Autodesk Reports Strong Third Quarter Results

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.

 
 
  Three Months Ended October 31,   Nine Months Ended October 31,
2014   2013 2014   2013
(Unaudited) (Unaudited)
 
GAAP cost of license and other revenue $ 51.9 $ 43.4 $ 154.6 $ 130.6
Stock-based compensation expense (1.2 ) (0.9 ) (3.2 ) (2.7 )
Amortization of developed technology (11.9 ) (9.7 ) (37.1 ) (29.5 )
Non-GAAP cost of license and other revenue $ 38.8   $ 32.8   $ 114.3   $ 98.4  
 
GAAP cost of subscription revenue $ 34.1 $ 23.7 $ 98.0 $ 71.8
Stock-based compensation expense (1.1 ) (0.5 ) (2.9 ) (1.6 )
Amortization of developed technology (1.2 ) (1.1 ) (3.5 ) (3.1 )
Non-GAAP cost of subscription revenue $ 31.8   $ 22.1   $ 91.6   $ 67.1  
 
GAAP gross profit $ 532.0 $ 488.1 $ 1,595.0 $ 1,484.9
Stock-based compensation expense 2.3 1.4 6.1 4.3
Amortization of developed technology 13.1   10.8   40.6   32.6  
Non-GAAP gross profit $ 547.4   $ 500.3   $ 1,641.7   $ 1,521.8  
 
GAAP marketing and sales $ 245.1 $ 203.4 $ 708.1 $ 610.3
Stock-based compensation expense (19.4 ) (14.5 ) (51.0 ) (42.5 )
Non-GAAP marketing and sales $ 225.7   $ 188.9   $ 657.1   $ 567.8  
 
GAAP research and development $ 183.9 $ 149.0 $ 533.7 $ 448.7
Stock-based compensation expense (14.7 ) (10.2 ) (39.3 ) (31.3 )
Non-GAAP research and development $ 169.2   $ 138.8   $ 494.4   $ 417.4  
 
GAAP general and administrative $ 78.9 $ 55.8 $ 212.9 $ 158.8
Stock-based compensation expense (6.7 ) (5.5 ) (20.1 ) (18.0 )
Non-GAAP general and administrative $ 72.2   $ 50.3   $ 192.8   $ 140.8  
 
GAAP amortization of purchased intangibles $ 9.5 $ 7.4 $ 30.5 $ 27.5
Amortization of purchased intangibles $ (9.5 ) $ (7.4 ) $ (30.5 ) $ (27.5 )
Non-GAAP Amortization of purchased intangibles $   $   $   $  
 
GAAP restructuring charges (benefits), net $ $ 4.4 $ 3.1 $ 6.5
Restructuring (charges) benefits   (4.4 ) (3.1 ) (6.5 )
Non-GAAP restructuring charges (benefits), net $   $   $   $  
 
GAAP operating expenses $ 517.4 $ 420.0 $ 1,488.3 $ 1,251.8
Stock-based compensation expense (40.8 ) (30.2 ) (110.4 ) (91.8 )
Amortization of purchased intangibles (9.5 ) (7.4 ) (30.5 ) (27.5 )
Restructuring (charges) benefits   (4.4 ) (3.1 ) (6.5 )
Non-GAAP operating expenses $ 467.1   $ 378.0   $ 1,344.3   $ 1,126.0  
 
GAAP income from operations $ 14.6 $ 68.1 $ 106.7 $ 233.1
Stock-based compensation expense 43.1 31.6 116.5 96.1
Amortization of developed technology 13.1 10.8 40.6 32.6
Amortization of purchased intangibles 9.5 7.4 30.5 27.5
Restructuring charges (benefits)   4.4   3.1   6.5  
Non-GAAP income from operations $ 80.3   $ 122.3   $ 297.4   $ 395.8  
 
GAAP interest and other income, net $ (3.0 ) $ 1.1 $ (16.6 ) $ (9.5 )
Loss (gain) on strategic investments 0.7   (0.3 ) 7.6   1.0  
Non-GAAP interest and other income, net $ (2.3 ) $ 0.8   $ (9.0 ) $ (8.5 )
 
GAAP provision for income taxes $ (0.9 ) $ (11.6 ) $ (19.8 ) $ (48.7 )
Discrete GAAP tax provision items (4.5 ) (3.0 ) (9.2 ) (2.3 )
Income tax effect of non-GAAP adjustments (14.9 ) (14.2 ) (45.9 ) (43.9 )
Non-GAAP provision for income tax $ (20.3 ) $ (28.8 ) $ (74.9 ) $ (94.9 )
 
GAAP net income $ 10.7 $ 57.6 $ 70.3 $ 174.9
Stock-based compensation expense 43.1 31.6 116.5 96.1
Amortization of developed technology 13.1 10.8 40.6 32.6
Amortization of purchased intangibles 9.5 7.4 30.5 27.5
Restructuring charges (benefits) 4.4 3.1 6.5
Loss (gain) on strategic investments 0.7 (0.3 ) 7.6 1.0
Discrete GAAP tax provision items (4.5 ) (3.0 ) (9.2 ) (2.3 )
Income tax effect of non-GAAP adjustments (14.9 ) (14.2 ) (45.9 ) (43.9 )
Non-GAAP net income $ 57.7   $ 94.3   $ 213.5   $ 292.4  
 
GAAP diluted net income per share $ 0.05 $ 0.25 $ 0.30 $ 0.77
Stock-based compensation expense 0.19 0.14 0.50 0.42
Amortization of developed technology 0.06 0.04 0.18 0.14
Amortization of purchased intangibles 0.04 0.03 0.13 0.12
Restructuring charges (benefits) 0.02 0.01 0.03
Loss (gain) on strategic investments 0.03
Discrete GAAP tax provision items (0.02 ) (0.01 ) (0.04 ) (0.01 )
Income tax effect of non-GAAP adjustments (0.07 ) (0.06 ) (0.19 ) (0.19 )
Non-GAAP diluted net income per share $ 0.25   $ 0.41   $ 0.92   $ 1.28  
 

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 $ 637 $ 618 $ 1,848
License and Other Revenue $ 316 $ 350 $ 321 $ 987
Subscription Revenue $ 276 $ 287 $ 298 $ 861
 
GAAP Gross Margin 87 % 86 % 86 % 86 %
Non-GAAP Gross Margin (1)(2) 89 % 89 % 89 % 89 %
 
GAAP Operating Expenses $ 472 $ 499 $ 517 $ 1,488
GAAP Operating Margin 7 % 8 % 2 % 6 %
GAAP Net Income $ 28 $ 31 $ 11 $ 70
GAAP Diluted Net Income Per Share (b) $ 0.12 $ 0.13 $ 0.05 $ 0.30
 
Non-GAAP Operating Expenses (1)(3) $ 427 $ 451 $ 467 $ 1,344
Non-GAAP Operating Margin (1)(4) 17 % 18 % 13 % 16 %
Non-GAAP Net Income (1)(5) $ 74 $ 82 $ 58 $ 214
Non-GAAP Diluted Net Income Per Share (1)(6)(b) $ 0.32 $ 0.35 $ 0.25 $ 0.92
 
Total Cash and Marketable Securities $ 2,388 $ 2,169 $ 2,157 $ 2,157
Days Sales Outstanding 50 52 55 55
Capital Expenditures $ 15 $ 17 $ 28 $ 60
Cash Flow from Operating Activities $ 219 $ 96 $ 136 $ 451
GAAP Depreciation, Amortization and Accretion $ 36 $ 37 $ 37 $ 110
 
Deferred Subscription Revenue Balance $ 848 $ 839 $ 839 $ 839
 
Revenue by Geography:
Americas $ 206 $ 223 $ 231 $ 660
Europe, Middle East and Africa $ 226 $ 244 $ 238 $ 707
Asia Pacific $ 161 $ 170 $ 149 $ 481
% of Total Rev from Emerging Economies 13 % 15 % 15 % 15 %
 
Revenue by Segment:
Platform Solutions and Emerging Business $ 212 $ 208 $ 188 $ 608
Architecture, Engineering and Construction $ 196 $ 218 $ 217 $ 631
Manufacturing $ 147 $ 168 $ 170 $ 485
Media and Entertainment $ 38 $ 44 $ 43 $ 124
 
Other Revenue Statistics:
% of Total Rev from Flagship 50 % 48 % 47 % 48 %
% of Total Rev from Suites 35 % 36 % 36 % 36 %
% of Total Rev from New and Adjacent 14 % 16 % 17 % 16 %
% of Total Rev from AutoCAD and AutoCAD LT 32 % 29 % 27 % 29 %
 

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 ) $ $ (4 ) $ (13 )
FX Impact on Cost of Revenue and Total Operating Expenses $ 2 $ (2 ) $ 3 $ 3
FX Impact on Operating Income $ (7 ) $ (2 ) $ (1 ) $ (10 )
 
Gross Margin by Segment:
Platform Solutions and Emerging Business $ 191 $ 185 $ 167 $ 544
Architecture, Engineering and Construction $ 176 $ 196 $ 194 $ 566
Manufacturing $ 133 $ 152 $ 153 $ 437
Media and Entertainment $ 29 $ 32 $ 32 $ 93
Unallocated amounts $ (15 ) $ (16 ) $ (15 ) $ (45 )
 
Common Stock Statistics (in millions):
Common Shares Outstanding 227.5 227.2 227.2 227.2
Fully Diluted Weighted Average Shares Outstanding 231.6 232.4 231.5 231.9
Shares Repurchased 2.0 1.9 1.9 5.8
 
Subscriptions (in millions):
Total Subscriptions (c) 1.94 2.01 2.13 2.13
 

(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 third party 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 %   86 %   86 %     86 %
Stock-based compensation expense % % % %
Amortization of developed technology 2 %   3 %   3 %       3 %
Non-GAAP Gross Margin 89 % 89 % 89 % 89 %
 
(3) GAAP Operating Expenses $ 472 $ 499 $ 517 $ 1,488
Stock-based compensation expense (32 ) (38 ) (41 ) (110 )
Amortization of purchased intangibles (11 ) (10 ) (10 ) (31 )
Restructuring (charges) benefits, net (2 )   (1 )           (3 )
Non-GAAP Operating Expenses $ 427 $ 451 $ 467 $ 1,344
 
(4) GAAP Operating Margin 7 % 8 % 2 % 6 %
Stock-based compensation expense 6 % 6 % 7 % 6 %
Amortization of developed technology 2 % 2 % 2 % 2 %
Amortization of purchased intangibles 2 % 2 % 2 % 2 %
Restructuring charges (benefits), net %   %   %       %

Non-GAAP Operating Margin

17 % 18 % 13 % 16 %
 
(5) GAAP Net Income $ 28 $ 31 $ 11 $ 70
Stock-based compensation expense 34 40 43 117
Amortization of developed technology 13 15 13 41
Amortization of purchased intangibles 11 10 10 31
Restructuring charges (benefits), net 2 1 3
Loss (gain) on strategic investments 4 3 1 8
Discrete GAAP tax provision items (2 ) (3 ) (5 ) (9 )
Income tax effect of non-GAAP adjustments (16 )   (15 )   (15 )       (46 )
Non-GAAP Net Income $ 74 $ 82 $ 58 $ 214
 
(6) GAAP Diluted Net Income Per Share $ 0.12 $ 0.13 $ 0.05 $ 0.30
Stock-based compensation expense 0.14 0.18 0.19 0.50
Amortization of developed technology 0.06 0.06 0.06 0.18
Amortization of purchased intangibles 0.05 0.04 0.04 0.13
Restructuring charges (benefits), net 0.01 0.01
Loss (gain) on strategic investments 0.02 0.01 0.03
Discrete GAAP tax provision items (0.01 ) (0.01 ) (0.02 ) (0.04 )
Income tax effect of non-GAAP adjustments (0.07 )   (0.06 )   (0.07 )       (0.19 )
Non-GAAP Diluted Net Income Per Share $ 0.32 $ 0.35 $ 0.25 $ 0.92
 
Reconciliation for Billings:
Q115   Q215   Q315
Year over year change in GAAP Net Revenue 4 % 13 % 11 %
Change in deferred revenue 8 % 12 % 13 %
Change in acquisition related deferred revenue and other (2 )%   2 %   1 %
Year over year change in Billings 10 %   27 %   25 %
 
Reconciliation for Guidance:
The following is a reconciliation of anticipated fiscal 2015 GAAP and non-GAAP operating margins:
Fiscal 2015
GAAP operating margin 4.5 % 5.0 %
Stock-based compensation expense 6.5 % 6.5 %
Amortization of purchased intangibles 4.0 % 4.0 %
Restructuring charges %   %
Non-GAAP operating margin 15.0 %   15.5 %

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