3D design software developer Autodesk (Nasdaq: ADSK) has reported revenue growth of 18 percent within its Q3 2022 financial results.
Autodesk’s revenue results, which are unorthodoxly published across financial years, reveal the firm brought in $1.13 billion over the course of Q3 2022, 18 percent more than the $952 million reported in Q3 2021. Despite this, Autodesk is predicting “macroeconomic uncertainty” as it enters Q4 2022, and has reduced the mid-point of its billings and free cash flow guidance by $150 million and $100 million respectively, for full-year fiscal 2022.
According to CEO Andrew Anagnost, Autodesk’s Q3 2022 results were “strong” and were driven by one of the firm’s best-ever quarters for new subscriptions, as well as the launch of its Flex consumption model and developments to its Forge platform. However, he said that the firm’s rate of improvement decelerated in comparison to Q1 and Q2 2022, and fell short of what the company expected.
“While demand is robust, we believe supply chain disruption and resulting inflationary pressures, a global labor shortage making it harder for our customers to stage new projects, and the ebb and flow of Covid are contributing to the deceleration, as well as documented country-specific disruption to AEC in China,” he said. “Our conversations with customers and channel partners reinforce our view.”
Autodesk’s Q3 2022 financials
Autodesk reports its financials across calendar years, and breaks down its revenue under its Subscription and Maintenance Plan divisions, as well as into ‘Design’ and ‘Make.’ The company’s Design arm, which comprises revenue from its maintenance, product subscriptions, EBAs and AutoCAD sales, generated $994 million, up 17 percent on Q3 2021.
Over the same period, Autodesk’s Make segment revenue increased by 23 percent to $94 million, while its billings jumped 16 percent between Q3 2021 and Q3 2022 to $1.2 billion, which according to Autodesk CFO Debbie Clifford reflected “robust underlying demand” for the firm’s offerings.
“Our product subscription renewal rates reached record highs, and our net revenue retention rate was toward the high end of our 100 percent to 110 percent range,” she said. “Billings increased 16 percent to $1.2 billion, reflecting robust underlying demand and a tough comparison versus last year when we signed two of our largest ever EBAs, including a nine-digit deal.”
She continued to explain that the shift of multi-year contracts to annual billings, announced in the firm’s Q2 results, would drive more predictable free cash flow and better price realization as the company moves into FY 2024.
Geographically, Autodesk’s Americas-based business, its biggest revenue driver, grew 18 percent to $461.9 million during Q3 2022. Meanwhile, its EMEA business increased 19 percent to $433.2 million, and its APAC rose 18 percent to $230.7 million.
|Autodesk revenue ($)||Q3 2022||Q3 2021||Difference (%)|
Autodesk’s strategic growth initiatives
According to Anagnost, Autodesk is continuing to develop higher-value end-to-end, cloud-based software offerings that connect their customers’ data and workflows to evolve their business models. During Q3, French construction firms Bouygues Construction and Colas significantly increased their portfolio of Autodesk products such as Revit, AutoCAD and Civil 3D following a move to BIM and digital workflows over the last three years. With some 100,000 construction employees between them, the companies’ renewed commitment substantially increased Autodesk’s monthly average users.
Autodesk is extending its reach into the construction mid-market further still with the recent launch of Autodesk Build, an account-based pricing business model, and distribution through its channel partners. The company plans to launch new Autodesk Build features and capabilities every couple of months, and remains “optimistic about the opportunities ahead.”
Turning to Autodesk’s manufacturing portfolio now, which Anagnost stated: “sustained strong momentum”. The company is continuing to grow its footprint in the automotive sector in order to move beyond the design studio into manufacturing and connected factories. During Q3, automotive manufacturer Ford renewed and expanded its EBA with Autodesk, adding Autodesk Construction Cloud and Autodesk Build to its manufacturing facilities in order to enable field access to plant drawings during maintenance and operations and equipment changeovers.
Autodesk’s Fusion 360 commercial subscribers grew strongly throughout the quarter to 175,000. “While still early days, our new extensions, including Machining, Generative Design, and Nesting & Fabrication are performing well and there is a major interest in our upcoming simulation and design extensions,” explained Anagnost. “Fewer promotions and growing demand for Fusion 360’s extensions are enabling us to capture more of the potential market opportunity and accelerate our growth.”
Outside of commercial use, Autodesk is seeing a large and rapidly growing ecosystem of Fusion 360 users at home, in education, and in the workplace, which Anagnost says will “fuel commercial usage in the future”. The company ended Q3 2022 with one million monthly active users, up 50 percent year-over-year.
Autodesk’s Fusion 360 was leveraged by a Technical University of Munich (TUM) team for Elon Musk’s Not-a-Boring tunneling competition, where they beat more than 400 applicants and 12 finalists take the crown.
“Fusion 360’s cloud-based solution enabled our 60-member team to collaborate remotely during the pandemic and design and build an award-winning 40-foot long, 22-ton tunneling machine,” said Haokun Zheng, Project Operations Lead of the TUM team. “Throughout the year, we were repeatedly told by industry experts that the timeline we were aiming for was borderline impossible. But Fusion 360’s ease of use and integrated CAD, CAM, and FEM enabled rapid simulation and improved the speed and efficiency of the design workflow.”
Finally, Q3 2022 has seen Autodesk take steps to optimize its capital structure by issuing its first sustainability bond. In addition to extending its debt maturity profile by almost two years and reducing its weighted average cost of debt by 40 basis points, the move aligns with the company’s sustainability goals.
“The recent report from the Intergovernmental Panel of Climate Change and the United Nations Climate Change COP26 meeting in Glasgow both underscored the urgency of reducing carbon in the earth’s atmosphere and the role that everyone, including corporations, needs to play,” said Anagnost. “Sustainability needs to be designed, made and, in many cases, retrofitted in construction and manufacturing. This cannot be achieved efficiently or effectively without end-to-end software like ours to drive the process.
“This organizing principle affects not just how we deploy capital for example through our investments to develop sustainable tools and our recent acquisition of Innovyze, but also how we source capital.”
Autodesk’s FY 2022 outlook
As Autodesk enters Q4, it plans to reduce its real-estate footprint due to moving to a hybrid workforce model as a result of the pandemic. The company will look to reduce the square footage of its facilities by around 20 percent worldwide, and optimize its facilities costs to allow the firm to better deploy its capital in its pursuit of growth.
During Q3 2022, the growth in Autodesk’s product subscription volume decelerated from 30 percent to the mid-20s, which is more than normal seasonality. This dynamic drove strong billings growth for the company during Q3, but still fell short of its expectations.
“Macroeconomic headwinds such as supply chain disruption and resulting inflationary pressures, a global labor shortage, the ebb and flow of Covid, and AEC in Chaina are impacting the pace of our recovery,” said Clifford. “In light of this macroeconomic uncertainty, as we enter Q4, we’re taking a pragmatic approach and are assuming that the supply chain, labor, Covid and country-specific challenges will persist.”
As such, the company is reducing the mid-point of its billings guidance by $150 million, and its free cash flow guidance by $100 million for FY 2022. Autodesk is still targeting $2.4 billion of free cash flow in FY 2023, however could see a risk to that target of between $100-$200 million if growth deceleration continues through next year.
The firm remains optimistic about its growth potential beyond FY 2023 and is continuing to target double-digit revenue growth and non-GAAP operating margins in the 38-40 percent range.
“I am reminded again that Autodesk’s purpose has never been more important or urgent,” said Anagost. “Empowering innovators with design-and-make technology so that they can achieve the new possible also enables them to build and manufacture efficiently and sustainably. Together, we can meet the challenges posed by carbon, water and waste while also advancing equity and access to the in-demand skills of the future.
“Autodesk’s central role in meeting these challenges underpins my confidence this year and my confidence in the future.”
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Featured image shows Autodesk’s Californian HQ. Photo via Wikimedia Commons.