Thread by @borrowed_ideas

1/ $ADSK FY 2Q'22 Update

Another decent quarter, but FCF guidance for full year is slightly softer than earlier which perhaps led the stock to ~7% decline in AH. But after listening to the call, any potential concern related to FCF should evaporate.

Here are my notes.

2/ Revenue met high end of the guidance for the quarter. Low end of the topline guidance for the full year was increased, and so did margins.

But as mentioned earlier, FCF mid-point guidance for FY decreased from $1.61 Bn to $1.54 Bn.

3/ Why did FCF guidance fall?

ADSK used to have multi-year Enterprise Business Agreement (EBA) for which they would get paid cash upfront, but in exchange EBAs would receive ~10% discount.

ADSK is still doing multi-year EBAs, but switching to annual billings, so less cash...

4/ ...upfront. Instead of 10% discount, now ADSK is giving EBAs 5% discount.

It's a win-win for both ADSK and customer. ADSK still has multi-year contract and give lower discount. Customers have more certainty of price and pay lower upfront cash.

5/ Net revenue retention ~100-110%.

~75% of new customers come from digital channels. Overall, direct sales, which is higher margin, was 34% of total sales (vs 30% last year). LT target of direct vs reseller 50-50.

Non-GAAP Gross Margin ~92%; OPM ~31%, +2 pp

6/ ADSK repurchased 679k shared YTD at avg. price of $278/share. Nothing too aggressive though; mostly offsetting the dilution.

7/ Mandatory question about ADSK's FY'23 FCF guidance which sell-side asks every quarter as they probably worry about implied >50% YoY FCF growth next year.

I don't know how much clearer management can get on this point.

8/ ADSK continues to tinker with their massive 2 mn non-compliant users as they introduce Flex payment i.e. pay-as-you-go

"it's also a tool for reaching the long tail of our customers."

9/ This year or next year's guidance incorporate nothing from the infrastructure bill, but obviously ADSK is going to be a beneficiary of the bill.

Also beneficiary of the semi's cycle. Picks and shovels are really a good business.

10/ Does ADSK still need to do tuck-in acquisitions to complete its platform?

"So there's always a little white space, okay?"

11/ Is labor shortage in construction a headwind or tailwind for ADSK?

"It's actually more of a tailwind because what our customers are struggling with is they're trying to do more with smaller staff."

End/ Overall, solid quarter. Nothing much to worry about for long-term shareholders.

paywalled deep dive on $ADSK (March, 2021): mbi-deepdives.com/adsk/

All my earnings threads: mbi-deepdives.com/twitter-thread…