Autodesk Inc. (
reported a better-than-expected third quarter of fiscal 2014,
beating the Zacks Consensus Estimate by 4 cents. Earnings
increased 10.2% from the year-ago quarter but decreased 10.1%
sequentially to 31 cents in the reported quarter.
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Revenues climbed 1.3% year over year but decreased 1.2% quarter
over quarter to $555.2 million, which met the high-end of
management's guided range of $540.0 million to $555.0 million and
beat the Zacks Consensus Estimate of $547.0 million.
The year-over-year growth was driven by higher subscription
revenues, which increased 8.4% from the year-ago quarter to
$257.7 million. License and other revenues declined 4.1% year
over year to $297.5 million.
Sequentially, weak license and other revenues, down 5.0%, fully
offset a 3.7% increase in subscription revenues.
Segment wise, revenues from the Platform Solutions and Emerging
Business (PSEB) were down 10.0% on a year-over-year and 7.1% on a
quarter-over-quarter basis to $183.0 million.
Revenues from the Architecture, Engineering and Construction
(AEC) business segment increased 13.0% from the year-ago quarter
and 5.1% from the previous quarter to $186.0 million.
The AEC results were driven by broad-based recovery in the
commercial construction market. The company continues to expand
its BIM product portfolio, particularly based on acquisitions, a
couple of which it closed in the reported quarter.
In the quarter, Autodesk renewed an agreement with an existing
customer using BIM 360 enterprise. The renewed agreement worth
$1.5 million was 20.0% more than the previous contract.
Manufacturing revenues increased 8.0% year over year but
decreased 1.4% sequentially to $142.0 million. The strong
year-over-year result was driven by broad-based and faster
adoption of manufacturing suites as well as industrial design,
visualization and simulation technology.
Cloud based PLM 360 reported a robust quarter, driven by strong
demand from small- and medium-size businesses in industrial
machinery, automotive and high tech sectors. Autodesk also saw
strong demand for Fusion 360, the world's first cloud-based
software for industrial and mechanical design, which currently
has more than 20,000 users.
Autodesk's Media and Entertainment segment recorded a revenue
decline of 9.0% year over year but increased 2.3% sequentially to
Although, Autodesk reported 21.0% jump in revenues from Suites,
revenues from its flagship products were down 9.0% year over
year. Revenues from new and adjacent products remained flat year
Geographically, revenues from Americas decreased 1.0% from the
year-ago quarter, while EMEA revenues increased 4.0%.
Asia-Pacific revenues remained flat on a year-over-year basis.
Revenues from emerging economies, which represented 15.0% of
consolidated revenues, were up 6.0% on a year-over-year basis.
Gross margin (including stock based compensation excluding
amortization) contracted 30 basis points (bps) from the year-ago
quarter but remained flat on a sequential basis at 89.9%. The
year-over-year decline was primarily due to unfavorable revenue
Operating expenses (including stock based compensation excluding
amortization) as a percentage of revenues, contracted 50 bps year
over year but expanded by the same percentage points to 71.6% in
The year-over-year decline was primarily due to lower marketing
& sales (down 60 bps) and research and development expenses
(down 110 bps), which fully offset higher general and
administrative expense (up 10 bps) in the quarter.
Operating margin (including stock based compensation excluding
amortization) contracted 80 bps from the year-ago quarter and 50
bps on a sequential basis to 18.3%, primarily due to lower
revenues and gross margin base.
Net income (including stock based compensation excluding
amortization) margin improved 90 bps from the year-ago quarter
but declined 130 bps on a sequential basis. The year-over-year
expansion was due to lower income tax rate.
Autodesk exited third quarter of fiscal 2014 with total cash and
cash equivalents (including marketable securities) of $2.48
billion compared with $2.41 billion in the previous quarter. Cash
flow from operating activities was $90.6 million compared with
$65.0 million in the previous quarter.
For the fourth quarter of fiscal 2014, Autodesk expects revenues
in the range of $560.0 - $580.0 million. Earnings (excluding
stock based compensation expense, amortization of intangibles and
restructuring charges) are expected to be in the range of 29 to
36 cents for the upcoming quarter.
Autodesk's third-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 faster penetrate the construction
industry, which is a $7.0 trillion market. We believe that
Autodesk's new cloud-based offerings are gaining traction.
Moreover, the company's focus on expanding its mobile
applications for both
Android platform will further drive market share, going forward.
However, sluggish macro-economic environment, weakness in
emerging markets, customer concentration and increasing
Adobe Systems Inc.
are the major concerns. Moreover, continued investments in new
products are expected to hurt margins in the near term.
Currently, Autodesk has a Zacks Rank #5 (Strong Sell).