Autodesk, Inc. ($ADSK)

Good afternoon, everyone. My name is Tomer Zilberman, and I lead coverage of the vertical software and back office applications sector here at Bank of America. I'm very excited to be closing out Day 2 of our conference with Janesh Moorjani, CFO of Autodesk. Janesh, first of all, thank you for being with us. And I know you want to read a safe harbor statement and say some other words before we start.

Well, this is the most important announcement of the day. We may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements. So now that we're all a little bit safer. But thank you for having us, Tomer. We appreciate it. And thank you for picking up coverage. I want to thank Koji as well. I see him in the audience there. Terrific working with him. And we appreciate the partnership with BofA.

So big shoes to fill after Koji. Maybe to start with a high-level question, Janesh. For the investors that are newer to the story, Autodesk has went through several business model transitions over the last few years. So if you could just kind of remind us what they are -- what the impact was for the business over the last few years? And really how does it position you appropriately for AI and Agentic?

Yes, it's a great question, Tomer. And it's a good thing to set that context because all of these transitions that we've been through really are done with the intent of having a technology platform and a business model that was designed for what the future will hold. And they say success is when opportunity meets preparation, and I feel like that's where we are. So over the years, we've made a number of changes in the business. We changed from perpetual to subscription like many other companies did. Some years ago, we shifted from billing our customers for the entire TCV upfront to billing annually on multiyear contracts. We just completed that transition here in this past quarter. So that's behind us. We also changed our customer buying experience in many markets around the world, where traditionally, a customer would buy from a reseller in those markets, and we shifted that to more of a direct buying relationship. The reseller still plays a very important role in terms of engaging with the customer and creating demand as well as getting quotes from Autodesk and so forth, but the transaction flows through directly with Autodesk, which gives us much richer information about what customers are doing with the products, how they're using our products, what they actually have. And all of that sets us up very nicely for the future, particularly when you pair that with the investments we've made on the technology side, investing in our platform and investing in our industry clouds. So these investments on the technology side and on the business model transitions have set us up very nicely for the future. On that last business model transition that I talked about where just about seeing the effects of that work through the financial model. So I realize it's been a little bit hard for people to pass through some of that in the last couple of years. But we are starting to see the effects of that finally wear off, and we should largely be done with that this fiscal year.

Right. I certainly want to go into maybe some of the nuances of what you were discussing. But before we go into that, I think the topic du jour is your announcement last week of the acquisition of MaintainX.

Very exciting.

Yes, right. $3.6 billion sticker price. I think it's the largest acquisition you guys have made to date. So I just want to give you the platform first to talk about what it is, what it adds to your portfolio? And really why now?

Yes. It's -- MaintainX is a very exciting acquisition for us. For us, when we think about our -- how we play across the entire life cycle and maybe to just provide a little bit of longer-term context, Autodesk historically started off as a plan and design company. And for decades, we were a plan and design company. And we extended across the life cycle into make, whether you think about construction, whether you think about areas like Fusion, and we started to extend into that good 7, 8 years ago. And extending further into operate now allows us to close the loop on that entire life cycle across all of plan, design, make and operate. So assets that you plan and design, you have them built, and then you can see how they now perform in the real world. So closing that loop is really important for us for a couple of reasons. One is it significantly expands our addressable market. Operations by itself is roughly a $40 billion TAM. And if I draw an analogy to construction, it's significantly larger in terms of a market opportunity than construction was. In the area of construction, we entered the construction market with cornerstone acquisition, and then we built around that with organic investments as well as smaller bolt-on acquisitions. And in operations, we intend to follow the same playbook. So in construction, we expended about $1.8 billion of acquisition capital, and we built a business that's about $600 million in size today, growing north of 20%. So that's a really exciting business that we built in construction, and we're largely looking to replicate that in operations. And operations ultimately will be an even bigger business just given the sheer size of the market opportunity that we have in that space. So that's a really exciting piece on why operations, and it's a logical extension from plan, design and make into operations. What that also does is it allows us to further strengthen our AI capabilities. We've invested for many years in AI, and we've talked about how data context and expertise are the 3 core differentiators for us with respect to our AI strategy. The complexity of the models that we've built, training them on real-world projects and that data doesn't exist in the public domain for others to necessarily train on, and the context that we have and the richness of the context that we have around how those assets are -- how that design process comes together, how those assets are actually constructed, everything from workflows to information about the buildability, the auditability, all of those things. So you then extend that to operations where MaintainX has about 14,000 customers, about 10 million assets under management. And over the years, they've collected very rich data around the operational aspects of that data in terms of how those assets are behaving in the real world. They've collected very rich workflow context on the performance of those assets. When you pair that up with the data and the context that we have on the plan, design and make space, that allows us to close the full loop, which then allows us to deliver much more sophisticated outcomes to all of our customers. If you think about owners who have -- owner operators who have interest in everything from plan all the way to the operate phase, it allows us to create much richer outcomes for them and ultimately leads to workflows, much higher-value AI workflows leading all the way up to autonomous operations. So it's a super exciting space, both as a stand-alone space and as -- and MaintainX as a stand-alone business. But also the complementarity and the synergies that it gives us with respect to our own existing business, those were really important factors as we thought about the acquisition.

Right. Maybe going back to the first part of compare to the construction opportunity, right? If we contextualize the opportunity set in both, I think you said $600 million trailing 12 months for construction going 20%. If we take the operate asset, it's growing nicely 50%, like you disclosed, and it's about 2% of the business, right? Construction, I think, is closer to a little shy of 10%, right? How long do you think the time line is to scale to something like 10%? Is it going to take you the same amount of time that it did to scale out the construction piece? Or because you've already had such experience, you can do in a shorter time frame.

I think that time frame will largely be determined by both how fast the construction business itself grows and we've not run out of any runway on growth over there. We still see that growing for many years to come. As well as on the operate side, we'll grow organically. MaintainX will continue to grow, but we might also have bolt-on acquisitions in the future. So the intent of describing it in that framework was to help people understand that this is really a long-term opportunity that we see. And what operate or what MaintainX does for us in terms of operations, it adds 1 more revenue-accretive growth stream for us on top of a base business that is already performing really well, and that we think is set up quite nicely for the future.

Got it. Maybe to ask you a little bit more on the base business. How do you see the growth trajectory of the core business over the next 2, 3 years for design and make? Is there a concern that there could be a slowdown in this market that kind of prompted you guys to go out and make an acquisition of the size?

I don't think that's -- I don't think these things are related. We actually have a deep belief in the strength of the underlying business. If you look at our performance over the last several years, fiscal '24, '25, '26, we've been a consistent and very resilient grower. The underlying markets in which we operate, the demand for those -- the demand drivers there are secular demand drivers. They've continued to be there. You see that during different periods of economic growth or variation. So we feel very good about that. And we laid out a lot of those at our Investor Day last year where we talked about not just our existing core businesses, but opportunity that we see in areas like construction continuing to grow, Fusion continuing to grow, opportunities in infrastructure and transportation. Those are all key growth drivers for us. So nothing has really changed in terms of our long-term thesis on the business. In operate, we actually declared our intention in that space also about 8 months ago. So this is nothing new that we've done trying to react to anything of that sort, but it's really a logical extension. Our core belief is that you should extend into adjacencies when you are playing from a position of strength. And our underlying business has remained strong. In AI, we are doing very well compared to many of the others in the industry. And so we feel like we're operating from a position of strength. And nothing here really changes our view of the underlying business, so looking out over the next few years.

Right. Maybe I'll ask you to dig maybe 1 layer deeper into the differentiation of MaintainX. And kind of talk about the competitive landscape right now is. When we think about your operate business and what you have now with MaintainX, is it more about competing with other, call it, platform vendors that are offering the gamut of design to make to operate? Or is it more about these next-gen mobile-first point product solutions.

I don't see others really competing with us across the entire landscape the way we envision it. And our core differentiators there continue to be great strength for us. I think there's a lot of point players in different parts of that ecosystem that entire life cycle that you compete with from a more narrow perspective. But on plan, design and make, I think we feel very well positioned as a broad platform provider. With respect to operations and how that factors in, operations is a highly fragmented space. There are many, many different providers in that space. There are some legacy technology providers. There are some slower moving providers that were built on traditional stacks, desktop software. They don't have great access to data. So in many instances, those are the ones that are being replaced. There's a large white space opportunity as well. So we see significant growth opportunity in all of that in a way that complements what we've been doing with plan and design and make. The MaintainX is the leader among what I would call the next generation of operations software companies and intelligence maintenance and asset management. And there's a number of younger companies in that space. MaintainX is 1 of the faster growing ones, and it's 1 of the larger ones as well. So we feel it gives us good early momentum in that space.

Right. And when you think about acquisition, right, because I think you did say that MaintainX is the biggest player in the next-gen space. How do you think about the difference between acquiring the mind share and the market share versus acquiring the best technology, especially as we talk about AI native companies?

Yes. I don't think it's a compromise in this case. When we started out about almost a year ago, scanning the operations landscape for things that we might be interested in, we wanted to repeat the construction playbook that we had with the cornerstone acquisition and building around it. And so when we started scanning the landscape, what we were fundamentally looking for is technology that is future-oriented, so built on a modern stack, cloud native, mobile-first, ease of use that is easily adopted by customers, has prebuilt integrations and things that fundamentally, it's delightful to use the software. In addition to that, we wanted to look for an asset that complements our AI capabilities around the differentiating data and context that it could bring to us from an operations perspective. And ideally looking for a company that actually has strong go-to-market traction so that you have proven product market fit and a good strong go-to-market motion where the company is prosecuting that and driving a successful growth rate. In MaintainX, we found all of those, and that's what was so appealing to us.

Got it. Maybe 1 last question on the acquisition is you announced you're raising $2 billion of new debt to fund the acquisition. How should we think about long-term capital allocation framework, share repurchases, further M&A from here?

Yes. We were very focused on making sure that our long-term capital allocation framework stays unchanged. Again, we spelled this out at Investor Day. We've reiterated this for investors a couple of times. Our first and foremost focus is to invest organically in the business and secondarily to invest through acquisitions. And these are targeted and tuck-in acquisitions as the expression we've used that continues to be the case here. But at the same time, that's all against the backdrop of continuing a healthy capital return program. We've said we would return approximately 50% of our free cash flow subject to acquisitions to investors. We did that last year, a little bit more than half last year. In fact, we're on track to do that again this year. And that underlying capital allocation framework will continue.

Got it. And is there any risk to the 49% margin level that you're guiding to the next...

I would love to be at 49% margin levels, but we're not going to be quite there. What we committed to was 41% by fiscal '29. Important correction there. But no, we fundamentally said that we are going to continue to stay true to that as well. So the MaintainX acquisition is going to be operating margin dilutive by its nature because it's a high-growth company and it's in investment mode. But we're going to absorb that dilution and our fiscal '27 and fiscal '29 operating margin goals will stay unchanged post close.

Got it. If we now turn to the recent quarter performance, on a reported basis, the numbers were quite strong. If I look at billings and free cash flow, I think you beat each of those versus Street expectations by $150 million plus each. But if we normalize it, I think you still said that there was some impact of the business model transitions that kind of mechanically bolstered some of the growth. So if we neutralize that and we just look at the normalized growth rate, how did that compare to your initial expectations for the quarter? And how is that informing your guidance for the rest of the year? Is everything on track? Are we performing better? Or where are we exactly?

The quarter played out -- it played out quite nicely for us. We are very pleased with our overall performance in the quarter. When I think about the underlying business itself, you are navigating the effects of the sales reorganization. That largely played out as we expected with respect to new subscriptions. Renewals were strong. So that gave us some strength in the quarter. We also saw outperformance on upfront revenue, which is the license revenue component under 606. That came in a lot stronger than we expected. That's largely a function of product mix and that contributed to about half of the revenue outperformance in Q1. So we took the entire outperformance for Q1 and rolled that through and raised our guidance for the full year by more than that. So there's an implied raise for Q2 to Q4 as well. So all of that reflects the strength that we saw in the business that upfront revenue is not necessarily something I would extrapolate to future periods. But the underlying strength of the business is what we extrapolated to the future periods. And that's what you see reflected in the guidance for Q2 to Q4. So overall, it played out quite nicely.

Right. I'm going to ask you a conceptual question now. It's a little bit crude, but bear with me. You talked about kind of your core beginnings being in more of the design and plan area. Right now, if I were to go into a Chat GPT or a Gemini or something, I can ask it, create me a 2D schematic or 3D schematic of a door window. And we'll do it maybe not super accurately, but it will create me something. We may not be in an area right now where these frontier models can handle something like that. And the difference between me asking for a door and someone asking create me this commercial building is way different. But is there any conceptual risk that the Frontier models can disrupt and maybe the like more CAD side area of the business?

Let me answer the question this way. If there's 100 people that gave the model, the exact same instructions that you give the model, you'd get 100 different answers. That doesn't work in our world. You need highly deterministic outcomes in our world. These are things that need millimeter level precision and that people are standing behind and taking large liability risks behind. So probabilistic is good to get you started and to get you thinking about things, but ultimately, probabilistic is not good enough. You actually need deterministic. And as long as these models are all based on probabilistic methodologies, I think that continues to be a core differentiator for us. So we described this a little bit more on our earnings call as well for some of you that may not have seen that. But what we described was our approach, we've talked about data and context and expertise as being the core differentiators, but it's not just the outcomes from our foundation models. We've trained our models on real-world data from real projects from actual customer projects that we've worked on, literally thousands of them over the years. And -- but it's not just about using the output directly from a model. That actually is then matched up against the deterministic algorithms that we've got that are built into the software, and that's been a core differentiator for -- because many of our flagship products like AutoCAD and Revit over the years. And so you get much more deterministic outcomes. I think that is a key differentiator as well. The second thing I would say is many of the models would lack the context. For example, if you said, hey, just render me this drawing, it would render you a drawing, but what's behind the wall -- what is it actually made of? What's the load-bearing capacity? What can't you see? What's the drainage system? If you move a door 6 feet from 1 side to the other, does it conflict with the MEP system? All of those things are things that the model doesn't really have context on. It doesn't have context on workflow. What's buildable, what's actually auditable. Tomer made a change 3 days ago and Janesh is going out to the site to build something, does he actually have the latest or is he going to go do something that is going to create rework later. The models don't have that. Models play a very valuable role in terms of how we think about the work that our customers perform. But it's much more comprehensive than that in our view.

Right. One of your peers on their last earnings call made a reference to saying something along the lines of let's say, you have a hypothetical example, $200,000 annually in engineering labor costs and $10,000 in design software costs. Even if you were to double the design software cost, but you were able to reduce 20% of the labor cost, the incremental opportunity that an Autodesk can get from that compared to the cost savings from the customers is tremendous, right? Is that something that you're seeing from customers now?

The biggest problem that our customers face today is 1 of capacity and productivity, right? They don't have enough people to do all the work that needs to be done, and the people that they have are not as productive as they could be because there's a lot of more mundane things that are required of them in their day-to-day jobs. So that's the way we think about it. It's similar in concept to what you said around where they're investing and where do the savings accrue. But fundamentally, that is the problem that our customers are trying to solve in terms of how do I make my people more productive, that is my most scarce asset, and how do I get more capacity. And that's what we help them do. We do that through features in the product that we described the framework of task automation, workflow automation and system automation. Task automation means making the user more productive. And if we can do that in a way that doesn't cause my COGS meters to spin faster and we can still measure or meter the value that we're delivering to customers by way of a seat, then great, we will factor that into how we think about subscription pricing. But to the extent it either causes my COGS meters to spin faster or if a seat is no longer the best way to meter that value we're giving the customer, we do that in the form of consumption-based pricing, which we've had for many years at Autodesk. A good chunk of our portion -- of our revenue comes from consumption-based pricing. So we feel like, again, going back to where you started with business model transitions, we've built not just the technology, but the commercial capabilities that we need for this world of the future as well.

Right. Maybe to go into the consumption-based model in just a second, but just to go on the last point. So are you hearing right now customers are preferring more productivity over cost savings?

Well, productivity can be reflected financially either through cost savings or driving higher revenue. And I think customers actually want both.

Got it. So consumption-based pricing, about 17% of your business, Flex within that is about 2%...

Roughly.

Roughly 2%. First of all, take us through the various pricing mechanisms you have within the consumption business. And if you were to take a future outlook now with AI and Agentic really starting to grow, where do you think it goes? Is it going to be more of this token-based approach?

Yes. So Flex is about 2%, and the rest of the lion's share of it roughly 15% is from EBAs, right? So EBAs are our enterprise business agreements and those customers are all on consumptive contracts. With the customer, it's structured as a token-based arrangement commercially. For revenue purposes, the revenue is still recognized ratably. So the revenue that fluctuates with usage is only on Flex, which is only about 2% of the business today. And so fluctuations in that 2% really don't have a meaningful outcome on the total revenue of the company just given our overall size. Over time, as we think about this, I think we see growth opportunities in -- with enterprise customers, but also with Flex, particularly as we go further down market and we continue to expand our reach with many smaller customers and different personas, including personas of users that may not need subscriptions all the time that they may be less frequent users or they may have burst capacity needs. So we do see that those consumptive models, particularly Flex continuing to become a bigger portion of the business. But just given the sheer size of Autodesk as an $8 billion-plus company and Flex being only 2%, that growth in the mix of Flex will take a long time to play out. It's just the math behind it. So we don't see that creating volatility in the revenue model anytime in the near term.

Got it. You've talked about the last few quarters about MCP and API opportunity. Really how incremental can that opportunity become? And in early conversations with customers that are a little bit more AI forward, are you seeing a preference towards utilizing the Autodesk tool directly or going through a third-party agent that then goes into the Autodesk platform?

The way we think about it is we should be exposing capabilities to customers in whichever way the customer wants to consume those capabilities. So for example, we announced the partnership with OpenAI on Fusion, that still requires a user to have access to a Fusion subscription. So we're still monetizing it. It's just a different mechanism. And if somebody wants to use it through Open AI or through Chat GPT, that's great. They can also use it directly in our products. If they're using it directly in our products, they actually get access to our foundation models. They get access to -- they get -- when they use the features to the extent that it doesn't require us to use expensive compute to deliver the customers' request, but it can be done in a less expensive way. We would do that behind the scenes for them in a seamless way. So there's lots of benefits for them to do both, and either of them works fine for us.

Yes. Let's go back to financials and talk about margins for a second. 93% gross margin is our guidance for this year, kind of stable from last quarter trends. You talked before about as you're going to scale out your AI and cloud compute, there could be a drag to the gross margin dollars, right? When would we start seeing that? And what are you doing to offset that?

Yes. Just to clarify, we don't expressly guide to gross margin percentage. But you're right, fundamentally, as cloud continues to grow in mix, the gross margin on cloud offerings will be lower than it is on desktop offerings. And so as that mix shifts, you do see an impact on the gross margin percentage. But from a gross profit dollars perspective, those are still accretive because the revenue size will correspondingly be bigger. So it's still actually is accretive to gross profit dollars, which ultimately drives free cash flow per share, which is the path to creating value. So we still feel pretty good about that. But in terms of the percentage of gross margin, we did factor that in into the guide that we provided. Again, I think that plays out over a long time frame. And specific to fiscal '29 and the outlook of 41% for non-GAAP margins that we have out there, that's 1 of the several levers in terms of the puts and takes, but it is embedded in that 41% outlook.

Right. So you talked a little bit about AI tools that you're monetizing on different ways to monetize AI. But I want to talk about monetizing on AI from the perspective that you are also participating in the data center build-outs, right? So maybe can you take us through there? What parts of the build-outs do you actually participate? And isn't it the data centers themselves? Or is it the associated infrastructure around waterways and electrical grids and everything else that's attached to the data center?

It's both. As you see, as data centers need surround infrastructure, Autodesk gets naturally used in many of those infrastructure projects as well. But the important thing for us is over the years we've actually built a highly diversified business across segments and geographies and industries and verticals. And so every time you see demand shift from 1 area to another, that's fine from our perspective, we see the benefits of that by way of that diversification. So construction is a good example of that. In construction, there's 8 to 9 months of backlog. And when demand shift, shifts towards data centers, it's moving away from somewhere else or capacity is shifting towards data -- in terms of our end user -- our customers' capacity to build is moving towards data centers. It's moving away from somewhere else. We're there in all parts of the market. So while on the 1 hand, it's great that it's providing a level of momentum to us. We are balanced in terms of how we approach it. And if for whatever reason, it shifts away from us in the future, there will be something else that in our minds will take up the slack.

So maybe continuing along that shifting perspective, do you now have an opportunity, even if it shifts away the actual construction portion into the kind of areas that maybe have been a little bit neglected over the last couple of months last year with make and operate, can you stay in that life cycle for longer, specifically for data centers?

The fundamental thesis behind operate is it extends our engagement to the facets from years to decades. So absolutely, I mean, we would view -- so make is really construct. And if data center builds slow down for whatever reason, I don't see them slowing down. But for whatever reason, if they do slow down, we will still -- that demand will shift elsewhere. And again, if you think about plan, build -- plan, design, build and operate, the plan, design, build capacity will move somewhere else. The industry is still capacity constrained. So whatever is being built, whether it's infrastructure, whether it's commercial housing, whether it's industrial buildings, whether it's other kinds of facilities. If it moves away from data center to something else, that's great. We'll be there for our customers wherever they are.

Right. But maybe to ask you it again in a different way. Do you see real headway of opportunity for operate within the data centers?

There is significant opportunity for operate that will play out over the long term.

Got it. If we look at the -- I'm sure you all know this, we compare your performance to the architectural billings indices and some of the other construction momentum indices, and we're seeing stabilization of demand there following kind of a weaker back half of last year kind of going into this year, we're seeing stabilization. How was the demand backdrop right now?

It has been pretty stable. But what I will say is that even when you were seeing softness in some of those potential leading indicators, our business continued to perform well because those are not perfect leading indicators, and there's always some level of noise. And just given the diversification we've built into our business over the years, when you're looking at any 1 leading indicator for 1 particular market or 1 particular vertical, it's not going to be reflective of our business overall. So when those indicators were softening, we didn't see our business softening. And as we see those indicators stabilizing, that's a good thing on balance. I'm not dismissing those in any event or in any way. I would rather have those be stable than be declining. But them being stable, doesn't necessarily translate into anything that is a direct read-through for our business.

Right. I think the opposite side of the equation is even if there is a little bit of macro weakness or whatnot, we've seen that you have gained share, right, in CAD and BIM or PLM or whatever you want to call it, we see that you gained share over the last year, 1 now versus kind of some of your incumbent peers. And I wanted to ask you, what is the real reason for the share gains? Is it more about you provide the full platform that customers want? Is it more about a total cost of ownership savings? Is it better flexibility or pricing model? What attracts people to come to you?

We have been growing our business faster than the market overall in many of these markets. But I'd attribute that to more -- if you think about the markets in which we are growing really fast, construction, we're still behind the market leaders. In Fusion, we're still a small part of the overall market. So a lot of it is attributable to the underlying businesses measured on a point way that are continuing to do well relative to the competitors that they have in their particular spaces. And then, of course, the mix effects of the higher-growth businesses helping the overall growth rate of the company.

Got it. As we look towards the back half of the year is kind of progressed throughout the year, you talked about the largest EBA cohort in 4Q, but I think it's offset by your multiyear cohort, right? That is in the middle, I believe, over the last few years, right? So what are the puts and takes of the multiyear product cohort and the EBA cohort?

So the EBA cohort that's up for renewal this year is our largest EBA cohort with the bulk of that happening in Q4. But if I think about that compared to last year, we had -- last year, we had our largest product subscription cohort that was renewing last year. And we also had, I think, our second largest EBA cohort. So the issue with the cohort dynamics is this always going to be something that's bigger or smaller than the other. You can see last year's dynamics, by the way, in the billings growth rate for last year. On an as-reported basis, it was north of 30% billings growth. And so even when you strip out the effects of the business model transitions and so forth, it was actually very, very strong growth last year. So it will present a naturally tough comp in Q4. But that was what we factored in overall when we set our billings guide out for the year. And Q1 played out nicely for us, which is what gave us the confidence to raise the underlying billings growth in dollar terms as we provided our revised guidance.

Now that we lapped kind of the remaining pieces of the transition in last quarter, should we expect that free cash flow growth tracks more closely with net income growth? And what do you think about free cash flow conversion over the next few years?

Yes. I think broadly speaking, free cash flow should track much more closely to operating or net income. There's a couple of things to keep in mind in fiscal '27, though, which is this year, which is that we're not really paying any U.S. federal cash taxes we say, because of the impacts of the One Big Beautiful Bill Act, and that benefit is largely offset by the cash outflows that we had associated with the restructuring that we implemented. Entering next fiscal year, fiscal '28, we will start to become a U.S. federal cash tax payer again.

Got it. Same question about on NRR. Right now that we're past the mechanical tailwinds. Where do you expect the steady-state NRR levels to be within that, I think, 100%, 110% framework you gave.

Yes, they should be within that same range. It exceeded 110%, mainly because of the mechanical impacts of the new transaction model. The new transaction model affects a whole bunch of metrics, the net expansion -- the net retention rate of the NR3, as we call it, as well as a whole bunch of others. But once that noise abates, you should see it back in that 100% to 110% range.

Got it. A couple of quarters ago, you made a strategic investment in World Labs.

Yes, we're very excited about that one, too.

Is there any new update since our disclosure?

No. I think that's actually been going well for us in terms of the conversations we have with them. I think the company continues to perform well. So we're very pleased with where that relationship is headed.

Got it. We're kind of 5, 6 minutes of time. I just wanted to pose -- open up the room and pose any questions for investors who want to ask a question. I keep going here. Maybe to go back to the competitive landscape. When you take maybe a 5-year-plus look -- how does the market change in terms of -- I think we think of some of the other competitors that have an Operate segment that are more of the platform vendors. But as you mentioned, their legacy. Is there -- does it get more competitive, meaning are they going to also try to make some of the acquisitions of these next-gen products and then you are in a different type of competitive environment or competitive landscape than kind of how you describe it today?

Yes. I mean, potentially, but the way I think about the competitive landscape is we need to do what's best for our customers and give them the best product with the best user experience, and the best integrations to maintain an open ecosystem because what MaintainX is fundamentally doing in the operations space is, it's not vendor-specific or it's not system-specific like some of these other folks are. It's actually a very open approach to manage as many assets as you can regardless of who the vendors are, which the systems are. So the more we can do that, the more successful we will be. And there's plenty of new market opportunity by way of just traditional white space. You walk into many of these facilities, you'll actually see there's things written on whiteboards with markers of what they should do by way of a maintenance schedule. There are things written on paper. You go to a complex manufacturing facility, and you'll see somebody stuck a sticky note on a piece of equipment, saying, do not open this valve. And those are the kinds of things that scare us and should scare us. Those are the kinds of things that we're looking to automate. So if we do this right, we'll actually capture significant white space opportunity. And along the way, maybe there will be some legacy vendors from whom we can gain a little bit of share they might acquire companies. They might improve their products. Fundamentally, we look forward to a vibrant ecosystem out there, but all in service of what the customer wants to do.

And where are we in terms of market education beyond kind of all the go-to-market changes that you already made. Is there anything else you need to do in terms of getting in front of the customer that they should know that you don't only have design to make, but you also have operate in the value of the platform?

I mean I think our customers know and understand the whole life cycle and MaintainX has built an independent go-to-market motion. For us, the most important thing is to continue to let them do what they've done well and take that strong product market fit and pair it with a go-to-market motion that continues to sustain growth for a period of time to come. There are a number of areas where working together with them, we can help them expand their presence, whether you think about leveraging the -- our global presence and having them be successful in markets outside of the U.S. thinking about ways in which they can work with our partner community, thinking about ways in which we can help represent the full portfolio of Autodesk and MaintainX to our enterprise customers. Thinking about just verticals in which we can help them expand even further. I think there's plenty of opportunity for white space expansion.

Right. Maybe last question here is, with MaintainX, do you feel that you are finally participating in the full life cycle? Or is there other areas that you could eventually, at some point, go into, I think 1 of your peers recent spinoff also has a Protect category? Is that something that could be on the road map eventually?

Yes. I mean we think of this in terms of plan design, make and operate. We've -- there's a lot that we can do to make sure that we complete that. Again, I'll remind you about make we entered the make about 7 or 8 years ago. We're still driving growth even within make. So we have plenty of room with operations before we declare entrance into new markets.

Understood. Janesh, I'm all out of questions and we have 2 minutes left. So I'll cede those back to you. Thank you so much.

All right. Thank you very much. We were efficient there.