UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 15, 2014
Autodesk, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 000-14338 | 94-2819853 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
111 McInnis Parkway
San Rafael, California 94903
(Address of principal executive offices, including zip code)
(415) 507-5000
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02. Results of Operations and Financial Condition.
On May 15, 2014, Autodesk, Inc. (“Autodesk” or the “Company”) issued a press release and prepared remarks reporting financial results for the first quarter ended April 30, 2014. The press release and prepared remarks are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.
These exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Non-GAAP Financial Measures
To supplement Autodesk’s consolidated financial statements presented on a GAAP basis, the press release and prepared remarks furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively, provide investors with certain non-GAAP measures, including but not limited to historical non-GAAP net earnings and historical and future non-GAAP net earnings per diluted share and billings. For our internal budgeting and resource allocation process and as a means to evaluate period-to-period comparisons, Autodesk uses non-GAAP measures to supplement our consolidated financial statements presented on a GAAP basis. These non-GAAP measures do not include certain items that may have a material impact upon our reported financial results. Autodesk uses non-GAAP measures in making operating decisions because Autodesk believes those measures provide meaningful supplemental information regarding our earning potential and performance for management by excluding certain expenses and charges that may not be indicative of our core business operating results. For the reasons set forth below, Autodesk believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. This allows investors and others to better understand and evaluate our operating results and future prospects in the same manner as management, compare financial results across accounting periods and to those of peer companies and to better understand the long-term performance of our core business. Autodesk also uses some of these measures for purposes of determining company-wide incentive compensation.
As described above, Autodesk may exclude the following items from its non-GAAP measures:
A. Stock-based compensation expenses. Autodesk excludes stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses and management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Autodesk believes excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies.
B. Amortization of purchased intangibles. Autodesk incurs amortization of acquisition-related purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Management finds it useful to exclude these variable charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of purchased intangible assets will recur in future periods.
C. Goodwill impairment. This is a non-cash charge to write-down goodwill to fair value when there was an indication that the asset was impaired. As explained above, management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning and forecasting future periods.
D. Restructuring charges (benefits), net. These expenses are associated with realigning our business strategies based on current economic conditions. In connection with these restructuring actions, Autodesk recognizes costs related to termination benefits for former employees whose positions were eliminated, and the closure of facilities and cancellation of certain contracts. Autodesk excludes these charges because these expenses are not reflective of ongoing business and operating results. Autodesk believes it is useful for investors to understand the effects of these items on our total operating expenses.
E. Loss (gain) on strategic investments. Autodesk excludes gains and losses related to our strategic investments from our non-GAAP measures primarily because management finds it useful to exclude these variable gains and losses on these investments in assessing our financial results. Included in these amounts are non-cash unrealized gains and losses on the derivative components and
realized gains and losses on the sale or losses on the impairment of these investments. Autodesk believes excluding these items is useful to investors because these excluded items do not correlate to the underlying performance of our business and these losses or gains were incurred in connection with strategic investments which do not occur regularly.
F. Establishment of a valuation allowance on certain net deferred tax assets. This is a non-cash charge to record a valuation allowance on certain deferred tax assets. As explained above, management finds it useful to exclude certain non-cash charges to assess the appropriate level of various cash expenses to assist in budgeting, planning and forecasting future periods.
G. Discrete tax items. Autodesk excludes the GAAP tax provision, including discrete items, from the non-GAAP measure of income, and includes a non-GAAP tax provision based upon the projected annual non-GAAP effective tax rate. Discrete tax items include income tax expenses or benefits that do not relate to ordinary income from continuing operations in the current fiscal year, unusual or infrequently occurring items, or the tax impact of certain stock-based compensation. Examples of discrete tax items include, but are not limited to, certain changes in judgment and changes in estimates of tax matters related to prior fiscal years, certain costs related to business combinations, certain changes in the realizability of deferred tax assets or changes in tax law. Management believes this approach assists investors in understanding the tax provision and the effective tax rate related to ongoing operations. Autodesk believes the exclusion of these discrete tax items provides investors with useful supplemental information about the Company's operational performance.
H. Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded from the non-GAAP measures relate to the tax impact on the difference between GAAP and non-GAAP costs and expenses, primarily due to stock-based compensation, purchased intangibles and restructuring for GAAP and non-GAAP measures.
There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP 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. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures. Autodesk compensates for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. The presentation of non-GAAP financial information is meant to be considered in addition to, not as a substitute for or in isolation from, the directly comparable financial measures prepared in accordance with GAAP. Autodesk urges investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description |
99.1 | Press release dated as of May 15, 2014. |
99.2 | Prepared remarks dated as of May 15, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AUTODESK, INC. | |
By: /s/ Mark J. Hawkins | |
Mark J. Hawkins Executive Vice President and Chief Financial Officer | |
Date: May 15, 2014
EXHIBIT INDEX
Exhibit No. | Description |
99.1 | Press release dated as of May 15, 2014. |
99.2 | Prepared remarks dated as of May 15, 2014. |
Investors: David Gennarelli, david.gennarelli@autodesk.com, 415-507-6033
Press: Noah Cole, noah.cole@autodesk.com, 415-580-3535
AUTODESK REPORTS STRONG FIRST QUARTER RESULTS
Delivers Double-digit Billings Growth
Raises Billings and Revenue Outlook for Fiscal Year 2015
SAN RAFAEL, Calif., MAY 15, 2014-- Autodesk, Inc. (NASDAQ: ADSK) today reported financial results for the first quarter of fiscal 2015.
First Quarter Fiscal 2015
• | Total billings increased 10 percent, compared to the first quarter of fiscal 2014. |
• | Total subscriptions increased by over 89,000, compared to the fourth quarter of fiscal 2014. |
• | Revenue was $593 million, an increase of 4 percent, compared to the first quarter of fiscal 2014 as reported, and increased 5 percent on a constant currency basis. Revenue contribution from the recent acquisition of Delcam was immaterial to first quarter results. |
• | GAAP operating margin was 7 percent, compared to 14 percent in the first quarter of fiscal 2014. |
• | Non-GAAP operating margin was 17 percent, compared with 24 percent in the first quarter of fiscal 2014. A reconciliation of GAAP to non-GAAP results is provided in the accompanying tables. |
• | GAAP diluted earnings per share were $0.12, compared to $0.24 in the first quarter of fiscal 2014. |
• | Non-GAAP diluted earnings per share were $0.32, compared to $0.42 in the first quarter of fiscal 2014. |
• | Deferred revenue increased 13 percent to a record $964 million, compared to the first quarter of fiscal 2014. |
• | Cash flow from operating activities was $219 million, compared to $224 million in the first quarter of fiscal 2014. |
"Our year is off to an encouraging start. We had solid first quarter results and made meaningful progress on our business model transition with the addition of over 89,000 subscriptions,” said Carl Bass, Autodesk president and CEO. "Continued strength in our suites and Architecture, Engineering and Construction (AEC) business segment, strong demand in Asia Pacific (APAC), and solid performance in our Manufacturing business drove financial results above our expectations.
“While we experienced strong growth in our cloud and desktop subscriptions (rental)", Bass continued, "strong growth in maintenance subscriptions was the primary driver behind the increase in total subscriptions, as expected. Late in the first quarter we launched AutoCAD LT as a desktop subscription on a global basis and
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were pleased with the initial response. We look forward to building on these early successes and transitioning Autodesk to an even more profitable and recurring, subscription-based model over the next four years.”
First Quarter Operational Overview
Revenue in the Americas increased 2 percent to $206 million compared to the first quarter last year as reported. EMEA revenue increased 4 percent to $226 million compared to the first quarter last year as reported, and 2 percent on a constant currency basis. Revenue in APAC increased 6 percent to $161 million compared to the first quarter last year as reported, and increased 15 percent on a constant currency basis. Revenue from emerging economies increased 5 percent to $79 million compared to the first quarter last year as reported and 4 percent on a constant currency basis. Revenue from emerging economies represented 13 percent of total revenue in the first quarter.
Revenue from the Platform Solutions and Emerging Business (PSEB) segment was flat at $212 million compared to the first quarter last year. Revenue from the AEC business segment increased 14 percent to $196 million compared to the first quarter last year. Revenue from the Manufacturing business segment increased 6 percent to $147 million compared to the first quarter last year. Revenue from the Media and Entertainment business (M&E) segment decreased 19 percent to $38 million compared to the first quarter last year.
Revenue from Flagship products decreased 4 percent to $299 million compared to the first quarter last year. Revenue from Suites increased 19 percent to $210 million compared to the first quarter last year. Revenue from New and Adjacent products was $83 million, and increased 2 percent compared to the first quarter last year.
"We are pleased with the first quarter results," said Mark Hawkins, Autodesk executive vice president and CFO. "Our better than expected results, coupled with our optimistic view of the current macroeconomic environment, led us to raise our business outlook for billings and revenue for fiscal year 2015."
Business Outlook
The following are forward-looking statements based on current expectations and assumptions, and involve risks and uncertainties some of which are set forth below. Autodesk's business outlook for the second quarter and full year fiscal 2015 assumes, among other things, a continuation of the current economic environment and foreign exchange currency rate environment, and interest expense related to Autodesk's $750 million debt offering in December 2012. A reconciliation between the GAAP and non-GAAP estimates for fiscal 2015 is provided in the tables following this press release.
Second Quarter Fiscal 2015
Q2 FY15 Guidance Metrics | Q2 FY15 (ending July 31, 2014) |
Revenue (in millions) | $595-$610 |
EPS GAAP | $0.05-$0.10 |
EPS Non-GAAP (1) | $0.25-$0.30 |
_______________
(1) Non-GAAP earnings per diluted share exclude $0.11 related to stock-based compensation expense and $0.09 for the amortization of acquisition related intangibles, net of tax.
Full Year Fiscal 2015
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FY15 Guidance Metrics | FY15 (ending January 31, 2015) |
Billings growth | 7-9% |
Revenue growth | 4-6% |
GAAP operating margin | 3-5% |
Non-GAAP operating margin | 14-16% |
Net subscription additions | 150,000-200,000 |
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.
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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.
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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 | |||||
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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 | ||||
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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 | |||
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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 | |||
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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 | ) | — | ||||
9
Income tax effect of non-GAAP adjustments | (0.07 | ) | (0.07 | ) | |||
Non-GAAP diluted net income per share | $ | 0.32 | $ | 0.42 | |||
10
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 | ||||||
11
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. | ||||||||||
12
(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 | ||||||
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(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. | ||||||||||
14
AUTODESK, INC. (ADSK)
FIRST QUARTER FISCAL 2015 EARNINGS ANNOUNCEMENT
May 15, 2014
PREPARED REMARKS
Autodesk is posting a copy of these prepared remarks and its press release to its Investor Relations website. These prepared remarks are offered to provide shareholders and analysts with additional time and detail for analyzing our results in advance of our quarterly conference call. As previously scheduled, the conference call will begin today, May 15, 2014 at 2:00 pm PT (5:00 pm ET) and will include only brief comments followed by questions and answers. These prepared remarks will not be read on the call.
To access the live broadcast of the question and answer session, please visit the Investor Relations section of Autodesk’s website at www.autodesk.com/investor. A complete reconciliation between GAAP and non-GAAP results is provided in the tables following these prepared remarks.
Business Model Transition
During the latter part of fiscal year 2014, Autodesk announced a business model transition in which the company would provide more offerings including desktop subscriptions (formerly referred to as rentals), cloud subscriptions, and flexible license arrangements for enterprise customers, in addition to our existing perpetual license and maintenance subscription offerings. Over the next four years, we expect to significantly increase our subscription base and the annual value per subscription, which we believe will help drive billings growth. During the transition, revenue, deferred revenue, operating margin, and EPS will be impacted as more revenue is recognized ratably rather than up front and as new offerings bring a wider variety of price points.
First Quarter Fiscal 2015 Overview
Autodesk's first quarter results were highlighted by continued strength in our core business, which generated better than expected financial results. We experienced strength in billings, subscriptions, revenue, suites, Architecture, Engineering and Construction (AEC) and Manufacturing business segments, Asia Pacific (APAC), and deferred revenue.
First quarter performance included:
• | Total billings increased 10 percent, compared to the first quarter last year. |
• | Total subscriptions increased by over 89,000, compared to the fourth quarter of fiscal 2014. |
• | Revenue was $593 million, an increase of 4 percent compared to the first quarter last year as reported, and increased 5 percent on a constant currency basis. Revenue contribution from the recent acquisition of Delcam was immaterial to first quarter results. |
• | GAAP operating margin was 7 percent, compared to 14 percent in the first quarter last year. |
• | Non-GAAP operating margin was 17 percent, compared to 24 percent in the first quarter last year. A reconciliation of GAAP to non-GAAP results is provided in the accompanying tables. |
• | GAAP diluted earnings per share were $0.12, compared to $0.24 in the first quarter last year. |
1
• | Non-GAAP diluted earnings per share were $0.32, compared to $0.42 in the first quarter last year. |
• | Deferred revenue increased 13 percent to a record $964 million, compared to $851 million in the first quarter last year. |
• | Cash flow from operating activities was $219 million, compared to $224 million in the first quarter last year. |
Billings and Subscriptions Review
Total billings* for the first quarter increased 10 percent, compared to the first quarter last year. The increase is related primarily to an increase in subscription billings.
Subscription billings (includes maintenance and cloud service billings) increased 19 percent, compared to the first quarter last year. The increase is related primarily to a strong increase in maintenance subscription billings.
Total subscriptions* was 1.94 million, an increase of over 89,000, compared to the fourth quarter of fiscal 2014.
Total billings, subscription billings, and total subscriptions benefited from promotional activity driving upgrades and maintenance renewals as part of a promotional campaign.
* For a definition, please view the Glossary of Terms later in this document.
Revenue Analysis
(in millions) | 1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | ||||||||||
Total net revenue (1) | $ | 570 | $ | 562 | $ | 555 | $ | 587 | $ | 593 | |||||
License and other revenue | $ | 324 | $ | 313 | $ | 298 | $ | 321 | $ | 316 | |||||
Subscription revenue | $ | 247 | $ | 249 | $ | 258 | $ | 266 | $ | 276 | |||||
___________
(1) Totals may not agree with the sum of the components due to rounding.
Total net revenue for the first quarter increased 4 percent to $593 million compared to the first quarter last year as reported, and increased 5 percent on a constant currency basis.
Backlog was $32 million, an increase of $30 million compared to the first quarter last year and $12 million sequentially. At the end of the first quarter, channel inventory remained at a near-historic low level of less than one week.
License and other revenue decreased 2 percent to $316 million, compared to the first quarter last year. The decrease in license and other revenue was related primarily to the decrease in Media and Entertainment licenses.
Subscription revenue increased 12 percent to $276 million, compared to the first quarter last year. Growth in subscription revenue was related primarily to an increase in maintenance subscription revenue.
2
Revenue by Geography
(in millions) | 1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | ||||||||||
Americas | $ | 202 | $ | 202 | $ | 208 | $ | 207 | $ | 206 | |||||
EMEA | $ | 216 | $ | 202 | $ | 204 | $ | 229 | $ | 226 | |||||
Asia Pacific | $ | 152 | $ | 158 | $ | 143 | $ | 150 | $ | 161 | |||||
Emerging Economies | $ | 75 | $ | 86 | $ | 84 | $ | 88 | $ | 79 | |||||
Emerging as a percentage of Total Revenue | 13 | % | 15 | % | 15 | % | 15 | % | 13 | % | |||||
Revenue in the Americas increased 2 percent to $206 million, compared to the first quarter last year as reported. Year-over-year results were led by growth in the U.S.
Revenue in EMEA increased 4 percent to $226 million, compared to the first quarter last year as reported, and 2 percent on a constant currency basis. Performance in EMEA was mixed by country.
Revenue in APAC increased 6 percent to $161 million, compared to the first quarter last year as reported, and 15 percent on a constant currency basis. Growth was led by Japan and South Korea.
Revenue from emerging economies increased 5 percent to $79 million, compared to the first quarter last year as reported, and 4 percent on a constant currency basis. As a matter of reference, none of the individual BRIC countries currently represent more than 3% of total revenue.
Revenue by Product Type
(in millions) | 1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | ||||||||||
Flagship | $ | 312 | $ | 289 | $ | 275 | $ | 288 | $ | 299 | |||||
Suites | $ | 176 | $ | 193 | $ | 199 | $ | 216 | $ | 210 | |||||
New and Adjacent | $ | 82 | $ | 80 | $ | 82 | $ | 83 | $ | 83 | |||||
As we have previously discussed, our customers continue to migrate to our Design and Creation Suites. As a result, revenue for many of our stand-alone products is decreasing, which impacts the growth of both Flagship and New and Adjacent categories.
Revenue from Flagship products decreased 4 percent to $299 million, compared to the first quarter last year. The year-over-year decline in Flagship was driven primarily by a decrease AutoCAD and other point products, reflecting customer migration to our suites.
Revenue from Suites was $210 million, or 35 percent of total revenue. Revenue from Suites increased 19 percent compared to the first quarter last year. Year-over-year growth in Suites was led by strong growth in AEC suites.
Revenue from New and Adjacent products increased 2 percent to $83 million, compared to the first quarter last year.
3
Revenue by Business Segment
(in millions) | 1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | ||||||||||
Platform Solutions and Emerging Business | $ | 213 | $ | 197 | $ | 183 | $ | 196 | $ | 212 | |||||
Architecture, Engineering and Construction | $ | 172 | $ | 177 | $ | 186 | $ | 196 | $ | 196 | |||||
Manufacturing | $ | 139 | $ | 144 | $ | 142 | $ | 154 | $ | 147 | |||||
Media and Entertainment | $ | 47 | $ | 43 | $ | 44 | $ | 41 | $ | 38 | |||||
Revenue from our Platform Solutions and Emerging Business (PSEB) segment was flat at $212 million, compared to the first quarter last year. Combined revenue from AutoCAD and AutoCAD LT was $189 million, a decrease of 1 percent compared to the first quarter last year. Strength in AutoCAD LT was offset by a decrease in AutoCAD. The decrease in AutoCAD in part reflects customer migration to our Design and Creation Suites. Revenue from PSEB suites increased 8 percent compared to the first quarter last year.
Revenue from our AEC business segment increased 14 percent to $196 million, compared to the first quarter last year. Revenue from our AEC suites increased 36 percent compared to the first quarter last year. All AEC suites grew on a year-over-year basis, led by strong growth in Building Design Suites and Infrastructure Design Suites.
Revenue from our Manufacturing business segment increased 6 percent to $147 million, compared to the first quarter last year. Revenue from our Manufacturing suites increased 8 percent compared to the first quarter last year. The year-over-year growth in our Manufacturing segment was primarily the result of growth in Product Design Suites.
Revenue from our Media and Entertainment (M&E) business segment decreased 19 percent to $38 million, compared to the first quarter last year. Revenue from our Animation products, including Maya, Entertainment Creation Suites, and 3ds Max decreased 12 percent compared to the first quarter last year. Revenue from Creative Finishing decreased 36 percent compared to the first quarter last year. The decrease in M&E revenue is related primarily to a general decrease in the M&E industry end-market demand, the planned inclusion of our M&E products in other Autodesk industry suites, and the business model transition (noted above) as customers are opting for desktop subscription.
Foreign Currency Impact
(in millions) | 1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | ||||||||||
FX Impact on Total Revenue | $ | (17 | ) | $ | (17 | ) | $ | (13 | ) | $ | (8 | ) | $ | (9 | ) |
FX Impact on Cost of Revenue and Operating Expenses | $ | 5 | $ | 4 | $ | 3 | $ | 3 | $ | 2 | |||||
FX Impact on Operating Income | $ | (12 | ) | $ | (13 | ) | $ | (10 | ) | $ | (5 | ) | $ | (7 | ) |
The foreign currency impact represents the U.S. Dollar impact of changes in foreign currency rates on our financial results as well as the impact of gains and losses from our hedging program.
Compared to the first quarter of last year, the impact of foreign currency exchange rates including the impact of our hedging program was $9 million unfavorable on revenue and $2 million favorable on cost of revenue and operating expenses.
Compared to the fourth quarter of fiscal 2014, the impact of foreign currency exchange rates and hedging was $2 million unfavorable on revenue and $1 million favorable on cost of revenue and operating expenses.
4
Balance Sheet Items and Cash Review
(in millions) | 1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | ||||||||||
Cash Flows from Operating Activities | $ | 224 | $ | 65 | $ | 91 | $ | 184 | $ | 219 | |||||
Capital Expenditures | $ | 26 | $ | 17 | $ | 12 | $ | 9 | $ | 15 | |||||
Depreciation, Amortization and Accretion | $ | 33 | $ | 32 | $ | 31 | $ | 33 | $ | 36 | |||||
Total Cash and Marketable Securities, net of $750M debt | $ | 1,730 | $ | 1,658 | $ | 1,729 | $ | 1,794 | $ | 1,638 | |||||
Days Sales Outstanding | 46 | 49 | 50 | 66 | 50 | ||||||||||
Deferred Revenue | $ | 851 | $ | 806 | $ | 766 | $ | 901 | $ | 964 | |||||
Net of long-term debt, total cash and investments at the end of the first quarter was approximately $1.6 billion. The sequential decrease is related primarily to cash used for acquisitions. Approximately 75 percent of the total cash and investments is located offshore and will fluctuate subject to business needs.
During the first quarter, Autodesk used $103 million to repurchase approximately 2 million shares of common stock at an average repurchase price of $51.26 per share. Through this stock repurchase program, Autodesk remains committed to returning excess cash to our stockholders and reducing shares outstanding over time.
Cash flow from operating activities during the first quarter was $219 million, a decrease of 2 percent compared to the first quarter last year. The year-over-year decrease is related to the decrease in net income.
Days sales outstanding (DSO) was 50 days, which was an increase of 4 days, compared to the first quarter last year and a decrease of 16 days sequentially. The year-over-year increase is primarily related to an increase in maintenance billings and the acquisition of Delcam. The sequential decrease is primarily related to billings linearity.
Deferred revenue was a record $964 million, an increase of 13 percent compared to the first quarter last year. The increase is primarily related to the increase in subscription billings over the past four quarters and the business model transition. Deferred revenue also benefited from approximately $10 million in acquired deferred revenue related to the acquisition of Delcam.
Margins and EPS Review
1Q 2014 | 2Q 2014 | 3Q 2014 | 4Q 2014 | 1Q 2015 | |||||||||||
Gross Margin | |||||||||||||||
Gross Margin - GAAP | 88 | % | 88 | % | 88 | % | 88 | % | 87 | % | |||||
Gross Margin - Non-GAAP | 90 | % | 90 | % | 90 | % | 90 | % | 89 | % | |||||
Operating Expenses (in millions) | |||||||||||||||
Operating Expenses - GAAP | $ | 422 | $ | 410 | $ | 420 | $ | 463 | $ | 472 | |||||
Operating Expenses - Non-GAAP | $ | 378 | $ | 370 | $ | 378 | $ | 413 | $ | 427 | |||||
Operating Margin | |||||||||||||||
Operating Margin - GAAP | 14 | % | 15 | % | 12 | % | 9 | % | 7 | % | |||||
Operating Margin - Non-GAAP | 24 | % | 24 | % | 22 | % | 20 | % | 17 | % | |||||
Earnings Per Share | |||||||||||||||
Diluted Net Income Per Share - GAAP | $ | 0.24 | $ | 0.27 | $ | 0.25 | $ | 0.23 | $ | 0.12 | |||||
Diluted Net Income Per Share - Non-GAAP | $ | 0.42 | $ | 0.45 | $ | 0.41 | $ | 0.40 | $ | 0.32 | |||||
5
GAAP gross margin in the first quarter was 87 percent. Non-GAAP gross margin in the first quarter was 89 percent. The year-over-year decrease in both GAAP and non-GAAP gross margin is primarily related to higher cloud-related costs. The sequential decrease in both GAAP and non-GAAP gross margins is primarily related to typical seasonality and higher employee-related costs.
GAAP operating expenses increased 12 percent year-over-year and non-GAAP operating expenses increased 13 percent year-over-year. Both GAAP and non-GAAP year-over-year operating expenses increased primarily related to higher employee-related costs and professional fees. GAAP operating expenses increased 2 percent sequentially and non-GAAP operating expenses increased 3 percent sequentially. Both GAAP and non-GAAP sequential operating expenses increased primarily from higher employee-related costs. Both GAAP and non-GAAP comparisons were also impacted by the consolidation of Delcam expenses.
GAAP operating margin was 7 percent compared to 14 percent in the first quarter last year. Non-GAAP operating margin was 17 percent compared to 24 percent in the first quarter last year. The decrease in both GAAP and non-GAAP operating margin is primarily related to increased spend related to the company's business model transition (noted above), which includes higher employee-related costs.
The first quarter effective tax rate was 20.5 percent and 25.5 percent for GAAP and non-GAAP, respectively. The GAAP effective tax rate was lower than expected due to higher estimated amortization and stock-based compensation expense and discrete items.
GAAP earnings per diluted share for the first quarter were $0.12. Non-GAAP earnings per diluted share for the first quarter were $0.32.
The share count used to compute basic net income per share was 227.0 million. The share count used to compute diluted net income per share was 231.6 million.
A complete reconciliation between GAAP and non-GAAP results is provided in the tables following these prepared remarks.
Business Outlook
The following are forward-looking statements based on current expectations and assumptions, and involve risks and uncertainties some of which are set forth below. Autodesk's business outlook for the second quarter and full year fiscal 2015 assumes, among other things, a continuation of the current economic environment and foreign exchange currency rate environment, and interest expense related to Autodesk's $750 million debt offering in December 2012. A reconciliation between the GAAP and non-GAAP estimates for fiscal 2015 is provided in the tables following these prepared remarks.
Second Quarter Fiscal 2015
Q2 FY15 Guidance Metrics | Q2 FY15 (ending July 31, 2014) |
Revenue (in millions) | $595-$610 |
EPS GAAP | $0.05-$0.10 |
EPS Non-GAAP (1) | $0.25-$0.30 |
_______________
(1) Non-GAAP earnings per diluted share exclude $0.11 related to stock-based compensation expense and $0.09 for the amortization of acquisition related intangibles, net of tax.
6
Full Year Fiscal 2015
FY15 Guidance Metrics | FY15 (ending January 31, 2015) |
Billings growth | 7-9% |
Revenue growth | 4-6% |
GAAP operating margin | 3-5% |
Non-GAAP operating margin | 14-16% |
Net subscription additions | 150,000-200,000 |
The second quarter and full year fiscal 2015 outlook assume a 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.
The majority of the euro, yen and Australian dollar denominated billings for our second quarter fiscal 2015 were hedged, materially reducing the impact of currency fluctuations on our second quarter results. However, over an extended period of time, currency fluctuations may increasingly impact our results. We also hedge certain expenses as noted below. We hedge our net exposures using a four quarter rolling layered hedge program. As such, a portion of the projected euro, yen, and Australian dollar denominated billings for our fiscal 2015 has been hedged. The closer to the current time period, the more we are hedged. See below for more details on our foreign currency hedging program.
Autodesk’s Foreign Currency Hedging Program and Calculation of Constant Currency Growth
Given continued foreign exchange volatility, we would like to provide a brief summary of how we handle foreign currency exchange hedging as well as a description of how we calculate constant currency growth rates. A few points on our hedging program include:
• | We do not conduct foreign currency exchange hedging for speculative purposes. The purpose of our hedging program is to reduce risk to foreign denominated cash flows and to partially reduce variability that would otherwise impact our financial results from currency fluctuations. |
• | We utilize cash flow hedges on projected billings and certain projected operating expenses in major currencies. We hedge our net exposures using a four quarter rolling layered hedge. The closer to the current time period, the more we are hedged. |
• | On a monthly basis, to mitigate foreign exchange gains/losses, we hedge monetary assets and liabilities recorded in non-functional currencies on the books of entities where these exposures are puposefully concentrated. |
• | From time to time, we hedge strategic exposures which may be related to acquisitions. Such hedges may not qualify for hedge accounting and are marked-to-market and reflected in earnings immediately. |
• | The major currencies we hedge include the euro, yen, Australian dollar, Canadian dollar, and Swiss franc. The euro is the primary exposure for the company. |
When we report period-over-period growth rate percentages on a constant currency basis, we attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates as well as eliminating hedge gains or losses recorded within the current and
7
comparative period. However, when we calculate the foreign currency impact of exchange rates in the current and comparative period on our financial results (See table above in “Foreign Currency Impact” section) we include the U.S. Dollar impact of fluctuations in foreign currency exchange rates as well as the impact of gains and losses recorded as a result of our hedging program.
Autodesk’s Product Type Classification
The following represents Autodesk’s current view for product categorization. Autodesk will periodically make changes to this list. This is not a complete list.
“Flagship” includes the following products:
•3ds Max®
•AutoCAD®
•AutoCAD LT®
•AutoCAD® vertical products such as AutoCAD® Mechanical and AutoCAD® Architecture
•Civil 3D®
•Inventor® products (standalone)
•Maya®
•Plant 3D
•Revit® products (standalone)
“Suites” include the following product classes:
•AutoCAD® Design Suites
•Building Design Suites
•Educational/academic suites
•Entertainment Creation Suites
•Factory Design Suites
•Infrastructure Design Suites
•Inventor® family suites
•Plant Design Suites
•Product Design Suites
•Revit® family suites
“New and Adjacent” includes the following products and services:
•Alias® Design products
•Autodesk® 360 products
•Autodesk® Consulting
•Autodesk® Simulation Mechanical
•Autodesk® Simulation Multiphysics
•Buzzsaw®
•CF Design
•Constructware®
•Consumer products
•Creative Finishing products
•Moldflow® products
•Navisworks®
8
•Scaleform®
•Vault products
•All other products
Glossary of Terms
License and Other revenue: License and other revenue consists of two components: (1) all forms of product license revenue and (2) other revenue. Product license revenue includes software license revenue from the sale of new seat licenses, software license revenue from the sale of new seat term-based licenses from our desktop subscription and enterprise offerings, and product revenue for Creative Finishing. Other revenue includes revenue from consulting, training, Autodesk Developers Network and Creative Finishing customer support, and is recognized over time, as the services are performed.
Subscription revenue: Autodesk subscription revenue consists of three components: (1) maintenance revenue from our software products; (2) maintenance revenue from our term-based desktop subscription and enterprise offerings; and (3) revenue from our cloud service offerings.
Maintenance: Our maintenance program provides our commercial and educational customers with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under our maintenance program, customers are eligible to receive unspecified upgrades when and if available, downloadable training courses and online support. We recognize maintenance revenue over the term of the agreements, generally between one and three years.
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.
Billings: Amounts billed to customers during the current fiscal period net of any partner incentives or other discounts.
Safe Harbor Statement
These prepared remarks contain forward-looking statements that involve risks and uncertainties, including statements in the paragraphs under “Business Outlook” above, the impacts of our business model transition, trends (including by geography, product, product type, and end user), the impact of foreign exchange hedges, 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 these remarks, 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
9
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.
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.
10
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 | |||||||||||
11
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. | |||||||||||||||
12
(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 | |||||||||||||
13
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. | |||||||||||||||
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 | |||||
14
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: | |||||||||||||||
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. | |||||||||||||||
15
(c) Prior amounts have been conformed to align with the current period presentation. | |||||||||||||||
(d) The first three quarters of 2013 percentages have been updated to reflect an adjustment implemented after we reported our results of operations for the third quarter of fiscal 2013. | |||||||||||||||
(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 generally accepted accounting principles 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 | |||||
16
(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 | |||||
(7) Effective in the second quarter of fiscal 2013, Autodesk began excluding gains and losses on strategic investments for purposes of its non-GAAP financial measures. Prior period non-GAAP interest and other income (expense), net, net income and earnings per share amounts have been revised to conform to the current period presentation. | |||||||||||||||
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