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Autodesk Inc. ( ADSK - Analyst Report ) reported first quarter 2013 earnings of 36 cents per share (including stock based compensation of 14 cents but excluding amortization expenses of 7 cents), which were 3 cents short of the Zacks Consensus Estimate. However, the reported earnings increased 12.5% from the previous-year quarter on the back of revenue growth across all geographies and business segments.
Revenues increased 11.4% year over year to $588.6 million in the reported quarter and whiskered past the Zacks Consensus Estimate of $587.0 million. Reported revenue for the quarter was at the higher end of management’s guided range of $575.0 million to $590.0 million. Revenue for the quarter was positively impacted by strong growth in the Manufacturing and Architecture, Engineering and Construction (AEC) business segments and strong growth in revenue from suites (34% revenue growth), which more than offset the decline in Media and Entertainment business segment.
Moreover, license and other revenues (61.3% of total revenue) increased 11.8% from the year-ago quarter to $361.0 million and maintenance revenues (38.7% of total revenue) rose 10.9% year over year to $227.6 million in the quarter.
On a segmental basis, Platform Solutions and Emerging Business (PSEB) revenues jumped 9.0% year over year to $229.0 million in the reported quarter. Revenues from the Architecture, Engineering and Construction (AEC) business segment were $163.0 million, up 16.0% from the previous-year quarter, while Manufacturing revenues increased 18.0% from the previous-year quarter to $146.0 million. However, revenues from the Media and Entertainment business declined 5.0% on a year-over-year basis to $51.0 million in the quarter.
Autodesk posted significant upside across all its geographical regions on the back of continued adoption of its products. Revenues in America jumped 14.0% year over year to $208.0 million. International businesses continued to be strong during the quarter. EMEA revenues climbed 4.0% year over year to $224.0 million. Among the EMEA countries, Russia and China recorded strong revenue growth, while Brazil and India were the laggards when compared with previous-year quarter. Revenue from Asia-Pacific region jumped 19.0% year over year to $157.0 million. Revenue from emerging economies (14.0% of the total revenue) was up 6.0% year over year to $82.0 million.
Gross profit (including stock-based compensation but excluding one-time charges) was $539.6 million, up 12.0% year over year. Gross margin increased 50 basis points (bps) year over year to 91.7% on the back of higher revenue base and favorable business mix.
Operating expenses (including stock-based compensation but excluding one-time charges) increased 10.1% year over year to $428.0 million, primarily attributable to higher marketing & sales expenses (up 10.5% year over year) and research & development expenses (up 11.8% year over year). General and administrative expenses also increased 5.8% from the year-ago quarter. However, operating expenses, as a percentage of revenue, contracted 80 bps to 72.7% in the quarter.
Operating income (including stock-based compensation but excluding one-time charges) of $111.6 million was up 19.7% year over year. Operating margin came in at 19.0% in the quarter, up 140 bps year over year, attributable to strong revenue growth and cost controls in the quarter.
The company exited the first quarter with total cash and cash equivalents of $1.07 billion compared with $1.16 billion in the previous quarter. Cash flow from operating activities was $139.3 million compared with $175.0 million in the prior quarter.
For second quarter 2013, Autodesk expects revenues in the range of $580.0 million to $600.0 million. The Zacks Consensus Estimate is pegged at $601.0 million.
Non-GAAP EPS is expected in the range of 46 cents to 51 cents, which excludes 12 cents related to stock-based compensation expense and 5 cents related to amortization of acquisition related intangibles. The Zacks Consensus Estimate is currently pegged at 41 cents per share, which is evidently below the guided range.
For fiscal 2013, Autodesk expects revenues to be 10% higher than fiscal 2012. Autodesk expects non-GAAP operating margin to improve 200 bps annually in fiscal 2013.
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 it sustain longer-term growth through the development of high-volume, lower-cost CAD software.
Moreover, the company’s expanding cloud computing services portfolio will expand its customer base going forward. The company is also increasing its penetration in the mobile market by developing software for smartphones and Apple Inc.’s ( AAPL - Analyst Report ) iPad. We believe that these initiatives will boost Autodesk’s top-line growth going forward.
However, Autodesk’s high exposure to Europe (approximately 40% of revenues) citing the lingering financial turmoil and gloomy economic environment in the region keeps us cautious on the stock. Moreover, customer concentration and increasing competition are the other headwinds.
We have a Neutral recommendation on Autodesk’s shares in the long term. Currently, Autodesk has a Zacks #3 Rank, which translates into a short-term (1-3 months) ‘Hold’ rating.
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