And thank you for standing by. Welcome to the Autodesk, Inc. Q1 2022 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Simon May Smith, VP, Investor Relations. Please go ahead.
Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss the results of our Q1 fiscal year 2022. On the line with me are Andrew Anagnost, our CEO and Debbie Clifford, our Chief Today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available at autodesk.com/investor. You can find the earnings press release, slide presentation and transcript of today's opening commentary on our Investor Relations website following this call.
During the course of this call, we may make forward looking statements about our outlook, future results and related assumptions, acquisitions, Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10 ks For important risks and other factors, including developments in the COVID-nineteen pandemic and the resulting impact on our business and operations that may cause our If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims Any obligation to update or revise any forward looking statements. During the call, we will quote a number of numerical growth changes As we discuss our financial performance and unless otherwise noted, each such reference represents a year on year comparison. All non GAAP numbers referenced in today's All are reconciled in our press release, OXXL Financials and other supplemental materials available on our Investor Relations website.
And now, I will turn the call over to Andrew.
Thank you, Simon, and welcome everyone to the call. I hope you and your families remain Now while parts of the world emerge from the pandemic, others are entering the eye of the storm. I especially want to acknowledge our colleagues, family and friends in India. We are thinking about you and we are helping wherever we can. Thank you to all our employees and their families, our partners and customers for their continued resilience, Our first quarter marks an important inflection point.
While solid execution, a resilient subscription business And continued secular shift to the cloud underpinned our strong Q1 results, waning uncertainty and growing confidence in our end markets generated Robust growth in new product subscriptions, combined with improving usage and renewal rates, accelerated billings and RPO growth 10% 22%, respectively. Together, these reinforce our confidence that we are through the revenue growth trough and on track to achieve our fiscal 2022 and 2023 goals. In mid May, we completed the acquisition of Upchain, a cloud native product data to bring products to market faster and build a stronger supply chain. Its next generation platform enables it to be rapidly deployed, Scaled, maintained and updated without the expensive, inflexible and time consuming integrations of legacy systems. We will grow Change to our enterprise and channel partnerships and expected to become a meaningful on ramp for legacy design tools to the Fusion 360 cloud ecosystem and facilitate further expansion into adjacent verticals.
As we highlighted in our recently published impact report, the convergence of Stretching from EVs and bicycles to high performance skis and low cost ventilators. While we are enabling customers to achieve their sustainability targets, We continue to lead by example, reaching our carbon neutral goal across our business and value chain in fiscal The report also sets out new diversity, equity and inclusion goals. And while I'm proud that 50% of Autodesk's Board and 45% of our executive team are women. We can and will do more both internally and through partnerships with organizations like ISS Labs As we recently announced, Pascal DiFranzo, Autodesk's Executive Vice President of Corporate Affairs and Chief Legal Officer, We'll be retiring in December after 23 very successful years at the company. He has been a trusted counselor and steward of
the company.
His contributions to Autodesk are many and have been incredibly impactful. And I want to thank him for his dedication and wish him all the best in retirement. I'm very excited to welcome Debbie back to Autodesk and will now turn the call over to her to take you through the details of Quarterly results and guidance for the year. I will then come back to provide an update on our strategic growth initiatives.
Thanks, Andrew. I'm very excited Looking at the Q1's results, several factors contributed to our strong financial And foreign exchange rates provided a modest tailwind to the quarter. Total revenue in the quarter grew 12 At 11% in constant currency, with subscription revenue growing by 18%. Looking at revenue by product and geography, AutoCAD and AutoCAD LT revenue grew by 9%, AEC revenue grew 16% and manufacturing revenue grew 8%. Excluding the impact of moving our Vault product to ratable revenue recognition, which we discussed last quarter, Manufacturing revenue grew double digits.
M and E revenue grew 5%. Across the globe, Revenue grew 8% in the Americas, 11% in EMEA and 20% in APAC. Direct revenue increased 25% and represented 33% of our total Revenue, up from 30% last year due to strength from both enterprise and e commerce. Our e commerce Reflecting the business critical nature of our products to our customers, our net revenue retention rate remains within the Accelerated 10% to $974,000,000 Total deferred revenue grew 11% to 3,350,000,000 Short term deferred revenue increased 17%, primarily reflecting growth in new A smaller contribution from long term deferred revenue resulting from fewer multiyear contracts when compared to last year. Total RPO of $4,230,000,000 and current RPO of 2.86 2%.
Current RPO growth was primarily driven by the increase in short term deferred revenue, but also by Strong growth in Enterprise Business Agreements and to a lesser extent, early renewals ahead of anticipated price Excluding the contribution from early renewals in Innovyze, current RPO grew approximately 20 I'll shift to giving you my initial thoughts as CFO and then finish with our outlook. Since I rejoined Autodesk about 2 months ago, I've been focused 2 things. 1st, reapplyting myself with everything Autodesk, the team, our strategy and how We've evolved during my 2 years away. And second, I've been digging deep to gain a solid understanding Our fiscal 'twenty two budget and fiscal 'twenty three financial goals. On the first point, while much at Autodesk is familiar to me.
I've been pleasantly surprised by how much has changed for the better, reflecting the enormous progress Autodesk has made over the last 2 years. Autodesk has undergone a cultural revolution. There's been a powerful shift in It's like construction and manufacturing in the cloud. I'm also struck by the compelling and expanding opportunities ahead of Digital transformation is happening now. It is real, and we are well positioned to capitalize These initial learnings give me confidence in our growth potential in fiscal 2024 and beyond.
Let me finish renewal rates to continue to be healthy and our net revenue retention rate to remain between 100% 110 Given our subscription model, revenue growth will lag the improving sales environment. We continue to expect About 3 quarters of our free cash flow to again be generated in the second half of the year due to our to a range of $4,305,000,000 to $4,385,000,000 or a 14% to 16% Increased over last year, reflecting a partial year contribution from acquisitions, net of the deferred revenue Given our results are weighted in the second half and Q1 is our seasonally smallest quarter, it's It's too early to change our view on the underlying trajectory of the year, but we're off to a good start. We expect non operating margin to expand to between 30% 31%, which includes approximately 1 percentage point of negative headwind from For the 2nd fiscal quarter and full year 2022. With improving economic conditions and easier comparable, We still expect our Q1 revenue growth will be the trough. Our accelerating momentum in fiscal 2022 will propel us into fiscal 2023, and I am therefore confident in our fiscal 2023 revenue growth potential and free cash flow target of 2,400,000,000 As I begin to look beyond fiscal 2023, the digital transformation of the industries we serve, Andrew, back to you.
Thank you, Debbie. Let me finish by giving you an update on Our strategic growth initiatives. The secular trends we have been investing in for years have accelerated during the pandemic. The digitization of AEC, the convergence of design and make and our expansion into adjacent verticals through organic investment and Acquisitions are growing our total addressable market. The evolution of our business model, the value generated by the growing is to connect all the phases of construction with end to end cloud based solutions that combine horizontal data flow with best in class Construction, asset operations and maintenance.
The breadth and depth of our solutions distinguish us in the market And we continue to build on that advantage to industry leading R and D, which we sustained through the pandemic and acquisitions. Our latest product releases reflect that. For example, Revit 2022 is a bridge to more open and interoperable ways of working That accelerate our design customers' digital transformation and improve communication design intent across all disciplines and project phases. For construction teams, we released Autodesk Build, Autodesk Takeoff and Autodesk BIM Collaborate, as well as product enhancements, And improving safety by connecting data, workflows and teams across the project lifecycle. As the construction backlog comes back Online and the new project pipeline builds, we are emerging from the pandemic stronger.
This is reflected in our success during the quarter. For example, Burns and McDonnell is a family of companies bringing together an unmatched team of 7,600 engineers, construction professionals, Architects, planners, technologists and scientists to design and build critical infrastructure projects. It is at the forefront Technology use and having invested in Revit and BIM 360 design some time ago, most of its data is already in the cloud. Monthly active users or MAUs on Autodesk software have grown by 80% since 2018. This quarter, Burns and McDowell renewed its Autodesk EBA and increased its investment with us, adding more cloud based products from the Autodesk Constructions portfolio, including audited build, pipe, assemble and building connected.
Our unified common data platform enables it 1898 and Company, part of Burns and McDonnell, is its future focused consulting and technology solutions And it is a founding participant in our Tandem Digital Twin programs. The Bolt Company is a 1,000,000,000 professional construction services firm in the U. S. Focusing on integrated delivery of complex vertical construction The office and field. Voalte was already relying on BIM Collaborate Pro and PlanGrid when this quarter it selected Autodesk built over a directly competitive construction project management solution and also invested in pipe.
Autodesk Construction Cloud's unified platform connects previously siloed data, reduces rework and saves time for bulk And Multigreen, a real estate development and operating company specializing in sustainable and tech enabled multifamily housing High growth and supply constrained markets standardized on Autonomous Construction Cloud. In order to build more efficiently and sustainably, They knew they had to standardize on a single platform to connect their teams from concept and design through project completion and day to day operations. In addition to Revit, Inventor, BuildingConnected, Artis Takeoff and Artis Build, they will be using BIM 360's integration with the embodied carbon calculator to analyze material carbon emissions with all their data connected to our common data In infrastructure, we released Civil 3d, ImproWorks and AutoCAD MAP 3d and AutoCAD Plant 3d and RECAPPRO We continue to mature our project delivery platform across design and construction to better support digital project that helps our customers increase operational efficiencies, make better design decisions, increase quality and reduce cost and material During the quarter, we received notice of an award in design from the Montana Department of Transportation. Instead of a competitor offering, They will be using our AEC collection, which includes Civil 3D, Revit, Infoworx, Navisworks, Recap and our common data The department was particularly impressed by connected bridge design workflows between Revit and InfraWorks that drive efficiency and Turning to manufacturing.
We've made significant organic investments in addition Inventor 2022 introduced new features and enhancements to speed up product development and interoperability with AutoCAD, Fusion 360 and Revit. In Fusion 360, we have introduced new functionality across the entire product development process For engineers and non CAD users to access their real time data anywhere and on any device. The potential to converge design and make The world's leading solutions provider for smart devices grew its investment with Autodesk. Having struggled with data management Data integrations in their product lifecycle management using a competitor's 3 d modeling product. AEC Technologies switched to our product design and manufacturing With Vault to manage all their data.
They found our connected workflows particularly attractive and believe they will improve productivity and collaboration across their And enable them to go to market more effectively by increasing flexibility in their supply chain. For data management, our customers can now Choose Vault for on prem and up chain as they transition to the cloud. With the largest number of new commercial users in 2020, Fusion 360's strong momentum continued, growing commercial subscriptions to 152,000 without any systematic cost While still early in its life cycle, we believe Fusion 360 has reached an adoption tipping point and with extensions and Up Chain, We are excited about its future. During the quarter, a U. K.-based design, manufacturing and installer of Into a single unified experience in the cloud, Fusion 360 enables faster design, prototyping and go to market.
By creating optimized and associative multi sheet layouts for sheet metal and non sheet metal parts in preparation For cutting on CNC machines, our nesting and fabrication extension helps them to significantly reduce waste. Last month, 3 students from Danville Community College in Virginia won the inaugural Project MFG National Championship, Director for Integrated Machining Technology at Danville Community College said, By testing a variety of advanced skills Like welding and multi axis machining, as well as communication and teamwork, the Project MFG National Championship is one of the most challenging skilled trade competitions in the country. Fusion 360's next generation platform enabled our As announced last quarter, we extended our multi user trade in to August 2023, But we are still seeing customers convert and benefit from their transition to named user. SSP, one of the leading integrated design offices in Germany traded in their multi user licenses with us this quarter and significantly increased their investment by purchasing additional AEC collections The premium plan is especially valuable to them as they improve their site to site management using single sign on, which enables more digital collaboration We are successfully converting non compliant users to paying customers with Q1 license compliance billings almost doubling year over year during For example, a non compliant customer converted into one of our largest premium customers to date.
Over 500 branches in Indonesia made it difficult to track and manage software usage, and this customer was inadvertently using more licenses than it was After completing a self audit, which confirmed the software gap, it purchased premium to help The complex rollout of compliant licenses. They are now a happy premium customer with detailed usage insight And the ability to flexibly manage their licenses from headquarters across their entire branch network. Now let me finish with a story. Construction began on Notre Dame Cathedral in 11/63, but was not completed for more than 100 In a 12th century version of light weighting, Notre Dame was the 1st gothic structure to use Klein buttresses, which are slanted beams that Support the heavy walls and ceilings that enable giant rose glass and stained glass windows in large edifices with open air spaces Following a catastrophic fire in 2019, the Cathedral is being rebuilt with traditional and sustainable materials Enhanced by next generation building information modeling provided by Autodesk. Combining traditional design and build know how With modern workflow solutions, reconstruction is expected to be completed in 2024 in time to welcome athletes at the Summer Olympics And future generations from across the globe.
I share this because as the world rebuilds after the I am reminded again that Autodesk's purpose to enable its customers to build and manufacture Carbon, water and waste. Audit's central role in meeting these challenges underpins my confidence this year and my confidence in the future. With that, operator, we would like to open the call up for questions.
Thank you. Our first question comes from the line of Jay Vleeschhouwer from Griffin Securities. Your line is now open.
Thank you. Good evening, Andrew and Debbie. Let me ask you, Andrew, first a couple of business and technology or technology evolution questions. You highlighted infrastructure and the company has been in that business for many, many years and you'll recall that once upon a time it In fact, the reporting segment and maybe should be again at some point. Could you describe the main ways in which that business has evolved over the last number of years in terms of Scope for its customer base and what the vision really is for that business in terms of perhaps adding new types of customers Such as owner operators that have not really been a large part of your business profile to date.
Secondly, since we're halfway between 2020 and AU 2021. Could you update us on some of the important initiatives that you yourself Highlighted during your Q and A session at AU 6 months ago, namely, the Forge roadmap and its implications for you long term. And secondarily, sharing technology across the portfolio and across industries, in other words, leveraging your R and D more and more across the company in that Yes. All right, Jay. So let me start with the infrastructure discussion.
So here's what's Fundamentally, same with the business. 1, we've been winning more and more departments of transportation as we've progressed since the last time The infrastructure business was broken out. And what we did is we focused our organic portfolio Very much on road and rail work, bridges, roads and rails and created a lot of workflows between Civil 3D And InfraWorks and some of our specific tools. And we've been very happy with the progress we've been making there and we continue that organic investment targeting those Pieces of infrastructure. We don't feel it needs to be broken out into a separate business because I think you might recall, since those days, We've moved our entire sales organization to account based sales.
So it's very easy to cover these types of customers With the kinds of support that we need to engage with them directly. Look, what is next? As you can see with what we've been doing with Tandem and the digital twin work and also with what we've acquired with Innovyze with their Info360 solution and some of the tools around there with digital twins for waste management and water management. We're definitely moving closer to things that are directly relevant to owner operators. And I would you would expect to see us do more of that As time progresses, okay.
So that kind of gives you a sense for what we're looking at and how we've gotten here. Now with regards to AU initiatives, I don't want to kind of preempt next day use announcements. But what I'll tell you is we continue to add Additional capabilities to forge into the APIs. And I think this coming AU, you're going to hear me talk a lot more about some of the common Experiences we're creating across some of our new environments that we're building for our various customers. So I want to hold on to some of that As we move forward to the next AU, but the hint is there's some common data experiences, there's some common ways of managing and accessing projects that we're developing and deploying, all things that are relevant to making the platform more powerful For bringing together the various products that our customers use.
Okay. For Debbie, quickly, you highlighted strong growth in product subs. If you're able to look at that in absolute terms, how would that product subs level of business compare with, let's say, the second and third quarter of last And perhaps even the Q4, are you now perhaps the highest level you've been in 4 or 5 quarters as far as product subs are concerned?
The short answer is yes. We've returned to growth after a period of several quarters that were impacted by COVID. And so we're pleased with the growth that we saw in Q1 and that's evidenced in the revenue results.
Great. Thank you.
Thank you. Our next question comes from the line of Saket Kalia from Barclays. Your line is now open.
Okay, great. Hey, can you hear me okay? Yes. Excellent. Excellent.
Well, hey, thanks so much for taking my questions and welcome, Debbie. Maybe first for you, Andrew. I'd like to dig into the new business acceleration you've touched on as we are starting this Maybe in particular, how much of this recovery do you feel is in demand that is, do you feel is tied to increased engineering Versus perhaps pent up demand for tools post pandemic, just as we kind of think about the pace of this recovery going forward. Does that make sense? Yes.
It's hard for me to break it down into increased engineering hiring versus kind of pent up demand. So I really Can't really give you a fine grain view on that. What I can tell you is that usage of some of our more engineering intensive products It's going up pretty significantly, okay. And we talked a lot about usage every year with regards to how The monthly active usage and the daily active usage is going in various countries. What we've seen is the majority of our countries are now at or above Pre COVID levels, the U.
K. Is now above pre COVID levels. The U. S. Still struggling a little bit to get above pre COVID levels, but showing a lot of Robust impact.
You also noticed, I think you probably watched the indexes out there, the PMI and the ABI Indices in particular, we have always found those indexes to be lagging indicators of our business. So they actually tell us that something has already happened with With the purchasing behavior of our customers. And what you've seen is those indices continuing to shift towards growth, which hints at Zach, it's the book of work that's going up, all right, which means people are going to hire more engineers, they're going to hire more People and they're going to engage they're going to be using our products more. So it's probably driven mostly by hiring related to the book of business of Customers is going up. The indices seem to indicate that as a lagging indicator of what we've seen in terms of purchasing behavior and usage.
But that's kind of As much granularity as I can give you on that. No, that's super helpful, Andrew. Thanks. Maybe for my follow-up for you, Debbie. You touched on this a little bit in the prepared remarks, but I'd like to just talk about the acceleration in revenue this year.
I think we get some of the drivers, but I'd love to sort of get your take and perhaps as part of that, your Confidence in that growth lasting into fiscal 2023 and for that matter longer term as well.
Thanks Saket. I'll start by saying, so Q1 is our seasonally smallest quarter and our guidance, excuse me, assumes that we'll see Improving results as the year progresses, which is consistent with what we're seeing. We're seeing uncertainty lessening, Growing confidence from our customers and our channel and improving demand in our end markets, which is resulting in accelerating growth in new We're also seeing increasing renewal rates, strong direct business, particularly through the e store. Our total direct revenue grew 25% year over year in Q1 and now represents 33% of total revenue. We're also pleased that we're starting to see momentum in key indicators like RPO, which grew 22% year And it's because of these factors that we're confident in the ramp during fiscal 2022.
Now if I shift Attention to fiscal 2023 and even beyond that, let me just break that down a little bit. I mentioned on the call that since I rejoined I've been focused on 2 primary things. The first is reacquainting myself with everything Autodesk, the team, And I'm very pleased with the progress we made in the quarter. I'm very pleased with the progress we made in the quarter. I'm very pleased with the progress we made in the quarter.
For growth, including a growing TAM from things like accelerating digitization and AEC, the convergence With the acquisition of Innovyze that got us into water infrastructure.
We're also
focused on further monetizing our TAM in a variety of ways.
Some examples include, Pricing our TAM in a variety of ways. Some examples include conversion of non compliant users. Andrew mentioned that Billings from non compliant users almost doubled year over year in Q1 and we're seeing more direct selling as I just mentioned. That direct selling And the free cash flow target of $2,400,000,000 in that period. Now I've been back for 90 days, less than 90 days Actually, so next step for me is more work on the long range financial plan and getting a deeper understanding Of our path in fiscal 2024 and beyond, our goal is to drive double digit growth using some kind of rule of 40
Thank you. Our next question comes from the line of Adam Borr from Stifel. Your line is now open.
Hey, guys, and thanks Maybe just on Upchane. So obviously, I know that just closed a few weeks back. But I was just curious if you can talk more about the vision over time Integrating Up Chain with Fusion and Forge and how we should even think about the convergence of both Vault and Up Chain just given the similarities,
Yes. It's an excellent question, Adam. So as you know, Shane is PLM and PDM, product data management, product and product lifecycle management in the cloud. So it's a fully cloud native application. It's got both product data management and PLM.
It understands both files and cloud information models Like with Power Fusion, for example. Our vision for how this is going to work is Fusion already has a stack built on its cloud model that goes all the way through simple data management up through into product lifecycle management. Up chain will likely replace That capability within Fusion over time, but more importantly, what Upchain does is it supports a whole Swath of legacy applications from our competitors and from other places. So what we're going to do is we're going to go into Counts with legacy applications or where we see overlap with other applications and Combine the Fusion stack and the Up chain stack to handle the whole swath of data our customers use. Now ultimately as well, what we're going to do is we're going to integrate Up chain with Vault, so that Vault can now have an extension to the cloud.
We're not going to force our Vault users to move from on prem to the Vault is a very popular application. We sell a lot of it every quarter, and we're going to continue to update and maintain it. You might have noticed that we Just released a mobile and extension to it and some web extend additional web extensions capability for Vault. So we continue to Drive Vault, but we are going to integrate Vault and Up Chain over time, which will give our Vault customers a path to Putting all their data in the cloud as they see fit to do it, but we're not going to force that migration. So look for it to replace the guts of Fusion lifecycle over time And integrate with Fusion's cloud information model and look for it to integrate with Vault over time and provide a path For Vault customers to the cloud and then ultimately look for us to be going after legacy systems with a combination Our Fusion offering and up chain's capability to bring all the customers' data and all the applications the customer use together in one robust cloud environment.
That's great, Andrew. Maybe just a quick follow-up. Just on the Autodesk Construction Cloud, you cited some nice examples of some customer wins in the quarter. Just as you think about that business over the course of the year, especially with the improving macro, kind of where are you thinking of how are you thinking about that business as the year progresses. Thanks so
much. Yes. So we have really high expectations for how that business progresses as the year progresses. And We're definitely getting some good indications. One of the things we watch are the bids the activity on bid board through our BuildingConnected service.
That activity has been going up in Q1. It's been progressively going up each month, which is great. So we see a lot of activity heading into there. Just like a lot of our We expect some of the new business to be back end loaded, but we're super happy with where we are right now. We had a good launch of Autodesk build is getting good take up and monthly active usage from some of our customers.
New customers are embracing it. Our international expansion that we put on hold last year because of the pandemic are now moving into full year this year. Later this year, we roll out Autodesk build to the channel And that's going to accelerate those business. And one other thing I just want to highlight is why we're winning, Okay. And why we continue to win business and why we're so incredibly confident about the future.
Here's what customers tell us, all right? The end to end solution that We offer all the way from planning, early planning, through design, through pre construction, to pre construction planning, to site execution, all the way to digital handoff, To actual maintenance and operations of the asset, nobody has this, especially to the depth that we have in each one of those disciplines. The other thing that people are really excited about is the deep integration with BIM and the fact that it's a BIM native platform. It speaks BIM from the get go. It will always speak BIM and it's really good at it.
This is driving more and more displacement in competitive Solutions and accounts where we overlap. And one of the other big things that we hear from customers is our business model flexibility. Customers love that they can buy from us where they need to buy from us and how they need to buy from us, right? If you need a project based license, we've got it. If you need a consumption based model, we got it.
If you need a per user model, we got it. We adapt and flex Our business model to whatever the particular customer's needs are or their ecosystem's needs are, and we can do it anywhere in the world. So if we're dealing with an international customer, they know that when they standardize on us, they can get everywhere with the solution we do. So that's why we're winning. That's why we're bullish As we move into the next year and why we're excited about the construction market becoming hot and active again.
The digitization of this market is a multiyear trend. There's lots of opportunity for lots of people and we're seeing lots of validation in the direction we're heading. I think it's going to be an exciting year for digital construction. Great. Thanks again.
Thank you. Our next question comes from the line of Joe Brunk from Baird. Your line is now open.
Great. Hi, everyone. Maybe just to focus on Fusion 360. I think the first disclosure on commercial subs was about a year ago and 152,000 is About 80% since then. Andrew, when you mentioned that business being at a tipping point or I think you might have said past the tipping point, Is it just a function of scale and customer awareness now that the product is as large as it is?
Or are there other dynamics At play that you would point to as kind of supporting the business through this fiscal year?
Well, there's a lot of things. 1, there's the increased interest in the cloud, all right. There's the simple network effect People saying, you know what, I displaced my Mastercam in SOLIDWORKS with Fusion. You should try it too. It's awesome.
So we're getting that Work effect of people basically encouraging each other to move forward and get off the legacy systems and move to the cloud, with Fusion. So we're seeing some of that. We're also seeing and this is super important. We're seeing increased purchases within accounts we've penetrated previously, which means we're moving from Kind of being a niche solution inside these companies or maybe a partially piloted solution to production. And that's also an important driver.
And we expect these trends to continue this year and continue moving forward. And one of the really exciting things about this is we talk about growth Beyond FY 'twenty three and in FY 'twenty four and 'twenty five and beyond, the early success we're seeing in Fusion right now is going to be a growth engine that continues to accelerate over the next 5 years, especially as we start introducing our new design our extensions. We already have one for Advanced Manufacturing. We have various There's going to be new extensions in the second half of the year. Those extensions are going to continue to be out there.
We're particularly excited We sold more Fusion than other applications in Q1 without any type of promotional activity. All of this points towards Increasing customer demand for what we're doing.
Okay, that's great. And then just on the comment that In regards to your construction end markets, uncertainty is lessening. I appreciate no sale is ever easy, but Are there things that become easier, the fact that license compliance billing seems to have had a good quarter coinciding with a Better backdrop, is that something that accelerates as the year goes on? Or would you maybe point to other areas of your business as well?
I'm sorry, could you you went out a little bit for me on the last part of that. The part of the question, what's the key point of the question here? Sorry.
With uncertainty lessening, license compliance and having those conversations seems like that Could be one area to benefit. Are there other areas as well?
Yes. Okay. So as I've said many times, license compliance is one of these areas that We're just going to build a steady drumbeat on, all right. It's going to be the gift that keeps giving for years years to come. We do not want to accelerate it unnaturally Because we want to bring our customers along with us, we want to keep them happy, help them get compliant.
You noticed the story that I offered up in Indonesia About that customer actually buying premium subscription as well as becoming compliant and being happy about how they were able to deploy it, that's the So we did see some acceleration. You saw the growth numbers in the opening commentary around Around non compliant billings in Q1, but that was off of a Q1 that was previously off. So we had a really strong compare. Don't expect any hockey sticks, though the Q1 of this year was better than the Q1 of fiscal 2020. So you're seeing continued growth, which is what we want to see is nice, Steady growth in this business, but don't look for any hockey sticks this year.
We're back to the path we were on previously.
Great. Thank you very much.
You're welcome.
Thank you. Our next question comes from the line of Matt Hedberg from RBC Capital, your line is now open.
Well, great. Thanks for taking my questions. Andrew, I wanted to go back to the construction side again. Obviously, the cost of building just continues to go up from a materials basis. And I know you guys have talked about the amount of waste globally that comes from construction Is that having a positive impact on pipeline generation?
As a lot of these construction firms, I just And customers just have to become more way more efficient. Is that a portion of your pipeline growth there? So Matt, that's a very astute observation, all right. It's too early to say if The cost of the increases in the cost of material is driving increased focus on digitization, but it is one of those things that we have Constantly highlighted as one of the reasons why the value chain for construction need to digitize. Because when material prices have gone up the way they have, you can't afford to over purchase and waste materials.
So I can't tell you precisely if this is one of the pipeline drivers, but I can tell you that we're mentioning it to customers and we're having customers about, hey, Conversation with customers, you want to keep your material costs down, digitize, right? Plan for less waste, only order what you need. So it's definitely entering into the conversation. I think it's too early to say if it's driving acceleration in the pipeline, but I think it's likely that it is. That's really great to hear.
And then, thank you for that. And then Debbie, welcome for me as well. I guess, one of the questions that we always get and I'm sure you get as well is that sort of what gives you confidence in that kind of that hockey stick cash flow guide for fiscal 2023? Now that you had a little bit of time to kind of reflect on the model, what are sort of what's your sort of your view on some of the major drivers? I know we've heard Yes, Scott talked about them in the past.
But just sort of curious on your perspective that gives you really that confidence that you seem it was clear in your remarks.
Yes, sure. Matt, good to talk to you too. It's a in large part, it's a lot of the things that I mentioned before. I think it's Combination of a growing TAM as well as further monetization of our TAM. And so that continued digitization in TC with more innovation in Revit, with expanding BIM mandates and ongoing BIM proliferation around the world with The digitization of construction that Andrew just talked about, even the infrastructure bill could be a wildcard We're hopeful, although nothing is baked into our numbers at this point, but these are all the multiple growth drivers that give me confidence in the ramp.
I think some of the other data points that we have out there, I'll repeat because these are the things, frankly, that I've been looking To get my own sense of confidence into that ramp into fiscal 2023, the conversion of non compliant users, the fact that those billings doubled in Q1 and we're seeing more Success with that program. The fact that we are selling more direct, that's a driver of growth for us and ultimately will translate to free cash flow Over time, the improving macroeconomic backdrop, all of these factors combined are what gives me confidence in our ability to achieve Our revenue growth potential in fiscal 'twenty three as well as that free cash flow number of $2,400,000,000
Thanks, Debbie.
And Matt, I'll just reinforce some of the things that Debbie said, because I don't think we can talk about this enough because did you notice the list of things she gave there? Right. There's a whole set of horizontal things just around the normal business, the non compliance, the new types of subscription models, the rollout of consumption, The accelerating growth in our end markets, all of that combined also with the strategic levers around digitization and AEC, Around the convergence of design and make of what we're seeing with Fusion and in the whole move into new adjacencies that we're doing, any one of those things Could contribute to viable long term growth, we have all of those levers to pull, all right? I just want to remind, we have all those levers to pull. And in Autodesk, we're really good Picking and choosing the levers to pull when we
need to pull them.
Sounds great. Thanks a lot guys.
Thank you. Our next question comes from the line of Sterling Auty from JPMorgan. Your line is now open.
Yes, thanks. Hi, guys. One housekeeping one to start. Can you be specific in terms of what the contribution to the guide is from the acquisitions?
Sure,
Sterling. So the impact on the acquisitions It was a one point increase to our revenue guidance range on the year, a one point decrease to our operating margin range on the year, And it was neutral to free cash flow. That's consistent with what we said on the last call.
All right, perfect. And then, Andrew, as we think going forward, is Fusion 360 always incremental to Kind of the installed base of traditional seats or have you already started to see a little bit of conversion 1 to the other. And if that's the case, what kind of change does that have on kind of the ARR contribution? Yes. So nobody is moving from inventor to fusion right now, okay?
It's just not happening, All right. It's actually most of the business is about going after incremental seats inside of competitive accounts, especially down market. The one great thing about our strategy is most of the Inventor is bought through collections, which includes Fusion. So as if an Inventor user does start to move diffusion over time, they continue on the same subscription path we'll do. And what we'll do with our collections is some of the extensions that would be available to a vanilla Fusion users that they'd have to pay for would be included with the collections version.
So essentially what you see is a kind of an ASP neutral Conversion from Inventor to Fusion, but that's going to take a long time. Most of the Inventor customers are going to stay comfortably where they are. But when they do move, It's essentially AFP neutral in terms of impact on our ARR. It doesn't change the ARR Excellent. Thank you.
Thank you. Our next question comes from the line of Jason Selino from KeyBanc Capital, your line is now open.
Great. Thanks for taking my questions. Maybe one, the ambitions in infrastructure, Andrew, you talked about the gains in roads and bridges with improvements to Civil 3 d and the Expansion is in the water here, but how do you think about some of those other areas of infrastructure, maybe some like some of the electric utilities or other areas?
Yes. So right now, Jason, we're going to stay focused on road and rail and And bridges and the things that go along with road and rail and water, that's going to be our focus area. There's a lot of Exciting things happening with elastic grid designs and the electrification and things associated with that. We're not going to be focusing on that right now. We may in the future.
But right now, if you look at even if you look at where the infrastructure bill is going, for instance, most of it is going To the upgrading and expanding the deteriorating infrastructure we have in the company around road, rail, bridges, civil and water And that's going to be our sweet spot for a while, both wins in that respect.
And then you also talked about the why Autodesk Wins in construction, which was quite helpful. We also alluded to the digitization opportunity there just being more broadly bigger. Maybe can you talk about how much of that TAM
Yes. A lot of the TAM is greenfield. Really, sometimes what you're competing with here is some kind of free tool, An Excel spreadsheet or a lack of any digital process whatsoever beyond emailing PDFs, Right. So there's a lot of greenfield opportunity here in addition to kind of just flipping existing customers off of legacy systems We're consolidating their systems. So there is a very robust long tail of growth here that's going to go on for years.
That's why it's so exciting to see all the activity in this space, because it's going to take a village to digitize this entire market. And we're at the very, very early stages Which is great.
Great. Appreciate the color. Thank you.
Thank you. Our next question comes from the line of Gal Munda from Berenberg. Your line is now open.
Hi, Andrew. Hi, Debbie and the team. Thanks for taking my questions. The first one, Andrew, maybe just a little bit on New construction portfolio has really expanded and it's very, very strong now. I'm just wondering how should we think about the individual brands that you acquired between PlanGrid, Assemble, BuildingConnected Pipe on one side and then Autodesk Construction Cloud on the other side In terms of user adoption, do you see users that came in for individual brands now starting to kind of move towards the platform approach as well?
Yes. It's an excellent question, Gal. So as you know, Gal, Autodesk Build and the construction cloud in general is the unification of all those brands. And it's where we lead with new customers. Absolutely, when we're going out there chasing new businesses, it's Autodesk build, it's all the capabilities that have built into Autodesk build, it's Take off, it's all of those tools associated with the construction cloud, and that's where we lead.
But we're also seeing people migrate Off of the individual brands and move forward, right? So we're seeing the same kind of thing Happening incrementally, but that's not we're going to let those people move at their own pace, right? So when they're choosing to move on to the consolidated cloud, They're doing that by choice and as part of a process. Over time, we will ultimately migrate all of them to Construction Cloud and ARTIS build. But right now, we're leading this with our new customers with Autodesk Build and helping customers consolidate onto Autodesk Build when they want to bring some of those old brands along with them.
But all the best technology from all those brands is in the Construction Cloud now.
Understood. Thank you. And maybe, Debbie, just Another question for you. I completely understand that Q1 is the smallest quarter in terms of new business generation and in terms of the renewals as well. So, what I wanted to touch though is it might not have been a good time to kind of organically think about raising the guidance for the year so early in the year.
I'd like to just kind of take a step back and think about what happened during Q1 and what you're seeing so far in Q2. If that kind of level of trading and recovery continues, is it fair to say that you feel pretty confident about your full year guidance then?
I mean, we issued the guidance today that we feel comfortable with. And I would We certainly have a strong sense of optimism based on the results that we had in Q1, but it's just too early for us to change the underlying view on the
Thank you. That is all the time we have for Q and A today. I would like to turn the call back over to Simon May Smith for closing remarks.
Thank you everyone for joining us. Look forward to chatting to you next quarter, updating you on our performance. If you have any questions in the meantime, please just ping me directly.