Autodesk’s Q1 a study in moving parts

There’s been no shortage of news from Autodesk lately, what with new licensing options, acquisitions, 3D printing and an RV touring the US*, so it’s no surprise that the Q1 earning call tried to put it all in perspective. CEO Carl Bass addressed the 3D printing hoopla right away, in his opening remarks:

We are developing an open software platform for 3D printing called Spark, which will make it more reliable yet simpler to print 3D models and easy to control how that model was actually printed. Spark will be open and freely licensable to hardware manufacturers and others who are interested. Same for our 3D printer, the complete design of which will be made publicly available to allow for further development in experimentation.

Autodesk’s 3D printer is intended to be a showcase and reference implementation for Spark. If Spark is widely adopted and becomes the standard platform for 3D printing (a big if, given how many formats are out there today), it could become the DWG of 3D printing. But even if it doesn’t get to that point, Spark and Autodesk’s 3D printer are important pieces of a concept-to-prototype workflow that would be hard for competitors to match. Mr.Bass was careful to say that 3D printing and Spark will have no near-term impact on revenue or profitability (hardware is a very different business model from software). Some of the earnings details (look here for the press release and prepared remarks):

• Total Q1 revenue was up 4% year/year (y/y) to $593 million. Q1 2014 revenue was up 5% y/y on a constant currency (cc) basis. The Delcam acquisition closed too late in the quarter to be meaningful.
• By geo, revenue from the Americas was up 2% y/y to $206 million.
• Revenue from EMEA grew 4% to $226 million (up 2% in cc). Like many other companies in our universe, Autodesk reported mixed results by country, though southern Europe seems to be growing again.
• Revenue from Asia Pacific was up 6% in Q1 to $161 million (and up 15% in cc). Autodesk highlighted Japan and South Korea.
• Revenue from emerging economies was up 5% to $79 million (up 4% in cc) and represents 13% of total revenue in Q1.
• By category, license and other revenue declined 2% to $316 million due, per the company, to declines in the Media & Entertainment part of the business. Subscription revenue (which includes maintenance for perpetual licenses) was up 12% to $276 million.
• Revenue from suites was $210 million, up 19% y/y and represents 35% of total revenue in Q1 (as compared to 31% of total a year ago).
• By business line, revenue from the Platform Solutions and Emerging Business segment was flat at $212 million, in part because customers are increasingly opting for suites and not standalone products like AutoCAD and AutoCAD LT.
• Revenue from the AEC segment was up 14% to $196 million. Revenue from AEC suites increased 36% y/y; the company again highlighted demand for the Building Design Suites and Infrastructure Design Suites. Mr. Bass these results were driven by the ongoing recovery in commercial construction and continued BIM adoption. He did later say that BIM 360 was down sequentially but had shown year/year growth in Q1. No details.
• Revenue from the Manufacturing business grew 6% to $147 million. Revenue from manufacturing suites, especially the Product Design Suite, was up 8%. Mr. Bass said mentioned simulation, but not NEi by name, saying that “we continue to investment in our portfolio, recently expanding to include new functionality like composite analysis technology for our simulation offering.” As far as the manufacturing economy, Mr. Bass said that it’s “stable to growing, relatively healthy across the globe” though Autodesk has seen sales in Russia decline, where “it’s going to get worse before it gets better”.
• Mr. Bass gave a bit of color about the typical PLM 360 customer, saying that most are entirely new to Autodesk and have decided created an IT strategy around cloud deployments (NetSuite or Salesforce, for example). 
• Mr. Bass also touched on Delcam, saying that Delcam’s business in Q1 was healthy, but that revenue recognized in Q1 was immaterial to the quarter. “It’s great to have the Delcam team onboard as we further broaden our already strong manufacturing solutions.” 
• Revenue from the company’s Media and Entertainment business segment fell 19% from a year ago to $38 million. Autodesk’s prepared remarks said that some of this decrease in M&E is due to “the inclusion of our M&E products in other Autodesk industry suites”; it would be interesting to know if that was material to the growth reported in the other parts of the business. Mr. Bass said that the animation software business is “a good business, good margins, continues to grow” but that the creative finishing business continues to shrink. 
• Mr. Bass highlighted the move to subscriptions, saying that the company added over 89,000 subscriptions in Q1, most of which were “maintenance subscriptions” — aka just maintenance to the rest of us. The number is probably so high because Autodesk announced the end of upgrades in 2015, so customers will need to be on maintenance to get new releases. Desktop subscriptions and Autodesk’s cloud offerings are growing more gradually. 

What’s interesting about Autodesk right now is in how many directions the company is moving, all at once. Do you want to buy tokens, perpetual or subscription? They can do that. On your desktop or in your browser? They can do that in many parts of the portfolio. Add in some cloud computing capability? Yes. Autodesk is clearly trying to bring its technologies to newer audiences, who don’t do business in traditional ways — and to traditional customers who need to be more nimble.

Autodesk guided to Q2 revenue of between $595 million and $610 million, and F15 revenue growth of 4% to 6%, or for a total of around $2.4 billion. Delcam last reported annual revenue of about $75 million; the accounting is tricky, so not all of that will wind up in Autodesk’s top line. Even so, Delcam will account for a significant part of Autodesk’s F15 growth. Factor in NEi and other acquisitions, and it’s possible that Autodesk’s transition from upfront/perpetual licensing to subscriptions will lead to flat organic revenue year/year in F15. But flat is quite a feat; other companies who’ve changed business models would have been extremely happy with flat. See AspenTech recently, Cadence a long time ago, and many in between.

—

* This is very cool. Autodesk has an RV touring the US to promote STEM and Reality Computing. Check out www.3drv.com for updates, meetups and the like.