Back to top

Image: Bigstock

Autodesk (ADSK) Q2 Loss Lower than Expected, Guides Well

Read MoreHide Full Article

Autodesk Inc. (ADSK - Free Report) reported second-quarter fiscal 2017 adjusted loss (including stock-based compensation expense and amortization of capitalized stock-based compensation but excluding all other non-recurring items and related tax impact) of 10 cents a share, which compared favorably with the Zacks Consensus Estimate of a loss of 30 cents.

The company reported non-GAAP earnings per share of 5 cents in the quarter compared with earnings of 19 cents in the year-ago quarter.

The company also updated its outlook for fiscal 2017. Autodesk raised the lower-end of its revenue guidance, while loss per share is now expected be lower than earlier projections, which is a positive.

Quarter Details

Revenues in the quarter decreased 10% year over year to $550.7 million but beat the Zacks Consensus Estimate of $512.1 million. Revenues were impacted by a 21.3% year-over-year decline in License revenues to $228.7 million. The results in the quarter were impacted to some extent by the exit from perpetual license offerings. Subscription revenues however increased about 1% from the year-ago quarter to $322 million.

Total subscriptions increased approximately 109K from the prior quarter to 2.82 million in the quarter. New model subscriptions (desktop, enterprise flexible license, and cloud subscription) increased approximately 125K from the last quarter to 692K.

Segment wise, revenues from the Architecture, Engineering and Construction (AEC) business segment increased 8% from the year-ago quarter to $253 million.

Manufacturing revenues increased 3% on a year-over-year basis to $177 million.

Revenues from Platform Solutions and Emerging Business (PSEB) plummeted about 47% from the year-ago quarter to $86 million.

Sales from Autodesk’s Media and Entertainment (M&E) segment decreased 16% on a year-over-year basis to $34 million in the reported quarter.

Geographically, revenues in the Americas decreased 2% year over year to $230 million. EMEA revenues declined 2% to $221 million, while the same in APAC decreased 32% from the year-ago quarter to $100 million.

Operating Results

Adjusted gross margin contracted 22 basis points (bps) from the year-ago quarter to 86.5% in the reported quarter.

Adjusted operating expenses were $504.7 million during the quarter. Autodesk also recorded a restructuring related charge of $16 million in the quarter. As a result, the company’s profitability was impacted. Autodesk’s adjusted loss from operations was $28.4 million.

Balance Sheet

Autodesk exited the quarter with total cash and cash equivalents (including marketable securities) of $2.06 billion compared with $2.25 billion as on Jan 31, 2016.

Cash flow from operating activities for the six-month period ended Jul 31, 2016 was $146.4 million compared with $163.7million in the comparable period last year.

Outlook

For the third quarter of fiscal 2017, Autodesk expects revenues in the range of $470 million - $485 million. Non-GAAP loss per share (excluding stock-based compensation expense and amortization of acquisition-related intangibles) is expected in the range of 22 cents – 27 cents for the quarter.

For fiscal 2017, Autodesk continues to expect revenues in the range of $2,000 million - $2,050 million (earlier expectation was $1,950 million - $2,050 million). Non-GAAP loss (excluding stock-based compensation expense and amortization of acquisition-related intangibles) is expected in the range of 55 cents- 70 cents per share, better than the earlier projection of 70 cents - 95 cents per share. The company projects subscription additions for fiscal 2017 to be between 475,000 - 525,000.

Our Take

In the near term, Autodesk’s financials will likely be affected by increasing investments in cloud-based infrastructure and marketing initiatives. This is a concern as the company is yet to report profits. The other headwinds are foreign exchange fluctuations and competition in the cloud-computing domain from the likes of Amazon.com Inc. (AMZN - Free Report) , Microsoft Corp. (MSFT - Free Report) and Adobe Systems (ADBE - Free Report) .

Nonetheless, there will be some respite from the strength in its cloud business and growth in subscription. The company has transitioned its business from license to cloud, which is expected to benefit its profitability and margins going ahead.

AUTODESK INC Price, Consensus and EPS Surprise

 

AUTODESK INC Price, Consensus and EPS Surprise | AUTODESK INC Quote

Presently, Autodesk carries a Zacks Rank #4 (Sell).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Published in