Autodesk First Quarter Results Driven by Strong Subscription Additions
Public Company Information:
NASDAQ:
ADSK
SAN RAFAEL, Calif.—(BUSINESS WIRE)—Autodesk, Inc. (NASDAQ: ADSK) reported its financial results for the first quarter of fiscal 2017 today.
First Quarter Fiscal 2017 Highlights:
- Total subscriptions rose by 132,000 from the fourth quarter of fiscal 2016 to reach 2.71 million by the end of the first quarter. New model subscriptions increased by 140,000 from the previous quarter, reaching 567,000.
- Total annualized recurring revenue (ARR) stood at $1.44 billion, marking a 9% increase compared to the same period last year, and a 12% rise on a constant currency basis. New model ARR reached $308 million, showing a 71% increase compared to the prior year, and 76% growth on a constant currency basis.
- Deferred revenue climbed by 32% to $1.52 billion, compared to $1.15 billion in the first quarter of the previous year.
- Revenue came in at $512 million, down 21% from the first quarter last year as reported, and a 17% drop on a constant currency basis. During Autodesk's business model transition, revenue is negatively impacted as more revenue is recognized ratably instead of upfront, and new offerings typically have a lower initial purchase price.
- Total GAAP spending (cost of revenue plus operating expenses) was $667 million, up 7% from the first quarter last year. A $52 million charge for a previously announced restructuring was recorded in the first quarter of fiscal 2017.
- Total non-GAAP spending amounted to $539 million, down 2% 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 $(0.77). GAAP diluted net income per share was $0.08 in the first quarter last year.
- Non-GAAP diluted net loss per share was $(0.10), compared to non-GAAP diluted net income per share of $0.30 in the first quarter last year.
"We had a strong first quarter, building on the momentum from last quarter and setting a solid foundation for the fiscal year," said Carl Bass, Autodesk president and CEO. "Our customers and partners continue to embrace Autodesk's shift to a subscription-based business model and cloud-based software solutions. We remain focused on controlling costs while investing in the transition. We're finding a healthy balance in achieving both short-term and long-term objectives."
First Quarter Operational Overview:
"Our first quarter results showcase the progress we're making with our business model transformation," said Scott Herren, Autodesk CFO. "We saw excellent subscription growth for the quarter, along with robust increases in new model ARR and deferred revenue. Revenue decreased as anticipated, while recurring revenue surged to 70% of total revenue."
Total subscriptions reached 2.71 million, increasing by 132,000 from the fourth quarter of fiscal 2016. Among these, new model subscriptions (product subscriptions, enterprise flexible licenses, and cloud subscriptions) totaled 567,000, rising by 140,000. The growth in new model subscriptions was primarily driven by product subscriptions. Maintenance subscriptions stood at 2.14 million, decreasing by 8,000 from the fourth quarter of fiscal 2016.
Total ARR for the first quarter increased by 9% to $1.44 billion compared to the first quarter last year as reported, and by 12% on a constant currency basis. New model ARR reached $308 million, growing by 71% compared to the first quarter last year as reported, and 76% on a constant currency basis. Maintenance ARR was $1.13 billion, declining by 1% compared to the first quarter last year as reported, and rising by 2% on a constant currency basis. Recurring revenue accounted for 70% of total revenue in the first quarter, compared to 51% in the first quarter last year.
As a reminder, during the business model transition, revenue has been and will continue to be negatively affected as more revenue is recognized over time rather than upfront, and new product offerings usually have a lower initial purchase price. As part of the business model transition, Autodesk stopped selling new perpetual licenses for most individual products at the end of the fourth quarter of fiscal 2016.
Revenue in the Americas was $218 million, down 11% compared to the first quarter last year as reported, and 10% on a constant currency basis. EMEA revenue was $203 million, dropping 17% compared to the first quarter last year as reported, and 11% on a constant currency basis. Revenue in APAC was $92 million, falling 42% compared to the first quarter last year as reported, and 39% on a constant currency basis.
Revenue from our Architecture, Engineering and Construction (AEC) business segment was $219 million, down 8% compared to the first quarter last year. Revenue from our Manufacturing business segment was $158 million, decreasing 14% compared to the first quarter last year. Revenue from our Platform Solutions and Emerging Business (PSEB) segment was $100 million, declining 46% compared to the first quarter last year. Revenue from our Media and Entertainment (M&E) business segment was $35 million, falling 12% compared to the first quarter last year.
Business Outlook:
The following are forward-looking statements based on current expectations and assumptions, and involve risks and uncertainties some of which are outlined below under “Safe Harbor.†Autodesk’s business outlook for the second quarter and full year fiscal 2017 assumes, among other things, a continuation of the current economic environment and foreign exchange currency rate environment. A reconciliation between the fiscal 2017 GAAP and non-GAAP estimates is provided below or in the tables following this press release.
Second Quarter Fiscal 2017 Guidance:
| Q2 FY17 Guidance Metrics | Q2 FY17 (ending July 31, 2016) |
|--------------------------|--------------------------------|
| Revenue (in millions) | $500 – $520 |
| EPS GAAP | ($0.73) – ($0.63) |
| EPS non-GAAP (1) | ($0.18) – ($0.11) |
(1) Non-GAAP earnings per diluted share exclude $0.26 related to stock-based compensation expense, between $0.12 and $0.09 related to GAAP-only tax charges, $0.09 related to restructuring charges and other facility exit costs, and $0.08 for the amortization of acquisition-related intangibles.
Full Year Fiscal 2017 Guidance:
| FY17 Guidance Metrics | FY17 (ending January 31, 2017) |
|---------------------------|--------------------------------|
| Revenue (in millions) (1) | $1,950 – $2,050 |
| GAAP spend growth | 3% – 4% |
| Non-GAAP spend growth (2) | (1%) – flat |
| EPS GAAP | ($3.25) – ($2.87) |
| EPS non-GAAP (3) | ($0.95) – ($0.70) |
| Net subscription additions| 475,000 – 525,000 |
(1) Excluding the impact of foreign currency rates and hedge gains/losses, revenue guidance would be $1,995 – $2,095 million.
(2) Non-GAAP spend excludes $229 million related to stock-based compensation expense, $88 million related to restructuring charges and other facility exit costs, and $66 million for the amortization of acquisition-related intangibles.
(3) Non-GAAP earnings per diluted share exclude $1.02 related to stock-based compensation expense, between $0.59 and $0.46 of GAAP-only tax charges, $0.39 related to restructuring charges and other facility exit costs, and $0.30 for the amortization of acquisition-related intangibles.
The second quarter and full year fiscal 2017 outlook assume a projected annual effective tax rate of (11)% and 26% for GAAP and non-GAAP results, respectively. Assumptions for the annual effective tax rate are regularly evaluated and may be changed based on shifts in the projected geographic mix of earnings. At this stage of the business model transition, small changes in geographic profitability significantly impact the 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/investors. 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/investors. 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. "New Model ARR" captures ARR relating to new model subscription offerings. Recurring revenue acquired with the acquisition of a business may cause variability in the comparison of this calculation.
ARR is currently our key performance metric 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 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. Our constant currency methodology removes all hedging gains and losses from the calculation and applies a constant exchange rate across periods.
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 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, statements regarding the impact of our restructuring activities, 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; 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 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, 2016, 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 helps people imagine, design and create a better world. Everyone—from design professionals, engineers and architects to digital artists, students and hobbyists—uses Autodesk software to unlock their creativity and solve important challenges. For more information visit autodesk.com or follow @autodesk.
© 2016 Autodesk, Inc. All rights reserved.
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