) reported mixed second quarter 2013 results. The company reported
non-GAAP earnings of 48 cents per share, which were ahead of the
Zacks Consensus Estimate of 40 cents per share. However, the top
line of $568.7 million was way behind the Zacks Consensus Estimate
of $594.0 million.
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Revenue increased 4.1% from the year-ago quarter to $568.7 million,
but was below management's guided range of $580 million to $600
million. Revenue growth slowed considerably as certain
organizational realignments hampered sales executions. Sluggishness
in the macroeconomic environment also led to the
weaker-than-expected top line growth.
However, the year-on-year revenue growth was on account of a 2.3%
increase in the license and other revenues and 7.0% increase in the
On a segmental basis, Platform Solutions and Emerging Business
(PSEB) revenue jumped 10% year over year to $218 million in the
reported quarter. Revenue from the Architecture, Engineering and
Construction (AEC) business segment was $161 million, a mere
increase of 2.0% from the previous-year quarter, while
Manufacturing revenues increased 4% from the previous-year quarter
to $141 million. However, revenues from the Media and Entertainment
business declined 10.0% on a year-over-year basis to $49.0 million
in the quarter.
On geographic basis, revenue from America (up 4% year over year)
and Asia-Pacific (up 12% year on year) offset the decline in
revenue from EMEA (down 1% year over year). Revenue from emerging
economies, which represented 15% of the total revenue, remained
flat on year-over-year basis.
Gross profit (including stock-based compensation) was $518.5
million, up 4.2% year over year. Gross margin increased 20 basis
points (bps) year over year to 91.2% on the back of higher revenue
base and favorable business mix.
Operating expenses (including stock-based compensation) increased
5.7% year over year to $408.1 million, primarily attributable to
higher marketing & sales expenses (up 5.7% year over year) and
research & development expenses (up 4.1% year over year).
General and administrative expenses also increased 11.2% from the
year-ago quarter. However, operating expenses, as a percentage of
revenue, expanded 120 bps to 71.8% in the quarter.
Operating income (including stock-based compensation) of $110.4
million was down 1.0% year over year. Operating margin came in at
19.4% in the quarter, down 100 bps year over year, primarily due to
higher-than-expected operating expenses.
Net income on non-GAAP basis came at $111.1 million or 48 cents per
share, which improved from $103 million or 44 cents reported in the
previous-year quarter. However, including stock based compensation
and its related tax effects, net income was $81.3 million or 35
cents per share.
The company exited the second quarter with total cash and cash
equivalents of $930.2 million compared with $1.07 billion in the
previous quarter. Cash flow from operating activities was $107.0
million compared with $139.3 million in the prior quarter.
For third quarter 2013, Autodesk expects revenues in the range of
$550.0 million to $570.0 million. Non-GAAP EPS is expected in
the range of 40 cents to 45 cents, which excludes 18 cents related
to stock-based compensation expense, 12 cents for restructuring
charges and 8 cents related to amortization of acquisition related
The company reduced its outlook for fiscal 2013. Autodesk expects
revenues to increase in the range of 4%-6%, against earlier
expectation of 10% growth over fiscal 2012. Autodesk expects
non-GAAP operating margin to improve 150 bps (earlier expectation
was 200 bps) annually in fiscal 2013.
The company also announced restructuring measures that would
facilitate the shift to the cloud computing and mobile computing.
The company expects to reduce workforce in the coming quarters and
expects to consolidate certain leased facilities. The company
expects a pre-tax charge of $50 million to $60 million for these
restructuring activities in this fiscal year 2013. Autodesk expects
the pre-tax charge to be $40 million to $45 million in the third
quarter and the remaining amount in the fourth quarter.
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.
The company's initiatives to shift towards cloud and mobile
computing are expected to be long-term positives. The company's
restructuring activities reduced the sales outlook for the fiscal
year. However, we believe that this will help the company's to
achieve its long-term goals to optimize its cost structure and
facilitate investments in the cloud computing services portfolio.
The company is also increasing its penetration in the mobile market
by developing software for smartphones and
) iPad. We believe that these initiatives will boost Autodesk's
top-line growth going forward.
However, Autodesk's high exposure to Europe amidst the lingering
financial turmoil in the region keeps us cautious. Moreover,
customer concentration and increasing competition are the other
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.