filings.toolsAutodesk 10-K 2017-01-31
Filed 2017-03-21. 22 sections, 493K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
10-K 1 adsk-0131201710xk.htm 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 31, 2017
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-14338
AUTODESK, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 94-2819853 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. employer Identification No.) | |
| 111 McInnis Parkway, San Rafael, California | 94903 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (415) 507-5000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Name of each exchange on which registered | |
| Common Stock, $0.01 Par Value | The NASDAQ Stock Market LLC (NASDAQ Global Select Market) |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”). Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of July 31, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, there were approximately 208.4 million shares of the registrant’s common stock outstanding that were held by non-affiliates, and the aggregate market value of such shares held by non-affiliates of the registrant (based on the closing sale price of such shares on the NASDAQ Global Select Market on July 31, 2016) was approximately $12.4 billion. Shares of the registrant’s common stock held by each executive officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 10, 2017, the registrant had outstanding 220,849,268 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for registrant’s Annual Meeting of Stockholders (the “Proxy Statement”), are incorporated by reference in Part III of this Form 10-K to the extent stated herein. The Proxy Statement will be filed within 120 days of the registrant’s fiscal year ended January 31, 2017.
2017 Form 10-K 1
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2017 Form 10-K 2
AUTODESK, INC. FORM 10-K
TABLE OF CONTENTS
2017 Form 10-K 3
FORWARD-LOOKING INFORMATION
The discussion in this Annual Report on Form 10-K contains trend analyses and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, future financial results (including by product type and geography) and subscriptions, the effectiveness of our efforts to successfully manage transitions to new business models and markets, our expectations regarding the continued transition of our business model, our ability to increase our subscription base, expected market trends, including the growth of cloud and mobile computing, the effect of unemployment, the availability of credit, our expectations for our restructuring, the effects of mixed global economic conditions, the effects of revenue recognition, expected trends in certain financial metrics, including expenses, the impact of acquisitions and investment activities, expectations regarding our cash needs, the effects of fluctuations in exchange rates and our hedging activities on our financial results, our ability to successfully expand adoption of our products, our ability to gain market acceptance of new businesses and sales initiatives, and the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries, the timing and amount of purchases under our newly announced stock buy-back plan, and the effects of potential non-cash charges on our financial results and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product capability and acceptance, remediation to our controls environment, statements regarding our liquidity and short-term and long-term cash requirements, as well as statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of a number of factors, including those set forth below in Item 1A, “Risk Factors,” and in our other reports filed with the U.S. Securities and Exchange Commission. We assume no obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
PART I
Item 1. BUSINESS
Note: A glossary of terms used in this Form 10-K appears at the end of this Item 1.
GENERAL
We are a global leader in design software and services, offering customers productive business solutions through powerful technology products and services. We serve customers in the architecture, engineering and construction; product design and manufacturing; and digital media and entertainment industries. Customers are able to design and create better things and processes by visualizing, simulating and analyzing real-world performance early in the design process. These capabilities allow our customers to foster innovation, optimize and improve their designs, save time and money, improve quality, communicate plans, and collaborate with others. Our professional software products are sold globally, both directly to customers and through a network of resellers and distributors.
Segments
We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions, allocating resources and assessing performance as the source of our reportable segments. Prior to the third quarter of fiscal 2017, we had four operating segments: Architecture, Engineering, and Construction (“AEC”), Manufacturing (“MFG”), Platform Solutions and Emerging Business (“PSEB”), and Media and Entertainment (“M&E”).
As a result of our business model transition, there have been a number of changes in the business including the shift from selling perpetual licenses to subscription-based offerings and organizational changes in how the business is managed including a restructuring announced in the first quarter of fiscal 2017. In the third quarter of fiscal 2017, these organizational changes resulted in a change in the internal reporting provided to our chief operating decision maker (“CODM”). These internal reports are used by the CODM to assess the performance of the business on a consolidated basis. Accordingly, our CODM now allocates resources and assesses the operating performance of Autodesk as a whole. As such, beginning in the third quarter of
2017 Form 10-K 4
fiscal 2017, we concluded that we had one segment manager (the CODM), one operating segment, and one reporting unit for goodwill impairment purposes.
A summary of our revenue by geographic area and product family is found in Note 13, “Segments,” in the Notes to our Consolidated Financial Statements.
Corporate Information
We were incorporated in California in April 1982 and were reincorporated in Delaware in May 1994. Our principal executive office is located at 111 McInnis Parkway, San Rafael, California 94903, and the telephone number at that address is (415) 507-5000. Our internet address is www.autodesk.com. The information posted on our website is not incorporated into this Annual Report on Form 10-K. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the Investor Relations portion of our web site at www.autodesk.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The public may also read and copy any material we file with the SEC at the SEC's Public Reference Room at 100 F Street N.E. Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1 (800) SEC-0330.
PRODUCTS
Our architecture, engineering and construction products improve the way building, civil infrastructure, process plant and construction projects are designed, built, and used. Our product development and manufacturing software provides manufacturers in automotive, transportation, industrial machinery, consumer products and building products with comprehensive digital engineering solutions that bring together data from all phases of the product development and production life cycle, creating a single digital model. Our digital media and entertainment products provide tools for digital sculpting, modeling, animation, effects, rendering, and compositing for design visualization, visual effects and games production. Our portfolio of products and services enables our customers to foster innovation, optimize and improve their designs, save time and money, improve quality, communicate plans, and collaborate with others.
Autodesk’s product offerings include:
| • | AutoCAD |
AutoCAD software, which is our largest single revenue-generating product, is a customizable and extensible CAD application for professional design, drafting, detailing, and visualization. AutoCAD software provides digital tools that can be used independently and in conjunction with other specific applications in fields ranging from construction and civil engineering to manufacturing and plant design.
| • | AutoCAD LT |
AutoCAD LT software is purpose built for professional drafting and detailing. AutoCAD LT includes document sharing capability without the need for software customization or certain advanced functionality found in AutoCAD. Users can share all design data with team members who use AutoCAD or other Autodesk products built on AutoCAD. AutoCAD LT software is our second largest revenue-generating product.
| • | Industry Collections |
Launched in August 2016, Autodesk's Industry Collections, our newest subscription offerings, provide our customers with increased access to a broader selection of Autodesk products, greater value, more flexibility, and a simpler way to subscribe and manage Autodesk subscriptions. To make way for industry collections, we ended the sale of the Design and Creation Suites on July 31, 2016, including Building Design Suites, Infrastructure Design Suites, and Product Design Suites. The collections are tailored to provide the essential software needed by professionals within each industry: AEC, Product Design, and M&E.
The AEC Collection aims to help our customers design, engineer, and construct higher quality, more predictable building and civil infrastructure projects, commonly used by AEC industry experts, such as AutoCAD, AutoCAD Civil3D, and Revit.
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The Product Design Collection offers connected, professional-grade tools that help our customers make great products today and compete in the changing manufacturing landscape of the future. The collection offers access to a wide range of our products, including AutoCAD and Inventor.
The M&E Collection provides end-to-end creative tools for entertainment creation. This collection enables animators, modelers and visual effect artists to access the tool they need, including Maya and 3ds Max, to create compelling effects, 3D characters and digital worlds.
| • | 3ds Max |
3ds Max software provides 3D modeling, animation, and rendering solutions that enable game developers, design visualization professionals and visual effects artists to digitally create realistic images, animations, and complex scenes and to digitally communicate abstract or complex mechanical, architectural, engineering, and construction concepts.
| • | Maya |
Maya software provides 3D modeling, animation, effects, rendering and compositing solutions that enable film and video artists, game developers, and design visualization professionals to digitally create engaging, lifelike images, realistic animations and simulations, extraordinary visual effects, and full length animated feature films.
| • | Revit |
Revit software is built for Building Information Modeling ("BIM") to help professionals design, build, and maintain higher-quality, more energy-efficient buildings. Using the information-rich models created with Revit, architects, engineers, and construction firms can collaborate to make better-informed decisions earlier in the design process to deliver projects with greater efficiency. Revit includes features for architectural, mechanical, electrical and plumbing design as well as structural engineering and construction, providing a comprehensive solution for the entire building project team.
| • | Inventor |
Inventor enables manufacturers to go beyond 3D design to digital prototyping by giving engineers a comprehensive and flexible set of tools for 3D mechanical design, simulation, analysis, tooling, visualization, and documentation. Engineers can integrate AutoCAD drawings and model-based design data into a single digital model, creating a virtual representation of a final product that enables them to validate the form, fit, and function of the product before it is ever built.
| • | AutoCAD Civil 3D |
AutoCAD Civil 3D products provide a surveying, design, analysis, and documentation solution for civil engineering, including land development, transportation, and environmental projects. Using a model-centric approach that automatically updates documentation as design changes are made, AutoCAD Civil 3D products enable civil engineers, designers, drafters, and surveyors to significantly boost productivity and deliver higher-quality designs and construction documentation faster. With AutoCAD Civil 3D products, the entire project team works from the same consistent, up-to-date model so they stay coordinated throughout all project phases.
| • | CAM Solutions |
Our computer-aided manufacturing ("CAM") software, obtained via our Delcam acquisition, offers industry-leading solutions for Computer Numeric Control ("CNC") machining, inspection, and modelling for manufacturing. A comprehensive line-up of expert products, including PowerMill, FeatureCAM, PowerInspect, PowerShare, and others, help our customers manufacture complex, innovative products and components with maximum quality, control, and production efficiency.
| • | Fusion 360 |
Fusion 360 is the first 3D CAD, CAM, and Computer-aided Engineering ("CAE") tool of its kind. It connects the entire product development process on a single cloud-based platform that works on both Apple and PC operating systems.
2017 Form 10-K 6
| • | BIM 360 |
BIM 360 construction management software enables almost anytime, anywhere access to project data throughout the building construction lifecycle. BIM 360 empowers those in the field to better anticipate and act, and those in the back office to optimize and manage all aspects of construction performance.
| • | Shotgun |
Shotgun is cloud-based software for review and production tracking in the M&E industry. Creative companies use the Shotgun platform to provide essential business tools for managers and visual collaboration tools for artists and supervisors, who often work globally with distributed teams.
PRODUCT DEVELOPMENT AND INTRODUCTION
The technology industry is characterized by rapid technological change in computer hardware, operating systems, and software. In addition, our customers’ requirements and preferences rapidly evolve, as do their expectations of the performance of our software and services. To keep pace with these changes, we maintain a vigorous program of new product development to address demands in the marketplace for our products.
The software industry is undergoing a transition from the personal computer to cloud, social, and mobile computing. In fiscal 2017, we continued to successfully implement a strategic transition of our business model announced in fiscal 2014. To support our transition, effective February 1, 2016, we discontinued the sale of new commercial seats of most individual software products, which are now exclusively available by desktop subscription, and discontinued selling perpetual licenses of suites while introducing industry collections effective August 1, 2016. Industry collections allow access to a broad set of products and cloud services that exceeds those previously available in suites - simplifying the customers' ability to access a complete set of industry tools. We now offer term-based product subscriptions for individual products and industry collections, cloud service offerings, and flexible enterprise business agreements ("new model subscription offerings"). These offerings are designed to give our customers increased flexibility with how they use our products and service offerings and to attract a broader range of customers such as project-based users and small businesses. The transition to a subscription model reflects the significant and growing interaction of our desktop software and our cloud services, working together to bring an integrated workflow to our customers.
We dedicate considerable technical and financial resources to research and development to further enhance our existing products and to create new products and technologies to expand our market opportunity. For example, in fiscal 2017, we continued strategically investing in digital manufacturing by bringing together a number of products and technologies, focused on providing integrated solutions for additive, subtractive, hybrid manufacturing, robotics and simulation. Digital manufacturing solutions provide our customers with the tools necessary to advance their manufacturing and production software, processes and systems in order to achieve efficiency and cost reduction improvements. Digital manufacturing provides a unique opportunity for these customers to connect designing, making, and using. We anticipate ongoing investments in digital manufacturing and other product groups to both serve existing customers and expand market opportunity.
Research and development expenditures were $766.1 million or 38% of fiscal 2017 net revenue, $790.0 million or 32% of fiscal 2016 net revenue and $725.2 million or 29% of fiscal 2015 net revenue. The increase in research and development expenditures as a percentage of revenue compared to fiscal 2016 and 2015 was driven by the decrease in our total revenue as a result of our business model transition. Our software is primarily developed internally; however, we also use independent firms and contractors to perform some of our product development activities. Additionally, we acquire products or technology developed by others by purchasing or licensing products and technology from third parties. We continually review these investments in an effort to ensure that we are generating sufficient revenue or gaining a competitive advantage to justify their costs.
The majority of our research and product development is performed in the United States, China, Singapore, Canada, and the United Kingdom. However, we employ experienced software developers in many of our other locations. Translation and localization of our products are performed in a number of local markets, principally Singapore and Switzerland. We generally localize and translate our products into German, French, Italian, Spanish, Russian, Japanese, Korean, and simplified and traditional Chinese.
We plan to continue managing significant product development operations internationally over the next several years. We believe that our ability to conduct research and development at various locations throughout the world allows us to optimize
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product development, lower costs, and integrate local market knowledge into our development activities. We continually assess the significant costs and challenges, including intellectual property protection, against the benefits of our international development activities.
For further discussion regarding risks from our product development and introduction efforts, see Item 1A, “Risk Factors.”
MARKETING AND SALES
We license or sell our products and services globally, primarily through indirect channels consisting of distributors and resellers. To a lesser extent we also transact directly with our enterprise and named account customers and with customers through our digitally transacted online Autodesk branded store. Our indirect channel model includes both a two-tiered distribution structure, where distributors sell to resellers, and a one-tiered structure, where Autodesk sells directly to resellers. We have a network of approximately 1,700 resellers and distributors worldwide. For fiscal 2017, approximately 72% of our revenue was derived from indirect channel sales through distributors and resellers, and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the future.
We anticipate that our channel mix will continue to change, particularly as we scale our digitally transacted online Autodesk branded store business and our largest accounts shift towards direct-only business models. Importantly, we expect our indirect channel will continue to transact and support the majority of our revenue as we move beyond the business model transition. We employ a variety of incentive programs and promotions to align our reseller channel with our business strategies.
Sales through our largest distributor, Tech Data Corporation and its global affiliates, accounted for 30%, 25%, and 25% of our net revenue for fiscal years 2017, 2016, and 2015, respectively. We believe our business is not substantially dependent on Tech Data. Our customers through Tech Data are the resellers and end users who purchase our software licenses and services. Should any of the agreements between us and Tech Data be terminated for any reason, we believe the resellers and end users who currently 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. No other distributor, reseller, or direct customer accounted for 10% or more of our revenue.
Our customer-related operations are divided into three geographic regions, the Americas; Europe, Middle East, and Africa (“EMEA”), and Asia Pacific (“APAC”). Each geographic region is supported by global marketing and sales organizations. These organizations develop and manage overall marketing and sales programs and work closely with a network of domestic and international sales offices. Fiscal 2017 net revenue in the Americas, EMEA, and APAC was $871.9 million (43%), $800.4 million (39%), and $358.7 million (18%), respectively. We intend to continue to make our products available in foreign languages. We believe that international sales will continue to comprise the majority of our total net revenue. Adverse economic conditions and currency exchange rates in the countries that contribute a significant portion of our net revenue, including emerging economies, may have an adverse effect on our business in those countries and our overall financial performance. A summary of our financial information by geographic location is found in Note 13, “Segments,” in the Notes to Consolidated Financial Statements. Our international operations and sales subject us to a variety of risks; see Item 1A, “Risk Factors,” for further discussion.
We also work directly with reseller and distributor sales organizations, computer manufacturers, other software developers, and peripherals manufacturers in cooperative advertising, promotions, and trade-show presentations. We employ mass-marketing techniques such as webcasts, seminars, telemarketing, direct mailings, sponsorships, advertising in business and trade journals, and social media. We have a worldwide user group organization and we have created online user communities dedicated to the exchange of information related to the use of our products and services.
We generate revenue primarily through various offerings that provide recurring revenue. The largest is our maintenance plan program, under which customers who own a perpetual use license for the most recent version of the underlying product are able to renew a previously purchased maintenance plan that provides them with unspecified upgrades when and if available, and receive online support during the term of their maintenance contract. We also offer subscriptions which provide our customers with flexible term-based licenses of our software and services. With the discontinuation of the sale of most perpetual licenses, we have accelerated our transition away from selling a mix of perpetual licenses and maintenance plans toward a single subscription model.
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Our ability to effectively distribute our products depends in part upon the financial and business condition of our distributor and reseller networks. The loss of, or a significant reduction in, business with any one of our major distributors or large resellers could harm our business; see Item 1A, “Risk Factors,” for further discussion.
CUSTOMER AND RESELLER SUPPORT
We provide technical support and training to customers through a multi-tiered support model, augmented by direct programs designed to address certain specific customer needs. Most of our customers receive support and training from the resellers and distributors from which they purchased subscriptions or licenses for our products or services, with Autodesk in turn providing second tier support to the resellers and distributors. Other customers are supported directly via self-service using the Autodesk Knowledge Network which guides customers to answers in our online support assets, support forums, webinars or to support representatives using a number of different modalities such as social media, phone, email and webchat. We also support our resellers and distributors through technical product training, sales training classes, webinars and other knowledge sharing programs.
EDUCATION, SUSTAINABILITY, AND PHILANTHROPIC PROGRAMS
Education
Autodesk is committed to helping fuel a lifelong passion for design and making among students of all ages. We offer free educational subscriptions of Autodesk's professional software to students, educators, and educational institutions worldwide. Through Autodesk Design Academy, we provide secondary and postsecondary schools hundreds of standards-aligned class projects to support design-based disciplines in Science, Technology, Engineering, Digital Arts, and Math (STEAM) using Autodesk's professional-grade design, engineering and entertainment software. Autodesk Design Academy curricula is also syndicated on iTunes U and Udemy, where millions of students go to learn online. Classes are available on our Instructables website for anyone looking to expand their "making" skills. Our intention is to make Autodesk software ubiquitous and the design software of choice for those poised to become the next generation of professional users.
Sustainability Programs
To help our customers imagine, design, and create a better world, our Sustainability initiatives focus our efforts on the area where we can have the greatest impact enabling sustainable practices through our products delivering free sustainable-design learning and training resources, providing software grants to qualifying nonprofits and entrepreneurs, and leading by example with our sustainable business practices. Through our products and services, we are supporting our customers to better understand and improve the environmental performance of everything they make.
Climate Change
In addressing the global challenges posed by climate change, we make it possible for our customers to innovate and respond to associated changes in regulation, building code, physical climate parameters and other climate-related developments. This effort can directly and indirectly create more demand for existing and new Autodesk products and services in the short and long-term. Furthermore, our leadership is committed to taking climate action and that commitment goes hand-in-hand with our reputation in the marketplace.
Climate Change Management Actions
To drive continued progress and meet growing demand, we continue to expand the solutions, education, and support we offer, helping customers secure a competitive advantage for a low carbon future by designing high-performance buildings, resilient cities and infrastructure, and more efficient transportation and products. To continue to grow this market, we provide software and support to early stage entrepreneurs and start-up companies who are designing clean technologies. We plan to expand these offerings in the future based upon demand and opportunity in response to challenges posed by climate change.
Internally, we are investing in best practices to mitigate our greenhouse gas emissions and climate change risk through investments in renewable energy, energy efficiency, disaster management and recovery strategies, and materials innovation. We are on track to meet our science-based greenhouse gas reduction target of 43% absolute emissions by 2020.
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Climate Change Governance
Ultimately, our co-CEOs, have the highest level of direct responsibility for addressing our climate-change related risks and opportunities. Autodesk has established an Environmental Core Team which reports indirectly to our co-CEOs. The Environmental Core Team has direct responsibility for setting and implementing the corporate sustainability strategy, including the climate change strategy.
Emissions Performance & Other Key Performance Indicators
By end of fiscal 2016, Autodesk had reduced its greenhouse gas emissions for its operational boundary by 33% from our fiscal year 2009 baseline to 172,000 metric tons of carbon dioxide equivalent. This reduction was accomplished through increased investment in renewable energy and energy efficiency in our global real estate portfolio, and continued transition from physical software delivery to cloud and electronic software delivery. In fiscal 2017, we added emissions from our supply chain to our measurement boundary. More information about our sustainability commitment can be found in our annual sustainability reports, which we have published on our website since 2008. Our fiscal 2017 sustainability report will be published in the second quarter of fiscal 2018.
Philanthropy
The Autodesk Foundation (the "Foundation"), a privately funded 501(c)(3) charity organization established and solely funded by us, leads our philanthropic efforts. The purpose of the Foundation is twofold: to support employees to create a better world at work, at home, and in the community by matching employee’s volunteer time and/or donations to nonprofit organizations; and to support organizations and individuals using design to drive positive social and environmental impact. In the latter case, we use grant funding, software donations, and training to accomplish this goal, selecting the most impactful and innovative organizations around the world, thus, leading to a better future for our planet. On our behalf, the Foundation also administers a discounted software donation program to nonprofit organizations, social and environmental entrepreneurs, and others who are developing design solutions that will shape a more sustainable future.
DEVELOPER PROGRAMS
Our business and our customers benefit from our relationships with an extensive developer network. These developers create and sell their own interoperable products that further enhance the range of integrated solutions available to our customers. One of our key strategies is to maintain an open-architecture design of our software products to facilitate third-party development of complementary products and industry-specific software solutions. This approach enables customers and third-parties to customize solutions for a wide variety of highly specific uses. We offer several programs that provide strategic investment funding, technological platforms, user communities, technical support, forums, and events to developers who develop add-on applications for our products. For example, we have created our web services platform, Autodesk Forge. The Forge Platform includes a number of web services that enable software developers to rapidly develop the next generation of applications, and experiences that will power the future of making things. Forge facilitates the development of a single connected ecosystem for integrating Autodesk applications with other enterprise, web and mobile solutions.
COMPETITION
The markets for our products are highly competitive, are subject to rapid change, and can have complex interdependencies between many of the larger businesses. We strive to increase our competitive separation by investing in research and development, allowing us to bring new products to market and create exciting new versions of existing products that offer compelling efficiencies for our customers. We also compete through investments in marketing and sales to more effectively reach new customers and better serve existing customers.
Our competitors include large, global, publicly traded companies; small, geographically focused firms; startup firms; and solutions produced in-house by their users. Our primary global competitors include Adobe Systems Incorporated, ANSYS, Inc., Apple Inc., AVEVA Group plc, Avid Technology, Inc., Bentley Systems, Inc., Dassault Systèmes S.A. and its subsidiary Dassault Systèmes SolidWorks Corp., Environmental Systems Research Institute, Inc. (ESRI), Intergraph Corporation, a wholly owned subsidiary of Hexagon AB, MSC Software Corporation, Nemetschek AG, PTC, 3D Systems, Siemens PLM, SONY Corporation, Technicolor, and Trimble Navigation Limited, among others.
The software industry has limited barriers to entry, and the availability of computing power with continually expanding performance at progressively lower prices contributes to the ease of market entry. The industry is presently undergoing a
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platform shift from the personal computer to cloud and mobile computing. This shift further lowers barriers to entry and poses a disruptive challenge to established software companies. The design software market is characterized by vigorous competition in each of the vertical markets in which we compete, both from existing competitors and by entry of new competitors with innovative technologies. Competition is increasingly enhanced by consolidation of companies with complementary products and technologies and the possibility that competitors in one vertical segment may enter other vertical segments that we serve. In addition, some of our competitors in certain markets have greater financial, technical, sales and marketing, and other resources than we do. Because of these and other factors, competitive conditions in these industries are likely to continue to intensify in the future. Increased competition could result in price reductions, reduced net revenue and profit margins, and loss of market share, any of which could harm our business. See Item 1A, “Risk Factors,” for further discussion of risks regarding competition.
We believe that our future results depend largely upon our ability to better serve customers by offering new products, including cloud and mobile computing products, whether by internal development or acquisition, and to continue to provide existing product offerings that compete favorably with respect to ease of use, reliability, performance, range of useful features, continuing product enhancements, reputation, price, and training.
INTELLECTUAL PROPERTY AND LICENSES
We maintain an active program to legally protect our investment in technology through intellectual property rights. We protect our intellectual property through a combination of patent, copyright, trademark and trade secret protections, confidentiality procedures, and contractual provisions. The nature and extent of legal protection associated with each such intellectual property right depends on, among other things, the type of intellectual property right and the given jurisdiction in which such right arises. We believe that our intellectual property rights are valuable and important to our business.
Nonetheless, our intellectual property rights may not be successfully asserted in the future or may be invalidated, circumvented or challenged. In addition, the laws and enforcement of the laws of various foreign countries where our products are distributed do not protect our intellectual property rights to the same extent as U.S. laws. Enforcement of intellectual property rights against alleged infringers can sometimes lead to costly litigation and counterclaims. Our inability to protect our proprietary information could harm our business.
From time to time, we receive claims alleging infringement of a third party’s intellectual property rights, including patents. Disputes involving our intellectual property rights or those of another party have in the past and may in the future lead to, among other things, costly litigation or product shipment delays, which could harm our business.
We retain ownership of software we develop. Desktop software is licensed to users pursuant to ‘click through’ or signed license agreements containing restrictions on duplication, disclosure, and transfer. Cloud software and associated services are provided to users pursuant to on-line or signed terms of service agreements containing restrictions on access and use.
We believe that because of the limitations of laws protecting our intellectual property and the rapid, ongoing technological changes in both the computer hardware and software industries, we must rely principally upon software engineering and marketing skills to continually maintain and enhance our competitive market position.
While we have recovered some revenue resulting from the unauthorized use of our software products, we are unable to measure the full extent to which piracy of our software products exists. We believe, however, that software piracy is and can be expected to be a persistent problem that negatively impacts our revenue and financial results. We believe that our transition from perpetual use software licenses to a subscription-based business model combined with the change from desktop to cloud-based computing will shift the incentives and means by which software is pirated.
In addition, through various licensing arrangements, we receive certain rights to intellectual property of others. We expect to maintain current licensing arrangements and to secure licensing arrangements in the future, as needed and to the extent available on reasonable terms and conditions, to support continued development and sales of our products and services. Some of these licensing arrangements require or may require royalty payments and other licensing fees. The amount of these payments and fees may depend on various factors, including but not limited to: the structure of royalty payments, offsetting considerations, if any, and the degree of use of the licensed technology.
See Item 1A, “Risk Factors,” for further discussion of risks related to protecting our intellectual property.
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PRODUCTION AND SUPPLIERS
The production of our software products and services involves duplication or hosting of software media. As we progress through our business model transition, the way that we deliver software has evolved. For certain cloud-based products, we use a combination of infrastructure-as-a-service providers like Amazon Web Services as well as co-located hosting facilities. For other products, we offer customers an electronic software download option for both initial product fulfillment as well as product updates for maintenance subscribers. Customers who choose electronic fulfillment receive the latest version of the software from our vendor’s secure servers. Customers may also obtain our software through media such as DVDs and USB flash drives available from multiple sources. The purchase of media and the transfer of the software programs onto media for distribution to customers are performed by us and by licensed subcontractors. Packaging materials are produced to our specifications by outside sources. Production is performed in leased facilities operated by independent third-party contractors. To date, we have not experienced any material difficulties or delays in the production of our software and documentation.
EMPLOYEES
As of January 31, 2017, we employed approximately 9,000 people. None of our employees in the United States are represented by a labor union. In certain foreign countries, our employees are represented by work councils. We have never experienced any work stoppages and believe our employee relations are good. Reliance upon employees in other countries entails various risks and changes in these foreign countries, such as government instability or regulation unfavorable to foreign-owned businesses, which could negatively impact our business in the future.
ACQUISITIONS
Over the past three years, we acquired new technology or supplemented our technology by purchasing businesses or technology related assets focused in specific markets or industries. For the fiscal years ended January 31, 2017, 2016, and 2015, we acquired a number of companies and technology related assets, some of which were accounted for as business combinations. The following were significant acquisitions for fiscal years 2017, 2016, and 2015:
| Date of closing | Company | Details | ||
| November 2015 | netfabb GmbH ("netfabb") | The acquisition of netfabb GmbH (“netfabb”) provided Autodesk with software solutions that reduced production costs and increased efficiency in 3D printing and additive manufacturing. | ||
| June 2014 | Shotgun Software Inc. ("Shotgun") | The acquisition of Shotgun provided a cloud-based production management solution that enabled digital studios to track, schedule, review, and collaborate on projects and images. | ||
| May 2014 | Within Technologies Limited ("Within”) | The acquisition of Within accelerated Autodesk’s development of tools and technologies for advanced manufacturing, including 3D printing. | ||
| February 2014 | Delcam plc (“Delcam”) | The acquisition of Delcam provided Autodesk a range of design, manufacturing and inspection software that enabled automated CADCAM solutions for a variety of industries, ranging from aerospace to toys and sports equipment. |
BACKLOG
Backlog is defined as current software license product orders which have not yet shipped. As a result of the business model transition, there was no backlog at January 31, 2017 compared to $31.4 million at January 31, 2016, and we do not expect material backlog in future periods.
GLOSSARY OF TERMS
Annualized Recurring Revenue (ARR)—Represents the annualized value of our average monthly recurring revenue for the preceding three months. "Maintenance ARR” captures ARR relating to traditional maintenance attached to perpetual licenses. "New Model ARR" captures ARR relating to new model subscription offerings. Recurring revenue acquired with the acquisition of a business may cause variability in the comparison of this calculation.
ARR is currently on of our key performance metrics to assess the health and trajectory of our business. ARR should be viewed independently of revenue and deferred revenue as ARR is a performance metric and is not intended to be combined with any of these items.
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Annualized Revenue Per Subscription (ARPS)—Is calculated by dividing our annualized recurring revenue by the total number of subscriptions.
Building Information Modeling (BIM)—BIM describes a model-based technology linked with a database of project information, and is the process of generating and managing information throughout the life cycle of a building. BIM is used as a digital representation of the building process to facilitate exchange and interoperability of information in digital formats.
Cloud Service Offerings—Represents individual term-based offerings deployed through web browser technologies or in a hybrid software and cloud configuration. Cloud service offerings that are bundled with other product offerings are not captured as a separate cloud service offering.
Constant Currency (CC) Growth Rates—We attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates as well as eliminating hedge gains or losses recorded within the current and comparative periods. We calculate constant currency growth rates by (i) applying the applicable prior period exchange rates to current period results and (ii) excluding any gains or losses from foreign currency hedge contracts that are reported in the current and comparative periods.
Flexible Enterprise Business Agreements—Represents programs providing enterprise customers with token-based access or a fixed maximum number of seats to a broad pool of Autodesk products over a defined contract term.
Industry Collections—Autodesk industry collections are a combination of products and services that target a specific user objective and support a set of workflows for that objective. Our Industry Collections consist of: Autodesk Architecture, Engineering and Construction Collection, Autodesk Product Design Collection, and Autodesk Media and Entertainment Collection. Autodesk introduced industry collections effective August 1, 2016 to replace its suites.
License and Other Revenue—License and other revenue consists of two components: (1) all forms of product license revenue and (2) other revenue. Product license revenue includes software license revenue from the sale of perpetual licenses, term-based licenses from our product subscriptions and flexible enterprise business agreements, and product revenue for Creative Finishing. Other revenue includes revenue from consulting, training, Autodesk Developers Network and Creative Finishing customer support, and is recognized over time, as the services are performed.
Maintenance Plan—Our maintenance plan provides our customers with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under our maintenance plan, customers are eligible to receive unspecified upgrades when and if available, and online support. We recognize maintenance plan revenue over the term of the agreements, generally between one and three years.
New Model Subscription Offerings (New Model)—Comprises our term-based product subscriptions (formerly titled Desktop subscription), cloud service offerings, and flexible enterprise business agreements.
Recurring Revenue—Represents the revenue for the period from our maintenance plans and revenue from our new model subscription offerings, including portions of revenue allocated to license and other revenue for those offerings. It excludes subscription revenue related to education offerings, consumer product offerings, select Creative Finishing product offerings, Autodesk Buzzsaw, Autodesk Constructware, and third party products. Recurring revenue acquired with the acquisition of a business is reported when total subscriptions are captured in our systems and may cause variability in the comparison of this calculation.
Suites—Autodesk suites are a combination of products that target a specific user objective (product design, building design, etc.) and support a set of workflows for that objective. Our primary suites include: Autodesk Building Design Suite, Autodesk Entertainment Creation Suite, Autodesk Factory Design Suite, Autodesk Infrastructure Design Suite, Autodesk Plant Design Suite, and Autodesk Product Design Suite. Autodesk discontinued selling new perpetual licenses of suites while introducing industry collections effective August 1, 2016.
Subscription Revenue—Autodesk subscription revenue consists of three components: (1) maintenance plan revenue from our perpetual software products; (2) maintenance revenue from our term-based product subscriptions and flexible enterprise business agreements; and (3) revenue from our cloud service offerings.
Total Subscriptions—Consists of subscriptions from our maintenance plans and new model subscription offerings that are active and paid as of the quarter end date. For certain cloud service offerings and flexible enterprise business agreements,
2017 Form 10-K 13
subscriptions represent the monthly average activity reported within the last three months of the quarter end date. Total subscriptions do not include education offerings, consumer product offerings, select Creative Finishing product offerings, Autodesk Buzzsaw, Autodesk Constructware, and third party products. Subscriptions acquired with the acquisition of a business are captured once the data conforms to our subscription count methodology and when added, may cause variability in the comparison of this calculation.
Item 1A. RISK FACTORS
We operate in a rapidly changing environment that involves significant risks, a number of which are beyond our control. In addition to the other information contained in this Form 10-K, the following discussion highlights some of these risks and the possible impact of these factors on our business, financial condition, and future results of operations. If any of the following risks actually occur, our business, financial condition, or results of operations may be adversely impacted, causing the trading price of our common stock to decline. In addition, these risks and uncertainties may impact the “forward-looking” statements described elsewhere in this Form 10-K and in the documents incorporated herein by reference. They could affect our actual results of operations, causing them to differ materially from those expressed in “forward-looking” statements.
Global economic and political conditions may further impact our business, financial results and financial condition.
As our business has expanded globally, we have increasingly become subject to risks arising from adverse changes in global economic and political conditions. The past several years were characterized by mixed global economic conditions, volatile credit markets, volatile exchange rates, relatively high unemployment, increased government deficit spending and debt levels, uncertainty about certain governments' abilities to repay such debt or to address certain fiscal issues, and volatility in many financial instrument markets. If economic growth in countries where we do business slows, such as in Japan or in emerging economies, or if such countries experience further economic recessions, customers may delay or reduce technology purchases. This could result in reductions in sales of our products and services, longer sales cycles and slower adoption of our technologies.
Over the past several years, many of our customers have experienced tighter credit, negative financial news and weaker financial performance of their businesses and have reduced their workforces, thereby reducing the number of licenses and the number of maintenance contracts they purchase from us. In addition, a number of our customers rely, directly and indirectly, on government spending. Current debt balances of many countries without proportionate increases in revenues have caused many countries to reduce spending and in some cases have forced those countries to restructure their debt in an effort to avoid defaulting under those obligations. This has not only impacted those countries but others that are holders of such debt and those assisting in such restructuring.
These actions may impact, and over the past several years have negatively impacted, our business, financial results and financial condition. Moreover, our financial performance may be negatively impacted by:
| • | lack of credit available to, and the insolvency of, key channel partners, which may impair our distribution channels and cash flows; |
| • | counterparty failures negatively impacting our treasury functions, including timely access to our cash reserves and third-party fulfillment of hedging transactions; |
| • | counterparty failures negatively affecting our insured risks; |
| • | inability of banks to honor our existing line of credit, which could increase our borrowing expenses or eliminate our ability to obtain short-term financing; and |
| • | decreased borrowing and spending by our end users on small and large projects in the industries we serve, thereby reducing demand for our products. |
In addition, in June 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the European Union (commonly referred to as “Brexit”). The Brexit vote and the perceptions as to the impact of the withdrawal of the United Kingdom from the European Union may adversely affect business activity, political stability and economic conditions in the United Kingdom, the European Union and elsewhere.
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It is uncertain at this time how the new U.S. President, Administration and Congress will affect our business, including potentially through increased import tariffs and other influences on U.S. trade relations with other countries, such as Mexico and China. The imposition of tariffs or other trade barriers could increase our costs and reduce the competitiveness of our offerings in certain markets. In addition, other countries may change their own policies on business and foreign investment in companies in their respective countries.
Geopolitical trends toward nationalism and protectionism and the weakening or dissolution of international trade pacts may increase the cost of, or otherwise interfere with, conducting business. Uncertainty about current and future economic and political conditions on us, our customers and partners, makes it difficult for us to forecast operating results and to make decisions about future investments.
Further macro-economic degradation, a slower economic recovery in industries important to our business or adverse exchange rate movements, may adversely affect our business, financial results and financial condition.
If we fail to successfully manage our business model transition to cloud-based products and more flexible product licenses, our results of operations could be negatively impacted.
To address the industry transition from personal computer to cloud, mobile, and social computing, we have accelerated our move to the cloud and are offering more flexible product licenses. To support our transition, we discontinued selling new perpetual licenses of most individual software products effective February 1, 2016, and discontinued selling new perpetual licenses of suites effective August 1, 2016. As a result, we expect to derive an increasing portion of our revenues in the future from subscriptions. This subscription model prices and delivers our products in a way that differs from the historical perpetual pricing and delivery methods. These changes reflect a significant shift from perpetual license sales and distribution of our software in favor of providing our customers the right to access certain of our software in a hosted environment or use downloaded software for a specified subscription period. During our transition, revenue, billings, gross margin, operating margin, net income (loss), earnings (loss) per share, deferred revenue, and cash flow from operations will be impacted as more revenue is recognized ratably rather than upfront and as new offerings bring a wider variety of price points.
Our ability to achieve our financial objectives is subject to risks and uncertainties. The new offerings require a considerable investment of technical, financial, legal, and sales resources, and a scalable organization. Market acceptance of such offerings is affected by a variety of factors, including but not limited to: security, reliability, performance, current license terms, customer preference, social/community engagement, customer concerns with entrusting a third party to store and manage their data, public concerns regarding privacy and the enactment of restrictive laws or regulations. Whether our business model transition will prove successful and will accomplish our business and financial objectives is subject to numerous risks and uncertainties, including but not limited to: customer demand, attach and renewal rates, channel acceptance, our ability to further develop and scale infrastructure, our ability to include functionality and usability in such offerings that address customer requirements, tax and accounting implications, pricing, and our costs. In addition, the metrics we use to gauge the status of our business model transition may evolve over the course of
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Item 1B. UNRESOLVED STAFF COMMENTS
None
Item 2. PROPERTIES
We lease 1,978,960 square feet of office space in 133 locations in the United States and internationally through our foreign subsidiaries. In addition, we own 101,225 square feet of office space in four locations internationally through our foreign subsidiaries. Our executive offices and corporate headquarters are located in leased office space in San Rafael, California. Our San Rafael facilities consist of 220,000 square feet under leases that have expiration dates ranging from December 2017 to December 2019. We and our foreign subsidiaries lease additional space in various locations throughout the world for local sales, product development, and technical support personnel.
All facilities are in good condition. Our facilities are operating at capacities averaging 82% occupancy worldwide as of January 31, 2017. We believe that our existing facilities and offices are adequate to meet our requirements for the foreseeable future. See Note 8, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements for more information about our lease commitments.
Item 3. LEGAL PROCEEDINGS
We are involved in a variety of claims, suits, investigations, and proceedings in the normal course of business activities including claims of alleged infringement of intellectual property rights, commercial, employment, piracy prosecution, business practices, and other matters. In our opinion, resolution of pending matters is not expected to have a material adverse impact on our consolidated results of operations, cash flows, or financial position. Given the unpredictable nature of legal proceedings, there is a reasonable possibility that an unfavorable resolution of one or more such proceedings could in the future materially affect our results of operations, cash flows, or financial position in a particular period, however, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our financial statements, any such amount is either immaterial or it is not possible to provide an estimated amount of any such potential loss.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NASDAQ Global Select Market under the symbol ADSK. The following table lists the intraday high and low sales prices for each quarter in the last two fiscal years.
| High | Low | ||||||
| Fiscal 2017 | |||||||
| First Quarter | $ | 62.42 | $ | 41.60 | |||
| Second Quarter | 61.42 | 49.82 | |||||
| Third Quarter | 73.40 | 56.80 | |||||
| Fourth Quarter | 83.96 | 67.15 | |||||
| Fiscal 2016 | |||||||
| First Quarter | $ | 65.00 | $ | 53.02 | |||
| Second Quarter | 59.42 | 49.50 | |||||
| Third Quarter | 55.82 | 42.06 | |||||
| Fourth Quarter | 65.78 | 45.04 |
Dividends
We did not declare any cash or stock dividends in either fiscal 2017 or fiscal 2016. We anticipate that, for the foreseeable future, we will not pay any cash or stock dividends.
Stockholders
As of January 31, 2017, the number of common stockholders of record was 430. Because many of our shares of common stock are held by brokers or other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.
Issuer Purchases of Equity Securities
Autodesk's stock repurchase program is largely to help offset the dilution from the issuance of stock under our employee stock plans and for such other purposes as may be in the interests of Autodesk and its stockholders, and has the effect of returning excess cash generated from our business to stockholders. The share repurchase program does not have an expiration date and the pace and timing of repurchases will depend on factors such as cash generation from operations, available surplus, the volume of employee stock plan activity, cash requirements for acquisitions, economic and market conditions, stock price and legal and regulatory requirements. In September 2016, the Board of Directors approved a plan which authorized the repurchase of up to an additional 30.0 million shares of the Company's common stock. As of January 31, 2017, 3.4 million shares have been repurchased under this plan. During the three and twelve months ended January 31, 2017, we repurchased 2.9 million and 9.7 million shares, respectively, of our common stock under the existing and prior Board of Director authorized share repurchase programs. At January 31, 2017, 26.6 million shares remained available for repurchase under the repurchase program approved by the Board of Directors. See Note 9, “Stockholders' Equity,” in the Notes to Consolidated Financial Statements for further discussion.
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The following table provides information about the repurchase of common stock in open-market transactions during the quarter ended January 31, 2017:
| (Shares in millions) | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2) | ||||||||
| November 1- November 30 | 1.2 | $ | 73.51 | 1.2 | 28.3 | |||||||
| December 1 - December 31 | 0.9 | 75.47 | 0.9 | 27.4 | ||||||||
| January 1 - January 31 | 0.8 | 80.01 | 0.8 | 26.6 | ||||||||
| Total | 2.9 | $ | 75.98 | 2.9 |
| (1) | Represents shares purchased in open-market transactions under the stock repurchase program approved by the Board of Directors. |
| (2) | These amounts correspond to the plan approved by the Board of Directors in September 2016 that authorizes the repurchase of 30.0 million shares. The plan does not have a fixed expiration date. |
Sales of Unregistered Securities
There were no sales of unregistered securities during the three months ended January 31, 2017.
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Company Stock Performance
The following graph shows a five-year comparison of cumulative total return (equal to dividends plus stock appreciation) for our Common Stock, the Standard & Poor’s 500 Stock Index, and the Dow Jones U.S. Software Index. The following graph and related information will not be deemed to be “soliciting material” or to be “filed” with the SEC, nor will such information be incorporated by reference into any filing pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into such filing.
Comparison of Five Year Cumulative Total Stockholder Return (1)
| (1) | Assumes $100 invested on January 31, 2012, in Autodesk’s stock, the Standard & Poor’s 500 Stock Index, and the Dow Jones U.S. Software Index, with reinvestment of all dividends. Total stockholder returns for prior periods are not an indication of future investment returns. |
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Item 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes thereto included in Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information presented below. The financial data for the fiscal years ended January 31, 2017 and 2016 are derived from, and are qualified by reference to, the audited consolidated financial statements that are included in this Form 10-K. The Consolidated Statements of Operations and the Consolidated Statements of Cash Flows data for the year ended January 31, 2015 are derived from, and are qualified by reference to, the audited consolidated financial statements that are included in this Form 10-K. The Consolidated Balance Sheet data for the fiscal year ended January 31, 2015 and the remaining financial data for the fiscal years ended January 31, 2014 and 2013 are derived from audited, consolidated financial statements which are not included in this Form 10-K.
| Fiscal year ended January 31, | |||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
| (In millions, except per share data) | |||||||||||||||||||
| For the Fiscal Year: | |||||||||||||||||||
| Net revenue | $ | 2,031.0 | $ | 2,504.1 | $ | 2,512.2 | $ | 2,273.9 | $ | 2,312.2 | |||||||||
| (Loss) income from operations | (499.6 | ) | 1.3 | 120.7 | 284.8 | 305.9 | |||||||||||||
| Net (loss) income | (582.1 | ) | (330.5 | ) | 81.8 | 228.8 | 247.4 | ||||||||||||
| Cash flow from operations (1) | 169.7 | 414.0 | 708.6 | 572.6 | 572.0 | ||||||||||||||
| Common Stock Data: | |||||||||||||||||||
| Basic net (loss) income per share | $ | (2.61 | ) | $ | (1.46 | ) | $ | 0.36 | $ | 1.02 | $ | 1.09 | |||||||
| Diluted net (loss) income per share | (2.61 | ) | (1.46 | ) | 0.35 | 1.00 | 1.07 | ||||||||||||
| At Year End: | |||||||||||||||||||
| Total assets | $ | 4,798.1 | $ | 5,515.3 | $ | 4,909.7 | $ | 4,589.9 | $ | 4,302.4 | |||||||||
| Long-term liabilities | 1,879.1 | 2,304.7 | 1,294.5 | 1,262.0 | 1,221.5 | ||||||||||||||
| Stockholders’ equity | 733.6 | 1,619.6 | 2,219.2 | 2,261.5 | 2,043.2 |
| (1) | During the three months ended July 31, 2016, the Company early adopted Accounting Standards Update No. 2016-09, “Improvements to Employee Share-Based Payment Accounting (Topic 718)” (“ASU 2016-09”), which addresses among other items, updates to the presentation and treatment of excess tax benefits related to stock based compensation. The Company has adopted changes to the consolidated statements of cash flows on a retrospective basis. The impact for the fiscal years ended January 31, 2015, 2014, and 2013 to net cash provided by operating activities and net cash used in financing activities was $0.5 million, $9.1 million, and $12.9 million, respectively. There was no impact to the fiscal year ended January 31, 2016. |
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion in our MD&A and elsewhere in this Form 10-K contains trend analyses and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, future financial results (including by product type and geography) and subscriptions, the effectiveness of our efforts to successfully manage transitions to new business models and markets, our expectations regarding the continued transition of our business model, our ability to increase our subscription base, expected market trends, including the growth of cloud and mobile computing, the effect of unemployment, the availability of credit, our expectations for our restructuring, the effects of mixed global economic conditions, the effects of revenue recognition, expected trends in certain financial metrics, including expenses, the impact of acquisitions and investment activities, expectations regarding our cash needs, the effects of fluctuations in exchange rates and our hedging activities on our financial results, our ability to successfully expand adoption of our products, our ability to gain market acceptance of new businesses and sales initiatives, and the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries, the timing and amount of purchases under our newly announced stock buy-back plan, and the effects of potential non-cash charges on our financial results and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product capability and acceptance, remediation to our controls environment, statements regarding our liquidity and short-term and long-term cash requirements, as well as statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of a number of factors, including those set forth above in Item 1A, “Risk Factors,” and in our other reports filed with the U.S. Securities and Exchange Commission. We assume no obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
Strategy
Autodesk makes software for people who make things. If you've ever driven a high-performance car, admired a towering skyscraper, used a smartphone, or watched a great film, chances are you've experienced what millions of Autodesk customers are doing with our software. Autodesk gives you the power to make anything.
Autodesk was founded during the platform transition from mainframe computers and engineering workstations to personal computers. We developed and sustained a compelling value proposition based upon desktop software for the personal computer. Just as the transition from mainframes to personal computers transformed the industry over 30 years ago, we believe our industry is undergoing a similar transition from the personal computer to cloud, mobile, and social computing. To address this transition we have accelerated our move to the cloud and mobile devices and are offering more flexible licensing. Our product subscriptions presently represent a hybrid of desktop software and cloud-based functionality, which provides a device-independent, collaborative design workflow for designers and their stakeholders. Our cloud service offerings, for example, BIM 360, Shotgun, Fusion 360, and AutoCAD 360 Pro, provide tools, including mobile and social capabilities, to help streamline design, collaboration, and data management processes. We believe that customer adoption of these new offerings will continue to grow as customers across a range of industries begin to take advantage of the scalable computing power and flexibility provided through these new services.
Our strategy is to lead the industries we serve to cloud-based technologies and business models. This entails both a technological shift and a business model shift. As part of the transition, we discontinued selling new perpetual licenses of most individual software products effective February 1, 2016, and discontinued selling new perpetual licenses of suites while introducing industry collections effective August 1, 2016. Industry collections allow access to a broad set of products and services that exceeds those previously available in suites - simplifying the customer ability to get access to a complete set of tools for their industry. We now offer subscriptions for individual products and industry collections, cloud service offerings, and flexible enterprise business agreements ("new model subscription offerings"). These offerings are designed to give our customers more flexibility with how they use our products and service offerings and to attract a broader range of customers, such as project-based users and small businesses.
With the discontinuation of the sale of most perpetual licenses, we have accelerated our transition away from selling a mix of perpetual licenses and term-based product subscriptions toward a single subscription model. As a result of this shift and various other factors described in Note 13, "Segments" in the Notes to our Consolidated Financial Statements, we have
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reassessed the way we allocate resources and evaluate financial performance and now operate as a single operating segment. During the transition, revenue, margins, EPS, deferred revenue and cash flow from operations have been and will be impacted as more revenue is recognized ratably rather than upfront and as new product subscription offerings generally have a lower initial purchase price.
As we progress through the business model transition, reported revenue is less relevant to measure the success of the business as perpetual license sales have been discontinued in favor of subscription offerings, which have considerably lower upfront prices. Annualized recurring revenue ("ARR") and growth of subscriptions better reflect business momentum and provide additional transparency into the transition. To further analyze progress, we disaggregate our growth in these metrics between the original maintenance model ("maintenance") and the new model subscription offerings. Maintenance subscriptions peaked in the fourth quarter of our fiscal 2016, and we expect them to decline slowly over time.
We sell our products and services globally, through a combination of indirect and direct channels. During the fiscal year ended January 31, 2017, 2016, and 2015, our indirect channels, which include value added resellers, direct market resellers, distributors, computer manufacturers, and other software developers, were responsible for 72%, 79%, and 83% of our overall revenue, respectively. During the same periods, our direct channels, which include sales resources dedicated to selling in our largest accounts, our highly specialized products, and business transacted through our online Autodesk branded store, were responsible for 28%, 21%, and 17% of our overall revenue, respectively.
We anticipate that our channel mix will continue to change, particularly as we scale our digitally transacted online Autodesk branded store business and our largest accounts shift towards direct-only business models. Importantly, we expect our indirect channel wi
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange risk
Our revenue, earnings, cash flows, receivables, and payables are subject to fluctuations due to changes in foreign currency exchange rates. Our risk management strategy utilizes foreign currency contracts to manage our exposure to foreign currency volatility that exists as part of our ongoing business operations. We utilize cash flow hedge contracts to reduce the exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. In addition, we use balance sheet hedge contracts to reduce the exchange rate risk associated primarily with foreign currency denominated receivables and payables. As of January 31, 2017 and 2016, we had open cash flow and balance sheet hedge contracts with future settlements within one to twelve months. Contracts were primarily denominated in euros, Japanese yen, Swiss francs, British pounds, Canadian dollars, and Australian dollars. We do not enter into any foreign exchange derivative instruments for trading or speculative purposes. The notional amount of our option and forward contracts was $640.0 million and $374.0 million at January 31, 2017 and 2016, respectively.
We use foreign currency contracts to reduce the exchange rate impact on the net revenue and operating expenses of certain anticipated transactions. A sensitivity analysis performed on our hedging portfolio as of January 31, 2017 indicated that a hypothetical 10% appreciation of the U.S. dollar from its value at January 31, 2017 and 2016 would increase the fair value of our foreign currency contracts by $60.9 million and $33.3 million, respectively. A hypothetical 10% depreciation of the dollar from its value at January 31, 2017 and 2016 would decrease the fair value of our foreign currency contracts by $32.5 million and $25.6 million, respectively.
Interest Rate Risk
Interest rate movements affect both the interest income we earn on our short term investments and the market value of certain longer term securities. At January 31, 2017, we had $1,898.9 million of cash equivalents and marketable securities, including $686.8 million classified as short-term marketable securities and $306.2 million classified as long-term marketable securities. If interest rates were to move up by 50 or 100 basis points over a twelve month period, the market value change of our marketable securities would have an unrealized gain or loss of $2.9 million and $5.6 million, respectively.
Other Market Risk
From time to time we make direct investments in privately held companies. Privately held company investments generally are considered inherently risky. The technologies and products these companies have under development are typically in the early stages and may never materialize, which could result in a loss of all or a substantial part of our initial investment in these companies. The evaluation of privately held companies is based on information that we request from these companies, which is not subject to the same disclosure regulations as U.S. publicly traded companies, and as such, the basis for these evaluations is subject to the timing and accuracy of the data received from these companies. See Note 2, "Financial Instruments" for further discussion regarding our privately held investments.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
| Fiscal year ended January 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net revenue: | |||||||||||
| Subscription | $ | 1,290.0 | $ | 1,277.2 | $ | 1,170.8 | |||||
| License and other | 741.0 | 1,226.9 | 1,341.4 | ||||||||
| Total net revenue | 2,031.0 | 2,504.1 | 2,512.2 | ||||||||
| Cost of revenue: | |||||||||||
| Cost of subscription revenue | 151.3 | 156.1 | 133.6 | ||||||||
| Cost of license and other revenue | 190.6 | 214.6 | 208.5 | ||||||||
| Total cost of revenue | 341.9 | 370.7 | 342.1 | ||||||||
| Gross profit | 1,689.1 | 2,133.4 | 2,170.1 | ||||||||
| Operating expenses: | |||||||||||
| Marketing and sales | 1,022.5 | 1,015.5 | 998.0 | ||||||||
| Research and development | 766.1 | 790.0 | 725.2 | ||||||||
| General and administrative | 287.8 | 293.4 | 283.3 | ||||||||
| Amortization of purchased intangibles | 31.8 | 33.2 | 39.8 | ||||||||
| Restructuring charges and other facility exit costs, net | 80.5 | — | 3.1 | ||||||||
| Total operating expenses | 2,188.7 | 2,132.1 | 2,049.4 | ||||||||
| (Loss) income from operations | (499.6 | ) | 1.3 | 120.7 | |||||||
| Interest and other expense, net | (24.2 | ) | (21.6 | ) | (37.7 | ) | |||||
| (Loss) income before income taxes | (523.8 | ) | (20.3 | ) | 83.0 | ||||||
| Provision for income taxes | (58.3 | ) | (310.2 | ) | (1.2 | ) | |||||
| Net (loss) income | $ | (582.1 | ) | $ | (330.5 | ) | $ | 81.8 | |||
| Basic net (loss) income per share | $ | (2.61 | ) | $ | (1.46 | ) | $ | 0.36 | |||
| Diluted net (loss) income per share | $ | (2.61 | ) | $ | (1.46 | ) | $ | 0.35 | |||
| Weighted average shares used in computing basic net (loss) income per share | 222.7 | 226.0 | 227.1 | ||||||||
| Weighted average shares used in computing diluted net (loss) income per share | 222.7 | 226.0 | 232.4 |
See accompanying Notes to Consolidated Financial Statements.
2017 Form 10-K 63
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In millions)
| Fiscal year ended January 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Net (loss) income | $ | (582.1 | ) | $ | (330.5 | ) | $ | 81.8 | |||
| Other comprehensive loss, net of reclassifications: | |||||||||||
| Net (loss) gain on derivative instruments (net of tax effect of ($1.1), $0.6, and ($0.7)) | (1.1 | ) | (27.1 | ) | 39.3 | ||||||
| Change in net unrealized gain (loss) on available-for-sale securities (net of tax effect of ($0.5), $0.0, and ($0.2)) | 1.3 | (1.4 | ) | (0.2 | ) | ||||||
| Change in defined benefit pension items (net of tax effect of ($0.9), $0.9, and $1.8) | (5.5 | ) | (4.6 | ) | (16.0 | ) | |||||
| Net change in cumulative foreign currency translation loss (net of tax effect of $0.2, $0.5, and $4.9) | (52.1 | ) | (34.7 | ) | (75.8 | ) | |||||
| Total other comprehensive loss | (57.4 | ) | (67.8 | ) | (52.7 | ) | |||||
| Total comprehensive (loss) income | $ | (639.5 | ) | $ | (398.3 | ) | $ | 29.1 |
See accompanying Notes to Consolidated Financial Statements.
2017 Form 10-K 64
AUTODESK, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
| January 31, 2017 | January 31, 2016 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 1,213.1 | $ | 1,353.0 | |||
| Marketable securities | 686.8 | 897.9 | |||||
| Accounts receivable, net | 452.3 | 653.6 | |||||
| Prepaid expenses and other current assets | 108.4 | 88.6 | |||||
| Total current assets | 2,460.6 | 2,993.1 | |||||
| Marketable securities | 306.2 | 532.3 | |||||
| Computer equipment, software, furniture, and leasehold improvements, net | 158.6 | 169.3 | |||||
| Developed technologies, net | 45.7 | 70.8 | |||||
| Goodwill | 1,561.1 | 1,535.0 | |||||
| Deferred income taxes, net | 63.9 | 9.2 | |||||
| Other assets | 202.0 | 205.6 | |||||
| Total assets | $ | 4,798.1 | $ | 5,515.3 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 93.5 | $ | 119.9 | |||
| Accrued compensation | 238.2 | 243.3 | |||||
| Accrued income taxes | 50.0 | 29.4 | |||||
| Deferred revenue | 1,270.1 | 1,068.9 | |||||
| Current portion of long-term notes payable, net | 398.7 | — | |||||
| Other accrued liabilities | 134.9 | 129.5 | |||||
| Total current liabilities | 2,185.4 | 1,591.0 | |||||
| Long-term deferred revenue | 517.9 | 450.3 | |||||
| Long-term income taxes payable | 39.3 | 161.4 | |||||
| Long-term deferred income taxes | 91.5 | 67.7 | |||||
| Long-term notes payable, net | 1,092.0 | 1,487.7 | |||||
| Long-term other liabilities | 138.4 | 137.6 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Preferred stock, $0.01 par value; shares authorized 2.0; none issued or outstanding at January 31, 2017 and 2016 | — | — | |||||
| Common stock and additional paid-in capital, $0.01 par value; shares authorized 750.0; 220.3 outstanding at January 31, 2017 and 224.4 outstanding at January 31, 2016 | 1,876.3 | 1,821.5 | |||||
| Accumulated other comprehensive loss | (178.5 | ) | (121.1 | ) | |||
| Accumulated deficit | (964.2 | ) | (80.8 | ) | |||
| Total stockholders’ equity | 733.6 | 1,619.6 | |||||
| Total liabilities and stockholders' equity | $ | 4,798.1 | $ | 5,515.3 |
See accompanying Notes to Consolidated Financial Statements.
2017 Form 10-K 65
AUTODESK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| Fiscal year ended January 31, | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Operating Activities | |||||||||||
| Net (loss) income | $ | (582.1 | ) | $ | (330.5 | ) | $ | 81.8 | |||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
| Depreciation, amortization, and accretion | 139.2 | 145.8 | 145.9 | ||||||||
| Stock-based compensation expense | 221.8 | 197.2 | 165.6 | ||||||||
| Deferred income taxes | (38.8 | ) | 235.9 | (18.8 | ) | ||||||
| Restructuring charges and other facility exit costs, net | 80.5 | — | 3.1 | ||||||||
| Other operating activities | (7.7 | ) | (25.0 | ) | 16.2 | ||||||
| Changes in |
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain "disclosure controls and procedures," as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our Exchange Act reports is (i) recorded, processed, summarized and reported within the time periods specified in the rules of the Securities and Exchange Commission, and (ii) accumulated and communicated to Autodesk management, including our Co-Chief Executive Officers and Chief Financial Officer, to allow timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and with the participation of our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon this evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of January 31, 2017 for reasons described below.
We have performed additional analyses and other procedures to enable management to conclude that, notwithstanding the existence of the material weakness described above, the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP. Additionally, corrective actions continue to address the internal control material weakness as described below under the section "Remediation Efforts with Respect to Material Weakness".
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of January 31, 2017. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control—Integrated Framework. Our management, including our Co-Chief Executive Officers and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Autodesk have been detected.
Our management has concluded that, as of January 31, 2017, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles due to the material weakness discussed in further detail below. Our independent registered public accounting firm, Ernst & Young, LLP, has issued an audit report on our internal control over financial reporting, which is included in Item 8 herein.
In connection with the preparation of our Consolidated Financial Statements for the fiscal year ended January 31, 2017, our management concluded that it has a material weakness in our internal control over financial reporting related to the operating effectiveness of our controls over the calculation of income tax expense. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Remediation Efforts with Respect to Material Weakness
Management first identified a material weakness in internal control over financial reporting in connection with the preparation of our Condensed Consolidated financial statements for the fiscal quarter ended October 31, 2015. Since that time, management’s remediation activities have included the following:
2017 Form 10-K 106
| • | enhanced our technical accounting review for complex income tax considerations; |
| • | enhanced the design of our income tax controls to include specific activities to ensure proper classification of deferred taxes and calculation of income tax expense; |
| • | supplemented our accounting and tax professionals with the engagement of an internationally recognized accounting firm to assist us in the technical review regarding the application of tax rules around deferred tax assets and liabilities; and |
| • | reorganized the structure of our tax function to enhance the level of documentation, technical oversight, and review. |
Management has enhanced its controls to include refinements and improvements to controls over the accounting for income taxes. While significant progress has been made as of January 31, 2017, management does not believe these controls are operating effectively. As a result, management does not believe that the material weakness has been remediated and will continue to enhance its controls over the accounting for income tax expense.
Changes in Internal Control Over Financial Reporting
Other than with respect to the remediation efforts described above, there were no changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended January 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B. OTHER INFORMATION
None.
2017 Form 10-K 107
PART III
Certain information required by Part III is omitted from this Annual Report because we intend to file a definitive proxy statement pursuant to Regulation 14A for our Annual Meeting of Stockholders not later than 120 days after the end of the fiscal year covered by this Annual Report (the “Proxy Statement”) and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement that specifically address the items set forth herein are incorporated by reference.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item is incorporated herein by reference to the sections entitled “Proposal One—Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Corporate Governance” in our Proxy Statement.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information as of March 21, 2017 regarding our executive officers.
| Name | Age | Position | |
| Andrew Anagnost | 52 | Co-CEO, Chief Marketing Officer and SVP, BSM | |
| Amar Hanspal | 53 | Co-CEO, Chief Product Officer and SVP, PDG | |
| R. Scott Herren | 55 | SVP and Chief Financial Officer | |
| Jan Becker | 64 | SVP, Chief Human Resources Officer and Corporate Real Estate | |
| Steve M. Blum | 52 | SVP, Worldwide Sales and Services | |
| Pascal W. Di Fronzo | 52 | SVP, Corporate Affairs, Chief Legal Officer & Secretary |
Andrew Anagnost joined Autodesk in September 1997 and has served as our co-CEO since February 2017 and as our Senior Vice President, Industry Strategy & Marketing since March 2012. From December 2009 to March 2012, Dr. Anagnost was Vice President, Product Suites and Web Services. Prior to this position, Dr. Anagnost served as Vice President of CAD/CAE products for the manufacturing division from March 2007 to December 2009. Previously, Dr. Anagnost held other senior management positions at Autodesk. Prior to joining Autodesk, Dr. Anagnost held various engineering, sales, marketing and product management positions at Lockheed Aeronautical Systems Company and EXA Corporation. He also served as an NRC post-doctoral fellow at NASA Ames Research Center.
Amar Hanspal joined Autodesk in June 1987 and has served as our co-CEO since February 2017 and as our Senior Vice President, Autodesk Product Group since November 2015. From February 2012 to November 2015, Mr. Hanspal served as Senior Vice President, Information Modeling & Platform Product Group. Prior to this position, Mr. Hanspal served as Senior Vice President, Platform Solutions and Emerging Business from January 2007 to February 2012 and as Vice President of Autodesk Collaboration Solutions from January 2003 to January 2007. Previously, Mr. Hanspal held other executive and non-executive positions at Autodesk.
R. Scott Herren joined Autodesk in November 2014 and serves as Senior Vice President and Chief Financial Officer. Prior to joining Autodesk, Mr. Herren was the Senior Vice President of Finance for Citrix Systems, Inc. from September 2011 to October 2014 where he led the company’s finance, accounting, tax, treasury, investor relations, real estate, and facilities teams. From March 2000 to September 2011, Mr. Herren held a variety of leadership positions at Citrix including Vice President and Managing Director for EMEA and Vice President and General Manager of the Virtualization Systems Group. Prior to Citrix, Mr. Herren served at FedEx Corporation as Vice President, Financial Planning. Prior to FedEx, he spent 13 years at International Business Machines Corporation in senior financial positions.
Jan Becker joined Autodesk in September 1992 and has served as Senior Vice President, Chief Human Resources and Corporate Real Estate since December 2016. Ms. Becker served as Senior Vice President, Human Resources and Corporate Real Estate from June 2000 to December 2016. Ms. Becker previously served in other capacities in the Human Resources Department at Autodesk. Prior to joining Autodesk, Ms. Becker held a variety of senior management positions at Sun Microsystems. Prior to Sun Microsystems, Ms. Becker worked both domestically and internationally at a number of high-tech organizations, including Activision, Digital Equipment Corporation, and Hewlett-Packard Company.
2017 Form 10-K 108
Steven M. Blum joined Autodesk in January 2003 and has served as Senior Vice President, Worldwide Sales and Services since February 2011. From January 2003 to February 2011, he served as Senior Vice President of Americas Sales. Prior to this position, Blum was Executive Vice President of Sales and Account Management for Parago, Inc. Blum also held positions at Mentor Graphics, most recently serving as Vice President of America's sales. Before joining Mentor Graphics, he held engineering and sales positions at NCR Corporation and Advanced Micro Devices.
Pascal W. Di Fronzo joined Autodesk in June 1998 and has served as SVP, Corporate Affairs, Chief Legal Officer & Secretary since December 2016. Mr. Di Fronzo served as Senior Vice President, General Counsel and Secretary from March 2007 to December 2016. From March 2006 to March 2007, Mr. Di Fronzo served as Vice President, General Counsel and Secretary, and served as Vice President, Assistant General Counsel and Assistant Secretary from March 2005 through March 2006. Previously, Mr. Di Fronzo served in other business and legal capacities in our Legal Department. Prior to joining Autodesk, he advised high technology and emerging growth companies on business and intellectual property transactions and litigation while in private practice.
There is no family relationship among any of our directors or executive officers.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the section entitled "Corporate Governance" and “Executive Compensation,” in our Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to the section entitled “Security Ownership of Certain Beneficial Owners and Management,” and “Executive Compensation—Equity Compensation Plan Information” in our Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated herein by reference to the section entitled “Certain Relationships and Related Party Transactions” and “Corporate Governance—Independence of the Board of Directors” in our Proxy Statement.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the sections entitled “Proposal Two—Ratification of the Appointment of Independent Registered Public Accounting Firm” in our Proxy Statement.
2017 Form 10-K 109
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report:
| 1. | Financial Statements: The information concerning Autodesk’s financial statements, and Report of Ernst & Young LLP, Independent Registered Public Accounting Firm required by this Item is incorporated by reference herein to the section of this Report in Item 8, entitled “Financial Statements and Supplementary Data.” |
| 2. | Financial Statement Schedule: The following financial statement schedule of Autodesk, Inc., for the fiscal years ended January 31, 2017, 2016, and 2015, is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Autodesk, Inc.: |
Schedule II Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.
| 3. | Exhibits: See Item 15(b) below. We have filed, or incorporated into this Report by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K. |
(b) Exhibits:
We have filed, or incorporated into the Report by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K.
(c) Financial Statement Schedules: See Item 15(a), above.
2017 Form 10-K 110
| ITEM 15(A)(2) | FINANCIAL STATEMENT SCHEDULE II |
| Description | Balance at Beginning of Fiscal Year | Additions Charged to Costs and Expenses or Revenues | Deductions and Write-Offs | Balance at End of Fiscal Year | |||||||||||
| (in millions) | |||||||||||||||
| Fiscal Year Ended January 31, 2017 | |||||||||||||||
| Allowance for doubtful accounts | $ | 7.6 | $ | (3.3 | ) | $ | 2.8 | $ | 1.5 | ||||||
| Product returns reserves | 1.6 | (7.7 | ) | (6.3 | ) | 0.2 | |||||||||
| Partner Program reserves (1) | 45.2 | 240.3 | 257.4 | 28.1 | |||||||||||
| Restructuring | 1.3 | 77.8 | 70.7 | 8.4 | |||||||||||
| Fiscal Year Ended January 31, 2016 | |||||||||||||||
| Allowance for doubtful accounts | $ | 6.3 | $ | 2.3 | $ | 1.0 | $ | 7.6 | |||||||
| Product returns reserves | 2.6 | 10.4 | 11.4 | 1.6 | |||||||||||
| Partner Program reserves (1) | 36.5 | 267.4 | 258.7 | 45.2 | |||||||||||
| Restructuring | 1.6 | — | 0.3 | 1.3 | |||||||||||
| Fiscal Year Ended January 31, 2015 | |||||||||||||||
| Allowance for doubtful accounts | $ | 4.9 | $ | 1.6 | $ | 0.2 | $ | 6.3 | |||||||
| Product returns reserves | 4.0 | 17.4 | 18.8 | 2.6 | |||||||||||
| Partner Program reserves (1) | 38.4 | 237.3 | 239.2 | 36.5 | |||||||||||
| Restructuring | 5.6 | 3.2 | 7.2 | 1.6 |
| (1) | The partner program reserves balance impacts "Accounts receivable, net" and "Accounts payable" on the accompanying Consolidated Balance Sheets. |
Item 16. FORM 10-K SUMMARY
None.
2017 Form 10-K 111
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AUTODESK, INC. | |||
| By: | /s/ ANDREW ANAGNOST | ||
| Andrew Anagnost | |||
| Co-CEO, Chief Marketing Officer and SVP, BSM | |||
| Dated: | March 21, 2017 |
| AUTODESK, INC. | |||
| By: | /s/ AMAR HANSPAL | ||
| Amar Hanspal | |||
| Co-CEO, Chief Product Officer and SVP, PDG | |||
| Dated: | March 21, 2017 |
2017 Form 10-K 112
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Andrew Anagnost, Amar Hanspal, and R. Scott Herren each as his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities as of March 21, 2017.
| Signature | Title | |
| /s/ ANDREW ANAGNOST | Co-CEO, Chief Marketing Officer and SVP, BSM (Principal Executive Officer) | |
| Andrew Anagnost | ||
| /s/ AMAR HANSPAL | Co-CEO, Chief Product Officer and SVP, PDG (Principal Executive Officer) | |
| Amar Hanspal | ||
| /s/ R. SCOTT HERREN | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |
| R. Scott Herren | ||
| /s/ PAUL UNDERWOOD | Vice President and Controller (Principal Accounting Officer) | |
| Paul Underwood | ||
| /s/ CRAWFORD W. BEVERIDGE | Director (Non-executive Chairman of the Board) | |
| Crawford W. Beveridge | ||
| /s/ CARL BASS | Director | |
| Carl Bass | ||
| /s/ JEFF CLARKE | Director | |
| Jeff Clarke | ||
| /s/ SCOTT FERGUSON | Director | |
| Scott Ferguson | ||
| /s/ THOMAS GEORGENS | Director | |
| Thomas Georgens | ||
| /s/ RICK HILL | Director | |
| Rick Hill | ||
| /s/ MARY T. MCDOWELL | Director | |
| Mary T. McDowell | ||
| /s/ LORRIE M. NORRINGTON | Director | |
| Lorrie M. Norrington | ||
| /s/ ELIZABETH RAFAEL | Director | |
| Elizabeth Rafael | ||
| /s/ STACY J. SMITH | Director | |
| Stacy J. Smith |
2017 Form 10-K 113
Index to Exhibits
| Exhibit No. | Description | |
| 3.1 | Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2006) | |
| 3.2 | Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Current Report on Form 8-K filed on February 7, 2017) | |
| 4.1 | Indenture dated December 13, 2012, by and between Autodesk, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 filed with the Registrant's Current Report on Form 8-K filed on December 13, 2012) | |
| 4.2 | First Supplemental Indenture (including Form of Notes) dated December 13, 2012, by and between Autodesk, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 filed with the Registrant's Current Report on Form 8-K filed on December 13, 2012) | |
| 4.3 | Second Supplemental Indenture (including Form of Notes) dated June 5, 2015, by and between Autodesk, Inc. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on Form 8-K filed on June 8, 2015) | |
| 10.1* | Description of Registrant's Performance Stock Unit Program (incorporated by reference to Item 5.02 of the Registrant's Current Report on Form 8-K filed on March 15, 2016) | |
| 10.2* | Registrant’s 1998 Employee Qualified Stock Purchase Plan, as amended and restated effective as of October 1, 2016 (incorporated by reference to Exhibit 99.1 filed with the Registrant’s Registration Statement on Form S-8 filed on September 19, 2016) | |
| 10.3* | Registrant’s 1998 Employee Qualified Stock Purchase Plan Forms of Subscription Agreement, as amended and restated (incorporated by reference to Exhibit 10.5 filed with the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2016) | |
| 10.4* | Registrant’s 2008 Employee Stock Plan, as amended and restated (incorporated by reference to Exhibit 10.2 filed with the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2010) | |
| 10.5* | Registrant’s 2008 Employee Stock Plan Forms of Agreement (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2008) | |
| 10.6* | Registrant’s 2008 Employee Stock Plan Form of Agreement (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on February 6, 2009) | |
| 10.7* | Registrant’s 2008 Employee Stock Plan Forms of Restricted Stock Unit Agreements (incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K filed on June 18, 2008) | |
| 10.8* | Registrant’s 2008 Employee Stock Plan Forms of Agreement (non-U.S. Employees) (incorporated by reference to Exhibit 10.14 filed with the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009) |
2017 Form 10-K 114
| Exhibit No. | Description | |
| 10.9* | Registrant's 2012 Employee Stock Plan, as amended and restated (incorporated by reference to Exhibit 10.1 filed with the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2016) | |
| 10.10* | Registrant's 2012 Employee Stock Plan Form of Restricted Stock Unit Agreement, as amended and restated (incorporated by reference to Exhibit 10.2 filed with the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2016) | |
| 10.11* | Registrant's 2012 Employee Stock Plan Form of Severance Restricted Stock Unit Agreement, as amended and restated (incorporated by reference to Exhibit 10.3 filed with the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2016) | |
| 10.12* | Registrant's 2012 Employee Stock Plan Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K filed on March 13, 2012) | |
| 10.13* | Registrant's 2012 Employee Stock Plan Form of Stock Option Agreement (non-U.S. Employees) (incorporated by reference to Exhibit 10.4 filed with the Registrant's Current Report on Form 8-K filed on March 13, 2012) | |
| 10.14* | Amendments to certain stock option agreements (incorporated by reference to Exhibit 10.16 filed with the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009) | |
| 10.15* | Registrant’s 2010 Outside Directors’ Stock Plan (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on June 16, 2009) | |
| 10.16* | Registrant’s 2010 Outside Directors’ Stock Plan Form of Stock Option Agreement (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on March 31, 2010) | |
| 10.17* | Registrant’s 2010 Outside Directors’ Stock Plan Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.2 filed with the Registrant’s Current Report on Form 8-K filed on March 31, 2010) | |
| 10.18* | Registrant's 2012 Outside Directors' Stock Plan, as amended and restated (filed herewith) | |
| 10.19* | Registrant's 2012 Outside Directors' Stock Plan Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.5 filed with the Registrant's Current Report on Form 8-K filed on March 13, 2012) | |
| 10.20* | Registrant’s Executive Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.23 filed with the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2016) | |
| 10.21* | Registrant’s 2005 Non-Qualified Deferred Compensation Plan, as amended and restated, effective as of January 1, 2010 (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2009) | |
| 10.22* | Participants, target awards and payout formulas for fiscal year 2017 under the Registrant's Executive Incentive Plan (incorporated by reference to Item 5.02 of the Registrant's Current Report on Form 8-K filed on March 15, 2016) | |
| 10.23* | Executive Change in Control Program, as amended and restated (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on December 21, 2016) | |
| 10.24* | Sub-Plan of the Autodesk, Inc. 1998 Employee Qualified Stock Purchase Plan, as amended and restated (incorporated by reference to Exhibit 99.2 filed with the Registrant’s Registration Statement on Form S-8 filed on September 19, 2016) | |
| 10.25* | Form of Indemnification Agreement executed by the Registrant and each of its officers and directors (incorporated by reference to Exhibit 10.8 filed with the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2005) | |
| 10.26* | Third Amended and Restated Employment Agreement between Registrant and Carl Bass dated March 21, 2013 (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on March 25, 2013) | |
| 10.27* | R. Scott Herren Offer Letter dated September 23, 2014 (incorporated by reference to Exhibit 10.1 filed with the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2014) |
2017 Form 10-K 115
| Exhibit No. | Description | |
| 10.28* | Registrant’s Equity Incentive Deferral Plan as amended and restated effective as of June 12, 2008 (incorporated by reference to Exhibit 10.4 filed with the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2008) | |
| 10.29* | Amendment to Registrant's Equity Incentive Deferral Plan effective as of February 17, 2012 (incorporated by reference to Exhibit 10.37 filed with the Registrant's Annual Report on Form 10-K for the fiscal year ended January 31, 2012) | |
| 10.30 | Office Lease between Registrant and the J.H.S. Trust for 111 McInnis Parkway, San Rafael, CA, as amended (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2004) | |
| 10.31 | Fourth Amendment to Lease between Registrant and the J.H.S. Holdings L.P. for 111 McInnis Parkway, San Rafael, CA (incorporated by reference to Exhibit 10.30 filed with the Registrant’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010) | |
| 10.32 | Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among the Registrant, the lenders from time to time party thereto and Citibank, N.A. as agent (incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K filed on May 29, 2015) | |
| 10.33 | Letter Waiver, dated as of January 18, 2017, to the Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among the Registrant, the lenders from time to time party thereto and Citibank, N.A. as agent (incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K filed on January 19, 2017) | |
| 10.34 | Agreement, dated March 10, 2016, by and among the Registrant, Sachem Head Capital Management LP, Uncas GP LLC, and Sachem Head GP LLC. (incorporated by reference to Exhibit 99.1 filed with the Registrant’s Current Report on Form 8-K filed on March 11, 2016) | |
| 10.35 | Agreement, dated March 10, 2016, by and among the Registrant, Eminence Capital, LP, and Eminence GP, LLC. (incorporated by reference to Exhibit 99.2 filed with the Registrant’s Current Report on Form 8-K filed on March 11, 2016) | |
| 10.36 | Agreement, dated February 6, 2017, by and among the Registrant, Sachem Head Capital Management LP, Uncas GP LLC, and Sachem Head GP LLC. (incorporated by reference to Exhibit 99.1 filed with the Registrant’s Current Report on Form 8-K filed on February 7, 2017) | |
| 10.37* | Transition and Separation Agreement, dated February 6, 2017, by and between the Company and Carl Bass (incorporated by reference to Exhibit 10.1 filed with the Registrant’s Current Report on Form 8-K filed on February 7, 2017) | |
| 21.1 | List of Subsidiaries (filed herewith) | |
| 23.1 | Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) (filed herewith) | |
| 24.1 | Power of Attorney (contained in the signature page to this Annual Report) | |
| 31.1 | Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith) | |
| 31.2 | Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith) | |
| 31.3 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith) | |
| 32.1† | Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) | |
| 101.INS †† | XBRL Instance Document | |
| 101.SCH †† | XBRL Taxonomy Extension Schema | |
| 101.CAL †† | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF †† | XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB †† | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE †† | XBRL Taxonomy Extension Presentation Linkbase |
| * | Denotes a management contract or compensatory plan or arrangement. |
2017 Form 10-K 116
| † | The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Autodesk, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing. |
| †† | The financial information contained in these XBRL documents is unaudited. |
2017 Form 10-K 117