EUR 850.00 For Business Accounts Only

Morningstar | ADSK Updated Forecasts and Estimates from 24 May 2019

Autodesk reported revenue at the low end of guidance in its first fiscal quarter, but billings and free cash flow were strong. Top-line growth was carried by all product portfolios with the company’s construction portfolio a highlight, as the company starts to benefit from the synergies from recent acquisitions. We continue to believe Autodesk is capable of revenue growth in the midteens over the next 10 years driven significantly by growth in the manufacturing and construction sectors as well as overall benefits from Autodesk’s transition into a subscription model. We are therefore maintaining our $117 fair value estimate for this wide-moat company. Even with shares down 3% on the day and 9% in after hours, we still think investors should seek a wider margin of safety before investing in this name.

For the quarter, revenue rose 31% year over year to $735 million (up 30% in constant currency). Revenue was reported at the low end of management’s guidance due to delays in closing deals, as Autodesk speculated clients were slow to finalize budgets for the year. Total subscription revenue grew to $596 million compared with $350 million in the prior fiscal year period. Of all product families, architecture, engineering and construction, or AEC, and AutoCAD & AutoCAD LT were standouts, both achieving 37% revenue growth. In Construction, particularly, the company saw synergies in both sales and technology due to the recent acquisitions of PlanGrid and BuildingConnected. The former has gained increased traction due to its integration with Building Information Modeling, or BIM, data. Manufacturing grew by 24% year over year as the company has benefited from the retirement of slow growth offerings. Media and Entertainment grew by 9% year over year. Additionally, the quarter’s billings rose 40% year over year on a normalized basis.

GAAP operating margins remained positive for the third consecutive quarter at 3%, while non-GAAP operating margin rose to 18%--both of which increased by 13 percentage points from the prior fiscal year quarter. Overall, we think Autodesk has shown stellar progress in its explicit strategy of taking share from the manufacturing and construction markets as well as transitioning to a subscription model. As Autodesk’s subscription business model matures and we see the positive layering effect from the maturity of this business model, we expect both GAAP and non-GAAP operating margins continuing to spike higher over the midterm.