Autodesk Fourth Quarter Driven by Strong Growth in Suites and Cash Flow

___________

(1)

 

Effective in the first quarter of fiscal 2014, Autodesk reclassified certain revenue and cost of revenue amounts associated with its cloud service offerings from "License and Other Revenue" to its new revenue line item "Subscription Revenue." Subscription Revenue consists of two components: maintenance revenue for our software products and revenue for our cloud service offerings including Autodesk 360. Prior period amounts have been revised to conform to the current period presentation.

 

Autodesk, Inc.
Condensed Consolidated Balance Sheets
(In millions)
   
January 31, 2014 January 31, 2013
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,853.0 $ 1,612.2
Marketable securities 414.1 342.1
Accounts receivable, net 423.7 495.1
Deferred income taxes 56.8 42.2
Prepaid expenses and other current assets 87.4   60.8  
Total current assets 2,835.0   2,552.4  
Marketable securities 277.3 411.1
Computer equipment, software, furniture and leasehold improvements, net 130.3 114.9
Purchased technologies, net 63.1 76.0
Goodwill 1,009.9 871.5
Deferred income taxes, net 131.1 122.8
Other assets 148.3   159.7  
$ 4,595.0   $ 4,308.4  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 84.5 $ 94.2
Accrued compensation 181.2 189.6
Accrued income taxes 24.3 13.9
Deferred revenue 696.2 647.0
Other accrued liabilities 85.3   99.0  
Total current liabilities 1,071.5   1,043.7  
Deferred revenue 204.4 187.6
Long term income taxes payable 211.8 194.2
Long term notes payable, net of discount 746.4 745.6
Other liabilities 99.4 94.1
Commitments and contingencies
Stockholders’ equity:
Preferred stock
Common stock and additional paid-in capital 1,637.3 1,449.8
Accumulated other comprehensive loss (0.6 ) (5.7 )
Retained earnings 624.8   599.1  
Total stockholders’ equity 2,261.5   2,043.2  
$ 4,595.0   $ 4,308.4  
 
Autodesk, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
   
Fiscal Year Ended January 31,
2014 2013
(Unaudited)
Operating activities:
Net income $ 228.8 $ 247.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 128.9 127.8
Stock-based compensation expense 132.2 156.3
Excess tax benefits from stock-based compensation (9.1 ) (12.9 )
Restructuring charges, net 12.8 43.9
Other operating activities (16.1 ) 6.7
Changes in operating assets and liabilities, net of business combinations 86.0   (10.1 )
Net cash provided by operating activities 563.5   559.1  
Investing activities:
Purchases of marketable securities (1,214.2 ) (1,397.7 )
Sales of marketable securities 537.0 332.9
Maturities of marketable securities 742.1 764.8
Capital expenditures (64.2 ) (56.4 )
Acquisitions, net of cash acquired (176.1 ) (263.7 )
Other investing activities (18.6 ) (27.1 )
Net cash (used in) investing activities (194.0 ) (647.2 )
Financing activities:
Proceeds from issuance of common stock, net of issuance costs 288.2 220.2
Repurchases of common stock (423.8 ) (431.2 )
Draws on line of credit 110.0
Proceeds from debt 745.6
Repayments on line of credit (110.0 )
Excess tax benefits from stock-based compensation 9.1 12.9
Other financing activities   (6.1 )
Net cash (used in) provided by financing activities (126.5 ) 541.4  
Effect of exchange rate changes on cash and cash equivalents (2.2 ) 2.0  
Net increase in cash and cash equivalents 240.8 455.3
Cash and cash equivalents at beginning of fiscal year 1,612.2   1,156.9  
Cash and cash equivalents at end of period $ 1,853.0   $ 1,612.2  
 
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 cost of license and other revenue, non-GAAP cost of subscription revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP restructuring charges (benefits), non-GAAP income from operations, non-GAAP operating margin, non-GAAP interest and other income (expense), non-GAAP provision for income taxes, non-GAAP net income, and non-GAAP net income per share. 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. 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, the 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 Fiscal Year Ended
January 31, January 31,
2014 2013 2014 2013
(Unaudited) (Unaudited)
 
GAAP cost of license and other revenue (1) $ 48.1 $ 41.4 $ 178.7 $ 166.0
Stock-based compensation expense (1) (1.1 ) (1.0 ) (3.8 ) (3.7 )
Amortization of developed technology (1) (10.6 ) (9.5 ) (40.1 ) (37.2 )
Non-GAAP cost of license and other revenue (1) $ 36.4   $ 30.9   $ 134.8   $ 125.1  
 
GAAP cost of subscription revenue (1) $ 23.8 $ 20.6 $ 95.6 $ 72.5
Stock-based compensation expense (1) (0.6 ) (0.4 ) (2.2 ) (1.5 )
Amortization of developed technology (1) (1.0 ) (0.9 ) (4.1 ) (2.5 )
Non-GAAP cost of subscription revenue (1) $ 22.2   $ 19.3   $ 89.3   $ 68.5  
 
GAAP gross profit $ 514.7 $ 544.9 $ 1,999.6 $ 2,073.7
Stock-based compensation expense 1.7 1.4 6.0 5.2
Amortization of developed technology 11.6   10.4   44.2   39.7  
Non-GAAP gross profit $ 528.0   $ 556.7   $ 2,049.8   $ 2,118.6  
 
GAAP marketing and sales $ 232.3 $ 236.0 $ 842.6 $ 875.5
Stock-based compensation expense (16.1 ) (16.9 ) (58.6 ) (64.3 )
Non-GAAP marketing and sales $ 216.2   $ 219.1   $ 784.0   $ 811.2  
 
GAAP research and development $ 162.4 $ 149.4 $ 611.1 $ 600.0
Stock-based compensation expense (12.4 ) (12.2 ) (43.7 ) (61.8 )
Non-GAAP research and development $ 150.0   $ 137.2   $ 567.4   $ 538.2  
 
GAAP general and administrative $ 62.0 $ 67.7 $ 248.3 $ 248.4
Stock-based compensation expense (5.9 ) (7.0 ) (23.9 ) (25.0 )
Amortization of customer relationships and trade names (9.0 ) (12.6 ) (36.5 ) (42.1 )
Non-GAAP general and administrative $ 47.1   $ 48.1   $ 187.9   $ 181.3  
 
GAAP restructuring charges (benefits), net $ 6.3 $ 7.2 $ 12.8 $ 43.9
Restructuring (charges) benefits (6.3 ) (7.2 ) (12.8 ) (43.9 )
Non-GAAP restructuring charges (benefits), net $   $   $   $  
 
GAAP operating expenses $ 463.0 $ 460.3 $ 1,714.8 $ 1,767.8
Stock-based compensation expense (34.4 ) (36.1 ) (126.2 ) (151.1 )
Amortization of customer relationships and trade names (9.0 ) (12.6 ) (36.5 ) (42.1 )
Restructuring (charges) benefits (6.3 ) (7.2 ) (12.8 ) (43.9 )
Non-GAAP operating expenses $ 413.3   $ 404.4   $ 1,539.3   $ 1,530.7  
 
GAAP income from operations $ 51.7 $ 84.6 $ 284.8 $ 305.9
Stock-based compensation expense 36.1 37.5 132.2 156.3
Amortization of developed technology 11.6 10.4 44.2 39.7
Amortization of customer relationships and trade names 9.0 12.6 36.5 42.1
Restructuring charges (benefits) 6.3   7.2   12.8   43.9  
Non-GAAP income from operations $ 114.7   $ 152.3   $ 510.5   $ 587.9  
 
GAAP interest and other (expense) income, net $ 4.6 $ 1.5 $ (4.9 ) $ 4.1
Loss (gain) on strategic investments 0.8   0.2   1.8   4.0  
Non-GAAP interest and other (expense) income, net $ 5.4   $ 1.7   $ (3.1 ) $ 8.1  
 
GAAP provision for income taxes $ (2.4 ) $ (11.6 ) $ (51.1 ) $ (62.6 )
Discrete GAAP tax provision items (7.9 ) (7.7 ) (10.2 ) (26.7 )
Income tax effect of non-GAAP adjustments (16.6 ) (13.9 ) (60.5 ) (56.7 )
Non-GAAP provision for income tax $ (26.9 ) $ (33.2 ) $ (121.8 ) $ (146.0 )
 
GAAP net income $ 53.9 $ 74.5 $ 228.8 $ 247.4
Stock-based compensation expense 36.1 37.5 132.2 156.3
Amortization of developed technology 11.6 10.4 44.2 39.7
Amortization of customer relationships and trade names 9.0 12.6 36.5 42.1
Restructuring charges (benefits) 6.3 7.2 12.8 43.9
Loss (gain) on strategic investments 0.8 0.2 1.8 4.0
Discrete GAAP tax provision items (7.9 ) (7.7 ) (10.2 ) (26.7 )
Income tax effect of non-GAAP adjustments (16.6 ) (13.9 ) (60.5 ) (56.7 )
Non-GAAP net income $ 93.2   $ 120.8   $ 385.6   $ 450.0  
 
GAAP diluted net income per share $ 0.23 $ 0.32 $ 1.00 $ 1.07
Stock-based compensation expense 0.15 0.16 0.57 0.67
Amortization of developed technology 0.05 0.05 0.19 0.18
Amortization of customer relationships and trade names 0.04 0.05 0.16 0.18
Restructuring charges (benefits) 0.03 0.03 0.06 0.18
Loss (gain) on strategic investments 0.02
Discrete GAAP tax provision items (0.03 ) (0.02 ) (0.04 ) (0.12 )
Income tax effect of non-GAAP adjustments (0.07 ) (0.06 ) (0.26 ) (0.24 )
Non-GAAP diluted net income per share $ 0.40   $ 0.53   $ 1.68   $ 1.94  
 
(1) Effective in the first quarter of fiscal 2014, Autodesk reclassified certain costs associated cloud service offerings from "Cost of License and Other Revenue" to "Cost of Subscription Revenue." Prior period amounts have been revised to conform to the current period presentation.

Autodesk, Inc.

       
 
 
                     
Other Supplemental Financial Information (a)
                     
Fiscal Year 2014   QTR 1   QTR 2   QTR 3   QTR 4   YTD 2014
Financial Statistics ($ in millions, except per share data):  
Total Net Revenue: $ 570 $ 562 $ 555 $ 587 $ 2,274
License and Other Revenue $ 324 $ 313 $ 298 $ 321 $ 1,255
Subscription Revenue $ 247 $ 249 $ 258 $ 266 $ 1,019
 
GAAP Gross Margin 88 % 88 % 88 % 88 % 88 %
Non-GAAP Gross Margin (1)(2) 90 % 90 % 90 % 90 % 90 %
 
GAAP Operating Expenses $ 422 $ 410 $ 420 $ 463 $ 1,715
GAAP Operating Margin 14 % 15 % 12 % 9 % 13 %
GAAP Net Income $ 56 $ 62 $ 58 $ 54 $ 229
GAAP Diluted Net Income Per Share (b) $ 0.24 $ 0.27 $ 0.25 $ 0.23 $ 1.00
 
Non-GAAP Operating Expenses (1)(3) $ 378 $ 370 $ 378 $ 413 $ 1,539
Non-GAAP Operating Margin (1)(4) 24 % 24 % 22 % 20 % 22 %
Non-GAAP Net Income (1)(5)(c) $ 96 $ 102 $ 94 $ 93 $ 386
Non-GAAP Diluted Net Income Per Share (1)(6)(b)(c) $ 0.42 $ 0.45 $ 0.41 $ 0.40 $ 1.68
 
Total Cash and Marketable Securities $ 2,480 $ 2,408 $ 2,479 $ 2,544 $ 2,544
Days Sales Outstanding 46 49 50 66 66
Capital Expenditures $ 26 $ 17 $ 12 $ 9 $ 64
Cash Flow from Operating Activities $ 224 $ 65 $ 91 $ 184 $ 564
GAAP Depreciation, Amortization and Accretion $ 33 $ 32 $ 31 $ 33 $ 129
 
Deferred Subscription Revenue Balance (c) $ 775 $ 736 $ 699 $ 789 $ 789
 
Revenue by Geography:
Americas $ 202 $ 202 $ 208 $ 207 $ 819
Europe, Middle East and Africa $ 216 $ 202 $ 204 $ 229 $ 852
Asia Pacific $ 152 $ 158 $ 143 150 $ 603
% of Total Rev from Emerging Economies 13 % 15 % 15 % 15 % 15 %
 
Revenue by Segment:
Platform Solutions and Emerging Business $ 213 $ 197 $ 183 $ 196 $ 789
Architecture, Engineering and Construction $ 172 $ 177 $ 186 $ 196 $ 731
Manufacturing $ 139 $ 144 $ 142 $ 154 $ 579
Media and Entertainment $ 47 $ 43 $ 44 $ 41 $ 175
 
Other Revenue Statistics:
% of Total Rev from Flagship 55 % 51 % 50 % 49 % 51 %
% of Total Rev from Suites 31 % 34 % 36 % 37 % 34 %
% of Total Rev from New and Adjacent 14 % 14 % 15 % 14 % 14 %
% of Total Rev from AutoCAD and AutoCAD LT 34 % 31 % 29 % 29 % 30 %
 
Favorable (Unfavorable) Impact of U.S. Dollar Translation Relative to
Foreign Currencies Compared to Comparable Prior Year Period:
FX Impact on Total Net Revenue $ (17 ) $ (17 ) $ (13 ) $ (8 ) $ (54 )
FX Impact on Cost of Revenue and Total Operating Expenses $ 5 $ 4 $ 3 $ 3 $ 16
FX Impact on Operating Income $ (12 ) $ (13 ) $ (10 ) $ (5 ) $ (38 )
 
Gross Margin by Segment:
Platform Solutions and Emerging Business $ 195 $ 180 $ 166 $ 176 $ 717
Architecture, Engineering and Construction $ 156 $ 161 $ 169 $ 178 $ 664
Manufacturing $ 128 $ 132 $ 130 $ 142 $ 532
Media and Entertainment $ 37 $ 34 $ 35 $ 32 $ 138
Unallocated amounts $ (12 ) $ (12 ) $ (12 ) $ (14 ) $ (50 )
 
Common Stock Statistics (in millions):
Common Shares Outstanding 224.4 222.5 224.6 226.7 226.7
Fully Diluted Weighted Average Shares Outstanding 229.3 228.3 227.7 231.1 229.6
Shares Repurchased 3.2 3.1 2.0 2.2 10.5
 
(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) Prior amounts have been conformed to align with the current period presentation.
 
(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, and non-GAAP net income per share. 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. 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 2014
(2) GAAP Gross Margin 88 % 88 % 88 % 88 % 88 %
Stock-based compensation expense % % % % %
Amortization of developed technology 2 %     2 %     2 %   2 %   2 %
Non-GAAP Gross Margin 90 % 90 % 90 % 90 % 90 %
 
(3) GAAP Operating Expenses $ 422 $ 410 $ 420 $ 463 $ 1,715
Stock-based compensation expense (32 ) (30 ) (30 ) (34 ) (126 )
Amortization of customer relationships and trade names (11 ) (9 ) (7 ) (9 ) (37 )
Restructuring (charges) benefits, net     (2 )     (4 )   (6 )   (13 )
Non-GAAP Operating Expenses $ 378 $ 370 $ 378 $ 413 $ 1,539
 
(4) GAAP Operating Margin 14 % 15 % 12 % 9 % 13 %
Stock-based compensation expense 6 % 6 % 6 % 6 % 6 %
Amortization of developed technology 2 % 2 % 2 % 2 % 2 %
Amortization of customer relationships and trade names 2 % 1 % 1 % 2 % 1 %
Restructuring charges (benefits), net %     %     1 %   1 %   %
Non-GAAP Operating Margin 24 % 24 % 22 % 20 % 22 %
 
(5) GAAP Net Income $ 56 $ 62 $ 58 $ 54 $ 229
Stock-based compensation expense 34 31 32 36 132
Amortization of developed technology 11 11 11 12 44
Amortization of customer relationships and trade names 11 9 7 9 37
Restructuring charges (benefits), net 2 4 6 13
(Gain) loss on strategic investments 1 1 2
Discrete GAAP tax provision items (1 ) 1 (3 ) (8 ) (10 )
Income tax effect of non-GAAP adjustments (15 )     (14 )     (14 )   (17 )   (61 )
Non-GAAP Net Income $ 96 $ 102 $ 94 $ 93 $ 386
 
(6) GAAP Diluted Net Income Per Share $ 0.24 $ 0.27 $ 0.25 $ 0.23 $ 1.00
Stock-based compensation expense 0.15 0.14 0.14 0.15 0.57
Amortization of developed technology 0.05 0.05 0.04 0.05 0.19
Amortization of customer relationships and trade names 0.05 0.04 0.03 0.04 0.16
Restructuring charges (benefits), net 0.01 0.02 0.03 0.06
(Gain) loss on strategic investments
Discrete GAAP tax provision items (0.01 ) (0.03 ) (0.04 )
Income tax effect of non-GAAP adjustments (0.07 )     (0.06 )     (0.06 )   (0.07 )   (0.26 )
Non-GAAP Diluted Net Income Per Share $ 0.42 $ 0.45 $ 0.41 $ 0.40 $ 1.68
 
Reconciliation for Business Model Transition:

The following is a reconciliation of the year-over-year rates discussed within:

Impacted revenue line: Total Revenue   License and other revenue   Flagship   AEC   Deferred Revenue
Stated year-over-year percent increase/(decrease) (3 )% (12 )% (13 )% (6 )% 8 %
Business Model Transition impact 5 %     9 %     10 %   14 %   (4 )%
Normalized year-over-year percent increase/(decrease) 2 %     (3 )%     (3 )%   8 %   4 %
 
Impacted revenue by geography: Americas   EMEA   APAC
Stated year-over-year percent increase/(decrease) (6 )% (4 )% 2 %
Business Model Transition impact 12 %     1 %     1 %
Normalized year-over-year percent increase/(decrease) 6 %     (3 )%     3 %
 
Reconciliation for Guidance:

The following is a reconciliation of anticipated full year fiscal 2015 GAAP and non-GAAP operating margins:

 
FY15 Revenue Growth 3%   5%
GAAP operating margin 5 % 8 %
Stock-based compensation expense 6 % 5 %
Amortization of purchased intangibles 3 % 3 %
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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