Good day, ladies and gentlemen, and thank you for your patience. You've joined Autodesk First Quarter Fiscal 2020 Earnings Conference Call. As a reminder, this conference may be recorded. I would now like to turn the call over to host, VP of Investor Relations, Abhey Lamba. Sir, you may begin.

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss the results of our first quarter of fiscal '20. On the line is Andrew Anagnost, our CEO; and Scott Herren, our CFO. Today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available at autodesk.com/investor. You can also find our earnings press release and a slide presentation on our website. We will also post a transcript of today's opening commentary on our website following this call. During the course of this conference call, we may make forward-looking statements. These statements reflect our best judgment based on factors currently known to us. Actual events or results could differ materially. Please refer to our SEC filings for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. During the call, we will quote a number of numeric or growth changes as we discuss our financial performance and, unless otherwise noted, each such reference represents a year-on-year comparison. And now, I would like to turn the call over to Andrew.

Thanks, Abhey. We started off fiscal '20 with great momentum, accentuated by continued acceleration of recent construction acquisitions and strong growth across all geographic regions. Our billings and free cash flow came in at or above expectations and reflect the strength of our business. We are on track with the integration of PlanGrid and BuildingConnected and have exciting achievements to share with you. Although our first quarter revenue came in at the low end of our guidance range, we are on track to achieve our fiscal '20 ARR and free cash flow guidance and are reaffirming our fiscal '23 targets. Our pipeline for the rest of the year is strong and growing, and the underlying demand strength we've seen in prior quarters continues to drive growth in our business. There is no change to our view of the strength of the business or the current spending environment in our end markets. Before I offer you more color on strategic highlights during the quarter, let me turn it over to Scott to give you more details on our first quarter results as well as our guidance. I'll then return with further insights into some of the key drivers of our business, including construction, manufacturing, and digital transformation, before we open it up to Q&A.

Thanks, Andrew. As Andrew mentioned, our leading indicators, billings and free cash flow, performed well. Total revenue of $735 million was up 31% and 28% excluding our recent acquisitions. It was within our planning assumptions, although at the low end of our guidance range. This was primarily driven by linearity, as we closed more business later in the quarter than anticipated, which affected the amount of ratable revenue recognized in the quarter. Overall, demand in our end markets was robust, as indicated by our strong billings and revenue growth. Our subscription volume also grew steadily across the board. Sales volume of AutoCAD LT remained strong. This has historically been a leading indicator of potential demand slowdown. As you can see, revenue from our AutoCAD and AutoCAD LT products grew 37% in the first quarter, slightly better than the 36% growth rate in Q4. AEC and manufacturing also rose 37% and 24%, respectively. Geographically, we saw broad-based strength across all regions. Revenue grew 35% in EMEA and APAC, and 27% in the Americas, with strength across almost all countries. We also saw strength in direct revenue, which rose 36% and represented 30% of our total sales, consistent with last year. Within direct, our e-store grew 45%. Looking at ARR, total ARR continued to grow quickly, up 33% versus last year to $2.8 billion. Adjusting for our recent acquisitions, total ARR was up 29%. Core ARR growth was in line with our total organic growth, while Cloud ARR grew 164%, propelled by strong performance in construction. Excluding the $83 million of ARR from our fourth quarter acquisitions, organic Cloud ARR, which is primarily made up of BIM 360 and Fusion 360, grew a record 43%. We continue to make progress with our maintenance to subscription, or M2S, program. The M2S conversion rate in Q1 was consistent with prior quarters, with approximately one-third of maintenance renewal opportunities migrating to product subscriptions. Of those that migrated, upgrade rates among eligible subscriptions remained within the historical range of 25% to 35%. As a reminder, this is the last year of the M2S program, and we are continuing to incentivize customers to convert. In addition to strong new customer billings, the growth in ARR was supported by continued expansion of our renewal base. As we introduced at our Investor Day in March, the net revenue retention rate is a key metric to monitor the health of our renewal base. Net revenue retention rate measures the year-over-year change in ARR for the population of customers that existed one year ago, or base customers. It's calculated by dividing the current period ARR related to those same base customers by the total ARR from one year ago. During Q1, the net revenue retention rate was within the fiscal '19 range of approximately 110% to 120%, and we expect it to be in this range throughout fiscal '20. In Q1, some of the deeply discounted subscriptions from our global field promotion we ran three years ago came up for renewal. We were very pleased with the renewal rates of this group of customers as they renewed closer to list price, and the total value from the entire cohort grew. Moving to billings, we had $798 million of billings during the quarter. On a normalized basis, billings rose about 40%. Recall that last year we adopted ASC 606, which resulted in adjustments of approximately $160 million to our deferred revenue balance and impacted billings since billings are calculated by taking the sum of revenue plus the change in deferred revenue. The growth in billings was driven by strong renewals and continued momentum in our core products. We also benefited from some customers renewing early in the quarter due to upcoming price increases. Our recently acquired construction assets contributed nicely to the billings increase. In line with our plans, multi-year contracts moved higher, helping our total billings. Recall that multi-year payments are good for our customers as they benefit from stable pricing and a single approval process. Our partners like them as they can sign higher contract values and maximize their cash flow. And we benefit from a more predictable revenue stream and upfront cash payments. The second and third year of those multi-year agreements are recorded in our long-term deferred revenue, which grew by 12% and ended the quarter at 17% of the total deferred balance. As we indicated at our Analyst Day, we expect to end the year with a long-term balance in the low 20% range of total deferred revenue, in line with the historical range. On the margin front, we realized significant operating leverage as we have entered the growth phase of our journey. Non-GAAP gross margins of 91% were up 140 basis points versus last year. Our disciplined approach to expense management combined with revenue growth enabled us to expand our non-GAAP operating margin by 13 percentage points to 18%, despite absorbing two significant acquisitions. Moving to free cash flow, we generated $207 million in Q1. Over the last twelve months, we have generated $550 million of free cash flow, positioning us well to hit our full year target of $1.35 billion. Note that Q1 benefited from the very strong Q4 of fiscal '19 that we had. As you may recall, we had over $1 billion of billings during Q4, some of which was collected in the first quarter of fiscal '20. As such, I expect our free cash flow in Q2 to be down sequentially. We continue to repurchase shares with our excess cash, which is consistent with our capital allocation strategy. During the quarter, we repurchased 582,000 shares for $100 million at an average price of $171.84 per share. Now I'll turn the discussion to our outlook. I'll start by saying that our view of global economic conditions and their impact on our business is unchanged from the last several quarters. We are not seeing any noticeable impact from Brexit and the various trade and tariff disputes. For the full year, we are reiterating our fiscal '20 free cash flow outlook of approximately $1.35 billion as well as our outlook for ARR of about $3.5 billion, up 27% to 29%. In line with our initial plans, we expect billings of about $4.1 billion at the midpoint, driven by the strength of our renewal base, new subscription growth, continued normalization of multi-year billings, the flow-through from unbilled deferred revenue, and our acquisitions. When looking at the quarterization of free cash flow for fiscal '20, we continue to expect about three-fourths of the free cash flow to be generated in the second half of the year. Looking at our guidance for the second quarter, we expect total revenue to be in the range of $782 million to $792 million, and we expect non-GAAP EPS of $0.59 to $0.63. The earnings slide deck on the Investor Relations section of our website has more details as well as modeling assumptions for the fiscal second quarter and for full year 2020. Now I'd like to turn it back to Andrew.

Thanks, Scott. Now, let me give you an update on some of the key growth initiatives we highlighted at Investor Day, specifically progress made in construction, manufacturing, and digital transformation. These initiatives are key drivers of our business both near and long-term. First, in construction, we are seeing continued strength across the portfolio as we execute on our strategy to deliver a comprehensive, integrated platform that seamlessly connects the office, the trailer, and the field. We had significant accomplishments during the quarter as we integrated PlanGrid and BuildingConnected into Autodesk. Both acquired companies showed impressive growth, which is important to note considering that acquisitions typically see a slowdown during the integration phase, whereas we experienced accelerating momentum. Post-close, we have won fifteen head-to-head bids against leading competitors in this space. Other milestones included the launch of our first product integration and the realization of revenue synergies. Q1 was the first full quarter where we had the entire construction portfolio in place, as we closed PlanGrid in December 2018 and BuildingConnected in January of this year. Feedback from customers has been very positive regarding the addition of these best-in-class solutions to our comprehensive construction portfolio, which now includes BIM 360, PlanGrid, Assemble Systems, and BuildingConnected, in addition to the design tools we have always sold into that market. On the technology development front, we were able to accelerate the product roadmap for PlanGrid, which resulted in the introduction of PlanGrid BIM last month. This is a new product integration between Revit and PlanGrid that allows customers to immediately access BIM data in either 2D or 3D directly within PlanGrid on their mobile devices. We were able to deliver this frequently requested feature at an accelerated pace now that PlanGrid is part of Autodesk. In fact, when PlanGrid BIM was launched we hosted a webcast and the demand was five times what PlanGrid had normally seen for prior product launches, and the number of customers who requested to be contacted by a salesperson following the webinar was also more than five times what they normally experience following a product-focused webinar. We've also seen synergies begin to develop on the sales front. For example, APTIM, a leading construction services vendor and joint customer of Autodesk and PlanGrid, tripled its PlanGrid users as part of the Enterprise Business Agreement for its Digital Foreman Initiative. Other Autodesk products they use include AutoCAD, Civil 3D, Plant 3D, Map 3D, and Revit. Because we have been clear with our customers that PlanGrid will be focused on field execution and BIM 360 on project management, there are a lot of synergies between the two offerings that our customers have yet to realize. We are also seeing BuildingConnected thrive within the Autodesk construction ecosystem. Since the acquisition, they have grown their user base from about 700,000 to over 800,000. Now, I'd like to elaborate on the impressive growth comment made earlier. When we made the acquisitions, I said that we were focused on keeping the strong sales momentum going, and that is exactly what happened. At PlanGrid, the sales teams are continuing to perform strongly with both new and existing customers. For example, they expanded their relationship with Rosendin Electric, a long-standing PlanGrid customer with over 6,000 employees and annual revenue of about $1.5 billion. The company recently extended its contract for three years and significantly expanded it, in part due to Autodesk's long-term vision. PlanGrid sales have also started to benefit from being part of the Autodesk family. During the quarter, Jacobs, a global leader in the professional services sector and a long-standing Autodesk customer, decided to further enhance its relationship with us by adding PlanGrid to one of its divisions. In making this decision, Jacobs pointed to its current speed in the field, ease of use, and integration with the rest of the Autodesk suite as determining factors in adopting the software. The Company is currently utilizing PlanGrid on a $1 billion infrastructure project. PlanGrid also ended Q1 with its largest ever pipeline of deals. The momentum continued at BuildingConnected too. BuildingConnected has introduced new features that continue to make its platform more valuable to larger portions of the market. In fact, they had their best quarter ever in Q1 in terms of new business and are seeing their flywheel continue to drive new business on both the general contractor and subcontractor side. BIM 360 also continues to demonstrate strong growth. Our organic Cloud ARR, of which BIM 360 is the largest component, was up 43% in Q1. This was driven by strength across the entire BIM 360 portfolio, especially BIM 360 Design, our real-time collaboration tool for Revit users. We also saw both existing and new customers increase adoption of BIM 360. A good example here is WeWork, with 485 locations and 466,000 members around the world. WeWork provides spaces and services to help people work, learn, and collaborate in more meaningful ways. They expanded their subscription with Autodesk this quarter and are one of our largest BIM 360 Design customers. We are excited to work with them and look forward to further enhancing our relationship over the coming years. Overall, all parts of our construction portfolio are performing at or above plan and showing strong growth. I am extremely proud of all the teams involved. They remain focused and dedicated to helping Autodesk grow and drive positive change in the construction industry. Lastly, I wanted to note that for those looking to get a more in-depth view of our construction business, we are hosting an event on June 4th here in San Francisco, where you'll have the opportunity to hear directly from AECOM, Webcor, and DPR in addition to our construction team regarding our portfolio and go-to-market opportunity. I hope to see all of you there.

On the manufacturing front, revenue grew 24% as customers see the benefits of our differentiated solution. We are gaining share and displacing competitive offerings in the space. For example, a large manufacturer of locomotives and rail equipment further expanded its relationship with us. They are in the process of deploying our manufacturing solutions across their various divisions and are relying on Inventor, our CAM solutions, and factory design utilities to automate their workflows. Our solutions displaced competing products due to our simplicity and short implementation cycles, which is in line with their rapid product introduction requirements. Our investments in generative design and Fusion 360 have resulted in more than 100% year-over-year growth in monthly active users for our commercial customers. Users love the cloud-based, comprehensive solution of Fusion 360, and it is disrupting the industry. Fusion 360 offers unprecedented value and out-of-the-box productivity for concept to production workflows, and that appeals to a large swath of our customers. A US-based specialty pharmaceutical company purchased Fusion 360 to replace SolidWorks for designing and manufacturing auto-injectors. After reviewing various options, they decided that Fusion 360 provided superior collaboration and data management capabilities in the cloud with no setup or maintenance complications. A Midwest metal fabrication company chose Fusion 360 to replace separate instances of CAD and CAM solutions. They were impressed by our integrated CAD/CAM functionality and collaboration features. With Fusion 360, they were able to replace CATIA, Creo, Mastercam, and PTC Windchill, allowing them to rely on fewer platforms and to promote collaboration. When it comes to digital transformation, we are seeing the positive impact it is having on our business. We are also making progress in using digitization internally as part of our plans to convert the large number of non-compliant users into paying customers. All new single-user product subscriptions are already using identity-based authentication and we continue to move existing customers to this new system. We are on track to migrate all eligible single-user subscriptions to identity-based authentication by the end of the current fiscal year, which will provide a much better user experience for our customers and help us in combating non-compliant usage of our software. Beyond that, we are already starting to see results from our efforts to engage directly with customers using non-compliant versions of our software and expect our ongoing learning to increase our effectiveness in FY '20 and beyond. As you've heard, there's a lot of activity happening towards the growth initiatives highlighted at Investor Day across construction, manufacturing, and digital transformation. These drivers, as well as the large opportunity we see in converting the current 14 million non-paying users into subscribers, should result in an acceleration in profitability and cash flow metrics and sustained growth going forward. We are highly confident in Autodesk's ability to capitalize on this large market opportunity and are committed to delivering our FY '20 and FY '23 targets. With that, operator, we'd like to open up the call for questions.

Our first question comes from the line of Phil Winslow of Wells Fargo. Your line is open.

Thanks for taking my question and congrats on a great start to the year. I just wanted to drill into your comment about just the linearity of the quarter, Scott you mentioned that the quarter's billings and it was well within your assumed range with revenue at the low end just because of linearity. But your full year expectations are unchanged. Wonder if you could just drill into that, where was the linearity different? Was it something about specific industries or more geographies, and sort of how are you thinking about the go forward there?

Yeah. Thanks, Phil. It was - it's certainly within the range of our guidance and our planning, $735 million was the low end of our guidance range. So it wasn't a significant variance from what our expectations were. So we did see those both Q3 and Q4 had - but I'll call better linearity. So earlier, linearity in each of those quarters, as we came into Q1, Q1 actually ended up with the linearity similar to last Q1, as opposed to the improved linearity that we've seen in Q3 and Q4, which I guess is not really surprising, given that, at the beginning of the year, people don't have budgets yet, sales teams are going through sales kickoff, et cetera. So we ended up with the same linearity we had in Q1 a year ago as opposed to the kind of improved linearity we've seen in Q3 and Q4 and that's what pushed us to the low end of the range. I'll go ahead and answer your follow-up question, which is our assumption for Q2. On linearity is that it'll look more like Q2 '19 as opposed to the improved linearity that we saw in Q3 and Q4. It doesn't really have an effect on the full-year; you see full-year guidance remains unchanged, and you see actually Q2 guidance shows a pretty nice step-up sequentially as a result of getting some of that, and that came in a little bit later in the quarter. Obviously, we have it for the full quarter of Q2. So it doesn't really change our view of the year. That was a good strong start to the year. Just had linearity more in line with what we had seen a year ago as opposed to what we had seen in the prior two quarters.

Then just a follow up for Andrew. It was great to hear some of those wins on the PlanGrid side, BuildingConnected, wonder if you can provide just more color on this early feedback you're getting now you provided some earlier, but how you think about bringing this into the product line and maybe even also using BuildingConnected even almost as a funnel for PlanGrid as well. Just some more color there that would be great.

Yes. So what was the second part you said about PlanGrid there, Phil?

Sorry to say as a funnel, potentially you're seeing bid management, actually you've been using that as a sort of lead management, so to speak for PlanGrid?

That's exactly it, and you actually hit on one of the points that's important about this coming year. The PlanGrid folks and the BuildingConnected folks immediately found some synergies between how they approach the market and their individual businesses. So there's a strong flow of leads and discussion back and forth between those two teams, and that plays a pretty integral part. Remember, BuildingConnected has visibility to the entire project bidding environment within the US. And obviously, PlanGrid is super eager to go and talk to those projects about how they can improve site execution and effectiveness and success for their particular projects. So that's one of the big uplifts we're seeing is some of the connection between those two offerings. And frankly, as we brought BuildingConnected in, we saw a very nice surge in their business. Like I said, they had their best Q1 ever in terms of new business, because people just like the fact that they're part of Autodesk and that - what they're focusing on with the bid management is - it's a good tool. They added a lot of features in there during Q1. And it's a solid result.

Our next question comes from the line of Saket Kalia of Barclays Capital. Your line is open.

Maybe first for you, Andrew, just picking up off the last line of questioning on PlanGrid. Clearly, it seems like it's off to a good start. And I believe the initial approach here was to let them operate largely separately, at least for the vast majority of sales. But it seems like you were able to really cross-sell to some mutual customers relatively early on. So can you just talk about how you sort of envision the combined company maybe looking by the end of this fiscal year, PlanGrid plus Autodesk BuildingConnected, and within that maybe touch on just a very minor overlap you might have with some products with Autodesk versus PlanGrid, and how you plan on sort of handling that?

Yes. So first off, all let me comment on some of those synergies we found in shared accounts. One of the things we did very quickly was establish how we were going to go-to market with our named account side of our business, and a lot of the places where we're seeing joint shared updates in our named account business. So that was a place where we have a named account rep, where we can come in and say, hey, look you know what, we can augment your solution with PlanGrid, and we can do some - we can get this project put it up on PlanGrid; we can get this project put up on BIM 360, that's where you're seeing a lot of collaboration. That fits within our standard salesforce, and it's functioning really well, and we have an interconnect strategy between those two, and a quarter retirement strategy that allows people to cross-sell and get benefit in terms of quarter retirement for both sides of the equation. Now what you see that PlanGrid team being highly effective at is doing land and expand in new accounts in the construction ecosystem. And we focus a lot of that team on going out and reaching construction companies that we historically did not touch. That's where they're spending a lot of energy. So they leverage our named accounts team for some of these synergistic sales, and they go out and they find new business out there using their existing infrastructure, which works very effectively. As we move across into the year, what you're going to see is basically - we're going to maintain that essential structure, but we're going to make sure that we coordinate sales more tightly within the Autodesk construction group as we move towards the end of the year. But we're going to continue to have that synergistic relationship between our named account program and the salesforce that sits inside of the construction group. We just think those synergies are going to increase as the year progresses. Remember, we just rolled out a tokenized version of PlanGrid as well, and you know how effective we are at driving usage within some of the named accounts underneath our EBA, so you're going to see that have a synergistic factor as well. It's all brand new. I mean, we're very, very early on in that.

Maybe for you, Scott, just to peel back the onion a little bit on ARR. It was actually a little funny, the maintenance ARR number actually came in a little bit below what I was expecting, but I think the consensus is actually a little bit higher. Maintenance at this point is getting to be such a small part of the business, but I guess maybe just to better help - better calibrate, maybe the pace of decline, any sort of idea for how we should think about that pace of decline in maintenance ARR, maybe through the rest of this year or some broad brushes?

Yes. So it's a great question, Saket. The M2S program, of course, just entered its third year, right, at the beginning of Q2. We just entered the third year of the M2S program. This is when the more significant price increase goes into effect for those who want to renew maintenance. Ahead of that, what we've seen is the maintenance renewal rates - we're not talking subs in renewal rates anymore, but if we were, the maintenance renewal rates have held up very nicely in that space. So we continue to see both success with conversions. I said that on the - during the script that was in the range that it had been historically, of those that convert the upsell, the collections continue to be good. We're down to at this point just short of 700,000 maintenance customers left, and that I'm super pleased. We started this with a little more than 2 million maintenance subscribers, and we've now moved all but about 700,000 over to product subscriptions. I think this year is the year where we'll see a lot more of the remainder move over. So what I would - my expectations is we'll continue to see good success with that moving over. And of those that elect to say - to stay what we have seen is the minus renewal rates are holding up nicely.

Next question comes from the line of Jay Vleeschhouwer of Griffin Securities. Your line is open.

Andrew, let me start with you. One of the things that you've talked about with respect to digital infrastructure is your usage telemetry, your ability to observe and collect data about how customers are employing the products, particularly now that it's mostly subscription. Can you talk about any trends or key observations that you're getting from the use of telemetry, particularly in the growing collection space? Second question: there's been quite a bit of commentary in the call thus far with regard to direct sales, and how you're handling the integration of the construction acquisitions. A broader question perhaps about customer engagement; you, like some other companies, have created a new customer success group, and this has become increasingly common in software. What do they do? And how do you measure the success of the customer success group?

So let me start with the first question about the kind of the insights we're seeing. So there's a few things I can tell you, one of the insights we're getting is usage is continuing to go up; it's going up nicely across numerous product sets. That's really great to see. The other thing we're seeing is that collections are seeing usage patterns better than the old suites in terms of how many products people are using, which shouldn't surprise you because there's more offerings inside - more diverse offerings inside the collections and we're seeing some of those things. One of the other things I'll tell you is that the ramp-up of 'new releases' that we're moving away from what we would like to consider major releases. People are ramping up on to the latest capabilities relatively quickly, including the people who don't pay us, which is important for us to talk about because it says that cohort of non-paying users continues to follow us into some of the newer capabilities. I think that's important in terms of the future capability of capturing some of that opportunity as we move forward. So yes, we are seeing some more fidelity in terms of usage, and we are seeing some interesting trends and some things that looked a lot better than they were in the suite days. Now in terms of the customer engagement team. The first thing I want to talk about is what this team is measured on. They're measured on net revenue retention. That's their job. Their job is to go in there and renew and help grow those accounts, and that's the primary metric they track. They also have metrics around MPS for the interaction that they have with the customers, not kind of global MPSs, but relationship MPSs and network net promoter scores around the various interactions. But primarily, we measure them on how well we capture money from the renewal base and net revenue retention in particular. The way they function is a function along the spectrum from low-touch - low human touch and digital relationships all the way up to high-touch engagements. One of the digital infrastructures we built that's facing this team is what we call the early warning system; it's an umbrella of a lot of metrics that basically give this team a sense for how healthy an account is, how healthy are they on their usage capabilities, how healthy are they on their adoption of learning tools, on other tools, has there been a drop-off, and it helps them spend their time with the accounts that need the most assistance and the most engagement with Autodesk. It is a new practice; we've beefed it up, it consolidates several things in the area, but I just want to emphasize the number one thing they're revenue - they're measured on is net revenue retention, and that's how we track the success of that organization. Scott, do you want to add anything?

No. I think you nailed it. The customer success team under Ray has actually done a really nice job so far, and one of the things we mentioned, Jay, in the opening commentary is that our net revenue retention rate has stayed right in the range that we talked about at Investor Day. Last year, all year, it was in that approximately 110% to 120% range, and it stayed right there again in Q1. So Ray and his team are off to a really good start.

Our next question comes from Heather Bellini of Goldman Sachs. Your line is open.

I had a question about - I know you referenced to linearity in your prepared remarks. I was wondering if you could share - if you noticed any impact or what you're hearing from your manufacturing customer base in the quarter just due to the kind of ongoing tariff war that seems to be going on, and if they've given you any sense of whether or not that's impacting their own spending plans? And also - I'm just also just because I'm getting asked myself, you obviously had very good outperformance. It seemed on long-term deferred versus some people's expectations. Could you share with us kind of how did short-term DR track versus your expectations? And that's it. Thank you.

So I'll take the first part, then I'll hand the second part over to Scott. So you saw our manufacturing business grow quite nicely during the quarter, with really strong growth. Now that doesn't mean we aren't hearing from our manufacturing customers that they're seeing pressure in terms of the commodities they use to build their products and things associated with that. They absolutely are. All of our customers are paying more for certain basic things to bring into their business. But you have to understand that what we sell to them isn't a commodity; it isn't a metal or a fabrication or a supplier. It's a mission-critical tool, and it's a mission-critical digital process. A lot of our customers see these tools and expansion of their investment with us as helping them be more efficient and be more effective when they're seeing cost pressures rise in other areas. Like a lot of those competitive wins I talked about are really focused on the consolidation of multiple tool sets into the single solution we offer, which is easier to deploy. It's lighter touch. It's got more and more end-to-end things, different types of price points. So customers are actually looking to us to help them get more efficient while they're seeing the cost of things that roll in the door to make their products go up. So we have not seen any kind of backing away of expenditures in our software space. We're seeing no signs of it. We haven't seen it yet; it doesn't mean things can't change. But we also - we do know that our customers are turning to us to make them more efficient, and I think that puts us in a good position when they're seeing the cost of other parts of their business go up. Now I'll turn it over to Scott for the second part.

Sure. On the second one, it's interesting, Heather. Of course, what you see showing up in long-term deferred, the sequential growth, there's some of the success we're having in having multi-year payments get closer to the mean that they had been historically. We're still not quite there, right? So there's still a little more headroom in long-term deferred to get to what we talked about at Investor Day as that being kind of a low 20% range. If you look at the growth rate year-on-year, the long-term deferred grew 12%, while short-term deferred actually grew 21% year-on-year. So we're seeing really nice performance as you'd expect when you see the billings line grow the way it has. We're seeing really nice performance across the deferred revenue spectrum. When you add in unbilled, total deferred revenue grew 24% year-on-year. So it was obviously a strong billings quarter that led to both good revenue results, but in particular, strong growth in deferred.

Our next question comes from the line of Matt Hedberg of RBC Capital Markets. Your question please.

Andrew, we continue to hear positive feedback from channel partners around generative design; it really transforming the whole design process. I know this remains a focus for you guys. Wondering about a little bit of an update there on this momentum and really customer receptivity to this sort of this new way of designing?

Yes. Well, there's a lot going on there, and we're rolling out a lot more in generative tools, especially to the Fusion platform. Manufacturers are going to see some new capabilities in terms of generative geometry creation tied to 2.5 axis milling constraints and more of the mainstream kind of CNC applications that customers use. So we're probably going to see a little bit of an explosion of use of some of these tools as we roll some of this out. But you're right, we're getting a lot of adoption. The partners are excited about it because they can go in and have a very, very differentiated discussion with their customers about what they can do with these tools. Now one of the things we're seeing, and I want to make sure that people understand this because people thought, well, these are really advanced things, isn't just like 3D printing focused and isn't this just for people that want to create organic shapes for 3D printing. The biggest usage right now that we're seeing with regards to generative design is people exploring new types of design options for things that they either had existing or they are building from scratch, and then taking those explorations and turning them into things they can build using their traditional manufacturing methods. That's one of the exciting things about what's going on right now; it's having a real impact on the mainstream customers and on the customers that are looking out on the cutting edge of things. So you're absolutely right, there's lots of reasons to be excited and our partners are really getting engaged in our manufacturing portfolio because of generative.

And then maybe just a quick one for Scott, obviously, a lot of questions on the construction opportunity. I'm curious when you think about adding sales capacity to this year, how do you kind of think about into the overall pace? And then, how do you think about putting that more so in the construction versus A&E or the manufacturing side? Just sort of wondering about how you kind of allocating your sales capacity adds this year?

Sure. Construction is such a massive opportunity for us, Matt, it won't surprise you to hear that we rotate a lot of investment into it. Coming on the heels of the acquisitions we did in the fourth quarter, we've also increased spend in each of those. It wasn't the normal buy them and go through a bit of a downsizing, we've actually done the reverse. We've acquired those companies, integrated them nicely into Autodesk, and at the same time increased the investment in construction. So great results out of the gate, as Andrew mentioned in the opening commentary, and I think you can expect to see us at this level of performance. What the market really beginning to turn this direction, you can expect to see us continue to invest in construction.

Our next question comes from the line of Ken Talanian of Evercore ISI. Your line is open.

So for the customers that are still on maintenance, do you have a sense for how the percentage of that group who might upgrade to collections compares to the folks who are already converted?

What I'd say, Ken, is really haven't seen the needle move much on that. We've had great success at the point of people moving from maintenance over to product subscription. We've had great success having them kind of cross-grade and instead of going single product to single product, going single product to collection. That really hasn't changed over the last six to eight quarters now that we've been tracking this. So I'm not expecting a significant change. The one thing I would note in the demographic, which is quite not surprising to you, the bigger customers that aren't EBA eligible, obviously, the bigger customers that were on maintenance were some of the first to adopt into us and move over. It's not as bigger skew as you might think from the biggest to the smallest, but there is a little bit of a bias to the larger customers. As we get down to the smaller and smaller customers, we might see a point or two difference there, but I wouldn't expect it to be significant. Andrew, anything you'd add?

No. I think we've seen a consistent pattern, and we don't see anything that would indicate that changing. I agree with you. It's probably going to make a point or two different as we get deeper into that base, just because of the size and because maybe a mix shift inside that what's left on the maintenance base.

And are you seeing any non-payer conversion from the shift to a serial number free licensing model?

We always see non-payer conversion every year. So one of the things I just have to say, because I say it every call, this non-paying conversion thing isn't going to be this big explosion, all right. It's an ongoing process. Some of these people have very clever ways. They continue to not pay us. But what I will tell you is that we've successfully rolled out some really interesting ways to have conversations with these customers and engage with them directly. We are learning a lot that we think is going to play pretty significantly into our long-term strategy with regards to converting these people. We have direct engages with them; we can track where they go after an engagement, whether or not they continue to pirate or they pursue some kind of other path. So we're learning a lot. That's what we expected to do this year. Every year, we convert non-paying users into users; every year, we convert more than we did the previous year. But more importantly, every year, we're learning more about how to effectively engage with these customers. That should give you a really good feeling about the long-term growth prospects as we start looking at those 14 million non-paying users and converting them over the next few years.

Our next question comes from Sterling Auty of JPMorgan. Your line is open.

I think you gave commentary that you saw strength across geographies, obviously see the pie chart with the percentages. But just wondering for - about some colored commentary. Looking at the PMI results coming out of Europe today, there's been questions in other areas of software around possible squishing as here in North America. What are you seeing from just the macro by geography?

So we're not seeing any kind of geography-based slowdowns. And by the way, the PMI in EMEA has actually been in contraction territory for a while. So it isn't like a new phenomenon. For us, we see the PMI as measuring a different side of the demand curve. It's much more focused on the purchasing of kind of the core assets that kind of go in the door and come out as product. We're selling efficiency in digital transformation. Right now, we - and what - actually let's just look back historically, we've never seen a strong correlation between the PMI and near-term impacts on our business. Long term, as the PMI phases contraction territory, you absolutely, eventually would see an impact on our business. Short-term, what people do is they tend to buy more of our software to try to invest in digitization and getting their processes more aligned, more efficient. So we're not seeing any slowdown in any geographic areas. The ongoing PMI results don't signal anything to us in terms of our demand environment.

And then one follow up, do you mind as where are we in terms of the various pricing or discount changes, both on maintenance and other parts that you had outlined at the beginning of the transition? What changes recently went into effect, if any? And what were the impacts?

Yes. Sterling, on the - you're talking about the maintenance to subscription program that we just began; or if you remember, we started that program actually kind of middle of Q2 a couple of years ago. So we just began the third year of that. At the third year, what we have said then went into effect at the beginning of May is the cost to convert - the price to convert would go up by 5%, the price through renew maintenance from last year, the price through new maintenance have got up 20%. So both of those increases went into effect in early May. We're sitting three weeks into that right now, not expecting to see any significant change in terms of renewal rate. I do think at this point, it probably becomes a lot more attractive for those that have gone under maintenance to actually make the conversion. Through the first quarter, what we saw in conversion rates, as they kind of held in at that roughly a third that are converting at about the point of renewal. We'll see now with the difference in - pretty significant difference in price. We'll see how that goes in this quarter and through the end of the year.

Our next question comes from the line of Matthew Broome of Mizuho. Your line is open.

You recently launched 2020 editions to AutoCAD, Revit, and some other products. Just curious how early feedback has been for that. What new features do you believe will have the biggest impact?

Yes. So like I said earlier, we've seen pretty rapid adoption of these capabilities as they rolled out, which actually bodes well for how customers are reacting to those things. I don't have any feedback on particular feature sets. Because we're working on large lumps of areas, like in one area we're working on in Revit in particular is on rail, adding capabilities that make it more efficient for rail. There's going to be lots of areas and each one of these products that are broadly accepted. But when it comes to AutoCAD in particular, customers are starting to embrace the multi-platform nature of what we've done with AutoCAD, and the way we're making it easy to integrate not only our own storage environments, but third-party storage environments like Dropbox and Box, and other types of environments, so that our customers can efficiently use AutoCAD data in multiple types of storage environments. One of the features we rolled out, and it doesn't get a lot of visibility, is that when a customer is inside the Dropbox environment and they go and they click on a DWG file, it actually launches the AutoCAD - AutoCAD web viewer - and it puts its full AutoCAD web, and if they're a subscriber, they get the edit experience, but it is the AutoCAD web version inside these applications, that kind of reach that we're getting with some of those things is actually exposing more and more customers to the power of the multi-platform view we've taken with some of these applications. So I think you're going to hear more and more about what we're doing there. On the Revit side, you're going to hear more and more about some of the things we're doing around rail and other areas, extending the capabilities to be not just Revit, but in InfraWorks such as more specifically on the InfraWorks side. You're going to hear more and more about some of those things as well. But those are some of the areas that are getting a lot of interest and a lot of traction.

And I guess, could you provide a brief update on the media and entertainment business? It looks like there was a little bit of revenue deceleration there during the quarter.

Yes. So there's a couple of things you want to know about the media and entertainment business. One, it's very sensitive to large deals. For instance, in Q4, we had a couple of really big deals in M&E. So there was a quarter or a quarter change around media and entertainment just related those deals. Last Q1, we also had a big deal that came in. The media and entertainment business of all our businesses is very sensitive to these large deals. There is a quarter-over-quarter change due to that large deal. But in addition, and this is something I want you to pay attention to over a multi-quarter scenario, similar to what we did in our manufacturing business, we've retired certain products in that space that we're no longer collecting revenue on, and you'll see some year-over-year decline associated with that. For instance, we don't charge for SketchBook anymore; that product is out there, it's completely free, it's available to people to anybody who wants to use it. That, that money isn't in there anymore, and it shows up in the year-over-year. Those are things affecting the M&E business. We actually had a pretty robust M&E quarter, right? But as I said, there's sensitivity to large deals and this idea that we've retired certain products, especially things like SketchBook, that are going to have year-over-year impacts.

Our next question comes from Rob Oliver of Baird. Your line is open.

I wanted to take it back to the construction side if I could, Andrew, and talk a little bit about the pricing side. I know you've said you guys favor the named user bundles. How is pricing playing out so far relative to your expectations coming in? And on those 15 deals in particular, where there was head-to-head competition, did price play a role at all? And then I have a very quick follow-up? Thanks.

Yes. So first off, like I said, we're really happy with the results of construction in Q1, we hit all our goals we're looking good heading into Q2, we're really happy with the things that are going on. Let me tell you right out of the gate, that the pricing models are working in their form, but I think I know you're asking a different question. When we go in against the competitor, let me tell you about the two things that help us win. The first thing is competitors just like the story, they see us with a best-in-class field execution solution at one end, they see us with a best-in-class design collaboration solution at the other end, all cloud-based. When we tell them we're going to connect the building information model all the way from design through to site execution, and we're going to do it with these things in between, they believe us, and they see it; they expect all of its functionality to roll out over time. When we do things like accelerate the rollout of PlanGrid BIM into the PlanGrid environment as quickly as we did, people start to say, okay, thank you Autodesk, you're showing us the evidence that we're heading in the right direction. So they buy the vision; they buy Autodesk's role. They don't see anybody else able to do this end-to-end kind of connection the way we're doing, and that's been something we've been consistent about. Yes, when they go in and look at the business model that we come to market with, they say yours is a much more customer-friendly business model; this is one I can grow with. This business model over here is going to penalize me as I grow. Yes, we do see those things, but I want to make it clear, the primary reason we win is the big story. That's what's getting customers excited; it's what's engaging them, and it's what's bringing more people into our ecosystem, and we are seeing that.

And just as a quick follow up, Andrew, you had mentioned on the last call, and Scott just reiterated, did you guys not only absorb the planned R&D at PlanGrid and BuildingConnected, but you've ramped that R&D. Aside from platforming and integration, and this - and I apologize because this may be leading on to the - to for the ramp of other areas that you're seeing from an end-user functionality perspective that are interesting to you as a possible recipient of those R&D dollars. Thank you guys very much.

Yes. One of the things I want to make sure I reiterate is that I mentioned this during the last call, but I think it bears restating: we've definitely applied clear missions to the two product stacks and the two teams, and we've swapped people back and forth between the two teams. PlanGrid is very much focused on field execution and being the best-in-class tool for field execution. So they're looking to accelerate the roadmap that they had in place for field execution, both customer-driven and internally-driven; that's where they're spending their dollars. On BIM 360, we're focusing the BIM 360 team much more on closing all the gaps around project management and things associated with project management, RFI flow and all of the things that go - that are connected to that, then connecting those things back to the PlanGrid environment, so customers see a seamless flow. This mission-based assignment of teams has been super important. It has resulted in additional R&D dollars going in. We are absolutely accelerating PlanGrid's roadmap, not decelerating it, and we're accelerating BIM 360's roadmap with regards to project management capabilities. You will hear more about this in June. But I think it's important to just reiterate where we put the money and how we're spending it to move forward because we really do want these solutions to survive, thrive, grow and connect together rapidly inside Autodesk. We're committed to that, and yes, we spend more and we brought them in, and we got the results we wanted. So I think we're going to keep doing that.

Our next question comes from Kash Rangan of Bank of America. Your line is open.

My question, Andrew, for you is when you look at the maintenance subscription conversion program, can you just give us an update on how much of that installed base has accepted the price increase versus converting to subscriptions and what is left in that third bucket? Any strategy or plans you might have in place to convince the last set of holdouts to get on the program? Thank you very much.

Yes. So we never, we never expected that every subscription - that every maintenance customer was going to move to subscription during this program. I think one thing that's important to note is we basically converted two-thirds of them already at this point. So there's really only one-third of the subscription base left from when we started this program. As we've told you over and over again, we've - everyone we've moved, we're growing the value of those customers through consolidation and through other efforts associated with that. So we have to pause and look at what we've accomplished with regards to this program. I think the results are pretty impressive given what we're trying to accomplish. We've always expected that by the end of the year, there were going to be a set of customers left in; there are going to be a set of customers left in maintenance. But I think also what you heard from Scott earlier is that the renewal rates for maintenance are holding up quite well, incredibly well actually even with the price increases that are in front of customers. So customers are going with us along the journey. There are going to be some left at the end of the year still on maintenance, and we'll look at what we do in terms of working with those customers as we get to that point. But we're already two-thirds in there; we'll be more than two-thirds by the end of the year. We've been successful in increasing the value of those customers and most of those customers that have moved over are happy and the ones that are still on maintenance are renewing it at robust rates. So the program looks like a success to me.

Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.

This is Hamza Fodderwala in for Keith Weiss. Just a couple of quick questions from my end. The first one, so the manufacturing revenue growth really accelerated this quarter and it's been up double digits for a few quarters now. I'm just wondering what's the inflection point there as far as you starting to really put up growth that's faster than many of your peers, what's driving some of that share gain? And what's the roadmap there going forward?

So Hamza, what you're seeing there is the strength that was always there underneath that you couldn't see because of all the product retirements we did. Alright. We've been doing this for several quarters in the core part of our business, which is one of the reasons why we're so excited about how we're doing in manufacturing in general right now. You saw declines or slowness in the manufacturing business because we retired a whole set of products. Some of them we just retired completely; some of them were transitioned into the collections environment, and some were combined with other products. We did some large consolidations, and this resulted in revenue that essentially disappeared. But it showed up eventually in other places. So now what you're seeing is the underlying strength in the core manufacturing business that was always there. I'm excited about it, and when you look at some of the things that are in the roadmap, what you're going to see is tighter and tighter coupling of these design to make workflows. You're going to see more showing up in Fusion regarding end-to-end design all the way through to machining workflows and new generative algorithms that take not only 3D printing workflows but workflows for 2-axis, 2.5 axis, and 3-axis milling operations and automate the geometry creation. You're also going to see more workflows between Inventor and Fusion so that Inventor customers can take advantage of the downstream production workflows built inside Fusion. Customers are starting to look inside the manufacturing and product design and manufacturing collection and they're cracking it open; they're seeing some things they think are pretty amazing. That's part and parcel of what's driving our growth. Customers are consolidating on what we have because they see us. I can take these eight weird things that I had against consolidating this into one thing. And by the way, I've got this cloud workflow that makes all my data problems a lot cleaner, and it's just working. I'm happy you can now see the underlying strength in the business that we knew was there all along.

And just a quick follow up. We did hear that there was a price increase on multi-user licenses in May. Just wondering if that caused any pull forward business from Q2 to Q1. That's it from me.

We did see and we referred to this a little bit in the opening commentary, Hamza. We did see a little bit of early renew activity, but really the same percent that we've seen historically. If you add up our total sales, what percent were early renewals where you'd see people trying to front-run the price increases. As we looked at that, it was really in line from a percentage basis with what we've seen historically. So I'm not anticipating any change or any kind of an impact to the full-year model from that. Having said that, the change we made on multi-user pricing was really to do a better job capturing the value of what we're shipping with that. You've seen us make kind of incremental changes in multi-user now for a couple of years in a row, and it's to better align the price with the value that's being delivered on multi-user.

At this time, I'd like to turn the call over to Abhey Lamba for closing remarks. Sir?

Yes. Thank you for joining us this afternoon. If you have any questions, feel free to contact us. Thanks for joining us. Bye.

That does conclude our conference. Thank you for your participation, and have a wonderful day. You may disconnect your lines at this time.