10-QPeriod: Q3 FY2020

Autodesk, Inc. Quarterly Report for Q3 Ended Oct 31, 2019

Filed December 5, 2019For Securities:ADSK

Summary

Autodesk's third quarter fiscal year 2020 (ending October 31, 2019) filing shows a significant rebound in financial performance compared to the prior year. Total net revenue increased by 28% year-over-year to $842.7 million, driven primarily by a strong 49% surge in subscription revenue. This shift towards subscriptions continues to be a key strategic focus, as evidenced by the substantial decline in maintenance revenue due to customers migrating to subscription plans. The company also reported healthy growth in Annualized Recurring Revenue (ARR), which increased by 17% year-over-year to $3.2 billion, with subscription plan ARR showing a robust 30% increase. Operationally, the company returned to profitability, reporting a net income of $66.7 million for the quarter, a significant improvement from a net loss of $23.7 million in the same period last year. This profitability was supported by disciplined expense management, although operating expenses did increase year-over-year, largely due to investments in growth initiatives and acquisitions. The company maintained a strong cash position and generated substantial cash flow from operations, indicating solid financial health and the ability to fund ongoing initiatives and shareholder returns.

Financial Highlights

50 data points
Beta

Revenue

$842.70M

90.6% Gross Margin

Net Income

$66.70M

7.9% Net Margin

EPS (Diluted)

$0.30

Total Assets

$5.04B

Cash & Equivalents

$956.20M

Free Cash Flow

$266.70M

Financial Statements
Beta
Revenue$842.70M
Cost of Revenue$79.50M
Gross Profit$763.20M
R&D Expenses$213.00M
Operating Expenses$652.60M
Operating Income$110.60M
Net Income$66.70M
EPS (Basic)$0.30
EPS (Diluted)$0.30
Shares Outstanding (Basic)219.70M
Shares Outstanding (Diluted)221.90M

Key Highlights

  • 1Total net revenue surged 28% year-over-year to $842.7 million, driven by a 49% increase in subscription revenue.
  • 2Net income of $66.7 million represents a significant turnaround from a net loss of $23.7 million in the prior year's quarter.
  • 3Annualized Recurring Revenue (ARR) reached $3.2 billion, a 17% increase year-over-year, with subscription plan ARR up 30%.
  • 4Gross profit increased by 29.7% to $763.2 million, with gross margin improving to 91% from 89% year-over-year.
  • 5Operating expenses increased by 14% to $652.6 million, reflecting investments in growth and acquisitions.
  • 6Cash flow from operating activities for the nine-month period was strong at $716.9 million, up from $65.6 million in the prior year.
  • 7Deferred revenue increased by 16% year-over-year to $2.42 billion, indicating strong future revenue potential.

Frequently Asked Questions

The increase in subscription revenue is primarily driven by the ongoing migration of customers from maintenance plans to subscription plans (M2S program), higher renewal rates for existing product subscriptions, growth in new product subscriptions, and increased adoption of cloud service offerings, which were also bolstered by recent acquisitions.

Profitability has significantly improved due to the substantial increase in net revenue, particularly from high-margin subscription services. This was coupled with continued efforts in managing operating expenses, although the company is investing in growth initiatives and acquisitions which led to an overall increase in operating expenses year-over-year. The shift to a subscription model generally carries higher margins and contributes to improved profitability over time.

The increase in deferred revenue ($2.42 billion) and remaining performance obligations ($2.97 billion) indicates a strong pipeline of future revenue. Deferred revenue represents payments received from customers for services not yet rendered, and remaining performance obligations represent the total contract value of unfulfilled obligations. These metrics suggest sustained business momentum and provide visibility into future revenue streams.

Recent acquisitions, such as Assemble Systems, PlanGrid, and BuildingConnected, have contributed to revenue growth, particularly in the Architecture, Engineering, and Construction (AEC) segment, and the expansion of cloud service offerings. While these acquisitions drive growth, they also contribute to increased operating expenses, including amortization of acquired intangibles and stock-based compensation expense.