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Autodesk, Inc. Announces Fiscal 2020 Third Quarter Results
SAN RAFAEL, Calif., November 26, 2019 /PRNewswire/ -- Autodesk, Inc. (NASDAQ: ADSK) announced its financial results for the third quarter of fiscal 2020 today.
Attached is a photograph titled "(PRNewsfoto/Autodesk, Inc.)".
*All growth rates are compared to the third quarter of fiscal 2019 unless otherwise noted. A detailed reconciliation of GAAP to non-GAAP results is provided in the accompanying tables. Definitions can be found in the Glossary of Terms later in this document.
- Total ARR increased by 28% to $3.22 billion;
- Total billings grew by 55% to $1.01 billion;
- Total revenue rose by 28% to $843 million, with recurring revenue representing 96% of the total;
- GAAP operating margin was 13%, an increase of 11 percentage points;
- Non-GAAP operating margin was 27%, up 13 percentage points;
- GAAP diluted EPS was $0.30; Non-GAAP diluted EPS was $0.78;
- Operating cash flow was $276 million; free cash flow was $267 million.
"Our strong performance continued in Q3 as revenue, billings, ARR, earnings, and free cash flow exceeded expectations," said Andrew Anagnost, President and CEO of Autodesk. "We continue to showcase the cash-generating power of our business model, driving a record last twelve months free cash flow of nearly $1 billion this quarter. The breadth and depth of our product portfolio in Construction paved the way for another strong quarter. In Manufacturing, we continue to outpace competitors and grow faster than the overall market."
"Third quarter results were driven by all regions and products, once again delivering robust margin expansion," said Scott Herren, Autodesk's CFO. "Exceptional execution, our resilient subscription business model, and steady demand for our products led to billings exceeding $1 billion, marking a 55% year-over-year growth."
**Third Quarter Fiscal 2020 Financial Highlights**
- Total ARR was $3.22 billion, increasing by 28% year-over-year and on a constant currency basis. Acquisitions from the fourth quarter of last year contributed $113 million or 4 percentage points of the growth. Sequentially, total ARR increased by 5% as reported and 6% on a constant currency basis.
- Subscription plan ARR was $2.86 billion, rising by 49% year-over-year and 50% on a constant currency basis. Acquisitions from the fourth quarter of last year added $113 million or 6 percentage points of the growth. Sequentially, subscription plan ARR increased by 8% both as reported and on a constant currency basis. Subscription plan ARR includes $597 million related to the maintenance-to-subscription (M2S) program.
- Maintenance plan ARR was $365 million, decreasing by 39% year-over-year and 40% on a constant currency basis. On a sequential basis, maintenance plan ARR fell by 12% both as reported and on a constant currency basis.
- Core ARR increased by 23% to $2.99 billion. Sequentially, core ARR increased by 5%.
- Cloud ARR surged by 164% to $232 million. Acquisitions from the fourth quarter of last year contributed $113 million or 128 percentage points of the growth. Sequentially, total cloud ARR increased by 12%.
- Total billings climbed by 55% to $1.01 billion.
- Total revenue was $843 million, increasing by 28% year-over-year and on a constant currency basis. Acquisitions from the fourth quarter of last year contributed $29 million or 4% of the growth.
- Net revenue retention rate was within the range of 110 to 120%.
- Total recurring revenue in the third quarter accounted for 96% of total revenue, consistent with the third quarter last year.
- GAAP operating income was $111 million compared to $15 million in the third quarter last year. GAAP operating margin was 13%, up 11 percentage points.
- Total non-GAAP operating income was $225 million compared to $92 million in the third quarter last year. Non-GAAP operating margin was 27%, up 13 percentage points.
- GAAP diluted net income per share was $0.30, compared to a GAAP diluted net loss per share of $(0.11) in the third quarter last year.
- Non-GAAP diluted net income per share was $0.78, compared to a non-GAAP diluted net income per share of $0.29 in the third quarter last year.
- Deferred revenue increased by 35% to $2.42 billion. Unbilled deferred revenue was $549 million, up $99 million compared to the third quarter of last year. Remaining performance obligations (RPO), or the sum of total billed and unbilled deferred revenue, totaled $2.97 billion, an increase of 32%. Current RPO totaled $2.05 billion, up 23%.
- Cash flow from operating activities was $276 million, an increase of $237 million compared to the third quarter last year. Free cash flow was $267 million, an increase of $240 million compared to the third quarter last year.
**Third Quarter Fiscal 2020 Business Highlights**
*Net Revenue by Geographic Area*
Our revenue is focused across four main geographic areas: Americas, EMEA, APAC, and Emerging Economies.
| Region | Q3 2019 Revenue (USD Mil) | Q3 2018 Revenue (USD Mil) | Change vs Prior Year (%) | Constant Currency Change (%) |
|-------------------|---------------------------|---------------------------|--------------------------|------------------------------|
| Americas | $349.3 | $268.5 | +30 | +30 |
| EMEA | $329.6 | $266.5 | +24 | +25 |
| APAC | $163.8 | $125.9 | +30 | +31 |
| Emerging Economies| $101.6 | $80.7 | +26 | +27 |
| **Total Net Revenue** | **$842.7** | **$660.9** | **+28** | **+28** |
*Net Revenue by Product Family*
Our product offerings are primarily divided into four families: Architecture, Engineering and Construction (AEC), AutoCAD and AutoCAD LT, Manufacturing (MFG), and Media and Entertainment (M&E).
| Product Family | Q3 2019 Revenue (USD Mil) | Q3 2018 Revenue (USD Mil) | Change vs Prior Year (%) |
|-------------------|---------------------------|---------------------------|--------------------------|
| AEC | $358.0 | $263.8 | +36 |
| AutoCAD and AutoCAD LT | $245.4 | $190.6 | +29 |
| MFG | $182.2 | $158.5 | +15 |
| M&E | $50.6 | $43.6 | +16 |
| Other | $6.5 | $4.4 | +48 |
| **Total Net Revenue** | **$842.7** | **$660.9** | **+28** |
**Business Outlook**
The following forward-looking statements are based on current expectations and assumptions, involving risks and uncertainties. Some of these risks are outlined below under "Safe Harbor Statement." Autodesk’s business outlook for the full year fiscal 2020 and the fourth quarter takes into account the current economic and foreign exchange currency rate environment. A reconciliation between the fiscal 2020 GAAP and non-GAAP estimates is provided below or in the tables following this press release.
*Full Year Fiscal 2020*
| Metric | FY20 Guidance Range (USD Mil) | Year-over-Year Growth (%) |
|------------------------------|-------------------------------|---------------------------|
| Total ARR | $3,405 – $3,445 | +24% – +25% |
| Billings | $4,050 – $4,090 | +50% – +51% |
| Revenue (excluding FX) | $3,270 – $3,285 | +28% |
| GAAP Spend Growth | ~12% | |
| Non-GAAP Spend Growth | ~9% | |
| GAAP EPS | $0.80 – $0.85 | |
| Non-GAAP EPS | $2.74 – $2.79 | |
| Free Cash Flow | $1,300 – $1,340 | |
*Fourth Quarter Fiscal 2020*
| Metric | Q4 FY20 Guidance Range (USD Mil) |
|------------------------------|----------------------------------|
| Revenue | $880 – $895 |
| GAAP EPS | $0.42 – $0.47 |
| Non-GAAP EPS | $0.86 – $0.91 |
The full year fiscal 2020 and fourth quarter outlook assumes a projected annual effective tax rate of 38% and 18% for GAAP and non-GAAP results, respectively. Changes in geographic profitability continue to impact the annual effective tax rate due to significant differences in tax rates across various jurisdictions. Therefore, assumptions for the annual effective tax rate are regularly evaluated and may change based on the projected geographic mix of earnings.
**Earnings Conference Call and Webcast**
Autodesk will host its third quarter conference call today at 5:00 p.m. ET. The live broadcast can be accessed at [http://www.autodesk.com/investor](http://www.autodesk.com/investor). A transcript of the opening commentary will also be available following the conference call.
A replay of the broadcast will be available at 7:00 p.m. ET at [http://www.autodesk.com/investor](http://www.autodesk.com/investor). This replay will be maintained on Autodesk’s website for at least 12 months.
**Investor Presentation Details**
An investor presentation providing additional information can be found at [http://www.autodesk.com/investor](http://www.autodesk.com/investor).
**Glossary of Terms**
*Annualized Recurring Revenue (ARR):* Represents the annualized value of our 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. Refer to the definition of recurring revenue below for more details on what is included within ARR. ARR is currently one of our key performance metrics to assess the health and trajectory of our business. 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.
*Billings:* Total revenue plus the net change in deferred revenue from the beginning to the end of the period.
*Cloud Service Offerings:* Represents individual term-based offerings deployed through web browser technologies or in a hybrid software and cloud configuration. Cloud service offerings that are bundled with other product offerings are not captured as a separate cloud service offering.
*Constant Currency (CC) Growth Rates:* We attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates as well as eliminating hedge gains or losses recorded within the current and comparative periods. We calculate constant currency growth rates by (i) applying the applicable prior period exchange rates to current period results and (ii) excluding any gains or losses from foreign currency hedge contracts that are reported in the current and comparative periods.
*Core Business:* Represents the combination of maintenance, product, and Enterprise Business Agreements (EBAs).
*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.
*Free Cash Flow:* Cash flow from operating activities minus capital expenditures.
*Maintenance Plan:* Our maintenance plans provide our customers with a cost-effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under our maintenance plans, customers are eligible to receive unspecified upgrades when and if available, and technical support. We recognize maintenance revenue over the term of the agreements, generally one year.
*Net Revenue Retention Rate (NR3):* Measures the year-over-year change in ARR for the population of customers that existed one year ago ("base customers"). Net revenue retention rate is calculated by dividing the current period ARR related to base customers by the total ARR from one year ago. ARR is based on USD reported revenue, and fluctuations caused by changes in foreign currency exchange rates and hedge gains or losses have not been eliminated. ARR related to acquired companies is excluded from the calculation for at least one year from integration.
*Other Revenue:* Consists of revenue from consulting, training, and other services, and is recognized over time as the services are performed. Other Revenue also includes software license revenue from the sale of products that do not incorporate substantial cloud services and is recognized upfront.
*Product Subscription:* Provides customers the most flexible, cost-effective way to access and manage 3D design, engineering, and entertainment software tools. Our product subscriptions currently represent a hybrid of desktop and SaaS functionality, which provides a device-independent, collaborative design workflow for designers and their stakeholders.
*Recurring Revenue:* Consists of the revenue for the period from our traditional maintenance plans and revenue from our subscription plan offerings. It excludes subscription revenue related to consumer product offerings, select Creative Finishing product offerings, education offerings, and third-party products. Recurring revenue acquired with the acquisition of a business is captured when total subscriptions are captured in our systems and may cause variability in the comparison of this calculation.
*Remaining Performance Obligations:* The sum of total short-term, long-term, and unbilled deferred revenue. Current remaining performance obligations is the amount of revenue we expect to recognize in the next twelve months.
*Spend:* The sum of cost of revenue and operating expenses.
*Subscription Plan:* Comprises our term-based product subscriptions, cloud service offerings, and Enterprise Business Agreements (EBAs). Subscriptions represent a combined hybrid offering of desktop software and cloud functionality which provides a device-independent, collaborative design workflow for designers and their stakeholders. With subscription, customers can use our software anytime, anywhere, and get access to the latest updates to previous versions.
*Subscription Revenue:* Includes subscription fees from product subscriptions, cloud service offerings, and Enterprise Business Agreements (EBAs).
*Unbilled Deferred Revenue:* Unbilled deferred revenue represents contractually stated or committed orders under early renewal and multi-year billing plans for subscription, services, and maintenance for which the associated deferred revenue has not been recognized. Under FASB Accounting Standards Codification ("ASC") Topic 606, unbilled deferred revenue is not included as a receivable or deferred revenue on our Condensed Consolidated Balance Sheet.
**Safe Harbor Statement**
This press release contains forward-looking statements that involve risks and uncertainties, including quotations from management, statements in the paragraphs under "Business Outlook" above and other statements about our short-term and long-term goals, and other statements regarding our strategies, market and product positions, performance, and results. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: failure to achieve our revenue and profitability objectives; failure to successfully manage transitions to new business models and markets; failure to maintain cost reductions or otherwise control our expenses; difficulty in predicting revenue from new businesses and the potential impact on our financial results from changes in our business models; general market, political, economic, and business conditions; any imposition of new tariffs or trade barriers; the impact of non-cash charges on our financial results; fluctuation in foreign currency exchange rates; the success of our foreign currency hedging program; our performance in particular geographies, including emerging economies; the ability of governments around the world to meet their financial and debt obligations, and finance infrastructure projects; weak or negative growth in the industries we serve; slowing momentum in subscription billings or revenues; difficulties encountered in integrating new or acquired businesses and technologies; the inability to identify and realize the anticipated benefits of acquisitions; the financial and business condition of our reseller and distribution channels; dependence on and the timing of large transactions; pricing pressure; unexpected fluctuations in our annual effective tax rate; significant effects of tax legislation and judicial or administrative interpretation of tax regulations, including the Tax Cuts and Jobs Act; the timing and degree of expected investments in growth and efficiency opportunities; changes in the timing of product releases and retirements; and any unanticipated accounting charges. Our estimates as to tax rate are based on current tax law, including current interpretations of the Tax Cuts and Jobs Act, and could be affected by changing interpretations of that Act, as well as additional legislation and guidance around that Act.
Further information on potential factors that could affect the financial results of Autodesk are included in Autodesk’s reports on Form 10-K and Form 10-Q, which are on file with the U.S. Securities and Exchange Commission. Autodesk disclaims any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
**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](autodesk.com) or follow @autodesk.
Autodesk uses its investors.autodesk.com website as a means of disclosing material non-public information, announcing upcoming investor conferences, and for complying with its disclosure obligations under Regulation FD. Accordingly, you should monitor our investor relations website in addition to following our press releases, SEC filings, and public conference calls and webcasts.
**Trademark Information**
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, and specifications and pricing at any time without notice, and is not responsible for typographical or graphical errors that may appear in this document.
© 2019 Autodesk, Inc. All rights reserved.
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**Autodesk, Inc.**
**Condensed Consolidated Statements of Operations**
*(In millions, except per share data)*
| Line Item | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 |
|----------------------------|-------------|-------------|-------------|-------------|
| Net Revenue | $842.7 | $660.9 | $2,375.0 | $1,832.5 |
| Cost of Revenue | $79.5 | $72.3 | $241.7 | $208.9 |
| Gross Profit | $763.2 | $588.6 | $2,133.3 | $1,623.6 |
| Operating Expenses | $652.6 | $573.9 | $1,924.1 | $1,688.9 |
| Income from Operations | $110.6 | $14.7 | $209.2 | $(65.3) |
| Interest and Other Expense | $(14.2) | $(3.2) | $(37.7) | $(10.4) |
| Income Before Taxes | $96.4 | $11.5 | $171.5 | $(75.7) |
| Provision for Income Taxes | $(29.7) | $(35.2) | $(88.8) | $(69.8) |
| Net Income (Loss) | $66.7 | $(23.7) | $82.7 | $(145.5) |
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**Condensed Consolidated Balance Sheets**
*(In millions)*
| Asset/Liability | Oct 31, 2019| Jan 31, 2019|
|----------------------------|-------------|-------------|
| Total Assets | $5,036.6 | $4,729.2 |
| Total Liabilities | $2,840.2 | $2,301.2 |
| Stockholders' Deficit | $(171.5) | $(210.9) |
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**Condensed Consolidated Statements of Cash Flows**
*(In millions)*
| Line Item | Nine Months Ended Oct 31, 2019 | Nine Months Ended Oct 31, 2018 |
|----------------------------|--------------------------------|--------------------------------|
| Net Cash Provided by Ops | $276.0 | $(237.0) |
| Free Cash Flow | $267.0 | $(240.0) |
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This document provides a comprehensive overview of Autodesk’s financial performance for the third quarter and nine-month period ending October 31, 2019.