Workday, Inc 10-Q for FY2022 Q3

Workday, Inc. (WDAY)

10-Q 2021-11-18 For: 2021-10-31

Added on April 11, 2026

About this 10-Q

Workday, Inc filed this 10-Q on November 18, 2021, covering the quarter ended October 31, 2021 (FY2022 Q3).

Headline figures

Quarter ended October 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.33B; up 20.0% from $1.11B a year earlier
Net income: $43.41M; compared with a net loss of $24.34M a year earlier
Diluted EPS: $0.17; compared with -$0.10 a year earlier

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Delaware						20-2480422
(State or other jurisdiction of incorporation or organization)						(I.R.S Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001	WDAY	The Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets as of October 31, 2021, and January 31, 2021	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2021, and 2020	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended October 31, 2021, and 2020	5

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended October 31, 2021, and 2020	6

	Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended October 31, 2021, and 2020	8

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	44

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70

Item 6.	Exhibits	71

	Signatures	72


	October 31, 2021		January 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	1,297,259	$	1,384,181
Marketable securities	2,257,722		2,151,472
Trade and other receivables, net	865,040		1,032,484
Deferred costs	135,829		122,764
Prepaid expenses and other current assets	137,858		111,160
Total current assets	4,693,708		4,802,061
Property and equipment, net	1,120,196		972,403
Operating lease right-of-use assets	269,687		414,143
Deferred costs, noncurrent	287,645		271,796
Acquisition-related intangible assets, net	371,658		248,626
Goodwill	2,428,481		1,819,625
Other assets	269,508		189,757
Total assets	$	9,440,883	$	8,718,411
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	47,928	$	75,596
Accrued expenses and other current liabilities	196,331		169,266
Accrued compensation	311,819		285,061
Unearned revenue	2,423,305		2,556,624
Operating lease liabilities	83,452		93,000
Debt, current	1,212,215		1,103,101
Total current liabilities	4,275,050		4,282,648
Debt, noncurrent	635,994		691,913
Unearned revenue, noncurrent	70,606		80,111
Operating lease liabilities, noncurrent	202,969		350,051
Other liabilities	40,448		35,854
Total liabilities	5,225,067		5,440,577
Stockholders’ equity:
Common stock	249		242
Additional paid-in capital	6,919,963		6,254,936
Treasury stock	(12,437)		(12,384)
Accumulated other comprehensive income (loss)	(20,627)		(54,970)
Accumulated deficit	(2,671,332)		(2,909,990)
Total stockholders’ equity	4,215,816		3,277,834
Total liabilities and stockholders’ equity	$	9,440,883	$	8,718,411


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
Revenues:
Subscription services	$	1,171,517	$	968,547	$	3,317,140	$	2,782,201
Professional services	155,746		137,413		445,517		404,111
Total revenues	1,327,263		1,105,960		3,762,657		3,186,312
Costs and expenses (1):
Costs of subscription services	200,700		152,396		575,646		442,666
Costs of professional services	159,024		142,785		462,652		442,422
Product development	455,615		419,962		1,341,482		1,282,127
Sales and marketing	366,323		302,870		1,050,974		897,924
General and administrative	121,656		102,024		347,391		296,461
Total costs and expenses	1,303,318		1,120,037		3,778,145		3,361,600
Operating income (loss)	23,945		(14,077)		(15,488)		(175,288)
Other income (expense), net	21,557		(8,846)		115,491		(31,272)
Income (loss) before provision for (benefit from) income taxes	45,502		(22,923)		100,003		(206,560)
Provision for (benefit from) income taxes	2,090		1,417		(2,623)		4,164
Net income (loss)	$	43,412	$	(24,340)	$	102,626	$	(210,724)
Net income (loss) per share, basic	$	0.17	$	(0.10)	$	0.42	$	(0.89)
Net income (loss) per share, diluted	$	0.17	$	(0.10)	$	0.40	$	(0.89)
Weighted-average shares used to compute net income (loss) per share, basic	248,468		238,059		246,348		235,685
Weighted-average shares used to compute net income (loss) per share, diluted	254,760		238,059		253,917		235,685


(1) Costs and expenses include share-based compensation expenses as follows:
	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
Costs of subscription services	$	21,340	$	16,767	$	62,478	$	45,484
Costs of professional services	29,105		27,349		83,331		74,467
Product development	135,591		128,423		395,345		378,950
Sales and marketing	55,645		54,077		158,121		150,881
General and administrative	39,437		33,216		111,197		97,958


	As of October 31,
	2021		2020
Reconciliation of cash, cash equivalents, and restricted cash as shown in the statements of cash flows:
Cash and cash equivalents	$	1,297,259	$	1,067,038
Restricted cash included in Prepaid expenses and other current assets	5,992		4,351
Restricted cash included in Other assets	—		127
Total cash, cash equivalents, and restricted cash	$	1,303,251	$	1,071,516


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
U.S. treasury securities	$	1,246,777	$	54	$	(294)	$	1,246,537
U.S. agency obligations	232,209		2		(383)		231,828
Corporate bonds	426,074		35		(444)		425,665
Commercial paper	934,715		—		—		934,715
Total debt securities	$	2,839,775	$	91	$	(1,121)	$	2,838,745
Included in Cash and cash equivalents	$	715,486	$	1	$	(2)	$	715,485
Included in Marketable securities	$	2,124,289	$	90	$	(1,119)	$	2,123,260


	Condensed Consolidated Balance Sheets Location	October 31, 2021		January 31, 2021
Money market funds	Cash and cash equivalents	$	280,481	$	659,964
Equity investments accounted for under the equity method	Other assets	—		48,222
Non-marketable equity investments measured using the measurement alternative	Other assets	169,929		73,142
Marketable equity investments	Marketable securities	134,462		21,300
Total equity investments		$	584,872	$	802,628


	October 31, 2021		January 31, 2021
Total initial cost	$	130,131	$	65,377
Cumulative net unrealized gains (losses)	39,798		7,765
Carrying value	$	169,929	$	73,142


	Level 1		Level 2		Level 3		Total
U.S. treasury securities	$	1,246,537	$	—	$	—	$	1,246,537
U.S. agency obligations	—		231,828		—		231,828
Corporate bonds	—		425,665		—		425,665
Commercial paper	—		934,715		—		934,715
Money market funds	280,481		—		—		280,481
Marketable equity investments	134,462		—		—		134,462
Foreign currency derivative assets	—		24,166		—		24,166
Total assets	$	1,661,480	$	1,616,374	$	—	$	3,277,854
Foreign currency derivative liabilities	$	—	$	24,197	$	—	$	24,197
Total liabilities	$	—	$	24,197	$	—	$	24,197


	October 31, 2021		January 31, 2021
Land and land improvements	$	80,553	$	37,065
Buildings	683,966		494,599
Computers, equipment, and software	1,054,780		931,456
Furniture and fixtures	55,329		54,193
Leasehold improvements	152,636		204,273
Property and equipment, gross	2,027,264		1,721,586
Less accumulated depreciation and amortization	(907,068)		(749,183)
Property and equipment, net	$	1,120,196	$	972,403


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
Common stock:
Balance, beginning of period	$	248	$	238	$	242	$	231
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes	1		2		7		7
Settlement of convertible senior notes	—		—		—		2
Balance, end of period	249		240		249		240
Additional paid-in capital:
Balance, beginning of period	6,639,067		5,954,738		6,254,936		5,090,187
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes	1,893		3,648		76,374		78,160
Share-based compensation	278,995		259,802		808,299		746,643

Settlement of warrants	—		(34,118)		—		(34,118)
Exercise of convertible senior notes hedges	8		—		58		303,202
Settlement of convertible senior notes	—		—		(2)		(4)
Cumulative effect of accounting changes	—		—		(219,702)		—
Balance, end of period	6,919,963		6,184,070		6,919,963		6,184,070
Treasury stock:
Balance, beginning of period	(12,431)		(303,201)		(12,384)		—

Exercise of convertible senior notes hedges	(6)		—		(53)		(303,201)

Settlement of warrants	—		34,118		—		34,118
Balance, end of period	(12,437)		(269,083)		(12,437)		(269,083)
Accumulated other comprehensive income (loss):
Balance, beginning of period	(44,150)		646		(54,970)		23,492
Other comprehensive income (loss)	23,523		464		34,343		(22,382)
Balance, end of period	(20,627)		1,110		(20,627)		1,110
Accumulated deficit:
Balance, beginning of period	(2,714,744)		(2,813,943)		(2,909,990)		(2,627,359)
Net income (loss)	43,412		(24,340)		102,626		(210,724)

Cumulative effect of accounting changes	—		—		136,032		(200)
Balance, end of period	(2,671,332)		(2,838,283)		(2,671,332)		(2,838,283)
Total stockholders’ equity	$	4,215,816	$	3,078,054	$	4,215,816	$	3,078,054


	Three Months Ended October 31,		Nine Months Ended October 31,
	2021	2020	2021	2020
Common stock (in shares):
Balance, beginning of period	248,087	237,161	242,667	231,708
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes	1,429	1,936	6,767	7,390
Settlement of warrants	—	186	—	186
Settlement of convertible senior notes	—	—	—	1,654
Purchase of treasury stock from the exercise of convertible senior notes hedges	—	—	—	(1,655)
Issuance of restricted stock awards	43	—	125	—
Balance, end of period	249,559	239,283	249,559	239,283


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
Cash flows from operating activities:
Net income (loss)	$	43,412	$	(24,340)	$	102,626	$	(210,724)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	87,127		73,864		254,973		218,556
Share-based compensation expenses	278,995		259,832		808,349		747,740
Amortization of deferred costs	35,482		28,732		100,844		82,141
Amortization of debt discount and issuance costs	997		12,098		2,991		41,466
Non-cash lease expense	21,407		22,141		64,706		60,389
(Gains) losses on investments	(25,222)		(143)		(125,479)		356
Other	3,411		(8,617)		(7,216)		7,684
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net	6,649		(53,923)		171,257		127,663
Deferred costs	(50,654)		(41,823)		(129,758)		(101,724)
Prepaid expenses and other assets	18,050		25,898		(21,047)		36,738
Accounts payable	(12,007)		3,762		(4,117)		(9,313)
Accrued expenses and other liabilities	2,498		(5,037)		(24,109)		(46,378)
Unearned revenue	(25,491)		1,358		(158,465)		(239,899)
Net cash provided by (used in) operating activities	384,654		293,802		1,035,555		714,695
Cash flows from investing activities:
Purchases of marketable securities	(722,275)		(806,713)		(2,317,040)		(1,963,244)
Maturities of marketable securities	674,246		427,910		2,303,478		1,282,324
Sales of marketable securities	—		—		27,286		5,279
Owned real estate projects	(4)		(1,072)		(171,498)		(5,323)
Capital expenditures, excluding owned real estate projects	(33,335)		(78,197)		(190,912)		(204,692)
Business combinations, net of cash acquired	(60,645)		—		(739,865)		—

Purchases of non-marketable equity and other investments	(26,720)		(4,618)		(84,526)		(63,218)
Sales and maturities of non-marketable equity and other investments	1,874		24		5,169		6,223
Other	—		—		1		—
Net cash provided by (used in) investing activities	(166,859)		(462,666)		(1,167,907)		(942,651)
Cash flows from financing activities:



Proceeds from borrowings on Term Loan, net of debt discount and issuance costs	—		—		—		747,795


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
Supplemental cash flow data:
Cash paid for interest	$	3,837	$	5,309	$	10,904	$	11,686
Cash paid for income taxes, net of refunds	2,716		2,598		9,150		7,239
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid	49,713		49,098		49,713		49,098


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


Acquisition-related intangible assets	$	170,500
Goodwill	542,201
Other assets	34,639
Deferred tax liability	(20,517)
Other liabilities	(25,075)
Total	$	701,748


	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


Fiscal Period:
Remainder of 2022	$	20,011
2023	77,786
2024	66,569
2025	53,913
2026	48,560
Thereafter	104,819
Total	$	371,658


	October 31, 2021		January 31, 2021
Non-marketable equity and other investments (1)	$	194,597	$	85,868
Prepayments for goods and services	29,174		19,824
Technology patents and other intangible assets, net	15,518		17,766
Net deferred tax assets	9,690		9,985
Deposits	6,589		6,218
Derivative assets	13,034		173
Equity investments accounted for under the equity method	—		48,222
Other	906		1,701
Total other assets	$	269,508	$	189,757


	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Condensed Consolidated Balance Sheets		Net Amounts of Assets Presented on the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets				Net Assets Exposed
							Financial Instruments		Cash Collateral Received
Derivative assets:
Counterparty A	$	1,879	$	—	$	1,879	$	(1,879)	$	—	$	—
Counterparty B	7,714		—		7,714		(7,714)		—		—
Counterparty C	4,961		—		4,961		(4,961)		—		—
Counterparty D	8,465		—		8,465		(8,465)		—		—
Counterparty E	1,147		—		1,147		(1,147)		—		—
Total	$	24,166	$	—	$	24,166	$	(24,166)	$	—	$	—


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Condensed Consolidated Balance Sheets		Net Amounts of Liabilities Presented on the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets				Net Liabilities Exposed
							Financial Instruments		Cash Collateral Pledged
Derivative liabilities:
Counterparty A	$	4,631	$	—	$	4,631	$	(1,879)	$	—	$	2,752
Counterparty B	9,136		—		9,136		(7,714)		—		1,422
Counterparty C	8,873		—		8,873		(4,961)		—		3,912
Counterparty D	1,255		—		1,255		(8,465)		—		(7,210)
Counterparty E	302		—		302		(1,147)		—		(845)
Total	$	24,197	$	—	$	24,197	$	(24,166)	$	—	$	31


	October 31, 2021		January 31, 2021
Term Loan, net of unamortized debt discounts of $1,379 and $1,682, respectively, and unamortized debt issuance costs of $127 and $155, respectively	$	701,619	$	729,413
2022 Notes, net of unamortized debt discounts of $0 and $79,562, respectively, and unamortized debt issuance costs of $3,261 and $4,771, respectively	1,146,590		1,065,601
Total debt	1,848,209		1,795,014
Less: current debt	(1,212,215)		(1,103,101)
Total debt, noncurrent	$	635,994	$	691,913


Fiscal Period:
Remainder of 2022	$	9,375
2023	1,224,851
2024	75,000
2025	75,000
2026	468,750

Total	$	1,852,976


	October 31, 2021	January 31, 2021
Weighted average remaining lease term (in years)	5	6
Weighted average discount rate	2.32%	1.73%


Fiscal Period:
Remainder of 2022	$	22,610
2023	86,427
2024	73,333
2025	57,244
2026	30,790
Thereafter	42,608
Total lease payments	313,012
Less imputed interest	(26,591)
Total operating lease liabilities	$	286,421


	Number of Shares	Weighted-Average Grant Date Fair Value
Balance as of January 31, 2021	13,168	$	154.90
RSUs granted	5,651	257.78
RSUs vested	(5,103)	147.99
RSUs forfeited	(1,101)	181.72
Balance as of October 31, 2021	12,615	201.44


	Outstanding Stock Options	Weighted-Average Exercise Price		Aggregate Intrinsic Value
Balance as of January 31, 2021	1,260	$	13.55	$	270

Stock options exercised	(671)	9.01
Stock options canceled	(13)	35.55
Balance as of October 31, 2021	576	18.34		156
Vested and expected to vest as of October 31, 2021	575	18.33		156
Exercisable as of October 31, 2021	545	17.23		149


	October 31, 2021		January 31, 2021
United States	$	1,184,335	$	1,169,820
Ireland	121,370		143,887
Other countries	84,178		72,839
Total long-lived assets	$	1,389,883	$	1,386,546


	Three Months Ended October 31, 2021
	GAAP Operating Expenses		Share-Based Compensation Expenses (1)		Other Operating Expenses (2)		Non-GAAP Operating Expenses (3)
Costs of subscription services	$	200,700	$	(21,340)	$	(12,859)	$	166,501
Costs of professional services	159,024		(29,105)		(1,043)		128,876
Product development	455,615		(135,591)		(2,870)		317,154
Sales and marketing	366,323		(55,645)		(9,642)		301,036
General and administrative	121,656		(39,437)		(772)		81,447
Total costs and expenses	$	1,303,318	$	(281,118)	$	(27,186)	$	995,014


	Three Months Ended October 31, 2020
	GAAP Operating Expenses		Share-Based Compensation Expenses (1)		Other Operating Expenses (2)		Non-GAAP Operating Expenses (3)
Costs of subscription services	$	152,396	$	(16,767)	$	(7,811)	$	127,818
Costs of professional services	142,785		(27,349)		(824)		114,612
Product development	419,962		(128,423)		(4,006)		287,533
Sales and marketing	302,870		(54,077)		(8,352)		240,441
General and administrative	102,024		(33,216)		(1,355)		67,453
Total costs and expenses	$	1,120,037	$	(259,832)	$	(22,348)	$	837,857


	Nine Months Ended October 31, 2021
	GAAP Operating Expenses		Share-Based Compensation Expenses (1)		Other Operating Expenses (2)		Non-GAAP Operating Expenses (3)
Costs of subscription services	$	575,646	$	(62,478)	$	(40,195)	$	472,973
Costs of professional services	462,652		(83,331)		(9,211)		370,110
Product development	1,341,482		(395,345)		(25,573)		920,564
Sales and marketing	1,050,974		(158,121)		(36,512)		856,341
General and administrative	347,391		(111,197)		(6,091)		230,103
Total costs and expenses	$	3,778,145	$	(810,472)	$	(117,582)	$	2,850,091


	Nine Months Ended October 31, 2020
	GAAP Operating Expenses		Share-Based Compensation Expenses (1)		Other Operating Expenses (2)		Non-GAAP Operating Expenses (3)
Costs of subscription services	$	442,666	$	(45,484)	$	(26,298)	$	370,884
Costs of professional services	442,422		(74,467)		(4,843)		363,112
Product development	1,282,127		(378,950)		(20,710)		882,467
Sales and marketing	897,924		(150,881)		(26,841)		720,202
General and administrative	296,461		(97,958)		(5,111)		193,392
Total costs and expenses	$	3,361,600	$	(747,740)	$	(83,803)	$	2,530,057


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
August 1, 2021 - August 31, 2021	—	$	—	—	—
September 1, 2021 - September 30, 2021	4	271.07		—	—
October 1, 2021 - October 31, 2021	20	257.19		—	—
Total	24			—


			Workday, Inc.

			/s/ Robynne D. Sisco
			Robynne D. Sisco
			Co-President and Chief Financial Officer (Principal Financial Officer)