Autodesk announced results last night for the quarter ended April 30. While pretty good retrospectively, the company’s outlook was cautious, leading to a sharp decline in the company’s share price morning. The good: total revenue was up 11%, revenue from Asia hit a record, the Americas was up; the Manufacturing and AEC business segments did well, as did suites and sales of commercial new licenses The worrisome: mixed results from EMEA and emerging countries. The bad: poor performance by the Media and Entertainment division and in a few countries.
The bottom line: in order to hit its targets for the remainder of the year, Autodesk’s reinvention will need to show results. Customer adoption of suites will have to accelerate; the new verticalized go-to-market strategies will have to find their feet; and resellers need to quickly seize the opportunity to sell all products, and with a growing emphasis on services. Q1 wasn’t nearly as bad as the 15% share price decline would have one believe, but, once again, investors are looking ahead to possible trouble.
The details of Q1:
- Revenue for the quarter was $589 million, up 11% from a year ago.
- By type of revenue: License and other revenue was $361 million, up 11.8% year/year which is a deceleration of about 1/2 of a percentage point from FQ4. Like most CAD companies, FQ4 is usually a blow-out, so this isn’t a trend to be worried about just yet, but it is something to watch.
- Revenue from new commercial licenses grew 19%, slightly faster than in Q4. Maintenance revenue hit a record at $228 million, up 11% year/year, implying that the subscription business is doing well.
- Autodesk wasn’t specific in its results for FQ1, but Mr. Bass said that large deal activity was “about double” what it saw a year ago.
- By generic category of product: Revenue from Flagship products was up 4% to $336 million, driven by sales of AutoCAD and LT. Revenue from Suites was up 34% to $166 million and now accounts for just over 1/4 of all revenue. The catchall “New and Adjacent products” category reported revenue of $87 million, up 9%, driven by growth in simulation products and Autodesk consulting services. Autodesk lumps Moldflow, Algor (now Simulation Mechanical) and CFdesign (now Simulation CFD) into “New and Adjacent”. Why consulting services is in a product category is a mystery; am trying to solve.
- By business unit: Platform Solutions and Emerging Business (PSEB) revenue was $229 million, up 9%. The AEC business segment reported revenue of $163 million, up 16%, driven by adoption of suites and strength in the Americas and Asia. The Manufacturing business segment revenue grew most rapidly, to $146 million, up 18%, as companies move to suites and adopt simulation and, again, by demand from the Americas and Asia. Autodesk said on the earnings call that it had just shipped its 1 millionth seat of Inventor.
- Mr. Bass gave a shout out to the new PLM 360 offering on the earnings call, saying that he is “thrilled with the current results. We’re seeing everything from large enterprise companies who have legacy PLM systems deploy pilot projects to SMB companies who have never used PLM before deploy our new service. This truly expands our market opportunity, and we’re looking forward to watching this business grow over time.” Later in the call, Mr. Bass said that early customer adopters are using PLM 360 for discrete workflows, that they are “clear about a very specific problem in which the traditional systems have proved inadequate, and they know exactly what they want to pilot [PLM 360] on.” He offered no other details.
- Revenue from the Media and Entertainment (M&E) business segment was down 5% from last year, to $51 million. Customers delayed purchases because of imminent releases of new hardware by Autodesk’s partners and the FQ3 release of Smoke on the Mac, and a change in buying patterns as customers moving to suites no longer need to buy products like 3DS Max on a standalone basis. Mr. Bass told investors that the M&E business will “return to historic levels” of growth by FQ3.
- By geography, revenue from EMEA was $224 million, up 4% as reported and up 2% in constant currencies. As Mr. Bass said in his opening remarks on the analyst call, performance in EMEA was “varied” and “unpredictable”, with Southern Europe “weak”, central Europe “better” and a “record quarter” in Germany. The Manufacturing and AEC business segments did especially well in Europe. Revenue from the Americas revenue was $208 million, up 14%, on strength in the US and Canada. Revenue from Asia Pacific hit a record at $157 million, up 19% as reported (up 13% in a constant currencies) driven by demand in Japan and South Korea.
- Autodesk has for several years highlighted revenue from a small number of countries it labels “emerging” — used to be called BRIC for Brazil, Russia, India and China. Revenue from these countries is already included in the regions’ revenue but is an important gauge of Autodesk’s ability to monitize products sold into economies where piracy has been a big issue. In any event, revenue from emerging economies was up 6% to $82 million, as strength in Russia and China was offset by weaker results in Brazil and India. Mr. Bass said that “these markets are much more volatile” and that the company is “taking actions to expand our business and improve our performance in these countries. We continue to believe that the BRIC countries and other emerging economies around the world hold tremendous growth potential for Autodesk, and we are focused on improving our performance there.”
This economic mixed bag led Autodesk to tweak its guidance for the remainder of fiscal 2013. The company now expects revenue for FQ2 to be between $580 million and $600 million, up about 8%, and up 10% for all of fiscal 2013. As I wrote above, in order to make its fiscal 2013 target, Autodesk’s sales need to accelerate in the second half of the fiscal year, as the changes it made over the last six months or so in its channel program and direct sales force take hold, and as customers continue to adopt suites.