Autodesk Reports 16 Percent Second Quarter Revenue Growth

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 EDT 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 anticipated market, segment, product and revenue trends, revenue, margin, earnings and cash flow improvement, and other statements regarding our expected 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, our performance in particular geographies, including emerging economies, failure to successfully expand adoption of our products, failure to successfully incorporate sales of products suites into our overall sales strategy, failure to maintain cost reductions and productivity increases or otherwise control our expenses, slowing momentum in maintenance billings or revenues, 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, 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, failure of key new applications to achieve anticipated levels of customer acceptance, failure to achieve continued success in technology advancements, interruptions or terminations in the business of Autodesk consultants, the expense and impact of legal or regulatory proceedings, and any unanticipated accounting charges.

Further information on potential factors that could affect the financial results of Autodesk are included in Autodesk’s report on Form 10-K for the year ended January 31, 2011 and Form 10-Q for the quarter ended April 30, 2011, which are 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, Inc., is a leader in 3D design, engineering and entertainment software. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries – including the last 16 Academy Award winners for Best Visual Effects – use Autodesk software to design, visualize, and simulate their ideas. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of state-of-the-art software for global markets. For additional information about Autodesk, visit www.autodesk.com.

Autodesk and AutoCAD are registered trademarks or trademarks of Autodesk, Inc., and/or its subsidiaries and/or affiliates in the USA and/or other countries. Academy Award is a registered trademark of the Academy of Motion Picture Arts and Sciences. All other brand names, product names, or trademarks belong to their respective holders. Autodesk reserves the right to alter product and service 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.

© 2011 Autodesk, Inc. All rights reserved.

Autodesk, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per share data)
       
Three Months Ended
July 31,
Six Months Ended
July 31,
2011 2010 2011 2010
(Unaudited) (Unaudited)
Net revenue:
License and other $ 333.0 $ 280.7 $ 656.0 $ 560.5
 
Maintenance   213.3     192.1     418.6     386.9  
 
Total net revenue   546.3     472.8     1,074.6     947.4  
 
Cost of revenue:
Cost of license and other revenue 45.7 40.5 88.3 81.7
 
Cost of maintenance revenue   11.7     7.9     23.7     18.0  
 
Total cost of revenue   57.4     48.4     112.0     99.7  
 
Gross profit   488.9     424.4     962.6     847.7  
 
Operating expenses:
 
Marketing and sales 201.0 177.5 402.9 364.0
 
Research and development 139.2 119.3 275.8 246.5
 
General and administrative 55.0 45.9 111.6 97.6
 
Restructuring charges   (1.3 )   1.9     (1.3 )   9.0  
 
Total operating expenses   393.9     344.6     789.0     717.1  
 
Income from operations 95.0 79.8 173.6 130.6
 
Interest and other income (expense), net   (0.8 )   0.1     5.1     (3.3 )
 
Income before income taxes 94.2 79.9 178.7 127.3
 
Provision for income taxes   (23.0 )   (20.0 )   (38.2 )   (30.5 )
 
Net income $ 71.2   $ 59.9   $ 140.5   $ 96.8  
 
Basic net income per share $ 0.31   $ 0.26   $ 0.61   $ 0.42  
 
Diluted net income per share $ 0.30   $ 0.25   $ 0.59   $ 0.41  
 

Shares used in computing basic net income per share

  229.4     228.0     228.8     228.5  
 

Shares used in computing diluted net income per share

  236.6     233.8     236.9     234.5  
 
Autodesk, Inc.
Condensed Consolidated Balance Sheets
(In millions)
   
July 31,
2011
  January 31,
2011
(Unaudited)
 
ASSETS:
 
Current assets:
Cash and cash equivalents $ 1,131.5 $ 1,075.1
Marketable securities 241.8 199.2
Accounts receivable, net 297.0 318.4
Deferred income taxes 35.3 56.8
Prepaid expenses and other current assets   73.2   64.8  
Total current assets   1,778.8   1,714.3  
 
Marketable securities 179.2 192.6
Computer equipment, software, furniture and leasehold improvements, net 105.2 84.5
Purchased technologies, net 69.4 57.2
Goodwill 607.4 554.1
Deferred income taxes, net 118.8 90.7
Other assets   114.9   94.2  
$ 2,973.7 $ 2,787.6  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
 
Current liabilities:
Accounts payable $ 89.8 $ 76.8
Accrued compensation 121.5 193.1
Accrued income taxes 15.3 28.6
Deferred revenue 525.3 496.2
Other accrued liabilities   75.2   75.1  
Total current liabilities   827.1   869.8  
 
Deferred revenue 117.1 91.7
Long term income taxes payable 157.4 139.1
Other liabilities 83.0 77.7
 
Commitments and contingencies
 
Stockholders' equity:
Preferred stock - -
Common stock and additional paid-in capital 1,356.5 1,267.2
Accumulated other comprehensive income (loss) 14.3 (0.6 )
Retained earnings   418.3   342.7  
Total stockholders' equity   1,789.1   1,609.3  
$ 2,973.7 $ 2,787.6  
 
Autodesk, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
  Six Months Ended
July 31,
2011   2010
(Unaudited)
 
Operating activities:
Net income $ 140.5 $ 96.8
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 54.2 53.0
Stock-based compensation expense 53.2 45.3
Excess tax benefits from stock-based compensation (13.5 ) -
Restructuring charges, net (1.3 ) 9.0

Changes in operating assets and liabilities, net of business combinations

  27.5     46.5  
Net cash provided by operating activities   260.6     250.6  
 
Investing activities:
Purchases of marketable securities (307.8 ) (318.7 )
Sales of marketable securities 61.6 52.8
Maturities of marketable securities 220.7 135.8
Capital expenditures (53.0 ) (11.1 )
Business combinations, net of cash acquired (81.2 ) (8.5 )
Other investing activities   (15.1 )   (0.5 )
Net cash used in investing activities   (174.8 )   (150.2 )
 
Financing activities:
Proceeds from issuance of common stock, net of issuance costs 129.6 40.1
Repurchases of common stock (169.4 ) (129.2 )
Excess tax benefits from stock-based compensation   13.5     -  
Net cash used in financing activities   (26.3 )   (89.1 )
 
Effect of exchange rate changes on cash and cash equivalents   (3.1 )   -  
 
Net increase in cash and cash equivalents 56.4 11.3
Cash and cash equivalents at beginning of fiscal year   1,075.1     838.7  
Cash and cash equivalents at end of period $ 1,131.5   $ 850.0  
 
Autodesk, Inc.
Reconciliation of GAAP financial measures to non-GAAP financial measures
(In millions, except per share data)
 

To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP net income, non-GAAP net income per share, non-GAAP cost of license and other revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP income from operations 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, restructuring charges, discrete tax provision items 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
July 31,
  Six Months Ended
July 31,
2011   2010 2011   2010
(Unaudited) (Unaudited)
 
GAAP cost of license and other revenue $ 45.7 $ 40.5 $ 88.3 $ 81.7
Stock-based compensation expense (1.0 ) (0.7 ) (1.9 ) (1.5 )
Amortization of developed technology   (8.5 )   (7.7 )   (16.6 )     (15.4 )
Non-GAAP cost of license and other revenue $ 36.2   $ 32.1   $ 69.8     $ 64.8  
 
GAAP gross profit $ 488.9 $ 424.4 $ 962.6 $ 847.7
Stock-based compensation expense 1.0 0.7 1.9 1.5
Amortization of developed technology   8.5     7.7     16.6     15.4  
Non-GAAP gross profit $ 498.4   $ 432.8   $ 981.1   $ 864.6  
 
GAAP marketing and sales $ 201.0 $ 177.5 $ 402.9 $ 364.0
Stock-based compensation expense   (11.3 )   (9.2 )   (23.1 )   (19.8 )
Non-GAAP marketing and sales $ 189.7   $ 168.3   $ 379.8   $ 344.2  
 
GAAP research and development $ 139.2 $ 119.3 $ 275.8 $ 246.5
Stock-based compensation expense   (9.8 )   (7.2 )   (18.7 )   (15.5 )
Non-GAAP research and development $ 129.4   $ 112.1   $ 257.1   $ 231.0  
 
GAAP general and administrative $ 55.0 $ 45.9 $ 111.6 $ 97.6
Stock-based compensation expense (5.2 ) (3.9 ) (9.5 ) (8.5 )

Amortization of customer relationships and trade names

  (9.3 )   (5.9 )   (15.8 )   (12.1 )
Non-GAAP general and administrative $ 40.5   $ 36.1   $ 86.3   $ 77.0  
 
GAAP restructuring charges $ (1.3 ) $ 1.9 $ (1.3 ) $ 9.0
Restructuring charges   1.3     (1.9 )   1.3     (9.0 )
Non-GAAP restructuring charges $ -   $ -   $ -   $ -  
 
GAAP operating expenses $ 393.9 $ 344.6 $ 789.0 $ 717.1
Stock-based compensation expense (26.3 ) (20.3 ) (51.3 ) (43.8 )

Amortization of customer relationships and trade names

(9.3 ) (5.9 ) (15.8 ) (12.1 )
Restructuring charges   1.3     (1.9 )   1.3     (9.0 )
Non-GAAP operating expenses $ 359.6   $ 316.5   $ 723.2   $ 652.2  
 
GAAP income from operations $ 95.0 $ 79.8 $ 173.6 $ 130.6
Stock-based compensation expense 27.3 21.0 53.2 45.3
Amortization of developed technology 8.5 7.7 16.6 15.4

Amortization of customer relationships and trade names

9.3 5.9 15.8 12.1
Restructuring charges   (1.3 )   1.9     (1.3 )   9.0  
Non-GAAP income from operations $ 138.8   $ 116.3   $ 257.9   $ 212.4  
 
GAAP provision for income taxes $ (23.0 ) $ (20.0 ) $ (38.2 ) $ (30.5 )
Discrete GAAP tax provision items 0.9 0.2 (3.2 ) (1.6 )
Income tax effect of non-GAAP adjustments   (12.4 )   (11.6 )   (24.4 )   (24.3 )
Non-GAAP provision for income tax $ (34.5 ) $ (31.4 ) $ (65.8 ) $ (56.4 )
 
GAAP net income $ 71.2 $ 59.9 $ 140.5 $ 96.8
Stock-based compensation expense 27.3 21.0 53.2 45.3
Amortization of developed technology 8.5 7.7 16.6 15.4

Amortization of customer relationships and trade names

9.3 5.9 15.8 12.1
Restructuring charges (1.3 ) 1.9 (1.3 ) 9.0
Discrete GAAP tax provision items 0.9 0.2 (3.2 ) (1.6 )
Income tax effect of non-GAAP adjustments   (12.4 )   (11.6 )   (24.4 )   (24.3 )
Non-GAAP net income $ 103.5   $ 85.0   $ 197.2   $ 152.7  
 
GAAP diluted net income per share (1) $ 0.30 $ 0.25 $ 0.59 $ 0.41
Stock-based compensation expense 0.12 0.09 0.22 0.19
Amortization of developed technology 0.04 0.03 0.07 0.06

Amortization of customer relationships and trade names

0.04 0.03 0.07 0.06
Restructuring charges (0.01 ) 0.01 (0.01 ) 0.04
Discrete GAAP tax provision items 0.01 - (0.01 ) (0.01 )
Income tax effect of non-GAAP adjustments   (0.06 )   (0.05 )   (0.10 )   (0.10 )
Non-GAAP diluted net income per share (1) $ 0.44   $ 0.36   $ 0.83   $ 0.65  
 
(1) 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.
 
Other Supplemental Financial Information (a)
         
Fiscal Year 2012 QTR 1 QTR 2 QTR 3 QTR 4 YTD 2012
Financial Statistics ($ in millions, except per share data):                    
Total Net Revenue $ 528 $ 546 $ 1,075
License and Other Revenue $ 323 $ 333 $ 656
Maintenance Revenue $ 205 $ 213 $ 419
 
GAAP Gross Margin 90 % 89 % 90 %
Non-GAAP Gross Margin (1)(2) 91 % 91 % 91 %
 
GAAP Operating Expenses $ 395 $ 394 $ 789
GAAP Operating Margin 15 % 17 % 16 %
GAAP Net Income $ 69 $ 71 $ 141
GAAP Diluted Net Income Per Share (c) $ 0.29 $ 0.30 $ 0.59
 
Non-GAAP Operating Expenses (1)(3) $ 364 $ 360 $ 723
Non-GAAP Operating Margin (1)(4) 23 % 25 % 24 %
Non-GAAP Net Income (1)(5) $ 94 $ 104 $ 197
Non-GAAP Diluted Net Income Per Share (1)(6)(c) $ 0.40 $ 0.44 $ 0.83
 
Total Cash and Marketable Securities $ 1,526 $ 1,553 $ 1,553
Days Sales Outstanding 47 49 49
Capital Expenditures $ 23 $ 30 $ 53
Cash Flow from Operating Activities $ 128 $ 132 $ 261
GAAP Depreciation and Amortization $ 25 $ 30 $ 54
 
Deferred Maintenance Revenue Balance $ 543 $ 566 $ 566
 
Revenue by Geography (in millions):
Americas $ 181 $ 191 $ 373
Europe, Middle East and Africa $ 215 $ 212 $ 427
Asia Pacific $ 132 $ 143 $ 275
 
Revenue by Segment (in millions):
Platform Solutions and Emerging Business $ 211 $ 199 $ 409
Architecture, Engineering and Construction $ 141 $ 158 $ 299
Manufacturing $ 123 $ 136 $ 259
Media and Entertainment $ 53 $ 54 $ 107
 
Other Revenue Statistics:
% of Total Rev from Flagship Revenue 61 % 56 % 59 %
% of Total Rev Suites Revenue 23 % 29 % 26 %
% of Total Rev New and Adjacent Revenue 15 % 15 % 15 %
% of Total Rev from AutoCAD and AutoCAD LT 37 % 31 % 34 %
% of Total Rev from Emerging Economies 15 % 16 % 15 %
Upgrade and Crossgrade Revenue (in millions) $ 53 $ 41 $ 94
 

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

FX Impact on Total Net Revenue

$ (3 ) $ 8 $ 5

FX Impact on Cost of Revenue and Total Operating Expenses

$

(9

) $

(17

) $

(26

)

FX Impact on Operating Income

$

(12

) $

(9

) $

(21

)
 
Gross Margin by Segment (in millions):

 

Platform Solutions and Emerging Business $ 199 $ 187 $ 386
Architecture, Engineering and Construction $ 128 $ 143 $ 271
Manufacturing $ 113 $ 124 $ 238
Media and Entertainment $ 43 $ 44 $ 86
Unallocated amounts $ (9 ) $ (10 ) $ (19 )
 
Common Stock Statistics (in millions):
Common Shares Outstanding 230.5 228.8 228.8
Fully Diluted Weighted Average Shares Outstanding 237.1 236.6 236.9
Shares Repurchased 1.7 2.5 4.2
 
Installed Base Statistics:
Maintenance Installed Base 3,004,000 2,985,000 2,985,000
 
(a) Totals may not agree with the sum of the components due to rounding.

(b) Effective in the second quarter of fiscal 2012, Autodesk changed the way it calculates constant currency growth rates and foreign currency impact on Total Net Revenue, and Cost of Revenue and Total Operating Expenses. Under the new methodology, all hedging gains and losses are removed from the calculation of constant currency growth rates, where previously Autodesk had not excluded hedging gains and losses from the prior period. Autodesk changed the way it calculates foreign currency impact on Total Net Revenue, and Cost of Revenue and Total Operating Expenses to include the impact of Autodesk's hedging program on both the current and prior period. Autodesk believes these changes are more useful to the users of Autodesk's financial information as they more fully reflect the underlying business growth rates and the impact of movements in foreign currency on Autodesk's U.S. dollar financial results. All prior period comparative information has been revised to conform to the current methodology.

QTR 1 QTR 2 QTR 3 QTR 4 YTD 2012

Constant currency revenue growth using current methodology

12 % 14 % 13 %
Constant currency revenue growth using previous methodology 11 % 10 % 11 %
 

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

 

FX Impact on Total Net Revenue

$

2

 

$

24

$

26

FX Impact on Cost of Revenue and Total Operating Expenses

$

(10

)

$

(19

)

$

(29

)

FX Impact on Operating Income

$

(8

)

$

5

$

(3

)

 

(c) 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.

(d) Prior period amounts have been changed to conform to current period presentation.

 

(1) To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP 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 total spend, non-GAAP income from operations 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 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.

         
QTR 1 QTR 2 QTR 3 QTR 4 YTD 2012
(2) GAAP Gross Margin 90 % 89 % 90 %
Stock-based compensation expense 0 % 0 % 0 %
Amortization of developed technology   1 %     2 %             1 %
Non-GAAP Gross Margin 91 % 91 % 91 %
 
(3) GAAP Operating Expenses $ 395 $ 394 $ 789
Stock-based compensation expense (25 ) (26 ) (51 )
Amortization of customer relationships and trade names (7 ) (9 ) (16 )
Restructuring charges   -       1               1  
Non-GAAP Operating Expenses $ 364 $ 360 $ 723
 
(4) GAAP Operating Margin 15 % 17 % 16 %
Stock-based compensation expense 5 % 5 % 5 %
Amortization of developed technology 2 % 2 % 2 %
Amortization of customer relationships and trade names 1 % 2 % 1 %
Restructuring charges   0 %     0 %             0 %
Non-GAAP Operating Margin 23 % 25 % 24 %
 
(5) GAAP Net Income $ 69 $ 71 $ 141
Stock-based compensation expense 26 27 53
Amortization of developed technology 8 9 17
Amortization of customer relationships and trade names 7 9 16
Restructuring charges - (1 ) (1 )
Discrete GAAP tax provision items (4 ) 1 (3 )
Income tax effect of non-GAAP adjustments   (12 )     (12 )             (24 )
Non-GAAP Net Income $ 94 $ 104 $ 197
 
(6) GAAP Diluted Net Income Per Share $ 0.29 $ 0.30 $ 0.59
Stock-based compensation expense 0.11 0.12 0.22
Amortization of developed technology 0.03 0.04 0.07
Amortization of customer relationships and trade names 0.03 0.04 0.07
Restructuring charges - (0.01 ) (0.01 )
Discrete GAAP tax provision items (0.02 ) 0.01 (0.01 )
Income tax effect of non-GAAP adjustments   (0.04 )     (0.06 )             (0.10 )
Non-GAAP Diluted Net Income Per Share $ 0.40 $ 0.44 $ 0.83

 




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