What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-08 compared with 2023-02-27 · 237 added, 238 removed, 961 unchanged (33% of the section changed)

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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, 2023, 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 27, 2023 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, 2024, 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 8, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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San Francisco, California

February 27, 2023

March 8, 2024

Report of Independent Registered Public Accounting Firm

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2024, 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, 2023 and 2022, 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, 2023, and the related notes and our report dated February 27, 2023 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, 2024 and 2023, 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, 2024, and the related notes and our report dated March 8, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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San Francisco, California

February 27, 2023

March 8, 2024

WORKDAY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value data)

(in millions, except number of shares which are reflected in thousands and per share data)

As of January 31,

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Trade and other receivables, net of allowance for credit losses of $ 11 and $ 9 , respectively

1,570,086 1,242,545

Deferred costs 232 191

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Acquisition-related intangible assets, net 233 306

Deferred tax assets

Goodwill 2,846 2,840

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Operating lease liabilities 89 91

Debt, current — 1,222,443

Total current liabilities 5,055 4,628

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Preferred stock, $ 0.001 par value;

10 million shares authorized;

no shares issued or outstanding as of January 31, 2023, and 2022

10,000 shares authorized;

no shares issued or outstanding

Class A common stock, $ 0.001 par value;

750 million shares authorized;

204 million and 196 million shares issued and outstanding as of January 31, 2023, and 2022, respectively

750,000 shares authorized;

213,676 and 204,507 shares issued;

210,674 and 203,354 shares outstanding, respectively

Class B common stock, $ 0.001 par value;

240 million shares authorized;

55 million and 55 million shares issued and outstanding as of January 31, 2023, and 2022, respectively

240,000 shares authorized;

53,188 and 54,637 shares issued and outstanding, respectively

Additional paid-in capital 10,400 8,829

Treasury stock, at cost;

1 million and 0.1 million shares as of January 31, 2023, and 2022, respectively

3,002 and 1,153 shares held, respectively

( 608 ) ( 185 )

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CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(in millions, except number of shares which are reflected in thousands and per share data)

Year Ended January 31,

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(in millions)

Year Ended January 31,

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Net change in foreign currency translation adjustment ( 1 ) ( 2 ) ( 3 )

Net change in unrealized gains (losses) on available-for-sale debt securities ( 10,967 ) ( 6,279 ) ( 1,437 )

Net change in unrealized gains (losses) on cash flow hedges 58,091 72,253 ( 79,951 )

Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax provision of $ 5 , $ 0 , $ 0 , respectively

18 ( 11 ) ( 6 )

Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $ 2 , $ 0 , and $ 0 , respectively

Other comprehensive income (loss), net of tax ( 32 ) 45 63

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(in millions, except number of shares which are reflected in thousands)

Year Ended January 31,

2024 2023 2022

Common stock:

Balance, beginning of period $ 251 $ 242 $ 231

Issuance of common stock under employee equity plans, net of shares withheld for employee taxes 7 9 9

Settlement of convertible senior notes 1 — 2

Balance, end of period 259 251 242

Additional paid-in capital:

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Exercise of convertible senior notes hedges — 98 —

Settlement of convertible senior notes ( 40 ) ( 3 ) ( 4 )

Settlement of warrants — — ( 290,875 )

Cumulative effect of accounting changes — — ( 220 )

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Common stock repurchases under share repurchase program ( 423 ) ( 75 ) —

Settlement of warrants — — 290,855

Balance, end of period ( 608 ) ( 185 ) ( 12 )

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2024 2023 2022

Common stock (in shares):

Common stock shares:

Balance, beginning of period 257,991 251,209 242,667

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Common stock repurchased ( 1,849 ) ( 450 ) —

Settlement of warrants — — 1,587

Other — 76 125

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(in millions)

Year Ended January 31,

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Amortization of deferred costs 213 175 139

Amortization and writeoff of debt discount and issuance costs 6,955 3,988 53,693

Non-cash lease expense 96 92 86

(Gains) losses on investments 19 31 ( 146 )

Accretion of discounts on marketable debt securities, net ( 149 ) ( 42 ) 3

Deferred income taxes ( 1,058 ) 4 ( 22 )

Other ( 17 ) 57 9

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Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld 155 152 148

Other ( 739 ) ( 463 ) ( 2,657 )

Net cash provided by (used in) financing activities ( 268 ) 1,204 110

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Restricted cash included in Prepaid expenses and other current assets 12 9 7

Restricted cash included in Other assets — — 138

Total cash, cash equivalents, and restricted cash $ 2,024 $ 1,895 $ 1,541

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Overview and Basis of Presentation

Company and Background

Description of the Business

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.

Our fiscal year ends on January 31.

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Use of Estimates

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.

Significant estimates, judgements, and assumptions include, but are not limited to, the identification of distinct performance obligations for revenue recognition, 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.

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 identification of distinct performance obligations for revenue recognition, the determination of the period of benefit for deferred commissions, the realizability of deferred tax assets, the measurement of uncertain tax positions, 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, judgments, and assumptions, and such differences could be material to our consolidated financial statements.

In February 2023, we completed an assessment of the useful lives of our data center equipment, including servers, network equipment, and integrated complete server and network racks.

Due to advances in technology, as well as investments in software that increased efficiencies in how we operate our data center equipment, we determined we should increase the estimated useful lives of data center equipment from 3 years to 5 years.

This change in accounting estimate will be effective beginning fiscal 2024.

This change in accounting estimate was effective beginning fiscal 2024.

Based on the carrying amount of data center equipment that was in-service as of January 31, 2023, this change decreased depreciation expense by $ 93 million for fiscal 2024.

Segment Information

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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 2023, our co-chief executive officers together served as CODM for purposes of segment reporting.

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

For fiscal 2024, our co-chief executive officers together served as CODM for purposes of segment reporting.

Effective February 1, 2024, Mr.

Bhusri stepped down from his role as Co-CEO and assumed the role of Executive Chair, and Mr.

Eschenbach became the sole CEO.

In conjunction with the transition, Mr.

Bhusri no longer serves as CODM for purposes of segment reporting effective February 1, 2024.

Despite the change in the CODM, we determined that no change to segment reporting is necessary as there is no change in the components for which separate financial information are regularly evaluated.

Accounting Standards and Significant Accounting Policies

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Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for services rendered.

Revenues are recognized net of any taxes collected from customers which are subsequently remitted to governmental authorities.

We determine revenue recognition through the following steps:

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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.

Our subscription contracts are generally three years or longer in length and are generally noncancelable.

Professional Services Revenues

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As our go-to-market strategies evolve, we may modify our pricing practices in the future, which could result in changes to SSP and may therefore impact revenue recognized in our consolidated financial statements.

Contract Balances

We generally invoice our customers annually in advance for our subscription services and in arrears for our professional services.

Payment terms and conditions vary by contract type and by customer, and payment is generally required within 30 days from date of invoicing.

The timing of revenue recognition may differ from the timing of invoicing customers, and these timing differences result in trade receivables, contract assets, or contract liabilities (unearned revenue) on our Consolidated Balance Sheets.

Trade Receivables and Contract Assets

We record a trade receivable when an unconditional right to consideration exists, such that only the passage of time is required before payment of consideration is due.

A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred.

The current and noncurrent portions of contract assets are included in Trade and other receivables and Other assets, respectively, on the Consolidated Balance Sheets.

We maintain an allowance for credit losses for expected uncollectible trade receivables and contract assets, which is recorded as an offset to trade receivables or contract assets.

We assess our allowance for credit losses 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 is recorded in General and administrative expenses on the Consolidated Statements of Operations.

Unearned Revenue

Contract liabilities consist of unearned revenue, which is recorded when we invoice in advance of revenues being recognized from our contracts.

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.

Fair Value Measurement

We measure our cash equivalents, marketable securities, and foreign currency derivative contracts at fair value at each reporting period using a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

In addition, we measure our non-marketable equity investments for which there has been an observable price change from an orderly transaction for identical or similar investments of the same issuer at fair value.

In addition, we measure our non-marketable equity investments for which there has been an impairment or an observable price change from an orderly transaction for identical or similar investments of the same issuer at fair value.

A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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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 Accumulated other comprehensive income (loss) (“AOCI”).

Non-credit related losses are recorded in Accumulated other comprehensive income (loss) (“AOCI”).

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

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As of January 31, 2024, and 2023, there were no VIEs for which we were the primary beneficiary.

Equity Investments Accounted for Under the Equity Method

Investments in VIEs for which we are not the primary beneficiary or do not own a controlling interest but can exercise significant influence over the investee are accounted for under the equity method of accounting.

These investments are measured at cost, less any impairment, plus or minus our share of earnings and losses and are included in Other assets on the Consolidated Balance Sheets.

Our share of earnings and losses are recorded in Other income (expense), net on the Consolidated Statements of Operations.

As of January 31, 2023, and 2022, we had no equity investments accounted for under the equity method.

Non-Marketable Equity Investments Measured Using the Measurement Alternative

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Marketable Equity Investments

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

We may 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.

They are measured using quoted prices in active markets with changes recorded in Other income (expense), net on the Consolidated Statements of Operations.

Trade and Other Receivables

Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount, net of an allowance for credit losses.

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 the Consolidated Statements of Operations.

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

As of January 31, 2024, we had no marketable equity investments.

Deferred Commissions

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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 AOCI on the Consolidated Balance Sheets and 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.

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.

Cash flows from the settlement of forward contracts designated as cash flow hedges and non-designated hedges are classified as operating activities on the Consolidated Statements of Cash Flows.

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Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

Property and equipment are stated at cost less accumulated depreciation, except for land which is stated at cost.

Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as shown in the table below.

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Acquisition-related intangible assets and goodwill are tested for impairment at least annually, and more frequently upon the occurrence of certain events.

Unearned Revenue

Unearned revenue primarily consists of customer billings in advance of revenues being recognized from our subscription contracts.

We generally invoice our customers annually in advance for our subscription services.

Our typical payment terms provide that customers pay a portion of the total arrangement fee within 30 days of the contract date.

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.

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

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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 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.

We have elected to combine lease and non-lease components for each of our existing underlying asset classes and to not include leases with a term of 12 months or less on our Consolidated Balance Sheets.

We recognize variable lease costs, including common area maintenance, utilities, real estate taxes, insurance, and other operating costs that are passed on from the lessor, in the Consolidated Statements of Operations in the period incurred.

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

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

We record a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method.

We record a provision for (benefit from) income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method.

Under this method, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.

We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.

We recognize tax benefits from uncertain tax positions only if we believe that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different.

We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and operating results.

The provision for income taxes includes the effects of any accruals that we believe are appropriate, as well as the related net interest and penalties.

A valuation allowance is established when necessary to reduce deferred tax assets to the net amount that is more likely than not to be realized.

In the event that we change our determination as to the amount of deferred tax assets that can be realized, we will adjust our valuation allowance with a corresponding impact to the provision for (benefit from) income taxes in the period in which such determination is made.

We recognize the tax benefit of an uncertain tax position only if it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits.

The tax benefit recognized is measured as the largest amount of benefit which is greater than 50% likely to be realized upon settlement with the taxing authority.

To the extent the assessment of such tax position changes, such difference will affect the provision for (benefit from) income taxes in the period in which we make the determination.

We recognize interest accrued and penalties related to unrecognized tax benefits in the provision for (benefit from) income taxes.

Warranties and Indemnification

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Concentrations of Risk and Significant Customers

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, and trade and other receivables.

Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, derivative instruments, and trade and other receivables.

Our deposits exceed federally insured limits.

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Other than the United States, no country individually accounted for more than 10% of total revenues during fiscal 2024, 2023, or 2022.

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

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.

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

We serve our customers and users from data center facilities operated by third parties, located in North America and Europe.

We have internal procedures to restore services in the event of disruption 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.

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

We are also exposed to concentration of risk in our equity investments portfolio, which consists of marketable equity investments and non-marketable equity investments measured using the measurement alternative.

As of January 31, 2023, and 2022, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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.

Prior to the adoption of the new standard, such assets and liabilities were recognized by the acquirer at fair value on the acquisition date.

We early adopted ASU No.

2021-08 on a prospective basis effective February 1, 2022.

The adoption had no impact on our consolidated financial statements during fiscal 2023, and any financial impact will be dependent on the magnitude and nature of future business combinations.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements.

We are currently evaluating the impacts of the new standard.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.

This ASU is effective for fiscal years beginning after December 15, 2024, and allows for adoption on a prospective basis, with a retrospective option.

We are currently evaluating the impacts of the new standard.

Debt Securities

As of January 31, 2023, debt securities consisted of the following (in thousands):

As of January 31, 2024, debt securities consisted of the following (in millions):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value

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Included in Marketable securities $ 5,794 $ 15 $ ( 8 ) $ 5,801

As of January 31, 2022, debt securities consisted of the following (in thousands):

As of January 31, 2023, debt securities consisted of the following (in millions):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value

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Included in Marketable securities $ 4,170 $ 1 $ ( 17 ) $ 4,154

The contractual maturities of debt securities were as follows (in millions):

January 31, 2024

Due within 1 year

Due 1 year through 5 years

Total debt securities

As of January 31, 2024, and 2023, the fair value of debt securities in an unrealized loss position was $ 2.4 billion and $ 3.1 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months.

We do not intend to sell these debt securities and it is not more likely than not that we will be required to sell the debt securities before recovery of their amortized cost bases, which may be at maturity.

We did not recognize any credit or non-credit related losses related to our debt securities during fiscal 2024, 2023, or 2022.

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Equity Investments

Equity investments consisted of the following (in thousands):

Equity investments consisted of the following (in millions):

As of January 31,

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Total equity investments $ 1,265 $ 1,245

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

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

Year Ended January 31,

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Non-Marketable Equity Investments Measured Using the Measurement Alternative

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

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

As of January 31,

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Carrying value $ 248 $ 262

In fiscal 2024, we recorded impairment losses of $ 30 million.

In fiscal 2023, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 8 million and impairment losses of $ 16 million.

In fiscal 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 58 million and a non-cash gain of $ 12 million related to our acquisition of Zimit.

In fiscal 2021, we recorded upward adjustments to the carrying value of non-marketable equity investments of $ 9 million.

Marketable Equity Investments

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

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

As of January 31,

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Carrying value $ — $ 81

During fiscal 2023, we sold marketable equity investments for proceeds of $ 6 million, and the realized gains from the sales were no t material.

During fiscal 2024, we sold all of our marketable equity investments for proceeds of $ 87 million, with corresponding realized gains of $ 6 million.

During fiscal 2023, we sold marketable equity investments for proceeds of $ 6 million, and the realized gains from the sales were not material.

During fiscal 2022, we sold marketable equity investments for proceeds of $ 37 million, with corresponding realized gains of $ 7 million.

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

During fiscal 2023, 2022, and 2021, we recorded unrealized net losses of $ 18 million, gains of $ 67 million, and gains of $ 14 million, respectively, on marketable equity investments held as of the end of each period.

During fiscal 2023 and 2022, we recorded unrealized net losses of $ 18 million, and gains of $ 67 million, respectively, on marketable equity investments held as of the end of each period.

Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of January 31, 2023 (in thousands):

Level 1 Level 2 Level 3 Total

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Money market funds 1,017 — — 1,017

Marketable equity investments 80,766 — — 80,766

Foreign currency derivative assets — 46 — 46

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Total liabilities $ — $ 27 $ — $ 27

Level 1 Level 2 Level 3 Total

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Property and Equipment, Net

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

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

As of January 31,

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Related-Party Transactions

There were no material related party transactions related to our property and equipment in fiscal 2023.

There were no material related party transactions related to our property and equipment in fiscal 2024 or 2023.

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-Founder, Co-CEO, and Chair Aneel Bhusri, and other Workday executives.

The aircraft was purchased primarily for the purpose of business travel by our Co-Founder and Executive Chair, 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.

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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.

During fiscal 2022, we purchased certain leased office space (“Property”) within our corporate headquarters from an affiliate of Mr.

Duffield for $ 173 million in cash.

In deciding to purchase the Property, the independent members of our Board of Directors considered the benefits to Workday, 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 of Directors 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.

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Business Combinations

There were no material business combinations in fiscal 2024 or 2023.

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.

With VNDLY, Workday provides organizations with a unified workforce optimization solution that helps 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 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 total acquisition-date fair value of the purchase consideration was $ 473 million, which was paid in cash.

In connection with the acquisition, we issued approximately 152 thousand shares of our Class A common stock to certain key VNDLY employees, with 50 % of such shares 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 was accounted for as post-acquisition share-based compensation expense.

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.

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

Cash $ 22,830

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

Acquisition-related intangible assets 40

Goodwill 412,151

Other assets 3

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Other liabilities ( 2 )

Total $ 473,164

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

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

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

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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.

With Zimit, Workday delivers a comprehensive quote-to-cash process automation offering that provides 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.

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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.

With Peakon, Workday provides 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):

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

Cash paid to stockholders, warrant holders, and vested option holders $ 684

Transaction costs paid by Workday on behalf of Peakon 18

Total $ 701,748

Additionally, we granted certain Peakon employees restricted stock awards (“RSAs”) with service conditions, which totaled approximately 82 thousand shares of our Class A common stock.

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

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

Acquisition-related intangible assets $ 171

Goodwill 541,611

Other assets 35

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Other liabilities ( 25 )

Total $ 701,748

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

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

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

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Customer relationships 72 13

Backlog 4,000 3

Trade name 1 1

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Acquisition-Related Intangible Assets, Net

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

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

As of January 31,

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Amortization expense related to acquisition-related intangible assets was $ 74 million, $ 86 million, and $ 78 million for fiscal 2024, 2023, and 2022, respectively.

As of January 31, 2023, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):

As of January 31, 2024, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in millions):

Fiscal Period:

2024 $ 74,318

Thereafter 39

Total $ 305,465

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

Other assets consisted of the following (in millions):

As of January 31,

Non-marketable equity and other investments $ 248 $ 263

Prepayments for goods and services 23,466 25,927

Derivative assets 21,757 16,618

Technology patents and other intangible assets, net 26 21

Net deferred tax assets 12,650 11,642

Deposits 5,819 6,701

Other 13,274 813

Contract assets 21 —

Derivative assets 14 22

Prepayments for goods and services 14 23

Total other assets $ 337 $ 348

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

As of January 31, 2023, the future estimated amortization expense was as follows (in thousands):

As of January 31, 2024, the future estimated amortization expense was as follows (in millions):

Fiscal Period:

Thereafter 10

Total $ 20,534

Derivative Instruments

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dollars in exchange for other currencies were $ 11 million and $ 2 million, respectively.

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

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

Consolidated Balance Sheets Location As of January 31,

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Non-designated hedges Accrued expenses and other current liabilities 1 5

Non-designated hedges Other liabilities 1 16

Total derivative liabilities $ 27 $ 34

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

Year Ended January 31,

Consolidated Statements of Operations Location 2023 2022 2021

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

Consolidated Statements of Operations Location Year Ended January 31,

2024 2023 2022

Total Gains (losses) related to cash flow hedges Total Gains (losses) related to cash flow hedges Total Gains (losses) related to cash flow hedges

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Costs and expenses 7,076 1 6,438 ( 29 ) 5,255 —

Income taxes 106,799 ( 6,092 ) ( 13,191 ) — 7,297 —

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

Provision for (benefit from) income taxes ( 1,025 ) — 107 ( 6 ) ( 13 ) —

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

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

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Gains (losses) reclassified from AOCI into income (effective portion) Costs and expenses 1 ( 29 ) —

Gains (losses) reclassified from AOCI into income (effective portion) Income taxes ( 6,092 ) — —

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

Gains (losses) reclassified from AOCI into income (effective portion) Provision for (benefit from) income taxes — ( 6 ) —

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

Consolidated Statements of Operations Location Year Ended January 31,

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We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

As of January 31, 2023, information related to these offsetting arrangements was as follows (in thousands):

As of January 31, 2024, information related to these offsetting arrangements was as follows (in millions):

Gross Amounts of Recognized Assets Gross Amounts Offset on the Consolidated Balance Sheets Net Amounts of Assets Presented on the Consolidated Balance Sheets Gross Amounts Not Offset on the Consolidated Balance Sheets Net Assets Exposed

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Total $ 27 $ — $ 27 $ ( 27 ) $ — $ —

Outstanding debt consisted of the following (in thousands):

Outstanding debt consisted of the following (in millions):

As of January 31,

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2032 Notes 1,250 1,250

2022 Notes — 1,149,817

Term loan under the 2020 Credit Agreement — 693,750

Total principal amount 3,000 3,000

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Net carrying amount 2,980 2,976

debt, current — ( 1,222,443 )

Debt, noncurrent $ 2,980 $ 2,976

As of January 31, 2023, the future principal payments for the outstanding debt were as follows (in thousands):

As of January 31, 2024, the future principal payments for the outstanding debt were as follows (in millions):

Fiscal Period:

2028 1,000,000

Thereafter 2,000

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The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67 %, 3.82 %, and 3.90 %, respectively.

As of January 31, 2023, the total estimated fair value of the Senior Notes was $ 2.8 billion.

As of both January 31, 2024, and 2023, the total estimated fair value of the Senior Notes was $ 2.8 billion.

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

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The modification to our revolving credit facility and extinguishment of the term loan under the 2020 Credit Agreement did not have a material impact to our Consolidated Statements of Operations for fiscal 2023.

As of January 31, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement.

As of January 31, 2024, and 2023, we had no outstanding revolving loans under the 2022 Credit Agreement.

The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid.

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The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50 :1.00, subject to a step-up to 4.50 :1.00 at our election for a certain period following an acquisition.

As of January 31, 2023, we were in compliance with all covenants.

As of January 31, 2024, and 2023, we were in compliance with all covenants included in the 2022 Credit Agreement.

Convertible Senior Notes

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The 2022 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 0.25 % on April 1 and October 1 of each year.

During fiscal 2023, the 2022 Notes were converted by note holders, and we repaid the $ 1.15 billion principal balance in cash.

We also distributed approximately 0.6 million shares of our Class A common stock to note holders during fiscal 2023, which represents 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”).

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 connection with the issuance of the 2022 Notes and 2020 Notes, we entered into convertible note hedge transactions (“Purchased Options”) which gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2022 Notes and 2020 Notes, approximately 7.8 million and 3.1 million shares of our Class A common stock, respectively, for $ 147.10 and $ 81.74 per share, respectively.

During fiscal 2023 and 2021, we received approximately 0.6 million and 1.7 million shares of our Class A common stock, respectively, from the exercise of the Purchased Options, which offset economic dilution to our Class A common stock upon conversion of the 2022 Notes and 2020 Notes.

These shares are held as treasury stock as of January 31, 2023.

The Purchased Options were separate transactions and were not part of the terms of the 2022 Notes and 2020 Notes, and expired on October 1, 2022, and July 15, 2020, 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 of our Class A common stock over 60 scheduled trading days beginning in January 2023 and 3.1 million shares of our Class A common stock over 60 scheduled trading days beginning in October 2020 at an exercise price of $ 213.96 and $ 107.96 per share, respectively.

The Warrants related to the 2022 Notes will be net share settled, and the resulting number of shares of our common stock we will issue depends on the daily volume-weighted average stock prices over the 60 scheduled trading day period beginning on the first expiration date of the Warrants.

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.

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

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

As of January 31, 2023, 2.6 million Warrants expired without exercise, and 5.2 million Warrants remained outstanding.

The Warrants related to the 2020 Notes were exercised during the third and fourth quarters of fiscal 2021, 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.

During the third quarter of fiscal 2023, the 2022 Notes were converted by note holders, and we repaid the $ 1.15 billion principal balance in cash.

We also distributed approximately 0.6 million shares of our Class A common stock to note holders during fiscal 2023, which represented the conversion value in excess of the principal amount.

In connection with the issuance of the 2022 Notes, we entered into convertible note hedge transactions (“Purchased Options”) which gave 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, respectively, for $ 147.10 per share.

During the third quarter of fiscal 2023, we received approximately 0.6 million shares of our Class A common stock from the exercise of the Purchased Options, which offset the economic dilution to our Class A common stock upon conversion of the 2022 Notes.

These shares were recorded as Treasury stock on the Consolidated Balance Sheets.

The Purchased Options were separate transactions and were not part of the terms of the 2022 Notes, and the unexercised Purchased Options expired on October 1, 2022.

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

During the first quarter of fiscal 2024, the Warrants fully expired without exercise.

Interest Expense on Debt

The following table sets forth total interest expense recognized related to our debt (in thousands):

The following table sets forth total interest expense recognized related to our debt (in millions):

Year Ended January 31,

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As of January 31, 2024, and 2023, finance leases were not material.

The components of operating lease expense were as follows (in thousands):

The components of operating lease expense were as follows (in millions):

Year Ended January 31,

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Total operating lease cost $ 158 $ 148 $ 125

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

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

Year Ended January 31,

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Weighted average discount rate 3.95 % 2.79 %

As of January 31, 2023, maturities of operating lease liabilities were as follows (in thousands):

As of January 31, 2024, maturities of operating lease liabilities were as follows (in millions):

Fiscal Period:

2024 $ 97,387

Thereafter 39

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Total operating lease liabilities $ 316

As of January 31, 2023, we had entered into additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $ 66 million.

These operating leases will commence in fiscal 2024 and fiscal 2025, with lease terms ranging from five to ten years .

As of January 31, 2024, we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $ 91 million.

These operating leases will commence in fiscal 2025 and fiscal 2026, with lease terms ranging from approximately five to nine years .

Related-Party Transactions

There were no material related party transactions related to our leases in fiscal 2023.

There were no material related party transactions related to our leases in fiscal 2024 or 2023.

Leased Property Purchase

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 and $ 16 million for fiscal 2022 and 2021, respectively.

As discussed in Note 6, Property and Equipment, Net, during fiscal 2022, we purchased certain leased office space within our corporate headquarters from an affiliate of Mr.

Duffield for $ 173 million in cash.

Subsequent to the purchase, the Property was included in Property and equipment, net on the Consolidated Balance Sheets.

Total rent expense under these agreements was $ 2 million for fiscal 2022.

Commitments and Contingencies

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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, 2023, were as follows (in thousands):

Future payments under purchase obligations with a remaining term in excess of one year as of January 31, 2024, were as follows (in millions):

Third-Party Hosted Infrastructure Platform Obligations Other Purchase Obligations

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2025 $ 180 $ 120

2025 72,235 71,281

2026 165,391 65,895

2027 120,000 39,427

2028 150,000 44,889

Thereafter — 58

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Bhusri, and (iv) the date on which the holders of a majority of the shares of Class B common stock elect to convert all shares of Class A common stock and Class B common stock into a single class of common stock.

Share Repurchase Program

Share Repurchase Programs

In November 2022, our Board of Directors authorized the repurchase of up to $ 500 million of our outstanding shares of Class A common stock.

We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions.

Under the 2022 Share Repurchase Program, we may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions.

The timing and total amount of stock repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

The 2022 Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

During fiscal 2023, we repurchased approximately 0.5 million shares of Class A common stock for approximately $ 75 million at an average price per share of $ 165.75 .

During fiscal 2024 and 2023, we repurchased approximately 1.8 million and 0.5 million shares of Class A common stock for approximately $ 423 million and $ 75 million, at an average price per share of $ 228.67 and $ 165.75 , respectively.

All repurchases were made in open market transactions.

As of January 31, 2024, we were authorized to purchase a remaining $ 2 million of our outstanding shares of Class A common stock under the 2022 Share Repurchase Program.

In February 2024, our Board of Directors authorized the 2024 Share Repurchase Program, under which we may repurchase up to an additional $ 500 million of our outstanding shares of Class A common stock.

For further information, see Note 21, Subsequent Events .

Employee Equity Plans

On June 22, 2022, our stockholders approved the 2022 Equity Incentive Plan (“2022 Plan”), with a reserve of 30 million shares for issuance.

In June 2022, our stockholders approved the 2022 Equity Incentive Plan (“2022 Plan”), with a reserve of 30 million shares for issuance.

The 2022 Plan serves as the successor to our 2012 Equity Incentive Plan (“2012 Plan” and, together with the 2022 Plan, “Stock Plans”).

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As of January 31, 2024, we had 21 million shares of Class A common stock available for future grants.

On June 22, 2022, our stockholders approved the ESPP.

In June 2022, our stockholders approved the ESPP.

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 are exercisable on or about the succeeding November 30 and May 31, respectively.

Pursuant to the terms of the ESPP, the share reserve increased by 2 million shares on March 31, 2022.

As of January 31, 2024, 4 million shares of Class A common stock were available for issuance under the ESPP.

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The weighted-average grant date fair value of RSUs granted during fiscal 2024, 2023, and 2022 was $ 197.22 , $ 200.98 , and $ 259.61 , respectively.

The total fair value of RSUs vested as of the vesting dates during fiscal 2023, 2022, and 2021 was $ 977 million, $ 1.6 billion, and $ 1.1 billion, respectively.

The total fair value of RSUs vested as of the vesting dates during fiscal 2024, 2023, and 2022 was $ 1.4 billion, $ 977 million, and $ 1.6 billion, respectively.

In the fourth quarter of fiscal 2023, we modified the vesting date of all unvested RSU awards from the 15th to the 5th of each month.

This change impacted awards vesting after December 31, 2022, and resulted in an acceleration of share-based compensation expense of $ 28 million.

This change impacted awards vesting after December 31, 2022, and resulted in an acceleration of share-based compensation expense in fiscal 2023 of $ 28 million.

As of January 31, 2024, there was a total of $ 2.3 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 .

Market-Based Restricted Stock Units

In December 2022, 0.3 million shares of market-based RSUs were granted to our newly appointed Co-CEO that vest based on appreciation of the price of our Class A common stock over a multi-year period and upon continued service (“PVU Award”).

In December 2022, 0.3 million shares of market-based RSUs were granted to Mr.

Eschenbach, in connection with his appointment as Co-CEO, that vest based on appreciation of the price of our Class A common stock over a multi-year period and upon continued service (“PVU Award”).

We estimated the fair value of the PVU Award on the grant date using the Monte Carlo simulation model with the following assumptions:

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However, the number of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.

As of January 31, 2023, there was a total of $ 35 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately five years .

As of January 31, 2024, there was a total of $ 19 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately four years .

Performance-Based Restricted Stock Units

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These performance conditions were met and the PRSUs vested on March 15, 2022.

We did no t grant any company-wide PRSUs in fiscal 2023.

We did no t grant any company-wide PRSUs in fiscal 2024 or 2023.

Stock Options

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Exercisable as of January 31, 2024 88 29.20 23

The total grant date fair value of stock options vested during fiscal 2023, 2022, and 2021 was $ 1 million, $ 8 million, and $ 23 million, respectively.

As of January 31, 2024, all stock options were fully vested with no remaining unrecognized compensation cost.

The total intrinsic value of stock options exercised during fiscal 2024, 2023, and 2022 was $ 5 million, $ 41 million, and $ 209 million, respectively.

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

As of January 31, 2023, unrecognized compensation cost related to unvested stock options was not material.

The stock options that are exercisable as of January 31, 2023, have a weighted-average remaining contractual life of approximately five years .

The weighted-average remaining contractual life of vested and expected to vest stock options as of January 31, 2023, is approximately five years , and the weighted-average remaining contractual life of outstanding stock options as of January 31, 2023, is approximately five years .

As of January 31, 2024, stock options have a weighted-average remaining contractual life of approximately four years .

Employee Stock Purchase Plan

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$ 225.70 - $ 260.86

Unearned Revenue and Performance Obligations

Subscription services revenues of $ 3.0 billion, $ 2.5 billion, and $ 2.2 billion were recognized during fiscal 2023, 2022, and 2021, respectively, that were 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.

Contract Balances and Performance Obligations

Contract Balances

Contract assets and unearned revenue balances were as follows (in millions):

Consolidated Balance Sheets Location As of January 31,

Contract assets:

Contract assets, current

Trade and other receivables, net $ 240 $ 160

Contract assets, noncurrent

Other assets 21 —

Total contract assets

Unearned revenue (1) :

Unearned revenue, current

Unearned revenue $ 4,057 $ 3,559

Unearned revenue, noncurrent

Unearned revenue, noncurrent 70 75

Total unearned revenue

$ 4,127 $ 3,634

(1) Included in this balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $ 76 million and $ 68 million as of January 31, 2024, and 2023, respectively.

Revenues of $ 3.5 billion, $ 3.0 billion, and $ 2.5 billion were recognized during fiscal 2024, 2023, and 2022, respectively, that were included in the unearned revenue balances at the beginning of the respective periods.

Transaction Price Allocated to the Remaining Performance Obligations

As of January 31, 2024, approximately $ 20.9 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts.

We expect to recognize revenues on approximately $ 9.7 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

We expect to recognize revenues on approximately $ 6.6 billion and $ 11.7 billion of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter.

Revenues from remaining performance obligations for professional services contracts as of January 31, 2024, were not material.

Other Income (Expense), Net

Other income (expense), net consisted of the following (in thousands):

Other income (expense), net consisted of the following (in millions):

Year Ended January 31,

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For further information, see Note 3, Investments .

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

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

Year Ended January 31,

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Income (loss) before provision for (benefit from) income taxes $ 356 $ ( 260 ) $ 16

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

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

Year Ended January 31,

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Total ( 287.6 ) % ( 41.1 ) % ( 81.6 ) %

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 domestic income tax provision was primarily related to an increase in state taxes due to capitalized research and development expenditures.

The foreign income tax provision was primarily attributable to a taxable gain recognized from an intercompany sale of intellectual property and income tax expenses in profitable foreign jurisdictions.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act (“IRA”) of 2022, which, among other things, implemented a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy.

The provisions of the IRA had no impact to our fiscal 2023 income tax provision.

The 2017 Tax Cuts and Jobs Act requires research and development expenditures incurred for the tax year beginning after December 31, 2021, to be capitalized and amortized ratably over five years for domestic research and fifteen years for international research.

The mandatory capitalization requirement had no material impact to our fiscal 2023 income tax provision due to our tax attributes carryover and full valuation allowance position.

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

The benefit from income taxes increased in fiscal 2024 primarily due to the release of a portion of our valuation allowance related to U.S.

federal and state deferred tax assets.

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

As of January 31,

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Operating lease liabilities 69 63

Other 27,364 39,373

Total deferred tax assets 2,498 2,600

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Operating lease right-of-use assets ( 62 ) ( 57 )

Property and equipment ( 13 ) —

Other ( 33 ) ( 47 )

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Net deferred tax assets $ 1,063 $ 11

We regularly assess the need for a valuation allowance against our deferred tax assets by considering both positive and negative evidence related to whether it is more likely than not that our deferred tax assets will be realized.

In evaluating the need for a valuation allowance, we consider the cumulative losses in recent years as a significant piece of negative evidence that is generally difficult to overcome.

As of January 31, 2023, we continue to maintain a full valuation allowance against our U.S.

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

As of January 31, 2023, we recorded a valuation allowance of $ 2.4 billion for the portion of the deferred tax assets that we do not expect to be realized.

The valuation allowance on our net deferred tax assets increased by $ 116 million and $ 159 million during fiscal 2023 and 2022, respectively.

The increase in the valuation allowance during fiscal 2023 is mainly due to an increase in deferred tax assets on amortization of intangibles from business combinations and capitalized research and development expenditures and credits, which are partially offset by the utilization of net operating losses.

We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative.

Prior to fiscal 2024, we considered global cumulative losses as a significant piece of negative evidence.

During fiscal 2024, we recognized cumulative earnings on a global basis and were profitable in the U.S.

Our ability to sustain and grow our profitability is supported by the continued positive operating performance in the U.S.

We also considered forecasts of future taxable income and evaluated the utilization of tax attributes before their expiration.

After considering these factors, we determined that the positive evidence outweighed the negative evidence and concluded that it was more likely than not that the majority of U.S.

deferred tax assets were realizable.

As a result, we released the valuation allowance against all U.S.

federal deferred tax assets and state deferred tax assets, excluding certain state tax credits.

The remaining valuation allowance of $ 1.2 billion as of January 31, 2024, was primarily related to tax credits in certain state jurisdictions and net operating loss in certain foreign jurisdictions.

We will continue to evaluate the need for valuation allowances for our deferred tax assets.

The valuation allowance on our net deferred tax assets decreased by $ 1.2 billion during fiscal 2024, primarily due to the release of the U.S.

federal and state valuation allowance discussed above.

The valuation allowance increased by $ 116 million during fiscal 2023 primarily due to an increase in deferred tax assets on amortization of intangibles from business combinations and capitalized research and development expenditures and credits, which were partially offset by the utilization of net operating losses.

As of January 31, 2024, we had approximately $ 1.7 billion of federal, $ 1.9 billion of state, and $ 3.5 billion of foreign net operating loss and other tax attributes carryforwards available to offset future taxable income.

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As of January 31, 2024, we estimate any such hypothetical foreign withholding tax expense to be immaterial to our financial statements.

A reconciliation of the gross unrecognized tax benefit is as follows (in thousands):

A reconciliation of the gross unrecognized tax benefit is as follows (in millions):

Year Ended January 31,

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Additions for tax positions related to the current year 27 21 15

Reductions related to a lapse of applicable statute of limitations ( 84 ) — ( 807 )

Reductions related to settlements — ( 393 ) ( 403 )

Unrecognized tax benefits at the end of the period $ 253 $ 196 $ 174

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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 ESPP obligations.

We determine the dilutive effect of outstanding share-based awards and warrants using the treasury stock method, and the dilutive effect of shares underlying our convertible senior notes using the if-converted method.

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 2023 and 2021, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

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

The computation of the diluted net income 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 2023, as the inclusion of potentially outstanding weighted-average shares of common stock would have been anti-dilutive due to the incurrence of net loss during the period.

The following table presents the calculation of basic and diluted net income (loss) per share (in millions, except number of shares, which are reflected in thousands, and per share data):

Year Ended January 31,

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Revenues by geography are 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):

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

Year Ended January 31,

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Our long-lived assets, which primarily consist of property and equipment and operating lease right-of-use assets, are attributed to a country based on the physical location of the assets.

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

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

As of January 31,

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Our contributions to the plan were $ 64 million, $ 57 million, and $ 46 million during fiscal 2024, 2023, and 2022, respectively.

Subsequent Events

HiredScore, Inc.

In February 2024, we entered into a definitive agreement to acquire HiredScore, Inc.

a provider of AI powered talent orchestration solutions.

The transaction is expected to close during the first quarter of fiscal 2025, subject to the satisfaction of customary closing conditions, including required regulatory approval.

2024 Share Repurchase Program

In February 2024, our Board of Directors authorized the 2024 Share Repurchase Program, under which we may purchase up to $ 500 million of our outstanding shares of Class A common stock.

We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in accordance with applicable securities laws and other restrictions.

The timing and total amount of stock repurchases will depend on business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

The 2024 Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.

Tax Withholding Method on Employee Equity Awards

Beginning in April 2024, we intend to fund withholding taxes due on employee equity awards by net share withholding, rather than our current approach of selling shares of our common stock on our employees’ behalf to cover taxes upon vesting of such awards.

We expect this net share withholding approach will increase our financing cash outflows and reduce the number of shares that will be issued from our equity plans.

However, we are unable to estimate the cash outflows and number of shares that will be withheld since they will depend on the market price of our Class A common stock.

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 8. Financial Statements and Supplementary Data