Autodesk Inc (ADSK) 2008 Q1 法說會逐字稿

Good morning. My name is [Latangia] and I will be your conference operator today. At this time, I would like to welcome everyone to the Moldflow Corp. first-quarter 2008 conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

Your speakers for today are Roland Thomas and Gregory Magoon. Thank you. I would now like to turn the call over to your host, Mr. Roland Thomas.

Welcome and thank you for joining the Moldflow Corporation conference call to report the results for the third quarter of our fiscal 2008 year. Greg and I will make a series of prepared remarks, and then we will take questions.

I will now ask Greg to remind all listeners about the risks and uncertainties surrounding forward-looking statements.

Thank you, Roland. During our conference call today, we will be making certain forward-looking statements, including statements related to our future business prospects and outlook. Please note that any statements contained in this conference call that are not based upon historical facts are forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include those detailed from time to time in reports filed by Moldflow with the Securities and Exchange Commission, including the Company's annual report on Form 10-K for the year ended June 30, 2007.

Our comments today will summarize the financial results for our first fiscal quarter ended September 30, 2007. For more complete details on our financial results, please refer to our quarterly report on Form 10-Q for quarter ended September 30, 2007 filed earlier today and our press release issued earlier this morning, which also includes a description of specific risk factors.

In addition, please note that, during the course of this call, we will be making certain references -- we will be making references to certain non-GAAP financial results and measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures for each relevant period is attached to our press please and also available now in the Investors section of our Web site at www.Moldflow.com.

With that, I will turn it back over to Roland.

Thanks, Greg. As you already know, the first quarter of fiscal 2008 marks our first quarter refocused solely on our CAE software business, following the finalization of the divestiture of our Manufacturing Solutions division at the end of June. At that time, we set out specific goals for the Company and its refined strategic focus. I'm pleased to say that we're right in line with the expectations we set for fiscal year plans.

For the first quarter, we saw the expected year-over-year growth in both products and service revenues, operating margin and EBITDA. The growth of our customer base is partly a result of our penetration into new regions and the expansion of the capabilities of the software solutions that we offer our customers. Our recent product releases not only address the process-wide product development issues for large multinational and small manufacturers around the world, but also address niche applications that target the needs of specific industries, such as glass replacement and semiconductors.

The steady increases in services revenue over the past few quarters demonstrate the reliance of our installed customer base on the steady stream of support services and valuable technology upgrades that we provide.

As we brought fiscal 2007 to a close, we told you that one of our main objectives for the Company during fiscal 2008 would be to unlock the leverage inherent in our model through cost management, particularly on G&A, balanced with measured investments in our sales resources. We have demonstrated progress on this objective during the first quarter. We had year-over-year increases in both our non-GAAP operating margin, which increased 2 points on a year-over-year basis, and EBITDA, which increased 20 points over last year on a revenue growth rate of 14%.

Turning now to our sales efforts around the world, during the first quarter, we saw a strong sales performance coming out of our Asia Pacific region, where once again just under half of our total revenue was generated. Sales in the Asia-Pacific region were broadly diversified. We saw orders for both our MPA product line, which has a lower price point, and MPI, our more in-depth suite of products. The ability of the sales team to sell successfully in both situations continues to add to the strength of this region. As we have stated before, our ability to grow in our installed base is a key component of a profitable growth strategy.

In terms of end-user industries, companies in the electronics field, where innovation and process improvement is a must to stay competitive, made up a significant portion of the revenue coming from this region, follow the automotive manufacturers and their suppliers.

Turning to our European region, we had a solid quarter with modest growth in products and services revenues, and we saw a good mix of orders coming from companies, both large and small, in a variety of countries, driven largely by automotive. We also saw orders coming from the electronics and consumer goods industries. As has been the norm for several quarters now, the automotive industry has dominated sales in this region as manufacturers (inaudible) process improvement.

We are seeing a continued shift from the use of our products solely in the centralized R&D departments of our European customers out to the broader design communities, which includes other design groups within the OEM and the broader supply chain. This shift has led to some of the biggest European companies making design analysis a mandatory path of their products, creations and manufacturing process. This requirement not only drives smaller companies to invest in our products to meet the demands of their biggest customers but also drives the larger companies to increase their investments to improve their own in-house process.

The North American market was challenging during the first quarter. Contrary to other regions, we noted a delay in purchases from the automotive markets, which added to the already-slow summer quarter and general economic uncertainty. The automotive sector had been slowly strengthening over the past year, and this result was contrary to that trend. This led to lower-than-expected performance in this region. We are monitoring the sector's issues closely as we head into our second quarter.

Over 2008, we expect to deliver new capabilities in our MPA and MPI product lines. During the first quarter, we put our MPA version 8.1 product into beta. A new module in the MPA product line will extend 3D analysis capabilities to a broader range of users. This new module will support more model types and extend the 3D computation capabilities to those companies working primarily in designing and building the molds used to make plastic (inaudible). Early reviews of this product have been good and we're looking forward to a Q2 commercial release.

So overall, we're pleased with the results achieved in the first quarter and our overall progress towards our 2008 goals. As we head into the next three quarters of our fiscal year, our focus will be on placing sales headcount where it can have the most immediate beneficial impact, making progress towards our target operating model, aggressively introducing new technologies, and revisiting our current products to include enhanced capabilities requested by our user base.

With that, I'd now like to turn back over to Greg so he can give a more in-depth review of the financial results for the first quarter.

Thank you.

As Roland stated, our overall operating results for the first quarter were consistent with the guidance that we had issued for our full fiscal 2008 year. Those results are particularly gratifying for us, as we have been able to achieve them while completing some significant organizational changes. As you will recall, we completed the sale of our Manufacturing Solutions division to Husky Injection Molding Systems on June 30, 2007. As a final note on the sale, during our first fiscal quarter, we reached agreement with Husky with regards to the amount of our estimated purchase price adjustment. The sale agreement included a provision to adjust the purchase price to reflect the final working capital balances of this whole division. We had initially estimated that this adjustment would increase the purchase price from $7 million to approximately $7.7 million. In the end, the parties agreed to reduce this amount by $160,000, resulting in an adjusted purchase price of $7.6 million. The reduction in the originally estimated purchase price, along with special fees incurred during our first fiscal quarter, were recorded as additional loss on the sale of the division. These items, along with all of the prior-year results of the operations of the Manufacturing Solutions division, have been classified as discontinued operations in our reported financial statements. Accordingly, my comments from this point forward relate solely to the continuing operations of Moldflow, which is essentially the Company's historical design analysis solutions division, and our MPX software products. The results we (inaudible) about to discuss exclude the impact of our non-cash, share-based compensation charges and their related tax effects. Therefore, the following financial data should be considered non-GAAP financial measures. A reconciliation of these measures to the most closely associated GAAP financial measures has been included in our press release issued earlier this morning.

Total first-quarter revenue of $13.4 million represented a 14% increase over the corresponding period of the previous fiscal year. 11% of which was a result of organic growth and 3% of which was the result of favorable foreign currency exchange rate movements. Consistent with our seasonal trends, total revenue decreased 11% from the preceding quarter, a result of the traditional closed-summer buying period that our company experienced.

Product revenue for the first quarter was $5.8 million, representing a 13% year-over-year increase of which 9% was derived from organic growth and 4% from favorable exchange rate movements.

Regionally, we experienced another solid quarter coming from Japan, driven by sales [in the] electronics market and growing revenue from the rest of Asia, a result of strong sales into the Korean mold-maker market.

In Europe, product revenue increased 9%, approximately half of which was due to favorable exchange rates. As Roland mentioned, we experienced challenges in our Americas region as the weak results in the automotive market contributed to a 32% year-over-year decrease in product revenue.

Total services revenue for the first quarter were $7.6 million, which represented a 15% year-over-year increase, 3% of which was a result of favorable exchange rate movements. The remainder of the increase was primarily a result of sales of maintenance and support contracts across all geographic regions, a reflection of long-term growth in the installed customer base.

In our first quarter, we derived 49% of our revenue from our Asia-Pacific region, 34% from Europe and 17% from North America, which is fairly consistent with our results from the past fiscal quarters. We shipped a total of 163 new seats of software licenses, bringing our cumulative seat count to approximately 9,500 seats.

With respect to our sales force, we completed the quarter with 53 quota-carrying sales reps compared to 44 at the end of the first quarter of fiscal 2007 and 51 at the end of our previous fiscal quarter.

Total cost of revenue was $1.6 million in the first quarter, representing an increase of 17% or $235,000 from the same period in the prior year. The changing cost of revenue for the period was largely a result of having seven additional customer support application engineers on staff and, to a lesser extent, third-party royalty expenses. Sequentially, total cost of revenue did not change significantly.

Total gross margin in the first quarter of fiscal 2008 was 88%, unchanged from the same period of the prior year and compared to 89% in the fourth quarter of fiscal 2007.

For the quarter, total operating expenses were $10.4 million, representing an 11% or $1 million increase from the prior year, primarily due to increased salary and wages paid to our development, sales and finance teams. Total operating expenses decreased 4% or $388,000 sequentially, as increases in audit expenses and results of the timing of our year-end audit work were more than offset by reduced compensation expense, a result of summer holidays and lower sales commissions.

Income from continuing operations for the first quarter of fiscal 2008 was $911,000, representing an 11% operating margin, which compared to $673,000 or a 9% operating margin for the same period of the prior fiscal year. In line with seasonal trends, operating margins decreased 7 points sequentially.

Interest income was $1 million compared to $783,000 in the corresponding period of 2007 and $893,000 in the preceding quarter, a reflection of increasing levels of cash on hand.

We recorded a tax provision of $411,000 on income before tax of $2.4 million, resulting in an effective income tax rate of 17% for the quarter. This rate reflects the impact of some small discrete items that occurred during the first quarter that reduced the rate, relative to our full-year expectations. As I will discuss in a moment, we still anticipate a full-year non-GAAP tax rate of 21%.

In the same period of the prior year, we recorded a tax benefit of $158,000, which included the impact of a one-time benefit of $562,000 that resulted from the revised estimate of the tax liabilities related to certain tax positions of one of the Company's foreign subs.

For the quarter, we are reporting net income from continuing operations of $2 million, which represents 2% year-over-year growth and a 29% sequential reduction. Our EPS for the first quarter of fiscal 2008 were $0.16 per diluted share, which compared to $0.17 in Q1 '07. The reduction of EPS, despite growth in net income, reflects the increase in the market value of our stock, which serves to increase the number of shares included in the calculation of EPS itself.

We incurred depreciation and amortization expenses of $436,000 in our first quarter. EBITDA, excluding non-cash share-based compensation expenses, was $1.8 million. This measure grew by 20% from the same period of the prior fiscal year and was reduced by 47% sequentially.

Now, looking at the balance sheet and cash flows, total cash and investments were $81.3 million at the end of the quarter, an increase of $8.7 million from the previous quarter. These amounts include $6 million of proceeds received in July related to the sale of our MS division. We received an additional $584,000 related to the sale in October.

Our continuing operations generated $2.2 million of cash. Our investing activities generated $6.1 million of cash, which included the $6 million of proceeds I just mentioned. And financing activities generated $922,000 of cash, primarily from stock option exercises.

Our capital expenditures for fixed assets were $380,000. DSOs for the first quarter were 69 days, an improvement of 3 days compared to the previous quarter. Lastly, I remind you that we continue to have no outstanding long-term debt.

I will now provide you with a view of our business prospects for the future, and in doing so, I will note this summary will include forward-looking statements which do involve risks and uncertainties that could cause actual results to differ materially from those projected. Again, I note that you should refer to our SEC filings and to our earnings press release for a description of those risks and uncertainties.

The current business outlook is based on information as of November 5, 2007 and is current as of that date only.

For our full fiscal 2008 year, we are affirming our previously issued guidance. We expect revenue to grow in the range of 10% to 13% when compared to fiscal 2007. We expect EBITDA to grow in the range of 13% to 20% in fiscal 2008. We expect non-GAAP income per diluted share of approximately $0.94 to $1, based upon an estimated 12.1 million diluted shares. Non-GAAP net income per diluted share excludes charges for share-based compensation expense, which are expected to be approximately $1.8 million, net of related tax effects, and assumes an effective tax rate of approximately 21%. GAAP net income per diluted share for fiscal 2008 is expected to be between $0.78 and $0.80, based upon an estimated 12.1 million diluted shares. This GAAP result assumes an annual effective tax rate of approximately 25%.

With that, I will turn it back over to Roland.

Thanks, Greg. Before turning to questions, I would like to reiterate our corporate goals for fiscal 2008, which are increasing the penetration of our existing customer base and expanding our customer base in order to have more users use our product to design more plastic parts, more often. We will introduce new technologies that will maintain Moldflow's leadership in the plastic CAE marketplace and seek out strategic partnerships and acquisition targets to strengthen our sales and product leadership positions and focus the development of our business model in such way to unlock more of the leverage inherent in the business.

With that, I would be happy to take any questions.

(OPERATOR INSTRUCTIONS)

Okay. I would like to thank all of you for joining us today. We look forward to speaking with you all to discuss our second-quarter results and our overall progress towards our corporate goals early next year. Hopefully, we will see some of you at the AeA Classic in Monterey over the next two days. Thank you and good bye.

Thank you for participating in today's Moldflow Corp. first-quarter fiscal 2008 conference call. You may now disconnect.