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Autodesk (ADSK) Up 15.7% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Autodesk (ADSK). Shares have added about 15.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Autodesk due for a pullback? 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.

Autodesk Q1 Earnings Beat Estimates, Revenues Up Y/Y

Autodesk reported first-quarter fiscal 2021 non-GAAP earnings of 85 cents per share that beat the Zacks Consensus Estimate by 4.5%.

Moreover, the earnings figure increased 88.9% year over year driven by growth in subscription plan revenues, led by product subscription revenues.

Revenues of $885.7 million beat the consensus mark by 1.2% and grew 20.4% year over year. At constant currency (cc), revenues were up 22%. The growth was driven by higher subscription revenues despite softness in software spending due to coronavirus outbreak.

Autodesk benefited from the ongoing transition to cloud. The company witnessed increased usage of its cloud collaboration products due to the remote working wave throughout the quarter.

Top-Line Details

Subscription revenues (90.7% of revenues) increased 34.8% year over year to $803 million.

However, maintenance revenues (7% of revenues) slumped 414.6% to $62.1 million. Moreover, other revenues (2.3% of revenues) decreased 25.6% to $20.6 million in the reported quarter.

Recurring revenues represented 98% of Autodesk’s first-quarter fiscal 2021 revenues. Net revenue retention rate was within 110% to 120%.

Geographically, revenues from the Americas (40.9% of revenues) increased 22.4% from the year-ago quarter to $362.2 million. Europe, Middle East and Africa (EMEA) revenues (38.9% of revenues) increased 16% to $344.8 million. Revenues from Asia-Pacific (20.2% of revenues) grew 25.4% to $178.7 million.

In February, Autodesk witnessed rapid decline in usage in China, which, however, rebounded above pre-coronavirus levels by the end of March as businesses started reopening in the country.

Billings of $884 million increased 11% year over year in the reported quarter.

Product-wise Top-line Details

Autodesk offers primarily four product families, Architecture, Engineering and Construction (AEC), AutoCAD and AutoCAD LT, Manufacturing (MFG), and Media and Entertainment (M&E).

AEC (43.2% of revenues) revenues increased 25.8% year over year to $382.7 million. AutoCAD and AutoCAD LT (29.6% of revenues) revenues rose 23% to $262.2 million. MFG (20.7% of revenues) revenues increased 9.2% to $182.9 million.

Meanwhile, M&E (5.9% of revenues) increased 15.6% to $52.6 million. Moreover, other revenues (0.6% of revenues) grew 6% to $5.3 million.

Autodesk witnessed steady renewal rates during the reported quarter and in May. Partial renewal rates remained relatively steady as well.

Operating Results

Non-GAAP gross margin expanded 150 basis points (bps) from the year-ago quarter to 92.2%.

Research & development, marketing & sales and general & administrative expenses as a percentage of revenues declined 350 bps, 440 bps and 60 bps year over year, respectively.

As a result, non-GAAP operating expenses, as a percentage of revenues, contracted 850 bps from the year-ago quarter to 64.2%.

The lower operating expenses reflected disciplined cost management in the reported quarter. The company reduced travel and entertainment expense and monitored hiring rate and marketing spend amid the coronavirus lockdown.

Autodesk reported non-GAAP operating income of $247.8 million compared with the year-ago quarter’s figure of $131.9 million.

Key Q1 Details

During the quarter, Autodesk announced free and extended access to cloud collaboration products including BIM 360 Docs, BIM 360 Design, Fusion 360, Fusion Team, AutoCAD Web and Mobile, and Shotgun for its customers. The company also launched COVID-19 Autodesk Resource Center as a measure to combat coronavirus.

The company collaborated with British supercar manufacturer Briggs Automotive Company (BAC) to apply generative design methods to the latter’s design and manufacturing process.

Moreover, Autodesk announced BIM 360 Design, part of Autodesk Construction Cloud, an expanded global collaboration with a new Europe-based data center offering for primary storage of product data. Also, the company established a connection to collaborate for Plant 3D.

On Apr 14, Autodesk announced an alliance with Aurigo software to bolster construction technology offering for owners. The integration of Aurigo with Autodesk Construction Cloud will give owners a single end-to-end technology platform for design, planning, construction and operations of infrastructure and private assets.

Balance Sheet & Cash Flow

As of Apr 30, 2020, Autodesk had cash and cash equivalents (including marketable securities) of $1.46 billion compared with $1.84 billion as of Jan 31, 2020.

Deferred revenues increased 40% to $3.01 billion. Unbilled deferred revenues at the end of the fourth quarter were $470 million.

Remaining performance obligations (RPO) totaled $3.5 billion, up 27%. Current RPO totaled $2.4 billion, up 18%.

The company repurchased shares worth $189 million. Cash flow from operating activities was $327 million, compared with $698 million posted in the previous quarter. Free cash flow was $307 million, compared with the previous quarter’s figure of $684 million.

Guidance

For second-quarter fiscal 2021, Autodesk expects revenues between $890 million and $905 million. The Zacks Consensus Estimate for revenues is pegged at $917.4 million, indicating growth of 15.1% from the figure reported in the year-ago quarter.

Autodesk expects new business activity in the second quarter to be most impacted by the pandemic. The company remains cautious on new business closure rates. Moreover, it expects a decline in renewal rates in the second quarter.

Non-GAAP earnings are anticipated to be in the range of 86-92 cents per share. The consensus mark for earnings is pegged at 98 cents, indicating 50.8% growth from the figure reported in the year-ago quarter.

For fiscal 2021, Autodesk expects revenues between $3.67 billion and $3.77 billion, indicating growth in the range of 12-15% year over year. The Zacks Consensus Estimate for revenues is pegged at $3.79 billion.

Billings are projected to be $4.07-$4.22 billion, implying a decline of 3% to growth of 1% year over year.

Further, net revenue retention rate is expected to remain above 100% but below the current range of 110 for the rest of the year.

Non-GAAP earnings are expected between $3.52 and $3.90 per share. The consensus mark for earnings is pegged at $4.17 per share.

Free cash flow is expected between $1.3 billion and $1.4 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.76% due to these changes.

VGM Scores

Currently, Autodesk has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Autodesk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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