Strong Annualized Recurring Revenue (ARR) Growth Highlights Autodesk Fourth Quarter Results

Fourth Quarter Fiscal 2018

• Subscription plan Annual Recurring Revenue (ARR) reached $1.18 billion, showing a 106% increase compared to the same period last year, and 105% on a constant currency basis.
• Total ARR was $2.05 billion, up 25% from the previous year, both reported and on a constant currency basis.
• Subscription plan subscriptions increased by 371,000 from the third quarter of fiscal 2018 to 2.27 million at the end of the fourth quarter. This growth was supported by 168,000 maintenance subscribers who transitioned to product subscriptions under the maintenance-to-subscription program.
• Total subscriptions rose by 127,000 from the third quarter of fiscal 2018 to 3.72 million at the end of the fourth quarter.
• Deferred revenue was $1.96 billion, an increase of 9% compared to the fourth quarter last year. Unbilled deferred revenue at the end of the fourth quarter of fiscal 2018 was $326 million. Total deferred revenue (deferred revenue plus unbilled deferred revenue) was $2.28 billion, an increase of approximately 25% compared to the fourth quarter last year.
• Revenue amounted to $554 million, reflecting a 16% increase compared to the fourth quarter last year, both reported and on a constant currency basis.
• Total GAAP spending (cost of revenue plus operating expenses) was $736 million, an increase of 14% compared to the fourth quarter last year.
• Total non-GAAP spending was $571 million, an increase of 2% compared to the fourth quarter last year. A reconciliation of GAAP to non-GAAP results is provided in the accompanying tables.
• GAAP diluted net loss per share was $(0.79), compared to $(0.78) in the fourth quarter last year.
• Non-GAAP diluted net loss per share was $(0.09), compared to $(0.28) in the fourth quarter last year.

Fourth Quarter Operational Overview

Subscription plan ARR was $1.18 billion, an increase of 106% compared to the fourth quarter last year as reported, and 105% on a constant currency basis. Subscription plan ARR includes $152 million related to the maintenance-to-subscription program. Maintenance plan ARR was $879 million, a decrease of 18% compared to the fourth quarter last year as reported, and 17% on a constant currency basis. Total ARR for the fourth quarter increased 25% to $2.05 billion compared to the fourth quarter last year as reported, and on a constant currency basis.

Subscription plan subscriptions (product, EBA, and cloud) were 2.27 million, a net increase of 371,000 from the third quarter of fiscal 2018, led by new product subscriptions and 168,000 product subscriptions that migrated from maintenance plan subscriptions. Maintenance plan subscriptions were 1.45 million, a net decrease of 244,000 from the third quarter of fiscal 2018, which includes the 168,000 that migrated to product subscription. Total subscriptions were 3.72 million, a net increase of 127,000 from the third quarter of fiscal 2018.

Total recurring revenue in the fourth quarter was 93% of total revenue compared to 86% of total revenue in the fourth quarter last year.

Revenue in the Americas was $232 million, an increase of 10% compared to the fourth quarter last year. Revenue in EMEA was $221 million, an increase of 19% compared to the fourth quarter last year as reported, and 20% on a constant currency basis. Revenue in APAC was $100 million, an increase of 23% compared to the fourth quarter last year as reported, and 21% on a constant currency basis.

Financial Highlights for Fiscal 2018*

• Total ARR increased 25% as reported, and on a constant currency basis.
• Total subscriptions increased 20% to 3.72 million.
• The base of both subscription plan ARR and subscriptions surpassed the base of maintenance plan ARR and subscriptions.
• Total GAAP spend increased 1% as reported, and on a constant currency basis. Total non-GAAP spend increased 1% as reported, and was flat on a constant currency basis.
• Total deferred revenue increased approximately 25%.

*All numbers are compared to fiscal 2017.

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 first quarter and full year fiscal 2019 assumes, among other things, a continuation of the current economic environment and foreign exchange currency rate environment. A reconciliation between the fiscal 2019 GAAP and non-GAAP estimates is provided below or in the tables following this press release.

Starting with the first quarter of fiscal 2019, Autodesk is adopting the new revenue accounting standard, ASC 606.

• We will be applying the modified retrospective transition method.
• We do not believe the new standard will result in a change in timing or amount of the recognition of revenue for the majority of our product subscription offerings and enterprise agreements.
• We will be required to capitalize and amortize sales commissions under the new standard.
• We do not expect a significant impact on reported expenses for the full fiscal year, however, the timing of when we recognize the deferred commissions by quarter will vary compared to our historical seasonality.
• None of the ASC 606 impacts affect cash flow.

 

 

 

 

Tax Rates

The recent tax reform legislation in the United States will result in a lower U.S. annual effective tax rate. From a GAAP perspective, Autodesk is in a U.S. loss position related to the business model transition and the recent restructuring. Autodesk’s losses and tax credits in the U.S. have had a full valuation allowance on them since the second quarter of fiscal 2016. As a result, there is no impact from U.S. tax reform in our tax provision, other than a benefit from revaluing certain deferred tax liabilities at the lower U.S. rate. We will utilize tax attributes that have previously been fully valued to offset the one-time transition tax.

From a non-GAAP perspective, Autodesk has eliminated the impact of the transition tax and re-measurement of deferred tax assets and liabilities from our tax expense as one-time, non-recurring expenses. We are still analyzing the full impact of tax reform but are currently modeling our GAAP annual effective tax rate at (388) percent for fiscal 2019 and 21 percent for fiscal 2020. We are estimating our non-GAAP annual effective tax rate at 19 percent in fiscal 2019 and between 17 percent and 18 percent in fiscal 2020 and beyond.

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 fourth 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 subscription offerings. 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 is captured when total subscriptions are captured in our systems and 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.

Annualized Revenue Per Subscription (ARPS): Is calculated by dividing our annualized recurring revenue by the total number of subscriptions.

Billings: Total revenue plus the net change in deferred revenue from the beginning to the end of the period.

Cloud Service Offerings: Represents individual term-based offerings deployed through web browser technologies or in a hybrid software and cloud configuration. Cloud service offerings that are bundled with other product offerings are not captured as a separate cloud service offering.

Constant Currency (CC) Growth Rates: We attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates as well as eliminating hedge gains or losses recorded within the current and comparative periods. 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.

Enterprise Business Agreements (EBAs): Represents 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 plans, 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.

Product Subscription: Provide customers the most flexible, cost-effective way to access and manage 3D design, engineering, and entertainment software tools. Our product subscriptions currently represent a hybrid of desktop and SaaS functionality, which provides a device-independent, collaborative design workflow for designers and their stakeholders.

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: Comprises our term-based product subscriptions, cloud service offerings, and enterprise business agreements (EBAs). Subscriptions represent a hybrid of desktop and SaaS functionality which provides a device-independent, collaborative design workflow for designers and their stakeholders. With subscription, customers can use our software anytime, anywhere, and get access to the latest updates to previous versions.

Subscription Revenue: Includes subscription fees from term-based product subscriptions, cloud service offerings, and enterprise business agreements (EBAs) 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 Deferred Revenue: Is calculated by adding together total short term, long term, and unbilled deferred revenue.

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 enterprise business agreements (EBAs), 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.

Unbilled Deferred Revenue: Unbilled deferred revenue represents contractually stated or committed orders under multi-year billing plans for subscription, services, license and maintenance for which the associated revenue has not been recognized and the customer has not been invoiced. Unbilled deferred revenue is not included on our Consolidated Balance Sheet until invoiced to the customer.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements in the paragraphs under “Business Outlook” above, statements regarding ARR growth acceleration, other statements about our short-term and long-term targets, 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 billings, revenue, subscriptions, spend, EPS and ARR, statements regarding the impact of, and our expectations regarding, tax reform legislation and the adoption of ASC 606, 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; failure to maintain cost reductions or otherwise control our expenses; the success of our restructuring activities; 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; 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; significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the Tax Cuts and Jobs Act; 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. Our estimates as to tax rate and the impact of the Tax Cuts and Jobs Act on our business are based on current tax law, including current interpretations of the Tax Cuts and Jobs Act, and could be affected by changing interpretations of the Act, as well as additional legislation and guidance around the Act.

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 and Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2017, which are 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.

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