Autodesk, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended January 31, 2011 (fiscal 2011), including the fourth quarter. This annual filing is not a standalone calendar-year 2010 or fiscal 2010 report. Amounts are in U.S. dollars.
Business context
Autodesk develops design software and services for architecture, engineering and construction; manufacturing; and media and entertainment. Fiscal 2011 revenue was generated across four segments: Platform Solutions and Emerging Business (37%), Architecture, Engineering and Construction (29%), Manufacturing (24%), and Media and Entertainment (10%). Approximately 85% of revenue came through distributors and resellers; international markets contributed 71%.
Financial performance and liquidity
| Metric | Fiscal 2011 | Fiscal 2010 | Change |
|---|---|---|---|
| Net revenue | $1,951.8 million | $1,713.7 million | +14% |
| Gross profit / margin | $1,755.2 million / 90% | $1,521.9 million / 89% | +15%; margin +1 point |
| Operating income / margin | $271.4 million / 14% | $65.6 million / 4% | +314%; margin +10 points |
| Net income | $212.0 million | $58.0 million | +266% |
| Diluted EPS | $0.90 | $0.25 | Up $0.65 |
| Operating cash flow | $540.8 million | $246.8 million | +$294.0 million |
| Cash, cash equivalents and marketable securities | $1,466.9 million | $1,126.2 million | +$340.7 million |
| Borrowings outstanding | None | None at year-end | $250 million U.S. credit facility available |
| Deferred revenue | $587.9 million | $516.5 million | +$71.4 million |
License and other revenue rose 20% to $1,172.1 million; maintenance revenue rose 6% to $779.7 million. Fiscal 2011 GAAP operating margin was 14%, versus 21% on the company’s non-GAAP basis; GAAP diluted EPS was $0.90 versus non-GAAP diluted EPS of $1.32. The non-GAAP measures exclude items including stock compensation, acquired-intangible amortization and restructuring charges.
Fiscal 2011 segment revenue increased year over year: PSEB 15% to $716.2 million; AEC 11% to $568.0 million; Manufacturing 22% to $470.0 million; and Media and Entertainment 4% to $197.6 million. The fourth quarter reported revenue of $527.7 million, operating income of $71.6 million, net income of $61.6 million and diluted EPS of $0.26.
Material changes versus the prior comparable period
- Revenue recovered from the fiscal 2010 downturn, rising 14%; management attributed the improvement to higher new-seat sales, maintenance revenue and growth across segments and geographies.
- Commercial new-seat revenue increased 31%, with most of the increase attributable to more seats sold. Upgrade revenue rose 22%; maintenance billings rose 14%, while recognized maintenance revenue increased 6% as it is recognized over contract terms.
- Operating expenses increased only 2% despite revenue growth, supporting the operating-margin recovery. Fiscal 2011 included $10.8 million of restructuring charges, down from $48.2 million, and no goodwill impairment, compared with $21.0 million in fiscal 2010.
- Operating cash flow more than doubled. Share repurchases increased to 9.0 million shares for $280.3 million, from 2.7 million shares for $63.2 million in fiscal 2010.
- International revenue increased 17% in EMEA and 20% in Asia Pacific; Americas revenue increased 7%. Results benefited from foreign exchange; management reported 13% revenue growth on a constant-currency basis.
Outlook, commentary, risks and unusual items
- Management forecast fiscal 2012 revenue growth of approximately 10% and an operating-margin increase of approximately 220 basis points versus fiscal 2011. These are expectations, not guarantees.
- Management described the business as stabilizing and beginning to grow, but remained cautious about the sustainability of the global recovery. Priorities included revenue growth, margin improvement, product investment and expanding Suites adoption.
- The March 2011 Japan earthquake and tsunami created uncertainty for future results; Japan represented approximately 10% of fiscal 2011 revenue.
- Key risks include economic weakness in customer industries, maintenance renewal and new-license demand, intense competition and technology shifts, reliance on indirect channels, foreign exchange, software piracy and intellectual-property claims, acquisitions, and the ability to realize deferred tax assets. Tech Data accounted for 16% of fiscal 2011 revenue and 16% of year-end trade receivables.
- Autodesk reported $14.0 million of foreign-currency losses within interest and other income, net, which fell to $0.6 million from $19.1 million in fiscal 2010. A remaining $4.2 million auction-rate security had limited liquidity and uncertain redemption timing.
- Pending legal matters were not expected by management to have a material adverse effect, though an unfavorable outcome could materially affect a particular period. The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions.
- Subsequent to year-end, Autodesk acquired Scaleform for approximately $36 million and Blue Ridge Numerics for approximately $39 million, subject to a working-capital adjustment.
Important facts for investors to verify
- Whether fiscal 2012 revenue and margin guidance was achieved, and how results compare on a constant-currency basis.
- New-license demand, maintenance billings, enrollment and renewal rates, and the sustainability of deferred-revenue growth.
- Growth and profitability trends across the four segments, especially the faster-growing Manufacturing and model-based design and Suites offerings.
- Cash conversion and capital allocation, including share repurchases, acquisition spending and the geographic availability and tax cost of cash balances.
- Exposure to Tech Data and other channel partners, foreign exchange movements, the Japan disaster’s impact, and the remaining illiquid auction-rate security.
- Potential effects of tax audits, deferred-tax-asset realizability, restructuring obligations and legal or intellectual-property contingencies.