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Why Is Autodesk (ADSK) Down 19.1% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Autodesk, Inc. (ADSK - Free Report) . Shares have lost about 19.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Autodesk reported third-quarter fiscal 2018 non-GAAP loss of 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 13 cents. The figure was within the guided range of a loss of 12–16 cents per share.
Revenues of $515.3 million beat the consensus mark of $514.1 million and increased nearly 5.3% year over year. The figure was within the guided range of $505–$515 million.
Moreover, deferred revenues increased 15% to $1.76 billion in the quarter, which reflects growing strength of the business model. Total recurring revenue was 92% in the reported quarter, a significant increase from 78% reported in the year-ago quarter.
Per Autodesk, restructuring will drive long-term growth by realigning investments in strategic areas like digital infrastructure, facilitating development of core products and increasing spend on construction opportunities.
Quarter Details
Revenues were impacted by a 61.7% year-over-year decline in License revenues (7.7% of total revenue), which were $39.8 million in the quarter.
Maintenance revenues (47.4% of total revenue) also declined 10.5% from the year-ago quarter to $244.4 million, primarily due to lower subscriptions.
However, the company’s business model transition continues to be on track. Subscription revenues soared 105.6% year over year to $231.1 million, driven by strong product subscriptions.
Total subscriptions increased approximately 146K from the prior quarter to 3.6 million in the quarter. Subscription plan (product, end-of-life and cloud subscriptions) increased approximately 307K from the last quarter to 1.90 million.
The company’s maintenance to subscription or M2S program recorded 110K subscriptions. New customers represented about 30% of the mix in the quarter and contributed a significant portion of subscription additions.
Autodesk is also gaining from the Enterprise Business Agreement (EBA) program. In the quarter, the company witnessed a substantial increase in deals valued at over $1 million with significant contribution from EBAs. Notably, Autodesk won large EBA renewals this quarter from two engineering companies, each of which increased their annual contract value by more than 50%.
Cloud subscription additions were impressive driven by robust performance of BIM 360 and Fusion tools. The company’s focus to fast integrate new technology into Fusion 360, advancement of BIM 360 platform and the growth of its Forge platform are positives.
Total annualized recurring revenues (ARR) were $1.90 billion, up 24% from the year-ago quarter and 25% on a constant currency (cc) basis. Subscription plan ARR surged 108% at cc.
Autodesk’s broad product portfolio continues to generate new customers in both domestic and overseas markets. Geographically, revenues in the Americas increased 1% year over year to $215 million. EMEA revenues increased 8% to $205 million, while the same from APAC increased 12% from the year-ago quarter to $95 million.
Operating Results
Non-GAAP gross margin expanded 30 basis points (bps) from the year-ago quarter to 86.5%.
The company reported non-GAAP operating loss of $26.2 million in the quarter compared with the year-ago quarter’s operating loss of $42.9 million.
Balance Sheet
Autodesk exited the quarter with total cash and cash equivalents (including marketable securities) of $1.45 billion compared with $1.90 billion as of Jan 31, 2017.
However, the company lost $78.4 million of cash from operating activities as of Oct 31, 2017.
Outlook
For fourth-quarter fiscal 2018, Autodesk expects revenues in the range of $537–$547 million. Non-GAAP loss per share is anticipated in the range of 10 cents to 14 cents for the quarter.
Buoyed by the encouraging third-quarter results, Autodesk revised its full-year revenue and EPS expectations. The company now expects revenues in the range of $2.040-$2.050 billion (mid-point $2.045 billion) compared with the prior guidance of $2.030–$2.040 billion (mid-point $2.040). Non-GAAP loss is now expected in the range of 54 cents to 61 cents compared with the previous guidance of 49 cents to 53 cents.
Autodesk now projects subscription additions to be between 625K and 650K compared with the prior guidance of 625K and 675K. Total ARR is still expected to be in the range of 24% to 26%. Non GAAP spending is expected to remain unchanged on a year-over-year basis.
The company also anticipates pretax charges of $135-$149 million owing to the restructuring plan undertaken by it. Of this, nearly $91-$100 million is expected to be incurred in the fourth quarter and the rest of it in the next fiscal.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
At this time, Autodesk's stock has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. However, 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 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 momentum investors based on our style scores.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is Autodesk (ADSK) Down 19.1% Since the Last Earnings Report?
A month has gone by since the last earnings report for Autodesk, Inc. (ADSK - Free Report) . Shares have lost about 19.1% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Recent Earnings
Autodesk reported third-quarter fiscal 2018 non-GAAP loss of 12 cents per share, narrower than the Zacks Consensus Estimate of a loss of 13 cents. The figure was within the guided range of a loss of 12–16 cents per share.
Revenues of $515.3 million beat the consensus mark of $514.1 million and increased nearly 5.3% year over year. The figure was within the guided range of $505–$515 million.
Moreover, deferred revenues increased 15% to $1.76 billion in the quarter, which reflects growing strength of the business model. Total recurring revenue was 92% in the reported quarter, a significant increase from 78% reported in the year-ago quarter.
Per Autodesk, restructuring will drive long-term growth by realigning investments in strategic areas like digital infrastructure, facilitating development of core products and increasing spend on construction opportunities.
Quarter Details
Revenues were impacted by a 61.7% year-over-year decline in License revenues (7.7% of total revenue), which were $39.8 million in the quarter.
Maintenance revenues (47.4% of total revenue) also declined 10.5% from the year-ago quarter to $244.4 million, primarily due to lower subscriptions.
However, the company’s business model transition continues to be on track. Subscription revenues soared 105.6% year over year to $231.1 million, driven by strong product subscriptions.
Total subscriptions increased approximately 146K from the prior quarter to 3.6 million in the quarter. Subscription plan (product, end-of-life and cloud subscriptions) increased approximately 307K from the last quarter to 1.90 million.
The company’s maintenance to subscription or M2S program recorded 110K subscriptions. New customers represented about 30% of the mix in the quarter and contributed a significant portion of subscription additions.
Autodesk is also gaining from the Enterprise Business Agreement (EBA) program. In the quarter, the company witnessed a substantial increase in deals valued at over $1 million with significant contribution from EBAs. Notably, Autodesk won large EBA renewals this quarter from two engineering companies, each of which increased their annual contract value by more than 50%.
Cloud subscription additions were impressive driven by robust performance of BIM 360 and Fusion tools. The company’s focus to fast integrate new technology into Fusion 360, advancement of BIM 360 platform and the growth of its Forge platform are positives.
Total annualized recurring revenues (ARR) were $1.90 billion, up 24% from the year-ago quarter and 25% on a constant currency (cc) basis. Subscription plan ARR surged 108% at cc.
Autodesk’s broad product portfolio continues to generate new customers in both domestic and overseas markets. Geographically, revenues in the Americas increased 1% year over year to $215 million. EMEA revenues increased 8% to $205 million, while the same from APAC increased 12% from the year-ago quarter to $95 million.
Operating Results
Non-GAAP gross margin expanded 30 basis points (bps) from the year-ago quarter to 86.5%.
The company reported non-GAAP operating loss of $26.2 million in the quarter compared with the year-ago quarter’s operating loss of $42.9 million.
Balance Sheet
Autodesk exited the quarter with total cash and cash equivalents (including marketable securities) of $1.45 billion compared with $1.90 billion as of Jan 31, 2017.
However, the company lost $78.4 million of cash from operating activities as of Oct 31, 2017.
Outlook
For fourth-quarter fiscal 2018, Autodesk expects revenues in the range of $537–$547 million. Non-GAAP loss per share is anticipated in the range of 10 cents to 14 cents for the quarter.
Buoyed by the encouraging third-quarter results, Autodesk revised its full-year revenue and EPS expectations. The company now expects revenues in the range of $2.040-$2.050 billion (mid-point $2.045 billion) compared with the prior guidance of $2.030–$2.040 billion (mid-point $2.040). Non-GAAP loss is now expected in the range of 54 cents to 61 cents compared with the previous guidance of 49 cents to 53 cents.
Autodesk now projects subscription additions to be between 625K and 650K compared with the prior guidance of 625K and 675K. Total ARR is still expected to be in the range of 24% to 26%. Non GAAP spending is expected to remain unchanged on a year-over-year basis.
The company also anticipates pretax charges of $135-$149 million owing to the restructuring plan undertaken by it. Of this, nearly $91-$100 million is expected to be incurred in the fourth quarter and the rest of it in the next fiscal.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
Autodesk, Inc. Price and Consensus
Autodesk, Inc. Price and Consensus | Autodesk, Inc. Quote
VGM Scores
At this time, Autodesk's stock has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. However, 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 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 momentum investors based on our style scores.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.