Autodesk Inc (ADSK) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2011 Autodesk, Inc.

earnings conference call.

At this time all participants are in listen only mode.

(Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Mr.

Dave Gennarelli.

Please proceed.

Thanks, operator.

Good afternoon.

Thank you for joining our conference call to discuss our fourth quarter of fiscal 2011.

Joining me today are Carl Bass, our Chief Executive Officer, and Mark Hawkins, our Chief Financial Officer.

Today's conference call is being broadcast live via webcast.

In addition, a replay of the call will be available at Autodesk.com/investors.

As noted in our press release, we have published our r prepared remarks on our website in advance of this call.

Those remarks are intended to serve in place of extended formal comments, and we will not repeat them on this call.

During the course of this conference call we will make forward-looking statements regarding future events and future performance of the Company, such as our guidance for the first-quarter and full-year fiscal 2012, our five-year financial targets, the factors we used to estimate our guidance, and new products and suites releases, certain future strategic transactions, business prospects and financial results, our market opportunities and strategies, and trends and sales initiatives for our products and trends in various geographies and industries.

We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially.

Please refer to the documents we file from time to time with the SEC, specifically our Form 10-K for the fiscal year 2010, Form 10-Q for the quarters ended April 30, July 31 and October 31, 2010, and our periodic Form 8-K filings, 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 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 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 quarter 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 the GAAP and non-GAAP results is provided in today's press release, prepared remarks, and on our Investor Relations section of our website.

We will quote a number of percentage increases as we discuss our financial performance, and unless otherwise noted, each percentage represents a year-on-year comparison.

In addition, during the call we will discuss our five-year non-GAAP operating margin target.

Autodesk is not able to provide a five-year GAAP operating margin target or a reconciliation at this time because of the difficulty of estimating certain items that are excluded from the non-GAAP measure that affect the operating margin, such as charges related to stock-based compensation expense and amortization of acquisition-related intangibles.

Now I would like to turn the call over to Carl Bass.

Thank you, and good afternoon.

Our strong fourth-quarter results capped off a substantial year of progress.

After navigating through the biggest economic downturn in Autodesk's history, we are now experiencing a healthy recovery, and even achieving record results in several areas.

Highlights for the quarter include 16% growth in total revenue, double-digit revenue growth in all of our geographies and business segments, a sharp increase in large deal activity, record total billings, record revenue for our Manufacturing business, record revenue for our Revit family of products, record deferred revenue, and strong growth in cash flow from operating activities.

We experienced strong year-on-year growth in all of our geographies, with APAC again leading the way.

Global revenue growth was led by our model-based design products.

Our Manufacturing business had record quarterly revenue in the fourth quarter and grew 22% for the full year.

Over the last few years the dynamics of the Manufacturing segment has shifted dramatically.

Historically engineering software was targeted to different sized companies, and competition mostly occurred within those strata.

Our initial mission was to provide 80% of the functionality at 20% of the price.

So truthfully we are often seen as a provider of high-value, but less strategic software.

And we competed infrequently against our major global competitors.

Today we do much more than that original mission.

Through sustained investment in R&D and targeted acquisitions, we now have a product portfolio that is the most comprehensive and functional in the industry, while staying true to our original mission of providing great value.

The combination of our modeling data management and simulation capabilities has allowed us to grow much faster than our major global competitors, despite the difficult economic times.

Coupled with the continuing investment by our channel partners, and an increase in our direct sales effort, we are winning deals previously unavailable to us.

Taken as a whole, we are substantially outperforming all of our major global competitors with stronger products and better sales channels.

The Manufacturing segment continues to be our largest opportunity.

And I'm very optimistic about our market position and momentum.

What might be surprising to some is the strong demand we are seeing in our AEC business around the world, including the Americas.

We are even beginning to see a pickup in hiring in American AEC firms.

There continues to be improving demand for BIM solutions to retrofit the aging infrastructure of developed countries and significant infrastructure buildout of developing countries.

These demand drivers led to record revenues for our Revit family of products.

Growth in our Media and Entertainment segment was led by our [creative finishing] products, which had a very strong quarter in Japan.

We also experienced nice customer adoption of our new Maya Entertainment Creation Suite, which we introduced back in August.

At the start of the fiscal year we identified an opportunity to elevate our presence within major accounts.

These efforts paid off as we saw increased traction with major accounts throughout the year, and as a result, recorded 31 transactions that each exceeded $1 million in the fourth quarter.

For fiscal 2011 the number of large deals exceeding $1 million was a record as well.

What is gratifying is that we are seeing big deal activity in all geographies and across all business lines.

We look to further this initiative in FY '12.

On the other end of the spectrum from large deals are our prosumer and consumer apps and products.

Last month we launched the Mac App Store addition of SketchBook Pro.

On the first day alone we effectively doubled the desktop user base for SketchBook Pro.

And in just three weeks we have seen more than 0.5 million downloads of the free and paid versions combined.

We also added to our growing line of consumer apps with the launch of the TinkerBox app for the iPad, a really cool game to spark interest in mechanical engineering in teens.

Just after launch TinkerBox was the number one free iPad game app, and is still in the top 10.

Next up on the product release front will be our annual refresh happening in just a few weeks.

Unique this year will be the launch of several new products suites across our business segments.

For the past several years we have been on a path to develop greater interoperability and a more common user interface across our products, and these efforts come to fruition with the launch of these suites.

Each suite will deliver significantly more functionality and better interoperability at a much greater value to our customers.

These suites were designed to be sold by our VAR channel, and our goal for the first year is broad adoption of these suites.

To accelerate our penetration into key markets, last week we announced two pending acquisitions that we anticipate will close during the current quarter.

Blue Ridge Numerics will be a complementary addition to our growing portfolio of analysis and simulation products, and will broaden our solution set for digital prototyping.

It will provide our customers with a spectrum of computational fluid dynamics capabilities that allows mechanical and building system engineers to virtually test and predict real-world behavior of new and existing designs and eliminate expensive physical prototyping cycles.

We also announced our intent to Scaleform, a leading provider of middleware and user interface tools for the media and entertainment market.

This technology has already been licensed in the development of at least 800 games across all leading game platforms.

We believe this technology will provide our customers with more complete workflows, helping them to more rapidly develop immersive 3D and casual game experiences.

Overall we were very pleased with our fourth-quarter results.

As I flagged last quarter, our revenue overperformance for the year led to higher performance-based compensation in the fourth quarter.

These expense levels are not expected to recur at the incentive plans we set at the beginning of this fiscal year.

Nevertheless, we still managed to exceed our operating margin targets for the year.

Non-GAAP operating margin grew almost 500 basis points for the year, and is a strong start for to our five-year target of reaching a non-GAAP operating margin of at least 30%.

We have a lot to be proud of in fiscal 2011.

Our channel is strong, our direct sales team had a great year.

We maintained strong cost controls, and we significantly outperformed on all of the financial goals that we established at the beginning of the year.

We continue to out-innovate and outperform our competition.

As we look at fiscal 2012, we have a lot to be excited about.

We have never been better positioned to capitalize on the market opportunities before us, and we have the right people and products to be successful.

The economic downturn was difficult for many, but I want to take a moment to acknowledge the determination, resilience and creativity of our partners and employees who worked so hard and helped us emerge from the downturn stronger than when we entered it.

Lastly, I want to acknowledge that we have promoted Steve Blum to lead our global sales and services organization.

For the past eight years Steve has done a fantastic job leading our Americas sales team.

He is highly respected by our customers, channel partners and employees, and we are confident that he will do an equally good job in his new role.

Operator, we would now like to open the call up for questions.

(Operator Instructions).

Brent Thill, UBS.

Carl, if you can just maybe expand on the sharp increase in large deals.

Maybe expand on what you're seeing and how this is potentially tying into the suite sales?

If I could follow up with Mark, on the 10% revenue guidance, I believe you're targeting 12% to 14% long term.

So is this just a natural function of just being conservative early in the year in terms of your guidance?

And I would assume you are still comfortable with that as a long-term target.

Let me take the first one.

I think the large deal activity we are seeing are somewhat a combination of what we see going on in the economy, just a general rebound across the world, as well as specific investments we have made.

So one of the things I'm glad we were able to do, despite the extensive cost cutting we did, is we are able to invest in our major account salesforce.

A lot of it is really a direct result of sales and marketing activity of those -- of those investments.

The one thing I would say, and we will be able to differentiate more as we go along, is most of our major account deals involve some form of flexible licensing.

It is generally global and flexible in nature.

I would position the suites as being slightly different.

Our suites will be for our small- and medium-sized customers.

They are better value for them.

They will generally go through our distribution partners, our channel partners, and will be different than what you see in the large accounts.

So two different initiatives, and I think they're trying to give the right functionality and licensing models to the appropriate customer.

Mark, you want to take --?

Absolutely.

Brent, in terms of the approximately 10% revenue growth, we feel good about that projection.

We feel confident in that.

I think the other thing that I would call out is this is very much consistent with our five-year plan that we have.

So I just want to reiterate that as well.

This is very much part and parcel to the five-year plan and the achievement of the 30% plus operating margin, as well as the 12% to 14% compounded annual growth rate in revenue over time.

I think clearly we came out of '11 with broad-based growth in terms of both geo and industry.

We feel like we've got a solid plan going forward, and we will continue to drive that.

Clearly there still are uncertainties in the world and we are trying to be prudent appropriately with foreign exchange and the various developments of the day and the economy, but we feel confident in our guidance.

Great, thanks.

Heather Bellini, ISI Group.

Carl, I was wondering if you could talk to us about -- if you start looking at the Bureau of Labor Statistics data you started to see headcount in some of your key end markets kind of -- it is not contracting anymore, and it is actually just starting to hover and show a tiny bit of growth.

I am just wondering what your outlook is in your revenue guidance for this year.

What is baked in there and how should we think about your expectation for seat growth in your core end markets?

Sure.

What I would say is our guidance really was predicated on no real big change in the employment environment.

What we are starting to see -- and this is the first quarter in which we have really started to see in some of the hard-hit markets, and I mentioned in the prepared remarks.

What we are starting to see is hiring -- we have seen hiring in AEC firms -- AEC firms in the Americas.

We started to see some in Western Europe.

So that is probably the most surprising thing we have seen.

They were really clearly hard-hit.

At some point we talked about there were numbers in certain cities in the US in which the architects, the number of jobs had been reduced by 30%.

And so we are starting to see both architecture, engineering and construction firms begin hiring back.

And I think the national labor statistics are reflecting that.

(multiple speakers).

Then I just had a follow-up if you don't mind.

(multiple speakers) contemplate that improvement in the numbers.

Yes.

Then my follow-up was just along the lines of you mentioned suites when you were answering Brent's question to the small and midsized customers.

Can you talk a little bit about do they need to change their workflow, how they do it today, to take advantage of the integrated offering?

Is it a way for them to be potentially more efficient with their existing workforce that might drive this uptake of some of the new products that you are starting to come out with?

Yes, so I would look at it as they don't have -- first of all, people don't have to change, but it gives them an opportunity for people to have more tools available on the desktop and more interoperability between those tools.

It allows them to be more efficient, because they focus on productive activities using the appropriate tool for the appropriate job.

Spend less time moving data around, and just wrangling all the information.

So it is giving each of the practitioners more tools and more capabilities to get their job done.

I think that is particularly relevant for small and medium businesses where as they come out of this downturn they are looking for more productivity.

Is the channel incented to help drive adoption of these more so than they might be on the standalone products?

Absolutely.

That was one -- as you can imagine, even though it is valuable for customers, if channel and our salespeople are not properly incented, it would take much longer than necessary.

And we talked about this a little bit.

Remember, we launched a couple of suites during this year as a trial run to make sure we could get everybody lined up and all the incentives and run a drill so everyone understood it.

Early results were promising.

We will go broad as we launch this in March and April.

But all the incentives are in place to do that.

Great, thanks again.

Phil Winslow, Credit Suisse.

This is [Dennis Simpson] for Phil Winslow.

Can you please comment on what feedback you're getting from your Civil products customers, given the budget issues of various governments?

Yes, sure.

So our civil engineering, our infrastructure, our mapping products are used both in public and private sector.

What we have seen is a healthy rebound.

We have seen lots of good government business.

It is debatable how effective the stimulus money has been, but there is a fair amount of buildout.

When you look at our products worldwide, as I referenced before, in the developing countries it is improvement -- and it continuous improvement to what we have.

Buildout around the world is actually much more general and broad.

So when you look at the emerging economies there is quite a lot.

The other thing to remember about these products is they are used across a wide variety of domains, from designing parking lots around buildings to building bridges, tunnels, highways, dams, railroads.

So it is quite an extensive one.

I would say as the economy has changed, certainly the usage profile changes.

But really good reception to our civil engineering stuff, particularly in the public sector.

Can you expand on the strength in your model-based design segment in the quarter.

Was there anything in particular that drove the strength there?

I didn't see anything particular that really drove the strength.

I think it is a continuation of the efforts we put and people recognizing the value in going to model-based design, which we have talked about for a long time.

So I think it was just a natural continuation.

Okay, thank you.

Sterling Auty, JPMorgan.

If I look at the revenue by segment, the Platform Solutions, the 181, that is the only segment that actually the fourth quarter was not the high point for the year.

Can you just talk -- are we actually starting to see even a further shift into the more vertical?

Revit had obviously a good quarter, so just a little color there.

And then I have one follow-up.

As I often remind all of us, ourselves included, one quarter doesn't make a data point -- or it makes a data point, it doesn't make a trend.

I would say maybe.

We have predicted a strong move to model-based design and more vertical products for a long time, but our horizontal products continue to be very strong.

Sometimes individual incentives, just the dynamics of the end of year business lead to one thing.

It would be good for us if that was happening.

I just wouldn't be too anxious to jump on that as a long-term trend yet.

Okay, and then the follow-up is actually on the maintenance revenue side.

Mark, as we look at the improvement overall in the business, how should we think about how the maintenance revenue will start to improve in that kind of correlated manner?

Obviously, in a lag effect, but should we start to see a little bit more catch-up in the next couple of quarters or will it still be a slower, gradual improvement lagging behind the improvement in license?

It is a good question.

Let me just say this that certainly there is a lag effect, to your point.

I think there is several variables that we always like to look at with the model.

The first thing it always starts with is certainly the billings.

And it was cold out.

We had 13% year-over-year growth in billings, which we really liked.

And that over time will obviously translate into maintenance revenue.

So I think you need to look at that and factor that into the equation.

I think the other thing that you have to factor into the equation is you start to model out the maintenance revenue over time, because you have to look at the renewal and the attach rates and call it on that.

Because we don't actually do that -- we don't guide that per se forward-looking, but those are the variables that you want to look at -- is the billings, how they are looking at now, how that is going to work itself out into revenue over time, and what your prediction is on the future attached and renewal.

I do want to comment on a couple of things here though that might give you a little bit of extra color.

Again, our renewal rates were up year-on-year and quarter-on-quarter.

We don't talk about specifics, but directionally we think that is a good sign.

Our cash was up year-on-year, and that is, I think, is a dynamic that you'll want to think about.

So hopefully that algorithm answers your question and gives you a little perspective as you start to model that going forward.

But it certainly is a lag effect.

Okay, thank you.

Richard Davis, Canaccord.

So, Carl, so a couple of questions that go together.

With regard to Moldflow, how has that lived up to your expectations, pluses and minuses?

Then, more broadly, kind of a derivative question is the new categorization of new and adjacent, it is a kind of a bunch of different products.

If I'm working in one of those units, am I hoping one of those units gets big enough to graduate to become a suite or a flagship?

Kind of what is that, is it science projects?

How do you think about that segment of the business?

So I am very happy with Moldflow.

I think we had not atypical integration issues.

It had a very different selling model than we are accustomed to.

I think we are long past that.

I like two parts of it.

What is the way it complements our Manufacturing portfolio generally.

When you now look, even in places where we are not the primary design -- primary, let's say, engineering tool, we may be in there with design tools like Alias.

We are in there with documentation and tooling stuff.

We are here in the design of the factory.

We are there with our analysis and simulation capabilities.

So we can have a footprint even when we are not the primary engineering tool.

Obviously, we prefer when we are more than that.

But just when you look at being able to serve customers in many different ways, Moldflow is just one part of it.

Just in the way I look at Blue Ridge Numerics as providing the same thing in simulation and analysis.

So I am overall thrilled with what we have been doing with analysis and simulation.

When you get to new and adjacent, what I think you should look at there is a movement towards more of the products moving to suites.

Suites should be our primary delivery vehicle over time for the majority of our customers.

And I think you'll see revenue moving into the suites category.

And it is the best way to gauge it.

I think when -- some of this is a potpourri of stuff.

It is labeled that way.

Generally speaking, we have a bunch of products that are not broadly applicable enough to be in a suite.

Some of those are still valuable businesses.

We will continue those business, continue to invest in them.

But I think what you should look for is products maturing to the point where they get included in suites as kind of the graduation.

Got it.

That's helpful.

Thank you very much.

Steve Ashley, Robert W.

Baird.

Great, that actually -- I would like to follow up on two lines of questioning.

First just relates to the simulation and analysis market, traditionally sold into the manufacturing sector.

Do you have an opportunity to take those tools to the AEC sector and maybe integrate them with Revit and bring them to an engineering kind of group that has historically not been a simulation and analysis customer?

Yes, so we certainly have -- first and foremost we have a way to bring them more broadly to the manufacturing sector.

We have historically not offered many of those tools, and this gives us an opportunity to give our customers more in manufacturing.

But we certainly have that same capability in AEC.

We have provided some tools around energy analysis so far.

We have done some around structural engineering analysis.

When you look at things like the CFD software we just acquired, it is applicable to both markets.

And as people in AEC are doing more model-based design, our ability to provide them with more simulation and analysis just grows.

Terrific.

Then I would just like to drill down just a little bit more on the new suites that are pending, and kind of Heather's kind of questioning.

What is going to make them more channel friendly than the existing line of suites today?

I don't think it is more friendly necessarily than the existing suites, so I wouldn't start there.

I think you have a broader range of suites, so the number of industries or industry subsegments they cover is much broader.

And they are tiered into three different offerings.

So they should be easier for our channel partners to sell.

The overall offering is more rationalized in terms of what is out there.

As we talked about in answer to Heather's question, there are incentives in place to make sure that our channel partners are incented to sell them.

But really what is in it is a better workflow for our customers.

What was contemplated as we put together is what is the person trying to accomplish.

So when you look at the engineer or architect sitting there, in their day job what are they trying to get done and what tools do they need to get that done, and how can we make those tools work as well as possible?

As you know, we are not breaking any ground here.

If you look at what Microsoft did with Office a decade ago or more, or if you look at what Adobe has done with Creative Suite, those are good examples of people really doing the same thing, taking disparate products that were often used by the same person, putting them together in ways that are more conveniently packaged for the go-to-market part and provide better value to the customers.

Perfect.

Thanks so much.

Keith Weiss, Morgan Stanley.

Nice quarter guys.

Thank you for taking my question.

It looks like it was a pretty strong quarter for updates and upgrades at $61 million this quarter.

It seems like that line item every once in a while comes out and surprises us to the upside.

Anything unusual that drove that revenue line this quarter?

So these things really surprises us too.

Let me -- we will add a couple of commentaries.

One of the things -- Carl had talked about some of the major deals that were going on, we found some customers as we got increased account penetration where they were doing some upgrades and crossgrades, and just some really nice packages that were coming together with the customers.

So that translated into some nice business results.

So that was really one of the big drivers that was influencing that line.

Got it, excellent.

Then as a follow-up, it looks like the nonsubscription-related portion of the deferred revenue balance was up very strongly in the quarter.

I calculate $79 million, up 50% year-over-year.

Anything in particular going into that bucket, like undelivered products or something?

And does that give you something of a head start for Q1?

Well, there is a variety of things that go in to deferred revenue in general.

Certainly we understand the subscription is the absolute lion's share of that.

There is also multi-year subscription that will actually classify itself beyond just one year, for example, as another major dimension to that.

We have other things that are in there, including training and things of that matter.

But in terms of whether it is a jump on Q1 or not, I think all that is fully factored into our guidance and our thinking for the quarter and for the year.

I would say generally speaking the unfulfilled product is a miniscule part.

I wouldn't take that as being a big thing.

That is just generally not that.

It absolutely is a miniscule part.

I can see the data here.

Got it.

Excellent, thank you guys.

Walter Pritchard, Citi.

This is Ken Wong from Citi in Walter's place.

With your commentary around big deals it sounds like large enterprises is showing pretty good health.

Can you talk a little bit about the SMB and professional market?

In order to post the results we did, absolutely our SMB market has to do well.

It is still the lion's share of our business.

The majority of our business is to small and medium enterprises.

We have laid that out a little bit over time where about 30% of the business is to our top-tier customers.

15% of our overall business goes through us directly, but 85% of our business is through our channel partners.

And that is the majority of the business.

So when our business does well, it is because we are seeing a pickup in small and medium business.

As we talked about as we went into this downturn, the place where the business fell off the most was in the small and medium business.

So we have seen a nice rebound around the world in terms of small and medium business.

In order to get back to the levels we were at before, we still think we want to see an increase in -- a decrease in unemployment.

And as employment levels get back and as hiring continues, we think we will continue to see that.

But we were very pleased overall with how the small and medium businesses did.

Got you.

Then perhaps can you -- in that same vein can you maybe talk a little bit about how suite adoption between those three markets differs?

Right now we don't have -- we only have historic data about the suites that we offered before.

Most of the new -- the introduction of suites will happen in the spring of this year in the next couple months.

So as we look at that introduction we will be able to give you more color about that.

Right now for our flagship products, like Revit and Inventor, a majority of them are sold in suites.

We introduced in the summer of last year our Entertainment Creation Suite that is doing real well.

So I believe this will be the primary way we go to market, certainly for small and medium business.

But we don't have any more detail right now.

Got it, thanks guys.

Dan Cummins, ThinkEquity.

I had a question on the visibility of the business.

If we exclude maybe four quarters of a couple of years ago at the tail end of the bubble -- the peak of the bubble, I would say in my judgment Autodesk you are back, so to speak.

So I guess my question is, why not guide all the way down to the EPS line?

And if you could give us a sense of how much -- or what level of visibility, maybe percent of recurring revenue or so forth, is inherent in the guidance, in the 10% revenue guidance?

Thank you.

Go ahead.

A couple of things here.

Certainly I think the visibility is better.

And we acknowledge that there is -- as we all see around the world, there is some economic unevenness and uncertainty, but it is certainly better.

We feel confident in the guidance that we have put forward.

It is -- good double-digit growth on top of a strong year that we've just completed an FY '11 that Carl talked about.

So from that standpoint I think it stands on its own.

In terms of guiding all the way down to the EPS level, right now we felt like people are primarily interested in what is happening at the operating margin level and at the revenue level.

Certainly we have given some direction on the tax of being approximately 26%, non-GAAP for the year as something to think about for the year, so that helps people get around that.

And then the delta has to do with share buyback and things of that nature.

You can certainly see our pattern historically on share buyback has largely been to cover dilution.

But I think that is probably the biggest thought I would give you there.

In terms of reoccurring versus non-reoccurring, I think that I would go back and look at the history that we are showing in terms of the subscription revenue relative to the license revenue, and you can see how that is breaking and how that is trending right now.

Just imagine that we are factoring that in as we go forward.

We don't guide the breakout of that on a forward-looking basis, but you can see the trending.

There is no doubt our subscription revenue has been growing.

But still the majority of our revenue comes from nonsubscription.

I'm not sure we will cross that line anytime soon.

Can I ask a follow-up on Revit.

Sure.

I've been trying to track it.

I think it feels like it has perhaps crossed the threshold of 10% of revenue overall.

It feels like it is really on the cusp of breakout demand.

Is that fair to say?

Yes, I think that is.

I think it has become a commonly accepted -- it is industry standard for BIM.

So when you -- when we introduced -- remember, we acquired some technology a bunch of years ago.

At that point it had almost no revenue and no customers.

We have invested in it heavily over the last few years.

We have invested in the idea of building information modeling.

The industry has now accepted this as a better way to do business.

I don't think that is in dispute at all.

I think when you look for products that deliver on BIM, Revit is the category leader.

So I think we have hit this point where people now recognize that they need to move to BIM products.

It is not a question of if; it is just a question of when.

The downturn allowed a lot of firms to retool.

Many people went into this saying, okay, the first reaction was, how do I cut my expenses?

How do I cut my staff?

The second reaction is, how do I come out of this better positioned to be more effective and more efficient and to be more competitive?

And in many cases that involved adopting a BIM workflow that centers around Revit.

So I am really pleased as to how will we have done with Revit.

And I think you have correctly identified that it has become the tool of choice for doing BIM.

Thank you.

Derek Bingham, Goldman Sachs.

Just on the suites, I am just curious what you learned from this first trial rollout over the past year or so in terms of how long it takes the channel and customers to kick the tires on these things and they start to really get interested?

And do you expect kind of maybe a similar kind of lag or a shorter lag when you put out your next raft of suites?

I would say the biggest lesson -- I think we knew it going into it, but we know probably have more details and n particulars, is just to make sure that everybody involved is aligned around this.

It is probably about getting alignment -- so we may make a great offering, and the customer can find it incredibly valuable.

But unless all of our sales and marketing, all our go-to-market efforts of all of our people as well as that of our channel partners are aligned, those things will not be successful or as rapidly adopted as we might see it.

So I think a lot of it is fine-tuning around how to make sure everything is aligned in terms of messaging and incentives and everything else.

The other thing is I would say is we knew when we put these together for many of the suites there would be a Version 1 of the suites.

And so for many customers they just sit there and wait and see.

For a customer who has been buying Inventor up for 10 years they would want to understand what more do I get.

But overall the general reaction has been great.

If you were to go up and look at the news groups or the blogs about it, really customers are really excited about the value that it has delivered, and particularly these ability to integrate the different products together.

So generally speaking, very good, but the biggest lesson is to make sure we are aligned as possible both internally and externally.

Okay, and a quick follow-up.

The increase in the maintenance attach and renewal rates that you're talking about, is that just a very straightforward function of the increased mix and model-based and suite products, or is there anything else that you're doing proactively to drive that?

I think some of it has to do with what you have described there.

I think some of it also is related to -- when we went through the simplified upgrade pricing it just makes more economic sense to stay in subscription.

And I think customers see the value of it.

As the economy recovers, they want the benefit that we offer with our subscription.

Got it.

Thanks, Mark, thanks Carl.

Brendan Barnicle, Pacific Crest Securities.

This is Matt in for Brendan.

Is there a way we can look at ASP increases in things like BIM and suites, and see how that translates into revenue growth?

No, you can't.

(laughter).

Generally we haven't broken that out.

But historically what we have said, and it continues to be true, is we don't see dramatic shifts in ASP on a line item by line item basis.

Meaning SKU by SKU you don't see great variability in ASPs.

What you do see occasionally is a substitution of one product for another, so a suite for a product would result in a higher ASP.

But if you were to look at standalone products quarter-over-quarter there is not a huge amount of variability, absent promotions, in the ASPs.

Okay, and then on Emerging Markets how have efforts to combat piracy been able to help your growth there?

And also due to the fact that most of the users who pirate your products are pirating the highest ASP products, have you been successfully converting any of those users?

I don't think we -- it is kind of a tale of two cities.

It is the best and worst.

In the sense that I don't think we have been particularly successful.

And on the other hand, we have been more successful than many other software companies.

And both of those things continue to remain true.

I think there are some things coming on the horizon that I am slightly more optimistic about that I had been.

A lot of the work we have done to combat piracy either involves direct enforcement or policy change with local governments.

What I see coming forward for the first time is the ability to do things technologically different by virtue of offering products that are a combination of our traditional desktop delivery, as well as a cloud-based delivery.

And as more value gets embedded in the cloud, obviously, there is less piracy there.

So I think that is the most optimistic thing I have seen in many years in terms of looking forward.

Looking back, I think it is same old, same old.

We continue to work on it in the same ways that we have with moderate success.

Thanks, guys.

Steve Koenig, Longbow Research.

I would like to dig into maybe one of your favorite topics, competition with friends at SolidWorks and Dassault.

So clearly you have a bigger base overall.

It looks like they are obviously being very successful selling model-based tools into manufacturing.

Now they are trying to attack AEC, and they are also trying to move to the cloud.

I am just wondering what are your thought on their moving to AEC?

Would you (inaudible) a competitive response?

And how do you see yourself dealing with that situation?

First of all I would say is, I think we have been much more successful than Dassault as a whole.

So you have to look at their high-end product, CATIA, and their low-end product, SolidWorks.

What we see is them try to co-mingle these two things in ways that they have never done before.

And we think that is to our advantage.

Every quarter I am more and more amazed by the number of competitive swap-outs and displacements that we have of CATIA, as well as the number of replacements we have for SolidWorks.

So we think of them as a competitor in the manufacturing space.

And we are increasingly pleased with our performance relative to them.

If you really -- it is very hard given the limited and obscure financials that they disclose.

But if you were able to break through it you would see very limited growth in their CATIA product.

So their flagship product really is not growing much at all.

And we think that is in part a result of how well we are doing in offering a broad range of manufacturing solutions.

When it comes to AEC we will see what they do, but right now I think they have their hands full competing in manufacturing.

Okay, very good.

And one quick follow-up.

Can you guys comment on how many -- you know, each of these acquisitions by themselves may not be significant, but in total would you expect them to add 1, 2 points to revenue growth this year in terms of all the acquisitions you do this year?

How should we think about that?

I would say your general idea that we will add, it is a little bit hard to know at this point given the size of it.

Right now we were in a slightly awkward position in that there is two deals that we've have announced but not closed yet, and fully accounting for some of the accounting details that is not done yet.

But what I have seen so far, and corresponds with history pretty well, is as times get better, the number of deals goes up slightly, and we also see slightly larger deals.

And we are already seeing that.

Absent the accounting details of deferred revenue write-down, those are the kind of things you would see.

But in general what I expect us to do is to concentrate on those kind of acquisitions that are mostly for technology.

Mark, do you have anything to add about accounting?

No, I think that -- I totally agree with your point.

I would say from this standpoint that is largely immaterial in the current year, as we can see right now.

We will see as we go on with the particular deals that we are talking about, the two immediate ones.

But that would be my point there, and certainly reaffirm Carl's point that we like the opportunities to add technologies to our business.

Great, congrats on your quarter.

Thanks a lot.

Israel Hernandez, Barclays Capital.

My questions were just asked.

But maybe a follow-up with respect to your performance in the Emerging Markets, which was up 16%.

Can you maybe comment and drill down on what you're seeing across the various BRIC countries, and what are the possibilities that we could see acceleration going forward in those markets?

I think we are coming out of a period -- and we certainly saw a decline and then a slightly chaotic period, and it is increasing, and I think we could surprise ourselves to the upside there.

When you look broadly at the emerging markets, signs in almost every one are positive.

I think it is still -- there are a handful of places when you look at some of the geopolitical concerns in places like the Middle East are still an issue for us that could weigh on us.

But other than that, when you look at the major parts all the signs are up and to the right.

Thank you.

(Operator Instructions).

Blair Abernethy, Stifel Nicolaus.

Nice quarter guys.

Carl, just back on the Manufacturing briefly, great performance this quarter.

Can you give us a sense of the 31 large deals, how much of that came from the Manufacturing segment?

And I wonder if you can just sort of expand a bit more on where you're getting your traction there?

If it's expansions, mostly displacements, new customers, what is driving that -- the outperformance in that segment?

So we don't break it down by segment for the large deals.

One of the main reasons is what we see amongst our major account activity, and just in general, when you look at that 30% of revenue that comes from the top 1% of customers, when you look at that kind of customer they are almost always buying products from multiple groups.

So when you look at the reporting segments, and we cross all the segments, they are buying products that cross them all.

When you look at the character of what is going on, to generalize a little bit, a lot of -- we generally don't do a big deal from nothing.

Someone doesn't show up on our doorstep and buy $5 million that hasn't been a customer before.

A lot of it is expansion within an account.

And a lot of it comes from consolidation.

As we have talked about before, many accounts have heterogeneous engineering environments.

They use multiple products by choice.

They have ended up with multiple products that they inherited through their own acquisitions, and this is usually part of a process of rationalization.

Occasionally it is also a process of expanding their business.

So it is a combination of rationalization.

Sometimes it comes from centralization and more central coordination within an account.

And sometimes it is just improving their toolsets for going forward.

A lot of them do involve competitive swap-outs.

So in many places the increased use of our tools is replacing something else.

It almost never comes at the expense of having them do nothing.

So it is almost always that they're replacing someone else's tools with our tools.

Okay, great.

Any update on the data management side or progress with the Vault product?.

Yes, I am actually thrilled with our data management product.

We have thousands and thousands of implementations of data management.

Sometime during this year we will talk about it a little bit more.

I would like to give you more detail on it.

But our strategy, which has been in stark contrast to that of our competitors, we have stuck pretty close to data management for the engineering teams, has been very successful.

It is considered high-value, widely deployed, easy to implement.

And I think that has worked really well.

It is really different than what many of our competitors are doing.

And they are finding some success there.

But we are happy with what we are doing in this space.

And when we disclose the numbers, I think everyone will be quite surprised by the amount of data and the number of users who are managing the lifecycle of products through Vault and the associated products.

Okay, great.

Thanks very much.

Ladies and gentlemen, this concludes our Q&A session for today's event.

I would now like to turn the call back over to Dave Gennarelli for closing remarks.

Thanks, operator.

That concludes our remarks.

We will be at the Morgan Stanley conference next Tuesday the 1st in San Francisco.

And if you have any questions in the meantime you can reach me at 415-507-6033.

Thanks.

Thank you for your participation in today's conference.

This concludes today's presentation.

You may now disconnect.

And have a great day.