The M&E Collection provides end-to-end creative tools for entertainment creation. This collection enables animators, modelers and visual effect artists to access the tools they need, including Maya and 3ds Max, to create compelling effects, 3D characters and digital worlds.•Inventor
Inventor
Inventor enables manufacturers to go beyond 3D design to digital prototyping by giving engineers a comprehensive and flexible set of tools for 3D mechanical design, simulation, analysis, tooling, visualization, and documentation. Engineers can integrate AutoCAD drawings and model-based design data into a single digital model, creating a virtual representation of a final product that enables them to validate the form, fit, and function of the product before it is ever built.
Maya•Vault
Vault data management software makes it easier to manage data in one central location, accelerate design processes, and streamline internal/external collaboration. Vault integrates with more than 30 Autodesk design applications, provides powerful revisioning and access control capabilities, and enables customers to share product data securely to improve engineering cycle time and reduce manufacturing errors.
Media and Entertainment (“M&E”)
•Media & Entertainment Collection
The M&E Collection provides end-to-end creative tools for entertainment creation. This collection enables animators, modelers, and visual effects artists to access the tools they need, including Maya and 3ds Max, to create compelling effects, 3D characters, and digital worlds.
•Maya
Maya software provides 3D modeling, animation, effects, rendering, and compositing solutions that enable film and video artists, game developers, and design visualization professionals to digitally create engaging, lifelike images, realistic animations and simulations, extraordinary visual effects, and full lengthfull-length animated feature films.
PlanGrid•ShotGrid
PlanGrid cloud-based field collaboration software provides general contractors, subcontractors, owners and architects access to construction information in real-time. With PlanGrid technology, any construction team member can manage and update blueprints, specs, photos, requests for information (RFIs), field reports, punchlists and other critical jobsite data. The data collected within PlanGrid software acts as a digital trail during the building process, allowing for easy turnover to the owner for operations and maintenance after construction is complete. PlanGrid mobile-first technology is accessible on modern desktop, laptop or mobile devices, including native iOS, Android and Windows.
Revit
Revit software is built for Building Information Modeling ("BIM") to help professionals design, build, and maintain higher-quality, more energy-efficient buildings. Using the information-rich models created with Revit, architects, engineers, and construction firms can collaborate to make better-informed decisions earlier in the design process to deliver projects with greater efficiency. Revit includes features for architectural, mechanical, electrical and plumbing design as well as structural engineering and construction, providing a comprehensive solution for the entire building project team.
Shotgun
ShotgunShotGrid is cloud-based software for review and production tracking in the M&E industry. Creative companies use the ShotgunShotGrid platform to provide essential business tools for managers and visual collaboration tools for artists and supervisors, who often work globally with distributed teams.
•3ds Max
3ds Max software provides 3D modeling, animation, and rendering solutions that enable game developers, design visualization professionals, and visual effects artists to digitally create realistic images, animations, and complex scenes and to digitally communicate abstract or complex mechanical, architectural, engineering, and construction concepts.
PRODUCT DEVELOPMENT AND INTRODUCTION
The technology industry is characterized by rapid technological change in computer hardware, operating systems, and software. In addition, our customers’ requirements and preferences rapidly evolve, as do their expectations of the performance of our software and services. To keep pace with these changes, we maintain a vigorous program of new product development to address demands in the marketplace for our products.
The
Autodesk was founded during the platform transition from mainframe computers and engineering workstations to personal computers. We have developed and sustained a compelling value proposition based upon software for the personal computer. Just as the transition from mainframes to personal computers transformed the industry over 30 years ago, the software industry has undergone a transition from developing and selling perpetual licenses and on-premises products to cloud, mobilesubscriptions and social applications. To address this shift, Autodesk made a strategic decision to shift its business model from selling perpetual licenses to selling subscriptions.cloud-enabled technologies. We discontinued the sale of new commercial licenses of most individual software products in 2016. Additionally, in June 2017, we commenced a program to incentivize maintenance plan customers to move to subscription plan offerings, maintenance-to-subscription ("M2S"), while at the same time increasing maintenance plan pricing over time for customers that remain on maintenance plans. Since launching the program, over 794,000 maintenance
plan customers have converted to subscription plan offerings. Autodesk seeks to convert the remaining796,100 maintenance plan customers to subscription through this program. Subscription plan offerings are designed to give our customers increased flexibility with how they use our products and service offerings and to attract a broader range of customers such as project-based users and small businesses. SubscriptionsSubscription plans represent a combined hybrid offering of desktop software and cloud functionality which provides a device-independent, collaborative design workflow for designers and their stakeholders. In order to offer better service to our customers, we are transitioning our existing customers from serial numbers to named users. We
completed the migration of our single-user subscriptions from serial numbers in fiscal 2021 and are transitioning multi-user subscriptions to named users through February 2024.
We dedicate considerable technical and financial resources to research and development to deliver additional automation and insights to our customers through artificial intelligence, machine learning, and generative design, which increase efficiency and sustainability and reduce waste. These investments further enhance our existing products and to create new solutions and technologies towhich connect the workflows and data of our customers across the ecosystem of their projects and expand our market opportunity. For example, in fiscal 2019, we continuedOur tools connect and expandedour investments in construction. We continued to make investments in the traditional data creation tools to support the design and pre-construction phases, while expanding our investment in the areas of site execution with process and project management cloud-based tools. Recognizing the value of data continuity across the construction lifecycle of design, building and operations, we made investments in the pre-construction and site execution phases of the project through our cloud-based tools. To connectautomate the phases of construction upstream with design we invested in and announced our cloud-based project delivery platform that allowscreation, enabling greater collaboration and the seamless flow of data for individuals teams and projects to be connectedteams across all phases in a common data platform. We anticipate ongoing investments in construction that support pre-construction, site execution as well as the handover phase of the project and will continue to invest in connecting workflows and data across the ecosystem of the project.phases.
Research and development expenditures were $725.0 million or 28% of fiscal 2019 net revenue, $755.5 million or 37% of fiscal 2018 net revenue and $766.1 million or 38% of fiscal 2017 net revenue. Our software is primarily developed internally; however, we also use independent firms and contractors to perform some of our product development activities. Additionally, we acquire or license products or technologyand technologies developed by others by purchasing or licensing products and technology from third parties. We continually review these investments in an effort to ensure that we are generating sufficient revenue or gaining a competitive advantage to justify their costs.
The majority of our research and product development is performed in the United States, China, Singapore, Canada, and the United Kingdom. However, we employ experienced software developers in many of our other locations. Translation and localization of our products are performed in a number ofseveral local markets, principally Singapore and Ireland. We generally localize and translate our products into German, French, Italian, Spanish, Russian, Japanese, Korean, and simplified and traditional Chinese.
We plan to continue managing significant product development operations internationally over the next several years. We believe that our ability to conduct research and development at various locations throughout the world allows us to optimize product development, lower costs, and integrate local market knowledge into our development activities. We continually assess the significant costs and challenges, including intellectual property protection, against the benefits of our international development activities.
For further discussion regarding risks from our product development and introduction efforts, see Item 1A,, “Risk Factors. “Risk Factors.”
MARKETING AND SALES
We sell our products and services globally, primarily through indirect channels consisting of distributors and resellers. To a lesser extent weWe also transact directly with our enterprise and named account customers and with customers through our online Autodesk branded store. Our indirect channel model includes both a two-tiered distribution structure, where distributors sell to resellers, and a one-tiered structure, where Autodesk sells directly to resellers. We have a network of approximately 1,3001,500 resellers and distributors worldwide. For fiscal 2019,2022, approximately 71%65% of our revenue was derived from indirect channel sales through distributors and resellers.
We anticipate that our channel mix will continue to change, particularly as we scale our online Autodesk branded store business and our largest accounts shift towards direct-only business models. Importantly, we expect that the majority of our revenue will continue to be derived from indirect channel sales in the near future. We employ a variety of incentive programs and promotions to align our reseller channel with our business strategies. Our ability to effectively distribute our products depends in part upon the financial and business condition of our distributor and reseller networks. The loss of, or a significant reduction in, business with any one of our major distributors or large resellers could harm our business; see business. See Item 1A,, “Risk “Risk Factors,,” for further discussion.
Sales through our largest distributor, Tech Data Corporation and its global affiliates (collectively, “Tech Data”), accounted for 35%36%, 31%37%, and 30%35% of our net revenue for the fiscal years ended January 31, 2022, 2021 and 2020, respectively. Ingram Micro Inc. (“Ingram Micro”), our second-largest distributor, accounted for 9% of Autodesk's total net revenue for fiscal year ended January 31, 2022 and 10% of total net revenue for fiscal years ended January 31, 2019, 2018,2021 and 2017, respectively.2020. We believe our business is not substantially dependent on Tech Data. Our customers througheither Tech Data are the resellers and end users who purchase our
products.or Ingram Micro. Should any of the agreements between us and Tech Data or Ingram Micro be terminated for any reason, we believe the resellers and end users who currently purchase our products through Tech Data or Ingram 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. No other distributor, reseller, or direct customer accounted for 10% or more of our revenue.
Our customer-related operations are divided into three geographic regions: the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific (“APAC”). Each geographic region is supported by global marketing and sales organizations. These organizations develop and manage overall marketing and sales programs and work closely with a network of domestic and international sales offices. Fiscal 2019 net revenue in the Americas, EMEA, and APAC was $1,049.9 million (41%), $1,034.3 million (40%), and $485.6 million (19%), respectively. We believe that international sales will continue to comprise the majority of our total net revenue. Adverse economic conditions and currency exchange rates in the countries that contribute a significant portion of our net revenue, including emerging economies, may have an adverse effect on our business in those countries and our overall financial performance. A summary of our financial information by geographic location is found in Note 2, “Revenue Recognition,” in the Notes to Consolidated Financial Statements. Our international operations and sales subject us to a variety of risks; see risks. See Item 1A,, “Risk “Risk Factors,,” for further discussion.
We also work directly with reseller and distributor sales organizations, computer manufacturers, other software developers, and peripherals manufacturers in cooperative advertising, promotions, and trade-show presentations. We employ mass-marketing techniques such as webcasts, seminars, telemarketing, direct mailings, sponsorships, advertising in business and trade journals, and social media. 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 and services.
We generate revenue primarily through various offerings that provide recurring revenue. Under our subscription plan, customers can use our software anytime, anywhere, and get access to the latest updates to previous versions through term-based product subscriptions, cloud service offerings, and enterprise business agreements. With the discontinuation of the sale of perpetual licenses,agreements (“EBA”). Historically, we have transitioned away from selling a mix of perpetual licenses and maintenance planshad increased EBA sale activity in favor of a consolidatedour fourth fiscal quarter. This seasonality may not have an immediate impact on our revenue as we recognize subscription model. However, our customers who have previously purchased a perpetual use license for the most recent version of the underlying product are able to renew a previously purchased maintenance plan that provides them with unspecified upgrades when and if available, and receive online support duringrevenue over the term of their maintenancethe contract. This seasonality may also affect the relative value of our billings, RPO, and collections in the fourth and first fiscal quarters.
CUSTOMER AND RESELLER SUPPORT
We provide technical support and training to customers through a multi-tiered support model, augmented by direct programs designed to address certain specific customer needs. Most of our customers receive support and training from the resellers and distributors from which they purchased subscriptions or licenses for our products or services, with Autodesk in turn providing second tiersecond-tier support to the resellers and distributors. Other customers are supported directly via self-service using the Autodesk Knowledge Network, which guides customers to answers in our online support assets, support forums, or webinars, or to support representatives using a number of different modalities such as social media, phone, email, and webchat. We also support our resellers and distributors through technical product training, sales training classes, webinars, and other knowledge sharingknowledge-sharing programs.
EDUCATION, SUSTAINABILITY,ENVIRONMENTAL, SOCIAL, AND PHILANTHROPICGOVERNANCE PROGRAMS
Impact at Autodesk
Autodesk is committed to advancing a more sustainable, resilient, and equitable world. We don’t believe in waiting for progress, we believe in making it. We take action as a business and to support our employees, customers, and communities in our collective opportunity to design and make a better world for all.
We focus our efforts to advance positive outcomes across three primary areas: energy and materials, health and resilience, and work and prosperity. These impact opportunity areas are derived from the UN Sustainable Development Goals (“SDGs”) and have been focused through a multi-pronged process to align the top needs of our stakeholders, the important issues of our business, and the areas we are best placed to accelerate positive impact at scale.
These opportunities manifest as outcomes through how our customers leverage our technology to design and make net-zero carbon buildings, resilient infrastructure, more sustainable products, and a thriving workforce. We realize these opportunities in our business through our 100% renewable and net-zero greenhouse gas operations and inclusive culture. We advance these opportunities with industry innovators through collaboration, grants, software donations, and training.
Education
Autodesk is committed to helping fuel a lifelong passion for design and making among students of all ages, both within and outside the classroom. We offer free educational licenses of Autodesk'sAutodesk’s professional software to students, educators, and accredited educational institutions worldwide. We inspire and support beginners with Tinkercad, a simple online 3D design and 3D printing tool. Through Autodesk Design Academy, we provide secondary and postsecondarypost-secondary schools hundreds of standards-aligned class projects to support design-based disciplines in Science, Technology, Engineering, Digital Arts, and
Math (STEAM) using Autodesk'sAutodesk’s professional-grade design, engineering, and entertainment software. Autodesk Design Academy curricula is also syndicated on iTunes U and Udemy, where millions of students go to learn online. Classes and projects are available on our Instructables website for anyone looking to expand their "making"“making” skills. In November 2020, we launched a credential program, which empowers current and future Autodesk customers to learn in-demand toolsets, skillsets, and mindsets, while earning credentials that demonstrate their job readiness. We offer self-paced, modular learning through a range of skill levels, roles, and career ambitions, helping professionals demonstrate and apply relevant knowledge, step into emerging roles, and stay at the forefront of their industry. Our intention is to make Autodesk software ubiquitous and the design and making software of choice for those poised to become the next generation of professional users.
Sustainability Programs
To help our customers imagine, design, and make a better world, our sustainability initiatives focus our efforts on the areas where we can have the greatest positive impact: enabling sustainable practices through our products, delivering free sustainable-design learning and training resources, providing software grants to qualifying nonprofits and entrepreneurs, and leading by example with our sustainable business practices. Through our products and services, we are supporting our customers to better understand and improve the environmental performance of everything they make.
Climate Change
In addressing the global challenges posed by climate change, we make it possible for our customers to innovate and respond to associated changes in regulation, building code, physical climate parameters, and other climate-related developments. This effort can directly and indirectly create more demand for existing and new Autodesk products and services in the short and long-term. Furthermore, our leadership is committed to taking climate action and that commitment goes hand-in-handhand in hand with our values and reputation in the marketplace. In fiscal 2022, we integrated regular analysis of various climate scenarios into our enterprise strategy and risk processes.
Climate Change Management Actions
To drive continued progress and meet growing demand, we continue to expand the solutions, education, and support we offer, helping customers secure a competitive advantage for a low-carbon future by designing high-performance buildings, resilient cities and infrastructure, and more efficient transportation and products. To continue to grow this market, we provide software and support to early stageearly-stage entrepreneurs, nonprofit organizations, and start-up companies who are designing clean technologies. We plan to expandare expanding these offerings in the future based upon demand and opportunity in response to challenges posed by climate change.
Internally, we are investing in best practices to mitigate our greenhouse gas emissions (“GHGs”) and climate change risk through investments in renewable energy, energy efficiency, and disaster management and recovery strategies,strategies. In fiscal year 2022, we deployed a new sustainability financing framework to accelerate new and materials innovation. We areexisting efforts in these areas. Details about this effort can be found in our Sustainability Financing Framework on track to meet our science-based greenhouse gas reduction targetwebsite at www.autodesk.com. Information contained on or accessible through our website is not part of 43% absolute emissionsor incorporated by 2020.reference into this report.
Climate Change Governance
With oversight from our CEO, the Sustainability & Foundation Team has direct responsibility for setting and implementing our corporate sustainability strategy, including our climate change strategy.
Emissions Performance & Other Key Performance Indicators
By end of fiscal 2018, Autodesk had reduced its net greenhouse gas emissions for its operational boundary by 38% from ourIn fiscal year 2009 baseline2022, we launched our second science-based GHG reduction target, to 187,000reduce Scope 1 and Scope 2 GHGs 50%, and reduce Scope 3 GHGs per dollar of gross profit 25%, by fiscal year 2031, compared to fiscal year 2020.
In fiscal year 2021, we attained our ongoing commitment to being net-zero emissions, and before carbon offsets, were responsible for 126,000 metric tons of carbon dioxide equivalent.equivalent across our operational, market-based, boundary. This represents a 45% reduction was accomplished through increasedcompared to our fiscal year 2020 base line. Our assured results for fiscal year 2022 and our ongoing commitments will be published in our fiscal year 2022 impact report. This change in GHGs largely stemmed from changes in travel during the global pandemic and also continued investment in renewable energy and energy efficiency inacross our global real estate portfolio, and continued transition from physical software delivery to cloud and electronic software delivery.footprint areas. More information about our sustainability commitment can be found in our annual sustainabilityimpact reports, which we have published on our website since 2008. Our fiscal 2019 sustainability2022 impact report will be published in the second quarter of fiscal 2020.2023.
Philanthropy
The Autodesk Foundation (the "Foundation"“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 create a better world at work, at home, and in the community by matching employees'employees’ volunteer time and/or donations to nonprofit organizations; and to support organizations and individuals using design to drive positive social and environmental impact. In the latter case, we use grant funding, software donations, and training to accomplish this goal, selecting the most impactful and innovative organizations around the world, thus leading to a better future for our planet. 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. During fiscal 2020, Autodesk committed to target 1% of annual operating margin for the long-term support of the Autodesk Foundation.
DEVELOPER PROGRAMS
Our business and our customers benefit from our relationships with an extensive developer network. These developers create and sell their own interoperable products that further enhance the range of integrated solutions available to our customers. 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-
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 created oura web services platform, Autodesk Forge. The Forge, Platformwhich includes a number of web services that enable software developers to rapidly develop the next generation of applications and experiences that will power the future of making things. Forge facilitates the development of a single connected ecosystem for integrating Autodesk applications with other enterprise, web, and mobile solutions.
COMPETITION
The markets for our products are highly competitive, are subject to rapid change, and can have complex interdependencies between many of the larger businesses. We strive to increase our competitive separation by investing in research and development, allowing us to bring new products to market and create exciting new versions of existing products that offer compelling efficiencies for our customers. We also compete through investments in marketing and sales to more effectively reach new customers and better serve existing customers.
Our competitors include large, global, publicly traded companies; small, geographically focused firms; startup firms; and solutions produced in-house by their users. Our primary global competitors include Adobe Systems Incorporated, ANSYS, Inc., Apple Inc., AVEVA Group plc, Avid Technology, Inc., Bentley Systems, Inc., Dassault Systèmes S.A. and its subsidiary Dassault Systèmes SolidWorks Corp., Intergraph Corporation, a wholly owned subsidiary of Hexagon AB, MSC Software Corporation, Nemetschek AG, Oracle Corporation, Procore Technologies, Inc., PTC Inc., 3D Systems Corporation, Siemens PLM, SONY Corporation, Technicolor S.A., and Trimble Navigation Limited, among others.
The software industry has limited barriers to entry, and the availability of computing power with continually expanding performance at progressively lower prices contributes to the ease of market entry. The industry is presently undergoingcontinues to undergo a platform shift from the personal computer to cloud and mobile computing. This shift further lowers barriers to entry and poses a disruptive challenge to established software companies. The design software market is characterized by vigorous competition in each of the vertical markets in which we compete, both from existing competitors and by entry of new competitors with innovative technologies. Competition is increasingly enhanced by consolidation of companies with complementary products and technologies and the possibility that competitors in one vertical segment may enter other vertical segments that we serve. In addition, some of our competitors in certain markets have greater financial, technical, sales and marketing, and other resources than we do. Because of these and other factors, competitive conditions in these industries are likely to continue to intensify in the future. Increased competition could result in price reductions, reduced net revenue and profit margins, and loss of market share, any of which could harm our business. See Item 1A,, “Risk “Risk Factors,,” for further discussion of risks regarding competition.
We believe that our future results depend largely upon our ability to better serve customers by offering new products, including cloud and mobile computing products, whether by internal development or acquisition, and to continue to provide existing product offerings that compete favorably with respect to ease of use, reliability, performance, range of useful features, continuing product enhancements, reputation, price, and training.
INTELLECTUAL PROPERTY AND LICENSES
We maintain an active program to legally protect our investment in technology through intellectual property rights. We protect our intellectual property through a combination of patent, copyright, trademark, and trade secret protections, confidentiality procedures, and contractual provisions. The nature and extent of legal protection associated with each such intellectual property right depends on, among other things, the type of intellectual property right and the given jurisdiction in which such right arises. We believe that our intellectual property rights are valuable and important to our business.
Nonetheless, our intellectual property rights may not be successfully asserted in the future or may be invalidated, circumvented, or challenged. In addition, the laws and enforcement of the laws of various foreign countries where our products are distributed do not protect our intellectual property rights to the same extent as U.S. laws. Enforcement of intellectual
property rights against alleged infringers can sometimes lead to costly litigation and counterclaims. Our inability to protect our proprietary information could harm our business.
From time to time, we receive claims alleging infringement of a third party’s intellectual property rights, including patents. Disputes involving our intellectual property rights or those of another party have in the past and may in the future lead to, among other things, costly litigation or product shipment delays, which could harm our business.
We retain ownership of software we develop. Our combined hybrid offerings include both desktop software and cloud functionality. Desktop software is licensed to users pursuant to ‘click through’ or signed license agreements containing restrictions on duplication, disclosure, and transfer. Cloud software and associated services are provided to users pursuant to on-lineonline or signed terms of service agreements containing restrictions on access and use.
We believe that because of the limitations of laws protecting our intellectual property and the rapid, ongoing technological changes in both the computer hardware and software industries, we must rely principally upon software engineering and marketing skills to continually maintain and enhance our competitive market position.
While we have recovered some revenue resulting from the unauthorized use of our software solutions, we are unable to measure the full extent to which piracyunauthorized use of our software products exists. We believe, however, that unauthorized use of our software piracy is and can be expected to be a persistent problem that negatively impacts our revenue and financial results. We believe that our transition from perpetual use software licenses to a subscription-based business model combined with the change from desktop to cloud-based computing will shift the incentives and means by which software is pirated.used without authorization.
In addition, through various licensing arrangements, we receive certain rights to intellectual property of others. We expect to maintain current licensing arrangements and to secure licensing arrangements in the future, as needed and to the extent available on reasonable terms and conditions, to support continued development and sales of our products and services. Some of these licensing arrangements require or may require royalty payments and other licensing fees. The amount of these payments and fees may depend on various factors, including but not limited to: the structure of royalty payments, offsetting considerations, if any, and the degree of use of the licensed technology.
See Item 1A,, “Risk “Risk Factors,,” for further discussion of risks related to protecting our intellectual property.
PRODUCTION AND SUPPLIERS
The production of our software products and services involves duplication or hosting of software media. The way that we deliver software has evolved during our business model transition. For certain cloud-based products, we use a combination of co-located hosting facilities and increasingly Amazon Web Services and to a lesser degree other infrastructure-as-a-service providers. We offer customers an electronic software download option for both initial product fulfillment and subsequent product updates. Customers who choose electronic fulfillment receive the latest version of the software from our vendor’s secure servers. Customers may also obtain our software through media such as DVDs and USB flash drives available from multiple sources. The purchase of media and the transfer of the software programs onto media for distribution to customers are performed by us and by licensed subcontractors. Packaging materials are produced to our specifications by outside sources. Production is performed in leased facilities operated by independent third-party contractors. To date, we have not experienced any material difficulties or delays in the production of our software and documentation.
TALENT AND HUMAN CAPITAL MANAGEMENT
Our employees play a central role in the success of our long-term strategy. Autodesk’s Culture Code defines values and behaviors that support our commitment to being a customer company, where each employee takes responsibility for understanding our customers’ needs, expectations, and experiences. As of January 31, 2019,2022, we employed approximately 9,600 people.12,600 people, an increase from approximately 11,500 employees as of the end of fiscal year 2021. None of our employees in the United States are represented by a labor union. In certain foreign countries, our employees are represented by trade unions or work councils. We have never experienced any work stoppages and believe our employee relations are good.strong. Reliance upon employees in other countries entails various risks and changes in these foreign countries, such as government instability or regulation unfavorable to foreign-owned businesses, which could negatively impact our business in the future.
Diversity and Belonging
Autodesk is committed to building and maintaining a diverse workforce and a culture of belonging that welcomes people from all backgrounds, perspectives, and beliefs. We have developed and embedded a holistic global Diversity and Belonging (“D&B”) strategy into all that we do. Our D&B strategy includes a variety of activities, such as inclusive leadership training for all people managers and senior employees, hiring manager and interview classes that include training on mitigating bias and inclusive practices, Culture Sprints for all employees to foster belonging, and a D&B speaker series featuring leaders from a range of disciplines.
To help us build a more diverse workforce, we have continued to invest in our diversity partnerships. We partner with educational institutions such as Hispanic-Serving Institutions and Historically Black Colleges and Universities, and professional organizations around the globe supporting underrepresented groups in technology. We provide a variety of scholarships, internship programs, mentoring and development partnerships, and program support to organizations focused on women and underrepresented groups.
We also have an Emerging Leaders Program which is focused on developing a diverse cohort of leaders through professional development, mentoring, and networking opportunities. In addition, we provide ongoing development opportunities, such as the Autodesk Mentorship Program, which provides one-on-one mentorship relationships. Autodesk has seven employee resource groups (“ERGs”), which are employee-led groups that bring employees together based on common backgrounds or diversity characteristics, to foster a sense of belonging and connection.
Additional information on our D&B program, initiatives, and metrics can be found on our website at https://www.autodesk.com/company/diversity-and-inclusion. Information contained on or accessible through our website is not part of or incorporated by reference into this report.
Professional Development and Employee Impact
We believe career development plays an important role in keeping our employees engaged and to provide additional opportunities to grow and build their careers. Autodesk offers extensive professional and technical development opportunities for our employees. These include self-service online modules and personalized learning paths, professional and management development programs, and a tuition reimbursement program.
We also encourage our employees to advance our vision for a better world and support their professional development by participating in our pro bono consulting program, using paid time to volunteer, and have their charitable giving matched by the Autodesk Foundation.
Total Rewards
To attract, retain, and support our highly qualified employees, we offer competitive compensation and benefits, which include an element of choice to meet the needs of our diverse and global population. In addition to base pay and opportunities to receive short- and long-term incentives, we have an employee stock purchase plan, and retirement and other financial support. In addition to comprehensive health insurance and wellness benefits, we have a generous time off program, including sabbatical, financial tools and education, and an employee assistance program. In fiscal 2021, we made changes to our equity strategy, expanding our grant program eligibility for new hires and existing employees. As part of this strategy, we made a one-time equity grant to all regular employees with no unvested equity to align all employees to the long-term success of the company and encourage an owner mindset.
2019 Form 10-K 1213
COVID-19
In response to the COVID-19 pandemic, we supported our employees by adopting remote work and providing reimbursements to employees to equip their home offices, unlimited videoconferencing access to gather virtually with friends and family, and additional company holidays in recognition of the unusual demands of the working environment during the pandemic.
ACQUISITIONS
Over the past three years, weWe acquired new technology or supplemented our existing technology by purchasing businesses or technology related assets focused in specific markets or industries. For the fiscal years ended January 31, 2019, 2018,2022 and 2017,2021, we acquired companies all of which were accounted for as business combinations. Autodesk did not complete any business combinations during fiscal year 2020. The following were significant acquisitions for fiscal years 2019, 2018,2022 and 2017:2021:
|
| | | | | | | | | | | | | |
| Date of closing | | Company | | Details |
January 2019May 2021 | | BuildingConnected,Upchain Inc. ("BuildingConnected"(“Upchain”) | | Autodesk integrated Upchain’s unified cloud platform in Autodesk solutions to centralize data management and process management. |
| March 2021 | | Storm UK Holdco Limited, the parent of Innovyze, Inc. (“Innovyze”) | | Innovyze provided comprehensive water modeling solutions that augment Autodesk’s BIM offerings in civil engineering, and extended Autodesk’s presence into operations and maintenance of water infrastructure assets |
| November 2020 | | Spacemaker AS ("Spacemaker") | | The acquisition of BuildingConnected will enable Autodesk to add bid-management capabilities to its construction portfolio. |
December 2018 | | PlanGrid, Inc. ("PlanGrid") | | The acquisition of PlanGrid will enable Autodesk to offer a more comprehensive, cloud-based construction platform. |
July 2018 | | Assemble Systems, Inc. ("Assemble Systems") | | The acquisition of Assemble Systems will enable Autodesk's customers to influence, querySpacemaker strengthened and connect BIM data to key workflows across bid management, estimating, scheduling, site managementenabled Autodesk’s early-stage design and finance.outcome-based design capabilities. |
We acquire technology-related assets that are complementary to or otherwise enhance our existing technologies. We also make investments in privately held companies that develop technology that is complementary to or provide strategic value and expand opportunities for our technologies.
REGULATION
We are subject to various regulations, particularly those involving privacy and import/export controls. See Item 1A, “Risk Factors—Risks Relating to Laws and Regulations,” for further discussion.
GLOSSARY OF TERMS
Annualized Recurring Revenue (ARR)—Billings: Represents the annualized value of our average monthly recurring revenue for the preceding three months. "Maintenance plan ARR” captures ARR relating to traditional maintenance attached to perpetual licenses. "Subscription plan ARR" captures ARR relating to subscription offerings. Refer to the definition of recurring revenue below for more details on what is included within ARR. Recurring revenue acquired with the acquisition of a business is captured when total subscriptions are captured in our systems and may cause variability in the comparison of this calculation.
ARR is currently one of our key performance metrics to assess the health and trajectory of our business. ARR should be viewed independently of revenue and deferred revenue as ARR is a performance metric and is not intended to be combined with any of these items.
Annualized Revenue Per Subscription (ARPS)—Is calculated by dividing our annualized recurring revenue by the total number of subscriptions.
Billings—Represents totalTotal revenue plus the net change in deferred revenue from the beginning to the end of the period.
Cloud Service Offerings—Offerings: Represents individual term-based offerings deployed through web browser technologies or in a hybrid software and cloud configuration. Cloud service offerings that are bundled with other product offerings are not captured as a separate cloud service offering.
Constant Currency (CC) Growth Rates—Rates: We attempt to represent the changes in the underlying business operations by eliminating fluctuations caused by changes in foreign currency exchange rates as well as eliminating hedge gains or losses recorded within the current and comparative periods. We calculate constant currency growth rates by (i) applying the applicable prior period exchange rates to current period results and (ii) excluding any gains or losses from foreign currency hedge contracts that are reported in the current and comparative periods.
Core BusinessDesign Business:—Represents the combination of maintenance, product subscriptions, and EBA.all EBAs. Main products include, but are not limited to, AutoCAD, AutoCAD LT, Industry Collections, Revit, Inventor, Maya, and 3ds Max. Certain products, such as our computer aided manufacturing solutions, incorporate both Design and Make functionality and are classified as Design.
Enterprise Business Agreements (EBAs):—Represents programs providing enterprise customers with token-based access or a fixed maximum number of seats to a broad pool of Autodesk products over a defined contract term.
Free Cash FlowFlow:—Represents cashCash flow from operating activities minus capital expenditures.
Industry CollectionsCollections: —Autodesk Industry Collections are a combination of products and services that target a specific user objective and support a set of workflows for that objective. Our Industry Collections consist of: Autodesk Architecture, Engineering and Construction Collection, Autodesk Product Design &and Manufacturing Collection, and Autodesk Media and Entertainment Collection. We introduced Industry Collections effective August 1, 2016 to replace our suites.
Other Revenue—Consists of revenue from consulting, training and other services, and is recognized over time as the services are performed. Other revenue also includes software license revenue from the sale of products which do not incorporate substantial cloud services and is recognized up front.
Subscription Plan—Comprises our term-based product subscriptions, cloud service offerings, and EBAs. Subscriptions represent a combined hybrid offering of desktop software and cloud functionality which provides a device-independent, collaborative design workflow for designers and their stakeholders. With subscription, customers can use our software anytime, anywhere, and get access to the latest updates to previous versions.
Maintenance Plan—Plan: Our maintenance plans provide our customers with a cost effective and predictable budgetary option to obtain the productivity benefits of our new releases and enhancements when and if released during the term of their contracts. Under our maintenance plans, customers are eligible to receive unspecified upgrades when and if available, and technical support. We recognize maintenance revenue over the term of the agreements, generally one year.
Make Business: Represents certain cloud-based product subscriptions. Main products include, but are not limited to, Assemble, Autodesk Build, BuildingConnected, Fusion 360, and ShotGrid. Certain products, such as Fusion 360, incorporate both Design and Make functionality and are classified as Make.
Net Revenue Retention Rate (NR3): Measures the year-over-year change in subscription and maintenance revenue for the population of customers that existed one year ago (“base customers”). Net revenue retention rate is calculated by dividing the current quarter subscription and maintenance revenue related to base customers by the total corresponding quarter subscription and maintenance revenue from one year ago. Subscription and maintenance revenue is based on USD reported revenue, and fluctuations caused by changes in foreign currency exchange rates and hedge gains or losses have not been eliminated. Subscription and maintenance revenue related to acquired companies, one year after acquisition, has been captured as existing customers until such data conforms to the calculation methodology. This may cause variability in the comparison.
Other Revenue: Consists of revenue from consulting, training and other products and services, and is recognized as the products are delivered and services are performed.
Product SubscriptionSubscription:—Provides customers the mosta flexible, cost-effective way to access and manage 3D design, engineering, and entertainment software tools. Our product subscriptions currently represent a hybrid of desktop and SaaScloud functionality, which provides a device-independent, collaborative design workflow for designers and their stakeholders.
Recurring RevenueRevenue:—Consists of the revenue for the period from our traditional maintenance plans and revenue from our subscription plan offerings. It excludes subscription revenue related to consumer product offerings, select Creative Finishing product offerings, education offerings, and third partythird-party products. Recurring revenue acquired with the acquisition of a business is captured when total subscriptions are captured in our systems and may cause variability in the comparison of this calculation.
Remaining Performance Obligations (RPO): The sum of total short-term, long-term, and unbilled deferred revenue. Current remaining performance obligations is the amount of revenue we expect to recognize in the next twelve months.
Spend: The sum of cost of revenue and operating expenses.
Subscription RevenuePlan: —Includes subscription fees fromComprises our term-based product subscriptions, cloud service offerings, and EBAs. Subscriptions represent a combined hybrid offering of desktop software and cloud functionality which provides a device-independent, collaborative design workflow for designers and their stakeholders. With subscription, customers can use our software anytime, anywhere, and get access to the latest updates to previous versions.
Total Deferred RevenueSubscription Revenue: —Is calculated by adding together total short term, long term, and unbilled deferred revenue.
Total Subscriptions—Consists ofIncludes our term-based product subscriptions, from our maintenance plans and subscription plan offerings that are active and paid as of the fiscal year end date. For certain cloud service offerings, and EBAs, subscriptions represent the monthly average activity reported within the last three months of the fiscal quarter end date. Total subscriptions do not include education offerings, consumer product offerings, select Creative Finishing product offerings, Autodesk Buzzsaw, Autodesk Constructware, and third party products. Subscriptions acquired with the acquisition of a business are captured once the data conforms to our subscription count methodology and when added, may cause variability in the comparison of this calculation.flexible EBAs.
Unbilled Deferred Revenue—Revenue: Unbilled deferred revenue represents contractually stated or committed orders under early renewal and multi-year billing plans for subscription, services, and maintenance for which the associated deferred revenue has not been recognized. Under FASB Accounting Standards Codification ("ASC") Topic 606, unbilled deferred revenue is not included as a receivable or deferred revenue on our Condensed Consolidated Balance Sheet.
ITEM 1A. RISK FACTORS
We operate in a rapidly changing environment that involves significant risks, a number of which are beyond our control. In addition to the other information contained in this Form 10-K, the following discussion highlights some of these risks and the possible impact of these factors on our business, financial condition, and future results of operations. If any of the following risks actually occur, our business, financial condition, or results of operations may be adversely impacted, causing the trading price of our common stock to decline. In addition, these risks and uncertainties may impact the “forward-looking”forward-looking statements described elsewhere in this Form 10-K and in the documents incorporated herein by reference. They could affect our actual results of operations, causing them to differ materially from those expressed in “forward-looking”forward-looking statements.
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our securities. These risks are described more fully below and include, but are not limited to, risks relating to the following:
•Our strategy to develop and introduce new products and services, exposing us to risks such as limited customer acceptance, costs related to product defects, and large expenditures.
•The effects of the COVID-19 pandemic and related public health measures.
•Global economic and political conditions may furtherconditions.
•Costs and challenges associated with strategic acquisitions and investments.
•Dependency on international revenue and operations, exposing us to significant international regulatory, economic, intellectual property, collections, currency exchange rate, taxation, political, and other risks.
•Inability to predict subscription renewal rates and their impact on our industries,future revenue and operating results.
•Existing and increased competition and rapidly evolving technological changes.
•Fluctuation of our financial results, key metrics and other operating metrics.
•Deriving a substantial portion of our net revenue from a small number of solutions, including our AutoCAD-based software products and collections.
•Any failure to successfully execute and manage initiatives to realign or introduce new business and financial results.sales initiatives.
•Social and ethical issues relating to the use of artificial intelligence in our offerings.
•Security incidents compromising the integrity of our or our customers’ offerings, services, data, or intellectual property.
•Reliance on third parties to provide us with a number of operational and technical services as well as software.
•Our overall performance depends largely upon domestichighly complex software, which may contain undetected errors, defects, or vulnerabilities.
•Increasing regulatory focus on privacy issues and worldwide economicexpanding laws.
•Governmental export and political conditions. import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.
•Protection of our intellectual property rights and intellectual property infringement claims from others.
•The United States and other international economies have experienced cyclical downturns from time to timegovernment procurement process.
•Fluctuations in which economic activity was impacted by falling demand forcurrency exchange rates.
•Our debt service obligations.
•Our investment portfolio consisting of a variety of goodsinvestment vehicles that are subject to interest rate trends, market volatility, and services, restricted credit, poor liquidity, decreased government spending, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. Theseother economic conditions can occur abruptly. If economic growth in countries where we do business slows or if such countries experience further economic recessions, customers may delay or reduce technology purchases. Our customers include government entities, including the U.S. federal government, and if spending cuts impede the ability of governments to purchase our products and services, our revenue could decline. In addition, a number of our customers rely, directly and indirectly, on government spending.factors.
2019 Form 10-K 1416
Geopolitical trends toward nationalism and protectionism and the weakening or dissolution of international trade pacts may increase the cost of, or otherwise interfere with, conducting business. These trends have increased levels of political and economic unpredictability globally, and may increase the volatility of global financial markets; the impact of such developments on the global economy remains uncertain. Political instability or adverse political developments in any of the countries in which we do business could harm our business, results of operations and financial condition.
A financial sector credit crisis could impair credit availability and the financial stability of our customers, including our distribution partners and channels. A disruption in the financial markets may also have an effect on our derivative counter-parties and could also impair our banking partners, on which we rely for operating cash management. Any of these events could harm our business, results of operations and financial condition.
Our strategy to develop and introduce new products and services exposes us to risks such as limited customer acceptance, costs related to product defects, and large expenditures, each of which may not result in no additional net revenue or could result in decreased net revenue.
RapidThe software industry is characterized by rapid technological changes as well as changes in customer requirements and preferences, characterizepreferences. In recent years, the software industry. Just as the transition from mainframes to personal computers transformed the industry 30 years ago, the software industry has undergone a transition from developing and selling perpetual licenses and on-premises products to cloud, mobilesubscriptions and social applications.cloud-enabled technologies. Customers are also reconsidering the manner in whichhow they purchase software products, which requires us to constantly evaluate our business model and strategy. In response, we are focused on providing solutions to enable our customers to be more agile and collaborative on their projects. We devote significant resources to the development of new technologies. In addition, we frequently introduce new business models or methods that require a considerable investment of technical and financial resources, such as our introduction of flexible subscription and service offerings.offerings and our transition of multi-subscription plans to named-user plans. It is uncertain whether these strategies, including our product and pricing changes, will proveaccurately reflect customer demand or be successful, or whether we will be able to develop the necessary infrastructure and business models more quickly than our competitors. We are makingmake such investments through further development and enhancement of our existing products and services, as well as through acquisitions. Such investments may not result in sufficient revenue generation to justify their costs and could result in decreased net revenue or profitability. If we are not able to meet customer requirements, either with respect to our software or the manner in which we provide such products, or if we are not able to adapt our business model to meet our customers'customers’ requirements, our business, financial condition, or results of operations may be adversely impacted.
In particular, a critical component of our growth strategy is to have customers of our AutoCAD and AutoCAD LT products, as well as other individual Autodesk products, expand their portfolios to include our other offerings and cloud-based functionality. We want customers using individual Autodesk products to expand their portfolio with our other offerings and cloud-based functionality, and we are taking steps to accelerate this migration. At times, sales of our AutoCAD and AutoCAD LT or individual Autodesk flagship products have decreased without a corresponding increase in Industry Collections or cloud-based functionality revenue, or without purchases of customer seats to our Industry Collections. Should this continue, our results of operations will be adversely affected.
Our executive management team must continuously act quickly continuously, and with vision, given the rapidly changing customer expectations and technology advancements inherent in the software industry, the extensive and complex efforts required to create useful and widely accepted products, and the rapid evolution of cloud computing, mobile devices, new computing platforms, and other technologies, such as consumer products. Although we have articulated a strategy that we believe will fulfill these challenges, if we fail to execute properly on that strategy or adapt thatthe strategy as market conditions evolve, we may fail to meet our customers'customers’ expectations, failbe unable to compete with our competitors' products and technology, and lose the confidence of our channel partners and employees. This in turn could adversely affect our business and financial performance.
The effects of the COVID-19 pandemic and related public health measures have affected how we and our customers are operating our respective businesses, and the extent of the impact on our business and results of operations remains uncertain.
We are continuing to conduct business during the COVID-19 pandemic with substantial modifications to employee travel and work locations, as well as virtualization, postponement, or cancellation of certain sales and marketing events, among other changes. We have observed other companies as well as governments taking precautionary measures to address COVID-19. While government authorities in some geographies are removing COVID-19 related business operations restrictions, we continue to actively monitor the situation and may take further actions to 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. The extent of the impact of any such modifications on our business, including the effects on our customers and prospects, and on our financial results, remains uncertain.
We will continue to invest in critical areas such as research and development, construction, and digitizing the company to support our future success as we come out of the pandemic. If we are not able to successfully manage our spending and investment, it could have a material adverse effect on our cash balances, business, and results of operations.
Although recent vaccine approvals and rollouts have raised hopes of a turnaround in the COVID-19 pandemic, renewed waves and new variants as well as delays in vaccinations pose risks to recovery and our outlook. In addition, 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. Growth may slow if virus outbreaks
(including from new variants) prove difficult to contain, infections and deaths mount rapidly before vaccines are widely available, and social distancing measures and/or lockdowns return and are more stringent than anticipated. Moreover, if economic policy support is insufficient or withdrawn before full economic recovery, bankruptcies of viable but illiquid companies could mount, leading to further or renewed employment and income losses and a more protracted recovery. Together, these uncertainties and risks could have a material adverse impact on our financial condition, business and results of operations.
Global economic and political conditions may further impact our industries, business, and financial results.
Our overall performance depends largely upon domestic and worldwide economic and political conditions. The United States and other countries’ economies have experienced cyclical downturns, in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, decreased government spending, reduced corporate profitability, volatility in credit, equity, and foreign exchange markets, bankruptcies, and overall uncertainty. These economic conditions can occur abruptly. For example, the coronavirus (COVID-19) pandemic has caused additional uncertainty in the global economy, and an economic downturn or recession in the United States or in other countries may occur or has already occurred and may continue. The extent to which COVID-19 will impact our financial condition or results of operations is still uncertain and will continue to depend on developments such as the impact on our customers, vendors, distributors, and resellers, such as the supply chain disruption and resulting inflationary pressures and global labor shortage that we have seen recently, as well as other factors, including the full duration and the extent of the pandemic, including as a result of outbreaks and variants; actions taken by governments, businesses, and consumers in response to the pandemic; speed and timing of economic recovery, including in specific geographies; speed of rollout of COVID-19 vaccines, lifting of restrictions on movement, and normalization of full-time return to work and social events; our billings and renewal rates, including new business close rates, rate of multi-year contracts, pace of closing larger transactions, and new unit volume growth; and effect of the pandemic on margins and cash flow. All of these factors continue to evolve and remain uncertain at this time, and some of these factors are not within our control. Due to our subscription-based business model, the effect of COVID-19 may not be fully reflected in our results of operations until future periods, if at all. If economic growth in countries where we do business slows or if such countries experience further economic recessions, customers may delay or reduce technology purchases, which we have seen recently in certain countries including China. Our customers include government entities, including the U.S. federal government, and if spending cuts impede the ability of governments to purchase our products and services, our revenue could decline. In addition, a number of our customers rely, directly and indirectly, on government spending.
As described elsewhere in these risk factors, we are dependent on international revenue and operations and are subject to related risks of conducting business globally. Trends toward nationalism and protectionism and the weakening or dissolution of international trade pacts may increase the cost of, or otherwise interfere with, conducting business. These trends have increased political and economic unpredictability globally and may increase the volatility of global financial markets, and the impact of such developments on the global economy remains uncertain. Political instability or adverse political developments in any of the countries in which we do business could harm our business, results of operations, and financial condition. A financial sector credit crisis could impair credit availability and the financial stability of our customers, including our distribution partners and channels. A disruption in the financial markets may also have an effect on our derivative counter-parties and could also impair our banking partners, on which we rely for operating cash management. War, including the significant military action against Ukraine launched by Russia and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy, could also affect our business. Any of these events could harm our business, results of operations, and financial condition.
Our business could suffer as a result of risks,be adversely impacted by the costs charges and integration riskschallenges associated with strategic acquisitions and investments such as the recent acquisitions of Assemble Systems, Inc., PlanGrid, Inc. and BuildingConnected, Inc.investments.
We regularly acquire or invest in businesses, software solutions, and technologies that are complementary to our business through acquisitions, strategic alliances, or equity or debt investments. For example, we recently acquired Assemble Systems, PlanGrid and BuildingConnected.investments, including several transactions in fiscal 2022. The risks associated with such acquisitions include among others, the difficulty of assimilatingintegrating solutions, operations, and personnel,personnel; inheriting liabilities such as intellectual property infringement claims, theclaims; failure to realize anticipated revenue and cost projections and expected synergies; the requirement to test and assimilate the internal control processes of the acquired business in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002,2002; and the diversion of management's time and attention.
In addition, such acquisitions and investments involve other risks such as:
•the inability to retain customers, key employees, vendors, distributors, business partners, and other entities associated with the acquired business;
•the potential that due diligence of the acquired business or solution does not identify significant problems;
•exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to, claims from terminated employees, customers, or other third parties;
•the potential for incompatible business cultures;
•significantly higher than anticipated transaction or integration-related costs;
the •potential additional exposure to fluctuations ineconomic, tax, currency, exchange rates;political, legal, and regulatory risks associated with specific countries; and
•the potential impact on relationships with existing customers, vendors, and distributors as business partners as a result of acquiring another business.
We may not be successful in overcoming such risks, and such acquisitions and investments may negatively impact our business. In addition, such acquisitionsif we do not complete an announced acquisition transaction or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated. Acquisitions and investments have in the past and may in the future contribute to potential fluctuations in our quarterly financial results. These fluctuations could arise from transaction-related costs and charges associated with eliminating redundant expenses or write-offs of impaired assets recorded in connection with acquisitions and investments. These costs or chargesinvestments, and could negatively impact our financial results for a given period, cause quarter to quarter variability in our financial results or negatively impact our financial results for several future periods.results.
We are dependent on international revenue and operations, exposing us to significant international regulatory, global economic, intellectual property, collections, currency exchange rate, taxation, political, instability and other risks, which could adversely impact our financial results.
We are dependent on our international operations for a significant portion of our revenue. International net revenue represented 66%67% and 64%66% of our net revenue infor fiscal 20192022 and 2018,2021, respectively. Our international revenue, including thatsome of which comes from emerging economies, is subject to general economic and political conditions in foreign markets, including conditions in foreign marketsthose resulting from economic and political conditions in the U.S.United States, as well as country-specific conditions related to COVID-19, such as varied speed of recovery in different geographies. For example, we have recently seen a deceleration in growth in certain geographies including China. Our total revenue is also impacted by the relative geographical and country mix of our revenue over time. At times, these factors adversely impact our international revenue, and consequently our business as a whole. Our dependency on international revenue makes us much more exposed to global economic and political trends, which can negatively impact our financial results even if our results in the U.S.United States are strong for a particular period.
We anticipate that our international operations will continue to account for a significant portion of our net revenue and, as we expand our international development, sales, and marketing expertise, will provide significant support to our overall efforts in countries outside of the U.S.
United States. Risks inherent in our international operations include:
•economic volatility;
•tariffs, quotas, and other trade barriers and restrictions;restrictions , including any political or economic responses and counter-responses or otherwise by various global actors tothe significant military action against Ukraine launched by Russia;
•fluctuating currency exchange rates, including devaluations, currency controls, and inflation, and risks related to any hedging activities we undertake;
unexpected •changes in regulatory requirements and practices;
•delays resulting from difficulty in obtaining export licenses for certain technology;
•different purchase patterns as compared to the developed world;
operating in locations with a higher incidence of corruption and fraudulent business practices, particularly in emerging economies;
increasing enforcement by•compliance with the U.S. under the Foreign Corrupt Practices Act, the U.K. Bribery Act, and adoption of stricterother anti-corruption laws in certain countries, including the United Kingdom;laws;
•difficulties in staffing and managing foreign sales and development operations;
•local competition;
•longer collection cycles for accounts receivable;
•U.S. and foreign tax law changes impacting how multinational companies are taxed;and the complexities of tax reporting;
tax arrangements with foreign governments, including our ability to meet and renew the terms of those tax arrangements;
•laws regarding the free flow of data across international borders and management of and access to data and public networks;
•possible future limitations upon foreign ownedforeign-owned businesses;
•increased financial accounting and reporting burdens and complexities;
•inadequate local infrastructure;
•greater difficulty in protecting intellectual property;
•software piracy; and
•other factors beyond our control, including popular uprisings, terrorism, war (including the significant military action against Ukraine launched by Russia and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy), natural disasters, and diseases.
Some of our business partners also have international operations and are subject to the risks described above.
The "Brexit" vote has exacerbated and may further exacerbate manyapplication of the risksTrade and uncertainties described above. The withdrawal ofCooperation Agreement between the European Union, the European Atomic Energy Community, and the United Kingdom from the European Unionsigned in December 2020 (the “TCA”), which took effect January 1, 2021, could among other potential outcomes, adversely affect thehave adverse tax, tax treaty, currency,banking, operational, legal, and regulatory, regimes to whichor other impacts on our businesses in the region are subject.region. The withdrawal could also, among other potential outcomes, create currency volatility; disrupt the free movement of goods, services, and people between the United Kingdom and the European UnionUnion; and significantly disrupt trade between the United Kingdom and the European Union and other parties. There remains significant risk that the United Kingdom will exit from the European Union without agreement between the European Union and United Kingdom on terms addressing customs and trade matters. Further, uncertaintyUncertainty around these and related issues could lead to adverse effects on the economy of the United Kingdom economy, the European Union economies, and the other economies in which we operate.
In addition, in recent years, the current U.S. administrationUnited States has instituted or proposed changes to foreign trade policy, including the negotiation or termination of trade agreements, the imposition of tariffs on products imported from certain countries, economic sanctions on individuals, corporations, or countries, and other government regulations affecting trade between the United States and other countries in which we do business. More recently, the United States and other global actors have imposed sanctions as a result of the significant military action against Ukraine launched by Russia. New or increased tariffs and other changes in U.S. trade policy, including sanctions, could trigger retaliatory actions by affected countries, including Russia, and certain foreign governments, including the Chinese government, have instituted or are consideringconsidered imposing trade sanctions on certain U.S. manufacturedU.S.-manufactured goods. The escalation of protectionist or retaliatory trade measures in either the United States or any other countries in which we do business, such as announcing sanctions, a change in tariff structures, export compliance, or other trade policies, may increase the cost of, or otherwise interfere with, conductingthe conduct of our business. Broad-based sanctions against Russia, should they be implemented, could have a material adverse effect on our operations and business outlook.
Furthermore, in response to the Russian invasion of Ukraine, effective early March 2022 we have suspended all new business in Russia. Our revenue in fiscal 2022 generated in Russia was less than 2% of total revenue. We continue to evaluate our business operations there, including whether and how to support existing customers.
Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.
Security incidents may compromise the integrity of our or our customers’ offerings, services, data or intellectual property, harm our reputation, damage our competitiveness, create additional liability and adversely impact our financial results.
As we digitize Autodesk and use cloud and web-based technologies to leverage customer data to deliver the total customer experience, we are exposed to increased security risks and the potential for unauthorized access to, or improper use of, our and our customers' information. Like other software offerings and systems, ours are vulnerable to security incidents. We devote resources to maintain the security and integrity of our systems, offerings, services and applications (online, mobile and desktop). We accomplish this by enhancing security features, conducting penetration tests, code hardening, releasing security vulnerability updates and accelerating our incident response time. Despite these efforts, we may not prevent security incidents.
Hackers regularly have targeted our systems, offerings, services and applications, and we expect them to do so in the future. Security incidents could disrupt the proper functioning of our systems, solutions or services; cause errors in the output of our customers' work; allow unauthorized access to sensitive data or intellectual property, including proprietary or confidential information of ours or our customers; or cause other destructive outcomes.
The risk of a security incident, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. These threats include but are not limited to identity theft, unauthorized access, DNS attacks, wireless network attacks, viruses and worms, advanced persistent threat (APT), application centric attacks, peer-to-peer attacks, phishing, malicious file uploads, backdoor trojans and distributed denial of service (DDoS) attacks. In addition, third parties may attempt to fraudulently induce our employees, vendors, partners or users to disclose information to gain access to our data or our users’ data and there is the risk of employee, contractor, or vendor error or malfeasance. Despite efforts to create security barriers to such threats, it is virtually impossible for us to entirely eliminate this risk.
If any of the foregoing security incidents were to occur, our reputation may suffer, our competitive position may be diminished, customers may stop paying for our solutions and services, we could face regulator inquiry, lawsuits and potential liability, and our financial performance could be negatively impacted.
Increasing regulatory focus on privacy issues and expanding laws may impact our business or expose us to increased liability.
Our strategy to digitize Autodesk involves increasing our use of cloud and web-based technologies and applications to leverage customer data to improve our offerings for the benefit of our customers. To accomplish this strategy, we must collect customer data, which may include personal data. Federal, state and foreign government privacy and data security laws apply to the treatment of personal data. Governments, regulators, the plaintiffs’ bar, privacy advocates and customers have increased their focus on how companies collect, process, use, store, share and transmit personal data.
The General Data Protection Regulation ("GDPR") is applicable in all EU member states The GDPR introduced new data protection requirements in the EU and substantial fines for non-compliance. In addition, in June 2018, California enacted the California Consumer Privacy Act (the "CCPA"), which takes effect in January 2020. The CCPA will, among other things, give California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA was amended in September 2018, and it is unclear whether further modifications will be made to this legislation or how it will be interpreted. We cannot yet predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
The GDPR, CCPA and other state and global laws and regulations increased our responsibility and potential liability in relation to personal data, and we have and will continue to put in place additional processes and programs to demonstrate compliance. Any failure to comply with the GDPR or other data privacy laws could lead to government enforcement actions and significant penalties. Any perceived privacy right violation could result in reputational harm, third-party claims, lawsuits or investigations.
Additionally, we store customer information and content and if our customers fail to comply with contractual obligations or applicable laws, it could result in litigation or reputational harm to us. The GDPR, CCPA other laws and self-regulatory codes may affect our ability to reach current and prospective customers, to understand how our offerings and services are being used, to respond to customer requests allowed under the laws, and to implement our new business models effectively. These new laws and regulations would similarly affect our competitors as well as our customers. These requirements could impact demand for our offerings and services and result in more onerous contract obligations.
We rely on third-parties to provide us with a number of operational and technical services; third-party security incidents could expose us to liability, harm our reputation, damage our competitiveness and adversely impact our financial performance.
We rely on third parties, such as Amazon Web Services, to provide us with operational and technical services. These third parties may have access to our systems, provide hosting services, or otherwise process data about us or our customers, employees, or partners. Any third-party security incident could compromise the integrity of, or availability or result in the theft of, data. In addition, our operations, or the operations of our customers or partners, could be negatively affected in the event of a security breach, and could be subject to the loss or theft of confidential or proprietary information, including source code. Unauthorized access to data and other confidential or proprietary information may be obtained through break-ins, network breaches by unauthorized parties, employee theft or misuse, or other misconduct. If any of the foregoing were to occur, our reputation may suffer, our competitive position may be diminished, customers may buy fewer of our offerings and services, we could face lawsuits and potential liability, and our financial performance could be negatively impacted.
Delays in service from third-party service providers could expose us to liability, harm our reputation, damage our competitiveness and adversely impact our financial performance.
From time to time, we may rely on a single or limited number of suppliers, or upon suppliers in a single country, for the provision of various services and materials that we use in the operation of our business and production of our solutions. The inability of such third parties to satisfy our requirements could disrupt our business operations or make it more difficult for us to implement our business strategy. If any of these situations were to occur, our reputation could be harmed, we could be subject to third party liability, including under data protection and privacy laws in certain jurisdictions, and our financial performance could be negatively impacted.
We are investing in resources to update and improve our information technology systems to digitize Autodesk and support our customers. Should our investments not succeed, or if delays or other issues with new or existing information technology systems disrupt our operations, our business could be harmed.
We rely on our network and data center infrastructure, technology systems and our websites for our development, marketing, operational, support, sales, accounting and financial reporting activities. We continually invest resources to update and improve these systems in order to meet the evolving requirements of our business and customers. In particular, our transition to cloud-based products and a subscription-only business model involves considerable investment in the development of technologies, as well as back-office systems for technical, financial, compliance and sales resources.
Such improvements are often complex, costly and time consuming. In addition, such improvements can be challenging to integrate with our existing technology systems, or may uncover problems with our existing technology systems. Unsuccessful implementation of hardware or software updates and improvements could result in disruption in our business operations, loss of customers, loss of revenue, errors in our accounting and financial reporting or damage to our reputation, all of which could harm our business.
We may not be able to predict subscription renewal rates and their impact on our future revenue and operating results.
Our customers are not obligated to renew their subscriptions for our offerings, and they may elect not to renew.renew, upgrade, or expand their subscriptions. We cannot assure renewal rates or the mix of subscriptions renewals. Customer renewal rates may decline or fluctuate due to a number of factors, including offering pricing,pricing; competitive offerings,offerings; customer satisfaction,satisfaction; and reductions in customer spending levels, or customer activity, or number of users due to economic downturns, including as a result of the current COVID-19 pandemic, or financial markets uncertainty. If our customers do not renew their subscriptions or if they renew on less favorable terms, our revenues may decline.
Our software is highly complex and may contain undetected errors, defects or vulnerabilities, each of which could harm our business and financial performance.
The software solutions that we offer are complex and, despite extensive testing and quality control, may contain errors, defects or vulnerabilities. Some errors, defects and vulnerabilities in our software solutions may only be discovered after they have been released. Any errors, defects or vulnerabilities could result in the need for corrective releases to our software solutions, damage to our reputation, loss of revenue, an increase in subscription cancellations or lack of market acceptance of our offerings, any of which would likely harm our business and financial performance.
Existing and increased competition and rapidly evolving technological changes may reduce our revenue and profits.
The software industry has limited barriers to entry, and the availability of computing devices with continually expanding performance at progressively lower prices contributes to the ease of market entry. The software industry has undergone a transition from developing and selling perpetual licenses and on-premises products to cloud, mobilesubscriptions and social applications.cloud-enabled technologies. This shift further lowers barriers to entry and poses a disruptive challenge to established software companies. The markets in which we competeoperate are characterized by vigorous competition, both by entry of competitorsentrants with innovative technologies and by consolidation of companies with complementary offerings and technologies. In addition, someSome of our competitors in certain markets have greater financial, technical, sales and marketing, and other resources. Furthermore, a reduction in the number and availability of compatible third-party applications or our inability to rapidly adapt to technological and customer preference changes, including those related to cloud computing, mobile devices, and new computing platforms, may adversely affect the sale of our solutions. Because of these and other
factors, competitive conditions in the industry are likely to intensify in the future. Increased competition could result in price reductions, reduced net revenue and profit margins, and loss of market share, any of which would likely harm our business.
We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.
Our offerings are subject to U.S. export controls and economic sanctions laws and regulations that prohibit the delivery of certain solutions and services without the required export authorizations or export to locations, governments, and persons targeted by U.S. sanctions. While we have processes in place to prevent our offerings from being exported in violation of these laws, including obtaining authorizations as appropriate and screening against U.S. government and international lists of restricted and prohibited persons, we cannot guarantee that these processes will prevent all violations of export control and sanctions laws.
We also note that if our channel partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected, through reputational harm as well as other negative consequences including government investigations and penalties. We presently incorporate export control and sanctions compliance requirements in our channel partner agreements. Complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Violations of U.S. sanctions or export control laws can result in fines or penalties.
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
Because we conduct a substantial portion of our business outside the U.S., we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and economic conditions change. Our exposure to adverse movements in foreign currency exchange rates could have a material adverse impact on our financial results and cash flows.
We use derivative instruments to manage a portion of our cash flow exposure to fluctuations in foreign currency exchange rates. As part of our risk management strategy, we use foreign currency contracts to manage a portion of our exposures of underlying assets, liabilities, and other obligations, which exist as part of our ongoing business operations. These foreign currency instruments have maturities that extend for one to twelve months in the future, and provide us with some protection against currency exposures. However, our attempts to hedge against these risks may not be completely successful, resulting in an adverse impact on our financial results.
The fluctuations of currencies in which we conduct business can both increase and decrease our overall revenue and expenses for any given fiscal period. Although our foreign currency cash flow hedge program extends beyond the current quarter in order to reduce our exposure to foreign currency volatility, we do not attempt to completely mitigate this risk, and in any case, will incur transaction fees in adopting such hedging programs. Such volatility, even when it increases our revenues or decreases our expenses, impacts our ability to accurately predict our future results and earnings.
In addition, countries in which we operate may be classified as highly inflationary economies, requiring special
accounting and financial reporting treatment for such operations, or such countries’ currencies may be devalued, or both, which may adversely impact our business operations and financial results.
If we do not maintain good relationships with the members of our distribution channel, our ability to generate revenue will be adversely affected. If our distribution channel suffers financial losses, becomes financially unstable or insolvent, or is not provided the right mix of incentives to sell our subscriptions, our ability to generate revenue will be adversely affected.
We sell our software products both directly to end-users and through a network of distributors and resellers. For fiscal 2019 and fiscal 2018, approximately 71% and 70%, respectively, of our revenue was derived from indirect channel sales through distributors and resellers and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the near future. Our ability to effectively distribute our solutions depends in part upon the financial and business condition of our distributor and reseller network. Computer software distributors and resellers typically are not highly capitalized, have previously experienced difficulties during times of economic contraction and experienced difficulties during the past several years. We have processes to ensure that we assess the creditworthiness of distributors and resellers prior to our sales to them. In the past we have taken steps to support them, and may take additional steps in the future, such as extending credit terms and providing temporary discounts. These steps, if taken, could harm our financial results. If our distributors and resellers were to become insolvent, they would not be able to maintain their business and sales, or provide customer support services, which would negatively impact our business and revenue.
We rely significantly upon major distributors and resellers in both the U.S. and international regions, including the distributor Tech Data. Tech Data accounted for 35%and31% of our total net revenue for fiscal 2019 and 2018, respectively. Although we believe that we are not substantially dependent on Tech Data, if Tech Data were to experience a significant disruption with its business or if our relationship with Tech Data were to significantly deteriorate, it is possible that our ability to sell to end users would be, at least temporarily, negatively impacted. This could in turn negatively impact our financial results.
Over time, we have modified and will continue to modify aspects of our relationship with our distributors and resellers, such as their incentive programs, pricing to them and our distribution model to motivate and reward them for aligning their businesses with our strategy and business objectives. Changes in these relationships and underlying programs could negatively impact their business and harm our business. Further, our distributors and resellers may lose confidence in our business, move to competitive products, or may not have the skills or ability to support customers. The loss of or a significant reduction in business with those distributors or resellers could harm our business. In particular, if one or more of such distributors or resellers were unable to meet their obligations with respect to accounts payable to us, we could be forced to write off such
accounts and may be required to delay the recognition of revenue on future sales to these customers. These events could have a material adverse effect on our financial results.
Our financial results, key metrics, and other operating metrics fluctuate within each quarter and from quarter to quarter, making our future revenue and financial results difficult to predict.
Our quarterly financial results, key metrics, and other operating metrics have fluctuated in the past and will continue to do so in the future. These fluctuations could cause our stock price to change significantly or experience declines. We also provide investors with quarterly and annual financial forward-looking guidance that could prove to be inaccurate as a result of these fluctuations. In addition to the other factorsrisks described in this Part I, Item 1A,these risk factors, some of the factors that could cause our financial results, key metrics, and other operating metrics to fluctuate include:
•general market, economic, business, and political conditions in particular geographies, including Europe, APAC, and emerging economies;economies, including from an economic downturn or recession in the United States or other countries;
•failure to produce sufficient revenue, ARR, billings, subscription, profitability, and cash flow growth;growth, including as a result of the COVID-19 pandemic;
•failure to accurately predict the impact of acquired businesses or to identify and realize the anticipated benefits of acquisitions, and successfully integrate such acquired businesses and technologies;
•failure to manage spend;
•changes in subscription mix, pricing pressure, or changes in subscription pricing;
•weak or negative growth in one or more of the industries we serve, including AEC, manufacturing, and digital media and entertainment markets;
•the success of new business or sales initiatives;
security breaches, related reputational harm, and potential financial penalties to customers and government entities;
•restructuring or other accounting charges and unexpected costs or other operating expenses;
•timing of additional investments in our technologies or deployment of our services;
•changes in revenue recognition or other accounting guidelines employed by us and/or established by the Financial Accounting Standards Board, Securities and Exchange Commission, or other rule-makingrulemaking bodies;
•fluctuations in foreign currency exchange rates and the effectiveness of our hedging activity;
•dependence on and the timing of large transactions;
changes in billings linearity;
•adjustments arising from ongoing or future tax examinations;
•the ability of governments around the world to adopt fiscal policies, meet their financial and debt obligations, and to finance infrastructure projects;
lower renewals of our maintenance program;
•failure to expand our AutoCAD and AutoCAD LT customer base to related design products and services;
•our ability to rapidly adapt to technological and customer preference changes, including those related to cloud computing, mobile devices, and new computing platforms;
the •timing of the introduction of new products by us or our competitors;
•the financial and business condition of our reseller and distribution channels;
•perceived or actual technical or other problems with a product or combination of subscriptions;
•unexpected or negative outcomes of matters and expenses relating to litigation or regulatory inquiries;
•increases in cloud functionality-related expenses;
•timing of releases and retirements of offerings;
•changes in tax laws or regulations, tax arrangements with foreign governments or accounting rules and regulations, such as increased use of fair value measures;
•changes in sales compensation practices;
•failure to effectively implement and maintain our copyright legalization programs, especially in developing countries;
•renegotiation or termination of royalty or intellectual property arrangements;
•interruptions or terminations in the business of our consultants or third-party developers;
the •timing and degree of expected investments in growth and efficiency opportunities;
•failure to achieve continued success in technology advancements;
•catastrophic events, natural disasters, or natural disasters;public health events, such as pandemics and epidemics, including COVID-19;
•regulatory compliance costs; and
potential goodwill impairment charges related to prior acquisitions; and
failure to appropriately estimate the scope of services under consulting arrangements.
We have also experienced fluctuations in financial results in interim periods in certain geographic regions due to seasonality or regional economic or political conditions. In particular, our financial results in Europe during our third quarter are usually affected by a slower summer period, and our APAC operations typically experience seasonal slowing in our third and fourth quarters. War, including the significant military action against Ukraine launched by Russia and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy, could also affect our business.
Our operating expenses are based in part on our expectations for future revenue and are relatively fixed in the short term. Accordingly, any revenue shortfall below expectations has had, and in the future could have, an immediate and significant adverse effect on our profitability. Greater than anticipated expenses or a failure to maintain rigorous cost controls would also negatively affect profitability.
Because weWe derive a substantial portion of our net revenue from a small number of solutions, including our AutoCAD-based software products and collections, and if these offerings are not successful, our revenue willwould be adversely affected.
We derive a substantial portion of our net revenue from sales of subscriptions of a limited number of our offerings, including AutoCAD software, solutions based on AutoCAD, which include our collections that serve specific markets, and products that are interoperable with AutoCAD. Any factor adversely affecting sales of these subscriptions, including the product release cycle, market acceptance, product competition, performance and reliability, reputation, price competition, economic and market conditions, and the availability of third-party applications, would likely harm our financial results. During both fiscal 20192022 and fiscal 2018,2021, combined revenue from our AutoCAD and AutoCAD LT family products, not including collections having AutoCAD or AutoCAD LT as a component, represented 28%and 27%29% of our total net revenue, respectively.revenue.
Our debt service obligations may adversely affect our financial condition and cash flows from operations.
We have $2.1 billion of debt, consisting of notes due at various times from June 2020 to June 2027 and a delayed draw term loan facility in the aggregate principal amount of $500.0 million due in December 2020, each as described in Part 2, Item 8. We also entered into a credit agreement that provides for an unsecured revolving loan facility in the aggregate principal amount of $650.0 million, with an option to be increased up to $1.0 billion, as described in Part 2, Item 8. Maintenance of our indebtedness, contractual restrictions, and additional issuances of indebtedness could:
cause us to dedicate a substantial portion of our cash flows from operations towards debt service obligations and principal repayments;
increase our vulnerability to adverse changes in general economic, industry and competitive conditions;
limit our flexibility in planning for, or reacting to, changes in our business and our industry;
impair our ability to obtain future financing for working capital, capital expenditures, acquisitions, general corporate or other purposes; and
due to limitations within the debt instruments, restrict our ability to grant liens on property, enter into certain mergers, dispose of all or substantially all of the assets of Autodesk and its subsidiaries, taken as a whole, materially change our business and incur subsidiary indebtedness, subject to customary exceptions.
We are required to comply with the covenants set forth in our debt instruments, such as an interest coverage ratio in effect January 31, 2019 and a leverage ratio in effect July 31, 2019. If we breach any of the covenants and do not obtain a waiver from the note holders or lenders, then, subject to applicable cure periods, we would not be able to incur additional indebtedness under the credit agreement described in Part 2, Item 8 and any outstanding indebtedness may be declared immediately due and payable. In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of our securities. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our credit agreement could increase. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.
If we are not able to adequately protect our proprietary rights, our business could be harmed.
We rely on a combination of patent, copyright and trademark laws, trade secret protections, confidentiality procedures and contractual provisions to protect our proprietary rights. Despite such efforts to protect our proprietary rights, unauthorized parties from time to time have copied aspects of our software or have obtained and used information that we regard as proprietary. Policing unauthorized use of our software is time-consuming and costly. We are unable to measure the extent to which piracy of our software exists and we expect that software piracy will remain a persistent problem, particularly in emerging economies. Furthermore, our means of protecting our proprietary rights may not be adequate.
Additionally, we actively protect the secrecy of our confidential information and trade secrets, including our source code. If unauthorized disclosure of our source code occurs, we could potentially lose future trade secret protection for that source code. The loss of future trade secret protection could make it easier for third-parties to compete with our offerings by copying functionality, which could adversely affect our financial performance and our reputation. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements with our customers, contractors, vendors and partners. However, it is possible that our confidential information and trade secrets may be disclosed or published without our authorization. If this were to occur, it may be difficult and/or costly for us to enforce our rights, and our financial performance and reputation could be negatively impacted.
We may face intellectual property infringement claims that could be costly to defend and result in the loss of significant rights.
As more software patents are granted worldwide, the number of offerings and competitors in our industries grows and the functionality of products in different industries overlaps, we expect that software developers will be increasingly subject to infringement claims. Infringement or misappropriation claims have in the past been, and may in the future be, asserted against us, and any such assertions could harm our business. Additionally, certain patent holders without products have become more aggressive in threatening and pursuing litigation in attempts to obtain fees for licensing the right to use patents. Any such claims or threats, whether with or without merit, have been and could in the future be time-consuming to defend, result in costly litigation and diversion of resources, cause product delays or require us to enter into royalty or licensing agreements. In addition, such royalty or license agreements, if required, may not be available on acceptable terms, if at all, which would likely harm our business.
From time to time we realign or introduce new business and sales initiatives; if we fail to successfully execute and manage these initiatives, our results of operations could be negatively impacted.
As part of our effort to accommodate our customers'customers’ needs and demands and the rapid evolution of technology, we from time to time we evolve our business and sales initiatives, such as realigning our development and marketing organizations, offering software as a service, and realigning our internal resources in an effort to improve efficiency. We may take such actions without clear indications that they will prove successful and, at times, we have been met with short-term challenges in the execution of such initiatives. Market acceptance of any new business or sales initiative is dependent on our ability to match our customers'customers’ needs at the right time and price. Often, we have limited prior experience and operating history in these new areas of emphasis. If any of our assumptions about expenses, revenue, or revenue recognition principles from these initiatives proves incorrect, or our attempts to improve efficiency are not successful, our actual results may vary materially from those anticipated, and our financial results will be negatively impacted.
Net revenue, ARR, billings, earnings, cash flow, or subscriptions shortfalls or the volatility of the market generally may cause the market price of our stock to decline.
The market price for our common stock has experienced significant fluctuations and may continue to fluctuate significantly. The market price for our common stock may be affected by a number of factors, including the other factorsrisks described in this Part I, Item 1Athese risk factors and the following:
•shortfalls in our expected financial results, including net revenue, ARR, billings, earnings, and cash flow or key performance metrics, such as subscriptions;subscriptions, including as a result of the current COVID-19 pandemic, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed, or significantly exceed securities analyst expectations;
•quarterly variations in our or our competitors'competitors’ results of operations;
•general socio-economic,socioeconomic, political, or market conditions;conditions, including from an economic downturn or recession in the United States or in other countries;
•changes in forward-looking estimates of future results, how those estimates compare to securities analyst expectations, or changes in recommendations or confusion on the part of analysts and investors about the
short-term short- and long-term impact to our business;
•uncertainty about certain governments'governments’ abilities to repay debt or effect fiscal policy;
the announcement•announcements of new offerings or enhancements by us or our competitors;
•unusual events such as significant acquisitions, divestitures, regulatory actions, and litigation;
•changes in laws, rules, or regulations applicable to our business;
•outstanding debt service obligations; and
•other factors, including factors unrelated to our operating performance, such as instability affecting the economy or the operating performance of our competitors.
Significant changes in the price of our common stock could expose us to costly and time-consuming litigation. Historically, after periods of volatility in the market price of a company's securities, a company becomes more susceptible to securities class action litigation. This type of litigation is often expensive and diverts management'smanagement’s attention and resources.
As a result of our strategy of partnering with other companies for product development, our product delivery schedules could be adversely affected if we experience difficulties with our product development partners.
We partner with certain independent firms and contractors to perform some of our product development activities. We believe our partnering strategy allows us to achieve efficiencies in developing new products and maintaining and enhancing existing product offerings. This strategy creates a dependency on independent developers. Independent developers, including those who currently develop solutions for us in the United States and throughout the world, may not be able or willing to provide development support to us in the future. In addition, use of development resources through consulting relationships, particularly in non-U.S. jurisdictions with developing legal systems, may be adversely impacted by, and expose us to risks relating to, evolving employment, export, and intellectual property laws. These risks could, among other things, expose our intellectual property to misappropriation and result in disruptions to product delivery schedules.
Social and ethical issues relating to the use of artificial intelligence in our offerings may result in reputational harm or liability.
Social and ethical issues relating to the use of new and evolving technologies such as artificial intelligence (“AI”) in our offerings, may result in reputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues. We are increasingly building AI into many of our offerings. As with many innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. AI presents emerging ethical issues and if we enable or offer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm, or legal liability. Potential government regulation in the space of AI ethics may also increase the burden and cost of research and development in this area, subjecting us to brand or reputational harm, competitive harm, or legal liability. Failure to address AI ethics issues by us or others in our industry could undermine public confidence in AI and slow adoption of AI in our products and services.
Risks Relating to Our Operations
Security incidents may compromise the integrity of our or our customers’ systems, solutions, offerings, services, applications, data, or intellectual property, harm our reputation, damage our competitiveness, create additional liability, and adversely impact our financial results.
As we digitize Autodesk and use cloud- and web-based technologies to leverage customer data to deliver the total customer experience, we are exposed to increased security risks and the potential for unauthorized access to, or improper use of,
our and our customers’ information. Like other software offerings and systems, ours are vulnerable to security incidents, including those from acquired companies. Also, our ability to mitigate the security incident risk may be impacted by our limited control over our customers or third-party technology providers and vendors, or the processing of data by third-party technology providers and vendors, which may not allow us to maintain the integrity or security of such transmissions or processing. We devote significant resources in an effort to maintain the security and integrity of our systems, offerings, services, and applications (online, mobile, and desktop), including by enhancing security features, conducting penetration tests, code hardening, releasing security vulnerability updates, and accelerating our incident response time. We also provide annual information security training to our employees. Despite these efforts, we may not prevent security incidents, and we may face delays or other difficulties in identifying, responding to, or remediating security incidents.
Hackers regularly have targeted our systems, offerings, services, and applications, and we expect them to do so in the future. To date, such identified security events have not been material or significant to us or our customers, including to our reputation or business operations, or had a material financial impact, but there can be no assurance that future cyberattacks will not be material or significant. Security incidents could disrupt the proper functioning of our systems, solutions, offerings, applications, or services; cause errors in the output of our customers’ work; allow unauthorized access to or unauthorized use, disclosure, modification, loss, or destruction of, sensitive data or intellectual property, including proprietary or confidential information of ours or our customers; or cause other destructive outcomes. The risk of a security incident, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. These threats include identity theft, unauthorized access, DNS attacks, wireless network attacks, viruses and worms, malware, bugs, vulnerabilities, advanced persistent threats (APT), application-centric attacks, peer-to-peer attacks, social engineering, phishing, credential stuffing, malicious file uploads, backdoor trojans, supply chain attacks, ransomware attacks, and distributed denial of service (DDoS) attacks. In addition, third parties may attempt to fraudulently induce our employees, vendors, partners, customers, or users to disclose information to gain access to our data or our customers’ or users’ data and there is the risk of employee, contractor, or vendor error or malfeasance. These existing risks are compounded given the COVID-19 pandemic and the resulting shift to work-from-home arrangements for a large population of employees and contractors, as well as employees and contractors of our third-party technology providers and vendors, and the risks could also be elevated in connection with the Russian invasion of Ukraine. Despite our significant efforts to create security barriers to such threats, we cannot entirely mitigate these risks, and there is no guarantee that inadvertent or unauthorized use or disclosure of such information will not occur or that third parties will not gain unauthorized access to such information.
Many governments have enacted laws requiring companies to provide notice of security incidents involving certain types of personal data and personal information. We are also contractually required to notify certain customers of certain security incidents. If any of the foregoing security incidents were to occur or to be perceived to have occurred, our reputation may suffer, our competitive position may be diminished, customers may stop paying for our solutions and services, we could be required to expend significant capital and other resources to evaluate and alleviate the security incident and to try to prevent further or additional incidents, and we could face regulatory inquiry, lawsuits, and potential liability. We could incur significant costs and liabilities, including due to litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, and costs for remediation and other incentives offered to customers or other business partners in an effort to maintain business relationships after a security incident, and our financial performance could be negatively impacted.
We cannot assure you that any limitations of liability provisions in our contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security incident. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims related to a security incident, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
Our useof third-partyopensourcesoftwarecould negatively affectour abilityto sell subscriptions to accessour productsandsubject us to possible litigation and greater security risks.
We use third-party open source software. From time to time, companies that use third-party open source software have faced claims challenging the use of such open source software and compliance with the open source software license terms. Accordingly, we may be subject to suits by parties claiming ownership of what we believe to be open source software or claiming non-compliance with the applicable open source licensing terms. Some open source software licenses require end-
users, who distribute or make available across a network software and services that include open source software, to make publicly available or to license all or part of such software (which in some circumstances could include valuable proprietary code, such as modifications or derivative works created, based upon, incorporating, or using the open source software) under the terms of the particular open source license. While we employ practices designed to monitor our compliance with the licenses of third-party open source software and protect our valuable proprietary source code, we may inadvertently use third-party open source software in a manner that exposes us to claims of non-compliance with the terms of the applicable license, including claims of intellectual property rights infringement or for breach of contract. Furthermore, there exists today an increasing number of types of open source software licenses, almost none of which have been tested in courts of law to provide clarity on their proper legal interpretation. If we were to receive a claim of non-compliance with the terms of any of these open source licenses, we may be required to publicly release certain portions of our proprietary source code. We could also be required to expend substantial time and resources to re-engineer some or all of our software. Any of the foregoing could materially adversely affect our business, financial condition, results of operations, and prospects.
In addition, the use of third-party open source software typically exposes us to greater risks than the use of third-party commercial software because open source licensors generally do not provide warranties or controls on the functionality or origin of the software. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform. Any of the foregoing could materially adversely affect our business, financial condition, results of operations, and prospects and could help our competitors develop products and services that are similar to or better than ours.
We rely on third parties to provide us with a number of operational and technical services; third-party security incidents could result in the loss of our or our customers’ data, expose us to liability, harm our reputation, damage our competitiveness, and adversely impact our financial results.
We rely on third parties, such as Amazon Web Services, to provide us with operational and technical services. These third parties may have access to our systems, provide hosting services, or otherwise process data about us or our customers, employees, or partners. Our ability to monitor such third parties’ security measures is limited. There have been and may continue to be significant supply chain attacks, and we cannot guarantee that our or our such third parties’ systems have not been breached or that they do not contain exploitable defects, bugs, or vulnerabilities that could result in an incident, breach, or other disruption to, our or these third parties’ systems. Any security incident involving such third parties could compromise the integrity or availability of, or result in the theft of, our and our customers’ data. In addition, our operations or the operations of our customers or partners could be negatively affected in the event of a security incident and could be subject to the loss or theft of confidential or proprietary information, including source code. Unauthorized access to data and other confidential or proprietary information may be obtained through break-ins, network breaches by unauthorized parties, employee theft or misuse, or other misconduct. If any of the foregoing were to occur or to be perceived to occur, our reputation may suffer, our competitive position may be diminished, customers may buy fewer of our offerings and services, we could face lawsuits, regulatory investigation, fines, and potential liability, and our financial results could be negatively impacted.
Delays in service from third-party service providers could expose us to liability, harm our reputation, damage our competitiveness, and adversely impact our financial results.
From time to time, we may rely on a single or limited number of suppliers, or upon suppliers in a single country, for the provision of services and materials that we use in the operation of our business and production of our solutions. Inability of such third parties to satisfy our requirements could disrupt our operations or make it more difficult for us to implement our strategy. If any of these situations were to occur, our reputation could be harmed, we could be subject to third-party liability, including under data protection and privacy laws in certain jurisdictions, and our financial results could be negatively impacted.
We are investing in resources to update and improve our information technology systems to digitize Autodesk and support our customers. Should our investments not succeed, or if delays or other issues with new or existing information technology systems disrupt our operations, our business could be harmed.
We rely on our network and data center infrastructure, technology systems, and websites for our development, marketing, operational, support, sales, accounting, and financial reporting activities. We continually invest resources to update and improve these systems to meet the evolving requirements of our business and customers. In particular, our transition to cloud-based products and a subscription-only business model involves considerable investment in the development of technologies, as well as back-office systems for technical, financial, compliance, and sales resources. Such improvements are often complex, costly, and time consuming. In addition, such improvements can be challenging to integrate with our existing technology systems, or may uncover problems with those systems. Unsuccessful implementation of hardware or software updates and improvements
could result in disruption in our business operations, loss of customers, loss of revenue, errors in our accounting and financial reporting, or damage to our reputation, all of which could harm our business.
Our software is highly complex and may contain undetected errors, defects, or vulnerabilities, each of which could harm our business and financial performance.
The software solutions that we offer are complex and, despite extensive testing and quality control, may contain errors, defects, or vulnerabilities. Some errors, defects, or vulnerabilities in our software solutions may only be discovered after they have been released. Any errors, defects, or vulnerabilities could result in the need for corrective releases to our software solutions, damage to our reputation, loss of revenue, an increase in subscription cancellations, or lack of market acceptance of our offerings, any of which would likely harm our business and financial performance.
If we do not maintain good relationships with the members of our distribution channel, or if our distribution channel suffers financial losses, becomes financially unstable or insolvent, or is not provided the right mix of incentives to sell our subscriptions, our ability to generate revenue will be adversely affected.
We sell our software products both directly to end users and through a network of distributors and resellers. For fiscal 2022 and 2021, approximately 65% and 69%, respectively, of our revenue was derived from indirect channel sales through distributors and resellers, and we expect that the majority of our revenue will continue to be derived from indirect channel sales in the near future. Our ability to effectively distribute our solutions depends in part upon the financial and business condition of our distributor and reseller network. Computer software distributors and resellers typically are not highly capitalized, and have previously experienced difficulties during times of economic contraction as well as during the past several years. We have processes to ensure that we assess the creditworthiness of distributors and resellers prior to our sales to them. In the past we have taken steps to support them, and may take additional steps in the future, such as extending credit terms and adjusting our incentives. These steps, if taken, could harm our financial results. If our distributors and resellers were to become insolvent, they would not be able to maintain their business and sales or provide customer support services, which would negatively impact our business and revenue.
We rely significantly upon major distributors and resellers in both the U.S. and international regions, including the distributors Tech Data and Ingram Micro. Tech Data accounted for 36% and 37% of our total net revenue for fiscal 2022 and 2021, respectively, and Ingram Micro accounted for 9% and 10% of our total net revenue for fiscal 2022 and 2021, respectively. Should any of our agreements with Tech Data or Ingram Micro be terminated, we believe the resellers and end users who currently purchase our products through Tech Data or Ingram 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 either Tech Data or Ingram Micro. However, if either distributor were to experience a significant business disruption or if our relationship with either were to significantly deteriorate, it is possible that our ability to sell to end users would, at least temporarily, be negatively impacted. This could, in turn, negatively impact our financial results. For example, in June 2020, an affiliate of funds managed by affiliates of Apollo Global Management, a global alternative investment manager, acquired Tech Data, and in July 2021, Platinum Equity, a global investment firm, acquired Ingram Micro from HNA Technology Co., Ltd. If there is any reseller or end user uncertainty caused by either acquisition, our ability to sell to these resellers and end users could, at least temporarily, be negatively impacted.
Over time, we have modified and will continue to modify aspects of our relationship with our distributors and resellers, such as their incentive programs, pricing to them, and our distribution model to motivate and reward them for aligning their businesses with our strategy and business objectives. Changes in these relationships and underlying programs could negatively impact their business and harm our business. Further, our distributors and resellers may lose confidence in our business, move to competitive products, or not have the skills or ability to support customers. The loss of or a significant reduction in business with those distributors or resellers could harm our business. In particular, if one or more of such distributors or resellers were unable to meet their obligations with respect to accounts payable to us, we could be forced to write off such accounts and may be required to delay the recognition of revenue on future sales to these customers. These events could have a material adverse effect on our financial results.
We rely on software from third parties, and a failure to properly manage our use of third-party software could result in increased costs or loss of revenue.
Many of our products are designed to include software licensed from third parties. Such third-party software includes software licensed from commercial suppliers and under public open source licenses. While we have internal processes to
manage our use of such third-party software, if such processes are inadequate, we may be subject to copyright infringement or other third-party claims. If we are non-compliant with a license for commercial software, we may be required to pay penalties or undergo costly audits pursuant to the license agreement. In the case of open-source software licensed under certain “copyleft” licenses, the license itself, or a court-imposed remedy for non-compliant use of the open source software, may require that proprietary portions of our own software be publicly disclosed or licensed. This could result in a loss of intellectual property rights, increased costs, re-engineering of our software, damage to our reputation, or loss of revenue.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties, support, indemnities, assurances of title or controls on origin of the software, or other contractual protections regarding infringement claims or the quality of the code. Likewise, some open source projects have known security and other vulnerabilities and architectural instabilities, or are otherwise subject to security attacks due to their wide availability, and are provided on an “as-is” basis.
Our business could be adversely affected if we are unable to attract and retain key personnel.
Our success and ability to invest and grow depend largely on our ability to attract and retain highly skilled technical, professional, managerial, sales, and marketing personnel. Historically, competition for these key personnel has been intense. The loss of services of any of our key personnel, (includingincluding key personnel joining our company through acquisitions), theacquisitions, inability to retain and attract qualified personnelemployees in the future, or delays in hiring required personnel, particularly engineering and sales personnel, could make it difficult to meet key objectives, such as timely and effective product introductions and financial goals.
Our investment portfolio consists of a variety of investment vehicles in a number of countries that are subject to interest rate trends, market volatility, and other economic factors. If general economic conditions decline, this could cause the credit ratings of our investments to deteriorate, illiquidity in the financial marketplace, and we may experience a decline in interest income and an inability to sell our investments, leading to impairment in the value of our investments.
It is our policy to invest our cash, cash equivalents and marketable securities in highly liquid instruments with, and in the custody of, financial institutions with high credit ratings and to limit the amounts invested with any one institution, type of security and issuer. However, we are subject to general economic conditions, interest rate trends and volatility in the financial marketplace that can affect the income that we receive from our investments, the net realizable value of our investments (including our cash, cash equivalents and marketable securities) and our ability to sell them. Any one of these factors could reduce our investment income, or result in material charges, which in turn could impact our overall net income (loss) and earnings (loss) per share.
From time to time we make direct investments in privately held companies. Privately held company investments are considered inherently risky. The technologies and products these companies have under development are typically in the early stages and may never materialize, which could result in a loss of all or a substantial part of our initial investment in these companies. The evaluation of privately held companies is based on information that we request from these companies, which is not subject to the same disclosure regulations as U.S. publicly traded companies, and as such, the basis for these evaluations is subject to the timing and accuracy of the data received from these companies.
A loss on any of our investments may cause us to record an other-than-temporary impairment charge. The effect of this charge could impact our overall net income (loss) and earnings (loss) per share. In any of these scenarios, our liquidity may be negatively impacted, which in turn may prohibit us from making investments in our business, taking advantage of opportunities and potentially meeting our financial obligations as they come due.
We are subject to legal proceedings and regulatory inquiries, and we may be named in additional legal proceedings or become involved in regulatory inquiries in the future, all of which are costly, distracting to our core business and could result in an unfavorable outcome, or a material adverse effect on our business, financial condition, results of operations, cash flows or the trading prices for our securities.
We are involved in legal proceedings and receive inquiries from regulatory agencies. As the global economy has changed and our business has evolved, we have seen an increase in litigation activity and regulatory inquiries. Like many other high technology companies, the number and frequency of inquiries from U.S. and foreign regulatory agencies we have received regarding our business and our business practices, and the business practices of others in our industry, have increased in recent years. In the event that we are involved in significant disputes or are the subject of a formal action by a regulatory agency, we could be exposed to costly and time consuming legal proceedings that could result in any number of outcomes. Any claims or regulatory actions initiated by or against us, whether successful or not, could result in expensive costs of defense, costly damage awards, injunctive relief, increased costs of business, fines or orders to change certain business practices, significant dedication of management time, diversion of significant operational resources, or otherwise harm our business. In any of these cases, our financial results, results of operations, cash flows or the trading prices for our securities could be negatively impacted.
We are subject to risks related to taxation in multiple jurisdictions.
We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our effective tax rate is primarily based on our expected geographic mix of earnings, statutory rates, intercompany arrangements, including the manner in which we develop, value and license our intellectual property, and enacted tax rules. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions on a worldwide basis. While we believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be overturned by jurisdictional tax authorities and may have a significant impact on our effective tax rate.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. For example, the U.S. government enacted significant tax law changes in December 2017, the Tax Act, which impacted our tax obligations and effective tax rate beginning in our fiscal 2018 tax year. Increasingly, governmental tax authorities are scrutinizing corporate tax strategies. Many countries in the European Union, as well as other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in many countries where we do business. If U.S. or other foreign tax authorities change applicable tax laws or successfully challenge the manner in which our profits are currently recognized, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.
Uncertainties in the interpretation and application of the Tax Act could materially affect our tax obligations and effective tax rate.
The Tax Act was enacted on December 22, 2017, and provides broad and significant changes to the U.S. tax code and how the U.S. imposes income tax on multinational corporations. Due to the complexity and varying interpretations of the Tax Act, the U.S. Department of Treasury and other standard-setting bodies have been issuing and will be issuing regulations and interpretative guidance that could significantly impact how we will apply the law and the ultimate impact to our results of operations from the Tax Act.
The Tax Act requires complex computations to be performed that were not previously provided for in the U.S. tax law. These computations require significant judgments to be made regarding the interpretation of the provisions within the Tax Act and treasury regulations issued thereunder, along with preparation and analysis of information not previously required. As additional regulatory guidance is issued, we may make amendments to prior year tax returns.
Changes in existing financial accounting standards or practices, or taxation rules or practices may adversely affect our results of operations.
Changes in existing accounting or taxation rules or practices, new accounting pronouncements or taxation rules, or varying interpretations of current accounting pronouncements or taxation practice could have a significant adverse effect on our results of operations or the manner in which we conduct our business. Further, such changes could potentially affect our reporting of transactions completed before such changes are effective.
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting. The report contains, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management.
If our management or independent registered public accounting firm identifies one or more material weaknesses in our internal control over financial reporting, we would be unable to assert that such internal control over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is effective (or if our independent registered public accounting firm is unable to express an opinion that our internal controls are effective), we could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our business and stock price.
In preparing our financial statements we make certain assumptions, judgments and estimates that affect amounts reported in our consolidated financial statements, which, if not accurate, may significantly impact our financial results.
We make assumptions, judgments and estimates for a number of items, including revenue recognition for our hybrid desktop software and cloud service subscriptions, the fair value of financial instruments, goodwill, long-lived assets and other intangible assets, the realizability of deferred tax assets and the fair value of stock awards. We also make assumptions, judgments and estimates in determining the accruals for employee related liabilities including commissions, bonuses, and sabbaticals; and in determining the accruals for uncertain tax positions, partner incentive programs, product returns reserves, allowances for doubtful accounts, asset retirement obligations and legal contingencies. These assumptions, judgments and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual results could differ materially from our estimates, and such differences could significantly impact our financial results.
We rely on third partythird-party technologies and if we are unable to use or integrate these technologies, our solutions and service development may be delayed and our financial results negatively impacted.
We rely on certain software that we license from third parties, including software that is integrated with internally developed software and used in our offerings to perform key functions. These third-party software licenses may not continue to be available on commercially reasonable terms, and the software may not be appropriately supported, maintained, or enhanced by the licensors. The loss of licenses to, or inability to support, maintain, and enhance any such software could result in increased costs or delays until equivalent software can be developed, identified, licensed, and integrated, which would likely harm our business.
Disruptions within licensing relationships and third partywith third-party developers could adversely impact our business.
We license certain key technologies from third parties. Licenses may be restricted in the term or the use of such technology in ways that negatively affect our business. Similarly, we may not be able to obtain or renew license agreements for key technology on favorable terms, if at all, and any failure to do so could harm our business.
Our business strategy has historically depended in part on our relationships with third-party developers who provide products that expand the functionality of our design software. Some developers may elect to support other products or may experience disruption in product development and delivery cycles or financial pressure during periods of economic downturn. In particular markets, such disruptions have in the past, and would likely in the future, negatively impact these third-party developers and end users, which could harm our business.
Additionally, technologyTechnology created by outsourced product development, whether outsourced to third parties or developed externally and transferred to us through business or technology acquisitions, has certaininvolves additional risks such as effective integration into existing products, adequate transfer of technology know-how, and ownership and protection of transferred intellectual property.
2019 Form 10-K 27Increasing regulatory focus on privacy, data protection, and information security issues and new and expanding laws may impact our business and expose us to increased liability.
cloud- and web-based technologies and applications to leverage customer data to improve our offerings for the benefit of our customers. To accomplish this strategy, we must collect and otherwise process customer data, which may include personal data and personal information of users from different jurisdictions globally. We also collect and otherwise process personal data and personal information of our employees and contractors. As a result, federal, state, and global laws relating to privacy, data protection, and information security apply to Autodesk’s personal data and personal information processing activities. The scope of these laws and regulations is rapidly
evolving, subject to differing interpretations, may be inconsistent among jurisdictions, or conflict with other rules and is likely to remain uncertain for the foreseeable future. We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. Globally, laws such as the General Data Protection Regulation (EU) 2016/679 (“GDPR”) in the European Union (“EU”) and the Personal Information Protection Law (“PIPL”) in China have been enacted. In addition, new and emerging state laws in the United States governing privacy, data protection, and information security, such as the California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”), the Virginia Consumer Data Protection Act (“VCDPA”), and the Colorado Privacy Act (“CPA”) have been enacted. These laws and regulations, as well as industry self-regulatory codes, create new compliance obligations and substantially expand the scope of potential liability and provide greater penalties for non-compliance. For example, the GDPR provides for penalties of up to €20 million or 4% of a company’s annual global revenue, whichever is greater, the PIPL provides for penalties of up to 50 million renminbi or 5% of a company's annual revenue and disgorgement of all illegal gains, whichever is greater, and the CCPA provides for penalties of up to $7,500 per violation. These laws, regulations and codes may also impact our innovation and business drivers in developing new and emerging technologies (e.g., artificial intelligence and machine learning). These requirements, among others, may impact demand for our offerings and force us to bear the burden of expanded obligations in our contracts.
In addition, there is continued instability of international personal data transfer legal mechanisms that are complex, uncertain, and subject to active litigation and enforcement actions in a number of jurisdictions around the world. For example, on June 4, 2021, the European Commission published a new set of modular standard contractual clause (“SCCs”), providing for an 18-month implementation period, which became effective on June 29, 2021, and imposes on companies obligations relating to personal data transfers, including the obligation to conduct a transfer impact assessment and, depending on a party’s role in the transfer, to implement additional security measures and to update internal privacy practices. If we elect to rely on the new SCCs for personal data transfers, we may be required to expend significant time and resources to update our contractual arrangements and to comply with new obligations. If we are unable to implement a valid mechanism for personal data transfers from the EU, we will face increased exposure to regulatory actions, substantial fines and injunctions against processing personal data from the EU.
In addition, the United Kingdom’s (“UK”) exit from the EU, and ongoing developments in the UK, have created uncertainty with regard to data protection regulation in the UK. Data processing in the UK is now governed by the UK General Data Protection Regulation and supplemented by other domestic data protection laws, such as the UK Data Protection Act 2018, which authorizes fines of up to £17.5 million or 4% of annual global revenue, whichever is higher. We are also exposed to potentially divergent enforcement actions for certain violations. Furthermore, the new SCCs apply only to the transfer of personal data outside the EU and not the UK. Although the European Commission adopted an adequacy decision for the UK on June 28, 2021, allowing the continued flow of personal data from the EU to the UK, this decision will be regularly reviewed going forward and may be revoked if the UK diverges from its current adequate data protection laws following its exit from the EU. On February 2, 2022, the UK’s Information Commissioner’s Office issued new standard contractual clauses to support personal data transfers out of the UK (“UK SCCs”). If approved by the UK Parliament, the UK SCCs will become effective March 21, 2022, and we may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing personal data on our behalf or localize certain personal data.
Several other countries, including China, Australia, New Zealand, Brazil, and Japan, have also established specific legal requirements for cross-border data transfers. There is also an increasing trend towards data localization policies. For example, in 2015, Russia introduced data localization laws. In 2021, China introduced localization requirements for certain data. There are also other countries, such as India, that are considering data localization requirements. If this trend continues, and countries implement more restrictive regulations for cross-border personal data transfers (or do not permit personal data to leave the country of origin), our business, financial condition, and results of operations in those jurisdictions could be impacted.
In addition, the new state laws – the CPRA and the VCDPA – that become effective on January 1, 2023, and the CPA that becomes effective on July 1, 2023, introduce additional obligations such as data minimization and storage limitations, granting additional rights to consumers such as correction of personal information and additional opt-out rights. The CPRA also creates a new agency to implement and enforce the law. These new state laws will require us to modify our data processing practices and policies and may cause us to incur substantial costs and expenses in order to comply. Laws in all 50 states, and some of our strategycontracts, require us to provide notice under certain circumstances to customers whose personal information has been disclosed as a result of partneringa data breach. Also, if third parties we work with, such as suppliers, violate applicable data protection laws or regulations, such violations may also put our users’ information at risk and could materially adversely affect our business, financial condition, results of operations, and prospects. Additionally, in addition to government activity, privacy advocacy
groups and technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. Evolving legislation and the interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues and have and may cause variation in requirements, increase restrictions and potential legal risk and impact strategies and the availability of previously useful data, potentially exposing us to additional expense, adverse publicity, and liability.
In the EU and the UK, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation, which is expected to significantly increase fines for non-compliance. While the text of the ePrivacy Regulation is under development, recent European case law and regulators’ recent guidance are driving increased attention to cookies and tracking technologies. This could lead to substantial costs, require significant system changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs, and subject us to additional liabilities. Regulation of cookies and similar technologies, and any decline of cookies or similar online tracking technologies as a means to identify and potentially target users, may lead to broader restrictions and impairments on our marketing and personalization activities and may negatively impact our efforts to understand our customers.
Governments, regulators, plaintiffs’ attorneys, privacy advocates have increased their focus on how companies for productcollect, process, use, store, share, and transmit personal data and personal information. Any perception of our practices, products, offerings, or services as a violation of individual privacy or data protection rights may subject us to public criticism, lawsuits, reputational harm, or investigations or claims by regulators, industry groups or other third parties, all of which could disrupt or adversely impact our business and expose us to increased liability. Moreover, because the interpretation and application of many laws and regulations relating to privacy, data protection, and information security are uncertain, it is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products, offerings, and services. We could be required to fundamentally change our business activities and practices or modify our offerings and services, any of which could require significant additional expense and adversely affect our business, including impacting our ability to innovate, delaying our development roadmap and adversely affecting our productrelationships with customers and our ability to compete. If we are obligated to fundamentally change our business activities and practices or modify our products, offerings, or services, we may be unable to make such changes and modifications in a commercially reasonable manner, or at all, and our ability to develop new products, offerings, and services could be limited.
We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.
Our offerings are subject to export controls and economic sanctions laws and regulations that prohibit the delivery schedules couldof certain solutions and services without the required export authorizations or export to locations, governments, and persons targeted by applicable sanctions. While we have processes to prevent our offerings from being exported in violation of these laws, including obtaining authorizations as appropriate and screening against U.S. government and international lists of restricted and prohibited persons, we cannot guarantee that these processes will prevent all violations of export control and sanctions laws.
If our channel partners fail to obtain appropriate import, export, or re-export licenses or permits, we may also be adversely affected, ifthrough reputational harm as well as other negative consequences including government investigations and penalties. We presently incorporate export control and sanctions compliance requirements in our channel partner agreements. Complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Violations of applicable sanctions or export control laws can result in fines or penalties.
For additional risks regarding sanctions and trade protectionism, please see the risk factor entitled “We are dependent on international revenue and operations . . .” earlier in this section.
If we experience difficulties withare not able to adequately protect our product development partners.proprietary rights, our business could be harmed.
We partner with certain independent firmsrely on a combination of patent, copyright, and contractorstrademark laws, trade secret protections, confidentiality procedures, and contractual provisions to perform some ofprotect our product development activities. We believeproprietary rights. However, the steps we take to protect our partnering strategy allows us to, among other things, achieve efficiencies in developing new products and maintaining and enhancing existing product offerings. Our partnering strategy creates a dependency on such independent developers. Independent developers, including those who currently develop solutions for usintellectual property rights may be inadequate. While we have patent applications pending in the U.S.United States and throughout the world, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued to us in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Furthermore,
legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our efforts to protect our proprietary rights, unauthorized parties from time to time have copied or reverse engineered aspects of our software or have obtained and used information that we regard as proprietary. Policing unauthorized use of our software is time-consuming and costly. We are unable to measure the extent to which unauthorized use of our software exists and we expect that unauthorized use of software will remain a persistent problem, particularly in emerging economies.
Additionally, we actively protect the secrecy of our confidential information and trade secrets, including our source code. If unauthorized disclosure of our source code occurs, we could potentially lose future trade secret protection for that source code. Unauthorized disclosure of our source code could make it easier for third parties to compete with our offerings by copying functionality, which could adversely affect our financial performance and our reputation. We also seek to protect our confidential information and trade secrets through the use of non-disclosure agreements with our employees, customers, contractors, vendors, and partners. However, it is possible that our confidential information and trade secrets may be disclosed or published without our authorization. If this were to occur, it may be difficult and/or costly for us to enforce our rights, and our financial performance and reputation could be negatively impacted.
We may face intellectual property infringement claims that could be costly to defend and result in the loss of significant rights.
Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our business. Third parties may claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such rights, even if we are unaware of the intellectual property rights claimed against us. As more software patents are granted worldwide, the number of offerings and competitors in our industries grows, and the functionality of products in different industries overlaps, we expect that software developers will be increasingly subject to infringement claims. Additionally, certain patent assertion entities have become more aggressive in threatening and pursuing litigation in attempts to obtain fees for licensing the right to use patents.
Any claims or threats of infringement or misappropriation, whether with or without merit, have been and could in the future be time-consuming to defend, result in costly litigation and diversion of resources, cause product delays, require us to change our products or business practices, prevent us from offering our software and services, or require us to enter into royalty or licensing agreements. In addition, such royalty or license agreements, if required, may not be available on acceptable terms, if at all, which would likely harm our business. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications, or refund fees, which could be costly. Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims.
Contracting with government entities exposes us to additional risks inherent in the government procurement process.
We provide products and services, directly and indirectly, to a variety of government entities. Risks associated with licensing and selling products and services to government entities include extended sales and collection cycles, varying governmental budgeting processes, and adherence to complex procurement regulations and other government-specific contractual requirements. We may be subject to audits and investigations relating to our government contracts and any violations could result in civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.
Risks Relating to Financial Developments
We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
Because we conduct a substantial portion of our business outside the United States, we face exposure to adverse movements in foreign currency exchange rates, which could have a material adverse impact on our financial results and cash flows. These exposures may change over time as business practices evolve and economic conditions change. We use derivative instruments to manage a portion of our cash flow, revenue and expense exposure to fluctuations in foreign currency exchange rates. As part of our risk management strategy, we use foreign currency contracts to manage a portion of our exposures of underlying assets, liabilities, and other obligations, which exist as part of our ongoing business operations. These foreign currency instruments may have maturities that extend for one to 18 months in the future and provide us with some protection against currency exposures. However, our attempts to hedge against these risks may not be completely successful, resulting in an adverse impact on our financial results.
The fluctuations of currencies in which we conduct business can both increase and decrease our overall revenue and expenses for any given period. Although our foreign currency cash flow hedge program extends beyond the current quarter in order to reduce our exposure to foreign currency volatility, we do not attempt to completely mitigate this risk, and in any case, will incur transaction fees in adopting such hedging programs. Such volatility, even when it increases our revenues or decreases our expenses, impacts our ability to accurately predict our future results and earnings.
In addition, global events, including the sudden and unexpected effects of the COVID-19 pandemic as well as geopolitical developments, may contribute to volatility in foreign exchange markets, which we may not be able or willing to provide development support to useffectively manage, and our financial results could be adversely impacted. Additionally, countries in the future. In addition, use of development resources through consulting relationships, particularly in non-U.S. jurisdictions with developing legal systems,which we operate may be adversely impacted by,classified as highly inflationary economies, requiring special accounting and expose us to risks relating to, evolving employment, export and intellectual property laws. These risks could, among other things, expose our intellectual property to misappropriation and result in disruptions to product delivery schedules.
Our businessfinancial reporting treatment for such operations, or such countries’ currencies may be significantly disrupted upon the occurrence of a catastrophic event.
Our business is highly automated and relies extensively on the availability of our network and data center infrastructure, our internal technology systems and our websites. We also rely on hosted computer services from third parties for services that we provide to our customers and computer operations for our internal use. The failure of our systemsdevalued, or hosted computer services due to a catastrophic event, such as an earthquake, fire, flood, tsunami, weather event, telecommunications failure, power failure, cyber attack, terrorism, or war, couldboth, which may adversely impact our business financial resultsoperations and financial condition. results.
Our debt service obligations may adversely affect our financial condition and cash flows from operations.
We have developed disaster recovery plans$2.65 billion of principal debt, consisting of notes due at various times from December 2022 to December 2031, as described in Part 2, Item 8. We also entered into a credit agreement that provides for an unsecured revolving loan facility in the aggregate principal amount of $1.5 billion, with an option to be increased up to $2.0 billion, as described in Part 2, Item 8. Maintenance of our indebtedness, contractual restrictions, and maintain backup systemsadditional issuances of indebtedness could:
•cause us to dedicate a substantial portion of our cash flows from operations towards debt service obligations and principal repayments;
•increase our vulnerability to adverse changes in ordergeneral economic, industry, and competitive conditions;
•limit our flexibility in planning for, or reacting to, reducechanges in our business and our industry;
•impair our ability to obtain future financing for working capital, capital expenditures, acquisitions, general corporate, or other purposes; and
•due to limitations within the potentialdebt instruments, restrict our ability to grant liens on property, enter into certain mergers, dispose of all or substantially all of the assets of Autodesk and its subsidiaries, taken as a whole, materially change our business, and incur subsidiary indebtedness, subject to customary exceptions.
We are required to comply with the covenants set forth in our credit agreement. If we breach any of the covenants and do not obtain a waiver from the note holders or lenders, then, subject to applicable cure periods, we would not be able to incur additional indebtedness under the credit agreement described in Part 2, Item 8, and any outstanding indebtedness under the credit agreement may be declared immediately due and payable. In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of our securities. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the interest rate payable by us under our credit agreement could increase. Downgrades in our credit ratings could also restrict our ability to obtain additional financing in the future and could affect the terms of any such financing.
Our investment portfolio consists of a catastrophic event, however therevariety of investment vehicles that are subject to interest rate trends, market volatility, and other economic factors. If general economic conditions decline, this could cause the credit ratings of our investments to deteriorate and illiquidity in the financial marketplace, and we may experience a decline in interest income and an inability to sell our investments, leading to impairment in the value of our investments.
It is our policy to invest our cash, cash equivalents, and marketable securities in highly liquid instruments with, and in the custody of, financial institutions with high credit ratings and to limit the amounts invested with any one institution, type of security, or issuer. However, we are subject to general economic conditions, interest rate trends, and volatility in the financial marketplace that can be no assuranceaffect the income that we receive from our investments, the net realizable value of our investments (including our cash, cash equivalents, and marketable securities), and our ability to sell them. Any one of these plansfactors could reduce our investment income or result in material charges, which in turn could impact our overall net income (loss) and systems would enableearnings (loss) per share.
From time to time we make direct investments in privately held companies. Investments in privately held companies are considered inherently risky. The technologies and products these companies have under development are typically in the early stages and may never materialize, which could result in a loss of all or a substantial part of our initial investment in these companies. The evaluation of privately held companies is based on information that we request from these companies, which is
not subject to the same disclosure regulations as U.S. publicly traded companies and, as such, the basis for these evaluations is subject to the timing and accuracy of the data received from these companies.
A loss on any of our investments may cause us to returnrecord an other-than-temporary impairment charge. The effect of this charge could impact our overall net income (loss) and earnings (loss) per share. In any of these scenarios, our liquidity may be negatively impacted, which in turn may prohibit us from making investments in our business, taking advantage of opportunities, and potentially meeting our financial obligations as they come due.
Changes in tax rules and regulations, and uncertainties in interpretation and application, could materially affect our tax obligations and effective tax rate.
We are a U.S.-based multinational company subject to normal business operations. In addition, any such event could negatively impacttax in multiple U.S. and foreign tax jurisdictions. Our effective tax rate is primarily based on our geographic mix of earnings; statutory rates; intercompany arrangements, including the manner we develop, value, and license our intellectual property; and enacted tax rules. Significant judgment is required in determining our effective tax rate and in evaluating our tax positions on a country or regionworldwide basis. While we believe our tax positions, including intercompany transfer pricing policies, are consistent with the tax laws in the jurisdictions in which we sellconduct our products. Thisbusiness, it is possible that these positions may be challenged by tax authorities and may have a significant impact on our effective tax rate and cash taxes.
Tax laws in the United States and in foreign tax jurisdictions are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. For example, the U.S. government enacted significant tax law changes in December 2017, the U.S. Tax Cuts and Jobs Act (“TCJA”), which impacted our tax obligations and effective tax rate beginning in our fiscal 2018 tax year, and significant tax legislation was included in the March 2020 CARES Act and subsequent Consolidated Appropriations Act in December 2020. Due to the complexity and varying interpretations of the TCJA and the CARES Act, the U.S. Department of Treasury and other standard-setting bodies have been issuing and will continue to issue regulations and interpretative guidance that could in turn decrease that country's or region's demandsignificantly impact how we will apply the law and the ultimate effect on our results of operations from both the TCJA and the CARES Act, including for our products, thereby negatively impactingprior tax years.In addition, increases in corporate tax rates, could increase our effective tax rate, cash taxes and have an adverse effect on our results from operations.
Increasingly, tax authorities are reviewing existing corporate tax regulatory and legal regimes. Many countries in the European Union as well as other countries and organizations such as the Organization for Economic Cooperation and Development are actively considering new taxing regimes and changes to existing tax laws. If U.S. or foreign tax authorities change applicable tax laws or successfully challenge how or where our profits are currently recognized, our overall taxes could increase, and our business, financial results.condition, or results of operations may be adversely impacted.
If we were required to record an impairment charge related to the value of our long-lived assets or an additional valuation allowance against our deferred tax assets, our results of operations would be adversely affected.
Our long-lived assets are tested for impairment if indicators of impairment exist. If impairment testing shows that the carrying value of our long-lived assets exceeds their estimated fair values, we would be required to record a non-cash impairment charge, which would decrease the carrying value of our long-lived assets, as the case may be, andadversely affecting our results of operations would be adversely affected.operations. Our deferred tax assets include net operating loss, amortizable tax assets, and tax credit carryforwards that can be used to offset taxable income and reduce income taxes payable in future periods. Each quarter, we assess the need for a valuation allowance, considering both positive and negative evidence to determine whether all or a portion of the deferred tax assets are more likely than not to be realized. In fiscal 2016,and in fiscal 2018, we determined that it was more likely than not that Autodesk would not realize our U.S. and Singapore deferred tax assets, respectively, and established a valuation allowance against the deferred tax assets. We continuedcontinue to have a full valuation allowance against ourcertain U.S. and Singaporeforeign deferred tax assets in fiscal 2019.assets. Changes in the amount of the U.S. and foreign jurisdictions valuation allowance could also result in a material non-cash expense or benefit in the period in which the valuation allowance is adjusted, and our results of operations could be materially affected. We will continue to perform these tests on our worldwide deferred tax assets, and any future adjustments to the realizability of our deferred tax assets may have a material effect on our financial condition and results of operations.
General Risk Factors
Our business may be significantly disrupted upon the occurrence of a catastrophic event.
Our business is highly automated and relies extensively on the availability of our network and data center infrastructure, our internal technology systems, and our websites. We also rely on hosted computer services from third parties for services that we provide to our customers and computer operations for our internal use. The failure of our systems or hosted computer
services due to a catastrophic event, such as an earthquake, fire, flood, tsunami, weather event, telecommunications failure, power failure, cyber attack, terrorism or war (including the significant military action against Ukraine launched by Russia and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy), or business interruption from epidemics or pandemics, or the fear of such events, could adversely impact our business, financial results, and financial condition. For example, our corporate headquarters and executive offices are located near major seismic faults in the San Francisco Bay Area and face annual periods of wildfire danger, which increase the probability of power outages and may impact employees’ abilities to commute to work or to work from home. We have developed disaster recovery plans and maintain backup systems in order to reduce the potential impact of a catastrophic event; however, there can be no assurance that these plans and systems would enable us to return to normal business operations. In addition, any such event could negatively impact a country or region in which we sell our products. This could in turn decrease that country’s or region’s demand for our products, negatively impacting our financial results.
We are subject to legal proceedings and regulatory inquiries, and we may be named in additional legal proceedings or become involved in regulatory inquiries in the future, all of which are costly, distracting to our core business, and could result in an unfavorable outcome or a material adverse effect on our business, financial condition, results of operations, cash flows, or the trading prices for our securities.
We are involved in legal proceedings and receive inquiries from regulatory agencies. As the global economy has changed and our business has evolved, we have seen an increase in litigation activity and regulatory inquiries. Like many other technology companies, the number and frequency of inquiries from U.S. and foreign regulatory agencies we have received regarding our business and our business practices, as well as the business practices of others in our industry, have increased in recent years. In the event we are involved in significant disputes or are the subject of a formal action by a regulatory agency, we could be exposed to costly and time-consuming legal proceedings that could result in any number of outcomes. Any claims or regulatory actions initiated by or against us, whether successful or not, could result in high defense costs, damage awards, injunctive relief, increased costs of business, fines or orders to change certain business practices, significant dedication of management time, diversion of operational resources, or otherwise harm our business. In any such event, our financial results, results of operations, cash flows, or trading prices for our securities could be negatively impacted.
Changes in existing financial accounting standards or practices, or taxation rules or practices may adversely affect our results of operations.
Changes in existing accounting or taxation rules or practices, new accounting pronouncements or taxation rules, or varying interpretations of current accounting pronouncements or taxation practices could have a significant adverse effect on our results of operations or the way we conduct our business. Further, such changes could potentially affect our reporting of transactions completed before such changes are effective.
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to furnish a report by our management on our internal control over financial reporting, including an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year. This assessment must include a statement as to whether or not our internal control over financial reporting is effective and disclosure of any material weaknesses in our internal control over financial reporting identified by management. If our management or independent registered public accounting firm identifies one or more material weaknesses in our internal control over financial reporting, we are unable to assert that our internal control over financial reporting is effective, or our independent registered public accounting firm is unable to express an opinion that our internal controls are effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our business and stock price.
In preparing our financial statements we make certain assumptions, judgments, and estimates that affect amounts reported in our consolidated financial statements which, if not accurate, may significantly impact our financial results.
We make assumptions, judgments, and estimates for a number of items, including revenue recognition for product subscriptions and enterprise business arrangements (“EBAs”), the determination of the fair value of acquired assets and liabilities, goodwill, financial instruments including strategic investments, long-lived assets, and intangible assets, the realizability of deferred tax assets, and the fair value of stock awards. We also make assumptions, judgments, and estimates in determining the accruals for uncertain tax positions, variable compensation, partner incentive programs, product returns
reserves, allowances for credit losses, asset retirement obligations, legal contingencies, and operating lease liabilities. These assumptions, judgments, and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual results could differ materially from our estimates, and such differences could significantly impact our financial results.
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ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 1B.UNRESOLVED STAFF COMMENTS
None.
We lease approximately 2,200,0001,830,000 square feet of office space in 107101 locations in the United States and internationally through our foreign subsidiaries. Our executive offices are located in leased office space in San Francisco, California, and our corporate headquarters are located in leased office space in San Rafael, California. Our San Rafael facilities consist of approximately 162,000116,000 square feet under leases that have an expiration date ofexpire in December 2019.2024. Our San Francisco facilities consist of approximately 287,000284,000 square feet under leases that have expiration dates ranging from April 2019December 2022 to December 2023.June 2026. We and our foreign subsidiaries lease additional space in various locations throughout the world for local sales, product development, and technical support personnel.
All facilities are in good condition. OurThe 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 the square footage of our facilities areportfolio by approximately 20 percent worldwide and incurred impairments to assets associated with our operating at capacities averaging 86% occupancy worldwide as of leases for real estate in the fiscal year ended January 31, 2019.2022, and expect to incur impairments over the next several quarters. See Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Note 9, “Leases,” in the Notes to Consolidated Financial Statements for more information. We believe that our existing facilities and offices are adequate to meet our requirements for the foreseeable future.
future. See Note 9, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements for more information about our lease commitments.
ITEM 3.LEGAL PROCEEDINGS
We are involved in a variety of claims, suits, investigations, inquiries, and proceedings in the normal course of business activities including claims of alleged infringement of intellectual property rights, commercial, employment, piracytax, prosecution of unauthorized use, business practices, and other matters. In our opinion, resolution of pending matters is not expected to have a material adverse impact on our consolidated results of operations, cash flows, or financial position. Given the unpredictable nature of legal proceedings, there is a reasonable possibility that an unfavorable resolution of one or more such proceedings could in the future materially affect our results of operations, cash flows, or financial position in a particular period, however, based on the information known by us as of the date of this filing and the rules and regulations applicable to the preparation of our financial statements, any such amount is either immaterial or it is not possible to provide an estimated amount of any such potential loss.
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ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
2019 Form 10-K 2934
PART II
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ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION FOR COMMON STOCK
Our common stock is traded on the Nasdaq Global Select Market under the symbol ADSK.
DIVIDEND POLICY
We anticipate that, for the foreseeable future, we will not pay any cash or stock dividends.
STOCKHOLDERS
As of January 31, 2019,2022, the number of common stockholders of record was 376.316. Because many of our shares of common stock are held by brokers or other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by the record holders.
ISSUER PURCHASES OF EQUITY SECURITIES
Autodesk'sAutodesk’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-negotiatedprivately negotiated transactions, accelerated share repurchase programs, tender offers, or by other means. The share repurchase program does not have an expiration date and the pace and timing of repurchases will depend on factors such as cash generation from operations, available surplus, the volume of employee stock plan activity, remaining shares available in the authorized pool, cash requirements for acquisitions, economic and market conditions, stock price, and legal and regulatory requirements.
The following table provides information about the repurchase of common stock in open-market transactions during the quarter ended January 31, 2019:2022:
| | | (Shares in millions) | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2) | (Shares in millions) | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(2) |
| November 1- November 30 | 0.2 |
| | $ | 133.83 |
| | 0.2 |
| | 17.4 |
| |
| November 1 - November 30 | | November 1 - November 30 | 0.3 | | | $ | 279.82 | | | 0.3 | | | 10.1 | |
| December 1 - December 31 | — |
| | — |
| | — |
| | 17.4 |
| December 1 - December 31 | 1.3 | | | 272.30 | | | 1.3 | | | 8.8 | |
| January 1 - January 31 | — |
| | — |
| | — |
| | 17.4 |
| January 1 - January 31 | 0.7 | | | 251.00 | | | 0.7 | | | 8.1 | |
| Total | 0.2 |
| | $ | 133.83 |
| | 0.2 |
| | | Total | 2.3 | | | $ | 267.22 | | | 2.3 | | |
____________________
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(1) | Represents shares purchased in open-market transactions under the stock repurchase program approved by the Board of Directors. |
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(2) | These amounts correspond to the plan publicly announced and approved by the Board of Directors in September 2016 that authorizes the repurchase of 30.0 million shares. The plan does not have a fixed expiration date. |
(2)These amounts correspond to the plan publicly announced and approved by the Board of Directors in September 2016 that authorizes the repurchase of 30.0 million shares. The plan does not have a fixed expiration date.
SALES OF UNREGISTERED SECURITIES
There were no salesIn connection with acquisitions completed in the fourth fiscal quarter of unregistered securities during2022, we issued and entered into agreements to issue up to an estimated 52,000 shares of our common stock (based on the three months endedvolume weighted average closing price of our common stock as of January 31, 2019.2022) as part of the consideration for the acquisition, contingent upon the achievement of certain events expected in fiscal years 2023, 2024 and 2025. The exact number of shares will be determined and issued following these events. The issuance of shares of our common stock in these acquisitions will not be registered under the Securities Act of 1933, as amended (the "Securities Act"). Such shares will be issued in private placements exempt from the registration requirements of the Securities Act in reliance on the exemptions set forth in Section 4(a)(2) of the Securities Act and Rule 506 under Regulation D.
2019 Form 10-K 3035
COMPANY STOCK PERFORMANCE
The following graph shows a five-year comparison of cumulative total return (equal to dividends plus stock appreciation) for our Common Stock,common stock, the Standard & Poor’s 500 Stock Index, and the Dow Jones U.S. Software Index. The following graph and related information will not be deemed to be “soliciting material” or to be “filed” with the SEC, nor will such information be incorporated by reference into any filing pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into such filing.
Comparison of Five Year Cumulative Total Stockholder Return (1)
___________________
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(1) | Assumes $100 invested on January 31, 2014, in Autodesk’s stock, the Standard & Poor’s 500 Stock Index, and the Dow Jones U.S. Software Index, with reinvestment of all dividends. Total stockholder returns for prior periods are not an indication of future investment returns. |
2019 Form 10-K 3136
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ITEM 6. | SELECTED FINANCIAL DATA |
The following selected consolidated financial data is not necessarily indicative of results of future operations, and should be read in conjunction with
Item 7
, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes thereto included in Item 8 of this Form 10-K to fully understand factors that may affect the comparability of the information presented below. The financial data for the fiscal years ended January 31, 2019 and 2018 are derived from, and are qualified by reference to, the audited consolidated financial statements that are included in this Form 10-K. The Consolidated Statements of Operations and the Consolidated Statements of Cash Flows data for the fiscal year ended January 31, 2017 are derived from, and are qualified by reference to, the audited consolidated financial statements that are included in this Form 10-K. The Consolidated Balance Sheet data for the fiscal year ended January 31, 2017 and the remaining financial data for the fiscal years ended January 31, 2016 and 2015 are derived from audited, consolidated financial statements which are not included in this Form 10-K.
|
| | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended January 31, |
| | 2019 (1) | | 2018 | | 2017 | | 2016 | | 2015 |
| | (In millions, except per share data) |
| For the fiscal year: | | | | | | | | | |
| Net revenue | $ | 2,569.8 |
| | $ | 2,056.6 |
| | $ | 2,031.0 |
| | $ | 2,504.1 |
| | $ | 2,512.2 |
|
| (Loss) income from operations | (25.0 | ) | | (509.1 | ) | | (499.6 | ) | | 1.3 |
| | 120.7 |
|
| Net (loss) income | (80.8 | ) | | (566.9 | ) | | (582.1 | ) | | (330.5 | ) | | 81.8 |
|
| Cash flow from operations | $ | 377.1 |
| | $ | 0.9 |
| | $ | 169.7 |
| | $ | 414.0 |
| | $ | 708.6 |
|
| Common stock data: | | | | | | | | | |
| Basic net (loss) income per share | $ | (0.37 | ) | | $ | (2.58 | ) | | $ | (2.61 | ) | | $ | (1.46 | ) | | $ | 0.36 |
|
| Diluted net (loss) income per share | $ | (0.37 | ) | | $ | (2.58 | ) | | $ | (2.61 | ) | | $ | (1.46 | ) | | $ | 0.35 |
|
| At year end: | | | | | | | | | |
| Total assets | $ | 4,729.2 |
| | $ | 4,113.6 |
| | $ | 4,798.1 |
| | $ | 5,515.3 |
| | $ | 4,909.7 |
|
| Long-term liabilities | 2,638.9 |
| | 2,246.4 |
| | 1,879.1 |
| | 2,304.7 |
| | 1,290.4 |
|
| Stockholders’ (deficit) equity | $ | (210.9 | ) | | $ | (256.0 | ) | | $ | 733.6 |
| | $ | 1,619.6 |
| | $ | 2,219.2 |
|
____________________
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(1) | Reflects the impact of the adoption of new accounting standards in fiscal year 2019 related to revenue recognition. See Part II, Item 8, Note 1, Business and Summary of Significant Accounting Policies, Accounting Standards Adopted, of our consolidated financial statements for additional information.
|
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ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion in our MD&A and elsewhere in this Form 10-K contains trend analyses and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, including those discussed in “Strategy” and “Overview of Fiscal 2019” below, future net revenue, operating expenses, recurring revenue, annualized recurring revenue, cash flow, other future financial results (by product type and geography), subscriptions and annualized revenue per subscription, the effectivenessanalysis of our efforts to successfully manage transitions to new markets,financial condition and results of operations should be read in conjunction with our ability to increase our subscription base, expected market trends, the impact of plannedconsolidated financial statements and past acquisitions and investment activities, the effects of global economic conditions, the effects of revenue recognition, the effects of recently issued accounting standards, expectations regarding our cash needs, the effects of fluctuationsrelated notes appearing in exchange rates and our hedging activities on our financial results, our ability to successfully expand adoption of our products, our ability to gain market acceptance of new business and sales initiatives, the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries, the timing and amount of purchases under our stock buy-back plan, and the effects of potential non-cash charges on our financial results and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product capability and acceptance, statements regarding our liquidity and short-term and long-term cash requirements, as well as statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the datePart II, Item 8 of this Annual Report on Form 10-K10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and are subject to business and economic risks. As such, ouruncertainties. Our actual results couldmay differ materially from those set forthanticipated in thethese forward-looking statements as a result of a number ofseveral factors, including those set forth above in Part I, Item 1A, “Risk"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 other reports filedcustomers 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 U.S. Securitiestailored tools, services, and Exchange Commission. We assume no obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on whichaccess they were made, except as required by law.
STRATEGY
Autodesk makes softwareneed for people who make things. If you have ever driven a high-performance car, admired a towering skyscraper, used a smartphone, or watched a great film, chances are you have experienced what millions of Autodesk customers are doing with our software. Autodesk gives yousuccess today and tomorrow. At every step, we help users harness the power of data to make anything.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 desktop software for the personal computer. Just as the transition from mainframes to personal computers transformed the industry, over 30 years ago, the software industry has undergone a transition from developing and selling perpetual licenses and on-premises products to cloud, mobilesubscriptions and social applications.cloud-enabled technologies.
To address this shift, Autodesk made a strategic decision to shift its business model from selling perpetual licenses and maintenance plans to selling subscriptions.Product Evolution
Today, weWe offer subscriptions for individual products and Industry Collections, flexible enterprise business agreements ("EBAs"arrangements (“EBAs”), and cloud service offerings (collectively referred to as "subscription plan"“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 product subscriptionssubscription 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, Shotgun, Fusion 360, ShotGrid, AutoCAD web app, and AutoCAD 360 Pro,mobile app, provide tools, including mobile and socialcollaboration capabilities, to streamline design, collaboration, building and manufacturing, and data management processes. We believe that customer adoption of these newlatest 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 new services.
Industry Collections provide our customers with increased access to a broader selection of Autodesk solutions and services, that exceeds those previously available in suites — simplifying the customers'customers’ ability to get access tobenefit from a complete set of tools for their industry.
We discontinued the sale of new commercial licenses of most individual software products in 2016. Additionally, in June 2017, we commenced a program to incentivize maintenance plan customers to move to subscription plan offerings,
maintenance-to-subscription ("M2S"), while at the same time increasing maintenance plan pricing over time for customers that remain on maintenance plans. Since launching the program, over 794,000 maintenance plan customers have converted to subscription plan offerings. Autodesk seeks to convert the remaining796,100 maintenance plan customers to subscription through this program.
To support our strategic priority of re-imagining construction, in fiscal 2019,Architecture, Engineering, and Construction (“AEC”), we strengthenedare strengthening the foundation of our constructionAEC solutions with both organic and inorganic investments. In additionfiscal 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 investingdeliver 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,
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 BIM 360 portfolio, we purchased Assemble Systemsstrategy is to combine organic and acquired software in existing and adjacent verticals to create end-to-end, cloud-based solutions for quantity take off functionality, PlanGrid for document-centric workflowsour customers that drive efficiency and field execution, and BuildingConnected for bidding and estimation processes. The broadened product portfolio will help us expand our presence with sub-contractors, trades people, and building owners.
As part of our manufacturing strategy wesustainability. 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 Fusionproduct functionality and expanding our product offerings through internal development as well as through the acquisition of products, technology, enhancements.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 ended January 31, 2019, 2018,2022, 2021, and 2017.2020.
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 programdeveloper 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, educators,learning partners, and students is a key competitive advantage which has been cultivated over an extensive period of time.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 helping fueladvancing a lifelong passionmore sustainable, resilient, and equitable world. We don’t believe in waiting for progress, we believe in making with students of all ages.it. We offer free educational licenses of Autodesk software worldwidetake action as a business and to students, educators,support our employees, customers, and accredited educational institutions. We inspire and support beginners with Tinkercad, a simple online 3Dcommunities in our collective opportunity to design and 3D printing tool. Throughmake a better world for all.
We focus our efforts to advance positive outcomes across three primary areas: energy and materials, health and resilience, and work and prosperity. These impact opportunity areas are derived from the UN Sustainable Development Goals (“SDGs”)
and have been focused through a multi-pronged process to align the top needs of our stakeholders, the important issues of our business, and the areas we are best placed to accelerate positive impact at scale.
These opportunities manifest as outcomes through how our customers leverage our technology to design and make net-zero carbon buildings, resilient infrastructure, more sustainable products, and a thriving workforce. We realize these opportunities in our business through our 100% renewable and net-zero greenhouse gas operations and inclusive culture. We advance these opportunities with industry innovators through collaboration, grants, software donations, and training.
The Autodesk Design Academy, we provide secondaryFoundation (the “Foundation”), a privately funded 501(c)(3) charity organization established and postsecondary school markets hundredssolely funded by us, leads our philanthropic efforts. The purpose of standards-aligned class projectsthe Foundation is twofold: to support design-based disciplines in Science, Technology, Engineering, Digital Arts, and Math (STEAM) while using Autodesk's professional-grade 3D design, engineering and entertainment software used in industry. We also have made Autodesk Design Academy curricula available on Udemy and Coursera. Our intention isemployees to make Autodeska 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 ubiquitousdonation program to nonprofit organizations, social and theenvironmental entrepreneurs, and others who are developing design and making software of choice for those poised to become the next generation of professional users.
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. For example, we recently acquired Assemble Systems, a leading provider of key workflow software solutions PlanGrid, Inc., a leading provider of construction productivity software, and BuildingConnected, a leading pre-construction platform. We believe that the acquisitions of Assemble Systems, PlanGrid and BuildingConnected will enable us to offershape a more comprehensive, cloud-based construction platform. Acquisitions often increase the speedsustainable future.
Additional information about our environmental, social, and governance program are available in our annual impact report on our website at which we can deliver product functionality towww.autodesk.com. Information contained on or accessible through our customers; however, they entail cost and integration challenges and may, in certain instances, negatively impact our operating margins. We continuallywebsite is not part of or incorporated by reference into this report.
2019 Form 10-K 34
review these trade-offs in making decisions regarding acquisitions. We currently anticipate that we will continue to acquire products, technology, and businesses as compelling opportunities become available.
In our current business model, annualized recurring revenue ("ARR"), growth of billings, and total deferred revenue better reflect business momentum. To analyze progress, we have disaggregated our growth between the original maintenance model ("maintenance plan") and the subscription plan model. Maintenance plan subscriptions peaked in the fourth quarter of our fiscal 2016 as we discontinued selling new maintenance plan subscriptions in fiscal 2017, and we expect them to keep declining over time as maintenance plan customers continue to convert to our subscription plans.
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 conformityaccordance with U.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. We regularly reevaluate our assumptions, judgments, and estimates.
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 highergreater 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.Recognition - Autodesk’s revenue is divided into three categories: subscription revenue, maintenance revenue, and other revenue. Revenue is recognized when control for these offerings is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for products and services.
Judgments with Multiple Performance Obligations. Our contracts with customers may include promises to providetransfer multiple subscriptionsproducts 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 the offeringsproducts and services are considered distinct performance obligations that should be accounted for separately or combined as one combineda single performance obligation may require significant judgment. Judgment is requiredjudgment that requires us to determineassess the levelnature of integrationthe promise and interdependency between individual components of software and cloud functionality. This determination influences whether the software is considered distinct and accounted for separately as a license performance obligation, or not distinct and accounted for together with the cloud functionality as a single subscription performance obligation recognized over time.
For product subscriptions, Industry Collections, and enterprise business agreement ("EBA") subscriptions in which the desktop software and related cloud functionality are highly interrelated, the combined performance obligation is recognized ratably over the contract term as the obligation is satisfied. For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer. For standalone maintenance subscriptions, cloud subscriptions, and technical support services, the performance obligation is satisfied ratably over the contract term as those services are delivered. For consulting services, the performance obligation is satisfied over a period of time as those services are delivered.
When an arrangement includes multiple performance obligations which are concurrentlyvalue delivered and have the same pattern of transfer to the customer (the services transferand 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 customer overcontext of the contract period), we accountand should be accounted for those performance obligations 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.
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"(“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 and geographic region to determine the SSP.
Our indirect channel model includes both a two-tiered distribution structure, where Autodesk sells to distributors that subsequently sell to resellers, and a one-tiered structure where Autodesk sells directly to resellers. For these arrangements, transfer of control begins at the time access to our subscriptions is made available electronically to our end customer, provided all other criteria for revenue recognition are met. Judgment is required to determine whether our distributors and resellers have the ability to honor their commitment to pay, regardless of whether they collect payment from their customers. If we were to change this assessment, it could cause a material increase or decrease in the amount of revenue that we report in a particular period.
As part of the indirect channel model, we have a partner incentive program that uses quarterly attainment of monetary rewards to motivate distributors and resellers to achieve mutually agreed upon business goals in a specified time period. Incentives related to our subscription program are recorded as a reduction to deferred revenue in the period the subscription transaction is billed, and are subsequently recognized as a reduction to subscription revenue over the contract period. A small portion of partner incentives reduce other revenue in the current period. These incentive balances do not require significant assumptions or judgments. Depending on how the payments are made, the reserves associated with the partner incentive program are recorded on the balance sheet as either contra accounts receivable or accounts payable.
The new revenue recognition standard had a material impact in our consolidated financial statements. Refer to Part II, Item 8, Note 1, Business and Summary of Significant Accounting Policies, Accounting Standards Adopted, of our consolidated financial statements and to discussions below under the heading “Overview” for additional information.
Marketable Securities and Privately Held CompanyStrategic Investments. As described in Part II, Item 8, Note 3, “Financial Instruments,” in the Notes to Consolidated Financial Statements, our investments in marketable securities are measured at the end of each reporting period and reported at fair value. Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In determining the fair value of our investments, we are sometimes required to use various alternative valuation techniques. Inputs to valuation techniques are either observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair value hierarchy:Strategic investment
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• | Level 1 - Quoted prices for identical instruments in active markets;
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• | Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
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• | Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
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This hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. This is generally true for our cash and cash equivalents and the majority of our marketable securities, which we consider to be Level 1 assets and Level 2 assets.
Privately held debt and equity securities (Level 3) 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.
The carrying valueWe 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 adjusted for our privately held equity securities if there are no observable price changes in a same or similarmore likely than not that Autodesk will be required to sell the available-for-sale debt security from the same issuer or if there are no identified events or changes in circumstances that may indicate impairment, as discussed below. In determining the estimated fair valueprior to recovery of its strategic investments in privately held companies, we utilize the most recent data available to us. In addition, the determination of whether an orderly transaction is for a same or similar investment requires significant management judgment including: the rights and obligations of the investments, the
extent to which those differences would affect the fair values of those investments, and the impact of any differences based on the stage of operational development of the investee.
All of Autodesk’s marketable securities and privately held company investments are subject to a periodic impairment review. For any marketable debt securities, declines in fair value judged to be other-than-temporary on securities available for sale are included as a reduction to investment income. Toamortized cost basis, Autodesk will determine whether a decline in fair value below the amortized cost basis is other-than-temporary, we evaluate, among other factors:due to credit-related factors. The credit loss is measured as the duration and extent toamount by which the fairdebt security’s amortized cost basis exceeds the estimate of the present value has been less thanof cash flows expected to be collected, up to the carrying valuedifference between the amortized cost basis and its intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. ForImpairment will be assessed at the purposes of computing realized and unrealized gains and losses, the cost of securities soldindividual security level. Credit-related impairment is basedrecognized as an allowance on the specific-identification method. InterestConsolidated Balance Sheets with a corresponding adjustment to “Interest and other expense, net” on securities classified as available for salethe Company’s Consolidated Statements of Operations. Any impairment that is also included as a component of investment income.not credit-related is recognized in “Accumulated other comprehensive loss” on the Consolidated Balance Sheets.
For Autodesk'sour quarterly impairment assessment of privately held debt and equity securities, strategic investment portfolio, the analysis encompasses an assessment of the severity and duration of the impairment and qualitative and quantitative analysis of other key factors including: the investee’s financial metrics, the investee’s products and technologies meeting or exceeding predefined milestones, market acceptance of the product or technology, other competitive products or technology in the market, general market conditions, management and governance structure of the investee, the investee’s liquidity, debt ratios, and the rate at which the investee is using its cash. If the investment is considered to be impaired, the Company will record the investment at fair value by recognizing an impairment through the consolidated statement of operations and establishing a new carrying value for the investment.
Business Combinations. The assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values at the acquisition date.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. Examples of critical estimates used in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
future expected cash flows from sales, maintenance agreements, and acquired developed technologies;
the acquired company's trade name, trademark and existing customer relationship, as well as assumptions about the period of time the acquired trade name and trademark will continue to be used in our product portfolio;
expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed; and
discount rates used to determine the present value of estimated future cash flows.
These estimates 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;
•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;budget, shifts in business strategies which affect the continued uses of the assets;assets, significant negative industry or economic trends;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.
In addition to our recoverability assessments, we routinely review the remaining estimated useful lives of our long-lived assets. Any reduction in the useful life assumption will result in increased depreciation and amortization expense in the quarter when such determinations are made, as well as in subsequent quarters.
We will continue to evaluate the values of our long-lived assets in accordance with applicable accounting rules. As changes in business conditions and our assumptions occur, we may be required to record impairment charges.
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 athe more likely than not threshold.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 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 or release of a valuation allowance, we consider all available evidence including past operating results and estimates of future taxable income. As a result of cumulative losses arising from our transition to a subscription model, we considered cumulative losses as a significant source of negative evidence and recorded a valuation allowance against our deferred tax attributes in Singapore, Canada and the U.S. jurisdictions.
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 that the federalNetherlands, Canada, Australia, California, Michigan and stateU.S. capital loss deferred tax assets will be realized; therefore,realized. Each quarter we will continue to evaluate the positive and negative evidence aroundof our ability to utilize our netglobal deferred tax assets each quarter, both in the U.S. and in foreign jurisdictions, based on all available evidence, both positive and negative.
Stock-Based Compensation. We measure stock-based compensation cost at the grant date fair value of the award, and recognize expense ratably over the requisite service period, which is generally the vesting period. We estimate the fair value of certain stock-based payment awards (including grants of employee stock purchases related to the employee stock purchase plan) using either the Black-Scholes-Merton option-pricing model or a binomial-lattice model (e.g., Monte Carlo simulation model). To determine the grant-date fair value of our stock-based payment awards, we use a Black-Scholes model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case we use the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. These variables include our expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, the risk-free interest rate for the expected term of the award, and expected dividends. The variables used in these models are reviewed on a quarterly basis and adjusted, as needed. Share-based compensation cost for restricted stock is measured on the closing fair market value of our common stock on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense in our Consolidated Statements of Operations.
LegalLoss Contingencies. As described in Part I, Item 3, “Legal Proceedings” and Part II, Item 8, Note 9,10, “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. BecauseSignificant 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 legal 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
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.
Restructuring and other exit costs, net
. Our restructuring plans include one–time termination benefits as well as certain contractual termination benefits. We record costs associated with exit activities related to restructuring plans in accordance with the ASC Topic 420, Exit or Disposal Obligations. Liabilities for costs associated with an exit or disposal activity are recognized in the period in which the liability is incurred. The timing of associated cash payments is dependent upon the type of exit cost and may extend over a 12-month period or longer. We record restructuring liabilities in “Other accrued liabilities,” or "Other liabilities" in the consolidated balance sheet.
Restructuring and other exit costs, net includes employee termination costs, facility closure, accelerated depreciation of certain assets and relocation costs, and contract termination costs. One–time termination benefits are recognized as a liability at
estimated fair value when the approved plan of termination has been communicated to employees, unless employees must provide future service that is longer than the statutory requirement, in which case the benefits are recognized ratably over the future service period. For the facility-related restructuring, we recognize upon exiting all or a portion of a leased facility and meeting cease-use and other requirements. The amount of restructuring is based on the fair value of the lease obligation for the abandoned space, which includes a sublease assumption that could be reasonably obtained. We also recognize accelerated depreciation related to assets at the time we commit to a plan to abandon.
Restructuring and other exit costs, net requires significant estimates and assumptions, including sub-lease income and expenses for severance and other employee separation costs. Our estimates involve a number of risks and uncertainties, some of which are beyond our control, including future real estate market conditions and our ability to successfully enter into subleases or termination agreements with terms as favorable as those assumed when arriving at our estimates. We monitor these estimates and assumptions on at least a quarterly basis for changes in circumstances and any corresponding adjustments to the accrual are recorded in our statement of operations in the period when such changes are known.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Part II,, Item 8,, Note 1,, “Business “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
2019
•Total net revenue was $2.57$4.39 billion during fiscal 2019,2022, an increase of 25%16% compared to the prior fiscal year.
Total ARR•Net revenue retention rate (“NR3”) was $2.75within the range of 100% and 110% as of both January 31, 2022 and 2021.
•Deferred revenue was $3.79 billion, an increase of 34%13% compared to the prior fiscal year.
Subscription plan ARR•Remaining performance obligations (short-term and long-term deferred revenue plus unbilled deferred revenue) (“RPO”) was $2.20$4.74 billion, an increase of 87%12% compared to the fourth quarter in the prior fiscal year.
•Current remaining performance obligations were $3.14 billion, an increase of 15% compared to the prior fiscal year.
Total subscriptions increased 0.6 million from the prior fiscal year to 4.3 million.
Deferred revenue was $2.09 billion, an increase of 7% compared to the prior fiscal year. Total deferred revenue (deferred revenue plus unbilled deferred revenue) was $2.68 billion, an increase of approximately 18 percent compared to prior fiscal year.
We adopted ASC Topic 606 and ASC Topic 340-40 during the first quarter of fiscal 2019. See discussion below for additional information regarding certain metrics that were affected by the new standards under the heading “Impact of New Revenue Accounting Standard."
Revenue Analysis
During fiscal 2019,2022, net revenue increased 25%16%, as compared to the prior fiscal year, primarily due to a 102% increase in subscription revenue. The19% increase in subscription revenue, was partially offset by a 36%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 both the U.S.United States and international regions, including Tech Data Corporation and its global affiliates (collectively, “Tech Data”) and Ingram Micro Inc. (“Ingram Micro”). Total sales to Tech Data accounted for 35%36%, 31%,37% and 30%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 2019, 2018,2022 and 2017, respectively.10% of Autodesk's total net revenue during both fiscal 2021 and 2020. Our customers through Tech Data and Ingram Micro are the resellers and end users who purchase our software subscriptionsubscriptions and services. Should any of our agreements with Tech Data or Ingram Micro be terminated for any reason, we believe the resellers and end users who currently purchase our products through Tech Data or Ingram 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.Data or Ingram Micro.
Recurring Revenue and SubscriptionsNet Revenue Retention Rate
In order to help better understand our financial performance we use several key performance metrics, including recurring revenue ARR, total subscriptions, and annualized revenue per subscription ("ARPS"). ARR, ARPS, total subscriptions, and recurring revenueNR3. These metrics are key performance metrics and should be viewed independently of revenue and deferred revenue as ARR, ARPS, total
subscriptions, and recurring revenuethese 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“Glossary of TermsTerms” for the definitions of these metrics.metrics in Part I, Item 1 Business.
The following table outlines our recurring revenue metric for the fiscal years ended January 31, 2019, 2018,2022, 2021, and 2017:2020:
| | | | Fiscal Year Ended January 31, 2019 | | Change compared to
prior fiscal year end | | Fiscal Year Ended January 31, 2018 | | Change compared to
prior fiscal year end | | Fiscal Year Ended January 31, 2017 | | Fiscal Year Ended January 31, 2022 | | Change compared to
prior fiscal year end | | Fiscal Year Ended January 31, 2021 | | Change compared to
prior fiscal year end | | Fiscal Year Ended January 31, 2020 |
| | | $ | | % | | $ | | % | | | $ | | % | | $ | | % | |
Recurring Revenue (in millions) (1) | $ | 2,437.2 |
| | $ | 554.9 |
| | 29 | % | | $ | 1,882.3 |
| | $ | 342.0 |
| | 22 | % | | $ | 1,540.3 |
| 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 | 95 | % | | | | | | 92 | % | | | | | | 76 | % | As a percentage of net revenue | 96 | % | | N/A | | N/A | | 97 | % | | N/A | | N/A | | 96 | % |
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(1) | (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. |
The following table outlines our ARR, subscriptions,
NR3 was within the range of 100% and ARPS metrics110% as of fiscal years endedboth January 31, 20192022 and 2018. For purposes of clarification, the ARR and ARPS balances in the following table as of January 31, 2019 are calculated under ASC Topic 606. For comparison of ARR and ARPS as of January 31, 2019 under the old revenue standard, ASC Topic 605, refer to the table under the title "Impact of New Revenue Accounting Standard" further below.2021.
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| | | | Change compared to
prior fiscal year | | |
| | January 31, 2019 | | $ | | % | | January 31, 2018 |
ARR (in millions) | | | | | | | |
| Subscription plan ARR | $ | 2,200.1 |
| | $ | 1,025.1 |
| | 87 | % | | $ | 1,175.0 |
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| Maintenance plan ARR | 549.3 |
| | (329.8 | ) | | (38 | )% | | 879.1 |
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| Total ARR (1) | $ | 2,749.4 |
| | $ | 695.3 |
| | 34 | % | | $ | 2,054.1 |
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Number of subscriptions (in thousands) (2) | | | | | | | |
| Subscription plan | 3,533.9 |
| | 1,267.1 |
| | 56 | % | | 2,266.8 |
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| Maintenance plan | 796.1 |
| | (652.8 | ) | | (45 | )% | | 1,448.9 |
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| Total subscriptions | 4,330.0 |
| | 614.3 |
| | 17 | % | | 3,715.7 |
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ARPS (ARR divided by number of subscriptions) (2) | | | | | | | |
| Subscription plan ARPS | $ | 623 |
| | $ | 105 |
| | 20 | % | | $ | 518 |
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| Maintenance plan ARPS | $ | 690 |
| | $ | 83 |
| | 14 | % | | $ | 607 |
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| Total ARPS (3) | $ | 635 |
| | $ | 82 |
| | 15 | % | | $ | 553 |
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(1) | The acquisition of a business may cause variability in the comparison of ARR reported in this table above and ARR derived from the revenue reported in the Consolidated Statements of Operations. |
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(2) | In the first quarter of fiscal 2020, we will discontinue presenting subscriptions and ARPS on a quarterly basis. |
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(3) | There are small variances between ARR and total subscriptions due in part to the inherent limitation with collecting all subscriptions information. For example, Buzzsaw and Constructware are included with ARR but not in total subscriptions due to these inherent limitations. We do not view these variances as meaningful to amounts or quarterly comparisons presented here for ARPS. |
Total ARR increased 34% as of January 31, 2019 as compared to the end of fiscal 2018, primarily due to a 87% increase in subscription plan ARR driven by product subscriptions, including the M2S program. The increase was partially offset by a 38% decrease in maintenance plan ARR driven by the migration from maintenance plan subscriptions to subscription plan subscriptions. Under ASC 605, total ARR increased 32% as compared to the end of the prior fiscal year primarily due to an 84% increase in subscription plan ARR, partially offset by a 36% decrease in maintenance plan ARR.
Subscription plan subscriptions increased 56% or approximately 1.3 million as compared to the end of fiscal 2018, driven by growth in all subscription plan types, led by new product subscriptions. Subscription plan subscriptions benefited from
approximately 452,000 maintenance subscribers that were converted to product subscription under the maintenance-to-subscription program during the fiscal year ended January 31, 2019.
Maintenance plan subscriptions decreased 45% or approximately 652,800 as compared to the end of fiscal 2018, primarily as a result of the strong performance of the M2S program in which approximately 452,000 maintenance plan subscriptions converted to product subscription during the fiscal year ended January 31, 2019. The net decrease is expected and we expect to see ongoing declines in maintenance plan subscriptions going forward as part of the business model transition. The rate of decline will vary based on the number of subscriptions subject to renewal, the renewal rate, and our ability to incentivize customers to switch over to EBAs or product subscriptions.
As of January 31, 2019, when adjusted for the impact of the M2S program, subscription plan ARPS and maintenance plan ARPS would have been $631 and $641, respectively.
ARPS as of January 31, 2019, was $635 under ASC 606, a 15% increase compared to the prior fiscal year primarily due to an increase in subscription plan ARPS. The increase in subscription plan ARPS was driven by growth in all subscription plan types, led by product subscription ARPS. Under ASC 605, ARPS was $628 as of January 31, 2019.
Our ARPS is currently, and will continue to be, affected by various factors including the M2S program, geography and product mix, promotions, acquisitions, sales linearity within a quarter, pricing changes, and foreign currency.
Impact of New Revenue Accounting Standard
Effective in the first quarter of fiscal 2019, we adopted Accounting Standard Update No. 2014-09, which codified new revenue recognition guidance under ASC Topic 606. Previously, we followed revenue accounting guidance under ASC Topic 605. Under the modified retrospective adoption, Autodesk calculated the impact of the adoption during fiscal 2019, as the first year of adoption. The table below shows what some of our key metrics would have been under ASC Topic 605 (see Part II, Item 8, Note 1, “Business and Summary of Significant Accounting Policies” for more details on our adoption and impacts).
|
| | | | | | | | | | | |
| | Fiscal Year Ended January 31, 2019 | | Fiscal Year Ended January 31, 2018 |
| (in millions except ARPS) | ASC 606 | | ASC 605 | | ASC 605 |
| Key Income Statement Metrics | | | | | |
| Subscription revenue | $ | 1,802.3 |
| | $ | 1,785.7 |
| | $ | 894.3 |
|
| Maintenance revenue | 635.1 |
| | 640.8 |
| | 989.6 |
|
| Other revenue | 132.4 |
| | 121.1 |
| | 172.7 |
|
| Total net revenue | 2,569.8 |
| | 2,547.6 |
| | 2,056.6 |
|
| Gross profit | 2,283.9 |
| | 2,260.7 |
| | 1,753.2 |
|
| Total spend (1) | 2,594.8 |
| | 2,577.9 |
| | 2,565.7 |
|
| Net loss | $ | (80.8 | ) | | $ | (90.9 | ) | | $ | (566.9 | ) |
| Basic and diluted net loss per share | $ | (0.37 | ) | | $ | (0.42 | ) | | $ | (2.58 | ) |
| ARR | | | | | |
| Subscription plan ARR | $ | 2,200.1 |
| | $ | 2,160.1 |
| | $ | 1,175.0 |
|
| Maintenance plan ARR | 549.3 |
| | 558.5 |
| | 879.1 |
|
| Total ARR | $ | 2,749.4 |
| | $ | 2,718.6 |
| | $ | 2,054.1 |
|
| ARPS (2) | | | | | |
| Subscription plan ARPS | $ | 623 |
| | $ | 611 |
| | $ | 518 |
|
| Maintenance plan ARPS | 690 |
| | 702 |
| | 607 |
|
| Total ARPS | $ | 635 |
| | $ | 628 |
| | $ | 553 |
|
| Net Revenue by Product Family (3) | | | | | |
| Architecture, Engineering and Construction ("AEC") | $ | 1,021.6 |
| | $ | 1,014.5 |
| | $ | 787.5 |
|
| AutoCAD and AutoCAD LT ("ACAD") | 731.8 |
| | 730.5 |
| | 561.4 |
|
| Manufacturing ("MFG") | 616.2 |
| | 607.2 |
| | 528.8 |
|
| Media and Entertainment ("M&E") | 182.0 |
| | 176.7 |
| | 152.1 |
|
| Other | 18.2 |
| | 18.7 |
| | 26.8 |
|
| Total Net Revenue | $ | 2,569.8 |
| | $ | 2,547.6 |
| | $ | 2,056.6 |
|
| Net Revenue by Geography | | | | | |
| Americas | $ | 1,049.9 |
| | $ | 1,034.6 |
| | $ | 871.1 |
|
| Europe, Middle East and Africa ("EMEA") | 1,034.3 |
| | 1,028.8 |
| | 815.4 |
|
| Asia Pacific ("APAC") | 485.6 |
| | 484.2 |
| | 370.1 |
|
| Total net revenue | $ | 2,569.8 |
| | $ | 2,547.6 |
| | $ | 2,056.6 |
|
____________________
| |
(1) | Our total spend is defined as cost of revenue plus operating expenses. |
| |
(2) | In the first quarter of fiscal 2020, we will discontinue presenting subscriptions and ARPS on a quarterly basis. |
| |
(3) | Due to changes in the go-to-market offerings of our AutoCAD product subscription, prior period balances have been adjusted to conform to current period presentation. |
The adoption of ASC Topic 606 required a change to our reporting of deferred revenue. See discussions below under the heading "Total deferred revenue."
Foreign Currency Analysis
We generate a significant amount of our revenue in the United States, Japan, Germany, Japan, the United Kingdom, and Canada.Finland.
The following table shows the impact of foreign exchange rate changes on our net revenue and total spend: | | | | | | | | Fiscal Year Ended January 31, 2022 |
| | Fiscal Year Ended January 31, 2019 | | Percent change compared to
prior fiscal year (as reported) | | Constant currency percent change compared to
prior fiscal year (1) | | Positive/negative/neutral impact from foreign exchange rate changes |
| | Percent change compared to
prior fiscal year (as reported) | | Constant currency percent change compared to
prior fiscal year (1) | | Positive/negative/neutral impact from foreign exchange rate changes | |
| Revenue | 25 | % | | 24 | % | | Positive | |
| Net revenue | | Net revenue | 16 | % | | 14 | % | | Positive |
| Total spend | 1 | % | | 1 | % | | Neutral | Total spend | 19 | % | | 18 | % | | Negative |
________________
| |
(1) | Please refer to the Glossary of Terms for the definitions of our constant currency growth rates. |
(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 the U.S. dollar may have a significant effect on net revenue, total spend, and income (loss) 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 the U.S. dollar.
Total Deferred RevenueRemaining Performance Obligations
The adoption of ASC Topic 606 required a change to the definition of unbilledRPO represents deferred revenue and new qualitative and quantitative disclosures around our performance obligations. Unbilled deferred revenue represents contractually stated or committed orders under early renewal and multi-year billing plans primarily for subscription, services, license, and maintenance for which the associated deferred revenue has not yet been recognized. Under ASC Topic 606, unbilledUnbilled deferred revenue is not included as a receivable or deferred revenue on our Consolidated Balance Sheet.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 | |
|
| | | | | | | | | | | |
| | January 31, 2019 | | January 31, 2018 |
| (in millions) | ASC 606 | | ASC 605 | | ASC 605 |
| Deferred revenue | $ | 2,091.4 |
| | $ | 2,269.2 |
| | $ | 1,955.1 |
|
| Unbilled deferred revenue | 591.0 |
| | 491.6 |
| | 326.4 |
|
| Total deferred revenue | $ | 2,682.4 |
| | $ | 2,760.8 |
| | $ | 2,281.5 |
|
We expect that the amount of billed and unbilled deferred revenueRPO 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
At January 31, 2019,2022, we had $953.6 million$1.81 billion in cash, cash equivalents, and marketable securities. Our cash flow from operations increased to $377.1 million for the fiscal year ended January 31, 2019 from $0.9 million$1.53 billion for the fiscal year ended January 31, 2018.2022, from $1.44 billion for the fiscal year ended January 31, 2021. We repurchased 2.24.0 million shares of our common stock for $292.5 million$1.09 billion during fiscal 2019.2022. Comparatively, we repurchased 6.92.6 million shares of our common stock for $690.1$549.4 million during fiscal 2018.2021. Further discussion regarding the balance sheet and cash flow activities are discussed below under the heading “Liquidity and Capital Resources.”
RESULTS OF OPERATIONS
The revenueImpacts 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 spend balances includedvirtualization, 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 tables belowbest 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 ended January 31, 2019,2022, 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 calculated under ASC Topic 606. For comparisoncurrently impacting the pace of subscription revenue, maintenance revenue, other revenueour recovery and total spend duringour outlook. The extent of the impact on our business in fiscal year ended January 31, 2019, under ASC Topic 605, refer2023 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 tablepandemic; 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 7, "Overview" under the title "Impact of New Revenue Accounting Standard."1A, “Risk Factors.”
Net Revenue by Income Statement Presentation
Subscription revenue consists of our term-based product subscriptions, cloud service offerings, and flexible enterprise
business arrangements.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 over time as the products are delivered and services are performed. Other revenue also includes software license revenue from the sale of products which do not incorporate substantial cloud services and is recognized up front.
2019 Form 10-K 4446
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended January 31, 2022 | | Change compared to prior fiscal year | | Fiscal Year Ended January 31, 2021 | | Management Comments |
| (in millions, except percentages) | $ | | % | | |
| 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 revenue | 4,232.7 | | | 570.5 | | | 16 | % | | 3,662.2 | | | |
| Other | 153.7 | | | 25.5 | | | 20 | % | | 128.2 | | | |
| $ | 4,386.4 | | | $ | 596.0 | | | 16 | % | | $ | 3,790.4 | | | |
| | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended January 31, 2021 | | Change compared to prior fiscal year | Fiscal Year Ended January 31, 2020 | | Management Comments |
| (in millions, except percentages) | $ | | % | |
| 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 revenue | 3,662.2 | | | 523.7 | | | 17 | % | 3,138.5 | | | |
| Other | 128.2 | | | (7.6) | | | (6) | % | 135.8 | | | |
| $ | 3,790.4 | | | $ | 516.1 | | | 16 | % | $ | 3,274.3 | | | |
| | | | | | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | Fiscal year ended January 31, 2019 | | Change compared to prior fiscal year | | Fiscal year ended January 31, 2018 | | Management comments |
| (in millions) | $ |
| % | | |
| Net revenue: |
| | | | | | | | |
| Subscription | $ | 1,802.3 |
| | $ | 908.0 |
| | 102 | % | | $ | 894.3 |
| | Up due to growth across all subscription types, led by product subscription renewal revenue, which benefited from the success of the M2S program. Also contributing to the growth was an increase in revenue from new product subscriptions and EBA offerings. |
| Maintenance (1) | 635.1 |
| | (354.5 | ) | | (36 | )% | | 989.6 |
| | Down primarily due to the migration of maintenance plan subscriptions to subscription plan subscriptions with the M2S program. |
| Total subscription and maintenance revenue | 2,437.4 |
| | 553.5 |
| | 29 | % | | 1,883.9 |
| | |
| Other (2) | 132.4 |
| | (40.3 | ) | | (23 | )% | | 172.7 |
| |
|
| | $ | 2,569.8 |
| | $ | 513.2 |
| | 25 | % | | $ | 2,056.6 |
| | |
| | | | | | | | | | |
____________________
| |
(1) | We expect maintenance revenue will continue to decline; however, the rate of decline will vary based on the number of renewals, the renewal rate, and our ability to incentivize maintenance plan customers to switch over to subscription plan offerings. |
| |
(2) | Previously labeled as "License and other" in prior periods. |
|
| | | | | | | | | | | | | | | | |
| | Fiscal year ended January 31, 2018 | | Change compared to prior fiscal year | | Fiscal Year Ended January 31, 2017 | | Management Comments |
| (in millions) | $ | | % | | |
| Net revenue: | | | | | | |
| | |
| Subscription | $ | 894.3 |
| | $ | 451.2 |
| | 102 | % | | $ | 443.1 |
| | Up due to growth across all subscription types, led by product subscriptions and EBA offerings, primarily as a result of the business model transition. |
| Maintenance (1) | 989.6 |
| | (113.5 | ) | | (10 | )% | | 1,103.1 |
| | Down due to the discontinued sale of new maintenance agreements and the migration of customers moving from maintenance to subscription. |
| Total subscription and maintenance revenue | 1,883.9 |
| | 337.7 |
| | 22 | % | | 1,546.2 |
| | |
| Other (2) | 172.7 |
| | (312.1 | ) | | (64 | )% | | 484.8 |
| | |
| | $ | 2,056.6 |
| | $ | 25.6 |
| | 1 | % | | $ | 2,031.0 |
| | |
| | | | | | | | | | |
____________________
| |
(1) | We expect maintenance revenue will continue to decline; however, the rate of decline will vary based on the number of renewals, the renewal rate, and our ability to incentivize maintenance plan customers to switch over to subscription plan offerings. |
| |
(2) | Previously labeled as "License and other" in prior periods. |
Net Revenue by Product Family
Our product offerings are focused in four primary product families: AEC, ACAD, MFG,Architecture, Engineering and Construction (“AEC”), AutoCAD and AutoCAD LT, Manufacturing (“MFG”), and Media and Entertainment (“M&E.&E”).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended January 31, 2022 | | Change compared to prior fiscal year | | Fiscal Year Ended January 31, 2021 | | Management Comments |
| |
| (in millions, except percentages) | $ | | % | |
| 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 Ended January 31, 2021 | | Change compared to prior fiscal year | | Fiscal Year Ended January 31, 2020 | | Management Comments |
| | |
| (in millions, except percentages) | $ | | % | | |
| 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 | | | |
|
| | | | | | | | | | | | | | | | |
| | Fiscal year ended January 31, 2019 | | Change compared to prior fiscal year | | Fiscal year ended January 31, 2018 | | Management Comments |
| | |
| (in millions) | $ | | % | |
| Net revenue by product family (1): | | | | | | | | | |
| AEC | $ | 1,021.6 |
| | 234.1 |
| | 30 | % | | $ | 787.5 |
| | Up due to an increase in AEC collections as well as an increase in revenue from EBAs and our individual product offering, Revit. |
| ACAD | 731.8 |
| | 170.4 |
| | 30 | % | | 561.4 |
| | Up due to increases in revenue from both AutoCAD and AutoCAD LT. |
| MFG | 616.2 |
| | 87.4 |
| | 17 | % | | 528.8 |
| | Up due to an increase in MFG collections as well as an increase in revenue from EBAs. |
| M&E | 182.0 |
| | 29.9 |
| | 20 | % | | 152.1 |
| | Up due to an increase in revenue from our individual product offerings 3DS Max and Maya. |
| Other | 18.2 |
| | (8.6 | ) | | (32 | )% | | 26.8 |
| | |
| | $ | 2,569.8 |
| | $ | 513.2 |
| | 25 | % | | $ | 2,056.6 |
| | |
|
| | | | | | | | | | | | | | | | |
| | Fiscal year ended January 31, 2018 | | Change compared to prior fiscal year | | Fiscal Year Ended January 31, 2017 | | Management Comments |
| | | |
| (in millions) | $ | | % | | |
| Net revenue by product family (1): | | | | | | | | | |
| AEC | $ | 787.5 |
| | $ | (22.9 | ) | | (3 | )% | | $ | 810.4 |
| | Down due to a net decrease in AEC collections and legacy suites due to the discontinuation of perpetual licenses. The decrease was partially offset by an increase in revenue from individual AEC product offerings and EBAs. |
| ACAD | 561.4 |
| | 88.7 |
| | 19 | % | | 472.7 |
| | Up due to increases in both AutoCAD LT and AutoCAD. |
| MFG | 528.8 |
| | (46.4 | ) | | (8 | )% | | 575.2 |
| | Down due to a net decrease in MFG collections and legacy suites due to the discontinuation of perpetual licenses, partially offset by an increase in revenue from MFG EBAs. |
| M&E | 152.1 |
| | 13.3 |
| | 10 | % | | 138.8 |
| | Up due to an increase in Animation, partially offset by a decrease in Creative Finishing. |
| Other | 26.8 |
| | (7.1 | ) | | (21 | )% | | 33.9 |
| | |
| | $ | 2,056.6 |
| | $ | 25.6 |
| | 1 | % | | $ | 2,031.0 |
| | |
____________________
| |
(1) | Due to changes in the go-to-market offerings of our AutoCAD product subscription, prior period balances have been adjusted to conform to current period presentation. |
Net Revenue by Geographic Area
| | | | | | | | | | | | | | | | | | | | | | Fiscal Year Ended January 31, 2022 | | Change compared to prior fiscal year | | Constant currency change compared to prior fiscal year | | Fiscal Year Ended January 31, 2021 | | Change compared to prior fiscal year | | Constant currency change compared to prior fiscal year | | Fiscal Year Ended January 31, 2020 |
| | Fiscal Year Ended January 31, 2019 | | Change compared to prior fiscal year | | Constant currency change compared to prior fiscal year | | Fiscal Year Ended January 31, 2018 | | Change compared to prior fiscal year | | Constant currency change compared to prior fiscal year | | Fiscal Year Ended January 31, 2017 | |
| | |
| (in millions) | | $ | | % | % | | $ | | % | % | | |
| (in millions, except percentages) | | (in millions, except percentages) | | | $ | | % | | % | | | | $ | | % | | % | | |
| | | | |
| Net revenue: | | | | | | | | | | | | | | | | | | Net revenue: | |
| Americas | | | | | | | | | | | | | | | | | | Americas | |
| U.S. | $ | 874.6 |
| | $ | 134.2 |
| | 18 | % | | * |
| | $ | 740.4 |
| | $ | (1.7 | ) | | — | % | | * |
| | $ | 742.1 |
| U.S. | $ | 1,456.5 | | | $ | 174.7 | | | 14 | % | | * | | $ | 1,281.8 | | | $ | 172.9 | | | 16 | % | | * | | $ | 1,108.9 | |
| Other Americas | 175.3 |
| | 44.6 |
| | 34 | % | | * |
| | 130.7 |
| | 0.9 |
| | 1 | % | | * |
| | 129.8 |
| Other Americas | 308.6 | | | 48.0 | | | 18 | % | | * | | 260.6 | | | 33.7 | | | 15 | % | | * | | 226.9 | |
| Total Americas | 1,049.9 |
| | 178.8 |
| | 21 | % | | 20 | % | | 871.1 |
| | (0.8 | ) | | — | % | | — | % | | 871.9 |
| Total Americas | 1,765.1 | | | 222.7 | | | 14 | % | | 14 | % | | 1,542.4 | | | 206.6 | | | 15 | % | | 16 | % | | 1,335.8 | |
| EMEA | 1,034.3 |
| | 218.9 |
| | 27 | % | | 24 | % | | 815.4 |
| | 15.0 |
| | 2 | % | | 4 | % | | 800.4 |
| EMEA | 1,700.4 | | | 227.8 | | | 15 | % | | 12 | % | | 1,472.6 | | | 169.1 | | | 13 | % | | 15 | % | | 1,303.5 | |
| APAC | 485.6 |
| | 115.5 |
| | 31 | % | | 31 | % | | 370.1 |
| | 11.4 |
| | 3 | % | | 2 | % | | 358.7 |
| APAC | 920.9 | | | 145.5 | | | 19 | % | | 17 | % | | 775.4 | | | 140.4 | | | 22 | % | | 22 | % | | 635.0 | |
| Total net revenue (1) | $ | 2,569.8 |
| | $ | 513.2 |
| | 25 | % | | 24 | % | | $ | 2,056.6 |
| | $ | 25.6 |
| | 1 | % | | 2 | % | | $ | 2,031.0 |
| |
| Total net revenue | | Total net revenue | $ | 4,386.4 | | | $ | 596.0 | | | 16 | % | | 14 | % | | $ | 3,790.4 | | | $ | 516.1 | | | 16 | % | | 17 | % | | $ | 3,274.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Emerging economies | $ | 307.4 |
| | $ | 80.9 |
| | 36 | % | | 34 | % | | $ | 226.5 |
| | $ | (1.0 | ) | | — | % | | — | % | | $ | 227.5 |
| 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 as Brazil, Russia, India, and China, and including as a result of the COVID-19 pandemic or in connection with the
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.
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.
