Debbie Clifford: Okay.
Operator: Thank you. Our next question comes from the line of Stephen Tusa of JPMorgan. Your line is open.
Stephen Tusa: Hi, good evening, guys. How are you?
Andrew Anagnost: Good.
Stephen Tusa: Thanks. So I’m just €“ maybe I’m an idiot, but just like reading between the lines, the faster you guys move in the transition, all else equal, the lower the free cash flow next year will be, correct? Or are there other things moving around?
Debbie Clifford: The faster the transition, well, first, I want to continue to characterize that the impact of the numbers is relatively small, and it would have a minor follow-on implications to next year. But ultimately, what was built into our guidance was an expectation of a certain proportion of the business that was going to be multiyear upfront. A small portion of those customers have elected to be annual. So rather than it being a negative impact to next year, it would be a very slight positive impact to next year because we would have annual billings next year that weren’t in the form of a multiyear upfront transaction this year. But I want to continue to reiterate that the impact is relatively small. The impact to our billings guidance this year is relatively small.
And if you think about the scale of the free cash flow number next year, I want to go back to that range that I was talking about that FactSet consensus range of $1.2 billion to $1.7 billion. And our goal really is to move the totality of the multiyear base to annual billings as fast as possible. And the faster we go, the greater that headwind is going to be to free cash flow next year.
Stephen Tusa: Yes, I was €“ yes, exactly. I was asking about €˜24. Basically, you’re kind of telling us $1.2 billion to $1.7 billion and then you’re reiterating that you’re going to try and move as fast as possible. So it was just much more of a €˜24 question, which you just, I think, answered.
Debbie Clifford: Okay. Great.
Stephen Tusa: Right. The faster you move, the more impact you have next year?
Debbie Clifford: Correct. Yes.
Stephen Tusa: Yes. Okay. That’s super helpful. And any color on kind of the I guess, the drop-through on bookings €“ or sorry, billings when I look at free cash flow it’s like 85% to free cash flow, That’s, I guess €“ just it drops through with your gross margin. I would assume you don’t really manage that on a quarterly basis. So it makes some sense. I am I looking at that the right way? Or is there something on the cost line that moves around and mitigates that decline in billings?
Debbie Clifford: No. I think you are thinking about it in a directionally accurate way. The billings reduction then has a follow-on implication to the free cash flow reduction. There is nothing else going on there.
Stephen Tusa: Yes, okay. Great. Thanks a lot for the color. Really appreciate it.
Operator: Thank you. Our next question comes from the line of Michael Funk of Bank of America. Your line is open.
Michael Funk: Yes. Thank you for the questions. So you mentioned a few times trying to incentivize the shift from multiyear to annual. So first, what are you doing to incentivize that? I guess second, what drove the different customer behavior this quarter than expected with the shift? And I guess third part, same question, is how quickly do you believe that you can transition your base over to annual as we think about trying to model out the free cash flow impact?
