Autodesk withholding guidance due to ‘unprecedented’ FX environment, CEO says

Autodesk CEO Andrew Anagnost joins Yahoo Finance Live to discuss earnings, changes to the business model, headwinds from currency volatility, manufacturing, and growth.

Video Transcript

JULIE HYMAN: Shares of Autodesk have been moving lower this morning, following a third quarter earnings report that came in line with expectations. The software company posted a revenue increase of 14% year over year. For more, let’s welcome in Autodesk CEO Andrew Anagnost. Good to see you, Andrew. Thanks for being here.

ANDREW ANAGNOST: Good morning.

JULIE HYMAN: It looks like the Street is focusing on the billings growth that you guys are projecting here, or that you guys reported here, which, I guess, has implications for what’s going to be happening next for the company. Can you talk me through what is going on there with billings and what kind of clarity you have on the coming quarters?

ANDREW ANAGNOST: Yeah, overall, the business is resilient and performing as we expected, especially given some of the headwinds we’re seeing. I think what you’re seeing them focus on is the fact that we’re in a transition moving away from charging our customers for multiyear contracts upfront to billing them annually for that. And frankly, as the demand market has changed, people are less reluctant to pay for multiyear contracts– are more reluctant, sorry, to pay for multiyear contracts upfront.

And as a result, that lowers our billings. Net, for us, that’s a good thing because we want to get to annual billings as quickly as possible because it’s not the way our customers want to interact with us. And it’s certainly not the kind of volatility we want with regards to some customers paying upfront, some customers not paying upfront. But mostly, the stock’s reacting to what they think next year might look like. And there’s a lot of speculation about that going on out there.

BRIAN SOZZI: Yeah, and Andrew, to that point, it doesn’t look like you put out formal fiscal year 2024 guidance. I saw that in a couple of notes out this morning. What’s giving you that, I guess, hesitance?

ANDREW ANAGNOST: Yeah, look, because there’s a lot going on right now. There’s a lot of movement going on, especially what’s happening in Europe. And FX, the FX environment is unprecedented, given where we are. The currency exchange environment has been highly volatile, highly fluctuating. One of the things we signaled for next year is we’re probably facing a five point growth headwind just from currency effects.

So with all those things in play right now, the uncertainty in Europe– we’re heading into the winter with regards to what’s going on in Ukraine– in the Ukraine and all the things associated with that– why don’t we just wait and see how we finish out the year and how the currency rate environment settles? And that will give us a better sense for what the next year will look like.

BRAD SMITH: For some of the other areas around the world that you already operate in, are you already seeing some of those recessionary effects actually make its way through to your results here?

ANDREW ANAGNOST: What’s interesting is we instrument our business pretty thoroughly. We can track monthly active usage of all of our products and see, actually, what is happening in terms of people’s work and things associated with that. In the US and in Asia, if you take out China and Asia, monthly active usage continues to go up year over year. But what we are seeing– and this is not unexpected– is that in Europe, the monthly active usage of our products has flatlined year over year. It’s actually not– it’s not growing year over year for the first time since the pandemic.

That’s an indicator to us that activity is slowing inside of Europe. And we’re seeing that with some of our new business. We still grew in Europe, but new business was slowing and seeing some headwinds. I think that’s totally to be expected, especially in our manufacturing sector, where our manufacturing customers are seeing large increases in their energy costs. Not just their material costs, but their energy costs.

JULIE HYMAN: Andrew, across the tech industry, of course, we’ve heard a lot about cost cutting this earnings season. The latest, HP coming out and announcing a lot of job cuts. So what are you guys considering in terms of any kind of retrenching of any sort, whether it’s expense cutting or outright job cutting? Are you staying the course here?

ANDREW ANAGNOST: Yeah, we’re a pretty resilient business. I mean, one thing, it’s really great to be on a subscription model because that creates an incredibly resilient business. But also more, our products are kind of core and critical to what our customers do. They need our products to complete their work and move forward. So they’re going to continue to invest in our products. And we’ve also been pretty disciplined over the last few years in terms of how we invest. We don’t want to get over our skis. We don’t want to invest ahead of what’s going on. We continue to invest, and frankly, we’re going to continue to invest in the next year.

If we see things start to go sideways, we simply just stop or slow hiring. And that’s the way that we’ll put a governor on how things go as we head into next year. But right now, we’re still on a path to investing.

BRIAN SOZZI: Andrew, what’s your next big project for next year that might move the sales and earnings needle?

ANDREW ANAGNOST: Well, one of the things we’re doing is we’re moving all of our customers to a new set of industry clouds. And the industry clouds are huge in form and flow, and these have implications for how our customers work. So we’re going to be looking to drive more adoption of these clouds as we head into next year. And also, you’ve got to pay attention to infrastructure spend. Water infrastructure, civil infrastructure, these are areas that are going to start seeing growth as we head into next year and the year beyond. So we’ll be paying attention to the civil business and all the things associated with it as we move into the year.

BRAD SMITH: Andrew, the old me who wanted to go to school for architecture and design remembers some days of fumbling around with an AutoCAD and trying things out. Now we think about the future and where that really– that engagement might take place for some of your customers, at least, and whether or not the software applications can translate as well to the Metaverse, if somebody is looking even to do it in that capacity. You know, how do you think about translation of some of the existing software that you have and what that may look like if the Metaverse does become a reality?

ANDREW ANAGNOST: Yeah, everybody thinks of Autodesk as AutoCAD. The reality is, is AutoCAD is 20% of our business now. The world’s moved to 3D. Everything’s 3D. All buildings are modeled in 3D before they’re built. All manufactured things are modeled in 3D before they’re built. It’s the products that aren’t household names from Autodesk that are the most used products now in terms of how our customers work.

It’s Revit for 3D building models. It’s Formit in the future on the cloud. It’s Inventor and Fusion for 3D modeling of product designs. It’s Maya for modeling animations and films, like “Avatar,” like you were just talking about a little while ago. Everything’s 3D. All of our geometries, all of our customers work in 3D now. And 3D and the visualization of 3D and the XR experiences associated with 3D, they all fit together naturally. And a big part of our business is film and games and producing content for film and games.

And that is where the Metaverse is happening. We certainly see these 3D processes translating into virtual processes for how our customers work in the future. But you know what? Everything’s 3D now. All of our customers, from our most sophisticated to our smallest, use 3D modeling to solve their design problems.

BRIAN SOZZI: Autodesk CEO Andrew Anagnost, good to see you. Have a happy Thanksgiving

ANDREW ANAGNOST: Thank you. You, too.

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