Autodesk Reports Third Quarter Results

Autodesk, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per share data)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2013			2012			2013			2012
	(Unaudited)
Net revenue (1):
License and other	$	297.5		$	310.2		$	934.2		$	999.4
Subscription		257.7			237.8			753.1			705.9
Total net revenue		555.2			548.0			1,687.3			1,705.3
Cost of revenue (1):
Cost of license and other revenue		43.4			41.3			130.6			124.6
Cost of subscription revenue		23.7			16.6			71.8			51.9
Total cost of revenue		67.1			57.9			202.4			176.5
Gross profit		488.1			490.1			1,484.9			1,528.8
Operating expenses:
Marketing and sales		203.4			203.9			610.3			639.5
Research and development		149.0			153.0			448.7			450.6
General and administrative		63.2			62.1			186.3			180.7
Restructuring charges, net		4.4			36.7			6.5			36.7
Total operating expenses		420.0			455.7			1,251.8			1,307.5
Income from operations		68.1			34.4			233.1			221.3
Interest and other income (expense), net		1.1			(0.1	)		(9.5	)		2.6
Income before income taxes		69.2			34.3			223.6			223.9
Provision for income taxes		(11.6	)		(4.9	)		(48.7	)		(51.0	)
Net income	$	57.6		$	29.4		$	174.9		$	172.9
Basic net income per share	$	0.26		$	0.13		$	0.78		$	0.76
Diluted net income per share	$	0.25		$	0.13		$	0.77		$	0.75
Weighted average shares used in computing basic net income per share		223.1			225.5			223.4			227.1
Weighted average shares used in computing diluted net income per share		227.7			229.9			228.6			231.4

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

Autodesk, Inc.
Condensed Consolidated Balance Sheets
(In millions)


	October 31, 2013			January 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,473.4		$	1,612.2
Marketable securities		587.1			342.1
Accounts receivable, net		304.1			495.1
Deferred income taxes		53.5			42.2
Prepaid expenses and other current assets		99.8			60.8
Total current assets		2,517.9			2,552.4
Marketable securities		418.5			411.1
Computer equipment, software, furniture and leasehold improvements, net		134.1			114.9
Purchased technologies, net		54.3			76.0
Goodwill		922.3			871.5
Deferred income taxes, net		118.3			122.8
Other assets		156.1			159.7
	$	4,321.5		$	4,308.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	75.3		$	94.2
Accrued compensation		154.7			189.6
Accrued income taxes		37.2			13.9
Deferred revenue		610.8			647.0
Other accrued liabilities		70.1			99.0
Total current liabilities		948.1			1,043.7
Deferred revenue		154.9			187.6
Long term income taxes payable		209.0			194.2
Long term notes payable, net of discount		746.2			745.6
Other liabilities		101.4			94.1
Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock		—			—
Common stock and additional paid-in capital		1,535.1			1,449.8
Accumulated other comprehensive loss		(4.1	)		(5.7	)
Retained earnings		630.9			599.1
Total stockholders’ equity		2,161.9			2,043.2
	$	4,321.5		$	4,308.4

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


	Nine Months Ended October 31,
	2013			2012
	(Unaudited)
Operating activities:
Net income	$	174.9		$	172.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		95.7			93.1
Stock-based compensation expense		96.1			118.8
Excess tax benefits from stock-based compensation		0.8			(27.4	)
Restructuring charges, net		6.5			36.7
Other operating activities		(3.1	)		4.4
Changes in operating assets and liabilities, net of business combinations		9.1			5.0
Net cash provided by operating activities		380.0			403.5
Investing activities:
Purchases of marketable securities		(969.8	)		(1,103.1	)
Sales of marketable securities		329.9			207.0
Maturities of marketable securities		395.1			436.6
Capital expenditures		(55.0	)		(44.7	)
Acquisitions, net of cash acquired		(68.0	)		(204.2	)
Other investing activities		(15.7	)		(22.1	)
Net cash (used in) investing activities		(383.5	)		(730.5	)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs		183.4			199.6
Repurchases of common stock		(318.7	)		(340.5	)
Draws on line of credit		—			110.0
Excess tax benefits from stock-based compensation		(0.8	)		27.4
Net cash (used in) financing activities		(136.1	)		(3.5	)
Effect of exchange rate changes on cash and cash equivalents		0.8			0.6
Net decrease in cash and cash equivalents		(138.8	)		(329.9	)
Cash and cash equivalents at beginning of fiscal year		1,612.2			1,156.9
Cash and cash equivalents at end of period	$	1,473.4		$	827.0

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 cost of license and other revenue, non-GAAP cost of subscription revenue, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP restructuring charges (benefits), non-GAAP income from operations, non-GAAP operating margin, non-GAAP interest and other income (expense), non-GAAP provision for income taxes, non-GAAP net income, and non-GAAP net income per share. These non-GAAP financial measures are adjusted to exclude certain costs, expenses, gains and losses, including stock-based compensation expense, restructuring charges, amortization of purchased intangibles, gain and loss on strategic investments, and related income tax expenses. See our reconciliation of GAAP financial measures to non-GAAP financial measures herein. We believe these exclusions are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of Autodesk's underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP in the United States. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release.

The following table shows Autodesk's non-GAAP results reconciled to GAAP results included in this release.


	Three Months Ended						Nine Months Ended
	October 31,						October 31,
	2013			2012			2013			2012
	(Unaudited)						(Unaudited)

GAAP cost of license and other revenue (1)	$	43.4		$	41.3		$	130.6		$	124.6
Stock-based compensation expense (1)		(0.9	)		(1.0	)		(2.7	)		(2.7	)
Amortization of developed technology (1)		(9.7	)		(9.2	)		(29.5	)		(27.7	)
Non-GAAP cost of license and other revenue (1)	$	32.8		$	31.1		$	98.4		$	94.2

GAAP cost of subscription revenue (1)	$	23.7		$	16.6		$	71.8		$	51.9
Stock-based compensation expense (1)		(0.5	)		(0.3	)		(1.6	)		(1.1	)
Amortization of developed technology (1)		(1.1	)		(0.7	)		(3.1	)		(1.6	)
Non-GAAP cost of subscription revenue (1)	$	22.1		$	15.6		$	67.1		$	49.2

GAAP gross profit	$	488.1		$	490.1		$	1,484.9		$	1,528.8
Stock-based compensation expense		1.4			1.3			4.3			3.8
Amortization of developed technology		10.8			9.9			32.6			29.3
Non-GAAP gross profit	$	500.3		$	501.3		$	1,521.8		$	1,561.9

GAAP marketing and sales	$	203.4		$	203.9		$	610.3		$	639.5
Stock-based compensation expense		(14.5	)		(16.7	)		(42.5	)		(47.4	)
Non-GAAP marketing and sales	$	188.9		$	187.2		$	567.8		$	592.1

GAAP research and development	$	149.0		$	153.0		$	448.7		$	450.6
Stock-based compensation expense		(10.2	)		(28.1	)		(31.3	)		(49.6	)
Non-GAAP research and development	$	138.8		$	124.9		$	417.4		$	401.0

GAAP general and administrative	$	63.2		$	62.1		$	186.3		$	180.7
Stock-based compensation expense		(5.5	)		(5.8	)		(18.0	)		(18.0	)
Amortization of customer relationships and trade names		(7.4	)		(13.8	)		(27.5	)		(29.5	)
Non-GAAP general and administrative	$	50.3		$	42.5		$	140.8		$	133.2

GAAP restructuring charges (benefits), net	$	4.4		$	36.7		$	6.5		$	36.7
Restructuring (charges) benefits		(4.4	)		(36.7	)		(6.5	)		(36.7	)
Non-GAAP restructuring charges (benefits), net	$	—		$	—		$	—		$	—

GAAP operating expenses	$	420.0		$	455.7		$	1,251.8		$	1,307.5
Stock-based compensation expense		(30.2	)		(50.6	)		(91.8	)		(115.0	)
Amortization of customer relationships and trade names		(7.4	)		(13.8	)		(27.5	)		(29.5	)
Restructuring (charges) benefits		(4.4	)		(36.7	)		(6.5	)		(36.7	)
Non-GAAP operating expenses	$	378.0		$	354.6		$	1,126.0		$	1,126.3

GAAP income from operations	$	68.1		$	34.4		$	233.1		$	221.3
Stock-based compensation expense		31.6			51.9			96.1			118.8
Amortization of developed technology		10.8			9.9			32.6			29.3
Amortization of customer relationships and trade names		7.4			13.8			27.5			29.5
Restructuring charges (benefits)		4.4			36.7			6.5			36.7
Non-GAAP income from operations	$	122.3		$	146.7		$	395.8		$	435.6

GAAP interest and other income, net	$	1.1		$	(0.1	)	$	(9.5	)	$	2.6
(Gain) loss on strategic investments		(0.3	)		(0.1	)		1.0			3.8
Non-GAAP interest and other income, net	$	0.8		$	(0.2	)	$	(8.5	)	$	6.4

GAAP provision for income taxes	$	(11.6	)	$	(4.9	)	$	(48.7	)	$	(51.0	)
Discrete GAAP tax provision items		(3.0	)		(15.4	)		(2.3	)		(19.0	)
Income tax effect of non-GAAP adjustments		(14.2	)		(17.2	)		(43.9	)		(42.8	)
Non-GAAP provision for income tax	$	(28.8	)	$	(37.5	)	$	(94.9	)	$	(112.8	)

GAAP net income	$	57.6		$	29.4		$	174.9		$	172.9
Stock-based compensation expense		31.6			51.9			96.1			118.8
Amortization of developed technology		10.8			9.9			32.6			29.3
Amortization of customer relationships and trade names		7.4			13.8			27.5			29.5
Restructuring charges (benefits)		4.4			36.7			6.5			36.7
(Gain) loss on strategic investments		(0.3	)		(0.1	)		1.0			3.8
Discrete GAAP tax provision items		(3.0	)		(15.4	)		(2.3	)		(19.0	)
Income tax effect of non-GAAP adjustments		(14.2	)		(17.2	)		(43.9	)		(42.8	)
Non-GAAP net income	$	94.3		$	109.0		$	292.4		$	329.2

GAAP diluted net income per share	$	0.25		$	0.13		$	0.77		$	0.75
Stock-based compensation expense		0.14			0.23			0.42			0.51
Amortization of developed technology		0.04			0.04			0.14			0.13
Amortization of customer relationships and trade names		0.03			0.06			0.12			0.13
Restructuring charges (benefits)		0.02			0.15			0.03			0.15
(Gain) loss on strategic investments		—			—			—			0.02
Discrete GAAP tax provision items		(0.01	)		(0.07	)		(0.01	)		(0.09	)
Income tax effect of non-GAAP adjustments		(0.06	)		(0.07	)		(0.19	)		(0.18	)
Non-GAAP diluted net income per share	$	0.41		$	0.47		$	1.28		$	1.42

(1) Effective in the first quarter of fiscal 2014, Autodesk reclassified certain costs associated cloud service offerings from "Cost of License and Other Revenue" to "Cost of Subscription Revenue." Prior period amounts have been revised to conform to the current period presentation.

Autodesk, Inc.

Other Supplemental Financial Information (a)

Fiscal Year 2014	QTR 1			QTR 2			QTR 3			QTR 4	YTD 2014
Financial Statistics ($ in millions, except per share data):
Total Net Revenue:	$	570		$	562		$	555			$	1,687
License and Other Revenue	$	324		$	313		$	298			$	934
Subscription Revenue	$	247		$	249		$	258			$	753

GAAP Gross Margin		88	%		88	%		88	%			88	%
Non-GAAP Gross Margin (1)(2)		90	%		90	%		90	%			90	%

GAAP Operating Expenses	$	422		$	410		$	420			$	1,252
GAAP Operating Margin		14	%		15	%		12	%			14	%
GAAP Net Income	$	56		$	62		$	58			$	175
GAAP Diluted Net Income Per Share (b)	$	0.24		$	0.27		$	0.25			$	0.77

Non-GAAP Operating Expenses (1)(3)	$	378		$	370		$	378			$	1,126
Non-GAAP Operating Margin (1)(4)		24	%		24	%		22	%			23	%
Non-GAAP Net Income (1)(5)(c)	$	96		$	102		$	94			$	292
Non-GAAP Diluted Net Income Per Share (1)(6)(b)(c)	$	0.42		$	0.45		$	0.41			$	1.28

Total Cash and Marketable Securities	$	2,480		$	2,408		$	2,479			$	2,479
Days Sales Outstanding		46			49			50				50

Capital Expenditures	$	26		$	17		$	12			$	55
Cash Flow from Operating Activities	$	224		$	65		$	91			$	380
GAAP Depreciation, Amortization and Accretion	$	33		$	32		$	31			$	96

Deferred Subscription Revenue Balance (c)	$	775		$	736		$	699			$	699

Revenue by Geography:
Americas	$	202		$	202		$	208			$	612
Europe, Middle East and Africa	$	216		$	202		$	204			$	622
Asia Pacific	$	152		$	158		$	143			$	453
% of Total Rev from Emerging Economies		13	%		15	%		15	%			15	%

Revenue by Segment:
Platform Solutions and Emerging Business	$	213		$	197		$	183			$	593
Architecture, Engineering and Construction	$	172		$	177		$	186			$	535
Manufacturing	$	139		$	144		$	142			$	425
Media and Entertainment	$	47		$	43		$	44			$	134

Other Revenue Statistics:
% of Total Rev from Flagship		55	%		51	%		50	%			52	%
% of Total Rev from Suites		31	%		34	%		36	%			34	%
% of Total Rev from New and Adjacent		14	%		14	%		15	%			14	%
% of Total Rev from AutoCAD and AutoCAD LT		34	%		31	%		29	%			31	%

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	)		$	(47	)
FX Impact on Cost of Revenue and Total Operating Expenses	$	5		$	4		$	3			$	13
FX Impact on Operating Income	$	(12	)	$	(13	)	$	(10	)		$	(34	)

Gross Margin by Segment:
Platform Solutions and Emerging Business	$	195		$	180		$	166			$	541
Architecture, Engineering and Construction	$	156		$	161		$	169			$	485
Manufacturing	$	128		$	132		$	130			$	390
Media and Entertainment	$	37		$	34		$	35			$	106
Unallocated amounts	$	(12	)	$	(12	)	$	(12	)		$	(37	)

Common Stock Statistics (in millions):
Common Shares Outstanding		224.4			222.5			224.6				224.6
Fully Diluted Weighted Average Shares Outstanding		229.3			228.3			227.7				228.6
Shares Repurchased		3.2			3.1			2.0				8.3

(a) Totals may not agree with the sum of the components due to rounding.
(b) Earnings per share were computed independently for each of the periods presented; therefore the sum of the earnings per share amounts for the quarters may not equal the total for the year.
(c) Prior amounts have been conformed to align with the current period presentation.

(1) To supplement our consolidated financial statements presented on a GAAP basis, Autodesk provides investors with certain non-GAAP measures including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP net income, and non-GAAP net income per share. These non-GAAP financial measures are adjusted to exclude certain costs, expenses, gains and losses, including stock-based compensation expense, restructuring charges, amortization of purchased intangibles, gain and loss on strategic investments, and related income tax expenses. See our reconciliation of GAAP financial measures to non-GAAP financial measures herein. We believe these exclusions are appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future, as well as to facilitate comparisons with our historical operating results. These adjustments to our GAAP results are made with the intent of providing both management and investors a more complete understanding of Autodesk's underlying operational results and trends and our marketplace performance. For example, non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside our core operating results. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods. There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP in the United States. Investors should review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying Autodesk's press release.

	QTR 1			QTR 2			QTR 3			QTR 4	YTD 2014
(2) GAAP Gross Margin		88	%		88	%		88	%			88	%
Stock-based compensation expense		—	%		—	%		—	%			—	%
Amortization of developed technology		2	%		2	%		2	%			2	%
Non-GAAP Gross Margin		90	%		90	%		90	%			90	%

(3) GAAP Operating Expenses	$	422		$	410		$	420			$	1,252
Stock-based compensation expense		(32	)		(30	)		(30	)			(92	)
Amortization of customer relationships and trade names		(11	)		(9	)		(7	)			(28	)
Restructuring (charges) benefits, net		—			(2	)		(4	)			(7	)
Non-GAAP Operating Expenses	$	378		$	370		$	378			$	1,126

(4) GAAP Operating Margin		14	%		15	%		12	%			14	%
Stock-based compensation expense		6	%		6	%		6	%			6	%
Amortization of developed technology		2	%		2	%		2	%			2	%
Amortization of customer relationships and trade names		2	%		1	%		1	%			1	%
Restructuring charges (benefits), net		—	%		—	%		1	%			—	%
Non-GAAP Operating Margin		24	%		24	%		22	%			23	%

(5) GAAP Net Income	$	56		$	62		$	58			$	175
Stock-based compensation expense		34			31			32				96
Amortization of developed technology		11			11			11				33
Amortization of customer relationships and trade names		11			9			7				28
Restructuring charges (benefits), net		—			2			4				7
(Gain) loss on strategic investments		1			—			—				1
Discrete GAAP tax provision items		(1	)		1			(3	)			(2	)
Income tax effect of non-GAAP adjustments		(15	)		(14	)		(14	)			(44	)
Non-GAAP Net Income	$	96		$	102		$	94			$	292

(6) GAAP Diluted Net Income Per Share	$	0.24		$	0.27		$	0.25			$	0.77
Stock-based compensation expense		0.15			0.14			0.14				0.42
Amortization of developed technology		0.05			0.05			0.04				0.14
Amortization of customer relationships and trade names		0.05			0.04			0.03				0.12
Restructuring charges (benefits), net		—			0.01			0.02				0.03
(Gain) loss on strategic investments		—			—			—				—
Discrete GAAP tax provision items		—			—			(0.01	)			(0.01	)
Income tax effect of non-GAAP adjustments		(0.07	)		(0.06	)		(0.06	)			(0.19	)
Non-GAAP Diluted Net Income Per Share	$	0.42		$	0.45		$	0.41			$	1.28

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