Debbie Clifford
Chief Financial Officer at Autodesk
Thanks, Andrew. Our fourth quarter and full year results were strong. Overall, the demand environment in Q4 remained consistent with Q3. The approaching transition from upfront to annual billings for multiyear contracts and a large renewal cohort provided a tailwind to billings and free cash flow. As Andrew mentioned, we continue to develop broader strategic partnerships with our customers and closed our largest deal to date during the quarter. The nine digit deal is a multiyear commitment build annually and did not have a meaningful impact on our financials during the quarter.
Total revenue grew 9% as reported and 12% in constant currency with subscription revenue growing by 11% as reported and 14% in constant currency. By product, AutoCAD and AutoCAD LT revenue grew 9% and AEC revenue grew 11%. Manufacturing revenue grew 4%, but was up mid-teens excluding foreign exchange movements and upfront revenue. M&E revenue was down 10%. Recall that in Q4 last year, M&E won its largest-ever EBA, which included significant upfront revenue. Excluding upfront revenue, M&E grew 4%. Across the globe, revenue grew 13% in the Americas, 7% in EMEA and 4% in APAC. At constant exchange rates, EMEA and APAC grew 12% and 10%, respectively. Direct revenue increased 5% and represented 36% of total revenue. Strong underlying enterprise and e-commerce revenue growth was partly offset by foreign exchange movements and lower upfront revenue.
Our product subscription renewal rates remained strong and our net revenue retention rate remains comfortably within our 100% to 110% target range at constant exchange rate. Billings increased 28% to $2.1 billion, our first quarter over $2 billion, reflecting continued solid underlying demand and a tailwind from both our largest multiyear renewal cohort and the pending removal of the discount for multiyear contracts billed upfront. Total deferred revenue grew 21% to $4.6 billion. Total RPO of $5.6 billion and current RPO of $3.5 billion grew 19% and 12%, respectively. About 2 percentage points of that current RPO growth was from early renewals.
Turning to the P&L. Non-GAAP gross margin remained broadly level at 92%. Non-GAAP operating margin increased by 1 percentage points to approximately 36% with ongoing cost discipline, partly offset by revenue growth headwinds from foreign exchange movements. For the fiscal year, non-GAAP operating margin increased by 4 percentage points, reflecting strong revenue growth and ongoing cost discipline. GAAP operating margin increased by 9 percentage points to approximately 21%.
Recall in Q4 last year, we took a lease-related charge of approximately $100 million. That was part of our effort to reduce our real estate footprint and to further our hybrid workforce strategy. For the fiscal year, GAAP operating margin increased by 6 percentage points. We delivered record free cash flow in the quarter and for the full year of more than $900 million and $2 billion, respectively, reflecting our strong billings growth.
Turning to capital allocation. We continue to actively manage capital within our framework. As Andrew said, our strategy is underpinned by disciplined and focused capital deployment through the economic cycle. We will continue to offset dilution from our stock-based compensation program and to opportunistically accelerate repurchases when it makes sense.
During Q4, we purchased 1.1 million shares for $210 million at an average price of approximately $193 per share. For the full year, we purchased 5.5 million shares for $1.1 billion at an average price of approximately $198 per share, and reduced total shares outstanding by 4 million. We retired a $350 million bond in December. Recall that we effectively refinanced this bond in October 2021, at historically low rates when we issued our first sustainability bond. Our average bond duration is now almost seven years.
Now, let me turn to guidance. Our strong finish to fiscal '23 sets us up well for the year ahead. Overall, end market demand in Q4 fiscal '23 remained broadly consistent with Q3 fiscal '23. Channel partners remained cautiously optimistic. Usage rates grew modestly, excluding Russia and China, and bid activity on BuildingConnected remained robust. As we said last quarter, foreign exchange movements will be a headwind to revenue growth and margins in fiscal '24. We expect FX to be about a 4 percentage point drag on reported revenue. We continue to expect the absence of recognized deferred revenue from Russia will be about a 1 percentage point drag to revenue growth. As we've highlighted before, most recently on our Q3 earnings call, the switch from upfront to annual billings for most multiyear customers creates a significant headwind for free cash flow in fiscal '24 and a smaller headwind in fiscal '25. You can see the impact on fiscal '24 in Slide 8 of our earnings deck.
Change in deferred revenue increased fiscal '23 free cash flow by $790 million, but will reduce fiscal '24 free cash flow by approximately $300 million. The switch to annual billings for multiyear customers and a smaller multiyear renewal cohort are the key drivers of this $1.1 billion swing. The transition will also affect the linearity of free cash flow during the year with Q1 fiscal '24 free cash flow benefiting from the strong billings in Q4 fiscal '23, and our largest billings quarters in the second half of the year proportionately more impacted by the switch to annual billings. While we expect many customers to switch to multiyear contracts billed annually, some may choose annual contracts instead. All else equal, if this were to occur, it would proportionately reduce the unbilled portion of our total remaining performance obligations and would negatively impact total RPO growth rates. Deferred revenue, billings, current remaining performance obligations, revenue, margins and free cash flow would remain broadly unchanged in this scenario. Annual renewals create more opportunities for us to drive adoption and upsell, but are without the price lock embedded in multiyear contracts. We'll keep you updated on this as the year progresses.
Our cash tax rate will return to a more normalized level of approximately 31% in fiscal '24, up from 25% in fiscal '23. We accrued significant tax assets as a result of the operating losses we generated during our business model transition. Growing profitability and more recently, rising effective tax rates across the globe have accelerated the consumption of those tax attributes. Absent changes in tax policy, we expect our cash tax rate to remain in a range around 31% for the foreseeable future.
Putting that altogether, we expect fiscal '24 revenue to be between $5.36 billion and $5.46 billion, up about 8% at the midpoint or about 13% at constant exchange rates and excluding the impact from Russia. We expect non-GAAP operating margins to be similar to fiscal '23 levels with constant currency margin improvement offset by FX headwinds. We expect free cash flow to be between $1.15 billion and $1.25 billion. The midpoint of that range, $1.2 billion, implies a 41% reduction in free cash flow compared to fiscal '23.
As I outlined earlier, the key drivers of that reduction are changes in long-term deferred revenue as a result of the shift to annual billings for multiyear customers and a smaller multiyear renewal cohort, FX and our cash tax rate. The slide deck and Excel financials on our website have more details on fiscal '23 results and modeling assumptions for the full year fiscal '24.
At Investor Day, we'll be looking beyond this year. As Andrew noted earlier, we remain in the relatively early innings of a transformational shift to the cloud to drive efficiency and sustainability. This is generating demand for cloud-based platforms and services, which break down the silos within and between the industries we serve. Autodesk is uniquely well positioned to seize these opportunities, and we will continue to invest with discipline and focus to realize that growth potential.
While our subscription business model and geographic, product, and customer diversification give us resilience when compared to many other companies, we're mindful that generational, macroeconomic, policy, geopolitical, climate and health uncertainty make the world more volatile and less predictable than in the past. Our business will grow somewhat faster in less volatile environments and somewhat slower in more volatile environments.
Finally, we're not just looking to have industry leading growth, although we often do nor are we just looking to have-industry leading margins, although we often do. On average and over time, we are looking to have an industry-leading balance between growth and margins and we often do. We think this balance between compounding growth and strong free cash flow margins captured in The Rule of 40 framework is the hallmark of the most valuable companies in the world and we intent to remain one of them.
With all this in mind, our target planning parameters over the next several years will be to grow revenue in the 10% to 15% range and generate free cash flow margins in the 30% to 35% range, with a goal of reaching a Rule of 40 ratio of 45% or more over time. The path to that 45% ratio will not be linear, given the drag in fiscal '24 and '25 to long term deferred revenue and free cash flow from the shift to annual billings of multiyear contracts. The rate of improvement will obviously also be somewhat determined by the macroeconomic backdrop. But let me be clear, we're managing the business to this metric and we feel it strike the right balance between driving top line growth and delivering on disciplined profit and cash flow growth. We intent to make meaningful steps over time toward achievement of this Rule of 45 goal regardless of the macroeconomic backdrop.
While macroeconomic and FX headwinds, along with sustained but disciplined investments in our products and platforms, will slow the rate of margin improvement, we continue to expect non-GAAP operating margins to be in the 38% to 40% range by fiscal '26, albeit more likely now in the lower half of that range. We continue to see scope for further margin growth thereafter. GAAP margins will further benefit from stock-based compensation as a percent of revenue trending down towards 10% and beyond over time.
Andrew, back to you.
