Engineering and entertainment software design maker, Autodesk Inc. (ADSK) reported first quarter 2012 earnings of 31 cents per share, in line with the Zacks Consensus Estimate. Earnings per share (EPS), including stock-based compensation but excluding one-time charges were up 47.6% year over year, driven by strong revenue growth.
Operational Performance
Gross profit (including stock-based compensation but excluding one-time charges) was $481.8 million, up 11.8% year over year. Gross margin increased 40 basis points (bps) year over year to 91.2%, primarily due to higher revenues.
Operating expenses (including stock-based compensation but excluding one-time charges) increased 8.2% year over year to $388.6 million, primarily attributed to higher marketing & sales expenses (up 8.3% year over year) and research & development expenses (up 7.4% year over year).
However, operating expenses, as a percentage of revenue, contracted 210 bps to 73.6% in the quarter.
Operating income (including stock-based compensation but excluding one-time charges) of $93.2 million was up 29.8% year over year. Operating margin was 17.6% in the quarter, an increase of 250 basis points from the year-ago quarter. This was driven by strong revenue growth in the quarter.
Revenue
Revenues increased 11.3% year over year to $528.3 million in the first quarter, beating the Zacks Consensus Estimate of $522.0 million and management’s guided range of $510.0 million to $525.0 million.
The year-over-year growth in revenue was driven by higher license and other revenues, which increased 15.4% year over year to $323.0 million. Maintenance revenues rose 5.4% year over year to $205.3 million in the quarter.
Autodesk witnessed year-over-year growth across all of its geographical regions. Revenues in America jumped 15.0% year over year to $181.0 million.
International businesses also contributed to the strong revenue growth in the quarter. EMEA revenues were up 8.0% year over year and 10.0% on a constant currency basis to $215.0 million. Asia-Pacific revenues escalated 15.0% year over year and 11.0% on a constant currency basis to $132.0 million.
Revenues from emerging economies represented 15.0% of the total revenue in the quarter and climbed 13.0% year over year on a constant currency basis to $77.0 million.
On a segmental basis, Platform Solutions and Emerging Business revenues leaped 15.0% year over year to $211.0 million in the reported quarter.
Revenues from the Architecture, Engineering and Construction (AEC) business segment were $141.0 million, up 3.0% year over year, while Manufacturing revenues increased 14.0% year over year to $123.0 million in the quarter. Revenues from the Media and Entertainment business rose 15.0% year over year to $53.0 million in the quarter.
Balance Sheet and Cash Flow
Autodesk’s balance sheet remains strong with no debt. Exiting the first quarter of 2012, total cash and investments were $1.35 billion compared with $1.27 billion in the previous quarter. Cash flow from operating activities was $128.4 million compared with $176.0 million in the previous quarter.
Guidance
For the second quarter of 2012, Autodesk expects revenues in the range of $530.0 million to $545.0 million. GAAP EPS is expected in the range of 25 cents to 29 cents. Non-GAAP EPS is expected in the 37 cents to 41 cents range for the quarter. The Zacks Consensus Estimate is currently pegged at 35 cents per share, below the guided range.
For fiscal 2012, Autodesk expects revenues to increase 12.0% year over year (up from 10.0%). Non-GAAP operating margin is expected to increase 200 basis points on a year-over-year basis. The company did not provide any EPS guidance for the full year. The current Zacks Consensus Estimate is pegged at $1.40 per share for fiscal 2012.
Recommendation
We maintain our Outperform rating over the long term (6-12 months). We believe that Autodesk’s supremacy is driven by its innovations in 3D design technology and product portfolio. These innovations enable Autodesk to stay ahead of competitors like Adobe Systems Inc. (ADBE), Parametric Technology Corp. (PMTC) and Avid Technology Inc. (AVID).
Moreover, strong margin growth, operating leverage and a clean balance sheet are other positives for the stock going forward.
Currently, Autodesk has a Zacks #2 Rank, which translates into a short-term Buy rating on the stock (1-3 months).
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