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Equity Compensation | 6 Months Ended
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Jul. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Equity Compensation | Equity Compensation Stock Plans The 2022 Equity Incentive Plan (the “2022 Plan”) was approved by Autodesk’s stockholders and became effective on June 16, 2022. The 2022 Plan replaced the 2012 Employee Stock Plan, as amended, and the 2012 Outside Directors’ Stock Plan, as amended (collectively, the “Prior Plans”), and no further equity awards may be granted under the Prior Plans. The 2022 Plan reserves up to 23 million shares. The 2022 Plan permits the grant of stock options, restricted stock units, and restricted stock awards. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2022 Plan as 2.08 shares. If a granted option, restricted stock unit, or restricted stock award expires or becomes unexercisable for any reason, the unpurchased or forfeited shares that were granted may be returned to the 2022 Plan and may become available for future grant under the 2022 Plan. As of July 31, 2022, 259 thousand shares subject to restricted stock units and restricted stock awards have been granted under the 2022 Plan. Restricted stock units that were granted under the 2022 Plan vest over one to three years from the date of grant. The 2022 Plan will expire on March 17, 2032. At July 31, 2022, approximately 23 million shares were available for future issuance under the 2022 Plan. Restricted Stock Units A summary of restricted stock activity for the six months ended July 31, 2022, is as follows:
| Unvested restricted stock units |  | Weighted average grant date fair value per share
| (in thousands) |  |
Unvested restricted stock units at January 31, 2022 | 4,033 |  |  | $ | 251.17 |
Granted | 3,126 |  |  | 197.06 |
Vested | (1,301) |  |  | 257.52 |
Canceled/Forfeited | (386) |  |  | 234.99 |
Performance Adjustment (1) | (2) |  |  | 299.07 |
Unvested restricted stock units at July 31, 2022 | 5,470 |  |  | $ | 219.81 |
_______________ (1)Based on Autodesk's financial results and relative total stockholder return for the fiscal 2022 performance period. The performance stock units were attained at rates ranging from 87% to 113% of the target award. The fair value of the shares vested during the six months ended July 31, 2022 and 2021, was $269 million and $173 million, respectively. During the six months ended July 31, 2022, Autodesk granted 2,772 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 $136 million and $115 million during the three months ended July 31, 2022 and 2021, respectively. Autodesk recorded stock-based compensation expense related to restricted stock units of $253 million and $205 million during the six months ended July 31, 2022 and 2021, respectively. During the six months ended July 31, 2022 and 2021, Autodesk settled liability-classified awards in the amount of $5 million and zero, 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 six months ended July 31, 2022, Autodesk granted 239 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 2023 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 six months ended July 31, 2022, was based on revenue and free cash flow goals adopted by the Compensation and Human Resource Committee. Additionally, during the six months ended July 31, 2022, Autodesk granted 115 thousand performance stock units, as part of a program offering certain employees the option to receive equity in lieu of the opportunity to receive an annual cash incentive award. The ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated service and performance period. The performance criteria for the performance stock units are based on revenue and Non-GAAP income from operations targets adopted by the Compensation and Human Resource Committee. The fair value of these performance stock units is expensed using the accelerated attribution method over the one-year vesting period. Performance stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. Autodesk recorded stock-based compensation expense related to performance stock units of $14 million and $20 million for the three months ended July 31, 2022 and 2021, respectively. Autodesk recorded stock-based compensation expense related to performance stock units of $29 million and $32 million during the six months ended July 31, 2022 and 2021, respectively. On May 20, 2022, the Compensation and Human Resource Committee of the Board of Directors approved an immaterial modification to certain elements of the fiscal year 2023 performance criteria for the performance stock units granted in fiscal years 2023, 2022, and 2021. Autodesk accounted for the change as a modification and revalued the awards as of the modification date resulting in no material incremental stock-based compensation expense. Common Stock 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 2021 acquisition. Issuance of the common stock is dependent on the respective employees’ continued employment through the vesting period. The number of shares to be issued will be determined based on the closing price of Autodesk’s common stock at the issuance date. During fiscal 2022, Autodesk issued 8,300 shares at an aggregate fair value of $3 million. As of July 31, 2022, the remaining shares to be issued are estimated to be 13 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 73,632 shares of restricted common stock to certain employees in connection with a fiscal 2021 acquisition. These shares of restricted common stock are subject to forfeiture by the employee if employment terminates prior to the three-year employment period. The fair value of the restricted common stock is recorded as compensation for post-acquisition services and recognized as expense using the straight-line method over the three-year repurchase period. Autodesk issued 9,277 shares of restricted common stock to certain employees in connection with a fiscal 2022 acquisition. These shares of restricted common stock were recorded as “Prepaid expenses and other current assets” and “Long-term other assets” on our Condensed Consolidated Balance Sheets and will be amortized to stock-based compensation expense for post-acquisition services using the straight-line method over the two-year vesting period. 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 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 for the ninety consecutive trading day period ending on the release date. During the three months ended July 31, 2022, Autodesk issued 24 thousand shares at an aggregate fair value of $5 million. As of July 31, 2022, the remaining shares to be issued are estimated to be 41 thousand. The awards are accrued as liability-classified awards and are 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 VWAP of Autodesk’s common stock at the issuance date. As of July 31, 2022, shares to be issued are estimated to be 55 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. Additionally, Autodesk issued 12,782 shares of restricted common stock to certain employees in connection with these fiscal 2022 acquisitions. 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 vesting period. Autodesk issued 40,289 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. As of July 31, 2022, shares to be issued are estimated to be 24 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. See Note 8, “Acquisitions,” for further information. Autodesk recorded stock-based compensation expense related to common stock shares of $7 million and $4 million for the three months ended July 31, 2022 and 2021, respectively. Autodesk recorded stock-based compensation expense related to common stock shares of $17 million and $7 million for the six months ended July 31, 2022 and 2021, 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 six months ended ended July 31, 2022 and 2021, is as follows:
|  |  | Six Months Ended July 31,
|  |  |  |  | 2022 |  | 2021
Issued shares (in thousands) |  |  |  |  | 377 |  |  | 490 |
Average price of issued shares |  |  |  |  | $ | 173.83 |  |  | $ | 128.02 |
Weighted average grant date fair value of shares granted under the ESPP (1) |  |  |  |  | $ | 69.19 |  |  | $ | 91.17 |
_______________ (1)Calculated as of the award grant date using the Black-Scholes Merton (“BSM”) option pricing model. During the six months ended July 31, 2022, Autodesk reset the price for certain offering dates in connection with Autodesk’s ESPP as Autodesk’s closing stock price for the respective offering dates was above the closing stock price on March 31, 2022, which triggered a new 24-month offering period through March 31, 2024, resulting in modification expense of approximately $18 million to be recognized over the new offering period. Stock-based Compensation Expense The following table summarizes stock-based compensation expense for the three and six months ended July 31, 2022 and 2021, respectively, as follows:
| Three Months Ended July 31, |  | Six Months Ended July 31,
| 2022 |  | 2021 |  | 2022 |  | 2021
Cost of subscription and maintenance revenue | $ | 9 |  |  | $ | 8 |  |  | $ | 17 |  |  | $ | 13 |
Cost of other revenue | 3 |  |  | 2 |  |  | 6 |  |  | 4 |
Marketing and sales | 69 |  |  | 65 |  |  | 131 |  |  | 113 |
Research and development | 69 |  |  | 60 |  |  | 128 |  |  | 107 |
General and administrative | 19 |  |  | 18 |  |  | 42 |  |  | 32 |
Stock-based compensation expense related to stock awards and ESPP purchases | 169 |  |  | 153 |  |  | 324 |  |  | 269 |
Tax expense (benefit) | 3 |  |  | (4) |  |  | 9 |  |  | (20) |
Stock-based compensation expense related to stock awards and ESPP purchases, net of tax | $ | 172 |  |  | $ | 149 |  |  | $ | 333 |  |  | $ | 249 |
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:
| Six Months Ended July 31, 2022 |  | Six Months Ended July 31, 2021
| Performance Stock Units (1) |  | ESPP (1) |  | Performance Stock Units |  | ESPP (2)
Range of expected volatilities | 39.4 - 40.7% |  | 38.3 - 42.7% |  | 36.9% |  | 36.5 - 41.8%
Range of expected lives (in years) | N/A |  | 0.5 - 2.0 |  | N/A |  | 0.5 - 2.0
Expected dividends | —% |  | —% |  | —% |  | —%
Range of risk-free interest rates | 1.2 - 1.6% |  | 0.9 - 1.9% |  | 0.1% |  | 0.1 - 0.2%
_______________ (1)There were no ESPP awards granted during the three months ended July 31, 2022. There we no performance stock units granted during the three months ended July 31, 2022, where the fair value was estimated by a Monte Carlo simulation. (2)There were no ESPP awards granted during the three months ended July 31, 2021. Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures: (1) a measure of historical volatility in the trading market for the Company’s common stock, and (2) the implied volatility of traded forward call options to purchase shares of the Company’s common stock. The expected volatility for performance stock units subject to market conditions includes the expected volatility of Autodesk's peer companies within the S&P North American Technology Software Index with a market capitalization over $2.0 billion, depending on the award type. The range of expected lives of ESPP awards are based upon the four six-month exercise periods within a 24-month offering period. Autodesk does not currently pay, and does not anticipate paying in the foreseeable future, any cash dividends. Consequently, an expected dividend yield of zero is used in the BSM option pricing model and the Monte Carlo simulation model. The risk-free interest rate used in the BSM option pricing model and the Monte Carlo simulation model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives. Autodesk recognizes expense only for the stock-based awards that ultimately vest. Autodesk accounts for forfeitures of our stock-based awards as those forfeitures occur.

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