A month has gone by since the last earnings report for Autodesk (ADSK Quick QuoteADSK - Free Report) . Shares have added about 10% 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 Q3 Earnings Top Estimates

Autodesk reported third-quarter fiscal 2022 non-GAAP earnings of $1.33 per share that beat the Zacks Consensus Estimate by 6.4% and increased 27.9% year over year.

Revenues of $1.126 billion beat the consensus mark by 0.7% and rose 18% year over year. At constant currency (cc), revenues were up 17%. The upside was driven by new product subscriptions and higher renewal rates.

Top-Line Details

Subscription revenues (95.1% of revenues) increased 21% year over year (up 19% on a constant currency basis) to $1.071 billion.

However, maintenance revenues (1.6% of revenues) slumped 56% to $18 million. Other revenues (3.3% of revenues) increased 33% to $37.5 million in the reported quarter.

Recurring revenues contributed 97% to Autodesk’s third-quarter fiscal 2022 revenues. Net revenue retention rate was within the 100-110% range.

Geographically, revenues from the Americas (41% of revenues) increased 18% from the year-ago quarter’s levels to $461.9 million. Europe, Middle East and Africa (EMEA) revenues (38.5% of revenues) increased 19% to $433.2 million. Revenues from Asia-Pacific (20.5% of revenues) rallied 18% to $230.7 million.

Billings of $1.168 billion increased 16% 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) as well as Media and Entertainment (M&E).

AEC (45.4% of revenues) revenues increased 22% year over year to $511.1 million. AutoCAD and AutoCAD LT (28.3% of revenues) revenues rose 14% to $318.4 million. MFG (20% of revenues) revenues increased 16% to $225 million.

M&E (5.6% of revenues) increased 17% to $63 million, while other revenues (0.7% of revenues) increased 36% to $8.3 million.

Operating Results

Non-GAAP gross margin contracted 100 basis points (bps) from the year-ago quarter’s figures to 92%.

Non-GAAP operating expenses increased 13.4% year over year to $675.2 million in the quarter under review. 

Autodesk reported a non-GAAP operating income of $365 million, up 27.1% year over year. Non-GAAP operating margin expanded 200 bps from the year-ago quarter’s levels to 32%.

Balance Sheet & Cash Flow

As of Oct 31, 2021, Autodesk had cash and cash equivalents (including marketable securities) of $1.792 billion compared with $924.9 million as of Jul 31, 2021.

Deferred revenues increased 14% to $3.3 billion. Unbilled deferred revenues at the end of the fiscal third quarter were $888.5 million, up 36.8% year over year.
Total RPO of $4.2 billion and current RPO of $2.9 billion increased 18% and 21%, respectively.

In the quarter under review, the company repurchased 980,000 shares for $287 million at an average price of approximately $293 per share. Cash flow from operating activities was $270 million compared with $202 million posted in the previous quarter. Free cash flow was $257 million compared with the previous quarter’s figure of $186 million.

Guidance

For fourth-quarter fiscal 2022, Autodesk expects revenues between $1.185 billion and $1.2 billion. Non-GAAP earnings are anticipated in the range of $1.41-$1.47 per share.

Owing to supply chain troubles, labor shortage, highly-evolving COVID situation and certain country-specific challenges, Autodesk lowered fiscal 2022 billings and free cash flow outlook at the mid-point by $150 million and $100 million, respectively.

Billings are now projected to be $4.74-$4.8 billion, suggesting an increase of 14-16% year over year. Previously, billings were projected to be $4.875-$4.795 billion, indicating an increase of 18-20% year over year.

Free cash flow is expected between $1.42 billion and $1.46 billion compared with the earlier guidance of $1.5-$1.575 billion.

For fiscal 2022, Autodesk expects revenues between $4.36 billion and $4.375 billion, indicating growth of 15% year over year. Earlier, Autodesk projected revenues between $4.345 billion and $4.385 billion, indicating growth of 15-16% year over year.

Non-GAAP earnings are expected between $4.98 and $5.04 per share compared with $4.91-$5.06 per share projected earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Autodesk has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly 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.