Autodesk Pops Into Profitability. Does Anyone Care?

Last Thursday, at the end of the trading day, came the announcement of Autodesk's FY2019 Q4 earnings. Late in the day is when you announce things you don't want people to notice. Or during a distraction. If President Trump would admit to global warming or collusion, it would be announced during the Super Bowl.

Finally. Autodesk posts a $65m profit in Q4 of  FY2019. (Picture courtesy of TenLinks)

We had been anticipation the Autodesk news. Autodesk had been approaching a breakthrough. For almost two years, it's revenue had been increasing. Last quarter, it almost made a profit. Then Thursday, the big news came. For the last quarter in FY2018, Autodesk posts a $65 million profit. It finished the year with record revenue of $2.6 billion. It is still in the red for the year, but only by about $85 million or so.

Five  years after radically changing their business model, from software ownership (perpetual licensing) to rental (term-licensing), you would think Andrew Anagnost would be doing cartwheels up and down executive row. After all, he was the architect of the term licensing model, its vocal champion and maybe the main reason the board of directors appointed him CEO.

Yet, Andrew was rather subdued, even a bit gloomy. In the Q&A that followed, profit is mentioned twice. Net income, as financial types call it, a couple more. Both are late in the conversation. The financial analysts don’t dwell on it. It's like "Yeah, we knew it was going to happen. What's the big deal?"

In a CNBC interview, more time is spent discussing the upcoming recession. The consensus among economists is every boom (we're in one) is followed with a bust. Andrew contends that Autodesk is immune and may benefit from a recession.

I have the numbers to prove it, he says. In the last recession, Autodesk business grew. Companies invested in their digital infrastructure to they could be profitable.

But for someone who has taken Accounting 101 and run their own company, the ways of finances of big companies are an enduring mystery. How can it not be about the bottom line? About cash in the bank?

It's complicated, I hear. They try to explain it, as if to child. About ARR, deferred revenue…

Maybe they're right. I think I'll stick to subjects I have hope of understanding.

I’m already looking forward to my next book about quantum mechanics.

Comments

[Richard Ernstberger]

Im wondering: is this profit caused by the savings in personnel costs after 2 huge rounds of layoffs or by the upcoming success of the subscription model?
Would be interesting to see the financial results in more detail to get an idea about the real reasons for the profit.

[Darren Young]

Last recession, companies sat on unused licenses, software promotions allowed companies to upgrade and lock in their investment at a lower rate.

The next recession, Autodesk subscription will be in full swing. The "elastic" licensing will undoubtedly drop unused licenses. Gone are the days of software promotions as subscriptions are prorated, there's now zero incentive to buy before you need.

If Autodesk has a plan to weather a recession, it'll have to be something other than software licensing unless they can manufacture another licensing crisis that cost customers more.