Autodesk reported results last week for the fourth quarter and full year ended January 31, 2011 that pretty much blew past expectations and continued the strong trends seen over the last several quarters, albeit with a bit of deceleration in many of the individual revenue categories. Total Q4 revenue of $592 million was up 12% from a year ago, ahead of Wall Street’s expectations and higher management’s own range of $575 million to $590 million. Standouts were Platform Solutions and Emerging Business (PSEB), where revenue jumped 18% over Q4 2011 and the Americas, where revenue was up 17% year/year. While they didn’t beat the overall average (hard to do when PSEB is over a third of revenue), the company’s Manufacturing and AEC business segments each recorded record revenue.
CEO Carl Bass gave one of the best quotes ever in an earnings press release: “As we kick off fiscal 2013, we aim to delight our customers with our ever-improving product portfolio while delivering continued revenue and profitability growth.” “Delighting customers” — definitely marketing-speak, but creates such a positive image of a desire to exceed expectations.
The company provided lots of detail to slice and dice; to summarize:
- Fourth quarter GAAP revenue was $592 million, up 12% year/year.
- Total license revenue was $370 million, up 12%. Autodesk also said that revenue from commercial new licenses grew 18%; implying that educational new licenses sales did not do well at all.
- Maintenance was $222 million, up 12%.
- Suites continued to grow, though momentum seems to be slipping, with revenue up 25% in FQ4 to $162 million, to account for 27% of total revenue. Year/year growth was 37% in FQ3, 53% in FQ2, 19% in FQ1, a trend that is clearly tied to promotional activities. Interestingly, Autodesk is seeing more demand at the high-end of the suites spectrum than anticipated, but didn’t give details.
- I am most interested in Autodesk’s “New and Adjacent” category, which includes a lot of the recently purchased CAE solutions, but also Vault, Buzzsaw and probably Instructables.com. Revenue from this category was $99 million, up 11% year/year and up 15% sequentially. It’s a broad category, but I’m going to try to tease out simulation growth.
- Autodesk reports that it closed 36 orders in excess of $1 million in Q4, up from 31 a year ago.
- By business unit, PSEB revenue was $214 million, up 18% year/year. Revenue from PSEB suites isn’t given, but the company says it grew an off-the-charts 88% year/year on what it likely still a small base.
- Revenue from the AEC business was up 8% year/year and 15% sequentially to a record $175 million, driven by a 32% increase in revenue from AEC suites. Growth was strongest in the Americas and the company reports progress in the government vertical. Autodesk, Mr. Bass said, has “hit the tipping point with BIM, with a huge amount of demand from owners, such as being mandated by government agencies. For example, historically, Japan has been a laggard with respect to the adoption of technology. They’ve been primarily doing 2D technology in AEC. Just in the last year, we’ve seen the leading firms all adopt BIM technology. It’s no longer a question of if but really of when people will be doing 3D modeling and simulation and visualization in AEC. Certainly, the macroeconomics in each of these countries affects it on a quarterly basis. But if you stand back and squint, you can just see broad adoption of a new way of doing business.”
- Revenue from the Manufacturing business was a record $148 million, up 11 percent year/year and also sequentially. Growth here was led by “continued adoption of our core manufacturing design products and suites, as well as strong growth in our simulation offerings.” Mr. Bass likes Autodesk’s chances in the manufacturing market, saying that “our competitive position has never been stronger. It’s a combination of what we have to offer, including the new PLM offerings, and some stumbling by our competitors. I think you’ll see good growth in Manufacturing continuing through the next year.”
- Revenue from the Media and Entertainment segment was $55 million, up 7% year/year.
- By geo, revenue from EMEA was $234 million, up 10%, with growth in northern Europe and emerging economies partially offsetting weakness in southern Europe. Autodesk says it recorded several large deals in EMEA in Manufacturing and AEC.
- Revenue from the Americas hit a new record in FQ4, at $226 million. This was an increase of 17% over last year and up 13 % sequentially. This growth was “broad based” across all of Autodesks’ segments, with the U.S., Canada, Mexico, and Brazil all called out. Mr. Bass said that he saw the turnaround in the Americas start “1.5 years ago, almost 2 years ago, and it’s just been building. We saw a little bit of a different mix [this quarter] than we anticipated. So as we went into planning for next year, the mix will be slightly different but I think the Americans will continue to do well.”
- Revenue from Asia Pacific was $133 million, up 9% year/year but down 3% sequentially against an unusually strong FQ3 that benefitted from a single large deal. Again, the year/year growth was described as “diversified” across business units, with particular strength mentioned in Southeast Asia, China and South Korea.
- Revenue from emerging economies was $95 million, up 12% year/year and up 9% sequentially. Emerging economies accounted for 16% of total revenue in FQ4, same as last year.
- Fiscal year 2012 revenue was $2.22 billion, up 14% from fiscal 2011, above the company’s expectations of revenue between $2.198 billion to $2.213 billon.
- Autodesk’s channel still accounts for over 80% of its revenue. Mr. Bass told investors that the company continually tweaks its channel program, such as enabling VARs to sell the full product portfolio (if they want to; serious investment is still needed to be successful –Ed.), expanding deal registration to all geos, and aligning incentive programs.
Unlike most other engineering software companies, Autodesk did not lower its forecast for 2013, instead simply reiterating its November 2011 statement that “Net revenue for fiscal 2013 is expected to increase by at least 10% compared to fiscal 2012.” That increase would put revenue at about $2.4 billion. For FQ1, the company now expects total revenue of $575 million to $590 million, which would be growth of 9% to 12%.
During the earnings call, Mr. Bass continued to tease Autodesk’s PLM offering, saying that he views the potential market for these solutions as a $3 billion “opportunity to disrupt and democratize”. Without giving any details, he said that companies of all sizes have been piloting PLM 360, “from small companies deploying PLM for the first time to large enterprises that have become disenchanted by existing legacy PLM systems.” Mr. Bass recognizes that, in many cases, his potential PLM customers have already have a PLM system which Autodesk will not be able to displace. He said that many accounts want to “Chernobyl their PLM installation. They want to entomb it in concrete and surround it with more modern flexible tools. They want to reach parts of the organization that, because of difficulty or expense, they couldn’t get their PLM systems to reach. We’re having a surprising amount of success in the larger customers, which is — I would have thought we had more to prove there early on, and it would have taken a little bit longer to develop. But in some ways, our best customers are those that know PLM, understand PLM and know where they find it wanting.”
But it’s not all about large enterprises, or even about enterprise IT. Mr. Bass said that over 50 million downloads have been recorded for the company’s Windows, Mac, iOS, Android and Web-based apps in just 18 months, representing both immediate brand-building and the potential for long-term revenue.
When asked by an investor about whether Autodesk is selling into its installed base or to new accounts, Mr. Bass said something very important: “In almost every case, customers have some of our software. So we don’t make as big a distinction between new and existing customers. We do look at the role we play in the value to the customer. So there are places we were, front and center, the most important product that they use to do their design and engineering work. There are other places where we play a peripheral role. A lot of [our strategy] is moving from those peripheral roles to more central roles … When you go from a small niche player [to the most important product they use] within a firm, you’re actually changing the quality of the relationship in some material way. It’s not just gaining more share within the company, you’re changing your relationship with the customer.”
Add together “changing the relationship” with “delighting our customers” and mix in 50 million downloads … Autodesk is a potent force that could, if all is executed well, change the dynamic in engineering software. Let’s face it: customers want to be delivered more than they asked for or thought they needed, they want things to be easier rather than harder. If Autodesk can deliver on all of these promises, it might just be unstoppable.
Autodesk, too, is hosting an investor event this week. If there’s anything new, I’ll update.
