Summary
Autodesk reported a sharp decline for the quarter ended April 30, 2009. Revenue fell 28.9% to $425.8 million. Gross profit fell 30.9% to $373.5 million. The company swung to an operating loss of $19.4 million from operating income in the prior-year quarter, a 116.2% decrease. Net loss was $32.1 million, down 133.9% from net income in the prior-year quarter. Diluted EPS was -$0.14, down $0.55. Gross margin was 87.7%, down 2.6 percentage points. Operating margin was -4.6%, down 24.6 percentage points. Operating cash flow fell 85.3% to $27.2 million. Capital expenditures rose 1.5% to $13.6 million. Deferred revenue, current portion, was $453.1 million.
The quarter included several charges. Autodesk recorded a $21.0 million goodwill impairment charge for its Media and Entertainment segment. It also recorded $16.5 million in restructuring charges. The effective tax rate was negative 65%, compared with 25% in the prior-year quarter. The rate included a $20.9 million discrete non-cash tax charge for a California deferred tax asset valuation allowance and a $7.7 million discrete tax benefit from the goodwill impairment. These items weighed on the bottom line.
Revenue declined across the business. License and other revenue fell 44%, while maintenance revenue rose 9%. Revenue from 3D model-based design products fell 16%, and 2D products fell 39%. By region, the Americas fell 15%, EMEA fell 35%, and APAC fell 36%. By segment, PSEB fell 38%, AEC fell 17%, MFG fell 21%, and M&E fell 29%. Revenue from emerging economies declined 42% and represented 14% of net revenue, down from 17%. Maintenance billings declined 14%. Total program enrollment was about 1.7 million users at April 30, 2009. Aggregate backlog was $556.8 million at April 30, 2009, down from $569.5 million at January 31, 2009. Cash and marketable securities were $966.5 million at April 30, 2009, down from $988.7 million at January 31, 2009.
Management expects net revenue to decrease in absolute dollars in the second quarter of fiscal 2010 compared with the second quarter of fiscal 2009. It expects operating expenses to decrease in absolute dollars in the second quarter of fiscal 2010. Cost of revenue, marketing and sales, research and development, and general and administrative expenses are expected to decrease in absolute dollars but increase as a percentage of net revenue in the second quarter of fiscal 2010. For the remainder of fiscal 2010, total costs and expenses are expected to decrease in absolute dollars but increase as a percentage of net revenue. In May 2009, Autodesk announced a restructuring to reduce headcount by approximately 430 positions and consolidate up to 32 leased facilities. It anticipates restructuring and impairment charges of $33 million to $40 million, with $20 million to $25 million for one-time employee termination benefits and $13 million to $15 million for facilities-related costs. Substantially all of these charges will be expensed in the second and third quarters of fiscal 2010.
Risks remain elevated. The company cited continued global economic contraction, job losses, tight credit, and reduced customer spending. Demand declined in every major geography and industry. Foreign currency volatility hurt results, with the stronger U.S. dollar having a negative effect of $9.0 million on operating income in the quarter. Autodesk relies on major distributors, including Tech Data, which accounted for 14% of consolidated net revenue in the quarter. Liquidity risks include auction rate securities and Reserve Funds. The company had $7.6 million in auction rate securities and $31.9 million in Reserve Funds. It also had $134.9 million of net deferred tax assets at April 30, 2009. The company had no stock repurchases in the quarter, compared with 8.0 million shares for $256.6 million in the prior-year quarter. Days sales outstanding in trade receivables was 49 days at April 30, 2009.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2010 | Q1 FY2010 | QoQ | Q2 FY2009 | YoY |
|---|---|---|---|---|---|
| Revenue | $425.8M | — | — | $425.8M | ±0.0% |
| Gross profit | $373.5M | — | — | $373.5M | ±0.0% |
| Gross margin | 87.7% | — | — | 87.7% | ±0.0 pp |
| Research & development | $124.1M | — | — | $124.1M | ±0.0% |
| Sales & marketing | $185.8M | — | — | $185.8M | ±0.0% |
| General & administrative | $45.5M | — | — | $45.5M | ±0.0% |
| Total operating expenses | $392.9M | — | — | $392.9M | ±0.0% |
| Operating income (loss) | -$19.4M | — | — | -$19.4M | ±0.0% |
| Operating margin | -4.6% | — | — | -4.6% | ±0.0 pp |
| Net income (loss) | -$32.1M | — | — | -$32.1M | ±0.0% |
| Net margin | -7.5% | — | — | -7.5% | ±0.0 pp |
| Diluted EPS | -$0.14 | — | — | -$0.14 | ±$0.00 |
Risks
Deteriorating global economic conditions have led customers to defer, reduce or cancel purchases, causing longer sales cycles and increased price competition. Revenue was $425.8 million in the quarter ended April 30, 2009, down 28.9% from the prior-year quarter, and license and other revenue decreased 44%.
A significant portion of revenue comes from maintenance, and customers have no obligation to attach or renew. Maintenance billings declined 14% compared with the first quarter of fiscal 2009 due to fewer new seats sold and lower renewal rates, which is expected to negatively impact future revenue.
The company relies on indirect channel sales, which were approximately 82% of revenue in the first quarter of fiscal 2010, and Tech Data accounted for 14% of consolidated net revenue in that quarter. Channel partner insolvency or financial instability could delay revenue recognition and harm revenue.
Cost reduction actions may be costly and not as effective as anticipated, potentially eliminating critical operations. The company recorded $16.5 million of restructuring charges in the first quarter of fiscal 2010 and announced a further restructuring in May 2009 to reduce about 430 positions and consolidate up to 32 leased facilities, with anticipated charges of $33 million to $40 million.
The company recorded a $21.0 million goodwill impairment charge in the first quarter of fiscal 2010 for the entire M&E segment goodwill balance. Additional impairment charges may be recorded if revenue and cash flow projections decline significantly.
The stronger U.S. dollar had a negative effect of $9.0 million on operating income in the first quarter of fiscal 2010 compared with the prior-year period. If the U.S. dollar continues to strengthen, future net revenue could be further harmed.
The global credit and banking crisis may cause insolvency of key channel partners, counterparty failures affecting treasury functions, and increased expense or inability to obtain short-term financing. These factors could impair distribution channels and access to cash reserves.
A substantial portion of net revenue is derived from AutoCAD-based software products. Combined revenue from AutoCAD and AutoCAD LT decreased 42% in the first quarter of fiscal 2010, harming operating results.
International net revenue represented 69% of net revenue in the first quarter of fiscal 2010, and revenue from emerging economies declined 42% compared with the first quarter of fiscal 2009. The company faces regulatory, economic, intellectual property, collections, currency and taxation risks from international operations.
The investment portfolio includes illiquid securities: the Reserve Funds ceased redemptions and auction rate securities have failed to settle in auctions since August 2007. The company may experience further declines in interest income, inability to sell investments, or impairment charges.
California enacted tax law changes in the first quarter of fiscal 2010 that reduced expected future California taxable income and deferred tax asset realizability. The company recorded a net discrete tax charge of $20.9 million, and its effective tax rate was negative 65% in that quarter.
The company is responding to stock option practices lawsuits and related Board review requests. Although the lawsuits were recently dismissed, the Board is reviewing requests, and the ultimate outcomes could have a material adverse effect; defense has been costly.
Success depends on attracting and retaining highly skilled personnel, and competition for these personnel has been intense. It took over eight months to recruit and hire a new chief financial officer, illustrating retention and hiring risk.
The software industry has limited barriers to entry, and some competitors have greater resources. Increased competition could result in continued price reductions, reduced net revenue and profit margins, and loss of market share.
Actual product returns as a percentage of applicable revenue were 5.3% in the first quarter of fiscal 2010 compared with 2.2% in the first quarter of fiscal 2009. Higher returns reduce revenue and require reserves, with product returns reserves at $12.1 million at April 30, 2009.
Operating expenses are based in part on expectations for future revenue and are relatively fixed in the short term. A revenue shortfall below expectations could have an immediate and significant adverse effect on profitability, and operating margin decreased from 20% to an operating loss of 5% in the first quarter of fiscal 2010.
Strategic acquisitions and investments carry integration, revenue projection, internal control and management diversion risks. The company took a $21.0 million goodwill impairment charge in the first quarter of fiscal 2010 and a $128.9 million impairment charge in the fourth quarter of fiscal 2009, primarily related to M&E segment acquisitions.
SaaS KPIs
All quarters →Aggregate backlog
Total Program Enrollment
Summary, forecast, risks and KPIs are extracted from Autodesk, Inc.'s SEC filings for Q2 FY2010 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 15, 2026.