Autodesk Inc

Previous wording

The discussion in our MD&A and elsewhere in this Quarterly Report on Form 10-Q contains trend analyses and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, including those discussed in “Strategy,” “Overview of the Three and Six Months Ended July 31, 2024,” and in“Results of Operations-Overview.”Examples of such forward-looking statements may relate to items such as future net revenue, operating expenses, recurring revenue, net revenue retention rate, cash flow, remaining performance obligations, and other future financial results (by product type and geography); the transition to annual billings for multi-year contracts; the implementation of new transaction models; the effectiveness of our efforts to successfully manage transitions to new markets; our ability to increase our subscription base; expected market trends, including the growth of cloud and mobile computing; the availability of credit; the effect of unemployment; the effects of global economic conditions, including from an economic downturn or recession in the United States or in other countries around the world; the effects of revenue recognition; the effects of recently issued accounting standards; expected trends in certain financial metrics, including expenses; expectations regarding our cash needs; the effects of fluctuations in exchange rates and our hedging activities on our financial results; our ability to successfully expand adoption of our products; our ability to gain market acceptance of new business and sales initiatives; the impact of past acquisitions, including our integration efforts and expected synergies; the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries; the timing and amount of purchases under our stock buy-back plan; and the effects of potential non-cash charges on our financial results and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product capability and acceptance, anticipated benefits of our products; statements regarding our liquidity and short-term and long-term cash requirements, as well as statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of a number of factors, including those set forth below in Part I…

Excerpt shortened here; the source contains the full paragraph.

Current wording

The discussion in our MD&A and elsewhere in this Quarterly Report on Form 10-Q contains trend analyses and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are any statements that look to future events and consist of, among other things, our business strategies, including those discussed in “Strategy,” “Overview of the Three and Nine Months Ended October 31, 2024,” and in“Results of Operations-Overview.”Examples of such forward-looking statements may relate to items such as future net revenue, operating expenses, recurring revenue, net revenue retention rate, cash flow, remaining performance obligations, and other future financial results (by product type and geography); the transition to annual billings for multi-year contracts; the implementation of new transaction models; the effectiveness of our efforts to successfully manage transitions to new markets; our ability to increase our subscription base; expected market trends, including the growth of cloud and mobile computing; the availability of credit; the effect of unemployment; the effects of global economic conditions, including from an economic downturn or recession in the United States or in other countries around the world; the effects of revenue recognition; the effects of recently issued accounting standards; expected trends in certain financial metrics, including expenses; expectations regarding our cash needs; the effects of fluctuations in exchange rates and our hedging activities on our financial results; our ability to successfully expand adoption of our products; our ability to gain market acceptance of new business and sales initiatives; the impact of past acquisitions, including our integration efforts and expected synergies; the impact of economic volatility and geopolitical activities in certain countries, particularly emerging economy countries; the timing and amount of purchases under our stock buy-back plan; and the effects of potential non-cash charges on our financial results and the resulting effect on our financial results. In addition, forward-looking statements also consist of statements involving expectations regarding product capability and acceptance, anticipated benefits of our products; statements regarding our liquidity and short-term and long-term cash requirements, as well as statements involving trend analyses and statements including such words as “may,” “believe,” “could,” “anticipate,” “would,” “might,” “plan,” “expect,” and similar expressions or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to business and economic risks. As such, our actual results could differ materially from those set forth in the forward-looking statements as a result of a number of factors, including those set forth below in Pa…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

To support our strategic priority of digital transformation in Architecture, Engineering, and Construction (“AEC”), we are strengthening our AEC solutions’ foundation with both organic and inorganic investments. In the first quarter of fiscal 2025, we acquired Payapps Limited (“Payapps”), a leading cloud-based software platform for managing construction-related payments. This acquisition will deepen Autodesk Construction Cloud’s footprint and provide a robust payment management offering to serve the needs of general contractors and trade contractors. Through automating the application of the payment process, Payapps’ solution provides greater transparency, reduces risk and helps accelerate time-to-payment. In fiscal 2024, we launched the first set of capabilities in Autodesk Forma, an industry cloud that unifies workflows across the teams that design, build, and operate the built environment. Autodesk Forma’s initial capabilities enable the early-stage planning and design process with automation and AI-powered insights that simplify the exploration of design concepts, offload repetitive tasks, and help evaluate environmental qualities surrounding a building site. In fiscal 2023, we acquired a cloud-connected, extended reality (XR) platform enabling AEC professionals to present, collaborate and review projects in immersive and interactive experiences, from anywhere and at any time. This acquisition enables Autodesk to meet increasing needs for augmented reality (AR) and virtual reality (VR) technology advancements within the AEC industry and further support AEC customers throughout the project delivery lifecycle.

Current wording

To support our strategic priority of digital transformation in Architecture, Engineering, and Construction (“AEC”), we are strengthening our AEC solutions’ foundation with both organic and inorganic investments. In the first quarter of fiscal 2025, we acquired Payapps Limited (“Payapps”), a leading cloud-based software platform for managing construction-related payments. This acquisition will deepen Autodesk Construction Cloud’s footprint and provide a robust payment management offering to serve the needs of general contractors and trade contractors. Through automating the application of the payment process, Payapps’ solution provides greater transparency, reduces risk and helps accelerate time-to-payment. In fiscal 2024, we launched the first set of capabilities in Autodesk Forma, an industry cloud that unifies workflows across the teams that design, build, and operate the built environment. Autodesk Forma’s initial capabilities enable the early-stage planning and design process with automation and Artificial Intelligence (“AI”)-powered insights that simplify the exploration of design concepts, offload repetitive tasks, and help evaluate environmental qualities surrounding a building site. In fiscal 2023, we acquired a cloud-connected, extended reality (XR) platform enabling AEC professionals to present, collaborate and review projects in immersive and interactive experiences, from anywhere and at any time. This acquisition enables Autodesk to meet increasing needs for augmented reality (AR) and virtual reality (VR) technology advancements within the AEC industry and further support AEC customers throughout the project delivery lifecycle.

Previous wording

We sell our products and services globally, through a combination of direct and indirect channels. Our direct channels include, but are not limited to, internal sales resources focused on selling our highly specialized solutions in our largest accounts, Solution Providers focused on serving certain Flex and subscription customers through our new transaction model, and business transacted through our online Autodesk branded store. Our indirect channels primarily include value added distributors, value added resellers, direct market resellers, volume channel partners, and product-specific resellers. During fiscal 2023, we entered into transition agreements with certain of our distributors, including TD Synnex and Ingram Micro, to provide transition distribution activities for a one-to-two-year period, with potential extensions. In connection with the transition agreements, Autodesk has increased its selling efforts with value-added resellers and Solution Providers. We introduced a new transaction model for our token-based Flex offering in North America, and certain countries in EMEA, and APAC during fiscal 2023 and 2024. Most of our subscription offerings transitioned to the new transaction model in Australia during fiscal 2024 and in North America during our second fiscal quarter of fiscal 2025. In this new transaction model, Solution Providers provide a quote to customers but the actual transaction occurs directly between Autodesk and the customer. We intend to transition our indirect business to the new transaction model in our major markets globally in remaining fiscal 2025 and fiscal 2026, including in Western Europe in our third fiscal quarter of 2025. We expect the change in recognition of sales incentives to indirect channels from contra revenue to operating costs under the new transaction model to positively impact calculated revenue growth, while being broadly neutral to calculated operating profit and free cash flow dollars, and to result in a calculated negative impact to operating margin. See Part I, Item 1, “Financial Statements,” Note 3, “Revenue Recognition” in the Notes to the Condensed Consolidated Financial Statements for further detail on the results of our indirect and direct channel sales for the three and six months ended July 31, 2024 and 2023.

Current wording

We sell our products and services globally, through a combination of direct and indirect channels. Our direct channels include, but are not limited to, internal sales resources focused on selling our highly specialized solutions in our largest accounts, Solution Providers focused on serving certain Flex and subscription customers through our new transaction model, and business transacted through our online Autodesk branded store. Our indirect channels primarily include value added distributors, value added resellers, direct market resellers, volume channel partners, and product-specific resellers. During fiscal 2023, we entered into transition agreements with certain of our distributors, including TD Synnex and Ingram Micro Inc., to provide transition distribution activities for a one-to-two-year period. In the third fiscal quarter of 2025, we entered into a new distribution agreement with TD Synnex for government business in certain jurisdictions. Existing distribution agreements will continue in emerging markets. We introduced a new transaction model for our token-based Flex offering in North America, and certain countries in EMEA, and APAC during fiscal 2023 and 2024. Most of our subscription offerings transitioned to the new transaction model in Australia during fiscal 2024, in North America during our second fiscal quarter of fiscal 2025, and in Western Europe during our third fiscal quarter of 2025. In this new transaction model, Solution Providers provide a quote to customers but the actual transaction occurs directly between Autodesk and the customer. We intend to transition our indirect business in our remaining major markets to the new transaction model by the end of fiscal 2025. We expect the change in recognition of sales incentives to indirect channels from contra revenue to operating costs under the new transaction model to positively impact calculated revenue growth, while being broadly neutral to calculated operating profit and free cash flow dollars, and to result in a calculated negative impact to operating margin. See Part I, Item 1, “Financial Statements,” Note 3, “Revenue Recognition” in the Notes to the Condensed Consolidated Financial Statements for further detail on the results of our indirect and direct channel sales for the three and nine months ended October 31, 2024 and 2023.

Previous wording

We anticipate that our channel mix will continue to change as we scale our business. With the continued growth of our online Autodesk branded store, the transition to annual billings for multi-year contracts and our new token-based Flex model, and the introduction of our new transaction model, we are transacting directly with more end customers, rather than through distributors, without substantial disruption to our revenue. We expect our indirect channel will continue to transact and support a considerable portion of our customers. We also expect our transition to annual billings for multi-year contracts to impact the timing of our billings and cash collections. We employ a variety of incentive programs and promotions to align our direct and indirect channels with our business strategies.

Current wording

We anticipate that our channel mix will continue to change as we scale our business. With the continued growth of our online Autodesk branded store and our new transaction model, we are transacting directly with more end customers, rather than through distributors, without substantial disruption to our revenue. We expect our indirect channel will continue to transact and support a considerable portion of our customers. We also expect our transition to annual billings for multi-year contracts to impact the timing of our billings and cash collections. We employ a variety of incentive programs and promotions to align our direct and indirect channels with our business strategies.

Previous wording

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We highlighted those policies that involve a higher degree of judgment and complexity with further discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K. There have been no material changes to our critical accounting policies and estimates during the three and six months ended July 31, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024. We believe these policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Current wording

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We highlighted those policies that involve a higher degree of judgment and complexity with further discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K. There have been no material changes to our critical accounting policies and estimates during the three and nine months ended October 31, 2024, as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024. We believe these policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Previous wording

Overview of the Three and Six Months Ended July 31, 2024

Current wording

Overview of the Three and Nine Months Ended October 31, 2024

Previous wording

•Total net revenue increased 12% to $1.51 billion and $2.92 billion, during the three and six months ended July 31, 2024, respectively, compared to the same periods in the prior fiscal year.

Current wording

•Total net revenue increased 11% and 12% to $1.57 billion and $4.49 billion, during the three and nine months ended October 31, 2024, respectively, compared to the same periods in the prior fiscal year.

Previous wording

•Recurring revenue as a percentage of net revenue was 97% for both the three and six months ended July 31, 2024 and 98% for both the three and six months ended July 31, 2023.

Current wording

•Recurring revenue as a percentage of net revenue was 97% for both the three and nine months ended October 31, 2024 and 98% for both the three and nine months ended October 31, 2023.

Previous wording

•Net revenue retention rate (“NR3”) was within the range of 100% and 110%, on a constant currency basis, for both the three and six months ended July 31, 2024 and 2023.

Current wording

•Net revenue retention rate (“NR3”) was within the range of 100% and 110%, on a constant currency basis, for both the three and nine months ended October 31, 2024 and 2023.

Previous wording

•Remaining performance obligations (short-term and long-term deferred revenue plus unbilled deferred revenue) (“RPO”) was $5.86 billion, a decrease of 4% compared to the fourth quarter in the prior fiscal year.

Current wording

•Remaining performance obligations (short-term and long-term deferred revenue plus unbilled deferred revenue) (“RPO”) was $6.11 billion, flat compared to the fourth quarter in the prior fiscal year.

Previous wording

•Current remaining performance obligations was $3.90 billion, a decrease of 2% compared to the fourth quarter in the prior fiscal year.

Current wording

•Current remaining performance obligations was $4.01 billion, an increase of 1% compared to the fourth quarter in the prior fiscal year.

Previous wording

Net revenue increased 12% during both the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year, primarily due to a 11% increase in subscription revenue for both periods.

Current wording

Net revenue increased 11% and 12% during the three and nine months ended October 31, 2024, respectively, as compared to the same periods in the prior fiscal year, primarily due to a 11% increase in subscription revenue for both the three and nine months ended October 31, 2024, respectively.

Previous wording

We rely significantly upon major distributors and resellers in both the U.S. and international regions, including TD Synnex Corporation and its global affiliates (collectively, “TD Synnex”). Total revenue from TD Synnex accounted for 36% and 37% of our total net revenue for the three and six months ended July 31, 2024, respectively. Total revenue from TD Synnex accounted for 40% of our total net revenue during both the three and six months ended July 31, 2023. Our customers through TD Synnex are the resellers and end users who purchase our software subscriptions and services. During fiscal 2023, we entered into transition agreements with certain of our distributors, including TD Synnex and Ingram Micro Inc., to provide transition distribution activities for a one-to-two-year period, with potential extensions. In connection with the transition agreements, we intend to increase our selling efforts with value-added resellers and Solution Providers in connection with our new transaction model. Consequently, we believe our business is not substantially dependent on TD Synnex.

Current wording

We rely significantly upon major distributors and resellers in both the U.S. and international regions, including TD Synnex Corporation and its global affiliates (collectively, “TD Synnex”). Total revenue from TD Synnex accounted for 33% and 35% of our total net revenue for the three and nine months ended October 31, 2024, respectively. Total revenue from TD Synnex accounted for 39% and 40% of our total net revenue during both the three and nine months ended October 31, 2023, respectively. Our customers through TD Synnex are the resellers and end users who purchase our software subscriptions and services. During fiscal 2023, we entered into transition agreements with certain of our distributors, including TD Synnex and Ingram Micro Inc., to provide transition distribution activities for a one-to-two-year period. In the third fiscal quarter of 2025, we entered into a new distribution agreement with TD Synnex for government business in certain jurisdictions. Existing distribution agreements will continue in emerging markets. We have increased our selling efforts with Solution Providers in connection with our new transaction model. Consequently, we believe our business is not substantially dependent on TD Synnex.

Previous wording

The following table outlines our recurring revenue metric for the three and six months ended July 31, 2024 and 2023:

Current wording

The following table outlines our recurring revenue metric for the three and nine months ended October 31, 2024 and 2023:

Previous wording

NR3 was within the range of 100% and 110%, on a constant currency basis, for both the three and six months ended July 31, 2024 and 2023.

Current wording

NR3 was within the range of 100% and 110%, on a constant currency basis, for both the three and nine months ended October 31, 2024 and 2023.

Previous wording

We generate a significant amount of our revenue in the United States, Germany, Japan, the United Kingdom and Finland.

Current wording

We generate a significant amount of our revenue in the United States, Germany, Japan, the United Kingdom and Canada.

Previous wording

At July 31, 2024, we had $2.11 billion in cash, cash equivalents, and marketable securities. Our cash flow from operations decreased to $706 million for the six months ended July 31, 2024, compared to $858 million for the six months ended July 31, 2023. We repurchased 504 thousand shares of our common stock for $124 million during the six months ended July 31, 2024. Comparatively, we repurchased 3.1 million shares of our common stock for $621 million during the six months ended July 31, 2023. See further discussion regarding the balance sheet and cash flow activities under the heading “Liquidity and Capital Resources.”

Current wording

At October 31, 2024, we had $1.98 billion in cash, cash equivalents, and marketable securities. Our cash flow from operations increased to $915 million for the nine months ended October 31, 2024, compared to $876 million for the nine months ended October 31, 2023. We repurchased 1.7 million shares of our common stock for $443 million during the nine months ended October 31, 2024. Comparatively, we repurchased 3.6 million shares of our common stock for $733 million during the nine months ended October 31, 2023. See further discussion regarding the balance sheet and cash flow activities under the heading “Liquidity and Capital Resources.”

Previous wording

We introduced a new transaction model for our token-based Flex offering in North America, and certain countries in EMEA, and APAC during fiscal 2023 and 2024. Most of our subscription offerings transitioned to the new transaction model in Australia during fiscal 2024 and in North America during our second fiscal quarter of fiscal 2025. In this new transaction model, Solution Providers provide customers with a quote, however, the actual transaction occurs directly between Autodesk and the customer. We intend to transition our indirect business to the new transaction model in our major markets globally in remaining fiscal 2025 and fiscal 2026.

Current wording

We introduced a new transaction model for our token-based Flex offering in North America, and certain countries in EMEA, and APAC during fiscal 2023 and 2024. Most of our subscription offerings transitioned to the new transaction model in Australia during fiscal 2024, in North America during our second fiscal quarter of fiscal 2025, and in Western Europe during our third fiscal quarter of 2025. In this new transaction model, Solution Providers provide a quote to customers but the actual transaction occurs directly between Autodesk and the customer. We intend to transition our indirect business in our remaining major markets to the new transaction model by the end of fiscal 2025.

Previous wording

Marketing and sales expenses include salaries, bonuses, benefits, and stock-based compensation expense for our marketing and sales employees, the expense of travel, entertainment, and training for such personnel, sales and dealer commissions, and the costs of programs aimed at increasing revenue, such as advertising, trade shows and expositions, and various sales and promotional programs. Marketing and sales expenses also include SaaS vendor costs and allocated IT costs, payment processing fees, the cost of supplies and equipment, gains and losses on our operating expense cash flow hedges, facilities costs, and labor costs associated with sales and order management.

Current wording

Marketing and sales expenses include salaries, bonuses, benefits, and stock-based compensation expense for our marketing and sales employees, the expense of travel, entertainment, and training for such personnel, sales and channel partner commissions, and the costs of programs aimed at increasing revenue, such as advertising, trade shows and expositions, and various sales and promotional programs. Marketing and sales expenses also include SaaS vendor costs and allocated IT costs, payment processing fees, the cost of supplies and equipment, gains and losses on our operating expense cash flow hedges, facilities costs, and labor costs associated with sales and order management.

Previous wording

The following table highlights our expectation for the absolute dollar change and percent of revenue change between the third quarter of fiscal 2025, as compared to the third quarter of fiscal 2024:

Current wording

The following table highlights our expectation for the absolute dollar change and percent of revenue change between the fourth quarter of fiscal 2025, as compared to the fourth quarter of fiscal 2024:

Previous wording

Interest and other income (expense), net, positively changed by $13 million during the three months ended July 31, 2024, and $19 million during the six months ended July 31, 2024, as compared to the same periods in the prior fiscal year. The positive change in the three and six months ended July 31, 2024, as compared to the same periods in the prior fiscal year was primarily due to a decrease in impairments of strategic investment equity securities, an increase in interest income, and an increase in gains for investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans in the current periods as compared to the prior periods.

Current wording

Interest and other income (expense), net, positively changed by $19 million during the three months ended October 31, 2024, and $38 million during the nine months ended October 31, 2024, as compared to the same periods in the prior fiscal year. The positive change in the three and nine months ended October 31, 2024, as compared to the same periods in the prior fiscal year was primarily due to a decrease in impairments of strategic investment equity securities and an increase in gains for investments in debt and equity securities that are held in a rabbi trust under non-qualified deferred compensation plans in the current periods as compared to the prior periods.

Previous wording

We had an income tax expense of $70 million, relative to pre-tax income of $352 million for the three months ended July 31, 2024, and an income tax expense of $36 million, relative to pre-tax income of $258 million for the three months ended July 31, 2023. Income tax expense for the three months ended July 31, 2024, reflects U.S. and foreign tax expense, including withholding tax, reduced by tax-deductible stock-based compensation and the foreign derived intangibles tax benefit in the U.S. The tax expense increased compared to July 31, 2023, mainly due to a nonrecurring tax benefit in the prior year arising from the temporary relief provided by Notice 2023-55 relating to U.S. foreign tax credit regulations.

Current wording

We had an income tax expense of $76 million, relative to pre-tax income of $351 million for the three months ended October 31, 2024, and an income tax expense of $79 million, relative to pre-tax income of $320 million for the three months ended October 31, 2023. Income tax expense for the three months ended October 31, 2024, reflects U.S. and foreign tax expense, including withholding tax, reduced by tax-deductible stock-based compensation, tax credits, and the foreign derived intangibles income tax benefit in the U.S. The tax expense decreased compared to October 31, 2023, mainly due to U.S. foreign tax credit relief available for the three months ended October 31, 2024 which was not available for the three months ended October 31, 2023 prior to the issuance of Notice 2023-80 by the Internal Revenue Service (“IRS”).

Previous wording

We had an income tax expense of $127 million, relative to pre-tax income of $661 million for the six months ended July 31, 2024, and income tax expense of $96 million, relative to pre-tax income of $479 million for the six months ended July 31, 2023. Income tax expense for the six months ended July 31, 2024, reflects U.S. and foreign tax expense, including withholding tax, reduced by tax-deductible stock-based compensation and the foreign derived intangibles tax benefit in the U.S. The tax expense increased compared to July 31, 2023 due to increased profit before tax, offset by an increase in tax-deductible stock-based compensation. The period to July 31, 2023 had a nonrecurring tax benefit arising from the temporary relief provided by Notice 2023-55 relating to U.S. foreign tax credit regulations.

Current wording

We had an income tax expense of $203 million, relative to pre-tax income of $1.01 billion for the nine months ended October 31, 2024, and income tax expense of $175 million, relative to pre-tax income of $799 million for the nine months ended October 31, 2023. Income tax expense for the nine months ended October 31, 2024, reflects U.S. and foreign tax expense, including withholding tax, reduced by tax-deductible stock-based compensation, tax credits, and the foreign derived intangibles income tax benefit in the U.S. The tax expense increased compared to October 31, 2023 due to increased profit before tax, offset by an increase in tax-deductible stock-based compensation. The period to October 31, 2023 had a nonrecurring tax benefit arising from relief provided by IRS Notice 2023-55 and the current period reflects relief from IRS Notice 2023-80 relating to U.S. foreign tax credit regulations offset in part by a nonrecurring integration tax expense.

Previous wording

Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company continues to retain a valuation allowance against Australia, Portugal, New Zealand, California, Massachusetts, and Michigan deferred tax assets and deferred tax assets that will convert to a capital loss upon reversal in the U.S., as we do not have sufficient income of the appropriate character to benefit these deferred tax assets.

Current wording

Autodesk regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Company continues to retain a valuation allowance against Australia, Portugal, New Zealand, California, Massachusetts, and Michigan deferred tax assets and deferred tax assets that will convert to a capital loss upon reversal in the U.S., as we do not have sufficient income of the appropriate character to benefit from these deferred tax assets.

Previous wording

As of July 31, 2024, we had $271 million of gross unrecognized tax benefits, of which $228 million would impact the effective tax rate, if recognized. The remaining $43 million would reduce our valuation allowance, if recognized. The amount of unrecognized tax benefits will immaterially decrease in the next twelve months for statute lapses.

Current wording

As of October 31, 2024, we had $277 million of gross unrecognized tax benefits, of which $234 million would impact the effective tax rate, if recognized. The remaining $43 million would reduce our valuation allowance, if recognized. The amount of unrecognized tax benefits will immaterially decrease in the next twelve months for statute lapses.

Previous wording

In addition to our results determined under GAAP discussed above, we believe the following non-GAAP measures are useful to investors in evaluating our operating performance. For the three and six months ended July 31, 2024 and 2023, our gross profit, income from operations, operating margin, net income, and diluted net income per share on a GAAP and non-GAAP basis were as follows (in millions except for operating margin and per share data):

Current wording

In addition to our results determined under GAAP discussed above, we believe the following non-GAAP measures are useful to investors in evaluating our operating performance. For the three and nine months ended October 31, 2024 and 2023, our gross profit, income from operations, operating margin, net income, and diluted net income per share on a GAAP and non-GAAP basis were as follows (in millions except for operating margin and per share data):

Previous wording

At July 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $2.11 billion and net accounts receivable of $402 million.

Current wording

At October 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $1.98 billion and net accounts receivable of $702 million.

Previous wording

Our cash and cash equivalents balances are concentrated in a few locations around the world, with substantial amounts held outside of the United States. As of July 31, 2024, approximately 77% of our total cash or cash equivalents are located in foreign jurisdictions and that percentage will fluctuate subject to business needs. There are several factors that can impact our ability to utilize foreign cash balances, such as foreign exchange restrictions, foreign regulatory restrictions, or adverse tax costs. Earnings in foreign jurisdictions are generally available for distribution to the United States with little to no incremental U.S. taxes. We regularly review our capital structure and consider a variety of potential financing alternatives and planning strategies to ensure we have the proper liquidity available in the locations in which it is needed. We expect to meet our liquidity needs through or in combination of current cash balances, ongoing cash flows, and external borrowings.

Current wording

Our cash and cash equivalents balances are concentrated in a few locations around the world, with substantial amounts held outside of the United States. As of October 31, 2024, approximately 73% of our total cash or cash equivalents are located in foreign jurisdictions and that percentage will fluctuate subject to business needs. There are several factors that can impact our ability to utilize foreign cash balances, such as foreign exchange restrictions, foreign regulatory restrictions, or adverse tax costs. Earnings in foreign jurisdictions are generally available for distribution to the United States with little to no incremental U.S. taxes. We regularly review our capital structure and consider a variety of potential financing alternatives and planning strategies to ensure we have the proper liquidity available in the locations in which it is needed. We expect to meet our liquidity needs through or in combination of current cash balances, ongoing cash flows, and external borrowings.

Previous wording

Net cash provided by operating activities of $858 million for the six months ended July 31, 2023, primarily consisted of $383 million of our net income adjusted for $400 million non-cash items such as stock-based compensation expense, and depreciation, amortization, and accretion expense, and deferred income tax. Cash provided by working capital increased due to the change in accounts receivable of $559 million due to the seasonality of our billings in the fourth fiscal quarter and timing of cash collections from customers offset in part by a decrease in deferred revenue of $350 million due to the timing of our billing installments and seasonality of billings in the fourth fiscal quarter and the change in accounts payable and other liabilities of $106 million primarily due to the timing of payments related to employee compensation and related costs.

Current wording

Net cash provided by operating activities of $915 million for the nine months ended October 31, 2024, primarily consisted of $809 million of our net income adjusted for $700 million non-cash items such as stock-based compensation expense, amortization of costs to obtain a contract with a customer, depreciation, amortization, and accretion expense, and deferred income tax. The decrease in working capital is primarily due to a decrease in deferred revenue of $612 million due to the timing of our billing installments and seasonality of billings in the fourth fiscal quarter and a negative change in prepaid expenses and other assets of $221 million partially offset by the change in accounts receivable of $177 million due to the seasonality of our billings in the fourth fiscal quarter and timing of cash collections from customers.

Previous wording

Net cash provided by operating activities of $706 million for the six months ended July 31, 2024, primarily consisted of $534 million of our net income adjusted for $442 million non-cash items such as stock-based compensation expense, and depreciation, amortization, and accretion expense, and deferred income tax. The decrease in working capital is primarily due to a decrease in deferred revenue of $577 million due to the timing of our billing installments and seasonality of billings in the fourth fiscal quarter partially offset by the change in accounts receivable of $477 million due to the seasonality of our billings in the fourth fiscal quarter and timing of cash collections from customers.

Current wording

Net cash provided by operating activities of $876 million for the nine months ended October 31, 2023, primarily consisted of $624 million of our net income adjusted for $619 million non-cash items such as stock-based compensation expense, and depreciation, amortization, and accretion expense, and deferred income tax. The decrease in working capital is primarily due to a decrease in deferred revenue of $551 million due to the timing of our billing installments and seasonality of billing in the fourth fiscal quarter partially offset by the change in accounts receivable of $380 million due to the seasonality of our billings in the fourth fiscal quarter and timing of cash collections from customers.

Previous wording

Net cash used in investing activities was $864 million for the six months ended July 31, 2024, primarily due to business combinations, net of cash acquired, and purchases of marketable securities partially offset by the sales and maturities of marketable securities. Net cash used in investing activities was $418 million for the six months ended July 31, 2023, primarily due to purchases of marketable securities partially offset by the sales and maturities of marketable securities.

Current wording

Net cash used in investing activities was $836 million for the nine months ended October 31, 2024, primarily due to business combinations, net of cash acquired, and purchases of marketable securities partially offset by the sales and maturities of marketable securities. Net cash used in investing activities was $524 million for the nine months ended October 31, 2023, primarily due to purchases of marketable securities partially offset by the sales and maturities of marketable securities.

Previous wording

Net cash used in financing activities was $221 million for the six months ended July 31, 2024, primarily due to taxes paid related to net share settlement of equity awards and repurchases of common stock and $665 million for the six months ended July 31, 2023, primarily due to repurchases of common stock.

Current wording

Net cash used in financing activities was $530 million and $753 million for the nine months ended October 31, 2024 and 2023, respectively, primarily due to repurchases of common stock.

Previous wording

(2)These amounts correspond to the plan publicly announced and approved by the Board of Directors in November 2022 that authorized the repurchase of $5 billion. At July 31, 2024, $4.62 billion remained available for repurchase under the November 2022 repurchase program. The plan does not have a fixed expiration date. See Part I, Item 1, “Financial Statements,” Note 18, “Stockholders' Equity,” in the Notes to the Condensed Consolidated Financial Statements for further discussion.

Current wording

(2)These amounts correspond to the plan publicly announced and approved by the Board of Directors in November 2022 that authorized the repurchase of $5 billion. At October 31, 2024, $4.30 billion remained available for repurchase under the November 2022 repurchase program. The plan does not have a fixed expiration date. See Part I, Item 1, “Financial Statements,” Note 18, “Stockholders' Equity,” in the Notes to the Condensed Consolidated Financial Statements for further discussion.