As product complexity and engineering innovation evolve, the importance of pre- production design has never been more important. High production pressures in certain sectors, such as aerospace, exacerbate this importance.
As with most IT service businesses, the move to a subscription-based SaaS model is key, as evidenced by the recent transition by Autodesk, even if results are slightly below expectations.
Innovative CAD businesses with a proven SaaS model will be highly prized by investors and acquirers alike, and we continue to watch this space with interest.
In its first quarter in which only subscriptions were sold, Autodesk reported third quarter 2017 revenues falling less than expected, down 18% to $490m (consensus $477m), and lower-than-expected adjusted operating loss of $42.9m (consensus $61m). The shift of customers to subscriptions and increased adoption of Cloud based solutions helped lift new model ARRs by 88% to $414m and recurring revenues to 76% of the total (2015: 56%). However, fourth quarter revenue and profit guidance was a bit light of expectations (revenues for $460-480m vs consensus of $487m). After ending its perpetual licence era in the prior quarter, Autodesk’s shift to subscription was in full swing during the period. To convert existing legacy customers, Autodesk offered a significant discount to accelerate the shift to subscription, alongside positive momentum with new customers, which represented about a third of new product subscriptions.