Ladies and gentlemen, welcome to Autodesk Q3 fiscal year 2014 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to Mr. Dave Gennarelli, Director, Investor Relations. Please go ahead.
Thanks, operator. Good afternoon, and thank you for joining our conference call to discuss the results of our third quarter. Joining me today are Carl Bass, our Chief Executive Officer, and Mark Hawkins, Chief Financial Officer. Today's conference call is being broadcast live via webcast. In addition, a replay of this call will be available at autodesk.com/invest. As noted in our press release, we have published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments, and we will not be taking any questions.
During the course of this conference call, we will make forward-looking statements regarding future events and the anticipated future performance of the company, such as our guidance for the fourth quarter and full year fiscal 2014, long-term financial model guidance, including billings and recurring revenue growth, factors we use to estimate our guidance, new business model introductions, new products and suite releases, market adoption and expected growth rates, cost management efforts, hiring plans, business execution, business prospects and financial results, our market opportunities and strategies, including our rental license offering plans, our transition to cloud and mobile computing, our educational vertical strategy, trends and sales initiatives for our products, and trends in various geographies and industries.
We caution you that such statements reflect our best judgment based on factors currently known to us, and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, specifically our Form 10-K for the fiscal year 2013, Form 10-Q for the periods ended April 30 and July 31, 2013, and our current reports on Form 8-K, including the 8-K filed with today's press release and prepared remarks. Those documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements.
We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. During the call, we will also discuss our non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of our GAAP and non-GAAP results is provided in today's press release, prepared remarks, and on the Investor Relations section of our website. We will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-over-year comparison. Now I'd like to turn the call over to Carl.
Thanks, Dave, good afternoon, everyone. Our third quarter results were driven by strength in our core AEC and manufacturing segments, as well as continued strong adoption of our suites. I'm pleased with the results, despite the negative impact on revenue from currency headwinds, the change we're making in our education vertical, and the impact from the U.S. government shutdown. Considering these factors, I feel good about how we finished the quarter. Our AEC business continues to perform well, driven by what looks to be a broad-based recovery in the commercial construction market. As we highlighted at our Investor Day last month, the construction vertical represents a significant opportunity, and we continue to gain momentum in that market. We also continue to broaden our BIM portfolio. Last quarter, we closed a couple of small acquisitions, bringing our BIM tools that further support infrastructure projects.
We're also pleased with the adoption and usage of BIM 360. The anecdotal feedback we hear from our construction industry customers suggests it is the dawn of a new era in construction technology. A highlight for the quarter was that we signed our biggest-ever BIM 360 enterprise agreement, worth over $1.5 million. This existing customer renewed its agreement with Autodesk for about 20% more in total billings than their previous contract. They will deploy BIM 360 as part of their strategic goal to transform their business and increase their competitive advantage. This is exactly the type of transaction that supports our long-term growth assumptions. We've only scratched the surface of the construction industry, and we're well-positioned to tap further into that $7 trillion market. Our manufacturing business had solid results. Once again, we built on our momentum in the automotive segment and extended that success to the automotive supply chain.
Areas of strength included rapid adoption of our manufacturing suites, as well as our industrial design, visualization, and simulation technologies. Our 100% cloud-based PLM 360 had its strongest quarter yet as it gained momentum with small and medium-sized businesses in industrial machinery, automotive, and high tech. These companies share common process challenges around the supply chain, engineering change, and quality management. For instance, PLM 360 was selected over traditional PLM offerings by a Midwestern manufacturer for its functionality and superior ROI.
This customer has grown to represent several hundred thousand dollars in PLM 360 billings to date. While it's early, we're also seeing encouraging usage of Fusion 360, the world's first cloud-based software for industrial and mechanical design. Since its launch just a few months ago, there are now over 20,000 users. Our Fusion 360 customers are doing some amazing things, from making lightweight drones to 3D-printed violins. For most of Autodesk history, we've been a leader in technology for design and left the work and technical challenge of fabrication and manufacturing to other providers. While we have collaborated closely and partnered with many of these companies, we have long believed we would provide greater value to manufacturers if we could streamline their workflows. With this in mind, we entered the CAM market last year with the acquisition of technology and expertise from HSMWorks.
Earlier this month, we embarked on the next step on our path toward a better manufacturing process by making an offer to acquire Delcam, the industry's leading CAM technology and brand. We see a significant opportunity given Delcam's technological expertise, strong market presence, and sterling brand. The combination of the companies is a significant step forward and what we hope will increase productivities for customers of both companies. As an added benefit, we will be utilizing our foreign-based cash for this transaction. We currently expect the transaction to close early in our fiscal year 2015. Afterwards, we'll be able to speak more freely about our integration plans. Another area to highlight in our third quarter results is the continued strength in adoption of our suites, which grew 21% and now represent 36% of total revenue. Growth was led by exceptional strength in our AEC suites.
As we discussed last month at our Investor Day, users of our suites have high maintenance, subscription attach and renewal rates, which supports our long-term goal of generating 20% more value with our subscription customers. Our strength in suites came partly at the expense of our volume channel products, AutoCAD and AutoCAD LT. While we did see improvement with these products in EMEA, it will likely take a few quarters to rekindle growth in this area. From a geographic perspective, performance was solid. EMEA and APAC had solid growth on a constant currency basis. Our performance in the Americas was better than it appears for the reasons I mentioned earlier, especially in the U.S., where changes we're making in the educational vertical and the U.S. government shutdown had its biggest impact. Normalizing for these things, revenue in the Americas increased year-over-year.
It was also great to see revenue from emerging economies return to growth with all of the BRIC countries growing on a constant currency basis. Just a couple of months ago, we announced the availability of most of our core products as rentals. Our customers wanted more choices and flexibility in how they access our portfolio of design, engineering, and entertainment creation tools. We expect rental plans to be attractive across all of the industries we serve, especially for freelancers, startups, or businesses that are project-based in nature. While it's very early, we're encouraged to see that many of the rental customers are new to Autodesk, which once again supports our long-term growth and model assumptions. As we outlined at our Investor Day last month, the addition of recurring revenue streams coming from rental, cloud, and consumption-based usage will significantly increase, making for a more predictable business time.
We'll begin to see the transition start this quarter as we anticipate approximately $50 million of enterprise license revenue will move to the balance sheet. We anticipate a larger impact from the model transition in fiscal year 2015 and plan to provide you with more details when we release our fourth quarter financial results in February. We're excited to move forward on this business model transition and give our customers even more flexibility to utilize our products. We'll discuss this and more with thousands of our customers at Autodesk University in just a couple of weeks. Over the past few weeks, I've spent time with our customers and partners in both EMEA and APAC. While the global economic environment remains uneven, it does feel as if things are beginning to improve.
We know that our technological leadership and global brand recognition have positioned us well for long-term growth and industry leadership. It's not just the business model that is changing. We're expanding the markets we address and increasing the ways in which customers can access and use our products. It's an exciting time for Autodesk. We look forward to reporting on our progress along the way. Operator, we'd now like to open up the call for questions.
At this time, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from Heather Bellini with Goldman Sachs.
Great. Thanks so much for taking the question. Carl, I had two. You mentioned that most of the customers for the new offerings are new to Autodesk, which is great. I'm wondering if you could share with us what the initial thoughts are from your existing customers about the new offerings. Secondly, how do you think the decision to do away with upgrade pricing a little more than a year from now will impact people wanting to buy a box product one last time at a discounted rate next year? Thank you.
Yes, sure, Heather. Two things is we were really encouraged. We did believe that a lot of the people who would end up wanting to rent software would be new to Autodesk. That's what we saw. Obviously, there were some of them who were existing customers. I think it falls into that category of some people are doing it just to meet peak demand loading, which would be existing customers. Others are doing it as freelancers or on a project basis. I think there are both usage cases in there. Like we said, it's pretty early, but we didn't see anything that was outside what we kind of predicted happening in the model from the first results. What I see happening as a result of us pre-announcing the elimination of upgrades, and this has been confirmed by all the resellers I've spoken with.
I think what we expect to see is probably more people moving to subscription rather than buying one last time. The tendency will be to buy and then protect their investment rather than just to buy and know that that investment they may need to buy a full new copy.
Just to be clear, do you think they'll buy a box product and attach maintenance to it, or will they just say, "You know what, I'm going to skip that and just go to the rental offering?
I think it'll be predominantly one and a fewer amount number two. We'll start telling you as we figure it out. My instincts and experience in this business would tell you more number one, and I would say 10%-20% of the number two.
Your next question comes from Brent Thill with UBS.
Good afternoon, Carl. Maybe if you could just talk a little bit about your comments about modest improvements in some of the customer behavior and give us a sense of how that's trending. We've heard, obviously, the opposite from some of the other technology vendors. If you could maybe talk about the sustainability of that a couple of quarters out. Then, Mark, just a quick question on deferred revenue. I believe that the sequential decline is just a seasonal change. There's nothing else to read in there on the DR.
No, Brent, our customers always behave well. What we started to see is that really solid results in AEC. I think we've been as clear as possible that we think it's being more led by C than by A. That a lot of what we're seeing is really construction customers retooling their technology base, and that the market for commercial construction has improved on a global basis. Both what we see in the U.S. and from my travels to both Europe and Asia kind of confirm that. Same thing we're kind of seeing in manufacturing. What we saw in manufacturing, I know there have been some data that's come out that is contrary to this, but what we've seen is an increase in buying from our customers and a prediction about them spending more during the next year.
We're pretty optimistic, and this is both my interpretation of what we're seeing, combined with what our partners are telling us. Mark.
No, it sounds right on. Also, Brent, you hit the nail on the head. While our deferred revenue is up year-over-year 7%, the sequential pattern fits almost perfectly with our five-year kind of sequential history that we look at from a norm standpoint. You absolutely are on the right point there.
Thank you.
You bet.
Your next question comes from Gregg Moskowitz with Cowen and Company.
Thank you very much. Solid job guys, this quarter. I wanted to ask a little bit more about manufacturing, because this was certainly one of the better performances we've seen in some time. Was the strength primarily on the automotive side, Carl, or was it more broad-based? Just at a higher level, do you think we have possibly turned the corner in this segment?
Yeah. No, I think it was more broad-based. What I would say is I saw broad-based improvement economically. I think in automotive, I think we've been competitively advantaged. I think that's more of winning business away from our competitors in automotive, whereas in consumer products and industrial machinery, I just saw a general improvement and a healthiness in most parts of the world. We talked about emerging countries. Japan has done well. The only place where I still see continued weakness is Southern Europe.
Okay, thanks. Then Mark, just a quick one for with regard to your Q4 guidance. Is the education impact on revenues again a couple of basis points, a couple of hundred basis points as it was in Q3?
Yeah. If you think about that, I think one to two points would be a good number to look at on the whole company. Yeah.
Your next question comes from Raimo Lenschow with Barclays.
Hey, thanks for taking my question. I just wanted to stay on that subject. How do you think about if you plan your business about a recovery? Europe looks a little bit better. U.S. is still kind of more in the early stages of recovery. What are the metrics numbers that you're looking at? Are you looking at PMI or anything to help us to kind of share the confidence that you have? Thank you.
We always look at external economic factors like PMI. What has been a better indicator is our actual business and our pipeline of business. I'm more reacting to what I see in terms of business that's come in and then business that we've lined up in the pipeline. It's always tempered somewhat. As we've seen, I think, some of the macroeconomic indicators in some of the industries have been really misdirections to what's gone on. I think, if you'd gone back three to four months ago, you would've said manufacturing was improving, but you saw many companies' results be subpar. We're much more interested in what we thought we would do, what we thought the build in our sales pipeline would be, how we were able to close deals, the size of those deals. They were more transactional metrics.
Perfect. Okay, thanks. That helps.
Your next question comes from Matthew Hedberg with RBC Capital Markets.
Thanks, guys. It sounds like the transition's going to start more in earnest next quarter. I'm curious what sort of new metrics might we get next quarter, perhaps, a number of subscribers, and is that something that we'll get on a quarterly basis?
Yeah, Matt. One of the things, you're absolutely right. The transition is going deeper in Q4 as we talked about the $50 million in enterprise license revenue going to deferred revenue, as per the discussion we had at Investor Day. I think there's a number of metrics that we're looking at as we prepare for discussing the FY 2015 guidance in terms of what we'll guide by and also what we'll track externally. Certainly we revealed the subscriber information with you just a couple of weeks ago. 1.9 million active subscribers of 4.7 million of subscribers, the potential there, of which 1.9 million are active today. We're going to start updating that eventually over time. Stay tuned for the FY 2015 guidance. We'll get much more granular on both the metrics we're going to guide by and the metrics we're going to disclose. I hope that helps.
Yeah.
You can imagine some of the metrics we're going to be putting forward.
That's great. That's helpful. Maybe one last question on this.
Sure.
I'm curious, you guys are primarily a channel model. What's the response been thus far from the channel?
Far, I'd say the channel is primarily reacting to business, which I think most of our channel partners had a good quarter. I think most of our channel partners have a wait-and-see attitude about many of our programs. Some form initial opinions, but right now, I think they see rentals as being additive. They think the elimination of upgrades in the future is a net positive. They're more positive about the cloud offerings than I've ever seen them. As a matter of fact, for the first time this quarter, I had some of our own sales force start asking me, or complaining to me, that we're not doing enough on the cloud. We're starting to get in balance, how far in front of customers we are with some of our cloud offerings. Certainly when the sales force brings that up as an issue.
Your next question comes from Jay Vleeschhouwer with Griffin Securities.
Yep. Thanks. Good afternoon. Carl and Mark, I'd like to refer back to one of your longer-term objectives that you talked about last month at the Investor Day, specifically getting 20% more value from new and existing subscribers. Perhaps you could clarify how you do that. If you look at the five-year period ended fiscal 2013 earlier this year, you had a cumulative increase in your average revenues per maintenance seat of about 25% under the existing model. That was largely due to mix, it seems, plus some better AutoCAD attach and renewal. Are you expecting that mix will be the predominant driver to the improving value that you're talking about from subscribers? Does that 20% build on the already enlarged maintenance revenues that you had over the last few years, or is it from a different starting point?
No, the starting point is one we described, Jay, It's additive over that. What I think the two biggest drivers that we'll see is one is the mix of suites, as we disclosed. Less of our revenue is in suites now. I think more will come from suites, and that mix towards suites from single products is a big driver. The second one, which we think will add substantially, is the addition of services, web-based services to our existing customers or to new subscribers of those services. Jay, is there more you want to add?
No, I would absolutely say that, with the SaaS offerings, it's going to add, I think the rental, we're going to penetrate even more and we're going to have more subscribers. That's going to bring more revenue as well. Carl, I feel good also about the enterprise offerings that we have and how that's kind of supersizing deals with the enterprise folks. Just to complement your points.
Great. I think the enterprise is definitely one to add. We try to detail a little bit, as you remember at Investor Day, how customers who use these flexible licensing plans, they get more, They often pay more.
Okay. I don't know if you're able to speak more about Delcam given the regulatory limitations, but if you can, could you distinguish it from the manufacturing software investments that two of your larger peers made many years ago? Dassault, of course, and what is now Siemens have been in similar sounding areas with their DELMIA and Tecnomatix acquisitions. How are you going to be positioned differently from what they've had for many, many years in the manufacturing area?
I'm not as old as you, Jay. I can't remember that far. What I do know is what we're really interested in is in taking these digital prototypes and these models that we built and actually manufacturing them. I think if you look at the product portfolios of some of the other companies, they're pretty widespread in what they try to do. We've built a very successful business in factory design and plant design, and what we're trying to do is complement that with very specifically, we're looking at the CNC tool market and being able to do that. We think it's taking advantage of the secular trend in what really is the application of microprocessors to manufacturing technology. I think, in some cases, it's just timing that we see this big growth because of the availability of these high-capability, high-performance machines.
We saw it as a limitation in terms of the workflow, that people couldn't get all the way to the end, and we felt that that was important. I think if you look at some of the workflows out there, even in the biggest automotive and aerospace companies, the workflows are not good. They're incomplete. There's data loss and fidelity problems between tools, and we need to change that. The thing that's really driving this today at the heart is that we're really interested in our manufacturing customers who are putting a premium on agility. It's about their ability to innovate and bring stuff to market more quickly. They've gotten to the point where quality is assumed, and what they're all interested in is how do I innovate and how do I bring products to market quickly?
One of the ways to do it is all the way from prototyping to final manufacturing, you get from end to end faster.
Your next question comes from Steve Ashley with Robert W. Baird.
Thanks very much. I was going to ask about maintenance attach rates and renewal rates. Have you seen any change or improvement in either of those metrics here in this recent quarter?
Steve, this is Mark. Yeah, let me just address that. In terms of the actual rates, we don't disclose that. I know you know that. We look at the changes period on period. It gets a little bit bumpy. It gets a little in flux at times. They're slightly down. I think the thing to look at, Steve, that's more interesting than that our subscriptions going are up by X. I think that's the part.
Hopefully everybody could hear that.
there was a little bit of background noise there, but I hope folks got that. Steve, does that cover it for you?
Next question, operator.
Our next question comes from Walter Pritchard with Citigroup.
Hi, thanks. I'm wondering if you could talk about, you gave the guidance for the $50 million impact from the business model transition during the analyst meeting, and I'm wondering if you could talk about, given the conversations, Carl, that you've had with customers over the last, I don't know, six weeks or so since that event, what have you learned about the appetite for those types of arrangements, and how should we think about that as we go forward from Q4?
Like we told you back then, we've always been the one that has been the obstacle. Customers have always wanted this. We wanted to recognize more revenue upfront. Customers have been thrilled with our willingness to offer software on terms that they've always wanted. The opportunity might grow this quarter, but it's a little bit limited by the renewal cycle, it'll come up during the year. We think people are enthusiastic about it, and it'll merely be a function of when their renewals are up.
Just on the LT product, I think the talk coming out of the analyst meeting was you were going to drive a bit more promotional activity in the volume channels and so forth, and it sounds like still that business was not as good as maybe you'd like it to be. I'm wondering, how far did you turn on the promotional activity in those volume channels, and should we expect that to turn on further as we sit here in Q4?
I think we turned it on sufficiently. I think it takes a while to respond, and we saw patchiness. I think there was places that responded really well, but there were others that didn't.
Just in building on Carl's point, I think that exactly describes the LT situation and the AutoCAD side of it, of some of the volume products. Keep in mind, Walter, one of the things that we observed this quarter is part of the real success we had with Suites growing at 21% year-on-year, which we're very pleased on, had a little bit of a trade-off with AutoCAD point product going to AutoCAD Suites, which grew roughly 50%. We really like that dynamic. We would take that dynamic all day long. I think that just complements the AutoCAD side. Obviously, the LT is more of the marketing-led activities that Carl talked about.
Your next question comes from Sterling Auty with JPMorgan.
Thanks. Hi, guys. Mark, at the Investor Day, there was also some discussion in your prepared remarks about looking at ratable recognition for some of the non-rental and other contracts. Wondering if there's any update that you can share with us. Since you're waiting until February to give an update on next year's guidance, I think we're all super curious what the magnitude of the adjustments we're all going to have to make, and I think that's going to be a big part of it as to whether that's going to happen right off the bat or if we're going to have to wait to that.
Yeah, Sterling, I don't have any new news to share with you. I think you absolutely got it right that at the Investor Day, we talked about a couple things. One, our recurring revenue, by the time we end this four-year plan that we covered from 2014 to 2018, is going to be 70% or more. We also talked about the intention to drive ratability even separate from recurring, in a way, to build on the comments that Carl made about customer-friendly things that really free people up to have even more flexible terms. I don't have anything to share with you at this stage. That is an intention that we'll be looking at and working on and driving throughout the course of this plan that we described at Investor Day. You got the right issue.
We just don't have any news to share with you at this stage.
One follow-up. In terms of the $50 million going into deferred, the sense is that's a smaller number of enterprise contracts. Why wouldn't the overall number be bigger since these programs are fully available to users?
It's the size of the enterprise base, the number of contracts that come up for renewal in that quarter. For example, if an enterprise customer, even if their renewal came up in the fourth quarter, but it was a two-year term or a three-year term, it might not be this year. We haven't gone back to customers whose renewal would be next year or the year after and opened it up to them yet. That's where we drive a much higher number.
Your next question comes from Richard Davis with Canaccord.
Hey, thanks. Two quick questions. One, Carl, you talked about people new to Autodesk. Do you have any sense that those are switches from other vendors, or are these people that were living in a cage using carbon paper and things like that, and they finally decided to use this thing called a computer? Secondly, we didn't talk about a lot about it, but the media and entertainment business remains kind of choppy. Do you have any sense as to what gets that thing back on track, or is there anything you can do on that side of the house?
No, I think they were probably using computers. I'm not sure they were paying for the software they were using on those computers is probably a more reasonable explanation of what was going on. On the M&E side, the software part of the business continues to do well. A large part of the money coming out of that business continues to be hardware, which we're happy to see. If it bleeds out over time, it's absolutely fine. We're much more interested in the software component to that business.
Got it. That's helpful. Thanks.
Your next question comes from Philip Winslow with Credit Suisse.
Hi, guys. Congrats on a good quarter. Thanks for taking the question. This is actually Harry for Phil. I was just wondering if you could give a little bit more color on the kind of performance across segments with regard to certain geographies. I know you've given a little bit. Could you talk a little bit about Southern Europe and maybe how you think about a turnaround there and, obviously, if you've just given some color on the media and entertainment segments, but any other segments that you think are poised for some strong growth in the coming quarters?
Yeah, I'll give a couple opinions, and then Mark, please join in. First one is we're not doing any planning about Southern Europe getting better. We'll leave that to the ECB and others. We just don't see any reason to be particularly optimistic about Southern Europe, and none of our plans contemplate an improving economy in Southern Europe. That being said, we continue to see strength in Central and Northern Europe, the U.K. in particular, and that's across segments. Happy to see that. We're happy to see solid stuff amongst the emerging economies. We like the results that we saw in Japan, so.
Yeah, I would just add Canada was great to see also. Nice, strong growth in that respect.
All right, great. Thank you.
Your next question comes from Brendan Barnicle with Pacific Crest Securities.
Thanks so much. Carl, I wanted to just follow up on that emerging markets commentary because a lot of enterprise companies this past quarter saw weakness there. Obviously, you saw some nice strength there. What do you think accounted for the recovery that you saw versus maybe some folks more broadly?
I think truthfully, we had easy compares. Last year, we found it more challenging in some of the emerging economies. In a number of places, we did some things around pricing changes and promotional stuff that I think helped. In a number of places, we raised the prices, and we saw that demand remained the same despite an increase in prices.
Great. Mark, I couldn't hear your full response to Steven Ashley's question. Maybe some other folks couldn't either. The first part came out about, but you broke up on the billings part. Could you just repeat that commentary on the maintenance billings?
Attachment renewals.
Yes, right. For attachment renewals, just to be clear, two things I would say here, Brendan. One is that we don't give out the rates at all. Number one, we give directional view. Directionally, it's always a bit lumpy. They were down a bit in terms of the quarter-on-quarter period. I think the more interesting point that I was trying to make was that our subscription billings were up 11% year-on-year. That, to us, is important, and that's driven by the fact that we had good subscription performance year-on-year, both in single year and multi-year. We also had our SaaS offerings, although smaller, contributed to that. For us, and we also saw the benefits of suites and the fact that more suites have better subscription, and the actual ASP content of that was attractive. We like that.
The rest of it fluxes around a little bit, but that's probably the more salient point, Brendan, to share with you. Can you hear that okay?
Your next question comes from Ross MacMillan with Jefferies.
Thanks. Mark, I had a question on maintenance. It's less about the specifics around attach and renewal, but more about the variability in growth. If I look at your maintenance billings, I think this year you've gone, I think, 16% growth, -17%, and in this quarter up 11%. I thought it might be related to multi-year, but when I look at maintenance revenues plus change in short-term deferred, you see a similar pattern with a big decline in your fiscal second quarter and then a rebound this quarter. Why are we seeing such variability in maintenance billings?
Well, a couple things here that I would say. First of all, there are seasonality factors that are strong in that respect, Ross. One of the things that I look at just to get a sense of how things are going is my 5-year historical average quarter to quarter. When you look at that, you can see patterns of strong seasonality in any given period, I think is one of the dynamics. Secondly, I would say, don't forget there's some special things that have happened if you look at the trailing 12 months that you're referring to. We had activities a year ago, Q2, where effectively we changed pricing in terms of what would have an impact on multi-year subscription. That has a certain effect in terms of pull-in of subscription. There's been both pricing changes.
There's been activities of that nature, plus you overlay historical seasonality, and that's the dynamic that you can net out. I think when you look at seasonality in aggregate, I think it's a lumpy business, so to speak, and it's not off the mark in that respect, let alone if you do the overlay with some of the kind of special events that have happened in the last 12 months. Ross, I hope that helps.
Yeah, that's helpful, especially on the pricing piece. Maybe one follow-up. As you talked about the ASP uplift, you said two things, mix and I guess attach of the SaaS products, the 360 products. What's your plan in terms of giving us disclosure around 360 product attach, or how should we think about you helping us understand that evolution, if you will?
Yeah, absolutely. Two things. One is as soon as this becomes material, you can be sure that we're going to be breaking that out to try to give granularity. We try to give a lot of granularity of what's going on, but anything that's material, we're really wanting to be out front on that, number one. One of the things also, Ross, that I think is important to reiterate is that as we look to FY 2015 and the guidance, one of the things that we look forward to talking to you about is things that we will disclose. It's a fresh point to talk about what we will disclose, and also, frankly, what we will guide. If you look at, and you're extremely well-versed in people that are going through light transformations, you can see the metrics that they guide by, the metrics that they disclose.
Ours won't be terribly different from that, especially once things become material. I think those two things ought to frame it nicely for you. One thing we do know is that SaaS is going to be an important ingredient for us to hit 70% recurring revenue in FY 2018. Obviously over time, that is going to definitely be material. We look forward to furthering this discussion at the February guidance discussion. Does that help, Ross?
Yeah, that's helpful. Congrats on a good quarter. Thanks.
Thank you, Ross.
Your next question comes from Matthew Williams with Evercore.
Hello? Who doesn't?
Hello?
Oh, there.
Can you guys hear me now?
Yes.
Okay. Sorry about that. Not sure what that was. Just wanted to ask a little bit more about the 360 offerings and your comments that they're going to play a big role in the moving to 70% on the recurring and the subscription basis going forward. You touched on the first sort of million-dollar-plus deal in BIM 360 in the quarter. I know you've talked about PLM 360 adoption and Sim 360 being strong. I guess sort of how close are we to million-dollar deals in some of these other 360 offerings? Sort of how receptive is the base to layering on these 360 offerings, I guess, going forward?
Yeah, I'd say that we saw the first over a $1 million deal in BIM 360. Well, we've seen deals of nearly that size, and there's certainly deals in the pipeline for much larger numbers than that in the PLM one. I don't expect to see $1 million deals in Sim 360 in the short term. Some of that is consumption-based, and that'll take place over time rather than upfront. I think the big variable is around Autodesk 360 because it's a much more broad-based one. In two weeks when we're at Autodesk University, we'll be disclosing a lot more about Autodesk 360 and make it clearer what that is. We'll also talk a little bit more about AutoCAD 360 at that point as well.
Okay, great. Thanks for taking the question.
Sure.
Your next question comes from Keith Weiss with Morgan Stanley.
Excellent. Thank you for taking my question, guys, and a nice quarter. I want to ask a more sort of strategic question. When we talk to channel partners and guys in the field, one of the feedbacks that we got was what they thought would be even more effective to getting non-maintenance paying customers to pay maintenance, rather than just not doing upgrades, would be attaching more functionality that you only get with maintenance. Is that part of the program? Is that something you guys are thinking about, kind of putting in perhaps more carrots with the sticks out there for moving people onto maintenance?
Yeah. One of the variables we have to figure out is as we offer these new web-based services, there are two things we can do, is we can offer it in subscriptions, just bundle it in to increase the attach rate. The other thing is when the services are really value added, is charge customers who are either not on maintenance or who already are on maintenance but are getting much more value. We try to separate into those two categories of kind of the convenience things that are nice and should really be bundled for all our customers, and those would be a big incentive to move more people onto maintenance. When we look at some of the offerings, these are substantial value over what we offer today. We think if customers want to avail themselves of those services, they should pay for them.
Got it. Just a more tactical question on the impacts that you saw from federal. Is that something that you expect to be a one-quarter blip or is the general dysfunction in D.C. likely to drag on for some time?
Personally, you're trying to just get me going, I know, Keith.
Exactly.
My prediction is the general dysfunction continues. I don't think it'll affect our business. I'm more worried about continued episodic breakouts. I think there's still much more opportunity. Even after today, it doesn't look like even the Senate is becoming a more bipartisan, congenial place to work. When the debt ceiling comes up again, there's plenty of opportunities for these knuckleheads to get off the railroad tracks, and I'm more worried about that. Ongoing dysfunction and our dissatisfaction with Congress is fine as long as the government spends money. It's when they put a halt to the spending abruptly like they did. In that case, we very specifically saw deals that we thought were in the pipeline just freeze up. There was no one to call on to write the check.
To build onto Carl's point, that probably cost the Americas a couple points of growth.
Yeah.
The shutdown itself, you add that to some of the other headwinds, including we even had a point of FX in Americas, which is unusual headwind. The educational strategic change, and you can start to see where the Americas is actually performing in a bit of a better mode than meets the eye.
Yeah. As always, we hope these deals haven't gone away. As people have gotten back to work, we start to see some of these deals come through. We continually worry. I think through the next two years you're going to see episodic dysfunctions in addition to the chronic form.
Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from Steve Koenig with Wedbush.
Hi, guys. Thanks for taking my question. You guys have been pretty transparent. Sorry, I didn't catch that.
No, I just said as long as it's not about the government, we're happy to answer your questions.
Okay. No, I'll stay away from that can of worms.
Exactly.
I want to dig into your model change. You all have been very clear and transparent on all the different pieces of it. I think the one piece of it that I feel a little bit in the dark about is how quickly, and more qualitatively, how to think about how you're going to make that change from perpetuals to some of that revenue being ratable. What is your thinking on what will drive that, and how quickly will that get driven?
There's two aspects to it. Let me speak to the first. There's perpetual being driven to recurring, which I think is largely driven by programmatic stuff we do, and I think we've outlined a lot of it. There's another aspect of it, of driving it to ratable, which is really more around accounting. I think Mark tried to answer that. We're working through a lot of these issues right now. As soon as we have answers, we'll communicate them, but maybe Mark you want to add some color to that.
Yeah, no, I think that's exactly right, Carl. We have the kind of the natural things that are going to drive our recurring from a product and services basis that are straight up the SaaS, the rental, the subscription maintenance out of the pool of opportunity we have with our core business, including the activities that are happening with Suites and all that. I think there's the other aspect of it in terms of what we can do as we reconfigure our offerings with perpetuals, and what kind of possibilities does that create to further move that to ratability because of the nature of what's being configured that's based on the offering itself that would clearly cause a different kind of an accounting. That's something that we're exploring.
I think that what we're trying to share with you is the intention to fully and robustly explore that throughout the course of this business plan that we shared with you from FY 2014 to FY 2018. Obviously, as soon as we have news that we can share with you, we will share with you. At this stage, we don't have news on that front. That's certainly our intention, is to continue to work that topic.
Okay. I'll leave it at that, guys. Thanks.
Yeah.
You're welcome.
There are no additional questions at this time. I would like to turn the call back over to Dave Gennarelli for closing remarks.
Thanks, operator, and thanks everyone for joining us. We do have Autodesk University, as Carl mentioned, coming up in about a week and a half on December 3rd in Las Vegas. If you haven't received that invitation, please call or email me. We'll also be at the Credit Suisse conference the following day on December 4th. If there's anything else, you can reach me again at 415-507-6033. Thanks.