Q1 2026 Autodesk Inc Earnings Call

Thank you for standing by and welcome to Autodesk first quarter and full year fiscal 'twenty 'twenty six earnings conference call. At this time, all participants are in a listen only mode.

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

Speaker Change: Okay.

Speaker Change: Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss Autodesk fiscal 'twenty six first quarter results, Andrew Annick, Nostos, CEO and general Mo Gianni our CFO on the line with me.

Speaker Change: During this call we will make forward looking statements, including outlook and the related assumptions and on products go to market and strategies.

Speaker Change: Actual events or results could differ materially.

Speaker Change: Please refer to our SEC filings, including our most recent Form 10-K, 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.

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

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

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

Speaker Change: We will quote several numeric or growth changes during this call as we discuss our financial performance.

Speaker Change: And Thats otherwise noted each such reference represents a year on year comparison.

Speaker Change: All non-GAAP numbers referenced in today's call are reconciled in our press release or XL financials, and other supplemental materials available on our Investor Relations website.

Speaker Change: And now I will turn the call over to Andrew. Thank you Simon and welcome everyone to the call Artemis delivered strong first quarter results revenue and non-GAAP earnings per share topped the higher end of our guidance ranges and billings non-GAAP margins and free cash flow exceeded our expectations.

Speaker Change: Two things are clear against an uncertain geopolitical macroeconomic and policy backdrop first our strong momentum and performance in the first quarter of fiscal 'twenty six set us up well for the year and second we continue to make the right decisions to drive long term shareholder value, we are focusing our growth investments on our strategic.

Speaker Change: <unk> cloud platform and AI, we are optimizing our sales and marketing and investing to enable future optimization that drives higher margins. We are allocating more capital to share repurchases as our free cash flow stack rebuilds from the transition to annual billings for most multi year contracts and with the appointment of John Cahill ROM Krishnan, Jeff Epstein and Christie.

Speaker Change: Simmons, we are refreshing our board to guide the next decade of growth in this uncertain World Autodesk has three sources of certainty first the new transaction model as a proactive plan to integrate more closely with our customers and drive additional business, while also increasing automation and reducing duplicative workflows with our channel partners.

Speaker Change: It opens up new growth and margin opportunities for Autodesk second rebuilding our free cash flow stack. After the transition to annual billings for most multi year contracts increases our capacity to sustainably return cash to shareholders through share repurchases and third as we come to the end of those two major business model transitions.

Speaker Change: Desk will be easier to analyze and understand.

Nash: I will now turn the call over to Nash to discuss our quarterly financial performance and guidance for fiscal 'twenty. Six I'll then come back to update you on our strategic growth initiatives.

Nash: Thanks, Andrew Q1 was another strong quarter overall, the underlying momentum of the business was similar to prior quarters, we saw strength in ACO in upfront revenue from enterprise business agreements or <unk>.

Nash: And in the Autodesk store as friction from the new transaction model implementation process continue to ease.

Nash: I will go to market optimization plan is also on track.

Speaker Change: Our new Chief revenue Officer, Andy Elder joint on May 12th from Microsoft.

Speaker Change: Total revenue in the first quarter grew 15% as reported and 16% in constant currency the.

Speaker Change: The contribution from the new transaction model to revenue was $78 million in the first quarter.

Speaker Change: Total revenue grew 11% in constant currency and excluding the impact of the new transaction model.

Speaker Change: Please see the tables in our press release earnings deck, NFL financials for details by product and region.

Speaker Change: Billings increased 29% as reported and 30% in constant currency, reflecting the shift to annual billings for most multiyear contracts and the transition to the new transaction model.

Speaker Change: The contribution from the new transaction model to billings was $105 million in the first quarter.

Speaker Change: Billings grew 22% at constant currency and excluding the impact of the new transaction model.

Speaker Change: Arpaio of seven $2 billion and current RVO, a $4 6 billion grew 21% and 16% respectively.

Speaker Change: Turning to margins.

Speaker Change: First quarter, GAAP, and non-GAAP operating margins were 14% and 37% respectively.

Speaker Change: GAAP operating margins decreased seven percentage points, primarily due to restructuring charges of $105 million and a one time noncash charge of $54 million, reflecting a cumulative adjustment and stock based compensation since fiscal 1999 related to the company's employee stock purchase program.

Speaker Change: The financial impact of this was immaterial and any of our historical reporting periods. For example, it was a total of $4 million in fiscal 2005.

Speaker Change: There are more detailed in the earnings deck.

Speaker Change: This does not affect the trajectory of stock based compensation for future years, we remain very focused on bringing stock based compensation as a percent of revenue to below 10% and in part reflect that intent we have incorporated it into a long term executive incentive plans.

Speaker Change: non-GAAP operating margins was strong increasing three percentage points.

Speaker Change: This reflected operating leverage from ongoing cost discipline and timing benefits from restructuring, partly offset by the margin drag from the new transaction model.

Speaker Change: First quarter free cash flow was $556 million.

Speaker Change: Moving on to capital allocation, we continue to focus organic investment on our strategic priorities. We purchased approximately one 3 million shares for $353 million at an average price of approximately $269 per share turning to guidance.

Speaker Change: I will again speak to the numbers, excluding the impact of the new transaction model and in constant currency to give you a clearer view on the underlying dynamics of the business.

Speaker Change: In the earnings deck, you'll see that we've against without the impact of the new transaction model and currency movements for our fiscal 2006 guidance.

Speaker Change: The underlying momentum of the business in the first quarter of fiscal 2006 was consistent with recent quarters.

Speaker Change: Since February the U S. Dollar has depreciated against major currencies and macroeconomic uncertainty has increased.

Speaker Change: The increases in our billings revenue and free cash flow dollar guidance ranges. Therefore reflect those foreign exchange movements, partly offset by additional caution in our underlying growth assumptions to reflect greater macroeconomic uncertainty.

Speaker Change: To give you a feel for what this means when compared to our prior guidance.

Speaker Change: Lower ends of our new billings and free cash flow ranges assume that new business growth for the rest of the year Decelerates at roughly the same rate as during the pandemic and that EBITDA renewal uplift rates deteriorate.

Speaker Change: Our underlying revenue growth guidance is unchanged because it's ratable nature makes it less volatile and our business performance in the first quarter has already incrementally reduce the risk of our guidance for the remainder of the year.

Speaker Change: So the billings guidance range increases to seven $1 6 billion to $731 billion. The revenue guidance range increases to $6 95 billion to $6 $995 billion and the free cash flow guidance range increases to $2 1 billion to $2 2 billion.

Speaker Change: On margins the revenue tailwind from exchange rate movements is in part balanced by cost headwinds, but we've raised the bottom end of our non-GAAP guidance range, reflecting operating leverage and ongoing cost discipline.

Speaker Change: GAAP earnings per share guidance reflects in part the one time charges taken in the first quarter, we've increased our non-GAAP earnings per share guidance, reflecting the non-GAAP operating margin increase.

Speaker Change: The slide deck on our website has more details on modeling assumptions for the second quarter and full year fiscal 2006 <unk>.

Andrew: Andrew back to you.

Andrew: Thank you Dinesh Autodesk.

Andrew: <unk> is focused on the convergence of design and making the cloud enabled by platform industry cloud and AI Autodesk is at the forefront of convergence because we've been evolving and investing in the business models products and platforms and go to market that capitalize on it let me give you a few examples from the quarter in ACO one of the world's leading infra.

Andrew: Structured consulting firms closed its sixth EMEA with us the second largest deal in Autodesk history. Our partnership is centered around accelerating its transition to been facilitating the adoption of global data standards and standardizing on Autodesk construction cloud is its common data environment for digital delivery.

Andrew: These initiatives will enable automation to replace low value manual tasks enhanced value added engineering reduce errors and rework and establish a framework for leveraging AI. The ultimate goal is to transform its design and delivery approach and leverage its scale and expertise to accelerate growth drive efficiency and improve profitability.

Andrew: Hitachi energy provides innovative sustainable and efficient solutions that support energy transition as part of the most recent EPA renewal it expanded adoption of Autodesk construction cloud rapid infusion to advance renewable energy integration and Digitization. Furthermore, Hitachi energy invested in asset and data driven capabilities in.

Andrew: Digital twin solutions, and creating a digital foundation throughout the product lifecycle and various disciplines. This includes enabling predictive maintenance through the real time monitoring and analysis of grid performance.

Andrew: Our leading design build general contractor in existing GC pay in building connected customer began looking for an integrated solution to manage increasing project complexity and drive efficiency.

Andrew: After a thorough evaluation its selected autodesk along with a platinum implementation partner to provide specialized implementation and onboarding plans by standardizing on Autodesk construction cloud this customer will unify project data and workflows and improve collaboration across design engineering and subcontractors.

Andrew: These stories have a common theme converging people processes and data across the project lifecycle to increase efficiency and sustainability, while decreasing risk.

Andrew: Our comprehensive end to end industry cloud and platform drive convergence and extend our footprint further into larger growth segments like infrastructure and construction and that is reflected in the continued strong revenue and new customer momentum in construction.

Andrew: Moving on to manufacturing.

Andrew: We made excellent progress on our strategic initiatives customers continue to invest in their digital transformations and consolidate our design and make platform to drive growth and increase resilience.

Andrew: <unk> is a German based industrial group specializing in engineering and system solutions across laboratories process systems and filling in sealing machines. It was looking to transition from 2% to <unk> solutions to streamline workflows and accelerate sales cycle times and project delivery in Q1, it purchased our product design and <unk>.

Andrew: Manufacturing collection and vault professional to supercharge, it's three design and data management capabilities.

Andrew: While there expects to enhance collaboration across stakeholders and efficiently manage design iterations through the project lifecycle.

Speaker Change: George P Johnson, which creates an immersive brand experiences partnered with Autodesk for its large scale digital transformation by breaking down silos and automating workflows G. P. J sought to enhance collaboration scheduling capacity planning and shop floor visibility to avoid late stage changes that can result in project deliver.

Andrew: <unk> and financial risk the team at G. P. J, we'll transition engineering design and for fabrication facilities from several disparate legacy applications to fusion manage and operations a modern consolidated in connected system with fusion managing operations G. P. J, we'll have three design tool.

Andrew: With integrated process automation powered by a common data environment.

Speaker Change: Grain handler is a global leader in grain handling equipment historically it relied on to competitor solutions, one for design and one for manufacturing facing growing inefficiencies from limited process integration grain handlers selected fusion to modernize its entire design and manufacturing workflow.

Andrew: Weighted cadcam capabilities on a unified platform will streamline engineering processes and accelerate production timelines.

Andrew: This story highlights customers' growing desire for unified workflows, and infusions, increasing ability to handle complex high stakes manufacturing processes and multi seat environments.

Andrew: Converged data opens up new opportunities for Autodesk.

Andrew: As customers seek to drive efficient innovation fusion is driving strong ACB growth with extension attach rates, increasing and driving average sales prices higher and we're delivering meaningful productivity gains to customers, where we deploy AI I talked about our AI powered auto constrained last quarter. This feature has created over.

Andrew: 580000 constraints for our fusion users since launch by automating the critical but laborious task of defining sketch geometry.

Andrew: This is a task that is foundational to three D model generation.

Andrew: Since last quarter user acceptance rates of Arctic constrained command have increased to more than 50% through our continual improvement in UX enhancements. This is indicative of the potential of Autodesk AI as a continually improves our users' experience with fusion.

Andrew: And education Aston University is preparing future engineers to drive innovation through next generation design analysis and manufacturing by making the entire autodesk product portfolio available to all students. Additionally, it is migrating diffusion for first year modules and all engineering related disciplines, providing a modern platform.

Andrew: To foster collaboration and hands on learning and equip the next generation of engineers and designers with industry relevant skills and lastly, we continue to find new ways for our customers to consume our products and services in ways that work best for them. For example, we helped a major engineering consulting company in Taiwan remove noncompliant versions of our software and have the necessary.

Andrew: License is to ensure access to the latest and safest software for all its employees.

Andrew: And we enabled flex consumption for Jones engineering, a global contractor. So they can manage fluctuating project requirements in their cutting edge offsite fabrication and modular modular manufacturing business. This enabled rapid scaling of new projects and reduced administrative bottlenecks.

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

Andrew: Our disciplined execution is driving greater operational velocity and efficiency, we are deploying capital to grow the business further reduce our share count and enhanced value creation over time in combination. We believe these factors will deliver sustainable shareholder value over many years.

Andrew: Yeah.

Andrew: Let me finish with a story on.

Andrew: On January 7th Wildfires started in Los Angeles in the Eaton Canyon in Pacific Palisades, driven by Hurricane force winds the fires burned over 57000 acres. They displaced over 200000 residents and tragically took the lives of at least 30 people.

Andrew: More than 16000 structures were lost with economic damage estimated at over 250 billion.

Andrew: I grew up in southern California, and I lived through major earthquakes and other natural disasters, but the scale and scope of the devastation of this fire makes my heart ache for the people that still live in my childhood home.

Andrew: But in the spirit of resilience that defines our country civic leaders in the community are working together in new ways to rapidly rebuild the city and rebuild it to be more resilient. For example, the Foothill catalog foundation formed by volunteer architects and supported by Autodesk is creating a pre.

Andrew: Reapproved catalog of home designs that will lower costs reduced permitting delays that can stretch over a year and accelerate reconstruction.

Andrew: Hundreds of architects have already signed on.

Andrew: We've seen the power of approaches like this before and Singapore Rns supported the governments coordinate acts initiative, allowing teams to collaborate in a single digital model detect issues early and streamline approvals across agencies. The result faster more coordinated building processes that reduced waste and delays.

Andrew: We strongly support similar initiatives now being proposed at the federal level here in the U S. We are not only doing this because there isn't enough labor money or materials to build and rebuild everything that is needed to support our rapidly changing future, but also because this is how we unlock the full potential of communities. This is how we help Los Angeles.

Speaker Change: Remain in every sense the city of Angels, operator, we would now like to open the call up for questions.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again please.

Andrew: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of socket Collier.

Speaker Change: Barclays. Please go ahead Sir.

Collier: Okay, Great Hey, guys. Thanks for taking my questions here and nice start to the year.

Collier: Thank you. Thank you.

Andrew: Andrew maybe just start with you.

Speaker Change: Mentioned in your prepared remarks that the underlying momentum in the business has been stable.

Speaker Change: Just given the significant uncertainty out there.

Speaker Change: Just talk about how customer conversations are evolving if at all and maybe just touch on just broadly your thoughts on the macro given how much time you spend with customers.

Speaker Change: Second pleasure and thanks for asking this question all right you know obviously trade policy uncertainty all of these things these have material impacts on our customers. It increases the cost of goods that they secured through the supply chain, they're material cost that creates uncertainty in their bidding processes and this is true for a wide variety of customers. So when I'm talking to.

Speaker Change: Customers Theyre, absolutely flagging. This uncertainty right now there's no doubt, it's creating concern for them when they fly get they talk a lot more about the second half of the year and they talk about things right now and the kind of put this in perspective and connected back to some things <unk> said in the opening commentary.

Speaker Change: Construction backlog ticked up in the quarter.

Speaker Change: We continue to see increases in monthly active users of our products, we saw increasing bid activity on bid board and most of our customers continue to see an inflow of business.

Speaker Change: So net net of all of this is that just like us.

Speaker Change: They're feeling uncertainty, but theyre not seeing it right now in our business and their business just like we're not seeing it right now in our business.

Speaker Change: Got it that's super helpful generic maybe maybe for you.

Speaker Change: Q1 margins here.

Speaker Change: Better than we expected and it was great to see the margin guide go up for the year could you just talk about your margin momentum a little bit and maybe in particular can you just talk about how the sales and marketing optimization plan is going generally.

Speaker Change: Okay. Thanks, I'll get happy to talk about that so the team executed really well here in Q1, and we are very pleased with the strong performance on both revenue and our non-GAAP operating margins for Q1 margin strength, mainly was driven by the revenue outperformance combined with just ongoing expense discipline that we have here and the team on the restructuring.

Speaker Change: During we executed that well.

Speaker Change: As you'll recall, we're on a multiyear journey with the implementation of the new transaction model.

Speaker Change: And deriving the benefits from that and so the restructuring or affected the initiation of the go to market optimization and we're building. The capability is now that we will need next year as we continue our sales and marketing evolution. So so far I'd say, we're on track with the overall sales and marketing optimization plan for the year and overall, we're very well set up for Q2 and the rest.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Very helpful. Thanks, guys.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Jay Blue shower.

Jay: Griffin Securities. Please go ahead Jay.

Speaker Change: Yeah. Thank you good evening, Andrew starting with you you spoke of the role of your products comprehensiveness product convergence, which.

Speaker Change: Which of course has been a theme for you and the industry for some time with that in mind and also recalling something you spoke on the Q4 call.

Speaker Change: You mentioned on the call that you were accelerating some of the roadmaps associated with your industry clouds, and perhaps you can elaborate on that what are you doing what have you been doing in terms of accelerating some of their development and perhaps gea of certain technologies, including in particular, perhaps the.

Speaker Change: The work Youre doing to integrate ACC with forma.

Speaker Change: And a follow up question yes.

Speaker Change: Yeah. So let me let me highlight on some of those things right first let me talk about the things, we're accelerating infusion, which I think are really kind of anchored in some of the strong success. We saw with fusion in the quarter were accelerating the roadmap around data management issues. This comes straight from our customers. They want better bond management, they want better product data management in the cloud.

Speaker Change: <unk> with granular data from fusion. So we have worked hard to reallocate funds, albeit on these customer priorities.

Speaker Change: A result, we have accelerated roadmap across some things come out in Q1 that are relevant to these problems, you'll see more things coming out throughout the year and there are important part of driving multi seat deals for four for fusion now when you look at the roadmap for our form I don't want to get ahead of some of the things that we talked about at au, but theirs are.

Speaker Change: Of course that that our customers are really interested in one of the big areas as they definitely want to be able to collaborate better across multi disciplines and they want to use kind of format is the center of that collaboration activity. So in order to facilitate some of that look for us to be accelerating some of the things that connect format deeply too to Rev.

Speaker Change: It and other tools that are relevant to the.

Speaker Change: The entire interdisciplinary process. Some are some things we've done in the past and look for us to kind of dial up the presence of form a board, which is a great collaboration tool an idea collaboration tool for multidisciplinary teams and see some of those things get a little bit more emphasis in some of the roadmap work as well as of course the AI features.

Speaker Change: That we're definitely focused on and have been focused on for some time.

Speaker Change: Okay as a follow up you spoke of course Tonight again about the go to market changes the model changes and so forth one of the things that seems to be happening in parallel and navy even.

Speaker Change: Accelerated by the changes you've been making is channel consolidation, particularly here in the U S. We.

Speaker Change: We've seen it among some of your peers, but we've certainly seen it in your case, where you now have half as many named entities with whom do counters partners as a decade ago. So the question is what do you see as the benefits of such consolidation or perhaps the risks of any of that consolidation in your channel. Yes. So you know this is something that.

Speaker Change: We've been deliberately encouraging and driving through a lot of processes and engages with our channel partners. We want fewer more solution focused channel partners out there and we want I mean, more sorry, more and we want fewer transactional focused channel partners out there in our ecosystem. So as a result, what youre seeing is our larger partner.

Speaker Change: These are more solutions focused partners or partners that focus on their own IP or are buying up some of the smaller gold and silver partners and also frankly, what you're seeing is some of the non contracted partners in silver partners lower down in the ecosystem kind of disappearing and we believe that that's advantageous to our business and it's as with the flow should do.

Speaker Change: In terms of the evolution, we're having now when you look at some of the benefits associated with this we actually saw some of these in Q1, we saw some fairly robust activity on the store.

Speaker Change: And that store grew quite nicely and most of this activity was focused to inc.

Speaker Change: Increased price realization and that is a result of us capturing business down market that would've gone to transactional focused partners in the past that that's great. We want to see those customers come closer to us and that's exactly what we saw in Q1 were catching up based on some of the impacts of the new transaction model I expect.

Speaker Change: Some of that to continue how much of it continues moving forward is something that we just have to wait and see but that's one of the clear benefits. The downside of course whenever you concentrate your partners you want your partners to stay focused on the things that are important Fortunately, we've corrected for that because we have some control of the commissions in terms of the things that we incent, we want our partners did.

Speaker Change: Not only focus on renewals, but we wanted to focus on new business as well and that's that's a risk we're aware of and that we correct for with the way we compensate them.

Speaker Change: Okay.

Andrew: Thank you Andrew Thank you Dinesh.

Andrew: Thank you.

Speaker Change: Our next question comes from the line of Adam Borg of Stifel. Please go ahead Adam.

Adam Borg: Awesome and.

Adam Borg: Thanks, so much for taking the questions.

Andrew: Andrew maybe for you and building off of <unk> question on the channel.

Andrew: Last quarter, you talked a little bit about the transaction model and I'd call. It some self inflicted hiccups as they were focusing on that as opposed to the business itself. Just curious kind of how that's progressing in general.

Andrew: And is there an opportunity for this to become a tailwind.

Andrew: Business as the channel partners continue to focus on the new business growth you just talked about.

Speaker Change: Thank you for the question Adam So so first off we're definitely not seeing the kind of disruptions. We saw last year and in Q4 associated with channel productivity. The channel partners are still working through.

Speaker Change: Adapting and Brent Onboarding their long tail of customers onto the new transaction model, but we're not dealing with the kind of systems requests or process realignments that we saw earlier in the in last year and towards towards the end of last year. So that's a really good thing. So what you should expect is that channel productivity should increase as we head out into the year and you'll actually.

Speaker Change: Start to see channel partners kind of move beyond just onboarding existing customers and in the kind of extending their renewal active activities and extending into their new business growth activities. So we are looking forward to that and we everything is a likely outcome of the current phase that we're in.

Adam: Adam I imagine Thats forever.

Speaker Change: Adam I might just add on that that.

Speaker Change: For some of our channel partners. The first renewals that they'll have on the new model in the Americas will be in June and in EMEA, Italy in September just given that.

Speaker Change: That's when those.

Speaker Change: Those regions went live on the new model last year, but as Andrew was saying so far so good and over time, we will continue to focus on how we can deliver more valuable than data driven and connected products and services to our customers.

Speaker Change: That's incredibly helpful. Maybe just as a quick follow up to Dash I think just on at our our this is the first time it was above the 100% to 110% range I think in years.

Speaker Change: Talked about some of that benefit coming from the new transaction model I guess.

Speaker Change: Just wanted to confirm it would've been within that range not below the range without the transaction model.

Speaker Change: Why should we think it should be at the 110 range for the rest of the year. Thanks, so much.

Adam Borg: Yes, Adam that's right, it's mainly the mechanical effects with the new transaction model, it's hard to disaggregate the specific percentage, but it's safe to say that excluding that effect. It would have been consistent with where it was previously and within the 100 to 100 and 100% to 110% range.

Speaker Change: Excellent. Thanks, so much.

Speaker Change: Thank you our next question.

Speaker Change: Comes from the line of Jason <unk> of Keybanc capital markets. Your question. Please Jason.

Speaker Change: Hey, good afternoon. Thank you.

Speaker Change: One question on kind of the numbers.

Speaker Change: So if we look at the Q1 call it revenue constant currency adjusted for the new model transition that growth was 11%.

Speaker Change: Exiting last quarter like for like this metric was up 9%, so it actually accelerated a little bit.

Speaker Change: Maybe can you just speak to what drove that uptick.

Speaker Change: And then I'll have a follow up.

Speaker Change: Yes, I'm happy to do so Q1, we saw strength across the quarter in Q1, we're obviously very pleased with the outcome that we had I mentioned some of the drivers earlier in the prepared remarks. There are some of the strength came in the quarter from AUC, a little bit more from the upfront revenue from <unk> and also from the Autodesk store some of the friction from.

Speaker Change: The new transaction model implementation continue to ease so all of those where the where the drivers and fundamentally our businesses has been very resilient and it's been like that over the past couple of years, because we are diversified across various industries and geographies and and.

Speaker Change: And segments one of the things I will point out for Q1. In particular is Q1 was an easier comp just given the timing of acquisitions that we had during fiscal 'twenty five most of our revenue from acquisitions last year came in in Q2 to Q4.

Speaker Change: So that's about a one percentage point impact there, but fundamentally even if you consider it.

Speaker Change: Adjusting for that it was still a strong performance overall.

Speaker Change: Okay, and then keeping on this project when we look at the full year guidance, 8% to 9% on a normalized FX neutral basis can you just remind us what you built in from like an extra cushion.

Speaker Change: <unk> I think last time, you talked about the go to market realignment.

Speaker Change: Sales leadership, but was there any cushion built in for macro or.

Speaker Change: Or are there any of those assumptions changed after after these 90 days. Thank you.

Speaker Change: Yeah, no assumption changes with respect to our core underlying business when we initiated guidance for the year back in February we had been quite transparent that we had not seen anything in the business at the time and we had assumed that the macroeconomic environment that that thing would stay unchanged. So fast forward demand the only two changes.

Speaker Change: Or that we've seen the U S dollar weakened and that's currency benefits that would be passed along in the guide.

Speaker Change: And we do see greater macroeconomic uncertainty that which we have now factored into the forecast and I spelt out some of the assumptions earlier in the prepared remarks. So those are the only two broad assumption changes if I think about what that means from the standpoint of revenue growth, particularly in the back half of the year the.

Speaker Change: The slower growth in revenue in the second half is mainly a function of these guidance assumptions that we've used as.

Speaker Change: As we said, we haven't actually seen that impact yet in the business, but we are prepared for it and we just think it's prudent to factor that in.

Speaker Change: Perfect. Thank you.

Speaker Change: Thank you.

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

Elizabeth Porter: Great. Thank you so much I wanted to follow up on some of the AI comments around auto constrain usage and it's been great.

Elizabeth Porter: Yes.

Speaker Change: Thank you Serge and acceptance rates increase so looking ahead are there any particular areas, where you see the biggest opportunity to launch more AI functionality, how should we think about the pace of deployments and understanding it's still really early what could this mean for an opportunity to improve upsells or start to use the price lever a little bit Martin just given.

Speaker Change: It could be driving a lot more innovation in our portfolio.

Martin: Yes. Thank you for that Elizabeth So first off let's just restate our philosophy here, where we're very interested in delivering highly specific AI enhancements that drive real productivity gains for our customers things that attack problems or challenges that our customers have that are either deeply repetitive or time consuming and that we can kind of point them to.

Speaker Change: And solve the problem for them. The auto constraint features a great example of that what we're doing with drawing automation is another great example of that.

Speaker Change: You should look for us to continue to roll out features like that and these are pretty intelligent features remember these are built off of our own foundation models. These are these are models that actually understand a sketch so so to speak and they understand geometry look for us to continue to rollout increasingly sophisticated tools that kind of takeaway some.

Speaker Change: This grunt work from the customers and allow them to be more productive with the tools. They have and there will be long term opportunities for us one infusion land, we intend to make fusion. The most AI powered tool out there in the mechanical design market that is going to be a clear example advantage for us as we move to continue to displace competitors.

Speaker Change: Currently we're gaining market share right now, we we look to accelerate that with AI, primarily as one of the one of the key tools now as you look into AUC land youre going to see more tools, specifically coming out informa that actually enhance form is already existing AI capabilities youll see some interesting things coming out there again.

Speaker Change: Targeted at some of these repeating repeatable processes. Eventually this will also translate into new opportunities. There's two ways that form is increasing capabilities translating the opportunity. One is it makes it easier to take sophisticated <unk> down market to ultimately it will make the total solution more powerful and at some point, we will be able to recover price like that better.

Speaker Change: Still early days, let us let us deliver some of the value and the customers recognize that and then we'll be able to kind of explore the deeper implications in terms of revenue uplift.

Elizabeth Porter: Great. Thank you very much and then just as a quick follow up I believe last quarter.

Speaker Change: There was a reference about possible disruptions around the restructuring plans in the Cri transition, which was prudently included in guidance. It sounds like it's been minimal disruption, thus far but could you just provide a little bit more color on what youre seeing and is there any point in the year, where you feel like we would be getting more comfortable that these risks are behind us.

Elizabeth Porter: Yes.

Speaker Change: Yes look I'll take that and <unk> can add anything if he wants to add anything you look obviously, we undertook a fairly major restructuring in the first quarter. We had mitigation plans, we had other things associated around that to make sure that we kind of manage that disruption. We did factor some disruption and in there of course, there was disruption associated with such a.

Elizabeth Porter: Large action like that but we also had some other aspects of the business that showed improvement. The store was another great example of where we saw improvement we saw improvement in upfront revenue. So there was some.

Elizabeth Porter: Offsetting momentum in the business as well that helped us get through some of these things as you look through it we already have our new CRO.

Elizabeth Porter: In place the acting CRO was was one of our one of our team Elizabeth Warren's on our team. So she was the acting CRO she's here to bridge the new CRO over while we're not kind of through the total knothole on on getting through all of these things we feel like we have this under control and that we've kind of accounted for the risks associated with Avnet Dinesh do you want to add anything.

Dinesh: No I think Andrew that you summarized it nicely.

Dinesh: Great. Thank you.

Andrew: Thanks Elizabeth.

Speaker Change: Thank you. Our next question comes from the line of Bob <unk> Shah of Deutsche Bank. Please go ahead Bob.

Bob Shah: Great. Thanks for taking my questions and congrats on the strong start to the year to let's just one clarification for you on the guidance it sounds like you're embedding.

Andrew: Incremental prudence just in terms of the macro and just clarifying that youre not seeing anything yet in the business.

Andrew: Shannon this is more of the headlines and the customer conversations that youre having.

Speaker Change: Enabling you to do this or is there something that you're seeing today.

Speaker Change: You are exactly right, Kevin we haven't actually seen anything we saw good momentum in the business in Q1, that's continued into Q2, so far we.

Speaker Change: We feel good about where we stand, but it's just being prudent about what we are hearing and seeing out there.

Speaker Change: That's helpful. There and then Andrew just one for you I know in the past you've talked about this and we can pick it up in every conversation as well that the industry continues to be labor constrained. When you state. The customers is this still a challenge for them. How long do you think that persists and how do you think AI might be able to solve this and how do you I didn't capture that yes.

Speaker Change: Yes look we were pretty consistent there's not enough labor materials and capital to build and rebuild everything that needs to be rebuilt our industry desperately needs digital efficiency.

Andrew: This isn't going away I think the current climate might made actually exasperate. Some of these labor labor constraints as well the good news is as we sell them, we sell certainty in uncertain times, we sell tools that allow people to digitize the process allow them to do more with the resources. They have this this frankly in my opinion is one of the reasons.

Andrew: Why were seeing robust adoption of our expanded design and make portfolios because we're actually delivering them the kind of productivity they need in a labor constrained market. Those constraints are going to be persistent I actually think in terms of impact on our business. It's positive for us because it continues to force industries like AUC to look at Tech.

Andrew: <unk> is a big is a big productivity lever for them they need technology now they realize that they're way behind relative to manufacturing and this is their opportunity and their moment to start embracing technology to increase their productivity and deal with these fundamental capacity constraints.

Speaker Change: Thank you. Our next question comes from the line of Joe Rock of Baird. Please go ahead Joe.

Joe Rock: Hi, great. Thanks for taking my question I wanted to ask.

Speaker Change: Of that Andy and the new revenue officer is in place.

Speaker Change: The search for.

Speaker Change: The next individual there as some of the skill sets you are looking for and particularly.

Speaker Change: And it's going to have a.

Speaker Change: A lot of new things they can undertake Joe Smith auto Thats more of a.

Speaker Change: And control direct sales organization and some of the opportunities. Thank.

Dan: Thanks, Dan about going forward and Andy is going to be to escalated.

Speaker Change: Yes. So you know Andy came to us from Microsoft He brings a background with really strong enterprise sales skills, alright, which is really important because you know increasingly we're getting into and an end to end solutions with our customers, we're going deeper into their businesses. We're a much more strategic partner in a lot of a lot of customer accounts.

Speaker Change: Good to have leadership that gets that that understands that he's got a lot of deep cloud knowledge cloud native kind of expertise with regards to selling solutions that are cloud enabled end to end solution. So he's basically rounding out our skill set with kind of the skills that we need moving forward into the next chapter of Autodesk history. So we're excited that he has joined in.

Speaker Change: We're looking forward to him having an impact.

Speaker Change: Okay, that's great and then.

Speaker Change: I wanted to ask you about AI again, Andrew touched on a lot of the initial autodesk focus of targeting things that are applicable to repeatable processes and customer workflows, which I would imagine doing that customers see it.

Speaker Change: Very quickly.

Speaker Change: I'm more interested in maybe the future use cases, and when you stand what's happening and kind of the startup community around tax the cats cat or scan to CAD or some of these capabilities and our projects are anemia is focused on some of that stuff, but when you think about the future of CAD users is autodesk do a.

Speaker Change: What it needs to be positioned when those two viable.

Speaker Change: We are absolutely doing what needs to be positioned I will I will add some ways defer you to Autodesk University for this year, okay not to get ahead of some of the announcements, but we are building very powerful tools that will allow people to generate different types of geometry, and significantly simpler and simpler ways now I consider these both <unk>.

Speaker Change: Jan in both massive productivity Enhancers, yes, obviously, we are looking at highly disruptive things that actually dramatically change the workflows, we not only we not only are doing some of these things organically, but we watch some of these companies externally as well I mean to give you a good example, and one of the most highly disruptive.

Speaker Change: Industries that we have media entertainment look at what we're doing with.

Speaker Change: Wonder Wonder studio, which is now flow studio is.

Speaker Change: A highly disruptive direct direct to do.

Speaker Change: Two special effects video.

Speaker Change: Video environment that allows people to create scenes great character animations, overlays and things very generative way highly different workflow than what our customers do in their current environment.

Speaker Change: We're doing things like that as well in our other industries, it's just the rate and pace is different.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Taylor Mcginnis of UBS. Please go ahead Taylor.

Taylor McGinnis: Hi, Thanks, so much for taking my question just maybe on the operating income margin guide. So I think the commentary last quarter was that most of the expansion. This year was really coming from operating efficiencies and scale and that like a good portion of the savings from the rats are being reinvested back into the business. So just how are you thinking.

Speaker Change: About the reinvestment of those savings today have your views at all changed and then you mentioned you have mentioned in the past the opportunity that scaled back on rent.

Speaker Change: Done that span so just where are what inning are we in that and are there more opportunities for that Athena throughout the year. Thanks.

Jen Asia: Taylor This is Jen Asia I'll take that.

Speaker Change: So so far we're on track for the plan that we had laid out for fiscal 2006. When we did the restructuring we said that we were going to reinvest a portion of the savings from the restructuring and building the capabilities that we know that youll need for the next.

Speaker Change: Body of work that we need to do on the sales marketing side in particular, particularly as we think about building tighter integrations with.

Speaker Change: Our partners in <unk>.

Speaker Change: And continuing to scale as we build out the self serve motion. So those are all on track and the overall spend planned for the year largely stays unchanged.

Speaker Change: You'll see that with the strong performance that we had on revenue in Q1 that that outperformance largely went to the bottom line and we've generally kept our full year spending outlook unchanged compared to the prior outlook. So.

Speaker Change: So we continue to expect that our spend in constant currency holding aside the new transaction model will be right around the 4% Mark in terms of year over year growth compared to 2005, and just by way of comparison in fiscal 'twenty five that number was 7% over fiscal 'twenty four so we've.

Speaker Change: We've definitely baked that in into the underlying business and that's a big source of the of the op margin expansion that we laid out at the start of this year.

Speaker Change: Yes, no it reinforced that just a little bit Taylor, we're on a multiyear journey to driving productivity enhancements in our sales and marketing organization, we're working on systems and processes like Jaenisch said that that lead to future and ongoing optimizations that will turn into productivity and ultimately turn into margin growth. So this is not a one and done kind of situation. When this is an ongoing kind of effort.

Speaker Change: Within the company.

Speaker Change: Perfect. Thank you so much.

Speaker Change: Thank you.

Speaker Change: Next question.

Speaker Change: Comes from the line of Michael <unk> of Wells Fargo Securities. Please go ahead Michael.

Speaker Change: Great. Appreciate you taking the questions and all the commentary throughout the call.

Speaker Change: Was just curious if you'd be able to compare and contrast, what you're seeing across geos at all we can see the currency impacts, but just wondering it doesn't sound like there's anything overly specific you're highlighting but if theres any difference in terms of momentum or activity youre seeing across certain regions versus what you were maybe expecting starting the year.

Speaker Change: Generally broadly speaking, we're seeing the kind of momentum we expected I think one area, where you might have seen a little bit more softness was in Asia Pacific and I guess I'll just kind of help you understand what's going on there.

Speaker Change: Japan remember was the last on the new transaction model. So Japan is still absorbing some of the impacts of the new transaction model. They are still going through some of the ramp up and you see some of that.

Speaker Change: Their impacts in our Asia Pacific growth, but also in China, and Korea are much more exposed to the macroeconomic turmoil in some of the the trade discussions that are going on right now so a little bit more softness there, but generally speaking some of those things were expected, especially with Japan, and that's kind of the only differences that stand out relative.

Speaker Change: <unk> to the rest of the business.

Speaker Change: Very helpful and just as a follow on for <unk> I think.

Speaker Change: Relatively clean start to the year. Despite the uncertainty would be may be useful to just get an update around your early observations as autodesk CFO, if there's anything you'd highlight for investors in terms of your philosophy in framing targets, how you SaaS the growth margin trade off in different scenarios.

Speaker Change: As the year plays out I think just the framework. There is certainly helpful. Thank you.

Speaker Change: Yeah happy to do that fundamentally nothing different than my first few months when I when I was in the job and I provided a view on that on the last call I continue to see the opportunity for us.

Speaker Change: To address a rich market opportunity ahead and to capture that growth.

Speaker Change: We've talked at length about the the product opportunity with respect to industry clouds and platform and AI.

Speaker Change: We're excited about that and focused on helping the team support growth in the future as well as driving strong operational focus on driving operational margin expand our operating margin expansion, there's there's opportunity for that as well so no real change in terms of our core guidance philosophy nothing has changed there either.

Speaker Change: The underlying momentum of the business continues and where we're off to a great start here in Q1.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of city Pentagon E. Mizuho. Please go ahead Sir.

Speaker Change: Thank you and Congress on a good quarter and especially Jackson.

Speaker Change: This is your first full quarter as a CFO a nice quarter.

Speaker Change: So.

Speaker Change: My question is just.

Speaker Change: Just wanted to understand the linearity that you saw in the quarter mainly.

Speaker Change: Given all the uncertainty we saw carriers integration all of that and wondering what kind of momentum also youre seeing in may as well and loyalty.

Speaker Change: Also kind of raise price as well love to hear your thoughts on that.

Speaker Change:

Speaker Change: Happy to talk about that there weren't really any meaningful trends that we would call out during the quarter I think it was strong and consistent throughout.

Speaker Change: We were off to a great start in February and that momentum continued in March as well as in April.

Speaker Change: And in term and that momentum has continued so far into the into the month of may as well as I mentioned, it's obviously too early to say anything more specific on Q2, but I will say that there are we have confidence in our in our guidance.

Speaker Change: Okay and then.

Speaker Change: Going back to this model transition and one of the benefit of that is cross sell opportunity.

Speaker Change: Should we think about the cross sell more in the second revenue all time when your.

Speaker Change: Our direct sales and gas they had or have you started seeing some kind of benefit as youre transitioning customers to the new transaction model yes.

Speaker Change: I think the best way to think about that as the cross sell and upsell automation that we're gonna be driving there are more longer term things that they're not going to be tied to any specific renewal cycle. So look for those is something that kind of like gets built into our business cadence and allows us to kind of more easily grab we can actually do these things off cycle in the future the systems will be able to support.

Speaker Change: Customers, adding additional capabilities or moving to flex in the middle of a cycle. So it's something that will be dynamically introduced into our business not tied to any individual renewal event or events like that in the future. So that's part and parcel of the investments we're making in some of the additional systems upgrades in systems work It allows us.

Speaker Change: To kind of do some of these more dynamic adjustments throughout the customers' lifecycle.

Andrew: Thanks for that color Andrew Youre welcome.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Ken Wong of Oppenheimer <unk> Company. Please go ahead Ken.

Speaker Change: Fantastic I just wanted to build on Taylor's question about the go to market transition in kind of the cost coming out of the P&L.

Speaker Change: We saw a big downtick in duplicative costs. After you guys moved all of your partners over across the regions is there. Another goalpost that we should think we should be thinking about that sees another big swatches expense coming out with that be getting everyone across on the first renewal or anything you guys can spotlight.

Speaker Change: We should be we should be thinking about or looking for.

Speaker Change: I think it's too early to talk about the.

Speaker Change: What the specifics of the ongoing sales and marketing optimization at this stage. The work that we need to do is to continue to build the capabilities to enable the future of the sales and marketing optimization. Some of the elimination of the duplicative costs that you touched on I think that once we move forward with the <unk>.

Speaker Change: Capabilities that we need to enable I think that'll then unlock more opportunity for us. So we will spend all of that out in a little bit more detail at a later point in time.

Speaker Change: Okay got it and then just wanted to touch on the Billings guide.

Speaker Change: And you guys did downtick slightly for the constant currency adjusted for <unk>.

Speaker Change: Adjusted for currency and transaction model just wondering what was what did you guys run into from a headwind perspective that impacted the transaction model piece of that guide.

Speaker Change: So theres no particular headwind that we ran into in fact, if anything the greater impact of the new transaction model suggests that the transaction a new transaction model is actually working well and customers are migrating nicely onto the onto the direct model. So if anything that's actually a positive sign for us in the business and that we're executing that part.

Speaker Change: The model well.

Speaker Change: Okay perfect. Thanks, a lot guys.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Josh Tilton of Wolfe Research. Please go ahead Josh.

Josh Tilton: Hey, guys. Thanks for sneaking me in here.

Speaker Change: Again, I don't mean to beat a dead horse, but maybe just following up on that last question.

Speaker Change: The billings guidance on a constant currency basis seems to be reiterated on a constant currency adjusted for the new transaction model. It seems to be down can you just walk us through the mechanics on how one of those is reiterated and one of those is because now cut.

Speaker Change: Yeah happy to do that and maybe the best way to think about that is if you think about the core underlying business in constant currency terms and excluding the impact of the new transaction model.

Speaker Change: That we've now guided to grow at 16% to 18% and that reflects the additional.

Speaker Change: Macroeconomic uncertainty that would be factored in thats, obviously constant currency. So it doesn't include any currency benefits. It only reflects the additional macroeconomic uncertainty that would be factored in quite discretely into the forecast.

Speaker Change: Which we had not done back in February.

Speaker Change: That explains that Delta and I will just reiterate that we've not actually seen any impact in the business just yet we didn't see anything in Q1 haven't seen anything in major yet and so that's just prudent on our part.

Speaker Change: The other piece then is the impact of the new transaction model itself and we are seeing a greater tailwind from that because we are seeing greater adoption of the new transaction model. So that is actually giving us a greater tailwind mechanically.

Speaker Change: To the billings number and.

Speaker Change: That's why that impact increased by one percentage point, which gets you back to the same constant currency growth rate that we had including the new transaction model back in February.

Speaker Change: Okay, and then maybe just as my follow up I think in the prepared remarks. It was mentioned that you are seeing most of the multi year deals renew is annual.

Speaker Change: Is that surprising to you is that in line with your expectations. Maybe you could just give us some color on why previous customers, who chose to lock in for longer now choosing to only go with.

Speaker Change: Annual deals.

Speaker Change: Yes, that's not something that we've actually seen.

Speaker Change: We didn't we didn't specifically say anything to that effect in the prepared remarks.

Speaker Change: What we've just generally continue to see as the onset of the final stages of the billings transition.

Speaker Change: Are you starting to see the the annual billing stack rebuild from the.

Speaker Change: From the transition that we went through where we converted most customers from.

Speaker Change: Annual from fully prepaid contracts to annual billings.

Speaker Change: Makes sense.

Speaker Change: Thank you.

Speaker Change: Thank you our next question.

Speaker Change: Comes from the line of Tyler Radke of Citi. Please go ahead Tyler.

Tyler Radke: Hey, Jeff Hey, Andrew Thanks for taking the question here I wanted to ask you about the <unk> generic I think you've talked about some higher than expected upfront revenue in the quarter or at least pointed to that as a source of outperformance. So did the EPA timing.

Speaker Change: And a little bit different than you expected and just given the conversations you're having with other EDA customers how are those expansions.

Speaker Change: Tracking are trending relative to what you've seen typically.

Speaker Change: Yes, Tyler Great question, and it's great to talk to you again, so the on the upfront revenue that was one of the contributing factors. It was it was not outsized. It was just one of several factors that that helped.

Speaker Change: The overall revenue number in the quarter. We also saw strong billings linearity in the quarter as I mentioned, a few minutes ago. We saw consistent performance across February March and April and that billings linearity also helped us a little bit from the standpoint of the actual revenue recognition that we get in the quarter.

Speaker Change: We saw strength universally across the three months in terms of what we're seeing with respect to how customers are thinking about their renewals and uplift on <unk>.

Speaker Change: Again, so far we haven't seen anything in terms of either renewal rates are in terms of the uplift associated with that there's always an occasional contract here or there that might be an outlier, but but fundamentally the momentum that we've seen in the business has continued.

Speaker Change: And we've just factored some prudence in.

Speaker Change: But that as we've guided in case that deteriorates in the future, but we haven't seen that yet.

Speaker Change: Okay helpful explanation, and if I could ask a follow up just on pricing philosophy. So.

Speaker Change: Certainly this is well before your time Dinesh and dating back to Andrew when you took the range, but the beginning of the subscription transition you're offered kind of annual price locks for a lot of customers to migrate them over for maintenance I think it was capped around three years to 4% over the call. It the last.

Speaker Change: Decade, or so you have delivered a lot of innovation to the platform not to mention what youre doing on the AI side. So how are you thinking about the.

Speaker Change: The uplift or the pricing philosophy as those customers come up for renewal in <unk>.

Speaker Change: Get them back to standard pricing over time, yeah. So that's the customer that we call the maintenance to subscription cohort.

Speaker Change: They actually they were actually given 10 year kind of visibility to price increases and price changes in their plan that that that program will sunset in the next foreseeable future you can do the math in terms of 10 years from when the subscription transition began.

Speaker Change: Ultimately, we will we will give price increases at a cohort that are consistent with the value we deliver but it's just too early to talk about that but again.

Speaker Change: That program hasn't fully sunset it yet, but it will out there in the future.

Speaker Change: In the near future.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: That is all the time, we have for Q&A today.

Speaker Change: I'd now like to turn the conference back to Simon Mays Smith for closing remarks, Sir.

Speaker Change: Thank you Latif and thanks, everyone for joining we look forward to seeing many of you over the coming days weeks and months on the road. If you have any questions in the meantime, please just ping me or the team be happy to chat otherwise, we'll catch up on our Q2 conference call.

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

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Speaker Change: Thank you for standing by and welcome to Autodesk first quarter and full year fiscal 'twenty 'twenty six earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: After the speaker presentation, there will be a question and answer session.

Speaker Change: SaaS. Good question during the session you will need to press star one one on your telephone.

Speaker Change: To remove yourself from the queue you May press star one again.

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

Speaker Change: Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss order Thats fiscal 'twenty six first quarter results, Andrew and ignore star CEO and generous schmo Gianni our CFO on the line with me.

Speaker Change: During this call we will make forward looking statements, including outlook and the related assumptions and on products go to market and strategies.

Speaker Change: Actual events or results could differ materially.

Speaker Change: Please refer to our SEC filings, including our most recent Form 10-K, 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.

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

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

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

Speaker Change: We will quote several numerical growth changes during this call as we discuss our financial performance.

Speaker Change: Unless otherwise noted each such reference represents a year on year comparison.

Speaker Change: All non-GAAP numbers referenced in today's call are reconciled in our press release or XL financials, and other supplemental materials available on our Investor Relations website.

Speaker Change: And now I will turn the call over to Andrew. Thank you Simon and welcome everyone to the call. All of this delivered strong first quarter results revenue and non-GAAP earnings per share topped the higher end of our guidance ranges and billings non-GAAP margins and free cash flow exceeded our expectations.

Speaker Change: Two things are clear against an uncertain geopolitical macroeconomic and policy backdrop first our strong momentum and performance in the first quarter of fiscal 'twenty six set us up well for the year and second we continue to make the right decisions to drive long term shareholder value, we are focusing our growth investments on our strategic.

Speaker Change: Priorities in cloud platform and AI, we are optimizing our sales and marketing and investing to enable future optimization that drives higher margins. We are allocating more capital to share repurchases as our free cash flow stack rebuilds from the transition to annual billings for most multi year contracts and with the appointment of John K Hill, ROM Krishnan, Jeff Epstein and Chris.

Speaker Change: Simmons, we are refreshing our board to guide the next decade of growth.

Speaker Change: In this uncertain World Autodesk has three sources of certainty first the new transaction model as a proactive plan to integrate more closely with our customers and drive additional business, while also increasing automation and reducing duplicative workflows with our channel partners.

Speaker Change: It opens up new growth and margin opportunities for Autodesk second rebuilding our free cash flow stack. After the transition to annual billings for most multi year contracts increases our capacity to sustainably return cash to shareholders through share repurchases and third as we come to the end of those two major business model transitions ATA.

Speaker Change: Desk will be easier to analyze and understand it.

Speaker Change: I'll now turn the call over to Dinesh to discuss our quarterly financial performance and guidance for fiscal 'twenty. Six I'll then come back to update you on our strategic growth initiatives.

Dinesh: Thanks, Andrew Q1 was another strong quarter overall, the underlying momentum of the business was similar to prior quarters, we saw strength in ACO in upfront revenue from enterprise business agreements or <unk> and in the Autodesk store as friction from the new transaction model implementation process continue to ease.

Dinesh: I'll go to market optimization plan is also on track.

Speaker Change: Chief revenue Officer, Andy Elder joint on May 12th from Microsoft.

Speaker Change: Total revenue in the first quarter grew 15% as reported and 16% in constant currency the.

Speaker Change: The contribution from the new transaction model to revenue was $78 million in the first quarter.

Speaker Change: Total revenue grew 11% in constant currency and excluding the impact of the new transaction model. Please.

Speaker Change: Please see the tables in our press release earnings deck, and XL financials for details by product and region.

Speaker Change: Billings increased 29% as reported and 30% in constant currency, reflecting the shift to annual billings for most multiyear contracts and the transition to the new transaction model.

Speaker Change: The contribution from the new transaction model to billings was $105 million in the first quarter.

Speaker Change: Billings grew 22% at constant currency and excluding the impact of the new transaction model.

Speaker Change: Our feel of $7 2 billion and current RVO, a $4 6 billion grew 21% and 16% respectively.

Speaker Change: Turning to margins.

Speaker Change: First quarter, GAAP, and non-GAAP operating margins were 14% and 37% respectively.

Speaker Change: GAAP operating margins decreased seven percentage points, primarily due to restructuring charges of $105 million and a one time noncash charge of $54 million, reflecting a cumulative adjustment and stock based compensation since fiscal 1999 related to the company's employee stock purchase program.

Speaker Change: The financial impact of this was immaterial and any of our historical reporting periods. For example, it was a total of $4 million in fiscal 2005.

Speaker Change: There are more details in the earnings deck. This does not affect the trajectory of stock based compensation for future years, we remain very focused on bringing stock based compensation as a percent of revenue to below 10% and in part reflect that intent we have incorporated it into a long term executive incentive plans.

Speaker Change: non-GAAP operating margins was strong increasing three percentage points.

Speaker Change: This reflected operating leverage from ongoing cost discipline and timing benefits from restructuring, partly offset by the margin drag from the new transaction model.

Speaker Change: First quarter free cash flow was $556 million.

Speaker Change: Moving on to capital allocation, we continue to focus organic investment on our strategic priorities. We purchased approximately one 3 million shares for $353 million at an average price of approximately $269 per share turning to guidance.

Speaker Change: I will again speak to the numbers, excluding the impacts of the new transaction model and in constant currency to give you a clearer view on the underlying dynamics of the business.

Speaker Change: In the earnings deck, you'll see that we have against without the impact of the new transaction model and currency movements for our fiscal 2006 guidance.

Speaker Change: The underlying momentum of the business in the first quarter of fiscal 2006 was consistent with recent quarters.

Speaker Change: Since February the U S. Dollar has depreciated against major currencies and macroeconomic uncertainty has increased.

Speaker Change: The increases in our billings revenue and free cash flow dollar guidance ranges. Therefore reflect those foreign exchange movements, partly offset by additional caution in our underlying growth assumptions to reflect greater macroeconomic uncertainty.

Speaker Change: To give you a feel for what this means when compared to our prior guidance. The lower ends of our new billings and free cash flow ranges assume that new business growth for the rest of the year Decelerates at roughly the same rate as during the pandemic and that EBITDA renewal uplift rates deteriorate.

Speaker Change: Our underlying revenue growth guidance is unchanged because it's ratable nature that makes it less volatile and our business performance in the first quarter has already incrementally reduce the risk of a guidance for the remainder of the year.

Speaker Change: So the billings guidance range increases to seven $1 6 billion to $7 $31 billion.

Speaker Change: The revenue guidance range increases to $6 95 billion to $6 $995 billion and the free cash flow guidance range increases to $2 1 billion to $2 2 billion.

Speaker Change: On margins the revenue tailwind from exchange rate movements as in part balanced by cost headwinds, but we've raised the bottom end of our non-GAAP guidance range, reflecting operating leverage and ongoing cost discipline.

Speaker Change: GAAP earnings per share guidance reflects in part the one time charges taken in the first quarter, we've increased our non-GAAP earnings per share guidance, reflecting the non-GAAP operating margin increase.

Speaker Change: The slide deck on our website has more details on modeling assumptions for the second quarter and full year fiscal 2006 <unk>.

Speaker Change: Andrew back to you.

Andrew: Thank you Dinesh Autodesk.

Speaker Change: Autodesk is focused on the convergence of design and making the cloud enabled by platform industry cloud and AI are.

Speaker Change: Autodesk is at the forefront of convergence, because we've been evolving and investing in the business models products and platforms and go to market that capitalize on it let me give you a few examples from the quarter.

Speaker Change: In ACO, one of the world's leading infrastructure consulting firms closed its sixth EMEA with us the second largest deal in Autodesk history. Our partnership is centered around accelerating its transition to bim facilitating the adoption of global data standards and standardizing on Autodesk construction cloud is its common data environment for digital delivery.

Speaker Change: These initiatives will enable automation to replace low value manual tasks enhanced value added engineering reduce errors and rework and establish a framework for leveraging AI. The ultimate goal is to transform its design and delivery approach and leverage its scale and expertise to accelerate growth drive efficiency and improve profitability.

Speaker Change: Hitachi energy provides innovative sustainable and efficient solutions that support energy transition as part of the most recent EPA renewal it expanded adoption of Autodesk construction cloud rapid infusion to advance renewable energy integration and Digitization. Furthermore, Hitachi energy invested in asset and data driven capabilities.

Speaker Change: <unk> and digital twin solutions, and creating a digital foundation throughout the product lifecycle and various disciplines. This includes enabling predictive maintenance through the real time monitoring and analysis of grid performance.

Speaker Change: Our leading design build general contractor in existing GC pay in building connected customer began looking for an integrated solution to manage increasing project complexity and drive efficiency.

Speaker Change: After a thorough evaluation at selected Autodesk, along with a platinum implementation partner to provide specialized implementation and onboarding plans by standardizing on Autodesk construction cloud this customer will unify project data and workflows and improve collaboration across design engineering and subcontractors.

Speaker Change: These stories have a common theme converging people processes and data across the project lifecycle to increase efficiency and sustainability, while decreasing risk.

Speaker Change: Our comprehensive end to end industry cloud and platform drive convergence and extend our footprint further into larger growth segments like infrastructure and construction and that is reflected in the continued strong revenue and new customer momentum in construction.

Speaker Change: Moving on to manufacturing.

Speaker Change: We made excellent progress on our strategic initiatives customers continue to invest in their digital transformations and consolidate our design and make platform to drive growth and increase resilience.

Speaker Change: <unk> is a German based industrial group specializing in engineering and system solutions across laboratories process systems and filling in sealing machines. It was looking to transition from <unk> to <unk> solutions to streamline workflows and accelerate sales cycle times and project delivery in Q1, it purchased our product design and <unk>.

Speaker Change: Manufacturing collection and vault professional to supercharge, it's three design and data management capabilities.

Speaker Change: While they are expected to enhance collaboration across stakeholders and efficiently manage design iterations through the project lifecycle.

Speaker Change: George P Johnson, which create immersive brand experiences partnered with Autodesk for its large scale digital transformation by breaking down silos and automating workflows G. P. J sought to enhance collaboration scheduling capacity planning and shop for visibility to avoid late stage changes that can result in project delivery.

Speaker Change: And financial risk the team at G. P. J, we'll transition engineering design and for fabrication facilities from several disparate legacy applications to fusion managing operations a modern consolidated in connected system with fusion managing operations G. P. J, we'll have three design tools.

Speaker Change: With integrated process automation powered by a common data environment.

Speaker Change: Grain handler is a global leader in grain handling equipment historically it relied on to competitor solutions, one for design and one for manufacturing facing growing inefficiencies from limited process integration grain handlers selected fusion to modernize its entire design and manufacturing workflow.

Speaker Change: Weighted cadcam capabilities on a unified platform will streamline engineering processes and accelerate production timelines.

Speaker Change: This story highlights customers' growing desire for unified workflows, and infusions, increasing ability to handle complex high stakes manufacturing processes and multi seat environments.

Speaker Change: Converged data opens up new opportunities for Autodesk.

Speaker Change: As customers seek to drive efficient innovation fusion is driving strong ACB growth with extension attach rates, increasing and driving average sales prices higher and we're delivering meaningful productivity gains to customers, where we deploy AI I talked about our AI powered auto constrained last quarter. This feature has created over.

Speaker Change: 580000 constraints for our fusion users since launch by automating the critical but laborious task of defining sketch geometry.

Speaker Change: This is a task that is foundational to three D model generation.

Speaker Change: Since last quarter user acceptance rates of auto constrained command have increased to more than 50% through our continual improvement in UX enhancements. This is indicative of the potential of Autodesk AI as a continually improves our users' experience with fusion.

Speaker Change: And education Aston University is preparing future engineers to drive innovation through next generation design analysis and manufacturing by making the entire autodesk product portfolio available to all students. Additionally, it is migrating diffusion for first year modules and all engineering related disciplines, providing a modern platform.

Speaker Change: To foster collaboration and hands on learning and equip the next generation of engineers and designers with industry relevant skills and lastly, we continue to find new ways for our customers to consume our products and services in ways that work best for them. For example, we helped a major engineering consulting company in Taiwan remove noncompliant versions of our software and have the necessary.

Speaker Change: License is to ensure access to the latest and safest software for all its employees.

Speaker Change: And we enabled flex consumption for Jones engineering, a global contractor. So they can manage fluctuating project requirements in their cutting edge offsite fabrication and modular modular manufacturing business. This enabled rapid scaling of new projects and reduced administrative bottlenecks.

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

Speaker Change: Our disciplined execution is driving greater operational velocity and efficiency, we are deploying capital to grow the business further reduce our share count and enhance value creation over time in combination. We believe these factors will deliver sustainable shareholder value over many years.

Speaker Change: Let me finish with a story on.

Speaker Change: On January 7th Wildfires started in Los Angeles in the Eaton Canyon in Pacific Palisades, driven by Hurricane force winds the fires burned over 57000 acres. They displaced over 200000 residents and tragically took the lives of at least 30 people.

Speaker Change: More than 16000 structures were lost with economic damage estimated at over 250 billion.

Speaker Change: I grew up in southern California, and I lived through major earthquakes and other natural disasters, but the scale and scope of the devastation of this fire makes my heart ache for the people that still live in my childhood home.

Speaker Change: But in the spirit of resilience that defines our country.

Speaker Change: Vic leaders in the community are working together in new ways to rapidly rebuild the city and rebuild it to be more resilient. For example, the Foothill catalog foundation formed by volunteer architects and supported by Autodesk is creating a preapproved catalog of home designs that will lower costs reduced permitting delays.

Speaker Change: The construct over a year and accelerate reconstruction.

Speaker Change: Hundreds of architects have already signed on.

Speaker Change: We've seen the power of approaches like this before and Singapore are they supported the governments coordinate acts initiative, allowing teams to collaborate in a single digital model detect issues early and streamline approvals across agencies. The result faster more coordinated building processes that reduced waste and delays.

Speaker Change: We strongly support similar initiatives now being proposed at the federal level here in the U S. We are not only doing this because there isn't enough labor money or materials to build and rebuild everything that is needed to support our rapidly changing future, but also because this is how we unlock the full potential of communities. This is how we help Los Angeles.

Speaker Change: We remain in every sense the city of Angels, operator, we would now like to open the call up for questions.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May Press Star one one again please.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Korea.

Speaker Change: Barclays. Please go ahead.

Speaker Change: Okay, Great Hey, guys. Thanks for taking my questions here and nice start to the year.

Speaker Change: Thank you. Thank you.

Speaker Change: Andrew maybe just start with you.

Speaker Change: Mentioned in your prepared remarks that <unk>.

Speaker Change: Underlying momentum in the business has been stable.

Speaker Change: Just given the significant uncertainty out there could you just talk about how customer conversations are evolving if at all and maybe just touch on just broadly your thoughts on the macro given how much time you spend with customers.

Speaker Change: Second.

Speaker Change: And thanks for asking this question all right you know obviously trade policy uncertainty all of these things these have material impacts on our customers. It increases the cost of goods that they secured through the supply chain, they're material costs that creates uncertainty in their bidding processes and this is true for a wide variety of customers.

Speaker Change: I'm talking to customers. They are absolutely flagging. This uncertainty right now there's no doubt, it's creating concern for them, but when they fly get they talk a lot more about the second half of the year and they talk about things right now and kind of put this in perspective and connected back to some things <unk> said in the opening commentary.

Speaker Change: Construction backlog ticked up in the quarter.

Speaker Change: We continue to see increases in monthly active users of our products, we saw increasing bid activity on bid board and most of our customers continue to see an inflow of business.

Speaker Change: So net net of all of this is that just like us.

Speaker Change: They're feeling uncertainty, but theyre not seeing it right now in our business and their business just like we're not seeing it right now in our business.

Speaker Change: Got it that's super helpful generic maybe maybe for you.

Speaker Change: Q1 margins here.

Speaker Change: Than we expected and it was great to see the margin guide go up for the year.

Speaker Change: Could you just talk about your margin momentum a little bit and maybe in particular can you just talk about how the sales and marketing optimization plan is going generally.

Speaker Change: Thanks happy to talk about that so the team executed really well here in Q1, and we are very pleased with the strong performance on both revenue and non-GAAP operating margins for Q1 margin strength, mainly was driven by the revenue outperformance combined with just ongoing expense discipline that we have here and the team on the restructuring we are.

Speaker Change: Executing that well as youll recall, they're on a multiyear journey with the implementation of the new transaction model and.

Speaker Change: Driving the benefits from that and so the restructuring or affected the initiation of the go to market optimization and we're building that capability is now that we will need next year as we continue our sales and marketing evolution. So so far I'd say, we're on track with the overall sales and marketing optimization plan for the year and overall, we're very well set up for Q2 and the rest of the year.

Speaker Change: Yes.

Speaker Change: Very helpful. Thanks, guys. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Jay really shower.

Speaker Change: Griffin Securities. Please go ahead Jay.

Speaker Change: Yeah. Thank you good evening, Andrew starting with you you spoke of the role of your products comprehensiveness product convergence, which.

Speaker Change: Which of course, we've been a theme for you and the industry for some time with that in mind and also recalling something you spoke of in the Q4 call.

Speaker Change: You mentioned on the call that you were accelerating some of the roadmaps associated with your industry clouds, and perhaps you can elaborate on that what are you doing what have you been doing in terms of accelerating some of the development and perhaps gea of certain technologies, including in particular, perhaps.

Speaker Change: The work Youre doing to integrate ACC with forma.

Speaker Change: Then a follow up question yes.

Speaker Change: Yes, So let me let me highlight some of those things right first let me talk about the things, we're accelerating infusion, which I think are really kind of anchored in some of the strong success. We saw with fusion in the quarter were accelerating the roadmap around data management issues. This come straight from our customers. They want better bond management, they want better product data management in the cloud.

Speaker Change: <unk> with granular data from fusion. So we have worked hard to reallocate funds and focus on these customer priorities.

Speaker Change: A result, we have accelerated roadmaps across some things come out in Q1 that are relevant to these problems, you'll see more things coming out throughout the year and they are important part of driving multi seat deals for four for fusion now when you look at the roadmap for our form I don't want to get ahead of some of the things that we talked about at au, but theirs are.

Speaker Change: Of course that our customers are really interested in one of the big areas that they definitely want to be able to collaborate better across multi disciplines and they want to use kind of format is the center of that collaboration activity. So in order to facilitate some of that look for us to be accelerating some of the things that connect format deeply to Rev.

Speaker Change: It and other tools that are relevant to the.

Speaker Change: The entire interdisciplinary process. Some are some things we've done in the past and look for us to kind of dial up the presence of form a board, which is a great collaboration tool an idea collaboration tool for multidisciplinary teams and see some of those things get a little bit more emphasis in some of the roadmap work as well as of course the AI features.

Speaker Change: That we're definitely focused on and have been focused on for some time.

Speaker Change: Okay as a follow up you spoke of course Tonight again about the go to market changes the model changes and so forth one of the things that seems to be happening in parallel and maybe even.

Speaker Change: Hi.

Speaker Change: <unk> accelerated by the changes you've been making is channel consolidation, particularly here in the U S.

Speaker Change: You've seen it among some of your peers.

Speaker Change: We've seen it in your case, where you now have.

Speaker Change: There's many named entities with whom do counters partners as a decade ago. So the question is what do you see as the benefits of such consolidation or perhaps the risks of any of that consolidation in your channel. Yes. So this is something that we've been deliberately encouraging and driving through a lot of processes and engages with our <unk>.

Speaker Change: Partners, we want fewer more solution focused channel partners out there and we want I mean, more sorry, more and we want fewer transactional focused channel partners out there in our ecosystem. So as a result, what youre seeing is our larger partners are more solutions focused partners or partners that focus on their own IP R. R.

Speaker Change: Buying up some of the smaller gold and silver partners and also frankly, what you're seeing is some of the non contracted partners in silver partners lower down in the ecosystem kind of disappearing and we believe that that's advantageous to our business in its as with the flow should do in terms of the evolution. We're having now when you look at some of the benefits associated with this we actually.

Speaker Change: We saw some of these in Q1, we saw some fairly robust activity on the store.

Speaker Change: And the store grew quite nicely and most of this activity was focused in on.

Speaker Change: Increased price realization and that is a result of us capturing business down market that would've gone to transactional focused partners in the past that that's great. We want to see those customers come closer to us and that's exactly what we saw in Q1 were catching up based on some of the impacts of the new transaction model I expect.

Speaker Change: Some of that to continue how much of it continues moving forward is something that we just have to wait and see but that's one of the clear benefits. The downside of course whenever you concentrate your partners you want your partners to stay focused on the things that are important Fortunately, we've corrected for that because we have some control of the commissions in terms of the things that we incent, we want our partners do.

Speaker Change: Not only focus on renewals, but we wanted to focus on new business as well and that's that's a risk we're aware of and that we correct for with the way we compensate them.

Speaker Change: Okay.

Speaker Change: Thank you Andrea Thank you Josh.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Adam Borg of Stifel. Please go ahead Adam.

Speaker Change: Awesome and thanks.

Speaker Change: Thanks, so much for taking the questions.

Speaker Change: Andrew maybe for you and building off of James' question on the channel.

Speaker Change: Last quarter, you talked a little bit about the transaction model and I'd call. It some self inflicted hiccups as they were focusing on that as opposed to the business itself. Just curious kind of how that's progressing in general.

Speaker Change: And is there an opportunity for this to become a tailwind.

Speaker Change: Business as the channel partners continue to focus on the new business growth you just talked about.

Speaker Change: Thank you for the question Adam So so first off we're definitely not seeing the kind of disruptions. We saw last year and in Q4 associated with channel productivity. The channel partners are still working through.

Speaker Change: Adapting and Brent Onboarding their long tail of customers onto the new transaction model, but we're not dealing with the kind of systems requests or process realignments that we saw earlier in the in last year and towards towards the end of last year. So that's a really good thing. So what you should expect is that channel productivity should increase as we head out into the year and you'll actually.

Speaker Change: Hard to see channel partners kind of move beyond just onboarding existing customers and in the kind of extending their renewal activities and extending into their new business growth activities. So we're looking forward to that and we think it's a likely outcome of the current phase that we're in.

Speaker Change: Adam.

Speaker Change: I don't.

Speaker Change: Adam I might just add on that that.

Speaker Change: For some of our channel partners. The first renewals that they will have on the new model in the Americas will be in June and in EMEA, Italy in September just given that.

Speaker Change: That's been those those regions went live on the new model last year, but as Andrew was saying so far so good and over time, we will continue to focus on how we can deliver more valuable than data driven and connected products and services to our customers.

Speaker Change: Oh, that's incredibly.

Speaker Change: Paul maybe just as a quick follow up to Dash I think you're just not at our our this is the first time it was above the 100% to 110% of our age I think in years.

Speaker Change: You talked about some of that benefit coming from the new transaction model I guess.

Speaker Change: Just wanted to confirm it would've been within that range not below the range without the transaction model and why should we think it should be at the 110 range for the rest of the year. Thanks, so much.

Speaker Change: Yes, Adam that's right, it's mainly the mechanical effects with the new transaction model, it's hard to disaggregate the specific percentage, but it's safe to say that excluding that effect. It would have been consistent with where it was previously and within the 100 to 100 and 100% to 110% range.

Speaker Change: Excellent. Thanks, so much.

Speaker Change: Thank you our next question.

Jason Celaeno: Comes from the line of Jason Celaeno of Keybanc capital markets. Your question. Please Jason.

Speaker Change: Hey, good afternoon. Thank you.

Speaker Change: One question on on kind of the numbers.

Speaker Change: So if we look at the Q1 call it revenue constant currency adjusted for the new model transition that growth was 11%.

Speaker Change: Exiting last quarter like for like this metric was up 9%, so it actually accelerated a little bit.

Speaker Change: Maybe can you just speak to what drove that uptick.

Speaker Change: And then I'll have a follow up.

Speaker Change: Yes, Im happy too. So Q1, we saw strength across the quarter in Q1, we're obviously very pleased with the outcome that we had I mentioned some of the drivers earlier in the prepared remarks, there are some of the strength game in the quarter from the EC.

Speaker Change: A little bit more from the upfront revenue from <unk> and also from the Autodesk store some of the friction from the new transaction model implementation continue to ease.

Speaker Change: So all of those were the what are the drivers and fundamentally our businesses has been very resilient and it's been like that over the past couple of years, because we are diversified across various industries and geographies.

Speaker Change: And segments one of the things I will point out for Q1. In particular is Q1 was an easier comp just given the timing of acquisitions that we had during fiscal 2005 most of our revenue from acquisitions last year came in in Q2 to Q4.

Speaker Change: So that's about a one percentage point impact there, but fundamentally even if you consider.

Speaker Change: Adjusting for that it was still a strong performance overall.

Speaker Change: Okay, and then keeping on this logic when we look at the full year guidance, 8% to 9% on a normalized FX neutral basis can you just remind us what you built in from like an extra cushion perspective, I think last time, you talked about the go to market realignment.

Speaker Change: Sales leadership, but was there any cushion built in for macro or.

Speaker Change: Are either of those assumptions changed after after these 90 days. Thank you.

Speaker Change: Yes, no assumption changes with respect to our core underlying business when we initiated guidance for the back in February.

Speaker Change: We had been quite transparent that we had not seen anything in the business at the time and we had assumed that the macroeconomic environment that that thing would stay unchanged. So fast forward demand the only two changes are.

Speaker Change: That we've seen the U S dollar weakened and that's currency benefits that would be passed along in the guide and we do see greater macroeconomic uncertainty that which we have now factored into the forecast and I spelled out some of the assumptions earlier in the prepared remarks. So those are the only two broad assumption changes if I think about what that means from the standpoint of.

Speaker Change: <unk> revenue growth, particularly in the back half of the year.

Speaker Change: Slower growth in revenue in the second half is mainly a function of these guidance assumptions that we've used.

Speaker Change: As we said, we haven't actually seen that impact yet in the business, but we are prepared for it and we just think it's prudent to factor that in.

Speaker Change: Perfect. Thank you.

Speaker Change: Thank you.

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

Speaker Change: Great. Thank you so much I wanted to follow up on some of the AI comments around auto constrained usage.

Speaker Change: Yeah.

Speaker Change: You said you'd acceptance rates increase so looking ahead are there any particular areas, where you see the biggest opportunity to launch more AI functionality, how should we think about the pace of deployments and understanding it's still really early what could this mean for an opportunity to improve upsells or start to use the price lever a little bit Martin.

Speaker Change: It could be driving a lot more innovation in our portfolio. Thank you yeah. Thank you for that so first off let's just restate our philosophy here, where we're very interested in delivering highly specific AI enhancements that drive real productivity gains for our customers things that attack problems or challenges that our customers have that are either deeply.

Speaker Change: Repetitive or time consuming and that we can kind of point them to and solve the problem for them. The auto constraint features a great example of that what we're doing with drawing automation is another great example of that.

Speaker Change: You should look for us to continue to rollout features like that now this is a pretty intelligent features remember these are built off of our own foundation models. These are these are models that actually understand a sketch so so to speak and they understand geometry look for us to continue to rollout increasingly sophisticated tools that kind of takeaway some.

Speaker Change: This grunt work from the customers and allow them to be more productive with the tools. They have and there will be long term opportunities for us one infusion land, we intend to make fusion. The most AI powered tool out there in the mechanical design market that is going to be a clear example advantage for us as we move to continue to displace competitors.

Speaker Change: Currently we're gaining market share right now we look to accelerate that with AI, primarily as one of the one of the key tools now as you look into AUC land, you're going to see more tools, specifically coming out informa that actually enhance form is already existing AI capabilities youll see some interesting things coming out there again.

Speaker Change: Targeted at some of these repeating repeatable processes. Eventually this will also translate into new opportunities. There's two ways that form is increasing capabilities translate an opportunity. One is it makes it easier to take sophisticated <unk> down market to ultimately it will make the total solution more powerful and at some point, we will be able to recover price at that point.

Speaker Change: Still early days, let us let us deliver some of the value and the customers recognize that and then we'll be able to kind of explore the deeper implications in terms of revenue uplift.

Speaker Change: Great. Thank you very much and then just as a quick follow up I believe last quarter.

Speaker Change: There was a reference about possible disruption from the restructuring plans in the Cri transition, which was prudently included in guidance. It sounds like it's been minimal disruption, thus far but could you just provide a little bit more color on what youre seeing and is there any point in the year, where you feel like we would be getting more comfortable that these risks are behind us.

Speaker Change: Yes.

Speaker Change: Yes look I'll take that and <unk> can add anything if he wants to add anything you look obviously, we undertook a fairly major restructuring in the first quarter. We had mitigation plans, we had other things associated around that to make sure that we kind of manage that disruption. We did factor. Some disruption and then there are of course, there was disruption associated with such a.

Speaker Change: A large action like that but we also had some other aspects of the business that showed improvement. The store was another great example of where we saw improvement we saw improvement in upfront revenue. So there was some.

Speaker Change: Offsetting momentum in the business as well that helped us get through some of these things as you look through it we already have our new CRO.

Speaker Change: In place the acting CRO was was one of our one of our team Elizabeth Warren's on our team. So she was the acting CRO she's here to bridge the new CRM over while we're not kind of through the total not whole on on getting through all of these things we feel like we have this under control and that we've kind of accounted for the risks associated with that generic do you want to add anything.

Speaker Change: No I think Andrew that you summarized it nicely.

Speaker Change: Great. Thank you.

Elizabeth Porter: Thanks Elizabeth.

Speaker Change: Thank you. Our next question comes from the line of Bob <unk> Shah of Deutsche Bank. Please go ahead Bob.

Bob Shah: Great. Thanks for taking my questions and congrats on the strong start to the year Dennis just one clarification for you on the guidance it sounds like you're embedding.

Bob Shah: Incremental prudence just in terms of the macro and just clarifying that youre not seeing anything yet in the business that caution you. This it's more of the headlines and the customer conversations that youre having.

Dennis: Enabling you to do this or is there something that youre seeing today, no you're exactly right. Kevin we haven't actually seen anything we saw good momentum in the business in Q1 that has continued into Q2 so far.

Bob Shah: We feel good about where we stand, but it's just being prudent about what we are hearing and seeing out there.

Speaker Change: That's helpful. There and then Andrew just one for you I know in the past you've talked about this and when you pick it up in a conversation as well that the industry continues to be labor constrained.

Speaker Change: When do you think the customer is this still a challenge for them. How long do you think that persists and how do you think AI might be able to solve this and how do you I didn't didn't capture that.

Speaker Change: Look we were pretty consistent that there's not enough labor materials and capital to build and rebuild everything that needs to be rebuilt our industry desperately needs digital efficiency.

Speaker Change: This isn't going away I think the current climate made actually exasperate. Some of these labor labor constraints as well the good news is as we sell them, we sell certainty in uncertain times, we sell tools that allow people to digitize the process allow them to do more with the resources. They have this this frankly in my opinion is one of the reasons.

Speaker Change: Why were seeing robust adoption of our expanded design and make portfolio is because we're actually delivering them the kind of productivity they need in a labor constrained market. Those constraints are going to be persistent I actually think in terms of impact on our business. It's positive for us because it continues to force industries like AUC to look at Tech.

Speaker Change: <unk> is a big is a big productivity lever for them they need technology now they realize that they're way behind relative to manufacturing and this is their opportunity and their moment to start embracing technology to increase their productivity and deal with these fundamental capacity constraints.

Speaker Change: Thank you. Our next question comes from the line of Joe Rock of Baird. Please go ahead Joe.

Joe Rock: Great. Thanks for taking my question I wanted to ask.

Speaker Change: Of that Andy and the new revenue officer is in place.

Speaker Change: The search for the next.

Speaker Change: Next individual there as some of the skill sets and we're looking for and particularly.

Speaker Change: And it's going to have.

Speaker Change: A lot of new things he can undertake autodesk more of.

Speaker Change: And in control direct sales organization and some of the opportunities.

Speaker Change: Thinking about going forward, Andy is going to be to escalate.

Speaker Change: Yes. So you know Andy came to us from Microsoft He brings a background with really strong enterprise sales skills, alright, which is really important because increasingly we're getting into and an end to end solutions with our customers, we're going deeper into their businesses. We're a much more strategic partner in a lot of a lot of customer accounts.

Speaker Change: Good to have leadership that gets that that understands that he's got a lot of deep cloud knowledge as cloud native kind of expertise with regards to selling solutions that are cloud enabled end to end solution. So he is basically rounding out our skill set with kind of the skills that we need moving forward into the next chapter of Autodesk history. So we're excited that he has joined and were.

Speaker Change: Looking forward to him having an impact.

Speaker Change: Okay.

Speaker Change: Great and then.

Speaker Change: I wanted to ask you about AI again.

Speaker Change: Andrew touched on a lot of the initial order that his focus is targeting things that are applicable to repeatable processes and customer workflows, which I would imagine doing that customers see the ROI very quickly.

Speaker Change: I'm more interested in maybe the future use cases, and when you scan what's happening again kind of the start up community around tax the cat cat or scan to CAD or if some of these capabilities and our projects are anemia is focused on some of this stuff, but when you think about the future of CAD uses is autodesk do a what it.

Speaker Change: <unk> to be positioned well.

Speaker Change: When those two.

Speaker Change: Through viable.

Speaker Change: We are absolutely doing what needs to be positioned I will I will let some ways defer you to Autodesk University for this year, okay not to get ahead of some of the announcements, but we are building very powerful tools that will allow people to generate different types of geometry, and significantly simpler and simpler ways now I consider these both.

Speaker Change: Nextgen in both massive productivity Enhancers, yes, obviously, we are looking at highly disruptive things that actually dramatically change the workflows, we not only we not only are doing some of these things organically, but we watch some of these companies externally as well maybe to give you a good example, and one of the most highly disruptive.

Speaker Change: Industries that we have media entertainment look at what we're doing with.

Speaker Change: Wonder Wonder studio, which is now flow studio.

Speaker Change: A highly disruptive direct direct to.

Speaker Change: Two special effects video.

Speaker Change: Video environment that allows people to create scenes create character animations overlays and things very generative way highly different workflows and what our customers do.

Speaker Change: Their current environments.

Speaker Change: We're doing things like that as well in our other industries, it's just the rate and pace is different.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Taylor Mcginnis of UBS. Please go ahead Taylor.

Taylor McGinnis: Hi, Thanks, so much for taking my question just maybe on the operating income margin guidance. So I think the commentary last quarter was that most of the expansion. This year was really coming from operating efficiencies and scale and that like a good portion of the savings from the ramp for being reinvested back into the business. So just how are you.

Speaker Change: About the reinvestment of those savings today have your views at all changed and then you mentioned you have mentioned in the past the opportunity that scaled back on rent.

Speaker Change: Dundon span so just where are what inning are we in that.

Speaker Change: Are there more opportunities for that has seen it throughout the year. Thanks.

John Cahill: Tyler This is John I'll take that.

Speaker Change: So far we're on track for the plan that we had laid out for fiscal 2006. When we did the restructuring we said that we were going to reinvest a portion of the savings from the restructuring and building the capabilities that we know that we will need for the next body.

Speaker Change: Body of work that we need to do on the sales and marketing side in particular, particularly as we think about building tighter integrations with.

Speaker Change: Our partners in.

Speaker Change: And continuing to scale as we build out the self serve motion. So those are all on track and the overall spend planned for the year largely stays unchanged.

Speaker Change: You'll see that with the strong performance that we had on revenue in Q1 that that outperformance largely went to the bottom line in.

Speaker Change: <unk> kept our full year spending outlook unchanged compared to the prior outlook.

Speaker Change: We continue to expect that our spend in constant currency holding aside the new transaction model will be right around the 4% Mark in terms of year over year growth compared to 2005, and just by way of comparison in fiscal 2005 that number was 7% over fiscal 'twenty four so we've.

Speaker Change: We've definitely baked that in into the underlying business and that's a big source of the of the op margin expansion that we laid out at the start of this year.

Speaker Change: Yes, no it reinforced that just a little bit Taylor, we're on a multiyear journey to driving productivity enhancements in our sales and marketing organization, we're working on systems and processes like Dinesh said that that lead to future and ongoing optimizations that will turn into productivity and ultimately turning to margin growth. So this is not a one and done kind of a situation. When this is an ongoing kind of effort.

Speaker Change: Within the company.

Speaker Change: Perfect. Thank you so much.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Michael <unk> of Wells Fargo Securities. Please go ahead Michael.

Michael: Hey, Great I appreciate you, taking the questions and all the commentary throughout the call.

Michael: I was just curious if you'd be able to compare and contrast, what you're seeing across geos at all we can see the currency impacts, but just wondering it doesn't sound like there's anything overly specific youre highlighting but if there is any difference in terms of momentum or activity youre seeing across certain regions versus what you were maybe expecting starting the year.

Michael: Yeah generally broadly speaking, we're seeing the kind of momentum we expected I think one area, where you might have seen a little bit more softness was in Asia Pacific.

Speaker Change: Just kind of help me understand what's going on there.

Speaker Change: One Japan remember was the last on the new transaction model. So Japan is still absorbing some of the impacts of the new transaction model. They are still going through some of the ramp up and you see some of that.

Speaker Change: Impacts in our Asia Pacific growth, but also in China, and Korea are much more exposed to the macroeconomic turmoil in some of the the trade discussions that are going on right now so a little bit more softness there, but generally speaking some of those things where expected, especially with Japan, and that's kind of the only differences that stand out.

Speaker Change: Relative to the rest of the business.

Speaker Change: Very helpful and just as a follow on for Gino I think.

Speaker Change: Relatively clean start to the year. Despite the uncertainty would be may be useful to just get an update around your early observations as autodesk CFO. If theres anything you would highlight for investors in terms of your philosophy in framing targets, how you SaaS gross margin tradeoff in different scenarios.

Speaker Change: As the year plays out I think just the framework. There is certainly helpful. Thank you.

Speaker Change: Yes, happy to do that fundamentally nothing different than my first few months when I.

Speaker Change: When I was in the job and I provided a view on that on the last call.

Speaker Change: I continue to see the opportunity for us.

Speaker Change: To address a rich market opportunity ahead and to capture that growth.

Speaker Change: <unk> talked at length about the the product opportunity with respect to industry clouds and platform and AI.

Speaker Change: We're excited about that and focused on helping the team support growth in the future as well as driving strong operational focus on driving operational margin expand operating margin expansion, there's there's opportunity for that as well so no real change in terms of our core guidance philosophy nothing has changed there either.

Speaker Change: Underlying momentum of the business continues and where we're off to a great start here in Q1.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you.

Speaker Change: Next question.

Speaker Change: Comes from the line of city.

Speaker Change: Pentagon Mizuho.

Speaker Change: <unk>. Please go ahead Sir.

Speaker Change: Thank you and Congress on a good quarter in Australia.

Speaker Change: This is your first full quarter as a CFO a nice quarter.

Speaker Change: So.

Speaker Change: My question is.

Speaker Change: Just wanted to understand the linearity that you saw in the quarter mainly.

Speaker Change: Given all the uncertainty we saw carriers indication all of that.

Speaker Change: Wondering what kind of momentum also youre seeing in may as well and loyalty.

Speaker Change: Are you also kind of raise price as we all love to hear your thoughts on that.

Speaker Change: Yes happy to talk about that there weren't really any meaningful trends that we would call out during the quarter I think it was strong and consistent throughout.

Speaker Change: We were off to a great start in February and that momentum continued in March as well as in April.

Speaker Change: And that momentum has continued so far into the into the month of May as well as I mentioned, it's obviously too early to say anything more specific on Q2, but I will say that there are we have confidence in our in our guidance.

Speaker Change: Okay and then.

Speaker Change: Going back to the model changes and one of the benefit of that is cross sell opportunity.

Speaker Change: Should we think about the cross sell more in the second breaking all time when your.

Speaker Change: Our direct sales and gas they had or have you started seeing some kind of benefit as youre transitioning customers to the transaction model.

Speaker Change: Yes.

Speaker Change: I think the best way to think about that as the cross sell and upsell automation that we're gonna be driving there are more longer term things like theyre not going to be tied to any specific renewal cycle. So look for those is something that kind of like gets built into our business cadence and allows us to kind of more easily grab we can actually do these things off cycle in the future of the systems will be able to support.

Speaker Change: Customers, adding additional capabilities or moving to flex in the middle of a cycle. So it's something that will be dynamically introduced into our business not tied to any individual renewal event or events like that in the future. So that's part and parcel of the investments we're making in some of the additional systems upgrades in systems work. It allows.

Speaker Change: As to kind of do some of these more dynamic adjustments throughout the customers' lifecycle.

Speaker Change: Thanks for that color Andrew Youre welcome.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Ken Wong of Oppenheimer <unk> Company. Please go ahead Ken.

Speaker Change: Fantastic I just wanted to build on Taylor's question about the go to market transition and kind of the cost coming out of the P&L.

Speaker Change: We saw a big downtick in duplicative costs. After you guys moved all of your partners over across the regions.

Speaker Change: Is there another goalpost that we should think we should be thinking about that sees another big swatches expense coming out would that be getting everyone across on the first renewal or anything you guys can spotlight that we should be we should be thinking about or looking for.

Speaker Change: I think it's too early to talk about the.

Speaker Change: What the specifics of the ongoing sales and marketing optimization at this stage.

Speaker Change: That we need to do is to continue to build the capabilities to enable the future of the sales and marketing optimization. Some of the elimination of the duplicative costs that you've touched on I think that once we move forward with the capabilities that we need to enable I think that'll then unlock more opportunity for us. So we can spend all of that out in there.

Speaker Change: A little bit more detail at a later point in time.

Speaker Change: Okay got it and then just wanted to touch on the Billings guide.

Speaker Change: And you guys did downtick slightly for the constant currency adjusted for.

Speaker Change: Adjusted for currency and transaction model just wondering what was what did you guys run into from a headwind perspective that impacted the transaction model piece of that guide.

Speaker Change: So theres no particular headwind that we ran into in fact, if anything the greater impact of the new transaction model suggests that the transaction new transaction model is actually working well and customers are migrating nicely onto the onto the direct model. So if anything that's actually a positive sign for us in the business and that we're executing that part.

Speaker Change: The model well.

Speaker Change: Okay perfect. Thanks, a lot guys.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Josh Tilton of Wolfe Research. Please go ahead Josh.

Speaker Change: Hey, guys. Thanks for sneaking me in here.

Speaker Change: Again, I don't mean to beat a dead horse, but maybe just following up on that last question.

Speaker Change: The billings guidance on a constant currency basis seems to be reiterated on a constant currency adjusted for the new transaction model. It seems to be down can you just walk us through the mechanics on how one of those is reiterated and one of those is because now cut.

Speaker Change: Yeah happy to do that and maybe the best way to think about that is if you think about the core underlying business in constant currency terms and excluding the impact of the new transaction model.

Speaker Change: That we've now guided to grow at 16% to 18% and that reflects the additional.

Speaker Change: Macroeconomic uncertainty that would be factored in thats, obviously constant currency. So it doesn't include any currency benefits. It only reflects the additional macroeconomic uncertainty that would be factored in quite discretely into the forecast.

Speaker Change: Which we had not done back in February.

Speaker Change: That explains that Delta and I will just reiterate that we've not actually seen any impact in the business just yet we didn't see anything in Q1 haven't seen anything in may just yet and so that's just prudent on our part.

Speaker Change: The other piece then is the impact of the new transaction model itself and we are seeing a greater tailwind from that because we are seeing greater adoption of the new transaction model. So that is actually giving us a greater tailwind mechanically.

Speaker Change: To the billings number and.

Speaker Change: That's why that impact increased by one percentage point, which gets you back to the same constant currency growth rate that we had including the new transaction model back in February.

Speaker Change: Okay, and then maybe just as my follow up I think in the prepared remarks. It was mentioned that you were seeing most of the multi year deals renew is annual.

Speaker Change: Is that surprising to you is that in line with your expectations, maybe could you just give us some color on why previous customers, who chose to lock in for longer now excusing to only go with.

Speaker Change: Annual deals.

Speaker Change: Yes, that's not something that we've actually seen.

Speaker Change: We didn't specifically say anything to that effect in the prepared remarks, I think what we've just generally continue to see is the word.

Speaker Change: We're now in the final stages of the billings transition.

Speaker Change: We're starting to see the the annual billing stack rebuild from the.

Speaker Change: From the transition that we went through where we converted most customers from annual from fully prepaid contracts to annual billings.

Speaker Change: Makes sense.

Speaker Change: Thank you.

Speaker Change: Thank you our next question.

Speaker Change #100: It comes from the line of Tyler Radke of Citi. Please go ahead Tyler.

Tyler Radke: Hey, Jeff Hey, Andrew Thanks for taking the question here I wanted to ask you about the <unk> generics I think you've talked about some higher than expected upfront revenue in the quarter or at least pointed to that as a source of outperformance. So.

Speaker Change: Did the EPA timing land, a little bit different than you expected and just given the conversations you're having with other EDA customers how are those expansions.

Speaker Change: Tracking are trending relative to what you've seen typically.

Speaker Change: Yes, Tyler Great question, and it's great to talk to you again, so the on the upfront revenue that was one of the contributing factors. It was it was not outsized. It was just one of several factors that that helped.

Speaker Change: The overall revenue number in the quarter. We also saw strong billings linearity in the quarter as I mentioned, a few minutes ago. We saw consistent performance across February March and April and that billings linearity also helped us a little bit from the standpoint of the actual revenue recognition that we get into the quarter.

Speaker Change: We saw strength universally across the three months in terms of what we're seeing with respect to how customers are thinking about their renewals and uplift on <unk>.

Speaker Change: Again, so far we haven't seen anything in terms of the renewal rates are in terms of the uplift associated with that there's always an occasional contract here or there that might be an outlier, but but fundamentally the momentum that we've seen in the business has continued.

Speaker Change: And we've just factored some prudence in.

Speaker Change: But that as we've guided in case that deteriorates in the future, but we haven't seen that yet.

Speaker Change #101: Okay helpful explanation, and if I could ask a follow up just on pricing philosophy. So.

Speaker Change #101: Certainly this is well before your time Dinesh and dating back to Andrew when you took the range, but the beginning of the subscription transition you offered kind of annual price locks for a lot of customers to migrate them over for maintenance I think it was capped around 3% to 4% over the call. It the last.

Speaker Change #101: Decade, or so you have delivered a lot of innovation to the platform not to mention what youre doing on the AI side. So how are you thinking about.

Speaker Change #101: The uplift or the pricing philosophy as those customers come up for renewal.

Speaker Change #101: Get them back to standard pricing over time, yeah. So that's the customer that we call the maintenance to subscription cohort.

Speaker Change #101: They actually they were actually given 10 year kind of visibility to price increases and price changes in their plan that that that program will sunset in the next foreseeable future you can do the math in terms of 10 years from when the subscription transition began.

Speaker Change #101: Ultimately, we will we will give price increases of that cohort that are consistent with the value we deliver but it's just too early to talk about that but again.

Speaker Change #101: That program hasn't fully sunset it yet, but it will out there in the future.

Speaker Change #101: In the near future.

Speaker Change #101: Great. Thank you.

Speaker Change #101: Thank you.

Speaker Change #102: That is all the time, we have for Q&A today.

Speaker Change #103: I'd now like to turn the conference back to Simon Mays Smith for closing remarks, Sir.

Speaker Change #102: Thank you Latif and thanks, everyone for joining we look forward to seeing many of you over the coming days weeks and months on the road. If you have any questions in the meantime, please just ping me or the team be happy to chat otherwise, we'll catch up on the Q2 conference call.

Speaker Change #102: This concludes today's conference call. Thank you for participating you may now disconnect.