CAD Giants Make it Big in 2005, Part 3

21 Mar, 2006 By: Sara Ferris

Autodesk revenue tops $1.5 billion -- 23% above past year

Over the past month we've been reviewing the year-end earnings reports of CAD heavyweights. Previously, we reported on the revenues of UGS (US$1.15 billion for 2005) and revenues of Dassault Systemes (approximately US$1.12 billion). Today, we'll look at the details of Autodesk's recent earnings report.

At the end of February, Autodesk reported fiscal year 2006 revenue of $1.523 billion, a 23% increase over the previous year. GAAP net income for 2006 was $329 million, up 48% from $222 million in 2005. For the fourth quarter of 2006, which ended January 31, net revenues were $417 million, and net income was $83 million.

Autodesk attributes the revenue increases to strong growth in new seats and subscriptions, as well as increasing interest in its vertical and 3D products. Fourth-quarter revenues from new commercial seats increased 16% over the fourth quarter of the prior year. Subscription revenues, also called maintenance, increased 53% over the fourth quarter of last year and exceeded upgrade revenue for the first time for 2006. Combined revenues from subscription and upgrades represent about one-third of total Autodesk revenue, the company reports.

"Autodesk had an excellent finish to another outstanding year," says Carol Bartz, Autodesk chair and CEO. "Customer demand for our products continues to be very strong. Through solid execution, we significantly increased revenues and profitability for the third year in a row."

The company predicts that net revenue will increase by 18%-20% in fiscal year 2007. Its acquisitions of Alias and Constructware will account for about 6% of that growth, it reports. Once Autodesk releases its 2007 upgrades, it will "begin the retirement of the AutoCAD 2004-based family of products," Bartz says. In addition, Autodesk is expected to raise the suggested retail price of its products when the 2007 upgrades launch on March 23, though the company has not yet confirmed this. Reseller Microsol Resources notes on its Web site that a stand-alone license of AutoCAD will go up by $250, and the network license will increase by $495.

Though Autodesk's 2D business remains robust, Bartz notes that 3D is "now the single biggest driver of new seats." However, 3D penetration of Autodesk's installed base remains very low, presenting a "tremendous growth opportunity," according to Bartz. The AutoCAD 2007 release is a "tantalizer," she says, designed to get users excited and comfortable with 3D.

Regarding future acquisitions, incoming CEO Carl Bass said, "Expect to see a continuation of the acquisition strategy in place. We continue to like the small, tuck-in acquisitions that are complementary to our business. I think you'll continue to see us do relatively small and adjacent -- ones that fit our business model, that complement what we have. You won't see us, generally speaking, with far-reaching acquisitions."

Autodesk's Manufacturing Solutions Division posted $74 million revenue in the fourth quarter, a 23% increase over the previous year. Total manufacturing revenue for 2006 was $257 million. Bartz reports strong growth for Autodesk's 2D products, AutoCAD Mechanical and AutoCAD Electrical, and notes that revenue from Inventor increased by 45% in 2006. A sea change is taking place in the market, she says: "Customers are increasingly choosing high-value mainstream solutions."

The Building Solutions Division also recorded an "outstanding" quarter, according to Bartz: Revenue was $52 million for the fourth quarter and $178 million for the full year 2006. The company shipped 13,700 seats of Revit in the fourth quarter.

The Infrastructure Solutions Division brought in $53 million in fourth-quarter revenue and $178 million for the year. Civil 3D continues to surpass Autodesk expectations, Bartz says.