Good day, ladies and gentlemen, and welcome to the Autodesk fourth quarter fiscal 2019 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Abhey Lamba, VP of Investor Relations. Sir, you may begin.
Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our fourth quarter and full year of fiscal 2019. On the line is Andrew Anagnost, our CEO, and Scott Herren, our CFO. Today's conference call is being broadcast live via webcast. A replay of the call will be available at autodesk.com/investor. As noted in our press release, we have published our prepared remarks in a slide presentation on our website in advance of this call. The prepared remarks document is intended to serve in place of extended formal comments, and we will not repeat them on this call. Going forward, we will replace the prepared remarks with the slide presentation. We will post a transcript of today's opening commentary on our website following this call.
During the course of this conference call, we will make forward-looking statements regarding future events and the anticipated future performance of the company, such as our guidance for the first quarter and full year fiscal 2020, our long-term financial model guidance, our revenue and cash flow expectations, the factors we use to estimate our guidance, our maintenance to subscription transition, our expectations regarding product mix and pricing, ops, customer value, cost structure, our market opportunities and strategies, and trends for various products, geographies, and industries. We caution you that such statements reflect our best judgment based on factors currently known to us, and that actual events or results could differ materially.
Please refer to the documents we file from time to time with the SEC, specifically our Form 10-K for fiscal year 2018, our Form 10-Q for the period ending October 31, 2018, and our current reports on Form 8-K, including the Form 8-K filed with today's press release and prepared remarks. Those documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or 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.
We will provide guidance on today's call, but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. During the call, we will also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of our GAAP and non-GAAP results is provided in today's press release, prepared remarks, and on the investor relations section of our website. We will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-over-year comparison under ASC 606. Now I would like to turn the call over to Andrew.
Thanks, Abhey. I am excited to share with you our impressive close to fiscal 2019 and the strong momentum we experienced closing the year. Consistent with the prior two quarters, we experienced strong personal performance across all geographic regions and in all product categories. In fiscal 2019, we achieved multiple milestones, putting us in an excellent position to deliver on our fiscal 2020 targets and advance the company to the next chapter of growth. Here are some of the key accomplishments we achieved this year. Recurring revenue was 95% of total revenues for the full year and has reached a steady state. Our total revenues of nearly $2.6 billion were the highest ever in the company's history. Our total subscription plan subs are now greater than total maintenance subs were at the peak of the prior model. We returned to positive free cash flow and earnings.
We significantly expanded our operating margin, and we strengthened our construction portfolio and now have an unrivaled breadth of construction solutions. Beyond that, I couldn't be prouder of the Autodesk team that delivered these results. They worked hard, and they deserve all the credit, and it's my honor to represent them. Now, before I dig deeper into our successes in the quarter, let me take a step back and revisit the five key priorities I laid out for the company at the beginning of last year. Our top priority entering fiscal 2019 was the continued execution of the business model transition. We now have less than 20% of our revenues coming from maintenance agreements, I am happy to report that we are effectively finished with the model transition and look forward to executing on our growth strategy.
We continue to invest in digitizing the company to provide our customers with a better experience as they go through their own digital transformations, which is a recurring theme we hear from all of them. We have a focus on driving the building information model to the design and make process in AEC. During the year, we highlighted a number of customer wins that are using BIM to manage their design and make processes in the AEC industry. We look forward to executing on that theme further in fiscal 2020 as BIM momentum remains strong.
We are continuing to invest in automating the process of design to manufacturing. We are seeing early signs of the convergence of construction and manufacturing processes. Looking at our Q4 performance, we built upon the broad-based strength of the last couple of quarters by achieving 34% growth in annualized recurring revenue, or ARR, which remains the most important metric for us. We are becoming a more strategic partner for all of our customers, but in particular for our larger customers, a fact reflected in the strong growth of our enterprise business. Within product categories, we continue to see greater adoption of industry collections in our BIM 360 solutions. In line with our expectations, our free cash flows accelerated in a meaningful way as our billings topped $1 billion for the first time in the fourth quarter.
Scott will walk you through more of the financials. I want to spend a little bit more time talking about our progress in various areas. Expertise in our products remains in high demand and is growing rapidly. According to Indeed Hiring Lab, AutoCAD expertise is featured among the top 10 fastest-growing skills in technology job searches. In addition, according to Upwork's latest quarterly index, Revit expertise is featured among the top 15 hottest skills for freelancers in the U.S. job market. These are important indicators of the ongoing opportunity we have to grow our subscription base and to turn more and more of our users into subscribers. During the year, we strengthened the foundation of our construction business with both organic and inorganic investments.
In addition to investing in our BIM 360 portfolio, we purchased Assemble Systems to bolster our pre-construction capabilities, PlanGrid for document-centric workflows and field execution, and BuildingConnected for bidding and risk management. This year, our focus is on integrating these businesses to deliver even greater value to our customers. The broadened product portfolio will help us expand our presence with general contractors, subcontractors, and building owners. The feedback from our customers regarding these acquisitions has been overwhelmingly positive. They are excited about the expansion of our portfolio. For instance, Clayco, a leading construction and design firm based in Chicago, has been an Autodesk customer for many years. As users of BIM 360, Assemble, PlanGrid, and BuildingConnected, they have fully embraced the digitization of construction.
They rely on the breadth of our portfolio to deliver value to their customers by automating their design and make activities throughout the pre-construction and construction processes. We look forward to strengthening our relationship with Clayco by investing in solutions that span their workflows. Additionally, we see opportunities to expand our relationships with other leading companies in the space. Beyond that, BIM adoption remains one of the key drivers of investments in the infrastructure space. Mandates for using BIM drove another seven-figured enterprise agreement with a large European infrastructure provider during the quarter. We doubled our contract with the customer as they look to expand their adoption of BIM for building and managing their infrastructure projects. Our unique portfolio design tools is allowing them to expand from products like AutoCAD and Inventor into Revit, the world's leading BIM design tool, BIM 360 for site execution, and other advanced analysis tools.
We look forward to strengthening our partnership with them and many other organizations that are looking to rely on advanced technologies to drive efficiencies. On the manufacturing side, generative design and our investments in Fusion continue to attract global manufacturing leaders to partner with us. During the quarter, we signed an enterprise agreement with Hyundai Motor Group, who plans to leverage our technologies to create innovative designs. Hyundai is very interested in utilizing our capabilities in generative design, and we look forward to partnering with them to drive innovation in the automotive space. In summary, I am extremely pleased with our fiscal 2019 performance, and I'm excited about the future. We are entering fiscal 2020 with strong momentum in every geographic region and across all product categories. This sets us up well to achieve our target of $1.35 billion of free cash flow this year.
We also expect to see acceleration in our construction business this year and beyond. When combined with continued execution in the core, this will drive strong ARR growth into the future and help us reach our FY 2023 goals. Now I'll turn it over to Scott for more details on the financials.
Thanks, Andrew. Before digging into the numbers, I would echo Andrew's excitement entering fiscal 2020, as we are experiencing great momentum in our business, driven by strong execution. Record billings of just over $1 billion in the quarter, coupled with better-than-expected cash collections, drove free cash flow of $294 million. For the year, we ended up generating free cash flow of $310 million. This kind of powerful leverage in the model drives our confidence in achieving our fiscal 2020 cash flow target. Before discussing more detailed financial metrics for the quarter, let me highlight the impact of the fourth quarter acquisitions on our results. The acquisitions contributed $27 million to ARR, $7 million to total revenue, and $43 million to billings for the quarter. Recall that we calculate billings by adding the change in deferred revenues from the balance sheet to our reported revenues.
The acquisitions contributed $36 million to deferred revenue on the balance sheet and $61 million to unbilled deferred, for a combined contribution of $97 million to total deferred revenue. The acquisitions also increased our total expenses by $12 million, resulting in a negative impact of $5 million to our operating income, or 85 basis points to our non-GAAP margin for the quarter. The acquisitions negatively impacted our non-GAAP earnings per share by $0.03. Lastly, they contributed 127,000 subscriptions that are included within our reported cloud and total subs numbers. Please refer to the earnings slide deck on our website for more information on the contribution from acquisitions and our adjusted results for the quarter. Now I'll discuss the remaining financial metrics excluding acquisitions, as our fourth quarter 2019 guidance did not include their contributions.
Our Q4 ARR growth of 33% benefited from a 17% increase in total ARPS and a 13% increase in subscriptions. Our strong performance across all product lines and geographic regions drove the results for the quarter. There was approximately one percentage point of benefit to the ARR growth related to upfront revenue recognition of some products, such as VRED and Vault, that do not incorporate substantial cloud services and are recognized upfront. Before I go into more details about our subs and ARPS, let me reiterate that this is the last time we'll be disclosing subs and ARPS on a quarterly basis. Going forward, we will use events like our Annual Investor Day to report on these metrics that will help you build your long-term models. Looking at subscriptions, we grew total subscriptions by 13% to 4.2 million.
In the quarter, our subscription plan subs grew by 291,000 organically, led by growth in product subscriptions. We added 51,000 cloud subs driven by the continued adoption of our BIM 360 solutions. For core subscriptions, our net additions of 74,000 were driven by strong adoption of our industry collections, which continue to grow as a percentage of net new product subs sold. Industry collections now represents approximately 28% of our total subscription install base. Moving to the maintenance to subscription program, or M2S, we continue to make solid progress. In Q4, 110,000 customers migrated from maintenance to product subscriptions. We now have converted nearly 800,000 maintenance customers to subscription since the inception of the program. Similar to the last few quarters, the conversion rate remains strong, with approximately one-third of the maintenance renewal opportunities migrating to product subscriptions.
Of those that migrated, upgrade rates among eligible subscriptions remained within the historical range of 25%-35%. We expect the number of M2S migrations to moderate in fiscal 2020, as we have less than 800,000 maintenance subs remaining. Maintenance renewal rates experienced a modest decline versus a year ago, which is as expected. Product subscription renewal rates ticked up year-over-year. Overall, we continue to experience very high renewal rates for M2S-related subs, and industry collections continue to command high renewal rates. We expect the renewal rate for product subs to keep increasing as the product mix shifts towards higher-value products. Now let's talk a little bit more about annualized revenue subscription, or ARPS. Total ARPS posted another quarter of strong growth as it continues to benefit from the same drivers we discussed at last year's Investor Day and that have manifested in the previous few quarters.
These drivers include continued growth of the renewal base, which comes at a higher net price to Autodesk. The increase in digital sales, also at a higher net price to Autodesk. The product mix shift to industry collections. The maintenance price increase for those customers who don't take advantage of the M2S program, and less discounting and promotional activity. Contributions from our direct business rose by two points sequentially to 30%. Our eStore, which is playing a bigger part in our digital sales, grew by more than 50% in fiscal 2019. For the past six quarters, our eStore has generated over 20% of the new product subscriptions. Q4 also marked the ninth consecutive quarter of more than 30% growth in our enterprise business, demonstrating greater adoption within the largest customers. In fact, our EBAs posted over 60% revenue growth in the quarter.
Looking at the balance sheet, total deferred revenue grew by 13%, which also includes the unbilled amount. Unbilled deferred revenue increased by $80 million sequentially to $530 million due to strong EBA performance. Our long-term deferred revenue posted sequential growth for the first time in seven quarters, driven by multi-year subscriptions, which we expect to normalize back toward historical norms during fiscal 2020 and beyond. While our stock repurchases slowed down in Q4 as we were conserving cash for the acquisitions, we used $293 million in fiscal year 2019 to repurchase 2.2 million shares at an average price of $130.15. We remain committed to managing dilution and reducing shares outstanding over time.
Now I'll turn the discussion to our outlook. I'll start by saying that our view of the global economic conditions remains unchanged for the last few quarters, and we continue to monitor the potential macroeconomic impact from Brexit and the various trade and tariff disputes. There have been some foreign exchange volatility, but our hedging program has succeeded in smoothing out the bigger swings. We are reiterating our fiscal 2020 free cash flow outlook of approximately $1.35 billion. Our across-the-board strength and momentum exiting fiscal 2019 will help us drive ARR growth in the range of 27%-29%. On an organic basis, we expect our total non-GAAP expenses to grow by only 2%, while the acquisitions will drive another seven points of growth.
In line with our initial plans, we expect billings growth to accelerate to about 50% due to continued normalization of our multi-year billings, flow-through from unbilled deferreds, strength in our renewals, new subscription growth, and acquisitions. Recall that our fiscal 2019 billings were negatively impacted due to the adoption of ASC 606 accounting standard, which, combined with the recent acquisitions, is offering a little over 10 percentage point tailwind to our billings growth in fiscal 2020. When looking at the quarterization of free cash flow for fiscal 2020, given normal seasonality and strength of payment collections and large deals signed in the fourth quarter, we expect about three-fourths of our free cash flow to be generated in the second half of the year. Lastly, the non-GAAP tax rate for fiscal 2020 is expected to be 18%, or a point lower than fiscal 2019.
Looking at our guidance for the first quarter, our strength in the fourth quarter presents a tough sequential compare. Given normal software seasonality, other revenue in Q1 is expected to be about half as much as we experienced in Q4. Normalizing for the upfront revenue recognition in the fourth quarter subscriptions and contributions from recent acquisitions, our expected sequential change for the first quarter revenue growth is in line with our historical trends. The slide deck on our website has more details on modeling assumptions for the fiscal first quarter and full year 2020. Before we start the Q&A part of the call, I want to summarize by highlighting that fiscal 2019 was a year of milestones for us. We exited the year with strong momentum in our free cash flow that drove our revenue growth plus free cash flow margin to 37% for the year.
Going forward, we continue to focus on driving our free cash flows, driven by ARR growth and margin expansion. I could not be prouder of the accomplishments of the Autodesk team, and I want to acknowledge our fantastic employees, customers, and partners around the world. We look forward to seeing most of you at our Analyst Day on March 28th, where we'll discuss our plans in more details. Operator, we'd now like to open up the call for questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, that's star then one to ask a question. In the interest of time, we ask you to please limit yourself to one question and one follow-up. Our first question comes from Philip Winslow with Wells Fargo. Your line is now open.
Hey, thanks guys for taking my question, and congrats on a great close to the year. Andrew, just wanted to focus in on the tone of business. Obviously, Scott mentioned that your view of the economic conditions was still unchanged from the last couple of quarters. If you drill down into the industries, AEC, manufacturing, what's the feedback that you're hearing from customers about their spending intentions? Anything that you'd want to call out there? Just one follow-up for Scott on that.
All right, Phil. Thanks. Look, like we said, we're seeing strength across all the geographies and all the industries. Everyone's growing well, and everyone's signaling an intention to keep buying. Right now, we don't see signs of a slowdown in anyone's purchasing activity. We probably told you previously many times that we watched the AutoCAD and LT revenue streams fairly carefully to see if we see any signs. Those grew 36% year-over-year, so they're still robust and strong. Right now, all the industries we look in, Phil, they're all showing signs of continued growth, so nothing's slowing down right now.
Phil, from a revenue standpoint, AEC growth was 35% for the quarter, and it's flat sequentially. AEC has been strong for us all year, continued to be strong. Manufacturing growth actually ticked up from 20% in Q3 to 29% in the quarter we just closed. If anything, we're seeing it stand pat and get stronger.
Got it. Just, Scott, a follow-up on your comments on ARPS, just wondering if you could help us just frame this coming fiscal year. Obviously, you had a lot of positives in fiscal 2019, maintenance pricing, M2S collections. How are you thinking about just ARPS this coming year? Maybe walk us through the puts and takes this year compared to fiscal 2019.
Phil, I think we'll continue to see the same trends that we've seen in ARPS. The long-term drivers of ARPS growth are still in place. That's the continued shift to industry collections, obviously drives ARPS up. We gave you some stats in the opening commentary that the industry collections are now 28% of our total product subscription base, which is huge. That's driving ARPS up. I think that trend continues. We'll see higher net from a continuing growth in the renewal base, and you know renewals come to us at a higher net price. We'll see the continued shift to direct sales, which also comes to us at a higher price. Smaller pricing changes and less discounting.
Some of the core trends that we saw driving it, that we talked about at last Investor Day, that we saw driving it this year, those things will continue into fiscal 2020.
Thank you. Our next question comes from Saket Kalia with Barclays. Your line is now open.
Hey, guys. Thanks for taking my questions here. Maybe just to shift gears to construction and start with you, Andrew. Realizing it's still early for PlanGrid, can you just talk about how you're thinking about pricing strategies here down the road? I know that we've talked about the benefits of the per user model, but if I think about other packages like EBAs, which have been so successful as of late, and think about potential with PlanGrid, I'm curious just how you're thinking about PlanGrid pricing strategy with what you've learned with some of the innovations in with Autodesk pricing strategy down the road.
Yeah, Saket, that's a really good question. I think you probably know that PlanGrid's current pricing strategy is basically packets that have unlimited project access and limit the number of sheets that are being accessed. They have a nail gun, dozer, and crane kind of purchase level. We have named user models. We also have a project-based model, and then we have the pay per use EBA model. One of the things that's important to recognize about the construction ecosystem is projects involve multiple people participating on trying to create an outcome. Generally speaking, what people want to do is get as many people into the project using the software as possible, and they want to do it in a predictable and economical way. You've seen lots of models being played with in this space.
One is the project-based model where people charge you as a percent of the project value, and every project they add, they keep charging you more. We found that model to be very problematic as you get deeper and deeper into your customers' business because the customers basically start to push back on this idea of paying more and more based on the number of projects you're putting into the ecosystem. Named user bundles are attractive because you can essentially charge discounted pricing for thousands of users at once. You'll probably see that showing up in the PlanGrid model moving forward. You mentioned, lastly, the notion of pay per use pricing. Imagine being able to sign up for a project and just pay for what you use as you go along through the project.
You'll probably see us start to experiment with those things as we move out in the later years. At the very least, PlanGrid, over a period of time, will start integrating with our EBA model, and our EBA customers will be able to do pay-per-use models. Looking forward, start to imagine the PlanGrid models lining up with some of the models we already have, and start looking at more pay-per-use type models as we move into bigger and bigger project ecosystems.
Got it. That's really helpful. Maybe on that same topic for you, Scott, can you just remind us how the billings work for PlanGrid and BuildingConnected, and similarly, how that could change over time, just as those businesses become more integrated with Autodesk?
Yeah. Initially, with both PlanGrid and BuildingConnected, we're leaving the sales teams intact so we can maintain the momentum in each of those businesses. They will flow in. They will be consolidated, obviously, with our total results, but they'll flow in through their own sales teams. For the full year, I expect to see those billings come driving somewhere around the mid-single digits of our year-on-year billings growth. It's a notable amount of billings growth for the year. The one exception to that is we will have the PlanGrid sales also incorporated through our named account team. The people that sell to our largest customers, sell the EBAs. They'll also be selling PlanGrid. We'll have a little bit of it coming through our own sales team. The remainder will continue to come through the sales teams that are there.
We are investing, by the way, to grow those sales teams post-acquisition.
Thank you. Our next question comes from Heather Bellini with Goldman Sachs. Your line is now open.
Great. Thank you so much for taking the question. I had two, just related to collections and then on the construction side. You guys have obviously seen a pretty steady mix shift over to collection SKUs, and I'm just wondering if you could share a little bit with us what's driving those conversions, and specifically, are you doing anything to help incent that with maybe special promotions around collections? Is there any change in terms of the mix? I think you used to say you expected it to be 30% of the mix. Any update on that would be helpful. Then, I had a follow-up on the construction side, which obviously now you've got a more robust offering. I'm just wondering what you're seeing, if anything different, from a competitive standpoint. Thank you.
All right, Heather. I'll start, make a comment on the collections thing, I'll let Scott weigh in as well, then we can come back to the construction point. Look, what's happening with collections is kind of what we expected. As customers are looking at their options, they're looking at upgrading from maintenance to subscription. They're looking at how they move their new seats into new types of mixes. They're just looking at the collections and saying, "Hey, you know what? This is a better way for me to consolidate my offering. My typical user uses this application and this application. I'm just going to true up on collections." We saw a similar phenomenon with Suites. We're just seeing it accelerated and at a somewhat larger scale with collections. We expect that to continue as we move forward, which is a good thing.
One, it simplifies our relationship with the customer. It increases the value of the account on an account-by-account basis, and it gets more of our technology on our users' desktops. It's all goodness from our perspective. Scott, do you want to add something?
The only thing, Heather, to the question of what's driving that, why is it going faster than Suites, we've talked in the past about a lot of work that was done to simplify from Suites that were seven different Suites, and each had three different versions, a good, better, best version, down to three. I think that simplicity has made it not only easier to sell and more efficient for our sales team and our channel partners, it's made it easier to buy on the buy side. I think that's the biggest driver behind it. There's always an occasional promo. There's nothing we've done explicit to try to drive this much faster.
Yeah.
I would say at the point of conversion, as Andrew just talked about, when you convert from maintenance to product subscription, that is a very attractive price point at that point to go from individual products over to Collections. That's why we're seeing that upgrade. That 25%-30% of those eligible are actually taking advantage of it and going to a Collection from a single product.
Heather, you've actually hit on something. Back in the Suites days, we did lots of cross-selling promotions around Suites. We've done very few, if any, around Collections, which is a really big difference between that program and what we're doing now. I think it talks to the maturity of the model and its connection with subscriptions. On your construction comments with regards to competitive dynamics, we've kind of surged into these acquisitions really pleased with what we're seeing. One, we feel like we've consolidated a pretty broad and exceptional solution, and it's right on track with some of our long-term strategic objectives. When we go and talk to customers right now, the conversation isn't really about competitors, it's about, okay, what's going to happen with the PlanGrid roadmap? What's going to happen with the BIM 360 roadmap?
How are you going to get the Building Information Model more entrenched into my processes? Our conversations with customers are excitement about what we're doing, not about, well, what our competitors are doing, which is a really great conversation to have. I just want to remind you of a couple of things so that you can kind of get a good sense for what we're doing here. With regards to both PlanGrid and BuildingConnected, we acquired these companies, and we did not change their run rate with regards to R&D. We didn't change their run rates at all. In fact, we've layered more R&D investment into PlanGrid and into BIM 360. What we're doing is we're accelerating the roadmaps of both of those products with much more targeting. PlanGrid is going to focus a lot more on site execution and the things associated with site execution.
BIM 360 is going to focus a lot more on project management and project flow. These are two incredibly sharp teams that are just going to kill it with what we've been able to do with the acceleration we're layering in. That's why you're seeing things like Construction IQ coming out right now, which we're really excited about because it's completely differentiated in the market. That's using data that only we have to aggregate it, layer machine learning on, and actually provide predictive outcomes of what could possibly happen at a construction project moving forward. Nobody else has that kind of stuff. You're seeing us surge ahead of the competition, not lose any momentum at all. This is a big area for us, and we're taking it really seriously, and we're investing more.
Thank you. Our next question comes from Jay Vleeschhouwer with Griffin Securities. Your line is now open.
Thank you. Andrew, for the six quarters since you've been highlighting your own internal digital infrastructure, is there some way for you to characterize or quantify or otherwise describe how that infrastructure, particularly in terms of transactional and license activation capabilities, has evolved? It's clear that your imputed license volume is already well above where it was before the model transition. You've got some pretty ambitious plans for multiplying the size of the eStore. In terms of what's occurred and what still has to occur, could you talk about that infrastructure? A follow-up.
Yeah. Jay, there's actually something really exciting I can comment on regarding the infrastructure. It doesn't get a lot of news, what's happening now is that every new purchase of a single-user license that happens out there in the market, whether it happens from a partner or directly to us, is going into a completely new back end that is serial number free. All of our customers that buy these single-user licenses that used to manage large spreadsheets of serial numbers, that is all gone. They are actually buying licenses that are completely identity based, and that is a powerful lubricant to how our customers manage and use Autodesk software. At the same time, the existing licenses they have that are sitting on the old model, serial number based, are being progressively migrated over to the new system.
By the end of the year, every single user license is going to be sitting on this new system, and serial numbers are gone from our single-user business. If you know anything about how people manage our software and how they do it, this is a non-value-added activity that sucks lots of time and dollars away from managing your relationship with Autodesk. That is getting removed, and that is a direct result of the investment we've made in the digital infrastructure. You're going to see similar moves as we look at how we do multi-user licensing in the future. That's something I'll save for another day. The other thing that we're able to do, and you're going to see coming out more and more, is usage analysis.
It's not just for our EBAs, but we're actually going to be projecting usage behavior back to our customers so they can see who's using what and to what degree the software is getting utilized. That will allow them to better control their relationship with Autodesk. It will also allow us to better understand what they're using and what we can recommend to them next. This year is a big year for lighting up infrastructure changes that we've been investing in over the last 18 months, and customers are going to see real benefits, Jay. These are not trivial changes in the way they manage their relationship with Autodesk. We're actually pretty excited about them.
Okay, thank you for that. The follow-up is, as you know, we track pretty closely your headcount, your open reqs, and where you're investing in sales and R&D and so forth. You have quite a number of very interesting-sounding senior management positions that you're looking to fill. Maybe you could talk about the thinking behind some of those. For instance, a Head of Build Design Strategy, a Chief Data Architect, a Head of Brand Strategy, Brand Activation, a Head of Self-Service Transactions, multiple things that sound pretty interesting. Maybe just put that in the context of where you're going this year and beyond.
Look, we are dead serious about having every aspect of Autodesk be completely digital. End to end, from when the customers first touch to when they get the product to when they use the product and when we provide layered automations on top of them. We manage and deal with mountains of data from our customers. For instance, what you heard about the Chief Architect role there, that's all about making sure that the infrastructure we're building behind the scenes takes that data from cradle to grave so it adds value to the customer at every single touch point. Does it in such a way that it's highly trusted, high integrity. The data's used in the service of the customer, not in the service of anyone else.
Those roles, what you're seeing is basically how we're translating the maturity of our investment into new types of automation activity, and we're just looking at, hey, we need this talent set, we need this talent set in order to layer on this automation. We're hiring to our roadmap, is what we're doing, and you're going to see more of that. Frankly, we're getting really interesting people coming on board that are interested in some of these positions. Very astute observation. Yes, you are correct. That presages other types of automation and activities that are yet to come from us, which we believe are kind of game-changing in our industry.
Thank you. Our next question comes from Gal Munda with Berenberg. Your line is now open.
Hey, thanks for taking my questions. The first one I just have, Scott, for you, maybe on the cost side. The guidance for the next fiscal year is kind of the high single-digit growth in terms of the cost base. Is that something we should be thinking more sustainable going forward, considering the fact we've had a few years kind of flattish cost base? Or is that something that's more of a one-off?
Yeah, Gal, it's a great question. If you peel back the guidance was 9% total spend growth for the year, and if you peel that back, it's about two points organic. Maintaining kind of the cost discipline that we've had. Of course, you layer on what Andrew just talked about in not just the
The inorganic growth, also the investments we'll make in those businesses. That's another seven points of spend growth overall. I think that's probably not a bad range to think, as you look further than beyond fiscal 2020 to 2021 through 2023. High single digits is probably not a bad range to think about spend growth going forward. It all depends on what opportunities are out there, and what's going to drive the long-term top-line growth of the company.
That makes sense. Thank you so much. If I just shift gears towards manufacturing a bit. Construction's been getting a lot of the highlight recently. In terms of the manufacturing, can you give us any color on the adoption of Fusion 360? When you look at some of the competitors, they're still growing pretty healthy in that space. How has been its growth, maybe if you look throughout 2018, in calendar terms, compared to what you've seen maybe the years before, because the product's more mature now, it's had several iterations. How do you feel about it?
Gal, let me tell it to you, this is Andrew. Let me say just a couple of things. One, nobody's growing at 29% in the manufacturing segment right now. All right? That kind of growth is share taking.
Besides us
besides us.
Right.
Besides us. All right? By the way, the reason you're seeing that growth is we talked a lot about year-over-year compares that people were questioning for a while because we were retiring some manufacturing project products. We were actually taking revenue out of the system as we retired and consolidated some products, mostly consolidating some of those products into the Fusion stack and into the Fusion platform. Now what you're seeing is the compares that actually show it was sitting underneath all of that. You're seeing robust growth in our manufacturing segment. What you're also probably seeing, if you're looking around in various forums, is that Fusion is really on fire. It's really, in terms of user growth, probably the fastest-growing platform in the industry right now. We're happy with where it's at right now.
What you're seeing is this exploration of what we've integrated into the platform with generative design. People are poking into this and using it in ways that, frankly, we didn't really foresee. I'll give you some examples. There's traditional hardline manufacturers that are using the generative capability inside of Fusion to explore a series of design options that would traditionally been 3D-printed natively. Then what they're doing is they're saying, "Wow, this is a better answer than I ever had." They turned it into a weldment. They're actually using the capability inside of Fusion to explore a design space they never explored before. They're doing it with constraints on their manufacturing methods and other things, then turning it into solutions that they can use right now with traditional methods they have. Really unique workflows, really unique things. Stay tuned.
I think we've been very clear with you that construction was the first priority. We've established a strong construction portfolio. We're happy with what we've got there. In terms of major acquisitions, we're done. As you look over the next 12 to 18 months, watch this space. You're going to see us start making the kinds of organic and inorganic moves in the manufacturing space that just accelerate the leadership position we already feel like we have.
Thank you. Our next question comes from Brad Zelnick with Credit Suisse. Your line is now open.
Excellent. Thanks so much, congrats on great results, guys. I've got one for Andrew and a follow-up for Scott. Firstly, something that came up in our conversations with partners this quarter was some confusion about the go-to-market strategy with PlanGrid. Can you just remind us of your strategy for integrating it into the broader construction portfolio, whether we should expect PlanGrid to continue being sold standalone or perhaps bundled with Build or ultimately integrating it with the BIM 360 platform longer term?
Yeah. For the foreseeable future, you're going to see PlanGrid continue to be sold standalone. We are rolling out a program where if a partner finds a deal, they get a commission on the deal. They get a finder's fee, essentially, for participating in the deal. PlanGrid's going to continue to sell directly. We are also looking at ways to appropriately create offerings that combine capabilities from BIM 360 and PlanGrid, where customers might be confused about which solution's best. Stay tuned, you'll see some of that. For the most part, we're letting this solution run and continue on its own. Remember, PlanGrid reached into a part of the construction ecosystem that we weren't spending a lot of time on, either were our partners, frankly, okay?
We're actually deeper into the construction chain than we were before, and we're letting them continue to go into that chain, renew their deals, and actually find new deals. That will continue, but we're definitely going to make sure that a partner, if they find something, we want them to tell us about it, and we want to make sure they make some money off it.
Great. Just for Scott, cloud subscriptions by my math grew about 35% organically. Can you maybe rank order the different drivers there? I think organic cloud ARPS was up only about 4% year-on-year. Was that in line with your expectations? Can you remind us of the levers that drive confidence in ARPS growth? Thanks.
Sure. On the cloud side, the biggest drivers organically of the cloud subs continue to be BIM 360 is number 1, and driving the biggest chunk of that growth. Fusion 360 would be 2, and then there's a handful of smaller products beyond that. Shotgun's in there. AutoCAD 360 is in there. But those two drive the majority of the cloud sub adds. The ARPS growth is in line with our expectations for the BIM 360 product set. You know in Fusion 360, we also made a price change on it recently. A quarter and a half ago, we made a price change on Fusion 360. You'll begin to see that price increase start to float its way through into the cloud ARPS as well. So I feel pretty good about where we are on the cloud side.
You can see the inorganic contribution in the slide deck that we posted. You can see it. It was also a positive to the cloud ARPS for the quarter.
Thank you. Our next question comes from Sterling Auty with J.P. Morgan. Your line is now open.
Thanks. Hi, guys. I guess I missed it, but I am going to ask the question anyway. What is PlanGrid and the other acquisition actually going to contribute in terms of this fiscal year's guidance? I didn't see it anywhere.
Sterling, we didn't spend a lot of time breaking that out. We expected it to drive about $100 million in ARR this year, that's consistent with what's built into the guidance that we gave. I broke out the spend. It was between the two of them, they drove seven points of spend growth year-over-year. You can do the math on what that looks like. That's probably about as much as we've done. The other thing is you're doing your own calculations, I saw in some of the preview notes, people trying to do the calculation. The other thing just to bear in mind is the swing in interest, the foregone interest on the cash spent and the added interest expense for the $500 million short-term loan agreement we picked up.
All in all, it's a slight headwind on EPS for fiscal 2020. It's a slight headwind for us on free cash flow for fiscal 2020, we feel good about being able to contain them.
All right. Excellent. Just one quick follow-up, Scott. Just as we think about the cash flow guide, I think multi-year agreements were going to be a decent contributor to that. What's been your experience, minus when you put the multi-year back into place, what's your experience and what does it need to do to hit that 1.35?
Yeah. It is one of the contributors. There are several things, obviously, that drive the cash flow growth year-over-year. Well, we posted $310 million of free cash flow this year, but if you remember, that included about $130 million of one-time cash outflows tied to the restructuring that we announced a year ago and the exit tax and moving our European hub out of Neuchâtel and to Dublin. The $310 is actually or it reflects $130 million of one-time payments that won't repeat themselves into FY 2020. The remainder of the growth is the two things we talked about. It's net income, and you can back into the net income increase year-over-year from the guidance points we gave you.
Net income grows strongly, driven by top-line growth, billings growth, and it'll grow for all the reasons we've talked about in ARPS. An element of it is multi-year, which is what you're touching on. We reintroduced the 10% discount for three-year paid upfront multi-year product subs. We hadn't previously offered any discount on that, although we did still have some multi-year sales on it. There was no discount. We reintroduced that in Q4. If you noticed, I know it's a busy night for you guys, but if you look at our balance sheet, you'll see our long-term deferred actually grew for the first time in seven quarters as we saw pretty good uptake of people buying that three-year product subscription deal. We expect to see that continue to grow next year and get back into the range that it has historically been.
I think in terms of what long term will represent of our total deferred revenue, we think it gets back into that 20%-21% range that we talked about at Investor Day last year.
Thank you. Our next question comes from Zane Chrane with Bernstein Research. Your line is now open.
Hi. Thanks for fitting me in. Congrats on the great quarter, gentlemen. I was speaking with developers in one of the new skyscrapers in N.Y., and they were telling me how adopting Revit recently, they're expecting that to generate a 3x return on the multimillion-dollar contract they signed with you guys. That wasn't so much surprising so much as the fact that it sounded like a fairly recent decision. It made me wonder, how penetrated do you think your customer base is in terms of Revit adoption for those customers that may potentially use it or could benefit from it?
Zane, you're actually hitting on something that's important to discuss. People think that Revit's already fully matured and penetrated the market. It's actually still very much the early kind of majority-type market for Revit adoption. We are actually seeing massive growth in Revit usage, Revit adoption. That's why I highlighted the increasing visibility of Revit skills as one of the skills that's important moving forward into the years. Revit's got a long way to go in terms of growth, and it really is the new engine of how architecture and building design is going to be done. It's not even begun its journey very much into the infrastructure space. Look for Revit to keep going and going and going, and watch how the skills referenced on Revit climbs up that list from where it is today, well into the top 10.
That's just to be expected, especially in Europe, where Revit adoption is taking off from the very early stages. It was much more mature in the U.S.
That's helpful. As far as the adoption, do you think that it will be driven more by the adoption of collections, or do you see a lot of enterprise customers buying it standalone?
Our enterprise customers almost all buy it through EBAs. They get access through the EBAs. It doesn't hurt that the collections have Revit inside, so the users can immediately start moving projects to Revit. Frankly, the big driving force for Revit has little to do with how we package our software. There's a couple of things that are driving it. One, the return you heard from those customers in New York. They basically see a fairly significant return. Owners, in particular, see a significant return and are more and more starting to mandate BIM for particular projects.
Governments are doing it. Owners of developers are doing it. People are just starting to expect BIM to be part of the process because they're seeing the ROI. That is more of a secular driver in terms of where things are going, this kind of digitization of the whole design through construction process, than how we package our software or sell it.
Thank you. Our next question comes from Matt Hedberg with RBC Capital Markets. Your line is now open.
Hi, this is actually Matthew Swanson on for Matt. Thanks for taking my question. Just one from me. In our survey work this quarter, we had a reseller bring up a large deal that came from previously pirated software. I know before at one point you had mentioned 4 million pirates in mature markets. Can you just remind us what this opportunity is and just how you go about identifying and pursuing it?
Just to put it all in scale, we have 18 million users of our products worldwide. There's 4 million subscribers. You can kind of see there's a big delta between users and subscribers right now. The way we look at this, especially in mature markets, is we look at people who are using the software, and maybe have a few illegal copies or a few illegal 6 serial numbers inside their environment, and we go and we have conversations with them. For the most part, when you hear about big deals like that was somebody that was probably really stretching the limits of what was legal with regards to our software.
Long term, what you're going to see with this whole entire process, like I said, I've said this over and over again on calls, there's no big surge that's going to happen at any one point. As a matter of fact, if we tried to create a big surge, I actually think what we'd do is create a big backlash. What you're going to see is a gradual kind of continuing add and penetration to that 18 million user base as we add more capability into the products that help us understand who's using the licenses validly, who isn't, and also as users start to realize that it's better to be part of the legal ecosystem than it is to be part of the invalid ecosystem. Just continue to see that momentum over time. Don't expect big spikes. Deals like what you just described are not the norm.
I want to make sure that we're clear on that. Especially as we move into fiscal 2021 and 2022, where we're getting further and further down from our last perpetual release, and we move more and more in pure named user licensing as a company, you're just going to see more and more of these people coming into the paid ecosystem.
Matt, we have our Investor Day at the end of March, actually a month from today, March 28th, here in San Francisco. This is obviously one of the topics that we'll update everyone on and give you a sense, not just of the numbers, but more importantly, the things we're doing, the changes we're making in both process and in the product to go after chasing that opportunity.
All right. Thanks for the time, guys.
Thanks.
Thank you. Our next question comes from Keith Weiss with Morgan Stanley. Your line is now open.
Hi, this is Hamza Fatawala in for Keith Weiss. Thank you for taking my questions. I wanted to follow up on an earlier question, asked about the integration between PlanGrid and the core BIM 360 product. What's the timeline for that, and is there any risk of customers perhaps being more cautious on purchasing BIM in advance of that integration, since there have been a lot of changes to that product in recent years, mostly positive, but just wondering if you're seeing any of that.
Yeah, one of the areas we're paying attention to, Keith. It was Keith, right? No.
It was actually Tom Porter.
Tom. It was Tom Porter , okay. One of the areas we're paying attention to, Tom, is moving very quickly on making it clear where the focus areas of those two products are. We've already kind of internally established that. PlanGrid is absolutely focused on site execution and all the things that make site execution just awesome, and they are incredibly talented. As Tracy likes to say, "Beautiful, simple software that helps people be more productive," and we're doubling down on that for them. All of the additional R&D investment we put in there is all going to accelerate their site execution roadmap.
Customers are going to start to see that very quickly and start to understand, "Okay, so the site execution stuff that I saw in BIM 360, I'm going to see more of it in PlanGrid, and I'm going to see these things kind of expand out." What we've done on the BIM 360 side is we've been very focused with that team of aligning them around project management and project management capabilities. There have been gaps that our customers have been asking for for quite a while around project management and project flow capabilities, and they're going to see an acceleration of those capabilities inside of BIM 360. We moved very quickly based on our own analysis pre-acquisition and some of our post-acquisition moves to be very clear with the R&D organizations where they should run and how fast they should run in those areas.
Customers will start to see that, and we're already starting to communicate some of this to our customers, and I think they're starting to understand it as being not only the right thing to do, but it intuitively makes sense.
Got it. That's helpful. A follow-up question, perhaps for you, Scott. It looks like ARR growth is pretty strong, sustaining a low 30%, but the sub adds were a bit below that of the original guidance, at least on an organic basis. Is that just the continued migration to collections, or is there any other factors behind that?
No, it is. You nailed it. As we've said in the past, we've focused much more on driving top-line growth and driving ARR than we have on driving the individual components of that. I feel really good about the continued strength in collections, not just at the point of migration from maintenance over to product subs, which has continued to stay strong, but also on new sales. We see Industry Collections at this point at 28% of our total product subscription install base. It's run faster than we expected to get to that point.
Thank you. Our next question comes from Ken Talanian with Evercore ISI. Your line is now open.
Hi. Thanks for taking the question. I was wondering if you could give us a sense for the percentage of your existing customer base that you're targeting for construction-related sales in fiscal 2020, and then what, if any, level of cross-selling success you're factoring into the fiscal 2020 guidance?
Well, Ken, one thing I can say is anybody that works in the AEC space is a target for our construction portfolio. When you look at our strategy, our strategy is to connect the end-to-end flow from the early design process all the way through down to site execution, and essentially get the building information model and the data that's attached to it moving through that entire process. Basically, our entire AEC ecosystem is a target for some part of this construction stack, be it BIM 360 design, all the way through to PlanGrid, and all the way through to BuildingConnected on the bidding side. We see a fairly open field with regards to who we're targeting. Now, what was the second part of your question?
What you're factoring into the fiscal 2020 guidance.
Yeah. Scott, why don't you take that?
Yeah. Ken, what I would talk about is we expect ARR to be in that $100 million range, and that is what's factored into the guidance for fiscal 2020. I think what I'd add, though, to the first part of your question of who are we targeting, one of the things that we were excited about when we got PlanGrid was not just the technology, which is beautiful, simple, easy to use, which is what's required in that site execution phase. They also have a strong base and a part of the ecosystem, the construction ecosystem, that we didn't have a lot of touchpoints to, which was the subcontractors and the trades. It's not just selling to our existing customer set in construction, which we obviously will continue to do. We also got a nice beachhead with PlanGrid into a part of the construction ecosystem we didn't previously touch.
BuildingConnected, by the way, brings that same thing. If you look at what BuildingConnected does, it connects general contractors to trades into subcontractors, into the people below them. It's actually a nice expansion of the people that we can target with our construction solutions.
Great. If I could follow up quickly, could you give us a sense of how to think about the adoption rate of construction software in the event that we see an economic slowdown? Are you having the kind of high-level conversations that suggest that this is a top priority regardless of the economic backdrop?
Excellent point, Ken. Look, what I'll do is I'll tell you about what happened in the last downturn, and I'll tell you about the sense of urgency the construction customers have around digitization. In the last downturn, construction IT spend continued to increase, even though that downturn hit construction incredibly hard. The reason for that is very simple. The most digital vendor or the most digital contractor won, because they were able to more accurately predict what their total costs were going to be able to do. They were able to get their bids in tighter. They were able to basically manage their costs better. Digitization wins. The whole ecosystem in construction understands this right now. It's an imperative across almost all of our customers at this point.
They're all looking to figure out how they can digitize their workflows, how they can extract more efficiency, how they can get more accuracy, reduce project risk, manage the timelines, reduce safety risks. That continues to be a highly visible aspect of this. We anticipate that even in a downturn, construction IT spend's going to go up. We're super excited about things like what we're doing with Construction IQ, where we're actually using some of the data that we collect from our customers to provide predictive outcomes, which is going to become more and more valuable. Digitization wins. All of our customers know that, and we anticipate the spend can continue even through a downturn.
Thank you. Ladies and gentlemen, this concludes our question and answer session for today's call. I would now like to turn the call back over to Abhey Lamba for any further remarks.
Thanks, Alfredo, and thanks, everyone, for joining us today. I want to remind you that we are hosting our Investor Day on March 28th in San Francisco, where we will discuss our business in detail. Please reach out to us if you would like to attend or have any questions from today's call. Thanks.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a wonderful day.