AutoDesk: Strong Q1

| About: Autodesk, Inc. (ADSK)

Summary

AutoDesk reported a loss of $0.16 per share on top line revenue of $486 million beating analyst estimates on both the top and bottom line.

AutoDesk subscribers grew 186,000 from the subsequent quarter to a total of 3.29 million subscribers.

Recurring revenue now accounts for 90% of total revenue and ~33% of subscribers were first time customers to AutoDesk.

AutoDesk (NASDAQ:ADSK) is trading 10% higher after hours due to a smaller than expected loss for the first fiscal quarter of FY2018. The results are due to faster adoption of the new cloud based business model. Investors should stay bullish on AutoDesk as the fundamentals, a streamlined cloud offering, and expansion into emerging markets support the shares appreciation.

AutoDesk reported a loss of $0.16 per share on top line revenue of $486 million beating analyst estimates on both the top and bottom line. Analysts forecasted a loss of $0.24 per share on sales of $470.4 million.

Revenue was negatively affected due to accounting being measured ratable over the next year versus upfront due r transition into a subscription model.

Management broke out a more detailed view of revenue across three categories; subscription revenue, maintenance revenue and licenses and other. Most of the growth came from subscription and maintenance revenue. Subscription annualized revenue grew an astounding 103% to $692 million year over year. Maintenance plan, which is AutoDesk's service offering updates to active users, decreased 7% year over year to $1.05 billion. Management has ended its sale of the old perpetual licensing.

The first quarter saw an addition of 233,000 subscription plans, formerly known as the New Model, for a total of 1.32 million plan subscribers. Total subscriptions grew by 186,000 from the subsequent quarter to a total of 3.29 million subscribers.

During AutoDesk's conference call management explained that recurring revenue now accounts for 90% of total revenue and ~33% of subscribers were first time customers to AutoDesk. New customer growth was driven by AutoDesk's marketing campaigns and how the cloud offers ease of access in emerging markets. Revenue in the regions of EMEA and APAC were reported as $190 million and $86 million down 6% and 3% respectively. The relatively small decrease can be partially offset by the ratable accounting and issues related to currency conversion

Barron's had upgraded AutoDesk prior to the earnings to a price target of $120.00 citing the accelerating adoption by customers into the newer subscription model. To put this quarter into some context Barron's forecasted it's price target based on estimates of subscriber additions of 120,000-140,000. AutoDesk reported 46,000 more subscribers than the top end of this forecast and is trading at above $105.00 after hours. Further reasons for the upgrade came from AutoDesk's management ability to repatriate $1.7 billion in foreign cash as it plans to use the bulk of this to repurchase shares.

AutoDesk guided second quarter FY2018 revenue to $488 - $500 million and expects a loss of ($0.16) per share. AutoDesk also announced a few price increases of its products including a 5% increase in maintenance service. AutoDesk delivered strong quarterly results and is positioned to deliver continued growth in the second half of 2017.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Technical & System Software, Earnings
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