Citi, Credit Suisse, Cowen, and Morgan Stanley have upgraded Autodesk (ADSK +4.1%) following its investor day. Shares are making fresh highs.
The main catalyst: Autodesk disclosed it will stop selling up-front licenses in 12-24 months to further migrate its base to cloud/subscription-based services. Adobe made a similar move last year (in part to combat piracy), and the results have been solid thus far. Autodesk had 1.94M subscribers at the end of July, and has guided for 200K-250K FY15 subscriber adds.
Credit Suisse, which has also upped its target by $20 to $70: "We believe that several significant changes to its business model will result in meaningful long-term upside to revenue (at limited incremental cost) and, therefore, operating profitability that is not reflected in consensus estimates or the stock's valuation."
Autodesk also guided for a 12% billings CAGR from FY14-18, and that its value/account and subscriptions would respectively rise 20% and 50% over this time. The company hopes to get over 70% of its revenue from recurring streams by FY18, and to grow its op. margin to 30%. FY15 op. margin guidance is at 15%-16%.
In tandem with the hosting of its investor day, Autodesk (NASDAQ:ADSK) has named Scott Herren, formerly Citrix Systems' finance SVP, its new CFO, effective Nov. 1. Herren's hiring follows ex-CFO Mark Hawkins' departure for Salesforce.
The CAD software giant is also reiterating its FQ3 and FY15 (ends Jan. '15) guidance.
Up sharply at first in response to its FQ2 beat and FY15 guidance hike, Autodesk (ADSK -4.6%) has reversed course. Volume is already over 5x the daily average.
Citi, which is reiterating a Sell, notes license revenue growth is being fueled by upgrades rather than new licenses, as customers take advantage of a promotion that ends in FY15. It also isn't impressed with Autodesk's (raised) guidance for 200K-250K FY15 subscriber adds, given it added ~250K in FY13 with less help from promotions.
On the other hand, RBC (Outperform) calls Autodesk's numbers "very strong," and thinks improving macro conditions are helping. It admits FY16 sub growth remains a question mark, but argues new maintenance adds, cloud growth, and the potential ending of perpetual license sales can provide a boost.
Pac Crest (Outperform) is upbeat: It observes FQ2 sub adds of 74K blew away expectations of 32K, and is pleased with CC remarks (transcript) indicating Autodesk's cloud offerings are reeling in new customers, and that the company sees as much as a 20% increase in total contract value when existing customers migrate to the cloud.
Autodesk (NASDAQ:ADSK) expects FQ3 revenue of $590M-$605M and EPS of $0.17-$0.23 vs. a consensus of $588.2M and $0.28. As is the case with Adobe, Nuance, and others, near-term EPS is pressured by a shift from licenses to subscriptions (leads revenue recognition to be deferred).
Autodesk's FY15 (ends Jan. '15) billings and revenue growth guidance ranges have respectively been hiked to 10%-12% and 7%-9% from 7%-9% and 4%-6%. Subscriber add guidance has been hiked by 50K to 200K-250K.
FQ2 results trounced estimates on the back of a 27% Y/Y increase in billings - that's sharply above FQ1's 10%. Subscriptions grew by 74K to 2.01M, and the deferred revenue balance rose 2% Q/Q and 22% Y/Y to $981M.
Americas revenue +11% Y/Y to $223M; EMEA +21% to $244M; Asia-Pac +8% to $170M.
Driving growth: Architecture, engineering, & construction sales rose 23% Y/Y to $218M, and manufacturing sales rose 17% to $168M. Platform solutions/emerging business revenue rose 5% to $208M, and media/entertainment was flat at $44M.
GAAP opex +22% to $499.3M, with big growth in both sales/marketing and R&D spend. 1.9M shares were repurchased.
Adobe beat May quarter estimates on the back of better-than-expected Creative Cloud subscriber growth, and also hiked its FY14 sub growth forecast. All of that is going over well with Autodesk (ADSK +3.8%) investors.
Autodesk's 3ds Max (3D modeling/rendering) and Maya (3D animation) software targets many of the same media/publishing firms Adobe sells Creative Cloud to. Moreover, Autodesk is undergoing a similar transition towards cloud/subscription-based revenue streams.
Autodesk (ADSK -0.7%) has bought Bitsquid, the Swedish creator of a 3D game engine used by multiple console/PC game developers. Terms are undisclosed.
Autodesk says it'll use Bitsquid's engine to "supercharge its portfolio of tools for game makers through the development of a new 3D game engine," as well as to "create new tools that push the limits of real-time 3D visualization for architects and designers."
The company goes as far as to say the deal will "revolutionize real-time exploration of complex data" for CAD projects. "Imagine being able to walk through and explore any type of design, from buildings to cars, with the same freedom you experience in the open world of a next-generation console game."
The purchase comes as the gaming industry's E3 conference gets underway. Autodesk already sells its Maya animation software and 3ds Max modeling/rendering software to game developers.
Autodesk (ADSK) expects FQ2 revenue of $595M-$610M and EPS of $0.25-$0.30 vs. a consensus of $576.3M and $0.28.
Moreover, the company is hiking its respective FY15 (ends Jan. '15) billings and revenue growth guidance ranges to 7%-9% and 4%-6% from prior ranges of 5%-8% and 3%-5%. The revenue growth consensus is currently at 3.7%.
Billings, which (unlike revenue) take into account deferred revenue tied to cloud subscriptions, grew 10% Y/Y in FQ1, easily outpacing rev. growth of 4%. Subscriptions rose by 89K Q/Q to 1.94M, and the deferred revenue balance by 7% Q/Q and 13% Y/Y to $964M.
Subscription revenue accounted for 47% of revenue vs. 45% in FQ4. Opex rose 12% Y/Y to $471.6M.
Americas sales +2% Y/Y, EMEA +4%, Asia-Pac +6%. Architecture, Engineering, and Construction was a strong point (sales +14%), and Media & Entertainment a weak point (-19%).
Good news for 3D printer vendors: (DDD, SSYS, VJET, XONE): CAD software giant Autodesk (ADSK) plans to launch Spark, an open-source software platform it hopes will lower software costs (both 3rd-party licensing and in-house R&D) for printer makers, and also improve/ease the design process for users.
Bad news: To show off Spark, Autodesk plans to make a reference printer whose design "will be made publicly available to allow for further development and experimentation." CEO Carl Bass calls the printer "a midmarket industrial machine," and notes similar hardware typically costs ~$5K.
Autodesk's printer will rely on stereolithography (SLA), a printing process less frequently used than fused deposition modeling (FDM) in mass-market printers, but which is gaining steam thanks to speed/reliability benefits and patent expirations. The company promises a wide range of materials will be supported.
Autodesk, which reports tomorrow, is undoubtedly hoping to drive further usage of its CAD software, already used in plenty of 3D printing projects. Its efforts could have implications for software vendor Materialise (recently filed for an IPO).
Earlier: ExOne -12.8% AH on Q1 miss, margin pressure