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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission File Number: 0-14338
 
AUTODESK, INC.
(Exact name of registrant as specified in its charter)
Delaware94-2819853
(State or other jurisdiction of
incorporation or organization)
(I.R.S. employer
Identification No.)
111 McInnis Parkway,
San Rafael, California94903
(Address of principal executive offices)(Zip Code)
(415507-5000
(Registrant’s telephone number, including area code)

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

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

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

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



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

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

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

As of May 31, 2021, registrant had outstanding 220,013,315 shares of common stock.



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




PART I. FINANCIAL INFORMATION
 
ITEM 1.FINANCIAL STATEMENTS

AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 
 Three Months Ended April 30,
 20212020
Net revenue:
Subscription$947.5 $803.0 
Maintenance 19.1 62.1 
Total subscription and maintenance revenue
966.6 865.1 
Other22.7 20.6 
Total net revenue989.3 885.7 
Cost of revenue:
Cost of subscription and maintenance revenue68.5 57.4 
Cost of other revenue14.1 17.1 
Amortization of developed technologies10.2 7.4 
Total cost of revenue92.8 81.9 
Gross profit896.5 803.8 
Operating expenses:
Marketing and sales377.1 341.3 
Research and development265.5 217.4 
General and administrative111.9 104.8 
Amortization of purchased intangibles 8.2 9.7 
Total operating expenses762.7 673.2 
Income from operations133.8 130.6 
Interest and other expense, net(2.4)(40.1)
Income before income taxes131.4 90.5 
Benefit (provision) for income taxes24.2 (24.0)
Net income $155.6 $66.5 
Basic net income per share$0.71 $0.30 
Diluted net income per share$0.70 $0.30 
Weighted average shares used in computing basic net income per share219.6 219.2 
Weighted average shares used in computing diluted net income per share222.0 221.3 

See accompanying Notes to Condensed Consolidated Financial Statements.

4


AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
Three Months Ended April 30,
20212020
Net income $155.6 $66.5 
Other comprehensive (loss) income, net of reclassifications:
Net gain on derivative instruments (net of tax effect of $(1.7) and $(0.4), respectively)
10.0 4.0 
Change in net unrealized gain on available-for-sale debt securities (net of tax effect of zero and $0.1, respectively)
4.0 0.4 
Change in defined benefit pension items (net of tax effect of zero and zero, respectively)
0.1 (0.3)
Net change in cumulative foreign currency translation gain (loss) (net of tax effect of $(1.8) and zero, respectively)
10.1 (22.9)
Total other comprehensive income (loss)24.2 (18.8)
Total comprehensive income $179.8 $47.7 

See accompanying Notes to Condensed Consolidated Financial Statements.

5


AUTODESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
April 30, 2021January 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$923.2 $1,772.2 
Marketable securities 4.0 
Accounts receivable, net326.1 643.1 
Prepaid expenses and other current assets256.1 206.2 
Total current assets1,505.4 2,625.5 
Computer equipment, software, furniture and leasehold improvements, net197.3 192.8 
Operating lease right-of-use assets401.5 416.7 
Developed technologies, net173.9 88.6 
Goodwill3,484.0 2,706.5 
Deferred income taxes, net743.7 763.1 
Long-term other assets792.5 486.6 
Total assets$7,298.3 $7,279.8 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$124.0 $122.5 
Accrued compensation202.8 322.6 
Accrued income taxes47.8 42.6 
Deferred revenue2,540.7 2,500.9 
Operating lease liabilities76.0 71.4 
Other accrued liabilities138.8 194.7 
Total current liabilities3,130.1 3,254.7 
Long-term deferred revenue804.3 859.3 
Long-term operating lease liabilities377.3 396.0 
Long-term income taxes payable19.7 15.9 
Long-term deferred income taxes 55.4 11.4 
Long-term notes payable, net1,637.9 1,637.2 
Long-term other liabilities145.2 139.8 
Stockholders’ equity:
Common stock and additional paid-in capital2,639.4 2,578.9 
Accumulated other comprehensive loss(101.7)(125.9)
Accumulated deficit(1,409.3)(1,487.5)
Total stockholders’ equity 1,128.4 965.5 
Total liabilities and stockholders' equity $7,298.3 $7,279.8 

See accompanying Notes to Condensed Consolidated Financial Statements.

6


AUTODESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 Three Months Ended April 30,
 20212020
Operating activities:
Net income $155.6 $66.5 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion33.0 30.0 
Stock-based compensation expense115.8 98.2 
Deferred income taxes18.8 3.5 
Other18.6 32.7 
Changes in operating assets and liabilities, net of business combinations:
Accounts receivable324.4 295.5 
Prepaid expenses and other assets (125.6)(47.5)
Accounts payable and other liabilities (182.2)(154.6)
Deferred revenue(27.5)(1.1)
Accrued income taxes5.2 4.1 
Net cash provided by operating activities
336.1 327.3 
Investing activities:
Purchases of marketable securities (11.0)
Sales and maturities of marketable securities4.0  
Capital expenditures(20.3)(19.9)
Purchases of developed technologies(0.9)(3.6)
Business combinations, net of cash acquired(1,031.6) 
Other investing activities8.4 (43.5)
Net cash used in investing activities
(1,040.4)(78.0)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs64.2 56.8 
Taxes paid related to net share settlement of equity awards (54.9)(32.5)
Repurchases of common stock(151.4)(202.0)
Repayment of debt (450.0)
Other financing activities (2.5)
Net cash used in financing activities
(142.1)(630.2)
Effect of exchange rate changes on cash and cash equivalents(2.6)(4.1)
Net decrease in cash and cash equivalents(849.0)(385.0)
Cash and cash equivalents at beginning of period1,772.2 1,774.7 
Cash and cash equivalents at end of period$923.2 $1,389.7 
Supplemental cash flow disclosure:
Non-cash financing activities:
Fair value of common stock issued to settle liability-classified restricted stock units$ $28.7 
Fair value of common stock issued related to business combination (See Note 8)$2.6 $ 

See accompanying Notes to Condensed Consolidated Financial Statements.
7


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

The accompanying unaudited Condensed Consolidated Financial Statements of Autodesk, Inc. (“Autodesk,” “we,” “us,” “our,” or the “Company”) as of April 30, 2021, and for the three months ended April 30, 2021 and 2020, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information along with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In management’s opinion, Autodesk made all adjustments (consisting of normal, recurring and non-recurring adjustments) during the quarter that were considered necessary for the fair statement of the financial position and operating results of the Company. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. In March 2020, the World Health Organization declared the outbreak of a disease caused by a novel strain of the coronavirus (COVID-19) to be a pandemic. This pandemic has created and may continue to create significant uncertainty in the macroeconomic environment which, in addition to other unforeseen effects of this pandemic, may adversely impact our results of operations. As the COVID-19 pandemic continues to develop, many of our estimates could require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve our estimates may change materially in future periods. In addition, the results of operations for the three months ended April 30, 2021, are not necessarily indicative of the results for the entire fiscal year ending January 31, 2022, or for any other period. Further, the balance sheet as of January 31, 2021, has been derived from the audited Consolidated Balance Sheet as of this date. There have been no material changes, other than what is discussed herein, to Autodesk's significant accounting policies as compared to the significant accounting policies disclosed in the Annual Report on Form 10-K for the fiscal year ended January 31, 2021. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes, together with management’s discussion and analysis of financial position and results of operations, contained in Autodesk’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed on March 19, 2021.

Change in presentation and immaterial correction of an error

During the quarter ended April 30, 2021, the Company changed its presentation on the Condensed Consolidated Balance Sheets for investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans, including correcting the classification as current and non-current assets. These amounts were previously presented as current "Marketable securities" and are now presented as “Prepaid expenses and other current assets” and “Long-term other assets” on the Condensed Consolidated Balance Sheets. Accordingly, prior period amounts have been reclassified to conform to the current period presentation. These presentation and classification changes did not impact “Total assets” on the Condensed Consolidated Balance Sheets and had no impact on the Company's Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statement of Cash Flows.

The effects of the changes on the Consolidated Balance Sheets as of January 31, 2021, were as follows:
 As Reported January 31, 2021Effect of Changes in Presentation As Adjusted January 31, 2021
Marketable securities$85.0 $(81.0)$4.0 
Prepaid and other current assets198.9 7.3 206.2 
Long-term other assets412.9 73.7 486.6 
Total current assets2,699.2 (73.7)2,625.5 
Total assets7,279.8 $ 7,279.8 

2. Recently Issued Accounting Standards

With the exception of those discussed below, there have been no recent changes in accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) or adopted by the Company during the three months ended April 30, 2021, that are applicable to the Company.

8


Recently issued accounting standards not yet adopted

In March 2020, FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU No. 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020, through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. Autodesk will apply the expedients in ASU No. 2020-04 through December 31, 2022. Autodesk does not believe ASU No. 2020-04 will have a material impact on its consolidated financial statements.

3. Revenue Recognition

Revenue Disaggregation

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

9


Information regarding the components of Autodesk's net revenue from contracts with customers by product family, geographic location, sales channel, and product type is as follows: 
 Three Months Ended April 30,
20212020
Net revenue by product family:
Architecture, Engineering and Construction $442.6 $382.7 
AutoCAD and AutoCAD LT285.1 262.2 
Manufacturing197.3 182.9 
Media and Entertainment55.0 52.6 
Other 9.3 5.3 
Total net revenue$989.3 $885.7 
Net revenue by geographic area:
Americas
U.S.$324.0 $300.6 
Other Americas67.7 61.6 
Total Americas391.7 362.2 
Europe, Middle East and Africa382.5 344.8 
Asia Pacific215.1 178.7 
Total net revenue$989.3 $885.7 
Net revenue by sales channel:
Indirect$661.3 $623.4 
Direct328.0 262.3 
Total net revenue$989.3 $885.7 
Net revenue by product type:
Design$885.1 $797.7 
Make81.5 67.4 
Other22.7 20.6 
Total net revenue$989.3 $885.7 

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

Remaining performance obligations consist of total short-term, long-term, and unbilled deferred revenue. As of April 30, 2021, Autodesk had remaining performance obligations of $4.23 billion, which represents the total contract price allocated to remaining performance obligations, which are generally recognized over the next three years. We expect to recognize $2.86 billion or 68% of our remaining performance obligations as revenue during the next 12 months. We expect to recognize the remaining $1.37 billion or 32% of our remaining performance obligations as revenue thereafter.

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

Contract Balances

We receive payments from customers based on a billing schedule as established in our contracts. Contract assets relate to performance completed in advance of scheduled billings. Contract assets were not material as of April 30, 2021. Deferred
10


revenue relates to billings in advance of performance under the contract. The primary changes in our contract assets and deferred revenues are due to our performance under the contracts and billings.

Revenue recognized during the three months ended April 30, 2021 and 2020, that was included in the deferred revenue balances at January 31, 2021 and 2020, was $838.2 million and $787.2 million, respectively. The satisfaction of performance obligations typically lags behind payments received under revenue contracts from customers.

4. Concentration of Credit Risk
    
Autodesk places its cash, cash equivalents, and marketable securities in highly liquid instruments with, and in the custody of, multiple diversified financial institutions globally with high credit ratings, and limits the amounts invested with any one institution, type of security, and issuer. Autodesk’s primary commercial banking relationship is with Citigroup Inc. and its global affiliates. Citibank, N.A., an affiliate of Citigroup, is one of the lead lenders and an agent in the syndicate of Autodesk’s $650.0 million line of credit facility. See Note 14, “Borrowing Arrangements,” in the Notes to Condensed Consolidated Financial Statements for further discussion.

Total sales to the Company's largest distributor Tech Data Corporation and its global affiliates (“Tech Data”) accounted for 36% and 38% of Autodesk’s total net revenue for the three months ended April 30, 2021 and 2020, respectively. The majority of the net revenue from sales to Tech Data is for sales made outside of the United States. In addition, Tech Data accounted for 36% and 26% of trade accounts receivable at April 30, 2021, and January 31, 2021, respectively. Ingram Micro Inc. ("Ingram Micro") accounted for 10% of Autodesk's total net revenue during both the three months ended April 30, 2021 and 2020. No other customer accounted for more than 10% of Autodesk's total net revenue or trade accounts receivable for each of the respective periods.

11


5. Financial Instruments

The following tables summarize the Company's financial instruments' amortized cost, gross unrealized gains, gross unrealized losses, and fair value by significant investment category as of April 30, 2021, and January 31, 2021:
 
April 30, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueLevel 1Level 2Level 3
Cash equivalents (1):
Money market funds$174.5 $— $— $174.5 $174.5 $ $ 
Other (2)1.5 — — 1.5 1.0 0.5  
Mutual funds (3) (4)70.0 21.2  91.2 91.2   
Strategic investments derivative assets (4)0.1 0.4 (0.3)0.2   0.2 
Derivative contract assets (4)0.4 9.4 (0.2)9.6  9.6  
Derivative contract liabilities (5)  (10.7)(10.7) (10.7) 
Total$246.5 $31.0 $(11.2)$266.3 $266.7 $(0.6)$0.2 
____________________ 
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits and certificates of deposit.
(3)See Note 12, “Deferred Compensation “for more information.
(4)Included in “Prepaid expenses and other current assets” or “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.
(5)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.
January 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueLevel 1Level 2Level 3
Cash equivalents (1):
Commercial paper$36.0 $— $— $36.0 $ $36.0 $ 
Money market funds 686.9 — — 686.9 686.9   
Other (2)4.4 — — 4.4 4.0 0.4  
Marketable securities:
Other (3)4.0   4.0  4.0  
Mutual funds (4) (5)64.5 16.5  81.0 81.0   
Strategic investments derivative asset (5)0.1 0.4 (0.3)0.2   0.2 
Derivative contract assets (5)0.4 9.8 (0.4)9.8  9.8  
Derivative contract liabilities (6)  (17.5)(17.5) (17.5) 
Total$796.3 $26.7 $(18.2)$804.8 $771.9 $32.7 $0.2 
____________________ 
(1)Included in “Cash and cash equivalents” in the accompanying Condensed Consolidated Balance Sheets. These investments are classified as debt securities.
(2)Consists of custody cash deposits and certificates of deposit.
(3)Consists of commercial paper and municipal bonds.
(4)See Note 12, “Deferred Compensation “ for more information.
(5)Included in “Prepaid expenses and other current assets,” or “Long-term other assets,” in the accompanying Condensed Consolidated Balance Sheets.
(6)Included in “Other accrued liabilities” in the accompanying Condensed Consolidated Balance Sheets.

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

12


As of both April 30, 2021, and January 31, 2021, Autodesk had no material unrealized losses, individually and in the aggregate, for marketable debt securities that are in a continuous unrealized loss position for greater than 12 months. Total unrealized gains for securities with net gains in accumulated other comprehensive income were not material for the three months ended April 30, 2021.

Autodesk monitors all marketable debt securities for potential credit losses by reviewing indicators such as, but not limited to, current credit rating, change in credit rating, credit outlook, and default risk. There were no allowances for credit losses for the three months ended April 30, 2021 and 2020. There were no write offs of accrued interest receivables for the three months ended April 30, 2021 and 2020.

There was no realized gain or loss for the sales or redemptions of debt securities during the three months ended April 30, 2021 and 2020. Gains and losses resulting from the sale or redemption of debt securities are recorded in “Interest and other expense, net” on the Company's Condensed Consolidated Statements of Operations.

There was $4.0 million in proceeds from the sale and maturity of marketable debt securities for the three months ended April 30, 2021. Autodesk did not have any proceeds from the sale and maturity of marketable securities for the three months ended April 30, 2020.

Strategic investment equity securities

As of April 30, 2021, and January 31, 2021, Autodesk had $129.8 million and $134.1 million, respectively, in direct investments in privately held companies. These strategic investment equity securities do not have readily determined fair values, and Autodesk uses the measurement alternative to account for the adjustment to these investments in a given quarter. If Autodesk determines that an impairment has occurred, Autodesk writes down the investment to its fair value.

Adjustments to the carrying value of our strategic investment equity securities with no readily determined fair values measured using the measurement alternative were as follows:
 Three Months Ended April 30,Cumulative Amount as of
20212020April 30, 2021
Upward adjustments (1)$0.7 $3.0 $16.7 
Negative adjustments, including impairments (1)(3.7)(19.1)(64.3)
Net adjustments$(3.0)$(16.1)$(47.6)
____________________ 
(1)Included in “Interest and other expense, net” on the Company's Condensed Consolidated Statements of Operations.

During the three months ended April 30, 2021, Autodesk recognized gains of $8.1 million on the disposition of strategic investment equity securities.

Foreign currency contracts designated as cash flow hedges

Autodesk uses foreign currency contracts to reduce the exchange rate impact on a portion of the net revenue or operating expense of certain anticipated transactions. These currency collars and forward contracts are designated and documented as cash flow hedges. The notional amounts of these contracts are presented net settled and were $1.18 billion at April 30, 2021, and $1.14 billion at January 31, 2021. Outstanding contracts are recognized as either assets or liabilities on the Company's Condensed Consolidated Balance Sheet at fair value. The majority of the net loss of $14.1 million remaining in “Accumulated other comprehensive loss” as of April 30, 2021, is expected to be recognized into earnings within the next 24 months.

13


The location and amount of gain or loss recognized in income on cash flow hedges together with the total amount of income or expense presented in the Company's Condensed Consolidated Statements of Operations where the effects of the hedge are recorded were as follows for the three months ended April 30, 2021 and 2020:

Three Months Ended April 30, 2021
Net revenueCost of revenueOperating expenses
Subscription revenueMaintenance revenueCost of subscription and maintenance revenueMarketing and salesResearch and developmentGeneral and administrative
Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded
$947.5$19.1$68.5$377.1$265.5$111.9
Gain on cash flow hedging relationships in Subtopic ASC 815-20
Foreign exchange contracts
Amount of (loss) gain reclassified from accumulated other comprehensive income into income$(4.9)$(0.6)$0.3$0.8$$0.5
Three Months Ended April 30, 2020
Net RevenueCost of revenueOperating expenses
Subscription RevenueMaintenance RevenueCost of subscription and maintenance revenueMarketing and salesResearch and developmentGeneral and administrative
Total amounts of income and expense line items presented in the condensed consolidated statements of operations in which the effects of cash flow hedges are recorded
$803.0$62.1$57.4$341.3$217.4$104.8
Gain (loss) on cash flow hedging relationships in Subtopic ASC 815-20
Foreign exchange contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income into income
$2.1$0.6$(0.2)$(0.8)$(0.1)$(0.4)

Derivatives not designated as hedging instruments

Autodesk uses foreign currency contracts that are not designated as hedging instruments to reduce the exchange rate risk associated primarily with foreign currency denominated receivables, payables, and cash. The notional amounts of these foreign currency contracts are presented net settled and were $112.8 million at April 30, 2021, and $434.5 million at January 31, 2021.

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Fair Value of Derivative Instruments

The fair values of derivative instruments in Autodesk’s Condensed Consolidated Balance Sheets were as follows as of April 30, 2021, and January 31, 2021:
 Balance Sheet LocationFair Value at
April 30, 2021January 31, 2021
Derivative Assets
Foreign currency contracts designated as cash flow hedges
Prepaid expenses and other current assets$6.1 $4.7 
Derivatives not designated as hedging instrumentsPrepaid expenses and other current assets and long-term other assets3.7 5.3 
Total derivative assets$9.8 $10.0 
Derivative Liabilities
Foreign currency contracts designated as cash flow hedges
Other accrued liabilities$6.3 $16.5 
Derivatives not designated as hedging instrumentsOther accrued liabilities4.4 1.0 
Total derivative liabilities$10.7 $17.5 

The effects of derivatives designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three months ended April 30, 2021 and 2020 (amounts presented include any income tax effects):
 Foreign Currency Contracts
Three Months Ended April 30,
20212020
Amount of gain recognized in accumulated other comprehensive loss on derivatives (effective portion)
$6.1 $5.1 
Amount and location of (loss) gain reclassified from accumulated other comprehensive loss into income (effective portion)
Net revenue$(5.5)$2.7 
Cost of revenue0.3 (0.2)
Operating expenses1.3 (1.3)
Total$(3.9)$1.2 

The effects of derivatives not designated as hedging instruments on Autodesk’s Condensed Consolidated Statements of Operations were as follows for the three months ended April 30, 2021 and 2020 (amounts presented include any income tax effects):
 Three Months Ended April 30,
20212020
Amount and location of gain (loss) recognized on derivatives in net income
Interest and other expense, net$6.9 $(1.0)

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6. Equity Compensation

Restricted Stock Units:

A summary of restricted stock activity for the three months ended April 30, 2021, is as follows:
Unvested
restricted
stock units
Weighted
average grant
date fair value
per share
 (in thousands) 
Unvested restricted stock units at January 31, 20214,503.9 $191.91 
Granted1,582.8 292.20 
Vested(558.4)161.69 
Canceled/Forfeited(112.6)198.93 
        Performance Adjustment (1)(7.9)137.02 
Unvested restricted stock units at April 30, 20215,407.8 $226.12 
 _______________
(1)Based on Autodesk's financial results and relative total stockholder return for the fiscal 2021 performance period. The performance stock units were attained at rates ranging from 103.0% to 108.0% of the target award.

The fair value of the shares vested during the three months ended April 30, 2021 and 2020, was $148.8 million and $111.4 million, respectively.

During the three months ended April 30, 2021, Autodesk granted 1.3 million restricted stock units. Autodesk recorded stock-based compensation expense related to restricted stock units of $89.6 million and $76.9 million during the three months ended April 30, 2021 and 2020, respectively.

During the three months ended April 30, 2021 and 2020, Autodesk settled liability-classified awards in the amount of zero and $28.7 million, respectively. The ultimate number of shares earned was based on the Autodesk closing stock price on the vesting date. As these awards were settled in a fixed dollar amount of shares, the awards were accounted for as a liability-classified award and were expensed using the straight-line method over the vesting period.

During the three months ended April 30, 2021, Autodesk granted 0.2 million performance stock units for which the ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units vested during the three months ended April 30, 2021, are based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee and, as applicable, total stockholder return compared against companies in the S&P North American Technology Software Index with a market capitalization over $2.0 billion (“Relative TSR”). The fair value of the performance stock units is expensed using the accelerated attribution method over the three-year vesting period and have the following vesting schedule:

Up to one third of the performance stock units may vest following year one, depending upon the achievement of the performance criteria for fiscal 2022 as well as 1-year Relative TSR (covering year one).

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

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

Additionally, during the three months ended April 30, 2021, Autodesk granted 96,564 performance stock units, as part of a program offering certain employees the option to receive equity in lieu of the opportunity to receive an annual cash incentive award. The ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units are based on revenue and Non-GAAP income from operations targets adopted by the Compensation and Human Resource Committee. The fair value of these performance stock units is expensed using the accelerated attribution method over the one-year vesting period.

Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights.
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Autodesk recorded stock-based compensation expense related to performance stock units of $11.8 million and $7.4 million for the three months ended April 30, 2021 and 2020, respectively.

Common Stock:

Autodesk agreed to issue a fixed amount of $4.9 million in common stock at a future date to certain employees in connection with a fiscal 2021 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the fair value of Autodesk’s common stock at the issuance date. Shares to be issued are estimated to be 16,786 based on the closing price of Autodesk’s common stock on April 30, 2021, the last trading day of the fiscal quarter. The awards are accounted for as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period.

Autodesk issued 73,632 shares of restricted common stock to certain employees in connection with a fiscal 2021 acquisition. These shares of restricted common stock are subject to forfeiture by the employee if employment terminates prior to the three-year employment period. The fair value of the restricted common stock is recorded as compensation for post-acquisition services and recognized as expense using the straight-line method over the three-year repurchase period.

Autodesk issued 9,277 shares of restricted common stock to certain employees in connection with a fiscal 2022 acquisition. These shares of restricted common stock were recorded as “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets and will be amortized to stock-based compensation expense for post-acquisition services using the straight-line method over the two-year vesting period. See Note 8, “Acquisitions,” for further discussion.

Autodesk recorded stock-based compensation expense related to common stock shares of $2.6 million and zero for the three months ended April 30, 2021 and 2020, respectively.

1998 Employee Qualified Stock Purchase Plan (“ESPP”)

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

A summary of the ESPP activity for the three months ended April 30, 2021 and 2020, is as follows:
Three Months Ended April 30,
20212020
Issued shares (in millions)0.5 0.5 
Average price of issued shares$128.02 $122.54 
Weighted average grant date fair value of shares granted under the ESPP (1)$91.17 $45.70 
 _______________
(1)Calculated as of the award grant date using the Black-Scholes Merton (“BSM”) option pricing model.

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Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three months ended April 30, 2021 and 2020, respectively, as follows:
Three Months Ended April 30,
20212020
Cost of subscription and maintenance revenue$5.3 $3.7 
Cost of other revenue1.8 1.5 
Marketing and sales48.3 40.7 
Research and development46.7 32.9 
General and administrative13.7 19.4 
Stock-based compensation expense related to stock awards and ESPP purchases
115.8 98.2 
Tax benefit(16.0)(0.1)
Stock-based compensation expense related to stock awards and ESPP purchases, net of tax
$99.8 $98.1 
 
Stock-based Compensation Expense Assumptions

Autodesk determines the grant date fair value of its share-based payment awards using a BSM option pricing model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case Autodesk uses a binomial-lattice model (e.g., Monte Carlo simulation model). The Monte Carlo simulation model uses multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:
 Three Months Ended April 30, 2021Three Months Ended April 30, 2020
 Performance Stock UnitsESPPPerformance Stock UnitsESPP
Range of expected volatility36.9%
36.5 - 41.8%
50.7%
39.4 - 45.8%
Range of expected lives (in years)N/A
0.5- 2.0
N/A
0.5 - 2.0
Expected dividends%%%%
Range of risk-free interest rates0.1%
0.1- 0.2%
0.3%
0.3 - 0.5%

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

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

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

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

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

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7. Income Tax

 Autodesk had income tax benefit of $24.2 million, relative to pre-tax income of $131.4 million for the three months ended April 30, 2021, and income tax expense of $24.0 million, relative to pre-tax income of $90.5 million for the three months ended April 30, 2020. Income tax benefit for the three months ended April 30, 2021, reflects a decrease in tax expense due to a discrete tax benefit primarily related to a Supreme Court decision in India 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 relative to the worldwide annual effective tax rate.

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

As of April 30, 2021, the Company had $200.5 million of gross unrecognized tax benefits, of which $32.1 million would reduce our valuation allowance, if recognized. The remaining $168.4 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 $8.2 million.

8. Acquisitions

On March 31, 2021, Autodesk acquired all of the outstanding stock of Storm UK Holdco Limited, the parent of Innovyze, Inc. (“Innovyze”), a global leader in water infrastructure software. Innovyze is expected to provide comprehensive water modeling solutions that augment Autodesk’s BIM offerings in civil engineering, and is expected to extend Autodesk’s presence into operations and maintenance of water infrastructure assets.

The results of operations for the acquisition were included in the accompanying Condensed Consolidated Statement of Operations from the date of the acquisition. Pro forma results of operations have not been presented because the effects of the acquisition were not material to Autodesk's Condensed Consolidated Financial Statements.

The acquisition-date fair value of the consideration transferred totaled $1,040.9 million, which consisted of $1,038.3 million of cash and 9,277 shares of Autodesk’s restricted common stock at an aggregate fair value of $2.6 million. Of the total consideration transferred, $1,038.3 million is considered purchase consideration. The remaining amount of $2.6 million was recorded in “Prepaid expenses and other current assets” and “Long-term other assets”. The 9,277 shares of restricted common stock are subject to forfeiture until the second anniversary of the acquisition closing date. 50% are released from restriction on both the first and second anniversaries subject to continued employment. See Note 6, “Equity Compensation” for further discussion.

The acquisition was accounted for as business combination, and Autodesk recorded the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair values assigned to the identifiable intangible assets acquired were based on estimates and assumptions determined by management. Autodesk recorded the excess of consideration transferred over the aggregate fair values as goodwill. The goodwill recorded was primarily attributable to synergies expected to arise after the acquisition. Goodwill of $376.2 million is deductible for U.S. income tax purposes. The transaction costs related to the acquisition were not material.

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The following table summarizes the fair value of the assets acquired and liabilities assumed by major class for the business combination that was completed during the three months ended April 30, 2021:

Aggregate Total
Developed technologies$93.0 
Customer relationships 221.0 
Trade name4.0 
Backlog0.5 
Goodwill767.2 
Deferred revenue and long-term deferred revenue(12.3)
Long-term deferred income taxes(42.4)
Net tangible assets7.3 
Total
$1,038.3 
For the business combination, the allocation of purchase price consideration to certain assets and liabilities as well as the final amount of purchase consideration are not yet finalized. For the items not yet finalized, Autodesk's estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized are amounts for tax assets and liabilities, deferred revenue, and residual goodwill.

9. Other Intangible Assets, Net

Other intangible assets, including developed technologies, customer relationships, trade names, patents, user lists, and the related accumulated amortization, were as follows:
April 30, 2021January 31, 2021
Developed technologies, at cost$794.1 $698.4 
Customer relationships, trade names, patents, and user lists, at cost (1)775.5 548.8 
Other intangible assets, at cost (2)1,569.6 1,247.2 
Less: Accumulated amortization(1,066.5)(1,047.9)
Other intangible assets, net$503.1 $199.3 
_______________ 
(1)Included in “Long-term other assets” in the accompanying Condensed Consolidated Balance Sheets.
(2)Includes the effects of foreign currency translation.

10. Cloud Computing Arrangements

Autodesk enters into certain cloud-based software hosting arrangements that are accounted for as service contracts. Costs incurred for these arrangements are capitalized for application development activities, if material, and immediately expensed for preliminary project activities and post-implementation activities. Autodesk amortizes the capitalized development costs straight-line over the fixed, non-cancellable term of the associated hosting arrangement plus any reasonably certain renewal periods. The capitalized costs are included in “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets. Capitalized costs were $87.7 million and $72.2 million at April 30, 2021, and January 31, 2021, respectively. Accumulated amortization was $6.3 million and $4.9 million at April 30, 2021, and January 31, 2021, respectively. Amortization expense for the three months ended April 30, 2021 and 2020, was $1.4 million and $0.9 million, respectively.

20


11. Goodwill

Goodwill consists of the excess of the consideration transferred over the fair value of net assets acquired in business combinations. The following table summarizes the changes in the carrying amount of goodwill for the three months ended April 30, 2021, (in millions):
 
Balance as of January 31, 2021$2,855.7 
Less: accumulated impairment losses as of January 31, 2021(149.2)
Net balance as of January 31, 20212,706.5 
Additions arising from acquisitions during the period767.2 
Effect of foreign currency translation 10.3 
Balance as of April 30, 2021$3,484.0 

Autodesk operates as a single operating segment and single reporting unit. As such, when Autodesk tests goodwill for impairment annually in its fourth fiscal quarter, it is performed on the Company's single reporting unit. Autodesk performs impairment testing more often if circumstances indicate a potential impairment may exist, or if events have affected the composition of reporting units.

When goodwill is assessed for impairment, Autodesk has the option to perform an assessment of qualitative factors of impairment (“optional assessment”) prior to necessitating a quantitative impairment test. Should the optional assessment be used for any given fiscal year, qualitative factors to consider include cost factors; financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market considerations, macroeconomic conditions, and other relevant events and factors affecting the reporting unit. If, after assessing the totality of events or circumstances, it is more likely than not that the fair value of the reporting unit is greater than its carrying value, then performing the quantitative impairment test is unnecessary.

The quantitative impairment test is necessary when either Autodesk does not use the optional assessment or, as a result of the optional assessment, it is not more likely than not that the fair value of the reporting unit is greater than its carrying value. In situations in which an entity’s reporting unit is publicly traded, the fair value of the company may be approximated by its market capitalization in performing the quantitative impairment test.

Goodwill impairment exists when the estimated fair value of goodwill is less than its carrying value. If impairment exists, the carrying value of the goodwill is reduced to fair value through an impairment charge recorded in our Condensed Consolidated Statements of Operations. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis. The value of Autodesk’s goodwill could also be impacted by future adverse changes such as: (i) declines in Autodesk’s actual financial results, (ii) a sustained decline in Autodesk’s market capitalization, (iii) a significant slowdown in the worldwide economy or the industries Autodesk serves, or (iv) changes in Autodesk’s business strategy.

There was