filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||
| Subscription | $ | 1,070.7 | $ | 884.4 | $ | 3,034.9 | $ | 2,528.6 | |||||||||||||||
| Maintenance | 17.6 | 39.8 | 53.6 | 153.1 | |||||||||||||||||||
| Total subscription and maintenance revenue | 1,088.3 | 924.2 | 3,088.5 | 2,681.7 | |||||||||||||||||||
| Other | 37.5 | 28.2 | 86.3 | 69.5 | |||||||||||||||||||
| Total net revenue | 1,125.8 | 952.4 | 3,174.8 | 2,751.2 | |||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of subscription and maintenance revenue | 74.8 | 60.7 | 219.3 | 176.6 | |||||||||||||||||||
| Cost of other revenue | 17.7 | 15.4 | 47.6 | 47.5 | |||||||||||||||||||
| Amortization of developed technologies | 14.6 | 7.6 | 38.4 | 22.4 | |||||||||||||||||||
| Total cost of revenue | 107.1 | 83.7 | 305.3 | 246.5 | |||||||||||||||||||
| Gross profit | 1,018.7 | 868.7 | 2,869.5 | 2,504.7 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Marketing and sales | 419.4 | 359.3 | 1,195.3 | 1,051.5 | |||||||||||||||||||
| Research and development | 282.1 | 233.0 | 824.5 | 682.9 | |||||||||||||||||||
| General and administrative | 112.8 | 98.8 | 344.1 | 296.8 | |||||||||||||||||||
| Amortization of purchased intangibles | 11.1 | 9.6 | 30.4 | 28.8 | |||||||||||||||||||
| Total operating expenses | 825.4 | 700.7 | 2,394.3 | 2,060.0 | |||||||||||||||||||
| Income from operations | 193.3 | 168.0 | 475.2 | 444.7 | |||||||||||||||||||
| Interest and other expense, net | (5.9) | (11.9) | (17.6) | (69.1) | |||||||||||||||||||
| Income before income taxes | 187.4 | 156.1 | 457.6 | 375.6 | |||||||||||||||||||
| Provision for income taxes | (50.7) | (23.9) | (49.7) | (78.7) | |||||||||||||||||||
| Net income | $ | 136.7 | $ | 132.2 | $ | 407.9 | $ | 296.9 | |||||||||||||||
| Basic net income per share | $ | 0.62 | $ | 0.60 | $ | 1.86 | $ | 1.35 | |||||||||||||||
| Diluted net income per share | $ | 0.61 | $ | 0.59 | $ | 1.83 | $ | 1.34 | |||||||||||||||
| Weighted average shares used in computing basic net income per share | 220.0 | 219.6 | 219.8 | 219.4 | |||||||||||||||||||
| Weighted average shares used in computing diluted net income per share | 222.5 | 222.3 | 222.3 | 222.1 |
See accompanying Notes to Condensed Consolidated Financial Statements.
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net income | $ | 136.7 | $ | 132.2 | $ | 407.9 | $ | 296.9 | |||||||||||||||
| Other comprehensive income (loss), net of reclassifications: | |||||||||||||||||||||||
| Net gain (loss) on derivative instruments (net of tax effect of $(3.3), $(0.4), $(6.7) and $1.5, respectively) | 18.8 | 3.9 | 38.3 | (11.6) | |||||||||||||||||||
| Change in net unrealized (loss) gain on available-for-sale debt securities (net of tax effect of zero, zero, zero and $0.1, respectively) | (0.7) | 0.6 | 7.1 | 1.9 | |||||||||||||||||||
| Change in defined benefit pension items (net of tax effect of zero for all periods presented) | 0.1 | 0.3 | 0.3 | — | |||||||||||||||||||
| Net change in cumulative foreign currency translation (loss) gain (net of tax effect of $(0.3), $0.1, $(0.9) and $(0.3), respectively) | (7.2) | (6.7) | (22.2) | 13.6 | |||||||||||||||||||
| Total other comprehensive income (loss) | 11.0 | (1.9) | 23.5 | 3.9 | |||||||||||||||||||
| Total comprehensive income | $ | 147.7 | $ | 130.3 | $ | 431.4 | $ | 300.8 |
See accompanying Notes to Condensed Consolidated Financial Statements.
AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
| October 31, 2021 | January 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,748.9 | $ | 1,772.2 | |||||||
| Marketable securities | 43.2 | 4.0 | |||||||||
| Accounts receivable, net | 580.3 | 643.1 | |||||||||
| Prepaid expenses and other current assets | 282.4 | 206.2 | |||||||||
| Total current assets | 2,654.8 | 2,625.5 | |||||||||
| Long-term marketable securities | 19.7 | — | |||||||||
| Computer equipment, software, furniture and leasehold improvements, net | 193.6 | 192.8 | |||||||||
| Operating lease right-of-use assets | 361.8 | 416.7 | |||||||||
| Intangible assets, net | 498.2 | 199.3 | |||||||||
| Goodwill | 3,579.2 | 2,706.5 | |||||||||
| Deferred income taxes, net | 740.4 | 763.1 | |||||||||
| Long-term other assets | 483.3 | 375.9 | |||||||||
| Total assets | $ | 8,531.0 | $ | 7,279.8 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 133.6 | $ | 122.5 | |||||||
| Accrued compensation | 284.3 | 322.6 | |||||||||
| Accrued income taxes | 52.6 | 42.6 | |||||||||
| Deferred revenue | 2,563.0 | 2,500.9 | |||||||||
| Operating lease liabilities | 89.7 | 71.4 | |||||||||
| Other accrued liabilities | 158.3 | 194.7 | |||||||||
| Total current liabilities | 3,281.5 | 3,254.7 | |||||||||
| Long-term deferred revenue | 779.9 | 859.3 | |||||||||
| Long-term operating lease liabilities | 333.0 | 396.0 | |||||||||
| Long-term income taxes payable | 22.0 | 15.9 | |||||||||
| Long-term deferred income taxes | 52.0 | 11.4 | |||||||||
| Long-term notes payable, net | 2,626.8 | 1,637.2 | |||||||||
| Long-term other liabilities | 155.9 | 139.8 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock and additional paid-in capital | 2,821.4 | 2,578.9 | |||||||||
| Accumulated other comprehensive loss | (102.4) | (125.9) | |||||||||
| Accumulated deficit | (1,439.1) | (1,487.5) | |||||||||
| Total stockholders’ equity | 1,279.9 | 965.5 | |||||||||
| Total liabilities and stockholders’ equity | $ | 8,531.0 | $ | 7,279.8 |
See accompanying Notes to Condensed Consolidated Financial Statements.
AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Nine Months Ended October 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | 407.9 | $ | 296.9 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation, amortization and accretion | 113.9 | 92.2 | |||||||||
| Stock-based compensation expense | 409.8 | 291.5 | |||||||||
| Deferred income taxes | 15.4 | 13.0 | |||||||||
| Other | 13.1 | 48.6 | |||||||||
| Changes in operating assets and liabilities, net of business combinations: | |||||||||||
| Accounts receivable | 70.0 | 112.8 | |||||||||
| Prepaid expenses and other assets | (138.8) | (61.6) | |||||||||
| Accounts payable and other liabilities | (67.4) | 42.3 | |||||||||
| Deferred revenue | (28.4) | (78.3) | |||||||||
| Accrued income taxes | 13.0 | 22.2 | |||||||||
| Net cash provided by operating activities | 808.5 | 779.6 | |||||||||
| Investing activities: | |||||||||||
| Purchases of marketable securities | (56.5) | (21.0) | |||||||||
| Sales and maturities of marketable securities | 4.0 | 17.0 | |||||||||
| Capital expenditures | (49.5) | (67.6) | |||||||||
| Purchases of developed technologies | (9.6) | (4.8) | |||||||||
| Business combinations, net of cash acquired | (1,185.1) | (44.8) | |||||||||
| Other investing activities | (2.3) | (55.5) | |||||||||
| Net cash used in investing activities | (1,299.0) | (176.7) | |||||||||
| Financing activities: | |||||||||||
| Proceeds from issuance of common stock, net of issuance costs | 113.3 | 112.9 | |||||||||
| Taxes paid related to net share settlement of equity awards | (147.8) | (105.0) | |||||||||
| Repurchases of common stock | (482.7) | (399.4) | |||||||||
| Proceeds from debt, net of discount | 997.0 | — | |||||||||
| Repayment of debt | — | (450.0) | |||||||||
| Other financing activities | (6.5) | (2.5) | |||||||||
| Net cash provided by (used in) financing activities | 473.3 | (844.0) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (6.1) | 3.4 | |||||||||
| Net decrease in cash and cash equivalents | (23.3) | (237.7) | |||||||||
| Cash and cash equivalents at beginning of period | 1,772.2 | 1,774.7 | |||||||||
| Cash and cash equivalents at end of period | $ | 1,748.9 | $ | 1,537.0 | |||||||
| Supplemental cash flow disclosure: | |||||||||||
| Non-cash financing activities: | |||||||||||
| Fair value of common stock issued to settle liability-classified restricted stock units | $ | 2.7 | $ | 28.7 | |||||||
| Fair value of common stock issued related to business combination (See Note 8) | $ | 2.6 | $ | — |
See accompanying Notes to Condensed Consolidated Financial Statements.
AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Tables in millions, except share and per share data, or as otherwise noted)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements of Autodesk, Inc. (“Autodesk,” “we,” “us,” “our,” or the “Company”) as of October 31, 2021, and for the three and nine months ended October 31, 2021 and 2020, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information along with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In management’s opinion, Autodesk made all adjustments (consisting of normal, recurring and non-recurring adjustments) during the quarter that were considered necessary for the fair statement of the financial position and operating results of the Company. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. In March 2020, the World Health Organization declared the outbreak of a disease caused by a novel strain of the coronavirus (COVID-19) to be a pandemic. This pandemic has created and may continue to create significant uncertainty in the macroeconomic environment which, in addition to other unforeseen effects of this pandemic, may adversely impact our results of operations. As the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve our estimates may change materially in future periods. In addition, the results of operations for the three and nine months ended October 31, 2021, are not necessarily indicative of the results for the entire fiscal year ending January 31, 2022, or for any other period. Further, the balance sheet as of January 31, 2021, has been derived from the audited Consolidated Balance Sheet as of this date. There have been no material changes, other than what is discussed herein, to Autodesk's significant accounting policies as compared to the significant accounting policies disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2021. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes, together with management’s discussion and analysis of financial position and results of operations, contained in Autodesk’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed on March 19, 2021.
Change in presentation and immaterial correction of an error
During the quarter ended July 31, 2021, the Company changed its presentation on the Condensed Consolidated Balance Sheet for intangible assets. These amounts were previously presented in “Developed technologies, net” and “Long-term other assets” and are now presented as “Intangible assets, net.” Accordingly, prior period amounts have been reclassified to conform to the current period presentation. This presentation change did not impact “Total assets” on the Condensed Consolidated Balance Sheets and had no impact on the Company's Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income, and Condensed Consolidated Statements of Cash Flows.
The effects of the change on the Consolidated Balance Sheet as of January 31, 2021, was as follows:
| As Reported January 31, 2021 | Effect of Change in Presentation | As Adjusted January 31, 2021 | |||||||||||||||
| Intangible assets, net | $ | 88.6 | $ | 110.7 | $ | 199.3 | |||||||||||
| Long-term other assets | 486.6 | (110.7) | 375.9 | ||||||||||||||
| Total assets | 7,279.8 | — | 7,279.8 |
During the quarter ended April 30, 2021, the Company changed its presentation on the Condensed Consolidated Balance Sheets for investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans, including correcting the classification as current and non-current assets. These amounts were previously presented as current “Marketable securities” and are now presented as “Prepaid expenses and other current assets” and “Long-term other assets” on the Condensed Consolidated Balance Sheets. Accordingly, prior period amounts have been reclassified to conform to the current period presentation. These presentation and classification changes did not impact “Total assets” on the Condensed Consolidated Balance Sheets and had no impact on the Company's Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statement of Cash Flows.
The effects of the changes on the Consolidated Balance Sheets as of January 31, 2021, were as follows:
| As Reported January 31, 2021 | Effect of Changes in Presentation | As Adjusted January 31, 2021 | |||||||||||||||||||||||||||
| Marketable securities | $ | 85.0 | $ | (81.0) | $ | 4.0 | |||||||||||||||||||||||
| Prepaid and other current assets | 198.9 | 7.3 | 206.2 | ||||||||||||||||||||||||||
| Long-term other assets | 412.9 | 73.7 | 486.6 | ||||||||||||||||||||||||||
| Total current assets | 2,699.2 | (73.7) | 2,625.5 | ||||||||||||||||||||||||||
| Total assets | 7,279.8 | — | 7,279.8 |
2. Recently Issued Accounting Standards
With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or adopted by the Company during the nine months ended October 31, 2021, that are applicable to the Company.
Recently issued accounting standards not yet adopted
In March 2020, FASB issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU No. 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020, through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. Autodesk will apply the expedients in ASU No. 2020-04 through December 31, 2022. Autodesk does not believe ASU No. 2020-04 will have a material impact on its consolidated financial statements.
In November 2021, FASB issued ASU No. 2021-08, “Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU No. 2021-08”), which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606 “Revenue from Contracts with Customers” (Topic 606). ASU No. 2021-08 allows an acquirer to assess how the acquiree applied Topic 606 to determine what to record for acquired revenue contracts. Historically, such amounts were recognized by the acquirer at fair value in accordance with Topic 805. The amendments are effective for Autodesk's fiscal year beginning February 1, 2023. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. Autodesk is currently evaluating the impact that the adoption of ASU No. 2021-08 will have on its consolidated statements of financial condition and results of operations.
3. Revenue Recognition
Revenue Disaggregation
Autodesk recognizes revenue from the sale of (1) product subscriptions, cloud service offerings, and enterprise business agreements (“EBAs”), (2) renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license, and (3) consulting, training, and other goods and services. The three categories are presented as line items on Autodesk's Condensed Consolidated Statements of Operations.
Information regarding the components of Autodesk's net revenue from contracts with customers by product family, geographic location, sales channel, and product type is as follows:
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net revenue by product family: | |||||||||||||||||||||||
| Architecture, Engineering and Construction | $ | 511.1 | $ | 419.4 | $ | 1,432.4 | $ | 1,199.1 | |||||||||||||||
| AutoCAD and AutoCAD LT | 318.4 | 278.8 | 907.9 | 812.9 | |||||||||||||||||||
| Manufacturing | 225.0 | 194.1 | 630.0 | 562.5 | |||||||||||||||||||
| Media and Entertainment | 63.0 | 54.0 | 176.5 | 159.9 | |||||||||||||||||||
| Other | 8.3 | 6.1 | 28.0 | 16.8 | |||||||||||||||||||
| Total net revenue | $ | 1,125.8 | $ | 952.4 | $ | 3,174.8 | $ | 2,751.2 | |||||||||||||||
| Net revenue by geographic area: | |||||||||||||||||||||||
| Americas | |||||||||||||||||||||||
| U.S. | $ | 383.2 | $ | 328.5 | $ | 1,054.5 | $ | 938.6 | |||||||||||||||
| Other Americas | 78.7 | 64.4 | 221.9 | 188.0 | |||||||||||||||||||
| Total Americas | 461.9 | 392.9 | 1,276.4 | 1,126.6 | |||||||||||||||||||
| Europe, Middle East and Africa | 433.2 | 364.3 | 1,225.9 | 1,063.8 | |||||||||||||||||||
| Asia Pacific | 230.7 | 195.2 | 672.5 | 560.8 | |||||||||||||||||||
| Total net revenue | $ | 1,125.8 | $ | 952.4 | $ | 3,174.8 | $ | 2,751.2 | |||||||||||||||
| Net revenue by sales channel: | |||||||||||||||||||||||
| Indirect | $ | 729.3 | $ | 656.2 | $ | 2,092.8 | $ | 1,918.9 | |||||||||||||||
| Direct | 396.5 | 296.2 | 1,082.0 | 832.3 | |||||||||||||||||||
| Total net revenue | $ | 1,125.8 | $ | 952.4 | $ | 3,174.8 | $ | 2,751.2 | |||||||||||||||
| Net revenue by product type: | |||||||||||||||||||||||
| Design | $ | 994.4 | $ | 847.7 | $ | 2,823.5 | $ | 2,466.8 | |||||||||||||||
| Make | 93.9 | 76.5 | 265.0 | 214.9 | |||||||||||||||||||
| Other | 37.5 | 28.2 | 86.3 | 69.5 | |||||||||||||||||||
| Total net revenue | $ | 1,125.8 | $ | 952.4 | $ | 3,174.8 | $ | 2,751.2 | |||||||||||||||
Payments for product subscriptions, industry collections, cloud subscriptions, and maintenance subscriptions are typically due up front with payment terms of 30 to 45 days. Payments on EBAs are typically due in annual installments over the contract term, with payment terms of 30 to 60 days. Autodesk does not have any material variable consideration, such as obligations for returns, refunds, warranties, or amounts due to customers for which significant estimation or judgment is required as of the reporting date.
Remaining performance obligations consist of total short-term, long-term, and unbilled deferred revenue. As of October 31, 2021, Autodesk had remaining performance obligations of $4.23 billion, which represents the total contract price allocated to remaining performance obligations, which are generally recognized over the next three years. We expect to recognize $2.88 billion or 68% of our remaining performance obligations as revenue during the next 12 months. We expect to recognize the remaining $1.35 billion or 32% of our remaining performance obligations as revenue thereafter.
The amount of remaining performance obligations may be impacted by the specific timing, duration, and size of customer subscription and support agreements, varying billing cycles of such agreements, the specific timing of customer renewals, and foreign currency fluctuations.
Contract Balances
We receive payments from customers based on a billing schedule as established in our contracts. Contract assets relate to performance completed in advance of scheduled billings. Contract assets were not material as of October 31, 2021. Deferred
revenue relates to billings in advance of performance under the contract. The primary changes in our contract assets and deferred revenues are due to our performance under the contracts and billings.
Revenue recognized during the three months ended October 31, 2021 and 2020, that was included in the deferred revenue balances at January 31, 2021 and 2020, was $568.9 million and $481.9 million, respectively. Revenue recognized during the nine months ended October 31, 2021 and 2020, that was included in the deferred revenue balances at January 31, 2021 and 2020, was $2.13 billion and $1.91 billion, respectively. The satisfaction of performance obligations typically lags behind payments received under revenue contracts from customers.
4. Concentration of Credit Risk
Autodesk places its cash, cash equivalents, and marketable securities in highly liquid instruments with, and in the custody of, multiple diversified financial institutions globally with high credit ratings, and limits the amounts invested with any one institution, type of security, and issuer. Autodesk’s primary commercial banking relationship is with Citigroup Inc. and its global affiliates. Citibank, N.A., an affiliate of Citigroup, is one of the lead lenders and an agent in the syndicate of Autodesk’s $1.5 billion revolving credit facility. See Note 14, “Borrowing Arrangements,” in the Notes to Condensed Consolidated Financial Statements for further discussion.
Total sales to the Company's largest distributor Tech Data Corporation and its global affiliates (“Tech Data”) accounted for 37% and 36% of Autodesk’s total net revenue for the three and nine months ended October 31, 2021, respectively. Total sales to Tech Data accounted for 37% of Autodesk’s total net revenue for both the three and nine months ended October 31, 2020. The majority of the net revenue from sales to Tech Data is for sales made outside of the United States. In addition, Tech Data accounted for 22% and 26% of trade accounts receivable at October 31, 2021, and January 31, 2021, respectively. Ingram Micro Inc. (“Ingram Micro”) accounted for 9% of Autodesk's total net revenue during both the three and nine months ended October 31, 2021. Total sales to Ingram Micro accounted for 10% of Autodesk’s total net revenue for both the three and nine months ended October 31, 2020. No other customer accounted for more than 10% of Autodesk's total net revenue or trade accounts receivable for each of the respective periods.
5. Financial Instruments
The following tables summarize the Company's financial instruments' amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category as of October 31, 2021, and January 31, 2021:
| October 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||||
| Cash equivalents (1): | |||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | 1,016.8 | $ | — | $ | — | $ | 1,016.8 | $ | 1,016.8 | $ | — | $ | — | |||||||||||||||||||||||||||||||||
| U.S. government securities | 20.0 | — | — | 20.0 | — | 20.0 | — | ||||||||||||||||||||||||||||||||||||||||
| Commercial paper | 18.2 | — | — | 18.2 | — | 18.2 | — | ||||||||||||||||||||||||||||||||||||||||
| Municipal bonds | 5.0 | — | — | 5.0 | — | 5.0 | — | ||||||||||||||||||||||||||||||||||||||||
| Other (2) | 3.0 | — | — | 3.0 | 1.9 | 1.1 | — | ||||||||||||||||||||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | 28.0 | — | — | 28.0 | — | 28.0 | — | ||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | 8.8 | — | — | 8.8 | — | 8.8 | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock | — | 6.4 | — | 6.4 | 6.4 | — | — | ||||||||||||||||||||||||||||||||||||||||
| Long-term | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | 19.7 | — | — | 19.7 | — | 19.7 | — | ||||||||||||||||||||||||||||||||||||||||
| Mutual funds (3) (4) | 71.7 | 24.6 | — | 96.3 | 96.3 | — | — | ||||||||||||||||||||||||||||||||||||||||
| Strategic investments derivative assets (4) | 0.1 | 0.4 | (0.3) | 0.2 | — | — | 0.2 | ||||||||||||||||||||||||||||||||||||||||
| Derivative contract assets (4) | 0.6 | 26.2 | (0.1) | 26.7 | — | 26.7 | — | ||||||||||||||||||||||||||||||||||||||||
| Derivative contract liabilities (5) | — | — | (7.8) | (7.8) | — | (7.8) | — | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,191.9 | $ | 57.6 | $ | (8.2) | $ | 1,241.3 | $ | 1,121.4 | $ | 119.7 | $ | 0.2 |
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits, corporate debt securities, and certificates of deposit.
(3)See Note 12, “Deferred Compensation” for more information.
(4)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.
(5)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
| January 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||||
| Cash equivalents (1): | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | $ | 36.0 | $ | — | $ | — | $ | 36.0 | $ | — | $ | 36.0 | $ | — | |||||||||||||||||||||||||||||||||
| Money market funds | 686.9 | — | — | 686.9 | 686.9 | — | — | ||||||||||||||||||||||||||||||||||||||||
| Other (2) | 4.4 | — | — | 4.4 | 4.0 | 0.4 | — | ||||||||||||||||||||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term | |||||||||||||||||||||||||||||||||||||||||||||||
| Other (3) | 4.0 | — | — | 4.0 | — | 4.0 | — | ||||||||||||||||||||||||||||||||||||||||
| Mutual funds (4) (5) | 64.5 | 16.5 | — | 81.0 | 81.0 | — | — | ||||||||||||||||||||||||||||||||||||||||
| Strategic investments derivative asset (5) | 0.1 | 0.4 | (0.3) | 0.2 | — | — | 0.2 | ||||||||||||||||||||||||||||||||||||||||
| Derivative contract assets (5) | 0.4 | 9.8 | (0.4) | 9.8 | — | 9.8 | — | ||||||||||||||||||||||||||||||||||||||||
| Derivative contract liabilities (6) | — | — | (17.5) | (17.5) | — | (17.5) | — | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | 796.3 | $ | 26.7 | $ | (18.2) | $ | 804.8 | $ | 771.9 | $ | 32.7 | $ | 0.2 |
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits and certificates of deposit.
(3)Consists of commercial paper and municipal bonds.
(4)See Note 12, “Deferred Compensation” for more information.
(5)Included in “Prepaid expenses and other current assets,” or “Long-term other assets,” in the accompanying Condensed Consolidated Balance Sheets.
(6)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
The following table summarizes the fair values of investments classified as marketable debt securities by contractual maturity date as of October 31, 2021:
| Fair Value | |||||
| Due within 1 year | $ | 36.8 | |||
| Due in 1 year through 5 years | 19.7 | ||||
| Total | $ | 56.5 |
Autodesk applies fair value accounting for certain financial assets and liabilities, which consist of cash equivalents, marketable securities, and other financial instruments, on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
As of both October 31, 2021, and January 31, 2021, Autodesk had no material unrealized losses, individually and in the aggregate, for marketable debt securities that are in a continuous unrealized loss position for greater than 12 months. Total unrealized gains for securities with net gains in accumulated other comprehensive income were not material for the nine months ended October 31, 2021.
Autodesk monitors all marketable debt securities for potential credit losses by reviewing indicators such as, but not limited to, current credit rating, change in credit rating, credit outlook, and default risk. There were no allowances for credit losses as of both October 31, 2021, and January 31, 2021. There were no write offs of accrued interest receivables for the nine months ended October 31, 2021 and 2020.
There was no realized gain or loss for the sales or redemptions of marketable debt securities during both the nine months ended October 31, 2021 and 2020. Realized gains and losses from the sales or redemptions of marketable debt securities are recorded in “Interest and other expense, net” on the Company's Condensed Consolidated Statements of Operations.
Proceeds from the sale and maturity of marketable debt securities for the three and nine months ended October 31, 2021, were none and $4.0 million, respectively. Proceeds from the sale and maturity of marketable debt securities for the three and nine months ended October 31, 2020, were $6.0 million and $17.0 million, respectively.
Strategic investment equity securities
As of October 31, 2021, and January 31, 2021, Autodesk had $139.8 million and $134.1 million, respectively, in direct investments in privately held companies. These strategic investment equity securities do not have readily determined fair values, and Autodesk uses the measurement alternative to account for the adjustment to these investments in a given quarter. If Autodesk determines that an impairment has occurred, Autodesk writes down the investment to its fair value.
Adjustments to the carrying value of our strategic investment equity securities with no readily determined fair values measured using the measurement alternative were as follows:
| Nine Months Ended October 31, | Cumulative Amount as of | ||||||||||||||||||||||||||||
| 2021 | 2020 | October 31, 2021 | |||||||||||||||||||||||||||
| Upward adjustments (1) | $ | 7.2 | $ | 3.0 | $ | 23.2 | |||||||||||||||||||||||
| Negative adjustments, including impairments (1) | (10.5) | (36.2) | (71.1) | ||||||||||||||||||||||||||
| Net adjustments | $ | (3.3) | $ | (33.2) | $ | (47.9) |
(1)Included in “Interest and other expense, net” on the Company's Condensed Consolidated Statements of Operations.
During the three and nine months ended October 31, 2021, Autodesk recognized gains of none and $8.1 million on the disposition of strategic investment equity securities, respectively. There were no gains or losses recognized on the disposition of strategic investment equity securities for both the three and nine months ended October 31, 2020.
Foreign currency contracts designated as cash flow hedges
Autodesk uses foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. These currency collars and forward contracts are designated and documented as cash flow hedges. The notional amounts of these contracts are presented net settled and were $941.3 million at October 31, 2021, and $1.14 billion at January 31, 2021. Outstanding contracts are recognized as either assets or liabilities on the Company's Condensed Consolidated Balance Sheet at fair value. The majority of the net gain of $14.2 million remaining in “Accumulated other comprehensive loss” as of October 31, 2021, is expected to be recognized into earnings within the next 24 months.
The location and amount of gain or loss recognized in income on cash flow hedges together with the total amount of income or expense presented in the Company's Condensed Consolidated Statements of Operations where the effects of the hedge are recorded were as follows for the three and nine months ended October 31, 2021 and 2020:
| Three Months Ended October 31, 2021 | ||||||||||||||||||||||||||||||||||||||
| Net revenue | Cost of revenue | Operating expenses | ||||||||||||||||||||||||||||||||||||
| Subscription revenue | Maintenance revenue | Cost of subscription and maintenance revenue | Marketing and sales | Research and development | General and administrative | |||||||||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded | $ | 1,070.7 | $ | 17.6 | $ | 74.8 | $ | 419.4 | $ | 282.1 | $ | 112.8 | ||||||||||||||||||||||||||
| (Loss) on cash flow hedging relationships in Subtopic ASC 815-20 | ||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||
| Amount of (loss) reclassified from accumulated other comprehensive income into income | $ | (3.0) | $ | — | $ | (0.3) | $ | (1.0) | $ | (0.3) | $ | (0.5) | ||||||||||||||||||||||||||
| Nine Months Ended October 31, 2021 | ||||||||||||||||||||||||||||||||||||||
| Net revenue | Cost of revenue | Operating expenses | ||||||||||||||||||||||||||||||||||||
| Subscription revenue | Maintenance Revenue | Cost of subscription and maintenance revenue | Marketing and sales | Research and development | General and administrative | |||||||||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded | $ | 3,034.9 | $ | 53.6 | $ | 219.3 | $ | 1,195.3 | $ | 824.5 | $ | 344.1 | ||||||||||||||||||||||||||
| (Loss) on cash flow hedging relationships in Subtopic ASC 815-20 | ||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||
| Amount of (loss) reclassified from accumulated other comprehensive income into income | $ | (12.4) | $ | (1.2) | $ | — | $ | (0.4) | $ | (0.5) | $ | (0.1) |
| Three Months Ended October 31, 2020 | ||||||||||||||||||||||||||||||||||||||
| Net Revenue | Cost of revenue | Operating expenses | ||||||||||||||||||||||||||||||||||||
| Subscription Revenue | Maintenance Revenue | Cost of subscription and maintenance revenue | Marketing and sales | Research and development | General and administrative | |||||||||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded | $ | 884.4 | $ | 39.8 | $ | 60.7 | $ | 359.3 | $ | 233.0 | $ | 98.8 | ||||||||||||||||||||||||||
| Gain (loss) on cash flow hedging relationships in Subtopic ASC 815-20 | ||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||
| Amount of gain (loss) reclassified from accumulated other comprehensive income into income | $ | (0.3) | $ | 0.1 | $ | 0.4 | $ | 1.6 | $ | 0.3 | $ | 0.7 | ||||||||||||||||||||||||||
| Nine Months Ended October 31, 2020 | ||||||||||||||||||||||||||||||||||||||
| Net revenue | Cost of revenue | Operating expenses | ||||||||||||||||||||||||||||||||||||
| Subscription revenue | Maintenance Revenue | Cost of subscription and maintenance revenue | Marketing and sales | Research and development | General and administrative | |||||||||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded | $ | 2,528.6 | $ | 153.1 | $ | 176.6 | $ | 1,051.5 | $ | 682.9 | $ | 296.8 | ||||||||||||||||||||||||||
| Gain (loss) on cash flow hedging relationships in Subtopic ASC 815-20 | ||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||||||||||||||||||||
| Amount of gain (loss) reclassified from accumulated other comprehensive income into income | $ | 3.4 | $ | 0.7 | $ | 0.1 | $ | 0.3 | $ | 0.2 | $ | 0.1 |
Interest rate locks designated as cash flow hedges
During the fiscal quarter ended October 31, 2021, Autodesk entered into interest rate lock arrangements to mitigate the risk of changes in interest rates prior to completion of a debt offering. The interest rate locks hedged the cash flow risk for each of the interest payments on the planned fixed-rate debt issue. The interest rate lock hedges were terminated in October 2021 in connection with the debt offering completed in that month. See Note 14, “Borrowing Arrangements,” for further discussion. The aggregate fair value of the terminated interest rate lock hedges, net of tax, in the amount of $4.0 million have been classified as an increase to accumulated other comprehensive income and will be amortized as a reduction to interest expense over the term of the related debt issuance. The Company had cash inflows of $4.0 million in the fiscal quarter ended October 31, 2021, associated with the termination of the interest rate lock arrangements, included in “Other financing activities” in our Condensed Consolidated Statement of Cash Flows.
Derivatives not designated as hedging instruments
Autodesk uses foreign currency contracts that are not designated as hedging instruments to reduce the exchange rate risk associated primarily with foreign currency denominated receivables, payables, and cash. The notional amounts of these foreign currency contracts are presented net settled and were $71.2 million at October 31, 2021, and $434.5 million at January 31, 2021.
Fair Value of Derivative Instruments
The fair values of derivative instruments in Autodesk’s Condensed Consolidated Balance Sheets were as follows as of October 31, 2021, and January 31, 2021:
| Balance Sheet Location | Fair Value at | ||||||||||||||||
| October 31, 2021 | January 31, 2021 | ||||||||||||||||
| Derivative Assets | |||||||||||||||||
| Foreign currency contracts designated as cash flow hedges | Prepaid expenses and other current assets | $ | 18.2 | $ | 4.7 | ||||||||||||
| Derivatives not designated as hedging instruments | Prepaid expenses and other current assets and long-term other assets | 8.7 | 5.3 | ||||||||||||||
| Total derivative assets | $ | 26.9 | $ | 10.0 | |||||||||||||
| Derivative Liabilities | |||||||||||||||||
| Foreign currency contracts designated as cash flow hedges | Other accrued liabilities | $ | 5.9 | $ | 16.5 | ||||||||||||
| Derivatives not designated as hedging instruments | Other accrued liabilities | 1.9 | 1.0 | ||||||||||||||
| Total derivative liabilities | $ | 7.8 | $ | 17.5 |
The effects of derivatives designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three and nine months ended October 31, 2021 and 2020 (amounts presented include any income tax effects):
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Amount of gain (loss) recognized in accumulated other comprehensive income on derivatives (effective portion) | $ | 14.7 | $ | 6.7 | $ | 24.6 | $ | (6.8) | |||||||||||||||
| Amount and location of (loss) gain reclassified from accumulated other comprehensive loss into income (effective portion) | |||||||||||||||||||||||
| Net revenue | $ | (3.0) | $ | (0.2) | $ | (13.6) | $ | 4.1 | |||||||||||||||
| Cost of revenue | (0.3) | 0.4 | — | 0.1 | |||||||||||||||||||
| Operating expenses | (1.8) | 2.6 | (1.0) | 0.6 | |||||||||||||||||||
| Total | $ | (5.1) | $ | 2.8 | $ | (14.6) | $ | 4.8 |
The effects of derivatives not designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three and nine months ended October 31, 2021 and 2020 (amounts presented include any income tax effects):
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Amount and location of (loss) gain recognized on derivatives in net income | |||||||||||||||||||||||
| Interest and other expense, net | $ | 5.9 | $ | (0.8) | $ | 11.1 | $ | (6.2) |
6. Equity Compensation
Restricted Stock Units
A summary of restricted stock activity for the nine months ended October 31, 2021, is as follows:
| Unvested restricted stock units | Weighted average grant date fair value per share | ||||||||||
| (in thousands) | |||||||||||
| Unvested restricted stock units at January 31, 2021 | 4,503.9 | $ | 191.91 | ||||||||
| Granted | 1,895.0 | 290.63 | |||||||||
| Vested | (1,847.8) | 177.88 | |||||||||
| Canceled/Forfeited | (430.3) | 221.52 | |||||||||
| Performance Adjustment (1) | (7.9) | 137.02 | |||||||||
| Unvested restricted stock units at October 31, 2021 | 4,112.9 | $ | 243.72 |
(1)Based on Autodesk's financial results and relative total stockholder return for the fiscal 2021 performance period. The performance stock units were attained at rates ranging from 103.0% to 108.0% of the target award.
The fair value of the shares vested during the nine months ended October 31, 2021 and 2020, was $516.5 million and $400.6 million, respectively.
During the nine months ended October 31, 2021, Autodesk granted 1.6 million restricted stock units. Restricted stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting right.
Autodesk recorded stock-based compensation expense related to restricted stock units of $109.9 million and $74.7 million during the three months ended October 31, 2021 and 2020, respectively. Autodesk recorded stock-based compensation expense related to restricted stock units of $314.4 million and $222.9 million during the nine months ended October 31, 2021 and 2020, respectively.
During the nine months ended October 31, 2021 and 2020, Autodesk settled liability-classified awards in the amount of $2.7 million and $28.7 million, respectively. The ultimate number of shares earned was based on the Autodesk closing stock price on the vesting date. As these awards were settled in a fixed dollar amount of shares, the awards were accounted for as a liability-classified award and were expensed using the straight-line method over the vesting period.
During the nine months ended October 31, 2021, Autodesk granted 0.2 million performance stock units for which the ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units vested during the nine months ended October 31, 2021, are based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee and, as applicable, total stockholder return compared against companies in the S&P North American Technology Software Index with a market capitalization over $2.0 billion (“Relative TSR”). The fair value of the performance stock units is expensed using the accelerated attribution method over the three-year vesting period and have the following vesting schedule:
-
Up to one third of the performance stock units may vest following year one, depending upon the achievement of the performance criteria for fiscal 2022 as well as 1-year Relative TSR (covering year one).
-
Up to one third of the performance stock units may vest following year two, depending upon the achievement of the performance criteria for year two as well as 2-year Relative TSR (covering years one and two).
-
Up to one third of the performance stock units may vest following year three, depending upon the achievement of the performance criteria for year three as well as 3-year Relative TSR (covering years one, two and three).
Additionally, during the nine months ended October 31, 2021, Autodesk granted 0.1 million performance stock units, as part of a program offering certain employees the option to receive equity in lieu of the opportunity to receive an annual cash incentive award. The ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units are based on revenue
and Non-GAAP income from operations targets adopted by the Compensation and Human Resource Committee. The fair value of these performance stock units is expensed using the accelerated attribution method over the one-year vesting period.
Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights.
Autodesk recorded stock-based compensation expense related to performance stock units of $18.1 million and $8.7 million for the three months ended October 31, 2021 and 2020, respectively. Autodesk recorded stock-based compensation expense related to performance stock units of $50.1 million and $26.2 million for the nine months ended October 31, 2021 and 2020, respectively.
Common Stock
Autodesk agreed to issue a fixed amount of $4.9 million in common stock at a future date to certain employees in connection with a fiscal 2021 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the closing price of Autodesk’s common stock at the issuance date. During the three months ended October 31, 2021, Autodesk issued 8,300 shares at an aggregate fair value of $2.7 million. Remaining shares to be issued are estimated to be 8,000 based on the closing price of Autodesk’s common stock on October 29, 2021, the last trading day of the fiscal quarter. The awards are accounted for as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period.
Autodesk issued 73,632 shares of restricted common stock to certain employees in connection with a fiscal 2021 acquisition. These shares of restricted common stock are subject to forfeiture by the employee if employment terminates prior to the three-year employment period. The fair value of the restricted common stock is recorded as compensation for post-acquisition services and recognized as expense using the straight-line method over the three-year repurchase period.
Autodesk issued 9,277 shares of restricted common stock to certain employees in connection with a fiscal 2022 acquisition. These shares of restricted common stock were recorded as “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets and will be amortized to stock-based compensation expense for post-acquisition services using the straight-line method over the two-year vesting period. See Note 8, “Acquisitions,” for further discussion.
Autodesk agreed to issue a fixed amount of $13.1 million in shares of common stock to certain employees in connection with a fiscal 2022 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the volume weighted average closing price (“VWAP”) of Autodesk’s common stock for the ninety consecutive trading day period ending on the release date. Shares to be issued are estimated to be 43,000 based on the VWAP of Autodesk’s common stock for the ninety consecutive trading day period ending October 29, 2021, the last trading day of the fiscal quarter. The awards are accrued as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period. See Note 8, “Acquisitions,” for further discussion.
Autodesk recorded stock-based compensation expense related to common stock shares of $4.7 million and $11.6 million for the three and nine months ended October 31, 2021, respectively. Autodesk recorded no stock-based compensation expense related to common stock shares for both the three and nine months ended October 31, 2020.
1998 Employee Qualified Stock Purchase Plan (“ESPP”)
Under Autodesk’s ESPP, which was approved by stockholders in 1998, eligible employees may purchase shares of Autodesk’s common stock at their discretion using up to 15% of their eligible compensation, subject to certain limitations, at 85% of the lower of Autodesk's closing price (fair market value) on the offering date or the exercise date. The offering period for ESPP awards consists of four, six-month exercise periods within a 24-month offering period.
A summary of the ESPP activity for the three and nine months ended October 31, 2021 and 2020, is as follows:
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Issued shares (in millions) | 0.4 | 0.4 | 0.9 | 0.9 | |||||||||||||||||||
| Average price of issued shares | $ | 133.00 | $ | 122.93 | $ | 130.13 | $ | 122.73 | |||||||||||||||
| Weighted average grant date fair value of shares granted under the ESPP (1) | $ | 83.75 | $ | 78.26 | $ | 84.21 | $ | 55.98 |
(1)Calculated as of the award grant date using the Black-Scholes Merton (“BSM”) option pricing model.
Stock-based Compensation Expense
The following table summarizes stock-based compensation expense for the three and nine months ended October 31, 2021 and 2020, respectively, as follows:
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Cost of subscription and maintenance revenue | $ | 5.5 | $ | 4.5 | $ | 18.3 | $ | 12.3 | |||||||||||||||
| Cost of other revenue | 2.3 | 1.6 | 6.5 | 4.7 | |||||||||||||||||||
| Marketing and sales | 60.0 | 45.4 | 172.8 | 129.5 | |||||||||||||||||||
| Research and development | 56.6 | 35.4 | 163.4 | 103.6 | |||||||||||||||||||
| General and administrative | 19.3 | 10.5 | 51.7 | 41.4 | |||||||||||||||||||
| Stock-based compensation expense related to stock awards and ESPP purchases | 143.7 | 97.4 | 412.7 | 291.5 | |||||||||||||||||||
| Tax benefit | (26.3) | (2.0) | (46.4) | (2.3) | |||||||||||||||||||
| Stock-based compensation expense related to stock awards and ESPP purchases, net of tax | $ | 117.4 | $ | 95.4 | $ | 366.3 | $ | 289.2 | |||||||||||||||
Stock-based Compensation Expense Assumptions
Autodesk determines the grant date fair value of its share-based payment awards using a BSM option pricing model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case Autodesk uses a binomial-lattice model (e.g., Monte Carlo simulation model). The Monte Carlo simulation model uses multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:
| Three Months Ended October 31, 2021 | Three Months Ended October 31, 2020 | ||||||||||||||||||||||
| Performance Stock Units | ESPP | Performance Stock Units | ESPP | ||||||||||||||||||||
| Range of expected volatility | N/A | 29.5 - 36.6% | N/A | 41.5 - 45.0% | |||||||||||||||||||
| Range of expected lives (in years) | N/A | 0.5- 2.0 | N/A | 0.5 - 2.0 | |||||||||||||||||||
| Expected dividends | N/A | —% | N/A | —% | |||||||||||||||||||
| Range of risk-free interest rates | N/A | 0.1- 0.2% | N/A | 0.1% | |||||||||||||||||||
| Nine Months Ended October 31, 2021 | Nine Months Ended October 31, 2020 | ||||||||||||||||||||||
| Performance Stock Units | ESPP | Performance Stock Units | ESPP | ||||||||||||||||||||
| Range of expected volatilities | 36.9% | 29.5 - 41.8% | 50.7% | 39.4 - 45.8% | |||||||||||||||||||
| Range of expected lives (in years) | N/A | 0.5 - 2.0 | N/A | 0.5 - 2.0 | |||||||||||||||||||
| Expected dividends | —% | —% | —% | —% | |||||||||||||||||||
| Range of risk-free interest rates | 0.1% | 0.1 - 0.2% | 0.3% | 0.1 - 0.5% |
Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures: (1) a measure of historical volatility in the trading market for the Company’s common stock, and (2) the implied volatility of traded forward call options to purchase shares of the Company’s common stock. The expected volatility for performance stock units subject to market conditions includes the expected volatility of Autodesk's peer companies within the S&P North American Technology Software Index with a market capitalization over $2.0 billion, depending on the award type.
The range of expected lives of ESPP awards are based upon the four six-month exercise periods within a 24-month offering period.
Autodesk does not currently pay, and does not anticipate paying in the foreseeable future, any cash dividends. Consequently, an expected dividend yield of zero is used in the BSM option pricing model and the Monte Carlo simulation model.
The risk-free interest rate used in the BSM option pricing model and the Monte Carlo simulation model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives.
Autodesk recognizes expense only for the stock-based awards that ultimately vest. Autodesk accounts for forfeitures of our stock-based awards as those forfeitures occur.
7. Income Tax
Autodesk had income tax expense of $50.7 million, relative to pre-tax income of $187.4 million for the three months ended October 31, 2021, and income tax expense of $23.9 million, relative to pre-tax income of $156.1 million for the three months ended October 31, 2020. Income tax expense for the three months ended October 31, 2021, reflects an increase in tax expense as a result of the jurisdictional mix of year-to-date earnings. The quarter over quarter comparison also reflects the U.S. valuation allowance release as of January 31, 2021.
Autodesk had income tax expense of $49.7 million, relative to pre-tax income of $457.6 million for the nine months ended October 31, 2021, and income tax expense of $78.7 million, relative to pre-tax income of $375.6 million for the nine months ended October 31, 2020. Income tax expense for the nine months ended October 31, 2021, reflects a decrease in tax expense due to a discrete tax benefit primarily related to a Supreme Court decision in India on the taxability of software license payments to nonresidents and the associated withholding taxes, offset by an increase in tax expense from jurisdictional mix of year-to-date earnings.
Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. We have maintained a valuation allowance on our Netherlands, Canada, California, Michigan and U.S. capital loss deferred tax assets as it is more likely than not that some or all of the deferred tax assets will not be realized.
As of October 31, 2021, the Company had $204.6 million of gross unrecognized tax benefits, of which $33.5 million would reduce our valuation allowance, if recognized. The remaining $171.1 million would impact the effective tax rate, if recognized. It is possible that the amount of unrecognized tax benefits will decrease in the next 12 months for an audit settlement of approximately $8.0 million.
8**.** Acquisitions
The results of operations for the following acquisitions are included in the accompanying Condensed Consolidated Statements of Operations since their respective acquisition dates. Pro forma results of operations have not been presented because the effects of these acquisitions were not material to Autodesk’s Condensed Consolidated Financial Statements.
During the three months ended October 31, 2021, Autodesk completed one business combination. The acquisition-date fair value of the consideration transferred totaled $33.5 million, which consisted of $33.3 million of cash and $0.2 million of assumed liabilities on behalf of the seller.
Upchain
On May 11, 2021, Autodesk acquired 100% of the outstanding stock of Upchain Inc. (“Upchain”), a cloud-based provider of product lifecycle management and product data management systems, for approximately $126.7 million in cash and Autodesk will issue a fixed amount of $13.1 million in common stock at future dates to certain employees in connection with the acquisition for a total consideration of $139.8 million. Of the total consideration transferred, $123.6 million is considered purchase consideration. Of the remaining amount, $13.1 million is accounted for as liability-classified awards and recognized as compensation expense using the straight-line method over the vesting period, and $3.1 million was recorded as stock-based compensation expense during the fiscal quarter ended July 31, 2021. Issuance of the $13.1 million fixed value in common
stock is dependent on the respective employees’ continued employment and vests 40% and 60% on the first and second anniversaries of the closing date, respectively. The number of shares will be determined based on the VWAP of Autodesk’s common stock for the ninety consecutive trading day period ending on the release date. The number of shares is estimated to be 43,000 based on the VWAP of Autodesk’s common stock for the ninety consecutive trading day period ending October 29, 2021, the last trading day of the fiscal quarter. See also Note 6, “Equity Compensation”.
Autodesk expects to integrate Upchain’s unified cloud platform in Autodesk solutions to centralize data management and process management.
Innovyze
On March 31, 2021, Autodesk acquired all of the outstanding stock of Storm UK Holdco Limited, the parent of Innovyze, Inc. (“Innovyze”), a global leader in water infrastructure software. Innovyze is expected to provide comprehensive water modeling solutions that augment Autodesk’s BIM offerings in civil engineering, and is expected to extend Autodesk’s presence into operations and maintenance of water infrastructure assets.
The acquisition-date fair value of the consideration transferred totaled $1,038.1 million, which consisted of $1,035.5 million of cash and 9,277 shares of Autodesk’s restricted common stock at an aggregate fair value of $2.6 million. Of the total consideration transferred, $1,035.5 million is considered purchase consideration. The remaining amount of $2.6 million was recorded in “Prepaid expenses and other current assets” and “Long-term other assets”. The 9,277 shares of restricted common stock are subject to forfeiture until the second anniversary of the acquisition closing date. 50% are released from restriction on both the first and second anniversaries subject to continued employment. See also Note 6, “Equity Compensation”.
Purchase Price Allocation
The acquisitions were accounted for as business combinations, and Autodesk recorded the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of the respective acquisition. The fair values assigned to the identifiable intangible assets acquired were based on estimates and assumptions determined by management. Autodesk recorded the excess of consideration transferred over the aggregate fair values as goodwill. The goodwill recorded was primarily attributable to synergies expected to arise after the respective acquisition. Goodwill of $86.7 million and $376.2 million is deductible for U.S. income tax purposes for Upchain and Innovyze, respectively. The transaction costs related to the acquisitions were not material.
The following table summarizes the fair value of the assets acquired and liabilities assumed by major class for the business combinations that were completed during the three and nine months ended October 31, 2021:
| Innovyze (1) | Upchain | Other | Total | ||||||||||||||||||||
| Developed technologies | $ | 93.0 | $ | 17.6 | $ | 9.4 | $ | 120.0 | |||||||||||||||
| Customer relationships | 221.0 | 10.4 | — | 231.4 | |||||||||||||||||||
| Trade name | 4.0 | 0.4 | — | 4.4 | |||||||||||||||||||
| Backlog | 0.5 | — | — | 0.5 | |||||||||||||||||||
| Goodwill | 764.4 | 98.3 | 24.1 | 886.8 | |||||||||||||||||||
| Deferred revenue and long-term deferred revenue | (12.3) | (2.6) | — | (14.9) | |||||||||||||||||||
| Long-term deferred income taxes | (42.4) | (0.7) | — | (43.1) | |||||||||||||||||||
| Net tangible assets | 7.3 | 0.2 | 7.5 | ||||||||||||||||||||
| Total | $ | 1,035.5 | $ | 123.6 | $ | 33.5 | $ | 1,192.6 |
(1) During the three and nine months ended October 31, 2021, Autodesk recorded an adjustment to the purchase price of the Innovyze acquisition. This adjustment reduced goodwill and decreased the purchase price by $2.8 million.
For the business combinations, the allocation of purchase price consideration to certain assets and liabilities as well as the final amount of purchase consideration are not yet finalized. For the items not yet finalized, Autodesk's estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized are amounts for tax assets and liabilities, deferred revenue, and residual goodwill.
9. Intangible Assets, Net
The following tables summarize the Company's intangible assets, net, as of October 31, 2021, and January 31, 2021:
| October 31, 2021 | |||||||||||||||||||||||
| Gross Carrying Amount (1) | Accumulated Amortization | Net | |||||||||||||||||||||
| Customer relationships | $ | 666.7 | $ | (367.8) | $ | 298.9 | |||||||||||||||||
| Developed technologies | 829.7 | (647.6) | 182.1 | ||||||||||||||||||||
| Trade names and patents | 115.9 | (98.7) | 17.2 | ||||||||||||||||||||
| Other | 0.3 | (0.3) | — | ||||||||||||||||||||
| Total intangible assets | $ | 1,612.6 | $ | (1,114.4) | $ | 498.2 |
(1)Includes the effects of foreign currency translation.
| January 31, 2021 | |||||||||||||||||||||||
| Gross Carrying Amount (1) | Accumulated Amortization | Net | |||||||||||||||||||||
| Customer relationships | $ | 437.3 | $ | (345.1) | $ | 92.2 | |||||||||||||||||
| Developed technologies | 698.4 | (609.8) | 88.6 | ||||||||||||||||||||
| Trade names and patents | 111.5 | (93.0) | 18.5 | ||||||||||||||||||||
| Total intangible assets | $ | 1,247.2 | $ | (1,047.9) | $ | 199.3 |
(1)Includes the effects of foreign currency translation.
10. Cloud Computing Arrangements
Autodesk enters into certain cloud-based software hosting arrangements that are accounted for as service contracts. Costs incurred for these arrangements are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. Autodesk amortizes the capitalized development costs straight-line over the fixed, non-cancellable term of the associated hosting arrangement plus any reasonably certain renewal periods. The capitalized costs are included in “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets. Capitalized costs were $116.5 million and $72.2 million at October 31, 2021, and January 31, 2021, respectively. Accumulated amortization was $11.4 million and $4.9 million at October 31, 2021, and January 31, 2021, respectively. Amortization expense for the three months ended October 31, 2021 and 2020, was $3.7 million and $1.0 million, respectively. Amortization expense for the nine months ended October 31, 2021 and 2020, was $6.5 million and $2.7 million, respectively.
11. Goodwill
Goodwill consists of the excess of the consideration transferred over the fair value of net assets acquired in business combinations. The following table summarizes the changes in the carrying amount of goodwill for the nine months ended October 31, 2021, (in millions):
| Balance as of January 31, 2021 | $ | 2,855.7 | |||||||||
| Less: accumulated impairment losses as of January 31, 2021 | (149.2) | ||||||||||
| Net balance as of January 31, 2021 | 2,706.5 | ||||||||||
| Additions arising from acquisitions during the period | 886.8 | ||||||||||
| Effect of foreign currency translation and measurement period adjustments (1) | (14.1) | ||||||||||
| Balance as of October 31, 2021 | $ | 3,579.2 |
(1)Measurement period adjustments reflect revisions made to the Company's preliminary determination of estimated fair value of assets and liabilities assumed and adjustments to the acquisition purchase price.
Autodesk operates as a single operating segment and single reporting unit. As such, when Autodesk tests goodwill for impairment annually in its fourth fiscal quarter, it is performed on the Company's single reporting unit. Autodesk performs impairment testing more often if circumstances indicate a potential impairment may exist, or if events have affected the composition of reporting units.
When goodwill is assessed for impairment, Autodesk has the option to perform an assessment of qualitative factors of impairment (“optional assessment”) prior to necessitating a quantitative impairment test. Should the optional assessment be used for any given fiscal year, qualitative factors to consider include cost factors; financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market considerations, macroeconomic conditions, and other relevant events and factors affecting the reporting unit. If, after assessing the totality of events or circumstances, it is more likely than not that the fair value of the reporting unit is greater than its carrying value, then performing the quantitative impairment test is unnecessary.
The quantitative impairment test is necessary when either Autodesk does not use the optional assessment or, as a result of the optional assessment, it is not more likely than not that the fair value of the reporting unit is greater than its carrying value. In situations in which an entity’s reporting unit is publicly traded, the fair value of the company may be approximated by its market capitalization in performing the quantitative impairment test.
Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying value. If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in our Condensed Consolidated Statements of Operations. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. The value of Autodesk’s goodwill could also be impacted by future adverse changes such as: (i) declines in Autodesk’s actual financial results, (ii) a sustained decline in Autodesk’s market capitalization, (iii) a significant slowdown in the worldwide economy or the industries Autodesk serves, or (iv) changes in Autodesk’s business strategy.
There was no goodwill impairment during both the three and nine months ended October 31, 2021 and 2020.
12. Deferred Compensation
At October 31, 2021, Autodesk had investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans and a corresponding deferred compensation liability totaling $96.3 million. Of this amount, $7.9 million was classified as current and $88.4 million was classified as non-current in the Condensed Consolidated Balance Sheets. Of the $81.0 million related to the investments in a rabbi trust as of January 31, 2021, $7.3 million was classified as current and $73.7 million was classified as non-current. The current and non-current asset portions of the investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans are recorded in the Condensed Consolidated Balance Sheets under “Prepaid expenses and other current assets” and “Long-term other assets,” respectively. The current and non-current portions of the liability are recorded in the Condensed Consolidated Balance Sheets under “Accrued compensation” and “Long-term other liabilities,” respectively. See Note 1 “Basis of Presentation” for a change in the presentation and immaterial correction of an error on the Condensed Consolidated Balance Sheets for investments in debt and equity securities that are held in a rabbi trust.
Costs to obtain a contract with a customer
Sales commissions earned by our internal sales personnel and our reseller partners are considered incremental and recoverable costs of obtaining a contract with a customer. The ending balance of assets recognized from costs to obtain a contract with a customer was $110.8 million as of October 31, 2021, and $120.9 million as of January 31, 2021. These assets are recorded in “Prepaid expenses and other current assets” and “Long-term other assets” in the Condensed Consolidated Balance Sheets. Amortization expense related to assets recognized from costs to obtain a contract with a customer was $29.6 million and $83.6 million during the three and nine months ended October 31, 2021, respectively. Amortization expense related to assets recognized from costs to obtain a contract with a customer was $23.8 million and $70.2 million during the three and nine months ended October 31, 2020, respectively. Autodesk did not recognize any contract cost impairment losses during the three and nine months ended October 31, 2021 and 2020.
13. Computer Equipment, Software, Leasehold Improvements, and Furniture, Net
Computer equipment, software, leasehold improvements, and furniture and equipment and the related accumulated depreciation were as follows:
| October 31, 2021 | January 31, 2021 | ||||||||||
| Computer hardware, at cost | $ | 133.1 | $ | 153.3 | |||||||
| Computer software, at cost | 55.1 | 57.9 | |||||||||
| Leasehold improvements, land and buildings, at cost | 343.7 | 335.9 | |||||||||
| Furniture and equipment, at cost | 98.8 | 88.4 | |||||||||
| 630.7 | 635.5 | ||||||||||
| Less: Accumulated depreciation | (437.1) | (442.7) | |||||||||
| Computer hardware, software, leasehold improvements, and furniture and equipment, net | $ | 193.6 | $ | 192.8 |
14. Borrowing Arrangements
In October 2021, Autodesk issued $1.0 billion aggregate principal amount of 2.4% notes due December 15, 2031 (“2021 Notes”). Net of a discount of $3.0 million and issuance costs of $9.2 million, Autodesk received net proceeds of $987.8 million from issuance of the 2021 Notes. Both the discount and issuance costs are being amortized to interest expense over the term of the 2021 Notes using the effective interest method. The 2021 Notes were designated as sustainability bonds, the net proceeds of which are used to fund environmentally and socially responsible projects in the following areas: eco-efficient products, production technologies, and processes, sustainable water and wastewater management, renewable energy & energy efficiency, green buildings, pollution prevention and control, and socioeconomic advancement and empowerment.
In September 2021, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders party thereto and Citibank, N.A. (“Citibank”), as administrative agent, which provides for an unsecured revolving loan facility in the aggregate principal amount of $1.5 billion, with an option to be increased up to $2.0 billion. The Credit Agreement replaced and terminated the Company’s existing $650.0 million Amended and Restated Credit Agreement, with an option to be increased up to $1.0 billion, dated as of December 17, 2018, among the Company, the lenders party thereto and Citibank, N.A., as administrative agent. The revolving credit facility is available for working capital or other business needs. The Credit Agreement contains customary covenants that could, among other things, restrict the imposition of liens on Autodesk’s assets, and restrict Autodesk’s ability to incur additional indebtedness or make dispositions of assets if Autodesk fails to maintain compliance with the financial covenants. The Credit Agreement requires the Company to maintain a maximum leverage ratio of Consolidated Covenant Debt to Consolidated EBITDA (each as defined in the Credit Agreement) no greater than 3.50:1.00 during the term of the credit facility, subject to adjustment following the consummation of certain acquisitions up to 4.00:1.00 for up to four consecutive fiscal quarters. At October 31, 2021, Autodesk was in compliance with the Credit Agreement covenants. Revolving loans under the Credit Agreement will bear interest, at the Company’s option, at either (i) a per annum rate equal to the Base Rate (as defined in the Credit Agreement) plus a margin of between 0.000% and 0.375%, depending on the Company’s Public Debt Rating (as defined in the Credit Agreement), or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market, plus a margin of between 0.785% and 1.375%, depending on Company’s Public Debt Rating. The Credit Agreement includes customary provisions to provide for the eventual replacement of LIBOR as a benchmark interest rate. The interest rates for the revolving credit facility are subject to upward or downward adjustments, on an annual basis, if the Company achieves, or fails to achieve, certain sustainability-linked targets based on two key performance indicator metrics: (i) the amount of scope 1 and 2 greenhouse gas emissions from the global operations of the Company and its subsidiaries during a fiscal year less qualified emissions reduction instruments and (ii) the percentage of employees of the Company and its subsidiaries identifying as female working in technical roles. The maturity date on the Credit Agreement is September 30, 2026. At October 31, 2021, Autodesk had no outstanding borrowings under the Credit Agreement.
In January 2020, Autodesk issued $500.0 million aggregate principal amount of 2.85% notes due January 15, 2030 (“2020 Notes”). Net of a discount of $1.1 million and issuance costs of $4.8 million, Autodesk received net proceeds of $494.1 million from issuance of the 2020 Notes. Both the discount and issuance costs are being amortized to interest expense over the term of the 2020 Notes using the effective interest method. The proceeds of the 2020 Notes were used for the repayment of the $450.0 million 2015 Notes, as defined below, and the remainder is available for general corporate purposes.
In June 2017, Autodesk issued $500.0 million aggregate principal amount of 3.5% notes due June 15, 2027 (the “2017 Notes”). Net of a discount of $3.1 million and issuance costs of $4.9 million, Autodesk received net proceeds of $492.0 million from issuance of the 2017 Notes. Both the discount and issuance costs are being amortized to interest expense over the term of the 2017 Notes using the effective interest method. The proceeds of the 2017 Notes have been used for the repayment of $400.0 million of debt due December 15, 2017, and the remainder is available for general corporate purposes.
In June 2015, Autodesk issued $300.0 million aggregate principal amount of 4.375% notes due June 15, 2025 (“2015 Notes”). Net of a discount of $1.1 million, and issuance costs of $2.5 million, Autodesk received net proceeds of $296.4 million from issuance of the 2015 Notes. Both the discount and issuance costs are being amortized to interest expense over the respective term of the 2015 Notes using the effective interest method. The proceeds of the 2015 Notes are available for general corporate purposes.
In December 2012, Autodesk issued $350.0 million aggregate principal amount of 3.6% notes due December 15, 2022 (“2012 Notes”). Autodesk received net proceeds of $346.7 million from issuance of the 2012 Notes, net of a discount of $0.5 million and issuance costs of $2.8 million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2012 Notes using the effective interest method. The proceeds of the 2012 Notes are available for general corporate purposes.
The 2021 Notes, 2020 Notes, 2017 Notes, 2015 Notes and the 2012 Notes may all be redeemed at any time, subject to a make whole premium. In addition, upon the occurrence of certain change of control triggering events, Autodesk may be required to repurchase all the aforementioned notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. All notes contain restrictive covenants that limit Autodesk's ability to create certain liens, to enter into certain sale and leaseback transactions and to consolidate or merge with, or convey, transfer, or lease all or substantially all of its assets, subject to important qualifications and exceptions.
Based on the quoted market prices, the approximate fair value of the notes as of October 31, 2021, were as follows:
| Aggregate Principal Amount | Fair value | ||||||||||
| 2012 Notes | $ | 350.0 | $ | 358.4 | |||||||
| 2015 Notes | 300.0 | 329.4 | |||||||||
| 2017 Notes | 500.0 | 546.8 | |||||||||
| 2020 Notes | 500.0 | 519.6 | |||||||||
| 2021 Notes | 1,000.0 | 987.1 |
The expected future principal payments for all borrowings as of October 31, 2021, were as follows (in millions):
| Fiscal year ending | |||||||||||||||||||||||
| 2022 (remainder) | $ | — | |||||||||||||||||||||
| 2023 | 350.0 | ||||||||||||||||||||||
| 2024 | — | ||||||||||||||||||||||
| 2025 | — | ||||||||||||||||||||||
| 2026 | 300.0 | ||||||||||||||||||||||
| Thereafter | 2,000.0 | ||||||||||||||||||||||
| Total principal outstanding | $ | 2,650.0 |
15. Leases
Autodesk has operating leases for real estate, vehicles, and certain equipment. Leases have remaining lease terms of less than 1 year to 68 years, some of which include options to extend the lease with renewal terms from 1 year to 10 years and some of which include options to terminate the leases from less than 1 year to 9 years. Options to extend or terminate the lease are considered in determining the lease term when it is reasonably certain that the option will be exercised. Payments under our lease arrangements are primarily fixed; however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. These amounts include payments affected by the Consumer Price Index, payments for common area maintenance that are subject to annual reconciliation, and payments for
maintenance and utilities. The Company’s leases do not contain residual value guarantees or material restrictive covenants. Short-term leases are recognized in the Condensed Consolidated Statements of Operations on a straight-line basis over the lease term. Short-term lease expense was not material for the periods presented. Changes in operating lease right-of-use assets and operating lease liabilities are presented net in the “accounts payable and other liabilities” line in the Condensed Consolidated Statements of Cash Flows.
The components of lease cost were as follows:
| Three Months Ended October 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of subscription and maintenance revenue | Cost of other revenue | Marketing and sales | Research and development | General and administrative | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease cost | $ | 2.1 | $ | 0.6 | $ | 11.0 | $ | 7.4 | $ | 3.7 | $ | 24.8 | |||||||||||||||||||||||||||||||||||||||||
| Variable lease cost | 0.5 | 0.1 | 3.0 | 2.1 | 1.0 | 6.7 | |||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended October 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of subscription and maintenance revenue | Cost of other revenue | Marketing and sales | Research and development | General and administrative | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease cost | $ | 6.1 | $ | 1.6 | $ | 32.5 | $ | 23.1 | $ | 11.0 | $ | 74.3 | |||||||||||||||||||||||||||||||||||||||||
| Variable lease cost | 1.3 | 0.4 | 7.2 | 5.2 | 2.4 | 16.5 |
| Three Months Ended October 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of subscription and maintenance revenue | Cost of other revenue | Marketing and sales | Research and development | General and administrative | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease cost | $ | 1.9 | $ | 0.6 | $ | 11.9 | $ | 8.6 | $ | 2.9 | $ | 25.9 | |||||||||||||||||||||||||||||||||||||||||
| Variable lease cost | 0.2 | 0.1 | 1.5 | 1.0 | 0.4 | 3.2 | |||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended October 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of subscription and maintenance revenue | Cost of other revenue | Marketing and sales | Research and development | General and administrative | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating lease cost | $ | 5.6 | $ | 1.7 | $ | 34.0 | $ | 24.3 | $ | 10.5 | $ | 76.1 | |||||||||||||||||||||||||||||||||||||||||
| Variable lease cost | 0.6 | 0.2 | 4.0 | 2.8 | 1.3 | 8.9 |
Supplemental operating cash flow information related to leases is as follows:
| Nine Months Ended October 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash paid for operating leases included in operating cash flows (1) | $ | 84.4 | $ | 74.7 | |||||||
| Non-cash operating lease liabilities arising from obtaining operating lease right-of-use assets | 12.2 | 50.8 |
(1) Includes $16.5 million and $8.9 million in variable lease payments for the nine months ended October 31, 2021 and 2020, respectively, not included in “Operating lease liabilities” and “Long-term operating lease liabilities” on the Condensed Consolidated Balance Sheets.
The weighted average remaining lease term for operating leases is 6.9 and 7.3 years at October 31, 2021, and January 31, 2021, respectively. The weighted average discount rate was 2.59% and 2.69% at October 31, 2021, and January 31, 2021, respectively.
Maturities of operating lease liabilities were as follows:
| Fiscal year ending | |||||||||||||||||||||||
| 2022 (remainder) | $ | 21.8 | |||||||||||||||||||||
| 2023 | 99.1 | ||||||||||||||||||||||
| 2024 | 81.6 | ||||||||||||||||||||||
| 2025 | 60.7 | ||||||||||||||||||||||
| 2026 | 45.9 | ||||||||||||||||||||||
| Thereafter | 148.2 | ||||||||||||||||||||||
| 457.3 | |||||||||||||||||||||||
| Less imputed interest | 34.6 | ||||||||||||||||||||||
| Present value of operating lease liabilities | $ | 422.7 |
As of October 31, 2021, Autodesk had additional operating lease minimum lease payments of $21.4 million for executed leases that have not yet commenced, primarily for office locations.
16. Commitments and Contingencies
Guarantees and Indemnifications
In the normal course of business, Autodesk provides indemnifications of varying scopes, including limited product warranties and indemnification of customers against claims of intellectual property infringement made by third parties arising from the use of its products or services. Autodesk accrues for known indemnification issues if a loss is probable and can be reasonably estimated. Historically, costs related to these indemnifications have not been significant, and because potential future costs are highly variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its future results of operations.
In connection with the purchase, sale, or license of assets or businesses with third parties, Autodesk has entered into or assumed customary indemnification agreements related to the assets or businesses purchased, sold, or licensed. Historically, costs related to these indemnifications have not been significant, and because potential future costs are highly variable, Autodesk is unable to estimate the maximum potential impact of these indemnifications on its future results of operations.
As permitted under Delaware law, Autodesk has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at Autodesk’s request in such capacity. The maximum potential amount of future payments Autodesk could be required to make under these indemnification agreements is unlimited; however, Autodesk has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable Autodesk to recover a portion of any future amounts paid. Autodesk believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.
Legal Proceedings
Autodesk is involved in a variety of claims, suits, investigations, inquiries, and proceedings in the normal course of business including claims of alleged infringement of intellectual property rights, commercial, employment, tax, prosecution of unauthorized use, business practices, and other matters. Autodesk routinely reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any matter is considered probable and the amount can be reasonably estimated, Autodesk records a liability for the estimated loss. Because of inherent uncertainties related to these legal matters, Autodesk bases its loss accruals on the best information available at the time. As additional information becomes available, Autodesk reassesses its potential liability and may revise its estimates. In the Company's opinion, resolution of pending matters is not expected to have a material adverse impact on its consolidated results of operations, cash flows, or its 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 the Company's results of operations, cash flows, or financial position in a particular period, however, based on the information known by the Company as of the date of this filing and the rules and regulations applicable to the preparation of the Company's financial statements, any such amount is either immaterial or it is not possible to provide an estimated amount of any such potential loss.
17. Stockholders' Equity
Changes in stockholders' equity by component, net of tax, as of October 31, 2021, are as follows:
| Common stock and additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total stockholders' equity | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balances, January 31, 2021 | 219.6 | $ | 2,578.9 | $ | (125.9) | $ | (1,487.5) | $ | 965.5 | ||||||||||||||||||||
| Common shares issued under stock plans | 0.9 | 9.0 | 9.0 | ||||||||||||||||||||||||||
| Stock-based compensation expense | 114.1 | 114.1 | |||||||||||||||||||||||||||
| Post-combination expense related to equity awards assumed | 0.1 | 0.1 | |||||||||||||||||||||||||||
| Shares issued related to business combination | 2.6 | 2.6 | |||||||||||||||||||||||||||
| Net income | 155.6 | 155.6 | |||||||||||||||||||||||||||
| Other comprehensive income | 24.2 | 24.2 | |||||||||||||||||||||||||||
| Repurchase and retirement of common shares (1) | (0.5) | (65.3) | (77.4) | (142.7) | |||||||||||||||||||||||||
| Balances, April 30, 2021 | 220.0 | 2,639.4 | (101.7) | (1,409.3) | 1,128.4 | ||||||||||||||||||||||||
| Common shares issued under stock plans | 0.1 | (6.5) | (6.5) | ||||||||||||||||||||||||||
| Stock-based compensation expense | 148.2 | 148.2 | |||||||||||||||||||||||||||
| Post-combination expense related to equity awards assumed | 0.1 | 0.1 | |||||||||||||||||||||||||||
| Net income | 115.6 | 115.6 | |||||||||||||||||||||||||||
| Other comprehensive loss | (11.7) | (11.7) | |||||||||||||||||||||||||||
| Repurchase and retirement of common shares (1) | (0.2) | (0.5) | (45.8) | (46.3) | |||||||||||||||||||||||||
| Balances, July 31, 2021 | 219.9 | 2,780.7 | (113.4) | (1,339.5) | 1,327.8 | ||||||||||||||||||||||||
| Common shares issued under stock plans | 1.3 | (51.4) | (51.4) | ||||||||||||||||||||||||||
| Stock-based compensation expense | 140.2 | 140.2 | |||||||||||||||||||||||||||
| Post-combination expense related to equity awards assumed | (0.1) | (0.1) | |||||||||||||||||||||||||||
| Settlement of liability-classified restricted stock units | 2.7 | 2.7 | |||||||||||||||||||||||||||
| Net income | 136.7 | 136.7 | |||||||||||||||||||||||||||
| Other comprehensive income | 11.0 | 11.0 | |||||||||||||||||||||||||||
| Repurchase and retirement of common shares (1) | (1.0) | (50.7) | (236.3) | (287.0) | |||||||||||||||||||||||||
| Balances, October 31, 2021 | 220.2 | $ | 2,821.4 | $ | (102.4) | $ | (1,439.1) | $ | 1,279.9 |
(1)During the three and nine months ended October 31, 2021, Autodesk repurchased 1.0 million and 1.7 million shares at an average repurchase price of $292.91 and $286.95 per share, respectively. At October 31, 2021, 10.4 million shares remained available for repurchase under the repurchase program approved by the Board of Directors.
Changes in stockholders' equity (deficit) by component, net of tax, as of October 31, 2020, are as follows:
| Common stock and additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total stockholders' equity (deficit) | ||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||
| Balances, January 31, 2020 | 219.4 | $ | 2,317.0 | $ | (160.3) | $ | (2,295.8) | $ | (139.1) | ||||||||||||||||||||
| Common shares issued under stock plans | 1.0 | 24.3 | — | — | 24.3 | ||||||||||||||||||||||||
| Stock-based compensation expense | — | 88.2 | — | — | 88.2 | ||||||||||||||||||||||||
| Settlement of liability-classified restricted stock units | — | 28.7 | — | — | 28.7 | ||||||||||||||||||||||||
| Post-combination expense related to equity awards assumed | — | 0.1 | — | — | 0.1 | ||||||||||||||||||||||||
| Net income | — | — | — | 66.5 | 66.5 | ||||||||||||||||||||||||
| Other comprehensive loss | — | — | (18.8) | — | (18.8) | ||||||||||||||||||||||||
| Repurchase and retirement of common shares (1) | (1.2) | (57.0) | — | (132.0) | (189.0) | ||||||||||||||||||||||||
| Balances, April 30, 2020 | 219.2 | 2,401.3 | (179.1) | (2,361.3) | (139.1) | ||||||||||||||||||||||||
| Common shares issued under stock plans | 0.2 | (4.6) | — | — | (4.6) | ||||||||||||||||||||||||
| Stock-based compensation expense | — | 95.9 | — | — | 95.9 | ||||||||||||||||||||||||
| Post combination expense related to equity awards assumed | — | 0.1 | — | — | 0.1 | ||||||||||||||||||||||||
| Net income | — | — | — | 98.2 | 98.2 | ||||||||||||||||||||||||
| Other comprehensive income | — | — | 24.6 | — | 24.6 | ||||||||||||||||||||||||
| Repurchase and retirement of common shares (1) | (0.1) | — | — | (7.8) | (7.8) | ||||||||||||||||||||||||
| Balances, July 31, 2020 | 219.3 | 2,492.7 | (154.5) | (2,270.9) | 67.3 | ||||||||||||||||||||||||
| Common shares issued under stock plans | 1.2 | (29.3) | — | — | (29.3) | ||||||||||||||||||||||||
| Stock-based compensation expense | — | 97.0 | — | — | 97.0 | ||||||||||||||||||||||||
| Post combination expense related to equity awards assumed | — | 0.1 | — | — | 0.1 | ||||||||||||||||||||||||
| Net income | — | — | — | 132.2 | 132.2 | ||||||||||||||||||||||||
| Other comprehensive loss | — | — | (1.9) | — | (1.9) | ||||||||||||||||||||||||
| Repurchase and retirement of common shares (1) | (0.8) | (53.4) | — | (142.7) | (196.1) | ||||||||||||||||||||||||
| Balances, October 31, 2020 | 219.7 | $ | 2,507.1 | $ | (156.4) | $ | (2,281.4) | $ | 69.3 | ||||||||||||||||||||
(1)During the three and nine months ended October 31, 2020, Autodesk repurchased 0.8 million and 2.1 million shares at an average repurchase price of 231.26 and $185.69 per share, respectively. At October 31, 2020, 12.6 million shares remained available for repurchase under the repurchase program approved by the Board of Directors.
18. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of taxes, consisted of the following at October 31, 2021:
| Net Unrealized Gains (Losses) on Derivative Instruments | Net Unrealized Gains on Available-for-Sale Debt Securities | Defined Benefit Pension Components | Foreign Currency Translation Adjustments | Total | |||||||||||||||||||||||||
| Balances, January 31, 2021 | $ | (24.1) | $ | 6.4 | $ | (21.3) | $ | (86.9) | $ | (125.9) | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 30.4 | 7.1 | — | (21.3) | 16.2 | ||||||||||||||||||||||||
| Pre-tax losses reclassified from accumulated other comprehensive loss | 14.6 | — | 0.3 | — | 14.9 | ||||||||||||||||||||||||
| Tax effects | (6.7) | — | — | (0.9) | (7.6) | ||||||||||||||||||||||||
| Net current period other comprehensive income (loss) | 38.3 | 7.1 | 0.3 | (22.2) | 23.5 | ||||||||||||||||||||||||
| Balances, October 31, 2021 | $ | 14.2 | $ | 13.5 | $ | (21.0) | $ | (109.1) | $ | (102.4) |
Accumulated other comprehensive loss, net of taxes, consisted of the following at October 31, 2020:
| Net Unrealized Gains (Losses) on Derivative Instruments | Net Unrealized Gains on Available-for-Sale Debt Securities | Defined Benefit Pension Components | Foreign Currency Translation Adjustments | Total | |||||||||||||||||||||||||
| Balances, January 31, 2020 | $ | 8.4 | $ | 4.7 | $ | (22.8) | $ | (150.6) | $ | (160.3) | |||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (8.3) | 1.7 | — | 13.9 | 7.3 | ||||||||||||||||||||||||
| Pre-tax (gains) losses reclassified from accumulated other comprehensive loss | (4.8) | 0.1 | — | — | (4.7) | ||||||||||||||||||||||||
| Tax effects | 1.5 | 0.1 | — | (0.3) | 1.3 | ||||||||||||||||||||||||
| Net current period other comprehensive (loss) income | (11.6) | 1.9 | — | 13.6 | 3.9 | ||||||||||||||||||||||||
| Balances, October 31, 2020 | $ | (3.2) | $ | 6.6 | $ | (22.8) | $ | (137.0) | $ | (156.4) |
Reclassifications related to gains and losses on available-for-sale debt securities are included in “Interest and other expense, net.” Refer to Note 5, “Financial Instruments,” for the amount and location of reclassifications related to derivative instruments. Reclassifications of the defined benefit pension components of net periodic benefit cost are included in “Interest and other expense, net.”
19. Net Income Per Share
Basic net income per share is computed using the weighted average number of shares of common stock outstanding for the period. Diluted net income per share is computed using the weighted average number of shares of common stock outstanding for the period and potentially dilutive common shares, including the effect of restricted stock units, performance share awards, and stock options using the treasury stock method. The following table sets forth the computation of the numerators and denominators used in the basic and diluted net income per share amounts:
| Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 136.7 | $ | 132.2 | $ | 407.9 | $ | 296.9 | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Denominator for basic net income per share—weighted average shares | 220.0 | 219.6 | 219.8 | 219.4 | |||||||||||||||||||
| Effect of dilutive securities | 2.5 | 2.7 | 2.5 | 2.7 | |||||||||||||||||||
| Denominator for dilutive net income per share | 222.5 | 222.3 | 222.3 | 222.1 | |||||||||||||||||||
| Basic net income per share | $ | 0.62 | $ | 0.60 | $ | 1.86 | $ | 1.35 | |||||||||||||||
| Diluted net income per share | $ | 0.61 | $ | 0.59 | $ | 1.83 | $ | 1.34 |
The computation of diluted net income per share does not include shares that are anti-dilutive under the treasury stock method because their exercise prices are higher than the average market value of Autodesk’s stock during the periods. For the three and nine months ended October 31, 2021, there were zero and 0.1 million potentially anti-dilutive shares excluded from the computation of diluted net income per share, respectively. For the three and nine months ended October 31, 2020, there were 0.3 million and 0.2 million potentially anti-dilutive shares excluded from the computation of diluted net income per share, respectively.
20. Segments
Autodesk operates in one operating segment and accordingly, all required financial segment information is included in the condensed consolidated financial statements. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision makers (“CODM”) in deciding how to allocate resources and assess performance. Autodesk reports 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 the Company’s reportable segments. The Company’s CODM allocates resources and assesses the operating performance of the Company as a whole.
Information regarding Autodesk’s long-lived assets by geographic area is as follows:
| October 31, 2021 | January 31, 2021 | ||||||||||
| Long-lived assets (1): | |||||||||||
| Americas | |||||||||||
| U.S. | $ | 391.5 | $ | 423.6 | |||||||
| Other Americas | 26.5 | 29.5 | |||||||||
| Total Americas | 418.0 | 453.1 | |||||||||
| Europe, Middle East, and Africa | 100.4 | 109.7 | |||||||||
| Asia Pacific | 37.0 | 46.7 | |||||||||
| Total long-lived assets | $ | 555.4 | $ | 609.5 |
(1)Long-lived assets exclude deferred tax assets, marketable securities, goodwill, and intangible assets.
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