Broad-based Strength Across All Subscription Types and Geographies

(PRNewswire) —   Autodesk, Inc. (NASDAQ: ADSK) today reported financial results for the first quarter of fiscal 2018.

First Quarter Fiscal 2018

• Subscription plan (formerly known as new model) subscriptions increased 233,000 from the fourth quarter of fiscal 2017 to 1.32 million at the end of the first quarter. 
• Total subscriptions increased 186,000 from the fourth quarter of fiscal 2017 to 3.29 million at the end of the first quarter.
• Subscription plan annualized recurring revenue (ARR) was $692 million and increased 103 percent compared to the first quarter last year as reported, and 105 percent on a constant currency basis. 
• Total ARR was $1.74 billion, an increase of 18 percent compared to the first quarter last year as reported, and 20 percent on a constant currency basis. 
• Deferred revenue increased 18 percent to $1.80 billion, compared to $1.52 billion in the first quarter last year.
• Revenue was $486 million, a decrease of 5 percent compared to the first quarter last year as reported, and 4 percent on a constant currency basis.  During Autodesk's business model transition, revenue is negatively impacted as more revenue is recognized ratably rather than up front and as new offerings generally have a lower initial purchase price.
• Total GAAP spend (cost of revenue plus operating expenses) was $605 million, a decrease of 9 percent compared to the first quarter last year.
• Total non-GAAP spend was $525 million, a decrease of 3 percent compared to the first quarter last year.  A reconciliation of GAAP to non-GAAP results is provided in the accompanying tables.
• GAAP diluted net loss per share was $(0.59), compared to GAAP diluted net loss per share of $(0.75) in the first quarter last year.
• Non-GAAP diluted net loss per share was $(0.16), compared to non-GAAP diluted net loss per share of $(0.10) in the first quarter last year.

"Broad-based strength across all subscription types and geographies led to another record quarter for total subscription additions and a fantastic start of the new fiscal year," said Amar Hanspal, Autodesk co-CEO and chief product officer.  "Customers continue to embrace the subscription model, and we're expanding our market opportunity with continued momentum of our cloud-based offerings, such as BIM 360 and Fusion 360."

"We're executing well and making significant progress on our business model transition as evidenced by our first quarter results," said Andrew Anagnost, Autodesk co-CEO and chief marketing officer.  "We're starting the year from a position of strength and are excited to kick off the next phase of our transition when we offer our maintenance customers a simple, cost effective path to product subscription starting next month."

"Recurring revenue jumped to 90 percent of total revenue, which is a significant milestone considering it was less than half that before we started the move to subscription," said Scott Herren, Autodesk chief financial officer.  "Strong transition-related metrics coupled with better than expected revenue and diligent cost control led to a terrific first quarter and provide us with confidence in achieving our transition-related targets.  I also want to draw attention to our new format for revenue reporting, which greatly improves transparency."

First Quarter Operational Overview

Subscription plan subscriptions (product, enterprise flexible license, and cloud) were 1.32 million, a net increase of 233,000 from the fourth quarter of fiscal 2017, led by product subscriptions.  Maintenance plan subscriptions were 1.97 million, a net decrease of 47,000 from the fourth quarter of fiscal 2017.  Total subscriptions were 3.29 million, a net increase of 186,000 from the fourth quarter of fiscal 2017.   

To provide more meaningful information as to the performance of different categories of product and services and improve transparency, we are now presenting our revenue across three categories:  subscription revenue, maintenance revenue, and license and other revenue (all are defined below in the glossary of terms).  Consistent with these revisions, cost of revenue classification has been adjusted to show cost of subscription and maintenance revenue and amortization of developed technology separately.  Cost of license and other revenue will continue to be presented as separate line item.  Amortization of developed technology is now presented separately to be consistent with the presentation of the amortization of purchased intangibles within operating expenses. In this new format, quarterly subscription revenue times four equals subscription ARR, and quarterly maintenance revenue times four equals maintenance ARR.  This change results in additional small legacy products in the ARR calculation.  As a result, historical figures for ARR have been adjusted to conform with the current presentation.

Subscription plan ARR was $692 million and increased 103 percent compared to the first quarter last year as reported, and 105 percent on a constant currency basis.  Maintenance plan ARR was $1.05 billion and decreased 7 percent compared to the first quarter last year as reported, and 6 percent on a constant currency basis.  Total ARR for the first quarter increased 18 percent to $1.74 billion compared to the first quarter last year as reported, and 20 percent on a constant currency basis.  Similar to the prior two quarters, first quarter total ARR growth was impacted by the allocation of existing marketing development funds (MDF).  MDF is recorded as contra revenue and historically was predominantly allocated against license revenue.  With the end of sale of perpetual licenses, MDF is now allocated against recurring revenue, negatively impacting subscription plan ARR growth by 6 percentage points, maintenance plan ARR growth by 2 percentage points, and total ARR growth by 2 percentage points.

Total recurring revenue in the first quarter was 90 percent of total revenue compared to 72 percent of total revenue in the first quarter last year.

As a reminder, during the business model transition, revenue is negatively impacted as more revenue is recognized ratably rather than up front and as new product offerings generally have a lower initial purchase price.  As part of the business model transition, Autodesk discontinued new perpetual license sales for most individual products at the end of the fourth quarter of fiscal 2016 and for suites at the end of the second quarter of fiscal 2017.

Revenue in the Americas was $210 million, a decrease of 3 percent compared to the first quarter last year as reported, and 4 percent on a constant currency basis.  Revenue in EMEA was $190 million, a decrease of 6 percent compared to the first quarter last year as reported, and 3 percent on a constant currency basis.  Revenue in APAC was $86 million, a decrease of 6 percent compared to the first quarter last year as reported, and on a constant currency basis.

Business Outlook

The following are forward-looking statements based on current expectations and assumptions, and involve risks and uncertainties some of which are set forth below under "Safe Harbor Statement."  Autodesk's business outlook for the second quarter and full year fiscal 2018 assumes, among other things, a continuation of the current economic environment and foreign exchange currency rate environment.  A reconciliation between the fiscal 2018 GAAP and non-GAAP estimates is provided below or in the tables following this press release.

Second Quarter Fiscal 2018

Full Year Fiscal 2018

The second quarter and full year fiscal 2018 outlook assume a projected annual effective tax rate of (13) percent and 26 percent for GAAP and non-GAAP results, respectively.  Assumptions for the annual effective tax rate are regularly evaluated and may change based on the projected geographic mix of earnings.  At this stage of the business model transition, small shifts in geographic profitability significantly impact the annual effective tax rate.

Earnings Conference Call and Webcast

Autodesk will host its first quarter conference call today at 5:00 p.m. ET. The live broadcast can be accessed at http://www.autodesk.com/investor. Supplemental financial information and prepared remarks for the conference call will be posted to the investor relations section of Autodesk's website simultaneously with this press release.

A replay of the broadcast will be available at 7:00 p.m. ET at http://www.autodesk.com/investor. This replay will be maintained on Autodesk's website for at least 12 months.

Glossary of Terms

Annualized Recurring Revenue (ARR): Represents the annualized value of our average monthly recurring revenue for the preceding three months. "Maintenance plan ARR" captures ARR relating to traditional maintenance attached to perpetual licenses. "Subscription plan ARR" captures ARR relating to term-based product subscriptions, cloud service offerings, and flexible enterprise business arrangements. Refer to the definition of recurring revenue below for more details on what is included within ARR. Recurring revenue acquired with the acquisition of a business may cause variability in the comparison of this calculation.

ARR is currently one of our key performance metrics to assess the health and trajectory of our business. ARR should be viewed independently of revenue and deferred revenue as ARR is a performance metric and is not intended to be combined with any of these items.

Constant Currency (CC) Growth Rates: We calculate constant currency growth rates by (i) applying the applicable prior period exchange rates to current period results and (ii) excluding any gains or losses from foreign currency hedge contracts that are reported in the current and comparative periods.

Flexible Enterprise Business Agreements (EBA): These represent programs providing enterprise customers with token-based access or a fixed maximum number of seats to a broad pool of Autodesk products over a defined contract term.

License and Other Revenue: Represents (1) perpetual license revenue and (2) other revenue. Perpetual license revenue includes software license revenue from the sale of perpetual licenses, and Creative Finishing. Other revenue includes revenue such as standalone consulting and training, and is recognized over time as the services are performed.

Maintenance Plan: Our maintenance plans provide our customers with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under our maintenance plan, customers are eligible to receive unspecified upgrades when and if available, and technical support. We recognize maintenance revenue over the term of the agreements, generally between one and three years.

Recurring Revenue: Consists of the revenue for the period from our traditional maintenance plans and revenue from our subscription plan offerings. It excludes subscription revenue related to consumer product offerings, select Creative Finishing product offerings, education offerings, and third party products. Recurring revenue acquired with the acquisition of a business is captured when total subscriptions are captured in our systems and may cause variability in the comparison of this calculation. 

Subscription Plan Offerings (formerly titled New Model): Comprises our term-based product subscriptions, cloud service offerings, and flexible enterprise business agreements.

Subscription Revenue: Includes subscription fees from term-based product subscriptions, flexible enterprise business arrangements and all other services as part of a bundled subscription agreement accounted for as a single unit of accounting. (i.e. cloud services, maintenance, and consulting).

Total Subscriptions: Total Subscriptions consists of subscriptions from our maintenance plans and subscription plan offerings that are active and paid as of the quarter end date.  For certain cloud service offerings and flexible enterprise business agreements, subscriptions represent the monthly average activity reported within the last three months of the quarter end date.  Total subscriptions do not include education offerings, consumer product offerings, select Creative Finishing product offerings, Autodesk Buzzsaw, Autodesk Constructware, and third party products.  Subscriptions acquired with the acquisition of a business are captured once the data conforms to our subscription count methodology and when added, may cause variability in the comparison of this calculation.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements in the paragraphs under "Business Outlook" above, other statements about our short-term and long-term goals, statements regarding the impacts and results of our business model transition, expectations regarding the transition of product offerings to subscription and acceptance by our customers and partners of subscriptions, expectations for subscriptions and ARR, statements about the expansion of our market opportunity; and other statements regarding our strategies, market and product positions, performance, and results. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: failure to achieve our revenue and profitability objectives; failure to successfully manage transitions to new business models and markets, including the introduction of additional ratable revenue streams and our continuing efforts to attract customers to our cloud-based offerings and expenses related to the transition of our business model; difficulty in predicting revenue from new businesses and the potential impact on our financial results from changes in our business models; general market, political, economic, and business conditions; any imposition of new tariffs or trade barriers; the impact of non-cash charges on our financial results; fluctuation in foreign currency exchange rates; the success of our foreign currency hedging program; failure to control our expenses; our performance in particular geographies, including emerging economies; the ability of governments around the world to meet their financial and debt obligations, and finance infrastructure projects; weak or negative growth in the industries we serve; slowing momentum in subscription billings or revenues; difficulties encountered in integrating new or acquired businesses and technologies; the inability to identify and realize the anticipated benefits of acquisitions; the financial and business condition of our reseller and distribution channels; dependence on and the timing of large transactions; failure to achieve sufficient sell-through in our channels for new or existing products; pricing pressure; unexpected fluctuations in our annual effective tax rate; the timing and degree of expected investments in growth and efficiency opportunities; changes in the timing of product releases and retirements; and any unanticipated accounting charges.

Further information on potential factors that could affect the financial results of Autodesk are included in Autodesk's Annual Report on Form 10-K for the fiscal year ended January 31, 2017, which is on file with the U.S. Securities and Exchange Commission.  Autodesk disclaims any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Autodesk

Autodesk makes software for people who make things. If you've ever driven a high-performance car, admired a towering skyscraper, used a smartphone, or watched a great film, chances are you've experienced what millions of Autodesk customers are doing with our software. Autodesk gives you the power to make anything. For more information visit autodesk.com or follow @autodesk.

Autodesk, AutoCAD, AutoCAD LT, BIM 360 and Fusion 360 are registered trademarks of Autodesk, Inc., and/or its subsidiaries and/or affiliates in the USA and/or other countries. All other brand names, product names or trademarks belong to their respective holders. Autodesk reserves the right to alter product and service offerings, and specifications and pricing at any time without notice, and is not responsible for typographical or graphical errors that may appear in this document.

© 2017 Autodesk, Inc. All rights reserved.

 

 

 

Autodesk, Inc.
Reconciliation of GAAP financial measures to non-GAAP financial measures
(In millions, except per share data)

To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, and non-GAAP diluted shares used in per share calculation. These non-GAAP financial measures are adjusted to exclude certain costs, expenses, gains and losses, including stock-based compensation expense, CEO transition costs, restructuring (benefits) charges and other facility exit costs, amortization of developed technology, amortization of purchased intangibles, gain and loss on strategic investments and dispositions, and related income tax expenses. See our reconciliation of GAAP financial measures to non-GAAP financial measures herein.  We believe these exclusions are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results.  These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of Autodesk's underlying operational results and trends and our marketplace performance.  For example, non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results.  In addition, these non-GAAP financial measures are among the indicators management uses as a basis for our planning and forecasting of future periods.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.  The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results.  The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP in the United States.  Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

The following table shows Autodesk's non-GAAP results reconciled to GAAP results included in this release.

 

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SOURCE Autodesk, Inc.