Autodesk Inc (NASDAQ:ADSK) Q4 2017 Earnings Conference Call - Final Transcript

Mar 06, 2018 • 05:00 pm ET


Autodesk Inc (NASDAQ:ADSK) Q4 2017 Earnings Conference Call - Final Transcript


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Scott Herren

individual product to an industry collection, which is the highest upgrade rate we've seen yet and relates to the collections upsell effect that Andrew just spoke about.

The renewal rate for maintenance customers held steady in Q4. However, remember that Q4 has the biggest pool of maintenance plan renewal opportunities, and consequently the decline in maintenance subs is always greatest in Q4. We're very pleased with the M2S program to-date and we'll continue to encourage maintenance customers to move sooner rather than later.

We expect fiscal 2019 to be the biggest year for M2S migrations. It makes more economic sense for our customers as the cost of staying on maintenance will be higher than the cost to migrate. And product subscription provides them the greatest value with increased flexibility, support and access to our cloud products.

Now, let's talk a little bit more about annualized revenue per subscription or ARPS. This is the anticipated quarter where we saw ARPS inflect up for all the reasons we've been calling out including improvements to the product mix and the geo mix and the base of our product subs, the price increase for the M2S program, less discounting and promotional activity and selling more direct to our customers through our e-store. Collections upsell is having a positive impact on ARPS.

Our total ARPS grew 5% year-over-year and 4% sequentially. Breaking it down, maintenance plan ARPS continues to grow as expected, driven by mix and the annual price increases we rolled out as part of the M2S program. Product subscription plan ARPS showed a 6% sequential growth. If we exclude the effect of M2S, the product subscription ARPS grew 8% sequentially, had its fifth consecutive quarter of sequential growth and grew 20% year on year.

That meaningful growth in ARPS was the largest component of our core business. Further, if we isolate on our core business which again is maintenance plus product subs plus EBA subs, core ARPS grew 10% year on year and 5% sequentially. These are the ARPS trends we've been predicting since the start of the transition, and I know have been a source of question for many of you.

Looking at our business mix. Once again, total direct was 30% of the Q4 mix. One of the key investment areas for Autodesk has been our digital infrastructure with the goal of making it easier for our customers who choose to do business directly with Autodesk. Our e-store is a big part of that and we're very pleased that we've already grown that channel to nearly a $100 million in fiscal 2018 revenue. In addition, our e-store generated approximately 20% of the product sub sales in Q4 and close to 50% of LT subs in the Americas came through the e-store in Q4. That's tremendous progress in the short amount of time, and we expect to see this continue to grow.

The biggest component of our direct mix is still the business we do with large enterprise customers. Q4 is always