Autodesk 2004 Annual Report Download - page 30

May 31, 2003, and otherwise was effective at the beginning of the first interim period beginning after
June 15, 2003. The adoption of this statement had no effect on our consolidated financial position, results
of operations or cash flows.
Overview of Fiscal 2004 Results of Operations
For the
year ended
January 31, 2004
Asa%
of Net
Revenues
For the
year ended
January 31, 2003
Asa%
of Net
Revenues
(in thousands)
Net Revenues ................................ $951,643 100% $824,945 100%
Cost of revenues ........................... 148,128 16% 145,810 18%
Operating expenses excluding
amortization of purchased intangibles
and restructuring and other charges . . . 693,573 73% 627,987 76%
Amortization of purchased intangibles . . . 522 — 299 —
Restructuring and other ................... 3,183 — 25,887 3%
Income from Operations ..................... $106,237 11% $ 24,962 3%
For fiscal 2004 our primary goals were to deliver a series of market-leading products and solutions to
our customers to drive revenue growth, while increasing our operating efficiency to move our business
model toward our long-term operating margin objectives. We made considerable progress towards our
goals. Our fiscal 2004 product releases offered continued advancements in design and authoring
productivity as well as project lifecycle management capability.
Our net revenues were 15% higher in fiscal 2004 as compared to fiscal 2003 primarily due to strong
upgrade and subscription revenues coupled with the positive effects of changes in foreign currencies,
principally driven by the strength of the euro. Upgrade revenues, equally driven by price increases and
volume growth, increased 88% from the prior year due to the strength of our product releases and to the
announcement of our intention to retire the AutoCAD 2000-based product series during early calendar
2004. In addition, our AutoCAD-based product installed base grew to nearly 3.4 million at the end of fiscal
2004. Subscription revenues increased 51% from the prior year as our subscription program, now available
to most customers in most major markets worldwide, continues to attract new customers with new
enhancements such as Web support direct from Autodesk, e-learning and multi-year contracts.
We generate a significant amount of our revenue in the United States, Japan, Germany, United
Kingdom, Italy, China and Canada. The weaker value of the U.S. dollar, relative to international currencies,
had a positive impact of $34.3 million on operating results in fiscal 2004 compared to fiscal 2003. Had
exchange rates from fiscal 2003 been in effect during fiscal 2004, translated international revenue billed in
local currencies would have been $57.8 million lower and operating expenses would have been $23.5
million lower.
Our operating expenses, excluding amortization of purchased intangibles and restructuring and other,
for fiscal 2004 increased $65.6 million but declined as a percentage of revenue as compared to fiscal 2003.
The increase is due primarily to higher commission and bonus costs based on current financial performance
as well as higher marketing costs. Our operating margins are very sensitive to changes in revenues, given
the relatively fixed nature of most of our operating expenses, which consist primarily of employee-related
expenditures, facilities costs and depreciation and amortization expense. In future periods, employee-
related expenditures would likely increase if we are required to expense employee stock option grants.
Duringthe second and third quarters of fiscal 2004, with the helpof a major consulting firm, we analyzed
our operations and cost structure. We identified a number of opportunities to help achieve our targeted
operating margins as well as redirect investments to the most promising growth areas, such as product
lifecycle management and development of our China sales and development infrastructure. As we
executed on these plans, we began to incur restructuring charges beginning in the fourth quarter of fiscal
2004. We expect to incur additional charges through the third quarter of fiscal 2005.
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