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Autodesk Q1 Earnings Meet Ests, Revs Beat

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Autodesk Inc.(ADSK - Free Report) reported earnings of 21 cents per share, which declined 21.2% from the year-ago quarter. However, earnings were on par with the Zacks Consensus Estimate.


Revenues increased 4.0% year over year to $593.0 million, ahead of management’s guided range of $560.0 to $575.0 million, and beat the Zacks Consensus Estimate of $569.0 million. Backlog was up by about $30.0 million on a year-over-year basis.

The year-over-year rise in revenues was primarily attributed to higher subscription revenues, which jumped 11.7% year over year to $276.0 million. License revenues, on the other hand, declined 2.3% from the year-ago quarter to $316.2 million. Total subscriptions increased by over 89,000 from the prior quarter.

Segment-wise, revenues from the Platform Solutions and Emerging Business (PSEB) declined 0.5% from the year-ago quarter to $212.0 million. AutoCAD and AutoCAD LT revenues remained flat on a year-over-year basis at 32.0% of net revenue.

Revenues from the Architecture, Engineering and Construction (AEC) business segment surged 14.0% from the year-ago quarter to $196.0 million. Continued adoption of BIM in the building and infrastructure industries drove growth in AEC suites and cloud based BIM 360 offering.

Late in the first quarter, Autodesk launched AutoCAD LT as a desktop subscription on a global basis and the initial response was quite positive.

Manufacturing revenues increased 5.8% on a year-over-year basis to $147.0 million. Autodesk continues to win new deals in industrial machinery, consumer products and automotive.

Autodesk continues to make investments in its portfolio and recently expanded its solution to include new functionalities like composite analysis technology for its simulation offering. As a result of these investments, the company is seeing greater penetration in industries like aerospace and automotive.

Autodesk continues to make progress with its 100.0% cloud-based PLM 360. The company closed the Delcam transaction earlier in the first quarter. The company is optimistic about its acquisition of cam technology provider, Delcam as it believes that it will help it to further broaden its already strong manufacturing solutions.

Autodesk’s Media and Entertainment segment recorded a revenue decline of 19.1% year over year to $38.0 million. Media and Entertainment segment suffered from lower end-market demand.

Although Autodesk reported a 19.0% jump in revenues from Suites (35.0% of revenues), revenues from its flagship products were down 4.0% year over year. Revenues from new and adjacent products increased 2.0% on a year-over-year basis.

Geographically, revenues in the Americas increased 2.0% on a year-over-year basis to $206.0 million. EMEA revenue increased 4.0% to $226.0 million compared with the first quarter last year. Revenues in APAC increased 6.0% to $161.0 million compared with the year-ago quarter. Revenues from emerging economies (13.0% of net revenue) increased 5.0% to $79.0 million from first quarter last year.

Operating Results

Gross margin (including stock-based compensation) contracted 120 basis points (bps) from the year-ago quarter to 88.9% in the reported quarter. The year-over-year decline was primarily due to business model transition and higher cloud-based cost.

Operating expenses (including stock-based compensation) increased 11.7% on a year over year basis to $458.4 million. The year-over-year increase was primarily due to higher marketing & sales (up 140 bps), research and development (up 240 bps) and general and administrative expenses (up160 bps) in the quarter.

Operating margin (including stock-based compensation) contracted 660 bps from the year-ago quarter to 11.5%, primarily due to lower gross margin base.

Net income (including stock-based compensation) was $48.7 million or 21 cents per share compared with $61.2 million or 27 cents per share in the year-ago quarter.

Balance Sheet

Autodesk exited the first quarter of fiscal 2015 with total cash and cash equivalents (including marketable securities) of $2.12 billion compared with $2.27 billion in the previous quarter. Cash flow from operating activities was $219.0 million compared with $184.0 million in the previous quarter.

Deferred revenues increased 13.0% on a year-over-year basis to a record $964.0 million at the end of the reported quarter.


For the second quarter of fiscal 2015, Autodesk expects revenues in the range of $595.0–$610.0 million. Earnings (excluding stock-based compensation expense, amortization of intangibles and restructuring charges) are expected in the range of 25 to 30 cents per share for the upcoming quarter. This is higher than the Zacks Consensus Estimate of 17 cents.

Management expects Autodesk to shift a small amount from licensed revenue to deferred revenue in the second quarter.

Management expects net billings to grow in the range of 7.0% to 9.0% for fiscal 2015. Net new subscription additions are expected to be in the range of 150K to 200K for the full year. Revenues are expected to increase 4.0% to 6.0%, while operating margin on a non-GAAP basis is expected to be in the range of 14.0% to 16.0% for fiscal 2015.

Our Take 

Autodesk’s first-quarter result reflects improving demand environment in the AEC market. We believe that the company has significant growth opportunities in the AEC and manufacturing markets, going forward.

Autodesk believes that the momentum from the BIM product portfolio will help it to penetrate the $7.0 trillion construction market fast. We believe Autodesk’s new cloud-based offerings are gaining traction. Moreover, the business transition will boost the company’s profitability, going forward.

Moreover, the company’s focus on expanding its mobile applications for both Apple’s (AAPL - Free Report) iOS and Google’s(GOOGL - Free Report) Android platform will further drive market share, going forward.

However, increasing competition from Adobe (ADBE - Free Report) is a concern. Moreover, continued investments in new products are expected to hurt margins in the near term.

Currently, Autodesk has a Zacks Rank #3 (Hold).

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