10-QPeriod: Q1 FY2017

Autodesk, Inc. Quarterly Report for Q1 Ended Apr 30, 2016

Filed June 6, 2016For Securities:ADSK

Summary

Autodesk, Inc. reported a net loss of $173.0 million for the first quarter of fiscal year 2017, a significant decrease from a net income of $19.1 million in the same period last year. This decline is primarily attributed to a substantial decrease in license and other revenue (-43%) due to the discontinuation of most individual perpetual software licenses and an increase in operating expenses (+8%), largely driven by restructuring charges. Despite the net loss, the company saw a modest 2% increase in subscription revenue, driven by new model subscriptions, and operating cash flow improved significantly year-over-year. The company is actively transitioning to a subscription-based business model, which is impacting short-term financial results but is expected to drive long-term growth and predictability. Key financial shifts include a substantial drop in total net revenue by 21% to $511.9 million, compared to $646.5 million in the prior year's quarter. This transition also led to a reported operating loss of $155.0 million, a stark contrast to the $21.5 million income from operations in the prior year. Investors should note the ongoing shift towards recurring revenue streams, with subscription revenue becoming a larger portion of the total, and the company's focus on Annualized Recurring Revenue (ARR) and total subscriptions as key performance indicators for assessing business momentum.

Financial Highlights

49 data points
Beta

Revenue

$511.90M

81.9% Gross Margin

Net Income

-$167.70M

-32.8% Net Margin

EPS (Diluted)

$-0.75

Total Assets

$5.21B

Cash & Equivalents

$1.22B

Free Cash Flow

$142.10M

Financial Statements
Beta
Revenue$511.90M
Cost of Revenue$92.40M
Gross Profit$419.50M
R&D Expenses$193.50M
Operating Expenses$569.20M
Operating Income-$149.70M
Net Income-$167.70M
EPS (Basic)$-0.75
EPS (Diluted)$-0.75
Shares Outstanding (Basic)224.40M
Shares Outstanding (Diluted)224.40M

Key Highlights

  • 1Reported a net loss of $173.0 million for the quarter, a significant decline from a net income of $19.1 million in the prior year period.
  • 2Total net revenue decreased by 21% to $511.9 million, largely due to the discontinuation of perpetual license sales.
  • 3Subscription revenue increased by 2% to $326.0 million, with new model subscriptions growing by 34%.
  • 4Operating expenses increased by 8% to $574.4 million, primarily due to $52.3 million in restructuring charges and other facility exit costs.
  • 5Operating cash flow significantly improved, increasing by 90% to $164.4 million compared to $86.5 million in the prior year.
  • 6The company is executing a strategic transition away from perpetual licenses to a subscription-based business model, impacting short-term financial performance but aiming for long-term recurring revenue growth.
  • 7Annualized Recurring Revenue (ARR) increased by 4% to $1.44 billion, indicating continued growth in the subscription base.

Frequently Asked Questions

The substantial net loss of $173.0 million was primarily driven by a significant decline in license and other revenue due to the company's strategic decision to discontinue selling most individual perpetual software licenses. Additionally, operating expenses increased due to $52.3 million in restructuring charges and other facility exit costs associated with the transition to a subscription-based business model.

The transition to a subscription model is leading to a decrease in upfront revenue from perpetual licenses, which is reflected in the overall decline in total net revenue. However, subscription revenue is growing, up 2% year-over-year, fueled by a 34% increase in new model subscriptions. While this shift impacts short-term revenue recognition, it is expected to build a more predictable and growing recurring revenue base over the long term, as indicated by the increase in Annualized Recurring Revenue (ARR).

Autodesk is forecasting revenue between $500-$520 million and a GAAP diluted EPS loss of ($0.73) to ($0.63) for the second quarter of fiscal year 2017. For the full fiscal year 2017, they project revenue between $1,950-$2,050 million. The company acknowledges that the business model transition will continue to impact financial results in the short term but anticipates it will expand the customer base and drive long-term revenue growth.

Total assets decreased to $5.21 billion from $5.52 billion at the previous fiscal year-end. Cash and cash equivalents decreased to $1.22 billion from $1.35 billion. Accounts receivable saw a substantial decrease to $256.4 million from $653.3 million, while deferred revenue increased slightly to $1.09 billion from $1.07 billion. Total stockholders' equity decreased to $1.44 billion from $1.62 billion.