Autodesk, Inc. reported financial results for the second quarter of fiscal 2016. The company reported strong billings and deferred revenue growth.
Second Quarter Fiscal 2016
· Total billings increased 7 percent, compared to the second quarter last year as reported, and 15 percent on a constant currency basis.
· Deferred revenue increased 26 percent to $1.2 billion, compared to $981 million in the second quarter last year.
· Total subscriptions increased by approximately 61,000 from the first quarter of fiscal 2016. Total subscriptions were 2.39 million at the end of the second quarter.
· Revenue was $610 million, a decrease of 4 percent compared to the second quarter last year as reported, and flat on a constant currency basis.
· GAAP operating margin was 1 percent, compared to 8 percent in the second quarter last year.
· Non-GAAP operating margin was 11 percent, compared to 18 percent in the second quarter last year. A reconciliation of GAAP to non-GAAP results is provided in the accompanying tables.
· GAAP diluted net loss per share was $(1.04). Please refer to the comment below regarding the non-cash GAAP tax charge recorded in the quarter. GAAP diluted net income per share was $0.13 in the second quarter last year.
· Non-GAAP diluted net income per share was $0.19, compared to $0.35 in the second quarter last year.
· Cash flow from operating activities was $77 million, compared to $96 million in the second quarter last year.
"We are pleased with the progress of our business model transition," said Carl Bass, Autodesk president and CEO. "Strong billings and deferred revenue growth led the quarter and we continue to see customers adopt our new model subscription offerings, which are showing strong year-over-year and sequential growth. For the past two years we've been preparing for this transition and we're now ready to accelerate the process."
Second Quarter Operational Overview
As a reminder, Autodesk is undergoing a business model transition in which the company will discontinue selling new perpetual licenses in favor of subscriptions and flexible license arrangements. During the transition, billings, revenue, gross margin, operating margin, EPS, deferred revenue, and cash flow from operations will be impacted as more revenue is recognized ratably rather than up front and as new offerings bring a wider variety of price points.
Revenue in the Americas increased 6 percent compared to the second quarter last year to $236 million. EMEA revenue was $226 million, a decrease of 7 percent compared to the second quarter last year as reported, and flat on a constant currency basis. Revenue in APAC was $148 million, a decrease of 13 percent compared to the second quarter last year as reported, and 9 percent on a constant currency basis. Revenue from emerging economies was $92 million, a decrease of 7 percent compared to the second quarter last year as reported, and 5 percent on a constant currency basis. Revenue from emerging economies represented 15 percent of total revenue in the second quarter.
Revenue from the Architecture, Engineering and Construction business segment was $233 million, an increase of 7 percent compared to the second quarter last year. Revenue from the Platform Solutions and Emerging Business segment was $164 million, a decrease of 21 percent compared to the second quarter last year. Revenue from the Manufacturing business segment was $171 million, an increase of 2 percent compared to the second quarter last year. Revenue from the Media and Entertainment business segment was $41 million, a decrease of 6 percent compared to the second quarter last year.
Revenue from Flagship products was $272 million, a decrease of 11 percent compared to the second quarter last year. Revenue from Suites was $226 million, a decrease of 3 percent compared to the second quarter last year. Revenue from New and Adjacent products was $112 million, an increase of 13 percent compared to the second quarter last year.
In the second quarter, Autodesk recorded a non-cash GAAP tax charge of $214 million to establish a valuation allowance on certain U.S. deferred tax assets. Due to Autodesk's pre-tax U.S. GAAP cumulative loss over the last three years, the company evaluated its deferred tax assets and determined that a valuation allowance was required. This is a GAAP-only charge and has no impact to cash this year or in the future. Autodesk will continue to monitor the application of this accounting rule and will consider reversing the valuation allowance when conditions warrant.
"Looking at the second half of this fiscal year we are maintaining our billings and subscriptions outlook but we're now expecting a greater portion of our sales to shift from perpetual licenses to new subscription types," said Scott Herren, Autodesk Chief Financial Officer. "Since the revenue from these new subscription types is deferred and recognized ratably we have revised our revenue, operating margin and EPS outlook for the year. Looking beyond this year, we are currently refining our plans around the pace and timeframe for the business model transition and look forward to providing more detail at our Investor Day event scheduled for September 29th."
Business Outlook
The following are forward-looking statements based on current expectations and assumptions, and involve risks and uncertainties some of which are set forth below under "Safe Harbor." Autodesk's business outlook for the third quarter and full year fiscal 2016 assumes, among other things, a continuation of the current economic environment and foreign exchange currency rate environment. A reconciliation between the GAAP and non-GAAP estimates for fiscal 2016 is provided below or in the tables following this press release.
