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Autodesk (ADSK) Down 15% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Autodesk (ADSK). Shares have lost about 15% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Autodesk due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Autodesk Q2 Earnings & Revenues Beat Estimates, Up Y/Y

Autodesk reported second-quarter fiscal 2023 non-GAAP earnings of $1.65 per share, beating the Zacks Consensus Estimate of $1.56 per share by 5.8%. The bottom line improved 36.4% year over year.

The company reported revenues of $1.24 billion, surpassing the consensus mark of $1.22 billion. The figure grew 17% year over year. At a constant currency basis, revenues were up 17%. The upside was driven by new product subscriptions and higher renewal rates.

Top-Line Details

Autodesk’s subscription revenues (93.1% of total revenues) increased 16% year over year (up 17% on a constant currency basis) to $1.16 billion. However, maintenance revenues (1.4% of total revenues) remained flat year over year at $17 million. Other revenues (4.9% of total revenues) surged 30.4% to $60 million in the reported quarter.

Recurring revenues contributed 98% to Autodesk’s second-quarter fiscal 2023 revenues. The net revenue retention rate was within the 100-110% range.

Region-wise, revenues from the Americas (41.6% of revenues) increased 22% from the year-ago quarter’s levels to $515 million. Revenues from Europe, Middle East and Africa (EMEA), which accounted for 38.2% of revenues, climbed 15% to $473 million. Revenues from Asia-Pacific (20.1% of revenues) rallied 10% to $249 million.

Billings of $1.19 billion advanced 17% year over year in the reported quarter.

Products 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 (45.6% of revenues) revenues increased 18% year over year to $564 million. AutoCAD and AutoCAD LT (27.8% of revenues) revenues rose 13% to $344 million. MFG (19.6% of revenues) revenues increased 16% to $242 million.

M&E (5.7% of revenues) revenues surged 20% to $71 million, while other revenues (1.3% of revenues) increased 20% to $16 million.

Operating Results

Autodesk reported a non-GAAP operating income of $444 million, up 34.1% year over year.

Non-GAAP operating margin expanded 500 basis points (“bps”) from the year-ago quarter’s levels to 36%.

Balance Sheet & Cash Flow

As of Jul 31, 2022, Autodesk had cash and cash equivalents (including marketable securities) of $1.53 billion compared with $1.59 billion as of Apr 30, 2022.

Deferred revenues increased 12% to $3.70 billion. Unbilled deferred revenues at the end of the fiscal second quarter were $984 million, up 16.7% year over year.

Total remaining performance obligation (RPO) of $4.69 billion and current RPO of $3.14 billion increased 13% and 10%, respectively.

Cash flow from operating activities was $257 million, while free cash flow was $246 million in the reported quarter. During the first half of fiscal 2023, ADSK generated $691 million worth of cash from operational activities and its free cash flow was $668 million.

In the quarter under review, the company repurchased 1.4 million shares for $257 million at an average price of approximately $182 per share.

Guidance

For the third quarter of fiscal 2023, Autodesk expects revenues between $1.275 billion and $1.290 billion. Non-GAAP earnings are anticipated to be $1.66-$1.72 per share.

For fiscal 2023, Autodesk expects revenues between $4.985 billion and $5.035 billion, indicating growth of 14-15% year over year. Non-GAAP earnings are expected between $6.52 and $6.71 per share.

Billings are estimated to be $5.705-$5.805 billion, suggesting an increase of 18-21% year over year.

The company expects a non-GAAP operating margin of approximately 36% in fiscal 2023. Free cash flow is projected to be $2.000-$2.080 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 5.51% due to these changes.

VGM Scores

Currently, Autodesk has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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