The paragraph is from the opening of Autodesk's Third Quarter Fiscal Year 2025 Financial Results Conference Call. The operator introduces the session, stating it will start with presentations followed by a Q&A. Simon Mays-Smith, VP of Investor Relations, then speaks, introducing the company’s CEO, Andrew Anagnost, and Interim CFO, Betsy Rafael. Simon mentions that forward-looking statements will be made during the call, with actual outcomes potentially differing from these predictions, and directs listeners to Autodesk's SEC filings for detailed risks and factors. He also notes that numeric or growth references are year-on-year comparisons, and non-GAAP numbers are reconciled in their available financial materials. Andrew Anagnost is then invited to continue the presentation.

In the third quarter, Autodesk achieved 12% revenue growth in constant currency, prompting an upward revision of its full-year guidance. This growth is attributed to the company's strategic execution, including the new transaction model in Western Europe. At Autodesk University in San Diego, attended by over 12,000 in-person and 30,000 online participants, the focus was on leveraging cloud data and APIs for enhanced customer solutions. Customer sentiment is cautiously optimistic, reflecting the company’s strong business momentum and increasing product usage. Autodesk’s investments in cloud, platform, and AI are positioned as industry-leading. The company is modernizing its market approach, shifting from subscription models to direct billing to create stronger customer relationships, with more benefits expected from upcoming optimization efforts.

The paragraph discusses Autodesk's financial outlook and strategy. The company expects to reach its fiscal 2026 non-GAAP operating margin target a year early, despite currency effects and a new transaction model. This model aims to improve efficiency, customer satisfaction, and partner opportunities, while reducing transaction revenue focus. Autodesk anticipates increased sales and marketing efficiency and leading GAAP margins. The company emphasizes its strong market position, strategic focus, and operational improvements. It plans to use capital to manage share dilution, supported by free cash flow growth and share repurchase authorization, ultimately aiming for sustainable shareholder value.

The paragraph discusses changes in Autodesk's leadership, welcoming Janesh as a new team member and thanking Betsy for her interim CFO role. Betsy then reports strong Q3 financial performance, highlighting growth across products and regions, despite challenges such as the absence of enterprise business agreement true-ups and FX impacts. Revenue grew notably, with specific product and regional increases, driven by a new transaction model, acquisitions, and ongoing success in construction and manufacturing sectors.

Direct revenue for the company increased by 23% and accounted for 42% of total revenue, benefiting from growth in EBAs and the Autodesk store, as well as a new transaction model. Billings rose by 28% due to the transition to annual billings, early renewals, and the new model. The new transaction model added $72 million in billings in Q3, with a year-to-date contribution of $108 million. Deferred revenue decreased by 9% to $3.7 billion due to the billing shift. Total and current RPO grew by 17% and 14%, respectively, affected by early renewals and the transaction model but hindered by declining deferred revenue from multi-year and EBA cohorts. Excluding these, current RPO growth was similar to Q2. The new transaction model and upcoming FY’26 renewals are expected to impact RPO growth further in Q4 fiscal '25. Operating margins declined by 2 and 3 percentage points for GAAP and non-GAAP, respectively, due to Autodesk University timing.

In the paragraph, the company discusses its financial performance and capital allocation strategy. The ratio of stock-based compensation to revenue is expected to decrease, falling below 10% over time. Free cash flow for the quarter was $199 million, influenced by early bookings in Western Europe. The company is actively managing capital to enhance shareholder value, with increased share buybacks in the third quarter totaling approximately $319 million. A share repurchase program authorization was increased by $5 billion, totaling around $9 billion, offering flexibility for the medium term. They emphasize that despite noise in billings and P&L due to a new transaction model, free cash flow is the best performance measure.

The company reports consistent underlying business momentum, prompting an increase in the guidance midpoint for billings, revenue, margin, earnings per share, and free cash flow for the full year. The smooth launch of a new transaction model in Western Europe and strong renewal rates have positively impacted billings, while some challenges remain due to FX movements and other factors. The new transaction model is expected to boost billings and revenue growth in fiscal ‘25. As a result, the company has raised its fiscal ‘25 billings guidance by $10 million and revenue guidance by $18 million. Additionally, both GAAP and non-GAAP margin guidance midpoints have been increased.

The paragraph outlines Autodesk's financial projections, highlighting margin guidance and free cash flow expectations. The GAAP margin is forecasted to be 21.5% to 22%, and non-GAAP margin 35.5% to 36%, factoring in improvements and challenges from a new transaction model. Despite headwinds from co-terming and FX rates, factors like early renewals and improved margins are offsetting these impacts. The fiscal 2025 free cash flow guidance midpoint was increased by $10 million to a range of $1.47 billion to $1.5 billion, with significant growth anticipated in fiscal 2026 due to contract renewals. The departing Interim CFO expresses confidence in Autodesk's future, citing a resilient business model and competitive momentum.

In the third quarter, Autodesk saw strong momentum in its Architecture, Engineering, and Construction (AEC) sector, particularly in infrastructure and construction, as clients consolidated workflows onto its cloud solutions. These solutions offer end-to-end capabilities from design to operations, helping Autodesk expand in infrastructure, construction, and the midmarket. Notably, Autodesk's construction business performed robustly, doubling net new customers and maintaining strong renewal and expansion rates. The company highlighted Power Construction, a top U.S. contractor, choosing Autodesk's Construction Cloud for its projects, and Bouygues, a leading international contractor, expanding its agreement with Autodesk.

The paragraph discusses Bouygues' and Surbana Jurong's strategic investments and adoption of Autodesk's digital solutions to enhance efficiency, collaboration, and sustainability across projects. Bouygues focuses on using Autodesk Construction Cloud and other platforms for project digitization and decarbonization, while Surbana Jurong renews investments in similar technologies for scaling operations and managing water projects globally. Autodesk aims to facilitate this industry transition by managing people, processes, and data. In manufacturing, Autodesk's Design and Make platform, especially Fusion, is seeing rapid growth as customers pursue digital transformation to innovate and reduce costs.

In the recent quarter, various companies and institutions have adopted Autodesk's Fusion software to enhance efficiency and collaboration. A global semiconductor manufacturer chose Fusion Manage and Vault PLM to optimize operations, expecting significant time and cost savings. Playdale Playground in the UK integrated Fusion to streamline production processes and reduce lead times. A leading precision engineering company expanded its use of Autodesk products, incorporating Fusion for reducing material waste and manufacturing costs. Additionally, the University of Stuttgart will implement Fusion in its medical device courses for its modern features and collaborative tools. Autodesk is also dedicated to ensuring clients use the latest secure software versions.

The paragraph discusses how a large multinational manufacturing company in APAC partnered with Autodesk to improve compliance rates across its global employee base, resulting in a significant license compliance agreement. This included the adoption of Alias and VRED for design studios and PDMC for mechanical engineering and rail design. Autodesk sees strong growth potential in its focused strategy and resilient business, which is enhancing operational efficiency and delivering long-term shareholder value. The CEO expresses optimism about the company's future and customer innovation. Following this, the call transitions to a Q&A session where Jason Celino from KeyBanc Capital Markets asks about Janesh, a new figure at Autodesk, to which Andrew Anagnost responds by highlighting Janesh's ability to drive optimization and scale.

The paragraph discusses the appointment of Janesh as the new CFO and COO at Autodesk, highlighting his extensive experience and the key qualities that made him an ideal candidate. Janesh's previous roles at Elastic, VMware, Cisco, and his industry knowledge from PTC are emphasized as assets for Autodesk's goals of optimizing scale and maximizing investment returns. The speaker expresses excitement about Janesh joining in December and responds to a question about the timing of the next Investor Day, implying that March might be considered.

In the paragraph, Janesh is expected to join in December, and the company plans to give him time to adjust before he leads efforts for the end of the year and preparations for the next fiscal year. They do not anticipate making any significant changes in the spring. The discussion then shifts to Jay Vleeschhouwer from Griffin Securities, who questions Andrew about the sustainability and potential improvement of the company's three-year CAGR for current RPO, which stands at 12%. Betsy Rafael responds by explaining that the CRPO is consistent with the previous quarter, despite both headwinds and tailwinds. She highlights factors such as early renewals and a new transaction model providing tailwinds, while declining contributions from deferred revenue present headwinds. She notes these larger cohorts will also impact free cash flow in the next fiscal year, drawing parallels to similar dynamics in fiscal 2022.

The paragraph discusses the decision to maintain a separate Chief Revenue Officer (CRO) position within the COO organization at Autodesk. Andrew Anagnost emphasizes the need for a CRO who can leverage direct customer engagement to drive business, analyze customer data for cross-selling and upselling opportunities, and transform transactional channels into lifecycle solution partners. Additionally, a question from Adam Borg of Stifel about a new transaction model is briefly mentioned, but Anagnost indicates it's too early to draw any conclusions.

The paragraph discusses Autodesk's shift towards more direct customer channels, highlighting early success in cross-selling and upselling through enterprise business agreements, which foster deeper customer relationships. It suggests this approach could be beneficial with the new transaction model. Additionally, regardless of the new administration, the focus remains on bipartisan issues like infrastructure and domestic manufacturing, which are key concerns for Autodesk's customers and likely to continue being prioritized.

In the paragraph, Joe Vruwink of Baird asks about Autodesk's financial outlook, specifically the $2.05 billion in free cash flow expected for fiscal '26, and whether recent changes in contract terms might improve the forecast. Betsy Rafael confirms no change to the projected midpoint. Joe Vruwink also inquires about Autodesk's approach to mergers and acquisitions, noting recent smaller strategic acquisitions and asking if this strategy aligns with their cloud platform and data model development. Andrew Anagnost explains that Autodesk is open to acquisitions when strategically and financially sensible. Elizabeth Porter of Morgan Stanley mentions partners spend more time with existing customers under the new transaction model and asks if this affects new business demand.

The paragraph is an excerpt from a discussion where Betsy Rafael and Elizabeth Porter address questions regarding business trends and billings. Betsy mentions that while the company continues to see growth, it is at a slower pace due to several factors like macroeconomic conditions, COVID, and exiting Russia, among others. These challenges are reflected in their guidance. Elizabeth asks about the volatility in billing changes and the expected slowdown in Q4 growth despite easier year-ago comparisons. Betsy explains fiscal '25 billing expectations, highlighting tailwinds from billing model changes and early renewals, and headwinds from co-terming and recent currency exchange issues. Bhavin Shah from Deutsche Bank then asks Andrew about the increased interest from owners and operators at a university event, inquiring if it results from internal enhancements or market focus and when it will impact financials.

In the paragraph, Andrew Anagnost discusses the company's focus on addressing the entire lifecycle of projects from design to operations, highlighting a product called Tandem, which is a digital twin solution. He mentions the increasing interest and adoption of this product, particularly in the owner space, and indicates plans to continue developing solutions and APIs for owners, including areas such as vertical buildings, factories, and infrastructure. Bhavin Shah then asks Betsy Rafael about the impact of foreign exchange and transaction models on operating margins for the next year, to which Rafael responds that more specific information will be available at the end of February. The discussion ends with Tyler Radke from Citi preparing to ask a question.

The paragraph consists of a discussion primarily between Andrew Anagnost and an unnamed speaker, focusing on Autodesk's approach to efficiency and optimization. The speaker asks Andrew about the potential for efficiency, particularly relating to hiring decisions and the implementation of a new transaction model. Andrew emphasizes that optimization is an ongoing mindset at Autodesk, not a sudden change. He notes that their non-GAAP margins are already reaching targets set for the following year and states that optimizing go-to-market efforts will continue to drive margin growth over the coming years.

The paragraph discusses Autodesk's focus on enhancing customer engagement through self-service, which is expected to improve efficiency and revenue growth by directly capturing customers. The company aims to better understand customers for upselling and cross-selling opportunities and is shifting its channel partners from transactional roles to solution and IP providers, reducing duplication and driving cost efficiencies. This strategy is part of a go-to-market optimization expected to bring top-line and bottom-line efficiencies. Additionally, strong growth in Autodesk's construction cloud, with customer additions doubling year over year and accelerated make revenue growth, prompts a discussion on the durability of this growth and what's driving the strength in new customer acquisitions.

The paragraph discusses the robust growth of the company's construction solutions business. It highlights both organic growth and successful inorganic strategies, such as the acquisition of Payapps, that are accelerating the company's expansion. The company reported a year-over-year doubling of new customers, strengthened its position in the ENR 400, and successfully engaged with clients seeking advanced, cloud-based construction solutions. Additionally, the company has scaled its distribution channels domestically and internationally, enabling effective market penetration and customer acquisition.

The paragraph features a conversation during an earnings call, where Michael Turrin from Wells Fargo asks about the overall spending environment and whether there are any signs of improvement. Andrew Anagnost responds by saying that the trends remain consistent with previous quarters, despite some fluctuations within the diverse business. Betsy Rafael adds that the new transaction model and elections have contributed to market noise, making it difficult to interpret specific behaviors. Overall, they both emphasize consistency in the market trends. Additionally, there is a brief congratulatory note to Betsy Rafael on her transition back to a board position.

The paragraph features a discussion involving Betsy Rafael about her role in the hiring and transition process for Janesh, a new recruit, highlighting her extensive experience and commitment to ensuring a smooth transition before she leaves at the end of the fiscal year. It then switches to a question from Mike Richards regarding an update on Project Bernini, which focuses on AI integration in the company's operations. Andrew Anagnost responds, emphasizing that AI is being embedded throughout the company's processes and discusses the development of foundational models aimed at automating tasks such as drawing creation and sketch generation.

The paragraph discusses the development and future prospects of Bernini, a top-down innovation focused on understanding 3D geometry. Currently not commercially available, Bernini is being refined with the help of targeted customers. The company is unsure about the exact monetization strategy but sees multiple opportunities, such as charging for advanced features and licensing technology. Autodesk aims to maintain its competitive edge by staying ahead of its rivals, supported by their established AI research lab, which has produced significant research over the past six years.

The paragraph discusses a company's strategic focus on 3D design technology and AI, while addressing financial and leadership updates during a conference call. Steve Tusa from JPMorgan asks about changes in billing contributions following a transaction model shift, to which Andrew Anagnost explains that a higher volume of buy-sell business in Europe led to less apparent tailwind from the new model. Joshua Tilton from Wolfe Research inquires about revenue growth projections and the impact of a new CFO. Anagnost mentions that despite aiming for 10% to 15% growth, the company has faced headwinds like the pandemic, inflation, exiting the Russian market, writer's strike, and trade wars, which have kept growth at the low end of their target range.

The paragraph discusses the challenges and expectations associated with a subscription business model, where revenue changes occur gradually. In the short term, the company anticipates being at the lower end of revenue projections, but maintains a long-term growth guideline of 10% to 15%. The company acknowledges that new perspectives may prompt reassessment, but currently their framework is seen as sensible. Betsy Rafael highlights past performance and ongoing focus on expansion, without providing specific forecasts for next year. The discussion also mentions attention to operating leverage and improvement. Lastly, the operator transitions the discussion to questions from analysts, with Michael Funk of Bank of America asking about upcoming significant cohort renewals.

In the conference call, Betsy Rafael discusses the expectations for renewals, indicating it will be a strong year but avoids providing specific guidance for 2026 until the earnings report in February. Michael Funk inquires about the cost structure related to new investments in transaction models, and Simon Mays-Smith directs him to a slide in the earnings deck for modeling information. The call concludes with Simon expressing gratitude and wishing a happy Thanksgiving to participants in North America.

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