MCAD Industry View - A May 2006 Update

Earnings in Q1 2006 for the G7 were less sanguine (see Table 2). As a group, the MCAD vendors had earnings of "only" $92 million, a 34% reduction from the combined $141 million in the same quarter a year earlier and a whopping 54% drop sequentially from $199 million in Q4 2005. Nevertheless, all vendors except UGS were still profitable in the first quarter of 2006. Autodesk endured the largest year- over-year decline. ANSYS had a 33% gain in earnings versus Q1 2005, while all others suffered declines. On a sequential basis, Autodesk, Dassault and UGS reported significant declines.

Details on Individual Vendors' Q1 2006 Performances

On April 27, 2006 ANSYS, Inc. announced the results of the first quarter the period ended March 31, 2006. Total revenue for the quarter was $46.0 million, a 22% increase for the $37.6 million in the same quarter a year earlier, and a 5.2% increase from the previous quarter. The $46 million was above the high end of the guidance given a quarter earlier. License revenue of $26.7 million, accounting for 58% of total revenue, was a 31% increase year-over-year, and a 9.5% increase sequentially. Maintenance and service revenue was $19.2 million, accounting for 42% of total revenue. Leases accounted for 19% of total revenue, and paid up licenses for 40%, including $3 million in major account sales.

In the quarter, there were two significant seven-figure deals that closed earlier than expected. During the quarter, recurring revenue accounted for 57% of total revenue. Deferred revenue climbed to $57.7 million, an all-time high.

North American revenue was up more than 40%. European revenue experienced low double digit growth. Revenue from Japan was flat, while revenue from the rest of General International grew by more than 20%, led by India and China. Net income for the quarter was $12.9 million, a 33% increase from the $9.6 million a year earlier, although a slight drop of 3% sequentially. The results for the quarter reflect the recent adoption of SFAS No. 123R, "Accounting for Stock-Based Compensation."

On February 16, 2006, ANSYS announced a definitive agreement to acquire Fluent, Inc., a global provider of computer-aided engineering simulation software, in a stock and cash transaction valued at approximately $565 million. Under the terms of the agreement, ANSYS will issue six million shares of its common stock and pay approximately $300 million of net cash to acquire Fluent, subject to certain adjustments at closing. Closing was completed on May 1, 2006. With over 40 direct sales offices and 17 development centers, on three continents, the combined company will employ approximately 1,350 people.

On April 27, 2006 ANSYS President and CEO Jim Cashman stated, "ANSYS is off to a strong start in 2006, as evidenced by our record first quarter financial performance. We believe that our first quarter results are further validation that we are headed in the right strategic direction and that we must continue to focus on execution and delivery of our commitments for continued success in the future. Our first quarter results include the further expansion of a long-term customer relationship that contributed significant incremental software revenues for the first quarter. I am very proud that the ANSYS team was able to stay focused on delivering a solid quarter, while at the same time engaging in planning and finalizing logistics related to the upcoming closing of the Fluent acquisition, which is anticipated to occur on May 1, 2006."

On May 18, 2006 Autodesk, Inc. reported the results for the first quarter of its fiscal 2007, the period ended April 30, 2006. Total revenue for the quarter was $436 million, an increase of 23% from the $355 million in the same quarter a year ago and an increase of 4.6% from the $416 million in the just previous quarter. The $436 million was at the high end of guidance given a quarter ago. License revenue of $349 million, accounting for 80% of total revenue, was an increase of 18% year- over-year and an increase of 3.8% sequentially. Maintenance revenue of $87 million, accounting for 18% of total revenue, was an increase of 47% year-over-year and an increase of almost 8% sequentially.

Combined subscription and upgrade revenue in Q1 2006 increased 36% over last year comparable quarter to $162 million. Record subscription attach and renewal rates drove a 47% increase in subscription revenue compared to the first quarter of last year, to $87 million. Deferred subscription revenue increased $39 million sequentially, the highest quarterly increase ever. Upgrade revenue increased 25% over last year to $75 million. Combined revenues from subscription and upgrades continue to represent approximately one-third of total revenues.

Revenue from new seats increased 19%. Revenue from 3D solutions (Inventor, Revit and Civil 3D), constituting 20% of total revenue, was up 53%. More than 31,000 commercial seats of 3D were shipped in the quarter. Revenue from Inventor family of products was up 17%, as the firm shipped more than 10,000 commercial seats in the quarter. Autodesk estimates that only 10% of its customers have moved from 2D to 3D, implying a reservoir of future opportunity.

Segment 1Q05 4Q04 Delta 1Q04 Delta
Manufacturing 59.1 60.3 -2.0% 44.8 31.9%
Platform 177.7 169.9 4.6% 152.7 16.4%
Table 3 Autodesk Revenue in Key Segments ($ millions)

The Platform segment, which accounts for nearly 50% of revenue, includes AutoCAD and AutoCAD LT products that service multiple markets. Other segments are Building, Infrastructure and Media/Entertainment (previously named Discreet). The Manufacturing segment (which includes the Inventor product lines) grew 32% year- over-year but was down 2% from the prior quarter. A "guesstimate" of "pure MCAD revenue" would be about $140 million for the recent quarter.

Geography 1Q06 4Q05 Delta 1Q05 Delta
Americas 170 177 -3.9% 131 30.4%
Europe 164 150 9.5% 134 22.5%
AP 102 90 13.3% 91 12.2%
Total 436 417 4.6% 355 22.8%
Table 4 Autodesk Revenue by Geography

The Americas accounted for 39% of total revenue, Europe 37% and Asia Pacific 23%. All geographies had year-over-year and sequential growth. The Americas, with 30% growth relative to the same quarter a year earlier, was particularly strong, although it dipped 4% sequentially.

Net income for the quarter was $48.5 million, down 36% from $76 million in the first quarter a year ago and down 42% from the $83 million in the prior quarter. The quarter's net earnings included $17 million in legal expenses related to a patent infringement suit which the company intended to appeal.

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Review Article
  • October 09, 2008
    Reviewed by 'Randy Bigs'
    I agree that the authors did not clearly tie in the overall state of the economy with the topic at hand: The MCAD industry. But, based on this week's Wall Street stock meltdown, and the worry about increased inflation, It's obivious that we've got big trouble right here in River City, and it will not only negatively impact our economy in general but the MCAD industry specifically. I applaud Russ and Jack for their in depth financial analysis, but I also would like to see their US and geopolitical comments weaved into the central theme, and I hope when things turn around they'll continue to present an objective viewpoint.

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  • October 09, 2008
    Reviewed by 'Mac'
    Where's the beef? As I read the article hoping to get an update on the MCAD industry, I quickly realized that this article was just another political aid without any data that could be interpreted without a secret MCAD decoder ring. I find it ridiculas that instead of giving us a real opinions on state things in the MCAD space, the authors just threw up graphs and charts and ambigious explantions about what those caharts and graphs meant. At the end of the article, I could only grin as I kept wating for some information that might actually provide me with some insight on the state of affairs in the MCAD space, but it didn't happen.
    I guess I will have to keep on collecting data myself and come up with my own opinions as I am not on someone's pay roll and have no political agenda. Here's a noval idea, lose the jibber jabber talk (Denny Crain) and call it like it is for once.

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  • October 09, 2008
    Reviewed by 'S. Wertel'
    This article is quite detailed and well written, but what does your political view on the current administration have anything to do with MCAD?
    The entire Economic & Geopolitical Factors section is filled with tripe and misleading statistics pulled from sources biased to anti-Bush sentiments. Is this the only medium Henke and Horgan have available to prevail themselves as some sort of economic masterminds? Please keep your political drivel to yourselves, or at least place them in a forum suited to that topic. If I were to have written something as perverse as this, my high school social studies teacher would have accused me of having diarrhea of the mouth and sent me back to perform an unbiased analysis showing both side of the story and how they relate to the topic at hand - the state of the MCAD industry. No where in the Economic & Geopolitical Factors section was there a tie between the rubbish on the page and how it relates to the topic of MCAD. Please go back to high school.
    In the future, please contain the Industry View to just an Industry View, or at least tie in the Economic and Political Factors with how they affect MCAD.

      One person found this review helpful.

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  • October 09, 2008
    Reviewed by 'Brian T.'
    What can I say, this article is not a News/Commentary article on MCAD. It is a Liberal Propaganda Tool which I will no longer subscribe to. This is my third comment on these out of place personal comments in a otherwise informative article. When the last article was being reviewed, the last I checked 6 out of 7 responses to that last article agreed with my review, then it was removed from the mcadcafe page. I guess this would be expected, that poll might not swing their way, so cut it short before it looks bad. I have never seen this report taken off this site before. These views are included in a bias manor. Some of the same information could be included with out the Liberal Bias View or the quotes from the Like Sources. Enough Said, another media tool that can't seem to go down the middle.

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