Autodesk Pricing Spineometer: 4 of 5 Vertebrae

Autodesk, a global software firm serving arts, manufacturing, engineering, and many other industries, had a positive FY 2024. Revenue rose 10% to $5.5 billion and earnings before interest and taxes rose 14% to $1.1 billion over the same period last year.

A review of Autodesk’s February 29^th earnings call and associated financial reports provided insight regarding the importance of pricing on performance.

Andrew Anagnost, CEO of Autodesk, shared multiple high-growth opportunities.  AI, cloud offerings, and virtual reality tools were all within scope.

CEO Anagnost is leaning heavily into artificial intelligence, for example, Autodesk AI. “Our intent to be the market leader in generative AI” related to design.“  “Now, in terms of how we’re going to do this is, there’s two avenues that we’re going to be approaching here. One is going to be more disruptive to how our customers work. And the other one is going to be basically automating the capabilities and workflows they have today. We have to do both. Both have different value levers, both will have different adoption curves.”

Debbie Clifford, CFO of Autodesk, provided some guidance on the price performance benchmarks and expectations.

For 2024, CFO Clifford stated, “We did about a 3 point increase [in pricing] for market factors and then we did a 5% increase for renewals. … Our goal is to streamline pricing around the world. And then for the renewals price change before the increase, we had a 10-point price differential between new and renewal and with this move to agency or the move to the new transaction model, we don’t see as much of a need for that delta.”

For 2025, CFO Clifford provided forward guidance suggesting 10% to 15% revenue growth to come “across volume and price, again, our target is to do roughly 50-50 in fiscal 2025.”

Other comments indicated a breadth of recent pricing changes.  Other comments raised business dynamics that would impact the needed pricing capability.

• Autodesk currently operates on an annual price increase cadence.
• They recently transitioned from up-front to annual billings on multiyear contracts. (Take note SaaS vendors.)
• Autodesk is changing its go-to-market practices, ending the distribution model and adopting a referral model where they quote directly to the end customer.
• They have been driving adoption with larger customers and serving higher-value segments.
• As a SaaS, profits are generally driven by renewals, not initial adoption. Currently, their net revenue retention is at or above 100%.
• Autodesk operates with “significant macroeconomic, geopolitical, policy, health, and climate uncertainty.” (Consider the use of Autodesk in sewage and water supply planning, and you have but one example.)

Autodesk’s business operations imply a need for 11 to 55 pricing professionals to be on staff according to industry benchmarks.  A deeper analysis implies the staffing levels of pricing professionals should be at the upper end of this range due to multiple complexity factors.

1. As a global company with distributed customers, we would expect some pricing professionals to be in EMEA, the Americas, as well as APAC.
2. Serving a variety of industries each with a distinct value proposition and competition would imply some alignment of pricing professionals to product line or market segments.
3. The recent change in the go-to-market business model would have been a major initiative. We suspect that pricing professionals will be needed to help land the new model and tweak it with improvements in the coming quarters.  Business model changes are known to increase the need for pricing professionals.
4. Autodesk has a policy not to discount their offerings to win deals. However, with increasing direct sales with large end customers in head-to-head competition, there will increasing pressure to offer deal-specific, sales-negotiated, price discounts. This would create a need for transactional pricing analysis and sales incentive alignment to strategy.
5. Autodesk prices in local currencies across the globe and exchange rates were mentioned as impacting profits. While in many countries this may have a nominal impact on pricing, in countries with 40% – 200% inflation, the impact would be significant implying a more dynamic approach to pricing is needed.
6. Constant value proposition evolution creates the need for pricing professionals engaged in the new product development process.
7. Changes in business models, fast-evolving value propositions, and further industry turbulence all contribute to a need for a robust pricing capability.

Research into the investment by Autodesk in pricing yielded interesting results.

1. The number of professionals engaged primarily in pricing is estimated to be at the lower end of expectations. Our research did not identify significant pricing expertise outside of California, U.S.A.
2. Professionals engaged in pricing at Autodesk primarily focused on strategy and monetization with some focus on analytics. We suspect these professionals are heavily engaged with NPD and annual price changes.  We suspect few to no pricing professionals are engaged with deal-specific pricing, even for large deals.
3. Pricing professionals ranged in seniority from manager and director to vice president.

Given the importance and capability of pricing at Autodesk as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of April 2024.

Autodesk Pricing Spineometer: 4 out of 5 Vertebrae.

ADSK (Autodesk, Inc.) was relatively unchanged at 255 the day prior to their earnings call to 254 one week later. FY 2024 revenue of $5.5 billion with a 21% operating margin and P/E ratio near 50.

For FY 2024, a 1% improvement in price would yield a 5% improvement in operating profits holding all else constant at Autodesk.