AUTODESK, INC. The discussion in our MD&A and elsewhere in this Form 10-Q contains trend analyses and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, including those discussed in "Strategy," "Overview of the Three and Nine Months EndedOctober 31, 2021 ," and in "Results of Operations-Impacts of COVID-19 to Autodesk's Business." Examples of such forward-looking statements may relate to items such as future net revenue, operating expenses, recurring revenue, net revenue retention rate, cash flow, remaining performance obligations, and other future financial results (by product type and geography), the effectiveness of our efforts to successfully manage transitions to new markets; our ability to increase our subscription base; expected market trends, including the growth of cloud and mobile computing; the availability of credit; the effect of unemployment; the effects of global economic conditions, including from an economic downturn or recession inthe United States or in other countries around the world; the effects of revenue recognition; the effects of recently issued accounting standards; expected trends in certain financial metrics, including expenses; expectations regarding our cash needs; the effects of fluctuations in exchange rates and our hedging activities on our financial results; our ability to successfully expand adoption of our products; our ability to gain market acceptance of new business and sales initiatives; the impact of past acquisitions, including our integration efforts and expected synergies; the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries; the timing and amount of purchases under our stock buy-back plan; and the effects of potential non-cash charges on our financial results and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product capability and acceptance, statements regarding our liquidity and short-term and long-term cash requirements, as well as statements involving trend analyses and statements including such words as "may," "believe," "could," "anticipate," "would," "might," "plan," "expect," and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of a number of factors, including those set forth below in Part II, Item 1A, "Risk Factors," and in our other reports filed with theU.S. Securities and Exchange Commission . We assume no obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
Note: A glossary of terms used in this Form 10-Q appears at the end of this Item 2.
Strategy
Autodesk is changing how the world is designed and made. Our technology spans
architecture, engineering, construction, product design, manufacturing, media
and entertainment, empowering innovators everywhere to solve challenges big and
small. From greener buildings to smarter products to more mesmerizing
blockbusters, Autodesk technology helps our customers to design and make a
better world for all.
Our strategy is to build enduring relationships with customers, delivering
innovative technology that provides valuable automation and insight into their
design and make process. To drive execution of our strategy, we are focused on
three strategic priorities: delivering on the promise of subscription,
digitizing the company, and reimagining construction, manufacturing, and
production.
We equip and inspire our users with the tailored tools, services, and access
they need for success today and tomorrow. At every step, we help users harness
the power of data to build upon their ideas and explore new ways of imagining,
collaborating, and creating to achieve better outcomes for their customers, for
society, and for the world. And because creativity can't flourish in silos, we
connect what matters - from steps in a project to collaborators on a unified
platform.
Autodesk was founded during the platform transition from mainframe computers and
engineering workstations to personal computers. We have developed and sustained
a compelling value proposition based upon software for the personal computer.
Just as the transition from mainframes to personal computers transformed the
industry over 30 years ago, the software industry has undergone a transition
from developing and selling perpetual licenses and on-premises products to
subscriptions and cloud-enabled technologies.
33--------------------------------------------------------------------------------
Product Evolution
We offer subscriptions for individual products and Industry Collections,
enterprise business arrangements ("EBAs"), and cloud service offerings
(collectively referred to as "subscription plan"). Subscription plans are
designed to give our customers more flexibility with how they use our offerings
and to attract a broader range of customers, such as project-based users and
small businesses.
Our subscription plans currently represent a hybrid of desktop software and
cloud functionality, which provides a device-independent, collaborative design
workflow for designers and their stakeholders. Our cloud offerings, for example,
BIM 360, Fusion 360, Shotgrid (formerly Shotgun), AutoCAD web app, and AutoCAD
mobile app, provide tools, including mobile and collaboration capabilities, to
streamline design, collaboration, building and manufacturing, and data
management processes. We believe that customer adoption of these latest
offerings will continue to grow as customers across a range of industries begin
to take advantage of the scalable computing power and flexibility provided
through these services.
Industry Collections provide our customers with access to a broader selection of
Autodesk solutions and services, simplifying the customers' ability to benefit
from a complete set of tools for their industry.
Our strategy includes improving our product functionality and expanding our
product offerings through internal development as well as through the
acquisition of products, technology, and businesses. Acquisitions often increase
the speed at which we can deliver product functionality to our customers;
however, they entail cost and integration challenges and may, in certain
instances, negatively impact our operating margins. We continually review these
factors in making decisions regarding acquisitions. We currently anticipate that
we will continue to acquire products, technology, and businesses as compelling
opportunities become available.
To support our strategic priority of re-imagining Architecture, Engineering, and
Construction ("AEC"), we are strengthening the foundation of our AEC solutions
with both organic and inorganic investments. In the fiscal quarter ended April
30, 2021 , we acquired Storm UK Holdco Limited , the parent of Innovyze, Inc.
("Innovyze"), which provides water infrastructure software. Combining Innovyze's
hydraulic modeling, simulation, asset performance management and operational
analytics solutions with Autodesk's design and analysis solutions (including
Autodesk Civil 3D, Autodesk InfraWorks, and the Autodesk Construction Cloud)
enables us to deliver end-to-end, cloud-based solutions for our water
infrastructure customers that drive efficiency and sustainability. In fiscal
2021, we acquired Spacemaker which uses cloud-based, artificial intelligence
(AI), and generative design to help architects, urban designers, and real estate
developers make faster and more informed early-stage design decisions which can
help maximize the long-term sustainability and return from property investments.
Other acquisitions in fiscal 2021 included solutions that use artificial
intelligence and machine learning to extract and process data from project plans
and specifications allowing general contractors, subcontractors, and owners to
automate workflows such as submittals and project closeout.
In Manufacturing, our strategy is to combine organic and acquired software in
existing and adjacent verticals to create end-to-end, cloud-based solutions for
our customers that drive efficiency and sustainability. We continue to attract
both global manufacturing leaders and disruptive startups with our generative
design and cloud-based Fusion 360 that converges the process of design with
manufacturing. A fiscal 2021 acquisition included a leading provider of
post-processing and machine simulation solutions. In May 2021 , we acquired
Upchain, an instant-on, cloud-based data management technology that allows
product design and manufacturing customers to collaborate in the cloud across
their value chains and bring products to market faster.
Global Reach
We sell our products and services globally, through a combination of indirect and direct channels. Our indirect channels include value added resellers, direct market resellers, distributors, computer manufacturers, and other software developers. Our direct channels include internal sales resources dedicated to selling in our largest accounts, our highly specialized solutions, and business transacted through our online Autodesk branded store. See Note 3, "Revenue Recognition" in the Notes to the Condensed Consolidated Financial Statements for further detail on the results of our indirect and direct channel sales for the three and nine months endedOctober 31, 2021 and 2020. We anticipate that our channel mix will continue to change as we scale our online Autodesk branded store business and our largest accounts shift towards direct-only business models. However, we expect our indirect channel will continue to transact and support the majority of our customers and revenue. We employ a variety of incentive programs and promotions to align our direct and indirect channels with our business strategies. In addition, we have a worldwide user group organization and we have created online user communities dedicated to the exchange of information related to the use of our products. 34 -------------------------------------------------------------------------------- One of our key strategies is to maintain an open-architecture design of our software products to facilitate third-party development of complementary products and industry-specific software solutions. This approach enables customers and third parties to customize solutions for a wide variety of highly specific uses. We offer several programs that provide strategic investment funding, technological platforms, user communities, technical support, forums, and events to developers who develop add-on applications for our products. For example, we have established the Autodesk Forge developer platform to support innovators that build solutions to facilitate the development of a single connected ecosystem for the future of how things are designed, made, and used as well as support ideas that push the boundaries of 3D printing. In addition to the competitive advantages afforded by our technology, our large global network of distributors, resellers, third-party developers, customers, educators, educational institutions, learning partners, and students is a key competitive advantage which has been cultivated over an extensive period. This network of partners and relationships provides us with a broad and deep reach into volume markets around the world. Our distributor and reseller network is extensive and provides our customers with the resources to purchase, deploy, learn, and support our solutions quickly and easily. We have a significant number of registered third-party developers who create products that work well with our solutions and extend them for a variety of specialized applications.
Impact at Autodesk
Autodesk is committed to advancing a more sustainable, resilient, and equitable
world. We don't believe in waiting for progress, we believe in making it. We
take action as a business and to support our employees, customers, and
communities in our collective opportunity to design and make a better world for
all.
We focus our efforts to advance positive outcomes across three primary areas:
energy and materials, health and resilience, and work and prosperity. These
impact opportunity areas are derived from the UN Sustainable Development Goals
("SDGs") and have been focused through a multi-pronged process to align the top
needs of our stakeholders, the important issues of our business, and the areas
we are best placed to accelerate positive impact at scale.
These opportunities manifest as outcomes through how our customers leverage our
technology to design and make net-zero carbon buildings, resilient
infrastructure, more sustainable products, and a thriving workforce. We realize
these opportunities in our business through our 100% renewable and net-zero
greenhouse gas operations and inclusive culture. We advance these opportunities
with industry innovators through collaboration, grants, software donations, and
training.
The Autodesk Foundation (the "Foundation"), a privately funded 501(c)(3) charity
organization established and solely funded by us, leads our philanthropic
efforts. The purpose of the Foundation is twofold: to support employees to make
a better world by matching employees' volunteer time and/or donations to
nonprofit organizations; and to support organizations and individuals using
design to drive positive social and environmental impact. On our behalf, the
Foundation also administers a discounted software donation program to nonprofit
organizations, social and environmental entrepreneurs, and others who are
developing design solutions that will shape a more sustainable future.
Additional information about our environmental, social, and governance program
is available in our annual impact report on our website at www.autodesk.com.
Information contained on or accessible through our website is not part of or
incorporated by reference into this report.
Assumptions Behind Our Strategy
Our strategy depends upon a number of assumptions, including: making our technology available to mainstream markets; leveraging our large global network of distributors, resellers, third-party developers, customers, educators, educational institutions, learning partners, and students; improving the performance and functionality of our products; and adequately protecting our intellectual property. If the outcome of any of these assumptions differs from our expectations, we may not be able to implement our strategy, which could potentially adversely affect our business. For further discussion regarding these and related risks, see Part II, Item 1A, "Risk Factors."
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements are prepared in conformity withU.S. generally accepted accounting principles ("GAAP"). In preparing our Condensed Consolidated Financial Statements, we make assumptions, judgments, and estimates that can have a significant impact on amounts reported in our Condensed Consolidated Financial Statements. We evaluate our estimates and assumptions on an ongoing basis. We base our assumptions, judgments, and estimates on historical 35 -------------------------------------------------------------------------------- experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. Our significant accounting policies are described in Note 1, "Business and Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements in our Form 10-K for the fiscal year endedJanuary 31, 2021 . An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We highlighted those policies that involve a higher degree of judgment and complexity with further discussion in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Form 10-K. There have been no material changes to our critical accounting policies and estimates during the three and nine months endedOctober 31, 2021 , as compared to those disclosed in our Form 10-K for the fiscal year endedJanuary 31, 2021 . We believe these policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Overview of the Three and Nine Months Ended
•Total net revenue increased 18% and 15% to$1,125.8 million and$3,174.8 million for the three and nine months endedOctober 31, 2021 , respectively, compared to the same periods in the prior fiscal year. •Recurring revenue as a percentage of net revenue was 97% for both the three and nine months endedOctober 31, 2021 , and remained flat as compared to both periods in the prior fiscal year. •Net revenue retention rate ("NR3") was within the range of 100% and 110% as of bothOctober 31, 2021 and 2020. •Deferred revenue was$3.34 billion , a decrease of 0.5% compared to the fourth quarter in the prior fiscal year. •Remaining performance obligations (short-term and long-term deferred revenue plus unbilled deferred revenue) ("RPO") was$4.23 billion , a decrease of 0.2% compared to the fourth quarter in the prior fiscal year. •Current remaining performance obligations were$2.88 billion , an increase of 5% compared to the fourth quarter in the prior fiscal year.
Revenue Analysis
Net revenue increased during the three and nine months endedOctober 31, 2021 , as compared to the same period in the prior fiscal year, primarily due to the respective 21% and 20% increase in subscription revenue, partially offset by the respective 56% and 65% decrease in maintenance revenue.
For further discussion of the drivers of these results, see below under the heading "Results of Operations."
We rely significantly upon major distributors and resellers in both theU.S. and international regions, including Tech Data Corporation and its global affiliates (collectively, "Tech Data") andIngram Micro Inc. ("Ingram Micro"). Total sales to Tech Data accounted for 37% and 36% of our total net revenue for the three and nine months endedOctober 31, 2021 , respectively, and 37% of our total net revenue for both the three and nine months endedOctober 31, 2020 . During both the three and nine months endedOctober 31, 2021 ,Ingram Micro accounted for 9% of Autodesk's total net revenue. During both the three and nine months endedOctober 31, 2020 ,Ingram Micro accounted for 10% of Autodesk's total net revenue. Our customers through Tech Data andIngram Micro are the resellers and end users who purchase our software subscriptions and services. Should any of our agreements with Tech Data orIngram Micro be terminated for any reason, we believe the resellers and end users who currently purchase our products through Tech Data orIngram Micro would be able to continue to do so under substantially the same terms from one of our many other distributors without substantial disruption to our revenue. Consequently, we believe our business is not substantially dependent on Tech Data orIngram Micro .
Recurring Revenue and Net Revenue Retention Rate
In order to help better understand our financial performance we use several key
performance metrics including recurring revenue and NR3. These metrics are key
performance metrics and should be viewed independently of revenue and deferred
revenue as these metrics are not intended to be combined with those items. We
use these metrics to monitor the strength of our recurring business. We believe
these metrics are useful to investors because they can help in monitoring the
long-term health of our business. Our determination and presentation of these
metrics may differ from that of other companies. The presentation of these
metrics is meant to be considered in addition to, not as a substitute for or in
isolation from, our financial measures prepared in accordance with GAAP. Please
refer to the Glossary of Terms for the definitions of these metrics.
36
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The following table outlines our recurring revenue metric for the three and nine
months ended
Change compared to
Three Months Ended prior fiscal year Three Months Ended
(In millions, except percentage data) October 31, 2021 $ % October 31, 2020
Recurring revenue (1) $ 1,088.3 $ 164.1 18 % $ 924.2
As a percentage of net revenue 97 % N/A N/A 97 %
Change compared to
Nine Months Ended prior fiscal year Nine Months Ended
October 31, 2021 $ % October 31, 2020
Recurring Revenue (1) $ 3,088.5 $ 406.8 15 % $ 2,681.7
As a percentage of net revenue 97 % N/A N/A 97 %
________________
(1)The acquisition of a business may cause variability in the comparison of recurring revenue in this table above and recurring revenue derived from the revenue reported in the Condensed Consolidated Statements of Operations.
NR3 was within the range of 100% and 110% as of both
Foreign Currency Analysis
We generate a significant amount of our revenue in
The following table shows the impact of foreign exchange rate changes on our net revenue and total spend:
Three Months Ended October 31, 2021 Nine Months
Ended
Constant Currency percent Constant Currency percent
Percent change compared to change compared to Positive/Negative/Neutral impact from Percent change compared to change compared to Positive/Negative/Neutral impact from
prior fiscal year prior fiscal year (1) foreign exchange rate changes prior fiscal year prior fiscal year (1) foreign exchange rate changes
Net revenue 18 % 17 % Positive 15 % 14 % Positive
Total spend 19 % 18 % Negative 17 % 15 % Negative
________________(1)Please refer to the Glossary of Terms for the definitions of our constant currency growth rates.
Changes in the value of theU.S. dollar may have a significant effect on net revenue, total spend, and income from operations in future periods. We use foreign currency contracts to reduce the exchange rate effect on a portion of the net revenue of certain anticipated transactions but do not attempt to completely mitigate the impact of fluctuations of such foreign currency against theU.S. dollar.
Remaining Performance Obligations
RPO represents deferred revenue and contractually stated or committed orders
under early renewal and multi-year billing plans for subscription, services,
license, and maintenance for which the associated deferred revenue has not yet
been recognized. Unbilled deferred revenue is not included as a receivable or
deferred revenue on our Condensed Consolidated Balance Sheets. See Note 3,
"Revenue Recognition," for more details on Autodesk's performance obligations.
(in millions) October 31, 2021 January 31, 2021
Deferred revenue $ 3,342.9 $ 3,360.2
Unbilled deferred revenue 888.5 880.5
RPO $ 4,231.4 $ 4,240.7
37-------------------------------------------------------------------------------- RPO consisted of the following: (in millions) October 31, 2021 January 31, 2021 Current RPO $ 2,877.0$ 2,738.0 Non-current RPO 1,354.4 1,502.7 RPO $ 4,231.4$ 4,240.7 We expect that the amount of RPO will change from quarter to quarter for several reasons, including 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. Historically, we have had increased EBA sales activity in our fourth fiscal quarter and this seasonality may affect the relative value of our billings, RPO, and collections in the fourth and first fiscal quarters.
Balance Sheet and Cash Flow Items
AtOctober 31, 2021 , we had$1,811.8 million in cash, cash equivalents, and marketable securities. Our cash flow from operations increased to$808.5 million for the nine months endedOctober 31, 2021 , compared to$779.6 million for the nine months endedOctober 31, 2020 . We repurchased 1.7 million shares of our common stock for$476.0 million during the nine months endedOctober 31, 2021 . Comparatively, we repurchased 2.1 million shares of our common stock for$392.9 million during the nine months endedOctober 31, 2020 . See further discussion regarding the balance sheet and cash flow activities under the heading "Liquidity and Capital Resources."
Results of Operations
Impacts of COVID-19 to Autodesk's Business
We are continuing to conduct business during the COVID-19 pandemic with substantial modifications to employee travel, employee work locations, and virtualization, postponement or cancellation of certain sales and marketing events, among other modifications. We will continue to invest in critical areas such as research and development, construction, and digitizing the company to ensure our future success as we come out of the pandemic. We have observed other companies, as well as many governments continuing to take precautionary measures to address COVID-19, and they may take further actions that alter their normal business operations. While government authorities in some geographies are removing or adding COVID-19 related business operations restrictions, we continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders, including in response to outbreaks and variants. Additionally, the COVID-19 pandemic has spurred changes in the way we work as we move to a more hybrid workforce resulting in an evaluation of our office space needs. Accordingly, we expect to reduce our facilities portfolio worldwide and expect to incur impairments to assets associated with our operating leases for real estate over the next several quarters, which we currently estimate could result in impairment charges that would range up to approximately$180 million depending on the then-current market conditions. Optimizing our facilities costs will allow us to better deploy capital to further our strategy and drive growth. However, there is no guarantee that we will realize any anticipated benefits to our business, including any cost savings or operational efficiencies, or that our impairment charges would be limited to that amount. We believe our investment in cloud products and a subscription business model, backed by a strong balance sheet, give us a robust foundation to successfully navigate the economic challenges of COVID-19. However, supply chain disruption and resulting inflationary pressures, a global labor shortage, and the ebb and flow of COVID, including in specific geographies, are currently impacting the pace of our recovery and our outlook. The extent of the impact on our business in fiscal 2022 and beyond will depend on several factors, including the full duration and the extent of the pandemic, including as a result of outbreaks and variants; actions taken by governments, businesses, and consumers in response to the pandemic; speed and timing of economic recovery, including in specific geographies; speed of rollout of COVID-19 vaccines, lifting of restrictions on movement, and normalization of full-time return to work and social events; our billings and renewal rates, including new business close rates, rate of multi-year contracts, pace of closing larger transactions, and new unit volume growth; and effect of the pandemic on margins and cash flow. All of these factors continue to evolve and remain uncertain at this time, and some of these factors are not within our control. Further discussion of the potential impacts of COVID-19 on our business can be found in Part II, Item 1A, "Risk Factors." 38 --------------------------------------------------------------------------------
Net Revenue
Net Revenue by Income Statement Presentation
Subscription revenue consists of our term-based product subscriptions, cloud service offerings, and flexible EBAs. Revenue from these arrangements is predominately recognized ratably over the contract term commencing with the date our service is made available to customers and when all other revenue recognition criteria have been satisfied.
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. We recognize maintenance revenue ratably over the term of the agreements, which is generally one year.
Other revenue consists of revenue from consulting, training, and other products
and services, and is recognized as the products are delivered and services are
performed.
Three Months Three Months
Ended Change Compared to Prior Fiscal Year Ended
October 31, October 31,
(In millions, except percentages) 2021 $ % 2020 Management comments
Net Revenue:
Subscription $ 1,070.7 $ 186.3 21 % $ 884.4 Increase due to growth across
subscription types, led by
product subscription renewal
revenue. Also contributing to
the growth was an increase in
revenue from EBA offerings.
Maintenance (1) 17.6 (22.2) (56) % 39.8
Total subscription and maintenance
revenue 1,088.3 164.1 18 % 924.2
Other 37.5 9.3 33 % 28.2
$ 1,125.8 $ 173.4 18 % $ 952.4
Nine Months Change compared to Nine Months
Ended prior fiscal year Ended
October 31, October 31,
2021 $ % 2020 Management Comments
Net Revenue:
Subscription $ 3,034.9 $ 506.3 20 % $ 2,528.6 Increase due to growth across
subscription types, led by
product subscription renewal
revenue. Also contributing to
the growth was an increase in
revenue from EBA offerings.
Maintenance (1) 53.6 (99.5) (65) % 153.1
Total subscription and maintenance
revenue 3,088.5 406.8 15 % 2,681.7
Other 86.3 16.8 24 % 69.5
$ 3,174.8 $ 423.6 15 % $ 2,751.2
____________________
(1)We expect maintenance revenue will slowly decline; however, the rate of
decline will vary based on the number of renewals, the renewal rate, and our
ability to incentivize maintenance plan customers to transition to subscription
plan offerings.
39
--------------------------------------------------------------------------------Net Revenue by Product Family
Our product offerings are focused in four primary product families:
Architecture, Engineering and Construction ("AEC"), AutoCAD and AutoCAD LT,
Manufacturing ("MFG"), and
Three Months Change compared to Three Months
Ended prior fiscal year Ended
October 31, October 31,
(In millions, except percentages) 2021 $ % 2020 Management comments
Net Revenue by Product Family:
AEC $ 511.1 $ 91.7 22 % $ 419.4 Increase due to growth in revenue
from AEC Collections, EBAs, Revit and
Innovyze.
AutoCAD and AutoCAD LT 318.4 39.6 14 % 278.8 Increase due to growth in revenue
from both AutoCAD LT and AutoCAD.
MFG 225.0 30.9 16 % 194.1 Increase due to growth in revenue
from EBAs, Fusion360, and MFG
Collections.
M&E 63.0 9.0 17 % 54.0 Increase due to growth in revenue
from ShotGrid, Maya, and 3DS Max.
Other 8.3 2.2 36 % 6.1
Total Net Revenue $ 1,125.8 $ 173.4 18 % $ 952.4
Nine Months Change compared to Nine Months
Ended prior fiscal year Ended
October 31, October 31,
2021 $ % 2020
Net Revenue by Product Family:
AEC $ 1,432.4 $ 233.3 19 % $ 1,199.1 Increase due to growth in revenue
from AEC Collections, EBAs, Innovyze,
and Revit.
ACAD and AutoCAD LT 907.9 95.0 12 % 812.9 Increase due to growth in revenue
from both AutoCAD LT and AutoCAD.
MFG 630.0 67.5 12 % 562.5 Increase due to growth in revenue
fromEBAs, Fusion360, and MFG
Collections.
M&E 176.5 16.6 10 % 159.9 Increase due to growth in revenue
from Maya, ShotGrid, and M&E
Collections.
Other 28.0 11.2 67 % 16.8
Total Net Revenue $ 3,174.8 $ 423.6 15 % $ 2,751.2
40--------------------------------------------------------------------------------
Net Revenue by Geographic Area
Constant currency
Three Months Change compared to change compared to Three Months
Ended October prior fiscal year prior fiscal year Ended October
(In millions, except percentages) 31, 2021 $ % % 31, 2020
Net Revenue:
Americas
U.S. $ 383.2 $ 54.7 17 % * $ 328.5
Other Americas 78.7 14.3 22 % * 64.4
Total Americas 461.9 69 18 % 17 % 392.9
EMEA 433.2 68.9 19 % 16 % 364.3
APAC 230.7 35.5 18 % 17 % 195.2
Total Net Revenue $ 1,125.8 $ 173.4 18 % 17 % $ 952.4
Emerging Economies $ 139.7 $ 24.8 22 % 20 % $ 114.9
Constant currency
Nine Months Change compared to change compared to Nine Months
Ended October prior fiscal year prior fiscal year Ended October
(In millions, except percentages) 31, 2021 $ % % 31, 2020
Net Revenue:
Americas
U.S. $ 1,054.5 $ 115.9 12 % * $ 938.6
Other Americas 221.9 33.9 18 % * 188.0
Total Americas 1,276.4 149.8 13 % 13 % 1,126.6
EMEA 1,225.9 162.1 15 % 12 % 1,063.8
APAC 672.5 111.7 20 % 18 % 560.8
Total Net Revenue $ 3,174.8 $ 423.6 15 % 14 % $ 2,751.2
Emerging Economies $ 393.6 $ 53.6 16 % 15 % $ 340.0
____________________* Constant currency data not provided at this level.
We believe that international revenue will continue to comprise a majority of our net revenue. Unfavorable economic conditions in the countries that contribute a significant portion of our net revenue, including in emerging economies such asBrazil ,Russia ,India , andChina , and including as a result of the COVID-19 pandemic, may have an adverse effect on our business in those countries and our overall financial performance. Changes in the value of theU.S. dollar relative to other currencies have significantly affected, and could continue to significantly affect, our financial results for a given period even though we hedge a portion of our current and projected revenue. Increases to the levels of political and economic unpredictability or protectionism in the global market may impact our future financial results. 41 --------------------------------------------------------------------------------
Net Revenue by Sales Channel
Three Months Change compared to Three Months
Ended prior fiscal year Ended
October 31, October 31,
(In millions, except percentages) 2021 $ % 2020 Management Comments
Net Revenue by Sales Channel: Indirect$ 729.3 $ 73.1 11 %$ 656.2 Increase due to growth in subscription revenue. Direct 396.5 100.3 34 % 296.2 Increase due to an increase in EBAs and our online Autodesk branded store. Total Net Revenue$ 1,125.8 $ 173.4 18 %$ 952.4 Nine Months Change compared to Nine Months Ended prior fiscal year Ended October 31, October 31, 2021 $ % 2020 Management Comments Net Revenue by Sales Channel: Indirect$ 2,092.8 $ 173.9 9 %$ 1,918.9 Increase due to growth in subscription revenue. Direct 1,082.0 249.7 30 % 832.3 Increase due to an increase in EBAs and our online Autodesk branded store. Total Net Revenue$ 3,174.8 $ 423.6 15 %$ 2,751.2
Net Revenue by Product Type
Change compared to
Three Months prior fiscal year Three Months
(In millions, except Ended October Ended October
percentages) 31, 2021 $ % 31, 2020 Management CommentsNet Revenue by Product Type:
Design$ 994.4 $ 146.7 17 %$ 847.7 Increase due to growth in EBA offerings, AEC & MFG collections, AutoCAD LT, and AutoCAD Family. Make 93.9 17.4 23 % 76.5 Increase primarily due to growth in revenue from BIM Family, Fusion 360, and Plangrid products. Other 37.5 9.3 33 % 28.2 Total Net Revenue$ 1,125.8 $ 173.4 18 %$ 952.4 Change compared to Nine Months prior fiscal year Nine Months (In millions, except Ended October Ended October percentages) 31, 2021 $ % 31, 2020 Management Comments Net Revenue: Design Increase due to growth in EBA offerings, AEC & MFG collections, AutoCAD LT, and$ 2,823.5 $ 356.7 14 %$ 2,466.8 AutoCAD Family. Make Increase primarily due to growth in revenue from BIM Family, Fusion 360, and 265.0 50.1 23 % 214.9 Plangrid products. Other 86.3 16.8 24 % 69.5 Total Net Revenue$ 3,174.8 $ 423.6 15 %$ 2,751.2 42
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Cost of Revenue and Operating Expenses
Cost of subscription and maintenance revenue includes the labor costs of providing product support to our subscription and maintenance customers, SaaS vendor costs and allocated IT costs, facilities costs, professional services fees related to operating our network and cloud infrastructure, royalties, depreciation expense and operating lease payments associated with computer equipment, data center costs, salaries, related expenses of network operations, stock-based compensation expense, and gains and losses on our operating expense cash flow hedges. Cost of other revenue includes labor costs associated with product setup, costs of consulting and training services contracts, and collaborative project management services contracts. Cost of other revenue also includes stock-based compensation expense, overhead charges, allocated IT and facilities costs, professional services fees, and gains and losses on our operating expense cash flow hedges.
Cost of revenue, at least over the near term, is affected by labor costs, hosting costs for our cloud offerings, the volume and mix of product sales, fluctuations in consulting costs, amortization of developed technology, new customer support offerings, royalty rates for licensed technology embedded in our products, stock-based compensation expense, and gains and losses on our operating expense cash flow hedges.
Marketing and sales expenses include salaries, bonuses, benefits, and
stock-based compensation expense for our marketing and sales employees, the
expense of travel, entertainment, and training for such personnel, sales and
dealer commissions, and the costs of programs aimed at increasing revenue, such
as advertising, trade shows and expositions, and various sales and promotional
programs. Marketing and sales expenses also include SaaS vendor costs and
allocated IT costs, payment processing fees, the cost of supplies and equipment,
gains and losses on our operating expense cash flow hedges, facilities costs,
and labor costs associated with sales and order management.
Research and development expenses, which are expensed as incurred, consist
primarily of salaries, bonuses, benefits, and stock-based compensation expense
for research and development employees, the expense of travel, entertainment,
and training for such personnel, professional services such as fees paid to
software development firms and independent contractors, SaaS vendor costs and
allocated IT costs, gains and losses on our operating expense cash flow hedges,
and facilities costs.
General and administrative expenses include salaries, bonuses, benefits, and
stock-based compensation expense for our CEO, finance, human resources, and
legal employees, as well as professional fees for legal and accounting services,
SaaS vendor costs and net IT costs, certain foreign business taxes, gains and
losses on our operating expense cash flow hedges, expense of travel,
entertainment, and training, facilities costs, acquisition-related costs, and
the cost of supplies and equipment.
Three Months Change compared to Three Months
Ended prior fiscal year Ended
(In millions, except October 31,
percentages) 2021 $ % October 31, 2020 Management comments
Cost of revenue:
Subscription and maintenance $ 74.8 $ 14.1 23 % $ 60.7 Increase primarily due to an increase in
cloud hosting costs and employee-related
costs driven by higher headcount as well
as an increase in stock-based
compensation.
Other 17.7 2.3 15 % 15.4 Increaseprimarily due to an increase in
employee-related costs driven by higher
headcount as well as an increase in
stock-based compensation.
Amortization of developed 14.6 7.0 92 % 7.6 Increase due to growth in amortization
technologies expense from acquired developed
technologies as a result of our
acquisitions in the fourth quarter of
fiscal 2021 and first and second quarter
of fiscal 2022.
Total cost of revenue $ 107.1 $ 23.4 28 % $ 83.7
Operating expenses:
Marketing and sales $ 419.4 $ 60.1 17 % $ 359.3 Increase primarily due to an increase in
employee-related costs driven by higher
headcount, an increase in advertisement
and promotion costs mainly due to new
company branding campaign as well as an
increase in stock-based compensation.
Research and development 282.1 49.1 21 % 233.0 Increase primarily due to an increase in
stock-based compensation as well as an
increase in employee-related costs due
to higher headcount and an increase in
professional fees.
43-------------------------------------------------------------------------------- General and administrative 112.8 14.0 14 % 98.8 Increase
primarily due to an increase in
stock-based compensation as well as an increase
in cloud hosting costs and employee-related
costs driven by higher headcount.
Amortization of purchased 11.1 1.5 16 % 9.6 Increase due to growth in amortization expense
intangibles from acquired intangibles as a result of our
acquisitions in the fourth quarter of fiscal
2021 and first and second quarter of fiscal
2022.
Total operating expenses $ 825.4 $ 124.7 18 % $ 700.7
Nine Months Change compared to Nine Months
Ended prior fiscal year Ended
October 31,
2021 $ % October 31, 2020 Management comments
Cost of revenue:
Subscription and maintenance $ 219.3 $ 42.7 24 % $ 176.6 Increase primarily due to an increase in cloud
hosting costs, employee-related costs driven by
higher headcount, as well as an increase in
stock-based compensation.
Other 47.6 0.1 0.2 % 47.5 Othercost of revenue remained flat as compared
to the prior period.
Amortization of developed 38.4 16.0 71 % 22.4 Increase due to growth in amortization expense
technologies from acquired developed technologies as a
result of our acquisitions in the fourth
quarter of fiscal 2021 and first and second
quarter of fiscal 2022.
Total cost of revenue $ 305.3 $ 58.8 24 % $ 246.5
Operating expenses:
Marketing and sales $ 1,195.3 $ 143.8 14 % $ 1,051.5 Increaseprimarily due to an increase in
employee-related costs driven by higher
headcount, an increase in advertisement and
promotion costs due to new company branding
campaign as well as an increase in stock-based
compensation, cloud hosting costs and
professional fees.
Research and development 824.5 141.6 21 % 682.9 Increaseprimarily due to an increase in
employee-related costs driven by higher
headcount, an increase in stock-based
compensation, as well as an increase in
professional fees and cloud hosting costs.
General and administrative 344.1 47.3 16 % 296.8 Increase primarily due to an increase in
employee-related costs driven by higher
headcount, an increase in stock-based
compensation and acquisition-related costs, as
well as an increase in cloud hosting costs, and
professional fees, partially offset by
capitalized software costs.
Amortization of purchased 30.4 1.6 6 % 28.8 Increase due to growth in amortization expense
intangibles from acquired intangibles as a result of our
acquisitions in the fourth quarter of fiscal
2021 and first and second quarter of fiscal
2022.
Total operating expenses $ 2,394.3 $ 334.3 16 % $ 2,060.0 The following table highlights our expectation for the absolute dollar change and percent of revenue change between the fourth quarter of fiscal 2022, as compared to the fourth quarter of fiscal 2021:
Percent of net
Absolute dollar impact revenue impact
Cost of revenue Increase Flat
Marketing and sales Increase Decrease
Research and development Increase Flat
General and administrative Increase Flat
Amortization of purchased intangibles Increase Flat
44--------------------------------------------------------------------------------
Interest and Other Expense, Net
The following table sets forth the components of interest and other expense, net:
Three Months Ended October 31, Nine Months Ended October 31,
(in millions) 2021 2020 2021 2020
Interest and investment expense, net
$ (39.2) $ (44.9) Gain (loss) on foreign currency 2.5 (1.0) 3.1 1.9 Gain (loss) on strategic investments 6.5 (0.3) 12.3 (31.2) Other income 0.9 4.0 6.2 5.1 Interest and other expense, net$ (5.9) $ (11.9) $ (17.6) $ (69.1) Interest and other expense, net, decreased by$6.0 million and$51.5 million during the three and nine months endedOctober 31, 2021 , as compared to the same periods in the prior fiscal year. The decrease in the three months endedOctober 31, 2021 , as compared to the same period in the prior fiscal year was primarily due to strategic investment equity securities measurement alternative adjustment gains and mark-to-market gains in the current period, compared to losses in the prior period, and a decrease in other income. The decrease in the nine months endedOctober 31, 2021 , as compared to the same period in the prior fiscal year was primarily due to disposition and mark-to-market gains and a decrease in impairments of strategic investment equity securities in the current period as compared to the prior period and an increase in mark-to market gains on debt and equity securities held in a rabbi trust under non-qualified deferred compensation plans in the current period compared to the prior period.
Interest expense and investment income fluctuates based on average cash, marketable securities, debt balances, average maturities, and interest rates.
Gains and losses on foreign currency are primarily due to the impact of re-measuring foreign currency transactions and net monetary assets into the functional currency of the corresponding entity. The amount of the gain or loss on foreign currency is driven by the volume of foreign currency transactions and the foreign currency exchange rates for the period.
Provision for Income Taxes
We account for income taxes and the related accounts under the liability method. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted rates expected to be in effect during the year in which the basis differences reverse. We had an income tax expense of$50.7 million , relative to pre-tax income of$187.4 million for the three months endedOctober 31, 2021 , and an income tax expense of$23.9 million , relative to pre-tax income of$156.1 million for the three months endedOctober 31, 2020 . Income tax expense for the three months endedOctober 31, 2021 , reflects an increase in tax expense as a result of the jurisdictional mix of year-to-date earnings. The quarter over quarter comparison also reflects theU.S. valuation allowance release as ofJanuary 31, 2021 . We had an income tax expense of$49.7 million , relative to pre-tax income of$457.6 million for the nine months endedOctober 31, 2021 , and an income tax expense of$78.7 million , relative to pre-tax income of$375.6 million for the nine months endedOctober 31, 2020 . Income tax expense for the nine months endedOctober 31, 2021 , reflects a decrease in tax expense due to a discrete tax benefit primarily related to aSupreme Court decision inIndia on the taxability of software license payments to nonresidents and the associated withholding taxes, offset by an increase in tax expense from jurisdictional mix of year-to-date earnings. We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider 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 ourNetherlands ,Canada ,California ,Michigan andU.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 we continually strive to optimize our overall business model, tax planning strategies may become feasible and prudent allowing us to realize many of the deferred tax assets that are offset by a valuation allowance; therefore, we will continue to evaluate the ability to utilize the deferred tax assets each quarter, both in theU.S. and in foreign jurisdictions, based on all available evidence, both positive and negative. 45 -------------------------------------------------------------------------------- As ofOctober 31, 2021 , we had$204.6 million of gross unrecognized tax benefits, of which$33.5 million would reduce our valuation allowance, if recognized. The remaining$171.1 million would impact the effective tax rate, if recognized. It is possible that the amount of unrecognized tax benefits will decrease in the next 12 months for an audit settlement of approximately$8.0 million . We anticipate that theU.S. Department of Treasury will continue to interpret or issue guidance on how provisions of theU.S. Tax Cuts and Jobs Act ("Tax Act") will be applied or otherwise administered. As future guidance is issued, we may make adjustments to the amounts that we have previously recorded that may materially impact our financial statements. Our future effective annual tax rate may be materially impacted by the amount of benefits and charges from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, changes in valuation allowances, level of profit before tax, accounting for uncertain tax positions, business combinations, closure of statute of limitations or settlement of tax audits, and changes in tax laws including impacts of the Tax Act. A significant amount of our earnings is generated by ourEurope andAsia Pacific subsidiaries. Our future effective tax rates may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory tax rates. OnJune 29, 2020 ,California enacted AssemblyBill No . 85, suspending utilization of net operating losses and limiting R&D credits utilization againstCalifornia taxable income in excess of$5.0 million for the remaining 2 years. The enactment of this state legislature may result in an increase inCalifornia taxes for Autodesk. Other Financial Information In addition to our results determined under GAAP discussed above, we believe the following non-GAAP measures are useful to investors in evaluating our operating performance. For the three and nine months endedOctober 31, 2021 and 2020, our gross profit, income from operations, operating margin, net income, and diluted net income per share on a GAAP and non-GAAP basis were as follows (in millions except for operating margin and per share data): Three Months Ended October 31, Nine Months Ended October 31, 2021 2020 2021 2020 (Unaudited) Gross profit$ 1,018.7 $ 868.7 $ 2,869.5 $ 2,504.7 Non-GAAP gross profit$ 1,040.2 $ 882.6 $ 2,932.2 $ 2,544.6 Income from operations$ 193.3 $ 168.0 $ 475.2 $ 444.7 Non-GAAP income from operations$ 365.0 $ 287.1 $ 975.8 $ 797.3 Operating margin 17 % 18 % 15 % 16 % Non-GAAP operating margin 32 % 30 % 31 % 29 % Net income$ 136.7 $ 132.2 $ 407.9 $ 296.9 Non-GAAP net income$ 296.1 $ 231.5 $ 794.5 $ 637.9 GAAP diluted net income per share$ 0.61 $ 0.59 $ 1.83$ 1.34 Non-GAAP diluted net income per share$ 1.33 $ 1.04 $ 3.57$ 2.87 For our internal budgeting and resource allocation process and as a means to provide consistency in period-to-period comparisons, we use non-GAAP measures to supplement our condensed consolidated financial statements presented on a GAAP basis. These non-GAAP measures do not include certain items that may have a material impact upon our reported financial results. We also use non-GAAP measures in making operating decisions because we believe those measures provide meaningful supplemental information regarding our earning potential and performance for management by excluding certain benefits, credits, expenses, and charges that may not be indicative of our core business operating results. For the reasons set forth below, we believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. This allows investors and others to better understand and evaluate our operating results and future prospects in the same manner as management, compare financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business. We also use some of these measures for purposes of determining company-wide incentive compensation. 46 -------------------------------------------------------------------------------- There are limitations in using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures included above are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. The presentation of non-GAAP financial information is meant to be considered in addition to, not as a substitute for or in isolation from, the directly comparable financial measures prepared in accordance with GAAP. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(In millions except for operating margin and per share data):
Three Months Ended October 31, Nine Months Ended October 31,
2021 2020 2021 2020
(Unaudited)
Gross profit $ 1,018.7 $ 868.7 $ 2,869.5 $ 2,504.7
Stock-based compensation expense 7.8 6.1 24.8 17.0
Amortization of developed technologies 13.5 7.6 37.3 22.4
Acquisition-related costs 0.2 0.2 0.6 0.5
Non-GAAP gross profit $ 1,040.2 $ 882.6 $ 2,932.2 $ 2,544.6
Income from operations $ 193.3 $ 168.0 $ 475.2 $ 444.7
Stock-based compensation expense 143.7 97.4 412.7 291.5
Amortization of developed technologies 13.5 7.6 37.3 22.4
Amortization of purchased intangibles 10.8 9.6 30.1 28.8
Acquisition-related costs 3.7 4.5 20.5 9.9
Non-GAAP income from operations $ 365.0 $ 287.1 $ 975.8 $ 797.3
Operating margin 17 % 18 % 15 % 16 %
Stock-based compensation expense 13 % 10 % 13 % 11 %
Amortization of developed technologies 1 % 1 % 1 % 1 %
Amortization of purchased intangibles 1 % 1 % 1 % 1 %
Acquisition-related costs - % - % 1 % - %
Non-GAAP operating margin (1) 32 % 30 % 31 % 29 %
Net income $ 136.7 $ 132.2 $ 407.9 $ 296.9
Stock-based compensation expense 143.7 97.4 412.7 291.5
Amortization of developed technologies 13.5 7.6 37.3 22.4
Amortization of purchased intangibles 10.8 9.6 30.1 28.8
Acquisition-related costs 3.7 4.5 20.5 9.9
(Gain) loss on strategic investments and dispositions, net
(6.5) 0.3 (12.3) 31.2
Discrete tax (provision) benefit items (5.4) 3.7 (61.4) 4.8
Income tax effect of non-GAAP adjustments (0.4) (23.8) (40.3) (47.6)
Non-GAAP net income $ 296.1 $ 231.5 $ 794.5 $ 637.9
47--------------------------------------------------------------------------------
Three Months Ended October 31, Nine Months Ended October 31,
2021 2020 2021 2020
(Unaudited)
Diluted net income per share $ 0.61 $ 0.59 $ 1.83 $ 1.34
Stock-based compensation expense 0.65 0.44 1.86 1.31
Amortization of developed technologies 0.06 0.04 0.17 0.10
Amortization of purchased intangibles 0.05 0.04 0.14 0.13
Acquisition-related costs 0.01 0.02 0.09 0.04
(Gain) loss on strategic investments and dispositions, net
(0.03) - (0.06) 0.14
Discrete tax (provision) benefit items (0.03) 0.02 (0.28) 0.02
Income tax effect of non-GAAP adjustments 0.01 (0.11) (0.18) (0.21)
Non-GAAP diluted net income per share $ 1.33 ____________________
(1)Totals may not sum due to rounding.
Our non-GAAP financial measures may exclude the following, as applicable:
Stock-based compensation expenses. We exclude stock-based compensation expenses from non-GAAP measures primarily because they are non-cash expenses and management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning, and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions, and the variety of award types that companies can use under FASB ASC Topic 718, we believe excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business operating results and those of other companies. Amortization of developed technologies and purchased intangibles. We incur amortization of acquisition-related developed technologies and purchased intangibles in connection with acquisitions of certain businesses and technologies. Amortization of developed technologies and purchased intangibles is inconsistent in amount and frequency and is significantly affected by the timing and size of our acquisitions. Management finds it useful to exclude these variable charges from our cost of revenues to assist in budgeting, planning, and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of developed technologies and purchased intangible assets will recur in future periods. CEO transition costs. We exclude amounts paid to the Company's former CEOs upon departure under the terms of their transition agreements, including severance payments, acceleration of restricted stock units, and continued vesting of performance stock units, and legal fees incurred with the transition. Also excluded from our non-GAAP measures are recruiting costs related to the search for a new CEO. These costs represent non-recurring expenses and are not indicative of our ongoing operating expenses. We further believe that excluding the CEO transition costs from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.Goodwill impairment. This is a non-cash charge to write down goodwill to fair value when there was an indication that the asset was impaired. As explained above, management finds it useful to exclude certain non-cash charges to assess the appropriate level of various operating expenses to assist in budgeting, planning, and forecasting future periods. Restructuring and other exit costs, net. These expenses are associated with realigning our business strategies based on current economic conditions. In connection with these restructuring actions or other exit actions, we recognize costs related to termination benefits for former employees whose positions were eliminated, the closure of facilities, and cancellation of certain contracts. We exclude these charges because these expenses are not reflective of ongoing business and operating results. We believe it is useful for investors to understand the effects of these items on our total operating expenses. Acquisition-related costs. We exclude certain acquisition-related costs, including due diligence costs, professional fees in connection with an acquisition, certain financing costs, and certain integration-related expenses. These expenses are unpredictable, and dependent on factors that may be outside of our control and unrelated to the continuing operations of the acquired business or our Company. In addition, the size and complexity of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. We believe excluding acquisition-related costs facilitates the comparison of our financial results to the Company's historical operating results and to other companies in our industry. 48 -------------------------------------------------------------------------------- Loss (gain) on strategic investments and dispositions. We exclude gains and losses related to our strategic investments and dispositions of strategic investments, purchased intangibles, and businesses from our non-GAAP measures primarily because management finds it useful to exclude these variable gains and losses on these investments and dispositions in assessing our financial results. Included in these amounts are non-cash unrealized gains and losses on the derivative components, dividends received, realized gains and losses on the sales or losses on the impairment of these investments, and gain and loss on dispositions. We believe excluding these items is useful to investors because these excluded items do not correlate to the underlying performance of our business and these losses or gains were incurred in connection with strategic investments and dispositions which do not occur regularly. Discrete tax provision items. We exclude the GAAP tax provision, including discrete items, from the non-GAAP measure of net income (loss), and include a non-GAAP tax provision based upon the projected annual non-GAAP effective tax rate. Discrete tax items include income tax expenses or benefits that do not relate to ordinary income from continuing operations in the current fiscal year, unusual or infrequently occurring items, or the tax impact of certain stock-based compensation. Examples of discrete tax items include, but are not limited to, certain changes in judgment and changes in estimates of tax matters related to prior fiscal years, certain costs related to business combinations, certain changes in the realizability of deferred tax assets, or changes in tax law. Management believes this approach assists investors in understanding the tax provision and the effective tax rate related to ongoing operations. We believe the exclusion of these discrete tax items provides investors with useful supplemental information about our operational performance. Establishment (release) of a valuation allowance on certain net deferred tax assets. This is a non-cash charge to record or to release a valuation allowance on certain deferred tax assets. As explained above, management finds it useful to exclude certain non-cash charges to assess the appropriate level of various cash expenses to assist in budgeting, planning, and forecasting future periods. Income tax effects on the difference between GAAP and non-GAAP costs and expenses. The income tax effects that are excluded from the non-GAAP measures relate to the tax impact on the difference between GAAP and non-GAAP expenses, primarily due to stock-based compensation, amortization of purchased intangibles, and restructuring charges and other exit costs (benefits) for GAAP and non-GAAP measures.
Liquidity and Capital Resources
Our primary source of cash is from the sale of our software and related services. Our primary use of cash is payment of our operating costs, which consist primarily of employee-related expenses, such as compensation and benefits, as well as general operating expenses for marketing, facilities, and overhead costs. Long-term cash requirements for items other than normal operating expenses are anticipated for the following: the acquisition of businesses, software products, or technologies complementary to our business; repayment of debt; common stock repurchases; and capital expenditures, including the purchase and implementation of internal-use software applications.
At
InSeptember 2021 , Autodesk entered into an amended and restated credit agreement ("Credit Agreement") by and among Autodesk, the lenders party thereto, andCitibank, N.A ., as agent, that provides for a revolving credit facility in the aggregate principal amount of$1.50 billion with an option to be increased up to$2.0 billion which increased from an aggregate principal amount of$650.0 million , with an option to be increased up to$1.0 billion , under our previous credit agreement. The revolving credit facility is available for working capital or other business needs. The maturity date on the Credit Agreement isSeptember 30, 2026 . AtOctober 31, 2021 , Autodesk had no outstanding borrowings under the Credit Agreement. Additionally, as ofDecember 3, 2021 , we have no amounts outstanding under the Credit Agreement. See Part I, Item 1, Note 14, "Borrowing Arrangements," in the Notes to Condensed Consolidated Financial Statements for further discussion on our covenant requirements. If we are unable to remain in compliance with the covenants under the Credit Agreement, we will not be able to draw on our revolving credit facility.
As of
Our cash and cash equivalents are held by diversified financial institutions globally. Our primary commercial banking relationship is with Citigroup and its global affiliates. In addition,Citibank N.A ., an affiliate of Citigroup, is one of the lead lenders and agent in the syndicate of our$1.50 billion revolving credit facility. 49 -------------------------------------------------------------------------------- Our cash and cash equivalents balances are concentrated in a few locations around the world, with substantial amounts held outside ofthe United States . As ofOctober 31, 2021 , approximately 32% of our total cash or cash equivalents are located in foreign jurisdictions and that percentage will fluctuate subject to business needs. There are several factors that can impact our ability to utilize foreign cash balances, such as foreign exchange restrictions, foreign regulatory restrictions, or adverse tax costs. The Tax Act included a mandatory one-time tax on accumulated earnings of foreign subsidiaries and generally eliminatedU.S. taxes on foreign subsidiary distributions in future periods. As a result, earnings in foreign jurisdictions are generally available for distribution tothe United States with little to no incrementalU.S. taxes. We regularly review our capital structure and consider a variety of potential financing alternatives and planning strategies to ensure we have the proper liquidity available in the locations in which it is needed. We expect to meet our liquidity needs through or in combination of current cash balances, ongoing cash flows, and external borrowings. Cash from operations could also be affected by various risks and uncertainties, including, but not limited to, the risks detailed in Part II, Item 1A titled "Risk Factors." We currently expect to have sufficient liquidity to manage through the COVID-19 pandemic but we will continue to monitor the impact of potential disruptions beyond our control. Based on our current business plan, planned acquisitions, and revenue prospects, we believe that our existing cash and cash equivalents, our anticipated cash flows from operations, and our available revolving credit facility will be sufficient to meet our working capital and operating resource expenditure requirements for at least the next 12 months. Our revenue, earnings, cash flows, receivables, and payables are subject to fluctuations due to changes in foreign currency exchange rates, for which we have put in place foreign currency contracts as part of our risk management strategy. See Part I, Item 3, "Quantitative and Qualitative Disclosures About Market Risk" for further discussion. Nine Months Ended October 31, (in millions) 2021 2020 Net cash provided by operating activities $ 808.5$ 779.6 Net cash used in investing activities (1,299.0) (176.7) Net cash provided by (used in) financing activities 473.3 (844.0) Net cash provided by operating activities of$808.5 million for the nine months endedOctober 31, 2021 , primarily consisted of$407.9 million of our net income adjusted for$552.2 million non-cash items such as stock-based compensation expense, and depreciation, amortization, and accretion expense. The decrease in cash provided by working capital was primarily due to an increase in prepaid expenses and other assets of$138.8 million , due to timing of prepaid operating expenses, and a decrease in accounts payable and other liabilities of$67.4 million , due to the timing of payments related to employee compensation and related costs, offset by a decrease in accounts receivable of$70.0 million due to the seasonality of our billings in the fourth fiscal quarter and timing of cash collections from customers. Net cash provided by operating activities of$779.6 million for the nine months endedOctober 31, 2020 , primarily consisted of$296.9 million of our net income adjusted for$445.3 million non-cash items such as stock-based compensation expense, and depreciation, amortization, and accretion expense. The increase in cash provided by changes in working capital was due to a decrease in accounts receivable of$112.8 million due to the seasonality of our billings in the fourth fiscal quarter and timing of cash collections from customers partially offset by a decrease in deferred revenue of$78.3 million driven by a decrease in multi-year billings. Net cash used in investing activities was$1,299.0 million for the nine months endedOctober 31, 2021 , primarily due to business combinations, net of cash acquired. Net cash used in investing activities was$176.7 million for the nine months endedOctober 31, 2020 , and was primarily due to purchases of capital expenditures, strategic investments equity securities, and acquisitions, net of cash acquired. Net cash provided by financing activities was$473.3 million for the nine months endedOctober 31, 2021 , primarily due to the proceeds from debt issuance, net of discount. These cash inflows were offset in part by repurchases of common stock. Net cash used in financing activities was$844.0 million for the nine months endedOctober 31, 2020 , primary due to the repayment of debt and the repurchases of common stock. These cash outflows were offset in part by cash proceeds from the issuance of common stock. 50 --------------------------------------------------------------------------------
Issuer Purchases of
Autodesk's stock repurchase program provides Autodesk with the ability to offset the dilution from the issuance of stock under our employee stock plans and reduce shares outstanding over time, and has the effect of returning excess cash generated from our business to stockholders. Under the share repurchase program, Autodesk may repurchase shares from time to time in open market transactions, privately negotiated transactions, accelerated share repurchase programs, tender offers, or by other means. 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, remaining shares available in the authorized pool, cash requirements for acquisitions, economic and market conditions, stock price, and legal and regulatory requirements.
The following table provides information about the repurchase of common stock in
open-market transactions during the three months ended
Total Number of Shares Maximum Number of
Total Number of Purchased as Part of Shares that May Yet Be
Shares Average Price Publicly Announced Plans Purchased Under the
(Shares in millions) Purchased Paid per Share or Programs (1) Plans or Programs (2)
August 1 - August 31 0.2 $ 316.51 0.2 11.2
September 1 - September 30 0.5 289.78 0.5 10.7
October 1- October 31 0.3 284.72 0.3 10.4
Total 1.0 $ 292.91 1.0
________________
(1)This represents shares purchased in open-market transactions under the stock
repurchase plan approved by the Board of Directors.
(2)These amounts correspond to the plan publicly announced and approved by the
Board of Directors in September 2016 that authorized the repurchase of 30.0
million shares. The plan does not have a fixed expiration date. See Note 17,
"Stockholders' Equity ," in the Notes to the Condensed Consolidated Financial
Statements for further discussion.
Off-Balance Sheet Arrangements
As of
Glossary of Terms
Billings: Total revenue plus the net change in deferred revenue from the beginning to the end of the period.
Cloud Service Offerings: Represents individual term-based offerings deployed through web browser technologies or in a hybrid software and cloud configuration. Cloud service offerings that are bundled with other product offerings are not captured as a separate cloud service offering.
Constant Currency (CC) Growth Rates: We attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates as well as eliminating hedge gains or losses recorded within the current and comparative periods. We calculate constant currency growth rates by (i) applying the applicable prior period exchange rates to current period results and (ii) excluding any gains or losses from foreign currency hedge contracts that are reported in the current and comparative periods.
Design Business: Represents the combination of maintenance, product subscriptions, and all EBAs. Main products include, but are not limited to, AutoCAD, AutoCAD LT, Industry Collections, Revit, Inventor, Maya and 3ds Max. Certain products, such as our computer aided manufacturing solutions, incorporate both Design and Make functionality and are classified as Design.
Enterprise Business Agreements (EBAs): Represents programs providing enterprise customers with token-based access to a broad pool of Autodesk products over a defined contract term.
Free Cash Flow: Cash flow from operating activities minus capital expenditures.
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Industry Collections: Autodesk Industry Collections are a combination of
products and services that target a specific user objective and support a set of
workflows for that objective. Our Industry Collections consist of: Autodesk
Architecture, Engineering and Construction Collection, Autodesk Product Design &
Manufacturing Collection, and Autodesk Media and Entertainment Collection.
Maintenance Plan: Our maintenance plans provide our customers with a cost
effective and predictable budgetary option to obtain the productivity benefits
of our new releases and enhancements when and if released during the term of
their contracts. Under our maintenance plans, customers are eligible to receive
unspecified upgrades when and if available, and technical support. We recognize
maintenance revenue over the term of the agreements, generally one year.
Make Business: Represents certain cloud-based product subscriptions. Main products include, but are not limited to, Assemble, Autodesk Build, BuildingConnected, Fusion 360 and Shotgrid. Certain products, such as Fusion 360, incorporate both Design and Make functionality and are classified as Make.
Net Revenue Retention Rate (NR3): Measures the year-over-year change in
subscription and maintenance revenue for the population of customers that
existed one year ago ("base customers"). Net revenue retention rate is
calculated by dividing the current quarter subscription and maintenance revenue
related to base customers by the total corresponding quarter subscription and
maintenance revenue from one year ago. Subscription and maintenance revenue is
based on USD reported revenue, and fluctuations caused by changes in foreign
currency exchange rates and hedge gains or losses have not been eliminated.
Subscription and maintenance revenue related to acquired companies, one year
after acquisition, has been captured as existing customers until such data
conforms to the calculation methodology. This may cause variability in the
comparison.
Other Revenue: Consists of revenue from consulting, training, and other products
and services, and is recognized as the products are delivered and services are
performed.
Product Subscription: Provides customers a flexible, cost-effective way to access and manage 3D design, engineering, and entertainment software tools. Our product subscriptions currently represent a hybrid of desktop and cloud functionality, which provides a device-independent, collaborative design workflow for designers and their stakeholders.
Recurring Revenue: Consists of the revenue for the period from our traditional maintenance plans and revenue from our subscription plan offerings. It excludes subscription revenue related to consumer product offerings, select Creative Finishing product offerings, and third-party products. Recurring revenue acquired with the acquisition of a business is captured when total subscriptions are captured in our systems and may cause variability in the comparison of this calculation. Remaining Performance Obligations (RPO): The sum of total short-term, long-term, and unbilled deferred revenue. Current remaining performance obligations is the amount of revenue we expect to recognize in the next twelve months.
Spend: The sum of cost of revenue and operating expenses.
Subscription Plan: Comprises our term-based product subscriptions, cloud service offerings, and EBAs. Subscriptions represent a combined hybrid offering of desktop software and cloud functionality which provides a device-independent, collaborative design workflow for designers and their stakeholders. With subscription, customers can use our software anytime, anywhere, and get access to the latest updates to previous versions.
Subscription Revenue: Includes our term-based product subscriptions, cloud service offerings, and flexible EBAs.
Unbilled Deferred Revenue: Unbilled deferred revenue represents contractually
stated or committed orders under early renewal and multi-year billing plans for
subscription, services, and maintenance for which the associated deferred
revenue has not been recognized. Under FASB Accounting Standards Codification
("ASC") Topic 606, unbilled deferred revenue is not included as a receivable or
deferred revenue on our Condensed Consolidated Balance Sheet.
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