Autodesk (ADSK 156.40, +20.09, +14.74%) is trading higher today after reporting Q2 (Jul)
results and providing guidance. Autodesk offers a broad suite of 3D
computer-aided design (CAD) software and tools. Its customers are architects,
engineers, product designers, manufacturing firms, and digital
media/entertainment firms. Its products allow customers to build things by
visualizing, simulating, and analyzing real-world performance early in the
Its largest product is its AutoCAD software, which is a customizable CAD application for professional design, drafting, detailing, and visualization. Its AutoCAD software provides digital tools that can be used in fields ranging from construction and civil engineering to manufacturing and plant design.
ADSK also offers AutoCAD LT software, which is purpose built for professional drafting and detailing. Users can share all design data with team members who use AutoCAD or other Autodesk products built on AutoCAD. AutoCAD LT software is the company's second largest revenue-generating product.
Another key product is Industry Collections, which launched in August 2016. This is ADSK's newest subscription offering. The collections are tailored for each industry: AEC, Product Design, and M&E. The AEC Collection is used for building and civil infrastructure projects, commonly used by AEC industry experts, such as AutoCAD, AutoCAD Civil3D, and Revit. The Product Design Collection offers tools that help customers with product design, this includes AutoCAD and Inventor. The M&E Collection enables animators, modelers, and visual effect artists to access the tool they need, including Maya and 3ds Max, to create compelling effects, 3D characters, and digital worlds.
Turning to the Q2 (Jul) results, ADSK reported non-GAAP EPS of $0.19, which was above prior guidance of $0.13-0.16. Revenue rose 21.9% year/year to $611.7 mln, which was above prior guidance of $595-605 mln. Looking ahead to Q3 (Oct), ADSK is guiding to non-GAAP EPS of $0.24-0.28 and revenue of $635-645 mln. While the revenue guidance was above market expectations, the mid-point of the EPS guidance came in below market expectations.
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. Subscription plan ARR in JulQ was $1.68 bln, an increase of 115% year/year. Total ARR was $2.35 bln, an increase of 28%. Subscription plan subscriptions increased 290,000 sequentially to 2.86 mln, this was helped by 117,000 maintenance subscribers that converted to product subscription under the maintenance-to-subscription (M2S) program. Total subscriptions increased 119,000 sequentially to 3.94 mln. ADSK also reaffirmed prior guidance for total ARR growth of +28-30% in FY19 and they reaffirmed prior guidance for 500-550K net subscription adds.
On the call, ADSK said these results were spurred by a healthy demand environment and continued execution. ADSK had record growth in total ARR and total ARPS on both a year/year and sequential basis. ADSK continues to see steady migration of maintenance customers to subscription with the maintenance-to-subscription (M2S) program. Also, ADSK bolstered its presence in the construction market with the acquisition of Assemble Systems.
The strength in total ARR was once again broad-based with all three major geographies showing growth, with APAC showing the strongest growth. Subscription plan ARR more than doubled for the sixth time in the past seven quarters, driven by growth in all subscription plan types, led by product subscription. Customers continue to engage with ADSK's platforms for reimagining construction and manufacturing. That progress is reflected in cloud ARR, which grew more than 20% year/year and 10% sequentially.
A great example of how BIM 360 is being used in the field comes from Webcor, a large general contractor. They are using Autodesk BIM 360 on the UC Merced 2020 project, which will expand the University of California's Merced campus by over 1.2 mln square feet across 14 structures. BIM 360 is enabling Webcor to gain greater efficiency in delivering documentation and coordinated models to the field. They are also using the Forge platform to integrate and connect project data with BIM data, resulting in a single source of information.
Just a quick comment on the recent Assemble Systems acquisition which shows ADSK's commitment to aggressively pursue the $10 bln construction opportunity. They extract info and make it accessible for contractors to help them with bid management, estimating, project management, scheduling, site management, and finance. Assemble will make BIM 360 a more comprehensive platform, spanning across the design and construction phases.
In sum, the JulQ results were quite good and the stock reaction shows investors are quite pleased. The stock has been in a $125-140 trading range since early March, but this JulQ report has caused an upside breakout which is generally a good sign for another potential move higher. It will be important for the stock to hold and consolidate (trade sideways) these gains. If it can do that, that will be a positive sign for potentially another leg higher.
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