Autodesk's Fourth Quarter and Full Year Fiscal 2024 Results Conference Call has begun with Simon Mays-Smith, Vice President of Investor Relations, welcoming participants. Andrew Anagnost, CEO of Autodesk, and Debbie Clifford, CFO, are also on the call. Forward-looking statements will be made, and any discrepancies in information presented may be due to the call being replayed or reviewed after today. Non-GAAP numbers will be referenced and reconciled in the press release and other materials. In the fourth quarter of fiscal 2024, Autodesk saw a 40% constant currency revenue growth.

Autodesk's financial and competitive success is attributed to its resilience, discipline, and opportunities. The company's subscription model and product diversification have helped balance growth across regions and industries. Renewal rates and new business growth have remained strong. The company's disciplined execution and strategic capital deployment have allowed them to realize the benefits of their strategy and mitigate risks. Autodesk is modernizing its go-to-market approach and developing lifecycle solutions within its industry clouds. They are also leading in 3D generative AI and working towards automating low-value tasks and generating complex designs more efficiently.

Autodesk's financial performance in the fourth quarter and fiscal year was strong, with a significant contribution from their enterprise business. The company saw a 11% and 14% growth in revenue, with upfront revenue being a major factor. AutoCAD, AEC, manufacturing, and M&E revenue all saw growth in constant currency.

In the fourth quarter, Autodesk's revenue grew in all regions, with direct revenue increasing and representing a larger percentage of total revenue. Billings declined due to the transition from upfront to annual billings for multiyear contracts, but this was offset by some early renewals in North America. Deferred revenue decreased as expected, but total RPO and current RPO still grew. The deceleration in RPO growth was due to a lower mix of multiyear contracts and some customers switching to annual contracts. The P&L showed stable gross margin but slightly lower operating margin due to timing of costs for Autodesk University.

The company's full-year non-GAAP operating margin was steady year-over-year and increased at constant exchange rates. GAAP operating margin also improved, partly due to a reduction in stock-based compensation. The company expects the ratio of stock-based compensation as a percent of revenue to decrease over time. Free cash flow for the quarter and year was strong, with early renewals providing a boost. The company is actively managing capital and investing in organic growth and acquisitions. They have offset dilution from their stock-based compensation program and will continue to repurchase shares when it makes sense. End-market demand has remained consistent in recent quarters.

In fiscal 2024, macroeconomic and one-off factors, such as the Hollywood writer strike, impacted Autodesk's new business growth rate and will continue to have a modest effect on revenue growth in fiscal 2025. However, the company's resilience and strong demand for its products and services suggest long-term growth potential. The new transaction model will help Autodesk build closer relationships with customers and partners, but it will also result in higher revenue and costs, with a neutral impact on operating profit and free-cash-flow dollars. This shift will primarily be driven by the transition to ratable subscription revenue accounting and the regional rollout of the new transaction model.

In fiscal year 2025, Autodesk expects to see revenue growth of 9% to 11%, with a 1 percentage point tailwind from the new transaction model, a 0.5 point contribution from the acquisition of payouts, and a 1 point headwind from the pandemic echo effect and foreign exchange hedges. Adjusting for these factors, underlying revenue is expected to grow more than 10%. Margins will be discussed next.

In fiscal year 2025, the company plans to maintain non-GAAP operating margins between 35% and 36%, with a goal of keeping them consistent with fiscal 2024. This may be challenging due to the new transaction model, which will result in margin headwinds from accounting changes and increased investments. However, the company expects the new model to ultimately benefit revenue, operating income, and free cash flow. They anticipate generating between $1.43 billion and $1.5 billion in free cash flow in fiscal 2025, with a projected growth of 35% at the midpoint of their guidance. The company expects even faster free cash flow growth in fiscal 2026 due to the return of their largest renewal cohort and other factors. However, the transition to the new transaction model may create some noise in the P&L.

Autodesk believes that free cash flow is the best measure of their performance and their estimate for fiscal 2026 is $2.05 billion. They are managing their business using a Rule-of-40 framework and are on track to reach their goal of 45% or more. In the fourth quarter, they saw good momentum in AEC, particularly in infrastructure and construction, and closed a record number of deals in this sector.

Vinci, Fortis Construction, and the Pennsylvania Department of Transportation have all chosen to use Autodesk Construction Cloud to streamline their operations and improve efficiency. This platform approach, along with Revit customization and BIM, has resulted in significant time savings and increased business opportunities. With the recent acquisition of Payapps, Autodesk will further enhance the project lifecycle by embedding payment and compliance management. The goal is for the majority of projects to be managed this way in the future, increasing efficiency and sustainability while reducing risk.

The risk of slow payments can deter contractors from bidding on projects. Autodesk is using technology to simplify and speed up construction payment management. In manufacturing, customers are investing in their digital transformations and using Autodesk's design and make platform to improve their business. Automotive companies are using Autodesk's tools to connect data and shorten design cycles. A leading US manufacturer saw a significant ROI and faster design durations by using Autodesk's connected factory and VR studio tools. Autodesk also serves large manufacturers with a full range of products, helping to reduce rework and support the digitalization of factories.

Autodesk's Fusion product is growing rapidly, with 255,000 subscribers in the manufacturing industry. They are expanding their features and targeting larger companies for adoption. In education, Fusion is being used by the University of Delaware for its engineering class. Autodesk is also working with customers to ensure they are using the latest and most secure versions of their software. An American pharmaceutical company conducted a preventative audit to ensure compliance in the transition to Autodesk's named user model, resulting in a 30% increase in annual spend. Autodesk is committed to evolving and innovating.

Autodesk has successfully executed strategic transformations and added new growth vectors, leading to a more diverse and resilient business. They have also formed stronger partnerships with customers and have a longer runway for growth and free-cash-flow generation. The company is now focusing on generative AI and intends to be a market leader in this area. Their AI lab has been in existence since 2018 and they have been delivering AI in their products for several years. Customers are looking for increased productivity from Autodesk's AI offerings.

Autodesk is focusing on delivering productivity increases to its customers through both disruptive and automating approaches. They have a new tool for generating 3D models from photographs and incomplete models, which will be released to a private beta. They also have technologies similar to Fusion drawing automation that will make the process of creating 3D models faster and more efficient. Both approaches are important and will provide value to customers. Debbie, as the interviewer, may have a follow-up question about how Autodesk captures this value.

The speaker is asked about recent pricing actions and how they may impact customer behavior. They discuss a 3% increase for market factors and a 5% increase for renewals, as well as a 10 point price differential between new and renewal subscriptions. The timing of the price increase was moved up to better align with the new transaction model, resulting in some early renewals. The increase was most helpful to billings, but not material to revenue and free cash flow.

The speaker, Andrew Anagnost, explains that the move to a direct relationship with customers is a necessary step for Autodesk's long-term success in a world of AI-driven, cloud-based solutions. He emphasizes the benefits for customers, such as better understanding and self-service capabilities, and for partners, who will become collaborators rather than transaction partners. Anagnost also mentions that they learned a lot from the early customer and partner feedback in Australia, which has been incorporated into the process for the US rollout.

Autodesk has made changes to their roadmap and upgraded their transaction systems based on learnings from Australia. They have also provided new materials to partners and customers to help them understand the impact of this transaction model. The company is seeing success with state DoT and expects to see more opportunities in the water industry, which will now be referred to as Autodesk Construction or water solutions. Water infrastructure is becoming increasingly important and will be a big focus for the company in the future.

Jay Vleeschhouwer asks about the capacity of Bentley Systems to support their long-term volume growth expectations, given the 700,000 subscriptions added in fiscal 2024 and the company's plans for even more in the future. He wants to understand the relationship between the operational, transactional, accounting, and compensation systems that have been put in place and the expected increase in volume.

Autodesk CEO Andrew Anagnost discusses the company's modernization efforts, stating that it is not just about rolling out a new transaction model, but also increasing their internal capacity to scale. He mentions that the cascading rollout of the new model will provide them with a test on the volume and capacity of their systems before going live with the next level of rollout. Anagnost also talks about the critical product deliverables for the year, such as improving upon existing products like Revit and introducing new tools.

The main focus for Fusion this year is to improve its capability to support full scale engineering teams and to attract customers with its cloud-based data management and AI solutions. Additionally, Fusion is working on partnerships with companies like Cadence to become the go-to solution for smart products. Forma and Fusion must also work together to ensure seamless data exchange and interoperability for customers using both products. Revit will still play a significant role and efforts are being made to make it more efficient in the context of Forma.

Autodesk has a long-term growth target of 10-15% and their fiscal 2025 guidance aligns with the midpoint of that range. The company is closely monitoring market indicators to determine when a recovery may occur, as their markets typically experience a rebound after reaching a low point.

The company's revenue growth for fiscal 2025 will depend on the macroeconomic conditions and their ability to take advantage of opportunities in various sectors. They are closely monitoring new business growth, product usage, and bidding activity to gauge their performance. The projected free cash flow for fiscal 2026 is $2.05 billion, which is expected to be higher than fiscal 2025. There have been no changes in their modeling for the progression of cash flow.

Autodesk has recently acquired Payapps, a company that was previously a partner. This decision was driven by the goal of providing end-to-end solutions for construction, as well as improving the payment process for customers. This integration will help reduce the time it takes for payments to be processed and increase cash flow for customers.

Autodesk plans to integrate a recently acquired solution into their platform, highlighting the importance of owning it. They have also acquired a leader in payment processors to enhance their offerings in the construction industry. The company expects continued growth and momentum, driven by their end-to-end solution and recent acquisitions. There was no significant impact on revenue from early renewals, but enterprise strength contributed 1 point of growth.

The speaker provides an update on the go-to-market changes made last year and expects the business to accelerate and grow in the teens. The sales force has been integrated and the business is starting the year with all processes and capabilities aligned for growth. Deal activity is increasing and the pipeline is firming up, with more competitive deals showing the company's end-to-end capabilities. The focus this year will be on preconstruction capabilities to drive growth.

The speaker discusses how their company is moving past integration issues and focusing on execution at scale. They also mention the success of a specific project as an example. The speaker then addresses a question about the company's growth outlook for fiscal year 2025, stating that they aim for a 50-50 split between volume and price growth. They also mention that they have not seen any impact on growth due to a decline in the number of engineers.

The company is not seeing a decline in customer bases and is not concerned about downsizing. They are focused on new business growth and are watching end market demand closely. If macroeconomic conditions shift or end market demand takes a turn, it could impact their performance and potentially bring them to the lower end of their growth range.

The company is monitoring sentiment from its channel partners to understand end market demand and potential impacts on their business. They expect a net 0.5 negative headwind for revenue in fiscal 2025 due to FX, EBA true-ups, and new transaction model. Half of their subscription growth is expected to come from volume and half from price, but there may be some mix effects. They are targeting a 50-50 mix for fiscal 2025.

The speaker asks about the potential impact of positive developments on make revenue, and whether it will return to growth rates in the 20s. They also inquire about the new transaction model and when the $600 million in reseller commission will be accounted for. The speaker responds that the pace of the rollout will determine when the $600 million will bleed into revenue and expenses, and it will likely take a couple of years.

Debbie Clifford, Chief Financial Officer of Autodesk, discusses the company's transition to a new invoicing system that will take approximately two years to complete. She also mentions that the company's goal is to drive greater growth from their "make" revenue line, which includes products like BuildingConnect and Fusion 360. The company anticipates this revenue growth rate to be higher than their core business, and they will be making incremental investments in this area. The call concludes with Simon Mays-Smith thanking everyone for joining and mentioning upcoming events and the Q1 conference call.

This summary was generated with AI and may contain some inaccuracies.