Autodesk, Inc. (ADSK) Q1 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the first quarter 2012 Autodesk Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Dave Gennarelli, Director, Investor Relations. Please proceed, sir.

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss our first quarter fiscal 2012. 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/investor. As noted in our press release, we have published our prepared remarks in 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 future performance of the company, such as our guidance for the second quarter and full year fiscal 2012, the taxes we use to estimate our guidance, new product and suite releases, certain future strategic transactions, business prospects and financial results, our market opportunities and strategies, the trends in 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 2011 and our periodic Form 8-K filings, including the Form 8-K filed with the today's press release and prepared remarks. Those documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements. Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. During the call, we will also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of 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 changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-on-year comparison. And now, I would like to turn the call over to Carl Bass.

Thank you and good afternoon. Our first quarter results reflect a solid start to fiscal 2012. There are several areas of notable growth and achievement. Highlights for the quarter include: 11% growth in total revenue; 23% growth in revenue from commercial new licenses; 38% growth in non-GAAP EPS; strong operating margin growth; record deferred revenue; and the launch of our 2012 product line, including our new Design and Creation Suites. Asia Pacific again led the growth for the quarter from a geographic perspective, and we also experienced strong growth in the Americas. Our EMEA region posted solid growth despite a difficult compare as it benefited the most from last year's promotion. Our Manufacturing business delivered another solid quarter, with growth in all geographies and particular strength in the Americas and APAC. Within our Manufacturing segment, revenue from commercial new licenses grew a strong 32% compared to the first quarter last year. We experienced strong growth in our data management business through broader penetration across industries and geographies. Enterprise and SMB customers are choosing our data management solution for its state-of-the-art technology, cost effectiveness and ease of use. Over the past 3 years, we've been building our portfolio of broad-based simulation technologies and will continue to democratize these technologies by bringing robust tools to design engineers. For example, during the quarter, we acquired Blue Ridge, a leading provider of simulation software specializing in computational fluid dynamics to add to our Simulation portfolio. Our AEC [Architecture, Engineering and Construction] business grew 3% during the quarter. We experienced softness in our infrastructure business -- excuse me, our AEC business grew 3% during the quarter. We experienced softness in our infrastructure business in Q1 but we are looking forward to the introduction of our new infrastructure Design Suites, which we'll launch in Q2. The market demand and acceptance for products based on building information modeling technology is accelerating. While we are disappointed by the tepid growth, when you consider that the majority of our PSEB [Platform Solutions and Emerging Business] revenue is sold into the AEC industry, our total sales to AEC customers are better than it may appear. Our strongest growth in the quarter was generated by our PSEB and Media and Entertainment business segments. Growth was driven by customer demand for our horizontal design and animation products, respectively. We also closed the acquisition of Scaleform, which adds strong UI [user interface] tools and middleware to our Media and Entertainment group's robust portfolio of tools for game development. The most significant event for us in Q1 was the launch of several new Design and Creation Suites. While we did not ship these suites until very late in the quarter, our customers and partners are very excited about the suites. As you might imagine, the subject of suites was a major portion of the sales kickoff meeting we held during the quarter. We've been doing a lot of education and training with our sales people and channel partners. And today, we've had over 1,200 employees and nearly 4,900 channel partner employees trained on the new suites. There are a number of other positives in our Q1 results. We continue to see our subscription attach and renewal rates rise, and are now at levels at or above prerecession levels. And our balance sheet remains strong, with deferred revenue experiencing solid double-digit growth. Channel inventory remains at historically low levels and our cash balance is over $1.5 billion. I also want to take a moment to say that we're very thankful that none of our employees or partners was physically harmed in the earthquake or tsunami in Japan. They have shown incredible courage and resilience in the face of this tragedy. It's clear from the extent of the devastation that it will take some time before the economic situation in Japan returns to normal. We did experience some softness in Japan in the first quarter. Looking ahead, we have factored this into our guidance. Beyond that, we are looking forward to our tools helping the companies and people of Japan in their rebuilding process. Overall, we're pleased with the solid start to fiscal 2012. The better-than-expected start, coupled with a more positive outlook for the rest of the year, has allowed us to raise our expectations of our revenue and margins for the full year. It's clear that we are participating in the general market recovery. And it's also clear the rate of recovery differs by geography and by industry. We're very confident about our market position and strategy and more excited than ever about the opportunities before us. We will continue to focus on executing our strategy and driving growth in revenue, margins and profitability. Operator, we would now like to open the call up for questions.

[Operator Instructions] Your first question comes from the line of Dan Cummins from ThinkEquity.

If we could just go back to the AEC results for a little more detail before you get back into what else you could perhaps tell us about infrastructure. The suite's results appear very, very strong. We're curious what else you're seeing in your business that correlates to a very rapid adoption of model-based IT by the construction verticals. Maybe something on how your data and project management tools are doing.

Yes, so first thing I'll tell you is, we were a little bit late in getting the infrastructure suites out there for this quarter. It was according to plan that they will be coming. And so we're looking forward to the infrastructure tools coming out. I think generally speaking, what we're seeing in the market is broad-based adoption of building information modeling. And just as we started in the architecture and engineering part of the market, it is moving over to the construction part of the industry, which is the biggest economic opportunity for us to the construction market. And what we're seeing is broad-based adoption, we're seeing mandates in government, we're seeing lots of agencies requiring the use of building information modeling. And what we're really seeing is the payoff for people using these model-based tools, the payoff being that you can simulate and analyze, estimate things, where the greatest benefit is in the construction part of it. So we're seeing a lot of good stuff happening there.

[Operator Instructions] Your next question comes from the line of Brent Thill from UBS.

Carl, on the Suite sales, they were very strong, up 17% year-over-year. Can you just give us a sense of what you think about in terms of the pipeline, what you're seeing? You mentioned that you've gotten a lot of your employees trained. How much more training do you have left? And just a quick follow-up for Mark, if you could talk a little bit about -- you're bumping up your full year guidance to 12% growth from over 10% originally, what are you hearing from customers that are giving you this increased confidence?

Yes. So Brent, just starting with the Suites. We were really pleased with the results so far. Like we said, we only had about a month of the new Suites in this quarter. We had some of the existing suites but what we saw is really the demand was led by our customers. And channel partners are often skeptical when we introduce new things. And what we saw in the fall last year, when we were piloting some of the Suites, were some skepticism or some reluctance to go whole hog, I think the value that Suites provides was seen clearly by the customers, and that motivated our channel partners to get a lot of their people trained as fast as possible. So we're really encouraged by the small amount of data we have so far and I'm looking forward to into the second quarter when we'll have a complete quarter of results for the Suites.

And then just to chip in also, in terms of the approximately 12% growth rate looking to the entire fiscal year, I think we like the way the year started in Q1. We felt good about that. I think we also, I think you're aware, we get a lot of good input from our channel and all the different geos, our channel partners, they give us a good view of our funnel, the way the future's looking from that standpoint, and so I think we factor that in as well as our view on how Manufacturing is proceeding to lead the way. Asia Pac's proceeding to lead the way, and I think Suites kind of come into full bloom, if you will. And I think that really gives us the confidence to put out the approximately 12%.

Your next question comes from the line of Phil Winslow from Crédit Suisse. Philip Winslow - Crédit Suisse AG: Carl, I wonder if you could just spend another minute just looking at the verticals again. Obviously, Manufacturing continues to be very strong for you guys and you've talked a little bit on to the commercial construction front. Yes, wondering if you could give us a sense to just, in particular, what you are seeing in Manufacturing versus the others and just sort of how sustainable this very high growth that you have is? And if there's anything, yes, by geography that's really driving it, U.S. versus EMEA, et cetera?

Yes. Sure, Phil. I mean, so what I saw is all through the downturn, the vertical that stayed the strongest was Manufacturing. And it continues to be very strong coming out of it. And it's more so than the others uniformly strong across the geos. I think one of the reasons is our unique competitive position in the Manufacturing market. As we've talked about, I think we sell great technology, a great value, it's in the right part of the market. And we are really the disruptor in that market. And we continue to win business, both new business, converting some of our customers to new 3D technology, but most often, winning share from other competitors. I think it's just better technology, better value of the products. So Manufacturing continues to be strong. I think when you look at some of the other verticals, I think it's a little bit more varied across the different geographies and across the different subsegments, if you will. And what we saw this time was pretty good growth in AEC in the Americas, but the backdrop is there are parts of weakness in AEC or places that still haven't recovered. We had temporary things like the spending freeze in Washington D.C. for a period of time. I mean, there are just these little things. There are parts of Europe that certainly haven't recovered, and commercial construction hasn't. So what I'm most happy about has enabled us to have produced such good results with a still not fully healthy AEC market. So we look forward to as the AEC market recovers. The one thing, we kind of pointed out, in my remarks was -- I think to really understand AEC, you have to really look at it, combined to some degree with PSEB. Some of those products sell primarily into the AEC market and so it's not a perfect alignment between the divisions we report on and the end-user customer segments.

Your next question comes from the line of Steve Ashley from Robert W. Baird. Steven Ashley - Robert W. Baird & Co. Incorporated: I actually just like to drill down again on the AEC business. Can you give us any kind of metrics around, if we look at the Civil 3D and some of the infrastructure products, how they were year-over-year? And in contrast maybe how Revit or some of the Revit Suites performed in the period?

Yes, so Steven I don't want to break down individual products. And as we move to suites, it becomes less important. I think what I would look at is, wait for the introduction of our infrastructure suite during this quarter. Generally speaking, we feel really good about our AEC business. We're really pleased by the adoption of the technology, people realizing that this building information modeling is really a game changer. And that's what we consistently saw, both in talking to customers, talking to our partners. And the one thing I've said many times is a single quarter doesn't make a data point. So I think, when you look at PSEB and AEC together, it's about the growth rate that I would've expected. It was a little lopsided towards PSEB. If that happens again, we can have a more robust conversation about it.

Yes. And I mean, just building on Carl's comment there. The Revit Suites we’ve been called out in the disclosure of 25% growth. And so the Revit suites look good to Carl's point and I think and building on what he said, what I feel really good about, is the infrastructure suites are about to come to bloom as well. So probably a good context. Steven Ashley - Robert W. Baird & Co. Incorporated: And then in EMEA, if you look at it in kind of net out that promotion from a year ago, it was particularly strong. Can you give us any color on kind of where that strength was? Was it products or markets or verticals or anything you could tell us there?

No, I think you're absolutely right that if you net out the promotion, EMEA performed quite well. I think it was fairly consistent across EMEA, across the sub-regions, as well as the various disciplines. A little bit spotty but generally, it was very healthy and very robust across Europe. And so we were pleased with the results. The combination of what we saw there when you factor out the promotion and stuff led us to changing our estimates for what we expect this year.

Your next question comes from the line of Jay Vleeschhouwer from Griffin Securities [ph].

Carl, I'd like to ask about your -- the maintenance revenues and billings in terms of the fiscal '12 outlook for Q1, both revenues and billings were up in the single digits. But should we expect that one or both, it could be billings, for maintenance should grow in the double digits this year? That's a general question about that business. And with respect to the suites effect, when you look at maintenance to date, it looks like your average active license fee for all products is somewhere around $400 or so, give or take, per year. And I'm wondering if over the next couple of years, as a result of suites, better attach and mix, you can add potentially couple of hundreds of dollars per active license under maintenance, all else being equal.

Okay. Jay, so on the maintenance and billings. The maintenance and billings, we don't really forecast of individual line items there. And then really, there is a fair amount of seasonalities. I'm sure if you go back and look at it, there's a fair amount of seasonality in the maintenance billings as you can see. So I think -- and I don't -- what I see is a recovering economy leading to increased attach and renewal rates. And but just the nature of the math of it is that builds slowly. So I think you'll see it building but you can kind of model out what happens as that builds. I think the question of perceived revenue -- averages are what averages are. And on average, people drown in a pool that's 3-feet deep, but they probably don't drown in the 3-foot part of the pool. And there's a lot of things that go into those maintenance revenues. But if you just isolate it and you look at it, you would see that subscription prices for Suites are higher than individual products, as you would imagine. So I won't -- at this point, I wouldn't say exactly how much I would raise, but -- how much I would expect that to rise, but I do expect that as the attach rates for Suites goes up, you will see the increase in this number.

Okay. For Mark, since you talked about the infrastructure business, would it be fair to infer that, that business, what you used to call ISD [Infrastructure Solutions Division], is somewhere in the range of $100 million to $200 million a year? Would that be about right?

We typically, Jay, don't really break that out at that level of granularity. You can kind of see the entire AEC business but we typically don't break it out to that level of granularity.

And then lastly for Carl, if I could just sneak one more in. Carl, since you mentioned data management as a highlight for the quarter, could you just talk about what the cross currents are in that market that are most relevant for you and your base? It appears that PTC [Parametric Technology Corporation] is going to retire their product point offering based on share point. They are addressed more or less towards the SMB market. There are some other older products aimed at SMB that are weakening, let's say. And I'm wondering if you could just talk about what's driving your opportunity, the growth that you're now referring to in data management?

Yes. Well, they -- aren't we competing against all older products? That's the polite way of saying what the competition is in data management. I think you have to break our data management activities into 2 different parts. One is in Manufacturing, where we're seeing really good adoption. I'd say if you look at the part of the market that we're concentrated on, it would be more of the M out of the SMB part of the market and the work group out of the large enterprise. So it's a slightly different take in the competitors. I think business had been healthy, but they're really directed at a different part of the market. They're looking at enterprise PLM systems. We're trying to increase the efficiency of individual work teams and workgroups. And so we're involved with large workgroups within the enterprises and generally, medium-sized businesses. And we're seeing really good adoption there. We've talked about this for a while. It just keeps building on itself with the proliferation of more 3D data. There's a greater need than ever to coordinate and collaborate on your 3D models and that's working really well. The other place where we've seen a change certainly over the last year is the desire to have greater data management capabilities in AEC. And so we've been talking about new product introduction and rejiggering some of our product lines that already exist, and we've been doing a lot more work on data management. Again, I think it's the same underlying root cause, is that as people adopt model-based design and they had simulation and other capabilities, the amount of data just goes up exponentially, and the need to both control it and manage it as well as distribute and collaborate on it goes up. And so we have tools in both of those areas. Some places, we're using share technology. Other places, we're building things from scratch. But I'm optimistic about data management in both those markets.

Your next question comes from the line of Walter Pritchard from Citigroup.

We have a couple of questions Mark on FX and just the impact on the quarter, a really surprised to see a headwind on the euro, and then also just any comments on FX guidance for the year. And then -- so that's on FX. And then just related to emerging markets, I guess, prior to the downturn, you guys were seeing emerging markets growing at nice premium to where you're seeing the developed world, and you're still seeing them grow kind of in the same range. And I'm just wondering if you could give us a little more color on sort of that performance and whether or not you're seeing certain markets grow faster than others and so forth?

Sure. Couple of things here. One is that -- yes, you could see a little bit of FX headwind as revealed and broken out there for this particular quarter. I think you're aware, for sure, that we have a rolling hedge program. It's kind of a classic 4 quarter cash flow hedge that we do for the company. And just for everybody's benefit, we try to articulate that in some other back ends of our disclosures. But basically, to fully understand our FX, you have to understand that we were doing hedging, and it increasingly becomes more hedged as you get closer and closer to the current periods. So that really kind of explains what's going on there. As it relates to going forward for the fiscal year, we typically don't give the explicit assumptions, but you should assume that when we give updated projections that we've factored in everything that we can comprehend as of today, including our hedge positions. That's the first part of the question. The second part relates to the emerging markets. We're pleased to see them grow faster than our company average. I think we've called out in the past they get kind of lumpy. You guys, just by the nature of emerging markets, we really like our presence there. We like -- we see our growing capability in the emerging markets. We think this is a very attractive market for us and we expect that this will outpace our growth as a company for years to come. So I hope that gives you a little lens, but the lumpiness is definitely something we've experienced before.

Yes, and we continue to see -- I mean what we're seeing now is strength in Russia and Brazil, as an example. A year ago, I wouldn't have been talking about Russia. 18 months ago, I wouldn't have been talking about Brazil. So I think it just changes over time. And so I would just be trying to look at that over a longer period of time in order to really gauge direction.

Your next question comes from the line of Derek Bingham from Goldman Sachs.

One thing I just want to make sure I understood, is there any more color you could give on the platform strength in the quarter? That was up strongly quarter-on-quarter. And then the prepared remarks also mentioned LT in particular. Just anything that you notice there? Anything that could explain that?

No, I don't really have a great explanation for it. What I would say is I think it has something to do with coming out -- people who are coming out of the recovery. We noted on the way in that, that business fell off. I think less people operated this software. They may not have stayed on maintenance during the time period. They still remained good customers. They were still users of our software. The financial situation prevented them from being current. I think given the opportunity with improving economies, people are getting back on the bandwagon and we're seeing that with the attach rates and renewal rates and just the increase in revenue. And so tools that they may have kind of overlooked upgrading during a period of time, they're now just making current. It's probably the best explanation I have at this point. And the other thing that I've said it times, Derek, to watch out for, is when we do run promotions and stuff, we can really sway activity. And so there a number of promotions out there about it. I think there are also a number of questions that people had about the introduction of suites, they weren't quite ready at the beginning. So I think we'll get a more full-featured picture as we go into Q2 with all of the suites available, and a little -- few more months of recovery behind us.

My -- same question is just on Japan. Just wondering if you could give us any sense for order of magnitude of the impact relative to what you would've expected from Japan with the -- at the outset of the quarter. And then also, what you've seen so far in terms of the ability to improve or continued impact into Q2?

Yes, so like I said, I mean, I think we saw remarkable resiliency. I mean we saw selling be strong even at the worst times of the crisis. I was surprised by both the resiliency and the resourcefulness. And I think there was a real determination on part of the entire country to make sure that business continued. I mean, I think you've read some of the things. I mean, there are certainly areas that have been devastated and some of the infrastructure has been damaged. When we talked about numbers going forward for both the quarter and the year, we contemplated what we've seen in Japan. So we're comfortable with what we spoke about given where it is. I think we'll continue to monitor the situation. There wasn't nearly as large -- you could have easily imagined business falling off a cliff, having watched the pictures and read the newspaper accounts. It didn't do that, but there was some drag on the business.

The next person to ask a question is Mike Olson from Piper Jaffray.

Just one quick question. On the BIM and simulation and visualization fronts, do you feel that you have all the technology and product portfolio in place or are there holes that you still feel that you need to fill? And would that be done more likely through internal development or through a continuation of some of these smaller technology acquisitions?

I mean, I don't -- I think we have a long way to go before I'd say we have a complete portfolio. Certainly, we've rounded out the portfolio over the last couple of years. We don't -- I'm proud of the development we were able to do even during the downturn. I feel really good about our position. But what we found out is that with each increasing capability we put in the products, we open up our products to more customers. We have more demands and push us to go further and further. And as long as it makes sense to, we'll continue to look. Once we decide there's a need, we have a process by which we determine whether internal development or acquisitions are the best ways to get there. We'll continue to do it. But in general, we think analysis and simulation is a growing market and that's true across all of our verticals, not limited to Manufacturing. And we'll continue to invest in that. It's technology that our customers want.

Your next question comes from the line of Keith Weiss from Morgan Stanley.

I want to ask a couple of questions on guidance. The first one being, if I'm doing my math right, at the midpoint of your Q2 guidance, it looks like revenue growth is going to accelerate to the 14% off of more difficult compares. But that 14% is also ahead of that 12% that you're looking at for the full year growth. I was wondering was there anything that shifted out of Q1 into Q2 that's giving you more confidence in the growth rate in Q2 or anything that you've seen in the pipeline? Something to help us sort of understand that sort of shift up in growth for 2Q but a more sort of flattish with 1Q-type growth for the full year?

So I think, generally speaking, Keith, our business consists of smaller deals. And so we don't have those big shifts in which an enormous deal switches from one quarter to the other, and to the extent that we have large deals. Revenue recognition, rules don't allow for it to be taken in a single quarter. So that's usually not what's going on. I think we feel very good about the pipeline we're seeing. We're seeing robustness in the economy. I'm encouraged by the suites. The results that we're just talking about now for Q1 only have a partial quarter of suites results in there. So we're more seeing that and a continuing improved economy, and just a healthy pipeline of business.

Okay. But -- and conversely, there wasn't any particular impacts in Q1? You mentioned federal government, perhaps any delays in signings, maybe there's some pent up demand from these new Suites coming? That perhaps explain some of the up shift in revenue growth?

Yes, I think everything seem the usual gives-and-takes that you see in a given quarter. And there's a lot of factors that go into each quarter but none of them really rise to the level of being worthy of calling out.

Got it. And then, one for Mark.

Sure Keith.

The comments you've made in the press release about balancing both sort of investments and margin growth. I wonder if you could give us some detail or talk just a little bit about what types of investments you guys are looking to make in FY '12?

Yes, absolutely. I think they really revolve, Keith, around 2 things. One has to do with just go-to-market activity. We're investing there to continue to drive revenue on the sales and marketing side. I think the other key area that we want to continue to invest in is in the product side and you heard Carl talk about simulation. It's clearly an area of continued investment for us. We're investing in suites and the full completion of that. We're investing in Web services, things of that nature. These are but a few examples. But I think you should have the takeaway as really go-to-market revenue generation and product.

Yes. I think most of our activities are around the go-to-market. If you looked during the downturn, despite some of the big cuts we did, we continued to not only expand the capacity but also the capability of the sales force and that of our partners. I think we can continue to do that. We found more ways to reach more customers and we wanted to take advantage of that. We feel really good about the product portfolio we have. We feel really good about the suites offering, and so now the idea is to make sure that we're as effective as we possibly can be in bringing those things to market.

Excellent, and if I could just sneak one last one in. Carl, you got us all very excited last quarter when you mentioned seeing new hiring going on in a lot of your industries. Has that trend continued into your fiscal first quarter?

Yes, absolutely. We, in example -- certainly, we've seen the bottom for -- I no longer hear about any customer who's continuing to reduce their workforce. Everyone's hit bottom at a minimum and most customers are hiring back. I think the real challenge in some places like United States is, in cases, there are places where they don't intend to hire back to the same levels, which I think has some long-term structural implications for the economy, but most of the customers that I'm in contact with are hiring. And particularly, some of the hardest hit segments, like architecture and parts of construction, there is new projects in the works and hiring is happening there.

The next question comes from the line of Steve Koenig from Longbow Research.

I noticed the upgrade, crossgrade line was pretty strong this quarter, just like Q1 a year ago. We did pick up some promotions in the quarter. Were those responsible for the bulk of the upgrade, crossgrade revenue or at least a bump in the revenue? And related to that, were the legacy promotions, did those help the new license line for Pearsons [ph] that were over 3 years old being upgraded?

So I think probably the biggest thing that would contribute to that is just the suites. And as suites continued to evolve, people look at that opportunity to do a crossgrade from that standpoint, Steve.

Yes, so the movement from single products to suites is classified as a crossgrade, and with that as a crossgrade, upgrade in cases, people take various paths to get there. But that's probably what we're measuring there.

Okay. And I guess for my follow-up, I'm curious to know, the suites promotion, will that continue on into Q2 on the same base as Q1, same geographies, et cetera, or are you looking to modify that promotion?

Yes, we were always tweaking the promotion slightly. As I said, we kind of rolled out the Suites, they're not already in all languages at the same time. So -- and we also look and we evaluate which are the ones that have been most successful, and so we'll continue to do that. But I expect some of them to come to an end and you'll see new promotions introduced. And as you may know, I mean some of the promotions come from us directly, some of them are managed by our channel partners. So some of the things you may pick up may have no root cause back at headquarters.

Okay. Great. And then the question about the legacy, if you could just wrap that up, did that help you on the new license line, the legacy promotion?

Yes, I mean it always does. I don't think it was a huge effect but I think it goes more to the question I was answering before where you see people who now have the means to get back -- to get current and want to get back on. I think that's an opportunity that we reached out to customers who may have been damaged during the downturn and want to get current. And that's some of what you're seeing there.

[Operator Instructions] Your next question comes from the line of Sterling Auty from JPMorgan. Sterling Auty - JP Morgan Chase & Co: Carl, I was just wondering, the comments on the little sluggishness in infrastructure, do you think you froze the market a little bit with the timing of the introduction of the next round of products? And how much bounced back have you factored into that sort of good guidance here for the second quarter?

Yes. So I think there's always a possibility. It's hard to perfectly know what information is out in the market in terms of people making purchasing decisions. Certainly, we've been very transparent about an infrastructure design suite coming. So that was known. So I think there's some -- when we do projections going forward, when we give guidance, like for the second quarter, we generally don't do it at a product level. We've not found that to be very effective in understanding our business. We have more -- we have a bunch of other ways, a kind of metric ways of looking at it. We do pipeline analysis. We have a number of techniques. But forecasting by product, given all the variables, has not turned out to be our most effective tool. Sterling Auty - JP Morgan Chase & Co: Okay. And then as a follow-up for Mark, as you think about the hiring through the year, trying to get a sense of the shape of the operating expenses, the profile through the year, how should we think about that investment? Because we talked about some of the sales and marketing. Is it more front loaded and we've already seen a bunch of it or is that really smooth through the year?

Sterling, I'd say, you've seen some of it. We've done some modest hiring. And I think there'll be some continued modest hiring but it'll be on the modest basis for sure. So I'd say in that respect, I think you've seen part of it and some to come.

[Operator Instructions] Your next question comes from the line of Blair Abernethy of Stifel Nicolaus. Blair Abernethy - Stifel, Nicolaus & Co., Inc.: Carl, just on the platform business one more time, you're tracking now at this level, still a good $100 million below sort of prerecession levels. And I'm wondering, where is -- is there still an opportunity to drive back up to that level as the business exists or are we seeing -- are the suites and the shift to 3D really shifting some of those rev -- some of that older, I mean that old customer revenue number into AEC and Manufacturing?

I think what you will see, as we continue to go forward, is there's plenty of opportunity in our horizontal design products. They continue to evolve and so when you compare today's releases against those of 3 years ago, there are lots of advantages for customers. I do think some of them become more aware of vertical answers, some of those are just vertical solutions and some of them are 3D model-based solutions and customers choose that. And I have gone out and said that I do think that you will see a pronounced shift to people purchasing through suites. Now included in the suites are some of our classic products like AutoCAD and the AutoCAD verticals are included in the suites. So I don't think it shows any lack of desire to purchase those products. I think customers are realizing value in the suites. And you'll see a shift to the way they purchase the products, not in the usage of products. Blair Abernethy - Stifel, Nicolaus & Co., Inc.: Okay. Great. And just one more quick one. On the Media segment, strong recovery this quarter, up 18% year-over-year. Is that end markets getting better due to some extra promotion in that segment?

It wasn't from extra promotion. It was just a good solid quarter and solid execution. And if you look over the history, over the last 5 years, 10 years, the Media business is smaller and tends to be a little bit more uneven than our other businesses. It is a little bit carried by larger deals and it's very sensitive to economic conditions. But I think what we were seeing is just the general recovery there.

Your next question comes from the line of Dan Cummins from ThinkEquity.

I had 2 follow-ups. On the gross margin, on the maintenance side, if I've got that right, I think it's rounding to about 94%. Is that -- I think that's somewhat less than what we've seen recently. Is that the way we should perhaps model going forward? And a comment, please, on the large deal environment at your -- at the major account level.

Sure. Dan, basically, at the -- I think you're right to pick up the difference there. And one of the things that you're going to notice is as we shift in our fulfillment, where -- in some of our suites in fact, for ease of customer installation, we have a kind of an advanced thumb drive as a way to think about it but it's a nice technology that allows people to have an easier install. And there's -- that's factored into the cost of goods sold. But you can see everything's factored into the total gross margin. It's just it has a shape in between the maintenance when you're doing the renewal versus the other part of the gross margin. Q1 is always low as well.

Okay.

The second part has to do with large deals, and whereby, each quarter, we don't comment on those offers per se and I've -- there's not a lot to say about that. Carl, don't you have any additional commentary? But it's...

Yes. I mean, I'd say generally speaking, we've been very successful in our major account program when we talk about future investment. One of the areas that we will continue to invest is in major accounts. We see it as being something very synergistic with our mainstream channel business. It's not as your -- sudden gain and what we found is as we win larger and larger deals and large accounts, the rest of our business does well. It's kind of a great entry point. And so sometimes, we enter markets and we do it through the small customers, buying 1 and 2 suites and work our way up. In other parts of the market, it's embedded into the market with large accounts. And we found our major accounts to be very effective for winning the lighthouse deals. Our channel partners are incredibly effective with the rest of the ecosystem and serving them well.

There are no further questions at this time. I will now turn the call over to Mr. Dan Gennarelli for closing remarks.

Thank you. First of all, we apologize for the audio difficulties on the call. Secondly, just a reminder, we'll be at the BofA conference on June 2 in New York City, and also on June 29 in New York City, we'll have the meeting with Autodesk management and we hope to see you there. Thank you.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.