Autodesk Reports Strong First Quarter Results

The second quarter and full year fiscal 2015 outlook assume projected annual effective tax rates of 25 percent and 25.5 percent for GAAP and non-GAAP results, respectively. These rates do not include one-time discrete items or the federal R&D tax credit that expired on December 31, 2013.

Earnings Conference Call and Webcast

Autodesk will host its first quarter conference call today at 5:00 p.m. ET. The live broadcast can be accessed at http://www.autodesk.com/investors. Supplemental financial information and prepared remarks for the conference call will be posted to the investor relations section of Autodesk's website simultaneously with this press release.

NOTE: The prepared remarks will not be read on the conference call. The conference call will include only brief remarks followed by questions and answers.

A replay of the broadcast will be available at 7:00 pm ET at http://www.autodesk.com/investors. This replay will be maintained on Autodesk's website for at least 12 months.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including statements in the paragraphs under “Business Outlook” above, statements regarding the impacts of our business model transition, and other statements regarding our strategies, market and products positions, performance, and results. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: general market, political, economic and business conditions; failure to maintain our revenue growth and profitability; failure to successfully manage transitions to new business models and markets, including the introduction of additional ratable revenue streams and our continuing efforts to attract customers to our cloud-based offerings and expenses related to the transition of our business model; failure to maintain cost reductions and productivity increases or otherwise control our expenses; our performance in particular geographies, including emerging economies; the ability of governments around the world to meet their financial and debt obligations, and finance infrastructure projects; weak or negative growth in the industries we serve; slowing momentum in subscription billings or revenues; difficulty in predicting revenue from new businesses and the potential impact on our financial results from changes in our business models; difficulties encountered in integrating new or acquired businesses and technologies; the inability to identify and realize the anticipated benefits of acquisitions; the financial and business condition of our reseller and distribution channels; dependence on and the timing of large transactions; fluctuation in foreign currency exchange rates; the success of our foreign currency hedging program; failure to achieve sufficient sell-through in our channels for new or existing products; pricing pressure; unexpected fluctuations in our tax rate; the timing and degree of expected investments in growth and efficiency opportunities; changes in the timing of product releases and retirements; and any unanticipated accounting charges.

Further information on potential factors that could affect the financial results of Autodesk are included in Autodesk's Annual Report on Form 10-K for the year ended January 31, 2014, which is on file with the U.S. Securities and Exchange Commission. Autodesk does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

About Autodesk

Autodesk helps people imagine, design and create a better world. Everyone--from design professionals, engineers and architects to digital artists, students and hobbyists--uses Autodesk software to unlock their creativity and solve important challenges. For more information visit autodesk.com or follow @autodesk.

Autodesk is a registered trademark of Autodesk, Inc., and/or its subsidiaries and/or affiliates in the USA and/or other countries. All other brand names, product names or trademarks belong to their respective holders. Autodesk reserves the right to alter product and services offerings, and specifications and pricing at any time without notice, and is not responsible for typographical or graphical errors that may appear in this document.

© 2014 Autodesk, Inc. All rights reserved.

Autodesk, Inc.    
Condensed Consolidated Statements of Operations
(In millions, except per share data)
 
Three Months Ended April 30,
2014 2013
(Unaudited)
Net revenue:
License and other $ 316.2 $ 323.5
Subscription 276.3   246.9  
Total net revenue 592.5   570.4  
Cost of revenue:
Cost of license and other revenue 49.3 44.4
Cost of subscription revenue 29.4   23.1  
Total cost of revenue 78.7   67.5  
Gross profit 513.8 502.9
Operating expenses:
Marketing and sales 225.4 208.8
Research and development 170.5 150.8
General and administrative 73.4 61.5
Restructuring charges, net 2.3   0.4  
Total operating expenses 471.6   421.5  
Income from operations 42.2 81.4
Interest and other (expense) income, net (6.6 ) (8.8 )
Income before income taxes 35.6 72.6
Provision for income taxes (7.3 ) (17.0 )
Net income $ 28.3   $ 55.6  
Basic net income per share $ 0.12   $ 0.25  
Diluted net income per share $ 0.12   $ 0.24  
Weighted average shares used in computing basic net income per share 227.0   223.8  
Weighted average shares used in computing diluted net income per share 231.6   229.3  
 
Autodesk, Inc.    
Condensed Consolidated Balance Sheets
(In millions)
 
April 30, 2014 January 31, 2014
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,609.6 $ 1,853.0
Marketable securities 510.1 414.1
Accounts receivable, net 323.3 423.7
Deferred income taxes 54.5 56.8
Prepaid expenses and other current assets 92.8   87.4  
Total current assets 2,590.3   2,835.0  
Marketable securities 268.2 277.3
Computer equipment, software, furniture and leasehold improvements, net 142.1 130.3
Purchased technologies, net 89.4 63.1
Goodwill 1,263.0 1,009.9
Deferred income taxes, net 93.6 131.1
Other assets 202.0   148.3  
$ 4,648.6   $ 4,595.0  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 90.3 $ 84.5
Accrued compensation 156.6 181.2
Accrued income taxes 36.4 24.3
Deferred revenue 749.7 696.2
Other accrued liabilities 85.7   85.3  
Total current liabilities 1,118.7   1,071.5  
Deferred revenue 213.8 204.4
Long term income taxes payable 170.5 211.8
Long term notes payable, net of discount 746.6 746.4
Other liabilities 110.3 99.4
Stockholders’ equity:
Preferred stock
Common stock and additional paid-in capital 1,683.1 1,637.3
Accumulated other comprehensive income (loss) 5.6 (0.6 )
Retained earnings 600.0   624.8  
Total stockholders’ equity 2,288.7   2,261.5  
$ 4,648.6   $ 4,595.0  
 
Autodesk, Inc.    
Condensed Consolidated Statements of Cash Flows
(In millions)
 
Three Months Ended April 30,
2014 2013
(Unaudited)
Operating activities:
Net income $ 28.3 $ 55.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 36.1 33.1
Stock-based compensation expense 33.6 33.5
Excess tax benefits from stock-based compensation (9.0 )
Restructuring charges, net 2.3 0.4
Other operating activities 8.3 6.7
Changes in operating assets and liabilities, net of business combinations 110.1   103.8  
Net cash provided by operating activities 218.7   224.1  
Investing activities:
Purchases of marketable securities (306.4 ) (264.6 )
Sales of marketable securities 59.2 128.1
Maturities of marketable securities 163.1 68.9
Capital expenditures (14.5 ) (25.8 )
Acquisitions, net of cash acquired (322.3 ) (34.7 )
Other investing activities (0.8 ) (3.6 )
Net cash (used in) investing activities (421.7 ) (131.7 )
Financing activities:
Proceeds from issuance of common stock, net of issuance costs 62.2 70.0
Repurchase and retirement of common stock (102.5 ) (129.2 )
Draws on line of credit
Excess tax benefits from stock-based compensation   9.0  
Net cash (used in) financing activities (40.3 ) (50.2 )
Effect of exchange rate changes on cash and cash equivalents (0.1 ) 1.4  
Net (decrease) increase in cash and cash equivalents (243.4 ) 43.6
Cash and cash equivalents at beginning of fiscal year 1,853.0   1,612.2  
Cash and cash equivalents at end of period $ 1,609.6   $ 1,655.8  
 
Autodesk, Inc.
Reconciliation of GAAP financial measures to non-GAAP financial measures
(In millions, except per share data)
   
To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share and billings. Excluding billings, these non-GAAP financial measures are adjusted to exclude certain costs, expenses, gains and losses, including stock-based compensation expense, restructuring charges, amortization of purchased intangibles, gain and loss on strategic investments, and related income tax expenses. In the case of billings, we reconcile to revenue by adjusting for the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period and other discounts. See our reconciliation of GAAP financial measures to non-GAAP financial measures herein. We believe these exclusions are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of Autodesk's underlying operational results and trends and our marketplace performance. For example, non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods.
 
There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP in the United States. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.
 
The following table shows Autodesk's non-GAAP results reconciled to GAAP results included in this release.
 
Three Months Ended
April 30,
2014   2013
(Unaudited)
 
GAAP cost of license and other revenue $ 49.3 $ 44.4
Stock-based compensation expense (0.9 ) (0.9 )
Amortization of developed technology (11.8 ) (9.8 )
Non-GAAP cost of license and other revenue $ 36.6   $ 33.7  
 
GAAP cost of subscription revenue $ 29.4 $ 23.1
Stock-based compensation expense (0.8 ) (0.6 )
Amortization of developed technology (1.2 ) (1.0 )
Non-GAAP cost of subscription revenue $ 27.4   $ 21.5  
 
GAAP gross profit $ 513.8 $ 502.9
Stock-based compensation expense 1.7 1.5
Amortization of developed technology 13.0   10.8  
Non-GAAP gross profit $ 528.5   $ 515.2  
 
GAAP marketing and sales $ 225.4 $ 208.8
Stock-based compensation expense (14.0 ) (14.1 )
Non-GAAP marketing and sales $ 211.4   $ 194.7  
 
GAAP research and development $ 170.5 $ 150.8
Stock-based compensation expense (10.9 ) (10.9 )
Non-GAAP research and development $ 159.6   $ 139.9  
 
GAAP general and administrative $ 73.4 $ 61.5
Stock-based compensation expense (7.0 ) (7.0 )
Amortization of customer relationships and trade names (10.9 ) (10.8 )
Non-GAAP general and administrative $ 55.5   $ 43.7  
 
GAAP restructuring charges (benefits), net $ 2.3 $ 0.4
Restructuring (charges) benefits (2.3 ) (0.4 )
Non-GAAP restructuring charges (benefits), net $   $  
 
GAAP operating expenses $ 471.6 $ 421.5
Stock-based compensation expense (31.9 ) (32.0 )
Amortization of customer relationships and trade names (10.9 ) (10.8 )
Restructuring (charges) benefits (2.3 ) (0.4 )
Non-GAAP operating expenses $ 426.5   $ 378.3  
 
GAAP income from operations $ 42.2 $ 81.4
Stock-based compensation expense 33.6 33.5
Amortization of developed technology 13.0 10.8
Amortization of customer relationships and trade names 10.9 10.8
Restructuring charges (benefits) 2.3   0.4  
Non-GAAP income from operations $ 102.0   $ 136.9  
 
GAAP interest and other income, net $ (6.6 ) $ (8.8 )
Loss (gain) on strategic investments 3.6   1.1  
Non-GAAP interest and other income, net $ (3.0 ) $ (7.7 )
 
GAAP provision for income taxes $ (7.3 ) $ (17.0 )
Discrete GAAP tax provision items (2.1 ) (0.5 )
Income tax effect of non-GAAP adjustments (15.8 ) (15.4 )
Non-GAAP provision for income tax $ (25.2 ) $ (32.9 )
 
GAAP net income $ 28.3 $ 55.6
Stock-based compensation expense 33.6 33.5
Amortization of developed technology 13.0 10.8
Amortization of customer relationships and trade names 10.9 10.8
Restructuring charges (benefits) 2.3 0.4
Loss (gain) on strategic investments 3.6 1.1
Discrete GAAP tax provision items (2.1 ) (0.5 )
Income tax effect of non-GAAP adjustments (15.8 ) (15.4 )
Non-GAAP net income $ 73.8   $ 96.3  
 
GAAP diluted net income per share $ 0.12 $ 0.24
Stock-based compensation expense 0.14 0.15
Amortization of developed technology 0.06 0.05
Amortization of customer relationships and trade names 0.05 0.05
Restructuring charges (benefits) 0.01
Loss (gain) on strategic investments 0.02
Discrete GAAP tax provision items (0.01 )
Income tax effect of non-GAAP adjustments (0.07 ) (0.07 )
Non-GAAP diluted net income per share $ 0.32   $ 0.42  
 

Autodesk, Inc.

       
 
 
 
                           
Other Supplemental Financial Information (a)
                           
Fiscal Year 2015   QTR 1   QTR 2   QTR 3   QTR 4   YTD 2015
Financial Statistics ($ in millions, except per share data):
Total Net Revenue: $ 593 $ 593
License and Other Revenue $ 316 $ 316
Subscription Revenue $ 276 $ 276
 
GAAP Gross Margin 87 % 87 %
Non-GAAP Gross Margin (1)(2) 89 % 89 %
 
GAAP Operating Expenses $ 472 $ 472
GAAP Operating Margin 7 % 7 %
GAAP Net Income $ 28 $ 28
GAAP Diluted Net Income Per Share (b) $ 0.12 $ 0.12
 
Non-GAAP Operating Expenses (1)(3) $ 427 $ 427
Non-GAAP Operating Margin (1)(4) 17 % 17 %
Non-GAAP Net Income (1)(5) $ 74 $ 74
Non-GAAP Diluted Net Income Per Share (1)(6)(b) $ 0.32 $ 0.32
 
Total Cash and Marketable Securities $ 2,388 $ 2,388
Days Sales Outstanding 50 50
 
Capital Expenditures $ 15 $ 15
Cash Flow from Operating Activities $ 219 $ 219
GAAP Depreciation, Amortization and Accretion $ 36 $ 36
 
Deferred Subscription Revenue Balance $ 848 $ 848
 
Revenue by Geography:
Americas $ 206 $ 206
Europe, Middle East and Africa $ 226 $ 226
Asia Pacific $ 161 $ 161
% of Total Rev from Emerging Economies 13 % 13 %
 
Revenue by Segment:
Platform Solutions and Emerging Business $ 212 $ 212
Architecture, Engineering and Construction $ 196 $ 196
Manufacturing $ 147 $ 147
Media and Entertainment $ 38 $ 38
 
Other Revenue Statistics:
% of Total Rev from Flagship 50 % 50 %
% of Total Rev from Suites 35 % 35 %
% of Total Rev from New and Adjacent 14 % 14 %
% of Total Rev from AutoCAD and AutoCAD LT 32 % 32 %
 
Favorable (Unfavorable) Impact of U.S. Dollar Translation Relative to
Foreign Currencies Compared to Comparable Prior Year Period:
FX Impact on Total Net Revenue $ (9 ) $ (9 )
FX Impact on Cost of Revenue and Total Operating Expenses $ 2 $ 2
FX Impact on Operating Income $ (7 ) $ (7 )
 
Gross Margin by Segment:
Platform Solutions and Emerging Business $ 191 $ 191
Architecture, Engineering and Construction $ 176 $ 176
Manufacturing $ 133 $ 133
Media and Entertainment $ 29 $ 29
Unallocated amounts $ (15 ) $ (15 )
 
Common Stock Statistics (in millions):
Common Shares Outstanding 227.5 227.5
Fully Diluted Weighted Average Shares Outstanding 231.6 231.6
Shares Repurchased 2.0 2.0
 
Subscriptions (in millions):
Total Subscriptions (c) 1.94 1.94
 
(a) Totals may not agree with the sum of the components due to rounding.
(b) Earnings per share were computed independently for each of the periods presented; therefore the sum of the earnings per share amounts for the quarters may not equal the total for the year.
(c) Total Subscriptions consists of subscriptions from our maintenance, desktop, cloud service and enterprise license offerings that are active as of the quarter end date. For certain cloud based and enterprise license offerings, subscriptions represent the monthly average activity within the last three months of the quarter end date. Total subscriptions do not include data from education offerings, consumer product offerings, certain Creative Finishing product offerings, Autodesk Buzzsaw, Autodesk Constructware and Delcam products. Subscriptions acquired with the acquisition of a business are captured once the data conforms to our subscription count methodology and when added, may cause variability in the quarterly comparisons of this calculation.
 
(1) To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share and billings. Excluding billings, these non-GAAP financial measures are adjusted to exclude certain costs, expenses, gains and losses, including stock-based compensation expense, restructuring charges, amortization of purchased intangibles, gain and loss on strategic investments, and related income tax expenses. In the case of billings, we reconcile to revenue by adjusting for the change in deferred revenue from the beginning to the end of the period less any deferred revenue balances acquired from business combination(s) during the period and other discounts. See our reconciliation of GAAP financial measures to non-GAAP financial measures herein. We believe these exclusions are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of Autodesk's underlying operational results and trends and our marketplace performance. For example, non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP in the United States. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying Autodesk's press release.
 
QTR 1   QTR 2   QTR 3   QTR 4   YTD 2015
(2) GAAP Gross Margin 87 % 87 %
Stock-based compensation expense % %
Amortization of developed technology 2 %                 2 %
Non-GAAP Gross Margin 89 % 89 %
 
(3) GAAP Operating Expenses $ 472 $ 472
Stock-based compensation expense (32 ) (32 )
Amortization of customer relationships and trade names (11 ) (11 )
Restructuring (charges) benefits, net (2 )                 (2 )
Non-GAAP Operating Expenses $ 427 $ 427
 
(4) GAAP Operating Margin 7 % 7 %
Stock-based compensation expense 6 % 6 %
Amortization of developed technology 2 % 2 %
Amortization of customer relationships and trade names 2 % 2 %
Restructuring charges (benefits), net %                 %
Non-GAAP Operating Margin 17 % 17 %
 
(5) GAAP Net Income $ 28 $ 28
Stock-based compensation expense 34 34
Amortization of developed technology 13 13
Amortization of customer relationships and trade names 11 11
Restructuring charges (benefits), net 2 2
Loss (gain) on strategic investments 4 4
Discrete GAAP tax provision items (2 ) (2 )
Income tax effect of non-GAAP adjustments (16 )                 (16 )
Non-GAAP Net Income $ 74 $ 74
 
(6) GAAP Diluted Net Income Per Share $ 0.12 $ 0.12
Stock-based compensation expense 0.14 0.14
Amortization of developed technology 0.06 0.06
Amortization of customer relationships and trade names 0.05 0.05
Restructuring charges (benefits), net 0.01 0.01
Loss (gain) on strategic investments 0.02 0.02
Discrete GAAP tax provision items (0.01 ) (0.01 )
Income tax effect of non-GAAP adjustments (0.07 )                 (0.07 )
Non-GAAP Diluted Net Income Per Share $ 0.32 $ 0.32
 
Reconciliation for Billings:
Q115
Year over year change in GAAP Net Revenue 4 %
Change in deferred revenue in the current period 7 %
Change in acquisition related deferred revenue and other in the current period

(1)

%

Year over year change in Billings 10 %
 
Reconciliation for Guidance:
The following is a reconciliation of anticipated fiscal 2015 GAAP and non-GAAP operating margins:
Fiscal 2015
GAAP operating margin 3 % 5 %
Stock-based compensation expense 7 % 7 %
Amortization of purchased intangibles 4 % 4 %
Restructuring charges % %
Non-GAAP operating margin 14 % 16 %
 
Reconciliation for Long Term Operating Margins:
Autodesk is not able to provide targets for our long term (ending with fiscal year 2018) GAAP operating margins at this time because of the difficulty of estimating certain items that are excluded from non-GAAP that affect operating margin, such as charges related to stock-based compensation expense and amortization of acquisition related intangibles, the effect of which may be significant.

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