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Autodesk Inc. F2Q11 (Qtr End 07/31/10) Earnings Call Transcript

Autodesk Inc. F2Q11 (Qtr End 07/31/10) Earnings Call Transcript

Autodesk Inc. (ADSK)

F2Q11 (Qtr End 07/31/10) Earnings Call Transcript

August 12, 2010 5:00 pm ET


David Gennarelli – Director, IR

Carl Bass – President & CEO

Mark Hawkins – EVP & CFO


Steve Ashley – Robert W. Baird

Phil Winslow – Credit Suisse

Brendan Barnicle – Pacific Crest

Heather Bellini – ISI

Brent Thill – UBS

Keith Weiss – Morgan Stanley

Derek Bingham – Goldman Sachs

Ross MacMillan – Jefferies

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Israel Hernandez – Barclays Capital



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Good day, ladies and gentlemen, and welcome to the second quarter 2011 Autodesk Incorporated earnings conference call. My name is Regina and I will be your operator for today. At this time, all lines are muted. Later, we will be conduct a question-and-answer session. (Operator instructions)

I would now like to turn the conference over to Mr. Dave Gennarelli, Director of Investor relations. You may proceed, sir.

David Gennarelli

Thanks, operator. Good afternoon. Thank you for joining our conference call to discuss our second quarter of fiscal 2011. With me today are Carl Bass, our Chief Executive Officer; and Mark Hawkins, our Chief Financial Officer.

Today’s conference call is being broadcast live via webcast. In addition, a replay of the call will be available at

As noted in our press release, we have published our prepared remarks on our Website in advance of this call. Those remarks are intended to serve in place of extended formal comments and we will not repeat them on this call.

During the course of this conference call, we will make forward-looking statements regarding future events and the future performance of the company, such as our guidance for the third quarter of fiscal 2011, remarks about fiscal 2011, our five-year financial targets, the factors we use to estimate our guidance, our future strategic transactions, business prospects and financial results, our market opportunities and strategies, and trends for our products and trends in various geographies and industries. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially.

Please refer to the documents we file from time to time with the SEC, specifically our Form 10-K for the fiscal year 2010, our Form 10-Q for the quarter ended April 30, 2010 and our periodic 8-K filings, including the Form 8-K filed with today’s press release and prepared remarks. Those documents contain and identify important risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If the call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements.

We will provide guidance on today’s call, but we’ll not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.

During the call, we will also discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of GAAP and non-GAAP results is provided in today’s press release, prepared remarks and on our Website.

In addition, during the call, we will discuss our five-year non-GAAP operating margin target. Autodesk is not able to provide a five-year GAAP operating margin target or reconciliation at this time because of the difficulty of estimating certain items that are excluded from the non-GAAP measure that affect operating margin, such as charges related to stock-based compensation, expense and amortization of acquisition-related intangibles.

Now, I would like to turn the call over to Carl Bass.

Carl Bass

Thank you. Good afternoon, everybody. We are pleased with our second quarter results, which benefited from better than expected revenue and excellent cost control. Year-over-year comparisons in the second quarter were strong in most categories.

Highlights included strong revenue results of $473 million, 46% growth in revenue from commercial new licenses, significant operating margin improvement, increased EPS and strong cash flow from operations.

Total revenue in the quarter exceeded our expectations and grew 14% year-over-year. It was nearly flat with the first quarter, which is a difficult comparison as the first quarter included a one-time benefit of approximately $15 million in upgrade revenue.

For the first time in several quarters, we experienced year-over-year growth in all of our geographies. Both Asia Pacific and EMEA showed strong double digit year-over-year growth. While we remain somewhat cautious regarding our outlook for EMEA, given the continued negative business headlines, the region performed quite well in the quarter.

We were pleased to see growth return to the Americas, which posted year-over-year and sequential growth. One notable highlight in the Americas was our government business. During the quarter, we signed a contract with the United States Air Force that has an initial value of approximately $5 million, most of which was recognized in the second quarter.

We have the opportunity to significantly expand this relationship going forward, and this win illustrates the strong traction we are gaining with government agencies.

Customers are more focused than ever on delivering better products. Our tools provide them the best means to do this with superior technology and the highest levels of interoperability in the industry. Because our solutions provide both innovation and high ROI, we are winning deals with companies of all sizes, often displacing incumbent products that sell for several times more than our solution.

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