AUTODESK, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing in Part II, Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth above in Part I, Item 1A, "Risk Factors," and elsewhere in this report. See "Forward-Looking Information" immediately preceding Part I.
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, the software industry has undergone a transition from developing and selling perpetual licenses and on-premises products to subscriptions and cloud-enabled technologies.
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, 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.
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 fiscal 2022, 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. Other acquisitions in fiscal 2022 include a
cloud-based estimating solution that enables construction teams to create
estimates, perform digital takeoffs, generate detailed reports and proposals and
manage bid-day processes. In fiscal 2021, we acquired Spacemaker which uses
cloud-based, artificial intelligence (AI), and generative design to help
architects,
38--------------------------------------------------------------------------------
Table of Contents
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 fiscal 2022, 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. 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.
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 2, "Revenue Recognition" in the Notes to the Consolidated Financial Statements for further detail on the results of our indirect and direct channel sales for the fiscal years endedJanuary 31, 2022 , 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. 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 theUN Sustainable Development Goals ("SDGs") 39
--------------------------------------------------------------------------------
Table of Contents
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-zerocarbon 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 are 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 I, Item 1A, "Risk Factors."
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Consolidated Financial Statements are prepared in accordance withU.S. generally accepted accounting principles. In preparing our Consolidated Financial Statements, we make assumptions, judgments, and estimates that can have a significant impact on amounts reported in our Consolidated Financial Statements. We evaluate our estimates and assumptions on an ongoing basis. We base our assumptions, judgments, and estimates on historical 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 Part II, Item 8, Note 1, "Business and Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements. 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 believe that of all our significant accounting policies, the following accounting policies and specific estimates involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. Revenue Recognition - Judgments with Multiple Performance Obligations. Our contracts with customers may include promises to transfer multiple products and services to a customer. A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as a single performance obligation may require significant judgment that requires us to assess the nature of the promise and value delivered to the customer and the interaction of the desktop applications and cloud functionalities. For our product subscriptions, cloud service offerings, and flexible enterprise business arrangements, the functional nature of the promise, as well as the customers' value expectations, led us to conclude desktop applications and cloud functionalities are not distinct in the context of the contract and should be accounted for as a single performance obligation. There is a high degree of interaction of the desktop applications and cloud functionalities, which is not available with the desktop applications alone or in conjunction with third-party cloud service providers. Furthermore, customers are not able to use the desktop applications for its intended purpose without our cloud functionalities. 40
--------------------------------------------------------------------------------
Table of Contents
For contracts with more than one performance obligation, the transaction price
is allocated among the performance obligations in an amount that depicts the
relative standalone selling price ("SSP") of each obligation. Judgment is
required to determine the SSP for each distinct performance obligation. We use a
range of amounts to estimate SSP when we sell each of the products and services
separately and need to determine whether there is a discount that should be
allocated based on the relative SSP of the various products and services.
In instances where SSP is not directly observable, such as when we do not sell
the product or service separately, we determine the SSP using information that
includes market conditions and other observable inputs. We typically have more
than one SSP for individual products and services due to the stratification of
those products and services by customer and circumstance. In these instances, we
use relevant information such as the sales channel to determine the SSP.
Strategic Investments. Strategic investment debt and equity securities are
valued using significant unobservable inputs or data in an inactive market and
the valuation requires our judgment due to the absence of market prices and
inherent lack of liquidity. The carrying value is adjusted for our strategic
investment equity securities if there are observable price changes in a same or
similar security from the same issuer or if there are identified events or
changes in circumstances that may indicate impairment, as discussed below. The
determination of whether an orderly transaction is for a same or similar
investment requires significant management judgment including the nature of
rights and obligations of the investments, the extent to which differences in
those rights and obligations would affect the fair values of those investments,
and the impact of any differences based on the stage of operational development
of the investee.
These assumptions are inherently subjective and involve significant management judgment. Whenever possible, we use observable market data and rely on unobservable inputs only when observable market data is not available when determining fair value.
We assess our strategic investment debt and equity securities portfolio quarterly for impairment. Strategic investment equity securities are assessed based on available information such as current cash positions, earnings and cash flow forecasts, recent operational performance, and any other readily available market data. For any available-for-sale debt securities, if Autodesk does not intend to sell and it is not more likely than not that Autodesk will be required to sell the available-for-sale debt security prior to recovery of its amortized cost basis, Autodesk will determine whether a decline in fair value below the amortized cost basis is due to credit-related factors. The credit loss is measured as the amount by which the debt security's amortized cost basis exceeds the estimate of the present value of cash flows expected to be collected, up to the difference between the amortized cost basis and the fair value. Impairment will be assessed at the individual security level. Credit-related impairment is recognized as an allowance on the Consolidated Balance Sheets with a corresponding adjustment to "Interest and other expense, net" on the Company's Consolidated Statements of Operations. Any impairment that is not credit-related is recognized in "Accumulated other comprehensive loss" on the Consolidated Balance Sheets. For our quarterly impairment assessment of privately held debt and equity securities, the analysis encompasses an assessment of the severity and duration of the impairment and qualitative and quantitative analysis of other key factors including: the investee's financial metrics, the investee's products and technologies meeting or exceeding predefined milestones, market acceptance of the product or technology, other competitive products or technology in the market, general market conditions, management and governance structure of the investee, the investee's liquidity, debt ratios, and the rate at which the investee is using its cash. Business Combinations. The assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values at the acquisition date, with the exception of contract assets and contract liabilities (i.e., deferred revenue) which are recognized and measured on the acquisition date in accordance with Autodesk's "Revenue Recognition" policy in Note 1 "Business and Summary of Significant Accounting Policies". Any residual purchase price is recorded as goodwill. Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets and deferred revenue obligations. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain and unpredictable. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates, or actual results. Examples of critical estimates used in valuing certain of the intangible assets and in determining the assets' useful lives for the assets we have acquired or may acquire in the future include but are not limited to:
•future expected cash flows from subscriptions and maintenance agreements, sales, and acquired developed technologies;
41--------------------------------------------------------------------------------
Table of Contents
•the acquired company's trade name and patents, as well as assumptions about the period of time the acquired trade name and patents will continue to be used in our product portfolio;
•expected growth in revenue from the acquired company's existing customer relationships;
•expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed;
•uncertain tax positions and tax related valuation allowances assumed; and
•discount rates used to determine the present value of estimated future cash flows.
Realizability of Long-Lived Assets. We assess the realizability of our long-lived assets and related intangible assets, other than goodwill, quarterly, or sooner should events or changes in circumstances indicate the carrying values of such assets may not be recoverable. We consider the following factors important in determining when to perform an impairment review: significant under-performance of a business or product line relative to budget, shifts in business strategies which affect the continued uses of the assets, significant negative industry or economic trends, and the results of past impairment reviews. When such events or changes in circumstances occur, we assess recoverability of these assets. We assess recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If impairment indicators were present based on our undiscounted cash flow models, which include assumptions regarding projected cash flows, we would perform a discounted cash flow analysis to assess impairments on long-lived assets. The key assumptions that we use in our discounted cash flow model include the amount and timing of estimated future cash flows to be generated by the asset group over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. Significant judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows. We also make judgments about the remaining useful lives of acquired intangible assets and other long-lived assets that have finite lives. Variances in these assumptions could have a significant impact on our conclusion as to whether an asset is impaired or the amount of any impairment charge. Impairment charges, if any, result in situations where any fair values of these assets are less than their carrying values. Income Taxes. We account for income taxes under the asset and liability approach. Under this method, deferred tax assets, including those related to tax loss carryforwards and credits, and deferred tax liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We recognize the tax benefit for an uncertain tax position when it meets the more likely than not threshold for recognition. We recognize potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. A valuation allowance is recorded to reduce deferred tax assets when management cannot conclude that it is more likely than not that the deferred tax asset will be recovered. The valuation allowance is determined by assessing both positive and negative evidence to determine whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction-by-jurisdiction basis. Significant judgment is required in determining whether the valuation allowance should be recorded against deferred tax assets. In assessing the need for or release of a valuation allowance, we consider all available evidence including past operating results and estimates of future taxable income. As we continually strive to optimize our overall business model, tax planning strategies may become feasible and prudent whereby management may determine that it is more likely than not thatthe Netherlands ,Canada ,Australia ,California ,Michigan andU.S. capital loss deferred tax assets will be realized. Each quarter we will continue to evaluate the positive and negative evidence of our ability to utilize our global deferred tax assets. Loss Contingencies. As described in Part I, Item 3, "Legal Proceedings" and Part II, Item 8, Note 10, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements, we are periodically involved in various legal claims and proceedings. We routinely review the status of each significant matter and assess our potential financial exposure. If the potential loss from any matter is considered probable and the amount can be reasonably estimated, we record a liability for the estimated loss. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters. Due to inherent uncertainties related to these matters, we base our loss accruals on the best information available at the time. Until the final resolution of such matters, there may be an exposure to loss in excess of the 42
--------------------------------------------------------------------------------
Table of Contents
amount recorded. As additional information becomes available, we reassess our potential liability and may revise our estimates. Such revisions could have a material impact on future quarterly or annual results of operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Part II, Item 8, Note 1, "Business and Summary of Significant Accounting Policies," in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and financial condition.
OVERVIEW OF FISCAL 2022
•Total net revenue was
•Recurring revenue as a percentage of net revenue was 96% for the fiscal year endingJanuary 31, 2022 , compared to 97% for the same period in the prior fiscal year.
•Net revenue retention rate ("NR3") was within the range of 100% and 110% as of
both
•Deferred revenue was
•Remaining performance obligations (short-term and long-term deferred revenue
plus unbilled deferred revenue) ("RPO") was $4.74 billion , an increase of 12%
compared to the fourth quarter in the prior fiscal year.
•Current remaining performance obligations were
Revenue Analysis
During fiscal 2022, net revenue increased 16%, as compared to the prior fiscal year, primarily due to a 19% increase in subscription revenue, partially offset by a 58% decrease in maintenance revenue.
Further discussion of the drivers of these results are discussed below under the heading "Results of Operations."
We rely significantly upon major distributors and resellers in boththe United States 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 36%, 37% and 35% of Autodesk's total net revenue during fiscal 2022, 2021 and 2020, respectively.Ingram Micro accounted for 9% of Autodesk's total net revenue during fiscal 2022 and 10% of Autodesk's total net revenue during both fiscal 2021 and 2020. 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 in Part I,
Item 1 Business.
43--------------------------------------------------------------------------------
Table of Contents
The following table outlines our recurring revenue metric for the fiscal years
ended
Fiscal Year Change compared to Change compared to
Ended January prior fiscal year end Fiscal Year Ended prior fiscal year end Fiscal Year Ended
31, 2022 $ % January 31, 2021 $ % January 31, 2020
Recurring Revenue (in millions)
(1) $4,232.7 $ 570.5 16 % $ 3,662.2 $ 523.7 17 % $ 3,138.5
As a percentage of net revenue 96 % N/A N/A 97 % N/A N/A 96 %
________________
(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 Consolidated Statements of Operations.
NR3 was within the range of 100% and 110% as of both January 31, 2022 and 2021.
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:
Fiscal Year Ended January 31, 2022
Percent change compared to Constant currency percent Positive/negative/neutral
prior fiscal year (as change compared to impact from foreign exchange
reported) prior fiscal year (1) rate changes
Net revenue 16 % 14 % Positive
Total spend 19 % 18 % Negative
________________
(1)Please refer to the "Glossary of Terms" in Part I, Item 1 Business 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 Consolidated Balance Sheets. See Part II, Item 8, Note
2, "Revenue Recognition" for more details on Autodesk's performance obligations.
(in millions) January 31, 2022 January 31, 2021
Deferred revenue $ 3,789.8 $ 3,360.2
Unbilled deferred revenue 949.2 880.5
RPO $ 4,739.0 $ 4,240.7
RPO consisted of the following:
(in millions) January 31, 2022 January 31, 2021
Current RPO $ 3,140.5 $ 2,738.0
Non-current RPO 1,598.5 1,502.7
RPO $ 4,739.0 $ 4,240.7
44--------------------------------------------------------------------------------
Table of Contents
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
AtJanuary 31, 2022 , we had$1.81 billion in cash, cash equivalents, and marketable securities. Our cash flow from operations increased to$1.53 billion for the fiscal year endedJanuary 31, 2022 , from$1.44 billion for the fiscal year endedJanuary 31, 2021 . We repurchased 4.0 million shares of our common stock for$1.09 billion during fiscal 2022. Comparatively, we repurchased 2.6 million shares of our common stock for$549.4 million during fiscal 2021. Further discussion regarding the balance sheet and cash flow activities are discussed below under the heading "Liquidity and Capital Resources." 45
--------------------------------------------------------------------------------
Table of Contents 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 are reducing our facilities portfolio worldwide and incurred impairment and accelerated depreciation charges of$103.7 million to assets associated with our operating leases for real estate during the fiscal year endedJanuary 31, 2022 , and expect to incur additional impairments over the next several quarters which we currently estimate could result in impairment charges that would range up to approximately$25.0 million depending on the then-current market conditions. See Note 9, "Leases," in the Notes to Consolidated Financial Statements for more information. 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-19, 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 2023 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 continued 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 I, Item 1A, "Risk Factors."
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.
46--------------------------------------------------------------------------------
Table of Contents
Change compared to prior fiscal
Fiscal Year year Fiscal Year
Ended January Ended January
(in millions, except percentages) 31, 2022 $ % 31, 2021 Management Comments
Net revenue:
Subscription $ 4,156.4 $ 677.5 19 % $ 3,478.9 Increase due to growth
across subscription types,
led by subscription renewal
revenue as a result of
growth in the subscription
base. Also contributing to
the growth was an increase
in revenue from EBA
offerings.
Maintenance 76.3 (107.0) (58) % 183.3
Total subscription and maintenance 4,232.7 570.5 16 % 3,662.2
revenue
Other 153.7 25.5 20 % 128.2
$ 4,386.4 $ 596.0 16 % $ 3,790.4
Change compared to prior fiscal
Fiscal Year year Fiscal Year
Ended January Ended January
(in millions, except percentages) 31, 2021 $ % 31, 2020 Management Comments
Net revenue:
Subscription $ 3,478.9 $ 727.0 26 % $ 2,751.9 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 183.3 (203.3) (53) % 386.6
Total subscription and maintenance 3,662.2 523.7 17 % 3,138.5
revenue
Other 128.2 (7.6) (6) % 135.8
$ 3,790.4 $ 516.1 16 % $ 3,274.3
47--------------------------------------------------------------------------------
Table of Contents 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
Fiscal Year Change compared to prior fiscal Fiscal Year
Ended January year Ended January
(in millions, except percentages) 31, 2022 $ % 31, 2021 Management Comments
Net revenue by product family: AEC$ 1,959.9 $ 311.3 19 %$ 1,648.6 Increase due to growth in revenue from AEC collections, EBAs, Innovyze and Revit. AutoCAD and AutoCAD LT 1,253.0 153.6 14 % 1,099.4 Increase due to growth in revenue from both AutoCAD and AutoCAD LT. MFG 876.0 77.4 10 % 798.6 Increase due to growth in revenue from Fusion360, EBAs, and MFG Collections. M&E 258.9 39.5 18 % 219.4 Increase due to growth in revenue from EBAs, Maya, and M&E Collections. Other 38.6 14.2 58 % 24.4$ 4,386.4 $ 596.0 16 %$ 3,790.4 Fiscal Year
Change compared to prior fiscal Fiscal Year
Ended January year Ended January
(in millions, except percentages) 31, 2021 $ % 31, 2020 Management Comments
Net revenue by product family: AEC$ 1,648.6 $ 271.5 20 %$ 1,377.1 Increase due to growth in revenue from AEC collections, EBAs, BIM360 and PlanGrid. AutoCAD and AutoCAD LT 1,099.4 151.2 16 % 948.2 Increase due to growth in revenue from both AutoCAD and AutoCAD LT. MFG 798.6 72.5 10 % 726.1 Increase due to growth in revenue from MFG Collections, EBAs, and Fusion360. M&E 219.4 20.2 10 % 199.2 Increase due to growth in revenue from EBAs, M&E Collections, Maya, and 3DS Max. Other 24.4 0.7 3 % 23.7$ 3,790.4 $ 516.1 16 %$ 3,274.3 48
--------------------------------------------------------------------------------
Table of Contents
Net Revenue by Geographic Area
Constant Constant
currency change currency change
Fiscal Year compared to Fiscal Year compared to Fiscal Year
Ended January Change compared toprior fiscal prior fiscal Ended January Change compared to prior fiscal prior fiscal Ended January
31, 2022 year year 31, 2021 year year 31, 2020
(in millions, except
percentages) $ % % $ % %
Net revenue:
Americas
U.S. $ 1,456.5 $ 174.7 14 % * $ 1,281.8 $ 172.9 16 % * $ 1,108.9
Other Americas 308.6 48.0 18 % * 260.6 33.7 15 % * 226.9
Total Americas 1,765.1 222.7 14 % 14 % 1,542.4 206.6 15 % 16 % 1,335.8
EMEA 1,700.4 227.8 15 % 12 % 1,472.6 169.1 13 % 15 % 1,303.5
APAC 920.9 145.5 19 % 17 % 775.4 140.4 22 % 22 % 635.0
Total net revenue $ 4,386.4 $ 596.0 16 % 14 % $ 3,790.4 $ 516.1 16 % 17 % $ 3,274.3
Emerging economies $ 546.4 $ 83.2 18 % 17 % $ 463.2 $ 67.0 17 % 17 % $ 396.2
____________________* 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 or in connection with the significant military action againstUkraine launched byRussia (or any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy), 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. 49
--------------------------------------------------------------------------------
Table of Contents
Net Revenue by Sales Channel
Change compared to prior fiscal
Fiscal Year year Fiscal Year
Ended January Ended January
(in millions, except percentages) 31, 2022 $ % 31, 2021 Management Comments
Net revenue by sales channel:
Indirect $ 2,849.4 $ 249.4 10 % $ 2,600.0 Increase due to growth in
subscription revenue.
Direct 1,537.0 346.6 29 % 1,190.4 Increase due to an increase in EBAs
and our online Autodesk branded
store.
Total net revenue $ 4,386.4 $ 596.0 16 % $ 3,790.4
Change compared to prior fiscal
Fiscal Year year Fiscal Year
Ended January Ended January
(in millions, except percentages) 31, 2021 $ % 31, 2020 Management Comments
Net revenue by sales channel:
Indirect $ 2,600.0 $ 317.8 14 % $ 2,282.2 Increase due to growth in
subscription revenue offset by
lower maintenance plan
subscriptions.
Direct 1,190.4 198.3 20 % 992.1 Increase due to growth in EBAs
and our online Autodesk branded
store.
Total net revenue $ 3,790.4 $ 516.1 16 % $ 3,274.3
50--------------------------------------------------------------------------------
Table of Contents
Net Revenue by Product Type
Change compared to
Fiscal Year prior fiscal year Fiscal Year
(In millions, except Ended January Ended January
percentages) 31, 2022 $ % 31, 2021 Management Comments
Net Revenue by Product
Type:
Design $ 3,868.8 $ 503 15 % $ 3,365.8 Increase is due to growth in
AEC & MFG collections,
AutoCAD Family, AutoCAD LT,
and EBA offerings.
Make 363.9 67.5 23 % 296.4 Increase primarily due to
growth in revenue from BIM
Family, PlanGrid, and Fusion
products.
Other 153.7 25.5 20 % 128.2
Total Net Revenue $ 4,386.4 $ 596 16 % $ 3,790.4
Change compared to
Fiscal Year prior fiscal year Fiscal Year
(In millions, except Ended January Ended January
percentages) 31, 2021 $ % 31, 2020 Management Comments
Net Revenue by Product
Type:
Design $ 3,365.8 $ 445.7 15 % $ 2,920.1 Increase is due to growth in
AEC & MFG collections,
AutoCAD Family, AutoCAD LT,
and EBA offerings.
Make 296.4 78.0 36 % 218.4 Increase primarily due to
growth in revenue from BIM
Family, PlanGrid, and Fusion
products.
Other 128.2 (7.6) (6) % 135.8
Total Net Revenue $ 3,790.4 $ 516.1 16 % $ 3,274.3 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
51--------------------------------------------------------------------------------
Table of Contents
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.
Change compared to prior fiscal
Fiscal Year year Fiscal Year
(In millions, except Ended January Ended January
percentages) 31, 2022 $ % 31, 2021 Management Comments
Cost of revenue:
Subscription and maintenance $ 299.1 $ 57.0 24 % $ 242.1 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
expense.
Other 66.6 2.5 4 % 64.1 Increase primarily due to an increase
in stock-based compensation expense.
Amortization of developed 52.8 21.9 71 % 30.9 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 in fiscal 2022.
Total cost of revenue $ 418.5 $ 81.4
24 % $ 337.1
Operating expenses:
Marketing and sales $ 1,623.1 $ 182.8 13 % $ 1,440.3 Increase primarily due to an increase
in employee-related costs driven by
higher headcount, an increase in
stock-based compensation expense, an
increase in advertisement and
promotion costs due to new company
branding campaign, as well as an
increase in cloud hosting costs and
professional fees.
Research and development 1,114.8 182.3 20 % 932.5 Increase primarily due to an increase
in stock-based compensation expense,
an increase in employee-related costs
driven by higher headcount, as well as
an increase in professional fees.
General and administrative 571.7 157.8 38 % 413.9 Increase primarily due to
lease-related asset impairment and
other charges in fiscal 2022, an
increase in stock-based compensation
expense, an increase in employee
related costs driven by higher
headcount, as well as an increase in
cloud hosting costs.
Amortization of purchased 40.7 3.2
9 % 37.5 Increase due to growth in amortization
intangibles expense from acquired intangibles as a
result of our acquisitions in the
fourth quarter of fiscal 2021 and in
fiscal 2022.
Total operating expenses $ 3,350.3 $ 526.1 19 % $ 2,824.2
52--------------------------------------------------------------------------------
Table of Contents
Fiscal Year Change compared to prior fiscal year Fiscal Year
(In millions, except Ended January Ended January
percentages) 31, 2021 $ % 31, 2020 Management comments
Cost of revenue:
Subscription and maintenance Increase primarily due to an increase
in cloud hosting costs as well as an
increase in stock-based compensation
$ 242.1 $ 18.2 8 % $ 223.9 expense.
Other Decrease primarily due to lower travel
and entertainment expense partially
offset by an increase in
employee-related costs driven by
64.1 (2.4) (4) % 66.5 higher headcount.
Amortization of developed Decrease primarily due to previously
technologies acquired developed technologies
continuing to become fully amortized
partially offset by amortization from
recently acquired developed
30.9 (3.6) (10) % 34.5 technologies.
Total cost of revenue $ 337.1 $ 12.2
4 % $ 324.9
Operating expenses:
Marketing and sales Increase primarily due to increased
employee-related costs driven by
higher headcount, an increase in
stock-based compensation expense, as
well as an increase in SaaS vendor
costs and allocated IT costs partially
offset by a decrease in travel and
$ 1,440.3 $ 130.0 10 % $ 1,310.3 entertainment expenses.
Research and development Increase primarily due to increased
employee-related costs driven by
higher headcount, an increase in
stock-based compensation expense, as
well as an increase in SaaS vendor
costs and allocated IT costs partially
offset by a decrease in travel and
932.5 81.4 10 % 851.1 entertainment expenses.
General and administrative Increase primarily due to increase in
employee related costs driven by
higher headcount, as well as an
increase in net SaaS vendor costs
partially offset by a decrease in
413.9 8.3 2 % 405.6 stock-based compensation expense.
Amortization of purchased Decrease as previously acquired
intangibles purchased intangibles continue to
become fully amortized partially
offset by amortization from recently
37.5 (1.4) (4) % 38.9 acquired purchased intangibles.
Restructuring and other exit
costs, net - (0.5) (100) % 0.5
Total operating expenses $ 2,824.2 $ 217.8 8 % $ 2,606.4 The following table highlights our expectation for the absolute dollar change and percent of revenue change for fiscal 2023 as compared to fiscal 2022:
Percent of net
Absolute dollar impact revenue impact
Cost of revenue Increase Flat
Marketing and sales Decrease Decrease
Research and development Increase Decrease
General and administrative Increase Increase
Amortization of purchased intangibles Flat Flat
53--------------------------------------------------------------------------------
Table of Contents
Interest and Other Expense, Net
The following table sets forth the components of interest and other expense,
net:
Fiscal year ended January 31,
2022 2021 2020
(in millions)
Interest and investment expense, net $ (65.0) $
(51.1)
Gain on foreign currency 0.4 3.5 3.9
Gain (loss) on strategic investments 4.0 (41.7) (3.3)
Other income 7.7 6.9 5.2
Interest and other expense, net $ (52.9) $
(82.4)
Interest and other expense, net, decreased by$29.5 million during fiscal 2022, as compared to fiscal 2021. The decrease was primarily due to gains on dispositions, mark-to-market gains, and a decrease in impairments of strategic investment equity securities in the current period as compared to the prior period offset in part by an increase in interest expense as a result of the issuance of debt in fiscal 2022 and a decrease in mark-to market gains on debt and equity securities held in a rabbi trust under non-qualified deferred compensation plans. Interest and other expense, net, increased by$34.2 million during fiscal 2021, as compared to fiscal 2020. The increase was primarily due to an increase in impairments and negative measurement alternative adjustments on our strategic investment equity securities and a decrease in interest income offset by a decrease in interest expense as result of the payment in full of our term loan, and an increase in mark-to-market gains on marketable securities.
Interest expense and investment income fluctuates based on average cash, marketable securities and 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 year.
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. Furthermore, onJanuary 22, 2018 , the FASB released guidance on the accounting for tax on the global intangible low-taxed income ("GILTI") provisions of the TCJA. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company has elected to recognize any potential GILTI obligations as an expense in the period it is incurred. Income tax expense was$67.7 million and tax benefit was$661.5 million for fiscal 2022 and 2021, relative to pre-tax income of$564.7 million and$546.7 million , respectively, for the same periods. The tax expense for fiscal 2022 consists primarily of theU.S. and foreign tax expense, including withholding tax, offset by shared-based compensation deductions,India withholding tax refunds and generation of federal tax credits. Tax benefit for fiscal 2021 consisted primarily of theU.S. valuation allowance release,U.S. foreign derived intangible income permanent benefit, share-based compensation deductions and generation of federal tax credits, offset by foreign tax expense, including withholding tax. A valuation allowance is recorded to reduce deferred tax assets when management cannot conclude that it is more likely than not that the net deferred tax asset will be recovered. The valuation allowance is determined by assessing both positive and negative evidence to determine whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction-by-jurisdiction basis. Significant judgment is required in determining whether the valuation allowance should be recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence including past operating results and estimates of future taxable income. In fiscal 2016, we considered cumulative losses inthe United States from our business model transition as a significant source of negative evidence. Considering this negative evidence, we determined that it was more likely than not that we would 54
--------------------------------------------------------------------------------
Table of Contents
not realize theU.S. deferred tax assets and recorded a full valuation allowance against our deferred tax assets. Similarly, in fiscal 2018 we recorded a valuation allowance against ourSingapore deferred tax assets due to significant negative evidence in the form of cumulative losses. Foreign operations inthe Netherlands andCanada that generated interest expense, future creditable research in excess of earnings, respectively, also resulted in the historic recording of a full valuation under the more likely than not realizability criteria. We released ourSingapore valuation allowance in fiscal 2020 due to positive evidence in the form of cumulative earnings, resulting in a$42.0 million non-cash benefit to earnings. In the fourth quarter of fiscal 2021, we released the valuation allowance against our deferred tax assets in theU.S. , resulting in a$679.0 million non-cash benefit to earnings. We released theU.S. valuation allowance in fiscal 2021 due to the following positive evidence: •Recent history of worldwide pre-tax earnings, including cumulative earnings on a worldwide basis as of fiscal 2021 •Recent history ofU.S. taxable income •Forecast of worldwide andU.S. pre-tax earnings, including a forecast of cumulative earnings in theU.S. jurisdiction •Forecast ofU.S. taxable income •Reversal of deferred tax liabilities We have retained a valuation allowance againstCalifornia andMichigan deferred tax assets as well as deferred tax assets that will convert into a capital loss upon reversal as we do not have sufficient income of the appropriate character to benefit these deferred tax assets. As we continually strive to optimize our overall business model, tax planning strategies may become feasible whereby management may determine, based on all available evidence, both positive and negative, that it is more likely than not thatthe Netherlands ,Canada ,Australia ,California ,Michigan , andU.S. capital loss deferred tax assets will be realized. As ofJanuary 31, 2022 , we had$206.7 million of gross unrecognized tax benefits, of which$33.6 million would reduce our valuation allowance, if recognized. The remaining$173.1 million would impact the effective tax rate. It is possible that the amount of unrecognized tax benefits will change in the next 12 months for an audit settlement of approximately$7.8 million . Our future effective annual tax rate may be materially impacted by the amount of benefits and charges from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, changes in valuation allowances, level of profit before tax, accounting for uncertain tax positions, business combinations, closure of statute of limitations or settlement of tax audits, and changes in tax laws. A significant amount of our earnings is generated by our European andAsia Pacific subsidiaries. Our future effective tax rates may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory tax rates. 55
--------------------------------------------------------------------------------
Table of Contents OTHER FINANCIAL INFORMATION In addition to our results determined underU.S. generally accepted accounting principles ("GAAP") discussed above, we believe the following non-GAAP measures are useful to investors in evaluating our operating performance. For the fiscal years endedJanuary 31, 2022 , 2021, and 2020, our gross profit, income from operations, operating margin, net income, and diluted net income per share on a GAAP and non-GAAP basis were as follows (in millions except for operating margin and per share data): Fiscal Year Ended January 31, 2022 2021 2020 (Unaudited) Gross profit$ 3,967.9 $ 3,453.3 $ 2,949.4 Non-GAAP gross profit$ 4,054.3 $ 3,508.5 $ 3,004.0 Income from operations$ 617.6 $ 629.1 $ 343.0 Non-GAAP income from operations$ 1,397.4 $ 1,111.9 $ 802.6 Operating margin 14 % 17 % 10 % Non-GAAP operating margin 32 % 29 % 25 % Net income$ 497.0 $ 1,208.2 $ 214.5 Non-GAAP net income$ 1,126.1 $ 899.8 $ 621.2 Diluted net income per share$ 2.24 $ 5.44 $ 0.96 Non-GAAP diluted net income per share$ 5.07 $ 4.05 $ 2.79 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 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 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. 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. 56
--------------------------------------------------------------------------------
Table of Contents
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In millions except for operating margin, and per share data):
Fiscal Year Ended January 31,
2022 2021 2020
(Unaudited)
Gross profit $ 3,967.9 $ 3,453.3 $ 2,949.4
Stock-based compensation expense 34.5 23.6 19.6
Acquisition-related costs 0.7 0.7 0.5
Amortization of developed technologies 51.2 30.9 34.5
Non-GAAP gross profit $ 4,054.3 $ 3,508.5 $ 3,004.0
Income from operations $ 617.6 $ 629.1 $ 343.0
Stock-based compensation expense 558.5 399.8 362.4
Amortization of developed technologies 51.2 30.9 34.5
Amortization of purchased intangibles 40.4 37.5 38.9
Acquisition-related costs 26.0 14.6 23.3
Lease-related asset impairments and other charges 103.7 - -
Restructuring and other exit costs, net - - 0.5
Non-GAAP income from operations $ 1,397.4 $
1,111.9
Operating margin 14 % 17 % 10 % Stock-based compensation expense 13 % 11 % 11 % Amortization of developed technologies 1 % 1 % 1 % Amortization of purchased intangibles 1 % 1 % 1 % Acquisition-related costs 1 % - % 1 % Lease-related asset impairments and other charges 2 % - % - % Non-GAAP operating margin (1) 32 % 29 % 25 % Net income$ 497.0 $ 1,208.2 $ 214.5 Stock-based compensation expense 558.5 399.8 362.4 Amortization of developed technologies 51.2 30.9 34.5 Amortization of purchased intangibles 40.4 37.5 38.9 Acquisition-related costs 26.0 14.6 23.3 Lease-related asset impairments and other charges 103.7 - - 57
--------------------------------------------------------------------------------
Table of Contents
Fiscal Year Ended January 31,
2022 2021 2020
(Unaudited)
Restructuring and other exit costs, net - - 0.5
(Gain) loss on strategic investments (4.0) 41.7 3.2
Release of valuation allowance on deferred tax assets - (679.0) (40.4)
Discrete tax benefit provision items (72.3) (43.9) 2.1
Income tax effect of non-GAAP adjustments (74.4) (110.0) (17.8)
Non-GAAP net income $ 1,126.1 $ 899.8 $ 621.2
Diluted net income per share $ 2.24 $ 5.44 $ 0.96
Stock-based compensation expense 2.52 1.80 1.63
Amortization of developed technologies 0.23 0.14 0.16
Amortization of purchased intangibles 0.18 0.17 0.17
Acquisition-related costs 0.12 0.07 0.11
Lease-related asset impairments and other charges 0.47 - -
(Gain) loss on strategic investments (0.02) 0.19 0.01
Release of valuation allowance on deferred tax assets - (3.06) (0.18)
Discrete tax (benefit) provision items (0.33) (0.20) 0.01
Income tax effect of non-GAAP adjustments (0.34) (0.50) (0.08)
Non-GAAP diluted net income per share $ 5.07 $ 4.05 $ 2.79 _______________
(1)Totals may not sum due to rounding.
Our non-GAAP financial measures may exclude the following:
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 technology 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 both 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 is an indication that the asset has been 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. 58
--------------------------------------------------------------------------------
Table of Contents
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. Lease-related asset impairments and other charges. These charges are associated with the optimization of our facilities costs related to leases for facilities that we have recently vacated as a result of our one-time move to a more hybrid remote workforce. In connection with these facility leases, we recognize costs related to the impairment or abandonment of operating lease right-of-use assets, computer equipment, furniture, and leasehold improvements, and other costs. 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 depend 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. 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, 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 they 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.
59--------------------------------------------------------------------------------
Table of Contents
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$1.5 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 . AtJanuary 31, 2022 , Autodesk had no outstanding borrowings under the Credit Agreement. Additionally, as ofMarch 14, 2022 , we have no amounts outstanding under the Credit Agreement. See Part II, Item 8, Note 8, "Borrowing Arrangements," in the Notes to 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 may not be able to draw on our revolving credit facility. As ofJanuary 31, 2022 , we had$2.65 billion aggregate principal amount of notes outstanding. See Part II, Item 8, Note 8, "Borrowing Arrangements," in the Notes to Consolidated Financial Statements for further discussion. 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$1.5 billion revolving credit facility. Our cash, cash equivalents, and marketable securities balances are concentrated in a few locations around the world, with substantial amounts held outside ofthe United States . As ofJanuary 31, 2022 , approximately 66% of our total cash or cash equivalents and marketable securities 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 I, 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 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 from the date of this Annual Report. 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 II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk" for further discussion. Fiscal year ended January 31, (in millions) 2022 2021
2020
Net cash provided by operating activities
$ 1,415.1 Net cash used in investing activities (1,594.6) (403.9)
(57.3)
Net cash used in financing activities (168.6) (1,046.8)
(466.8)
Net cash provided by operating activities of$1,531.3 million for fiscal 2022, primarily consisted of$497.0 million of our net income adjusted for$817.0 million non-cash items such as stock-based compensation expense, depreciation, amortization, and accretion expense, lease-related asset impairment charges, and deferred income tax. The increase in cash provided by working capital was primarily due to a net increase in deferred revenue of$419.4 million driven by an increase in product subscriptions and EBA offerings and a decrease in maintenance subscriptions offset in part by an increase in prepaid expenses and other assets of$133.5 million primarily due to the timing of payments for operating expenses. 60
--------------------------------------------------------------------------------
Table of Contents
Net cash provided by operating activities of$1,437.2 million for fiscal 2021, primarily consisted of$1,208.2 million of our net income adjusted for$217.6 million non-cash items such as deferred income tax including the release of our deferred tax valuation allowance, stock-based compensation expense, and depreciation, amortization, and accretion expense. The increase in cash provided by working capital was primarily due to: a net increase in deferred revenue of$344.4 million driven by an increase in product subscriptions and EBA offerings and a decrease in maintenance subscriptions; and an increase in accounts payable and other liabilities of$129.6 million primarily due to the timing of payments for operating expenses and accruals for employee related costs. Net cash used in investing activities was$1,594.6 million for fiscal 2022 and was primarily due to business combinations, net of cash acquired, and purchases of marketable securities. Net cash used in investing activities was$403.9 million for fiscal 2021 and was primarily due to business combinations, net of cash acquired, capital expenditures, purchases of strategic investments, and purchases of marketable securities. These cash outflows were partially offset by maturities of marketable securities. Net cash used in financing activities was$168.6 million in fiscal 2022 and was primarily due to repurchases of our common stock offset by proceeds from the issuance of debt and common stock.
Net cash used in financing activities was
61
--------------------------------------------------------------------------------
Table of Contents CONTRACTUAL OBLIGATIONS The following table summarizes our significant financial contractual obligations atJanuary 31, 2022 , and the effect such obligations are expected to have on our liquidity and cash flows in future periods. Fiscal year Fiscal years Fiscal years (in millions) Total 2023 2024-2025 2026-2027 Thereafter Management Comments Notes payable$ 3,150.0 $ 430.0 $ 137.8 $ 416.4 $ 2,165.8 Notes payable consist of the notes issued in December 2012, June 2015, June 2017, January 2020, and October 2021 including interest. See Part II, Item 8, Note 8, "Borrowing Arrangements," in the Notes to Consolidated Financial Statements for further discussion. Operating leases 467.4 95.8 153.5 94.0 124.1 Operating lease obligations consist primarily of obligations for real estate, vehicles, and certain equipment. See Part II, Item 8, Note 9, "Leases," in the Notes to Consolidated Financial Statements for further discussion. Purchase obligations 317.6 109.4 195.5 9.2 3.5 Purchase obligations are contractual obligations for purchase of goods or services and are defined as agreements that are enforceable and legally binding to Autodesk and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations relate primarily to acquisition of cloud services, marketing, and commitments related to our investment agreements with limited liability partnership funds. Deferred compensation 89.5 7.1 15.6 14.1 52.7 Deferred compensation obligations obligations relate to amounts held in a rabbi trust under our non-qualified deferred compensation plan. See Part II, Item 8, Note 7, "Deferred Compensation," in our Notes to Consolidated Financial Statements for further information regarding this plan. Pension obligations 35.2 2.9 5.8 6.6 19.9 Pension obligations relate to our obligations for pension plans outside of the United States. See Part II, Item 8, Note 15, "Retirement Benefit Plans," in our Notes to Consolidated Financial Statements for further information regarding these obligations. Asset retirement 12.0 4.3 4.0 0.8 2.9 Asset retirement obligations obligations represent the estimated costs to bring certain office buildings that we lease back to their original condition after the termination of the lease. Total (1)$ 4,071.7 $ 649.5 $ 512.2 $ 541.1 $ 2,368.9 ____________________ (1)This table generally excludes amounts already recorded on the balance sheet as current liabilities, certain purchase obligations as discussed below, long term deferred revenue, and amounts related to income tax accruals for uncertain tax positions, since we cannot predict with reasonable reliability the timing of cash settlements to the respective taxing authorities (see Part II, Item 8, Note 5, "Income Taxes" in the Notes to Consolidated Financial Statements). Purchase orders or contracts for the purchase of supplies and other goods and services are not included in the table above. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current procurement or development needs and are fulfilled by our vendors within short time horizons. We do not have significant agreements for the purchase of supplies or other goods specifying minimum quantities or set prices that exceed our expected requirements for three months. In addition, we have certain software royalty commitments associated with the shipment and licensing of certain products. The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services or changes to agreed-upon amounts for some obligations. 62
--------------------------------------------------------------------------------
Table of Contents
We provide indemnifications of varying scopes and certain guarantees, including limited product warranties. Historically, costs related to these warranties and indemnifications have not been significant, but because potential future costs are highly variable, we are unable to estimate the maximum potential impact of these guarantees on our future results of operations.
ISSUER PURCHASES OF EQUITY SECURITIES
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. During the three and 12 months endedJanuary 31, 2022 , we repurchased 2.3 million and 4.0 million shares of our common stock, respectively. AtJanuary 31, 2022 , 8.1 million shares remained available for repurchase under the repurchase program approved by the Board of Directors. This program does not have a fixed expiration date. See Part II, Item 8, Note 11, "Stock Repurchase Program," in the Notes to Consolidated Financial Statements for further discussion. 63
--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
