Autodesk, Inc. (NASDAQ:ADSK) Q2 2024 Earnings Call Transcript

Joe Vruwink: Okay. Great. Andrew, that’s helpful. And then second question, wondering if you can comment on how you see the writers and actors, strike potentially impacting business in media and entertainment, particularly if this goes on for a while and your customers are finishing what’s in post-production with, I suppose, a lack of new things coming in, what that might mean towards the end of the year?

Andrew Anagnost: Yes. So you’ve hit one thing right there, right? People are still in post-production right now for the existing book that post production overhang will continue for a little while. If the strike continues for months on end, we will likely see an increased impact on our media and entertainment business. It’s still growing now. It definitely slowed down in Q2, but it’s still growing. So as we look forward, your guess is as good as mine about how long this strike will go on. But I do remind you our exposure to media entertainment is relatively small compared to the other parts of our business. But there’s no doubt that an extended strike could have an impact on that business.

Joe Vruwink: Okay. Thank you very much.

Operator: Thank you. Our next question comes from the line of Tyler Radke of Citi.

Tyler Radke: Yes. Thanks for taking the question. So I wanted to just go back to the commentary on kind of the puts and takes in the quarter. So you talked about seeing some early expansions on some of the multiyear EBAs. And I just wanted to clarify, was that also stronger expansion? Or was it more of a timing factor? And then Debbie, this might be a bit of a nitpicky question. But just as I look at the constant currency revenue guidance, I think the high end of the guide says 12% plus versus 13% last quarter. I just wasn’t sure if there was a change there. If you could just kind of comment on the puts and takes on that, too? Thank you.

Debbie Clifford: Sure. Thanks, Tyler. So the EBA usage was strong, and we’ve been tracking it for the year-to-date. It wasn’t necessarily stronger than our expectations, however. So to clarify, it’s really more than anything it’s a timing difference. We were expecting that the revenue would hit in Q4 and it hit in Q2. But the fact that our customers are using more than they had anticipated the onset of the contracts is a good thing. It’s just that we’ve been tracking it. We’ve known about it for the year-to-date, and we just saw the invoices in Q2 versus Q4. In terms of the constant currency guide, the range, it was impacted really by rounding. The dollar change was immaterial. And overall, the business is tracking generally in line with our expectations.

Tyler Radke: Okay. Great. And follow-up for Andrew. You talked about some encouraging signs on the Autodesk construction side, given the reorg, you talked about it kind of settling in. How – maybe just remind us kind of what were the big changes? What are you hoping to accomplish? And should we start to see the make revenue begin to accelerate throughout the rest of the year? Thank you.

Andrew Anagnost: Yes, Tyler. Happy to clarify that. So look, what we did in Q1 is we merged the Autodesk Construction Solutions sales force with the mainline sales force. This was with the objective of long-term accelerating business growth in that area, particularly in our design-centric accounts. So we wanted to keep the contractor and subcontractor power of the ACS team and combine it with the teams that are focused on some of our design accounts as well. We expected some bumps in doing that because you have to realign account assignments, you have to realign players and who’s in charge of what. We’ve seen a lot of those bumps get smoothed out into Q2. So we’re seeing a return to expected patents. We’ve lost no business during the process.

As I told you – as I told you earlier in the opening commentary, when we talked about – when I talked about things like Shook, the general contractor in Ohio. We’re winning – we’re continuing to win these contractors. Primarily, one of the things we hear a lot is the pricing predictability associated with our offering and the ability to show them a path not only to a stable pricing model, which customers really like and increasingly see a viable and strong alternative to project management and what ACS offers, but also in terms of the integration between design and banking. I expect the consolidation of the sales force is to continue to further accelerate the construction business moving forward as we continue to work this through. So progress in the right direction, and we can expect to see more progress.

Tyler Radke: Great to hear. Thank you.

Operator: Thank you. Our next question comes from the line of Jason Celino of KeyBanc Capital Markets.

Jason Celino: Great. Thanks for taking my question. This is a spin on Saket’s very first question, but it relates to the quarter and not necessarily the guide. But when we look at the outperformance in the quarter, it’s the biggest beat on a percentage and an absolute basis we’ve seen in many quarters. Can you just help us unpack maybe what the magnitude of the EBA strength was or the FX kind of benefits, if there were any?

Debbie Clifford: The biggest driver of the beat came from the EBAs.

Jason Celino: Okay. Perfect. And then, Andrew, curious on updates on Innovyze. At the beginning of the year, I think there was this view that funding for sewer projects and water projects hadn’t quite started to flow, no pun unintended yet, but that maybe we would see things start to open up in the second half or next year. Is that still the case? I guess what are you seeing?

Andrew Anagnost: Yes. I mean, look, look at the news, right, all you get is increasing evidence that most regions and municipalities need to reevaluate their water management, both at a sewage level and a treatment level infrastructure. So that has fundamentally not changed. And we haven’t yet seen the increase in project actually starting projects in that area. But what we are seeing is people buying ahead of demand. So we actually saw a lot of strength with Innovyze in our EBAs in our large accounts, which is an important precursor to some of the larger efforts that might go on moving forward. But no floodgates have opened up yet, no pun intended from my side. But we still see the exact same pattern we’ve talked about.

Jason Celino: Okay. Great. Appreciate it. and I like the puns.

Operator: Thank you. Our next question comes from the line of Michael Funk of Bank of America.

Michael Funk: Yes. Thank you all for the questions tonight. A couple if I could. So on the EBA renewal comments that you made earlier, can you give us a sense of the like-for-like change there, whether or not customers on balance or upsizing, increasing the duration of the contract, what that looked like.

Debbie Clifford: So to clarify, these contracts, they were not contracts that were renewed. We’re expecting that these contracts will be renewed in Q4 per our normal cycles. What happened is that these customers have been using ahead of the usage that was built into their original contracts. And so what we saw in Q2 was billings for the overuse versus the original contracts. But we still expect the renewals will occur in Q4.

Michael Funk: Understood. I must have miss heard you earlier. So for the overview then, do you expect that trend to continue for the remainder of the year? And what do you think is driving that over use?

Debbie Clifford: We’re certainly hopeful that, that trend continues. We see it as a very positive sign that our customers are asking for early billings because they’re using our products more than they anticipated, and they’re using the broad breadth of the portfolio. The other thing I would say is that the usage that was built into these contracts when they were originally signed. Remember, this was three years ago, at the onset of the pandemic. And so the usage in those contracts might have been a bit lower just given the environment in which those contracts were renewed. And so as we start to come out of the pandemic, we’re seeing more and more usage. We’ve talked about usage being broadly speaking for Autodesk, but also for our EBAs being a good leading indicator, and that usage continues to increase.

I don’t have a crystal ball, Michael. I wish I did. I could tell you for sure that the usage would continue to go up in the back half of the year, but we’re certainly hopeful and all signs are leading in that direction.