Friday, August 19, 2011

Autodesk (ADSK) reports excellent sales and profits. Nonetheless, share price falls off the cliff

Yesterday afternoon (August 18, 2011), Autodesk (ADSK) reported results for the second quarter of its 2012 fiscal year ….. on a day when the Dow Jones Industrial Average sank by nearly 500 points. Kind of depressing, I think, for a company to report excellent sales and profits, only to watch its stock tank because the overall market is in a tanking mode.

DISCLOSURE: I am now “long” ADSK shares. (Morningstar Research just upgraded ARC to a ***** (five star) stock.

Autodesk shares were trading at $45.99 on May 12, 2011. Since then, Autodesk shares have fallen off the cliff; when I checked this morning, Autodesk shares were trading at $24.92 !!!

Brief snapshot of Autodesk’s results:


Strong Growth of EPS and Cash Flow from Operations

SAN RAFAEL, Calif., August 18, 2011-- Autodesk, Inc. (NASDAQ: ADSK) today reported financial results for the second quarter of fiscal year 2012.

Revenue was $546 million, an increase of 16 percent compared to the second quarter of fiscal 2011.

GAAP operating margin was 17 percent, compared to 17 percent in the second quarter of fiscal 2011.

Non-GAAP operating margin was 25 percent, compared to 25 percent in the second quarter of fiscal 2011. A reconciliation of GAAP to non-GAAP results is provided in the accompanying tables.

GAAP diluted earnings per share were $0.30, compared to $0.25 in the second quarter of fiscal 2011.

Non-GAAP diluted earnings per share were $0.44, compared to $0.36 in the second quarter of fiscal 2011.

Cash flow from operating activities was $132 million, compared to $112 million in the second quarter of fiscal 2011.

After ADSK released its results yesterday afternoon, ADSK held an “earnings call” with analysts who follow the company. You can access a transcript of the earnings call at (enter ticker: ADSK). If you do access the transcript, be sure to read not just the transcript of the company’s statements, but the Q&A transcript (accessed by clicking on the Q&A tab.)

Below, I’ve copied into this post some of the comments made by Autodesk’s CEO, Carl Bass and I’ve also copied into this post one of the questions Carl Bass was asked and the response he gave to that question.

Carl Bass

“Thanks, Dave, and good afternoon, everyone. Financial markets grew weaker and more volatile by the week. Today was certainly no exception. It's a bit surreal announcing our results after the close of today's market, since we have lots of positive news to report.

Across the board, our key financial metrics was strong, with growth across all geographies and business segments, better-than-expected operating margins and profitability and continued strong cash flow. Hoping driver growth was an increase in the demand for our suites.

There are several areas of notable growth and achievement. Highlights for the quarter include 16% growth in total revenue, 45% growth in total suites revenue, 24% growth in revenue from Asia-Pacific, 20% growth in record revenue in Manufacturing, 19% growth in AEC, 37% growth in maintenance billings, 22% growth in non-GAAP EPS, 18% growth in cash flow from operations, strong operating margins and record deferred revenue.”

And, later on, Bass says…..

“Our Infrastructure Design Suites began shipping in early July and sales of Revit-related products have the biggest quarter ever. Suites was another driver of growth in Q2. All of our suites offer a tremendous value to our customers, and we couldn't be more pleased with the initial uptake of our newly launched design in creation suites. We're having success in selling suites to new customers and migrating existing customers from point products in older suites into our new suites.

At their core, our suites facilitate the migration to model-based 3D design tools and helps eliminating the purchasing and interoperability complexity of stand-alone point products. They also increase value by improving the customers' workflow. It's a clear win-win scenario for our customers and for us.”

And, later on, Bass says…..

“At our investor day event in June, I spoke to you about Autodesk's initiatives utilizing the cloud. Later this quarter, we'll be introducing a collection of new web-based services, adding unlimited computing power to our offering. This will transform the way our customers work by helping them design, visualize, simulate and share ideas more rapidly and effectively than they've ever been able to do before. Stay tuned for the launch and more details in the coming months.”

And, here’s one of the questions one of the analysts asked and Bass’ response to that question:

Sterling Auty - JP Morgan Chase & Co

“Okay. And then a follow-up on those, on the suite side, can you give us a sense of the order of magnitude, which of the suites is contributing the most now? And how should that evolve over, let's say, the next 12 months?”

Carl Bass

“Yes, I think the biggest contributor and the biggest surprise to the upside has been in the Building Design Suite, particularly because as we looked at the macroeconomic factors going on, this would not be a particular time you would have guessed that the Building Design Suite would be leading the charge, given all the economic factors out there. So that's pretty much surprised us the most. But the Product Design Suite's done well. Some of the -- and both of those are building off previously existing suites. The numbers on the other seats, like Factory Design Suite, Plant Design Suite, the basic design suite, those all are coming off much smaller bases and the movement from point products. So while the growth has been -- exceeded our expectations, those numbers are relatively small.”

Additional comments made by Carl Bass:

“Revit adoption has really been strong. Revit is closely tied in the markets of this concept of BIM or building information modeling. BIM has been on a roll, it's way past the tipping point, it's doing incredibly well. People are thinking about BIM not only in terms of buildings, but in terms of civil infrastructures. So it's been doing really, really well. It's been doing well across the world, lots of countries, it's doing really well. We're seeing it strong in United States, we're seeing it strong in EMEA, particularly Australia and New Zealand. And the thing that I find most exciting about it is that early on in the rollout of Revit, there was a lot of adoption by the architectural community. As we proceeded further, there's a huge take-up in what's going on with engineering firms, as well as what's going on in construction with the large, general contractors. And that's obviously a much bigger portion of this global $4.2 trillion industry.”

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