Autodesk 2015 Annual Report Download - page 133

2015 Form 10-K 41
purchase our products through Tech Data would be able to continue to do so under substantially the same terms from one of our
many other distributors without substantial disruption to our revenue.
Operating Margin Analysis
Income from operations decreased 58% in fiscal 2015 due to a $334.6 million or 20% increase in our operating expenses
and a $67.8 million or 25% increase in cost of revenue, as compared to fiscal 2014. Partially offsetting the increase in our spend
was a $238.3 million or 10% increase in net revenue, as compared to the prior fiscal year. Our operating margin decreased to
5% for fiscal 2015 from 13% for fiscal 2014. The increase in cost of revenue was driven by employee related expenses
associated with the business model transition as well as the inclusion of Delcam related costs and an increase in cloud service
costs as compared to the prior fiscal year. The increase in operating expenses between fiscal 2015 and 2014 was driven by
higher employee related costs, primarily due to increased headcount and higher commissions expense as a result of increased
billings. Also impacting the increase in operating expenses during fiscal 2015 as compared to fiscal 2014 was an increase in
professional fees related to acquisition and business model transition initiatives.
Further discussion regarding the cost of revenue and operating expense activities are discussed below under the heading
“Results of Operations.”
Foreign Currency Analysis
We generate a significant amount of our revenue in the U.S., Japan, Germany, France, and the United Kingdom. Total net
revenue for fiscal 2015 increased 10% on an as reported basis compared to the prior fiscal year, and was negatively impacted by
foreign exchange rate changes during fiscal 2015. Had applicable exchange rates from fiscal 2014 been in effect during fiscal
2015 and had we excluded foreign exchange hedge gains and losses from both fiscal 2014 and 2015 (“on a constant currency
basis”), net revenue would have increased 12% compared to the prior fiscal year.
Our total spend, defined as cost of revenue plus operating expenses, during fiscal 2015 increased 20% on an as reported
basis as compared to the prior fiscal year. Had applicable exchange rates from fiscal 2014 been in effect during fiscal 2015 and
had we excluded foreign exchange hedge gains and losses from both fiscal 2014 and 2015, total spend would have increased
21% on a constant currency basis compared to the prior fiscal year.
Changes in the value of the U.S. dollar may have a significant effect on net revenue, total spend, and income from
operations in future periods. We use foreign currency contracts to reduce the exchange rate effect on a portion of the net
revenue of certain anticipated transactions but do not attempt to completely mitigate the impact of fluctuations of such foreign
currency against the U.S. dollar.
Balance Sheet and Cash Flow Items
At January 31, 2015, we had $2,299.4 million in cash and marketable securities. We completed fiscal 2015 with higher
deferred revenue and accounts receivable balances as compared to the prior fiscal year. Our deferred revenue balance at
January 31, 2015 included $936.8 million of deferred subscription revenue primarily related to customer maintenance contracts,
which will be recognized as revenue ratably over the life of the contracts. The term of our maintenance contracts is typically
between one and three years. Our cash flow from operations increased 26% to $708.1 million as of January 31, 2015 from
$563.5 million at January 31, 2014. We repurchased 6.9 million shares of our common stock for $372.4 million during fiscal
2015. Comparatively, we repurchased 10.5 million shares of our common stock for $423.8 million during fiscal 2014. Further
discussion regarding the balance sheet and cash flow activities are discussed below under the heading “Liquidity and Capital
Resources.”
Business Outlook
Autodesk's business model is evolving. We continue to assess current business offerings including introducing more
flexible license and service offerings that have ratable revenue streams. The accounting impact of these offerings and other
business decisions are expected to result in an increase in the percentage of our ratable revenue, making for a more predictable
business over time, while correspondingly reducing our upfront perpetual revenue stream. Over time, we expect our business
model transition to expand our customer base by eliminating higher up-front licensing costs and providing more flexibility in
how customers gain access to and pay for our products. We also expect our traditional perpetual license revenue to decline
without a corresponding decrease in expenses over the next 12 to 24 months. In the future, we expect this business model
transition will increase our long-term revenue growth rate by increasing total subscriptions and customer value over time.
2015 Annual Report