Autodesk’s anti-piracy efforts finally pay off – oh, and the looming end of maintenance
We’ve had a bit of an earnings bottleneck here at Schnitger Corp. HQ, but let’s see if we can get caught up before more news rocks our world. You are washing your hands while humming Happy Birthday twice or the chorus from Stayin’ Alive, right? You could do CPR to that one, too, in case it’s relevant …
Autodesk was the last PLMish company to report earnings this cycle. But they’re a biggie, so let’s cover them before we backtrack to ANSYS and Altair. By being last, they had the advantage of a few extra weeks of visibility into 2020, but really, can anyone’s be, given the current roller coaster ride of supply chain disruption, virus fears and, today, oil price insanity?
Let’s start with some details:
- Total revenue in Q4 was $899.3 million, up 22% as reported and up 23% n constant currencies (cc)
- For the year, total revenue was up 27% to $3.27 billion. That total includes $106 million from acquisitions made in FQ4 of 2019 (that would be BuildingConnected and Plangrid). We’ll focus on the details for the year from here onwards
- For the year, AEC product family revenue was $1,377 million, up 35%
- The manufacturing product family reported revenue of $726 million, up 18%
- Revenue from the Media & Entertainment unit was $199 million, up 9%
- And, from AutoCAD and AutoCAD LT, which spread across industries, revenue was $948 million, up 30%
- What does this tell us? That no matter how hard Autodesk tries to drive buyers to the industry vertical-specific product set, there are still an awful lot of people and companies that are perfectly fine using AutoCAD and LT, and that those people aren’t likely to be upsold any time soon
- By geo, revenue from the Americas was $1.336 billion, up 27%
- From EMEA, revenue was $1.303 billion, up 26% as reported and in cc
- From Asia, revenue was $635 million, up 31% (up 32% cc)
- Autodesk uses a number of other metrics to gauge progress since subscriptions are tied to accounting rules that can make it hard to compare prior periods. To that end, the company said billings increased 55% to $4.19 billion; recurring revenue is now 96% of total revenue, up 1 percentage point from a year ago; and the number of subscribers grew by 539,000 from fiscal 2019 to 4.87 million at the end of fiscal 2020.
- In addition, CEO Andrew Anagnost told investors that subscriptions “now represent around 85% of our revenue, and we exited the year with maintenance contributing less than 10%. Fiscal year 2020 marked the end of the business model transition for us, and we are entering fiscal 2021 firmly positioned to deliver strong, sustainable growth through fiscal 2023 and beyond.”
- Regarding channels: the mix held roughly flat with 31% of revenue from direct / 69% from indirect channels.
Autodesk is clearly still focusing much of its attention on the AEC markets and, specifically, construction. I didn’t time it, but I would guess that 75% of the company’s planned content was AEC, and the other 25%, manufacturing. In manufacturing, Mr. Anagnost said Autodesk “continues to gain share, with revenue growth of 15% for the quarter and 18% for the year. Our solutions enable our customers to migrate from traditional workflows to the cloud … We added 20,000 Fusion 360 commercial subscriptions this year, establishing us as the leading cloud-based multi-tenant design and make solution provider in the market.” And he finally mentioned CNC, citing a customer using the breadth of Autodesk’s design, generative design, additive manufacturing and CNC to reduce material costs and cut manufacturing time.
One of the original reasons for the whole move to subs was to bring non-compliant users (ie pirates or people sharing licenses) back as paying customers. Mr. Anagnsot said that in fiscal 2020, Autodesk signed 62 deals, each over $500,000 and 14 over $1 million, to bring companies back into compliance. “This is almost three times the number we did in fiscal 2019, he said, and across all regions (though China accounted for almost 20% of the fiscal 2020 deals). That’s big. Autodesk has long been chasing these pirates, trying to encourage legal penalties at home and internationally — and, while he didn’t say I can’t help but wonder if there were legal penalties as well (or penalties avoided by signing up).
On that note, Mr. Anagnost said that Autodesk will be moving everyone to named licenses, rather than serial numbers. “This will allow us to better serve our paying customers and will make our solutions harder to pirate. Plans based on named users will give our customers visibility into their usage data allowing them to optimize their license costs and enable us to better understand their needs. We moved our single-user subscriptions to named users in fiscal 2020 and will now transition all of our multi-user subscriptions”. Autodesk says that it sees roughly two humans using every multi-user license, and has priced the offering accordingly. And all of this is intended to move Autodesk and its products to a SaaS (software as a service) model: pay for what you use at an even more granular level.
If you are still on maintenance with Autodesk, you’re one of 400,000 — but listen up: Mr. Herren said that there’s one quarter left to shift to a subscription with any kind of promotional credit and then, “We will be retiring maintenance after May 2021.” That means that you won’t get updates. At all. After May 7, 2021. Contact your reseller or look at the details in Autodesk’s FQ4 investor slide presentation, pages 11 and 12.
As of two weeks ago, when Autodesk held its earnings call, Mr. Anagnost said that Covid-19 “events are not currently impacting our service levels for our customers or global R&D efforts.” Mr. Herren added that the company’s “direct exposure to China is small, and our experience with past outbreaks showed limited impact to our sales. While we will continue to monitor the situation more broadly, we expect total revenue to grow by 20% to 22% in fiscal 2021” That leads to guidance for Q1 and fiscal 2021: For Q1, the company expects revenue of $880 million to 895 million; for the year, it sees revenue of $3.93 billion to $3,99 billion, up Mr. Herren’s 20% to 22%.
One last thing: Mr. Anagnost, in answer to a question about license volume, said something like this: “Too many people spend a lot of time talking to our old maintenance customers who say the transition to subscriptions has been hard — they’re confused and upset. But there is a whole swath of customers that are just sitting there going, how did Autodesk stuff get so cheap? People using Revit who never thought they could, using Inventor, using Max…” And that’s really the whole point of years of turmoil: How can Autodesk attract new customers when it’s so hard to convince users to switch from one CAD platform to another? You keep pushing that rock uphill but spend more energy on new rocks: all those prospective users who see sophisticated tools as out of financial reach. By making it cheaper, creating an online store so you can transact fast and easily … and, we all hope, by continuing to deliver products that make it all worthwhile.