Autodesk Increases Profitability in Third Quarter Fiscal 2010

© 2009 Autodesk, Inc. All rights reserved.

 
Autodesk, Inc.
Consolidated Statements of Operations
(In millions, except per share data)
                 
    Three Months Ended   Nine Months Ended
    October 31,   October 31,
    2009   2008   2009   2008
    (Unaudited)   (Unaudited)
Net revenue:                
License and other   $ 236.1     $ 421.0     $ 710.7     $ 1,293.4  
                 
Maintenance     180.8       186.1       546.9       532.0  
                 
Total net revenue     416.9       607.1       1,257.6       1,825.4  
                 

Cost of revenue:

               
                                 
Cost of license and other revenue     42.0       50.5       138.6       164.1  
                 

Cost of maintenance revenue

    3.0       2.4       8.8       6.5  
                 
Total cost of revenue     45.0       52.9       147.4       170.6  
                 
Gross profit     371.9       554.2       1,110.2       1,654.8  
                 
Operating Expenses:                
                 
Marketing and sales     180.3       227.0       540.6       682.7  
                 
Research and development     109.3       137.0       340.7       437.4  
                 
General and administrative     51.1       50.6       150.6       156.4  
                 
Impairment of goodwill     -       -       21.0       -  
                 
Restructuring charges     4.9       -       47.8       -  
                 
Total operating expenses     345.6       414.6       1,100.7       1,276.5  
                 
Income from operations     26.3       139.6       9.5       378.3  
                 

Interest and other income (expense), net

    5.7       (3.4 )     16.5       9.9  
                 
Income before income taxes     32.0       136.2       26.0       388.2  
                 
Provision for income taxes     (2.5 )     (31.7 )     (18.1 )     (99.2 )
                 
Net income   $ 29.5     $ 104.5     $ 7.9     $ 289.0  
                 
Basic net income per share   $ 0.13     $ 0.46     $ 0.03     $ 1.28  
                 
Diluted net income per share   $ 0.13     $ 0.45     $ 0.03     $ 1.25  
                 

Shares used in computing basic net income per share

    229.6       225.3       228.5       225.2  
                 

Shares used in computing diluted net income per share

    232.9       230.4       231.1       231.2  
                                 
Autodesk, Inc.
Condensed Consolidated Balance Sheets
(In millions)
         
    October 31,   January 31,
    2009   2009
    (Unaudited)    
         
ASSETS:        
         
Current assets:        
Cash and cash equivalents   $ 698.5   $ 917.6  
Marketable securities     263.1     63.5  
Accounts receivable, net     215.7     316.5  
Deferred income taxes     49.8     31.1  
Prepaid expenses and other current assets     60.0     59.3  
Total current assets     1,287.1     1,388.0  
         
Marketable securities     92.0     7.6  
Computer equipment, software, furniture and leasehold improvements, net     111.9     120.6  
Purchased technologies, net     88.9     113.3  
Goodwill     530.5     542.5  
Long term deferred income taxes, net     92.7     125.7  
Other assets     112.3     123.0  
    $ 2,315.4   $ 2,420.7  
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY:        
         
Current liabilities:        
Accounts payable   $ 60.0   $ 62.4  
Accrued compensation     98.9     124.3  
Accrued income taxes     9.8     16.7  
Deferred revenue     401.2     438.8  
Borrowings under line of credit     -     52.1  
Other accrued liabilities     57.4     105.8  
Total current liabilities     627.3     800.1  
         
Deferred revenue     68.3     113.3  
Long term income taxes payable     123.2     116.9  
Long term deferred income taxes     -     22.7  
Other liabilities     64.9     57.0  
         
Commitments and contingencies        
         
Stockholders' equity:        
Preferred stock     -     -  

Common stock and additional paid-in capital

    1,194.2     1,080.4  

Accumulated other comprehensive income (loss)

    3.7     (11.2 )
Retained earnings     233.8     241.5  
Total stockholders' equity     1,431.7     1,310.7  
    $ 2,315.4   $ 2,420.7  
               
Autodesk, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
     
    Nine Months Ended
    October 31,
    2009   2008
    (Unaudited)
         
Operating Activities        
Net income   $ 7.9     $ 289.0  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization     84.4       64.5  
Stock-based compensation expense     74.7       70.9  
Impairment of goodwill     21.0       -  

Restructuring charges, net

    47.8       -  
Gain on disposition of assets     (2.3 )     -  
Charge for acquired in-process research and development     -       18.0  

Changes in operating assets and liabilities, net of business combinations

    (112.3 )     65.1  
Net cash provided by operating activities     121.2       507.5  
         
Investing Activities        
Purchases of marketable securities     (409.9 )     (111.2 )
Sales of marketable securities     8.1       5.2  
Maturities of marketable securities     126.5       -  
Capital expenditures     (30.2 )     (59.1 )
Purchase of equity investment     (10.0 )     -  
Business combinations, net of cash acquired     (3.6 )     (297.3 )
Net cash used in investing activities     (319.1 )     (462.4 )
         
Financing activities        
Draws on line of credit     2.2       800.0  
Repayments of line of credit     (54.3 )     (796.0 )
Proceeds from issuance of common stock, net of issuance costs     67.5       89.1  
Repurchases of common stock     (39.4 )     (256.6 )
Net cash used in financing activities     (24.0 )     (163.5 )
         
Effect of exchange rate changes on cash and cash equivalents     2.8       (3.1 )
         
Net decrease in cash and cash equivalents     (219.1 )     (121.5 )
Cash and cash equivalents at beginning of fiscal year     917.6       917.9  
Cash and cash equivalents at end of period   $ 698.5     $ 796.4  
                 
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 net income, non-GAAP net income per share, non-GAAP cost of license and other revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP interest and other income, net and non-GAAP provision for income taxes. These non-GAAP financial measures are adjusted to exclude certain costs, expenses, gains and losses, including stock-based compensation expense, amortization of purchased intangibles, in-process research and development expenses, restructuring charges, goodwill impairment, establishment of a valuation allowance on certain deferred tax assets 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 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 this press release.

                 
The following table shows Autodesk's non-GAAP results reconciled to GAAP results included in this release.
                 
    Three Months Ended   Nine Months Ended
    October 31,   October 31,
    2009   2008   2009   2008
    (Unaudited)   (Unaudited)
                 
GAAP cost of license and other revenue   $ 42.0     $ 50.5     $ 138.6     $ 164.1  

Stock-based compensation expense

    (1.1 )     (1.0 )     (2.4 )     (3.1 )
Amortization of developed technology     (8.7 )     (6.4 )     (25.3 )     (15.2 )
Non-GAAP cost of license and other revenue   $ 32.2     $ 43.1     $ 110.9     $ 145.8  
                 
GAAP gross profit   $ 371.9     $ 554.2     $ 1,110.2     $ 1,654.8  

Stock-based compensation expense

    1.1       1.0       2.4       3.1  

Amortization of developed technology

    8.7       6.4       25.3       15.2  
Non-GAAP gross profit   $ 381.7     $ 561.6     $ 1,137.9     $ 1,673.1  
                 
GAAP marketing and sales   $ 180.3     $ 227.0     $ 540.6     $ 682.7  

Stock-based compensation expense

    (13.5 )     (10.1 )     (32.5 )     (30.6 )
Non-GAAP marketing and sales   $ 166.8     $ 216.9     $ 508.1     $ 652.1  
                 
GAAP research and development   $ 109.3     $ 137.0     $ 340.7     $ 437.4  

Stock-based compensation expense

    (9.5 )     (7.2 )     (23.7 )     (23.3 )
In-process research and development     -       (1.2 )     -       (18.0 )
Non-GAAP research and development   $ 99.8     $ 128.6     $ 317.0     $ 396.1  
                 
GAAP general and administrative   $ 51.1     $ 50.6     $ 150.6     $ 156.4  

Stock-based compensation expense

    (6.2 )     (4.2 )     (16.1 )     (13.9 )

Amortization of customer relationships and trademarks

    (6.4 )     (7.2 )     (19.5 )     (16.5 )
Non-GAAP general and administrative   $ 38.5     $ 39.2     $ 115.0     $ 126.0  
                 
GAAP impairment of goodwill   $ -     $ -     $ 21.0     $ -  
Impairment of goodwill     -       -       (21.0 )     -  
Non-GAAP impairment of goodwill   $ -     $ -     $ -     $ -  
                 
GAAP restructuring charges   $ 4.9     $ -     $ 47.8     $ -  
Restructuring charges     (4.9 )     -       (47.8 )     -  
Non-GAAP restructuring charges   $ -     $ -     $ -     $ -  
                 
GAAP operating expenses   $ 345.6     $ 414.6     $ 1,100.7     $ 1,276.5  

Stock-based compensation expense

    (29.2 )     (21.5 )     (72.3 )     (67.8 )

Amortization of customer relationships and trademarks

    (6.4 )     (7.2 )     (19.5 )     (16.5 )

In-process research and development

    -       (1.2 )     -       (18.0 )
Impairment of goodwill     -       -       (21.0 )     -  
Restructuring charges     (4.9 )     -       (47.8 )     -  
Non-GAAP operating expenses   $ 305.1     $ 384.7     $ 940.1     $ 1,174.2  
                 
GAAP income from operations   $ 26.3     $ 139.6     $ 9.5     $ 378.3  

Stock-based compensation expense

    30.3       22.5       74.7       70.9  
Amortization of developed technology     8.7       6.4       25.3       15.2  

Amortization of customer relationships and trademarks

    6.4       7.2       19.5       16.5  

In-process research and development

    -       1.2       -       18.0  
Impairment of goodwill     -       -       21.0       -  
Restructuring charges     4.9       -       47.8       -  
Non-GAAP income from operations   $ 76.6     $ 176.9     $ 197.8     $ 498.9  
                 
GAAP provision for income taxes   $ (2.5 )   $ (31.7 )   $ (18.1 )   $ (99.2 )

Establishment of valuation allowance on deferred tax assets

    -       -       21.0       -  

Income tax effect on difference between GAAP and non-GAAP total costs and expenses at a normalized rate

    (16.7 )     (11.8 )     (55.4 )     (32.1 )
Non-GAAP provision for income tax   $ (19.2 )   $ (43.5 )   $ (52.5 )   $ (131.3 )
                 
GAAP net income   $ 29.5     $ 104.5     $ 7.9     $ 289.0  

Stock-based compensation expense

    30.3       22.5       74.7       70.9  
Amortization of developed technology     8.7       6.4       25.3       15.2  

Amortization of customer relationships and trademarks

    6.4       7.2       19.5       16.5  
In-process research and development     -       1.2       -       18.0  
Impairment of goodwill     -       -       21.0       -  
Restructuring charges     4.9       -       47.8       -  

Establishment of valuation allowance on deferred tax assets

    -       -       21.0       -  

Income tax effect on difference between GAAP and non-GAAP total costs and expenses at a normalized rate

    (16.7 )     (11.8 )     (55.4 )     (32.1 )
Non-GAAP net income   $ 63.1     $ 130.0     $ 161.8     $ 377.5  
                 
GAAP diluted net income per share   $ 0.13     $ 0.45     $ 0.03     $ 1.25  

Stock-based compensation expense

    0.13       0.10       0.33       0.31  
Amortization of developed technology     0.04       0.03       0.11       0.06  

Amortization of customer relationships and trademarks

    0.02       0.03       0.08       0.07  
In-process research and development     -      

-

      -       0.07  
Impairment of goodwill     -       -       0.09       -  
Restructuring charges     0.02       -       0.21       -  

Establishment of valuation allowance on deferred tax assets

    -       -       0.09       -  

Income tax effect on difference between GAAP and non-GAAP total costs and expenses at a normalized rate

    (0.07 )     (0.05 )     (0.24 )     (0.14 )
Non-GAAP diluted net income per share   $ 0.27     $ 0.56     $ 0.70     $ 1.62  
                 

GAAP diluted shares used in per share calculation

    232.9       230.4       231.1       231.2  

Impact of stock-based compensation on diluted shares

    0.9       -       0.8       0.3  

Non-GAAP diluted shares used in per share calculation

    233.8       230.4       231.9       231.5  
                 

Autodesk

Other Supplemental Financial Information (*)

Fiscal Year 2010   QTR 1   QTR 2   QTR 3  

    QTR 4    

  YTD 2010
Financial Statistics ($ in millions, except per share data):                
Total net revenue   $ 426     $ 415     $ 417         $ 1,258  
License and other revenue   $ 244     $ 231     $ 236         $ 711  
Maintenance revenue   $ 182     $ 184     $ 181         $ 547  
                     
GAAP Gross Margin     88 %     88 %     89 %         88 %
Non-GAAP Gross Margin (1)(2)     90 %     90 %     92 %         90 %
                     
GAAP Operating Expenses   $ 393     $ 362     $ 346         $ 1,101  
GAAP Operating Margin     -5 %     1 %     6 %         1 %
GAAP Net Income (Loss)   $ (32 )   $ 10     $ 30         $ 8  
GAAP Diluted Net Income (Loss) Per Share   $ (0.14 )   $ 0.05     $ 0.13         $ 0.03  
                     
Non-GAAP Operating Expenses (1)(3)   $ 327     $ 308     $ 305         $ 940  
Non-GAAP Operating Margin (1)(4)     13 %     16 %     18 %         16 %
Non-GAAP Net Income (1)(5)   $ 42     $ 57     $ 63         $ 162  
Non-GAAP Diluted Net Income Per Share (1)(6)   $ 0.18     $ 0.24     $ 0.27         $ 0.70  
                     
Total Cash and Marketable Securities   $ 966     $ 1,029     $ 1,054         $ 1,054  
Days Sales Outstanding     49       49       47           47  
Capital Expenditures   $ 14     $ 11     $ 6         $ 30  
Cash from Operations   $ 27     $ 47     $ 47         $ 121  
GAAP Depreciation and Amortization   $ 27     $ 28     $ 29         $ 84  
                     
Deferred Maintenance Revenue Balance   $ 469     $ 444     $ 420         $ 420  
                     
Revenue by Geography (in millions):                    
Americas   $ 163     $ 159     $ 164         $ 486  
Europe   $ 167     $ 157     $ 159         $ 484  
Asia/Pacific   $ 96     $ 99     $ 94         $ 288  
                     

Revenue by Segment (in millions):***

                   
Platform Solutions and Emerging Business   $ 156     $ 150     $ 154         $ 460  
Architecture, Engineering and Construction   $ 128     $ 123     $ 125         $ 376  
Manufacturing   $ 94     $ 95     $ 90         $ 279  
Media and Entertainment   $ 48     $ 47     $ 48         $ 143  
Other   $ -     $ -     $ -         $ -  
                     
Other Revenue Statistics:                    

% of Total Rev from AutoCAD and AutoCAD LT***

    33 %     31 %     32 %         32 %
% of Total Rev from 3D design products     29 %     29 %     29 %         29 %
% of Total Rev from Emerging Economies     14 %     15 %     15 %         15 %
Upgrade Revenue (in millions)   $ 43     $ 26     $ 26         $ 96  
                     

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

               
FX Impact on Total Net Revenue   $ (31 )   $ (24 )   $ (4 )       $ (59 )
FX Impact on Total Operating Expenses   $ 22     $ 14     $ 2         $ 37  
FX Impact on Total Net Income (Loss)   $ (9 )   $ (10 )   $ (2 )       $ (22 )
                     

Gross Margin by Segment (in millions):***

                   
Platform Solutions and Emerging Business   $ 146     $ 140     $ 147         $ 433  
Architecture, Engineering and Construction   $ 116     $ 110     $ 113         $ 340  
Manufacturing   $ 86     $ 88     $ 84         $ 257  
Media and Entertainment   $ 34     $ 36     $ 38         $ 108  
Unallocated amounts   $ (9 )   $ (9 )   $ (10 )       $ (28 )
                     
Common Stock Statistics:                    
GAAP Shares Outstanding     228,219,000       229,666,000       229,665,000           229,665,000  
GAAP Fully Diluted Weighted Average Shares Outstanding     227,080,000       232,286,000       232,947,000           231,140,000  
Shares Repurchased     -       -       1,673,000           1,673,000  
                     
Installed Base Statistics:                    

Maintenance Installed Base **

    1,719,000       2,299,000       2,236,000           2,236,000  
                     

* Totals may not agree with the sum of the components due to rounding.

 

** The second quarter of fiscal 2010 maintenance installed base includes a one-time adjustment of 581,000 educational seats for users migrated to a standard educational maintenance plan. These users were not previously captured in our maintenance installed base.

                     

*** In the third quarter of fiscal 2010, Autodesk changed its methodology for allocating certain revenue transactions, including gains and losses from foreign currency. The second quarter of fiscal 2010 amounts have been reclassified to conform to the current presentation. The change of methodology did not have a material effect on any other period.

 

(1) To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP net income, non-GAAP net income per share, non-GAAP cost of license and other revenue, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations, non-GAAP interest and other income, net and non-GAAP provision for income taxes. 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, goodwill impairment, establishment of a valuation allowance on certain deferred tax assets 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 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.

                     
Fiscal Year 2010   QTR 1   QTR 2   QTR 3   QTR 4   YTD 2010
                     
(2) GAAP Gross Margin     88 %     88 %     89 %         88 %
Stock-based compensation expense     0 %     0 %     0 %         0 %
Amortization of developed technology     2 %     2 %     3 %         2 %
Non-GAAP Gross Margin     90 %     90 %     92 %         90 %
                     
(3) GAAP Operating Expenses   $ 393     $ 362     $ 346         $ 1,101  
Stock-based compensation expense     (22 )     (21 )     (30 )         (73 )
Amortization of customer relationships and trademarks     (6 )     (7 )     (6 )         (19 )
Restructuring charges     (17 )     (26 )     (5 )         (48 )
Impairment of goodwill     (21 )     -       -           (21 )
Non-GAAP Operating Expenses   $ 327     $ 308     $ 305         $ 940  
                     
(4) GAAP Operating Margin     -5 %     1 %     6 %         1 %
Stock-based compensation expense     5 %     5 %     7 %         6 %
Amortization of developed technology     2 %     2 %     2 %         2 %
Amortization of customer relationships and trademarks     2 %     2 %     2 %         1 %
Restructuring charges     4 %     6 %     1 %         4 %
Impairment of goodwill     5 %     0 %     0 %         2 %
Non-GAAP Operating Margin     13 %     16 %     18 %         16 %
                     
(5) GAAP Net Income (Loss)   $ (32 )   $ 10     $ 30         $ 8  
Stock-based compensation expense     23       21       30           75  
Amortization of developed technology     8       8       9           25  
Amortization of customer relationships and trademarks     6       7       6           19  
Establishment of valuation allowance on deferred tax assets     21       -       -           21  
Impairment of goodwill     21       -       -           21  
Restructuring charges     17       26       5           48  

Income tax effect on difference between GAAP and non-GAAP total costs and expenses at a normalized rate

    (22 )     (16 )     (17 )         (55 )
Non-GAAP Net Income   $ 42     $ 56     $ 63         $ 162  
                     
(6) GAAP Diluted Net Income (Loss) Per Share   $ (0.14 )   $ 0.05     $ 0.13         $ 0.03  
Stock-based compensation expense     0.10       0.09       0.13          

0.33

 
Amortization of developed technology     0.04       0.03       0.04           0.11  
Amortization of customer relationships and trademarks     0.03       0.03       0.02           0.08  
Establishment of valuation allowance on deferred tax assets     0.09       -       -           0.09  
Impairment of goodwill     0.09       -       -           0.09  
Restructuring charges     0.07       0.11       0.02           0.21  

Income tax effect on difference between GAAP and non-GAAP total costs and expenses at a normalized rate

    (0.10 )     (0.07 )     (0.07 )         (0.24 )
Non-GAAP Diluted Net Income Per Share   $ 0.18     $ 0.24     $ 0.27         $

0.70

 

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