A month has gone by since the last earnings report for Autodesk, Inc. (NASDAQ:ADSK) . Shares have lost about 7.4% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is ADSK due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Autodesk incurred fourth-quarter fiscal 2018 non-GAAP loss of 9 cents per share, narrower than the Zacks Consensus Estimate of a loss of 12 cents. The figure was also better than the company’s guided range of a loss of 10-14 cents per share.
Revenues of $553.8 million beat the consensus mark of $545.3 million and increased nearly 15.7% year over year. The figure surpassed the guided range of $537-$547 million.
Moreover, deferred revenues increased 9% to $1.96 billion in the quarter, which reflects growing strength of the business model. Total recurring revenues were 93%, a significant increase from 86% reported in the year-ago quarter.
Quarter Details
Revenues were impacted by a 40.2% year-over-year decline in License revenues (7.3% of total revenues), which totaled $40.3 million in the quarter.
Maintenance revenues (39.7% of total revenue) also declined 18% from the year-ago quarter to $219.8 million, primarily due to lower subscriptions.
However, the company’s business model transition continues to be on track. Subscription revenues soared 104.8% year over year to $293.7 million, driven by strong product subscriptions and other subscription plan types. Total subscriptions increased approximately 127K from the prior quarter to 3.72 million.
Subscription plan (product, end-of-life and cloud subscriptions) increased approximately 371K from the last quarter to 2.27 million backed by new product subscriptions as well as maintenance to subscription or M2S program which recorded 168K subscriptions.
Total annualized recurring revenues (ARR) were $2.05 billion, up 25% from the year-ago quarter, driven by product subscription and Enterprise Business Agreement (EBA) subscriptions.
Subscription plan ARR of $1.18 billion surged 106% year over year and 105% on a constant currency (cc) basis. However, maintenance plan ARR of $879 million declined 18% from the year-ago quarter and 17% at cc.
Autodesk is also benefiting from its investment in digital infrastructure. The company’s e-store generated nearly 20% of products subscription sales in the quarter. Moreover, half of AutoCAD LT subscriptions in the United States came through the e-store.
Autodesk is gaining from the EBA program. In the quarter, the company witnessed more than 70 deals valued at more than $1 million with significant contribution from EBAs. Furthermore, 14 of them were valued at $5 million or more.
New customers represented about 30% of the mix in the quarter and contributed a significant portion of subscription additions.
Cloud subscription additions of 45K represented a decline of 50% year over year. However, increasing adoption of BIM 360 Docs and Field tools and other high value products is a positive. The company won several large contracts from top-ranked construction companies. Management expects cloud to be a key growth driver beyond fiscal 2020.
Autodesk’s broad product portfolio continues to generate new customers in both domestic and overseas markets. Geographically, revenues in the Americas increased 10% year over year to $232 million. EMEA revenues increased 19% to $221 million while the same from APAC increased 23% from the year-ago quarter to $100 million.
Operating Results
Non-GAAP gross margin expanded 310 basis points (bps) from the year-ago quarter to 88.2%.
Research & development, sales & marketing and general & administrative expenses as percentage of revenues declined 550 bps, 450 bps and 80 bps, respectively. This was partially offset by higher restructuring charges and other facility exit costs, which expanded 1510 bps from the year-ago quarter to 17%.
Non-GAAP operating expenses as a percentage of revenues declined 1080 bps to 91.4%.
The company reported non-GAAP operating loss of $17.5 million in the quarter compared with the year-ago quarter’s operating loss of $81.5 million.
Balance Sheet
Autodesk exited the quarter with total cash and cash equivalents (including marketable securities) of $1.32 billion compared with $1.45 billion as of Oct 31, 2017.
As of Jan 31, 2018, cash from operating activities was $0.9 million compared with $169.7 million in the year-ago period.
The company repurchased 2.4 million shares in the quarter.
Outlook
Per the company’s new revenue recognition standard, Accounting Standards Codification (ASC) 606, for first-quarter fiscal 2019, Autodesk expects revenues in the range of $550-$560 million. Under the earlier ASC 605, revenues are expected to be $565-$575 million.
Non-GAAP earnings per share are anticipated in the range of 1-4 cents for the quarter (under ASC 606) and 11-14 cents (under ASC 605).
Cash flow in the quarter will be negatively impacted by the company’s restructuring activity and exit tax related to the shift of European operations center to Dublin from Switzerland.
For fiscal 2019, the company expects revenues in the range of $2.455-$2.505 billion (under ASC 606) and $2.495-$2.545 billion (under ASC 605). Billings are projected to be in the range of $2.720-$2.820 billion, under both the measures.
Non-GAAP earnings are now expected in the range of 77 cents to 95 cents (under ASC 606) and 92 cents to $1.10 (under ASC 605).
Autodesk now projects subscription additions to be between 500K and 550K. Management expects M2S migrations to be the highest in fiscal 2019 as cost to switch will be lesser than the cost of staying on maintenance plan.
Total ARR is still expected to be in the range of 28% to 30% (under ASC 606) and 29-31% under ASC 605. Non-GAAP spending is expected to be increase marginally by 1-2%, under both the standards.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter.
VGM Scores
At this time, ADSK has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. The stock was also allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, ADSK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Autodesk, Inc. (ADSK): Free Stock Analysis Report
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