Autodesk, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended January 31, 2018 (Autodesk’s fiscal 2018; not a standalone calendar 2017 fourth-quarter report). The filing describes a design software and services company serving architecture, engineering and construction, manufacturing, and media and entertainment markets. Autodesk reports one operating segment.
Financial performance and key metrics
| Metric | Fiscal 2018 | Fiscal 2017 |
|---|---|---|
| Net revenue | $2,056.6 million | $2,031.0 million |
| Gross profit / gross margin | $1,753.2 million / 85% | $1,689.1 million / 83% |
| Operating loss / operating margin | $509.1 million / (25%) | $499.6 million / (25%) |
| Net loss | $566.9 million | $582.1 million |
| Diluted loss per share | $2.58 | $2.61 |
| Cash flow from operations | $0.9 million | $169.7 million |
| Cash, cash equivalents and marketable securities | $1.51 billion | $2.21 billion |
- Subscription revenue rose 102% to $894.3 million; maintenance revenue fell 10% to $989.6 million; license and other revenue fell 64% to $172.7 million. Total revenue increased 1% (2% in constant currency).
- Recurring revenue was $1.88 billion, or 92% of net revenue, up 22%. ARR increased 25% to $2.05 billion. Total subscriptions rose 20% to 3.72 million. Subscription-plan ARR more than doubled to $1.18 billion, while maintenance-plan ARR declined 18% to $879.1 million.
- GAAP gross margin was 85%; non-GAAP gross margin was 87%. GAAP operating loss was $509.1 million; non-GAAP operating loss was $112.0 million. GAAP net loss was $566.9 million; non-GAAP net loss was $106.3 million. Non-GAAP measures exclude specified expenses and adjustments and should be considered alongside GAAP results.
- Cash from operations declined 99% to $0.9 million. Investing activities provided $506.4 million, mainly from marketable-security sales and maturities; financing activities used $656.6 million, including share repurchases and debt repayment.
- At year-end, current assets were $1.88 billion and current liabilities $2.12 billion. Deferred revenue totaled $1.96 billion; an additional $326.4 million of unbilled deferred revenue was reported but is not a balance-sheet liability.
- Debt principal outstanding was approximately $1.6 billion. The $400 million revolving credit facility had no borrowings at year-end. Autodesk repurchased 6.9 million shares for $690.1 million and paid no dividends.
Changes versus the prior comparable year
- Revenue was nearly flat after a 19% decline in fiscal 2017. Subscription growth substantially offset declines in perpetual-license revenue and maintenance.
- Gross margin improved from 83% to 85%, while the GAAP operating loss widened slightly. Total cost of revenue and operating expenses rose 3% to $2.26 billion.
- Operating cash flow fell from $169.7 million to $0.9 million, despite higher deferred revenue; Autodesk attributed cash generation to a large net loss, non-cash expenses, and working-capital movements.
- The subscription transition advanced: subscription-plan ARR became the majority of total ARR. About 342,000 maintenance subscriptions converted to product subscriptions during the year.
Outlook, management commentary, risks and unusual items
- Management expects maintenance revenue and subscriptions to keep declining over time as customers convert to subscriptions; conversion, renewal rates, pricing, and customer acceptance remain important uncertainties. The filing does not provide a specific fiscal 2019 revenue or earnings forecast.
- A worldwide restructuring begun in the fourth quarter targets approximately 1,150 positions, or 13% of the workforce, and facility consolidation. Autodesk expects total pre-tax charges of $135–$149 million, substantially all cash, and expects to substantially complete the actions by fiscal 2019 year-end. Management said it aims to keep non-GAAP spending flat in fiscal 2019 while shifting investment toward digital infrastructure, customer success, and construction.
- Adoption of the new revenue standard (ASC 606) was planned for February 1, 2018. Autodesk estimated a balance-sheet reduction to deferred revenue of $80–$100 million and capitalization of deferred sales commissions of $102–$112 million at adoption; the company said the standard was not expected to materially change revenue timing for most subscription offerings.
- The Tax Cuts and Jobs Act resulted in a provisional tax benefit of about $32.3 million. Autodesk retained a full valuation allowance against U.S. deferred tax assets; the tax accounting assessment was not yet complete.
- Key risks include successful execution of the subscription and cloud transition, renewal and conversion rates, intense competition, cybersecurity and privacy obligations (including GDPR), foreign exchange and international-market exposure, and reliance on distribution channels. Tech Data accounted for 31% of revenue and 31% of trade receivables.
- Autodesk disclosed a December 2016 voluntary self-disclosure to OFAC concerning certain license sales totaling less than $700,000; OFAC’s review was pending. The company said pending legal matters were not expected to materially affect results, but potential losses could not be estimated for some matters.
- Auditors issued unqualified opinions on the financial statements and internal controls; management and the auditor concluded internal control over financial reporting was effective as of January 31, 2018.
Most important facts for investors to verify
- Whether subscription ARR, renewals, and customer conversions can offset expected maintenance and perpetual-license declines.
- Whether very low operating cash flow is temporary and how cash generation develops as the transition progresses.
- Execution, cash costs, and realized savings from the restructuring, including the fiscal 2019 spending outlook.
- Final ASC 606 adoption effects and any subsequent changes to deferred revenue, commission assets, or reported revenue trends.
- Tax Act accounting updates, the U.S. deferred-tax-asset valuation allowance, and the status and possible outcome of the OFAC review.
- Debt maturities, liquidity needs, share-repurchase pace, and concentration in Tech Data for revenue and receivables.