10-QPeriod: Q2 FY2018

Autodesk, Inc. Quarterly Report for Q2 Ended Jul 31, 2017

Filed August 31, 2017For Securities:ADSK

Summary

Autodesk, Inc. (ADSK) reported its financial results for the quarter and six months ended July 31, 2017. The company experienced a significant decline in license and other revenue, primarily due to the discontinuation of perpetual licenses, which was partially offset by a substantial increase in subscription revenue. This shift towards a subscription model is a key strategic focus, impacting revenue recognition and overall financial performance during this transition period. Despite the revenue decline, Autodesk demonstrated growth in its subscription base and Annualized Recurring Revenue (ARR), indicating positive momentum in its business model transformation. The company is actively managing its expenses and cash flow, with a focus on navigating this transition to a more predictable, recurring revenue stream. Investors should monitor the continued growth of subscription revenue and the successful execution of the business model transition as key indicators of future performance.

Financial Highlights

51 data points
Beta

Revenue

$501.80M

85.1% Gross Margin

Net Income

-$144.00M

-28.7% Net Margin

EPS (Diluted)

$-0.66

Total Assets

$4.35B

Cash & Equivalents

$1.17B

Free Cash Flow

-$90.30M

Financial Statements
Beta
Revenue$501.80M
Cost of Revenue$74.60M
Gross Profit$427.20M
R&D Expenses$193.80M
Operating Expenses$534.80M
Operating Income-$107.60M
Net Income-$144.00M
EPS (Basic)$-0.66
EPS (Diluted)$-0.66
Shares Outstanding (Basic)219.50M
Shares Outstanding (Diluted)219.50M

Key Highlights

  • 1Net revenue decreased by 9% for the three months ended July 31, 2017, compared to the prior year, driven by a significant 74% drop in license and other revenue, while subscription revenue surged by 93%.
  • 2For the six months ended July 31, 2017, net revenue declined 7%, with license and other revenue down 70% and subscription revenue up 97%, reflecting the ongoing business model transition.
  • 3Total subscriptions increased by 5% sequentially to 3.44 million, with subscription plan subscriptions growing by 20% and maintenance plan subscriptions declining by 6%.
  • 4Total Annualized Recurring Revenue (ARR) grew 5% sequentially to $1.83 billion, driven by a 13% increase in subscription plan ARR, partially offset by a 1% decrease in maintenance plan ARR.
  • 5The company reported a net loss of $144.0 million for the three months ended July 31, 2017, compared to a net loss of $98.2 million in the prior year, impacted by the business model transition and increased operating expenses.
  • 6Cash used in operating activities was $27.3 million for the six months ended July 31, 2017, a significant decrease from $146.4 million cash provided by operations in the prior year period.
  • 7Autodesk completed a $500 million issuance of 3.5% notes due 2027 and used proceeds to repay $400 million of existing debt.

Frequently Asked Questions

The substantial decrease in 'License and Other Revenue' is primarily attributed to Autodesk's strategic decision to discontinue the sale of new perpetual licenses for most of its software products, effective February 1, 2016, and for suites effective August 1, 2016. This aligns with the company's transition to a subscription-based business model.

The transition to a subscription model leads to more revenue being recognized ratably over the contract term, rather than upfront as with perpetual licenses. This impacts the timing of revenue recognition, generally leading to lower initial purchase prices for new offerings, which can affect reported revenue, billings, and cash flow from operations in the short term. However, it is designed to build a more predictable recurring revenue stream.

Annualized Recurring Revenue (ARR) represents the annualized value of the company's average monthly recurring revenue over the preceding three months. It is a key performance metric used to assess the health and trajectory of the business, particularly during the business model transition. It provides insight into the predictable revenue base, separating it from upfront license sales and deferred revenue.

The significant increase in Subscription Plan ARR (up 13% sequentially) indicates strong customer adoption of Autodesk's subscription offerings, including product subscriptions and cloud services. This growth is a positive sign for the success of the company's business model transition towards recurring revenue streams.