Autodesk 2014 Annual Report Download - page 95

2013 Annual Report
2014 Form 10-K 21
We derive a substantial portion of our net revenue from sales of licenses of a limited number of our products, including
AutoCAD software, products based on AutoCAD, which include our suites that serve specific markets, upgrades to those
products and products that are interoperable with AutoCAD. Any factor adversely affecting sales of these products, including
the product release cycle, market acceptance, product competition, performance and reliability, reputation, price competition,
economic and market conditions and the availability of third-party applications, would likely harm our financial results. During
fiscal 2014 and 2013, combined revenue from our AutoCAD and AutoCAD LT products, not including suites having AutoCAD
or AutoCAD LT as a component, represented 30% and 33% of our total net revenue, respectively.
A significant portion of our revenue is generated through maintenance revenue; decreases in maintenance attach or renewal
rates or a decrease in the number of new licenses we sell would negatively impact our future revenue and financial results.
Our maintenance customers have no obligation to attach maintenance to their initial license or renew their maintenance
contract after the expiration of their initial maintenance period, which is typically one year. Our customers' attach and renewal
rates may decline or fluctuate as a result of a number of factors, including the overall global economy, the health of their
businesses, and the perceived value of the maintenance program. If our customers do not attach maintenance to their initial
license or renew their maintenance contract for our products, our maintenance revenue will decline and our financial results will
suffer.
In addition, a portion of the growth of our maintenance revenue has typically been associated with growth of the number
of licenses that we sell. Any reduction in the number of licenses that we sell, even if our customers' attach rates do not change,
will have a negative impact on our future maintenance revenue. This in turn would impact our business and harm our financial
results.
We recognize maintenance revenue ratably over the term of the maintenance contracts, which is predominantly one year,
but may also range up to five years. Decreases in net maintenance billings will negatively impact future maintenance revenue,
however future maintenance revenue will also be impacted by other factors such as the amount, timing and mix of contract
terms of future billings.
Our restructuring and cost reduction actions may not be as effective as anticipated.
During fiscal years 2013 and 2014, we undertook restructuring plans. If we are unable to realize the outcomes from the
restructuring efforts as planned, we may need to undertake additional restructuring efforts, and our business and operating
results may be harmed. In taking any future restructuring actions, we may incur additional costs that negatively impact our
operating margins. Additionally, a prolonged and slow economic recovery or a renewed recession in U.S. or foreign markets
could also lead to additional restructuring actions and associated costs.
In the past, we have taken actions to reduce our cost structure to more closely align our costs with our revenue levels. In
taking these actions, we have attempted to balance the cost of such initiatives against their longer term benefits. If we do not
achieve the proper balance of these cost reduction initiatives, we may eliminate critical elements of our operations, the loss of
which could negatively impact our ability to benefit from an economic recovery. We cannot assure that our cost cutting efforts
will achieve appropriate levels of expenses, and we may take additional actions in the future.
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
Because we conduct a substantial portion of our business outside the U.S. and we make certain business and resource
decisions based on assumptions about foreign currency, we face exposure to adverse movements in foreign currency exchange
rates. These exposures may change over time as business practices evolve and economic conditions change, and they could
have a material adverse impact on our financial results and cash flows.
We use derivative instruments to manage a portion of our cash flow exposure to fluctuations in foreign currency exchange
rates. As part of our risk management strategy, we use foreign currency contracts to manage a portion of our exposures of
underlying assets, liabilities and other obligations, which exist as part of our ongoing business operations. These foreign
currency instruments have maturities that extend for one to twelve months in the future, and provide us with some protection
against currency exposures. However, our attempts to hedge against these risks may not be completely successful, resulting in
an adverse impact on our financial results.
The fluctuations of currencies in which we conduct business can both increase and decrease our overall revenue and
expenses for any given fiscal period. Although our foreign currency cash flow hedge program extends beyond the current