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Equity Compensation

9 Months Ended

Oct. 31, 2023

Share-Based Payment Arrangement [Abstract]

Restricted Stock Units

A summary of restricted stock activity for the nine months ended October 31, 2023, is as follows:


	Unvested restricted stock units	Weighted average grant date fair value per share
	(in thousands)
Unvested restricted stock units at January 31, 2023	4,848	$	216.20
Granted	3,544	199.54
Vested	(2,334)	216.56
Canceled/Forfeited	(261)	212.95
Performance Adjustment (1)	(11)	189.41
Unvested restricted stock units at October 31, 2023	5,786	$	205.98

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(1)Based on Autodesk's financial results and relative total stockholder return for the fiscal 2023 performance period. The performance stock units were attained at rates ranging from 86% to 110% of the target award.

The fair value of the shares vested during the nine months ended October 31, 2023 and 2022, was $476 million and $402 million, respectively.

During the nine months ended October 31, 2023, Autodesk granted 3,233 thousand restricted stock units. Restricted stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights.

Autodesk recorded stock-based compensation expense related to restricted stock units of $151 million and $130 million during the three months ended October 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to restricted stock units of $445 million and $383 million during the nine months ended October 31, 2023 and 2022, respectively.

During the nine months ended October 31, 2023 and 2022, Autodesk settled liability-classified awards in the amount of $9 million and $8 million, respectively. The ultimate number of shares earned was based on the Autodesk closing stock price on the vesting date. As these awards were settled in a fixed dollar amount of shares, the awards were accounted for as a liability-classified award and were expensed using the straight-line method over the vesting period.

During the nine months ended October 31, 2023, Autodesk granted 311 thousand performance stock units for which the ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units are primarily based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee and total stockholder return compared against companies in the S&P North American Technology Software Index with a market capitalization over $2.0 billion (“Relative TSR”). The fair value of the performance stock units is expensed using the accelerated attribution method over the three-year vesting period and have the following vesting schedule:

•Up to one third of the performance stock units may vest following year one, depending upon the achievement of the performance criteria for fiscal 2024 as well as 1-year Relative TSR (covering year one).

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

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

The performance criteria for the performance stock units vested during the nine months ended October 31, 2023, was based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee.

Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights.

Autodesk recorded stock-based compensation expense related to performance stock units of $11 million and $13 million for the three months ended October 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to performance stock units of $32 million and $42 million during the nine months ended October 31, 2023 and 2022, respectively.

Common Stock

Autodesk agreed to issue a fixed amount of $13 million in shares of common stock to certain employees in connection with a fiscal 2022 acquisition. Issuance of the common stock was dependent on the respective employees’ continued employment through the vesting period. During the nine months ended October 31, 2023, Autodesk issued the remaining 39 thousand shares at an aggregate fair value of $8 million. The awards were accounted for as liability-classified awards and were recognized as compensation expense using the straight-line method over the vesting period.

Autodesk agreed to issue a fixed amount of $11 million in common stock at a future date to certain employees in connection with other fiscal 2022 acquisitions. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the volume weighted average closing price (“VWAP”) of Autodesk’s common stock at the issuance date. As of October 31, 2023, remaining shares to be issued are estimated to be 33 thousand. The awards are accounted for as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period.

Autodesk issued 40 thousand shares of restricted common stock to certain employees in connection with a fiscal 2023 acquisition. These shares of restricted common stock were recorded as “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets and will be amortized to stock-based compensation expense for post-acquisition services using the straight-line method over the two-year vesting period. Additionally, Autodesk agreed to issue a fixed amount of $5 million in common stock at a future date to certain employees in connection with a fiscal 2023 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the VWAP of Autodesk’s common stock at the issuance date. During the nine months ended October 31, 2023, Autodesk issued 9 thousand shares at an aggregate fair value of $1 million. Remaining shares to be issued are estimated to be 13 thousand as of October 31, 2023. The awards are accounted for as liability-classified awards and are recognized as compensation expense using the straight-line method over the vesting period.

Autodesk recorded stock-based compensation expense related to common stock shares of $5 million and $10 million for the three months ended October 31, 2023 and 2022, respectively. Autodesk recorded stock-based compensation expense related to common stock shares of $15 million and $27 million for the nine months ended October 31, 2023 and 2022, respectively.

1998 Employee Qualified Stock Purchase Plan (“ESPP”)

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

A summary of the ESPP activity for the three and nine months October 31, 2023 and 2022, is as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Issued shares (in thousands)	357		363		791		740
Average price of issued shares	$	164.30	$	158.78	$	163.91	$	166.44
Weighted average grant date fair value of shares granted under the ESPP (1)	$	67.29	$	66.43	$	68.70	$	67.77

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(1)Calculated as of the award grant date using the Black-Scholes Merton (“BSM”) option pricing model.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three and nine months ended October 31, 2023 and 2022, as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Cost of subscription and maintenance revenue	$	9	$	9	$	28	$	26
Cost of other revenue	4		3		11		9
Marketing and sales	66		68		202		199
Research and development	78		71		233		199
General and administrative	24		21		69		63
Stock-based compensation expense related to stock awards and ESPP purchases	181		172		543		496
Tax (benefit) expense	(2)		(2)		1		7
Stock-based compensation expense related to stock awards and ESPP purchases, net of tax	$	179	$	170	$	544	$	503

Stock-based Compensation Expense Assumptions

Autodesk determines the grant date fair value of its share-based payment awards using a BSM option pricing model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case Autodesk uses the Monte Carlo simulation model. The Monte Carlo simulation model uses multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:


	Three Months Ended October 31, 2023		Three Months Ended October 31, 2022
	Performance Stock Units	ESPP	Performance Stock Units	ESPP
Range of expected volatility	N/A	29.4 - 37.4%	N/A	40.7 - 44.9%
Range of expected lives (in years)	N/A	0.5- 2.0	N/A	0.5 - 2.0
Expected dividends	N/A	—%	N/A	—%
Range of risk-free interest rates	N/A	5.0 -5.5%	N/A	3.7 - 3.9%

	Nine Months Ended October 31, 2023		Nine Months Ended October 31, 2022
	Performance Stock Units	ESPP	Performance Stock Units	ESPP
Range of expected volatilities	40.9 - 42.5%	29.4 - 42.4%	39.4 - 40.7%	38.3 - 44.9%
Range of expected lives (in years)	N/A	0.5 - 2.0	N/A	0.5 - 2.0
Expected dividends	—%	—%	—%	—%
Range of risk-free interest rates	4.3 - 4.7%	4.3 - 5.5%	1.2 - 1.6%	0.9 - 3.9%

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

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

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

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

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