Quarter-to-quarter results saw nice gains, but looking only at sequential results would hide just how hard Autodesk was hit by the recession. Wall Street thinks Autodesk has turned the corner; so do we.
By Randall S. Newton
When Autodesk, Inc. (NASDAQ: ADSK) released its fiscal results for its fourth quarter and fiscal year 2010 (ending January 31, 2010) it made a big deal out of “sequential” gains in the quarter. But reporting sequential gains (from one quarter to the next) in a seasonal business like software is like the proverbial comparison of apples and oranges. We prefer to give you the numbers as we always do, comparing results to the year-earlier period.
Autodesk revenue in the fourth quarter was $456 million, down 7% compared from a year earlier. Cash flow from operations was $126 million, up 45% year-over-year. The big jump despite lower revenue is due to Autodesk’s aggressive cost-cutting. Net income for the quarter was $50.1 million, up from a net loss of $105.3 million a year earlier.
For the full year, revenue was $1.7 billion, down 26% compared to fiscal 2009. Cash flow from operations was $247 million, down 58% compared to fiscal
2009. Net income was $58 million, down from $183.6 million a year earlier. Autodesk CEO Carl Bass says the company ended the fiscal year with “better than anticipated revenue and profitability.” He credited the up-tick to “a sequentially improving demand environment and continued competitive displacements” and a continued focus on cost containment.
Fourth Quarter in Detail
Fourth quarter revenue in Europe/Middle East/Africa (EMEA) was $188 million, down 14% compared to the fourth quarter of fiscal 2009 and 22% on a constant currency basis.
Revenue in the Americas was $168 million, down 2% compared compared to the fourth quarter of fiscal 2009.
Revenue in Asia Pacific was $100 million, up 1% compared to the fourth quarter of fiscal 2009 but down 4% on a constant currency basis.
Revenue from emerging economies was $73 million, down 8% year-over-year and down 12% on a constant currency basis. Revenue from emerging economies represented 16% of total revenue in the fourth quarter.
Combined revenue from Autodesk’s 3D model-based design solutions was $134 million in 4Q, down 7% year-over-year. Revenue from 2D horizontal and 2D vertical products was $213 million, down 8% from a year earlier. Combined revenue from AutoCAD and AutoCAD LT products decreased 9% compared to a year earlier.
There are now 2,250,000 seats on maintenance, the highest ever.
Cash per share on January 31, 2010 was $4.92, among the highest for companies we track.
Revenue by Geographies, in millions, in Fiscal 2010
Quarter: 1Q 2Q 3Q 4Q FY10
Americas $163 $159 $164 $168 $655
Europe $167 $157 $159 $188 $671
Asia/Pacific $96 $99 $94 $100 $388
Revenue by Segment, in millions, in Fiscal 2010
Quarter: 1Q 2Q 3Q 4Q FY10
Platform & $156 $150 $154 $165 $624
Emerging
AEC $128 $123 $125 $137 $514
Mfg. $94 $95 $90 $108 $387
Media $48 $47 $48 $46 $189
& Entertain.
Other statistics:
Quarter: 1Q 2Q 3Q 4Q FY10
% of Total Rev. 33% 31% 32% 31% 32%
from AutoCAD
and AutoCAD LT
% of Total Rev. 29% 29% 29% 29% 29%
from 3D design
products
% of Total Rev. 14% 15% 15% 16% 15%
from Emerging
Economies
Upgrade $43 $26 $26 $37 $133
Revenue
(in millions)
Question and Answer
During the question and answer session with Wall Street analysts, Autodesk made the following points:
- The company will take a close look at how it bundles and sells suites; Adobe and Microsoft make “considerably more” from suites as a percentage of
- revenue than Autodesk.
- There is more “pent-up demand than capacity” for Autodesk products. Many customers have put off upgrading so long, their technology is now significantly outdated, says CEO Carl Bass.
- There were 22 sales greater than $1 million during the quarter.
Guidance
For the first quarter of fiscal 2011, (ending April 30, 2010) Autodesk expects revenue to be in the range of $420 million to $440 million. Autodesk is not issuing guidance for the full year at this time.
The Final Analysis
The guidance for 1Q11 is sequentially lower than revenue in 4Q10. This one comparison points out the fallacy of trumpeting sequential increases in revenue. The fourth quarter is always the best quarter, and the first quarter is always significantly lower. Now, if Autodesk increases net revenue sequentially next quarter, they’ll have something to crow about.
Looking back four fiscal years, it is easy to see how far Autodesk revenue has fallen during the current recession, 26% in the last year alone. FY10 revenue was lower than FY07:
- FY07: $1.8 billion
- FY08: $2.2 billion
- FY09: $2.3 billion
- FY10: $1.7 billion
Wall Street generally reacted favorably to Autodesk’s results. The shining star for analysts was maintenance billings, which set a new record.
Autodesk is still sitting on a mountain of cash, and is not in a hurry to spend it. One reason is that the company looks for technology advancements, not big companies to boost revenue. The other reason is that much of their money is overseas, and the company would take a huge tax hit to bring it home to finance a deal. Increased tax liability probably is a reason why Autodesk still refuses to pay stockholders a dividend.
This quarter’s result might be a signal that the worst is over for Autodesk, but it will take another two quarters to know for sure. One new financial element in Autodesk’s favor is the rise of the US Dollar, currently benefiting from a battered Euro.
One Final Point
Many technology pundits outside the CAD industry continue to mention Autodesk as a potential takeover target for Apple, Adobe, SAP or (as stupid as it sounds) Google. Such fanciful talk stems from not knowing Autodesk or its market. If you want a change-of-ownership prediction for 2010, think about
the possibilities of PTC going private, not Autodesk being acquired. If we were running a betting pool, the odds for PTC going private would be 5-to-1; Autodesk being acquired would be 100-1. §
Five charts follow. Contributing Analyst L. Stephen Wolfe, P.E. contributed research for this article, despite being in South Africa on vacation.
