Autodesk (ADSK) Q3 2018 Earnings Conference Call Transcript

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Autodesk (NASDAQ: ADSK)
Q3 2018 Earnings Conference Call
Nov. 28, 2017 5:00 p.m. ET

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Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Autodesk Third Quarter Fiscal 2018 Earnings Conference Call. At this time all participants are in a listen-only mode, later we will conduct a question and answer session and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to hand the floor over to David Gennarelli, Senior Director, Investor Relations.

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Please go ahead, Sir.

David Gennarelli -- Senior Director, Investor Relations

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss the results of our third quarter of fiscal 2018. On the line today is Andrew Anagnost, 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 2018; our long-term financial model guidance; the factors we use to estimate our guidance, including expectations regarding our restructuring, our maintenance to subscription transition, ARPS, 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 2017; our Form 10-K for the periods ending April 30, July 31; 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 being made as of today.

If this call is replayed or reviewed after today, the information presented during this 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 we 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 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 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 Andrew.

Thanks, Dave. I just got back two weeks ago from the largest Autodesk University in our history. There were over 10,000 design, engineering, construction, manufacturing, and film production professionals in attendance. And as usual, their enthusiasm for and dedication to our product is absolutely inspiring.

Now I know several of you are able to attend the event, and I'm sure you felt some of the same level of excitement I did. Now before we get started with the details, I want to point out that after we review our Q3 results, I'll discuss the restructuring that we announced with today's earnings release, which now brings me to our Q3 results. I'm pleased to announce that Q3 marks our return to revenue growth, and we continue to make excellent progress on our two major initiatives: completing the subscription transition and expanding beyond design with cloud-based solutions for construction and manufacturing. The consistence in performance we've delivered over the last several quarters increases our confidence and our ability to achieve the goals of the subscription transition.

Now here are some key outcomes of Q3 that I want to highlight: Total annualized recurring revenue, or ARR, grew 25% at constant currency. Recurring revenue had increased to 92% of total revenue. Approximately 1/3 of the eligible customers are choosing to migrate to subscription with the maintenance-to-subscription program or M2S. We added 146,000 total subscriptions, driven by 307,000 subscription plan sub additions, making the base of subscription plan subs bigger than the base of maintenance plan subs.

That is a great milestone. Now let's take a closer look at our Q3 performance. I think it's important to first note that Q3 represents our return to revenue growth. It's the first quarter where the year-over-year revenue is comparing back to our first subscription-only quarter.

The growth was even better than it looked if you remember that our Q3 results last year also included $38 million of license backlog that rolled over from the end-of-sale of Suites perpetual licenses in Q2 of fiscal year '17. Normalizing for that, Q3 revenue would have grown 14% year-over-year. The trends we're seeing in ARR are clear signals that the transition is working. Total ARR continues to accelerate, powered by double-digit growth in all the three major geographies.

Subscription plan ARR more than doubled, driven by growth in all subscription plan types, led by product subscription. We continue to experience tremendous growth in product subscription ARR on both a year-over-year and sequential basis. Subscription plan ARR was just shy of becoming the major component of total ARR, and there is no doubt it will become the major component in Q4, as we anticipated. We achieved the growth in subscription plan ARR by adding a record number of subscription plan subs in Q3, led by continued strong adoption of product subscription.

Even when we normalize for M2S, total product subscriptions more than doubled year-over-year. Another consistent attribute of the transition is that new customers continue to make up a meaningful portion of product subscription additions and represented 30% of the mix for the quarter. These new customers come from a mix of market expansion, growth in emerging markets, converting unlicensed users and people who have been using an alternate design tool. We continue to make meaningful progress in converting legacy nonsubscribers into subscribers.

In Q3, we added another 26,000 product subscription through another successful promo targeted at legacy users, which is on par with the promo-related subs we added in Q1 despite an even lower discount structure. Interestingly, we're still finding that more than half of those participating in the promo are turning in licenses seven years back or older. This reinforces our view that there are a meaningful number of active users who are interested in moving to the latest software and have licenses that are more than five years old. There are over 2 million of these legacy users that are actively using an old perpetual license.

Over time, we will convert a large portion of these users either through a promotion or compelling new product releases as their product becomes increasingly outdated over time. One more positive development with the Q3 promo is that we experienced a meaningful uptick in the percentage that purchased an industry collection. Now Q3 is not typically a big quarter for EBA subscription additions, and we experienced normal seasonal trends this quarter. However, we did experience a sizable increase in large deals valued at over $1 million in Q3, and most of them are EBAs.

We'll see the benefits of the new EBAs in both subscription additions and ARR in future quarters. We also signed the two largest contracts in Autodesk history in Q3. Both were EBA renewals with large engineering companies, and both increased their annual contract value by more than 50%. These cases illustrate how Autodesk is moving beyond being a software vendor to becoming a strategic partner with our customers.

Now that doesn't happen by wishful thinking. It's been very intentional on Autodesk's part to become a thought and technology leader in the industry and work with our customers to solve the biggest design challenges they are facing today. Now total cloud subscriptions continue to be a fast-growing subscription component. There are three areas of our cloud-based products that I want to highlight briefly: the acceleration of new technology integration into Fusion 360; the growth of the Forge partner ecosystem; and the evolution of the BIM 360 product and business.

Let's start with Fusion 360. We recently announced the integration of two key capabilities into Fusion 360: Inventor and SolidWorks interoperability in the basic version; and general design workflows in the $1,500 per year Ultimate version. This will allow users to associatively move data back and forth between Fusion, Inventor, and SolidWorks so they can access advanced manufacturing capabilities, like 5-axis CAM and the automated creation of manufacturing-ready geometry delivered by Generative. This will bring these users one step closer to true push-button manufacturing.

Next, I want to talk about our Forge platform. We are working with dozens of partners integrating with Forge and BIM 360. These third-party developers share the same vision as we do on supporting the needs of construction workflows today as well as anticipating their future needs in preconstruction and site execution. There are nearly 54 applications for BIM 360 available today.

We also have customers successfully integrating BIM 360 with their existing systems using Forge. One example is a company that is designing and constructing large infrastructure projects, including hydropower stations, tunnels and more. Another large U.S.-based construction company is using BIM 360 and Forge to extend their workflows and services to facilities management. Forge is well on its way to becoming the extensibility platform for the world of design and making.

And you can expect us to talk a lot more about it in the future. In addition, we just announced the next-generation BIM 360 platform is now available as a public technology preview. This new platform is built on Forge and integrates the capabilities of the BIM 360 family in a single environment that easily allows customers to pilot test and implement their next project. We've also had several key BIM 360 wins with construction companies.

And in Japan, we signed a $5 million BIM 360 deal with one of the country's largest general contractors. In EMEA, we had a 7-figure deal with another contractor. These are just a few examples of the BIM 360 deal activity. Now we'll turn it over to Scott for a few more details on the M2S program, ARPS and other financials.

Scott?

Scott Herren -- Chief Financial Officer

Thanks, Andrew. I'll start with subscriptions and our maintenance-to-subscription, or M2S, program. Partially offsetting the strong growth in subscription plan subs was the expected decline in maintenance plan subs. It's worth repeating that we expect to see ongoing declines in maintenance plan subscriptions, and the rate of decline will vary based on the number of maintenance plan subscriptions that come up for renewal, the renewal rate and the pace of the M2S program.

110,000 of the decline in maintenance subs was the result of the fast start to the M2S program. It was the first full quarter of availability for the program, and we again experienced better-than-expected results. Approximately 1/3 of all maintenance renewal opportunities during Q3 migrated to product subscription, which is even better than the early data we got from Q2 results. And of those that migrated, over 25% of eligible subscriptions upgraded from an individual product to an industry collection.

Once again, some customers were doing a partial conversion of their maintenance seats, but we're especially pleased that overall, participating accounts are growing their total subscriptions and growing their spend with Autodesk. In other words, accounts that participate in M2S are purchasing net new product and cloud subs, and we're seeing this behavior across all geographies. It's still early days for the M2S program, but as we've said, we'd like these maintenance customers to move sooner rather than later as product subscription provides them the greatest value with increased flexibility, support, and access to our cloud products. Moving to a single model makes the most sense and will immensely simplify our business and how our customers interact with Autodesk.

Now let's talk a little about annualized revenue per subscription, or ARPS. We spend a lot of time on ARPS on last quarter's call and reiterated the influence on the short-term performance of ARPS, including product mix, geo mix, timing and the M2S program, which is having an impact on ARPS. That's a positive impact on maintenance ARPS and a negative impact on subscription plan ARPS due to the discount offered for conversion. I know it's easy to get distracted by the near-term noise in ARPS, but here's a metric to focus on: Product subscription ARPS grew nearly 20% year-over-year.

And if we exclude the effects of M2S, it would have grown nearly 25% and had its fourth consecutive quarter of sequential growth. That's meaningful growth in ARPS for our core business. We remain confident that overall ARPS will increase in Q4, driven by less discounting and promotions, the price increase for maintenance and M2S customers, and the migration to higher-value products. Moving to spend management.

We continue to be able to execute and drive results while keeping spend growth nearly flat. Non-GAAP spend increased by 1% at constant currency in Q3 and is flat year-to-date. We're achieving this through targeted divestments and reallocation of those dollars to initiatives that drive our transition. Andrew will talk more about how we're accelerating this with the restructuring and that we remain committed to keeping spend approximately flat this year and next year.

Looking at the balance sheet. Reported deferred revenue grew 15%. At the same time, unbilled deferred revenue increased by $85 million sequentially. So total unbilled deferred revenue now stands at $148 million, which would have added another 10 percentage points of growth to deferred revenue, and we expect it to continue to grow meaningfully in Q4 and going forward as we move more of our enterprise customers to annual billing terms.

Our view of the global economic conditions remains consistent with our view over the past several quarters, with most of the mature markets performing relatively well and little change in emerging markets. Turning to our outlook. We continue to see strength in our core business around product subscriptions, EBAs, and our ongoing maintenance and are seeing the trends we expected for total ARR, which is the key driver for our long-term model. We're holding steady or slightly increasing most of our guidance metrics.

However, we slightly reduced our Q4 subs outlook related to our cloud assumptions. With cloud subs, we continue to see good traction with our core products, namely BIM 360 and Fusion. As the capability of these products has matured, more and more customers are purchasing the higher-value offerings that include the features of the lower-value products they were purchased last year. As such, we expect to see continued increases in cloud subs with higher ARPS and lower volume.

Now we'll turn the call back over to Andrew.

Andrew Anagnost -- Chief Executive Officer

Thanks, Scott. I'll reiterate what Scott just said and assure you that we remain fully committed to the FY '20 goals around ARR, subs and cash flow, which brings me to the restructuring. Some of you may recall that last quarter, I outlined the three strategic priorities that I believe will drive long-term success at Autodesk: completing the subscription transition; digitizing the company; and reimagining manufacturing, construction, and production. The next era of the Autodesk will not be defined by simply a product or business innovation but in their combination.

We must excel at both, and we must do that all in the service of our customers. Restructuring actions, like we're announcing today, are usually taken when the company is under an external pressure, such as a prolonged economic downturn or when there is a need to significantly cut expenses. In contrast, this action is being taken to support our evolving company strategy by rebalancing our investments, divesting in some areas and investing in others. By realigning our investments, we are positioning the company to meet our long-term goals.

We will be investing in building and expanding the digital infrastructure of the company, increasing go-to-market and development spend for the construction opportunity and maintaining development on our core products. To fund these growth areas, we must rebalance resources and divest where it makes sense. We will, therefore, divest in some research and development activities that are not well aligned with reimagining construction, manufacturing, and production. We will also close some Autodesk sites that are no longer aligned with our global location and talent acquisition strategy.

I want to reaffirm what Scott said earlier: Our flat spend goals for this year and next are not changing. To wrap things up, we're excited to be another step further along in our transition. We've been able to consistently execute on our long-term plan and while providing our customers with greater flexibility, more compelling products, and a better user experience. Operator, we'd now like to open the call up for questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press * followed by the no.1 key on your telephone keypad. If your question has been answered, or if you would like to remove your line from the queue, you may press the # key. To allow as many questions as possible, we ask that you limit yourself to one question and one follow-up question.

And our first question for today comes from the line of Sterling Auty with JPMorgan. Please go ahead, Sir.

Sterling Auty -- JPMorgan Chase -- Analyst

Yes, thanks. Hi, guys. Let's hit the 625,000 to 650,000 net adds for the year down from the 625,000 to 675,000. Scott, you gave us some color but some of the discussions having with investors looks like the maintenance-to-conversion program is working really well.

Getting more subs from that component would seem to indicate that you're getting lower organic net adds into that subscription program. Is it just cloud? Or is there anything else that you're not getting quite the traction that you thought at the beginning of the year?

Scott Herren -- Chief Financial Officer

Yes. Thanks, Sterling. It really is cloud, our cloud assumptions and what we see in cloud in Q3. So the core business is still strong.

In fact, our core business subs are up sequentially Q2 to Q3, and they'll grow again from Q3 to Q4. That's what delivered the strong quarter that we just announced, with ARR up 25%. That's what underpins the guidance that we gave, the slight uptick in our guidance on the financial metrics at least for Q4. So the core business is strong.

But as we look at cloud, the slight dive down that we've got there at the midpoint is really a function of continuing to see good traction. We're pleased with the growth. We're seeing our overall cloud subscription base, just to give you a sense of it, is up 150% year-on-year. So the cloud base continues to be strong, but it is still a relatively new business and it's still fairly choppy.

We also have a really big renewal opportunity on cloud in Q4. Remember, cloud, Q4 a year ago, we talked about how big a quarter we had on cloud sub adds. Many of those come up for renewal this quarter. So we're trying to be conservative on our expectations in that cloud business.

But it's, in effect, moving from a little bit what I talked about during the script, a seeding strategy with promotional activity that drove a lot -- high volume at a low price to more mature market that we see now that is likely to have slightly lower volume in cloud but at a higher price.

Andrew Anagnost -- Chief Executive Officer

Yes. Sterling, this is Andrew. I want to jump in, too, just before you do your follow-up question. So first, one of the things that I want reiterate that Scott said is the core business is doing awesome.

I mean, the net adds for product subscription are up quarter-over-quarter, year-over-year. They're robustly heading in the right direction. And let's remember, that's the key driver to the financial metrics. That's why you see us with a slight uptick in the guide around some of the core financial metrics.

When you look at cloud, the construction business is doing awesome right now. And one of the reasons why I highlighted those large deals we were talking about in both EMEA and APAC is I'm trying to give you a sense for where that business is trending right now. Last year, we were doing a lot of work seeding the business, injecting things like BIM 360 team into various accounts through promos and other types of activities to try to get people exposed to the offering. Now what we're seeing is people stepping up and making large investments in the BIM 360 offering.

So I think what you're going to see and we kind of started to feel in Q3 is you're going to see lower volume in things like BIM 360 but at higher prices because we're actually making bigger deals and going deeper into accounts. So the cloud is on fire. Construction is on fire. It's just in a different mix than we were expecting earlier in the year.

We expected a mix like this further down in the maturation cycle.

Sterling Auty -- JPMorgan Chase -- Analyst

Got you, got you. And then glad to hear the reiteration of the fiscal long-term goals, especially on cash flow, which brings up the point -- cash flow, I think, was negative again in the quarter, getting questions from investors. When do we start to see that inflection in cash flow to get positive and start to trend toward those long-term goals?

Scott Herren -- Chief Financial Officer

Yes, I mean, it's consistent with what the cash flow slide that I laid out back in December a year ago at our -- almost a year ago at our Investor Day. This showed fiscal '18 is the trough. Certainly, when we get to fiscal '19, we expect for the full year of fiscal '19 to see positive cash flows. Frankly, we'll continue to see in fiscal '19 revenue growth that you've now seen for the first time in Q3 as we've compared back to a quarter that was a full subscription quarter.

We'll see that revenue growth continue, and we'll see earnings per share turn positive next year. But I think it's -- while we don't guide cash flow as a metric, it's not surprising at all that cash flows are negative this quarter, and it wouldn't surprise me to see them negative again next quarter.

Sterling Auty -- JPMorgan Chase -- Analyst

Right. Thank you.

Scott Herren -- Chief Financial Officer

Thanks, Sterling.

Andrew Anagnost -- Chief Executive Officer

Thank you.

Operator

And our next question comes from the line of Heather Bellini with Goldman Sachs.

Mark Grant -- Goldman Sachs -- Analyst

Hey, guys. It's Mark Grant on for Heather. Just wanted to dig in some of those large deals a little bit. You mentioned most of those are EBAs, cited the two largest contracts in history.

But in the prepared remarks, I look and I see that you called out a decline in EBA ARPS. Can you give us a sense of kind of what that sales cycle is looking like in those EBAs? Is there any kind of incremental promotion that you might be doing that's having a negative near-term impact on the ARPS there?

Scott Herren -- Chief Financial Officer

Sure, Mark. That decline in the EBA ARPS is what we typically see actually every Q2 and every Q3. So if you think about the way our enterprise business agreements work, they're 3-year commitments with an annual payment. That's what we see in the cash flows now.

But that revenue is fully ratable over the 3- year time frame. So we've laid it out. And the revenue, that is unchanged. But the denominator in ARPS is subs.

And for EBAs, it's a token-based, right -- it's a consumption-based offering. So what we use for subscriptions is monthly active users. And what we see in all of our EBAs is from the time they signed, the monthly active usage continues to increase, right. They access more and more of our products.

So the numerator of the EBA equation stays flat on an account-by-account basis, but the denominator grows. And so we'd -- typically, we'll see that aggregated result in enterprise ARPS for both Q2 and Q3 every year, and then that begins to tick up a little bit in Q4. And then, of course, it gets much bigger in Q1 when we get the full quarter, the full benefit of all the revenue from the Q4 EBAs that we'll sign. So that's just a normal seasonality trend.

It's not about any additional promos or discounting into those accounts.

Mark Grant -- Goldman Sachs -- Analyst

All right, makes sense. Thank you.

Operator

Thank you. Our next question comes from the line of Philip Winslow with Wells Fargo.

Michael Barrett -- Wells Fargo -- Analyst

Hi, guys. Thanks for taking our question. This is actually Michael Barrett sitting on for Phil. I wanted to touch on the 2/3 of maintenance customers who were up for renewal, who decided not to migrate.

Do you have a sense of their thinking about the timing of migration? Are they just waiting until next year? Are they going to write out the price increase as long as they can? Any sense of that, that you could give would be great.

Andrew Anagnost -- Chief Executive Officer

Yes. Look, I think what's really kind of straightforward here is it's a small price increase this year. So when you're looking at a 5% price increase, you say, "Okay, look, I'm going to ride this out probably to the 10% price increase and reevaluate my options at my next renewal cycle." And if you're really concerned about holding on to your perpetual rights as long as possible and locking in a release at some point, you're going to do that. That's really what's happening.

What's interesting is we actually didn't expect to see as much front-loading as we're seeing right now. So we're way ahead of our expectations. We expected the surge to start next year as we got close to the 10%. So this gives us a lot more confidence in terms of how this program is going to play out over the next two years.

But really, there -- a 5% price increase, if you wanted to hedge your bets, you just wait until the next renewal cycle.

Scott Herren -- Chief Financial Officer

Michael, the other interesting point there that -- and we've talked about this in the past, is we also look at the migration rate by customer size. And what you see is the smallest customers are the most reluctant to give up their perpetual license, and the biggest customers, they're ready for subscriptions. In many cases, they are already buying a lot of products on subscription. So they're moving the most quickly.

Andrew Anagnost -- Chief Executive Officer

They're also moving to EBAs.

Michael Barrett -- Wells Fargo -- Analyst

Got it. That's very helpful. And then just one quick follow-up. What impact on subs did the migration to industry collection among those M2S customers have on subs adds, if any? I mentioned there were some consolidation of numbers.

Andrew Anagnost -- Chief Executive Officer

Yes, you always -- look, whenever you have the customers moving to an aggregate offering, there's always some consolidation associated with that. But remember, the price of the industry collection is significantly higher. But what we did see in these M2S accounts is all of these accounts, when the renewal cycle is over, they were actually higher-value accounts than when they started. So in some cases, they may have consolidated some of their offerings around industry collections, but at the same time, they actually bought additional cloud subs and additional other types of subs that actually made them -- the value of the account to actually increase over time, which is what we were expecting.

So it's no surprise if you see some -- so we saw the exact, same thing when we rolled out Suites.

Michael Barrett -- Wells Fargo -- Analyst

Got it. Thanks, guys.

Operator

Thank you. Our next question comes from the line of Gal Munda with Berenberg. Please go ahead.

Gal Munda -- Berenberg -- Analyst

Hey, I just have a question about the impact of the EBAs into Q4 and new subs. You said that you're expecting some tailwind. Can you quantify how much compared to last year you're expecting if you have any visibility on that?

Scott Herren -- Chief Financial Officer

Yes, Gal. The -- what we typically see in EBAs is a 1 quarter lag from when we see a big amount of sales. So we did have a good quarter for EBA, a surprisingly good quarter -- or I guess it wasn't surprising, a good quarter for EBA sales in Q3, bigger than what we normally would see in Q3. We expect another big quarter of sales for EBAs in Q4.

Most of those Q4 EBA sales will accrete to subscribers, the monthly active users beginning in Q1 of next year. So the impact we'll see in the coming quarter will be the impact from the sales we had in Q3, and that is already baked to the guidance that we gave. It's not something that I want to break out, but it's baked into the guidance that we gave you.

Gal Munda -- Berenberg -- Analyst

Then just a follow-up. You said that the guidance implies lower renewals in the cloud than the other side. Does that imply -- considering cloud comps at lower ARPS, does that imply a significant improvement in ARPS you're expecting in Q4?

Scott Herren -- Chief Financial Officer

I'm sorry, Gal. Can you restate the question?

Gal Munda -- Berenberg -- Analyst

Sure. So in terms of your guidance, you said that your guidance implies, in terms of net new subs, lower renewal -- sorry, lower additions in the cloud -- coming from lower renewals in the cloud. Does that mean because cloud is lower ARPS that there should be a positive impact on overall ARPS in Q4?

Scott Herren -- Chief Financial Officer

We do expect that. We said all along -- I mean, that's only one effect that I think will cause ARPS to tick up in Q4, but we do expect to see ARPS pick up in aggregate and -- between maintenance and subscription plan.

Andrew Anagnost -- Chief Executive Officer

Yes. The obvious behavior we're seeing right now is exactly the kind of behavior we expected, where we fully expect to see the ARPS tick up in Q4 just as we said it was going to tick up in the second half. We're well on our way to getting there.

Gal Munda -- Berenberg -- Analyst

Okay. Thank you.

Scott Herren -- Chief Financial Officer

Thanks, Gal.

Operator

Our next question comes from the line of Saket Kalla with Barclays.

Saket Kalla -- Barclays -- Analyst

Hey, guys. Thanks for taking my questions here. Scott, maybe for you, just kind of thinking about subs a little bit higher level. Can you just talk about any commonalities that you're seeing from the first couple of slugs of M2S conversions? And I guess what I mean by that, are the first leg of M2S conversions maybe coming in -- focused in any particular product family or any particular vertical, any commonalities that you're seeing in the first couple of quarters of M2S?

Andrew Anagnost -- Chief Executive Officer

So it's going to be Andrew, and then we'll probably bounce back and forth to Scott. Look, one thing you're seeing is a large -- it's dominated by the Suites customers. The Suites customers are moving the fastest because they have this one path to collection, and they see themselves, I think, as basically locking in the lowest possible price per collection. So you definitely do see a slight Suites bias in some of the migrations, and that's evident.

One of the stuff that I think is important for us to reiterate is that when you look at the percentage of -- when you look at the people who are eligible to move to something else, 25% of them are opting to move to a collection. So you might be seeing a bunch of Suites people moving to collection. You're seeing a very large percentage of people who are non-Suites that move to the collection, which is great and above our original expectation.

Saket Kalla -- Barclays -- Analyst

Sure, that is great. Actually, Andrew, maybe just to stay with you. Again, kind of even going higher level than kind of the M2S, which, of course, is the focus here. But even more strategically, as it kind of get into your first couple of quarters as CEO, just maybe longer term around the business, how do you think about M&A strategically?

Andrew Anagnost -- Chief Executive Officer

Well -- so I'm going to pass that one to Scott. No, I'm just kidding. Look, I think when you look at yourself entering new markets, like when we talked about reimagining construction, manufacturing, production, you're going to be looking at M&A as a major part of that reimagination. We are going to be bringing in not only technology but, whole businesses that increase our effectiveness not only from a technology and product side but also from a go-to-market side and market knowledge side.

So I think M&A is an important part of the strategy moving forward, especially in these reimagining exercises we have in the new markets in construction and manufacturing. So I see this as supercritical element.

Saket Kalla -- Barclays -- Analyst

Very helpful, guys. Thanks very much.

Scott Herren -- Chief Financial Officer

Thanks, Saket.

Operator

Thank you. Our next question comes from the line of Jay Vleeschhouwer with Griffin Securities.

Jay Vleeschhouwer -- Griffin -- Analyst

Got it. Thanks. Good evening. Andrew, let me start with you with a longer-term question stemming from a couple of things you said at AU.

You made the -- a pretty interesting comment or observation that you think that eventually if I'm quoting you correctly, that all subscription companies will eventually be consumption model companies. In perspective, you -- specifically, how do you see effectuating that? What do you see as the intersection of your business model with your technology platform enabling a broad consumption model not just for the EBAs as today but more broadly? Secondly, the near-term question for Scott vis-�-vis the restructuring. So you mentioned some product or R&D rationalization there. I assume it has to do largely with what you call your Horizon three designations, but anything on the sales and distribution cost side? Anything baked into the restructuring from channel management or every cost of that kind not specifically related to products?

Scott Herren -- Chief Financial Officer

Sure, if you want to...

Andrew Anagnost -- Chief Executive Officer

Yes, so I'll go first. So Jay, thank you for asking that question. First, let me frame it -- so for the other people who weren't there for my comments. What I said exclusively, I said, "Look, the cloud is turning every software company into a subscription company," and I said, "Machine learning and artificial intelligence is going to turn every subscription company into a consumption company." And what I mean there is the value of the automations that are being created on top of cloud platforms is so large that people are going to pay for an outcome.

Now we're talking out in the future, and I'll give you some examples of some of the outcomes that we might deliver in the future. So one of the things we've been talking a lot about is push-button manufacturing and this idea that, I come up with an idea, I come up with the design, and my design is instantaneously informed by the type of manufacturing methods I'm going to be using. And when I'm done with my design, I push a button, not today but in the future, and that design is immediately turned into a stream of bits that go to a configurable micro-factory that makes it. Pushing that button, Jay is incredibly valuable.

When you go from having a design to instantaneously turning it into a stream of bits that you can then manufacture without any intervention by a human being, that's worth a lot. People are going to push that button. Now we've already been experimenting with consumption in numerous ways, the EBAs -- or consumption model. So that allows people to consume all of our portfolios.

And by the way, it's how a lot of our largest customers are getting active to BIM 360, but we've also experimented with pure consumption models in the push-button sense. One of the most successful offerings we have right now is a rendering service for consumption. That's one of our most successful consumption offerings. People push a button and they get an outcome.

They either get an incredibly large pixel at high resolution or they get a lower number of pixels at low resolution, and they pay for that outcome. You're going to see us deliver numerous types of outcomes in the future. Some of the outcomes may be, "I want to know what the energy consumption of this building design is." Push a button. You know what the energy consumption of the business.

I want to know what is going to cost me to manufacture this particular -- you push a button. You get the answer. That's where we're going to be going over the future. And as we mature and develop these machine learning-based algorithms and these artificial intelligence-based algorithms, you're going to see more and more of these things show up as consumption offerings.

And that's where the future is going. Now it's not tomorrow. It's the 5- to 10-year horizon, but that's where we're heading.

Scott Herren -- Chief Financial Officer

And Jay, to your second question on restructuring. It will have an impact on our sales organization as we continue to evolve that sales model. It's consistent with what we've talked about. Moving to subscription, almost by definition, will put us in a position of having more direct touch with our customers, right.

The subscription model lends itself to that kind of direct touch, whether it's through an e-commerce channel, whether it's through customer success, whether it's through kind of an inside sales, direct touch. We'll continue to invest in direct touch. And so I don't want this to sound like it's the death of the channel. It's not.

We've been very upfront with the channel that we'll continue to move this needle. But we also, based on our modeling, believe the channel business in absolute dollar terms grows. So it's a smaller piece of the pie, but it's more dollars. So I think the restructuring clearly will have an impact on sales.

There will be some disinvest and some reinvest in that space, consistent with the plans we've talked about. I just don't want you to misinterpret that as this is somehow the death of the channel. We're not -- I don't think that makes sense.

Andrew Anagnost -- Chief Executive Officer

No. And as I've said previously when I talked about investing and digitizing the company and -- a large chunk of the investment is going to go into that. That is all about providing self-service to the set of customers that work with us directly, either EBAs or digitally direct through eStores or hub sales. That's absolutely going to be valuable to the customer.

But at the same time, we're going to be able to provide more account insight to our internal sales force and our partners as well so that they can better serve those customers, do better cross-sell, upsell and engagement with those customers. So it's going to work both ways. We're going to have a healthy 50-50 mix of channel and direct, as I've said before. And yes, a big part of this investment is going into that digital infrastructure to enable that.

Jay Vleeschhouwer -- Griffin -- Analyst

Okay. Thank you very much.

Scott Herren -- Chief Financial Officer

Thanks, Jay.

Andrew Anagnost -- Chief Executive Officer

Thank you, Jay.

Operator

Our next question comes from the line of Zane Chrane with Bernstein Research.

Zane Chrane -- Sanford Bernstein -- Analyst

Hi, Thanks for filling me in. I just want to dig into the 30% metrics of the subscribers being added, 30% being net new customers, pretty impressive. Comparing Adobe at this point of their transition, I think it was only adding 20% net new customers. Can you just talk a little bit about the composition of that 30% net new customers, how much is coming from the new emerging products, such as cloud and BIM 360, et cetera, versus how much is coming from customers buying the product offerings?

Andrew Anagnost -- Chief Executive Officer

Yes. So the vast majority of that is coming from the existing offerings, all right. And it's a mix of several things. In some ways, it's customers who were -- remember, for a lot of customers, they've never seen a price like this before for the kind of sophisticated software that we deliver.

They've never imagined themselves buying Revit, for instance, because it always looked outside of their initial cash flow capabilities. So now they can and they may have been using some kind of alternative method, either a free piece of software or something that's maybe not necessarily the professional-grade stuff we deliver, and they've decided now is the time to invest in Autodesk. We're seeing a lot of those customers. The one thing that is hard to know is how many of those customers that are coming in for the first time were users but were never payers, the people we like to euphemistically call pirates.

We can't tell -- they don't declare themselves at the door. We do know that some of those people are actually pirates. And they've come in and they bought the software for the first time, which is great, but we're happy to see them come in. I think Adobe was seeing some of the same phenomenon when they rolled out their initiatives as well.

The other piece of customers that we see are just people that are starting their businesses up for the first time. They're basically net new, but it goes in those three kind of categories. They're moving from something else, either nothing to us. They're moving from user to actual customer, and they were a customer before.

Or they're starting up a business from scratch. And yes, we have been delighted with the fact that, that number has stayed as constant as it stayed throughout this experience. And when you look at our cloud business, especially on the Fusion side, the percentages are even larger.

Zane Chrane -- Sanford Bernstein -- Analyst

Got it. That's really helpful. Just a quick follow-up, how do you think about when you could, if or when revise upward your cost guidance? It seems like the opportunity in construction and some of the collaboration tools in the cloud, the massive potential TAM, which is pretty underpenetrated. How do you think about when you might want to actually revise upward your cost guidance to just capture that land grabber or drive greater growth in some of these emerging products?

Scott Herren -- Chief Financial Officer

Yes, Zane. We've talked about that. We've committed to flat spend this year, which is overall most at the end of and flat spend again next year. But after that, we do see total spend.

And when I say total spend, by the way, it's not just OpEx. It's COGS plus OpEx. But we expect to see it begin to trend up in fiscal '20 in a single-digit kind of way, but I think you can expect to see spend trend up in fiscal '20 and then beyond.

Zane Chrane -- Sanford Bernstein -- Analyst

Got it. Thanks very much. Nice quarter, congrats.

Scott Herren -- Chief Financial Officer

Thanks, Zane

Operator

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

Keith Weiss -- Morgan Stanley -- Analyst

Excellent. Thank, guys, for taking the question. Starting out on the restructuring side of the equation, how should we think about the timing? There's actually a lot of heads coming out of the organization. How should we think about the timing in terms of when those guys are coming out of the equation, sort of coming out of our models? And then vice versa, what's the expense ramp on the other side? Then maybe if you could give us a little bit of color in terms of what types of stuff that investment will come into? So where and when does the expense ramp on the other side of that restructuring?

Andrew Anagnost -- Chief Executive Officer

Yes. So Keith, I'll -- this is Andrew. I'll start and then I'll turn it over to Scott for any additional color. So most of that is very front-end-loaded.

We're going to see a lot of that -- those -- that expense [inaudible] it's come out of the system fairly quickly, right. The ramp-up to higher -- look, if I could do it all in two months, I would, perfectly honestly, because I'm in a big hurry to ramp up that investment in construction, in particular, because we're seeing so much success there. I want to keep turning that wheel. I'm very interested in the digitalization.

The truth of the matter is when you try to hire back that many people, it takes time. So there'll probably be a lag as we head into Q1 and Q2 of next year in terms of the ramp-up, but our overall goal is to get that money invested back in the business as quickly as we possibly can. Scott, do you want to add any color?

Scott Herren -- Chief Financial Officer

No. You said it exactly right. The only other comment I would add, Keith, is if you do the math on our EPS guide, you can see there's a couple of pennies of benefit that we're expecting to accrue to Q4. That's built into our guide.

Keith Weiss -- Morgan Stanley -- Analyst

Got it. And then one follow-up on going back to the subscriptions number. Can you remind us -- is there any sort of impact that we should be aware of in terms of like a year-over-year compare, in terms of promotions you're doing where you attached cloud subscriptions to collections?

Scott Herren -- Chief Financial Officer

Yes. That's part of, as we talked about the subs guide, change that we made in Q4. That was part of the cloud impact that we saw. We had two things that drove a really big quarter for cloud sub adds in Q4 a year ago.

One was we launched user packs for the first time, and there was some pent-up demand for that. But the second one was we did have some promotional activity around -- specifically around a really low-end member of the BIM 360 family called Team. A lot of those Team subs come up for renewal in Q4. And so that's part of what's factored into our -- the way we're thinking about the cloud.

Andrew Anagnost -- Chief Executive Officer

Yes. You're pointing to -- you're pointing exactly to what we were talking about earlier.

Keith Weiss -- Morgan Stanley -- Analyst

Got it. And so we shouldn't expect a similar type of promotion this year to attach Team subs to collections?

Andrew Anagnost -- Chief Executive Officer

No, we don't -- one, we don't need it, all right. Those promotions, we're seeding upwards. They were brand-building efforts. They were trying to get the message out there.

Here's BIM 360. Welcome to me. We don't need those right now. The brand is carrying itself. You're not going to see that kind of promotional activity.

Keith Weiss -- Morgan Stanley -- Analyst

Got it. Very helpful. Thanks, guys.

Scott Herren -- Chief Financial Officer

Thanks, Keith.

Operator

Our next question comes from the line of Rob Oliver with Baird.

Rob Oliver -- Robert W. Baird -- Analyst

Hey, guys, thanks for taking my question. Scott, you mentioned that a lot of the timing on the conversions are going to depend upon just when maintenance subs are up for renewals. Is there anything -- just to keep our eyes open for there in terms of seasonality, just wondering on seasonal trends there and when we might -- how we might think about that. And I had one quick follow-up.

You did talk about some customers doing partial conversions, and I was wondering if you could just add a little more color on that. Thanks, guys.

Scott Herren -- Chief Financial Officer

Sure, yes. Rob, the seasonal -- so the customers are eligible to take part in the maintenance-to-subscription program only when their maintenance sub expires. And we have the heaviest quarter for maintenance subs renewals in Q4, which makes sense because historically, that was our heaviest quarter for perpetual license sales. So it makes sense that would be the heaviest quarter for subs renewal.

I think beyond that, there's not a lot of other seasonality. Q1, surprisingly, also has a fair amount of maintenance subs that come up for renewal, but I'd say the bigger effect is in Q4. And I'm sorry, Rob, remind me of your second question.

Rob Oliver -- Robert W. Baird -- Analyst

It was just on the -- and then the other was just on the -- you mentioned -- I think it was in reference to larger or EBA customers doing some partial conversions and I guess -- I apologize. I just wanted to understand that a little bit better.

Scott Herren -- Chief Financial Officer

Sure. We do have -- I think it's one of the questions that's come up as -- and it comes through channel checks that some customers are doing partial renews or partial conversions as they move from maintenance over to subscription. Partial renews a nothing new. It's something that we've had for quite a while ever since we've had -- even before we announced product subscription, we would have customers do partial renews, for example, when they were moving from stand-alone products into Suites, right.

So it's not a new phenomenon. We are seeing it now. I think we've kept a sharp eye on that though. And some of the interesting stats that we see on the customers that are moving from maintenance to subscription and doing just a partial move is that also, we see them adding more new subs, either cloud subs or other product subs so that the net total subscriptions are increasing in those accounts and the net total revenue is increasing in those accounts.

So it's -- even though there's only a partial renew, I think that the immediate thing that people run to is, "Well, that must mean subs are coming down and revenues coming down." We're actually seeing the exact opposite behaviorally.

Rob Oliver -- Robert W. Baird -- Analyst

Great. Thanks, Scott. Thanks, guys.

Scott Herren -- Chief Financial Officer

Thanks, Rob.

Rob Oliver -- Robert W. Baird -- Analyst

Welcome.

Operator

And the next question comes from the line of Matt Hedberg with RBC Capital Markets.

Dan Bergstrom -- RBC Capital Markets -- Analyst

Hi, it's Dan Bergstrom for Matt Hedberg. So you mentioned piracy in an answer to a question -- a couple of questions ago. That was something you talked about at last year's Analyst Day and since then, and the strategy is to communicate more with the customers pirating the software next year. As we approach that point, could you talk a little bit more about that strategy and then maybe how we should think about that unfolding through next year?

Andrew Anagnost -- Chief Executive Officer

Yes. Dan, let me kind of reiterate what we've said in the past. So this year, what we're doing is we're providing higher quality leads and insights to the existing capacity we have, targeting piracy. We're doing that through analytics and through dashboards and help people understand where, in particular, areas piracy is happening.

As we move into next year, there will be much more in-product communication that we'll be rolling out and piloting in various places so that we cannot only provide better lead quality to existing capacity, but we can also provide more capacity through automated fulfillment to some of these piracy activities through direct digital engagement with some of these customers. So that's rolling out. We expect that to increase some of our volume of piracy conversion, and we expect that to be a continuing, ongoing thing for years to come. Given the number of pirated usage -- or number of users who aren't paying out there, it's going to be years and years of bringing those users into the paying community.

But next year, yes, we're moving to more automation and more direct communication with those customers. I expect that to be more fully operational as we head into second half of next year and have an ongoing impact beyond then.

Operator

Thank you. Our next question comes from the line of Scott Koenig with Wedbush Securities.

Scott Koenig -- Wedbush -- Analyst

Hi, gentlemen, thanks for taking my question. I wanted to ask you, Scott, a little bit more on cash flow here. So the -- it looks like the cash flow result was pressured by two main components: one is the -- it looks like maybe the move to annual billings is what's hurting your billings; and then collections, meaning DSO, not the product suite, were also pretty weak. So can you give us more color on those factors? And were there other things that were responsible for the weak cash flow result this quarter? And how -- I know you're not guiding for cash flow, but how should we think about how to model that going forward? Is there any way to think about it?

Scott Herren -- Chief Financial Officer

Yes. The -- so Steve, first of all, thanks for the questions, and it's great that you're digging into the numbers. I would say that if you look at our DSOs, you can see they were up slightly during the quarter, up to the mid-50s, which means we had a little bit more back-end loading of the -- it just means that the linearity moves more toward the end. The quality of the receivables is unchanged.

We have a very high percentage of on-time receivables. So there's no change in the quality, but when those come in later in the quarter, of course, they sit in receivables and not in cash as the quarter closes. So a little bit of a shift in linearity is part of what drove that. The other is the shift to annual billings for EBAs, but remember also, as part of the maintenance-to-subscription program, we shut off multiyear sales for maintenance as well, right, so the people couldn't front-run the series of price increases that we had laid out there.

And so there's actually two effects that you're seeing in the -- on the -- in the long-term deferred: one is the reduction of multiyear maintenance, and the second is moving to annual billings from EBAs.

Scott Koenig -- Wedbush -- Analyst

Got it. So Scott, how do we think about -- well, how long does the pressure on the -- to the -- shift to annual? Does that anniversary, say, in Q1 and that subsides? Or how should -- and more generally then, how should we think about the cash flow rack?

Yes. The unbilled deferred is strictly driven -- the number that I give you. So we had $148 million of unbilled deferred during the quarter. So add that to the deferred revenue.

If you're trying to do an apples-to-apples, kind of how much the deferred revenue grow year-on-year, that number will grow again in Q4 and that's strictly driven by EBAs that are 3-year commitments with annual billings. That phenomenon will continue. We'll continue to build unbilled deferred throughout fiscal '19 and that -- but of course, at the same time, we'll start to see some of the unbilled deferred from prior years bleed back out, right, as the -- because we'll continue to have annual billings on that. I think the whole system gets to a more steady state by the time we get to late fiscal '20.

Okay, all right, great. I'll stop there.

Scott Herren -- Chief Financial Officer

You can -- if you want, then you can waterfall that out just by looking at the growth in unbilled deferred, which is the number we'll give you each quarter. You can start to waterfall out when that's going to come back.

Scott Koenig -- Wedbush -- Analyst

Okay. Great. Thanks a lot, guys.

Scott Herren -- Chief Financial Officer

Yup, thanks.

Operator

Thank you. Our next question comes from the line of Gregg Moskowitz with Cowen and Company.

Gregg Moskowitz -- Cowen & Co. -- Analyst

Okay. Thank you and good afternoon, guys. Just getting back to the restructuring. You're planning to reduce staffing level by 13%, obviously a material number.

Given what will be some degree of transition in go-to-market, can you just expand on why you have confidence this will not impair your ability to execute your fiscal 2020 plan?

Andrew Anagnost -- Chief Executive Officer

Yes. First off, we were very selective in where we divest. We actually looked at project areas and functional areas that were not contributing to either our long-term strategic goals around reimagining construction, manufacturing and production. So that's where we're actually seeing permanent removals in cost.

So those areas are not aligned with any of the goals or with the subscription transition, and they're not going to affect any of our ability to achieve those goals. In fact, the money we've taken out of those areas, we're reinvesting in areas that are absolutely going to allow us to achieve our goals. Now on the sales side, what we're doing is we're moving away from some of the things that we were using to focus on the territories and other parts of the organization to move more into the inside sales structure. We've already been doing this for a while.

So we have nice machinery in place to actually manage these moves. So this is actually in line with actions we've already been taken. So it has absolutely no material impact on our ability to hit our goals. In fact, what it's doing is it's reinforcing our ability to hit these goals, especially when you look at the digital infrastructure side.

Gregg Moskowitz -- Cowen & Co. -- Analyst

Okay. Andrew, that's helpful. And then Scott -- so the unbilled deferred obviously grew very nicely this quarter. I assume you're still on track to the over $300 million by year-end?

Scott Herren -- Chief Financial Officer

So it continues to grow rather than make that a metric that I try to forecast each quarter and update guidance because there's a lot of variables in that number. It's driven by EBAs, and both the size and the timing of the EBAs have an impact on that number. But we continue to expect that to grow strongly not just in Q4, but throughout fiscal '19 as well.

Gregg Moskowitz -- Cowen & Co. -- Analyst

All right. Thanks, guys.

Scott Herren -- Chief Financial Officer

Thanks, Gregg.

Operator

Thank you. Our next question comes from the line of Ken Talanian with Evercore ISI.

Ken Talanian -- Evercore ISI -- Analyst

I wanted to pop back and talk about these net subscription adds. I was wondering if you could give us a sense for which elements within that mix you have the least amount of visibility. And if you could give us a sense for -- if there's a baseline of net subscription adds that we can think about as sort of being your floor on a quarterly basis or even on an annual basis if that's easier to predict.

Scott Herren -- Chief Financial Officer

Yes. Ken, there's not a -- unfortunately, there's not an easy rule of thumb on this even within -- so if I just look at a category like maintenance. Even within maintenance, there are different rates of renew and migration to subscription by major product family, in other words, AutoCAD versus LT versus Suites versus other stand-alone. So, unfortunately, I can't give you an easy kind of a rule of thumb on that.

I think the thing I would tie back to though is the strength of the core business. So -- and when I say the core business, it's the sum of maintenance plus product subscription plus enterprise business agreements, right. If you add those three together, that's the core business. We continue to see nice growth in the core business in subscriptions, and that's what's driving the results.

That's what's driving the ARR that we just posted in Q3 at constant currency, 24% as reported, 25% at constant currency. It's that -- it's the sum of those 3. And that -- if you want to focus your model, focus in on those three.

Ken Talanian -- Evercore ISI -- Analyst

Okay. And just as a point of clarification on an earlier comment, I think you said that linearity was a bit different this quarter. I wanted to confirm, one, is it different from what you've seen in the past? And was there a substantial impact on ARR in the quarter because of that?

Scott Herren -- Chief Financial Officer

No. There -- I mean, obviously, a later linearity in the subscription model does have an impact on ARR. I don't think it was significant. I think the change in DSOs was from the mid-40s to the low to mid-50s.

So I'm trying to find it on my cheat sheet here. Yes, it went from 48 days to 54 days. So it wasn't a big swing, but it's a little bit later. It doesn't make a big difference in ARR, but the question that, that was asked in relation to was what's happening to cash flow.

It does make a difference on cash flows, right. Those six additional days sitting, not collected and sitting in cash but sitting in receivables, makes a difference when you're talking about a cash flow number that's as small as our cash flow number right now.

Ken Talanian -- Evercore ISI -- Analyst

Great. Thank you very much.

Scott Herren -- Chief Financial Officer

Thanks, Ken

Operator

Thank you. And we have time for one more question. Our final question comes from the line of Kash Rangan with Bank of America Merrill Lynch.

Kash Rangan -- Bank of America/Merrill Lynch -- Analyst

Hey, guys, congratulations on wrapping up a great AU, really enjoyed it. My question has to do with the restructuring. Andrew, you said that typically, these things are done when there is an adverse business. Clearly, businesses are going really well for you guys.

I'm thinking through -- your goals to keep the spend flat next year and the year after, if you're cutting 13% of your headcount, it's going to take some time to rehire back. So how realistic is your plan going to be to reabsorb that 13% back in the workforce? And also, to an earlier question, these kinds of moves can be somewhat deceptive. How much of a buffer have you provided to Wall Street with respect to your financial plans as you go through this restructuring?

Andrew Anagnost -- Chief Executive Officer

So first off, let me make sure we're all clear on what our stated goals are. So we're flat next year. We are not flat the year after that, and we do not intend to be, all right. We intend, in fiscal '20, to ramp up our investment, especially in some of the areas that we think are important in expanding our business.

So this is -- that goal is all about flat on OpEx next year. So with regards to your other question, yes. There's always a ramp in terms of rehiring some of these people. So you're not going to immediately rehire them.

But remember, we've divested from areas that are not right now aligned to some of our critical key goals, like, for instance, completing the subscription transition, digitizing the company, and reimagining construction in particular right now. So we've been very deliberate in how we've actually executed this restructure to create the pool of money that we're going to be able to execute on, but we're reaffirming the goals for next year in terms of the total spend for the year. Scott, do you want to add anything?

Scott Herren -- Chief Financial Officer

Yes, Kash, just to address your last statement about the offer. What I'd say is these things are never easy, and there's no question that it will be a rocky couple of days. But what I'd say is we didn't -- this wasn't a -- some kind of an across-the-board, peanut butter method type restructuring. It was a very targeted set of divestments that were focused in a few areas.

So I don't think it's going to have the same disruptive effect overall, certainly to the overall core business, that it might have been if we had done something that's a little bit more, "Hey, everybody take out x percent," which I think is a far more disruptive path. So I'm not -- I don't want to minimize it. This is a tough day and it's going to be a tough couple of days, but I don't think it's going to have the same kind of disruptive impact to our execution.

Andrew Anagnost -- Chief Executive Officer

Yes. And frankly, peanut butter cuts are actually, as Scott said, more disruptive execution, actually more demoralizing to the teams because everybody feels like, "We're all getting squeezed but we're asked -- being asked to do the same thing." When you actually stop doing something for -- although it's hard for the team that was on the projects or initiatives that are being shut down, it's more motivating for the other people because they say, "Wow, OK. We're getting investment over here, and we're not being asked to do two things with less money again." And I think that's something you have to pay attention to.

Kash Rangan -- Bank of America/Merrill Lynch -- Analyst

Wonderful. And is it fair to say that you're reiterating your long-term fiscal '20, what had we out at the Analyst Day, the ARR, the revenue, the earnings and free cash flow? Is it fair to say that you still are reiterating that? That's it from me.

Andrew Anagnost -- Chief Executive Officer

Absolutely, Kash. We are reiterating our FY '20 goals, the 24% CAGR and ARR, the free cash flow targets. All of that is completely reiterated. Matter of fact, the restructuring is aligned to increase our confidence and our ability to execute on those goals and actually deliver results beyond FY '20, especially when we look at what's going to happen with construction as we move forward.

Kash Rangan -- Bank of America/Merrill Lynch -- Analyst

Thank you so much, gentlemen.

Scott Herren -- Chief Financial Officer

Thanks, Kash.

Andrew Anagnost -- Chief Executive Officer

Thank you, Kash.

Operator

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the floor back over to David Gennarelli for any closing comments.

David Gennarelli -- Senior Director, Investor Relations

Thanks, operator. That concludes our call today. Just by reference, we will be at the Credit Suisse conference tomorrow in Scottsdale. After that, we'll be at the Wells Fargo conference in Deer Valley on December 5, and at the Barclays conference in San Francisco on December 6.

If you have any questions in the meantime, you can reach me, Dave Gennarelli, at 415-507-6033. Thanks.

Operator

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.

Duration: 63 minutes

Call Participants:

David Gennarelli -- Senior Director, Investor Relations

Scott Herren -- Chief Financial Officer

Andrew Anagnost -- Chief Executive Officer

Sterling Auty -- JPMorgan Chase -- Analyst

Mark Grant -- Goldman Sachs -- Analyst

Michael Barrett -- Wells Fargo -- Analyst

Gal Munda -- Berenberg -- Analyst

Saket Kalla -- Barclays -- Analyst

Jay Vleeschhouwer -- Griffin -- Analyst

Zane Chrane -- Sanford Bernstein -- Analyst

Keith Weiss -- Morgan Stanley -- Analyst

Rob Oliver -- Robert W. Baird -- Analyst

Dan Bergstrom -- RBC Capital Markets -- Analyst

Scott Koenig -- Wedbush -- Analyst

Gregg Moskowitz -- Cowen & Co. -- Analyst

Ken Talanian -- Evercore ISI -- Analyst

Kash Rangan -- Bank of America/Merrill Lynch -- Analyst

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