Autodesk, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended October 31, 2013 (Autodesk fiscal 2014 third quarter). Unaudited results; comparisons are with the corresponding 2012 periods. Amounts are in millions except per-share data.
Financial performance
| Metric | Three months 2013 | Three months 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $555.2 | $548.0 | $1,687.3 | $1,705.3 |
| Gross profit / margin | $488.1 / 88% | $490.1 / 89% | $1,484.9 / 88% | $1,528.8 / 90% |
| Operating income / margin | $68.1 / 12% | $34.4 / 6% | $233.1 / 14% | $221.3 / 13% |
| Net income | $57.6 | $29.4 | $174.9 | $172.9 |
| Diluted EPS | $0.25 | $0.13 | $0.77 | $0.75 |
- Quarterly revenue rose 1%; nine-month revenue fell 1%. License and other revenue declined 4% in the quarter and 7% for nine months, while subscription revenue grew 8% and 7%, respectively.
- Quarterly operating income nearly doubled, helped by lower expenses and substantially lower restructuring charges than in 2012. Nine-month operating income increased 5%; the nine-month gross margin declined two percentage points.
- Operating cash flow was $380.0 for nine months, down from $403.5. Cash and cash equivalents were $1,473.4 at October 31, versus $1,612.2 at January 31.
- Cash, cash equivalents and marketable securities totaled $2,479.0. Long-term notes payable had a carrying amount of $746.2; $750.0 principal was outstanding. The $400.0 revolving credit facility was undrawn.
- Deferred revenue was $765.7 in total, including $698.7 of deferred subscription revenue. Current assets were $2,517.9 and current liabilities $948.1.
Business drivers and changes
- Growth in Architecture, Engineering and Construction (AEC) and Manufacturing was offset by declines in Platform Solutions and Emerging Business (PSEB) and Media and Entertainment (M&E). Quarterly segment revenue changed year over year: AEC +13%, Manufacturing +8%, PSEB −10%, and M&E −9%.
- Suites revenue grew 21% in the quarter and 16% for nine months; flagship-product revenue declined 9% and 10%, respectively. Autodesk attributed pressure in part to declining AutoCAD and AutoCAD LT sales, foreign exchange, and education licenses provided without charge in selected regions.
- Management is shifting toward cloud, mobile and flexible term-based offerings. This is expected to increase ratable subscription revenue over time, while reducing upfront perpetual-license revenue during the transition.
- Tech Data accounted for 24% of quarterly and 25% of nine-month revenue, and 25% of trade receivables at quarter-end.
Outlook, risks and unusual items
- Guidance: Fiscal Q4 2014 revenue of $560–$580 and diluted GAAP EPS of $0.09–$0.16; non-GAAP EPS of $0.29–$0.36. Fiscal 2014 revenue guidance was $2,247–$2,267, with diluted GAAP EPS of $0.84–$0.90 and non-GAAP EPS of $1.55–$1.61.
- Guidance includes an estimated $50 impact from the business-model transition: revenue otherwise expected in the period will be deferred, with deferred revenue expected to rise correspondingly. Management expected fourth-quarter cost of revenue to increase slightly, partly from cloud-service costs; R&D expense was also expected to increase slightly.
- A new restructuring plan approved in the quarter covers approximately 85 positions and four facilities, with estimated total costs of about $15.0. The prior-year plan affecting approximately 500 positions and eight facilities was substantially complete. Nine-month 2013 restructuring charges were $6.5.
- After quarter-end, Autodesk completed its approximately $87.0 acquisition of Graitec technology assets on November 21, 2013. It announced a proposed Delcam acquisition for approximately £172.5, subject to customary conditions and expected to close in fiscal Q1 2015; offshore cash was expected to fund it.
- Approximately 75% of cash, cash equivalents and marketable securities were held offshore. Repatriation may trigger U.S. tax. The filing cites foreign-exchange exposure, global economic conditions, competition and execution of the cloud/business-model transition as risks.
- Routine legal proceedings were not expected by management to materially affect consolidated results, cash flows or financial position; potential losses were not estimable in some cases. No significant off-balance-sheet arrangements were reported. Management concluded disclosure controls were effective.
Investor verification points
- Track whether recurring subscription growth and suites adoption offset continued declines in flagship and upfront license revenue, including the deferred-revenue effect of the transition.
- Compare actual Q4 and full-year results with the stated revenue and EPS ranges; review the assumptions and exclusions underlying non-GAAP guidance.
- Monitor cloud-service costs, gross margins, restructuring spending and operating cash flow.
- Review acquisition closing, integration costs and financing/currency exposure related to Graitec and the proposed Delcam transaction.
- Assess distributor concentration, offshore cash accessibility and tax exposure, foreign-exchange sensitivity, and changes in legal contingencies or other disclosed risks.