A month has gone by since the last earnings report for Autodesk (ADSK). Shares have added about 5.3% 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 Q2 Earnings Beat Estimates, Revenues Up Y/Y
Autodesk reported second-quarter fiscal 2020 non-GAAP earnings of 65 cents per share that beat the Zacks Consensus Estimate by 4 cents. Moreover, the figure was much better than earnings of 19 cents posted in the year-ago quarter.
Revenues of $797 million comfortably surpassed the consensus mark of $787 million and grew 30.3% year over year. At constant currency (cc), revenues were up 30%.
Recurring revenues represented 96% of Autodesk’s second-quarter fiscal 2020 revenues, flat year over year.
Subscription revenues (83.3% of revenues) soared 57.8% year over year to $663.7 million. However, maintenance revenues (13% of revenues) slumped 37.8% to $103.5 million.
Revenues were also positively impacted by a 19.8% year-over-year increase in other revenues (3.7% of revenues), which totaled $29.6 million in the reported quarter.
Direct revenues rose 38% year over year and accounted for 30% of revenues.
Geographically, revenues from the Americas (40.9% of revenues) increased 31.7% from the year-ago quarter to $325.9 million. Europe, Middle East and Africa (EMEA) revenues (39.7% of revenues) increased 27.3% to $316.2 million. Revenues from Asia-Pacific (19.4% of revenues) grew 33.5% to $154.7 million.
Product-wise, AEC (41.9% of revenues) revenues surged 37.5% year over year to $334.2 million. AutoCAD and AutoCAD LT (29% of revenues) revenues rose 31% to $231.3 million. MFG (21.9% of revenues) revenues increased 19.5% to $174.6 million. M&E (6.4% of revenues) grew 21.8% to $50.8 million. Moreover, other revenues (0.7% of revenues) jumped 40.5% to $5.9 million.
Manufacturing revenues were up 20% year over year. Adoption of Fusion 360 picked up, while Autodesk gained market share.
Billings of $893 million surged 48% year over year in the reported quarter.
Annualized Recurring Revenues in Detail
Annualized Recurring Revenues (ARR) were $3.07 billion, up 31% year over year. Latest acquisitions contributed $98 million to ARR. Notably, BIM 360 ARR growth accelerated in the reported quarter.
Subscription plan ARR of $2.65 billion surged 58% (59% at cc). The figure includes $566 million related to the maintenance-to-subscription (M2S) program.
However, maintenance plan ARR of $414 million declined 38% (39% at cc) from the year-ago quarter.
Core ARR rose 26% to $2.86 billion. Cloud ARR skyrocketed 175% to $207 million, driven by strong performance in construction. Organic Cloud ARR, which primarily comprises BIM 360 and Fusion 360, soared 43%.
Net revenue retention rate was within the fiscal 2019 range of 110-120%.
Non-GAAP gross margin expanded 190 basis points (bps) from the year-ago quarter to 91.7%.
Research & development, sales & marketing and general & administrative expenses as a percentage of revenues declined 340 bps, 780 bps and 120 bps year over year, respectively.
As a result, non-GAAP operating expenses, as a percentage of revenues, declined to 68.3% from 80.7% reported in the year-ago quarter.
The lower operating expenses reflected disciplined cost management in the reported quarter.
Autodesk reported non-GAAP operating income of $186.5 million compared with the year-ago quarter’s income of $55.6 million.
Balance Sheet & Cash Flow
As of Jul 31, 2019, Autodesk had cash and cash equivalents (including marketable securities) of $991.3 million compared with $972.1 million as of Apr 30, 2019.
Deferred revenues increased 25% to $2.25 billion. Unbilled deferred revenues at the end of the second quarter were $563 million.
Remaining performance obligations (RPO) totaled $2.81 billion, up 28%. Current RPO totaled $2.01 billion, up 23%.
Cash flow from operating activities was $219 million, increasing $176 million year over year. Free cash flow was $205 million, rising $181 million from the year-ago quarter.
For third-quarter fiscal 2020, Autodesk expects revenues between $820 million and $830 million. The Zacks Consensus Estimate for revenues is pegged at $836.47 million, indicating growth of 26.6% from the figure reported in the year-ago quarter.
Non-GAAP earnings are anticipated to be 70-74 cents per share. The consensus mark for earnings is pegged at 76 cents, much better than 29 cents reported in the year-ago quarter.
For fiscal 2020, Autodesk expects revenues between $3.24 billion and $3.27 billion, indicating growth of 26-27% year over year. The Zacks Consensus Estimate for revenues is pegged at $3.28 billion.
Billings are projected to be $4.02-$4.08 billion, implying growth of 49-51% year over year.
Total ARR is expected between $3.425 billion and $3.485 billion, indicating year-over-year growth of 25-27%.
Non-GAAP spend is expected to increase roughly 9%.
Non-GAAP earnings are expected between $2.69 and $2.81 per share. The consensus mark for earnings is pegged at $2.80.
Free cash flow is expected to be almost $1.30 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -15.09% due to these changes.
At this time, Autodesk has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Autodesk has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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