Autodesk, Inc. :ADSK-US: Earnings Analysis: Q4, 2017 By the Numbers : March 24, 2017

Autodesk, Inc. reports financial results for the quarter ended January 31, 2017.

We analyze the earnings along side the following peers of Autodesk, Inc. – Adobe Systems Incorporated, Synopsys, Inc., Nuance Communications, Inc., ANSYS, Inc., Mentor Graphics Corporation, Trimble Inc., Apple Inc. and Exa Corporation (ADBE-US, SNPS-US, NUAN-US, ANSS-US, MENT-US, TRMB-US, AAPL-US and EXA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 478 million, Net Earnings of USD -170.50 million.
  • Gross margins narrowed from 84.13% to 80.71% compared to the same period last year, operating (EBITDA) margins now -25.98% from 4.07%.
  • Year-on-year change in operating cash flow of -90.82% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-01-31 2016-10-31 2016-07-31 2016-04-30 2016-01-31
Relevant Numbers (Quarterly)
Revenues (mil) 478 488.6 548.2 507 648.3
Revenue Growth (%YOY) -26.27 -17.23 -8.36 -20.22 -2.45
Earnings (mil) -170.5 -142.8 -98.2 -173 -32.7
Earnings Growth (%YOY) -421.41 -226.03 58.3 -1005.76 -384.35
Net Margin (%) -35.67 -29.23 -17.91 -34.12 -5.04
EPS -0.77 -0.64 -0.44 -0.77 -0.15
Return on Equity (%) -76.02 -47.75 -28.39 -45.3 -7.8
Return on Assets (%) -14.17 -11.57 -7.66 -12.91 -2.44

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Market Share Versus Profits

Revenues History
Earnings History

ADSK-US‘s change in revenue this period compared to the same period last year of -26.27% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ADSK-US is holding onto its market share. Also, for comparison purposes, revenues changed by -2.17% and earnings by -19.40% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 84.13% to 80.71%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 4.07% to -25.98% in this time frame. For comparison, gross margins were 81.93% and EBITDA margins were -17.42% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ADSK-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 96.11 days from 199.21 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ADSK-US‘s change in operating cash flow of -90.82% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -1.50% to -33.24% and (2) one-time items that contributed to a decrease in pretax margins from -3.16% to -35.19%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Autodesk, Inc. designs and develops multimedia software products. The company serves variety of customers in the field of architecture, engineering and construction; manufacturing; and digital media and entertainment markets. It operates through four segments: Platform Solutions and Emerging Business; Architecture, Engineering and Construction; Manufacturing; and Media & Entertainment. The Platform Solutions and Emerging Business segment products include AutoCAD, AutoCAD LT, Autodesk Revit, AutoCAD Civil 3D, AutoCAD Architecture and AutoCAD Map 3D. The Architecture, Engineering and Construction segment software products help to improve the way building, civil infrastructure, process plant and construction projects are designed, built, and managed. The Manufacturing segment provides manufacturers in automotive and transportation, industrial machinery, consumer products and building products with comprehensive digital prototyping solutions that brings together design data from all phases of the product development process to develop a single digital model created in Autodesk Inventor software. The Media & Entertainment segment comprises of two product groups: Animation and Creative Finishing. The Animation products are sold as software only and provide tools for digital sculpting, modeling, animation, effects, rendering, and compositing for design visualization, visual effects and games production. The Creative Finishing products are primarily sold as turnkey solutions for editing, finishing and visual effects design and color grading. The company was founded by John Walker in April 1982 and is headquartered in San Rafael, CA.

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