Autodesk Misses Estimates


Autodesk Inc. (ADSK) reported third quarter earnings (including stock based compensation expense of 23 cents per share) of 28 cents per share, which missed the Zacks Consensus Estimate by 3 cents.

Quarter Details

Revenue for the quarter decreased marginally from the previous-year quarter to $548.0 million and was below management’s guided range of $550.0 million to $570.0 million. Revenue also fell shy of the Zacks Consensus Estimate of $561.0 million.

The lower-than-expected revenue was a result of tepid demand for Autodesk’s solutions. License revenue for the quarter was down 4.3%, which fully offset the 6.3% increase in maintenance revenue and resulted in a decline in overall revenue.

Management also cited that ‘Superstorm Sandy’ had a negative effect on quarterly revenue. Moreover, sluggishness in the macroeconomic environment also led to the weaker-than-expected revenue.

On a segmental basis, Platform Solutions and Emerging Business (“PSEB”) revenue decreased 2.0% year over year to $205.0 million. Revenue from the Architecture, Engineering and Construction (“AEC”) business segment increased 7.0% year over year to $163 million, while revenue from Manufacturing segment inched down 1.0% from the year-ago quarter to $132.0 million. Media and Entertainment revenue declined 9.0% year over year to $48.0 million.

On geographic basis, revenue from America (up 4.0% year over year) was fully offset by the decrease in Asia-Pacific (down 3.0% year on year), and EMEA (down 3.0% year over year). Revenue from emerging economies, which represented 15.0% of the total revenue, was down 9.0% compared with the year-ago quarter.

Gross profit (including stock-based compensation) remained flat on a year-over-year basis to $499.9 million. Gross margin also remained flat on a year over year basis to 91.2%.

Operating expenses (including stock-based compensation) increased 4.1% year over year to $406.7 million, primarily attributable to higher research & development expenses (up 8.8% year over year) and general and administrative expenses (up 12.3% year over year) which fully offset the 0.8% decline in marketing & sales expenses. Moreover, operating expenses as a percentage of revenue expanded 300 bps to 74.2% in the quarter.

Operating income (including stock-based compensation) of $93.2 million was down 14.9% year over year. Operating margin came in at 17.0% in the quarter, down 300 bps year over year, primarily due to higher-than-expected operating expenses.

Net income on non-GAAP basis came at $107.8 million or 47 cents per share, which improved from $102.1 million or 44 cents in the previous-year quarter.

Our non-GAAP calculations may differ from management’s presentation due to the inclusion/exclusion of some items that were not considered by management.

The company exited the third quarter with total cash and cash equivalents of $827.0 million compared with $930.2 million in the previous quarter. Cash flow from operating activities was $157.0 million compared with $107.0 million in the prior quarter.


For fourth quarter 2013, Autodesk expects revenue in the range of $570.0 million to $600.0 million.  Non-GAAP earnings is expected in the range of 43 cents to 51 cents per share, which excludes 13 cents related to a stock-based compensation expense, 3 cents for restructuring charges and 9 cents related to amortization of acquisition related intangibles.

For fiscal 2013, Autodesk expects revenues in the range of $2.28 billion to $2.31 billion and expects non-GAAP earnings in between $1.84 and $1.92 per share.


Autodesk maintains a dominant position in the computer-aided designing market. We believe that Autodesk’s expanding product portfolio, broadening industry applications and geographic reach will help sustain longer-term growth. The company’s initiatives to shift towards cloud and mobile computing are expected to be long-term positives.

However, sluggish macroeconomic environment along with the company’s high exposure to Europe amidst the lingering financial turmoil are the near term headwinds. Moreover, margin contractions coupled with slower-than-expected revenue growth and a tepid outlook keep us cautious on the stock.

Additionally, customer concentration and increasing competition from Adobe Systems Inc. (ADBE) and Dassault Systemes are the other headwinds going forward.

We have a Neutral recommendation on Autodesk’s shares in the long term. Currently, Autodesk has a Zacks #4 Rank, which translates into a short-term (1-3 months) Sell rating.

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