Design software company Autodesk (NASDAQ:ADSK) reported results in line with analyst expectations in Q4 FY2023 quarter, with revenue up 8.78% year on year to $1.32 billion. The company expects that next quarter's revenue would be around $1.27 billion, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Autodesk made a GAAP profit of $293 million, improving on its profit of $89.1 million, in the same quarter last year.
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Autodesk (ADSK) Q4 FY2023 Highlights:
- Revenue: $1.32 billion vs analyst estimates of $1.31 billion (small beat)
- EPS (non-GAAP): $1.86 vs analyst estimates of $1.81 (2.64% beat)
- Revenue guidance for Q1 2024 is $1.27 billion at the midpoint, roughly in line with what analysts were expecting
- Management's revenue guidance for upcoming financial year 2024 is $5.41 billion at the midpoint, missing analyst estimates by 1.03% and predicting 7.99% growth (vs 14.4% in FY2023)
- Free cash flow of $903 million, up 96.3% from previous quarter
- Gross Margin (GAAP): 90.6%, down from 91.9% same quarter last year
"As we deliver next-generation technology and services to our customers, the pace of transformation within and between the industries we serve will accelerate, generating large new growth opportunities for Autodesk," said Andrew Anagnost, Autodesk president and CEO.
Founded in 1982 by John Walker and growing into one of the industry's behemoths, Autodesk (NASDAQ:ADSK) makes computer-aided design (CAD) software for engineering, construction, and architecture companies.
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Sales Growth
As you can see below, Autodesk's revenue growth has been mediocre over the last two years, growing from quarterly revenue of $1.04 billion in Q4 FY2021, to $1.32 billion.
Autodesk's quarterly revenue was only up 8.78% year on year, which might disappoint some shareholders. But the growth did slow down a little compared to last quarter, as Autodesk increased revenue by $38 million in Q4, compared to $43 million revenue add in Q3 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.
Guidance for the next quarter indicates Autodesk is expecting revenue to grow 8.33% year on year to $1.27 billion, slowing down from the 18.3% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $5.41 billion at the midpoint, growing 7.99% compared to 14.1% increase in FY2023.
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Profitability
What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Autodesk's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 90.6% in Q4.
That means that for every $1 in revenue the company had $0.91 left to spend on developing new products, marketing & sales and the general administrative overhead. This is a great gross margin, that allows companies like Autodesk to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity. It is good to see that the gross margin is staying stable which indicates that Autodesk is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from Autodesk's Q4 Results
Sporting a market capitalization of $46.8 billion, more than $2.07 billion in cash and with positive free cash flow over the last twelve months, we're confident that Autodesk has the resources it needs to pursue a high growth business strategy.
It was unfortunate to see that Autodesk's revenue guidance for the full year missed analysts' expectations and the revenue guidance for next year indicates quite a significant slowdown in growth. Overall, this quarter's results were not the best we've seen from Autodesk. The company is down 4% on the results and currently trades at $212.32 per share.
Autodesk may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.