10-QPeriod: Q2 FY2016

Autodesk, Inc. Quarterly Report for Q2 Ended Jul 31, 2015

Filed August 31, 2015For Securities:ADSK

Summary

Autodesk, Inc. (ADSK) reported a net loss of $235.5 million for the three months ended July 31, 2015, a significant shift from the $31.3 million net income in the prior year's quarter. This loss was primarily driven by a substantial $205.3 million discrete tax expense related to establishing a valuation allowance against U.S. federal and state deferred tax assets, alongside a $213.6 million total valuation allowance. Revenue also saw a decline, down 4% to $609.5 million, impacted by a 17% drop in license and other revenue, although subscription revenue grew by 11%. The company is in the midst of a strategic transition towards a subscription-based business model, which is affecting short-term financial results. Despite the quarterly loss, Autodesk maintained a strong cash position, ending the period with $1,473.1 million in cash and cash equivalents and substantial marketable securities. The six-month period ending July 31, 2015, also resulted in a net loss of $216.4 million, compared to a net income of $59.6 million in the same period last year, again heavily influenced by the aforementioned tax provision. Total net revenue for the six months increased slightly by 2% to $1,256.0 million, with subscription revenue up 13% and license revenue down 7%. The company's operational expenses increased, contributing to the significant decrease in income from operations for both the quarter and year-to-date periods. Investors should monitor the progress of the business model transition and its impact on future revenue recognition and profitability.

Financial Highlights

50 data points
Beta

Revenue

$609.50M

84.7% Gross Margin

Net Income

-$268.60M

-44.1% Net Margin

EPS (Diluted)

$-1.18

Total Assets

$5.34B

Cash & Equivalents

$1.47B

Free Cash Flow

$59.90M

Financial Statements
Beta
Revenue$609.50M
Cost of Revenue$93.00M
Gross Profit$516.50M
R&D Expenses$193.10M
Operating Expenses$512.20M
Operating Income$4.30M
Net Income-$268.60M
EPS (Basic)$-1.18
EPS (Diluted)$-1.18
Shares Outstanding (Basic)227.00M
Shares Outstanding (Diluted)227.00M

Key Highlights

  • 1Net loss of $235.5 million for the three months ended July 31, 2015, a significant decline from the $31.3 million net income in the prior year.
  • 2A substantial $205.3 million discrete tax expense was recognized due to the establishment of a valuation allowance against U.S. deferred tax assets.
  • 3Total net revenue decreased by 4% to $609.5 million for the quarter, primarily due to a 17% decline in license and other revenue.
  • 4Subscription revenue showed strength, increasing by 11% to $319.0 million, indicating progress in the shift towards recurring revenue models.
  • 5Operating expenses increased by 3% year-over-year, impacting profitability and contributing to the decrease in income from operations.
  • 6The company ended the period with a strong liquidity position, holding $1,473.1 million in cash and cash equivalents.
  • 7Autodesk is actively transitioning to a subscription-based business model, which is expected to impact near-term financial results but provide more predictable revenue over the long term.

Frequently Asked Questions

The substantial net loss of $235.5 million for the three months ended July 31, 2015, was primarily driven by a $205.3 million discrete tax expense. This expense was incurred to establish a valuation allowance against the company's U.S. federal and state deferred tax assets, reflecting recent cumulative losses in the U.S. and the ongoing business model transition.

The transition to a subscription-based business model is leading to a shift in revenue recognition. While subscription revenue is growing, the decline in upfront perpetual license revenue, coupled with increased operating expenses related to supporting this transition, has negatively impacted short-term profitability. Over time, Autodesk expects this model to provide more predictable revenue and customer value.

The company provided guidance for Q3 FY16 expecting revenue between $580-$600 million and a GAAP EPS loss of ($0.23) to ($0.18). For the full fiscal year 2016, they guided for billings growth of 2-4% (9-11% constant currency) and GAAP EPS loss of ($1.39) to ($1.27). The near-term outlook indicates continued pressure on GAAP profitability due to the business model transition and associated expenses, with a focus on driving subscription growth for long-term financial health.

The increase in deferred revenue, particularly deferred subscription revenue, is a direct consequence of the shift towards subscription and maintenance contracts. These revenues are recognized over the life of the contract, meaning that upfront payments are received before revenue is fully recognized. This growing deferred revenue balance signals a healthy pipeline of future recognized revenue, supporting the company's recurring revenue strategy.