Autodesk, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended January 31, 2019. The filing also reports fourth-quarter results; this is not a standalone quarterly filing. Autodesk sells design, engineering, construction, manufacturing, and media software, and is transitioning from perpetual licenses and maintenance plans to recurring subscriptions. It reports one operating segment.
Financial performance and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Net revenue | $2,569.8 million | $2,056.6 million |
| Subscription revenue | $1,802.3 million | $894.3 million |
| Maintenance revenue | $635.1 million | $989.6 million |
| Gross profit / margin | $2,283.9 million / 89% | $1,753.2 million / 85% |
| Operating loss / margin | $(25.0) million / (1)% | $(509.1) million / (25)% |
| Net loss | $(80.8) million | $(566.9) million |
| Operating cash flow | $377.1 million | $0.9 million |
- Revenue grew 25% year over year, driven mainly by a 102% increase in subscription revenue; maintenance revenue fell 36% as customers migrated to subscriptions. Recurring revenue was $2.44 billion, or 95% of net revenue.
- Cash flow from operations less $67.0 million of capital expenditures implies free cash flow of approximately $310.1 million. Cash, cash equivalents, and marketable securities totaled $953.6 million at year-end.
- Year-end total assets were $4.73 billion; stockholders’ deficit was $210.9 million. Long-term notes payable, net, were $2.09 billion. Autodesk also had a $500 million term loan and an unused $650 million revolving credit facility.
- Reported current assets were $1.62 billion and current liabilities $2.30 billion, including substantial deferred revenue. Deferred revenue was $2.09 billion; billed and unbilled deferred revenue totaled $2.68 billion.
- Non-GAAP results were operating income of $316.0 million, a 12% operating margin, and net income of $223.3 million, or $1.01 per diluted share. These exclude specified items, including stock compensation, restructuring, acquisition costs, and amortization.
Material changes and fourth-quarter results
- Total ARR rose 34% to $2.75 billion. Subscription-plan ARR increased 87% to $2.20 billion, while maintenance-plan ARR declined 38% to $549.3 million. Total subscriptions grew 17% to 4.33 million.
- Fourth-quarter revenue was $737.3 million, versus $553.8 million a year earlier. Operating income was $40.3 million and net income was $64.7 million, compared with losses of $181.9 million and $173.5 million, respectively, in the prior-year quarter.
- Autodesk adopted ASC 606 and ASC 340-40 using modified retrospective methods. The standards affected reported revenue, contract costs, balance-sheet items, and the opening accumulated deficit; FY2019 net loss would have been $90.9 million under the prior revenue standard rather than the reported $80.8 million.
- Cash flow from operations improved from $0.9 million to $377.1 million. Investing cash outflow was $710.4 million, including $1.04 billion of acquisitions, net of cash acquired. Repurchases were 2.2 million shares for $292.5 million, down from $690.1 million in FY2018.
Outlook, commentary, and risks
- Management expects maintenance revenue to continue declining as customers convert to subscription plans. More than 794,000 maintenance customers had converted since the M2S program began; 796,100 maintenance subscriptions remained at year-end.
- For FY2020, management expected absolute costs to increase in cost of revenue, marketing and sales, research and development, general and administrative expenses, and purchased-intangible amortization. As a percentage of revenue, most were expected to decrease; cost of revenue was expected to decline slightly and amortization to increase slightly. No specific revenue or earnings guidance is provided in the supplied filing text.
- Autodesk acquired Assemble Systems, PlanGrid, and BuildingConnected for combined consideration of approximately $1.12 billion. Management cited construction-platform expansion as the strategic rationale; integration and realization of expected benefits remain risks.
- Key exposures include intense competition and execution of the subscription/cloud transition; subscription renewal rates; dependence on resellers and distributors (indirect channels generated 71% of revenue); and concentration through Tech Data, which accounted for 35% of revenue and 29% of trade receivables.
- International operations generated 66% of revenue. Foreign exchange, economic and political volatility, trade restrictions, privacy regulation, cybersecurity, and third-party cloud-provider disruptions could affect results. The company also cites debt covenants, tax uncertainty, and potential acquisition-related charges.
- Management said pending legal matters were not expected to have a material adverse effect, but noted that an unfavorable resolution could materially affect a particular period and that potential loss estimates were unavailable or immaterial. A full valuation allowance remained against U.S. and Singapore deferred tax assets.
- The company reported effective internal controls, and the auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether subscription growth, ARR, renewals, and customer conversions continue to offset declines in maintenance revenue.
- How much of the GAAP-to-non-GAAP earnings gap reflects recurring costs, particularly stock-based compensation and restructuring or acquisition expenses.
- Cash generation, debt repayment, covenant headroom, and the effect of acquisitions and share repurchases on liquidity.
- Integration progress and contribution from Assemble Systems, PlanGrid, and BuildingConnected, including any changes to goodwill or acquired-asset valuations.
- Reported metrics’ comparability after ASC 606 and ASC 340-40 adoption, and the effect of foreign exchange and tax developments on future results.