Raises Revenue and Earnings Guidance for Fiscal 2007
Fourth quarter net income was $83 million, or $0.33 per diluted share on a GAAP basis and $91 million, or $0.37 per diluted share on a non-GAAP basis. Fourth quarter non-GAAP net income excludes $8 million in-process R&D expenses related to the acquisition of Alias and $1 million amortization of purchased intangibles. Net income in the fourth quarter of the prior year was $66 million, or $0.26 per diluted share on a GAAP basis, and $75 million, or $0.30 per diluted share on a non-GAAP basis.
"Autodesk had an excellent finish to another outstanding year," said Carol Bartz, Autodesk chairman and CEO. "Customer demand for our products continues to be very strong. Through solid execution we significantly increased revenues and profitability for the third year in a row."
Autodesk's performance was driven by strong growth in new seats and subscriptions, increasing penetration of its vertical and 3D products and continued strong profitability. In addition, during the quarter the company completed the acquisition of Alias for $197 million.
Unlike trends at many major software companies, revenues from new seats and emerging businesses continued to be strong, representing approximately two-thirds of total revenues in the fourth quarter. Revenues from new commercial seats increased 16 percent over the fourth quarter of the prior year and 23 percent on a constant currency basis.
Subscription revenues, which are called maintenance in the financial statements, increased 53 percent over the fourth quarter of last year and exceeded upgrade revenue for the quarter and the full year. Combined revenues from subscription and upgrades continue to represent approximately one-third of total revenues. Consistent with the growth in subscriptions and the company's movement of the retirement of the AutoCAD 2002-based family of products to March 2006, upgrade revenues decreased compared to the fourth quarter of the prior year.
The company's vertical and 3D products continue to increase their market penetration. In the fourth quarter of fiscal 2006, combined revenues from new commercial seats of the company's 3D products increased 73 percent over the prior year.
During the quarter, Autodesk continued to show strong profitability. Operating margins increased to 23 percent on a GAAP basis compared to 22 percent in the prior year. Non-GAAP operating margins were flat compared to the prior year at 25 percent. The acquisition of Alias decreased fourth quarter non-GAAP operating margins by 1 percentage point.
"We are very confident about our future and are raising our guidance," said Bartz. "In March, we will retire the AutoCAD 2002-based family of products. Immediately after, we will launch our new product portfolio with significant new releases of all of our major products and then begin the retirement of the AutoCAD 2004-based family of products. Our 3D products are showing dramatic growth and we continue to improve our productivity and profitability. I have never been more optimistic about Autodesk's opportunities."
Fiscal 2006 Review
Fiscal 2006 revenues increased 23 percent over last year to $1.523 billion. GAAP net income for fiscal 2006 was $329 million compared to $222 million in fiscal 2005, an increase of 48 percent. Fiscal 2006 GAAP earnings per diluted share were $1.33 compared to $0.90 in fiscal 2005, an increase of 48 percent. Fiscal 2006 GAAP net income includes net tax benefits totaling $19 million, pre-tax in-process R&D expenses of $8 million and $1 million of pre-tax amortization of purchased intangibles, both related to the Alias acquisition. Fiscal 2005 GAAP net income included tax benefits totaling $24 million and $27 million in pre-tax restructuring charges. Excluding these items, non-GAAP net income for fiscal 2006 was $316 million and $218 million in the prior year. Non-GAAP earnings per diluted share were $1.28 in fiscal 2006 and $0.88 in fiscal 2005. Once again, full year GAAP net income was higher than non-GAAP.
The following statements are forward looking statements which are based on current expectations and which involve risks and uncertainties some of which are set forth below.
Full Year Fiscal 2007
For fiscal year 2007, net revenues are expected to increase in the range of 18 to 20 percent compared to fiscal 2006. On a constant currency basis, fiscal 2007 net revenue growth rate guidance would have been approximately 3 percentage points higher or 21 to 23 percent. The acquisitions of Alias and Constructware account for approximately 6 percentage points of the fiscal 2007 revenue growth.
GAAP earnings per diluted share are expected to be between $1.12 and $1.17. Non-GAAP earnings per diluted share are expected to be between $1.45 and $1.50. Non-GAAP earnings per diluted share exclude $0.05 for the amortization of acquisition related intangibles and $0.28 related to stock based compensation expenses as required by SFAS No. 123R, which becomes effective to Autodesk commencing in the first quarter of fiscal 2007.
First Quarter Fiscal 2007
Net revenues for the first quarter of fiscal 2007 are expected to be between $425 and $435 million. GAAP earnings per diluted share are expected to be between $0.22 and $0.24. Non-GAAP earnings per diluted share are expected to be between $0.30 and $0.32 and exclude $0.07 related to stock based compensation expenses, and $0.01 for the amortization of acquisition related intangibles.
Second Quarter Fiscal 2007
Net revenues for the second quarter of fiscal 2007 are expected to be between $440 and $450 million. GAAP earnings per diluted share are expected to be between $0.26 and $0.28. Non-GAAP earnings per diluted share are expected to be between $0.34 and $0.36 and exclude $0.07 related to stock based compensation expenses, and $0.01 for the amortization of acquisition related intangibles.
As previously indicated, Autodesk currently believes that its effective tax rate will increase to 23 percent in fiscal year 2007.
A reconciliation of the above non-GAAP measures to the corresponding GAAP amounts is provided at the end of this press release.
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 our expected effective tax rate, our new product portfolio and other statements regarding our anticipated performance. Factors that could cause actual results to differ materially include the following: general market and business conditions, the timing and degree of expected investments in growth opportunities, changes in the timing of product releases and retirements, difficulties encountered in integrating the Alias business or in achieving expected earnings accretion, failure to successfully integrate new or acquired businesses and technologies, failure to achieve sufficient sell-through in our channels for new or existing products, failure of key new applications to achieve anticipated levels of customer acceptance, pricing pressure, failure to achieve continued cost reductions and productivity increases, failure to achieve continued migration from 2D products to 3D products, unanticipated changes in tax rates and tax laws, mix of geographic earnings, unexpected outcomes of matters relating to litigation, failure to achieve continued success in technology advancements, continued fluctuation in foreign currency exchange rates, the financial and business condition of our reseller and distribution channels, renegotiation or termination of royalty or intellectual property arrangements, interruptions or terminations in the business of the company's consultants or third party developers, failure to grow lifecycle management or collaboration products, and unanticipated impact of accounting for technology acquisitions.
Further information on potential factors that could affect the financial results of Autodesk are included in the company's report on Form 10-K for the year ended January 31, 2005 and Form 10-Q for the quarter ended October 31, 2005, which are each on file with the Securities and Exchange Commission.