Summary
Autodesk closed FY2010 Q3 with revenue of $414.9 million, down 33% from the prior-year quarter. Gross profit fell 34.8% to $364.8 million. Operating income dropped 97.7% to $2.7 million. Net income declined 88.3% to $10.5 million. Diluted EPS fell 87.2% to $0.05. Gross margin was 87.9%, down 2.4 percentage points. Operating margin was 0.7%, down 18.5 percentage points. Deferred revenue, current portion only, stood at $424.4 million. The quarter ended July 31, 2009.
The revenue decline came from a 48% drop in license and other revenue, partly offset by a 3% increase in maintenance revenue. Maintenance billings declined 11% in the quarter and 12% in the six months ended July 31, 2009. That trend creates downward pressure on maintenance revenue over the next four quarters. By region, net revenue fell 21% in the Americas, 41% in EMEA and 34% in APAC. Emerging economies revenue dropped 45%. International net revenue represented 69% of total net revenue. Segment revenue fell 39% in Platform Solutions and Emerging Business, 29% in Architecture, Engineering and Construction, 25% in Manufacturing and 32% in Media and Entertainment. Tech Data accounted for 14% of consolidated net revenue.
Management is cutting costs. A restructuring plan started in the second quarter of fiscal 2010 will reduce headcount by about 430 positions globally and consolidate up to 32 leased facilities. A prior program from the fourth quarter of fiscal 2009 reduced about 700 positions and up to 27 facilities. The company had $1,028.7 million in cash and marketable securities at July 31, 2009. It made no stock repurchases in the quarter or the six months. Backlog was $517.9 million at July 31, 2009, down from $569.5 million at January 31, 2009. Product returns reserves were $10.2 million at July 31, 2009, compared with $13.0 million at January 31, 2009. Actual product returns were 5.5% of applicable revenue in the quarter, up from 4.2% in the prior-year quarter.
Guidance points to more pain in the next quarter. For the third quarter of fiscal 2010, Autodesk expects net revenue to decrease in absolute dollars compared with the third quarter of fiscal 2009 because of the continued global recession. Operating expenses are expected to decrease in absolute dollars but increase as a percentage of net revenue. Cost of revenue is expected to decline in absolute dollars but rise as a percentage of net revenue. Marketing and sales, research and development, and general and administrative expenses are each expected to decrease in absolute dollars and increase as a percentage of net revenue. The company's primary goals for the remainder of fiscal 2010 are to deliver products, stimulate revenue growth, reduce expenses and invest in product functionality while limiting the impact on gross profit, operating margins and operating cash flow.
Risks remain elevated. The global economic contraction, job losses and tight credit have hurt demand. Customers have reduced their workforces, leading to fewer seats sold and fewer maintenance renewals. The stronger U.S. dollar weighed on operating income in the quarter and the six months. The company recorded a $20.9 million discrete non-cash tax charge from a valuation allowance against California deferred tax assets. Its effective tax rate was 22% in the quarter and negative 256% in the six months. Unrecognized tax benefits were $188.8 million at July 31, 2009. Auction rate securities had a fair value of $7.6 million, and investments in the Reserve Funds had a fair value of $18.0 million. Both are illiquid. Goodwill impairment could occur if revenue and cash flow projections decline significantly. The company has a $250.0 million U.S. line of credit with no borrowings outstanding.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2010 | Q2 FY2010 | QoQ | Q3 FY2009 | YoY |
|---|---|---|---|---|---|
| Revenue | $414.9M | $425.8M | -2.6% | $414.9M | ±0.0% |
| Gross profit | $364.8M | $373.5M | -2.3% | $364.8M | ±0.0% |
| Gross margin | 87.9% | 87.7% | +0.2 pp | 87.9% | ±0.0 pp |
| Research & development | $109.8M | $124.1M | -11.5% | $109.8M | ±0.0% |
| Sales & marketing | $176.4M | $185.8M | -5.1% | $176.4M | ±0.0% |
| General & administrative | $49.5M | $45.5M | +8.8% | $49.5M | ±0.0% |
| Total operating expenses | $362.1M | $392.9M | -7.8% | $362.1M | ±0.0% |
| Operating income (loss) | $2.7M | -$19.4M | +113.9% | $2.7M | ±0.0% |
| Operating margin | 0.7% | -4.6% | +5.2 pp | 0.7% | ±0.0 pp |
| Net income (loss) | $10.5M | -$32.1M | +132.7% | $10.5M | ±0.0% |
| Net margin | 2.5% | -7.5% | +10.1 pp | 2.5% | ±0.0 pp |
| Diluted EPS | $0.05 | -$0.14 | +$0.19 | $0.05 | ±$0.00 |
Risks
Global economic contraction and tight credit have led customers to defer, reduce or cancel purchases, contributing to a 33.0% year-over-year decline in FY2010 Q3 revenue and a 97.7% decline in operating income.
Maintenance billings declined 11% and 12% during the three and six months ended July 31, 2009, and management expects the year-over-year decline to create downward pressure on maintenance revenue over the next four quarters even though maintenance revenue rose 3% and 6% in those periods.
Tech Data and its global affiliates accounted for 14% of consolidated net revenue for the three and six months ended July 31, 2009, and 85% of Q3 revenue came from indirect channel sales, exposing Autodesk to distributor insolvency or payment delays.
Autodesk recorded restructuring charges of $26.4 million in FY2010 Q3 and $42.9 million in the first half, including a plan to cut about 430 positions and consolidate up to 32 leased facilities, and may incur additional charges if revenue declines further.
The stronger U.S. dollar had a negative effect of $10.0 million and $19.0 million on operating income during the three and six months ended July 31, 2009, and hedging cannot completely mitigate the impact.
Autodesk recorded a $21.0 million goodwill impairment in the first half of fiscal 2010 representing the entire M&E segment goodwill balance, and further revenue or cash flow projection declines could trigger additional impairment charges.
Autodesk derives a substantial portion of net revenue from AutoCAD-based products, and combined AutoCAD and AutoCAD LT revenue decreased 39% and 38% during the three and six months ended July 31, 2009, harming operating results.
Customers delayed purchases due to macroeconomic uncertainty, driving a 54% decrease in upgrade revenue in FY2010 Q3 and a 50% decrease in commercial new seat revenue, with longer sales cycles and slower adoption of new technologies.
Operating margin fell 18.5 percentage points year over year in FY2010 Q3 to 0.7%, and because operating expenses are relatively fixed in the short term, any revenue shortfall below expectations could have an immediate and significant adverse effect on profitability.
A California tax law change led to a $20.9 million discrete non-cash tax charge in the first half of fiscal 2010 and a negative 256% effective tax rate for the six months, and future tax rates may be materially impacted by valuation allowances and tax law changes.
Autodesk holds $18.0 million fair value in two Reserve Funds that ceased redemptions and $7.6 million in auction rate securities that failed to settle, and further market deterioration could cause additional other-than-temporary impairments.
Aggregate backlog decreased to $517.9 million at July 31, 2009 from $569.5 million at January 31, 2009, and deferred revenue was lower, which may pressure future revenue recognition.
International net revenue represented 69% of net revenue during the three months ended July 31, 2009, and revenue from emerging economies decreased 45% and 43% during the three and six months ended July 31, 2009, increasing exposure to global economic trends.
Actual product returns as a percentage of applicable revenue increased to 5.5% in FY2010 Q3 from 4.2% a year earlier and to 5.5% in the first half from 3.6%, primarily due to revenue decreases.
SaaS KPIs
All quarters →Deferred Revenue
Aggregate backlog
Total Program Enrollment
Summary, forecast, risks and KPIs are extracted from Autodesk, Inc.'s SEC filings for Q3 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.