Good day, ladies and gentlemen, and welcome to the Autodesk Third Quarter Fiscal 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the conference over to David Gennarelli, Senior Director of Investor Relations. Please go ahead.

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss the results of our third quarter of fiscal '17. Also on the line is Carl Bass, our CEO; and Scott Herren, our CFO. Today's conference call is being broadcast live via webcast. In addition, a replay of the call will be available at autodesk.com/investor. As noted in our press release, we have published our 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 the anticipated future performance of the Company such as our guidance for the fourth quarter and full-year fiscal 2017, our long-term financial model guidance, the factors we use to estimate our guidance including currency headwinds, our transition to new business models, our 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 the fiscal year 2016, our Form 10-Q for the period ending April 30, and July 31, 2016, 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 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 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-on-year comparison. And now, I'd like to turn the call over to Carl.

Thanks Dave. We're really pleased with our third quarter results. Q3 marks a significant milestone in our transition. It's the first quarter where we only sold subscriptions and were off to a great start. New model subscriptions grew by 168,000. New model ARR grew 91% at constant currency, and recurring revenue jumped to 76% of total revenue. More generally, we made progress on our two major initiatives growing lifetime customer value by moving customers to the subscription model, and increasing adoption of our cloud based solutions. Given that this quarter was the most uncertain when we started the year, these are fantastic results. So let's look at the details. For the quarter, we added 134,000 net subscriptions. New model subscription additions more than tripled year-over-year to 168,000, while the maintenance subscriptions declined as expected by 34,000 during the quarter. Product subscriptions drove the vast majority of the new models of additions. The launch of industry collections, the next generation of suites that include many of our cloud services contributed to our strong growth this quarter. Collections are a great example of how we’re simplifying our offerings while increasing lifetime customer value. During the quarter, we ran another promotion aimed at converting our legacy, non-subscriber base to new product subscriptions. Like the promotion in Q1, legacy non-subscribers were offered product subscriptions at a discount when trading in their old perpetual licenses. The Q3 promotion added approximately 43,000 product subscriptions, significantly more than in Q1. In addition the overall average selling price was twice as high as the Q1 promotion due to a lower discount and the fact that customers favored higher price products. And lastly, more than 50% of the subscribers tuned in licenses that were seven years back or older. This reinforces our view that there are meaningful number of…

Thank you. [Operator Instructions] And our first question for today comes from the line of Saket Kalia from Barclays.

First just sort of a housekeeping question for you Scott. Can you just remind us what market development funds are from high level and what sort of dollar amount we should expect that to be on an annual basis?

Yes, sure. Saket. So market development funds are common to every company that sells through a value added reseller channel. So it's in effect demand generation dollars, it's money that we make available to our resellers for them to go off and drive demand -- presales demand for the product. So it’s not a new program, we’ve had market development funds for years. I think what's changed this quarter is the way those market development funds are allocated. They are not treated as an expense, they are treated as a contra revenue, meaning they’re subtracted from our reported revenues. It runs $10 million to $11 million a quarter, and so historically what’s happened is that was allocated pro-rata to the sales through the channel which were heavily driven by license sales. This quarter of course, there is no license sales, so all of the market development funds, the same amount we've always spent, ended up being allocated for the first time to recurring revenues, and so the $10 million or $11 million per quarter when you annualize that of course is between $40 and $45 million for the year. So first time, we've seen that effect on recurring revenue was this quarter and I would expect it to stay in that range going forward.

Understood, that's very helpful. And then for my followup, and I'm sure this is going to be something that we talk about a lot more next week, but how sensitive is the long-term model to mix, meaning can you just talk us through qualitatively maybe how different the mix is across the product ranges in this first quarter with total subscription compared to what you are modeling in that $6 per share in free cash flow, and maybe just qualitatively how much leeway do you have with that mix?

Let me start with this and Scott feel free to jump in. We have a variety of mixes that we try to talk about, one was about certainly product mix, one is about geo mix, there’s others like term length, and then there are very specific things, the difference between for example, EBA’s and maintenance. Those numbers look different as well as certainly the cloud revenues look different. So those things matter a lot, we have a fair amount of flexibility, we understand the price range that these things will come in. Right now we’re actually above the plan for where we expect it to be and one of the things I tried to do in the middle of the prepared remarks, give you a little bit of information about what’s selling on a like-for-like basis. So that’s were -- those were those quotes in the middle, all about how much more people are paying this year or this quarter compared to the previous year or the previous quarter. And we thought it was important to really compare the like-for-like, so that people could understand it. One of the things we also mentioned is, going forward we’ll start breaking this out for you, having an average of averages of averages is way too confusing as we’ve all seen. I think, the folks at Goldman did a nice job at breaking out the model in their most recent report and I think they did a nice job of looking at the stuff we did, though it’s not identically our model, it’s closing certainly has the major effects in there, and a good understanding of the time and mix we anticipate seeing and the price ranges. So maybe that helps a little bit. We’re going to spend a lot more time next week walking you through this, but hopefully that’s a start on the problem.

Saket, the other thing that I would add to that is, I think mix is a bigger effect on ARPs right now than it will be longer term, you just need to look at the ARPs for maintenance and you’ll see it’s far more steady, because it’s a much bigger base of maintenance subs, so as the base grows, mix will become slightly less important. I think longer term, the more important metric than ARPs is ARR, and so one of the things we’ll look to do is provide you better insight into where we think ARR is headed, so that ARPs calculation becomes slightly less sensitive.

Next question operator. Karen are you there? Okay, we seem to have lost the operator. Hang on one second while we try to reconnect to her and see if we can keep the Q&A moving.

This is a first for me of all the earnings calls I’ve done, I’ve never had this happen.

I’m here now. Our next question comes from the line of Steve Ashley from Robert W. Baird.

I would just like to ask on the promotion, if you could give us some color on how much of that might have been direct versus indirect and what role the e-store might have played in the performance there?

Yes Steve, the promotions, you know Carl laid out the success of the 43,000 subs that came through the promotions. It was almost entirely driven through the channel versus through the e-store.

Okay, perfect, and then I would just like to ask about collections and I realize they have not been out very long, but with that you introduced multiuser pricing and that's kind of the first time that's been out there. Wondering if you've gotten any early response to that or if there is any early color you can provide on that new pricing option.

You know it's still early. We're trying to replicate some of the things that we had in the previous model. But really I mean it's only a quarter worth of data, so we'll update it more as we go through next year. But we know it is one of the things that customers really want. It's one of the important things you know that whole middle bulk of our customer base has multiple seats , and while we offer lots of flexible offerings for people with large number of seats through the EBAs, people are also looking for it in here, so we’ll update you as we go.

Thank you, and our next question comes from the line of Heather Bellini from Goldman Sachs.

Hi, this is Shateel Alam filling in for Heather. Thanks for taking my question. First question was just on new model ARR. That increased by 43 million, I'm not sure if you specifically broke out what the MDS impact was for specifically new model, but first could you break that out and then also last quarter’s new model ARR increased by 63 million, we're expecting it to increase in size again this quarter, going forward now that your subscription only should we expect new model ARR increase of each quarter to get larger?

Yes Shateel, the overall amounts that ARR was affected by the allocation of MBF, again MBF not a new program, but it’s the first time it's really been heavily allocated, exclusively allocated to recurring revenues that’s why we're seeing the impacts so pronounced in this quarter, it was about 40 million on the overall, if you split that between how much was allocated to new model versus maintenance. It's about 6 percentage points on a year on year basis about six percentage points of growth for the MBF impact on new models and about two percentage points of growth reduced by MBF being allocated to maintenance. So overall it was three points, but if you split it between the two it was about six on new model and about two on maintenance.

I just had one follow up on collection. Suites used to represent 30% of your revenues, I'm wondering over time do you expect Collections to also end up representing 30% of total new model ARR and how long do you think it would take for that to ramp to that level?

My best guess is that it will be less because of the additional offerings we'll have with you know the cloud offerings and the consumption services tied to things like collections, so I think it will be less, but not substantially so.

Thank you, and our next question comes from the line of Jay [indiscernible].

Carl, I'd like to ask you, for my first question a technology question stemming from [indiscernible] University a couple weeks ago, particularly if you could try some of your technology disclosures from two weeks ago to the longer term business implication, in other words, you have some very interesting things to say I thought about your future architecture with the quantum project, you talked about. There are numerous references to what you talked about as a common data environment, new architecture and so forth. So talk about the commercial implication and commercial plans for that as you showed two weeks ago and what that needs for the next number of years in terms of the business model? And then a selling follow up question.

Yes, sure Jay [ph]. I mean this goes back a number of years, we have firm believe that engineering software is going to move to the cloud, all design and engineering software will be in the cloud. We started to demonstrate that with the number of products we talked about some like BIM 360, we’ve shown kind of the basic architecture with products like Fusion 360 and how they take advantage of the connectivity and the compute power of the cloud. So we started to demonstrate that and we started investing in this area three or four years ago. As I have said before while everybody is rightfully focused on the business model transition of our existing business and how we are using it to attract new customers, what I think people will must be surprise about as you look out the next couple of years, if the size of the cloud business that we build, and how we really expands our TAM. So we are going to spend a bunch of time next week showing a little bit more, you were at AU and got to see it, we’ll try to put kind of a an investor look on it, so that people next week can understand what we are doing and what the important is, and why we are investing in the cloud and why this really is the next generation architecture. I have talked in the past about being a place for collaboration as well as giving access to virtually unlimited amounts of compute power which is something our uses demand and so it’s just a natural fit. It's unusual that engineering has been one of the slowest to move to the cloud, but we see lots of evidence of hitting the tipping point, not just in the U.S. but other places in terms of customers willingness to adopt it. And so next you’ll hear a bunch more.

Thank you. And our next question comes from a line of Gregg Moskowitz from Cowen and Company.

Carl, thanks for the additional information on ARPs during your prepared remarks, having said that given where you are today, you do have a lot of grounds and make up to reach 24% ARR CAGR by fiscal '20, can you elaborate on what gives you the confidence that you get there?

Part of it is -- the calculation method we chose gives great certainty and repeatability, it's very auditable, but it is a method that can greatly understate the amount of revenue coming in. So one of the things we do and we’ll walk you through this example, but what we actually do is we take the revenue that comes in for the quarter, the recognized revenue which if it's particularly back end loaded, can be close to zero, and we divide it by the number of subscribers at the end of the quarter. So in the extreme if somebody -- so for example, I’ll use one example that’ll illustrate two points, the promotions were very heavily backend loaded. So you have a low phase offering that’s discounted, coming in very close to the end. So what you might get out of that is one day out of 91 worth of revenue, we’ll call it four days out of 365 or slightly less than 1% of the revenue that that subscription is worth, but we divide it by a whole subscriber. So it greatly under stakes the value. Even as we go through this it will normalize as Scott mentioned because the numbers come up -- the numbers get larger and you’ll get the same effect moving from quarter-to-quarter. In the beginning it's very sensitive to mix its very sensitive is to timing. So we’re ahead of our plans from where we want to be and while I understand that some people are paying lots of attention to ARPs, I think the better thing to look at going forward and we’ve tried to stress it as ARR, as Scott mentioned we’ll start giving you guidance on ARR and on the ARPs one we’ll start breaking it out so you don’t have to be guessing at the co-efficients between what’s in cloud, what’s in EBA, what’s in product subscriptions and even in the subset that's something like the legacy promotion. We think we can help you understand that a little better, again I'll tell you again one of the reasons we gave the numbers in the middle of the prepared remarks about like-for-like was to show you the increase in pricing that we were seeing and that was both -- there were some numbers that were quarter-over-quarter and somewhat year-over-year and we’ll detail that a little bit more next week at Investor Day, so you can see the thing. And what we think is the like-for-like is the best comparison.

Okay, perfect. Thanks for that detail and I agree that will be helpful and I look forward to that. And then just one for Scott, any update on the timing to potentially change the segment classifications on product subscriptions and EBAs from the hybrid approach to 100% subscription on the income statement?

Yes, Gregg fast enough [ph] on that. I would love to have that done now. I think I mentioned on this call last quarter the complication we’re doing it is, it’s not the revenue side, it’s the cog side. We working that very carefully, so the goal will be to end up with three revenue lines instead of the two that we have today, because I recognize the confusion it causes. The three lines would be one for maintenance revenue, one for subscription revenue which ties the new model and one for kind of license and other. As there will still be a small amount of license revenue that comes in. We’ll have to go through of course it carve up differed revenue and then new revenue going forward, so my goal is to get that done as quickly as possible, I'd look to roll that out next year.

Thank you. And our next question comes from the line of Keith Weiss from Morgan Stanley.

This is actually Stan Zlotsky sitting in for Keith. Thank you for taking our questions. So how much of the churn on maintenance subscription base was driven from maintenance subscribers moving over to desktop subscribers, and a quick follow up what happening with OEM and what are you thinking with the latest on pricing for the maintenance and enticing those customers to move over to become full product subscribers? Thank you.

So on the first part we don’t know exactly, we use an estimation method that's fairly manual in order to do this and so we’ll try to explain this a little bit next week, but we don’t actually know exactly how many set through manual process. And we don’t automated it because that will make less and less sense going forward. While I think I understand the second question was about conversions of the programs?

Yes it’s actually, are you driving pricing increases to entice people to move over from maintenance or are they doing it voluntarily through seeing a greater value proposition of those products or is there a third option [multiple speakers] thinking about?

I think both on right now, and an ongoing basis it’s going to be a combo of the two. We’ve some incentives to move people forward we choose to go early. But a lot of it is a value in the new offering, which is the latest and includes large aspects of the cloud in it and gives you those additional flexibilities. So we think there will be a little bit of a push and a little bit of a pull.

Thank you. And our next question comes from the line of Richard Davis from Canaccord.

If I’m a firm that’s decided the switch to the cloud, to what extend should we thinking about -- is there any risk because this happened with Oracle to some degree, is there any risk that I would consider other cloud option, I mean obviously yes, but have you seen any kind of data that would say, that’s an issue or is more just like, listen we’re going to switch and when we switch I have all my model in Autodesk so I’m just going to go to your new model? Thanks.

On the cloud stuff Richard, in terms of having mature viable cloud products to both the AC industry and manufacturing. We’re really the only one that have it. You can look out and see some small startups that barely having interaction. We probably have three orders of magnitude, may be four orders of magnitude more usage in the cloud then they do. So I think for people who are deciding that the cloud has real benefits, I think Autodesk is the natural choice. We’ve detailed a little bit at previous times, where we said, more than half and sometimes it was three quarters of the users of Fusion are coming from other mechanical CAD packages. So it’s not just our users, who are adding on cloud capabilities, it’s really to attract new users. The second part of it is, one of the things we did when we introduced our cloud products is we made sure they weren’t only direct competitors with what we already did. But it was to extend the market. So if you look at BIM 360, BIM 360 wasn’t a replacement for Revit, it was to extend having model based design go all the way out to the job site and reach all the construction workers. Those are the kind of things we’re trying to do, is expand the reach of our products, because of the more natural platform. And I think you’ve seen the same things in other parts of enterprise software with SaaS offerings, where people are expanding into parts of the company, that their legacy applications would have never go to. And I think it’s identical in the design and engineering world.

Thank you. And our next question comes from a line of Sterling Auty from JPMorgan.

Carl, your prepared remarks you did touch upon the infrastructure possibility in terms of the new administration. Can you level set for us if you were to just give us a rough estimate, what percentage of the Autodesk business at this point is infrastructure related and how should we think about that within the U.S.?

You know just for construction or broadly speaking the AC business, think of it as roughly around 50% and then you can take the fraction that's the U.S. part of that and go from there. And of course Mexico's going to be building the wall, so I guess we can extend to the rest of North America. So that's about the reach of it, you know it's the American part which is about a quarter on about 50%, something like that. I'd put it in the 10% to 15% range.

Okay fair enough and then can you give us an update, so you touched upon the e-store a couple of times, the Analyst Day last year you talked about a lot of the improvements that you were making in North America the initiatives to move international with the e-store, where are you on those initiatives and you know are you at a point yet where you can start to break out how much of the revenue is actually coming through the e-store.

Tell you what Carl I'll start and you can jump in. We have -- of course e-stores everywhere, we’ve launched our own e-stores now across North America and in most of Europe. The e-store continues to grow. We talked about the proportion of our sales that were direct versus indirect grew to the high 20s this quarter, I think 29% up sequentially from 25% just last quarter and 17% a year ago. So it continues to grow as a proportion of total sales and I think we'll continue to see that happen not so much because we're guiding people there, it's that style -- when you get to a subscription model buying direct is a style of interaction that customers want to have with the company much more so than when I renewed my subscription to the Wall Street Journal, I don't walk down to a bookstore to do that. I go to WSJ.com and do that renewal and I think we're going to see more of that business move in that direction.

Thank you and our next question comes from the line of Monika Garg from Pacific Crest Securities.

Hi, thanks for taking my question you know how much revenue in the quarter came from indirect channel and where do you think channels could be as percentage of revenue over the next couple of years.

Yes, Monika that's the data point I was just trying to give. So the direct channel in the quarter was 29% of sales and up from 25% last quarter, where that goes longer term it actually is a topic that we'll talk about again next week, but I don't think our view has changed much from the perspective that we had a year ago, which was as we get off the fiscal '20 we think the channel continues to be a significant part of our sales in terms of absolute dollars we think there are more dollars of sales going through the channel in fiscal '20 than there were in fiscal '16. But in terms of a percent of pie, the percent of the total sales that get done, it'll be a smaller percent by the time we get out there. So I think we'll see a case where the channel has a place where absolute dollars of revenue growth, by the way probably fewer channel partners out there than we have today, so it's a more profitable business for the channel partners that remain but as a percent of product sales it will come down pretty significantly from where it is.

Got you, thanks. I have a question, on the final call Carl you talked about a lot of question on that already on the call. So if I look Q-over-Q ask for new model are down almost 10% in spite of the fact that collections were slow on subscription due to higher our revenue of per suite items, so why would that be the case and then, seven straight quarters of ARPs for new model being down?

Generally speaking we have continued to add lower price products as we build this out. We started with the lot of EBA, we started with a lot of transactions going through the e-store. But we also went through, when you have backend loaded quarters, you greatly understate the value of that subscription. It's why during the thing I try to breakout how the prices were increasing for like-for-like products going forward. And I think that’s going to be an important one. What you are getting is, you’re trying to look at in average and guess the component pieces and rather than having you guess what we said we would do next year, is break it out so that you can actually see. In the interim what we did is we gave you some numbers for showing that the prices are actually increasing, even if the calculation methodology in the mix is heading down. As we said just some of the mix issues were responsible for 50% of the decline, so mixing time plays a big role here and remember how I just described that calculation that if you buy something at the end of the quarter for example on the last day, it greatly undervalues what that subscription is worth over the long term. At the quarter end which we had a fair amount of promotion and the promotion was backed loaded, you are going to see that. But I’ll reemphasis again, the prices of like-for-like, for people buying the same thing that they bought last quarter or a year ago, those prices are going up significantly. And I highlighted how they were going up significantly across the world.

Yes, Monika what I would add, and again we will spend more time on this next week. If you go back to new model subscription sales a year ago, it was a small number, they were largely in mature markets, healthy mix of monthly and annual as well as many of them came through the e-store, the channel is still largely focused on selling perpetual licenses at that point. What we have seen over the last several quarters is a pretty significant uptake of new model subscription sales and I am talking about products subscription sales now, pretty significant uptake of those in emerging markets, which I think is healthy for the business. Certainly I would expect some of those to be recapture of pirates in those emerging markets, but as that happens of course those are lower priced, so that’s a headwind on ARPs. We see a lot more long term sales of product and lot less monthly, frankly we had a lot of tow dippers coming in monthly previously, previously we now have a lot more annual and multi-year. Again good for the business, but that monthly subscription price is about 50% higher than the annual subscription price, the monthly times 12 is about 50% more than annually. So that mix shift again good for the business not necessarily good for ARPs, it’s a headwinds, and then as the channel has gotten really engaged and is driving this, so a higher proportion of the sales of products subs come through the channel then a year ago were many of that things sold off to e-store again I think that's a positive for the business it gives us scale but it cuts into ARPs. So three trends that are very positive for our business and positive for the long-term ARR growth, but all that cut against growing ARPs in the short-term.

Thank you. And our next question comes from the line of Ken Wong from Citigroup.

Carl you mentioned the convergence of maintenance and rentals early and I think you might have been heading down the path on one of the earlier questions, but could you give us some color on some of the moving pieces of that particular convergence?

Yes, there are number of things that we've talked about. So one is if you look out to kind of call it FY’20 we want to be in a place where first of all we have really a single kind of offerings with a single back office and infrastructure to support it. One that will be a combination of subscriptions, product subscriptions as you see it plus a consumption model on top of it. That's where we see the business heading. Along the way it's how do we motivate customers to move from one model to another that’s actually in the program, what are the price points, how does that transition working and we’ll talk a little bit more about this next week. But in our mind getting to a single model is really important, it will give the best service to our customers it will be the most affordable us to have, we can start getting rid of some of the systems that were designed for a different era and be able to really concentrate on giving a world class experience for what users are trying to do today. So as we go through the next couple of years we’ll talk about how we do that and how we do that the most prudence and responsible way.

Got it, looking forward to next weekend then. And then building on Stan's question around maintenance and just renewal, any rough sense of the magnitude of renewal that are coming up in Q4 relative to Q3?

Yes, sure Ken. So renewals tend to be on the anniversary of when the license was sold and of course Q4 as far has been our biggest quarter, we've sold the most perpetual licenses over -- if you look back over the last several years we saw the most in Q4. So we have a significant renewal base that comes up during Q4 that I would go back though and highlight what Carl mentioned in the script, renewal rate is actually stronger this year than it was last year. So yes we're seeing a decline to the absolute numbers, but it's not driven by decline in renewal rate, it's driven by the rate at which the maintenance agreements come up for renewal and then in some cases we are incentivizing them and successfully moving them over to new model.

Yes, we’ll also see an effect in Q4 some people moving to EBAs. As we've talked about we are really encouraging our large customers to move to EBAs and there is an issue in which we don’t count the subscribers until the following quarter. You might have seen this in Q1 of this year and the same phenomena will go on. So particularly if someone goes from being a large maintenance customer to an EBA customer you will see some of that attendance to depress the number of maintenance customers and you will see the corresponding increase, but you won’t see it till Q1.

And our next question comes from the line of Steve Koenig from Wedbush Securities.

I apologize if this question has been asked, hopefully it hasn’t. I’m wondering if you could elaborate a little bit on your expectation for subscriber -- subscription counts, which implies acceleration in the out years. May be if you could give us a little color on -- or a ranking of the factors that will drive that, when you think about things like piracy and cloud et cetera. What’s going to drive that acceleration that you guys are looking for and to what extend are you starting to see those things kick in?

So in the kind of the existing business, what we’re really looking for is the three places we saw at this time, one was legacy, one is piracy and one is new customers. And I think we’ve seen this effectiveness. We’ve been able to detail the effectiveness of the legacy programs very specifically. Piracy is a little bit harder, unlike legacy where people claim to be a legacy customer, people don’t claim to be former pirates. So it make it a little bit difficult to identify them as former pirates, but we do have our ways. I expect to see more from that and like we said about a third of the customers coming are new customers. In terms of the other things that we see is, good growth amongst our enterprise customers in terms of EBA’s in the size of those and then the whole new category of cloud customers and consumption. So you both have cloud customers and then consumption models where people kind pay as they go for various services. Many of them will be tired directly to cloud products but many will be consumption, based into things like the Collections. So for example if someone is doing simulation or rendering in a collection, they will get some amount with it and if they wanted use extra they will pay as they go. So that’s where we’re expecting to see that.

Got it, I’ll leave it at that, thanks Carl.

And next week you’ll see a bunch more about it, but right now our cloud business is doing incredibly quickly, we’re really pleased with the growth we’re seeing in the cloud business. We’ll talk more about which customers we’re getting with the cloud business and why that expands the margin.

Our next question from the line of Brent Thill from UBS.

Carl you mentioned a third of the subscribers are now coming from new customers. I’m curious what may be most surprising to you, what you’re seeing in terms of switchers from the competition, Greenfield, old users, pirate, how do you put the community together and highlight where you seeing the strongest numbers of new users coming into the platform?

I probably put in, probably in that category, I have to guess, like I said, right now we’re doing a bunch of manual work to figure out all the new customers, how many were really free [ph] we’ve seen before versus those who pirated the software. So we’re trying to understand that dynamic a little bit more, and then we’ll talk a little bit more about that. As a rough guess, one of the ways to think about it, we’ve talked about this before. For every legitimate user out there, there is about one, slightly more than one user who's not paying for the software, so my guess would be, as we made some of these offerings more affordable from an upfront perspective we're attracting a fair number of the pirates. So the piracy base is probably bigger than we originally anticipated, you know kind of last year when we laid out these goals. The second thing is the legacy base is probably bigger than we laid out last year at this time. We saw it in terms of the distribution throughout the years again you know the mid-point is again around seven years. So we're seeing a fair number of people who are historical users. So on both those fronts we're kind of pleased. You know the Greenfield is a little harder to identify for certain, the other ones we have a better chance at, but we'll give you a little bit more color on this as we go and we get the numbers. Like I said at a certain point it won't actually matter, but we are looking at both piracy as well as maintenance customers who are moving over.

And just a quick follow up, you've been talking a lot about you know the make process, you can bill it, but then you got to make it and you mentioned in the past it hasn't been a big -- maybe as big a piece of revenue could be a lot bigger in the business. Can you maybe just update us in terms of what you're seeing on that core area?

Yes. So for example you know a lot of -- I mean we're seeing a number there, in the AC area you know particularly with products like BIM 360, BIM 360 really is communicating with all of our nontraditional customers involved in the process. If things like our structural analysis software for the architects and engineers BIM 360 encompasses the entire workflow, all the way from architects to general contractors, to subcontractors and next week we'll go through a bunch of deal, a bunch of what we're doing there and how it's reaching people that are actually on the construction site, building stuff. When you look at the other things like manufacturing Fusion 360 as well as all of our advanced manufacturing products are really very specifically about you know the next part of the process, I’ve kind of joked, but we're helping people make beautiful digital prototypes things that stay on that side of the glass, but you know our customers get paid for making real things. And so what we started doing a number of years ago is starting to helping them in that process, of taking it from one side of the screen to the other side of the screen and we have you know lots of stuff going on in composite materials, a lot we have going on with machining, communicating on the factory floor as well as the construction site, those are all expansions of the market and we'll spend a fair amount of time. We generally spend most of our time and probably appropriately so, as people have been very interested in the business model transition, but like I said this is a growing and very important part of the business and as people look you know to the next couple of years they’ll become increasingly important. So we'll give you some more details.

Thank you, and that concludes our question and answer session for today, I would like to turn the conference back over to Autodesk management for any closing comments.

Thanks Karen, that will conclude our call today, as Carl mentioned we do have our Investor Day next week, next Tuesday the 6th, it's going to be at our gallery in San Francisco and after that we'll be at the Barclays conference in San Francisco on December 8th, if you need to reach me, you can reach me at 415-507-6033 or email me with any questions. Thank you.

Thank you. Ladies and gentlemen thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. Everyone, have a great day.