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edited transcript of adsk earnings conference call or presentation 23-may-19 9:00pm gmt

by:QY Precision      2019-11-01
First Quarter of June 3, 2019 2020 Autodesk earnings
Thomson StreetEvents)--
Edit record of Autodesk Inc. earnings conference call or presentation (Thursday, May 23, 2019, 9:00:00)-
Vice President, IR * Andrew AnagnostAutodesk-
President, CEO and director of Richard Scott HerrenAutodesk-
Senior vice president and chief financial officer of Research Department Stanley Conference call participant ham * Hamza FodderwalaMorgan Stanley-
Research assistant * shi nan Anne BelliniGoldman Goldman Sachs Group.
Research Department-
Management Discussion and Analysis * Jay Chou VleeschhouwerGriffin Securities Co. , Ltd.
Research Department-
Software Research for MD * Kasthuri Gopalan RanganBofA Merrill Lynch, Research Office,
Research, Richard TalanianEvercore ISI Research unit stock-
Matthew BroomeMizuho Securities, analyst at research department us Securities Co. , Ltd-
Vice President of American Studies * research division limited Matthew George Hedberg
Securities analyst Philip Allen Fargo WinslowWells Limited, Research Office,
Senior analyst Robert Cooney OliverRobert W. Baird & Co.
Registration of Research Department-
Senior research analyst at research department * Saket KaliaBarclays Bank PLC-
Senior analyst at research department * Sterling AutyJP Morgan Chase & Co-
Senior analyst = = = Introduction-------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------
Hello, ladies and gentlemen, thank you for your patience.
You have already attended the Autodesk earnings call for fiscal 2020. (
Operator instructions)
As a reminder, this meeting may be recorded.
I would now like to transfer the call to your host, Abhey Lamba, vice president of investor relations.
You can start, Sir. --------------------------------------------------------------------------------
Autodesk Abhey Rattan Lamba-VP of IR [2]--------------------------------------------------------------------------------
Thank you, operator. Good afternoon.
Thank you for attending our conference call to discuss the results of our first quarter of fiscal 20.
Our CEO Andrew Anagnost is waiting in line.
And our chief financial officer, Scott Huron.
Today\'s conference call is being broadcast live via live webcast.
In addition, autodesk will provide a replay of the call. com/investor.
You can also find our earnings press release and slide presentation on our website.
After receiving this call, we will also post a record of today\'s opening comments on our website.
We may move forward during this conference call.
Look at the report.
These statements reflect our best judgment based on the factors currently known.
There may be significant differences in actual events or results.
Please refer to our SEC document for important risks and other factors that may lead to our actual results being different from our future results
Look at the report. Forward-
As of today, forward-looking statements are being made during the conference call.
If you replay or view this call after today, the information presented during the call may not contain current or accurate information.
Autodesk assumes no obligation to update or modify any forwarding-
Look at the report.
During the conference call, we will cite some numbers or growth changes as we discuss our financial performance.
Unless otherwise stated, each such reference represents a year-on-Year comparison.
Now I want to transfer the phone to Andrew. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director3]--------------------------------------------------------------------------------Thanks, Abhey.
We started in fiscal 20 with strong momentum, continued acceleration of recent construction acquisitions and strong growth in all geographic areas.
Our bills and free cash flow meet or exceed expectations, reflecting the strength of our business.
Our integration with PlanGrid and building connected is on track and has exciting achievements to share with you.
Although our first quarter earnings are at the low end of the guidance range, we are achieving our 20-year ARR fiscal and free cash flow guidance and reaffirming our 23-year fiscal target.
Our growth momentum for the rest of this year is strong, and the potential demand we saw in the previous quarters continues to drive the growth of our business.
Our view of business strength or the current spending environment in our end market has not changed.
Before I offer you more color on the highlights of this quarter\'s strategy, let me hand it over to Scott to give you a more detailed look at our first quarter results and our guidance.
Then, before we open to Q & A, I will come back with a further understanding of some of the key drivers of our business, including architecture, manufacturing, and digital transformation. --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer4]--------------------------------------------------------------------------------Thanks, Andrew.
As Andrew mentioned, our leading indicators, billing and free cash flow performed well.
Excluding our recent acquisition, total revenue of $0. 735 billion grew by 31% and 28%.
Although at the low end of our guidance range, it is within our planning assumptions.
This is mostly linear driven because we closed down more business than expected later in the quarter, which affected the rated revenue recognized this quarter.
As our strong billing and revenue growth have shown, overall demand in our end market is strong.
We have also seen steady growth in volume.
Sales of AutoCAD LT are still strong, which has historically been a leading indicator of a potential slowdown in demand.
As you can see, revenue from our AutoCAD and AutoCAD LT products grew by 37% in the first quarter, slightly higher than the growth rate of 36% in the fourth quarter.
AEC and manufacturing also rose by 37% and 24% respectively.
Geographically, we see
Based on the strength of all regions.
Revenue from EMEA and APAC grew by 35% and 27% in the Americas, with growth in almost all countries.
We also saw strong growth in direct revenue, which was the same as last year, with direct revenue growing 36%, or 30% of our total sales.
In direct, our electronicsstore grew 45%.
From ARR\'s perspective, total ARR continues to grow rapidly, up 33% from last year to $2. 8 billion.
According to our recent acquisition adjustment, the total amount of ARR has increased by 29%.
Core ARR growth is aligned with our overall organic growth, while cloud ARR has grown by 164% driven by strong performance in construction.
Excluding the $83 million ARR We acquired in the fourth quarter, the organic cloud ARR, mainly composed of BIM 360 and Fusion 360, grew by a record 43%.
We continue to make progress in maintaining the subscription or m2 plan.
Interest rate conversion for the first quarter was consistent with the previous quarters, with approximately 1/3 of maintenance update opportunities migrating to product subscriptions.
Among the migrated users, eligible subscription upgrades remain within a historical range of 25% to 35%.
It needs to be reminded that this is the last year of the M2S project and we will continue to encourage customers to make conversions.
In addition to strong new customer bills, ARR\'s growth is supported by the continued expansion of our updated base.
As we introduced on the third investor day, net income retention is a key indicator to monitor our updated base health status.
Annual net income retention rate-over-
The customer group that existed a year ago, that is, our basic customer, the annual change of ARR.
It is calculated by dividing the current period ARR related to these same base customers by the total ARR 1 year ago.
In the first quarter, net income retention is within fiscal 19 of fiscal 110% to fiscal 120%, and we expect it to be within this range in fiscal 20.
In the first quarter, during our global on-site promotion three years ago, some of the significantly discounted subscriptions were updated.
We are very satisfied with the renewal rate of this group of customers because their renewal is closer to the price tag and the total value of the whole group is also growing.
Moving to Billings, we have $0. 798 billion in billings this quarter.
On a normal basis, Billings rose about 40%.
Remember that we adopted ASC 606 last year, which resulted in an adjustment of approximately $0. 16 billion in our deferred revenue balance and affected the bill, because the bill is calculated by the sum of income plus the change in deferred income.
The strong update and continued momentum of our core products have driven the growth of bills.
Due to the upcoming price increase, we also benefit from some customer updates earlier this quarter.
The growth of the statement of construction assets we recently acquired has contributed very well.
Multi-year contracts are higher according to our plan and help with our total bill.
Recall that multi-year payments are good for our customers as they benefit from a stable price and a single approval process.
Our partners love them because they can sign higher contract value and maximize cash flow, and we can benefit from more predictable revenue streams and upfront cash payments.
The second and third years of these multi-year agreements are recorded in our long-term agreements.
Long-term deferred revenue, up 12%, accounted for 17% of the total deferred balance as of this quarter.
As we pointed out on analyst day, we expect to have a long term at the end of this year
Consistent with the historical scope, the long term balance is within 20% of the low total deferred revenue.
In terms of profit, we achieved significant operational leverage as we entered the growth phase of our journey. Non-
The gross margin of 91% GAAP rose by 140 basis points from last year.
Our strict cost management approach, combined with revenue growth, enables us to expand our
Despite the absorption of two major acquisitions, GAAP\'s operating margin increased by 13 percent to 18%.
In the first quarter, we created $0. 207 billion in free cash flow.
Over the past 12 months, we have created $0. 55 billion in free cash flow, putting us in a good position within the full year target of $1. 35 billion.
Please note that the first quarter benefited from our very strong fourth quarter of fiscal 19.
You may recall that we had more than $1 billion in bills in the fourth quarter, some of which were collected in the first quarter of fiscal 20.
Therefore, we expect free cash flow to decline in turn in the second quarter.
We continue to buy back shares in excess cash, which is consistent with our capital allocation strategy.
In the fourth quarter of last year, the average price of $5820 million for 100 million shares was $171. 84 per share.
Now I turn the discussion to our point of view.
Let me start by saying that our views on the global economic situation and its impact on our business have not changed in the past few quarters.
We have not seen any obvious impact on Brexit and various trade and tariff disputes.
Throughout the year, we will reiterate our free cash flow outlook for fiscal 20, which is expected to be around $1.
35 billion and our outlook for about $3 ARR.
5 billion, up 27% to 29%.
According to our original plan, we expect the bill to be about $4.
1 billion at the midpoint, driven by our updated base, new subscription growth, continued normalization of multi-year bills, traffic
Through unopened Deferred revenue and our acquisition.
Look at the quarter-
With the realization of free cash flow in fiscal 20, we continue to expect about 3/4 free cash flow in the second half of the year.
Based on our guidance for the second quarter, we expect total revenue to be between $0. 782 billion and $0. 792 billion, and we expectGAAP EPS of $0. 59 to $0. 63.
There are more details on the earnings slides in the Investor Relations section of our website, as well as modeling assumptions for the second fiscal quarter and the full year of 2020.
Now I want to give it back to Andrew. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director5]--------------------------------------------------------------------------------Thanks, Scott.
Now, let me update you on some of the key growth initiatives we have highlighted on investor day, especially the progress made in building, manufacturing and digital transformation.
These initiatives are key drivers of our recent and long-term operations.
First, construction.
As we execute our strategy to provide a comprehensive, integrated platform that seamlessly connects offices, trailers, and the site, we see the continued benefits of the entire portfolio.
When we connected PlanGrid and building to Autodesk, we achieved significant results this quarter.
Both acquired companies have shown impressive growth, which is important given that acquisitions usually slow down during the integration phase and we have experienced an accelerated momentum.
We have already won 15 goals. to-
Compete with leading competitors in this field.
Other milestones include the launch of our first product integration and revenue synergies.
The first quarter was the first quarter when we closed the PlanGrid in December 2018 and when we connected the building in January, the entire building portfolio was in place.
Customer feedback on adding these best products is very positivein-
In addition to the design tools we have been selling to the market, the best-in-class solutions for our integrated building portfolio now include BIM 360, PlanGrid, assembly systems, and building connectivity.
In terms of technology development, we were able to speed up the product roadmap for PlanGrid, which led to the introduction of PlanGrid BIM last month.
This is a new product integration between Revit and PlanGrid, allowing customers to directly access BIM data in 2D or 3D in PlanGrid on mobile devices.
Since PlanGrid is part of Autodesk, we are able to deliver this often needed feature at a faster pace.
In fact, when PlanGrid BIM was released, we hosted a webcast with a requirement of 5 times what PlanGrid usually saw in previous product releases.
After the webinar, the number of customers that ask the salesperson to contact is also more than 5 times what they usually experience after the product --Focus on Webinar.
We also saw that the synergy in sales began to develop.
For example, APTIM is a leading building service provider and joint customer for Autodesk and PlanGrid, and as part of its enterprise business agreement for its digital Foreman program, its PlanGrid users have increased
Other Autodesk products they use include AutoCAD, Civil 3D, Plant 3D, Map 3D, and Revit.
Because we have made it clear to our customers that PlanGrid will focus on-site execution and that BIM 360 will focus on project management, our customers have not yet realized that there is a lot of synergy between these two products.
We have also seen building connections flourish in the Autodesk Architecture ecosystem.
Since the acquisition, their user base has grown from around 700,000 to more than 800,000.
Now, I would like to elaborate on the impressive growth comments made earlier.
When we made the acquisition, I said we were focused on maintaining strong sales momentum and that\'s exactly what happened.
At PlanGrid, the sales team continues to work closely with new and existing customers.
For example, they expanded their relationship with rosentdin Electric
With 6,000 employees, the annual income is about 1. 5 billion.
The company recently extended the contract for 3 years and significantly expanded the contract, in part because of Autodesk\'s long termterm vision.
As a member of the Autodesk family, PlanGrid sales are also beginning to benefit.
In this quarter, the global leader of professional service industry, long-term
Autodesk\'s long-term customers have decided to further strengthen their relationship with us by adding PlanGrid to one of their departments.
In making this decision, Jacobs noted that its current speed in the field, ease of use, and integration with the rest of the Autodesk suite are the determining factors for adopting the software.
The company is currently using a billion-dollar PlanGrid.
Dollar infrastructure project
PlanGrid also ended the first quarter with its largest trading channel ever.
The momentum of building connections continues.
BuildingConnected has introduced new features that continue to make its platform more and more valuable in the market.
In fact, in terms of the new business, they had the best quarter ever in the first quarter and saw their flywheel continue to drive new business on the part of general contractors and subcontractors.
BIM 360 also continued to grow strongly.
In fact, our organic ARR grew by 360 in q1, of which BIM 43% is the largest component.
This is driven by the benefits of the entire BIM 360 portfolio, specifically the BIM 360 design, which is what we really do
Time collaboration tool for Revit users.
We also see an increase in the adoption rate of BIM 360 for both existing and new customers.
Our work is a good example.
We have 485 locations and 466,000 members around the world, providing people with more meaningful work, learning and collaboration spaces and services.
They expanded their subscription with Autodesk this quarter and are one of the largest BIM 360 design customers.
We are pleased to work with them and look forward to further strengthening our relationship in the coming years.
Overall, all parts of our construction portfolio are running as planned or above and show strong growth.
I am very proud of all the participating teams.
They are still focused on helping Autodesk grow and driving positive changes in the construction industry.
Finally, I would like to point out that for those who want to get more income,
Get an insight into our building business, we will host an event in San Francisco on June 4, and you will have the opportunity to get news directly from AECOM, in addition to our building team, webcor and DPR also involve our portfolio and go-to-
Market opportunities.
I hope to see all of you there.
In manufacturing, revenue grew by 24% as customers saw the benefits of our differentiated solutions.
In this area, we are gaining a share and replacing competitive products.
For example, large manufacturers of locomotives and railway equipment have further expanded their relationship with us.
They are deploying our manufacturing solutions across departments and rely on Inventor, our CAM solutions, and faster design utilities to automate their workflow.
Thanks to our simplicity and short implementation cycles, our solutions replace competing products that meet their fast product introduction requirements.
We have invested more than 360 years in Chuangcheng design and Fusion 100%. over-
Annual growth in monthly active users of our business customers.
Users like cloud
The integrated solution of 360 is disrupting the industry.
Fusion 360 offers unprecedented valueof-the-
Box productivity from concept to production workflow, which attracts a large number of our customers. A U. S. -
A professional pharmaceutical company based in the United States purchased Fusion 360 to replace SolidWorks in the design and manufacture of automatic syringes.
After reviewing the various options, they decided that Fusion 360 would provide superior collaboration and data management capabilities in the cloud without setting up or maintaining them.
A Midwest metal manufacturing company chose Fusion 360 to replace a separate instance of CAD and CAM solutions.
They were impressed by our integrated CAD/CAM functionality and collaboration capabilities.
With Fusion 360, they were able to replace cad, Creo, Mastercam, and PTC Windchill, reducing their reliance on the platform and facilitating collaboration.
Now when it comes to digital transformation, we see its positive impact on our business.
As part of the transformation of a large number of non-compliant users into paid customer plans, we have also made progress in the use of digitization internally. All new single-
User product subscription is already using identity-
Based on authentication, we will continue to transfer existing customers to this new system.
We will migrate all eligible singles
User subscription for identity-
By the end of this fiscal year, based on authentication, this will provide a better user experience for our customers and help us combat the use of software that does not meet the requirements.
In addition to this, we have begun to see the results of our efforts to directly engage with customers using software versions that do not meet the requirements, and expect that our ongoing learning can improve our stay at FY \'20 and beyond
As you have heard, there is a lot of activity going on in terms of the growth plan highlighted by the investor day of construction, manufacturing and digital transformation.
These drivers and the huge opportunities we see in turning the current 14 million non-paying users into users should lead to acceleration of profitability and cash flow metrics and continued growth in the future.
We are very confident in Autodesk\'s ability to take advantage of this huge market opportunity and are committed to achieving our FY \'20 and FY 23 goals.
With this, operator, we want to ask a question.
Questions and Answers--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------(
Operator instructions)
Our first question came from Phil Winslow of Wells Fargo. --------------------------------------------------------------------------------
Philip Allen Winslow, Research Department, Wells Fargo Securities Co. , Ltd-
Senior analyst2]--------------------------------------------------------------------------------
Congrats for a solid start this year.
I just wanted to dig into your comments on quarterly linearity.
Scott, you mentioned it. -
The billing and revenue for the quarter are all within the range you assume, and because of the linear relationship, the revenue is at the low end.
But your expectations have not changed throughout the year.
Want to know if you can get a deeper understanding.
Where is the difference in linearity?
Is it a specific industry or more location?
How do you want to go-forward there? --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer3]--------------------------------------------------------------------------------Yes. Thanks, Phil.
This is certainly within the scope of our guidance and planning.
$0. 735 billion is the low end of our range of guidance.
Therefore, this is not significantly different from our expectations.
Although we do see that both Q3 and Q4 have what I call better linearity, so there is an earlier linearity in each quarter.
When we enter Q1, Q1 actually ends with a linearity similar to the previous Q1, not the improved linearity we see in Q3 and Q4, which I guess is not surprising, because people don\'t have a budget at the beginning of this year.
The sales team is going through the sales start and so on.
So we ended up getting the same linearity as the first quarter of a year ago, not the kind of improvement we saw in the third and fourth quarters.
That\'s why we are moving into the low end.
I will continue to answer your questions.
The problem is that our assumption of Q2 linearity is that it looks more like Q2 \'19 than the improved linearity we see in Q3 and q1.
This has no real impact on the whole year.
You see no change in the guidance throughout the year.
Actually, you will see the guidance for the second quarter very--
A nice step.
Because we got some results like this.
This came later this quarter.
Obviously, we had it in the second quarter.
So that doesn\'t really change how we feel about the year.
This is a good strong start this year, but the linearity is more in line with what we saw a year ago than what we saw in the first two quarters. --------------------------------------------------------------------------------
Philip Allen Winslow, Research Department, Wells Fargo Securities Co. , Ltd-
Senior analyst4]--------------------------------------------------------------------------------Got it.
And then just a follow-upup for Andrew.
It was a pleasure to hear some victories in PlanGrid.
Building connections, not sure if you can provide more colors in the early feedback you get there.
You provided some before.
But how do you think about incorporating it into the product line, or using building technology, or even--
As a funnel for PlanGrid?
It would be great to have more colors. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director5]--------------------------------------------------------------------------------Yes.
Phil, what are you talking about the second part of PlanGrid? --------------------------------------------------------------------------------
Philip Allen Winslow, Research Department, Wells Fargo Securities Co. , Ltd-
Senior analyst6]--------------------------------------------------------------------------------Oh, sorry.
As with the funnel, you may see bid and bid management, which is, arguably, the leading management of PlanGrid. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director7]--------------------------------------------------------------------------------Yes. Exactly.
In fact, you have reached a point that is important about this.
PlanGrid and BuildingConnected immediately discovered some synergies between how they treat the market and their personal business.
So there is a lot of leads and discussion between the two teams, which plays a rather important role.
Keep in mind that BuildingConnected can see the entire project bidding environment in the United StatesS.
Obviously, PlanGrid is very eager to talk to these projects about how to improve on-site execution, effectiveness and success of their specific projects. So that\'s --
A huge boost we \'ve seen is some connection between these two products.
Frankly, when we connected the building in, we saw a surge in their business.
Like I said, they have the best Q1 ever in terms of new business because people like that they are part of Autodesk.
Their focus is on bid management, which is a great tool.
They added a lot of features there in the first quarter, which is a solid result. --------------------------------------------------------------------------------Operator [8]--------------------------------------------------------------------------------
The next question comes from Saket Kalia of Barclays Capital. --------------------------------------------------------------------------------
Saket Kalia, research arm of Barclays Bank-
Senior analyst9]--------------------------------------------------------------------------------
Andrew, maybe it\'s you first, just got out of the last line of questions from PlanGrid.
Obviously, this seems to be a good start.
I believe the initial approach here is to have them basically operate separately, at least in the vast majority of sales.
But it seems you can really cross.
Sold to some common customers earlier.
So, can you talk about how you imagine what the combined company would look like by the end of this fiscal year, PlanGrid plus Autodesk plus connected?
At this point, perhaps touching you may have a very small overlap with some of Autodesk\'s and PlanGrid\'s products, and how you plan to deal with these overlaps. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director10]--------------------------------------------------------------------------------Yes.
So first of all, let me comment on some of the synergies we found in our shared accounts.
So one of the things we did very quickly was that we determined how to get into the market with our designated accounts.
A lot of the places we see are like shared [updates]
In our designated account business
So this is a place where we have a designated account representative and we can come in and say, \"Hey, look, you know, we can add your solution with PlanGrid, we can do some. -
We can start this project on PlanGrid.
We can start this project on BIM 360.
\"This is where you see a lot of collaboration.
This is in line with our standard sales team and works very well.
We have an interconnect strategy between the two, and a quota retirement strategy that allows people to cross
Sell and receive benefits in terms of quota retirement on both sides of the equation.
Now, you see the PlanGrid team doing land development and expanding new accounts very effectively in the building ecosystem.
We focused a lot of our team\'s attention on reaching out to construction companies that we haven\'t had in our history.
This is where they spend a lot of energy.
So they use our assigned customer team for some collaborative sales.
They go out and find new businesses using their existing infrastructure, which is very effective.
What you will see when we enter this year is basically that we will maintain this basic structure, but, as we approach the end of the year, we will make sure to coordinate sales more closely within the Autodesk building group.
However, we will continue to maintain this synergy between our designated customer plan and sales staff within the building group.
We just think that these synergies will increase as the year progresses.
Keep in mind that we have just launched a token version of PlanGrid.
You know how effective we are to push usage in some of the designated accounts below EBA.
So you will see that this is also a synergy, and it is all new.
I mean, we are very, very early in this regard. --------------------------------------------------------------------------------
Saket Kalia, research arm of Barclays Bank-
Senior analyst11]--------------------------------------------------------------------------------Got it. Got it.
This is really helpful.
Scott, maybe for you, just to peel a little onion on ARR.
It\'s actually a bit funny, maintaining the ARR number is actually a bit lower than I expected, but I think the consensus is actually a bit higher.
Maintenance has become a small part of the business at this point, but I think maybe just to help better--
Better calibrate the speed of the drop, any ideas on how we should look at maintaining the speed of the ARR drop? --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer12]--------------------------------------------------------------------------------Yes.
This is a great question, Saket.
Of course, the M2S project has just entered its third year, right?
At the beginning of the second quarter, we have just entered the third year of the m2 s program, which is a more significant price increase for those who want to update maintenance.
What we have seen before this is the maintenance of renewal rates, and we are no longer talking about sub and renewal rates, but if we are, maintenance of the renewal rate remains very good in this area.
So we continue to see the success of the conversion, which I said in the script is within the historical scope.
Those who changed,
Continue to sell to collections.
At this point, we only have 700,000 maintenance customers left, and this--
I am very happy.
We started with more than 2 million maintenance submarines.
We have now transferred everything except 700,000 to the product subscription.
I think this year is the year we will see more of the rest of the transfer.
So I will--
My expectation is that with this shift we will continue to see good success.
Among those who choose to stay, what we see is that the maintenance update rate is maintained well. --------------------------------------------------------------------------------Operator [13]--------------------------------------------------------------------------------
The next question comes from Jay Vleeschhouwer of Griffin Securities. --------------------------------------------------------------------------------
Jay Vleeschhouwer, Griffin Securities Limited
Research Department-
PhD in software research14]--------------------------------------------------------------------------------
Andrew, let me start with you.
One thing you\'re talking about digital infrastructure is your ability to use telemetry technology, your ability to observe and collect data on how customers use products, especially now mostly subscriptions.
Can you talk about any trends or key observations you get from using telemetry, especially in the growing collection space?
The second question, so far there have been quite a few comments about direct sales and how you handle the integration of building acquisitions.
A broader question about customer engagement.
Like some other companies, you have created a new customer success group, which is becoming more and more common in software.
What do they do?
How do you measure the success of the Customer Success group? --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director15]--------------------------------------------------------------------------------Okay. All right.
So, let me start with the first question, what kind of insights do we see.
I can tell you something.
One of the insights we get is that usage is continuing to increase.
It\'s going very well in many product lines, and it\'s really great.
Another thing we see is that in terms of the number of products people use, collections are better than the usage patterns seen in the old Suite, which won\'t surprise you because there are more products inside-
More diverse products within the collection.
We saw something like this.
The other thing I\'m going to tell you is the ramp.
We are getting rid of the \"new version\" of the main version we want to consider, and people are growing relatively fast under the latest features, including those who don\'t pay us, which is important to us, because it says a group of non-paying users continue to follow us into some new features.
I think it is important for the future to be able to seize some opportunities as we move forward.
So yes, we see more loyalty in terms of use.
We saw some interesting trends and some things that looked so much better than the suite era.
Now, as far as the customer engagement team is concerned, the first thing I want to talk about is what is the measurement of the team?
They\'re measured by net income retention, okay?
This is their job.
Their job is to get into there, update and help develop these accounts, which is the main indicator they follow.
They also have NPS metrics that interact with customers.
Not the global NPSs, but the relationship between NPSs and the network-
Net promoter scores around various interactions.
However, we are mainly measuring them based on how we get funds from updating the base, especially Net income retention.
The way they work is to start working along the spectrum from low contact-
Low touch digital relationship all the way to high touch activity.
One of the digital infrastructure we built for this team is what we call an early warning system.
This is the umbrella of many indicators, basically making the team feel how healthy an account is, how healthy they are in their ability to use, how healthy they are in using learning tools and other tools, whether there has been a decline.
This helps them to spend their time with accounts that need help the most and need contact with Autodesk the most.
This is a new approach.
We have strengthened.
It integrates a few things in the field, but I just want to stress that one thing that measures them is net income retention.
That\'s how we track the success of the organization.
Scott, what do you want to add? --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer16]--------------------------------------------------------------------------------No.
I think you\'re done. We --
So far, the Customer Success team led by Ray has actually done a very good job.
Jay, one of the things we mentioned in our opening remarks is that our net income retention rate remains within the scope of what we are talking about on investor day.
Throughout last year, it was in the range of about 110% to 120% and stayed there again in q1.
So Ray has a very good start with his team. --------------------------------------------------------------------------------Operator [17]--------------------------------------------------------------------------------
The next question comes from Heather Bellini of Goldman Sachs. --------------------------------------------------------------------------------
Heather Anne Bellini of Goldman Sachs Group
Research Department-MD & Analyst [18]--------------------------------------------------------------------------------
I have a question--
I know you mentioned the linearity in the prepared comments.
I was wondering if you could share--
If you notice any impact, or what you heard from your manufacturing customer base this quarter, simply because of the ongoing turf war, if they give you any impact on whether or not they affect their own spending plan.
I just--
Just because I was asked myself, you obviously performed very well and seemed to be in a very long time
The term of office was postponed compared to the expectations of some.
Can you share with us, short-
Follow Dr. with your expectations? And that\'s it. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director19]--------------------------------------------------------------------------------
So I put the first part, and I gave the second part to Scott.
So you see that our manufacturing sector is growing very well this quarter and very strongly.
Now, that doesn\'t mean that we didn\'t hear from our manufacturing customers who saw the goods they used to make the product and the East-West pressure associated with it, they were absolutely.
All of our customers are paying more for certain basic things to bring them into their business.
But you have to understand that we are not selling them goods.
It\'s not metal, it\'s not manufacturing, it\'s not a supplier. It\'s a mission-
The key tool, this is a task.
The key digital process.
Many of our customers believe that these tools and the expansion of their investment in us help them improve efficiency and efficiency when they see increased cost pressures in other areas.
Like many of the competitive advantages I \'ve talked about, what we really focus on is integrating multiple toolset into the single solution we offer, which is easier to deploy.
Lighter to touch
It has more and more terminals. to-
End things at different types of prices.
Therefore, customers actually want us to help them improve their efficiency when they see the cost of on-site production of products rising.
So we haven\'t seen any reduction in spending in our software space yet.
We see no signs.
We haven\'t seen it yet.
It doesn\'t mean things can\'t change, but we know that our customers are asking us for help to make them more efficient.
I think it puts us in a good position when they see the cost of other parts of their business going up.
Now I will hand over the second part to Scott. --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer20]--------------------------------------------------------------------------------Sure.
The second one is very interesting, Heather.
Of course, what you see in long-
Deferred payments, continuous growth, are some of the successes we have achieved in terms of multi-year payments, closer to the historical average.
We haven\'t arrived completely yet.
There\'s more space in long-
The term put off until we\'re talking on investor day is that it\'s a low of 20%.
If you look at the annual growth rateon-year, long-
The extension period increased by 12%. Short-
The actual increase in the extension period is 21%-on-year.
So when you see the Billings line growing in its way, we see a very good performance.
We have seen a very good performance in deferred revenue.
Total deferred revenue is up 24% year on year when you increase Unbilledon-year.
As a result, this is a clearly strong quarter, both of which have resulted in good earnings results, but especially strong growth over the extension. --------------------------------------------------------------------------------Operator [21]--------------------------------------------------------------------------------
The next question comes from Matt Hedberg of RBC Capital Markets. --------------------------------------------------------------------------------
Matthew George Hedberg, RBC Capital Market Research division Co. , Ltd-Analyst [22]--------------------------------------------------------------------------------
Andrew, we keep hearing positive feedback from channel partners about creative design, which really changed the whole design process.
I know this is still the focus of your attention.
Want to know a little update on this momentum and the real customer\'s activity on this ---
This is a new way of designing. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director23]--------------------------------------------------------------------------------Yes.
Well, there are a lot of things that are happening and we are rolling out more generation tools, especially the Fusion platform.
Manufacturing, you will see some new features in terms of generating geometry creation related to 2.
5-axis milling constraints used by customers and more mainstream types of CNC applications.
So, when we roll out some tools, we might see some of them explode in use.
But you\'re right. we\'re adopted a lot.
Partners are excited about this because they can go in and have very, very different discussions with their customers about what they can do with these tools.
One thing we see now, I want to make sure that people understand this because people think, \"Well, these are very advanced things.
Is this not 3D printing? focused?
Isn\'t this just for those who want to create organic shapes for 3D printing?
\"The biggest usage we\'re seeing right now about generative design is that people explore new types of design options for what they already exist or are building from scratch, then turn these explorations into something they can make with traditional manufacturing methods.
So they basically use generative design as a tool to show them new solutions to problems that they would not naturally find in the first place.
This is one of the exciting things that is happening right now, and it has a real impact on mainstream customers and those who focus on cuttingedge of things.
So you\'re right. we have a lot of reasons to be excited. our partners are really involved in our manufacturing portfolio because of generative. --------------------------------------------------------------------------------
Matthew George Hedberg, RBC Capital Market Research division Co. , Ltd-Analyst [24]--------------------------------------------------------------------------------That\'s great.
Then maybe it\'s just a quick question for Scott, obviously a lot of questions about building opportunities.
When you consider increasing your sales capacity this year, I\'m curious, what do you think of the overall speed?
Then, compared to A & E or the manufacturer, how do you think about doing this more in the building under construction?
Just wondering how you are distributing sales this year. --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer25]--------------------------------------------------------------------------------Sure.
Matt, architecture is a huge opportunity for us and you won\'t be surprised to hear that we are turning a lot of investment into architecture.
Following our acquisition in the fourth quarter, we also increased the spending on each acquisition.
It\'s not a normal purchase, but a little bit of a reduction.
We actually did the opposite.
We acquired these companies and integrated them well into Autodesk while increasing our investment in architecture.
As Andrew mentioned in his opening remarks, there is such a great result outside the door.
I think you can look forward to seeing our performance at this level and as the market really starts to move in that direction you can look forward to seeing us continue to invest in construction. --------------------------------------------------------------------------------Operator [26]--------------------------------------------------------------------------------
The next question is Ken Talanian from Evercore ISI. --------------------------------------------------------------------------------
Research Department, Kenneth Richard Talanian, Evercore ISI Institutional Stock Company-Analyst [27]--------------------------------------------------------------------------------
So for customers who are still in maintenance, do you know what percentage of the group that was upgraded to the collection is compared to those who have already converted? --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer28]--------------------------------------------------------------------------------
You know, what I\'m trying to say is that we don\'t really see the needle moving too much on it.
We have achieved great success.
At a time when people move from maintenance to product subscription, we have been very successful in getting them across
Grade, instead of a single product to a single product, but a single product to a collection.
This has not changed in the last 6 or 8 quarters as we have been following m2.
So I don\'t want any big changes.
One of the things I will notice in demographics, may not be surprising to you, not a big customer of EBA, well, obviously, the big customer being maintained is the first customer to adopt m2 s and transfer it.
From Max to Min, SKU is not as big as you think, but a little bit biased against larger customers.
When we reach smaller and smaller customers, we may see the difference between the two, but I don\'t think it makes any sense.
Andrew, do you have anything to add? --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director29]--------------------------------------------------------------------------------
No, I think we \'ve seen a consistent pattern, and we don\'t see anything that indicates this change.
I agree with you.
This could be a point or two different points, as we go deep into that base just because of the size, or it could be because of the hybrid movement inside the stuff left in the maintenance base. --------------------------------------------------------------------------------
Research Department, Kenneth Richard Talanian, Evercore ISI Institutional Stock Company-Analyst [30]--------------------------------------------------------------------------------Great.
Do you see any non-payer from shift to continuous conversion? number-
Free authorization mode? --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director31]--------------------------------------------------------------------------------
We see non-payer conversions every year.
So one of the things-
I have to say that because I say that every time I call, this non-paying conversion won\'t be a big bang, okay?
This is an ongoing process.
Some of these people continue not to pay us and they have very clever ways.
But what I\'m going to tell you is that we \'ve successfully rolled out some very interesting ways to talk to these customers and get in touch with them directly, and we \'ve learned a lot, we think these things will play a very important role in our long-term development.
The terminology strategy for converting these people.
We have direct contact with them.
We can track where they went after their engagement, whether they continue with the pirates or if they are on another path.
So we learned a lot and that\'s what we expected this year.
We turn non-paying users into users every year.
Every year, we change more than the previous year.
But more importantly, every year we learn how to engage effectively with these customers.
This should give you a very good feeling about the long term.
As we begin to focus on these 14 million non-paying users and convert them over the next few years, long-term growth prospects. --------------------------------------------------------------------------------Operator [32]--------------------------------------------------------------------------------
The next question comes from Sterling Auty at JPMorgan Chase. --------------------------------------------------------------------------------
Sterling Auty, JP Morgan research department-
Senior analyst33]--------------------------------------------------------------------------------
I think you gave the review and you saw the power of the whole area.
Obviously, we see a pie chart with a percentage.
Just wanted to know some color reviews.
Judging from the PMI results released by Europe today, in other areas of software, there may be extrusion problems in North America.
What do you see from a geographical perspective? --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director34]--------------------------------------------------------------------------------
So we don\'t see any location. Based on deceleration.
By the way, EMEA\'s PMI has actually been shrinking for a while, so this is not a new phenomenon.
Keep in mind that we think PMI measures the other side of the demand curve.
It focuses more on buying some sort of core asset that enters the market as a product.
We are transforming sales efficiency and digital.
So now, we-
Actually, let\'s look back at history.
We have never seen a strong correlation between PMI.
The impact on our business.
In the long run, as PMI is still shrinking, you will definitely see the impact on our business in the end.
In the short term, what people do is they tend to buy more of our software, try to invest in digitalization and make their processes more consistent and efficient.
Therefore, we do not see any slowdown in any geographical area, and from our demand environment, the continuous PMI results do not send us any signal. --------------------------------------------------------------------------------
Sterling Auty, JP Morgan research department-
Senior analyst35]--------------------------------------------------------------------------------Okay.
And then there\'s one. up.
Can you remind us where we are in terms of various price or discount changes for maintenance and other products, and you will outline these changes at the beginning of the transition?
If so, what has changed recently?
What is the impact? --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer36]--------------------------------------------------------------------------------Yes.
Pound, in--
What you are talking about is the subscription process that we are maintaining. . . --------------------------------------------------------------------------------
Sterling Auty, JP Morgan research department-
Senior analyst37]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Richard Scott Huron from Autodesk-
Senior Vice President and Chief Financial Officer38]--------------------------------------------------------------------------------Yes. We just began --
If you remember, we started this project in the second quarter a few years ago.
That\'s why we started our third year.
In the third year, what we said at that time, what has just come into effect, may be the cost of conversion ---
The price of the conversion will rise 5%.
The price of updated maintenance will be up 20% from last year.
So these two kinds of growth came into effect early on, so we \'ve been sitting for 3 weeks now.
Do not want to see any major changes in the renewal rate.
I do think that at this point, it might be more attractive for those who are maintaining to actually make the conversion.
Through the first quarter, what we see in the conversion rate is that they remain the same at a rate of about 1/3 when updating.
Let\'s take a look now--
There is a big difference in price, we will see the situation in this quarter and the end of the year. --------------------------------------------------------------------------------Operator [39]--------------------------------------------------------------------------------
Our next question comes from Matthew Bloom at Mizuho. --------------------------------------------------------------------------------
Matthew Fraser Bloom, Research Department of Mizuho Securities United States Co. , Ltd-
Vice President of American Studies [40]--------------------------------------------------------------------------------
You recently launched 2020 versions of products such as AutoCAD, Revit.
Just curious about how early this feedback is.
What new features do you think will have the biggest impact? --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director41]--------------------------------------------------------------------------------Yes.
As I said before, we have seen these features being adopted very quickly when they are launched, which actually indicates that the customer\'s response to these things is good.
I don\'t have any feedback on a particular feature set because we\'re working like a big block area.
Just like one of the areas we deal with in Revit, especially on orbit and things related to orbit, and adding features that make orbit more efficient.
Therefore, each of these products will have many widely accepted areas.
However, especially in AutoCAD, customers are beginning to accept more
The platform nature of the work we do with AutoCAD, and not only can we easily integrate our own storage environment, but we can also easily integrate third-
Parties such as Dropbox and Box store environments and other types of environments so that our customers can use AutoCAD data efficiently in multiple types of storage environments.
One of the features we \'ve introduced is that when customers are in a Dropbox environment and they go and click on the DWG file, it doesn\'t have much visibility and it actually launches the AutoCAD web browser. And it\'s --
But it\'s the full AutoCAD web and it actually says you\'re a subscriber.
If they are users, they will get an extra experience.
But it is the full AutoCAD web version in these applications.
The influence we \'ve gained in some of these things actually brings more and more customers into contact with the power of many parties.
We have a platform view of some of these applications.
So I think you will hear more and more about what we are doing there.
On the Revit side, you will hear more and more about some of the things we do in rail and other areas where we not only extend functionality to Revit, but also to InfraWorks.
I am more specific about it in terms of infrastructure.
You will also hear more and more of these things, but these are areas that are becoming more and more interesting and attractive. --------------------------------------------------------------------------------
Matthew Fraser Bloom, Research Department of Mizuho Securities United States Co. , Ltd-
Vice President of American Studies [42]--------------------------------------------------------------------------------
I think you can provide an update on the media and entertainment business?
It looks like there\'s a little slowdown when there\'s 1/4 of revenue. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director43]--------------------------------------------------------------------------------Yes.
So there are a few things you want to know about the media and entertainment industry.
First, it\'s very sensitive to bulk trading, okay?
For example, in the fourth quarter, we had several very large deals in M &.
So there\'s a quarteron-
Quarterly changes in media and entertainment related to these transactions.
In the first quarter of last year, we also encountered a big event.
As I said, in all of our businesses, the media and entertainment industries are very sensitive to these big deals.
So there is still a quarter compared to the big deal.
But other than that, this is what I want you to be in more than one
Similar to what we do in manufacturing, we retire in this area with products that no longer charge revenue.
You will see some years-over-
The year associated with this fell.
For example, we no longer charge for sketchbooks.
That product is out there.
Totally free.
People can use it. -
Anyone who wants to use it.
The money is gone and will appear this year --over-years.
But these are the factors that affect the M & A business.
Actually, our M & E quarter is pretty strong, right?
But as I said, there\'s sensitivity to big deals, and it\'s the idea that we\'re going to be rolling out some products that are retired, especially products like SketchBookover-year impacts. --------------------------------------------------------------------------------Operator [44]--------------------------------------------------------------------------------
The next question comes from Rob Oliver of Baird. --------------------------------------------------------------------------------
Robert Kuni Oliver. Baird & Co.
Registration of Research Department-
Senior Research Analyst]45]--------------------------------------------------------------------------------
Andrew, I \'d like to bring it back to the building world if I can and talk about pricing.
I know you said you guys like naming user bundles.
So far, how has the price changed relative to your expectations?
Especially on those 15 deals that have a head. to-
Head competition, does the price play a role?
Then I followed up soon. up. --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director46]--------------------------------------------------------------------------------Yes.
So first of all, as I said, we are very satisfied with the results of q1 construction.
We achieved all our goals and we looked good in the second quarter.
We are very satisfied with the way things are developed.
But I should have told you right away that pricing models work in their form, but I think I know you\'re asking a different question.
So, when we compete with our competitors, let me tell you two things that help us win.
First of all, competitors are like a story.
They saw that we had the best. in-
The class field at one end performs the solution.
They saw that we had the best. in-
Class design collaboration solution on the other end, all clouds-based.
They just look at us, and when we tell them, \"Look, we\'re going to be doing this from design to site, connecting building information models all the way, and we\'re going to do this between the two, they believe us.
They see that they hope that all of these features will be rolled out over time.
When we accelerated the introduction of PlanGrid BIM into the PlanGrid environment as we did before, people began to say, \"Okay, thank you, Autodesk.
You show us the evidence that we are moving in the right direction.
So they bought the vision.
They buy Autodesk characters.
They don\'t see anyone else doing that. to-
Close some kind of connection as we are doing.
This is what we have always agreed.
Yes, when they enter the market, they will look at the business model we enter the market and they will say, \"Look, there are a lot more of your customers --
Friendly business model.
This is what I can grow together.
The business model here will punish me as I grow up.
\"Yes, we did see these things, but I want to make it clear that the main reason we won was the big story.
This is why customers are excited.
It\'s something that attracts them, and it\'s something that gets more people into our ecosystem.
We saw that. --------------------------------------------------------------------------------
Robert Kuni Oliver. Baird & Co.
Registration of Research Department-
Senior Research Analyst]47]--------------------------------------------------------------------------------Okay.
This is really helpful.
Like a quick follow-up.
Andrew, you mentioned on your last phone call that Scott just reiterated that not only did you absorb the planned R & D of PlanGrid and BuildingConnect, but you stepped up your R & D efforts
In addition to platform formation and integration, I am sorry as this may lead to activities in June 4, but have you seen some areas from the end
As a possible recipient of these R & D funds, are you interested in the user function perspective? --------------------------------------------------------------------------------
Autodesk, Inc. Andrew ananost-
President, CEO and director48]------
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