Q4 2024 Earnings Summary
- Autodesk's new business growth remains relatively soft, impacted by macroeconomic factors, leading to revenue growth guidance at the lower end of their 10% to 15% target range.
- The transition to the new transaction model introduces uncertainty and headwinds to revenue growth and operating margins, with the $600 million shift expected to affect revenue and expenses over multiple years.
- Competitive pressures and past integration issues in the construction segment may pose challenges to Autodesk's growth, even as the company works to scale execution in that area.
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FY 2025 Growth Outlook
Q: Why is FY '25 revenue growth at 10%? What drives a potential recovery?
A: We continue to target our long-term growth algorithm of 10% to 15% revenue growth. For FY '25, we guided to the midpoint of 10% due to macroeconomic conditions impacting new business growth. We are monitoring indicators like new business growth, product usage, and bidding activity to assess recovery prospects. -
Free Cash Flow Guidance
Q: How does the FY '26 free cash flow target compare to prior expectations?
A: We reaffirm our FY '26 free cash flow target of $2.05 billion. The progression from FY '24 to FY '26 is linear when adjusting for the $200 million impact from upfront multi-year contracts. No changes have been made to our cash flow expectations. -
Impact of Pricing Actions
Q: How will recent pricing actions affect customer behavior and the model?
A: We implemented a 3% market factor increase and a 5% renewal increase. We moved up the timing, leading to some early renewals and adding one point of growth to current RPO. The price increase was helpful to billings but not material to revenue and free cash flow. -
Transaction Model Changes
Q: What is the impact of the new transaction model on revenue?
A: The new transaction model will provide a one-point tailwind to revenue growth in FY '25. The transition involves $600 million in reseller commissions impacting revenue and expenses over time, bleeding into results over the next couple of years. -
Construction Business Growth
Q: Can construction revenue accelerate to 20% growth?
A: Our goal is to drive greater growth in our "Make" revenue line. It grew 17% in constant currency over the past three quarters. We anticipate this growth rate will be higher than the core business, aiming to accelerate beyond current levels. -
Acquisition of Payapps
Q: Why acquire Payapps instead of extending the partnership?
A: We acquired Payapps to tightly integrate their capabilities into our construction solutions, automating and tracking payments to reduce processing time from 83 days. This aligns with our end-to-end solution strategy and will help accelerate growth in construction. -
Potential Risks to Guidance
Q: What could cause results to hit the lower end of guidance?
A: A shift in macroeconomic conditions impacting new business growth could lead us to the lower end of our guidance range. We are closely monitoring new business growth, end-market demand, and partner sentiment to assess potential risks. -
Capacity to Support Volume Growth
Q: Can your systems handle expected volume growth?
A: We have modernized our transaction environment to support significant scaling. This ensures we can operate at scale as we deepen penetration and increase subscriptions. -
Effects of Declining Engineers
Q: Any impact from fewer engineers on seat growth?
A: We are not seeing a decline in growth rates due to pressure from declining ranks of engineers. We continue to displace competitive products, especially with Fusion in manufacturing. -
Generative AI Initiatives
Q: How are customers responding to generative AI?
A: Customers are seeking productivity increases from generative AI. We intend to be the market leader, delivering disruptive technologies and tools that automate workflows.