SAN FRANCISCO, May 31, 2024 /PRNewswire/ — Autodesk, Inc. (NASDAQ: ADSK) today announced the conclusions of the Audit Committee's investigation. As previously disclosed on April 1, 2024, the Audit Committee of the Board of Directors initiated an internal inquiry into the company’s practices concerning free cash flow and non-GAAP operating margins. The Committee has now concluded its scheduled procedures for the investigation. Management has confirmed that there will be no need for restating or adjusting any audited or unaudited, filed or previously announced, GAAP or non-GAAP financial statements.
Accompanying the investigation conclusion, the company is also providing initial results for the first quarter of fiscal 2025 along with its business outlook.
"We greatly appreciate everyone's patience as we navigated through this critical process," stated Andrew Anagnost, President and CEO of Autodesk. "In Q1 of fiscal 2025, we achieved broad-based growth across our Architecture, Engineering, Construction (AEC) and Manufacturing sectors, both in terms of products and regional performance. The rollout of our new transaction model remains on schedule. Our strong start positions us well to achieve our goals for the year ahead."
The company also announced several executive appointments:
Elizabeth "Betsy" Rafael has been named Interim Chief Financial Officer (Principal Financial Officer), effective May 31, 2024. As Interim CFO, she is not considered an "independent director" under Nasdaq rules and has stepped down from the Audit Committee. She continues to serve as a director of the company.
Deborah L. Clifford has been appointed Chief Strategy Officer, reporting directly to the CEO, effective May 31, 2024. Her responsibilities include corporate development, exploring new vertical businesses outside of Autodesk's existing product groups, and leading the company’s Social Impact and Sustainability efforts.
Autodesk is actively working towards filing its annual report on Form 10-K as soon as feasible and plans to host an earnings call to discuss Q1 fiscal 2025 results. Until the Form 10-K is filed and complete first-quarter earnings are reported, the company remains in a quiet period and is restricted from communicating with investors.
Summary of the Principal Findings of the Audit Committee
The relevant timeframe for the investigation covered fiscal years 2022, 2023, and 2024. Below is a summary of the principal findings:
- Historically, the company has depended on multi-year contracts with enterprise and product subscription clients, billed upfront, to meet its free cash flow targets. During the investigation period, the company implemented programs aimed at encouraging customers to accept upfront multi-year billing, renew early, or pay before the end of the fiscal year.
- The company has publicly disclosed its practice of incentivizing customers to adopt upfront multi-year billing arrangements. It has also acknowledged that such discounted contracts reduce revenue and lower billings in later years. Although prior to fiscal year 2024 the company did not quantify free cash flow attributed to upfront billing, it has highlighted the effect of upfront collections on fluctuations in the company’s quarterly reported long-term deferred revenue.
- In fiscal year 2022, the company announced a shift toward annual billing for enterprise customers and expected fiscal 2023 contracts to follow suit. However, the company decided to pursue multi-year upfront contracts with enterprises to meet its fiscal 2023 free cash flow objectives. Enterprise upfront billings in fiscal 2023 significantly surpassed historical levels, helping the company reach its adjusted annual free cash flow target.
- Additionally, during the relevant period, certain decisions regarding discretionary spending, collections, and accounts payable were influenced by their anticipated impact on the company’s external free cash flow and/or non-GAAP operating margin targets. These actions generally resulted in reduced reported free cash flow and/or lower reported margins in the current period. While free cash flow was part of the company’s executive compensation program, these decisions were not intended to affect compensation outcomes.
The Audit Committee recommended certain corrective measures, including reviewing specific processes around financial communications and disclosures, assessing certain organizational functions and responsibilities, and adopting and enhancing policies and processes related to the matters investigated.
Separately from the Audit Committee’s findings, the company notes that multi-year upfront billings from enterprise customers in fiscal year 2024 were substantially lower compared to fiscal years 2022 and 2023.
Preliminary Results for First Quarter Fiscal 2025 and Business Outlook
Autodesk also announced preliminary results for the first quarter of fiscal 2025 and its business outlook:
First Quarter Fiscal 2025 Preliminary Results
| Metric | Q1 FY25 (ending April 30, 2024) |
|---------------------|--------------------------------|
| Revenue | Approximately $1.42 billion |
| GAAP Diluted EPS | Approximately $1.16 |
| Non-GAAP Diluted EPS| Approximately $1.87 |
(1) Non-GAAP earnings per diluted share exclude approximately $0.69 related to stock-based compensation expense, $0.05 and $0.07 for the amortization of purchased intangibles and developed technologies, respectively, $0.07 for acquisition-related costs, and $0.02 for valuation allowance on deferred tax assets, partially offset by ($0.19) related to GAAP-only tax charges.
Business Outlook
The following are forward-looking statements based on current expectations and assumptions, and involve risks and uncertainties, some of which are outlined below under "Safe Harbor Statement." Autodesk’s business outlook for the second quarter and full-year fiscal 2025 considers the current economic environment and foreign exchange currency rate environment. A reconciliation between the fiscal 2025 GAAP and non-GAAP estimates is provided below.
Second Quarter Fiscal 2025
| Metric | Q2 FY25 Guidance Metrics |
|----------------------------|---------------------------------|
| Revenue (in millions) | $1,475 – $1,490 |
| EPS GAAP | $1.12 – $1.18 |
| EPS Non-GAAP (1) | $1.98 – $2.04 |
(1) Non-GAAP earnings per diluted share exclude $0.80 related to stock-based compensation expense, $0.15 for the amortization of both purchased intangibles and developed technologies, and $0.07 for acquisition-related costs, partially offset by ($0.16) related to GAAP-only tax charges.
Full Year Fiscal 2025
| Metric | FY25 Guidance Metrics |
|----------------------------|---------------------------------|
| Billings (in millions) | $5,810 – $5,960 |
| Revenue (in millions) (1) | $5,990 – $6,090 |
| GAAP Operating Margin | 21% – 22% |
| Non-GAAP Operating Margin | 35% – 36% |
| EPS GAAP | $4.71 – $4.93 |
| EPS Non-GAAP (3) | $7.99 – $8.21 |
| Free Cash Flow (in millions)| $1,430 – $1,500 |
(1) Excluding the impact of foreign currency exchange rates and hedge gains/losses, revenue guidance range would be approximately 1 percentage point higher.
(2) Non-GAAP operating margin excludes approximately 11% related to stock-based compensation expense, approximately 2% for the amortization of both purchased intangibles and developed technologies, and approximately 1% related to acquisition-related costs.
(3) Non-GAAP earnings per diluted share exclude $3.16 related to stock-based compensation expense, $0.57 for the amortization of both purchased intangibles and developed technologies, and $0.20 related to acquisition-related costs, partially offset by ($0.65) related to GAAP-only tax charges.
(4) Free cash flow is cash flow from operating activities less approximately $30 million of capital expenditures.
The second quarter and full-year fiscal 2025 outlook assumes a projected annual effective tax rate of 21 percent and 19 percent for GAAP and non-GAAP results, respectively. Shifts in geographic profitability continue to impact the annual effective tax rate due to significant differences in tax rates in various jurisdictions. Therefore, assumptions for the annual effective tax rate are evaluated regularly and may change based on the projected geographic mix of earnings.
Safe Harbor Statement
This press release includes forward-looking statements that involve risks and uncertainties, including statements regarding our preliminary first quarter fiscal 2025 results, statements in the paragraphs under "Business Outlook" above, statements about our short-term and long-term goals, statements regarding our strategies, market and product positions, performance and results, and all statements that are not historical facts. Many factors could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including: any adjustments that might be made prior to filing our annual report on Form 10-K and announcing our first quarter fiscal 2025 results; the risk that the completion and filing of the Form 10-K will take longer than expected; our strategy to develop and introduce new products and services and to move to platforms and capabilities, exposing us to risks such as limited customer acceptance (both new and existing customers), costs related to product defects, and large expenditures; global economic and political conditions, including foreign exchange headwinds, recessionary fears, supply chain disruptions, resulting inflationary pressures and hiring conditions; costs and challenges associated with strategic acquisitions and investments; dependency on international revenue and operations, exposing us to significant international regulatory, economic, intellectual property, collections, currency exchange rate, taxation, political, and other risks, including risks related to the war against Ukraine launched by Russia and our exit from Russia; inability to predict subscription renewal rates and their impact on our future revenue and operating results; existing and increased competition and rapidly evolving technological changes; fluctuation of our financial results, key metrics and other operating metrics; our transition from upfront to annual billings for multi-year contracts; deriving a substantial portion of our net revenue from a small number of solutions, including our AutoCAD-based software products and collections; any failure to successfully execute and manage initiatives to realign or introduce new business and sales initiatives; net revenue, billings, earnings, cash flow, or new or existing subscriptions shortfalls; social and ethical issues relating to the use of artificial intelligence in our offerings; our ability to maintain security levels and service performance meeting the expectations of our customers, and the resources and costs required to avoid unanticipated downtime and prevent, detect and remediate performance degradation and security breaches; security incidents or other incidents compromising the integrity of our or our customers’ offerings, services, data, or intellectual property; reliance on third parties to provide us with a number of operational and technical services as well as software; our highly complex software, which may contain undetected errors, defects, or vulnerabilities; increasing regulatory focus on privacy issues and expanding laws; governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls; protection of our intellectual property rights and intellectual property infringement claims from others; the government procurement process; fluctuations in currency exchange rates; our debt service obligations; and our investment portfolio consisting of a variety of investment vehicles that are subject to interest rate trends, market volatility, and other economic factors. 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 Form 10-K and subsequent Forms 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
"The world’s designers, engineers, builders, and creators trust Autodesk to help them design and make anything. From the buildings we live and work in, to the cars we drive and the bridges we drive over. From the products we use and rely on, to the movies and games that inspire us. Autodesk’s Design and Make Platform unlocks the power of data to accelerate insights and automate processes, empowering our customers with the technology to create the world around us and deliver better outcomes for their business and the planet. For more information, visit autodesk.com or follow @autodesk. #MakeAnything"
Autodesk is a registered trademark 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 services 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.
© 2024 Autodesk, Inc. All rights reserved.
SOURCE Autodesk, Inc.
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