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Autodesk, Inc. (NASDAQ:ADSK)
Q4 2018 Earnings Conference Call
March 6, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to the Q4 Fiscal 2018 Autodesk, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host our question-and-answer session and our instructions will be given at that time. If, during the conference, you require operator assistance, please press * then 0 and an operator will be happy to assist you. As a reminder, this conference is being recorded.

It is now my pleasure to hand the conference over to David Gennarelli, Senior Director, Investor Relations. Sir, you may begin.

David Gennarelli -- Senior Director, Investor Relations

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss the results of our fourth quarter and full-year fiscal 2018. On the line 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 first quarter and full year Fiscal 2019, our long-term financial model guidance, the factors we use to estimate our guidance including assumptions regarding ASC 606 and tax reform, our maintenance to subscription transition, ARPS, customer value, cost structure and 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-Q for the periods ending April 30, July 31, and October 31, 2017, 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 the 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 Andrew.

Andrew Anagnost -- Chief Executive Officer

Thanks, Dave. Q4 was another milestone quarter for our subscription transition. Key to the quarter was the strong growth in both ARR and ARPS. Even as subscription additions fell below expectations, we finished the year with better than expected performance on many of the traditional financial metrics such as revenue, deferred revenue, EPS, and cash flow, all of which are becoming more relevant again as we pass the inflection point on our business model transition. Overall, these results bolster our belief in our ability to achieve our Fiscal 2019 goals around ARR and free cash flow.

There are several key outcomes of Q4 that I want to highlight. Total annualized recurring revenue, or ARR grew 25% and subscription plan ARR more than doubled again. Both ARR and subscriptions or subscription plan are now greater than the ARR and subscription base for maintenance, which is a significant milestone and in line with our projections when we began the transition. Annualized revenue per subscription, or ARPS, inflected up in Q4, also in-line with our projections. Recurring revenue has increased to 93% of total revenue and we continue to see faster than expected migration of maintenance customers to subscription, with the maintenance to subscription program or M2S. Beyond that, we remain enthusiastic about our long-term market expansion initiatives in both manufacturing and construction as we continue to introduce new technology that brings Design and Make closer together and drives the convergence of manufacturing and construction.

Now, I know you want to hear what's going on with sub adds and I will get to that, but let's first start by talking about ARR. The continued positive trends we're seeing in ARR are clear signals that the transition is working. I'll stress once again that ARR is the most important metric when evaluating the health of the business at this stage of the transition. The strength in total ARR was broad-based with all three major geographies growing ARR at 20% or more. Subscription plan ARR more than doubled, driven by growth in all subscription plan types, but led by product subscription. We continue to drive tremendous growth in product subscription ARR on both a year-over-year and sequential basis.

Now let's talk about subscription additions. To provide you more insight into the subscription dynamics, we need to break out core and cloud subscriptions. To be more explicit, the core business represents a combination of maintenance, product subscription and EBA subscriptions, while the cloud business represents all the results generated by stand-alone cloud offerings. When you break these two views out, our core business, which drives the overwhelming majority of our revenue ARR and billings growth, is performing quite well. Our cloud business performed up to our reset expectations for the quarter. We added 45,000 cloud subscriptions in Q4, which represented a nearly 50% decrease against a tough compare to Q4 of last year when we ran a seating program for a component of BIM 360.

However, from a billings perspective cloud had its biggest quarter ever, fueled by several large wins, including six with top-ranked construction companies. We see continued momentum in terms of customers moving to higher value products like BIM 360 Docs and Field. We remain very enthusiastic about the opportunity with our cloud products, but keep in mind that cloud is still a small contributor to our overall business. ARR for stand-alone cloud grew 23% in Q4 but contributed less than $100 million of our total $2.05 billion in ARR so, while cloud will not be a major driver of our FY '20 performance, we remain confident it will be a major component of our business in the years beyond FY '20.

This brings us to the question why did the net sub additions fall short for the quarter? The answer is that we experienced greater than expected subscription consolidation as customers are reducing their total subscriptions in favor of Collections. We're seeing this reflected in the general adoption of Collections where the mix of Collections within the product subscription base more than doubled year-over-year and now represents over 20% of the product subscription base. The good news is that most of these customers are increasing their total spend with Autodesk, contributing to solid increases in ARPS and ARR so our core strategy of driving upsell to industry Collections is working better than we anticipated.

We're also seeing the impact of Collections upselling with both regular renewals and with customers participating in the M2S program and the upsell effect related to M2S is happening across all geographies. To give you an idea of how this works, I'll give you a real example of a Canadian engineering firm and their M2S transaction from Q4. They had 42 maintenance subscriptions up for renewals -- 20 AutoCADs, 21 Navisworks, and 1 Premium Suite. They migrated to 19 subscriptions of the AEC collection and one AutoCAD subscription, a net reduction of over half their seats. However, the account value for this customer increased by over 10%. This happens enough times and you get a depressive impact on our net sub adds as a result of Collections upsell but a pronounced increase in overall ARR. So, that should help you understand what's happening.

This is a positive outcome for ARR and ARPs, but it negatively impacts our net sub adds. Beyond that, we believe this issue will work itself out over the course of the year as most of our largest customers complete their maintenance to subscription migration.

Despite the impact from Collections upsell, sub adds in our core business increased 14% year-over-year and accelerated from the prior three quarters, led by a record number of product subscription additions. Even when normalizing for M2S, the base of product subscriptions nearly doubled the year-over-year and EBA sub additions increased over 30%, fueled by the strong Q3 EBA deal activity. The core business drove more than $1.9 billion of our total ARR in Q4 and grew more than 25%.

Another consistent attribute of the transition is that new customers continue to make up a meaningful portion of product subscription additions and represented close to 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 have been using an alternative design tool. We'll go into much greater sub results and modeling details at our Investor Day in a few weeks, but there wasn't anything in these numbers that alters our conviction in our ability to drive ARR and cash flow.

Now I'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. Subscription plan subs grew by a record 371,000 during Q4, with growth in net subscriptions coming in all three categories: cloud, enterprise, and product subscriptions. Partially offsetting the growth in subscription plan subs was the expected decline in maintenance plan subs, primarily related to the M2S program. The M2S program continues to progress faster than expected, especially in the Americas.

In Q4, customers migrated 168,000 maintenance subs to product subs. Similar to last quarter, approximately one-third of all maintenance renewal opportunities during Q4 migrated to product subscription. Those that migrated, over one-third of eligible subscriptions upgraded from an individual product to an industry collection, which is the highest upgrade rate we've seen yet and relates to the Collections upsell effect that Andrew just spoke about. The renewal rate for customers held steady in Q4. However, remember that Q4 has the biggest pool of maintenance plan renewal opportunities. Consequently, the decline in maintenance subs is always greatest in Q4.

We're very pleased with the M2S program to-date and we'll continue to encourage maintenance customers to move sooner rather than later. We expect Fiscal '19 to be the biggest year for M2S migrations. It makes more economic sense for our customers as the cost of staying on maintenance will be higher than the cost to migrate and products subscription provides them the greatest value with increased flexibility, support, and access to our cloud products.

Now let's talk a little bit more about annualized revenue per subscription, or ARPS. This is the anticipated quarter where we saw ARPS inflect up for all the reasons we've been calling out, including improvements to the product mix and the geo mix and the base of our products subs, the price increase for the M2S program, less discounting and promotional activity, and selling more direct to our customers through our e-store. Collections upsell is also having a positive impact on ARPS. Our total ARPS grew 5% year-over-year and 4% sequentially. Breaking it down, maintenance plan ARPS continues to grow as expected, driven by mix and the annual price increases we rolled out as part of the M2S program. Product subscription plan ARPS showed a 6% sequential growth. If we exclude the effect of M2S, product subscription ARPS grew 8% sequentially, had its fifth consecutive quarter of growth, and grew 20% year-on-year.

That's meaningful growth in ARPS for the largest component of our core business. Further, if we isolate on our core business -- which, again, is maintenance plus product subs plus EBA subs -- core ARPS grew 10% year-on-year and 5% sequentially. These are the ARPS trends we've been predicting since the start of the transition and I know have been a source of question for many of you.

Looking at our business mix, once again, total direct was 30% of the Q4 mix. One of the key investment areas for Autodesk has been our digital infrastructure, with the goal of making it easier for our customers who choose to do business directly with Autodesk. Our e-store is a big part of that and we're very pleased that we've already grown that channel to nearly $100 million in Fiscal 2018 revenue. In addition, our e-store generated approximately 20% of the product sub sales in Q4 and close to 50% of LT subs in the Americas came through the e-store in Q4. That's tremendous progress in a short amount of time and we expect to see this continue to grow.

The biggest component of our direct mix is still the business we do with large enterprise customers. Q4 is always our biggest quarter for large-deal activity and we signed a record number of million-dollar plus deals in Q4 -- over 70 of them, including 14 contracts valued at $5 million or more. Most of these large deals were EBAs and, on average, the contract value for EBA renewals increased over 40% compared to the original EBA contract value.

For those of you who might not be as familiar with the history of Autodesk, these large deal stats are quite remarkable, even compared to just five or ten years ago. Through our product innovation and forward thinking, Autodesk has evolved to become a trusted partner and thought leader with our customers. Many are now coming to us seeking our guidance on how to prepare for the confluence of Design and Make, which is already happening in certain industries.

Moving to spend management, we continue to be able to execute well while keeping spend flat on a constant currency basis for both Q4 and Fiscal 2018. The restructuring action we initiated last quarter is allowing us to reallocate our spend to increase investment in areas that drive long-term value or reducing spend and making targeted divestments in other areas. We also remain committed to keeping Fiscal 2019 non-GAAP spend flat at a constant currency relative to our Fiscal 2018 budget at about $2.2 billion. Looking at the balance sheet, reported deferred revenue grew 9%. At the same time, unbilled deferred revenue increased by $178 million sequentially, bringing total unbilled deferred revenue to $326 million. As a reminder, this completes the first full year of moving our enterprise customers to annual billing terms.

If we consider total deferred revenue as reported deferred plus unbilled deferred -- which is a fair comparison to last year -- deferred revenue grew more than 25%. Since most of our enterprise customers are on three-year contracts, an entirely new group of enterprise customers will come up for renewal this year and next year so the amount of unbilled deferred revenue will continue to grow meaningfully.

Q4 cash flow was stronger than expected, driven by good billings linearity in the quarter. The strength of the Q4 cash flow allowed us to finish the year just in the black, which was also better than expected. When it comes to capital allocation, our stock repurchase program continues to be primary use of cash and we opportunistically accelerated that program in Q4, buying back roughly $2.4 million shares. At our last Investor Day, I indicated that we would use the majority of the $1.7 billion cash balance we had available at that time for stock repurchases. Since then, we've spent over $9 million on share buybacks. In fact, over the past two years, we've reduced our absolute share count by close to 3% and we remain committed to managing dilution and reducing shares outstanding over time.

Before getting into our outlook, I want to touch on two high-profile items that are impacting every company: tax reform and ASC 606. With the start of the new fiscal year, we have adopted the new revenue accounting standard, ASC 606, and will be applying the modified retrospective transition method. The new standard will not result in a change in timing and amount of the recognition of revenue for the majority of our product subscription offerings and enterprise agreements. In Fiscal '19, the estimated impact will be a net reduction to revenue and EPS of approximately $40 million and $0.15, respectively, compared to what would have been recognized under ASC 605 and a reduction of approximately $20 million in ARR.

We will be required to capitalize and amortize sales commissions under the new standard. While we do not expect a significant impact on reported expenses for the full-year, the timing of when we recognize the deferred commissions by quarter will vary compared to historic seasonality. 606 impacts are greatest in Q1 and then dampen as we move through the year and become nominal by Fiscal '20. And, of course, none of the 606 impacts affect cash flow.

Regarding the impact from tax reform, saying it's complex may be an understatement and clarifications from the IRS seem to come out daily, although we have enough information to provide the following. All in all, U.S. tax reform is good for Autodesk, whereby the lower U.S. tax rate and the ability to access foreign cash in the future will increase our profitability and help us manage capital more efficiently. We will utilize our deferred tax assets to offset the cash cost of the one-time transition tax. We're still analyzing the full impact of tax reform, but we currently estimate our Fiscal '19 non-GAAP effective tax rate at 19%. For Fiscal '20 and beyond, we estimate our non-GAAP effective tax rate to be between 17% and 18%.

Now I'll turn the discussion to our outlook and I'll start by saying that our view of the global economic conditions remains unchanged from the last few quarters, with most of the mature markets performing relatively well and little change in the emergent markets. We're providing guidance this quarter under both ASC 605 for comparison to our historic financials and ASC 606 and would expect The Street to model us using the 606 numbers.

We recognize, as we introduce guidance for Fiscal 2019, you'll be able to fill in the blanks for several Fiscal '20 metrics based on our stated Fiscal '20 goals. As Andrew said at the top of the call, we are confident in our ability to achieve our important goals around ARR and free cash flow. As we head into the growth phase of the model transition, we're bringing back annual guidance on billings, defined as reported revenues plus the change in deferred revenues, which should be helpful in modeling our cash flow. I'll note that while we expect billings to increase by approximately 26% at the mid-point for the full year, billings growth in Q1 will be much more modest due to a tough compare against strong billings in Q1 last year.

Another thing to keep in mind as you model out free cash flow is that there are a couple of one-time impacts to Fiscal '19 cash flow that total about $130 million. These pertain to charges for the restructuring and the exit tax from moving our European operations center from Switzerland to Dublin, Ireland. These one-time items, together with the strength of our Q4 cash flows, will have an impact on the strength of cash flow for Q1, which is likely to be negative. As we emerge from the inflection in our business model transition, cash flow ramps up quickly through Fiscal '20. A significant part of the ramp is driven by the increase in billings, primarily from what will be a much larger renewal base of product subs and multi-year subscriptions returning to the levels we used to see with maintenance.

In addition, in Fiscal '20, we'll then have two years' worth of unbilled deferred revenue flowing into billings, following our transition to annual billing for enterprise customers. The underlying positive trends in our business give us confidence in accelerating ARR growth to approximately 30% for Fiscal '19. This growth will be driven by fewer subscriptions at higher ARPS, which reflects the trends we're seeing with both our cloud products and Collections upsell. As such, we've revised our outlook for subscription additions for the year.

As Andrew mentioned, our next investor day event is just about three weeks from today. We'll use that opportunity to do another deep dive on the model and provide more details on the recent numbers and the path ahead. We'll also go into greater detail on subs and ARPS model to get us to the Fiscal '20 goals and we'll revisit our five-year model.

Now I'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 are confident in our ability to accelerate ARR growth to achieve our Fiscal '20 ARR and free cash flow goals and we have a realistic plan in place to achieve those goals.

Given the changes we've seen at the end of this year, it shouldn't come as a surprise that we'll be reducing the subs CAGR and increasing the ARPS CAGR, consistent with the move to fewer higher value subs in both the core business and in our cloud business. The transition is on-track and these model adjustments are happening for the right reasons. We'll go into all the details at our Investor Day on March 28th.

Now, if we look back at the year, we've taken significant action to realign our investments and position Autodesk to meet our long-term goals. We are 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 of our core products. I'll finish by repeating the three strategic priorities that will drive long-term success at Autodesk: completing the subscription transition, digitizing the company, and reimagining manufacturing, construction, and production.

We have already made significant progress in addressing the tremendous new market opportunity in the construction market and we will continue to pursue that market aggressively. In addition, some of you may have noticed that we are increasing our efforts in the manufacturing space as we just opened the new advanced manufacturing facility in Birmingham to highlight the work we're doing to move product design and manufacturing companies to a new hybrid additive and subtractive future. You'll see more of that over the next couple of years and you'll also begin to see the first results of our efforts to reimagine production.

To wrap things up, I want to thank our customers, but especially recognize our employees and partners who have worked so hard to make last year a success. We're excited to be now in the growth stage of the transition, to see accelerated growth in ARR, and to be another step further along the journey of our transition. We're confident in our long-term plans and ability to execute 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, sir. Ladies and gentlemen, at this time, if you would like to ask a question over the phone lines, please press * and then 1 on your telephone keypad. To everyone participating in today's question-and-answer session, we please ask that you limit yourself to one question and a follow-up. If your questions have been answered and you wish to remove yourself from the queue, simply press the # key.

And our first question will come from the line of Phillip Winslow with Wells Fargo. Your line is now open.

Phillip Winslow -- Wells Fargo -- Managing Director

Hey, thanks, guys, for taking my question. Obviously, we've been focused on ARPS since mid-2015 so it's really exciting to see the inflection here in that number in Q4 so congratulations on that. And my question is, on ARPS -- and, obviously, you said you're going to give us more details in terms of just the framework for the long-term guidance at Analyst Day -- but wondering if you'd talk about '19 and '20, the puts and takes that you see? Because there's a lot of things going on -- obviously, the price increases on maintenance, the less discounting on the M2S, as well as discounting on the overall -- help us frame out the puts and takes of ARPS as you think about it in 2020?

Andrew Anagnost -- Chief Executive Officer

Yeah, so let me give you a little perspective on what's driving us. First, let me frame the problem a little bit. One of the things I want to make sure you're seeing here is the same thing that we saw. So, the core is doing incredibly well -- sub space grew 14% year-over-year last year -- we're going to see that number continue moving forward at least at that level, which is in-line with historical level so the core's doing really good. And, when you look forward, you guys have probably noticed where we're at with our guide.

Most of that guide is due to our reset expectations in cloud so you're zeroing in on exactly the right thing right now on ARPS. So, what's driving the ARPS, specifically? So, what we're seeing is an acceleration of some of the strategies that we've already put in place and we've talked about in the past. The first one's being the upsell in the Collections. Like I said in the prepared remarks, we're seeing an acceleration. More people, as they move from M2S, are taking us up on the move to Collections. More people in the run rate of our core business are moving to Collections. You're going to see those phenomena play out into next year and into beyond.

The other thing that's getting accelerated right now is our price realization efforts and this comes from, basically, three components. One, better execution in the e-store -- which, by the way, is very high price realization channel. Our renewal-based changes in terms of the channel costs to renew product subscriptions -- we're making some changes there. We've made some changes in the low-end margins of our business as particularly around LTs. That is accelerating our price realization. And we're doing much better in terms of managing the promo discounts across the products. All of those things, in the fact that they're accelerating, are going to drive up ARPS as we move into next year and beyond.

Phillip Winslow -- Wells Fargo -- Managing Director

Got it. Thanks, guys. And I'll just get back in the queue. Thanks.

Operator

Thank you. And our next question will come from the line of Saket Kalia with Barclays. Your line is now open.

Saket Kalia -- Barclays -- Director

Hey, guys. Thanks for taking my questions here. First, maybe, for you, Andrew, thanks a bunch for the example on the Canadian engineering firm to show that net add and ARR dynamic. But, just to make sure that we understand, the question is are customers buying for fewer engineers? I guess, why is it that a collection is able to handle fewer seats if, presumably, seats are a good proxy for employees. And, I guess, I think we all appreciate the ARR lift that you're getting, but talk us through how you think about this dynamic when you think about seat share within your customers, if that makes sense?

Andrew Anagnost -- Chief Executive Officer

Yeah, Saket, I'm really glad you asked this question, alright? So, this is the dynamic of subscriptions versus users, alright, and this is an anomaly of how we're counting our business. So, what you saw in this example is each user actually had two subscriptions -- so the number of users in this company did not change at all. It just so happened that each user had a seat at AutoCAD and a seat of Navisworks Manage sitting on their desktop. So, what happened is that the customer said, "Well, I can now take this M2S offer, move all of those seats to Collections. Not only do they get AutoCAD, Navisworks Management, they get Revit as well," and that's what the customer did. So, the number of engineers sitting there -- exactly the same. The number of subscriptions sitting on each engineer's desktop -- one from two. Make sense?

Saket Kalia -- Barclays -- Director

That does. That makes a lot of sense.

Andrew Anagnost -- Chief Executive Officer

We're seeing that broadly.

Saket Kalia -- Barclays -- Director

Got it. Maybe for my follow-up, just a little bit of extension of Phil's question: could either you or Scott just maybe talk about the shape of M2S in Fiscal '19? Because it feels like we saw a nice reaction to some of the pricing strategies here in Fiscal '18 -- I believe the next action will build on that. Can you just maybe walk us through how you're thinking about the maintenance space by the end of Fiscal '19? And, back to ARPS, how should we think about the impact that that could have on ARPS?

Andrew Anagnost -- Chief Executive Officer

Yeah, Saket, it's a great question. We are expecting to see an acceleration of people -- maintenance subscribers -- that, as they come up to the point of renewal, seeing them move to product subscription. It's already moved faster than we expected, as you know, in Fiscal '18 -- 110,000 migrations in Q3, 168,000 in Q4. Both of those numbers were higher than expected. As we look at next year, the economics change again and the price to renew goes up 10%, the price to convert only goes up 5%, so the economics actually swing in favor of conversion even more strongly. And, of course, the product sub has higher value to our customers in terms of higher access and ease of management so I think we'll see it accelerate. What we haven't done is gone into trying to forecast each of the sub components to give you a sense of that, but I think our expectation all along was that Fiscal '19 was the biggest year for M2S conversions and I think, seeing how quickly it's already moved in Fiscal '18, I think we will see that acceleration happen again in Fiscal '19.

In terms of the effect on ARPS, I don't think it has a massive effect either way. The price to convert or the price to renew is still relatively close -- a little bit more expensive to renew maintenance, but I don't think that, by itself, will have a big effect. What's likely to have a bigger effect is people who, at the point of migration from maintenance to subscription who do, like the example we used in the opening commentary, and actually move up from individual licenses up to the Collection.

Saket Kalia -- Barclays -- Director

Very helpful. Thanks, guys.

Operator

Thank you. And our next question will come from the line of Sterling Auty with JP Morgan Your line is now open.

Sterling Auty -- JP Morgan -- Managing Director

Yeah, thanks. Hi, guys. Based on the positive comments that you made around the number of users eligible to move to subscription that did and some of the other elements, is there a redrew on churn? So, other words, has churn actually improved over the last couple of quarters?

Scott Herren -- Chief Financial Officer

So, in fact, Sterling, what we've seen is that there's absolutely no change in the churn rate of the maintenance mix. So, the maintenance mix quarter-over-quarter, year-over-year, is holding solidly at the same kind of renewal rates we've seen historically. What you just see is more people are deciding to take the maintenance to subscription offer and, of those people, even more -- in acceleration over the previous quarter -- are choosing to go to Collections. But the actual renewal rate of that base has remained solidly intact on a quarter-over-quarter and year-over-year basis and even trend wise.

Andrew Anagnost -- Chief Executive Officer

And, to your point, Sterling, that's an aggregated renewal rate -- you know we do it on seat count today -- so what it implies is that, because you've got consolidation going on, the remainder is actually seeing a bit of an uptick in renewal rate, right, because some of them are moving off maintenance -- like the example we pointed to -- are dropping off, certain subscribers, as they consolidate up to Collections. So, we're really pleased with the renewal rates we're seeing in aggregate.

Sterling Auty -- JP Morgan -- Managing Director

Alright. Great. And then one follow-up, on the EBAs, I think you mentioned the subscriptions in arrears and that's an element that can cause some noise within the net subscriber count, if you will. Wonder if you can give us some insight into maybe some previous cohorts? So, an EBA from three, four quarters ago, how does that number of subscriptions' contribution into the total count fluctuate?

Andrew Anagnost -- Chief Executive Officer

Yeah, the biggest impact we see is on the first measurement of MAUs. So, a customer that buys an EBA, in every case, has had a larger state of perpetual licenses that are on maintenance and then convert those perpetual over to an EBA. So, the first effect you see is maintenance subs go down, enterprise subs go up. And because anyone in the company now has access to the license, we can't count MAUs instead of people who have access to it when they move to an MBA. After 90 days of measuring the MAU, that's what gets added to the subscriber count and what we typically see is a pretty significant uptick at that first read. Beyond that we continue to see growth and it's that volume growth in usage that drives one of the stats that we talked about in the opening commentary, which is we've had several renewals of EBAs in Q4 and, on average, the renewal is 40% higher than the original EBA. That's driven by usage -- it's not as much price-driven as it is by usage -- so big uptick on the first measurement and then slight upticks out through the remainder of the three years.

Sterling Auty -- JP Morgan -- Managing Director

Thank you.

Operator

Thank you. And our next question will come from the line of Zane Chrane with Bernstein Research. Your line is now open.

Zane Chrane -- Bernstein Research -- Vice President and Senior Equity Analyst

Great. Thanks very much. I was wondering how should we think about the timing and magnitude of the EBA billing cycle change to deferred revenue for Fiscal '19 and '20. And then, my second question, what's been the feedback from customers on the new features and functionality with the new model subscription versus legacy licenses? Is it the features and new functions that's driving the migration of license-only users or is it more of a financial decision given the upfront cost? Thanks.

Scott Herren -- Chief Financial Officer

Okay, Zane, I'll take the front end of that and let Andrew talk about the value prop of moving to subs. This is the first year where we've migrated the overwhelming majority of our EBAs over to annual billings, so it's still a three-year commitment but billed annually. So, if you notice, one of the stats that we're providing now is unbilled deferred. What that represents -- almost entirely represents -- is Year 2 and Year 3 of EBAs that we signed this year. A few other small cats and dogs in there, but almost all of that $326 million is the second and third year of the EBAs we signed this year. So, you can tell half of that $326 million will come out in Fiscal '19, the other half will come out in Fiscal '20. In Fiscal '19, we'll sign another cohort of EBAs, alright, and in each case, those will also be on annual billing so I expect to see that $326 million balance grow this year as we add two more years of unbilled deferred to the balance but only bill one year out of that $326 million. Right? So, the $326 million will be something higher at the end of Fiscal '19. I think it's pretty straightforward and we'll provide you those stats each quarter. It's pretty straightforward for you to just set up a quick waterfall model, then understand how that's going to creep into future billings.

Andrew Anagnost -- Chief Executive Officer

Yeah, Zane, this is Andrew. With regards to the other question about what's driving their motion right now, if you're looking at a stand-alone product, right now, the financial incentive is probably the core thing that's driving the momentum in terms of maintenance subscription moves because they're essentially seeing the same product with a cloud wrapper around it. We are getting a lot of feedback that the inclusion of some of the new cloud wrappers we've put in with the products around collaboration and sharing, in conjunction with the support offering we've entangled with subscription is adding a lot of value.

When you look at Collections and the increase in people choosing Collections, that's more than just the financials incentive -- the Collections has actually been beefed up progressively. So, for instance, in the product Design and Manufacturing Collection, we've added machining capabilities into the Collection and people are noticing that and choosing the options. Same with the AEC Collection -- we've added some core capabilities that are making it more attractive for people to decide to take the Collections option as they move. So, it's kind of bifurcated in terms of stand-alone products and what we're seeing with Collections. Everybody likes the support.

Zane Chrane -- Bernstein Research -- Vice President and Senior Equity Analyst

Sorry, what was that last part?

Andrew Anagnost -- Chief Executive Officer

I said everybody likes the support -- the added support.

Zane Chrane -- Bernstein Research -- Vice President and Senior Equity Analyst

Okay. That's really helpful. Thanks, guys. Congratulations.

Operator

Thank you. And our next question will come from the line of Michael Nemeroff with Credit Suisse. Your line is now open.

Michael Nemeroff -- Credit Suisse -- Co-Head U.S. Software Research

Hi, guys. Thanks for taking my questions. We've been talking with a lot of your channel partners throughout the quarter and there's obviously a shift occurring in the channels involvement in your new product sales. Andrew, how do you view the channels role in new product sales over the next couple of years and what are you expecting from them?

Andrew Anagnost -- Chief Executive Officer

Yeah, so I think I've stated pretty emphatically over time that the channel, one, is still an important part of our business. As we move out to a steady state, we expect our business to be 50/50 split between direct and indirect. With everybody seeing a larger business, we'll have a larger direct business -- they'll have a larger indirect business. So, the channel's a strategic component of our execution moving forward. In the new businesses, when it comes to booting up new businesses, a lot of the hard work has to be done by Autodesk first.

Channel partners really, really want to get engaged in new businesses early on and we do engage them at various points in new businesses, but it's better if we do some of the early market seating and market development efforts and then start to migrate the business more over into the channel. We've been doing that with BIMS 360 in some of the new applications, but try to make a measured approach. One area where we've really engaged partners in the future is the Forge platform and building out customizations on top of our cloud platform -- that's an area we're encouraging partners to step up and get engaged in really early because that allows them to stitch together solutions for their customers and really drive their services business, which we think is not only important for us long-term, with the fact that we're going to be seeing new types of custom solutions built on Forge, it's important for them.

Michael Nemeroff -- Credit Suisse -- Co-Head U.S. Software Research

That's helpful. Thanks very much, guys.

Operator

Thank you. And our next question will come from the line of Heather Bellini with Goldman Sachs. Your line is now open.

Heather Bellini -- Goldman Sachs -- Managing Director

Great. Thank you. I was just wondering, Andrew, how do you feel about cloud? As you look further out as being a TAM expander, there's been a lot of question. Talking me through how you get to $6.00 in free cash flow? And, by the way, assuming -- you guys didn't explicitly state that, but I guess people are asking if that's still your target? And then, when you look out to your further target, the Fiscal '23 target, how important is cloud as a TAM expander to get to that level and what do you see as being a driver for that to drive adoption? Thank you.

Andrew Anagnost -- Chief Executive Officer

Alright, thanks, Heather. First off, let's be very clear: we are affirming the $6.00 and we're committed to that, so let's be super clear on that one. So, now, when we look at the cloud, so let's be super clear about a few facts. So, first off, in Q4, we added 45,000 cloud subscriptions in the quarter. Okay? A lot of people would love to have that number, so that's the net adds -- yes, that's the net adds -- so there's a robust add. We have record billings, robust billings growth. The cloud is right where we expect it to be at this point. What we've decided to do strategically -- and I think it was appropriate -- is we've deemphasized and moved away from the super low-end cloud subscriptions we had. They came under the guide of BIMS 360 team, Infusion 360 team, and moved much more toward portfolio strategy around things like Docs, and Field, and the higher value Fusion offerings.

That was a very deliberate choice and that's why you see some of these subscription guidances that are being heavily impacted by the change in the way we're executing on cloud. But now, as you look out forward in terms of our business development efforts in the cloud, we're exactly where we should be in the cycle as we move to FY '23. So, one more fact -- just to comment on FY '23 before I talk about the cloud -- the business model transformation, the move to subscription of the core business, doesn't just suddenly run out of steam as we move to FY '23. It provides a solid growing foundation that we build upon but, to get to those FY '23 targets, you're definitely going to see us add a lot more cloud business as we get to FY '23. It's not necessary for FY '20 -- it's absolutely part of the FY '23 plan and you're going to see us grow that both organically and inorganically like we've done with any new business in the past.

Heather Bellini -- Goldman Sachs -- Managing Director

That's really helpful. Thank you so much.

Operator

Thank you. And our next question will come from the line of Jay Vleeschhouwer with Griffin Securities. Your line is now open.

Jay Vleeschhouwer -- Griffin Securities -- Managing Director

Yeah, thanks. Good evening. First question, Andrew, you touched on this, is the role of the e-store. I think you said $300 million for Fiscal '18 and, at some point, you expected it to be at least half of the direct business, which would mean quarter-to-quarter business. So, if, by, say, Fiscal '22, '23, you are a $4 billion plus company, you're looking at potentially roughly a $1 billion e-store business. So, if the map is wrong, tell me, but could you talk about the infrastructure scaling requirements or expectations that you have to get to that kind of multiplier of your e-store business from Fiscal '18? And then, last question, it has to do with your product roadmap or your product development execution. You did that very well starting 15 years ago with the namesake program, moving to an annual release and that sustained your flywheel for recurring revenue. Given all the changes in the company -- you talk about a move in terms of core products and changes in R&D, R&D management and all that -- could you talk about your execution plans for development, not just in cloud, for the next year or two to make sure that you keep that flywheel going for recurring revenue?

Andrew Anagnost -- Chief Executive Officer

Yeah, OK. So, let me start with the infrastructure question. So, you're right -- we've been moving up close to $1 billion e-store business as we move to those outlying years. And an infrastructure investment is required to make sure that we manage that base in the appropriate way. So, I've talked about this whole effort around digitizing the company and investing in digitizing the company -- we already have the transactional infrastructure to get to that number, so we can take the orders, we can manage the entitlements, but there's that whole wrapper of infrastructure around $1 billion base. Just think how many subscribers that's going to be -- it's in the millions, right, and you want to take care of that base, you want to engage with that base, you want to have intelligence on that base so that you can easily see what's going on with those customers.

That's the infrastructure we're building out: the inward-facing infrastructure that allows us to understand the customer that came to us electronically, but also the infrastructure that faces the customer that allows them to, on their own without any intervention from an Autodesk person, -manage their relationship with Autodesk. So, you'll see us building out both of those pieces of infrastructure over time. Right now, obviously, we've already got the core transactional infrastructure to drive the results here.

Now, when we talk about the R&D cadence, so one of the things I did -- and I think you astutely noticed this -- is that we've split the development efforts up into essentially what is the core business -- design and creation products, inventor, AutoCAD, Revit, Max, Maya -- and the new business products, essentially around the cloud construction-based products, the new kind of advanced manufacturing products. One of the key things that's going on inside the design and creation organization is spinning that flywheel on development where there's a rapid cadence of small, incremental additions and upgrades to the product that keep the customer seeing progress. Now, they're going to see progress not only in the product, but for those people who manage large installations over the next 18 months or so, they're going to see progress on how easy it is to manage their installations with Autodesk.

So, over a 12 to 18-month period, people are going to see a lot of functionality show up. The experience we aspire to, Jay, is like what you're seeing with Office 365 right now, where these little updates come in and they give you a quick little dialogue that says, "Here's the things that we just updated for your Office experience." That's where we're heading -- we're actually making very good progress in that direction -- and that's how customers are going to be able to digest a continuous stream of upgrades without this kind of big thud that we used to do.

Jay Vleeschhouwer -- Griffin Securities -- Managing Director

Thanks, Andrew.

Operator

Thank you. And our next question will come from the line of Ken Talanian with Evercore ISI. Your line is now open.

Ken Talanian -- Evercore ISI -- Director

Hi, guys. Thanks for taking the question. So, I was wondering if you could give us a sense of what kind of uptake you've seen from unsubscribers during the year and then any plans to address that base going into Fiscal '19?

Scott Herren -- Chief Financial Officer

Yeah, so, historically, the non-subscribers are absorbed into our run rate. We run promos -- we've been running promos on a cadence of about twice a year -- so you saw that we did fairly successfully in the promos this year. I can't remember exactly the number of non-subscribers we brought in through promos last year -- we did two promos, one in Q1 and one in Q3. What we're doing this year, as we move forward, one, on the non-paying non-subscribers side, this is the year we're instrumenting our license compliance efforts so we're actually putting out more intelligence and capability that actually tells the customer in the product that they're working with a non-compliant copy and maybe they might want to investigate how they got there and also allowing them to contact us quickly and buy.

If you look at what what we're doing the legacy base -- the non-subscribers that have fallen off maintenance and they're sitting on old perpetual licenses -- we're actually rolling out a new set of promos, lower discounts but actually have some insurance policies built into it where, if the customer moves and falls off two years from now, they can default back to the old perpetual release they had at the time they moved. They don't get the latest -- they just get their old one -- so it's like an insurance policy to provide even more attraction to that base to come and move forward. We're going to see how that works as we move into this year.

This past year -- I got the number in front of me -- we moved 50,000 users into our paying base from promotions like this. We actually expect this new promotion to do as well, if not better, than some of those past promotions.

Scott Herren -- Chief Financial Officer

Yeah. And, Ken, promotions are one way that we go after the legacy bases. In many cases, they end up coming back to us as the product that they're using, if they're not on maintenance, ages out. And, as it gets older and older, their ability to communicate with other partners around them -- whether they're in manufacturing and part of a supply chain or they're a contractor on AEC -- as their version becomes more and more down-level, their ability to exchange files becomes harder and harder. File types change through time. So, promos is one way, a financial lever to pull. Another is, since all of these are network-type used products -- in other words, they're used in conjunction with other companies -- they end up needing to get the latest release just to stay compliant.

Ken Talanian -- Evercore ISI -- Director

Great. And, I guess, just a bigger picture question: could you rank order what factors might cause you to exceed your current ARR growth targets for Fiscal '19?

Scott Herren -- Chief Financial Officer

Yeah, that's a little bit of a loaded question. What I'd say is what we've seen so far is faster progression in ARPS growth than we had previously anticipated -- a lot of it based on the factors that, again, Andrew talked about earlier. Some of it's coming from consolidation of subscriptions where people are moving up to the Collections at a faster pace than we had saw. The uptick of maintenance to subscription has been a bit of a catalyst for that. E-store has been bigger than we expected and we'll continue to drive that faster. Our renewal base, remember, when we sell a new product through the channel, there's a higher margin for the channel partner than when we sell a renewal through a partner.

And as that renewal base grows out through time, the lower channel cost-end effect accretes to us as well. That's also driving ARPS. So, there's a whole set of things that are driving ARPS growth even faster than we expected -- I would say that's probably been the bigger upside. And you've seen subs, in particular around cloud, subs are coming in at a slightly lower level but at a higher price point.

Ken Talanian -- Evercore ISI -- Director

Great. Thank you very much.

Operator

Thank you. And our next question will come from the line of Keith Weiss with Morgan Stanley. Your line is now open.

Keith Weiss -- Morgan Stanley -- Equity Analyst

Thank you, guys, for taking the question. So, not to be too bear-ish, but we've seen two quarters in a row where the net subscriber adds have come in below people's expectations and you guys have taken your targets down and, if I'm not mistaken, it's two different explanations for why it happened. Last quarter, it was more about heavily promoted cloud subscriptions not being in the number going forward basis and, this quarter, it was more about the difference between what a subscriber is and what a subscription is and more subscriptions getting collected into one Collection. How do we garner confidence that this is the last take down in terms of our net subscription add estimates on a going forward basis? Is there any visibility you can give us into any excess that might be in that base on a going forward basis that you feel comfortable that this number's not coming down again?

Andrew Anagnost -- Chief Executive Officer

Yeah. First, let me acknowledge your frustration that you might be having with the way this has played out over the last two quarters -- I just have to acknowledge that. It doesn't help you with your modeling, it doesn't help you with some of your core efforts, so I absolutely want to acknowledge that. I want to just go back to some fundamentals here so we get level-let and then I'll answer your question as specifically as I can. So, first off, remember that we broke out the core and the cloud deliberately now so you can start seeing those dynamics. The core grew 14% for the year -- so the subs space in the core grew 14% for the year. That's in-line with historical behavior. We're going to see that same number or greater moving forward, so the core shows some nice strength and stability. Alright? What we did see this quarter that was not anticipated at the rates was this acceleration in the Collections activity associated not only with the run rate of M2S and it was an acceleration that was off the trend of the previous two quarters in terms of how fast people we removing. And, yes, that did result in this consolidation resulting from upsell, but for the right reasons. We saw the appreciation of ARR associated with that.

So, when you look forward to what we've done with the guide, like I said earlier, the vast majority or the most of that guide is due to our cloud reset expectations and the majority of that cloud reset is due to simply not driving these super low value cloud subscriptions. When you look at the core, our CAGR for FY '20 is essentially unchanged for the core business. So, what can garner you confidence here is we understand a lot more what's going on with the cloud, we're now prepared for more acceleration around consolidation as we've seen it move forward, we know it will play out through FY '19, and we're holding to the CAGR for the core business that we expect to have in FY '20. And that's where we're at. You want to add anything else, Scott?

Scott Herren -- Chief Financial Officer

Yeah, the only thing I'd say is, even in those two quarters, as you point out, with subs coming in, certainly lighter than everyone externally expected in Q3 and lighter than our own expectations in Q4. In each quarter, ARR performed nicely and that really has been -- we've said all along -- that's our top goal is to drive ARR and to drive cash flow out of that ARR. If you remember, Q3, ARR grew 24% so faster than Q2 before that -- actually, it was the seventh consecutive quarter of increasing growth rate in ARR -- and it grew again 25% in the quarter we just closed. So, ARR continues to perform nicely, even as subs have been a little bit lower than our expectations in the last quarter.

Keith Weiss -- Morgan Stanley -- Equity Analyst

Excellent. Definitely understand that ARR is the key number that you're looking at but also want to have confidence in the components building onto that ARR -- the trend line there going in line with my model.

Andrew Anagnost -- Chief Executive Officer

Oh, I get that. I totally get that.

Scott Herren -- Chief Financial Officer

And I want you to go back to that core strength that we're talking about here because that's the important driver. You layer on top of that the factors we're talking about -- ARPS appreciation associated with upsell of Collections, better price realization, and the reduced promo activity. And, by the way, don't underestimate how the acceleration of price realization is going to affect the year moving forward. Those are the things you're going to want to pay attention to -- the core. That's why we're trying to help by breaking out the two.

Keith Weiss -- Morgan Stanley -- Equity Analyst

Got it. And, longer-term, do you think there's any chance that you have a view on subscribers versus subscriptions?

Scott Herren -- Chief Financial Officer

It's a conversation we have a lot. Part of the investment -- Andrew's talked about three big priorities we've invested in -- one of them is digitizing the company. Part of the effort there in digitizing the company is to be able to count users as opposed to subscriptions. Historically, we sold shrink-wrapped product that had a license number with it so you can track licenses but you can't always track on a one-to-one basis who's the actual user of that license. Part of the investment that we're making in digitizing the company will give us much better insight into account-level metrics and then, within that, user metrics. And so, yes, we may get to that point -- we're not there today.

Keith Weiss -- Morgan Stanley -- Equity Analyst

Got it. Thanks, guys.

Operator

Thank you. And our next question will come from the line of Monika Garg with Keybanc. Your line is now open.

Monika Garg -- Keybanc -- Senior Research Analyst

Hi. Thanks for taking my question. Sorry to go back to the ARPS point, to you look at your Fiscal '19 guidance, you're guiding ARR to 30%, but your net sub add group is about 14% -- that mean you're guiding ARPS growth of somewhere 10%ish. Could you walk through the math and we achieved this kind of guidance?

Scott Herren -- Chief Financial Officer

Sure, Monika, and it sounds like you're looking at the 605 guidance. The mid-point of the guide to ARR under 606, which is really what I'd like everyone to adjust their models to, is 29% but your math is still directionally right. And I think the ARPS growth drivers will be the components that we've talked about. It's continuing upsell to Industry Collections. And, particularly, as maintenance to subscription accelerates, what we're seeing is that, as people make that choice, is those who are eligible to upgrade, more than one-third are taking that, so that's going to push more people to Industry Collections that obviously drives ARPS up. E-store will continue to grow. The renewal bases is a big part of the ARPS growth -- it's a significantly higher yield to Autodesk, when a channel partner sells a renew, versus selling a new product. And so, as renewal becomes a bigger part of our overall revenue, obviously, the cost of selling to the channel comes down. That drives up our price realization.

And we've made some very specific changes on partner margins around the low end, specifically, AutoCAD LT, and what those margins look like. So, you add those factors together, along with reduced promotional activity and discounting -- that's what's going to drive that ARPS growth rate. And, if anything, what we've seen is it move up faster than we expected.

Monika Garg -- Keybanc -- Senior Research Analyst

Got it. Thanks, Scott. And then, just the follow-up, your 1Q revenue growth guidance is somewhere 14%, 14.5%, but your yearly guidance is somewhere 21%, 22%, which would mean deep ramp acceleration and revenue growth toward second half. Maybe walk us through the factors that could lead to that acceleration? Is it like ARPS growth is more second-half accelerated or any other factors? Thank you.

Andrew Anagnost -- Chief Executive Officer

Yeah, that's exactly what it is. And, if you recall, so, it's ARPS growth mostly. We do see some growth in subs throughout the year, but it's mostly ARPS growth. But, remember, too, the maintenance to subscription program, the annual change in price points on that come into effect in Q2 and so that also... that not only affects Q2 but, of course, direct-end, when we sell that, it drops into deferred revenue, it comes back out of deferred revenue as the year goes on, so it has a lesser effect earlier in the year and a bigger effect later in the year.

Monika Garg -- Keybanc -- Senior Research Analyst

Thank you.

Operator

Thank you. And our next question will come from the line of Steve Koenig with Wedbush Securities. Your line is now open.

Steve Koenig -- Wedbush Securities -- Equity Analyst

Thanks. Hi, guys. Thanks for your explanations on the mechanics of how this is going. I wanted to ask one question on maintenance subs and then just a follow-up question on ARR and then converting to billings growth. So, on the maintenance subs, Scott, I think you said the expected decline in maintenance subs was primarily related to the M2S program so that leads me to the question, if that was the primary factor, what are the secondary factors in the decline in maintenance subs?

Scott Herren -- Chief Financial Officer

Yup, there's always a certain number of non-renew. Right? We don't have 100% renewal rates, Steve, so as the maintenance base is bigger in Q4, that drives the other piece of why you saw the decline in maintenance subs. So, 168,000 of the 244,000 that maintenance came down, 168,000 migrated -- the remainder are some form of non-renew. Remember the example we gave, though. That customer, those were 42 licenses on maintenance that converted over to 20 subs, so some of that non-renew is actually good news -- it's individual licenses that are converting up to Collections.

Steve Koenig -- Wedbush Securities -- Equity Analyst

Got it. Okay. Thanks for that. And then, on the follow-up, is there anything that could surprise you guys when it comes to eventually converting that ARR to billings growth? And then I want to sneak in, maybe, a related question if I could define it that way: thinking about post-Fiscal '20, how should we think about how ARPS and free cash flow, how that trajectory flows after Fiscal '20? Should the ARPS growth peak in Fiscal '20 and then decelerate fairly gradually because you're still layering on subscriptions faster than you're converting the base? So, how should we think about longer-term trajectory as well?

Scott Herren -- Chief Financial Officer

Okay. That's quite a suite of questions, there, Steve. Let me take the billings one first. I think the other thing to think about as we talk about ARPS and how that's going to grow and how that's going to drive billings out through Fiscal '20, billings, so the two big drivers are cash flow -- which I think is the source of your question -- our net income -- you have a good sense of that from the targets we've given -- and billings, which drives deferred revenue growth. The only other effect besides the ARPS growth that'll drive the billings side of that that you need to bear in mind is we've always had a steady proportion of customers that buy multi-year. So, if you go back to when, before we started the transition, we were selling maintenance agreements, somewhere between 20% and 25% of our customers who bought a maintenance agreement bought a multi-year. That's been pretty steady.

Of course, when we launched maintenance to subscription, we cut that off -- we cut off multi-year maintenance subs. What we see, interestingly, in product subs -- off a much smaller base, of course -- is many of them are also buying. In fact, it's almost the exact same proportion of product subs customers are buying multi-year as well. So, as you're thinking about your billings model out through Fiscal '20, remember that we've had a decline in Fiscal '18 in billings driven by no multi-year maintenance. The same proportion of customers are also buying multi-year product subs and, as product subs become a bigger part of the base, that's going to drive billings as well.

The other factor to layer in -- two other factors to layer in on that -- the bleed back of unbilled deferred which we talked about earlier with Zane's question, make sure you're modeling that in. We have a year of unbilled deferred that's built up to $326 million. That'll build again in Fiscal '19 and then, by Fiscal '20, we'll actually have two years of unbilled deferred bleeding back into the billing stream so add that in. And then, finally, just from a cash flow -- not from a billings standpoint -- bear in mind that Fiscal '19 has these two one-time events that total about $130 million of cash outflows, partly driven by the cash payments for the restructuring, partly the exit tax from moving our operational center in Europe from Neuchâtel, Switzerland to Dublin, Ireland.

Andrew Anagnost -- Chief Executive Officer

And the only point I'll add, Steve, just to reinforce what he said about multi-year, the multi-year is not going to happen for no reason at all. As we enter into Fiscal '20, we're actually entering the first group of M2S customers that are seeing their M2S period end so they're going to want to lock in their price. That's been a historic behavior. What happens is customers say, "Okay, I want some price stability out there," so they'll buy multi-year. And the fact that we had such a large tranche of initial M2S customers, you'll see that just naturally migrate into the business in FY '20.

Steve Koenig -- Wedbush Securities -- Equity Analyst

And then, guys, if you could answer the question I snuck in there, that would be great, which is how should we think about the trajectory after Fiscal '20 in terms of growth rates as we layer on the subscription revenue and more of that until you get to more of a steady state? How should that progress?

Scott Herren -- Chief Financial Officer

Steve, I think there's no big change to the path that we had laid out on that at our last Investor Day. Probably the better thing to do, rather than try to tackle the moving parts here, is to say we have our Investor Day three weeks from tomorrow here and, at that point, we'll not only give you a little more granularity on the path to Fiscal '20, but we'll also give you a little more granularity on the five-year plan. So, that might be the best thing to do is to hold off on that until March 28th.

Steve Koenig -- Wedbush Securities -- Equity Analyst

Terrific. Thank you very much, guys.

Operator

Thank you. Ladies and gentlemen, this is all the time we have for questions today. So, now I'd like to hand the conference back over to Mr. Dave Gennarelli, Investor Relations, for closing comments and remarks.

David Gennarelli -- Senior Director, Investor Relations

Great. Well, thanks, everybody. As Scott just mentioned, we have our Investor Day coming up on March 28th here in our office in San Francisco. We'll also be at the Bernstein conference on April 10th in Boston. We're going to follow that up with an NDR in Boston on April 11th and in New York on April 12th. If you have any questions in the meantime, you can reach me at (415)507-6033. Thanks.

Operator

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude the program and we may all disconnect. Everybody, have a wonderful day.

Duration: 65 minutes

Call participants:

David Gennarelli -- Senior Director, Investor Relations

Andrew Anagnost -- Chief Executive Officer

Scott Herren -- Chief Financial Officer

Phillip Winslow -- Wells Fargo -- Managing Director

Saket Kalia -- Barclays -- Director

Sterling Auty -- JP Morgan -- Managing Director

Zane Chrane -- Bernstein Research -- Vice President and Senior Equity Analyst

Michael Nemeroff -- Credit Suisse -- Co-Head U.S. Software Research

Heather Bellini -- Goldman Sachs -- Managing Director

Jay Vleeschhouwer -- Griffin Securities -- Managing Director

Ken Talanian -- Evercore ISI -- Director

Keith Weiss -- Morgan Stanley -- Equity Analyst

Monika Garg -- Keybanc -- Senior Research Analyst

Steve Koenig -- Wedbush Securities -- Equity Analyst

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