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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission File Number: 0-14338
 
AUTODESK, INC.
(Exact name of registrant as specified in its charter)
Delaware94-2819853
(State or other jurisdiction of
incorporation or organization)		(I.R.S. employer
Identification No.)
One Market Street, Ste. 400
San Francisco, California94105
(Address of principal executive offices)(Zip Code)
(415) 507-5000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareADSKThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer☒  Accelerated filer☐
Non-accelerated filer☐  Smaller reporting company☐
  Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 23, 2023, registrant had outstanding 213,763,632 shares of common stock.


AUTODESK, INC. FORM 10-Q
TABLE OF CONTENTS
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



PART I. FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS

AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 
 Three Months Ended July 31,Six Months Ended July 31,
 2023202220232022
Net revenue:
Subscription$1,270 $1,160 $2,463 $2,249 
Maintenance 14 17 28 35 
Total subscription and maintenance revenue
1,284 1,177 2,491 2,284 
Other61 60 123 123 
Total net revenue1,345 1,237 2,614 2,407 
Cost of revenue:
Cost of subscription and maintenance revenue95 83 191 167 
Cost of other revenue21 21 41 40 
Amortization of developed technologies11 15 22 29 
Total cost of revenue127 119 254 236 
Gross profit1,218 1,118 2,360 2,171 
Operating expenses:
Marketing and sales449 433 905 852 
Research and development355 306 682 595 
General and administrative141 128 273 248 
Amortization of purchased intangibles 11 9 21 20 
Total operating expenses956 876 1,881 1,715 
Income from operations262 242 479 456 
Interest and other (expense) income, net(4)(10)— (29)
Income before income taxes258 232 479 427 
Provision for income taxes(36)(46)(96)(95)
Net income $222 $186 $383 $332 
Basic net income per share$1.04 $0.86 $1.79 $1.53 
Diluted net income per share$1.03 $0.85 $1.77 $1.52 
Weighted average shares used in computing basic net income per share214 217 214 217 
Weighted average shares used in computing diluted net income per share215 218 216 218 

See accompanying Notes to Condensed Consolidated Financial Statements.

4

AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Net income $222 $186 $383 $332 
Other comprehensive income (loss), net of reclassifications:
Net (loss) gain on derivative instruments (net of tax effect of $1, $(4), $3, and $(12), respectively)
(13)18 (26)73 
Change in net unrealized (loss) gain on available-for-sale debt securities (net of tax effect of zero for all periods presented)
(3)4 (1)3 
Change in defined benefit pension items (net of tax effect of zero for all periods presented)
— 3 — — 
Net change in cumulative foreign currency translation gain (loss) (net of tax effect of zero, $1, $5, and $1, respectively)
18 (46)14 (121)
Total other comprehensive income (loss)2 (21)(13)(45)
Total comprehensive income $224 $165 $370 $287 

See accompanying Notes to Condensed Consolidated Financial Statements.

5

AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
July 31, 2023January 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$1,714 $1,947 
Marketable securities359 125 
Accounts receivable, net402 961 
Prepaid expenses and other current assets346 308 
Total current assets2,821 3,341 
Long-term marketable securities219 102 
Computer equipment, software, furniture and leasehold improvements, net136 144 
Operating lease right-of-use assets248 245 
Intangible assets, net410 407 
Goodwill3,637 3,625 
Deferred income taxes, net1,078 1,014 
Long-term other assets558 560 
Total assets$9,107 $9,438 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$124 $102 
Accrued compensation279 358 
Accrued income taxes116 33 
Deferred revenue3,131 3,203 
Operating lease liabilities72 85 
Other accrued liabilities153 219 
Total current liabilities3,875 4,000 
Long-term deferred revenue1,102 1,377 
Long-term operating lease liabilities311 300 
Long-term income taxes payable147 164 
Long-term deferred income taxes 35 32 
Long-term notes payable, net2,282 2,281 
Long-term other liabilities149 139 
Stockholders’ equity:
Common stock and additional paid-in capital3,531 3,325 
Accumulated other comprehensive loss(198)(185)
Accumulated deficit(2,127)(1,995)
Total stockholders’ equity 1,206 1,145 
Total liabilities and stockholders’ equity $9,107 $9,438 

See accompanying Notes to Condensed Consolidated Financial Statements.

6

AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 Six Months Ended July 31,
 20232022
Operating activities:
Net income $383 $332 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion66 76 
Stock-based compensation expense362 322 
Deferred income taxes(65)(43)
Lease-related asset impairments7 9 
Other(33)(11)
Changes in operating assets and liabilities, net of business combinations:
Accounts receivable559 281 
Prepaid expenses and other assets (23)(25)
Accounts payable and other liabilities (115)(199)
Deferred revenue(350)(77)
Accrued income taxes67 26 
Net cash provided by operating activities
858 691 
Investing activities:
Purchases of marketable securities(687)(97)
Sales and maturities of marketable securities339 245 
Capital expenditures(16)(23)
Purchases of intangible assets(10)(5)
Business combinations, net of cash acquired(26)(96)
Other investing activities(18)(47)
Net cash used in investing activities(418)(23)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs71 67 
Taxes paid related to net share settlement of equity awards (120)(92)
Repurchases of common stock(616)(708)
Net cash used in financing activities(665)(733)
Effect of exchange rate changes on cash and cash equivalents(8)(23)
Net decrease in cash and cash equivalents(233)(88)
Cash and cash equivalents at beginning of period1,947 1,528 
Cash and cash equivalents at end of period$1,714 $1,440 
Supplemental cash flow disclosure:
Non-cash financing activities:
Fair value of common stock issued to settle liability-classified restricted common stock$9 $5 
Fair value of common stock issued related to business combinations $— $10 

See accompanying Notes to Condensed Consolidated Financial Statements.
7

AUTODESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In millions, except share and per share data, or as otherwise noted)
 
1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Autodesk, Inc. (“Autodesk,” “we,” “us,” “our,” or the “Company”) as of July 31, 2023, and for the three and six months ended July 31, 2023 and 2022, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information along with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In management’s opinion, Autodesk made all adjustments (consisting of normal, recurring and non-recurring adjustments) during the quarter that were considered necessary for the fair statement of the financial position and operating results of the Company. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. In addition, the results of operations for the three and six months ended July 31, 2023, are not necessarily indicative of the results for the entire fiscal year ending January 31, 2024, or for any other period. Further, the balance sheet as of January 31, 2023, has been derived from the audited Consolidated Balance Sheet as of this date. There have been no material changes, other than what is discussed herein, to Autodesk's significant accounting policies as compared to the significant accounting policies disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2023. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes, together with management’s discussion and analysis of financial position and results of operations, contained in Autodesk’s Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed on March 14, 2023.

2. Recently Issued Accounting Standards

With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or adopted by the Company during the six months ended July 31, 2023, that are applicable to the Company.

Accounting Standards Adopted

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

3. Revenue Recognition

Revenue Disaggregation

Autodesk recognizes revenue from the sale of (1) product subscriptions, cloud service offerings, and enterprise business agreements (“EBAs”), (2) renewal fees for existing maintenance plan agreements that were initially purchased with a perpetual software license, and (3) consulting, training, and other products and services. The three categories are presented as line items on Autodesk's Condensed Consolidated Statements of Operations.

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Information regarding the components of Autodesk's net revenue from contracts with customers by product family, geographic location, sales channel, and product type is as follows: 
 Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Net revenue by product family:
Architecture, Engineering and Construction $627 $564 $1,209 $1,101 
AutoCAD and AutoCAD LT 364 344 713 671 
Manufacturing256 242 502 467 
Media and Entertainment74 71 145 139 
Other 24 16 45 29 
Total net revenue$1,345 $1,237 $2,614 $2,407 
Net revenue by geographic area:
Americas
U.S.$485 $424 $941 $822 
Other Americas104 91 201 177 
Total Americas589 515 1,142 999 
Europe, Middle East and Africa506 473 980 922 
Asia Pacific250 249 492 486 
Total net revenue$1,345 $1,237 $2,614 $2,407 
Net revenue by sales channel:
Indirect$850 $816 $1,670 $1,585 
Direct495 421 944 822 
Total net revenue$1,345 $1,237 $2,614 $2,407 
Net revenue by product type:
Design$1,154 $1,064 $2,240 $2,068 
Make130 113 251 216 
Other61 60 123 123 
Total net revenue$1,345 $1,237 $2,614 $2,407 

Payments for product subscriptions, industry collections, cloud subscriptions, and maintenance subscriptions are typically due up front with payment terms of 30 to 45 days. Payments on EBAs are typically due in annual installments over the contract term, with payment terms of 30 to 60 days. Autodesk does not have any material variable consideration, such as obligations for returns, refunds, warranties, or amounts due to customers for which significant estimation or judgment is required as of the reporting date.

Remaining performance obligations consist of total short-term, long-term, and unbilled deferred revenue. As of July 31, 2023, Autodesk had remaining performance obligations of $5.22 billion, which represents the total contract price allocated to remaining performance obligations, which are generally recognized over the next three years. We expect to recognize $3.51 billion or 67% of our remaining performance obligations as revenue during the next 12 months. We expect to recognize the remaining $1.71 billion or 33% of our remaining performance obligations as revenue thereafter.

The amount of remaining performance obligations may be impacted by the specific timing, duration, and size of customer subscription and support agreements, the specific timing of customer renewals, and foreign currency fluctuations.

Contract Balances

We receive payments from customers based on a billing schedule as established in our contracts. Contract assets relate to performance completed in advance of scheduled billings. Contract assets were not material as of July 31, 2023. Deferred
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revenue relates to billings in advance of performance under the contract. The primary changes in our contract assets and deferred revenues are due to our performance under the contracts and billings.

Revenue recognized during the three months ended July 31, 2023 and 2022, that was included in the deferred revenue balances at January 31, 2023 and 2022, was $913 million and $828 million, respectively. Revenue recognized during the six months ended July 31, 2023 and 2022, that was included in the deferred revenue balances at January 31, 2023 and 2022, was $1.98 billion and $1.82 billion, respectively. The satisfaction of performance obligations typically lags behind payments received under revenue contracts from customers.

4. Concentration of Credit Risk
    
Autodesk places its cash, cash equivalents, and marketable securities in highly liquid instruments with, and in the custody of, multiple diversified financial institutions globally with high credit ratings, and limits the amounts invested with any one institution, type of security, and issuer. Autodesk’s primary commercial banking relationship is with Citigroup Inc. and its global affiliates. Citibank, N.A., an affiliate of Citigroup, is one of the lead lenders and an agent in the syndicate of Autodesk’s $1.5 billion revolving credit facility. See Note 13, “Borrowing Arrangements,” in the Notes to Condensed Consolidated Financial Statements for further discussion.

Total sales to the Company's largest distributor TD Synnex Corporation and its global affiliates (“TD Synnex”) accounted for 40% of Autodesk’s total net revenue during both the three and six months ended July 31, 2023. Total sales to TD Synnex accounted for 37% of Autodesk’s total net revenue for both the three and six months ended July 31, 2022. The majority of the net revenue from sales to TD Synnex is for sales outside of the United States. In addition, TD Synnex accounted for 22% and 27% of trade accounts receivable at July 31, 2023 and January 31, 2023, respectively. Ingram Micro Inc. (“Ingram Micro”), our second largest distributor, accounted for 8% of Autodesk's total net revenue during both the three and six months ended July 31, 2023. Total sales to Ingram Micro accounted for 9% of Autodesk’s total net revenue during both the three and six months ended July 31, 2022. No other customer accounted for more than 10% of Autodesk's total net revenue or trade accounts receivable for each of the respective periods.
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5. Financial Instruments

The following tables summarize the Company's financial instruments by significant investment category as of July 31, 2023, and January 31, 2023:
July 31, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Cash equivalents (1):
Money market funds$499 $— $— $499 
Commercial paper 194 — — 194 
Certificates of deposit75 — — 75 
U.S. government securities44 — — 44 
Municipal bonds11 — — 11 
Other (2)5 — — 5 
Marketable securities:
Short-term
Commercial paper179 — — 179 
Corporate debt securities63 — — 63 
U.S. government securities61 — — 61 
Asset-backed securities29 — — 29 
Other (3)27 — — 27 
Long-term
Corporate debt securities104 — — 104 
Asset-backed securities47 — — 47 
U.S. government securities29 — — 29 
Agency mortgage backed securities26 — — 26 
Other (4)13 — — 13 
Mutual funds (5) (6)86 12 (1)97 
Total$1,492 $12 $(1)$1,503 
___________________ 
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of mortgage-backed securities and asset-backed securities.
(3)Primarily consists of supranational bonds, agency discount notes, and mortgage-backed securities.
(4)Primarily consists of agency bonds, agency collateralized mortgage obligations, and mortgage-backed securities.
(5)See Note 11, “Deferred Compensation” for more information.
(6)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.
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January 31, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Cash equivalents (1):
Money market funds$737 $— $— $737 
Commercial paper169 — — 169 
Certificates of deposit35 — — 35 
U.S government securities13 — — 13 
Other (2)12 — — 12 
Marketable securities:
Short-term
Corporate debt securities44 — — 44 
Commercial paper42 — — 42 
Asset-backed securities 19 — — 19 
U.S. government securities 17 — — 17 
Other (3)3 — — 3 
Long-term
Corporate debt securities45 — — 45 
U.S. government securities35 — — 35 
Asset backed securities13 — — 13 
Other (4)9 — — 9 
Mutual funds (5) (6)81 6 (1)86 
Convertible debt securities (6)3 1 (2)2 
Strategic investments derivative asset (6)2 — (2)— 
Total$1,279 $7 $(5)$1,281 
____________________ 
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits, agency discount notes, municipal bonds, corporate debt securities, asset-backed securities, and mortgage-backed securities.
(3)Consists of mortgage-backed securities, agency mortgage-backed securities, common stock, and agency collateralized mortgage obligations.
(4)Consists of agency mortgage-backed securities, agency bonds, agency collateralized mortgage obligations, mortgage-backed securities, and collateralized mortgage obligations.
(5)See Note 11, “Deferred Compensation” for more information.
(6)Included in “Prepaid expenses and other current assets,” or “Long-term other assets,” in the accompanying Condensed Consolidated Balance Sheets.

The following table summarizes the fair values of investments classified as marketable debt securities by contractual maturity date as of July 31, 2023:
Fair Value
Due within 1 year$331 
Due in 1 year through 5 years212 
Due in 5 years through 10 years16 
Due after 10 years19 
Total
$578 
    
As of both July 31, 2023, and January 31, 2023, Autodesk had no material unrealized losses, individually and in the aggregate, for marketable debt securities that are in a continuous unrealized loss position for greater than 12 months. Total
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unrealized gains for securities with net gains in accumulated other comprehensive income were not material for the six months ended July 31, 2023.

Autodesk monitors all marketable debt securities for potential credit losses by reviewing indicators such as, but not limited to, current credit rating, change in credit rating, credit outlook, and default risk. There were no allowances for credit losses as of both July 31, 2023, and January 31, 2023. There were no write offs of accrued interest receivables for both the six months ended July 31, 2023 and 2022.

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

Proceeds from the sale and maturity of marketable debt securities were as follows:
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Marketable debt securities$176 $43 $339 $245 

Strategic investments in equity securities

As of July 31, 2023, and January 31, 2023, Autodesk had $178 million and $177 million, respectively, in direct investments in privately held companies. These strategic investments in equity securities do not have readily determined fair values, and Autodesk uses the measurement alternative to account for the adjustment to these investments in a given quarter. If Autodesk determines that an impairment has occurred, Autodesk writes down the investment to its fair value. These strategic investments in equity securities are generally subject to a security-specific restriction which limits the sale or transfer of the respective equity security during the holding period.

Adjustments to the carrying value of our strategic investment equity securities with no readily determined fair values measured using the measurement alternative are included in “Interest and other (expense) income, net” on the Company's Condensed Consolidated Statements of Operations. These adjustments were as follows:
 Six Months Ended July 31,Cumulative Amount as of
20232022July 31, 2023
Upward adjustments$— $1 $29 
Negative adjustments, including impairments (11)(5)(97)
Net unrealized adjustments$(11)$(4)$(68)

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

Fair Value

Autodesk applies fair value accounting for certain financial assets and liabilities, which consist of cash equivalents, marketable securities, and other financial instruments, on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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The following tables summarize the Company's financial instruments measured at fair value on a recurring basis by significant investment category as of July 31, 2023, and January 31, 2023:  
July 31, 2023
Level 1Level 2Level 3Total
Assets:
Cash equivalents (1):
Money market funds$499 $— $— $499 
Commercial paper — 194 — 194 
Certificates of deposit— 75 — 75 
U.S. government securities— 44 — 44 
Municipal bonds— 11 — 11 
Other (2)— 5 — 5 
Marketable securities:
Short-term
Commercial paper— 179 — 179 
Corporate debt securities— 63 — 63 
U.S. government securities— 61 — 61 
Asset-backed securities— 29 — 29 
Other (3)— 27 — 27 
Long-term
Corporate debt securities— 104 — 104 
Asset-backed securities— 47 — 47 
U.S. government securities— 29 — 29 
Agency mortgage backed securities— 26 — 26 
Other (4)— 13 — 13 
Long-term other assets:
Mutual funds (5)(6)97 — — 97 
Derivative assets:
Derivative contract assets (6)— 12 — 12 
Derivative liabilities:
Derivative contract liabilities (7)— (11)— (11)
Total$596 $908 $— $1,504 
____________________ 
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of mortgage-backed securities and asset-backed securities.
(3)Primarily consists of supranational bonds, agency discount notes, and mortgage-backed securities.
(4)Primarily consists of agency bonds, agency collateralized mortgage obligations, and mortgage-backed securities.
(5)See Note 11, “Deferred Compensation” for more information.
(6)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.
(7)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.


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January 31, 2023
Level 1Level 2Level 3Total
Assets:
Cash equivalents (1):
Money market funds$737 $— $— $737 
Commercial paper— 169 — 169 
Certificates of deposit— 35 — 35 
U.S government securities— 13 — 13 
Other (2)4 8 — 12 
Marketable securities:
Short-term
Corporate debt securities— 44 — 44 
Commercial paper— 42 — 42 
Asset backed securities — 19 — 19 
U.S. government securities — 17 — 17 
Other (3)— 3 — 3 
Long-term
Corporate debt securities— 45 — 45 
U.S. government securities— 35 — 35 
Asset backed securities— 13 — 13 
Other (4)— 9 — 9 
Long-term other assets:
Mutual funds (5) (6)86 — — 86 
Convertible debt securities (6)— — 2 2 
Derivative assets:
Derivative contract assets (6)— 14 — 14 
Derivative liabilities:
Derivative contract liabilities (7)— (31)— (31)
Total$827 $435 $2 $1,264 
____________________ 
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits, agency discount notes, municipal bonds, corporate debt securities, asset-backed securities, and mortgage-backed securities.
(3)Consists of mortgage-backed securities, agency mortgage-backed securities, common stock, and agency collateralized mortgage obligations.
(4)Consists of agency mortgage-backed securities, agency bonds, agency collateralized mortgage obligations, mortgage-backed securities, and collateralized mortgage obligations.
(5)See Note 11, “Deferred Compensation” for more information.
(6)Included in “Prepaid expenses and other current assets,” or “Long-term other assets,” in the accompanying Condensed Consolidated Balance Sheets.
(7)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.





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6. Equity Compensation

Restricted Stock Units

A summary of restricted stock activity for the six months ended July 31, 2023, is as follows:
Unvested
restricted
stock units		Weighted
average grant
date fair value
per share
 (in thousands) 
Unvested restricted stock units at January 31, 20234,848 $216.20 
Granted3,394 199.00 
Vested(1,858)213.16 
Canceled/Forfeited(173)217.00 
        Performance Adjustment (1)(10)190.48 
Unvested restricted stock units at July 31, 2023
6,201 $207.70 
_______________
(1)Based on Autodesk's financial results and relative total stockholder return for the fiscal 2023 performance period. The performance stock units were attained at rates ranging from 86% to 110% of the target award.

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

During the six months ended July 31, 2023, Autodesk granted 3,083 thousand restricted stock units. Restricted stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights.

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

During the six months ended July 31, 2023 and 2022, Autodesk settled liability-classified awards in the amount of $9 million and $5 million, respectively. The ultimate number of shares earned was based on the Autodesk closing stock price on the vesting date. As these awards were settled in a fixed dollar amount of shares, the awards were accounted for as a liability-classified award and were expensed using the straight-line method over the vesting period.

During the six months ended July 31, 2023, Autodesk granted 311 thousand performance stock units for which the ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units are primarily based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee and total stockholder return compared against companies in the S&P North American Technology Software Index with a market capitalization over $2.0 billion (“Relative TSR”). The fair value of the performance stock units is expensed using the accelerated attribution method over the three-year vesting period and have the following vesting schedule:

•Up to one third of the performance stock units may vest following year one, depending upon the achievement of the performance criteria for fiscal 2024 as well as 1-year Relative TSR (covering year one).

•Up to one third of the performance stock units may vest following year two, depending upon the achievement of the performance criteria for year two as well as 2-year Relative TSR (covering years one and two).

•Up to one third of the performance stock units may vest following year three, depending upon the achievement of the performance criteria for year three as well as 3-year Relative TSR (covering years one, two and three).

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

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Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights.

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

Common Stock

Autodesk agreed to issue a fixed amount of $13 million in shares of common stock to certain employees in connection with a fiscal 2022 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the volume weighted average closing price (“VWAP”) of Autodesk’s common stock for the ninety consecutive trading day period ending on the release date. During the six months ended July 31, 2023, Autodesk issued the remaining 39 thousand shares at an aggregate fair value of $8 million. The awards were accounted for as liability-classified awards and were recognized as compensation expense using the straight-line method over the vesting period.

Autodesk agreed to issue a fixed amount of $11 million in common stock at a future date to certain employees in connection with other fiscal 2022 acquisitions. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the VWAP of Autodesk’s common stock at the issuance date. As of July 31, 2023, remaining shares to be issued are estimated to be 33 thousand. The awards are accounted for as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period.

Autodesk issued 40 thousand shares of restricted common stock to certain employees in connection with a fiscal 2023 acquisition. These shares of restricted common stock were recorded as “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets and will be amortized to stock-based compensation expense for post-acquisition services using the straight-line method over the two-year vesting period. Additionally, Autodesk agreed to issue a fixed amount of $5 million in common stock at a future date to certain employees in connection with a fiscal 2023 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the VWAP of Autodesk’s common stock at the issuance date. During the six months ended July 31, 2023, Autodesk issued 9 thousand shares at an aggregate fair value of $1 million. Remaining shares to be issued are estimated to be 14 thousand as of July 31, 2023. The awards are accounted for as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period.

Autodesk recorded stock-based compensation expense related to common stock shares of $4 million and $7 million for the three months ended July 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to common stock shares of $10 million and $17 million for the six months ended July 31, 2023 and 2022, respectively.

1998 Employee Qualified Stock Purchase Plan (“ESPP”)

Under Autodesk’s ESPP, which was approved by stockholders in 1998, eligible employees may purchase shares of Autodesk’s common stock at their discretion using up to 15% of their eligible compensation, subject to certain limitations, at 85% of the lower of Autodesk's closing price (fair market value) on the offering date or the exercise date. The offering period for ESPP awards consists of four, six-month exercise periods within a 24-month offering period.

A summary of the ESPP activity for the six months ended July 31, 2023 and 2022, is as follows:
Six Months Ended July 31,
20232022
Issued shares (in thousands)434 377 
Average price of issued shares$163.59 $173.83 
Weighted average grant date fair value of shares granted under the ESPP (1)$71.34 $69.19 
 _______________
(1)Calculated as of the award grant date using the Black-Scholes Merton (“BSM”) option pricing model.

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Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three and six months ended July 31, 2023 and 2022, as follows:
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Cost of subscription and maintenance revenue$10 $9 $19 $17 
Cost of other revenue4 3 7 6 
Marketing and sales74 69 136 131 
Research and development86 69 155 128 
General and administrative23 19 45 42 
Stock-based compensation expense related to stock awards and ESPP purchases
197 169 362 324 
Tax expense2 3 3 9 
Stock-based compensation expense related to stock awards and ESPP purchases, net of tax
$199 $172 $365 $333 
 
Stock-based Compensation Expense Assumptions

Autodesk determines the grant date fair value of its share-based payment awards using a BSM option pricing model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case Autodesk uses the Monte Carlo simulation model. The Monte Carlo simulation model uses multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:
Six Months Ended July 31, 2023Six Months Ended July 31, 2022
Performance Stock Units (1)ESPP (1)Performance Stock Units (2)ESPP (2)
Range of expected volatility
40.9 - 42.5%
40.0 - 42.4%
39.4 - 40.7%
38.3 - 42.7%
Range of expected lives (in years)N/A
0.5- 2.0
N/A
0.5 - 2.0
Expected dividends—%—%—%—%
Range of risk-free interest rates
4.3 - 4.7%
4.3 -5.0%
1.2 - 1.6%
0.9 - 1.9%
(1)There were no ESPP awards or performance stock units granted during the three months ended July 31, 2023.
(2)There were no ESPP awards granted during the three months ended July 31, 2022. There were no performance stock units granted during the three months ended July 31, 2022, where the fair value was estimated by a Monte Carlo simulation.

Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures: (1) a measure of historical volatility in the trading market for the Company’s common stock, and (2) the implied volatility of traded options to purchase shares of the Company’s common stock. The expected volatility for performance stock units subject to market conditions includes the expected volatility of companies within the S&P North American Technology Software Index with a market capitalization over $2.0 billion, depending on the award type.

The range of expected lives of ESPP awards are based upon the four six-month exercise periods within a 24-month offering period.

Autodesk does not currently pay, and does not anticipate paying in the foreseeable future, any cash dividends. Consequently, an expected dividend yield of zero is used in the BSM option pricing model and the Monte Carlo simulation model.

The risk-free interest rate used in the BSM option pricing model and the Monte Carlo simulation model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives.

Autodesk recognizes expense only for the stock-based awards that ultimately vest. Autodesk accounts for forfeitures of our stock-based awards as those forfeitures occur.

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7. Income Tax

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

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

Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. We have maintained a valuation allowance on all or part of our Australia, New Zealand, California, Michigan deferred tax assets, as well as our U.S. capital loss deferred tax assets as it is more likely than not that some or all of the deferred tax assets will not be realized.

As of July 31, 2023, the Company had $220 million of gross unrecognized tax benefits, of which $181 million would impact the effective tax rate, if recognized. The remaining $38 million would reduce our valuation allowance, if recognized. The amount of unrecognized tax benefits will decrease in the next twelve months for statute lapse of approximately $2 million.

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

8. Intangible Assets, Net

The following tables summarize the Company's intangible assets, net, as of July 31, 2023, and January 31, 2023:
July 31, 2023
Gross Carrying Amount (1)Accumulated AmortizationNet
Customer relationships$668 $(419)$249 
Developed technologies894 (739)155 
Trade names and patents116 (110)6 
Other1 (1)— 
Total intangible assets$1,679 $(1,269)$410 
 _______________ 
(1)Includes the effects of foreign currency translation.

January 31, 2023
Gross Carrying Amount (1)Accumulated AmortizationNet
Customer relationships$659 $(402)$257 
Developed technologies858 (718)140 
Trade names and patents116 (106)10 
Total intangible assets$1,633 $(1,226)$407 
 _______________ 
(1)Includes the effects of foreign currency translation.


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9. Cloud Computing Arrangements

Autodesk enters into certain cloud-based software hosting arrangements that are accounted for as service contracts. Costs incurred for these arrangements are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. Autodesk amortizes the capitalized development costs straight-line over the fixed, non-cancellable term of the associated hosting arrangement plus any reasonably certain renewal periods. The capitalized costs are included in “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets. Capitalized costs were $220 million and $190 million at July 31, 2023, and January 31, 2023, respectively. Accumulated amortization was $59 million and $41 million at July 31, 2023, and January 31, 2023, respectively. Amortization expense for the three months ended July 31, 2023 and 2022, was $9 million and $5 million, respectively. Amortization expense for the six months ended July 31, 2023 and 2022 was $18 million and $9 million, respectively.

10. Goodwill

Goodwill consists of the excess of the consideration transferred over the fair value of net assets acquired in business combinations. The following table summarizes the changes in the carrying amount of goodwill for the six months ended July 31, 2023, (in millions):
 
Balance as of January 31, 2023$3,774 
Less: accumulated impairment losses as of January 31, 2023(149)
Net balance as of January 31, 20233,625 
Additions arising fro