Autodesk, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended January 31, 2013. The filing is an annual report; it also provides unaudited fourth-quarter results. All financial amounts below are in U.S. dollars.
Business context
Autodesk sells design software and related services to architecture, engineering and construction; manufacturing; and media and entertainment customers, primarily through distributors and resellers. Maintenance subscriptions are a significant recurring revenue source. The company is investing in product suites and transitioning toward cloud, mobile and social offerings.
Financial performance
| Metric | FY2013 | FY2012 |
|---|---|---|
| Revenue | $2,312.2 million | $2,215.6 million |
| Gross profit / margin | $2,073.7 million / 90% | $1,986.5 million / 90% |
| Operating income / margin | $305.9 million / 13% | $355.6 million / 16% |
| Net income | $247.4 million | $285.3 million |
| Diluted EPS | $1.07 | $1.22 |
| Cash flow from operations | $559.1 million | $573.5 million |
FY2013 revenue rose 4%; maintenance revenue grew 7% to $921.6 million, while license and other revenue increased 2% to $1,390.6 million. Operating expenses grew 8% to $1,767.8 million, outpacing revenue growth. Research and development expense was $600.0 million, or 26% of revenue. The effective tax rate was 20%, compared with 21% in FY2012.
In Q4 FY2013, revenue was $606.9 million versus $592.4 million a year earlier; operating income was $84.6 million versus $91.8 million, and net income was $74.5 million versus $72.0 million.
Segments and material changes
- FY2013 revenue by segment: Platform Solutions and Emerging Business (PSEB) $849.7 million, up 2%; Architecture, Engineering and Construction (AEC) $694.3 million, up 11%; Manufacturing (MFG) $573.8 million, up 6%; Media and Entertainment (M&E) $194.4 million, down 10%.
- Suites revenue grew 16% and represented 30% of revenue, compared with 27% in FY2012. Flagship products represented 56%; new and adjacent products represented 15%.
- International revenue was 71% of total, versus 72% in FY2012. Emerging-market revenue fell 4% and was 14% of total revenue.
- Revenue growth was 5% on a constant-currency basis. Commercial new-seat license revenue rose 6%, driven by seat volume, while average revenue per seat was flat. Upgrade revenue declined 3%.
- Operating income fell 14%, reflecting higher employee-related costs and $43.9 million of restructuring charges. The restructuring plan covered approximately 500 positions and eight facilities; total planned costs were up to $52.0 million.
Cash, debt and liquidity
- Cash, cash equivalents and marketable securities totaled $2,365.4 million at year-end, compared with $1,604.1 million a year earlier. Net accounts receivable was $495.1 million.
- Operating cash flow was $559.1 million; capital expenditures were $56.4 million, implying operating cash flow less capital expenditures of $502.7 million.
- Autodesk issued $750.0 million principal amount of senior notes in December 2012: $400.0 million at 1.95%, due 2017, and $350.0 million at 3.6%, due 2022. Year-end carrying value was $745.6 million. The $400.0 million revolving credit facility had no balance outstanding at year-end.
- Deferred revenue was $834.6 million, including $733.5 million related to maintenance contracts. The company reported no significant off-balance-sheet arrangements other than operating leases.
- Autodesk stated that available liquidity, expected operating cash flows and its credit facility should cover working-capital and operating-resource requirements for at least 12 months.
Outlook, commentary and risks
Management forecast FY2014 revenue growth of approximately 6% and operating-margin improvement of approximately 455–480 basis points versus FY2013. It expected cost of revenue to rise in absolute dollars and slightly as a percentage of revenue, while major operating expense categories were expected to rise in dollars but remain relatively consistent as a share of revenue. Management said adoption of cloud and rental offerings would build gradually and did not expect a significant core-business-model change in FY2014.
Key risks include uncertain global economic conditions and customer spending; execution of restructuring and organizational changes; competition and the shift to cloud and mobile computing; dependence on maintenance renewals and distribution channels; foreign-exchange and international-market exposure; cybersecurity, privacy and service-provider risks; acquisition integration and impairment risk; and tax, legal and intellectual-property contingencies. Tech Data accounted for 23% of FY2013 revenue and 23% of year-end trade receivables. The company recorded a $10.5 million impairment on privately held equity investments and reported $212.7 million of gross unrecognized tax benefits. Pending legal matters were not expected by management to have a material aggregate impact, although an unfavorable outcome could affect a particular period and potential losses were not estimable.
Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded that disclosure controls were effective.
Important facts for investors to verify
- Whether forecast FY2014 revenue growth and 455–480-basis-point operating-margin improvement were achieved, and how much reflected restructuring or other nonrecurring effects.
- Whether suite growth and cloud, mobile or rental adoption offset weaker M&E demand, lower upgrade revenue and the decline in emerging-market revenue.
- Maintenance renewal and enrollment trends, deferred-revenue conversion, and the increase in days sales outstanding from 61 to 74.
- Cash availability by geography, debt-service obligations, and the implications of foreign earnings designated as permanently reinvested.
- Exposure to Tech Data, uncertain tax positions, legal contingencies, restructuring payments and the strategic-investment impairment.