The CAD Insider

Autodesk Makes New Math to Explain Why It Had A Good Quarter

In the first quarter under new leadership, you might have expected to see a turnaround in Autodesk’s predicament. Andrew Anagnost has been sole CEO since June. What is he waiting for?

Seriously, Andrew has taken control of a rather large ship and turning a large ship around –without capsizing it – it going to take time.

And that presumes a turnaround is in order. Those who know more about financial matters (many at Autodesk and in the financial community) have stated the company is on the right tack and sailing towards eventual riches. It's just a matter of time before everyone converts from perpetual to term licensing.

 

Revenue curve is showing an upward arc with last 3 quarters of increases. Chart based on Autodesk data, created by TenLinks.

9 straight quarters in the red. The profit curve is oscillating and appears to be leveling off below $100 million in net loss (last 6 quarters average loss of $143 million). Chart based on Autodesk data, created by TenLinks.

For the 2nd quarter of FY 2018, the company barely upticked in revenue (up 3%) and continued losing money, this time $144 million, even more that of the previous quarter ($130 million).

Autodesk lists $2.1 billion in assets, $1.2 billion in cash or “cash equivalents,: a burn rate of $140 million per quarter puts the company’s life expectancy at 2.1 years. Last year at this time, Autodesk listed $2.5B in cash or its equivalent.

To explain Autodesk’s continued optimism, a new financial mathematics has been developed by Autodesk, called New Metrics, uses  terms like M2S (maintenance to subscription) and ARR (annualized recurring revenue) to prove Autodesk is on the right course. One industry observer struggling to attempts to reconcile general accounting practices to Autodesk math here. Worrisome to another industry observer is the decline in bastions of Autodesk: manufacturing (down 17%) and AEC (down 18%) while low cost AutoCAD LT was up 32%.

While the new math has industry observers -- and engineers -- scratching their heads, financial analysts admit to no such confusion.

Go figure. Autodesk stock surges to record high on the day $144 million loss was announced. Chart from Google Finance.

“Good quarter,” says a financial analyst on the call, buoyed by losses not as much as expected. Investors raised stock price to a record high of $119.73 in midday trading the day of the Q2 announcement, though it fell back as by as much as $6 the following business day.

Feeling Out of Place in the Silicon Valley

Sunnyvale, CA - the beating heart of the Silicon Valley. Lobby of the Plug and Play Center

The Plug and Play Center, in Sunnyvale, CA, the beating heart of Silicon Valley, is the unlikely venue for a venerable CAE company’s conference. The demographic is all askew. If you are visiting from Mars – or almost anywhere else on Earth, the neighborhood looks like any industrial park. But inside, there are signs of the extraordinary. The building is abuzz. Ever one under 30 years old. There are so many Asians, Indians… Not that there is anything wrong with that!

The Plug and Play Center is painted in primary colors to set itself apart in the industrial park. It looks playful, but it’s not. Billing itself as an “the ultimate startup ecosystem,” it houses hundreds of start-ups all desperate to be the next big thing, to get the next round of financing, to be embraced, discovered, rich. To remind them of what they could become, posters of the two or three who have emerged to household name status adorn the walls (Dropbox, Paypal, the Lending Club, SoundHound). There is a 2nd tier who have at least achieved significant rounds of funding – probably in the millions. But most are hungry, anxious…

Plug and Play is 3rd in number of US VC deals in 2015 per the Silicon Valley Business Journal. To be housed there, you have to selected. The center provides desk space, services and a small ($25K to $500K) investment. So being there is already some measure of success, like reaching the base camp of Everest. Bu the peak still looms. Most of the companies, as genius as their youthful leaders are, will not make it to summit.

Venture capitalism is based on just one or two out a hundred making it. Big bets are lavished on eventual failures. VCs know this, even if the start ups don’t. Millions of dollars are being thrown at them, with the hopes of getting hundreds of millions back, but we only need one or two of you to make it.

Don't have a Tesla and you're not a VC? Park it in the back of the Plug and Play Center, Sunnyvale, CA.

A few old guys are here, the ones with a practiced casualness belied by expensive loafers. They are the venture capitalists, the princes of Silicon Valley. They park their Teslas in reserved spots in front of the building, saunter in to offer sagacious business advice to the young geniuses – and give interviews to the press.

The VCs are fond of saying they provide “adult supervision” to the startups. 'Twere it was so. Mostly they are there to check attendance, that their investments are still in house, which somehow equates into their investment being safe. Most startups get plenty of leash to flounder. VCs’ few pearls of wisdom do little to save start-ups, most with no solid business plan, no hopes of revenue, their eyes crossed by the last Pokémon Go or next killer app with the lifetime of a shooting star.

Still, at first glance, the Center will fool you into thinking it was built for your success. You get a receptionist, IT services, a really cool address in Sunnyvale. That last bit alone is bragging rights. The occasional VC is seen wandering down the aisles and you can probably bump into him. There must be daily elections for “hottest start-up” because just about every company is one, so say their banners in the lobby.

Good luck, one and all.

Rugs to riches. Saeed Amidi, head of the Plug and Play Center, was a rug merchant. From plaque that hangs on the Plug and Play lobby of San Jose Mercury News article.