This week we talk about Autodesk’s results. Later in the post, I have a couple of comments about the Enphase transaction announced yesterday.
The numbers for the company are that it reported $489M in Revenue and a loss of $0.64 per share. These numbers and some of the other numbers were better than expected. But then the stock took a quick hit in the market. Since then it has recovered and been doing better than pre-release prices. So, what is going on here?
This is all about transparency. If you have read my columns about Autodesk in the past, you will have seen how the company is in the midst of a transition from selling software to leasing software. Because of the way that financial statements work, this looks ugly during the transition. By 2019 or 2020, the numbers “should” look great. And therein lies the challenge for investors. Do you believe what Autodesk management is telling you? If you do, then things are looking really good. If you don’t then run away.
Normally, I like to go to the scorecard (aka the financial results) for the answer. The problem here is I can not. The next best thing would be specific guidance from Management on targets that will mean that the company is on track. They have these numbers. You know that they do, because if they do not then Management is incompetent. They have a really good idea of how many of what kind of subscriptions they need to build a great company. So, why don’t they just tell us? The answer is pretty simple: Uncertainty. Given the uncertainty of the way the conversion would go and how it would proceed, Management did not want to publish these internal objectives. Suppose customers bought in ways that they did not expect? Suppose the popularity of the new model was vastly different than what they thought? On the downside, they could be vilified and the stock could crash. This way they can make comforting noises and say happy things and keep people in line.
I have no idea if things are going great or bad. But then again, nobody on the outside does either.
This week Enphase sold some field operations to a vendor already in the field. I have no commentary directly on the sale other than the numbers involved were small. How do I know? The numbers are not “material”. That means that the number itself is small enough that they did not need to release it. If the numbers are significant (either in the number of employees impacted, the value of the contracts involved, or the actual sales price), the company is required to file them with the SEC. Since they did not, then you know that the deal is small.
Have a great day!
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