Autodesk (ADSK 160.86, -2.15, -1.32%), a supplier of 3D computer-aided design (CAD)
software for architects, engineers, and product designers, is trading modestly
lower today after reporting Q4 (Jan) earnings results last night.
ADSK reported non-GAAP EPS of $0.46, which was above prior guidance of $0.40-0.44. Revenue rose 33.1% yr/yr to $737.3 mln, which was well above prior guidance of $700-710 mln. Looking ahead to Q1 (Apr), ADSK is guiding to non-GAAP EPS of $0.44-0.48 and revenue of $735-745 mln. While the revenue guidance was above market expectations, the EPS guidance came in below market expectations. But investors do not seem too concerned.
In addition to the financials, there are several operating metrics that investors watch closely with ADSK. The company views ARR (annualized recurring revenue) as the best proxy for measuring its progress and the overall health of the business.
Total ARR was $2.75 bln, an increase of 34% yr/yr. Subscription plan ARR was $2.20 bln, an increase of 87% yr/yr. Total subscriptions increased 252,000 from Q3 to 4.33 mln at the end of Q4. Subscription plan subscriptions benefited from 110,000 maintenance subscribers that converted to product subscription under the maintenance-to-subscription program. These numbers show that ADSK keeps winning new customers. In addition, a very high priority for ADSK has been to move more revenue to subscriptions. ADSK now has less than 20% of revenue coming from maintenance agreements.
An area of its portfolio ADSK has really been trying to build up is construction offering. A lot of this has been done by acquiring construction-based software offerings. In December, it closed on its acquisition of PlanGrid and BuildingConnected. This deal added bid management, risk analysis and other pre-construction offerings to Autodesk's construction portfolio. And earlier in 2018, ADSK acquired Assemble Systems, one of the first companies to recognize the power of BIM for pre-construction planning. It's clear that ADSK has been aggressively pursuing the construction market.
This fiscal year, ADSK's focus is on integrating these businesses. The broadened product portfolio will help ADSK expand its presence with general contractors, sub-contractors, and building owners. The feedback from customers regarding these acquisitions has been overwhelmingly positive and they are excited about the expansion of the portfolio. For instance, ADSK mentioned Clayco, a construction and design firm based in Chicago. It has been an Autodesk customer for many years. As users of BIM 360, Assemble, PlanGrid, and BuildingConnected, they have fully embraced the digitization of construction. Clayco is now automating their design and make activities throughout the pre-construction and construction processes.
On the manufacturing side, ADSK continues to attract global manufacturing leaders to partner with it. During the quarter, ADSK signed an Enterprise Agreement with Hyundai, which plans to leverage ADSK technologies to create innovative designs. Hyundai is very interested in using ADSK's capabilities in generative design to create innovation in the automotive space.
In sum, the JanQ results were quite good with nice upside. However, the AprQ guidance, especially EPS, is weighing on the stock this morning. As we cautioned in our preview, we thought expectations were running high heading into this report and that we would be cautious. The stock has made quite a move in recent months, going from $120 in late December to around $164 when the report was released. It's pulling back under $160 this morning. That's a lesson here, when a stock runs into an earnings report, expectations are high so weak guidance like ADSK had for AprQ today usually will impact the stock.
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