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Autodesk (ADSK) Q1 Earnings Top Estimates, Revenues In Line

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Autodesk Inc. ADSK reported first-quarter fiscal 2019 non-GAAP earnings of 6 cents per share, which beat the Zacks Consensus Estimate by 3 cents. In the year-ago quarter, the company had reported non-GAAP loss of 16 cents.

Revenues of $559.4 million matched the consensus mark but increased nearly 15.3% year over year. Billings of $411 million declined 18% year over year due to the impact of the adoption of ASC 606.

Moreover, total deferred revenues increased 21% to $2.22 billion in the quarter, which reflects growing strength of the business model. Total recurring revenues were 95%, a significant increase from 90% reported in the year-ago quarter.

Notably, shares of Autodesk have gained 32.6% year-to-date, substantially outperforming the industry’s 13.2% rally.



Quarter Details

Maintenance revenues (32.4% of total revenue) declined 21.9% from the year-ago quarter to $181.2 million, primarily due to lower subscriptions. Revenues were also impacted by a 41.9% year-over-year decline in Other revenues (5.1% of total revenues), which totaled $28.3 million in the quarter.

However, the company’s business model transition continues to be on track. Subscription revenues (62.6%) soared 102.1% year over year to $350.4 million, driven by strong product subscriptions and other subscription plan types. Total subscriptions increased approximately 101K from the prior quarter to 3.82 million.

Subscription plan (product, EBA and cloud subscriptions) increased approximately 307K from the last quarter to 2.57 million backed by new product subscriptions.

Maintenance-to-subscription (M2S) program recorded 154K subscriptions. Notably, 30% of the migrating subscribers upgraded to an Industrial Collection from an individual product. Demand from construction and manufacturing sector continues to remain a tailwind.

Total annualized recurring revenues (ARR) were $2.13 billion, up 22% from the year-ago quarter, driven by product subscription and Enterprise Business Agreement (EBA) subscriptions.

Subscription plan ARR of $1.40 billion surged 103% year over year and 101% on a constant currency (cc) basis, led by product subscriptions. However, maintenance plan ARR of $725 million declined 31% from the year-ago quarter and on a cc basis.

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.

New customers represented about 25% of the mix in the quarter and contributed a significant portion of subscription additions.

Moreover, growing adoption of cloud products by EBA customers is noteworthy. In the quarter, EBA accounts constituted more than half of the monthly active users for BIM 360.

Autodesk’s broad product portfolio continues to generate new customers in both domestic and overseas markets.  Geographically, revenues in the Americas increased 11% year over year to $234 million. EMEA revenues increased 16% to $221 million while the same from APAC increased 23% from the year-ago quarter to $106 million.

Autodesk, Inc. Price, Consensus and EPS Surprise

Autodesk, Inc. Price, Consensus and EPS Surprise | Autodesk, Inc. Quote

Operating Results

Non-GAAP gross margin expanded 370 basis points (bps) from the year-ago quarter to 89.3%.

Research & development, sales & marketing and general & administrative expenses, as a percentage of revenues, declined 660 bps, 210 bps and 90 bps, respectively.

Non-GAAP operating expenses as a percentage of revenues declined 960 bps to 84.2%.

The company reported non-GAAP operating income of $29 million in the quarter as against the year-ago quarter’s operating loss of $39.5 million.

Balance Sheet

Autodesk exited the quarter with total cash and cash equivalents (including marketable securities) of $1.29 billion compared with $1.32 billion as of Jan 31, 2018.

The company used $16.9 million of cash for operating activities in the quarter, compared with $0.9 million of cash generated from operations in the previous quarter.

The company repurchased 200k shares in the quarter.

Outlook

For second-quarter fiscal 2019, Autodesk expects revenues in the range of $595-$605 million.

Non-GAAP earnings per share are anticipated in the range of 13-16 cents for the quarter.

The company expects higher expenses in the quarter due to an increase in hiring.

For fiscal 2019, the company reaffirmed its earlier revenue guidance range of $2.455-$2.505 billion.

Billings are now projected to be in the range of $2.560-$2.660.

Non-GAAP earnings per share are reiterated to be in the range of 77 cents to 95 cents.

Autodesk maintained its earlier guidance for subscription additions to be in the range of 500K and 550K. Net subscription addition will continue to be impacted due to consolidation of subscriptions owing to upgrade to Collections. Moreover, new packaging for BIM 360 will also lead to consolidation of cloud subscriptions in the upcoming quarters.

Total ARR is still expected to be in the range of 28% to 30%. Non-GAAP spending is expected to increase marginally by 1-2%.

Management expects M2S migrations to be the highest in fiscal 2019 as cost to switch (up 5%) is lesser than the cost of staying on maintenance plan (up 10%).

Zacks Rank & Stocks to Consider
 
Autodesk currently carries Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Twitter TWTR, Micron Technology MU and Western Digital WDC, all sporting a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks Rank #1 stocks here.

Long-term earnings growth rate for Twitter, Micron and Western Digital is projected to be 23.1%, 10% and 19%, respectively.

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