David Gennarelli.
Good morning, everybody. Thanks for coming back out to the Nasdaq site again this morning for our meeting with Autodesk management. We're going to have four presentations today. Carl Bass is going to kick things off. Andrew Anagnost, who is our Senior VP of strategy and marketing, is going to go next, followed by Steve Blum, our Senior VP of worldwide sales, and Mark Hawkins, our CFO, will wrap things up. We're going to do those four presentations and then do one large Q&A session after that. In total, we're going to have about two hours of content and questions. With that, we'll kick things off.
Design has a unique power to solve problems. The better our power to design solutions, the bigger the problems we can solve. The challenges we face today are complex and global. That's why one 3D software company. Ladies and gentlemen, please welcome President and CEO, Carl Bass.
Good morning, everybody. Guess I can just take this. Let me just give you an outline of what we're going to do today. Dave gave you a little bit. I'm just going to give you a brief overview and a recap of what's gone on over the last year, try to provide a little color commentary. We're going to hear from Andrew, who's going to talk about both our product and service initiatives, what's going on with our changing business model, and how it's evolving. You'll hear from Steve Blum, who's going to talk about all our go-to-market activities. Finally, you're going to hear from Mark Hawkins. Just a brief recap about last year. Last year, revenue growth was 14%. One of the things we did, and you'll hear a lot about, is we continue to make investments for the future.
We believe we're on the cusp of the biggest platform transition in the company's history in terms of moving to I think when people talk about the cloud, they kind of miss the point of it. We're moving to a new platform, a distributed computing platform that includes cloud, social, mobile. You may have heard me talk last year about infinite computing and what we think that means to our customers. Really, this is just a whole new way of working for our customers, and that's what we've invested in. We also continued to keep our eye on the ball when it came to costs, and you saw the results in terms of profitability. We had an operating margin expansion of 260 basis points and a non-GAAP EPS growth of 32%.
It was a good year despite the economic backdrop, particularly around Europe, which continues to exist, and as someone said, it's the elephant in the room today. I have no better insights than any of you do on Europe. I read The Economist on the plane down from Boston yesterday, so I'm happy to quote from it, but I really don't have much more insight into Europe than you do. I'm happy to answer any questions that you guys have about it. One of the things we did this year is we realigned how our go-to-market activities work, in particular around four industries. This is all around customer industry segments. It's similar to how you probably think of our business, and with one slight wrinkle in there. One is the traditional AEC business, architecture, engineering, and construction, that you understand, and we've served for many years.
The second is the broad-based and broadly defined manufacturing industry. The one thing we broke out was the engineering, natural resources, and infrastructure. While it has aspects that are related to manufacturing and it has aspects related to AEC, we found the nature of the customers in that segment different enough in terms of their needs and their desires about how they want to buy and how they want to be served, that we separated it out. The last one is the media and entertainment. The thing that we did this year is we reorganized around serving those particular market segments and bringing all of our offerings to those customers, and you'll hear more about it a little bit from Andrew and a lot from Steve.
When you look at the addressable market for us, we pen it, and this is sourced from Cambashi, at around $19 billion. If you look at this, it's slightly more than $2 billion, somewhere in the low double digits of market share. When you step back and you look at really what our strategy has been, is there are two things going on. One is the big force in moving to mobile, social, and cloud. Really what's going on is this enormous platform shift and moving our customers there. In the short term, what we're selling our customers is suites. We started about a year ago, our movement to suites. The year before that, we had done a couple of kind of pilots
You might remember in the summer and leading into the fall, we had introduced a couple of suites to test out the concept, learn a little bit more about it. We introduced them in full in the spring of last year, and they've been enormously successful. Andrew's going to detail a bunch of the metrics about what's going on with suites. Customers are finding increasing value in the suites. As we move forward, because you have what customers are doing today with suites and in the future, what they will do with cloud services, and what we'll watch is this transition from suites with cloud services to where we believe the cloud will become central and it'll have some desktop components, and this is a multi-year transition that's going to play out. The big thing is the cloud.
Like I said, for those who somehow think the cloud is another form of mainframe computing or something about client-server, I think they miss the point entirely. They miss what the essence of it is. I think there are two really important aspects of this new computing architecture that surrounds all of us. One is this idea about the infinite computing, this idea that you have this infinitely scalable resource to do computing. For many of the things that our customers do, having more computing power is incredibly important. That's different than the rest of the industry, where people say, "All my PC does is email and browse the web." For our customers, having access to more computing power means they can understand the things they're going to design and build better, and as a result, build better things.
They will produce better products, bring better projects to market as a result. One is this high-powered computing that's essential to what all of our customers do. The second aspect that you've seen in many cases, and certainly on the personal level, is the community-based collaborative aspect of having centralized computing. It's every bit as important in that all of the projects that our customers do are done with groups of people. The idea of sharing information and having the right information at the right place and at the right time is incredibly important for all of our customers. When we look, it's not just cloud computing, it's not just mobile, it's this combination of social, mobile, and cloud that will be the new way that our customers work. I'm often asked, how long is this going to take?
I would say within three years, I think the primary way our customers will work is through cloud-based services. We'll spend some time today kind of backing up our assertion about that and what we're doing to manage the transition to a world in which our customers work that way. This is becoming one of my hit slides. I think this is the third or fourth year I'm showing it. It continues to be true, and it continues to be the way that we think about our business. I think it's a good backdrop, and we always use it to frame it because people, we're a little bit like people touch one part of the elephant and they're trying to figure out what's the animal in the middle.
This is a good way to do it when you look at lots of what we do around our go-to-market activities, around the products and services we're building, what's going on in our various sales channels. It's important to understand this. The top three segments in the pyramid, very understandable. The top part of it is our enterprise customers. It accounts for almost 30% of our revenue. People are always surprised that less than 1% of our customers accounts for that much of our revenue. Those are the customers we also go to in a direct fashion. We serve them with our own sales force. Many of the programs are designed, many of our support programs, many of the sales programs are tailored for our biggest and best customers.
There's also the next 2 categories, small and medium business, which is really the part of the business that you should most associate with our VARs. Our value-added resellers, what you think of as the traditional business, is a very important part, but it's certainly not the whole part. There's the other one, which we have an incredibly long tail, in which we have hundreds of thousands of customers that generally have a seat or 2 of our software. All the way from people who have 10,000 seats in the enterprise accounts, accounting for lots of revenue, about the same amount of revenue in the lowest tier category, but it's single users with 1 or 2 seats each. The way we go to market for those are completely different. We have volume channels to serve at the bottom.
We have value channels in the middle. We have our direct sales force at the top. Everything about how we serve those customers is different. However, the offerings themselves are really the same. The last thing is all about consumers. Our consumer has been like one big Petri dish. It's been an experiment for us in which we've learned a tremendous amount about where we think the world is going. Just as we've seen in the rest of the world, it used to be that innovation started at the top. You'd see things, it started in the military, it went to large corporations, it came down, and it would eventually get down to folks like you and me. We're seeing the opposite nowadays. Things are starting, it's this whole consumerization of IT.
Innovation is starting with the consumer and working its way into large companies. We're incredibly excited about the stuff we're seeing with our consumer business, but we've also used it as a great laboratory to learn a tremendous amount about what's possible in cloud and social and mobile and what's going on there. We've also expanded the number of customers we serve. It's now tens of millions of consumers that we've reached with these applications and learned a tremendous amount of what we're able to do and how well we can serve them. You won't hear much about this today. This will be it unless people ask questions. I just want to tell you, we're being very successful here. People have seen tens of millions of users, whether it's in AutoCAD WS, these are professional customers using AutoCAD in a mobile footprint.
It might be SketchBook, in which we have more than 10 million users who are using phones and tablets to create drawings and paintings and sketches, as well as our photo editing software and an entire range of products made for the consumer to design and make things. This has been an incredibly valuable learning ground, and we have taken a lot of what we have learned there and applied it to our professional offerings. With that, what I would like to do is invite up Andrew Anagnost, who is the SVP of Industry Strategy and Marketing, and let Andrew describe this transition that we are going through from what we are offering today in terms of suites and the background on suites, the genesis of it, some of the economics of it, and then the transition to cloud-based services.
Thank you, Carl. Morning, everybody. It is a pleasure to be talking to you for the first time. Like Carl said, I am going to expand on exactly what we are doing to ignite growth in our markets, and I am going to be specifically using the word offerings instead of products, because more and more as we move forward, what we offer to our customers are going to be aggregates of some of the products we offer and some of the services we offer, and not just individual products. Some of them will be individual products, but more often we are going to be emphasizing access over buying an individual product. We are starting out focusing on expanding our desktop business. You have heard a lot about the design and creation suites. I am going to give you a little bit more data on how we are doing with those.
Those are essentially expanding what we are already good at in the desktop, and we are going to wrap around those offerings some additional services and tools that help us reach out and grab more opportunity in our existing TAM. As you see us expand the kind of offerings we are delivering, we are going to be going after brand new TAMs and opening up new markets and exploiting places where we really have not had a huge presence to date. Let us take a look at how this offering map looks and how it is going to evolve. We will start right at the foundation, the design suites and Autodesk 360. You are going to hear us more and more talk about design suites and Autodesk 360 together.
Autodesk 360 is the brand we are going to be using to talk about our online services, and there is a component of those online services we are entangling with these design suite offerings. These are all about building the desktop business and blending the desktop workflows with the cloud. As we move forward, we are going to go to pure cloud-based offerings that address whole different types of needs. Just yesterday, you probably heard us announce the BIM 360 initiative. This is all about taking the expertise we have in BIM and bringing the next generation of BIM to market by using the cloud and the cloud platform to get there.
We've also started rolling out pieces of a new offering called Sim 360, and this is something we're going to use to take what was classically a limited access, high-end tool like simulation and bring it to a much broader audience at much lower prices using the cloud platform to help us get there. Earlier this year, we announced PLM 360, which is a pure cloud-based offering for addressing PLM and lifecycle problems in the manufacturing industry. Now, all of these initiatives have certain unique business model characteristics. Right now, the suites and Autodesk 360 initiative is really expanding off our current perpetual and maintenance license model. People buy the software, they own it, and then they pay us maintenance for it on a continual basis. We've entangled online services with that maintenance contract. They turn off when the customer isn't paying us.
These other services are much more about pure subscriptions, per-user subscriptions, and usage-based metering applications. They're a very different business model. As we move forward, you're going to see us layer that same business model onto our core business as well. We'll be offering options or offerings that allow people to get access to our desktop portfolio in subscription and usage-based ways as well. Before we fly off into all the clouds and talk about some of these things and what we're doing, I want to step back and look at how we're doing with the design and creation suites and how the strategic initiative is going and how some of our metrics are going relative to our original expectations. The first thing, and really the most important thing, is customers are seeing the value and they're buying the suites.
Now, there's a couple of events that are labeled here. Carl alluded to them earlier. In 2011, we rolled out a set of pilot suites that we used to test the value proposition, test our go-to-market, test some of our new delivery mechanisms, because we had a whole bunch of systems that we put in place to get the suites to market. Customers started buying. As we released the whole portfolio last year, customers started to buy even more. You can see the two events, and they're continuing to buy now. What's important about this is not only are they buying, but they're seeing the value and they're buying at higher per-seat prices. Now, you may have heard us historically say we were targeting a 20% uplift relative to our standalone products and our legacy suite products.
We're actually seeing a little bit more than that 20% uplift, that's really kind of a short-term effect from the way we're going to market. What we've seen is a few more Ultimate suites sold than we expected. We still sell mostly Premium, but we sold a few more Ultimates. In the emerging markets, we're seeing a larger price premium between these suites and the standalone products. Over time, we expect to settle down to that 20% target that we were seeking out in the initial strategy when we did this. So far, so good. We're seeing a premium for these offerings. What we're also doing very deliberately and we're focusing on is that if we do not continue to add value to these offerings, the customers are not going to continue to buy, and they're not going to continue to attach or renew subscription.
We're paying a lot of attention to making sure the value is there. A couple of ways we're doing that is we're adding new products, new desktop offerings to the suites every year. We've done that with this new release, and we did it with the release before, but from the pilots to the full portfolio and to today. We're stitching some of these products together, so we're providing workflows that help the customers use the various products together. We're also attaching services to the A360 brand, the Autodesk 360 brand, to these maintenance programs for the suites. All of this designed to drive the value for the customers. What's happening is it's working. The customers are seeing the value, and they're attaching subscription at higher rates than they are our desktop products.
The good news is not only are they attaching at higher rates, they're renewing at about the same rates as they renew the regular desktop products. We attach higher, and we renew at about the same rates. We're delivering value, the customers are seeing the value, and we're also watching very closely how the customers use the various applications. Since we rolled out the suites, obviously when we first rolled them out, customers were using single product. As time has gone on since we've rolled them out over the last 12 months, we've seen a gradual increase in the number of customers using two or more products and the number of customers using three or more products. The trend continues to shift. Those pie charts continue to grow, and we expect more and more of them to dominate the green over there.
What's important moving forward is you'll hear us talking not just about desktop products, but the number of services they're using in conjunction with their suite offering. There's going to be a whole plethora of services available for them for use. We're going to start tracking those as well because that's going to be important part of the value proposition moving forward. The last piece of all of this is that we've barely started to penetrate the opportunity here for the suites. This is using a very conservative way of looking at what the opportunity is. We're looking purely at our subscription install base. The blue wedge right there is our penetration into that subscription install base. We still have quite a bit of headroom in terms of penetrating that subscription install base. When you look back at suites, customers are buying.
They see the value. They're buying at higher ASPs, higher right now than our current targets, but we very much expect to settle down to our targets. We're adding value. We're focusing on adding value. They're attaching at higher rates, and they're using multiple products. Like I said earlier, a lot of that value we want to deliver is going to be showing up in the cloud moving forward. I think that's a good segue for talking about what we're doing with our A360 portfolio or Autodesk 360 portfolio and how we're going to move forward with that. Strategically, what we're doing initially is we're extending what they're doing on the desktop to the cloud. Right now, we're adding services around the desktop, helping them do more with their desktop offerings and get more value out of what we deliver on the desktop.
Long term, that's not what we're going to do. You heard Carl say very directly that the platform shift is not just about servers and client server. It's about changing the way the customers work. All of the access to project files anytime, anywhere, the ability to collaborate across the lifecycle, and the access to the computing power that is unique to the cloud is going to allow us to change the way the customers work. Today, focusing on extending. In the future, offering whole new ways for the customers to work and whole new ways for the customers to solve their design problems. How are we doing with this core piece, this A360 piece that we've entangled with subscription for suites? I have a few statistics here that'll help you understand what we're doing.
To date, there's been 9 million downloads of the mobile applications, AutoCAD WS, Design Review Mobile, that are focused on the extended design team and the people that want to use design data beyond the initial design process. Of those downloads, we're seeing 4.6 million unique users, there's a lot of unique users out there that are banging on these tools in that extended design team trying to use design data in an extended way. Really, all we're doing right now is simple viewing and editing of the design information. We haven't yet dipped deeper into their design process. When you look at some of the compute-intensive tools that we've delivered, the main one and the most popular one we've delivered into the core Autodesk 360 offering is this rendering application online.
These are some of the examples of some of the things that the customers are doing online with the renderers. So far, to date, 375,000 roughly jobs have been submitted. 200,000 files are being uploaded every week to the rendering environment. We've done about three and a half million hours of rendering. That's a lot of usage, and it continues to ramp up. We're seeing real traction and real interest in using the cloud to extend their desktop and do things they weren't able to do before. Matter of fact, a lot of people who didn't do renderings and who didn't do these kind of visualizations before are doing them because we've made it that simple for them to do it. This isn't where we're going to stop.
We're going to expand this offering to those unique cloud-based offerings I talked about earlier, and let's drill into those a little bit. The first one was what we announced yesterday, Autodesk BIM 360. We really are calling this the next generation of BIM. We're trying to change the way people do BIM. We're already recognized as an expert in the BIM space, we've got lots of expertise and knowledge of how BIM works and what we need to do, this is going to be our platform for moving BIM to the cloud. The reason this is important is the amount of money people are spending on BIM software and services is going to go from about $2 billion today to about $6 billion by 2020.
A lot of that is going to be driven by companies and municipalities making BIM a requirement of how designs are submitted and managed throughout the construction process. Our initial focus with this BIM 360 effort is going to be on that construction opportunity, particularly in the building space and in the civil infrastructure space. You probably heard a while back we did an acquisition of Horizontal Glue, and we recently announced an acquisition of Vela Systems. Both of these are squarely targeted at the construction piece of the BIM workflow, and that's where we're going to build out this next generation BIM from. Construction first, total BIM life cycle in the cloud later. The next piece is very interesting in that what it's going to do is disrupt a high-end market that we participate in in a small way right now, and it's the simulation space.
Today's simulation software is dominated by high-cost software, expert-driven work paradigms, and user interfaces. What we're going to do is we're going to release a series of applications that bring most of this workflow to the cloud and allow the user to get access, either for over long-term or over short terms, to simulation software that can use the full power of the cloud to do many simulations quickly to make it easier for non-experts to use the software and the environments, but also do it at significantly lower price points. This is going to be pretty disruptive to the simulation software business, and we're pretty excited about this. You're going to see us rolling out a larger portfolio here very soon.
I'm going to spend a little bit more time on this particular piece because we rolled this out at the beginning of the year, and we've got some customer feedback and some stats on how we're doing that I'd like to talk about. This is the Autodesk PLM 360 piece. This is all about a new way of doing PLM that makes it easy for a customer to experiment and dive in without engaging in a large consulting operation or a large initial software purchase to manage a particular piece of their problem or their life cycle. It's up and running in days, and there's no hardware environment for it to install. There's a large underserved piece of the PLM opportunity that this application is perfect for, and the cloud enables it. Let's look at how we're doing since we've launched this and rolled this out.
We've got about 100 companies that are evaluating and testing the solution in production environments. Inside those 100 companies, there's about 5,000 users, and they've created about 9,000 workspaces. A workspace is something somebody uses to manage a process, be it quality control, be it engineering change, or something related. Inside those workspaces, they have over 1.5 million items, so they're actually managing real things in their processes. We also have a large community of engagers. The reason the engagers are important is we're trying to build awareness for this and a community of people talking about it, and the engagers is the classic social definition. This is someone that has pursued information about PLM 360 and has taken some action on it, either to request a trial, talk to a salesperson, or forward a video or something on to somebody else.
We've got active pilot customers, active using customers in production, and we've got lots of people interested in trying to understand what we're doing. Here's a couple examples of some of those customers, and I'll talk a little bit about them and what's in common between these various customers. First off, they represent a couple of extremes here, so I'll talk about the ones at the top. Franke is a fairly large, medium-sized business, and they're in the food service business. They do a lot of high-end kitchens for restaurants, and they do some very high-end work for homes as well. Roulunds Braking is obviously in the braking business and the machinery industry, and they're a smaller company. Franke and Roulunds have a couple of things in common. They use spreadsheets to manage certain processes. Franke has SAP, and they have a bunch of Oracle Database applications.
However, they've never been able to automate certain things in their process without somebody pitching them a pretty large consultative effort or a pretty large initial project to try to explore something. They both have in common a desire and a need for a self-service, self-paced way to get up and running on some of these things. Franke is doing site survey work with PLM 360, where they're enabling the people in the field to go to the site and understand what the kitchen requirements are, the restaurant requirements are for the kitchen installation to document and capture information. They're taking their site survey cycle down from days to hours with the application. Rollins is actually managing a global engineering change process and using PLM 360 to provide self-service access to their customers for the design information they're currently working on.
Like I said, both have in common a lot of spreadsheet-driven processes and a real desire for getting up and running with little or no help from the vendor that's providing the software. That's what we're delivering with PLM 360 in this environment. All of these companies here have that in common, and that is the space where there is a really underserved population in the PLM market. To summarize what we're talking about with our offerings today and moving forward, and kind of the highlights of what I said in this presentation. Today, we're using Design Suites and Autodesk 360 to bring a lot more value to the customer and a lot more value back to Autodesk, primarily through increased revenue per customer. You already saw the evidence of that in some of the information I presented to you.
We're trying to increase subscription, attach, and renewal rates, and one of the ways we're going to do that is entangle the cloud with these desktop offerings. Not only is that great in terms of creating the stickiness of the offerings, it's also introducing our customers to these cloud-based workflows and how the cloud is going to change the way they work. As we build up from that, we have this whole other universe of initiatives that are going to extend things we're capable of. BIM 360, we're already leaders in BIM. We're going to extend BIM in the cloud to construction, ultimately replace BIM with a next-generation BIM solution in the cloud. Sim 360. We're going to disrupt the high-end simulation market and capture new users to Autodesk and really change the way people buy and use simulation software.
PLM 360 allows us as Autodesk to reach whole new users in the manufacturing life cycle. All of these offerings are pretty exciting tools for igniting growth. In order to hear about how we're going to turn these offerings into growth, I'd like to invite Steve Blum up to talk.
Thank you, Andrew. Good morning, everybody. It's great to be here to give you an update on our go-to-market implementation and our focus on our growth initiatives. We're going to continue to refine our go-to-market strategies to ensure a few things. We want to ensure that we're best positioned to meet the needs of our customers. We want to capitalize on technology trends as they continue to evolve. Of course, we want to position ourselves for the growth opportunities that we have in front of us. Let's talk about these growth opportunities. Carl's already teed up a few things here. We see significant opportunities in driving growth by driving deeper penetration within our existing customer base while we continue to find new customers. We're going to do that by focusing on industries and driving penetration through industries and through the ecosystems and supply chains that support those industries.
We've been investing in named accounts, and we're going to continue to invest in focusing on key strategic influential firms within each of these industries. The emerging markets have tremendous opportunities for growth. We've been investing there in the past, and we're going to continue to invest based upon the long-term prospects that they bring for us. As Andrew had just mentioned, we've enabled our sales teams and our partners to sell the entire portfolio, and we're leading with suites and subscription. We're very excited about rolling on top of that our Autodesk 360 opportunities and capabilities as we continue to introduce that functionality into the marketplace. Carl actually already has shown you this slide. He talked about the fact that we have a $19 billion TAM.
What I want to do is kind of summarize again where the opportunities exist, because I'm later going to show you how we're going to market with each of the types of channels that we have. As Carl mentioned, the enterprise customers are our largest customers. These are companies that have more than 500 seats of software. There aren't many of them overall. They're in the hundreds. In fact, less than 1% of our entire customer base is in the enterprise space, but it accounts for 30% of our revenue. It's a very important segment, although very small in customer penetration. In fact, what Carl did mention, I almost wanted to highlight, the whole yellow section is really our penetration into the total TAM, but also within the customer base that exists in each of these segments.
The small and medium-sized segment, these are for customers that have between five and 500 seats of software. This is where we get the most revenue. About 50% of our revenue comes from the SMB space. Interestingly, it is still only about 15% of our total customers. The top two segments, which account for about 80% of our revenue, are less than 20% of total customers that are using Autodesk software. This means that the professional space, the hundreds of thousands of companies that have between one and five seats, this is over 80% of our users, customers, but they account for about 20% of revenues overall. It is important to understand how bifurcated the market is and how we need to have different approaches to different segments in order to service the needs of customers across all of these elements.
The key point is we have the same offerings that we leverage and sell into all of these segments. I am not going to talk much about the consumer space. Just to highlight the fact that that is a segment that we measure in the millions and tens of millions, and that is a very exciting area. In fact, it has impacts on the rest of the business because it is introducing Autodesk to millions and millions of people. I will share with you, in discussions with customers in the professional space, in the enterprise space, in the small and medium-sized space, we talk about our consumer applications because we do see them bringing our consumer applications into their environment. That is very exciting. Okay, we have realigned our go-to market, and we have restructured. We used to focus on geos.
We were really geographically focused with a predominant focus on selling specific parts of our portfolio into those geographies. Sales teams were segmented by geography. We have changed that. We have realigned the focus on customers in specific industries and emerging markets. What I want to do first is talk about industries. Our goal by aligning by industries is to become industry experts. We want to become mission-critical, trusted advisors to customers in the targeted industries that we are focused on. We also want to sell the entire portfolio that is appropriate to customers in those segments. We have recognized that there is significant opportunity for growth just within our existing customer base by selling more of our entire portfolio. Of course, suites have really opened up the doors to going after those new opportunities.
This is a very important area for us because not only do we want to go and focus on the key companies within these segments, but we want to understand the influences within the ecosystems and the supply chains, because this is how we can drive broad and deep adoption into each of the industries. Carl showed you this slide already, which are the four industries that we have selected. What I want to do is take you one level deeper and actually share with you what are the sub-segments within each of these industries and give you a couple of example customers that fit into each one of them. Most of you are familiar with the architecture, engineering, and construction space. This is where we have all of our architecture and construction service providers. We have utilities and telecommunications firms in this space.
Example customers that you've heard us talk about in the past are Stantec or Balfour Beatty or AECOM. Manufacturing. Manufacturing, by the way, is the single largest industry that we have, and it's quite broad. It includes sub-segments such as consumer products, industrial machinery, automotive and transportation, even aerospace and defense. This is where we actually have a focus on the government entities focused on defense and the commercial supply chains that support them. Example customers are Joy Global, Tesla Motors, or Parker Hannifin. What I want to do is make sure you understand engineering, natural resources, and infrastructure. You know we use three-letter acronyms a lot, so if you hear us talking about ENI, it stands for engineering, natural resources, and infrastructure.
Within this segment, we have engineering service providers All the civil infrastructure firms, including the government entities that are driving investments in civil infrastructure, oil and gas, and minerals and mining. Example customers are Parsons Brinckerhoff. Down here, we have the Wisconsin DOT. It's hard to read that, I know, but our departments of transportation, as an example, are in this space. In fact, you're going to find a large amount of government entities fit within the ENI part of our business. We have GHD, which is a global engineering services firm. This is an interesting segment, by the way, because this segment was kind of buried within AEC, but as we've evaluated it, we've recognized there's not just significant opportunities for AEC offerings, but also manufacturing offerings. We have an opportunity to go much deeper and broader with customers in that segment.
In the fourth segment, our fourth industry is media and entertainment. This is where we have film and TV, and games firms, and example customers are BBC, Pixar, or Electronic Arts. One of the key changes in order to help us drive broad and deep penetration into the industries is that we've enabled our sales teams and our channel partners to sell the entire portfolio. You may be sitting there thinking, "Well, weren't they doing that in the past?" Well, our channel partners, some of them, had the opportunity to sell all of our products, but many of them were only authorized for portions of our portfolio. They were unable to meet the needs and demands of some customers they were serving, and we've removed that problem. We've enabled all of our partners and all of our sales teams to represent and sell the entire portfolio.
This enables us to actually solve more of our customers' business problems. We become more relevant to those customers, and it positions us to be able to grab more share of wallet as a result because we become more relevant to those companies. Let's talk about our partners for a second. Most of our business still comes from channel partners and will continue to come from our channel partners. As I mentioned, we've enabled them to sell the entire portfolio. For any of you who have talked with our partners, I can share with you, I talk with them a lot, they are loving the fact that they represent the entire portfolio today. We've implemented a global channel framework. We call it the Autodesk Partner Advantage. Within that framework, we've included recognition and incentive programs. We have volume incentive rebates. We have tiered benefits.
Tiered benefits is a tremendous value to our partners. It recognizes the partners that have invested deepest to support Autodesk solutions. It means they've specialized in key areas. They can use this externally to represent themselves as the best of the best with customers. It's a benefit they're leveraging and enjoying to position themselves in the marketplace. We have numerous specializations and certifications, and we'll be adding more. If you're wondering what's the difference between the two, a firm, a partner, would specialize in a particular area. It's a workflow area, so it may be focusing on a consulting best practice or factory design, as an example. Certifications are what the individuals within our partner community apply for and earn themselves. For a partner to become a specialized partner, they need to have a certain number of employees that have become certified in that area.
We're ensuring that we have great capabilities amongst our partners to deliver a world-class experience to our customers. Our partner framework also includes customer engagement programs. Customer satisfaction, as an example, has become a very important thing, and we measure customer satisfaction that our customers have through our partners. We want to ensure, again, that we are giving a consistent experience around the world to our customers. Of course, we have deal registration. Our partners are leveraging deal registration to create demand and close demand, and this is also where we have an opportunity as Autodesk employees to help our partners close those opportunities. Here's now the same representation of our customer base by size, enterprise, small, medium-sized business, and professionals. Here's how we go to market.
Within the enterprise space, as Carl mentioned, our predominant go-to-market is with our direct sales folks, and we've been investing in that area. I'm going to talk a little bit about that in a few minutes. We do sometimes leverage VARs to help us, to give us global reach and span. We've also been adding some system integrator partners to help us with implementation and adoption of our solutions once customers have bought them. Within the small and medium-sized business space, our VARs take the predominant role. I do want to highlight that as we've been adding our own sales resources, our Autodesk salespeople also serve in a direct lead capacity, helping our partners close deals with the largest SMBs.
When you hear direct lead, that means Autodesk salespeople are teaming up with our partners to create demand and close demand that gets fulfilled through our partners. The professionals, again, over 80% of our customers fit in this bucket, one to five seats. VARs provide some value here, the predominant method of helping those customers acquire our products is through our volume channels or our eStore or other ePartners. We want to make sure we have numerous different ways for customers in this space to acquire our products. While I'm not really focusing on the consumer space, I did want to highlight that the way we are getting to tens of millions of customers are through app stores and through the web. Since most of our business comes through our channel partners, we need to continue to grow our capacity through our partner community.
This slide actually shows you that we continue each year to do two things very effectively. One is increasing the number of total channel partners that represent Autodesk each and every day around the world. Also, we focus on increasing the number of feet on the street that represent our offerings. This is the number of sales and technical people that are represented by our partner community that are out there every day selling Autodesk solutions. This is critical that we increase capacity to support our growth expectations. Let's talk a little bit more about named accounts. We've identified specific named accounts within the four industries that we're targeting, and our goal is to have key large strategic firms that also provide influence and drive standardization within those industries.
We've grown our dedicated resources, our salespeople within Autodesk, to help us continue to drive growth in this space. In fact, last year, we increased our direct sales resources by 23%. This was the single largest area of investment for us from a resource perspective within the worldwide sales and services organization. What I want to highlight is that our folks actually serve in both the direct and direct-led engagements. They're focused on those enterprise customers, but they're also focused on teaming up with our partners for the large SMBs, as I mentioned before. That combination is truly working and helping us drive many, many more large transactions. In fact, you can see that in FY 2012, our last fiscal year, the number of transactions that were $1 million or larger grew 24%.
I'm really pleased that we're getting great representation from the investment of salespeople in growing the total users within each of the existing customers that we have. Large transactions represent broader adoption and implementation of Autodesk solutions within our existing customer base. All right, emerging markets. We've all talked about emerging markets in the past. We hear about them a lot. First of all, I just remind you, why do we even focus on emerging markets? Why are they important to us? There's some key reasons. Over the long term, but it's happening now, there's a tremendous urbanization movement. People are moving from the rural areas to the large cities. This is creating an incredible need for infrastructure build-out. For any of you who have been traveling in any of these countries, you know infrastructure is in demand. I was just in Turkey last week.
There's only two bridges that go over the river in Istanbul, and at the wrong time of the day, you could spend hours trying to get across a bridge. It's no surprise that they're looking at adding a third bridge. In fact, it's no surprise they're looking to add another canal. These are incredible investments in infrastructure, and I see this everywhere I go in the emerging markets. What's interesting is more people move into the cities, the consumer base is growing, and the economies are becoming more consumer-oriented. That creates tremendous opportunities for growth as well. All of these countries have higher macro and industry growth rates. For long-term opportunities, there's also some short-term challenges. We've all been hearing about the fact that growth rates within the economies in China and India have been slowing. They're slowing.
They're still much faster than the mature markets, but they're slowing from where they were perhaps a year ago. We've seen that in many of these countries, there's volatility in the exchange rates, and that volatility creates some challenges at times with making credit available for investments. Within any country, at any particular time, there's the opportunity or the chance there's some geopolitical uncertainty. Going after these opportunities is critical, but there's challenges, of course, with any big opportunity worth going after. Here's our approach. Last year, we built out three-year strategic plans for the four BRIC countries, this year we're actually adding three more. We're building plans for Indonesia, Turkey, and Mexico. What's interesting about these plans is that there's elements of the plans that are similar.
Each one of our plans includes a specific focus on government, because government's focusing on all the investments on infrastructure, and it's driving standardization requirements across their ecosystem. Having a focus on government is key. We focus on education. That's also very important. There are more students graduating from universities within the emerging markets than there are coming out of the mature markets. It's very important that we have them using Autodesk software and that they're getting educated on the latest and greatest design flows and methodologies, so when they come out into the commercial space or the government space, they're prepared to take advantage of those technologies. We certainly are focusing on named accounts, because named accounts come in two flavors in emerging countries.
There's multinational or global firms that we're already calling on in the mature markets that are investing in these countries, and we need to provide great service and support to them there. There's also large companies that are established within the emerging markets that we need to make sure we're focused on. Now, we also sometimes need to tailor our offerings or pricing to meet the specific needs of the markets. By having a focus explicitly on emerging markets, it gives us the opportunity to have some flexibility to dial in the right offerings and right pricing for those markets. Of course, we have a focus on license compliance. There's high piracy rates around the world, but some of the highest piracy rates are within the emerging markets. Our focus within license compliance is to turn non-paying users into paying customers with an ongoing relationship.
We feel like we have a good model there. It's a key focus for us and something we're continuing to invest in. To summarize, we've re-architected and realigned our go-to-market to focus on customers in specific industries and emerging markets. What's critical to driving deep penetration into those segments is that we've enabled our sales teams and our channel partners to represent the entire portfolio. They're leading with suites. They're leveraging subscription. Suites, again, are the best way to start representing a much larger portion of our portfolio. Of course, we'll be rolling in Autodesk 360 over time. By focusing on customers in particular industries and emerging markets, our goal is to become a mission-critical partner to those customers to truly establish trusted advisor relationships.
By having those relationships and by having a very clear focus on customer industries and emerging markets, we are absolutely positioning ourselves for long-term sustainable growth. Thank you very much, and it's my pleasure to introduce to you Mark Hawkins.
Thanks a lot, Steve. It's great to be back. I'll give you an update, my outline. We're going to be talking about driving shareholder value, both in terms of the progress we've made, and we're also going to talk about our plans. We'll jump right into it here. I really have four things I want to cover in my outline, and we'll just keep digging deeper into each one of these. These will be familiar topics to you. One are the financial tenets that we embrace as we pursue our long-term business model, and I want to just outline those and talk a little bit about that. The second thing is I want to talk about FY 2012 performance. We had a strong performance in FY 2012. We'll get into that. We'll delve into that a little bit, make sure you see all those different attributes.
Capital allocation is a pertinent topic, of course, today. You saw our press release on the share buyback authorization. We're going to click deeper into that as well. Then, of course, the guidance, which you're all wanting to hear about. Let's talk about that a little bit more. These financial tenets, I think about these five points, and when you think about us embracing our long-term business model, again, we'll delve into each one of these, but the fact that we're fostering growth, we talked about growing 12%-14% compounded annual growth rate over our five-year plan, and we started during a period in the economy when it was hard to think about growth. We've been progressing. We're in the third year of that plan. We'll get more into that around the financial tenet.
Growing our expenses less than our revenue, this is our opportunity to shape our structure on our walk as we continue to walk toward that 30%+ operating margin goal that we have in our five-year plan. You've seen our progress to date. We'll talk more about that. Maintaining a strong balance sheet. This is a strategic asset for us as a company. We have a rock-solid balance sheet. We'll go into that and show you some of the attributes to make sure you're seeing that. We want to continue to embrace that as we walk through this five-year plan. Optimizing our capital allocation. We'll get more into the details behind the prioritization, including articulating a little bit more on our share buyback announcement and our intentions in that regard.
Also, as part of that, we're talking about covering dilution, which is something that we're well familiar with and our company's done for years and years, and also over time, reducing the share count. So we'll look at that as an opportunity and a financial tenet as we go to optimize our capital allocation long term. Let's get into it. If you look at FY 2012, there's three numbers that pop, and you guys are well familiar with that. The first thing is the 14% revenue growth. You heard a lot from the team, Carl, Steve, Andrew. You can see some of the things that drove that. I'll go a little bit deeper on that. Again, that's 14% revenue growth on top of a year prior that was 14% revenue growth. We'll go deeper there. The operating margin, we expanded 260 basis points.
You remember at the onset of the year, we talked about expanding approximately 200 basis points. We actually did 260. We started the beginning of the year in FY 2012 at 10% growth. As a guidance, we delivered the 14, we delivered 32% EPS growth on a flat share count. That's approximately 2x the software industry, we were pleased to see some of that progress. Let's take a look at a chart that you're well familiar with. We look at, again, this in terms of progressing on our five-year journey, and you look at 2010, you can see the blue and the golden bar is the revenue being tracked, and the green trend lines are operating margin. Of course, the golden bar is our guidance that we've given for FY 2013. You can see that 14% revenue growth in FY 2011.
You can see the 14% revenue growth in FY 2012. You can see the operating margin stepping up 480 basis points in FY 2011, another 260 basis points in FY 2012, and you know our guidance of approximately 200 basis points in FY 2013. That's our progression. We're in the third year of our five-year plan, we're tracking. Let's, as I said, we'll keep clicking deeper into a couple of these different attributes, when you look at revenue, one of the things that's nice, and you heard about it, a nice articulation of the different end-user markets that we serve. This is a slice by product group, which starts to approximate some of the go-to-market activity that Steve outlined. Fundamentally, you can see a nice different portfolio there from that standpoint.
If I think about the growth rates, we look at PSEB in FY 2012 grew 16%, our horizontal products that fundamentally sell into all the different industries. The other thing is manufacturing did a really nice job in that respect. Strong growth for the year at 15%, again, we talked about that leading the way in FY 2013. You saw in Q1 of 2013, it came in at a strong 18%. In Q1 of 2013, we saw AEC come in at a strong 16%, nice attributes in our diversified portfolio. Let's talk another lens of our revenue. Let's think about suites, a very well set up approach that Andrew talked about in terms of suites. It's an important part of our business. It's an important part of our revenue. We said it wasn't going to be a light switch. It was going to bloom over time. It's blooming.
Let's look at the pie chart. The pie chart takes a look at our total revenue for the company. You can see that 27% of the total revenue of the company are suites. That pie is bigger than the prior year, which was 23%, and over time, that green part of the pie is going to be the majority of the pie. This is something that we've talked to you about and just watched that unfold over the years. One of the nice parts about that, and Andrew called out very aptly, is we're getting ASP expansion, and we're tracking what we had talked to you that we would. We're seeing a really nice attach rate, which a number of you have asked about, and Andrew has addressed that, and renewal rates that are on par with the rest of our business.
This is a good thing, not only because of the economics behind it, but the relationship and the value being delivered to our customer. We're always super focused, as Andrew pointed out, on delivering more and more value to our customer. If you step way from the pie chart, don't forget the message that suites in total grew 31% year-on-year in FY 2012. Okay? In Q1, it grew 34%. This is a nice attribute. It's another layer of our revenue that we're pleased to be able to address. If we get into another aspect of our business, let's shift to commercial new license revenue. These are new licenses. We take a look at this indicator. We're very pleased to report in FY 2012 that was 16%. That's a nice number. It's conducive and supportive of our overall growth plans.
I want to call out to you that in Q1, it was 19%. This is, again, a good dynamic for our business in the revenue side. If you look at maintenance revenue, I think this chart is particularly interesting. We know that maintenance is a really important part of our value proposition. We know our customers find it to be very attractive with the value being delivered. We know it's a chance for us to continue to satisfy them long after the initial commercial license is sold, we continue to do that. What I like about this chart is in 2010, our maintenance revenue growth year-on-year was 3%. In 2011, it was 6% year-on-year. In 2012, it's 10%, and in Q1 of 2013, it was 11%. These are good attributes for an important part of our value proposition.
Renewal rates are an important indicator. We don't disclose the exact renewal rates, but we want you to know, we've talked about these in terms of certain directions on them. Our renewal rate for maintenance continues to increase, which is just a favorable attribute and speaks volumes about how our customers view this value. When we see that it's higher than pre-recessionary levels, we're doing well here, and we have headroom to grow. Let's go on to now taking a look at different aspects of our model, shifting away from revenue, look at gross margin. This chart to show the consistency of our non-GAAP gross margin at 92% is a hallmark of our business model. The reason this is so important is we're able to deliver value, get 92% gross margin. We're able to invest where we need to perpetuate our future.
Carl talked about making investments. It also enables us to grow our profitability. We have the ability to invest and deliver profitability. This is a key part of our business model. It's performing well, and we're glad to see that. We've come through the revenue discussion. We've come through a little bit of the P&L with the gross margins and such. Let's talk about the balance sheet. I talked about why that was a strategic asset for our company. Again, I'm going to touch on a little of these and then go deeper and show you a little bit more of the attribute. When I stand here and talk to you, we have a very strong balance sheet. You can see growth in deferred revenue. I'll show you the attributes of that. You can see a very healthy DSO, which speaks to our receivables.
Again, attractive in that regard. Strong cash generation you're familiar with, even in the deepest, darkest hour of the recession, cash flow positive, again, speaks well for the business model. I think the record cash balance, we're going to talk a little bit more about that in the capital allocation. Low physical inventory, very low, then no debt. That gives us the strategic firepower to do the kinds of things we need to do to grow our business long term from a company standpoint. This, I think you'll agree, is a good case for a strong balance sheet. As we look at deferred revenue, I know a lot of you talk about this, it doesn't miss your attention that it grew 22% in FY 2012. At $719 million, it's rapidly approaching $1 billion. This is revenue waiting to happen.
This is revenue that we have the cash already collected. This is a good attribute from our business. The next thing that I talked about is days sales outstanding, for a global company, this is Q1 of 2013, to have 46 days DSO is actually quite a healthy collection cycle. It just, again, speaks to the quality of the balance sheet. If you look at the cash generation, you can see a strong uptick in our cash flow from operations. There'll be a continued growth in this over time. We're pleased to see that progressing and more opportunity. Talked to a number of you about cash flow margin. You take your cash flow from operations divided by your revenue.
I think when you can show a cash flow margin in FY 2012 that's even higher than your operating margin, that's a nice attribute in terms of the quality of the income. We can see the cash, that's a good attribute. Speaking of cash, our cash and marketable securities were at $1.8 billion in Q1 of 2013. I think you know the vast majority of that's offshore. We talk about that and disclose that. Much like other tech companies, our attributes are similar in many ways in terms of our cash and the location of our cash. We look at low channel inventory. This is yet another attribute around our business, the fact that our whole ecosystem has very low channel inventory is a nice fact pattern.
I think you get that and understand why that is. We've been consciously driving that down over time as we continue to do a number of different attributes to make our ecosystem even more efficient and scalable. Now I said we'd talk about capital allocation. I'd like to get into that. We've had three priorities that we have focused on as a company very consistently. The single best use of our cash and our capital is to fund our business. It's about funding our business for innovation and things that are going to allow this business to grow, not only this year or next year, but for years and years to come to take our franchise to where it can go long term, and the opportunities that we have to capitalize on those. That's priority one, no change.
Priority two is to have select and discerning M&A. We talked about Vela Systems. It happened in Q1, or rather Q2. We've talked about the M&A that we did in FY 2012. We spent about a little over $200 million and about 22 small kind of tuck-in acquisitions, but we picked up really interesting opportunities for our company long term. Things like Blue Ridge Numerics in the area of simulation, very strategic for us. Scaleform in the middleware area of our M&E business, and a variety of other small tuck-in technologies that we get to leverage with our global sales team that Steve leads and just is a good attribute for us, including we also purchased intellectual property. These are good, well-spent dollars that are going to help us in years to come. Then the third way that we think is critical for capital allocation is the share buyback.
Of course, we had a big announcement today about our share repurchase authorization. We'll go into that a little bit deeper. When you look at the shares outstanding, we've put this out for years. Not unlike a lot of companies, we have been trying to hold our share count pretty stable and have been successful in doing that over the years, whether it's fully diluted or basic shares outstanding, tiny downward tilt, but basically flat. That's the case. At the same time, we talked about the repurchase authorization today. As announced, 30 million shares were authorized.
That's in addition to 12 million approximately that were available for share repurchase as of the end of Q1, which it gets us to the 42 million available times the market share, or market price yesterday, rather, gets us to about $1.4 billion in share buyback authorization for our company. I think the key thing that we're communicating to you is, yes, we will continue to cover dilution and offset dilution, and we will reduce shares over time. As the cash affords itself, and we'll make sure to look at things appropriately, but over time, we look at reducing our share count. That's for the capital allocation topic. Let's shift now into operational efficiencies and improving those. This mission's never done, I think you guys know I have a passion around this.
To scale a company, you're always looking for opportunities. It's important because it creates flexibility to fund other things, including expanding your operating profit and funding the other strategic things that allow us to have fuel to grow our business long term. These are just a few examples. Let me start out even before going into the examples. These are a few that we've accomplished. We have an operating council, which I chair. There's a number, both Steve and Andrew are part of this. Our full mission is to look at how to scale and drive efficiency in the company across the company. There's lots of ideas that are constantly being attended to.
We won't go into all those details. That's an important point for you to know because we know that creating goodness here creates fuel for the future in terms of funding our growth and profit. We also do extensive benchmarking. I think you know just one of the benefits of being an experienced person, spending my whole career over 3 decades in technology is you're able to connect with other friends in the software industry. We've done rigorous benchmarking at the operational level at every level in the companies under non-disclosure. We know where there's gems for improvement. We pursue those vigorously. Let me talk through a couple of these particular items. Electronic software delivery, a lot of you have heard about that. This is a huge win for our customers. They get the product quicker. It's more efficient for the ecosystem.
It's more efficient from a green standpoint. We're not shipping boxes around and freight and that type of thing. There's just this opportunity that we've been driving on. You'll see more improvement over time. We've improved our commercial sophistication in terms of our procurement areas. This has again delivered goodness in the prior years. We'll continue to work that. We have a good playbook, and our sophistication level's advanced substantially. We found opportunities to localize our products in a way that was even more scalable. That's delivered good benefit. The last just example, one of many, is we modernized our computing environment last year. This not only provided better capacity, just core capacity to run our company, but better security, better speed, and we saved money, substantial money on this.
What's interesting also you might find is we were also able to actually reduce our energy costs substantially. There was a real friendly green effect about this. That was another dynamic that was positive. Speaking of the green effect in terms of corporate and social responsibility, we take that seriously. We're a bit of a unique company because we look at it from two vantage points. One, we operate our company with sustainability in mind. Any of you that have come to our major buildings, a lot of them are LEED platinum certified. We've embraced this as a way we do business. There's something about preserving things that are valuable and eliminating waste that just makes a lot of common sense. That's some of the cores of sustainability. We embrace that operationally. That's not all.
The bigger opportunity for us is we help people with our software to help them imagine, design, visualize, and deploy better sustainable designs in all the industries that they pursue. That's a revenue opportunity for us. We have an operational aspect that we do, then there's the revenue aspect. It's not a surprise that we get called out in a number of these different indices from that standpoint. The next thing that I want to talk about is Best Places to Work recognition. You can look at this chart, and I don't know if you can see all the detail. Well, you can look at Fortune 100 Best Companies to Work For. You can look at, in the U.S., some people like to do that when we go around the world.
Some people like to call out the one that's from China on this chart. Some people like to call out the one in Switzerland, Germany, the U.K., Canada. You pick the one that you like to look at. Why is this important to us? Why is this from a shareholder standpoint important to us? We are in one of the most fiercely competitive industries in the world. To compete for talent, you know the names of the companies. We're in Silicon Valley, then all over the world in the hot centers. We need to compete to be able to attract and retain talent. This is a nice attribute in our company, we're able to do that, to lower attritions, attract and retain the right people. That's another attribute of our company. Let's now shift to the last part of my discussion, which is around guidance.
You saw the press release. We reiterated our guidance for Q2, the revenue range of $580 million-$600 million. You saw the non-GAAP EPS between the $0.46 and $0.51 reiteration. Then for FY 2013, we also reaffirmed our plan for the year. We talked about revenue growth at 10%+, at least 10%. Then our operating margins at approximately another 200 basis points improvement on top of the 480 in FY 2011, the 260 in FY 2012. We're tracking in the third year of our five-year model, that's the guidance reiteration. Speaking of the model, we like to land on this one. We've been driving this 12%-14% compounded annual growth rate. You've seen the two years and the current year in terms of how we're progressing.
At the end of this year, hitting our plan would get us to approximately 26% operating margin, which again, is closing the gap to that 30%+ operating margin. I think we're tracking that well. That's our update from a long-term business model standpoint. That wraps up my presentation, without any further ado, I'd like to invite the rest of the leadership team up here, we'll take questions. That's a key part of the discussions today. What I might want to call out just during the setup here is there will be microphones. This is a webcast, if you don't mind, just raise your hand. Let everybody get set up. Just give us a minute, if you will. Then we'll jump into it. We'll take questions, glad to engage in that way. Okay. There we go.
You bet.
All right.
It's a joke.
A little.
Great. Steve Ashley from Robert Baird, couple questions. My first question is, the go-to-market change with respect to the channel, they now can sell all of the products. Any sense of what kind of benefit you might be seeing from just opening that up and allowing them to sell all the products?
Want me to, yes. First, our partners are now able to engage in a full discussion with our customers as opposed to only talking about pieces of the discussion. It's enabled them to actually go in with more confidence, to actually talk about more of the business problems for our customers, as opposed to just specific pieces of those problems. It's empowered them to actually invest further in the business and add more value to customers overall. Interestingly, we've also made ourselves easier to do business with. For partners in the past to gain access to different pieces of the portfolio, they needed to work through an authorization process. There was a cost to them associated with doing that. There was some administrative burden even on us for that. We've simplified the business while empowering them to go and sell more.
We've removed some costs from the business and empowered our partners to be able to go and become a little bit more engaging with the customer discussions they're having.
Do you think there was incremental revenue to Autodesk from that change?
There has and there will continue to be, especially as our partners gain more knowledge and comfort in selling all portions of the portfolio. The goal is to be able to penetrate deeper into each customer that we engage with and our partners' engagement, and as a result, it should empower them to be able to sell more than they did in the past.
I just wanted to talk about emerging markets a little bit, just because we all know that China and India seem like they've slowed. If you think about the last three years, my guess is emerging markets, they were growing north of 20% and a large contributor to your revenue growth. I'm just thinking, next three years, is it 15%? Is it the new normal, or how do you think about emerging markets and the contribution? Thanks.
One of the things over the last couple of years is the emerging markets have been incredibly volatile. They were our biggest growers during the downturn. It went negative the fastest. It continues to be the most volatile. I don't think that dynamic's going to change at all. I think it will continue to be really volatile. We saw a period where Russia was growing really quickly. It wasn't.
Right.
Now it is again. Brazil has been on fire until the last quarter. Last quarter, it was down. We've seen that, and we've not come to depend too much on the emerging markets. There are some long-term trends I like about the emerging markets. One of the things that we certainly hope as we move stuff online is it gives us a better ability to combat piracy. That helps. The other thing in emerging markets, I think what you have to separate is what's going on in the emerging market per se versus the work that multinationals are doing in the emerging countries. We don't have a great breakdown, but some of that business is relatively stable from because of the multinationals, and some is more local dependent.
Absolutely. In fact, we gain benefits in our mature markets because some of our largest firms or customers in the mature countries are actually driving tremendous business growth and opportunities in those emerging countries.
Yeah.
As Carl said, it's a volatile area. The prospects, though, over the long term still look very positive and certainly are worth continuing to invest in that area.
Yeah. To the extent that you think it's going to go down, I'm not sure it will go down.
Yeah.
There's as much upside there. It's just much less predictable and harder to capture and harder to quantify, or at least forecast quantify, than any other part of our business.
Yeah.
It's up to Dave.
Yeah, Dave.
Don't look at me.
Bring the microphone.
Thank you.
Dave's all-powerful
Keith Weiss from Morgan Stanley. Definitely clear evidence that the suite strategy's working, that you're seeing greater adoption of the suites. Cloud services obviously adding onto that, creating a nice virtuous cycle. You're seeing, and you gave some good detail around uplift in seat prices and whatnot. One of the other impacts that we were expecting to happen is increased maintenance attach rates, increased maintenance rates that go along with those suites.
Yeah.
Maintenance billings have been relatively, or the growth has been relatively muted under the growth of the overall company, even if you average out the last two quarters. Why wouldn't we be seeing stronger than company average growth in terms of maintenance billings, given all the traction you're seeing in suites and given the high renewal rates, the high attach rates that are going along with this suite strategy?
Why don't I take a jump at that, and then anybody else can add in here. I think, Keith, you amply touched on that. If you look at the maintenance billings basically in Q1, basically one of the things we talked about is when we went and deployed our channel partner framework, it basically harmonized some of the things in terms of how we actually have people sell maintenance, for example, around the world. The one area that was harmonizing was Europe was adopting to the approach that we were doing both in Asia and the U.S. One of the things we find looking back is, it turned out, it incented people a little bit to actually pull in some of the maintenance billings from Q4 into Q1, and billings in Europe in particular.
What that did is, if you take a look at the billings in Q1, and you take a look at the maintenance billings in Q4, and you average those out, you actually get a nice double-digit number. It kind of mutes it out a little bit. I think one of the things that you should look for is take a look at the maintenance billings in future quarters as you're assessing this calculation. That's one thing I would say. Steve, I don't know if you have any other additives.
what-
That's probably the key point.
Well, I'll add something. I think Andrew wants to add something as well.
Yeah.
You do have to take a look at our subscription billings over time as opposed to any particular quarter. I can share with you that our sales teams, our partners, are fully engaged and focused on selling subscription. It's part of their core. The suites are adding value, not taking value away. The discussion on the value of subscription with suites is very productive. It's an easy discussion overall. We continue to add more value to our subscription offerings. I think over the long term, you just have to keep evaluating it. Wouldn't look at any one particular quarter, and it's trending in the right direction.
Okay.
I was just going to say, the suites are still relatively new. The whole family's been out there for one year, the compounding effect of the suites on our maintenance billings is not visible yet. You're going to see it start to show more and more visibility as it continues to get traction.
Yeah.
Perhaps if I could sneak in one follow-up. Last year at the Analyst Day, you guys talked about feet on the street as well.
I think Carl made a comment that channel partners are expecting to expand their feet on the street by, I think you gave a number of 27% in the forward year. Just as an indication of how healthy the channel is and sort of how they're investing, do you think they met that target? Do you think they actually expanded feet on the street to that 27% type level? Do you have any indication of what the plans for investment would be on the going forward year?
Well, we don't have a projection for the growth. They actually have continued to invest overall, as I showed in the chart. I don't recall what the exact growth rate ended up being, but our partners have continued to invest and grow overall. Giving them access to the entire portfolio has been a greater incentive for them to invest further because they can actually get more. They're anticipating and seeing more sales per sales call. They can sell more on each particular sales call, which gives them more dollars to invest in. Of course, by rewarding them with the different incentive structures that we have, by making those investments and feet in the street, it actually gives them a double return. We're not providing a projection on that growth right now, but they're continuing to invest and grow.
Yeah.
Thanks, Keith. At least how a couple of things. Maybe start with Andrew on suites and the industry orientation, particularly in an industry context, since one of your close competitors, Dassault Systèmes, at their meeting on Friday in Paris, also spoke in great detail about their industry solutions. Their case, 12. You targeted four. My question is, with suites, you have pre-configured-
applications. You are defining what the customer gets for a particular horizontal or vertical approach. Are you suggesting that in the future, as you evolve beyond the desktop, that you will still have suites, but increasingly instead offer what would be ad hoc recipes that you and the channel would somehow configure with services to back it up?
for the various industries and no longer rely as much on these pre-configured offerings.
Well, first off, there's a lot of benefit in the pre-configured offerings because it makes it very simple to deliver the solution to the customer and move forward. You're absolutely right. We are definitely looking at offerings in the future that allow the customers to decide how they deploy these applications, either in the cloud or on the desktop. We actually do that at the enterprise level right now, where we offer up the whole portfolio, and they can decide how to do that across their installations. We have lots of concepts as we expand the portfolio to the cloud and expand our desktop reach in how customers will be able to access these things.
Yeah. A little bit, maybe the mistake there is assuming that a single customer only buys one type of suite.
Okay.
A suite is packaged for an individual user. Within a single firm, they could have multiple suites.
Right.
Before you get to the large ones, like Andrew said, in which they customize the entire offering, even in a medium-sized business in which, let's say they have 50 seats, 10 of them could be on building design suite and 40 could be on product design suite.
Okay. The follow-up on PLM is, I know it's still new, of course, since you launched it at AU just a few months ago, but your premise was that the existing suppliers were either over-serving or under-serving the market. From what you-
Worse.
Worse, okay. Your words. The question is, from what you've seen so far in the evals and the piloting, are the customers using your apps in the way that you thought they would, to supplant or overcome the issues that you presumed with the existing offerings?
It's still relatively early. We announced this at the very end of February. What I would say is the use of PLM 360 has been much broader than we expected. Even some of the examples that Andrew pointed out, we went to market with an idea that we'll concentrate on a number of very specific kinds of workflow. Our customers have seen the tool and the flexibility of it and decided to take it much broader. That surprised us. Both the types of companies that are interested in it, as well as the workflows that they're tending to employ, is much broader. That's kind of surprised me. The rest of it is kind of in keeping.
We're seeing companies that either chose not to spend or couldn't afford to spend what kind of the legacy PLM guys did, as well as we're seeing lots of installations and trials alongside. Many of the customers already have what they would consider an existing PLM system, and they're trying to contain it. We have lots of trials going on inside places where they already have a PLM system of record, which is what we kind of guessed.
Yeah.
Hi, Carl. Thank you. Heather Bellini from Goldman Sachs. I had a follow-up to that question. In particular, in the BIM and the PLM segments, you guys talked about the cloud offerings as being a growth opportunity. I'm wondering if you could share with us how your efforts here in the cloud compare to what your competitors are doing. Also, given, as you just mentioned, a lot of them already consider themselves as having a solution, do you think we can see, over time, cloud adoption leading to a rip-and-replace strategy similar to what we've seen in other SaaS-based markets, which might open the door for you more than maybe they were open two years ago?
Yeah. Heather, it's a good question. To kind of back up, in many ways, if you look at our competitors, both in BIM and PLM, broadly based, the entire CAD, CAM, CAE market. We always served one part of the market, and most of our competitors served a different part of the market. Over time, the offerings themselves became virtually identical. In many ways, it was a classic disruptive innovator's dilemma strategy in which our products at what was the so-called low-end became better than the high-end offerings. We just delivered them differently at different price points. Essentially, there was nothing that you could model or build in one that you couldn't do in the other system. Right now, what I see is probably the most dramatic break in strategy and difference amongst the competitors than I've ever seen.
We've decided, we did about two and a half years ago, that this basis of infinite computing was leading to a whole new way that people were going to work. Most of our competitors, and certainly the ones in MCAD, have taken the idea that this is not an important platform shift, that things are going to continue the way they are, that customers don't want it. I think there's lots of rationalization out there for why not to move forward. We've taken the approach that five years from now, it will be as different as pre-PC, post-PC. We see the entire market changing and creating enormous opportunity. One, for the customers to be able to solve problems they couldn't, and a business opportunity for us. We've kind of doubled down on cloud and social and mobile.
With it, I think right now what you're seeing is the same thing that you saw at the beginning of lots of other SaaS business models, which was this put the toe in the water, try it, install it alongside. We were classic, just as Autodesk the company, we had Salesforce and we had Siebel. We had lots of secondary offerings that we put alongside until we started to replace the legacy ones, and now we're investing all of our IT in cloud-based ones. When you look at what we've done with BIM 360, PLM 360, and Sim 360, everything about it is cloud and mobile. We think this is where the future is.
I have no reason to believe that you won't see the same disruption go on in the next few years where people realize that the old way is no longer the best way. It's a conservative industry, and it'll take some time, but people are already starting to see the benefits of this. We're seeing it either in Sim 360, where people are realizing they can now solve simulation problems they've never been able to solve, or in the PLM case, they're able to deploy solutions in a fraction of the time and cost that it took to do in a traditional way. I would wholly imagine that you'll get the rip and replace, but over a period of time.
Matthew Hedberg from RBC. Thanks, Carl, for those. Clearly, everything's moving to the cloud, and like you said, it's going to take time, and it's a slow progression. Andrew made the comment that eventually desktop solutions will be transitioned to a subscription model. I guess my question is whether or not it's cloud or subscription, is there a point in time where your entire license revenue or a good chunk of it will eventually transition to more of a subscription offering, whether it's cloud or traditional desktop, but subscription-based pricing?
Yeah. I think what you'll see is term-based, as Andrew alluded to. There'll be a number of different business models, but they will all be much less perpetual license. I think the perpetual license will go away, and there will be a combination of various kinds of subscription models, and I think there'll be some à la carte stuff as well. So for example, capacity-based pricing, so that, for example, you may sign up for a service, but you may have peak demand that requires more usage of compute capability, and you pay for that. So that would be the non-ratable part. Certainly, the vast majority of our revenue will end up in the ratable category over time.
Appreciate you taking the time. Rahul Gorawara from Antipodean Advisors. I just want to ask if you can elaborate a little bit on how the cloud offering works to combat piracy, specifically while you're still putting out the desktop solution. I imagine it would take you to eventually just have the cloud offering to really see piracy go away. Is that right, or are you seeing a big shift right now?
Well, no, we're not seeing a big shift yet. One of the things is we're not going to be offering two versions, an online version and an offline version. What we're doing is taking our desktop products and we're complementing it with a bunch of cloud services. None of those cloud services are available in a desktop format. So anything that you get, so whether Andrew was talking about the visualizations that are done online, simulation that's done online, PLM, there is no way to access their desktop analog. You will continue to see piracy of the traditional products as long as we release them. I don't expect anything different, no change in the trajectory there. When it comes to services that are tied to desktop products or just standalone services that are cloud-based, there will be no way to access them.
Hi, Saket from J.P. Morgan. Two questions for you, Mark. Can you talk about how aggressive you think you'll be on the buyback program? Secondly, can you just talk about how we should think about the growth in suite revenue as compared to kind of the fall-off in flagship revenue?
Sure. In terms of the share buyback, again, we announced the intention to cover more than dilution. We're not going to give a target out in terms of the percent or anything like that. We're going to take a look at the situation. We're going to look at the actual cash balances in the various geographies. Times when we look at the price and think that this is just in the best interest of the shareholders. There's a whole cadre of considerations, some of which we noted in the press release, but we will be reducing shares over time. Just hopefully give you a little bit of color. That's the intention. That's the notion that we want to make sure we're clear on without giving a specific percent. Your second question is in regards to thinking about suites and the flagship.
I think one of the things that you're making a good point on, when we grew our suites 31% last period, obviously, flagship was much less. It was more like in the 9%-10% range. When you start to look at that, one of the things we expect is that our suites will be more than 50% of our business. We would expect some of these point solutions that are bundled into our suites to grow at a lesser rate over time. That is the right expectation to be thinking about. We don't guide by category. The most important thing is if we can keep driving the suites in the way that we have, we're going to get all the favorable attributes that Andrew talked about.
Most importantly, our customer's value proposition is going to be better and better, which makes our position even more competitive. I think you've got the right trending on that. You should continue to see that over time, with the net benefit being the kind of double-digit growth that we're looking for. That's the right vectoring that you're thinking about. Okay?
Thank you. Hi, it's Blair Abernethy at Stifel Nicolaus. Two questions. On the industry focus, can you just expand a little bit more on your plans to become more experts? Does this mean you're going to eventually shift from suites to solutions? Are you thinking about adding more services to your business model?
Let me start by saying, I hate the solutions word. I don't get it. We sometimes fall into that trap and market ourselves that way. I hate the solutions word because I don't know what it means. I'm always wondering, when I go to the store and I want a toothbrush, and they tell me they're selling me a teeth-cleaning solution-
Yeah
or a hairbrushing solution. It's a really overdone phrase. If you want to more specifically know about the offering, we have been building our services, consulting services capability over time. Certainly, our largest customers have come to expect it, and it's an important part of the engagement with them. We've continued to do that. At the end of the day, I still believe our customers buy products and services. They very specifically choose about the best thing to get their job done. For certain customers, that involves services. We've seen it both with PLM, we've seen it with our BIM stuff, that customers require a level of consulting in order to succeed. Slap me every time you hear the word solution come out of my mouth, or you see it on our website.
Yeah. I want to add something there, because I agree with Carl. There was a notion that maybe you were bringing up, I just wanted to highlight. Focusing on industries has another meaning to it. Forget solutions or offerings. Understanding customers in particular industries, truly understanding their business challenges and requirements, positions us and our partners to be able to help them solve their problems better than we did in the past. I've traveled around the world and talked with lots of customers and found that we're helping them solve portions of their problem. When they explain their overall challenges, I sit there thinking, we can help them solve these problems, but we may not have educated and prepared our sales teams or partners most effectively to solve the bigger picture, the real issues they're trying to face.
I'm excited about the teamwork we have between my organization and Andrew's organization, because what we're doing is we're architecting the key requirements and challenges by industry and sub-industry, so those subsegments, and then preparing the sales teams that go off and have the right discussions, the right dialogues to engage in helping them solve those problems. We become more relevant because we can help our customers be more effective in serving their needs and their customer needs. That's going to be one of the most explicit benefits of focusing on industries.
Okay. Thank you. One other quick one, Carl, just on the consumer market.
Yeah.
Maybe you can blue sky it for us. Is this going to be an evolution, or is there potentially a big bang that will really drive this for you?
What we've seen as the numbers have started to grow is that there's real potential for a sizable business. Just to gauge it, I think there's a real opportunity. Probability of success is lower. In the other businesses we talk about, with a high degree of confidence, I can sit here and tell you what's going to happen with our simulation business or our PLM business. That's why we're willing to stake out five-year growth rates and stuff. When you get to the consumer business, one, it's a little bit the Wild West in terms of what's going on there. It's a much more rowdy and volatile market. I think there's huge upside there, but much less guarantee that we will be successful in that market. We're starting to see revenue from it.
We're starting to see business models emerge that are different than the traditional ones. It's also requiring some learning and retraining on our part for how to go about it. Many more of the business models in the consumer space are either around advertising or commerce. Historically, we've had 0 revenue from that. It's a very different business, and I don't think the right thing is to take our existing business model and impose it in that market. It's much more adjusting to what that market expects and trying to tap into it. There really is a big opportunity. Just to put it in perspective, by various measures, we have 75 million users in this consumer business. In 30 years of Autodesk history, we had 12 million users. You're almost an order of magnitude larger in a fraction of the time.
It is a very different business, and price points are different. I would love to see it turn into a really big business. Even without it, I go back to my assertion that it's been a wonderful experimentation for us. I think back to Heather's question about the difference between us and the competition. I think it's given us the confidence to move forward. Maybe not just the Petri dish, it's like the fruit fly experiment. Generations of consumer software come so quickly that we've been able to go through generation to generation stuff really quickly, tap into new technology, understand what customers want, and like I said, nobody in the corporate enterprise is really willing to tolerate answers to their problem worse than what they have at home.
We're seeing that, although some of you guys, I saw with all the BlackBerrys, we had a good discussion. I don't know why you still tolerate it. Generally speaking, people are not willing to tolerate substandard technology when they've seen that better stuff exists. It has really given us the confidence to move forward with what we're doing, and we've been able to try out in a broad way. We know we have the scale to make many of these cloud-based offerings available to our commercial customers. It's been good from that standpoint alone. I still do hope it turns into a real business.
Carl, from the mainstream side of the business, I think one of the things that's been very interesting about the consumer side is it's been one of the most successful brand-building campaigns Autodesk has ever done. I know from a personal standpoint, trying to explain to people who are not involved in our industry that I know or meet, what we do, is sometimes challenging. Now my eight-year-old daughter knows who Autodesk is and is constantly badgering me on when the next app comes out. It's definitely been a revolution in terms of helping people understand the potential of design software and touching the next generation of people that are going to be using our products.
We started with a fairly extreme first offerings. Our professional ones were over here, and we had things like SketchBook and Pixlr way on the other side. Now we've started to do things like the mechanical engineering games, like TinkerBox. We've actually brought real engineering apps to tablets and phones, things like the ForceEffect, which is having a great impact in places like education. I think it's brand building, it's awareness, but it's also showing a generation of people what's possible there.
Yes.
I have been totally surprised by even some of our most traditional customers' willingness to adopt the new technology. I thought they would be slower. I went to a meeting at one of our biggest multi-industry customers the other day. There was not a laptop in the room. It was all tablets. They were talking about a large construction project they were doing where they had bought 1,000 tablets. They'd bought 1,000 iPads and deployed them. I'm just watching just a huge shift go on. It's not understated to talk about the post-PC era.
Yeah.
There will still be a role for traditional PCs, it's going to become diminished over time in a significant way.
Yeah.
Thank you. Dan Cummins, ThinkEquity. I thought last year we saw a slide that described the number of technical certifications going on in the channel or a growth rate or something. I think it's accurate to say that the number of available technical certifications is way up, perhaps as a result of the industry intensity and go to market. Can you give us some indication or update on those numbers and how important that is as any kind of gating factor for you to get to that aha moment that the industry intensity is really working and showing up in the numbers?
Yeah. We're not providing targets and goals in specific numbers. What we are doing is this. I mentioned that the way we've architected our channel framework is based upon tiered benefits. There's benefits to our partners to get as many of their folks certified and for them to apply for certifications. The certifications, we have seven of them that are available. We're going to be doubling that number over the next 12 to 18 months as we focus on the specific workflows that we really do want our partners to specialize in. You're going to see our partners continue to invest in certifications for their employees and specializations to be able to not only differentiate themselves in the marketplace, but to truly learn about how to best implement solutions.
Sorry for that word, a customer-based offering, they can really solve the customer problem most effectively. It's up to us at Autodesk to put those certifications and specialization programs in place so that we can help our partners learn as quickly as possible, they're hungry for it.
Hey, Richard Davis, Canaccord. Maybe Carl or something like that. What do you view as the gating issues in your simulation effort? Is it features? Is it reference customers? Is it one of the challenges you have, especially if you try to move it to the cloud, is just the size of the files are really big and sometimes porting them back and forth can be a challenge? When you think about this over the next few years, what are the things you have to accomplish to get to where you need to be?
I think the simulation market, if you look at it, there are different customers. To change our market position, what we have to do is go to relatively conservative customers and have them be willing to try something new. What we found most successful are those parts of the industry where they're not saying, "Look, I have to keep these results around for 50 years, and I got to compare it to the old results." If that's the kind of account, it's not that interesting. In some places, like for example, our Moldflow product, which is computational fluid dynamics related to plastics, putting that online has been absolutely fantastic.
I've had a bunch of customers come to me and say, "We've had these problems that we've not been able to solve because we have not had machines big enough to do it, or the number of times to do it has been there." What we look to do, I think the other more traditional competitors will continue to do well. I think at the margins, we're going for the engineers who have not taken enough advantage of it. What we're trying to do is really do the problem of optimization rather than serial simulation, one after another. We're trying to say, think about your problem differently early in the design process. How would you go about choosing between a matrix of alternatives? Those are the kind of things that are really well-designed. A wholesale rethinking of how you're going to do simulation is good for us.
Places where there's fast cycle times, where the market moves quickly, are also good for us. If what you want to do is just take something that you computed on your desktop and move it online, that's a little bit less interesting for us, and I'm not sure nearly as compelling for the customer. We can ask the rocket scientist
These large file simulations too, these are classic examples of automotive crash tests and these kind of things. You know what? That's not the market we're going after. There's a lot that can be done with By the way, a 50 megabyte file, nobody blinks at that moving back and forth anymore, and that covers a large gamut of what people are trying to do. I think Carl's point about making optimization a big discussion out there and not, "I'm a simulation expert, I'm going to keep simulating and simulating until I find the right answer," but rather splaying out a bunch of options and letting people use that information, something classically called design by experiments, is going to be a big part of how we change the market. Changing the dialogue more to that-
Yeah
and less away from-
Yeah, the typical trade-off, I'm looking at things like, let's say cost and strength and material. How do I explore that space and come up with the best alternatives? There are things like that. So far I'm very encouraged by what I'm seeing, but I'm not sure you'll see it necessarily reflected in others. I think there's still a strong traditional business out there for others.
Yeah.
Sarah Holmes, Gilder Gagnon. Way back when the story was you were going from 2D to 3D, I think the idea was that not only 3D was more per seat, but that it was going to drag on a number of other seats per seat. Does the move to the cloud and mobile and et cetera sort of potentially accelerate or broaden that trend?
I think it's already happened to some degree, and it clearly continues that. If you look at a number of the things that we talked about, for example, simulation, which we were just talking about. Simulation only comes about because you have model-based design, that you have an actual 3D model. In a 2D schematic representation, we wouldn't have been able to do that kind of analysis. The visualization comes from 3D models. When you look at things like BIM 360, and particularly the acquisition we did with Vela, this is doing construction management at the point of the job, so it's job site management. It's a much broader audience than just the people who are designing and engineering.
If you look at the PLM and the workflows that have even been implemented to date, that's reaching out to parts of the company that are historically not our traditional customers. I stick by what we said is that the first step was moving people from 2D to 3D, so they started to have models. Models really are just the foundation for simulation visualization analysis, as well as all the other business process workflows that come along with that. It really is reaching lots more parts of the organization than ever before.
In fact, I would add, I had a discussion with a customer last week, which really shows how this is driving some expansion. It's a company that actually builds airports, but they've evolved their business model to not just do the construction and design of the airports, but they also now have a business where they operate and manage those airports after they've been implemented. They've evolved their business model. We were talking to them about BIM and the fact that they've implemented BIM, and they brought the different business unit leaders in. What was interesting is, in the past, we would've just had the discussion with the design people. Maybe we would've talked to the construction folks as well. Now we're having a discussion with the leaders of design, the heads of construction, because they were leveraging the models during the construction process.
We also had the person responsible for driving the manage and operate part of their business afterwards. Interestingly, that person actually was arguing amongst the peers that he'll get more value out of the BIM model than any of the others because the life cycle of managing this airport was going to be significant, and the model was enabling them to think about that business very differently than they would've in the past with 2D drawings. It just kind of highlighted in one specific discussion how models have changed the entire discussion and landscape with our customers.
Hi, Steve Ashley, Robert W. Baird & Co. Just a follow-up question, and it's on the future evolution of the product. Today you offer this hybrid approach of a desktop, but then some SaaS goodies that are connected to it in the cloud. As we move that forward, do you foresee taking some of the feature functions that are currently in the desktop and moving those to the cloud as you go forward? Do you just see one day a full-featured desktop showing up as an alternative in the cloud to replace this? Just wondering how we take what's on the desktop or under our desk and move that to the cloud in the future.
We will have all things along the spectrum. I think our customers will choose to adopt it differently. We already have full-featured versions of some of our most sophisticated design software running in the cloud. There are new customers who love it, who think this is the way it should be, and it's the way it always should have been. There are others who are very comfortable and have invested heavily in desktop products, and we will continue to provide them so that they can move at a pace that they find appropriate. As you said, mix in some of the SaaS goodies. If they want to reach out for SIM 360 or PLM 360, it's available to them, but they still run in a traditional way.
I think more and more of our customers and more and more of our development efforts are going to purely cloud-based offerings, you will see our initiatives there. We've already demonstrated two different ways of delivering full functionality in the cloud to the desktop. One is through a Kind of a video compression, a remoting technology. The other is by rewriting applications that are on a new foundation that are entirely designed to be run in the cloud and accessed from all types of devices. I think it's an incredibly exciting one when you see this full-featured. I think it was certainly at AU, we showed some of that, where we showed a mechanical design application, something that typically ran on a desktop. It was running it on the cloud.
You're accessing it with a mobile device with multi-touch, and you're sitting there pushing and pulling and designing mechanical devices that's running in the cloud. For the most part, it is not going to be a technical limitation. It's going to be a cultural limitation in terms of the rate of adoption of our customers. I think we've just about passed every hurdle. I had this conversation with an engineer the other day where they were talking about the latency involved. There's always these questions about large models. There's questions about latency. We were demonstrating delivering frames with 20 milliseconds of latency. It's imperceptible by people. At that rate, you could be watching a movie, and I think it's good. You can certainly be interacting with an engineering model. I think the technical limitations are being overcome.
There will still be people and organizations who have issues around security and reasons for not putting stuff in the cloud. For them, there will continue to be desktop offerings, but the bulk of our business will move increasingly to online offerings.
Hi, Ken Wong from Citi. Mark, on the buyback, you guys talked about going beyond simply offsetting dilution.
Right.
What's the company's philosophy on perhaps approaching the debt market to try to fuel that initiative?
Well, I think, the approach that we're taking right now is we've got $1.8 billion in cash and marketable securities. I think the approach that we're looking at is using our excess cash to do that as opposed to looking at the debt market. Every time people look at facts and circumstances and revisit that, but that's our philosophy, Ken.
Yeah. Carl, you guys didn't touch much on the media entertainment business. Could you perhaps give us just a quick thought on your outlook there?
Yeah. I think there's a continuation of what we've seen in media and entertainment is that the high end of the business continues to be sluggish in this economy. The software part of the business continues to be good. It's fueled not only by the traditional customers, but increasingly by all the attention in things like mobile gaming. I see a lot going on in more mobile gaming, more casual gaming, driving the use of our tools, and the software part of that business seems to be on par with the rest of our business. The high-end creative finishing business is still suffering because the overall industry, I think, is going through some pain. One of the other things I was just going to add to the first question on the buybacks. We certainly will look at the cash that we have available first.
Remember where the money is located, the vast majority of the money's offshore. As somebody said to me the other day, the way to get it back is through synthetic repatriation. There are other tools that are available to us to make sure that we can access the full $1.8 billion that led us to take this action.
Jay.
Thanks. A couple of unrelated questions. First, perhaps for Andrew, does the concept of segmentation make sense on the cloud? That is the standard premium ultimate notion that you have in packaged software. Does that have any role at all on the cloud? Number 2, over the last year, you've announced relationships with companies as different as Pitney Bowes in the mapping area, for example, and Nintendo, I think, in the gaming area. Perhaps for Carl, could you talk about what you think the future of these and other relationships might be in terms of helping you with market development and the like?
I'll answer that. I do believe that the standard premium and ultimate tiering methodology does have applicability to the cloud offerings. I think most of the commercial offerings out there we see around the clouds are showing that. It'll be different. It will present itself differently, but the concept is completely portable. You want to do it in a way that makes sense. Tiering functionality according to standard premium and ultimate is clearly something we're going to look at.
On the partnership question, partnerships have played an increasingly important role. It's another one of, interestingly enough, some of the side benefit that's actually come from our consumer business has been increased media attention, and people have recognized us. Whether it's partnerships we've done with Apple or Pitney Bowes. It's increasingly important, and given how diverse our portfolio is, we're finding all kinds of places where good cooperation makes a lot of sense, and we're going to continue to pursue those. Historically, I think we had a much more traditional view of partnerships that were more around platform providers to us. That's turned out to be less interesting. Out in the market, somewhat in response to our customers who have asked us to say, "You have great stuff. You have great stuff.
It'd be really wonderful if you guys could work together so we would have a better answer." Partnerships will be in an important and increasingly important role.
Thank you. This one's for Mark, maybe one on the reiterated guidance for the full year. One of the questions I've gotten from investors is, if you look at least 10% growth for the full year in terms of revenues in relation to a couple aspects, the 2Q guide being below 10% at the midpoint, backlog coming down in Q1, FX currency benefits, which likely get smaller as we get into the year. Are we looking for a re-acceleration of core demand, of underlying demand into the second half of the year? That's the first question is, does the guidance imply that? 2, if it does, are there elements in the model that should enable you guys to have better strength into or acceleration in growth into the back half?
Let's address the first point. First of all, basically, your question is any kind of re-acceleration, big shifts. I think the guidance for the year talks about 10% plus. Start with Q1, we grew 11%. Some of the backlog adjustments as we guided earlier, in quarters earlier, in terms of the ecosystem with the electronic fulfillment, some of the other changes that were going on, we've kind of covered some of that ground in the past. 11% revenue growth in Q1 bodes well for thinking about our growth of 10% plus for the year with three quarters to go. I think the things that basically get us there, from that standpoint, you take a look at our business in Q1, you look at AEC, grew 16%. You look at manufacturing, grew 18%.
You look at our subs revenue grew 11%, you stand back and you look at the opportunities that we have over time. Again, our view for the year is for the year. I think Q1 was a good solid start, that's why we're reaffirming it today. Those are some of the attributes about what's going on. Hopefully that squares it away. I don't know, Carl, if you have any additive points.
No.
Yeah.
I think that's the basic coverage of it.
Yeah.
We're not blind to what's going on in Europe. As I said on the earnings call, Q1 was one of the most unusual quarters that I've seen in our history, that if I would've told you that our AEC and manufacturing business would do really well, Germany, Japan, and the U.S. would do really well, and it would just be a so-so quarter, I could never have imagined that scenario. When AEC and manufacturing are doing well, when our three biggest countries are doing well. It was definitely more unusual, and we're somewhat prepared for a more unusual conclusion to the year. There's no doubt there is a lot of noise in Europe right now.
with some amount of spillover effect. As we gave guidance, it's fully aware.
Yeah
I won't be shocked to wake up one morning and see some kind of news out of Europe that certainly sent the markets in the wrong direction.
Any more questions? All right, I think we're going to wrap there. Thanks again for coming. The PDFs of all the presentations will be on our IR website, probably within about 45 minutes, so by the time you get back to your office. Thanks again for coming.
Thanks.