Item 1. FINANCIAL STATEMENTS

132K characters. Original on sec.gov · Markdown

Item 1. FINANCIAL STATEMENTS

AUTODESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Net revenue:
Subscription	$	1,270	$	1,160	$	2,463	$	2,249
Maintenance	14		17		28		35
Total subscription and maintenance revenue	1,284		1,177		2,491		2,284
Other	61		60		123		123
Total net revenue	1,345		1,237		2,614		2,407
Cost of revenue:
Cost of subscription and maintenance revenue	95		83		191		167
Cost of other revenue	21		21		41		40
Amortization of developed technologies	11		15		22		29
Total cost of revenue	127		119		254		236
Gross profit	1,218		1,118		2,360		2,171
Operating expenses:
Marketing and sales	449		433		905		852
Research and development	355		306		682		595
General and administrative	141		128		273		248
Amortization of purchased intangibles	11		9		21		20

Total operating expenses	956		876		1,881		1,715
Income from operations	262		242		479		456
Interest and other (expense) income, net	(4)		(10)		—		(29)
Income before income taxes	258		232		479		427
Provision for income taxes	(36)		(46)		(96)		(95)
Net income	$	222	$	186	$	383	$	332
Basic net income per share	$	1.04	$	0.86	$	1.79	$	1.53
Diluted net income per share	$	1.03	$	0.85	$	1.77	$	1.52
Weighted average shares used in computing basic net income per share	214		217		214		217
Weighted average shares used in computing diluted net income per share	215		218		216		218

See accompanying Notes to Condensed Consolidated Financial Statements.

AUTODESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Net income	$	222	$	186	$	383	$	332
Other comprehensive income (loss), net of reclassifications:
Net (loss) gain on derivative instruments (net of tax effect of $1, $(4), $3, and $(12), respectively)	(13)		18		(26)		73
Change in net unrealized (loss) gain on available-for-sale debt securities (net of tax effect of zero for all periods presented)	(3)		4		(1)		3
Change in defined benefit pension items (net of tax effect of zero for all periods presented)	—		3		—		—
Net change in cumulative foreign currency translation gain (loss) (net of tax effect of zero, $1, $5, and $1, respectively)	18		(46)		14		(121)
Total other comprehensive income (loss)	2		(21)		(13)		(45)
Total comprehensive income	$	224	$	165	$	370	$	287

See accompanying Notes to Condensed Consolidated Financial Statements.

AUTODESK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


	July 31, 2023		January 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,714	$	1,947
Marketable securities	359		125
Accounts receivable, net	402		961

Prepaid expenses and other current assets	346		308
Total current assets	2,821		3,341
Long-term marketable securities	219		102
Computer equipment, software, furniture and leasehold improvements, net	136		144
Operating lease right-of-use assets	248		245
Intangible assets, net	410		407
Goodwill	3,637		3,625
Deferred income taxes, net	1,078		1,014
Long-term other assets	558		560
Total assets	$	9,107	$	9,438
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	124	$	102
Accrued compensation	279		358
Accrued income taxes	116		33
Deferred revenue	3,131		3,203
Operating lease liabilities	72		85


Other accrued liabilities	153		219
Total current liabilities	3,875		4,000
Long-term deferred revenue	1,102		1,377
Long-term operating lease liabilities	311		300
Long-term income taxes payable	147		164
Long-term deferred income taxes	35		32
Long-term notes payable, net	2,282		2,281
Long-term other liabilities	149		139
Stockholders’ equity:

Common stock and additional paid-in capital	3,531		3,325
Accumulated other comprehensive loss	(198)		(185)
Accumulated deficit	(2,127)		(1,995)
Total stockholders’ equity	1,206		1,145
Total liabilities and stockholders’ equity	$	9,107	$	9,438

See accompanying Notes to Condensed Consolidated Financial Statements.

AUTODESK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended July 31,
	2023		2022
Operating activities:
Net income	$	383	$	332
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	66		76
Stock-based compensation expense	362		322
Deferred income taxes	(65)		(43)

Lease-related asset impairments	7		9

Other	(33)		(11)
Changes in operating assets and liabilities, net of business combinations:
Accounts receivable	559		281
Prepaid expenses and other assets	(23)		(25)
Accounts payable and other liabilities	(115)		(199)
Deferred revenue	(350)		(77)
Accrued income taxes	67		26
Net cash provided by operating activities	858		691
Investing activities:
Purchases of marketable securities	(687)		(97)
Sales and maturities of marketable securities	339		245

Capital expenditures	(16)		(23)
Purchases of intangible assets	(10)		(5)
Business combinations, net of cash acquired	(26)		(96)
Other investing activities	(18)		(47)
Net cash used in investing activities	(418)		(23)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs	71		67
Taxes paid related to net share settlement of equity awards	(120)		(92)
Repurchases of common stock	(616)		(708)





Net cash used in financing activities	(665)		(733)
Effect of exchange rate changes on cash and cash equivalents	(8)		(23)
Net decrease in cash and cash equivalents	(233)		(88)
Cash and cash equivalents at beginning of period	1,947		1,528
Cash and cash equivalents at end of period	$	1,714	$	1,440

Supplemental cash flow disclosure:
Non-cash financing activities:
Fair value of common stock issued to settle liability-classified restricted common stock	$	9	$	5
Fair value of common stock issued related to business combinations	$	—	$	10

See accompanying Notes to Condensed Consolidated Financial Statements.

AUTODESK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(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 July 31, 2023, and for the three and six months ended July 31, 2023 and 2022, 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 addition, the results of operations for the three and six months ended July 31, 2023, are not necessarily indicative of the results for the entire fiscal year ending January 31, 2024, or for any other period. Further, the balance sheet as of January 31, 2023, 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, 2023. 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, 2023, filed on March 14, 2023.

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 six months ended July 31, 2023, that are applicable to the Company.

Accounting Standards Adopted

In June 2022, the FASB issued ASU No. 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”), which applies to all equity securities measured at fair value that are subject to contractual sale restrictions. ASU 2022-03 prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. ASU 2022-03 is effective for Autodesk's fiscal year beginning February 1, 2024, and interim periods within that fiscal year, with early adoption permitted. Autodesk adopted ASU 2022-03 as of February 1, 2023. The adoption of ASU 2022-03 did not have a material impact on Autodesk’s consolidated financial statements.

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 products 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 July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Net revenue by product family:
Architecture, Engineering and Construction	$	627	$	564	$	1,209	$	1,101
AutoCAD and AutoCAD LT	364		344		713		671
Manufacturing	256		242		502		467
Media and Entertainment	74		71		145		139
Other	24		16		45		29
Total net revenue	$	1,345	$	1,237	$	2,614	$	2,407

Net revenue by geographic area:
Americas
U.S.	$	485	$	424	$	941	$	822
Other Americas	104		91		201		177
Total Americas	589		515		1,142		999
Europe, Middle East and Africa	506		473		980		922
Asia Pacific	250		249		492		486
Total net revenue	$	1,345	$	1,237	$	2,614	$	2,407

Net revenue by sales channel:
Indirect	$	850	$	816	$	1,670	$	1,585
Direct	495		421		944		822
Total net revenue	$	1,345	$	1,237	$	2,614	$	2,407

Net revenue by product type:
Design	$	1,154	$	1,064	$	2,240	$	2,068
Make	130		113		251		216
Other	61		60		123		123
Total net revenue	$	1,345	$	1,237	$	2,614	$	2,407

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 July 31, 2023, Autodesk had remaining performance obligations of $5.22 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 $3.51 billion or 67% of our remaining performance obligations as revenue during the next 12 months. We expect to recognize the remaining $1.71 billion or 33% 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, 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 July 31, 2023. 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 July 31, 2023 and 2022, that was included in the deferred revenue balances at January 31, 2023 and 2022, was $913 million and $828 million, respectively. Revenue recognized during the six months ended July 31, 2023 and 2022, that was included in the deferred revenue balances at January 31, 2023 and 2022, was $1.98 billion and $1.82 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 13, “Borrowing Arrangements,” in the Notes to Condensed Consolidated Financial Statements for further discussion.

Total sales to the Company's largest distributor TD Synnex Corporation and its global affiliates (“TD Synnex”) accounted for 40% of Autodesk’s total net revenue during both the three and six months ended July 31, 2023. Total sales to TD Synnex accounted for 37% of Autodesk’s total net revenue for both the three and six months ended July 31, 2022. The majority of the net revenue from sales to TD Synnex is for sales outside of the United States. In addition, TD Synnex accounted for 22% and 27% of trade accounts receivable at July 31, 2023 and January 31, 2023, respectively. Ingram Micro Inc. (“Ingram Micro”), our second largest distributor, accounted for 8% of Autodesk's total net revenue during both the three and six months ended July 31, 2023. Total sales to Ingram Micro accounted for 9% of Autodesk’s total net revenue during both the three and six months ended July 31, 2022. 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 by significant investment category as of July 31, 2023, and January 31, 2023:


	July 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash equivalents (1):
Money market funds	$	499	$	—	$	—	$	499
Commercial paper	194		—		—		194
Certificates of deposit	75		—		—		75

U.S. government securities	44		—		—		44
Municipal bonds	11		—		—		11


Other (2)	5		—		—		5
Marketable securities:
Short-term
Commercial paper	179		—		—		179
Corporate debt securities	63		—		—		63
U.S. government securities	61		—		—		61
Asset-backed securities	29		—		—		29






Other (3)	27		—		—		27
Long-term
Corporate debt securities	104		—		—		104
Asset-backed securities	47		—		—		47
U.S. government securities	29		—		—		29
Agency mortgage backed securities	26		—		—		26

Other (4)	13		—		—		13
Mutual funds (5) (6)	86		12		(1)		97

Total	$	1,492	$	12	$	(1)	$	1,503

(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.

(2)Consists of mortgage-backed securities and asset-backed securities.

(3)Primarily consists of supranational bonds, agency discount notes, and mortgage-backed securities.

(4)Primarily consists of agency bonds, agency collateralized mortgage obligations, and mortgage-backed securities.

(5)See Note 11, “Deferred Compensation” for more information.

(6)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.


	January 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash equivalents (1):
Money market funds	$	737	$	—	$	—	$	737
Commercial paper	169		—		—		169
Certificates of deposit	35		—		—		35
U.S government securities	13		—		—		13


Other (2)	12		—		—		12
Marketable securities:
Short-term
Corporate debt securities	44		—		—		44
Commercial paper	42		—		—		42
Asset-backed securities	19		—		—		19

U.S. government securities	17		—		—		17


Other (3)	3		—		—		3


Long-term

Corporate debt securities	45		—		—		45
U.S. government securities	35		—		—		35
Asset backed securities	13		—		—		13

Other (4)	9		—		—		9
Mutual funds (5) (6)	81		6		(1)		86
Convertible debt securities (6)	3		1		(2)		2
Strategic investments derivative asset (6)	2		—		(2)		—
Total	$	1,279	$	7	$	(5)	$	1,281

(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, agency discount notes, municipal bonds, corporate debt securities, asset-backed securities, and mortgage-backed securities.

(3)Consists of mortgage-backed securities, agency mortgage-backed securities, common stock, and agency collateralized mortgage obligations.

(4)Consists of agency mortgage-backed securities, agency bonds, agency collateralized mortgage obligations, mortgage-backed securities, and collateralized mortgage obligations.

(5)See Note 11, “Deferred Compensation” for more information.

(6)Included in “Prepaid expenses and other current assets,” or “Long-term other assets,” 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 July 31, 2023:


	Fair Value
Due within 1 year	$	331
Due in 1 year through 5 years	212
Due in 5 years through 10 years	16
Due after 10 years	19
Total	$	578

As of both July 31, 2023, and January 31, 2023, 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 six months ended July 31, 2023.

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 July 31, 2023, and January 31, 2023. There were no write offs of accrued interest receivables for both the six months ended July 31, 2023 and 2022.

There were no material realized gain or loss for the sales or redemptions of marketable debt securities during both the six months ended July 31, 2023 and 2022. Realized gains and losses from the sales or redemptions of marketable debt securities are recorded in “Interest and other (expense) income, net” on the Company's Condensed Consolidated Statements of Operations.

Proceeds from the sale and maturity of marketable debt securities were as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Marketable debt securities	$	176	$	43	$	339	$	245

Strategic investments in equity securities

As of July 31, 2023, and January 31, 2023, Autodesk had $178 million and $177 million, respectively, in direct investments in privately held companies. These strategic investments in 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. These strategic investments in equity securities are generally subject to a security-specific restriction which limits the sale or transfer of the respective equity security during the holding period.

Adjustments to the carrying value of our strategic investment equity securities with no readily determined fair values measured using the measurement alternative are included in “Interest and other (expense) income, net” on the Company's Condensed Consolidated Statements of Operations. These adjustments were as follows:


	Six Months Ended July 31,				Cumulative Amount as of
	2023		2022		July 31, 2023
Upward adjustments	$	—	$	1	$	29
Negative adjustments, including impairments	(11)		(5)		(97)
Net unrealized adjustments	$	(11)	$	(4)	$	(68)

Realized gains for the disposition of strategic investment equity securities for both the three and six months ended July 31, 2023 and 2022, were immaterial.

Fair Value

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.

The following tables summarize the Company's financial instruments measured at fair value on a recurring basis by significant investment category as of July 31, 2023, and January 31, 2023:


	July 31, 2023
		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (1):
Money market funds		$	499	$	—	$	—	$	499
Commercial paper		—		194		—		194
Certificates of deposit		—		75		—		75

U.S. government securities		—		44		—		44


Municipal bonds		—		11		—		11

Other (2)		—		5		—		5
Marketable securities:
Short-term
Commercial paper		—		179		—		179
Corporate debt securities		—		63		—		63
U.S. government securities		—		61		—		61
Asset-backed securities		—		29		—		29





Other (3)		—		27		—		27
Long-term
Corporate debt securities		—		104		—		104
Asset-backed securities		—		47		—		47
U.S. government securities		—		29		—		29
Agency mortgage backed securities		—		26		—		26


Other (4)		—		13		—		13
Long-term other assets:
Mutual funds (5)(6)		97		—		—		97

Derivative assets:
Derivative contract assets (6)		—		12		—		12

Derivative liabilities:
Derivative contract liabilities (7)		—		(11)		—		(11)
Total		$	596	$	908	$	—	$	1,504

(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.

(2)Consists of mortgage-backed securities and asset-backed securities.

(3)Primarily consists of supranational bonds, agency discount notes, and mortgage-backed securities.

(4)Primarily consists of agency bonds, agency collateralized mortgage obligations, and mortgage-backed securities.

(5)See Note 11, “Deferred Compensation” for more information.

(6)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.

(7)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.


	January 31, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents (1):

Money market funds	$	737	$	—	$	—	$	737
Commercial paper	—		169		—		169
Certificates of deposit	—		35		—		35
U.S government securities	—		13		—		13




Other (2)	4		8		—		12
Marketable securities:
Short-term
Corporate debt securities	—		44		—		44
Commercial paper	—		42		—		42
Asset backed securities	—		19		—		19

U.S. government securities	—		17		—		17


Other (3)	—		3		—		3
Long-term

Corporate debt securities	—		45		—		45
U.S. government securities	—		35		—		35
Asset backed securities	—		13		—		13

Other (4)	—		9		—		9
Long-term other assets:
Mutual funds (5) (6)	86		—		—		86
Convertible debt securities (6)	—		—		2		2

Derivative assets:
Derivative contract assets (6)	—		14		—		14
Derivative liabilities:
Derivative contract liabilities (7)	—		(31)		—		(31)
Total	$	827	$	435	$	2	$	1,264

(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, agency discount notes, municipal bonds, corporate debt securities, asset-backed securities, and mortgage-backed securities.

(3)Consists of mortgage-backed securities, agency mortgage-backed securities, common stock, and agency collateralized mortgage obligations.

(4)Consists of agency mortgage-backed securities, agency bonds, agency collateralized mortgage obligations, mortgage-backed securities, and collateralized mortgage obligations.

(5)See Note 11, “Deferred Compensation” for more information.

(6)Included in “Prepaid expenses and other current assets,” or “Long-term other assets,” in the accompanying Condensed Consolidated Balance Sheets.

(7)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.

6. Equity Compensation

Restricted Stock Units

A summary of restricted stock activity for the six months ended July 31, 2023, is as follows:


	Unvested restricted stock units	Weighted average grant date fair value per share
	(in thousands)
Unvested restricted stock units at January 31, 2023	4,848	$	216.20
Granted	3,394	199.00
Vested	(1,858)	213.16
Canceled/Forfeited	(173)	217.00
Performance Adjustment (1)	(10)	190.48
Unvested restricted stock units at July 31, 2023	6,201	$	207.70

(1)Based on Autodesk's financial results and relative total stockholder return for the fiscal 2023 performance period. The performance stock units were attained at rates ranging from 86% to 110% of the target award.

The fair value of the shares vested during the six months ended July 31, 2023 and 2022, was $373 million and $269 million, respectively.

During the six months ended July 31, 2023, Autodesk granted 3,083 thousand 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 rights.

Autodesk recorded stock-based compensation expense related to restricted stock units of $164 million and $136 million during the three months ended July 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to restricted stock units of $294 million and $253 million during the six months ended July 31, 2023 and 2022, respectively.

During the six months ended July 31, 2023 and 2022, Autodesk settled liability-classified awards in the amount of $9 million and $5 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 six months ended July 31, 2023, Autodesk granted 311 thousand 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 are primarily based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee and 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 2024 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).

The performance criteria for the performance stock units vested during the six months ended July 31, 2023, was based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee.

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 $10 million and $14 million for the three months ended July 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to performance stock units of $21 million and $29 million during the six months ended July 31, 2023 and 2022, respectively.

Common Stock

Autodesk agreed to issue a fixed amount of $13 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. During the six months ended July 31, 2023, Autodesk issued the remaining 39 thousand shares at an aggregate fair value of $8 million. The awards were accounted for as liability-classified awards and were recognized as compensation expense using the straight-line method over the vesting period.

Autodesk agreed to issue a fixed amount of $11 million in common stock at a future date to certain employees in connection with other fiscal 2022 acquisitions. 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 VWAP of Autodesk’s common stock at the issuance date. As of July 31, 2023, remaining shares to be issued are estimated to be 33 thousand. 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 40 thousand shares of restricted common stock to certain employees in connection with a fiscal 2023 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. Additionally, Autodesk agreed to issue a fixed amount of $5 million in common stock at a future date to certain employees in connection with a fiscal 2023 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 VWAP of Autodesk’s common stock at the issuance date. During the six months ended July 31, 2023, Autodesk issued 9 thousand shares at an aggregate fair value of $1 million. Remaining shares to be issued are estimated to be 14 thousand as of July 31, 2023. 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 recorded stock-based compensation expense related to common stock shares of $4 million and $7 million for the three months ended July 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to common stock shares of $10 million and $17 million for the six months ended July 31, 2023 and 2022, respectively.

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 six months ended July 31, 2023 and 2022, is as follows:


	Six Months Ended July 31,
	2023		2022
Issued shares (in thousands)	434		377
Average price of issued shares	$	163.59	$	173.83
Weighted average grant date fair value of shares granted under the ESPP (1)	$	71.34	$	69.19

(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 six months ended July 31, 2023 and 2022, as follows:


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Cost of subscription and maintenance revenue	$	10	$	9	$	19	$	17
Cost of other revenue	4		3		7		6
Marketing and sales	74		69		136		131
Research and development	86		69		155		128
General and administrative	23		19		45		42
Stock-based compensation expense related to stock awards and ESPP purchases	197		169		362		324
Tax expense	2		3		3		9
Stock-based compensation expense related to stock awards and ESPP purchases, net of tax	$	199	$	172	$	365	$	333

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 the 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:


	Six Months Ended July 31, 2023		Six Months Ended July 31, 2022
	Performance Stock Units (1)	ESPP (1)	Performance Stock Units (2)	ESPP (2)
Range of expected volatility	40.9 - 42.5%	40.0 - 42.4%	39.4 - 40.7%	38.3 - 42.7%
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	4.3 - 4.7%	4.3 -5.0%	1.2 - 1.6%	0.9 - 1.9%

(1)There were no ESPP awards or performance stock units granted during the three months ended July 31, 2023.

(2)There were no ESPP awards granted during the three months ended July 31, 2022. There were no performance stock units granted during the three months ended July 31, 2022, where the fair value was estimated by a Monte Carlo simulation.

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 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 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 $36 million, relative to pre-tax income of $258 million for the three months ended July 31, 2023, and income tax expense of $46 million, relative to pre-tax income of $232 million for the three months ended July 31, 2022. Income tax expense for the three months ended July 31, 2023, reflects income tax benefit arising from the temporary relief provided by the Internal Revenue Service relating to U.S. foreign tax credit regulations and reduced U.S. foreign derived intangible income tax benefit, offset by increased withholding tax expense and increased tax expense relating to stock-based compensation, resulting in a net tax expense decrease year over year.

Autodesk had income tax expense of $96 million, relative to pre-tax income of $479 million for the six months ended July 31, 2023, and income tax expense of $95 million, relative to pre-tax income of $427 million for the six months ended July 31, 2022. Income tax expense for the six months ended July 31, 2023, reflects income tax benefit arising from the temporary relief provided by the Internal Revenue Service relating to U.S. foreign tax credit regulations and reduced U.S. foreign derived intangible income tax benefit, offset by increased withholding tax expense and increased tax expense relating to stock-based compensation.

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 all or part of our Australia, New Zealand, California, Michigan deferred tax assets, as well as our 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 July 31, 2023, the Company had $220 million of gross unrecognized tax benefits, of which $181 million would impact the effective tax rate, if recognized. The remaining $38 million would reduce our valuation allowance, if recognized. The amount of unrecognized tax benefits will decrease in the next twelve months for statute lapse of approximately $2 million.

Signed into law on August 16, 2022, the Inflation Reduction Act contains many revisions to the Internal Revenue Code effective in taxable years beginning after December 31, 2022, including a 15% corporate minimum income tax. Autodesk continues to monitor the impact of the Inflation Reduction Act on its consolidated financial statements.

8. Intangible Assets, Net

The following tables summarize the Company's intangible assets, net, as of July 31, 2023, and January 31, 2023:


	July 31, 2023
	Gross Carrying Amount (1)		Accumulated Amortization		Net
Customer relationships	$	668	$	(419)	$	249
Developed technologies	894		(739)		155
Trade names and patents	116		(110)		6
Other	1		(1)		—
Total intangible assets	$	1,679	$	(1,269)	$	410

(1)Includes the effects of foreign currency translation.


	January 31, 2023
	Gross Carrying Amount (1)		Accumulated Amortization		Net
Customer relationships	$	659	$	(402)	$	257
Developed technologies	858		(718)		140
Trade names and patents	116		(106)		10

Total intangible assets	$	1,633	$	(1,226)	$	407

(1)Includes the effects of foreign currency translation.

9. 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 $220 million and $190 million at July 31, 2023, and January 31, 2023, respectively. Accumulated amortization was $59 million and $41 million at July 31, 2023, and January 31, 2023, respectively. Amortization expense for the three months ended July 31, 2023 and 2022, was $9 million and $5 million, respectively. Amortization expense for the six months ended July 31, 2023 and 2022 was $18 million and $9 million, respectively.

10. 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 six months ended July 31, 2023, (in millions):


Balance as of January 31, 2023	$	3,774
Less: accumulated impairment losses as of January 31, 2023	(149)
Net balance as of January 31, 2023	3,625
Additions arising from acquisitions during the period	3
Effect of foreign currency translation	9

Balance as of July 31, 2023	$	3,637

11. Deferred Compensation

At July 31, 2023, 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 $97 million. Of this amount, $7 million was classified as current and $90 million was classified as non-current in the Condensed Consolidated Balance Sheets. Of the $86 million related to the investments in a rabbi trust as of January 31, 2023, $7 million was classified as current and $79 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.

Costs to obtain a contract with a customer

Sales commissions earned by our internal sales personnel and our channel 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 $120 million as of July 31, 2023, and $133 million as of January 31, 2023. 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 $33 million and $63 million during the three and six months ended July 31, 2023, respectively. Amortization expense related to assets recognized from costs to obtain a contract with a customer was $33 million and $67 million during the three and six months ended July 31, 2022, respectively. Autodesk did not recognize any contract cost impairment losses during the three and six months ended July 31, 2023 and 2022.

12. 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:


	July 31, 2023		January 31, 2023
Computer hardware, at cost	$	127	$	126
Computer software, at cost	50		49
Leasehold improvements, land and buildings, at cost	359		363
Furniture and equipment, at cost	97		94
	633		632
Less: Accumulated depreciation	(497)		(488)
Computer hardware, software, leasehold improvements, and furniture and equipment, net	$	136	$	144

13. Borrowing Arrangements

In November 2022, 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 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 July 31, 2023, 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 Secured Overnight Financing Rate, plus a margin of between 0.785% and 1.375%, depending on Company’s Public Debt Rating. 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 July 31, 2023, Autodesk had no outstanding borrowings under the Credit Agreement.

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 million and issuance costs of $9 million, Autodesk received net proceeds of $988 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 January 2020, Autodesk issued $500 million aggregate principal amount of 2.85% notes due January 15, 2030 (“2020 Notes”). Net of a discount of $1 million and issuance costs of $5 million, Autodesk received net proceeds of $494 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 $450 million of debt due June 15, 2020, and the remainder is available for general corporate purposes.

In June 2017, Autodesk issued $500 million aggregate principal amount of 3.5% notes due June 15, 2027 (the “2017 Notes”). Net of a discount of $3 million and issuance costs of $5 million, Autodesk received net proceeds of $492 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 million of debt due December 15, 2017, and the remainder is available for general corporate purposes.

In June 2015, Autodesk issued $300 million aggregate principal amount of 4.375% notes due June 15, 2025 (“2015 Notes”). Net of a discount of $1 million, and issuance costs of $3 million, Autodesk received net proceeds of $296 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.

The 2021 Notes, 2020 Notes, 2017 Notes, and the 2015 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 July 31, 2023, were as follows:


	Aggregate Principal Amount		Fair value
2015 Notes	$	300	$	294
2017 Notes	500		473
2020 Notes	500		437
2021 Notes	1,000		821

The expected future principal payments for all borrowings as of July 31, 2023, were as follows (in millions):



Fiscal year ending
2024 (remainder)	$	—
2025	—
2026	300
2027	—
2028	500
Thereafter	1,500
Total principal outstanding	$	2,300

14. Leases

Autodesk has operating leases for real estate, vehicles, and certain equipment. Leases have remaining lease terms of less than 1 year to 67 years, some of which include options to extend the lease with renewal terms from 1 year to 9 years and some of which include options to terminate the leases from less than 1 year to 7 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 with the exception of “Lease-related asset impairments” which is presented in “Adjustments to reconcile net income to net cash provided by operating activities”.

The components of lease cost were as follows:


	Three Months Ended July 31, 2023
	Cost of subscription and maintenance revenue		Cost of other revenue		Marketing and sales		Research and development		General and administrative		Total
Operating lease cost	$	1	$	—	$	8	$	6	$	3	$	18
Variable lease cost	—		—		2		1		1		4

	Six Months Ended July 31, 2023
	Cost of subscription and maintenance revenue		Cost of other revenue		Marketing and sales		Research and development		General and administrative		Total
Operating lease cost	$	3	$	1	$	15	$	12	$	5	$	36
Variable lease cost	—		—		4		2		2		8


	Three Months Ended July 31, 2022
	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	$	9	$	7	$	3	$	22
Variable lease cost	1		—		1		1		—		3

	Six Months Ended July 31, 2022
	Cost of subscription and maintenance revenue		Cost of other revenue		Marketing and sales		Research and development		General and administrative		Total
Operating lease cost	$	4	$	2	$	19	$	14	$	6	$	45
Variable lease cost	1		—		3		3		1		8

Supplemental operating cash flow information related to leases is as follows:


	Six Months Ended July 31,
	2023		2022
Cash paid for operating leases included in operating cash flows (1)	$	55	$	60
Non-cash operating lease liabilities arising from obtaining operating lease right-of-use assets	38		37

(1) Includes $8 million and $8 million in variable lease payments for the six months ended July 31, 2023 and 2022, 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 6.3 years and 6.5 years at July 31, 2023, and January 31, 2023, respectively. The weighted average discount rate was 2.79% and 2.60% at July 31, 2023, and January 31, 2023, respectively.

Maturities of operating lease liabilities were as follows:


Fiscal year ending
2024 (remainder)	$	42
2025	87
2026	74
2027	54
2028	45
Thereafter	115
	417
Less imputed interest	34
Present value of operating lease liabilities	$	383

Autodesk has subleased certain office space to a third party and has classified the sublease as an operating lease. The sublease has a remaining lease term of 8.6 years. Sublease income was $2 million and $4 million and for the three and six months ended July 31, 2023, respectively. Sublease income was $1 million for both the three and six months ended July 31, 2022. Sublease income is recorded as a reduction of lease expense in the Company’s Condensed Consolidated Statements of Operations.

Operating lease amounts in the table above do not include sublease income payments of $75 million. Autodesk expects to receive sublease income payments of approximately $37 million for remaining fiscal 2024 through fiscal 2028 and $38 million thereafter.

As of July 31, 2023, Autodesk had no material additional operating lease minimum lease payments for executed leases that have not yet commenced.

15. Derivative Instruments

The fair values of derivative instruments in Autodesk’s Condensed Consolidated Balance Sheets were as follows as of July 31, 2023, and January 31, 2023:


	Balance Sheet Location	Fair Value at
	July 31, 2023	January 31, 2023
Derivative Assets
Foreign currency contracts designated as cash flow hedges	Prepaid expenses and other current assets	$	8	$	9
Derivatives not designated as hedging instruments	Prepaid expenses and other current assets and long-term other assets	4		5
Total derivative assets		$	12	$	14
Derivative Liabilities
Foreign currency contracts designated as cash flow hedges	Other accrued liabilities	$	8	$	20
Derivatives not designated as hedging instruments	Other accrued liabilities	3		11
Total derivative liabilities		$	11	$	31

The effects of derivatives designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three and six months ended July 31, 2023 and 2022 (amounts presented include any income tax effects):


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Amount of (loss) gain recognized in accumulated other comprehensive income, net of tax, (effective portion)	$	(13)	$	18	$	(26)	$	73
Amount and location of gain (loss) reclassified from accumulated other comprehensive loss into income (effective portion)
Net revenue	$	17	$	11	$	37	$	17
Cost of revenue	—		(1)		—		(2)
Operating expenses	1		(7)		3		(10)
Total	$	18	$	3	$	40	$	5

The amount and location of gain recognized in net income of derivatives not designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three and six months ended July 31, 2023 and 2022, (amounts presented include any income tax effects):


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022

Interest and other (expense) income, net	$	5	$	6	$	7	$	30

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 $1,058 million at July 31, 2023, and $934 million at January 31, 2023. 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 $38 million remaining in “Accumulated other comprehensive loss” as of July 31, 2023, 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 six months ended July 31, 2023 and 2022:


	Three Months Ended July 31, 2023
	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	$	1,270	$	14	$	95	$	449	$	355	$	141

Gain on cash flow hedging relationships in Subtopic ASC 815-20
Foreign exchange contracts
Amount of gain reclassified from accumulated other comprehensive income into income	$	17	$	—	$	—	$	—	$	—	$	1

	Six Months Ended July 31, 2023
	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	$	2,463	$	28	$	191	$	905	$	682	$	273

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	$	37	$	—	$	—	$	1	$	—	$	2


	Three Months Ended July 31, 2022
	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	$	1,160	$	17	$	83	$	433	$	306	$	128

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	$	11	$	—	$	(1)	$	(3)	$	(2)	$	(2)

	Six Months Ended July 31, 2022
	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	$	2,249	$	35	$	167	$	852	$	595	$	248

(Loss) gain on cash flow hedging relationships in Subtopic ASC 815-20
Foreign exchange contracts
Amount of (loss) gain reclassified from accumulated other comprehensive income into income	$	17	$	—	$	(2)	$	(5)	$	(2)	$	(3)

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 $114 million at July 31, 2023, and $951 million at January 31, 2023.

16. Commitments and Contingencies

Purchase Commitments

In the normal course of business, Autodesk enters into various purchase commitments for goods or services. Effective April 1, 2023, Autodesk entered into a renewed agreement with a third-party cloud services provider. Under the agreement, Autodesk committed to spend an aggregate of $750 million through March 31, 2028 on cloud services.

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 July 31, 2023, are as follows:


	Common stock and additional paid-in capital				Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
Shares		Amount
Balances, January 31, 2023	215		$	3,325	$	(185)	$	(1,995)	$	1,145
Common shares issued under stock plans	2		(21)		—		—		(21)
Stock-based compensation expense	—		160		—		—		160
Settlement of liability-classified restricted common shares	—		1		—		—		1




Net income	—		—		—		161		161
Other comprehensive loss	—		—		(15)		—		(15)
Repurchase and retirement of common shares (1)	(3)		(97)		—		(437)		(534)
Balances, April 30, 2023	214		3,368		(200)		(2,271)		897
Common shares issued under stock plans	—		(31)		—		—		(31)
Stock-based compensation expense	—		195		—		—		195
Settlement of liability-classified restricted common shares	—		8		—		—		8


Net income	—		—		—		222		222
Other comprehensive income	—		—		2		—		2
Repurchase and retirement of common shares (1)	—		(9)		—		(78)		(87)
Balances, July 31, 2023	214		$	3,531	$	(198)	$	(2,127)	$	1,206

(1)During the three and six months ended July 31, 2023, Autodesk repurchased 437 thousand and 3 million shares at an average repurchase price of $199.73 and $199.42 per share, respectively. At July 31, 2023, no shares remained available for repurchase under the September 2016 repurchase program. At July 31, 2023, $4.91 billion remained available for repurchase under the November 2022 repurchase program approved by the Board of Directors.

Changes in stockholders' equity by component, net of tax, as of July 31, 2022, are as follows:


	Common stock and additional paid-in capital				Accumulated other comprehensive loss		Accumulated deficit		Total stockholders' equity
Shares		Amount
Balances, January 31, 2022	218		$	2,923	$	(124)	$	(1,950)	$	849
Common shares issued under stock plans	1		(10)		—		—		(10)
Stock-based compensation expense	—		146		—		—		146


Shares issued related to business combination	—		10		—		—		10

Net income	—		—		—		146		146
Other comprehensive loss	—		—		(24)		—		(24)
Repurchase and retirement of common shares (1)	(2)		(97)		—		(339)		(436)
Balances, April 30, 2022	217		2,972		(148)		(2,143)		681
Common shares issued under stock plans	—		(17)		—		—		(17)
Stock-based compensation expense	—		163		—		—		163
Settlement of liability-classified restricted common shares	—		5		—		—		5

Net income	—		—		—		186		186
Other comprehensive loss	—		—		(21)		—		(21)
Repurchase and retirement of common shares (1)	(1)		(34)		—		(223)		(257)
Balances, July 31, 2022	216		$	3,089	$	(169)	$	(2,180)	$	740

(1)During the three and six months ended July 31, 2022, Autodesk repurchased 1 million and 3 million shares at an average repurchase price of $181.64 and $199.45 per share, respectively. At July 31, 2022, 5 million shares remained available for repurchase under the September 2016 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 July 31, 2023:


	Net Unrealized Gains (Losses) on Derivative Instruments		Net Unrealized Gains (Losses) on Available-for-Sale Debt Securities		Defined Benefit Pension Components		Foreign Currency Translation Adjustments		Total
Balances, January 31, 2023	$	64	$	18	$	(19)	$	(248)	$	(185)
Other comprehensive income before reclassifications	11		—		—		9		20
Pre-tax loss reclassified from accumulated other comprehensive loss	(40)		(1)		—		—		(41)
Tax effects	3		—		—		5		8
Net current period other comprehensive (loss) income	(26)		(1)		—		14		(13)
Balances, July 31, 2023	$	38	$	17	$	(19)	$	(234)	$	(198)

Accumulated other comprehensive loss, net of taxes, consisted of the following at July 31, 2022:


	Net Unrealized Gains (Losses) on Derivative Instruments		Net Unrealized Gains (Losses) on Available-for-Sale Debt Securities		Defined Benefit Pension Components		Foreign Currency Translation Adjustments		Total
Balances, January 31, 2022	$	24	$	18	$	(16)	$	(150)	$	(124)
Other comprehensive income (loss) before reclassifications	90		3		—		(122)		(29)
Pre-tax losses reclassified from accumulated other comprehensive loss	(5)		—		—		—		(5)
Tax effects	(12)		—		—		1		(11)
Net current period other comprehensive income (loss)	73		3		—		(121)		(45)
Balances, July 31, 2022	$	97	$	21	$	(16)	$	(271)	$	(169)

Reclassifications related to gains and losses on available-for-sale debt securities are included in “Interest and other (expense) income, net.” Refer to Note 15, “Derivative 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) income, 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 July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
Numerator:
Net income	$	222	$	186	$	383	$	332
Denominator:
Denominator for basic net income per share—weighted average shares	214		217		214		217
Effect of dilutive securities	1		1		2		1
Denominator for dilutive net income per share	215		218		216		218
Basic net income per share	$	1.04	$	0.86	$	1.79	$	1.53
Diluted net income per share	$	1.03	$	0.85	$	1.77	$	1.52

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 six months ended July 31, 2023, there were 436 thousand and 512 thousand anti-dilutive shares excluded from the computation of diluted net income per share, respectively. For the three and six months ended July 31, 2022, there were 1,705 thousand and 1,118 thousand 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:


	July 31, 2023		January 31, 2023
Long-lived assets (1):
Americas
U.S.	$	258	$	256
Other Americas	16		13
Total Americas	274		269
Europe, Middle East, and Africa	65		72
Asia Pacific	45		48
Total long-lived assets	$	384	$	389

(1)Long-lived assets exclude deferred tax assets, marketable securities, goodwill, and intangible assets.

Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS