Autodesk 2Q20: First Signs of Macro Concerns Hit Guidance

This headline is reminiscent of headlines at the end of the dot com era. Once one company stared having revenue issues the rest of them jumped on the bandwagon and claimed their issues were due to (an unrelated event like) 9/11!  ...Aivars Lode

Autodesk 2Q20 results from JP Morgan Equity Research:
Results in the quarter were great with beats from top to bottom, but management is seeing signs of macro concern in the UK, the EMEA industrial complex and even with China (<3% of revenue). So to be proactive they are cutting guidance a modest amount, but not taking meaningful steps that would indicate any concerns lingering from the macro perspective. We like the initial cut, but remain concerned about the potential of further macro impacts in the back half of the year.

Headline results were good in the quarter. ADSK reported 2Q20 revenue/non-GAAP EPS of $796.8M/$0.65 compared to our estimate of $785.1M/$0.60 and Street’s $787.0M/$0.61.

Positives: Strong billings leads to cash flow performance, AEC revenue accelerated over 1Q20. Billings in the quarter grew 47.6% year-over-year to $892.8M compared to our $834.6M estimate and the street’s $798.0M estimate. The increase in billings was the primary driver of cash flow outperformance of over $75M relative to our expectations. The strength in the quarter came from the AEC segment, which saw 37.5% growth compared to 37.1% in the first quarter.

Issues: Macro headwinds and FX driving down top-line expectations, back-end linearity here to stay. The company took down ARR, billings and revenue guidance by $70M, $75M and $20M, respectively, at the midpoint for the year. FX headwinds of $10M accounts for a portion of this but clearly, in our opinion, the bigger issue is the macro environment causing the slowdown particularly in the manufacturing segment. Brexit, European manufacturing and the ongoing trade dispute with China were all cited as adding to top-line uncertainty in the second half where we are lowering our second half billings estimates by $103.7M after this quarter’s beat. The linearity issue highlighted in the first quarter continued in the second quarter and management anticipates quarters to be back-end loaded going forward, which puts some additional risk on even these lowered expectations.

Establishing our December 2020 price target of $160. Our price target is based on an EV/FCFF multiple of 19x applied to our FY22 estimate.

While everyone is watching bond yields, the S&P 500 is carving out a familiar pattern

A worthwhile read, with some graphs of history to help you decide whether we will have a recession.... Aivars Lode

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Wall Street pundits are suddenly freaking out about recession. Their main concern stems from what happened in the bond market last week. Namely, the yield on 10-year U.S. Treasuries falling below that of 2-year U.S. Treasuries. This is called an “inverted yield curve.” Whatever, right?

That’s just a detail. I prefer to focus your attention on what is actually happening. That is, not on TV, not from politicians, and not from your friend or family member who works for a big brokerage firm. I want to try to tip you off. Specifically, I aim to point out things that actually matter to your money at a time when it is easy to lose your marbles over this stuff.

After all, all of this hype over the goings-on in the bond market are just the latest, little piece of evidence that things are not as they have been. That, in turn, is filtering down to the mainstream media. That trickles down to consumers, who do what they should do. They personalize it to their own situation. The toughest part for them is deciding what, if anything to do about it.