Q3 2025 Autodesk Inc Earnings Call

Speaker Change: Thank you for standing by and welcome to Autodesk's third quarter and fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session.

Speaker Change: To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again.

Speaker Change: I would now like to hand the call over to Simon Mays-Smith, VP, Investor Relations. Please, go ahead.

Simon Mays-Smith: Thanks operator and good afternoon. Thank you for joining our conference call to discuss the third quarter results of Autodesk Fiscal 25. On the line with me is Andrew Anagnost, our CEO, and Betsy Rafal, our interim CFO.

Simon Mays-Smith: During this call, we will make forward-looking statements, including outlooks and related assumptions, and on product and strategies.

Actual events or results could differ materially.

Simon Mays-Smith: Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K files 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 space.

Simon Mays-Smith: 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.

Simon Mays-Smith: AUSESC disclaims 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.

Simon Mays-Smith: In less otherwise noted, each such reference represents a year-on-year comparison.

Simon Mays-Smith: All NONGAT numbers referenced in today's call are reconciled in our press release, OXL 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 third quarter of the year strongly, delivering 12% revenue growth in cost and currency, and have again raised full year guidance.

Andrew Anagnost: This reflects the sustained momentum of the business and successful execution of our strategy, including a smooth implementation of the new transaction model in Western Europe. Once again, opportunity, resilience, and discipline underpinned our performance.

Andrew Anagnost: Last month at Autodesk University in San Diego, we hosted 12,000 registered attendees and another 30,000 online.

Andrew Anagnost: We showed how granular data in the cloud, organized in data models, and connected to everything through APIs, can deliver even more valuable and connected solutions for customers and partners, and support a much broader ecosystem and marketplace.

Andrew Anagnost: Customers and channel partners that I spoke with at AU remained cautiously optimistic, a sentiment consistent with the underlying momentum of our business, our growing product usage, and building connected bid activity trends over recent quarters.

Andrew Anagnost: I left AU with a tremendous sense of purpose and optimism in the ingenuity and persistence of our customers and for the future.

Andrew Anagnost: On our earnings call last quarter, I set out our secular growth opportunities and our strategy to capitalize on them.

Andrew Anagnost: I concluded that Autodesk's investment in cloud, platform, and AI in pursuit of those opportunities were ahead of its peers.

Andrew Anagnost: AU was a good demonstration of that, but we're also leading the industry in modernizing our go-to-market motion.

Andrew Anagnost: Starting a few years ago with the subscription transition through consumption and self-service enabling and more recently to direct billing. These initiatives enable Autodesk to build larger and more durable direct relationships with its customers and to serve them more efficiently.

Andrew Anagnost: We have already seen significant benefits from initiatives like these and there's more to come in the next optimization phase.

Andrew Anagnost: Taking out the effects on margins from FX and the new transaction model, we still 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.

Andrew Anagnost: We are confident we will make further improvement in Fiscal 26 on the same basis.

Andrew Anagnost: The new transaction model will enable tighter channel partnerships with less duplication of effort and more digital self-service and automation, which increases customer satisfaction and workforce productivity. It will also create new opportunities for partners and auditors to earn more, with less emphasis on transaction revenue sharing and a greater emphasis on value creation for customers.

Andrew Anagnost: Once complete, we expect the new transaction model and subsequent go-to-market optimization to increase sales and marketing efficiency and deliver gap margins among the best in the industry.

Andrew Anagnost: Attractive, long-term, secular growth markets, a focused strategy delivering ever more valuable and connected solutions to our customers, and a resilient business are generating strong and sustained momentum, both in absolute terms and relative to peers.

Andrew Anagnost: Disciplined execution and capital deployment is driven even greater operational velocity and efficiency within Autodesk and will underpin the mechanical build of revenue and free cash flow over the next few years and gap margins among the best in the industry.

Andrew Anagnost: We will continue to deploy capital to offset and buy forward dilution as our free cash flow grows from the fiscal 24 trough. This practice has reduced our share count over the last three years.

Andrew Anagnost: We have significantly increased our share repurchase authorization to extend this momentum flexibility over the medium term, with the precise trajectory remaining dependent on our debt repayment schedule and the ebb and flow of M&A.

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

Andrew Anagnost: Before I conclude, I'd like to formally welcome Janesh to Autodesk. We're excited to welcome Janesh, who brings a wealth of experience and will be instrumental in sustaining Autodesk growth and enhanced profitability momentum.

Andrew Anagnost: Of equal importance, I'd like to thank Betsy for stepping in as interim CFO at an important time in the company's journey, and I'm looking forward to continuing to work closely with her as an Autodesk board member.

Andrew Anagnost: I will now turn the call over to Betsy to discuss our quarterly financial performance and guidance for the year. I'll then return to provide an update on our strategic growth initiative.

Thanks, Andrew.

Betsy Rafal: Q3 was another strong quarter. It generated broad-based, underlying growth across products and regions.

Betsy Rafal: In addition, we saw revenue increases from the new transaction model and M&A, which were offset by the absence of Enterprise Business Agreement true-ups from Q3 last year and FX.

Betsy Rafal: Our made products continue to enhance growth, driven by our ongoing strength in construction and fusion.

Betsy Rafal: Overall, macroeconomic, policy, and geopolitical challenges, and the underlying momentum of the business were consistent with the last few quarters, with continued strong renewal rates and headwinds to our new business growth.

Betsy Rafal: By product in constant currency, AutoPAD is AutoPAD LT Revenue Group 8%.

Betsy Rafal: AEC revenue, which was most impacted by the absence of true debt revenues, grew 12%.

Betsy Rafal: Manufacturing revenue grew 16% and still comfortably in double digits excluding upfront revenue.

Betsy Rafal: and M&E revenue grew 15%, boosted by the PIC acquisition and associated integration adjustments.

Betsy Rafal: By region and constant currency, revenue grew 11% in the Americas, which was most impacted by the absence of true revenues.

13% in EMEA and 14% in APAC.

Betsy Rafal: The mechanical contribution from the new transaction model to revenue was $17 million in the third quarter and $25 million on a year-to-date basis.

Betsy Rafal: Direct revenue increased 23% and represented 42% of total revenue, up 4 percentage points from last year.

Betsy Rafal: benefiting from strong growth in both EBAs and the Autodesk store and also the natural tailwind to revenue from the new transaction model.

Betsy Rafal: That revenue retention rate remained within the 100-110% range at constant exchange rates.

Betsy Rafal: Billings increased 28% in the quarter, reflecting a tailwind from the prior year's shift to annual billings for most multi-year contracts.

Betsy Rafal: Early Renault's and the natural tailwind from the transition to the new transaction model.

Betsy Rafal: Similar to last quarter and as expected, co-turning negatively impacted billing ahead of the launch of the new transaction model in Western Europe.

Betsy Rafal: The natural contribution from the new transaction model to billing was $72 million in the third quarter and $108 million on a year-to-day basis.

Betsy Rafal: Total Deferred Revenue decreased 9% to $3.7 billion and was again impacted by the transition from upfront to annual billings for multi-year contracts.

Betsy Rafal: Total RPO of $6.1 billion and current RPO of $4.0 billion through 17% and 14% respectively.

Betsy Rafal: which reflect a tailwind from early renewals and the new transaction model and a headwind from the declining contribution of billed and unbilled deferred revenue.

Betsy Rafal: from large multi-year and EBA cohorts ahead of renewal in fiscal 26.

Excluding these, current RPO growth was broadly consistent with Q2.

Betsy Rafal: We do expect the new transaction model and the larger FY26 renewal cohorts to have a greater impact on both RPO and current RPO growth in Q4 of FY25.

Betsy Rafal: Turning to margins, GAAP and non-GAAP gross margins were broadly leveled.

Betsy Rafal: With Autodesk University shifting back to Q3 this year from Q4 last year, GAAP and non-GAAP operating margins decreased by 2 and 3 percentage points respectively.

Betsy Rafal: Timing effects from AU obviously washes out over the full year.

Betsy Rafal: At current course of speed, the ratio of stock-based compensation as a percentage of revenue peaked in FY24 will fall by more than a percentage point in FY25 and will be below 10% over time.

Pre-cash flow for the quarter was $199,000,000.

Betsy Rafal: This benefited from some channel partners in Western Europe booking business earlier in the quarter ahead of the transition to the new transaction model, really to de-risk month one after the transition.

Betsy Rafal: This accelerated free cash flow to the third quarter, which was partially offset by the expected negative impact of co-terming in Western Europe.

Turning now to capital allocation.

Betsy Rafal: 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.

Betsy Rafal: As expected, the pace of 5X picked up to the third quarter.

Betsy Rafal: We purchased approximately 1.2 million shares for $319 million at an average price of approximately $269 per share.

Betsy Rafal: We will continue to deploy capital to offset and buy forward dilution as our free cash flow grows from the fiscal 24 trial.

Betsy Rafal: This practice has 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.

Betsy Rafal: We increased the amount authorized under our Sharewood Purchase Program by $5 billion, for a total of approximately $9 billion.

Betsy Rafal: This extends our flexibility over the medium term, with the precise trajectory remaining dependent on our debt repayment schedule, as well as the ebbs and flow of M&A.

Now let me finish with guidance.

Betsy Rafal: As we said in February, the pace of the rollout of the new transaction model will create noise in billing and the P&R.

Betsy Rafal: So we think pre-capsule is the best measure of our performance.

Betsy Rafal: Taking out that noise, the underlying momentum in the business remains consistent with the expectations embedded in our guidance range for the full year, with continued strong renewal rates and headwinds to new business growth.

Betsy Rafal: Our sustained momentum in the third quarter and smooth launch of the new transaction model in Western Europe reduced the likelihood of our more cautious forecast scenarios.

Betsy Rafal: Given that, we're raising the midpoints of our billing, revenue, margin, earning per share, and free cash flow guidance ranges.

Let me give you a little bit more detail.

Betsy Rafal: The underlying momentum of billing is in line with our expectations.

Betsy Rafal: Compared to our modeling at the start of the year, the launch of the new transaction model in Western Europe in Q3 and early renewals have been a tailwind to billing.

Betsy Rafal: whereas more co-turning or business done under the old FICEL model before the launch of the new transaction model and in recent weeks FX movements have been headwinds to billing.

Betsy Rafal: We now estimate that the new transaction model will provide between a 5 and 5.5 percentage point tailwind to billings growth in fiscal 25.

Betsy Rafal: We've raised the midpoint of our Fiscal 25 Billings Guidance by $10 million to a range of $5.90 to $5.98 billion.

Betsy Rafal: The underlying momentum of revenue is also in line with our expectations.

Betsy Rafal: We estimate the new transaction model will provide around a 1-1.5% point tailwind to revenue growth in FY25.

Betsy Rafal: Upfront revenue contributed 2 percentage points to revenue growth in Q4 of Fiscal 24, and therefore this is a headwind in Q4 of Fiscal 25.

Betsy Rafal: While not large enough to call out at the start of the year, it was already factored into our Q4 and our full year model.

Betsy Rafal: We've raised the midpoint of our fiscal 25 revenue guidance range by $18 million to a range of $6.12 to $6.13 billion.

Betsy Rafal: We're increasing our gap and non-gap margin guidance midpoint by 25 basis points by raising the bottom end of the ranges by 50 basis points.

The Gap Margin Guidance Range is now 21.5% to 22%.

Betsy Rafal: The Non-Gap Margin Guidance Range is now 35.5 to 36 percent, which includes a 1 to 1.5 percentage point underlying margin improvement.

Betsy Rafal: broadly offset by the margin headwinds from the new transaction model and the related incremental investments in people, processes, and automation.

Betsy Rafal: The underlying momentum of free cash flow is also in line with our expectations. The headlist of billings from co-turning and FX rates that I mentioned earlier is being offset by early renewals, faster collection, and improved underlying margins.

Betsy Rafal: We raised the midpoint of our fiscal 25 free cash flow values by $10 million and tightened the range to $1.47 to $1.5 billion.

We expect strong pre-CASLA growth in Fiscal 26.

Betsy Rafal: because of the return of our largest multi-year renewal cohort, the natural mechanical stacking of multi-year contract bills annually, and a larger EBA cohort.

Betsy Rafal: With our current trajectory, we still estimate free cash flow in Fiscal 26 to be around $2.05 billion at the midpoint.

Betsy Rafal: The slide deck on our website has more details on modeling assumptions for Q3 and for the full fiscal year 2025.

Betsy Rafal: And while this may be my last earnings call for Autodesk, I will stick around for a bit to ensure a smooth transition for Ginesh. Thank you Andrew and everyone at Autodesk for your support while I was here, and to the many investors and analysts with whom I've had lively discussions over the last few quarters.

Speaker Change: While the transition to annual billings for multi-year contracts and the deployment of the new transaction model has created noise and billings in the P&L, they do provide a natural near-term tailwind to revenue and pre-cash flow growth.

Speaker Change: Combined with a resilient business model, sustained competitive momentum, Autodesk has enviable sources of visibility and certainty in a very uncertain world.

Speaker Change: For all these reasons, I step down from my role as Interim CFO with tremendous optimism for the future.

Andrew, back to you.

Thank you, Betsy.

Andrew Anagnost: Let me finish by updating you on our strong progress in the third 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 pre-construction, field execution, through handover, and into operation.

Andrew Anagnost: 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.

Andrew Anagnost: As a sign of our growing momentum as the benefits of our end-to-end solution become more apparent, our construction business continues to perform robustly, with net new customers doubling year over year and existing customers' renewal and expansion rates remaining strong.

Let me give you a few examples.

Andrew Anagnost: Power construction is number 79 on the Engineering News Record ENR Top 400 U.S. Contractor List.

Andrew Anagnost: It is a Chicago-based general contractor serving residential and non-residential end markets.

Speaker Change: After completing a competitive RFP to replace its legacy project management tool, Power selected Autodepth for its unified construction platform across pre-construction, construction, and DDC.

Speaker Change: By standardizing on Autodesk Construction Cloud, Power will have a single source of truth for project data, enhanced collaboration capabilities, and streamlined workflows on a single platform.

Speaker Change: Power Construction was one of two ENR 400 Top 100 U.S. contractors that standardized enterprise-wide on Autodesk Build during the quarter.

Speaker Change: In Europe, Bouygues, a top 10 ENR 250 international contractor based in France,

Speaker Change: and leader in sustainable building and infrastructure projects renewed and expanded its EBA in the quarter. BWEAG is continuing to consolidate on Autodesk solutions across the enterprise, including broader adoption of Autodesk Forma, Carbon Insight, and Informed Design to digitize, decarbonize, and industrialize projects.

Speaker Change: It also significantly increases commitment to Autodesk Construction Cloud to drive efficiency gains and faster bid response times through better collaboration between design and project teams.

Speaker Change: Sabana Durang is number 23 on ENR's top 225 international design firms.

Speaker Change: Based in Singapore, it is an urban infrastructure and integrated solutions consulting firm. In Q3, it renewed its third EBA, which included increased investment in Autodesk Construction Cloud and Autodesk Water Infrastructure Solutions.

Speaker Change: ACC is helping to scale its operations through increased automation, integrated design workflows, and enhanced collaboration across time zones.

Speaker Change: Our water infrastructure solutions will be a core technology supporting its growth ambitions in planning, designing, engineering, and managing water projects for customers worldwide.

Speaker Change: 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.

Speaker Change: Moving on to manufacturing, we made excellent progress on our strategic initiatives. Customers continue to invest in their digital transformation and consolidate on our design and make platform.

Speaker Change: Fusion remains one of the fastest-growing products in the manufacturing industry.

Speaker Change: 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.

Speaker Change: For example, in the quarter, a global manufacturer supplying the semiconductor industry selected Fusion Manage and Vault PLM over competitive solutions to foster greater collaboration across manufacturing sites and improve operating efficiency.

Speaker Change: Once fully scaled and operational, this customer expects to save 105,000 hours per year by connecting people and data, resulting in reduced product development costs and faster time to market.

Speaker Change: In the UK, Playdale Playground has been designing, manufacturing, and installing outdoor playground equipment for over 40 years.

Speaker Change: This quarter, Playbail added Fusion to its existing portfolio of audited solutions, including Inventor, AutoCAD, and Vault, to streamline and digitize workflows, optimize production to reduce lead times, reduce nonconformities, and replace inefficient Excel-driven operations on the shop floor.

Speaker Change: A long-time Autodesk customer and global leader in precision engineering solutions, renewed and expanded its EPA in the quarter. In addition to Inventor, Vault, and AutoCAD, it is adopting Fusion's generic design capabilities for material waste reduction and fluid flow optimization and mold flow to reduce manufacturing costs and defects while increasing mold yields.

Speaker Change: In education, universities continue to modernize their courses and curriculum to attract and prepare future engineers.

For example, from this winter,

Speaker Change: Students at the University of Stuttgart's Institute for Medical Device Technology will use Fusion across six courses. Fusion was selected to replace a competitive solution for its modern platform, ease of use, cloud collaboration capabilities, and unique combination of PCB and additive manufacturing workloads in a single team environment.

Speaker Change: And lastly, we continue to work with our customers to ensure they are using the latest and most secure versions of our software.

Speaker Change: For example, after a period of rapid scaling and diversification, a large multinational manufacturing company in APAC was looking to align compliance rates across its global employee base. Working collaboratively, we addressed compliance issues while cementing a long-term partnership and completing one of our largest ever licensed compliance agreements, which included expanded adoption of Alias and VRED for the design studio, and PD&C for mechanical engineering and rail design.

Speaker Change: Attractive, long-term secular growth markets, a focused strategy delivering ever more valuable and connected solutions to our customers, and a resilient business are generating strong and sustained momentum both in absolute terms and relative to peers.

Speaker Change: Disciplined execution and capital deployment is driving even greater operational velocity and efficiency within Autodesk, and we continue to deploy capital to deliver sustainable shareholder value over many years.

Speaker Change: I retain a tremendous sense of purpose and optimism in the ingenuity and persistence of our customers and for the future.

Speaker Change: Operator, we would now like to open the call for questions.

Speaker Change: Our first question comes from the line of Jason Salino of KeyBank Capital Markets. Your question, please, Jason.

Jason Salino: Hey, thanks for taking my questions. Just two for me. You know, the first one, Andrew, you know, some of us are unfamiliar with Janesh. Can you just tell us a little bit more about him and what he brings Autodesk?

Speaker Change: I certainly can. Before I do that, let me make sure that I thank Betsy for everything she brought to Autodesk during this interim period. I really appreciate it. The company appreciates it. Thank you, Betsy. Now, we're really excited about Ginesh. Let me tell you why we're excited about Ginesh.

Speaker Change: As you remember, one of the things I was telling you that I was looking for was someone that was going to be able to dispassionately drive optimization at scale inside of Autodesk. And what that really means is someone that's going to be really inwardly focused, looking at every dollar that we invest and making sure that we're getting the most return for the business and that investors are getting the best return from their business.

Speaker Change: The next kind of criteria we were looking for, which was nice to have, was time in the seat as a sitting CFO, which was important for us as well. But it was kind of the next nice to have after the optimization of scale. Janash brings a great balance of both of those things.

Speaker Change: He's been in the seat seven years at Elastic, both CFO and COO.

Speaker Change: driving some fairly turbulent changes inside of Elastic. So he's got battle scars from pushing inside the company to get changes done inside, and we like that. We like that a lot. He's also got

Speaker Change: very good early experience at companies that we feel have always added value to Autodesk. So he was at VMware in a senior position. He was at Cisco in a senior position. We've had good success bringing people from those kind of companies. He worked at those companies driving optimization at scale, which is the number one criteria I was looking for when we were driving this work. He also has another nice to have. He's got knowledge of our industry.

Speaker Change: He spent two years at PPC earlier in his career, he was actually recently on the PPC board, so he understands our industry and he'll be able to get up to speed pretty quickly. The number one goal here, drive optimization at scale over the next few years, make sure that we're getting everything we need from every dollar we invest, which is a very important theme for Autodesk.

Speaker Change: And, you know, with that, I'm really excited and I'm looking forward to him joining in December.

Speaker Change: Okay, great. Interesting. And then for my second question, now that you do have a CFO, do you have any thoughts on when you might hold the next Investor Day? I think in the past you usually did it in March. Is that a good time frame or is that too soon? Thanks.

Speaker Change: Yeah, well, Ginesh is joining in December. I think we need to give him time to get his steel legs on, give him time to kind of, you know, drive at the end of the year and actually get it set up for next fiscal year in good steed. So I would say it's unlikely we'll be doing anything in the spring, but we'll get back to you on that as soon as, you know, Ginesh is ready to talk about those things.

Thank you.

Thank you.

Speaker Change: Our next question comes from the line of Jay Vlishauer of Griffin Securities. Your question, please, Jay. Thank you. Andrew, as of the third quarter, your three-year CAGR for current RPOs is about 12 percent.

Speaker Change: How are you thinking about the sustainability or perhaps improvement upon that K-group or CRPO over the next number of years? When we think about the ingredients of that, it looks like over the last several years, the K-group for your unit volume for all brands is roughly 6 to 7% in the aggregate. So on top of that, you've had price and other ingredients. Perhaps talk about how you think you might be able to improve upon the most recent trajectory for current RPO. Then my follow-up.

Betsy Rafal: Hi Jay, this is Betsy. Let me just give you a couple things. There's a number of things that are going on on the headline of the CRPO number.

Speaker Change: You know, if you first take away the headwinds and the tailwinds, CRPL was broadly consistent with the second quarter. And as I mentioned in my opening commentary, early renewals and growth and the new transaction model are providing a tailwind, and then there's also a headwind to CRPL growth from the declining contribution of billed and unbilled deferred revenue.

Speaker Change: from the large multi-year EBA cohort coming up for renewal in fiscal 26. And just as a reminder, these are the same larger cohorts we are calling out as tailwinds to pre-CASLA for next year.

Speaker Change: And if you look back to Fiscal 22, we saw the same dynamic ahead of the Fiscal 22.

and J3 Renewals as well.

Speaker Change: Okay, since new management is part of the news this evening, could you talk about how you're thinking about the Chief Revenue Officer position? Would it make sense perhaps to continue to have a separate CRO or do you think it might make more sense perhaps to combine CRO and COO?

Speaker Change: Yeah, so we're going to continue to have a separate CRO because we have various functions that work together there under the COO organization, including our IT organization, our infrastructure and all things associated with it. What we're looking for in our CRO is someone that understands how to continue to drive a business when you have direct engagement with the customer.

Speaker Change: So that means someone that really understands what it takes to analyze self-service patterns, actually understand the data that comes in from the customers to help drive cross-sell and up-sell, while also transforming a channel from a transactionally-focused extension of Autodesk to kind of a solutions partner that's driving lifecycle solutions for our customers. So that's the kind of role we're looking for here, and yeah, it's going to continue to be a standalone CRO role within the CRO organization.

Thank you very much.

Thank you.

Speaker Change: comes from the line of Adam Borg of Stiefel. Your line is open, Adam.

Adam Borg: Awesome, thanks so much for taking the questions and congrats to Betsy and Janesh. Maybe on the new transaction model, I know it's still early, but I was just curious, are there any learnings from those customers that are on the new model that you're seeing in terms of the adoption of Autodesk technology and the ability to find white space to better upsell and cross sell different solutions now that you have a more direct relationship?

Adam Borg: served on a very kind of, you know, arm's length kind of transactional level. But in terms of driving cross-sell and up-sell, early days, early days. But, you know, it's...

Speaker Change: If you want to get a sense for how that might evolve, you know, we've got experience with our EBAs and our enterprise business agreements, and we've learned over the years that having that kind of relationship with the customer, where we really understand their usage patterns, who they are and what they're doing, we are much more effective at driving cross-sell and up-sell, even when partnering with our channel partners. So, you know, I think those kind of stand as a testament of what's possible as we move forward with the completion of the new transaction model.

Speaker Change: Great, and maybe just as a quick follow-up, just as we think about the new administration coming in, you talked about the macro being broadly consistent. Any change in tone in your conversations with the end markets in terms of optimism or their ability or willingness to expand new projects ahead of the administration, any pause or just full steam ahead? I'm just curious. Any commentary you have there from a macro perspective would be really, really helpful. Thanks so much. You know, what I'll say is the things that matter to our customers are bipartisan things.

Speaker Change: All right. Our customers care about infrastructure build-outs. Both parties care about infrastructure build-outs.

Speaker Change: Our customers care about domestic manufacturing, be it in Europe, be it in the United States.

Speaker Change: Both parties agree that domestic manufacturing build-outs are important. Supply chain independence, supply chain stability, all of these things are bipartisan issues that really affect our customers. So regardless of the administration, I suspect the things that are important to our customers are continuing to be a focus.

Thanks again.

Thank you.

Speaker Change: Our next question comes from the line of Joe Runk of Baird. Please go ahead, Joe.

Thank you.

Speaker Change: Great, thank you. On the outlook for next year, $2.050 billion in free cash has, I think, been the expectation for the past year now. Within the last year, you've also seen more co-term of contracts, and I think that leads to better billings in FY26. So my question is, does that actually create the potential that things are better, and that's why you're qualifying now the $2.050 billion as the midpoint of possibilities?

Speaker Change: There's no change to how we've talked about the detachment guide for Partition 26.

Speaker Change: Thank you for watching the 3.0 5 show and have a good night.

Speaker Change: Okay, fair enough. And then just on the M&A environment, over recent history, Autodesk has been more in a mode of, I would say, strategic tuck-ins. I think there was actually an asset in the CFP simulation space that was announced during AU in the quarter. Is that the right approach for Autodesk, just given this point in time, all the work you've done to build out the cloud platform, the data models, and so these tuck-ins make the most sense? And if that's true, how would you maybe compare and contrast some of the larger scale M&A that's happening with your peers in the space?

Speaker Change: Yeah, so look, you know, consolidation in our space is inevitable. I'm not going to comment on any specific deals, but here's what I'll say. Autodesk has always been an acquisitive company, and we will be an acquisitive company when that makes both strategic and financial sense for the company.

Thank you.

Okay, thank you.

Thank you, Joe.

Thank you.

Speaker Change: Our next question comes from the line of Elizabeth Porter of Morgan Stanley. Please go ahead, Elizabeth.

Elizabeth Porter: Great, thanks so much for the question. As partners are getting customers just up and running on the new transaction model, we picked up that they're spending a little bit more time than usual of time and resources with those existing customers, so I was curious if that had any impact on new business demand kind of more recently, and then just more broadly, any change in new business trends that you think you should call out from versus last quarter?

Speaker Change: Hi Elizabeth, it's Bessie and so just broadly speaking you know we continue continue to see growth but at a slower pace due to a number of factors over the really over the last several years. Macro, COVID, exiting Russia, elections and and while a drag on the forward momentum of the business all of that's really factored into you know into our guidance so I kind of just would leave it at that.

The End

Speaker Change: Great, and then a follow-up just on billings. Understanding there's a lot of volatility around the change from multi-year and the transaction model, but it looks like guidance implies a bigger step down in growth in Q4, just despite an easier year ago compare. So it's helping that you could help us unpack the balance of those headwinds and tailwinds that would drive kind of a greater downtick in growth in Q4.

Thank you.

Speaker Change: Well, again, let me start out with just from a fiscal 25 perspective.

Speaker Change: Your billing tailwinds are going to be from the final shift to annual billing, a new transaction model, and early renewal.

Speaker Change: and you're going to get headwinds from co-turning and business booked ahead of the new transaction model launch.

Speaker Change: and in recent weeks, some FX. So, again, I think that...

We've continued to perform well as we've executed

Speaker Change: through Q3, and so I think we feel very strongly about our expectations for Q4.

Thank you.

Speaker Change: Thank you. Our next question comes from the line of Babin Shah of Deutsche Bank. Your question please, Babin.

Speaker Change: Great, thanks for taking my question as we wrap up the quarter. Andrew, at university there appeared to be a noticeable uptick in attendance and sessions geared towards owners and operators. What's been driving the recent interest from this segment? How much of it is product enhancing the you guys have made versus really more focusing and emphasizing from a go-to market perspective? And how long before this segment of buyers kind of becomes more meaningful to the financials?

Speaker Change: Yeah, Paul, that's an excellent question, all right. We're very interested in tackling the whole entire life cycle from design through make, construction, manufacturing, all the way to operations.

You're probably aware we have a product called Tandem.

Speaker Change: And a lot of those sessions were driven by increasing interest and increasing adoption of Tandem, which is a digital twin solution tightly coupled to our solutions that also has a toolkit that allows people to easily connect sensor data to the digital twin solution. So you're seeing that uptick because we're directly releasing products and capabilities that are of interest to the owner's space. You can expect to see that trend continue over time and you can expect to see us continue to talk about the owner's space, continue to deliver solutions for the owner's space and even APIs for the owner's space. It's an area of great interest, especially when it comes not only to vertical buildings, but factories and other things that are related to that as well as infrastructure, like what we were doing.

Speaker Change: with some of our water owner solutions. So yes, owners matter, we're building software for them, and you're going to see more of that.

Speaker Change: Super helpful there. And then Betsy, one for you, just in terms of the underlying improvement that we've been seeing in the margins, and I know you've called out FX and the transaction model. I know it's very early, but as we think about next year, how do we think about the impact of FX and the transaction model to kind of, they have line operating margins?

Betsy Rafal: Well, you know, I wish I could give you that answer, but I think that the new CFO would probably have a little bit of a problem with that, so we'll wait until the end of February to give you more specifics on that.

Thank you. Thank you.

Fair enough. Thanks for taking my questions.

Good try.

Speaker Change: Thank you. Our next question comes from the line of Tyler Radke of Citi. Please go ahead, Tyler.

Tyler Radke: Yeah, good afternoon. Thanks for taking the questions. I was going to ask you about a placeholder for next year's

Tyler Radke: guidance. I don't want to waste a question on that but feel free to answer. But Andrew, I wanted to kind of ask you

about some of your comments you made.

Tyler Radke: around efficiency, especially as it relates to hiring Janesh, who you pointed out has a lot of experience at, you know, larger companies, VMware, Cisco, etc. Now that you're a few quarters into this transaction model rollout, you have...

kind of visibility better on some of the

Tyler Radke: prior channel relationships, having that direct billing with the customer. What are some of the areas that you've identified as having that efficiency potential? And then as we think about that efficiency unlock, should we think about that as incremental to the free cash flow number you have out for next year, or is that embedded in that already? Thank you.

Speaker Change: So many layers to that question. All right, so first, let me kind of answer the question in a curious stage, and then dodge other ones, OK? So first off, optimization is kind of a mindset at Autodesk. It's not something that suddenly happens. I want to reemphasize that, because if you look right now, this year, for example.

Speaker Change: When you look at the apples apples comparison, which will be in the slide decks or in our disclosed materials, you can see that our non-gap margins are already hitting the targets we set for next year, this year. Okay, so optimization is a mentality.

Speaker Change: You've also heard me say over and over again, as the new transaction model starts to roll out, optimization of our go to market efforts is going to be a critical step for us and part of the optimization journey that we're on, that's going to deliver a margin growth for the company for for a couple of years to come. Okay. And I think that's important. It's a long term driver. Now we're getting into the specifics. Okay, I think the specifics are probably for another time. But let me just kind of

Speaker Change: give you a sense for some of the things that are important, right? One is...

The drive to self-service, right? Self-service has a huge impact.

Speaker Change: on how our customers will engage with us and where those customers come from. And that is a value accreted to Autodesk, both on an efficiency side from renewals and other things, but also on a revenue growth side through Autodesk.

Speaker Change: The other thing I talked about is understanding the customer better, so the upsell and cross-sell. So we're going to be able to do a lot more automation and understanding about where the opportunities are, and that's going to drive some efficiencies.

Speaker Change: And we're moving the channel partners away from this model of being the transactional players to being the solution providers and the IP providers to our customers. That's going to have all sorts of opportunities to eliminate duplication of effort and drive real cost efficiencies for the company moving forward. So there's both top line efficiencies here in revenue growth, but there's bottom line efficiencies as well through removing the redundancies and steps that just aren't necessary for the customer. You'll get a lot more clarity on that as you see us continue to move forward with this go-to-market optimization into next year and beyond that.

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Speaker Change: Great, thanks. Thanks for the detail. And then my follow up question, Andrew, you talked about some.

Speaker Change: really strong net new customer additions within the construction cloud, I think doubling year-over-year.

Speaker Change: We also saw the make revenue accelerate to 28% Constant currency. Can you just help us understand? Do you think that that reacceleration is is durable and How are you sort of thinking about? Just your your position there with what's been driving that strength and in the new customer additions

Speaker Change: First let me comment on the make revenue, then I'm going to go into construction. The make revenue also includes some revenue from PICS and things associated with that. However, let's talk about the facts around our construction business because I think this is important. Number one, number one fact here is that we continue to drive consistent, high growth in our construction solution.

Speaker Change: You're seeing it, it's built into the make numbers and it's the lion's share of those make numbers. You're really seeing some consistent growth there.

Speaker Change: That's organically. Inorganically, we're actually executing incredibly well on things like pay apps, and that's driving acceleration of our growth.

Speaker Change: So, we are not decelerating as a business, okay? We are actually performing solidly, or inorganically, we're accelerating, all right? And I just want to be really clear about that. And yes, we said year over year, we drove a 2x increase.

Speaker Change: and our new customers. And I'll talk about where some of that's coming from in just a minute. But I also want to highlight the other thing that's going on.

Speaker Change: We are strengthening an already strong position in the ENR 400. So, you heard about the story about power construction, which was a great example of someone taking out a competitive RFP and saying, look, I need a forward-looking cloud-based solution on new technology that goes end-to-end from design to construction all the way to operations.

and they chose us.

Speaker Change: and that was just one example that we gave in the opening commentary. So, already a strengthening position in the ENR 400.

Speaker Change: Now, the other qualitative things that are driving some of that new customer growth is we already have our distribution channel operating at scale.

Speaker Change: In the U.S., this is helping us go down market more effectively, which is allowing us to capture more customers more effectively, be places where we weren't before and where others aren't, which is part of driving that. But also, we're already at scale operating internationally with our distribution channels, and that's driving international growth for us.

Speaker Change: And that's a really important driver as well as some of those net new accounts that you're seeing there. And the last thing I'll add, and then I'm done with construction, is that, look, I heard this over and over again at AU. I'm hearing it over and over again from customers in lots of different places. They want the end-to-end solution. They want the light solution in the cloud. They're placing bets for the next 10 years. They want to go from design to construction to operations. And that's just making our solution more attractive to the market.

Thank you.

Speaker Change: Thank you. Our next question comes from the line of Michael Turin of Wells Fargo. Your question please, Michael.

Michael Turin: Thanks very much. I appreciate you taking the questions. The commentary on the call sounded consistent, but I'm wondering if there are any added details you can provide for us on just the overall macro spend environment and how that's maybe progressing across.

Michael Turin: either key product segments or geos, whatever split you think is more useful. I think what we're trying to get a sense for is if there are any...

Michael Turin: Shades of improvement anywhere or if you characterize as mainly just consistent over the past couple of quarters. Thanks

Speaker Change: Michael, I think the core answer here is consistency, okay? We're seeing consistent trends that we've seen in all the other quarters. There's always puts and takes in a large business like ours, especially ones as diverse as ours, but the general tone is, it's consistent with prior quarters. And I would just add that there's also been a lot of noise this year from the new transaction model and then, obviously, the elections.

and leading up to that.

and so it's hard to sparse out.

Speaker Change: kind of that particular behavior. So I think as Andrew said,

We call it consistent

Speaker Change: Yeah, tough for us too. That's why we keep asking. Betsy, congrats on the transition back. Kevin, you're also on the board. I think it'd be useful to hear you chime in on the hiring of Janash and maybe just also comment on how you ensure you're able to hand over the reins and keep progress going on the key transitions the company's working through. Thanks.

Speaker Change: Per se, I was involved in the process, which was quite extensive in the company and the recruiting of Ginesh, and so we're certainly very excited to have him on board. What I would also say is, obviously, with my experience of being on the board for 11 years, as well as my deep dive into the business over the last six months,

Speaker Change: One of the reasons I'm staying around until the end of the fiscal year Is I think I can be really helpful in that transition for Janesh And so I'm very much looking forward and and you know I think that we have a great finance team and I think that that he's He's going to be he's going to fit very well, and I'm looking forward to Making that happen as fast as we can

Thank you.

Speaker Change: Thank you. Our next question comes from the line of Matthew Hedberg of RBC Capital Markets. Your question please, Matthew.

Speaker Change: Hey guys, this is Mike Richards. I'm for Matt. Thanks for taking the question.

Speaker Change: I was wondering if you could provide an update on Project Bernini and maybe how customer reception has been and where we are in developing other foundational models or just the monetization opportunity there.

Thanks.

Speaker Change: Yeah, so first off, before I comment on Bragino, AI is embedded in everything we're doing from a bottom-up and a top-down perspective.

Speaker Change: And you also heard us talk at AU about new types of foundation models we're building that understand how certain things are done in our applications. You heard about a foundation model that's driving automated drawing creation. You heard about a foundation model that's driving automated sketch generation and sketch constraints. That kind of stuff is bottom-up innovation. Berdini is more of a top-down type innovation where you're actually specifying things and trying to generate a preliminary outcome from those specifications. And what we've been doing with Berdini is we've been trying to engage with

Speaker Change: certain targeted customers to get them to participate with us in making Borghini smarter and more intelligent. It's not available commercially right now.

Speaker Change: But it's it's getting more intelligent. We've actually been successful in getting some customers to stand up and say look Yeah, I'd like to work with you to make this more intelligent because we need something that actually understands 3d geometry as geometry Not just as a picture

Speaker Change: or something, okay? So that's what's going on with Bernini right now, and you should continue to see refinements and extensions of that moving forward.

Speaker Change: Now, with regard to monetization, you know, nobody knows exactly how all this is going.

Speaker Change: to be monetized. But you know, there's a few vectors here that come into play. One, we are ahead of our competitors in this space. We intend to be ahead. We're investing to stay ahead. That increases one's competitive position in the marketplace, and that's really important. Also, you get to be able to charge for some of these incremental features in the future. When you're delivering value or a high-quality outcome as a result, you're going to charge for that outcome. How we charge for those things, let's let this play out, okay? It's

Speaker Change: But there's also monetization opportunities through licensing certain technologies for specific maturation for a specific customer's needs. And that will be another avenue.

Speaker Change: So how these avenues play out, which one waits more, let's let this play out. But what you need to know about Autodesk is we're ahead. We've been ahead for a while. We were the first out there with an AI research lab that's been out there for over six years. It's published 70 papers. We're right on the cutting edge of 3D design technology and AI, and we intend to stay there.

Thank you. Our next question.

Speaker Change: comes from the line of Steve Tusa of J.P. Morgan. Your question, please, Steve.

Hi, good evening or afternoon.

Oh, I know. That's for later. Sorry.

Hello?

Yeah.

Speaker Change: Yeah, so it's basically because we did more buy-sell business ahead of the European launch. So remember we said five to six percent when we launched Europe and it was the if we did more buy-sell business which means there's less tailwind from the new transaction model. The flip side mean that that means that the underlying increase in our bidding guidance is greater than it looks on a headline basis.

Okay, great. Thanks a lot.

Thank you.

Speaker Change: Our next question comes from the line of Joshua Tilton of Wolf Research. Your line is open, Joshua.

Hey guys, can you hear me?

yep

Speaker Change: Great. I have a kind of a high-level one on the incoming CFO. If I heard correctly, we didn't exactly get like an initial outlook for revenue growth for next year. And I'm just trying to understand in the context of the new CFO coming in, is there anything that could change the calculus of how you guys think about that 10 to 15 percent growth, you know, for the underlying business outside of the agency transition that's ongoing today?

Speaker Change: Well, first let's talk about that framework a little bit, and then I'll comment a little bit on the increase in CFOs. So look, the 10 to 15% growth, right now we're

pretty much right at the bottom end of that range.

Speaker Change: And, you know, if we look back over the last two years, there's been a series of things that created headwinds to new business. It started off with things like the pandemic, the inflation, the exiting of the Russian business, the writer's strike, the whole trade wars within particular geographies. All of these things were accumulated headwinds that built slowly into the business and have pushed us down to the low end of the range.

Speaker Change: It takes time in a subscription model for those things to build out of the business, okay? So, it's going to take time for us to build out of that. That's to be expected with a subscription model. The revenue goes down slowly, it goes back up slowly as headwinds turn into tailwinds. So, expect us to be near the bottom of that range in the short term, just as a general kind of guideline for the core business to be at the bottom of the range, okay? As a long-term framework, the 10 to 15 still makes sense as a long-term guide for the company, but of course, you know, as new eyes come in, we'll look at these things and we'll evaluate them. But right now, this all still makes sense.

Super helpful. Thank you.

Thank you.

Speaker Change: Our next question comes on the line of Siti Panagrahi of Mizzouho. Your question please, Siti.

Speaker Change: Thanks for taking my question. I understand the new business model has some kind of noise on your expense and margin side, but if you exclude that, where do you see some of the operating leverages that you can drive next year or so?

Speaker Change: Well, I think we've actually provided historically what we've done over the last three years pretty clearly, and I think we've said that we're continuing to be focused on expansion, but nothing further to add as far as next year.

Speaker Change: We did provide data on that. You can see what the underlying thing is, and we expect to see continued improvement in that same vector. On the same basis? On the same basis. On the same apples-to-apples basis.

Okay, great. Thank you.

Thank you. Our next question.

Speaker Change: comes from the line of Michael Funk of Bank of America. Your question please, Michael.

Michael Funk: Hey guys, thank you for the questions tonight. To, if I could, you've mentioned a few times in the last calls about the largest multi-year cohort renewing next year and then also a large EBA cohort. Just wondering if you can give us kind of the range of potential outcomes among the renewals there, whether, you know, potential to upsell, risk of downsell, and what that variant might look like around those renewals.

Speaker Change: No, I mean, I think what we have said is that it's the largest cohort, and we saw that

Speaker Change: performance in 23, and so we expect a strong renewal year, but we're not giving any specific guidance on what that looks like for 26 at this point, and we'll wait until we report earnings in February.

Speaker Change: Okay, great. And then, Betsy, one more, you know, you've mentioned a few times off the invest in a new transaction model, people, processes.

Speaker Change: and automation, you know, presumably more fixed cost versus variable like commission. Can you quantify that for us to help us with modeling as we try to forecast margin? I know you don't have much guidance, but a better understanding of what that cost might actually be on an absolute basis would help us to think about our modeling.

Speaker Change: Mike, we've got a slide in the earnings deck to help you think about modeling, and I'll just point you to that.

Okay, great, thank you, Simon.

The End

Speaker Change: Thank you, and ladies and gentlemen, that is all the time we have for Q&A today. I would now like to turn the conference back to Simon Mays Smith for closing remarks, sir.

Simon Mays-Smith: Great. Thanks, Lateef. And thank you, everyone, for joining us today. Looking forward to seeing many of you on the road over the next few weeks. If you have any questions in the meantime, please email me or call me. And in the meantime, all those of you in North America, wishing you a very happy Thanksgiving. Thanks, Lateef.

Speaker Change: Thank you, Simon. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: and the New York Times. I'm Deborah Clifford. Thanks for watching. I hope you enjoyed this video. If you did, please click the Like button and subscribe.

Goodbye!

Thanks for watching this video.

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Thank you for watching...

[music]

Starting a few years ago with the subscription transition through consumption and self-service enablement and more recently to direct billing.

These initiatives enable Autodesk to build larger and more durable direct relationships with the customers and to serve them more efficiently.

We have already seen significant benefits from initiatives like these and there's more to come in the next optimization phase.

Taking out the effects on margins from FX and the new transaction model we still expect to be towards the midpoint of our fiscal 26th non-GAAP operating margin target of 38 to 40% in fiscal 25, a year ahead of schedule.

[music]

We are confident we will make further improvement in fiscal 26 on the same basis.

The new transaction model will enable tighter channel partnerships with less duplication of effort and more digital self-service and automation, which increases customer satisfaction and workforce productivity.

It will also create new opportunities for partners and auditors to earn more with less emphasis on transaction revenue sharing and a greater emphasis on value creation for customers.

Once complete, we expect the new transaction model and subsequent go to market optimization to increase sales and marketing efficiency and deliver gap margins among the best in the industry.

Attractive long term secular growth markets a focused strategy delivering ever more valuable and connected solutions to our customers and a resilient business are generating strong and sustained momentum, both in absolute terms and relative to peers.

Speaker Change: John Hawkes Donald Luther King Chicago Robert Hogan Americans Shining Paul McCartney Arina Grossman Davidern Woman In Ties With Country Margaret Salte offering Crosby Keller

Disciplined execution and capital appointment is driven even greater operational velocity and efficiency within Autodesk and we'll underpin the mechanical build of revenue and free cash flow over the next few years and gap margins among the best in the industry.

We will continue to deploy capital to offset and buy forward dilution as our free cash flow grows from the fiscal 24 trough.

This practice has reduced our share count over the last 3 years.

We have significantly increased our share repurchase authorization to extend this momentum flexibility over the medium term.

With the precise trajectory remaining dependent on our debt repayment schedule and the ebb and flow of M&A.

In combination

We believe these factors will deliver sustainable shareholder value over many years.

Before I conclude, I'd like to formally welcome Dinesh to Autodesk.

[music]

We're excited to welcome Dinesh, who brings a wealth of experience and will be instrumental in sustaining all that growth and enhanced profitability momentum.

Of equal importance, I'd like to thank Betsy for stepping in an interim CFO at an important time in the company's journey and I'm looking forward to continuing to work closely with her as an A desk board member.

I will now turn the call over to Betsy to discuss our quarterly financial performance and guidance for the year. I'll then return to provide an update on our strategic growth initiative.

Thanks Andrew.

Tier 3 was another strong quarter.

We generated broad-based underlying growth across.

product and.

In addition, we saw revenue increases from the new transaction model and M&A.

Which were offset by the absence of enterprise business agreement true up from Q3 last year and FX.

Hope you enjoyed the video!

Our make products continue to enhance growth driven by our ongoing strength and construction and fusion.

Overall, macroeconomic policy and geopolitical challenges and the underlying momentum of the business were consistent with the last few quarters.

With continued strong renewal rates and headwinds to our new business growth.

The

Total revenue grew 11% and 12% in constant currency.

A product is constant currency AA is AAT LT revenue through 8%.

AEC revenue, which was most impacted by the absence of true revenues through 12%.

Manufacturing revenue grew 16%.

And still comfortably in double digits, excluding upfront revenue.

And Emily revenue grew 15%.

Boosted by the pick acquisition and associated integration adjustments.

By region and constant currency, revenue grew 11% in the Americas.

Which was most impacted by the absence of troop revenues.

Michael Funk,

13% in AA.

And 14% in APEC.

mechanical contribution from the new transaction model to revenue.

With $17 million.

In the 3rd quarter and $25 million on a year to date basis.

Direct revenue increased 23% and represented 42% of total revenue.

A 4% points from last year.

Benefiting from strong growth in both EBAs and the Autodesk store and also the natural tailwind to revenue from the new transaction model.

That revenue retention rate remained within the 100 to 110% range at constant exchange rate.

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Billing increased 28% in the quarter, reflecting a tailwind from the prior year's ship to annual billings for most multi-year contracts.

Early renewals

And the natural tailwind from the transition to the new transaction model.

Similar to last quarter and as expected, couring negatively impacted Billing ahead of the launch of the new transaction model in Western Europe.

The natural contribution from the new transaction model to billing was $72 million in the third quarter and $108 million on a year to day basis.

Total deferred revenue decreased 9% to 3.7 billion.

And was again impacted by the transition from upfront to annual billings for multi-year contracts.

Total RPO of 6.1 billion and current RPO of 4.0 billion.

17% and 14% respectively.

Which reflect the tailwind from early renewals and the new transaction model.

And I had one from the declining contribution of Bill and unfilled deferred revenue.

From large multi-year and EBA cohorts.

Ahead of renewal in fiscal 26.

Excluding these current RPO growth was broadly consistent with Q2.

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We do expect the new transaction model and the larger FY 26 renewal cohorts to have a greater impact on both RPO and current RPO growth in Q4 of Fiscal 25.

Turning to margins, gap and non-GAAP gross margins were broadly level.

With Autodesk University shifting back to Q3 this year from Q4 last year.

Gap and non-GAAP operating margins decreased by 2 and 3% points respectively.

Timing effect from AU obviously washes out over the full year.

At current course of speed, the ratio of stock-based compensation is a percentage of revenue peaked in fiscal 24.

will fall by more than 1% point in fiscal 25.

And will be below 10% over time.

Pre-cast book for the quarter was $199 million.

This benefited from some channel partners in Western Europe booking business earlier in the quarter ahead of the transition to the new transaction model.

Speaker Change: Thank you for standing by and welcome to Autodesk's third quarter and fiscal year 2025 financial results conference call.

Really to de-risk month one after the transition.

Speaker Change: At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session.

It's accelerated free cash flow to the 3rd quarter.

Which was partially offset by the expected negative impact of co-terming in Western Europe.

Speaker Change: To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again.

Turning now to capital allocations.

We continue to actively manage capital within our framework and deploy it with discipline and focus.

Speaker Change: I would now like to hand the call over to Simon Mays-Smith, VP, Investor Relations. Please, go ahead.

Through the economic cycle to drive long-term shareholder values.

Simon Mays-Smith: Thanks, Operator, and good afternoon. Thank you for joining our conference call to discuss the third quarter results of Autodesk Fiscal 25. On the line with me is Andrew Anagnost, our CEO, and Betsy Rafal, our Interim CFO.

As expected, the pace of buybacks picked up in the 3rd quarter.

He purchased approximately 1.2 million shares.

$169 per ship.

Simon Mays-Smith: During this call we will make forward-looking statements including outlook and related assumptions and on product and strategies.

We will continue to deploy capital to offset and buy forward deletion as our free cash flow grows from the fiscal 24 trial.

Actual events or results could differ materially.

This practice has reduced our share count by about 5 million shares over the last 3 years.

Simon Mays-Smith: Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K files 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.

With an average percentage reduction of about 70 basis points per year.

We increased the amount authorized under our share repurchase program by 5 billion.

Simon Mays-Smith: 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.

For a total of approximately 9 billion.

Simon Mays-Smith: AUSESC disclaims 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.

Simon Mays-Smith: In less otherwise noted, each such reference represents a year-on-year comparison.

Simon Mays-Smith: All NONGAT numbers referenced in today's call are reconciled in our press release, OXL 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 third quarter of the year strongly delivering 12% revenue growth in cost and currency and have again raised full year guidance.

Andrew Anagnost: This reflects the sustained momentum of the business and successful execution of our strategy, including a smooth implementation of the new transaction model in Western Europe. Once again, opportunity, resilience, and discipline underpinned our performance.

Andrew Anagnost: Last month at Autodesk University in San Diego, we hosted 12,000 registered attendees and another 30,000 online.

Andrew Anagnost: We showed how granular data in the cloud, organized in data models, and connected to everything through APIs, can deliver even more valuable and connected solutions for customers and partners, and support a much broader ecosystem and marketplace.