Autodesk (NASDAQ:ADSK) delivered once again strong quarterly figures, with both revenues ($637m vs. consensus of $604m) and EPS ($0.35 vs. consensus of $0.28) coming in ahead of expectations. Revenue growth accelerated to 13% vs. 4% in Q1 as strength was relatively broad-based, with both Construction (32% of revenues) and Manufacturing (25% of revenues) performing well (+23% and +17% respectively) and with most geographies contributing to the beat. Asia was solid at +8% despite the temporary economic slowdown in Japan due to the recent implementation of the sales tax hike. Importantly, the business model transition from licenses to Cloud & subscriptions continued to perform ahead of expectations, leading Autodesk to raise its FY15 net adds target to 200-250K from 150-200K. Billings growth, now widely viewed as a key metric as it takes into account the business model transition, accelerated to 27% in Q2 from 12% in Q1, boding well for future revenue growth.
We have been saying since our January article "Autodesk: A Different And Safer Way To Play The 3-D Printing Revolution" that Autodesk was likely to keep surprising on the upside, as the company's two main verticals (Construction and Manufacturing) benefited from an increasingly supportive environment: a strong commercial construction market (which typically lags residential construction recoveries by 6-12 months) and an improving macro for Autodesk's Manufacturing customers, notably in the important Japan and Europe geographies. We believe that these drivers remain intact and that the revenue & earnings revision cycle (FY15 revenue growth guidance raised to 7-9% from 4%-6%) will remain positive in coming quarters. We also explained in our previous articles that the model shift from licenses to Cloud was a clear positive as revenue streams would become more recurring and predictable (based on subscriptions) and as new paying users would join (upfront costs are more attractive vs. licenses).
In conclusion, we reiterate that Autodesk is a different and safer way to play the 3-D printing revolution, with valuation levels and earnings expectations much more decent than 3-D printing stocks such as 3D Systems (NYSE:DDD). Note that the January 2015 P/E is expensive at first sight (46x) but that this is due to Autodesk's financials being distorted by the current model transition. Assuming a normative operating margin of 30%, the stock's P/E would stand slightly above 20x, which is not overly demanding for a software company with a leading position and the opportunity to play a key role in the 3-D printing revolution.
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