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Strong Annualized Recurring Revenue (ARR) Growth Highlights Autodesk Fourth Quarter Results
SAN RAFAEL, Calif., March 6, 2018 /PRNewswire/ — Autodesk, Inc. (NASDAQ: ADSK) announced its financial results for the fourth quarter of fiscal 2018 today.
[Image: PRNewsfoto/Autodesk, Inc.]
**Fourth Quarter Fiscal 2018 Highlights**
- Subscription plan Annual Recurring Revenue (ARR) reached $1.18 billion, a 106% increase compared to the same period last year, and 105% on a constant currency basis.
- Total ARR was $2.05 billion, reflecting a 25% growth from the previous year's fourth quarter, both reported and on a constant currency basis.
- Subscription plan subscriptions increased by 371,000 from the third quarter of fiscal 2018, reaching 2.27 million at the end of the fourth quarter. This growth was driven by 168,000 maintenance subscribers who transitioned to product subscriptions under the maintenance-to-subscription program.
- Total subscriptions rose by 127,000 to 3.72 million in the fourth quarter.
- Deferred revenue totaled $1.96 billion, an increase of 9% compared to the previous year's fourth quarter. Unbilled deferred revenue stood at $326 million, with total deferred revenue (including unbilled) reaching $2.28 billion, up approximately 25% year-over-year.
- Revenue amounted to $554 million, a 16% increase compared to the fourth quarter of the prior year, both reported and on a constant currency basis.
- Total GAAP spending was $736 million, an increase of 14% compared to the same period last year.
- Non-GAAP spending was $571 million, representing a 2% increase over the previous year's fourth quarter. A reconciliation between GAAP and non-GAAP results is provided in the accompanying tables.
- GAAP diluted net loss per share was $(0.79), compared to $(0.78) in the same period last year.
- Non-GAAP diluted net loss per share was $(0.09), a significant improvement from $(0.28) in the fourth quarter of the previous year.
Andrew Anagnost, President and CEO of Autodesk, stated, "We continue to execute well on our business model transition and are positioned to accelerate ARR growth next year. We were pleased with the meaningful increase in total annualized revenue per subscription (ARPS) and a better-than-expected conversion rate with the maintenance-to-subscription program. The shift from individual products to higher-value Industry Collections impacted the number of subscription additions this quarter, but it still contributed to ARR growth."
Scott Herren, CFO of Autodesk, added, "During the quarter, we achieved a significant milestone as subscription plan ARR surpassed maintenance plan ARR for the first time, aligning with our projections. In addition to strong revenue and ARR growth, we experienced strength in billings and deferred revenue, generating better-than-expected cash flow from operations. Our fiscal 2018 was another successful year, setting us up to achieve our fiscal 2020 goals for ARR growth and free cash flow."
**Operational Overview for the Fourth Quarter**
Subscription plan ARR was $1.18 billion, up 106% year-over-year, and 105% on a constant currency basis. This includes $152 million related to the maintenance-to-subscription program. Maintenance plan ARR was $879 million, down 18% compared to the previous year's fourth quarter, and 17% on a constant currency basis. Total ARR for the quarter increased 25% to $2.05 billion.
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 that migrated from maintenance plans. Maintenance plan subscriptions were 1.45 million, a net decrease of 244,000 from the third quarter of fiscal 2018, including the 168,000 that moved to product subscriptions. Total subscriptions reached 3.72 million, a net increase of 127,000 from the third quarter of fiscal 2018.
Recurring revenue accounted for 93% of total revenue in the fourth quarter, compared to 86% in the same period 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, up 19% compared to the previous year's fourth quarter, and 20% on a constant currency basis. Revenue in APAC was $100 million, an increase of 23% compared to the same period last year, and 21% on a constant currency basis.
**Financial Highlights for Fiscal 2018**
- Total ARR increased 25% year-over-year, both reported and on a constant currency basis.
- Total subscriptions grew by 20% to 3.72 million.
- Both subscription plan ARR and subscriptions exceeded those of the maintenance plan.
- Total GAAP spending increased 1% year-over-year, and 1% on a constant currency basis. Non-GAAP spending increased 1% reported and remained flat on a constant currency basis.
- Total deferred revenue increased approximately 25%.
**Business Outlook**
Autodesk’s business outlook for the first quarter and full year of fiscal 2019 assumes the continuation of the current economic and foreign exchange environments. A reconciliation between 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 will adopt the new revenue accounting standard, ASC 606. The company will apply the modified retrospective transition method, and does not expect a change in the timing or amount of revenue recognition for most product subscriptions and enterprise agreements. Sales commissions will be capitalized and amortized under the new standard, but the impact on expenses is expected to be minimal. None of the ASC 606 impacts affect cash flow.
**First Quarter Fiscal 2019 Guidance**
- Revenue is expected to range from $565 million to $575 million under ASC 605, and $550 million to $560 million under ASC 606.
- GAAP EPS is expected to range from $(0.34) to $(0.31), and $(0.44) to $(0.41) under ASC 606.
- Non-GAAP EPS is projected to range from $0.11 to $0.14, and $0.01 to $0.04 under ASC 606.
**Full Year Fiscal 2019 Guidance**
- Billings are expected to range from $2,720 million to $2,820 million, both under ASC 605 and ASC 606.
- Revenue is expected to range from $2,495 million to $2,545 million under ASC 605, and $2,455 million to $2,505 million under ASC 606.
- GAAP spend growth is projected to range from -2.5% to -1.5%.
- Non-GAAP spend growth is expected to range from 1% to 2%.
- GAAP EPS is expected to range from $(0.77) to $(0.59), and $(0.92) to $(0.74) under ASC 606.
- Non-GAAP EPS is projected to range from $0.92 to $1.10, and $0.77 to $0.95 under ASC 606.
- Net subscription additions are expected to range from 500,000 to 550,000.
- Total ARR growth is projected to range from 29% to 31% under ASC 605, and 28% to 30% under ASC 606.
**Tax Rates**
The recent U.S. tax reform legislation will result in a lower U.S. effective tax rate. From a GAAP perspective, Autodesk is currently in a U.S. loss position due to the business model transition and restructuring. As a result, there is no impact from U.S. tax reform on the tax provision, except for a benefit from revaluing certain deferred tax liabilities at the lower U.S. rate. The company will use previously fully valued tax attributes to offset the one-time transition tax.
From a non-GAAP perspective, Autodesk has excluded the impact of the transition tax and re-measurement of deferred tax assets and liabilities from its tax expense as one-time, non-recurring expenses. The company is currently modeling its GAAP annual effective tax rate at (388)% for fiscal 2019 and 21% for fiscal 2020. For non-GAAP, the estimated annual effective tax rate is 19% for fiscal 2019 and between 17% and 18% for fiscal 2020 and beyond.
**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 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 annual value of average monthly recurring revenue for the preceding three months. "Maintenance plan ARR" captures ARR related to traditional maintenance attached to perpetual licenses. "Subscription plan ARR" captures ARR related to subscription offerings.
- **Annualized Revenue Per Subscription (ARPS):** Calculated by dividing 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:** Individual term-based offerings deployed through web browser technologies or in a hybrid software and cloud configuration.
- **Constant Currency (CC) Growth Rates:** Changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates.
- **Enterprise Business Agreements (EBAs):** 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:** Includes perpetual license revenue and other revenue such as standalone consulting and training.
- **Maintenance Plan:** Provides customers with a cost-effective and predictable budgetary option to obtain productivity benefits of new releases and enhancements.
- **Product Subscription:** Offers flexible, cost-effective access to 3D design, engineering, and entertainment software tools.
- **Recurring Revenue:** Consists of revenue from traditional maintenance plans and subscription plan offerings.
- **Subscription Plan:** Comprises term-based product subscriptions, cloud service offerings, and EBAs.
- **Subscription Revenue:** Includes subscription fees from term-based product subscriptions, cloud service offerings, and enterprise business agreements.
- **Total Deferred Revenue:** Calculated by adding together short-term, long-term, and unbilled deferred revenue.
- **Total Subscriptions:** Consists of subscriptions from maintenance plans and subscription plan offerings that are active and paid as of the quarter end date.
- **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.
**Safe Harbor Statement**
This press release contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the statements made. Factors that could cause actual results to differ include failure to achieve revenue and profitability objectives, difficulty in predicting revenue from new businesses, general market conditions, imposition of new tariffs, fluctuation in foreign currency exchange rates, and other factors.
**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.
**Disclaimer**
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, specifications, and pricing at any time without notice and is not responsible for typographical or graphical errors that may appear in this document.
© 2018 Autodesk, Inc. All rights reserved.
**Condensed Consolidated Statements of Operations**
| (In millions, except per share data) | Three Months Ended January 31, 2018 | Fiscal Year Ended January 31, 2018 |
|--------------------------------------|----------------------------------------|-------------------------------------|
| **Net Revenue** | $553.8 | $2,056.6 |
| **Cost of Revenue** | $73.1 | $303.4 |
| **Gross Profit** | $480.7 | $1,753.2 |
| **Operating Expenses** | $662.6 | $2,262.3 |
| **Loss from Operations** | $(181.9) | $(509.1) |
| **Interest and Other Expense, Net** | $(16.4) | $(48.2) |
| **Loss Before Income Taxes** | $(198.3) | $(557.3) |
| **Benefit (Provision) for Income Taxes** | $24.8 | $(9.6) |
| **Net Loss** | $(173.5) | $(566.9) |
**Condensed Consolidated Balance Sheets**
| (In millions) | January 31, 2018 | January 31, 2017 |
|---------------|------------------|------------------|
| **Assets** | $4,113.6 | $4,798.1 |
| **Liabilities and Stockholders' Equity** | $4,113.6 | $4,798.1 |
**Condensed Consolidated Statements of Cash Flows**
| (In millions) | Fiscal Year Ended January 31, 2018 | Fiscal Year Ended January 31, 2017 |
|---------------|------------------------------------|------------------------------------|
| **Operating Activities** | $0.9 | $169.7 |
| **Investing Activities** | $506.4 | $272.0 |
| **Financing Activities** | $94.4 | $119.6 |
| **Net Cash Provided by Operating Activities** | $0.9 | $169.7 |