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.
Outlook
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.
Recommendation
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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