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Autodesk (ADSK) Q1 Loss In Line with Estimates, Sales Lag

Zacks Equity Research
Updated

Autodesk Inc. ADSK reported first-quarter fiscal 2017 adjusted loss (including stock-based compensation expense and amortization of capitalized stock-based compensation but excluding all other non-recurring items and related tax impact) of 27 cents a share, in line with the Zacks Consensus Estimate.

The company reported non-GAAP loss per share of 10 cents in the quarter as against earnings of 30 cents reported in the year-ago quarter.

Quarter Details

Revenues in the quarter decreased 21% year over year to $511.9 million and also fell marginally short of the Zacks Consensus Estimate of $513 million. Revenues were impacted by a 43% year-over-year decline in License revenues to $185.9 million. The results in the quarter were impacted to some extent by the exit from perpetual license offerings. Subscription revenues however increased about 2% from the year-ago quarter to $326.7 million.

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Total subscriptions increased approximately 132,000 from the prior quarter to 2.71 million in the quarter. New model subscriptions (desktop, enterprise flexible license, and cloud subscription) increased approximately 140,000 from the last quarter to 567,000.

Segment wise, revenues from the Architecture, Engineering and Construction (AEC) business segment decreased 8% from the year-ago quarter to $219 million.

Manufacturing revenues decreased 14% on a year-over-year basis to $158 million.

Revenues from Platform Solutions and Emerging Business (PSEB) plummeted about 46% from the year-ago quarter to $100 million.

Sales from Autodesk’s Media and Entertainment (M&E) segment decreased 12% on a year-over-year basis to $35 million in the reported quarter.

Geographically, revenues in the Americas decreased 11% year over year to $218 million. EMEA revenues declined 17% to $203 million, while the same in APAC decreased 42% from the year-ago quarter to $92 million.

Operating Results

Adjusted gross margin contracted 380 basis points (bps) from the year-ago quarter to 84.1% in the reported quarter.

Adjusted operating expenses were $514.2 million during the quarter. Autodesk also recorded a restructuring related charge of $52.3 million in the quarter. As a result, the company’s profitability was impacted. Autodesk’s adjusted loss from operations was $83.9 million.

Balance Sheet

Autodesk exited the fiscal with total cash and cash equivalents (including marketable securities) of $2.27 billion compared with $2.25 billion as on Jan 31, 2016.

Cash flow from operating activities for the quarter was $164.4 million compared with $86.5 million in the prior-year quarter.

Outlook

For the second quarter of fiscal 2017, Autodesk expects revenues in the range of $500 million - $520 million. Non-GAAP loss per share (excluding stock-based compensation expense and amortization of acquisition-related intangibles) is expected in the range of 11 cents – 18 cents for the quarter.

In fiscal 2017, Autodesk continues to expect revenues in the range of $1,950 million - $2,050 million. Non-GAAP loss (excluding stock-based compensation expense and amortization of acquisition-related intangibles) is expected in the range of 70 cents - 95 cents per share. The company projects subscription additions for fiscal 2017 to be between 475,000 - 525,000.

Our Take 

We believe Autodesk’s business transition (from licenses to cloud-based services) though affecting its business in the near term will benefit it in the long run. Also, the company remains focused on undertaking more cost-cutting initiatives as a part of its business transition.

It’s noteworthy that though the transition is still underway, the company has started seeing strong growth in new subscription additions, which represented more than half of the total new subscription additions in the quarter.

However, in the near term, the company’s profitability will likely be affected by investments in cloud-based infrastructure and marketing initiatives.

In addition, foreign exchange fluctuations and competition in the cloud-computing domain from the likes of Amazon.com Inc. AMZN, Microsoft Corp. MSFT and Adobe Systems Incorporated ADBE pose concerns.

Presently, Autodesk carries a Zacks Rank #4 (Sell).

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