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Autodesk Delivers Q1 Upside Surprise

May 19, 2017

Autodesk reported financial results for the first quarter of fiscal 2018. The firm noted an adjusted loss of 16 cents a share on revenue of $486 million verses a loss of 10 cents a share on sales of $512 million a last year. Investors looked for a loss of 24 cents a share excluding items on sales of $470.4 million.

"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.

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.

Business Outlook

Second Quarter Fiscal 2018

Q2 FY18 Guidance Metrics

Q2 FY18 (ending July 31, 2017)

Revenue (in millions)

$488 - $500

EPS GAAP

($0.66) - ($0.60)

EPS non-GAAP (1)

($0.18) - ($0.14)

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(1) Non-GAAP earnings per diluted share excludes $0.28 related to stock-based compensation expense, between $0.15 and $0.13 related to GAAP-only tax charges, $0.04 for the amortization of acquisition-related intangibles, and $0.01 related to CEO transition costs.

Full Year Fiscal 2018

FY18 Guidance Metrics

FY18 (ending January 31, 2018)

Revenue (in millions) (1)

$2,000 - $2,050

GAAP spend growth (cost of revenue plus operating expenses)

Approx. (2%)

Non-GAAP spend growth (cost of revenue plus operating expenses) (2)

Approx. flat

EPS GAAP

($2.61) - ($2.35)

EPS non-GAAP (3)

($0.73) - ($0.56)

Net subscription additions

600,000 - 650,000

Total ARR

24% - 26%

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