Autodesk reports results of audit committee investigation Provides preliminary results for first quarter fiscal 2025 and business outlook
Autodesk (NASDAQ: ADSK) has completed an internal investigation regarding its free cash flow and non-GAAP operating margin practices. The investigation revealed no need for restatement of financial statements. Preliminary results for Q1 FY25 show revenue of approximately $1.42 billion, GAAP diluted EPS at $1.16, and non-GAAP diluted EPS at $1.87. The company also announced executive appointments, with Elizabeth Rafael as Interim CFO and Deborah Clifford as Chief Strategy Officer. Autodesk is working to file its annual report and hold an earnings call soon.
- Preliminary Q1 FY25 revenue of approximately $1.42 billion.
- GAAP diluted EPS for Q1 FY25 approximately $1.16.
- Non-GAAP diluted EPS for Q1 FY25 approximately $1.87.
- No financial restatements required following the audit investigation.
- Strong growth noted in AEC and manufacturing sectors.
- New transaction model implementation on track.
- Appointment of experienced executives to key roles.
- Reduced multiyear upfront billings in FY24 compared to FY22 and FY23.
- Audit investigation highlights reliance on multiyear contracts to meet free cash flow targets.
- Upfront billing strategies led to reduced revenue and lower future billings.
- Certain discretionary spending decisions negatively impacted reported free cash flow and margins.
Insights
The recent findings of Autodesk’s Audit Committee and the company’s preliminary Q1 FY25 results are noteworthy. The investigation into free cash flow and non-GAAP operating margin practices did not result in any restatements or adjustments of prior financial statements. This is reassuring for investors as it indicates no historical financial misstatements.
For the preliminary Q1 FY25 results, Autodesk reported an estimated
From a financial perspective, while the shift to multiyear upfront billing practices previously helped meet free cash flow targets, the company has started to transition enterprise customers to annual billing contracts. This change could potentially impact reported earnings in the short term but is likely aimed at achieving a more sustainable revenue model.
In terms of outlook, continued growth and successful implementation of the new transaction model will be key drivers. Investors should watch for any future impacts of the disclosed remedial measures on operational efficiency and financial transparency.
The detailed disclosure of Autodesk’s multiyear billing practices and the associated impacts on free cash flow are important for understanding the company's revenue structure. By incentivizing customers to accept multiyear upfront billing, Autodesk historically ensured a stable cash flow but potentially at the cost of future revenue. The significant reduction in upfront billings during FY24 compared to FY22 and FY23 indicates a shift towards more transparent revenue reporting practices.
Autodesk's preliminary results for Q1 FY25 show consistent growth across different product segments and regions, highlighting the company's resilience and market demand. The new transaction model and the remedial measures proposed by the Audit Committee will likely enhance financial transparency and investor confidence.
For retail investors, the emphasis on diversified revenue streams and geographical breadth is significant. It reflects less dependence on single markets and increases the robustness of Autodesk's business model against regional economic fluctuations.
The internal investigation into Autodesk’s financial practices, spearheaded by the Audit Committee, underscores the company's commitment to corporate governance and transparency. The findings did not result in restatements, which is reassuring. However, the proposed remedial measures indicate areas for improvement in financial disclosures and organization processes. These steps are essential for maintaining investor trust and compliance with regulatory expectations.
The appointment of Elizabeth Rafael as the Interim CFO, stepping down from her Audit Committee role and Deborah Clifford as Chief Strategy Officer to oversee corporate development and sustainability efforts, are strategic moves. The alignment of these roles with the company’s long-term goals suggests a focused approach to governance and strategic growth.
For investors, these changes point towards a strengthened governance framework and enhanced oversight, which are critical for sustained corporate health and competitive advantage in the long term.
The company is also providing preliminary results for first quarter fiscal 2025 and business outlook.
"We appreciate your patience as we work through this important process. We take situations like this very seriously and are grateful to put the investigation behind us," said Andrew Anagnost, Autodesk president and CEO. "In the first quarter of fiscal 2025, we generated broad-based growth in AEC and manufacturing across products and regions. The new transaction model implementation is on track. Our strong start sets us up well to achieve our goals for the year."
The company also announces the following executive appointments.
Elizabeth "Betsy" Rafael has been appointed by the Board as Interim Chief Financial Officer (Principal Financial Officer), effective May 31, 2024. As Interim Chief Financial Officer, she is not currently an "independent director" for purposes of the Nasdaq Stock Market and has stepped down from the Audit Committee. She remains a director of the company.
Deborah L. Clifford has been appointed as the company's Chief Strategy Officer, reporting to the Chief Executive Officer, effective May 31, 2024. Her responsibilities will include, among other things, corporate development, new vertical businesses that are outside Autodesk's existing product groups, and the company's Social Impact and Sustainability efforts.
Autodesk is working diligently to file its annual report on Form 10-K as soon as possible and to hold an earnings call to discuss first quarter fiscal 2025 results. Until the Form 10-K is filed and full first quarter earnings are reported, the company remains in a closed period and is restricted in its communications with investors.
Summary of the principal findings of the Audit Committee
The relevant time period for the investigation was fiscal years 2022, 2023, and 2024. A summary of the principal findings of the Audit Committee are set forth below:
- The company has historically relied on multiyear contracts with its enterprise and product subscription customers, billed upfront, to help meet its free cash flow targets. During the relevant period, the company engaged in programs designed to incentivize customers to accept multiyear upfront billing, renew early, and/or pay before the end of the fiscal year.
- The company has disclosed its practice of incentivizing customers to adopt multiyear upfront billing arrangements. It has also acknowledged that discounted multiyear upfront contracts reduce revenue and lower billings in out years. Though prior to fiscal year 2024, the company did not quantify free cash flow attributable to multiyear upfront billings, it has noted the contribution of upfront collections to fluctuations in the company's quarterly reported long-term deferred revenue.
- During fiscal year 2022, the company announced that it had begun to shift enterprise customers to contracts billed annually, and that it had assumed fiscal 2023 enterprise contracts would be billed annually. The company subsequently determined, however, to pursue multiyear upfront contracts with enterprise customers to help meet its fiscal year 2023 free cash flow goal. Upfront billings of enterprise customers in fiscal year 2023 substantially exceeded historical levels, helping the company to meet its lowered annual free cash flow target.
- In addition, during the relevant period, certain decisions regarding discretionary spending, collections, and accounts payable were informed by their anticipated effects on the company's external free cash flow and/or non-GAAP operating margin targets. The resulting actions generally served to reduce reported free cash flow and/or lower reported margin in the current period. Though free cash flow was one factor in the company's executive compensation program, these decisions were not calculated to influence compensation outcomes.
The Audit Committee proposed certain remedial measures including: reviewing certain processes around financial communications and disclosures; assessing certain company organizational functions and responsibilities; and adopting and enhancing policies and processes related to the matters investigated.
Separate from the Audit Committee's findings, the company notes that multiyear upfront billings of enterprise customers in fiscal year 2024 was substantially lower than fiscal years 2022 and 2023.
Preliminary results for first quarter fiscal 2025 and business outlook
Autodesk also announced preliminary results for the first quarter fiscal 2025 and business outlook as follows:
First Quarter Fiscal 2025 Preliminary Results
Q1 FY25 | |
Revenue | approximately |
GAAP diluted EPS | approximately |
Non-GAAP diluted EPS (1) | approximately |
(1) Non-GAAP earnings per diluted share excludes approximately
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 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
Q2 FY25 Guidance Metrics | Q2 FY25 |
Revenue (in millions) | |
EPS GAAP | |
EPS non-GAAP (1) |
(1) Non-GAAP earnings per diluted share excludes
Full Year Fiscal 2025
FY25 Guidance Metrics | FY25 |
Billings (in millions) |
|
Revenue (in millions) (1) |
|
GAAP operating margin | |
Non-GAAP operating margin (2) | |
EPS GAAP | |
EPS non-GAAP (3) | |
Free cash flow (in millions) (4) |
(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
(3) Non-GAAP earnings per diluted share excludes
(4) Free cash flow is cash flow from operating activities less approximately
The second quarter and full-year fiscal 2025 outlook assume 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 contains 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. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: any adjustments that could 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
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
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
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