Autodesk, Inc. — Form 10-Q Summary
Business context and reporting period. This unaudited quarterly report covers the three and six months ended July 31, 2012, Autodesk’s fiscal 2013 second quarter and first half. Autodesk sells design, engineering, construction, manufacturing, and media software, primarily through distributors and resellers.
Financial performance
Amounts are in millions except per-share data. Comparisons are year over year.
| Metric | Three months ended July 31, 2012 | Six months ended July 31, 2012 | Prior-period comparison |
|---|---|---|---|
| Revenue | $568.7 | $1,157.3 | Up 4% and 8%, respectively |
| License and other revenue | $340.5 | $701.5 | Up 2% and 7% |
| Maintenance revenue | $228.2 | $455.8 | Up 7% and 9% |
| Gross profit / margin | $508.9 / 89% | $1,038.7 / 90% | Margins unchanged year over year |
| Operating income / margin | $92.9 / 16% | $186.9 / 16% | Income down 2% for the quarter; up 8% for the half |
| Net income | $64.6 | $143.5 | Down 9% for the quarter; up 2% for the half |
| Diluted EPS | $0.28 | $0.62 | Prior year: $0.30 and $0.59 |
| Operating cash flow | Not separately stated | $246.4 | Prior-year half: $260.6 |
| Capital expenditures | Not separately stated | $28.2 | Prior-year half: $39.8 |
First-half operating cash flow less capital expenditures was approximately $218.2 million, compared with $220.8 million in the prior-year period. The cash-flow statement reports a $226.7 million decrease in cash during the half, principally alongside substantial purchases of marketable securities.
Balance sheet and liquidity
- At July 31, 2012, cash and cash equivalents were $930.2 million and marketable securities totaled $786.6 million, for combined cash and securities of $1,716.8 million.
- Current assets were $1,902.7 million and current liabilities were $901.4 million. Deferred revenue totaled $752.0 million, including $672.3 million related to maintenance contracts.
- Autodesk had no borrowings under its $400 million revolving credit facility, which expires in May 2016. The filing reports no outstanding debt borrowings.
- Management stated that available liquidity, expected operating cash flows, and the credit facility should meet working-capital and operating needs for at least the next 12 months.
Material changes and business trends
- Quarterly revenue grew more slowly than operating expenses: revenue increased 4%, while operating expenses rose 6%. Operating margin declined from 17% to 16%; management attributed pressure largely to higher personnel costs and execution challenges following organizational changes.
- For the first half, revenue and operating expenses each increased 8%, and operating margin remained 16%.
- By segment, second-quarter revenue increased 10% in Platform Solutions and Emerging Business, 2% in Architecture, Engineering and Construction, and 4% in Manufacturing; Media and Entertainment declined 10%. For the first half, the respective changes were +9%, +8%, +11%, and -7%.
- Asia Pacific revenue rose 12% in the quarter and 15% in the half; EMEA declined 1% in the quarter but increased 2% in the half. International revenue accounted for 72% of quarterly revenue.
- Maintenance growth reflected higher commercial enrollment, partly offset by lower revenue per maintenance seat. Upgrade revenue declined 21% in the quarter and 15% in the half, partly reflecting promotional activity in the prior year.
- Revenue from suites was 29% of total revenue in both periods, increasing 5% for the quarter and 18% for the half. Management expects suites to become a larger share as customers move from standalone products.
Outlook, commentary, and risks
- Management cited weaker-than-anticipated quarterly revenue amid uneven global conditions and execution difficulties following sales and organizational realignment. The company said it had reduced its revenue outlook for fiscal 2013, but this filing does not provide a clear revised numerical forecast.
- Management’s stated priorities were to grow revenue, maintain operating-margin percentage, invest in products and growth initiatives, and reduce spending. It cautioned that it could not assure these goals would be achieved.
- On August 22, 2012, the board approved a worldwide restructuring plan. Autodesk estimated pre-tax charges of $50–$60 million, expected to be cash expenditures; approximately $40–$45 million was expected in fiscal Q3 2013, with most of the remainder in Q4.
- On August 1, 2012, Autodesk acquired Socialcam for approximately $59.5 million. In June, it acquired Vela Systems for $76.0 million cash consideration; the Vela accounting was preliminary, and Autodesk recorded a $3.3 million gain from the staged acquisition.
- First-half results included a $10.0 million other-than-temporary impairment of a privately held investment. The six-month cash-flow statement also reports $69.2 million of acquisitions, net of cash acquired.
- Tech Data accounted for 23% of quarterly revenue and 22% of first-half revenue, and 26% of accounts receivable at July 31. Management stated that alternative distributors could limit disruption if the relationship ended, but concentration remains a risk.
- Other disclosed risks include global economic and geopolitical uncertainty, foreign-exchange exposure, dependence on maintenance renewals and indirect sales channels, competition and technology transitions to cloud and mobile, acquisition integration, tax uncertainties, and legal proceedings. Management said pending legal matters were not expected to materially adversely affect consolidated results, cash flows, or financial position, while noting outcomes are uncertain.
Important facts for investors to verify
- Review the complete fiscal 2013 outlook and any later updates: this filing notes a reduced revenue outlook but gives no revised numerical target.
- Track whether the restructuring is completed as planned, whether the estimated $50–$60 million charges are incurred, and whether expected cost savings improve operating margins.
- Monitor renewal rates, maintenance billings, deferred revenue, and the transition from standalone licenses to suites.
- Assess distributor concentration, particularly Tech Data’s share of revenue and receivables, and monitor regional demand, especially the weakness in Media and Entertainment and EMEA quarterly revenue.
- Evaluate cash generation and capital allocation alongside acquisitions and repurchases: Autodesk repurchased 5.9 million shares for $210.3 million in the first half.
- Consider the effect of investment impairments, acquisition accounting, tax exposures, and foreign-exchange movements on reported and non-GAAP results. Non-GAAP diluted EPS was $0.48 for the quarter and $0.94 for the half; these measures exclude specified expenses and investment-related items.