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 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 2020-06-09
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. Acquisition - Related Intangible Assets, Net
Note 8. Other Assets
Note 9. Derivative Instruments
Note 10. Debt
Note 11. Leases
Note 12. Commitments and Contingencies
Note 13. Stockholders' Equity
Note 14. Unearned Revenue and Performance Obligations
Note 15. Other Income (Expense), Net
Note 16. Income Taxes
Note 17. Net Loss per Share
Note 18. 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-31.1 wday-4302020xex311.htm
EX-31.2 wday-4302020xex312.htm
EX-32.1 wday-4302020xex321.htm
EX-32.2 wday-4302020xex322.htm

Workday Earnings 2020-04-30

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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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, 2020
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)
(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 26, 2020, there were approximately 174 million shares of the registrant’s Class A common stock and 61 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, 2020January 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,214,213  $731,141  
Marketable securities1,384,793  1,213,432  
Trade and other receivables, net584,219  877,578  
Deferred costs100,501  100,459  
Prepaid expenses and other current assets166,641  172,012  
Total current assets3,450,367  3,094,622  
Property and equipment, net937,008  936,179  
Operating lease right-of-use assets310,267  290,902  
Deferred costs, noncurrent214,353  222,395  
Acquisition-related intangible assets, net292,592  308,401  
Goodwill1,819,261  1,819,261  
Other assets203,655  144,605  
Total assets$7,227,503  $6,816,365  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$35,430  $57,556  
Accrued expenses and other current liabilities111,651  130,050  
Accrued compensation274,903  248,154  
Unearned revenue2,012,078  2,223,178  
Operating lease liabilities70,764  66,147  
Debt, current266,137  244,319  
Total current liabilities2,770,963  2,969,404  
Debt, noncurrent1,508,784  1,017,967  
Unearned revenue, noncurrent78,320  86,025  
Operating lease liabilities, noncurrent254,182  241,425  
Other liabilities13,250  14,993  
Total liabilities4,625,499  4,329,814  
Stockholders’ equity:
Common stock235  231  
Additional paid-in capital5,330,170  5,090,187  
Accumulated other comprehensive income (loss)57,526  23,492  
Accumulated deficit(2,785,927) (2,627,359) 
Total stockholders’ equity2,602,004  2,486,551  
Total liabilities and stockholders’ equity$7,227,503  $6,816,365  
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,
20202019
Revenues:
Subscription services$881,956  $701,024  
Professional services136,429  124,031  
Total revenues1,018,385  825,055  
Costs and expenses (1):
Costs of subscription services145,263  112,469  
Costs of professional services160,367  130,750  
Product development443,484  347,831  
Sales and marketing318,557  272,936  
General and administrative95,171  84,455  
Total costs and expenses1,162,842  948,441  
Operating loss(144,457) (123,386) 
Other income (expense), net(10,973) 7,141  
Loss before provision for (benefit from) income taxes(155,430) (116,245) 
Provision for (benefit from) income taxes2,938  30  
Net loss$(158,368) $(116,275) 
Net loss per share, basic and diluted$(0.68) $(0.52) 
Weighted-average shares used to compute net loss per share, basic and diluted232,939  223,309  
(1) Costs and expenses include share-based compensation expenses as follows:
Costs of subscription services$13,892  $10,415  
Costs of professional services22,566  16,150  
Product development122,022  91,237  
Sales and marketing46,950  38,854  
General and administrative31,242  28,579  
See Notes to Condensed Consolidated Financial Statements
4
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Workday, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended April 30,
20202019
Net loss$(158,368) $(116,275) 
Other comprehensive income (loss), net of tax:
Net change in foreign currency translation adjustment(1,247) (646) 
Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax provision of $0 and $219, respectively
2,974  703  
Net change in market value of effective foreign currency forward exchange contracts, net of tax provision of $0 and $1,981, respectively
32,307  13,865  
Other comprehensive income (loss), net of tax34,034  13,922  
Comprehensive loss$(124,334) $(102,353) 
See Notes to Condensed Consolidated Financial Statements
5
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Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Three Months Ended April 30,
20202019
Common stock:
Balance, beginning of period$231  $221  
Issuance of common stock under employee equity plans1  1  
Vested restricted stock units3  3  
Balance, end of period235  225  
Additional paid-in capital:
Balance, beginning of period5,090,187  4,105,334  
Issuance of common stock under employee equity plans3,576  3,454  
Vested restricted stock units(3) (3) 
Share-based compensation236,410  185,204  
Cumulative-effect of accounting changes—  381  
Balance, end of period5,330,170  4,294,370  
Accumulated other comprehensive income (loss):
Balance, beginning of period23,492  (809) 
Other comprehensive income (loss)34,034  13,922  
Balance, end of period57,526  13,113  
Accumulated deficit:
Balance, beginning of period(2,627,359) (2,146,304) 
Net loss(158,368) (116,275) 
Cumulative-effect of accounting changes(200) (381) 
Balance, end of period(2,785,927) (2,262,960) 
Total stockholders’ equity$2,602,004  $2,044,748  

Three Months Ended April 30,
20202019
Common stock (in shares):
Balance, beginning of period231,708,391  222,052,063  
Issuance of common stock under employee equity plans797,591  718,832  
Vested restricted stock units2,664,085  2,666,099  
Settlement of convertible senior notes6  —  
Balance, end of period235,170,073  225,436,994  
See Notes to Condensed Consolidated Financial Statements
6
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Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended April 30,
20202019
Cash flows from operating activities:
Net loss$(158,368) $(116,275) 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization71,514  61,165  
Share-based compensation expenses236,672  185,235  
Amortization of deferred costs26,060  20,880  
Amortization of debt discount and issuance costs14,840  11,587  
Non-cash lease expense18,369  15,822  
Other4,370  (6,846) 
Changes in operating assets and liabilities:
Trade and other receivables, net290,902  157,379  
Deferred costs(18,060) (18,485) 
Prepaid expenses and other assets19,977  (5,107) 
Accounts payable(22,382) 1,503  
Accrued expenses and other liabilities(1,504) 21,403  
Unearned revenue(218,707) (119,098) 
Net cash provided by (used in) operating activities263,683  209,163  
Cash flows from investing activities:
Purchases of marketable securities(553,985) (471,054) 
Maturities of marketable securities381,398  460,097  
Sales of marketable securities5,279  50,948  
Owned real estate projects(2,487) (39,634) 
Capital expenditures, excluding owned real estate projects(59,940) (65,535) 
Purchases of non-marketable equity and other investments(52,250) (2,200) 
Sales and maturities of non-marketable equity and other investments4,638  —  
Other—  23  
Net cash provided by (used in) investing activities(277,347) (67,355) 
Cash flows from financing activities:
Proceeds from borrowings on term loan, net497,795  —  
Payments on convertible senior notes(1) —  
Proceeds from issuance of common stock from employee equity plans3,577  3,455  
Other(2,040) (93) 
Net cash provided by (used in) financing activities499,331  3,362  
Effect of exchange rate changes(265) (327) 
Net increase (decrease) in cash, cash equivalents, and restricted cash485,402  144,843  
Cash, cash equivalents, and restricted cash at the beginning of period734,721  642,203  
Cash, cash equivalents, and restricted cash at the end of period$1,220,123  $787,046  
See Notes to Condensed Consolidated Financial Statements
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Three Months Ended April 30,
20202019
Supplemental cash flow data:
Cash paid for interest, net of amounts capitalized$1,438  $3  
Cash paid for income taxes2,945  3,534  
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid39,721  77,429  

As of April 30,
20202019
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents$1,214,213  $781,772  
Restricted cash included in Prepaid expenses and other current assets5,792  5,144  
Restricted cash included in Other assets118  130  
Total cash, cash equivalents, and restricted cash$1,220,123  $787,046  
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, 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 capital 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, 2020, shown in this report are not necessarily indicative of the results to be expected for the full year ending January 31, 2021. 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, 2020, filed with the SEC on March 3, 2020.
There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the year ended January 31, 2020, other than the adoption of accounting pronouncements as described in Note 2, Accounting Standards. Certain prior period amounts reported in our condensed consolidated financial statements have been reclassified to conform to current period presentation.
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. These estimates, judgments, and assumptions include, but are not limited to the fair value of assets acquired and liabilities assumed through business combinations, the determination of the period of benefit for deferred commissions, certain assumptions used in the valuation of equity awards, and assumptions used in 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 the chief operating decision maker, who is our chief executive officer, in deciding how to allocate resources and assessing performance. Our chief operating decision maker allocates resources and assesses performance based upon discrete financial information at the consolidated level.
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Note 2. Accounting Standards
Recently Adopted Accounting Pronouncements
ASU No. 2016-13
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. We adopted this standard effective February 1, 2020, using a modified retrospective approach, which resulted in a cumulative-effect adjustment of $0.2 million to Accumulated deficit.
Under the new standard, we assess our allowance for credit losses on trade receivables by taking into consideration forecasts of future economic conditions, information about past events, such as our historical trend of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. The allowance for credit losses on trade receivables is recorded in operating expenses on our condensed consolidated statements of operations.
With respect to available-for-sale debt securities, when the fair value of the security is below its amortized cost, the amortized cost should be written down to its fair value if i) it is more likely than not that management is required to sell the impaired security before recovery of its amortized basis or ii) management has the intention to sell the security. If neither of the conditions are met, we must determine whether the impairment is due to credit losses. To determine the amount of credit losses, we compare the present value of the expected cash flows of the security, derived by taking into account the issuers’ credit ratings and remaining payment terms, with its amortized cost basis. The amount of impairment recognized is limited to the excess of the amortized cost over the fair value of the security. An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in Other income (expense), net on our condensed consolidated statements of operations. Non-credit related impairment losses are recorded in Other comprehensive income (loss) (“OCI”).
ASU No. 2018-15
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements.
We adopted this standard effective February 1, 2020, using a prospective approach. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements. Subsequent impact on our condensed consolidated financial statements will depend on the magnitude of implementation costs to be incurred. Implementation costs capitalized subsequent to adoption will be recognized in operating expenses on our condensed consolidated statements of operations over the noncancellable period of the hosting arrangement plus any renewal periods reasonably certain to be taken.
ASU No. 2019-12
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies accounting guidance for certain tax matters including franchise taxes, certain transactions that result in a step-up in tax basis of goodwill, and enacted changes in tax laws in interim periods. In addition, it eliminates a company’s need to evaluate certain exceptions relating to the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses.
We adopted this standard effective February 1, 2020. We adopted the amendments in this update on a retrospective basis for the provision related to franchise taxes and prospectively for all other applicable amendments. The adoption of this new standard did not have a material impact on our condensed consolidated financial statements.
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Recently Issued Accounting Pronouncements
ASU No. 2020-04
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 (“LIBOR”) to alternative reference rates. 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, 2020, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$331,237  $1,876  $—  $333,113  
U.S. agency obligations326,082  190  (123) 326,149  
Corporate bonds562,835  4,089  (40) 566,884  
Commercial paper208,994  —  —  208,994  
$1,429,148  $6,155  $(163) $1,435,140  
Included in cash and cash equivalents$50,347  $—  $—  $50,347  
Included in marketable securities$1,378,801  $6,155  $(163) $1,384,793  
As of January 31, 2020, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$312,183  $492  $(5) $312,670  
U.S. agency obligations169,613  99  (44) 169,668  
Corporate bonds504,434  2,476  —  506,910  
Commercial paper364,701  —  —  364,701  
$1,350,931  $3,067  $(49) $1,353,949  
Included in cash and cash equivalents$140,517  $—  $—  $140,517  
Included in marketable securities$1,210,414  $3,067  $(49) $1,213,432  
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 in the accompanying 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, 2020, and January 31, 2020, and we did not recognize any credit losses related to our debt securities during the three months ended April 30, 2020.
We sold $5 million of our debt securities during the three months ended April 30, 2020. There were no sales of debt securities during the three months ended April 30, 2019. The realized gains and losses from the sales were immaterial.
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Equity Investments
Equity investments consisted of the following (in thousands):
Condensed Consolidated Balance Sheets LocationApril 30, 2020January 31, 2020
Money market fundsCash and cash equivalents  $1,007,297  $386,909  
Equity investments accounted for under the equity methodOther assets  48,976  —  
Non-marketable equity investments measured using the measurement alternativeOther assets  57,203  59,026  
$1,113,476  $445,935  
We determine at the inception of each arrangement whether an investment or other interest is considered a variable interest entity (“VIE”). If the investment or other interest is determined to be a VIE, we must evaluate whether we are considered the primary beneficiary. For investments in VIEs in which we are considered the primary beneficiary, the assets, liabilities, and results of operations of the VIE are consolidated in our condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to direct the activities that most significantly impact the VIE’s economic performance; and (2) has the obligation to absorb losses or the right to receive benefits from the VIE. As of April 30, 2020, there were no VIEs for which we were the primary beneficiary.
Equity Investments Accounted for Under the Equity Method
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. These investments are measured at cost less any impairment, plus or minus our share of earnings and losses, and are included in Other Assets on the condensed consolidated balance sheets. Our share of earnings and losses are recorded in Other income (expense), net, on the condensed consolidated statements of operations.
During the first quarter of 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 variable interest entity 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. The carrying value was $49 million as of April 30, 2020. There was no impairment loss recorded on this investment during the three months ended April 30, 2020.
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 have significant influence. We adjust the carrying values of non-marketable equity investments based on observable price changes from orderly transactions for identical or similar investments of the same issuer. No material adjustments were made to the carrying values of non-marketable equity investments as measured under the measurement alternative as a result of observable events during the three months ended April 30, 2020, and 2019.
Additionally, we assess our non-marketable equity investments quarterly for impairment. Our impairment analysis encompasses an assessment of the severity and duration of the impairment and a qualitative and quantitative analysis of other key factors including the investee’s financial metrics, market acceptance of the investee’s product or technology, other competitive products or technology in the market, general market conditions, and the rate at which the investee is using its cash. We have also considered the impacts of the coronavirus pandemic (“COVID-19 pandemic”) in our impairment analysis. These factors require significant judgment. During the three months ended April 30, 2020, we recorded impairment losses on non-marketable equity investments of $3 million. We did not record any such impairment losses during the three months ended April 30, 2019.
Non-marketable equity investments that have been remeasured during the period due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold.
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Marketable Equity Investments
We did not hold marketable equity investments as of April 30, 2020, and January 31, 2020. There were no sales of marketable equity investments during the three months ended April 30, 2020. We sold $51 million of marketable equity investments during the three months ended April 30, 2019, with a corresponding gain recognized of $7 million.
Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):
Three Months Ended April 30,
20202019
Net realized gains (losses) recognized on equity investments sold$1,591  $6,844  
Net unrealized gains (losses) recognized on equity investments held(4,096) —  
Total net gains (losses) recognized in Other income (expense), net$(2,505) $6,844  
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.
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, 2020 (in thousands):
Level 1Level 2Level 3Total
U.S. treasury securities$333,113  $—  $—  $333,113  
U.S. agency obligations—  326,149  —  326,149  
Corporate bonds—  566,884  —  566,884  
Commercial paper—  208,994  —  208,994  
Money market funds1,007,297  —  —  1,007,297  
Foreign currency derivative assets—  61,172  —  61,172  
Total assets$1,340,410  $1,163,199  $—  $2,503,609  
Foreign currency derivative liabilities$—  $1,439  $—  $1,439  
Total liabilities$—  $1,439  $—  $