Autodesk, Inc. quarterly report, Q3 FY2014

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

MetricThree months 2013Three months 2012Nine months 2013Nine 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.