Autodesk, Inc. (ADSK) Earnings Call Transcript & Summary

Hello, everyone. Good afternoon. My name is Tyler Radke. I co-head the U.S. software sector here at Citi, and welcome to day 2 of our Virtual Tech Conference. For the 3:30 Eastern session, we are happy to have the relatively recent, new CFO of Autodesk, Debbie Clifford with us. Debbie, thanks so much for joining us.

Thanks so much for having me.

And so Debbie, I know you and I were just chatting. It's been 6 months now after taking over the CFO role, although I think folks that know your background well know that you've been at Autodesk a lot longer in an earlier life. So maybe you could just start with your experience first. And you're first in at Autodesk. I think you moved to SurveyMonkey and then decided to come back. What brought you back? And what's different about the company now versus your first tenure here?

Yes. So I'm very excited to be back. I have spent a significant portion of my professional life at Autodesk. I love Autodesk, and I've always loved Autodesk. I'm thankful for the experience that I had in my first stint at Autodesk, which was about 14 years, making my way through the FP&A ranks and partnering with many of the functional areas of the company. And you're right, I then went for about 2 years to SurveyMonkey, another great company. But I got my chance to be a CFO in a public company environment for a couple of years before the opportunity came up at Autodesk, and I'm just delighted to be back. The company has changed but also stayed the same. The way that I think about it is that all the positives of Autodesk that I saw prior to my departure have sustained throughout but there's been some positive changes as well. And the one that I talk about the most is the evolution of the company's culture. I think we have more accountability happening within the organization, and it allows us to be more agile and to make decisions faster. So the combination of that, plus some of the real positives of the culture before, I think, are positive -- make a nice balance for Autodesk going forward. In terms of why I went back, this is a really exciting time to rejoin Autodesk. So one of the things that I loved about my experience before was partnering with Andrew Anagnost, our CEO, when he was then the Chief Marketing Officer. He was the visionary behind the company's shift from a perpetual model to a subscription model. And I was his finance partner throughout that journey. And as we emerged from the business model transition and we're writing the next chapter of Autodesk's story, Andrew as CEO and me as CFO, we're renewing that partnership, and it's a really exciting time to help forge that path forward. I'm also excited to rejoin the people and the culture that I talked about. And then lastly, I'd say Autodesk is a really mission-driven company. So we really believe that we're changing the way the world is designed and made. And I've always been attracted to that mission. So that was another big driver of me coming back.

Yes. Great. Well, congratulations again on the new role. And maybe what are -- in your 6 months, what are kind of some of the biggest highlights that you'd point out just in terms of things that have surprised you?

Well, after 6 months, I can say I feel like I'm back in the saddle. I've reacclimated to the business, the culture, the management team, the financial landscape. And I think I -- perhaps just naively thinking that I would be plug-and-play after having spent 14 years at the company, but we just talked about how the company has evolved in the 2 years that I was away. So I needed some time to reacclimate at the company, and I feel like I'm now officially back on board and back in the saddle. In terms of the highlights, I really enjoyed partnering with Andrew and the rest of the management team. So that's been a highlight for me is reacclimating with that group and thinking about our growth story in the future. I also think the company is well positioned to deliver on our fiscal '22 financial objectives and be ramped into fiscal '23. So that would be another highlight. And then more on a playful note, I guess I would say, I learned a lot about onboarding on Zoom. It's been interesting in the year with a great resignation. It's been an interesting experience for me to learn how to onboard in an executive role like this over Zoom.

Yes. I could imagine. Yes. I thought we'd kind of dive right into the Investor Day and results, which I imagine are kind of where people are asking the most questions. I guess one of the things that came up during the Investor Day was just kind of some shifting around in terms of the billings and free cash flow dynamics. Maybe just level set for us kind of what were the key changes. How much of this was kind of driven by new initiatives that you and the leadership team are pursuing versus kind of market dynamics?

Yes. So that's -- let's kind of start at the top and the beginning of this journey and how we've been engaging with investors over the last month or so. We had a strong Q2, and we feel we're well positioned for the rest of the year and heading into our fiscal '23. And that's because we're seeing improving end market demand. So some of our leading indicators are quite positive. Our current remaining performance obligations for one grew 24% in Q2. And the ad hoc indicators that we monitor closely are giving us very positive signs. So one of them is tracking product usage around the world, which we did see decline at the onset of the pandemic. But as of our Q2, that product usage has returned to pre-COVID levels around the world. We also see construction backlog back online with bidding activity hitting an all-time high on our BuildingConnected platform. And overall, we're seeing increasingly positive feedback from our customers about underlying end market demand. So all of that gives us confidence in our business right now, resulted in a solid Q2. And as we shift to guidance, it's why we raised our guidance for both revenue and operating margin for the full year. Now to the second part of the question that you're asking, we reduced our guidance for billings and free cash flows prior to the earnings call to reflect 2 things that don't relate to that underlying health of the business. The first is FX. And the second is that we're increasingly shifting more of our enterprise customers to annual billings from 3-year contracts that we bill and collect upfront. And the key point about this is that overall, we're focused on making changes that are both good for our customers and good for Autodesk and shifting more of the billing patterns for our enterprise business agreements to annual billings is one step to help us achieve that goal. These annual billings that make more sense for our customers because our customers, they retain price certainty because they sign a multiyear contract, but by moving to annual billings, they get a more predictable annual cash outlay. The shift is good for us, too, because we generate more predictable annual cash flows but we also remove the discounts that we see to generate the cash collections upfront. So a lot of our EBAs were already on annual billing terms. And at the beginning of our fiscal '23, we had already assumed that all of them would be on annual billing terms. We just decided to expedite that because, again, it's a change that we think is better for our customers and better for Autodesk and will help us make Autodesk a more valuable company over time. The last thing I'd point out just on the guidance piece is that even though we did reduce our billings guidance, the adjustment was only about 1 percentage point of our total billings guidance. So it wasn't huge.

Right. Right. Okay. And a few things to follow up on there, just in terms of leading indicators for the business. Would you focus people kind of on current RPO as the cleanest metric? I know there's different metrics from revenue to billings to current RPO. But what do you think kind of gives that true read into the underlying growth of the business?

Current RPO is one of them, for sure. The 3 metrics that we focus most on are revenue, free cash flow and current RPO. It doesn't mean that other metrics aren't important, but those are the 3 metrics that we emphasize the most when monitoring business performance.

Okay. Okay. Great. And in terms of the product usage trends that you saw there returning to pre-COVID levels, was that across the board? Was that in the Autodesk Construction Cloud? Maybe just clarify what you're seeing kind of by product.

It was across the board. So no discernible trends across the different products. It was broad-based across our products. The trends we did see were more by region. So when the pandemic hit, we saw a more immediate impact in Asia Pacific, but then that region recovered more quickly. It was more gradual in terms of decline and then more gradual in terms of the recovery for both Europe and the Americas, respectively.

Right. Right. Okay. Makes sense. Makes sense. So shifting to the Autodesk Construction Cloud, I guess it's fair to say that you've seen kind of overall usage levels recover postpandemic. I mean -- I think there's some questions on just given -- I think the construction market is a little bit bifurcated between -- residential is really strong and maybe commercial in large cities is a little bit less strong. But what are you just seeing broadly across the board on the construction side?

You mentioned some interesting trends in your lead-up, so we are seeing a bit of that. I mentioned earlier that we're seeing bidding activity hit an all-time high on our BuildingConnected platform in Q2, and that's an important leading indicator for us for 2 reasons. One, we have strong offerings in preconstruction, that phase of the construction life cycle. So of course, the more activity we see there, the better it is for our business over the short and long term. But also the bidding activity that we see on the BuildingConnected platform is a leading indicator for downstream construction projects. And so we monitor this closely because we think it's an indicator of what we'll see in terms of future construction project activity. And so signs are positive there now. We feel that the market is back online, and we're optimistic about the future growth potential that we see from construction.

Got you. Okay. And we've had some questions from the audience come in and it was kind of where I was going for my second question here. Just competitively, Procore, a recent IPO in the space, could you just kind of compare and contrast your offering versus Procore? And how important is project management in your offering?

Yes. So I won't get into the specifics of a play-by-play with Procore except to say the following. We respect Procore, and we think that there is a big market opportunity for all of us, and we can all be successful. I think the biggest competitor that any of us are seeing out there in the construction space is paper and pencil. And we said at our Investor Day that we estimated that the addressable market would be about $16 billion across all stages of the make life cycle and construction. So I think it's fair to say that there's more than enough opportunity for all of us to succeed. Having said that, we feel we have a strong product in the market. So our Autodesk Construction Cloud is an end-to-end offering across all phases of the construction life cycle. So it covers design, plan and build all the way to operate. And we feel that because it's an end-to-end offering, it is a competitive differentiator for us. We're also ISO-compliant. We provide a world-class common data environment. And we are BIM-based like no one else. So that -- all those things combined with the go-to-market muscle that we have with the breadth of our resources globally as well as our channel partner network that will be further ramping over time we feel positions us well to succeed in capitalizing on this opportunity over time.

Got you. Okay. And you mentioned BIM, which has really been a critical part of kind of the Autodesk story. Can you just give us a sense for where we are kind of on the adoption of BIM broadly across your customer base? And how do you see kind of the continued growth drivers from here for BIM 360?

Yes. So I would isolate BIM versus BIM 360 because BIM 360 is shorthand for our former construction offering that we now broadly talk about as Autodesk Build. But -- and since we just talked about construction, let's talk about BIM for a minute. So I had a slide at the Investor Day. Amy Bunszel also, our Head of Product on the AEC side, had a slide as well in her presentation that showed the proliferation of BIM usage around the world. And the takeaway from that slide is that we've made real progress but there's still a lot of room to roam to drive growth from expanding BIM proliferation but also increasingly government mandates that drive BIM usage in markets around the world. And we expect that, that BIM adoption will continue, and it's going to help us fuel growth broadly in our AEC revenue and now and in the future.

Yes, yes. And I think -- we -- I've been doing a number of Autodesk Investor Days in the past, I feel like that slide gets more colorful every year [ you got ] that BIM adoption increasing. But I guess, from a catalyst perspective, how are you thinking about whether it's post-COVID recovery, digitization, regulatory mandates? Maybe just help us understand what are the factors that you guys are excited about that you see over the coming years driving that BIM adoption forward.

Well, we covered one. I mean certainly, the expansion of BIM usage, of BIM mandates around the world is going to drive growth for us in our BIM-related products like Revit and the AEC collections over time. So that's probably one of the biggest drivers to the site, not only going forward but has been part of the success that we've seen in AEC historically as well. And as you know, it's -- AEC is a big part of our total business. The other thing I would say is that the pandemic, I think, has only accelerated the pace of digitization around the world. And as we see digital transformation happening faster in many, many workflows, particularly in the industries that we serve, I think that's one thing that is going to drive more BIM adoption over time because it drives more sustainable, efficient outcomes and saves money for our design customers and ultimately for construction customers over time. So digitizing the processes is good for those customers and our BIM solutions are going to be a part of that.

Yes. Makes sense. So I think we'd be remiss to talk about the construction opportunity if we didn't mention the potential implications of an infrastructure bill from D.C., so I'm sure it's something that you're getting asked a lot about. But I guess, maybe 2-part question here, what are you doing to kind of prepare Autodesk for that? And if it were to happen, how do you see it kind of impacting the company?

Yes. So we've been investing in infrastructure-related opportunities for some time. We've been investing organically in road and rail capabilities. And we recently acquired Innovyze, which extended our offerings into water infrastructure. So we have several different use cases that we serve in infrastructure opportunity in the -- in infrastructure areas. We haven't built anything into our projections to reflect potential additional growth based on the infrastructure conversations that are happening in D.C. right now. And while we're optimistic about it, it takes a long time for those discussions to play out. And then we are several orders downstream in terms of whether or not we would see growth from those discussions. We are optimistic about it. The flip side is we're also watching the discussion about how to pay for the infrastructure bill. And it's still early days there as well. But we would anticipate that over time, if an infrastructure bill were to provide a growth driver for us, it might also provide a cash tax implication for us, too. So we're monitoring both very closely. But if I zoom out from the conversations happening in Washington specifically, I think that Autodesk is well positioned to capitalize on infrastructure opportunities, be it water, road or rail or otherwise. And it's because we have the end-to-end workflow solution across AEC. And whether you're building a railroad, whether you're building a road is not -- at least in terms of how the workflow works is not that different from building a commercial skyscraper or building a series of residential homes. A lot of the same needs are serviced by our end-to-end AEC workflow, and we see infrastructure is no different. We've just been investing in certain design capabilities that are tailored to those industry use cases like water, road and rail. But overall, it's a very natural complement to the way that we address the AEC end-to-end workflow in general at Autodesk.

Got you. Got you. And you mentioned Innovyze, which I believe is a recent acquisition for you. By the way, is that the Innovyze office behind you? Or is that...

No, it's not. It's our Portland office, I think, but I haven't been to the Portland office. Actually, I'm going to be going back to the San Francisco office this week for the first time in a long time. So it seems like we're coming out of this COVID fog a little bit.

It looked like Portland to me because I grew up in Oregon, so I just [ had to ask ]. Anyways, on the -- I wanted to talk about the opportunity in water and more broadly, sustainability because I know that is a big topic for you, but carbon, water waste, I think, is some areas you mentioned at the Analyst Day. But it seemed like relatively newer opportunities for Autodesk at least compared to what we've heard in the past. How big do you think those opportunities are? And just kind of curious how you expect the maturity of kind of that industry and demand for those solutions to evolve?

Yes. So water infrastructure and design of water infrastructure specifically and our extension into that vertical, we believe -- with the acquisition of Innovyze, we believe will be a growth driver for us over the long term. I mentioned that we've been investing in road and rail organically. We did not have design capabilities in water infrastructure. And so it's an example of where we would be acquisitive, in this case, with Innovyze to give us the technology to service this particular use case, but then connect it back to the Autodesk platform of offerings so that we can have this end-to-end solution that I described. So Innovyze specifically, I think, again, represents a long-term growth driver. If I zoom out, sustainability is a part of who we are, and it's a part of what we're seeking to drive and helping our customers deliver more sustainable outcomes. When we think of sustainability or ESG broadly, of course, it starts first and foremost with us as a company. We're already carbon neutral. We recently published an updated impact report highlighting the work that we've done as a company in ESG. But the real opportunity for us, over time, not only to drive growth but to have an impact -- and as I mentioned before, we're a very mission-driven organization to have a real impact is to partner with our customers to help them deliver more sustainable outcomes. And we think as we invest in these areas, water infrastructure is one example of that, that we're going to be part of the solution in driving those more sustainable outcomes. And as a result of that, there will be more demand for our products over time as these types of use cases and a focus on sustainability become more and more important.

Got you. Okay. So shifting gears to the manufacturing side. I think Autodesk has always had kind of a unique approach to this market, kind of coming at it from more of a disruptive mentality versus an incumbent. I think you invested in cloud offerings before your competitors did. Can you just give us a sense for where the Autodesk manufacturing business is today? And I know we talked about Fusion 360 in the past. But just give us a refresh on kind of the overarching strategy with manufacturing.

Sure. So we're deploying a strategy that's really similar to what we've done in AEC, and that strategy is to create an end-to-end offering to digitize key manufacturing workflows in the case of manufacturing and to maximize value and efficiency for our customers. You're right that we are a challenger in the manufacturing space. But what we're seeing is a format change. So as our customers are going to the cloud, we are leading with a manufacturing end-to-end workflow in the cloud, and that offering is Fusion. We believe that we're ahead of our competitors in building out this fully cloud-enabled workflow for manufacturing. And the key is that it's easier for our customers to use in a distributed world. The pandemic has only accelerated this type of need because people are working remotely even in manufacturing settings to do the design work. And we believe that the cloud provides compute power that wasn't possible before. And so some of these benefits are really driving gradual and increased adoption of cloud-related tools. And like I said, we believe that we're squarely in the midst of that disruption with our Fusion offering. Today, we've mentioned that Fusion is not a significant contributor to our total revenue. We have a monetization strategy where we're focused on getting as many users as possible on the platform, first and foremost. That's where we were several years ago. Any user is a good user. Then we focused on gradually monetizing those users. So we have a base subscription fee for users in a commercial setting. And then more recently, we've launched manufacturing extensions for Fusion. The idea there is that manufacturing customers have a variety of different manufacturing use cases that all have different degrees of complexity. And so our customers can pick and choose depending on what their process is, their particular process is, they can leverage specific manufacturing extensions to solve their problems. And what it means for us is that we gradually deepen the monetization with these customers. So think of it as we started with the freemium type model, then we monetize to get customers on to the platform and then we're gradually increasing the average sales price or ASP across these users over time as we get to more complex manufacturing use cases. We anticipate -- I had a slide at Investor Day that showed the contribution to growth across the various industries. And the intent there was to illustrate that manufacturing will take some time, and we expect it to be a bigger contributor to our growth over the long term.

And on that last point, how are you thinking about that longer term? Is it beyond 5 years? Is it several years just kind of order of magnitude in terms of the -- when that [ layer's new ]?

Yes. We haven't gotten that specific, I wouldn't say, but think of it as multiple years from now is when you would anticipate that it would be a more significant driver of our revenue.

Right. Makes sense. And I guess just in terms of what's important to the company and to Andrew, who's someone I know that you work with personally. Of course, he's focused on different areas. But just in terms of the manufacturing business, is it fair to say that maybe spending him or -- the company is spending a little bit more time there. I mean it feels like the AEC business with the number of acquisitions we've seen in that space and now really kind of rounding it out with the Construction Cloud, is there kind of more time or opportunity now to go focus on the manufacturing business?

Well, we've been investing against the manufacturing opportunity for some time. And that's why we believe we are set up for success to capitalize on this cloud transition or the disruption that the cloud is presenting for manufacturing workflows because we've been ahead, because we've been investing for many years against the manufacturing opportunity. Now what's changed is that you're seeing us talk more about it. And we're talking more about it because we like the progress that we're seeing in executing against the strategy. And as I mentioned with the freemium model that gets to paying, that gets to more paying as we solve more complex use cases, we wanted more progress against that strategy, and we're seeing positive results, which makes us talk about it more externally and then talk about how we anticipate it would contribute to our growth over the long term.

Right. Right. Okay. And I wanted to ask you, earlier in the year, there was some discussion around Altium as a potential acquisition target. I guess can you just -- understanding that I think the -- that ship has sailed for now, can you just comment on why now? Like why approach a company like Altium now versus maybe a few years ago? And then more broadly, how do you kind of see the intersection of PCB in manufacturing?

Yes. So I can't comment specifically on Altium, but let me take a step back and talk about our strategy generally because I think that should help provide some insight. So electrical design is one important component of the manufacturing design process. And we have historically had strong technological solutions for mechanical design. We have some basic technology for electrical design through EAGLE. And as you think about the manufacturing evolution of our strategy that I was talking about when we were at those more basic use cases with freemium and then to a starter paid model, having more rudimentary capabilities for electrical design was sufficient. Now as we look to have more complex use cases, thinking about more complex electrical design workflows is important to us. And as with any evaluation of how we can accelerate our strategy, we will look both internally or externally to get us there. And we apply a relatively straightforward framework. We look at the pace at which we could buy versus build. We look at it to the extent we determine there is an acquisition opportunity for us. We look at whether or not the acquisition would present a unique combination with Autodesk that delivers shareholder value and helps us accelerate the realization of a particular strategy in the industries we serve. In this case, we're talking about manufacturing. And then finally, an acquisition would need to be value accretive to shareholders over time. And so that's how we think about it. Electrical design is one important component of manufacturing. How are we going to get there over time? We have some but we're expanding over time, and we'll apply our buy build process to anything we do here.

Right. I guess is it fair to say that since there was at least an initial attempt at the buy, you've kind of leaned that way? Or are you still kind of considering building it out, too?

Our goal is to execute on our strategy in the most efficient and effective way. So I couldn't say whether or not our bias would be to acquisition. We're going to evaluate a variety of different paths to achieve our goals, and it's probably going to result in a combination of organic and inorganic investments across the industries that we serve.

Right. Okay. Makes sense. And another area in manufacturing that came up a bit in the Analyst Day was just around simulation. And I think Autodesk has acquired some smaller simulation assets in the past. You also closely partner with ANSYS kind of on the high end. Can you just talk about your ambitions in the simulation market if you kind of bifurcate it by complexity? Where will you partner? Where would you want to kind of take that on yourselves?

You know what, you described it actually quite well. So we do have some simulation capabilities in our Fusion offering today, and that services most of the needs that we have for simulation. But we have a strong partnership with ANSYS to the extent there are more complex simulation use cases that can leverage their expertise. So that -- this strategy to serve simulation needs is working for us, and we feel that simulation is an important part of the manufacturing workflow.

Yes. And I guess to put a finer point on that, are you -- is this an area that's a big investment area for you both organically and inorganically? Or do you kind of feel like you have what you need in simulation and now you can kind of monetize that just given the industry trends around more and more simulation?

Yes. I think -- I mean, look, we look at simulation. We look at electrical design. We look at mechanical design, all the different areas of the manufacturing workflow and how we can have a best-in-class product in the cloud like Fusion or enhancing Fusion so that we can achieve our long-term strategy. I wouldn't comment specifically about more or less investments in simulation versus electrical design. I would just take it back to that higher level backdrop, that is we're always looking at ways to further our strategy, and it could be some combination of organic investment, inorganic investment or otherwise over time.

Right. Okay. And one of the other things that came up product-related at the Analyst Day was around Forge and the broader developer -- or ecosystem initiatives. Can you just talk about the progress that you've seen with Forge and where you think that could go over time?

Sure. So let's start with we have decades of history building software, and that software solves specific industry problems. And the vision that we have for Forge is let's stitch it all together and create a platform foundation that will bring all that technology together. It will drive interoperability across our product suite in a better way than we have today. It will provide a common data model. It will allow us to more efficiently leverage service capabilities across the breadth of our portfolio. We believe that a platform like this, a foundation like this will increase customer value and it will create greater stickiness of our products. One downstream impact over time, of course, too, would be that we think we can drive efficiency in our R&D investment over the long term. If we're investing in one service capability across the platform that can be, as an example, leveraged across all of the vertical offerings, on top of that, that would certainly be an example of our vision here and would drive efficiency over time. But it's going to take us some years to get there because building this platform is exciting but it's a lot of work. In terms of over and above the platform itself, we have an ecosystem, and we'll be looking to enhance the ecosystem or building out more of that ecosystem of partners. And we expect that, that ecosystem can add more developers, more value-added applications in our Autodesk app store. And we see by virtue of having more developers and more apps, that can be a huge accelerant for our customer outcomes. And so it becomes this flywheel of usage on the platform, capabilities on the platform, all around this foundation with common data services and a workflow. So building this out is our focus right now.

Got it. Got it. All right. I wanted to touch on just kind of some more -- a couple of financial questions. As we think about the evolution of the Autodesk business model, I think you recently talked about some -- introducing some new pricing models such as Flex and I think just kind of more of a consumption-oriented model. Maybe number one, could you just give us an overview of the pricing strategy with Flex? And how should we think about the impact of Flex on kind of the numbers? Any way to frame that?

Yes. Well, let's start with the last -- your last question first, and that is that we haven't built any near-term impacts from Flex into our projections. We expect it to be a long-term growth driver but we're not anticipating any significant growth from Flex in the near term. So that's an easy one to get off the table. But Flex is a business model. It's interesting because we started -- effectively, Flex is a consumption-oriented business model. So our customers buy tokens. And then as they use our software, they draw down on those tokens. So customers pay for what they use. Now there are minimums in the tokens that they purchase out of the gate, so that establishes a hurdle price for a customer to get on the platform. But really, what we're doing is we had a lot of success with what we call EBAs or enterprise business agreements, which are effectively consumption -- it's a consumption model for our largest customers. And what we found was that having that linkage to what customers pay for and what they use was strong. It drove more adoption over time. And we believe that there is a use case for this at -- for customers of other sizes. Now Andrew talked at the earnings call and at the Investor Day about how the primary strategy is to lower the barrier to entry for customers to try new products, which is a way for us to better monetize or further monetize the long tail of users on the platform. But ultimately, this just gives another way for our customers to engage with us in a way that matches their needs. And I think it will be positive overall for Autodesk and should be a growth driver in the long term.

Interesting. Okay. So you're kind of taking some of the learnings from the EBA customers and maybe applying that to customers of all sizes over time. I -- while it's still early, I guess, is it -- is there a certain subsegment of the customer base where you think that's most logical for initially, maybe not the top of the pyramid of your go-to-market, maybe the tier down? Or is this -- do you think this kind of gets rolled out to everyone at one time?

Yes. So -- I mean the offering launch is later this month. So you -- as you can imagine, we're going to be monitoring the activity that we see pretty closely. But I believe that there are 2 primary use cases in the near term. One is we announced our 2-for-1 trade-in for multiuser customers to get to the named user model. And in cases where those customers might have more usage historically than the 2-for-1 trade-in would represent, it gives those customers an opportunity to buy some form of residual usage to make them whole but in a way that would be more affordable for them over time and gives us an opportunity to not potentially lose the -- those seeds of that usage pattern when we convert these multiusers to the named user model. So that's one. That's time bound, obviously, because as we migrate the entirety of that multiuser base to a named user model or to Flex, that will eventually work its way through the system. I think the more interesting use case touches upon what I was already talking about, which is that monetization of the long tail. And I think noncompliant users are a good example of this, so -- that we see a lot of usage on the platform. A lot of it is noncompliant usage. By having different ways to engage with our customers and for them to buy, this is one way where they can kick the tires. They can start or -- start a monetization plan with us but pay for what they use. And we think that if we're successful over time, it's going to give us another way of monetizing that long tail, which includes a big piece of it being that -- the conversion of those noncompliant users.

Great. And I think that brings me to the last topic because I know we're running out of time, but everyone's favorite subject, piracy or the more PC way to say noncompliant users. I thought it was interesting to me was it kind of ticked up pretty significantly in terms of the amount of users, I think 15 million from 12 million before. I guess in the last couple of minutes, could you just talk about that increase and then help us understand how -- relative to the prior kind of noncompliant monetization strategy, any change in thought process there.

Yes. Sure. So a couple of things in terms of the numbers that you cited themselves. The first is that we're getting better at detecting these users. So as we get better at detecting them, the population goes up. The second is that we did see an impact from COVID. So when COVID hit, we did see an increase in noncompliant usage, which I don't think would be surprising against that macroeconomic backdrop. One thing that I think is important, and I'm increasingly having this conversation more and more with investors, this is a population that's amorphous and it's always going to shift over time because as we convert noncompliant users to some form of paying plan, there's going to be more noncompliant users that take that -- take their place. As we harden our systems to be able to detect and convert those noncompliant users, there's going to be new ways to get around the system. And so this population is always going to have some form of conversion to paying plans but an increase in volume of the -- of more noncompliant users that are out there. And we don't see this as a terrible thing. We see this as users on our -- users on our platform. The more users that we have on our platform, the more adoption of our software there is, the more they're not using any potential other offerings that might be out there and the more this population, to the extent it exists, gives us an opportunity to engage with those users and drive monetization over time. Our goal is to be able to gradually convert these users to paying plans over the short, medium and long term. So overall, this is a big opportunity for us.

Yes. A big one and growing, it seems like, in [ cost ].

Yes, yes.

Well, Debbie, thank you so much. This is a great discussion. Congratulations again on coming back to Autodesk, and appreciate your support of the conference.

Thanks so much for having me.

Absolutely. And thank you to the investors who tuned in and asked questions. We'll talk to everybody later.