Autodesk Inc. continued to use a controversial sales strategy after promising investors it would stop and ignored internal warnings about the risks of doing so, according to previously unreported internal documents.
The years-long strategy involved offering discounts to certain corporate customers willing to pay up front for large multiyear contracts. In an effort to provide more predictable cash flow and wean itself off of the discounts, the engineering software company in 2021 pledged to halt the practice.
But Autodesk kept doing it in an effort to meet financial targets, according to the documents, which were reviewed by Bloomberg. The company counted on the upfront payments to boost cash flow, the documents show.
The Autodesk Inc. office in San Francisco
David Paul Morris/Bloomberg
Employees considered the practice risky because the discounts and other concessions reduced long-term revenue, boosted the chance of mistakes in financial modeling and made it harder for salespeople to do their jobs, the documents said.
The shares dropped as much as 4.1% in extended trading.
An Autodesk spokesperson said the company’s use of upfront billing continues to decrease, but won’t end entirely “as we consider customer preferences and our presence in emerging countries.” She noted that an internal investigation resulted in no changes to any financial statements.
The accounting issues first came to light in April, when the company delayed its annual financial disclosures and said it was opening a review of processes related to free cash flow and operating margins. In May, the company announced it was replacing Debbie Clifford as chief financial officer. The following month, activist hedge fund Starboard Value LP said it had taken a stake and began pushing for board changes over concerns about how Autodesk was handling the accounting probe.
Employees warned executives about the strategic risk in early 2022, but the company continued to book such deals at least until the fiscal year ending in January 2024, according to the documents. Some of the deals were approved by Chief Operating Officer Steve Blum, the documents show.
Autodesk has offered similar discounts to smaller customers and has said it will phase out those offerings later than discounts for corporate customers.
Autodesk’s accounting probe concluded in May, with the board deciding to remove Clifford as CFO. The company said it had provided related documents to the Securities and Exchange Commission and U.S. Justice Department.
Starboard has urged the board to consider replacing chief executive officer Andrew Anagnost and said the company is “asking shareholders to accept a complete lack of consequences and accountability for” the accounting issues. The hedge fund, led by CEO Jeff Smith, unsuccessfully sued to reopen Autodesk’s board nomination window, saying the company had purposely hidden the probe until after it had closed.
Autodesk has said management and the board met with Starboard multiple times. “Autodesk is taking decisive actions to drive growth, enhance margins and deliver strong free cash flow, and our business has momentum, as evidenced by our strong first-quarter results,” the spokesperson said.
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all endorsed this week by the American Institute of CPAs, and passed two others as well.
H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
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