What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-28 compared with 2021-03-02 · 463 added, 468 removed, 877 unchanged (51% of the section changed)

1 unchanged sentence

The ongoing COVID-19 pandemic has resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk.

For further discussion of the potential impacts of the COVID-19 pandemic on our business, operating results, and financial condition, see “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.

For further discussion of the potential impacts of the COVID-19 pandemic on our business, financial condition, and operating results, see “Risk Factors” included in Part I, Item 1A of this report.

Foreign Currency Exchange Risk

1 unchanged sentence

As a result, our operating results and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.

As of January 31, 2021, our most significant currency exposures were the euro, Canadian dollar, British pound, and Australian dollar.

As of January 31, 2022, our most significant currency exposures were the euro, British pound, Canadian dollar, and Australian dollar.

Due to our exposure to market risks that may result from changes in foreign currency exchange rates, we enter into foreign currency derivative hedging transactions to mitigate these risks.

For further information, see Note 10, Derivative Instruments, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

For further information, see Note 10, Derivative Instruments , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

Interest Rate Risk on our Investments

2 unchanged sentences

treasury securities, U.S.

agency obligations, corporate bonds, commercial paper, and money market funds.

agency obligations, corporate bonds, commercial paper, money market funds, and marketable equity investments.

The cash, cash equivalents, and marketable securities are held primarily for working capital purposes.

4 unchanged sentences

Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.

Our debt securities are classified as “available-for-sale.” When the fair value of the security declines below its amortized cost basis, any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the impaired security, is recognized on the consolidated statement of operations.

An immediate increase of 100 basis points in interest rates would have resulted in a $10 million and $7 million market value reduction in our investment portfolio as of January 31, 2021, and 2020, respectively.

An immediate increase of 100 basis points in interest rates would have resulted in an $11 million and $10 million market value reduction in our investment portfolio as of January 31, 2022, and 2021, respectively.

This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.

Interest Rate Risk on our Debt

In April 2020, we entered into a Credit Agreement pursuant to which the lenders would extend to Workday a senior unsecured Term Loan in an aggregate principal amount of $750 million and an unsecured Revolving Credit Facility in an aggregate principal amount of $750 million.

In April 2020, we entered into a Credit Agreement pursuant to which the lenders extended to Workday a senior unsecured Term Loan in an aggregate principal amount of $750 million and an unsecured Revolving Credit Facility in an aggregate principal amount of $750 million.

The Term Loan and Revolving Credit Facility bear interest, at our option, at either (i) a floating rate per annum equal to the base rate plus a margin that ranges from 0.000% to 0.625%, or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market plus a margin that ranges from 1.000% to 1.625%.

1 unchanged sentence

Actual margins under either election will be based on our consolidated leverage ratio.

As of January 31, 2021, the Term Loan had a carrying value of $729 million and there were no outstanding borrowings under the Revolving Credit Facility.

The interest rate on the Term Loan was 1.38% as of January 31, 2021.

As of January 31, 2022, and 2021, the Term Loan had a carrying value of $692 million and $729 million, respectively, and there were no outstanding borrowings under the Revolving Credit Facility.

The interest rate on the Term Loan was 1.30% and 1.38% as of January 31, 2022, and 2021, respectively.

Because the interest rates applicable to borrowings under the Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.

A hypothetical immediate increase of 100 basis points in interest rates would not have had a significant impact on our results of operations.

Table of Conten t s

In September 2017, we completed an offering of $1.15 billion of 0.25% convertible senior notes due October 1, 2022.

3 unchanged sentences

In addition, the fair value of the 2022 Notes is affected by our stock price.

The carrying value of the 2022 Notes was $1.1 billion as of January 31, 2021.

The carrying value represents the liability component of the principal balance of the 2022 Notes as of January 31, 2021.

The estimated fair value of the 2022 Notes was $1.8 billion as of January 31, 2021.

The estimated fair value was determined based on the quoted bid price of the 2022 Notes in an over-the-counter market as of the last trading day for fiscal 2021, which was $159.87.

For further information, see Note 11, Debt, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

The carrying value of the 2022 Notes was $1.1 billion as of January 31, 2022, and 2021, and the estimated fair value of the 2022 Notes was $1.9 billion and $1.8 billion as of January 31, 2022, and 2021, respectively.

The estimated fair value was determined based on the quoted bid price of the 2022 Notes in an over-the-counter market as of the last trading day of each reporting period, which was $167.00 and $159.87, respectively.

For further information, see Note 11, Debt , of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this report.

Table of Conten t s

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

4 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

1 unchanged sentence

Notes to Consolidated Financial Statements

Table of Conten t s

Report of Independent Registered Public Accounting Firm

2 unchanged sentences

We have audited the accompanying consolidated balance sheets of Workday, Inc.

(the Company) as of January 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of January 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 2, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

13 unchanged sentences

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Table of Conten t s

Revenue Recognition

10 unchanged sentences

We have served as the Company’s auditor since 2008.

San Jose, California

March 2, 2021

San Francisco, California

February 28, 2022

Table of Conten t s

Report of Independent Registered Public Accounting Firm

4 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2021, and the related notes and our report dated March 2, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended January 31, 2022, and the related notes and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

15 unchanged sentences

/s/ Ernst & Young LLP

San Jose, California

March 2, 2021

San Francisco, California

February 28, 2022

Table of Conten t s

WORKDAY, INC.

1 unchanged sentence

(in thousands, except share and par value data)

As of January 31,

Current assets:

30 unchanged sentences

Preferred stock, $ 0.001 par value;

10 million shares authorized as of January 31, 2021, and 2020;

no shares issued and outstanding as of January 31, 2021, and 2020

10 million shares authorized;

no shares issued or outstanding as of January 31, 2022, and 2021

Class A common stock, $ 0.001 par value;

750 million shares authorized as of January 31, 2021, and 2020;

750 million shares authorized;

196 million and 184 million shares issued and outstanding as of January 31, 2022, and 2021, respectively

Class B common stock, $ 0.001 par value;

240 million shares authorized as of January 31, 2021, and 2020;

240 million shares authorized;

55 million and 59 million shares issued and outstanding as of January 31, 2022, and 2021, respectively

1 unchanged sentence

Treasury stock, at cost;

0.1 million and 0 million shares as of January 31, 2021, and 2020, respectively

0.1 million shares as of January 31, 2022, and 2021

( 12,467 ) ( 12,384 )

Accumulated other comprehensive income (loss) 7,709 ( 54,970 )

3 unchanged sentences

See Notes to Consolidated Financial Statements

Table of Conten t s

WORKDAY, INC.

15 unchanged sentences

Other income (expense), net 132,632 ( 26,535 ) 19,783

Loss before provision for (benefit from) income taxes ( 275,134 ) ( 482,447 ) ( 423,752 )

Income (loss) before provision for (benefit from) income taxes 16,182 ( 275,134 ) ( 482,447 )

Provision for (benefit from) income taxes ( 13,191 ) 7,297 ( 1,773 )

Net loss $ ( 282,431 ) $ ( 480,674 ) $ ( 418,258 )

Net loss per share attributable to Class A and Class B common stockholders, basic and diluted $ ( 1.19 ) $ ( 2.12 ) $ ( 1.93 )

Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders 237,019 227,185 216,789

Net income (loss) $ 29,373 $ ( 282,431 ) $ ( 480,674 )

Net income (loss) per share, basic $ 0.12 $ ( 1.19 ) $ ( 2.12 )

Net income (loss) per share, diluted $ 0.12 $ ( 1.19 ) $ ( 2.12 )

Weighted-average shares used to compute net income (loss) per share, basic 247,249 237,019 227,185

Weighted-average shares used to compute net income (loss) per share, diluted 254,032 237,019 227,185

(1) Costs and expenses include share-based compensation expenses as follows:

6 unchanged sentences

General and administrative 154,422 131,537 118,614

Total share-based compensation expenses $ 1,112,405 $ 1,004,854 $ 859,880

See Notes to Consolidated Financial Statements

Table of Conten t s

WORKDAY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

1 unchanged sentence

2022 2021 2020

Net loss $ ( 282,431 ) $ ( 480,674 ) $ ( 418,258 )

Net income (loss) $ 29,373 $ ( 282,431 ) $ ( 480,674 )

Other comprehensive income (loss), net of tax:

2 unchanged sentences

( 6,279 ) ( 1,437 ) 2,392

Net change in market value of effective foreign currency forward exchange contracts, net of tax provision of $ 0 , $ 3,216 , and $ 6,386 , respectively

Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $ 0 , $ 0 , and $ 3,216 , respectively

72,253 ( 79,951 ) 22,484

Other comprehensive income (loss), net of tax 62,679 ( 78,462 ) 24,301

Comprehensive loss $ ( 360,893 ) $ ( 456,373 ) $ ( 372,654 )

Comprehensive income (loss) $ 92,052 $ ( 360,893 ) $ ( 456,373 )

See Notes to Consolidated Financial Statements

Table of Conten t s

WORKDAY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(in thousands)

Year Ended January 31,

2 unchanged sentences

Balance, beginning of period $ 242 $ 231 $ 221

Issuance of common stock under employee equity plans 9 10 8

Issuance of common stock under employee equity plans, net of shares withheld for employee taxes 9 9 10

Settlement of convertible senior notes — 2 —

2 unchanged sentences

Balance, beginning of period 6,254,936 5,090,187 4,105,334

Issuance of common stock under employee equity plans 148,664 125,663 37,746

Issuance of common stock under employee equity plans, net of shares withheld for employee taxes 148,319 148,664 125,663

Share-based compensation 1,100,536 1,003,726 858,809

Equity awards assumed in business combination — — 4,350

Exercise of convertible senior notes hedges 88 303,238 —

5 unchanged sentences

Balance, beginning of period ( 12,384 ) — —

Issuance of common stock under employee equity plans — — 55,813

Exercise of convertible senior notes hedges ( 83 ) ( 303,239 ) —

Settlement of convertible senior notes — — 17

Settlement of warrants — 290,855 —

6 unchanged sentences

Balance, beginning of period ( 2,909,990 ) ( 2,627,359 ) ( 2,146,304 )

Net loss ( 282,431 ) ( 480,674 ) ( 418,258 )

Settlement of warrants — — ( 617 )

Net income (loss) 29,373 ( 282,431 ) ( 480,674 )

Cumulative effect of accounting changes 136,032 ( 200 ) ( 381 )

5 unchanged sentences

Balance, beginning of period 242,667 231,708 222,052

Issuance of common stock under employee equity plans 9,371,466 9,656,111 9,011,223

Settlement of warrants 1,587,375 — 1,063,380

Issuance of common stock under employee equity plans, net of shares withheld for employee taxes 8,417 9,373 9,656

Purchase of treasury stock from the exercise of convertible senior notes hedges — ( 1,655 ) —

Settlement of convertible senior notes — 1,654 —

Settlement of warrants — 1,587 —

Other 125 — —

Balance, end of period 251,209 242,667 231,708

See Notes to Consolidated Financial Statements

Table of Conten t s

WORKDAY, INC.

4 unchanged sentences

Cash flows from operating activities:

Net loss $ ( 282,431 ) $ ( 480,674 ) $ ( 418,258 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Net income (loss) $ 29,373 $ ( 282,431 ) $ ( 480,674 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization 343,723 293,657 276,278

3 unchanged sentences

Non-cash lease expense 86,235 84,376 67,325

(Gains) losses on investments ( 145,845 ) ( 16,558 ) ( 4,016 )

Other ( 14,213 ) 4,247 ( 31,047 )

23 unchanged sentences

Payments on Term Loan ( 37,500 ) ( 18,750 ) —

Proceeds from issuance of common stock from employee equity plans 148,673 125,673 93,567

Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld 148,328 148,673 125,673

Other ( 463 ) ( 2,657 ) ( 519 )

5 unchanged sentences

See Notes to Consolidated Financial Statements

Table of Conten t s

Year Ended January 31,

7 unchanged sentences

2022 2021 2020

Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows

Reconciliation of cash, cash equivalents, and restricted cash as shown in the Consolidated Statements of Cash Flows

Cash and cash equivalents $ 1,534,273 $ 1,384,181 $ 731,141

3 unchanged sentences

See Notes to Consolidated Financial Statements

Table of Conten t s

Workday, Inc.

2 unchanged sentences

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.

Workday delivers applications for financial management, spend management, human capital management, planning, and analytics.

With Workday, our customers have a unified system that can help them plan, execute, analyze, and extend to other applications and environments, thereby helping them continuously adapt how they manage their business and operations.

We were originally incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware.

7 unchanged sentences

Use of Estimates

The preparation of 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 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 consolidated financial statements.

The preparation of consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgements, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.

For revenue recognition, examples of significant estimates, judgements, and assumptions include the identification of distinct performance obligations and the assessment of the standalone selling price for each performance obligation identified.

Other significant estimates, judgements, and assumptions include, but are not limited to, the determination of the period of benefit for deferred commissions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, and the valuation of non-marketable equity investments.

Actual results could differ from those estimates, judgements, and assumptions, and such differences could be material to our 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 fiscal 2021, our CODMs were our co-chief executive officers, Aneel Bhusri and Chano Fernandez.

Our CODMs allocate resources and assess performance based upon discrete financial information at the consolidated level.

Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by a chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance.

For fiscal 2022, our CODM was our Co-Chief Executive Officer and Chairman, Aneel Bhusri, and our Co-Chief Executive Officer, Chano Fernandez.

Our CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

Accounting Standards and Significant Accounting Policies

8 unchanged sentences

• Allocation of the transaction price to the performance obligations in the contract;

• Recognition of revenue when, or as, we satisfy a performance obligation.

Subscription Services Revenue

Subscription services revenue primarily consists of fees that provide customers access to one or more of our cloud applications for financial management, spend management, human capital management, planning, and analytics, with routine customer support.

Revenue is generally recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer.

• Recognition of revenues when, or as, we satisfy a performance obligation.

Table of Conten t s

Subscription Services Revenues

Subscription services revenues primarily consist of fees that provide customers access to one or more of our cloud applications for financial management, spend management, human capital management, planning, and analytics, with routine customer support.

Revenues are generally recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer.

Our subscription contracts are generally three years or longer in length, billed annually in advance, and are generally noncancelable.

Professional Services Revenue

Professional services revenue primarily consists of consulting fees for deployment and optimization services, as well as training.

Professional Services Revenues

Professional services revenues primarily consist of consulting fees for deployment and optimization services, as well as training.

Our consulting contracts are billed on a time and materials basis or a fixed price basis.

For contracts billed on a time and materials basis, revenue is recognized over time as the professional services are performed.

For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion of the professional services performed.

For contracts billed on a time and materials basis, revenues are recognized over time as the professional services are performed.

For contracts billed on a fixed price basis, revenues are recognized over time based on the proportion of the professional services performed.

Contracts with Multiple Performance Obligations

27 unchanged sentences

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 consolidated statements of operations.

An allowance for credit losses for the excess of amortized cost over the expected cash flows is recorded in Other income (expense), net on the Consolidated Statements of Operations.

Non-credit related impairment losses are recorded in Other comprehensive income (loss) (“OCI”).

Table of Conten t s

If quoted prices for identical instruments are available in an active market, debt securities are classified within Level 1 of the fair value hierarchy.

7 unchanged sentences

and (2) has the obligation to absorb losses or the right to receive benefits from the VIE.

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 consolidated financial statements.

For investments in VIEs in which we are considered the primary beneficiary, the assets, liabilities, and results of operations of the VIE are included in our consolidated financial statements.

As of January 31, 2022, there were no VIEs for which we were the primary beneficiary.

4 unchanged sentences

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.

These investments are included in Other assets on the Consolidated Balance Sheets.

2 unchanged sentences

Adjustments and impairments are recorded in Other income (expense), net on the Consolidated Statements of Operations.

Non-marketable equity investments are valued using significant unobservable inputs or data in an inactive market.

Valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data, and require our judgment due to the absence of market prices and inherent lack of liquidity.

In addition, the determination of whether an orderly transaction is for an identical or similar investment requires significant management judgment, including understanding the differences in the rights and obligations of the investments and the extent to which those differences would affect the fair values of those investments.

Our impairment analysis encompasses a qualitative and quantitative analysis of 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 also consider the impacts of the COVID-19 pandemic.

These factors require significant judgment.

If impairment is identified, we will assess the severity and duration of the impairment.

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.

Marketable Equity Investments

We hold marketable equity investments over which we do not have a controlling interest or significant influence.

We hold marketable equity investments with readily determinable fair values over which we do not own a controlling interest or exercise significant influence.

Marketable equity investments are included in Marketable securities on the Consolidated Balance Sheets.

3 unchanged sentences

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 consolidated statements of operations.

The allowance for credit losses on trade receivables is recorded in operating expenses on the Consolidated Statements of Operations.

Other receivables represent unbilled receivables related to subscription and professional services contracts.

1 unchanged sentence

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer.

Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years .

Sales commissions for new revenue contracts are capitalized and then amortized on a straight-line basis over a period of benefit that we have determined to be five years .

We determined the period of benefit by taking into consideration our customer contracts, our technology, and other factors.

Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period.

Amortization expense is included in Sales and marketing expenses on the Consolidated Statements of Operations.

Table of Conten t s

Derivative Financial Instruments and Hedging Activities

2 unchanged sentences

Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting.

For derivative instruments designated as cash flow hedges, which we use to hedge certain customer contracts denominated in foreign currencies, the gains or losses are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the consolidated balance sheets and subsequently reclassified to income in the same period that the underlying revenues are earned.

For derivative instruments not designated as hedging instruments, which we use to hedge a portion of our net outstanding monetary assets and liabilities, the gains or losses are recorded in Other income (expense), net on the consolidated statement of operations in the period of change.

For derivative instruments designated as cash flow hedges (“cash flow hedges”), which we use to hedge a portion of our forecasted foreign currency revenue and expense transactions, the gains or losses are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Consolidated Balance Sheets and subsequently reclassified to earnings in the same period that the hedged transaction affects earnings.

For derivative instruments not designated as hedging instruments (“non-designated hedges”), which we use to hedge a portion of our net outstanding monetary assets and liabilities, the gains or losses are recorded in Other income (expense), net on the Consolidated Statements of Operations in the period of change.

We use nonderivative financial instruments designated as net investment hedges to hedge our net investment in certain foreign subsidiaries.

7 unchanged sentences

Business Combinations

We use our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed as of the acquisition date.

We allocate the purchase consideration of acquired companies to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess recorded to goodwill.

Our estimates are inherently uncertain and subject to refinement.

During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.

In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.

Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

In the event that we acquire a company in which we previously held an equity interest, the difference between the fair value of the shares as of the date of the acquisition and the carrying value of the equity investment is recorded as a non-cash gain or loss and recorded within Other income (expense), net on the Consolidated Statements of Operations.

Goodwill and Acquisition-Related Intangible Assets

7 unchanged sentences

Unearned revenue that is anticipated to be recognized during the succeeding twelve-month period is recorded as current unearned revenue and the remaining portion is recorded as noncurrent.

Convertible Senior Notes

In June 2013, we issued 0.75 % convertible senior notes due July 15, 2018, with a principal amount of $ 350 million, which were subsequently converted by note holders during the second quarter of fiscal 2019.

Concurrently.

in June 2013, we issued 1.50 % convertible senior notes due July 15, 2020 with a principal amount of $ 250 million, which were subsequently converted by note holders during the second quarter of fiscal 2021.

In September 2017, we issued 0.25 % convertible senior notes due October 1, 2022, with a principal amount of $ 1.15 billion.

In accounting for the issuance of the Notes, we separated each of the Notes into liability and equity components.

The carrying amounts of the liability components were calculated by measuring the fair value of similar liabilities that do not have associated convertible features.

The carrying amount of the equity components representing the conversion option were determined by deducting the fair value of the liability components from the par value of the respective Notes.

These differences represent debt discounts that are amortized to interest expense over the respective terms of the Notes using the effective interest rate method.

The equity components are not remeasured as long as they continue to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, we allocated the total amount of issuance costs incurred to the liability and equity components based on their relative values.

Issuance costs attributable to the liability components are being amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the respective terms of the Notes.

The issuance costs attributable to the equity components were netted against the respective equity components in Additional paid-in capital.

We have entered into operating lease agreements for our office space, data centers, and other property and equipment.

2 unchanged sentences

As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate to determine the present value of lease payments.

We recognize variable lease costs in our consolidated statement of operations in the period incurred.

Table of Conten t s

We recognize variable lease costs in the Consolidated Statements of Operations in the period incurred.

Variable lease costs include common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor.

Options to extend or terminate a lease are included in the lease term when it is reasonably certain that we will exercise such options.

The remaining lease term of our leases generally ranges from less than one year to nine years .

Advertising Expenses

2 unchanged sentences

Share-Based Compensation

We measure and recognize compensation expense for share-based awards issued to employees and non-employees, including RSUs, performance-based restricted stock units (“PRSUs”), stock options, and purchases under the 2012 Employee Stock Purchase Plan (“ESPP”), on our consolidated statements of operations.

We measure and recognize compensation expense for share-based awards issued to employees and non-employees, primarily including RSUs, performance-based restricted stock units (“PRSUs”), and purchases under the 2012 Employee Stock Purchase Plan (“ESPP”), on the Consolidated Statements of Operations.

For RSUs and PRSUs, fair value is based on the closing price of our common stock on the grant date.

1 unchanged sentence

The requisite service period of the awards is generally the same as the vesting period.

For stock options assumed, fair value is estimated using the Black-Scholes option-pricing model.

Compensation expense, net of estimated forfeitures, is recognized on a straight-line basis over the requisite service period.

We determine the assumptions for the option-pricing model as follows:

• Risk-Free Interest Rate.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the date closest to the grant date for zero-coupon U.S.

Treasury notes with maturities approximately equal to the expected term of the stock option grants.

• Expected Term.

The expected term represents the period that our share-based award is expected to be outstanding.

The expected term for stock options was determined based on the vesting terms, exercise terms, and contractual lives.

• Volatility.

The volatility is based on a blend of historical volatility and implied volatility of our common stock.

Implied volatility is based on market traded options of our common stock.

• Dividend Yield.

The dividend yield is assumed to be zero as we have not paid and do not expect to pay dividends.

For shares issued under the ESPP, fair value is estimated using the Black-Scholes option-pricing model.

27 unchanged sentences

To date, we have not incurred any material costs, and we have not accrued any liabilities in the accompanying consolidated financial statements, as a result of these obligations.

Table of Conten t s

In our standard agreements with customers, we commit to defined levels of service availability and performance and, under certain circumstances, permit customers to receive credits in the event that we fail to meet those levels.

15 unchanged sentences

In order to reduce the risk of down-time of our cloud applications, we have established data centers in various geographic regions.

We have internal procedures to restore services in the event of disaster at one of our current data center facilities.

We serve our customers and users from data center facilities operated by third parties, located in the United States, Europe, and Canada.

We serve our customers and users from data center facilities operated by third parties, located in the United States, Canada, and Europe.

We have internal procedures to restore services in the event of disaster at one of our data center facilities.

Even with these procedures for disaster recovery in place, our cloud applications could be significantly interrupted during the implementation of the procedures to restore services.

In addition, we rely upon third-party hosted infrastructure partners globally, including AWS and Dimension Data, to serve customers and operate certain aspects of our services, such as environments for development testing, training, sales demonstrations, and production usage.

In addition, we rely upon third-party hosted infrastructure partners globally, including AWS, Google LLC, and Microsoft Corporation, to serve customers and operate certain aspects of our services.

Given this, any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.

Other than the United States, no country individually accounted for more than 10% of total revenues for any of the periods on the consolidated financial statements.

Other than the United States, no country individually accounted for more than 10% of total revenues during fiscal 2022, 2021, or 2020.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued 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.

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 consolidated financial statements.

Subsequent impact on our 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 consolidated statements of operations over the noncancelable period of the hosting arrangement plus any renewal periods reasonably certain to be taken.

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 and certain transactions that result in a step-up in tax basis of goodwill, and enacts 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 consolidated financial statements.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued 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 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.

For further information, see Note 11, Debt .

Table of Conten t s

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts.

Under current GAAP, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date.

The new standard is effective for our fiscal year beginning on February 1, 2023, with early adoption permitted.

We are currently evaluating the accounting, transition, and disclosure requirements of this standard.

2020-04 and ASU No.

6 unchanged sentences

The impact on our consolidated financial statements from the adoption of this standard is expected to be immaterial.

In August 2020, the FASB issued 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.

The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating earnings per share.

This new standard is effective for our interim and annual periods beginning February 1, 2022, and earlier adoption is permitted.

We intend to early adopt this standard effective February 1, 2021, using the modified retrospective approach.

Adoption of the new standard is expected to result in a decrease to Accumulated deficit of approximately $ 140 million, a decrease to Additional paid-in capital of approximately $ 220 million, and an increase to Debt, current of approximately $ 80 million.

There will be an immaterial impact on Property and equipment related to non-cash interest previously capitalized.

If all of the 2022 Notes remain outstanding through maturity, non-cash interest expense will be reduced by approximately $ 45 million in fiscal 2022, and approximately $ 30 million in fiscal 2023.

Debt Securities

5 unchanged sentences

Commercial paper 969,204 — — 969,204

$ 2,569,269 $ 1,654 $ ( 73 ) $ 2,570,850

Total debt securities $ 2,535,791 $ 5 $ ( 4,703 ) $ 2,531,093

Included in Cash and cash equivalents $ 525,524 $ — $ ( 1 ) $ 525,523

6 unchanged sentences

Commercial paper 664,262 — — 664,262

$ 1,350,931 $ 3,067 $ ( 49 ) $ 1,353,949

Total debt securities $ 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

The unrealized losses associated with our debt securities were immaterial as of January 31, 2021, and January 31, 2020, and we did not recognize any credit losses related to our debt securities during fiscal 2021, 2020, or 2019.

No debt securities held as of January 31, 2022, or 2021, were in a continuous unrealized loss position for greater than 12 months, and we did not recognize any credit losses related to our debt securities during fiscal 2022, 2021, or 2020.

We sold $ 162 million, $ 11 million, and $ 6 million of debt securities during fiscal 2022, 2021, and 2020, respectively.

The realized gains and losses from the sales were immaterial.

Table of Conten t s

Equity Investments

Equity investments consisted of the following (in thousands):

As of January 31,

Consolidated Balance Sheets Location 2022 2021

Money market funds (1)

Cash and cash equivalents $ 659,964 $ 386,909

Marketable equity investments (1)

Marketable securities 21,300 —

Money market funds Cash and cash equivalents $ 607,640 $ 659,964

Equity investments accounted for under the equity method Other assets — 48,222

Non-marketable equity investments measured using the measurement alternative (2)

Other assets 73,142 59,026

$ 802,628 $ 445,935

(1) Investments with readily determinable fair values.

(2) Investments in privately held companies without readily determinable fair values.

Non-marketable equity investments measured using the measurement alternative Other assets 256,643 73,142

Marketable equity investments Marketable securities 104,318 21,300

Total equity investments $ 968,601 $ 802,628

Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):

2 unchanged sentences

Net realized gains (losses) recognized on equity investments sold (1)

Net unrealized gains (losses) recognized on equity investments held 18,425 6,057 32,127

$ 22,273 $ 1,667 $ 26,837

Net unrealized gains (losses) recognized on equity investments held as of the end of the period 121,474 18,425 6,057

Total net gains (losses) recognized in Other income (expense), net $ 143,747 $ 20,092 $ 32,894

(1) Reflects the difference between the sale proceeds and the carrying value of the equity investments at the beginning of the fiscal year.

Equity Investments Accounted for Under the Equity Method

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 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.

The carrying value was $ 48 million as of January 31, 2021.

There was no impairment loss recorded on this investment during fiscal 2021.

During fiscal 2021, we made an equity investment of $ 50 million in a limited partnership, which represented an ownership interest of approximately 6 %.

We determined that the limited partnership was a VIE because the at-risk equity holders, as a group, lacked the characteristics of a controlling financial interest.

We did not have majority voting rights nor the power to direct the activities of this entity, and therefore, we were not the primary beneficiary.

The investment was accounted for under the equity method of accounting as it was considered to be more than minor and we had the ability to exercise significant influence over the entity.

Under the equity method, our share of earnings and losses of the investee was not material and there was no impairment loss recorded for the periods presented.

In June 2021, the limited partnership was liquidated and shares of common stock in a corporation were distributed to the partners.

Immediately thereafter, the corporation completed its IPO.

We no longer exercise significant influence over the entity and therefore we accounted for our interest in the common stock received as a marketable equity investment measured at fair value.

Since the IPO, we have sold a portion of our investment for proceeds of $ 25 million, resulting in a realized gain of $ 16 million.

Our remaining investment had a carrying value of $ 104 million as of January 31, 2022.

We recorded an unrealized gain of $ 67 million related to this investment during fiscal 2022.

Non-Marketable Equity Investments Measured Using the Measurement Alternative

During fiscal 2021 and 2020, there were $ 9 million and $ 6 million in upward adjustments to the carrying values of non-marketable equity investments as measured under the measurement alternative.

No material adjustments were made to the carrying value of the non-marketable equity investments during fiscal 2019, and no material impairment losses were recorded during fiscal 2021, 2020, or 2019.

In addition, during fiscal 2020 we recognized a $ 20 million non-cash gain on the sale of a non-marketable equity investment as part of the Scout acquisition.

See Note 7, Business Combinations for further details on the Scout acquisition.

The carrying values for our non-marketable equity investments are summarized below (in thousands):

As of January 31,

Total initial cost $ 192,694 $ 65,377

Cumulative net unrealized gains (losses) 63,949 7,765

Carrying value $ 256,643 $ 73,142

We recorded upward adjustments to the carrying value of non-marketable equity investments of $ 58 million, $ 9 million, and $ 6 million during fiscal 2022, 2021, and 2020, respectively.

No material impairment losses or downward adjustments were recorded during the periods presented.

Additionally, as discussed in Note 7, Business Combinations , we recognized non-cash gains of $ 12 million and $ 20 million related to our acquisitions of Zimit and Scout during fiscal 2022 and 2020, respectively.

Table of Conten t s

Marketable Equity Investments

The carrying values for our marketable equity investments are summarized below (in thousands):

As of January 31,

Total initial cost $ 40,739 $ 5,000

Cumulative net unrealized gains (losses) 63,579 16,300

Carrying value $ 104,318 $ 21,300

During fiscal 2022, we sold marketable equity investments of $ 37 million with corresponding net gains recognized of $ 7 million.

This includes the $ 25 million sale of the investment previously accounted for under the equity method described above.

There were no sales of marketable equity investments during fiscal 2021.

During fiscal 2020, we sold marketable equity investments of $ 51 million with a corresponding gain recognized of $ 7 million.

During fiscal 2022 and 2021, we recorded unrealized gains on marketable equity investments of $ 67 million and $ 14 million, respectively.

There were no unrealized gains or losses recorded during fiscal 2020.

During fiscal 2020, we sold $ 51 million of marketable equity investments, with a corresponding gain recognized of $ 7 million.

There were no sales of marketable equity investments during fiscal 2021 or 2019.

Fair Value Measurements

19 unchanged sentences

Money market funds 659,964 — — 659,964

Marketable equity investments 21,300 — — 21,300

Foreign currency derivative assets — 3,221 — 3,221

2 unchanged sentences

Total liabilities $ — $ 49,456 $ — $ 49,456

Table of Conten t s

Non-Marketable Equity Investments Measured at Fair Value on a Non-Recurring Basis

For further information, see Note 3, Investments .

Fair Value Measurements of Other Financial Instruments

In April 2020, we entered into a Credit Agreement pursuant to which the lenders extended to Workday a senior unsecured Term Loan in an aggregate principal amount of $ 750 million and an unsecured Revolving Credit Facility in an aggregate principal amount of $ 750 million.

As of January 31, 2021, the carrying value of the Term Loan was $ 729 million, and there were no outstanding borrowings under the Revolving Credit Facility.

In April 2020, we entered into a Credit Agreement pursuant to which the lenders extended to Workday a senior unsecured Term Loan facility in an aggregate principal amount of $ 750 million and an unsecured Revolving Credit Facility in an aggregate principal amount of $ 750 million.

The carrying value of the Term Loan was $ 692 million and $ 729 million as of January 31, 2022, and 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 .

The following table presents the carrying amounts and estimated fair values of our outstanding Notes which are not recorded at fair value on the consolidated balance sheets (in thousands):

January 31, 2021 January 31, 2020

Net Carrying Amount Estimated Fair Value Net Carrying Amount Estimated Fair Value

1.50 % Convertible senior notes due 2020

$ — $ — $ 244,319 $ 571,057

0.25 % Convertible senior notes due 2022

1,065,601 1,838,448 1,017,967 1,587,978

The carrying amounts of the Notes represent the liability components of the principal balances as of January 31, 2021, and 2020.

The estimated fair values of the Notes, which we have classified as Level 2 financial instruments, were determined based on the quoted bid prices of the Notes in an over-the-counter market on the last trading day of fiscal 2021 and 2020.

As of January 31, 2021, the if-converted value of the 2022 Notes exceeded the principal amount by $ 629 million.

The if-converted value was determined based on the closing price of our common stock of $ 227.53 on the last trading day of fiscal 2021.

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 January 31, 2022, and 2021, and the estimated fair value of the 2022 Notes was $ 1.9 billion and $ 1.8 billion as of January 31, 2022, and 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 .

5 unchanged sentences

Property and equipment, net consisted of the following (in thousands):

Land and land improvements $ 37,065 $ 38,737

Buildings 494,599 489,028

As of January 31,

Computers, equipment, and software $ 1,071,141 $ 931,456

Furniture and fixtures 54,193 51,917

Buildings 691,896 494,599

Leasehold improvements 158,037 204,273

Land and land improvements 80,553 37,065

Furniture, fixtures, and transportation equipment 79,723 54,193

Property and equipment, gross 2,081,350 1,721,586

2 unchanged sentences

Depreciation expense totaled $ 263 million, $ 231 million, and $ 201 million for fiscal 2022, 2021, and 2020, respectively.

No interest costs were capitalized to Property and equipment, net during fiscal 2021.

Interest costs capitalized to Property and equipment, net totaled $ 6 million and $ 11 million for fiscal 2020 and 2019, respectively.

Related-Party Transactions

Aircraft Purchase

During fiscal 2022, we purchased an aircraft from an affiliate of our Co-Founder and CEO Emeritus, David Duffield, for approximately $ 24 million in cash.

The aircraft was purchased primarily for the purpose of business travel by our Co-CEO and Chairman, Mr.

Bhusri, and other Workday executives.

In approving the related-party transaction, the Audit Committee of our Board of Directors considered the benefits to Workday of purchasing the aircraft, independent appraisals, the terms of the related purchase agreement, and the extent and nature of Mr.

Duffield’s interest in the transaction.

The aircraft is included in the Furniture, fixtures, and transportation equipment category in the table above.

Table of Conten t s

Leased Property Purchase

During fiscal 2021, we entered into an agreement with an affiliate of Mr.

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 .

Business Combinations

VNDLY Acquisition

On December 21, 2021, we acquired all outstanding stock of VNDLY, a cloud-based external workforce and vendor management technology.

With VNDLY, Workday will provide organizations with a unified workforce optimization solution that will help organizations manage all types of workers—salaried, hourly, contingent, and outsourced—and support a holistic talent strategy, including insight into costs, workforce planning needs, and compliance.

We have included the financial results of VNDLY in our consolidated financial statements from the date of acquisition.

The acquisition-date fair value of the purchase consideration consisted of the following (in thousands):

Cash paid to stockholders and option holders $ 473,029

Transaction costs paid by Workday on behalf of VNDLY 135

Total $ 473,164

Additionally, in connection with the acquisition, we agreed to issue approximately 152 thousand shares of our Class A common stock to certain key VNDLY employees, with 50 % of such shares to be issued following the first anniversary of the closing date of the acquisition and the remaining 50 % to be issued following the second anniversary of the closing date, subject to service conditions.

The aggregate fair value of the equity is accounted for as post-acquisition share-based compensation expense.

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):

Cash $ 22,830

Acquisition-related intangible assets 40,000

Goodwill 412,151

Other assets 2,595

Deferred tax liability ( 2,372 )

Other liabilities ( 2,040 )

Total $ 473,164

Table of Conten t s

The fair values and weighted-average useful lives of the acquired intangible assets by category are as follows (in thousands, except years):

Estimated Fair Values Weighted-Average Useful Lives (in Years)

Developed technology $ 27,000 4

Customer relationships 13,000 13

Total acquisition-related intangible assets $ 40,000 7

The goodwill recognized was primarily attributable to the assembled workforce and the expected synergies from integrating VNDLY’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 VNDLY have not been presented as the effect of this acquisition was not material to our financial results.

Zimit Acquisition

On September 28, 2021, we acquired all outstanding stock of Zimit, a CPQ solution built for services industries.

We believe the acquisition of Zimit will accelerate our ability to deliver a comprehensive quote-to-cash process automation offering that will provide services organizations increased visibility across the entire revenue cycle.

We have included the financial results of Zimit in our consolidated financial statements from the date of acquisition.

The acquisition-date fair value of the purchase consideration was $ 76 million, with $ 62 million attributable to cash consideration and $ 14 million attributable to the fair value of a previously held equity interest.

We recorded developed technology intangible assets of $ 7 million (to be amortized over an estimated useful life of 4 years), customer relationships intangible assets of $ 3 million (to be amortized over an estimated useful life of 13 years), and goodwill of $ 67 million.

Goodwill was primarily attributable to the expected synergies from integrating Zimit’s technology into our product portfolio.

The goodwill is not deductible for income tax purposes.

The fair values of assets acquired and liabilities assumed may change over the measurement period as additional information is received.

The measurement period will end no later than one year from the acquisition date.

We invested $ 2 million in Zimit prior to the acquisition, which was accounted for as a non-marketable equity investment.

We recognized a non-cash gain of approximately $ 12 million as a result of remeasuring our prior equity interest in Zimit held before the business combination.

The gain is included in Other income (expense), net on the Consolidated Statements of Operations.

Separate operating results and pro forma results of operations for Zimit have not been presented as the effect of this acquisition was not material to our financial results.

Peakon Acquisition

On March 9, 2021, we acquired all outstanding stock of 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 consolidated financial statements from the date of acquisition.

The acquisition-date fair value of the purchase consideration 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 Peakon 17,960

Total $ 701,748

Additionally, we granted certain Peakon employees restricted stock awards (“RSAs”) with service conditions, which totaled 81,695 shares of our Class A common stock.

The aggregate grant date fair value of the RSAs is accounted for as post-acquisition share-based compensation expense.

Table of Conten t s

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 updated preliminary purchase consideration allocation inclusive of measurement period adjustments was as follows (in thousands):

Acquisition-related intangible assets $ 170,500

Goodwill 541,611

Other assets 34,639

Deferred tax liability ( 20,021 )

Other liabilities ( 24,981 )

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 Values Weighted-Average Useful Lives (in Years)

Developed technology $ 94,000 5

Customer relationships 72,000 13

Backlog 4,000 3

Trade name 500 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.

Scout Acquisition

7 unchanged sentences

Total purchase consideration, inclusive of previously held equity interest 513,492

Estimated goodwill $ 430,275

Goodwill $ 430,275

Table of Conten t s

The fair values and estimated useful lives of the acquired intangible assets by category were as follows (in thousands, except years):

Estimated Fair Values Estimated Useful Lives (in Years)

Estimated Fair Values Weighted-Average Useful Lives (in Years)

Trade name $ 400 1

9 unchanged sentences

In the second quarter of fiscal 2020, acquisition activity resulted in an increase of $ 4 million and $ 9 million in acquired developed technology and goodwill, respectively.

Adaptive Insights Acquisition

On August 1, 2018, we acquired all outstanding stock of Adaptive Insights for $ 1.5 billion.

The acquisition of Adaptive Insights, a cloud-based provider of business planning software, strengthened our product portfolio and helps enable our customers to better plan, execute, and analyze in one system.

The purchase consideration transferred consisted of the following (in thousands):

Purchase Consideration

Cash paid to common and preferred stockholders, warrant holders, and vested option holders $ 1,408,422

Debt repaid by Workday on behalf of Adaptive Insights 53,696

Transaction costs paid by Workday on behalf of Adaptive Insights 23,375

Fair value of assumed Adaptive Insights awards attributable to pre-combination services (1)

Total purchase consideration $ 1,490,917

(1) The assumed awards were primarily options, which were valued based upon the Black-Scholes option-pricing model.

The purchase consideration was 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 as shown below.

The purchase consideration allocation, which includes measurement period adjustments, was as follows (in thousands):

Assets acquired:

Cash and cash equivalents $ 37,892

Trade and other receivables, net 23,042

Prepaid expenses and other current assets and other assets 2,581

Property and equipment, net 2,246

Acquisition-related intangible assets 316,000

Total assets acquired $ 381,761

Liabilities assumed:

Accounts payable $ 3,115

Accrued expenses and other current liabilities 9,396

Accrued compensation 13,545

Unearned revenue (1)

Other liabilities 1,919

Total liabilities assumed 95,729

Net assets acquired, excluding goodwill 286,032

Total purchase consideration 1,490,917

Goodwill $ 1,204,885

(1) The cost build-up method was used to determine the fair value of unearned revenue.

The goodwill recognized was primarily attributable to the value of the acquired workforce, the opportunity to expand our customer base, and the ability to add breadth and depth to our product portfolio by accelerating our financial planning roadmap.

The goodwill is not deductible for U.S.

federal income tax purposes.

The fair values and estimated useful lives of the acquired intangible assets by category were as follows (in thousands, except years):

Estimated Fair Values Estimated Useful Lives

Trade name $ 12,000 1.5

Developed technology 105,000 5

Customer relationships 188,000 9 - 10

Backlog 11,000 2

Total acquisition-related intangible assets $ 316,000 8

The fair values of the trade name and developed technology were determined utilizing the relief-from-royalty method, and the multi-period excess earnings method was utilized to fair value customer relationships and backlog.

The valuation model inputs required the application of considerable judgment by management.

The acquired finite-lived intangible assets have a total weighted-average amortization period of eight years .

The weighted-average amortization period of customer relationships is ten years .

We have included the financial results of Adaptive Insights in our consolidated financial statements from the date of acquisition.

One-time acquisition related transaction costs of $ 25 million were expensed as incurred during fiscal 2019, and were recorded in general and administrative expense on our consolidated statements of operations.

The pro forma financial information shown below summarizes the combined results of operations for Workday and Adaptive Insights as if the closing of the acquisition had occurred on February 1, 2017, the first day of our fiscal year 2018.

The pro forma financial information includes adjustments that are directly attributable to the business combination and are factually supportable.

The adjustments primarily reflect the amortization of acquired intangible assets, share-based compensation expense for replacement awards, as well as the pro forma tax impact for such adjustments.

The pro forma financial information reflects $ 67 million of nonrecurring expenses related to acquisition costs and certain compensation expenses.

Year Ended January 31,

(in thousands, except per share data)

Total revenues $ 2,886,057 $ 2,228,917

Net loss ( 425,604 ) ( 529,404 )

Net loss per share, basic and diluted ( 1.96 ) ( 2.55 )

The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been realized if the acquisition had taken place on February 1, 2017.

Other Acquisitions

In the second quarter of fiscal 2019, we completed two acquisitions resulting in an increase of $ 12 million and $ 16 million in developed technology and goodwill, respectively.

Acquisition-Related Intangible Assets, Net

Acquisition-related intangible assets, net consisted of the following (in thousands):

As of January 31,

Developed technology $ 346,300 $ 218,400

11 unchanged sentences

Total $ 391,002

Other assets consisted of the following (in thousands):

Table of Conten t s

Other noncurrent assets consisted of the following (in thousands):

As of January 31,

Non-marketable equity and other investments (1)

$ 256,759 $ 85,868

Equity investments accounted for under the equity method 48,222 —

Prepayments for goods and services 25,927 19,824

Technology patents and other intangible assets, net 22,792 17,766

Derivative assets 16,618 173

Net deferred tax assets 11,642 9,985

Deposits 6,701 6,218

Derivative assets 173 9,529

Equity investments accounted for under the equity method — 48,222

Other 813 1,701

Total $ 189,757 $ 144,605

(1) Included in non-marketable equity and other investments are investments in loan receivables of privately held companies, which are carried at amortized cost.

The carrying values of these loan receivables were $ 13 million and $ 16 million as of January 31, 2021, and 2020, respectively.

As of January 31, 2021, the allowance for credit losses on this balance was immaterial.

Total other assets $ 341,252 $ 189,757

(1) Included in the Non-marketable equity and other investments category are investments in loan receivables of privately held companies, which are carried at amortized cost.

The carrying values of these loan receivables were no t material as of January 31, 2022, and $ 13 million as of January 31, 2021.

The allowance for credit losses on loan receivables was immaterial for the periods presented.

Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis.

7 unchanged sentences

We do not enter into any derivatives for trading or speculative purposes.

Foreign Currency Forward Contracts Designated as Cash Flow Hedges

We are exposed to foreign currency fluctuations resulting from customer contracts denominated in foreign currencies.

We have a hedging program in which we enter into foreign currency forward contracts related to certain customer contracts.

Cash Flow Hedges

We enter into foreign currency forward contracts to hedge a portion of our forecasted revenue and expense transactions.

We designate these forward contracts as cash flow hedging instruments since the accounting criteria for such designation have been met.

Foreign currency forward contracts designated as cash flow hedges are recorded on the consolidated balance sheets at fair value.

Cash flow hedges are recorded on the Consolidated Balance Sheets at fair value.

Cash flows from such forward contracts are classified as operating activities.

Gains or losses resulting from changes in the fair value of these hedges are recorded in AOCI on the consolidated balance sheets and will be subsequently reclassified to the related revenue line item on the consolidated statements of operations in the same period that the underlying revenues are earned.

As of January 31, 2021, we estimate that $ 8 million of net losses recorded in AOCI related to our foreign currency forward contracts designated as cash flow hedges will be reclassified into income within the next 12 months.

As of January 31, 2021, and 2020, we had outstanding foreign currency forward contracts designated as cash flow hedges with total notional values of $ 1.3 billion and $ 908 million, respectively.

The notional value represents the amount that will be bought or sold upon maturity of the forward contract.

All contracts have maturities of less than 48 months.

Foreign Currency Forward Contracts Not Designated as Hedges

Gains or losses resulting from changes in the fair value of these hedges are recorded in AOCI on the Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Consolidated Statements of Operations in the same period that the hedged transaction affects earnings.

As of January 31, 2022, we estimate that $ 4 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of January 31, 2022, and 2021, the notional values of the forward contracts designated as cash flow hedges that we held to buy U.S.

dollars in exchange for other currencies were $ 1.4 billion and $ 1.3 billion, respectively.

The notional values of the forward contracts designated as cash flow hedges that we held to sell U.S.

dollars in exchange for other currencies were $ 355 million as of January 31, 2022.

We did no t hold forward contracts designated as cash flow hedges to sell U.S dollars as of January 31, 2021.

All contracts had maturities of less than 48 months.

Table of Conten t s

Non-Designated Hedges

We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities.

2 unchanged sentences

Cash flows from such forward contracts are classified as operating activities.

As of January 31, 2021, and 2020, we had outstanding forward contracts not designated as hedges with total notional values of $ 175 million and $ 246 million, respectively.

As of January 31, 2022, and 2021, the notional values of the forward contracts not designated as hedges that we held to buy U.S.

dollars in exchange for other currencies were $ 217 million and $ 160 million, respectively, and the notional values of the forward contracts not designated as hedges that we held to sell U.S.

dollars in exchange for other currencies were $ 8 million and $ 15 million, respectively.

The fair values of outstanding derivative instruments were as follows (in thousands):

Consolidated Balance Sheets Location January 31,

Consolidated Balance Sheets Location As of January 31,

Derivative assets:

Foreign currency forward contracts designated as cash flow hedges Prepaid expenses and other current assets $ 2,073 $ 20,944

Foreign currency forward contracts designated as cash flow hedges Other assets 173 9,529

Foreign currency forward contracts not designated as hedges Prepaid expenses and other current assets 975 2,801

Foreign currency forward contracts not designated as hedges Other assets — —

Cash flow hedges Prepaid expenses and other current assets $ 21,337 $ 2,073

Cash flow hedges Other assets 16,618 173

Non-designated hedges Prepaid expenses and other current assets 1,076 975

Non-designated hedges Other assets — —

Total derivative assets $ 39,031 $ 3,221

Derivative liabilities:

Foreign currency forward contracts designated as cash flow hedges Accrued expenses and other current liabilities $ 23,647 $ 1,211

Foreign currency forward contracts designated as cash flow hedges Other liabilities 24,586 1,809

Foreign currency forward contracts not designated as hedges Accrued expenses and other current liabilities 1,162 976

Foreign currency forward contracts not designated as hedges Other liabilities 61 —

Cash flow hedges Accrued expenses and other current liabilities $ 7,512 $ 23,647

Cash flow hedges Other liabilities 5,175 24,586

Non-designated hedges Accrued expenses and other current liabilities 336 1,162

Non-designated hedges Other liabilities 16 61

Total derivative liabilities $ 13,039 $ 49,456

The effect of foreign currency forward contracts designated as cash flow hedges on the consolidated statements of operations was as follows (in thousands):

The effect of cash flow hedges on the Consolidated Statements of Operations was as follows (in thousands):

Year Ended January 31,

1 unchanged sentence

Total revenues Revenues $ 5,138,798 $ 4,317,996 $ 3,627,206

Amount of gains (losses) related to foreign currency forward contracts designated as cash flow hedges Revenues 18,780 6,142

Pre-tax gains (losses) associated with foreign currency forward contracts designated as cash flow hedges were as follows (in thousands):

Consolidated Statements of Operations and Statements of Comprehensive Loss Locations Year Ended January 31,

Amount of gains (losses) related to cash flow hedges Revenues ( 8,759 ) 18,780 6,142

Pre-tax gains (losses) associated with cash flow hedges were as follows (in thousands):

Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations Year Ended January 31,

2022 2021 2020

Gains (losses) recognized in OCI Net change in market value of effective foreign currency forward exchange contracts $ ( 61,171 ) $ 31,842 $ 44,079

Gains (losses) recognized in OCI Net change in unrealized gains (losses) on cash flow hedges $ 63,494 $ ( 61,171 ) $ 31,842

Gains (losses) reclassified from AOCI into income (effective portion) Revenues ( 8,759 ) 18,780 6,142

Gains (losses) recognized in income (amount excluded from effectiveness testing and ineffective portion) (1)

Other income (expense), net — — 13,868

(1) Prior to the adoption of ASU No.

2017-12, Derivatives and Hedging (Topic 815) , the changes in value of these foreign currency forward contracts resulting from changes in forward points were excluded from the assessment of hedge effectiveness and were recorded as incurred in Other income (expense), net on the consolidated statements of operations.

Upon adoption of ASU No.

2017-12, we elected to prospectively include changes in the value of these contracts resulting from changes in forward points in the assessment of hedge effectiveness.

These changes are recorded in AOCI on the consolidated balance sheets and will be subsequently reclassified to the related revenue line item on the consolidated statements of operations in the same period that the underlying revenues are earned.

Gains (losses) associated with foreign currency forward contracts not designated as cash flow hedges were as follows (in thousands):

Table of Conten t s

Gains (losses) associated with non-designated hedges were as follows (in thousands):

Consolidated Statements of Operations Location Year Ended January 31,

Derivative Type 2021 2020 2019

Foreign currency forward contracts not designated as hedges Other income (expense), net $ ( 4,095 ) $ 3,671 $ 4,706

We are subject to master netting agreements with all of the counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other.

2022 2021 2020

Amount of gains (losses) related to non-designated hedges Other income (expense), net $ 6,664 $ ( 4,095 ) $ 3,671

We are subject to netting agreements with all of the counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other.

It is our policy to present the derivatives gross on the Consolidated Balance Sheets.

9 unchanged sentences

Counterparty D 12,756 — 12,756 ( 331 ) — 12,425

Counterparty E 2,843 — 2,843 ( 53 ) — 2,790

Total $ 39,031 $ — $ 39,031 $ ( 13,039 ) $ — $ 25,992

6 unchanged sentences

Counterparty D 331 — 331 ( 331 ) — —

Counterparty E 53 — 53 ( 53 ) — —

Total $ 13,039 $ — $ 13,039 $ ( 13,039 ) $ — $ —

Outstanding debt consisted of the following (in thousands):

January 31, 2021 January 31, 2020

As of January 31,

Term Loan, net of unamortized debt discounts of $ 1,279 and $ 1,682 , respectively, and unamortized debt issuance costs of $ 117 and $ 155 , respectively

1 unchanged sentence

2022 Notes, net of unamortized debt discounts of $ 0 and $ 79,562 , respectively, and unamortized debt issuance costs of $ 2,374 and $ 4,771 , respectively

2022 Notes, net of unamortized debt discounts of $ 79,562 and $ 124,403 , respectively, and unamortized debt issuance costs of $ 4,771 and $ 7,630 , respectively

1,147,443 1,065,601

Total debt 1,839,797 1,795,014

debt, current $ ( 1,103,101 ) $ ( 244,319 )

current debt ( 1,222,443 ) ( 1,103,101 )

Total debt, noncurrent $ 617,354 $ 691,913

Table of Conten t s

As of January 31, 2022, contractual repayments and maturities of our outstanding debt were as follows (in thousands):

1 unchanged sentence

2023 $ 1,224,817

2023 1,224,934

Total $ 1,843,567

6 unchanged sentences

The financial covenant, based on a quarterly financial test, requires Workday not to exceed a maximum leverage ratio of 3.50 :1.00, subject to a step-up to 4.50 :1.00 at the election of Workday for a certain period following an Acquisition (as defined in the Credit Agreement).

As of January 31, 2021, we were in compliance with all covenants.

As of January 31, 2022, and 2021, we were in compliance with all covenants.

The Term Loan was funded in two individual tranches.

On April 2, 2020, $ 500 million of the Term Loan was funded, and the remaining $ 250 million was funded on July 13, 2020.

The Term Loan matures on April 2, 2025, and provides for quarterly repayment in installments of the principal amount, beginning October 2020, at a rate of 1.25 % of the principal amount per quarter through January 2022, and 2.50 % of the principal amount per quarter thereafter.

The Term Loan matures on April 2, 2025, and provides for quarterly repayment in installments of the principal amount at a rate of 1.25 % of the principal amount per quarter through January 2022, and 2.50 % of the principal amount per quarter thereafter.

The Term Loan may be prepaid or permanently reduced by Workday without penalty or premium.

We incurred fees of approximately $ 2 million in connection with entering into the agreement for the Term Loan.

The fees paid to the lenders for the issuance of the debt are accounted for as a debt discount, while the remaining fees paid to third parties are accounted for as debt issuance costs.

The debt discount and issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the contractual term of the arrangement.

As of January 31, 2021, the Term Loan had a carrying value of $ 729 million, of which $ 38 million is classified as current and $ 692 million is classified as noncurrent on the consolidated balance sheet.

As of January 31, 2021, the interest rate on the Term Loan was 1.38 % and the effective interest rate was 1.46 %.

As of January 31, 2022, the Term Loan had a carrying value of $ 692 million, of which $ 75 million was classified as current and $ 617 million was classified as noncurrent on the Consolidated Balance Sheets.

As of January 31, 2021, the Term Loan had a carrying value of $ 729 million, of which $ 38 million was classified as current and $ 692 million was classified as noncurrent on the Consolidated Balance Sheets.

As of January 31, 2022, and 2021, the interest rate on the Term Loan was 1.30 % and 1.38 %, respectively, and the effective interest rate was 1.38 % and 1.46 %, respectively.

Revolving Credit Facility

3 unchanged sentences

The Revolving Credit Facility may be prepaid or permanently reduced by Workday without penalty or premium.

We are required to pay each revolving lender a commitment fee on a quarterly basis based on amounts committed but unused under the Revolving Credit Facility that ranges from 0.090 % to 0.225 % per annum, depending on our consolidated leverage ratio.

The commitment fee is expensed as incurred and included within Other income (expense), net on the consolidated statement of operations.

We incurred fees of approximately $ 2 million in connection with entering into the agreement for the Revolving Credit Facility.

The fees are recorded in Other assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement.

As of January 31, 2021, there were no outstanding borrowings under the Revolving Credit Facility.

As of January 31, 2022, and 2021, there were no outstanding borrowings under the Revolving Credit Facility.

Table of Conten t s

Convertible Senior Notes

In June 2013, we issued 0.75 % convertible senior notes due July 15, 2018, with a principal amount of $ 350 million.

The 2018 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 0.75 % on January 15 and July 15 of each year.

During fiscal 2019, the 2018 Notes were converted by note holders and we repaid the $ 350 million principal balance in cash.

We also distributed approximately 1.5 million shares of our Class A common stock to note holders during fiscal 2019, which represented the conversion value in excess of the principal amount.

In June 2013, we issued 1.50 % convertible senior notes due July 15, 2020, with a principal amount of $ 250 million.

The 2020 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 1.50 % on January 15 and July 15 of each year.

During fiscal 2021, the 2020 Notes were converted by note holders and we repaid the $ 250 million principal balance in cash.

We also distributed approximately 1.7 million shares of our Class A common stock to note holders during fiscal 2021, which represents the conversion value in excess of the principal amount.

In September 2017, we issued 0.25 % convertible senior notes due October 1, 2022, with a principal amount of $ 1.15 billion.

13 unchanged sentences

On or after June 1, 2022, holders of the 2022 Notes may convert their 2022 Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2022 Notes.

The 2022 Notes became convertible at the option of the holders during the fourth quarter of fiscal 2021 and continue to be convertible in the first quarter of fiscal 2022 since the trigger for early conversion was met.

Specifically, the last reported sale price of our Class A common stock exceeded 130 % of the conversion price of the 2022 Notes for more than 20 trading days during the 30 consecutive trading days ended October 31, 2020, and January 31, 2021.

Accordingly, the 2022 Notes are classified as current on the consolidated balance sheet as of January 31, 2021.

The 2022 Notes were convertible at the option of the holders during fiscal 2022 and continue to be convertible through the first quarter of fiscal 2023 since the trigger for early conversion was met.

Through the date of this filing, the amount of the principal balance of the 2022 Notes that has been converted or for which conversion has been requested was not material.

In accounting for the issuance of the Notes, we separated each of the Notes into liability and equity components.

The carrying amounts of the liability components were calculated by measuring the fair value of similar liabilities that do not have associated convertible features.

The carrying amounts of the equity components representing the conversion option were determined by deducting the fair value of the liability components from the par value of the respective Notes.

These differences represent debt discounts that are amortized to interest expense over the respective terms of the Notes using the effective interest rate method.

The gross carrying amounts of the equity components recorded were $ 77 million, $ 68 million, and $ 223 million for the 2018 Notes, 2020 Notes, and 2022 Notes, respectively, and were included in Additional paid-in capital on the consolidated balance sheets upon issuance.

The equity components are not remeasured as long as they continue to meet the conditions for equity classification.

The effective interest rate of the liability component was 5.75 %, 6.25 %, 4.60 % for the 2018 Notes, 2020 Notes, and 2022 Notes, respectively.

The interest rates were based on the interest rates of similar liabilities at the time of issuance that did not have associated convertible features.

In accounting for the issuance costs related to the Notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values.

The issuance costs attributable to the equity components were netted against the respective equity components in Additional paid-in capital.

Upon issuance of the 2018 Notes, we recorded liability issuance costs of $ 7 million and equity issuance costs of $ 2 million;

upon issuance of the 2020 Notes, we recorded liability issuance costs of $ 5 million and equity issuance costs of $ 2 million;

and upon issuance of the 2022 Notes, we recorded liability issuance costs of $ 14 million and equity issuance costs of $ 4 million.

In connection with the issuance of the Notes, we entered into convertible note hedge transactions with respect to our Class A common stock (“Purchased Options”).

The Purchased Options are intended to offset potential economic dilution to our Class A common stock upon any conversion of the Notes.

The Purchased Options are separate transactions and are not part of the terms of the Notes.

The 2022 Notes are classified as current on the Consolidated Balance Sheets as of January 31, 2022.

As described in Note 2, Accounting Standards and Significant Accounting Policies , we adopted ASU No.

2020-06 effective February 1, 2021, using a modified retrospective method, under which financial results reported in prior periods were not adjusted.

Prior to the adoption of the standard, in accounting for the issuance of the 2022 Notes, we separated them into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have associated convertible features.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2022 Notes.

This difference represented a debt discount that was amortized to interest expense over the term of the 2022 Notes using the effective interest rate method.

The gross carrying amount of the equity component for the 2022 Notes was $ 223 million and was included in Additional paid-in capital on the Consolidated Balance Sheets upon issuance.

The effective interest rate of the liability component of the 2022 Notes was 4.60 %.

Additionally, we separated the total issuance costs incurred into liability and equity components in proportion to the allocation of the initial proceeds, resulting in liability issuance costs of $ 14 million and equity issuance costs of $ 4 million.

Issuance costs attributable to the liability component were amortized on a straight-line basis, which approximated the effective interest rate method, to interest expense over the term of the 2022 Notes.

The issuance costs attributable to the equity component were netted against the equity component in Additional paid-in capital.

Table of Conten t s

Upon adoption of ASU No.

2020-06 on February 1, 2021, we recombined the liability and equity components of the 2022 Notes assuming that the instrument was accounted for as a single liability from inception to the date of adoption.

We similarly recombined the liability and equity components of the issuance costs.

The issuance costs are presented as a deduction from the outstanding principal balance of the 2022 Notes, and are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the term of the 2022 Notes.

As of January 31, 2022, the effective interest rate on the 2022 Notes was 0.55 %.

In June 2013, we issued 1.50 % convertible senior notes due July 15, 2020, with a principal amount of $ 250 million.

The 2020 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 1.50 % on January 15 and July 15 of each year.

During fiscal 2021, the 2020 Notes were converted by note holders and we repaid the $ 250 million principal balance in cash.

We also distributed approximately 1.7 million shares of our Class A common stock to note holders during fiscal 2021, which represents the conversion value in excess of the principal amount.

The adoption of ASU No.

2020-06 did not impact the accounting for the 2020 Notes since they were converted and repaid prior to the date of adoption.

In connection with the issuance of the 2022 Notes and 2020 Notes, we entered into convertible note hedge transactions with respect to our Class A common stock (“Purchased Options”).

The Purchased Options are intended to offset potential economic dilution to our Class A common stock upon any conversion of the 2022 Notes and 2020 Notes.

The Purchased Options are separate transactions and are not part of the terms of the 2022 Notes or 2020 Notes.

The amounts paid for the Purchased Options are included in Additional paid-in capital on the Consolidated Balance Sheets.

The Purchased Options relating to the 2018 Notes gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2018 Notes, approximately 4.2 million shares of our Class A common stock for $ 83.28 per share, exercisable upon conversion of the 2018 Notes.

During the second quarter of fiscal 2019, we received approximately 1.5 million shares of our Class A common stock from the exercise of the Purchased Options relating to the 2018 Notes.

These shares were recorded as treasury stock.

The Purchased Options relating to the 2022 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2022 Notes, approximately 7.8 million shares of our Class A common stock for $ 147.10 per share, exercisable upon conversion of the 2022 Notes.

The Purchased Options relating to the 2022 Notes will expire on October 1, 2022, if not exercised earlier.

The Purchased Options relating to the 2020 Notes gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2020 Notes, approximately 3.1 million shares of our Class A common stock for $ 81.74 per share, exercisable upon conversion of the 2020 Notes.

1 unchanged sentence

These shares were recorded as treasury stock.

The Purchased Options relating to the 2022 Notes will expire in 2022, if not exercised earlier.

In connection with the issuance of the Notes, we also entered into warrant transactions to sell warrants (“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 4.2 million shares over 60 scheduled trading days beginning in October 2018, 3.1 million shares over 60 scheduled trading days beginning in October 2020, and 7.8 million shares over 60 scheduled trading days beginning in January 2023 of our Class A common stock at an exercise price of $ 107.96 , $ 107.96 , and $ 213.96 per share, respectively.

In connection with the issuance of the 2022 Notes and 2020 Notes, we also entered into warrant transactions to sell warrants (“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 7.8 million shares over 60 scheduled trading days beginning in January 2023 and 3.1 million shares over 60 scheduled trading days beginning in October 2020 of our Class A common stock at an exercise price of $ 213.96 and $ 107.96 per share, respectively.

If the Warrants are not exercised on their exercise dates, they will expire.

1 unchanged sentence

If the market value per share of our Class A common stock exceeds the applicable exercise price of the Warrants, the Warrants will have a dilutive effect on our earnings per share, assuming that we are profitable.

The Warrants are separate transactions and are not part of the terms of the Notes or the Purchased Options.

The proceeds from the sale of the Warrants are recorded in Additional paid-in capital on the consolidated balance sheets.

During the third and fourth quarters of fiscal 2019, Warrants related to the 2018 Notes were exercised, and we distributed approximately 1.1 million shares of our Class A common stock to warrant holders primarily utilizing treasury stock.

As of January 31, 2019, there were no Warrants outstanding related to the 2018 Notes.

The Warrants are separate transactions and are not part of the terms of the 2022 Notes, 2020 Notes, or the Purchased Options.

The proceeds from the sale of the Warrants were recorded in Additional paid-in capital on the Consolidated Balance Sheets.

During the third and fourth quarters of fiscal 2021, Warrants related to the 2020 Notes were exercised, and we distributed approximately 1.6 million shares of our Class A common stock to warrant holders primarily utilizing treasury stock.

As of January 31, 2021, there were no Warrants outstanding related to the 2020 Notes.

Table of Conten t s

Interest Expense on Debt

12 unchanged sentences

Year Ended January 31,

2022 2021 2020

Operating lease cost $ 93,045 $ 94,183 $ 85,154

2 unchanged sentences

Total operating lease cost $ 125,426 $ 126,435 $ 119,259

Prior to the adoption of ASU No.

2016-02, Leases (Topic 842) in the first quarter of fiscal 2020, we generally recognized rent expense on a straight-line basis over the period in which we benefited from the lease.

Total rent expense associated with operating leases was $ 99 million for fiscal 2019.

Supplemental cash flow information related to our operating leases was as follows (in thousands):

Year Ended January 31,

2022 2021 2020

Cash paid for operating lease liabilities $ 91,402 $ 87,450 $ 75,029

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 54,846 205,103 365,305

205,103 365,305

(1) Prior year activity includes $ 279 million for operating leases existing on February 1, 2019, and $ 86 million for operating leases that commenced during fiscal 2020.

Other information related to our operating leases was as follows:

Year Ended January 31,

As of January 31,

Weighted average remaining lease term (in years) 5 6

6 unchanged sentences

Less imputed interest ( 25,639 )

Total $ 443,051

As of January 31, 2021, there were no operating leases that had not yet commenced.

Related-Party Lease Transactions

We lease certain office space from an affiliate of our Chairman of the Board of Directors, Mr.

Duffield, adjacent to our corporate headquarters in Pleasanton, California, under various lease agreements.

As of January 31, 2021, and 2020, operating lease right-of-use assets related to these agreements were $ 134 million and $ 57 million, respectively, and operating lease liabilities were $ 146 million and $ 70 million, respectively.

The weighted average remaining lease term of these agreements is eight years .

Total operating lease liabilities $ 262,959

Table of Conten t s

As of January 31, 2022, we have additional operating leases, primarily for office space and data centers, that have not yet commenced with total undiscounted lease payments of $ 9 million.

These operating leases will commence in fiscal 2023, with lease terms ranging from two to seven years .

Related-Party Transactions

As discussed in Note 6, Property and Equipment, Net, during fiscal 2021, we entered into an agreement with an affiliated party which gave us the option to purchase certain leased properties within our corporate headquarters.

We exercised the Leased Property Purchase Option in the first quarter of fiscal 2022 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.

Subsequent to the exercise of the Leased Property Purchase Option, the Property was included in Property and equipment, net on the Consolidated Balance Sheets.

As of January 31, 2021, operating lease right-of-use assets and operating lease liabilities related to these agreements were $ 134 million and $ 146 million, respectively.

The total rent expense under these agreements was $ 2 million, $ 16 million, and $ 13 million for fiscal 2022, 2021, and 2020, respectively.

During fiscal 2021, we entered into an agreement with this affiliated party for a fee of $ 2 million for an option to purchase these leased properties at a price based on third-party appraisals and negotiation between Workday and the affiliated party.

If the Leased Property Purchase Option was not exercised by March 1, 2021, the existing lease agreements would have been automatically renewed for four years beyond the current lease end dates at rates determined based on independent third-party evaluations.

We accounted for this arrangement, which was approved by our Board of Directors, as a lease modification during the third quarter of fiscal 2021, as we were not reasonably certain that the option to purchase the leased facilities would be exercised.

As of January 31, 2021, this assessment did not change.

On February 23, 2021, our Board of Directors approved the exercise of this Leased Property Purchase Option to purchase the leased properties.

See Note 22, Subsequent Events for further details.

Commitments and Contingencies

Third-Party Hosted Infrastructure Platform-Related Commitments

We have entered into noncancelable agreements with third-party hosted infrastructure platform vendors with various expiration dates.

As of January 31, 2021, future noncancelable minimum payments under these agreements were approximately $ 424 million.

As of January 31, 2021, future noncancelable minimum payments for third-party hosted infrastructure platforms were as follows (in thousands):

Purchase Obligations

Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities.

These obligations consist of agreements to purchase goods and services that are enforceable and legally binding, and specify all significant terms and the approximate timing of the payments.

For purchase obligations with cancellation provisions, the amounts included in the following table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fees.

Future payments under purchase obligations with a remaining term in excess of one year as of January 31, 2022, were as follows (in thousands):

Third-party hosted infrastructure platform obligations Other purchase obligations

Fiscal Period:

2023 $ 42,985 $ 127,216

2024 48,519 81,550

2025 93,916 68,224

2026 272,663 70,207

2027 120,000 35,512

Thereafter 150,000 74,629

Total $ 728,083 $ 457,338

4 unchanged sentences

In our opinion, as of January 31, 2022, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

Table of Conten t s

Stockholders’ Equity

1 unchanged sentence

The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.

Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share.

Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share.

Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.

4 unchanged sentences

Our 2012 Equity Incentive Plan (“EIP”) serves as the successor to our 2005 Stock Plan (together with the EIP, the “Stock Plans”).

As of January 31, 2021, we had approximately 63 million shares of Class A common stock available for future grants.

In connection with the acquisition of Adaptive Insights, we assumed unvested awards that had been granted under the Adaptive Insights, Inc.

2013 Equity Incentive Plan.

As of January 31, 2022, we had 58 million shares of Class A common stock available for future grants.

We also have a 2012 Employee Stock Purchase Plan.

Under the ESPP, eligible employees are granted options to purchase shares at the lower of 85 % of the fair market value of the stock at the time of grant or 85 % of the fair market value at the time of exercise.

Options to purchase shares are granted twice yearly on or about June 1, and December 1, and exercisable on or about the succeeding November 30, and May 31, respectively, of each year.

As of January 31, 2021, approximately 4 million shares of Class A common stock were available for issuance under the ESPP.

Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively.

As of January 31, 2022, 4 million shares of Class A common stock were available for issuance under the ESPP.

Restricted Stock Units

1 unchanged sentence

RSUs generally vest over four years .

A summary of information related to RSU activity during fiscal 2021 is as follows:

A summary of information related to RSU activity during fiscal 2022 is as follows (in thousands, except per share data):

Number of Shares Weighted-Average Grant Date Fair Value

5 unchanged sentences

The weighted-average grant date fair value of RSUs granted during fiscal 2022, 2021, and 2020 was $ 259.61 , $ 152.70 , and $ 187.89 , respectively.

The total fair value of RSUs vested as of the vesting dates during fiscal 2021, 2020, and 2019 was $ 1.1 billion, $ 1.2 billion, and $ 801 million, respectively.

As of January 31, 2021, there was a total of $ 1.8 billion in unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years .

The total fair value of RSUs vested as of the vesting dates during fiscal 2022, 2021, and 2020 was $ 1.6 billion, $ 1.1 billion, and $ 1.2 billion, respectively.

As of January 31, 2022, there was a total of $ 1.9 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years .

Performance-Based Restricted Stock Units

During fiscal 2021, 0.6 million shares of PRSUs were granted to all employees other than executive management that included both service conditions and performance conditions related to company-wide goals.

These performance conditions were met and the PRSU awards will vest if the individual employee continues to provide service through the vesting date of March 15, 2021.

During fiscal 2022, 0.4 million shares of PRSUs were granted to employees below the level of vice president that included both service conditions and performance conditions related to company-wide goals.

These performance conditions were met and the PRSUs will vest if the individual employee continues to provide service through the vesting date of March 15, 2022.

During fiscal 2022, we recognized $ 65 million in compensation cost related to these PRSUs, and as of January 31, 2022, there was a total of $ 16 million in unrecognized compensation cost which is expected to be recognized over a weighted-average period of approximately two months .

1 unchanged sentence

These performance conditions were met and the PRSUs vested on March 15, 2021.

During fiscal 2021, we recognized $ 19 million in compensation cost related to these PRSUs.

We recognized $ 17 million and $ 91 million in compensation cost related to these PRSUs during fiscal 2022 and 2021, respectively.

Table of Conten t s

Stock Options

1 unchanged sentence

Stock options issued under the Stock Plans generally are exercisable for periods not to exceed ten years and generally vest over five years .

A summary of information related to stock option activity during fiscal 2021 is as follows (in millions, except share and per share data):

A summary of information related to stock option activity during fiscal 2022 is as follows (in millions, except number of shares which are reflected in thousands and per share data):

Outstanding Stock Options Weighted-Average Exercise Price Aggregate Intrinsic Value

Balance as of January 31, 2021 1,260 $ 13.55 $ 270

Stock options granted — —

Stock options exercised ( 860 ) 10.27

6 unchanged sentences

The intrinsic value is the difference between the current fair value of the stock and the exercise price of the stock option.

The weighted-average remaining contractual life of vested and expected to vest stock options as of January 31, 2021, is approximately three years .

As of January 31, 2021, there was a total of $ 9 million in unrecognized compensation cost related to unvested assumed stock options, which is expected to be recognized over a weighted-average period of approximately one year .

The weighted-average remaining contractual life of vested and expected to vest stock options as of January 31, 2022, is approximately two years .

As of January 31, 2022, there was a total of $ 1 million in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately nine months .

The stock options that are exercisable as of January 31, 2022, have a weighted-average remaining contractual life of approximately two years .

The weighted-average remaining contractual life of outstanding stock options as of January 31, 2021, is approximately three years .

There were no stock options granted during fiscal 2021, 2020, and 2019, and no stock options assumed during fiscal 2021 and 2020.

The weighted-average grant date fair value of stock options assumed during fiscal 2019 was $ 100.69 .

The fair value of stock options assumed was estimated using the following assumptions:

Year Ended January 31, 2019

Expected volatility 31.5 % - 34.3 %

Expected term (in years) 0.03 - 2.42

Risk-free interest rate 2.10 % - 2.72 %

Dividend yield — %

The weighted-average remaining contractual life of outstanding stock options as of January 31, 2022, is approximately two years .

Employee Stock Purchase Plan

15 unchanged sentences

Unearned Revenue and Performance Obligations

Subscription services revenue of $ 2.2 billion, $ 1.8 billion, and $ 1.4 billion was recognized during fiscal 2021, 2020, and 2019, respectively, that was included in the unearned revenue balances at the beginning of the respective periods.

Professional services revenue recognized in the same periods from unearned revenue balances at the beginning of the respective periods was not material.

Subscription services revenues of $ 2.5 billion, $ 2.2 billion, and $ 1.8 billion was recognized during fiscal 2022, 2021, and 2020, respectively, that was included in the unearned revenue balances at the beginning of the respective periods.

Professional services revenues recognized in the same periods from unearned revenue balances at the beginning of the respective periods were not material.

Transaction Price Allocated to the Remaining Performance Obligations

As of January 31, 2021, approximately $ 10.09 billion of revenue is expected to be recognized from remaining performance obligations for subscription contracts.

We expect to recognize revenue on approximately $ 6.53 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Revenue from remaining performance obligations for professional services contracts as of January 31, 2021, was not material.

As of January 31, 2022, approximately $ 12.8 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts.

We expect to recognize revenues on approximately $ 8.0 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

Revenues from remaining performance obligations for professional services contracts as of January 31, 2022, were not material.

Table of Conten t s

Other Income (Expense), Net

6 unchanged sentences

143,659 23,483 37,200

Other income (expense), net $ ( 26,535 ) $ 19,783 $ 39,532

(1) Interest expense includes the contractual interest expense of the Term Loan and Notes, and the related non-cash interest expense attributable to amortization of the debt discounts and debt issuance costs, net of capitalized interest costs.

Total other income (expense), net $ 132,632 $ ( 26,535 ) $ 19,783

For further information, see Note 11, Debt .

(2) Other includes the net gains (losses) from our equity investments, the commitment fee on the Revolving Credit Facility, and amortization of issuance costs on the Revolving Credit Facility.

For further information, see Note 3, Investments and Note 11, Debt.

The components of loss before provision for (benefit from) income taxes were as follows (in thousands):

(2) Other primarily includes the net gains (losses) from our equity investments.

For further information, see Note 3, Investments .

The components of income (loss) before provision for (benefit from) income taxes were as follows (in thousands):

Year Ended January 31,

2 unchanged sentences

Foreign ( 292,879 ) ( 134,782 ) ( 225,675 )

Total $ ( 275,134 ) $ ( 482,447 ) $ ( 423,752 )

Income (loss) before provision for (benefit from) income taxes $ 16,182 $ ( 275,134 ) $ ( 482,447 )

The provision for (benefit from) income taxes consisted of the following (in thousands):

1 unchanged sentence

2022 2021 2020

Federal $ — $ — $ —

State $ 763 $ 1,524 $ 438

6 unchanged sentences

Provision for (benefit from) income taxes $ ( 13,191 ) $ 7,297 $ ( 1,773 )

Table of Conten t s

The items accounting for the difference between income taxes computed at the federal statutory income tax rate and the provision for (benefit from) income taxes consisted of the following:

8 unchanged sentences

Changes in valuation allowance 558.5 % ( 56.3 ) % ( 48.3 ) %

Stock compensation 19.0 % 21.6 % 12.7 %

Share-based compensation ( 365.4 ) % 19.0 % 21.6 %

Permanent difference 4.6 % ( 0.3 ) % ( 0.7 ) %

Nontaxable gain on investment ( 15.7 ) % 0.0 % 0.9 %

Other 1.0 % ( 0.1 ) % ( 0.5 ) %

1 unchanged sentence

As a result of our history of net operating losses, the current provision for income taxes primarily relates to state income taxes and the current foreign provision from our profitable foreign entities.

The foreign deferred income tax benefit primarily relates to the excess of tax benefit from share-based compensation in certain foreign jurisdictions.

The domestic income tax benefit primarily relates to the release of our valuation allowance resulting from business combinations.

The foreign deferred income tax benefit primarily relates to the excess of tax benefit from share-based compensation and net operating loss in certain foreign jurisdictions.

Significant components of our deferred tax assets and liabilities were as follows (in thousands):

As of January 31,

Deferred tax assets:

1 unchanged sentence

Other reserves and accruals 28,629 23,021

Federal net operating loss carryforwards 752,346 746,020

State net operating loss and foreign tax attributes carryforwards 447,716 371,233

Tax attributes carryforward 1,790,396 1,536,758

Property and equipment 23,977 13,093

Share-based compensation 71,191 77,815

Research and development credits 336,696 243,617

Intangibles 422,985 483,752

5 unchanged sentences

Deferred tax liabilities:

Other ( 22,992 ) ( 28,517 )

Deferred commissions ( 102,682 ) ( 81,125 )

Operating lease right-of-use assets ( 57,001 ) ( 100,917 )

Other ( 43,990 ) ( 22,992 )

Total deferred tax liabilities ( 203,673 ) ( 205,034 )

4 unchanged sentences

federal, state, and certain foreign jurisdiction deferred tax assets.

Table of Conten t s

As of January 31, 2022, we recorded a valuation allowance of $ 2.2 billion for the portion of the deferred tax assets that we do not expect to be realized.

26 unchanged sentences

Due to our net operating loss carryforwards, our income tax returns generally remain subject to examination by federal and most state and foreign tax authorities.

On June 22, 2020, the U.S.

Supreme Court declined to hear the appeal of a ruling by the U.S.

Court of Appeals for the Ninth Circuit regarding the treatment of stock-based compensation expenses in a cost-sharing agreement (Altera Corporation & Subsidiaries v.

Commissioner).

Supreme Court decision resulted in an immaterial reduction in our deferred tax assets relative to the total gross deferred tax assets, which was fully offset by our valuation allowance.

As a result, there was no net impact on our consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in response to the COVID-19 pandemic.

The CARES Act includes temporary changes to income and non-income based tax laws.

We evaluated the applicable provisions of the CARES Act and determined that there is no material impact to our financial results.

Net Loss Per Share

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, net of treasury stock.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including our outstanding stock options, unvested RSUs and PRSUs, common stock related to convertible senior notes to the extent dilutive, outstanding warrants, and common stock issuable pursuant to the ESPP.

Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The net loss per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the loss for the period had been distributed.

As the liquidation and dividend rights are identical, the net loss attributable to common stockholders is allocated on a proportionate basis.

The following table presents the calculation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share data):

Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, net of treasury stock.

Diluted net income (loss) per share is computed by giving effect to all potentially dilutive shares of common stock, including our convertible senior notes, outstanding warrants related to the issuance of the convertible senior notes, and outstanding share-based awards consisting primarily of unvested RSUs and PRSUs, and ESPP obligations.

The net income (loss) per share is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the income (loss) for the period had been distributed.

As the liquidation and dividend rights are identical, the net income (loss) is allocated on a proportionate basis.

The computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted net income (loss) per share of Class B common stock does not assume the conversion of those shares.

Basic and diluted net loss per share was the same for fiscal 2021 and 2020 as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Table of Conten t s

The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):

Year Ended January 31,

1 unchanged sentence

Class A Class B Class A Class B Class A Class B

Basic and diluted net loss per share attributable to Class A and Class B common stockholders:

Allocation of distributed net loss attributable to common stockholders $ ( 210,637 ) $ ( 71,794 ) $ ( 345,958 ) $ ( 134,716 ) $ ( 287,021 ) $ ( 131,237 )

Weighted-average common shares outstanding 176,758 60,261 163,513 63,672 148,767 68,022

Basic and diluted net loss per share $ ( 1.19 ) $ ( 1.19 ) $ ( 2.12 ) $ ( 2.12 ) $ ( 1.93 ) $ ( 1.93 )

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because doing so would be anti-dilutive were as follows (in thousands):

Net income (loss) per share, basic:

Net income (loss) $ 22,556 $ 6,817 $ ( 210,637 ) $ ( 71,794 ) $ ( 345,958 ) $ ( 134,716 )

Weighted-average shares outstanding, basic 189,864 57,385 176,758 60,261 163,513 63,672

Net income (loss) per share, basic $ 0.12 $ 0.12 $ ( 1.19 ) $ ( 1.19 ) $ ( 2.12 ) $ ( 2.12 )

Net income (loss) per share, diluted:

Net income (loss) $ 22,556 $ 6,817 $ ( 210,637 ) $ ( 71,794 ) $ ( 345,958 ) $ ( 134,716 )

Reallocation of net income as a result of conversion of Class B to Class A common stock 6,817 — — — — —

Reallocation of net income to Class B common stock — ( 182 ) — — — —

Net income (loss) for diluted calculation 29,373 6,635 ( 210,637 ) ( 71,794 ) ( 345,958 ) ( 134,716 )

Weighted-average shares outstanding, basic 189,864 57,385 176,758 60,261 163,513 63,672

Conversion of Class B to Class A common stock 57,385 — — — — —

Dilutive effect of share-based awards 5,549 — — — — —

Dilutive effect of warrants related to the issuance of convertible senior notes 1,234 — — — — —

Weighted-average shares outstanding, diluted 254,032 57,385 176,758 60,261 163,513 63,672

Net income (loss) per share, diluted $ 0.12 $ 0.12 $ ( 1.19 ) $ ( 1.19 ) $ ( 2.12 ) $ ( 2.12 )

The computation of diluted net income (loss) per share does not include the effect of the following potentially outstanding weighted-average shares of common stock.

The effects of these potentially outstanding shares were not included in the calculation of diluted net income (loss) per share because the effect would have been anti-dilutive (in thousands):

Year Ended January 31,

2022 2021 2020

Outstanding common stock options 1,260 3,436 5,781

Unvested RSUs and PRSUs 13,790 12,530 13,551

Shares related to outstanding share-based awards

1,436 15,366 18,083

Shares related to the convertible senior notes 7,817 9,205 10,876

Shares subject to warrants related to the issuance of convertible senior notes — 10,392 10,876

Shares issuable pursuant to the ESPP 416 491 402

Total 9,253 34,963 39,835

Geographic Information

Disaggregation of Revenue

We sell our subscription contracts and related services in two primary geographical markets:

to customers located in the United States and to customers located outside of the United States.

Revenue by geography is generally based on the address of the customer as specified in our master subscription agreement.

The following table sets forth revenue by geographic area (in thousands):

Revenues by geography is generally based on the address of the customer as specified in our customer subscription agreement.

The following table sets forth revenues by geographic area (in thousands):

Year Ended January 31,

2 unchanged sentences

Other countries 1,293,386 1,068,869 885,779

Total $ 4,317,996 $ 3,627,206 $ 2,822,180

Total revenues $ 5,138,798 $ 4,317,996 $ 3,627,206

Table of Conten t s

Long-Lived Assets

1 unchanged sentence

Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in thousands):

As of January 31,

United States $ 1,174,371 $ 1,169,820

1 unchanged sentence

Other countries 79,463 72,839

Total $ 1,386,546 $ 1,227,081

Total long-lived assets $ 1,370,883 $ 1,386,546

We have a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code covering eligible employees.

1 unchanged sentence

Our contributions to the plan were $ 46 million, $ 42 million, and $ 36 million during fiscal 2022, 2021, and 2020, respectively.

Selected Quarterly Financial Data (unaudited)

The following tables set forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in fiscal 2021 and 2020 (in thousands, except per share data):

Quarter ended

1/31/2021 10/31/2020 7/31/2020 4/30/2020 1/31/2020 10/31/2019 7/31/2019 4/30/2019

Consolidated Statements of Operations Data:

Total revenues $ 1,131,684 $ 1,105,960 $ 1,061,967 $ 1,018,385 $ 976,299 $ 938,100 $ 887,752 $ 825,055

Operating loss ( 73,311 ) ( 14,077 ) ( 16,754 ) ( 144,457 ) ( 146,097 ) ( 110,250 ) ( 122,497 ) ( 123,386 )

Net loss ( 71,707 ) ( 24,340 ) ( 28,016 ) ( 158,368 ) ( 127,958 ) ( 115,729 ) ( 120,712 ) ( 116,275 )

Net loss per share, basic and diluted ( 0.30 ) ( 0.10 ) ( 0.12 ) ( 0.68 ) ( 0.56 ) ( 0.51 ) ( 0.53 ) ( 0.52 )

Subsequent Events

On January 28, 2021, we entered into a definitive agreement to acquire Peakon ApS, an employee success platform that converts feedback into actionable insights, for consideration of approximately $ 700 million in cash, subject to adjustments.

The acquisition is expected to close during our first quarter of fiscal 2022, subject to the satisfaction of customary closing conditions, including required regulatory approvals.

Exercise of Leased Property Purchase Option

As discussed in Note 12, Leases, we entered into an agreement with an affiliated party during fiscal 2021 which gives us the option to purchase certain leased properties.

On February 23, 2021, our Board of Directors approved the exercise of this Leased Property Purchase Option to purchase the leased properties.

This purchase provides long-term stability to our corporate headquarter footprint in Pleasanton, California.

The purchase price is $ 173 million in cash, reduced by the $ 2 million fee paid for the Leased Property Purchase Option.

The transaction is expected to be completed in the first quarter of fiscal 2022.

The net carrying value of the properties purchased will be $ 159 million at the time of purchase, which is calculated as the net purchase price of $ 171 million, reduced by the difference between the carrying values of the right-of-use asset and lease liability of the leased properties immediately prior to the purchase of approximately $ 12 million.

Table of Conten t s

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk