Autodesk Inc at Berenberg Design Software, Cybersecurity & DevOps Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And some investors that might be dialing in or logging in, whatever they're doing, might know you already. We've -- interestingly, I would say that they will probably get to know you even better in the future considering the fact that I would say that Autodesk manufacturing business is definitely getting more and more prominent within the -- becoming increasingly more important as the whole kind of investment thesis plays out as well. It's fair to say that a lot of the focus in the past has been -- especially the past few years, has been in Construction itself, which might be a little bit unfair considering the fact that you've been developing specifically Fusion 360 and -- at the same time and starting to get some really good adoption in that developer market. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2021 / 8:00PM, ADSK.OQ - Autodesk Inc at Berenberg Design Software, Cybersecurity & DevOps Conference (Virtual) So based on that, Steve, what I'd like to kind of focus on first is that would you agree with my statement that Fusion 360 and the home manufacturing approach to Autodesk is an increasingly important area for you, especially as you think about kind of the future and where Autodesk is taking -- and it's an area that you're taking extremely seriously?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Right. Right. And when you look at the opportunity, especially in the maker community, and make no mistake, it's a powerful set of tools as well that they're starting to make its way all the way to the traditional designers as well, right? So how do you size that? Let's call it -- I don't know. Should we refer to it as a cloud-based, kind of SaaS-based CAD and 3D CAD for manufacturing or whatever we want to call it? But how do you look at opportunity overall? Who is your target market? And maybe you've created some sort of personas or something like that.

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's quite interesting because especially, it would also signal that you're just kind of in the first stage of the adoption of the development, right? Is it fair to say that over the last 5-ish years or so, 5 to 7 years, you've really been focusing in developing the tool that -- or platform, actually, that enables all these things that you referred to? It's a lot more than a CAD tool. It's a PLM tool, including PLM. It's a CAM tool. It's a simulation tool. It's a generative design, if that's simulation or whatever it is, tool. So if the first stage is let's create that platform, and then the second one adopt -- let's make sure that adoption counts and gets in. And a lot of the focus so far has been on kind of universities, on education and that kind of seeding it effectively. And now we're just starting to move. You mentioned '23. Maybe that's a good time line when we start thinking about material contribution to Autodesk as a business as well. Is that fair?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And it's not -- so the point you made is important because it also doesn't require anyone to switch necessarily, right? You can use Fusion 360 alongside with your SolidWorks or what you may have?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : So would it be fair to say as well that when you take Fusion 360, what -- because the focus so much is on the maker community, and when I think about that, what they're interested in is having the CAD file, it doesn't matter if they made it or someone else supplied it to them. It doesn't matter whether it was generated within Fusion or another inventor or another CAD offering like SolidWorks. Being able to do that without the other steps in the process, which people might not be aware of, but if you talk about subtractive manufacturing and CNC machining and stuff, there's a whole lot of coding that's going on in between that. And it doesn't just happen. You have your CAD and you have your machine. You press the button and it happens. There's a lot of prototyping, a lot of playing around with little parts and a lot of green screens like coding still happening on the shop floor in the -- what's called digital factory today, right? Is the idea to ultimately build this one end-to-end solution that takes the CAD data and then you see your machine part at the end, which is not what is the case today?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : And it's both for additive and subtractive manufacturing, I guess.

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : It's more than just -- it's outside of printing edges.

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's helpful. I think everyone can relate to installing drivers for printers. I'm pretty sure...

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Steve, how far away are we from you to say, okay, where we have most of the -- we cover 80%, 90% of the machining world today and we are the section where you can press a print button and it will?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Yes. Very helpful. And when we touch on generative design, basically what you're trying to achieve there is if -- if I'm correct, you're effectively taking a job that's fairly artist-like, fairly creative and taking the concept of, okay, we -- as people might consider 3, 5 different options when we start our design. And then we narrow down and we go with one, and then we run away with that one. And if it works, great. If not, we have to go back. Whereas generative design will start from the other premise like, okay, let's take 100,000 of different options and see which one might work for you. There's no one. There's 10 or 20 of them, but you can pick which one we think would be the best based on, a, what your manufacturing process is. It's not all 3D printing. Is it -- some of that might be subtractive. And then B, the forces and the limitations that you gave us, right? And throw in as well different materials that we can use. Is that -- that's just too complex for a person to -- for a designer to kind of put in. We are not able to process, even though we have great computers in our heads, like it's very, very hard to do that, right? So do you believe the world is understanding that generative design is something that's more powerful than a little design team of 2, 3 people trying to come up with a solution? Because -- I'll give you a piece of feedback. When I was -- in 2015, '16, when we were just kind of releasing the early stages of generative design, I was at a DEVELOP3D conference, I remember, and I asked one of the attendee, so what do you think about this? Would you do it? And he was a designer. And he said, "Are you kidding me? My boss first would ask me like why didn't I do my job; and then secondly, wouldn't believe what I gave them; and then thirdly say, well, if it works, why are you still here?" So the question is, where is generative design today considering the fact that it is objectively better than what people designed but 99.999% of designs are still done the old way? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 11, 2021 / 8:00PM, ADSK.OQ - Autodesk Inc at Berenberg Design Software, Cybersecurity & DevOps Conference (Virtual)

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Got you. Yes. And you've also started moving into other areas. Like you said, media entertainment is one of those. But you also -- you acquired Spacemaker as well, which does a similar type of thing in the area of architecture kind of landscape design and things like that, right?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Awesome. Now I know your monetization efforts around generative design is slightly different to the kind of start-up platform the way I can basically start trialing, I have a Fusion 360 for free very easily, if I'm not making any money out of it. But I did speak to a number of your customers and one conversation, in particular, kind of struck me. It was about 1.5 years ago now. If I remember, it was one of your not smallest customers by any means. It was a medium-sized customer and said, "Fusion 360 is really changing the way we procure CAD software. We tend to be open in anything. We have inventory. We have SolidWorks we have other areas. But we've really been mostly procuring Fusion 360 recently." And I gave you one feedback for them. And when you get the chance to ask them and -- it's interesting. And it was -- the question was like, how can they provide all this value for -- and it was bizarre because I don't hear that very often, but he thought it was way too cheap. You played around with pricing a little bit. It tends to be between all $250 all the way to $1,200 kind of per year or whatever. Right now, we're somewhere in the middle-ish, around $500. And then -- but that's not the whole story. How are you trying to really monetize and making sure that you're not leaving too much money on the table? And I understand that from a product perspective, you had a lot of technology. Autodesk, over the last 15 years, did a lot of acquisitions. And those were great acquisitions. You mentioned Delcam as an example, right? It's one of the market-leading CAM solutions. Now you're starting to put that into Fusion. You don't put it there for free, right? So how do you ensure that -- again, that you don't [leave] money on the table?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That covers everything. Absolutely. And I think it also shows the depth of analysis and how you -- this isn't a trial and error kind of a situation. This is segmentation. And I guess the most important, like you said, is there's different types of users that will be interested in this type of application. And now everyone will be interested in CAM or everyone will, so why charge 5,000, 7,000 for the whole pack where you can segment them better.

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Awesome. Steve, you mentioned that Fusion has done really well over the last year or so, and again, expecting that to happen. Again, you've actually started disclosing a little bit of paid user data as well around the earnings calls recently. Andrew has referred to north of 20,000 users -- new users in Q3. Q4, again, you're talking about 140,000 total paying subscribers, which is huge considering the fact where you came from, right? And also, the way I estimate on the proportion of share of the market that's available out there, you're now starting to grab material amount of those new users. What has been the key driver of it? Has it been part of that go-to-market motion but also collaboration? What's been the kind of the killer application for the adoption of Fusion 360?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Okay. A little bit of collaboration maybe, but that's about it, right?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : When I think about -- you've had very successful -- obviously, not market-leading but very successful...

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Program with Inventor as well in the past. And that's been really popular in education. One, is there a risk of cannibalization as Fusion becomes really, really big, kind of taking that away, but then you say, "Oh, but the SolidWorks and the rest of the market is actually such a big -- much bigger opportunity that outweighs that risk at the same time"?

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : Okay. And then are you seeing any -- considering Inventor has been such a popular product, especially within the universities, is that now shifting towards Fusion 360? Because it does so much more, and people are kind of starting to incrementally more being brought up on...

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : That's -- I think that's a great end to our time, which has just run out. And Steve, again, I'd like to thank you for your time today. I think that had been extremely informative, and I hope investors enjoyed it as much as I did, and really looking forward to hosting it at more events in the future as well. Thank you.