Autodesk (ADSK), a supplier of 3D computer-aided design (CAD) software primarily intended for architects, engineers, and product designers, is trading lower today after reporting Q1 (Apr) earnings results last night.
ADSK reported non-GAAP EPS of $0.45, which was within the company's prior guidance of $0.44-0.48 but below market expectations. Revenue rose 31.4% yr/yr to $735.5 mln, which also was at the low end of prior guidance of $735-745 mln and below market expectations. Looking ahead to Q2 (Jul), ADSK is guiding to non-GAAP EPS of $0.59-0.63 and revenue of $782-792 mln. Both ranges are in-line. Full year EPS and revenue outlooks were reaffirmed.
The headline here is that this was ADSK's first EPS miss in five years; this was not expected, and it has spooked investors. On the call, CEO Andrew Anagnost said that the revenue shortfall was "primarily driven by linearity, as we closed more business later in the quarter than anticipated, which affected the amount of ratable revenue recognized in the quarter." He made sure to say that "[o]verall demand in our end markets was robust, as indicated by our strong billings and revenue growth." On a geographic basis, ADSK "saw broad based strength across all regions," according to Anagnost. Revenue grew 35% in EMEA and APAC and 27% in the Americas.
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 $2.83 bln, an increase of 33% yr/yr. Subscription plan ARR was $2.38 bln, an increase of 70% yr/yr.
As we mentioned in our preview, ADSK has been transitioning its business away from maintenance revenue and toward recurring revenue for its core design platforms. ADSK says that it's effectively finished with this business model transition, and that was evident in the AprQ results, as maintenance revenue comprised just 15.2% of total revenue in the quarter vs 32.4% in the prior year period.
ADSK has also been making a big push to boost its construction offerings as it has made a number of recent acquisitions in this area. In fact, AprQ was the first full quarter with all recent acquisitions in the fold, and it sounds like integration efforts are going well.
On the call, Anagnost said that the company is seeing "continued strength across the portfolio as we execute on our strategy to deliver a comprehensive... platform that seamlessly connects the office, the trailer, and the field." ADSK has been integrating PlanGrid and BuildingConnected into his core portfolio. "Both acquired companies showed impressive growth, which is important to call out considering that acquisitions typically see a slow down during the integration phase, whereas we experienced accelerating momentum."
Overall, the miss seems to have spooked investors. Management sounded quite bullish during the call in terms of demand, and it seems like the shortfall was caused by deals closing later than expected. However, investors will want to see improvement in JulQ.