Autodesk, Zoom Video Communications - Q2'24 Earnings review
1. Autodesk Q2’24 Earnings
Results
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Revenues of $1.34B, a 9% increase YoY and 6.0% QoQ, exceeding management’s guidance of $1.32B (mid-point) mainly due to early billings for EBAs (Enterprise Business Agreements).
Subscription revenue accounts for 94.4% of revenues and increased 9.5% YoY and 6.5% QoQ.
Billings of $1.1B down by 8% reflecting the transition from up-front billings to annual billings for multi-year contracts.
Source: Autodesk Q2’24 earnings presentation
GAAP Operating Margin of $262M up by 8.3% YoY while margin declined by 100bps to 19%.
Non-GAAP Operating Margin of $489M up by 10% YoY while margin remained flat at ~36%. In Q1 margin was 32% and it’s currently behind the mid-term goal of 38%-40%.
Net Income increased to $222M (up by 19.4%) compared to $186M in Q2’23. Net margin of 16.5% Vs 15% in Q2’23.
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Balance sheet
Cash flow from operating activities of $135M (Vs $257M in Q2’23) – Margin of 10% (20.8% in Q2’23).
Free cash flow of $128M (Vs $246M in Q2’23) – Margin of 9.5% (19.9%). Free cash flow of $128M was slightly higher than management expectations whereas the material drop is vastly affected by the transition of upfront to annual billings for multi-year contracts. Headwind is expected to be significant in FY24 and decline in FY25.
Strong balance sheet with Cash, Cash equivalents and marketable securities of $2.1B compared to debt and lease liabilities of $2.6B.
Outlook
Management expects FY24 revenue to be between $5.405B and $5.455B (up 8%-9% YoY), increasing the lower end of estimates by $50M. Q3’FY24 Revenue estimate assumes a growth of 8%-9%.
Management expects FY24 billings to be between $5.075B and $5.175B (down by 12%-11%).
FY24 Non-GAAP operating margin is expected to remain flat at ~36%.
FY24 Free Cash Flow is expected to be between $1.17B and $1.25B.
Source: Autodesk Q2’24 earnings presentation
Other highlights
Net revenue retention rate remained within the range of 100 to 110 percent.
Direct sales accounted for 37% of sales, the highest in the last 6 quarters.
Remaining performance obligations comprised of $4.23B deferred revenue and $991M unbilled revenue, increased by 11% to $5.22B.
In Q2’24, 400,000 shares were purchased for $87 million at an average price per share of $199.7, partly offsetting stock based compensation (“SBC”) dilution. SBC remains high at 15% of revenue, with yearly estimates standing at ~13%.
“We will continue to offset dilution from our stock-based compensation program and to opportunistically accelerate repurchases when it makes sense to do so.” Debbie Clifford, CFO
Andrew Anagnost, CEO explained how Autodesk Construction Cloud is gaining traction (reporting a +100% increase in MAU in the quarter) as customers aim to streamline their workflows by having an end-to end solution.
Seen some improvements in dealing with non-compliant users.
Final thoughts
Pros:
Strong performance across all sectors and products.
Forecasts revised upwards.
Transition to annual billings goes well and the number of customers reverting back to annual contracts was within expectations.
Cons:
We want to see more on the profitability front but as long as the company grows we are pleased.