Autodesk Reports Third Quarter Financial Results

_______________

(1) Effective in the second quarter of 2016, Autodesk elected to retrospectively adopt ASU 2015-03, regarding Subtopic 835-30 "Interest - Imputation of Interest". The adoption resulted in a $4.1 million reclassification of debt issuance costs from other assets to a reduction of long term notes payable, net, as of January 31, 2015.

Autodesk, Inc.    
Condensed Consolidated Statements of Cash Flows
(In millions)
 

Nine Months Ended October 31,

2015 2014
(Unaudited)
Operating activities:
Net (loss) income $ (293.3 ) $ 70.3
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, amortization and accretion 109.7 109.9
Stock-based compensation expense 141.1 116.5
Deferred income taxes

221.9

(13.7 )
Restructuring charges, net 3.1
Other operating activities (10.6 ) 9.5
Changes in operating assets and liabilities, net of business combinations:
Accounts receivable 97.4 65.9
Prepaid expenses and other current assets (5.5 ) 7.7
Accounts payable and accrued liabilities

(75.1

) 7.6
Deferred revenue 54.5 94.3
Accrued income taxes 4.0   (20.2 )
Net cash provided by operating activities 244.1   450.9  
Investing activities:
Purchases of marketable securities (1,827.9 ) (899.0 )
Sales of marketable securities 263.0 160.7
Maturities of marketable securities 970.7 623.2
Capital expenditures (41.8 ) (60.0 )
Acquisitions, net of cash acquired (104.6 ) (603.8 )
Other investing activities (15.5 ) 1.2  
Net cash used in investing activities (756.1 ) (777.7 )
Financing activities:
Proceeds from issuance of common stock, net of issuance costs 57.0 129.6
Repurchase and retirement of common stock (357.7 ) (307.6 )
Proceeds from debt, net of discount 748.3
Excess tax benefits from stock-based compensation
Other financing activities (6.3 ) (1.7 )
Net cash provided by (used in) financing activities 441.3   (179.7 )
Effect of exchange rate changes on cash and cash equivalents (2.4 ) (1.5 )
Net (decrease) in cash and cash equivalents (73.1 ) (508.0 )
Cash and cash equivalents at beginning of fiscal year 1,410.6   1,853.0  
Cash and cash equivalents at end of the period $ 1,337.5   $ 1,345.0  
 
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, non-GAAP diluted shares used in per share calculation 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
October 31,

Nine Months Ended
October 31,

2015 2014 2015 2014
(Unaudited) (Unaudited)
 
GAAP cost of license and other revenue $ 53.0 $ 51.9 $ 159.1 $ 154.6
Stock-based compensation expense (1.7 ) (1.2 ) (4.4 ) (3.2 )
Amortization of developed technology (11.1 ) (11.9 ) (34.7 ) (37.1 )
Non-GAAP cost of license and other revenue $ 40.2   $ 38.8   $ 120.0   $ 114.3  
 
GAAP cost of subscription revenue $ 38.0 $ 34.1 $ 116.7 $ 98.0
Stock-based compensation expense (1.5 ) (1.1 ) (4.1 ) (2.9 )
Amortization of developed technology (0.5 ) (1.2 ) (2.4 ) (3.5 )
Non-GAAP cost of subscription revenue $ 36.0   $ 31.8   $ 110.2   $ 91.6  
 
GAAP gross profit $ 508.8 $ 532.0 $ 1,580.0 $ 1,595.0
Stock-based compensation expense 3.2 2.3 8.5 6.1
Amortization of developed technology 11.6   13.1   37.1   40.6  
Non-GAAP gross profit $ 523.6   $ 547.4   $ 1,625.6   $ 1,641.7  
 
GAAP marketing and sales $ 243.4 $ 245.1 $ 738.1 $ 708.1
Stock-based compensation expense (22.2 ) (19.4 ) (61.2 ) (51.0 )
Non-GAAP marketing and sales $ 221.2   $ 225.7   $ 676.9   $ 657.1  
 
GAAP research and development $ 197.9 $ 183.9 $ 585.5 $ 533.7
Stock-based compensation expense (17.5 ) (14.7 ) (49.9 ) (39.3 )
Non-GAAP research and development $ 180.4   $ 169.2   $ 535.6   $ 494.4  
 
GAAP general and administrative $ 74.2 $ 78.9 $ 220.2 $ 212.9
Stock-based compensation expense (7.3 ) (6.7 ) (21.5 ) (20.1 )
Non-GAAP general and administrative $ 66.9   $ 72.2   $ 198.7   $ 192.8  
 
GAAP amortization of purchased intangibles $ 8.1 $ 9.5 $ 25.2 $ 30.5
Amortization of purchased intangibles (8.1 ) (9.5 ) (25.2 ) (30.5 )
Non-GAAP Amortization of purchased intangibles $   $   $   $  
 
GAAP restructuring charges, net $ $ $ $ 3.1
Restructuring charges, net       (3.1 )
Non-GAAP restructuring charges, net $   $   $   $  
 
GAAP operating expenses $ 523.6 $ 517.4 $ 1,569.0 $ 1,488.3
Stock-based compensation expense (47.0 ) (40.8 ) (132.6 ) (110.4 )
Amortization of purchased intangibles (8.1 ) (9.5 ) (25.2 ) (30.5 )
Restructuring charges, net       (3.1 )
Non-GAAP operating expenses $ 468.5   $ 467.1   $ 1,411.2   $ 1,344.3  
 
GAAP (loss) income from operations $ (14.8 ) $ 14.6 $ 11.0 $ 106.7
Stock-based compensation expense 50.2 43.1 141.1 116.5
Amortization of developed technology 11.6 13.1 37.1 40.6
Amortization of purchased intangibles 8.1 9.5 25.2 30.5
Restructuring charges, net       3.1  
Non-GAAP income from operations $ 55.1   $ 80.3   $ 214.4   $ 297.4  
 
GAAP interest and other expense, net $ (7.7 ) $ (3.0 ) $ (10.8 ) $ (16.6 )
(Gain) loss on strategic investments 0.1   0.7   (3.3 ) 7.6  
Non-GAAP interest and other expense, net $ (7.6 ) $ (2.3 ) $ (14.1 ) $ 9.0  
 
GAAP provision for income taxes $ (21.3 ) $ (0.9 ) $ (293.5 ) $ (19.8 )
Discrete GAAP tax benefit (provision) items

1.2

 

(4.5 )

2.4

 

(9.2 )
Establishment of valuation allowance on deferred tax assets

230.9

Income tax effect of non-GAAP adjustments

5.7

  (14.9 ) 6.1   (45.9 )
Non-GAAP provision for income tax $ (14.4 ) $ (20.3 ) $ (54.1 ) $ (74.9 )
 
GAAP net (loss) income $ (43.8 ) $ 10.7 $ (293.3 ) $ 70.3
Stock-based compensation expense 50.2 43.1 141.1 116.5
Amortization of developed technology 11.6 13.1 37.1 40.6
Amortization of purchased intangibles 8.1 9.5 25.2 30.5
Restructuring charges, net 3.1
(Gain) loss on strategic investments 0.1 0.7 (3.3 ) 7.6
Discrete GAAP tax benefit (provision) items

1.2

 

(4.5 )

2.4

 

(9.2 )
Establishment of valuation allowance on deferred tax assets

230.9

Income tax effect of non-GAAP adjustments

5.7

  (14.9 ) 6.1   (45.9 )
Non-GAAP net income $ 33.1   $ 57.7   $ 146.2   $ 213.5  
 
GAAP diluted net (loss) income per share $ (0.19 ) $ 0.05 $ (1.29 ) $ 0.30
Stock-based compensation expense 0.22 0.19 0.61 0.50
Amortization of developed technology 0.05 0.06 0.16 0.18
Amortization of purchased intangibles

0.03

0.04 0.11 0.13
Restructuring charges, net 0.01
(Gain) loss on strategic investments (0.01 ) 0.03
Discrete GAAP tax benefit (provision) items

 

 

(0.02 )

0.01

 

 

(0.04 )
Establishment of valuation allowance on deferred tax assets

1.01

 

Income tax effect of non-GAAP adjustments

0.03

  (0.07 ) 0.03   (0.19 )
Non-GAAP diluted net income per share $ 0.14   $ 0.25   $ 0.63   $ 0.92  
 
GAAP diluted shares used in per share calculation 225.3 231.5 226.5 231.9
Shares included in non-GAAP net income per share, but excluded from GAAP net loss per share as they would have been anti-dilutive 3.4     4.0    
Non-GAAP diluted weighted average shares used in per share calculation 228.7   231.5   230.5   231.9  
Autodesk, Inc.        
 
 
 
                     
Other Supplemental Financial Information (a)
                     
Fiscal Year 2016   QTR 1   QTR 2   QTR 3   QTR 4   YTD 2016
Financial Statistics ($ in millions, except per share data):
Total Net Revenue: $ 647 $ 610 $ 600 $ 1,856
License and Other Revenue $ 327 $ 291 $ 281 $ 898
Subscription Revenue $ 320 $ 319 $ 319 $ 958
 
GAAP Gross Margin 86 % 85 % 85 % 85 %
Non-GAAP Gross Margin (1)(2) 88 % 87 % 87 % 88 %
 
GAAP Operating Expenses $ 533 $ 512 $ 524 $ 1,569
GAAP Operating Margin 3 % 1 % (2 )% 1 %
GAAP Net Income (Loss) $ 19 $ (269 ) $ (44 ) $ (293 )
GAAP Diluted Net Income (Loss) Per Share (b) $ 0.08 $ (1.18 ) $ (0.19 ) $ (1.29 )
 
Non-GAAP Operating Expenses (1)(3) $ 477 $ 466 $ 469 $ 1,411
Non-GAAP Operating Margin (1)(4) 15 % 11 % 9 % 12 %

Non-GAAP Net Income (1)(5)

$ 69 $ 44 $ 33 $ 146

Non-GAAP Diluted Net Income Per Share (1)(6)(b)

$ 0.30 $ 0.19 $ 0.14 $ 0.63
 
Total Cash and Marketable Securities $ 2,271 $ 2,952 $ 2,824 $ 2,824
Days Sales Outstanding 44 59 55
Capital Expenditures $ 13 $ 17 $ 12 $ 42
Cash Flow from Operating Activities $ 87 $ 77 $ 80 $ 244
GAAP Depreciation, Amortization and Accretion $ 38 $ 36 $ 36 $ 110
 

Deferred Subscription Revenue Balance

$ 930 $ 1,004 $ 963 $ 963
 
Revenue by Geography:
Americas $ 244 $ 236 $ 236 $ 716
Europe, Middle East and Africa $ 245 $ 226 $ 225 $ 696
Asia Pacific $ 157 $ 148 $ 139 $ 444
% of Total Rev from Emerging Economies 14 % 15 % 15 % 15 %
 
Revenue by Segment:
Architecture, Engineering and Construction $ 237 $ 233 $ 225 $ 695
Manufacturing $ 185 $ 171 $ 175 $ 531
Platform Solutions and Emerging Business $ 185 $ 164 $ 161 $ 510
Media and Entertainment $ 40 $ 41 $ 39 $ 120
 
Other Revenue Statistics:
% of Total Rev from Flagship 46 % 45 % 45 % 45 %
% of Total Rev from Suites 37 % 37 % 36 % 37 %
% of Total Rev from New and Adjacent 17 % 18 % 19 % 18 %
% of Total Rev from AutoCAD and AutoCAD LT 25 % 24 % 24 % 25 %
 

Favorable (Unfavorable) Impact of U.S. Dollar Translation Relative to Foreign Currencies Compared to Comparable Prior Year Period:

FX Impact on Total Billings $ (31 ) $ (50 ) $ (36 ) $ (117 )
FX Impact on Total Net Revenue $ (22 ) $ (25 ) $ (28 ) $ (75 )
FX Impact on Cost of Revenue and Total Operating Expenses $ 22 $ 25 $ 24 $ 71
FX Impact on Operating Income $ $ $ (4 ) $ (4 )
 
Gross Profit by Segment:
Architecture, Engineering and Construction $ 217 $ 210 $ 202 $ 629
Manufacturing $ 158 $ 151 $ 155 $ 465
Platform Solutions and Emerging Business $ 163 $ 138 $ 136 $ 438
Media and Entertainment $ 33 $ 32 $ 31 $ 95
Unallocated amounts $ (16 ) $ (14 ) $ (15 ) $ (46 )
 
Common Stock Statistics:
GAAP Common Shares Outstanding 227.6 226.2 225.1 225.1
GAAP Fully Diluted Weighted Average Shares Outstanding 231.7 227.0 225.3 226.5
Shares Repurchased 1.6 2.1 3.2 6.9
 
Subscriptions (in millions):
Total Subscriptions 2.33 2.39 2.47 2.47
 
Annualized Recurring Revenue (ARR):
Maintenance Model ARR $ 1,141 $ 1,133 $ 1,133 $ 1,133
New Model ARR $ 180 $ 204 $ 221 $ 221
Total ARR $ 1,321 $ 1,337 $ 1,354 $ 1,354
 
(a) Totals may not agree with the sum of the components due to rounding.
(b) Net Income (Loss) Per Share were computed independently for each of the periods presented; therefore the sum of the net income (loss) per share amounts for the quarters may not equal the total for the year.
 

(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 net 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 2016
(2) GAAP Gross Margin 86 % 85 % 85 % 85 %
Stock-based compensation expense % % % 1 %
Amortization of developed technology 2 % 2 % 2 %   2 %
Non-GAAP Gross Margin 88 % 87 % 87 % 88 %
 
(3) GAAP Operating Expenses $ 533 $ 512 $ 524 $ 1,569
Stock-based compensation expense (47 ) (38 ) (47 ) (133 )
Amortization of purchased intangibles (9 ) (8 ) (8 ) (25 )
Restructuring charges, net          
Non-GAAP Operating Expenses $ 477 $ 466 $ 469 $ 1,411
 
(4) GAAP Operating Margin 3 % 1 % (2 )% 1 %
Stock-based compensation expense 8 % 7 % 8 % 8 %
Amortization of developed technology 2 % 2 % 2 % 2 %
Amortization of purchased intangibles 2 % 1 % 1 % 1 %
Restructuring charges, net % % %   %
Non-GAAP Operating Margin 15 % 11 % 9 % 12 %
 
(5) GAAP Net Income (Loss) $ 19 $ (269 ) $ (44 ) $ (293 )
Stock-based compensation expense 50 41 50 141
Amortization of developed technology 14 12 12 37
Amortization of purchased intangibles 9 8 8 25
Restructuring charges, net
(Gain) loss on strategic investments (1 ) (2 ) (3 )
Discrete GAAP tax (provision) benefit items (3 ) 4

1

 

2

 

Establishment of valuation allowance on deferred tax assets

231

231

Income tax effect of non-GAAP adjustments (19 )

19

 

6

    6  
Non-GAAP Net Income $ 69 $ 44 $ 33 $ 146
 
(6) GAAP Diluted Net Income (Loss) Per Share $ 0.08 $ (1.18 ) $ (0.19 ) $ (1.29 )
Stock-based compensation expense 0.21 0.18 0.22 0.61
Amortization of developed technology 0.06 0.05 0.05 0.16
Amortization of purchased intangibles 0.04 0.04

0.03

0.11
(Gain) loss on strategic investments (0.01 ) (0.01 )
Discrete GAAP tax (provision) benefit items (0.01 ) 0.02

 

0.01

 

Establishment of valuation allowance on deferred tax assets

1.01

 

 

1.01

Income tax effect of non-GAAP adjustments (0.08 )

0.08

 

0.03

    0.03  
Non-GAAP Diluted Net Income Per Share $ 0.30 $ 0.19 $ 0.14 $ 0.63
 
Reconciliation for Billings:
Q116 Q216 Q316
Year over year change in GAAP net revenue 9 % (4 )% (3 )%
Change in deferred revenue in the current period (11 )% 10 % (8 )%
Change in hedge gain (loss) applicable to billings 4 % 2 % %
Change in acquisition related deferred revenue and other 1 % (1 )% 2 %
Year over year change in billings 3 % 7 % (9 )%
 
Reconciliation for Subscription Billings
Q116 Q216 Q316
Year-over-year change in GAAP subscription revenue 16 % 11 % 7 %
Change in deferred subscription in the current period (20 )% 31 % (14 )%
Change in hedge gain (loss) applicable to subscription billings 5 % 4 % 1 %
Change in acquisition related deferred subscription revenue and other 2 % 6 % %
Year-over-year change in subscription billings 3 % 52 % (6 )%
 
(a) Totals may not agree with the sum of the components due to rounding.

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