Autodesk Q1 revenue down, as expected

Transition to subscriptions is going well, but the short-term revenue hit remains strong.

The interior of Autodesk's AEC headquarters in Waltham, Mass. (Source: Autodesk)
The interior of Autodesk’s AEC headquarters in Waltham, Mass. (Source: Autodesk)

Autodesk (ADSK: NASDAQ) has reported first quarter results for fiscal 2017 that are in line with its long-term forecast for moving revenue from product purchases to subscriptions. During this transition, quarterly revenue is impacted because more revenue is recognized over the course of a year instead of immediately, and because most products now have a lower cost of initial access.

Revenue for the quarter ending April 30, 2016 was $512 million, down 21% from the same quarter a year ago (down 17% on a constant currencies basis).

Autodesk recorded a net loss for the quarter of $173 million, compared to net income of $19.1 million in 1Q16. A charge of $52 million for previously announced “restructuring” (layoffs) was recorded during the quarter, impacting net income.

Autodesk says Annualized Recurring Revenue (ARR) is a “key performance metric” to understand its new revenue model. ARR is the annualized value of average monthly recurring revenue for the preceding three months. The company says, “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.” So we will report both revenue and subscription metrics going forward, including ARR.

Autodesk stock performance for the past three months. (Source: Google Finance)
Autodesk stock performance for the past three months. (Source: Google Finance)

Looking closer at first quarter revenue:

Revenue by regions (percentage based on constant currency comparisons):

  • Americas revenue was $218 million, down 10% from 1Q16;
  • EMEA revenue was $203 million, down 11% from last year;
  • Asia/Pacific revenue was $92 million, down 39% from last year.

Revenue by business segments:

  • AEC: $219 million, down 8% from 1Q16;
  • Manufacturing: $158 million, down 14% from a year ago;
  • Platforms/Emerging Businesses: $100 million, down 46% from a year ago;
  • Media & Entertainment: $35 million, down 12% from 1Q16.

Revenue by sales model:

  • Subscription revenue: $326 million, up 3% from a year ago;
  • License and other revenues: $185.9 million down 42% from a year ago.

Subscription  metrics:

  • Total subscriptions increased by 132,000 to 2.71 million;
  • New model subscriptions (aka Desktop, cloud, and enterprise flexible licenses) in the quarter were up 140,000 to 567,000 total;
  • Maintenance subscriptions rose by 8,000 to 2.14 million;
  • Total Annualized Recurring Revenue (ARR) was $1.44 billion, up 12% over the previous quarter;
  • Total Deferred Revenue was $1.52 billion, up 32% from the first quarter a year ago.

What do we think?

Looking into the crystal ball a couple of years ago, CEO Carl Bass and his team had a choice: Be risky and change or be reluctant and stand firm. They chose risky, and are now riding it out. From a subscriptions viewpoint, it was a good quarter. From a revenue standpoint (at least as GAAP accounting tells us), it as a lousy quarter. Autodesk continues to look ahead. Most customers and partners are embracing the twin transitions to a subscription-based business model and to cloud-based software. As Bass told Wall Street analysts, “We’re striking a healthy balance in achieving both short-term and long-term goals.”