NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2021
(Tables in millions of dollars, except per share data, unless otherwise indicated)
1. Business and Summary of Significant Accounting Policies
Business
Autodesk, Inc. (“Autodesk” or the “Company”) is a world leading design software and services company, offering customers productive business solutions through powerful technology products and services. The Company serves customers in the architecture, engineering, and construction; manufacturing; and digital media, consumer, and entertainment industries. The Company’s sophisticated software products, offered through a hybrid of desktop and cloud functionality, enable its customers to experience their ideas before they are real by allowing them to imagine, design, and create their ideas and to visualize, simulate, and analyze real-world performance early in the design process by creating digital prototypes. These capabilities allow Autodesk’s customers to foster innovation, optimize and improve their designs, help save time and money, improve quality, and collaborate with others. Autodesk software products are sold globally, both directly to customers and through a network of resellers and distributors.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Autodesk and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in Autodesk’s consolidated financial statements and notes thereto. These estimates are based on information available as of the date of the consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Actual results may differ materially from these 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.
Examples of significant estimates and assumptions made by management involve revenue recognition for product subscriptions and enterprise business arrangements (“EBAs”), the determination of the fair value of acquired assets and liabilities, goodwill, financial instruments including strategic investments, long-lived assets, and other intangible assets, the realizability of deferred tax assets, and the fair value of stock awards. The Company also makes assumptions, judgments, and estimates in determining the accruals for uncertain tax positions, variable compensation, partner incentive programs, product returns reserves, allowances for credit losses, asset retirement obligations, legal contingencies, and operating lease liabilities.
Segments
Autodesk operates in one operating segment and accordingly, all required financial segment information is included in the 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:
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January 31,
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2021
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2020
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Long-lived assets (1):
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|
Americas
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U.S.
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$
|
423.6
|
|
|
$
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434.2
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Other Americas
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29.5
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|
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33.2
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Total Americas
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453.1
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|
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467.4
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Europe, Middle East, and Africa
|
109.7
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|
|
75.8
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Asia Pacific
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46.7
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|
|
57.3
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Total long-lived assets
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$
|
609.5
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|
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$
|
600.5
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____________________
(1)Long-lived assets exclude deferred tax assets, marketable securities, goodwill, and other intangible assets.
Revenue Recognition
Autodesk’s revenue is divided into three categories: subscription revenue, maintenance revenue, and other revenue. Subscription revenue consists of our term-based product subscriptions, cloud service offerings, and flexible EBAs. Maintenance revenue consists of renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license. Under our maintenance plan, customers are eligible to receive unspecified upgrades, when and if available, and technical support. Other revenue consists of revenue from consulting, training, and other products and services. Revenue is recognized when control for these offerings is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for products and services.
Autodesk’s contracts with customers may include promises to transfer multiple products and services to a customer. Determining whether the products and services are considered distinct performance obligations that should be accounted for separately or as a single performance obligation may require significant judgment. Judgment is required to determine the level of integration and interdependency between individual components of desktop software applications and cloud functionalities. This determination influences whether the desktop software is considered distinct and accounted for separately as a license performance obligation recognized at the time of delivery, or not distinct and accounted for together with the cloud functionalities as a single subscription performance obligation recognized over time.
For product subscriptions and flexible EBA subscriptions in which the desktop software and related cloud functionalities are highly interrelated, the single performance obligation is recognized ratably over the contract term as the subscription is delivered. For subscriptions involving distinct desktop software licenses, the license performance obligation is satisfied when delivered to our customers. For standalone maintenance subscriptions, cloud subscriptions, and technical support services, the performance obligation is satisfied ratably over the contract term as those services are delivered. For consulting services, the performance obligation is satisfied over a period of time as those services are delivered.
When an arrangement includes multiple performance obligations which are concurrently delivered and have the same pattern of transfer to the customer (the services transfer to the customer over the contract period), we account for those performance obligations as a single performance obligation.
For contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative standalone selling price (“SSP”) of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, subsection “Critical Accounting Policies and Estimates,” for details of the judgments made for SSP.
Our indirect channel model includes both a two-tiered distribution structure, where Autodesk sells to distributors that subsequently sell to resellers, and a one-tiered structure where Autodesk sells directly to resellers. For these arrangements, transfer of control begins at the time access to our subscriptions is made available electronically to our customer, provided all other criteria for revenue recognition are met. Judgment is required to determine whether our distributors and resellers have the ability to honor their commitment to pay, regardless of whether they collect payment from their customers. If we were to change this assessment, it could cause a material increase or decrease in the amount of revenue that we report in a particular period.
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 commission costs are capitalized and included in “Prepaid expenses and other current assets” and “Long-term other assets” on our Consolidated Balance Sheets. The deferred costs are then amortized over the period of benefit. Autodesk determined that sales commissions earned by internal sales personnel that are related to contract renewals are commensurate with sales commissions earned on the initial contracts, and we determined the period of benefit to be the term of the respective customer contract. Commissions paid to our reseller partners that are related to contract renewals are not commensurate with commissions earned on the initial contract, and we determined the estimated period of benefit by taking into consideration customer retention data, customer contracts, our technology, and other factors. Deferred costs are periodically reviewed for impairment. Amortization expense is included in marketing and sales expenses in the Consolidated Statements of Operations.
Fair Value Measurement
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In determining the fair value of our investments, we are sometimes required to use various alternative valuation techniques. Inputs to valuation techniques are either observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair value hierarchy:
Level 1 - Quoted prices for identical instruments in active markets;
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Unobservable inputs for which there is little or no market data, which require Autodesk to develop its own assumptions.
This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. This is generally true for our cash and cash equivalents and the majority of our marketable securities, which we consider to be Level 1 and Level 2 assets.
Key inputs for currency derivatives are spot rates, forward rates, interest rates, volatility, and credit default rates. The spot rate for each currency is the same spot rate used for all balance sheet translations at the measurement date. Autodesk reviews for any potential changes on a quarterly basis, in conjunction with our fiscal quarter-end close. It is Autodesk’s assessment that the leveling best reflects current market activity when observing the pricing information for these assets. Autodesk’s Level 2 securities and derivatives are valued primarily using observable inputs other than quoted prices in active markets for identical assets and liabilities. The Company has elected to use the income approach to value derivatives using the observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present
amount (discounted). Mid-market pricing is used as a practical expedient and when required, rates are interpolated from commonly quoted intervals published by market sources. See Note 3, “Financial Instruments” for information.
Cash and Cash Equivalents
Autodesk considers all highly liquid investments with insignificant interest rate risk and remaining maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at estimated fair value.
Marketable Securities and Strategic Investments
Autodesk classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Generally, marketable securities with remaining maturities of less than 12 months are classified as short-term and marketable securities with remaining maturities greater than 12 months are classified as long-term. Autodesk may sell certain of its marketable securities prior to their stated maturities for strategic purposes or in anticipation of credit deterioration.
Marketable securities are stated at fair value. Marketable securities maturing within one year that are not restricted are classified as current assets.
Autodesk determines the appropriate classification of its marketable securities at the time of purchase and re-evaluates such classification as of each balance sheet date. Autodesk carries all “available-for-sale securities” at fair value, with unrealized gains and losses, net of tax, reported in stockholders’ equity (deficit) until disposition or maturity. Autodesk carries all “trading securities” at fair value, with unrealized gains and losses, recorded in “Interest and other expense, net” in the Company’s Consolidated Statements of Operations. The cost of securities sold is based on the specific-identification method.
The company's strategic investments consist of privately held debt and equity securities.
Under the measurement alternative method, strategic investment equity securities are measured at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer in the current period. The carrying value is not adjusted for the Company’s strategic investment equity securities if there are no observable price changes in a same or similar security from the same issuer or if there are no identified events or changes in circumstances that may indicate impairment, as discussed below. To determine if a transaction is deemed a similar investment, Autodesk considers the rights and obligations between the investments and the extent to which those differences would affect the fair values of those investments with additional consideration for the stage of development of the investee company. The fair value would then be adjusted positively or negatively based on available information such as pricing in recent rounds of financing.
The company’s strategic investment debt and equity securities (Level 3) are valued using significant unobservable inputs or data in an inactive market and the valuation requires the Company’s judgment due to the absence of market prices and inherent lack of liquidity. These assumptions are inherently subjective and involve significant management judgment. Whenever possible, we use observable market data and rely on unobservable inputs only when observable market data is not available, when determining fair value.
In determining the estimated fair value of its strategic investments, the Company utilizes the most recent data available to the Company. In addition, the determination of whether an orderly transaction is for a same or similar investment requires significant management judgment including: the rights and obligations of the investments, the extent to which those differences would affect the fair values of those investments, and the impact of any differences based on the stage of operational development of the investee.
All of Autodesk’s marketable securities and strategic investments are subject to a periodic impairment review. Strategic investments equity securities are assessed based on available information such as current cash positions, earnings, earnings and cash flow forecasts, recent operational performance and any other readily available market data. For any available-for-sale debt securities, if Autodesk does not intend to sell and it is not more likely than not that Autodesk will be required to sell the available-for-sale debt security prior to recovery of its amortized cost basis, Autodesk will determine whether a decline in fair value below the amortized cost basis is due to credit-related factors. The credit loss is measured as the amount by which the debt security’s amortized cost basis exceeds the estimate of the present value of cash flows expected to be collected, up to the difference between the amortized cost basis and the fair value. Impairment will be assessed at the individual security level.
Credit-related impairment is recognized as an allowance on the Consolidated Balance Sheets with a corresponding adjustment to “Interest and other expense, net” on the Company’s Consolidated Statements of Operations. Any impairment that is not credit-related is recognized in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets.
Autodesk does not measure an allowance for credit losses on accrued interest receivables on available-for-sale debt securities separately. Autodesk writes off accrued interest receivables by reversing interest income in the period deemed uncollectible in “Interest and other expense, net” on the Company’s Consolidated Statements of Operations. Any accrued interest receivable on available-for-sale debt securities is recorded in “Cash and cash equivalents,” “Prepaid expenses and other current assets,” or “Long-term other assets” in the accompanying Consolidated Balance Sheets, as applicable.
For Autodesk’s quarterly impairment assessment of privately held debt and equity securities strategic investment portfolio, the analysis encompasses an assessment of the severity and duration of the impairment and qualitative and quantitative analysis of other key factors including: the investee’s financial metrics, the investee’s products and technologies meeting or exceeding predefined milestones, market acceptance of the product or technology, other competitive products or technology in the market, general market conditions, management and governance structure of the investee, the investee’s liquidity, debt ratios, and the rate at which the investee is using its cash.
For additional information, see “Concentration of Credit Risk” within this Note 1 and Note 3, “Financial Instruments.”
Derivative Financial Instruments
Under its risk management strategy, Autodesk uses derivative instruments to manage its short-term exposures to fluctuations in foreign currency exchange rates that exist as part of ongoing business operations. Autodesk’s general practice is to hedge a portion of transaction exposures primarily denominated in euros, Japanese yen, British pounds, Canadian dollars, Australian dollars, Singapore dollars, Swiss francs, Swedish krona, and Czech koruna. These instruments generally have maturities between one and 12 months in the future. Autodesk uses foreign currency contracts not designated as hedging instruments and foreign currency contracts designated as cash flow hedging but Autodesk does not enter into derivative instrument transactions for trading or speculative purposes.
The bank counterparties to the derivative contracts potentially expose Autodesk to credit-related losses in the event of their nonperformance. However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company’s minimum requirements under its counterparty risk assessment process. Autodesk monitors counterparty risk on at least a quarterly basis and will adjust its exposure to various counterparties as necessary. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. Autodesk does not have any master netting arrangements in place with collateral features.
Autodesk accounts for these derivative instruments as either assets or liabilities on the balance sheet and carries them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. Derivatives that do not qualify for hedge accounting are adjusted to fair value through earnings.
In addition to these foreign currency contracts, Autodesk holds derivative instruments issued by privately held companies, which are not designated as hedging instruments. These derivatives consist of certain conversion options on the convertible debt securities held by Autodesk and an option to acquire a privately held company. These derivatives are recorded at fair value as of each balance sheet date and are recorded in “Long-term other assets.” Changes in the fair values of these instruments are recognized in “Interest and other expense, net.”
Foreign Currency Translation and Transactions
The assets and liabilities of Autodesk’s foreign subsidiaries are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date, and revenue and expense amounts are translated at exchange rates that approximate those rates in effect during the period in which the underlying transactions occur. Foreign currency translation adjustments are recorded in other comprehensive income (loss).
Gains and losses realized from foreign currency transactions, those transactions denominated in currencies other than the foreign subsidiary’s functional currency, are included in “Interest and other expense, net.” Monetary assets and liabilities are
remeasured using foreign currency exchange rates at the end of the period, and non-monetary assets are remeasured based on historical exchange rates.
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 effectiveness of the cash flow hedge contracts is assessed quantitatively using regression at inception and thereafter. To receive cash flow hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge relationship and the hedges are expected to be highly effective in offsetting changes to future cash flows on hedged transactions. The gains and losses on these hedges are included in “Accumulated other comprehensive loss” and are reclassified into earnings at the time the forecasted revenue or expense is recognized. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, Autodesk reclassifies and discloses the gain or loss on the related cash flow hedge from “Accumulated other comprehensive loss” to “Interest and other expense, net” in the Company’s Consolidated Financial Statements at that time. Derivative contracts and related gain (loss) are presented within “Net cash provided by operating activities” in the Company’s Consolidated Statements of Cash Flow. See Note 3, “Financial Instruments” for additional information.
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. These forward contracts are marked-to-market at the end of each fiscal quarter with gains and losses recognized as “Interest and other expense, net.” These derivative instruments do not subject the Company to material balance sheet risk due to exchange rate movements because gains and losses on these derivative instruments are intended to offset the gains or losses resulting from the revaluation and settlement of the underlying foreign currency denominated receivables, payables, and cash.
Accounts Receivable, Net
Accounts receivable, net, consisted of the following as of January 31:
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2021
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2020
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Trade accounts receivable
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$
|
701.3
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$
|
716.1
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Less: Allowance for credit losses
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(3.8)
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|
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(4.9)
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Product returns reserve
|
(0.7)
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|
|
(0.5)
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Partner programs and other obligations
|
(53.7)
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|
|
(58.4)
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Accounts receivable, net
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$
|
643.1
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|
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$
|
652.3
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|
Allowances for uncollectible trade receivables and contract assets are subject to impairment using the expected credit loss model. Allowances for expected credit losses are measured based upon the lifetime expected credit loss which is based on historical experience, the number of days that billings are past due, reasonable economic forecast, including revised forecast data for the current economic environment, customer payment behavior, credit reports, and other customer-specific information. Allowances for credit losses on trade receivables and contract assets were not material as of January 31, 2021.
As part of the indirect channel model, Autodesk has a partner incentive program that uses quarterly attainment of monetary rewards to motivate distributors and resellers to achieve mutually agreed upon business goals in a specified time period. The majority of these incentives are recorded as a reduction to deferred revenue in the period the transaction is billed and subsequently recognized as a reduction to subscription or maintenance revenue over the contract period. The remainder reduces subscription or maintenance revenue in the current period.
These incentive balances do not require significant assumptions or judgments. Depending on how the payments are made, the reserves associated with the partner incentive program are treated on the balance sheet as either a reduction to accounts receivable or recorded as accounts payable.
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 $650.0 million line of credit facility.
The bank counterparties to the derivative contracts potentially expose Autodesk to credit-related losses in the event of their nonperformance. However, to mitigate that risk, Autodesk only contracts with counterparties who meet the Company's minimum requirements under its counterparty risk assessment process. Autodesk monitors counterparty risk on at least a quarterly basis and will adjust its exposure to various counterparties as necessary. Autodesk generally enters into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. However, Autodesk does not have any master netting arrangements in place with collateral features.
Autodesk’s accounts receivable are derived from sales to a large number of resellers, distributors, and direct customers in the Americas, EMEA, and APAC geographies. Autodesk performs ongoing evaluations of these partners’ and customers’ financial condition and limits the amount of credit extended when deemed necessary, but generally does not require collateral from such parties. Total sales to the Company’s largest distributor Tech Data Corporation, and its global affiliates (“Tech Data”), accounted for 37% of Autodesk's net revenue for fiscal year ended January 31, 2021, and 35% of Autodesk’s net revenue for both fiscal years ended January 31, 2020 and 2019. 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 26% and 31% of trade accounts receivable as of January 31, 2021 and 2020, respectively. Ingram Micro Inc. (“Ingram Micro”), our second largest distributor, accounted for 10% of Autodesk’s total net revenue for both fiscal years ended January 31, 2021 and 2020, and 11% of Autodesk’s total net revenue for fiscal year ended January 31, 2019. No other customer accounted for more than 10% of Autodesk’s total net revenue or trade accounts receivable for each of the respective periods.
Computer Equipment, Software, Furniture, and Leasehold Improvements, Net
Computer equipment, software, and furniture are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the lease term. Depreciation expense was $51.4 million in fiscal 2021, $51.0 million in fiscal 2020, and $59.2 million in fiscal 2019.
Computer equipment, software, furniture, leasehold improvements, and the related accumulated depreciation at January 31 were as follows:
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2021
|
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2020
|
Computer hardware, at cost
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$
|
153.3
|
|
|
$
|
159.7
|
|
Computer software, at cost
|
57.9
|
|
|
64.0
|
|
Leasehold improvements, land and buildings, at cost
|
335.9
|
|
|
284.0
|
|
Furniture and equipment, at cost
|
88.4
|
|
|
69.0
|
|
Computer software, hardware, leasehold improvements, furniture, and equipment, at cost
|
635.5
|
|
|
576.7
|
|
Less: Accumulated depreciation
|
(442.7)
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|
|
(415.0)
|
|
Computer software, hardware, leasehold improvements, furniture, and equipment, net
|
$
|
192.8
|
|
|
$
|
161.7
|
|
Costs incurred for computer software developed or obtained for internal use are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. These capitalized costs are amortized straight-line over the software’s expected useful life, which is generally three years.
Software Development Costs
Software development costs incurred prior to the establishment of technological feasibility are included in research and development expenses. Autodesk defines establishment of technological feasibility as the completion of a working model. Software development costs incurred subsequent to the establishment of technological feasibility through the period of general market availability of the products are capitalized and generally amortized over a three-year period, if material. Autodesk had no material capitalized software development costs at January 31, 2021, and January 31, 2020.
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 Consolidated Balance Sheets. Capitalized costs were $72.2 million and $22.3 million at January 31, 2021, and January 31, 2020, respectively. Accumulated amortization was $4.9 million and $1.2 million at January 31, 2021, and January 31, 2020, respectively. Amortization expense was $3.7 million, $1.2 million, and nil at January 31, 2021, January 31, 2020, and January 31, 2019, respectively.
Leases
Autodesk determines if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use assets,” “Operating lease liabilities,” and “Long-term operating lease liabilities” in the Consolidated Balance Sheets.
Operating lease right-of-use (“ROU”) assets represent Autodesk’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The operating lease ROU assets also include any lease payments made and are reduced by any lease incentives. Autodesk uses its incremental borrowing rate, if the Company’s leases do not provide an implicit rate, adjusted for local country-specific borrowing rates as applicable, based on the information available at commencement date in determining the present value of lease payments. 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. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Autodesk has lease agreements with lease and non-lease components. Autodesk accounts for the lease and non-lease components as a single lease component.
Other Intangible Assets, Net
Other intangible assets include developed technologies, customer relationships, trade names, patents, user lists, and the related accumulated amortization. These assets are shown as “Developed technologies, net” and as part of “Long-term other assets” in the Consolidated Balance Sheet. The majority of Autodesk’s other intangible assets are amortized to expense over the estimated economic life of the product, which ranges from three to ten years. Amortization expense for developed technologies, customer relationships, trade names, patents, and user lists was $69.9 million in fiscal 2021, $73.7 million in fiscal 2020, and $33.5 million in fiscal 2019.
Other intangible assets and related accumulated amortization at January 31 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
Developed technologies, at cost
|
$
|
698.4
|
|
|
$
|
647.1
|
|
Customer relationships, trade names, patents, and user lists, at cost (1)
|
548.8
|
|
|
532.2
|
|
Other intangible assets, at cost (2)
|
1,247.2
|
|
|
1,179.3
|
|
Less: accumulated amortization
|
(1,047.9)
|
|
|
(972.2)
|
|
Other intangible assets, net
|
$
|
199.3
|
|
|
$
|
207.1
|
|
_______________
(1)Included in “Long-term other assets” in the accompanying Consolidated Balance Sheets.
(2)Includes the effects of foreign currency translation.
The weighted average amortization period for developed technologies, customer relationships, trade names, patents, and user lists during fiscal 2021 was 4.74 years. Excluding in-process research and development, expected future amortization expense for developed technologies, customer relationships, trade names, patents, and user lists for each of the fiscal years ended thereafter is as follows:
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|
|
|
|
|
|
Fiscal Year ended January 31,
|
2022
|
$
|
60.5
|
|
2023
|
48.8
|
|
2024
|
30.5
|
|
2025
|
22.7
|
|
2026
|
18.9
|
|
Thereafter
|
17.9
|
|
Total
|
$
|
199.3
|
|
Impairment of Long-Lived Assets
At least annually or more frequently as circumstances dictate, Autodesk reviews its long-lived assets for impairment whenever impairment indicators exist. Autodesk continually monitors events and changes in circumstances that could indicate the carrying amounts of its long-lived assets may not be recoverable. When such events or changes in circumstances occur, Autodesk assesses recoverability of these assets. Recoverability is measured by comparison of the carrying amounts of the assets to the future undiscounted cash flow the assets are expected to generate. If the long-lived assets are impaired, the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds its fair market value. Autodesk did not recognize any material impairments of long-lived assets during the fiscal years ended January 31, 2021, 2020, and 2019, respectively. See Note 9, “Leases” for impairment of lease right-of-use assets.
In addition to the recoverability assessments, Autodesk routinely reviews the remaining estimated useful lives of its long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter when such determinations are made, as well as in subsequent quarters.
Goodwill
Goodwill consists of the excess of the consideration transferred over the fair value of net assets acquired in business combinations. Autodesk tests goodwill for impairment annually in its fourth fiscal quarter or 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; and 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 the Company’s 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.
For the annual impairment test, Autodesk’s market capitalization was substantially in excess of the carrying value of the Company as of January 31, 2021. Accordingly, Autodesk has determined there was no goodwill impairment of our reporting unit during the fiscal year ended January 31, 2021. In addition, Autodesk did not recognize any goodwill impairment losses in fiscal 2020 or 2019.
The following table summarizes the changes in the carrying amount of goodwill during the fiscal years ended January 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2021
|
|
January 31, 2020
|
Goodwill, beginning of the year
|
$
|
2,594.2
|
|
|
$
|
2,600.0
|
|
Less: accumulated impairment losses, beginning of the year
|
(149.2)
|
|
|
(149.2)
|
|
Additions arising from acquisitions during the year
|
220.8
|
|
|
—
|
|
Effect of foreign currency translation
|
40.7
|
|
|
(5.8)
|
|
|
|
|
|
Goodwill, end of the year
|
$
|
2,706.5
|
|
|
$
|
2,445.0
|
|
Deferred Tax Assets
Deferred tax assets arise primarily from tax credits, net operating losses, and timing differences for reserves, accrued liabilities, stock options, deferred revenue, purchased technologies, and capitalized intangibles, partially offset by U.S. deferred tax liabilities on acquired intangibles, and valuation allowances against U.S. capital losses, California and Michigan deferred tax assets and foreign deferred tax assets. Autodesk performed a quarterly assessment of the recoverability of these net deferred tax assets and believes it will generate sufficient future taxable income in appropriate tax jurisdictions to realize the net deferred tax assets. They are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce gross deferred tax assets to the amount that is more likely than not to be realized.
Stock-based Compensation Expense
The following table summarizes stock-based compensation expense for fiscal 2021, 2020, and 2019, respectively, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Cost of subscription and maintenance revenue
|
$
|
17.2
|
|
|
$
|
13.8
|
|
|
$
|
13.2
|
|
Cost of other revenue
|
6.4
|
|
|
5.8
|
|
|
4.3
|
|
Marketing and sales
|
178.4
|
|
|
149.0
|
|
|
109.4
|
|
Research and development
|
145.0
|
|
|
120.8
|
|
|
82.6
|
|
General and administrative
|
52.8
|
|
|
73.0
|
|
|
40.0
|
|
Stock-based compensation expense related to stock awards and Employee Qualified Stock Purchase Plan ("ESPP") purchases
|
399.8
|
|
|
362.4
|
|
|
249.5
|
|
Tax benefit
|
(42.0)
|
|
|
(1.1)
|
|
|
(2.6)
|
|
Stock-based compensation expense related to stock awards and ESPP purchases, net
|
$
|
357.8
|
|
|
$
|
361.3
|
|
|
$
|
246.9
|
|
Autodesk measures stock-based compensation cost at the grant date fair value of the award, and recognizes expense ratably over the requisite service period, which is generally the vesting period. Autodesk determines the estimated fair value of stock-based payment awards for stock options and grants of employee stock purchases related to the employee stock purchase plan using either the Black-Scholes-Merton (“BSM”) option-pricing model or a binomial-lattice model (e.g., Monte Carlo simulation model). To determine the grant-date fair value of our stock-based payment awards for restricted stock units and performance stock units, we use the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case we use the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. These variables include our expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the
expected term of the award, and expected dividends. The variables used in these models are reviewed on a quarterly basis and adjusted as needed. Share-based compensation cost for restricted stock is measured on the closing fair market value of our common stock on the date of grant. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
Fiscal Year Ended
|
|
Fiscal Year Ended
|
|
|
January 31, 2021
|
|
|
|
January 31, 2020
|
|
January 31, 2019
|
|
|
Performance Stock Unit
|
|
ESPP
|
|
|
|
Performance Stock Unit
|
|
ESPP
|
|
Stock Option Plans
|
|
Performance Stock Unit
|
|
ESPP
|
Range of expected volatilities
|
|
50.7%
|
|
39.4 - 45.8%
|
|
|
|
36.3%
|
|
33.0 - 40.0%
|
|
37.0 - 42.0%
|
|
35.7%
|
|
33.0 - 38.0%
|
Range of expected lives (in years)
|
|
N/A
|
|
0.5 - 2.0
|
|
|
|
N/A
|
|
0.5 - 2.0
|
|
0.5 - 3.8
|
|
N/A
|
|
0.5 - 2.0
|
Expected dividends
|
|
—%
|
|
—%
|
|
|
|
—%
|
|
—%
|
|
—%
|
|
—%
|
|
—%
|
Range of risk-free interest rates
|
|
0.3%
|
|
0.1 - 0.5%
|
|
|
|
2.5%
|
|
1.7 - 2.5%
|
|
2.3 - 2.7%
|
|
2.0%
|
|
1.9 - 2.8%
|
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 companies within the S&P North American Technology Software Index with a market capitalization over $2.0 billion, depending on the award type.
Autodesk estimates the expected life of stock-based awards using both exercise behavior and post-vesting termination behavior as well as consideration of outstanding options. The range of expected lives of ESPP awards are based upon the four, six-month exercise periods within a 24-month offering period.
Autodesk did not pay cash dividends in fiscal 2021, 2020, or 2019 and does not anticipate paying any cash dividends in the foreseeable future. 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 stock-based awards as those forfeitures occur.
Advertising Expenses
Advertising costs are expensed as incurred. Total advertising expenses incurred were $60.4 million in fiscal 2021, $42.2 million in fiscal 2020, and $37.5 million in fiscal 2019.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding for the period, excluding stock options and restricted stock. Diluted net income (loss) per share is computed based upon the weighted average shares of common stock outstanding for the period and potentially dilutive common shares, including the effect of stock options and restricted stock units under the treasury stock method.
Defined Benefit Pension Plans
The funded status of Autodesk’s defined benefit pension plans is recognized in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of plan assets and the projected benefit obligation for the fiscal years presented. The projected benefit obligation represents the actuarial present value of benefits expected to be paid upon retirement based on employee services already rendered and estimated future compensation levels. The fair value of plan assets represents the current market value of Autodesk’s cumulative company and participant contributions made to the various plans in effect.
Net periodic benefit cost is recorded in the Consolidated Statements of Operations and includes service cost, interest cost, expected return on plan assets, amortization of prior service costs, and gains or losses previously recognized as a component of other comprehensive income (loss). Certain events, such as changes in the employee base, plan amendments, and changes in actuarial assumptions may result in a change in the defined benefit obligation and the corresponding change to other comprehensive loss.
Gains and losses and prior service costs not recognized as a component of net periodic benefit cost in the Consolidated Statements of Operations as they arise are recognized as a component of other comprehensive income (loss) in the Consolidated Statements of Comprehensive Income (Loss). Those gains and losses and prior service costs are subsequently amortized as a component of net periodic benefit cost over the average remaining service lives of the plan participants using a corridor approach to determine the portion of gain or loss subject to amortization.
The measurement of projected benefit obligations and net periodic benefit cost is based on estimates and assumptions that reflect the terms of the plans and use participant-specific information such as compensation, age and years of services, as well as certain assumptions, including estimates of discount rates, expected return of plan assets, rate of compensation increases, interest rates, and mortality rates.
Accounting Standards in Fiscal 2021
With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by FASB or adopted by the Company during the fiscal year ended January 31, 2021, that are applicable to the Company.
Accounting Standards Adopted
In June 2016, FASB issued ASU No. 2016-13 regarding ASC Topic 326, “Financial Instruments - Credit Losses,” which requires the measurement and recognition of expected credit losses for certain financial instruments using forward-looking information to calculate credit loss estimates. Autodesk adopted ASU 2016-13 as of the effective date which represents Autodesk’s fiscal year beginning February 1, 2020. The ASU did not have a material impact on Autodesk’s consolidated financial statements at adoption.
Adoption and policy elections
Allowances for uncollectible trade receivables and contract assets are subject to impairment using the expected credit loss model. Allowances for expected credit losses are measured based upon the lifetime expected credit loss which is based on historical experience, the number of days that billings are past due, reasonable economic forecast, including revised forecast data for the current economic environment, customer payment behavior, credit reports, and other customer-specific information. Allowances for credit losses on trade receivables and contract assets were not material as of January 31, 2021.
Autodesk’s investments in available-for-sale debt securities are subject to a periodic impairment review. If Autodesk does not intend to sell and it is more likely than not that Autodesk will not be required to sell the available-for-sale debt security prior to recovery of its amortized cost basis, Autodesk will determine whether a decline in fair value below the amortized cost basis is due to credit-related factors. The credit loss is measured as the amount by which the debt security’s amortized cost basis exceeds the estimate of the present value of cash flows expected to be collected, up to the difference between the amortized cost basis and the fair value. Impairment will be assessed at the individual security level. Credit-related impairment is recognized as an allowance on the Consolidated Balance Sheets with a corresponding adjustment to “Interest and other expense, net” on the Company's Consolidated Statements of Operations. Any impairment that is not credit-related is recognized in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets.
Autodesk does not measure an allowance for credit losses on accrued interest receivables on available-for-sale debt securities separately. Autodesk writes off accrued interest receivables by reversing interest income in the period deemed uncollectible in “Interest and other expense, net” on the Company’s Consolidated Statements of Operations. Any accrued interest receivable on available-for-sale debt securities is recorded in “Cash and cash equivalents,” “Prepaid expenses and other current assets,” or “Long-term other assets,” in the accompanying Consolidated Balance Sheets, as applicable.
Recently Issued Accounting Standards but not yet Adopted
In March 2020, FASB issued 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.
2. Revenue Recognition
Revenue Disaggregation
Autodesk recognizes revenue from the sale of (1) product subscriptions, cloud service offerings, and 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 Consolidated Statements of Operations.
Information regarding the components of Autodesk’s net revenue from contracts with customers by geographic location, product family, sales channel, and product type is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Net revenue by product family:
|
|
|
|
|
|
Architecture, Engineering and Construction
|
$
|
1,648.6
|
|
|
$
|
1,377.1
|
|
|
$
|
1,021.6
|
|
Manufacturing
|
798.6
|
|
|
726.1
|
|
|
616.2
|
|
AutoCAD and AutoCAD LT
|
1,099.4
|
|
|
948.2
|
|
|
731.8
|
|
Media and Entertainment
|
219.4
|
|
|
199.2
|
|
|
182
|
|
Other
|
24.4
|
|
|
23.7
|
|
|
18.2
|
|
Total net revenue
|
$
|
3,790.4
|
|
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
|
|
|
|
|
|
Net revenue by geographic area:
|
|
|
|
|
|
Americas
|
|
|
|
|
|
U.S.
|
$
|
1,281.8
|
|
|
$
|
1,108.9
|
|
|
$
|
874.6
|
|
Other Americas
|
260.6
|
|
|
226.9
|
|
|
175.3
|
|
Total Americas
|
1,542.4
|
|
|
1,335.8
|
|
|
1,049.9
|
|
Europe, Middle East and Africa
|
1,472.6
|
|
|
1,303.5
|
|
|
1,034.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
|
775.4
|
|
|
635.0
|
|
|
485.6
|
|
Total net revenue
|
$
|
3,790.4
|
|
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
|
|
|
|
|
|
Net revenue by sales channel:
|
|
|
|
|
|
Indirect
|
$
|
2,600.0
|
|
|
$
|
2,282.2
|
|
|
$
|
1,830.8
|
|
Direct
|
1,190.4
|
|
|
992.1
|
|
|
739.0
|
|
Total net revenue
|
$
|
3,790.4
|
|
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
|
|
|
|
|
|
Net revenue by product type:
|
|
|
|
|
|
Design
|
$
|
3,365.8
|
|
|
$
|
2,920.1
|
|
|
$
|
2,347.8
|
|
Make
|
296.4
|
|
|
218.4
|
|
|
89.6
|
|
Other
|
128.2
|
|
|
135.8
|
|
|
132.4
|
|
Total net revenue
|
$
|
3,790.4
|
|
|
$
|
3,274.3
|
|
|
$
|
2,569.8
|
|
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 payable 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 January 31, 2021, Autodesk had remaining performance obligations of $4.24 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 $2.74 billion or 65% of our remaining performance obligations as revenue during the next 12 months. We expect to recognize the remaining $1.50 billion or 35% 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 January 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 fiscal year ended January 31, 2021 and 2020, that was included in the deferred revenue balances at January 31, 2020 and 2019, was $2.24 billion and $1.80 billion, respectively. The satisfaction of performance obligations typically lags behind payments received under revenue contracts from customers.
3. 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 January 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (3)
|
4.0
|
|
|
|
|
—
|
|
|
4.0
|
|
|
|
|
4.0
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds (4)
|
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 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 7, "Deferred Compensation" for more information.
(5)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Consolidated Balance Sheets.
(6)Included in “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2020
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Cash equivalents (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency discount notes
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
|
$
|
—
|
|
|
$
|
6.0
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
36.8
|
|
|
—
|
|
|
—
|
|
|
36.8
|
|
|
—
|
|
|
36.8
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
1,135.5
|
|
|
—
|
|
|
—
|
|
|
1,135.5
|
|
|
1,135.5
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (2)
|
2.3
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|
1.3
|
|
|
1.0
|
|
|
—
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term trading securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds (3)
|
59.9
|
|
|
9.2
|
|
|
(0.1)
|
|
|
69.0
|
|
|
69.0
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic investments derivative asset (4)
|
0.1
|
|
|
0.5
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
Derivative contract assets (4)
|
1.0
|
|
|
9.2
|
|
|
(1.3)
|
|
|
8.9
|
|
|
—
|
|
|
8.9
|
|
|
—
|
|
|
Derivative contract liabilities (5)
|
—
|
|
|
—
|
|
|
(4.7)
|
|
|
(4.7)
|
|
|
—
|
|
|
(4.7)
|
|
|
—
|
|
|
|
|
Total
|
$
|
1,241.6
|
|
|
$
|
18.9
|
|
|
$
|
(6.1)
|
|
|
$
|
1,254.4
|
|
|
$
|
1,205.8
|
|
|
$
|
48.0
|
|
|
$
|
0.6
|
|
|
____________________
(1)Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits and certificates of deposit.
(3)See Note 7, "Deferred Compensation" for more information.
(4)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Consolidated Balance Sheets.
(5)Included in “Other accrued liabilities” in the accompanying Consolidated Balance Sheets.
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 January 31, 2021 and 2020, 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 fiscal 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 for fiscal 2021. There were no write offs of accrued interest receivables for fiscal 2021.
The sales or redemptions of debt securities in fiscal 2021 resulted in a net gain of $0.6 million. There was no realized gain or loss for the sales or redemptions of debt securities during fiscal 2020. The sales or redemptions of debt securities in fiscal 2019 resulted in a loss of $1.3 million. The gains and losses were recorded in “Interest and other expense, net” on the Company’s Consolidated Statements of Operations.
Proceeds from the sale and maturity of marketable debt securities for fiscal 2021, 2020, and 2019 were $17.0 million, $27.4 million, and $531.0 million, respectively.
Strategic investment equity securities
As of January 31, 2021 and 2020, Autodesk had $134.1 million and $122.5 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
Cumulative Amount as of
|
|
2021
|
|
2020
|
|
2019
|
|
January 31, 2021
|
Upward adjustments (1)
|
$
|
6.6
|
|
|
$
|
3.2
|
|
|
$
|
6.2
|
|
|
$
|
16.0
|
|
Negative adjustments, including impairments (1)
|
(51.6)
|
|
|
(4.2)
|
|
|
(4.8)
|
|
|
(60.6)
|
|
Net adjustments
|
$
|
(45.0)
|
|
|
$
|
(1.0)
|
|
|
$
|
1.4
|
|
|
$
|
(44.6)
|
|
____________________
(1)Included in “Interest and other expense, net” on the Company’s Consolidated Statements of Operations.
Autodesk does not consider the remaining investments to be impaired at January 31, 2021.
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 $1.14 billion at January 31, 2021, and $981.3 million at January 31, 2020. Outstanding contracts are recognized as either assets or liabilities on the Company’s Consolidated Balance Sheets at fair value. The majority of the net loss of $24.1 million remaining in “Accumulated other comprehensive loss” as of January 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 Consolidated Statements of Operations where the effects of the hedge are recorded were as follows for the fiscal year ended January 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 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 Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
|
|
$
|
3,478.9
|
|
$
|
183.3
|
|
$
|
242.1
|
|
$
|
1,440.3
|
|
$
|
932.5
|
|
$
|
413.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
|
$
|
(0.4)
|
|
$
|
0.1
|
|
$
|
0.6
|
|
$
|
2.4
|
|
$
|
0.5
|
|
$
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 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 Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
|
|
$
|
2,751.9
|
|
$
|
386.6
|
|
$
|
223.9
|
|
$
|
1,310.3
|
|
$
|
851.1
|
|
$
|
405.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
11.7
|
|
$
|
5.9
|
|
$
|
(0.9)
|
|
$
|
(4.3)
|
|
$
|
(0.7)
|
|
$
|
(2.1)
|
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 $434.5 million at January 31, 2021, and $736.2 million at January 31, 2020.
Fair Value of Derivative Instruments:
The fair values of derivative instruments in Autodesk’s Consolidated Balance Sheets were as follows as of January 31, 2021, and January 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Fair Value at
|
|
January 31, 2021
|
|
January 31, 2020
|
Derivative Assets
|
|
|
|
|
|
Foreign currency contracts designated as cash flow hedges
|
Prepaid expenses and other current assets
|
|
$
|
4.7
|
|
|
$
|
1.0
|
|
Derivatives not designated as hedging instruments
|
Prepaid expenses and other current assets and long-term other assets
|
|
5.3
|
|
|
8.4
|
|
Total derivative assets
|
|
|
$
|
10.0
|
|
|
$
|
9.4
|
|
Derivative Liabilities
|
|
|
|
|
|
Foreign currency contracts designated as cash flow hedges
|
Other accrued liabilities
|
|
$
|
16.5
|
|
|
$
|
2.8
|
|
Derivatives not designated as hedging instruments
|
Other accrued liabilities
|
|
1.0
|
|
|
1.9
|
|
Total derivative liabilities
|
|
|
$
|
17.5
|
|
|
$
|
4.7
|
|
The effects of derivatives designated as hedging instruments on Autodesk’s Consolidated Statements of Operations were as follows for the fiscal years ended January 31, 2021, 2020, and 2019, respectively (amounts presented include any income tax effects):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
Fiscal Year Ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Amount of (loss) gain recognized in accumulated other comprehensive loss on derivatives (effective portion)
|
$
|
(28.1)
|
|
|
$
|
3.0
|
|
|
$
|
19.6
|
|
Amount and location of (loss) gain reclassified from accumulated other comprehensive loss into income (loss) (effective portion)
|
|
|
|
|
|
Net revenue
|
$
|
(0.3)
|
|
|
$
|
17.6
|
|
|
$
|
(8.5)
|
|
Cost of revenue
|
0.6
|
|
|
(0.9)
|
|
|
—
|
|
Operating expenses
|
4.1
|
|
|
(7.1)
|
|
|
(3.6)
|
|
Total
|
$
|
4.4
|
|
|
$
|
9.6
|
|
|
$
|
(12.1)
|
|
The effects of derivatives not designated as hedging instruments on Autodesk’s Consolidated Statements of Operations were as follows for the fiscal years ended January 31, 2021, 2020, and 2019, respectively (amounts presented include any income tax effects):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Amount and location of (loss) gain recognized on derivatives in net income (loss)
|
|
|
|
|
|
Interest and other expense, net
|
$
|
(0.8)
|
|
|
$
|
6.0
|
|
|
$
|
6.6
|
|
4. Equity Compensation
Stock Plans
As of January 31, 2021, Autodesk maintained four active stock plans for the purpose of granting equity awards to employees and to non-employee members of Autodesk’s Board of Directors: the 2012 Employee Stock Plan (as amended, the “2012 Employee Plan”), which is available only to employees, the Autodesk 2012 Outside Directors’ Stock Plan (“2012 Directors’ Plan”), which is available only to non-employee directors, the PlanGrid 2012 Equity Incentive Plan (“PlanGrid 2012 Plan”), which is available to employees who held outstanding unvested options and restricted stock units that were assumed as part of our acquisition of PlanGrid, Inc. and the BuildingConnected, Inc. 2013 Stock Plan (“BuildingConnected 2013 Plan”), which is available to employees who held outstanding unvested options that were assumed as part of our acquisition of BuildingConnected, Inc. Additionally, there is one terminated plan with options outstanding.
The 2012 Employee Plan was approved by Autodesk’s stockholders and became effective on January 6, 2012. Since the 2012 Stock Plan was adopted by stockholders in January 2012, Autodesk has received stockholder approval to increase the number of shares subject to the plan by 36.1 million shares. The 2012 Employee Plan replaced the 2008 Employee Stock Plan, as amended (“2008 Plan”), and no further equity awards may be granted under the 2008 Plan. The 2012 Employee Plan reserves up to 57.3 million shares which includes 51.3 million shares reserved under the 2012 Employee Plan, as well as up to 6.0 million shares forfeited under certain prior employee stock plans during the life of the 2012 Employee Plan. The 2012 Employee Plan permits the grant of stock options, restricted stock units, and restricted stock awards. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Employee Plan as 1.79 shares. If a granted option, restricted stock unit, or restricted stock award expires or becomes unexercisable for any reason, the unpurchased or forfeited shares that were granted may be returned to the 2012 Employee Plan and may become available for future grant under the 2012 Employee Plan. As of January 31, 2021, 55.0 million shares subject to options or restricted stock awards have been granted under the 2012 Employee Plan. Options and restricted stock that were granted under the 2012 Employee Plan vest over periods ranging from immediately upon grant to over a three-year period and options expire 10 years from the date of grant. The 2012 Employee Plan will expire on June 30, 2022. At January 31, 2021, 10.0 million shares were available for future issuance under the 2012 Employee Plan.
The 2012 Directors’ Plan was approved by Autodesk’s stockholders and became effective on January 6, 2012. The 2012 Directors’ Plan replaced the 2010 Outside Directors’ Stock Plan, as amended (“2010 Plan”). The 2012 Directors’ Plan permits the grant of stock options, restricted stock units, and restricted stock awards to non-employee members of Autodesk’s Board of Directors. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Directors’ Plan as 2.11 shares. As of January 31, 2021, 1.0 million shares subject to restricted stock unit awards have been granted under the 2012 Directors’ Plan. Restricted stock units that were granted under the 2012 Outside Directors’ Plan vest over one to three years from the date of grant. On March 12, 2015, the Board reduced the number of shares reserved for issuance under the 2012 Directors' Plan by 0.9 million shares, so that 1.7 million shares are now reserved for issuance under the 2012 Directors’ Plan. The 2012 Directors’ Plan will expire on June 30, 2022. At January 31, 2021, 0.8 million shares were available for future issuance under the 2012 Directors’ Plan.
Pursuant to the PlanGrid acquisition on December 19, 2018, the Company assumed the unvested options and restricted stock units under the PlanGrid 2012 Plan. No further equity awards will be granted under the PlanGrid 2012 Plan. As of January 31, 2021, approximately 10 thousand shares subject to options remain outstanding under the PlanGrid 2012 Plan. Options that were granted under the PlanGrid 2012 Plan vest over a four-year period and expire 10 years from the date of grant. The PlanGrid 2012 Plan will expire on June 18, 2022.
Pursuant to the BuildingConnected acquisition on January 23, 2019, the Company assumed the unvested options under the BuildingConnected 2013 Plan. No further equity awards will be granted under the BuildingConnected 2013 Plan. As of January 31, 2021, approximately 38 thousand shares subject to options remain outstanding under the BuildingConnected 2013 Plan. Options that were granted under the BuildingConnected 2013 Plan vest over a four-year period and expire 10 years from the date of grant. The BuildingConnected 2013 Plan will expire on May 6, 2023.
The following sections summarize activity under Autodesk’s stock plans.
Restricted Stock Units:
A summary of restricted stock activity for the fiscal year ended January 31, 2021, is as follows:
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Unreleased Restricted Stock Units (in thousands)
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Weighted average grant date fair value per share
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Unvested restricted stock at January 31, 2020
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4,732.3
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$
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147.24
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Granted
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2,462.2
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224.20
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Vested
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(2,341.6)
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|
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142.15
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Canceled/Forfeited
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(327.8)
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|
158.00
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Performance Adjustment (1)
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(18.0)
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190.74
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Unvested restricted stock at January 31, 2021
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4,507.1
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$
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191.88
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_______________
(1)Based on Autodesk’s financial results and relative total stockholder return for the fiscal 2020 performance period. The performance stock units were attained at rates ranging from 96.6% to 101.1% of the target award.
For the restricted stock granted during fiscal years ended January 31, 2021, 2020, and 2019, the weighted average grant date fair values were $224.20, $156.24, and $144.37, respectively. The fair value of the shares vested during fiscal years ended January 31, 2021, 2020, and 2019 were $503.4 million, $361.0 million, and $425.4 million, respectively.
During the fiscal year ended January 31, 2021, Autodesk granted 2.2 million restricted stock units. Restricted stock units vest over periods ranging from immediately upon grant to a pre-determined date that is typically within three years from the date of grant. 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. The fair value of the restricted stock units is expensed ratably over the vesting period.
During the fiscal years ended January 31, 2021 and 2020, Autodesk settled liability-classified awards of $28.7 million and $23.5 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.
Autodesk recorded stock-based compensation expense related to restricted stock units of $308.9 million, $274.5 million, and $189.3 million during fiscal years ended January 31, 2021, 2020, and 2019, respectively. As of January 31, 2021, total compensation cost not yet recognized of $617.7 million related to non-vested awards is expected to be recognized over a weighted average period of 1.8 years. At January 31, 2021, the number of restricted stock units granted but unvested was 4.1 million.
During the fiscal year ended January 31, 2021, Autodesk granted 0.3 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 fiscal 2021 are based on revenue 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”). These performance stock units vest over a three-year 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 2021 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).
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 has determined the grant-date fair value for these awards using the stock price on the date of grant or if the awards are subject to a market condition, a Monte Carlo simulation model. The fair value of the performance stock units is expensed using the accelerated attribution over the vesting period.
Autodesk recorded stock-based compensation expense related to performance stock units of $30.7 million, $27.1 million, and $28.6 million during fiscal years ended January 31, 2021, 2020, and 2019 respectively. As of January 31, 2021, total compensation cost not yet recognized of $5.0 million related to unvested performance stock units, is expected to be recognized over a weighted average period of 0.8 years. At January 31, 2021, the number of performance stock units granted but unvested was 0.4 million.
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 fair value of Autodesk’s common stock at the issuance date. Shares to be issued are estimated to be 17,662 based on the closing price of Autodesk’s common stock on January 29, 2021, the last trading day before Autodesk’s fiscal 2021 year-end. 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. See Note 6, “Acquisitions,” for further discussion.
Autodesk recorded stock-based compensation expense of $2.4 million during the fiscal year ended January 31, 2021, related to common stock shares.
1998 Employee Qualified Stock Purchase Plan (“ESPP”)
Under Autodesk’s ESPP, which was approved by stockholders in 1998, eligible employees may purchase shares of Autodesk’s common stock at their discretion using up to 15% of their eligible compensation, subject to certain limitations, at 85% of the lower of Autodesk's closing price (fair market value) on the offering date or the exercise date. The offering period for ESPP awards consists of four, six-month exercise periods within a 24-month offering period.
At January 31, 2021, a total of 6.4 million shares were available for future issuance. Under the ESPP, the Company issues shares on the first trading day following March 31 and September 30 of each fiscal year. The ESPP does not have an expiration date.
A summary of the ESPP activity for the fiscal years ended January 31, 2021, 2020, and 2019 is as follows:
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Fiscal year ended January 31,
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2021
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2020
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2019
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Issued shares
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0.9
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0.9
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1.0
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Average price of issued shares
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$
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122.73
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$
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102.20
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$
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90.25
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Weighted average grant date fair value of awards granted under the ESPP
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$
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55.98
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$
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47.78
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$
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42.75
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Autodesk recorded $40.1 million, $33.3 million, and $27.2 million of compensation expense associated with the ESPP in fiscal 2021, 2020, and 2019, respectively.
Equity Compensation Plan Information
The following table summarizes the number of outstanding options and awards granted to employees and directors, as well as the number of securities remaining available for future issuance under these plans as of January 31, 2021:
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(a)
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(b)
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(c)
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Plan category
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Number of securities to be issued upon exercise or vesting of outstanding options and awards (in millions)
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Weighted-average exercise price of outstanding options
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (in millions)
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Equity compensation plans approved by security holders
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4.7
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$
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23.75
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17.3
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(1)
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Total
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4.7
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$
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23.75
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17.3
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____________________
(1)Included in this amount are 6.4 million securities available for future issuance under Autodesk’s ESPP.
5. Income Taxes
The provision for income taxes consists of the following:
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Fiscal year ended January 31,
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2021
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2020
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2019
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Federal:
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Current
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$
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9.8
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$
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(2.3)
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$
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(13.3)
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Deferred
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(741.0)
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7.6
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(6.7)
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State:
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Current
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19.0
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(0.4)
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(1.8)
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Deferred
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(57.5)
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2.1
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0.1
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Foreign:
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Current
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87.6
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69.6
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65.3
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Deferred
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20.6
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3.7
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(5.5)
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Income tax provision (benefit)
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$
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(661.5)
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$
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80.3
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$
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38.1
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Foreign pretax income was $527.8 million in fiscal 2021, $475.5 million in fiscal 2020, and $181.4 million in fiscal 2019.
The differences between the U.S. statutory rate and the aggregate income tax provision are as follows:
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Fiscal year ended January 31,
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2021
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2020
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2019
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Income tax provision (benefit) at U.S. Federal statutory rate
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$
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114.8
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$
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61.9
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$
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(9.0)
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State income tax benefit, net of the U.S. Federal benefit
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(7.9)
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(5.3)
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(11.4)
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Foreign income taxed at rates different from the U.S. statutory rate
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(15.7)
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(41.2)
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117.8
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Valuation allowance adjustment
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(661.7)
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|
65.3
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18.8
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Transition tax and revisions due to subsequent regulations
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|
9.6
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(16.0)
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Tax effect of non-deductible stock-based compensation
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20.4
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|
24.9
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|
7.6
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Stock compensation windfall / shortfall
|
(35.4)
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|
(22.4)
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|
|
(39.4)
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Research and development tax credit benefit
|
(22.1)
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|
|
(19.8)
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(23.5)
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Closure of income tax audits and changes in uncertain tax positions
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—
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(2.0)
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|
(12.7)
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Tax effect of officer compensation in excess of $1.0 million
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4.6
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3.4
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|
5.0
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|
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Non-deductible expenses
|
2.3
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|
|
5.4
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|
|
1.5
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Global intangible low-taxed income, foreign derived intangible income
|
(65.0)
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|
|
—
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|
—
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Other
|
4.2
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|
0.5
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|
(0.6)
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Income tax provision (benefit)
|
$
|
(661.5)
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|
$
|
80.3
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|
$
|
38.1
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Autodesk’s fiscal 2021 tax benefit is primarily driven by the U.S. valuation allowance release, excess tax benefits from share-based compensation and a permanent tax benefit from foreign derived intangible income in the U.S., offset by tax expense in foreign locations, including withholding taxes on payments made to the United States or to Singapore from foreign sources.
Significant components of Autodesk’s deferred tax assets and liabilities are as follows:
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January 31,
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2021
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2020
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Stock-based compensation
|
$
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39.0
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$
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32.8
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|
Research and development tax credit carryforwards
|
220.4
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|
263.4
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Foreign tax credit carryforwards
|
69.9
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|
|
253.9
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|
Accrued compensation and benefits
|
3.4
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|
|
3.4
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|
Other accruals not currently deductible for tax
|
14.1
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|
|
28.4
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Purchased technology and capitalized software
|
48.2
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|
|
37.7
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Fixed assets
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8.1
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|
|
11.6
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|
Lease liability
|
114.2
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|
|
106.4
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|
Tax loss carryforwards
|
65.5
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|
|
241.2
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Deferred revenue
|
501.5
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|
29.2
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Other
|
40.2
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|
|
28.0
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Total deferred tax assets
|
1,124.5
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|
|
1,036.0
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Less: valuation allowance
|
(186.5)
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|
|
(883.4)
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Net deferred tax assets
|
938.0
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|
|
152.6
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|
Indefinite lived intangibles
|
(83.1)
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|
|
(76.5)
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Right-of-use assets
|
(101.6)
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|
|
(101.3)
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|
Unremitted earnings of foreign subsidiaries
|
(1.6)
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|
|
(0.9)
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|
Total deferred tax liabilities
|
(186.3)
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|
|
(178.7)
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|
Net deferred tax assets (liabilities)
|
$
|
751.7
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|
|
$
|
(26.1)
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|
Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk evaluates whether it is more likely than not that some or all of the deferred tax assets will not be realized based on all available positive and negative evidence.
In evaluating the need for a valuation allowance, prior to fiscal 2021 Autodesk considered global cumulative losses arising from the Company’s business model transition as a significant piece of negative evidence. During fiscal 2021 Autodesk has recognized cumulative earnings on a global basis and is profitable in the U.S.. Autodesk forecasts cumulative earnings in U.S. jurisdiction in fiscal 2022. In the fourth quarter of fiscal 2021, Autodesk released the valuation allowance against the Company’s U.S. deferred tax assets, due to positive evidence indicating that these deferred tax assets are more likely than not to be realized. The Company has retained a valuation allowance against California deferred tax assets and deferred tax assets that will convert into a capital loss upon reversal as we do not have sufficient income of the appropriate character to benefit these deferred tax assets. The Company continues to retain a valuation allowance of $65 million against foreign deferred tax assets in the Netherlands and Canada as of January 31, 2021.
The valuation allowance decreased by $696.9 million in fiscal 2021 primarily due to the U.S. valuation allowance release of $679.0 million. The valuation allowance increased by $85.6 million and $163.6 million in fiscal 2020 and fiscal 2019, respectively, primarily related to the generation of deferred tax attributes, net of the fiscal 2020 valuation allowance release of $42.0 million in Singapore.
The U.S. Tax Cuts and Jobs Act (“TCJA”) provided broad and significant changes to the U.S. corporate income tax regime and reduced the statutory federal corporate rate from 35% to 21% for fiscal 2018 and forward. TCJA subjects the deemed intangible income of our foreign subsidiaries to current U.S. taxation (commonly referred to as “GILTI”), provides for a full dividends received deduction upon repatriation of untaxed earnings of our foreign subsidiaries, imposes a minimum taxation (without most tax credits) on modified taxable income, which is generally taxable income without deductions for payments to related foreign companies (commonly referred to as “BEAT”), modifies the accelerated depreciation deduction rules, and revises the deductibility of certain expenses.
The Company has elected to recognize any potential GILTI obligations as an expense in the period it is incurred.
We anticipate that the U.S. Department of Treasury and other standard-setting bodies will continue to interpret or issue guidance on how provisions of the TCJA will be applied or otherwise administered. As future guidance is issued, we may make adjustments to amounts that we have previously recorded that may materially impact our financial statements in the period in which the adjustments are made.
As of January 31, 2021, Autodesk had $8.8 million of cumulative U.S. federal tax loss carryforwards and $560.4 million of cumulative U.S. state tax loss carryforwards, which may be available to reduce future income tax liabilities in federal and state jurisdictions. The pre-fiscal 2019 U.S. federal tax loss carryforward will expire beginning fiscal 2035 through fiscal 2039. U.S. federal losses generated beginning in fiscal 2019 do not expire and are carried forward indefinitely. The U.S. state tax loss carryforward will expire beginning fiscal 2025 through fiscal 2041.
In addition to U.S. federal and state tax loss carryforwards, the Netherlands, Norway, Singapore, and other foreign jurisdictions incurred federal tax losses totaling $222.0 million, which may be available to reduce future income tax liabilities. Our Norway and Singaporean losses, of $22.5 million and $156.4 million, respectively, have an indefinite expiration period. The Netherlands losses of $40.0 million will expire beginning in fiscal 2025 through fiscal 2027, and have a full valuation allowance against them on our balance sheet as the Company has determined it is more likely than not that these losses will not be utilized.
As of January 31, 2021, Autodesk had $166.8 million of cumulative U.S. federal research tax credit carryforwards, $97.3 million of cumulative California state research tax credit carryforwards, and $56.8 million and $1.6 million of cumulative Canadian federal research and Ontario minimum tax credit carryforwards, respectively, which may be available to reduce future income tax liabilities in the respective jurisdictions. The federal research tax credit carryforwards will expire beginning fiscal 2026 through fiscal 2041, the state research tax credit carryforwards may reduce future California income tax liabilities indefinitely, and the Canadian research tax credit carryforwards will expire beginning fiscal 2028 through fiscal 2041. Autodesk also has $112.2 million of cumulative U.S. federal foreign tax credit carryforwards, which may be available to reduce future U.S. tax liabilities. These foreign tax credits will expire beginning fiscal 2025 through fiscal 2030. As discussed above, the California and Canada cumulative assets have full valuation allowance against them on our balance sheet as the Company has determined it is more likely than not that these losses and credits will not be utilized.
Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code and similar state provisions. This annual limitation may result in the expiration of net operating losses and credits before utilization. No ownership change has occurred through the balance sheet date that would result in permanent losses of the U.S. federal and state tax attributes.
As of January 31, 2021, the Company had $198.0 million of gross unrecognized tax benefits, of which $31.7 million would reduce our valuation allowance, if recognized. The remaining $166.3 million would impact the effective tax rate. It is possible that the amount of unrecognized tax benefits will decrease in the next 12 months for an audit settlement of approximately $8.2 million.
A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits is as follows:
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|
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|
|
Fiscal Year Ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Gross unrecognized tax benefits at the beginning of the fiscal year
|
$
|
220.6
|
|
|
$
|
209.0
|
|
|
$
|
337.6
|
|
Increases for tax positions of prior years
|
12.7
|
|
|
2.8
|
|
|
7.9
|
|
Decreases for tax positions of prior years
|
(41.1)
|
|
|
(0.4)
|
|
|
(146.3)
|
|
Increases for tax positions related to the current year
|
6.4
|
|
|
11.1
|
|
|
10.3
|
|
Decreases relating to settlements with taxing authorities
|
—
|
|
|
—
|
|
|
—
|
|
Reductions as a result of lapse of the statute of limitations
|
(0.6)
|
|
|
(1.9)
|
|
|
(0.5)
|
|
Gross unrecognized tax benefits at the end of the fiscal year
|
$
|
198.0
|
|
|
$
|
220.6
|
|
|
$
|
209.0
|
|
It is the Company’s continuing practice to recognize interest and/or penalties related to income tax matters in income tax expense. Autodesk had $4.5 million, $2.3 million, and $3.1 million, net of tax benefit, accrued for interest and penalties related to unrecognized tax benefits as of January 31, 2021, 2020, and 2019, respectively. There was $2.2 million, $(0.8) million, and $0.3 million of net expense for interest and penalties related to tax matters recorded through the consolidated statements of operations for the years ended January 31, 2021, 2020, and 2019, respectively.
Autodesk’s U.S. and state income tax returns for fiscal 2002 through fiscal 2021 remain open to examination due to either net operating loss or credit carryforward. The Internal Revenue Service has examined the Company’s U.S. consolidated federal income tax returns for fiscal 2014 and 2015. This audit was finalized on January 31, 2019, and impacts from the finalization of the audit were recorded in the fiscal 2019 financial statements.
Autodesk files tax returns in multiple foreign taxing jurisdictions with open tax years ranging from fiscal 2005 to 2021.
As a result of certain business and employment actions and capital investments undertaken by Autodesk, income earned in certain European and Asia Pacific countries was subject to reduced tax rates through fiscal 2019. Historically, the Company incurred $0.0 million net benefit ($0.00 basic net income per share) in fiscal 2021 and fiscal 2020 from the tax status of these business arrangements, and $11.4 million ($0.05 basic net income per share) in fiscal 2019.
6. Acquisitions
Fiscal 2021 Acquisitions
The results of operations for the following acquisitions are included in the accompanying 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 Consolidated Financial Statements.
Spacemaker AS
On November 23, 2020, Autodesk acquired Spacemaker AS (“Spacemaker”). Spacemaker is a leading provider of cloud-based artificial intelligence technology and generative design enabling architects, urban designers, and real estate developers to optimize and maximize the potential of a building site, especially during early-stage design.
The acquisition-date fair value of the consideration transferred totaled $252.0 million, which consisted of $214.1 million of cash and 147,264 shares of Autodesk’s common stock at an aggregate fair value of $37.9 million. Of the total consideration transferred, $231.1 million is considered purchase consideration. Of the remaining amount, $18.9 million was recorded in “Prepaid expenses and other current assets” and “Long-term other assets” on our Consolidated Balance Sheets and will be amortized to stock-based compensation expense, and $2.0 million was recorded as stock-based compensation expense during the fiscal quarter ended January 31, 2021. The 147,264 shares of common stock are held in escrow until the third anniversary of the acquisition closing date, and 73,632 of those shares are subject to forfeiture by the employee if employment terminates during the three-year employment period. See Note 4, “Equity Compensation ,” for further discussion.
Other Acquisitions
During the fiscal year ended January 31, 2021, Autodesk also completed two other business combinations. The acquisition-date fair value of the cash consideration transferred totaled $45.4 million.
Purchase Price Allocation
The acquisitions during fiscal 2021 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 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 acquisition. Goodwill of $193.0 million is deductible for U.S. income tax purposes.
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 fiscal year ended January 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spacemaker
|
|
Other
|
|
Total
|
Developed technologies
|
$
|
29.8
|
|
|
$
|
12.0
|
|
|
$
|
41.8
|
|
Customer relationships
|
3.9
|
|
|
5.7
|
|
|
9.6
|
|
Trade name
|
1.1
|
|
|
0.8
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
189.4
|
|
|
31.4
|
|
|
220.8
|
|
Deferred revenue (current and non-current)
|
(0.4)
|
|
|
(2.2)
|
|
|
(2.6)
|
|
|
|
|
|
|
|
Net tangible assets (liabilities)
|
7.3
|
|
|
(2.3)
|
|
|
5.0
|
|
Total
|
$
|
231.1
|
|
|
$
|
45.4
|
|
|
$
|
276.5
|
|
For the business combinations, the allocation of purchase price consideration to certain assets and liabilities is 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, pending finalization of estimates and assumptions for certain tax aspects of the transaction and residual goodwill.
Fiscal 2020 Acquisitions
During the fiscal year ended January 31, 2020, Autodesk did not complete any business combinations.
Fiscal 2019 Acquisitions
During the fiscal year ended January 31, 2019, Autodesk completed three business combinations consisting of BuildingConnected, Inc., PlanGrid, Inc. and Assemble Systems, Inc. (“Assemble Systems”) for total aggregated purchase consideration of $1.12 billion. The total purchase consideration consisted of $1.06 billion of cash, $44.8 million of Autodesk common stock, $10.3 million attributable to the fair value of equity awards related to pre-combination services, and ascribed value of $10.6 million of Autodesk’s existing equity interest in Assemble Systems. In allocating the aggregate purchase consideration based on estimated fair values, the Company recorded $261.4 million of intangible assets and $868.0 million of goodwill. There is no amount of goodwill that is deductible for U.S. income tax purposes. The results of operations for these acquisitions were included in the accompanying Consolidated Statement of Operations from the dates of the respective acquisitions.
7. Deferred Compensation
At January 31, 2021, Autodesk had marketable securities totaling $85.0 million, of which $81.0 million related to investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans. Of the $81.0 million related to the deferred compensation liability at January 31, 2021, $7.3 million was classified as current and $73.7 million was classified as non-current liabilities. Of the $69.0 million related to the deferred compensation liability at January 31, 2020, $5.3 million was classified as current and $63.7 million was classified as non-current liabilities. The securities are recorded in the Consolidated Balance Sheets under the current portion of “Marketable securities.” The current and non-current portions of the liability are recorded in the 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 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 $120.9 million and $98.8 million as of January 31, 2021, and January 31, 2020, respectively. These assets are recorded in “Prepaid expenses and other current assets” and “Long-term other assets” in the Consolidated Balance Sheet. Amortization expense related to assets recognized from costs to obtain a contract with a customer was $96.6 million, $101.6 million, and $108.8 million during fiscal years ended January 31, 2021, 2020, and 2019, respectively. Autodesk did not recognize any contract cost impairment losses during the fiscal years ended January 31, 2021, 2020, or 2019.
8. Borrowing Arrangements
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 $450.0 million 2015 Notes, as defined below, and the remainder is available for general corporate purposes.
In December 2018, Autodesk entered into a credit agreement by and among Autodesk, the lenders from time to time party thereto and Citibank, N.A., as agent, which provides for an unsecured revolving loan facility in the aggregate principal amount of $650.0 million with an option, subject to customary conditions, to request an increase in the amount of the credit facility by up to an additional $350.0 million, and 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 financial covenants consist of (1) a minimum interest coverage ratio of 3.00:1.0, and (2) a maximum leverage ratio of 3.00:1.0. At January 31, 2021, Autodesk was in compliance with the credit agreement covenants. Revolving loans under the credit agreement bear interest, at Autodesk’s option, at either (i) a floating rate per annum equal to the base rate plus a margin of between 0.000% and 0.500%, depending on Autodesk’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 0.900% and 1.500%, depending on Autodesk’s Public Debt Rating. The maturity date on the credit agreement is December 2023. At January 31, 2021, Autodesk had no outstanding borrowings under the credit agreement.
In June 2017, Autodesk issued $500.0 million aggregate principal amount of 3.5% notes due June 15, 2027 (collectively, 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 $450.0 million aggregate principal amount of 3.125% notes due June 15, 2020 (“$450 million 2015 Notes”) and $300.0 million aggregate principal amount of 4.375% notes due June 15, 2025 (“$300 million 2015 Notes”) (collectively, the “2015 Notes”). Net of a discount of $0.6 million and $1.1 million, and issuance costs of $3.8 million and $2.5 million, Autodesk received net proceeds of $445.6 million and $296.4 million from issuance of the $450 million 2015 Notes and $300 million 2015 Notes, respectively. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the 2015 Notes using the effective interest method. The proceeds of the $300 million 2015 Notes are available for general corporate purposes. On March 4, 2020, the proceeds of the 2020 Notes were used for the repayment of the $450 million 2015 Notes. Autodesk paid a redemption price of $452.1 million, plus accrued and unpaid interest to, but not including, the date of redemption.
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 2020 Notes, 2017 Notes, $300 million 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 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 January 31, 2021, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Principal Amount
|
|
Fair value
|
2012 Notes
|
$
|
350.0
|
|
|
$
|
366.3
|
|
$300 2015 Notes
|
300.0
|
|
|
341.4
|
|
2017 Notes
|
500.0
|
|
|
564.6
|
|
2020 Notes
|
500.0
|
|
|
542.7
|
|
The expected future principal payments for all borrowings as of January 31, 2021, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ending
|
|
|
|
|
|
2022
|
$
|
—
|
|
|
|
|
|
|
|
2023
|
350.0
|
|
|
|
|
|
|
|
2024
|
—
|
|
|
|
|
|
|
|
2025
|
—
|
|
|
|
|
|
|
|
2026
|
300.0
|
|
|
|
|
|
|
|
Thereafter
|
1,000.0
|
|
|
|
|
|
|
|
Total principal outstanding
|
$
|
1,650.0
|
|
|
|
|
|
|
|
9. Leases
Autodesk has operating leases for real estate, vehicles and certain equipment. Leases have remaining lease terms of less than 1 year to 69 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 the lease are included in the lease liability if they are reasonably certain of being exercised. Options to terminate are considered in determining the lease liability if they are reasonably certain of being 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 consolidated statement of operations on a straight-line basis over the lease term. Short-term lease expense was not material for the periods presented.
During the fiscal year ended January 31, 2021, Autodesk recorded an operating lease right-of-use asset impairment of $6.9 million included in “General and administrative” on the Company’s Consolidated Statements of Operations. The impairment loss was due to vacating an office facility.
The components of lease cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 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
|
$
|
7.2
|
|
$
|
1.9
|
|
$
|
45.0
|
|
$
|
29.2
|
|
$
|
18.1
|
|
$
|
101.4
|
|
Variable lease cost
|
0.9
|
|
0.2
|
|
5.3
|
|
3.5
|
|
2.1
|
|
12.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 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
|
$
|
6.6
|
|
$
|
2.2
|
|
$
|
38.0
|
|
$
|
27.3
|
|
$
|
12.7
|
|
$
|
86.8
|
|
Variable lease cost
|
0.9
|
|
0.3
|
|
5.4
|
|
3.8
|
|
1.8
|
|
12.2
|
|
Supplemental operating cash flow information related to leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31, 2021
|
|
Fiscal Year Ended January 31, 2020
|
|
|
|
|
Cash paid for operating leases included in operating cash flows (1)
|
$
|
96.3
|
|
|
$
|
93.5
|
|
Non-cash operating lease liabilities arising from obtaining operating right-of-use assets
|
67.4
|
|
|
231.7
|
|
_______________
(1) Includes $12.0 million and $12.2 million in variable lease payments not included in “Operating lease liabilities” and “Long-term operating lease liabilities” on the Consolidated Balance Sheet for fiscal years ended January 31, 2021 and 2020, respectively.
The weighted average remaining lease term for operating leases is 7.3 and 7.5 years at January 31, 2021 and 2020, respectively. The weighted average discount rate was 2.69% and 3.41% at January 31, 2021 and 2020, respectively,
Maturities of operating lease liabilities were as follows:
|
|
|
|
|
|
Fiscal year ending
|
|
2022
|
$
|
82.8
|
|
2023
|
95.0
|
|
2024
|
79.2
|
|
2025
|
59.3
|
|
2026
|
45.2
|
|
Thereafter
|
149.1
|
|
|
510.6
|
|
Less imputed interest
|
43.2
|
|
Present value of operating lease liabilities
|
$
|
467.4
|
|
As of January 31, 2021, Autodesk has additional operating lease minimum lease payments of $0.4 million for executed leases that have not yet commenced, primarily for office locations.
Rent expense related to operating leases recognized on a straight-line basis over the lease period under previous accounting guidance, was $60.7 million for fiscal 2019.
10. Commitments and Contingencies
Purchase Commitments
In the normal course of business, Autodesk enters into various purchase commitments for goods or services. Total non-cancellable purchase commitments as of January 31, 2021, were approximately $374.8 million for periods through fiscal 2028. These purchase commitments primarily result from contracts entered into for the acquisition of cloud services, IT infrastructure, marketing, and commitments related to our investment agreements with limited liability partnership funds.
Autodesk has certain royalty commitments associated with the sale and licensing of certain products. Royalty expense is generally based on a fixed rate over a specified period, dollar amount per unit sold or a percentage of the underlying revenue. Royalty expense, which was recorded under cost of subscription and maintenance revenue and cost of other revenue on Autodesk’s Consolidated Statements of Operations, was $14.9 million in fiscal 2021, $14.3 million in fiscal 2020, and $6.4 million in fiscal 2019.
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, inquiries, investigations, 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.
11. Stock Repurchase Program
Autodesk has a stock repurchase program that is used to offset dilution from the issuance of stock under the Company’s employee stock plans and for such other purposes as may be in the interests of Autodesk and its stockholders, which has the effect of returning excess cash generated from the Company’s business to stockholders. Autodesk repurchased and retired
approximately 2.6 million shares in fiscal 2021 at an average repurchase price of $207.61 per share, 2.7 million shares in fiscal 2020 at an average repurchase price of $168.63 per share, and 2.2 million shares in fiscal 2019 at an average repurchase price of $130.15.
At January 31, 2021, 12.1 million shares remained available for repurchase under the repurchase program approved by the Board of Directors. The share repurchase program does not have an expiration date and the pace and timing of repurchases will depend on factors such as cash generation from operations, available surplus, the volume of employee stock plan activity, cash requirements for acquisitions, economic and market conditions, stock price and legal and regulatory requirements.
12. Interest and Other Expense, net
Interest and other expense, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Interest and investment expense, net
|
$
|
(51.1)
|
|
|
$
|
(54.0)
|
|
|
$
|
(52.1)
|
|
Gain on foreign currency
|
3.5
|
|
|
3.9
|
|
|
5.1
|
|
(Loss) gain on strategic investments
|
(41.7)
|
|
|
(3.3)
|
|
|
12.5
|
|
Other income
|
6.9
|
|
|
5.2
|
|
|
16.8
|
|
Interest and other expense, net
|
$
|
(82.4)
|
|
|
$
|
(48.2)
|
|
|
$
|
(17.7)
|
|
13. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of taxes, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Gains (Losses) on Derivative Instruments
|
|
Net Unrealized Gains (Losses) on Available for Sale Securities
|
|
Defined Benefit Pension Components
|
|
Foreign Currency Translation Adjustments
|
|
Total
|
Balances, January 31, 2019
|
$
|
15.0
|
|
|
$
|
3.3
|
|
|
$
|
(16.3)
|
|
|
$
|
(137.0)
|
|
|
$
|
(135.0)
|
|
Other comprehensive income (loss) before reclassifications
|
4.1
|
|
|
1.8
|
|
|
—
|
|
|
(13.7)
|
|
|
(7.8)
|
|
Pre-tax losses reclassified from accumulated other comprehensive income
|
(9.6)
|
|
|
—
|
|
|
(8.1)
|
|
|
—
|
|
|
(17.7)
|
|
Tax effects
|
(1.1)
|
|
|
(0.4)
|
|
|
1.6
|
|
|
0.1
|
|
|
0.2
|
|
Net current period other comprehensive (loss) income
|
(6.6)
|
|
|
1.4
|
|
|
(6.5)
|
|
|
(13.6)
|
|
|
(25.3)
|
|
Balances, January 31, 2020
|
8.4
|
|
|
4.7
|
|
|
(22.8)
|
|
|
(150.6)
|
|
|
(160.3)
|
|
Other comprehensive (loss) income before reclassifications
|
(33.1)
|
|
|
1.5
|
|
|
0.3
|
|
|
64.3
|
|
|
33.0
|
|
Pre-tax (gain) loss reclassified from accumulated other comprehensive income
|
(4.4)
|
|
|
0.1
|
|
|
1.5
|
|
|
—
|
|
|
(2.8)
|
|
Tax effects
|
5.0
|
|
|
0.1
|
|
|
(0.3)
|
|
|
(0.6)
|
|
|
4.2
|
|
Net current period other comprehensive (loss) income
|
(32.5)
|
|
|
1.7
|
|
|
1.5
|
|
|
63.7
|
|
|
34.4
|
|
Balances, January 31, 2021
|
$
|
(24.1)
|
|
|
$
|
6.4
|
|
|
$
|
(21.3)
|
|
|
$
|
(86.9)
|
|
|
$
|
(125.9)
|
|
Reclassifications related to gains and losses on available-for-sale debt securities are included in “Interest and other expense, net.” Refer to Note 3, “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.”
14. Net Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding for the period, excluding stock options and restricted stock units. Diluted net income (loss) per share is based upon the weighted average number of shares of common stock outstanding for the period and potentially dilutive common stock, including the effect of stock options and restricted stock units under the treasury stock method. The following table sets forth the computation of the numerators and denominators used in the basic and diluted net income (loss) per share amounts:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended January 31,
|
|
2021
|
|
2020
|
|
2019
|
Numerator:
|
|
|
|
|
|
Net income (loss)
|
$
|
1,208.2
|
|
|
$
|
214.5
|
|
|
$
|
(80.8)
|
|
Denominator:
|
|
|
|
|
|
Denominator for basic net income (loss) per share—weighted average shares
|
219.4
|
|
|
219.7
|
|
|
218.9
|
|
Effect of dilutive securities (1)
|
2.7
|
|
|
2.8
|
|
|
—
|
|
Denominator for dilutive net income (loss) per share
|
222.1
|
|
|
222.5
|
|
|
218.9
|
|
Basic net income (loss) per share
|
$
|
5.51
|
|
|
$
|
0.98
|
|
|
$
|
(0.37)
|
|
Diluted net income (loss) per share
|
$
|
5.44
|
|
|
$
|
0.96
|
|
|
$
|
(0.37)
|
|
____________________
(1)The effect of dilutive securities of 3.1 million shares for the fiscal year ended January 31, 2019, have been excluded from the calculation of diluted net loss per share as those shares would have been anti-dilutive due to the net loss incurred during that fiscal year.
The computation of diluted net income (loss) 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 fiscal year. The effect of 0.1 million potentially anti-dilutive shares were excluded from the computation of diluted net income per share for the fiscal year ended January 31, 2021. There were no potentially anti-dilutive shares excluded from the computation of diluted net income per share for the fiscal year ended January 31, 2020. The effect of 0.5 million potentially anti-dilutive shares were excluded from the computation of net loss per share for the fiscal year ended January 31, 2019.
15. Retirement Benefit Plans
Pretax Savings Plan
Autodesk has a 401(k) plan that covers nearly all U.S. employees. Eligible employees may contribute up to 75% of their pretax salary, subject to limitations mandated by the Internal Revenue Service. Autodesk makes voluntary cash contributions and matches a portion of employee contributions in cash. Autodesk’s contributions were $21.6 million in fiscal 2021, $21.4 million in fiscal 2020, and $17.1 million in fiscal 2019. Autodesk does not allow participants to invest in Autodesk common stock through the 401(k) plan.
Defined Benefit Pension Plans
Autodesk provides certain defined benefit pension plans to employees located in countries outside of the United States, primarily the United Kingdom, Switzerland, and Japan. The Company deposits funds for specific plans, consistent with the requirements of local law, with insurance companies or third-party trustees, or into government-managed accounts, and accrues for the unfunded portion of the obligation, where material.
The projected benefit obligation was $110.0 million and $103.5 million as of January 31, 2021, and January 31, 2020, respectively. The accumulated benefit obligation was $105.2 million and $97.3 million as of January 31, 2021, and January 31, 2020, respectively. The related fair value of plan assets was $107.2 million and $96.2 million as of January 31, 2021, and January 31, 2020, respectively. Our defined pension plan assets are measured at fair value and consist primarily of insurance contracts categorized as level 2 in the fair value hierarchy and an investment fund valued using net asset value. The insurance contracts represent the immediate cash surrender value of assets managed by qualified insurance companies. The assets held in the investment fund are invested in a diversified growth fund actively managed by a third party.
Autodesk recognized an aggregate pension liability for the funded status of $12.1 million and $11.6 million in “Long-term other liabilities” on the Consolidated Balance Sheet as of January 31, 2021, and January 31, 2020, respectively. Our total net
periodic pension plan cost (benefit) was $2.8 million, $3.7 million and $(3.1) million for fiscal years 2021, 2020, and 2019, respectively.
Our expected funding for the plans during fiscal 2022 is approximately $5.5 million.
Estimated Future Benefit Payments
Estimated benefit payments over the next 10 fiscal years are as follows:
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|
|
|
|
|
Pension Benefits
|
2022
|
$
|
2.6
|
|
2023
|
2.6
|
|
2024
|
2.7
|
|
2025
|
3.9
|
|
2026
|
2.9
|
|
2027-2031
|
17.1
|
|
Total
|
$
|
31.8
|
|
Defined Contribution Plans
Autodesk also provides defined contribution plans in certain foreign countries where required by statute. Autodesk’s funding policy for foreign defined contribution plans is consistent with the local requirements in each country. Autodesk’s contributions to these plans were $31.7 million in fiscal 2021, $28.7 million in fiscal 2020, and $29.6 million in fiscal 2019.
Cash Balance Plans
Autodesk provides a cash balance plan that insures the risks of disability, death, and longevity, in which the vested pension capital is reinvested and provides a 100% capital and interest guarantee. The weighted-average guaranteed interest crediting rate for cash balance plans was 1%, 1%, and 1% for mandatory retirement savings and 0.1%, 0.1%, and 0.3% for supplementary retirement savings for fiscal 2021, 2020, and 2019, respectively.
Other Plans
In addition, Autodesk offers a non-qualified deferred compensation plan to certain key employees whereby they may defer a portion (or all) of their annual compensation until retirement or a different date specified by the employee in accordance with terms of the plan. See Note 7, “Deferred Compensation,” for further discussion.
16. Selected Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for fiscal years 2021 and 2020 is as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
Fiscal year
|
Net revenue
|
$
|
885.7
|
|
|
$
|
913.1
|
|
|
$
|
952.4
|
|
|
$
|
1,039.2
|
|
|
$
|
3,790.4
|
|
Gross profit
|
803.8
|
|
|
832.2
|
|
|
868.7
|
|
|
948.6
|
|
|
3,453.3
|
|
Income from operations
|
130.6
|
|
|
146.1
|
|
|
168.0
|
|
|
184.4
|
|
|
629.1
|
|
(Provision) benefit for income taxes
|
(24.0)
|
|
|
(30.8)
|
|
|
(23.9)
|
|
|
740.2
|
|
|
661.5
|
|
Net income
|
66.5
|
|
|
98.2
|
|
|
132.2
|
|
|
911.3
|
|
|
1,208.2
|
|
Basic net income per share (1)
|
$
|
0.30
|
|
|
$
|
0.45
|
|
|
$
|
0.60
|
|
|
$
|
4.15
|
|
|
$
|
5.51
|
|
Diluted net income per share (1)
|
$
|
0.30
|
|
|
$
|
0.44
|
|
|
$
|
0.59
|
|
|
$
|
4.10
|
|
|
$
|
5.44
|
|
Income from operations includes the following items:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
$
|
98.2
|
|
|
$
|
95.9
|
|
|
$
|
97.4
|
|
|
$
|
108.3
|
|
|
$
|
399.8
|
|
Amortization of acquisition related intangibles
|
17.1
|
|
|
16.9
|
|
|
17.2
|
|
|
17.2
|
|
|
68.4
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition related costs
|
1.9
|
|
|
3.5
|
|
|
4.5
|
|
|
4.7
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
1st quarter
|
|
2nd quarter
|
|
3rd quarter
|
|
4th quarter
|
|
Fiscal year
|
Net revenue
|
$
|
735.5
|
|
|
$
|
796.8
|
|
|
$
|
842.7
|
|
|
$
|
899.3
|
|
|
$
|
3,274.3
|
|
Gross profit
|
652.8
|
|
|
717.3
|
|
|
763.2
|
|
|
816.1
|
|
|
2,949.4
|
|
Income from operations
|
24.8
|
|
|
73.8
|
|
|
110.6
|
|
|
133.8
|
|
|
343.0
|
|
(Provision) benefit for income taxes
|
(32.8)
|
|
|
(26.3)
|
|
|
(29.7)
|
|
|
8.5
|
|
|
(80.3)
|
|
Net (loss) income
|
(24.2)
|
|
|
40.2
|
|
|
66.7
|
|
|
131.8
|
|
|
214.5
|
|
Basic net (loss) income per share (1)
|
$
|
(0.11)
|
|
|
$
|
0.18
|
|
|
$
|
0.30
|
|
|
$
|
0.60
|
|
|
$
|
0.98
|
|
Diluted net (loss) income per share (1)
|
$
|
(0.11)
|
|
|
$
|
0.18
|
|
|
$
|
0.30
|
|
|
$
|
0.59
|
|
|
$
|
0.96
|
|
(Loss) Income from operations includes the following items:
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
$
|
75.2
|
|
|
$
|
88.2
|
|
|
$
|
94.0
|
|
|
$
|
105.0
|
|
|
$
|
362.4
|
|
Amortization of acquisition related intangibles
|
19.0
|
|
|
18.3
|
|
|
18.1
|
|
|
18.0
|
|
|
73.4
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition related costs
|
12.7
|
|
|
6.0
|
|
|
2.5
|
|
|
2.1
|
|
|
23.3
|
|
Restructuring and other exit costs, net
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
____________________
(1) Net income (loss) per share were computed independently for each of the periods presented; therefore the sum of the net income (loss) per share amount for the quarters may not equal the total for the fiscal year.
17. Subsequent Events
On February 23, 2021, Autodesk entered into an agreement to acquire Storm UK Holdco Limited, the parent of Innovyze, Inc. (“Innovyze”), a global leader in water infrastructure software, for approximately $1.0 billion, net of cash acquired and subject to working capital and tax closing adjustments. Innovyze provides water infrastructure software, is expected to provide comprehensive water modeling solutions that augments Autodesk’s BIM offerings in civil engineering, and is expected to extend Autodesk’s presence into operations and maintenance of water infrastructure assets. The transaction, which is structured as a cash offer for all the outstanding shares of Storm UK Holdco Limited, is subject to customary closing conditions, including regulatory approvals, and is expected to close in Autodesk’s first quarter of fiscal 2021. Autodesk expects to use readily available cash to fund the transaction.