Company Quick10K Filing
⚲
Workday
Financials
Price174.44 EPS-2
Shares228 P/E-87
MCap39,853 P/FCF70
Net Debt-917 EBIT-407
TEV38,936 TEV/EBIT-96
TTM 2019-10-31, in MM, except price, ratios
Filings
10-Q 2021-04-30 Filed 2021-05-26
10-K 2021-01-31 Filed 2021-03-02
10-Q 2020-10-31 Filed 2020-11-20
10-Q 2020-07-31 Filed 2020-08-28
10-Q 2020-04-30 Filed 2020-05-28
10-K 2020-01-31 Filed 2020-03-03
10-Q 2019-10-31 Filed 2019-12-04
10-Q 2019-07-31 Filed 2019-08-30
10-Q 2019-04-30 Filed 2019-05-30
10-K 2019-01-31 Filed 2019-03-18
10-Q 2018-10-31 Filed 2018-12-03
10-Q 2018-07-31 Filed 2018-09-05
10-Q 2018-04-30 Filed 2018-06-01
10-K 2018-01-31 Filed 2018-03-14
10-Q 2017-10-31 Filed 2017-11-30
10-Q 2017-07-31 Filed 2017-08-31
10-Q 2017-04-30 Filed 2017-06-02
10-K 2017-01-31 Filed 2017-03-20
10-Q 2016-10-31 Filed 2016-12-02
10-Q 2016-07-31 Filed 2016-09-02
10-Q 2016-04-30 Filed 2016-06-01
10-K 2016-01-31 Filed 2016-03-22
10-Q 2015-10-31 Filed 2015-12-04
10-Q 2015-07-31 Filed 2015-09-04
10-Q 2015-04-30 Filed 2015-06-05
10-K 2015-01-31 Filed 2015-03-25
10-Q 2014-10-31 Filed 2014-12-05
10-Q 2014-07-31 Filed 2014-09-02
10-Q 2014-04-30 Filed 2014-06-06
10-K 2014-01-31 Filed 2014-03-31
10-Q 2013-10-31 Filed 2013-12-02
10-Q 2013-04-30 Filed 2013-06-05
10-K 2013-01-31 Filed 2013-03-22
10-Q 2012-10-31 Filed 2012-12-07
Reports
8-K 2020-11-19
8-K 2020-08-27
8-K 2020-08-26
8-K 2020-06-09
8-K 2020-05-27
8-K 2020-04-02
8-K 2020-03-14
8-K 2020-02-27
8-K 2019-12-04
8-K 2019-12-03
8-K 2019-11-04
8-K 2019-08-29
8-K 2019-06-18
8-K 2019-05-28
8-K 2019-03-30
8-K 2019-02-28
8-K 2018-11-29
8-K 2018-09-04
8-K 2018-08-01
8-K 2018-06-20
8-K 2018-06-11
8-K 2018-05-31
8-K 2018-02-27
8-K 2018-02-14
8-K 2018-02-01
8-K 2018-01-02

WDAY 10Q Quarterly Report

Content
Part I. Financial Information
Item 1. Financial Statements
Note 1. Overview and Basis of Presentation
Note 2. Accounting Standards
Note 3. Investments
Note 4. Fair Value Measurements
Note 5. Deferred Costs
Note 6. Property and Equipment, Net
Note 7. Business Combinations
Note 8. Acquisition - Related Intangible Assets, Net
Note 9. Other Assets
Note 10. Derivative Instruments
Note 11. Debt
Note 12. Leases
Note 13. Commitments and Contingencies
Note 14. Stockholders' Equity
Note 15. Unearned Revenue and Performance Obligations
Note 16. Other Income (Expense), Net
Note 17. Income Taxes
Note 18. Net Loss per Share
Note 19. Disaggregation of Revenues and Geographic Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Exhibits
EX-10.1 wday-4302021xex101.htm
EX-31.1 wday-04302021xex311.htm
EX-31.2 wday-04302021xex312.htm
EX-31.3 wday-04302021xex313.htm
EX-32.1 wday-04302021xex321.htm
EX-32.2 wday-04302021xex322.htm
EX-32.3 wday-04302021xex323.htm

Workday Earnings 2021-04-30

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
 1.00.80.50.30.0-0.22012201420172020
Rev, G Profit, Net Income
 1.10.60.1-0.3-0.8-1.32012201420172020
Ops, Inv, Fin
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended April 30, 2021
OR
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For transition period from                     to                     
Commission File Number: 001-35680
WORKDAY, INC.
(Exact name of registrant as specified in its charter) 
Delaware20-2480422
(State or other jurisdiction of
incorporation or organization)		 (I.R.S Employer
Identification No.)
6110 Stoneridge Mall Road
Pleasanton, California 94588
(Address of principal executive offices, including zip code)
(925) 951-9000
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001WDAYThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes  ☒ No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒  No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No  ☒
As of May 24, 2021, there were approximately 189 million shares of the registrant’s Class A common stock, net of treasury stock, and 58 million shares of the registrant’s Class B common stock outstanding.

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Workday, Inc.
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Workday, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
April 30, 2021January 31, 2021
Assets
Current assets:
Cash and cash equivalents$959,358 $1,384,181 
Marketable securities2,035,171 2,151,472 
Trade and other receivables, net647,163 1,032,484 
Deferred costs123,828 122,764 
Prepaid expenses and other current assets140,277 111,160 
Total current assets3,905,797 4,802,061 
Property and equipment, net1,155,697 972,403 
Operating lease right-of-use assets280,943 414,143 
Deferred costs, noncurrent265,388 271,796 
Acquisition-related intangible assets, net401,220 248,626 
Goodwill2,362,166 1,819,625 
Other assets252,796 189,757 
Total assets$8,624,007 $8,718,411 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$48,097 $75,596 
Accrued expenses and other current liabilities208,559 169,266 
Accrued compensation320,176 285,061 
Unearned revenue2,361,095 2,556,624 
Operating lease liabilities81,106 93,000 
Debt, current1,191,722 1,103,101 
Total current liabilities4,210,755 4,282,648 
Debt, noncurrent673,273 691,913 
Unearned revenue, noncurrent64,914 80,111 
Operating lease liabilities, noncurrent213,568 350,051 
Other liabilities56,056 35,854 
Total liabilities5,218,566 5,440,577 
Stockholders’ equity:
Common stock246 242 
Additional paid-in capital6,298,516 6,254,936 
Treasury stock(12,420)(12,384)
Accumulated other comprehensive income (loss)(60,421)(54,970)
Accumulated deficit(2,820,480)(2,909,990)
Total stockholders’ equity3,405,441 3,277,834 
Total liabilities and stockholders’ equity$8,624,007 $8,718,411 
See Notes to Condensed Consolidated Financial Statements
3
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Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended April 30,
20212020
Revenues:
Subscription services$1,032,169 $881,956 
Professional services142,864 136,429 
Total revenues1,175,033 1,018,385 
Costs and expenses (1):
Costs of subscription services182,208 145,263 
Costs of professional services150,845 160,367 
Product development441,616 443,484 
Sales and marketing326,494 318,557 
General and administrative112,183 95,171 
Total costs and expenses1,213,346 1,162,842 
Operating income (loss)(38,313)(144,457)
Other income (expense), net(9,051)(10,973)
Loss before provision for (benefit from) income taxes(47,364)(155,430)
Provision for (benefit from) income taxes(842)2,938 
Net loss$(46,522)$(158,368)
Net loss per share, basic and diluted$(0.19)$(0.68)
Weighted-average shares used to compute net loss per share, basic and diluted243,739 232,939 
(1) Costs and expenses include share-based compensation expenses as follows:
Three Months Ended April 30,
20212020
Costs of subscription services$20,717 $13,892 
Costs of professional services27,692 22,566 
Product development129,862 122,022 
Sales and marketing50,308 46,950 
General and administrative36,056 31,242 
See Notes to Condensed Consolidated Financial Statements
4
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Workday, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended April 30,
20212020
Net loss$(46,522)$(158,368)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment218 (1,247)
Net change in unrealized gains (losses) on available-for-sale debt securities(898)2,974 
Net change in market value of effective foreign currency forward exchange contracts(4,771)32,307 
Other comprehensive income (loss)(5,451)34,034 
Comprehensive loss$(51,973)$(124,334)
See Notes to Condensed Consolidated Financial Statements
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Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Three Months Ended April 30,
20212020
Common stock:
Balance, beginning of period$242 $231 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes4 4 
Balance, end of period246 235 
Additional paid-in capital:
Balance, beginning of period6,254,936 5,090,187 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes(1,361)3,573 
Share-based compensation264,605 236,410 
Exercise of convertible senior notes hedges39 — 
Settlement of convertible senior notes(1)— 
Cumulative effect of accounting changes(219,702)— 
Balance, end of period6,298,516 5,330,170 
Treasury stock:
Balance, beginning of period(12,384)— 
Exercise of convertible senior notes hedges(36)— 
Balance, end of period(12,420)— 
Accumulated other comprehensive income (loss):
Balance, beginning of period(54,970)23,492 
Other comprehensive income (loss)(5,451)34,034 
Balance, end of period(60,421)57,526 
Accumulated deficit:
Balance, beginning of period(2,909,990)(2,627,359)
Net loss(46,522)(158,368)
Cumulative effect of accounting changes136,032 (200)
Balance, end of period(2,820,480)(2,785,927)
Total stockholders’ equity$3,405,441 $2,602,004 

Three Months Ended April 30,
20212020
Common stock (in shares):
Balance, beginning of period242,667 231,708 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes3,562 3,462 
Issuance of restricted stock awards82 — 
Balance, end of period246,311 235,170 
See Notes to Condensed Consolidated Financial Statements
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Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended April 30,
20212020
Cash flows from operating activities:
Net loss$(46,522)$(158,368)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization82,463 71,514 
Share-based compensation expenses264,635 236,672 
Amortization of deferred costs31,614 26,060 
Amortization of debt discount and issuance costs997 14,840 
Non-cash lease expense22,230 18,369 
Other3,397 4,370 
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net392,119 290,902 
Deferred costs(26,270)(18,060)
Prepaid expenses and other assets(35,566)19,977 
Accounts payable(170)(22,382)
Accrued expenses and other liabilities(10,920)(1,504)
Unearned revenue(225,579)(218,707)
Net cash provided by (used in) operating activities452,428 263,683 
Cash flows from investing activities:
Purchases of marketable securities(765,395)(553,985)
Maturities of marketable securities857,408 381,398 
Sales of marketable securities12,457 5,279 
Owned real estate projects(171,423)(2,487)
Capital expenditures, excluding owned real estate projects(69,796)(59,940)
Business combinations, net of cash acquired(679,220)— 
Purchases of non-marketable equity and other investments(45,767)(52,250)
Sales and maturities of non-marketable equity and other investments25 4,638 
Other(5)— 
Net cash provided by (used in) investing activities(861,716)(277,347)
Cash flows from financing activities:
Proceeds from borrowings on Term Loan, net of debt discount and issuance costs— 497,795 
Payments on convertible senior notes(51)(1)
Payments on Term Loan(9,375)— 
Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld(1,357)3,577 
Other(225)(2,040)
Net cash provided by (used in) financing activities(11,008)499,331 
Effect of exchange rate changes186 (265)
Net increase (decrease) in cash, cash equivalents, and restricted cash(420,110)485,402 
Cash, cash equivalents, and restricted cash at the beginning of period1,387,921 734,721 
Cash, cash equivalents, and restricted cash at the end of period$967,811 $1,220,123 
See Notes to Condensed Consolidated Financial Statements
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Three Months Ended April 30,
20212020
Supplemental cash flow data:
Cash paid for interest$4,638 $1,438 
Cash paid for income taxes4,493 2,945 
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid78,468 39,721 

As of April 30,
20212020
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents$959,358 $1,214,213 
Restricted cash included in Prepaid expenses and other current assets7,755 5,792 
Restricted cash included in Other assets698 118 
Total cash, cash equivalents, and restricted cash$967,811 $1,220,123 
See Notes to Condensed Consolidated Financial Statements
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Workday, Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Overview and Basis of Presentation
Company and Background
Workday delivers financial management, spend management, human capital management, planning, and analytics applications designed for the world’s largest companies, educational institutions, and government agencies. We offer innovative and adaptable technology focused on the consumer internet experience and cloud delivery model. Our applications are designed for global enterprises to manage complex and dynamic operating environments. We provide our customers highly adaptable, accessible, and reliable applications to manage critical business functions that help enable them to optimize their financial and human resources. We were originally incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware. As used in this report, the terms “Workday,” “registrant,” “we,” “us,” and “our” mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Workday, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of Workday’s financial position, results of operations, stockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the quarter ended April 30, 2021, shown in this report are not necessarily indicative of the results to be expected for the full year ending January 31, 2022. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 2, 2021.
There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, other than the adoption of an accounting pronouncement as described in Note 2, Accounting Standards.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, judgments, and assumptions include, but are not limited to, the determination of the fair value and useful lives of assets acquired and liabilities assumed through business combinations, the period of benefit for deferred commissions, the fair value of certain equity awards, and the valuation of non-marketable equity investments. Actual results could differ from those estimates and such differences could be material to our condensed consolidated financial statements.
Segment Information
We operate in one operating segment, cloud applications. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by chief operating decision makers (“CODMs”) in deciding how to allocate resources and assessing performance. For the three months ended April 30, 2021, our CODMs were our Co-Chief Executive Officer and Chairman, Aneel Bhusri, and our Co-Chief Executive Officer, Chano Fernandez. Our CODMs allocate resources and assess performance based upon discrete financial information at the consolidated level.
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Note 2. Accounting Standards
Recently Adopted Accounting Pronouncements
ASU No. 2020-06
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). Under ASU No. 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating diluted earnings per share.
We adopted this standard effective February 1, 2021, using a modified retrospective method, under which financial results reported in prior periods were not adjusted. We applied the provisions of this guidance to our 0.25% convertible senior notes due October 1, 2022 (“2022 Notes”). Upon adoption, we recorded a decrease to Accumulated deficit of $136 million, a decrease to Additional paid-in capital of $220 million, an increase to Debt, current of $79 million, and a decrease to Property and equipment, net of $5 million, which represented non-cash interest previously capitalized. There was no impact to diluted loss per share as the inclusion of potential shares of common stock related to the 2022 Notes would have been anti-dilutive. For further information, see Note 11, Debt.
Recently Issued Accounting Pronouncements
ASU No. 2020-04 and ASU No. 2021-01
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate to alternative reference rates. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which refines the scope of Topic 848 and clarifies some of its guidance. We may elect to apply the amendments prospectively through December 31, 2022. The impact on our condensed consolidated financial statements from the adoption of this standard is expected to be immaterial.
Note 3. Investments
Debt Securities
As of April 30, 2021, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$897,929 $203 $(9)$898,123 
U.S. agency obligations364,857 89 (13)364,933 
Corporate bonds343,176 506 (93)343,589 
Commercial paper765,880 — — 765,880 
$2,371,842 $798 $(115)$2,372,525 
Included in Cash and cash equivalents$347,014 $— $— $347,014 
Included in Marketable securities$2,024,828 $798 $(115)$2,025,511 
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As of January 31, 2021, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$1,054,146 $205 $(10)$1,054,341 
U.S. agency obligations504,298 196 (49)504,445 
Corporate bonds346,563 1,253 (14)347,802 
Commercial paper664,262 — — 664,262 
$2,569,269 $1,654 $(73)$2,570,850 
Included in Cash and cash equivalents$440,678 $— $— $440,678 
Included in Marketable securities$2,128,591 $1,654 $(73)$2,130,172 
We classify our debt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all debt securities as available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets on the condensed consolidated balance sheets. Debt securities included in Marketable securities on the condensed consolidated balance sheets consist of securities with original maturities at the time of purchase greater than three months, and the remainder of the securities is included in Cash and cash equivalents.
The unrealized losses associated with our debt securities were immaterial as of April 30, 2021, and January 31, 2021, and we did not recognize any credit losses related to our debt securities during the three months ended April 30, 2021, or 2020.
We sold $10 million and $5 million of debt securities for the three months ended April 30, 2021, and 2020, respectively. The realized gains and losses from the sales were immaterial.
Equity Investments
Equity investments consisted of the following (in thousands):
Condensed Consolidated Balance Sheets LocationApril 30, 2021January 31, 2021
Money market funds Cash and cash equivalents$337,727 $659,964 
Equity investments accounted for under the equity method Other assets46,010 48,222 
Non-marketable equity investments measured using the measurement alternative Other assets100,778 73,142 
Marketable equity investments Marketable securities9,660 21,300 
$494,175 $802,628 
Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):
Three Months Ended April 30,
20212020
Net realized gains (losses) recognized on equity investments sold (1)
$(1,751)$1,591 
Net unrealized gains (losses) recognized on equity investments held as of the end of the period(4,298)(4,096)
Total net gains (losses) recognized in Other income (expense), net$(6,049)$(2,505)
(1)Reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period.
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Equity Investments Accounted for Under the Equity Method
We determine at the inception of each arrangement whether an investment or other interest is considered a variable interest entity (“VIE”). Investments in VIEs for which we are not the primary beneficiary or do not own a controlling interest but can exercise significant influence over the investee are accounted for under the equity method of accounting. During fiscal 2021, we made an equity investment of $50 million in a limited partnership, which represents an ownership interest of approximately 6%. We determined that the limited partnership is a VIE because the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest. We do not have majority voting rights nor the power to direct the activities of this entity, and therefore, we are not the primary beneficiary. The investment is accounted for under the equity method of accounting as it is considered to be more than minor and we have the ability to exercise significant influence over the entity. Our share of losses on this investment was $2 million and $1 million for the three months ended April 30, 2021, and 2020, respectively. There was no impairment loss recorded on this investment during the periods presented.
Non-Marketable Equity Investments Measured Using the Measurement Alternative
Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. The carrying values for our non-marketable equity investments are summarized below (in thousands):
April 30, 2021January 31, 2021
Total initial cost$87,704 $65,377 
Cumulative net unrealized gains (losses)13,074 7,765 
Carrying value$100,778 $73,142 
We recorded upward adjustments to the carrying values of non-marketable equity investments of $8 million during the three months ended April 30, 2021. No material adjustments were made to the carrying values of these investments during the three months ended April 30, 2020. Additionally, we recorded impairment losses on these investments of $2 million and $3 million during the three months ended April 30, 2021, and 2020, respectively.
Marketable Equity Investments
We hold marketable equity investments with readily determinable fair values over which we do not own a controlling interest or exercise significant influence. The carrying values for our marketable equity investments are summarized below (in thousands):
April 30, 2021January 31, 2021
Total initial cost$4,004 $5,000 
Cumulative net unrealized gains (losses)5,656 16,300 
Carrying value$9,660 $21,300 
We sold marketable equity investments for proceeds of $2 million during the three months ended April 30, 2021. The initial cost of the equity investments sold was $1 million. There were no sales of marketable equity investments during the three months ended April 30, 2020.
Note 4. Fair Value Measurements
We measure our cash equivalents, marketable securities, and foreign currency derivative contracts at fair value at each reporting period using a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs that are supported by little or no market activity.
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of April 30, 2021 (in thousands):
Level 1Level 2Level 3Total
U.S. treasury securities$898,123 $— $— $898,123 
U.S. agency obligations— 364,933 — 364,933 
Corporate bonds— 343,589 — 343,589 
Commercial paper— 765,880 — 765,880 
Money market funds337,727 — — 337,727 
Marketable equity investments9,660 — — 9,660 
Foreign currency derivative assets— 5,265 — 5,265 
Total assets$1,245,510 $1,479,667 $— $2,725,177 
Foreign currency derivative liabilities$— $53,714 $— $53,714 
Total liabilities$— $53,714 $— $53,714 
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of January 31, 2021 (in thousands):
Level 1Level 2Level 3Total
U.S. treasury securities$1,054,341 $— $— $1,054,341 
U.S. agency obligations— 504,445 — 504,445 
Corporate bonds— 347,802 — 347,802 
Commercial paper— 664,262 — 664,262 
Money market funds659,964 — — 659,964 
Marketable equity investments21,300 — — 21,300 
Foreign currency derivative assets— 3,221 — 3,221 
Total assets$1,735,605 $1,519,730 $— $3,255,335 
Foreign currency derivative liabilities$— $49,456 $— $49,456 
Total liabilities$— $49,456 $— $49,456 
Fair Value Measurements of Other Financial Instruments
In April 2020, we entered into a credit agreement (“Credit Agreement”) pursuant to which the lenders extended to Workday a senior unsecured term loan facility in an aggregate principal amount of $750 million (“Term Loan”) and an unsecured revolving credit facility in an aggregate principal amount of $750 million (“Revolving Credit Facility”). The carrying value of the Term Loan was $720 million and $729 million as of April 30, 2021, and January 31, 2021, respectively. The estimated fair value of the Term Loan, which we have classified as a Level 2 financial instrument, approximates its carrying value because it is a floating rate facility. There were no outstanding borrowings under the Revolving Credit Facility during the periods presented. For further information, see Note 11, Debt.
In September 2017, we completed an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022. The carrying value of the 2022 Notes was $1.1 billion as of April 30, 2021, and January 31, 2021, and the estimated fair value of the 2022 Notes was $2.0 billion and $1.8 billion as of April 30, 2021, and January 31, 2021, respectively. The estimated fair value of the 2022 Notes, which we have classified as a Level 2 financial instrument, was determined based on the quoted bid price in an over-the-counter market on the last trading day of each reporting period. For further information, see Note 11, Debt.
Note 5. Deferred Costs
Deferred costs, which consist of deferred sales commissions, were $389 million and $395 million as of April 30, 2021, and January 31, 2021, respectively. Amortization expense for the deferred costs was $32 million and $26 million for the three months ended April 30, 2021, and 2020, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.
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Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
April 30, 2021January 31, 2021
Land and land improvements$80,553 $37,065 
Buildings672,291 494,599 
Computers, equipment, and software1,007,543 931,456 
Furniture and fixtures54,883 54,193 
Leasehold improvements144,683 204,273 
Property and equipment, gross1,959,953 1,721,586 
Less accumulated depreciation and amortization(804,256)(749,183)
Property and equipment, net$1,155,697 $972,403 
Depreciation expense totaled $63 million and $55 million for the three months ended April 30, 2021, and 2020, respectively.
Related-Party Transactions
During fiscal 2021, we entered into an agreement with an affiliate of our Co-Founder, Director, and Chairman Emeritus, David Duffield, for an option to purchase certain leased office space (“Property”) within our corporate headquarters at a price based on third-party appraisals and negotiation between Workday and the affiliated party (“Leased Property Purchase Option”). In deciding to enter into and subsequently exercise the Leased Property Purchase Option, our Board of Directors considered the benefits to Workday of purchasing the Property, including the importance of obtaining control of the Property, which is part of Workday’s headquarters campus, and the long-term cost savings from ownership as compared to continuing to lease the Property. Our Board also considered independent appraisals, comparable transaction data, and the extent and nature of Mr. Duffield’s interest in the transaction.
In the first quarter of fiscal 2022, we exercised the Leased Property Purchase Option at a purchase price of $173 million in cash, reduced by a $2 million fee paid for the Leased Property Purchase Option in the prior fiscal year. The carrying value of the Property upon purchase was $158 million, calculated as the purchase price less approximately $15 million which represents the difference between the carrying values of the right-of-use asset and lease liability of the Property immediately prior to the purchase. For further information, see Note 12, Leases.
Note 7. Business Combinations
On March 9, 2021, we acquired all outstanding stock of Peakon ApS (“Peakon”), an employee success platform that converts feedback into actionable insights, for $702 million. With Peakon, Workday will provide organizations with a continuous listening platform, including real-time visibility into employee experience, sentiment, and productivity, to help drive employee engagement and improve organizational performance. We have included the financial results of Peakon in our condensed consolidated financial statements from the date of acquisition.
The acquisition-date fair value of the purchase consideration transferred consisted of the following (in thousands):
Cash paid to stockholders, warrant holders, and vested option holders$683,788 
Transaction costs paid by Workday on behalf of Peakon17,960 
Total$701,748 
Additionally, we granted certain Peakon employees restricted stock awards (“RSA”) with service conditions, which totaled 81,695 shares of our Class A common stock. The aggregate grant date fair value of the RSAs will be accounted for as post-acquisition share-based compensation expense.
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The purchase consideration was preliminarily allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. The fair values of assets acquired and liabilities assumed may change over the measurement period as additional information is received. The primary areas that are subject to change include income taxes payable and deferred taxes. The measurement period will end no later than one year from the acquisition date. The preliminary purchase consideration allocation was as follows (in thousands):
Acquisition-related intangible assets$170,500 
Goodwill542,541 
Other assets34,639 
Deferred tax liability(20,857)
Other liabilities(25,075)
Total$701,748 
The fair values and weighted-average useful lives of the acquired intangible assets by category are as follows (in thousands, except years):
Estimated Fair ValuesWeighted-Average Useful Lives (in Years)
Developed technology$94,000 5
Customer relationships72,000 13
Backlog4,000 3
Trade name500 1
Total acquisition-related intangible assets$170,500 8
The goodwill recognized was primarily attributable to the assembled workforce and the expected synergies from integrating Peakon’s technology into our product portfolio. The goodwill is not deductible for income tax purposes.
Separate operating results and pro forma results of operations for Peakon have not been presented as the effect of this acquisition was not material to our financial results.
Note 8. Acquisition-Related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following (in thousands):
April 30, 2021January 31, 2021
Developed technology$312,400 $218,400 
Customer relationships295,000 223,000 
Trade name12,500 12,000 
Backlog15,000 11,000 
Acquisition-related intangible assets, gross634,900 464,400 
Less accumulated amortization(233,680)(215,774)
Acquisition-related intangible assets, net$401,220 $248,626 
Amortization expense related to acquisition-related intangible assets was $18 million and $16 million for the three months ended April 30, 2021, and 2020, respectively.
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As of April 30, 2021, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):