you for taking the question.

Tyler Radke: I guess it's just start off on the free cash flow number for next year. I guess that's one piece of guidance or at least.

Operator: Guidance, or at least a target that you've given.

Simon Mays-Smith: Can you just talk about the confidence behind that? And as you think about being ahead of plan in terms of some of these margin optimizations, how much margin and cost optimizations is built into that number?

Tyler Radke: I'm a target that you've given. Can you just talk about the confidence behind that? And if you think about being ahead of plan in terms of some of these margin optimizations, like how much?

Speaker Change #140: Margin and you know cost optimizations is built into that number.

Operator: Well, again, we're obviously not going to be giving you detailed guidance for fiscal 26 at this point, but what we will do at the end of the fiscal year is we'll give you a lot more details about the impact of the new transaction model both on fiscal 25 as well as what we expect, how we expect it to impact fiscal 26. And right now we're focused on the rollout in North America as well as Western Europe in September. What I can say is the tailwind to revenue growth will be greater in fiscal 26 than in 25. And all else being equal, the greater the tailwind to revenue in 26, the greater the headwind to margins. And again, but we are very focused on managing that.

Betsy Rafael: Well, again, we're obviously not going to be giving you detailed guidance for fiscal 26 at this point, but what we will do at the end of the fiscal year is we'll give you a lot more details about the impact of the new transaction model both on fiscal 25 as well as what we expect, how we expect it to impact fiscal 26. And right now we're focused on the rollout in North America as well as Western Europe in September. What I can say is the tailwind to revenue growth will be greater in fiscal 26 than in 25. And all else being equal, the greater the tailwind to revenue in 26, the greater the headwind to margins. And again, but we are very focused on managing that.

Speaker Change #141: Well again, we're obviously not going to be giving you detailed guidance for physical 26 at this point.

Speaker Change #141: But what we will do at the end of the fiscal year, it will give you a lot more details about the impact of the new Transaction model, both on fiscal 25, as well as what we expected, how we expected to impact fiscal 26.

Speaker Change #141: and right now we're focused on the rollout in North America as well as Western Europe and September. But when I can't say it's a tailwind to revenue growth, we'll be greater in fiscal 26th than in 25th.

Speaker Change #141: and all else being equal, the greater the tailwind to revenue in 26, the greater the headwind to margin.

Operator: Again, based upon this change in the geography on the balance sheet and the P&L, we're still largely focused on being able to manage to margins that are better than they are today. And again, going back to the free cash flow number of $2.05 billion at the midpoint. But you know, obviously that's up significantly from where it is this year. And I mentioned earlier the largest multi-year cohort is renewing next year. We have a large EBA cohort. And again, this natural transition from annual billing from the upfront to the annual billings will also help us from a cash flow perspective.

Again, based upon this change in the geography on the balance sheet and the P&L, we're still largely focused on being able to manage to margins that are better than they are today. And again, going back to the free cash flow number of $2.05 billion at the midpoint. But you know, obviously that's up significantly from where it is this year. And I mentioned earlier the largest multi-year cohort is renewing next year. We have a large EBA cohort. And again, this natural transition from annual billing from the upfront to the annual billings will also help us from a cash flow perspective.

Speaker Change #141: and again, but we are very focused on managing that, again, based upon this.

Speaker Change #141: this change in the geography on the balance sheet in the P&L, we're still largely focused on being able to manage to margins.

Speaker Change #141: that are better than they are today. And again, going back to the precastle number of the 2.0-5 billion at the midpoint.

Speaker Change #141: But you know, obviously that's up significantly from where it is this year and I mentioned earlier, the largest multi-year cohort is renewing next next year.

Speaker Change #141: We have a large EVA cohort and again this natural transition from annual billing from the upfront to the annual billing will also help us from a cash flow perspective.

Simon Mays-Smith: Great. And for Andrew, the Make revenue in the quarter was particularly strong, I think the strongest sequential growth in a number of years despite sort of having the leap year last quarter. Was there any one-time factors there or is that sort of a function of share gains and some of the reorg you've done in that organization to sort of accelerate growth?

Tyler Radke [Managing Director and Senior Equity Research Analyst: Great. And for Andrew, the Make revenue in the quarter was particularly strong, I think the strongest sequential growth in a number of years despite sort of having the leap year last quarter. Was there any one-time factors there or is that sort of a function of share gains and some of the reorg you've done in that organization to sort of accelerate growth?

Speaker Change #141: Great, and for Andrew, the make revenue in the quarter was particularly strong. I think the strongest sequential growth in a number of years, despite.

Andrew Anagnost: sort of having the leap year last quarter. Was there any one time factors there, is that sort of a function of share gain to some of the, you know, re-ordid, you've done in that organization to sort of accelerate growth?

Operator: Yeah.

Andrew Anagnost: Yeah. So first off, the core underlying momentum of the Make businesses is intact. There was one-time factor. The acquisition of Payapps is in there as well. All right. Which is an important piece of it. But the underlying momentum in the construction Fusion business, that is solid and consistent with previous quarters with a little kick from the Payapps business. Okay. Makes sense.

Simon Mays-Smith: So first off, the core underlying momentum of the Make businesses is intact. There was one-time factor. The acquisition of Payapps is in there as well. All right. Which is an important piece of it. But the underlying momentum in the construction Fusion business, that is solid and consistent with previous quarters with a little kick from the Payapps business. Okay. Makes sense. Yeah. Yeah. Any way to quantify the Payapps in the quarter? No.

Speaker Change #142: Yes, I'm so sorry.

Speaker Change #143: First off, the core underlying momentum of the make businesses have been tapped. There was one one time factor, the opposition of pay-offs is in there as well, right? Which is an important piece of it. But the underlying momentum in the construction of the use of business, that is solid and consistent with previous quarters, with a little kick from the pay-offs business, okay?

Tyler Radke [Managing Director and Senior Equity Research Analyst: Yeah. Yeah. Any way to quantify the Payapps in the quarter?

Speaker Change #143: Exem.

Andrew Anagnost: No.

Speaker Change #144: Yeah, any way to quantify the pay-abs in the quarter.

Operator: Okay, thank you. Thought I'd try.

Tyler Radke [Managing Director and Senior Equity Research Analyst: Okay, thank you. Thought I'd try.

Speaker Change #144: Now.

Simon Mays-Smith: It's always worth trying. Always ask.

Andrew Anagnost: It's always worth trying. Always ask.

Speaker Change #145: Okay, thank you, but I try.

Operator: Thank you. That is all the time we have for Q and A today. I would now like to turn the call back over to Simon Mays-Smith for any closing remarks.

Operator: Thank you. That is all the time we have for Q and A today. I would now like to turn the call back over to Simon Mays-Smith for any closing remarks.

Speaker Change #146: I thought we were trying, how would that?

Speaker Change #147: Thank you. That is all the time we have for Q&A today. I would not like to turn the call back over to Simon Mays Smith for any closing remarks.

Simon Mays-Smith: Thanks everyone for attending. We'll look forward to seeing many of you on the road over the coming weeks and or at AU at the end of October. Please just ping me if you have any questions in the meantime. Otherwise we'll catch up on next quarter's call towards the end of November. Thanks very much.

Simon Mays-Smith: Thanks everyone for attending. We'll look forward to seeing many of you on the road over the coming weeks and or at AU at the end of October. Please just ping me if you have any questions in the meantime. Otherwise we'll catch up on next quarter's call towards the end of November. Thanks very much.

Speaker Change #148: Thanks, everyone for attending. We'll look forward to seeing many of you on the road over the coming weeks and towards AU at the end of October. Please just ping me if you have any questions in the meantime. Otherwise, we'll catch up on next call as call towards the end of November. Thanks so much.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Speaker Change #149: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Speaker Change #150: I'm going back to the next episode of the

Speaker Change #150: Episode 2

Speaker Change #150: i

Speaker Change #150: [inaudible]

Speaker Change #150: [inaudible]

Simon Mays-Smith: Sa.

Operator: Sa.

Simon Mays-Smith: Sam.

Operator: Sarah. Good day and thank you for standing by. Welcome to the Q2 Fiscal 25 Autodesk Earnings Conference call. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation there will be a question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your speaker today, Simon Mays-Smith, Vice President, Investor Relations.

Speaker Change #150: [inaudible]

Speaker Change #150: Music

Speaker Change #150: [inaudible]

Speaker Change #151: Good day and thank you for standing by. Welcome to the Q2 fiscal 25 auto desk earnings conference call. At this time, all participants are an Alicinomi mode. Please be advised that today's conference is being recorded.

Speaker Change #152: After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1, one on your telephone and wait for your name to be announced. To withdraw your question, please press star 1, one again. I would not like to end the conference over to your speaker today. Simon Mays Smith, Vice President and Vester Relations.

Simon Mays-Smith: Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss the second quarter results of Autodesk fiscal 25. On the line with me is Andrew Anagnost, our CEO, and Betsy Rafael, our interim CFO. During this call, we will make forward-looking statements including outlook, and related assumptions, products, and strategies. Actual events or results could differ materially. Please refer to our SEC filings including our most recent Form 10-Q and the Form 8-K filed with today's press release for important risks and other factors that 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. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information.

Speaker Change #153: Thanks, Operator and good afternoon. Thank you for joining our Conference School to discuss the second quarter results of Audit F. Fitzgald 25.

Speaker Change #154: D. E. O. And Betsy Raphel, are Andrew Anagnost, our CEO and Betsy Raphel are Andrew and CFO.

Speaker Change #154: During this call, we will make forward-looking statements, including Outlook and Related Assumption, Products, and Strategies.

Speaker Change #154: Actual events or results could differ materially.

Speaker Change #154: Please refer to our SEC findings, including our most recent form 10Q, and the form 8K, filed with today's press release, for important risks and other factors that may cause our actual results to vithers from those in our forward-looking statements.

Speaker Change #154: For looking statements made during the call, 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.

Simon Mays-Smith: Autodesk disclaims any obligation to update or revise any forward-looking statements. We will quote several numeric or growth changes during this call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year-on-year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release, or Excel financials, and other supplemental materials available on our Investor Relations website. Now I will turn the call over to Andrew. Thank you, Simon, and welcome everyone to the call. We finished the second quarter and first half of the year strongly, delivering 13% revenue growth and constant currency in both periods, and have raised guidance for the full year reflecting the sustained momentum of the business and the smooth launch of the new transaction model in North America in June and expected launch in Western Europe in September.

Speaker Change #155: Board of Deaf Disclaims, any obligation to update or revise any forward-looking statements.

Speaker Change #155: We will quote several numeric or growth changes during this call as we discuss our financial performance. And that's otherwise noted each such reference represents a year-on-year comparison.

Andrew Anagnost: All non-gat numbers reference in today's call are reconciled in our press release or itself financials and other supplemental materials available on our Investor Relations website. And now I will turn the call over to Andrew.

Andrew Anagnost: Thank you, Simon and welcome everyone to the call. We finished the second quarter in first half of the year strongly, delivering 13% revenue growth and constant currency in both periods, and have raised guidance for the full year reflecting the sustained momentum of the business.

Andrew Anagnost: and the smooth launch of the new Transaction Model in North America and June, an expected launch in western Europe in September.

Simon Mays-Smith: Once again, opportunity, resilience, and discipline underpinned our performance. In March last year we laid out the secular growth trends in our markets, from accelerating digital transformation in architecture, engineering, and construction or AEC to the transition to the cloud in manufacturing, media, and entertainment. These secular trends are driving customers to break down siloed workflows and seamlessly connect data end to end. Real world experiences from remote collaboration to supply chain disruption and AI are reinforcing these trends. We are aggressively pursuing our strategy to benefit from these secular trends including the development of next-generation technology and services, end-to-end digital transformation, and unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries.

Andrew Anagnost: Once again, Opportunity, Resilience and Discipline, under Pandar Performance.

Andrew Anagnost: In March last year, we laid out the secular growth trends in our markets from accelerating digital transformation in architecture, engineering and construction, or AEC, to the transition to the cloud in manufacturing and meeting entertainment.

Andrew Anagnost: The secular trends are driving customers to break down pilot workloads and seamlessly connect data and to end.

Andrew Anagnost: Real-world experiences from remote collaboration to supply chain disruption and AI are reinforcing these trends.

Andrew Anagnost: We are aggressively pursuing our strategy to benefit from these secular trends, including the development of next-generation technology and services, and the end digital transformation, and you need growth enable or such as business model evolution, customer experience evolution, and convergence between industries.

Simon Mays-Smith: Our investments in cloud, platform, and AI in pursuit of these growth opportunities and ahead of our peers enable Autodesk to provide its customers with ever more valuable and connected solutions and to support a much broader customer and developer ecosystem and marketplace. While macroeconomic policy, geopolitical, and one-off factors like the Hollywood strikes have impacted industry growth, Autodesk's subscription model and diversified product and customer portfolio have proven resilient. The underlying momentum of the business and key performance indicators remain consistent with previous quarters as evidenced by increased product usage, record bid activity on BuildingConnected, and cautious optimism from our channel partners. We realize the significant benefits of this strategy for shareholders through our disciplined and focused execution and capital deployment throughout the economic cycle.

Andrew Anagnost: Our investments in cloud, platform, and AI in pursuit of these growth opportunities, and ahead of our peers, enable Autodesk to provide its customers with ever more valuable and connected solutions and to support a much broader customer and developer ecosystem and marketplace.

Andrew Anagnost: While macroeconomic, policy, geopolitical, and one-off factors like the Hollywood strike has impacted industry growth.

Andrew Anagnost: Autodesk subscription model and diversified products and customer portfolio have proven resilient.

Andrew Anagnost: The underlying momentum of the business and key performance indicators remain consistent with previous quarters as evidence by increased product usage, record bid activity on building connected and cautious optimism from our channel partners.

Andrew Anagnost: We realize a significant benefit of this strategy for shareholders through our disciplined and focused execution and capital deployment to out the economic cycle.

Simon Mays-Smith: These investments mitigate the risk of expensive catch-up investments in the future and support sustained revenue, margin, and free cash flow growth. To support our growth initiatives and margin improvement, we have been modernizing our go-to-market approach to create more durable and direct relationships with our customers and to serve them more efficiently. We are transforming our platform to enable greater engineering velocity and efficiency to support a broader customer and developer ecosystem and marketplace. We have already seen significant benefits from initiatives like these, and there's more to come. Stripping out the effects of margins from FX and the new transaction model, we expect to be towards the midpoint of our fiscal 26 non-GAAP operating margin target of 38% to 40% in fiscal 25, a year ahead of schedule and representing about 300 basis points of improvement since fiscal 23.

Andrew Anagnost: These investments mitigate the risk of expensive catch-up investments in the future and support sustained revenue, margin, and free cash flow growth.

Andrew Anagnost: To support our growth initiatives and margin improvement, we have been modernizing our go-to-market approach to create more durable and direct relationships with our customers.

Andrew Anagnost: and to serve them more efficiently.

Andrew Anagnost: and we are transforming our platform to enable greater engineering velocity and efficiency.

Andrew Anagnost: is a port of broader customer and developer ecosystem and marketplace.

Andrew Anagnost: We have already seen significant benefits from initiatives like these, and there's more to come.

Andrew Anagnost: Stripping out the effects of margins from FX and the new transaction model, we expect to be towards the midpoint of our fiscal 26 non-gap operating margin target of 38 to 40%.

Andrew Anagnost: in Cisco 25, a year ahead of schedule and representing about 300 basis points of improvement in Cisco 23.

Simon Mays-Smith: We are confident we will make further improvements in Fiscal 26 on the same basis. Once complete, we expect the new transaction model and subsequent go-to-market optimization to increase sales and marketing efficiency, and deliver GAAP margins among the best in the industry. Non-GAAP operating profit, including stock-based compensation costs, will become a key metric to track as we make this transition. Attractive long-term secular growth, market-focused strategy delivering ever more valuable and connected solutions to our customers, customers, and a resilient business model are generating strong and sustained momentum both in absolute terms and relative to peers. Disciplined execution and capital deployment is driving even further operational velocity and efficiency within Autodesk, and will underpin the mechanical build of revenue and free cash flow over the next few years, and GAAP margins.

Andrew Anagnost: We are confident we will make further improvements in fiscal 20s, it's on the same basis.

Andrew Anagnost: One's complete, we expect the new Transaction Model in subsequent go-to-market optimization to increase sales and marketing efficiency and deliver gap margins among the best in the industry.

Andrew Anagnost: Non-gap operating process, including stock-based compensation costs, will become a key metric to track as we make this transition.

Andrew Anagnost: Attractive long-term, effectively growth market.

Andrew Anagnost: A focus strategy delivering ever more valuable and connected solutions to our customers.

Andrew Anagnost: and a resilient business model are generating strong and sustained momentum both in absolute terms and relative to peers.

Andrew Anagnost: Discipline Dexter Cution and Capital Deployment is driving even further operational velocity and efficiency within our desk and will underpin the mechanical build of revenue and free cash flow over the next few years and get margins among the best in the industry.

Operator: Among the best in the industry.

Simon Mays-Smith: We expect the pace of buybacks to buy forward dilution will pick up into fiscal 2026 as our free cash flow builds from the fiscal 2024 trough. We expect this to result in a further reduction in shares outstanding over time, continuing the capital return trend of the last few years. In combination, we believe these factors will deliver sustainable shareholder value over many years. I'd like to welcome Betsy and thank her for stepping in as interim CFO, and will now turn the call over.

Andrew Anagnost: We expect the pace of buy-back to buy forward-relution will pick up into fiscal 26 as our free cash flow builds from the fiscal 24 truck. We expect this to result in a further reduction in shares outstanding over time, continuing the capital return trend of the last few years.

Andrew Anagnost: In combination, we believe these factors will deliver sustainable, shareholder value over many years.

Bethby: I'd like to welcome Bethby and thank her for stepping in at interim CFO and will now turn the call over to her to take you through the details of our quarterly financial performance and guidance for the year. I'll then come back and to provide an update on our strategic growth initiative.

Operator: To her to take you through the.

Simon Mays-Smith: Details of our quarterly financial performance and guidance for the year. I'll then come back and to provide an update on our strategic growth initiatives.

Operator: Thanks, Andrew. Q2 was a strong quarter. We generated broad-based growth across products and regions in AEC and manufacturing, which was partly offset by softness in media and entertainment, primarily due to the lingering effects of the Hollywood strike. Our make business continues to enhance growth driven by its ongoing strength in construction and Fusion. Overall, macroeconomic policy and geopolitical challenges and the underlying momentum of the business were consistent with the last few quarters and included strong renewal rates, but softer new business in China and Korea. The new transaction model did not make a material contribution to our second quarter results. In his opening remarks, Andrew discussed the benefits we expect to derive from our go-to-market initiatives, which support our growth and ongoing margin improvement. Before I discuss revenue, billings, deferred revenue, RPO, and free cash flow.

Bethby: Thank you, Andrew. Q2 is a strong quarter. We generated broad-based growth across products and regions in ADC and VayneoFasterly, which was partly offset by softness in median entertainment. Primarily due to the lingering effect of the Hollywood strike.

Speaker Change #157: are make business continues to enhance growth driven by ongoing strengths and construction confusion.

Speaker Change #158: Overall, McRow's economic policy and geosculetical challenges in the underlying momentum of the business were consistent with the last few quarters and included strong renewal rates and but softer business new business in climate and Korea.

Speaker Change #159: The New Transaction Model did not make the material contribution to our second quarter result.

Andrew Anagnost: In this opening remark, Andrew discussed the benefits we expected to rise from our go-to-market initiatives which support our growth and ongoing market improvement.

Speaker Change #160: Before I discuss revenue, failing deferred revenue, RTO and free cash flow.

Operator: Let me remind you of how these metrics naturally and mechanically evolve during the shift to annual billings for most multi-year contracts as well as the New Transaction Model. The shift to annual billings for most multi-year contracts moves billed deferred revenue into unbilled deferred revenue in our financial reporting. Unbilled deferred revenue would then not be included in deferred revenue on our balance sheet but would be included in our remaining performance obligations disclosure. Initially, this reduces billings, deferred revenue, and free cash flow as you saw in Fiscal 2024, but is gradually becoming a tailwind to billings and free cash flow as our annually billed multi-year cohorts rebuild. Metrics that include unbilled deferred revenue like RPO give a better view of performance during our transition to annual billing for most multi-year contracts.

Speaker Change #160: Let me remind you of how these metrics naturally and mechanically evolve during the shift to annual buildings for most multi-year contracts, as well as the new Transaction model.

Speaker Change #160: The fifth to annual billings for most multi-year contracts moved bills to preferred revenue into un-built deferred revenue in our financial reporting.

Speaker Change #160: Unbuild deferred revenue would then not be included in deferred revenue on our balance sheet but would be included in our remaining performance obligations disclosure.

Nicholene: and Nicholene did produce his billing, deferred revenue, and three cash flow, as you saw this before. But it's gradually becoming a talent to billing and three cash flow as our annually-filled multi-year cohorts rebuild.

Nicholene: Metrics that include unveiled the third revenue like RTO, give a better view of performance during our transition to annual billing for most multi-year contract.

Operator: As we have said before, we will continue to offer multi-year contracts billed up front in certain circumstances such as in emerging countries where there is increased credit risk if not received up front on the Autodesk store until we enable system changes to offer annual billing, and of course on an exception basis when it is driven by customer preference such as for our non-cloud-enabled offerings. Just to give you some context, on scale, multi-year contracts billed up front incrementally contributed less than 5% of total billings in Q2. The New Transaction Model also has mechanical and timing impacts on billings, deferred revenue, revenue, and operating costs. The amount of impact is determined by the pace of the model rollout. In addition, channel partner and customer behavior can also impact the results.

Nicholene: And as we have said before, we will continue to offer multi-year contracts build up front in certain circumstances.

Nicholene: Such that in emerging countries where there is increased credit risk, it's not received at all.

Nicholene: On the other desk door, until we enable system changes to offer annual billing. And of course, on an exception basis, when it is driven by customer pressants, such as for our non-slows enables offering.

Speaker Change #162: Just to give you some contact on scale, we'll pay your contract build up front, incrementally contributed less than 5% of total billing in the second quarter.

Speaker Change #162: The new transaction model also has mechanical and timing impacts on billing, deferred revenue, revenue and operating cost.

Speaker Change #162: The amount of impact is determined by the pace of the model rural life.

Speaker Change #162: In addition, channel partner and customer behavior can also impact the results.

Operator: The mechanical impact is due to the way channel partner payments are recognized and accounted for in the P&L. Under the old or the buy-sell model, channel partner payments are deducted from gross billings and revenue. We then report net billings and net revenue. Conversely, in the new transaction model we record channel partner payments in sales and marketing expense. So as we shift from the old model to the new, there is an increase in billings, deferred revenue, revenue, and sales and marketing expense. That increase in revenue and operating costs resulting from the change in the way that channel partner payments are recognized and accounting for flows ratably through revenue and costs in the P&L over time, and the overall pace of that transition is determined by when we launch the new transaction model into each geography.

Speaker Change #162: The mechanical impact is due to the way channel partner payments are recognized in a

Speaker Change #162: Under the old or the Bicell model, panel partners, partner payments are deducted from growth, billing and revenue.

Speaker Change #162: We then report net filling and net revenue.

Speaker Change #162: Conversely in the new Transaction Model, we record channel partner payments in sales and marketing

Speaker Change #162: So, as we shift from the old model to the new, there is an increase in building, deferred revenue, revenue, and sales and marketing.

Speaker Change #162: That increase in revenue and operating cost, resulting from the change in the way the channel partners payments are recognized and accounted for.

Speaker Change #162: Flowed gradually through revenue and cost in the P&L over time.

Speaker Change #162: and the overall pace of that transition is determined by when we launch the new Transaction Model into each geography.

Operator: In the short term, moving the P&L geography of channel partner payments from contra revenue to sales and marketing expense creates a headwind to the operating margin percentage, but it's really broadly neutral to operating profit and free cash flow dollars. Over the long term we expect that this transition to the New Transaction Model will enable us to further optimize our business, which we anticipate will provide a tailwind to revenue and deliver GAAP margins among the best in the industry. On mechanically higher revenue and despite mechanically higher costs, channel partners and customer behavior during the rollout of the New Transaction Model are much harder to predict and model. For example, with channel partners better prepared ahead of launch, more customers in North America than Australia co-termed their contract expiration to align the timing of renewals across their business.

Speaker Change #162: In the short term, moving to P&LGography at Channel Partner Payments from Contravenue to sales and marketing expenses, creates a headwind to the operating margin percentage. But it's really broadly mutual to operating profit in free cash was dollars.

Speaker Change #162: But over the long term, we expect a disposition to the new transaction model will enable us to further optimize our business.

Speaker Change #162: which we anticipate will provide a talent to revenue and deliver gap margins among the best in the industry on mechanically higher revenue and despite mechanically higher cost.

Speaker Change #162: Channel partner in customer behavior during the rollout of the new transaction model are much harder to predict in model.

Speaker Change #162: For example, the Channel Partners better prepared ahead of launch. More customers in North America and Australia's co-turned their contract expiration to align the timing of the rules across their business.

Operator: This had a negative impact on the timing of billings and deferred revenue. As we've seen many times before, co-terming contracts actually create an opportunity for larger contracts on renewal as we elevate our relationship with customers from subsidiaries to company-wide. Along with more self-service functionality, it also enabled us to reduce administrative costs and serve our customers more efficiently. While activity in the second quarter was probably more tactical in nature, co-terming is one of the expected benefits of the new transaction model and will be one of the drivers of our margin momentum over the coming years. As I'll discuss, this creates timing headwinds but is not a change in the underlying momentum of the business.

Speaker Change #162: This has a negative impact on the timing of buildings in the bird revenue.

Speaker Change #163: and as we see many times before, co-term contracts actually create an opportunity for larger contract number-new-all, but the elevator relationship with customers from the city area to come to the U.S.

Speaker Change #164: Along with more sub-service functionality, it also enables us to reduce administrative costs and serve our customers more efficiently.

Speaker Change #164: While activity in the second quarter was probably more tactical in nature, co-terming is one of the spec and benefits of the new transaction model, and will be one of the drivers of our marginal investment over the coming years.

Speaker Change #164: As I've discussed, this creates timing headwind, but it's not a change in the underlying momentum of the distance.

Operator: We'll give you much more details about the impact of the new transaction model on Fiscal 25 results and the expected impact on Fiscal 26 when we report our full year results next February. So now let's move on to the results. Total revenue grew 12% and 13% in constant currency by product. In constant currency, AutoCAD and AutoCAD LT revenue grew 8%, AEC revenue grew 15%, manufacturing revenue grew 17% and, in the low teens excluding upfront revenue, ME grew 5%. Revenue grew 13% in all regions on a constant currency basis. Direct revenue increased 21% and represented 40% of total revenue, up 3 percentage points from last year, benefiting from strong growth in both EBAs and the Autodesk stores. Net revenue retention rate remained within the 100% to 110% range at constant exchange rate.

Speaker Change #164: We'll give you much more detail about the impact of the Nutrients Act model on fiscal 25 results and the expecting impact on fiscal 26 when we report our full year results next February.

Speaker Change #164: for now lets move on to the report.

Speaker Change #165: Total revenue could be a 12% and 13% in constant currency.

Speaker Change #166: By Product and Concentring Courses, I want to have an Autocad LTE with a new group 8% AEDZ revenue group 15%, manufacturing revenue group 17% and in the low teams excluding upfront revenue.

Speaker Change #166: Enemy Group 5%

Speaker Change #166: Revenue with 13% in all regions on a constant currency basis.

Speaker Change #166: Directs revenue increase 21%.

Speaker Change #166: and represented 40% of total revenue, up 3% of points from last year, benefiting from the current growth in both EVAs and the Autodesk storm.

Speaker Change #166: Next revenue retention rate remained within the 100 to 110% range at constant exchange rate.

Operator: Billings increased 13% in the quarter, reflecting a modest tailwind from the prior year shift to annual billings from most multi-year contracts and a mechanical tailwind of approximately 2% from the transition to the new transaction models. Billings were also negatively impacted by more co-terming. Total Deferred Revenue decreased 13% to $3.7 billion and was again impacted by the transition from upfront to annual billing for multi-year contracts. Total RPO of $5.9 billion and current RPO of $3.9 billion grew 12% and 11% respectively. Turning to margins, GAAP and non-GAAP gross margins were broadly level, while GAAP and non-GAAP operating margins increased by 4 and 1 percentage points respectively at current course and speed. The ratio of stock-based compensation as a percentage of revenue peaked in Fiscal 2024, will fall by more than a percentage point in Fiscal 2025, and will be below 10% over time.

Speaker Change #166: Billings increased 13% in the quarter, reflecting a modest talent from the prior year shift to annual billing for most of your contract.

Speaker Change #166: and a mechanical tailwind of approximately 2% from the transition to the new transaction models.

Speaker Change #166: Billings were also negatively impacted by most war-coachers.

Speaker Change #166: Total deferred revenue decreased 13% to 3.7 billion. And once again, impacted by the transition from upfront to annual billing for most of your contracts.

Speaker Change #166: Total RPO of 5.9 billion and current RPO of 3.9 billion grew 12% and 11% respectively.

Speaker Change #167: Turning to Barton, Gap and non-Gap Griff margins were proudly left.

Speaker Change #167: While Gap and Nongap operating margins increased by four and one percentage points effectively.

Speaker Change #168: at Current Course in Speed, the ratio of stock base compensation at the percentage of revenue.

Speaker Change #168: Peace in fiscal 24 will fall by more than a percentage point of fiscal 25 and will be below 10% over time.

Operator: Free cash flow for the quarter was $203 million, as we said might happen back in February. Some channel partners in North America booked business earlier in the quarter ahead of the transition to the new transaction model to de-risk month one. After the transition, this accelerated free cash flow to the second quarter, which was partially offset by the negative impact of more co-terming. Turning to capital allocation, we continue to actively manage capital within our framework and deploy it with discipline and focus through the economic cycle to drive long-term shareholder value. During the second quarter, we purchased approximately 471,000 shares for $115 million, which is an average price of approximately $245 per share. We do expect the pace of buybacks to pick up during the second half of the year, as we had very minimal purchases in the first half.

Speaker Change #168: Free task local for the quarter with 2300.

Speaker Change #169: As we said might happen back in February, some canle partners in North America both did this earlier than the quarter, ahead of the transition to the Nutransaction Model, to deriz the month one after the transition.

Speaker Change #169: This accelerated three-cats close to the second quarter, which was partially offset by the negative impact of most more co-turbing.

Speaker Change #170: During the capital allocation, we continue to actively manage capital within our framework and deploy it with discipline and focus through the economic cycle to drive long-term shareholder value.

Speaker Change #170: During the Second Quarter, we purchased approximately 471,000 shares for 115 million dollars.

Speaker Change #170: which is an average price of approximately 245 dollars per share.

Speaker Change #170: We do expect to paint the five acts to pick up during the second half of the year, and we have very minimal purchases in the first half.

Operator: We will also continue to deploy capital to offset dilution into Fiscal 2026 as our free cash flow grows from the Fiscal 2024 trough generated by the transition from upfront to annual billing. Again, for most multi-year contracts, we will continue to buy forward dilution which we expect to result in a further reduction in shares outstanding over time. Continuing the capital return trend of the last few years, we have reduced our share count by about 5 million shares over the last three years with an average percentage reduction of about 70 basis points per year. Now let me finish with guidance. As we said in February, the pace of the rollout of the new transaction will create noise in billings and the P&L. So we think free cash flow is the best measure of our performance.

Speaker Change #170: We will also continue to deploy capitals to op that solution in your fiscal 26th as our pre-casual growth from the fiscal 24th drop generated by the transition from up to annual billing.

Speaker Change #170: Again, to mark most multi-year contract.

Speaker Change #170: We will continue to buy forward delusion, which we expect to resolve in a further reduction in care that's standing over time.

Speaker Change #170: Continuing capital return from the last few years.

Speaker Change #170: We have reduced our share count by about 5 million shares over the last three years with an average percentage reduction of about 70 basis points per year.

Speaker Change #170: Now let me finish with Guy.

Guy: As we said in February, the pace of the rollout of the new transactions will create noise and buildings and the piano. So we think it's free cash flow is the best measure of our performance.

Operator: Taking out that noise, the underlying momentum in the business remains consistent with the expectations embedded in our guidance range for the full year. Our sustained momentum in the second quarter and the smooth launch of the new transaction model in North America reduce the likelihood of our more cautious forecast scenarios given that we're raising the midpoint of our billings, revenue, earnings per share, and free cash flow guidance ranges. Let me give you a little bit more detail. The underlying momentum of billings is in line with our expectations, but two of our modeling assumptions have changed. First, the new transaction model is expected to launch in Western Europe in September rather than early fiscal 26, which was our modeling assumption at the start of fiscal 25. This is a tailwind to our reported billings.

Guy: Taking out that noise, the underlying momentum and business remains consistent with the expectations and better than our guidance range for the full year.

Guy: are sustained momentum in the second quarter, and the smooth launch of the Nutransactual and North America reduced to likelihood of our more processed forecast in the area.

Guy: Given that, we're raising the midpoint of our building, revenue, earnings per share, and pre-castle of guidance ratio.

Guy: Let me give you a little bit more detail.

Guy: The underlying momentum of buildings is in line with our expectations, but two of our modeling of substance that changed.

Guy: First, the New Transaction Model is expected to launch in Western Europe in September, rather than an early sick of 26, which was our modeling assumption that the start of fiscal 25.

Operator: Second, more customers have co-termed contracts in North America than we modeled, and we have assumed the same thing will happen in Western Europe. This timing effect is a headwind to reported billings in Fiscal 25. The net effect of these is a 5 to 6 percentage point tailwind to billings from the new transaction model in Fiscal 25, which includes a 3 to 4 percentage point tailwind from North America. Specifically, we've raised our Fiscal 25 billings guidance to a range between $5.88 and 5.98 billion. The underlying momentum of revenue is also in line with our expectations. The $40 million increase to the top end of revenue guidance reflects the expected launch of the new transaction model in Western Europe in September as well as acquisitions, and think about those in roughly equal measures.

Speaker Change #172: This is a talent to our report's village.

Speaker Change #172: Second, we'll cover some of our cultural constructs in North America and then we model. And we have assumed the same thing will happen in Western Europe.

Speaker Change #172: This timing of facts is the head was to report in building in fiscal 25.

Speaker Change #172: The net effect of the is a five to six percentage points tailwind to billing from the New Transaction Model in fiscal 25.

Speaker Change #172: which includes a three to four percentage points talent from North America specifically.

Speaker Change #172: We've raised a distance of 25 buildings guidance to arrange between 5.88 and 5.98 billion.

Speaker Change #173: He's underline momentum of revenue, he's also in line with their expectations.

Speaker Change #173: The 40 million increase to the top end of graduate guidance reflects the expected launch of the Nutransaction Model in mustard, Europe, and September, as well as acquisitions and take about those in roughly equal measures.

Operator: The $90 million increase to the bottom end of the guidance range includes that $40 million, with the remainder an underlying increase due to the reduced likelihood of our more cautious forecast scenarios. At the midpoint, we are increasing revenue guidance by $65 million or $25 million. Excluding the impact of acquisitions and the New Transaction Model, our Fiscal 25 guidance range is now between $6.08 and 6.13 billion, translating into revenue growth of around 11% at the midpoint when compared to fiscal four, and includes one to one and a half percentage points from the New Transaction Model. Underlying margins are slightly better than our previous guidance, and that enables us to offer offset higher expected costs from the earlier launch of the New Transaction Model in Western Europe.

Speaker Change #173: The $90 million increase to the bottom of this as a guidance reach includes that $40 million. With the remainder and underline increase due to the reduced likelihood of our more cost and forecast scenario.

Speaker Change #173: At the midpoint, we are increasing revenue guidance by 65 million.

Speaker Change #173: For 25 million, excluding the impact of its acquisition and the new translactium model.

Speaker Change #173: Our Githyl-25 guide history is now between 6.08 and 6.13 billion.

Speaker Change #173: Translating into revenue growth of around 11% of the midpoint when compared to just before. And includes one to one and a half percentage point from the new transaction model.

Speaker Change #173: Underlying Mars is a slightly better than our previous guidance, and that enables us to offer up-that higher-sex outcomes from the earlier launch of the new transaction model in Western Europe.

Operator: While we still expect non-GAAP operating margins between the range of 35% and 36% in Fiscal 25, that now includes a 1 to 1.5-point underlying margin improvement that is broadly offset by the margin headwinds from the New Transaction Model and the incremental investment in people, processes, and automation. The underlying momentum of free cash flow is in line with our expectations as well. The headwind to billings from co-terming that I mentioned earlier is largely being offset by faster collections and improved underlying margins. We've raised the lower end of our Fiscal 25 free cash flow guidance, resulting in a range between $1.45 and 1.5 billion. We expect strong free cash flow growth in Fiscal 26 because of the return of our largest multi-year renewal cohort, the natural mechanical stacking of multi-year contracts built annually, and a larger overall EBA cohort.

Speaker Change #173: I'm in Bill's segment at operating margins between the range of 35 and 36% in fiscal 25. That now includes a one-to-one-and-a-half-point underlying margin improvement that is broadly offset by the margin headwind.

Speaker Change #173: from the New Turns Act model and the incremental investment in people, processes, and automations.

Speaker Change #173: The underlying momentum of recast flow is in line with our expectations as well. They have linked the feelings from co-termings I mentioned earlier, is largely being offset by staffs with collection and improved underlying margins.

Speaker Change #173: We've raised the lower end of our fiscal 25th cast load guidance, resulting in a range between 1.45 and 1.5 billion.

Speaker Change #173: Reexact Strongfrey Caswell Growett in fiscal 26, because of the return of our largest multi-year renewal code.

Speaker Change #173: and Natural Mechanical Backing of Multi-Ear Contracts killed annually and a larger overall EVA cover.

Operator: With our current trajectory, we still estimate free cash flow in Fiscal 26 to be around $2.05 billion at the midpoint. While the transition to annual billing for multi-year contracts and the deployment of the new transaction model creates noise and billings in the P&L, they do provide a natural tailwind to revenue and free cash flow over the next few years. Combined with a resilient business model and sustained competitive momentum, Autodesk has enviable sources of visibility and certainty given the context of significant macroeconomic, geopolitical, policy, health, and climate uncertainty. We continue to manage our business using a Rule of 40 framework with a goal of reaching 45% or more over time. We are taking significant steps toward our goal this year and next.

Speaker Change #173: With our current trajectory, we still have to make three cast photos in fiscal 26 to be around 2.05 billion at the Miss Point.

Speaker Change #173: While the transition to annual billing for multi-year contracts and the deployment of the new transaction model

Speaker Change #174: Chris noise and billing them a piano. They do provide a natural tailwind to revenue in free cast-flow over the next few years.

Speaker Change #174: Combined with a resilient business model and sustained competitive momentum.

Speaker Change #174: Autographs have enviable sources of visibility in certainty given the context of significant macroeconomic geopolitical policy, health, incline it uncertainty.

Speaker Change #174: We continue to manage our business using a rural foreign framework with a goal of reaching 45% or more over time.

Operator: We think this balance between compounding revenue growth and strong Free Cash Flow margins captured in the Rule of 40 framework is the hallmark of the most valuable companies in the world, and we intend to remain one of them. The slide deck on our website has more details on modeling assumptions for both Q3 and full Fiscal 25. Andrew, back to you.

Speaker Change #174: We are taking significant steps to our goal this year and back.

Speaker Change #174: We think this sounds between compounding revenue growth in Drunk 3 Casper margin, captured in the rule of 40 framework that's the hallmark of the most valuable companies in the world. And we intend to remain one of them.

Speaker Change #174: The slide deck on our website has more detail on modeling assumptions for both history and both fiscal year 25. Andrew, back to you.

Simon Mays-Smith: Thank you, Betsy. Let me finish by updating you on our strong progress in the second quarter. We continue to see good momentum in AEC, particularly in infrastructure and construction fueled by customers consolidating onto our solutions to connect and optimize previously siloed workflows through the cloud. The cornerstone of that growing interest is our comprehensive end-to-end solutions encompassing design, pre-construction, field execution through handover, and into operations. This breadth of connected capability enables us to extend our footprint further into infrastructure and construction and also expand our reach into the mid-market. As a sign of that growing momentum, our construction business had another strong net new customer quarter as the benefits of our end-to-end solution became more apparent. Let me give you a few examples.

Andrew Anagnost: Thank you, Betsy. Let me finish by updating you on our strong progress in the second quarter.

Andrew Anagnost: We continue to see good-y-momentaminate you see

Andrew Anagnost: Particularly in infrastructure and construction fueled by customer-consolidating on-the-art solutions to connect and optimize previously-filoed workflows through the cloud.

Speaker Change #175: The cornerstone of that growing interest is our comprehensive end-to-end solutions in combating design, pre-construction, field execution, through hand over and into operation.

Speaker Change #175: This breath of connected capability enables us to extend our footprint, further into the structure and construction, and also expand our reach into the mid-market.

Speaker Change #175: As a sign of that growing momentum, our construction business had another strong net new customer quarter as the benefit of our end-to-end solution became more apparent. Let me give you a few examples.

Simon Mays-Smith: Thornton Tomasetti is an internationally recognized engineering design and analysis firm which uses Revit and other advanced technologies to enable it to deliver projects at all scales and levels of complexity. We have been a proud partner as it has transformed its business to excellence and interoperability in BIM. The transition from BIM 360 to Autodesk Construction Cloud has optimized project workflows and cloud collaboration. Autodesk virtual reality tools have reimagined its visualization workflows, and Dynamo and generative design have enabled its team to focus on high value creative work. During the quarter, Thornton Tomasetti renewed its EBA with Autodesk and expanded it by more than 50% to address challenges of a fragmented ecosystem and siloed working environments.

Speaker Change #175: Thoroughton Thomas-Settie is an internationally recognized engineering design and analysis firm, which uses Revit and other advanced technologies to enable us to deliver projects at all scales and levels of complexity.

Speaker Change #176: We have been a proud partner as it has transformed its business to excellence and interoperability in BIM. The transition from BIM 360 to Autodesk Construction Cloud has optimized project workflows and cloud collaboration.

Speaker Change #177: Our next virtual reality tool have reimagined this visualization workflow.

Speaker Change #178: and Dynamo and Jennifer Design have enabled its teams to focus on high value creative work.

Speaker Change #179: During the quarter, Thornton Thomas Betty renewed its EBA with Autodesk and expanded its time more than 50%.

Simon Mays-Smith: A European consortium of nine public water operators serving millions of residents across numerous municipalities decided to expand its relationship with Autodesk by adding BIM Collaborate, BIM Collaborate Pro, and an upgraded premium plan to its existing AutoCAD Docs, AEC collections, and InfoWorks subscriptions. With these expanded capabilities, it will continue its digital transformation, accelerating its transition from 2D to 3D and its ability to manage all assets in a common data environment across all consortium members. In the quarter, a leading single source specialty subcontractor based in the Midwest of the United States began looking to replace point solutions that no longer serve supported custom workflows with the help of a channel partner.

Speaker Change #179: To address challenges of a fragmented ecosystem in siloed working environment.

Speaker Change #180: and European Consortium of Nine Public Water Operators.

Speaker Change #181: Through millions of residents across numerous municipalities, decided to expand its relationship with artists by adding them collaborate and them collaborate pro and an upgraded premium plan to a existing auto-cat, doc, AEC collections and info works description.

Speaker Change #181: With these expanded capabilities, it will continue its digital transformation, accelerating its transition from 2D to 3D, and its ability to manage all assets and a common data environment across all consortium members.

Speaker Change #182: In the court, a leading single source specially subcontractor based in the Midwest of the United States, began looking to replace points of the solution that no longer supported custom work for.

Simon Mays-Smith: After a 45-day evaluation, the subcontractor chose to adopt Autodesk Build, which complements its virtual construction and design capabilities, streamlines communication between design and construction teams, and importantly, gives us control over and ownership of its own data. Again, these stories have a common theme, managing people, processes, and data across the project lifecycle to increase efficiency and sustainability while decreasing risk over time. We expect the majority of all projects to be managed this way and we remain focused on enabling that transition through our industry clouds. Moving on to manufacturing, we made excellent progress on our strategic initiatives. Customers continue to invest in their digital transformations and consolidate our Design and Make Platform. In automotive, we continue to strengthen and expand our partnerships both within and beyond the design studio.

Speaker Change #182: with the help of a channel partner after a 45 day evaluation.

Speaker Change #183: The subcontractor chose to adopt Autodesk Build, which complementes virtual construction and design capabilities, streamlined communication between design and construction team. And, importantly, give this control over and ownership of its own data.

Speaker Change #184: Again, these stories of common sense, managing people, processes, and data across the project life cycle, to increase efficiency and sustainability while decreasing risk.

Speaker Change #185: Over time, we expect the majority of all projects we manage this way and we remain focused on enabling that transition to our industry cloud.

Speaker Change #185: Moving on to manufacturing, we made excellent progress on our strategic initiative.

Speaker Change #185: Customers continue to invest in their digital transformations and consolidate our design and make platform.

Speaker Change #185: In Automotive we continue to strengthen and expand our partnership.

Simon Mays-Smith: In the second quarter, a leading European manufacturer renewed and expanded its EBA to accelerate its time to market and help drive its business transformation initiatives. In addition to Alias for concept design, it will leverage VRED for virtual prototypes and Flow Production Tracking for project management. These solutions democratize visualization across the organization, reducing the reliance on physical prototypes, improving design collaboration, and speeding up the product development process. Additionally, as the manufacturer moves to build new battery factories, it is exploring the adoption of integrated factory modeling to reduce costs and increase collaboration across suppliers and contractors throughout the project lifecycle. Meissner, a global leader in complex tool and plant construction, is leveraging Autodesk solutions to adapt more quickly to a fast-moving automotive industry. It is driving business growth through improved production cycle times while meeting high-quality reliability standards at reduced cost.

Speaker Change #185: Both with in and beyond the design studio.

Speaker Change #185: In the second quarter, a leading European manufacturer renewed and expanded at BBA to accelerate its time to market and help drive its business transformation initiative.

Speaker Change #185: In addition to alias for content design, it will leverage V-Red, Proversial Prototype, and slow production tracking for project management.

Speaker Change #185: These solutions democratize visualization across the organization, reducing the resilience reliance on physical prototypes, improving design collaboration, and speeding up the product development process.

Speaker Change #185: Additionally, as the manufacturer moves to build new battery factories, it is exploring the adoption of integrated factory modeling to reduce costs and increase collaboration across suppliers and contractors throughout the project life cycle.

Myfner: Myfner, a global leader in complex tool and plant construction, is leveraging audit solutions to adapt more quickly to a fast-moving automotive industry.

Myfner: is driving business growth through improved production cycle time while meeting high-quality reliability standards at reduced cost.

Simon Mays-Smith: To achieve this, Meissner has adopted PowerMill for complex simultaneous 5-axis milling, PowerInspect for programming 3D measurement inspection routines of machine parts, and PowerShape to produce blow-molded plastic hollow parts while leveraging Fusion for its collaboration capabilities. Fusion remains one of the fastest growing products in the manufacturing industry as customers seek to drive innovation and growth at lower cost. Fusion extension attach rates are increasing, which is helping to drive the average sales price higher. In education, we are preparing future engineers to drive innovation through next generation design analysis and manufacturing solutions. Three years ago, Ruhr-University Bochum, a public research university in Germany, evaluated Fusion for its mechanical engineering department but determined the solution didn't fulfill existing requirements in the second quarter.

Mythner: To achieve this, Mythner is adopted power mill for complex, simultaneous, five active milling.

Mythner: Power Inspect for Programming 3D Measurement, Inspection Routine, the Machine Parts, and Power Shakes to produce low-molded plastic hollow parts, while leveraging fusion for its collaboration capability.

Mythner: Fusion remains one of the fastest growing products in the manufacturing industry.

Speaker Change #186: As customer seats to drive innovation and grow the lower costs, Fusion extension attest rates are increasing, which is helping to drive the average sales price higher.

Speaker Change #186: In education, we are preparing future engineers to drive innovation through next generation design, analysis and manufacturing solutions.

Speaker Change #187: Three years ago, Thou Holmes University, a public research university in Germany, evaluated fusion for mechanical engineering departments, but determined the solution didn't fulfill existing requirements.

Simon Mays-Smith: Impressed with Fusion's significantly expanded capabilities in electronics and PCB design, configuration, drawing, automation, and collaboration, Ruhr-University Bochum decided to replace a high end competitive solution with Fusion for all mechanical engineering courses. With the Fusion platform, Ruhr-University Bochum students can now acquire end-to-end workflow skills from simulation in the cloud through data management with just one installation, enabling better collaborative learning and employability for students while saving time and administration costs for the university. And finally, we continue to leverage unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries to grow our market opportunities. For example, Mercury Engineering is a European leader in complex construction solutions. The company builds and manages complex engineering construction projects for the world's leading corporations across a range of sectors including data centers, semiconductor, and life sciences.

Speaker Change #188: In the second quarter, impressed with fusion significantly expanded capabilities in all electronics and PCB design, configuration, drawing automation and collaboration, bowel homes decided to replace a high-end competitive solution with fusion for all mechanical engineering courses.

Speaker Change #189: With the Fusion Platform, now whom students can now acquire end-to-end work flow skill for simulation in the clouds through data management, with just one installation enabling better collaborative learning and employability for students while saving time and administration costs for the university.

Speaker Change #190: And finally, we continue to leverage unique growth in April, or such as business model evolution, customer experience evolution, and convergence between industries to grow our market opportunity.

Speaker Change #191: For example, Mercury Engineering is a European leader in construction solutions.

Mercury Engineering: The company builds and manages complex engineering instruction projects for the world leading corporations across a range of sectors including data centers, semiconductor and life sciences.

Simon Mays-Smith: To support its Digital Edge initiative and the ability to deliver large scale projects wherever its clients operate, Mercury increased its investment in Flex during the quarter, using Flex to access solutions such as Navisworks, Revit, ReCap, AutoCAD, and Plant 3D coupled with account-based Autodesk Construction Cloud. Mercury enjoys frictionless consumption, limitless cloud access, the ability to rapidly scale up new projects with the right tools, and the ability to collaborate across its ecosystem. I know many of you pay close attention to the American Institute of Architects data. We do too, but maybe not always to the same data. In 2022, the AIA said that almost half of architecture firms' total billing came from reconstruction and renovation projects, up from about a third 20 years ago, with the rest coming from new builds in commercial, industrial, and institutional subsectors.

Mercury Engineering: To support its digital adgen initiative.

Mercury Engineering: and the ability to deliver large-scale projects wherever its clients operate, mercury increases investment in flex during the quarter.

Mercury Engineering: Using Quest to access solutions such as Navitor, Srebbit, Recap, AutoCAD and Plant 3D, coupled with account-based auto-dev construction cloud.

Mercury Engineering: Mercury enjoys frictionless consumption, limitless cloud access, and ability to rapidly scale up new projects at the right tool, and the ability to collaborate across the ecosystem.

Speaker Change #192: I know many of you pay close attention to the American Institute of Architects data and we do too, but maybe not always through the same data.

Speaker Change #193: In 2022, the AA said that almost half of our detective firms total billings came from reconstruction and renovation projects, up from about a third 20 years ago.

Speaker Change #193: with the rest coming from new bills. In commercial and industrial and institutional sub-dectors, reconstruction and renovation accounted for more than 60% of the bill.

Simon Mays-Smith: Reconstruction and renovation accounted for more than 60% of billing from infrastructure exceeding its design life to regulations mandating greater efficiency, with climate change making action more urgent. Renovation and reconstruction are growing trends both in the United States and worldwide for buildings and infrastructure. Autodesk is a leader in BIM and digital technologies across the project lifecycle that underpin these reconstruction and resident renovation efforts. That's why we're delighted to be named as the official Design and Make Platform of the LA28 Olympic and Paralympic Games to support LA28's no new permanent venues plan and commitment to build LA28's footprint by adapting existing or building temporary infrastructure. Autodesk will support LA28's more than $1 billion temporary overlay and construction plan, including retrofitting more than 40 venues across the Los Angeles metro area.

Speaker Change #193: from Infrastructure, exceeding its design life to regulations mandating greater efficiency.

Speaker Change #193: with climate change making action more urgent, renovation and reconstruction are growing trends both in the United States and worldwide.

Speaker Change #194: But building an infrastructure auto-deft is a leader in beam and digital technologies across the project life cycle that underpins.

Speaker Change #194: the ease of reconstruction and worth the renovation effort.

Speaker Change #195: That's why we're delighted to be named as the official design and make possible form of the LA 28 Olympic in parallel with the game.

Speaker Change #195: The Support LA 28, no new permanent venues plan, and commitment to build LA 28 foot print by adapting existing or building temporary infrastructure.

Speaker Change #195: Autodesk will support LA 28 more than 1 billion temporary overlay into instruction plan.

Simon Mays-Smith: Over the next four years, LA28 will use Autodesk software and building information modeling tools to bring to life an ambitious venue plan. Consultative support to help LA28 meet its delivery and sustainability plan. Autodesk Construction Cloud is a central tool to facilitate better collaboration with thousands of critical stakeholders on the design, development, and ultimate delivery of the venues. Autodesk technology is used every day to design and make a better world. We're thrilled to be LA28's official design and make platform. Before I open the call for questions, I'd like to quickly update you on our CFO search. We have some excellent candidates and are making good progress. Once our new CFO is up to speed and we've launched a new transaction model in all developed markets, we'll set out our plans in more detail. We'll update you when we have more to say.

Speaker Change #195: including retrofitting more than 40 venues across the Los Angeles Vesco area. Over the next four years, LH28 will use AutoDest software and building information modeling in to bring to life an ambitious venue plan.

Speaker Change #195: Consultative Support to help L.A. 28 meet its delivery at the Sanitility Plan.

Speaker Change #195: and our Destruction Cloud is a central tool that facilitates better collaboration with thousands of critical stakeholders on the design, development, and ultimate delivery of the venue.

Speaker Change #196: Autodist technology is used every day to design and make a better world and work through to be LA28's official design and make-place ones.

Speaker Change #197: Before I open the call for questions, I'd like to quickly update you on our CFO search. We have some excellent candidates and are making good progress. Once our new CFO is up to speed and we've launched a new Transaction model in all of the markets, we'll set out our plans in more detail. We'll update you when we have more to say.

Simon Mays-Smith: Operator, we would now like to open the call up for questions.

Operator: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. Our first question comes from Saket Kalia with Barclays. You may proceed. Okay, great. Hey, Andrew. Hey, Betsy.

Speaker Change #198: Operator, we would now like to open the call-up for questions.

Speaker Change #199: Thank you. As a reminder, task a question, please press star 1, one on your telephone and wait for your name to be announced. Two with drier question, please press star 1, one again. One moment for questions.

Speaker Change #200: Our first question comes from Sacket Khalia with Parkley's C. May Proceed.

Simon Mays-Smith: Thanks for taking my questions here. Andrew, since you last reported, Starboard Value has issued a couple letters and a slide deck just maybe for the benefit of the group. I was wondering if you had any high level thoughts that you wanted to share with us. Right to it, Saket. All right, look, first off, you know, we, we listen to all of our investors and we listen carefully. We've met with Starboard several times. They came and presented to our board. And I'll tell you one thing we are very much aligned with them on is there is a lot more shareholder value to be created from Autodesk for our investors. Okay. And I think, I think it's important to kind of talk about, okay, what should we be expecting? Excited about today's results? We delivered in a pretty tough environment.

Sacket Khalia: Okay, great. Hey, Andrew. Hey, Betsy. Thanks for taking my questions here.

Sacket Khalia: Um...

Sacket Khalia: since you last reported Starboard value has issued a couple letters and a slide deck. Just maybe for the benefit of the group, I was wondering if you had any high level thoughts that you wanted to share with us.

Speaker Change #202: All right, to it, Zachett. All right, all right, all right.

Speaker Change #203: First off, we listen to all of our investors, and we listen carefully, we've met with Starboard.

Speaker Change #204: It's several times they came in for that to our board and I'll tell you one thing we are very much aligned with the mod is there is a lot more shareholder value to be created from Autodesk for our investors. Okay, and I think it's important to kind of talk about, okay, what should we be excited about?

Simon Mays-Smith: We've seen macro impacts; we've had one-off impacts from Russia, from China, from writers and actors strikes. And still you're seeing the kind of results that we delivered this quarter. Revenues up, free cash flows up, the guide's up 1% at the midpoint. You know, those things come from work and discipline. Now, how did we get here? There's a couple of things I want to make sure we remember and highlight. Okay. You know, about two years ago we began this journey to move away from multi-year contracts built up front to multi-year contracts built annually. I know that created some clouds for all of you on the outlook of Autodesk for 18 months, but look at the results. Okay? Two years ago, the number of multi-year contracts built up front was measured in the billions. Today you heard from Betsy. It's immaterial.

Speaker Change #205: Today's results we delivered in a pretty tough environment. We've seen macro impact, we've had one off impact from Russia, from China, from writers and afterstrikes and still you're seeing the kind of results that we delivered this quarter. Revenue's up.

Speaker Change #205: We cash those up, the guide up, a percentage of midpoint, those things come from work and discipline.

Speaker Change #205: How did we get here? There's a couple of things I want to make sure we remember in highlight, okay? You know about two years ago, we began this journey.

Speaker Change #205: To move away from multi-year contract builds up front to multi-year contract build annually. I know that created some clouds for all of you on the outless of autodesk for 18 months, but look, look at the results, okay?

Speaker Change #205: Two years ago, the number of multi-year contracts filled up front was measured in the billions. Today, you heard from Betsy, it's in material.

Simon Mays-Smith: Now the great thing about that is that billions from the past comes back to you, but it comes back to you in a nice smooth buildup over time. It's math. I love math. More than that, it's simple math and we all love simple math. That money's coming and it's building up. So one, that's something to be excited about ongoing value from Autodesk. Another thing I want to talk about that is really important. Last year we started this journey on the new transaction model. And when we told you about the new transaction model, what did we tell you we were doing it for? We were doing it to get more control and visibility over our sales and marketing costs. And that is the mission going forward.

Speaker Change #205: Now, the great thing about that is that billions from the past come back to you, but it comes back to you in a nice smooth build up over time. If math, I love math.

Speaker Change #205: More than that, it's simple math, and we all love simple math. That money is coming and it's building up, so one, that's something to be excited about about ongoing value from our death.

Speaker Change #206: Now, another thing I want to talk about that was really important, the last year we started this journey on the new Transaction Model.

Speaker Change #206: and when we told you about the new transaction model, what did we tell you we were doing it for? We were doing it to get more control and visibility over our sales and marketing costs.

Simon Mays-Smith: Here we see line of sight to increasing productivity and effectiveness in our sales and marketing motions and driving some of those costs down on a per deal basis, which is great because that's how we see line of sight to margin growth. Now, why should you believe me? Why should you believe us? All right, let's look at what happens. What's going to happen this year? This year we are going to achieve the non-GAAP targets on an apples to apples basis that we set out two years ago, a year ahead of target. So I think you can trust that we're focused on this and that we're going to deliver. So we agree with Starboard that there is a lot more value creation coming out of Autodesk. And I'm really excited about it going forward.

Speaker Change #206: and that is the mission going forward here.

Speaker Change #206: We see line of sites to increasing productivity and effectiveness in ourselves and marketing go emotions and driving some of those talks down on a purge deal basis, which is great because that's how we see line of site to margin growth.

Speaker Change #207: Now, why should you believe me? Why should you believe us? Alright, let's look at what happened with going to happen this year. This year we are going to achieve.

Speaker Change #207: The non-gap targets on an apple's to apple's basis that we set up two years ago, a year ahead of target. So I think you can trust that we're focused on this and that we're going to deliver. So...

Speaker Change #208: We agree with Starboard that there is a lot more value creation coming out of all of us.

Simon Mays-Smith: The results that we've delivered this quarter are just the first step in that journey. Yeah, absolutely. That was super helpful, Andrew, maybe for.

Speaker Change #208: and I'm really excited about going forward in the results that we've delivered this quarter just the first step in that journey.

Operator: My follow up for you as well.

Speaker Change #208: Yeah, absolutely, that was super helpful, Andrew.

Simon Mays-Smith: Maybe just moving to the business.

Operator: You know, you gave some nice examples.

Speaker Change #209: may be from my follow-up for you as well, maybe just moving to the business, you know, you gave some nice examples of construction winds in the quarter. Could we just go one double deeper into Autodesk Construction Cloud? Maybe talk about sort of the overall construction factor up that you're seeing, and how you feel about ACC competitively.

Simon Mays-Smith: Of construction wins in the quarter. Could we just go one level deeper?

Operator: Into Autodesk Construction Cloud?

Simon Mays-Smith: Maybe talk about sort of the overall construction backdrop that you're seeing and how you feel about ACC competitively? Yeah, that's a great question. All right. And look, you know, first off, the, one of the things I'm really excited about with our construction business is that we're maintaining momentum in a really tough competitive environment where, you know, others are having challenges maintaining momentum, but we're maintaining momentum, and there's a couple of key reasons why we're maintaining momentum. One, there is still a large backlog in construction. Backlog matters, all right? And that backlog is still there. And construction professionals are still interested in digitization. That, in addition to our value proposition becoming more resonant with customers. One, the portfolio of Construction Cloud is competitive. People like it. They like our value proposition of going from design to construction.

Speaker Change #210: Yeah, that's a great question, all right, and look, first off the one thing I'm really excited about in our construction business is that we're maintaining momentum

Speaker Change #210: and a really tough competitive environment where you know others or you know, you know, having challenges maintaining momentum. But we're maintaining momentum. And there's a couple of key reasons why we're maintaining momentum.

Speaker Change #210: and Symptom. Once there is still a large backlog in construction. B backlog matters, all right? And that backlog is still there.

Speaker Change #210: Construction Professionals are still interested in digitization.

Speaker Change #210: That, in addition to our value proposition becoming more resonant with customers. One.

Speaker Change #210: The portfolio of construction clouds, competitive, people like it. They like our value profit proposition of going from design to construction. They like the flexibility that business models we bring to them. They're looking to...

Simon Mays-Smith: They like the flexibility, the business models we bring to them. They're looking to either move to construction cloud net new or they're looking to move from older solutions, competitive solutions, to our solutions. The other thing is, in the mid market in the US, we see our competition more and we win more. And that's because of the strengthening of this value proposition. And the last bit, I think, is worth talking about, the international growth for Autodesk. This is the place where Autodesk has the superpower, and we're going to continue to grow internationally. We saw strong growth internationally. We're going to continue to see strong growth internationally. And long term, that's going to continue to kind of be accretive to our construction business. So a lot going on there. But I do want people to remember there's a backlog, and we're definitely maintaining momentum.

Speaker Change #210: Either move the construction cloud, net new, or they're looking to move from older solutions to our solution.

Speaker Change #210: The other thing is, in the mid-market, in the U.S., we see our competition more and we would more and that's because of the strengthening of this value proposition.

Speaker Change #211: And the last bit, you know, I think is worth talking about is, is you get an Anagnostal Growth for Artif. This is a place where Artif has a super power.

Speaker Change #211: and we're going to continue to grow internationally, be soft, strong growth internationally, we're going to continue to see strong growth internationally and long-term that's going to continue to kind of be a creative drug construction business.

Speaker Change #211: So a lot going on there but I do want people to remember there's a backlog and we're definitely maintaining momentum

Simon Mays-Smith: Very helpful, guys.

Operator: Thank you. Thank you. Our next question comes from Jay Vleeschhouwer with Griffin Securities. You may proceed. Thank you. Good evening, Andrew.

Speaker Change #212: Very helpful, guys. Thank you.

Speaker Change #213: Thank you.

Speaker Change #214: Our next question comes from Jay Bliechauer with Griffin Securities you may have received.

Simon Mays-Smith: With regard to the new engagement or transactional model, the new channel compensation arithmetic is very readily understandable. But I'd like to ask more about the division of labor under the new model, which is to say your inside sales, your customer success investments, and the like versus the channel. So how do you see the role of your inside and other direct sales capacities versus that of the channel, particularly when it comes to renewals and or upselling? How do you see the role of the eStore versus the channel under the new model? Then my follow up.

Jay Bliechauer: Thank you, good evening. Andrew, if we go into the new engagement or transaction model, the...

Jay Bliechauer: New Channel Compensation arithmetic is very readily understandable, but I'd like to ask more about the division of later under the new model, which is to say, your inside sales, your customer success investments and the like.

Speaker Change #216: Versus the channel. So how do you see the role of your inside and other direct sales capacities versus data of the channel? Particularly when it comes to renewals and or upselling, how do you see the role of the east door Versus the channel under the new model, then I follow up.

Operator: Jay.

Simon Mays-Smith: You're asking some very specific questions. Let me kind of answer it in a very general way. With this new transaction model, with the ability to drive clear divisions of labor, there are opportunities to drive efficiencies and productivity moving forward in sales and marketing. So absolutely, you're highlighting some things with regards to our partners and with regards to us that we are going to continue to perfect over time. And that is where some of this margin growth is going to come from. Most of this margin growth is going to come from over the next couple of years. So you are definitely talking around some of the areas that are important to discuss. Okay, second question.

Speaker Change #217: Day, you're asking for very specific questions, let me kind of answer it in a very general way.

Speaker Change #217: with this new trans-assum model, with the ability to drive clear divisions of labor. There are opportunities to drive.

Speaker Change #217: Assessions these productivity moving forward in sales and marketing.

Speaker Change #218: All right, so absolutely you're highlighting some things with regards to our partners and with regards to us that we are going to continue to perfect over time and that that is where some of this marching growth is going to come from most of this marching growth that comes from over the next couple of years.

Speaker Change #219: Here, so you're definitely talking around some of the areas that are important to discuss.

Simon Mays-Smith: With regard to the billings co-terming effects, the model effects, and the like, perhaps we can parse that to get at the organic effects of the business, which is to say, how are you thinking about your license volume and mix expectations? In other words, how are you thinking near term and long term with regard to the volume assumptions that you've previously spoken about in your overall P times Q framework? So look, let me just start here before if Betsy wants to add anything. You know, I think the important thing to get about the co-terming is that what it does is it takes some billings out of the current renewal cycle and moves them forward. And more importantly, it creates efficiency in our renewal process. All right, so we're going to get much more efficiency in our renewal process.

Speaker Change #219: Okay?

Speaker Change #220: Second question, with regard to the Billings, Colt Termid effects, the model effects, and the like.

Speaker Change #221: Perhaps we can parse that to get at the organic effects of the business which is to say...

Speaker Change #222: How are you thinking about your license volume and mixed expectations?

Speaker Change #223: In other words, however you think he is near term and long term with regard to the volume assumptions that you previously spoken about in your overall P times Q framework.

Speaker Change #224: So, look, let me just start here for if Beth you want to add anything. You know, I think the important thing to get about the code terming is that when it does is it is it.

Beth: Take some buildings out of the current renewal cycle and move them forward and more importantly, it creates a efficiency.

Simon Mays-Smith: A co-term contract is much easier to wrangle at renewal time than another contract. It's also much easier to do cross-sell, upsell, and expansion at renewal time. You're going to get some efficiencies from this. Co-terming is good, even though it has some puts and takes on where the billings show up. I think that's kind of the important piece to take away from that. The rest of that detail is a little harder to address directly.

Beth: In our renewal process, all right. So we're going to get much more efficiency in our new process. A co-curren contract is much more easy to wrangle at renewal time than another contract is Also much more easy to do cross-sell upsell an expansion at renewal time.

Beth: So you're going to get some efficiencies from this, so cold-terming is good, even though it has some puts and takes on where the building's show up. So I think that's kind of the important piece to take away from that.

Operator: The only thing I would add is with fewer contracts to manage, you also drive efficiency from inside the company.

Beth: The rest of that detail of a little harder to address directly. The other thing I was at is with fewer contracts to manage. You also drive efficiency from that inside the company.

Simon Mays-Smith: All right, thank you.

Operator: Thank you. Our next question comes from Adam Borg with Stifel. You may proceed. Awesome. And thanks so much for taking the question. Just maybe for Andrew, just going back to the new transaction model, it's great to hear that things are going smoothly.

Speaker Change #225: Alright, thank you.

Speaker Change #226: Our next question comes from Adam Borgwood's feeful he may proceed.

Adam Borgwood: Awesome, and thanks so much for taking the question. Just maybe for Andrew just going back to the new transactional model, it's great to hear that things are going smoothly so far North America. I hope you can maybe go step deeper on what that exactly means.

Simon Mays-Smith: So far in North America.

Operator: I was hoping you maybe go a step deeper on what that exactly means.

Simon Mays-Smith: Importantly, what's given the confidence to.

Operator: Accelerate the rollout into Europe and Japan ahead of expectations, especially given the additional.

Speaker Change #227: and importantly, you know, let's give in the confidence to roll out, accelerate the roll out into Europe and Japan. I had an expectation, especially given the additional complexities.

Simon Mays-Smith: Complexities you've talked about rolling out internationally. Yeah, good question. So remember, let's just recount the incremental journey we've taken here. Right. We started with Australia, really stressed and tested the system in that environment. We always like to stress and test things in smaller markets, on smaller pools. And we have essentially completed the entire rollout in the US, and during that time we've had no major issues. No major issues came up with regards to disruption to the business as we did this. Now, of course, there's all sorts of quality of life issues. There's been a backlog of issues that people want more functionality, they want more capabilities, ability to do X, Y, and Z. And what we're doing is we're working that backlog, and we gave ourselves a little bit of extra time to clear that backlog.

Speaker Change #228: You've talked about pulling out internationally.

Speaker Change #229: Yeah, it's a good question. So remember, let's just recount the incremental journey we've taken here, right? We started with Australia, really.

Speaker Change #229: Restraft and tested the system in that environment. We always like to stress and test things in small markets.

Speaker Change #229: and Smaller Pool.

Speaker Change #229: and we have essentially completed the entire roll out in the US and during that time.

Speaker Change #229: We've had no major issues, no major issues came up with regards to disruption to the business. Now of course, there's all sorts of quality of life issues. There's been a backlog of issues that people want more functionality. They want more capabilities to do X, Y, and Z. And what we're doing is we're working that backlog and we gave ourselves a little bit of extra time to clear that backlog. Some of that backlog is specific to test runs that we've done in Europe as well. So given what we learned in...

Simon Mays-Smith: Some of that backlog is specific to test runs that we've done in Europe as well. So given what we learned in Australia, given how the US went even smoother than Australia and we had a much shorter recovery time as we rolled out in Australia, given that, we're probably going to see the same kind of pull forward in Europe that we saw in the US which buffers things as we move forward. We're very confident about the cascade here and how this is going to roll out.

Speaker Change #229: in Australia, given how the U.S. went even smoother than Australia and we had a much shorter recovery time as we rolled out in.

Speaker Change #229: and Australia, given that we're probably going to see the same kind of pull forward in Europe that we saw in the US, which buffers things as we move forward. We're very confident about the cascade here and how this is going to roll out.

Operator: The only thing that's different in Western Europe from North America is really that it's different currencies and there's different legal regulatory laws in place. But I think that we've learned from each step along the way and so are very, very comfortable with the plan for the full fiscal year. That's super helpful and maybe just as a quick follow up.

Speaker Change #229: is the only thing that's different in Western Europe from North America is really that it's different currencies.

Speaker Change #229: and there's different legal regulatory laws in place, but I think that we've learned from each step along the way and so are very, very comfortable with the plan for the full fiscal year.

Simon Mays-Smith: Andrew, obviously, US elections coming up in a few months, I was hoping you.

Andrew Anagnost: That's super helpful and maybe this is a quick follow-up Andrew obviously U.S. election coming up in a few months

Operator: Could talk a little bit more about?

Simon Mays-Smith: What you're seeing in the end market demand environment.

Operator: Are the AEC or manufacturing industries making?

Andrew Anagnost: I hope you can talk a little bit more about what you're seeing in the end-market demand environment.

Simon Mays-Smith: Any changes in the decision-making process either accelerating or slowing down decision making?

Speaker Change #230: are the AETC or manufacturing industry is making any changes in the other situation-making process. These are accelerating or slowing down the situation-making ahead of the election in a few months.

Operator: Ahead of the election in a few months?

Simon Mays-Smith: Thanks again. Yeah, you know, the good thing here is that the issues that affect our customers are bipartisan issues. All right, infrastructure, manufacturing, go USA, you know, everything across the world, they are bipartisan issues. So I think, you know, whoever wins, there may be all sorts of other puts and takes. But with regards to the things that affect our customers, end markets, I see little impact and we're not hearing a lot of trepidation from our customers on that. Incredibly helpful.

Andrew Anagnost: Yeah, you know, the good thing here is that the issues that affect our customers are bipartisan issues, all right, infrastructure, manufacturing, go USA, you know, everything across the world, they are bipartisan issues.

Andrew Anagnost: So, I think whoever wins, there may be all sorts of other puts and takes, but with regards to the things that affect our customers and markets, I see little impact and we're not hearing a lot of trepidation from our customers on that.

Operator: Thanks again. Thank you. Our next question comes from Jason Celino with KeyBanc Capital Markets. You may proceed. Great.

Speaker Change #231: and incredibly helpful. Thank you again.

Speaker Change #232: Our next question comes from Jason Salino with Keybank Capital Market, he may proceed.

Simon Mays-Smith: Thanks for taking my questions. I kind of wanted to dig into just the performance of the quarter. Obviously, you beat nicely. You beat margins nicely. You're keeping kind of the margin framework the same for the year, even though you're absorbing some of these incremental headwinds from the transition. So, internally, did you do anything to drive leverage or sources of leverage with that? No, we did nothing unusual to do this.

Jason Salino: Great. Thanks for taking my questions. I kind of wanted to kind of dig into just the performance of the quarter. You know, obviously you...

Speaker Change #233: You beat nicely, you beat margins nicely, you're keeping kind of the margin.

Speaker Change #234: Framework the same for the year, even though you're absorbing some of these incremental headwinds from the transition.

Speaker Change #235: So internally, did you do anything to drive leverage or sources of leverage with that?

Operator: All right.

Simon Mays-Smith: This is all the rate and pace of the business. Betsy, you want to comment a little bit more?

Speaker Change #236: No, we did nothing unusual to do this, all right. This is all the rated pace of the business that you want to comment a little bit more. I think that we did see underlying improvements in the margins, and that was intentional knowing that we were going to get some headlines from some of these transitions.

Operator: I think that we did see underlying improvements in the margins, and that was intentional, knowing that we were going to get some headwinds from some of these transitions.

Simon Mays-Smith: Okay, great. And then maybe just a little more pointed on the free cash flow side. So it is a, you know, $10 million raise. Nice to see. Obviously, the transition timelines have no impact to free cash flow. So I know you said some customers signed earlier in Q2. So is the raise on free cash flow just a function of timing or more a function like the core business?

Speaker Change #236: [inaudible]

Speaker Change #237: Great, and then maybe just a little more pointed on the free cash flow side, so it is a $10 million raise, nice to see.

Speaker Change #238: obviously the transition timelines of no impact to free cash flow. So I know you said some customers signed earlier in TUQ, so is the raise on free cash owed just a time function of timing or more a function like the core business. Thank you.

Operator: Thank you. So I think a lot of it is a timing issue because we originally estimated that we didn't anticipate the significance of people buying ahead of the launch in North America. And so our original assumption for free cash flow for FY25 was that roughly 2/3 of it would take place in the back half of the year. Our current modeling assumption is 1/2 of that will take place in the back half of the year.

Speaker Change #239: So I think it's a lot of it is a timing issue because we originally estimated that we didn't anticipate the significance of...

Speaker Change #240: People buying ahead of the launch in North America. And so our original assumption for pre-casual for FY25 was that roughly two thirds of it would take place in the back half of the year. Our current modeling assumption is one half of that will take place in the back half of the year.

Simon Mays-Smith: Excellent. Thank you.

Operator: Thank you. Our next question comes from Elizabeth Porter with Morgan Stanley. You may proceed. Great.

Speaker Change #241: Excellent. Thank you.

Speaker Change #241: Thank you.

Speaker Change #242: Our next question comes from Elizabeth Porter with Morgan Stanley, you may proceed.

Simon Mays-Smith: Thank you so much for the question. I wanted to ask a bit on the pricing environment. I believe that one of the things we picked up was the move to the transactional model should allow you to have some more control on discounting behavior and help narrow some of the pricing differentials you've seen. So I wanted to ask, is this.

Elizabeth Porter: Great, thank you so much for the question.

Elizabeth Porter: I wanted to ask if I don't have the pricing environment, I believe one of the things we picked up was to move to the transactional model should allow you to have some more control on discounting behavior and help narrow some of the price differentials you've seen. So I wanted to ask, is this a lever you expect to use and is it something you're doing today or a future opportunity and how we could think about that going forward?

Operator: A lever you expect to use and.

Simon Mays-Smith: Is it something you're doing today or a future opportunity and how we could?

Operator: Think about that going forward? Yeah.

Simon Mays-Smith: So the place where that has the biggest impact is with our partners. Quite frankly, what our best partners really like about the new transaction model is it prevents a less competent, less value added partner coming in and undermining them on price on a big deal where they're trying to really add value. So for our partners, this is definitely going to allow them to sell to the value they're delivering. For us moving forward, it's all about the efficiencies of the process. So for us, it's not so much about the price. The partners are definitely going to benefit from that. What we're going to benefit is the ability to get the efficiencies and the cost out the environment as we move forward. And I think that's where you want to look at for us, the partners, definitely a price advantage for our best partners.

Speaker Change #243: Yeah, so the pleasure that has the biggest impact is with our partners, quite frankly, what our best partners really like about the new Transaction model is it prevents a less competent, less value added partner coming in and undermining them on price on a big deal where they're trying to really add value.

Speaker Change #243: So for our partners, this is definitely going to allow them to sell to the value they're delivering.

Speaker Change #244: For us moving forward, it's all about the efficiencies of the process.

Speaker Change #244: So, for us it's not so much about the price, the partners are definitely going to benefit from that. What we're going to benefit is the ability to get the efficiencies and the cost out of the environment as we move forward. And I think that's where you want to look at for us. The partners definitely have a price advantage for our best partners for us, a cost advantage as we drive productivity.

Simon Mays-Smith: For us, a cost advantage as we.

Operator: Drive productivity, enhance those strategic relationships directly with customers. Great.

Speaker Change #244: and Pam Foster's secret relationship directly with customers.

Simon Mays-Smith: And then just as a follow up, appreciate the comments on the overall demand environment that maybe you could unpack a little bit more around the new business trends?

Speaker Change #245: Great, and it just has a follow up, appreciate the comments on the overall demand environment. We've done a good unpack a little bit more around the new business trends, you know, understand the macro means changing, challenging. Anything you're picking up from a new business standpoint in the quarter or how that outlook is changing.

Operator: You know, understand the macro means challenging.

Simon Mays-Smith: Anything you're picking up from a new business standpoint in the quarter or how that outlook is changing? Yeah. So let me talk about that a little bit. You know, generally, broadly, okay. We're seeing the same kind of trends that we've seen in previous quarters. There are absolutely some headwinds in new business, but there's different puts and takes here. As we, as we look at this quarter now are moving forward, metrics like monthly active usage and bids on BuildingConnected, those show the same kind of positive forward momentum that we've seen in the past. But if you look at the market, obviously AEC continued to do well. This has a lot to do with construction growth helping in there, as well as other things driving Revit and the backlog associated with that. Manufacturing did well. It beats a lot of our competitors in the market.

Speaker Change #246: Yeah, so let me talk about that a little bit. You know, generally broadly, okay, we're seeing the same kind of trends that we've seen in previous quarters. There are absolutely some headwinds and new business, but there's different puts and takes here as we look at this quarter now, are moving forward metrics like

Speaker Change #246: Like a monthly active usage.

Speaker Change #246: and build this on building connected. Those show the same kind of positive forward momentum that we've seen in the past. But if you look at the market, obviously, AEC continues to do well. This has a lot to do with construction growth, helping in there, as well as other things driving, driving, rev it, and the backlog associated with that. Manufacturing did well. It beats a lot of our competitors in the market. The drive was meeting entertainment.

Simon Mays-Smith: The drag was media entertainment still coming out of the effects of those strikes. Okay. That will continue to take time geographically. A few puts and takes here.

Speaker Change #247: Still coming out of the effects of those strikes, okay, and that will continue to take time.

Operator: Okay.

Simon Mays-Smith: You know, most of the world was strong, but China and Korea dragged on our business geographically. That gives you kind of a lay of the land for what we see. But one of the things that you got to take away from this is this Autodesk is an incredibly resilient business. You know, there's puts and takes in one part of the business. You know, you might be off on certain types of projects, but you're up on other types of projects. One geography is down, another geography is up. This is the magic of Autodesk and our very distributed and resilient business. That's what you're seeing as a result here. Great. Thank you very much.

Speaker Change #247: Geographically, a few puts in takes here, okay? Most of the world was strong, but China and Korea were dragged on our business geographically.

Speaker Change #247: Alright, and that gives you kind of a lay of the last one what we see, but one of the things that you got to take away from this is...

Speaker Change #248: Autism is incredibly resilient business.

Speaker Change #248: You know, there's puts in takes in one part of the business, you know, there's, you might be, you might be off on certain types of projects, but you're up on other sites of projects, one geography's down, another geography's up, this is the magic of Autodesk and our very distributed and resilient business, that's what you're seeing as a result here.

Operator: Thank you. Our next question comes from Joe Vruwink with Baird. You may proceed. Great. Hi, everyone.

Speaker Change #249: Great, thank you very much.

Speaker Change #249: Our next question comes from Joe Brunk with Fair Gamer Proceed.

Simon Mays-Smith: Going back to Andrew, to your manufacturing comments.

Operator: Growth in the upper teens there or low teens for just the recurring business.

Joe Brunk: I have everyone.

Speaker Change #250: and go back to Andrew's here, Manufacturing Commons, so it's gross in the upper teams there, low teams, for just the right of a business.

Simon Mays-Smith: Those numbers definitely stand out relative to.

Operator: What we've been hearing throughout the summer, I think, particularly at the high end.

Speaker Change #251: Those members definitely stand at relative to what we've been hearing throughout the summer. I think, particularly at the high-ends where there's been some commentary about more the world to want to be met at Enterprise.

Simon Mays-Smith: Where there's been some commentary about more deal lumpiness at Enterprise.

Operator: I mean, you have exposure to mid market and Enterprise. You gave anecdotes about both segments. I'm wondering if you're ultimately seeing maybe more share movement, and that's ultimately explaining the strength there.

Speaker Change #252: I mean, you have exposure to mid-market and enterprise, you gave anecdotes about both segments. I'm wondering if you're ultimately seeing maybe more share movements and that's ultimately explaining the strengths there.

Simon Mays-Smith: We are definitely seeing share movement. Look, we feel like we're out in front on a lot of things. Fusion did well in the quarter. Its seat count growth was consistent with previous quarters. More importantly, we continue to drive ASPs up for Fusion with attach rates of extensions and other actions in the Fusion base. So you are absolutely seeing share shift.

Speaker Change #253: We are definitely to make sure I'm moving.

Speaker Change #254: We feel like we're...

Speaker Change #255: We're out in front on a lot of things.

Speaker Change #255: Fusion did well.

Speaker Change #256: in the corner, at C.Cown Road, the assisted with previous quarters, more important links.

Speaker Change #257: We continue to drive ASP's up for fusion with the tax rate of extension and other actions in the fusion day. So you are absolutely appreciate it.

Operator: Okay. And then on the slide showing underlying margin improvement that's taken place since FY23.

Speaker Change #257: Okay?

Speaker Change #257: and then John the slide showing underlying margin improvement that's taking place in FY23.

Simon Mays-Smith: How much latent investment is still being?

Operator: Absorbed in that normalized 39%.

John: How much?

Simon Mays-Smith: So you talk about making investment in cloud platform AI. Those investments are.

Speaker Change #258: Layton Investment is still being absorbed in at normalized 39%. You talk about making investment in cloud platform AI.

Operator: So you're ahead of peers and not needing to make up some future catch up investment. I mean, another way to say is you're spending some amount and you haven't.

John: Those investments are your ahead of peers and not be in a make-up from future catch-up investments.

Simon Mays-Smith: Matched it against revenues yet?

Speaker Change #259: I mean, another way to say is you're spending some amounts and you haven't matched it against revenues. So, just wondering if it's possible to quantify what that is because that would seem to be an area of future improvement in addition to what you're doing with the transaction model.

Operator: So, just wondering if it's possible to?

Simon Mays-Smith: Quantify what that is, because that would.

Operator: Seems to be an area of future.

Simon Mays-Smith: Improvement in addition to what you're doing.

Operator: With the transaction model.

Simon Mays-Smith: So there's always a delay in R&D investment and return on R&D investment.

Operator: Okay.

Simon Mays-Smith: So there's always a shift. We're definitely in a time of great technological advancements here. We're definitely in an environment where share shift is starting to happen. So there's always a shift in those areas.

Speaker Change #260: No, there's always a delay in R&D investment and return on R&D investment, okay, so there's always a shift.

Speaker Change #260: We're definitely in a time of great technological advancements here. We're definitely in an environment where share shifts are starting to happen. So there's always a shift in those areas, okay? And I think we should expect that that there's this delay between the actual value creation and the investment. That's very natural in technology like this.

Operator: Okay.

Simon Mays-Smith: And I think we should expect that, that there's this delay between the actual value creation and the investment that's very natural in technology like this. That's why I want you to understand that we're very focused on net sales and marketing productivity moving forward because that's how we're going to drive the margin growth over the next couple of years as the investments in these new and emerging technologies start to really pick up.

Speaker Change #260: That's why I want you to understand that we're very focused on that sales and marketing productivity moving forward. Even that's how we're going to drive the margin growth of the next couple years as the investments in these new and emerging technologies start to really tip out.

Operator: Okay, thank you. Thank you. Our next question comes from Ken Wong with Oppenheimer & Co. You may proceed. Fantastic.

Speaker Change #261: Ok, thank you.

Speaker Change #262: Our next question comes from Ken Wong with Oppenheimer and Company you may proceed.

Simon Mays-Smith: I wanted to maybe dig into the margins a little bit. You mentioned being ahead of schedule on the margin profile. Also, confident you can make further improvements in Fiscal 26.

Ken Wong: Fantastic. I wanted to maybe dig into the margins a little bit. You mentioned, you know, being a head of schedule on the margin profile. Also confident you can make further improvements in fiscal 2006.

Operator: I guess.

Simon Mays-Smith: How should we think about where that could go? We're at a point where you haven't even optimized for sales and marketing.

Ken Wong: I guess, how should we think about where that could go? We're at a point where you haven't even optimized for sales and marketing. What's the right way to think about that trajectory?

Operator: What's the right way to think about that trajectory? So it's a little early for me.

Simon Mays-Smith: To say, I'm not going to be giving the guide for next year. So there's a couple of things that are gating here. Okay. One, we want to complete the rollout of the New Transaction Model. We want to hire a new CFO and get their fingers on this. And then what we'll do is we'll start giving you more color on the specifics for next year. But suffice it to say, what I'm trying to do is give you confidence. That one. We're not only paying attention to this, but we've got line of sight, just like we did in the move to annualized billings. Look at the results that we're delivering now as a result. Result of that. Okay, that happened. That was two years ago. Look at the results we're delivering now.

Speaker Change #263: So it's a little early for me to say, I'm not going to be forgiving the guy for next year. So there's a couple of things that are gating here, okay? One, we want to complete the roll out.

Speaker Change #263: of the Nutrient Dash for Model, but when I hire a new CFO and get their fingers on this, and then what we'll do is we'll start giving you more color on the specifics for next year, but to say what I'm trying to do is...

Speaker Change #263: and we're not only paying attention to this, but we've got line of sight. Just like we did in the move to annualized buildings, look at the results that we're delivering now as a result of that, okay? That was two years ago, look at the results we're delivering. Now I'm telling you, we have line of sight on other productivity improvements that Jose was selling and marketing in the new Transaction Model. So I want you to know, we see it and you need to believe in it. And as we said before, the P&L is going to be noisy as we continue to transition to the new Transaction Model.

Simon Mays-Smith: I'm telling you, we have line of sight on other productivity improvements associated with sales and marketing and the new transaction model. So I want you to know we see it and you need to believe in it.

Operator: As we've said before, the P and L is going to be noisy as we continue to transition to the new transaction model. That's why we anchored you on the FY26 free cash flow target to give you a sense of what to expect. With our current trajectory, we still estimate that the free cash flow in fiscal 2026 to be around $2.05 billion at the midpoint. As I said earlier, we have our largest multi-year cohort renewing. We have a large EBA cohort, and we have kind of a natural transition to annual billings from upfront billings.

Speaker Change #263: and that's why we anchor you on the FY26 free cash flow target to give you a sense of what to expect.

Speaker Change #263: and with our current trajectories, we still estimate that the free cash flow of this will 26 to the around.

Speaker Change #263: 2.05 billion at the midpoint and as I said earlier, we have our largest multi-year cohort renewing, we have a large EBA cohort and we have kind of the natural transition to annual billings from up front billings.

Simon Mays-Smith: Okay, perfect.

Operator: We will await anxiously for these details. Maybe second, just thinking about, we talked.

Speaker Change #264: Great, perfect. We will await anxiously for these details. Maybe second, just thinking about the...

Simon Mays-Smith: A lot about the potential economics and kind of the partner activity on the transaction model. What are you guys hearing from customers? Do they even care? Do they even notice? Is there some sort of benefit on their side that they might be seeing that we're maybe on the analyst world not quite as cognizant of? Yeah, so look, for most customers, it's a non-event, all right? Because, you know, they're just finding themselves buying differently. Some are happier, some would prefer to go through a third party. Notice that some are taking the opportunity to true up contracts. All right, what they're doing right there, they're saying, oh, I have a chance to clean up my relationship with Autodesk, that's going to give me more power come the renewal cycle.

Speaker Change #265: We've talked a lot about the potential economics and kind of the partner activity on the transaction model What are you guys hearing from from customers?

Speaker Change #266: And do they do they even care to they even notice like is there some sort of a you know a benefit on on their side that they might be seeing that we're maybe on the on the analyst world not not quite as cognizant of

Speaker Change #267: Yeah, so it's up!

Speaker Change #268: for Moist customer, if...

Speaker Change #269: It's a non-events, right? Because, you know, they're just finding themselves buying differently. Some are happier, some would prefer it to go through a third party. Notice that some are taking the opportunity to, to a true up contract, right? That, what they're doing right there is a thing, oh, I have a chance to clean up my relationship with Autodesk. You know, that's going to give me more power to come to a renewal cycle. So they actually see, you know, the advantages with...

Simon Mays-Smith: So they actually see advantages with cleaning up their relationship with us and making sure that they have visibility in their company. So that's good for them. But for the most part, it's not a big customer issue, positive or negative. Okay, perfect.

Speaker Change #269: with cleaning up their relationship with us and making sure that they have disability in their company. So that's good for them, but for the most part, it's not a big customer.

Operator: Thank you for the insight, guys. Thank you. Our next question comes from Tyler Radke with Citi. You may proceed.

Speaker Change #270: U, what positive or negative?

Speaker Change #271: Okay, perfect. Thank you for the insight, guys.

Speaker Change #272: Thank you.

Simon Mays-Smith: Yes, thank you for taking the question. I guess just to start off on the free cash flow number for next year, I guess that's one piece of guidance or at least a target that you've given. Can you just talk about the confidence behind that? And as you think about being ahead of plan in terms of some of these margin optimizations, like how much margin and cost optimizations is built into that.

Speaker Change #273: Yes, thank you for taking the question.

Speaker Change #274: I guess this just started off on the free cash flow number for next year. I guess that's one piece of guidance or at least a target that you've given. Can you just talk about the confidence behind that? And is you think about being ahead of plan in terms of some of these margin optimizations? Like how much?

Operator: Now, well, again, we're obviously not going to be giving you detailed guidance for fiscal 26 at this point, but what we will do at the end of the fiscal year is we'll give you a lot more details about the impact of the new transaction model both on fiscal 25 as well as what we expect it, how we expect it to impact fiscal 26. And right now we're focused on the rollout in North America as well as Western Europe in September. What I can say is the tailwind to revenue growth will be greater in fiscal 26 than in 25. And all else being equal, the greater the tailwind to revenue in 26, the greater the headwind to margins. And again. But we are very focused on managing that.

Speaker Change #275: Margin and you know cost optimizations is built into that number.

Speaker Change #276: Well, again, we're obviously not going to be giving you details guidance for physical 26 at this point but what we will do at the end of the physical year is we'll give you a lot more details about the impact of the new Transaction model both on physical 25 as well as what we expected, how we expected to impact physical 26

Speaker Change #276: and right now we're focused on the rollout in North America as well as Western Europe and September. But when I can't say it's a tailwind to revenue growth will be greater in physical 26th and in 25th.

Speaker Change #276: and all else being equal, the greater the tailwind to revenue in 26, the greater the headwind to margin.

Operator: Again, based upon this change in the geography on the balance sheet and the P and L, we're still largely focused on being able to manage to margins that are better than they are today. And again, going back to the free cash flow number of $2.05 billion at the midpoint, obviously that's up significantly from where it is this year. And I mentioned earlier, the largest multi-year cohort is renewing next year. We have a large EBA cohort. And again, this natural transition from annual billing from the upfront to the annual billings will also help us from a cash flow perspective. Great.

Speaker Change #276: And again, but we are very focused on managing that. Again, based upon this change in the geography on the balance sheet in the P&L, we're still largely focused on being able to manage to margins.

Speaker Change #276: that are better than they are today. And again, going back to the precastle number of the 2.0-5 billion at the midpoint.

Speaker Change #276: But you know, obviously that's up significantly from where it is this year and I mentioned earlier, the largest multi-year cohort is renewing next next year.

Simon Mays-Smith: For Andrew, the make revenue in the quarter was particularly strong. I think the strongest sequential growth in a number of years despite sort of having the leap year last quarter. Was there any one-time factors there or is that sort of a function of share gains and some of the reorg you've done in that organization to.

Speaker Change #277: Great, and for Andrew, the make revenue in the quarter was particularly strong. I think the strongest sequential growth in a number of years despite having the leap year last quarter. Was there any one time factors there? Is that sort of a function of share gained in some of the re-ord that you've done in that organization to accelerate growth?

Operator: Sort of accelerate growth? Yeah.

Simon Mays-Smith: So first off, the core underlying momentum of the make businesses is intact. There was one-time factor. The acquisition of Payapps is in there as well. All right. Which is an important piece of it. But the underlying momentum in the construction and Fusion business, that is solid and consistent with previous quarters with a little kick from the Payapps business. Okay, makes sense. Yeah. Yeah. Any way to quantify the Payapps in the quarter?

Speaker Change #278: Yato Sous

Speaker Change #279: First off, the core underlying momentum of the make businesses at the touch. There was one one time factor, the opposition of pay-offs is in there as well, all right? It was just an important piece of it. But the underlying momentum in the construction is using business. That is solid and consistent with previous quarters with a little kick from the pay-offs business, okay?

Speaker Change #280: Thanks then.

Speaker Change #281: Yeah, anyway to quantify the pay-ups in the quarter.

Operator: No.

Simon Mays-Smith: Okay, thank you.

Operator: Thought I'd try.

Speaker Change #281: Now!

Simon Mays-Smith: It's always worth trying. Always asking.

Speaker Change #282: Okay, thank you, thought I'd try.

Operator: Thank you. That is all the time we have for Q and A today. I would now like to turn the call back over to Simon Mays-Smith for any closing remarks.

Speaker Change #283: I can't always be trying, I'll be back!

Speaker Change #284: Thank you. That is all the time we have for Q&A today. I would not like to turn the call back over to Simon Mays Smith for any closing remarks.

Simon Mays-Smith: Thanks everyone for attending. We'll look forward to seeing many of you on the road over the coming weeks and/or at AU at the end of October. Please just ping me if you have any questions in the meantime. Otherwise we'll catch up on next quarter's call towards the end of November. Thanks very much.

Speaker Change #285: Thank you for attending. We'll look forward to seeing many of you on the road over the coming weeks and towards AU at the end of October. Please just ping me if you have any questions in the meantime. Otherwise, we'll catch up on next course call towards the end of November. Thanks so much.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Speaker Change #286: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.