Schnitger Corporation

Quickie: Autodesk’s decent FQ3 doesn’t help, investors unhappy with Q4 outlook

Quickie: Autodesk’s decent FQ3 doesn’t help, investors unhappy with Q4 outlook

Nov 27, 2019 | Hot Topics

tThe marAutodesk’s Q3 beat expectations (at least by a little in most categories) but less-than-stellar outlook for Q4 caused investors to push the share price down by as much as 4% after the earnings release hit the newswires. 

Some of the details of the Q3 results:

  • Total revenue in Q3 was $843 million, up 28% as reported and up 28% in constant currencies (cc)
  • Subscription revenue was $715 million, up 49% and beating analysts’ consensus: of $708 million
  • Maintenance revenue was $91 million, down 39% but still better than consensus: of $89 million
  • Finally, Other revenue was $36.5 million, beating a consensus of $28 million. Why tell you about Other, that always-mysterious dumping ground? Because for Autodesk, it includes revenue from consulting, training and similar services, as well as software license revenue “from the sale of products that do not incorporate substantial cloud services and is recognized up front”. I hope to get more info about this but it’s quite possible that the category benefited from acquired products, which may require more consulting
  • Looking at total revenue by the main product family, revenue from AEC products was $358 million, up 28%
  • The manufacturing products reported revenue of $182 million, up 18%
  • By geo, revenue from the Americas was $349 million, up 30% as reported and cc
  • Revenue from EMEA was $330 million, up 24% (up 25% cc)
  • Revenue from Asia was $164 million, up 30% (up 31% cc)

So about that guidance: The company said that it believes Q4 revenue will be between $880 million and $895 million, for a total fiscal 2020 (ending January 31, 2020) of $3,255 million to $3,270 million, up 27%. That sounds good, and it is, but the Q4 is less than expected because, according to Autodesk, customers opted for subs in Q3 rather than waiting for Q4. 

A couple of other tidbits from the earnings call: The AEC portfolio seems to get most of Autodesk’s attention (as well as investors’) but the manufacturing business did come up. CEO Andrew Anagnost said that Autodesk is gaining share against SolidWorks, MasterCAM, and PTC Creo.

And the channel mix continues to evolve. Remember that just a few years ago, Autodesk was 90% indirect? In Q3, revenue was 70% indirect, on its way to a target of 50% indirect/50% direct. Given that direct was such a small proportion of the total, how will that grow to 50% of revenue? The answer is e-store. Autodesk has invested heavily in what it calls its “digital direct channel” and that, said Mr. Anagnost, is the fastest growing channel right now. Traditional indirect channel sales “grew robustly [in Q3]”, said Mr. Anagnost, “and I think we should all celebrate that.” True. That said, he remains committed to an overall 50/50 channel split, with 25% of overall revenue eventually coming from the e-store.

Think about that: Autodesk’s focus right now is clearly on AEC. And AEC is usually project-based work, where contractors jump into and out of projects as workloads shift. They buy licenses on Autodesk’s e-store, get their login credentials, are authorized by the project’s admin, and are all set to go. For this part of the economy, an e-store facilitates smooth transactions with no waiting time.

Last night, after the earnings news broke, the share price was down 4%. This morning, before the markets open, it appears to be down about 0.25%.

UPDATE: At the end of today’s trading (so 24 hours after Autodesk’s Q3 earnings announcement), Autodesk’s share price is up 5.5%.

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